In Spite of Medicare's Latest Trustees Report, Medicare Is Still In Trouble

As a policy wonk, I find that certain things simply want to make me nerd out because that's how much I'm attuned to public policy. One of those moments is when the Medicare Trustees Report is released, much like it was earlier this week. Medicare is a government-run social insurance program that promises to provide health care to Americans 65 and older who have paid into the Medicare system. Given the influx of Baby Boomers retiring, the expenditures of Medicare become more and more important when discussing the federal budget. The good news from this report is that the Hospital Insurance (HI) Fund [that pays for Part A of Medicare] will not have its funds exhausted until 2030, which is four years later than expected in the last Trustees Report (p. 25). Furthermore, the Supplementary Medical Insurance (SMI) Fund, which pays for Parts B and D of Medicare, are looking to remain in financial balance for the remainder of the projection (p. 42). I was hoping for better news, like that Medicare will not have exhausted funds or that it won't cost the taxpayers more money, but I couldn't. As the bipartisan Committee for a Responsible Budget points out, the kernels of good news hardly mean that we're out of the woods when it comes to Medicare.

First, the HI Fund fails to meet the short-range test of financial adequacy (Trustees Report, p. 42), which is to say that it's insolvent. Second, the national health expenditures (NHE) are decreasing, and not necessarily for the right reasons. Although there is the distinct possibility that we are improving upon cost effectiveness in health care delivery, it's just as possible that the NHE dropped due to the recession (p. 3). As a matter of fact, I would contend that it's more likely due to the recession. Why? In spite of the Report's ambivalence on the effects of Obamacare (ibid), it nevertheless admits that "without fundamental change in the current delivery system, these [Obamacare-induced] adjustments would probably not be viable indefinitely (p. 43)." Once the funds are scheduled to exhaust in 2030, Medicare will only be able to provide for 85 percent of payable benefits as a percentage of cost (p. 30). What that means is that as of 2030, you will be paying the same amount, but only acquiring 85 percent of what you were previously. Second, although one can cheer over the surplus being created, the deficits will kick in again in 2021 and remain throughout the remainder of the budget projection (p. 21). Third, although SMI funds are considered solvent for the foreseeable future, they will remain solvent at the expense of economic growth. Right now, SMI-related costs are only equivalent to 1.9 percent of the GDP. That is expected to rise to 4.5 percent of the GDP over the next 75 years (p. 42). When looking at overall Medicare costs as a percentage of GDP, it's hardly flattering:

The CBO brought this up in its recent long-term budget outlook and how Medicare will further drive up costs (p. 40, Figure 2-2). The inability to contain costs, even with the supposedly wonderful Obamacare, is troublesome. This problem won't get easier to solve because the workers to beneficiary ratio is decreasing (Medicare Trustees Report, p. 67). Even the people managing Medicare were calling for legislative action to make fiscal improvements upon Medicare (p. 25, 30, 44). I'm not going to even touch policy alternatives to reform Medicare because it's well beyond the scope of this blog entry. I will, however, provide some from the Kaiser Family Foundation and the Congressional Budget Office on policy alternatives for your reading pleasure. What I will say is this: in spite of what certain individuals think on the Left, we should be more worried about Medicare solvency if we actually care about the dampening effects that debt has on economic growth.

8/6/2014 Addendum: For further reading, here is an analysis by research fellow Charles Blahous.

Pirke Avot 6:3: Judaism and How to "Keep it Simple, Stupid!"

K.I.S.S. "Keep it simple, stupid!" For someone who is a public policy wonk such as myself, trust me when I say I have an appreciation for the nuanced and the complex. However, sometimes the best explanation is the simplest, and sometimes, the simplest approach is the one that helps make your life most sane. That thought ran through my mind when I was recently studying Pirke Avot. In Pirke Avot 6:3, there is a discussion about respecting someone who has taught you even a single chapter, word, verse, letter of the Hebrew alphabet, or a single law. It then proceeds to say that "there is no reverence but Torah" (ואין כבוד אלא תורה). One of the proof texts they used was most intriguing:

ותמימים ינחלו טוב.

