John Dewey on rights and government

Jonah Goldberg's article The Newest Deal in The Dispatch includes the following about John Dewey, a leader in the "progressive" Progressive movement during its formative years:

Philosophically, the New Deal drew on—or at least reflected—Dewey’s and Woodrow Wilson’s contempt for the outdated vision of the Founders. The Founders “lacked,” Dewey wrote in Liberalism and Social Action, “historic sense and interest.” The Burkean and Madisonian vision of government simply serving to protect liberties and enforce fair, neutral rules was inadequate next to what could be accomplished with a sufficient application of will by experts given the power to provide meaning to every individual.

This is what the lid-less, unconstrained universe had to offer planners. Indeed, even the idea of individual rights was a bygone relic. “Natural rights and natural liberties exist only in the kingdom of mythological social zoology,” Dewey explained. Rights can only be properly secured through “social control of economic forces in the interest of the great mass of individuals.” For Dewey, humans were “nothing in themselves”; the General Will was everything.

I have read very little by John Dewey. I don’t have a copy of Liberalism and Social Action, so I looked on Amazon to see if I could find these quotes in Liberalism and Social Action. Unfortunately Amazon does not have a "look inside" feature for the book.

Anyway, if Goldberg’s claims are legitimate enough, these quotes are enough for me to strongly disagree with Dewey’s political philosophy. The bedrock views of today's Progressives surely agree with Dewey's. The so-called General Will, even if it expresses the wants of a majority of the people subject to the government’s rules, can realistically only be wielded by politicians backed by government force.

Federal spending spree

In 2008 Rahm Emanuel, former Chief of Staff to President Barack Obama and mayor of Chicago, said: "You never want a serious crisis to go to waste. And what I mean by that [is] it's an opportunity to do things that you think you could not before."

It has become a common catchphrase. Emanuel repeated it last year amid the coronavirus pandemic (link). Spendthrifts Joe Biden and the "progressives" and leftist radicals of the Democratic party have strongly embraced it 

FEE: Federal ‘COVID’ Spending Just Hit $41,870 Per Taxpayer Signed by Biden last month, the 
American Rescue Plan Act of 2021 called for spending $1.9 trillion on the Covid19 crisis, with a large part of the $1.9 trillion not directly related to Covid19. It includes, among other things, spending on

• agriculture and nutrition programs;
• schools and institutions of higher education;
• child care and programs for older Americans and their families;
• mental health and substance-use disorder services;
• emergency rental assistance, homeowner assistance, and other housing programs;
• payments to state, local, tribal, and territorial governments for economic relief. (Link)

The $6 trillion stated in the FEE article includes the $4.1 in relief measures passed while Donald Trump was President (link).

Still far from satisfied, Biden and his cronies propose another spending spree called the American Jobs Plan. It proposes spending another $2 trillion on infrastructure and jobs (link). Of course, it includes lots of "pork", such as subsidies for buying all-electric vehicles and charging stations for them. In other words, it is a down-payment -- merely a down-payment -- on the so-called Green New Deal.

The $2 trillion would increase total spending to about 8/6*$41,780 = $55,707 per taxpayer.

As usual, the the promoters of such legislation hype how many jobs it will create while ignoring how many jobs it will destroy.

This proposed legislation also includes tax increases to pay for some of it. The corporate tax rate would rise from 21% to 28%, half way toward the 35% pre-2018 tax rate. It would mostly raise personal income tax rates for people with incomes exceeding $200,000 for single filers and $400,000 for married filing jointly. However, it will very likely hit a lot of people with incomes lower than those.

Of course, all this spending (over 10 years) will increase the federal debt and sow seeds of inflation. Much of the debt will likely be funded by the accommodating Federal Reserve.

George Orwell as a Public Choice Economist?

George Orwell as a Public Choice Economist? is an essay by Michael Makovi.

George Orwell's famous novels Animal Farm and Nineteen can give the impression that Orwell was an anti-socialist. However, he was not strongly anti-socialist. Makovi holds that:

- George Orwell was a (democratic) socialist, despite his famous novels being biting satires of socialism, and

- Orwell’s criticisms were directed not against socialism per se but against the Soviet Union and similarly totalitarian regimes.

Makovi argues likewise in another essay, Two Opposing Literary Critiques of Socialism: George Orwell Versus Eugen Richter and Henry Hazlitt.

The Wikipedia article about Orwell agrees. "His work is characterised by lucid prose, biting social criticism, opposition to totalitarianism, and outspoken support of democratic socialism."

What's unique about both articles is that Makovi portrays Orwell as a public choice economist. Orwell died in 1950 before public choice economics gained much recognition in the 1960s, but there were strands of public choice economics in the 1950s. 

The first article has a good description of public choice economics in layman terms. 

"This interpretation of market activity as being based largely on self-interest is probably familiar to most readers, even those not trained in economics. Yet somehow, when we shift to the study of politics, the general assumption is often that political officials are not  self-interested, that they serve only the public good for conscience’s sake."

