The Economist points out a study that found an interesting but little commented-on aspect of the Affordable Care Act:

Hospitals in districts where a Republican congressman supported the Medicare Modernisation Act were five times more likely to receive a waiver than those in ones where a Republican lawmaker voted against. Those hospitals spent 25% more than they otherwise would have in the seven years after the law, according to the researchers. Between 2005 and 2010 the 29 hospitals that received the most lucrative waivers spent an average of $1.25bn more than if they had not received one.

Some of the windfall went on equipment and staff. The average hospital to benefit from a waiver increased its number of nurses by 16% per year from 2006 to 2010. But the splurge seems not to have improved care. No changes were registered as a result in the mortality rate for patients admitted to hospitals with a heart attack, or in the time taken to discharge those who survive one—two standard measures of quality.

Chief executives fared well, though. The average bump in bosses’ pay in the sample of hospitals benefiting most from the waiver was 81% over the same period, equating to a pay rise of about $428,000 per year above that received by bosses of similar hospitals with no waiver. Politicians benefited indirectly. Legislators with hospitals granted waivers in their district saw a 22% overall increase in campaign contributions after the act. Donations from individuals in the health industry in their state increased by 65%.

In other words in explaining the high cost of health care in the United States, your investigation should start and end with Congress. It didn’t start in 2013 or even in 2010. It began more than a half century ago when the Congress began using health care as a political lever.

Don’t expect the Congress to remedy the situation now or ever. More than anything else they want to keep their jobs.

At RealClearPolitics Charles Lipson, whose blog Zip Dialog is in my select blogroll at right, ably summarizes the “North Korea crisis”:

We have entered the most dangerous moment in world politics since the 1962 Cuban Missile Crisis.

The nightmare is only getting worse, thanks to North Korea’s increasingly rapid development of nuclear weapons, the missiles to deliver them, and the regime’s chilling threats to use them against the U.S., Japan, and South Korea.

There’s only one paragraph in his assessment that I found controversial:

Since deterrence is almost certain to work, the real question is “Is ‘near certainty’ good enough?” If there is a 10 percent chance Seattle and Los Angeles could be destroyed in some future conflict with North Korea, should we wage preventive war now? What if the chance is 5 percent? 1 percent? No one has any idea what the odds are. No one. But we do know that preventive war now will kill tens of thousands, possibly many more, and we know the last preventive war ended badly.

I think, quite to the contrary, that deterrence is almost certain not to work in North Korea’s case because of the country’s unique political and cultural circumstances and that, absent a willingness in the United States to impose sanctions on China, North Korea’s primary sponsor and abettor in its nuclear weapons development, our alternatives are limited to preventive war or what President Obama referred to as “strategic patience”.

Preventive war is always immoral for reasons along the lines that Mr. Lipson lists and is certainly illegal. I choose patience.

Sadly, I also think that Mr. Lipson gravely underestimates the likely death toll of war with North Korea. It is far more likely to number in the millions than tens of thousands and our political leaders and media pundits are doing an awful job of preparing us for the likely outcome.

The topic of the day is without a doubt Attorney General Jeff Sessions’s announcement that President Trump would end President Obama’s Deferred Action for Childhood Arrivals decree in six months, effectively throwing the hot potato into Congress’s lap. That has provoked agonistic responses from the editors of the New York Times:

President Trump didn’t even have the guts to do the job himself. Instead, he hid in the shadows and sent his attorney general, Jeff Sessions, to do the dirty work of telling the country that the administration would no longer shield from deportation 800,000 young undocumented immigrants brought to this country as children.

the Washington Post:

The president didn’t have the spine to announce his decision himself. He shuffled it to Attorney General Jeff Sessions, an anti-immigration extremist who seemed to relish sticking a knife in DACA. Mr. Trump told reporters Tuesday that he hoped “Congress will be able to help” the dreamers “and do it properly.” But his written statement — “young Americans have dreams too” — was a study in ambiguity. While saying the dreamers wouldn’t be first in line for deportation, Mr. Trump put them on a path to lose jobs, educational opportunities, and the ability to lead open and unafraid lives.

and the Wall Street Journal:

President Trump is taking flak from all sides for ending his predecessor’s Deferred Action for Childhood Arrivals (DACA) policy, thus putting some 800,000 young immigrants—so-called Dreamers—in legal limbo. Though the President and Barack Obama share responsibility for instigating the crisis, Mr. Trump and Congress now have an obligation to fix it and spare these productive young adults from harm they don’t deserve.

as well as dozens of newspaper columnists and op-ed writers including Paul Krugman, David Leonhardt, Leon Panetta, and scores of others not to mention intemperate blog posts and comments. It was also the topic of this week’s Council forum question.

