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Is An Ivy League Education Worth the Price?

March 30th, 2010 . by economistmom

It’s a question I am asking this week, as my oldest daughter hears about her admission status at the 7 schools she’s applied to–4 of them Ivies, who do not give any merit-based aid. As I tweeted yesterday, she’s received a national merit scholarship of $2500 (one time) to any school she decides to attend, but that is only about 1 percent of the 4-year cost of her going to Dartmouth–which in a money-blind contest she picks as her first choice.

There are big reasons why her dad and I chose to raise our (four) children in northern VA when we first decided to come work in Washington, DC, and two of them are called “U VA” and “William and Mary” (or is that three of them?!)–note their places in this Kiplinger “best value” ranking.  She’s gotten into both. As an “Economist” and a “Mom” readers will understand why I find this agonizing.

If you are willing to follow my agony over the next few weeks, I am willing to share…

I am looking for advice everywhere–from Ivy League grads who believe they wouldn’t be where they are today were it not for their Ivy League education, to Ivy League grads who regret graduating with so much debt, to public university grads (like myself) who don’t believe life could have turned out that different had we gone to an Ivy League school instead (and who paid off their small loans rather quickly after graduation).

And naturally I’ve been scouring the internet, which is how I found the ABC News video above with the very bright young man who is the CEO and founder of Unigo.com–a fascinating site that features “insider” info on colleges and which I had never heard of until tonight when I was googling on this very question.

Stay tuned for updates, and feel free to advise!

Concord on Meet the Press!

March 28th, 2010 . by economistmom

Visit msnbc.com for breaking news, world news, and news about the economy

Very cool–Concord’s minute in the spotlight on today’s Meet the Press. And kind of funny with the technical glitches in getting Senator Graham his chance to speak. Fortunately, David Gregory does a nice job of expressing some Concord-like skepticism towards Senator Schumer’s happy talk on how much we can count on the cost control in the bill panning out.

As we said in our statement and as I said in my blog post, the good stuff is in there, it’s just a long way out, and it’s not clear we should count on it materializing.

Oh Yeah, That Social Security Problem…

March 25th, 2010 . by economistmom

nytimes-social-security-deficit-032510

We’ve been so busy with health care reform and trying to figure out how to “bend the health cost curve” that we’ve almost forgotten about the other federal entitlement program that is on an unsustainable (albeit less severe) fiscal path.  An article in today’s New York Times reminds us of that other program, Social Security, with the newsworthy event being a Congressional Budget Office table that reveals the program is expected be in a cash deficit this year–with Social Security benefits paid out expected to exceed Social Security payroll taxes collected.  True, the Social Security program only faces one of the two pressures adversely affecting Medicare spending: just the demographic challenge of a rising elderly population relative to the working-age population.  And as a result the problem is not as large.  Some argue that’s a reason not to worry about it–and not to do anything about it until it’s more certain we’re right at the doorstep of that unsustainable fate.

Not doing anything about Social Security now would be fine if either: (i) we knew what to do with the much bigger challenge of  much more rapidly rising Medicare spending (i.e., we knew how to flatten that health cost curve and were really on the way to doing it), or (ii) we didn’t know what to do to close the much smaller Social Security deficit.  But the fact is that it’s hard to know how to solve the Medicare problem and relatively easy (mathematically and economically) to solve the Social Security problem.  We know how to solve the latter, and I think most Americans in hearing what some of these solutions are (see this NYTimes editorial blog featuring some experts’ ideas), would think they were no big deal.  Why, just this week my (very socially-conscious) 17-year old daughter, Emily, brought up the unsustainable fiscal outlook and said she didn’t understand why we don’t just raise the retirement age–which is what both Bill Gale (of the liberal-leaning Brookings Institution) and Andrew Biggs (of the conservative-leaning American Enterprise Institute… ok, perhaps more than leaning, but more on the David Frum story later) recommend in the NYTimes piece.  Emily spoke of raising the retirement age as a “no brainer”–and not because I’ve brain-washed her but perhaps because she knows her mom will be working forever anyway just to pay for her and her three siblings’ college educations…  ;)

