Source of chart: Jonathan Hoenig (@JonathanHoenig), Chicago, IL, based on U.S. Census data

The poverty rate in the United States fell by half from 1950 to the start of the “War on Poverty.” And it was on track to continue falling. But after the “War on Poverty” programs kicked in, the poverty rate has been stuck in a narrow corridor.

The lesson: Despite good intentions, statist redistribution programs to “help the poor” lead to multigenerational dependency and shrinking opportunities and incentives for low-skill individuals to enter the workforce, increase their skills, and move up the income ladder.

On the other hand, steady private investment in physical and human capital within a secure system of private property rights (which minimizes government corruption and exploitation) results in self-sustaining prosperity, which enables poor people to take advantage of opportunities and permanently lift themselves out of poverty.

Prior to the “War on Poverty,” the post-1950 U.S. economy wasn’t a capitalist nirvana, but it did benefit the poor much more than after The Great Society programs. The numbers speak for themselves.

President Obama has recently promoted inequality as a fundamental threat to our way of life, saying, “The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe.”  You can read the rhetoric here.  Let’s look at the reality.

The president suggested policy initiatives to address these issues, so presumably, the president’s policies can make a difference.  What has he done so far?

He has presided over corporate bailouts, not only declaring the Wall Street banks too big to fail, while a multitude of small businesses did fail, his policies continue to support the banking industry through low interest rates and the payment of interest on reserves held at the Fed. Banks holding bad mortgages were bailed out while individual homeowners were evicted from their homes.

While the president does not directly determine Fed policy, Bernanke was all-in on the president’s agenda, and now the president has appointed Janet Yellen as Fed chair because she supports a continuation of those policies.

The low interest rate policy has hurt small savers, who tend to keep their savings in fixed-interest assets, but has propped up the stock market where the wealthier tend to invest.

The president’s support for extended unemployment benefits has taken away some of the incentive for people to find work, which is the best way to escape poverty.

After campaigning against them, the president worked hard to preserve the “Bush tax cuts,” with ultimately just a small increase in rates for the highest-income individuals.

Then there is Obamacare, which provides financial incentives for employers to convert full-time jobs to part-time jobs to avoid the health insurance penalties, further eroding opportunities for those at the bottom of the income scale.

What has been the effect of the president’s economic policies?  The unemployment rate remains high, at 6.7%, and long-term unemployment has spiked to its highest level in history, largely because of the extended unemployment benefits. The labor force participation rate has fallen from 66% in 2008 to below 63% today, so fewer people are even looking for the jobs that could help them escape poverty.

In 2008 13.2% of Americans fell below the official poverty line.  By 2012 the poverty rate was 15%.  The president’s policies have increased poverty.

How about the rich?  The Dow Jones Industrial Average, which hovered around 8,000 when the president took office in 2009 has more than doubled to top 16,000 today.

Despite the rhetoric, the reality is that the president’s policies have created more inequality.  They have hurt the poor, but Wall Street has done well.

This blog’s readers are better informed than most about the (somewhat complicated) question of how health insurers will be compensated for bearing risk in Obamacare’s health insurance exchanges.

A previous entry explained the basics of two of the three programs that protect health insurers from losing too much money on Obamacare’s exchanges. These are called “reinsurance” and “risk corridors.” Both programs exist for only three years, 2014 through 2016, and were put in the legislation because health insurers were not confident that they could accurately price premiums in Obamacare’s early years.

Opening for enrollment in the beginning of October, the exchanges have been a complete disaster. A subsequent post noted obscure regulatory language, whereby the administration appeared to blur the rules governing the risk corridors as much as possible, to ensure that health insurers would not lose faith in the exchanges. A third post noted the administration’s amending a rule to increase taxpayers’ liability for the risk corridors that protect insurers from losing too much money.

On January 9, Humana, a large insurer, reported in a filing to the Securities and Exchange Commission (SEC) that it “now expects the risk mix of members enrolling through the health insurance exchanges to be more adverse than previously expected.” Corporations cannot spin filings with the SEC: The CEO and CFO can go to jail if they mislead investors. So, they have to tell us more about what is going on in the exchanges than the administration does.