"No doubt, there are many individuals who are in politics because they sincerely wish to advance the public weal. But Public Choice is skeptical of the assumption that just because someone is in government office, he is an altruist. Public Choice argues that we ought to assume that political officials are every bit as self-interested - or not - as market actors - no more, no less. In other words, Public Choice assumes moral, behavioral, and psychological equivalence between public and private actors. This does not necessarily mean people seek to maximize their financial wealth alone, for self-interest means only seeking to obtain whatever an individual person subjectively desires, which may or may not be money." 

I add that the politician's self-interest may also be power over the lives of other people. The politician is in a position of using coercion or threat of coercion -- typically with somebody else, the police or the court system, doing the enforcing -- to punish or induce said others to act in a manner desired by the politician.

This is not to say that I view all power negatively. High-level executives in a private business have lots of power. The decisions they make may strongly affect the business and its employees. However, the executives generally do not have the power to enforce their decisions in the manner that politicians do, backed by a coercive government. 

This interpretation of market activity as beingbased largely on self-interest is probably familiar tomost readers, even those not trained in economics.Yet somehow, when we shift to the study of poli-tics, the general assumption is often that politicalofficials are

 not 

 self-interested, that they serve onlythe public good for conscience’s sake.

Teachers unions and political power

John Stossel: Teachers Unions Fail Science. Stossel echoes Thomas Sowell (link) on the effects of poor public school education on black American children. The following in italics are quotes from the article.

Is your child's school open now?

Probably not — because teachers unions say that reopening would "put their health and safety at risk."

Closed schools hurt low-income students most because they have fewer learning alternatives. The privileged get around union restrictions.

Almost all of California's government-run schools are closed, but California Governor Gavin Newsom sends his kids to a private school that stayed open.

Union demands include all sorts of things unrelated to teacher safety. The Los Angeles union demands: defunding the police, a moratorium on charter schools, higher taxes on the wealthy and "Medicare for All."

It's revealing that government-run schools fight to stay closed, while most businesses — private schools, restaurants, hair salons, gyms, etc., fight to be allowed to open.

Why is that? [Heritage Foundation's Lindsey] Burke points out that government schools "receive funding regardless of whether or not they reopen."

So, union workers get paid even when they don't work. Not working seems to be a big union goal.

Yet, the teachers unions keep winning. They will win more now that Democrats control the federal government. Congress' last stimulus package forbids any funds to be used to expand school choice: no "vouchers, tuition tax credit programs, education savings accounts, scholarship programs, or tuition assistance programs."

So, students lose. Parents lose. Taxpayers lose. America loses.

Unions win.

Thomas Sowell: Is Truth Irrelevant?

Thomas Sowell: Is Truth Irrelevant?  Thomas Sowell notes how many noticed the riots which took place January 5, but paid so little attention to the riots that took place in various cities across the country last year. For too many people, especially in the media, what is right and wrong, true or false, depends on who it helps or hurts politically. Too many media people who are supposed to be reporters act as if they are combatants in political wars. The following in italics are quotes from Sowell's article.

Someone once said that, in a war, truth is the first casualty. That has certainly been so in the media — and in much of academia as well. 

Unfortunately, too many American educational institutions — from elementary schools to universities — have become indoctrination centers. The riots that swept across the country last year are fruits of that indoctrination and the utter disregard for other people's rights that accompanied those riots.

At the heart of that indoctrination is a sense of grievance and victimhood when others have better outcomes — which are automatically called "privileges" and never called "achievements," regardless of what the actual facts are.

Facts don't matter in such issues, any more than facts mattered when smearing [Abraham] Lincoln.

Any "under-representation" of any group in any endeavor can be taken as evidence or proof of discriminatory bias. But those who argue this way cannot show us any society — anywhere in the world, or at any time during thousands of years of recorded history — that had all groups represented proportionally in all endeavors. 

Whites are "under-represented" in the NBA and NFL. About 80% of players in both organizations  are black. Is that due to discriminatory bias?

Thomas Sowell: A Vote at the Crossroads

Thomas Sowell: A Vote at the Crossroads

Thomas Sowell says how Democrats will take advantage of its political power in the Senate and beyond now that they have won the two Senate seats for Georgia. When he wrote this, the seats were not yet decided. The following in italics are quotes from Sowell's article.

Senate Democrats' leader, Senator Charles Schumer, has already announced what he has in store, if the Democrats get a majority in the Senate. So has President-elect Joe Biden. And it goes way beyond specific policies. It includes institutional changes that can be permanent, and almost guarantee one-party rule in this country, as far out as the eye can see.

Among the groups likely to be hurt most by Democrats' dominance of both houses of Congress and the White House is the black population that has been the most loyal to the Democrats for many generations.

There is no more vital interest of black Americans than the education of black children. The whole future of the race depends on the quality of that education, more than on any other single factor.

In many public schools in low-income minority neighborhoods, most of the students cannot pass tests in mathematics or English. In some ghetto schools, nobody passed either test.

When charter schools succeed where traditional public schools fail, that is welcome news to everyone to whom black education matters. But it is bad news to failing public school bureaucrats and to teachers unions, since charter schools attract students from unionized public schools.

These politicians are almost all Democrats. President-elect Biden has already assured teachers unions that there will be no more federal money for charter schools. 

