Ghost bill on taxes introduced

February 9, 2010 in Blog

A strange thing happened in Olympia today.  This morning a bill was introduced in the Senate, SB 6853, which has no text.  The full bill is reproduced below.  The bill is scheduled for a public hearing in the Ways and Means Committee this afternoon.  Committee members may decide to pass it today and send it to the full Senate, going against the rule that legislation be made public for at least five days before being acted on.

This bill may make major changes in the tax code, and could result in a significant increase in the tax burden state lawmakers place on citizens, so it would be nice to know what the bill actually says.  As independent policy analysts, it is hard for Washington Policy Center, or anyone else, to make a fair assessment of a major bill when the public has no idea what it says, or how it may affect our lives.

Public option would become the only option.

December 17, 2009 in Blog

I labored over a carefully worded op-ed, "Public option would lower private insurance zero," analyzing how a public option health plan would put private insurers out of business, and here the whole thing is explained in a 41-second cartoon.

What's in the bill?

December 16, 2009 in Blog

Earlier today, Senator Baucus explains, in response to a question from Senator Coburn, that no Senator has read or fully understands what's in the massive health care overhaul bill.

ObamaCare: Government can kick you off your health care plan

December 2, 2009 in Blog

In a stunning YouTube video, Henry Waxman, Chairman of the
House Energy and Commerce Committee, explains how under ObamaCare the
government would have the power to “suspend” the enrollment of any American in
any health care plan, that is, kick you off your plan.  With the help of an aide, he begins reading
from the 2,074-page bill;

“The remedies described in the paragraph with respect to a
qualified health benefit plan, they [federal officials] can levy civil money
penalties, or can suspend the enrollment of individuals under such a plan after
the date the commissioner notifies the entity of the determination under
paragraph 1 that the plan does not qualify.” 

If federal officials determine your health plan does not qualify, you will be disenrolled.  In government-speak “remedies” means punishment, and
“suspend” means cancel.  Watch it here.

Injecting politics into health care will lead to efficiency, public option backers say

August 7, 2009 in Blog

Responding to the concern that setting up a government-run public option insurance plan would inject politics into American health care, public option backers are saying, “Right.  And that’s a good thing.”

Today the Washington Post reports, “Economists in this [pro-public option] camp say a public option would not underprice insurers so as to drive them out of business; political pressures from medical providers would restrain Congress just as it is restrained today from limiting Medicare rates too much.”

The article add, “And the [public] option’s pricing powers would be limited by political pressures against driving too hard a bargain on providers.”

This is a novel argument, that bringing “political pressures” into a private market makes that market more efficient.  I’d sure like to know the names of the economists in the public option camp who say lobbying Congress is a form of healthy market competition.  Ample real-world experience shows the opposite.  Massive government intervention distorts markets, reduces the benefits of competition, and leads to waste, inefficiency and cronyism, not lower prices and better service.

We already have an example from the world of health care.  Every year Congress experiences a political firestorm as it tries to save Medicare from bankruptcy by cutting reimbursement rates to doctors.  The American Medical Association, not surprisingly, vigorously objects and lobbies hard to preserve or increase payments to doctors.  A deal is reached and the controversy is re-scheduled for the following year.  Whether this management technique is saving Medicare or sinking it faster is an open question, but I doubt most Americans want their own health plan run this way.

The current lack of competition in health care comes from politicians, not insurers.  Health insurance is perhaps the most highly regulated economic activity in the country, with price controls, limits on products, extensive reporting rules, a ban on interstate sales, high barriers to entry, unequal tax treatment, and a host of minutely detailed federal and state regulations.  Congress and state legislatures might first try removing the anti-competitive laws that they created, and force insurance companies to compete more against themselves, before Congress sets up an insurance company of its own.

ObamaCare supporters are right about one thing.  A public option would reduce the cost of private insurance premiums.  It would reduce them to zero, as private insurers go out of business trying to compete against a federal plan that can print it own money.

Will "Cash for Clunkers" be followed by "Shekels for Shacks"?

August 5, 2009 in Blog

If paying out public money to encourage drivers to trade their servicable older car for a brand new one is such a great idea, perhaps Congress should mail checks to people willing to bulldoze their current home and build a new, energy-efficient one.  Who knows, Maybe the Cash for Clunkers program will be followed by a multi-billion dollar Shekels for Shacks program.

