Below is one of the most iconic and long-running commercials in television history. The ad for Prince Spaghetti depicts 12-year-old Anthony Martignetti running home through the streets of North Boston after his mother calls him to dinner by shouting from a window. “Anthony! Anthony!” No cell phone in those days.
Recorded in 1969, the commercial continued to appear on TV until the early 1980s. The kid in the commercial really was named Anthony Martignetti, and he really did live in Boston’s Little Italy. (The mother, however, was played by an actress.)
But what was Anthony doing out on the streets out of sight of his parents? How could he be left alone to run like a maniac through the streets of a big city?
In today’s America, Anthony would be stopped by the police, and his mother charged with neglect and endangerment.
File under: We Hardly Recognize this Country Anymore.
One of the most frequently encountered economic myths is that real wages in the U.S. have remained stagnant for decades. Every few months, it seems, we run across a news article that propagates this fallacy. Typical of the genre is an article by Pew research that appeared back in October. The title of the article asserts that “For most workers, real wages have barely budged for decades.” The article illustrates that assertion with the following chart.
[A]fter adjusting for inflation, today’s average hourly wage has just about the same purchasing power as it did in 1979, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms the average wage peaked more than 40 years ago: The $4.03-an-hour rate recorded in January 1973 has the same purchasing power as $22.41 would today.
That hypothetical wage of $22.41 in 1973 exceeds the actual figure of $20.67 for 2014. So the implication is that the average worker was better off back in 1973. Workers would therefore choose, if they could, to turn back the clock on the U.S. economy by 40 years.
There are, however, at least two major problems with this analysis. First, wages alone do not account for total employee compensation. Today, employees receive more of their compensation in the form of benefits such as health insurance. Looking at total compensation would tell a somewhat different story.
The other problem, which is potentially even more significant, is that the inflation adjustment is incorrect. The hypothetical wage of $22.41 is derived by adjusting the actual 1973 wage of $4.03 to account for inflation. This inflation adjustment, however, is too large, because price indexes used to measure inflation tend to over-estimate the true amount of inflation. The reason for the over-estimate is because price indexes cannot fully account for improvements in the quality of goods and services. (Think of how much better computers, phones, and health care are now than in 1973.)
For instance, a report by the U.S. Senate in 1996 concluded that the Consumer Price Index over-estimates inflation by about 1.1 percentage points per year. If that is true, then the 1973 wage in terms of current dollars was really only $14.31. Since the actual current wage is $20.67, it follows that real wages over 41 years have increased by 44 percent.
Even if the price index exaggerates inflation by only 0.5 percent, a rather low estimate of the index bias, today’s real wage is still higher by about 13 percent. And again, this improvement does not account for increases in employee benefits.
Writing at Cafe Hayek, Don Boudreaux observes that a fascinating way to see just how much economic conditions have improved in the last 40 years is to watch the debut episode of “The New Price is Right.” The show was recorded in August 1972, only five months prior to January 1973, when real wages are alleged to have peaked. The show gives us a vivid picture of the material conditions that Americans experienced some 40 years ago.
Remarkably, almost all the merchandise displayed on the show seems to fall into one of two categories.
1. Goods similar to today’s version of the same goods, and at dollar prices in 1972 not much different than their dollar prices today.
2. Goods that now seem totally obsolete, and which today might be hard to even give away.
The first category includes the $385 electric range introduced at 3:43, the $250 dishwasher shown at 16:40, and the $319 upright freezer displayed at 18:00. The astonishing thing is that those prices from 1972 don’t look too far off from today’s prices for the same appliances. But remember that the actual average dollar wage in 1972 was only about $4 per hour. At that wage, the $250 dishwasher was very expensive indeed. Today, median personal income in terms of dollars is now roughly five times as high as in 1972. So relative to today’s income, appliances like these only cost a fraction of what they cost back then.
