This article from the Buckeye Institute says much of what I was thinking in terms of the payday lending legislation recently passed by Ohio:
A Payday Post-Mortem
By Marc Kilmer, posted June 2, 2008
In Biblical times, the people of Israel symbolically placed their sins on a goat and sent it into the wilderness. The modern idea of a scapegoat - an innocent person who takes the blame for the sins of others - comes from this historic practice. This notion is appropriate in light of the recent banishment of payday lenders from Ohio. The politicians who are presiding over a tax and regulatory structure which is killing the state's economy found a scapegoat in payday lenders. They placed the blame for Ohioans' financial woes on the backs of these businessmen and sent them away. Just as in ancient Israel, however, the sins of these politicians will not go away with the departure of these modern scapegoats.
The practice of providing high-interest, short-term loans to people should not be controversial. If people want or need these loans, and businesses think they can make a profit providing them, then there is no reason for a third party (or the government) to stop them. After all, people take a variety of different loans, from mortgages to car payments, and generally the government presumes that the borrower and lender are the best people to judge the merits of such financial arrangements.
But in this spring of economic discontent, with Presidential candidates crisscrossing the state highlighting the state's financial difficulties, the picture of Ohioans struggling to pay their bills played across both local and national media. Slow job creation, manufacturing plants moving across the border, and people being kicked out of their homes illustrated the poor economy Ohio has been saddled with this entire decade.
Of course, other states are having a much better time than Ohio. When manufacturing plants leave the state, the border they may cross is just as likely to be a state border rather than the national border. There are many businessmen who choose to locate in, say, Texas or Florida, states that offer a better tax rate and less government regulation.
Ohio, in fact, has one of the worst tax climates for business in the nation. Only two states come in ahead of it in this race to the bottom. Its regulatory burden is also far from ideal, with many other states doing better attracting investment and business. And, of course, the idea that workers do not have the freedom to choose whether or not they belong to a union is a huge incentive to look elsewhere when a business is looking to expand or move.
Are Ohio's elected officials looking at changing any of these things? No, they spent days debating whether or not a financial transaction between two willing people should be criminalized. Instead of trying to improve the conditions that have led businesses to go out-of-state and leave workers in Ohio with fewer job opportunities, they decided to shut down businesses that employ thousands across the state.
And, in perhaps the ultimate irony, they looked into the TV cameras and wailed about the "cycle of debt" as they continued to spend your money at a rate which is unsustainable given the revenue coming into the state�s coffers.
The idea that payday lending is the cause of the financial troubles of even a small fraction of Ohioans is contradicted by a variety of scholarly studies. The real source of many Ohio workers� economic problems is the state's onerous tax and regulatory structure. But payday lending has a bad reputation, so it was easier for them to legislate based on appearance, not on substance.
Now with payday lending banished from the state�s borders, what can we expect? Ohio will still continue to lag behind other states in terms of job creation and economic growth. Those who used payday loans will not magically have their financial picture improve. The only real effect is that those who were employed by payday lenders will now join the ranks of Ohio�s unemployed and those who used payday loans will, if scholarly data is correct, bounce more checks and pay more late fees.
The payday loan ban will not solve Ohio�s problems. To do that, legislators need to look at fundamental tax, regulatory, and labor reforms. Without taking steps like cutting taxes, streamlining regulations, and opening up the labor market, the state�s workers will have fewer and fewer options. Ohio's politicians used payday lenders as the scapegoat this time. What industry will they target when they fail to do their duty in the future?
Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus, Ohio.
Showing posts with label Marc Kilmer. Show all posts
Showing posts with label Marc Kilmer. Show all posts
Monday, June 09, 2008
Thursday, July 19, 2007
Socialized Medicine, SCHIP and the role of the GOP-UPDATED
As I was doing some research on the proposal to expand the SCHIP (State Children's Health Insurance Program) by taxing cigarettes and cigars, I came across and interesting perspective from Marc Kilmer of the Buckeye Institute.
(For some background information on this issue, I recommend local blogger Smoke If You Got 'Em, who has a post on the issue as well as the response to a letter he sent to Sen. Sherrod Brown. Toledo Talk also has a thread on the issue.)
Kilmer starts with an challenging question:
"If a politician ever suggested that taxes should be raised on the poor in order to pay for a product that people in the middle or upper class could already afford, it is not likely that this politician would have much of a future in office. So why, then, are so many members of the U.S. House and Senate rushing to support an effort to raise cigarette taxes (which hit the poor much harder than the rich) to pay for expanding federal health insurance program to include many middle class families?"
