Tag: tax

Why Should We Pity These People?

A couple of weeks ago, I ripped apart a factually anemic but all-too-typical USA Today article decrying the plight of student debtors. Today, the grand journalistic tradition of anecdote-and-pity laden reporting on student debt continues with offerings from Business Week and The New York Times.

In an article about tight times for student loan forgiveness programs, The Old Gray Lady sticks with the journalistic tried-and-true by leading with an extreme anecdote that readers, presumably, are supposed to see as illustrating typical suffering:

When a Kentucky agency cut back its program to forgive student loans for schoolteachers, Travis B. Gay knew he and his wife, Stephanie — both special-education teachers — were in trouble.

“We’d gotten married in June and bought a house, pretty much planned our whole life,” said Mr. Gay, 26. Together, they had about $100,000 in student loans that they expected the program to help them repay over five years.

Then, he said, “we get a letter in the mail saying that our forgiveness this year was next to nothing.”

Now they are weighing whether to sell their three-bedroom house in Lawrenceburg, Ky., some 20 miles west of Lexington. Otherwise, Mr. Gay said, “it’s going to be very difficult for us to do our student loan payments, house payments and just eat.”

Please, Mr. Gay (and Mr. Glater, the author of this heart-string puller)! You, and presumably your wife, are only in your mid-twenties, have what appears to be a very nice home according to the picture accompanying the article, and yet have the nerve to assert that taxpayers should eat your student loans lest you not eat at all!

Excuse me if I don’t start singing “We Are the World.”

This is simple greed – you know, the stuff for which the media regularly excoriates “big business” – but readers are expected to see it as suffering because it involves recent college grads. Oh, and grads who have gone into teaching, according to Glater “a high-value but often low-paying” field. That the Gays have felt wealthy enough to buy a house despite holding much greater than normal student debt – and the fact that on an hourly basis teachers get paid on par with comparable professionals – doesn’t present any impediment to the reporter repeating the baseless underpaid teacher myth. It’s all just part of the standard narratives.

Business Week’s piece isn’t much better than the Times’, though at least reporter John Tozzi had the decency not to start off with an emotionally manipulative anecdote of supposed human suffering. His third paragraph, however, centers around “analysis” from the student-centric Project on Student Debt, and he rolls out the ol’ Tale of Woe right after:

“It’s just so frustrating,” says Susan D. Strayer, director of talent acquisition for Ritz-Carlton in Washington. “They tell you to be self-made. They tell you get yourself a good education and you can get yourself into a pretty big hole.” Strayer, 33, has $90,000 in student loan debt from her bachelor’s at Virginia Tech and a master’s from George Washington University. She also has an MBA from Vanderbilt University, which she earned on a full scholarship—but skipped two years of earnings to acquire. Strayer says her monthly loan payments of $600 barely budge the principal on her debt. She doesn’t regret her educational decisions, although she says the debt load has made her put off plans to pursue a consulting side business full-time.

So Ms. Strayer chose one of the most expensive schools in the country —George Washington — for a Master’s (in what we do not know); we have no information about why she chose to finance her education through loans (she and her parents bought new cars, clothes, and stereos instead of saving for college, perhaps?); but we are supposed to feel it is a terrible thing that at 33 she hasn’t been able to start a full-time consulting business. Why is that, exactly?

Thankfully, though he frontloads anecdotes and pity parties, Tozzi ends his piece with a clear, if far too rare, voice of reason:

“It’s easy for me to say, ‘Oh, I have all this student loan debt,’ but I chose to take it and I have to deal with the consequences of that choice,” [24-year-old] Patricia Hudak says. “So many people in my generation think of everything as a short-term investment with immediate return.”

Finally, someone I can truly feel sorry for! Why? Because with journalists cheering it on, Ms. Hudak is exactly the kind of person that our political system will punish, making her pay not only for her own choices, but those of the Gays, Ms. Strayer, and countless other student debtors who really do think that everything, and everybody, should give them an immediate — and huge — payoff.

Game, Set, and Match to Sowell over Powell

With just one sentence, Tom Sowell thoroughly demolishes Colin Powell’s statist assertion that the American people want higher taxes:

Just days after Colin Powell informed us that the American people were willing to pay higher taxes in order to get government services– and that Republicans therefore needed to stop their opposition to taxes– California voters resoundingly defeated a bill to raise taxes in order to pay for the many government services in that liberal state.

Tax Bureaucrats Take the Fun out of Everything

The Daily Mail reports that a Romanian student who sold her virginity to the highest bidder as part of an online auction may wind up keeping less than half of her earnings thanks to Germany’s oppressive tax system:

Tax authorities in Germany are poised to claim 50 per cent of the money that a teenage student earned for ‘auctioning’ her virginity… Romanian-born Alina Percea, who is a student in Germany, was paid £8,800 in cash for a weekend of sex with the Italian businessman after she auctioned her virginity online. But tax officials in Berlin regard the 18-year-old’s act as ‘nothing more than prostitution’. Prostitution is legal in Germany – but it is heavily taxed. …It also emerged that, because Alina earned so much in such a short time, she may even be liable for a hefty VAT bill too. VAT in Germany works out to 19 per cent, meaning the sale of her virginity could land her with just over £3,000 in the end.

