Archive for September 2010

All The Way

September 27, 2010

I think the argument goes this way. The Country can not afford the Obama health care plan and besides it is not the role of government to be in the health care business. Some are quick to add that they want the Government to keep its hands off Medicare. I wonder if these people (who make up a sizeable part of the voting population) have really thought this subject through?

For a moment let’s follow this logic. Let’s eliminate any government role in health care. That means that if your employer provides health care or supplements your expense, the employer must do it without any tax break. Instead his health care costs turn into wages or salary augmentation and become fully taxable to you. How many employers do you think would continue providing health care benefits?

Next, the average person would find that the full cost of buying medical care or buying insurance to provide health care coverage that he or she was paying over $ 500 per month for each person he or she were insuring (a family of four would spend $ 2000 per month). This average amount reflect currently the per capita cost for US health care and are 60-100% more than any other modern country in the world.

In a free market environment, each of us could shop around and buy insurance coverage that better fit our needs. One might buy insurance with co-pays or large deductibles. If one was young and healthy maybe one could find a policy that assumed you would be healthy and charged you less. But there is no free lunch and since nothing was being done to contain and preferrably lowering health care costs, someone else would be paying a lot more for their coverage than the average.

Common sense should bring you to the conclusion that no government involvement must result in a lot more uninsured. And since government was out of health care, the stampede of the uninsured to the ER would be met with barred and protected doors. No entrance signs would greet the unfortunate.

Socially our society would split into the haves and have nots (even more than today). With less money, the current medical delivery system would necessarily need to contract. Doctors would have to make less and hospitals would need to rationalize their services, like any other business. This is an ugly future if left to market forces.

My guess, however, that out of these ashes would rise a new and competitive system. There are enough doctors and hospitial administrators who believe their mission is to heal and protect their patients health. These renegades would form cooperative arrangements with rates that were far more affordable. They would teach and demand preventive health care and they would abandon “fee for service”. These coops would be scattered and it would be difficult for anyone to travel with assurance that medical care would be available in a location they were unfamiliar with. Oh, if there was only some national regulations.

For the rich, there is no issue and never will be. It is the middle class that has to wake up and think about health care. The current system offers no one incentives to drive costs down. Fee for service and relatively speaking cheap health care (though Medicaid or employer support) motivate doctors and hospitals to make as much money as they can, and citizens to avoid any meaningful involvement in their own health care.

So the question is should we go all the way, or is there another way to make sense of health care?

Where Next?

September 24, 2010

Here is a something to think about. Most media experts have pronounced the Democratic Congressional majorities over (as of this fall’s elections). And while they are not predicting it yet, most hint that President Obama will be a one term President. The Democrats and the President will be swept from power, pundits say, because America does not trust them and believes Republicans can govern better.

Democrats, you know, are allied with unions and minorities. Both of these groups are looking for handouts or at a minimum preferential treatment. And at a time when the American bounty does not seem to be enough to go around, why should anyone vote for a party that wants to give what there is too little of, to someone else?

Fast forward. Republicans will clearly fail to produce on any of their promises. They will succeed in favoring the well to do and the rich, and then tell everyone else this is the land of opportunity and those spoils are available to them if they would only work for it. Republicans might also raise their social policy banners again which will bring two consequences for sure. One, individual Republican congress members will choose to live by a different standard than they preach for everyone else, and will be caught out of step with their words. America’s famous “Independents” will scratch their heads and say this is not what we voted for. What will they do? Where can they go?

Once again there is a unique opportunity to redefine both parties, or even better, to add one or two more. The Democratic coalition of unions and minorities is not working because Democrats cannot make life better for either group. Only a strong and growing economy and the desire by both group members to become educated (skills and book learning) to remain current will change their lot in life. Republican policies and values which feature social values that others must follow or those that claim the founding fathers hold the model of how we should live today are simply out of touch with reality. If left unchecked, Republican policies can make only an ever shrinking pool of followers happy.

