Taxing the Wealthy to Finance Healthcare Reform

Recently, I’ve become a member of a Washington Post health care panel that answers a weekly questions  about health care reform. This week’s query, “Should We Tax the Rich to Cover the Uninsured? refers to the House proposal, released earlier this week, which would tax the wealthy to help finance reform.“

Below, my answer, plus some additional thoughts:

Sometimes a picture is worth a million words. This graph, from the Center on Budget and Policy Priorities   tells you why it makes sense to tax the very rich to fund reform.

Focus on the red bars. They show how much the wealthiest 1 percent of all households benefited from income gains as the country grew wealthier from 1946 to 1976 (the group of bars on the left) --and  the degree to which they shared in the nation’s prosperity from 1976 to 2006 (the bars on the right.)

During the thirty years following World War II, the richest 1 percent enjoyed 20 percent of the gains—which is to be expected. It takes money to make money. Wealthier Americans are in a position to pay for education that will help them leverage their talents, and they have the deep pockets to take advantage of the best investment opportunities—buying stocks, real estate, businesses and other assets when prices are low.

But the vast majority of all Americans—the lower 90 percent on the income ladder—also did very well, taking in 80 percent of the wage benefits that came with the nation’s growth.

By contrast, in more recent years growth was no longer widely shared. From 1976 to 2006 the mega-rich enjoyed 232 percent of the gains while the bottom 90 percent saw only 10 percent of the benefits. And in recent years, the trend accelerated.  From 2002 to 2006, the share of the nation’s income flowing to the top 1 percent climbed from 15.8 percent to 20.0 percent. “Not since 1928, just before the Great Depression, has the top 1 percent held such a large share of the nation’s income,” the Center observes. :

 

Table 1: Average Income Gains, Adjusted for Inflation, 2002-2006

In 2006, the bottom 90 percent of households were those with incomes below about $105,000. The next 9 percent were those with incomes between $105,000 and about $368,000, and the top 0.1 percent were those with incomes above about $1,764,000.

When growth is no longer widely shared, the imbalances that are created can threaten both a nation’s economy and its social solidarity. Today, as in the 1930s, we are suffering through a deep recession caused, in large part, by the excesses of the past. In recent years,  just as in the 1920s, too much money was concentrated at the top, and not knowing what else to do with the money, the very wealthy went on a spending and investing spree.  This meant that too many dollars were chasing too few things—in this case, mainly stocks and real estate—and prices levitated, creating bubbles. Now, we’re enduring the collapse that invariably follows any bubble..

That concentration of wealth also has widened the gaps in our society between the upper-class, the upper-middle-class, the middle-class, the working poor and the very poor. Unless we begin to address the inequities that are driving us apart, before long we will become a nation of strangers. Asking the very wealthy to help finance healthcare for all is a step in the right direction.

Who is Being Taxed—And Can They Afford It?

Keep in mind that the House proposal is not suggesting that we tax the upper-middle-class—or even the wealthiest 10 percent of all households.  The tax would target a much smaller group—roughly the top 1.5 percent.  The House would place a modest surtax of 1 percent on households with incomes over $350,000 --and 1.5 percent on couples with incomes of $500,000 to $1 million. It would impose a surtax of 5.4 percent only on couples with more than $1 million in income. It would not (as some have suggested) raise capital gains and dividends taxes for everyone. It would include capital gains and dividends in the gross adjusted income subject to the surcharges which apply only to households earning over $350,000—and for everyone earning less than $1 million, the increase would no more than 1.5%.
Can the very wealthy afford the surcharge? Consider this: From 2002 to 2006 the average inflation-adjusted income of the top 1 percent of households rose 42 percent, whereas the average inflation-adjusted income of the bottom 90 percent of households rose about 4.7 percent.

Tax Cuts for the Wealthy

Finally, note that these tax hikes are merely redressing tax cuts that have brought taxes rates for the rich well below historic norms—at a time when we all need to pull together. As this chart from Andrew Sullivan’s blog over at The Atlantic shows, the surtax will simply  take effective tax rates for the top 1 percent back to where they were in the mid-nineties—a time when the economy was strong.

