My Odyssey on Healthcare Reform

The debate about healthcare reform in the United States didn’t begin in 2009. It has been going on for more than 70 years. Although it’s forgotten by most Harry Truman’s Fair Deal included a provision for universal healthcare. That didn’t go much of anywhere and the discussion really began to heat up in the 1960s.

When the debates that culminated in the establishing of Medicaid and Medicare were going on, I supported something quite different, a system of clinics, run by the federal government, that would provide healthcare to needy seniors. Something else that has been forgotten is that before Medicare there were a lot of destitute or near-destitute seniors. I suspect that was a leftover from the Great Depression. Some areas of the country, particularly in the South, didn’t recover for a generation and the seniors of the 1960s had been adults in the 1930s and their lives had been blighted by the Depression.

There was a very simple reason for my preference. The United States had no experience in running a system like Medicare or Medicaid in which tax money was transferred in the billions to private providers but it did have experience in running a much more modest plan which seemed to be working and controlling costs at the same time: the VA system. Also, that plan wouldn’t have the spillover effects that Medicare has and which were obvious from its inception fifty years ago.

Such a system didn’t satisfy the ambitions of the progressives of the time (we called them “liberals” then) who really wanted British National Health. For reasons that have never been clear to me it was anathema to conservatives and libertarians of 50 years ago as well. A system of clinics to provide healthcare to qualifying seniors was “socialized medicine” but the VA hospital system wasn’t? The idea is beyond absurd.

In the 1970s I had the opportunity to live and work in Germany briefly, visiting France, Belgium, and the Netherlands. While there I learned that their systems didn’t lead inevitably to those countries becoming Soviet hellholes as most Americans seemed to believe and many believe still. For decades thereafter I supported a single payer system something on the order of France’s. That got nowhere and when Hillary Clinton bungled her opportunity to reform the U. S. healthcare system the door was once again closed on any sort of U. S. healthcare reform for another 15 years.

Shortly after the Congress began its annual exercise in kicking the can down the road called the “doc fixes” I abandoned my support for a single payer system. I have now concluded that the federal government is simply unwilling and incapable of controlling costs and any system in which costs are not controlled will inevitably collapse of its own weight. The present system, which I still find disrespectful to call “Obamacare”, is no exception. I think it will collapse for all of the reasons its critics have predicted but it’s still early days. By the time it collapses healthcare will comprise about 20% of the economy and the dislocation that collapse will produce is truly awful to consider.

So now I’m in despair. It’s far too late for a modest program capable of addressing the actual problems. Healthcare costs, inflated by Medicare, are simply too high. The U. S. is pretty obviously incapable of running a nationwide single payer system.

I suspect that workable reform must take place at the state level, as is the case in Canada and Australia, which will mean that some states will have state healthcare systems, some will have have state-based single payer systems, and some won’t have either one. Such an outcome is so unacceptable to both political parties that I don’t expect to see our system seriously reformed in my lifetime. The deadweight loss of our healthcare system will continue to grow, stunting economic growth in the other sectors of the economy, for the foreseeable future.

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Breaking Radio Silence

The radio silence being maintained by the various media outlets on what is actually going on in Syria is slowly but surely being broken. It’s hard out there for a gatekeeper. From The National:

Is Syrian president Bashar Al Assad finally winning? One can feel a deep sense of grief running through opposition factions whether inside or outside Syria over how events have unfolded over the past two weeks.

Pro-regime forces have made a series of major gains in northern, central and southern Syria over the past week.

More strikingly, they broke a three-year siege imposed by the rebels around the Shia towns of Nubbol and Zahraa, 20 kilometres from Aleppo city, which represents a major setback for the rebels especially as it could disrupt a game of encirclement and counter-encirclement that sustained the rebels’ control of much of Aleppo since 2012.

Five months after the regime’s forces seemed incapable of halting the string of victories achieved by the rebels in northern Syria, which led to the Russian military intervention to prop up their ally, the regime appears to be on the offensive. The offensive is seen n northern Latakia, the western Ghouta near Damascus, Deraa and in the rural areas of Hama, Idlib and Aleppo. The regime appears to have made an impressive comeback.

and from Nancy Youssef in The Daily Beast:

Syrian President Bashar al-Assad could make his biggest gains in the country’s long civil war—and potentially tip its outcome in his favor in a matter of weeks—by wresting control of the city of Aleppo from opposition forces, two U.S. military officials told The Daily Beast on condition of anonymity.

