The Carter Failure

On December 12, 1974 Jimmy Carter announced his candidacy for the 1976 presidential nomination. He made this announcement in front of a gathering of the National Press Club. Carter’s speech contained within it a promise to reform health care:

The quality of health care in this Nation depends largely on economic status. It is often unavailable or costs too much. There is little commonality of effort between private and public health agencies or between physicians and other trained medical personnel. I expect the next Congress to pass a national health insurance law. But present government interest seems to be in merely shifting the costs of existing services to the federal taxpayer or to the employers. There is little interest in preventing the cripplers and killers of our people and providing improved health care for those who still need it most.Is a practical and comprehensive national health program beyond the capacity of our American government? I think not.

This speech was welcome news to Democrats pushing for Health Care Reform. It was well understood by this time that the Watergate Conspiracy and its inevitable backlash against the Republican Party would most likely result in a Democratic Congress and a Democratic President in the upcoming election. Carter's inclusion of health care reform in his domestic policy platform garnered support from many groups pushing for reform. The UAW had openly been pushing for health care reform for many years by this time. Religious, charity, and consumer groups were pushing for reform as well. Congress had shown an interest in passing legislation to address the runaway costs and the general public was feeling the pinch as well.

As I noted in my last post, Kennedy had been pressured not to accept a compromise bill with Nixon because many groups supporting a national health care insurance plan would be achievable with gains that Democrats would make in Congress, especially with a Democratic administration likely coming into office in the 1976 elections. Carter himself believed that such a program was needed, although it was soon to become apparent that he had few concrete ideas of how to implement such a plan. Medicare and Medicaid had been passed in the mid sixties. This had taken care of the immediate medical needs of the elderly and disabled. It did nothing to address the exploding costs that all other Americans were facing as technology advances in surgery and diagnostics along with the growth of organized large corporate health care providers drove costs ever higher. As health care costs steadily ate into the national GDP almost everyone understood that something had to give. However, what had to give was a very sticky problem.

The AMA and large health care providers were diligently protecting record profits as were the large healthcare insurance companies. The last thing either of these groups wanted to see was a system that would cut into these profits. As Carter came into office he immediately found himself dealing with runaway inflation and a stagnant economy. Between the necessity of holding down government expenditures and his administrative approach to formulating a new policy, health care reform became bogged down in power struggles within his administration. Carter delegated responsibility for coming up with a comprehensive plan to appointed committees which were largely composed of people with little experience in health care or reform policies. Carter himself spent a large amount of time and focus in consideration of numerous possible plans but never really decided on any one type of plan. Instead, he tried to combine the best options of a single pay system with compulsory insurance and selective benefit programs. To make matters worse, he found that differing groups within his own administration disagreed violently on priorities as the Office of Management and Budget believed such reforms would have little effect on quality of care but would drastically exacerbate inflation, unemployment, and investment policies.

Carter took office as inflation problems came to a head. During Nixon's term inflation had been a growing concern. Nixon tried to attack inflation with price controls and wage freezes. The reals cause of the inflation Nixon struggle so mightily with was largely a creation of his own. Nixon served as Vice-President under Eisenhower who was a notorious free market supporter. Eisenhower and his administration did little to try to control economic policy and as a result the economy was an up and down cycle. The economy under his administration grew at just a 2.5 % GDP rate over Eisenhower's eight years in the White House. This low growth was largely the result of three large recessions which drove down what was a much higher growth rate overall. The last of these three recessions occurred in April of 1960 and lasted through February of 1961. Eisenhower's policy of riding out recessions without actively combatting them caused Nixon to run against Kennedy in 1960 during an economic downturn. Nixon blamed his defeat in this election on this downturn in his book Six Crises. Nixon was more pro-active in trying to control the economy when he was elected eight years later but had no control over Eisenhower's policy in the 1960 election even though he was running on his experience as Vice President. Nixon's defeat in this election soured him forever on hands off economic policy.

When he was elected in 1968 he became much more pro-active in trying to control economic policy as he understood the relationship between economic prosperity and re-election. The actual cause of the recession of 1959-1960 recession was a tightening of credit policy by the Federal Reserve Chairman at the time, William McChesney Martin, who had been appointed by Truman. Martin believed that it was the primary responsibility of the Federal Reserve to protect against inflation. When he saw such signs in 1959 he tightened credit policies by raising the prime interest rate which drove the country into recession. This is much the same policy that the Federal Reserve had followed since its inception. As one of the earliest leaders of the Federal Reserve had explained, "It's our job to take away the punchbowl when the party gets going." Accordingly, the Fed had historically raised interest rates when inflation began and lowered them to stimulate the economy when things slowed down.

When Martin's term was up in 1970, Nixon appointed Arthur Burns as head of the Federal Reserve in his place. Burns was a well respected economist and academic leader who had served on Eisenhower's economic policy council. Nixon, in conflict with tradition, believed that he should have influence over who he appointed to such a position and early on wrung an agreement to ensure easy credit for the time period surrounding his upcoming re-election campaign in 1972. As the election approached and plain signs of runaway inflation persisted, Burns began to resist Nixon's efforts to maintain easy credit policies. Negative press against Burns and other Federal Reserve Governors were planted in the newspapers along with threats of legislation to reduce the policy control of the Federal Reserve itself. Burns succumbed to the pressure and agreed to keep the credit policy loose, which only served to increase inflation.

After the election, the 1973 oil crisis caused further upward pressure and Nixon's price control policies failed completely as inflation was above 12% by 1973. By this time, Burns felt powerless to fight inflation without support from within the Treasury office and Congress as he understood the high unemployment would be the inevitable result of such a policy. This was the economic situation that Carter came into in 1976, largely unaware that a large recession was imminent. Today, Burns is largely regarded as one of the worst Chairmen ever to sit in that office. Historians don't agree as to whether Burns was unaware of the fallacy of doing nothing to control inflation or if he was simply too susceptible to political pressure to properly do his job. The simple fact that the Watergate burglars were found carrying $6300 of sequential numbered $100 bills probably further degraded his reputation as did his stonewalling of Congressional investigations into the matter. He then issued a directive to all Fed offices prohibiting any discussion of the subject.

Carter, noticeably reticent to influence the Federal Reserve, seemed incapable of either fighting inflation or stimulating the economy. In truth, it is virtually impossible to do both at the same time as it is necessary to raise interests rates to fight inflation which is directly opposite of stimulating the economy with easy credit. In 1979 Carter appointed Paul Volcker as Chairman of the Federal Reserve. Volcker immediately set about tightening credit even further until it reached as high as 20% in 1981. While Volcker is widely credited with ending the inflation that had plagued the economy since 1970, it is without question that his decisive policies further degraded economic prosperity during Carter's re-election campaign in 1980.

Early in his presidency, Carter charged the Department of Health, Education, and Welfare in charge of final policy formation for health care reform. The first action of HEW was to create four contrasting health insurance models, which served to further polarize supporters of reform. Carter's own administration argued so much internally over which plan to take that the head of HEW, Joseph Califano, advised Carter not to take a firm stand on any policy having to do with health care reform. As the economy worsened and deficits from oil prices and the Viet Nam war era drove debt levels higher, consensus for action weakened further. As the AMA and AHA, representing non-profit hospitals, mobilized against reform they were joined by for profit hospital groups and insurance companies. Political action committees were formed and large amounts of money form the Federation of American Hospitals began to find their way into the pockets of congress. Profits for these companies shot up some 40-50% per year in the late seventies as costs skyrocketed and they had no intention of allowing Carter or anyone else to kill the goose that was laying golden eggs.

In 1977, Kennedy still pushing for National Health Care Insurance, spoke at a UAW convention. He suggested the Carter was defaulting on his promise to reform health care and urged Carter to take action. Carter, in return, promised to have a bill ready by the end of 1978. Both Carter and Califano were surprised to learn how unprepared the HEW was to implement such a plan and time dragged on. Kennedy, growing impatient, submitted his own plan again in the press. When a plan was finally submitted to Kennedy it contained a phasing in process based upon an unspecified time schedule based upon inflation and fiscal policy to be determined by Carter and his administration.

