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Piketty Neglects After Tax Resources

Thomas Piketty’s Capital in The Twenty First Century, has spawned a cottage industry of dissent.  Piketty uses masses of data to illuminate a growth in inequality, that he surmises is an inevitable result of capitalism and can only be resolved by painfully high taxes on the rich. For the left it is a pivotal work that brings data and credentialism to their ideology that capitalism is so flawed that it requires constant and strong control from the state.

Anti-Piketty is a collection of noted economists and political thinkers that find significant flaws with Piketty’s work.  These critiques include serious flaws with the data itself and how it is used, the difficulty of measuring the forms of income and inequality itself, conclusions that are not supported by the data, and a philosophically flawed concept of wealth, growth and capitalism.

From   Chapter 13 of Anti-Piketty. The Financial Times vs. Piketty,   by Chris Giles

The point is true, but it’s also misleading. Piketty and Saez answer the technical question of how taxable income earned by tax units (i.e., a single filer or a married couple filing jointly, unadjusted for the number of dependents) has changed over time. But that answer has vastly different real-world implications from the answer to this question: How has the access of American households to after-tax resources changed over time?

Consider these points: government-provided Social Security benefits and the Earned Income Tax Credit flow in much greater proportion to lower-income Americans than those in upper-income quintiles; and our income tax system takes progressively more from higher-income households. Fringe benefits and non-wage compensation (employer-provided health insurance, for example) have also become a much larger portion of workers’ compensation, as have the value of Medicare and Medicaid health insurance for the aging and the poor.

Because Piketty and Saez’s numbers focus on only taxable market income, they miss those additional sources of income and the progressive effects of our tax system on after-tax resources. And, by focusing their analysis on individual tax filing units, unadjusted for the number of persons residing within them, they miss changes in the composition of American households (i.e., an increasing number of households are made up of unmarried single tax filers who share their income).

The Failure of Pragmatic Health Care

by Henry Oliner

The search for pragmatic health care solutions seems to only create bigger problems.  This is because pragmatism has gone amok; and totally rejected sound economic and political principles. Pragmatic approaches are one thing to address short term problems; but pragmatism without sound supporting principles is doomed.

Pragmatism in health care is failing because the ideology is wrong, and the economics is wrong.

The worst obstacle to health care and to tax reform as well is the atmosphere of constant change. Even the best solution will be neutered by the belief in the market that it will only last until the next election.  How can medical practices, health insurers, businesses and individuals plan when every year they are confronted with significant changes.

I do not know that any economic model considers the lack of faith in the permanence of the solution, and this may be the costliest part of any reform proposal. How can the OMB ‘score’ an issue that is not acknowledged?

Our health care problem is an accumulation of tax policies, mandates, cross subsidies, regulations, wishful thinking, social engineering. What is missing is sound economics and thoughtful policy.

The ‘right to health care’ is a meaningless myth.  Health is a market for drugs, doctors, diagnostics, devices.  The ‘right to health care’ means nothing without providing these services and products. It means nothing without discussing quality and access (service). To declare a right to health care is to totally ignore that it is an economic problem and requires economic solutions.

Combining the issue of health care cost and insurance confuses the issue. The applies to mixing the problems of cost and access.  Using insurance to pay or even file routine expenses to insurance only adds to cost.

Preferential tax treatment for business provided insurance removes consumer choice.

Mandating coverage for pre-existing conditions without holding the consumer responsible for maintaining coverage is just another cross-subsidy hike in premiums.

For decades, the market has been polluted by government meddling, laws, regulations, rules and mandates.  Yet when prices continue to rise the market is blamed.

The health insurance controversy is the pragmatic apex of sharply conflicting ideologies and both will not easily coexist. It will take more than the repeal of Obamacare to fix. Obamacare was just a bad response to a history of bad policies. Trying a different bad response will not fix the problem either.

It is time to stop the tinkering around the edges and address the ideological failures and the accumulation of bad solutions enacted under the guise of pragmatism.

Only if we fix the ideology will we be able to address the problem with the permanence it requires.  It’s a tough sale and it does not appear that either party is up to the task.

Why the Working Class Rejected Marx

from Sarah Hoyt, Poor Darlings:

So the bright men and women who embraced Marxism for all things, particularly as a cure-all to the “greed” and “hatred” that had led to world war one were destined to be disappointed.  The working class they counted on to destroy the system were by and large sane people, with their heads on tight.  They knew that, harsh as the industrial revolution jobs were, they were better than looking at the South end of a Northbound mule or the other “earthy” jobs available back on the farm.  And they knew that things were getting better, already.  And they had ambitions, which didn’t involve giving jumped up intellectuals the right to dictate their lives.

HKO

Great post, read the whole piece.

The Cruz Option

from Kevin Williamson at National Review,  Apartment Fires and Health Insurance

The problem for health insurance is the same as the problem for condominium sprinklers: The benefits are desirable, but they are not free, and many people, given a choice, would spend their money in a different fashion. In the matter of health insurance, Senator Ted Cruz has offered an amendment that would allow insurers to sell relatively low-cost plans that do not cover everything that must be covered under current ACA regulations. Critics, including Senator Susan Collins, have protested that these policies are too “skimpy,” that they do not include all of the coverage and benefits that we might like to see people have. But all the Cruz amendment does is give buyers a choice. The danger isn’t that insurance companies will fail to offer more expensive and comprehensive policies — of course they will offer them; those are more profitable — but that many Americans will prefer less expensive and less comprehensive health-insurance plans.

Pal Review

from Steve Milloy at the WSJ, A Step Toward Scientific Integrity at the EPA:

The most prominent of the EPA’s myriad boards of outside advisers are the Science Advisory Board and the Clean Air Scientific Advisory Committee, or CASAC. Mostly made up of university professors, these boards also frequently draw members from consulting firms and activist groups. Only rarely do members have backgrounds in industry. All EPA boards are governed by the Federal Advisory Committee Act, which requires that they be balanced and unbiased. While the EPA is required by law to convene the SAB and CASAC, the agency is not bound by law to heed their advice.

In 1996 two-thirds of the CASAC panel had no financial connection to the EPA. By the mid-2000s, the agency had entirely flipped the composition of the advisory board so two-thirds of its members were agency grantees. Lo and behold, CASAC suddenly agreed with the EPA’s leadership that fine particulates in outdoor air kill. During the Obama years, the EPA packed the CASAC panel. Twenty-four of its 26 members are now agency grantees, with some listed as principal investigators on EPA research grants worth more than $220 million.

HKO

This is the consequence of political consensus ruling over scientific inquiry. Scientific objectivity is thwarted by intellectual McCarthyism. Dissent is demonized, careers are destroyed.  It is more like religious fanaticism than science.  Yet they have been able to brand the right with the pejorative of being anti-science.  Moral superiority justifies illiberalism. Obvious conflicts of interests are ignored.

Read the whole article.