Rep. Alex Mooney’s Feckless Vote on Healthcare

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On May 4, 2017, the United States House of Representatives voted to pass the American Health Care Act (AHCA) by a narrow margin of 217 to 213, sending the bill to the Senate for deliberation. This Bill would repeal the majority of the Affordable Care Act (ACA) known as Obamacare, a promise made by Donald Trump and numerous Republican legislators during the 2016 campaign.

It is hard to describe in measured words the destructive impact the AHCA would have on West Virginia. Obamacare permitted the expansion of Medicaid benefits to large numbers of uninsured West Virginians. Because of this expansion we made great progress insuring low income, working adults, reducing the uninsured rate from 17% of the population to 5%. Repealing this feature of the law will cause 175,000 West Virginians to be uninsured once again.

One effect of the loss of health insurance is that people who need to see a doctor simply won’t. These people are at risk that their health status and earning capability will decline. Then there is opioid addiction, which has reached epidemic proportions in West Virginia. In 2016 approximately 20,000 people were treated for substance abuse disorder under the Medicaid expansion. This treatment will evaporate under AHCA. Some of the newly uninsured will get emergency treatment for illness and injury at hospitals and clinics. This is called uncompensated care.

When there is no insurance, who actually pays for uncompensated care? The people receiving care could pay out of their pockets. More likely, state and local governments or the hospitals and clinics themselves could be forced to absorb the cost. One projection estimates that West Virginia hospitals would be asked to provide $135 million more in uncompensated care annually.

Numerous national trade associations and interest groups operating in the healthcare space strongly opposed the AHCA. These included the AARP, The American Medical Association, The American Hospital Association, and Catholic Health Association of the United States. Even conservative groups such as Heritage Action and the Cato Institute opposed the AHCA.

In a series of three letters beginning in January 2017, two West Virginia Governors and the West Virginia Cabinet Secretary for Health and Human Services warned our Congressional delegation about the consequences of a repeal of Obamacare. On January 9, Governor Earl Ray Tomblin wrote to House majority leader Kevin McCarthy and the West Virginia delegation, noting that West Virginia’s population is one of the most rural and oldest in the nation, with poor health indicators. He said, “Federal funding must be maintained or West Virginia’s health care infrastructure will collapse.”

On February 15, Governor Jim Justice wrote a number of U.S Senators and sent copies to Rep. Mooney and the others in the West Virginia delegation. Justice said “Repeal of Medicaid expansion would eliminate up to $900 million from West Virginia’s healthcare economy annually” leading to the potential loss of 16,000 jobs.

None of these entreaties had the desired effect on Rep. Mooney — he voted in support of the AHCA. His official statement began as follows: “Today, I was proud to vote for the American Health Care Act. I pledged to voters in the Second District that I would vote to repeal and replace Obamacare and today I fulfilled that pledge.” His statement pointed to the “collapsing market” for health insurance and asserted that the free market would provide better options for people who can afford insurance, but offered not one word concerning the large swath of West Virginians who will be rendered uninsured or the impact of repeal on West Virginia’s economy.

Why would our Congressman vote for the AHCA in the face of unrebutted information that it would devastate the lives of many West Virginians and deal another blow to our economy? One answer is to take him at his word – he promised to do it and he was determined to keep his promise. While there is something to be said for keeping promises, the moral value of doing so here is petty in comparison to the moral imperative to protect hundreds of thousands of people who would lose healthcare coverage.

There is a less attractive explanation that may be closer to the truth. A vote in favor of the AHCA was demanded by President Trump and the House Republican hierarchy, and Rep. Mooney did not have the fibre to oppose them despite the cost to his constituents. More likely he was happy to join with them for ideological reasons despite the costs to his constituents.

As for being “proud” of his position on the AHCA, Rep. Mooney certainly has not acted like it. In March when he and Senator Joe Manchin met with constituents at a state Congressional reception in Washington, D.C., many of the attendees aggressively questioned Rep. Mooney about the AHCA. Mooney fled the room when he could no longer provide answers. Subsequently, he was quoted in the Martinsburg Journal claiming that these people were “professionally trained radicalists.” But in the comments submitted by readers of the Journal’s original March 11, 2017 article about the incident, Sara Le Rana said:

I was in attendance as an interested citizen. I WAS NOT paid or a “professionally trained radicalist.” I’m uncertain what that is. Mooney RAN, not walked, he RAN rather than stay and do his job. Manchin listened, encouraged the guests closer to him. Mooney refused to listen or stay to respond in a respectful manner . . . . The dude ran.

This evasive behavior on the part of Rep. Mooney has been typical of his lack of responsiveness, and that of his staff, in large part around the healthcare issue. West Virginians deserve better than this.

2018 cannot come soon enough.

Imagining A Fair Distribution of Wealth and Income

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Many have said that wealth and income inequality is the most serious long-term problem facing our country. So I invite you to play this thought game. Imagine that you are in a position to decide how wealth should be distributed and, further, that you can decide what rules will apply to the distribution of future income. Your objective is to devise the fairest system that will allow our economy to prosper and best ensure the long-term stability of our democracy.

