http://www.nytimes.com/2010/03/26/opinion/26brooks.html?emc=eta1
People in politics are looking toward the fall elections and in terms of what they have to do to keep their jobs (i.e. Senator McCain and Sarah Palin making headlines, the Obama Administration looking at how to "spin their win", etc.).
We had the chance today to see three of the most interesting people we follow on one TV show which was a good "perspective getter" for us: Peggy Noonan, George Will and Paul Krugman. It's a good thing when TV tries to "inform" as opposed to when it gets hijacked by one side or the other in some political debate. In this particular case, ABC had Will and Noonan on one side of the "round table" and Krugman with Donna Brazille on the other (we make the assumption that party affiliation would be "implied").
The moderator of this discussion was very careful to balance inputs from each of the parties in their responses to various issues: the one of most interest to us was health care. Here, we began to wonder what we were watching. George Will seemed very Republican about what the health care bill wasn't (and we stress, at this point, that we are not "Republican or Democrat" on this site or in our classrooms): it cost too much, it will save nothing, there was a better bill that could have gotten Republicans on board ... Peggy Noonan, a great writer with her own column at the WSJ, and, not a "sound bite" person, sort of went on about why there isn't more bi-partisanship (it's hard to remember what she said) ... Paul Krugman was sort of placed on the different "side" of the table and introduced into the discussion as the only Nobel Economist in that conversation: as the only panelist who'd read the bill (which is now north of 2,300 pages), he said that many of the cost saving provisions will actually come to pass and that it's "positives" will far outweigh it's negatives (here, we couldn't agree more ... see prior posts on adding 30 million more people to coverage, preventing insurance companies from dropping policy holders from coverage because their illnesses cost too much, etc.).
We want to salute Krugman here for his willingness, as an economist, to appear publically and advocate for, or inform about, what is really happening that touches us all.
Not all economists have that attitude or intention.
David Brooks' OP-ED contribution to the NY Times (3/26/10 - attached) is an absolute classic in this regard. There is a reason why "Economics" is called the "Dismal Science" and that reason has something to do with the inability of most of its practitioners to relate what they do to reality: do we need go any further than the worldwide financial crisis? The best of them suggest that only a few of them saw it coming. And, further, they have continually debated about what to do about it!
Brooks puts the history of modern economics into "Acts". So, Act I would be the "Era of Economic Scientism": the period when economists based their work on a crude vision of human nature (the perfectly rational, utility-maximizing autonomous individual) and built elaborate models based on that creature. That was the era we grew up in at Wharton where the first ever econometric model was created while we were in school - how modern! The only problem was that all that "math" was based on "history."
Act II would occur over the past few decades as a few brave economists tried to move beyond the "stick-figure" view of humanity.
This leads us to Act III, the economic crisis of 2008 and 2009. Here, all the wonderful financial models helped wipe out $50 trillion in global wealth causing immense human suffering.
So, by Brooks' view, that brings us to Act IV, the period of soul searching that we are in now. There is no concensus on what caused the crisis! "Economists" are fundamentally re-evaluating their field. Brooks quoting Russ Roberts of George Mason University: "... why is economics even considered a science?" Again, from Roberts: "The bottom line is that we should expect less of economists."
This is a refreshing perspective and one we have advocated for a long time. If Act IV becomes, as Brooks predicts, "... economists taking baby steps into the world of emotion, social relationships, imagination ...", we applaud the trend. We also applaud Brooks' prediction that Act V "... will blow up their whole field." At the end of Act V: "... economics will be realistic, but it will be an art, not a science."
What we most admire about Paul Krugman is his humility. He is brilliant technically but he doesn't try to use that to upend others when he has the TV stage. He tries to inform without talking down. He sees his basic economics textbook as his legacy. He and his wife work tirelessly to keep it current and informative. He understands all of the econometric theory and quantitative hupla but only uses it to counter some of the most preposterous theories that his profession has come up with. And, oddly enough, he comes out at the same place as someone like, for example, Warren Buffet, who took the position that we were way to small in our economic stimulus package to make a dent in the massive and long lasting unemployment situation we face.
So, if we could build on Brooks' perspective, we would suggest the "economic model" for the new modern economist would be: Paul Krugman. We hope that "Act V" produces more like him.
Sunday, March 28, 2010
Friday, March 19, 2010
Krugman on Health Care 2
http://www.nytimes.com/2010/03/19/opinion/19krugman.html?emc=eta1
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031803639.html?referrer=emailarticle
As Paul Krugman revisits health care reform today, so will we. From today's OP-ED, we quote Krugman: "As it happens, Reuters published an investigative report this week that powerfully illustrates the vileness of our current system. The report concerns the insurer Fortis, now part of Assurant Health, which turns out to have had a systematic policy of revoking its clients' policies WHEN THEY GOT SICK (my "caps"). In particular, according to the Reuters report, it targeted every single policyholder who contracted H.I.V., looking for any excuse, no matter how flimsy, for cancellation. In the case that brought all this to light, Assurant Health used an obviously misdated hand written note by a nurse, who wrote '2001' instead of '2002,' to claim the infection was a pre-existng condition that the client had failed to declare, and revoked his policy."
