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24.3.05

Just say no if behavior is irresponsible

Elected officials have a moral obligation to be wise stewards of the citizenry’s resources. Since government has the ability to coerce from the governed the latter’s resources, it must do so only to address a problem that affects or might affect the entire society that otherwise cannot be solved for by the individual by any means. The Bossier Parish School Board’s decision at present to not pay for an employee’s gastric bypass surgery represents such a hard but just decision.

The school system self-insures and already is facing dramatically higher spending in the area of health care of its employees. Part of the system’s response, mirroring the overall trend in the industry, is to create wellness incentives, so that their insured will undertake actions that can prevent much larger and expensive health care problems down the road. A policy that would pay for gastric bypass surgery is contrary to this philosophy.

An uncontroversial performance of this technique costs tens of thousands of dollars; complicated cases can run closer to $100,000 per individual. In assessing the total potential liability faced by the board by sanctioning this procedure, the estimate at present ran to $3 million, more than this year’s large jump in expenses from all causes.

And the fact of the matter is if there is an area of wellness where individual responsibility can avoid huge medical costs, it concerns obesity. Almost all cases of morbid obesity develop because the individual involved chooses to overeat relative to activity level. That individuals who behave in this fashion who have no medical condition that would cause morbid obesity would expect the rest of society to pay to subsidize this behavior is an immoral request, placing a burden on others when they first have not exhausted all possibilities that they can pursue on their own.

To have a government body grant such a request also would be immoral, both from the perspective of society and the individual involved. By holding out this option to its insured, the district would create a false sense of security for those on their way to morbid obesity, a belief that they could continue to engage in personally destructive behavior without major consequence. Instead, the wise insurer would pay for programs designed to wean away people from this self-destructive behavior.

A person in such straits also has other options than getting taxpayers to pay for her overindulgence. At any time, a person simply can choose to eat less and to seek from the Bossier school system to help make this happen as with any other form of addiction. Stories are legion about people who made a personal commitment to change their diets and whose mastery of urges and self-discipline allowed them to drop hundreds of pounds.

Another option would be seeking employment in the private sector with an employer who does offer surgery as a benefit. Unlike the public sector, those in the private sector represent voluntary associations, so these employers are free to offer whatever benefits they like, just as employees are free to work with whatever employer will hire them. If leaving long-time employment in the school system is necessary to obtain the surgery, then that is a cost of an individual’s suboptimal behavior.

An unpalatable but possible option would be to pay out of one’s own resources for the procedure. It might involve years to pay back a lender or provider, but this possibility as a last option perhaps can serve as a discouragement to those tempted to get on the road to future morbid obesity.

These options do exist, so the action to deny by the Board does not in any way threaten the life of its employees with this condition. By offering incentives to avoid behavior leading to this condition, rather than funding a repair of the consequences of this condition, the Board serves both the purposes of the community and individuals acquiring this syndrome. For that reason, the Board recently decided wisely, and future refusals to include gastric bypass surgery as a reimbursable procedure serve the entire community of employees, children, and taxpayers of Bossier Parish.

23.3.05

In a better world Rombach stays while Wooley goes

If it’s not a double standard, it should be. Witness the treatment afforded to state Insurance Commissioner Robert Wooley in his annual purchase of a luxury vehicle at taxpayer expense compared to that of the officer of the Louisiana Legislative Fiscal Office, Johnny Rombach.

Wooley barely bats an eyebrow over the statewide outrage (here, and here, and here again, and here yet again, and here one more time, let’s keep going, here, here, and here) and there’s nothing I can add about the arrogance and audacity of Wooley except that it is Odom-esque in nature.

It’s politicians like Wooley who think the taxpayers’ monies are their own who need to be driven out of state government, but instead it’s Rombach who was forced out of his job. Rombach’s tenure in office not only ensured that somebody providing information to lawmakers would tell the facts, but he also was not shy about exploring and publicizing the facts as they related to the state’s fiscal situation.

And because the facts weren’t flattering, Rombach became a marked man among those who enjoyed and prospered from the “business-as-usual” attitude which has sent the state spiraling downwards in terms of economic development. Or, as Rombach’s office noted in perhaps the finest data-driven explanation of the causes and consequences of this, into a vortex. The inconvenience he posed to these politicians led to move to his ouster when they found something they could hang on him.

True, Rombach did bend rules – the same rules bent by others including legislators for which they never suffered consequences, the same people who then hypocritically called for his head (and who make it legal for their allies to enjoy the very same benefits for which Rombach gets investigated). And Wooley legally could do what he asked (although “luxury” items were not supposed to be part of the deal).