Will "Cash for Clunkers" to be followed by "Shekels for Shacks"?

August 4, 2009 in Blog

If paying out public money to encourage drivers to trade their servicable older car for a brand new one is such a great idea, perhaps Congress should mail checks to people willing to bulldoze their current home and build a new, energy-efficient one.  Maybe the Cash for Clunkers program will be followed by a multi-billion dollar Shekels for Shacks program.

The Public Option Insurance Company of the United States (POICUS): getting Congress to target your competitors

July 31, 2009 in Blog

The plan for the federal government to enter the health insurance market got a boost yesterday after members of the powerful House Energy and Commerce Committee expressed concern that an earlier version of the bill did not do enough to harm their future competitors.

“Private insurers were coming off unscathed,” said committee member Peter Welch, a Vermont Democrat.  He worried that people working in private insurance “ quite well – too well, frankly.”

Liberal members of the committee stoutly opposed a provision that would have allowed doctors to negotiate with the government over how much they would be paid for their work.

To make sure private citizens would not succeed too much in the same business government officials themselves plan to enter, the bill was modified to enhance the market power of the proposed public option insurance company.

Liberal members succeeded in altering the bill so that government officials would unilaterally determine payments to doctors for treating people covered by public option insurance, as officials currently do in the Medicare program.

If backers of government-run health care say private insurers have too much influence in Congress, imagine the political clout of an insurance company that is run by Members of Congress.  As private companies go out of business and employers transfer workers to the government plan, the only recourse for public option patients who are denied medical care will be to write a letter to Congress.

A good name for the government plan might be Public Option Insurance Company of the United States (POICUS), managed by the Social Commission for Reform, Equality and Wellness of the United States (SCREWUS).

Obama uses free-market language to promote socialized health care

July 16, 2009 in Blog

In pushing yesterday for the sweeping health care plan working its way through Congress, President Obama argued for a government option, saying it “would make health care more affordable by increasing competition, providing more choices and keeping insurance companies honest.”  He sounds like Adam Smith making the well-proven case for freedom in the marketplace – market competition drives down prices and improves quality and choice for consumers. 

No, the President hasn’t suddenly experienced libertarian enlightenment.  The competition he has in mind is the federal government competing against its own citizens.

Government works well when it sets rules that apply equally to all companies, protect consumer rights and provide for public safety.  When government itself enters a market though, in this case as an insurance company, government officials end their role as impartial referees and become market players, with one important difference.  The “competition” President Obama envisions is a national insurance company that can print its own money.

The point is well illustrated by Germany, which allows citizens to buy private insurance or pick a subsidized public option.  Guess what?  Eighty-five percent of Germans take the public option.  Having eliminated most private choices, program managers began rationing care.  According to today’s Seattle Times, “[Germany] tries to control costs by limiting what’s available.”  The practice is standard in socialized systems.  Laboring under intense budget pressures, government managers seek to control costs by limiting people’s access to medical treatments.

If the President wants us to gain from real competition, he should let Americans buy health insurance in any state, just like auto insurance.  Making private insurance companies compete for our business in a national market, not starting a federal super-insurer, is the best way to get health care spending under control.

Democrats’ Proposed Health Plan Leaves 17 Million Uninsured

July 15, 2009 in Blog

The new health care reform plan unveiled today by Democrats in Congress is not universal care.  The Democrat-proposed plan provides for 17 million people to go without health care coverage.  The plan carries other risks, such as:

  • It raises taxes during a recession.  Higher taxes, even on the so-called rich, means there would be less money available for investment and job creation, delaying the recovery and increasing hardship for people who are out of work.  Business owners would slow or stop hiring, as they wait to see what their new payroll tax will be, and whether they will be forced to pay the proposed 8% “pay-or-pay” penalty each year.
  • The government option would crowd out private coverage.  Many workers would be forced onto the government plan against their will, as employers drop their current coverage in an effort to shift health costs to taxpayers.  Yet the President’s family and those of Members of Congress would not be forced onto the government option plan; as dependents of federal employees they would continue to receive first-class coverage.
  • Eight million people with Health Savings Accounts (100,000 in Washington) might lose their coverage if it doesn’t meet the federal definition of mandated insurance.  Innovative patient-centered medical practices in Washington, such as Dr. Erika Bliss’ Qliance clinic in Seattle, would be forced to close.

