Wednesday, April 30, 2008

What a Difference a Few Weeks Make

Many Republicans, both among pundits and the rank-and-file, are quite happy about the current Democratic hammer-and-tongs fight for the party’s presidential nomination. In fact, some of the GOP folks are positively giddy about it. The Democratic nomination fight, they assume, can only improve the GOP’s November prospects.

Pundits point to recent polls showing that regardless of which candidate wins the Democratic nomination, a significant number of Democrats that currently support the other candidate will refuse to vote for the winner. It’s very easy to find Democrats that say that they would much rather vote for John McCain than for Sen. Clinton or Sen. Obama, whichever of these two they don’t presently support.

It is true that historically the party that has had the most bruising nomination fight loses the White House in the general election. But there are many variables in this equation that are shunted aside in favor of the proposition that the Democrats are killing themselves this year.

Let’s be real, people. As recently as a couple of months ago, many of the Republicans now expressing schadenfreude at the Democrats’ disagreements were vehemently opposed to supporting John McCain, who had too many policy and relationship heterodoxies for their tastes. Oddly enough, the passage of a few weeks has somehow brought them into the McCain camp.

This is really just human nature. Can we really convince ourselves that the losing side of the Democratic battle will behave any differently than the losing side of the Republican campaigns? Oh yes, some claim. Republicans will have had many more months to overcome their McCain dyspepsia than Democrats will have to overcome their problems with their nominee. While the sheer time factor cannot be discounted, I wonder how much it will really mean come November.

In real life, most Democrats that now support whoever will end up losing the nomination will lick their wounds for a few days. The media will happily report on any national figures that express outrage or a willingness to support McCain. But before long, most of these people, similar to the GOP McCain supporters that used to detest McCain, will think to themselves, “I’m not totally happy with my party’s choice. But I can’t bring myself to vote for the Republican.”

Will there be Democrats that cross over and vote for McCain? Of course. Will that number be significantly larger than the number of Democrats that ordinarily vote Republican in general elections? Probably not. Maybe the number that sit out the election will be higher, but that’s hard to tell. I suspect that once the Democrats settle once and for all on a nominee, the vast majority of Democratic voters will ultimately vote for her/him in November.

But perhaps I’m focusing on the wrong question. It’s probably not the registered Democratic voters that might be driven away by current party struggles. It might be the independent voters that will be affected. Democrats are probably right to be concerned about this.

Still, it would be well for Republicans that are enjoying the Democratic infighting to remember an important rule of political contests. Waiting for the opposition to destroy itself via disunity is hardly a winning strategy. You have to win people over, not just on the strength of a candidate’s personality, but on the appeal of your policies and the sense that you have the ability to carry them out. In case you hadn’t noticed, the GOP hasn’t been performing very well in this arena lately.

Tuesday, April 29, 2008

Looking Forward

Last week my old junior high school held its 40th anniversary celebration. (The school opened in 1968, a few years before I attended.) I didn’t plan to attend the event. It’s not that I never wax nostalgic, but I live my life looking forward, not backward. That’s not the only reason. My school years were, frankly, not that great. I have little desire to revive those memories.

I have also found that most event reunions (as opposed to family reunions) leave me feeling rather disappointed. The people that I care to see aren’t there. Socializing with people with whom I never shared any mutual interest just isn’t my idea of fun.

As luck would have it, however, my son needed to go to one of the junior high anniversary events to perform in the school band for half an hour. So I ended up at the school anyway. I thought it was kind of ironic that the band was blaring 60s music in the school library during a reception hosted by current student officers for former students and faculty.

I was recognized by some of the current faculty members, who know me, at least obliquely, as my son’s dad. My son is among the popular crowd at school. But few of today’s faculty know that I was once a student at the same school.

I recognized only a few of the former students attending the event, but I definitely recognized my former teachers and administrators that were in attendance. While they all looked older, the funny thing was that they didn’t look much older than my teenage memories of them. It dawned on me that many of these people must have been fairly young and not long out of college when I attended the school. I guess that to a 14-year-old, there isn’t much difference between 30 and 60. It’s all old. Just not as old as really old.

On the way home, my son asked me why I didn’t go and socialize with any of my old teachers. I explained that they probably wouldn’t be able to dredge up any memories of me. Unlike my popular son, I was among the great faceless, mediocre masses. I didn’t particularly stand out in any way.

It’s also a factor of sheer numbers. During my three years at the school, it was easy for me to know who all of the faculty members were. But over a 30-year career, each teacher and administrator deals with literally thousands of students. Only those students that have impressed deep memories (good or otherwise) on the educator will be remembered much.

And, of course, I have gone from being a young teen to being middle age, so I have changed dramatically. Even if any of the educators had any memories of me, my appearance would probably not give them much of a cue to access them. The educators, on the other hand, are only older versions of their younger adult selves, so they were quite recognizable.

I looked around the room. The educators in attendance had done their jobs. I didn’t have particular fond memories of any of them. None present were among the rare few that had a memorable positive impact on me.

I also looked around at my son and the other current students chasing around the hallways after the performance. I thought to myself that it was incredible that I had to have been that young and callow when I attended the school. We thought we were so mature back then.

I considered the three groups that were present: current students, middle age former students and current faculty, and retired former faculty. I thought to myself that this was a good representation of the chain of life. The 12-14-year-olds will one day be in my present shoes, as I will someday be in the shoes of the retirees.

When that day comes, I don’t know if I will have any greater affinity for reunions than I do today. I hope I’m still living my life looking forward.

Monday, April 28, 2008

One of the Reasons You are Paying More for Fuel and Groceries

Inflation is the thief of the thrifty middle class. —WSJ Editors

Saving more, but enjoying it less? Perhaps the Federal Reserve is to blame. To most Americans, the Fed is an enigma. They hear news about the Fed, especially with respect to interest rates. But few Americans have a firm grasp on the Fed’s actual role and how its actions impact their lives.

The Fed is a quasi-public central bank that ultimately answers to no political authority. When the Federal Reserve Act was enacted in 1913, it was understood that the central bank needed autonomy to fulfill its purpose of providing stability in the financial industry.

The Wall Street Journal Editors claim in this editorial that Fed Chairman Ben Bernanke is doing a deplorable job of providing this kind of stability. In fact, they contend that much of today’s inflation is directly attributable to Bernanke’s actions. For example, they suggest that almost half the rise in the price you pay for gas at the pump stems from bad Fed policies.