Three general approaches to this game come to mind. First, there is the “Candide” approach in which we would conclude that this is the best of all possible worlds and that the wealth and income distribution we now have is superior to any other. A second approach might be called the utopian socialist approach where all wealth and income would be distributed equally among everyone. A third approach might be to devise some system, either moral or economic or both, that values the contribution made to society by each person and then distributes wealth and income accordingly.

Despite the huffing and puffing of conservatives (I can hear them now) redistribution of wealth and income is not a radical idea. We already do it regularly. Almost any taxation system imaginable takes wealth from one class of person and spends it in ways that benefit another class. This is especially true of the progressive income tax, which taxes the wealthy more heavily and spends on programs that either benefit everyone equally (national parks) or benefit only the poor (food stamps). Our Social Security and Medicare programs are well-loved income transfer devices. Even public schools have a redistributive effect – property owners pay tax that is spent educating the children of some parents who own little or no property. So in our game let us not be afraid to imagine that we can shuffle the deck.

Most of us will reject the Candide approach because it would be manifestly unfair, unstable and will lead to disaster. Anyone with a pulse has heard the statistics about how unequally distributed American wealth and income have become. Take this example: the six heirs to the Wal-Mart fortune command wealth of $69.7 billion, which is equivalent to the wealth of the entire bottom 30% of U.S. society. This inequality is getting worse. Some scholars like Thomas Picketty have advanced a theory for why this is happening.

In his 2013 book Capital in the Twenty-First Century, Picketty summarizes mountains of data by offering a simple maxim: over time income from capital grows faster than income from wages and salaries. Let’s say you start with an inherited nest egg. Your interest, dividends and capital gains make you better off today than the average Joe who works for a living. Picketty says that by normal operation of the economy you will be even better off than Joe next year, and then better the next, and so on. Add to this the fact that the wealthy have political power to protect their favored position and are shameless in exercising that power.

Wealth and income inequality is not just an abstract numbers game – it is a life and death matter. Take, for example, infant mortality and life expectancy. Out of 34 industrialized nations, life expectancy for newborn girls in America ranks 29th. While American babies born to white, college-educated mothers survive at normal levels, what drags our statistics down is the high mortality rate of infants born to non-white, unmarried, poor women. Infant mortality is not the only threat to life created by skewed wealth distribution in this country. Recent studies have shown an increase in “deaths of desperation” among middle-aged, uneducated whites.

If our social conscience is somehow blind to all this, consider the following wake-up call. Every society that has allowed itself to become seriously unequal has suffered a catastrophic redistribution of wealth and income. Some of this was the result of plague-related population decreases. But more often than not, it was the result of war or violent revolution. Those are the findings of a new book The Great Leveler, by Walter Scheidel:

Violent shocks were of paramount importance in disrupting the established order, in compressing the distribution of income and wealth, in narrowing the gap between rich and poor. Throughout recorded history, the most powerful leveling invariably resulted from the most powerful shocks . . . mass mobilization warfare, transformative revolution, state failure and lethal pandemics.

So if the best solution isn’t to leave things as they are, is it instead a utopian equality of wealth and income? There has never been such a system, except on a scale too small to be a reliable guide. The communist expropriation of wealth in the Soviet Union followed by forced collectivization didn’t work out so well. A complete redistribution of income in America, even in a thought game, is hard to imagine.

Putting aside that it would be politically impossible, a completely equal distribution of wealth and income would itself be unstable. Most people don’t see complete equality of wealth as necessary or even desirable. Recent research has shown that people are less concerned with inequality of wealth and income than with the negative consequences of that inequality and the unfairness of how the inequality developed. In other words, most people are willing to tolerate a modest level of inequality if it has not been unfairly achieved.

If we reject the two extreme approaches, we must imagine a wealth and income distribution based on social and economic values. But it must be a sustainable system that produces economic prosperity. At a minimum, such a redistribution would involve a shift of wealth and income from the super-wealthy to everyone else. We know how to do this – an effective progressive income tax with high marginal rates, a corporate income tax with no loopholes and an estate tax that prevents the inheritance of obscene fortunes. Such a regime would produce more money to put in the hands of people who will spend it rather than save it, increasing demand for the products and services offered by businesses and spurring growth.

But how would we make fair distinctions among the recipients of the new tax revenues? One idea now in vogue leap-frogs that problem by providing a universal basic income. Alaska does this now with its oil wealth, distributing around $2,000 per year to every man, woman and child in the state. In his 2006 book In Our Hands: A Plan to End the Welfare State, the conservative intellectual Charles Murray proposes a $10,000 payment per year to every citizen beginning at age 21, funded by the complete dismantling of welfare programs that grant benefits to some but not all citizens. The key would be to distribute a like amount to everyone that would raise the floor of income but not be so large as to create a disincentive to work. Universal basic income is an idea we will be hearing more about.

Finally, should we readjust the wealth and income benefits of people who contribute to society through public service but who are now underpaid? In this group would be teachers, police, fire fighters, country doctors and others. We could achieve this through tax credits. We do something similar to this now by forgiving the loan debt of people who enter public service careers. Why not get serious about it and through favorable tax treatment raise the income and status of these professions so they attract the best?

