Earlier today, DDay pointed out that the NYT, after issuing a fairly pointed correction revealing Jonathan Gruber’s ties with the Administration, then used a quote from Gruber without disclosing his role in the Administration. DDay was focusing on the NYT’s actions. But I would like to focus on the quote.

Jonathan Gruber, a Massachusetts Institute of Technology economist, predicted the excise tax would raise workers’ wages from 2010 to 2019. “There are many academic studies showing that when health costs rise, wages fall,” he said. “In the mid- and late 1990s, when we got health costs under control, wages rose nicely.” But he added that other factors could have also lifted wages during that period.

According to Stephen Greenhouse, Gruber repeated the claim that the excise tax would result in a pay increase for the little guys, and then did the following:

• Noted that “many” academic studies (though he doesn’t say it, some of them are Gruber’s own studies) show that “when health costs rise, wages fall”
• Pointed out that during the late 1990s, the slowing rise in health care costs coincided with wage increases
• Admitted that “other factors could also have lifted wages during that period”

With this formulation, Gruber dramatically backs off one of the key claims excise tax supporters make about the tax–that it will result in a pay increase for those affected. Indeed, he seems to suggest (though I’d need to see a direct quote to be sure) that he doesn’t actually know whether decreasing health care costs would increase wages. He certainly doesn’t appear to say he’s got a study to prove that.

This is one of the reasons why I believe Gruber’s now-revealed ties to the Administration are so important.

The Recursive Claims To Support the Excise Tax Raises

As you might recall, one of my biggest gripes about the excise tax have to do with a bunch of seemingly unexamined assumptions that go into it. For example, the claim that employers would have actual savings from cutting back expensive insurance plans, rather than managing simply to keep health care spending constant; or the claim that increasing out-of-pocket claims will decrease costs without affecting outcomes. Both are dubious and, if they’re wrong, then not only will the tax not generate the revenue promised, but it will make people less healthy.

But one of my biggest gripes was precisely this claim, that employers would pass on presumed savings to employees. I first questioned the claim when Ezra made it based on an uncritical demonstration of the relationship in the 1990s that Gruber points to. Then, I spent an entire post both trying to trace how the White House had justified that claim in a blog post, and pointing out the evidence that contradicted it. I also spent the better part of a day asking economists to point to proof that employers would pass on savings to employees; one normally friendly economist who has elsewhere backed the claim ignored my question; several more pointed to studies showing, again, the inverse (that when health care costs rise, wages fall). More recently, the Economic Policy Institute did analysis–partly based on White House aide Jared Bernstein’s work–showing that wages didn’t go up in the 1990s because health care cost increases slowed.

In other words, no one has been able to point to a study that supports the case. And a lot of data from the real world suggests just the opposite would occur–that employers would pocket the savings as profit rather than passing them onto employees.

The Joint Committee on Taxation and the Excise Tax Raise Claim

Now, the one place that people do point to (aside from things like Gruber’s papers showing the inverse relationship) to defend their Excise Tax Raise claim is a report from the Joint Committee on Taxation, a non-partisan Congressional Committee that provides the same kind of reviews as CBO (but, because it is managed by Committee chairs, may be more exposed to political pressure). I’ll come back to this, but here’s what Center for Budget and Policy Priorities says JCT said about the Excise Tax Raise:

Similarly, the JCT writes, “We expect that consumers will seek less costly policies that will reduce their exposure to the excise tax. Cost reductions could be achieved through several strategies, ranging from managed care plans and limited provider networks to more out-of-pocket cost sharing by consumers. When employers offer employees less costly plans, the employees will have less compensation in the form of non-taxable health care benefits and more in the form of [taxable] cash compensation.”

JCT projects that only 20 percent of the revenues from the proposal in 2014 will come from the excise tax itself, with the remaining 80 percent coming from additional income and payroll taxes on the increased cash compensation that workers will receive. By 2019, fully 83 percent of the additional revenues will come from taxes on higher wages and salaries, not the excise tax.[11]

And here’s what the Chief of Staff of JCT, Thomas Barthold, said to Congressman Joe Courtney, one of the biggest skeptics of the excise tax.

As you can see in the table, other than the first year, the percentage owing to excise taxes is declining over the period, as consumers shift away from higher cost health coverage towards increased wage benefits.

