The other day my students and I were talking about the Model T Ford, which in the 1920s ran around $6000 in today’s money for a new car. It is impossible to find a brand-new vehicle of any make for $6000 today. Granted, a Ford Focus, for example, is packed with way more technology and safety features than a Model T from 100 years ago, and that technological advancement gets factored into the price.
But consider that in the 1990s, when Kia hit the American market, they advertised a new sedan for around $6999 (in 1990s’ dollars). What would that be twenty-five years late—maybe $9000 or $10,000? That price point, too, is virtually impossible.
I managed to purchase my current vehicle—a 2017 Nissan Versa Note SV—for right around $9100. It has around 45,000 miles on it when I bought it, and had been a rental vehicle before I purchased it. I got a steal on that car—the closest comparable I’ve found since then was a list price of around $8900 (the list for my car was $8000 even). That’s for a four-year old subcompact hatchback.
I got lucky when I found that car. I figured it would be easy enough to find a decent car for under $10,000 when I began vehicle shopping in late 2019. Boy, was I wrong. Vehicles last longer than ever before, and maintain their value a very long time. They’re also, as mentioned, packed full of technology and safety features that weren’t present even twenty years ago. Trucks in particular hold their value extremely well; to find a truck in my price range, I’d have had to purchase a Ford F-150 from 1994 with half-a-million miles on it.
It’s great that cars last longer and are safer. But those features—many of which drivers will never need or use—drive up the costs substantially. Such was the point of an illuminating Twitter thread by Oren Cass, which demonstrates that, despite earning more money, Americans’ expenses for basic goods are substantially higher, requiring a whopping fifty-three weeks of pay to cover now versus a mere thirty weeks in 1985. Naturally, given that there are only fifty-two weeks in a year, that presents a problem.
I don’t know the solution, but as I wrote a year ago, “Something’s gotta give.”
It’s another Lazy Sunday dive into some of my deep cuts—the forgotten or neglected posts of yesteryear. As a reminder, here’s my loose criteria for selecting these posts, as spelled out last Sunday:
That’s all a long way of saying that I’m doing some deep dives for an indeterminate number of Sundays into some forgotten posts. These are posts that don’t immediately spring to my mind when I’m referencing my own work. These posts may or may not have had high or low hit counts; they are just posts that don’t linger strongly in my memory. They’re the red-headed stepchildren of my churning mind.
“Breaking: Trump Nominated for Nobel Peace Prize” – I used to do these “breaking” news posts periodically—dashing off a couple hundred words about some major development. I was perhaps overly optimistic about Trump’s peace talks in Korea, but while they might not have ended the Korean War’s long cease-fire, they definitely calmed down tensions between the US and North Korea.
“George Will’s Self-Destruct Sequence” – The Never Trump phenomenon was gasping for air in 2018, but it still had some loyal adherents (and still does, if you check out National Review, The Dispatch, and The Bulwark, the last of which is blatantly progressive, despite its claims to be a conservative site). One of the first major figures to succumb publicly and wildly to the disease was George Will, the long-time WaPo columnist and tweedy neocon. Will argued that Republicans in Congress should be voted out to avoid giving Trump dictatorial powers—a ludicrous obsession with the Left and the Never Trumpers, and completely deleterious to the future of the nation. Sure, we Republicans might be the “Stupid Party” sometimes, stupidity in the highest halls of power is generally preferable to the “Evil Party” of intentional wickedness. Now we have so-called conservatives plumping for Joe Biden on similarly faulty premises. Yeesh!
“HSAs are A-Okay” – I’m a big fan of health savings accounts, or HSAs, thanks in large part to my younger brother’s financial wizardry. Health savings accounts allow account holders to deposit funds that can be used to cover future, out-of-pocket medical expenses. Since my cut-rate insurance comes with a hefty $6750 annual deductible, squirreling away cash into my HSA helps in the event of a catastrophic injury or health crisis. But the real beauty of an HSA is that the deposited funds can be invested in mutual funds and grow in value—tax-free. They’re the ultimate investment vehicle, and you can save medical receipts for years before using them to withdraw HSA funds (if you use an emergency fund to cover medical expenses on the front-end, the HSA funds can grow unmolested until you decide to use them).
That’s it for another edition of Lazy Sunday—one of the last truly lazy ones for some time, as I report back to school tomorrow morning. Classes resume 20 August 2020, so I still have about eleven days to prepare for the return of students.