The problem we see now is that both parties’ central theme are non-starters.  (For example, the question is not whether some Americans should have health care and others not, it is rather how do we make quality health care affordable for everyone.) If they will not abandon them, then voters must look for a new alternative. From recent history we should expect neither party to act fiscally responsible. Neither party will pro-actively rid themselves of the ethics risk of large campaign donations.

We certainly can understand the need for a strong national security but does spending more than all other countries combined make sense? Health care is harder to understand unless it involves you. What could be wrong with health care systems available in all other modern countries that provide superior outcomes at substantially lower prices? Social security and private pension (including public sector employees) were designed to enable individuals to live in dignity in their post retirement years. What can be wrong with ensuring that funds collected during a persons productive years are invested wisely to later years?

The door is wide open for pragmatism. The door is also wide enough for parties with ideology providing they do not carry social baggage. (Gay marriage, for example, should be a non-issue since (1) the government should have no place in religious matters, and (2) the Constitution already outlaws discrimination).

Where next?

The Pledge

September 23, 2010

The outlook appears gloomy. Unemployment is high, good jobs seem to be no where. Cutbacks and givebacks are bombarding the average American. Congress members say one thing and do another. The 24/7 news entertainment media proclaims President Obama the worst President in history. Republicans appear on the verge of regaining control of both the House and the Senate. What more could there be?

You ask for more, well here it is. The Republican Party has rolled out “The Pledge to America”. This clever document provides almost no details but leads those who want to be lead to the comfort of conservative rhetoric.

The Pledge offers a promise to freeze government hiring, keep the Bush tax cuts, and to repeal the Obama health care reform. Now that is a pledge to run on. That is unless you are someone who has a pre-existing condition or are a recent college graduate and have not found a job yet. For that matter, there is nothing in this pledge that should give anyone unemployed hope that a job will be coming their way. As to the deficit, there is no idea presented on how that might be eliminated unless of course you want to give up your Medicare or deny someone else their Medicaid.

Democrats so far are asking figuratively to be thrown out of office. Democrats continue to remain silent on what history will likely record as noteworthy accomplishments. Rescuing the financial sector and the auto industry was both strategic and job-wise, the right thing to do. Imagine if banks had failed or that retirement plans had gone belly up? The auto industry is even a clearer example where so many other jobs are connected to GM and Chrysler, and had those two failed, Ford would have been in the same position soon after.

Probably the most sinister of the Pledge statements is freezing government hiring. This clearly places the blame for the mess we are in on the backs of government workers. While it is almost certainly true that government operations could be more efficient (less people), the three biggest expenses are Social Security, Medicare/Medicaid, and the Defense Department. The first two involve direct payments (not people related) and the Defense budget is almost always off the radar with Republicans.

The Pledge proposes sound bites that will do nothing for the economy or job creation. It guaranties deficits as far as the eye can see. And worst of all, it pits one group of Americans against another. Par for the course I would say.

Wake Up

September 22, 2010

Do you know anyone who has or had breast cancer, or other serious life threatening disease? Do you know anyone who is unemployed or would like to leave their current job and look for a better one? Do you know anyone who has a son or daughter who recently graduated from college and has not found employment? If you do, you probably know someone who cannot find affordable health insurance or may very possibly find insurance at any price.

These situations have been “fixed” in the health care reform bill that passed earlier this year. While the health reform did not do everything reformers had hoped for, it did offer relief for these cruel and senseless practices. Strangely I do not hear any Democrats campaigning on the virtues of health care reform.

The Democratic strategy is pretty vague. It appears to be to simply stand up and take outlandish slurs from Republicans and simply respond with “that’s not true”. Why don’t they tell people what has changed and why the reforms represent the real American spirit. Why don’t they establish the high ground that there are no conditions (other than outright misrepresentation) for denying health care coverage? Or that insurance companies can no longer charge extremely high rates to some people just because they want to?

