Friday, February 26, 2010

The Healthcare Summit

Political theater for sure.

There is no earthly reason for serious legislative work to be televised. Posturing, yes, that should be televised. Otherwise, why do it? So this summit was an excellent opportunity for Dems to appear reasonable and Republicans to act like populists. It was, in some ways, a reversal of the usual rap that the left and right throw at each other. Usually, liberals say that conservatives are mean, and conservative say that liberals are stupid. Yesterday, the liberals were accused of tyranny and the conservatives of “not getting it.”

On one score, the liberals were surely right: affordable insurance cannot cover pre-existing conditions if you can wait until you’re sick to buy it. So, everyone must be required to buy insurance (or someone must buy it for them), so that there won’t be any pre-existing conditions. And the insurance everyone must buy has to cover the conditions that would be excluded as pre-existing if the insurance were purchased later. If you can buy a policy now that costs $5 a month because it only covers bunions, you can’t expect to buy one later that covers everything for a reasonable price. No, the policy that qualifies you to avoid a pre-existing condition exclusion has to cover all the conditions to which that condition might apply. Otherwise, the opportunity to game the system remains.

The result, of course, is that we need a one-size fits-all “basic” coverage that people must buy and insurers must sell. Beyond that, individuals might be offered additional benefits, but insurers must be permitted to deny the extra benefits with respect to conditions existing at the time the policy was upgraded. Open enrollment at a give age might be used to enable people to get full expanded coverage – that’s for the actuaries to figure out – but in general, the coverage that cannot be denied on the grounds of pre-existing conditions must match the coverage that individuals are required to buy at an early age.

This analysis is obvious, and yet the Republicans whine on about “Washington deciding what everyone must have,” and how “people don’t want to be told they have to buy insurance,” all the while joining the mob that wants to stone the insurance companies for, as Jay Rockefeller (not a Republican, maybe not even a Rockefeller) said, “putting profits ahead of people.” As if Wellpoint were a charity. But I digress – my point is that the Republicans were singing the same tune as Democrats about pre-existing condition exclusions “going straight to the insurance company’s bottom line,” but without the logical consistency of mandatory coverage to make a solution work. When BHO said that he had campaigned against mandatory coverage, one of the moronic Republicans shouted out “Bless you!” The President was making the point (true or false) that he “had to be dragged kicking and screaming” to the conclusion that mandatory coverage was necessary.

Of course, in Washington, you can’t tell who’s dumb and who’s pretending to be dumb. Somewhere in the Republican ranks is someone who gets this stuff. I mean, this same sort of domino logic applied when ERISA was passed in 1974. That law sought to provide insurance for workers pensions, but to do it, it had to establish rules about participation waiting periods, benefit accrual rates, vesting schedules and investment management. Otherwise, the system could be gamed or moral hazard would infect fund management. So this pre-existing condition thing ain’t rocket science.

Maybe politics-watching has always been an exercise in telling the knaves from the fools. But if wasn’t always, it sure is now.

Tuesday, February 23, 2010

Glazier Nation

French Economist Frederic Bastiat is best known for this parable:

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented. Bastiat, Frédéric, That Which Is Seen, and That Which Is Not Seen (1850).

The sort of thinking Bastiat sought to combat is especially prevalent in hard times, when a glazier’s job in the hand seems to be worth two shoe salesman’s or bookseller’s jobs in the bush, especially since the glaziers know who they are and have a vote and can contribute to a PAC, whereas the cobblers and bookbinders don’t know that the shopkeeper’s six francs will go to them.

In a democracy, the political power of glaziers matters. As fewer and fewer of us earn our livings actually making things, and more and more of us are paid to fix life’s metaphoric broken windows, Bastiat becomes more and more relevant and less and less listened to.

