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World Association of International Studies

Post US Tax Reform and Deficits
Created by John Eipper on 12/05/17 4:08 AM

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US Tax Reform and Deficits (Timothy Brown, USA, 12/05/17 4:08 am)

More than $6.0 trillion was added to debt in 8 years under Obama. So what?

More than $1.6 trillion to be added in 10 years under Trump (a calculation based on a worst-case scenario, with no growth, no inflation, no more people with jobs, etc). And this is seen as evil?

I can understand the ideological bias, but not the apparent assumption that $1.6 trillion in the next 10 years will ruin forever America, whereas $6 trillion during Obama that was, as Latinos say, "¡no problema!"
(Sorry, I can't do upside-down exclamation marks.) [Just added them, and Tim, I'm going to give you a tutorial!--JE.]

Unless I missed something, when Obama came into office he was facing a potentially catastrophic monetary problem. A major part of the deficit under him was expended forestalling it, so Obama's deficit financing approach was, in my opinion, necessary. So an important part of the deficit under Obama was unavoidable and, in my opinion, was reasonably well managed.

The problem was that, in addition to monetary stabilization, Obama also sharply increased Federal expenditures on social support programs, primarily health, a major new expense that's popularly called "Obamacare." It now appears that this will either be abolished or sharply revised downward.

Personally, I find neither approach to health care ideal, as much for economic reasons as social ones because the cost of our health care services is inflating so much faster than incomes. So, a couple of suggestions:

I have both VA and Medicare. VA and Federal Health programs both pay (happily because it's much, much less expensive) 100% of medical expenses in another country. Making Medicare payable worldwide would reduce its cost while also increasing the availability of advanced medical services in less prosperous countries, something that's already happening in a number of places, from Thailand to Costa Rica.

I also believe we should make pharmacists not MDs, the first source of medical attention, just like they did in every country where I served.

Just some thoughts.

JE comments: Dismal Scientists calculate another $1.6 trillion to the deficit under the Trump tax plan. But doesn't this begin from the dubious assumption that otherwise, there would be no deficits at all? Shouldn't it be $1.6 trillion, in addition to the deficits that would have compounded anyway?  A dismally inspired question:  is there any worth whatsoever in ten-year economic forecasts?  Even more to the point, do politicians of any stripe care what happens ten years down the road?

Tim, how does US Medicare work with care received abroad?  Do you have to fill out copious paperwork, or are there providers in places like Mexico and Costa Rica who take care of this for you?

(On a related note, an Adrian College student just had his wisdom teeth removed in...Colombia.  He saved a bucket of money.  I believe he's the first study-abroad student to take advantage of elective surgery in Latin America.)

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  • US Tax Reform, Deficits, and Party "Branding" (Francisco Ramirez, USA 12/05/17 1:30 PM)
    If the point underlying the first three paragraphs of Tim Brown's post (5 December) is that selective moral outrage is not acceptable, I agree.

    There are two differences: 1. First, and most obviously, the $1.6 trillion cut is more clearly designed to more directly benefit those who already are most comfortable. Note which part of the tax cuts are supposed to be permanent and which are time-sensitive and can expire. So, some of the outrage is not about the size of the deficit but about who mostly wins. So the issue is not $1.6 versus $6 trillion.

    The second difference has to do with brand or identity and its relationship to policy. Concern about rising deficits is part of the GOP brand or identity. Indeed, WAISer conservatives are more likely to express fears regarding deficits than WAISer liberals. (I use the labels conservative and liberal in the American sense.) I would go further and suggest that the economists who advice Republicans are in general more likely to be deficit hawks than those who offer counsel to Democrats. (Consider the debate between John Taylor and Larry Summers here at Stanford on whether government was the problem, a very thoughtful debate.) So, the ease with which a Paul Ryan embraces $1.6 trillion in additional deficits is brand inconsistent. That raises obvious questions.

    if the only basis for opposing the proposed tax bill is the size of the deficit and one did not oppose the deficits under Obama, that's selective moral outrage. But I think there are other grounds for opposition and I have indicated both the different distributional impacts of the tax cuts and the matter of brand consistency.

