http://www.nytimes.com/2009/09/11/opinion/11fri1.html?emc=eta1
http://www.nytimes.com/2009/09/11/business/11bailout.html?emc=eta1
http://online.wsj.com/article_email/SB125259099642699581-lMyQjAxMDI5NTEyMTUxOTEwWj.html
According to the Census Bureau's annual snapshot of living standards, median household income has continued to get worse: adjusted for inflation, it fell 3.6% last year to $50,303 - the steepest drop in 40 years. The poverty rate has continued to climb (now 13.2%) and about 700,000 more people didn't have health insurance in 2008 versus the year before (WSJ 9/11/09, attached: click on the "interactive graphic" within the article to look at the 20 year trends). In Texas, the number of uninsured has crept up to more than 25% of the state population.
As today's NY Times editorial states, the overall number of uninsured rose from 45.7 million in 2007 to 46.3 million in 2008 (NY Times 9/11/09, attached). See our 8/24 post on how those health insurance "numbers" break down.
According to Bruce Meyer, an economist at the University of Chicago, "It's striking how fast and how far the incomes of the typical family have fallen...and things are almost certainly going to get worse." The Census Bureau's report captured only how Americans fared in the first year of the recession, which began in December, 2007 ( economists denied, at the time, that a recession had begun because the U.S. GDP growth rate had NOT gone down for two consecutive quarters - two quarters later, it had gone down so a recession was declared: we call this "Retroactive Economics". It's like "Behavioral Economics", only backwards.). Figures for 2009 will be worse.
Oh, and was that Timothy Geithner testifying before congress (NY Times 9/11/09, attached) this week that the administration is comfortable with backing off some of the stimulus efforts because the economy is "coming back?" So, the lessons of 1937 (when Franklin Roosevelt did that and things got worse) were lost on the understaffed Secretary of the Treasury?
Perhaps the 2.6 million people who were added to the official "poverty level" population last year (earnings under $22,000 for a family of 4) would be interested in discussing this issue with the Obama administration. According to the census, about 54 million people were living under 125% of the poverty line.
So, that pernicious "lagging indicator" (the jobless rate), which will be up in 2010, won't have as much "fiscal stimulus" chasing it if Secretary Geithner takes the actions he told congress he would. If, for the sake of argument, unemployment averages 10% for 2010 (and it will), that would be 2% above the unemployment rate the Obama administration said, when it went to congress for "bailout money", would be the maximum: in other words, the "stimulus" money would keep unemployment from rising above 8% according to Lawrence (don't call me "Larry") Summers and the Obama economic team. So, unemployment is now, or will shortly be, 10% (or more), which is 2% above what the original stimulus proposal was supposed to cap it at. And, we're going to cut back on stimulus spending because we don't need it as much now. I'm guessing this means that there is an economic model someplace that says the way to achieve the number you missed because you didn't spend enough is to spend LESS!
Since I'm not an "economist", I don't have to get all confused with "fuzzy math" and economic models that I'm sure explain the difference between 8% and 10%. Perhaps it has something to do with retroactive observation: sort of like not declaring a recession until we observe two consecutive quarters of negative GDP growth. I'm sure that the economists could explain that old saying about closing the barn door after the horse was already out. It's probably some sort of retroactive deal again.
Friday, September 11, 2009
Thursday, September 10, 2009
The Emanuel Principle
http://www.nytimes.com/2009/09/06/business/economy/06view.html?emc=eta1
Alan S. Blinder is a professor of economics and public affairs at Princeton and a former vice chairman of the Federal Reserve. He is also well known for "Blinder's Shift" which involved a well known change in his position on free trade: while he still supports the theory of "comparative advantage" (simply put - trade with large low-wage countries like India and China can make the U.S. richer and more productive while it improves the standard of living of those low wage countries - and all will be richer; eventually), he has discovered that the job losses surrounding "globalization" for the U.S. have the potential to be much larger than he previously thought and he feels strongly that something needs to be done about that. Given the current state of the U.S. economic recovery (weak), and the status of the unemployment rate (high), Blinder's position is understandable and even, perhaps, more urgent.