And the whole-hearted shall inherit good. -Proverbs 28:10

What my chevruta study partner and dear friend pointed out was that the word תמים can also mean "simple person." This would render the verse to say "[and] the simple ones shall inherit good." Going off this interpretation of the word תמימים, there is an equivocation with good and simplicity. In spite of all the nuances in Jewish law, is there something to be said for a simpler Judaism? And my answer to that is a resounding "Yes!" 

At least from my personal experience observing the more observant community, there is a trend in which one worships the halachic system instead of worshiping G-d. The halachic system was always meant to be the means to connecting with G-d, not the end unto itself. I analogize it to the Taoist concept of the Dao (道), or "the way." In Hebrew, the word הלכה (halacha) comes from the root word ללכת (to go). Regardless of how Jewish practice has evolved and continues to evolve, it should keep in mind this concept. R. Nathan Cardozo recently wrote a verbose, but stunningly spot-on critique of Orthodoxy in this vein, in which he says:

Today most of these [Orthodox] communities view themselves as observant, not model communities. An observant community is one that is primarily concerned with religious observance. As such, it views halacha and a proper Orthodox environment to execute its demands as a priority...It lacks the language and spirit necessary to be a model community conveying the great message of Judaism to all other Jews, and even Gentiles.

In being focused on the nuances, it's all too easy to forget the great message of Judaism. I'm not saying that we should necessarily ignore nuances because the world is a nuanced place. We should come to an understanding of the world around us with that in mind. However, we should still remember the simpler points of Judaism that form its profundity. What might those points be?

First is that G-d exists as Infinite Oneness. What does G-d expect from us? Although it is mighty difficult to summarize a religion as complex as Judaism into a sound byte or a single sentence or concept, the Rabbis nevertheless tried. For R. Hillel (Talmud Bavli, Shabbat 31a), it was "What is hateful unto you, do not do unto others. This is the entirety of Torah. Now go and study." For R. Akiva (Jerusalem Talmud, Nedarim 30b), it was "Love your neighbor as yourself (Leviticus 19:18). The rest is commentary." The Prophet Micah asked this question. His response? "You shall act justly, love chesed, and walk humbly in all His ways (6:8)." Treating others the way you would want to be treated is a significant part of the great message of Judaism.

It should even play into how we view ritual practice. Ritual practice is not meant to be done for its own sake, but rather to invoke something and transform ourselves. In the Introduction of the Mussar text Orchot Tzaddikim (Path of the Righteous), it states that "if you do not have good traits, you do not have Torah and mitzvahs because all of Torah hinges upon the perfection of one's traits" (וכשאין בידך מדות טובות אין בידך תורה ומצוות כי כל התורה תלויה בתקון המדות). That is why ritualistic practice (בין אדם למקום) requires a bracha (a blessing, i.e., a statement of intent) before undertaking a mitzvah, and a mitzvah involving interpersonal relations (בין אדם לחברו) does not. Take tefillin as an example. When one wraps the tefillin on around the finger, the following is uttered:

 וארשתיך לי לעולם. וארשתיך לי בצדק ובמשפט ובחסד וברחמים. וארשתיך ליבאמונה וידעת את הי.

"And I will betroth you unto me forever. I will betroth you unto Me in righteousness, justice, loving-kindness, and compassion. And I will betroth you unto Me in faithfulness, and you shall know G-d." 

-Hosea 2:21-22

Since we are created in G-d's Image and are supposed to act imitatio Dei, we are meant to act in justice and kindness. How we perceive our actions and how we treat others should stem from that idea. If you're donning tefillin and that's not what is running through your mind, you're doing it wrong. If you're obsessing over minutiae such as not eating kitniyot on Passover instead of remembering the spiritual significance of chametz or why celebrating freedom on Passover is important, you're doing it wrong. If you berate and embarrass someone for not covering the challah on Shabbat, even though the purpose of covering the challah is to teach us the importance of not embarrassing the wine (and as an a fortiori inference, not embarrassing other human beings), you're doing it wrong. If you're praying not because it changes you into a better person or makes you more aware of G-d, but because you treat the rote recitation as a magic formula [or even less so], you're not doing it right. If you're not fasting on Yom Kippur because it spiritually awakens you to do teshuvah and to help out others, but because "it's what we've always done" or doing so for the sake of fasting, you're not doing it right. Rituals are a way to moment in time in which we establish a moment of G-dliness. If one's actions are contrary to these simple and basic meta-halachic principles, you're not doing it right.