"This was illegal, and the company must have known it: the South Carolina Supreme Court, after upholding a decision granting large damages to the wronged policyholder, concluded that the company had been systematically concealing its actions when withdrawing coverage, not just in this case, but across the board."
Krugman goes on to point out that a House committee estimated that Assurant made $150 million in profits between 2003 and 2007 by canceling coverage of people who thought they had insurance.
A further quote: "Beyond that, this is a story that could only happen in America. In every other advanced nation, insurance coverage is available to everyone regardless of medical history. Our system is unique in its cruelty."
The Congressional Budget Office (CBO), which we have referred to before in our posts, is unassailable in it's standards of objectivity. The CBO estimates that the proposed legislation (which will cost $940 billion) would reduce the deficit by $138 billion in its first decade and half of 1% of GDP ($1.2 trillion) in its second decade.
We have attached, as well, today's editorial from the Washington Post which quite eloquently supports the legislation on the grounds that it "improves" by, for example, including 32 million of the 46 million who are not covered by health insurance and prevents the two major events that we have consistently discussed here: dropping people when they get sick (see above) or after a medical event that cost "too much", and preventing people from getting coverage because of a prior existing condition.
And, to the 29 year olds that we have referred to in prior posts who don't have medical insurance because they don't need it (until they do), get over it. You need to understand that insurance requires a large risk pool of people who don't get sick in order for it to work. Ask Warren Buffet. And, tell Warren you saw his GEICO video.
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/18/AR2010031803639.html?referrer=emailarticle
As Paul Krugman revisits health care reform today, so will we. From today's OP-ED, we quote Krugman: "As it happens, Reuters published an investigative report this week that powerfully illustrates the vileness of our current system. The report concerns the insurer Fortis, now part of Assurant Health, which turns out to have had a systematic policy of revoking its clients' policies WHEN THEY GOT SICK (my "caps"). In particular, according to the Reuters report, it targeted every single policyholder who contracted H.I.V., looking for any excuse, no matter how flimsy, for cancellation. In the case that brought all this to light, Assurant Health used an obviously misdated hand written note by a nurse, who wrote '2001' instead of '2002,' to claim the infection was a pre-existng condition that the client had failed to declare, and revoked his policy."
"This was illegal, and the company must have known it: the South Carolina Supreme Court, after upholding a decision granting large damages to the wronged policyholder, concluded that the company had been systematically concealing its actions when withdrawing coverage, not just in this case, but across the board."
Krugman goes on to point out that a House committee estimated that Assurant made $150 million in profits between 2003 and 2007 by canceling coverage of people who thought they had insurance.
A further quote: "Beyond that, this is a story that could only happen in America. In every other advanced nation, insurance coverage is available to everyone regardless of medical history. Our system is unique in its cruelty."
The Congressional Budget Office (CBO), which we have referred to before in our posts, is unassailable in it's standards of objectivity. The CBO estimates that the proposed legislation (which will cost $940 billion) would reduce the deficit by $138 billion in its first decade and half of 1% of GDP ($1.2 trillion) in its second decade.
We have attached, as well, today's editorial from the Washington Post which quite eloquently supports the legislation on the grounds that it "improves" by, for example, including 32 million of the 46 million who are not covered by health insurance and prevents the two major events that we have consistently discussed here: dropping people when they get sick (see above) or after a medical event that cost "too much", and preventing people from getting coverage because of a prior existing condition.
And, to the 29 year olds that we have referred to in prior posts who don't have medical insurance because they don't need it (until they do), get over it. You need to understand that insurance requires a large risk pool of people who don't get sick in order for it to work. Ask Warren Buffet. And, tell Warren you saw his GEICO video.
Thursday, March 18, 2010
Middle-Class and Uninsured
http://www.dallasnews.com/sharedcontent/dws/img/03-10/0317uninsured.pdf
Through the two recessions that America has weathered during the first 10 years of the 21st century, there has been an increase in both the long term unemployed and the inability of people to be able to afford health insurance - and, an employer's capacity to offer it.
In a new report, published yesterday, "Barely Hanging On: Middle Class and Uninsured", the Robert Wood Johnson Foundation documents that, while the situation has been tough for everyone, it's America's middle class that has been the hardest hit.
The report shows that the number of middle-income earners who obtained health insurance from their employers dropped by 3 million people from 2000 to 2008. Just 66% of people in families earning roughly $45,000 to $85,000 are now insured through their employer - a drop of 7% from 2000 to 2008.
Employer-sponsored insurance (ESI) has long been the mainstay of health coverage for middle-class families who typically do not qualify for government insurance programs. Among middle-income Americans, only about half of the decline in employer-sponsored coverage from 2000 to 2008 was offset by government insurance programs like Medicaid.