Schumer and Warren yearn for a dictator

Senators Chuck Schumer (link) and Elizabeth Warren (link) yearn for a dictator. They want Joe Biden to cancel up to $50,000 in student loan debt per person, and they want him to do so by Executive Order -- bypass Congress and just do it. Apparently they did not learn, have forgotten, or don't care that the Executive Branch is for executing the law, not making it. It is Congress's role to make law. That follows the principle of separation of powers. A primary definition of "execute" in most dictionaries is to carry out or put in effect, not to create or make.

Even the left-leaning Brookings Institution said Biden shouldn’t listen to Schumer and Warren on student loans. The objection was not based on separation of powers. "Many student loan borrowers are advantaged, well-educated high earners. About 56 percent of student debt is owed by those with masters or professional degrees, and almost 35 percent of loan balances are owed by individuals in the top 20 percent of the income distribution. Many student-borrowers need relief, but well-off borrowers who are thriving — thanks, no doubt, to their college degrees — do not."

Even the Washington Compost is against it. I doubt it is based on separation of powers. I don't subscribe to the Compost, so I couldn't read the article.   

Joe Biden has proposed only cancelling up to $10,000 (link). He might also accept an income cap, such as $125,000, or limiting it to undergraduate debt. More significant -- and unlike Schumer and Warren -- he wants Congress to make the law.

Coronavirus - finance #2

Firstly, the Families First Coronavirus Response Act is enacted law and hence apart from the not yet (7:00 a.m.) enacted legislation to pay $1,200 ($500 for children) to about 90% of the US population and provide unemployment compensation. It pertains to sick leave and family leave.

TurboTax summarizes the Act here. The following list is more brief, showing only the topics.

Relief for Regular Employees
- Emergency Sick Leave.
- Paid Sick Leave.

Relief for Self-Employed and Small Businesses
- Self-Employed Tax Credit for Sick Leave.
- Self-Employed Tax Credit for Family Leave.
- Small Business Tax Credit for Paid Sick Leave.
- Small Business Tax Credit for Paid Family Leave.

MarketWatch has this story.

The relief for self-employed and small businesses is in the form of tax credits. Thus it is far from immediate and doesn't solve current cash needs brought us by the pandemic shutdown. Of course, a self-employed person who makes estimated tax payments could reduce them. On the other hand, the self-employed people who don't make estimated tax payments don't have that opportunity. I bet the latter is the case for nearly all gig workers such as Uber or Lyft drivers.

Regarding the relief for regular employees, it appears there is no overall exception for an employer with only one or a handful of employees, which could be devastating for the employer. There is an exception for employers with less than 25 employees, but it appears to be about requiring the employee being able to return to work with the same employer after leave. One news article referenced by the Wikipedia page says, "Republicans were able to insert language exempting smaller businesses from the requirements." However, it wasn't clear what said exemption is.

Importantly, self-employed people are not eligible for unemployment compensation. That may change soon for some, e.g. gig workers. Related:
Unemployment benefit claims skyrocket to 3.283 million.
Coronavirus stimulus relief plea from self-employed to Washington: 'We need help now'

Coronavirus - finance

I wrote the following three days ago elsewhere:

Trump-Mnuchin, Sen. McConnell, and Sen. Schumer have all proposed "stimulus" plans in response to financial hardships due to the coronavirus.

Relying on the news stories I have seen, Trump-Mnuchin's plan is stupid in my opinion. It pays everybody and hence is far off-target. Why send $1,000 to Warren Buffett, Bill Gates, Jeff Bezos, the Clintons, or even me? Why send $1,000 to people who are retired, people who still have good paying jobs, or are wealthy? Sen. McConnell's plan is quite a bit better. His plan gives $1,200 to singles with 2018 adjusted gross income (AGI) < $75,000 and married filing jointly couples with 2018 AGI < $150,000. It gives $0 to singles with 2018 AGI > $99,000 and married filing jointly couples with 2018 AGI > $198,000. However, the link between 2018 AGI and current financial difficulty is weak. While Sen. Schumer's plan lacks detail, I believe his basic idea of expanding unemployment compensation is far more on-target -- people who were employed, but lost their jobs due to the coronavirus. Many of them were in low-paying jobs that were hit hard, e.g. at restaurants. His plan is probably slower to implement, but its aim is far better. 

Since then I have learned some more details about McConnell's proposal. For low income folks the amount could be less than $1,200 and as low as $600. Also, any amount received could result in a lower tax refund after 2020. Finally, the IRS lacks the ability to act quickly or accurately. It will not be able to send so many payments as quickly as the pols want, and will make plenty of mistakes in the process (link).

Bernie Sanders wants to outdo both Trump-Mnuchin and McConnell (link). The latter two proposals of $1,000 or $1,200 stipulate a one-time event, with maybe a repeat later, e.g. in a few months. Bernie Sanders wants to give everybody -- no income test -- $2,000 "each month for the duration of this pandemic!" I thought he hated billionaires. Why does he want to start handing Bill Gates, Warren Buffett, Jeff Bezos, Mike Bloomberg et al $2,000 per month? The dictator-wannabe fascist shows total ignorance about producing and market distribution of goods or services and the skills and efforts needed to run a business. He often condemns profit like it is the root of all evil, and fails to understand that his salary as a Senator and his book royalties are or nearly are also 100% profit (since the costs incurred to obtain them are zero or negligible).

