Part III Obama and Haley on Health Policy

Part III Obama and Haley on Health Policy

by

Howard Adelman

Obama boasted that the overseas health policy of his administration had been successful in stopping Ebola in its tracks and significantly reducing the scourge of HIV/AIDS. These were successes, not only in other countries, but were important in keeping Americans safe from these diseases. Obama had now set his regime on the path of eliminating malaria. But the criticisms ignored these successes and focused on the alleged failures of Obamacare (the Patient Protection and Affordable Care Act otherwise known as ACA) for raising insurance premiums significantly and eliminating a patient’s choice of his or her physician. Were Haley’s critiques on these two issues warranted? What were other successes and failures of Obamacare? For the major issues were not just the costs of health-care insurance coverage and access to care.

First some disclosure. When I was a medical student in the late fifties and Canadian Medicare [C-M] had not yet been invented in Saskatchewan by Tommy Douglas, I once dared to raise the issue of socialized medicine with our clinician whom our team had taken out to dinner. Two of my fellow students, those on either side, both kicked me under the table. Among the vast majority of doctors, discussing a state-run medical plan with access guaranteed to all was a no-no at that time.

When I lived in the intern quarters at Mt. Sinai Hospital in Toronto (I was not an intern) and worked in radiology, I conducted a number of survey experiments. One was to track the topics of conversations when physicians ate in the cafeteria. I was instructed to sit with them and not the nurses or other health service workers. (After all, this was 1958.) As one result, I found that 53% of conversations by physicians focused on patients who did not pay their bills and the problems of collection.

I offer this background to indicate both my bias and that of many physicians not exposed to some form of Medicare. But more guidance is needed than revealing biases. I use the designation C-M to differentiate the Canadian plan from the American Medicare prior to Obamacare that provided health insurance for seniors. When C-M was introduced, first in Saskatchewan and then eventually across Canada, doctors’ salaries immediately increased. The reason was simple; the problem of delinquent patients as well as the costs of collection had been eliminated in the single-payer system. Though increasing numbers of physicians gradually came around to acknowledge that C-M was an improvement in most ways over the previous system, many continued to gripe about the system nevertheless. Because of my bias, physician bias and the inevitable bias of many, I will refer only to the work of independent analysts.

C-M eliminated the problem of unpaid bills and collection. Obamacare has not. In fact, some evidence indicates that Obamacare has possibly exacerbated the problem. For example, problems of reimbursement to hospitals and physicians were virtually eliminated by C-M. In the U.S., while reimbursement to hospitals has been greatly improved, under Obamacare, physician reimbursement has only improved slightly. In the U.S., citizens have their choice of insurance providers. They can enroll in one of a number of competing plans. But what happens if they do not keep up with paying their premiums? They lose their coverage, perhaps after 90 days of non-payment. However, the insurers are only required to pay the doctors for the first 30-day period of unpaid premiums. Medical services are provided for the remaining 60 days with the understanding that the patients are insured. But they are not. The doctors cannot collect from the insurer and will, in most cases, be unable to collect from the patient. C-M virtually eliminated the problem of collections. Obamacare, on the other hand, seems plagued with doctors’ complaints about the unreliability of reimbursement. In addition to continuing and, perhaps, even increased losses from non-payment, there have been additional bureaucratic expenses. While C-M reduced the costs of electronic record keeping since records had only to conform to the requirements of a single payer, in general, administrative overhead for electronic record keeping as well as for collections has increased for American physicians.

One result is that doctors refuse to join many plans. This forces a patient to try to reconcile the plan he/she is in with the doctor she has selected. The two are often incongruent. That physician may or may not be covered under the plan chosen. The problem becomes a tremendous one in cases of acute health problems; a patient may have to choose between paying for a physician out-of-pocket to get the physician of his/her choice and available, or be forced to find a specialist covered by the insurer.

At the same time, to keep premiums low, insurers have to press to keep payments low. The lower the payments, the fewer the number of doctors willing to be part of the referral list covered by the insurer. Insurers have to walk a fine line between keeping premiums low, and hence payments to doctors low, versus maintaining payments at a high enough level to keep doctors enrolled. In Canada, the tension between keeping premiums low was not set off against keeping doctors enrolled in one insurer versus another, but keeping doctors from migrating to the U.S., where, in many cases, especially for specialists, medicine had been a much more lucrative profession as long as a doctor was not working in a public hospital. In the U.S., the tension has shifted. If reimbursement rates to doctors remain too low under Obamacare, more doctors opt out, thereby giving patients access to insurance but at the cost of limiting access to doctors. This is not just a possibility. 70% of Obamacare plans offer access to fewer hospitals and fewer doctors than employer-sponsored group plans or pre-Obamacare individual market plans.

The Academy of Family Physicians has otherwise lauded Obamacare, because the law offers health insurance for everybody, encourages preventative care, allows children to stay on their parents’ insurance plans until age 26, and delivers insurance for people with pre-existing conditions. The major problem Obamacare addressed was access to health care (the uninsured rate since Obamacare was introduced has dropped below 12%), but the way it was structured through the compromise negotiations meant other problems were accentuated. One major problem is the amount of time an American has to spend shopping around for a suitable plan that offers access to a doctor of his/her choice and at a level of care he/she can afford.