Among those “glaziers” are many of those whose livelihood depends on the inefficiency of our healthcare delivery system. (No need to name names; they know who they are!) The efforts to reform our healthcare delivery system are being stymied by the political demands of these glaziers. Mind, our political system runs on self-interest, so I don’t want to blame hard-working glaziers for not wanting their business to vanish or for working to make it not vanish. Rather, I am wondering aloud if we can, or have, reached a tipping point where, to paraphrase the old saw, if it weren’t for bad jobs, we'd have no jobs at all.

Ironically, one of the ways we might spend the money now wasted on healthcare is on repairing “windows” – rebuilding our crumbling infrastructure. The infrastructure needs repairing because we have neglected it, and we have neglected it because we’ve been spending our money on things less deserving than maintaining it. And now, when we have to repair it because we failed to maintain it, we are making a virtue of necessity by claiming that the repair project creates jobs.

Of course, featherbedding has always been with us, and people have always made money on inefficiency. But what if the new shoes and books that used to be made here by other employed Americans are now made in China? What is the economic and social calculus? I don’t have the numbers to do that math. But I do worry that we can no longer afford efficiency in any area of our national economic life because not enough of our people earn their daily bread doing the things that efficiency would make possible.

Wednesday, February 17, 2010

Think fast.

Here is the key part of Tom Friedman’s piece in today’s New York Times:

China, of course, understands [what’s going on], which is why it is investing heavily in clean-tech, efficiency and high-speed rail. It sees the future trends and is betting on them. Indeed, I suspect China is quietly laughing at us right now. And Iran, Russia, Venezuela and the whole OPEC gang are high-fiving each other. Nothing better serves their interests than to see Americans becoming confused about climate change, and, therefore, less inclined to move toward clean-tech and, therefore, more certain to remain addicted to oil. Yes, sir, it is morning in Saudi Arabia.

This observation points out an important difference between dictatorships and democracies that has until now served democracies and particularly the US well but is not necessarily going to do so forever.  The difference is that the US can never “understand” anything complicated.  Our system depends on the nation never really understanding anything.  We believe  some important things, and our intellectuals understand some important things, but our government does not operate by understanding – it operates by resolving the power vectors of people with competing beliefs, beliefs determined by short-term interests, which can be greatly at odds with how things really are.

China’s bosses do have to answer indirectly to the people.  Everyone talks about how the Chinese mercantilist strategy is intended to prevent some sort of political upheaval.  How can there be an upheaval in a true thugocracy?  But the Chinese political system does not have nearly the give and take of ours.  The bosses are the bosses until they are not the bosses.  So if they think nuclear, wind, and solar energy would be good for China, then they will implement them, and they will not have to worry about being voted out in the next election.  If the policies fail – if the growing prosperity stops growing – then they may have something to worry about.  But for now, there is no one to stop them from turning pretty much on a dime – no 41-vote minority of an opposing party – to stand in their way. 

The point here is not specifically that dictatorships can move quickly. That has always been true.  But dictatorships’ power to move quickly has, in the past, ended badly, as ideologues implement rules that stifle rather than promote innovation and prosperity.  But things change.  The Chinese dictatorship appears not to be terribly ideological, at least not in the way we are used to seeing Communists be ideological.  Nor do they appear to be thugs in the sense that they kill their political rivals the way Stalin and Pol Pot did.  Yes, they suppress dissent, but they have not suppressed innovation, allowing some measure of economic, i.e., entrepreneurial freedom, which is a great release valve for restless minds.

The point, rather, is that there are times when speed matters more than at others, and there are world conditions to which a democracy, unable to reason, cannot respond effectively, whereas a dictatorship, if it has the right people in place, can respond intelligently and rapidly.  The odds may very well favor democracy, in the sense that a confluence of difficult problems and wise dictators doesn’t happen often enough to make dictatorship the “right” strategy for a people to pursue.  But that does not mean that such a confluence does not happen or that it is not happening right now, precisely as Friedman describes it.