Here's a good illustration of how the proposed health care plan would work was released by the Joint Economic Committee.


Payday lending bill would reduce access to credit

May 15, 2009 in Blog

The governor is thinking about vetoing a bill that would limit access to credit by placing new regulations on payday lenders. Political activists attack the 2,600 people working in the state’s 571 payday lending stores by calling them “loan sharks,” and say that a short-term loan works out to 2,700% when calculated on a yearly basis. First, they are manipulating their example to make the percentage rate look abnormally high. The fee for a $100 payday loan is $15. The average loan term is 20 days, which is 274% when calculated on an annual basis.

Second, they forget that if you are late by one day in paying your property taxes, the state will charge you 1,825% Annual Percentage Rate (APR) on a $100 tax bill. Here are some other common examples.

Overdraft fee: 912%. For a bounced check of $100 a typical bank will charge an overdraft fee of $35. Although the account holder might pay the original check amount plus the overdraft fee within a few days, the APR for this “loan” is 912%.

Credit card late fee: 652%. For a past-due amount of $100 a credit card company may charge a $25 late fee. If the cardholder pays the amount owed plus the late fee within two weeks, the APR charged by the credit card company is 652%.

Electricity bill fee: 560%. If Seattle City Light charges $30 plus its reconnect fee of $16 for a $100 electricity bill that is 30 days overdue the APR is 560%.

Late rent fee: 365%. Landlords typically add a 5% fee if rent is paid more than five days late. On an overdue rent payment of $100 this works out to an APR of 365%.

The political activists are playing a game by treating three-week loans as if they lasted a year.  Try it yourself.  The mathematical formula is: Loan fee divided by loan amount divided by loan term (in days) times 365 times 100.

If you lend a friend a dollar and the next day he pays you back $1.05, you just charged him 1,825% interest on an annual basis.

The math works the other way too. The borrower of a $100,000, 30-year mortgage at 5% will pay back $193,255 over the life of the loan – or 93% more than the amount he borrowed. A payday borrower will only pay back 15% of the original loan. So who got the better deal? The answer is both. Lenders provide different credit products for different purposes, depending on what the borrower needs. A payday loan makes sense if the borrower needs money for 20 days to pay a property tax bill that carries a stiff late penalty.

Across Washington, payday lenders employ 2,600 people, have a yearly payroll of $60 million, provide health coverage to 3,500 people, create $1.4 billion in easy-access credit, pay $5 million a year in taxes to the state, and are tightly regulated by the Department of Financial Institutions.

People working in payday lending stores don’t fit most people’s idea of “loan sharks.”

With the economy the way it is this is not the time for the governor to: 1) make it harder for people to get access to credit; 2) add new burdens to a business that is actually employing people; 3) reduce tax revenues by stifling a legal, profitable business sector – hey, these days the state treasury needs every dollar it can get.

Seattle Times: Back to the template

April 23, 2009 in Blog

For a while there Seattle Times' top Olympia reporter Andrew Garber was giving readers a more accurate view of state budget trends, explaining that the "cuts" being debated are mostly reductions in the rate of planned spending increase, and that future increases are built in to respond to expected growth of public services, but now, well...never mind.  Today the Times is back to the standard template, describing "deep cuts...totaling $4 billion," and "the total budget about $9 billion," leaving readers with the strong impression that state government is about to get radically smaller.

Compare this to the better-informed coverage reporter Richard Roesler provides today for readers of the Spokesman-Review:  "....the state is expected to have collected about $30.4 billion for the 2007-09 budget.  Over the next two years, state economists think, that will rise to $30.5 billion.  The $9 billion!
shortfall is based on what it would have cost to keep state services and programs as-is..."

Roesler's coverage puts the deficit in a clear context, and explains that the people of Washington will pay slightly more in taxes to Olympia in the next budget compared to the last one, news you won't learn from reading the Seattle Times.