Of course no one likes to work longer, just like no one likes to pay higher taxes or have limits on their subsidized health benefits.  But let’s face it: there will have to be more of these things we don’t like, and to me it’s a simple cost-benefit analysis.  The relative benefit of doing something we know how to do sooner (reducing the Social Security deficit) seems high in that small, phased-in changes now can save a lot of compound interest going forward.  Even if it saves us more money than the size of the (small) Social Security “problem,” that’s a good thing, because chances are really good that our other reforms to the other programs will save us less money than the size of those other (bigger) problems.  And any pain associated with these Social Security fixes–such as a gradual rise in the retirement age–seems relatively low and “easy” compared with those other (currently largely uncertain) ways of solving the long-term fiscal challenge which we’ll still be trying to figure out for many, many years to come, and which will have to result in much more fundamental (and ultimately painful) changes to those other programs.

So yeah, we still have this little problem of Social Security, but it’s completely and pretty easily solvable–and so we should be paying attention to it, now.

It Ain’t Over Until the Speaker Lady Sings

March 24th, 2010 . by economistmom

signed-health-reform-whitehouse…and gets the President to (sign and) sing along.

There are lots of good stories speaking of Speaker Pelosi’s own determination and the pressure she put on the President to follow through with the necessary leadership on health reform that only the President (if anyone) could provide.

The health reform effort seemed about to crash and burn just two months ago.  As Ceci Connolly recounted so well in yesterday’s Washington Post:

The remarkable change in political fortunes thrust Obama into a period of uncertainty and demonstrated the ability of one person to control the balance of power in Washington. On Jan. 19, that person seemed to be Brown.

But as the next 61 days would show, culminating in Sunday night’s historic vote, the fate of the legislation ultimately rested in the hands of Obama, who in the hours before Brown’s victory was growing increasingly frustrated as Pelosi detailed why no answer was in sight.

There went health-care reform.

There went history.

“I understand that, Nancy,” he finally snapped. “What’s your solution?

Well, her solution seemed to be to keep up the kind of determination, forcefulness, and yet grace and diplomacy that perhaps only the first female speaker (and a mom and grandmother) could provide, as a Politico story suggests:

The rebirth of the reform effort is the result of a little luck, insurance company avarice, a subsiding of post-Brown panic among party incumbents and the calculation by many Hill Democrats that going small or giving up was just as politically perilous as going big.

But the main reason the bill has made it to the floor has as much to do with the complex, occasionally tense, ever-evolving partnership between the first African-American president and the first female speaker.

“I think [Pelosi] is the one who has kept the steel in the president’s back — and I think she represents that to Harry Reid, too,” Rep. Anna Eshoo (D-Calif.), Pelosi’s closest friend in Congress, told POLITICO.

“White Houses end up with — how do I say this? — they take an incrementalism pill,” added Eshoo. “But Nancy Pelosi is not an incrementalist.”

Neither is Obama, says Sen. Ben Cardin (D-Md.), it’s just that he moves more deliberately. “I don’t think [the White House] were there from Day One, but they were from Day Two,” he said. “I think they knew this would be the way.”

So this unique Pelosi-Obama partnership, and their blend of personalities, seems to have somehow worked in the end.

Now, of course it’s still “not over,” even with the Speaker lady having led the President in song, because the reconciliation “fixes” have to be passed by the Senate–over the Senate Republicans’ objections (off-key dissonance?) which we will hear over the next several days.

But the President has gotten his song out, and apparently now that it’s out, it sounds pretty good to people.  (See this USA Today/Gallop poll.)  Earlier this month, Speaker Pelosi caught a lot of flack (and indeed made me cringe), when she said “we have to pass the bill so that you can find out what is in it, away from the fog of controversy.”

But now I think what she might have meant was that the President would have to sign the bill into law and “sing” about it more (like no one else could), so that Americans could more clearly see what was in it to like.

Perhaps it was the Speaker’s special “intuition” on the matter–and only something that a shrewd politician who also happens to be a woman and a mother could pull off.