In any case, Blinder's 9/6 NY Times article on "The Wait for Financial Reform" (attached) refers to President Obama's chief of staff (Rahm Emanuel) enunciating the "Emanuel Principle": you don't ever let a crisis go to waste. So, Emanuel's point was (and is) let's get everything done that we can. And, as we have pointed out here, when you put all your best people on too many things in a crisis situation, what you get is nothing.
So, it's been about a year since the financial crisis hit last September and Blinder characterizes the political indifference toward financial reform as "...somewhere between maddening and tragic." Why?
Blinder sees 5 reasons:
(1) It's yesterday's problem (how soon we forget!)
(2) The overcrowded legislative agenda (budget, health care reform, cap and trade, etc.)
(3) Heavy lobbying on all of the issues major and minor
(4) Bureaucratic infighting (government agencies fighting to keep their "turf", FDIC, etc.)
(5) A lack of focus (it's hard to keep the public engaged in something as complex and boring as financial regulation)
What's needed is a "systemic risk regulator" and the Federal Reserve is the right place for that job. We also need to do something about derivatives markets. Blinder is right about both issues but he's looking for evidence that anything is being done about it. He sees none. I see none. And, we have the Emanuel Principle...
Alan S. Blinder is a professor of economics and public affairs at Princeton and a former vice chairman of the Federal Reserve. He is also well known for "Blinder's Shift" which involved a well known change in his position on free trade: while he still supports the theory of "comparative advantage" (simply put - trade with large low-wage countries like India and China can make the U.S. richer and more productive while it improves the standard of living of those low wage countries - and all will be richer; eventually), he has discovered that the job losses surrounding "globalization" for the U.S. have the potential to be much larger than he previously thought and he feels strongly that something needs to be done about that. Given the current state of the U.S. economic recovery (weak), and the status of the unemployment rate (high), Blinder's position is understandable and even, perhaps, more urgent.
In any case, Blinder's 9/6 NY Times article on "The Wait for Financial Reform" (attached) refers to President Obama's chief of staff (Rahm Emanuel) enunciating the "Emanuel Principle": you don't ever let a crisis go to waste. So, Emanuel's point was (and is) let's get everything done that we can. And, as we have pointed out here, when you put all your best people on too many things in a crisis situation, what you get is nothing.
So, it's been about a year since the financial crisis hit last September and Blinder characterizes the political indifference toward financial reform as "...somewhere between maddening and tragic." Why?
Blinder sees 5 reasons:
(1) It's yesterday's problem (how soon we forget!)
(2) The overcrowded legislative agenda (budget, health care reform, cap and trade, etc.)
(3) Heavy lobbying on all of the issues major and minor
(4) Bureaucratic infighting (government agencies fighting to keep their "turf", FDIC, etc.)
(5) A lack of focus (it's hard to keep the public engaged in something as complex and boring as financial regulation)
What's needed is a "systemic risk regulator" and the Federal Reserve is the right place for that job. We also need to do something about derivatives markets. Blinder is right about both issues but he's looking for evidence that anything is being done about it. He sees none. I see none. And, we have the Emanuel Principle...
Saturday, September 5, 2009
Saltwater Economists
http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?emc=eta1
There is probably a reason why Fox News data shows that Paul Krugman's blog is the most widely read in the world (and yes, Thomas L. Friedman - he of "The World Is Flat" - is number 2). Aside from winning the most recent Economics Nobel, Krugman speaks and writes in terms we can all understand. He will also take on (in any medium - TV, articles, public debates at universities, etc.) any of the pompous, self-important and narrow minded members of his profession that prefer to live in "theory" as opposed to the real world.
Krugman has written an article this week that is scheduled to be published in the Sunday NY Times Magazine this weekend on "How Did Economists Get It So Wrong?" (copy attached). In it, he basically points out that "The Great Recession" was the result not only of lax regulation in Washington and reckless risk-taking on Wall Street but also of "faulty theorizing" in academia. The singular achievement of his article is that he has summarized what happened much more cogently than various books that have already been written about it. It is so good that it will probably be remembered as the greatest article he ever wrote.