The reason, he explains, that SCHIP needs more money isn't just because of increasing medical costs - it's because coverage is being expanded to children in families that should be able to afford medical coverage (in some states a family of four can make up to $83,000 and still qualify) - and to ADULTS. In my logic, this doesn't make sense, as such expansions seem to be directly opposite to the original intent of covering children in families who made too much to qualify for medicare, but not enough to purchase their own insurance.
Kilmer says, "In fact, according to a recent study by the non-partisan Tax Foundation, almost 60 percent of American children would be eligible for government health care under a proposal being pushed by some Senators. Can anyone say with a straight face that this is really about “poor kids”?"
He further explains that the idea for such taxes is because "smokers impose such a heavy burden on government health care programs" so it's logical that they should pay more for medical care. But he rightly points out that children aren't supposed to be smoking, so how do you justify the use of such fund for them?
Kilmer hits the nail on the head with this statement:
"Why tax smokers more to pay for this program, then? I think it has a lot to do with the fact that people like “free” government programs. They like the concept of government funding children’s health care, but they do not want to pay for it themselves. So they pick out a group of folks engaged in activities they do not like – such as smoking – and decide to tax them."
But before you go off on the Democrats who are supporting this, remember that there are plenty on the right side of the aisle who believe this expansion of government is a good idea. In fact, it was a Republican Congress that, in 1997, gave us (what was at the time) the largest expansion of government health care since 1965, when Medicaid and Medicare were created.
The new federally funded program? "State Children's Health Insurance Program" (SCHIP).
At the time of passage, Congress estimated SCHIP would cost taxpayers $48 billion over ten years. Ten years later, the current figure being bandied about is $5.04 billion per year, which is not that much more than what's been spent, on average, each year previously. But the kicker is that the re-authorization is only for five years and some estimate that the shortfall from the states during that time frame could be $7 billion - yes, billion with a 'b'...
Ironic - when the Democrats controlled Congress in 1993, the Clinton administration failed to pass a national plan for socialized medicine. But Republicans, in 1997, implemented the administration's backup plan. According to the Association of American Physicians and Surgeons (AAPS), a "kids first" strategy which could be implemented through Medicaid was the backup option in case the larger plan failed. Many rejected 'HillaryCare' as socialized medicine...but those same people willingly took the first step toward the end goal by passing SCHIP.
So why did the GOP do this? Some speculate that they caved to an effective Democrat strategy which went something like this: Let's propose a new government program for children and fund it with cigarette taxes. Then, if Republicans oppose "KidCare" we'll charge that they don't care about children and that the only reason they oppose it is because they get large sums of money from the tobacco industry. This was a brilliant political strategy and one that is duplicated in numerous issues today. How many times do you hear, in a campaign, that it's 'for the children'?
At the time of passage, there was concern that the program would encourage families and employers to drop private health insurance and take this new government subsidy.
Estimates from the Congressional Budget Office in 1997/1998 were that half of the participants in the new program would be families who gave up private insurance. And they had good reason for such expectations....In 1987, Medicaid was expanded to pregnant women and their children with incomes 250% of the poverty level. Between 1988 and 1995, the number of kids covered by private insurance fell 8 percentage points while the percentage of kids covered by Medicaid climbed 7.6 points. Some studies showed that at least 3/4 of the shift was the result of parents dropping private coverage for themselves and their children.
Another concern at the time was that SCHIP would eventually become mandatory, regardless of family income or need. With the current proposed expansion to higher income levels, it's not yet mandatory, but it looks like it will certainly become the 'insurance of choice' for those eligible, after all - if the government is going to pay for something, why should I?
In 1994, the Republicans won control of Congress by promising to reduce government. But they didn't. Recently, under the guise of 'compassionate conservatism,' Republicans continued to expand the scope and reach of the federal government. One would think they would have learned a good lesson from previous experiences - that it is almost impossible to roll back entitlement programs once they're created, especially health-care entitlements. Yet instead of learning that lesson, in 1997 Republicans helped create the largest health-care entitlement in 30 years. And then, in 2003, they exceeded their previous record by passing what became the largest expansion of health-care entitlements when they approved the Medicare Prescription Drug program.
If they support the proposed expansion of eligibility for SCHIP, they may get credit for paving the road to socialized medicine.
UPDATE:
Fellow SOBers weigh in: Porkopolis has additional information on SCHIP and some good links, and One Oar in the Water shares thoughts about socialism and presidential candidate Ron Paul.
(For some background information on this issue, I recommend local blogger Smoke If You Got 'Em, who has a post on the issue as well as the response to a letter he sent to Sen. Sherrod Brown. Toledo Talk also has a thread on the issue.)