If Democrats chose this approach, the shoe would quickly be on the other foot. It would be great to hear John Boehner or Mitch McConnell saying they wanted to deny cancer survivors health care coverage or that unemployed workers should go to the Emergency Room if they wanted coverage for themselves or their children. Boehner and McConnell may not be bad persons but their policies sure create bad situations for too many Americans.

Plan B

September 21, 2010

Previously I have associated the term “plan B” with what do you do when what you want to do does not work? Even the morning after birth control treatment was aptly named plan B. Now there is a new concept associated with plan B but this new application raises unpleasant questions.

Today’s newspapers are carrying a story about the Republican Party’s “plan B” campaign rhetoric. Their “plan A” was to hype the repeal of President Obama’s health care reform. This was catchy and appealed to many of the Republican base and even better to the far right, act now-think later faction. When it became clear there would not be enough votes to overcome a Presidential veto, voila, we need a plan B.

The Republican plan is to gut the bill of certain provisions, each that would seem innocent by itself and therefore might carry a majority and might even be popular enough to overcome a veto. An example might be the provision that requires all businesses to offer health insurance and if they do not, then the business is subject to a special tax. You can hear the cry now. We are taxing our businesses to death. How can we expect new jobs when we tax our businesses so heavily. And so on.

Well if we do not fund health care through payrolls, how do Republicans propose that it be paid for? At the end of the day, employer’s contributions are really tax supported (these costs are tax deductible) and for the most part, are an outright hidden tax where the remaining cost is built into the price of goods and services. What are their ideas?

The most troubling aspect of Plan B is that the discussion is not about health care cost. Further, unwinding the Obama plan will mean denying certain groups of people coverage, either directly or by pricing them out of the market. Health care is not free and should not be viewed as free. The discussion must come around to how do we make basic health care affordable and available (as in all other modern countries)? Sadly, the American voter does not see a con when it is coming right at them.

What A Deal

September 20, 2010

Voters will have a choice on November 2. Rural and conservative types can vote to throw out the bums (mostly Democrats). Urban and progressives can vote to save the Country from the types that got us into the mess we are in now. In either case, no matter which side prevails, voters should have little expectation that anything will change. What a deal!

This sad story begins with the fact that the current state of affairs is a complex mess.

  • The Country has shipped too many jobs overseas without any serious effort to stimulate good replacement jobs. You cannot jump start the economy with Starbucks jobs, and while fat bonuses on Wall Street might help New York City, it does nothing for the rest of the Country.
  • Our educational system has been babysitting too many students for too many years and its output lack drive, knowledge, and skills.
  • Health care is slowly bankrupting the Country and no one seems to worry about why. (Denying someone coverage is not the answer.)
  • Social activists have lost sight of the notion that what they believe may be ok for them, but they have no right to impose it on others. These social activists through their protests have ground the political process to a halt with the left and the right polarized to the extreme.

Like pick up sticks, this puzzle could be unwound. Unfortunately, as soon as the voters elect anyone, that person must begin rewarding their backers, and then prostrating themselves for contributions for the next election.

What a deal…

Starting Point

September 19, 2010

The US has an unspeakable Federal Budget deficit, an enormous and growing National debt, and no political idea how to eliminate them. The question everyone should be asking is why is there no path forward.

The 24/7 media, most of the seasoned politicians, and all of the new eureka (give power back to the people) politicians deal in sound bites. It is a mystery whether any of these sources have a clue to what makes up the federal budget, or how to correct the deficits. Their motivations are so compromised by advertising revenues, campaign contributions, and other spoils available to elected officials. Their combined duty to lead and inform is hopelessly lost behind the sparkle of other people’s money.

But one has to start some place. A recent full page ad in the New York Times, submitted by the Cato Institute, list a way to reduce Government spending in a big way. The Cato people estimate about a $600 billion saving annually. This is a big number and deserves a thoughtful review.

You can view their ideas at

There are some questionable cuts like turning social security into private accounts (2008 and 2009 showed clearly what can happen) and cutting Medicare and Medicaid without directly attacking the sources of health care costs and increases. Never the less, nature shows us time and again that cutting vegetation back, usually produces thriving fields afterwards.