Elon Musk has said he could convert part of his business to produce ventilators and masks to deal with the pandemic. He has talked with Medtronic (symbol MDT), a maker of medical devices about ventilators and respirators. Suppose Musk's business or Medtronic do achieve said production. (Medtronic has already increased its ventilator production by more than 40%, and is on track to more than double its capacity in response to demand triggered by COVID-19. Link.) If revenues minus costs < 0, would Bernie Sanders say that is morally acceptable, even heroic? However, if revenues minus costs > 0, would Sanders say it is evil? Suppose an anti-coronavirus drug or combination of drugs is found that saves millions of lives and results in a drug manufacturer getting millions of dollars in revenue. Ditto for a vaccine. A big part of costs would likely be unclear. Regardless, I pose the same questions to Bernie Sanders. 

Why You Shouldn’t Be A Socialist #3

The author devotes a chapter to critics of socialism with ‘Why Opponents of Socialism Are All Wrong’ as part of the title.

One criticism is that socialists always deny that socialist governments are “true socialism.” Ironically, that’s what Robinson does. Referring to critics using Venezuela to discredit socialism, Robinson denies Venezuela is a case of “true socialism.” He dismisses North Korea being called socialist simply because it isn’t democratic (245). So does he believe North Korea is capitalist? Heh. He chides others who treat socialism as synonymous with the Soviet Union for being selective in their presentation of history. Yet he is very selective about what he considers “true socialism.” “The socialist left has a great heritage, both in the United States and everywhere else.” “To be a socialist is to take part in a tradition that is intelligent, humane and honorable” (162). An even blacker pot calls the kettle black.

While most socialists are advocates of government control of the economy, Robinson tries to “sweep it under the rug” by saying there are a few socialists who “loathe the government.” This tactic is quite ironic. He calls himself a libertarian socialist, yet several times he says the left needs more political power and better organization. He also strongly endorses Bernie Sanders, an advocate of much more government power and putting chains on private sector businesses. By the way, Bernie Sanders calls himself a Democratic Socialist, but more accurately he is a fascist. Like described here fascism permits some private ownership of the means of production, but subject to extensive controls by government: "As an economic system, fascism is socialism with a capitalist veneer." "Under fascism, the state, through official cartels, controlled all aspects of manufacturing, commerce, finance, and agriculture. Planning boards set product lines, production levels, prices, wages, working conditions, and the size of firms." State control is paramount. This captures Sanders’ proposal for health insurance. He wants to eliminate private health insurance by the U.S. federal government taking over all health insurance, like Josef Stalin took over agriculture in the Soviet Union. More recently he has advocated government takeover of electrical power producers.

Robinson’s praise of socialism is based mostly on wishful thinking inspired by moral outrage. He gives no realistic causal mechanism of how socialism will work in practice. His “theory” boils down to:
- dreaming of utopias,
- moral outrage,
- lecturing by a self-appointed moral authority,
- nobody will need to work at an unpleasant job, e.g. garbageman or roofer (my opinion), or due to a boss, or a boring job, but somehow the work will get done anyway,
- nobody will be poor regardless of whatever else they do or don’t do,
- lots of “free stuff” paid for by others, expropriated,
- who produces what, how, where, and how much of a large, ever-changing, wide variety of goods and services in a society of millions of people with dispersed, yet localized, knowledge is no concern to Robinson. It will happen just fine; no causal explanation needed.

The End

Edit (2/17):

I tried to put a book review of Why You Should Be a Socialist on Amazon and met a barrier that was new to me.

"We apologize but this account has not met the minimum eligibility requirements to write a review. If you would like to learn more about our eligibility requirements, please see our community guidelines." The guidelines say to post a review you must have spent at least $50 on Amazon.com in the past 12 months. I did spend more than $50 in the past 12 months. However, part was with a gift card, and my net spent was less than $50. 🙂

Why You Shouldn’t Be A Socialist #2

Robinson misunderstands limited liability. A key feature of incorporation is that non-employee stockholders have limited liability for actions made by employees. Why should the former, who have minimal control on how the corporation is run, be held personally responsible -- beyond the worth of their stock -- for the actions done wholly by others, employees? Even trying to make them responsible is a big conundrum. The ownership of publicly-traded stocks of big companies is ever-changing. (If non-employee stockholders are personally responsible, then why not lenders, too?)

Robinson abuses the concept of marginal utility. It was developed to explain an individual’s valuation, not different valuations by different persons like he does. He shows no understanding of marginal utility’s importance to market prices or the division of labor.

All but one of his “explanations” of why opponents of socialism are wrong (Chapter 12) are weak or wrong. His response to one alleged criticism of socialism -- that socialists are boring and humorless -- isn’t worth further comment.

He says critics say socialists dislike freedom, but he says “Democratic socialists believe deeply in freedom.” He adds, “capitalism actually restricts people’s freedom. We believe that the choices capitalism gives people -- obey your employer or starve to death -- are not really choices at all “ (234). Huh? They can’t seek a different job, become self-employed (be their own boss), find free food from a charity, or sponge off relatives or socialist friends? He characterizes “free market freedom” as “the freedom to die when your medical bill exceeds your paycheck” (245). Oh my, so simplistic and so wrong.

