Monday, November 30, 2015

In Defense of Ben Carson

A cousin of mine recently told me that he “can’t stand Ben Carson” because “as Politifact points out, honesty is a challenge.”

So I hopped onto Politifact’s Ben Carson page, and sure enough, the picture was clear: Ben Carson hardly ever tells the truth. Right at the top of the page is a histogram showing that the vast majority of his statements were found to be False, Mostly False, or Pants on Fire...and not one statement was found to be True!

A quick glance at the site makes it look like Ben Carson has never spoken the truth in his life. The reality is that Politifact’s assessment here is purely a product of which statements were selected for analysis, and more importantly how these statements were evaluated.

So I decided to look into some of the statements that Politifact found to be False, and I gotta say — each of these ratings is very questionable:
  1. “German citizens were disarmed by their government in the late 1930’s,” which allowed the Nazis to “carry out their evil intentions with relatively little resistance.” - Ben Carson [rated False by Politifact]

  2. In their writeup, Politifact acknowledges that the Nazis’ 1938 gun laws specifically prevented Jews from owning guns, ammunition, and “stabbing weapons” — and that even before these laws were put into place, the Nazis had been raiding Jewish homes and seizing weapons.

    So why then does Politifact rate Carson’s statement as False? Because he said that “German citizens” were disarmed, when in reality German citizens as a whole were not disarmed — just the Jews. But Carson didn’t say that all German citizens were disarmed — he said German citizens, which includes Jews.

    Politifact also concludes that it wasn’t the seizing of guns that allowed the Nazis to “carry out their evil intentions with relatively little resistance”, because many non-Jewish citizens did have guns and could have used them to fight the Nazis if they had wanted to. But the Nazis certainly did encounter relatively little resistance compared to what they would’ve faced had their victims been armed.

    So Carson’s statement here is 100% true, yet Politifact didn’t even call it Half True, or Mostly False — they called it flat-out False.

  3. Ben Carson says he “didn’t have an involvement with” nutritional supplement company Mannatech. [rated false by Politifact]

  4. Politifact rates this statement False because it “suggests he has no ties to Mannatech whatsoever.” They point out that Carson has in fact delivered paid speeches for Mannatech, and has promoted their products on numerous occasions.

    But during the debate when Carson said that he “didn’t have an involvement with” Mannatech, he went on to explain that he did do some paid speeches for them, and he actually endorsed their product right then and there: “Do I take the product? Yes, I think it’s a good product.”

    Politifact says the statement here is false because it suggests there are no ties between Carson and Mannatech, when in fact Carson admitted some of those ties directly after making the statement. It’s unfair for Politifact to narrow in on Carson’s “didn’t have an involvement with Mannatech” comment and judge it as if he hadn’t gone on to clarify what he meant.

  5. Ben Carson says his tax plan wouldn’t leave the federal government with a $1.1 trillion hole. [rated False by Politifact]

  6. By calling this claim false, Politifact is saying that Carson’s tax plan would in fact leave the federal government with a $1.1 trillion deficit.

    Politifact came to this conclusion by applying Carson’s proposed 15% income tax to this year’s expected taxable income, leaving a federal revenue of $2.6 trillion. Then they subtracted this year’s projected federal spending ($3.7 trillion) to arrive at a $1.1 trillion deficit.

    But it’s not a valid analysis to apply future tax rates to the current taxable income in order to predict what federal revenue will be in the future. Lowering the tax rates would give people more of an incentive to work and to create businesses, which could lead to more economic activity and more taxable income. Time and time again, reduced tax rates have led to higher tax revenue for the federal government. So it’s not valid for Politifact to just assume that Carson’s tax plan would mean $600 billion less in revenue.

    In addition, Carson has said that his new income tax rate would be “phased in over time”. The very vagueness of this makes it impossible to say with certainty how tax revenues would be affected.

    Politifact also assumes that Carson’s tax plan would bring in zero dollars in capital gains taxes, excise taxes, and customs duties — even though Carson hasn’t called for an end to any of these taxes. These taxes alone bring in over $150 billion in revenue annually.

    For all of these reasons, it’s a major stretch for Politifact to conclude that Carson’s tax plan would in fact leave the federal government with a $1.1 trillion deficit.

Throw on top of this the recent fraudulent Politico piece on Carson and West Point, and it’s clear to me that there’s a deliberate effort underway to paint Ben Carson as a liar.

The American people will ultimately have to decide whether Dr. Carson is trustworthy enough to win their vote. Yet something’s telling me he has less to worry about in this regard than, say, Hillary Clinton does — a recent survey found the three words most associated with her to be “liar”, “dishonest”, and “untrustworthy”.

Tuesday, December 31, 2013

Perspectives On Welfare

I think we'd all agree that Debra is in a rotten, uncalled-for situation; we just might disagree as to the cause of it.