From the days of the previous Fed Chairman, Alan Greenspan, the Fed’s main inflation fighting tool has been cutting short term interest rates, which eases the money supply. But the WSJ Editors point out that this tactic has decreasing effectiveness. It even becomes destructive when it undermines overall financial confidence. Then it actually causes inflation of the commodities that most impact the budgets of American families.

The WSJ Editors gibe:

“So Federal Reserve officials are whispering to reporters that they will consider a "pause" after another interest-rate cut this week. Perhaps we should be more respectful, but this sounds like the alcoholic who tells his wife he'll quit drinking next weekend, after one more bender. What Chairman Ben Bernanke needs isn't a gradual withdrawal from easy money but membership in Central Bankers Anonymous.”

It’s a lot easier to be a critic than to be the guy that’s actually doing the job and taking the heat. Even the WSJ Editors hail some of Bernanke’s actions and admit that the Fed has gotten lots of pressure from both Wall Street and politicians to continually cut short term interest rates. But, the Editors argue, it should be clear by now that this pursuit has crossed the line and is actually causing financial instability.

The WSJ Editors finally show their exasperation when they say that neither the Bush Administration nor the McCain campaign seem to have the remotest clue about “the monetary roots of our current economic troubles.” Presumably, Republicans are expected to grasp this concept, while Democrats are not.

Several things are clear at this point. We are facing some serious economic problems that seem to be of 1970s vintage. We’ve got a lot of top level players — in both politics and business — that are standing around pointing fingers at each other. And whatever it is that they are doing to address the problems isn’t working.

Friday, April 25, 2008

Why Did Mitt Romney Keep Boy Scouts From Volunteering at the Olympics?

Remember the 2002 Winter Olympics in Utah? Of course, that was what helped put Mitt Romney on the map nationally and internationally. Financially, the Salt Lake Organizing Committee (SLOC) was deep in the hole. Then the bribery scandal surrounding the bid hit the news in a big way.

The foundering committee turned to Mitt Romney, a guy with a great track record in turning around failing businesses. Romney came in and made everything better than even the most optimistic had hoped. The games went well (except for the ice skating scandal) and made money. Romney, who had previously failed in a 1994 bid for Ted Kennedy’s U.S. Senate seat, went home to Massachusetts and became governor.

I have been (slowly) reading Texas Governor Rick Perry’s book On My Honor. (I am not commenting here about Perry’s handling of the FLDS fiasco.) The book is about Perry’s experiences with the Boy Scouts of America. Perry particularly discusses the vendetta by some on the Left to purge the BSA from American public life.

On pages 90 and 120-121, Perry specifically discusses yet another Salt Lake Olympic scandal. The Great Salt Lake Council of the BSA had been in a number of meetings with Olympic officials focusing on how the Boy Scouts could help the Olympic effort through volunteerism and use of BSA facilities, similar to what had been done in Georgia for the 1996 Atlanta Olympics.

Shortly after the Supreme Court decided in 2000 that the BSA was constitutionally permitted to exclude activist homosexuals from leadership positions, SLOC shut down all communication with the BSA. Romney, who is an Eagle Scout and has been a Scout leader, refused to return calls. The entire SLOC staff acted as if the BSA had suddenly ceased to exist.

Finally, a SLOC spokeswoman was asked directly by a reporter whether the Boy Scouts had been shut out of volunteering to help with the Olympics because of gay protests over the court decision. She responded that any Scout was permitted to apply to volunteer, but only as a private individual and not as a Boy Scout. Moreover, boys would have to be 18 or older. This effectively cut off any official BSA involvement.

Romney and other former SLOC officials have since avoided any discussion of the Olympic shutout of the BSA. So it’s not truly known what caused the shutout. But Perry works to build a case that it was retribution for the Supreme Court ruling. He finally cites Romney’s statement during a 1994 debate with Sen. Kennedy, where Romney said, “I feel that all people should be allowed to participate in the Boy Scouts regardless of the sexual orientation.”

Of course, it is well known that Romney changed many of his liberal positions in an attempt to appeal to conservatives during his presidential candidacy. He has left himself wide open to the accusation that he would say anything to get elected. I think that his view is more likely something along the lines of, “It’s nothing personal. It’s just business. That’s the way the game works in business.”

Romney has been mentioned as the ideal running mate for John McCain this fall. Whether that happens or not, you can bet that Romney will be gunning for the GOP nomination next time the position is actually open (2012 or 2016). GOP voters might question whether a businessman would actually be superior to a politician as president.

Wednesday, April 23, 2008

Health Care Consumerism

“It has gotten so ridiculous that a provider locked into the 3rd party payment system cannot even tell his patient what his services will cost over the phone.” —Utah Association of Health Underwriters

Back in the first part of the 20th Century, there was a great deal of concern over lack of access to adequate health care. There were particular problems with high cost events, such as serious illness or injury. The solution was health insurance, which began as catastrophic insurance for most people. But scope creep, helped along by continual clamor for increasing coverage, gradually expanded coverage and cost.

As more people obtained more coverage, medical costs climbed to the point of concern. The solution was to work to contain costs through managed care systems. But this has turned out to only exacerbate the problems it intended to solve.

Managed health care did effect some efficiencies, but it went wrong because it cut the major cost containment and quality control factor out of the loop: the consumer. Patients are now simply medical products rather than health care consumers. They are denied real cost information. The costs paid by consumers have no direct connection to the amount and quality of the services consumed. This has distorted the health care market, causing both providers and patients to act irresponsibly and inefficiently.

The UAHW argues in this position paper that THE ONLY way to reduce health care cost inflation is to restore Consumerism to the health care industry. Consumerism exists when buyers have a broad variety of choices, “accurate price information,” and the ability “to evaluate the product or service so they know if it fulfills their needs or desires.”

In Utah today, there is a very broad selection of health insurance plans available. But pricing information and knowledge of provider outcomes are guarded as “corporate top-secret[s].”

When the doctor came into my Dad’s hospital room and told him he absolutely needed a pacemaker/defibrillator installed, we had no idea how much it would cost, how beneficial it would be, or what kind of track record this doctor had. It took many months after the surgery and combing through hoards of billings from numerous different sources to get any kind of idea what this thing cost. Dad now says that knowing what he knows today, he would have refused the procedure. But a lot of people made a good chunk of change from it, mostly at taxpayer expense.

