James Galbraith: CBO Not Competent to Assess Economics of Minimum Wage

Yves here. I’m delighted to see Jamie Galbraith take up the heavy lifting of debunking an obviously bogus CBO analysis attacked raising the minimum wage to $15 due to alleged large job losses and fall in Federal tax receipts. Galbraith points out that he isn’t attacking the CBO’s competence in the budget arena, although he readily could there. The CBO is not merely a deficit scaremonger; it regularly cooks its models to assure that Federal debt trees grow to the sky.

The CBO has repeatedly taken what amount to partisan positions and has skewed its analysis in gross violation of its own procedures to produce results that have had enormous impact on policy debates. We described a particularly egregious example in 2012, when two budget analysts at the Fed, as in unquestionably qualified to take on the CBO, took the unusual step of clearing their throats and depicting CBO Medicare cost projections as nonsense. Their article made clear that the CBO also violated its own procedures to come up with its estimates. From our post:

The fundamental beef of [Glenn] Follette and [Louise] Sheiner with the CBO model is that it naively assumes past growth in health care spending as the basis for its long-term projections. The result is that it shows that trees will grow to the sky. One of the things anyone who has built forecasting models will tell you is you come up with assumptions that look reasonable and then sanity check the output (for instance, does your model say in year 10 that your revenues will be 3x what you can produce given your forecast level in plant and investment? If so, you need to make some revisions). The Fed economists point out numerous ways that the model output flies in the face of what amounts to common sense in the world of long term budget forecasting. From the opening of the paper (emphasis ours):

Long-run projections of the U.S. federal budget have played a prominent role in discussions about fiscal policy and the design of major transfer programs for several decades. The projections typically show large fiscal imbalances owing to ramping up of retirement and health care costs relative to GDP. Health care costs are the key factor in these projections for two reasons. First, in current projections they are the prime source of growth of spending as a share of GDP. Second, they are the most uncertain part of the forecast. For example, the Congressional Budget Office’s most recent long run outlook shows spending on Medicare and Medicaid, the governments health programs for the old and poor, respectively, rising from 4.1 per cent of GDP in 2007 to 19.1 per cent of GDP in 2082.1 By contrast, Social Security benefits (the government’s main old-age pension program) increase only 2 percentage points, from 4.3 per cent of GDP in 2007 to 6.4 per cent in 2082. Another analysis by CBO suggests that an 80 per cent confidence band around the Social Security projection would be from 51⁄2 to 91⁄2 per cent of GDP.2 CBO did not present similar calculations for health spending; instead, they projected health spending under three different assumptions about the rate of growth of age-adjusted health care spending in excess of per capita income. Their projections show health spending ranging from 7 to nearly 40 per cent of GDP by 2082.

By comparison, defense spending as a percent of GDP peaked at 42% of GDP in World War II. A model that presents as a possible outcome that the US will devote nearly 40% of GDP to health care spending a long-term, sustained outcome, is ludicrous on its face. The CBO assuming public health care spending will sustain its growth rate of the last 50 years for as long as they do (see further discussion below) with no policy changes is like budget analysts in 1946 assuming that military spending will grow at the same rate it did during World War II without any policy changes. Yet they further assume that, having reached this crushing level, Medicare costs in 2082 will still be growing faster than GDP!

The CBO fully deserves the criticism that Galbraith levels at it, not just for being bad at economics, but also for operating in an openly partisan manner.

By James K. Galbraith, Lloyd M. Bentsen Jr. Chair in Government and Business Relations, University of Texas at Austin. Originally published at the Institute for New Economic Thinking website

Congressional Budget Office Report on the Raise the Wage Act of 2021 underpins a February 11 Washington Posteditorial headlined, “Democrats Must Listen to the Data.” The Postlaments that a $15 minimum wage would (according to CBO) eliminate about 1.4 million jobs when fully in effect, with half of the job losers leaving the workforce. Because of the projected fall in employment, the CBO also calculates that a $15 minimum wage would increase federal budget deficits by $54 billion dollars over ten years while adding $16 billion to federal interest costs.

This note examines the so-called data: should they be taken seriously as economics? Without in any way criticizing the competence of CBO’s budget analysts, the answer is clearly “no.” In particular, the CBO’s employment forecast is unsupported. As a result, its deficit forecast, though trivial in magnitude, is also unsound.