Slate Magazine correspondent Katy Waldman interviewed Debra from D.C. to find out how she would cope with the recent cuts to the food stamps program — cuts that reduced Debra's intake from $203 to $135 a month. Debra said that her and her daughter's already-meager diet would be "much worse" with the cuts. The interview, titled "Meat is the First Thing to Go: What it's like to have your food stamps cut", is presented in such as a way as to blame the "largest cuts in the history of our country's food stamps program" for Debra's ongoing hardship. I contend that the root of the problem is the fact that such programs penalize finding a job.

Debra, a single mother and disabled veteran, is currently unemployed and receiving food stamps, rental assistance, Social Security, and VA compensation. She uses these benefits to provide not only for herself but also for her 21-year-old daughter, who is also unemployed.

When Debra was asked point-blank whether she has considered getting a job, her answer was clear-cut and very revealing: "Yes, I've thought about it... But my food stamps, rent, VA compensation, and social security would be affected. I'd have to make a lot of money to overcome all the reductions, something like $15 to $20 an hour." In other words, Debra has done the math and determined that if she were to take a full-time job that pays anywhere up to $15 an hour, she would lose more in benefits than she would gain in compensation. So she'd make more money by not working than she would by working even for $15 an hour, or around $30,000 a year. This means that if Debra were to take just about any of the jobs that she's currently qualified for, she'd have to get by on even less than she makes now!

Debra's 21-year-old daughter faces similar incentives. According to Debra, her daughter "wants to help and get a job, but it's a catch-22. I'm on rent assistance, and if she gets a job, my rent goes up and my food stamp money goes down." Pointing out that her daughter "can't apply for her own benefits until she's 22" seems to suggest that applying for benefits is her very plan — and can you blame her?

Our country's food stamps program is called the Supplemental Nutrition Assistance Program, or SNAP. This program, which by its name seems to have been intended merely to assist people by supplementing their incomes, is in reality part of a collection of benefits that has become a way of life for Debra, her daughter, and many others.

People respond to incentives, especially to short-term ones. In a system of benefits where recipients are effectively punished for choosing to work, many will choose to remain unemployed. And that's why this system is perverse; the right financial decision for recipients in the short term deprives them of the work experience that would improve their prospects for the future.

Unemployed recipients, lacking the opportunities for advancement that come with being employed, are liable to feel stuck in a lifestyle of subsistence and dependence. When Debra was asked whether she sees a way out of her situation, she said, "I've been on food stamps for two years. It is really tight. And right now, no, I don't see a way out. Unless I get a job that really pays a lot of money, but that's what everyone is looking for. There's a way to do it but I don't know what it is."

Fortunately, there are ways to help those in need without counteracting their natural incentive to work. For one, benefits programs could be reconstituted: anyone who loses their job could be given a fixed amount of money, regardless of when, or if, they return to work; and able-bodied people could be required to work or participate in a job training program in order to receive food stamps. There's also private charity, which Debra and her daughter receive through their church, food banks, and Meals on Wheels. Debra herself is charitable, regularly volunteering to help the mentally ill. Americans are the most charitable people in the world.1 And because the amount of charity a person receives isn't based on whether he's employed, private charity doesn't discourage people from seeking a better way of life.

Any extension or expansion of benefits programs that penalize recipients for working will result in more and more people choosing to remain unemployed, leaving them less qualified for quality jobs and likely in need of additional assistance, and thus continuing the vicious cycle of dependence.

1. Charities Aid Foundation. "World Giving Index 2013: A global view of giving trends."

Sunday, September 30, 2012

The Medicare Debate, Part II

It barely made a blip on the news, so you may not have heard that the U.S. credit rating was just downgraded again for the fourth time in the past fourteen months. Downgrades are dangerous because they signal to other countries that the U.S. is now a riskier place to invest in, and this raises our cost of borrowing money. But the bigger problem for Americans is the reason for the downgrades: our government is less likely to pay its debts, and is therefore less likely to honor its commitments to people who are counting on government assistance in their senior years.

One of our biggest obligations is Medicare. It's the third-most expensive federal program ($560 billion spent in 2011, or about $3000 per working-age adult1), and due to the wave of retiring baby boomers its cost is expected to nearly double within a generation.2 Our current path is unsustainable — and will result in millions of people shelling out more for their medical care than they've been planning on.

So what do we do about it? The status quo approach is to cut costs by reducing pay for doctors who treat Medicare patients...but this would also reduce the quality of care (see my last post). VP candidate Paul Ryan has an alternative plan, one that's been both attacked and championed by people who probably don't really understand it. (I know — I was one of them.) But now that I've read his plan, here's what you need to know:

Nothing changes for anyone currently 55 or older.

For everyone else, when you become eligible for Medicare you will choose your own health insurance plan. You can choose the traditional fee-for-service option (the way it is now, where government reimburses doctors directly), or you can select from among a variety of private insurance plans within the new Medicare Exchange.

