Topic: Health Care & Welfare

Red Tape and Volunteer Rescuers in Louisiana

In the wake of the devastating floods in Louisiana, many people have been stranded in places that are difficult to access, some needing rescue and others running dangerously low on basic supplies. 

The federal response has gotten mixed reviews so far, but some residents in Louisiana saw the real need for help and decided to step up and do what they could for their friends and neighbors.

“All of a sudden before the feds could react, we got thousands of boats in the water, with locals helping each other,” said Kevin Dietz.

The “Cajun Navy” as it has been called, consists of dozens of people with boats and coordinators who work together to deliver supplies or rescue people from flooded areas. 

These volunteers are not just some disorganized rag-tag group, many of them might know how to navigate their neighborhoods better than the government officials, and they are utilizing new technologies to share their GPS locations with each other and organize their communications onto dedicated channels.

State Senator Jonathan Perry is now in the middle of a maelstrom after a report came out that he was working on a proposal that could require these would-be rescuers to undergo training or get a permit in order to help.

To be fair to Senator Perry, he contends that he is trying to figure out a way to remove the layers of red tape that prohibit volunteers from helping with the rescue efforts, as under current law it is illegal for them to  cross the barriers set up by law enforcement and many of them are prevented from doing so.

In the current framework these volunteers are being turned away and prevented from doing what they can at the same time that people are stranded and waiting for help.

This dynamic is not unique to situations like the flooding in Louisiana. Dozens of cities have passed bans making it illegal for private citizens and charities to feed the homeless, which leads to situations like this 90-year-old man and two being charged in Florida for violating the ban. Occupational licensing makes it much more difficult for medical professionals to volunteer their medical and dental services at free clinics through organizations like Remote Area Medical.

Aetna is the Latest Insurer to Drastically Scale Back ACA Exchange Participation

On Monday Aetna announced that it will significantly reduce the scope of its participation in the Affordable Care Act’s health insurance exchanges, pulling out of 11 of its 15 states. The company will only continue offering exchange plans in Delaware, Iowa, Nebraska, and Virginia. In the related press release, Aetna Chairman and CEO Mark T. Bertolini pointed to the sizable losses the company had incurred through its business on the exchanges: $200 million in pretax losses in the second quarter and $430 million total since January 2014. Aetna covered almost 850,000 people through its exchange plans as of June 30th, and most of those people will have to find new plans in the next open enrollment, and these customers the latest group to find out first hand that “if you like your plan you can keep it” was not actually a guarantee.

Aetna 2017 Exchange Participation

Aetna Map

 

Sources: Bloomberg, Aetna.

Note: Created using DataWrapper.

Language Matters: Call It Low-Cost Housing

Housing affordability is an issue that’s been paid considerable attention over the previous two decades, but it doesn’t show signs of meaningful improvement. This even despite the almost $50 billion HUD spends in taxpayer dollars annually on solving the affordability crisis and related concerns.

So what gives? One likely culprit is the language we use to describe the problem.

Take the word “affordable.” Affordable housing – used in a public policy context – is a misnomer of sorts: affordability implies the ability to pay for something given your budget. But budgets vary considerably between households, and so the definition of affordability varies considerably, too.

There are only two – improbable – ways that any given housing could be affordable to the aggregate U.S. population. One option is that everyone’s incomes are identical. Another option is that housing is altogether free.

It’s Time to End the Government’s Outsized Role in Housing Finance

Our government forays into the housing market have been a disaster, to say the least.

The mortgage interest deduction goes solely to the wealthy and costs the government nearly $100 billion a year. For some perspective of how out of whack this subsidy is, the residents of Nancy Pelosi’s pricey San Francisco neighborhood get roughly 100 times the benefit, per household, of the denizens of my middle class home town in central Illinois.

Of course, our government-sponsored enterprises are an even more ill-conceived subsidy for home buying. Fannie Mae and Freddie Mac ostensibly increase the amount of capital available to finance home buying by purchasing mortgages from banks and other mortgage originators, packaging them into mortgage-backed securities, and then selling them to pensions, hedge funds, and the like. But it is dubious that their existence meaningfully increases home ownership rates: The Census Bureau announced last month that the U.S. homeownership rate was 62.9 percent, its lowest since 1965 and well below most EU countries, virtually none of which has anything akin to either the mortgage interest deduction or government-sponsored enterprises buying up mortgages.