Much of the CBO report details the effects of an increase in the minimum wage on Medicare, the Affordable Care Act, SNAP, the Earned Income Tax Credit, and on tax revenues, which would increase due to higher payroll taxes on higher rates of pay. Some of this analysis is apparently novel and represents a significant advance on earlier CBO work in this area. However, the net estimated budget effects are small, since the total increases in spending are roughly offset by increases in tax revenue or reductions in tax expenditure. Of the cumulative estimated increase in the (on-budget) deficit, almost $53 billion are due to spending increases in just three areas: unemployment insurance, Medicaid, and CHIP. These expenses CBO attributes to its projection of job loss. The job loss projection is therefore the nub of CBO’s deficit projection, and it is important to understand how CBO arrived at its number.

The method is not explained in the CBO’s analysis, and a paper cited does not offer much explanation either. CBO merely states that it “has formed distributions of values for both wage growth and [employment] responsiveness” and “to generate an average estimate, CBO simulated a distribution of possible changes in employment by drawing randomly from these distributions.” The distributions themselves are said to be based on economic research, presumably academic research by labor economists.

The first problem is that the academic “literature” on which the distribution of estimates of an increase in the minimum wage is based is deeply uncertain and highly controversial. A predominance of studies are based on the simple idea that demand curves for labor slope downward, the proposition that with a higher average wage, fewer people necessarily will be employed. This is a textbook verity, often repeated, and beloved by business lobbies. But it is eminently doubtful in the real world. The real world is shot through with high unemployment in low-wage regions and fuller employment in high-wage regions, and it is also a fact, looking around the world, that more egalitarian regions have lower unemployment, generally, than less egalitarian regions.[1]

A second problem is that few if any studies can fairly assess the effect of a large increase in the minimum wage, which is a different animal from the average wage because no such large-scale increase has occurred in the record. Instead, academic studies generally confine themselves to projecting estimates from small changes that have been observed, out into an environment in which they provide little to no useful guidance. That is what CBO has also done here.

In any event, the minimum wage is a peculiar thing. It is very low and applies to a very small and marginalized fraction of the working population. Who are they? In the main, they are teenagers working a first job, women and minorities in low-income communities and regions, day laborers, and migrant workers. What happens to these workers when the minimum rises is far from clear since one must also take account of the effect on workers who make a bit more than the present minimum, whose pay will also be increased, many of whom are in the same families as minimum wage workers.

For instance, some young people in low-wage employments will find that their family incomes have gone up by enough to justify quitting their jobs and (say) returning to school. Others, working two or more jobs, will be able to reduce their hours or quit extra jobs with little or no loss of income. The fact that these low-wage workers may leave the workforce is a good thing, not a bad thing as both CBO and The Washington Post suggest.

As a famous study found,[2] some employers will increase their employment without even thinking about it, because with higher wages job turnover declines, there are fewer vacancies to fill, and such employers will make back part of what they lay out in higher wages through lower training costs. This is a characteristic situation facing fast-food restaurants, a major employer of low-wage teenagers. Some other employers, unable to recruit cut-rate illegal labor from across the border, will offer the same jobs at the higher wage to documented legal residents and US citizens. In these cases, legal employment will go up, not down.

Finally, some employers, perhaps a vast majority, will face an unchanged need for strawberry pickers or wait-staff, and will simply pay the higher wage. They won’t like it but they will do it. And they may find that what they pay out in higher wages, they make back because their customers have more money to spend. What is the net effect of these different forces? The literature cannot say.

The CBO study states that “when the cost of employing low-wage workers goes up, the relative cost of employing higher-wage workers or investing in machines and technology goes down.” This is another textbook verity that does not withstand scrutiny. High-wage labor is not a more-efficient substitute for low-wage labor at a checkout counter or in a burger joint. The entire reason that those jobs are low-wage is that they have been engineered to use people who have few skills, require little training, and are easily replaced! Filling the slots with college graduates does not make the checkout lines any shorter or the burgers any better.

As for machines, CBO’s assertion overlooks the fact that many low-wage people are employed in the business of making machines – if not on the assembly line, then in packing, distributing, cleaning the factory floors, and in many other essential occupations. It is therefore not obvious that raising minimum wages across the board makes machines cheaper – even if there is a good automated substitute for human hands, which there often is not. Further and finally, when such a substitute does exist, it is often no less competitive with labor at $7.25 as at $15. Machines do not shirk, strike, or talk back.