Concord on the Risks in the Health Reform Reconciliation Bill

March 22nd, 2010 . by economistmom

The Concord Coalition has released a series of videos, blog posts, and statements explaining the fiscal risks and challenges in the health reform reconciliation bill. One of the videos is shown above, but you can get to the others through this page. We basically elaborate on the quick points I made in my blog post from last week. We think the bill does a lot of good things and has tremendous potential to be fiscally responsible–if the political will is there, not just now, but more crucially (and unfortunately much more dubiously) ten years from now.

What if the fiscally-courageous “follow through” doesn’t materialize and Congress and whichever Administration is in place ten years from now says “never mind”?  On Friday the Congressional Budget Office did just this calculation.  While the reconciliation bill modifying the Senate bill as written would reduce the budget deficit in the second ten years by about one half of one percent of GDP, CBO director Doug Elmendorf explains in his blog post that without the fiscally-courageous “follow through” the deficit would instead rise in the second ten years (emphasis added):

Today, in a letter responding to questions from Congressman Ryan, CBO described the effects on the federal budget of enacting the reconciliation proposal and the Senate-passed health bill if:

  • The excise tax on insurance plans with relatively high premiums—which would take effect in 2018 and for which the thresholds would be indexed at a lower rate beginning in 2020—was never implemented;
  • The annual indexing provisions for premium subsidies offered through the insurance exchanges continued in the same way after 2018 as before—in contrast with the reconciliation proposal, which would slow the growth of subsidies after 2018;
  • The adjustment to physician payment rates under Medicare that was passed by the House last fall was included; and
  • The Independent Payment Advisory Board—which would be required, under certain circumstances, to recommend changes to the Medicare program to limit the rate of growth in that program’s spending, and whose recommendations would go into effect automatically unless blocked by subsequent legislative action—was never implemented.

We estimated that if this set of changes was made, the legislation as modified would increase federal budget deficits during the decade beyond 2019 relative to those projected under current law—with a total effect during that decade in a broad range around one-quarter percent of GDP.

That’s a three-quarter percent of GDP difference between the bill(s) as written and a new “health policy extended” baseline that would apply for several years after passage of the bill.  And it’s the difference between being able to call this a major deficit reduction plan (which was a sketchy label anyway for a plan with a primary purpose of expanding health coverage), and more realistically calling it a deficit-financed expansion of a new entitlement.  So Concord’s position is that we’ll have to remain “vigilant” about cost control going forward, and we’ll certainly have to “follow through” on the good stuff in this package that isn’t supposed to happen for awhile.

(PS:  We’re going to need a lot of help with this fiscal vigilance, and this isn’t a message that attracts a lot of lobbying money, trust me.  If you believe in Concord’s mission and policy positions, please consider joining us and supporting our efforts!  I don’t make any money in doing this blog (note: not even any ads!), but instead I hope I can at least broaden Concord’s community through it.)

Passing on the “Deem and Pass”

March 20th, 2010 . by economistmom

Well, the Democrats have come to their senses on that darned “deeming” thing–which never seemed worth the political cost, even while it was ironically thought to be a political “way out.”  The Atlantic’s Benjamin Carlson collected some positive reaction to this news today.

Sunday night’s going to be interesting.  Will you stay up late to watch?

It’s a Good Plan. In 10 Years. Maybe.

March 19th, 2010 . by economistmom

Visit msnbc.com for breaking news, world news, and news about the economy

The good ideas are all still there in some size or shape, but it’s fascinating how some of the most promising features in the health reform bill have been diluted and/or postponed so much that they barely show up in the official ten-year window of the official CBO cost estimate.

Take the excise tax on high-end employer-provided health insurance plans, which is already a bit of a second-best solution compared with directly reducing or eliminating the exclusion of employer-provided health insurance under the personal (individual) income tax (because were it accomplished via a tax on households, it would be easier to adjust for households’ ability to pay).  In order to get the labor unions on board, the tax now doesn’t take effect until 2018.  Partly to make up for that newly lost time with the excise tax, and partly to cover the additional cost of now-higher subsidies offered through the new insurance exchanges, the excise tax was modified with less generous indexing starting in 2020–indexing the threshold to general inflation rather than inflation plus one percentage point.  That change in indexing helps the trajectory of revenue offsets in the second ten years, but of course, 2020 is beyond the first ten years and so outside the official ten-year budget window–so the change shows up in the official cost estimate as shrinking the positive contribution of the excise tax (the best part of the bill, in my opinion) to the overall package.

