Obamacare appears to be heading to the Supreme Court for a showdown. Multiple federal judges in multiple districts have either ruled that parts of the legislation are unconstitutional or have ruled that they are constitutional. Many are calling for an expedited course--skipping the Appeals Court level--and going straight to the Supremes. Their arguments are persuasive.
The short version is the question: does the Congress have the right, under the commerce clause of the constitution, to force citizens to buy health insurance. This is called the individual mandate. The secondary question is: if the individual mandate is unconstitutional, is the whole bill unconstitutional?
I am no legal scholar and will make no predictions about how this will turn out...however, I recall the philosopher, social scientist, political scientist and trouble maker Hegal, who famously suggested that the argument that has the fewest internal contradictions should prevail. Following that logic, I would like to know that if the Supreme Court finds that Congress cannot compel citizens to buy health insurance, can hospitals and physicians and other providers begin to refuse to treat people who have no insurance and who refuse (or are unable) to pay? Decades ago, it became illegal for any health care facility to refuse treatment based on his or her ability to pay. Then the infamous HIPPA legislation made it illegal to even ASK patients in the emergency room if they had insurance before they underwent at least an initial medical evaluation. Health Care facilities have been giving out free care quietly and graciously for a long time. Now that Medicaid and Medicare and, increasingly, private insurance continue to reduce payments to providers, free care is becoming problematic.
So, if people refuse to buy insurance, would it not be consistent to say that providers should be able to refuse them free service? OK...I know what you are going to say. Car insurance covers people to drive and driving a car is a privilege not a right. No insurance, no license. Living is not a privilege, it is a right--one does not require a state license to keep breathing. There is also that pesky little document that says something like "life, liberty and the pursuit of happiness....".
Life is a right and the state would never take that right away. But wait....it does. The death penalty is still legal. So, the State does on occasion take a life away--so should one conclude that living is a privilege and not a right?
The reimbursement problem in healthcare is a huge problem which significantly adds to the cost of healthcare for all. If the Supreme Court is going to weigh in on this, perhaps they should write an opinion which clarifies in which direction this should head. I am certain that they have all read Hegal and are familiar with his argument. The real question becomes if they or any other of our leaders have the political will to gravitate toward a reasonable, consistent, non-contradictory policy. I am not holding my breath.
March 24, 2011
November 26, 2010
Adventures in the Urologist's Office
Being a strict adherent to Murphy's laws, I peed blood the day before traveling overseas. Knowing full well that this was cancer until proven otherwise, I made an appointment for the day after my return--there was no way I was surrendering my trip.
Seated nervously in the waiting room, I found that the only available reading material was the current issue of Cosmopolitan. What strange reading material for a Urology office. The lead article was "50 Ways To Keep Your Man Happy in Bed." I began to imagine that I had entered a Fellini movie. At 61, I was, by far, the youngest patient there; I doubt if any of these men wanted to be reminded of their diminished or totally absent sex lives. Hello... this is a Urology office.
An attractive, young, blond nurse escorted me into an exam room. Even by Doctor's Office standards, this room was stark. No art, no pictures...nothing. Having a high familiarity with exam rooms, I decided to poke around to pass the time; I had left my issue of Cosmo in the waiting room. The first drawer that I opened had a stack of paper gowns with an old, beat up pair of Channel lock pliers sitting on top. What the hell do they use those for??? Well--obviously--for adjustments to your genitals. I decided to quit poking around.
The doctor came in and took a short history. He suggested an IVP and a cystoscopy for a workup. I agreed to the cysto and, if that were negative, to negotiate the need for the IVP xray exam. I readily agreed to do the cysto right away since I did NOT want to come back again.
The nice, young, blond nurse took me into the procedure room where she told me, unceremoniously, to drop my pants and lie down on the table. She stood with her back to me while I complied; the formality of undressing and putting on a gown was skipped. Just drop trou...at least, I wasn't asked to bend over. (I will cover colonoscopy in another blog.)
