VA Health Care for All Veterans

As both of my regular readers know my wife and I will be Medicare eligible next month. My interest in health care in general and the multitude of options now facing Medicare beneficiaries is more than academic. Among other options I already checked into VA coverage because I personally know three people covered by the VA, all of whom are quite satisfied with both the quality and price. One is an insulin-dependent diabetic and another has a complicated medical picture involving both oral and (unrelated) abdominal surgery Turns out I'm not elegible because there is a means test. I have income over 30.000 dollars annually for the last three years. So this looks good to me.

Obama proposes expansion of VA health care

By KIMBERLY HEFLING – 1 day ago

WASHINGTON (AP) — President Barack Obama wants to expand health care access to veterans earning modest incomes.

The president's proposed budget for Veterans Affairs would provide health care to non-disabled veterans whose income exceeds about $30,000 annually. Obama has promised to provide VA health care to those blocked under the Bush administration.

By 2013, the administration says 500,000 veterans would be eligible.

Obama would provide extra funding for programs targeting homeless veterans and those in rural areas. And it would pay for upgrades to the VA's technology system to help eliminate the average six-month wait to have a disability claim processed.

Overall, it would increase the agency's discretionary spending by 10 percent to $53 billion.

All kinds of people are bitching about Barack Obama's initiatives, but as far as I can tell the loudest complaints are coming from a comfortable, well-cared for, economically secure population. I thought I was in that group myself during my working life, having paid the max into Social Security over twenty years, but I was wrong.

I worked closely with those who never had, and never would have, that measure of income. The minimal assistance they received from government was all the safety net they had. Now, at the end of my career, we are joining that group. My income will be Social Security for me and my wife, plus a small pension that will remain fixed until I die because it is not indexed to inflation. My wife and I are not in trouble. Our health is good and our assets secure. But we know that without a safety net for health care, everything we have can vanish in the financial aftermath of one expensive medical event. The specter of death itself is more inviting than that.
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When I read complaints critical of universal health care, it makes me want to cry.

Is Food the New Sex?

As a retired food service manager, this via Execupundit caught my eye.

Put down that cheeseburger and listen up: If food has become what sex was a generation ago -- the intimidatingly intelligent Mary Eberstadt says it has -- then a cheeseburger is akin to adultery, or worse. As eating has become highly charged with moral judgments, sex has become notably less so, and Eberstadt, a fellow at Stanford University's Hoover Institution, thinks these trends involving two primal appetites are related.

In a Policy Review essay "Is Food the New Sex?" -- it has a section titled "Broccoli, pornography, and Kant" -- she notes that for the first time ever, most people in advanced nations "are more or less free to have all the sex and food they want." One might think, she says, either that food and sex would both be pursued with an ardor heedless of consequences, or that both would be subjected to analogous codes constraining consumption. The opposite has happened -- mindful eating and mindless sex.

...If food is the new sex, Eberstadt asks, "where does that leave sex?" She says it leaves much of sex dumbed-down -- junk sex akin to junk food. It also leaves sexual attitudes poised for a reversal. Since Betty's era, abundant research has demonstrated that diet can have potent effects, beneficial or injurious. Now, says Eberstadt, an empirical record is being assembled about the societal costs of laissez-faire sex.

...Today "the all-you-can-eat buffet" is stigmatized and the "sexual smorgasbord" is not. Eberstadt's surmise about a society "puritanical about food, and licentious about sex" is this: "The rules being drawn around food receive some force from the fact that people are uncomfortable with how far the sexual revolution has gone -- and not knowing what to do about it, they turn for increasing consolation to mining morality out of what they eat."

George Will noticed the trend, concluding with a trenchant comment.

Stigmas are compasses, pointing toward society's sense of its prerequisites for self-protection. Furthermore, as increasing numbers of people are led to a materialist understanding of life -- who say not that "I have a body" but that "I am a body" -- society becomes more obsessive about the body's maintenance. Alas, expiration is written into the leases we have on our bodies, so bon appetit.

The name Mary Eberstadt rang a bell. Sure enough, I vicariously linked something else she wrote when Fr. Neuhaus died last month. I marked the occasion by reposting something from June, 2007.

This started off as a toss-away post, but Mary Eberstadt's essay is more serious than the cute title suggests. Her article prints out to nine pages of 10-point type. Short snip here...

As much as you want

The dramatic expansion in access to food on the one hand and to sex on the other are complicated stories; but in each case, technology has written most of it.

Up until just about now, for example, the prime brakes on sex outside of marriage have been several: fear of pregnancy, fear of social stigma and punishment, and fear of disease. The Pill and its cousins** have substantially undermined the first two strictures, at least in theory, while modern medicine has largely erased the third. Even hiv/aids, only a decade ago a stunning exception to the brand new rule that one could apparently have any kind of sex at all without serious consequence, is now regarded as a “manageable” disease in the affluent West, even as it continues to kill millions of less fortunate patients elsewhere.

As for food, here too one technological revolution after another explains the extraordinary change in its availability: pesticides, mechanized farming, economical transportation, genetic manipulation of food stocks, and other advances. As a result, almost everyone in the Western world is now able to buy sustenance of all kinds, for very little money, and in quantities unimaginable until the lifetimes of the people reading this.***

One result of this change in food fortune, of course, is the unprecedented “disease of civilization” known as obesity, with its corollary ills. Nevertheless, the commonplace fact of obesity in today’s West itself testifies to the point that access to food has expanded exponentially for just about everyone. So does the statistical fact that obesity is most prevalent in the lowest social classes and least exhibited in the highest.

And just as technology has made sex and food more accessible for a great many people, important extra-technological influences on both pursuits — particularly longstanding religious strictures — have meanwhile diminished in a way that has made both appetites**** even easier to indulge. The opprobrium reserved for gluttony, for example, seems to have little immediate force now, even among believers. On the rare occasions when one even sees the word, it is almost always used in a metaphorical, secular sense.

**Donald Sensing observed long ago how the introduction of reliable contraception has had a more destructive impact on traditional marriage than all the queers in the world.

***Stories about obesity among the Pacific Islanders have also been around a long time. Only when the problem strikes close to home do we pay attention.

****Just last night I caught an interview with a former True Believer in Mao's Cultural Revolution whose bubble burst twenty years ago at Tienanmen Square. Her sad retrospective observation is that China's nouveau riche is experiencing a "real spiritual vacuum. They've given up worshiping Chairman Mao. Nothing has replaced him. They're worshiping Western materialism. But...we know what they don't know, that that's empty and you need something more in your life."


Malcolm Gladwell's new book, Outliers. goes into detail about the impact that agriculture has on education. The connection is at least academic, but implications are great for social science, health, politics and economics.

There is a connection, you know, between these thoughts and the current economic meltdown. Back off from the trees and take a look at the forest. You will see that what we are calling is not an "economic" meltdown as much as a CREDIT Meltdown. As Pogo said, "We have seen the enemy and he is us." The US economy has been "growing" on credit for decades. We got away with it for a long time until creative minds figured out how to convert the first level of credit into another generation of credit backed by other credit. They called it "securitized debt" to make the new credit look like it was "secured." It was, in a sense, in the same way that sub-prime loans to buy houses were "secured" by the actual real estate. Slick brokers arranged what they called "neutron loans" knowing that even if the original borrower walked away the land and house remained. We see now how insecure that arangement can become. In the end, as the new Chinese economic aristocracy has yet to learn, you don't get something for nothing.

Meantime,don't spread it around. If they discover what we are hopefully learning (the hard way), China might stop lending us the money we need to climb out. Oh wait. I think that's what they call "enabling."

Did I say "money"?
I meant credit.
They're not the same, you know.

Here is an inciteful little snip I found buried in the bowels of a long, dry document from a pissed-off shareholder who probably lost a big piece of his ass when Washington Mutual went to the chopping block:

A bank’s assets are its loans, because loans are where people owe you money plus interest, an income stream. Deposits are a liability, because the bank owes the depositor the money, plus interest, and is liable for its payment on demand.