Every year, each insurer in the Exchange will declare the price that they must be paid in premiums in order for them to cover enrollees' medical costs. Medicare then pays for all or some of your premiums depending on your income and the price of your plan.

The "benchmark" that determines how much Medicare pays for is the price of the baseline plan, which is either traditional fee-for-service or the second-cheapest private plan, whichever is cheaper. But what's not clear is what "benchmark" means — that is, if you choose the baseline plan, are your premiums fully covered or not? What is clear is that of the people who select the baseline plan, Medicaid-eligible seniors will have no out-of-pocket expenses, other low-income seniors will receive additional assistance, and high-income seniors will have to pay a share of their premiums.

If you choose a plan that's more expensive than the baseline, you'll have to cover the difference. Choose a plan cheaper than the baseline and you'll receive a rebate for the difference.

Each insurer in the Exchange must abide by two ground rules. First, they have to cover at least the actuarial equivalent of the fee-for-service benefits package. This means that while each plan will provide different coverage, every plan's coverage will be at least as valuable as traditional Medicare and you'll know upfront what's included in your plan. Second, they have to accept all applicants regardless of any high-risk/pre-existing conditions. Medicare will support this provision by paying for the increase in premiums that's necessary for high-risk individuals and by regularly transferring money from plans with more low-risk seniors to plans with more high-risk seniors.

The vision here is to have companies compete for customers by thinking of creative and efficient ways to cover medical expenses for less than it costs Medicare to do so today. If this plan fails and the anticipated cost reductions don't pan out, there's a provision to cap Medicare expenditure growth at nominal GDP growth plus 0.5 percent. This means that if insurance prices rise faster than that upper growth rate, some seniors (Medicaid-eligibles excluded) would have to cover the spillover costs. Whatever the merits, this is a more truthful way of dealing with ballooning costs than trying in vain to hide the problem from seniors by paying doctors less.

No plan will magically wipe away the underlying problem of having an increasingly strapped government provide for an aging population...but applying the tried-and-true principles of competition and personal choice/responsibility is a step in the right direction.

1. There were 183.9 million U.S. adults ages 20-64 in 2009.
2. Peter G. Peterson Foundation. "Budget Explainer: Medicare."

Tuesday, August 28, 2012

The Medicare Debate, Part I

Turn on your TV and I bet you'll hear one of the Presidential candidates claim that if we elect the other guy, Medicare patients are bound to suffer. You'll hear Romney allege that Obama took $700 billion out of Medicare to pay for Obamacare.

It's true: Obamacare comes with a $716 billion reduction in government's Medicare expenditures over the next 10 years. The majority of these cuts will reduce how much doctors and insurance companies will be reimbursed for the care that they provide/fund.

But there's a perception out there that since these cuts are made to providers, they won't affect patients. A recent Reuters article "Top Six Myths about Medicare" says that the cuts to providers are "mostly meaningless to patients." In National Journal's "10 Things You Need To Know About The Medicare Debate", Thing #1 reads: "President Obama's cuts to Medicare do not affect any benefits." And a Washington Post analysis says "there's one area these cuts don't touch: Medicare benefits."

One of the most important medical benefits people have is the ability to be seen by a doctor when in need. Arbitrarily cutting pay for doctors could certainly impact this benefit.

If a doctor's pay per patient is reduced, he'd need to cram in more patients per day in order to earn as much as before. This trend would leave fewer available doctors for people with urgent medical needs. Some doctors would look to avoid Medicare patients altogether. A 2010 American Medical Association survey of doctors attests to this.

The broader issue here is the unwillingness of some to consider or even acknowledge the existence of unintended consequences of government intervention. And if we can disagree about the effects of this one small aspect of Obamacare, imagine what other unforeseen consequences lie within its 2,700 pages.

In my next post I'll analyze Paul Ryan's proposal for Medicare. I skimmed it the other day and it's more complicated than either side would have you believe.

Sunday, June 10, 2012

Making Money

The piercing tone from his clock radio is his signal to stumble out of bed, collect himself, and get ready to face another day at work. Shower, breakfast, coffee, commute. He plans the day ahead, then spends it working hard — making tradeoffs, meeting deadlines, and trying to find some value in those unavoidable meetings. He closes up shop and drives home, eager to finally spend some time with the people who mean the most to him. And at the end of it all he lands in bed, ready or not to hit repeat.

The more money he makes during his days — and the more he’s made throughout his life — the more likely he is to hear politicians clamor for him to pay his fair share back to society. Senate hopeful Elizabeth Warren recently sounded off about the need for the most successful businessmen to pay their fair share in taxes, declaring, “You built a factory and turned it into something terrific, or a great idea? God bless, keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Putting aside the fact that high earners already do pay a large share of their earnings in taxes, Warren’s point and those like it overlook the reality that a person making money is in itself a benefit to society.