But this episode precisely points out the very ethos Rombach long warned about. For so long some political elites in this state found ways to follow the letter of the law (although some didn’t and went to jail for it, and others like Wooley's former boss blame the FBI for their crimes) while still enriching themselves financially and/or politically. Actions like Wooley’s demonstrate the contempt they have for the people, instead of carrying the attitude that they are there to serve the people and to be good stewards of the resources they take from the people to operate the government on the citizenry’s behalf.

Rombach’s work argued for living up to this vision, the spirit of the laws that lay behind our ideas of governance in America, not the faux version too many elites have tried to inflict upon this state. It’s bad enough the likes of Wooley stay in power, but worse that Rombach gets run out of a meaningful role in state government

22.3.05

Stelly still trying to make a silk purse out of a sow's ear

It’s not only journalists who write disingenuous pieces, but politicians as well – actually, ex-politicians, as Vic Stelly demonstrates.

Stelly for years to come will be championed by some and reviled by others for the tax change plan that acquired his name. Basically, it rid Louisiana filers of taking deductions beyond those countable against the federal income tax standard rate and forced more people into higher tax brackets in exchange for dropping off “temporary” sales taxes (prohibited on unprepared food, utilities, and drugs unless the Legislature voted periodically to allow them; in essence, disallowing the Legislature from being able to impose these taxes even temporarily).

Most people’s income taxes went up as a result of this by amounts that more than offset any sales tax savings they received. This was the original intent of the backers of the plan, because income tax revenues were growing annually at an 8 percent clip as opposed to the 1 percent rate of sales taxes. In short, they wanted to tap into a more lucrative source of revenue, simply to get their hands on more of the people’s money.

But not according to Stelly:

The reason for the ‘Stelly Plan’ in the first place was never just a means to raise personal income tax. The goal from the word go was simple – get rid of the ridiculous unfair "temporary" sale tax on necessities of life (food, drugs and utilities) that we had continued to renew for 16 years.

This is disingenuity at its finest. At any time the Legislature could have forgone imposing the 4 percent tax (for a couple of years it did with 1 cent of it). There was no need whatsoever to link it to a raise in income taxes. There would have been more red ink, but perhaps that would have spurred the Legislature on to make the hard but necessary choices in cutting programs ill-serving the state and wring more efficiency out of the bureaucracy. If those temporary taxes were so “unfair,” nothing was stopping the legislature from forgoing them.

But Stelly tries to justifies the linkage:

A study … reported among other things that we rank 40th in America in state income tax, have the most lenient tax brackets in the country, and are one of only a few who allow for "excess itemized deductions."

We therefore chose to only make changes in those two areas (brackets and deductions). We still allow the most generous personal exemptions (which we double for retirees), a deduction for all federal taxes paid, and do not tax public retirement benefits whatsoever. We currently rank 45th in America in total state and local tax burden. Home mortgage interest and charitable contributions are still fully deductible on our federal returns.

First, Stelly is dead wrong about the 45th place ranking, by about half. I don’t know when that was true, but as of 2004 Louisiana was 23rd, and you would think Stelly would be more careful in his assertions (or he’s spreading false information in a desperate attempt to back himself up). But more telling is Stelly’s use of a comparative ranking as the appropriate metric by which to consider whether the tax burden ought to be changed.

In other words, even if we were low and lenient compared to others that the people of the state weren’t paying their “fair share” of personal income taxes? Such arrogance belies an attitude that it’s not really the people’s money, but the government’s. In determining the use of government’s coercive power to take from the people, one must analyze it in absolute, rather than relative, terms. What if 40th, or 45th, is too high? Just because Stelly tells us people from other states are jumping off of bridges, does it mean we have to follow them?

Then he makes one final attempt to justify it the removal of “excess itemized deductions”:

Many fail to remember that it was the Legislature itself that removed 50 percent of this deduction two years before the Stelly Plan passed.

And your point? Just because the Legislature did something dumb doesn’t mean you have to follow (review the “jumping off of bridges” example). But Stelly has to get in a shot at state politicians such as state Reps. Pete Schneider and Peppi Bruneau and Sen. James David Cain who want to restore the deductibility of charitable and home mortgage expenses on state taxes:

[I]t is more than a little aggravating to read misrepresentations from political demagogues who have made a career of feeding from the public trough while never stepping up to the plate and submitting a plan of their own, unless of course it is self-serving or has to do with pork barrel projects.

I don’t seem to be the object of his scorn, but I’ll give you a plan: restore these deductibles and institute a flat 4 percent tax regardless of income. That may well raise more revenue than the current graduated 2-4-6 percent brackets and certainly is fairer. Why punish the most productive people in society with a higher rate? They’ve already contributed once by creating more wealth that subsequently gets taxed; why take that productive capital out of their hands by forcing them to make another, unjustified contribution to the state?