My predisposition is that Congress should enact some sort of program and that the president should sign it into law. One of my fellow Council members outlined such a plan in a recent post:

First of all, DACA needs to be ended. There’s no question that it’s both illegal and unjust. And even worse, holds people in limbo, so it solves nothing.

Some of the DREAMers could be allowed to stay under certain conditions. They would have to be able to document 10 years residency in the United States from what I call unimpeachable sources; school records, health records, employment records, DMV records if available,tax returns, that sort of thing.

They would be of good character, have committed no crimes, not be members of any questionable groups or organizations, have learned to speak English, and not be on public assistance. They would not be eligible for U.S. citizenship but would receive a special permanent residence permit that would allow them to live and work in America.The citizenship restriction would not apply to illegal migrants who have served in our military and who otherwise qualify.

And it should clearly be understood that this residence permit is a one time act of clemency, not an entitlement or precedent. If necessary, legislation would need to be passed clarifying this.

As non-citizens, they would not be allowed participation in any family reunification program to bring relatives to America from overseas, to hold public office or to vote.

While it might be wise to put a numerical quota on these residence permits, I believe that anywhere from 30-50% of the DREAMers would qualify to stay in America should they choose to. It would mean they have forfeited certain rights given to legal migrants, but that they could continue to live in America.

My view is that the matter should be addressed through the political system using the ordinary legislative process, not bundled into “comprehensive immigration reform”, and not be addressed via presidential proclamation.

The end does not justify the means. President Obama’s proclamation and his subsequent edict which granted similar immunities from deportation to the parents of DACA beneficiaries, an evidentiary “slippery slope”, went far beyond presidential discretion on enforcement, an assessment with which most legal scholars have agreed. We are a country of laws not of men. Action by Congress on this matter is long overdue and should be undertaken and completed with all due haste.

Maybe I’m easily excited but I find this development pretty exciting. The very first zero-emissions fossil fuel power plant is nearing deployment. MIT Technology Review reports:

On a small lot between Houston and the Gulf Coast, in an industrial zone packed with petrochemical factories and gas pipelines, a little-known company is finalizing construction of a demonstration power plant that could represent a genuine energy breakthrough.

If it works as expected, Net Power’s $140 million, 50-megawatt natural gas plant will capture effectively all of the carbon dioxide it produces, without significantly higher costs, in part by relying on the greenhouse gas itself to crank the turbine that generates electricity. The technology could enable a new generation of plants that provide clean power, without the development risks of nuclear (see “Meltdown of Toshiba’s Nuclear Business Dooms New Construction in the U.S.”), the geographic restrictions of hydroelectric, or the intermittency issues of solar and wind. Crucially, future plants of this type could also rely on the nation’s abundant supply of cheap natural gas.

Such plants could produce significant amounts of energy 24 hours a day, 365 days a year regardless of weather conditions and without emitting carbon dioxide. That would add a useful element to our future power generation mix.

Any bets on whether there will be people who find other reasons to oppose them?

Most Americans aren’t aware of it but today is a big day for the Patient Protection and Affordable Care Act. Today is the deadline for insurers to report what they will charge on the PPACA’s insurance exchanges next year. Spoiler alert: it will be more than last year, in some cases significantly more. This passage from Sally Pipes’s post on the event at RealClearHealth caught my eye:

Obamacare’s defenders — and insurers themselves — have attributed these rate hikes to the “uncertainty” Republicans have injected into the marketplace. First with their on-again, off-again effort to repeal the law, and second with their indecision about ending the law’s Cost Sharing Reduction subsidies.

But a new analysis of premium data from the past four years provides evidence that two regulations at the heart of Obamacare are largely to blame for years of rate hikes. Those regulations are the law’s guarantee of coverage to all and its requirement that insurers charge the same premium to all people of the same age, regardless of health status or history.

The analysis was conducted by McKinsey for the Department of Health and Human Services. The consulting firm looked at rate hikes in four states: Georgia, Pennsylvania, Ohio, and Tennessee. Premiums in each had doubled or tripled since 2013 — the year before Obamacare went into effect.

Now for the those of you who don’t follow this issue closely, those two regulations have buzzwords attached to them: “guaranteed issue” and “community rating”. And they’re the very heart of the PPACA. They’re the steak.

If true, that would mean that the main problem with the PPACA is the PPACA. Said another way, the claim that the PPACA was just the slow motion withdrawal of insurance companies from the individual health care market may well have been right.

Some will see that as a bug and others a feature.

At The Interpreter (hat tip: RealClearDefense) Korea analyst Robert E. Kelly presents what what I think is a solid characterization of why South Korea’s reaction to North Korean nuclear weapons development is so blasé. Basically, it boils down to that for the South Koreans North Korean bad actions aren’t news and that Americans are so unaccustomed to living with insecurity that they’re overreacting.