The second category of goods, those that now seem obsolete, includes the television (10:38) and the electric typewriter (11:25). For most people today, those goods would just be taking up space, but in 1972 they were valuable prizes.
The sewing machine introduced at 9:10 is perhaps not obsolete, but how many households these days would want it, regardless of price? We suspect relatively few. But in 1972, a sewing machine was considered a very desirable and useful device. Nowadays, if clothes come apart, people throw them away and buy new ones. But in 1972, clothes were relatively expensive, so people would mend them rather than throw them away. Many women even still made their own dresses.
Right now, the best-selling sewing machine at Amazon is this one:
This machine, unlike the 1972 one, is computerized with 60 different built-in stitches. Its features and capabilities exceed those of the 1972 machine. Amazon claims the list price is $449, but sells the machine for $147.81. In contrast, the 1972 machine was priced at $250, which would translate to well over $1,000 relative to today’s incomes.
Of course, the prizes on the show are almost all manufactured goods, and it’s true that over the past 40 years, prices of services have increased more dramatically. In particular, prices for tertiary schooling and health care have soared. But in the case of medical care, it’s also true that quality has improved dramatically. Today, the death rate for the average heart attack victim is only one-third what it was in 1972. As Boudreaux and our friend Mark Perry put it,
Would you prefer 1980 medical care at 1980 prices, or 2013 care at 2013 prices? Most of us wouldn’t hesitate to choose the latter.
Almost nobody would want to turn back the clock to the material conditions of decades past. (But social conditions are another matter altogether.) Even if you were relatively poor so that your income ranked only at, say, the 10th percentile, it would be better to earn that 10th percentile income in 2015 than in 1973.
The tech industry for some time now has been importing skilled ‘guest workers’ from places like India and China. This practice occurs under the H-1B visa program. This week, the Senate Judiciary Committee heard testimony from so-called experts opposed to H-1B.
[A] number of experts testified that the H-1B program, so sought-after by CEOs, is being abused to harm American workers.
Ron Hira, a Howard University professor and author of the book Outsourcing America, told the story of Southern California Edison, which recently got rid of 500 IT employees and replaced them with a smaller force of lower-paid workers brought in from overseas through the H-1B program. The original employees were making an average of about $110,000 a year, Hira testified; the replacements were brought to Southern California Edison by outsourcing firms that pay an average of between $65,000 and $75,000.
Uh-oh. Those displaced IT workers making $110,000 are upper middle class, and as we know, in today’s America you don’t f*ck with Upper Middle Class. So naturally, there’s significant political pressure right now to amend or abolish H-1B, including several petitions before Congress.
One petition claims that H-1B foreign workers are “easily exploited,” while another asserts that H-1B is the “result of Greedy companies trying to exploit lowly paid foreign workers.” (Capitalization of greedy in original.) In fact, a Google search of “H-1B” and “exploit” turns up nearly 1.6 million hits.
But hold it–$70,000 per year is low pay and “exploitation”? That’s considerably more than the median personal income in the U.S. Most people in the world can only dream of attaining that standard of living, and the vast majority of humans who ever lived could never even imagine it. Karl Marx would not have recognized this ‘exploitation.’
Immigration is about something much more pure and sacrosanct than corporate profits.
But how are corporate profits any less sacrosanct than the salaries of IT workers? We know these folks will take a bit hit to their lifestyles and their retirement accounts if their salaries get reduced from $110,000 to $70,000. At the same time, however, other good people are struggling to save for retirement by adding corporate stock to their 401(k) plans. Those plans depend on those stocks paying dividends which requires the issuing firms to earn…wait for it…corporate profits. Why should IT workers be entitled to feather their nests at the expense of savers?
What the anti-H-1B petitioners are asking for is protection from free trade, plain and simple. And yet, for some reason, many commentators who are ostensibly free-trade are coming out against H-1B. Something about this issue strikes a populist chord and causes both conservatives and liberals to go full-on nationalistic. The comment sections of both liberal and conservative sites stand united in their vehement opposition to H-1B. Those opposed even include the normally free-market “Monty” who blogs about economics at Ace of Spades HQ.
