Good morning from Brazil, where I am helping the local ITS team with their 1Q Close and where I will be participating in the Client Experience Jam this Tuesday through Friday. If you haven't already registered for the Jam, please take a moment to do so. This is a huge moment in our company's history, where we will define the behaviors that differentiate IBM and makes us essential to our clients and the world.
A number of people have asked me, "Why do you work so hard and such long hours?"
I have found that many people are smart enough and sufficiently qualified to do most jobs; but, hard work is what distinguishes top performers from everyone else. In my opinion, it's a characteristic that distinguishes us as IBMers and sets us apart from our competition.
Every significant achievement in civilization from art to science to sport is the result of people who worked a lot harder than everyone else. You don't hear many people in India, Brazil or China (to name a few countries) complain about work-life balance, even though many in these developing countries work 12-15 hour days. These people are hungry to be top performers and obtain the rewards and recognition bestowed on the top 10% of the population. This takes hard work.
Research shows that exceptional achievers live longer and that they pretty much work until their death. The 10 most workaholic nations in the world account for most of the world's GDP.
I understand that many people are working long hours. I also know some are not working as hard as others. Are you working hard enough to achieve your objectives for 1Q? 1H13? Full Year 2013? Our commitment to hard work in service to our clients is one of the topics I'll be discussing in the Jamand I look forward to reading your posts.
Please consider this and take the actions you deem appropriate.
Robert J. Hoey
ITS and General Business
IBM Global Technology Services
Somers, NY 10589
Response from an IBM worker:
Dear Mr. Hoey
I wanted you to be aware that I find your memo to be completely offensive, and possibly in violation of federal law. You describe people who ask for work-life balance as "complaining?" This memo completely lacks empathy for people who have significant obligations outside of work. Are you implying that people who have other priorities are not eligible to be top performers, and therefore may be passed over for promotions? Will my job be in jeopardy if I am unable to work overtime, or if I have to take time off to care for a family member, or if I have a health condition that would restrict my ability to "work harder?" If so, this attitude will disproportionately affect women, minorities, and the disabled, and is in violation of the Equal Opportunity Act as well as the Americans with Disabilities Act. This company has historically been a trailblazer in equal opportunity, and I am frankly appalled that IBM would put someone with this attitude in a leadership position.
I am curious to see this research you mentioned that links long working hours with extended life expectancy. Because in the course of my research, I am seeing that employee burnout is on the rise*. Due to corporate downsizing, layoffs, and restructuring, employees are being asked to pick up the slack of extra work, or as you call it, "working harder." Burnout is known to be related a host of serious physical and mental health issues, including but not limited to relationship problems, stress, exhaustion, heart disease, suicide, anger, depression, anxiety, malaise, withdrawal from social circles, domestic violence, obesity, chronic pain, and the list goes on. Does it sound like someone with these symptoms would be a productive employee to you, Mr. Hoey? Federal and state labor laws in the United States protect the 40 hour work week for a reason. Work-life balance is a right that is protected under the Fair Labor Standards Act. To continue to place greater demands on employees creates a sweat shop environment of overworked, exhausted people, and ultimately hurts the organization due to the lower average productivity that those people are able to churn out. I see my co-workers suffering this every day, and I see how it hurts our business.
As a GTS employee, we are encouraged to work smarter, not harder. This means increasing efficiency, not work hours. However, if this is not an attitude that is sanctioned from the top down, employees will continue to be treated as disposable resources at the convenience of executive fat cats. Your employees will treat your business as well as you treat them. Sick people equals sick business. I would strongly encourage stockholders to question how this business is being managed.
I am requesting that Human Resources review your statements in this memo and launch an investigation into your organization to ensure that no qualified person has been illegally passed over for promotion due to being unable to work 15 hour days, which would certainly put IBM at risk of serious litigation.
To all IBM employees, I encourage you to stand up for yourself and your co-workers. Do not stand idly by while abuse and injustice is being sanctioned at the highest levels of this organization. Demand better working conditions, set limits with management, and take the work-life balance that you need to make your health and well-being your first priority.
Sincerely, One Voice for All
*Source: The slow -to-recover economy is taking a new toll on workers, USA Today, October 24, 2012 http://www.usatoday.com/story/news/nation/2012/10/23/stress-burnout-employees/16\ 51897/
Oh and Bob, how much hard work does it take to sanction a round of lay offs, give out bogus 3 ratings in order to make your 'numbers'.
Another useless executive.
Of course nobody complains about this, so these weekend Jams will probably continue and be more often until eventually we will all be working 6 days a week.
And they don't care about people's lives outside of work, if they had their way we wouldn't have lives outside of work. To me work/life balance was always lip service, they want us to work, work, work.
There are many like me who, if we were to leave IBM, they would be completely and totally screwed, as in my area, I am the subject matter expert and the one who everyone comes to for help when nobody else knows what to do. They continue to hire in the worst 3rd world employees, who are no help at all and they are complete idiots in some cases.
All in the name of more profit year after year, forever. Does this sound sane to anyone? How can they expect this to go on forever? At some point there has to be a limit to how much profit a company can make.
Not everyone is suited to work overtime. At some point in the day, after a certain number of hours worked, it becomes non-productive to keep working as the mind starts wandering and it becomes hard to concentrate.
In fact it is probably more productive if you take frequent breaks and give your mind a rest.
Regards, Just an IBM worker who is concerned about the direction this company is going.
Cook said the change will affect both full-time IBM employees and contract workers. He declined to say how many workers would lose their jobs or how many are currently employed in Rochester. IBM has not reported employee numbers since 2008, when it said the Rochester site had 4,200 employees. ...
When asked why the manufacturing is being moved, Cook said it is to "maximize efficiency."
According to the IBM spokesperson, who I finally reached this morning (my fault, not his), IBM will be moving the manufacturing of the Power Systems, PureFlex, and PureSystems servers that are assembled in the Rochester facility for customers in the Americas region to Guadalajara, Mexico. The refurbishment of used Power Systems equipment will be transferred to IBM's Poughkeepsie, New York, facility, which is where it makes System z mainframes and high-end Power Systems boxes like the Power 770, 780, and 795 (as far as I know). ...
As far as I know, IBM makes high-end Power Systems and System z mainframes in Singapore and entry and midrange Power Systems boxes in Shenzhen, China, for both the European and Asian markets, but Cook was unable to confirm that this was still the case. IBM opened up a Power Systems refurbishing operation in China last March and has been making entry and midrange Power Systems gear there since the fall of 2010. IBM closed down its high-end Power Systems and mainframe factory outside of Dublin, Ireland, in May 2010 and moved it to Singapore. ...
The transition of manufacturing from Rochester to Guadalajara will take perhaps a year to accomplish, maybe a little bit more. And it is unclear what effect this change will have on "Made In America" provisions in some government contracts. I am not a lawyer, but in many cases a business partner could probably do some final configuration changes on a Power Systems box and qualify. I am all for manufacturing here in my home country, but these rules rarely work out as intended is my guess.
I think you need to manufacture and design in the same place, and it is a wonder why Big Blue doesn't see this. This is one of the reasons, in fact, that General Electric just announced that it was moving manufacturing operations for water heaters and fancy chancy refrigerators back from China to the United States. There are a lot of reasons for this, but labor and energy costs relative to the United States are a lot higher than they were a decade ago.
