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12/29/15

CBO replacement rates weaken case for expanding Social Security

Over at Forbes, I look at new numbers from the Congressional Budget Office on Social Security “replacement rates,” which measure retirement income as a percentage of pre-retirement earnings. Most financial advisers say that a 70% replacement rate is sufficient for a retiree to maintain a pre-retirement standard of living. The Social Security actuaries claim that an average person receives only a 40% replacement rate from Social Security, but I’ve argued that these figures – which are measured in a very different way than how financial advisers measure replacement rates – are misleadingly low.

Shutterstock.

Shutterstock.

In response to this debate, last September an expert panel appointed by the Social Security Advisory Board recommended new methods for calculating replacement rates that would be more compatible with financial advisers’ “final earnings” approach.

And now, in new figures released December 15, the CBO is the first agency to follow up on these recommendations. The CBO found much higher replacement rates than the 40% figures that SSA’s actuaries claim. The typical new retiree receives a benefit equal to about 60% of his late-in-life earnings, substantially reducing the amount he would need to save to hit financial advisers’ 70% benchmark. These figures weaken the case for expanding Social Security and weaken claims that the overall US retirement system isn’t working.

cbo

Check out the whole article here.



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Republicans can stop obsessing over Hispanic voters

Can Republicans win the next presidential election without getting more Hispanic votes? It’s a question that has obsessed the party since 2012. It’s also the wrong question.

Mitt Romney won only 27 percent of Hispanics’ votes when he lost in 2012, to President Barack Obama’s 71 percent. Romney’s defeat convinced a lot of Republicans that they had to court Hispanics by passing legislation offering citizenship, or at least legal status, to most illegal immigrants. So said a lot of big Republican donors, who tended to favor that kind of immigration reform to begin with. The “autopsy” prepared for the Republican National Committee echoed this conclusion. Even Donald Trump said Romney had lost by alienating Hispanics.

Opponents of the so-called reform pointed out numerous defects in the strategy. Republicans who favored some form of legal status, such as 2008 presidential nominee John McCain, had also done poorly among Hispanics. The critics warned that support for such policies might drive turnout lower among white working class voters who otherwise favored Republicans.

The biggest defect of the strategy turned out to be that it was incapable of being implemented. Conservative opposition ran too strong. The Republican House refused to pass the legislation. Marco Rubio, one of its sponsors in the Senate, turned against it. The presidential candidate who has topped the polls of Republicans for months, Trump, has been saying he will deport all illegal immigrants (and then take many of them back, but not many people have picked up on that). Senator Ted Cruz, who comes second in polling averages, now says that he will never offer legal status to illegal immigrants.

Even Cruz, though, says that to win in 2016 Republicans need to get 40 percent of Hispanics’ votes — the same magic number other Republicans cite. Evidently he believes he can win Hispanics who either themselves oppose legalization or who favor it but consider other issues more important.

Hispanic voters are not as crucial to Republicans as conventional wisdom has it. Romney would still have lost the election if he had won 40 percent of Hispanics. He would have lost, for that matter, if he had won a majority of these voters, something Republicans have never done. To win, Romney would have had to do a bit better than even Obama did among Hispanics.

It would make a real difference, on the other hand, if Republicans increased their share of white voters by only a few percentage points. RealClearPolitics has an interactive tool that allows for simulating different election scenarios for 2016. It suggests Republicans would win the popular vote and Electoral College if they took 3.3 percent more than Romney from whites — even if everything else about the party’s performance stays the same.

So maybe Republicans should just hunt for new white supporters? No mainstream voice has advocated that strategy, even if it sometimes feels as though it’s one the party has fallen into. A Republican surge among white voters and only white voters is more realistic than a Hispanic landslide for Republicans. But it’s still far-fetched.

Romney performed very well among whites, for one thing. What would help Republicans improve on his showing without affecting nonwhite voters? Taking a harder line than Romney on immigration might not boost white support: Most white voters are open to a path to citizenship. And there’s no reason to think Romney’s dismal share of Hispanic and Asian voters represents a floor for Republicans.

The most plausible winning formula for Republicans in 2016 would involve their performing at least somewhat better among all racial groups. In the RealClearPolitics tool, input the average turnout rates for each group over the last three elections. Then assume that Republicans get 9 percent from black voters, 32 percent from Hispanics and 35 percent from Asians and others — all numbers lower than the percentages George W. Bush won in 2004. In that case Republicans would just need to do two points better among whites to score their biggest electoral win since 1988, carrying Colorado, Florida, Ohio, Pennsylvania and Virginia.

I’m not predicting that anything like this will happen. Reality won’t be as neat as an electoral model, with voters from each racial group moving in sync across state lines.

