An exchange about policy on economic growth

I left David Chase and Jim Sloman know that I liked this article on pro-growth economic policies and asked for their comments and they had the exchange reproduced below.

As a state representative, I focus on matters of state policy and especially on those matters of state policy where there is some potential for action. Within that defined space, I think that there is a broad agreement represented in the exchange below on the following priorities:

• Simplify our tax code by eliminating special purpose deductions, exemptions and credits — there is some momentum building for an effort to do this in Massachusetts. There is no appetite for an increase in rates, and perhaps we can even reduce corporate rates if we do enough to eliminate special breaks.
• Take a similar aggressive approach on the spending side, focusing on fundamental investments in infrastructure and education rather than economic development gimmicks and special interest waste — budget pressures will make this a timely conversation in the coming year.
• Take a serious interest in controlling health care costs — we are going to do this in Massachusetts over the coming year, but I’m not sure where it will lead. The issue about how much additional responsibility to place on the consumer for controlling health care costs is a deep one and I don’t have the answers.

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Sloman: . . . I fear that the gap that David and I is as wide as the one between a Pelosi democrat and a Ryan republican but I will keep espousing my case in a more civil manner than I suspect we will see portrayed by MSNBC, FOX, ABC, NBC, CBS and the so called leaders in DC. The world is seeing the canary in the coal mine in Europe today (note my post on the prophesy of Thatcherism and my prior post on France). We must have pro-growth policies in the US to raise from this mess and I fear Washington is too polarized to find common ground.

Brownsberger: The hard question is: What is the right set of pro-growth set of policies?

Sloman: The co-chairmen’s proposal from the commission is on to it:

Lower tax rates
Eliminate most deductions
Eliminate subsidies
Promote immigration policies that focus on the applicants skills
Tort reform-loser pays
Enforce existing regulations –eliminate out dated ones
Bring back Glass-Steagall
Legislate locally
And did I mention…
Simplify the tax code
Shrink what citizens get from government

Chase:At least for people make as much money as I do (or more), My preference would be to skew the income tax a good deal more progressive, and then probably implement a consumption tax as a carbon tax (and because a consumption tax is very regressive, that’s why I would goose the other taxes to be progressive).

You’ll probably be stunned, but [I agree with most of the rest of your points] :
Eliminate most deductions
Eliminate subsidies
Promote immigration policies that focus on the applicants skills
Tort reform-loser pays
Enforce existing regulations –eliminate out dated ones
Bring back Glass-Steagall

Except — one provision on “loser pays” — loser should not pay more of the other guy’s expenses than loser spent. I am thinking about David&Goliath suits, SLAPP suits, that sort of thing. If BigUglyCo spends a million dollars in legal fees pursuing a $1000 judgement, a 10% chance of losing has an expected penalty value 100x larger than the judgement. (There’s unintended consequences to everything.)

And 110% yes to Glass-Steagall.

On the immigration, I am inclined to say that we need some sort of a statute of limitations; if we fail to follow through on deporting people in (say) 3 or 5 or maybe 7 years, then we blew it. Especially, if they have kids (except, yes, I know that provides an incentive to make babies while here, not sure how to slice this one, but I know that I hate the draconian
alternatives more.)

Not sure about these two [points of yours]:
“Simplify” means different things to different people. And “Legislate locally” can also be bad for business, if it means different nutty regulations (no happy meals in SF, e.g.) in different localities.

As to your point ‘shrink what citizens get from government’, disagree, somewhat — I strongly believe that universal care is morally right, AND cheaper, AND works better (and I base this on outcomes in all the other countries that have it). That would be a big lump of “get from govt”, that other cuts are unlikely to offset.

But otherwise, probably more agreement than you expected, right?

Sloman:In no particular order-

I think you will find that the elimination of deductions will make actual rates higher and more progressive. But in general we will not find agreement on rates, you and I that is.