One “freedom” that Robinson doesn’t mention is that many socialists approve of is a government free to use coercion and bullying against other people they dislike. The freedoms and rights of people they dislike matter little or none to them. When they decide who gets elected, that’s the road to democratic mobocracy, or as Karl Marx said it, the dictatorship of the proletariat.

To be continued.

Why You Shouldn’t Be A Socialist #1

Nathan L. Robinson’s book Why You Should Be A Socialist might convince some socialists they are wrong. It’s that poorly argued.

His critique of capitalism is a harangue and hate speech. Chapter 3 is even titled ‘The Army of Psychopathic Androids: How Capitalism Works.’ He shows at best a superficial understanding of how capitalism works. He shows no understanding of how markets develop and change, the price system, entrepreneurs, division of labor, risk, or the role of knowledge and information in economic production and distribution (see F. Hayek's work). Capitalism (or free enterprise) does not ban ownership by other than stockholders -- worker-owned firms, nonprofits, coops, credit unions owned by depositors, mutual insurance companies owned by policyholders -- none of which Robinson acknowledges. Such firms can exist in capitalism because it’s a voluntary, live and let live system. And if a business were worker-owned like Robinson says all should be, wouldn’t the workers then be capitalists? Or would they somehow operate with no capital, not even borrowing from outside lenders?

He makes many contrasts between capitalism and socialism. One he doesn’t make is voluntary versus coercive. That’s probably because of the following. In capitalism, or a free market, entrepreneurs create goods and services for customers to satisfy the latter's particular needs. They deal with suppliers and employees voluntarily. The entire system is voluntary; coercion is banned. Entrepreneurs are not forced to create, and they don't force investors to give them money, employees to work, or customers to buy their products. Government is the opposite - a system based on coercion. A politician's ability to get something of value for themselves or others is the power to coerce certain people to provide it for them.

“If a corporation were a person, they might be the worst person you have ever met in your life. They might manipulate you into doing things you don’t want to do, take advantage of your weaknesses, lie to you if it benefited them, and show zero regard for basic standards of moral conduct” (78). Does this describe Robinson’s own corporation, Current Affairs, LLC? Anyway, Johnson & Johnson’s reaction to the 1982 Tylenol poisoning contradicts his very biased portrayal. If any business treats its customers and suppliers with zero moral regard, the business will soon fail.

On p. 79 he misrepresents Milton Friedman's position. Friedman did not say a corporation's sole responsibility is to its shareholders and shareholders' only concern is profit. He said a corporation's main responsibility is to its shareholders, and he recognized that shareholders’ desires may include some sort of social responsibility. They also have a means of expressing that, via voting their shares. Some corporations contribute to charities and do charitable gift-matching. Friedman also qualified corporate social responsible action to include the business staying within the rules of the game, i.e., engaging in open and free competition without deception or fraud. Robinson blatantly ignored it. Very likely Friedman made these remarks when others were advocating greater coercion and bullying of business by those in government on behalf of some political view of "social responsibility."

To be continued.

Paying higher taxes

This article about the wealthy paying higher taxes got my attention. It features Disney heir Abigail Disney. She is a member of Patriotic Millionaires that advocates raising taxes on the ultra-wealthy. She doesn't like the low wages of some Disney employees. The following are questions I would like her to answer.

1. Why does she want the government legislation to in effect coerce her to pay higher taxes? Why doesn't she simply start writing checks to the U.S. Treasury? Or is her desire more about forcing other people to pay more?
2. Why does she want the government to legislate minimum wage laws and enforce them on all employers, even struggling ones? Why doesn't she write checks to Disney, Inc. with strings attached, so that the money will be used to pay bonuses to low-paid employees?
3. Why does her urge to help the less fortunate so often lead to wanting more government bullying and coercion?  Rather than the voluntary ways I suggest in #1 and #2?

Health insurance administrative cost

An argument advocates of Medicare for All often make is that administrative costs would be far lower than private insurance. They typically say Medicare's administrative cost is only 2-3% of its spending, compared to 12% of revenues for private insurer. Since Medicare's revenues aren't much different than its spending, the different italicized terms matters little. However, there are plenty of other things that make it an "apples and oranges" comparison.

This Mises Institute article gives several counter-arguments. It seems to mostly copy a Heritage Foundation article more than 10 years old. The following counter-arguments are from the articles and some of my own:

1. "Social Security administers the collection of Medicare premiums. The IRS collects the taxes. Health and Human Services pays for building and marketing costs, as well as accounting and related concerns. Attributing those costs correctly would roughly double Medicare’s administrative costs."

In the Medicare 2019 Trustees Report administrative cost was about 1.7% of expenditures in 2018. The breakdown includes amounts paid to other government departments, including IRS and HHS. I don't know how realistic they are. So this argument the articles make seems weak or false.

2. "Medicare patients are far older and less healthy — and more than twice as costly, on average, than younger people in private plans. But having less than half the health care costs per beneficiary more than doubles private insurance’s administrative cost as a percentage of total costs, than if the more accurate measure — administrative cost per beneficiary — was used." A different source I found with more detail said that Medicare's cost per beneficiary is about three times that of private health insurance.

This is a good argument. Expressing administrative costs as a percent of total cost instead of per beneficiary is biased.

