July 5, 2012

Confession time: I don’t care whether Mitt Romney thinks the individual mandate is a tax or a penalty. And you shouldn’t, either.

Here, via the Kaiser Family Foundation, is how the individual mandate works if we call it a tax: “Those without coverage pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income…Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants, incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of an individual's income, and those with incomes below the tax filing threshold.”

And here is how the individual mandate works if we call it a penalty: “Those without coverage pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income…Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants, incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of an individual's income, and those with incomes below the tax filing threshold.”

As you might have noticed, there’s no difference between the description of the mandate in those two paragraphs. That’s not because I’ve made some disastrous copy-and-paste error. It’s because the individual mandate works the exact same way whether you call it a tax or a penalty.

Nor is it credible to say that this distinction will have real political consequences. “Tax” is not a popular word. But neither is “penalty.” It’s very difficult to imagine the voter who loved the idea of paying a penalty for going without health insurance — aren’t penalties great? — but is morally appalled at the prospect of paying a tax.

And, remember, the individual mandate is a well-known policy that is already extremely unpopular. In fact, it’s the most unpopular provision of the health care law, and always has been. The people who don’t like it already know they don’t like it. The people who do like it are, at this point, well aware that they like it. The idea that, this late in the game, even one vote will be decided by whether Republicans call this already-disliked policy “a tax” rather than “a penalty” or “government coercion” or “jackbooted thugs making you buy health care” strains credulity.

Wonkbook dashboard

RCP Obama vs. Romney: Obama +2.6%; 7-day change: Obama -0.4%.

RCP Obama approval: 47.7%; 7-day change: -0.2%.

Top story: More health care fallout

Fifteen governors have said they are leaning towards or will reject expanding Medicaid. “At least 15 governors have indicated they will not participate in the expansion of Medicaid under the healthcare law, striking a blow to President Obama's promise of broader insurance coverage…Seven states with Republican governors have given a flat ‘no’ to the Medicaid expansion since the Supreme Court ruling, according to reports and press statements…States that will decline to participate include Florida, where Gov. Rick Scott (R) turned his opposition to the law into a political career, and Louisiana, where Gov. Bobby Jindal (R) has vowed to help elect Mitt Romney as president in order to repeal it. In eight other states — seven with GOP governors — the Medicaid expansion seems unlikely, given comments from governors and their offices.” Elise Viebeck in The Hill.

States could cut their Medicaid rolls in 2014. “Starting in 2014, things could get worse for people in Medicaid…The impact of the high court's ruling making the expansion voluntary is likely to be compounded by another provision in the law that the justices left intact: In 2014, states are no longer barred from making it harder for adults to qualify for Medicaid. Experts worry those two developments taken together could spur some states to reduce the number of people covered…Since 2009, when Congress approved the federal stimulus law, which included additional Medicaid funding, states have been prohibited from reducing eligibility or increasing the cost-sharing requirement for people enrolled in Medicaid. The health law extended that prohibition until 2014, when the expectation was that every state would have a new online insurance market and would have expanded Medicaid to everyone under 133 percent of federal poverty level.” Phil Galewitz in Kaiser Health News.

@sarahkliff: If nothing else, SCOTUS decision has been a great public education tool to remind people that 50% of ACA’s coverage gains are in Medicaid.

The Medicaid expansion is already covering a half-million Americans. “The health law's Medicaid expansion does not officially start until Jan. 1, 2014. It did, however, give states the option of starting enrollment even earlier. Five states – California, Connecticut, Minnesota, New Jersey and Washington — as well as the District of Columbia took the Obama administration up on the offer…All told, they expected to cover 600,000 Americans by 2014 — about 10 times the amount covered under the health law's often-touted high risk pools.” Sarah Kliff in The Washington Post.

More legal challenges to Obamacare are on the way. “The next wave of lawsuits likely wouldn't put the whole law at stake, as the challenge to the individual mandate could have. But they're going after pieces of the law that happen to be red meat for many conservative voters — like the law's contraception mandate and a new Medicare panel that Republicans call a ‘rationing board.’ And one possible legal challenge, which would try to block the feds from offering subsidies in a federal health insurance exchange, is meant to exploit a loophole in the law…There are 23 lawsuits already filed in courts across the country challenging the law's requirement that religious-affiliated institutions, such as schools and hospitals, provide insurance coverage for birth control and other contraceptives.” Jennifer Haberkorn in Politico.

