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Editor’s Note: On the right, please watch our exclusive interview with Indiana Governor Mitch Daniels, and then below, please read an original guest blog to The Foundry from the Governor himself.
We’ve been through a global recession. Now we’re fighting through a stalled recovery. Revenues are the lowest they’ve been in half a century. Their finances a wreck, many states have effectively sunk into bankruptcy.
Indiana is still afloat. In fact, we’ve fared better than most. We continue to meet our obligations without raising taxes, and the reserves we carefully built and protected will get us through the downturn.
But as if we did not already have enough on our plates, the passage and implementation of Obamacare presents us with a whole new set of challenges and a costly to-do list.
id="more-41858">I note with special sadness that first and foremost amongst the bill’s consequences will be the probable demise of the Healthy Indiana Plan (HIP). This program is currently providing health insurance to 50,000 low-income Hoosiers. With its Health Savings Account-style personal accounts and numerous incentives for healthy lifestyle choices, it has been enormously popular and successful.
Obamacare’s expansion of Medicaid, soon to cover one in every four citizens, will not only scoop up most of HIP’s participants, but will also cost the state between $3.1 and $3.9 billion over the next decade. It is hard to see how my successors as governor will be able to avoid a steep state tax increase to pay for it. Meanwhile, our medical device companies and small businesses will shed jobs as they wrestle with the taxes and penalties levied to help finance Washington’s “reforms.”
Of course, it’s a misnomer to even refer to this as “reform.” It doesn’t reform anything. Instead, it perpetuates and magnifies all the worst aspects of our current system: fee for service reimbursement, “free” to the purchaser consumption, and an irrationally expensive medical liability tort system. It’s a sure recipe for yet more overconsumption and overspending.
There were better options.
Since my election, my state coworkers have had the choice of Health Savings Accounts in lieu of traditional health care plans. The first year this option was made available, some 4 percent of us signed up for it. Six years later, more than 70 percent of our 30,000 state workers have opted for the personal account.
This trend has had a startlingly positive effect on costs for both employees and the state. State employees enrolled in the consumer-driven plan saved more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative. Indiana will save at least $20 million in 2010 because of our high HSA enrollment.
It has also been the source of significant changes in behavior, as state workers with the HSA visit emergency rooms less frequently and are more likely to use generic drugs than co-workers with traditional health care. Hoosiers enrolled in HIP have experienced similar changes in behavior with generic drugs now accounting for 84 percent of all prescriptions used by enrollees.
This is a sharp contrast to the prevalent model of health plans in this country that encourage individuals to buy health care on someone else’s credit card. What seems free will always be overconsumed, compared to the choices a normal consumer would make. Hence our plan’s immense savings.
The condescension of the “reformers” is misplaced. It turns out that typical Americans are neither too dense nor too intimidated to make sound decisions about their own health. This is, of course, a fact that national policy makers sadly ignored during their overhaul of our health are system. Now the rest of us are left to pick up the pieces.
Events of the last week have made the Deficit Commission an embarrassment. Co-Chair Alan Simpson is a one-man disaster movie, compulsively offending one key voting bloc after another. Commission member Paul Ryan faced an angry crowd over his anti-Social Security stance, while another Commissioner locked experienced workers out of a nuclear facility rather than provide retirement benefits.
That's right: He's cutting retirement benefits.
But if the political blowback is obvious, here's what isn't: The Commissioners who are determined to cut your Social Security benefits are going to enjoy their own retirements in comfort. Their own pension plans insulate them from the fears that many other Americans face, and they don't have the professional expertise that would help them understand those concerns. In fact, the Commission's only expert on retirement is Rep. Jan Schakowsky, and she apparently opposes benefit cuts. The rest of the Commission is dominated by people who've expressed their desire to cut Social Security, despite their own secure futures. Millions of working Americans who have contributed to Social Security all their lives will lose out if these Commissioners have their way.
Happy Labor Day.
Normally I consider it off-limits to discuss people's personal finances when discussing their political opinions. But these Commissioners' lack of subject matter expertise, along with their lack of empathy, is important. If you don't know much about the topic and are protected from the problem, what makes you credible? Their pre-established prejudices makes the situation even worse, and their own situations underscore the irony of their self-professed willingness to make "brave choices" - choices whose consequences will mean little or nothing to them.
The Commission's Social Security obsession is odd anyway, since the projected Social Security shortfall comes out to only 0.7% of GDP. Nevertheless, these Commissioners have made their benefit-cutting intentions plain, presumably because they want to offer up America's seniors as a sacrifice to the bond markets. So how will these would-be income-slashers for the elderly make out in their own golden years? They'll be golden.
Consider Commissioner Alice Rivlin. Rivlin co-authored a paper that called for raising the retirement age and other benefit cuts, and recently released a specious paper about "Saving Social Security." As a former HEW Undersecretary, CBO Director, White House Budget Director, and Federal Reserve Vice Chair, she will presumably enjoy a comfortable retirement supported by multiple public pensions. Says Rivlin: ""We can't get out of this problem without doing both spending cuts, especially slowing the growth of entitlement, and tax increases."
Experts on Social Security finance (including the long-time Chief Actuary for the program) flatly disagree with Rivlin, pointing out that an adjustment to the payroll tax cap would unquestionably be enough to get the job done. They have the numbers to prove it. So why does Rivlin, who does not have their expertise in this area, disagree? Go ask Alice.