That's exactly opposite how most people think. For you and I what we have in the bank is an asset and what we borrow is a liability. For the bank, it's exactly the opposite. Banks are to the economy what black and white film negatives are to prints.
That's why we call them "negatives."

Puts banks in a different light, no?

So how did we get from food and sex to credit?

Same way a tobacco smoker graduates to grass, then crack, then heroin and meth, and finally to prostitution and larceny to support the habit. See how that works? Credit is the new prostitution and toxic assets are the new larceny.

(So is IT the new condom?)

Hope for an Avian Flu Vaccine

This week's news cycle carried this item. I heard it from several sources and waited til H5N1 reported it. Crawford Kilian is a journalist with credibility. NY Times is among several places it can be found.

For the second time in a week, a team of scientists announced it had found an antibody that attacks both seasonal flu virus and the H5N1 pandemic flu strains, a discovery that could lead to new treatments and, possibly, a universal flu vaccine. The new antibody was revealed in the online journal Science by a team from the Scripps Research Institute and Crucell, a Dutch company. It attaches to the neck of the hemagglutinin spike on the virus’s shell, as did the antibody revealed on Sunday by a team from the Dana-Farber Cancer Institute, Harvard and others. But the first team also tested its antibody in mice.

Warren Buffet on Swimming

"It's only when the tide goes out that you learn who's been swimming naked."

Warren Buffet

Totten's Adventure with Hitchens in Beirut

Heads up...

Michael J. Totten's latest online photo-essay is worthy of a TV episode in a mini-series. Check it out.

Christopher Hitchens and the Battle of Beirut

Another Health Care Blog Regards the Coming Train

Left a comment at a blog called Real Health Reform. According to the sidebar archives, this blog started last year in June and has received about three and a half thousand hits. I haven't dug into the stacks, but from what I can tell there are two contributors who are probably in health care or some related line of work. Insurane if I had to guess. I didn't find descriptive information identifying either screen name, jomaxx or obi jo. Most posts consist of two parts, a leading paragraph in either blue or red which is openly editorial, followed by a journalistic style informational paragraph with supporting links supplied for drilling (but not hyperlink active, which probably saves a lot of valuable time). It is clear that they have a love-hate relationship with the government (Medicare and Medicaid are vital to the health care revenue stream. Many creatures drink from that pool.) and are terrified that the coming Health Care Reform Train will cause a big wreck at their whistle stop.

This morning's post is about J. James Rohack, M.D., president-elect of the AMA, and his endorsement of the stimulus bill's appropriation aimed at improving and standardizing HIT . (Health Information Technology by the way. When you start reading about this stuff you better start a cheat sheet to keep up with acronyms. These people just LOVE acronyms, often using the letters without even knowing what they stand for. I ran into the same phenomenon at a gerontology continuing ed course I took a couple of years ago. The people from CMS sometimes seemed to be speaking another language.) The writer knew better than to cross swords with any future president of the AMA but wanted to warn against a Trojan horse in the stimulus bill. "...we must resist at all turns attempts by federal bureaucrats to interject THEIR beliefs about what is proper care and leave that to professionals and patients." Lord knows, too much scrutiny can mess up comfortable arrangements. If the patient wants it and the doctor says okay, then what's wrong with that?

Go read the post for yourself. Here is the comment I left.

I'm less interested in (and less threatened by) what "federal bureaucrats " have to say about proper care and more interested in what works. The medical community used the term "outcomes" as a metric to determine the effectiveness of a procedure or medicine. Outcomes, unlike opinions, are a measurable statistic.

I'm just a layman looking into what I have learned to call "health care inflation," but in the short span of a few weeks reading I have come to realize that both Medicare and private insurance plans are fighting that same demon. It's gotten a little better over the last decade, but health care costs as a whole are still way over what they should be. Compared with other economies the US shows embarrassing "outcomes" in many categories, while our costs per person are higher than others and continuing to climb.

Something is wrong with this picture.

I'm coming to believe that there are two factors figuring into health care inflation costs. Too many drugs that cost too much. And too many medical procedures that are simply not necessary.

Ours is a sales-oriented economy, so selling is what we do best. In the case of drugs and health care, competition among vendors and providers coupled with an insured population with no real clue about costs adds fuel to the fire. Who gets medical care in our system? Those of us covered by company-subsidized group insurance, others who can afford private insurance, Medicare beneficiaries, and those at the bottom (the uninsured whose care is "written off" and Medicaid and welfare recipients who pay nothing). No where on this list really knows (or cares) what their care costs. Like patrons waiting in line for an "all you can eat" buffet, all want to get something for nothing. They (we?) expect to receive no less than "our money's worth" which means individual money's worth, by the way, whatever that may be.

And if there is any question about actual NEED or RESULTS, we will always choose to get it, just to be on the safe side, in the same way that so many people insist their doctor prescribe antibiotics for the common cold, ignoring the fact that viral infections are not treatable by antibiotics and the over-use of antibiotics has detrimental side effects, not only to the individual but in the larger population, resulting in time in antibiotic-resistant strains of infectious organisms.

As consumers we're speeding down the health care highway in a gas hog. It's time to take a look at a more fuel-efficient model, and until we pick one, we need to apply the brakes a little before we come to a sharp curve and crash.

Here is the reply I received.

Thanks for the thoughtful comments. However, you should be concerned about too much government intervention in the provider/patient relationship.

The first issue is access. The President (including the last several) could have addressed in large measure access issues by executive action without the need for protracted, overly expensive, Congressional action, which will likely be outdated before it takes action. How you ask? By demanding that private insurers become insurance companies again, not money mangers in the risk arbitrage business.

For example, eliminating any exclusion for pre-existing conditions would allow many to get private coverage. Also, by removing sub-group rating to allow for expansion of risk over a large pool of subscribers.

There are many other changes in our system which are needed, and this site will be commenting on them across the board. No group is exempt from the need to participate in reform. In fact this site has indeed addressed a number of those items and we invite you to explore other posts.

Thanks for the commentary and hope you keep checking in!

Now I'm more confused than ever. Here is what I had to ask...

By demanding that private insurers become insurance companies again, not money mangers in the risk arbitrage business.

For example, eliminating any exclusion for pre-existing conditions would allow many to get private coverage. Also, by removing sub-group rating to allow for expansion of risk over a large pool of subscribers.

Whoa! Help me out here.
This is language I don't understand. I know all the words, but I'm confused.

What is the difference between "private insurers" and "insurance companies"? I thought they both meant the same thing.

Does "money managers in the arbitrage business" refer to the medigap "alphabet" plans? Or the now "advantage" products? Or TPA's (that's a cool new acronym I learned lately... Third Party Administrators")?

So how do pre-existing conditions puzzle into all this? By disallowing those with pre-existing conditions, that certainly makes the "risk pool;" a lot cheaper to cover per capita, but at the same time it pushes those excluded into another horrendously expensive pool. I thought the mission of insurance was to do just the opposite... making it better for those in trouble by spreading pooled assets over a larger population.

Are you advocating excluding pre-existing conditions from access? And if so, how might costs for their treatment be covered?

As far as I can tell, the main revenue streams paying for health care are insurance premiums (in one form or another, including Part B deductions from SS checks), co-pays and deductibles directly from clients, and government funds (Medicare and Medicaid) from payroll taxes. The costs of treating uninsured people, indigents and others who do not pay for whatever reason are "written off" but that is only an accounting gimmick. The costs do not, in reality, vanish. If providers are not to go bankrupt they have to recover those costs from one or several of the revenue streams listed.

In the end, the health care pie is cut and paid for one way or another.

What am I missing?