The Rochester facility, which is one half the size of the Pentagon and which sits out on Highway 52 (you didn't think that 5250 came from nowhere, did you?), had a peak of around 8,100 employees back in 1990, when this case study about the facility was published. By 1999, it had around 7,000 employees, and in 2007, that had dropped to around 4,400. That was the last time anyone had a sense of how many people worked at Rochester. ...
Bootnote: After this story originally ran, Lee Conrad, who is in charge of the Alliance@IBM effort to unionize IBM workers in the United States, emailed me to say that sources within the Rochester plant tell him that the facility has 2,800 full-time employees. And a follow-on report at KTTC said that insiders told the TV station that 200 full-time workers and 150 part-times would lose their jobs because of the decisions to move operations from Rochester to Guadalajara and Pokie. And there will be ripple effects in Rochester because suppliers have companies and employees in the region surrounding the plant--and sometimes in it.
IBM has not divulged how many employees it has in the United States for many years, but Conrad estimates it to be around 92,000, down from 133,789 in 2005 and from over 200,000 in the early 1990s, before Big Blue had what former CEO Sam Palmisano called its "near death experience" when it did not see the mainframe cresting and the rise of RISC and PC servers. The AS/400, of course, was one of the bright points during the trying time, with record midrange system sales despite a recession.
Having said that its amazing how well the CFOs or IBM have been able to pull this off since the big restructure under Gertsner. It shows how much fat IBM had accumulated in its apogee days of old and how long your can milk a first rate brand but as I and many have said before here you can't do it forever unless you eventually grow the brand organically and that they have failed to do so far.
IBM used to make high-end Power Systems and System z mainframes as well as entry and midrange Power gear in a factory in Mulhuddart, outside of Dublin, Ireland, to serve European customers. In May 2010, IBM opened up a shiny new factory in Singapore – which cost $90m – to make high-end Power gear and mainframes to serve Asian markets, but then moved the manufacturing of all high-end gear from Ireland to Singapore. ...
Lee Conrad – who has the most thankless job on earth trying to unionize IBM US workers at Alliance@IBM, Communications Workers of Americas Local 1701, at IBM's original headquarters of Endicott, New York – tells El Reg that the Rochester facility employs around 2,800 workers. Rumors indicate that the manufacturing moves may affect hundreds of full-time and contract workers. IBM has not talked about how many people work at the Rochester facility since 2007, when it was 4,400 people. That is well off its recent peak, which El Reg estimates was 8,100 people back in 1990 and which had fallen to around 7,000 by 2007. ...
IBM may still be raking in $5bn a year or so in hardware for its Power-based iron, but if CEO Ginni Rometty wants to keep doing share buybacks to pump up IBM's earnings per share, then the cash money has to come from somewhere.
In a world where big companies increasingly distrust their advisers, because consultants don’t know what it’s like to be big, IBM is seen as a trusted peer. Still the IBM CEO is wrong about the changes that technology is bringing.
Let’s recap those briefly.
Data is the new raw material and will change the way decisions are made. “Many more decisions will be based on predictive elements versus gut instinct.”
The social network will drive value: “The social network will be the new production line in a company…Your value is not what you know but what you share.
Customer segments will individualize: “What you will see with rapid data and social sharing is the death of the average and the era of you.”
What’s wrong with this picture and the advice it will drive into the Fortune 500?
I was at a dinner recently where when asked what difference Rometty has brought to IBM thus far, the ranking IBMer at the table said he felt it was a stronger focus on the customer. I’m not so sure it’s any stronger, but it may be more nuanced. For instance, Rometty has made it plain that the new target for IBM is the chief marketing officer (CMO) or whatever that role is identified as in enterprises. Her first event as CEO was a symposium for CIOs and CMOs. And IBM has identified the CMO as a major target. ...
I was a Palmisano guy. And after watching how he transformed IBM and worked magic with not only the nearly half a million employees but also with IBM customers around the world – many of whom he knew personally – I was wondering who could rightly replace him. Well, Ginni is showing that she can carry it forward. No, one public speech does not a miracle make. Yet, it’s not just the speech; it’s the fact that she came up through the ranks watching and learning the IBM way, realizing the importance of the client, the responsibility to the shareholder and the value of the employee. Of course, many will argue that point.
Cons: As a re-badged employee there was constant tension between IBM goals and the goals of previous co-workers who were now on the other side of the fence.
I expected to be able to tap into the vast wealth of knowledge that a massive corporation like IBM might offer, but in reality each account was largely an island in terms of support, and getting assistance from resources assigned to other accounts was very burdensome where possible at all.
I expected that a technology company would be on the forefront of that field, but in almost every regard I found that only the most basic system administrator practices were understood and employed by IBM. Battling with IBM management against cookie-cutter designs which conflicted with customer requirements, or outright didn't solve the customer's problem, was a regular and frustrating occurrence.
Despite significantly increased responsibilities and being at the near-bottom of the pay scale, annual salary adjustment was embarrassing (<1% despite being rated as an exceptional employee). Same story on the bonus front (my bonus didn't make it into the triple digits, <$100).
Advice to Senior Management – When taking on new IT outsourcing accounts, I'd recommend a careful evaluation of the position of the account's technology environment (degree of automation, adoption of recent tech, etc), and measure whether the IBM product line will make that account's situation better or worse.
Mr. Newman, 27, who joined Google straight from Yale, and Brian Welle, a “people analytics” manager who has a Ph.D. in industrial and organizational psychology from New York University, led me on a brisk and, at times, dizzying excursion through a labyrinth of play areas; cafes, coffee bars and open kitchens; sunny outdoor terraces with chaises; gourmet cafeterias that serve free breakfast, lunch and dinner; Broadway-theme conference rooms with velvet drapes; and conversation areas designed to look like vintage subway cars. ...
Google lets many of its hundreds of software engineers, the core of its intellectual capital, design their own desks or work stations out of what resemble oversize Tinker Toys. Some have standing desks, a few even have attached treadmills so they can walk while working. Employees express themselves by scribbling on walls. The result looks a little chaotic, like some kind of high-tech refugee camp, but Google says that’s how the engineers like it. ...
In keeping with a company built on information, this seeming spontaneity is anything but. Everything has been researched and is backed by data. In one of the open kitchen areas, Dr. Welle pointed to an array of free food, snacks, candy and beverages. “The healthy choices are front-loaded,” he said. “We’re not trying to be mom and dad. Coercion doesn’t work. The choices are there. But we care about our employees’ health, and our research shows that if people cognitively engage with food, they make better choices.” ...
“The philosophy is very simple,” Mr. Nevill-Manning said. “Google’s success depends on innovation and collaboration. Everything we did was geared toward making it easy to talk. Being on one floor here removed psychological barriers to interacting, and we’ve tried to preserve that.” Among innovations that sprang from seemingly chance office encounters are the Google Art Project, which is putting thousands of museum works online, and enhancements to the company’s AdSense and AdWords advertising platforms. Razor scooters make it easy to get around the huge floors (each covers five acres), which offer every conceivable gathering space, from large open spaces to tiny nooks with whimsical furniture. It was Mr. Nevill-Manning’s idea to install the ladder connecting floors, now that Google is too large to fit on one. He said he wouldn’t go so far as to say cost is no object, but software engineers “are incredibly productive on a square foot basis,” he said. “Their value is enormous. It doesn’t cost that much to make them happy.” ...