Kennedy then came forward with his Health Care For All Americans Act, which would effectively guarantee universal coverage for all Americans. Carter responded with his own plan which he had named Healthcare. Carter's plan did not guarantee universal coverage and contained a large role for private insurance firms along the same lines as Nixon's earlier plan which Kennedy had turned down. Kennedy and Carter conducted negotiations to combine the plans in an acceptable alternate form and finally came to agreement on a compromise bill that was closer to Kennedy's bill with some concessions to the private insurance sector. By this time the 1980 election was approaching and the bill died a quick death in a Congress concerned with a stagnant economy and deficit issues.

Other plans were proposed with lesser universal support but the truth of the matter was that Congress was growing more concerned with other issues. The Iran hostage crisis further damaged Carter and disagreements with Kennedy over health care and many other issues led to him running against Carter in the 1980 Democratic primaries, further weakening the Democratic party prior to this election. There was a growing concern with a perpetually weak economy and what was seen as failing foreign policy. The inability of proponents of health care reform to work together combined with the financial opposition of those profiting most highly from the current system eventually spelled the doom of reform policy during Carter's administration.

The growth of Conservative movement efforts to limit government and increase corporate power in national politics found the perfect combination of unorganized opposition and a weak economy reinforced by Volcker's determination to throttle inflation to allow Conservatives to step into power. The election of Reagan and imposition of his policies ended the window of opportunity for reforming healthcare in this country for many years while at the same time increasing the wealth and power of those most opposed to any change that might cut into their growing profit margins.

Healthcare Reform Attempts During the Nixon Years

The passage of Medicare in 1965, while a momentous step for healthcare for the elderly, did little to address the issue of spiraling health care costs and its effects on the nation as a whole. Millions of Americans were feeling the squeeze of higher prices and no health insurance. Charts show that US health care expenditures have outgrown all other expenditures as a percentage of GDP since 1960. In the decade from 1960 through 1970 they grew some 2.5%. While this may not sound like much it is worth realizing that I am talking about the percentage of all the economic growth in the whole country that health care devours. In that decade the GDP doubled from 526 billion in 1960 to 1038 billion in 1970. This means that health care costs grew by more than 10 billion dollars in one decade. This was the beginning of the dominance of Insurance providers in the system. Previously, health care costs for most Americans, while expensive and growing had not been prohibitive. The 1960’s saw the beginning of the runaway costs that continue to swamp our economic system. By 1980 the growth rate as a percentage of GDP was another 2%. It has only climbed since. The 90’s saw a 5% increase. The next 20 years saw an even greater increase. The end result is that health care spending in this country has went from 5% of GDP in 1960 to a little over 20% presently and it is still climbing. We are now spending some 2.8 trillion a year on health care in this country which far outstrips what any other country in the world spends.

Politicians in the 60’s saw the groundswell in costs and how it was eating into economic growth. They viewed this with considerable concern as in our system economic growth is the metric we use to judge the health of the country. Anything that threatens this growth necessarily threatens the politicians’ main goal of getting re-elected. It got their attention in a big way. The cost to the average citizen soon came to be so high that it was impossible to survive financially without health care insurance. This essentially created a three party system wherein the end user (patient) had little connection with cost. The health care provider set costs and the insurance company paid the cost while the end user had no input into either.

A good analogy would be to take your car to a mechanic for a tune up; only in this case you don’t pay the cost of the tune up as you have a warranty you purchased from someone else. The people who sold you the warranty have a goal of maximizing the number of warranties they sell so the higher the mechanic’s cost is, the more warranties they sell because they depend on these high prices you can’t afford to pay in order to sell you a warranty. It is easy to see the higher costs greatly benefit two out of the three parties in this system; the mechanic and the seller of warranties. You don’t really pay much attention to the cost because your cost ends with the purchase of the warranty. The bad news is that every time costs go up the cost of a warranty goes up as well. This is a gradual increase that you don’t immediately feel; at least until you have to purchase another warranty. You might complain about it at that time but you know you have to purchase it as the cost of doing without it is even higher this time around. Without the warranty in the middle of your dealings with the mechanic you would simply take your car somewhere else when his costs get out of line with the competition.

In the health care industry this is not possible. Try going to your doctor and asking for an estimate before the next procedure you need. Not only is there no competition, if you have insurance you have no say so at all about what things cost. This is exactly the reason when you go into the doctor’s office for a head cold they weigh you, check your blood pressure, and collect urine samples. They have a shopping list from the insurance company that tells them exactly what they can charge for and they hit every item on the list. If you don’t believe this, try explaining that you don’t want to be weighed or have your blood pressure checked. They won’t mind, unless you also explain that you want a copy of the bill they are sending to the insurance company.

In a nutshell, it was the advent of this system that led to spiraling health care costs. We don’t have an insurance problem in this country; we have a health care cost problem. Without recognizing this we have no hope of solving the problem. Every step towards more private insurance is a step toward higher costs. The two groups who have caused this problem are the health care providers and the insurance companies. Asking them how to solve the problem is a lot like asking a fox to guard your chickens.

For much of Lyndon Johnson’s term he was pre-occupied with Viet Nam. He declared a War on Poverty but quickly found himself in so much hot water over the war in Southeast Asia that he had little time for anything else. The civil rights movement focused health care concerns on the disparity between white and black health care opportunities but little was actually done to address these issues during his term. When Nixon came into office he too was forced to deal with Viet Nam for much of his first term but he began to take up the banner of health care reform in 1971 as the election approached.

Nixon, for all his other faults, was actually quite interested in doing something about health care in the US for several reasons. He was alarmed at the growing cost to economic growth and was of course interested in furthering his re-election chances. However, there as a deeper interest for Nixon, a personal one. Nixon came from a relatively poor family originally. He lost a younger brother to Tuberculosis early on. A little later, he lost an older brother to the same disease. Nixon always believed that one or both of his brothers could have been saved if they could have afforded better care. As it was the family suffered greater economic hardship as a result of the treatments they did seek for the two boys and Nixon never forgot this. One of his first acts as a newly elected Congressman in 1947 was a proposal to institute a national health care program. He often pointed to the expense of what was eventually a cure for tuberculosis as proof that we needed a public-private partnership to advance medical science effectively.

Another player in the efforts to reform health care at the time was Edward Kennedy. Kennedy had his own reasons for his interest in health care issues. As a passenger in a private airplane crash in 1964 he has suffered extensive injuries that were to bother him for the rest of his life. During his recovery he began to understand the devastating costs of such accidents on ordinary citizens as he was to remark that he had no idea how other people could afford the care he received. In early 1973 his son, Edward, was diagnosed with a rare form of cancer that caused him to have his leg amputated. His son Patrick suffered severe asthma symptoms for much of his life. Kennedy gravitated toward health care issues early in his career and stuck to this interest for the rest of his political career. In 1968 he joined the new Committee for National Health Insurance which was founded by UAW president Walter Reuther. By August of 1970 he had introduced the first of many national health care insurance plans in Congress. He was to serve for a decade after 1971 as the chairman of the Subcommittee on Health and Scientific Research in the Senate.

Kennedy was known to have stronger political ambitions but an incident a Chappaquiddick in July of 1969 where a young girl died when Kennedy’s car careened into a creek after a night of partying probably ruined his chances of ever getting elected outside of Massachusetts. Kennedy had not reported the wreck until the next morning, fully aware that the girl had not escaped the car. He later suggested that he was in shock after the accident and had no explanation for his failure to report the accident or seek immediate help for the girl involved. An inquest later revealed that she survived the crash and died from lack of oxygen. A forensics expert suggested that she had lived for several hours breathing from a small air pocket in the submerged vehicle. Kennedy was pressured to run in 1972 opposing Nixon but he declined no doubt in large part over fear of more exposure to this incident.

