It’s Still the Prices

At Forbes Ellie Kincaid restates the now 15 year old claim about U. S. health care (it’s the prices, stupid):

Spending on pharmaceuticals was $1,443 per capita in the U.S., double the average of $749 for the 11 countries studied. American generalist physicians also made nearly twice the average for all the countries, at $218,173, with similar trends for specialists and nurses. But a bigger proportion of U.S. spending went into administrative healthcare costs: 8% compared to an average of 3%. Most of the data for the study published in JAMA came from the OECD and World Bank.

“Some of the more common explanations about higher healthcare spending in the United States, such as underinvestment in social programs, the low primary care/specialist mix, the fee-for-service system encouraging high volumes of care, or defensive medicine leading to overutilization, did not appear to be major drivers of the substantially higher U.S. healthcare spending compared with other high-income countries,” the authors wrote.

She continues with a hat tip towards the excess utilization theory. Why can’t it be both? Half of Medicare recipients take five or more drugs. That’s overutilization but it’s physician-created overutilization and I would argue that it’s unethical. I’d be willing to bet a shiny new dime that no one really knows what the interactions of all of these drugs are and that relatively few combinations have ever been studied.

IMO we’ll never bring sanity to our health care system without substantial structural changes in how health care is delivered and how it is paid for. Since that will inevitably mean that someone’s earning will be reduced and someone won’t get as much care as he or she wants, those changes will be fought tooth and nail.


What Brink?

I have so many problems with Charles Kupchan’s article at Foreign Policy on the U. S., Turkey, and Syria I hardly know where to begin:

Washington and Ankara need to step back from the brink before it is too late. The United States and Turkey still need each other to help stabilize a Middle East that is in turmoil. And with Turkish democracy already imperiled by President Recep Tayyip Erdogan’s autocratic turn, a breakup with the United States would likely prompt him to further tighten his grip and potentially end Turkey’s geopolitical alignment with the West — dealing both Turkey and the Atlantic community a decisive blow.

First, Turkey jumped off “the brink” 15 years ago. Is there any “Turkish democracy” any longer about which to be concerned? What’s Mr. Kupchan’s operative definition of democracy?

I don’t believe that the United States can have a close relationship with any Islamist country and, indeed, it’s hard for the U. S. even to have a productive relationship with today’s Turkey. Why is a NATO that includes an aggressive, irredentist, Islamist Turkey and a half dozen major European countries that refuse to pay for their own defense worth remaining a part of?

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Timing the Market

There’s a very interesting article at Alpha Architect that dives into three different methods of determining stock values, the Fed model, the Shiller model, and the Graham model.

So, is the market overvalued, undervalued, or overvalued and undervalued? Beats me. IMO it’s a pond that guys like me shouldn’t play in.


My Thoughts On Elitism

After reading several articles whining about attacks on elitism and complaining that the elite aren’t being treated well enough, I will only add this.

Not everyone with an IQ over 145 went to Harvard.

Not everyone at Harvard has an IQ over 145.

There are plenty of smart, hardworking, well-educated people in Freeport, Illinois or Topeka, Kansas.

Don’t confuse being elitist with being elite.


St. Patrick’s Day

As you may be aware St. Patrick’s Day is a distinctively American holiday. In Ireland it’s a saint’s day; a religious holiday.

Yesterday I received a text message from one of my siblings. The exchange went something like this.

Sibling: What percent Irish are you?

Me: Same as you. 😉

Me: (after outlining the details). About 40%. The DNA tests say about 45%.

Me: However, since ethnic identity tends to follow the maternal line and Mama identified as Irish, so do we as has everybody on that side of the family going back 150 years.

My best high school buddy was 100% Irish. All four of his grandparents were born in Ireland. He was a contrary cuss. He used to wear orange on St. Patrick’s Day.

As you may also be aware the Irish in Ireland didn’t eat corned beef and cabbage. Beef was exported. Corned beef and cabbage was 19th century working man’s fare. We’ll be eating Irish bangers and mash tonight.


Working Your Way Through College? Not Anymore

In the Wall Street Journal former college dean Richard R. West reminisces about working his way through college:

In 1956, as a freshman at Yale, I waited tables in a student dorm for about $1 an hour, 10 hours a week, over the 30-week academic year. I received a full scholarship, but even if it had ended, I recall that Yale’s “all in” price—including tuition, room and board—was $1,800 a year. My work during the term could have covered one-sixth of that.

Today tuition, room and board at Yale run $66,900. Working the same amount as I did—even at, say, $12 an hour, an increase of roughly one-third after inflation—produces income of $3,600, or slightly more than 5% of the total. To earn enough to pay for one-sixth of a Yale education would require an hourly wage of more than $37! Yale’s own literature, by the by, lists the amount that a freshman on scholarship can expect to contribute during the school year at $2,850. The same basic economics applies to summer employment.

