Archive for December 2010

Year End, Decade End

December 31, 2010

Today marks the end of the first decade of the 21st century.  Since it is the last day of both the year and the decade, one might ask the question, what has this period taught us?  Even more important, what have we learned?

I can think of three important lessons.  I am not sure, on the other hand, whether the Country has digested these events and learned anything.

War on Terror. It is difficult to understand, even today, how such an event as 9/11 could have taken place.  Sufficient precaution were in place but not followed.  Further, had the capability to lock the pilot’s cabin door been in place, it is arguable that the disaster might have been averted.  So what did we learn?

Not much based upon the Government’s reaction.  First, the event became politicized and the term “war on terror” was coined.  This was a thinly veiled ploy to gain Republican election victories.  Under this political cover, we have seen an invasion of a sovereign country that posed no imminent threat (pure opportunism since there was no connection between Iraq and 9/11), Abu Ghraib (reflection of the tone at the top of the Administration), enhanced interrogation (torture), and Gauntanamo detention facilities (indefinite detention).

Financial sector implosion.  During the last decade of the 20th century and the first decade of the 21st, the financial sector found (created) ways to make a lot of money (fees) on mortgage and other lending transactions.  Mortgages which once were tied to the original lender (at least in part) were now being sold and resold.  Once the mortgage sold (or resold), the previous mortgage holder was free from any future liability.  Banks knowingly and willingly repackaged these mortgages and created instruments that spread the risk around the world in pieces that bore credit agency high ratings.  Financial firms then expanded the use of an unregulated form of insurance.  Once they began to see the imminent collapse of the mortgaged backed financial instruments, the use of this unregulated insurance instrument was seized upon even more.  Financial firms thus created a global interwoven web of insurance and cross insurance policies.  The result was that each institution could show healthy looking balance sheets (based upon the potential payoff from these insurance contracts).  No one took into account the consequences of what might happen if the “insurer” could not pay.  So, what did we learn?

Not much based upon the size of bonuses and salary packages that followed the financial bail outs.  The simplest learning should have been that banks have little or no regard for their social or moral position.  Further, they produce nothing yet they collect fees that place financial firms as the largest maker of corporate profits.  Sensible regulation should have been a no brainer but such proposals were made to look like an attack on motherhood.

Healthcare reform.  Comparisons of the US health care delivery system with those of other civilized, modern, industrial countries consistently show that the quality of US health care is mediocre while costing more than any other country.  Further one aspect of US health care is that unless you can afford it, or fit some poverty category, you do not get health care until it is too late or too costly, and on top of that, insurance companies in pursuit of higher profits can deny anyone coverage for their own reasons.  With models of many successful plans around the world, what did Washington reformers learn?

Not much based upon the 2009 reform.  For sure, President Obama’s reform eliminated the ability of insurance companies to deny coverage and this is morally a great step forward.  The reform also promises to slow the increase in premiums but did nothing to attack the current high cost or address the underlying factors of why the outcomes of the US health care system lag behind places like Germany, France, the UK, Canada, and Japan.  All elements of the health care industry (AMA, hospitals, drug companies, and insurance companies) attacked the suggestion of any reform that might affect them.  Not a one said lets step back and fix this socially and financially broken system).

The first decade of the 21st century has put in sharp focus the evolution of American values and misuse of capitalism.  America was founded upon individual hard work and progressive ideals.  Our country has flourished based upon hard work, innovation, and updating our progressive values.  America has always been at it best when the gulf between the rich and the poor, while real, were not excessive.  America has always flourished when education was put to work inventing and making things.  America has always flourished when the concept of “one man, one vote” was expanded to include all person, male or female, rich or poor, gay or straight, religious or not.

I hope that the second decade will demonstrate that these historic traditions have not been lost and America can flourish again.

 

And What Next ?

December 30, 2010

Health care is in season beginning with January 1, 2011.  It will probably prove to be a long season.  Many victories will be claimed but in the end, real politicians will treat the subject more as a tar baby and be careful to use nonspecific words. They will put in place little action.

John Boehner will stand tall and pronounce “we have the best health care system in the world and unless we repeal President Obama’s reform, those days are numbered”.  Former Governor Mike Huckabee says already “Obamacare is atrocious and must be repealed”.  Mike spares us any details on what, if anything, should replace it.

This is the whole point. The US health care system, in place when President Obama took office was good (not great).  It was going broke fast, and was on a path to become more and more out of reach for even more Americans in the next few years.  That system was content to deny some people medical coverage for what ever reasons suited the profit insurance companies.  How can that represent “the best health care system in the world”?

Opponents to President Obama’s reform argue from a knowledge starved basis.  In World Health Organization surveys, the US rates well down the list of the best health care systems.  To be sure the US health care system has some of the best health care providers in the world, but these facilities serve only a fraction of the population and then only if you have adequate insurance.  Boehner and other opponents misinform Americans when they pompously proclaim how good our system is when it is a system inherently designed discriminate on the ability to pay.  On top of that, it cost too much by any standard, and produces outcomes relative to the American population that are far from the best.