That is, JCT appears to simply assume that workers, not their employers, get to choose whether they want higher cost health care or raises. But I have not found JCT actually citing a study that supports that claim.

Gruber and the Excise Tax Raise Claim

As it happens, Gruber has written three papers (none of these are peer-reviewed; these papers seem to be hybrids that place him squarely in the policy debate about these issues, but not–Gruber says–part of his work-product under the contract with HHS) that include defenses of the Excise Tax Raise claim.

• November 5: Implications of JCT Score
• November 17: Response to AFSCME Criticisms
• November 20: Impacts of Excise Tax on Wages

These papers–particularly the November 5 one–are another source cited to defend the claims about the excise tax.

Let me start with the November 17 paper. I don’t dispute some of Gruber’s argument about the AFSCME complaints (note, Gruber hasn’t done a similar response to the CWA’s much stronger report illustrating the problems with the Excise Tax, nor to a recent EPI report that seriously challenged this claim). Here’s what Gruber says about the Excise Tax Raise:

Claim: The argument that reduced employer-sponsored insurance spending will lead to higher employee wages is “speculative”

Reality: The available evidence clearly illustrates that there is essentially a one to one offset between employer insurance spending and wages. There are a number of economics studies that support this conclusion. But it is perhaps most vividly illustrated by simply comparing the growth rate of health insurance costs to the growth rate of wages, a task recently undertaken by Ezra Klein:

It is readily apparent in this graph that when health care costs moderate, wages rise – but as health care costs increase, wages fall.

Moreover, the ultimate authority on this topic is the Joint Committee on Taxation, and they have clearly spoken: the shift away from high cost insurance raises wages. As I have illustrated in another analysis, the JCT estimates imply that net worker wages will increase by over $300 billion over the next decade under the Senate Finance Committee’s proposed excise tax, after taking out the payments on this high cost insurance tax. The shift out of excessively generous health insurance plans and into wages is a major boon to U.S. workers.

Now, Ezra, to his credit, twice notes this is a correlation (and even calculates it), not proof of causation. But not the economist we’re paying $400,000–for him, “it is readily apparent” is strong enough proof. In my post on this, JTMinIA raised some problem with this correlation. And the EPI does an even more thorough job explaining why this graph can’t prove what Gruber claims it does.

The other value of Ezra’s post is this classic:

Earlier in the day, I’d been talking to MIT economist Jon Gruber about this issue. “There are a few things economists believe in our souls so strongly that we have a hard time actually explaining them,” he said. “One is that free trade is good and another is that health-care costs come out of wages.”

Ahem.

These are, Gruber makes clear, articles of faith, not proven facts. And the absence of any study actually proving this claim (which, I’m sure, most economists would consider less foundational than free trade, for what that’s worth) is instead pitched as a simple “hard time actually explaining.”

Which leaves Gruber, in this paper, with the JCT paper. The “another analysis” Gruber refers to is his own November 5 paper, in which he refers to the JCT’s apparently uncritical assumption that employers will pass on savings in the form of wages.

This [JCT] memo shows the year-by-year revenues raised by the High-cost insurance tax. Importantly, the memo highlights the two different ways the High-cost insurance tax raises revenues. The first is through actual excise tax receipts paid by those high cost plans that remain above the High-cost insurance threshold. The second is through the fact that firms will spend less on health insurance – and this reduced spending will be shifted to workers in the form of higher wages. This conclusion of wage shifting is supported by both economic theory and evidence, and is assumed in modeling by both the JCT and the CBO. This division is very informative: the JCT estimates that about 80% of the revenues raised by the High-cost insurance tax will come from revenue from higher wages, not from the excise tax itself.

Gruber–the guy who has been distinctly unforthcoming about the fact that he had been doing simulations to find out the outcomes of various policy outcomes for more than seven months by the time he wrote this paper–then makes a show of calculating the increased wages based on the JCT numbers.

The JCT estimates can be used infer the impact of the High-cost insurance tax on wages.

[snip]

Key findings[…] are:

• Worker wages rise by $74 billion by 2019,
• Worker wages rise by $313 billion in aggregate over this time period, or more than one-third of the estimated price tag of the entire health reform bill

In the November 20 paper, Gruber repeats the same exercise using the revised Senate bill.