Aside from the bottom line of what needs to be done, which we'll get to in a moment, Krugman gives us an insight into the "Saltwater Economists" (mainly in coastal U.S. universities), who have a more or less Keynesian vision of what recessions are all about; and "Freshwater Economists" (mainly at inland schools) who consider that vision nonsense. So, freshwater economists are "purists" who believe that all worthwhile economic analysis starts from the premise that people are "rational" and markets work. Saltwater economists were and are pragmatists. They were willing to deviate from the assumption of perfect markets, adding enough imperfections to accomodate a more or less Keynesian view of recessions: active policy to fight recessions remains desirable. While Krugman doesn't put it this way, it would appear that the saltwater economists had it right because there is no longer any debate about how fiscal stimulus has helped the current economic situation.
What fascinates Krugman is the stance that Alan Greenspan took, based on a general belief that "bubbles just don't happen" (or my favorite: "financial markets are self-regulating"), which was based on no evidence: "...it was an a priori assertion that there simply can't be a bubble in housing." In short, the belief in efficient financial markets "...blinded many if not most economists to the emergence of the biggest financial bubble in history."
To Krugman, economics, as a field, got into trouble because economists were "seduced" by the vision of a perfect, frictionless market system. So, now, "flaws-and-frictions" economics will move from the periphery of economic analysis to the center. And, the best example of this form of economic thought is: the school of thought known as "Behavioral Finance" where investors bear little resemblance to the cool calculators of efficient-market theory - here investors are too subject to herd behavior, to bouts of irrational exuberance and unwarranted panic. Behavioral finance, drawing on the broader movement known as behavioral economics, tries to relate the apparent irrationality of investors to known biases in human cognition, like the tendency to care more about small losses than small gains or the tendency to extrapolate too readliy from small samples.
Given all of this, we have Krugman quoting one of his old favorite lines: "the market can stay irrational longer than you can stay solvent." So, as Krugman goes on, "...economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly." Unlike his profession, Krugman's article approaches perfection.
There is probably a reason why Fox News data shows that Paul Krugman's blog is the most widely read in the world (and yes, Thomas L. Friedman - he of "The World Is Flat" - is number 2). Aside from winning the most recent Economics Nobel, Krugman speaks and writes in terms we can all understand. He will also take on (in any medium - TV, articles, public debates at universities, etc.) any of the pompous, self-important and narrow minded members of his profession that prefer to live in "theory" as opposed to the real world.
Krugman has written an article this week that is scheduled to be published in the Sunday NY Times Magazine this weekend on "How Did Economists Get It So Wrong?" (copy attached). In it, he basically points out that "The Great Recession" was the result not only of lax regulation in Washington and reckless risk-taking on Wall Street but also of "faulty theorizing" in academia. The singular achievement of his article is that he has summarized what happened much more cogently than various books that have already been written about it. It is so good that it will probably be remembered as the greatest article he ever wrote.
Aside from the bottom line of what needs to be done, which we'll get to in a moment, Krugman gives us an insight into the "Saltwater Economists" (mainly in coastal U.S. universities), who have a more or less Keynesian vision of what recessions are all about; and "Freshwater Economists" (mainly at inland schools) who consider that vision nonsense. So, freshwater economists are "purists" who believe that all worthwhile economic analysis starts from the premise that people are "rational" and markets work. Saltwater economists were and are pragmatists. They were willing to deviate from the assumption of perfect markets, adding enough imperfections to accomodate a more or less Keynesian view of recessions: active policy to fight recessions remains desirable. While Krugman doesn't put it this way, it would appear that the saltwater economists had it right because there is no longer any debate about how fiscal stimulus has helped the current economic situation.
What fascinates Krugman is the stance that Alan Greenspan took, based on a general belief that "bubbles just don't happen" (or my favorite: "financial markets are self-regulating"), which was based on no evidence: "...it was an a priori assertion that there simply can't be a bubble in housing." In short, the belief in efficient financial markets "...blinded many if not most economists to the emergence of the biggest financial bubble in history."