You all know me as a free-trade and free-markets kind of guy, but on the issue of H1B Visas I find it hard to be dispassionate. I’ve made my living as a software engineer for nearly a quarter of a century now, man and boy, and I’ve seen up close the wreckage the H1B program has wrought on businesses and IT workers alike. Indian IT workers reduced to the status of indentured servants; American IT workers endlessly working under the sword of Damocles, waiting for the outsourcing axe to fall;
Hey, maintaining intellectual integrity is hard. That’s why we admire people who do it. Keep trying, Monty.
The way we see it, the moral and economic high ground cannot be occupied by people who are complaining that somebody else is willing to do the same job for less pay.
To preserve their $110,000 salaries, the American IT workers would have the foreign workers go back to their impoverished home countries where they might struggle to earn, what, $20,000 or $30,000 to do the same work.
The anti-H-1B argument comes down to this. They’re effectively saying that if two guys do the same work, it’s totally fair if one guy is paid $110,000 and the other only $30,000, but paying them both $70,000 is totally unfair.
The Environmental Protection Agency (EPA) wants hotels to monitor how much time its guests spend in the shower.
The agency is spending $15,000 to create a wireless system that will track how much water a hotel guest uses to get them to “modify their behavior.”
“The proposed work aims to develop a novel low cost wireless device for monitoring water use from hotel guest room showers,” it said. “This device will be designed to fit most new and existing hotel shower fixtures and will wirelessly transmit hotel guest water usage data to a central hotel accounting system.”
The funding is going toward creating a prototype and market analysis for the device. The goal of the project is to change the behavior of Americans when they stay at hotels.
We’re frankly more interested in finding ways to stop Americans who work for the government from seeking to change the behavior of Americans who don’t.
The EPA also has a WaterSense program that challenges hotels to track their water use and upgrade their restrooms with low-flow toilets and showerheads.
We wouldn’t call low-flow an upgrade.
A “program that challenges hotels…” So what they’re saying is, ‘We’re from the government and we’re here to challenge you.’
The program also encourages “linen and towel reuse programs” in guest rooms.
Somehow, we thought that life in the 21st century would be better than this.
The EPA is concerned that the average shower, which lasts just eight minutes, uses 18 gallons of water, and has asked Americans to reduce their shower length by at least one minute.
By the way, reading the whole article makes it clear that the government is concerned not just with showering at hotels, but with Americans’ showers in general. Hotels are just the launching point for the government’s assault.
Is it just us, or is there something just a little creepy and disturbing about the fact that bureaucrats in DC are “concerned” with how much time you and I are spending in the shower? How is that an essential function of government?
Note also that the feds are already interfering with our showers by regulating the shower head to deliver a flow of no more than 2.5 gallons per minute. Not satisfied with limiting the flow, now they also want to limit the time. And the two variables are related. If only people could get more flow, they’d be able to finish up their showers in less time.
What’s next? Mandating a shower head with a timer that automatically shuts off the water after 7 minutes, even if you still have shampoo in your hair? The bureaucrats haven’t reached that point yet, but does anybody really believe that the bureaucracy would see any moral or constitutional objection to such a device?
Tyler W. Johannes, Ph.D., an associate professor in the University of Tulsa’s School of Chemical Engineering who is working on the project, told the Washington Free Beacon that the researchers hope to see the technology “adopted by all major hotels and used across the country.”
He said the device seeks to get hotel guests to limit their showers to seven minutes as a start.
Johannes and his team assumed the average hotel shower lasts 8.2 minutes, using 17.2 gallons of water per guest per shower.
“Initially our device/app seeks to get hotel guests to reduce their water use by 10 percent or to reduce their showers by about one minute,” he said.