There is another problem. Many private exchanges avoid hospitals that are part of university-based health networks because their costs are higher given their role in research and the fact that they deal with much tougher, more complex and more expensive cases. On the other side, new enrollees are likely to inadequately insure, especially if they are young, to avoid higher cost options.

In addition to the pressure towards lower payments to doctors, another problem common to both C-M and Obamacare is the increased regulation and subjecting doctors to government regulation and oversight, a problem compounded in the U.S. by the addition of non-state insurers which have their own regulatory and service demands.

Both countries face the problem of a shortage of physicians, but the problem is even more acute in the U.S. A study by Paul Howard and Yevgeniy Feyman (“The Obamacare Evaluation Project: Access to Care and the Physician Shortage,” 26 June 2013) projected that, “population growth, demographic changes, and an expansion of insurance spurred by Obamacare will contribute to a significant shortage in primary-care physicians over the coming decade. We project that by 2025, states will experience a shortage of roughly 30,000 primary-care physicians—with about 16.5 percent (4,950 physicians) of this shortage being driven by the expansion of insurance coverage under Obamacare, while the remaining 83.5 percent (25,050 physicians) will be due to population growth, aging, and various demographic shifts.”

This data is crucial, for it means that even if only 16.5% of that physician shortage is due to Obamacare, since the U.S. already fills its current shortages by the import of physicians from abroad (over 25% of physicians in the U.S.), very many of them from poor countries with an already high physician to population ratio, Obamacare could be contributing to a decline in health services in countries which are in most need of enhanced health care. Given the U.S. pattern and extent of training of physicians, one can expect the proportion of imported health professionals, not just physicians, will increase.

Doctors face the threat of deep payment cuts under the application of the U.S. Medicare’s sustainable growth rate (SGR) formula, wherein, the annual growth of Medicare physician payments is subject to an overall ceiling. Seniors covered by Medicare are affected. The competition for doctors serving them has grown as drastic provider payment cuts called for by the SGR also tend to reduce seniors’ access to care. The legislated reductions have been temporarily set aside somewhat as each year Congress overrides SGR through what is called a “doc fix.” Without it, payments to physicians might decline as much as 25%.

The same pressures on physician remuneration have taken place in Medicaid as well. For states that agreed, Medicaid covered individuals earning up to 138% of the federal poverty level, just over $16,000 last year. Numbers were expected to increase as almost 30% of the almost 50 million uninsured Americans, that is, 15 million Americans, were estimated to be eligible. Given that about half the states did not opt to enter into the program, the enrollment of 12 million in Medicaid was viewed as outstanding as the number of uninsured was cut in half. Between October and December 2013 when the program opened up, 6.6 million applications were received directly by the federal government, most of which were applications for more than one person. Many more were received through the State Based Marketplaces (SBMs) and the Federally Facilitated Marketplace (FFM) operating in 36 states, the latter accounting for 2.7 million applications alone. Expanding eligibility, introducing a simplified enrollment process, broadening the outreach and putting a concentrated effort on enrollments all resulted in Obamacare being a tremendous success with respect to access for many who lacked it. But with much lower remuneration rates (almost 60% of regular charges), access has also been limited because 1 in 3 primary care physicians refused to accept new Medicaid patients. On the other hand, although reductions in payments to Medicare Advantage plans enacted under Obamacare were expected to lead to reductions in Medicare Advantage enrollment, enrollment in fact rose, increasing by 50% to 5.6 million.

So Haley was incorrect. Obamacare has not eliminated the choice of physicians, but it has limited that choice to a greater extent than existed previously for most Americans. The benefit is that up to fifty more million Americans will have a choice to access the health care system that they previously lacked. At the same time, insurance premiums have increased as Haley stated, but this was inherent and was bound to be the case if insurers were forced to cover those with pre-existing conditions and give access to many more old people and even young people in poor health. By forbidding denial of coverage to consumers with pre-existing conditions, as well as imposing taxes and fees to fund aspects of the new law, to make up for the costs of Obamacare and still keep premiums low, insurers put pressure on both physicians and hospitals to accept payments discounted by up to 30%. What is even clearer is that, on the issue of choice of physicians or access more generally, or the cost of premiums, the problem cannot be reduced to a sound bite and the hyperbole that the choice of physicians for Americans has been eliminated.

There are many other real problems and merits of Obamacare:

  • To avoid conflicts of interest, doctors were not allowed to refer patients to hospitals in which they had an economic interest, but the cost has been to place many excellent physician-owned, specialty hospitals off limits even though they had a record of providing high-quality patient care and even though this narrowed accessibility
  • The “nonprofit” Patient-Centered Outcomes Research Institute (PCORI) promises to provide valuable data on the clinical effectiveness of medical treatments, procedures, drugs, and medical devices, but the guidelines will almost inevitably result in further constraints on the ability of the physician to have the final say on treatments and procedures when reimbursements are tied to the results of PCORI
  • Since last year, as an inevitable result of such programs, however organized, reimbursement has been adjusted to reflect performance based on the analysis of data collected, with the concomitant result that the variety of needs of patients and responses of physicians are forced into a cookie-cutter formulation with the inevitable result that an incentive develops for doctors to check the boxes which yield the highest returns for the least amount of time invested
  • Obamacare ignored the issue of medical liability and tort reform, a problem very specific to the U.S.