I have had my car at the mechanic and had the mechanic suggest a procedure that was not initially agreed to. And then I have been able to quickly find out from competitors what they would charge for the procedure and get their opinion on its necessity. While it is possible to get a second medical opinion (usually by waiting for weeks for an appointment), just try going out and getting a competing cost estimate on a prescribed procedure.

I agree with the UAHU when it says, “We have to give consumers the tools to behave rationally in the market. Those changes will release the market forces that will ultimately tame the ridiculous cost spiral which is causing our national health care expense crisis.”

Before you go whining about underserving the poor among us, nobody is suggesting any such thing. Those that are unable to afford care should be able to get the care they actually need. There are ways to address these needs as well that require taxpayer funds, but can still be made more efficien than at present.

The UAHU doesn’t take the silly position that broad Consumerism can be imposed in one fell swoop. Rather, they suggest implementing it “one procedure at a time,” excluding the handful of procedures that “do not lend themselves to Consumerism.” When Consumerism is in place, insurance companies will return to “being financial institutions rather being intermediaries between doctors and patients,” and government intervention will not be minimized.

The association admits that the road to consumerizing the health care market won’t be easy. But they argue that since it is the only way to actually contain costs while increasing quality, it is the only rational way to go. Their plan for accomplishing this goal can be found here.

This is not nearly as radical as it may seem. “Consumerism,” contends the UAHU “is actually the natural state of health care commerce.” Today the market is performing poorly because it is in an unnatural state. Also, there is already a good track record for Consumerism in health care in certain market segments. We just need to follow the existing successful examples.

Tuesday, April 22, 2008

Transfer Nation

“The average taxpayer has lower income than the people on whom the government lavishes its financial favors.” —Thomas Sowell

In this NRO article, Thomas Sowell lays out the conflict between economic liberty and governmental politics, particularly with respect to wealth transfers.

My observation is that the economics discussed by Sowell apply not only to money, but to almost any kind of system, including human relationships, personal health, and human liberty.

Monday, April 21, 2008

Athletic Spectatorship

Last week at my #2 son’s AYSO soccer game, I sat on the sidelines with the other parents. As a group we were pretty mellow folk. We chatted amicably while watching and commenting on the game. While parents called encouragement to players from time to time, no one got out of sorts or yelled, even when the referees made what appeared to be bad calls.

One of the moms sitting nearby commented about how this was such a pleasantly relaxed atmosphere compared to the comp league games she attended for her kids. She said that quite a few parents at every comp league game she attended got extremely intense — often to the point of embarrassment (or perhaps even abuse).

At this week’s game I sat next to this lady’s husband. He explained that she was attending a comp league game with another child. This dad mentioned how the AYSO games always start late and that even then, it is common for a number of players to show up long after play has begun. He mentioned that the play at the AYSO games is sloppier and that there doesn’t seem to be nearly the level of effort that he sees at comp games.

I think that’s pretty much what is expected. To join a comp team by high school age, you’ve got to be pretty good. In AYSO, everyone plays, regardless of proficiency. Still, I smiled at the different views presented by this mom and dad.

I find that I’m one of the parents that kicks back and takes it easy at games. Regular readers will know that I probably would never attend an athletic event unless one of my children were playing. I cheer on my child and the players on my child’s team. I like to get to know the names of my children’s teammates so that my cheering can be informed. But I also cheer players on the opposing team when they make a good play.

I have a brother that very much enjoys getting intense at sporting events. It’s part of his personality. I don’t think he could be effective at the kind of work he does without that kind of edge. The only times in my adult life that I have gotten uptight at an athletic event have been when a parent has done something to intimidate a player or a referee.

I once watched a huge guy — a dad of one of my son’s teammates —threaten a nine-year-old on the opposing team. The ref stopped the game and said that if the guy didn’t leave the field at once, the game would be forfeit. The man hesitated to leave, even after other dads encouraged him to do so. He finally walked over to the player, got down on his knee so that he could be at eye level, and sincerely apologized, saying that there was no excuse for his behavior. He then folded up his chair and left. Even though this guy had let his temper get the best of him, my estimation of him went up immensely.

I enjoy taking it easy at my kids’ games. Others like to be more involved. It’s best, however, if they can make sure that the game continues to be a good experience for the players and for the other spectators.

Saturday, April 19, 2008

Ve Have Vays to Make You Buy Insurance, Comrade

The desired outcomes of the [state health care task force] are pretty set, but plotting strategies for getting there is the big challenge. — Judi Hilman, executive director of the Utah Health Policy Project advocacy and research group

The D-News reports that John T. Nielsen, special health-care adviser to Gov. Jon Huntsman Jr. has put out the call for anyone interested in the future of health care in Utah to find a way to get involved in the state health care task force. He is quoted as saying, “If you're interested in how this is going to go and you're not at the table now, you better find a way to be.”

You can listen to audio of the task force’s first meeting here (hat tip David Miller).

You can attend some of the task force sessions and maybe even get a chance to say something. But go back and read the quote at the top of this post. The “desired outcomes” referenced by Ms. Hilman boil down to universal health insurance coverage for all Utahns. The task force is essentially only dealing with how to get to that goal.

I have discussed my opposition to the health insurance ‘mandate’ in many posts. (See 4/14/08, 4/1/08, 3/21/08, and 2/14/08.)

Utah is barreling down the path of RomneyCare heedless of the massive problems this is causing in Massachusetts right now. In MA, the plan was pitched as a way to achieve both universal health care and lower costs in a ‘market based’ approach. The plan has achieved neither of these lofty goals (see AP article).

The MA plan was originally pitched as costing about $125,000 annually, but that figure rose to $372,000 by the time the ink dried on the legislation. Now that reality has set in, its real price could exceed $1 billion this fiscal year. In response, Massachusetts is raising taxes, decreasing service levels, and quadrupling the penalty for refusing to buy its mandated insurance.

Apparently RomneyCare is a faith based initiative. Because despite the plan’s obvious failings, its proponents insist on calling it a success.

If you live in Utah, you’re going to get to feel MA-like pain first hand. Read that quote at the top of this post once again. Do you people get it yet?

You are about to have Soviet style central planning applied to your health care. The smart people at the central politburo (state regulators along with insurance companies and brokers) will determine what kind of health insurance you must buy. Buying less or none will be prohibited. If you are in a low income bracket, insurance will be provided for you at the expense of everyone else.