It says a lot about the government’s priorities that they’ve got people working on stopping Americans from showering for that 8th minute, but nobody in the government is much concerned about rectifying the government’s own long-term fiscal gap of approximately $210 trillion.
Maybe the government should get its own house in order before worrying about what other people are doing in their bathrooms.
After all, this is a bureaucracy that employs people who spend their days porn-surfing because they don’t have enough work to do. And they have the chutzpah to tell Americans they shouldn’t be spending that 8th minute in the shower. Frankly, we’d all be better off if the bureaucrats just went back to their porn and left our showers alone.
I was looking to fill out my billion dollar brackets again this year and was surprised that I couldn’t find the link. What happened? Here is the story:
The media went into a tizzy last year when Warren Buffett’s Berkshire Hathaway, Yahoo and Quicken Loans teamed up to offer $1 billion to any person who correctly predicted the outcome of all 64 games in the NCAA basketball tournament.
Nobody won the pool last year — no one even guessed all 32 first round games correctly. But the only excitement this year is over lawsuits related to who generated the original idea, CNNMoney reports.
The legal brouhaha began in 2014, when SCA Promotions, a small sweepstakes company, sued Yahoo for allegedly reneging on a deal for a perfect bracket contest with SCA.
Yahoo countersued, charging SCA with giving confidential information to Berkshire when it sought insurance to pay the $1 billion in case a contestant beat the overwhelming odds against winning.
It goes to show that the best way to take the fun out of anything is to get the lawyers involved.
The answer is Big Business. Big Business wants to be regulated, and they get the regulations they want. They write their own rules–rules that benefit them, typically by limiting competition.
The idea that government imposes regulations on Big Business against the wishes of Big Business is generally false. For instance, we knew a professor who asserted that it was a good thing that government imposed safety regulations on the auto industry. But the fact is that the landmark 1966 National Traffic and Motor Vehicle Safety Act was passed with the support of the industry. In fact, the regulations written under the Act were essentially drafted by the Automobile Manufacturers Association’s Safety Standards Committee. Notably, the AMA’s proposed rules were even stricter and more comprehensive than those the government eventually adopted.
October 17, 1966. The AMA submitted to the government a detailed series of proposed initial motor vehicle safety performance standards, covering nineteen items, prepared by the AMA’s Safety Standards Committee. Each of the proposals consisted of three basic parts-a brief description of the proposal followed by the proposed standard itself and a technical critique.
November 1, 1966. The AMA submitted ten additional proposals covering passenger cars and approximately 125 proposals for trucks, buses, and special-purpose vehicles.
It is interesting to observe that had government accepted these proposals as written, it would have achieved initial standards of greater severity and covering more aspects of performance than those it finally adopted.
The industry wanted to be regulated even more than the government wanted to regulate it.
Why would the auto industry impose these costly regulations on itself? Because the industry knew they could pass the costs on to consumers and, moreover, that the regulations would be relatively more costly for their Japanese competitors. A regulation that increases your own costs by 10% but your competitor’s by 20% will give you a competitive advantage.
Now consider banking regulation. In the wake of the financial crisis of 2008, there was a popular outcry for the government to assert more control over the big banks. The resulting Dodd-Frank Act of 2010 was the most significant banking legislation enacted in many years. Some people might be sufficiently deluded to believe that Dodd-Frank was intended to diminish the power of the big banks and to finally put them in their place. But while the legislation was still being crafted, the U.S. Treasury sent a draft of the bill to the Congressional banking committees. Treasury inadvertently forgot to delete from the document an electronic watermark. It was the watermark of a prominent law firm used by the big banks. The big banks had written the bill.
We discussed all this with our students in class just yesterday. Then this morning we picked up the dead-tree Wall Street Journal and on the front page, above the fold, was an article entitled “Boeing Helped Craft Own Loan Rule.” Seems that Congress wanted the government’s Export-Import Bank to tighten its lending rules. Ex-Im responded by letting its biggest corporate client–Boeing–write the new rule.