Estimates from the Joint Tax Committee (JCT) can be used to demonstrate the important effect of the High-cost insurance tax in terms of increasing worker wages. Using data from the JCT, I show in this memo that the high-cost insurance tax will

• Raise net worker wages from 2013 through 2019 by $234 billion
• By 2019, net wages per insured household will be $700 higher because of this excise tax

Do you begin to see why Gruber’s failure to disclose the fact that he has been doing simulations on this stuff is so problematic?

Now, before I move on, let me emphasize what these papers don’t do. They don’t cite any study that proves that a decrease in health care costs bring about an increase in wages. Gruber says they exist,

There are a number of economics studies that support this conclusion.

But as his primary proof, Gruber links to Ezra’s pretty picture (which has since been debunked) and to the JCT analysis (which itself doesn’t seem to cite any evidence). And, apparently, in the conversation supporting Greenhouse’s article, Gruber didn’t cite one either. Gruber, supposedly the expert on precisely this issue, twice stops well short of providing proof for this assertion that wages will increase if benefits are taxed.

Who Is Doing the Simulations?

But I’m more interested in where that leaves us. The popular press often cites Gruber for this claim (without, of course, any disclosure that he’s working for the Administration), and Gruber cites JCT. And neither of them, apparently, cite any study proving this claim.

More interesting to me is that a guy who had, by the time he wrote his November 5 paper, received something in the neighborhood of $250,000 doing simulations showing what would happen if “the President’s plan” were implemented, seeming to work backwards off of the public JCT data, all the while proclaiming “the ultimate authority on this topic is the Joint Committee on Taxation.”

In one explanation to Ben Smith, Gruber said,

Gruber said his work for the administration was running the sort of cost simulations that the Congressional Budget Office does, based on a model that he’d spent 10 years developing. “I’m the numbers guy,” he said.

Part of its value, Cohn writes, is that it helped the administration predict CBO scores.

In an earlier one, Gruber said,

Throughout this year I have provided technical assistance to the administration and to Congress with my micro-simulation model, as well as based on my experience as a member of the Massachusetts health connector board.

Now, to be fair, Gruber once told Jonathan Cohn that he wasn’t doing the same analysis as the CBO on a different topic,

He hasn’t formally modeled the impacts of the reforms on premiums; for this analysis, he has relied simply on available data from the Congressional Budget Office.

But Gruber’s admission that his consulting includes working with Congress doing the same kind of analysis as CBO, and his repeated production of papers that apparently replicate analysis done by CBO and JCT, apparently does just that sort of analysis before the CBO and JCT do them.

Only, in papers he says had nothing to do with his contract, to then work backwards off the analysis of CBO and JCT to prove points that then get used in the Administration’s support of its preferred version of health care reform.

I’m sure Gruber is not doing the CBO’s work for him. I doubt he’s doing JCT’s work either. (Though, in both cases, I’m mindful of the delay Reid had every time he submitted something to the CBO.)

But the way in which Gruber repeatedly does this kind of analysis, all the while suggesting he hasn’t been doing precisely this kind of analysis for the Administration, raises more questions about his role.

One of the biggest puzzles in Jonathan Gruber’s explanation for why he hasn’t been disclosing his $400,000 HHS contract as he has led the campaign to support the bill is timing. By his own admission, he revealed the contract for a disclosure form associated with a December New England Journal of Medicine article. That form was dated November 30.

But the WaPo did not disclose the relationship for an op-ed published almost a month after he filled out that disclosure form.

Now, Gruber says he has disclosed the contract whenever he has been asked.

Gruber told POLITICO that he has told reporters of the contract “whenever they asked.”

But in a follow-up with the WaPo, Ben Smith reports that Gruber was asked by the WaPo, and he said he didn’t have any financial conflicts.

Washington Post op-ed editor Autumn Brewington emails that the Post, as a practice, asks writers to disclose any “conflicts of interest that might be relevant to this op-ed, including but not limited to financial or family relationships with any of the subjects of the article” and that Gruber, when asked whether he “received any funding, for research or otherwise, from organizations or persons identified in the column,” answered “no.”