When I was in college I worked around 40 hours a week. I cooked short order breakfasts, three hours a day, six days a week for five years. I waited on tables. I taught judo. I gave guitar lessons. I sang at weddings (I’ve sung at more than 400). I translated scientific articles from Russian into English. When you sum it all up, add a few thousand dollars in NDEA loans, and tossed in the scholarships I received it enabled me to graduate from a pricey private university. That’s no longer possible.

What has happened? Several things. The demand for a college education has gone up while the supply remained relatively constant. The proportion of college administrators has risen sharply, increasing costs. The federal government has made a lot more money available for college loans and when you increase what people can pay for a scarce resource its price will inevitably rise.

And all of that has taken place as wages for the sorts of jobs that college kids used to do have remained flat and there’s been more competition for them than ever before.

I don’t envy the situation of today’s college students. They’re emerging from four (or six or eight) years of higher education with significant levels of debt even as the monetary value of their educations except in a few niches has remained flat.


The Top .0001%

There’s a lot of whining going on the major news outlets about former Theranos CEO Elizabeth Holmes to the effect that the only female equivalent of Steve Jobs is a fraud, trying to draw some sort of gender solidarity message from it.

I question whether anybody can draw meaningful conclusions about a group (billionaires) with so few members other than that they’re really, really rich. Don’t look at them as members of some other group whether it’s women, white folk, blondes, people who attended Stanford, or any other group. They’re sui generis, a group unto themselves.

Maybe it’s true as Honoré de Balzac alleged that every great fortune begins with a crime. I don’t know. I’ve never known any billionaires that well.

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Nevertheless She Persisted

In her weekly column at the Wall Street Journal Peggy Noonan succinctly summarizes Hillary Clinton’s persistent error and the quandary in which Democrats find themselves:

“If you look at the map of the United States,” she said, “there’s all that red in the middle where Trump won. I win the coasts. . . . But what the map doesn’t show you is that I won the places that represent two-thirds of America’s gross domestic product. So I won the places that are optimistic, diverse, dynamic, moving forward.” Mr. Trump’s campaign “was looking backwards. You know, you didn’t like black people getting rights, you don’t like women getting jobs, you don’t wanna see that Indian-American succeeding more than you are.”

Why did 52% of white women support Mr. Trump? Because the Democratic Party doesn’t do well with white men and married white women. “Part of that is an identification with the Republican Party, and a sort of ongoing pressure to vote the way that your husband, your boss, your son, whoever, believes you should.” James Comey announced that he had reopened the investigation of her State Department emails, and “white women who were going to vote for me, and frankly standing up to the men in their lives and the men in their workplaces, were being told, ‘She’s going to jail. You don’t want to vote for her.’ ”

So, to recap: Trump supporters were racist, narrow and ignorant, and Trump women are not tough and modern but fearful, cowering and easily led. They live in a big mass of red in the middle (like an ugly wound, or an inflammation!) while we have the coasts—better real estate. And better people.

The point of her column is that Ms. Clinton and others who hold her views are clinging bitterly to a “Deliverance” view of America beyond the urban megalopolises. I think she’s got the wrong movie. More like The Hills Have Eyes. Or maybe Wrong Turn.

However, let me provide an alternative explanation to the one proposed by Ms. Clinton to why big cities are prospering. They’re being highly subsidized and the calculations of government subsidy generally don’t capture the actual value of those subsidies. The interstate highway system subsidizes major cities. Intellectual property law subsidizes big cities. Banking laws subsidize big cities. Uncontrolled imports of hard goods while controlling the provision of services subsidizes cities. Concentrating federal government offices in Washington, DC and its environs subsidizes the East Coast megalopolis.

Then there are the direct subsidies. In the wake of 9/11 New York City received between $20 billion and $50 billion in direct subsidies from government at various levels. Then there are the huge infusions of cash the big, mostly New York-located banks received during the financial crisis. That New York is prospering from all of these subsidies is not surprising what would be surprising is if it didn’t.

Not all major cities are flourishing. Chicago is not. Philadelphia is not. Baltimore is not. St. Louis is not. That effectively refutes the urban/rural dichotomy being proposed. What should be more closely examined is subsidized vs. unsubsidized. In today’s economy what is subsidized flourishes while what is not struggles.


The Illinois Governor’s Race Primary

The Illinois Democratic primary race for governor is coming down to the finish line. On Tuesday there was a final debate among the candidates. The Chicago Tribune reported:

Leading Democratic governor candidate J.B. Pritzker was called a “liar” and a “fraud” by two rivals as the billionaire businessman’s ties to secret offshore shell companies became the focus of the final forum of the campaign Wednesday night.