3. Private insurers pay premium taxes to states that Medicare does not. The tax averages about 2%. Private insurers, at least for-profit ones, pay income taxes, which Medicare doesn't. How much is difficult to quantify, since there are both for-profits and non-profits, but let's assume it's about 2%.

4. Some private insurer revenues go towards profit and marketing. Private insurers need to advertise and pay salespeople to persuade customers to buy their product. Medicare doesn't. Its revenues are required by law and backed by force.

5. A significant part of a private insurer's administrative cost consists of complying with Medicare rules, regulation, and practices. Since they are ever-changing, simply keeping up-to-date adds to such cost. This is especially true for insurers that administer Medicare Advantage policies.

6.  The costs private insurers bear for administering Medicare Advantage policies is done on behalf of Medicare. Medicare dictates that the policies must cover at least what original Medicare does. Medicare pays these insurers a lot of money to do so. It was about $11,000 per person covered in 2018. So such costs can be regarded as Medicare "off the books" administrative costs.

7. Medicare imposes administrative costs on providers, which aren't included in Medicare's spending. Providers must submit the forms and procedure codes to, and demanded by, Medicare in order to be reimbursed. This story reports that doctors spend almost half their time on paperwork and electronic records.

I'm not convinced that Medicare's administrative costs are higher than private insurance, like the Mises Institute and Heritage Foundation claim. However, Medicare's administrative costs are understated when provider costs aren't included and should be lower given Medicare's much larger size than any single private insurer. Regardless, other things matter, too. Medicare operates by force; private insurers don't. This difference matters little or none to advocates of Medicare for All.

This article has more detail about administrative costs, especially of providers.

Three more questions nobody asks Bernie Sanders about M4A

This video shows some young people's opinions about Medicare for All. When they first hear about it from the likes of Bernie Sanders -- political sound bites and propaganda -- their response is favorable. "Great. Free stuff." After they learn a little more about it -- what it would cost them, how some people would lose their jobs, and how it would eliminate health insurance that about half the population now has through and largely paid for by their employers -- they are shocked and many no longer favor it.

I am not surprised by how little young people know about health insurance. It's way down the list of their concerns and they don't question the pied pipers of Medicare for All. Health insurance is largely a concern of older people. Here I asked some questions that nobody asks Bernie Sanders about M4A that affect mostly people who have health insurance via employers.

I searched for the terms {Bernie Sanders eliminate private insurance advantage supplement} using Google and DuckDuckGo. Sanders proposes to "eliminate private insurance" but I am not aware that he has specifically proposed eliminating Medicare Advantage, Medicare supplement (Medigap) policies, and Medicare Part D prescription drug policies. His own press release in April doesn't mention them. The links on the page don't either. All are products of private insurers. Looking at a few of the results from my search, I saw none that mentioned eliminating these three kinds of coverage. Sanders' primary target is employer-based health insurance coverage, at least private sector employers (link). His wanting "no copays or deductibles" at least suggests eliminating Medicare supplement (Medigap) policies.

Thus the three additional questions are: Do you propose to eliminate Medicare Advantage? Do you propose to eliminate Medicare supplement (Medigap) policies? Do you propose to eliminate Medicare Part D prescription drug policies?

Replacing them with Medicare would either eliminate what they cover beyond current Medicare or require a large expansion of Medicare benefits. Most likely Bernie proposes the latter. He surely does when he talks about no copays or deductibles and small maximum costs to patients for prescription drugs.

Medicare Advantage is a substitute for original Medicare. The federal government, more specifically the Center for Medicare Services, heavily controls Medicare Advantage. The policies must cover at least what original Medicare does. The insurers receive most of their funding from Medicare. How much is pretty complicated (link). The national average was about $10,000 per person enrolled in 2018. Those enrolled -- about 20.4 million people now -- also pay copays, deductibles, and some pay premiums (link). Medicare also subsidizes Part D prescription drug insurers.

A Wall Street Journal article (paywalled) reports that Sanders wants his young supporters to help him win over their parents. If they try, they better not mention health insurance! Sanders wants to eliminate their parents and grandparents private health insurance.

The Atlantic reports: "Bernie Sanders, by contrast, leads all candidates among voters under 30 and polls just 5 percent among voters over 65. In a national Quinnipiac poll asking voters which candidate has the best ideas, Sanders crushes Biden 27 percent to 4 percent among those under 35 and receives an equal and opposite crushing at the hands of Biden among voters over 65: 28 percent to 4 percent."

Free market healthcare

This EconTalk interview of Dr. Keith Smith gives an insight into what free market health care. He co-runs a surgery center in Oklahoma that shows prices in advance, honors them afterwards, and only accepts cash, checks, and credit cards. The surgery center doesn't deal with insurance or Medicare. It has worked with employers who self-insure healthcare for their employees. Dr. Smith also cites tricks that hospitals use to get more money from the federal government and that insurance companies use to get more money from employers.

Employer-sponsored health insurance #2

In my my previous post I said a little about Ed Dolan's idea of making healthcare deductibles higher for higher income people. This is not the case for Medicare now. Everybody on Medicare faces the same dollar amount. Dolan's idea is novel, and I believe it's worth considering.