I almost fell asleep waiting for the procedure to begin. In came the Urologist and explained the procedure. It was to be a Fellini movie after all....I got to watch the whole thing on the tv monitor. He held my manhood in his left hand and injected some lubricant into my urethra with his right hand. Oh boy. This was quickly followed by the cystocope, a flexible tube with a lens on the end as well as ports to add water or suction water or take biopsies as necessary. I could not decide which was worse: following the scope up my urethra on the monitor or watching him push the scope up my penis. My bottom was quickly soaked with the overflow of water used to improve visability. Aha...there's the problem: he found a stricture in the urethra where I had had Radiation for my Prostate Cancer four years earlier. He said it was tight and he might not be able to break through and finish the examination.
He said it might hurt a bit and I encouraged him to go for it. I went, back and forth, from watching the monitor to watching him, manhood in left hand and scope in right hand, pushing back and forth to try to break open the obstruction. I could not help but envision a pile driver; but without the noise. The pain was as much psychic as physical. After a minute or so (which seemed like an hour), he popped through into the bladder and finished the exam. No cancer. No need for further workup.
In a flash, he was gone. Having had my cherry popped, I turned to the nurse, who probably assists on a half-dozen of these a day, and said: "Do you think I put out too much for a first date?" She cracked up.
I bled for a couple of days but was relieved to know I was free of serious pathology and, more importantly, was relieved to have this whole episode in my rear-view mirror. Many would complain that this episode reflects the new health care system; personally,I was quite pleased to have a serious problem dealt with quickly and efficiently. I would send my patients to this office with no reservations. It could have been worse; he might have pulled out the channel lock pliers.....
Seated nervously in the waiting room, I found that the only available reading material was the current issue of Cosmopolitan. What strange reading material for a Urology office. The lead article was "50 Ways To Keep Your Man Happy in Bed." I began to imagine that I had entered a Fellini movie. At 61, I was, by far, the youngest patient there; I doubt if any of these men wanted to be reminded of their diminished or totally absent sex lives. Hello... this is a Urology office.
An attractive, young, blond nurse escorted me into an exam room. Even by Doctor's Office standards, this room was stark. No art, no pictures...nothing. Having a high familiarity with exam rooms, I decided to poke around to pass the time; I had left my issue of Cosmo in the waiting room. The first drawer that I opened had a stack of paper gowns with an old, beat up pair of Channel lock pliers sitting on top. What the hell do they use those for??? Well--obviously--for adjustments to your genitals. I decided to quit poking around.
The doctor came in and took a short history. He suggested an IVP and a cystoscopy for a workup. I agreed to the cysto and, if that were negative, to negotiate the need for the IVP xray exam. I readily agreed to do the cysto right away since I did NOT want to come back again.
The nice, young, blond nurse took me into the procedure room where she told me, unceremoniously, to drop my pants and lie down on the table. She stood with her back to me while I complied; the formality of undressing and putting on a gown was skipped. Just drop trou...at least, I wasn't asked to bend over. (I will cover colonoscopy in another blog.)
I almost fell asleep waiting for the procedure to begin. In came the Urologist and explained the procedure. It was to be a Fellini movie after all....I got to watch the whole thing on the tv monitor. He held my manhood in his left hand and injected some lubricant into my urethra with his right hand. Oh boy. This was quickly followed by the cystocope, a flexible tube with a lens on the end as well as ports to add water or suction water or take biopsies as necessary. I could not decide which was worse: following the scope up my urethra on the monitor or watching him push the scope up my penis. My bottom was quickly soaked with the overflow of water used to improve visability. Aha...there's the problem: he found a stricture in the urethra where I had had Radiation for my Prostate Cancer four years earlier. He said it was tight and he might not be able to break through and finish the examination.
He said it might hurt a bit and I encouraged him to go for it. I went, back and forth, from watching the monitor to watching him, manhood in left hand and scope in right hand, pushing back and forth to try to break open the obstruction. I could not help but envision a pile driver; but without the noise. The pain was as much psychic as physical. After a minute or so (which seemed like an hour), he popped through into the bladder and finished the exam. No cancer. No need for further workup.
In a flash, he was gone. Having had my cherry popped, I turned to the nurse, who probably assists on a half-dozen of these a day, and said: "Do you think I put out too much for a first date?" She cracked up.
I bled for a couple of days but was relieved to know I was free of serious pathology and, more importantly, was relieved to have this whole episode in my rear-view mirror. Many would complain that this episode reflects the new health care system; personally,I was quite pleased to have a serious problem dealt with quickly and efficiently. I would send my patients to this office with no reservations. It could have been worse; he might have pulled out the channel lock pliers.....