The whole idea of saying “China understands…” is alien to us.  When do we ever say “The United States understands…”?  We don’t say it.  We say, in retrospect, that some American leader understood something and was able to persuade folks to act on it.  Or not.  Jimmy Carter understood how damaging our dependence on foreign oil was.  But did the US “understand”?  Not hardly.  We had just lived through an oil embargo that had disrupted life here significantly.  Still, instead of starting a crash program to become energy independent, we watched the price of oil fall back to comfortable levels, as if it would never rise again, and went back to our stupid ways.  Like the hillbilly in the Arkansas Traveler’s song, we can’t fix the roof when it’s raining, and we don’t need to fix it when it’s not. 

A traveler was riding by that day,
And stopped to hear him a-practicing away;
The cabin was a-float and his feet were wet,
But still the old man didn't seem to fret.
So the stranger said "Now the way it seems to me,
You'd better mend your roof," said he.
But the old man said as he played away,
"I couldn't mend it now, it's a rainy day."

The traveler replied, "That's all quite true,
But this, I think, is the thing to do;
Get busy on a day that is fair and bright,
Then patch the old roof till it's good and tight."
But the old man kept on a-playing at his reel,
And tapped the ground with his leathery heel.
"Get along," said he, "for you give me a pain;
My cabin never leaks when it doesn't rain."

Apparently, the old man didn’t understand. 

Tuesday, February 9, 2010


In a recent op-ed Bob Herbert listed the unemployment rates for various income levels, and then wrote:

The point here is that those in the lower-income groups are in a much, much deeper hole than the general commentary on the recession would lead people to believe. And none of the policy prescriptions being offered by the administration or the leaders of either party in Congress would in any way substantially alleviate the plight of those groups.

Mr. Herbert calls for “bold, targeted (and, yes, expensive) government action.” Such programs may indeed provide some short-term relief, but the lower group includes many inner-city Black men, a group that wasn’t doing very well before the crash. The patient who couldn’t play the violin before hand surgery cannot play it after. So we need to do far more than just undo the damage of the current recession.

One of the problems facing the lowest income group has been facing them for some time: despair born of limited opportunity. Look at this chart:


Forget for now about how well the top 5% (P95) is doing. The important point for P20 is not how well P95 is doing; it’s how well P60, and P40 are faring, and, as it turns out, they have been making steady gains in family income. So, while P80 complains about the bonuses in P95 Land, P20 needs to know why P60 and even P40 are doing so much better than the bottom quintile.

President Obama’s election sent a powerful message to every young Black man: you can be anything you have the talent, training, and drive to be. But that sort of message can be problematic. The election shows only that White racism is less of bar to success than it once was, not that there are a lot of jobs for young Black men to fill. So, where is are the jobs that would make it as wise as we say it is for young Black men to stay in school?

I’m afraid that many of those jobs have gone to White women, especially married White women. Of course, the jobs themselves are held by Whites of both sexes. But the issue isn’t who has the jobs, but how the increase in available jobs compares to the demographic changes in the workforce. If jobs have increased, and White female participation has increased, but Black male participation has not, it seems fair to say that the new jobs, viewed as statistical opportunities for work, have “gone to” White women.

By extension, then, if those jobs had not gone to White women, i.e., if White women had not entered the workforce in such numbers after 1970, Black men (and immigrants) would have had to fill the void. Nothing induces affirmative action like a shortage of workers. Scholarships, mentoring, all of the things that go on in token volume today to satisfy political demands would be happening instead in earnest if young Black men were seen as source of scarce labor. But they are not, and they know it, and, as a statistical cohort, they are behaving rationally in response: they are giving up.

In 1970 or so, Black Americans encountered one of those nasty confluences that we have come to call “perfect storms.” Equal opportunity can only be won when a bigger pie lowers the stakes for those made to share what they once had to themselves. The expansion of the economy after WWII made possible the early Civil Rights movement. It takes nothing away from the brave people of all races who demanded equality for Blacks to say that those demands would have borne little fruit if material economic conditions were not so hospitable to the cause. But it also takes nothing away from the brave people of both sexes who made the same demands on behalf of women to say that the influx of White women into the job market after 1970 was not a boon to Black men.