Now, perhaps there’s some wiggle room here. Perhaps, since Gruber’s op-ed doesn’t mention HHS, even though it mentions the health care reform he was hired to consult on repeatedly, he felt he didn’t need to reveal the conflict. Perhaps there’s some confusion at the WaPo, which itself is having problems disclosing ethical conflicts (though Ben says Brewington was quoting directly from the exchange on disclosure).

But, at least given what we know, it looks like Gruber felt obliged to reveal the conflict to the NEJM on November 30, but when asked a similar question about financial conflicts less than a month later, he did not disclose it.

After I learned that Jonathan Gruber–one of the biggest pitchmen for the Administration’s health care reform–had also gotten a significant sole source contract from HHS, I wanted to get a sense of how sound the justification for the sole source on it was. I asked Dr. Uwe Reinhardt about the contract. Reinhardt, a professor at Princeton, has himself testified on health care financing to Congress. And he has been critical of the whole hocus pocus that lies at the heart of the excise tax proposal.

“The consumer-directed-health-care crowd argues that with high cost-sharing, patients will do the only legitimate . . . cost-benefit calculus — but that surely is nonsense,” said Princeton economist Uwe Reinhardt. “None of these proponents has ever shown that patients are even capable of evaluating the clinical merits” of treatment options.

That said, Reinhardt does vouch for the quality of Gruber’s simulations. When I asked him whether he could have applied for this contract (given that he, like Gruber, is an acknowledged expert in the financing of health care), he said,

If I had constructed as a sophistiated a simulation model for health reform as has Jon Gruber, I certainly would have been in the running for a competitive bid. But there are not many sophisticated models of this sort around.

Gruber is one of the brightest young health economists (and public-finance specialists) in the field. He thinks and writes twice as fast as most of his peers (although David Cutler at Harvard comes to mind as well). So I am sure that, too, weighed in his favor with this contract. Just have a look at his textbook in Public Finance to get a feel for the man.

All simulation models suffer from the fact that their predictions are a function of a series of assumptions that must be fed into the models. I certainly would trust one of Gruber’s simulations more than those produced for much higher fees for trade associations.

Mind you, that doesn’t excuse Gruber’s disclosure lapses, nor does it recommend having the top pitchman for a policy also be the guy running simulations to see how it’ll turn out. But at least according to Reinhardt, we’re not going to get better simulations than we’re getting from Gruber.

I was intrigued to see Gruber link–in his response to Ben Smith–to his May 2009 analysis of how to measure affordability for a national healthcare reform plan. After all, I’ve been debating with people who love to cite Gruber on affordability for months, and I’ve never seen them cite it. Now there are several reasons they might not want to rely on this paper. It might be that he starts out by arguing that you can still call something “affordable” even if it isn’t affordable for everyone.

In considering affordability for a group, we need to establish a sensible benchmark whereby insurance is considered affordable if “most of” a group can afford it. We can disagree about what “most of” means, but it would be wrong to define “most of” only as “very close to 100%.”

This, of course, accepts as a baseline some continued medical debt (at least) or even bankruptcies in your definition of “affordable.”

Or maybe it’s the fact that Gruber insists that health insurance (not care) be considered as the same kind of necessity as food and shelter.

Second, it implicitly assumes that health care is less important than these other categories; that is, that if individuals have to spend their resources on these other categories, then they should not have to spend resources on health care. It is unclear why health insurance should take a lower position on the priority scale than other necessities.

But the thing I’m most troubled by in this paper is something Gruber neglects to mention: real data from MA on the number of people who forgo necessary medical care because it is not affordable.

In March 2009–two months before Gruber wrote this paper–MA released the first results [PPT] of how that state’s health care reform had improved access. It showed that 21% of the total population–and even 12% of children–forgo necessary medical care because they cannot afford it. Of the 21% forgoing care, most (something like 18 or 19%) have health insurance–but it is health insurance they can’t afford to use. In a paper contemplating what constitutes affordability for a national plan that resembles the MA plan in many ways, Gruber uses national Kaiser/HRET data, rather than the MA data that is much more directly on point.

Now, I might excuse other analysts for ignoring the MA results, except for two things. First, Gruber boasts of his involvement in the MA program as part of his explanation for his qualifications for the HHS contracts.