Suppose poor Pete and rich Rich both have Medicare. Pete's income is $30,000, he has more debt than savings, and Rich's is $300,000 with substantial savings and no debt. Each is in the hospital for several days for an operation. This results in a $200,000 bill for each. Medicare will pay the same for each, about $200,000 - $1,364 (Part A deductible) = $198,636. (This is simplified, which should be obvious if you have seen a hospital bill or one for outpatient surgery.) Pete might have a Medigap policy to cover the $1,364. Else, it is probably a significant expense to him. Whether Rich has a Medigap policy or not, he could easily afford the $1,364.

One may argue the Medicare law treats both equally, but that is only in terms of dollars. On the other hand, one may argue the Medicare law treats them unequally in terms of percent of income or wealth. One may argue that Rich is entitled to as much or more from Medicare because he paid far more in payroll taxes over his working lifetime than Pete did. I have no incontestable answer to what is equitable here, i.e. how much Medicare ought to pay. Anyway, it seems that Medicare paying less on behalf of Rich is not an unreasonable opinion. How much less is very debatable. If it were much less, let's assume that Rich had the opportunity to purchase a Medigap policy with a lower deductible to recognize his higher Medicare deductible if he wished to buy insurance for the extra risk.

One may argue that using income to calculate how much Medicare pays adds an administrative burden on Medicare. That is true, but Medicare already does that for Part B and Part D premiums.

Employer-sponsored health insurance #1

I missed this EconTalk interview about employer-sponsored health insurance when it occurred in January. The topic is still very relevant, so the interview is still worth hearing/reading.  My comments follow.

Ed Dolan was the guest. He said he knew of no major countries other than the United States where health insurance is tied to a job. Some who commented on the interview said that wasn't true, which Dolan acknowledged. I consider that a very minor flaw, and he made several good points.

The structure of the health insurance market was discussed, but not that there are really two very different parts to that structure. One part consists of people who have employer-provided health insurance or they buy individual coverage from an insurer (some on the Obamacare exchanges). The second part consists of people who have (1) Medicare Advantage, or (2) original Medicare plus perhaps a Medicare supplement or Medigap policy or Medicaid. A supplement or Medigap policy or Medicaid pays for healthcare in addition to what original Medicare pays.

The first part consists mostly of people under age 65, and the second part mostly people age 65 or older. The exception for the first part is that a few people under age 65 have Medicare due to disability. The exception for the second part is that a few people age 65 or older do not have Medicare or Medicare Advantage because they still work and have employer-sponsored insurance.

The second part of the market is quite competitive. Many insurers offer Medicare supplement (Medigap) policies and Medicare Advantage policies. They are often advertised, especially during open enrollment (Oct. 15 to Dec. 7). In contrast, the first part of the market is not very competitive. An employee must generally choose from a very small number of plans the employer offers. Not many people buy insurance policies for themselves, so the market is small and the risk pool is small and very risky to insurers. The buyers are the self-employed, not employed, part-timers, and employees of smaller employers that do not provide health insurance. Many complain about the premiums being too high. I don't see many advertisements aimed at potential buyers. The number of persons with employer-sponsored insurance is several (7 or 8) times as many as the number buying individual insurance on their own.

Here I argued that making employer-paid insurance premiums taxable income to the employee would significantly change the nature of the first market (and lower government deficits). Some employees, considering how much they pay into an employer plan plus the additional income tax, would choose to switch to the individual policy market. Many could switch eventually, with fewer employers offering health insurance and higher wages instead. The individual market risk pool would become much larger, with more choices and more competition. Also, people who have employer-sponsored coverage tend be healthier than average. If many of them moved to the individual market, there would be more spreading of the risk and lower, more predictable claims, which permits lower average premiums.

I believe the Universal Catastrophic Coverage that Dolan proposes would be much better than the current system. Higher income folks having higher deductibles, i.e. higher out-of-pocket expenses, makes sense. They can better afford it, and it would reduce government spending on healthcare. I find it ironic that people such as Bernie Sanders and Elizabeth Warren don't advocate higher deductibles, i.e. higher out-of-pocket expenses, for people with higher incomes. They only advocate lower deductibles to benefit middle and lower income people. In general higher income people utilize healthcare more and live where medical provider charges are higher. Lower deductibles benefit higher income people, too! Why do Sanders and Warren desire a plan that does that? Of course, both are advocates of ever higher government spending with little or no concern for government deficits and debt. As is, Medicare and Medicaid will add to ever increasing future deficits, much due to the aging baby boomers. Medicare spending is expected to double in 10 years (link).

The Entrepreneurial State #3

The author says that integrated circuits were designed by Jack Kilby and Robert Noyce. She omits that they did so when they worked at private companies. She then gives huge credit to the US Govt for the development of the microprocessor industry. “As the sole consumers of the first processing units based on the new circuit design, defense contracts helped fund the development of the infant microprocessor industry and those introducing complementary electronic equipment and devices were simply unaffordable in regular commercial markets. Large-scale demand for microprocessors by the US Air Force was created by the Minuteman II missile programme” (p. 104).