October 28, 2010
Arrogance
The Juan Williams' firing underscores everything that is wrong with traditional main stream media. Eight million Americans have lost their jobs over the past 2 years--the vast majority lost their jobs through no fault of their own. Juan Williams was fired for cause--I think that the cause was pretty weak but the only opinion that matters is his boss's opinion.
As an independent, I watch PBS, FOX, CNN as well as other news sources. I liked that Juan Williams appeared on many venues--he had a nice, moderate, sensible take on current events. He balanced the extreme views of the right and the left quite nicely....until he played the race card and claimed that he was fired because he didn't play the role of the lackey black man (that was expected of him). What a waste. Why do the talking heads think that they do not play by the same rules as the rest of Americans....that they can be fired, demoted or used as needed by their employers?
At 61 years old, I have joined the young and look to Jon Stewart (The Daily Show) for more meaningful news than the traditional sources. NO ONE gets a free pass on his show. He exposes the hypocritical attitudes of not only the politicians but also (and most vehemently) the pundits who cover them. The public has become less and less tolerant of the slow intimate dirty dance going on between politics and media.President Obama, an astute politician, decided to appear on The Daily Show for good reasons.
Mr. Williams was awarded a $2 million dollar contract from FOX within 48 hours of his firing--way more money than a brain surgeon makes...and political commentary is not brain surgery. Perhaps big money is as big a problem in the media as it is in politics.
Several commentators have complained that Obama's appearance on the Daily Show, for a 30 minute interview, demeaned the office of the Presidency. This is sour grapes...they wish that they had scored the interview. Maybe if they were a little more relevant and a little less arrogant, shrewd politicians (as Obama certainly is) would sit with them for thirty minutes. It is simultaneously ironic and sad that we have to turn to the Comedy Channel for serious dialog.
October 6, 2010
Look forward...plan back
Recent data shows that the United States now spends 17% of GDP on health care. This is just over one dollar out of six. Other advanced countries, with similar or better quality indicators, spend 8-12%. Some experts suggest that this expense could reach 25%--one dollar out of four--by the end of the new decade. Ouch....
A number of factors are contributing to this spiraling cost. The baby-boomer generation is approaching age 65--this tsunami of demographic statistical significance will flood the available resources. New procedures, drugs and treatments march ever forward. The Dartmouth Atlas reveals wide variation in the appropriate use of common medical procedures. Medical practice is increasingly fragmented into smaller and smaller quanta; today, it takes a village of practitioners to take care of patients. Surgeons sub-specialize not only into fields (say Orthopedics) but also into one specialty procedure (such as arthroscopic surgery on the shoulder). An endocrinologist will manage your diabetes but wants nothing to do with your blood pressure or cholesterol. This fragmentation improves the treatment of individual problems while ignoring the patient's overall well-being; your care is being deconstructed. It also maximizes total revenue.
American Corporations face increasing headwinds in global competition. Two striking ones are corporate taxes (nearly the highest in the world) and the highest health care costs in the world. Not only do companies in other developed countries pay lower corporate income taxes, most pay NO health care costs as they are underwritten by the state. If health care costs spike to 25% by 2020, how will American companies be able to compete with foreign companies who do not face these costs? Would it surprise you if they invested their profits overseas?
Health care experts agree that the trifecta of health care reform would address three issues: access, quality and cost. Obamacare seriously addressed only one..access. Access to our existing dysfunctional system has been expanded; quality will probably stagnate and costs will continue their upward spiral.
Game Theory tells us to look forward and plan back. What will be the public policy response when health care costs hit 25%? No doubt, the system will be capped and any new additional medical expense will have to be balanced by a reduction in some other medical area. Politicians call this pay-as-you-go. Economists call it a closed system.
Well then, if we know that we are hurtling toward a cap, why don't we start initiating a cap now with a pay-as-we-go program? If we eased into a flexible cap now, we would have time to work out the kinks before we hit that brick wall down the road.