I have no problem with your compromise on loser pays. I just think shareholder suits, medical torts, patent case are in general, anti-growth and the hurdle should be higher. ( watch this “insider trading case” about to be revealed to see if it is real or another Spitzer like, job creator for lawyers stunt).
Not sure about your tangent re: immigration but know we need to make the path for “skilled “people easier than for others. As Freidman proposes, give a green card to every science/engineering, medical advanced degree foreigner who graduates from an American university. If you limit access to benefits we may find the population of immigrants might skew somewhat, but in general I applaud the guts most immigrants have to uproot.

Stand by my legislate locally doctrine because if it means different nutty regulations (no happy meals in SF, e.g.) in different localities, business can decide if they want to be there. If it is national business has no choice. Obviously no business has the right to discriminate etc.

Healthcare is trickier and in need of a longer discussion but I do agree it is a drag on the economy. I am not opposed to a minimum of universal care but how much care is provided is like our tax disagree in that we will probably not agree on limits. It is only cheaper when you limit (ration) care and whether it works better is in the details. I do not think there is evidence that it works “better” in other countries when you start doing an “apples for apples” comparison. For instance there is little drug discovery in countries with UC, limited or no orphan drugs, limited or no medical technology innovation or usage. Essentially the private American health insurance payer is funding the healthcare innovation for the world. Also please find countries that fairly compare with the US in order to make your claims. I for one would prefer to be here than England, Canada isn’t a comparable and the Nordic countries have cut benefits dramatically. France is next to cut or they too will follow on the Spain, Greece Ireland express. If you propose a minimum limited healthcare right for citizens I can buy in: emphasis on LIMITED & MINIMUM. Then consumers can buy additional coverage for innovative and costly care? Or do you propose equalitarian care and if so where will all the rich French, Canadian, English, Arab, Russian get their care?

I base this on outcomes in all the other countries that have it). That would be a big lump of “get from govt”, that other cuts are unlikely to offset.

Chase:Two nits —

the health metrics that I find most alarming are life expectancy, percentage of life “healthy”, infant mortality, and spending. It’s hard to fudge mortality numbers, and arguably those are the ultimate statistic, provided that the longer life is relatively healthy (and it is). The counterargument to “look at the great care we provide” is that we do a poor job at prevention, which leads to worse outcomes in the end, but not before we show off our medical dexterity.

and services to immigrants, some of those, we need to do from a public health POV, ignoring any other issues of what is “right” or good for our country as a nation. Just an anecdote, but years ago my grad school housemate, officemate, and good friend popped up solid positive on a TB test. All his friends had to get “the good test” to be sure we were not also infected. This was in Texas. His dad, a pediatrician, said essentially, “well yeah, we’ve got a large immigrant population here, you’d be stunned how many people walking around on the street in San Antonio or El Paso would show up positive on a TB screen”.

Sloman:

And the first thought has what to do with our healthcare discussion? The second thought is a point taken but isn’t that what er’s are for?
So our life expectancy numbers are different than who? Mexico? Russia? David, I hear your point but remember we are very culturally diverse country, to compare nations and not regions in our country makes no sense. Do you believe in laws that govern eating (your SF big mac ban , NYC salt)and lifestyles? As a tangent I do not think government programs should buy junk food and soda but thats a problem with giving money- how far does the government intrude into a person’s life? Should people be rated for health care the same way they are for life and auto insurance? Do we really do a poor job at prevention or do people make conscience and unconscious decisions to be or not be healthy? Like I said I have no problem in a minimum and limited healthcare program but I think if you look we have one in Medicaid. Unfortunately it is incident oriented rather than preventive and incident. Expand its scope but limit the care. Do overweight, non exercising smokers deserve unlimited care? Give me a system that people have some responsibility and incentive for their health and I believe our mortality and relative health will improve.

Chase:

> And the first thought has what to do with our healthcare discussion? The second thought is a point taken but isn’t that what er’s are for?
> So our life expectancy numbers are different than who?

Our life expectancy numbers are lower than a lot of places. The 2008 numbers list the following (large) nations as doing better than us:

Japan (82.07), Australia, Canada, France, Switzerland, Sweden, Israel, Iceland, New Zealand, Italy, Spain, Norway, Greece, Austria, Netherlands, Germany, Belgium, UK, Finland, Jordan, South Korea (78.64).