Then came the Bush tax cuts, and a rising deficit. As Ron Pollack, Director of Families USA,  and another member of the Washington Post panel points out: raising taxes on the richest households “is part of a sensible approach to ensuring that health care reform is deficit-neutral during the next ten years. Since this group enjoyed a significant tax reduction windfall during the last decade -- and since this windfall played a big role in burgeoning federal deficits -- it makes sense that this group bears some burden as part of the effort to secure America's long-term economic future through health-care reform.”

Comments

[joe blow]

Maggie,

Your idea sounds all well and good, but you need to take a look at the bigger picture.

Putting a tax base on the highest 1% or 0.5% or 0.1% of earners is a very narrow non-sustainable tax base during bad economic times.

California found out this year that it "feels good" to get the vast majority of your tax revenue from rich people but when economic times change and the number of rich people changes by just a few percentage points, it is absolutely DEVASTATING to tax revenues.

Instead of limiting the taxes to just the top 1% you need a broader tax base so that revenues dont plummet in bad economic times. I suggest creating a tax structure that is heavily weighted against hte rich but that also includes a small floating tax on the middle class. That way when you have another economic downturn and the number of rich people drops off you still have some reserve funded by the huge middle class.

[Maggie Mahar]

McDonald's,, Gregory and Brenda

McDonald's-- It is not "ultimately the patient's responsiblity to use narcotics responsiblly."

It is the physician's responsibility to know how to wean a patient off narcotics when he no longer needs them.

There is a science to this--a science that shoudl be taught in med school.

This is one reason why I believe a course in palliative care should be a requirement.

Just the other day, I was talking to a someone who talked about how few physicians know how to "wean people off".

I once knew a physician who became addicted while being treated for cancer.
Her life was ruined. For years, she could not get off the drugs. She lost her license, her family and her life.

This doesn't mean we shouldn't give patients adequate pain-killers. We absolutely should.

But then the hospital and physician have a responsbilty to make sure that the patient is weaned off. I would think this should happen before the patient leaves the hospital.

Gregory--

Yes-- and thanks for the facts.

Brenda--

No one is talking about reducing your husband's investment income.

People are simply suggesting that we over-pay for some ortohpetdi surgery.

Fees are set based on what it costs the doctor: the amount of time it takes him to perform the procedure; the amount of mental effort involved, what it costs him in terms of stress and phyical effort, how many years of training it took him to learn how to do this.

Nowhere is "benefit to the patient" factored into the equation.

Now Medicare is going to take that into acccount. Many orthopedic surgeries are not necessary--some do more harm than good. (Here I'm thinking particularly of some hip and knee surgieres. Some patients would be better off with physical therapy or other treatments.

Comparative effectiveness reasearch will be used to deicide which treatments work best for which patients--and Medicare will pay more for the most effective treatments and raise co-pays and lower fees for less effective treatments.

Since your husband isn't "money-driven" I doubt he will object to seeing physicians and patients steered to the most effective treatments.

And since, these days, no physician can know everything he needs to know--even within his speciality-- I'm sure your husband may learn something from the guidelines.
(Doctors who think they have nothing to learn are self-deluded--and dangerous.)

[Brenda]

As the wife of an extremely hard-working and caring orthopaedic surgeon who is in the business of putting peoples fingers and hands back together, I resent the idea a government panel telling my husband what he can earn. The hours and his expertise that he puts into his day are mind boggling. And when the day is done, his patients are happy and able to resume their jobs/lives because of his knowledge and honest approach and pure caring. Yes, he makes a good living, but it's not all from patient care. He has made smart investments over the years and owns his building. His practice employs 300 happy people, who are given very nice health benefits.