The revenue estimate shows that the excise tax now only raises $32.0 billion in the ten-year budget window, because it barely gets started within the ten-year window.  In contrast, $210 billion–more than half of the total $409 billion in revenue raised–comes from the increased Medicare tax on high-income households, which would start in 2013.

However fair one thinks it is to increase taxes on the rich, this Medicare tax is not a tax on health spending (it’s another income-based tax), and so it’s not a tax that can keep up with rising health costs as a reliable offset for expanded health coverage.

Ironically, the (fiscally-wise) excise tax now scores as providing less than half the amount of deficit reduction within the ten-year budget window as the (somewhat-budget-gimmicky) Community Living Assistance Services Support (CLASS) program, which is shown as raising $70.2 billion, even though we know that over the longer-run CLASS is a new entitlement which is expected to be a net drain on the federal budget.

The Independent Payment Advisory Board (”IPAB” or what’s commonly known as “the commission”) is still in the bill, too, but remember those recommendations wouldn’t be made until the second half of the decade, and hospitals are exempt until 2020.

So in the overall assessment the health reform/reconciliation bill isn’t full of gimmickry (it’s only tinged with it), does still contain some good health policy in it, was scored fairly and as accurately as possible by CBO.  And it does officially show a net $138 billion in deficit reduction in the ten-year budget window.  If all goes as planned (as written in this bill), in ten years there will be a decently-large excise tax on employer-provided health insurance in place, and the IPAB (commission) will be recommending wise ways to reduce Medicare and overall health costs.  In ten years we will have learned something from the demonstration projects about how to save money, and we’ll implement those ideas more broadly throughout our entire health care system.  And thus we will start “bending the health cost curve.”

That is, unless we don’t. Unless we get to 2018 when the excise tax is supposed to kick in and say “wait, we don’t want to pay that tax.”  And unless we get to 2020 and say, “no, hospitals aren’t going to accept those recommended payment reductions.”…

So it might be a good plan if you look at where the bill says we should be in 2020, if we actually follow through when we get there.

And by the way, even if we follow through, we still won’t have solved the problem of unsustainable health costs and federal entitlement benefits and not enough ways to pay for them.  That’s my boss Bob Bixby’s point in the NBC Nightly News piece above.  Even $138 billion of deficit reduction over the first ten years or even $1 trillion over the second ten years doesn’t amount to much against a policy-extended baseline that shows $15 trillion in deficits just over the first ten years.

Earlier today (Thursday) the President called this “the most significant effort to reduce deficits since the Balanced Budget Act in the 1990s.”  But let’s face it: this was not a “deficit reduction effort”–as if deficit reduction were its primary goal.  It was an effort to expand health insurance coverage that happens to reduce the deficit.  If we follow through on those good things we’re supposed to do much later, after President Obama is no longer President and after many members of Congress will be gone as well, that is.

Senator Al Franken: Funny But Courageous, Too

March 18th, 2010 . by economistmom

emily-with-al-franken-smaller

I was happy to see the front page of the Style section in today’s Washington Post, featuring a story on Senator Al Franken.  I first met Al Franken at an annual dinner of the American Enterprise Institute in the mid-to-late 1990s.  I was walking down the staircase from the reception to the dinner, and suddenly I noticed he was walking right next to me.  I touched his arm (or maybe I slapped it), and said “I know you!  You’re, you’re… Al Franken!”  And he said “why, yes, I am–and who are you?”  And then I told him I was just a lowly tax policy analyst at CBO who had written something that went into an AEI book the prior year, but what was he doing there, and all he told me was that the only reason he was there was because Norm Ornstein of AEI was (and still is?) his good friend. I have to admit, I can’t remember exactly what year that dinner was–but it turned out that at that time Al was working on or just finished his “Rush Limbaugh Is a Big, Fat Idiot” book which included some spot-on discussions about the distribution of the tax burden, which happened to be the issue I was working on for CBO at the same time.  (It was the focus of my Ph.D. dissertation as well; here’s the book I eventually wrote with my dissertation supervisor.)  I didn’t know about Al’s command of fiscal policy until after the encounter, when I read his book and then over the years another and another, and I was impressed.  Not just about how funny he was in these books, but how substantive and insightful and correct he could be in his policy analysis, and his rare talent in disguising the otherwise dry policy analytics as something engaging enough for normal people (not just policy geeks) to read and learn about.  That ability to “translate” like that was inspiring to me.