Allison Mooney, 32, joined Google two years ago from the advertising giant Omnicom Group, and the difference is “night and day,” she said. “I came here from the New York agency model, where you work constantly, 24/7. You answer every e-mail, nights and weekends. Here, you don’t have to show you’re working, or act like you’re working. The culture here is to shut down on weekends. People have a life.”
And the perks, she added, are “amazing.” In the course of our brief conversation, she mentioned subsidized massages (with massage rooms on nearly every floor); free once-a-week eyebrow shaping; free yoga and Pilates classes; a course she took called “Unwind: the art and science of stress management”; a course in advanced negotiation taught by a Wharton professor; a health consultation and follow-up with a personal health counselor; an author series and an appearance by the novelist Toni Morrison; a live interview of Justin Bieber by Jimmy Fallon in the Google office.
Selected reader comments follow:
The money that Google spends on food, furniture, and perks is most likely a pittance compared to the savings Google enjoys in lower labor costs.
If a good software engineer earns $300,000-$400,000 on Wall Street, and maybe $180K to $200K at a large tech company, Google can most likely get away with paying $140-$160K in salary.
I heard recently that Google earns $1 million in revenue for each employee, a fact that likely allows for such generous accommodations. I certainly would not want other businesses to feel the need to strive for such a high bar in order to compete.
As a contrast, I suggest the Federal government as a place to work, where personal time is protected and health/retirement benefits are good (though not nearly as lavish as many believe). In return though, there are virtually no workplace 'perks' - we pay out of pocket for the water cooler and coffee machine in the kitchen. The peace of mind and time with my family are well worth the trade off.
The narrative goes that every single one of these oh so precious young people (ALWAYS young, never from the loser/misfit pile of over-40 maintenance programmers and others who are undeserving) creates $10,000 of wealth for every dollar they are compensated.
On one hand you have these kept, entitled people, extremely well compensated Googlers who have paid few dues. On the other hand you have an enormous mass of displaced IT workers who have had their core skills demeaned and defined down to rubbish through the labor pool dilution of the H1B program. Plus Google has been a pioneer in using low cost outsourced labor to do things like scan books and publications for Google Books. Those folks work side by side with the kept elite.
On one hand you have these kept, entitled people, extremely well compensated Googlers who have paid few dues. On the other hand you have an enormous mass of displaced IT workers who have had their core skills demeaned and defined down to rubbish through the labor pool dilution of the H1B program. Plus Google has been a pioneer in using low cost outsourced labor to do things like scan books and publications for Google Books. Those folks work side by side with the kept elite.
Every single one of them will have real fun encountering the normal career marketplace where economic value added is the determinant of a person's job worth.
Google doesn't want employees working out of their home ALL THE TIME. But every morning we get a flood of WFH messages (work from home). No advance permission is required, and I'm aware of no one who has abused the privilege.
There are a lot of women at Google. I'm sure we are substantially above industry averages.
Google pays very well compared to the industry. The crazy little benefits cost very little compared to salary, but they have a meaningful affect on employee happiness and productivity. Googlers are often willing to take less to work for Google, but most don't have to.
The truck is real, they move it around from time to time using the gigantic elevators that once moved freight trucks when the building was used by the port authority.
Google is a young company, but there are tons of middle age and older employees. A huge fraction of the population is at the age where they are having children. New fathers get 7 weeks of paid leave and other benefits, and are encouraged to take it. Mothers get 22 weeks of paid leave. They also have mother's rooms all over the facility for female employees to pump or feed their kids, who are welcome in the work place.
Google is a playground, but it is a very productive playground. Who wouldn't want to work for a company that thinks it has a responsibility to do everything in its power to keep its employees happy?
This data is now new. The discussion should be about why so many other companies are short-changing their investors by ignoring good business practices?
I'd like to share a bit more about MY experience working at Google, and address what I think are some misconceptions out there:
1. Average age of worker (29). TRUE, Google is a "young" company when compared to most companies its size, but its workforce is getting older. I am in my mid 30s and have 3 young children, and the culture is very inclusive of families.
2. Perks come don't come at the expense of compensation, in my opinion Google compensates very well. Adding base salary, stock units, and performance bonus, I think the total compensation is REALLY good.
3. Google doesn't require you to work long hours. Employees are managed by objectives and results. How many hours an employee works to achieve those results is up to him or herself.
My average workday starts around 8am and on most days will be out by 4-5pm. I get home to play with my kids and have dinner, and IF I am falling behind on my deliverables I'll put another 1-2 hours before unplugging. I have yet to do any work on a weekend.
4. In my opinion, perks make a huge difference related to how much I want to be at the office, in comparison to previous jobs, the day flies by when you have taken breaks for barista-made coffee or have done one of the many activities available on campus (dance classes, massages, gym, etc.) - In all seriousness, I've seen people hanging out at the campus on their day off.
This all comes on the heels of action that plan sponsors of DB plans are taking to freeze or terminate their plans and also as many participants are realizing that their 401(k) plans will not provide adequate replacement income when they retire. As many Americans continue to be concerned about outliving their retirement savings, longevity benefits are gaining interest. DB plans have built-in longevity features that provide a stream of annuity payments for a participant’s lifetime. Given that DB plans place all the risk on the plan sponsor and that defined contribution (DC) plans, such as 401(k) plans, place all the risks on the individuals, many employees overwhelmingly support congressional action to provide all Americans with access to a new type of privately run pension plan. The proposed new plan would be portable from job to job, allow for a regular check that lasts throughout retirement, and easy for employers to administer while offering professional money management. The characteristics are similar to a possible proposal by the U.S. Senate called Universal, Secure, and Adaptable (USA) retirement funds. ...
Finally, the survey confirmed that a majority of Americans, about 87%, believe that the increasing number of Baby Boomers retiring without pensions and adequate savings is straining families and the economy.
New workers in their early-to-mid twenties fall on the other end of the spectrum. Incomes are smaller, so contributions are smaller, and tax consequences are smaller as well. During those early earning years, there’s less need to jump down to a lower tax bracket, so it generally makes sense to make Roth contributions.
If you’re between 25 and 60, things are a lot grayer as tax and income situations vary widely. And tax laws could change drastically by the time you retire, so there isn't a perfect plan for deciding on Roth, traditional, or blended contributions.
You can, however, diversify to mitigate tax risks. In this case, I’m not talking about your asset class allocation—I mean tax diversification. You can blend so that you’re making Roth and traditional contributions. An even split may or may not work well for you. If you’re younger or area lower income-earner, you may tend toward Roth contributions; if you’re nearing retirement or are a higher income-earner, reducing your taxable income may be beneficial. But, ultimately, much of the decision hinges on whether you feel more comfortable paying taxes now or later and whether you’re willing to risk tax uncertainty during retirement years in exchange for a beneficial tax situation now.
