One thing moral theologians might contribute to our political discourse is pushing it to address problems in less simplistic ways. Much coverage has been devoted to the “fiscal cliff” set up for next year by the expiration of the Bush tax cuts and the automatic spending cuts required by the debt ceiling “deal.” President Obama has already decided to press for extending the tax cuts… but only for those making less than $250,000. Republicans, of course, want to extend them all.
This is a tiresome debate that ignores more substantial problems. I want to suggest two concerns that might rightly be raised by moral theologians interested in fiscal sanity: the compensation of doctors and the tax deduction for mortgage interest. These are not “silver bullets” – what I hope they prompt are other, similar suggestions of identifying key problems in the present system that could be modified for the common good.
American physicians, especially primary care physicians, make considerably more money than their counterparts in other developed countries. Average compensation estimates begin at over $150,000, and rise substantially for specialists and surgeons. One problem identified by many is our fee-for-service system, in which doctors benefit from simply by offering more, and not necessarily effective, treatment. And this is certainly a problem. But could it be that doctors simply earn too much money? One simple way to cut medical costs, which are strangling the economy and the federal budget, would be to figure out ways for physician compensation to decrease. While I would be the first in line to criticize the high salaries of CEO’s and of many in the finance sector, the fact is that doctors make up a significant portion of these top earners, and of those in the next 10%.
There are two common responses to this claim. One, which is indisputable, is the malpractice insurance burden carried by doctors. I do not know if the figures above are affected by this expense, but this is certainly a problem. The other response is to point to medical school debt. More than 80% of medical school graduates carry debt, with the average load currently at $158,000. The debt problem creates a vicious cycle, since doctors starting out turn out to be the ones most justified in drawing a high salary. On the other hand, such a complaint would be more palatable if this debt load actually meant that doctors were living lifestyles like those of small-college professors (!!), which it seems many are not. It would be quite rational to figure out a system whereby medical school costs could be reduced in exchange for some kind of reduction in doctor compensation – a difficult task in the market system we currently have, but there would be ways to do it.
A second issue to raise would be the largest (besides medical insurance) “tax expenditure” in the current tax code, the deduction of mortgage interest payments. There are periodic attempts to raise this issue, but it has become something of a “sacred cow,” because of its widespread use. However, it is a really terrible tax expenditure, for many reasons, reasons that both liberals and conservatives should both endorse. First, in its present form, it constitutes an extraordinary income transfer from the poor to the wealthy. Because the deduction is capped so high ($1 million), and can be applied to multiple homes, the beneficiaries are disproportionately wealthy – and they even benefit further because the deduction applies to their higher marginal tax rates. Overall, the expenditure costs around $130 billion a year – to put this number in perspective, the primary income transfers to the poor (EITC and TANF) combined cost $79 billion (2008).
But secondly, it also distorts market forces significantly. Because of preferential tax treatment, it directs investments toward real estate assets, rather than other productive uses. And its effect (as any prospective homeowner know) is basically as a price subsidy – even with historically low mortgage interest rates, the deduction in effect allows me to receive a $200 a month “rebate” of any house payment I would make, thus making a $1200 house payment “equivalent” to a $1000 rent payment. But, as any economist will tell you, a universal price subsidy simply increases cost. Without the price subsidy, housing prices would drop, and I would essentially be no worse off – or (even better) I would be incentivized to save more for a down payment or simply “downshift” to a simpler residence.
I don’t want to make light of this deduction – I have many people I know for whom such a deduction is likely crucial in making a household budget. Therefore, most proposals do not eliminate it, but reduce it. For example, the Simpson-Bowles balanced budget proposal changes the deduction to a flat 15% refundable credit (with a lower cap). This proposal in effect makes the deduction less regressive, by hitting the “benefits” of wealthy taxpayers the most. At least this would a step toward its elimination, since it is very unclear that the deduction actually provides much social benefit overall (Canada has similar rates of homeownership, for example).
Both of these cases, it seems to me, are very much about luxury. They seek to identify excessive costs – costs that it would be difficult to justify on any grounds of necessity – and work toward reducing them. In theory, at least, they should appeal to ideological concerns of both liberals and conservatives. Of course, they also will challenge other aspects of this concern – it is generally easier for liberals to vilify profit-seeking insurance companies, as well as ignore tax preferences that seriously subsidize the upper-middle classes, and it is generally distasteful for conservatives to suggest that one’s home or one’s salary might be “excessive” rather than “something you’ve earned.” However, both issues really call for more efficient markets, with lower costs (hooray, say conservatives), and controls on fundamentally regressive expenditures that funnel money (public and private) from those who are poorer to those who already have enough (hooray, say liberals). Ultimately, they both ask us to propose to people that they could get by with less.