If government forces are able to successfully encircle the city and hold it, and control the province around it, “the war is essentially over,” said one of the senior defense officials.

Under assault from hundreds of Russian airstrikes over the past week, Aleppo increasingly is falling out of rebel hands. As many as 40,000 Syrians fled the city toward Turkey’s border over the past two days, walking up to 60 miles to get to safety. Turkish Prime Minister Ahmet Davutoglu said Friday that 15,000 people had already arrived at Turkey’s border from Aleppo.

The Russian onslaught on Syria’s keystone city has left many wondering just how long rebels can hold on. During Syria’s five-year civil war, which has killed at 250,000, it’s been surmised that whoever controls Aleppo will prevail.

Ending the civil war in Syria is probably the most important step towards stemming the flow of actual refugees from the country. The reality always has been that the most that could ever be expected from the rebels, moderate or otherwise, is ongoing civil war.

I cannot for the life of me figure out why our major media outlets have maintained the position they have on Syria for so long. Is it to support the Obama Administration? Idealism and romanticism? Because they hate the Russians?

What’s missing from the accounts (but not from the website of the Russian Defense Ministry) is that the Syrian government, supported by Iran, Russia, Hezbollah, et al., farther east is using the same tactics against DAESH. They’re advancing, encircling, and retaking territory.

The outcome of the Syrian civil war won’t be determined in Switzerland which if all you read was the New York Times, Washington Post, and other major U. S. news outlets, you would assume to be the case. It will be in the field.

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Speed

Nouriel Roubini points out the remarkable slowing of the velocity of money at Project Syndicate:

The reason ultra-low inflation remains a problem is that the traditional causal link between the money supply and prices has been broken. One reason for this is that banks are hoarding the additional money supply in the form of excess reserves, rather than lending it (in economic terms, the velocity of money has collapsed). Moreover, unemployment rates remain high, giving workers little bargaining power. And a large amount of slack remains in many countries’ product markets, with large output gaps and low pricing power for firms (an excess-capacity problem exacerbated by Chinese overinvestment).

To give you some idea of what has actually happened, let’s look at some of the conventional measures of the money supply.

M1 is usually define as notes and coins in circulation along with travelers’ checks, demand deposits, and other checkable deposits and here’s a chart of its velocity:


M2 is M1 plus savings accounts and time deposits:

and MZM is M2 plus money market funds:

Pretty clearly if you want money to start moving around, you need to do something. You could raise interest rates, you could stop paying banks for reserves, or you could start taxing it, i.e. taxing wealth. I can’t help but wonder if there’s some relation between the money supply freezing up and the general slowing of growth as well as the decline in the rate of new business start-ups.

My intuition is that all have a common cause: a reduced appetite for risk. I’m open to explanations as to why that might be.

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Blow Me Down!

Reuters is reporting that the German intelligence agency has said that DAESH fighters are entering Germany disguised as refugees:

Islamic State militants have slipped into Europe disguised as refugees, the head of Germany’s domestic intelligence agency (BfV) said on Friday, a day after security forces thwarted a potential IS attack in Berlin.

Hans-Georg Maassen said the terrorist attacks in Paris last November had shown that Islamic State was deliberately planting terrorists among the refugees flowing into Europe.

“Then we have repeatedly seen that terrorists … have slipped in camouflaged or disguised as refugees. This is a fact that the security agencies are facing,” Maassen told ZDF television.

“We are trying to recognize and identify whether there are still more IS fighters or terrorists from IS that have slipped in,” he added.

I’m sure the next million refugees will have no terrorists among them. In possibly related news German Chancellor Angela Merkel’s approval rating has dropped to its lowest level in five years.

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Fantasy Policies

As I was reading this article from Fox Chicago on the teachers’ demonstration that took place in Chicago yesterday, this passage jumped out at me:

Chicago Teachers Union President Karen Lewis took part in the peaceful march, but her role in contract negotiations with Chicago Public Schools has come under criticism from some teachers.

Earlier this week, a CTU bargaining committee unanimously voted down a contract offer — rejecting a deal that CTU officials initially described as a “serious offer.”

CPS CEO Forrest Claypool called that rejection disappointing, given the intense negotiations, and ratcheted up the pressure on negotiations this week by announcing $100 million in cuts and a decision to stop CPS’ 7 percent contribution to teachers’ pensions. Lewis called those moves “an act of war.”