To Krugman, economics, as a field, got into trouble because economists were "seduced" by the vision of a perfect, frictionless market system. So, now, "flaws-and-frictions" economics will move from the periphery of economic analysis to the center. And, the best example of this form of economic thought is: the school of thought known as "Behavioral Finance" where investors bear little resemblance to the cool calculators of efficient-market theory - here investors are too subject to herd behavior, to bouts of irrational exuberance and unwarranted panic. Behavioral finance, drawing on the broader movement known as behavioral economics, tries to relate the apparent irrationality of investors to known biases in human cognition, like the tendency to care more about small losses than small gains or the tendency to extrapolate too readliy from small samples.
Given all of this, we have Krugman quoting one of his old favorite lines: "the market can stay irrational longer than you can stay solvent." So, as Krugman goes on, "...economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly." Unlike his profession, Krugman's article approaches perfection.
Tuesday, September 1, 2009
Gen-Y Johnny Can't Read Nonverbal Cues
http://fish.blogs.nytimes.com/2009/08/24/what-should-colleges-teach/?emc=eta1
http://online.wsj.com/article_email/SB10001424052970203863204574348493483201758-lMyQjAxMDA5MDIwODEyNDgyWj.html
I want to do a "shout out", as my son's generation would say, for Stanley Fish who has a blog in the NY Times called "Think Again". He is also most accomplished academically at the highest level at some of the best universities. Stanley's 8/24 blog (attached) starts out, "A few years ago, when I was grading papers for a graduate literature course, I became alarmed at the inability of my students to write a clean English sentence. They could manage about six words and then, almost invariably, the syntax (and everything else) fell apart. I became even more alarmed when I remembered that these same students were instructors in the college's composition program."
It has been my privilege to share my thoughts and my experience with some of the best and brightest of this current generation of college students (graduate and undergraduate) and I want to support Stanley's position that we don't emphasize the ability to write (effectively) enough. Stanley has subsequently been attacked for his position (perhaps by people who think he is being "elitist") and that's too bad because he's right. The best students we have ever had can write but not necessarily cogently. So, even there, we can help (and we have a method for doing that).
My thought on this is that, especially for the best schools, we think that our students are admitted with an ability to do the "basics". While I'm no expert, I think our colleges get students who are, in many cases, quantitatively exceptional and exceptional at "test taking" (SATs, etc.). Writing cogently is not emphasized and that's a shame because that skill is what gets you moving up the ladder no matter what you end up doing - it also forces you to prioritize how you talk about what you are doing because it engages a mental discipline that is not exclusive to "how" you write.
Speaking of "Gen-Y Johnny", as the article we've attached indicates, on September of 2008, Nielsen Mobile announced that teenagers with cellphones each sent and received, on average, 1742 text messages a month. A few months later, that tally was raised to 2,272. They read comments on Facebook, but they don't "read" each others' posture, hand gestures, eye movements, shifts in personal space and other nonverbal - and expressive - behaviors. Basically, this emphasis on social networking puts younger people at a face-to-face disadvantage, if not with themselves, at least with the generations ahead of them.
In the Silicon Valley, some companies have installed the "topless meeting" - in which not only laptops but iPhones and other tools are banned - to combat a new problem: "CONTINUOUS PARTIAL ATTENTION." As these companies have said, it's too easy to check email, stock quotes and Facebook. While a quick log-on may seem, to the user, a harmless break, others in the room receive it as a silent dismissal. It announces: "I'm not interested."
Older employees might well accept such a ban, but younger ones might not understand it. Reading a text message in the middle of a conversation isn't a lapse to them - it's what you do. It has, they assume, no nonverbal meaning to anyone else. It does, of course, but how would they know it?
Lots of folks grumble about the diffidence, self-absorption and general uncommunicativeness of Generation Y. Perhaps, the next time we encounter someone who would rather "text" then talk when talking is the indicated form of communication, we could use that as a "teachable moment."
Last, I believe I saw last week that Utah has now passed a law that texting while driving is the equivalent of driving drunk. If that is, indeed, the case, they are probably right.
http://online.wsj.com/article_email/SB10001424052970203863204574348493483201758-lMyQjAxMDA5MDIwODEyNDgyWj.html
I want to do a "shout out", as my son's generation would say, for Stanley Fish who has a blog in the NY Times called "Think Again". He is also most accomplished academically at the highest level at some of the best universities. Stanley's 8/24 blog (attached) starts out, "A few years ago, when I was grading papers for a graduate literature course, I became alarmed at the inability of my students to write a clean English sentence. They could manage about six words and then, almost invariably, the syntax (and everything else) fell apart. I became even more alarmed when I remembered that these same students were instructors in the college's composition program."