Co-Chair Erskine Bowles brokered a deal with Newt Gingrich to cut Social Security in the 1990s, when he served as Bill Clinton's Chief of Staff. Before that he headed the Small Business Administration, so his government tenure presumably qualifies him for a Federal pension. If not, don't worry: He receives $425,000 per year in his current job running the public universities of North Carolina, and the people of North Carolina are presumably also funding a pension on his behalf. To his credit, Bowles pledged to donate $125,000 of his salary for need-based student funds - but then, he can afford it. As the son of a US Congressman, Bowles had the education and connections needed to make millions as an investment banker. The added income he earns today as a Board member for General Motors and Morgan Stanley will help, too - and his government experience undoubtedly helped him win those positions, too.
Republican Rep. Paul Ryan, an aggressive advocate of Social Security cuts and privatization, will also enjoy his sunset years in comfort, thanks to a publicly-funded pension from his tenure as a Congressman. (He'll presumably earn even more as a result of his employment as an aide to two United States Senators.) Rep. Jeb Hensaerling has served as both a Representative and as an aide to Sen. Phil Gramm, so he should be safe from financial insecurity in his old age too .
The average annual pension payments for former members of Congress ranged from $41,000 to $55,000 in 2002, considerably more than the average $13,836 that Social Security recipients received in 2009. Yet neither Ryan nor Hensaerling have proposed cutting Congressional retirement benefits - nor should they. Sound pension plans like theirs were once available to most working Americans, and more effort should be made to restore them.
Former SEIU President Andrew Stern, who once might have been counted on to defend Social Security, recently sneered at Commission critics as "assassins of change" while saying that "all entitlements should be on the table." Mr. Stern's annual pension is $152,000 - and he retired at the age of 59, not 70. Nevertheless, Stern now publicly muses about "whether defined benefit pensions can really exist in the long run in a globalized economy."
Judd Gregg, who wants to raise the retirement age to 70, will receive a Federal pension for his Senate position. Gregg, like Alan Simpson, is the son of a Governor (self-made men, you might say), which means that public pensions also ensured that neither of them had to worry about supporting their aged parents. Tom Coburn, another would-be Social Security cutter, will receive a Congressional and Senatorial pension too.
David Cote, the CEO of Honeywell, provides some "private enterprise" perspective to the Commission's work. But Cote's wealth comes in part from Honeywell's government contracts, which exceed $4 billion annually. What's more, Cote's "free enterprise" ethic didn't stop him from making sure that Honeywell grabbed a few million in stimulus money from the taxpayers, too. A few billion from the Pentagon here, a few million more from Uncle Sam there - that'll plump up the nest egg a little for Mr. Cote's sunset years.
Cote made the headlines this week when Honeywell locked out the union workers at a nuclear power plant over a labor dispute - even though the workers agreed to stay on the job to protect public safety. Instead, Cote hired replacements and put them through a pared-down training process. The image of Homer Simpson comes to mind, pushing the wrong buttons and spilling beer on the reactor console - which would presumably make Cote Mr. Burns.
But it's no joking matter. Apparently there's real danger, which is why the Nuclear Regulatory Commission reportedly stepped in to block Honeywell from distilling uranium with its crew of replacement workers And what are the union and Honeywell arguing about? Honeywell's raising health care costs - and eliminating retiree pension plans for new workers.
That's right. A member of the Commission that's pretending to judge our retirement security with impartiality would rather have hastily-trained amateurs handle nuclear materials than bargain openly with his workers - about their retirement. D'oh!
As for Simpson (Alan, not Bart), to say that he suffers from "political Tourette's syndrome" would be a disservice to Tourette's sufferers. Most of them don't really say socially objectionable things, and those who do (it's called "coprolalia") don't mean what they say. But Simpson does. By attacking senior citizens as "greedy geezers," then offending women with his "milk cow with 100 million tits" comment, and now offending veterans' groups, Simpson has now hit the voting bloc trifecta.
And Cote's outraged labor, a fourth group. But the problem isn't Simpson anymore, or Cote for that matter. It's the Commission itself. The coprolalic curmudgeon Simpson has done a service to the nation. He's drawn attention to the Commission, and to the anti-Social Security biases held by so many of its members - all of whom will retire in comfort, thanks to those whose benefits they would cut. It's the comfortable afflicting the afflicted.
If these Deficit Commission members want their recommendations to have any credibility, they should pledge to live on the same Social Security benefits that they would impose for other Americans. Better yet, they should dedicate themselves to helping provide every American with the kind of retirement security they enjoy. That was part of the social contract this nation embraced during its years of greatest economic growth, the fulfillment of a promise that a lifetime of work should never end with years of deprivation. They should be working to restore that contract, not erode it even further.
One thing is clear: This Commission has no business making recommendations about Social Security.
(Sign a petition asking Congress and the President to protect Social Security from the Deficit Commission. Roger Hickey has more here.)
Additional links:
* Sam Seder and I discussed Social Security this week while co-hosting The Young Turks.
* For further reference on the Commission's members and their biases, see Firedoglake and Talking Points Memo.
* House Democrats are vowing to protect Social Security from any cuts. The polls show why that's a very wise idea.
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