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Financing health care with consumer loans

If you were to write a dystopian comedy about healthcare with this plan, people would shout “No Way!” but here it is in real life: Long-term loans, like mortgages, to pay for treatment for diseases like cancer, and hepatitis C that are outrageously expensive because the drug companies can charge whatever they want.  The authors comment “By estimating the post-treatment mortality rates of the patients and using statistical models to gauge the default characteristics of these loans, we demonstrate viability under current practical conditions,” (i.e. adjusting interest rates to reflect the proportion of patients who die before paying off the loan.)  Never underestimate the ingenuity of capitalism in healthcare.

From: Don McCanne
Date: Tue, 3/29/2016 12:09 PM
To: Quote-of-the-Day;
Subject:qotd: Financing health care with consumer loans

Kaiser Health News
March 29, 2016
Mortgages For Expensive Health Care? Some Experts Think It Can Work.
By Michelle Andrews

A Massachusetts Institute of Technology economist and Harvard oncologist have a proposal to get highly effective but prohibitively expensive drugs into consumers’ hands: health care installment loans.

Writing last month in the journal Science Translational Medicine, the authors liken drug loans to mortgages, noting that both can enable consumers to buy big-ticket items requiring a hefty up-front payment that they could not otherwise afford.

Some consumer advocates and health insurance experts see it differently.

“Isn’t this why we have health insurance?” asked Mark Rukavina, a Boston-based health care consultant whose work has focused on affordability and medical debt. “Insurance used to protect people from financial ruin for these unpredictable, costly occurrences. Now, with large deductibles, we’ve got coverage for preventive care but not for treatment.”

Andrew Lo, a financial economist at MIT’s Sloan School of Management, and Dr. David Weinstock, an oncologist at the Harvard-affiliated Dana-Farber Cancer Institute, agree that insurance would be a better option. But for many consumers that isn’t enough protection these days.

“This is a private sector stopgap way to deal with something right now,” said Lo.

Their proposal calls for the loans to be financed by a pool of investors who would buy bonds and equities issued by an organization that makes the loans to consumers.

While it’s “distasteful” to talk about patients mortgaging their lives for treatment, Lo said, they hope the proposal will spur change.


Science Translational Medicine
February 24, 2016
Buying cures versus renting health: Financing health care with consumer loans
By Vahid Montazerhodjat, David M. Weinstock, and Andrew W. Lo


A crisis is building over the prices of new transformative therapies for cancer, hepatitis C virus infection, and rare diseases.. The clinical imperative is to offer these therapies as broadly and rapidly as possible. We propose a practical way to increase drug affordability through health care loans (HCLs) — the equivalent of mortgages for large health care expenses. HCLs allow patients in both multipayer and single-payer markets to access a broader set of therapeutics, including expensive short-duration treatments that are curative. HCLs also link payment to clinical benefit and should help lower per-patient cost while incentivizing the development of transformative therapies rather than those that offer small incremental advances. Moreover, we propose the use of securitization — a well-known financial engineering method — to finance a large diversified pool of HCLs through both debt and equity. Numerical simulations suggest that securitization is viable for a wide range of economic environments and cost parameters, allowing a much broader patient population to access transformative therapies while also aligning the interests of patients, payers, and the pharmaceutical industry.

The Role of Health Insurance

Large copays are antithetical to the very purpose of health insurance. Hence, our proposal for patients to cover these costs with HCLs is only a short-run bridging solution. A more sustainable and economically more efficient approach to address the high cost of transformative therapies is for insurance companies to cover these costs, spread the amortized costs across their policyholders, finance the upfront payments using securitization, and set premiums at the appropriate levels to cover these costs. In return for larger drug purchases, insurance companies would wield substantial leverage to negotiate lower prices. Also, insurers would presumably borrow at lower interest rates than would individual patients, further reducing the overall financing cost of these therapies.


The burden of upfront payment for curative therapies makes it challenging for public and private payers to afford universal access to potentially life-saving therapies. To address this issue, we considered a new financing paradigm in which portfolio theory and securitization techniques are used to finance HCLs whose repayment is linked to ongoing value. By estimating the post-treatment mortality rates of the patients and using statistical models to gauge the default characteristics of these loans, we demonstrate viability under current practical conditions. Securitization brings new participants (for example, pension funds, mutual funds, and life insurance companies) into the financing pool and helps transform a set of disjointed and sometimes competing interests into a more cooperative system focused on improving care.. HCLs, not unlike student loans, auto loans, and home mortgages, can improve access to the best health care for the less affluent.

