US still struggling to find a proper health care solution
We’ve all heard this definition of insanity: doing the same thing over and over again but expecting a different result.
Here, in a nutshell, is the insanity of the current U.S. health care debate:
Medicare, the government’s single-payer wealth redistribution health care program, is quickly going bankrupt. No one disputes this fact.
When President Obama refers to “cutting costs of healthcare,” he is referring to cutting the Medicare budget. Period. No increased efficiencies, no improved services, no reduced market-clearing prices. No, cutting costs refers to reducing the fraction of the U.S. government’s tax collections devoted to Medicare.
The new Health Care Plan is fundamentally a new Medicare program. Let’s call is Medicare 2.0.
Medicare 2.0 is being funded in large part by cutting the current Medicare budget item. We are supposed to ignore the fact that the funds cut from the current Medicare program will be spent on Medicare 2.0.
The Medicare 2.0 plan shifts as much as 25% of its (under)estimated costs (e.g. payments to physicians) to other accounts. The costs are still there; these obligations would still need to be paid by the government under the proposed legislation, but Congress is hoping the public won’t “count” the shifted costs if they slap another name on them, further fostering the illusion of “lowering costs of health care.”
Medicare 2.0 will also go bankrupt but, as a larger, more far-reaching entitlement program, the impact on the U.S. budget will be larger and more far-reaching.
What does the much delayed maiden flight of the Boeing 787 tell us about integrity?
But how difficult can it be for Boeing to make yet another new aircraft? The answer depends on how different the 787 aircraft is from anything the company has built in the past. Some initial indication that is significantly different can be taken from its being named Dreamliner.
Well done British banks ….. loads of loans built on sand … I suppose the words “conservative” and “prudent” didn’t get printed in the Banking Terminology dictionary?
So Britain, that Global Giant of the banking world, has half the dodgy loans? British banks are therefore as daft as the rest of the world put together? (Can someone check my maths!)
Oh, and why exactly were the banks lending money to SORDID DICTATORSHIPS? Would we have lent billions to Hitler’s Germany in 1937? What on earth happened to ETHICS in the financial world? I suppose lending to POOR countries who need it rather than the nasty, venal, corrupt dictatorships of the Middle East was right off the radar?
There is an obsession with the “Human Rights” of immigrants and others in Britain, but a complete and utter turning of blind eyes to the slavery going on in the Middle East, as if it doesn’t concern us because it’s in “another far-off country of which we know little”. (Neville Chamberlain’s shameful explanation of his inaction over Hitler’s annexation of the Sudetenland in Czechoslovakia in 1936.)
Sorry, but “No Man is an Island” …. we can’t sign the UN Declaration of Human Rights on the one hand and then blithely lend money (the PEOPLE’S money) to countries that are treating people so terribly.
I hope Dubai goes bankrupt and our cretinous banks with it so that we can start again with people’s banks that have a modicum of honour and decency and are prepared to invest in democracies, not insanely greedy property developments based on dictators’ idle fantasies.
It wasn’t much different with Sadaam Hussein, whatever you think of the invasion. This was a man who – just to take one example – gassed to death 5,000 innocent men, women and children in one single village alone. Yet countries in the “free world” were secretly queuing up to do deals with him. One British government MP even went there and shook his hand, the hand that consigned hundreds of thousands of people to a horrible death.
Ecology? Apart from anything else, Dubai’s carbon emissions are pro rata 250% higher than the US, so much power goes into air-conditioning and desalination. Once again, the left hand doesn’t know or care what the right hand is doing. A British minister tells us to stop eating meat to save the world while British banks simultaneously rush to finance a humongously-profligate and obscenely-elitist project in the desert.
I sometimes wonder if we really deserve to survive Global Warming. Will it be God’s way of cleansing the Earth of an aberrant experiment in free will?
The U.S. banking system remains vulnerable to sizeable potential losses as the housing market struggles to recover.
Estimates of these losses range from $500 billion to $1 trillion (£312 bn – £625 bn). The Federal Reserve Board is especially concerned about the impact of commercial real estate on many regional and small banks across the country. Occupancy and rental rates continue to decline dramatically as 2009 draws to a close, and the worst seems yet to come.
Commercial real estate loans on banks’ balance sheets total almost $1.1 trillion dollars. With near-term commercial real estate losses topping $100 billion, the Wall Street Journal estimates that as many as one-third of small and mid-size U.S. banks could experience financial distress.
Troubled banks restrict lending until they can raise more capital. In this illiquid market, expect banks to fight for survival by raising lending rates, shortening maturities, and lowering loan amounts. Credit will continue to shrink in the U.S., which spells big trouble for any economic recovery.