The Medicaid ruling will set up legal battles over other federal programs. “Think last Thursday's Supreme Court ruling was just about health care? Think again. Chief Justice John Roberts's surprise opinion, which allows states to opt out of the law's Medicaid expansion, could set up a series of legal showdowns between states and the federal government over the strings attached to billions of dollars in federal grants for everything from transportation to education and the environment. It’ll take many years — and many lawsuits — before the full effects of Roberts's health care ruling are sorted out. Still, legal experts on both the right and the left agree that the door is now open for states to challenge everything from the Clean Air Act to No Child Left Behind and anti-discrimination protections.” J. Lester Feder and Darren Samuelsohn in Politico.

Romney now says the mandate is a tax. ”Mitt Romney said Wednesday that a mandate in President Obama's signature health-care law is ‘a tax,’ contradicting a position his campaign staked out this week and belatedly getting in line with many other Republican leaders…By saying the mandate is a tax, Romney seemed to acknowledge that the provision in the Massachusetts law that, like Obama's federal law, fines people who don't buy health coverage also is a tax. But he argued that is not the case…In the CBS interview, Romney signaled that he would campaign on the Supreme Court ruling and he began to brand Obama as imposing new taxes on the middle class.” Philip Rucker in The Washington Post.

@JeffreyYoung_HC: Let’s just call it a penaltax and move on.

@afrakt: Scientists debate whether the new particle is really the Higgs or is actually a tax.

KLEIN: The mandate isn’t the only healthcare tax Republicans have backed. “The law's biggest tax increase, at least in the first decade, is a 0.9 percent increase in the Medicare payroll tax paid by Americans earning more than $200,000 a year. Long-term, however, the largest increase — and certainly the most important one for the future of the health-care system — will be the excise tax on high- value health insurance plans, which begins in 2018…This is actually an attempt to address a core Republican concern: The tax break for employer-provided health insurance, which Republicans believe encourages employers to spend too much on health care while also making it impossible for a health-care system not based on employers to emerge…This year, Mitt Romney's health-care proposal — although it's so vague it hardly merits the term — gestures toward the same idea: His website says he will ‘end tax discrimination against the individual purchase of insurance.’” Ezra Klein in Bloomberg.

WESSEL: The slowing growth of health costs may be lasting. “For the past couple of years, U.S. health-care spending has been growing at a surprisingly slow pace…Gerard Anderson, an economist at Johns Hopkins University’s Bloomberg School of Public Health, says there is nothing comparable to the 1990s spread of managed care to explain the current slowing of health spending…Harvard University economist David Cutler draws the opposite conclusion. He attributes about a third of the slowdown to the transitory impact of the recession, and another dollop to recent cuts in government payment rates to providers and to the drug industry’s inability to find pricey new drugs to replace the revenue from generics. But Mr. Cutler speculates a significant part of the slowdown reflects changes in consumer and provider behavior that will persist. Americans are using less health care because they are being forced to pay more out of pocket.” David Wessel in The Wall Street Journal.

ZAKARIA: The Republican plan to reduce healthcare costs won’t work. “Republican alternatives to Obamacare, such as Rep. Paul Ryan's plan, don't bother with expanding coverage, which is a mistake because they leave in place a broken insurance model in which people can freeload. But most do have a strategy to control costs — get consumers to pay for more of their health care. The basic idea is intuitively appealing. Markets produce efficiencies; they presumably would do the same thing in health care. But the situation on the ground suggests that markets work imperfectly in this realm…Economists have often written about ‘the asymmetry of information’ — areas where consumers are not expert enough to be able to determine what product is best. Evidence increasingly shows that this is true of health. After all, consumers freely make the choice to smoke, eat junk food and forgo preventative care…Having us spend more of the money ourselves is unlikely to solve the cost crisis in health care.” Fareed Zakaria in The Washington Post.