It was this passage, however, that caught my attention:

But no Korea analyst of any stature has argued for war.

My advice: pay no attention to the regional analysts. In 1937 I am confident that no American Germany analyst of any stature argued for war and that in 1997 no Middle East analyst of any stature argued for war with Iraq. We went to war nonetheless, invading both countries.

An American Korea analyst may know everything there is to know about Korea but understand the United States very poorly. Indeed, academic specialization being what it is, I would expect it.

I don’t know whether to file Lawrence Summers’s Labor Day Washington Post op-ed under “Wishful Thinking”, “Irony”, “Nostalgia”, or “Lack of Self-Awareness”:

The central issue in American politics is the economic security of the middle class and their sense of opportunity for their children. As long as a substantial majority of American adults believe that their children will not live as well as they did, our politics will remain bitter and divisive.

Surely related to middle-class anxiety is the slow growth of wages even in the ninth year of economic recovery. The Phillips curve — which postulates that tighter labor markets lead to an acceleration of wage growth — appears to have broken down. Unemployment is at historically low levels, but the Bureau of Labor Statistics reported Friday that average hourly earnings last month rose by all of 3 cents — little more than a 0.1 percent bump. For the past year, they rose by only 2.5 percent. In contrast, profits of the S&P 500 are rising at a 16 percent annual rate.

What is going on? Economists don’t have complete answers. In part, there are inevitable year-to-year fluctuations (profits have declined in several recent years). And in part, BLS data reflects wages earned in the United States, even though a bit less than half of profits are earned abroad and have become more valuable as the dollar has declined relative to other currencies. And finally, wages have not risen because a strengthening labor market has drawn more workers into the labor force.

But I suspect the most important factor is that employers have gained bargaining power over wages while workers have lost it. Technology has given some employers — depending on the type of work involved — more scope for replacing American workers with foreign workers (think outsourcing) or with automation (think boarding-pass kiosks at airports) or by drawing on the gig economy (think Uber drivers). So their leverage to hold down wages has increased.

On the other hand, other factors have decreased the leverage of workers. For a variety of reasons, including reduced availability of mortgage credit and the loss of equity in existing homes, it is harder than it used to be to move to opportunity. Diminished savings in the wake of the 2008 financial crisis means many families cannot afford even a brief interruption in work. Closely related is the observation that workers as consumers appear more likely than years ago to have to purchase from monopolies — such as a consolidated airline sector or local health-care providers — rather than from firms engaged in fierce price competition. That means their paychecks do not go as far.

On this Labor Day, we would do well to remember that unions have long played a crucial role in the American economy in evening out the bargaining power between employers and employees. They win higher wages, better working conditions and more protection from unjust employer treatment for their members. More broadly, they provide crucial support in the political process for programs such as Social Security and Medicare that benefit members and nonmembers alike. (Both were passionately opposed by major corporations at their inception.)

Before proposing measures to restore a balance you believe to have been lost, it would probably be prudent to consider what forces have upset that balance. I would suggest that most of the loss of union power can be attributed to three factors: government policy, technology, and poor leadership.

Government policy is the most obvious. Labor unions thrive when the supply of labor is constrained, indeed, they function by constraining the supply of labor. Our immigration laws whether by commission or omission have worked to expand the labor supply. It’s no accident that so many union members these days are members of public employees’ unions. Governments don’t have competition. I can’t walk across the street and start “Dave’s State of Illinois” and governments can constrain the supply of public employees in ways that private sector companies cannot.

Labor unions are also strongest in heavy industry. The system of managed trade, generally referred to incorrectly as “free trade”, which has been put in place has resulted in a general decline of heavy industry in the United States, sometimes called “deindustrialization”. The most egregious examples of this decline are in steel and the auto industry. USW and UAW used to have tens of millions of members. Now they have fewer than a million. These policies have been put in place with the support of both major political parties. When Dr. Summers was Secretary of the Treasury and again when he was Director of the National Economic Council he supported the very policies that resulted in the weakening of industrial unions. Yes, the weakening preceded Dr. Summers’s terms of office but over the last 25 years he’s contributed substantially to the weakening.

Another major factor in the weakening of the unions has been technology, particularly transportation and communication. I wouldn’t be a bit surprised if the development of shipping containers weren’t the single largest factor in the decline of U. S. industrial unions.

The third factor is union leadership. Union leaders have continued to support establishment Democratic candidates even as establishment Democratic candidates have supported policies that weakened industrial unions. They’ve bargained away millions of union jobs presumably in the interest of retaining the rest and increased their own compensation packages while doing it.

The leadership problem isn’t unique to organized labor. Big business and government are also experiencing grave leadership problems. I think it’s a civilizational issue. They guys at the top have convinced themselves they’re working for the good of their unions, their companies, and their jurisdictions when they’re actually just working for their own, personal good.