In early 1971 Kennedy held public hearings around the country that exposed the support of the public for reform. More and more people were feeling the squeeze of higher costs and less access to health care. In an effort to control inflation Nixon had implemented wage and price freezes this same year but everyone recognized that the expiration of these freezes would cause more pressure. The specific price controls for health care centered around limits on increases in physician and hospital charges but insurance premiums continued to climb.

Kennedy’s first reform proposal in 1971 called for a National Health Insurance that was to be a single payer plan financed by payroll tax deductions, a true national health care system that would for all intents and purposes eliminate the need for private insurance companies. For all intents and purposes it closely matched Nixon’s original proposal from his early days in Congress. However, things had changed since then and Nixon had two problems with Kennedy’s plan. The first problem was that it went against the interests of many of his most financially able supporters. The second problem was that he didn’t trust Kennedy and suspected that Kennedy would try to leverage his proposal into a run against Nixon in his upcoming re-election campaign. Kennedy was being pressured to do this very thing from some within the Democratic Party but he finally decided not to run.

In a recorded conversation in the White House in February of 1971 Nixon can be heard discussing the issue with John Ehrlichman, his domestic policy advisor. Ehrlichman proposed a Nixon plan that would rely heavily on Health Maintenance Organizations as a key component. They hoped this would kill several birds with one stone. It would be a tool to control costs by providing for more competitive pricing. It would facilitate a coverage option for those without insurance. It would be private sector based and profit driven, thereby soothing loud complaints from rich donors from the insurance industry. Best of all, it would be an alternative to Kennedy’s plan and one that Nixon felt he could gain support for in Congress.

Nixon took his plan to leaders in Congress. Realizing such a plan had to go through Wilbur Mills and his Ways and Means Committee; Nixon approached him and Russell Long of the Senate. Mills agreed to help push the bill but soon was approached by Kennedy. Kennedy, realizing the potential for universal coverage worked with Mills to produce a middle ground between his original proposal and that put forth by Nixon. The resulting bill contained employer mandates and personal cost-sharing with employees while utilizing private insurers as intermediaries. However, it also required employees to participate and was to be financed by a payroll tax. Insurance providers were fearful of the growing support for National Health Insurance and calculated that Nixon’s plan was the lesser of two evils. The AMA while steadily cranking up the “red scare” tactics against Kennedy’s plan as a socialist/communist plot campaigned less stringently against Nixon’s plan. Nixon’s reputation as a strong anti-communist made it harder to assail him on the issue and he was a Republican after all. They well recognized attacking Nixon would likely lead to a Democrat in the White House and like the Insurance providers were very afraid of a National Plan what might limit their control of prices or make them operate in a true free market.

The Mills-Kennedy compromise was rejected by Senate leader Long. Republicans found themselves in the middle of a choice between doing nothing and risking voter anger or appeasing the Chamber of Commerce and Insurance Company executives who financed much of their party. In 1973 Congress passed a stop gap measure in an attempt to head off the crisis. The Health Maintenance Organization Act required companies with over 25 employees who already offered health care insurance to off federally certified HMO options as well. It was thought that these plans would help hold down costs for the insured but it did nothing for those without insurance. In the final analysis the act did little to control costs because neither patients who were limited in their choice of doctors nor physicians who had prices dictated to them liked the plan. HMO’s actually eventually led to higher usage as the patients had less service based costs for doctor visits and insurance companies wound up spending more money in administering the plans than what traditional health care cost.

After Nixon’s election in 1972 Kennedy tried to work directly with Nixon to implement a major reform of the system. Nixon was less fearful of Kennedy as an opponent and both men wanted to implement a policy that would allow all Americans better access to health care. Nixon was soon pre-occupied with other problems however, and his desire to address health care issues became secondary. As inflation returned Nixon again activated price and wage freezes. This time, the freezes were much more unpopular with the public as well as business interests who were frustrated with a stagnant economy. On top of these issues Watergate began to take up more of his time and attention as the trail led closer to his advisors and eventually the Oval Office as well.

Kennedy’s secret negotiations with Nixon to implement a national plan soon fell victim to Kennedy’s ambition and Nixon’s resignation. As Nixon’s popularity waned Kennedy began to receive pressure from Labor groups not to compromise. They believed that Nixon’s impending downfall would almost surely usher in a Democratic candidate in the next election who would be more amenable to a National Health Care plan that would not contain compromise measures with Insurance providers. Kennedy hesitated until Nixon resigned only to find Ford to be more intransigent to the plan. Still, many supporters of National Health care were certain that they would have a better position after the 1976 election as Carter had already come out in favor of the plan publicly.

1974 was probably as close as we have ever been to having a National Health Care plan that provides equal access to healthcare for all Americans. There was every reason to believe that the incoming president would support such a plan and both the AMA and Insurance providers had their backs against the wall as Republicans lost office after office in the wake of the Watergate scandal.

In October of 1974, Wilbur Mills who had long privately supported health care reform while publicly working to find politically palatable incremental steps toward this goal managed to ruin his own reputation. US Park Police in Washington stopped his car for driving with the lights off. Mills was intoxicated and visibly scratched up from a confrontation with the passenger in the car. The passengers, upon seeing the police approach the car, leaped out and jumped into the nearby Tidal Basin in a drunken attempt to escape. Annabelle Battistella was her name but she was better known by her stage name, Fanne Foxe. Fanne was a stripper from Argentina who had quite a following in the area. The police escorted her to St. Elizabeth’s Mental Hospital and Mills went home. He was re-elected a month later despite the growing scandal but managed to ruin what was left of his reputation by appearing onstage in a drunken state at a burlesque house in Boston where Fanne was performing a month later. To remove all doubt about his physical drunkenness he then called an impromptu press conference in her dressing room afterwards. Shortly after this incident Mills stepped down as chairman of the Ways and Means Committee, joined Alcoholics Anonymous and checked into a treatment facility.

Healthcare for Profit

Approximately 85% of our health care costs in this country are for physician and hospital care. This is by far the largest bulk of our expenditures on healthcare. In the US we spend an average of $7960 per person per year on Health care. The world average is $2342 so we spend 339% of the international average on health care. Yet… we rank 37th on the World Health Care Organization’s ranking of national health care systems; right between Slovenia and Costa Rica who spend $2084 and $1059 respectively according to WHO for 2009.

The United States remains the only industrialized nation without a public health care system. Let’s look at why our costs are so high….

Doctors compensation
US General Practitioner- $161,000 Rest of the World- $78000
US Specialist Doctor- $230,000 Rest of the World- $107,000
While both of these are over 200% higher than the rest of the world this is not the whole story either…

Let’s start with our insurance system. Most Americans get their health insurance through a carrier that works with their employers. This was basically set up originally because the government helped subsidize it by offering tax breaks for employers who provided health insurance. The insurance companies liked it because it tied the insurance to people who were working and therefore less likely to have serious health issues that would cost a lot of money to treat. This has led to a system wherein the vast majority of Americans who have health insurance purchase it through their employer. Health insurance is just like car insurance in that it takes a lot of people who don’t file accident claims to pay for those who do. In effect, younger healthier employees who don’t file claims help balance out the system for the older employees who have more health problems.

Therefore, there is a large pool of employees paying into plans that do not file a lot of medical claims and therefore make this a profitable business for private health care insurance companies. However, as soon as these people retire or reach the age where they start to have more health problems they are no longer on the roles of the private health care carriers and become the problem of the government Medicare system. This is exactly why our system does not work and public health care systems do. A private health care carrier gets the benefit of receiving premiums for the part of our life where we don’t really need a lot of health care and then turns us over to the Medicare system when we do. By this time, the profit from a large pool of healthy people is in the pockets of a private health care insurer and the government is stuck with paying for all of our health care when we need it most.