“Do you know what it means for me to see for the first time in 50 years a French European commissioner in charge of the internal market, including financial services, including the City (of London)? I want the world to see the victory of the European model, which has nothing to do with the excesses of financial capitalism.” (As quoted by The Daily Telegraph.)
“Victory”? So we were at war, then? Oh dear ….. you are 60 years out of date old boy, or perhaps 500 years! Does Agincourt still hurt so much?
One has for some time had the feeling that Europe’s leaders are a mediocre lot, with “statesmen” being very thin on the ground. Unfortunately, this impression has just been reinforced by Nicholas Sarkozy’s outrageous, finger-wagging gloating about the appointment of Michel Barnier to the EU post of Internal Markets Commissioner.
From this lofty position this mighty expert on world financial markets threatens to regulate the City to “European” (aka French) “‘standards”. The rationale will be to avoid another financial crisis by “reining in” the banks. The not-so-hidden agenda will be to sap the vitality of London so that Paris and Frankfurt in particular can cream off some of the rich pickings.
This is stupid and reprehensible for a number of reasons.
Firstly, any cutting-off of the City at the knees will not result in financial firms emigrating to sclerotic, over-regulated, pretentious, high-cost, overblown Europe but to the USA or elsewhere. True, the US is reeling at present, but I for one won’t bet on the mighty beast remaining on its knees for very long. And when it does rise up again, Europe will still be the same old bureaucratic, state-interfering, suffocating, high-tax business and financial environment that we know and hate.
Moreover, Sarko’s diatribe is extraordinarily partisan. If London’s City is a world financial centre, then this is to Europe’s advantage as much as Britain’s. Sapping its vitality will hurt Europe, ensuring that more financial business flows elsewhere. In the electronic age, it is not fine French wines or German Wurst that will keep these companies in France or Germany.
And what sort of pro-Europe message are such comments going to send to ordinary British voters, who all polls suggest would actually vote to leave Europe if given a choice, which of course they will not be? Britain has lost almost all its once-mighty fishing industry, still pays to support French farming, has almost no indigenous motor industry any more … but at least we have the City. If Sarko’s hatchet-man gets his way, it will be regulated to its knees …..
Sarkozy’s comments were the most prattish, partisan, nationalistic and stupid comments ever made by one of the principal leaders of Europe. And apart from anything else, Barnier has to swear to uphold the interests of ALL EUROPE when taking up his post; the fact that he is French should be IRRELEVANT. The nationalistic cynicism of Sarkozy’s comments are breathtaking. There have been frantic efforts by Barnier himself to backtrack in recent days, as London seethed at Sarko’s comments. But you can’t undo the past. Sarkozy said what he said; one has no reason to suppose he didn’t mean it.
Yes, there have been terrible excesses, but not all the City is to blame. And German and Franco banks hardly kept their snouts out of the trough, almost ALL European banks having been clobbered, so inter-connected is the banking world. And I for one haven’t forgotten the shameful fiasco at French Credit Lyonnais a few years ago, nor the recent £5 billion loss ($8 bn) by a rogue trader at Société Générale two years ago.
“The European Model”? It is laughable ……. Continental Europe has nothing to teach us about creating a healthy economy and sustainable jobs.
Sadly, Sarkozy’s narrow-minded nationalism have been matched by the stupefying incompetence of the British government in failing to block the appointment of Barnier, a well-known regulator à la française and the last thing Europe needs. We need reforms, yes, but throwing the baby out with the bathwater was never a good idea, and nor is it now.
And Mr President – less of that finger-wagging please …..
As I was perusing the business press this morning, an article caught my eye: “That would make a great post!” I thought to myself. I continued reading through the rest of the articles, intending to go back to the one that piqued my interest to compose a comment. Of course, when I went back, I could not find it!
Trouble internally
But in the process of looking for that particular paragraph, I noticed something troubling. Something that, should my students’ papers include the same, would bring their score down by a full letter grade, if not more.
Recently there was an event at which Bill Gates and Warren Buffett answered questions from students of the Columbia Business School in New York. I referred to the event recently when writing about Warren Buffett.
So why were these students interested in Messrs Gates and Buffett? It is, of course, because they are successful.
While different people define success in many different ways, we can be reasonably sure that, in the context of a business school, most of those business students would categorise Gates and Buffett as being among the most successful people alive.
So what did the students ask about? Well, of course, they asked about success! The questions were of two main types.
A small challenge to a Nobel prize winner in Economics!
In a recent New York Times op-ed, Paul Krugman continues his boundless quest to become the “it” guy in the world of economics. I have taken issue with his command of basic economic facts in the past — a gutsy, if not insane thing to do given the man was awarded a Nobel Prize in Economics.