It does not require an economist or financial expert to see who stands to gain the most from this setup. Here’s a hint. It’s not the people on either end of the transaction (i.e. patients and care providers). It’s those in the middle that not only take their cut, but also dictate to providers what care they are allowed to provide and to patients what care they are permitted to purchase.

Is there anyone in the press that is even interested in following the money trail on this one? Let’s put it bluntly. Middlemen that increase their income by making sure that patients get the least care possible are working to get politicians to use government coercion to force you and all your neighbors to purchase their wares.

I wonder what will happen when the real costs of this individual mandate balloon to engulf a huge portion of the state budget. What of the 62% of the budget that is currently consumed by public education? Do you think the education industrial complex is going to take this lying down?

Yes, there are ‘consumer advocates’ involved in the task force process. But they either agree with the universal mandate or else have no chance to overcome the task force’s predetermined outcome.

You will buy health insurance per the state’s specifications. Resistance is futile, weak and puny citizen.

Friday, April 18, 2008

Think Before You Broadcast

Sometimes I wonder if radio script writers deliberately pull jokes on their news announcers, or if some script writers are simply oblivious to how bizarre some of their material sounds.

Yesterday I was listening to a radio broadcast on my way home from work. An announcer said, “Coming up: the Pope encourages Catholics to build bridges with abuse victims.”

Having a somewhat quirky sense of humor, I couldn’t help but think to myself, “Wouldn’t that be adding insult to injury? Besides, I’m not sure what kind of structural integrity such a bridge would have. Most bridges nowadays are built with steel and concrete.”

Ten minutes later, the same announcer read, “The Pope is encouraging Catholics to reach out to victims of abuse.” That statement certainly paints a much clearer picture of the message that they wanted to communicate.

Still, the first announcement made me chuckle. And I can’t help but wonder what happened in the newsroom between the two announcements.

Wednesday, April 16, 2008

Why I Refuse to Use Electronic Tax Filing

In yesterday’s post, I wrote about how I go about filing taxes and why I file paper tax returns instead of electronic tax returns. Now I’ll explain why I go this route. I am opposed to government effectively subsidizing the accounting industry. I have a somewhat personal view of this.

Years ago I worked on the pilot project that initialized and tested the electronic filing of tax returns at IRS. It was clear from early on that each electronic return would cost far less to process than a similar paper return. But back then, only a couple of preparers had qualified for electronic filing. The cost savings for the IRS were so significant that I questioned why IRS didn’t simply provide this service free of charge. The answer, it turned out, was that when electronic filing was conceived, powerful politicians made deals with the accounting and tax law lobbies that the government would never threaten their customer base.

Thus, IRS today provides free electronic filing for a limited group of taxpayers — mostly those with simpler tax situations. But the rest of us have to pay a qualified preparation firm to electronically submit our taxes. If IRS can provide this service free to some taxpayers, there is no logical reason that IRS cannot do so for all taxpayers —(only political reasons exist for this). It would actually save the government money.

Instead, we have a system that effectively subsidizes the accounting and tax law industries. I rebel against the system by filing paper returns, which actually cost the IRS more to process than if they simply let me file electronically for free. But at least I’m not paying a tax preparer that is made necessary only due to political dealing.

The tax preparing industries are not your friends in tax matters. They do not want any kind of actual tax law simplification. And they spend a lot more lobbying our politicians than do taxpayer activist organizations.

You’d think that my retired parents’ tax returns would be relatively simple to figure. And they would be easy were it not for my folks’ unfortunate investment in a registered tax shelter a decade and a half ago. Although the shelter really doesn’t make much difference in total tax liability, the contortions one must go through to figure everything properly rises to the level of Rube Goldbergian absurdity. The accounting lobby loves this sort of thing.

True tax simplification would be nice, but it’s not currently on the radar of anyone with real political clout. Only a few on the fringe pay any attention to the various tax reform proposals that are out there. It’s as if most taxpayers (60% pay someone to prepare their returns) have given up. I guess the cost isn’t high enough to cause a revolt. Leviathan appears to have won this battle. So I have to be satisfied with my private (admittedly minimal) paper return rebellion.

Tuesday, April 15, 2008

"Happy" Tax Day

The tax deadline is here. I filed my own taxes way back in January. I spent a grand total of about four hours on the task. But over the past week, I spent more than a dozen hours working on tax returns for my retired parents.

I grumbled about the time spent, but I guess I should be happy. This USA Today article reports that the “average person who prepares his or her own taxes spends 34 hours on a 1040 long form, according to the IRS.” I am able to do taxes faster than average for two reasons: my former profession and my current profession.

I spent my early adult years working as a tax professional for the IRS. Though a number of years have passed, I retain a certain level of familiarity with tax forms, publications, and laws. That familiarity permits me to read through and comprehend tax jargon much more rapidly than the average person.

As an IT professional, I have learned to develop relatively complex spreadsheets. Years ago I built a dynamic spreadsheet that is designed to quickly calculate taxes for someone with a tax situation very similar to mine. It requires a few tweaks every year due to tax law changes. Then it just requires plugging figures into a handful of fields, and voila, the calculations are done.

Don’t ask for a copy of the spreadsheet. For one thing, your tax situation is probably sufficiently different that it wouldn’t work for you without lots of tweaking. Working on complex spreadsheets is messy due to dependencies between various fields and sheets. Also, I use the spreadsheet only as a scratch pad. I can’t legally vouch for its accuracy. I actually go back and calculate everything by hand as I enter the data onto tax forms.

To do that, go to the IRS forms & pubs site, download the forms I need, fill them out, and print them off. My wife and I check the forms for accuracy (the downloadable forms allow input, but do not calculate anything, so you can make math errors), sign them, and ship them off.

You may ask why I don’t use a tax preparation package, such as TurboTax that actually does compute everything with some degree of accuracy. Those tools are great for people that are not proficient at tax preparation. But frankly, for people like me they just get in the way. It would take a lot longer for me to use TurboTax than it does to use my own longhand method.

I also refuse to file electronically, partially because I’m cheap, and partially as a private protest against government subsidization of the accounting industry. As noted in the USA Today article, the complexity of our tax code “helps underwrite a $65 billion industry of tax preparation and related services, and it enables the wealthy to exploit the code's many artfully crafted loopholes.”

Tomorrow: my personal experience with subsidizing accountants.