According to the National Center for Policy Analysis, a conservative think tank based in Dallas, the majority of middle-income families who don't have health insurance rejected an opportunity to buy it. With nearly 40% of America's 46 million uninsured living in households earning more than $50,000 annually (and half of those greater than $75,000 annually), rejected the insurance is a "choice" that's being made based on value. Basically, medical insurance costs too much for something that doesn't cover enough.
Employers have to choose between either passing on costs to workers who cannot afford the increase and therefore drop coverage, or paying more for their employees' coverage at the cost of creating and preserving jobs.
We see two problems with all of this: first, for obvious reasons, the young and healthy 29 year old rejects health insurance because, as we said above, it costs too much for something that doesn't cover enough, AND, that person doesn't need it! Until they do ... and then the rest of us pay ... and, second, the insurance companies have profit margins to cover (stockholders to satisfy) so it is in their best interests to drop coverage on those who are poor risks (people who have actually had medical claims [or large medical claims], and so, cost too much) and not allow coverage for potential new customers that have "poor" medical histories.
As we communicated in a prior post in 2009, roughly 20,000 people per year are "dropped" from insurance coverage for bad claims experience. After all, insurance is a "for profit" business. Any legislation which threatens the insurance industry's ability to maximize profits by, for example, ending the option to cancel coverage, is something the insurance industry is going to lobby against. Whether or not a health care bill passes this week, or next week, there are some aspects to that legislation that have virtue. Giving more value for the already high cost of health insurance would probably be a good thing. Raising prices to preserve profit margins while dropping those who are bad risks (by whose definition?) would continue to be a bad thing.
Through the two recessions that America has weathered during the first 10 years of the 21st century, there has been an increase in both the long term unemployed and the inability of people to be able to afford health insurance - and, an employer's capacity to offer it.
In a new report, published yesterday, "Barely Hanging On: Middle Class and Uninsured", the Robert Wood Johnson Foundation documents that, while the situation has been tough for everyone, it's America's middle class that has been the hardest hit.
The report shows that the number of middle-income earners who obtained health insurance from their employers dropped by 3 million people from 2000 to 2008. Just 66% of people in families earning roughly $45,000 to $85,000 are now insured through their employer - a drop of 7% from 2000 to 2008.
Employer-sponsored insurance (ESI) has long been the mainstay of health coverage for middle-class families who typically do not qualify for government insurance programs. Among middle-income Americans, only about half of the decline in employer-sponsored coverage from 2000 to 2008 was offset by government insurance programs like Medicaid.
According to the National Center for Policy Analysis, a conservative think tank based in Dallas, the majority of middle-income families who don't have health insurance rejected an opportunity to buy it. With nearly 40% of America's 46 million uninsured living in households earning more than $50,000 annually (and half of those greater than $75,000 annually), rejected the insurance is a "choice" that's being made based on value. Basically, medical insurance costs too much for something that doesn't cover enough.
Employers have to choose between either passing on costs to workers who cannot afford the increase and therefore drop coverage, or paying more for their employees' coverage at the cost of creating and preserving jobs.
We see two problems with all of this: first, for obvious reasons, the young and healthy 29 year old rejects health insurance because, as we said above, it costs too much for something that doesn't cover enough, AND, that person doesn't need it! Until they do ... and then the rest of us pay ... and, second, the insurance companies have profit margins to cover (stockholders to satisfy) so it is in their best interests to drop coverage on those who are poor risks (people who have actually had medical claims [or large medical claims], and so, cost too much) and not allow coverage for potential new customers that have "poor" medical histories.
As we communicated in a prior post in 2009, roughly 20,000 people per year are "dropped" from insurance coverage for bad claims experience. After all, insurance is a "for profit" business. Any legislation which threatens the insurance industry's ability to maximize profits by, for example, ending the option to cancel coverage, is something the insurance industry is going to lobby against. Whether or not a health care bill passes this week, or next week, there are some aspects to that legislation that have virtue. Giving more value for the already high cost of health insurance would probably be a good thing. Raising prices to preserve profit margins while dropping those who are bad risks (by whose definition?) would continue to be a bad thing.
Thursday, March 11, 2010
U.S. Offshore Oil and Nuclear Power
http://online.wsj.com/article/SB10001424052748704784904575112144130306052.html?mod=WSJ_Opinion_AboveLEFTTop&mg=com-wsj
We were reminded today by the WSJ editorial board that President Obama, in his January State of the Union speech, promised "... a new generation of safe, clean nuclear power plants and new offshore areas for oil and gas development."
It would appear that President Obama's Cabinet hasn't jumped on that directive.
The Congressional ban on offshore drilling expired in September 2008, and the Bush Administration plan for leasing the high potential "Outer Continental Shelf" was due to begin this year. But, within a month of taking office, Interior Secretary Ken Salazar halted leasing by extending the public comment period by six months. When that period ended last September, Interior said it would take "several weeks" to analyze the results. It has yet to release those results (our guess is that 6 months is longer than "several weeks").