Krugman accepting the Nobel Prize
This post is more about ego than economics, however.
In this op-ed, Mr. Krugman says (and I kid you not),
…But after the debacle of the past two years, there’s broad agreement — I’m tempted to say, agreement on the part of almost everyone not on the financial industry’s payroll — with Mr. Turner’s assertion that a lot of what Wall Street and the City do is “socially useless.” And a transactions tax could generate substantial revenue, helping alleviate fears about government deficits. What’s not to like?
Well, I disagree with the idea that what Wall Street does is socially useless. And I am not on the financial industry’s payroll.
Nope, I’m just a simple economist, using my head, training, and experience to consider this idea, map out the pros and cons, and analyze the logical end-game of such a tax. I conclude that it is a really bad idea.
Why? There are lots of reasons, but I will mention only two.
One, raising taxes reduces private economic activity, which will curtail growth, reduce tax revenues and increase the deficit.
Two, taxes distort the price signal between suppliers and demanders of goods and services, including financial capital, reducing economic efficiency.
His reasons? Other than citing one academic study (while ignoring the many others that reach a different conclusion), he gives no economic reasons for his views. Instead, he make claims. He claims, for example, that “socially damaging behavior … caused our current crisis.” He says that the financial services industry is “bloated” and needs to be cut down to size. He says that the new tax is okay because it raises revenues for the government which, he claims, should make us all feel better about the deficit and, apparently, the size and nature of government spending under Obama. And, the lamest of all, for no other reason than to hide behind their skirt, he claims the existence of some phantom majority, apparently to create the impression that anyone with a different view is clearly in the minority. A tactic that should be beneath a Noble Prize winner, but one that runs through his work with increasing frequency over time.
But, Mr. Krugman, I so disagree with you. And even in an op-ed piece — perhaps especially in an op-ed piece – I believe that one needs to reign in an ego that would parade claims as facts, especially when each of those claims is disputed by your fellow economists, none of whom stooped so low as to imply that you were paid for your views.
We were invited to our friend’s 25th Wedding Anniversary on Saturday, 21st November.
English pub
It was in a local pub and they had invited many friends, some of whom we had not seen for many years.
One friend had started his own architect business, built it up over the last 10 years and, although he had lost a large amount of work because of the recession, things seemed to be picking up.
I mentioned that my work had dropped off dramatically since the summer. He said:
Well, Jon. You can make your own mind up what you do. You can either decide you’re going to go bankrupt or you can decide that you’re going to succeed – in spite of everything.
For some reason, that short conversation had a huge impact on me and I realised that it really is mind over matter and once we make our mind up about something, good or bad, it tends to happen.
It came up again in conversation today: someone was offended and upset over the level of compensation of some senior executives in the U.S. economy. I have to admit I just do not understand the anger. And I have a fundamental lack of respect for the arguments that have been served up thus far in support of the position.
I have tried to resist drawing the conclusion that the anger is born of envy, but I am very close to throwing in the towel on that one. Why should we begrudge anyone who earns a healthy salary, especially in an economy that provides each of us the opportunity to aspire to the same?
Even if there were reasonable ways around the practical issues and costs associated with legislative caps on salaries — how to set them, who sets them, using what measures, what value judgements — it simply makes no sense. It is the antithesis of a competitive market economy where individuals have the incentive to learn, grow, work hard, and succeed. It ignores the role played by capitalism in creating a strong and vibrant private economy that provides endless opportunities for all who want to put in the hours and the effort to succeed.
U.S. corporate governance rules provide the framework for determining the compensation for senior executives, and it works remarkably well. Each shareholder, or owner of the company, gets one vote on material issues such as reorganization. The Board of Directors is responsible for hiring and firing senior management on behalf of the shareholders. If the shareholders do not like the decisions of the board, including those that set the level and form of compensation for senior management, they have at least two, very effective choices. They can either sell their shares in the company or they can vote to replace the board members. The board can take several steps if, after negotiating the compensation package for senior management, the executive fails to perform. The board can withhold the bonus, renegotiate the terms of the contract, or fire the executive. Then the long, mostly objective arm of the competitive labor market will determine the market-clearing value for the skills and experience of the recently fired executive.
One thing I’ve never quite understood is why the market doesn’t seem to exact more punishment on senior executives who run their companies into the ground. Maybe there is an old boys network that looks out for ex-executives; maybe my observations are biased; maybe I notice only those cases where failed executives rise again. But it’s an empirical question, in any case; we can gather data on the issue and study it objectively.
Regardless of the conclusions of such an analysis, however, decisions about executive compensation must remain in the labor market where your ability to produce economic value still reigns supreme over your ability to curry votes and political favor.
Learning from Dogs 