Today's new word: Narcotecture

Been tracking a new blog started in January now up to 34 posts. The writer has a leisurely, discursive style that makes for comfortable reading, a welcome relief from the turbulent, stress-filled stuff I usually encounter. Dr. Bob, The Anchoress and 3 Quarks provide recreational reading, but they and others tend to be light on recreation and heavy on challenges. jwm's world famous blog (yes, all lower case) is a roadside park along the information super-highway. This morning's post, "Toxic Nostalgia," described a walk home from where his car was left for repair.
(The last two lines of this post are also worth keeping: It isn't the days that were better then; it was the eyes that saw them. It's not the traffic on memory lane that gets you down, but the reflection you see in the storefront windows. Nicely said.)
The scene is in Southern California. Here is the part with my new word:

The Heights incorporated into its own city some years back, and the lot restrictions shrunk from five acres to one, and now I believe it's smaller than that, but I'm not sure, and I don't care to look it up. What you see when you look up to the heights now are big ass mansions: narcotecture in its most ostentatious, and obtrusive manifestation.

"Narcotecture" isn't in Merriam-Webster Online (yet) but a Google search gets over five hundred hits.
It's very descriptive. No one can mistake the meaning of a neologism combining architecture with narcotics. It may not be as poetic (or obscure) as white lobster, but from the looks of a Google search it spans the globe, starting in Afghanistan, of course, but popping up in Africa and South America as well as the good old USA.

(Something about the very use of this word is a sad commentary on what many still call a "war on drugs." The phase is slowly going out of fashion because the same people who want to pump the notion of "war" also enjoy using terms like "victory." They can't bring themselves to articulate or come to terms with the reality of "defeat" but if the so-called "war" on drugs is really a war, it's had plenty of time to declare defeat or victory. The same semantic dynamic applies to the term "global war on terror" or "war on terrorism" which is neither a war nor a remedy for terrorism. A post I put together a couple of weeks ago addressed that abuse of language. In the UK General Sir Michael Rose saw through the charade in 2006 and called for the impeachment of Tony Blair. But that is not the subject of this post. As usual, I digress. Please excuse.)

I'm reminded of another word used some time ago in a Fortune Magazine article to describe a pretentious style of architecture found in Atlanta's upscale neighborhoods. Paying homage to how much wealth is connected with the only soft drink permitted to be mentioned in this town, it was called "Roco-cola." That was before Internet Days, but I found evidence that at least one person other than me remembered.

You and Me and Eastern Europe

Huh! What does Eastern Europe have to do with us?
Glad you asked. It's something like that old song that says "Da hip bone connected to da leg bone..." Pay attention here:

Roubini's weekly letter says

The Central and Eastern Europe (CEE) region is the sick man of emerging markets. While the global crisis means few, if any, bright spots worldwide, the situation in the CEE area is particularly bleak. After almost a decade of outpacing worldwide growth, the region looks set to contract in 2009, with almost every country either in or on the verge of recession. The once high-flying Baltics (Estonia, Latvia, Lithuania) look headed for double-digit contractions, while countries relatively less affected by the crisis (i.e. Czech Republic, Slovakia and Slovenia) will have a hard time posting even positive growth. Meanwhile, Hungary and Latvia’s economies already deteriorated to the point where IMF help was needed late last year.

The CEE’s ill health is primarily driven by two factors – collapsing exports and the drying-up of capital inflows. Exports were key to the region's economic success, accounting for a significant 80-90% of GDP in the Czech Republic, Hungary and Slovakia. By far the biggest market for CEE goods is the Eurozone, which is now in recession. Meanwhile, the global credit crunch has dried up capital inflows to the region. An easy flow of credit fueled Eastern Europe’s boom in recent years, but the good times are gone. According to the Institute of International Finance, net private capital flows to Emerging Europe are projected to fall from an estimated $254 billion in 2008 to $30 billion in 2009. Whether or not this is formally considered a ‘sudden stop’ of capital, it will necessitate a very painful adjustment process.

(I got that via G-mail so I don't know how to put up a link, but here's another link to the RGE site with much the same content.) He goes on to describe the particulars. The details are of great interest to a lot of big shots with skin in the game. I'm not in that group so I didn't play close attention and moved on.
It didn't take long running a couple of searches to turn up similar observations elsewhere. This, by NY Times writer Nelson D. Schwartz, says much the same thing.

Last week, Wall Street plunged after Moody’s Investors Service warned that Western banks that had recently beat a path to Eastern Europe’s doorstep now faced “hard landings,” spooking investors with new fears that the exposure could spread beyond Europe’s shores.

“There’s a domino effect,” said Kenneth S. Rogoff, a professor at Harvard and former chief economist of the International Monetary Fund. “International credit markets are linked, and so a snowballing credit crisis in Eastern Europe and the Baltic countries could cause New York municipal bonds to fall.”

Got that? A credit crisis in Eastern Europe can cause problems with New York municipal bonds. As every schoolboy knows, municipal bonds are almost as safe a place to put your money as a coffee can in the back yard. Or they used to be. I don't want to ruin your day, but take a look at this:

International finance officials fret that the worst regional economic crisis since the Berlin Wall came down could set off a contagion among the region’s currencies, with echoes of the Asian financial crisis of the late 1990s. Then, emerging markets like Thailand borrowed in foreign currencies to fuel growth, but suddenly owed more than they could afford to pay back once their own currencies lost value.

Since peaking last summer, Poland’s currency has slumped 48 percent against the euro; Hungary’s has fallen 30 percent and the Czech Republic’s is off 21 percent. “Very simply, Eastern Europe has become Europe’s version of the subprime market,” said Robert Brusca of FAO Economics in New York.

On Monday, the central banks of Poland, Hungary, Romania and the Czech Republic sought to restore calm by issuing statements arguing that the recent sell-off was not justified by economic fundamentals.

In addition, Western banks [uh-oh] could very likely suffer a further increase in nonperforming loans. “Most of the banks in this region are from the euro countries and will have to undergo further recapitalization,” Gillian Edgeworth, an economist with Deutsche Bank in London, said.

Another problem is that big institutional investors in Western Europe — banks, pension funds and insurance companies — have large holdings of East European debt. If the banks need further infusions of capital from Western governments already straining to pay for stimulus packages and to maintain their social safety nets, itcould put additional pressure on the euro as well.

“The threat to more developed economies goes through the banking channel,” Dominique Strauss-Kahn, the head of the monetary fund, said in a recent interview.

As the downturn worsens across the Continent, Mr. Rogoff explained, risk aversion can quickly spread to other parts of the world. Some investors hurt by plunging markets in Europe are having to sell American assets to raise money, [See how that works?] adding pressure to a United States stock market already weakened by fears of nationalization.

“It’s one big trans-Atlantic money market out there, and these banks lend money to each other all the time,” said Simon Johnson, another veteran of the monetary fund who is a now a professor at the Sloan School of Management at the Massachusetts Institute of Technology. “Deutsche Bank and UBS and Goldman Sachs and Citi are all intertwined.”

In Eastern Europe itself, the risks for Western companies doing business there have also surged.

Until recently, for example, Eastern Europe and Russia were rare bright spots for the beleaguered American automakers Ford Motor and General Motors. In Poland, where G.M. has a major factory, sales rose 10 percent last year to 38,000 cars, while sales in Russia soared 30 percent to 338,000 vehicles. [Guess where GM's biggest new dealership and show room are located? Moscow! Americans don't have a clue.]

Since then, demand has fallen sharply. In the Baltic countries, which were among the first to feel the chill, G.M.’s sales dropped an average of 57 percent in the final months of 2008. [Hello, Detroit. This is not good.]

Among the biggest victims of the crisis are tens of thousands of workers who had clawed their way to more prosperity, only to see their dreams crumble as jobs and the financial system eroded. [Sound familiar?]

Because their declining currencies make it more expensive to import goods and to pay off foreign debts, governments have cut spending and reduced public services, leading toa wave of increasingly violent protests across the region that is threatening governments.

On Friday, the coalition government in Latvia — where the economy contracted more than 10 percent on an annualized basis last month — became the second European government, after that of Iceland, to collapse.