Monday, April 14, 2008


“The assumption seems to be that insurance – rather than the service delivered by doctor to patient – is the important commodity.” —Jonathan Kellerman

The main problems in the U.S. health care industry are rising costs and diminishing service. The most prevalent diagnosis of these problems seems to be that Americans are inadequately insured. Largely missing in health care discussions is that the real culprits are expanding bureaucracy and parasitical rent seekers that have overtaken the industry.

Clinical psychologist cum novelist Jonathan Kellerman argues in this WSJ op-ed that almost everyone would be better off if most people paid for medical services out of pocket. Kellerman appears to be out to make enemies with the powerful insurance industry, likening health insurers to the Mafia. Kellerman claims that insurance companies are actually worse because they “systematically suck the lifeblood out of the supply chain with obstructive strategies.” He writes:

“You don't need to be an economist to understand that any middleman interposed between seller and buyer raises the price of a given service or product. Some intermediaries justify this by providing benefits, such as salesmanship, advertising or transport. Others offer physical facilities, such as warehouses. A third group, organized crime, utilizes fear and intimidation to muscle its way into the provider-consumer chain, raking in hefty profits and bloating cost, without providing any benefit at all.

“The health insurance model is closest to the parasitic relationship imposed by the Mafia and the like. Insurance companies provide nothing other than an ambiguous, shifty notion of "protection." But even the Mafia doesn't stick its nose into the process; once the monthly skim is set, Don Whoever stays out of the picture, but for occasional "cost of doing business" increases. When insurance companies insinuate themselves into the system, their first step is figuring out how to increase the skim by harming the people they are allegedly protecting through reduced service.

Insurance is all about betting against negative consequences and the insurance business model is unique in that profits depend upon goods and services not being provided.”

Some point to problems such as these to justify greater government involvement in health care. But Kellerman contends that “the consequences of any insurance-based health-care model, be it privately run, or a government entitlement, are painfully easily to predict. There will be progressively draconian rationing using denial of authorization and steadily rising co-payments on the patient end; massive paperwork and other bureaucratic hurdles, and steadily diminishing fee-recovery on the doctor end.”

This is now evident in Massachusetts (see AP article), where bureaucrats contend that their forced health insurance system is a success, despite soaring costs and declining service levels. Cato’s Michael Tanner says that the Massachusetts system “has been an unqualified failure” that has achieved neither of its goals of achieving universal coverage and lowering costs. (Also see Tanner’s 1/29/08 SLTrib op-ed.)

Some contend that the most significant health care problem is unequal levels of service. But the fact is that the only proven way to achieve service equality is by forcing substandard care on everyone and prohibiting the purchase of higher quality care.

Kellerman argues that everyone deserves a minimum level of care. He claims that if health care providers were to “liberate themselves from the Faustian bargain they've cut with the Mephistophelian suits who now run their professional lives,” costs for most services would become affordable through market pressures. Most people would need only catastrophic insurance. And “government-funded county facilities” could serve the “small percentage of indigent individuals [that wouldn’t] be able to afford even low-cost procedures.”

Most Utahns are completely unaware of the state health care task force that is currently ramping up. The task force’s prime directive is to figure out how to ensure that all Utahns get health care coverage. The task force will not and cannot address the real problems in health care because it starts from the wrong premise and is stacked with people representing those groups that stand to gain the most from expanding the existing protection racket. Unless the task force ultimately decides to do nothing, which is highly unlikely, any decision it makes will ultimately exacerbate the problems.

The answers to our health system woes rest, writes Kellerman “on a radically different approach: fewer people insured” rather than more. I would extend that to say that solutions lie in less government involvement in the system; not more. We need eliminate the parasites and return the focus to the most important aspect of the health care system: the direct relationship between the service provider and the patient.

Friday, April 11, 2008

Get Ready to Pay (A LOT) More Taxes

In an effort to assuage its guilt over its decade-long “bipartisan spending binge,” Congress is set to impose “the largest increase in personal income taxes since World War II.” So note John F. Cogan and R. Glenn Hubbard in this WSJ op-ed.

Lower income households will see their taxes go up by as much as 50%. Parents with children under 17 will see their taxes increased by $500 per child. Married taxpayers will see the return of the marriage penalty. Investors will experience a 33% increase in capital gains taxes. If you think this is only going to hit the “rich” people, bear in mind that more than half of all taxpayers are now investors. With inflation on the uptick, effective capital gains taxes will be about 70%. The Alternative Minimum Tax, which was initiated to catch a dozen high rollers that would otherwise avoid federal taxes, will ensnare 25 million taxpayers, most of them from the middle class.

How does Congress assay to pull off such a massive tax increase? By doing nothing.

Normally I think it’s a good thing when Congress does nothing. But too often Congress does nothing when it should do something and vice versa. I have often cited LaVarr Webb’s contention that Congress is capable of doing only two things: overreact and nothing. It’s almost as if Congress has figured out an insidious way of doing both of these things simultaneously.

How is this possible? Back in 2001 and 2003 when President Bush worked to get his tax cut plans pushed through Congress, he found the plans stymied by members of his own party plus a small number of Democratic senators that had enough power to kill the bills via filibuster. Finally, Bush settled for temporary tax cuts as a compromise.

The plan was to come back and make the tax cuts permanent before the end of Bush’s second term, but that only happened with a small number of provisions. The rest of the tax cuts are set to expire in 2010 unless Congress does something to stop that from happening.

The Bush tax cuts spurred economic development and helped bring an end to the 2000-02 economic downturn. Moreover, government revenues have increased dramatically. The only problem was that Congress, with the President’s blessing, went hog wild increasing spending at a much higher rate than revenues increased. I may never forget former Rep. Tom DeLay’s (R-TX) 2005 pronouncement that there was “no fat left to cut in the federal budget.”

There is no shortage of progressive types that love the idea of getting rid of the Bush tax cuts. They argue that this “is necessary in the near term to balance the federal budget, and necessary in the longer term to finance the retirement and health-care promises made to the baby-boom generation.” Perhaps these progressives could support Rep. John Campbell’s (R-CA) Put Your Money Where Your Mouth Is Act instead. “But,” argue Cogan and Hubbard “a tax increase is neither wise nor necessary.”

Cogan and Hubbard show how the budget can be balanced, even with some additional tax cuts, and even while continuing military operations in the Middle East plus beefing up national security. This sounds great, but it calls for something that seems to be complete anathema to our federal politicians: fiscal restraint. Oh, they like to say those words, but they don’t vote that way. The electorate doesn’t require them vote that way either.