From House Minority Leader Nancy Pelosi to President Obama, Washington politicians are scrambling to get their hands on other people’s toddlers. But they’re not alone.

Back in 2010 California Gov. Arnold Schwarzenegger signed into law the Kindergarten Readiness Act of 2010. Basically, every year since 2012-13 children must celebrate their fifth birthday sooner and sooner in the year to be eligible for kindergarten. Rather than make a lot of almost five-year-olds wait to start kindergarten, California simply added an entire additional year of formal schooling called “transitional kindergarten.”

Fast forward to 2012, and Gov. Jerry Brown was having second thoughts about the staggering cost of government child care and preschool. The state’s General Child Care program, which included a California State Preschool Component, was set to be converted to a voucher program (p. 1) administered by county welfare departments, similar to several other voucherized programs.

Meanwhile, transitional kindergarten, which was estimated to cost more than $2 billion over its three-year life span once fully implemented (p. 3, $675 million annually), was slated for “non initiation” (or “elimination” in plain English). The Legislative Analyst’s Office supported that idea because it made no sense to offer an additional year of schooling to a select group of four-year-olds “based on their birth month rather than their academic or financial needs”—especially since districts could allow four-year-olds to attend kindergarten on a voluntary,  case-by-case basis (p. 3, and here).

No one knows how many times police shoot and kill Americans every year. Most estimates put the number at a few hundred a year, but we don’t know the details, including how many of these killed people presented a real threat to anyone. The U.S. government does not do body counts, as it admitted during the Iraq war. And the same appears to be true in domestic policing, where law enforcement has become comparably brutal to the armed forces overseas, including in what has become standard operating procedure in the hundred SWAT raids performed every day across this country, the vast majority of which are launched to serve warrants to people accused of non-violent offenses.

Three news stories in the first couple weeks of this new year remind us of the unsettling culture encouraged in modern policing. It is a culture that values officer safety, however dubious the threats against it, above the rights of everyday Americans, a culture that holds police above the law.

On Sunday, January 5, a North Carolina family called the police for help with their schizophrenic teenaged son, Keith Vidal, who was threatening the mother. As with many calls to the police, this proved to be a terrible mistake for those seeking help. Two officers showed up and managed to help subdue the ninety-pound eighteen-year-old. Then a third officer arrived, and within a couple minutes, the boy’s life was over. The last law enforcer on the scene said, “I don’t have time for this,” according to the boy’s stepfather. Keith was held down, tased, and then shot. The officer “reached right up, shot this kid point-blank, with all intent to kill,” the stepfather said. “Keith was not threatening anybody, Keith did not want any part of it. He was having a bad day. . . . He was flat out murdered, there was no need for deadly force. No reason.”

Yesterday, January 13, a jury acquitted two officers who beat a homeless schizophrenic man to death. On July 5, 2011, Fullerton, California, officers, responding to a tip about car vandalization, came upon a confused man, Kelly Thomas, and attempted to search him. According to the officers, he resisted a search. According to witnesses and video evidence, Thomas apologized and tried to comply. An officer put on latex gloves, and, according to the prosecutor, an unprovoked beating began. They hit him with batons and tased him five times. They called paramedics, one of whom says the police asked that an officer’s minor injury be treated first. Thomas was a bloodied pulp. Here’s how he looked, lying in a coma, before he died from his multiple wounds, if you can stomach the image. The prosecutor closed his argument with Thomas’s last words:

“Dad help me.”
“God help me.”
“Help me. Help me. Help me.”

During the 2008 presidential election, Barack Obama was asked if he would favor of a higher capital gains tax rate, even if the government received less revenue as a result. His answer: Yes.

When you stop to think about it, that’s a remarkable answer. By hypothesis, everyone is worse off. The owners of capital are worse off. The government is worse off. Poor people who depend on government are worse off.