In essence, the Stelly Plan represents just another link in the long history of Louisiana tax policy that favors redistribution and discourages economic development. It’s that kind of thinking that has gotten us into an economic mess, and no amount of dressing it up by an ex-politician can change that.

21.3.05

What happens when reporters disdain fact and logic

When an undergraduate at the University of Oklahoma, I spent my career there in journalism, as a reporter, copy editor, and finally as editor-in-chief of the school newspaper. In the years since, I have been interviewed hundreds of different times by dozens of different journalists from newspapers, magazines, radio stations, and television stations, all the way from local outlets to those in Washington, Berlin, and Tokyo. Having practiced it and been around it for over two decades, one of the things I have learned is that a fair number of these folks don’t really understand what they’re reporting on.

Consider that most people in the profession have journalism degrees, which focuses on the craft of reporting rather than substantive knowledge in any area in which they would report. Further, particularly with electronic media (stories being brief by nature especially with television tied into visuals) there’s not much in the way of depth and their news menu changes daily. In short, unless one does a lot of study outside of working hours and is allowed to concentrate in particular areas, reporters aren’t going to know much about the topics they cover, which not only means they won’t ask the really vital questions but that they’ll report questionable arguments with dubious conclusions.

(Fortunately, informed reporters are out there and it is a pleasure to serve as a source to them. But they seem to be becoming rarer and rarer.)

The area which this occurs the most frequently and detrimentally is in stories involving business and economics. One of my constant disappointments in academia, outside of colleges of business (but even sometimes within), is encountering the amount of sheer ignorance a number of highly educated people have about economics. But it’s even worse with many in the media, and the Associated Press’ Adam Nossiter’s remarks about President George W. Bush’s stop in Shreveport are Exhibit A of this malady.

“Analysis” stories like this pose some risks for a beat reporter like Nossiter who on the beat are presumed to follow the journalistic canons of fairness and objectivity (and should also know a bit about the subject area they regularly cover). With its derogatory tone concerning Bush this might call many to question whether the stories he writes regarding Bush (or Republicans, or conservatism, or political ideas connected to Bush) in fact are impartial and honest. His adherence to these canons becomes more questionable when he does such a poor job in logic and with fact in this piece.

Let’s review the multitude of problems with this piece. What follows are his statements, italicized in quotes, with then commentary on them.

  • In regards to the nature of the event, the President’s visit to Shreveport: “What is important here are the trappings of reality, not whether there is anything real about it.”

    Already we are tipped off that this guy is an opponent of the president. Fair enough, but his column is credible only if now he can prove this – that the president’s plan is flawed in concept and assumptions. He can do this by logical presentation with points that are relevant to the president’s argument with clear facts. It also belies an attitude that the president seeks to make up for a lack of credibility through pomp and circumstance.

  • Answering a question he poses, “Why not simply give a sober speech on behalf of your ideas at some pre-existing forum, and be done with it:” “It's an idea whose necessity is, to put it gently, fiercely disputed — and not just by Democrats. There are economists and even some Republicans who aren't buying. First, they don't agree with Bush's notion that Social Security faces imminent crisis, and second, they sharply dispute the idea that private accounts will be beneficial. Polls show a majority of citizens share these doubts.”

    One of the great tragedies of intellectual thought in modern times is the notion now so prevalent that just because there is some dispute about an issue that must mean that there is more than one “right” answer to it, that all answers are equally “valid.” Or, another way of putting it, that a fact supported by incontrovertible evidence is no more valuable than any opinion, no matter how divorced from reality it might be from reality, merely because the opinion is uttered

    This paragraph is a classic example. So what if Democrats, and even some Republicans, don’t “buy it?” The fact remains, unless changes are made, Social Security does face imminent crisis, no matter how loudly and often opponents of the idea may bray otherwise. It simply is an actuarial fact. And so what if a majority of the public “doubts” the idea of private accounts. These may be political problems, but they are not problems with the validity of the president’s plan itself. I can go around long and loud stating “2+2=5,” but that doesn’t make it so.

  • On Bush’s stating that funding for the program doesn’t come from the depleted Social Security trust fund, but is pay-as-you-go: “But he didn't mention what the critics say: that Social Security's trust fund is something real, that it contains rock-solid government bonds, that interest and principal on them would easily cover any Social Security shortfall, and that if the U.S. government ever (unimaginably) defaulted on these bonds, it wouldn't just be the old-age pension that would come crashing down, but the country's financial structure as well.”