What will happen to jobs when the minimum wage goes up? The truth is that CBO does not know. Its estimates are a hotchpotch of guesses, entirely without serious basis in either fact or theory. They were crafted, one may credibly suspect, to conform to an irrelevant body of textbook doctrine, so as to minimize criticism from people who write and read textbooks, and political figures who pretend to believe them. One can understand this impulse without sympathizing with it.

Since the unemployment estimate drives the deficit estimate, that too should be disregarded. Still, it is worth noting that CBO’s number, $54 billion in increased deficits over ten years, is tiny by present standards. The federal budget deficit for 2020 alone is estimated at $3,300 billion, so the estimated annualized increase in the budget deficit from raising the minimum wage to $15 per hour is less than two-tenths of one percent of the actual deficit last year. Even if the estimate were valid, which it isn’t, it is of no economic significance and the claim that it might lead to a rise of interest rates is entirely preposterous on that ground alone. CBO has a long track record of predicting increases in interest rates that never happened; this is just another bad forecast in that line.

 

A final issue concerns CBO’s assumption that the growth of nominal GDP (real growth plus inflation) would be unchanged by the increase in the minimum wage. The assumption of unchanged nominal GDP growth is a feature of CBO projections generally, not particular to this report, it is useful for standardizing comparisons of different legislative proposals. But because in this case income would shift toward lower-income families, CBO also predicts that “total demand for goods and services would increase for several years, boosting overall real output.”

In other words, raising the minimum wage is good for the economic growth rate! But if nominal GDP is constant while realGDP is higher, it is mathematically necessary that the rate of inflation must be falling under these projections, relative to the CBO baseline. So we have the following predictions all bundled together: higher wage costs, higher interest rates, more economic growth, but fewer jobs and lower price increases. The story makes no sense at all.

The Congressional Budget Office performs a useful function, in ordinary times, by estimating the budget consequences of spending and tax legislation on the basis of standardized economic projections. These projections are not proper forecasts of the economic future and should not be treated as such. But it is within CBO’s competence to use them as a common baseline for assessing the size of various tax and spending measures, and that is the legitimate function of the CBO.

An analysis of a major increase in the minimum wage is different. CBO can correctly analyze some of the mechanical consequences of such a measure, and it does so in this report. Those consequences include a major increase in the total income of low-income families, especially minorities, a large reduction in poverty, an increase in total demand for goods and services, higher payroll tax revenues, and changes in eligibility for and use of various federal programs in health care, nutrition, and the EITC. None of these, taken together, have much net effect on the budget.

As for the effect on jobs, CBO does not know. Its estimate has no valid foundation. Its deficit score for the fifteen-dollar minimum wage is therefore also meaningless. The blatant contradictions, cited above, in the macroeconomic inferences concerning the Raise the Wage Act are sufficient proof that CBO should not have published this report, and no one should rely on it.

Notes

[1] James K. Galbraith and Enrique Garcilazo, “Unemployment, Inequality and the Policy of Europe, 1984-2000,” Banca Nazionale del Lavoro Quarterly Review, Vol LVII, No. 228, March 2004, 3-28.

[2] David Card and Alan Krueger, Myth and Measurement, Princeton: Princeton University Press, 1995.

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30 comments

  1. Mike R.

    I know one thing that will happen if the minimum wage goes to $15. Prices will rise in those goods and services that have not risen from past monetary inflation. I’m thinking lower end food products, probably alcoholic beverages, entertainment services. And the prices could rise enough as to counteract the initial benefits of the wage increase…..so we’d be back to where we started.
    It will also drive other prices higher as other wages have to move up accordingly.

    I’m not saying this is right or wrong, good or bad; just the fact that the benefit to the working class maybe shorter lived than thought.

    Reply
      1. JTMcPhee

        Of course since when would corporate looting profits be reduced by doing anything so awful as paying working people a living wage? Sacrilege!

        Reply
      2. Alice X

        Put another way, in my granular way: the fat cats could easily suck it up the little for them it would take to offset their workers getting a living wage. But! What if we (the government) set price controls for business, offset with corresponding subsidies to counter their claim of loss from an increased minimum wage. These subsidies would need to be progressively shunted away from big business, which already has its subsidies. I just wanted to throw this out, though it misses the evergreen political problem of the greed of the donor class. I live on a different planet, so excuse me.

        Reply
    1. a different chris

      Well supposedly as people have more money to spend, they attract competition for said dollars.

      I actually think that is one thing the drippy old pseudo-science of economics gets right. And competition keeps prices down. So instead of just a Dollar Store maybe a real supermarket will show up? Instead of a payday lender, a bank will be there to trust a working class stiff enough to keep his car payments within reason?

