Thursday, November 5, 2009

Cognitive Dissonance

Another blog had a post yesterday on the election results, which generated a vigorous and wide-ranging discussion in its comment thread. One of the commenters, a successful border state businessman, whom I know to be intelligent from his previous comments, lamented his high tax burden while essentially expressing support for unskilled immigration to deal with "scarce labor" in the U.S. Surprised that he hadn't connected the dots from the one issue to the other, I left him this comment in response:

If memory serves, elsewhere in this thread you were complaining about your tax burden. Here you seem fairly sanguine about the importation of unskilled immigrants, who, research shows, tend to consume more in government resources than they pay in taxes. Further, when they become amnestied (or when their American-born kids turn 18) they will vote to increase your tax burden -- you know most of them aren't going to be joining the Club for Growth, right? There seems to be some cognitive dissonance at work here.


JK said...

The labor pool for toilet cleaners and weed pullers is very scarce indeed, IMO.

Do you really think our home grown underclass would work those jobs, or work them half as well as unskilled Mexicans do? Moreover, is there a feasible solution to deterring unskilled immigration from our southern neighbor? Ideas such as erecting a Berlin Wall around our borders, giving all immigrants one-way plane tickets, etc, sound workable in a literal sense but are politically tone-deaf, as you would say. If millions of people are willing to risk getting killed by gangs or dying of thirst in the desert just to work menial labor here, I'm not sure there's really much that can be done to stop that march. Smart entrepreneurs should find ways to take advantage of it instead.

Also, if the businessman you speak of is intelligent, he should be aware of ways to shelter his income. All of the rich do it. Banking is a big industry in the Caribbean for a reason but you don't even have to go that far to alleviate your tax burden. He should be able to find good consultation on the various loopholes out there. Paying high taxes is for upper level wage-earners, not savvy business owners.

DaveinHackensack said...


When I was growing up, the weed pullers were all American teens. And that's probably still the case in parts of the country that don't have a lot of illegal immigrants. In general though, there's a great way to attract American workers to a job: offer higher pay. If that's not economically feasible (as it probably isn't for, say, lettuce picking), than automate the business or move it to a cheap labor country. Either of those two options would be preferable to the status quo.

And yes, there's a feasible solution to deterring illegal unskilled immigration. It's the same one that we already use to deter illegal skilled immigration: enforce our immigration laws at the employer level. Not too many illegals working at your company, are there?

As for why the commenter doesn't try to hide all of his money offshore, judging from his other comments (and the American flag that's part of his gravitar), he considers himself a patriot. Good for him.

trumwill said...

Though I think it's an issue that should be addressed (including better avenues to legalized residency), illegal immigration is pretty low on my list of priorities. I much prefer the idea of going after employers, though. One of the things I find off-putting is the personal animus of anti-immigration folks is towards the immigrants themselves. Focusing on those who enable them is not only more likely to be effective (employers have a whole lot more to lose), but I think also avoids the sense among Hispanics already here (including citizens) that the issue is race and that they are not welcome here.

Regarding "the jobs Americans won't do", it's a grayer issue than either side is willing to admit. When I lived in the mountain west, the cereal companies were paying $20/hr for wheat field work (twice as much as I made, despite my college degree and half-year of experience), paid a lot of overtime, and still had a whole lot of trouble finding people.

On the other hand, Phi made an outstanding point recently about graft in the NYC cabbie industry and how the competition seems to be awfully fierce for "jobs that Americans won't do."

DaveinHackensack said...


Race shouldn't be a factor in our immigration policy; we should just select immigrants who have the most potential to make a positive contribution to the country. In general, that means favoring higher-skilled immigrants (as Australia, and Canada, for example, do) who are likely to pay more in taxes than they consume in government services. In a labor market like the one we have now, with 10%+ unemployment, I'd further restrict immigration to entrepreneurs who have the talent and resources to start businesses and create jobs here -- and perhaps to physicians and other medical personnel* to increase their supply and perhaps lower their fees (and, consequently our health care costs) to some extent.

The issue with Mexican and other Latin American immigrants isn't that they are Latin American per se, but that we are getting some of the poorest, least educated folks from those countries. If a successful Mexican entrepreneur wants to come here, start a company, and hire 20 American workers, by all means, let's welcome him with open arms. I'll go pick him up at the airport if he needs a ride. But if we keep importing poor people who, empirical research shows, tend to have children, grand children, and great grand children who are poorer and less educated than the average American, we'll get poorer as a country.

*It would be helpful if the current, guild-like requirement for qualified foreign physicians to redo their entire residencies here were replaced with a more reasonable requirement (e.g., pass the necessary licensing tests in English, and perhaps work under supervision for a reasonable probationary period?).

trumwill said...