To put it another way, voters largely accept increased government spending. They seem not to understand that THEY are the people that must foot the bill. For a humorous (but telling) view of this topic, watch this clip. The whole thing is fun to watch, but you can skip to the 1:50 mark for the 30 seconds of pertinent content, if you wish.

The reason that most voters don’t care about our expanding government, asserts Stephen J. Entin, President of the Institute for Research on the Economics of Taxation in this WSJ op-ed, is that due to the social engineering portions of the Bush tax cuts, “over 40% of the population owes no federal income tax, and about half who owe nothing actually get net refunds.” These people “embrace higher taxes and more government spending, because someone else seems to be paying for it.” For them, “general government is practically a free good” or else an income source. In actuality, everyone ends up paying, but in the less visibly connected forms of higher prices and reduced income.

In a system engineered by politicians, most federal spending increases are actually on autopilot. Just as the Bush tax cuts will expire without congressional action, most federal budget items automatically increase unless congressional action is taken to stop or reduce those increases. Guess how often that happens. Republicans recognized too late, as Jonathan Rauch put it back in 2006, that they were “captives of their own machine.” He wrote that “political entrenchment militates against governmental reform.” GOP congressional power created a “fortress [that was] conservatism's prison.”

In the interim between now and the sunset of the Bush tax cuts, I suppose voters will glide along, voting for presidents, congressional representatives and senators, serenely oblivious to the impending massive tax increase. That is, until they compute their 2011 taxes during the first quarter of 2012. This will be during the primary voting season of the 2012 presidential race.

Congress does actually seem interested in making part of the Bush tax cuts permanent. But the parts they like are the social engineering aspects that harm economic growth and reduce revenues. Many federal politicians seem enthusiastic about allowing the growth elements of the tax cuts expire. They assume that doing this will avert a general tax revolt. Besides, they will be able to say that they’re making the “rich” pay their “fair share.” Never mind that such a massive tax increase on those that already foot 97% of the bill will make today’s economic slowdown look like a picnic. Can you say, “unemployment,” children?

Americans may have come to accept Big Government as inevitable, and perhaps even desirable. But they haven’t warmed to the idea of paying for it yet. Congress seems to be working to provide services to Paul by charging Peter, in the hope that Paul will have more votes come Election Day. Judging from the ungrateful and ignorant Pauls out there, this sinister plan just might work. But at what cost?

Thursday, April 10, 2008

When Foreigners Intrude In American Politics

Elton John to Americans that have the audacity to withhold support from Hillary Clinton: “To hell with [you].” Elton John to Hillary Clinton: “I love you Hillary, I’ll be there for you.” This all happened at a concert where John raised $2.5 million for Hillary’s campaign (see here).

Three questions. 1) How should this kind of relationship be expected to generate any enthusiasm among middle Americans to vote for Hillary? 2) Why should any American voter vest any positive value in the political opinions of a foreign entertainer with a penchant for being outrageous? 3) Why can Americans donate only up to $2,300 to a political candidate, while a foreign (or domestic) entertainer can donate services worth millions of dollars to a political campaign?

The first two questions are rhetorical. Eugene Volokh explained the answer to the third question in this 3/28/08 post. In essence, the Federal Election Commission has ruled that donated services are not counted as having monetary value for campaign purposes.

This is true regardless of whether the services are low value, such as you or me spending an evening making phone calls for a campaign, or high value, such as when Billy Crystal and Elvis Costello raised $1.5 million at Hillary’s ‘birthday party’ last fall. Despite the fact that such high value services are in fact substantial contributions, they are exempted from campaign finance laws as voluntary services.

Clearly we’ve got something messed up in our election laws and regulations. If we’re going to limit political campaign contributions from Americans, the rules need to apply across the board. For simplicity, we could exempt low value voluntary services, but the same should not be true of high value services. Moreover, foreign contributions should be disallowed altogether.

On the other hand, we could just allow anyone to donate any amount of money or services to any political campaign, but require complete transparency. For example, we could require that all contributions (with assigned monetary values) be made publicly available within 72 hours of receipt of the contribution. The idea is to get the news out and then let the people draw their own conclusions about the matter.

Still, I am completely uncomfortable with foreign interests inserting any influence whatsoever into American political campaigns. That right should be restricted to official Americans and those that can legally vote here.

Wednesday, April 09, 2008

Badmouthing Parents Will Not Improve Education — But Here's What Works

In a comment on my 4/7/08 post, I mentioned a study I had reviewed that revealed that familial decline was found to be responsible for only a small portion of lackluster student performance. By comparing school districts with similar demographics, the study found that the greatest factor in overall student performance — greater than all other factors combined — came down to school district policy.

I asserted that the declining family argument was essentially a red herring that was useful only for deflecting attention from the real culprits of poor educational outcomes. Despite the fact that the “average child today is growing up in a more learning-friendly family environment than ever before” (see here), parents are continually harangued by the education establishment as being the bad guys that are just too busy or too selfish to do what the schools want them to do.

Jeremy Manning asked me to provide a link for the study. It has been a couple of years since I reviewed the study. Although I am certain of the study’s conclusions, I have been embarrassingly unable to find a link to the study. During my search for the missing link (ha-ha), however, I have found a number of intriguing articles and studies aimed at educational performance.

This Hoover Institution article, for example, asserts that while design is essential, many schools based on the best designs still struggle with achieving consistent results from year to year. The authors explore three successful charter systems that have demonstrated consistently superior results. All of these systems serve lower income areas that have high rates of family dysfunction, and yet they are exceptionally successful.

The three systems discussed are successful due to their “central thesis that quality execution—deciding what matters most and sweating the details—underlies strong results for students.” The traits these school systems share include:
  • –“[Aligning] money, people, and leadership time to their most important activities.”
  • –“[Building] systems that translate general concepts into specific, repeatable actions that ensure quality execution throughout the organization.”
  • –“[Moving] quickly to make changes when things aren’t working as planned.”
The article also makes the point that most of the resources in these successful systems are concentrated in the schools and in the classrooms, where teacher and student impact is greatest. Many common extracurricular activities are foregone in order to focus on the most important factors. Although support structures exist above the school level, relatively few resources are applied to these other levels.