Last week, Secretary Salazar informed Congress that he was scrapping the Bush plan and that leasing would not begin for at least another TWO YEARS.
As we look for signs that oil prices are starting to trend up (and they are not, as yet), our thought here is that getting started with oil leases now would be good strategic planning. Actually, getting started with drilling our own oil would be good strategic planning anyway, no matter what the price is. "Spills" are no longer an issue technically and "deep water" technology has been perfected, as has been evidenced in recent years in the Gulf of Mexico and off the coast of Brazil.
Nuclear power has not made much progress either. Only 5 of 50 states have nuclear-friendly "enabling" legislation that might convince corporate boards to commit capital to a long-term project. The federal Nuclear Regulatory Commission, despite adopting a streamlined licensing process in 2005, hasn't issued key rules. Worse, nothing has been approved as a process for nuclear waste disposal. No utility is going to make large capital bets given this kind of government policy uncertainty.
We would conclude, as the Wall Street Journal has, that the government's actions show continued "hostility" to oil drilling and nuclear power. So, does that mean that we're comfortable with an oil price "range" of $50 to $150 per barrel. We're back to $80 now. Is that comfortable? Is $120 still comfortable?
Just as China is now the largest car market in the world, how soon will they surpass the rest of the world in oil demand? If China and India were to increase their rate of oil consumption to just half of America's levels, those two countries would burn thru 100 million additional barrels per day OVER the current world oil use rate of 86 million barrels per day. Do we think that's not going to happen?
Getting back to Mr. Salazar (and those he represents), how does he explain that it is OK for a China/Cuba joint venture to drill 60 miles off the coast of Miami, Florida but he's not ready to give guidelines for his own country's oil companies to drill off our coasts? Does he think the China/Cuba technology is better than what we have in the U.S.?
Peak oil theorists are not all crackpots. Matthew Simmons and Boone Pickens are well respected for their knowledge and accomplishments in the oil business. If Simmons is right about oil depletion rates, and the aging infrastructure (both people and "rust"), oil could go to $500 in a heartbeat.
Deep water drilling takes longer.
We were reminded today by the WSJ editorial board that President Obama, in his January State of the Union speech, promised "... a new generation of safe, clean nuclear power plants and new offshore areas for oil and gas development."
It would appear that President Obama's Cabinet hasn't jumped on that directive.
The Congressional ban on offshore drilling expired in September 2008, and the Bush Administration plan for leasing the high potential "Outer Continental Shelf" was due to begin this year. But, within a month of taking office, Interior Secretary Ken Salazar halted leasing by extending the public comment period by six months. When that period ended last September, Interior said it would take "several weeks" to analyze the results. It has yet to release those results (our guess is that 6 months is longer than "several weeks").
Last week, Secretary Salazar informed Congress that he was scrapping the Bush plan and that leasing would not begin for at least another TWO YEARS.
As we look for signs that oil prices are starting to trend up (and they are not, as yet), our thought here is that getting started with oil leases now would be good strategic planning. Actually, getting started with drilling our own oil would be good strategic planning anyway, no matter what the price is. "Spills" are no longer an issue technically and "deep water" technology has been perfected, as has been evidenced in recent years in the Gulf of Mexico and off the coast of Brazil.
Nuclear power has not made much progress either. Only 5 of 50 states have nuclear-friendly "enabling" legislation that might convince corporate boards to commit capital to a long-term project. The federal Nuclear Regulatory Commission, despite adopting a streamlined licensing process in 2005, hasn't issued key rules. Worse, nothing has been approved as a process for nuclear waste disposal. No utility is going to make large capital bets given this kind of government policy uncertainty.
We would conclude, as the Wall Street Journal has, that the government's actions show continued "hostility" to oil drilling and nuclear power. So, does that mean that we're comfortable with an oil price "range" of $50 to $150 per barrel. We're back to $80 now. Is that comfortable? Is $120 still comfortable?
Just as China is now the largest car market in the world, how soon will they surpass the rest of the world in oil demand? If China and India were to increase their rate of oil consumption to just half of America's levels, those two countries would burn thru 100 million additional barrels per day OVER the current world oil use rate of 86 million barrels per day. Do we think that's not going to happen?
Getting back to Mr. Salazar (and those he represents), how does he explain that it is OK for a China/Cuba joint venture to drill 60 miles off the coast of Miami, Florida but he's not ready to give guidelines for his own country's oil companies to drill off our coasts? Does he think the China/Cuba technology is better than what we have in the U.S.?
Peak oil theorists are not all crackpots. Matthew Simmons and Boone Pickens are well respected for their knowledge and accomplishments in the oil business. If Simmons is right about oil depletion rates, and the aging infrastructure (both people and "rust"), oil could go to $500 in a heartbeat.