In 2008 Wellpoint (one of the ten largest health care carriers in the country) reported total revenue of $61,579,200,000. From this total they reported a 4.07% profit. This comes out to $250,627,334 for one company. If we assume there are ten other companies with this same level of profit we are talking about 250 billion dollars in profit for health care companies that would go a long way towards solving our deficit problem because we could eliminate this by going to a public health care system. We must remember that privatize actually means profitize.
While some may claim that private companies are more efficient actual numbers in health care show this is not true. The average administration cost for private health care carriers is around 13% while the average administrative cost of Medicare is less than 2%. It is much simpler to administrate a system where everything is covered as there is no time spent trying to decide what is covered and what is not. Canada’s public health care system has similar administrative costs as do those in Great Britain and France.

How hospitals work…

Most public hospitals (including my local hospital) are now 501C non- profit corporations. They also get special dispensation from the Federal Government for providing community services such as free health care for indigents and uninsured. These dispensations mean they pay no income tax, no property tax, and no sales tax. They are also eligible for special loan rates and bond issue rates as a part of these dispensations.

Let’s look at what they actually do. Most hospitals average around 5-7% rate of people who either cannot pay for treatment or do not pay although many of the larger systems actually have knocked this rate down to around 2% and still maintained their tax exempt status. If you added up the taxes they are exempt from you would easily come up to the 45-50% range that they would be paying if they were not tax exempt so a 5% loss is very acceptable as they are in effect producing a 45% savings for their board of directors by providing free health care.
Hospitals have what are called “master charge” or “billable” rates that are used to calculate these numbers. Unfortunately, these “master charge” rates have little to do with actual costs. For example, if you go to the hospital without insurance and have a colonoscopy you will be charged from $6000 - $8000 dollars for this procedure. Blue Cross often settles these claims for less than $1000 (this just happened to my daughter). Plainly, the hospital cannot accept less than $1000 if the actual cost of the procedure is $8000 and stay in business so there is something very wrong with the math.

The only people who ever pay these “master charge” rates or those who do not have insurance or are indigent. In other words, the vast majority of them are not paid but are used by the hospital to estimate their loss to get their losses in the 5% range. However, the Federal Government has what are called DSH (Disproportionate Share Hospital) plans. These are funds that are available to reimburse hospitals for their losses through free health care. There were around 43 Billion dollars paid out on this plan in 2003. There are only two requirements that a hospital has to meet to receive these funds.

1) At least 1% of a facilties total in patients must be Medicaid patients
2) If the hospital offers obstetrical services, the hospital must provide at least two obstetricians with staff privileges who agree to serve Medicaid beneficiaries.

If the hospital meets these requirements they are eligible to receive up to 100% of their shortfalls due to Medicaid, Medicare, and uninsured patients.
Medicare typically pays 91-93% of all medical costs. Medicaid typically pays 45% of all medical costs with the rest made up by the states and DSH payments. However, since hospitals cannot collect 100% of their costs through these two programs they typically add a 38% fee to all private health care carrier bills to make this money up (even though it is usually totally reimbursed by DSH payments).

It is easy to see why our health care system is broken. We don't have a lack of insurance problem we have a cost of healthcare problem. Between insurance providers, doctors, and health care providers (hospitals and nursing homes) we have a system where it is impossible to track actual costs. This has led to the bloated, ineffective system we all struggle with when we need healthcare. Anyone who doesn't have healthcare insurance is one illness or accident away from bankruptcy. Anyone who does have healthcare insurance is paying through the nose for it and it will only increase as time goes by. We cannot solve the problem with more insurance. We have to get costs under control before we can even make a dent in it.

It really is quite simple. As long as we have a profit based system we will have healthcare that concentrates on the most profitable areas of healthcare; hospitalization, surgery, and major illness treatments. This is basically the reason that our healthcare system in this country does not resemble that of any other industrialized nation. It is also the reason why we are all at the mercy of insurance providers and hospitals. Last year, my mother passed away after a long stay in the hospital. She was in an automobile accident and later died from complications from that accident. The bill for the first month of her stay was over 600,000 dollars. You might want to keep that figure in mind if you think you can save enough to cover your own healthcare without Medicare under the current system. The plain and simple truth is that this is impossible for all but the wealthiest among us.

The next time you drive by your local hospital and notice the gleaming new buildings and constant expansion you might want to think about this post. The truth is that a large part of our national wealth and most all of our private wealth is eventually going into the coffers of insurance providers, doctors, and health care providers. They are sitting there just waiting because they know something you don't. If you live long enough, you will give them everything you have worked for your whole life in the last few months of your life.

To Carry a Gun

I honestly don’t know what is happening in the world around me sometimes. It seems like I go along for extended time periods thinking that I understand people’s motivations and actions and then suddenly realize that I not only don’t understand these things, I don’t even have a clue about them. I was raised by a father that that was a certified weapons instructor. From the time I was very small, I was taught gun safety and how to use a gun proficiently. By the time I was eight years old I was a very good shot with a rifle. My father taught me sight image and squeezing the trigger, which are the two keys to accuracy with most guns. He shot competitively in pistol target matches and I spent a great deal of time with him at these events. Having five kids in a one job family didn’t exactly lend itself to expensive hobbies so my father subsidized his hobby with work. He did taxes for gun shop owners for trade in guns and reloading equipment. He reloaded ammo for accuracy that was customized to specific gun barrels. He smelted bullets from expended rounds with line type from the local newspaper and old tire weights my brother and I gathered at junkyards. I gathered brass from people who didn’t reload and dug old bullets out of dirt banks behind the targets after matches. I understood the culture of these men and numerous other police officers he worked with as well as hunters and other gun hobbyists.

In those days the rule of thumb was that you never, ever pointed a gun at someone unless you meant to kill them. Guns were the last resort and only to be used for self-defense. You did not point a gun at someone in order to control their actions. You did not point a gun at someone to prevent them from running away. The only acceptable reason to point a gun at someone was if you meant to kill them. I can well remember being sent home from an early morning squirrel hunting trip at the age of fifteen because I accidentally let the barrel of an unloaded shotgun point in the general direction of my dad as we crossed a barbed wire fence. Gun safety had concrete rules and there were no exceptions to the rule that you never point a gun at anyone, even an unloaded gun.

My dad’s instructions made a deep and lasting impression on me; one that stays with me to this day. I often think that had we kept these rules as a society we would not have the problems with gun violence that we have today. Police routinely point loaded weapons at people’s heads during arrest procedures. I never see this on TV or movies without thinking of my dad’s words. Do they mean to kill the person? If they had that thought process I believe we would see a lot less in the way of shootings as pointing a gun at someone is a guaranteed methodology for escalating danger for everyone, including the officer pointing the gun.

Our culture has undeniably changed since those days. Maybe it is our continual exposure to gun violence on TV and in movies but society as a whole seems callous to the consequences of carrying a gun; even to shooting other people. I know many people who carry handguns under one situation or another and I always wonder why. In the final analysis I wonder if these people ever think the whole situation through beforehand and I have to assume they do not because I don’t understand the value system that says it is acceptable to kill another human being unless it is a kill or be killed situation. Do people really believe that situation is going to occur on the way to the grocery store?

When I was much younger I suffered a theft of all my tools one night. I was working as an electrician at the time so my tools were the source of my livelihood. I could not make a living without them. I didn’t make a tremendous amount of money to begin with so the loss of all my tools at one time was a serious setback. I lost around $1300 worth of tools without a way of replacing them. I had to go buy more tools on credit simply to go to work that day. In retrospect I was not blameless in the theft because I left my truck parked all night at a rather seedy bar with the tools in the toolbox behind the cab. I was extremely angry at the theft and I am quite sure I would have reacted with whatever level of violence was necessary to prevent the theft if I could have caught the thief in the act. I am equally sure that I would have regretted it later. As it happened it didn’t have to face that situation but I bring it up to point out that I understand the feeling of violation and anger that goes with having hard earned property stolen by someone who it essentially taking a shortcut to get whatever it is that they want.