Please remember these highly trained physicians and their years of sacrifice and training when espousing your views on what they should make. I'm lucky to know many hard working and selfless physicians and not a one of them got into medicine to make money. Not one. Do they earn good incomes? Yes, most of them do, but only after spending years paying off loans. My husband didn't break even until he was in his 40's. And I won't even mention the amount of money he pays a year in malpractice insurance, which all goes into this equation, folks. Is anyone talking of tort reform, or of limiting lawyers' incomes? I haven't heard of any and I listen closely! Can we be honest and bring lawyers into this conversation? Is this because most of the government "experts" on healthcare are lawyers? Don't get me wrong, I have lawyers in the family as well, but they agree with me. Tort reform is needed and any talk of healthcare reform without tort reform is laughable.

[Gregory D. Pawelski]

The "wealthiest" people in the United States had it prettly good during the last eight years in terms of tax policy. Families USA executive director Ron Pollack said, "Since this group enjoyed a significant tax reduction windfull during the last decade, and since this windfall played a big role in burgeoning federal deficits, it makes sense that this group bears some burden as part of the effort to secure America's long-term economic future through health care reform."

God! This is a tax on less than 1.2 % of the wealthiest people in the United States (98.8% will be totally unaffected by the surcharge). And this select minority have benefited from years of skyrocketing income and a falling effective tax rate.

According to Citizens for Tax Justice, between 1979 and 2006, the inflation-adjusted after-tax income of the top 1% of households increased by 256%, compared to 21% for families in the middle income quintile. Meanwhile, over the ten year window from 2001-2010, the Bush tax cuts gave the richest 1% of Americans about $715 billion in tax breaks. This comes out to about $518,000 per household over ten years or about $51,800 per year.

So the surcharge would require the richest 1% to give back some of the tax cuts they received over the 2001-2010 period. Sen. Bernie Sanders said, "It certainly is okay for me to tell my friends on Wall Street, who just got a bonus of $600,000 that they're going to pay more in taxes so that we can lower health care costs in America," including them!

The surcharge won't affect small businesses. According to both the Joint Tax Committee on Taxation and the Tax Policy Center, 96% of taxpayers with business income would not owe the surcharge. And according to the Center on Budget and Policy Priorities, the 4% of remaining "small" businesses affected by the surcharge include taxpayers that "stretch" the definition of the term, including partners in large law and accounting firms and investors who have stakes in Wall Street investment partnerships.

In the House's health care legislation, small businesses are exempt from a lot of the penalties. They are given tax credits so they're able to hire and get people healthcare.

[Mc donalds]

These points to an interesting article in findrxonline where they talk about this subject it is necessary to inform the community.
It is ultimately the patient's responsibility to use narcotics responsibly.

A few years ago, narcotics were only prescribed after surgery, severe trauma, or for terminal cancer because of a concern over the possibility of addiction. Recently, they have been cautiously prescribed to treat moderate to severe non-malignant chronic pain in conjunction with other modalities such as physical therapy, cortisone and trigger point injections, muscle stretching, meditation, or aqua therapy. Unfortunately, the upsurge of narcotics as medical treatment also increased associated cases of abuse and addiction.

Derived from either opium (made from poppy plants) or similar synthetic compounds, narcotics not only block pain signals and reduce pain, but they affect other neurotransmitters, which can cause addiction. When taken for short periods, only minor side effects such as nausea, constipation, sedation and unclear thinking are noted.

[Maggie Mahar]

Barry & Legacy--

Yes, Wacther's piece is excellent. I also agree with him that we are not going to go the route of explicitly rationing end-of-life care.

This isn't a utliitarian society-- and in some ways this is a good thing. Utlitarianism is limited and somewhat literal-minded world-view. (Though I also like Singer; some of his past work on ethcis is brililantly provocative)

We will instead, as Reinharddt puts it "muddle along elegantly."

The good news is that there is so much waste in our system-- so much low-hanging fruit that is merely profit-driven (as Atul Gawande describes) -- that we really don't need to make these extremely hard decisions.
My one concern about Singer's piece is that in many minds it raises the specter of the "government playing god"--providing ammunitions for fear-mongers who oppose reform.
If we want reform we should get on with the practical politics of accomplishing it, and leave hypothetical philosophical discussions for another time.