Contrast this with my local public elementary, junior high, and high school. The annualized per-pupil cost of facilities, maintenance, utilities, faculty, support staff, materials, busing, etc. expended at the school level constitutes only a fraction of the $7,500 weighted per-pupil average. The vast majority of that money is expended in structures above the school level (district, state, federal). While these structures create power enclaves, their connection to student outcomes is quite unclear.

The problem with the common elements of success listed above is that current power structures are arrayed against these types of reforms. You’re not going to find a single person in the education industrial complex that thinks she/he is opposed to such reforms. But go ahead and try to implement them and you will find yourself fighting against inertia as well as the educational power structure. If history has taught us anything, it’s that challenging power is a dangerous proposition.

No one whose power is threatened by these kinds of reforms will give an inch. Indeed, they will fight tooth and nail with many convincing arguments (and backroom deals) to defeat such measures or run them off the track into programs that require yet more management structures above the school level. They will even enlist teachers whose wages are kept down by the monopoly as unwitting foot soldiers to protect the powers that be — all in the name of helping the children. In the meantime, educational quality will continue to suffer.

You can’t really point to a single individual and say that he/she is the problem. Rather, it is the system that is the problem. Many good and wonderful people work in that system, but they are powerless to change it. While No Child Left Behind had many lofty goals, it effectively added yet more power structures above the school level. The effort to remake schools in the image of the collective imagination of federal politicians and bureaucrats may rearrange some of the numbers and grow new power enclaves, but it cannot ultimately achieve the kinds of improvements that are needed.

How long will parents sit still while their children are underserved at high cost? In my 12/1/07 post, I discussed the possibility of some of my children attending Venture Academy, a new expeditionary learning charter school that is opening this fall. We are now committed to this experience and are hopeful that the results will be good. Since directly challenging the education industrial complex isn’t going anywhere, it is likely that efforts such as this are the pathway to fostering eventual systemic change.

Monday, April 07, 2008

Utah's (Still) #51 and Getting Worse

The “news” about school funding in Utah remains perpetually dismal, as I noted in this May 2006 post. Nearly on schedule, we have the regular quarterly hand wringing about Utah’s failure to make adequate sacrifices to the gods of per-pupil-funding (see D-News, SLTrib).

As I noted nearly two years ago, there are only so many golden eggs that can be gotten from the taxpayer goose before we succeed in killing the goose. Over the last three legislative sessions, the legislature has dumped nearly $1 billion into the public education industrial complex on top of regular funding. But we’re still in dead last (51st) place in per-pupil funding. We’d only need another half billion to tie with 50th place Idaho.

A big part of the problem is demographic. The D-News article notes that “one in five Utahns are public school students compared to one in seven nationally.” Apparently Utah has been less successful than other states in getting its citizens to kill off their unborn progeny — you know, all those people that are supposed to generate enough money in the future to cover Social Security and Medicare costs for the currently living population.

But there’s another component to the funding situation. In 1995, Utah was in fifth place nationwide in amount of education funding per $1000 of personal income. By 2004 we had slipped to 27th place on that scale. We haven’t been keeping up with the Joneses. Other states have been increasing their education expenditures (with pretty lackluster results) at a much quicker pace than Utah has, while Utah has had the temerity put some money toward other pressing matters. No figures are available on where Utah currently stands on this scale after three years of unprecedented spending increases.

Comparatively speaking, Utah can boast some pretty decent returns on its educational spending, but there are some warning signs. The vast majority of our eighth graders can’t write proficiently. As might be expected, the problem is much worse among minorities and students for whom English is a second language.

While this latter issue pops up anytime there is immigration, the former issue means that the average student is underperforming. When compared with other states with a similar demographic profile, Utah’s overall student performance is the worst in the nation (see 11/5/07 post).

But let’s face reality. Utah is never going to win the per-pupil-funding race. In fact, given demographics and income levels, Utah will likely never make it out of 51st place. The folks in the education industrial complex will forever flog us for failing to properly worship the gods of per-pupil-spending. So I guess we’d just better get used to being harangued about it.

If we can simply accept this reality, we can get on with understanding that we have to innovate without having a lot more cash to do it. And for that, we may need to go back to the future. How in the world did we manage to teach students to read, write, speak, do math, and understand history back in the bad old days when we had superior educational outcomes while spending only a fraction (in real terms) of what we spend today?

Frankly, this isn’t rocket science. There are tried and proven methodologies. But we long ago scrapped them in favor of more costly modernized approaches that accrue power and money while simultaneously worsening educational outcomes (see 3/6/08 post). We know what works, but doing what works threatens ingrained power structures.

Utahns balked last November when asked to challenge those power structures. At least some folks believe that November’s voucher vote means that they have a mandate to punish those that seek to alter the current power framework (see 3/26/08 post). Apparently it’s not a good thing to threaten a caged animal.

On a related note, a friend of mine recently had a discussion with an educator that was very angry about the whole voucher thing. On top of that, the educator wondered how Utah can continue to pay teachers so poorly while simultaneously experiencing a teacher shortage. (As I noted in a 5/29/07 post, shortages exist for only certain types of teachers, but that was apparently not brought up in the discussion to which I am referring.)

My friend asked the teacher if it had ever occurred to him that teacher wages were low because there was no serious demand for these skills outside of the current educational monopoly. Thus, the monopoly is free to set wages very low. If there were real market based competition for K-12 teaching skills, asserted my friend, teacher wages would reflect what the market was willing to bear and there would be fewer problems with shortages. The angry educator was stunned. Such a line of thinking had never occurred to him, but it made sense to him.

As we consider Utah’s K-12 education challenges, it seems that we all too often are likewise locked into limited thinking patterns. This is especially true for those that build influence via the education industrial complex. It seems we are suffering not so much from a shortage of educational spending as from a shortage of imagination — and a shortage of willingness to do what is known to actually work.

Friday, April 04, 2008

Making a Positive Difference

We are at a stage of life where we are very busy. Besides a regular job, we are very active in both our church and community. With five school age children, we have many commitments and matters which require our attention. Among the week’s activities, my wife and I always work to get a date together, and I take time out for a special outing with a child.

While I take advantage of any opportunity to get one-on-one time with any of my children, we have a rotating schedule where dad takes each child on a planned outing. It’s nothing glamorous. We do something and we get a treat of some kind. We don’t spend much money. Sometimes the outing amounts to little more than running errands. But we’re spending time together and talking in a somewhat relaxed atmosphere.