Ours is 78.14.

We beat Denmark (78.13), Ireland, and Portugal (78.04).

I am pretty sure that every country in that list, except us, had universal health care of some form (either mandatory insurance (Germany, Switzerland, Obamacare, RomneyCare), single payer (Canada, Medicare) or single provider (UK, Veterans Administration medical care). All of them spend far less than we do — any money problems that you hear reported in other systems, they could solve in the blink of an eye by spending a fraction of the gap between their current spending and our current spending. (e.g., y2k, we spent $4.7k/capita, #2 (switzerland) spent $3.2k/capita, #3 (Germany) spent $2.7k. 2004 numbers are similar, slightly rearranged, but we ($6.1k) are still on top though Switzerland jumped up ($5.6k). Germany ($3.5k) slipped behind Norway ($5.4k), Iceland, Denmark($3.9k), Austria, and Sweden($3.5k).

And it’s because it’s such a large bunch of countries, and because there’s not a clear diversity or obesity pattern among them, that I am not terribly sympathetic to claims that it’s not our lack of universal care that is the problem, instead it is some other cause.

In addition, I read somewhere (and now I cannot find it, I am running tests at work and they are almost done) that we’re looking at a sort of recent pattern; there was a time when we were indeed best in the world, despite our diversity, but we failed to improve while the rest of the world did. And, somewhat interesting to me, though obesity and diversity do not make the cut as statistically large causes, that paper did not look at exercise. So, hmmmmm?

> Mexico? Russia? David, I hear your point but remember we are very culturally diverse country, to compare nations and not regions in our country makes no sense.

I’m wary of “diverse” — it seems a lot like an excuse to me. (See above.)

> Do you believe in laws that govern eating (your SF big mac ban , NYC salt)and lifestyles? As a tangent I do not think government programs should buy junk food and soda but thats a problem with giving money- how far does the government intrude into a person’s life? Should people be rated for health care the same way they are for life and auto insurance? Do we really do a poor job at prevention or do people make conscience and unconscious decisions to be or not be healthy?

I would consider what has been done in other countries first. I don’t think they do a lot of detailed food regulation, though they might have different subsidy patterns for some of their foods. They do seem to encourage exercise, in a sort of offhand way.

So for example, they tax gasoline at a rather high level, which discourages use of cars when there are alternatives (walking, biking, walking/biking to mass transit). In some European countries, they provide better facilities for biking, walking, and transit. In others, the liability laws for car crashes include a default assignment of blame to the “larger party” — this also favors biking and walking. That’s the exercise half.

On the food half, I am not sure. I am wary of what I would call fad-driven legislation — so, salt for instance, I keep hearing that go back and forth, and salt is cheap enough that I don’t see that there is an influential salt lobby that would churn out disinformation (unlike, say, the tobacco lobby). On the other hand, it appears certain that the partially hydrogenated oils are a terrible thing, and for those, an outright ban would be just fine. I think such a ban would be good for business, not bad for business — there’s food that I avoid, because I am not sure what fats it was prepared with.

But I am ambivalent on the salt thing — I’m old, I’ve got borderline blood pressure, so cutting back on salt was one thing we tried. Turns out I’m not much of a salt responder, but in the process of cutting back, I recalibrated my taste buds, and you can be plenty happy with less salt than is usually the case around here (this was made very clear back in about 2006 on a bike tour, when I tried to drink a can of V-8, and could not stomach it because it was too salty). This is clearly something where regulation could be done wrong, but I suspect that we could also be looking at a sort of saltiness arms race, where as we get accustomed to a certain level of saltiness, food manufacturers try to win our attention by nudging just a little bit higher. Eventually, we get used to that level, and the eventual result is V-8 juice.

Information is a big part of it — for all I know, we may have already banned PHO’s in Massachusetts or the US, but I don’t know it, so I have to behave as if they are out there. On the other hand, last time I bought food at a Starbucks in New York, I recall seeing the calorie labels on some of it, and THAT information caused me to simply not buy whole categories of stuff ever again (I do a taste-per-calorie calculation, more or less; if it’s going to be a ton of calories, it had better test really good).