Regardless of the mitzvah, we should ask ourselves what the greater spiritual meaning behind the mitzvah is instead of acting by rote. We should be able to discern the underlying principle behind what we do. Whatever complexities there might be behind the Jewish law, we should remember why we do what we do and ask ourselves if we are transforming ourselves in the process. In summation, when performing mitzvahs, we should keep it simple.

The Idea of a Greek Economic Recovery Is a Greek Myth

Ever since the Great Recession, the European Union has dealt with much pessimism and economic stagnation. One country that has received more than its fair share of negative press is Greece. Greece is a country in southeastern Europe that racked up a large amount of government debt because of fiscal irresponsibility. Being part of the European Union, the fiscal disarray of Greece has always had the rest of the Eurozone worry about a contagion effect throughout Europe. Listening to some recent news about the Greek sovereign market debt and the improvement of other economic indicators, there are some, including the European Commission, that postulate the possibility of a Greek recovery. I have to say that the state of the Greek economy is in a better state than it was in 2008. It was truly a basket case of an economy back then. Even a couple of years ago, I thought that the Greek government should exit the Euro Zone and return to the drachma. However, I still have to wonder just how well the Greek economy is doing.

I took a look at some economic analyses to help me answer the question, including analyses from the International Monetary Fund, the Greek-based Foundation for Economic and Industrial Research, and Price Waterhouse Coopers. Although there is a lot I can cover, and there's no way I can realistically cover everything, let's start with the good news coming out of Greece. The unemployment rate is finally starting to decrease, as well as government bond yields, the latter of which were above 10 percent up until very recently. Not only has Greece reached the point of positive GDP growth once more, but it went from running current account deficit [in 2009] to running an account surplus (IMF, p. 5), which is impressive. Exports are also continued to grow, which is good for an economy that looked like it was only heading in a downward direction.

In spite of some of this good macroeconomic news, there are still a good number of issues going on in Greece that make me hesitate to use the word "recovery" to describe Greece. Greece is still not a good investment, partially because it is relying heavily on their tourist sector (FEIR, p. 15; IMF, p. 15). It has an exceptionally high number of non-performing loans. The bond yield in Greece, whether that of government or private-sector bonds, is roughly five percentage points higher than any other European country, which means any investment in Greece must promise an extra five percent in returns. This gap creates a major issue because foreign countries are hesitant to invest in the Greek economy. What's more is that the decrease in yields is not due to Greek reform, but a general trend towards a reduction in global rates. Even the OECD, which is by no means a free-market organization, is pointing out the issues of Greek bureaucracy and red tape. The OECD recently identified 555 problematic regulations that make it nigh impossible for Greece to be able to compete in the foreign marketplace. Another study by the OECD highlights administrative burdens in various sectors.

As economist Yanis Varoufakis illustrates in his recent economic brief on the topic, "Greece is a failed social economy." Greece is ignoring some of the most basic structural reforms required in order to truly pull itself out of this debacle. In spite of some improvements in the Greek economy, the idea of a Greek recovery is about as mythical as Zeus and Hera.

Can Social Security Be Saved By Payroll Tax Reform? Maybe, Maybe Not.

A few days ago, the Congressional Budget Office (CBO) released their annual long-term budget outlook report. In this report, there was some not-so-shocking news about Social Security: the year in which Social Security funds will be exhausted has moved up to 2030 (p. 51). The lower interest rates and economic growth projections were reportedly the reasons for the timetable being pushed up a year from last year's projections. Although Social Security's Disability Insurance and Medicaid have more pressing fund exhaustion dates, this is still perturbing. The Left-leaning Urban Institute shows that across the demographic board, we receive more in Social Security and Medicare benefits than we pay in payroll taxes. What the government is doing is not fiscally sustainable. We need to find superior policy alternatives compared to the status quo. Back in 2010, the Congressional Budget Office (CBO) analyzed various methods of policy alternatives that would improve the longevity of Social Security. What tends to be a popular policy alternative, particularly those who are Left of center, is payroll tax reform.