It has been my privilege to share my thoughts and my experience with some of the best and brightest of this current generation of college students (graduate and undergraduate) and I want to support Stanley's position that we don't emphasize the ability to write (effectively) enough. Stanley has subsequently been attacked for his position (perhaps by people who think he is being "elitist") and that's too bad because he's right. The best students we have ever had can write but not necessarily cogently. So, even there, we can help (and we have a method for doing that).
My thought on this is that, especially for the best schools, we think that our students are admitted with an ability to do the "basics". While I'm no expert, I think our colleges get students who are, in many cases, quantitatively exceptional and exceptional at "test taking" (SATs, etc.). Writing cogently is not emphasized and that's a shame because that skill is what gets you moving up the ladder no matter what you end up doing - it also forces you to prioritize how you talk about what you are doing because it engages a mental discipline that is not exclusive to "how" you write.
Speaking of "Gen-Y Johnny", as the article we've attached indicates, on September of 2008, Nielsen Mobile announced that teenagers with cellphones each sent and received, on average, 1742 text messages a month. A few months later, that tally was raised to 2,272. They read comments on Facebook, but they don't "read" each others' posture, hand gestures, eye movements, shifts in personal space and other nonverbal - and expressive - behaviors. Basically, this emphasis on social networking puts younger people at a face-to-face disadvantage, if not with themselves, at least with the generations ahead of them.
In the Silicon Valley, some companies have installed the "topless meeting" - in which not only laptops but iPhones and other tools are banned - to combat a new problem: "CONTINUOUS PARTIAL ATTENTION." As these companies have said, it's too easy to check email, stock quotes and Facebook. While a quick log-on may seem, to the user, a harmless break, others in the room receive it as a silent dismissal. It announces: "I'm not interested."
Older employees might well accept such a ban, but younger ones might not understand it. Reading a text message in the middle of a conversation isn't a lapse to them - it's what you do. It has, they assume, no nonverbal meaning to anyone else. It does, of course, but how would they know it?
Lots of folks grumble about the diffidence, self-absorption and general uncommunicativeness of Generation Y. Perhaps, the next time we encounter someone who would rather "text" then talk when talking is the indicated form of communication, we could use that as a "teachable moment."
Last, I believe I saw last week that Utah has now passed a law that texting while driving is the equivalent of driving drunk. If that is, indeed, the case, they are probably right.
Sunday, August 30, 2009
Facebook Nation
http://www.nytimes.com/2009/08/30/magazine/30FOB-medium-t.html?emc=eta1
It would appear that those of us who are looking to avoid the Internet at all costs will not have to buy a hunting lodge in the mountains of Colorado...yes, the NY Times has come thru for us (article attached) by giving us the facts on Facebook burnout. I know that business recruiters who like to scour Facebook sites to see if anything is their to embarrass their "candidates" will be sorely disappointed. Does this mean that people will actually be encouraged to resume face to face contact? OMG!
My recent experience with Facebook required me to get on it in order to retrieve wedding pictures that a close friend of the family had "posted". Having done that, that same person now chastises me for not putting more of my education on my "profile". What "profile"? I never put anything on my profile. Facebook now asks me if I'm looking for "friends". No. I'm happy.
Fortunately for me, it would appear that the Facebook phenomenon will be like "The Day the Earth Stood Still" where we can watch (along with Tom Cruise) as the monsters from outer space succumb to the tiny "microbes" that help sustain our earth's ecosystem. It would appear that 87 million people is about as many as Facebook could grow to and that very size is beginning to cause "slippage".
But, then, who am I to say? I can barely do email and the computers that I use don't like me no matter how hard I try to get along. And now I do a "blog"? I just hope that Facebook Nation doesn't try to "friend" my blog as it looks to acquire new things while it slowly oozes back to the giant computer swamp from which it came.