Considering the extremely large burden of certain diseases, such as HCV, for which cures already exist, and the many transformative therapies on the horizon, developing more efficient financing methods is now a matter of life and death. Taking action is no longer a choice but has become a necessity.


Comment by Don McCanne

So the answer to outrageously priced drugs is to pay for them through health care loans (HCLs) – the equivalent of mortgages – and then use securitization “to finance a large diversified pool of HCLs through both debt and equity.” Did we not learn anything from the subprime mortgage crisis? Just as securitization of subprime loans became a “necessity,” securitization of HCLs is now not only supposedly necessary to prevent personal insolvency, it is, according to Andrew Lo, et al, “a matter of life and death.”

In Lo’s words, “While it’s ‘distasteful’ to talk about patients mortgaging their lives for treatment, they hope the proposal will spur change.”

Oh my.

An improved Medicare for all with first dollar coverage would eliminate any need to consider such an inhumane concept.


Finland 1906: The revolutionary roots of women’s suffrage — an International Women’s Day tribute

John Riddell

By Eric Blanc. In 1906, Finland became the world’s first nation to grant full female suffrage.[1] This watershed achievement for women was won by Finnish socialists during the revolutionary upheaval that swept the Czarist empire to which Finland belonged.

Yet this important history has been overlooked by both academics and activists. Abraham Ascher’s standard work on the 1905 revolution in Czarist Russia, for instance, completely omits any mention of Finnish suffrage and argues that “the efforts of women to achieve equality bore few concrete results during the revolution.”[2] In the few non-Finnish books that address the 1906 victory, the role of the socialist movement is generally marginalized: David Kirby writes that suffrage “was conceded virtually without a struggle” and Barbara Evans Clements portrays mainstream feminists like Alexandra Gripenberg as the suffrage battle’s main protagonists.[3]

The granting of universal suffrage owes far more to the class struggle…

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Andy Lopez case: Sonoma DA used pro-police expert witness to justify not charging deputy who shot Andy

The Sonoma, California DA who refused to charge the deputy who murdered Andy Lopez used a pro-police expert witness to justify her decision.  The deputy has a history of violence and lying.

UPDATE: to get an idea of the atmosphere of intimidation in Santa Rosa about the Andy Lopez case, the July 11 2014 “Stop Mass Incarceration Bay Area” email list, (, reports: “Three of Andy’s Youth, ages 13 and 14, were roughed up by the police after leaving the Tuesday rally. The activists in Santa Rosa have been working on get the facts of the story organized. I have been working through last night and this morning to see if lawyers can file a complaint against “sexual assault”. The behavior of the SR police was Extremely inappropriate. As the 3 young women begged the cops for a female officer to search them – the were told to “spread your legs. Spread your legs wide” followed by the officer kicking their legs out to a wide stance. The MALE office then ran his hands over the girls and into their pockets as they protested pleading to not be hurt and for a woman officer. If the plan goes right – There will be a press release tomorrow morning and they will file a claim with the City.”

SF Chronicle, Friday, July 11, 2014

Expert witness in toy-gun case has history of siding with police

Bob Egelko

Called on to investigate the fatal shooting of a toy-gun carrying 13-year-old boy by a sheriff’s deputy, Sonoma County District Attorney Jill Ravitch chose a consultant she described as “an independent, outside expert on human performance in high-stress encounters, such as officer-involved shootings.”

One quality of William Lewinski that Ravitch didn’t mention was his reliability to side with police.

Lewinski, whose website describes him as “one of the nation’s foremost authorities on reaction times and shooting dynamics,” divides his time between training police officers, researching their conduct and testifying on their behalf, usually to dispute accusations of wrongful shootings.

Since 1990, he has testified for police in more than 75 cases in the United States and several in Canada and Great Britain. The Police Firearms Officers Association in Britain honored him in 2009 with its first life-member award for his “commitment to firearms officers in the U.K.,” particularly two he helped to exonerate of murder charges.