Throughout this year I have provided technical assistance to the administration and to Congress with my micro-simulation model, as well as based on my experience as a member of the Massachusetts health connector board.

Also, when the facts from MA suit his argument, he uses them, as he did in a November analysis of how much the Senate plan would reduce premiums.

So rather than looking at a real world study showing what happens when a program very similar to the Senate plan goes into effect–which shows that a significant number of people can’t afford to use their health insurance–here’s what Gruber says about how out-of-pocket expenses affect affordability.

A very conservative response would be to say that a plan is only affordable if the premiums plus the maximum out of pocket exposure does not exceed available resources. This is very conservative because while premium payments are certain, out of pocket payments are not, and a sizeable majority of enrollees will not reach the out of pocket limit.

Moreover, there is a strong argument that out of pocket costs should not be incorporated into a discussion of affordability of insurance. After all, individuals face more out of pocket risk without insurance than they do with coverage. Thus, if an individual is very ill and faces large out of pocket costs under an insurance plan, they would have faced at least those same out of pocket costs, and likely more, had they remained uninsured. So it would be wrong to say that those out of pocket costs were responsible for making insurance unaffordable. That is, it is nonsensical to argue that very sick individuals cannot afford insurance because they will have large out of pocket costs under the insurance plan; indeed, the problem is that these individuals cannot afford not to have insurance.

This is analysis that Jonathan Cohn, with data from Gruber, expands upon here.

But it all comes back to that underlying premise. So long as you define “affordable” in such a way that accepts ongoing medical debt for at least some of your sample in your definition of affordable, then this approach–looking at total risk, rather than whether insurance equates to care, makes sense. It transforms the question of whether health care (not health insurance) is affordable into one that measures degrees of indebtedness for using health care.

But then again, that’s what a lot of bill apologists do: consistently oversell what this kind of reform does, by conflating health insurance with health care.

Update: Fixed percentages forgoing care for clarity.

Ben Smith got a fairly long response from Jonathan Gruber on why he hasn’t disclosed the $392,600 contracts he has had with HHS during the period when he was the chief spokesperson for the Administration’s health care plan. He lays out his qualifications and points to some studies addressing the questions I have asked (I’ll return to them shortly). The bulk of his response is spent insisting that everything he has said was completely consistent with his beliefs (which, if I remember correctly, is just what Armstrong Williams had to say).

Moreover, at no time have I publicly advocated a position that I did not firmly believe – indeed, I have been completely consistent with my academic track record. On the two issues this article raises:

But that, of course, wasn’t the point. I don’t doubt he believes all this stuff. But why didn’t he disclose it? Here’s what he says about that.

Gruber told POLITICO that he has told reporters of the contract “whenever they asked” and noted that he formally disclosed that “I am a paid consultant to the Obama Administration” in a form attached to his most recent, December 24 article in the New England Journal of Medicine, though it wasn’t widely known by reporters on the beat.

So, nine months after he first gets a contract with HHS, he starts disclosing the relationship, and only to the organization that can totally discredit him professionally, not to those that will more directly affect the health care debate? Gruber was first put under contract in March of last year–$95,000 to promote “the President’s” plan–and the received another $297,600 in June. Why no disclosure then? And why–after he decided he ought to start disclosing this stuff–did he not disclose it in a December 28 op-ed in the WaPo?

MIT health economist Jonathan Gruber has been the go-to source that all the health care bill apologists point to to defend otherwise dubious arguments.  But he has consistently failed to disclose that he has had a sole-source contract with the Department of Health and Human Services since June 19, 2009 to consult on the “President’s health reform proposal.”

He is one source for the claim that the excise tax will result in raises for workers (though his underlying study is in-apt to the excise tax question). He is the basis for the argument that the Senate bill reduces families’ risk–even if it remains totally unaffordable. Even Politico stenographer Mike Allen points to Gruber’s research.

But none of the references to Gruber I’ve seen have revealed that Gruber has a $297,600 contract with HHS to produce,

a technical memorandum on the estimated changes in health insurance coverage and associated costs and impacts to the government under alternative specifications of health system reform. The requirement includes developing estimates of various health reform proposals on health insurance coverage and cost. The alternative specifications to be considered will be derived from the President’s health reform proposal. [my emphasis]

(h/t Mote Dai)

The President’s health reform proposal? But I thought this was the Senate’s health reform proposal?!?!? (wink!)