WASHINGTON—When the Export-Import Bank sought to respond to critics with tighter rules for aircraft sales, it reached out to a company with a vested interest in the outcome: Boeing Co., the biggest beneficiary of the bank’s assistance.
For months in 2012, according to about 50 pages of emails reviewed by The Wall Street Journal, the bank worked with Boeing to write rules that would satisfy critics in Congress and the domestic commercial airline industry—while leaving most sales of Boeing’s airplanes to foreign carriers unscathed.
The previously unreported documents, obtained through an open-records request, show how the two sides swapped ideas, drafts and data on sales of wide-body airplanes. Ex-Im Bank officials pushed their Boeing counterparts for information. Boeing suggested changes to the bank’s draft proposal.
They reveal an extraordinary level of coordination between public officials and corporate executives.
The cooperation between Big Business and government is real, but we suspect it’s not so extraordinary. It’s more like standard operating procedure.
The requirement didn’t specifically include aircraft purchases, but Delta Air Lines Inc. and some lawmakers wanted the bank to include them in the rules, too.
That’s when Boeing and Ex-Im Bank started discussing how the rule should be written. Many of the emails between the bank and Boeing deal with the guidelines the bank was creating to determine which aircraft transactions would trigger the additional review.
The collaboration appears to have worked. In the nearly two years since the rule went into effect, no Boeing sales have been nixed as a result.
WITH the collapse in globaloilprices, members of Congress are once again pushing to raise the federal gasoline tax, with the proceeds going to new roads, bridges and other infrastructure projects. While some in Congress might be averse to a tax increase of any kind, they might find it more palatable if it came packaged with a tax cut.
Fortunately, there is a perfect option, a hidden levy that has benefited a small group of farmers and manufacturers in a handful of states: the corn ethanol tax.
The tax is hidden because, on paper, it appears as a clean-energy mandate. Federal law currently requires fuel retailers to blend about 13 billion gallons of corn ethanol per year into the gasoline they sell to the public, making the gas more expensive. This year, that mandate, known as the Renewable Fuel Standard, will impose about $10 billion in additional fuel costs on motorists.
Congress created theRenewable Fuel Standardin 2005 with several goals in mind: energy security, rural economic development and environmental protection. But the indirect environmental costs involved, including growing, harvesting and processing corn into fuel, are significant. Ethanol diverts corn from the food supply, driving up food costs; it promotes inefficient and harmful land-use strategies; and it can damage small engines. But a more fundamental problem is its high cost when compared with conventional gasoline.
It really is amazing that there is bipartisan consensus about promoting a fuel that costs more than gasoline, gets lousy fuel efficiency, damages engines, raises food prices, and causes environmental damage to boot. It may be time to get rid of the Iowa Caucuses.
Last week, the Senate voted 62-37 to override President Obama’s veto of the Keystone XL pipeline. The result fell a few votes short of the two-thirds majority needed to overcome the veto. And so the pipeline, which has already been delayed for years, will be delayed at least a few more months, if it ever gets built at all.
The obstruction of the Keystone pipeline shows clearly that government is the problem, not the solution. There simply are no good economic or environmental reasons for opposing the pipeline project.
There are no good environmental reasons, because over 100 years of experience demonstrates that pipelines are safe, and in fact the safest way to transport oil over long distances. The United States already safely manages approximately 330,000 miles of pipelines, and Keystone would add just another 1,700 miles to that total.
Each of the several states through which the pipeline would pass has conducted environmental studies of the effects of the pipeline. All these studies support the project. If the pipeline is not built, the oil will have to be transported by rail, which is much less safe. Trains carrying oil often derail, catch fire, and explode. Here’s what happened when a train carrying crude derailed in Quebec just the summer before last.