I have recently heard numerous conversations on talk radio and indeed with people I work around on this subject as the Second Amendment conversations seem to be on everyone’s mind these days. Without going into the Second Amendment I would simply point out those recent events have opened a window into many people’s thought processes along these lines and I find it a little disconcerting to realize my own views are so far from those of a lot of people I like and respect. I believe as a society we need to emphasize some long term perspective in these cases instead of blindly jumping on one side or the other based upon gut instincts and emotions. Unfortunately, I don't hear that discussion taking place.

For instance, if someone breaks into my house in the middle of the night there are two issues having to do with guns and home protection that immediately become paramount. The first concerns whether I have the right to defend myself and my family. The second revolves around whether it is right to shoot someone to protect my personal property. In the first case, I think we can all agree that we have the right; indeed the duty to protect ourselves and our family from others would do us harm. However, the fact remains that the vast majority of break-ins are committed to steal property that is easily converted to cash. TV’s, stereos, computers, guns, and jewelry seem to be at the top of this list of property that is usually taken in such cases. In the overwhelming majority of these cases the thieves have no interest in a confrontation with the homeowner. In fact, they would much prefer the homeowner is not on the premises when they break in. Is there not a value judgment that comes into play in these cases? In other words, is your TV worth the life of another human being? Can anyone say that with careful consideration they would kill someone to keep their TV set? I hear no conversation along these lines when this subject comes up yet this is absolutely the relative value judgment we make when we choose to shoot someone for breaking into our house as the vast majority of break-ins have the goal of gaining cash as the motive.

There have been several high profile cases involving these same types of knee jerk rationale lately yet we never seem to get to this part of the conversation. The Trayvon Martin case is one example. Leaving aside the “stand your ground” laws or even the particulars of the case on any level, there is a judgment call that was made at the outset by Mr. Zimmerman that indirectly led to a death that would not have otherwise occurred. If Mr. Zimmerman had not chosen to take a gun with him that night on his self-appointed job of protecting the neighborhood the Martin boy would not have been shot. It really is that simple on some level. Why should a neighborhood watch volunteer have a gun on their person to begin with? Three things become possible when such a volunteer decides they need to carry a gun. The first is that nothing will happen to justify the decision in which case the decision is simply a bad decision with no noticeable result. The second possibility is that the volunteer will suddenly and without warning be confronted with someone intent on using deadly force upon them and have to respond in kind. I would put the odds on this occurring roughly equivalent to winning the lottery every day for a week in a row while being struck by lightning each night. It is theoretically possible, but only so remotely so as to be negligible in any world remotely associated with reality. The third possibility is that something will occur that will lead to an overreaction or accidental shooting. Of the three possibilities the first is by far the most likely. The second is within the realm of possibility but so far removed from probability as to be nonsensical and the third is so horrible that I don’t think any rational human being could think it through and still carry the gun. I am reasonably sure Mr. Zimmerman would not make that choice knowing what he knows now but how many other people are making similar types of decisions every day without thinking their way through the possibilities?

The second case that has recently been on the news is the case of the young lady who wound up being arrested for buying a twelve pack of water. It seems that this young lady was seen with what appeared to be a 12 pack of beer in Virginia. It was actually a 12 pack of water but agents with the Virginia Alcohol Beverage Control Board approached her thinking it was beer that she had purchased as an underage person. According to the victim she was suddenly surrounded by people who did not identify themselves as agents demanding that she get out of the car. In a panic, her and her two friends rapidly left the scene and the car ran into one of the agents on the way out. Obviously, the whole incident was a huge mistake on several people’s part but the part that bothers me the most is that guns were drawn by the agents in an attempt to stop the girl from leaving. Happily, no one was injured although the girl was later arrested when she called the police to tell about the incident for endangering the agents with her car. Charges were later dropped of course but the whole incident speaks to my point.

In what world is it reasonable for agents to draw weapons to stop an underage person from escaping with a 12 pack of beer that she had bought? All the agents involved suggested that it was her age that led to them trying to question her in the first place. Why would they then draw weapons to stop her from escaping? This is exactly the kind of reasoning that is so foreign to my understanding. How can anyone possibly believe this was a reasonable response on the part of the officers? How is it possible for a reasonable person to suggest that this was not a horribly dangerous overreaction that could have very easily led to the death of either one of the officers or the girl and her friends? In retrospect, to support their actions in a logical manner the officers would have to argue that letting her escape with a 12 pack of beer she had bought and paid for was a capital offense that she should be executed for committing. People are upset that she spent the night in jail and demanding that the incident be further investigated but I have read no discussion centered around the fact that there is a basic flaw in our system wherein officers who are ostensibly there to protect the public draw weapons on an underage drinking suspect to threaten deadly force if she does not cooperate. The fact that they are trained to do this type of thing is reflective of our lack of understanding that such actions have lethal consequences and the only reasonable way to make such judgments is to consider the possibilities that our actions eventually lead to before we decide to resort to carrying a gun.

I have come to believe that we need to have a logical discussion about gun safety in this country. Whether or not people should have the right to own guns is inconsequential to the real problem that is so lethal; the literal life and death responsibility that comes with the decision to carry a gun. The discussion needs to be based on and start with irreversible value judgments that are instantly bypassed when people choose to carry guns. In split second decision events we rely upon instinct, emotion, and training to react. I seems obvious that our training is often tactically incorrect and severely lacking in perspective. Therefore, we are left with emotion and instinct to instantaneously make what is quite literally a life and death decision when we carry a gun. The irrefutable statistics of actual gun deaths in this country is a clarion call to the fact that we are woefully inadequate in understanding the consequences of our actions when it comes to the choice to carry a gun.

The Chosen People

I was recently having a conversation with someone when they brought up the "Chosen People". I haven't thought of this in years but I remember it being a little confusing when I was a child in a Baptist Church. At the time it seemed odd that my Sunday School teacher couldn't see a problem with this idea as it applied to Jewish people. Being very young, I didn't really know what being Jewish meant but I recognized that it involved something that we were not. In other words, while I wasn't quite sure what it meant to be Jewish, I knew were not. This seemed a problem to me as by then I understood from my Bible lessons that Jesus had been Jewish and the Bible is literally full of references to the fact that the Jews were the chosen people. I asked questions of course, but the answers I got didn't seem right. How could someone accept that the Jews were God's chosen people without at the same time understanding that everyone else was necessarily not chosen? Being raised in Alabama I didn't even know a Jewish person at the time but I was very curious about what it meant to be Jewish.

I soon recognized there were many things in the Christian faith that are contradictory and began the long process of recognizing that I am not a Christian. I am still asked that question occasionally by someone proselytizing for the faith but am quite comfortable now telling them that I am not a Christian because it is not an accidental thing. I have taken the time to research in some detail many different religious faiths and doctrines and am quite content with the fact that I am not a Christian. As a matter of fact, I tend to believe that anyone who is a Christian is either slightly brainwashed or not very curious intellectually. I don't mean that as in insult but have yet to meet anyone that I believe has done an honest appraisal of the facts and researched the history of the period time period that saw the birth of Christianity yet still believes in the inerrancy of the Bible. In any case, when the subject of "Chosen People" came up I had something of an epiphany.

Having spent a lot of time studying the Bible and the historical context in which it was written in the last 10 years I had more or less left off thinking about my earlier problem having to do with one group being God's chosen people. When it came up this time, it suddenly dawned on me that there is a point of confusion here that goes a long way towards understanding why anti-semitism still flourishes in the world today. It is a problem rooted in the same incongruity I noted as a small child when I first heard the term mentioned. To understand this you have to first understand what the Bible meant to the people who wrote it originally. Reading the writings of Josephus, who was a Jewish leader in Judea during the time Jesus supposedly lived, I understood what the Bible meant to him. His writings were largely an effort to explain the Bible and Jewish faith to a Roman Emperor who was unfamiliar with Jewish history. It becomes clear reading Josephus that the Jews see the Old Testament as a history of the 12 tribes of Israel. It contains rules to live by, instruction of how to eat, what to eat, and how to live in society. What it does not do according to Josephus, is claim that their God is the one and only God. I found this surprising as that is very much a part of how Christians view the Old Testament. It is an integral part of the Christian belief system and one that Christians believe they got directly from the Bible itself.