In fact, I was so taken by Al Franken’s books that I had my budding social-activist child, my second daughter, Emily, read his books starting at age 12–as a early middle-schooler.  (Emily is the kid who would later be the one accompanying me to the anti-war march in DC and who would eventually become an officer at her high school’s Amnesty International group.)  So the second time I met Al was in late 2005, when I took Emily to a book signing (in McLean, VA) for his new “The Truth (with jokes)” book.  That’s the two of them in the photo above.  We had arrived at the very start, heard Al talk to the group of people mostly way older than me, let alone Emily (who was certainly his youngest fan there), but then I had to take Emily to her basketball game.  By the time the game was over and we rushed back to the bookstore fearing we were too late to catch him, it turned out that there were only a few people left in line waiting for their books to be signed, and Emily and I were going to be the last ones to have our book signed and talk with him–so we got some high-quality, individual time with him!  I loved how warmly Al greeted and talked with us.  (This, even though Emily was sweaty from the bball game!)  I explained how I had met him years before, and having heard him talk about possible interest in running for the Senate in 2008 (fans at the book signing had asked him about that), I told him I worked on the Hill on fiscal policy issues and gave him my business card, telling him “if you ever need an economist…”  (He never called or emailed me, but I don’t hold that against him and like to think he just couldn’t find me when he needed me, as I’ve moved on since then.)

I’ve been trying to keep up with now-Senator Franken; my ears always perk up when I hear him on the TV that’s normally just background noise for me at home and in my office.  I always like what I hear, because Senator Franken shows that mixture of conviction, honesty, intelligence and good humor in how he explains things.  So in today’s Washington Post, I was happy to see Post writer Jason Horowitz suggest that not only is Al Franken funny and getting more comfortable about showing that funny side even as Senator Franken, but he’s using his unique talents to show more political courage than your average politician as well.  For example:

In early February, Franken rose during a private panel discussion with the Democratic caucus and Axelrod and theatrically declared, “I’ve been in a slow burn” about the administration’s handling of health care, according to several attendees who asked to remain anonymous to discuss the details of a private meeting. He then launched into an extended critique and demanded to know from Axelrod when the president would take a leading role in pushing the issue. According to multiple sources familiar with the proceedings, Axelrod countered that the president had constantly championed health-care reform.

Franken, according to several sources, urged Axelrod to answer his question and aggressively suggested that the administration push the House to pass the Senate’s health-care reform bill. Axelrod replied that if Franken had the names of 218 supportive members of Congress in his pocket, he’d gladly pass them along to House Speaker Nancy Pelosi (D-Calif.). Axelrod added that he doubted Franken did.

Franken then, according to multiple sources, directed his ire toward President Obama.

“When will he apologize for his stupid idea to put these discussions on C-SPAN,” Franken said, according to two sources.

So, Senator Franken:  if by chance you feel like speaking up more on fiscal responsibility (which I know you understand and care about), and if you could use some help from an economist on the substance of the issue, I happen to know an economist who could use your help in making the fiscal responsibility messages more compelling to real people–or even just to those people who are your colleagues now.  I’m at the Concord Coalition now.  Give me a call!  ;)

Out, Out, Damned Deem!