Dean Garfield, president of the Information Technology Industry Council, which lobbies for large Silicon Valley groups including Apple, Google, and Hewlett-Packard, will testify that India is pressing ahead with measures that will “undermine, if not outright dismantle” its own progress as a global power in the tech sector.
Mr Garfield’s remarks to the House ways and means subcommittee on trade – which were obtained by the Financial Times – single out India’s “preferential market access policy”, or PMA, as its main source of complaint, since it would require the sourcing of IT products made in India in both the public and private sectors.
The way it works now, U.S. companies that manufacture goods abroad for sale here can hold their foreign income outside of the country, untaxed. The Offshoring Prevention Act would require companies that send factories and jobs overseas to play by the same rules as companies that keep jobs and factories in the U.S. This remove an offshoring incentive and helping local businesses compete.
Figure 1 shows increasing pressure that the H-1B program for temporary high-tech workers puts on the STEM labor market. H-1B workers in our labor force already dominate the annual graduation rate of 150,000 students from all U.S. engineering schools combined including about 20,000 bachelors, masters and PhD graduates in computing.
Roughly 130-150,000 initial H-1B visas are issued each year. Tens of thousands of foreign workers use other temporary visa programs, or stay in the workforce while they pursue permanent status. ...
Employers express frustration at not finding workers with needed skills. At the same time, they acknowledge receiving dozens or hundreds of applications for each job opening. Peter Cappelli, at the Wharton School of Business, points to a shift in hiring behavior. For many years, employers sought qualified workers who were able to do the work. Lately, employers are hiring fewer workers, and being much more selective. Now they want a perfect match of skills, knowledge and experience. That is, they want someone already doing the work, requiring no training or learning curve. Employers seek a "snowflake" applicant, uniquely qualified to fill their job opening. ...
"Job shops" dominate the H-1B petition process, and supply high-tech workers under a labor practice that is nearly commodity-like. Ironically, domestic workers are held to a exceptionally high level of precision in the skill set they must possess.
Employers will testify they are unable to find a domestic worker with highly specific skills, but the same employers will bring in foreign temporary workers with generic skills. Some employers file thousands of H-1B petitions, then "bench" workers until an opening is found. ...
H-1B workers have no great advantage over the corresponding domestic workers. We see this clearly in the workplace, when domestic workers get layoff notices, then are directed to train their own H-1B replacement workers as a condition for receiving severance.
The real culprit here is fee-for-service payment to doctors.
We cannot control runaway medical spending without changing how physicians in this country are paid — currently the single most significant driver of health care costs. We pay physicians according to the number of services they provide. The skewed financial incentives inherent in a fee-for-service model promote fragmented care and encourage doctors to provide more — and more costly — care, regardless as to whether those services improve the health of patients. ...
The current system places an emphasis on high-technology care and interventions, such as imaging and surgery. Services provided by surgeons, radiologists and other procedural specialists are reimbursed at a much higher rate than critical wellness visits with a primary care physician or office visits to discuss diabetes care. This reimbursement model discourages doctors from spending time with patients, particularly those with complex chronic illness, and has fueled the widening pay gap between specialties and the nation’s primary care shortage. ...
his same pay structure is influencing the number and type of services that physicians recommend and even where those services are done. Under Medicare, medical services performed in outpatient facilities are reimbursed at a lower rate than the same services provided in hospitals. For example, Medicare pays $450 for an echocardiogram done in a hospital and $180 for the same procedure in a physician’s office. That makes no sense. ...
Bill Frist, a physician, is a former Republican senator from Tennessee and Senate majority leader, and Steven Schroeder is a professor of health and health care in the department of medicine at the University of California, San Francisco. The two men co-chair the National Commission on Physician Payment Reform, which has issued a report providing recommendations aimed at controlling health spending by changing the way doctors are paid.
Brill examined seven medical bills in his story to make this point. A new, NIH-funded study takes the idea even further: A team of four researchers looked at medical expenditure bills that represented more than 8,303 emergency room visits.
They found, essentially, two things. First, huge variation in prices: Bills sent out for sprained ankles ranged from $4 to $24,110. Second, overall, really high prices: The average emergency room visit now costs 40 percent more than a month’s rent. ...
A headache could cost $15 — or $17,797. There was a difference of more than $70,000 between the most and least costly treatments for a urinary tract infection.
The slowing of the rate of health care cost increases comes amid a sluggish economy and a period of high unemployment that has made it easier for companies to reduce benefits of their workers. And like other surveys, the Towers Watson report shows employers are continuing to shift the cost of the total premium onto their workers with the employee share of the costs rising to 37 percent this year from 34 percent in 2011. ...
In the meantime, employers will continue to deal with health care costs by raising the share of total costs on workers. More than 80 percent of the survey’s respondents said they will continue to increase the share of company-paid premiums onto their workers.
Employers still bear most of the cost of workplace health plans. But employees contribute 42 percent more for heath plan coverage than they did five years ago, as against a 32 percent increase for employers, according to the study from the benefits consultant Towers Watson and the National Business Group on Health, a nonprofit industry group whose members are large employers concerned rising about health care costs. (This change is shown in the graphic above.)
Meanwhile, though, the share of the total cost of health care borne by employees, including both premiums and costs paid out-of-pocket, climbed to 37 percent in 2013, from 34 percent in 2011, the report found.
Annual salary increases, meanwhile, have averaged less than 2 percent percent over the last three years, so workers are losing ground. “From a total rewards perspective, ” the report concludes, “rising health care contributions are taking their toll on employee take-home pay.” ...
Employees paid, on average, about 23 percent of total premium costs last year, and are expected to pay nearly a quarter in 2013, as companies take steps to control their costs. In terms of paycheck deductions, this translates into an average employee contribution of $2,658 to premiums in 2012. That is expected to rise to $2,888 in 2013 — an increase of nearly 9 percent in one year.
Republicans say they would give people the option of enrolling in traditional Medicare, or accepting a voucher towards the cost of a private plan, but that so-called choice is a sly attempt to destroy senior’s guaranteed health coverage. The only people who would opt for a voucher are seniors with few health concerns, and who don’t cost much to insure. Seniors who can’t afford to pay the difference in premiums, and those with greater health concerns, wouldn’t have the option of selecting a private insurance company.
This means Medicare would be responsible for seniors who need the most expensive care, and couldn’t off-set those costs with a pool of healthier individuals. With less money coming in, and the burden of covering those who require the most care, eventually the program would default. And that’s exactly what Paul Ryan and House Republicans want.
Dental and vision care for children was the least likely of the Essential Health Benefits to be provided in base benefits for a health insurance plan. Only one out of four plans nationally had these benefits within their base coverage. Looking at these benefits at a more granular level revealed that only 8% of plans provided coverage for dental check-up services. Maternity coverage was nearly as infrequent as pediatric dental and vision coverage. Two thirds of health plans did not offer their beneficiaries prenatal, delivery, and postnatal healthcare coverage. Substance Use Disorder Coverage was frequently absent in health insurance coverage as well. Only half of plans covered inpatient and outpatient services for substance use issues (e.g. alcohol or drug addiction). Mental health coverage was slightly better with six out of ten plans covering inpatient and outpatient treatment.