Today was my fifth grader’s turn. He asked that we go and shoot our wrist rockets. I’ve been trained in all kinds of shooting sports since my early days, including archery, firearms, and slingshots. I own some equipment. But oddly enough, I’ve never really enjoyed it. And despite my training, I am a terrible shot. I’ve never successfully shot an animal of any size or kind, so I’m no hunter. I pretty much engage in shooting sports only for the benefit of others nowadays.

I took my fifth grader to a location near our home that he’s never visited before. We could have walked, but we drove. There are a number of trails running through the hills east of North Ogden. It was easy to find a location where we could set up a safe slingshot range. I’m a stickler for safety when shooting. You’ve got to have eye protection, hearing protection for firearms, a safe backstop, and range rules that prevent everyone from getting into anyone else’s line of fire. Yeah, I even do this for slingshots — even when there’s only two of us.

After what seemed like endless shooting at milk jugs, I suggested that we explore the area. Of course, that area is not new to me, so I knew where I was guiding my son. We were soon walking up fairly steep inclines, breathing heavily as we clambered up deer trails that were heavily littered with deer scat. My son mentioned more than once that he was probably ready to go back.

Finally we came to level ground where the expanse of western Weber County spread out before our eyes. Then just up a small hill from there, we were at the base of a large rocky escarpment that is known as Big Rock. Of course, my son forgot all about his fatigue and wanted to get to the top of that rock. There is a decent trail that brings you up to the rear of the rock’s summit if you know how to find it. We clambered up the trail and were soon more than 100 feet above where we had been standing a few minutes earlier.

After a few minutes in the breeze (it’s always windy up there), my son noticed the trail that led away further up the hill behind Big Rock. He had to climb up there. We had to walk through the snow that still lingers up there. At the top of that knoll, my son saw that a trail split off that led higher and higher, up to the top of a peak. He wanted to climb up there, but I demurred. There was too much snow and it wasn’t safe. The distance to the peak was much longer than he realized.

Had we climbed to the top of that peak, another peak would have become visible. Of course, from there, the trail continues higher. You can make a good six-mile hike out of it to the highest peak in the area. None of that upper area is safely accessible at the moment.

So we started scrambling back down the mountain and back down the hills. We didn’t return quite the same way we came, but eventually we were back at our slingshot range. We collected our milk jugs and returned to the vehicle. Throughout this whole trek, we met no one else. It was like we were in our own private world.

By the time we got home, we had been away from the house only about an hour and a half. But for my son, it had been a private adventure with his dad in a new and exciting world. This is the kind of thing that makes all the difference in the world for a boy.

Tuesday, April 01, 2008

Real Choice Curbs Medical Expenses - Mandates Don't

“An insurance policy for a single male resident in mandate-enforced Boston costs five times more than a policy for his identical twin in mandate-free Tucson.” —David Gratzer and Paul Howard

I have expressed my displeasure with Utah’s leap in the direction of a Massachusetts-like health care system (see here and here). HB133 established a health care task force that consists of politicians and various groups that make a lot of money from the current system. The hope is that competing incentives will produce an even-handed result. The likely outcome is that this hand will reach out to grab even more citizen money than it does at present.

One of my central gripes with Huntsman-care, or whatever you want to call it, is the Governor’s encouragement (insistence?) of an “individual mandate.” This means that everyone would be forced to purchase health insurance that meets the state’s specifications. Those that are judged to be unable to afford this insurance would have it provided at taxpayer expense. This is a government attack on your individual liberty.

David Gratzer and Paul Howard explain in this City Journal article how the argument works for both liberals and conservatives.

“Liberal proponents think of mandates as social insurance. Many of the uninsured are younger and healthier, they note, so forcing them into insurance pools will result in lower average premiums. Some conservatives, meanwhile, argue that uninsured people use emergency rooms but often don’t pay, offloading their health costs onto the rest of us. It’s not simply about coverage, in other words; it’s also about personal responsibility.”

This panacea ignores the reality that that insurance “costs are influenced much less by mandates than by consumers’ ability to buy a broad range of competing health-insurance products.” When states begin to design insurance policies via public policy, they drive up costs unnecessarily. The quote at the top of this post is evidence of this.

It has been claimed that the uninsured that consume medical services but don’t pay add up to a “hidden tax” on each of the rest of us to the tune of $900 annually. But “uncompensated care costs” to federal and state governments constitute less than 2% of total health costs. This means that the $900 figure doesn’t add up.

Over the past year and a half as my Dad has worked through stroke related issues, we have never had the remotest clue up front the cost of any medical service or product provided to him. In most cases, this information has not become clear until 120-150 days after the service was provided. Each actor bills separately and it takes a great deal of detective work to piece together everything related to a given event.

Compare this with retail care clinics that, for example, offer a quadruple bypass at a flat $30,000 rate. There are no extra charges for a nurse administering painkiller and no separate bills by the surgeon or anesthesiologist. You pay one flat rate, period. And you get a 90-day guarantee, something you won’t find anywhere in the traditional medical industry.

OK, if mandates are not the answer, what is? Gratzer and Howard suggest generating competition by “allowing people to buy health-insurance policies across state lines,” requiring medical service providers to “to post their prices for common procedures, including rates that the uninsured will pay,” malpractice reform, and repealing “regulations limiting the availability of inexpensive retail-care clinics.”

The citizens of Massachusetts are discovering the horror of their utopian mandated RomneyCare health plan. Initially it was estimated that it would cost about $125 million for 2008. By last year that was pushed up to $380 million. Now they are scrambling to come up with $870 million, and the administration is saying that real costs will be closer to $1 billion. Yet citizens are finding that these expensive insurance plans buy them substandard care.

Now, that sounds like a plan to emulate! (sarcasm) But that is exactly what proponents of state-mandated health insurance want to do in Utah. And because many businesses stand to make a lot of money from this, a lot of businesses are on board. The Salt Lake Chamber of Commerce regularly runs ads promoting this as a “market based” or a “bold” solution. As folks are discovering in Massachusetts, calling it market based doesn’t make it a competitive free market solution.

This is a plan that is designed to reduce the freedoms of every citizen of Utah in order to enrich businesses (and politicians’ war chests). But, hey, at least we’ll all be covered! So, as your politicians work with businesses that stand to make lots of money from ‘reforming’ the health care system, it is wise for you to put your hand on your wallet and firmly tell them no.