Deep water drilling takes longer.
Wednesday, March 10, 2010
The Economix of Health Care
http://www.nytimes.com/2010/03/10/business/economy/10leonhardt.html?emc=eta1
http://economix.blogs.nytimes.com/2010/03/09/health-care-reform-and-the-doc-fix/?emc=eta1
http://www.washingtonpost.com/wp-dyn/content/article/2010/02/25/AR2010022504074.html?referrer=emailarticle
It was a privilege for me yesterday to be part of a "coffee" with the honors undergraduate students here at the university. "Health Care" came up as an issue they wanted to talk about, so we did.
When they asked me for my position on the subject, we basically shared that, overall, we don't need 1178 pages to fix two major problems: nobody should be denied health care insurance (no matter their prior medical history) and nobody should be terminated from medical coverage because the "insurer" has paid too much (parenthetically, what is "too much"?) in claims. This could, actually, be accomplished in one page.
Instead, we have a massive bill(s) that is so "inclusive" that there is something in it for almost everybody to be against.
We have attached David Leonhardt's article and his "Economix" post both authored on 3/9 so the information is current. In addition, we have attached the Washington Post "transcript" that Leonhardt refers to.
Leonhardt's perspective is that President Obama's overall plan is a "... terribly mixed back." It would not come close to eliminating Medicare's long term budget deficit. It would reduce the deficit only if a future Congress did not tinker with the various taxes and spending cuts scheduled to be phased in over the next decade, and what are the odds of that?
On the other hand, the plan would make progress in all sorts of areas. Insurance exchanges would create more competition. A Medicare oversight board would gain authority over reimbursement rates. Hospitals that committed certain medical errors would face financial penalties.
Leonhardt: "So which matters more: what the plan does, or what it fails to do? It's a tough call, and the answer depends on what you see as the alternative to the current plan."
Leonhardt mentions Paul Ryan, a top Republican on the House Budget Committee, as someone who has produced a reasonable alternative to the Democrats' plan (see attached). So, there are "reasonable" Republicans.
What's the bottom line to this bottomless pit? Right now, it is a bill that would spend $950 billion over 10 years to help the uninsured and small business employees buy insurance. Initially, the bill relies on accounting gimmicks to cover these costs. Most important, the insurance expansion does not start until 2014, holding down the 10 year cost. The taxes and Medicare/Medicade cuts in the bill are then big enough to pay for the bill. In the second decade the Congressional Budget Office (CBO) projects the bill would cut about $1 trillion from the deficit.
This is where we are.
Now, there is a separate issue related to health care that has to do with what is known in D.C. as the "Doc Fix". Leonhardt addresses this in his "Economix" blog (see attached) where he explains that in the 1990s the Clinton Administration (along with a Republican Congress - please note) passed a law cutting Medicare Payments to doctors. As one might imagine, this did not sit well. In the years since that law was passed, both Republican and Democratic Congresses have overridden that legislation. Officially, the law says these cuts will take place. The current health care bill(s) don't fix this problem.
"Something" should have been done by now. Paul Krugman, who understands the politics of the situation, and has some influence on those who are charged with passing health care legislation, actually thought we would have a new health care law before 2009 ended. We don't.
What happens next is anybody's guess.
http://economix.blogs.nytimes.com/2010/03/09/health-care-reform-and-the-doc-fix/?emc=eta1
http://www.washingtonpost.com/wp-dyn/content/article/2010/02/25/AR2010022504074.html?referrer=emailarticle
It was a privilege for me yesterday to be part of a "coffee" with the honors undergraduate students here at the university. "Health Care" came up as an issue they wanted to talk about, so we did.
When they asked me for my position on the subject, we basically shared that, overall, we don't need 1178 pages to fix two major problems: nobody should be denied health care insurance (no matter their prior medical history) and nobody should be terminated from medical coverage because the "insurer" has paid too much (parenthetically, what is "too much"?) in claims. This could, actually, be accomplished in one page.
Instead, we have a massive bill(s) that is so "inclusive" that there is something in it for almost everybody to be against.
We have attached David Leonhardt's article and his "Economix" post both authored on 3/9 so the information is current. In addition, we have attached the Washington Post "transcript" that Leonhardt refers to.
Leonhardt's perspective is that President Obama's overall plan is a "... terribly mixed back." It would not come close to eliminating Medicare's long term budget deficit. It would reduce the deficit only if a future Congress did not tinker with the various taxes and spending cuts scheduled to be phased in over the next decade, and what are the odds of that?
On the other hand, the plan would make progress in all sorts of areas. Insurance exchanges would create more competition. A Medicare oversight board would gain authority over reimbursement rates. Hospitals that committed certain medical errors would face financial penalties.
Leonhardt: "So which matters more: what the plan does, or what it fails to do? It's a tough call, and the answer depends on what you see as the alternative to the current plan."