It would appear that those of us who are looking to avoid the Internet at all costs will not have to buy a hunting lodge in the mountains of Colorado...yes, the NY Times has come thru for us (article attached) by giving us the facts on Facebook burnout. I know that business recruiters who like to scour Facebook sites to see if anything is their to embarrass their "candidates" will be sorely disappointed. Does this mean that people will actually be encouraged to resume face to face contact? OMG!
My recent experience with Facebook required me to get on it in order to retrieve wedding pictures that a close friend of the family had "posted". Having done that, that same person now chastises me for not putting more of my education on my "profile". What "profile"? I never put anything on my profile. Facebook now asks me if I'm looking for "friends". No. I'm happy.
Fortunately for me, it would appear that the Facebook phenomenon will be like "The Day the Earth Stood Still" where we can watch (along with Tom Cruise) as the monsters from outer space succumb to the tiny "microbes" that help sustain our earth's ecosystem. It would appear that 87 million people is about as many as Facebook could grow to and that very size is beginning to cause "slippage".
But, then, who am I to say? I can barely do email and the computers that I use don't like me no matter how hard I try to get along. And now I do a "blog"? I just hope that Facebook Nation doesn't try to "friend" my blog as it looks to acquire new things while it slowly oozes back to the giant computer swamp from which it came.
Monday, August 24, 2009
The Uninsured
http://www.nytimes.com/2009/08/23/opinion/23sun1.html?emc=eta1
We have said in prior posts that, when you try to do too many things at once, you end up getting nothing done - we specifically applied that observation to the Obama administration's plans to solve the problems of the economy, health care, and climate (plus countless "sub goals" - is "carbon" climate? I get confused) simultaneously. Fortunately for me, I have Paul Krugman, Maureen Dowd and others to help me thru the vast and confusing mess of the administration's priorities.
As to health care, we have said before that delegating to congress the task of creating a comprehensive approach is ridiculous. Too many people with too many "agendas." Sadly, the people who are still suffering are the losers. And the "choosers" can be losers too - if you're 24 years old and have "chosen" not to buy medical insurance, you're in a tough situation when you find out next week that you have a form of cancer.
The theme of our 7/14 post ("45 Million") was: do something. Start with the basics like nobody can be dropped from health coverage because they cost too much and nobody can be denied coverage because of prior medical conditions. Simple concepts. Build from there. Our "Health Care Flowchart" post (8/17) gave us, thanks to Krugman referencing us to Nick Beaudrot's brilliant simplicity (Medicare: 78 million people, employer provided: 122 million people, etc., "people" who have coverage), a perspective on who has "coverage" and who needs it.
The generally accepted number for the "uninsured" is 45.7 million, a number that the NY Times Editorial Board pointed out yesterday (attached) is from 2007 census data. The insurance industry hacks away at that guesstimate by pointing out that many of those people are "temporary" losers of coverage because they are between jobs or the insurance cost too much. And, does anyone think that the unemployment rate is going to drop anytime soon - so some of those "temporaries" probably need to be called something else.
Now, the Department of Health and Human Services estimates that 28 million people were uninsured for all of 2005 and 2006 and that 18.5 million of them were uninsured for at least 4 straight years. Does that sound temporary?
Here are the "uninsured":
THE WORKING POOR - The Kaiser Family Foundation estimates that two-thirds of the uninsured - 30 million people - earn less than twice the poverty level, or about $44,000 for a family of four. 80% of these are full-time or part-time workers. They cannot afford coverage!
THE BETTER OFF - About 9 million uninsured people come from households earning $75,000 or more. While the mix of this group is complex, buying some form of medical insurance lessens the possibility that a serious accident or illness might turn them into charity cases. Compelled to buy (perhaps with a subsidy) somewhat along the lines of Social Security deductions sounds reasonable here because the "insured" will pay for them one way or the other unless they can be "compelled" (I dislike that word) to make a more rational decision.
YOUNG ADULTS - 13 million young adults between the ages of 19 and 29 lack coverage.
ALREADY ELIGIBLE - 11 million of the poorest people, mostly low income children and their parents, are thought to be eligible for public insurance programs but have failed to enroll.