Now, HHS says they had to put Dr. Gruber in charge of evaluating health care reform proposals because he’s got,

a proven micro-simulation model with the flexibility to ascertain the distribution of changes in health care spending and public and private sector health care costs due to a large variety of changes in health insurance benefit design, public program eligibility criteria, and tax policy.

Even assuming that Gruber is the only one in the world who can run these simulations, don’t you think it’s rather, um, dubious that the guy evaluating the heath care reform–for $300,000–is also the package’s single biggest champion?

And no one has been transparent about this contract?

Update: Actually, Gruber failed to disclose his $392,600 contracts with HSS. The reference to ongoing work in the bigger, second one refers to a $95,000 contract he had from March 25, 2009 to July 25, 2009.

In an article lacking some pretty important follow-up questions, Jodi Kantor tucks in this judgment, from C Street member Bart Stupak.

He is trying to pass the health care overhaul, he insists, not sabotage it, and predicts that the legislation will ultimately collapse for reasons apart from abortion. But he will be blamed anyway, he is sure.

“I get the distinct impression that I’m the last guy the president wants to see,” he said. [my emphasis]

Now, at one level, I think Stupak is right on. The women in both the House and Senate have proven themselves willing to allow Stupak and Ben Nelson to use health care as a means to restrict access to reproductive care in this country; there’s no reason to believe that that will change.

But I am curious why, then, Stupak believes health care will fail.

There are, IMO, two possible reasons. The most obvious would be if the House refused to accept the Senate’s Hocus Pocus Excise tax. A couple of the corporatist Democrats in the Senate, having refused other, more effective cost control measures (like drug reimportation and a public option) insist on the Hocus Pocus Excise tax, claiming they need to do something to control cost. So if the House were to refuse to accept that as is, it might well scotch the bill.

But there’s another possibility: that those same corporatist Democrats refuse to accept ways (probably subsidies) to make the bill remotely affordable to the middle class. That would be news. Because it would mean that Stupak, who is not himself a Blue Dog but who may know their mood on this, may have reason to believe we’ll actually lose conservatives in the House (or those same obstructionists in the Senate) if this bill becomes anything but a plan to turn the American middle class into serfs handing over chunks of their income away to the health care industry.

As Brian Beutler reports, Nancy Pelosi’s snippy comment about Obama’s campaign promises was a reference to the White House’s demand that the House accept the Senate excise tax.

[Pelosi] aides say she’s particularly steamed that the White House wants her to largely adopt the Senate bill in its entirety. And she’s particularly unhappy that the White House has thrown its weight behind the Senate bill’s chief funding mechanism: an excise tax on so-called “Cadillac” insurance policies, which she and many in her caucus have long believed violates President Obama’s pledge not to raise taxes on the middle class. According to one aide, that–not the public option–was likely the reason she ribbed Obama at her press conference yesterday, quipping, “there were a number of things he was for on the campaign trail.”

The House proposes paying for its bill by imposing a surtax on high-income Americans. And though there’s been speculation for months that the final reform package will include a combination of both sources of revenue, Pelosi, who’s already had to accept the demise of the public option, wants the excise tax gone.

Yet, the White House has not revisited any of the assumptions it has made about the excise tax that seem to be increasingly dubious–such as that it will end up giving workers a raise.

Interestingly, the EPI has just released a paper debunking the claim.

There is logic to [the argument that cutting health care costs leads to wage growth], but it is only skin-deep and deeper examination will show it to be simply not true. The logic can be seen looking at trends in health care premiums and wages—wage growth fared better in the late 1990s when health care premiums grew more slowly than in the early 1990s and wages performed poorly in the 2000s, a period when health premiums grew strongly again.

However, digging just a bit beneath the surface reveals the following:

1. Health care costs are not large enough to substantially move wages as these proponents claim;
2. Examination of actual wage and benefit trends confirms that changes in the trajectory of health care costs did not materially affect wage trends over the last 20 years; and
3. The wage behavior described—accelerating in the late 1990s and more slowly thereafter—actually best characterizes wage growth for low-wage workers who have minimal access to employer-based health care. Conversely, this pattern of wage-growth over time is least pronounced for higher paid workers with the most health coverage.