Leonhardt mentions Paul Ryan, a top Republican on the House Budget Committee, as someone who has produced a reasonable alternative to the Democrats' plan (see attached). So, there are "reasonable" Republicans.
What's the bottom line to this bottomless pit? Right now, it is a bill that would spend $950 billion over 10 years to help the uninsured and small business employees buy insurance. Initially, the bill relies on accounting gimmicks to cover these costs. Most important, the insurance expansion does not start until 2014, holding down the 10 year cost. The taxes and Medicare/Medicade cuts in the bill are then big enough to pay for the bill. In the second decade the Congressional Budget Office (CBO) projects the bill would cut about $1 trillion from the deficit.
This is where we are.
Now, there is a separate issue related to health care that has to do with what is known in D.C. as the "Doc Fix". Leonhardt addresses this in his "Economix" blog (see attached) where he explains that in the 1990s the Clinton Administration (along with a Republican Congress - please note) passed a law cutting Medicare Payments to doctors. As one might imagine, this did not sit well. In the years since that law was passed, both Republican and Democratic Congresses have overridden that legislation. Officially, the law says these cuts will take place. The current health care bill(s) don't fix this problem.
"Something" should have been done by now. Paul Krugman, who understands the politics of the situation, and has some influence on those who are charged with passing health care legislation, actually thought we would have a new health care law before 2009 ended. We don't.
What happens next is anybody's guess.
Saturday, March 6, 2010
Senator Bunning's Universe
http://www.nytimes.com/2010/03/05/opinion/05krugman.html?emc=eta1
If you are a baseball fan and a Krugman fan, then you have a rare opportunity with this post to combine your level of interest.
Jim Bunning was a great pitcher for the Detroit Tigers and the Philadelphia Phillies during his Hall of Fame career. He is one of only 5 pitchers to throw a "no hitter" in both the National and American Leagues. After he retired from baseball, he went into politics.
Bunning has been in the U.S. Senate for a long time representing Kentucky.
According to Krugman, Senator Bunning "... exploited Senate rules to block a one-month extension of unemployment benefits." This caused an interruption of payments to about 100,000 workers (he eventually gave in).
Per Krugman: "But while the blockade is over, the lessons remain. Some of those lessons involve the spectacular dysfunctionality of the Senate. What I want to focus on right now, however, is the incredible gap that has opened up between the parties. Today, Democrats and Republicans live in different universes, both intellectually and morally."
Let's go to Economics 101 (Krugman literally wrote the book): when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. "That's because the economy's problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office (CBO) says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay." Our thought here is that we'll go with Krugman and the CBO. The CBO is considered by members of both parties to be completely objective.
We have no interest here in dealing with politics but we need to explain or understand why some things happen and, in this case, the only explanation available from the Republicans is that unemployment relief "... doesn't create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work."
Have the Republicans seen the real unemployment numbers? Our thought here is that 17% real unemployment is a big number.
As Krugman points out, the difference between the Republican and the Democratic "universes" is not just intellectual, it's also moral.
We were big fans of Jim Bunning as a baseball player. As a lawmaker, not so much.
With this as predicate, we wonder at the future of health care legislation.
If you are a baseball fan and a Krugman fan, then you have a rare opportunity with this post to combine your level of interest.
Jim Bunning was a great pitcher for the Detroit Tigers and the Philadelphia Phillies during his Hall of Fame career. He is one of only 5 pitchers to throw a "no hitter" in both the National and American Leagues. After he retired from baseball, he went into politics.
Bunning has been in the U.S. Senate for a long time representing Kentucky.
According to Krugman, Senator Bunning "... exploited Senate rules to block a one-month extension of unemployment benefits." This caused an interruption of payments to about 100,000 workers (he eventually gave in).
Per Krugman: "But while the blockade is over, the lessons remain. Some of those lessons involve the spectacular dysfunctionality of the Senate. What I want to focus on right now, however, is the incredible gap that has opened up between the parties. Today, Democrats and Republicans live in different universes, both intellectually and morally."
Let's go to Economics 101 (Krugman literally wrote the book): when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. "That's because the economy's problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office (CBO) says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay." Our thought here is that we'll go with Krugman and the CBO. The CBO is considered by members of both parties to be completely objective.
We have no interest here in dealing with politics but we need to explain or understand why some things happen and, in this case, the only explanation available from the Republicans is that unemployment relief "... doesn't create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work."
Have the Republicans seen the real unemployment numbers? Our thought here is that 17% real unemployment is a big number.
As Krugman points out, the difference between the Republican and the Democratic "universes" is not just intellectual, it's also moral.
We were big fans of Jim Bunning as a baseball player. As a lawmaker, not so much.
With this as predicate, we wonder at the future of health care legislation.