I suppose if I were John Boehner and had the Federal worker’s health insurance plan I would be quite satisfied.  I would also feel that there should be a limit on malpractice awards and would support the sale of health insurance across State boarders as a means to lower insurance costs.  (Frankly these changes might be worthwhile, but they would not effect either the quality of health care or the number of people covered).

So, when the politicians begin next year to huff and puff about the great health care abomination, just listen carefully to what they say should replace the current reform legislation.  Most likely they will gloss over that important detail.

So, just say, and what next?

 

Jobs and Housing

December 29, 2010

Today’s papers carried depressing stories about the fall off in home sales and the gross absence of jobs, especially in the inner city Camden, NJ area.  With respect to home sales, while depressing, this should not be a real surprise with the weak economy outlook and ruins of the housing bubble all around.  With respect to jobs, this should be a wake up call for Federal, State, and local officials.

More jobs, of course, could boost home sales just by itself.  But it isn’t that easy to say, well let’s just have more jobs.  Jobs require a lot of other factors in order to materialize.

For example, jobs flow to people who are qualified and show up for work.  High school drop outs have a much more difficult time finding employment and are almost excluded from consideration of “good” jobs.  Jobs also flow to places where the labor environment is constructive and works easily with management.  And, jobs flow to places where State and local officials create incentives and positive working relationships with job creators (companies).

Think about the past 30 years.  Unions have reenforced win-lose relationships in both the private and public sectors.  Companies have sold their souls to Wall Street in order to reward senior executives disregarding the future investments necessary to meet global competition.  States have systematically avoided hard decisions versus the productive, if not the utility, of many State funded agencies and allowed these budgets to grow to proportions that can no longer be sustained.  Worst of all, along the way, many of these States have bitten the “jobs hand” that had fed it.  Both States and local authorities have turned their backs on the underlying causes of the education system’s failures.  The Federal Government has done its share too.  The nation’s infrastructure is crumbling.  The feds have at times turned their back on science, and have not emphasized math, science, and engineering.  Sensible regulation has been non-existent.

Politically it is still too easy to blame the other party.  It is still too easy to blame those unemployed.  It is still too easy to simply say it is not my problem.

There is no silver bullet or magic wand treatment that can make things different.  As all too frequent, sustained improvement in home sales (read the economy) and jobs (read the engine of the economy) rests upon a skilled and talented work force.  There needs to be intelligent and cooperative efforts from Federal, State, and local agencies, all working together and not separately.  Profits must be fair and investments in the future must be adequate and well managed.

None of this is natural or should be expected to just happen.  But anyone at the Federal, State, or local level can start.

The New Year is a time of renewed hope.  We can hope but as a little incentive, think about how things are today and imagine the current state is the best we may ever see.

 

Bankrupting Common Sense

December 28, 2010

There is a conservative movement afoot.  No surprise in its intent.  The avenue, however, is a huge surprise.  Let States declare bankruptcy.

The rumor is that when the new Congress meets, Republicans in the House will introduce legislation that would make it easier for States to file for bankruptcy.  Today State obligations are backed by law that the State will honor its debt.  A consequence will be increased prices on everything States purchase and far higher interest on State bonds.

The conservatives’ objective is to give States lethal tools to combat unionized government workers contracts.  Just as we have witnessed with airlines and auto companies, once under bankruptcy protection, contracts suddenly become easier to renegotiate, and if no agreement can be reached, a management friendly contract can be put in place by edict.

This idea may sound interesting but it is far more dangerous to everyone else.

First, think about the State declaring it cannot pay its bills.  What does that say to future bond holders or any other debt holder, like Staples, the utilities companies, or the company that supplies salt for winter roads?    No more credit.

Second, what should people do relative to other States laws, regulations, and traditions?  If  States choose walk away from obligations, why should average citizens meet their obligations.

Third, why shouldn’t States accept the risk of union work actions (strikes) if they now can show that unionized public sector workers are earning too much when compared to the private sector (of similar jobs)?  If compensation was too low, we would all understand negotiation that ultimately lead to a strike.  Why would it not be true if suddenly wage were too high?

Balancing State budgets, when raising taxes is not an option, leads to the obvious conclusions.  Either State services must be eliminated (and those workers laid off) or the pay of workers providing services must be reduced.  In any case, citizens should be offered the chance to choose.

The ugly side of this rumor is that it is really about reducing taxes and cutting services that the Tea Party and other conservatives do not use.  Their opposition is State unions who prefer to hold on to “hard fought benefits” without review.  Unions have not learned from the transformation of the airline and auto industries.  When wages and benefits get grossly out of line, the end is near.