Progressives will cry foul immediately and claim these cuts will lead to even greater splits between the rich and the poor. But here is an idea.

Let’s agree that the tax table in use during Bill Clinton’s years will be adopted. That is in effect a tax increase for everyone. Now, progressives must offer expenditures cuts that will balance the budget. Do you think there will be any takers?

The China Myth

September 18, 2010

China is manipulating its currency in order to hold a preset exchange rate with the dollar. Myth or Truth? You must be living under a rock if you do not recognize that China has held a long standing policy of fixing the rate of exchange between the US and China. There should be no doubt about that.

The artificially low value of the Chinese RMB provides an unfair advantage for Chinese manufactured goods. This advantage in turn supports the huge trade imbalance that favors China and hurts the US. Myth or Truth? This is a little more difficult to call but when the dust settles, this is a true statement. The only question is how much higher the RMB must rise in value to significantly impact the China-US trade imbalance.

Therefore, China’s currency policy is contributing to the high US unemployment and slowing the US economic recovery. Myth or Truth? There is no need to even ponder this statement. It is clearly a myth and in fact the Chinese exchange rate has little to do with American jobs. Here’s why.

Most manufacturing jobs are completely portable. The manufacture of goods will flow to where ever the cost to make is sufficiently low. China has simply done a magnificent job of organizing its labor and raw material supply resources.   As a result, China dominates the manufacture of labor intensive goods. As China’s labor force demands higher wages, Chinese entrepreneurs will simply move more farmers into the factories displacing current workers. At some point even this source of labor will be fully used and costs to make will rise. Will that point bring jobs to the US?

Not a chance. The US and international companies that have sourced production in China and then import these goods into the US will just move to another country for manufacturing. When this happens the US trade imbalance will remain unchanged. It will simply be composed of imbalances with other countries.

Righteous speeches (like President Obama has recently made) where politicians castigate China are seriously misplaced. They endanger relations with China. More important, they hide the real causes for the loss of manufacturing jobs from the American public. Consequently, any fundamental US economic recovery effort is delayed.

The US public was offered, accepted, and drank the toxic liquor that said the future was service sector jobs. Starbucks on one end and commercial banks at the other. In between was building houses. “Good” jobs were to be found in IT and investment firms. Financial products were the buzz words. Creating real value was replaced with an unspoken Ponzi scheme reality.

The naivety of the service sector strategy (we don’t need manufacturing jobs when we can sell financial services products around the world) was that developing countries would outrightly block these products and sophisticated countries as in Europe would find clever ways to delay the introduction of US financial products until they had equivalent or superior home grown alternatives. Jobs (especially good ones) are well understood and appreciated in other countries. Exporting financial products while an attractive concept does not work in practice.

Free trade must be fair trade too. When US products are blocked by other countries, the US must have the means to treat the offending country in a equal and off setting manner. With a severely limited manufacturing base (as with alternative energy production), the US is fighting trade infractions with one hand tied behind its back.

House of Cards

September 17, 2010

One of the great conservative cries these days is to keep Government out of health care and roll back the changes President Obama signed into law recently. These critics claim (falsely) that US health care is the “best in the world” and they do not want government getting between them and their doctor. Great rhetoric but totally misleading.

What these conservatives should be focused upon is the gigantic per capita cost of US health care and that this cost is rising each year 2-3 times the rate of inflation. It should not take a genius to realize that soon health care will consume so large a part of people’s discretionary spending that more and more people who now have health care will not be able to afford it. I suspect these conservatives concede this is a possibility but it won’t happen to them. They will relax with the notion that it is the other persons job to look out for themselves.

Let’s put a little more paint on this picture.

First, there is health care available in the US that is as good as any place in the world. It is really a mute point whether some US health care is the best in the world, US health care is not available to all Americans and those who do receive it, receive widely varying degrees of quality. The US allocates it health care on the ability to pay.