Not only does the MID and the GSEs fail to boost home ownership but they also can exacerbate broader problems in the housing market, and financial markets in general. The MID encourages people to purchase as much house as they can possibly afford in order to take full advantage of the tax break, which set up many people for disaster when they lost their job in the Great Recession of 2008-2009.

The pressure the federal government put on the GSEs to extend credit to low-income borrowers in order to help boost home ownership amongst the middle and lower-classes ended in tears for millions of Americans as well, as the swings in the housing market destroyed the value in their homes and left them unable to afford to continue living there.

The plunging home prices cratered the portfolio of the GSEs and led the Treasury to use the 2008 Home Equity and Recovery Act, or HERA, to place them into a conservatorship, with the shareholders seeing their share of the company slashed to just 20%, with the government assuming the rest. 

However, the demise of Fannie and Freddie was premature: the reported losses of the GSEs were just temporary, a fact that was clear to many shareholders who held onto their stock or jumped into the company post-crisis. For these people, holding onto the stock post-crisis appeared as if it would work out to be a good bet, especially once real estate prices returned to their previous levels.

Unfortunately for them such a bet failed to account for the vagaries of government action. In 2012 the Treasury imposed an amendment to HERA that effectively nationalized the GSEs and cut out the shareholders from any residual profits. The massive profits generated by Fannie Mae and Freddie Mac–which Treasury officials fully anticipated prior to the takeover–went directly into Treasury’s coffers, helping the Obama Administration claim a victory over the federal budget. The 2012 deficit was “just” $1.1 trillion, or $200 billion less than the previous year, helped by th outsized GSE profits that year.

Why Tax Credits Aren’t Controversial & Why They Should Be

Ah, tax credits. The answer to all of our environmental, social, and urban cares. Or so they say.

This spring, Senator Maria Cantwell (D-WA) and Senator Orrin Hatch (R-UT) cheerfully joined forces to expand the Low Income Housing Tax Credit (LIHTC) program. Their bill was subsequently referred to the Senate Finance Committee, which Hatch chairs. LIHTC provides select developers with tax credits for building affordable housing units, and the newly minted Affordable Housing Credit Improvement Act of 2016 would enlarge the LIHTC program by 50%, which puts the program at about $11 billion annually. If it’s anything like previous expansions of the program, it will surely draw broad bi-partisan support.

This brings us to a rather heartwarming aspect of tax credit programs more generally: tax credits appeal to democrats and republicans alike. In an age of acute political polarization, such collaboration seems to be the essence of civility and fraternization that the American public so longs for. Or is it?

Enter the alternative hypothesis: tax credits get a free pass because people think that tax credits are free. Unfortunately, as Milton Friedman said, TANSTAAFL, or “there ain’t no such thing as a free lunch,” and someone, somewhere paid for that hotdog and chips. So the question is who’s paying for tax credits?

The answer – if you’re not utilizing the credits – is probably you. That is because although select businesses or individuals are writing off taxes owed, the total U.S. tax burden is consistent or growing. Unlike across-the-board cuts that reduce taxes for everyone and are designed to support economic growth, LIHTC and other tax credit programs choose special businesses or individuals to reduce taxes for. So in the absence of reductions in spending, you’re just moving the money around, akin to any other direct subsidy (e.g. ethanol). When Uncle Sam needs to collect, the American tax payer is still on the hook.

Of course indirectly, we all “pay” for tax credits due to the slower economic growth caused by the misallocation of capital.

What’s more, tax credits operate outside of the annual Congressional appropriations process, and do not appear as an expenditure on the federal budget. In other words, a tax credit program may be completely ineffective at accomplishing program goals and never warrant so much as a side-eye come budget season.