“They Don’t Have the Money to Pay Us Back”

When they let their guard down, politians can say the most revealing things.  In today’s Wall Street Journal, representatives of local governments in California attacked Governor Schwarnenegger’s plan to borrow $2 billion from local property tax revenues to cover some of the state’s budget shortfalls.  In response, Don Knabe, chairman of the Los Angeles County Board of Supervisiors said, “They’re hijacking our dollars.  They don’t have the money to pay us back.  It’s a joke.” 

Given that California doesn’t have the money to pay back borrowing from its local government, it’s likely they might not be able to pay back borrowing from private investors either.  To solve this problem, we have the Municipal Bond Insurance Enhancement Act, on which the House Financial Services Committee held a hearing this week.  To encourage investors to buy California’s risky debt, the federal government would cover any losses to the investor.  We’re told that the federal government would charge bond-issuing governments insurance premiums to cover any losses, but the federal government’s history of setting rates based on politics rather than risk (have you looked at the health of the National Flood Insurance Program lately?) guarantees that the taxpayer would likely have to cover billions in losses on any guarantee of California’s debt.

The Coburn-Burr-Ryan-Nunes Mandate-Price-Control Bill

Today, Senators Tom Coburn (R-OK) and Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) announced that they will introduce a health care reform bill. If my reading of the bill summary is correct, their bill would:

  • Mandate that states create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
  • Mandate that all plans offered through those exchanges meet federal regulatory standards,
  • Mandate “guaranteed issue” in those exchanges,
  • Mandate “uniform and reliable measures by which to report quality and price information,”
  • Impose price controls on those plans by prohibiting risk-rating,
  • Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and
  • Fall just short of an individual mandate by setting up (mandating?) automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” – essentially, trying to achieve universal coverage by nagging Americans to death.

Needless to say, I am troubled.

The bill summary is self-contradictory. On the one hand, it lists “No Tax Increases” as a core concept. Do its authors not know that imposing price controls on health insurance premiums imposes a tax on healthier-than-average consumers? And where do they think the money for “risk-adjustment” payments will come from? Heaven?

The bill sponsors seem to want to cement in place the monopoly regulation that currently exists at the state level – when they’re not encouraging Congress to take over that function. Have they abandoned their colleague Rep. John Shadegg’s (R-AZ) proposal to allow for competitive regulation of health insurance?

And if Massachusetts created an “exchange” on its own, why do other states need federal legislation?

The bill includes some ideas for which I have more sympathy, like its tax-credit proposal and expanding health savings accounts.

But the above provisions would sow the seeds of a government takeover of health care – so much so that The Washington Post’s Ezra Klein is salivating:

The word of the day is “convergence.” That – and that alone – is the definitive message of the conservative health reform alternative developed by Sens. Tom Coburn (Okla.) and Richard Burr (N.C.), as well as Rep. Paul Ryan (Wisc.). For now, some of the key provisions are about as clear as mud. The plan’s changes to the tax code, in particular, are impossible to discern. So I’ll do another post when I can get some clarity on those issues. The politics, however, are perfectly straightforward.

A superficial read of the Patients’ Choice Act – which I’ve uploaded here – would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues. “States should provide direct oversight of health insurers to make sure they are playing by fair rules,” it demands. The way we pay private insurers in Medicare “wastes taxpayer dollars and lines the pockets of insurance executives,” it says. Elsewhere, it praises solutions that have worked in several European countries.”

And though it’s still too early to say how the policy fits together, it’s clear that many traditionally Democratic concepts have been embraced. To put it simply, the plan wants to encourage a version of the Massachusetts reforms – which it calls a “well-known, bi-partisan achievement of universal health care” – in every state. There are some differences, of course. The plan doesn’t have an individual mandate. It doesn’t have an obvious tax on employers. But it strongly endorses State Health Insurance Exchanges. And that, for Republicans, is a radical change in policy.

This idea – present in every Democratic proposal but absent in Arizona Sen.John McCain’s plan – would empower states to create heavily regulated marketplaces of insurers. The plans offered would have to “meet the same statutory standard used for the health benefits given to Members of Congress.” Cherrypicking would be discouraged through risk adjustment, which the PCA calls “a model that works in several European countries.” The government would automatically enroll individuals in plans whenever they interacted with a government agency and states would be able to join into regional cooperatives to increase the size of their risk pool.

In essence, Coburn, Burr, and Ryan are abandoning the individual market entirely. Like Democrats, they’re arguing that individuals cannot successfully navigate the insurance market, and they need the protection of government regulation and the bargaining power that comes from a large risk pool. This is literally the opposite approach from McCain, who attempted to unwind the employer-based insurance and encourage families to purchase health coverage on the individual market. The core elements of this plan, in other words, make it the same type of plan Democrats are offering. A plan that enlarges consumer buying pools rather than shrinks them. It’s pretty much exactly what I’d expect a Blue Dog Democrat to propose. And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.

UPDATE: After discussions with Sen. Coburn’s staff, I happily issued a few corrections. Still, concerns remain.