Today It’s Global Warming; In the ‘70s It was the Coming Ice Age

April 22, 2009 in Blog

Untitled-1 On Earth Day, we commonly hear dark predictions about the looming horrors of global warming (a typical example, “What is at stake [is] our ability to live on planet Earth,” Al Gore). 

Yet not so long ago the news media issued dire warnings about global cooling and a coming Ice Age.  Consider these headlines:

• “The Earth’s Cooling Climate,” Science News, November 15, 1969.

• “Colder Winters Held Dawn of New Ice Age,” Washington Post, January 11, 1970.

• “Science:  Another Ice Age?”  Time Magazine, June 24, 1974.

• “The Ice Age Cometh!”  Science News, March 1, 1975.

• “The Cooling World,” Newsweek, April 28, 1975.

• “Scientists Ask Why World Climate is Changing; Major Cooling May Be Ahead,” New York Times, May 21, 1975.

• “In the Grip of a New Ice Age?” International Wildlife July-August, 1975.

• “A Major Cooling Widely Considered to Be Inevitable,” New York Times, September 14, 1975.

• “Variations in the Earth’s Orbit, Pacemaker of the Ice Ages,” Science magazine, December 10, 1976.

Reporters told the public about global cooling in the same confident tone used in today’s coverage about global warming, creating the strong impression that no reasonable person could disagree.  Here are some examples:

“The evidence in support of these predictions [global cooling] has now begun to accumulate so massively that meteorologists are hard-pressed to keep up with it.” The Cooling World

“A study release last month by two NOAA scientists that the amount of sunshine reaching the ground in the continental U.S. diminished by 1.3% between 1964 and 1972.” The Cooling World

“Telltale signs are everywhere...the thickness of the pack ice...the southward migration of warmth-loving creatures like the armadillo...”  Another Ice Age?

“Since the 1940s the mean global temperature has dropped about 2.7 degrees.” Another Ice Age?

“The threat of a new ice age must now stand alongside nuclear war as a likely source of wholesale death and misery for mankind,” The Ice Age Cometh!

Critics will say there was no scientific consensus in the 1970s that the world was cooling, but that’s not how the media reported it to the public.  Similarly, today some scientists want to debate global warming and its possible causes, but the media presents global warming as a settled issue, not to be questioned.  Since the reporting today about world climate is the opposite of what it was 30 years ago, it’s ok to be skeptical about the worst predictions surrounding global warming.

Overspending caused our $9 billion deficit

April 9, 2009 in Blog

Lawmakers in Olympia are wrestling with a $9 billion budget deficit, which raises an important question: How did we get in this mess in the first place?  The conventional answer is the lousy national economy.  But some states don't have deficits and others have shortfalls that are proportionately much more manageable than ours.  Another response is that tax revenues are "down."  But the state will collect as much money in the next budget as in the last one.  We do not have a deficit because Washington citizens pay too little in taxes.

The clear answer is overspending.  In recent years lawmakers and the governor increased permanent spending by 33%, raising the state's financial obligations to unsustainable levels.  It might have worked had the good times continued indefinitely, but when the recession hit poor judgment by state leaders had already placed Washington in a weakened financial position.  The!
chart below shows how the state's general fund spending has increased over time, especially in the 2003-05 and 2005-07 budgets.  If state leaders had not overreached we would not have a deficit today, or at least the budget crisis would not be so severe.


County officials can give back part of their salary to help close budget gap

April 8, 2009 in Blog

I was catching up on my reading and noticed an article from the April 2nd Everett Herald, “County workers agree to take unpaid
time to avoid layoffs.”
  Reporter Noah Haglund says Snohomish County's elected officials told him they are cutting the pay of some employees by 3% but they are frustrated because they can’t lower
their own pay to help close the county’s budget gap.  Apparently an independent commission which meets once every two years sets their salaries.  O.K., they can't increase their own pay, but what is to prevent them from lowering their pay by just voluntarily
returning part of their salary to the county? 
For example, Executive Aaron Reardon could simply write a personal check
for $4,410 (3% of his $147,000 salary) and mail it to the county treasurer.  Other elected officials could do the
same.  That way they would share equally
in the salary reduction they are suggesting for other county workers.  What could be easier?