      So I do believe you are wrong, this is a pretty unmitigated good at this point in history. Economics not actually being a science that could be completely untrue 10 years from now, but it will be true again after that.

      I wish the profession could somehow admit to that.

      Reply
    2. lyman alpha blob

      Wage hike shouldn’t happen in a vacuum – there need to be other changes too if we are to have a more equitable society.

      To keep businesses from raising prices to keep their profits ups and negating any potential wage hikes, among other things the government could also raise taxes on the wealthy at the same time, sending the message that price gouging is not an option. The elites will just have to learn to live with less. Of course before we can have systemic change, we going to need to figure out to get rid of the self-dealing elites who currently set policy.

      Reply
    3. tegnost

      plus if you make more than $850 a month you get booted off medicaid!
      The herd doesn’t know what’s good for it really /s

      Reply
    4. aj

      This line of reasoning is fallacious. Remember when Papa John’s did the analysis and the result was that they would have had to charge $0.25 more per pizza? I did a similar analysis a while back on McDonald’s and it showed that they would have to raise the price of a value meal by about $0.40 to compensate for a $15 minimum wage. It’s not like the prices are going to double if you double wages. They really only need to go up a few %. And in industries as competitive as fast food and retail, there is pressure to keep prices as low as possible even while costs increase.

      Also, lets not forget that inflation is a continuous increase in prices. A $15 minimum wage hike doesn’t produce inflation, it produces a 1-time price correction.

      Reply
  2. Jack

    Good article. It is clear that the CBO does act in a partisan manner. It was reported in the WAPO today that Biden is already backpedaling on the $15 an hour minimum wage. He says he is open to stretching out the phase in period and reducing the amount to say $12 or $13, comments he made in a CNN town hall last evening.

    Reply
    1. engo

      Ron Unz wrote a good paper in favor of a $12 hour wage in 2014, asserting what was said formerly. However, I didn’t notice he was an awful commie…

      Reply
  3. DJG, Reality Czar

    Reading the post is worth it just for this tasty paragraph: “The truth is that CBO does not know. Its estimates are a hotchpotch of guesses, entirely without serious basis in either fact or theory. They were crafted, one may credibly suspect, to conform to an irrelevant body of textbook doctrine, so as to minimize criticism from people who write and read textbooks, and political figures who pretend to believe them. One can understand this impulse without sympathizing with it.”

    What I note is that the arguments against raising minimum wage seem to be the usual potpourri of austerity, bad managerial practices, disrespect for workers, nods to “data,” and libertarian nostrums.

    Raise the minimum wage. All one has to do is look at the changes in the U.S. Gini coefficient to get a hint at problems caused by the U.S. workforce being underpaid.

    Reply
  4. Gregorio

    It’s ironic that WaPo, which is owned by the union busting second richest man in the world, has gone all in on shutting down the $15 minimum wage. Poor little Jeff Bezos must be losing sleep worrying about where his next 100 billion will come from.

    Reply
  5. RODGER MALCOLM MITCHELL

    These are not the only fake predictions the CBO has foisted on the public. They also have talked about something called the “output gap.”

    It’s a mythical number, described as “An output gap indicates the difference between the actual output of an economy and the maximum potential output of an economy expressed as a percentage of gross domestic product (GDP). A country’s output gap may be either positive or negative.”

    Total BS.

    First, how would it be possible for the “output gap” to be positive. (Producing MORE than the maximum potential??)

    Second, the “gap” is a measure of one thing only: The accuracy of the prediction itself, In short, the gap measures the predictor’s ability to predict.

    It’s not a real measure; it’s a critique.

    A more thorough analysis can be found here.

    Reply
  6. Bill Smith

    “Employment would be reduced by 1.4 million workers, or 0.9 percent, according to CBO’s average estimate”.

    That is as it says, just an average of their estimates. They published a range of estimates. That seems to me that they are admitting they don’t know the exact outcome.

    As to this: “it is therefore not obvious that raising minimum wages across the board makes machines cheaper”, anyone have access to some cost accounting data to take a look at to get some idea of what might be the case?

    Reply
  7. shinola

    The CBO’s position on minimum wage makes sense if you realize that it actually stands for the Corporate Budget Outlook (see the article posted just prior to this one).