So, I wish that Dr. Summers had thought more about why unions have weakened over the years before writing his op-ed. His proposals for someday when the time is right but not now won’t do much to alter the balance of power between labor and management.

Last night when my wife and I were watching the news, the reporter interviewed a teary young woman, an illegal immigrant brought to the United States as a child, who was obviously frightened about what would happen to her if Obama Administration’s Deferred Action for Childhood Arrivals (DACA) program were eliminated.

There are several things that need to be understood.

1. It is in fact illegal to enter the United States without having your authorization to enter the country reviewed by a duly constituted officer of the federal government. It’s a misdemeanor.
2. Re-entering the country illegally after having once been deported is a felony.
3. The DREAM-ers do not have a right to be here.
4. The only policy that will satisfy immigration activists is open borders whether de facto or de jure.
5. The only policy that will satisfy anti-immigration activists is expelling all illegal immigrants and erecting a wall, whether metaphorical or physical.
6. The conditions that immigrants to this country experience when they come to this country are very different than those the immigrants of a century ago faced.

IMO mercy requires that there be some process by which some subset of those brought here illegally as children (“DREAM-ers” from the DREAM Act) may be allowed to remain. I don’t know how large a subset that is. I think the process should be fair and reasonable and shouldn’t be a moving target. I don’t believe 100% of those brought here illegally will qualify for any workable program.

No workable reform will satisfy the activists on either side. What should be done about the DREAM-ers?

To the editors of the Wall Street Journal’s list of reasons that employers find it hard to find workers:

The biggest labor story this Labor Day is the trouble that employers are having finding workers across the country. Friday’s report of a modest gain of only 156,000 new jobs in August doesn’t change that reality even though the jobless rate rose a tick to 4.4%

There are many reasons for the shortage, including drug use among the young, the disincentive to work due to easier disability, and the skills mismatch between what employers need and what kids learn in poor K-12 public schools. But the shortage will increase if the economy grows faster, so it’s good news that some in Congress have ideas to mitigate labor shortages in fields like construction and technology.

I would add several more. Nearly 10% of mortgages nationwide are still underwater (negative equity), ten years now after the financial crisis. That makes it harder to move for a job than it otherwise might be. The problem is particularly serious in black communities where the percentage of underwater mortgages is 20%.

Another issue is the large number of households making ends meet by two or more of its members working. That’s the case with more than 50% of married couples. That makes it easier to pay the bills but it also means that if you move for work either the job for which you are moving has to pay enough for the other spouse to stop working or you’ve got to find two jobs in the new location.

An additional issue, particularly problematic among blacks, is criminal records. If you’re poor stealing a bottle of wine from a convenience store or getting caught smoking a joint can blight your life.

Yet another issue is the manner in which jobs are advertised and filled. Many companies no longer have inhouse personnel departments that advertise and hire. They rely on temp or placement companies and many placement companies do business mostly or entirely by bringing in workers from abroad. That makes labor shortages look greater than they actually may be. Those are the reasons that I support a national clearing house for jobs.

A much graver issue is that most of the jobs that go unfilled are low wage jobs for which no one would or should move to fill. A great deal of that is by design.

I’ve told this story before but it bears repeating. Some years back I sat in the boardroom of one of the country’s biggest banks while a director explained his bank’s business plan as it related to hiring: rather than automating tasks they organized them to be performed by unskilled workers paid minimum wage. That way they wouldn’t need skilled workers to operate the machine and if the workers complained about wages or conditions or tried to organize they could easily be replaced. Multiple that by thousands or tens of thousands of companies. It’s what the Germans call the “American system”: maximize the number of minimum wage jobs. IMO it’s a widespread business plan and it’s not one that serves the American people well.

The construction and technology jobs to which the editors of the WSJ point are a red herring. The number of construction jobs on offer is actually declining and the percentage that goes unfilled is relatively low. The percentage of job openings in either industry is actually low. That assertion is supported by low wage growth in both the technology and construction industries. If the demand were actually growing sharply, you would expect wages to be rising. Where is the actual increase in jobs? Hospitality and food service.

IMO that’s the best argument in favor of a high national minimum wage. The weakness in the argument is that in the absence of serious workplace enforcement it would be more likely to create a black market in employment than it would be to increase wages.

The graph at the top of the page illustrates something that might surprise you. See that tiny dogleg at the right end of the graph? The working age population of the United States has actually declined a little. Are we entering the same territory as China, Japan, Germany, and most of the other OECD countries? Japan is prospering despite a declining population because GDP continues to increase and its income inequality is low. We need to devote more energy to thinking about what sort of country we want to be. If we continue with the “American model” we’ll continue creating mostly low wage jobs, importing workers to fill them, and treating everyone who isn’t in the top few percent of income earners like dirt.