Paul Haahr’s Blog

Ezra Klein has a good post up today on the problems of giving employers, but not individuals, a tax exemption on health insurance. This is clearly central to the problems of healthcare financing in the US, but, given how things are, it’s not the sort of policy that can be changed by itself – doing so without another mechanism to pay for insurance would end up making many more people uninsured.

What has always seemed to me to be bad policy, but not so intimately tied to the rest of our economy, is the existence of Flexible Spending Accounts. The gist of an FSA is that an employee of a firm which offers such a plan can set aside a fixed amount of their salary to pay for health care or dependent care; that portion of their salary is tax exempt, but must be used in the space of a little bit more than a year or it is forfeited.

I can’t see any public policy purpose here. Why is the tax exempt status of my medical or child care spending dependent on my employer offering such a plan? Why do I need to play “Let’s Make a Deal” to guess the closest dollar amount without going under to the amount I will spend on health or child care in order to exempt it from taxes? How does setting aside “use it or lose it” money help in any way to reign in health care costs?

I do participate in these plans. For child care, it’s easy to figure out in advance how much we’ll spend in a year on preschool. For health care, we overestimate how much we’ll spend and, towards the end of the year, use the leftover money to pick up a few pairs of glasses, since optometry is covered as medical. (Call me cynical; I’ll take advantage of a tax break even if I think it’s bad policy.)

But who benefits from FSAs versus a policy which says “The first N dollars of health or child care spending per year is tax exempt”? I can see how the companies which offer these plans to employers benefit. I can see how such things benefit optometrists or other providers where people can spend their money before losing it. I can even see how employers benefit, since they receive the money their employees forfeit due to the “use it or lose it” issue, though I don’t think many employers are actively seeking that revenue.

But the benefit to the public? To individual employees of companies offering the plans? To people who don’t have access to such plans? There are much more straightforward, efficient, and fair ways to provide a tax exemption for medical expenses.

Lawrence Lessig spoke at Google this week on his and Joe Trippi’s Change Congress organization. In particular, he made a convincing pitch for the Strike 4 Change initiative, which asks people to make a pledge:

“I’m pledging not to donate to any federal candidate unless they support legislation making congressional elections citizen-funded, not special-interest funded.”

Many of my politically smartest friends believe that campaign finance changes are essential to making government work. I’ve never been in that camp – I’m very skeptical that anything can remove the influence of money on government, at any level – but I’m coming around to the belief that we need to try to plug holes in the system and hope to make progress while the “moneyed interests” are figuring out how to route around the new rules. A few observations seem to have tipped the scales for me:

• Regulatory and legislative capture by established, often declining, industries appear to me to often be the biggest roadblocks to progress, even within those industries. (Think: cars, music, finance, or health care for starters.)
• The common and brazen movement between government officials and lobbying firms is a form of institutionalized corruption.
• The amount of time elected officials need to spend raising money for their next races is shocking and necessarily distorts everything else they do.

Lessig makes these points, and more, very effectively.

For the last several years, I’ve been giving money to a lot of campaigns, almost always Democrats challenging Republicans or contesting open seats. I feel good about this (even though an economist would probably find the utility of these contributions as low as the utility of voting). At first I was negative on the idea of the donor strike, because I feel it’s one side giving up a possible powerful edge unilaterally. What I came to realize, while listening to Lessig, is that this acts as a useful filter – I don’t want to give money to someone who’s wants the status quo in politics to continue; there are certainly plenty of possible candidates to give money to and this gives me a way to nudge on this important issue.

Let’s hope Lessig’s optimism about being able to pass the Durbin-Specter bill is justified; my cynical fear is a filibuster that “supporters” of the bill don’t try too hard to override.

I suspect the Google talk will be available online soon, but it doesn’t appear to be yet. This talk appears to be similar:

Allie, our three year old, just told me she’d do something “soonly,” obviously generalizing from an observation that she wanted a word that ended in “-ly” for that role. Matthew, our son, didn’t make the same types of errors at that age. He’s nearly eight now and a very good reader; I’m not sure if he sees the distinction between adjectives and adverbs today and it doesn’t seem to interfere with his speaking, reading, or writing.

Allie also refers to her school, the Eureka Learning Center, as “My-reka;” for Matthew, it was always “Eureka.”

I’m reminded of Steven Pinker’s Words and Rules, which posits that there are two different mechanisms in the brain for modeling language, represented in the title as “Words,” for memorizing vocabulary and irregular forms, and “Rules,” for grammar and declension/conjugation of regular forms. Allie’s language development seems to be very rule-centric.

Both our kids are great with language. But it seems like they’re wired a bit differently from each other.