In response, ACA included a mechanism to require a minimum basic level of essential health benefits (EHB). The expansion of the benefits to be covered, along with guaranteed issue to those with preexisting disorders, and placing a maximum on out-of-pocket costs, will all result in significantly higher premiums for plans offered in the individual market. That is in spite of the fact that many will still find the benefits to be deficient, and will still face large out-of-pocket costs because of the low actuarial values of the plans that most people will select.
Even with subsidies, these plans will be expensive. And for those who do not qualify for subsidies? Maybe those potential purchasers would finally see the wisdom of establishing an equitable public system of financing health care through progressive taxes - a single payer national health program. They certainly aren't going to like what they are going to get under ACA.
About one-half of the people in the United States who have health insurance receive it from their employers. Most of the rest are enrolled in individual plans or government Medicare and Medicaid programs.
More than half the states have declared they want nothing to do with setting up or running those health insurance marketplaces opening in their states later this year. But a closer look shows that at least a few of these states, like Ohio and Virginia, may have a larger role than they’re letting on.
When potentially millions of new customers start to enroll in exchanges come October, just 17 states and Washington, D.C., are currently slated to run their own. Elsewhere, the feds will play a big role in running the insurance markets, where people can shop and compare plans, often with federal subsidies.
That includes seven states that have signed up for “partnerships.” That means the Department of Health and Human Services, at least for the first year or two, will handle the technical side of things — like building the complex IT systems and helping people to sign up for coverage. And the state partners will maintain their traditional control over their health insurance markets. Partnership states can either run consumer assistance programs, oversee health plans in the exchange or both. But even as a number of Republican governors sign up for the law’s massive Medicaid expansion, many remain wary of being associated with the exchanges. So entering into a “partnership” with the feds doesn’t do them any political favors. ...
Most states are taking a hands-off approach to the exchanges, even after the Supreme Court ruling and the November election made it clear the GOP opponents of Obamacare weren’t going to stop the law in its tracks. So HHS has been carving out a quiet role for states to play even in these federally run exchanges. As an enticement, they’re even offering states grants.
And that role looks an awful lot like a partnership exchange, even if neither the states nor HHS wants to come out and say so.
“I can’t discern any meaningful difference between a partnership where a state controls plan management and this [federal-run exchange] plan management option,” said Avalere Health Vice President Caroline Pearson, who has been tracking exchange development across the country.
Head about two miles Northwest to another’s doctor office, and the price more than quadruples to $1,861. Head out to the Virginia suburbs and the price jumps another $300. ...
The clearest takeaway from the Cast light data is that there is huge, huge variation in what doctors charge. The map of Washington above, which shows the prices for ankle MRIs, is pretty much par for the course. Across the country, a number of cities see four-fold variation in how much providers charge for the same procedure.
Accurate data, flawed conclusions
In “Bitter Pill,” a well-researched and in many ways thoughtful essay, Steven Brill gets all the data right, but then draws conclusions that are surprisingly off the mark
After providing nearly 20 pages of damning evidence -- against both the excesses and inefficiencies of the private health insurance industry, and the runaway profiteering of hospitals, pharmaceutical and device manufacturers -- he arrives, or appears to arrive, at the obvious point: that is, “the best way both to lower the deficit and to help save money for people” is “the single payer approach favored by liberals and used by most developed nations.” Here he is right on the mark. But then abruptly, having just provided an argument that clearly supports it, he dismisses this conclusion. He provides two reasons for backing away from single payer: first, “no doctor could hope for anything approaching the income he or she deserves (and that will encourage future doctors to want to practice).” Second, “this kind of systemic overhaul ... seems unrealistic” given the extraordinary political power and influence of the health care industry.
The first assertion is factually incorrect. In fact, most doctors would earn the same under a single-payer system as they do now. The main difference in the professional life of myself and of tens of thousands of physicians like me would be freedom from the unimaginably exhausting and time-consuming demands of private insurance company rules and regulations. For those doctors whose high incomes ($1 million or more annually) result from billing for individual procedures like cardiac catheterization and joint replacements, incomes would likely suffer somewhat, but would certainly remain in the mid- to high-six figures. It’s hard to believe that as a nation, we would reject such urgently needed reforms simply to protect these multimillion-dollar salaries.
The second assertion -- that it “seems unrealistic” for Medicare to be improved and expanded to include comprehensive coverage for all Americans -- is logically flawed. Brill himself admits that the halfway measures he goes on to propose are similarly “unlikely to happen” given the current political power structure. Beyond this, if our society had followed his logic in 1917 or 1954, today we’d be living in a country where women were forbidden to vote and where schools were separated by race.
The injustice of our current health care system is a civil rights issue as urgent as women’s suffrage and desegregation. Now the oppressed are not only women or minorities, but all of us who find ourselves outside the 1 percent of wealth and influence. An improved and expanded Medicare for All would change this. Virtually all other developed countries know this. When will we wake up to this?
Jim Recht, M.D. Cambridge, Mass. The writer, a psychiatrist, is cochair of Massachusetts PNHP.
Brill missed the elephant in the room
Mr. Brill focuses on eight hospital billing statements yet dismisses the American private insurance industry as “ho-hum.” He missed the biggest elephant in the room. The largest single expense in American medicine is the administrative costs of private insurance that would be recovered with a single payer financing plan – that’s $350 billion annually and rising. That $350 billion represents 40 percent of our premium dollars. Half are insurance industry administrative costs; the other half are physician and hospital costs to collect from insurance companies. Remember this industry denies 30 percent of all first claims, requiring physicians to spend $82,000 each to pay clerks to persist in second and third claims.
That $350 billion is more than the combined income of all American physicians; more than the nation spends on all medications; more than we spend on obesity and tobacco-related diseases – combined; and more than we need to expand care to provide complete coverage of everyone in the country.
Every other industrialized nation provides better care to more people for less money than we do, and none use a private insurance industry like ours. Replacing it with a national single payer financing agency, even with no change in hospital billing, will provide everyone in the U.S. with health care for less than spend now. Mr. Brill found the bitter pill but missed the elephant.
Samuel Metz, M.D. Portland, Ore. The writer, an anesthesiologist, is a member of the Oregon chapter of Physicians for a National Health Program.
A clause in the 2010 health-care overhaul penalizes some employers when their workers aren’t able to obtain affordable medical coverage through the company. Employers can avoid those fees if their workers qualify for Medicaid as part of an expansion that as many as 22 states have rejected, according to a report today by Jackson Hewitt Tax Service Inc.
Without Medicaid, a “shared responsibility” payment of as much as $3,000 may be triggered for each employee who can’t get insurance through their company. In Texas, the largest state to refuse to increase Medicaid, employers may be liable for as much as $448 million in fines, the study found. In Florida, where the legislature has refused an expansion supported by Governor Rick Scott, employers may pay as much as $219 million.
“A lot of businesses have taken the position that they oppose a Medicaid expansion because it would increase their taxes,” Brian Haile, senior vice president for health policy at Jackson Hewitt in Parsippany, New Jersey, said in an interview. “The irony of this, or the paradox, is that the opposite may be true, at least for some businesses in some states.”