If there was any animosity toward Lewis and her approach to the offer, which was ultimately found to be unpalatable, it was hidden Thursday.

“We love you Karen,” supporters shouted as Lewis made her way through the crowds.

At the rally, Lewis bolstered her troops and spoke briefly with reporters about Gov. Bruce Rauner’s quest for a state takeover of CPS.

“How is he going to take over CPS if he can’t even do a budget with the state,” Lewis said. “He needs to set his own house in order and he needs to sit down before he breaks something.”

“We’re still under the old contract, so to unilaterally make a change in the contract as far as we’re concerned is a declaration of war,” she said.

Lewis addressed a wider audience while explaining the rally and march.

“We need to have people understand in this entire country that there is a big schism between the wealthy and those of us who are not so wealthy. It’s just that simple — let alone between the working class and the poor.”

She went on to call for government reform: “I’d like to see some revenue, a progressive income tax, and clean out the TIFS and give them back to the agencies they’ve been stolen from.”

Unfortunately for her, neither of those are actually within the city’s power. The Illinois constitution mandates a flat rate tax. She should be demonstrating in front of Mike Madigan’s office. And tax increment financing isn’t a fund you can dip into. It’s a commitment of future tax revenues.

The city has been trying to increase revenues for some time without a great deal of success. We already have the highest sales tax in the country and among the highest property taxes. What Chicago really needs is economic growth. That’s the sine qua non.

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Counting Your Chickens, 2016 Edition

I just heard another Democratic pundit waxing poetic about the Democrats’ demographic advantage in the 2016 presidential election. The Gallup organization (from whom I sampled the graphic above) has a reminder for them:

The partisanship of the state population is a starting point in determining a state’s likely vote, and there are more states in the Republican column heading into 2016 — a positive sign for the GOP. But because electoral votes are based on state population, the size of the state matters as much as the number of states each party holds. The 20 states that Gallup classifies as solidly Republican or leaning Republican account for 152 electoral votes, less than the 187 accounted for by the 14 solidly or leaning Democratic states plus the heavily Democratic District of Columbia.

But the election will not be merely a reflection of party preferences among adults in each state. If party preferences led directly to vote outcomes, Democrats would surely have won most presidential elections in the past, given their historical advantage in party preferences nationally.

Turnout is another key factor in determining the outcome, and it will especially be key in the 16 competitive states, which together account for 199 electoral votes. Republicans typically have an advantage in voter turnout in elections, and they will need to at least match Democratic turnout in competitive states in which they have a slight party advantage among all adults, such as Georgia, Virginia and Arizona. And the GOP will likely need to exceed Democratic turnout to win some of the larger, most politically balanced states like Florida, Ohio and North Carolina.

Starting out with a 35 electoral vote advantage is helpful but it isn’t everything. The Democrats have a number of problems, too. People are ready for a change and the Democrats have a candidate who is an unlikely standardbearer for change. Can anyone really make the argument for Hillary Clinton as the agent of change without snickering?

In an election with low turnout literally anything can happen. Solid red states can turn blue and vice versa. Remember that at the last election deep blue Illinois elected a Republican governor.

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Do People Listen to Themselves?

In the last two weeks I’ve heard two separate interviews, one of a Florida citrus grower and the other of a guy who built rental properties, saying that they supported increased immigration to the U. S. explicitly for the purpose of reducing wages. They started off by saying that they couldn’t get the workers they needed but ended up saying that without a steady stream of new immigrants other employers hired their crews away from them at higher wages.

Do people listen to themselves? I guess not.

I’ve said it before and I’ll say it again. We can be a country of higher wages and lower immigration or one of higher immigration and lower wages but we cannot be a country of higher immigration and higher wages. It just does not compute.

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Encouraging or Discouraging?

Let me see if I can’t interpret the graph above, gleaned from an Investors Business Daily article, not a usual source for me. It looks like the minimum wage hike in Washington, DC, San Francisco, and Los Angeles did not result in employment decreases in SF or DC but did in LA. They did result in a slowing of the increase in employment in all three markets with LA being the most notable. Does that sound about right?