Payroll tax reform takes a few forms. One is to raise the payroll tax. As of date, the current Social Security payroll tax is 12.4 percent, half of which is paid by the employer, and the other half by the employee. If you are self-employed, that means you have to pay the full 12.4 yourself directly. The proposal would be to raise the tax either in the amount of 1, 2, or 3 percentage points (CBO, 2010, p. 17). The other popular policy alternative is to remove or alter the payroll tax cap. With Social Security, there is a limit at which one's earning are subjected to the Social Security payroll tax. The current cap is at $117,000. Let's say you make $200,000. Only $117,000 would be taxed, and the remaining $83,000 would not be taxed. This means that there is a maximum amount of Social Security benefits one would receive. When Social Security was created, the reason for the cap was to make sure that Social Security was only meant to be a form of financial relief, as opposed as a full-blown welfare program.

In all honesty, I do not think that either raising payroll taxes or altering the payroll tax cap are good ideas. What's wrong with a payroll tax?

Let's start with that it causes moderate, adverse effects on hours worked (CBO, 2010, p. 15; Liebman and Saez, 2006). It also disincentivizes people from saving (CBO, 2010, p. 16), not to mention that it will incentivize employers to either pass the costs onto their customers or lay off workers. I have to wonder if it would actually work. Where the CBO gets the idea that a 2 percent increase in the payroll tax will prevent from funds being exhausted for another twenty-plus years, I'll never know (CBO, 2010, p. 12, Figure 5) because it won't. I literally cut and pasted this chart [below] from the Social Security Administration showing its negligible effect.

What about removing the payroll tax cap? What I can say for the tax cap removal is at least it would, according to SSA projections, help with maintaining funds.

Even if that were the case, and it might not be, I'm not satisfied with the cap removal as an alternative. First, there is no empirical evidence showing that trust fund assets do anything to improve publicly-held debt. Second, one of the talking points from proponents is that the removal of the cap would only affect about six percent of workers. What they forget is this little thing called income mobility. Most people don't maintain the same salary for their entire lives. Experience helps individuals "move up the ladder" and gain higher salaries, which would help explain why those who are older have a higher average salary than those who are younger. Since Social Security benefits are calculated based on lifetime average wages, as opposed to annual wages, a payroll tax cap would actually affect twenty percent of all workers. The Right-leaning Heritage Foundation also points out that removing this tax cap would substantially increase the marginal tax rate. Take a look at who is taxed by tax bracket, and I can tell you that this policy alternative would stick it to the middle-class more than the über-rich. It would be even more problematic if removing the cap also meant making sure that higher-income individuals would receive the same benefits as they did without the cap. One of the reasons that Social Security isn't viewed as a form of welfare is because the link between contributions and benefits remains. The fact that Social Security is a modest form of supplemental income for retirees is what helps retain its popularity.

Let's say that either policy, or even both policies, could take care of some of the fiscal woes, even though the CBO doubted the fiscal solvency of either (CBO, 2010, p. 13). I would still have a problem with these policies because it does nothing to reform the quality of Social Security. Whether you propose payroll tax reform, raising the retirement age, or decreasing benefits, it doesn't change the fact that Social Security is still a coercive retirement savings program with a lousy rate of return and is one of the major cost drivers in the federal government budget. On a personal level, nothing short of retirement funds privatization would make me completely happy. Even treating the program as a safety net [in the strictest of terms, to be sure] or allowing for citizens to take part of that tax and stash it away in a private retirement account would at least be steps in the right direction (see Minneapolis Fed report here for similar reforms). Until quality can be addressed while discussing Social Security reform, we're merely perpetuating the same mediocre policy.


3-2-2015 Addendum: The American Enterprise Institute put out a nice list of eight reasons why raising the Social Security tax cap is a bad idea.

What Moral Equivocation Between Israel and Hamas? It Doesn't Exist!

The latest conflict in Gaza between Hamas and Israel only reminds me how little has changed since Hamas' inception in 1987. Unfortunately, Hamas doesn't simply like to play dirty when they fire rockets. They also do so in their PR campaign by equating Palestinian terrorism with Israeli retaliation of Hamas bombarding the Jewish state with rockets. It seems simple to just give each party half of the blame, to say "Israel's partly to blame, Palestine is partly to blame. Both sides are using violence, so let's split the blame down the middle." This moral equivocation is as untrue as it is misleading. In the moral sphere, Israel is hands-down superior to Hamas. The difference between the two is as clear as night and day, as Charles Krauthammer astutely illustrates. The facts support this stark difference, and I will elucidate upon that right now.