In this article I have suggested some action we should probably avoid and some we might pursue. Now the game is up to you. What would you do?

 

 

Bank Regulation and Bubbles

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The bubbles referred to here aren’t in Champagne or a luxurious bath. They are the rapid inflation of value in an asset class – maybe stocks or single-family homes – to unsustainable levels inevitably followed by rapid, uncontrolled deflation. The unmistakable pop. Those my age have muddled through a number of these bubbles. There was the incredible run-up in value of tech stocks in the 1990s. Then came the sub-prime mortgage lending bubble that popped in 2007.

Bubbles are important to consider these days because a central brake on the conduct of banks in contributing to bubbles, called the Dodd-Frank Act, is under attack by the de-regulators in Congress. Banks and bankers provide a crucial function in our economy. We need them to extend credit, which is the lubricant of the economy, but to do so in a prudent manner. Unfortunately, like most every industry, the banking industry is not self-regulating. Left to govern itself completely, the industry will engage in excessive and risky behavior. This has happened time and again and is just the nature of things.

Man Controlling TradeThe image to the right is a statue called Man Controlling Trade installed outside the Federal Trade Commission in Washington. It was commissioned in 1937, before the United States had completely crawled out of the Great Depression. Most historians agree that among the causes of the Depression was the credit banks granted for speculative investment in stocks. This was followed by the stock market crash of 1929, which led to the failure of 9,000 banks. This risky behavior with depositors’ money had been completely unregulated. The statue’s powerful horse is meant to represent the danger of uncontrolled economic behavior.

To bridle this risky bank behavior, Congress passed the Glass-Steagall Act in 1933. The principal feature of this law was a separation of commercial banking from investment banking. Commercial banks, which took in deposits and made loans, were no longer allowed to underwrite or deal in securities. This regulated environment continued until 1999 when it was lifted by the Gramm-Leach-Bliley Act, which allowed banks, securities firms and insurance companies to affiliate with one another through common holding companies.

The conventional wisdom is that deregulation under Gramm-Leach-Bliley led to the sub-prime mortgage crash in 2007. This is incorrect. The two portions of Glass-Steagall that Gramm-Leach-Bliley repealed had nothing to do with the issuance or purchase of mortgage-backed securities. Banks had been issuing mortgages, securitizing them with other financial instruments, and buying mortgage-backed securities for years before Gramm-Leach-Bliley. But unfortunately there was no regulatory structure that prevented banks from lowering underwriting standards on the underlying mortgage loans as the market overheated. This lack of regulatory control led, as it always does, to excessively risky lending and a bubble.

The Great Recession that began in 2007 spurred the adoption of the Dodd-Frank Act, a massive piece of legislation. Dodd-Frank was designed to reorganize government financial oversight and give greater transparency to the finance industry. It sought to address the notion that some financial institutions are “too big to fail” and end taxpayer bailouts of failed banks. It also sought to protect the consumer from abusive conduct in the finance industry. But it has been a regulatory nightmare. One commentator has noted that the Act requires regulators to create 243 rules, conduct 67 studies, and issue 22 periodic reports.

Dodd-Frank has been on the books only seven years and it is too soon to know how successful it has been and can be. We do know, however, that there has been no financial bubble since it was enacted. Nevertheless, Rep. Alex Mooney (WV 2nd) and others whose mission is to dismantle anything created during the Obama administration want a complete repeal of Dodd-Frank. Mr. Mooney is now on the House Financial Services Committee where he can do some real damage.

Rep. Mooney recently met with roundtables of community bankers in Charleston and in the Eastern Panhandle. The bankers complained that Dodd-Frank was designed for huge banks and doesn’t “scale down” to banks the size of most in this state. They claimed that over-regulation has raised their costs and made it harder and more costly to make loans. Maybe this is a legitimate complaint for small community banks, but what regulated industry ever believes that the hand of the regulator lays upon it too lightly? There are even some in the banking industry who argue that  community banks are “too small to succeed” because they cannot generate the return on assets of larger banks, a problem that cannot be blamed on Dodd-Frank. Whatever their regulatory burden, community banks do not seem to be hobbled in West Virginia – auto loans and home equity loans are a booming business now.

Michael Barr, University of Michigan Law School professor and a key architect of the Dodd-Frank Act, says that the U.S. financial system is “incredibly healthy” in comparison to 2008 and presently in other countries. But not if you listen to House Financial Services Committee Chair Jeb Hensarling (R, Tex.), who blames a slow recovery from the Great Recession on Dodd-Frank. Hensarling has championed The Financial Choice Act, which would gut a number of important Dodd-Frank regulations.  This bill was recently reported out of his Committee on a completely partisan vote of 34-26.

Both sides of this issue have decent arguments. But considering the incredibly damaging effects of bursting asset bubbles, I for one am willing to risk a little sluggishness in bank lending in exchange for solid controls on bank behavior. Perhaps when the Financial Choice Act reaches the House floor, or the Senate, better recognition of the virtues of control will prevail.