If anyone seriously questions this interpretation of who God was to the Jews at the time of Jesus all one has to do is refer to the Ten Commandments themselves. God approached Moses on Mount Sinai saying, "I am the Lord your God, who brought you out of the land of Egypt, out of the house of slavery." Notice there is no claim saying "I am the one and only God", instead we have him introducing himself as "the Lord your God." This is followed by the very first commandment, "Thou shalt have no other Gods before me." Why would it be necessary to instruct his people to have no other Gods if he is the only one? The answer is that neither God nor Moses supposed that there was only one God. Neither did Josephus. Both his writings and the writings of the Old Testament are full of examples wherein the chosen people were punished for worshipping other Gods. Christians suppose that all other Gods are false Gods; that they somehow don't exist in reality. The men who wrote the Old Testament and indeed the Jews who were worshipping God at the time Jesus is supposed to have lived held no such belief.

The key to understanding their sense of who and what God was comes from their history. Abraham is understood to be the father of Judaism, Christianity, and Islam. All three major religions trace their lineage back to this one man through the religious writings of each. Abraham himself originally came from Sumeria; specifically a city-state in Sumeria called Ur. According to this tradition, Abraham came from royalty within Ur. When he came to the area of Judea he came with a great deal of money and what was probably a small and fierce armed contingent. The important part to remember is that he brought his belief system with him. In Sumeria, each city-state had its own God. These Gods were widely divergent in how they expected to be worshipped but were seen as the protectors of their people. When one city-state defeated the other, it was believed this was because their God was superior to the other. It was more complicated than that on some levels but it was necessary to have a strong God and to be in good standing with that God to achieve military or political success.

The God of the Jewish tribes that descended from Abraham was a local God in Judea. Yahweh was his name. Not surprisingly, Abraham took a local God as his protector when he moved into Judea. This God was quite literally a fire and thunder God from Mount Sinai. For centuries, the success or failure of Abraham's tribe was understood to be directly related to their relationship with Yahweh. When Yahweh was happy with the way his people acted and worshipped, things were good in Judea. When Yahweh was unhappy, bad things happened. Bad things with a capital B. There is good reason to believe Yahweh's description of himself as a jealous and angry God. Along with the belief in local fire and thunder Gods Abraham also brought creationist stories that relate directly back to Sumerian beliefs; the flood story being one example. This historical chain of evidence explains much of what is written in the Old Testament including the "Chosen People" story.

All of this makes perfect sense but it doesn't fit into the Christian interpretation of who God is. According to Christians, there is only one God and he is the same God Moses talked to on Mount Sinai. Obviously, this is a view that has evolved over time. What is less obvious until you look closely is why the story evolved the way it did. Perhaps the roots of this evolution are contained within the historical context that existed in Judea when Christianity was born. The Romans were occupying Judea along with most the known word at the time that Jesus supposedly lived. Jesus, who if he lived, was obviously and literally a Jew got into trouble with the Romans for stirring up trouble in the Temple. There was only one crime in Roman Judea that was punishable by crucifixion and that crime was insurrection. This is easy to understand when you realize that small groups of Roman soldiers were occupying hostile territory in much of the known world at that time. The one thing that Roman's were terribly afraid of was insurrection as bloody uprisings by the locals threatened both Roman government and the lives of the Roman soldiers themselves. As it happens, there was several such insurrections in Judea during that period so the Romans were not too concerned with being overly zealous about enforcing the law against insurrection. If Jesus indeed is a historical figure and was crucified in Judea it was unquestionably for what the Romans perceived as insurrection.

By 70 AD the Romans were fed up with Jewish insurrections and began cracking down by outlawing Jewish worship. I believe this is when Christianity began to distance itself from its Jewish origins; as a means of continuing the people's ability to worship as they saw fit. it was also the beginning of the evolution of the belief that there was only one God. This belief was further fed when the Roman's saw within Christianity a means of uniting diverse ethnic groups into one system that would be controlled by a Roman leader. Christianity, then became a tool that Roman leaders utilized for their own purposes, both political and military. Christianity spread to much of the civilized world at the time, with its inherent belief in one God that contradicted the earlier Jewish understanding that there were many Gods.

It is at this juncture in history that the Jewish people's belief that they were God's chosen people clashed with Christian beliefs that they worshipped the same God. Jews across the world have historically clung to their own belief system as well as a belief that they should retain ethnic purity and separatism. Through the years since, Judaic principles of separatism and favoritism of their people with God have not been taken lightly by Christians. I believe this is largely because of a basic disagreement in how the two groups view God. There is little to be offended about if one group believes that their own personal God loves them more than anyone else. However, if there is only one God it doesn't quite seem fair that he has a favorite ethnic group. Hence, the periodic anti-semitic ravings of Christian and Islamic leaders. Children on the playground often fall into similar arguments about who the teacher likes best. Luckily, they don't have access to ovens to put those in who claim to be the teacher's favorites.

A Tax Tale

It’s been a while since I posted anything on this blog. I have been trying to be more actively involved in politics in the meantime but the candidate I was trying to help was soundly defeated in the recent congressional elections so maybe I should stick with writing in a blog.


There is an old wives tale that has been circulated by conservatives for some time now concerning the tax structure and federal deficits. There are many versions of this tale but the gist of the story is that it is impossible to fix the deficit problem by taxing the rich. Neil Boortz is very fond of this particular tale and likes to quote numbers that profess to prove that raising taxes on those that make $250,000 will make a very minimal difference as far as the deficit is concerned. I have often heard him and others say that if we took all the money that these people earned in taxes it would not fix the deficit. The tactic they usually undertake to prove this point is by breaking down what the government spends per day and applying this increase to this figure. This involves a classic bait and switch analogy in that they start out discussing the deficit and then either devolve into discussing debt or government total expenditures.


It is worth pointing out at this point the difference between the deficit and the debt. The deficit is the annual amount of money that our government spends over and above the amount of revenue it takes in. The debt is the total amount of money our government has spent over and above the amount of revenue it has taken in. It is important to note that most of the government debt is financed by treasury bills that US companies and individuals purchase but there is also a small percentage owned by foreign governments with China holding the largest percentage of this (about 7% as of June 2012).


The tale I am discussing usually winds up comparing the total debt with the amount of revenue a higher tax rate for the wealthy will raise. The first problem with this argument is that it suggests that nothing can be done to solve the debt issue which is of course a bad place to start any discussion. After all, if nothing can be done about it we may as well not discuss it. The reality is that we must first solve the deficit issue before we can solve the debt issue. In other words, we must find a way to spend less annually than we take in as revenue before we can ever begin to pay down the total debt. As Will Rogers once said, if you find yourself in a hole, the first thing you must do is quit digging. The truth of the matter is that a certain amount of deficit in a country with a central bank is a healthy thing but I will save that argument for later. The point is that we have to find a way to limit deficits if we are going to have a successful economy in the long term.


Perhaps we should start with some real numbers and a brief explanation of why we are currently running deficits. In a national government such as ours with a central bank the deficit is the cushion for economic instability. Since we are currently trying to pull out of the worst recession since the Great Depression it is not surprising that our deficits have been very high since 2008. What conservatives don’t like to talk about is when we starting running deficits again after the Clinton years.


When Clinton left office we were actually running a surplus on government spending. In other words, we were taking in more revenue than we were spending which is the only way we can possibly begin to pay down the debt. During the last three years of the Clinton era we ran a 583 billion dollar surplus. CBO projections suggested that a continuation of these policies would have seen us virtually eliminate the federal debt by 2012.