Let's start with defining Israel and the Gaza Strip in geopolitical terms. Israel is a democratic nation-state with a rule of law, social change, and civil society. Gaza is an authoritarian state that is run by Hamas, a branch organization of the Muslim Brotherhood that was elected by the majority of Gazans back in 2007. Hamas is anti-Western, anti-Semitic, anti-gay, anti-intellectual, and virulently hateful. When looking at its Freedom House score, Hamas, and Palestine in general, has no respect for freedom, civil society, or human rights.  Hamas' charter calls for the destruction of Israel. Is it a surprise that Canada, the United States, the European Union, Australia, and Japan have declared Hamas as a terrorist organization?

While Hamas has territorial ambitions and is hellbent on destroying the Jewish people, Israel wants to be left in peace. Israel neither has territorial ambitions nor is genocidal. How so? Those who are anti-Israel like to use the amount of land Israel had during UN Resolution 181 as a starting point for territorial ambition. That way, it makes the Six-Day War look like a land grab. For one, the Israeli government returned both the Sinai Peninsula and the West Bank after the Six Day War. Two, if Israel were really hellbent on land, it wouldn't have disengaged from Gaza back in 2005. Three, let's take a look at the square milage a little further back....let's say at around the Balfour Declaration since this was the first formal, international recognition of a Jewish state. The Jewish people were offered much more land during this time, and actually gave Transjordan in hopes for there to be peace in the Middle East.

Genocide is as ridiculous of a claim as being colonial land grabbers. If Israel were such a genocidal nation-state, why would the Gazan population continue to increase? If Israel wanted to indiscriminately wipe out Gazans, my guess is that it has the military might to do so, but interestingly enough, it has not. If genocide were hypothetically a goal of the Israeli government, Israel does a bang-up job of it, much like it does with its "colonization" and still only has a piece of land the size of New Jersey. What reality reflects is that contrary to the Palestinian image of a "big, bad Israel," Israel actually does its utmost to avoid civilian casualties.

That is why comparing tactics between the two entities also matters. Israel actually has respect for human life. Hamas spits on the notion. Israel uses bomb shelters to protect people. Hamas uses civilian areas to protect bombs, thereby turning the Gazans into human shields. Israel shouldn't be chided in the international media simply because it succeeds at protecting its citizens. These despicable tactics are nothing new. At least the United Nations is finally starting to catch on, particularly when it recently condemned Hamas for placing rockets in schools. Hamas is one to indiscriminately target Israeli civilians. Israel aims for military targets derived from legitimate intelligence gathering. The Israeli government calls the landlines and the cellphones to notify all civilians to evacuate the building before the IDF targets it, which is yet another reason the notion of genocide is ridiculous. Even though I disagree with the IDF providing advanced notification, it still does a lot to elevate the moral standards of military combat.

Before concluding, I would like to respond to the criticism of the number of Palestinian deaths being disproportionate to Israeli deaths, and that's assuming you can even trust the numbers coming out of Gaza. First and foremost, as already illustrated, the Hamas-run government has no respect for the lives of their citizens. Hamas uses their people as human shields, which is why their death toll remains relatively high to Israel. Israel protects its citizens, which is why their death toll remains relatively small. That is why it is important to think of the raw data versus the adjusted data. Second, you should be glad that Israel doesn't attack proportionately because if it did, it would fire a rocket into a civilian center each time Hamas did. Third, where is the moral outrage over Hamas firing rockets into Israel? Fourth, while the death of any human being is unfortunate, if we're going to make the argument that "people getting killed in international [or intranational] conflict or warfare like this is wrong," let's put the numbers into a greater context. If you're worried about Palestinians being killed, how about the 2,000-plus Palestinians that have been killed in the Syrian conflict since 2011 alone? Not a peep from so-called "pro-Palestinian" advocates. The number of Arabs killed since the modern-day Arab-Israeli conflict began in the 1920's, most of whom were Arab soldiers hellbent on wiping out the Jewish state, is less than the number of Arabs killed by the Syrian government since 2011. If you're worried about Muslims being killed, how about those killed in the Arab Spring, the Iraq War, Chechnyans killed by Russians, or the Afghan Muslims killed by either the Russians or Americans? If killing humans is an issue, what about Sudan, Kosovo, Rwanda, or other despicable acts of genocide? Those were human rights violations in the recent past, yet they have not received an iota of the animosity that Israel receives for defending itself. Israel is way at the bottom of the list of global offenders of human rights. Finally, what does proportionality have to do with ethics or morality? This is wartime, not teatime. You are talking about a deranged governmental entity that wants you dead and is willing to use military force to try to wipe you out. If you're going to even attempt to criticize Israel based on the death toll, at least have the decency to do so with context.