So, what prevents us from raising issues such as these? And trust me, I know there are a number of similar kinds of issues that could and should be raised. But these are big, numbers-wise. And I think they are also important because they are not really of the form of “the poor vs. the 1%.” They recognize that prudent economic decisions in the present environment require broader attention to unsustainable aspects of the present system, where the consequences fall more broadly. Of course, they are tricky issues – I do not mean to criticize the skill of doctors, or their importance, nor do I mean to reject the goods of homeownership, particularly for families. But it is a great problem in politics for us to believe that we can identify some alleged “enemy group” on whom we can pile blame. Let’s try to get beyond that problem, and implicate ourselves a bit more in the problems. What other kinds of solutions might be helpful, but lost amidst the usual simplications?
David,
Thanks for this…You bring up some good points concerning doctors, compensation. You are right to bring in the question of medical school debt – but I actually think the combination of undergraduate and medical school debt is a bigger problem/threat to the system. Is that avg 158,000 in debt JUST from med school? more frequently now they have undergrad debt too….I agree with you that this is a broken system and I do not believe “The market” can fix it. SO I just want to reiterate how much debt needs to be taken into account when looking really at what doctors are compensated. i don’t know that our doctors are really (primary care) that much more compensate when you adjust for student debt in england versus the united states.
But also important to keep in mind is that we have a shortage of primary care physicians…..how would you suggest we address the primary care doctor shortage in combination with physician compensation. In part, because specialists make so much – we can’t get people to become general practitioners.
I am sorry for all the typos…hit enter before finishing or proofreading!
One place where we may (or may not) disagree is on the status of doctors in the top 10%. I do not think it is a problem that doctors make up a substantial part of the top 10%, the problem is in the GAP. So the levels of inequality between the top 10% and the bottom 90% is a scandal. Your post appears to hint that doctors should not be in the top 10% and thats where I’d want to refocus and say the problem isn’t that we have a 10% (or a 1%) but the inequality level.
And in reponse to the primary care shortage I mention, I would very much like to see med school debt forgivenss for public service as a primary care physician in an underserved population (which originally had been a proposal that didn’t make it into the APPCA).
I don’t know if what you and David are arguing for here are really at odds, Meghan. One reason that specialists get paid so much more than PCPs is because of the fee for service system. If we got off of this (though, admittedly, this has its own challenges), it would bring down specialist compensation and make the role of the PCP that much more attractive.
Oh – i don’t think we’re really at odds at all….they were just other points/concerns I thought were related. I think the fee for service system is a major problem! as is school debt, and malpractice insurance costs, and well….you both are aware that I am for much more radical change than we’ve got coming. But I am quite concerned with the shrinking population of primary care physicians especially in undeserved populations/parts of the country…..we know that preventative care works, keeps people healthier and lowers costs but it requires consistent primary care.
Meg and Charlie– Great points – the more I study economics, the more I think it is dangerous to only focus on macro numbers (an abstraction called “the economy”), and lose sight of the the specific complexities involved in various sectors of it. From what I’ve read, the PCP problem is (a) somewhat localized – that is, there is no shortage of PCP’s in the DC area, and (b) somewhat due to a scarcity created by limiting medical school entrance. Guilds push up pay!! I take Meg’s point that it’s the inequality that is key – but the real question is: does a typical suburban PCP require/deserve a salary of 150-180K? Or, as a standard professional salary, is that out of line? In my conversations with Dan Finn, I’ve often engaged the question of just wage and just price – key issues for medieval economic ethics – and of course these are terms that modern economists look at with horror/scorn. A fair wage is whatever the market sets. We value highly trained doctors more than (say) highly trained elementary school teachers – plus med school and science classes are harder. And maybe more expensive. Ergo, the wage difference.
I ultimately do not think this is sufficient for moral analysis. I can explain various reasons why Joe Mauer is making $23 million a year to play a sport. But the high pay of certain athletes and other celebrities have a lot to do with what Thomas Frank calls the emergence of “winner-take-all” markets – if you’re the best catcher in baseball, you make $23 million. If you are the hundredth best catcher in baseball, you are making peanuts playing for a double A team. But I worry these salaries are a sideshow. Our economic struggles (and successes) have much more to do with what people occupying ordinary, necessary occupations make – and (aside from financiers) doctors (and the rising cost of medical care) are the most prominent version of this “ordinary, necessary occupation.” Can’t doctors make 100K, and we’d all be better off? I understand that such a question drives economists crazy. But it seems like a genuine issue to me – especially in these days where supposedly -cosseted government employee unions are under attack for precisely this issue: the perception that their pay is too high!