GOOLSBEE: Obamacare and other regulations aren’t slowing the recovery. “Of all the public reactions to last Thursday’s surprise ruling from the Supreme Court on the Affordable Care Act, one of the most interesting came from the markets: Nothing happened. That probably disappointed those who spent the past two years saying that the costs from increased regulation and fear of the health plan explain why U.S. companies have not hired faster and have accumulated huge amounts of cash on their balance sheets. If that were so, the court ruling should have had a big impact on expected future profits. Stocks should have tumbled. They didn’t, and the markets’ collective yawn was the latest piece of evidence refuting the notion that the health plan and other regulations are the main problems facing the economy…A fair read of the data suggests that the economy is growing slowly today because we are still making our way out of a deep financial crisis.” Austan Goolsbee in The Wall Street Journal.

Top op-eds

1) BAKER: Working fewer hours could solve unemployment. “We can deal with unemployment every bit as effectively by having people work fewer hours, as we can by increasing demand. The most important point to realize is that the problem facing wealthy countries at the moment is not that we are poor, as the stern proponents of austerity insist. The problem is that we are wealthy. We have tens of millions of people unemployed precisely because we can meet current demand without needing their labor…There is nothing natural about the length of the average work week or work year and there are, in fact, large variations across countries. The average worker in Germany and the Netherlands puts in 20% fewer hours in a year than the average worker in the United States. This means that if the US adopted Germany’s work patterns tomorrow, it would immediately eliminate unemployment.” Dean Baker in The Guardian.

2) WOLF: The EU summit deal didn’t do enough. “First, there was actual progress towards a higher degree of integration; and, second, a coalition formed between France, Italy and Spain. The latter suggests that the political dynamic of the eurozone might have altered with the rise to power of Francois Hollande. It also seems to confirm that Germany does not wish to seem isolated, provided it does not have to concede on fundamental principles. However these shifts certainly do not show that the path to true fiscal or banking unions now lies open. Either would require a far greater sense of solidarity than now exists…In substance, then, these are small steps, incapable of achieving the three necessary conditions for an end to the crisis: a definitive separation of banks from sovereigns; financing of weak sovereigns on manageable terms during the lengthy period of economic adjustment and retrenchment; and, above all, a return to healthy economic growth.” Martin Wolf in The Financial Times.

3) BAUMAN AND HSU: A carbon tax just makes sense. “The United States should jump at the chance to adopt a similar revenue-neutral tax swap. It's an opportunity to reduce existing taxes, clean up the environment and increase personal freedom and energy security. Let's start with the economics. Substituting a carbon tax for some of our current taxes — on payroll, on investment, on businesses and on workers — is a no-brainer. Why tax good things when you can tax bad things, like emissions? The idea has support from economists across the political spectrum, from Arthur B. Laffer and N. Gregory Mankiw on the right to Peter Orszag and Joseph E. Stiglitz on the left. That's because economists know that a carbon tax swap can reduce the economic drag created by our current tax system and increase long-run growth by nudging the economy away from consumption and borrowing and toward saving and investment.” Yoram Bauman and Shi-Ling Hsu in The New York Times.

4) BARRO: Congress just undermined pensions. “Private firms that offer pensions are required by law to use a discount rate that is tied to interest rates on long-term, highly rated corporate bonds, under the theory that a pension obligation and a bond obligation are similarly risky: Each can be broken only if the company goes bankrupt. Since interest rates are currently near historic lows, companies are being told to set aside a lot of money for pensions; the lower the discount rate, the more cash you need on hand today to fund future liabilities. Companies don't want to set aside so much money. So they lobbied Congress to change the rules so that they can choose discount rates based not on current rates but on an average of interest rates over the last 25 years…As a result of the new rules, corporate pension plans won't have enough money on hand to cover their liabilities — and if companies go bankrupt, those funding gaps will become the responsibility of the Pension Benefit Guaranty Corporation, which is run by the government.” Josh Barro in Bloomberg.