Kilmer starts with an challenging question:
"If a politician ever suggested that taxes should be raised on the poor in order to pay for a product that people in the middle or upper class could already afford, it is not likely that this politician would have much of a future in office. So why, then, are so many members of the U.S. House and Senate rushing to support an effort to raise cigarette taxes (which hit the poor much harder than the rich) to pay for expanding federal health insurance program to include many middle class families?"
The reason, he explains, that SCHIP needs more money isn't just because of increasing medical costs - it's because coverage is being expanded to children in families that should be able to afford medical coverage (in some states a family of four can make up to $83,000 and still qualify) - and to ADULTS. In my logic, this doesn't make sense, as such expansions seem to be directly opposite to the original intent of covering children in families who made too much to qualify for medicare, but not enough to purchase their own insurance.
Kilmer says, "In fact, according to a recent study by the non-partisan Tax Foundation, almost 60 percent of American children would be eligible for government health care under a proposal being pushed by some Senators. Can anyone say with a straight face that this is really about “poor kids”?"
He further explains that the idea for such taxes is because "smokers impose such a heavy burden on government health care programs" so it's logical that they should pay more for medical care. But he rightly points out that children aren't supposed to be smoking, so how do you justify the use of such fund for them?
Kilmer hits the nail on the head with this statement:
"Why tax smokers more to pay for this program, then? I think it has a lot to do with the fact that people like “free” government programs. They like the concept of government funding children’s health care, but they do not want to pay for it themselves. So they pick out a group of folks engaged in activities they do not like – such as smoking – and decide to tax them."
But before you go off on the Democrats who are supporting this, remember that there are plenty on the right side of the aisle who believe this expansion of government is a good idea. In fact, it was a Republican Congress that, in 1997, gave us (what was at the time) the largest expansion of government health care since 1965, when Medicaid and Medicare were created.
The new federally funded program? "State Children's Health Insurance Program" (SCHIP).
At the time of passage, Congress estimated SCHIP would cost taxpayers $48 billion over ten years. Ten years later, the current figure being bandied about is $5.04 billion per year, which is not that much more than what's been spent, on average, each year previously. But the kicker is that the re-authorization is only for five years and some estimate that the shortfall from the states during that time frame could be $7 billion - yes, billion with a 'b'...
Ironic - when the Democrats controlled Congress in 1993, the Clinton administration failed to pass a national plan for socialized medicine. But Republicans, in 1997, implemented the administration's backup plan. According to the Association of American Physicians and Surgeons (AAPS), a "kids first" strategy which could be implemented through Medicaid was the backup option in case the larger plan failed. Many rejected 'HillaryCare' as socialized medicine...but those same people willingly took the first step toward the end goal by passing SCHIP.
So why did the GOP do this? Some speculate that they caved to an effective Democrat strategy which went something like this: Let's propose a new government program for children and fund it with cigarette taxes. Then, if Republicans oppose "KidCare" we'll charge that they don't care about children and that the only reason they oppose it is because they get large sums of money from the tobacco industry. This was a brilliant political strategy and one that is duplicated in numerous issues today. How many times do you hear, in a campaign, that it's 'for the children'?
At the time of passage, there was concern that the program would encourage families and employers to drop private health insurance and take this new government subsidy.
Estimates from the Congressional Budget Office in 1997/1998 were that half of the participants in the new program would be families who gave up private insurance. And they had good reason for such expectations....In 1987, Medicaid was expanded to pregnant women and their children with incomes 250% of the poverty level. Between 1988 and 1995, the number of kids covered by private insurance fell 8 percentage points while the percentage of kids covered by Medicaid climbed 7.6 points. Some studies showed that at least 3/4 of the shift was the result of parents dropping private coverage for themselves and their children.
Another concern at the time was that SCHIP would eventually become mandatory, regardless of family income or need. With the current proposed expansion to higher income levels, it's not yet mandatory, but it looks like it will certainly become the 'insurance of choice' for those eligible, after all - if the government is going to pay for something, why should I?
In 1994, the Republicans won control of Congress by promising to reduce government. But they didn't. Recently, under the guise of 'compassionate conservatism,' Republicans continued to expand the scope and reach of the federal government. One would think they would have learned a good lesson from previous experiences - that it is almost impossible to roll back entitlement programs once they're created, especially health-care entitlements. Yet instead of learning that lesson, in 1997 Republicans helped create the largest health-care entitlement in 30 years. And then, in 2003, they exceeded their previous record by passing what became the largest expansion of health-care entitlements when they approved the Medicare Prescription Drug program.
If they support the proposed expansion of eligibility for SCHIP, they may get credit for paving the road to socialized medicine.
UPDATE:
Fellow SOBers weigh in: Porkopolis has additional information on SCHIP and some good links, and One Oar in the Water shares thoughts about socialism and presidential candidate Ron Paul.
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