Furthermore, what do you expect Israel to do? Ask Hamas nicely to stop? There have been enough peace talks, and Hamas has made no concessions towards peace. They have been firing rockets into Israel at least since 2005. Do you expect "land for peace" to work? The Jewish people have tried that more than once, and the other side still has a bloodlust and wants to see the Jewish people dead. If a hostile entity were indiscriminately firing rockets upon your people, how would you respond? Does any other country think they could handle the situation better than Israel has? Israel is making the best of a terrible situation. Israel has made a defensive response to hostile aggression, and has gone well beyond the call of duty in terms of civil warfare. The fact that Israel did not enact a full-scale attack, even though it was well within its rights to do so, shows considerable restraint. In contrast, Hamas is perpetuating an already terrible situation by intentionally antagonizing Israel. After Israel withdrew from Gaza in 2005, the Gazan government could have invested in infrastructure, economic aid, education for its children, green technology, or healthcare. Instead, it primarily invests in weaponry and preparing itself for war. The Kurds, Sudanese, or Tibetans could have violently retaliated, but chose not to because they were better than that. Hamas should take a lesson from their example.

Much like any other nation-state, Israel is going to be imperfect because it is a governmental entity run by humans. If you want to criticize Israel, that unto itself is not a problem. If one cares about something, they will provide constructive criticism anyways. However, if you're going to be intellectually honest enough to apply the same standards to Palestine, or any other governmental entity, as you do to Israel, what you have to conclude is that without fail, Israel has the moral high ground.

Pirke Avot 5:26: I'd Rather Be a Mensch Than a Tzaddik

For most religions, it would seem to make sense that the most righteous individual (in Judaism, that individual is called a tzaddik; צדיק) who does the most good deeds that are "pleasing to G-d" would acquire the best reward. There might be something said for complete obedience or compliance to a given set of religious rules, but not so much in Judaism. Judaism says that life is more nuanced than that, and is thus reflected in how G-d perceives us. We actually see this in the Talmud (Berachot 34b), where it says that a צדיק cannot stand in front of a ba'al teshuvah (בעל תשובה), who is an individual who was not observant but becomes observant. How can it be that a penitent receives more merit than a righteous individual? Because that individual has truly experienced repentance. What does repentance have to do with one's merit before G-d? This is where Pirke Avot 5:26 comes in:

לפום צערא אגרה.

The reward is in proportion to the exertion.

Although the word לפום literally means "according to the suffering," it has been commonly interpreted as "the reward is in proportion to the effort and difficulty exerted" (Rashi, Rav). Some other interpretations extend it to those not intellectually endowed (Midrash Shmuel) or are not as young as they used to be (R. Yonah), but the point is that the predominant meaning of the passage is that G-d understands our circumstances, and thusly takes them into account when judging our deeds.

For someone who is a צדיק, they have to exert little to no effort to perform a mitzvah. For them, it practically is natural. They hardly, if at all, have the desire to perform a transgression. For such individuals, performing such behavior is automated, natural. That is not how the vast majority of those who want to do good in this world operate. For so many of us, there is the internal struggle to want to do right and do what feels good. While they are not inherently mutually exclusive, we see this dichotomy play out time and time again. Struggle is part of the typical human experience. A lot of us question if G-d exists or why G-d would allow for something bad to happen. We doubt, we question, we transgress. It's part of the human experience. Personally speaking, I'd rather have that struggle. Yes, it can be [more than] annoying at times, but it's what makes life worth living. To be able to do what G-d wants in spite of that struggle is what puts the biggest metaphorical smile on His face, and for that reason, I would rather be a mensch than a tzaddik. 