As long as a bulk of the immigrants are coming from the same (non-white) place, I think that race automatically becomes an issue whether it should be or not.

The medical provider issues interest me a great deal because my wife is in that line of work. I think that we need to change a whole lot about residency and not just as it pertains to foreigners and artificial shortages. A good solution would probably include more aggressive use of NPs and PAs.

Given my wife's career, though, I would be reticent not to point out that even if you slashed doc salaries in half, you'd be cutting something like 5% off our health care tab. Now, change how doctors are paid and you might be getting somewhere. And for that matter, you might alleviate the shortage, too. Obama bit around this issue when championing his reform, but as far as I've seen nothing in the bills being proposed really addresses it.

Congrats on not mis-identifying the "cartel" as the AMA, which a lot of people do and which annoys me to no end. On the other hand, it was a useful marker for people to disclose that they don't know what they're talking about. :)

DaveinHackensack said...


In practical terms, if we established an Australian- or Canadian-style immigration system, the bulk of our immigrants would not be coming from Mexico, because that country isn't exactly teeming with potential immigrants who would meet Australian or Canadian requirements.

PAs and NPs are already pretty heavily used around these parts. I think you are right that how physicians get paid is an important issue. I doubt physician comp is only 10% of medical spending though.

trumwill said...

Since my wife is a doc, I'm biased of course, though (a)that doesn't stop me from thinking we should ramp up on PA and NP docs and (b) my wife's pay is more in line with German or Canadian averages than specialists. My source on the 10% figure is this. If you've got a better one, feel free to share.

The biggest thing with doctor pay is that it encourages docs to order a $2k test that they make $500 on. I'm pulling the specific numbers out of my posterior, but you get the idea. So in one sense, the doc has just cost the system $2k, but it's not take-home. If you just gave the doc $500 (which I'm not advocating!), you'd be further ahead than if you said "You can only make $200 on that procedure now," because that could just result in more procedures to make up the difference.

A moment to brag on my wife. She's not money-oriented at all. Despite graduating in the top third of her med school class, she chose one of the least desirable (economically and QOL) areas to go into: rural family medicine.

DaveinHackensack said...

"My source on the 10% figure is this. If you've got a better one, feel free to share."

"Net take home pay" -- what Reinhardt claims to count -- is an odd way to slice it. I still think 10% is low. For an idea why, look at the charts here re Medicare and compare the federal expenditures on Medicare Part A, which includes non-physician hospital expenses, and Part B, which includes physician reimbursements. I don't know what percentage of Part B goes to physician services (if you have a link breaking this out, feel free to share), but I suspect it comprises the lion's share of Part B.

In fact, I suspect that the way Obama's econ guys expect to "bend the cost curve" of health care is to get to the tipping point where a high enough percentage of physician pay comes from the government that the government has effective monopsony pricing power. I.e., if a "public option" puts most private insurers out of business, the government will be the only game in town for the vast majority of physicians who can't fall back on boutique practices for wealthy, cash-paying patients.

Congrats on your wife, but there are other reasons physicians eschew high-paying specialties, e.g., longer residencies, more stressful/male-dominated workplaces. I knew a female PA who worked in a two year LVAD program. I went to a party once thrown by one of the attendings/professors in his ginormous home in an enclave of Tenafly, NJ I hadn't known existed, to celebrate the graduation of one of the fellows. I don't think there was one female fellow or attending/professor in that department.

trumwill said...

What's so odd about using net take-home pay? That strikes as the most reasonable metric given that a great many doctors are not salaried.

Regarding residency length, my wife has put in five if you include the two fellowships she took so that she could get more OB training and learn a whole lot more "oscopies".

Most family practice docs go into it either because they didn't have other options or because it's what they wanted to do. It's hard to be enthusiastic about the former and there are too few of the latter.

I'll look over your Medicare link when I get the time. What you say about Obama's intent to get the government to short-change docs may well be true. I can't say that the thought hadn't crossed my mind.

DaveinHackensack said...

What's odd about using "net take home pay" is that it seems intended to obscure, rather than to illuminate how much health care spending goes toward paying physicians. It also doesn't seem terribly relevant from the perspective of government health care spending, at least not without some further elaboration. E.g., if the government spends $X on physician comp, that's what it spends. What physicians' "net take home pay" is from that comp seems irrelevant unless one is arguing a way to minimize physician comp while offsetting the bite to physicians by minimizing their expenses at the same time.