[Barry Carol]

Legacy Flyer,

The UCSF’s Dr. Bob Wachter has a terrific post on the subject raised in Singer’s article over on The Healthcare Blog titled “A Brief History of the R Word.” The comment section is pretty interesting as well.

[Ray]

$500,000 and $1,000,000 can have their taxes but why pack the $5 million, $10 million or $100 million in the same tax range. There should be some relief for those making $1 million vs 10 or 100 Million. If they want to play it fair, then play it really fair.

[Legacy Flyer]

Off the topic of Taxes and more squarely on the topic of Health Care is an article that appeared in the New York Times Magazine July 19th titled “Why We Must Ration Health Care”.

In it the author (Peter Singer) makes very good points about the costs of health care and rationing - much better thought out than the “It’s high quality if it’s effective” and “we’ll just get rid of the ineffective test/treatments” philosophy that has been proposed here previously.

I recommend it to everyone.

[Teobaldo L. Fernandez]

Maggie,
There maybe a a high correlation between high reported income and wealth but not between their wealth and the taxes they pay. Also these taxes only apply to reported income and do not affect the underground economy. That is why I prefer the VAT Tax and a bill that contains the essentials described in your previous blogs. This bill does not have them!

[Maggie Mahar]

Teobaldo--

On HealthBeat, we are pretty careful about facts and don't spread misinforamtion.

As a group, Americans with the highest incomes are also the weathiest.

2007 Federal Reserve numbers show that families who stand on the middle-rung of a 5-rung net worth ladder, are also earning median income ($56,000), while those in the top 10% when it comes to net worth have a median income of $158,000 and a mean income of $347,000 (with the best paid in the group pulling the mean average way up.)

Those in the top 10 percent in terms of income had median net worth of $1.2 millio and mean net work of $3.3 million.

So for practical purposes, "high-income" and "wealthiest" can be used interchangeably. The two groups overlap.

This should come as no surprise.

And while the income tax taxes only incomem (including capital gains and dividends, but not municipal bonds because we want to encourage the wealthy to provide capital so that cities can operate and build infrasture)

we also tax wealth in the form of property taxes, transfer taxes (when properties are bought and sold properties are inheritance taxes.

Sales taxes, while not terribly progressive also tax wealth because the wealthy consume (buy) far more than the rest of us, and buy many more very expensive items.

[Teobaldo L. Fernandez]

As far as I know we have a Federal Income Tax not a Federal Wealth Tax. A family with an earned income of $300,000.00 paids more taxes than one with a $10,000,000.00 investment in municipal bonds. Who is the wealthier? Who is being tax the most? Stop propagating misinformation! we do not tax the wealthies americans only the high income americans!

[Barry Carol]

Maggie,

My wife makes the same point that I do about how much of her and our income gets paid out in federal, state and local taxes. She tells her friends and others that while she enjoys her work, she is not willing to do it for nothing or next to nothing. There is associated stress, there’s limited vacation time and there are other things that she and I would like to have more time for as well. She works for a small company of less than 30 people which is under economic stress in this economy. There haven’t been raises in two years, and she gets no benefits aside from paid vacation. They don’t pay for her health insurance and there is no 401-K match. She doesn’t appreciate the prospect of higher federal taxes any more than I do. Fortunately for us, we are both approaching the normal retirement age anyway. At the margin, though, if the tax burden were at least stable, we might be inclined to work somewhat longer.

[Maggie Mahar]

Barry--

I'm sure you mean well, but I feel a bit sorry for your wife.

I would hate to be married to a man who "kidded me" about how little I earned doing something I love.

If your wife retires, I hope she finds something she enjoys as much as her current work. So many people are so very unhappy when they retire . .

[Barry Carol]

“Truly creative people (and I have known many) don't work for the money--or the money after taxes.

They work because they love the work for its own sake.”