One courtroom adversary, Pasadena attorney John C. Burton, who has clashed with Lewinski in two police-shooting cases, describes him as “an uncredentialed police expert who will say whatever they need to justify the situation.”

Had to keep firing

In the Sonoma County case, Deputy Erick Gelhaus shot Andy Lopez seven times on Oct. 22 as the teenager walked near his Santa Rosa home, carrying a plastic AK-47 rifle, its distinctive orange tip removed by a friend.

In his 14-page report, Lewinski found Gelhaus’ explanation supportable “to a high degree of scientific certainty.”

The rifle, he wrote, looked like the real thing from a distance, and Gelhaus had good reason to think his life was in danger when the boy started to turn toward him after being told to drop his gun. “From a behavioral science perspective and an action/reaction paradigm,” Lewinsky said, Gelhaus couldn’t wait until the gun was pointed at him, but had to fire, and keep firing, until the perceived threat was removed.

Lewinski said he reviewed statements by other witnesses, but interviewed only Gelhaus.

Likewise, he interviewed only one person – former BART police Officer Johannes Mehserle – before testifying at Mehserle’s murder trial for fatally shooting unarmed passenger Oscar Grant on an Oakland transit platform in January 2009.

Brought in as an expert witness on police psychology, Lewinski wasn’t allowed to say whether he thought the shooting was justified. But he told the jury in 2010 that factors such as “inattentional blindness” and “muscle memory”can cause an officer under stress like Mehserle to mistake his gun for a Taser, carried on the opposite hip, and to perceive that his captive may be armed and dangerous, even though he was lying face down with another officer kneeling on his shoulder.

The jury acquitted Mehserle of murder and convicted him of involuntary manslaughter. Lewinski also testified for Mehserle last month before a federal jury in San Francisco that found the officer had not violated Grant’s civil rights.

Weighed against other evidence in the two cases, Lewinski’s opinions don’t appear to be extreme. While protesters in Sonoma County continue to demand criminal charges against Gelhaus, they haven’t come up with evidence to contradict Lewinski’s conclusion that the officer thought Andy Lopez was carrying a real gun.

Stacking the deck?

The question that’s now being raised is whether Ravitch, the district attorney, was trying to stack the deck with her choice of consultants.

“He’s an opportunist who will say whatever is expedient to get the cop off, so why in the world would any reputable district attorney’s office rely on someone like him?”asked Oakland attorney Michael Haddad, who tangled with Lewinski over a 2000 police shooting in Oakland. Haddad is president of the National Police Accountability Project, a group of lawyers who sue police, often with the aid of their own experts.

Ravitch responded to an inquiry by listing Lewinski’s academic credentials.

Lewinski didn’t respond to requests for comment, but he’s replied to similar criticisms in the past, most recently after an office that reviews complaints against police in British Columbia said it would stop using him as an expert consultant. One official said Lewinski’s reports seemed biased.

“The science I share in the context of my work is held in the highest regard by top experts in the legal, academic and criminal justice communities worldwide, “Lewinski said in an August 2013 e-mail quoted by CBC News.

Pioneered the field

A native of Canada, Lewinski earned a doctorate from Union Institute, taking his courses online. He then pioneered – or, his critics would say, invented – the field of police psychology, founding a research center now called the Force Science Institute at the University of Minnesota at Mankato, where Lewinski was also a professor for 28 years.

Asked at last month’s Mehserle trial about the fees he charges as an expert witness, Lewinski did not give an exact figure, but said the payments include $475 an hour that goes to the institute.

He regularly testifies that police are justified in opening fire as soon as they perceive a potential threat and can’t wait until they see a gun pointed at them. If Gelhaus, in the Santa Rosa case, had waited until Andy Lopez had fully turned toward him, Lewinski wrote, “he could be shot at multiple times before he could respond.”

‘Shoot-first doctrine’

Lewinski’s shoot-first doctrine led to what he described as a major victory in the case of Anthony Dwain Lee, a Hollywood actor who was fatally shot in the back by a Los Angeles police officer at a Halloween party in 2000 after showing up in costume and pulling out a real-looking toy gun. After Lewinski’s research on reaction times showed that the officer could have been acting in self-defense, he said on his website, the family’s $100 million suit against the officer and the Los Angeles Police Department was settled for $225,000.