The reality is that a system that aspires to allow physicians untrammeled control of patient care and the patients to be the key decision makers in the financing of care is a total chimera. This illusionary utopia cannot be achieved for physician decisions, especially as one moved up the ladder of specialization; physician decisions were always subject to checks and balances, including checks imposed by payers that have significantly increased both under a state model and a purely free enterprise model.  The vision of patients being in control of financial decisions was the nonsensical partner to this illusion, for the only real partners were the wealthy who could afford to pay for what they wanted. The middle class had to choose only what they could afford and a whole swath of Americans was denied any choice at all.

With the help of Alex Zisman

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IV Haley and Obama – Military and Foreign Policy

 

IV Haley and Obama – Military and Foreign Policy

by

Howard Adelman

On the issue of the role of the military and security of Americans from overseas threats, Haley insisted that the U.S. was facing “the most dangerous terrorist threat since 9/11,” and called for “strengthening the military so when we fight wars we win them.” Obama, based on the intelligence reports he reads every morning, agreed that these are dangerous times, but America faces no dangers from a rival power. America had the most powerful and best military force in history and spent more on its military than the next eight nations combined (four if you calculate based on a percentage of GDP). But the danger comes from failed and failing states, not rival powers. Decrying America’s growing weakness was just so much hot air.

Obama did not denigrate the threat that terrorists posed. His first priority was going after terrorist networks to protect Americans. But that did not make this task WWIII.  Terrorists in the back of pickup trucks and making bombs in a garage do not pose an existential threat to the U.S. Rather than rhetorically building them up, Obama called for rooting out these killers and fanatics, hunting them down and destroying them. Obama claimed that America was on track to do just that, for in concert with its allies, the U.S. was working to cut off ISIL’s financing, disrupt its plots, stop the flow of fighters and stomp out its vicious ideology. He called on the Republican- dominated Congress to formally authorize the use of military force against ISIL.

Does that require an additional carrier group, additional ground combat forces, modernization of America’s nuclear fleet and a host of other enhanced expenditures on the military? If there is indeed a real danger of WWIII, say with China, such an enhancement might be warranted. But if America intends largely to stay out of other country’s civil wars, if America is going to concentrate its military forces in fighting ISIL, then increasing the Pentagon budget by a trillion dollars as Senator Rubio proposed (cf. an analysis by the Cato Institute) is not necessary.

Obama’s proposed military expenditures are more than sufficient both to go after terrorists and provide a cover and help for America’s allies. In going after terrorists, Obama articulated the correct approach. “When you come after Americans, we go after you. It may take time, but we have long memories, and our reach has no limit.”

Not only are American memories long, but its concerns are very broad. Though the immediate focus may be terrorists, the long term threat remains instability because of weak states, ethnic conflict, poverty and even famine. Tough talk and calling for the carpet bombing of civilians will not solve such problems. Nor will assigning America the role of rebuilding every nation that falls into crisis. Effectively, Obama called for managing threats rather than aspiring to a utopian ideal of eliminating them. And then he reiterated the central platform of his foreign policy – building coalitions “with sanctions and principled diplomacy.” The policy applied to China with TPP and climate change agreements. It applied to the re-opening to Cuba. In this pairing of diplomacy with military and economic threats, Obama defined leadership in the world as the “wise application of military power, and rallying the world behind causes that are right.”

What about the main foreign policy issue of Obama’s presidency, preventing a nuclear-armed Iran? Instead of insisting, as Haley did, on only entering into international agreements celebrated in Israel rather than in Iran, Obama insisted that his program combining sanctions with diplomacy had worked. Iran was in the process of deconstructing its nuclear program. The world had avoided another war that would have been the consequence of a military attack against Iran’s nuclear facilities.

On this central foreign policy issue, was Obama correct? Or were his Republican critics? Even though Netanyahu has now acknowledged defeat, many if not most Republicans have not. On Monday (18 January), that is, on Implementation Day of the Iran Nuclear Deal, Fox News published a peace by one of its frequent contributors, Fred Fleitz. (http://www.foxnews.com/opinion/2016/01/18/iran-nuclear-agreement-is-national-security-fraud.html)

Fleitz worked for the CIA and various national security agencies for a quarter of a century. When John R. Bolton, the űberhawk in the Republican constellation, was Under Secretary of State for Arms Control and International Security in the George W. Bush administration, Fleitz was his Chief of Staff. Fleitz is the author of Peacekeeping Fiascos of the 1990s: Causes, Solutions and U.S. Interests and currently is senior vice president for policy and programs with the Center for Security Policy (CSP), a Washington, D.C. right wing national security think tank. As Wikipedia described it, “The Center for Security Policy (CSP) is a Washington, D.C.-based national security think tank that has been widely accused of engaging in conspiracy theorizing.”In July of 2011, even before the interim agreement with Iran was agreed upon, in an op-ed in The Wall Street Journal, Fleitz accused leaders of the U.S. intelligence community of being unwilling to conduct a proper assessment of the Iranian nuclear issue at variance even with the Obama White House. Further, he insisted that “liberal professors and scholars from liberal think tanks” had given biased (that is, favourable) reviews of the 2011 National Intelligence Estimate (NIE) on Iran that was classified at the time.