Maggie,

I smiled when I read this as it reminds me of my wife. She enjoys her work as a software developer, but I often kid her that she’s working more for intellectual stimulation than for money. When her income is stacked on top of mine, more than half of it goes for federal and state taxes even excluding the employer’s share of FICA taxes. Even she has her limit though, especially after she recently became eligible to collect Social Security. After the Bush tax cuts are allowed to expire, she’ll probably be ready to pack it in. If the income tax surcharge on the top two percent is added to help finance health insurance reform, her retirement will be a virtual certainty and so probably will mine even though I enjoy my work as well. We’ve always lived modestly and we no longer have to work. While some people in Congress may think that high income people can always pay more no matter how much they are already paying, they forget that many of them have options including working less, retiring, and, in the case of business owners and the self-employed, hiding (more of their) income. The political class will likely be surprised to see the magnitude of the decline in the population of “golden geese.”

[Christopher George]

www.omblog.GOV

[Alan]

Please, hide the truth. Looking at that graph made my eyes bleed.

[Maggie Mahar]

Billy--

Truly creative people (and I have known many) don't work for the money--or the money after taxes.

The work because they love the work for its own sake.

This may be hard for you to believe, but this is how the the creative and very intelligent people that I have ever known live.

At present, I am enjoying my work more than ever before--and earning significantly less than I earned 5 or 10 years ago.

[Maggie Mahar]

Barry--

Barry-

I am glad that you acknowledge that the top 1% took the lion's share of the gains made in recent years.

And of course, they took that away from the middle class. Corporate gains went to shareholders, not to employees.

During that period, Morgan Stanley economist Steve _______ argued, forcefully, that corporations should be sharing more of their record profits with their workers.

But they didn't.

Since the 1980s, corporations had been down-sizing, and workers were "working scared." Afraid of being laid off, they were not going to demand raises. Moreover, Ronald Reagan had, for all intents and purposes, broken the unions during the air controllers' strike. There was no one to stand up for workers in the private sector.

Executives paid themselves handsomely (stock options) and shareholders wealthy enough to own large amounts of stock grew even wealthier.

But they represnted a small percentage of Americans at the very top of the wealth and income ladder.

Even at the end, only 1/2 of all Americans owned any stock or stock mutual funds.. Middle-class shareholders owned small amounts of stock--and got in very late.

The wealthiest 5% owned the lion's share of stock-- and they took the lion's share of profits and growth. (When lion's devour a carcass, they lick the bones nearly clean, leaving very little behind for other hungry animals--that's where the phrase comes from.)

And, Barry, Congress cannot make putting MedPac in charge of Medicare part of Health Care Reform legislation.

That would doom health care reform.

Can you imagine what conservatives would do with that plank in the legislation? "Seniors, Washington bureaucrats are going to have complete control over what care you can and cannot afford--raising co-pays on some treatments that THEY say are not appropriate."
(They won't mention that "approrpiate" is basd on medical evidence, as determined by a panel of physicians, reserachers, nurses and patient advocates.)

The conservatives would say: "Doctors: Washington bureaucrats would have complete control over what you are paid."

As a practical matter, putting MedPac in charge must be separate legislation. We cannot risk the whole idea of health reform by putting it in the broad health care bill. l.

The fact that Obama has endorsed Jay Rockefeller's serparate legilsation that puts MedPac in charge is very gutsy. The letter that the administartion just wrote to Congress about putting MedPac in charge of setting Medicare providers' fees demonstrates great political will.
(See Peter Orszag's blog today www.omblog.org.)

I have the letter and the legislation attached to it. I'll be writing about it this week-end.

I talked to Orszag's office today. They gave me this info.

Orszag plans to do what he always planned to do.

In the news coference late today Obama made it very clear that he is not backing down in any way.

In terms of what the CBO said yesterday,and what that means--the media simply got the story wrong. As far as I can tell, very, very few reporters actually read the 1000 page House bill.

And they don't understand the implications of putting MedPac in charge.

[Barry Carol]

"a bigger and bigger portion of economic growth has accrued to the wealthiest 1 percent, whether the measure is basic wages or total compensation, which includes the value of employee-sponsored and government benefits."