But there have also been defeats, like the case of Willie Wilkins, an undercover Oakland police officer shot to death by fellow officers as he tried to arrest a suspect in 2001.

Lewinski, hired as an expert by the city in a damage suit by Wilkins’ family, cast doubt on the testimony of other officers who claimed to have heard Wilkins identify himself before he was shot. Stress, he asserted, may have confused them or clouded their memories. Haddad, the family’s lawyer, challenged Lewinski at a lengthy deposition and said the witness wound up admitting that his confusion-under-stress theory would apply equally to the officers who fired the fatal shots.

The city settled the suit for $3.5 million.

Lewinski is “charming,” Haddad said in a recent interview, but “his opinions can be pretty flaky.”

Bob Egelko is a San Francisco Chronicle staff writer. E-mail: Twitter: @egelko

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SF Chronicle, Tuesday, January 7, 2014

New accusations against Santa Rosa deputy who shot boy

Henry K. Lee

SANTA ROSA — The Sonoma County sheriff’s deputy who shot and killed a 13-year-old boy after mistaking the youth’s replica gun for an assault rifle has a history of excessive force and questionable judgment, the teenager’s family said Tuesday in an amended lawsuit.

Deputy Erick Gelhaus had been involved in several controversial incidents long before he encountered and shot dead eighth-grader Andy Lopez in October, the suit said.

In 1996, Gelhaus pointed his gun at a woman “carrying her young son” after she had called for help in connection with a dispute with a neighbor, the suit said. “He chased her around her vehicle, causing her great fear and anxiety,” the complaint said.

Around that same year, Gelhaus and his partner were accused of falsifying police reports in a domestic violence matter, the suit said. The other deputy, whose name wasn’t released, was fired, according to the suit.

The suit also cites an incident in August, two months before the teenager was killed, in which Gelhaus allegedly pulled a gun on motorist Jeffrey Westbrook two times during a traffic stop on Highway 101 in Cotati. Westbrook told The Chronicle that the interaction troubled him so much that he recalled asking the deputy at one point, “Sir, is there something wrong with you?”

Sheriff’s officials “were long aware of the propensity of defendant Gelhaus to recklessly draw his firearm and to use excessive force,” said the suit, which the family first filed in November. The new allegations were added to the suit Tuesday.

Sheriff’s officials have not responded to the fresh allegations in court.

On Oct. 22, Gelhaus and a deputy he was training pulled up behind Andy, who was holding what turned out to be a replica AK-47 pellet gun in his left hand near his home outside Santa Rosa. A witness heard Gelhaus yell at the boy twice to drop the weapon, police said. Gelhaus has told investigators that he fired when the boy turned and the barrel of the rifle rose toward the deputies, he said.

An attorney for Gelhaus has said that the deputy “absolutely believed it was a real AK-47 and absolutely feared for his life.”

Gelhaus, an Iraq War veteran and frequent contributor to law enforcement magazines and online forums in which he promotes officer safety, “instructed and advised others on the use of questionable tactics, including recommendations as to how an officer must respond to justify shooting a kid with a toy gun,” the suit said.

After shooting the boy, Gelhaus deleted his online comments “in an effort to conceal his beliefs,” the suit said.

Gelhaus had not previously not fired on anyone in his 24 years with the Sheriff’s Office, where he has served as a field training officer for new recruits and trains colleagues to shoot at the department’s gun range. But the suit cites an incident in 1995 in which he accidentally shot himself in the leg while on duty, reportedly while holstering a gun.

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Gray Panthers of SF Support MUNI Drivers

Gray Panthers of San Francisco
2940 16th Street, Room 200-4, San Francisco CA 94103

To: Mayor Ed Lee
City Attorney Dennis Herrera
San Francisco Supervisors
MTA Transportation Director Edward Reiskin,

June 9, 2014

We, as members of the Gray Panthers of San Francisco, demand the City not press charges against MUNI drivers or their union and give drivers a fair contract.