Then Bush was elected and we started down the path of tax cuts for the wealthiest Americans and immediately turned surpluses into deficits. It is important to understand that we were not dealing with recessions or economic collapse in those years; we were simply giving money away to those who least needed it but were most able to pay for elections. We averaged a 440 billion dollar deficit for the eight years of Bush’s presidency. Crazily enough, we did this by fighting two wars while at the same time lowering taxes. It turns out that Cheney’s comment that deficits don’t matter was an accurate portrayal of Bush’s fiscal acumen.


Obama took office during the worst economic collapse in almost eighty years and we are just now beginning to crawl out of the hole that put us into. What you won’t hear conservatives talking about is the fact that the deficit has actually decreased every years since 2009, even in the midst of this collapse. As a matter of fact the 2013 deficit is projected to be 58% of the 2009 deficit. No one should mistake this as something to celebrate but we are making process.


The recent discussions about tax increases have once again brought conservatives to a fever pitch as they trot this same old wives tale out for our consumption. I heard Marco Rubio, the conservative darling, on Sean Hannity yesterday using a variant on this same tale to describe why he refused to vote yes on the compromise measure just passed. He suggested that there was absolutely no way to raise taxes enough so that we could get the debt under control. Let’s take a look at the numbers and see if he is right.


Another tidbit that the old wives tale tends to look over is the fact that there is another tax bracket above the 250,000 dollar bracket, one that some very wealthy people happen to reside in so by just looking at this one bracket it is much easier to skew the numbers to suit conservative’s fancy. The CBO has a distribution chart available for 2007 that details the number of people in each bracket along with their average income within that bracket. This is interesting information because it is notoriously hard to come up with numbers and dollar figures for the upper tax bracket.


According to the CBO chart, the top 10% for reported earnings averaged 394,500 dollars a year in income. There were 116.9 million of these people in 2007. If we were to raise the tax 15% on just these people to a 50% rate we can do the math and see that we would have increased federal revenue 704 billion dollars that year. This is interesting because in 2007 we actually had a 178 billion dollar deficit. In other words, if we had raised taxes on the upper 10% of income earners 15% in 2007 we would have had a 526 billion dollar surplus that year to pay towards the debt.


According to the same CBO chart, the top 5% of earners that same year averaged 611,200 dollars a year in income. There were 5.9 million of these people in 2007. Using the same increase of 15% on this 5% of the wealthiest Americans we can do the math and see that we would have increased federal revenue 540 billion dollars that year. Subtract the 178 billion dollar deficit that we actually had and you can see that this would have resulted in a 362 billion dollar surplus.


Let’s look at the top 1% of wealthiest Americans. According to the same CBO chart this group averaged 1,873,000 dollars that year in income. There were 1.2 million of these people in 2007. Applying the same 15% increase to this bracket we can do the math and see that we would have increased federal revenue 337 billion dollars that year. This would have resulted in a 159 billion dollar surplus.


This still isn’t the whole story as most of these people make their money from investment and pay at the most the 15% tax rate that capital gains requires (think Mitt Romney and his 13% tax rate). Let’s assume these people actually had to simply pay the 35% rate they are supposed to pay according to the federal tax brackets. This would be a 20% increase in the amount of taxes they actually pay. This would have resulted in a 449 billion dollar increase in revenue and resulted in a 271 billion dollar surplus.


If we actually raised this income group to a 50% tax rate as I have suggested for all the other groups in the top 10% that amounts to a 35% increase in revenue. If we do that math for this we get a 786 billion dollar increase in revenue. This amounts to a 608 billion dollar surplus for that year alone. This is actually almost 5% of our current national debt that can be eliminated by raising taxes on the top 1% of wealthiest Americans for that one year. If we had done this in 2007, the year all these numbers are taken from and every year since we would have eliminated 25% of our national debt by 2012 in principle alone. This does not take into account the interest on the debt that is accrued annually as well which usually hovers between 2 and 3%.


It seems like the multiplying large numbers by small percentages makes for surplus instead of deficit; even if we just do this with the wealthiest Americans. This is not something that you will hear conservatives talk about because many of the talking heads of their movement are in this bracket. However, the numbers speak for themselves and they are even more surprising the further you refine them.


In 2009 a pair of young economists, Thomas Piketty and Emmanuel Saez, did a study concerning the distribution of wealth in this country. Unsurprisingly, they came up with some interesting numbers. They based their numbers on reported tax income instead of random surveys so there is plenty of room to suppose that even the numbers they came up with were underestimated but they paint an interesting picture of how the wealth in this country is actually distributed. Their study gives a clearer picture of a group that has largely been in the shadows of other studies; the top 1%.


For instance the top 1% earners took in 8% or all reported income in 1974. In 2007 they took in 18% of all income. If you include capital gains in these figures the numbers skew even further. Their take jumped from 9% to 23.5% of all income; the highest percentage recorded since 1928.


Piketty and Saez then went further and found that the top .01% earners income went from less than 1 million a year in 1974 to 7.1 million in 2007. This is an average and both numbers are adjusted for inflation to 2007 dollar values. If you dig even further into the data the top .001% now average some 35 million dollars a year in income.


These are quite astounding numbers. Put another way in 1974 the top .01% earners took in 1 of every 100 dollars of income in the country. In 2007 they took in one of every 17, or 6% or our whole national income.


Taking the CBO number and applying them to these smaller categories we can get even more interesting results. If there were 1.2 million in the top 1% then there were 120,000 earners in the top .01%, each making an average of 7.1 million dollars in that year. Applying the same 35% increase it we would have gotten a 298 billion dollar increase in revenue by simply raising the tax rate on the wealthiest .01%. This alone would have given us a 120 billion dollar surplus that year.


Think about this the next time you hear a conservative talking about tax increases. The restructuring of our tax system from 1980 on has all been aimed at increasing both the number of the wealthiest among us and the size of their wealth. They have done an admirable job of sequestering over 40% of the wealth of this country into their pockets. They also have done an admirable job of convincing those whose pockets they stole the money from to vote for their candidates in elections. The old wives tale about the futility of raising taxes on the wealthy is just one example of the logic they like to use. The perception that raising taxes on the wealthy will not help us control the national debt simply doesn't hold up to math but that seems to be a common denominator when you analyze the bedrock principles of conservatism through the prism of reality.

A Convenient Loophole

Alabama the Beautiful the sign at the state line says. There are probably some that would argue with that description but I think for the most part it fits. Alabama has recently gotten a lot of national attention for the passage of what many term is the strictest immigration bill passed in any state. While most everyone agrees that it is the province of the Federal Government to set immigration law there is a growing consensus in this country that the Federal Government is not doing very well at enforcing the existing regulations. State governments squeezed by rising health care and unemployment costs are having troubles making ends meet. A lot of people believe one of the reasons for these problems is the growing influx of illegal alien workers and their families.

The thinking is that these workers who often don’t contribute to the tax base are a double whammy when it comes to social services as their children attend public schools at the same time their families often take advantage of health care services that the state ends up paying for when people without insurance require medical care. On top of this loss is the simple fact that illegal workers take up jobs that US citizens would otherwise be able to do. I won’t bother to go into the merits of these arguments at this time because it seems to me that the illegal immigration problem is really fairly simple to solve. All we really have to do is enforce existing laws. If employers in this country were faced with the real prospect of paying the high fines such infractions are supposed to bring upon them, they would quit hiring illegal workers. Without jobs I can assure you that illegal workers would not be pouring into this country. It is really a simple matter to control the supply of workers by eliminating the demand for their services.

However, since the reality is that we are not likely to do something as sensible as enforce the existing laws in this country we have seen several states in the recent past pass legislation attempting to protect state interests from illegal workers; Alabama’s House Bill 56 being probably the most severe law passed so far.