    If you reflect on the undoing of the individual mandate, a feature in one version of the bill, then once again it should be obvious that some folks will be nailed and others not so. It is always easier to say "that's life" if the nails do have your name.

    JE comments: Isn't it better when the other guy's name is on the nails?  Regarding party branding, deficits only matter when the other party owns them.  Frankly, has it ever been otherwise?

    Francisco, when time permits, tell us more about the Taylor-Summers debate.

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  • Medicare and Treatment Abroad (Timothy Brown, USA 12/06/17 3:27 AM)
    On our skyrocketing medical costs:

    One thing that can be done to reduce at least its marginal costs would be to authorize Medicare to pay overseas just like other Federal health providers like the VA, and other insurance programs do, including Federally supported ones. Medicare would save a great deal by doing so because the bill is much lower. My most recent brush with this was some time ago in Costa Rica. Needing a checkup, we chose to use a local hospital. When they checked with our secondary insurance AFSPA they were told to do anything they needed to do and AFSPA would cover 100% of it regardless. Why? Because the cost in US dollars in Costa Rica was about 70% lower than in the US.

    Our moderator's friend got his dental work done in Mexico because it costs less that half what it would cost in the US. There are lonely parking lots on the US side of the Mexico-US border with strips of dental offices on the Mexican side where people in the know have their dental work done to reduce the costs of dental work by 50%, and sometimes more.

    On national debts: A reasonably large debt (usually the product of paying out over a period of years more than the Treasury brings in) is necessary for maintaining the value of a currency, but it can become destructive if it gets out of hand.

    Some decade ago when Venezuela didn't have enough national debt to keep its currency's exchange value, we helped them create one debt so they could minimize exchange problems. (Talk about historical debt ups and downs!)

    One thing that seems to be missing from this discussion of a national debt is inflation. If inflation continues at, say 2%, in 20 years the national debt will actually have lost about half of its real (not nominal) value.

    JE comments:  It was a student--not friend, although I like him very much--who had his wisdom teeth done in Colombia (not Mexico).  He just returned to Michigan.  I'll ask him to write up his experience for the Forum.  

    At what time did Venezuela not have "enough" debt?  Was it during the oil-frenzied 1970s?  Remember that Weimar Germany inflated its way out of WWI reparations.  Did Venezuela basically do the same under Chávez and Maduro?  No debt would be issued in Bolívares (fuertes) to be sure, but Venezuela has a Byzantine system of competing exchange rates.

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    • Medical Treatment Abroad; "Medivalue" (Timothy Ashby, Spain 12/06/17 9:08 AM)
      Timothy Brown December 6th) is absolutely right to advocate allowing Medicare to follow other US Federal health care providers in authorizing patients to pay for medical care overseas. The cost savings are indeed staggering, and the quality of the care is as good (and some cases better) than that in the USA. US patients generally average savings of 60-80% (including travel and accommodation) over domestic costs.

      As a personal example, in South Africa (where Rosemary and I are going tomorrow) we pay the Rand equivalent of around $25 each for a full dental exam including X-rays, and our local dentist uses state-the-art technology. Earlier this year I had a root canal, a crown replacement and a series of fillings (plus treatment for a gum infection) for a total cost of the Rand equivalent of $800. Although we both use the NHS in the UK (and think the service is good), we prefer to have medical and dental work done in South Africa because there is usually a long waiting period to see a specialist in the UK after referral from one's GP.

      In 2014 I co-founded a company called Medivalue that was to be the "Expedia of Global Medical Care." The project was shelved for several reasons (including a lawsuit against my co-founder for deviously trying to take over the company--I won) and because I became extremely busy after Obama's December 2014 liberalization of relations with Cuba.  I am considering reviving the company as I have had quite a bit of investor interest over the years.