MTA’s proposed wage increases, together with increased health and pension costs, will result in a net loss in pay for drivers, who have not had a pay raise for four years, yet MTA has given up millions in parking revenue and still has a budget surplus. The contract proposal contains permanently lower wages for new hires, an affront to our principles of inter-generational solidarity. The City’s charge against the union of delaying the ratification vote is based on the expectation that the drivers would be forced to vote before they had time to consider the implications of the proposed agreement. Similarly, the charge of delaying arbitration is based on the expectation that the union would submit to a process with a pre-determined outcome without any resistance.

Proposition G puts MUNI drivers in an impossible position: Wages must be determined by collective bargaining, but the City Charter prohibits them from striking. If drivers reject any contract proposal by MTA management, no matter how outrageous, the dispute must go to binding arbitration, which must side with management unless the arbitrator decides the drivers’ interests “outweighs the public interest in efficient and reliable transit.” Under these circumstances, drivers must accept whatever management proposes, or stage a sickout. What did the City expect to happen?

By taking actions against drivers and their union, the City is actively participating in a coercive labor process that will ultimately bring wider and more disruptive conflict to San Francisco. In an economic environment where San Francisco is unaffordable for its workers, and has the fastest-growing gap between rich and poor, it would be wise to realize that workers will not accept this treatment indefinitely.

The City’s mass media has long slandered drivers as greedy, incompetent, and rude, for performing some of the most difficult driving assignments in the country, but do not count on the media’s ability to permanently turn the community against MUNI workers. Members of the biggest union of the most poorly-paid City workers’ union are also in negotiations, and are angry at the City’s determination to hold wage increases down in the face of rising inflation, a budget surplus, and millions of dollars in tax breaks to tech companies. Times can change. Times will change.

Do not press charges against MUNI drivers or their union and give drivers a fair contract.


Michael Lyon, Treasurer
Patricia Jackson, Convener
Denise D’Anne, Secretary

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Fight Foreclosures and Evictions: Take Your Money Out of Wells Fargo

Indybay Media, December 18, 2012

Take Your Money Out of Wells Fargo

by Patricia Jackson

Gray Panthers leaving WF Bank after closing account

On Tuesday, December 18, two senior organizations took their money out of Wells Fargo and joined a protest rally outside at Grant and Market in San Francisco. James Chionsini of Senior Disability Action and Michael Lyon of Gray Panthers addressed the rally after they had closed their organizations’ accounts and called on other organizations to also take their money out of predatory banks. Prior to the rally and while members of Gray Panthers and Senior and Disability Action were inside closing their accounts, a Wells “undercover spy” approached several protesters and took our pictures. He then tried to pass himself off as “one of us.” All morning Wells Fargo customers had to show ID and Wells ATM cards before guards would allow them into the bank. Protesters engaged in conversations with customers and passersby to talk about alternative ways of banking, local credit unions. Speakers educated them about Wells Fargo’s foreclosures.

Senior & Disability Action is welcomed by WF Bank undercover men

Setting up for the protest

Tony Robles, a member of Senior and Disability Action and a 4th generation San Franciscan, started the rally citing case after case of folks who are in foreclosure, forced out of homes they have lived in for decades. Like Larry Fox being thrown out of his home he has lived since as a child when his father took him watch as it was being built.And Robert Moses, 92. year old WWII Veteran, refinanced his nearly paid-off loan with Deutsche Bank to bring his home up to city code. Deutsche raised his interest rate and payment to $3,400 a month. Many seniors living on Social Security and/or fortunate enough to have a pension usually average far less that that amount a month to live on.

Foreclosure Fighters speaking out

Another Foreclosure Fighter

Wells Fargo has been fraudulently processing mortgage documents with a practice called robo-signing for years. Placing quotas on employees and forcing them to sign a certain number of foreclosure files each day. While other documents required for homeowners to avoid foreclosure were ignored, left sitting on unattended fax machines. Wells Fargo has double the number of foreclosures of other banks- a despicable record of evicting record numbers of seniors, disabled and people of color with a $4.8 billion profit. Protesters call for them to negotiate with the 27 families who are in foreclosures.

Archbishop Franzo King, of St. John Coltrane African Orthodox Church and NAACP told us that Wells Fargo made money off trading slaves and now it is foreclosing on the African American decedents of slaves. These banksters have no morality if they continue to put seniors and poor people out of their homes and on to the streets!