I will also admit (I’ll be curious about what Meg has to say about this), I think these questions are interesting, because I’d strongly prefer a society where wages were more equalized, with LESS redistribution (i.e. 100K for the doctor and 40K for the store clerk), then less equalized wages, with MORE redistribution (i.e. 180K for the doctor plus higher taxes and 20K for the store clerk, then supplemented by EITC, SNAP, credit card debt, etc.). But to accomplish this, there has to be movement in wages and price to what I would call a more “just” place. Hence, we need to ask: who is making too little? And who is making too much?
Ok this is take 2 as I lost my other comment. This is what I get trying to comment from iPad in a waiting room!
David, I agree with you. I do not believe a fair wage is whatever the market sets but do think the doctor should be paid more than the clerk. My problem, and I think we agree here, is the gap. It isn’t that the dr is at 150 but that the clerks at 20….I do support greater equality in wages and there is interesting stuff in the research I ve been doing on inequality. Japan has significantly greater equality in wages (CEO to worker range we should’ve been dealing with) and sweeden does it through redistribution through taxes and benefits.
On the shortage, it is very localized but also related to population. There is not a shortage of drs in NY but is a shortage who will take/treat low income patients…why I support the old Obama plan to make an Americorp type program for doctors who go to underserved populations for 5 yrs.
Where is the theological argument or basis for any of this. Assuming the good faith of your intentions, what is the theological or moral basis for a third party (the State? who exactly) deciding who and how much anyone should earn? Isn’t this contrary to the Seventh Commandment and the Parables.
Your argument on mortgage interest is kind of a non sequitur to your overall point. Well meaning people wanted to have the average individual be better able to afford their own homes. This good intention led to the abuses that you are rightly concerned about.
I think, theologically speaking, all of us are enjoined to a duty of charity. That duty is personal and comes from our Creator. It cannot be compelled by the State or our fellow citizens. Does that mean all social welfare legislation is wrong? By no means. Can and should the state do what can be reasonably accomplished to care for the poor and the sick? Yes. But we still have to respect the rights of others, and should proceed with a measure of care and humility in addressing these concerns.
Thanks for the comment, Merkn – it is fair to wonder about the theological rationale, which is certainly thin in the post – such is the nature of blog posting about complicated topics. Your further questions are helpful, as well. It seems to me that questions about excess compensation or excessive tax subsidies for the already-comfortable (that is the connection – the mortgage subsidy is in a sense an income subsidy that actually increases as you spend on housing) can be theologically justified biblically by reference to the many critiques of excess in the Prophetic literature (just yesterday, the daily mass reading from Isaiah 1, for example) and by parables such as the rich man who builds himself more and more barns, as well as his consistent teachings about the incompatibility of wealth and the Kingdom. There is thus a theological duty for us not to accumulate excessive wealth, and of course the best way for us to avoid such accumulation is to give excessive wealth away to those in need (the duty of charity you speak of).
But in the cases treated here, the accumulation may very well be a result of various injustices (e.g. the tax code, an unnecessarily restriction of access to credentials, a byzantine insurance system, etc.). If the wealth is accumulated unjustly, there is no “right” to it, and it is certainly the task of the state (though not ONLY the state) to consider ways of restructuring the system in ways that reduce unjust accumulation. This is not theft, but justice.
I think our present system of earning-and-redistributive-taxation tends to be less than ideal, because it creates exactly the concerns you cite: that the state is stealing money that rightly belongs to you. Hence, increasing taxation on the doctor making 180K seems less than ideal. What would be more ideal would be for the doctor to make less in the first place. The tacit assumptions here are (a) that no one “needs” 180K/year, and (b) that this pay level is tied up in certain pieces of social organization which inflates it unnecessarily. I certainly grant that either (a) or (b) can be challenged – my point in suggesting these cases is (partly) to see if there are good challenges. It’s certainly not a criticism of the good work doctors do. It’s not about their work, nor their need for a comfortable living (which should be received by all who do good work).
It would be important to recognize that the task of setting of wages and prices already goes on, particularly in areas that do not function much like markets. For example, there is a board of experts that meets regularly to set prices for a whole book-ful of procedures paid for by Medicare. Wages are routinely set by corporations, or by corporations and unions in concert. I don’t mean to be defending these particular procedures – which may very well be problematic in all sorts of ways – but the question of “who decides?” about earning in already one that goes on, and one could imagine ways of having it go on differently. If we look at American doctors and see that they are compensated more highly overall than their peers in other developed countries, we might well ask questions about why, no differently than one might ask this question about unionized auto workers in the 1970’s and 1980’s. My point in posting is not to pick on or steal from doctors – we could do the same question for university professors, except we don’t make nearly as much! – but simply to say that the question of fair compensation, not too little and not too much, is a moral question about justice, which is often avoided in our usual politics.