Clearly, this “health care theory of wage determination” is wrong, and other factors explain these overall wage trends. The simple explanation is that productivity accelerated in the mid-1990s, and the low unemployment (and hikes in the minimum wage) facilitated faster wage growth. That this wage growth disappeared entirely in the 2002-07 recovery is not due to faster health care cost increases but to weak employment growth and employers’ ability to achieve increased profitability rather than pass on productivity gains to workers. This reveals a fundamental flaw in our economy: productivity gains are not passed on to higher living standards for workers.

Now, it should surprise no one that EPI is taking this on. After all, if I can debunk this myth, than surely real economists can, too.

But I find it interesting in that the paper itself cites an earlier paper co-authored by Jared Bernstein.

About half of all workers don’t even receive employer-provided coverage. According to the U.S. Bureau of Labor Statistics (BLS), 47% of workers did not participate in employer-provided health care benefit plans in 2005. Thus, there is no health care squeeze that would explain the wage losses of nearly half the workforce. In addition, the BLS data show that among workers whose average wage was less than $15 per hour last year, only 39% participated in employer-provided health plans….. low-wage workers also lost the most ground in terms of real wages. Thus, those least likely to get health care experienced the greatest loss in real wages, the opposite of what the trade-off explanation would predict.

Bernstein, of course, has gone on to a new job: working in the White House (albeit advising Biden, not Obama directly).

In other words, they’ve got to know that their earlier claims are–at the least–potentially flawed. Yet still they push it.

Of course, there’s a reason for that. It’s that the White House has promised some kind of cost controls. There were a number of cost controls discussed which used the power of the market to bring costs down: things like drug reimportation and a public option. But the White House chose, instead, to pursue this stinker. And now it has to invent some myths–the wage increase myth debunked here–to try to get around the fact that this does amount to a middle class tax hike.

Just before the holiday, Democratic leaders forced Senator Byron Dorgan to forgo a key policy initiative–drug reimportation–so as to push through a stinker of a health care reform bill. And while he says his decision “does not relate to any dissatisfaction that I have about serving in the Senate,” over the holiday he decided not to run for re-election.

Although I still have a passion for public service and enjoy my work in the Senate, I have other interests and I have other things I would like to pursue outside of public life. I have written two books and have an invitation from a publisher to write two more books. I would like to do some teaching and would also like to work on energy policy in the private sector.

So, over this holiday season, I have come to the conclusion, with the support of my family, that I will not be seeking another term in the U.S. Senate in 2010. It is a hard decision to make after thirty years in the Congress, but I believe it is the right time for me to pursue these other interests.

Let me be clear that this decision does not relate to any dissatisfaction that I have about serving in the Senate. Yes, I wish there was less rancor and more bipartisanship in the U.S. Senate these days. But still, it is a great privilege to serve and I have the utmost respect for all of the men and women with whom I serve.

It has been a special privilege to serve with Senator Conrad and Congressman Pomeroy, who do an outstanding job for our state. And although he inherited an economy in serious trouble, I remain confident that President Obama is making the right decisions to put our country back on track. Further, my decision has no relationship to the prospect of a difficult election contest this year. Frankly, I think if I had decided to run for another term in the Senate I would be reelected.

But I feel that after serving 30 years, I want to make time for some other priorities. And making a commitment to serve in the Senate for the next seven years does not seem like the right decision for me.

This is a huge loss for Democrats–first and foremost because Dorgan is one of the good guys, largely uncorrupted by the nastiness of DC. In addition, it is almost sure to be a loss for Democrats, as Republican Governor John Hoeven would win this election in a landslide, if he chooses to enter it.

Senator Dorgan, thank you for your service. But you will be missed.

There’s a lot I object to in Hendrik Hertzberg’s judgment of those opposed to the Senate health bill as “pathetic.” His entire piece revolves around the claim that bill critics are committing a pathetic fallacy: attributing to an inanimate object–Congress–animate actions–passing the bill.