What this simulation suggests, rather, are four points. First: Republicans do not absolutely have to get 40 percent of the Hispanic vote to win. Second: Republicans have no good reason to obsess about Hispanic voters to the exclusion of black and Asian voters. Third: If Republicans end up winning, it will probably be because they improved in all racial groups, albeit unevenly, which is what they did in elections from 1996 through 2004.

And fourth: Instead of thinking about voters in racial categories at all, Republicans should probably make the case that their agenda would turn out better than the Democratic one for most people — and make that case to voters of all races. The question Republicans should be asking themselves is not how to do better with this or that racial group, but how to make that basic case.



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Do health system rankings matter when monitoring health reform?

’Tis the season for reflection on the progress of the U.S. health system as open enrollment season comes to a close for health insurance markets. With the Affordable Care Act, the U.S. made efforts to meet their peers in other industrialized nations to close its uninsured gap. The United States has made progress on that metric with 16.4 million out of an estimated 50 million uninsured gaining coverage through the Marketplace and Medicaid expansions. But will this change finally put the United States at the top of the health system rankings?

U.S. policymakers seek to rank as the nation’s health system as best in world. Unfortunately, rankings from the World Health Organization and Organization for Economic Cooperation and Development show the United States as quite a laggard. The WHO rankings that got the most attention placed the United States at 37th of 191 behind all other industrialized countries and Cuba in a comparison akin to football (U.S. and otherwise) league tables.

As health economists we were convinced that the United States might do better if we took into consideration different variables like access to the physicians. The result in a just published study shows that the United States is not necessarily at the bottom of the league table, but it is not at the top either. Just like the residents of U.S. fictional small town Lake Woebegone, Americans are just above average — some of the time.

More disturbing than not finding a top place for the United States was the highly sensitive scoring process. And actually the conceit of a single country-specific metric of health system performance is the futility of the process itself. We show that single country rankings are fraught with challenges around data availability, transparency and comparability across countries.

For example, although individual health behaviors are important predictors of health utilization and spending, measures such as obesity are not regularly or consistently collected across countries. Even when the data are available, we found that rankings at such 30,000-foot levels are highly sensitive to the statistical approach and set of variables used in a model.

Our work suggests that singular rankings are not well correlated with resource and utilization measures such as physicians per capita, which suggests that factors beyond the control of the health system are at play. One would think that more physicians would lead to better system performance.

The training and payment of physicians is one of the costliest attributes of any industrialized nation. Instead, we see countries with higher rank (Sweden) and lower rank (Hungary) have nearly identical per capita physicians.

In this era of big data, analysts have amassed data from a wide range of sources such that could someday provide new signal for a league table metric and truly provide country-to-country comparisons. For example, a metric could be created from an anonymous population’s aerobic activity based on cell phone traveled distance and type of transportation (e.g., car, transport or walking).

Unfortunately, our current health system inputs are stuck in the 20th century. More work is needed to make these connections across countries to improve our comparisons. Improvement in health insurance coverage is a start, but much more needs to be done to identify areas of inefficiency in our health system.

Citizens of the 21st century need to have a more comprehensive set of real-time metrics that are relevant to evolving health systems across the globe. One single ranking number is not going to tell us whether we are improving or not. The United States and other nations around the globe spend trillions a year on healthcare with well over half of the of expenditures based on tax receipts of citizens. Worse much of the expenditure is deficit financed in the United States and other countries.

Industrialized nations around the world owe it to our children’s children to develop appropriate metrics to gauge the effectiveness of health systems expenditures. Until then, our current international health system league tables are statistically unworthy of global discussion.

parente_healthrank

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Michael Gerson wants more ‘nagging’ and ‘back-seat driving’ from Washington

Chalk it up to too much eggnog. In today’s Washington Post, columnist Michael Gerson expresses a beatific faith in the ability of the federal government to micro-manage American education.

Lamenting the new Every Student Succeeds Act (ESSA), which retires the Bush-era No Child Left Behind Act and sharply reverses a quarter-century of growing Washington control over America’s schools, Gerson declares the new law a betrayal of disadvantaged children. Indeed, he declares that Senator Lamar Alexander’s principled, conservative triumph “devalues the educational needs of black children.”

What makes the column so peculiar is that Gerson concedes NCLB was a failure and offers no reason to think that it knows how to do better. Of NCLB, he writes, “The whole thing was a mess from the start . . . Teachers didn’t like the relentless emphasis on testing, which ate into their time for the unmeasurable joys of learning.”

Shutterstock.

Shutterstock.

Gerson even notes, “The Every Student Succeeds Act ends the back-seat driving of the federal government in education policy.  State and local officials will be free to set academic goals and to determine if schools are meeting them. While the law still mandates consequences for the worst-performing schools, states will determine what those consequences are.”