Friday, March 5, 2010
China's Advantages
http://www.washingtonpost.com/wp-dyn/content/article/2010/02/26/AR2010022602601.html?referrer=emailarticle
There is all this talk about the G-20, the G-8 (or G-7) but really, aside from the textbooks, the world has a "G-2": China and the U.S. With the G-2, it starts with money and goes on to China's export products giving the U.S. a "Wal-Mart Effect" lifestyle: "For every dollar taken from U.S. drivers' pockets at the gas pump in the form of higher prices ... low cost exports from China and elsewhere have put $1.50 back in terms of cheaper retail goods." (WSJ - 9/29/07)
The Washington Post has given us one of the latest perspectives on how China seems to be doing so many things better than the U.S. while they complain about how much of our debt they hold. The Post quotes Thomas L. Friedman as seeing some virtue in the Chinese Communist Party's monopoly on political power: "One party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages."
And, of course, China is putting out more engineers than we are, they're going green faster than we are, at least they can build a high-speed train, etc. The NY Times seems to lead the charge in stories of how the U.S. is lagging China in growth. Of course, the Post points out that China's per capita income of $6,546 puts it somewhere above the Ukraine and below Namibia (according to the IMF).
About those "engineers". In 2006, the NY Times reported that China graduates 600,000 per year compared with 70,000 in the United States. The Times report was quoted on the House floor. The only problem was that China's statisticians count car mechanics and refrigerator repairmen as "engineers."
Projections of China's economic growth seem to shortchange the country's looming demographic crisis: it is going to be the first nation in the world to grow old before it gets rich. John Pomfret, one of the co-authors of the article, has been quoted as saying that before and we agree with the statistics (a sad result of the one child policy). By the middle of this century, the percentage of China's population above age 60 will be higher than the United States, and more than 100 million Chinese will be older than 80.
The article concludes that China is no enemy, but inflating the challenge from China could be just as dangerous as underestimating it.
We agree.
There is all this talk about the G-20, the G-8 (or G-7) but really, aside from the textbooks, the world has a "G-2": China and the U.S. With the G-2, it starts with money and goes on to China's export products giving the U.S. a "Wal-Mart Effect" lifestyle: "For every dollar taken from U.S. drivers' pockets at the gas pump in the form of higher prices ... low cost exports from China and elsewhere have put $1.50 back in terms of cheaper retail goods." (WSJ - 9/29/07)
The Washington Post has given us one of the latest perspectives on how China seems to be doing so many things better than the U.S. while they complain about how much of our debt they hold. The Post quotes Thomas L. Friedman as seeing some virtue in the Chinese Communist Party's monopoly on political power: "One party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages."
And, of course, China is putting out more engineers than we are, they're going green faster than we are, at least they can build a high-speed train, etc. The NY Times seems to lead the charge in stories of how the U.S. is lagging China in growth. Of course, the Post points out that China's per capita income of $6,546 puts it somewhere above the Ukraine and below Namibia (according to the IMF).
About those "engineers". In 2006, the NY Times reported that China graduates 600,000 per year compared with 70,000 in the United States. The Times report was quoted on the House floor. The only problem was that China's statisticians count car mechanics and refrigerator repairmen as "engineers."
Projections of China's economic growth seem to shortchange the country's looming demographic crisis: it is going to be the first nation in the world to grow old before it gets rich. John Pomfret, one of the co-authors of the article, has been quoted as saying that before and we agree with the statistics (a sad result of the one child policy). By the middle of this century, the percentage of China's population above age 60 will be higher than the United States, and more than 100 million Chinese will be older than 80.
The article concludes that China is no enemy, but inflating the challenge from China could be just as dangerous as underestimating it.
We agree.
Tuesday, March 2, 2010
Disasters That Didn't Happen
http://www.foreignpolicy.com/articles/2010/01/04/it_didnt_happen
Moises Naim is the Editor in Chief of Foreign Policy and a well respected thinker on international issues of note. His perspective is that the worldwide financial crisis didn't cause the dollar to crash. Tariffs didn't come roaring back. The world's economies didn't grind to a halt.
Obviously, some of that is because of actions like the Federal Reserve (Ben Bernanke) sending $350 billion to the European Central Bank before the U.S. even had a stimulus bill pass at the very outset of the crisis. So, actions were taken to avert a worse outcome.
Naim points out that the International Monetary Fund estimated that the global economy's new and permanent trajectory is a 10% lower rate of GDP growth than before the crisis. But, that's not the same thing as a worldwide "depression". Naim lists the six most common predictions about the crisis that have been proven wrong:
The international financial system will collapse. It didn't.
The economic crisis will last for at least two years and maybe even a decade. It didn't. By the fall of 2009, the economies of the United States, Europe, and Japan had begun to grow again, and many of the largest developing economies, such as China, India, and Brazil were growing at an even faster pace.
The U.S. dollar will crash. It didn't. It's value actually increased 20% between July 2008 and March 2009.
Protectionism will surge. It didn't. Trade flows did drop dramatically in late 2008 and early 2009, but they started to grow again in the second half of 2009 as economies recovered.