Meanwhile, in the Ukrainian capital, Kiev, demonstrators took to the streets Friday as depositors rushed to pull their money out of local banks.

The crisis has forced the monetary fund to step into the breach. In recent months, it has extended Ukraine, Iceland, Hungary and Latvia billions in aid. “I’m expecting a second wave of countries to knock at the door,” Mr. Strauss-Kahn said.

Two years ago, “the idea was very, very consistently projected that the I.M.F. would not have to help emerging countries any more,” and that the “financial markets would take care of it,” Jean-Claude Trichet, president of the European Central Bank, said Friday. Now, he said, this has proved to be “totally false.”

For Mr. Johnson and other students of financial history, the latest developments in Europe — especially in Austria, whose banking industry is heavily exposed to its Eastern neighbors — raise eerie parallels with the 1930s. Mr. Johnson notes that it was the failure of a Viennese bank, Creditanstalt, in 1931 that was a turning point in what became the Great Depression.

Mr. Johnson said he did not expect a repeat of that calamity, but he does foresee a long period of minimal growth, akin to Japan’s “lost decade” of the 1990s, in both the United States and Europe.

And while the United States may have been the trigger for this international financial crisis, it is hardly alone in shouldering the blame. “We set off the sticks of dynamite, but a lot of people had tinderboxes under their houses,” he said.

Mr. Johnson doesn't strike me as a panic-stricken extremist. Academic types are sometimes like that but mostly they tend to be dry as chips. In the case of Nouriel Roubini I wanted to get a second opiinion because he'e from Eastern Europe and might not be a disinterested observer. Also, his recent rock star status might be going to his head, but I don't think so. Seems to me he's staying on task as well as the new president.

What all this means, I don't know. I don't think anyone does beyond the warnings just quoted. If nothing else I am in agreement with the president that doing nothing about the paralysis of the banking and credit markets is not the right option. The Republican option of a big global kick in the ass really appeals to me, but it's like firing a shotgun at a kidnapping thug holding a child, hoping not to wound or kill the child at the same time.

Health Care Reform -- Essential Reading

When I come across links as rich in content as these I get frustrated that traffic to this blog is so low. It's my own fault. I put up a disorganized collection of scrap-book -like keepsakes with few main themes. But the pursuit of health care debate information has led me to some unexpectedly top-quality thinking and reading. Here are three links that should be on every one's reading list, no matter what position they hold, if they intend to call themselves informed.

First, the Diamond-Orszag for Social Security reform, (9 page pdf) dated from four years ago. There is no way to know what it might look like after it goes through the Congressional sausage grinder, but as written it is as delicately balanced as a Swiss time piece. What has Social Security to do with health care? Easy. Beneficiaries of Medicare also qualify for Social Security benefits at the same time and Medicare is joined at the hip with Social Security. Medicare Parts B monthly premiums are charged to the beneficiary by a withdrawal from their Social Security check. Also, although no monthly premium is charged for Part A, the annual deductible increases as the costs of health care are passed on to Medicare. Even though a separate payroll tax is designated to fund Medicare, Social Security provides a critical revenue stream for that part of the population receiving benefits from Medicare, many of whom, as in the case of Social Security beneficiaries have no income to make contributions.

(A word about Social Security reform... No official, updated plan has been proposed yet, but scare-mongers are already screaming that "they" are trying to "gut Social Security" and "take away our benefits." This is a bunch of crap. To start with, anything along those lines would be politically suicidal and there are too many smart people in Washington to come close to anything like that. The Diamond-Orszag Plan linked above consists of three easy to understand parts. 1. Adjust the age of "full retirement" to reflect our increased life expectancy. Early access to the system at age 59 would not change. 2. Raise the income cap from which the tax is collected. This year that would mean nothing to anyone not earning under a hundred thousand dollars. 3. Using a means test based on individual private retirement arrangements, adjust Social Security benefits to reflect those other assets for those who have set them aside tax-sheltered during their working years. The plan specifically states that "individual accounts would create a massive cash-flow problem for Social Security." The Diamond-Orszag Plan does not aim to molest private plans in any way.)

As you read about health care, try to remember that nothing comes without a price. It's simple arithmetic. Just like your home budget, only much bigger, any benefit received must be paid for, typically (and fortunately) not by the one receiving the benefit. Remember, too, that the Medicare portion of the overall health care picture is but one piece of the much larger combined universe we tend to compartmentalize. Health care is not an assembly of unconnected compartments but a single big economic animal depending on a variety of revenue streams which include private insurance (both individual and group), co-payments from insured people, government money from Medicare and Medicaid, and charitable gifts funding a variety of capital and community needs by not-for-profit providers.

Second, read what Maggie Mahar says in The Truth about Medicare and Private Insurers, Parts I and II. The nub of her point is that the demon we are fighting is not altogether exploitation of the system by private insurers to collect enough extra income over and above costs to furnish profits to shareholders and handsome bonuses to top performers and executives. The real problem, she points out, supporting her point with facts, is health care inflation. The actual cost of health care in America is increasing annually at a rate exceeding both inflation and GDP. Records going back thirty-five years tracking annual increases separately for both Medicare and private insurers show double digit annual percentage increases until 1990 and very little improvement since. !n 1998 private insurers got costs down to 4% over the preceding years, and in 1994 Medicare had costs down to 3% but with those two exceptions the picture has not been good. "From 2000 to 2006, the amount that [Medicare] paid for healthcare grew by 6 percent to 9 percent each and every year. This is why Medicare premiums, deductibles and co-pays have been rising." There is no way to summarize the range of links at Maggie Mahar's blog or simplify the topics they cover. The reader can spend a very long time drilling into the many resources cited and looking (for a change) at comment threads from informed professionals who know how to disagree in a (mostly) civil manner.

Third, Dr. Robert Wachter at The Health Care Blog asks Are We Mature Enough to Make Use of Comparative Effectiveness Research? This is one touchy issue. The stimulus bill that just passed included large amounts of money to look into the matter of effectiveness of drugs and treatment options. According to the sidebar, the post that has stirred the most arguments at The Health Care Blog is about that subject, Fear and Loathing over the Stimulus Bill. It illustrates how heated the debate will be once it gets up to speed. For a variety of reasons the notion of comparing outcomes and efficiencies is a scary idea. So long have we been told that "government health care" and "socialized medicine" are the hidden agenda of the Obama administration and a host of sinister forces seeking to kill off old people and babies, ration scarce resources, and push for more physician-assisted suicide that it's hard to breath in the polluted air surrounding informed discussion. Here is a snip from Dr. Wachter's post...

Here’s where things get dicey. A chief medical officer I know was once discussing unnecessary procedures in his health care system. In a rare moment of unvarnished truth telling, one of his procedural specialists told him, “I make my living off unnecessary procedures.” Even if we stick to the correct side of the ethical fault line, doctors and companies inevitably believe in their technologies and products, making it tricky to get them to willingly lay down their arms. Robert Pear described the political challenges surrounding effectiveness research in last week’s New York Times:

[the legislation has become] a lightening rod for pharmaceutical and medical-device lobbyists, who fear the findings will be used by insurers or the government to deny coverage for more expensive procedures and, thus, to ration care. In addition, Republican lawmakers and conservative commentators complained that the legislation would allow the federal government to intrude in a person’s health care by enforcing clinical guidelines and treatment protocols.

At this moment, Medicare’s rules – yes, the same Medicare that’s slated to go broke in a decade or so – forbid it to consider cost in its coverage decisions. Rather, its mandate is to cover treatments that are “reasonable and necessary.” So if Medicare comes to believe that a new chemotherapy will offer patients an extra week of life at a cost of $100,000 per patient, it is pretty much obligated to cover it. This is insane, obviously, but such are the rules.