Tommi Avicolli Mecca told us to come to a rally Wednesday, December 19th, at 8th & Castro to protest the evictions caused by the Ellis Act- currently 25 buildings in the Mission are being “Ellised”, throwing out people with AIDS, parents and children.

Henne Kelly of California Alliance of Retired Americans (CARA) warned us about the ads Wells Fargo is running in the SF Chronicle offering $20,000 loans, which would not have to be paid back if people stay in a home for 5 years. “Do we trust Wells Fargo?” We roared back, “No!” Chants followed- “Wells Fargo’s impunity Destroys Community!”

It feels good to fight back!

Speaking out against the Grinch that stole our homes.

All groups should take their money out of Wells Fargo!

John Stumpf, Wells Fargo CEO

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Chile, Mapuche, and the Bernal Heights Library Mural

pw-bernal-mural_front_panorama-w_copyright6-26-12CHILE AND MAPUCHE

The SF Gray Panthers November 2012 Newsletter reported the painting over of the mural about Chile that was on three sides of the Bernal Heights Library. That mural included references to the Mapuche indigenous population of Chile. Today in Chile the Mapuche are threatened and persecuted by the government of President Sebastian Pinera much the same way as did Pinochet.

The Mapuche are an ancient indigenous people in southern Chile who matched the powerful Incas over centuries and kept hold of their various territories. The Spanish tried in vain to enslave them. Once Chile was independent from Spain it finally overwhelmed the long Mapuche resistance in the effort called “Pacification of Araucania.” This process in the late 1800s destroyed Mapuche agricultural and trading economies and created a system of Reducciones, similar to US Indian reservations.

Since the overthrow of the Pinochet government in Chile the Mapuche have been struggling to reclaim their territory, their language, their agricultural and horticultural skills adapted over the years to Chile’s incredibly varied terrain, and their own specific culture. The current Chilean government has resisted these efforts by increasingly militarizing areas, including such actions as army and helicopter attacks on the community of Temucuicui. Protests on the ground led to the arrests of some of the protesters led to widespread hunger strikes in Concepcion and Temuco in support of the arrested Mapuche. Subsequently, four men were convicted of killing a police officer. In October, the Chilean Superior Court annulled the murder charge due to “irregularities in the trial.” The Court left standing accusations of possessing arms and mandated a new trial.

Much of the information in this article was reported on line by the Unrepresented Nations and Peoples Organization. It was certainly not covered by the US mainstream media. Painting over the Bernal Heights mural about Chile under Pinochet is part of the selective re-writing of history.

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Dec. 2nd, San Francisco: Why we need to protest, even with no Super Committee plan

Some may wonder whether the stalemate in the Super Committee has reduced the urgency of our December 2nd demonstration against cuts to Social Security, Medicare, and Medicaid. (The action is Friday, Dec. 2nd, at Mission & 7th Sts., in SF. Read more. ) I believe the following article shows that our situation is still very urgent, both in the short term and the long term.

As Jack Rasmus explains below, four matters come before Congress in December that could raise all the Super Committee issues again, and lead to the same sort of fights as July’s battle over raising the debt ceiling: (1) continuing the 2% reduction in Social Security payroll tax another year, (2) extending unemployment insurance benefits, (3) another year’s ‘fix’ to the Alternative Minimum Tax, and (4) another delay in the 29% cut in doctors’ fees for serving Medicare patients. In addition, the Bush 2001 tax cuts to corporations and the rich are due to expire.

In the longer term, Rasmus shows below that Democrats continue to be more than willing to put Medicare and Medicaid on the chopping block, proposing $500 billion cuts over the next decade. (This is in addition to the $575 billion Medicare cuts already built into the Obama “Affordable Care Act”.)   Also see the November 25 NY Times article saying that following failure of the Super Committee, both Democrats and Republicans are calling for changing Medicare into a voucher system.

So yes, it is definitely a victory for us that members of the Super Committee were afraid to do the hatchet job that corporate and financial interests demanded. And yes, you do need to come to the San Francisco Federal Building at 7th & Mission Streets at 2 PM on Friday, December 2.