Maybe I'm missing something. But let me give a personal example to illustrate where I'm coming from. I just handed a five figure check over to my web developers last week. I know that their "net take home pay" is less than the amount of the check -- they've got to pay taxes out of it, cover their costs, etc. Knowing that doesn't make the check I just wrote them any smaller though.

Your wife chose an admiral specialty, and I have no reason not to believe that she did it for the reasons you mentioned. You are right to be proud of her. I just wanted to note that "going into family practice" doesn't connote "doesn't care about money" in all cases. There are other motivations for these decisions, and often more than one motivation applies. This is true of many professions. Sure, many teachers want to help educate the next generation. But having a relatively high-paying (by hours worked) job with almost unrivaled job security is probably a motivation in many cases as well.

Re physician comp and health care reform, I had what I thought was an informative discussion with a physician or two in a comment thread on Megan McCardle's blog a while ago. If I can dig it up at some point I'll link to it here. BTW, if you haven't read her blog, she has done some impressive work on the subject.

trumwill said...

I'm thinking that our difference may be one of terminology. What you are refering to as "pay" I think of as "cost". What you view as "odd" I view as "pay".

That your web developer costs $15,000 (just to pick a number) is the significant part to you. However, if we're discussing web developer pay, it would not be particularly accurate to say "They make $15,000 a contract!" as that doesn't help me decide whether they're overpaid, underpaid, or whatever. It doesn't tell if me if that's something I should consider doing or if I should be happy if my kid comes home and says he wants to do that.

It's sort of like those talking about how the health insurance companies are making hand over fist because we're signing over $500-1000 a month to them. Health insurance is expensive, but when it's in one hand and out the other, does it really count? That's not to say that health insurance costs aren't an issue, but complaints about profits are, IMO, off the mark.

Same goes with people talking about how much money can be saved by cutting "doctor pay". When significant portions of that money is going towards brick, mortyr, secretaries, nurses, EMR, billing retrieval, and so on... I don't think it's particularly fair to view the money that comes in one hand and out the other as part of an exorbitant package.

None of this is to say that we can't look at reimbursement rates and make some tweaks. Or preferably change the system altogether, if we can. But to me the meme that "doctors are paid too much" makes me think first and foremost in reference to the equivalent of their "salary", "lifestyle money", which tracks more closely to how much they take home than it does how much they get and spend on facilities and personnel.

Joe said...

I'm interested in your points about unskilled migrants consuming more from the government than what they pay in taxes. As a migrant to the UK myself, anecdotally, I don't see illegals being a net cost by a long way. Having no documents means most can't access the UK's generous social welfare system except through education for their kids. On the contrary huge amounts are spent by the government during the period that they're processing immigrants whether for deportation or integration.

It's no surprise that I'm more in line with JK's statement. However I've long thought that any migrants who are given amnesty MUST be put on a higher tax band for something like five years. If infact they aren't contributing enough this could be one way of balancing those figures.

That said, I'm with you on moving lower pay jobs to other countries. It's a sensible long-term solution. In time as those populations get employed and their standard of living rises, the problem of illegal immigrants will fall in the Western world.

The bad thing is that Western voters wouldn't elect anyone willing to tackle the problems by using some of these methods. i.e. loss of jobs or an amnesty. Voters would rather have politicians spend more money on walls and other less effective/more costly measures. Pity.

DaveinHackensack said...


If memory serves, insurance company profits are in the low single digits, on average (and of course many of them are not-for-profit anyway). I doubt Obama & Co. think there would be significant cost savings from cutting them out of the mix, but they've been a focus because they are a less sympathetic target than physicians (or nurses, profusionists, etc., for that matter -- there are a lot of well paid workers in the allied health fields. Not that this is a bad thing per se, but it's worth remembering the extent to which skilled labor is a component of health care costs).

That said, I made this point to folks on an investing website who were piling into health insurance stocks last year: The government doesn't need those companies. Under a single payer system (which I am against) it could cut costs by fiat.


I'm not in favor of amnesty, in most cases. I prefer enforcement of our current laws, which would lead to most illegal immigrants self-deporting (in fact, some have already started doing so, due to the collapse of residential construction which employed many of them).

As for the costs of illegal unskilled immigrants, see here, for example. In general though, you are right that unskilled citizens and legal residents are more expensive than unskilled illegals, because the citizens and legal residents are eligible for more benefits.

trumwill said...

If memory serves, insurance company profits are in the low single digits, on average (and of course many of them are not-for-profit anyway).

The 2.5-5% range is what I've heard. That was my point. People think that because they collect a lot of money that they're making a lot of profit. People assume the same of the oil companies who also have trim profit margins. If it's in one hand and out the other, it doesn't entirely count, in my view.

Joe said...

That link was great and really insightful. Thanks Dave.