And, if anybody tries to put the Kybosh on the Chemo, you can count on boatloads of oncologists, patient advocates, and pharma companies to descend on Washington like teenagers with Obama inaugural tickets, hammering the authorities to “be humane” and “take the decisions out of the hands of government bureaucrats and MBAs” and “put them in the hands of doctors, where they belong.” (This is precisely what happened in at Medicare’s hearings regarding cardiac CT, a technology that Medicare decided to cover despite a striking dearth of evidence of effectiveness). And TV news magazines will be right there, telling the compelling and tragic story of the kindly grandma who will never see her grandchildren’s bar mitzvahs because of Medicare’s heartlessness.

As Stalin said, “a single death is a tragedy, a million deaths a statistic.” Such is the problem with trying to make rational, evidence-based tradeoffs (that lead some people to not get the care they want) in a media-saturated open society.

I remember a snide aside from another blog:

Question: Why do coffins have nails?
Answer: To keep the oncologists out.

This bitter observation gets to one of the most important reasons for what is delicately being called "health care inflation." Too many drugs and procedures that are not medically justified. It's simple to say but hard to get under control. We are a sales-oriented culture and our mission is to sell, sell, sell. That is as true of health care providers as it is for retailers. As that doctor said so plainly above, he makes his living off unnecessary procedures. It's no accident that the two most expensive and high-profile additions to a local hospital were capital outlays for a cancer center and a heart center. From my reading, those are the two most lucrative of all modern medical specialties. Never mind about whether or not those breathtakingly expensive cancer protocols lead to verifiable positive outcomes and that unneeded heart surgeries are proliferating like tonsillectomies did when I was in school.

These are hard pills to swallow. But I urge the reader to brace for a tough look at some realities we all want to ignore. In the last two weeks of study I have come across two items that stick in my memory. The first is a snip form a video I linked about Canadian Health care. A woman in a Canadian hospital was asked about advertising their services and she replied, somewhat surprised, that she worked in a hospital. There was no need to advertise because people know what they needed without it. Besides, too many people coming in would mess with her budget. The way she said it struck me wrong at the time, but the more I think about it the more it makes sense. Here was a professional who also had a grip on the expenses involved in what she was providing.

The other item I remember was that in Sweden all preventive health care measures are free, from pap smears and mammograms to diabetes screening and checks for other conditions. As a result people with chronic disease have no reason not to take advantage professional assistance caring for themselves. For my wife, who has a family history of breast cancer, this seemed like a dream.

My homework continues.
I'm just starting and these are a couple of my notes.
If even one reader finds them to be of value I would appreciate a comment to let me know this effort was not in vain.

Reflections on the New Great Depression

In Questions for 2009, posted at 3Quarks this morning, Bryant Urstadt takes a dark look at our protracted recession. The writer muses to himself "Will I write a great novel? Probably never... If I wrote a great novel, could I even get it published? With major publishing houses shrinking as fast as the newspapers, this seems unlikely... If I got it published, would anyone read it?" And so on.

This part jumped out at me:

How can so many women be supporting so many men? Among my friends, the men are all in sweatpants at home, or supervising the meltdown of some formerly flourishing concern, while the women soldier on, bringing home the paychecks, and sometimes making dinner, too. Statistics bear this out. Eighty percent of the fired are men. This is not just the collapse of an economy, but the collapse of a gender.

First off, it's a sad but true that most well-paid jobs are held by men. It's well and good that women are making progress toward equal pay for equal work, but the mathematical reality is that in the workforce men outnumber women. And even in this time of "single-parent households" which nearly always means a woman and her children, for most families men still do the heavy lifting.

This economic imbalance may have roots in our agricultural past. For Western farming culture** the division of labor is fairly straightforward. Women cared for the house and children while their men took care of the barn and fields. What little economy was needed was not a big deal. The big money went for essentials and what little remained was incidental. Mama may have had a little "egg money" or "pin money" stashed in a jar somewhere but that was as close to discretionary income as they had.

Ironically the Great Depression slogged on for some time until WWII turned out to do more than anything to bring about a "recovery." During and following the war women moved into the workplace and became integral to family economics. The post-war economy shifted from an agricultural base to a manufacturing base. While the men were at war women started to make serious income furnishing wartime needs from uniforms to airplanes.

When the men came home most women continued in their new roles. A new family model emerged with two incomes which accounts for a decade of incredible prosperity until the marketplace (Remember The Marketplace? That's the altar at which we have worshiped since WWII.) adjusted costs to calibrate expenses upward. Family income changed going into the Sixties. The second income, which started out as "discretionary," little by little became essential. By the end of the Sixties the two-income family had replaced the old (agricultural) single income model.

The change was made easier by a distribution system that enabled California truck farms, Iowa meat plants, Idaho potato farms, Wisconsin dairy farms, Georgia peach farms and New York apple farms to put products on every table in the country. And Detroit was making enough cars that one car per family was no longer enough. No need to go on. You know the rest.

Times were tough during the Great Depression but by most accounts there was enough to eat, even though begging, soup lines and other forms of charity formed the distribution network. In the current crisis, so far, there is enough to eat but as the writer observes it may be the woman's contribution to family economics may be, even in the case of homelessness, what stands between poverty with or without hunger.


I submit that Bryant Urstadt's keen observation goes to an important but overlooked reality. Women have replaced agriculture as the lynch-pin to our economy. As a population, women now stand between what we imagine to be a worst case scenario and physical hunger. We must now redefine "discretionary income" as women's earnings have become essential.

_______________________________________________
**Malcolm Gladwell points out in Outliers a fundamental difference
between Western farming, which is seasonal, and farming in the East.
Very important differences too complicated to summarize here which
may very well figure in how current economic challenges may be
approached by two very different cultural bases.

Roubini on Laissez-Faire Capitalism

Before last October I never heard of Nouriel Roubini, but his appearance as a guest on C-SPAN's Washington Journal got my attention.

Since then in the short space of four months his name has become a household word. If you hear someone talking about "Doctor Doom" this is the man to whom they refer, due to his relentless unheard warnings that the national and global economies were cruising for a bruising. Every week and months that passes proves him to have been more right than wrong.

The vocabulary we use to speak of matters economic is becoming more focused. The word "recession" is now more carefully referred to as V-shaped, U-shaped or L-shaped. These handy letters reflect how a recession might appear on a graph. A V-shaped recession is the old-fashioned okay one, starting with a "Bear" market plunging down, followed by a moment in time we once called the "Bottom," after which smart people would jump into the "Bull" market to make a killing on the way up. Listening to the news over the last month or two I notice a lot more references to a "U-shaped" recession. Hmm... Looks like the "Bottom" is becoming more than just a moment in time. If it is, it's the longest "moment" anyone can remember.

Comes now talk of an "L-shaped" recession. This is not a good thing. An "L" on the chart means we don't know when the economy will get better. Early in the discussion of the various "plans" for the government to throw money at the problem, we heard references to Japan's "lost decade," referring, I suppose, to an "L-shaped" recession that turned into a way of life variously called deflation, stagnation or some neologism of both. As I write this the horizontal line of the "L" is getting longer... along with the vertical line, come to think of it. If this is gonna be a "U-shaped" recession it's the biggest upper-case "U" on record. But more and more smart people are calling it "L-shaped."

This post is simply to put Nouriel Roubini's essay in Forbes in an easy to read form for my own handy reference. He's belled the cat with this one, starting with the title. See if there is anything about the title you don't understand.

Laissez-Faire Capitalism Has Failed

It is now clear that this is the worst financial crisis since the Great Depression and the worst economic crisis in the last 60 years. While we are already in a severe and protracted U-shaped recession (the deluded hope of a short and shallow V-shaped contraction has evaporated), there is now a rising risk that this crisis will turn into an uglier, multiyear, L-shaped, Japanese-style stag-deflation (a deadly combination of stagnation, recession and deflation).

The latest data on third-quarter 2008 gross domestic product growth (at an annual rate) around the world are even worse than the first estimate for the U.S. (-3.8%). The figures were -6.0% for the euro zone, -8% for Germany, -12% for Japan, -16% for Singapore and -20% for Korea. The global economy is now literally in free fall as the contraction of consumption, capital spending, residential investment, production, employment, exports and imports is accelerating rather than decelerating.