The pathetic fallacy is a category mistake. It’s the false attribution of human feelings, thoughts, or intentions to inanimate objects, or to living entities that cannot possibly have such feelings, thoughts, or intentions—cruel seas, dancing leaves, hot air that “wants” to rise.

Yet most critics have been very specific about the people (Harry Reid for his inability to enforce party discipline, Rahm and others for prioritizing deals with the industry over cost containment, Joe Lieberman for being Joe Lieberman) who have made this bill what it is. It is Hertzberg’s fallacy, not critics’, to suggest that this bill got so bad because of an inanimate object called “the system.” Indeed, suggesting the end result of the actions of a small group of fully deliberate beings is not the product of human will serves as a neat excuse for those who want to obscure the process and decisions that resulted in this bill.

Hertzberg also curiously invokes the defeat of Kennedy’s Medicare efforts in the Senate (after which, two years later, the bill passed) to argue we are faced with a choice between the status quo or this bill. The history of prior reforms can and has been used as a double edged sword in this debate, so I’m not arguing that the lesson offers us any real insight into the fate of health care if we do or don’t pass this bill. But used as he is doing, doesn’t it suggest the possibility that, if this bill were to fail, it might not be several generations until we tried again, it might be passed in the near future? (Not that I necessarily believe this would get easier in two years, I just think it is a very inapt use of the example.)

But reading the piece finally got me to read another piece that bill champions have repeatedly pointed to to celebrate the bill: a post by University of Chicago Health Policy Professor Harold Pollack, comparing the subsidies included in this program with the subsidies offered in just about all other support for the poor.

By 2019 when the reforms are fully implemented, the Senate bill would provide about $196 billion per year down the income scale in subsidies to low-income and working Americans.

Even policy wonks have trouble getting their heads around such a big number. With due allowance for the back-of-the-envelope nature of this calculation, $196 billion exceeds the combined total of federal spending on Food Stamps and other nutrition assistance programs, the Earned Income Tax Credit, Head Start, TANF cash payments to single mothers and their children, all the National Institutes of Health, and the Department of Housing and Urban Development. (I admit to some uncertainty about that last one. We may have to leave HUD behind…)

(Pollack has a worthwhile, thoughtful expansion of his stance on the bill here.)

Now, I don’t contest Pollack’s numbers. Nor do I underestimate the magnitude of this amount of subsidies.

But there’s a flip side to that magnitude, one which, IMO, is not worth celebrating.

First, a significant number of the recipients of these very generous subsidies aren’t going to see them in tangible form. For those getting subsidized premiums, the biggest immediate benefit will be yearly check-ups, if they have access to a doctor (experts expect there will be access issues in the years after the subsidies start). If MA is any indication, though, many won’t actually be getting health care beyond that check-up; they still won’t be able to afford it. And for those who will go into debt before they get any out-of-pocket subsidies, I suspect those subsidies won’t feel all that generous.

Now compare that to the other tangible things the subsidies Pollack lists give people: real cash for single mothers, tax credits for the working poor, and food stamps that function as cash in many stores (which, shockingly, serve as the sole source of income for 6 million Americans). These other subsidies give people income, cash to spend on food, affordable housing. Real, tangible benefits. The thing they lack.

Shouldn’t the program be measured by what tangible benefits it provides–how many get health care–rather than how many subsidies the insurance companies get?

Then there’s the issue of scale that Pollack’s post displays. We are providing the poor food, shelter, and income. All for less money than it is taking to provide an admittedly much larger group of people insurance (but not necessarily care). Do we have our priorities in order? Doesn’t the sheer scale of these subsidies constitute a flashing warning sign about the relative cost of health insurance (but not care) that this reform institutionalizes?

And therein lies the real risk. As many many people have pointed out, subsidies–particularly subsidies to the poor–often fall prey to political pressure. Particularly given the number of conservative Democrats who are itching to cut back on other programs supporting the needy, should we really be crowing about the success of this program by how dependent it is on subsidies–by how big a target it establishes for deficit hawks to go after?

I’m sympathetic to both Hertzberg’s and Pollack’s argument that we have an opportunity to get millions care that they don’t have, even as they acknowledge the imperfections of the bill.

But isn’t it a sign of the bill’s problems that bill champions have to point to the subsidies the bill will provide, rather than the actual health care it gives?