Second, among wealth modern countries, health care is rated better in approximately 17 other countries (like Germany, France, UK, Canada, and Japan). Life expectancies are longer there as well as the general level of health. US infant mortality ranks among the third world countries (but you would never hear a conservative talk about that).

Third, US health care is mainly paid for with coverage provided by private insurance companies. Insurance premiums, in turn, are mainly covered by employer contributions (this is a practices that began after world war II as a means to attract and retain good workers). The individual health care receiver (even the conservatives) are largely shielded from both the absolute cost of health care and its annual increases.

Fourth. State governments provide safety nets for the poor and unemployed through Medicaid. These rolls have been growing and now occupy a significant portion of State budgets.

Fifth. There has been a dislocation in the US economy. We described the economic slowdown as the consequence of the housing bubble (that burst) and the financial sector (that nearly imploded). We have not yet said what is really the case. The US economy has been uncompetitive for years. This uncompetitiveness was masked with unsupportable levels of house construction and false profits (used to power consumer spending) from baseless home appreciation. Now as they say, we can see the king has no clothes.

And therefore, Six. It is only a matter of time before businesses will conclude they cannot afford to provide health care coverage at all. This trend will blossom and as it does there will be panic as the number of uninsured grow. The health care industry including the insurance companies will see that the gravy train is about to end. A national task force will be assembled and a study commissioned. What will be the outcome?

Who knows for sure but the health care models available today in Europe, Canada, and Japan all work and cost far less than the US today. What is clear is that the role of private insurance where profit is the goal is obsolete. (Private insurance for boutique medicine will be a market probably for ever but the bulk of health care delivery in the US must change to outcomes oriented system).

Conservatives could play an important role. If they would simply focus on cost and results, they could steer the conversation to a new system (adopted from one already in use elsewhere). In steering this conversation, emphasis could be placed upon total cost and not just coverage. Will conservatives see their opportunity?

Good or Bad?

September 16, 2010

Yesterday’s primaries brought some huge surprises and some sad disappointments. Christine O’Donnell’s victory over Representative Mike Castle in Delaware was spectacular, and Representative Charles Rangel’s was sad at the other end of the spectrum. But were these nomination victories good or bad?

O’Donnell’s win was hailed as a Tea Party success. Credit also accrued to Sarah Palin. While the outcome in November is less certain, the sun shined today upon Christine and the Tea Party.

Rangel’s victory, on the other hand, elicited tears or at least great disappointment. With Congressional opinion polls registering about 20%, reelecting people like Rangel does no one any good. (In truth, Rangel may be no worse than who ever would have replaced him, or violated no worse Congressional ethics rules than other Representatives, but that is no endorsement).

O’Donnell’s candidacy raises some important questions. Clearly voters cast their vote for her but in actuality, I think, they were voting against something else. O’Donnell has no record of performance and laid out no programs of how to change what ails the country. The great unknown is what will Tea Party people like O’Donnell do if they get elected?

There should be no one surprised at the Democratic agenda in President Obama’s first term. He ran on social policies. Maybe people read more into his message of bi-partisanship and change, but his social policies were clear from the start. Maybe people did not realize the magnitude of the hurdles facing any elected officials. The economy is in shambles and must be put back on a growth path over time. People probably do not appreciate that. Health care costs, hidden behind private insurance and employer contributions have been rising 2-3 times the rate of inflation for years and nothing is being done to control this increase. Maybe people do not realize this. The Defense Department budget has nearly doubled from the Bill Clinton era and is taking huge share of the budget. Maybe people do not realize that this budget is 10 times the next largest in the world and equals all other countries budgets combined.

What people do realize is that their personal budgets do not go as far as they used to. They also do not see as bright a future (jobs, opportunity, the American dream) as they remember.

Maybe the country must go through a dislocation where clearly divisive candidates must get elected and be exposed as having no clue how to address the big problems. In Rangel’s case it is hard to see any value in his likely next term.