5) PORTER: Numbers show that the drug war has failed. “When policy makers in Washington worry about Mexico these days, they think in terms of a handful of numbers…They are thinking about the wrong numbers. If there is one number that embodies the seemingly intractable challenge imposed by the illegal drug trade on the relationship between the United States and Mexico, it is $177.26. That is the retail price, according to Drug Enforcement Administration data, of one gram of pure cocaine from your typical local pusher. That is 74 percent cheaper than it was 30 years ago. This number contains pretty much all you need to evaluate the Mexican and American governments' ‘war’ to eradicate illegal drugs from the streets of the United States. They would do well to heed its message. What it says is that the struggle on which they have spent billions of dollars and lost tens of thousands of lives over the last four decades has failed.” Eduardo Porter in The New York Times.

DC indie rock interlude: Ted Leo plays ‘Who Do You Love’ live at AOL.

Got tips, additions, or comments? E-mail me.

Still to come:The living wills are here; Republicans are divided over food stamps; tariff breaks are back; more people are buying cars; and kittens are still kittens.

Economy

Regulators released living wills for big banks. “Federal regulators released so-called living wills on Tuesday for nine of the nation's largest banks — blueprints for how they could be dismantled in the event of a collapse — but some analysts and other banking experts warned that they were still too big to fail without sending shock waves through the financial system…The living wills, released by the Federal Deposit Insurance Corporation and the Federal Reserve, outline plans prepared by the banks, including JPMorgan Chase, Bank of America and Citigroup, for their liquidation. These contingency plans represent one more bit of fallout from the 2008 financial crisis, when the bankruptcy of Lehman Brothers caused the entire banking system to freeze up, prompting government guarantees for lending and outright aid for many of the largest banks. The financial sector has bounced back for the most part since then, but public ire over the bailout remains strong.” Jessica Silver-Greenberg and Nelson Schwartz in The New York Times.

Demand for personal service jobs has held strong. “Before, during and after the recession, demand for one sort of worker has been persistently stronger: jobs that involve assisting or caring for other people–from fast-food workers to home-health aides to nail polishers. These occupations have one thing in common: They aren’t easily automated or outsourced abroad. ‘You can’t send people to China or India for a haircut,’ says Israel Kakuriev, 37 years old, who has been cutting hair in midtown Manhattan for the past 20 years. Nor is there, yet, a robot that can cut hair or hold the hand of an elderly woman with Alzheimer’s or do all the chores that flight attendants do…Mr. Autor and MIT’s Daron Acemoglu sliced the U.S. workforce into 318 occupations, ranked by skill and education. Between 1989 and 2007–just before the recession–they found a 5% increase in routinized production, machine-operator and clerical jobs–but a 36% increase in personal-service jobs.” Neil Shah and David Wessel in The Wall Street Journal.

The IMF lowered its forecast for U.S. growth. “The fund cut its estimates of American growth to 2 percent in 2012 and 2.25 percent in 2013 in the report. In April, it estimated growth of 2.1 percent in 2012 and 2.4 percent in 2013…The fund cited numerous reasons for the slowdown. The need for households to pay down their debts has cut into consumer spending and reduced economic demand.” Annie Lowrey in The New York Times.

Austerity is chipping away at some small programs. “Two presidents — one Democrat, one Republican — tried unsuccessfully for more than a decade to cut back or eliminate a fund for closing abandoned coal mines that had become a piggy bank for Western states. It took a highway bill to do the trick…For years, pay-as-you-go rules meant to control budget deficits have been maligned as ineffective. Congress always found a path around them, declaring that they did not apply to tax cuts or labeling spending as ‘emergencies’ not offset with equal spending cuts or tax increases. But trillion-dollar deficits and a new core of spending hawks in the House and Senate are beginning to change that. Tax breaks once routinely extended — for business research and development, or wind energy, for instance — are languishing. Spending cuts proposed by the executive branch and rejected by legislators protecting their turf are getting a second look.” Jonathan Weisman in The New York Times.

Factory orders rose in May. “Orders for manufactured goods increased 0.7 % in May to a seasonally adjusted $469.04 billion, the Commerce Department said Tuesday. Economists surveyed by Dow Jones Newswires had expected factory orders to grow just 0.1% from the prior month. Orders for April were revised to an 0.7% decline from a previously reported 0.6% slip.” Eric Morath and Sarah Portlock in The Wall Street Journal.