Some sort of cap would FORCE us to develop programs with more bang for the buck than what we are getting now. Health care cannot be an open ended commitment to everything...we simply cannot afford it. Unfortunately, the politicians would pick winners and losers...those who are politically astute would be favored; the dis-enfranchised would suffer. These groups already know who they are. It will take time to develop a more equitable balance; that time is only available if we start seeking out ways to get more value for our health care dollars now--not when we hit that brick wall of 25%(which is not far off). Starting a flexible cap now would give us time to work out the political problems: the recent furor over mammograms is an excellent example of the resistance that will accompany any radical change to the status quo.
We spend 2.5 trillion dollars a year on health care; we deserve to get more for that expense than we are currently receiving. We need to cull unnecessary treatments and use the savings to develop newer treatments that are even more effective. It is not rocket science figuring out what works...it just takes political will. I am not optimistic.
A number of factors are contributing to this spiraling cost. The baby-boomer generation is approaching age 65--this tsunami of demographic statistical significance will flood the available resources. New procedures, drugs and treatments march ever forward. The Dartmouth Atlas reveals wide variation in the appropriate use of common medical procedures. Medical practice is increasingly fragmented into smaller and smaller quanta; today, it takes a village of practitioners to take care of patients. Surgeons sub-specialize not only into fields (say Orthopedics) but also into one specialty procedure (such as arthroscopic surgery on the shoulder). An endocrinologist will manage your diabetes but wants nothing to do with your blood pressure or cholesterol. This fragmentation improves the treatment of individual problems while ignoring the patient's overall well-being; your care is being deconstructed. It also maximizes total revenue.
American Corporations face increasing headwinds in global competition. Two striking ones are corporate taxes (nearly the highest in the world) and the highest health care costs in the world. Not only do companies in other developed countries pay lower corporate income taxes, most pay NO health care costs as they are underwritten by the state. If health care costs spike to 25% by 2020, how will American companies be able to compete with foreign companies who do not face these costs? Would it surprise you if they invested their profits overseas?
Health care experts agree that the trifecta of health care reform would address three issues: access, quality and cost. Obamacare seriously addressed only one..access. Access to our existing dysfunctional system has been expanded; quality will probably stagnate and costs will continue their upward spiral.
Game Theory tells us to look forward and plan back. What will be the public policy response when health care costs hit 25%? No doubt, the system will be capped and any new additional medical expense will have to be balanced by a reduction in some other medical area. Politicians call this pay-as-you-go. Economists call it a closed system.
Well then, if we know that we are hurtling toward a cap, why don't we start initiating a cap now with a pay-as-we-go program? If we eased into a flexible cap now, we would have time to work out the kinks before we hit that brick wall down the road.
Some sort of cap would FORCE us to develop programs with more bang for the buck than what we are getting now. Health care cannot be an open ended commitment to everything...we simply cannot afford it. Unfortunately, the politicians would pick winners and losers...those who are politically astute would be favored; the dis-enfranchised would suffer. These groups already know who they are. It will take time to develop a more equitable balance; that time is only available if we start seeking out ways to get more value for our health care dollars now--not when we hit that brick wall of 25%(which is not far off). Starting a flexible cap now would give us time to work out the political problems: the recent furor over mammograms is an excellent example of the resistance that will accompany any radical change to the status quo.
We spend 2.5 trillion dollars a year on health care; we deserve to get more for that expense than we are currently receiving. We need to cull unnecessary treatments and use the savings to develop newer treatments that are even more effective. It is not rocket science figuring out what works...it just takes political will. I am not optimistic.
August 30, 2010
Claw Back
http://online.wsj.com/article/SB10001424052748703447004575449813071709510.html?mod=WSJ_hp_mostpop_emailed
The above link will take you to an opinion piece by Arnold Schwarzenegger in the WSJ; in this illuminating piece, the governor outlines the horrible state of California finances...especially when it comes to state sponsored pensions. Unfortunately, this same scenario is playing out in municipal and state governments across the land.
It is quite clear that local and state governments are running Ponzi schemes when it comes to their pensions. It is simply a mathematical improbability that they will be able to pay off these pensions which were obviously irresponsibly promised. What to do?
Hagel, the philosopher, famously stated that the argument that most often wins out in the end is the argument with the fewest internal contradictions. The corollary of this is that the facets of any argument must be consistent.