Currently, there are ongoing attempts to overturn the law or have it declared unconstitutional and as late as last week a federal judge in Birmingham did set aside certain features of the law as being unconstitutional. Again, this is outside the scope of what this particular post is about so I won’t bother to go into this in any detail; just remind the reader that it is an ongoing process. The point of this particular post is to point out a convenient loophole in this law. HB 56 has been widely disparaged and supported from many different sides but I have yet to hear or read of a conversation concerning this loophole.

In order to explain just how far the drafters of this bill went to combat the influx of illegal workers into this state I would like to point to the following sections which many find the most ludicrous and uncharitable:

Section 13. (a) It shall be unlawful for a person to do any of the following:
(1) Conceal, harbor, or shield or attempt to conceal, harbor, or shield or conspire to conceal, harbor, or shield an alien from detection in any place in this state, including any building or any means of transportation, if the person knows or recklessly disregards the fact that the alien has come to, has entered, or remains in the United States in violation of federal law.
(2) Encourage or induce an alien to come to or reside in this state if the person knows or recklessly disregards the fact that such coming to, entering, or residing in the United States is or will be in violation of federal law.
(3) Transport, or attempt to transport, or conspire to transport in this state an alien in furtherance of the unlawful presence of the alien in the United States, knowingly, or in reckless disregard of the fact, that the alien has come to, entered, or remained in the United States in violation of federal law. Conspiracy to be so transported shall be a violation of this subdivision.
(4) Harbor an alien unlawfully present in the United States by entering into a rental agreement, as defined by Section 35-9A-141 of the Code of Alabama 1975, with an alien to provide accommodations, if the person knows or recklessly disregards the fact that the alien is unlawfully present in the United States.
(b) Any person violating the provisions of this section is guilty of a Class A misdemeanor for each unlawfully present alien, the illegal presence of which in the United States and the State of Alabama, he or she is facilitating or is attempting to facilitate.
(c) A person violating the provisions of this section is guilty of a Class C felony when the violation involves 10 or more aliens, the illegal presence of which in the United States and the State of Alabama, he or she is facilitating or is attempting to facilitate.

Basically it is no longer legal, according to this law, to conceal, harbor, transport, or even encourage the visitation of illegal workers under penalties up to and including conviction of a Class C felony. While this is the section of the law that has many people up in arms as being uncharitable or even worse in this state, unchristian; it is a fair idea of the seriousness with which the Alabama Legislature has taken it upon itself to do away with the issue. Our legislature means business. We want no more illegal workers in this state. Unless…

I know what you are thinking. Unless what? If we are willing to lock up Alabama citizens for simply giving a ride to illegal workers under what exception are we willing to overlook hiring them? There is a saying about how a chicken and a hog feel about breakfast; the chicken is involved when she gives her egg, but the hog is committed when he gives his ham. In this case it seems that some legislators are likely a little more committed in some areas of employing illegal workers than others.

In the opening part of HB 56 there is a long list of situations that the bill sets out to address not the least of which follows:

to prohibit a business entity, employer, or public employer from knowingly employing an unauthorized alien and to provide penalties;

This seems simple enough. After all, to control or eliminate employment of illegal workers is largely the main impetus for drafting the bill in the first place. Unfortunately, this is only partly true in this case. Tucked down in Section 15 you will find this loophole:

(l) This section does not apply to the relationship between a party and the employees of an independent contractor performing work for the party and does not apply to casual domestic labor performed within a household.

Ok… I know what you are thinking now; we can’t hold people responsible for hiring a contractor who might hire an illegal worker. Fair enough. However, it is the second part that contains the disgraceful loophole:

and does not apply to casual domestic labor performed within a household.

Why would we put this exception in? Maybe a person or persons who drafted this legislation have some reason for putting such a loophole into HB 56. Could it be that some of the legislators in Montgomery employ illegal workers for domestic labor within their own household? I mean after all, you can’t really blame the wealthy lawyers and business owners that populate our legislature if they don’t want to pay decent wages to have their house cleaned or their grass cut. They probably can’t afford to hire a maid service or a grass cutting service that might be forced to provide minimal benefits and wages to their employees. Maybe the whole domestic labor loophole is an oversight. After all, the whole purpose of the act is to make it illegal to employ illegal workers and anyone who hires someone to do anything is by definition an employer according to any reasonable definition of the term.
Unless… you happen to read the definitions in HB 56 Section 3:

(5) EMPLOYER. Any person, firm, corporation, partnership, joint stock association, agent, manager, representative, foreman, or other person having control or custody of any employment, place of employment, or of any employee, including any person or entity employing any person for hire within the State of Alabama, including a public employer. This term shall not include the occupant of a household contracting with another person to perform casual domestic labor within the household.

So… an occupant of a household contracting with another person to perform casual domestic labor within the household is NOT an employer according to this act. Well… surely anyone who hires an illegal worker is in fact offering them employment. Unless you happen to read 6) as well:

(6) EMPLOYMENT. The act of employing or state of being employed, engaged, or hired to perform work or service of any kind or character within the State of Alabama, including any job, task, work, labor, personal services, or any other activity for which compensation is provided, expected, or due, including, but not limited to, all activities conducted by a business entity or employer. This term shall not include casual domestic labor performed in a household on behalf of the occupant of the household or the relationship between a contractor and the employees of a subcontractor performing work for the contractor.

What a strange coincidence. It is not considered employment at all under HB 56 to do domestic labor on behalf of the occupant of the household. I am struggling to come up with a proper term to describe this type of arrangement whereby one person utilizes the labor of another if it is not employment; servitude? Slavery? Chattel ownership?

In any case, the drafters of this legislation were so determined to do away with employment of illegal workers that they even attempted to stop the practice of making tax deductions based upon employment of illegal workers:

Section 16. (a) No wage, compensation, whether in money or in kind or in services, or remuneration of any kind for the performance of services paid to an unauthorized alien shall be allowed as a deductible business expense for any state income or business tax purposes in this state. This subsection shall apply whether or not an Internal Revenue Service Form 1099 is issued in conjunction with the wages or remuneration.
(b) Any business entity or employer who knowingly fails to comply with the requirements of this section shall be liable for a penalty equal to 10 times the business expense deduction claimed in violation of subsection (a). The penalty provided in this subsection shall be payable to the Alabama Department of Revenue.

Not only is it illegal to make the deductions; you will henceforth be subject to fines up to 10 times the deduction if you are caught doing so. What about our little loophole about domestic labor? Forget it. This applies to “Any business entity or employer”. But wait a minute, we have already seen that you can’t be an employer under HB 56 just for employing someone to do domestic labor in your home. Maybe you can be a business entity? Let’s see how Section 3 defines a business entity:

(2) BUSINESS ENTITY. Any person or group of persons performing or engaging in any activity, enterprise, profession, or occupation for gain, benefit, advantage, or livelihood, whether for profit or not for profit. “Business entity” shall include, but not be limited to the following:
a. Self-employed individuals, business entities filing articles of incorporation, partnerships, limited partnerships, limited liability companies, foreign corporations, foreign limited partnerships, foreign limited liability companies authorized to transact business in this state, business trusts, and any business entity that registers with the Secretary of State.
b. Any business entity that possesses a business license, permit, certificate, approval, registration, charter, or similar form of authorization issued by the state, any business entity that is exempt by law from obtaining such a business license and any business entity that is operating unlawfully without a business license.

No….. I guess not. In other words the carefully crafted loophole for hiring domestic labor in your home also allows you to be exempted from paying a fine if you get caught illegally taking a tax deduction for it as well. It almost makes you proud to be an Alabamian. Either that, or it makes you long to be a legislator. It reminds me of the story about Ulysses S. Grant and his response to the first suggestion that he go into politics:

“I don’t think I belong in politics…. But… I could use a new sidewalk in front of my house…”

Thus launching the career of what many considered to be the leader of the most corrupt presidential administration our country has yet seen.