 

In other words, Fleitz contended that leaders of the U.S. intelligence agencies and liberal intellectuals had been in cahoots in both misleading Americans and, even more strangely, were at odds with the Obama administration. Recall my earlier blogs on the Iran nuclear program: the NIE had concluded that Iran, though it was preparing the ground for a nuclear weapons program, had not yet decided to actually build a nuclear weapon. Fleitz, in contrast, insisted that Iran was on the brink of testing a nuclear device.

In 2002, when he was appointed as an analyst for the House Permanent Select Intelligence Committee by GOP Chairman Pete Hoekstra, Fleitz was one of the leaders in the chorus that insisted that Cuba had under development a biological weapons program, a conclusion he justified not on the basis of an objective collection of facts and analysis, but because all intelligence analysis is political. He also had a reputation of continuing Nixonian practices. He was widely suspected of being involved in releasing the name of Valerie Plame, a covert CIA operative, to the media in retaliation for her husband’s public denial of George Bush’s claims about Iraq’s WMDs. Fleitz has had a stellar record of exaggeration, distortion and hyperbole.

This background is important in understanding Fred Fleitz’s attack on Monday which one of my readers sent to me. It exemplifies some of the wild analysis behind the attacks on the Iran nuclear agreement made by Republicans. One accusation is that Iran “will receive approximately $150 billion in sanctions relief even through Iran is still designated by the United States as a state sponsor of terror.” The latter is true – Iran is designated by most Western countries, with good justification, as a state sponsor of terrorism, though an enemy of ISIS. But it is not true that Iran will receive $150 billion in sanctions relief, monies that it can then use to foster terrorism.

http://www.washingtoninstitute.org/uploads/Documents/other/SzubinTranscript20150916-v2.pdf

The rest of Iran’s reserves are not liquid; they have already been pledged as guarantees for other purposes: $20 billion as collateral for projects with China; tens of billions more to back nonperforming loans to Iran’s energy and banking sectors. Further, of that $50 billion, Iran cannot spend the $50 billion; it needs to hold most of those funds in reserve to defend their currency, the rial, and to finance the pent-up demand for imports. $50 billion is just enough to finance about 5-10 months of Iranian imports and is the buffer that the IMF recommends as a prudent reserve. Further, in President Hassan Rouhani’s economic revitalization program, the government will be torn between taking the lid off the consumer sector and the need of government funds to get out of the deep economic hole Iran fell into as a result of the sanctions. Iran needs $100 billion for unfunded pensions and debts to the domestic banking sector, $100 billion for infrastructure, and $170 billion to once again make the oil and gas sector functional.

Iran has supported the murderous regime of Syrian President Bashar al-Assad and Hezbollah, its terrorist proxy. Is this accurate? In previous years, Iran has been supporting Syria to the tune of $4-7 billion per annum, if the value of Iranian oil transfers, lines of credit, military personnel costs and subsidies for weapons for the Syrian government are all taken into account.  Nadim Shehadi, director of the Fares Center for Eastern Mediterranean Studies at Tufts University, claimed that in 2012 and 2013, Iran spent $14-15 billion in military and economic aid to Assad. Tehran is very unlikely to spend significant increased amounts in support of terrorism and destabilizing the Middle East only because it already has been spending plenty. Iran did increase its military support of the Assad regime. In preparation for the October offensive against Aleppo by the Syrian forces, Iran sent in 2,000 Republican Guard troops in addition to Lebanese Hezbollah fighters who fought alongside Assad’s army with Russian air and cruise missile support from its ships in the Caspian Sea.

In contrast, Qatar, Saudi Arabia and the U.S. did not even provide the Free Syrian Army (FSA) with advanced military equipment even though the FSA had been significantly debilitated in its continuing battles with ISIS. Nor did the Americans offer to provide a no-fly zone to enable the FSA to resist the Syrian army advance, though the three countries did provide extra military supplies and anti-tank weapons, the latter used to excellent effect to destroy a considerable number of tanks and armoured vehicles. The FSA Brigades (the Thuwar al-Sham Battalions, the Sultan Murad Brigade, the 13th Division, the 101st Division, Suqour al-Jabal, etc.) actually managed to hold off the recapture of Aleppo by the Syrian forces and its allies, though in its retreat back to Aleppo the FSA lost a number of villages and towns on the Ghab Plain – including Tall Qarah, Fafin, Kulliyat al-Mushat, Tall Suwsein Abtin; the desert and mountainous terrain of the Aleppo southern countryside greatly benefitted the Assad regime forces which were armed with heavy weapons.