Let us turn to how the government is handling the most famous of Ponzi schemes--the Madoff affair. In that scheme, Bernie Madoff reported consistent 18% returns to his clients year after year--whether the economy was growing or receding. People should have known that it was a scam. The Justice Department, using that logic is going back a number of years and repossessing the assets of those who cashed in their chips before Madoff was finally exposed. Most will get to keep their initial investment but must return their fraudulent 18% returns so that those who did not get out in time will get at least a part of their investment back. This is called a claw back; it is based on a sense of fairness; the out-in-time investors should not profit from a fraudulent scheme while others lose everything; perhaps the investors should have known that these types of returns were other worldly. This process is ongoing at the present.
The existing California pension plan is a Ponzi scheme (as probably are NY's, NJ's, Illinois' and several others). The number of public employees retiring in their 50's with 6 figure pensions (and health care) for life is staggering. Many got a quick raise just before retirement to bolster their loot. You can bet that there are politics involved as well. No matter....the uncontroverted facts are that the pension system is unsustainable; it is underfunded; it lies on its reporting by quoting totally unrealistic investment return projections; and it is probably corrupt.
I see parallels with the Bernie Madoff case. Where is the government claw back? Are they looking at those last minute raises? Are they looking at those ridiculously high pensions? Are they looking at those unrealistic investment return projections?
Are they looking at the true state of underfunding?
This appears to be a case of do as I say not do as I do. A large chunk of the 800 billion dollar stimulus package went to prop up local and state governments. The money that was supposed to go to shovel-ready infrastructure projects has ended up kicking the pension-bomb can down the street. No wonder, the stimulus package delivered so little bang for the buck.
To recover its credibility, the government must act consistently in how it handles various ponzi schemes which have been unmasked by the economic melt-down....whether they are private or public schemes. I am not holding my breath.
The above link will take you to an opinion piece by Arnold Schwarzenegger in the WSJ; in this illuminating piece, the governor outlines the horrible state of California finances...especially when it comes to state sponsored pensions. Unfortunately, this same scenario is playing out in municipal and state governments across the land.
It is quite clear that local and state governments are running Ponzi schemes when it comes to their pensions. It is simply a mathematical improbability that they will be able to pay off these pensions which were obviously irresponsibly promised. What to do?
Hagel, the philosopher, famously stated that the argument that most often wins out in the end is the argument with the fewest internal contradictions. The corollary of this is that the facets of any argument must be consistent.
Let us turn to how the government is handling the most famous of Ponzi schemes--the Madoff affair. In that scheme, Bernie Madoff reported consistent 18% returns to his clients year after year--whether the economy was growing or receding. People should have known that it was a scam. The Justice Department, using that logic is going back a number of years and repossessing the assets of those who cashed in their chips before Madoff was finally exposed. Most will get to keep their initial investment but must return their fraudulent 18% returns so that those who did not get out in time will get at least a part of their investment back. This is called a claw back; it is based on a sense of fairness; the out-in-time investors should not profit from a fraudulent scheme while others lose everything; perhaps the investors should have known that these types of returns were other worldly. This process is ongoing at the present.
The existing California pension plan is a Ponzi scheme (as probably are NY's, NJ's, Illinois' and several others). The number of public employees retiring in their 50's with 6 figure pensions (and health care) for life is staggering. Many got a quick raise just before retirement to bolster their loot. You can bet that there are politics involved as well. No matter....the uncontroverted facts are that the pension system is unsustainable; it is underfunded; it lies on its reporting by quoting totally unrealistic investment return projections; and it is probably corrupt.
I see parallels with the Bernie Madoff case. Where is the government claw back? Are they looking at those last minute raises? Are they looking at those ridiculously high pensions? Are they looking at those unrealistic investment return projections?
Are they looking at the true state of underfunding?
This appears to be a case of do as I say not do as I do. A large chunk of the 800 billion dollar stimulus package went to prop up local and state governments. The money that was supposed to go to shovel-ready infrastructure projects has ended up kicking the pension-bomb can down the street. No wonder, the stimulus package delivered so little bang for the buck.
To recover its credibility, the government must act consistently in how it handles various ponzi schemes which have been unmasked by the economic melt-down....whether they are private or public schemes. I am not holding my breath.
August 29, 2010
Animal Spirits and Policy
The Bush and Obama Administrations have spent over a trillion dollars on various bailouts over the past 2 years. Arguably, that spending has kept us from falling into the abyss of another depression. Even though we are on the cusp of a double dip recession, it is clear that we are on firmer ground than we were 18 months ago.