Europe and Japan, as I understand it, are both more picky about how (some) food is produced. It’s uneven — again as I understand it, there are some standards that are looser (raw-milk-based cheeses in France, some meats prepared in Italy) and some that are tighter (restrictions on use of antibiotics in Europe, pickier meat inspections in Japan).

> Do overweight, non exercising smokers deserve unlimited care? Give me a system that people have some responsibility and incentive for their health and I believe our mortality and relative health will improve.

But is there any data showing that this works? We’ve got all these other nations where people live longer — do they do this? Why shouldn’t we try to do what works for them, rather than trying new stuff, that might not work, that might merely make people miserable? We’ve already got social and some legal incentives in place to discourage smokers and the overweight — how far do we want to go?

And, speaking as a Person of Size, I happen to know that the last time I had a “normal” BMI, I had so little fat on me that I could not float, no matter how full I inflated my lungs (this was a long time ago, in college, taking a water safety instructor class. Same thing happened to one of my brothers, and my Dad recalls a time when he could not float even in salt water). Some of use are just plain dense, not just in the mental sense of the word. I would probably get dinged by any such metric (note that I ride a bicycle, minimum of 50 miles per week, every single week — it is the rational thing to do).

Sloman:

David, other than France, the UK and Germany none of the other countries are remotely analogous and I would venture to say we are bigger, racially and culturally more diverse than all. We are at an impasse as until there is a discussion of limits and personal incentives I am not on board turning healthcare over to a single payer system. Will, you want to weigh in?
From my conversions with you I think we basically have different orientations that make it unlikely we will find agreement in many aspects of how individuals and the government interact. I have faith in the individual and less so in government making decisions that affect oneself. I think what is good for MA is not necessarily good for MI, AZ TX or WA so let’s have the states continue to be laboratories for the federal government and if something works let’s consider it nationally. IMHO the MA healthcare experiment is not ready for prime time and until it is self sustaining, has a net neutral or positive effect on job creation and shows positive health outcomes lets hold off on going national.

Chase

:
> David, other than France, the UK and Germany none of the other countries are remotely analogous and I would venture to say we are bigger, racially and culturally more diverse than all.

Before that argument has much worth for me, you need to show me some credible sort of connect-the-dots explanation for why that is the cause of our terrible expenses and outcomes, and not single payer. Ideally, with data. I don’t just dismiss “obesity” out of hand without taking a stab at figuring out whether they might be a big factor, because intuitively, it could be — so I did a regression of costs vs obesity rate, even splitting into the self-report and doctor-report groups (the info is there, if you look for it). It didn’t work; there was no particular pattern.

Someone else (afore-mentioned link, not re-found yet) did a more detailed study, looking at changes over time, and again, they got a result of “not large enough”.

So if you say it is “diversity”, how does that actually work as a cause? And are you sure that isn’t a fancy way of saying “terrible care for poor people”?

And since this is a big problem, if it turns out that diversity is in fact the key, how should we then go about fixing the problem?

> We are at an impasse as until there is a discussion of limits and personal incentives I am not on board turning healthcare over to a single payer system.

Why personal incentives? Again, I want data. How do other countries compare here? What works for them? They appear to manage without limits — at least, not with limits that affect meaningful outcomes — so why can’t we?

> IMHO the MA healthcare experiment is not ready for prime time and until it is self sustaining, has a net neutral or positive effect on job creation and shows positive health outcomes lets hold off on going national.

The problem with getting definitive answers from the MA experiment is that on the one hand, we are embedded in a larger, different health care economy, that may constrain what we can do, or how companies can game against it (kinda like Greece, being stuck with debts in the Euro, no?), so it just might not work, and on the other hand, if it does work, that’s not definitively good for the rest of the country, because we are relatively wealthy and relatively well-educated, compared to the rest of the country. Demographically, we look really good. People might say that “they’re not diverse, that won’t work for us”.