Thus, as I predicted even while I strongly supported the nuclear deal, Iran could be expected to enhance its backing of terrorism and the Assad regime. As it happens, the enhanced support in Syria took place independently of the Iran nuclear deal. For Iran’s assistance to both terrorist and oppressive allies was based on the principle: “in for a penny, in for a dime,” Further, the implementation of the deal depended on Iran’s Supreme Leader Ayatollah Ali Khamenei providing continuing support for Iranian President Hassan Rouhani. Instead, Khamenei warned the so-called moderates of American perfidy and accused the U.S. of deceit and treachery. More importantly, Khamenei auspiciously disqualified a number of reformist candidates who applied to run in next month’s elections, including some sitting members.

Fleitz made a number of other accusations.

  1. “When Iranian officials refused to give up their uranium enrichment program, the U.S. said they could keep it.” Wrong! The U.S. and its allies only aimed to dismantle Iran’s nuclear arms enrichment program and not its use of nuclear energy for peaceful purposes.
  2. “Iran will continue enriching uranium under the nuclear deal with 5,000 uranium centrifuges.” Yes, but at very low grades unsuitable to be converted to very high grade enriched uranium needed for nuclear weapons except through a very lengthy process.
  3. Iran swapped all of its highly enriched uranium, which was shipped to Russia, for an equivalent amount of uranium ore which Iran was free to enrich. True, but the enriched uranium shipped to Russia was enriched above 5% and some of it to almost 20%, whereas it will take months just to convert the uranium ore for which it was swapped to just above 3%.
  4. The Chinese will assist Iran in redesigning and rebuilding its heavy-water Arak plutonium facility after its core was removed. True, but the redesign will not permit the reactor to be used to produce plutonium suitable for a nuclear weapon.
  5. “When Iran balked on including restrictions on ballistic missile tests in the agreement, they were removed.” Wrong! Restrictions on Iran’s missile program were an ambition, but not an expectation. Restrictions were never included in the agreement. (I will comment further on the American continuing effort to limit Iran’s missile program.)
  6. “The Obama administration also took Iran’s sponsorship of terror and its meddling in the Middle East off the table.” They were never on the table, even in the 2012 Interim Agreement.
  7. “The deal drops U.N. and EU sanctions on Iranian terrorist individuals and entities.” U.S. allies and the UN are not colonies or satraps of the U.S.
  8. “The U.S. encouraged Iran to play a more active role in Iraq.” But the tensions between the Shiite government and Iraqi Sunnis were worse before under Maliki who was not Obama’s creation.

The lesson: Republican ideologues cannot be relied upon to discern fact from fiction or offer a reasonable analysis. The reality is that, contrary to Fleitz’s contention, the Iran nuclear deal has not only slowed Iran’s pursuit of nuclear weapons; it has stopped it altogether. Haley has been too influenced by these hacks.

The reality, as Adam Szubin articulated it so well, is:

  1. JCPOA does not in any way affect American sanctions with respect to Iran’s support to terrorist groups;
  2. It does not touch on Iran’s human rights abuses;
  3. It does not touch on Iran’s support for the Assad regime, nor was it ever intended to;
  4. The Iran nuclear program is the most serious issue of all to the U.S., to its allies, and particularly to Israel and dismantling it should not be made hostage to Iran’s support for terrorism, abuse of human rights or backing for Assad.

The result: on Implementation Day at the beginning of this week, the International Atomic Energy Agency (IAEA) certified that Iran had reduced its stockpile of enriched uranium by 98%, the number of centrifuges by two thirds. Iran removed the atomic core of the Arak Reactor so it could not produce plutonium for military purposes. In return, the embargo on Iran’s reserves was removed. What should have been a day of celebration for the whole world was marred by hatred and bitterness of Khamenei, on the one hand, and the belligerent paranoid fantasists in America on the other hand.

Nevertheless, there remains a great deal to be done on non-nuclear issues. There is a need to have Iran own up to its deceitful methods of circumventing the IAEA and hiding its program; as the IAEA reported in December, Iran had failed to fully cooperate and even provided some answers to investigators that were blatantly false. There is Iran’s sponsorship of terrorism. There is Iran’s, not only support for, but military intervention in Syria. There are a plethora of human rights violations. And there is the constant – the Iranian regime’s implacable hatred of Israel. There are no sanctions in place against Iran for the latter evil practice, but sanctions do remain in place by the U.S. and are being enforced for the unsettling and destabilizing practices of Iran in the international arena – its missile development program, its support for terrorism and its intervention in Syria on behalf of Assad against the FSA.

The U.S. embargo on Iran remains almost entirely intact. U.S. investment is still prohibited. Iran and its companies cannot access the American banking system. U.S. sanctions against Iran as well as designated companies and individuals prior to the sanctions imposed against its nuclear program remain in place. Perhapsamore important, secondary sanctions against non-Iranian banks doing business with embargoed individuals, companies and state entities remain in place; non-Iranian businesses working with those Iranian entities will be cut off from using the U.S. banking sector.

For example, those banks cannot do business with: the Qods Force, or any of its officials or subsidiaries such as Bonyad Taavon Sepah; its construction arm, Khatam al-Anbiya; its oil and gas engineering company, Sepanir; Mahan Air; Bank Saderat, one of the largest commercial banks in Iran; key Iranian defense entities, including the Ministry of Defense for Armed Forces Logistics (MODAFL), the Defense Industries Organization, the Aerospace Industries Organization, and other key missile entities, including Shahid Hemmat Industrial Group and Shahid Bakeri Industrial Group; the Tiva Sanat Group which worked to develop the Iranian navy’s fast boat; the Iran Aircraft Manufacturing Company (unmanned aerial vehicles (UAVs).