Going forward, how do we establish a terra firma from which to proceed? It is clear that we must GROW our way out of this mess. Unemployment continues at unacceptably high rates; the consumer continues to keep a firm grasp on his wallet; the banks are reluctant to lend; surviving industries are unwilling to invest in new employees or capital infrastructure;the whole economy has a bad case of paralysis.
The FED recently announced its intention of enacting a new round of quantitative easing (QE); this means they will buy up securities which will have the intended effect of increasing the money supply. The danger of this is that an increased money supply will lead to inflation--a result that is bad for everyone and everything.
What is needed is growth. In this environment, growth comes from two sources: animal spirits and public policy. Animal spirits is the term used for entrepreneurship...the effort made by business to create or expand operations; to make investments with the hope of a decent return on investment. Such entrepreneurship necessarily entails risk. While risk is acceptable to entrepreneurs because it can be quantified and allowed for, uncertainty cannot be quantified and allowed for.
This is where public policy comes in. Public policy must be clear and allow risk to be evaluated clearly. Any public policy which fosters uncertainty will quash animal spirits dead in its tracks. Nouriel Roubini describes risk as being handed a revolver with one bullet in the cylinder and being asked to play Russian Roulette; uncertainty is being handed a revolver with NO information as to whether there are 2, 6 or no bullets loaded in the chamber. Which game would you play?
Unfortunately, the public policy of the last 2 years has increased uncertainty and absolutely stalled any animal spirits which may have existed. Hence, the present paralysis. Huge quantities of political capital have been spent on Healthcare Reform; in short, access to a dysfunctional system has been expanded with no attention to the bigger problems of cost and quality. This reform increases uncertainty about how much greater will be the inflation of medical costs which have risen at a steeper rate than other costs for business. Financial reform, a 2500 page document full of uncertainty, has left most practical decisions about important issues such as capital requirements, to new political committees yet to be formed. In other words, these reforms have increased uncertainty rather than decreased it. Risk is manageable.... uncertainty is not.
Both parties need to put their child-like ideologies behind them and work toward a goal of developing public policy that will encourage and nurture animal spirits. Public policy needs to become more business friendly. This is not a matter of ideology, this is a matter of pragmatism.....a matter of survival. If the existing anti-business policy trend continues, animal spirits will continue to be suppressed, growth will remain elusive and ideology (any ideology--whether left or right) will become academic. In order to foster growth, everything needs to be on the table: Medicare, Social Security, Pensions, taxes, Defense spending, War(s),--nothing gets a free pass.
If we cannot foster growth, then crushing unemployment will lead to civil unrest. At that point, we will regret that we did not seize the opportunity to create a reasonable public policy to foster growth. Ideology needs to be put aside; the cold clear logic of pragmatism needs to be the order of the day. My confidence that our present political system can adapt to this necessity in constrained.
Going forward, how do we establish a terra firma from which to proceed? It is clear that we must GROW our way out of this mess. Unemployment continues at unacceptably high rates; the consumer continues to keep a firm grasp on his wallet; the banks are reluctant to lend; surviving industries are unwilling to invest in new employees or capital infrastructure;the whole economy has a bad case of paralysis.
The FED recently announced its intention of enacting a new round of quantitative easing (QE); this means they will buy up securities which will have the intended effect of increasing the money supply. The danger of this is that an increased money supply will lead to inflation--a result that is bad for everyone and everything.
What is needed is growth. In this environment, growth comes from two sources: animal spirits and public policy. Animal spirits is the term used for entrepreneurship...the effort made by business to create or expand operations; to make investments with the hope of a decent return on investment. Such entrepreneurship necessarily entails risk. While risk is acceptable to entrepreneurs because it can be quantified and allowed for, uncertainty cannot be quantified and allowed for.
This is where public policy comes in. Public policy must be clear and allow risk to be evaluated clearly. Any public policy which fosters uncertainty will quash animal spirits dead in its tracks. Nouriel Roubini describes risk as being handed a revolver with one bullet in the cylinder and being asked to play Russian Roulette; uncertainty is being handed a revolver with NO information as to whether there are 2, 6 or no bullets loaded in the chamber. Which game would you play?