Is that encouraging or discouraging? Some people got raises. Other than in LA there weren’t a lot of job losses. Some people did not get jobs who otherwise might have. Here’s what the author, Jed Graham, says about Chicago’s minimum wage hike:

The Chicago area saw its weakest year of leisure-and-hospitality sector job growth since 2009. The Windy City’s $1.75-an-hour minimum-wage hike to $10 an hour took effect in July. Annual employment gains averaged just 1.1% from October through December, less than half the pace seen in 2014.

Chicago’s minimum wage will get another bump to $10.50 an hour on July 1, another stop on the way to $13 by 2019.

The Chicago data cover the Chicago-Naperville-Arlington Heights area, of which Chicago represents only about 40% of the population.

He pretty obviously sees that as a Bad Thing:

Liberals fighting for a dramatic increase in the minimum wage have insisted that there would be a negligible impact on job creation. Though the data are preliminary and overly broad, Washington D.C., Oakland, Los Angeles, San Francisco, Seattle and Chicago seem to be finding out that the reality isn’t so benign.

Was that the claim? Or was the claim that it wouldn’t have much effect on employment, a slightly different issue? Maybe both were claimed. My concern was more with employment.

I’m of mixed minds. As a matter of policy I think the results so far support my view that we should want wages to rise and the number of people seeking minimum wage jobs to shrink which would mean less immigration.

I don’t honestly see how wanting to increase the minimum wage and wanting to increase the number of low-skilled and unskilled workers who come to the United States will work together.

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Economic Progress Isn’t Linear

It’s interesting to see just how parochial Larry Summers is in his understanding of just how much the world has changed over the last dozen years or so. From his op-ed at Prospect, bemoaning the slow rate of economic growth:

It is striking to contrast the changes during my grandmother’s lifetime with those during mine. I have seen the microwave become universal in American kitchens. Automotive air-conditioning has gone from common to universal.

A much wider range of TV programmes are now available and with a much sharper picture. There is a wider array of healthy foods. And, of course, I carry a smartphone that keeps me more connected to information sources, friends and colleagues than was imaginable 50 years ago.

But whereas my grandmother would have been at sea if returned to her girlhood home, I would miss relatively little if suddenly placed in the home I grew up in. It takes longer and is less comfortable to fly from Boston to Washington or London than it was 40 years ago. There are more highways now but much more traffic congestion as well. Life expectancy has continued to increase, though at about half the pace it did during my grandmother’s day. But the most important transformation—child death being an extraordinary event—had already happened by the time I was born.

I wonder if he is aware of the thousands of American companies who are exchanging orders and engineering design changes with their Chinese suppliers on a real-time basis (or pseudo-real time, why split hairs)? Apparently not:

Gordon acknowledges a “third industrial revolution” built around software and IT but argues that it is much less significant than the “second industrial revolution” of the mid-century because its impacts are largely confined to telecommunications and entertainment. He further argues that it may already be largely played out, and that in any event concerns of technology replacing jobs are not new; workers displaced by new technologies tend to find new jobs, often in sectors created by those new technologies.

Gordon is right in pointing to the huge disjunction between the techno-optimist narrative and the productivity statistics. It is hard to see how technology could be displacing huge numbers of workers without raising measured productivity. And if its effects are so pervasive as to lead to large shifts in the distribution of income with innovators capturing huge rents, why do we not see more evidence of increased output?

While I disagree with the way in which he reaches his conclusions, I agree with the conclusions themselves. Global economic growth is likely to be slow for the foreseeable future because of the huge overhang of debt and the mammoth, excessive productive capacity in China. Unless world demand increases fast, that capacity will be enough to supply a world unable to expand fast enough to drag many of its people out of poverty for many years to come.

What has happened over the last decade or so is that China has time-shifted its own economic growth from what was then the future (today) into the present (which is now the past). Consumption needs to catch up and, because of that debt overhang I mentioned, that will take a very long time.

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Objectivist House Hunters

For your reading pleasure over at McSweeney’s, Ayn Rand as a real estate agent in Objectivist House Hunters. A snippet:

NARRATOR: House 3 is a tiny house, recently built. At 425 square feet, it’s a tight squeeze, but the low asking price would let Jack and Rachel have more money for travel.

AYN: This house is absurdly small, and its aesthetic is an offense to decency. You asked me to bring you here: as your agent, I complied.

RACHEL: Sometimes I just want to simplify my life, you know? This house might be perfect for that.

JACK: I’m not sure we need a bigger space to store more stuff.

AYN: Run for your life from any man who tells you that possessions are evil. That sentence is the leper’s bell of the approaching looter.

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