The crisis in rich countries will drag down developing ones. It didn't. As the economies of America and Europe stalled during the first quarter of 2009, China's economy accelerated. China replaced the U.S. as Brazil's top export market. Thanks to Milton Friedman, countries like Chile were now being run conservatively in anticipation of potential worldwide economic problems.
Violent political turmoil will become more common. It didn't. We haven't seen it.
Overall, Naim has a point.
Moises Naim is the Editor in Chief of Foreign Policy and a well respected thinker on international issues of note. His perspective is that the worldwide financial crisis didn't cause the dollar to crash. Tariffs didn't come roaring back. The world's economies didn't grind to a halt.
Obviously, some of that is because of actions like the Federal Reserve (Ben Bernanke) sending $350 billion to the European Central Bank before the U.S. even had a stimulus bill pass at the very outset of the crisis. So, actions were taken to avert a worse outcome.
Naim points out that the International Monetary Fund estimated that the global economy's new and permanent trajectory is a 10% lower rate of GDP growth than before the crisis. But, that's not the same thing as a worldwide "depression". Naim lists the six most common predictions about the crisis that have been proven wrong:
The international financial system will collapse. It didn't.
The economic crisis will last for at least two years and maybe even a decade. It didn't. By the fall of 2009, the economies of the United States, Europe, and Japan had begun to grow again, and many of the largest developing economies, such as China, India, and Brazil were growing at an even faster pace.
The U.S. dollar will crash. It didn't. It's value actually increased 20% between July 2008 and March 2009.
Protectionism will surge. It didn't. Trade flows did drop dramatically in late 2008 and early 2009, but they started to grow again in the second half of 2009 as economies recovered.
The crisis in rich countries will drag down developing ones. It didn't. As the economies of America and Europe stalled during the first quarter of 2009, China's economy accelerated. China replaced the U.S. as Brazil's top export market. Thanks to Milton Friedman, countries like Chile were now being run conservatively in anticipation of potential worldwide economic problems.
Violent political turmoil will become more common. It didn't. We haven't seen it.
Overall, Naim has a point.
Polar Bears 3
http://www.msnbc.msn.com/id/35650398/ns/technology_and_science-science/from/ET
We would like to thank our students and former students for their continuing interest in what we post. Today's thought is based on an article forwarded to us from a reader.
Scientists have concluded that the polar bear evolved roughly 150,000 years ago based on new DNA studies. These studies appear to corroborate prior research.
Given this, there appears also to be a consensus amongst those same scientists that, at least once, 44,000 years ago, polar bears had to "adapt" to a global warming period. This involved herding to those places that continued to provide the environment they were used to. Some say that may be going on today - we are empathetic to those who try to "count" polar bears in order to see "where" they are and "how many" there are.
But, unless we are mistaken, there were no SUVs on the planet 44,000 years ago so we see an argument here for cyclical periods in the Earth's history where we had "cooling" and "warming" which were, in some cases, more severe than many doomsayers predict for now or the near future (this would be the same thought as was expressed quite eloquently by an MIT climatologist we quoted in our year end 2009 post).
We were pleased to see that Al Gore did chime in over the weekend about the heavy snows in D.C., Dallas and elsewhere and we plan on responding.
For now, we remain in the camp of people like George Will who have problems with the "global warmists" who claim that "anything" (like heavy snows) is a sign of global warming. As Will has said many times, we are in a 10 year period (or, is it 15?) where world temperatures haven't gotten any warmer. Would this too be a sign of global warming?
Meanwhile, our best to the polar bears who appear to be surviving modern life and are being carefully watched.
We would like to thank our students and former students for their continuing interest in what we post. Today's thought is based on an article forwarded to us from a reader.
Scientists have concluded that the polar bear evolved roughly 150,000 years ago based on new DNA studies. These studies appear to corroborate prior research.
Given this, there appears also to be a consensus amongst those same scientists that, at least once, 44,000 years ago, polar bears had to "adapt" to a global warming period. This involved herding to those places that continued to provide the environment they were used to. Some say that may be going on today - we are empathetic to those who try to "count" polar bears in order to see "where" they are and "how many" there are.
But, unless we are mistaken, there were no SUVs on the planet 44,000 years ago so we see an argument here for cyclical periods in the Earth's history where we had "cooling" and "warming" which were, in some cases, more severe than many doomsayers predict for now or the near future (this would be the same thought as was expressed quite eloquently by an MIT climatologist we quoted in our year end 2009 post).
We were pleased to see that Al Gore did chime in over the weekend about the heavy snows in D.C., Dallas and elsewhere and we plan on responding.
For now, we remain in the camp of people like George Will who have problems with the "global warmists" who claim that "anything" (like heavy snows) is a sign of global warming. As Will has said many times, we are in a 10 year period (or, is it 15?) where world temperatures haven't gotten any warmer. Would this too be a sign of global warming?
Meanwhile, our best to the polar bears who appear to be surviving modern life and are being carefully watched.
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