The vast majority of people who make money do so only because they’ve delivered goods or services of comparable value. Both parties — employer and employee — benefit from the exchange, and each side’s gain ultimately extends to society at large. An employee’s ability to meet his employer’s needs leaves the employer free to focus on growing the business in order to tackle the needs of potential new customers. This dynamic helps those folks whose needs will now be met as well as those who will be hired to fill new positions in the growing business. In addition, the wealth amassed over the course of a person’s career won’t just be spent on yachts and palaces but also invested back into the economy, spurring the growth of existing businesses and the creation of new ones. As John F. Kennedy famously put it, “a rising tide lifts all boats.”

The wealthiest among us are in this way already contributing the most to society, and those contributions have little to do with taxes.

During a 2010 financial reform event in Illinois, President Obama said, “I do think at a certain point you’ve made enough money.”

I say you can’t get enough of a good thing.

Wednesday, July 27, 2011

Boehner's Flaw

In discussing his latest debt ceiling plans, House Speaker John Boehner said yesterday, "Remember one of the principles here: we are not going to increase the debt limit by anything more than what we're willing to cut spending." Specifically he's proposing to raise the debt ceiling by $1 trillion ($1T) and to reduce future spending by around $1T. The concept sounds reassuring at first, but in practice it wouldn't come close to solving the problem we face.

The debt ceiling exists to limit the amount of debt we can carry. Our debt grows when our federal government spends more than it receives in taxes and has to borrow money to cover the difference. For each of the past 3 years the government has spent about $1.5T that it didn't have, and our debt grew by that much each year.

Boehner's proposal is to raise the debt ceiling by $1T and to cut spending by $1T over the next 10 years. That would mean cutting spending by only $0.1T each year, which would reduce next year's deficit from $1.5T to $1.4T. Well if we only raised the ceiling by $1T, those cuts wouldn't even get us through 1 year without us hitting the ceiling again, at which point Congress could just apply Boehner's principle again...and then again, and again, essentially just paving the way for more astronomical deficits.

The real flaw here is in comparing the amount of spending cuts to the amount we raise the debt ceiling. The right thing to do is to compare the amount of spending cuts to our projected deficits. If we're about to annually spend $1.5T we don't have, we need to cut $1.5T in spending per year! Accomplish that, and there would be no need to raise the debt ceiling.

Saturday, May 21, 2011

Creating Wealth

There is a widespread notion that there’s only a fixed amount of wealth in the world — that one can only gain wealth at the expense of others. This belief goes hand in hand with a variety of common viewpoints: the conviction that one man’s fortune is unfair to the rest of us; the guilt many Americans feel on account of our relative wealth in the world; and the fear that immigrants who send money back home have reduced our overall wealth. But what exactly is wealth? And if the fixed-wealth view is wrong, how is wealth created?

Wealth is anything that helps a person or group meet their needs and desires. People use wealth to meet needs on their own (e.g., a house is a form of wealth that provides shelter) and by interacting with others who are in a position to help (e.g., money is wealth that can be used to buy food from a vendor). To better understand the nature of wealth, let’s consider whether a simple transaction between two people adds wealth to their community, and whether wealth has been taken from others in the process.

Let’s say that Grace needs a jacket and pays James $50 to make one for her. For simplicity we’ll assume that James already has the materials and machinery necessary for the job.

After the exchange, the community has gained one jacket at the expense of the materials required to make it. Since the jacket is able to meet needs such as warmth and comfort that the raw materials alone could not, wealth has been added to the community.

In addition, James has likely learned something by making the jacket. Perhaps he’s discovered a way to speed up the process or to improve the quality of his product. James is now better able to meet the needs of others; his newfound knowledge is a form of wealth added to the community.

The 50 dollars themselves still exist, but are they worth as much as they were before? Do transactions like this reduce the value of currency or raise it? Well an increase in the supply of a product tends to reduce its price because the additional competition among suppliers forces them to slash prices to compete for customers. And lower prices mean more bang for the buck. So this transaction is representative of the type of production that increases the value of currency, which adds wealth to communities throughout the world.

On the other hand, the machinery used to make the jacket has undergone wear and tear that will eventually take it out of service, leaving it unable to meet needs any longer. Over time, different forms of wealth are inevitably lost: products age and lose their value, and people leave the work force taking their expertise with them. But if beneficial transactions happen efficiently and often enough, overall wealth creation will outpace these natural losses.

In the end, Grace and James have added wealth to their community without taking it from anyone! Wealth has been created.

Sadly, the fixed-wealth misconception is self-fulfilling: antipathy toward achievers leads to tax-raising schemes that stifle people’s ability and incentive to create wealth. In this time of need, we should allow and encourage talented and motivated people to do what they do best.