The ECB is expected to announce a rate cut. “The European Central Bank is widely expected to write history Thursday by cutting its policy rate to a fresh all-time low. But would it go further?…More than two-thirds of the 46 banks and think tanks polled by Dow Jones Newswires forecast that the ECB will cut its one-week lending rate 0.25 percentage point to 0.75% from the current 1.0% and nine are predicting a deeper cut to 0.50%…But the central bank, which numerous analysts regard as the sole player with the means and credibility to solve the region's raging debt crisis, may well stop short of announcing further unconventional policy steps. In doing so, the ECB would demonstrate that it prefers doing business as usual-remaining in the realm of policy measures regarded as conventional for a central bank.” Christopher Lawton and Margit Feher in The Wall Street Journal.

@Lisamckelvey101: Sun shining, birds singing and indications that the ECB is going to drop interest rates… All in all a positive outlook for the day

Around the world interlude: London to Iceland in 3,000 pictures.

Health Care

The GOP is divided over the extent of cuts to food stamps. “Do Republicans in Congress want to fix the food stamp program — or punish it? That's the question facing the House Agriculture Committee leadership as it rolls out its plan this week to cut farm subsidies together with about $16 billion in 10-year savings from food stamps — also known as the Supplemental Nutrition Assistance Program. ” David Rogers in Politico.

@petersuderman: Cop stops to inspect our fireworks. Someone mutters, “this is worse than IPAB!”

Domestic Policy

Tariff breaks are back. “Back in 2010, House Republicans made a bold promise. To show they were serious about reform, they would deny themselves two well-used — but frequently misused — tools of congressional power. In short, they would stop doing expensive favors for the folks back home with taxpayer dollars. The House GOP banned ‘earmarks,’ which allow a legislator to dole out taxpayer money for hometown projects. They also banned a lesser-known kind of favor, which allowed a congressman to give a local company a break on its federal tariff payments. But now, 19 months later, dozens of Republicans have decided they went too far. They want to bring one kind of favor back. Led by a powerful committee chairman, GOP legislators have joined Democrats in proposing hundreds of those small tariff breaks. Legislators say each would be a mini-boost to the economy: Companies could save up to $500,000.” David Fahrenthold in The Washington Post.

Auditors found overlap in federal jobs programs for the disabled. “Dozens of federal programs to help Americans with disabilities find jobs are fragmented and overlapping, potentially making services for this vulnerable population inefficient and wasteful, government auditors reported. Even with at least $4 billion a year allocated by nine federal agencies to employment programs, the government does little to measure whether the efforts are putting the disabled to work, how long those workers stay employed and whether they are satisfied with their jobs, the Government Accountability Office found.” Lisa Rein in The Washington Post.

Kittens being kittens together interlude: Two kittens chase a laser pointer, wrestle.

Energy

Lower gas prices pushed vehicle sales up last month. “The auto industry surpassed expectations in June by reporting a 22 percent increase in sales, fueled in part by lower gas prices and a surge of interest in new car models. While analysts had forecast a softening in demand, the car companies on Tuesday reported strong sales in most vehicle segments without the need to resort to higher discounts.” Bill Vlasic in The New York Times.

@grossdm: So aside from rising sales at GM, Ford, Chrysler, Nissan, VW, etc., June auto sales a total disaster

JPMorgan is being investigated over potential power-market manipulation. “JPMorgan Chase & Co. (JPM) is being investigated over potential power-market manipulation that inflated payments for electricity, according to the U.S. Federal Energy Regulatory Commission. The FERC, which has pledged to combat manipulation of prices, began its probe after reports last year of bidding practices by JPMorgan that the California and Midwest grid operators deemed to be abusive, according to documents provided by the Washington-based agency.” Katarzyna Klimasinska in Bloomberg.

@Ben_Geman: I wonder if crazy heat/outages +wildfires +Solyndra will push Dem/enviro messaging on climate away from jobs and back toward, well, climate

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

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