If this all sounds pretty good . . . it should. But Gerson frets that, “with the end of federal nagging,” some states will do “really good, creative things for students”—but some may not. Some might see this as the healthy dynamics of federalism, with state and community leaders tackling their challenging, innovating, learning, and being held responsible for the results. Gerson does not.

Gerson’s musings are curiously devoid of any consideration of what Washington should be doing or does well. Instead, it embraces the starry-eyed progressive credo that, if something is important, Washington should be in charge of it. The truth is that ESSA embraces a remarkably grounded and constructive view of the federal role. It’s rooted in recognizing that federal mandates are moderately effectively when simply requiring that states do them is enough. For instance, requiring states to administer annual tests and report the results is pretty straightforward. It’s a lot like mailing Social Security checks—there’s just not that much room for slippage. It’s an easy requirement to enforce, and therefore it entails little red tape or intrusion.

On the other hand, when it comes to things like micro-managing accountability systems and school improvement, whether they’re done matters infinitely less than how they’re done. Here federal efforts have yielded incoherent mandates, bureaucratic sprawl, and one-size-fits-all dictates, with lots of consequent foot-dragging and ineptitude. This constricts those seeking to do things well while ensuring that school improvement will be done poorly and with little ownership or accountability.

Gerson is a self-avowed “reformicon.” The reformicon project is to apply conservative principles to devise policies that address today’s public policy challenges.  On the right, the effort suffers from suspicion that it’s little more than camouflage for big government Republicanism. This column, with its cri de coeur for more “federal nagging” and cheerful willingness to ignore Washington’s dismal track record in schooling, will justifiably feed that skepticism.



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12/28/15

New Carpe Diem economic news and data quiz

CarpeDiemBlackBoard

Test your knowledge of recent economic news and data, most of which has been featured in recent posts on the Carpe Diem blog, with this new 10-question quiz below (links to the correct answers are provided).




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The fall of ISIS in Ramadi: Rubin on CNBC’s “Power Lunch”

Resident Scholar Michael Rubin discusses the defeat of ISIS in Ramadi.

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2016 Data Point: A postmortem on 2015 for the nation

As the country enters the New Year, how do people think the US fared in 2015? While opinion is more negative than positive, it has improved over the past few years. Fifty-four percent in the December 2015 NBC News/Wall Street Journal poll said that 2015 was a “below-average year” or “one of the worst years” for the United States, down from a high of 83 percent who gave that response in December 2008 when the Great Recession was in full force. Thirty-three percent said 2015 was an “about average year” for the country, while only 13 percent said 2015 was an “above-average year” or “one of the best years” for the US.

Data-point-NBC-WSJ-2015-for-the-US

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Generosity won’t fix our shortage of organs for transplants

Each week, In Theory takes on a big idea in the news and explores it from a range of perspectives. This week we’re talking about government compensation for organ donors. 

Sally Satel is a resident scholar at the American Enterprise Institute and a lecturer in psychiatry at Yale University School of Medicine. She is the editor of When Altruism Isn’t Enough: The Case for Compensating Kidney Donors.”

My interest in the national organ shortage began one steamy afternoon in August 2004. That day, my doctor told me my kidneys were failing. As a physician myself, I knew immediately that I would need to find a replacement organ or else face a shortened life tethered to a dialysis machine. My search was rocky at first, but finally I did get a kidney from a casual friend — now a very dear one.

At the time of my search, there were about 60,000 people on the national waiting list maintained by the United Network for Organ Sharing. Today, a decade later, there are roughly 101,000. Meanwhile, donation rates from both living and deceased donors are effectively flat. The death toll is 12 people per day — individuals who could not survive the years-long wait for an organ.

Clearly, our current organ transplant policy is a qualified failure. And it is because our current system, by law, mandates altruism as the sole legitimate motive for organ donation. We need to give more healthy young and middle-age people a reason to become living donors.

Tragically, altruism is not enough. The yield from public awareness campaigns, the organ procurement teams that meet with families of the recently deceased and the reimbursement for donors’ expenses has leveled off. Moving to an opt-out system, under which we would harvest people’s organs at death unless they had earlier indicated they didn’t wish to donate them, can do only so much — relatively few people die in ways that leave their organs suitable for transplantation.

So, to save lives, let’s test incentives. A model reimbursement plan would look like this: Donors would not receive a lump sum of cash; instead, a governmental entity or a designated charity would offer them in-kind rewards, such as a contribution to the donor’s retirement fund; an income tax credit or a tuition voucher; lifetime health insurance; a contribution to a charity of the donor’s choice; or loan forgiveness.