      At the moment, I am very busy working on a Cuban Retirement Villages project, which we believe will have a growing "Baby Boomer" market in North America and Northern Europe due to the excellent quality of medical care in Cuba and the fact that Boomers from "Yuma" will able to enjoy a comfortable, secure retirement in Cuba for about 25% of what similar facilities would cost in the US Sunbelt.

      I'll report from South Africa where we'll be until the end of January.

      JE comments:  Tim Ashby also sent a PowerPoint deck on Medivalue, which I can forward to interested WAISers.  Tim, an online global health clearinghouse is truly a "disruptive" idea whose time has come.  Best of luck with it! (Sorry; I just broke my own rule to avoid the annoying buzzword "disruptive" in the sense of industry-changing or innovative.  I'm still of the old-school belief that being "disruptive" gets you sent to the Principal's office.)

      Cuba is trending in WAISworld.  Aldona and I are heading to Havana next week for some educational fact-finding.  It will be my first visit in almost 20 years.

      Safe travels, Tim!

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      • Medical Treatment Abroad (Tor Guimaraes, USA 12/07/17 6:04 AM)
        I agree with both Tims Brown and Ashby about allowing Medicare to pay for medical treatment in other countries.

        What I find very disturbing is how can a situation like that exist, where our nation has selected their leaders who apparently have prostituted themselves and commonly turn on their own people to the point where nothing seems to work.

        How is it possible that a little besieged and starved Communist nation run by dictators can provide better/cheaper health care for its people? What has happened while the American people standard of living deteriorated so much? And now we seem unable to control our own destiny.

        JE comments:  Some optimism, Tor...?

        Allowing Medicare payments to other countries might drive down costs, but it would also open a can of worms for potential fraud (not that there's no Medicare fraud already).  A question for Tim Brown:  what process does the VA have to ensure its payments abroad are legit?

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  • US Tax Reform and Deficits (Istvan Simon, USA 12/08/17 3:53 AM)
    I have always enjoyed Tim Brown's WAIS posts on all sorts of subjects. His expertise on the civil war in El Salvador, his knowledge of Latin America, and his experience as a US diplomat who served in the United States Marines, are all invaluable. But in my humble opinion Tim's 5 December post is one of his worst. It lacks objectivity, and what in my eyes is still much worse and that deeply troubles me, it seems to be colored by a heavy dose of political bias.

    Tim says that $6 trillion was added to the national debt during the 8 years of the Obama administration. This is true, but the reasons behind that are completely ignored by Tim. President Obama inherited from George W. Bush a country on the verge of complete financial collapse, which seriously threatened a worldwide financial meltdown, a meltdown that was averted only because of the skillful actions of President Obama and his economic team. How someone of Tim's caliber could "overlook" this fact, as if it had nothing to do with the 6 trillion he reported that was added to the national debt is beyond me.

    In contrast, president Trump inherited a great economy with 7 years of continuous growth, with unemployment at an all-time low, the result of the excellent economic policies of President Obama, and his economic team, and the result also of Obamacare:


    It is disingenuous of Tim to compare this with the estimated projected $1.6 trillion to be added to the deficit in 10 years under the Tax "reform" just approved by the Senate. To begin with, he compares apples to oranges. The Obama years numbers are what actually happened. The Trump ones a merely a guess of the future. The 1.6 trillion could very well become 10 trillion in reality, if there is a new recession for example, or if the Middle East explodes in riots for a prolonged period of time (happening right now), or if Trump starts a war with North Korea.

    Frankly, I would expect a hell of a lot more from Tim Brown.

    JE comments: A harsh Friday woodshedding.  But Istvan, please re-read Tim's fourth paragraph.  While Tim doesn't single out GW Bush for blame, he does acknowledge the grave economic situation of 2008-'09, and the necessity of responding with deficit spending:

    Unless I missed something, when Obama came into office he was facing a
    potentially catastrophic monetary problem. A major part of the deficit
    under him was expended forestalling it, so Obama's deficit financing
    approach was, in my opinion, necessary. So an important part of the
    deficit under Obama was unavoidable and, in my opinion, was reasonably
    well managed.

    Either way, Tim Brown is a Marine and one tough hombre.

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