THE UNDERINSURED - The Commonwealth Fund estimates that 25 million people who had health insurance in 2007 had inadequate policies with high deductibles and restrictions that stuck them with large amounts of uncovered expenses.
NON-CITIZENS - 9.7 million of the uninsured are not citizens. 6 million of those are estimated to be illegal immigrants. None of the pending bills cover them.
However one wishes to count the total of those who are uninsured (plus the "under-insured"), if something is not done, it will get worse. Quoting here, "That would be a personal tragedy for many and a moral disgrace for the nation ... Any nation as rich as ours ought to guarantee health coverage for all its residents."
My impression is that we are having "town hall meetings" where members of congress are being shouted down by "citizens" (there is a suspicion that some of those people are "planted") who feel their coverage is threatened. So, we've gone from delegating to congress to adding town hall meetings to the design process. Thinking this out, congress + town hall meetings = impossible health care reform. How inept, politically insensitive and irresponsible we are.
We have said in prior posts that, when you try to do too many things at once, you end up getting nothing done - we specifically applied that observation to the Obama administration's plans to solve the problems of the economy, health care, and climate (plus countless "sub goals" - is "carbon" climate? I get confused) simultaneously. Fortunately for me, I have Paul Krugman, Maureen Dowd and others to help me thru the vast and confusing mess of the administration's priorities.
As to health care, we have said before that delegating to congress the task of creating a comprehensive approach is ridiculous. Too many people with too many "agendas." Sadly, the people who are still suffering are the losers. And the "choosers" can be losers too - if you're 24 years old and have "chosen" not to buy medical insurance, you're in a tough situation when you find out next week that you have a form of cancer.
The theme of our 7/14 post ("45 Million") was: do something. Start with the basics like nobody can be dropped from health coverage because they cost too much and nobody can be denied coverage because of prior medical conditions. Simple concepts. Build from there. Our "Health Care Flowchart" post (8/17) gave us, thanks to Krugman referencing us to Nick Beaudrot's brilliant simplicity (Medicare: 78 million people, employer provided: 122 million people, etc., "people" who have coverage), a perspective on who has "coverage" and who needs it.
The generally accepted number for the "uninsured" is 45.7 million, a number that the NY Times Editorial Board pointed out yesterday (attached) is from 2007 census data. The insurance industry hacks away at that guesstimate by pointing out that many of those people are "temporary" losers of coverage because they are between jobs or the insurance cost too much. And, does anyone think that the unemployment rate is going to drop anytime soon - so some of those "temporaries" probably need to be called something else.
Now, the Department of Health and Human Services estimates that 28 million people were uninsured for all of 2005 and 2006 and that 18.5 million of them were uninsured for at least 4 straight years. Does that sound temporary?
Here are the "uninsured":
THE WORKING POOR - The Kaiser Family Foundation estimates that two-thirds of the uninsured - 30 million people - earn less than twice the poverty level, or about $44,000 for a family of four. 80% of these are full-time or part-time workers. They cannot afford coverage!
THE BETTER OFF - About 9 million uninsured people come from households earning $75,000 or more. While the mix of this group is complex, buying some form of medical insurance lessens the possibility that a serious accident or illness might turn them into charity cases. Compelled to buy (perhaps with a subsidy) somewhat along the lines of Social Security deductions sounds reasonable here because the "insured" will pay for them one way or the other unless they can be "compelled" (I dislike that word) to make a more rational decision.
YOUNG ADULTS - 13 million young adults between the ages of 19 and 29 lack coverage.
ALREADY ELIGIBLE - 11 million of the poorest people, mostly low income children and their parents, are thought to be eligible for public insurance programs but have failed to enroll.
THE UNDERINSURED - The Commonwealth Fund estimates that 25 million people who had health insurance in 2007 had inadequate policies with high deductibles and restrictions that stuck them with large amounts of uncovered expenses.
NON-CITIZENS - 9.7 million of the uninsured are not citizens. 6 million of those are estimated to be illegal immigrants. None of the pending bills cover them.
However one wishes to count the total of those who are uninsured (plus the "under-insured"), if something is not done, it will get worse. Quoting here, "That would be a personal tragedy for many and a moral disgrace for the nation ... Any nation as rich as ours ought to guarantee health coverage for all its residents."