The microprocessors in the missile’s guidance system were made by Texas Instruments (and two other companies). However, the use of microprocessors in missiles was not the sole demand for microprocessors or the transistors in them. The hearing aid industry began making use of transistors a few years earlier. Also a few years earlier, the huge consumer demand for transistor radios spurred the development of microprocessors. Shortly after the surge in demand from defense contractors came another surge in demand for microprocessors for use in hand-held or pocket calculators. The author mentions none of these and thus gives no credit to the buyers of those things.

She also claims that “government agencies helped to drive down the costs of integrated circuits significantly” (p.105). This is another instance of her magnifying government and diminishing the private sector. The costs fell due to more efficient production, economies of scale, and competition.

She devotes an entire chapter to the State behind Apple. She praises Steve Jobs and Apple, but exaggerates the State’s role – for example, public schools buying Apple computers and a $500,000 State-backed investment. “[I]n 1980 Apple additionally secured $500,000 as an early-stage equity investment from Continental Illinois Venture Corp, a Small Business Investment Company (SBIC), which was licensed by the Small Business Administration (SBA), a federal agency” (100-101). Nothing is said about that $0.5 million being a drop in the bucket. In 1980 Apple’s net sales were $117 million and its profits $11.7 million. In 1979 the amounts were $48 million and $5 million (link). She says nothing about whether or not Continental Illinois might have invested with or loaned Apple the money without the SBA. She also says little about SBIC failures. The LA Times says about Apple’s case: “But such success stories are rare among SBICs. Since the program started in 1958, 465 SBICs out of a total of 1,597 have been placed in liquidation after defaulting on their payments. Since 1980, the backlog of the SBIC program's liquidation portfolio has grown from $100 million to more than $500 million, and the number of SBICs placed in liquidation has doubled in the past five years” (link).

I bet Apple Inc. and its employees paid billions in income taxes before Mazzucato finished writing her book. It apparently was not enough to satisfy her. Also, per its 10-Ks Apple Inc. paid $55.7 billion in income taxes 2014-18. Not all of it went to the US Treasury, but I wonder if she now believes that the US government has had an adequate return on its tiny support via Continental Illinois.

She doesn’t write about Internet browsers, which surprises me. The first very successful browser was Mosaic. It was developed by Marc Andreessen and Eric Bina at the National Center for Supercomputing Applications at the University of Illinois, which had been funded by the (Sen. Al) Gore Bill. (The Innovators, 415-6). Al Gore took credit, so why didn’t she credit the State?

She says the algorithm developed by the Google founders was funded by a National Science Foundation grant (27). She says this was while the founders attended Stanford University, but does not say Stanford is a private, not a public, university. She also says nothing about how much the government has benefited from Google. How much have government employees used Google without paying? She says, “After Google made billions in profits, shouldn’t a small percentage have gone back to fund the public agency that funded its algorithm?” I bet Google (Alphabet Inc), Page and Brin have paid income taxes many, many times the amount of the NSF grant, but she says nothing about that.

She asserts that the drug Taxol was discovered by the National Institute of Health (203). An Internet page belies this (link).  It credits two men at the Research Triangle Institute (RTI) for the discovery and the National Cancer Institute (NCI) for some further work. RTI International is a nonprofit organization headquartered in North Carolina that provides research and technical services. It was founded in 1958 with $500,000 in funding by local businesses and the three North Carolina universities (Wikipedia). NCI is part of the NIH. But why did she give all credit to NIH and none to those local businesses who helped fund RTI? Obviously, it is because she is very biased.

The Entrepreneurial State #2

The author often wrote ‘the State’ as another term for government(s). I will follow her practice.

Before commenting on some of her specific narratives, I will make general criticisms of the method of her narrative. I haven’t read all the reviews on Amazon, but all the criticisms I read were at a more specific level.

She bases much of her exaggeration of the State’s role on funding or being a customer, rather than the developing and implementing the basic ideas. She says little about an entrepreneur’s work in implementing new ideas and bringing a new product to market. Sorry, buying, subsidizing, and demanding are not producing. The author blurs the difference between a producer of X and its customers buying X.

True entrepreneurs rely on funding, money for research and producing their products/services. The funding may be from issuing stock, borrowing, revenue from selling their products/services to customers, or, when from the State, subsidy or grant. When the State is involved, the author conflates the last three ways and says funding. Customers aren’t always passive ones; they may give specs to a supplier or otherwise assist the supplier. However, in her narratives the State is never only a customer; it provides “entrepreneurial funding.” She hypes this customer and downplays the role of the true entrepreneur. That’s like shifting most or all credit from those who invented and produced iPhones to the buyers of iPhones.

The author mentions Xerox a few times, but not about the State being a customer for Xerox’s copy machines, toner, and paper. I’m confident that States were a major customer for these things. But does that imply the State played a major entrepreneurial role in Xerox’s growth? I think not.

The author purports to define entrepreneurship (64). She cites Schumpeter: “[A]n entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. It is not not just about setting up a new business … , but doing so in a way that produces a new product, or a new process, or a new market. Citing Knight and Drucker, “entrepreneurship is about taking risks.”

That’s fine, but she falls short of illuminating the nature of this risk. The risk is that the revenues from selling the product are enough to meet or exceed the funds spent in creating the product. I’d like to know how the US or a European government does this. What does it create with a plan to sell it for money exceeding the funds spent in creating it?