With respect to enforcement of the nuclear deal itself, those sanctions are only suspended; the snap-back provisions remain in place in case of violations and can come into force in a few days. This also applies to multilateral sanctions by the United Nations should just one of the P5, the permanent five members of the UNSC, opt to do so. Finally, there are no grandfather clauses in the JCPOA protecting preexisting contracts against snap-back. That is, contracts entered into before the snap-back will also be subject to sanctions.

“The JCPOA is built to eliminate Iran’s nuclear threat and the potential for any of Iran’s proxies or affiliates to acquire a nuclear weapon. Thus far, it offers great promise.” That deal does not diminish the terrorism threat and the threat to regional stability. “Our joint goal—and one we share with our Israeli and Gulf partners—is to ensure that we’re using all of our tools, including sanctions, to combat all of these conventional activities… the JCPOA is a strong deal. It makes the United States and our allies safer by ensuring that the nightmare scenario… (terrorist entities with access to nuclear devices) does not come close to becoming a reality. The deal is not based on trust but on verification and on scrutiny.” (Szubin)

With the help of Alex Zisman

 

Obama and Haley: Part II Economic Policy

Obama and Haley: Part II Economic Policy

by

Howard Adelman

On economic policy, Governor Nikki Haley criticized Barack in six areas: excessive taxation, excessive expenditures, excessive debt, and the failure to provide adequate support for innovation, education and ensuring increasing incomes for average Americans. What did Obama claim about his record on taxes and policies going into the future?

He advocated raising taxes for those who avoided taxes by opening offshore accounts. On the other hand, he also argued that the Trans-Pacific Partnership (TPP) will both make more jobs for Americans, but also cut $18,000 in taxes on products made by Americans. With respect to businesses, Obama argued that his policies were intended to lift up businesses, not oppress them by more taxes, at least those businesses which try to do right by their workers in terms of the rules of the TPP which will recognize the benefits for their shareholders, customers and communities when they did.

Republicans proposed much more extensive slashing of taxes on personal and corporate incomes. Texas Sen. Ted Cruz proposed lowering the rate to 10%, Florida Sen. Marco Rubio proposed eliminating it, while Donald Trump wanted to set capital gains tax rates at 20%.  Who would benefit from a reduction? To a considerable extent, and certainly disproportionately, wealthier Americans! Certainly proposals to cut rates on capital gains and on qualified dividends would as well. After all, almost 80% of federal and state taxes from the latter two sources come from the very wealthy, in fact, the top 1%. Capital gains taxes on assets held for more than a year and then sold, as well as taxes on corporate dividends, in 2003 were reduced to 5% in the lowest two income tax brackets and 15% in other income brackets constituting the vast majority of income from capital gains and dividend taxes. Obama extended these provisions of Bush’s Tax Prevention and Reconciliation Act of 2005 to 2010, but in The American Taxpayer Relief Act (2012) signed in January of 2013, that tax was raised to 20% for those in the highest 39.6% tax bracket. The rich were still entitled to pay 50% of normal income taxes on these two taxes. And the rich were overwhelmingly the beneficiaries of this type of reduction in taxes. (Cf. Thomas Hungerford (2010) The Economic Effects of Capital Gains Taxation.)

If Republicans eliminate estate taxes altogether, federal coffers would be deprived of $30 billion a year. These were figures cited in a New York Times op-ed piece last week by Mike Lofgren, a former Republican staff member who served on both the House and Senate Budget Committees and authored the book, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government. As it is, inherited property is only taxed for capital on the difference between its value at the time the property was inherited and when it was sold at the time it was sold. This means that there is no capital gains tax, that is zero tax, from the time a person acquired the property to the time of his/her death and bequeathing that property to a heir. Hence, the proliferation of “trustee” adults who effectively live as rentiers on the wealth accumulated by the family members who bequeathed them their property.

This supports Obama’s argument that the democratic deficit in American politics is fed by economic distortions and the widening gap between the wealthy and the rest. Cutting taxes is a formula for enhancing the control of money over American democracy, not reducing it. The state would be starved in its ability to do much of anything for the middle and lower classes, quite aside from damaging infrastructure and environmental projects that would benefit all Americans.

In contrast, like the new Liberal government in Ottawa promises to do, Obama did increase taxes on the wealthiest Americans, those earning in excess of $250,000 per year, including decreasing the level of charitable deductions from 35% to 28%. But as he said in a speech when he was first running for election in 2008 (23 October), Obama promised those earning less than a quarter million a year would not pay an additional dime in taxes. That included 98% of small businesses. Joe the plumber would not be affected, only Joe the CEO and Joe the hedge fund manager. In fact, most middle class families saw their income taxes decrease. The typical middle-class family received about $1,000 in tax relief, paying taxes 20% lower than under Ronald Reagan. His original budget gave a tax credit of 6.2% of earned income up to $400 for single workers making less than $75,000 a year and $800 for married couples making less than $150,000 per year.