This is particularly problematic for LIHTC, which National Bureau of Economic Research, Journal of Housing Economics, and Journal of Public Economics studies all found subsidize affordable units by displacing affordable units that would otherwise be provided by the private market. Economist Ed Glaeser agrees: “current research finds that LIHTC is not very effective along any important dimension—other than to benefit developers and their investors.” In other words, rather than improving welfare, LIHTC may actually just improve corporate welfare.

In the case of LIHTC and other tax credit programs, regular budgetary oversight would provide an opportunity to determine whether there is a better use for our collective resources, whether the program is achieving its objectives, and whether the country has the political will to continue supporting the program. Yet tax credit programs are protected from these basic questions by their very design.

And that is why tax credits are a problem. But out of sight on the federal budget outlay, out of mind. In the meantime, Congress will continue to play a cute little bipartisan game until American taxpayers get suspicious about all of that celebrated bipartisan collaboration happening in Washington. 

HUD’s Latest Proposal Is Big on Good Intentions & Unintended Consequences

Even when government has good intentions, it manages to muddle things up.

The U.S. Housing and Urban Development Department (HUD) has been applauded for its latest revision to its largest housing assistance program, the Housing Choice Voucher program. The new-and-ostensibly-improved program will provide larger housing subsidies to individuals that decide to live in wealthier neighborhoods, and smaller subsidies to individuals who decide to live in poor neighborhoods. The adjustment has already been piloted in five locations, and would be widely expanded (although HUD demurs on how widely).

On the surface, it sounds like a clever solution to an age-old concern. HUD is worried that dense concentrations of urban poverty – the type that often occurs in inner cities and historically occurred as a result of government housing projects – trap generations of residents in cycles of perpetual poverty.

In fact, the housing voucher program was devised to target this precise problem by providing individuals with a ticket they could use to rent housing anywhere in the United States. But through the years, HUD realized that although the voucher program provided choices, voucher recipients weren’t making the choices that HUD wanted – namely, moving out of low-income neighborhoods. The revised program will create the incentives required to make the choice for voucher recipients more … straightforward, shall we say… and redistribute low-income families across geographies.

Of course, the analysts at HUD aren’t the only ones worried that lack of residential mobility further entrenches low-income residents in poverty. The idea is at least as old as the fall of public housing in the 1970’s. But when it gets down to brass tacks the academic literature on the topic is less-than-satisfying, as described by the Moving to Opportunity study and the follow-up analysis by Katz, Kling, and Liebman and Clampet-Lundquist. Raj Chetty’s most recent work was hailed as proof that moving to wealthier neighborhoods has positive long-term impacts on children, but even it leaves something to be desired.  

Meanwhile, the evidence that HUD cites to support its latest proposal is essentially meaningless. Rather than grapple with the real question – whether a change of neighborhood can lift a family out of poverty – HUD cites early evidence that giving the poor money to move to wealthier neighborhoods helps them move to wealthier neighborhoods. Surprising no one.

But the discussion of evidence ignores one of the more fundamental concerns – basic equity issues. First, seventy-five percent of Americans that qualify for housing assistance don’t receive it. And housing assistance is worth thousands of dollars annually to the lucky few who are selected, generally through a lottery or multi-year waitlist. Under the revised program, those that do receive assistance will be provided an even more oversized benefit (as compared with their ill-fated, voucherless peers) than they were before, assuming they decide to live in the wealthier neighborhood.

Want to End War? Privatize the VA.

A while back, the Cato Institute’s vice president for defense and foreign policy studies and director of health policy studies took to the pages of the New York Times to explain why privatizing the Veterans Health Administration would lead to less war and better health care for veterans. 

Today in The Hill, I discuss why this proposal has enduring relevance:

As Britain Tries to Learn from Iraq Mistakes, So Should the U.S. — by Privatizing the VA

[…]

Many Democrats remain angry with their presumptive presidential nominee Hillary Clinton for voting as a U.S. senator from New York to authorize the Iraq invasion in 2002. Clinton later wrote, “I had acted in good faith and made the best decision I could with the information I had … But I still got it wrong.”

There is a reform that could have given Clinton and other policymakers better information about the costs of invading Iraq – information that could conceivably have prevented the invasion altogether or at least shortened the U.S. occupation.

Read the whole thing.