To avoid this L-shaped near-depression, a strong, aggressive, coherent and credible combination of monetary easing (traditional and unorthodox), fiscal stimulus, proper cleanup of the financial system and reduction of the debt burden of insolvent private agents (households and nonfinancial companies) is necessary in the U.S. and other economies.

Unfortunately, the euro zone is well behind the U.S. in its policy efforts for several reasons. The first is that the European Central Bank is behind the curve in cutting policy rates and creating nontraditional facilities to deal with the liquidity and credit crunch. The second is that the fiscal stimulus is too modest, because those who can afford it (Germany) are lukewarm about it, and those who need it the most (Spain, Portugal, Greece, Italy) can least afford it, as they already have large budget deficits. The last reason is that there is a lack of cross-border burden sharing of the fiscal costs of bailing out financial institutions.

With its aggressive monetary easing and large fiscal stimulus putting it ahead, the U.S. has done more. Except for two elements, both key to avoiding a near-depression, which are still missing: a cleanup of the banking system that may require a proper triage between solvent and insolvent banks and the nationalization of many banks, even some of the largest ones; and a more aggressive, across-the-board reduction of the unsustainable debt burden of millions of insolvent households (i.e., a principal reduction of the face value of the mortgages, not just mortgage payments relief).

Moreover, in many countries, the banks may be too big to fail but also too big to save, as the fiscal/financial resources of the sovereign may not be large enough to rescue such large insolvencies in the financial system.

Traditionally, only emerging markets suffered--and still suffer--from such a problem. But now such sovereign risk, as measured by the sovereign spread, is also rising in many European economies whose banks may be larger than the ability of the sovereign to rescue them: Iceland, Greece, Spain, Italy, Belgium, Switzerland and, some suggest, even the U.K.

The process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign. Among these liabilities are banks, other financial institutions and, soon possibly, households and some important nonfinancial corporate companies.

At some point a sovereign bank may crack, in which case the ability of governments to credibly commit to act as a backstop for the financial system, including deposit guarantees, could come unglued.

Thus the L-shaped, near-depression scenario is still quite possible (I assign it a 30% probability), unless appropriate and aggressive policy action is undertaken by the U.S. and other economies.

This severe economic and financial crisis is now also leading to a severe backlash against financial globalization, free trade and the free-market economic model.

To paraphrase Churchill, capitalist market economies open to trade and financial flows may be the worst economic regime--apart from the alternatives. However, while this crisis does not imply the end of market-economy capitalism, it has shown the failure of a particular model of capitalism. Namely, the laissez-faire, unregulated (or aggressively deregulated), Wild West model of free market capitalism with lack of prudential regulation, supervision of financial markets and proper provision of public goods by governments.

There is the failure of ideas--such as the "efficient market hypothesis," which deluded its believers about the absence of market failures such as asset bubbles; the "rational expectations" paradigm that clashes with the insights of behavioral economics and finance; and the "self-regulation of markets and institutions" that clashes with the classical agency problems in corporate governance--that are themselves exacerbated in financial companies by the greater degree of asymmetric information. For example, how can a chief executive or a board monitor the risk taking of thousands of separate profit and loss accounts? Then there are the distortions of compensation paid to bankers and traders.

This crisis also shows the failure of ideas such as the one that securitization will reduce systemic risk rather than actually increase it. That risk can be properly priced when the opacity and lack of transparency of financial firms and new instruments leads to unpriceable uncertainty rather than priceable risk.

It is clear that the Anglo-Saxon model of supervision and regulation of the financial system has failed. It relied on several factors: self-regulation that, in effect, meant no regulation; market discipline that does not exist when there is euphoria and irrational exuberance; and internal risk-management models that fail because, as a former chief executive of Citigroup put it, when the music is playing, you've got to stand up and dance.

Furthermore, the self-regulation approach created rating agencies that had massive conflicts of interest and a supervisory system dependent on principles rather than rules. In effect, this light-touch regulation became regulation of the softest touch.

Thus, all the pillars of the 2004 Basel II banking accord have already failed even before being implemented. Since the pendulum had swung too much in the direction of self-regulation and the principles-based approach, we now need more binding rules on liquidity, capital, leverage, transparency, compensation and so on.

But the design of the new system should be robust enough to counter three types of problems with rules. A tendency toward "regulatory arbitrage" should be kept in mind, as bankers can find creative ways to bypass rules faster than regulators can improve them. Then there is "jurisdictional arbitrage," as financial activity may move to more lax jurisdictions. And, finally, "regulatory capture," as regulators and supervisors are often captured--via revolving doors and other mechanisms--by the financial industry. So the new rules will have to be incentive-compatible, i.e., robust enough to overcome these regulatory failures.

Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics, is a weekly columnist for Forbes.com.

Regarding Same-Sex Marriage and Abortion

Question: Same-Sex Marriage and Abortion. What do these two topics have in common?

Answer: Whenever these topics are mentioned in certain religious quarters both trigger hypertension and spirited (no pun intended) debate.

Think about it for a moment. Does the reader know anyone with strong opinions about one who is indifferent to the other? Although they are miles apart from a practical point of view, these two subjects spark heated discussions among politically conservative Christians. Speaking practically, same-sex marriages may run into problems, but abortion is not likely to be on the list. In fact, the abortion issue is so far removed from the other issue that no one I know has considered any connection, other than "attacks of the Enemy" to destroy our country. What, then, might calm heated arguments at the national level and soothe the fears of Christians disturbed that both issues present a creeping menace, if not a conspiracy, to attack and destroy the faith?

Dale Carpenter at VC points to a Times editorial by David Blankenhorn and Jonathan Rauch, A Reconciliation on Gay Marriage, which links both subjects by using a very Christian principle, reconciliation. Reconciliation, as every schoolboy knows, recognizes that both sides of any dispute are not just fussing for the sake of fussing. At bottom, especially in matters of faith, both sides have irreconcilable differences that are by definition insoluble. In order to be reconciled, each side must cede a little to the other in hopes that with the passing of time they can move on with life and leave at least one wound to heal.

Christians have recognized from ancient times the most common of all reconciliations, divorce. It's misleading to call divorce a form of reconciliation since by definition "irreconcilable differences" is its very foundation. But that has not discouraged Christians from recognizing divorce whenever it occurs in their midst. A case can be made that recent years have seen an increase in divorces, a veritable fashion statement, as men at a certain mid-life stage are driven to find a new trophy wife, in many cases starting second families.

But I digress. This post is not about divorce, but abortion and same-sex marriage. It's easier to throw stones at someone else's glass house as long as our glass house is a different color. Consider this:

In politics, as in marriage, moments come along when sensitive compromise can avert a major conflict down the road. The two of us believe that the issue of same-sex marriage has reached such a point now.

We take very different positions on gay marriage. We have had heated debates on the subject. Nonetheless, we agree that the time is ripe for a deal that could give each side what it most needs in the short run, while moving the debate onto a healthier, calmer track in the years ahead.

It would work like this: Congress would bestow the status of federal civil unions on same-sex marriages and civil unions granted at the state level, thereby conferring upon them most or all of the federal benefits and rights of marriage. But there would be a condition: Washington would recognize only those unions licensed in states with robust religious-conscience exceptions, which provide that religious organizations need not recognize same-sex unions against their will. The federal government would also enact religious-conscience protections of its own. All of these changes would be enacted in the same bill.

For those not immersed in the issue, our proposal may seem puzzling. For those deeply immersed, it may seem suspect. So allow us a few words by way of explanation.

What follows is a patient, easy to grasp outline of a very sensible proposal to federalize the question of same-sex marriage in the same way that the abortion question will very likely be federalized by the Freedom of Choice Act (FOCA) when it again comes up for vote. (This time I expect it to pass, incidentally. After thirty-six years the political will seems to be there. Only by federalizing the question will the tired old debate over Roe vs. Wade be put to bed in the same way that Brown put Plessy to bed. This time the Executive and Legislative branches will make the move rather than shoving the responsibility on the Judicial branch to do the tough work.) Blankenhorn and Rauch end their column with a reference to abortion that inspired this post.