On the other hand, by eliminating “tax credits that have outlived their usefulness,” closing corporate tax loopholes, and reversing a portion of the tax cuts awarded to the wealthiest 2% of families, the treasury recouped greater revenues overall while cutting income taxes overall, taking a smaller ratio of GDP through income taxes than under Reagan. By reducing net overall taxes at the same time as tax loopholes were closed and tax credits eliminated where they were no longer useful, it is estimated that the government took in or is on the verge of taking in at least 600 billion in extra revenue over the last seven years. Contrast the tax cuts of the Bush administration that distributed twice that amount, about $1.35 trillion over 10 years, mainly to the wealthy, but also families with children. IRS data released showed that the average effective tax rate for the richest 400 Americans rose in 2013, but only to 22.9% compared to 16.7% previously. No wonder the very wealthy and the Republicans that represent those interests have been irate.

What about capital gains taxes, taxes on dividends and estate taxes? On the latter, taxes of 35% on estates and individuals worth over $5 million and on family estates worth over $10 million were restored. Obama when he took office proposed dividend tax rates 39% lower than what George W. Bush proposed in his 2001 budget tax cuts. On capital gains tax, Obama continued the rates set by George W. Bush. It is not clear why since this certainly benefits the wealthy most of all since lower capital gains taxes means a decrease in revenues for the state with no offset whatsoever in economic stimulus though no correlation with decline either. (Cf. Len Burman (2012) “Capital Tax Rates and Economic Growth (or not),” Forbes, 15 March 2012; See also the independent Congressional Research Service (CRS) in its report (subsequently withdrawn under pressure from Senate Republicans), Taxes and the Economy: An Economic Analysis of Top Tax Rates Since 1945 and Small Business and the Expiration of the 2001 Tax Rate Reductions: Economic Issues.)

It would appear that Haley’s criticisms of Obama in this area were simply a repetition of a Republican mantra with little if any basis in fact. What about Haley’s complaints about exploding expenditures under Obama? She certainly has a case for 2009. In seven months, the American Recovery and Reinvestment Act (ARRA) led to over an additional $240 billion being poured into the American economy. In total, by the end of March 2011, over $630 billion additional funds were invested in the U.S. economy. These were not expenditures in the normal sense of the term, but capital investments in infrastructure, in bailing out the automobile companies and saving the American economy. Obama has every reason to boast and no reason to regret making those expenditures (investments), though some criticism seems warranted on who received the benefits of those investments.

What about deficits? The budget was last balanced in 1998, with credit going largely to Bill Clinton even though Republicans controlled Congress at the time, for Clinton had fulfilled his promise of reducing the deficit, as had George Bush Sr., his predecessor. As a contrast, the leading Republican contender, Donald Trump, would add a staggering $12 trillion to the deficit. Though his competitors are all far behind in such an extravagance, the average addition to the annual deficit would be $3-4 trillion. George W. Bush inherited a $236 billion budget surplus from Bill Clinton but by the time he left office in 2008, the deficit was $408 billion and the national debt had doubled. As Mike Lofgren, the Republican budget staffer quoted above, opined, the Republican ritual denunciation of deficits is a fraud. As my son, an economic historian at Princeton wrote me, “It’s the worst kept secret of the last 30 years that the Republicans are reckless on the economy, but they still froth about fiscally profligate Democrats…”

Haley may be much more civil than the current Republican candidates for President, but on the economy she sings from the same denial of economic facts that has become the habit of Republicans. Tax cuts, especially those that are erroneously targeted, undercut the government’s abilities to create and maintain infrastructure and support new initiatives. Ever since the Reagan administration using voodoo economics drastically cut taxes while enormously increasing its investment in the military, the result has been huge deficits and enormous increases in the national debt. In contrast, Obama has reduced both. Conrad Black after Obama’s first year as president lamented that a $10-trillion national debt accumulated from 1776 to 2008 had become a $16-trillion debt while leaving 50 million citizens in poverty and the entire middle class living on an economic knife-edge. However, during Obama’s presidency, the debt has been enormously reduced, though he took his base line 2009 rather than 2008 with some justification since he inherited his economic woes from George W. Bush’s gross mis-management of the economy. In the last year of Obama’s term, the American national debt as a percentage of GDP is lower than in 1945 in spite of the enormous debt accumulated in saving the economy during his first term.

What about fostering innovation? Haley spoke of the need to reignite the spirit of innovation among Americans. Did she have an advance copy of Obama’s speech? Obama insisted that America’s best corporate citizens are the most creative, but nevertheless asked, in similar words to Haley’s: “how do we reignite the spirit of innovation to meet our biggest challenges?” for the “spirit of discovery is in our DNA.” Contrary to Haley, however, Obama claimed that his administration over the past seven years had “nurtured that spirit” by ensuring the internet remained open and increasing access to that internet for students and low-income Americans. Obama launched next generation manufacturing hubs and online tools. In other words, government played a significant role in fostering innovation.