Yet Obama’s answer wasn’t remarked upon. It was generally ignored. The reason: I think most people in the mainstream media took it as aberration. Maybe even a misstatement. And that is because the mainstream media doesn’t take the president seriously when he says he is against inequality — an understandable attitude, given that the first family just finished a 17 day, $4 million vacation in Hawaii.

But I have it on good authority that the president repeated that answer to the very same question in private fundraisers. So I’m willing to entertain the idea that he really means it. That implies that for Barrack Obama equality is a serious value — one that should be pursued even if it requires the destruction of wealth, less revenue for government, less welfare for the poor, and compromising on other things that are also of value. Not only am I willing to take Barack Obama seriously, I’m willing to give the benefit of the doubt to Paul Krugman, Joe Stiglitz, Robert Reich, and others.

Let’s admit it, folks. Maybe these guys aren’t the hypocrites many of you think they are. Maybe they are really serious.

I’ve written about sky-high hospital prices in this blog, especially for uninsured patients who present at emergency rooms. A related issue is price transparency. In most normal transactions, it is not hard to discover the price you will pay for a good or service. Indeed, for most ordinary items, prices are posted and we do not even spend much time negotiating.

For much of health care, this is untrue. It is usually very difficult to learn the price of a service from a doctor’s office or a hospital before receiving treatment. Doctors and hospital managers will often reply that they don’t know what the right prices are either, because charges are subject to adjudication by insurers.

When uninsured (and, increasingly, insured) patients are shocked by bills they receive after treatment, they often balk at paying inflated charges. This results in bad accounts receivable for hospitals, which I have argued is a necessary pain to cause hospitals to change.

While everyone outside the health sector agrees that more price transparency would be beneficial, others often propose solutions that increase government regulation. One example is a recent report written by the Pacific Business Group on Health, a group of large employers in Northern California.

Uwe Reinhardt had a column the other day in which he argued that:

1. We are paying Medicare Advantage plans more than we pay for similar patients in traditional Medicare.
2. Enrollees in traditional Medicare are paying higher Part B premiums in order to subsidize the higher MA payments.
3. This is bad public policy; we should instead have a level playing field for subsidies for both programs.

Now here is a surprise: I agree with Uwe.

Here’s a second surprise: I bet if they could get a real level playing field, the health insurers that offer MA plans would agree as well.

But Congress has not been willing to allow this. Politicians don’t just interfere with overall payment rates, Congress actually gets into the weeds and dictates payment rates on a county-by-county basis. The reason: to protect vested interests in the districts members of Congress represent.

50 years after LBJ declared a “War on Poverty,” the U.S. would do well to take a page from the global playbook—whereby economic liberalization and more open trade has resulted in an 80% decline in abject poverty since 1976.

The graphs below, taken from the National Bureau of Economic Research Working Paper, “Parametric Estimations of the World Distribution of Income,” surely ought to impress even the most avid central-planner:

Medicaid is a welfare program jointly funded by federal and state governments, which claims to provide health insurance to low-income people.

A few years ago, Oregon expanded Medicaid enrollment by lottery. This created an excellent environment to study the effects of being uninsured versus being enrolled in Medicaid, because it approximated a randomized-controlled trial — the gold standard of medical research, but seldom conducted in the social sciences.

The latest result of the study, published in Science, reported that Medicaid increased use of emergency rooms by 40 percent (gated abstract here, and reported here).

This result is important for anticipating the consequences of Obamacare. About half of the 30-plus million people expected to get health insurance under Obamacare will be enrolled in Medicaid, not private health insurance. Already, the administration asserts that four million new Medicaid enrollees have signed up via Obamacare (but this estimate has been questioned).

Nobody should be surprised: Despite politicians’ assertion that Medicaid coverage increases the likelihood of using primary care rather than an ER, the evidence points clearly to the contrary. For example, in Massachusetts, ER use soared by 17 percent two years after Gov. Romney’s law mandating insurance coverage came into effect.