Linking federal civil unions to guarantees of religious freedom seems a natural way to give the two sides something they would greatly value while heading off a long-term, take-no-prisoners conflict. That should appeal to cooler heads on both sides, and it also ought to appeal to President Obama, who opposes same-sex marriage but has endorsed federal civil unions. A successful template already exists: laws that protect religious conscience in matters pertaining to abortion. These statutes allow Catholic hospitals to refuse to provide abortions, for example. If religious exemptions can be made to work for as vexed a moral issue as abortion, same-sex marriage should be manageable, once reasonable people of good will put their heads together.

In all sharp moral disagreements, maximalism is the constant temptation. People dig in, positions harden and we tend to convince ourselves that our opponents are not only wrong-headed but also malicious and acting in bad faith. In such conflicts, it can seem not only difficult, but also wrong, to compromise on a core belief.

But clinging to extremes can also be quite dangerous. In the case of gay marriage, a scorched-earth debate, pitting what some regard as nonnegotiable religious freedom against what others regard as a nonnegotiable human right, would do great harm to our civil society. When a reasonable accommodation on a tough issue seems possible, both sides should have the courage to explore it.

To underscore my point: If Christians can come to terms with divorce in their intimate midst, even to the point of looking the other way when many of their brothers and sisters engage in serial monogamy, I see no reason there should be any loud objections to federal moves to address these two vexing social problems, especially when language is specifically in place allowing exceptions for "religious objections." For those who are skimming instead of reading, here it a salient point you may have missed:
A successful template already exists: laws that protect religious conscience in matters pertaining to abortion. These statutes allow Catholic hospitals to refuse to provide abortions, for example. If religious exemptions can be made to work for as vexed a moral issue as abortion, same-sex marriage should be manageable, once reasonable people of good will put their heads together.


In the interest of full disclosure I should mention that as a conscientious objector during the Vietnam Era my tour of duty in the Army Medical Service Corps was the consequence of my decision to be drafted as a non-combatant in uniform. I am personally familiar with what it means to be a Christian standing for a deeply held principle when all around me seem to be in disagreement. For me that is not a sign of cowardice or compromise. My decision was and is, if anything, my small way of keeping an important core value of faith alive until a time which for which I hope, long after I am dead, when "no sword is drawn but the sword of righteousness, no strength known but the strength of love" and "all peoples may be gathered under the banner of the Prince of Peace, as children of one Father..." [BCP p.815]

Hootsbuddy on The Minimum Wage as an Economic Stimulus

In Hootsbuddy's opinion increases in the minimum wage have a stimulating effect on the economy because every dime going into that segment of the labor market will be spent immediately. Those working at the minimum wage and others receiving a little bump in earnings thanks to the tandem effect, are not the ones who set aside part of their earnings for a rainy day. For that population the rainy day is already here.

Another increase in the minimum wage has already been scheduled for July, 2009. In the overall scale of the mess we are in, the impact will barely move the needle. Most economists and other observers likely won't notice. But for those who get the increase it will literally be Christmas in July. TV reporters won't be chasing after busboys and housekeepers to get stories for the evening news. Who cares if they can now buy enough baby food to last them two weeks instead of one, or put another second-hand tire on that piece of junk waiting for the owner to get it running again. Those are lifestyle tales that don't attract the "middle" class even though they wouldn't be middle class without a lower class.

I can hear it now, screams of "class warfare" rising from the gasbag and talk show set. But guess what? I really don't care.

As I write this Hillary Clinton is in Asia and the topic of the day on Washington Journal is whether or not she should be pushing the Chinese about human rights. After all, this is the twentieth anniversary of the Tienanmen Square uprising. Callers to that program are a mixed bag, but in the first few minutes I heard mention of Chinese "slave labor," poor quality, dangerous production, and an oppressive system using savage methods to silence free speech. These complaints are coming from Americans who as a group eager to do business with Walmart and other retailers in a relentless pursuit of the lowest price, even (or especially) if that means buying products from China. They forget that the video games, cell phones and computers we love so well also come from there.

Discussions of the federal minimum wage are as full of contradictions and mixed messages as discussions of human rights abroad. As consumers we hate the notion that when wages increase goods and services cost more. Members of the middle class are often too close to the bottom to have sympathy for those still there. (Let their incomes get stuck for a couple of years and see how they react.) This week we witnessed outraged complaints from homeowners who were not in trouble because the stimulus bill had no candy in the stocking for them. Rick Santelli's disgusting rant on CNBC was a public exhibition of selfishness that appealed to the lowest common denominator of American self-absorption. When he said "The government is promoting bad behavior" my first reaction was "Excuse me? Did I just hear a reporter standing in the midst of a bunch of Wall Street types complain about bad behavior?" If I were in that place "bad behavior" would be the last topic I would mention. He later got of a cute line about giving money to people who "carry the water instead of those who drink it," never imagining a population near the bottom who worry about paying for their water, having to decide between utilities or groceries. (Before I leave the Santelli reference, here is a link to Robert Gibbs' serious, adult response during a White House press briefing.)

I could go on like this for pages, but the inspiration for this post comes from a referral among my stats.

I have no idea when it was started but someone put up a website called The Minimum Wage and Economic Stimulus. It makes me especially proud that something I wrote last year (when the federal minimum wage was increased for the first time in many years), appears as the first link on their home page.

Readers are invited to check it out. At this point, as I said, I can't figure out who put this together or how to leave comments. Until then, I send them thanks for noticing.

The T-Mobile Dance

Watch the moment Liverpool Street Station danced to create this special T-Mobile Advertisement.




It was about this time last year that we saw Frozen Grand Central Station.
I like this better.

Robert Reich on the Audacity of Hope

Yesterday's lesson was long, messy and simple: BANKS LIE.
Yesterday's best line (William Black via Yves Smith) went to the heart of the matter:

Very few folks earning $60K are willing to get in the face of the CEO and CFO making $25 million annually and tell them that they are running a fraudulent bank and they are liars.

Which means the big shots have everybody by the jewels.
Since banks don't tell the truth about their assets, and since little shots don't tell big shots what to do, Treasury has little choice.
Today the lead story on the evening news was preparing everybody for nationalization of the banks.
When the guy making sixty grand is telling, not asking, the results are different.
And more credible.
Today's best lines are from Robert Reich.

The truth is that no one has any idea how long this crisis will last or exactly how to reverse it. Anyone who says differently cannot be trusted. And because restoring trust is so central to mending the economy, our leaders must be extremely careful not to indulge right now in the audacity of hope.

Credibility is the only asset that makes any difference. This is not the time for anyone to be blowing smoke. Not anyone.

Bankers LIE

Lots of smart people from different cages in the political zoo are commenting lately about banks and how they work, or don't. Apart from the stimulus package the administration has another slush fund from which to draw water for a thirsty economy, the bailout money remaining in TARP. It's fair to say that money is not burning a hole in anyone's pocket, but everyone agrees that in this case time is "of the essence." The sooner lighter fluid gets squirted on the fire, the sooner the charcoal starts to burn.

Mr. Geitner the Treasury Secretary, decided that since heaping big amounts into a few big banks proved to be a failed effort, it is better to parcel out smaller amounts to a greater number of banks in hopes that by doing so he can get things moving faster. Problem is that the whole banking system is shot through with bad accounting which the financial community likes to call "under stress."

Call it what you want, it all cooks down to carrying outstanding obligations on their books, some of which are more unlikely than others to be worthless. If what I have been reading is close to reality, the next few months will witness a bloodbath in the world of banking that will look like a scene from a Bruce Lee film. Here are a few links for further reading.

Reader advisory: This stuff is by wonks, for wonks and about wonks. Very dry, indeed. Some of it long and boring. Wade in at your own risk and don't complain you weren't warned.