Sad to say, I can think of no market that better fits these criteria than health care. In a March 4 Time Magazine cover story titled “The Bitter Pill: Why Medical Bills Are Killing Us,” reporter Steven Brill dissects a number of hospital bills and traces the detailed charges back to their origins. He concludes, “everyone along the supply chain – from hospital administrators (who enjoy multimillion-dollar salaries) to the salesmen, executives and shareholders of drug and equipment makers – was reaping a bonanza. The only exceptions, I found, were those actually treating the patients – the nurses and doctors.”
When you need medical care there is absolutely no way you can accurately determine ahead of time what that care will cost you. Don’t hope to get anything approaching a rational explanation for what you are charged after the fact either. The best you can hope for is that whatever insurance you have will cover most of the costs. If not, you are at the mercy of the hospital and, if you can’t pay, its collection agency. ...
As the number of doctors who have become employees of profit or non-profit corporations has increased (now about 80 percent of Maine doctors and rising), they have come under pressure to increase the number of “units of service” they provide – visits, tests, procedures and prescriptions – in order to maximize the revenues and profits of the institutions that employ them. ...
I still believe that most health care workers want to do the right thing by our patients. But our corporatized and business-oriented health care system is making it increasingly difficult. ...
Businesses try to optimize prices and sales in order to maximize revenues. When “consumers” (patients) have little or no information about what they’re buying, Akerlof’s prediction that maximization of profits rather than value will dominate decision-making comes true. In other words, the asymmetry of information between patients (who possess little) and health care providers and administrators (who possess a lot) makes anything like a rational market in health care services impossible. ...
In his Time article, Brill documents that Medicare is much more efficient and does a much better job of controlling costs than private insurance. It seems to me that he makes a compelling case for expanding Medicare to everybody. But, in the end, he backs off of actually recommending it because, as he explained in an interview, he fears the power of a health care industry that generates huge profits and spends four times as much on lobbying as does the defense industry.
Were a private insurer to take over his Medicare coverage, Morse believes, his drug bill would once again skyrocket — only he wouldn't have his aerospace income to pay the tab.
"I'd be really scared about what could happen," he said. And he has reason to be afraid.
Republican lawmakers, in their budget proposal released this week, showed they're determined to roll back President Obama's healthcare reforms, deny coverage to millions, limit treatment of the poor and essentially hand Medicare over to private insurers.
This isn't just bad public policy. It's the perpetuation of a Darwinian struggle between those who have access to affordable healthcare and those who do not.
"There are goods and services that the private market does a very good job of providing," said Mindy Marks, an associate professor of economics at UC Riverside. "Healthcare isn't one of them."
That may sound obvious. But it is, in fact, key to understanding one of the most pressing problems facing our economy. In 2009, Americans spent $7,960 per person on health care. Our neighbors in Canada spent $4,808. The Germans spent $4,218. The French, $3,978. If we had the per-person costs of any of those countries, America’s deficits would vanish. Workers would have much more money in their pockets. Our economy would grow more quickly, as our exports would be more competitive.
There are many possible explanations for why Americans pay so much more. It could be that we’re sicker. Or that we go to the doctor more frequently. But health researchers have largely discarded these theories. As Gerard Anderson, Uwe Reinhardt, Peter Hussey and Varduhi Petrosyan put it in the title of their influential 2003 study on international health-care costs, “it’s the prices, stupid.”
As it’s difficult to get good data on prices, that paper blamed prices largely by eliminating the other possible culprits. They authors considered, for instance, the idea that Americans were simply using more health-care services, but on close inspection, found that Americans don’t see the doctor more often or stay longer in the hospital than residents of other countries. Quite the opposite, actually. We spend less time in the hospital than Germans and see the doctor less often than the Canadians.
“The United States spends more on health care than any of the other OECD countries spend, without providing more services than the other countries do,” they concluded. “This suggests that the difference in spending is mostly attributable to higher prices of goods and services.”
On Friday, the International Federation of Health Plans — a global insurance trade association that includes more than 100 insurers in 25 countries — released more direct evidence. It surveyed its members on the prices paid for 23 medical services and products in different countries, asking after everything from a routine doctor’s visit to a dose of Lipitor to coronary bypass surgery. And in 22 of 23 cases, Americans are paying higher prices than residents of other developed countries. Usually, we’re paying quite a bit more. The exception is cataract surgery, which appears to be costlier in Switzerland, though cheaper everywhere else.
Yet here is a curious fact about humans, in the United States, at least. Though we spend more per person on health care than any other people on earth, and with results that are no better and often worse than all other advanced nations, we have allowed conservatives and corporate interests to bind us with laws that explicitly forbid the use of formal cost-benefit analysis to determine how health care dollars are spent. Until we get our heads around this contradiction, we are in big trouble.
The stunning inefficiency of the U.S. health care system as a whole is now beyond dispute. To see the magnitude of aggregate waste, one only has to look at the gross disparities in how medicine is practiced in different parts of the country and with what results.
The best-known work in this area comes from the Dartmouth Atlas Project. For more than a decade, researchers there have systematically reviewed the medical records of deceased Medicare patients nationwide, including those who suffered from specific chronic conditions during their last two years of life. And by doing so, the researchers have uncovered striking anomalies that point to vast inefficiencies.
In Miami, for example, the Dartmouth researchers have discovered that the average number of doctor visits for a Medicare patient during the last two years of his or her life is 106. But in Minneapolis, among Medicare patients suffering from the same chronic conditions, the average number of doctor visits during the last two years of life is only twenty-six. Yet in both cities, all of these patients are equally dead at the end of two years.
The implication is unavoidable. The much higher volume and intensity of medicine as it is practiced in Miami as compared to Minneapolis may benefit some patients in some ways. But all the extra exams, as well as the extra tests, drugs, and operations that doctors in Miami regularly order for their patients, bring no aggregate gain in life expectancy.
By extrapolating from such disparities in medical practice around the country, Dartmouth researchers have developed the widely accepted estimate that roughly a third of all health care spending in the United States is pure waste or worse, mostly in the form of unnecessary and often harmful care—amounting to some $700 billion a year. Using a similar approach of comparing best and worst practices, a recent study by the Institute of Medicine concludes that over treatment and other forms of waste in the system consume $750 billion annually. That’s roughly the cost of the entire Iraq War.
This finding is in line with that of another recent study published in the Journal of the American Medical Association (the house organ of America’s doctor lobby!). It calculates that on its current course the U.S. will spend nearly $11 trillion between 2011 and 2019 on health care that has no benefit to patients and that is often harmful to their health. Cutting that waste by just 4 percent a year, the study concludes, would be enough to keep health care spending in line with the growth of the economy, which in turn would be enough to evaporate the federal government’s long-term deficits. And it would mean that wasteful health care would no longer crowd out care that actually improves and prolongs the lives of patients.
Yet while we know the system as a whole is grossly inefficient, it remains easy for those responsible for the waste to escape detection, let alone accountability. The biggest single reason is that, due to the insistence of conservatives allied with drug manufacturers and medical device makers, the federal government is not allowed to consider the cost-effectiveness of different treatments in deciding how to invest health care dollars. ...