I wasn’t arguing that the top 1% did not gain ground relative to the rest of the population in recent years. I was arguing that compensation growth among the broad middle class in the last 25 years or so was considerably greater than the growth in their wage income alone. The sharp increase in the growth of the cost of health insurance nominally paid by the employer is, of course, the reason for this. It’s misleading and overstates the case to look at wages alone in assessing the growth of pay when the value of benefits, not just health insurance, is such an important component of compensation.

While I agree that the top 1% did extraordinarily well financially during the last 20-25 years, I don’t think one could argue that it caused the rest of the population to somehow do worse than they would have if the people at the top had done less well. We had a tangible asset bubble (everything from commodities like gold, silver and oil to collectibles) in 1979-1980 when inflation looked like it was getting out of control. The recent real estate bubble was driven, I think, by one key idea that was clearly wrong, and most people, especially the banks but most ordinary Americans as well should have known was wrong before the fact. That idea is that home prices would continue to appreciate pretty much indefinitely. Banks thought that even if the homeowner defaulted, they could foreclose, sell the house, repay their mortgage loan, and have money left over for the homeowner. Homeowners, including investors who had no intention of occupying the house, bought into the concept as well. Politicians encouraged the loosening of lending standards so more of the population could become homeowners. In short, there was plenty of blame to go around.

In the manufacturing sector, huge advances in productivity during the last 30-35 years made it possible to produce a car or a ton of steel with far fewer man-hours. Many of the jobs that remained required less skill than previously because many of those skills were built into the computer controlled equipment that wasn’t available previously. Lots of people in foreign countries also became capable of producing these products because the equipment, in effect, de-skilled the jobs. The economy gradually shifted from an industrial base to a knowledge base. Think computer programmers, software developers, communications experts. Education and healthcare became the new growth industries. The largest private employer in Philadelphia, for example, is the University of Pennsylvania while the largest in Miami is the University of Miami. These two industries are now much more important than steel in Pittsburgh. It’s unfortunate but the economic opportunities for people with just a high school education or less are far more limited than they were 50 years ago. That’s nobody’s fault. It’s just the way the economy evolved.

Finally, I want to make a point about healthcare reform. The fact that the various committees in Congress working on the main healthcare reform effort did not include either tort reform or giving MedPAC the authority to drive payment policy suggests that there is a lack of courage to make the tough choices. The message I take away is let’s do the (relatively) easy stuff – expand coverage, provide subsidies, pass community rating guaranteed issue, mandate that employers provide insurance for their people or pay into a fund and require individuals to have insurance or pay a fine. In short, cover the uninsured while pouring more money into the same failed healthcare delivery system we have today. After we do that, maybe we will get around to the heavy lifting of cutting costs via tort reform to reduce defensive medicine and payment reform to reduce cost-ineffective care. However, Congress will have already provided the good stuff to the people so it will be even harder to do the things that will reduce revenue for providers, make people pay more out of pocket if they want cost ineffective treatments, and, perhaps, limit choices. With this strategy, I certainly wouldn’t nominate anyone in Congress or the Administration for a Profile in Courage award.

[Christopher George]

We don't need to go into Sherwood Forrest to solve the healthcare problem. Lets not conflate the inequality issue which has been with us since Biblical Times, and the Healthcare crisis, which is of slightly latter vingage.

The more everyone feels the pain of medical waste, the quicker this will be addressed. Shielding 99% of the population from this folly is conterproductive.

[Billy]

I'm convinced. Why bother creating anything great, if higher taxes are the reward? Excellent.

[Karl]

REASONED OPPOSITION BY C.B.O.

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/16/AR2009071602242.html?nav=hcmodule

"Congress's chief budget analyst delivered a devastating assessment yesterday of the health-care proposals drafted by congressional Democrats, fueling an insurrection among fiscal conservatives in the House and pushing negotiators in the Senate to redouble efforts to draw up a new plan that more effectively restrains federal spending."

How inconvenient.

Ms. Maher -- will your income is next on MoveOn.org's hit-list? Watch your back.

Or -- perhaps those working 90 hours/week trying to build business in the insane Obama economy will just give up.