People on the terrace at the Musi-Café—a bar located next to the centre of the explosions—saw the tank cars leave the track and fled as a blanket of oil generated a ball of fire three times the height of the downtown buildings. Between four and six explosions were reported initially as tank cars ruptured and crude oil escaped along the train’s trajectory. Heat from the fires was felt as far as 2 kilometres (1.2 mi) away. People were jumping from the third floor of buildings in the central business district to escape the fire. As the blazing oil flowed over the ground, it entered the town’s storm sewer and emerged as huge fires towering from other storm sewer drains, manholes, and even chimneys and basements of buildings in the area.
The Musi-Café owner says that some employees and patrons felt the tremors of the train and thought it was an earthquake. They went out and started running. Other patrons and employees told some survivors that the tremors were an earthquake and that it would be better to stay under a table. Of those that went out, not all survived. Some were not able to outrun a “tsunami of fire”.
Forty-two bodies were found and transported to Montreal to be identified. 39 of those were identified by investigators by late August 2013 and the 40th in April 2014. Identification of additional victims became increasingly difficult after the August 1 end of the on-site search and family members were asked to provide DNA samples of those missing, as well as dental records. The bodies of five presumed victims were never found. It is possible that some of the missing people were vaporized by the explosions.
And here’s what it looked like when a train carrying crude derailed just last week in Illinois, near the Mississippi river.
How many more such disasters is President Obama prepared to see occur?
There is no good economic reason for opposing the project, because the pipeline would create value. Transporting oil via pipeline is considerably less costly than doing so by rail.
The only reasons for opposing the pipeline are political, about which we can only speculate. Maybe Warren Buffett has influenced the politicians to keep oil moving on his own BNSF Railway. Maybe the politicians are catering to the sensibilities of the contemporary religious movement known as environmentalism, which of course has little or nothing to do with actually protecting the environment. Or perhaps President Obama is merely using Keystone as a political bargaining chip in order to extract concessions from Congress. But whatever the reason, all sentient Americans of goodwill should be properly outraged by this failure of their political system.
This whole episode is reminiscent of the political struggle over the trans-Alaska pipeline, built nearly 40 years ago. The 800-mile pipeline had to overcome daunting physical challenges posed by the harsh Alaskan wilderness. In particular, the pipeline had to be specially designed to survive powerful earthquakes. Workers tried to continue construction throughout the winter, above the arctic circle, but had to stop as temperatures plunged below -60 Fahrenheit and motor oil solidified in the engines of vehicles. The pipeline route included a 1,000 foot near-vertical drop, and so welders had to use ropes to rappel down the side of a frozen mountain.
And yet, the greatest obstacle to constructing the Alaskan pipeline was not physical, but political. The project was very nearly killed, and squeaked through Congress by the narrowest of margins. The Senate vote, in fact, was deadlocked 48-48 and Vice President Spiro Agnew had to cast the tie-breaking vote. One of the votes against the pipeline came from a young, newly-elected Senator by the name of Joe Biden. As the Romans used to say, nihil sub sole novum.
Embedded below is a fascinating documentary that details the remarkable efforts required to construct the trans-Alaska pipeline. The completed project truly represents a paragon of human achievement, and a testimony to human ingenuity and the indomitable human spirit. This is one of our favorite documentaries.
A few notable excerpts from the video:
So many people flocked to Alaska looking to work on the pipeline construction that the Alaskan government had to place ads in newspapers asking people to stay home.
Each construction worker was given a book entitled “Staying Alive in the Arctic.” That way, notes a former worker, if you were freezing to death, you could always stay alive by burning the book.
“Amazingly, only 31 people died while building the pipeline.”
Thirty-one workers died, but no politicians or radical environmentalists. They were at home or in their offices, safe and warm.
CNSNews has this story of “seniors” with some serious work ethic:
CNSNews.com) – Many people are living longer, but not to age 112 or beyond — except in the records of the Social Security Administration.
The SSA’s inspector general has identified 6.5 million number-holders age 112 — or older — for whom no death date has been entered in the main electronic file, called Numident.