    Reply
  8. I have lived in your future

    I employed 4 people on minimum wage in one of our businesses pre-covid.
    Right now I cant get them back to work even if I will pay them the minimum wage , the benefits of staying home and collecting unemployment being more attractive.
    If I have to pay them higher wages I might have to get rid of one of them to keep the same margins and prices, and probably the same volume of work will still have to be handled by 3 instead of 4 workers.
    Another option would be to increase menu prices, which is most probably what we will do.
    Will se how it goes, but there is smth to be said about the cost of turnover, I will gladly pay more for a reliable person, but not sure increasing minimum wage will take care of that.

    Reply
    1. aj

      If your business can be run by 3 instead of 4 people, why are you running with 4 people regardless of the wage rate? This is how modern business thinks. They will always try to reduce labor (and other expenses) regardless of the cost. If you can’t do the business with only 3 people and you have to raise rates a little bit, so what? Businesses raise their prices all the time as their costs change. Why wouldn’t your competitors have to do the same?

      Reply
      1. I have lived in your future

        It makes sense for me to hire more if labor is cheap, it gives me the flexibility when one of the workers doesn’t show up or quits abruptly. I still need to serve customers.
        People working for minimum wage aren’t very reliable in my experience.
        I don’t agree that the business mindset is anti labor as you try to portray, the problem is most small businesses have very thin profit margins, you can’t squeeze the cost of your materials/supplies (unlike big business) and the only saving possible would be the labor.
        Wages are 100% deductible so any small business with good profit margins won’t hesitate to pay higher wages (sending money to IRS or giving it to your workers, the choice is easy made) but for that you need to make good profit. People are sensitive to prices and whenever we tried to increase the prices sales suffer, maybe postcovid will be a different world.
        Intention is good, but one must run a business and do payroll every two weeks trying to balance the books before creating economic models that try to predict things nationwide about such wage increase effects. Economy is an adaptive complex system, any attempt to predict in such system is an exercise in futility imho.

        Reply
        1. aj

          “Wages are 100% deductible so any small business with good profit margins won’t hesitate to pay higher wages (sending money to IRS or giving it to your workers, the choice is easy made) but for that you need to make good profit.”

          I don’t buy your logic that you would pay your workers more to avoid taxes because the math just doesn’t work out. Assuming a 35% tax rate, for every dollar more you pay your workers, you could have paid $0.35 to the IRS instead. So, $0.65 comes out of your pocket. You, as decent person, might like to pay your workers more if you can but most businesses won’t. Major companies make decisions based on maximizing shareholder profit. If something decreases profits (like raising wages) the only way to get that to happen is by force through something like union negotiations or raising the minimum wage. The business guys will bitch and moan about it the whole time, but when eventually forced, they will adapt and either raise prices or go under. If your business is only profitable because you pay people poor wages, maybe you business isn’t as viable as you thought.

          Reply
    2. Jack Parsons

      What was your demographic? Were they minimum wage workers? If the minimum wage were raised, would they have more money to spend?

      This marginal analysis assumes that the rest of the context will stay the same.

      Reply
    3. RMO

      “Right now I cant get them back to work even if I will pay them the minimum wage”

      Even if I will pay them the minimum wage?

      And you might have to get rid of one of them if you have pay them more? But you said you’re not actually employing anyone right now.

      Reply
  9. Dick Swenson

    It is ovious that economic forecasting is very poor, perhaps even impossible.

    It is obvious that raising the minimum wage will put money in the hands of those who need it badly.

    It is obvious that large organizations that use low wage employees can afford to raise theeir minimum wage by simpy being less greedy. How many cars can a Walmart executive own and drive? How much more money does Bezos need?

    Whether or not a business with two or three minimum wage employees can survive an increase in the minimum wage is a matter of just what the business is and how well it is run.

    Reply
  10. RODGER MALCOLM MITCHELL

    The CBO and others, who cry “woe” about an increase in the minimum wage, do not calculate how much unemployment would be reduced by a reduction in the minimum wage — all the way down to slavery.

    There is no question that more businesses can profit, at least temporarily, if they could get away with giving less to employees. The Southern plantation owners, and before them, the Pharaohs, did quit well using slave labor, along with minimal food and housing..

    Remember that the next time you hear the sad crying by small business owners, who profit on the backs of impoverished workers.

    Reply
  11. LowellHighlander

    May I offer to the good professor a theoretical argument published by an old, late friend of his? This offering is in regard to Professor Galbraith’s statement here:

    “A predominance of studies are based on the simple idea that demand curves for labor slope downward, the proposition that with a higher average wage, fewer people necessarily will be employed. This is a textbook verity, often repeated, and beloved by business lobbies. But it is eminently doubtful in the real world.”