Why work so hard, if all you're going to get is a kick in the teeth?

Let the IRS go after Maggie and her friends.

[Maggie Mahar]

NG--

What they are talking about in Mass. is a very good idea.

But it will take years and years to accomplish.

You can't just herd doctors and hosptials into accountable care organizations and expect them to play nicely together.

Especially not in Massachusetts where you are talking about physicians with enormous egos, many of whom do NOT want anyone trying to tell them what to do and hospitals that are very powerful and often arrogant institutions that are accusomted to competing--not collaborating.

This will be much easier to accomplish in the NorthWest. Or Upper New England (Maine, NH, VT).
Howard Dean territory. Dartmouth territory.

The House bill makes provisions for Medicare to
encourage docs to go into accountable care organizations (financial carrots), and I expect to see more of this happening over the next 4 to 8 years.

But it means a huge cultural change. It means, among other things, that we have to change the way we train medical students.
(Collaboration, working together as a team, not competition.)

And it means that we will have to wait for some of the dinosaurs to retire.

[Maggie Mahar]

Matt--

You make a good point:it's part of my job to read the House bill--it's not of part of your job.

I'm mainly frustrated by people who write as if they know what is in the bill--without reading it.

I'm afraid many journalists and bloggers who are writing about the bill haven't read it.

I just spoke to White House budget director Peter Orszag's office about the savings in the
House bill.

If I'm irrationally optimistic about MedPac savings, so is he.

He and I have both read the 400--500 pages or recommendations that MedPac issued in March and June of this year--and the 400-500 pages it issued hte year before, and the year before that.

So we both know what MedPac is recommending-- and those recommendations are in the House Bill.

When Orszag ran CBO, hewrote extensively about MedPac's reports and how much money could be saved by following their recommendations.

And Orszag is a hard-headed and brillian realist.

See his blog today on MedPac as a "game-changer"
www.omblog.gov.

And the administratin's letter to Congress . .

I'll be writing about all of this and the structural reforms in the House bill.

As for the people who earn more than $350,000, the fact is that the bulk of them are in finance, real estate and banking--that's were most of the most profitable jobs are in our society.

A certain number of them are doctors--but that's a pretty small percentage compared to the number in finance, real estate and banking. Some are corporate executives.

Unfortunately, in recent years, these sectors of the economoy have been corrupted in many ways. Much cooking of the books, gouging, etc.

The SEC wasn't doing its job. Businesses were deregulated, meaning that companies like Enron were free do do as they pleased. (Most of what Enron did was legal.)

This, of couse, does not apply to all companies or everyone in these companies.

But I would point out that Warren Buffet has had a very hard time finding stocks to buy over the last 12 to 15 years in part because he takes a close look at management --and has had a hard time finding honest management.

I cover Wall Street for Barron's as senior editor for 12 years. There are honest people on Wall Street--but I'm afraid they are the exception. Most just look the other way--or are actively engaged in deception.

(See my book Bull! -- a history of the 1980s and 1990s. Buffet actually recommended it in Berkshire Hathaway's annual report. And last time I checked, he wasn't a socialist. I'm afraid my assessment of what was going on is pretty accurate.

Finally, when I think about the people who make less than $350,000 a year, I think about some of the most productive people in our society--productive because they are investing their talents in human capital--helping people

Teachers, nurses, primary care docs, pediatricaisn, palliative care specailists, environmentalists, many scientis, writers, jouranlists and film-makers who are "truth-tellers"--adding to our knoweldge of the world--they all make less than $350,000.

There may be some self-selection involved when people choose to go for the Mega-bucks in those sectors of the economoy where the financial rewards are highest.

Perhaps money is just too important to them, and that's why so many wind up doing things that actually hurt the economy and society.

I don't think most of them are "bad" or "evil" people--but somehow, when they get into these careers, they check their conscience at the door.

It's part of the culture in these sectors. And before long, you begin to believe it's okay because hey, everyone is doing it--telling the home-buyer not to worry, this house really is worth twice what it was worth 4 years ago, etc. . .