The story of how this happened and what it means is full of perverse ironies. Leading up to the Obama years, mainstream health care policy experts and many politicians in both parties generally agreed on the need for the federal government to fund cost-effectiveness studies. As far back as 1996, a panel convened by the U.S. Public Health Service called for evaluating specific drugs and treatments based on how many years of healthy life they produced per dollar. When President George W. Bush signed the Medicare Modernization Act into law, he authorized $50 million to study the clinical effectiveness and appropriateness of health care services, including prescription drugs, while Bush’s Medicare program administrator, Mark McClellan, pushed for using such research in Medicare coverage decisions. ...
As late as 2008, Republican presidential nominee John McCain issued a position paper, entitled “Straight Talk on Health System Reform,” that reflected the bipartisan consensus on the need for government research into the actual value of different drugs and treatments. Based on the thinking of one of his health care advisers, Gail R. Wilensky, who had long championed the cause, the position paper stated, “We must make public more information on treatment options and doctor records, and require transparency regarding medical outcomes, quality of care, costs and prices. We must also facilitate the development of national standards for measuring and recording treatments and outcomes.” ..
President Obama came to office strongly sharing this conviction and committed to putting it into practice. But as it happened, even the administration’s most tentative moves in this direction were met by a firestorm of opposition from the drug and medical device lobbies. This opposition would have far-ranging consequences, including, in the end, an effective ban on government even sponsoring cost-effectiveness research in health care, let alone using it as a guide for setting health care policy. ...
“You have to be very careful,” warned W. J. “Billy” Tauzin, then president of the Pharmaceutical Research and Manufacturers of America, in explaining why he mobilized his industry’s legions of lobbyists in fierce opposition to the administration’s proposal. “An arrogant staffer writing a report was about to dramatically change the direction of health care in America,” Tauzin told the Los Angeles Times, adding ominously, “I hope it is a clear warning. There are a lot of beehives out there. You don’t just go around punching them.”
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
Thanks to this plan, nobody can take the House Budget Committee chairman seriously anymore as a policy wonk or a true deficit hawk. His budget is the work of an ideologue. It’s a bargaining ploy that even Ryan concedes is merely “a vision.”
It is full of holes and magic asterisks, the biggest being his refusal to detail any of the middle-class tax deductions he would have to scrap to get to his 25 percent income tax rate. This would represent an astonishingly large cut from the current 39.6 percent rate for incomes of over $450,000 a year.
It’s a cruel budget. To finance his largess to the very well-off, Ryan would — through steep Medicaid cuts and the repeal of Obamacare — leave an additional 40 million to 50 million poor or moderate-income Americans without health insurance, according to the Center on Budget and Policy Priorities. ...
True, the 2012 elections ought to have settled these issues. The Ryan budget was on the ballot last November not only because Ryan was on the ticket with Mitt Romney but also because Romney offered a similar approach. It takes nerve to dismiss the results of an election that Ryan himself called a “referendum.”
The question is: Will House Republicans be held accountable for ignoring that verdict while putting forward something this radical and unrealistic?
But there is bad news. House Republicans seem to believe they can offer a budget closer to Ayn Rand’s worldview than Ronald Reagan’s without paying much of a price. Some Senate Republicans inclined toward a reasonable deal will feel pressure to move right, given where Ryan has defined the boundaries of the debate inside the GOP.
This is, finally, a test of those who consider themselves moderate and are seeking a sensible settlement. Will they call out Ryan and the House Republicans for how extreme their ideas are? Or will they instead adjust their own postures and timidly let Ryan dictate the terms of the debate?
Here are the facts:
But on the other side of the Capitol, Senate Democrats rolled out a 10-year spending plan that sent a different message: Not so fast.
While Democratic leaders are offering quiet support for Obama’s renewed campaign to strike a grand bargain with Republicans that would include cuts to Social Security and Medicare, a significant number of Democratic lawmakers are digging in their heels and vowing to protest any reduction in promised benefits. ...
Meanwhile, a growing number of Democrats have declared their opposition to a proposal that has emerged as Obama’s biggest selling point to Republicans: his offer to apply a less-generous measure of inflation to Social Security, resulting in slightly smaller annual cost-of-living increases.
“I don’t want to break the bad news to you, but the president is not the only elected official in the United States,” said Sen. Bernard Sanders (I-Vt.), a member of the Budget Committee, who pressed Murray to avoid any cuts to social programs in her spending plan. “Some of us believe very strongly that it would be absolutely wrong to cut Social Security benefits.” ...
But Sen. Tom Coburn (Okla.), one of a dozen GOP senators who dined with Obama at a downtown hotel last week, said Republicans oppose Obama’s biggest money-saver, a plan to reduce federal payments to drug companies by $140 billion over the next decade. And other dinner guests said they want to see more structural changes to reduce Medicare benefits.
The CPC says the budget would create millions of new jobs through investments in critical areas such as infrastructure and education:
In the first year alone, we create nearly 7 million American jobs and increase GDP by 5.7%. We reduce unemployment to near 5% in three years with a jobs plan that includes repairing our nation’s roads and bridges, and putting the teachers, cops and firefighters who have borne the brunt of our economic downturn back to work. We reduce the deficit by $4.4 trillion by closing tax loopholes and asking the wealthy to pay a fair share. We repeal the arbitrary sequester and the Budget Control Act that are damaging the economy, and strengthen Medicare and Medicaid, which provide high quality, low-cost medical coverage to millions of Americans when they need it most. This is what the country voted for in November. It’s time we side with America’s middle class and invest in their future. ...
The plan also proposes to end “corporate welfare” by closing loopholes that reward companies for sending production and profits overseas, as well as ending the billions of dollars in tax credits for oil companies and other major corporations that have shown record profits in recent years.
The plan intends to reduce defense spending to 2006 levels and enact a tax on financial transactions. Currently stock trading and other transactions between financial institutions are untaxed. Attaching a fee to securities transactions, currency transactions and other inter-bank exchanges would not only raise revenue, but hopefully reduce the kind of rampant, unchecked speculation that contributed to the 2008 financial crash.
In addition, the progressive budget hopes to lower health costs by instituting a public option for health insurance, negotiating drug prices and reducing fraud. ...
With corporate profits already back up to record highs, the budget's strategy of public investing and corporate belt-tightening--for instance, modernizing 35,000 public schools rather than providing a $25 billion stock option loophole for Wall Street--don't seem bold, so much as commonsensical.
Taxpayers earning more than $1 million a year would benefit the most from the GOP tax plan, the analysis shows, reaping an average $400,000 tax break that would send their after-tax income soaring by nearly 20 percent.
Meanwhile, taxpayers earning between $40,000 and $50,000 a year — closer to the national average — would see their taxes cut by about $666 on average, increasing their after-tax income by less than 2 percent.
In order to make the U.S. system of capitalism truly sustainable, we must tackle this unhealthy concentration of wealth. The wealthiest one percent of Americans now have more wealth than the bottom 90 percent. The gap continues to widen as the top one percent receives almost 25 percent of annual U.S. income, up from 12 percent just 25 years ago.
While some inequality is inevitable and even desirable, the levels of income inequality have reached dangerous levels in the United States. Too much wealth concentrated in the hands of too few disrupts societal stability and corrupts the wealth-creating incentives of our capitalist system. Anger over income inequality has already sparked popular backlash in the form of Occupy Wall Street and other similar demonstrations. Indeed, the level of inequality in the U.S. is already worse than in Egypt or Tunisia, two nations rocked in recent years by popular uprisings that overthrew national governments during the Arab Spring. While the two situations are clearly different, addressing income hyper-inequality in the United States is crucial to making our system of capitalism more sustainable.