    This comment simply is disingenuous. What the president is pointing out is that there is no current asset pool of money waiting to be tapped. Instead, starting long ago these funds were borrowed away by government for its spending and the bonds that represent the fund have to be paid back by the government – meaning ultimately by taxpayers. These are the hundreds of billions of “transitional” dollars that will have to be spent regardless of any attempt to reform Social Security. It’s those “missing” dollars which are the problem, and others that will be added to them if the system continues to be underfunded, not that there will be any default (this shift in presumed argument being a “straw man,” common in this debate). Nossiter either doesn’t have the financial acumen to understand this simple fact and see through the fallaciousness of this argument, or he is being dishonest in his zeal to attack the plan.

  • The “best” appeared last in the column, because when Bush pitched his plan he made: “…no mention of the argument that a small tax increase now, or a slight adjustment to previously enacted cuts, would cover any shortfall. "Investing in the private markets, you'll be able to get a better rate of return," the President declared. Only if stocks yield around 7 percent, after inflation, economists say; anything but a sure thing.”

    We get two-for-one here. First, the fact that Bush does not mention less palatable alternatives to his does not make his any less valid, nor would these tax increases or cuts be small or solve the problem. Then, the second part about a 7 percent after inflation yield that “economists say [is] anything but a sure thing” is an attempt to fool the reader into thinking the extreme, improbable case is much more of a possibility than it really is – or that you would need a 7 percent rate of return which simply is untrue.

    The facts:
  • The rate of return on Social Security has averaged 1.8 percent, and over may years a rate not much higher than this would make the system solvent.
  • Except for the very shortest terms, any stock fund of quality equities or bond fund of high-grade debt has beaten the government’s return over Social Security’s history.
  • The projected custodial fee to be charged on the privatized government accounts will be microscopic, well below that of the private sector and a fraction of that effectively taken by government bureaucracy now in administering Social Security – reducing the required rate of return for solvency.

    Throughout, Nossiter keeps trying to convey the impression that a lot of wishful thinking or assumptions are being made by the president, which therefore have to be made up for by rousing spectacle, when the truth is very much the opposite. His plan is solid, and it is telling that opponents of it continually resort either to misreporting, rhetorical tricks, or to insinuating it is all a con job to deflect the public from this reality.Except for the very shortest terms, any stock fund of quality equities or bond fund of high-grade debt has beaten the government’s return over Social Security’s historyExcept for the very shortest terms, any stock fund of quality equities or bond fund of high-grade debt has beaten the government’s return over Social Security’s history
  • 20.3.05

    Landrieu's ANWR vote good for Louisiana and the country

    While a pessimist would remind us that even a stopped clock is right twice a day, Sen. Mary Landrieu stepped up to do the right thing with her vote to retain the authorization to drill in the Arctic National Wildlife Refuge in Alaska as part of the energy budget bill. Not only did she help put into place a sensible policy for America, she made maximal use of the leverage her vote provided to win concessions for increased scrutiny of coastal erosion in Louisiana, even as her colleagues knew she was leaning this way anyway (without her vote on the side to keep the amendment doing this in, the ensuing 50-50 tie would have needed Vice President Dick Cheney’s vote to win).

    The environmentalist left’s reaction to this issue always has served as a telling barometer to their true motivations and overall general wackiness. As on so many other issues these people act like the sky is falling almost any time any aspect about the environment is desired to be altered in any way, no matter how far the benefits exceed the costs. They and their Democrat allies have treated the prospect of drilling there as nothing short of a national environmental disaster that will despoil beautiful scenery, disrupt pristine nature, strike a blow against people living there, and generally will ruin the entire refuge while not making a dent in energy production in the U.S.

    But the facts say otherwise:

  • The total area to be explored is about 0.01 percent of the entire refuge
  • That small parcel that would be, Section 1002 (about the size of a larger airport), is frozen over 290 days a year, in darkness two straight months (with wind chills hitting 120 degrees below zero), has little light for several months more, and when it’s thawed is almost treeless mud flats
  • The most common living being in the area, during the brief summer, is swarms of mosquitoes
  • Of the 1,500 area natives near there, 80 percent support drilling.
  • At an estimated 2 million barrels a day removed from a field that could last decades (these being typical estimates of those studying its capacity), with modern techniques and exacting safety standards (more oil leaks into a typical Wal-Mart parking lot per day than has been spilled in all of Alaska in the last 25 years), this would reduce our current import needs by 20 percent (although it will be seven years before the first crude hits the market)

    To understand the hysteria opposing drilling, we must understand that for many environmentalists the issue serves as a cover for deeper resentments against free enterprise. To them, the use of any technology on the environment exemplifies the march of capitalism and its penchant for rewarding people in proportion to their contributions to society, and is the single greatest threat to their desire to control that economy (through government regulation) in order for them to extract power and privilege.

    Too often in the past Landrieu sided with people such as these. But last week, she made the right call in opposing them and most of the Democratic Party. It’s a refreshing independence that hopefully she’ll display more often.