Bay State Blues

I’m a native of Massachusetts, from that great old industrial city, Brockton. I moved to Washington, DC area as a young man but returned to The Bay State in retirement to that lovely town on Buzzard’s Bay, Marion, and lived there for nine wonderful years.

Almost four years ago, my wife and I returned to the National Capital Area to be near our children and grandchildren, but I maintain a keen interest in what goes in The Old Colony, indeed all of New England And many of my readers hail from that neck of the woods.

Not unique but relatively rare, I have a lot of experience with local and state government in New England and in places that organize quite differently – county v. town. I’ll post something in the near future on my take on the differences, but, today, I want to focus on a contemporary issue in Massachusetts, health care financing.

I know too many economists – family, friends, acquaintances, neighbors - and wind up chatting with more of them at cocktail parties than all other species combined. Being a shrinking violet, as my readers know well, I am at a great disadvantage in this intercourse. While these economists are often brilliant, they tend, unlike wild Bill, to be very opinionated about everything, but I find that they really do know their stuff when it comes to their specialty.

Today, I’m featuring Walt Francis who last week wrote the very helpful posting on choosing a Medicare prescription drug plan that was put up on this site. That piece drew more favorable comment than any other single posting ever.

Massachusetts is one of only three states that are losing population. The angst this has created has caused more navel gazing than anything in recent memory. About two decades ago, the Commonwealth found itself losing ground against its competitors and a popular revolt against the perceived enemy came about. Taxachusetts was the laughing stock of the nation and jobs were heading south, literally. Proposition 2 ½ put a lid on local taxes and the state recovered nicely, and, while the high tax label was never shed, the state moved down the list of heavy taxers quite a way.

Today the culprits are the high cost of living - especially housing and health care, the loss of manufacturing, and social issue – including immigration. Again the angst over loss of economic and political position is driving the residents batty.

Yesterday’s Boston Globe had a very well written argument on why state law should be changed to mandate that employers be required to cover the health care of workers. Again, while wonderfully argued, I found it to be completely without merit as a way to solve the economic and political problems that raised the issue.

Here’s a link to the op-ed piece in question:
http://www.boston.com/news/globe/editorial_opinion/oped/articles/2005/12/27/the_health_insurance_meltdown?p1=email_to_a_friend

I asked Walt to look at the article and to give me his views. His opinion tracks mine exactly, except that he knows what he’s talking about. So I’m posting this and mailing it to my readers with known New England connections.

Here Walt’s take:

”The details of the Massachusetts scheme are not given. A similar scheme recently enacted in Maryland would only tax employers who do not spend 8 percent of their payroll on health care, and apply only to very large employers. In fact, it is believed to apply only to one employer in the state: Walmart. Regardless, all such schemes have the same bogus justification, seek to dictate the details of employer benefit design, and generally fall under the rubric of "feel good insanity." The spurious rationale is that if workers are uninsured the taxpayer will bear the brunt. I suppose so, to the extent that the State so elects. But no deity mandated that Massachusetts or Maryland taxpayers pay for any worker's health care. By the same rationale, if workers don't have good pensions, the taxpayers will bear the brunt in Supplemental Security Income payments to the elderly poor. If workers don't have employer-funded contraceptives who knows what the taxpayers may have to pay in welfare benefits? Why not mandatory life insurance subsidies to make sure there are no impoverished widows and orphans? If workers don't have cars to drive to work, they might become a burden on the unemployment insurance system, and who better than employers to pay automobile purchase and repair subsidies? Where shall the cornucopeia end?Where it will end is in the relocation of entrepreneurs to states not seized of mandatory benefit frenzy. WalMart is perfectly capable of locating super stores on the Delaware, Pennsylvania, and Virginia borders of Maryland, to say nothing to some creative accounting for its Maryland books. Nobody forces Internet firms who hire only the youngest and brightest (and cheapest to insure) to maintain work forces in Massachusetts. Nobody forces Massachusetts firms to hire full time workers who show up on payrolls rather than to hire through contracts to temporary worker firms or subsidiaries located in other states. And nobody forces Massachusetts firms to stay in state rather than relocate to New Hampshire (where many of their workers live anyway).Where shall the equity lines be drawn? Maryland at least would exempt 99.9 percent of firms in the State. Does Massachusetts intend to require the local hot dog stand to purchase group health insurance for its owner operator? Nationally, relatively few small businesses provide employer-financed health insurance--does Massachusetts seek to impose costly new requirements on them, imposed by no other state in the union? Or is the Massachusetts proposed law aimed only at WalMart, and purely symbolic "feel goodism." Has either state bothered to consult an economist? Folks in that profession will advise them that over time the entire effect of the mandated benefit will fall on workers, who will lose essentially dollar for dollar in dollar wages the amount spent on insurance benefits. Of course, one might argue the broader social benefits are well worth overriding worker preferences. Perhaps, but some workers have insurance elsewhere (through spouses, for example), and other workers are more interested in sending dollar wages to relatives abroad who would otherwise starve. Has any legislator in either state considered that workers in the state already have the luxury of deciding whether to work for an employer who offers "good" health insurance and one who does not, and have decided, by voting with their employment applications, on the mix of salary and fringe benefits that they prefer? No one has to take a job as a WalMart greeter. It is really quite remarkable how wise are the solons in these states who know better the needs and wants of every single worker in the state than the workers themselves.Proposals like these illustrate the high cost we pay for the economic illiteracy of most legislators, to say nothing of the arrogance of those who, like the latter day czars of the Soviet Union and the Platonists among us, believe that omniscient, all-powerful government can better arrange the affairs of men than private decisions freely arrived at. One can only hope that these states will pay an economic price so high as to dissuade any others from similar folly.”

As you can see, Walt, unlike your regular contributor, is a bit of a polemicist. But he’s right and Massachusetts lawmakers really ought to look at things other than this solution to their problems.

Blog on!

Wild Bill