My impression is that we are having "town hall meetings" where members of congress are being shouted down by "citizens" (there is a suspicion that some of those people are "planted") who feel their coverage is threatened. So, we've gone from delegating to congress to adding town hall meetings to the design process. Thinking this out, congress + town hall meetings = impossible health care reform. How inept, politically insensitive and irresponsible we are.
Tuesday, August 18, 2009
Measuring Profits in China
http://dealbook.blogs.nytimes.com/2009/08/17/another-view-shanghai-ed-profits/?emc=eta1
Generally Accepted Accounting Principles (GAAP!) are not generally accepted in China. This is partly because the Chinese have their own accounting rules and partly because "...rules are for breaking." This is a perspective that Andrew Ross Sorkin conveys (attached) after his discussions with Mark Dixon, an M&A advisor with "the1.com." Dixon was hired to decide how much a buyer should pay for a business in China. For Dixon, this meant first calculating an accurate profit for the target company, its so-called "normalized" profit.
That's where the problems started: as Sorkin points out, "One can hardly call something 'normal' when it doesn't normally happen." What Dixon went thru to get to normalized profit, or what he ended up calling "Profit X", involved a formula:
Profit X, or normalized after-tax profit=
The amount of after-tax profit reported to the government
+ Revenues received off the books to avoid paying revenue tax and to reduce corporation tax
+ Revenues from invoices pushed into the next period in order to delay paying revenue tax in the current period
- Revenues from invoices delayed from the prior period into the current period for the same reason
(Plus or minus 8 more categories to get to a real net!)
Dixon eventually got to a real net profit and created a net profit multiple for a potential purchase price and it's a story worth reading.
But, one wonders about potential acquisitions on a much larger scale like the Coca Cola offer for Huiyuan Juice which Chinese authorities ruled against in March of this year. Coke's offer of $2.4 billion would have put that acquisition as the largest ever by any company in the history of China. People who were in a position to know felt that Coke was offering way too much even though Huiyuan held a dominant market position in its space (40% of the pure juice sector).
One wonders how the Coke people figured out Huiyuan's real net profits.
On Coke's side of things, they announced after the transaction did not go thru, that they would spend roughly the amount that they proposed for Huiyuan on their "China" capital investments anyway. Many think that that announcement does not bode well for Huiyuan's market share.
One wonders about those China profits.
Generally Accepted Accounting Principles (GAAP!) are not generally accepted in China. This is partly because the Chinese have their own accounting rules and partly because "...rules are for breaking." This is a perspective that Andrew Ross Sorkin conveys (attached) after his discussions with Mark Dixon, an M&A advisor with "the1.com." Dixon was hired to decide how much a buyer should pay for a business in China. For Dixon, this meant first calculating an accurate profit for the target company, its so-called "normalized" profit.
That's where the problems started: as Sorkin points out, "One can hardly call something 'normal' when it doesn't normally happen." What Dixon went thru to get to normalized profit, or what he ended up calling "Profit X", involved a formula:
Profit X, or normalized after-tax profit=
The amount of after-tax profit reported to the government
+ Revenues received off the books to avoid paying revenue tax and to reduce corporation tax
+ Revenues from invoices pushed into the next period in order to delay paying revenue tax in the current period
- Revenues from invoices delayed from the prior period into the current period for the same reason
(Plus or minus 8 more categories to get to a real net!)
Dixon eventually got to a real net profit and created a net profit multiple for a potential purchase price and it's a story worth reading.
But, one wonders about potential acquisitions on a much larger scale like the Coca Cola offer for Huiyuan Juice which Chinese authorities ruled against in March of this year. Coke's offer of $2.4 billion would have put that acquisition as the largest ever by any company in the history of China. People who were in a position to know felt that Coke was offering way too much even though Huiyuan held a dominant market position in its space (40% of the pure juice sector).
One wonders how the Coke people figured out Huiyuan's real net profits.
On Coke's side of things, they announced after the transaction did not go thru, that they would spend roughly the amount that they proposed for Huiyuan on their "China" capital investments anyway. Many think that that announcement does not bode well for Huiyuan's market share.
One wonders about those China profits.
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