Meanwhile, the law can impose a waiting period of at least six months before people donate, ensuring that they don’t act impulsively and that they offer fully informed consent. Prospective compensated donors would be carefully screened for physical and emotional health, as all donors are now. These arrangements would filter out financially desperate individuals who might otherwise rush to donate for a large sum of instant cash and later regret it.

The donors’ kidneys would be distributed to people on the waiting list, according to the rules now in place. (People who wanted to donate a kidney to a specific person — say, a father to a son — would still be able to, alongside this system.) Finally, all rewarded donors would be guaranteed follow-up medical care for any complications, which is not ensured now.

The good news is that the general notion of incentivizing donations is gaining traction. A 2009 poll of the membership of the American Society of Transplant Surgeons revealed that 80 percent supported or were neutral toward the provision of tax credits for donors. In 2014, the American Society of Transplantation and the American Society of Transplant Surgeons published the results of a workshop in which the societies expressed approval of testing third-party, in-kind incentives. A few weeks ago, the American Medical Association passed a resolution in favor of testing the effect of incentives on living and deceased donation. (A reward for deceased donation could take the form of a funeral subsidy or a contribution to the estate of the deceased.)

The objections I heard years ago seem to be wearing thin. Take the objection that rewarding donors “commodifies the body.” We already commodify the body, speaking strictly, every time there is a transplant: The doctors get paid to manipulate the body. So does the hospital and the agency that obtains and transports the organ. Why would we now object to enriching the donor — the sole individual in this entire scenario who gives the precious item in question and assumes all the risk?

At the heart of the “commodification” claim is really the concern that donors will not be treated with dignity. But dignity is affirmed when we respect the capacity of individuals to make decisions in their own best interest, protect their health and express gratitude for their sacrifice. Material gain, per se, is not inconsistent with this. The true indignity is to stand by smugly while thousands of people die each year for want of an organ.

Some worry that that rewarded donation will attract only low-income people. This is possible, though only a trial project can provide the answer. But even if this turns out to be the case, why doubt the capacity of low-income people to make decisions in their own interest? From the standpoint of the recipient, it is low-income individuals who stand to benefit the most, as they are disproportionately represented among those waiting for a kidney. 

Yet regardless of who ends up donating, any plan must ensure that donors’ decisions are thoroughly informed, their health is protected and they are amply rewarded. As the organ waiting list grows, the need to test incentives becomes stronger and stronger. 

We need to liberate patients from the tyranny of “the gift.” It’s glorious when you are the recipient, as I know better than most, but the penalty for being unlucky should not be premature death. Hollow moralizing from critics in the face of so much needless suffering must be replaced by sensitive and pragmatic policy.



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Infographic: New Year’s polls

Happy New Year! As 2015 comes to a close, and the new year officially begins, how many Americans will make a New Year’s resolution? How many will keep it? Here’s what people are telling the pollsters.

Tis the Season New Years Infographic

Infographic by Jewel Dauletalina.



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Will Chris Christie win New Hampshire?

Chris Christie was the nominal front-runner for the GOP nomination back in summer 2014. Then he fell down to asterisk territory, and was once even consigned to the J.V. debate this year.

Republican presidential candidate and New Jersey Governor Chris Christie takes a selfie with a supporter following an event to kick off a campaign bus tour in Exeter, New Hampshire December 19, 2015. Reuters

Republican presidential candidate and New Jersey Governor Chris Christie takes a selfie with a supporter following an event to kick off a campaign bus tour in Exeter, New Hampshire December 19, 2015. Reuters

If you look closely now, however, he’s a legitimate contender.

The national polls still have him in the low single digits, but check out the New Hampshire:

Poll Trump Rubio Christie Cruz Kasich Bush
ARG 21 15 12 10 13 7
CBS 32 13 11 14 8 6
Boston Herald 26 12 11 12 8 10
WBUR 27 11 12 10 7 8
CNN 32 14 9 6 7 8
PPP 27 11 10 13 8 5

Christie’s RealClearPolitics average puts him in third place in New Hampshire. He’s second or within the margin of error of second place in the two polls conducted by local media (Boston Herald and WBUR). Christie has doubled his numbers from early November, and he’s climbing, while Rubio is basically flat over the past month.

Given Christie’s GOP establishment support in Iowa (today he added a former state party co-chair), it’s also not crazy to think he could finish third in the caucuses despite his currently dismal polling there.

Here’s a scenario that strikes me as not crazy:

Christie finishes third in Iowa, making him an attractive choice for anti-Cruz voters in New Hampshire, and for former Trump backers who now want an electable choice. This would put Christie in striking distance of a victory in New Hampshire.

Noah Rothman at Commentary got me thinking about Christie’s chances with this blog post, which links back to my early June piecepredicting a Christie boom at some point.

Timothy P. Carney, The Washington Examiner’s senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Tuesday and Thursday nights on washingtonexaminer.com.



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