Thread (1/16). How is that our economic statistics suggest workers have been making slow but steady progress in recent decades, while popular perception is that their family finances are coming under increasingly untenable pressure? I’ve been working on this, here’s my answer:
Cass also wrote about the issue in greater detail in American Affairs and in a lengthy paper for the Manhattan Institute. That question—why does it feel like it’s harder to make ends meet now, even though inflation is low and we’re wealthier?—is one of the gnawing concerns of modern-day America.
My Congressman, Tom Rice, sends out little e-mail updates on a regular basis. In his latest newsletter, the South Carolina US-7 representative included a link to a video (below) of his statements before Congress about expanding Health Savings Accounts, or HSAs.
The gist of the proposal is to expand health-savings accounts to allow account holders to contribute more to them. The current legal annual contribution (in FY2018) for a single individual is $3450, up from $3400 last year and $3350 the year before. That comes out to $287.50 a month, which can be contributed pre-tax directly from an account holder’s paycheck.
The way the law is currently written, HSAs are excellent both to cover medical expenses before reaching your deductible (and, naturally, most HSA-compliant plans are high deductible ones) and to save and invest for retirement. You can accrue a qualified medical expense today—say, a visit to the emergency room—and you can submit that receipt in a decade (or longer—there’s no apparent time-limit) to take out that amount.
To give a hypothetical: let’s say you have a medical bill for $3000. Yes, your annual contribution to your HSA could cover that. But, let’s say you’ve built up a good emergency fund, and elect to pay the bill out-of-pocket through that fund. In, say, five years, you need to tap your HSA funds for some reason. If you’ve kept the receipt (and credit card statements help, too), you can file that with your HSA and withdraw the $3000.
Why go through the trouble? Because many HSA administrators—including my own, HealthSavings Administrators—allow you to invest in mutual funds with your HSA contributions. If you’re making an 8% annual return on those contributions, that $3000 today will be worth around $4100 in five years (investment math folks, please check my numbers; regardless, you get the point—money grows).
Alternatively, if you don’t tap that money for decades—and keep contributing—you’ll have a very nice retirement account growing tax-free for all those years.
My current health insurance carries a $6550 deductible—which I didn’t even come close to hitting in 2017 when I broke my left wrist, although it was still expensive—but I’ve accrued enough of an emergency fund that I could meet that expense should the need arise (I pray it doesn’t). If my emergency fund were sunk into something else—say, a new car, or a less flood-prone house—then I could tap into my HSA contributions from the past few years.
And here is the other benefit of HSAs, the one that I’m sure Congressman Rice as in mind: they help you reach your deductible, and bring some market forces to bear on healthcare costs.
I suspect that one of the culprits of high healthcare costs is the lack of transparency—no one knows how much anything costs, and everything is fungible. When I broke my wrist, I received a hefty ER bill (about $3000) about four months after the fall (I don’t understand the delay on that; it seems like they could just tally it all up and print it out at the time of the accident). I called the hospital, and they told they were “running a special”—if I paid in full that day, they’d knock HALF of the cost off the bill. Because I’m an extreme budgeter and have an emergency fund, I could do it, and leaped at the “special.”
Most people don’t have enough money saved up to even meet a $500 emergency, but an HSA makes it more doable. Even without an emergency fund, if an account holder were making monthly contributions, he’d be able to take advantage of such price reductions.
HSAs aren’t a magic bullet to bringing down healthcare costs, but they would go a long way to addressing the problem. If we lived in a pre-Obamacare age, you’d be able to get a high-deductible, HSA-compliant plan for probably $50-100 a month, depending on age and health. Even if you didn’t want to manage the money in various investments, the incentives to save—namely, the pre-tax benefit—are enough that many Americans would likely take contribute to their HSA.
When Secretary of Housing and Urban Development Ben Carson was running for president in 2015-2016, he proposed transferable, minimally-funded ($5000 at birth, I believe) HSAs be issued for all Americans. The ability to transfer funds between family members and to grow that wealth over time would be huge.
Similarly, President George W. Bush proposed giving Americans the option to contribute their Social Security contributions into personally-managed investment accounts. That would reduce the astronomical costs of that federal boondoggle and give Americans much greater returns on their investments. Naturally, Democrats rejected that plan out of hand, and accused Bush of hating old people. Yeesh.
The takeaway is this: whether it’s in healthcare or retirement savings, the American people know best. Yes, we’d need some additional financial education—which we desperately need anyway—but, c’mon, are you going to continue running the same inefficient, wasteful systems just because a small percentage of people won’t adequately manage their money?
Liberty works in nearly every arena, and it would work in healthcare and health insurance, too. HSAs are the wave of the future, and I’m glad to see Tom Rice is championing them.