Unfortunately, the public policy of the last 2 years has increased uncertainty and absolutely stalled any animal spirits which may have existed. Hence, the present paralysis. Huge quantities of political capital have been spent on Healthcare Reform; in short, access to a dysfunctional system has been expanded with no attention to the bigger problems of cost and quality. This reform increases uncertainty about how much greater will be the inflation of medical costs which have risen at a steeper rate than other costs for business. Financial reform, a 2500 page document full of uncertainty, has left most practical decisions about important issues such as capital requirements, to new political committees yet to be formed. In other words, these reforms have increased uncertainty rather than decreased it. Risk is manageable.... uncertainty is not.
Both parties need to put their child-like ideologies behind them and work toward a goal of developing public policy that will encourage and nurture animal spirits. Public policy needs to become more business friendly. This is not a matter of ideology, this is a matter of pragmatism.....a matter of survival. If the existing anti-business policy trend continues, animal spirits will continue to be suppressed, growth will remain elusive and ideology (any ideology--whether left or right) will become academic. In order to foster growth, everything needs to be on the table: Medicare, Social Security, Pensions, taxes, Defense spending, War(s),--nothing gets a free pass.
If we cannot foster growth, then crushing unemployment will lead to civil unrest. At that point, we will regret that we did not seize the opportunity to create a reasonable public policy to foster growth. Ideology needs to be put aside; the cold clear logic of pragmatism needs to be the order of the day. My confidence that our present political system can adapt to this necessity in constrained.
July 22, 2010
Theory of Everything
There are two very large camps in the wonderful world of Physics. One group studies Quantum Mechanics which is basically the study of the behavior of subatomic particles; what are they made of and how do they work? The other camp is the more macro camp which studies the universe: Relativity, Inflation, Dark Matter, Expansion, Space Time...the big picture. For more than half a century, their respective findings and equations have been contradictory. Einstein, after winning his Nobel prize at a relatively young age, spent most of the rest of his life trying to resolve these contradictions into a generalized Theory of Everything. He did not get very far and neither have any of his successors.
In response to this, each camp has retired to its respective field and done ongoing research to further its own specialty while ignoring the fact that the two fields were incompatible. Science moves on; careers are made; papers are published and any theory which would reconcile this fundamental discrepancy has simply not appeared.
Physics is a "hard science". It uses the scientific method which we all learned (or should have learned) in elementary school. You observe something; you formulate an hypothesis; you design an experiment to test that hypothesis; your experiment proves or disproves the hypothesis. Wash, rinse repeat.
Economics is soft science. Yet, it finds itself in the same pickle when it comes to forecasting a solution to the instant political-economic mess. We recently dodged a depression but still find ourselves very slow to surface from a very long and difficult recession. The Fed spent and guaranteed trillions of dollars to avoid that depression. Interest rates are just barely above zero. As we peer over the edge of an abyss which is the dreaded double dip, the economists and political scientists find themselves in two camps--just like the physicists. One camp, the Keynesians, believe that more stimulus is needed. Print some more money and bail out the municipalities, the States, the corporations and whoever else is needed to get the economy growing again. They believe that the government is the spender-of-last-resort and the only group that can save the economy. We can deal with the deficits later. They claim that the first stimulus definitely worked (despite the 9.5% unemployment figure). Paul Krugman is their champion.
The second camp calls for a period of austerity; it is time to address the deficit before we find the national debt at 100% of GDP. When debt reaches 100% of GDP, almost all growth (say a nominal 4%) will go to debt service; hence, we have to grow at a nominal rate to tread water. We now have the highest corporate taxes in the world and all those corporate taxes barely cover the debt service right now. (Greece presently has debt equal to 150% of its GDP; even if it were to perform the herculean task of reducing its debt by 50%, all its growth would still go to paying the interest on that debt!)
This camp wants to cut spending, cut spending, cut spending. Of course, to cut spending in this fragile recovery state could lead to a new round of recession with even higher unemployment.
Both camps have good arguments for their points of view....just like the physicists. Unlike the physicists (who do hard science), the economists cannot design experiments to see which camp is right. The two camps cannot even agree on whether the first stimulus plan did any good. How can you know for sure? Each economic camp has its own set of equations, rationals and presidents to support its point of view.