States clearly have too many workers, earning rich pay and benefit packages.  Unless State citizens are earning more and more money, there is no way to pay for all these workers.  The equilibrium position is where like skills in the private sector and the government service sector are treated the same.  Unions need to step out and take the lead.  Tea Party and conservatives are only interested in themselves.  State jobs and services affect far more.

 

Negotiations or Just Brain Paralysis?

December 27, 2010

Any other description of the Palestinian and Israeli peace negotiations than purely dysfunctional could only be “intentionally insincere”.  Each side has a sugar daddy and sees no imperative to negotiate in good faith.  Therefore, hoping for a settlement fits the description of insanity.

The US sends lots of money (and weapons) to Israel and asks weakly for their best efforts to produce a lasting peace.  The Iranians also send lots of money to the Palestinians and ask that their surrogates, Hezbollah and Hamas, hold tough, not give an inch, and be as disruptive as possible.  These actions fit what each side thinks is best for their foreign policy.

The central players, the Palestinians and the Israelis, do have the power and freedom to negotiate and reach an agreement but seem unwilling to do the hard, rationale work.

Other than the nuisance of homemade rockets fired into Israel from Gaza, and the Israeli strangle hold embargo on Gaza, the basis of a settlement has been on the table for some time.  The Israeli Government, however, is composed of several political factions.These political minorities threaten to pull out of the coalition claiming, for example, Jerusalem should be 100% Israeli.   Each side claims the right to this land on the basis of who they see as god and what that god has said to them.

As history has shown, god plays almost always no good role in any negotiation.  Commonsense would lead a rational person to know that land has been occupied by conquering groups time after time.  And with respect to a people, history can make clear that people evolve, migrate, and intermarry leaving a clean ancestry at best a few generations.

My bet is that both the Israelis and the Palestinians are suffering from brain paralysis.

 

Waiting for Snow

December 26, 2010

It is a cloudy, cold morning and the prediction are dire.  Moisture from the south will mix with cold from the west, and bingo, a lot of snow will arrive.  The streets are dry now.  There are no signs of snow but the forecasters are adamant, look out for 20 inches or more.

Political forecasters are much the same.  They continually predict unfavorable consequences but like the pros, always leave themselves a way out.  This morning a employment prognosticator allowed that in 2011, the economy would most likely improve, but only modestly.  From the current almost 10%, this forecaster predicted a level of 9% for the end of 2011.  Well, he stated, you know, maybe 8.5 to 9%.  Of course, it could move less and maybe end up at 9.5%.

This is winter time.  Storms come and go, and the occurrence of snow is sort of expected.  After over 20 years of growth and low unemployment, most Americans are not shocked that the economy has slowed or that the unemployment rate has risen.  But the same Americans had expected the economy to bounce back just like it always has.  Why is it this time, we are waiting for jobs?

With the weather, we don’t know about tomorrow, but we are very certain when Spring and Summer comes, it will be warm.  Jobs and the economy are another expectation altogether.  They are not tied to seasonal changes.

We must remember that with the globalization of manufacturing, objects meeting high quality standards can be made just about anyplace in the world with low wage labor.  High intellectual content things, which should be a strong point for the US finds other countries competing very strongly.  These other countries, surprise, surprise, also have younger generations which are scoring very well on standardized math, reading, and science tests.

A wise man, when he waits for snow, readies his snow shovel and salt.  A wiser man, when waiting for jobs, ensures that his schools are first class and emphasize high achievement in math, reading, and science.

 

Being Thankful

December 24, 2010

On Christmas Eve, there is time to reflect and assess how lucky (or unlucky) you might be.  This can be on a personal level or in a more abstract vein.  In particular, when I think in the abstract  about this blog, I see our Country “regaining the center”.  If we can stay there, this bodes very will for all ships.

Think about the not too distant past.  We had an Administration that picked people for their religious or political views and placed some of them in critical roles administering justice.  Imagine appointing John Yoo to write memos on the admissibility of torture. (Just the notion that someone would ask about torture is mind bending).

Think about an administration that made up story after story about why the US should invade a sovereign country that posed no imminent threat to the US.  Consider what happened when the tone at the top of this Administration taught that some people were less than human and places like Abu Ghraib and Guantanamo appeared.

Or, think about all the talk of god and reading the bible.   Now think about the Terry Schaivo disgrace and the wholesale rejection of science.  We cannot overlook that Administration’s views of regulations and regulators, and the incompetents who were placed in key posts.  Katrina, the burst housing bubble, and the financial sector implosion resonate from these decisions.

For sure in every Administration, fate or luck plays a role.  Some years everything seems to go well with the economy and world affairs.  And, in other years, misfortune reigns.  When an Administration enters any period with a strong tilt, either right or left, the ship of state is in for a rough ride.

The years 2000-2008 were dreadful in this respect.  We are only two years into the new Administration but somehow I think the ship of state has a better chance to sail the course.