The Stress Test: Time for Transparency by James Kwak

The stress test is supposed to indicate which banks are healthy and which aren’t (so they can be fixed or closed). We need this for the reason most of you already know: nobody thinks the banks (meaning, mainly, the big ones) are healthy. The New York Times has a good summary of the situation. Nouriel Roubini thinks U.S. banks are facing another $1 trillion in write-downs. The IMF thinks it’s more like $500 billion. The only people who think the banks are healthy are the bankers themselves...

Remember that last bit as you read. This next link is not directly about about banking and finance but it pertains to the intended result if money once again gets moving.

"Hurry Up and Waste" by Mark Thoma

...by emphasizing the worthiness of his spending proposals, Obama has allowed the debate to revolve around the merits of each project. Normal spending is judged on those terms--whether the goods or services justify their cost. The point of stimulus spending, by contrast, is simply to spend money--on something useful if possible, wasteful if necessary. Keynes proposed burying money in mineshafts, so that workers would be hired to dig it out. (Imagine what the GOP could do with material like that.) World War II was an effective stimulus that, economically speaking, consisted of 100 percent waste. If war hadn't broken out, we could have enjoyed the same economic benefit by building all those tanks and planes and dumping them into the ocean.

William Black: "There Are No Real Stress Tests Going On" by Yves Smith

By way of background, William Black is a former senior bank regulator, best known for his thwarted but later vindicated efforts to prosecute S&L crisis fraudster Charles Keating. He is currently an Associate Professor of Economics and Law at the University of Missouri - Kansas City.

More germane for the purpose of this post, Black held a variety of senior regulatory positions during the S&L crisis.He managed investigations with teams of examiners reporting to him, redesigned how exams were conducted, and trained examiners.

...it is more likely that the banks will get scorecards that show them to be in various stages of peril, but none will be found to be terminal. (They can't be given a clean bill of health, that would call the whole rationale of the TARP and its various injections into question, and also would put Geithner at considerable risk if any bank declared OK fell over in less than 12 months).

But even the designation of "sick but not ready to be hospitalized" carries with it risk to the Administration. If the banks get sicker than anticipated, how can they explain it? They can't say, "oh, things got worse than we contemplated". The whole point of a stress test is to anticipate worst case scenarios. And it is pretty certain a fair number of the big banks will be on such large-scale life support by year end that it will be hard to make a case not to put them in receivership.

...You can't conduct a meaningful stress test without reviewing (sampling) the underlying loan files and it seems likely that the purchasers of securitized instruments (not just mortgages) do not even have the loan file data. Moreover, loss ratios vary enormously depending on the issuer, so even a bank that originates (or has purchased a bank that originates) similar product cannot simply take its own loss rate and extrapolate it to the measure the risk on the value of securitized credit instruments.

...it takes examiners with experience, care, courage, and investigative instincts and abilities. Very few folks earning $60K are willing to get in the face of the CEO and CFO making $25 million annually and tell them that they are running a fraudulent bank and they are liars.

...Black is not using the fraud word lightly. He believe that we have Enron-level accounting fraud happening, now, in the financial services industry. And we have asked repeatedly, why has there been no investigation of fraud at Lehman? There was a $100 billion plus hole in its balance sheet, meaning a substantial negative net worth, when its financial statements presented a completely different picture.

He goes on the describe how the complexity of the challenge of assessing the financial health of any bank is greater than can be determined by a few outside examiners. In the end, the only people who know the truth are employees of the banks themselves. And if they haven't been doing a good job, it certainly is not in thier interests to rat out themselves.

I've saved the best for last. Unfortunately, this one is also the longest. I printed it off to carry it to the loo, but once you get going, it's not hard reading. However, the reader needs to have done a little background reading to appreciate what is said. I got the link via Cassandra Does Tokyo.

Bank solvency and the "Geithner Plan" by John Hempton

...I used to be an (Australian and New Zealand) Treasury official and thought I gave up policy analysis when I ceased being a bureaucrat.

But the analysis of banks got intertwined with the analysis of politics. You can’t possibly decide what bank to invest (or for that matter short) without an understanding of where the politics is. If the government is going to keep giving money to banks (as per the Citigroup bailout) then you just have to own them. If the government is going to be harsh (as per the AIG bailout) then you want to run a mile. And they could be harsher than that. There are lots of possible outcomes – and the outcomes seem uncorrelated to the solvency of the institution. WaMu was probably solvent (subject to definitions below) and was confiscated – certainly – according to the FDIC – it had enough capital when it was confiscated. Wachovia was forced to sell itself when solvent (and when Wells happily purchased them later proving the point). AIG was shockingly insolvent and the shareholders were 80% diluted. Citigroup was in much bigger trouble than WaMu (it was actually illiquid) and the shareholders were given a big kiss (lots of very cheap government money and guarantees) and told to go on their way.

The government policy is very hard to determine. Under the Bush administration there was no policy. Each financial institution in crisis was handled a different way – think Bear, Lehman, AIG, Fannie and Freddie, WaMu, Wachovia, Citigroup. No two deals were even close to similar. Ad-hoc – thy name is Hank Paulson.

We have gone from an administration which demonstrated that it had no plan to the “Geithner Plan”. The “scare quotes” around “Geithner Plan” are because it is unfair to even call the “Geithner Plan” a “Plan”. As far as I can see there is no detail – and if you don’t have detail you don’t have a plan. I will remove the scare quotes when I think the Obama administration has a plan.

That said – lets put some framework around “the plan” – such as it is

There is no way for me to parse what follows.

Just know that my post title "Banks LIE" is not the punch line. It is the theme. I always knew my suspicions about banks and banking were as poisoned as my attitude about insurance but in recent years, thanks to having banked with some very well-run big banks I almost changed my mind.

The food business taught me that size is the enemy of service. But we were never so big to discover another obvious reality, that size is also the mother of corruption. The bigger the institution, the easier it is for immoral people to escape detection and the greater the temptation to steal.

Robert Reich offers a cliff notes version of what's going on that covers all one really needs to know in a few short paragraphs.

The only way to make sense of Tim Geithner’s “stress test” for banks is to assume a kind of triage. Banks that are reasonably healthy right now -- whose assets are fully adequate to fund their liabilities, and can make new loans -- don't need a bailout. And banks that are too far gone to save –- whose loans when realistically valued won’t make them solvent even when the economy recovers -- shouldn't be bailed out. They should be put under receivership that pays off depositors, wipes out shareholders, and then closes the bank.

This leaves a third category of bank that could be salvaged -- whose assets are likely to be enough to make them solvent when the economy turns up again -- but that need bailouts in the meantime. Money from the Treasury and Fed will be used to lure outside investors to buy up these banks' bad loans and clear up their balance sheets so they can make new, responsible loans.

At least, that's the only sense I can make of it.

But how much of our financial system falls into the “too-far-gone-to save” category, and how much into the “might be saved with taxpayer help?” And how will Geithner and his colleagues at the Treasury be able to tell? After all, we got into this mess because banks were fiddling with their numbers and making bets off their balance sheets. And most still aren’t willing to write down their bad loans to realistic market values.

It would be far cheaper, quicker, and safer for the government to just take over every questionable bank. This is the only way we can get the truth about which should be shut down. And the way taxpayers who will be bailing out salvagable banks can ever recoup our costs. Why should any upside gains go to private shareholders who made bad bets or to bank executives and directors who got us into this mess in the first place?

Meanwhile, the rest of America could stand a stress test on a much bigger scale. No need to worry about families with adequate assets to get them through the storm. And the stimulus will help many others. But families that have lost their savings and are within a few years of retirement, or whose breadwinners have been out of work for months and have exhausted their unemployment benefits, or have no health insurance, or who are on the verge of losing their homes – may not make it. Instead of rewarding executives of insolvent banks that would otherwise fail, we should be helping insolvent families for whom failure spells disaster.