Here is where it gets dicey. We have two distinct groups facing off in a polar standoff with no OBJECTIVE way to determine which school of thought is correct and no way to measure after the fact whether the success or failure was due to the intervention. Like the physicists, each camp will retreat to its respective arena and continue to push its respective agenda. For the physicists, it is hard science; for the political economists, it is ideology. The republicans will push to lower taxes, cut entitlements, reduce government; the democrats will push for more stimulus (especially for their specific special interests), increase the size and scope of government, and increase taxes (redistribute income) as a means to an end.
Hence, the recovery from this economic melt-down has simply hardened pre-established positions rather than brought the two sides together to work for the common good. Rham Emanuel said it best when he said: "A crisis is a terrible thing to waste."
More than a clash of ideologies, this is quickly becoming a clash of classes. A new culture war is brewing; if unemployment continues high and the bankers continue to draw obscene bonuses for almost destroying the economy, the existing polarization will look like grade school stuff.
Let's all hope that Washington develops some adult supervision and that we start to work together to sort out this mess. Everything depends on it. The clock is ticking.
In response to this, each camp has retired to its respective field and done ongoing research to further its own specialty while ignoring the fact that the two fields were incompatible. Science moves on; careers are made; papers are published and any theory which would reconcile this fundamental discrepancy has simply not appeared.
Physics is a "hard science". It uses the scientific method which we all learned (or should have learned) in elementary school. You observe something; you formulate an hypothesis; you design an experiment to test that hypothesis; your experiment proves or disproves the hypothesis. Wash, rinse repeat.
Economics is soft science. Yet, it finds itself in the same pickle when it comes to forecasting a solution to the instant political-economic mess. We recently dodged a depression but still find ourselves very slow to surface from a very long and difficult recession. The Fed spent and guaranteed trillions of dollars to avoid that depression. Interest rates are just barely above zero. As we peer over the edge of an abyss which is the dreaded double dip, the economists and political scientists find themselves in two camps--just like the physicists. One camp, the Keynesians, believe that more stimulus is needed. Print some more money and bail out the municipalities, the States, the corporations and whoever else is needed to get the economy growing again. They believe that the government is the spender-of-last-resort and the only group that can save the economy. We can deal with the deficits later. They claim that the first stimulus definitely worked (despite the 9.5% unemployment figure). Paul Krugman is their champion.
The second camp calls for a period of austerity; it is time to address the deficit before we find the national debt at 100% of GDP. When debt reaches 100% of GDP, almost all growth (say a nominal 4%) will go to debt service; hence, we have to grow at a nominal rate to tread water. We now have the highest corporate taxes in the world and all those corporate taxes barely cover the debt service right now. (Greece presently has debt equal to 150% of its GDP; even if it were to perform the herculean task of reducing its debt by 50%, all its growth would still go to paying the interest on that debt!)
This camp wants to cut spending, cut spending, cut spending. Of course, to cut spending in this fragile recovery state could lead to a new round of recession with even higher unemployment.
Both camps have good arguments for their points of view....just like the physicists. Unlike the physicists (who do hard science), the economists cannot design experiments to see which camp is right. The two camps cannot even agree on whether the first stimulus plan did any good. How can you know for sure? Each economic camp has its own set of equations, rationals and presidents to support its point of view.
Here is where it gets dicey. We have two distinct groups facing off in a polar standoff with no OBJECTIVE way to determine which school of thought is correct and no way to measure after the fact whether the success or failure was due to the intervention. Like the physicists, each camp will retreat to its respective arena and continue to push its respective agenda. For the physicists, it is hard science; for the political economists, it is ideology. The republicans will push to lower taxes, cut entitlements, reduce government; the democrats will push for more stimulus (especially for their specific special interests), increase the size and scope of government, and increase taxes (redistribute income) as a means to an end.
Hence, the recovery from this economic melt-down has simply hardened pre-established positions rather than brought the two sides together to work for the common good. Rham Emanuel said it best when he said: "A crisis is a terrible thing to waste."
More than a clash of ideologies, this is quickly becoming a clash of classes. A new culture war is brewing; if unemployment continues high and the bankers continue to draw obscene bonuses for almost destroying the economy, the existing polarization will look like grade school stuff.
Let's all hope that Washington develops some adult supervision and that we start to work together to sort out this mess. Everything depends on it. The clock is ticking.
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