Wednesday, August 6

Wednesday, August 6

Is income inequality hindering economic growth?; Medicaid pilot program shows improved outcomes and lower costs; movie subsidies are still a loser for taxpayers; levee board heads back to court.

Is income inequality is hindering economic growth?
At extreme levels, income inequality can harm sustained economic growth over long periods. The U.S. is approaching that threshold.” So says a new report from economic forecasting firm Standard & Poor’s, which also found that high income inequality contributes to the “boom/bust cycle such as the one that culminated in the Great Recession” and has held back the tepid recovery. As Neil Irwin on the New York Times’ Upshot blog notes, the doesn’t really say anything new, but the fact that concerns about inequality are migrating from academia and politicians to Wall Street illustrates the depth of the problem and the threat inequality poses to the broader economy. S&P’s report is light on policy prescriptions, but does focus in particular on the need to expand educational opportunity, noting that “income imbalances tend to dampen social mobility and produce a less-educated workforce that can’t compete in a changing global economy. This diminishes future income prospects and potential long-term growth.”

Medicaid expansion pilot program: “Better care, better outcomes, better cost”
One Cleveland hospital’s effort to expand coverage to 28,000 uninsured residents is improving health outcomes and reducing costs, reports Kaiser Health News and National Public Radio. Before Ohio moved forward with Medicaid expansion, MetroHealth in Cleveland started its own Medicaid program for the uninsured. But beyond just expanding coverage, the hospital also used nurses to coordinate care for 18,000 of the most expensive “frequent flyers”—patients with chronic conditions like diabetes who overuse the emergency department. The results so far are phenomenal: After just 9 months, ER visits are down 60 percent, primary care visits up 50 percent, and costs have dropped $150 per patient per month. The pilot program shows the promise of expanding coverage, but also the need to go further by focusing on care coordination, especially for patients with chronic conditions.

Despite industry claims, movie subsidies are still a loser for state taxpayers
In a letter to the editor in The Advocate, film producer Michael Johnson took issue with LBP’s recent analysis that shows Louisiana taxpayers have subsidized the Duck Dynasty reality show to the tune of $6.2 million. “What they don’t acknowledge is how much money is generated by tourists coming to see the Duck Dynasty factory and purchasing merchandise that pays taxes into the state,” Johnson complains. “Is there a way to track that? What about the great-paying jobs that pay taxes in the state?”

Unfortunately, the letter misses the point. There is no doubt that the subsidies generate some economic activity. The problem is that for every dollar that taxpayers give to film producers, the state only gets back around 15 cents, and LBP’s 2012 analysis found that every movie job created costs taxpayers $60,000. Those are dollars that can’t be invested to educate our children or repair Louisiana’s crumbling infrastructure.

Johnson is right that Hollywood is not the only industry Louisiana woos with expensive incentives, which is why LBP has consistently called for more scrutiny of not only film subsidies, but oil and gas tax breaks, Enterprise Zone credits and more. The fact is that movie subsidies just happen to be one of the most expensive programs, costing taxpayers more than $1 billion over 10 years.

Levee board heads back to court
One of the major debates of the 2014 Legislature involved a New Orleans-area levee board’s lawsuit against oil and gas companies for damage to Louisiana’s coast. The result was Act 554, which was designed to prohibit the levee board and other local authorities from suing. But on Tuesday, the Southeast Louisiana Flood Protection Authority-East argued in U.S. District Court that the law does not actually apply to it due to sloppy bill language. The board claims it’s exempt because it is a “regional” and not a “local” authority, reports The Times-Picayune. The parties are due back in court today.


Number of the Day

$525 billion: Potential increase in U.S. Gross Domestic Product (GDP) in five years if educational attainment increased by one full year, as it did between 1960 and 1965. (Source: S&P)