For his part, Pritzker avoided getting into specifics of his financial holdings, and claimed the offshore companies were investment instruments of family trusts established long ago and that charity was the beneficiary, not himself.

“I have no control over those trusts, the entities that are created. Just like all trusts, they make investments, so they were created by the people who control those trusts. And remember, those trusts are focused on charitable giving,” said Pritzker, who has declined to make available his complete tax returns or any returns from the trusts.

Rival Daniel Biss called Pritzker’s explanation an “unbelievable mess of word salad” in contending the Hyatt Hotel fortune heir was trying to “avoid taxes” through the offshore companies “and spent the last year lying about it.”

“This is just exposing the fraud that is the J.B. campaign for governor,” said Biss, a state senator from Evanston.

And another contender, Kenilworth developer Chris Kennedy, said voters should consider Pritzker’s words as if they were conducting a job interview for governor.

“I’ve hired a lot of people and I can tell you just one piece of advice to the voters of this state: You should never hire someone who lies to you during a job interview. If they’ll lie to you to get the job, they’ll lie to you to keep the job. And you do not want a liar as the governor of the state of Illinois,” said Kennedy, a member of the iconic Massachusetts political family.

According to the reports I’ve heard, The debate largely consisted of a shouting match with Kennedy and Biss complaining about Pritzker but with nothing much to say about the issues. Pritzker showed more gravitas (no pun intended) and talked about the issues. All three candidates are running on a platform of tax hikes and increased spending.

The Sun-Times remarked:

Each painted the picture of himself he wanted voters to see:

The true “progressive.” The one with values. And the one who can defeat Republican Gov. Bruce Rauner come November.

During Wednesday night’s final televised debate before next week’s primary, billionaire entrepreneur J.B. Pritzker tried to look ahead to November while fending off his rivals’ attacks; state Sen. Daniel Biss touted his record in Springfield as proof of his progressive values; and businessman Chris Kennedy defended his statements and policy positions, while vowing to be an honest and untethered candidate.

There were no pleasantries or how-do-you-dos. The three major candidates — excluded were former Ceasefire Director Tio Hardiman, Madison County Schools Supt. Bob Daiber and Burr Ridge doctor Robert Marshall— took rapid-fire shots at each other.

“It seems to me once again you don’t know who Dan Biss really is,” Pritzker said about the senator from Evanston criticizing state House Speaker Mike Madigan — but voting for him as speaker, accepting Madigan’s money, and helping to run a super PAC for him.

Biss called the attack “bananas,” reiterating that he has worked with Democrats and will continue to work with Democrats if elected.

I’m in a quandary about whom to vote for in the primary. I like Biss’s anti-Madigan stance, belied as it is by his vote to re-elected Madigan as Illinois House Speaker but he doesn’t really represent my views; I hate political dynasties; and I think Pritzker is as crooked as a dog’s hind leg. In all likelihood the race in November will be our billionaire vs. their billionaire.


Still Evil After All These Years

In the Wall Street Journal Richard Goldberg and Mark Dubowitz recommend scrapping the Iran nuclear deal to defang North Korea:

Former Obama-administration officials warn that if Mr. Trump abandons their Iran nuclear deal, North Korea will view the U.S. as an untrustworthy partner. The opposite is true. The North Korean dictator wants to talk because the Trump administration’s campaign of maximum economic sanctions pressure is working.

But if the president agrees to a fictional fix to the JCPOA, or if he responds to a stalemate by backing down from the threat to reimpose maximum economic sanctions, North Korea will see Mr. Trump as a paper tiger. Conversely, if North Korea sees that Iran is held to tough nuclear and missile standards, backed by the credible threat of crippling sanctions, Mr. Trump will be better positioned to make it clear to Pyongyang that he means business.

The path to a denuclearized Korean Peninsula thus runs through Tehran. If Mr. Trump fixes the fatal flaws of the Iran deal, or even if he scraps it because the Europeans balk, his high-stakes North Korean gamble may yet succeed. Even if it doesn’t, he’ll have stopped Iran from following North Korea’s path to nuclear weapons and the missiles to deliver them.

While I continue to be skeptical of the Iran nuclear deal, I don’t think it should be scrapped. The costs to us are already sunk costs. They were heavily loaded to the beginning of the deal. The benefits were mostly backloaded. Abandoning it now would be foolhardy.

I seriously doubt that President Trump will wring any concessions from Kim Jong Un. Even deified dictators have political considerations and I believe that either Kim is playing to his or he believes his own advance press and in his supreme power as a negotiator.