March 16th, 2010 . by economistmom

ladymacbeth1

I have to agree with the Washington Post’s Harold Meyerson, the Washington Post’s editorial board, and I’m sure many, many Americans, that this damned “deeming” thing to allow the House to come up with a passed-then-modified version of the Senate health reform bill, is not just very silly.  Worse, it’s exactly the wrong way to go about gaining the trust of the American public, and seems yet another example of the lack of courage among the Democrats.  As Harold puts it:

What’s ridiculous about the Democratic deeming is that the Republicans are going to run against them with the provisions of the Senate bill whether the Democrats vote for it or not. What the Democrats need to do is man-up and woman-up and just pass the Senate bill, idiocies and all, and then amend it forthwith through reconciliation. I share the House Democrats’ contempt for the Senate (the existing Senate, anyway), but as I noted in a column a few weeks back, if the Democrats sacrifice health reform on the altar of bicameral mistrust, future historians will look back at them and pronounce, “These guys were jerks.”

Just pass the bill, amend it, and go home for the holidays.

In Virginia, We (Only) Get What We’re Willing to Pay For

March 15th, 2010 . by economistmom

It’s the same situation in all states, actually.  Virtually all state governments have some sort of “balanced budget requirement.”  (See Table 11 on pages 40-41 in this report of the National Association of State Budget Officers (NASBO).)  The constraints take on a variety of degrees of stringency, but empirical evidence suggests they do bind (i.e., matter).  Even in Vermont, the only state that doesn’t have any sort of balanced budget requirement, the NASBO report indicates that “in practice, a deficit has not been carried over.”

So in Virginia (where I live and work), we’re now offered a little insight into what balancing the budget entirely on the spending side looks like, with this report in today’s Washington Post (emphasis added):

RICHMOND — The Virginia General Assembly adjourned its annual legislative session Sunday evening after adopting a two-year, $82 billion budget that cuts millions from education, health care and public safety — curtailing state spending more aggressively than any in generations while fulfilling the new Republican governor’s promise not to raise taxes.

The trade-off for holding firm against a tax increase to plug a $4 billion hole was a spending plan that cuts deeply into virtually every area of state responsibility.

“We tried to keep our word,” said House Majority Leader H. Morgan Griffith (R-Salem). “We knew times were tough, but the state has to live within its means, just as families have to live within theirs.”

Funding for schools will drop $646 million over the next two years; the state will also cut more than $1 billion from health programs. Class sizes will rise. A prison will close, judges who die or retire won’t be replaced and funding for local sheriff’s offices will drop 6 percent.

Only 250 more mentally disabled adults will receive money to get community-based services, in a state where the waiting list for such services numbers 6,000 and is growing. Employees will take a furlough day this year, the state will borrow $620 million in cash from its retirement plan for employees and future employees will be asked to retire later and contribute more to their pensions.

Medical care providers will see Medicaid payments from the state trimmed, and fewer poor children will be enrolled in state health care, although those health cuts could be tempered by anticipated federal funds. Funding for the arts and public broadcasting will be cut by 15 percent over two years.

Thank goodness the federal government is able to run a deficit in bad economic times like these, otherwise there would be no social safety net at all.  But I don’t mean to say thank goodness deficits occur at all times.  In my mind deficits at the national level are justified and even wise under two types of circumstances: (i) as treatment for a temporary emergency–be it a war, a natural disaster, or an economic recession; or (ii) in order to fund economically-fruitful investments that pay off over the course of several years in a broader net social benefit, not just private benefit, sense–investments that otherwise couldn’t be funded if annual deficits were not allowed.

Much of federal deficit-financed spending (and tax cuts) of course does not fall under these two categories, which means we shouldn’t be so grateful for the federal government’s seemingly unlimited capacity to borrow at all times (good or bad) and for all sorts of things (wise investments or wasteful spending).  And that’s why the President’s fiscal commission is a good idea.  But the Virginia example may provide a little window into what the federal government would look like if Congressman Paul Ryan, newly named to the fiscal commission and the author of a plan to balance the budget entirely on the spending side, got his way.  What Virginia will be cutting looks like a lot more than just “waste, fraud, and abuse.”  But I guess I’m supposed to be happy about my taxes staying low, and people like me who (at the moment) have good jobs and income and health aren’t supposed to think that “there but for the grace of God go I” when we see our fellow citizens losing their safety net just as they’re falling.

I’m not so sure the motto “Virginia Is For Lovers” is very fitting… unless it refers to loving low taxes.

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