Obama, however, insisted the government could do much more and, in the spirit of the space program that he had cited earlier, he named Joe Biden as head of Mission Control to launch a concerted effort to finally conquer cancer once and for all, just as the government had facilitated landing a man on the moon in just twelve years. The one area, other than health Obama cited, was the issue of climate change where a similar order of commitment was needed, a subject which Haley did not mention. For Obama, climate change deniers were relegated to a lonely existence of the margins as America’s military, business leaders, the majority of Americans and almost the entire scientific community as well as 200 nations around the world agreed that climate change was indeed a problem that had to be solved. There was a bonus in such recognition: America’s businesses, led by America’s spirit of innovation, could and should produce and sell the energy of the future. After all, over the past seven years, investments in wind power had now paid off since wind power was now cheaper than conventional power and employs more people than the coal industry. On top of that, America had cut its imports of oil by 60% and cut carbon pollution more than any other country on earth. Obama called for accelerating the transition away from dirty fuel by putting the costs of pollution on the backs of fossil fuel producers and investing in a 21st century transportation system.

So Obama argued that money will be saved, jobs will be created and the planet will be preserved by such measures. Jennifer Rubin, a right wing economic pundit in her op-ed, “Obama’s challenge: Why give a failed president another chance?” (The Washington Post, 3 September 2012) before his second term election, challenged Obama for falling back on failed policies of raising taxes on the upper income group, expanding investments in teachers and education and enhancing infrastructure investments. Ashe Schow, in her article, “President Obama’s Taxpayer-Backed Green Energy Failures,” in The Foundry (18 October 2012) argued that all the eco-companies in which the U.S. had invested large sums had failed in their initiatives: Geothermal ($98.55 million), Babcock and Brown ($178 million), Ener1 ($118.5 million) (Ener1 was sold to a Russian), Johnson Controls ($299 million) while others filed for bankruptcy – Abound Solar ($400 million) (the company actually only received $68 million when the government cut its loan off) and A123 Systems ($279 million) (the Chinese conglomerate, Wanxiang Group, bought A123 for 1% of its share value at its peak evaluation), Solyndra ($535 million). (For example, http://www.greentechmedia.com/articles/read/nec-snatches-a123-energy-storage-biz-from-wanxiang should be read regarding A123e.) The attacks continued unabated over the last four years paying little or no attention to the data that contradicted their contentions.

After the inaugural address of Obama’s second term, Charles Krauthammer accused Obama of promising “a state-created green energy sector, massively subsidized (even as the state’s regulatory apparatus systematically squeezes fossil fuels, killing coal today, shale gas tomorrow).” (Charles Krauthammer: “Obama Unbound,” Washington Post, 24 January 2013). Capitalists count on most of their investments not paying off but counting on the minority that do. If those government investments are compared to private ones, even though the private sector was far more risk averse, a comparison indicates that government investments, surprisingly, may have been more successful. (World Economic Forum http://www.weforum.org/content/closing-green-investment-gap)

To repeat what I wrote 3 years ago at the time Krauthammer wrote his piece, “The right wing economic critics of Obama’s various economic strategies work by repetition of stock phrases, are selective in their citations, and ignore analyses that might falsify their beliefs. It is possible that their position could be right to some degree. However, they create a caricature. The evidence when weighed does not demonstrate that the economic conservatives are right. Instead the evidence suggests that ideological conviction rather than comparative detailed analyses yield their conclusions.”

Finally, let me add the response to yesterday’s blog before he had a chance to read the above.

I agree Haley deserves credit for being a voice of civility in a party of spoilers.  But she did NOT take responsibility for the GOP being a financially ruinous party.  It is simply untrue that we have runaway spending.  It is simply untrue that the debt is crushing (it is almost back to the pre-2008 levels after a near depression).  It is simply untrue that the US does not innovate.  The world looks to America for the technological and social breakthroughs.  It is simply untrue that “American” taxes are “too high.”  That is utter crap.  What’s America when the top 1% for all intents and purposes pays no tax  anymore?  The New York Times for the past several weeks has been running long investigative articles, backed by peer-reviewed social science research, drawing attention to scale of regressivety of American fiscal (revenue as well as expenditure) policy.

The GOP is not just part of the “Washington syndrome.”  It is the purveyor of a fiction about the nature of the economy that profits from this narrative.  There is an alternative story.  It is this: the US is profoundly innovative and successful.  It is not beset by public debt (it is by private debt — but that’s a separate issue for the moment); it is not crippled by regulations of “Washington bureaucrats” and unions (just to take the example of education which you cite).  Blaming Washington recycles the problem by avoiding it.  The GOP has burnished this anti-Washington message for decades now — ironically, from within the beltway itself.  And the meta-narrative paralyzes by polarizing the very agent we need to be smart and responsive: the state.

So, what’s the problem?  The problem is that the benefits of private sector-driven innovation go to 30% of the population; 30% of the population is struggling to keep above water; 40% is backsliding, some very quickly. The problem is the absence of public goods that distribute the benefits more evenly.  The blame-Washington narrative endorses a view that divests from public goods rather than reframing the social pact for the 21st century.

That’s why America’s cities are in trouble.  That’s why the rich get richer (and contribute less).  That’s why we can be an innovative society while watching the bottom half struggle to keep up and depend on (public) infrastructures from schools to trains that would make a Third World country worry about its future.

Jeremy

 

This blog was prepared with the help of Alex Zisman.