See a video with Jack Rasmus and others on the need to demonstrate December 2nd, and more about the action:

“It’s the Tax Cuts, Stupid!
Supercommittee Post-Mortems”

By Jack Rasmus
Copyright November 2011

The collapse of the Supercommittee’s effort to produce a joint package of recommendations for deficit reduction proves conclusively that for Republicans and their corporate allies that deficit reduction is, and always has been, a secondary objective. The primary objective is to protect and expand the Bush tax cuts.

From reports now leaking out it is apparent that Democrats on the Supercommittee had offered massive cuts to Medicare and Medicaid amounting to a minimum of $500 billion over the coming decade. Those cuts were in addition to the automatic $1.2 trillion automatic additional deficit cuts negotiated as part of last August’s Debt Ceiling Deal. That deal already had authorized $1 trillion in spending-only cuts. So the Democrats’ offer was the $1.2 trillion automatic deficit cuts-all spending about equally divided between defense and non-defense cuts-plus another $500 billion in Medicare-Medicaid matched by another roughly equal $500 billion in tax revenue increases.

The Republicans on the Supercommittee offered a different ‘mix’ of tax revenue and spending cuts. Their counter was $760 billion in Medicare-Medicaid cuts plus approximately $300 billion in tax revenue recovery. However, that tax revenue recovery was largely raised from increasing taxes on the middle class, by reducing the mortgage interest deduction and other middle class tax breaks. In addition, the Republicans required a further major tax break for the top personal income tax bracket and for the corporate income tax. Both currently are set at a 35% tax rate. Republicans proposed to reduce both to between 25%-28%. In other words, raise taxes on the middle class and give it to the rich and their corporations. And make seniors, retirees and the poor pay $760 billion in Medicare-Medicaid benefit cuts.

What these maneuvers by both parties shows is the following:

First, Republican’s top priority is shielding the Bush tax cuts. Those cuts cost the U.S. budget a minimum of $2.9 trillion last decade. Another $450 billion in extensions 2010-12. And a projected $2.2 to $2.7 trillion if extended for another decade. By proposing further tax cuts for the top income brackets and corporations, it is clear Republicans aren’t all that concerned about the deficit and debt in fact. They are focused on protecting and further cutting taxes for the rich and their corporations. What’s new in their position, revealed by the Supercommittee’s machinations, is that they now propose that not only seniors and the poor pay more for continuing (and expanding) those tax cuts, but that now the middle class will also have to pay for them with more tax hikes.
Second, it is clear the Democrats continue to be more than willing to put Medicare-Medicaid on the chopping block. They proposed $500 billion cuts last June, in the secret negotiations between Vice-President, Joe Biden, that broke down. They repeated that offer in July as President Obama offered the same as part of a ‘grand deal’ that also imploded. Obama subsequently offered up front $320 billion in Medicare-Medicaid cuts last September 19 as an enticement to get Republicans to agree to his $447 billion third recovery plan. And just a few weeks ago, the Democrats again proposed $500 billion. In other words, the Democrats have repeatedly offered massive cuts in Medicare-Medicaid. They will likely continue to do so in the coming months.

Third, the sticking point between the two is not whether Medicare-Medicaid will eventually be cut, but only when. Nor is the amount of these cuts really in question. It will be between $500 billion and $1 trillion when it happens-and it eventually will happen.

Fourth, the real bottleneck is the Bush tax cuts and Republican efforts to not only protect those cuts but extend them as well, even if now at the expense of the middle class.

What the breakdown of the Supercommittee’s efforts shows is that the Republicans calculated they would have a better chance at extending the $2.2 trillion Bush tax cuts for another decade by deferring the vote on their extension until next fall, 2012, in the midst of the final months of the 2012 election campaign.

Republicans no doubt looked beyond November 23 and see several legislative ‘choke points’ that will enable them to extract more spending cut concessions from the Democrats without having to give up on the Bush tax cuts. The first of such ‘choke points’ will come next month, in December 2011.

There are four major legislative bills that Democrats and Obama desperately want that will have to be decided by Congress before the end of 2011. The first has already been raised by Obama: continue the 2% payroll tax deduction for workers another year. That will cost another $112 billion to the budget and deficit this coming year. A second is an extension of unemployment benefits for millions of more workers, whose benefits run out at year end. That’s another $55 billion cost. The third is yet another year ‘fix’ to the Alternative Minimum Tax, AMT, which impacts the upper middle class who earn more than $150,000 a year. That’s another $70 billion cost. The fourth is also another delay in the 29% cut in doctors’ fees for serving medicare patients. That’s tens of billions more cost to part B medicare spending. We’re talking here about at least another $250 billion. If these bills are not passed, it will mean a major hit to GDP and the economy in the first quarter 2012, for an economy already extremely fragile and susceptible to a double dip early next year. In fact, the Federal Reserve now predicts the likelihood of a double dip occurring in the US economy early next year is now greater than 50%.