While the federal government has largely stuck by the principle of progressive taxation, the states have gone their own ways: tax policy is particularly regressive in the South and West, and more progressive in the Northeast and Midwest. When it comes to state and local taxation, we are not one nation under God. In 2008, the difference between a working mother in Mississippi and one in Vermont — each with two dependent children, poverty-level wages and identical spending patterns — was $2,300.
These regional disparities go back to Reconstruction, when Southern Republicans increased property taxes on defeated white landowners and former slaveholders to pay for the first public services — education, hospitals, roads — ever provided to black citizens. After Reconstruction ended in 1877, conservative Democrats — popularly labeled “the Redeemers” — rolled taxes back to their prewar levels and inserted supermajority clauses into state constitutions to ensure it could never happen again. Property taxes were frozen; income taxes were held down; corporate taxes were almost nonexistent.
Practically the only tax that could rise was the one that hurt the poor the most: the sales tax. And rise it did, throughout the Deep South in the late 19th century, then spreading into the Carolinas, Georgia, Florida and the rest of the region in the 1960s and 1970s. Even liberal politicians weren’t able to buck the tide — just ask Bill Clinton, who as governor of Arkansas urgently sought new revenue to improve his state’s ailing schools and found the sales tax was the only politically viable option.
If this were just a history lesson, we could set it aside. It isn’t. In the last 30 years, these trends have only gotten worse. Southern states have steadily increased the tax burden on their poorest citizens by shifting the support of the public sector to sales taxes and fees for public services. After California voters passed Proposition 13, which capped property-tax increases, in 1978, Western states began to move in a similar direction. Sales taxes on clothing and school supplies and fees for bus fare and car registration take up, of course, a far bigger slice of a poor household’s budget than they do from the rich. ...
For a book published in 2011, my colleague Rourke L. O’Brien and I analyzed the combined burden of sales tax, state and local income taxes on poor households in 49 states, based on consumer expenditures, from 1982 to 2008. (We omitted Alaska because it offers oil-revenue-related rebates to every household). We looked at the relationship between the total tax burden on a poor family of three and state-level figures for mortality, morbidity, teenage childbearing, dropping out of high school, property crime and violent crime.
It turns out that after factoring out all other explanations — like racial composition, poverty rates, the amount spent on education or health care, the size of the state’s economy, existing inequality levels, and differences in the cost of living — the relationship between taxing the poor and negative outcomes like premature death persisted. For every $100 increase on taxes at the poverty line, we saw an additional 7 deaths and 78 property crimes per 100,000 people, and a quarter of a percentage point decrease in high school completion.
Southern states have far higher rates of strokes, heart disease and infant mortality than the rest of the country. Students drop out of high school in larger numbers. These outcomes are not just a consequence of a love of fried food or higher poverty levels. Holding all those conditions constant, the poor of the South — and increasingly the West — do worse because their states tax them more heavily. They have less money to buy medication, so their health problems get worse. High sales taxes make meals more expensive, so they shift to cheaper, unhealthy food. If people can’t make ends meet, they may turn to the underground economy or to crime. ...
The fact is, the more the poor are taxed, the worse off they are, whether they are working or not. We all pay a huge price for this shortsightedness. Medicaid payments, food stamps, disability benefits — all of these federal programs swoop in to try to patch up a frayed safety net. Consequently, the Southern states reap more dollars in federal benefits than they pay in taxes (like Mississippi, which saw a net gain of $240 billion between 1990 and 2009), while the wealthier states — which do more to take care of their own — lose out for every dollar they pay (like New Jersey, which handed over a net of $706 billion over that same period). As noble as the federal effort to rescue the poor in the “mean states” may be, it is not enough to reverse the impact of regressive taxation.
There is a better way: increasing taxes on luxury goods; exempting necessities like food, medicine and children’s clothing from sales taxes; and perhaps most important, issuing tax rebates and preserving refundable earned-income tax credits, which put more money in the hands of low-income households. Since poor families tend to spend all of what they take in, these protections would stimulate the economy and preserve, or even expand, the job base.
All the tired ideas from 2011 and 2012 are back: eliminating Medicare’s guarantee to retirees by turning it into a voucher plan; dispensing with Medicaid and food stamps by turning them into block grants for states to cut freely; repealing most of the reforms to health care and Wall Street; shrinking beyond recognition the federal role in education, job training, transportation and scientific and medical research. The public opinion of these callous proposals was made clear in the fall election, but Mr. Ryan is too ideologically fervid to have learned that lesson.
The 2014 budget is even worse than that of the previous two years because it attempts to balance the budget in 10 years instead of the previous 20 or more. That would take nondefense discretionary spending down to nearly 2 percent of the economy, the lowest in modern history. And in its laziest section, it sets a goal of slashing the top tax rate for the rich to 25 percent from 39.6 percent, though naturally Mr. Ryan doesn’t explain how this could happen without raising taxes on middle- and lower-income people. (Sound familiar?)
"If you're caught with an ounce of cocaine, the chances are good you're going to jail. If it happens repeatedly, you may go to jail for the rest of your life. But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night.”
Game on! Naturally, the left is swooning. Elizabeth Warren says what we all wish we could say to the besuited jerks who defend a crooked industry. Except, instead of snatching them by the lapels and screaming obscenities as we might do, Warren sits calmly and repeats her inimitably direct questions like a blond Terminator. The big banks and their lackeys can’t stand her, and it looks as if the feeling is mutual.
Americans love her because we have serious unfinished business with the banking industry. We remember how the White House chose to protect the bankers from the pitchforks in the wake of the financial crisis. We’ve gritted our teeth as bankers have charted a course to record-breaking profits as the rest of us slogged through a shitty economy.
Even as analysts hailed a better-than-expected jobs report on Friday that pointed to an acceleration in growth, they warned that stronger employment gains are being put at risk by sequestration, the automatic spending cuts being imposed by the federal government.
“They’re doing their best to get in the way,” Nigel Gault, chief United States economist at IHS Global Insight, said of lawmakers and other officials. “But the good news is that the economy is carrying plenty of momentum going into sequestration.” ...
But many experts said if it were not for political gridlock in Washington, which led to the automatic spending reductions on March 1, the performance of the job market and the broader economy would be even more robust in the months ahead. ...
Public sector employment continued a long decline, with the number of state and local government workers falling by 10,000 in February. Over all, there are now 366,000 fewer government workers in the United States than there were two years ago.
A possible answer to where budget hawks get energy and inspiration comes from the first systematic survey social scientists have managed to do of the political attitudes of wealthiest one percent of Americans. Working with a team of scholars from several disciplines, I have conducted a study called the “Survey of Economically Successful Americans and the Common Good.” Most national surveys include only a tiny number of very wealthy citizens, but we used additional data sources to identify a larger sample of wealthy individuals living in the greater Chicago metropolitan area. Further research would be needed to explore attitudes among the very wealthy living everywhere in the United States. But our findings are highly suggestive of what would be found in a nationwide study. For the first time, we are able to pinpoint issues on which the very wealthiest agree or disagree with other Americans.
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