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EconomicPolicyInstitute July 21, 2009

As President Obama’s push for health care reform moved into high gear, EPI economists have produced a body of research outlining why health reform would not be as expensive as is often stated, and why proposals to finance the reform partly through a tax on the wealthy would actually impose a very light burden.

In Looking for Health Care Dollars in All the Right Places economist Josh Bivens dissected the health care reform bill from the House Tri-Committee that would provide coverage to more than two-thirds of the uninsured population, and fund the cost partly with a surcharge on those with the highest incomes. Since high-income earners are the only workers who have seen any meaningful income growth in recent years, Bivens argued that the surcharge would not only be appropriate but also very affordable. Based on the pace at which incomes for the top-earning workers have grown in recent decades, any income they lost due to the proposed health care surcharge would be regained through income  growth in well under a year, and in some cases as little as a single month, Bivens’ research showed. To the critics who object to taxing the wealthy, Bivens notes that, since 1979, the income of the top 1% of earners has grown between 40 and 80 times faster than the bottom 90%.

Elise Gould, EPI’s director of Health Policy Research, meanwhile, explained why a different tax proposal to fund health care reform was flawed. In response to a Washington Post column that advocated a tax on health care benefits, Gould stressed that such a move would impose a penalty on many workers who had very high-priced health care. Contrary to a common assumption that people pay more for so-called “gold-plated” health plans, Gould noted that the cost of a health plan didn’t necessarily reflect its quality as much as the circumstances under which it was purchased.  Small businesses, for example, usually have high health care costs, as do companies with a high portion of older workers, Gould explained.

A forthcoming Issue Brief by Bivens and Gould will also show how small businesses stand to reap big benefits from health care reform. The paper will outline how the existing health care system places small businesses at a significant cost disadvantage, resulting in much lower coverage rates among small business workers, and it will explain how reform could help correct the discrepancy.

Senator Bernie Sanders at EPI
U.S. Senator Bernie Sanders delivered the keynote address at EPI’s July 15 event, Transparency in the Federal Reserve. Sanders argued that although the financial crisis had faded from the national headlines, it remained “very, very serious” and warranted continued outrage – and questions – from the American people.  “It seems a bit incongruous that we put trillions of dollars at risk and we do not know who has received that money,” Sanders said of last year’s $700 billion bailout of the country’s most troubled banks. The event was the second in a series of forums that EPI’s Bailout Analysis Project  is hosting to examine the government’s response to the financial crisis. Sanders’ complete address is available on EPI’s Web site.

EPI’s Bailout Analysis Project Director Nancy Cleeland was also vocal in the press last week, explaining why Goldman Sachs’ $3.5 billion quarterly profit should be viewed with some skepticism. In a BBC interview, Cleeland said that while Goldman had paid back Troubled Asset Relief Program, or TARP funds it borrowed last year, it was still benefiting from government subsidies. Cleeland also noted that such a large profit in a such a tough economy suggested Goldman was continuing to engage in some of the high risk trading activities that were the cause of last year’s financial meltdown.

Tale of two economies
The rising fortunes of big banks like Goldman Sachs offer a stark contrast to the ongoing struggles of average Americans, a growing number of whom are unemployed. New state unemployment data released on July 17, showed that some 15 states, as well as the District of Columbia, now have double-digit unemployment, with Alabama and Georgia the latest to join the list. Michigan’s unemployment, the highest in the country, has reached 15.2%.

An extensive EPI analysis explored the change in state unemployment rates since the start of the recession, and showed how a number of states with comparatively low unemployment have also been hit hard. Arizona’s June unemployment rate of 8.7%, for example, was below the national level of 9.5%. Nevertheless, Arizona ranks second (after Michigan) in terms of states with the highest percentage of job loss since late 2007.

An Associated Press story on the latest state data pointed out that the official unemployment rate did not count all the laid off workers who had given up looking for work or settled for part-time work. It quoted EPI President Lawrence Mishel offering context: “The unemployment rate is just the tip of the iceberg of the extensive, adverse impact of this ‘Great Recession.’”  

Mishel also participated in the discussion Mixed Signals on the Economy on WAMU radio, where he emphasized that the economy was much weaker than the official data captured. “When we get to 10% unemployment, about 18% or 19% of the people are going to be unemployed or underemployed,” he said. “There is tremendous pain out there.”

The economics of lead poisoning
EPI’s Elise Gould recently published Childhood Lead Poisoning, a cost-benefit analysis of household lead paint control. The paper found that every dollar spent on controlling lead hazards would return at least $17 in improved health outcomes, increased IQs, higher lifetime earnings, increased tax revenue, less spending on special education, and reduced criminal activity.

EPI’s new communications director
EPI is pleased to announce Jody Franklin has joined as Director of Communications. Franklin comes to EPI with almost two decades of strategic communications and political experience in a variety of venues, including the federal government, the United States Congress, and a national non-profit organization.  She served as Chief-of-Staff for Hillary Clinton during the 1992 presidential campaign and more recently, spent five years as public relations director for Share Our Strength, a national anti-poverty organization. Jody also served as Chief-of-Staff in the Office of Public Affairs at the U.S. Department of Labor under Secretary Robert Reich.

Franklin will oversee EPI’s public relations, publications, and Web publishing teams, where she will coordinate the dissemination and promotion of the institute’s research across different media platforms.

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Alyce Anderson
The President’s Actions on Immigration Will Make America Better
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