Should We Be Targeting Wal-Mart?

Wal-Mart is one of those topics that breed a special form of contempt in American politics. Wal-Mart is symbolic the kind of evil corporatism that only cares about the "bottom line" at the expense of its employees, as well as "Main Street America." Watch a documentary like "Wal-Mart: The High Cost of Low Price," and you'll get an idea of what I mean. An opinion piece in the New York Times a month ago that called for Wal-Mart to raise the wages of its low-skilled workers reignited the Wal-Mart debate. This brings us to the question du jour: Do Wal-Mart's low prices outweigh the costs or are we dealing with "unfettered capitalism" at its worst?

One of the fears is that Wal-Mart is going to use its economies of scale to destroy mom-and-pop business, and as a result, the world will be overrun by Wal-Marts. In spite of its large profits (although its profit margins are smaller in comparison) and its relative longevity, we have not been invaded by Wal-Mart. Even so, has Wal-Mart been a hindrance or a help?

Offhand, I can tell you there are some things I don't like about Wal-Mart. I don't like the fact that they receive about $7B in tax breaks or government subsidies per annum. I'm also not a fan that Wal-Mart doesn't oppose a federal minimum wage increase or is in favor of the employer mandate for Obamacare not because it's better for workers, but because minimum wage is an additional cost of labor that would screw over their competitors. I am also annoyed that Wal-Mart does not have transparency in the wages it pays its low-skilled workers because it would put an end to the question of whether the wages of the "typical Wal-Mart worker" is higher or lower than they should be. A study conducted by an economist, who is by no means Left-leaning, shows that Wal-Mart reduces county-level retail employment by 1.4 percent (Neumark et al., 2007). My counterargument to this study would be that the study does not take into consideration the employment effects on a macro level, but that's just me. Even so, I wonder about the net effects on employment, which when accounting for creative destruction, seem to be negligible (Dean and Sobel, 2008). There was also a study showing that Wal-Marts can dampen crime reduction (Wolfe and Pyrooz, 2013). And let's not forget that Wal-Mart has lower levels of customer satisfaction than other retail stores.

That being said, I can still recognize the benefits of Wal-Mart. One of the most concise studies ever done on Wal-Mart, a study that has been cited by the Chairman of President Obama's Council of Economic Advisors as a success, shows that consumers benefit from Wal-Mart's prices, especially on food prices (Hausman and Leibtag, 2005). Considering that food expenses make up 35 percent of pre-tax income for the lowest quintile, I hardly think that a Wal-Mart induced reduction in food costs of 20-25 percent is insignificant.

The wages of Wal-Mart workers is a point of contention because they are seen as exploitative, which is those on the Left ask whether Wal-Mart can raise its wages while still keeping it competitive edge. Part of the debate is determining whether having a low-wage job at Wal-Mart is better than having no job at all. We also have to realize that Wal-Marts tend to be in lower-income, lower-wage areas than other stores, which means that any comparison of wages has to be done with other individuals in the same geographical area and the comparable job skill sets (i.e., you need a valid comparison group).The Federal Reserve Bank of Minneapolis did so a few years back and found that when considering total compensation [that included benefits], Wal-Mart workers fared slightly better. Wal-Mart does not do anything atypically egregious in the retail industry. If Wal-Mart is really that terrible, then people shouldn't want to work there. As an example, the Wal-Mart that opened up in DC last year shows otherwise. 23,000 individuals applied for 800 positions, which is an acceptance rate of less than 4 percent. The Wal-Mart jobs must be appealing enough because apparently, it's harder to get a job at Wal-Mart than it is to get accepted to an Ivy League university.

Blocking Wal-Mart to enter the market is a different form of government favoritism, but still exists as a form of government intervention. What's more is that a Harvard economist recently found that these barriers of entry to the market also harm mom-and-pop shops (Sadun, 2014). Individuals should decide if they want the lower prices and greater economic efficiency of Wal-Mart or the convenience, specialty items, and the more personable customer service experience that comes with independent retailers. If Americans wanted to support Main Street America, they wouldn't shop at Wal-Marts. The truth is that we live in an age with discount stores and online shopping. Whether you agree with some or all of Wal-Mart's practices or not, it should be the individual that decides the medium through which they have the best customer experience possible.