The audit, dated March 4, 2015, concluded that SSA lacks the controls necessary to annote death information on the records of number-holders who exceed “maximum reasonable life expectancies.”
“We obtained Numident data that identified approximately 6.5 million numberholders born before June 16, 1901 who did not have a date of death on their record,” the report states.
Some of the numbers assigned to long-dead people were used fraudulently to open bank accounts.
And thousands of those numbers apparently were used by illegal immigrants to apply for work:
“During Calendar Years 2008 through 2011, SSA received 4,024 E-Verify inquiries using the SSNs of 3,873 numberholders born before June 16, 1901,” the report said. “These inquiries indicate individuals’ attempts to use the SSNs to apply for work.”
Perhaps the biggest obstacle to reforming our unsustainable welfare state is that most of the welfare recipients refuse to acknowledge that they are, in fact, welfare recipients. They feel that, one way or another, they’re entitled to the benefits. For instance, as we discussed with our students, retirees in the past have often collected Social Security payments amounting to many times their lifetime contributions. In particular, folks who retired back in the 1950s collected on average more than 10 times what they paid in. Yet almost all of these people, if you asked them, would deny being beneficiaries of government largess.
In an excellent piece at washingtonpost.com, Catherine Rampell reports that seniors are also unwilling to recognize the massive government subsidy implicit in the Medicare program.
[R]espondents were asked whether they personally receive a government subsidy to help them pay for health insurance. The overwhelming majority — 85 percent — said no. The age group most likely to say this? Again, those over age 65, 93 percent of whom insisted they do not receive any such subsidies.
This is astounding, given that the lion’s share of people in this cohort receive Medicare. Despite all the mockery that oblivious cries of “Keep your government hands off my Medicare!” generated several years ago, older Americans still don’t seem to understand that Medicare is not only the government’s largest health-care program but also one that involves transferring lots of money away from everyone else and toward them — i.e., a subsidy.
Folks are apparently kidding themselves that they’re getting no more than what they paid for. But that’s not even close to being true.
[A] single male who earned an average wage, was employed every year from age 22 to 64 and turned 65 this year would have paid about $70,000 into the Medicare system, in inflation-adjusted terms. Sounds like a lot, right? But bear in mind that he should expect to receive about $197,000 in Medicare benefits. A two-earner couple of the same age, both of whom also worked every year since age 22 at the average wage, would have paid in $141,000 to get some $427,000 in benefits.
So basically a ratio of about three to one.
As Rampell points out, however, it’s not just seniors who have their health insurance subsidized. Health insurance subsidies are received by the vast majority of Americans.
There are the 9 million leeches who receive subsidies through the Obamacare exchanges, yes, and the nearly70 million moochers who use Medicaid or the Children’s Health Insurance Program, or CHIP, benefits. But the largest group of Americans who benefit from government health-care subsidies — without often acknowledging it — are those who receive employer-sponsored insurance.
Like me, about 158 million Americans receive insurance through employers. The exclusion from workers’ taxable income of employer-sponsored health insurance costs the federal government about $250 billion each year. Why? Your employer gets to deduct the costs of compensation provided to you in exchange for your services, whether it’s salary, bonuses, health-care costs or even a BMW. But while the value of that salary, bonus and Beemer are all taxable to you, the tax code explicitly lets you ignore the value of those health-care benefits when calculating how much you owe Uncle Sam in payroll and income taxes.
So what’s the problem with people getting all these government subsidies to pay for health care? After all, people need health care, and it’s very, very expensive. Three problems:
1. The unsustainable growth of the programs threatens to bankrupt the government, which could lead to default and a major financial crisis.
2. The subsidies breed government dependency and undermine the character traits of accountability and individual responsibility necessary to the maintenance of a free republic.
3. A large part of the reason for why health care has gotten so expensive is the subsidies themselves. The subsidies increase the demand for health care which drives up prices.
Like an alcoholic, the first step toward a cure would be for Americans to admit they have a problem.