    Professor Robert E. Prasch published a far more realistic Labor Supply Curve in his article “Reassessing the Labor Supply Curve”, Journal of Economic Issues, Vol. XXXIV, No. 3, September 2000 (pp. 679-692). I believe that, for our purposes here, this far more sensible conception of the Labor Supply Curve shows that with increasing wages, employment offered by individuals falls. [In the interests of posting this comment on the same date as the posting of Professor Galbraith’s article here, I am relying on my having read this article at least twice, but many years ago. Thus, I invite others to read this article and offer their understanding of Professor Prasch’s conclusions here.]

    Yes, a higher minimum wage can, quite likely, offer people the chance to do away with that second (or even third) job. I believe that this would affect employment as shown in the data collected and published in the Current Population Survey, which queries employment by household.

    One might ask: If this model by Professor Prasch is so illuminating, why aren’t more people (i.e. economists) using it? As Professor Prasch himself taught me, his model would provide more than one equilibrium in the labor market modelling. And, as he further explained, the sanctity of the viaibility of the math must take priority over all else in economic modeling. [This is a big reason why I was allowed to write a graduate thesis in economics that was all about ethics and justice within economics.]

    Reply
  12. Jack Parsons

    This article by Dean Baker and Nick Buffie in 2016 has a wonderful take-down of the CBO’s estimating abilities. Look for the charts in the middle of the article entitled ‘Actual Interest Rates v.s. CBO’s Projected Rates’:

    Budget Deficit Mania and the Congressional Budget Office

    It would be really great if Neera Tanden runs and represents the CBO badly enough that the office is discredited and abolished. One can always dream.

    Reply
  13. Susan the other

    This CBO stuff is the same old song that has been loud and off key for 50 years. It’s the Phillips Curve all over again. Can’t have full employment (or god forbid an actual living minimum wage) because inflation. Keep the cost of labor at poverty levels (anybody else notice our poverty rate hasn’t budged since LBJ?) – because that way at least some elite prosperity will survive to live the high life – the 10%, now 1%. Somehow shared prosperity is always “inflation”. Clearly it is total BS. But it’s the same underlying rationale that prevents M4A and other social spending. Everyone knows its bogus, but it persists almost subconsciously because the way the system (nationally and globally) functions protects it. This country is willing to do all sorts of egregious things, like allow people to starve in the Great Depression, prosecute a century of war for “free trade”, allow American Labor to be literally decimated for the sake of corporate profits, and also for the sake of corporate profits to simply “offshore” labor, shut down the American economy for the sake of globalization. No wonder the CBO still spews this crap. Congress is completely bought and sold so it literally doesn’t know how else to think. But now, there’s an apparent disconnect occurring at the CBO because Yellen and Powell are talking up “full employment” and ready to spend to get there. The hedge, as always, is that promoting full employment will not be allowed to cause “inflation” and if it does then it will be “employment” that will be cut back. That’s like saying if it causes well being, employment will be cut back. I’d love to see both Congress and the Congressional Budget Office lose credibility over this. Somebody’s gotta.

    Reply
  14. run75441

    Yves:

    Since I was around here a ways back. I seem to recall you had received a phone call from Elmensdorf’s assistant to arrange a phone call about your views on healthcare? At that time you were quoting the same Follette and Sheiner which you have cited above. If my memory serves me correctly, that was interesting.

    Social Security costs can still be resolved for as little as 1 tenth of 1% increase for both employer and also employee for each year 10 years out. This was proposed by ABs Dale Coberly and Bruce Webb’s Northwest Plan which was reviewed by SS and thought to be a solution. The same plan would still work today.

    Healthcare is still an issue. What I am seeing is a different approach where as companies are asking for increased prices for older drugs for which new uses for have been found.

    Rituxan is one such cancer drug for which other uses have been found. Today an infusion of Rituxan over a 3 hour period is ~$30,000 per infusion. To my knowledge the formulation has not changed for the newly discovered uses and neither has the cost to produce the drug.

    Recently the ICER rejected price increases (+20% retail) for Rituxan (and also Humira) as there was no legitimate increase in value found by the ICER. The Value added approach touted by Healthcare companies can be subjective. Healthcare is pushing this as a better approach for them. I see it as excessive rent taking

    Just some thoughts

    Reply

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