The Republicans will especially drive a hard bargain, and extract more than a ‘pound of legislative flesh’, in exchange for agreeing to pass the extension of unemployment benefits and the payroll tax cuts for another year. They will demand more spending-only cuts, likely to include Medicare-Medicaid, and also likely demand that the $450 billion in defense spending cuts mandated in the $1.2 trillion automatic deficit reduction are removed from the $1.2 trillion. Obama will be hard pressed not to agree to remove the defense spending cuts if he wants his payroll tax cut and unemployment benefits extensions passed before year end 2011. Obama and the Democrats will be desperate in an election year to have the unemployment benefits and payroll tax extended, as well as the AMT ‘fix’ which otherwise would impact the ‘independent voters’ heavily that he is courting heavily in the coming election. The Republicans know all this, and will push to extract cuts in spending at least equal to the $250 billion cost for these various measures coming up in December 2011.

Republicans may also get another opportunity in early 2012 to extract spending cuts without having to touch their Bush tax cuts. According to last August’s debt ceiling deal, that reduced spending by $1 trillion immediately and the $1.2 trillion additional automatic cuts that will now go into effect, there would be no further need to raise the debt ceiling until after the November 2012 elections. That was the trade-off for the $2.2 trillion in spending cuts that the Obama administration and Democrats in Congress agreed to: i.e. no more debt ceiling crises in exchange for the $2.2 trillion in spending-only cuts. But the debt ceiling issue may still re-emerge before the elections, and maybe even as early as this spring 2012.

As part of the August 2011 deal the U.S. Treasury is authorized to raise another $400 billion or so this spring and increase the debt ceiling by that amount. But it the economy retreats in early 2012, as many now increasingly predict, that will mean less federal tax revenues than originally projected and a larger budget deficit in 2012 than originally forecast. That might potentially reintroduce the need to raise the debt ceiling again in mid-2012 even more than projected last August. If this scenario unfolds, the Republicans will have yet another ‘bite at the apple’ of deficit cutting. That’s in addition to the four bills coming up next month costing $250 billion, for which Republicans will demand at least an equivalent spending cuts elsewhere to fund.

So look for the issue of cutting Medicare-Medicaid to continue to be on the negotiating table despite the Supercommittee’s recent breakdown. The Supercommittee may fade away, but not the fundamental issues behind it. Those issues are the continuing weak US economy and its impact on deficits, the intense commitment by the Republicans, corporations, and the wealthiest 1% to protect their Bush tax cuts ‘at all costs’, and the repeated willingness of Obama and the Democrats to offer up Medicare-Medicaid as a bargaining chip.

The Republicans are in the preferred bargaining position going forward. They will try to cash in on some of Democrats’ repeated offers to cut Medicare-Medicaid by $500 billion-first in exchange for agreeing to pass the $250 billion in bills in December and thereafter potentially in the spring should the debt ceiling issue raise its ugly head again.

As the November 2012 election grows nearer, Democrats’ resolve not to extend the Bush tax cuts another decade will also undoubtedly weaken. Republicans count on chipping away at Medicare-Medicaid and other spending over the coming year, while bidding their time for the best timing to extend the Bush tax cuts for another decade.

It’s no wonder, therefore, that the Republicans on the Supercommittee were more than willing to allow the Supercommittee to implode. They can protect their tax cuts better, and extract spending cuts more effectively, by going at it piecemeal over the coming year.

Jack Rasmus
November 22, 2011

Jack is the author of Epic Recession: Prelude to Global Depression, May 2010, and the forthcoming Obama’s Economy: Recovery for the Few, February 2012, both published by Pluto Press and Palgrave-Macmillan. He is also author of the just published 35pp. pamphlet, An Alternative Program for Economic Recovery, which can be purchased from his website: His blog is

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