And the influx of women into the workforce, especially into the professions and higher paying jobs, was driven by something about those newly available jobs: they increasingly demanded higher education, something middle-class White women already had or had access to whereas inner-city Black men had neither. The Bell Curve identified this ominous trend in American employment. Not only was income inequality, growing, but the dividing line between the high and low was was increasingly correlated with intelligence. The good jobs created since 1970 have increasingly gone to the smartest people.

In this context, debating the meaning of “intelligence” is pointless. Quibbles about IQ may call Herrnstein and Murray’s science into question, but they do not change the facts. Faced with a burgeoning demand for smart workers, employers had to expand the job pool, and when they got to college campuses, they found that the expanded pool consisted primarily of White women (and, of course, Asians of both sexes, but not in the same numbers).

The trend identified in The Bell Curve was exacerbated by globalization. Not only was work becoming more cerebral, manufacturing jobs for which a college degree was not required were moving off shore. The kind of jobs that an emerging social class needs were drying up just as Black men were allowed to fill them. Picture Lucy holding that elusive football and telling Charlie Brown that it was finally his turn to try a field goal.

Given this history, the current economic mess, standing alone, is almost a non-event for young Black men. Yes, Black unemployment, especially among young men, is off the charts, but it was already horrible for the reasons mentioned. White women are probably not going to get out of the way (although economically rational strategies like fielding only one worker per household in tough times do have an odd way of becoming mores). So what else have we got? How do we create a job shortage here so great that even two earners per White family cannot fill it. I’m afraid that the choice is really simple: someone in China, India, Mexico, Vietnam, or the Philippines will have to step aside.

And so we come back to the trade deficit. It costs us jobs, and because it costs us jobs, it costs us opportunity for social change. We need job growth not only to employ people in general; we need it on steroids to force employers to look to the inner cities for help, and for the people in the inner city to see the light at the end of their own hellish tunnel.

And it starts with tariffs.

Monday, February 8, 2010

Republican Nonsense

I usually vote for the Republican candidate, because he or she usually has policy positions closer to mine than the Democrat. But sometimes, I vote for a third party or abstain from voting to express my dissatisfaction with both parties’ selections. I think low turn out sends a negative mandate, and I want to participate in giving that message.

Because I’d like to have a say in whom the Republican Party nominates for office, I’m registered as a Republican. (I think NY has closed primaries – and I strongly believe that all primaries should be closed – so it seems to me only right that if one wants to vote in a party’s primaries, one should join the party.) But I don’t believe that “joining” one of our major political parties commits one to that party’s platform or obliges one to defend what that party’s leaders do. Especially, as now, when what that party’s leaders do is indefensible.

I’m the first to argue that BHO has no mandate, that his election was a perfect storm of anti-Bush sentiment, economic collapse, and feel-good expiation of racial taint. But there are things that both parties want to do that the Republicans are refusing to do because it is more important to them that BHO and his party get blamed for things staying bad than that things get better. That strategy is not necessarily objectionable: one can imagine a ruling party so bad that getting them out of power is worth any price. But IMHO, this ain’t that. This is just sore losers trying to get their perks back.

And what good would a “return to power” do the GOP once they’ve established that the role of the minority is to gum up the works? They are destroying the car they want to drive. I hope that BHO presses and succeeds in his efforts to embarrass GOP legislators for standing in the way - for voting against bills they themselves sponsored, for putting "blanket" holds on nominations to extort pork for their districts - all in the cynical expectation that the the majority will be blamed if things don't get better.

Meanwhile, the party leadership continues to act as if Sarah Palin might actually be Presidential material. What better badge of unseriousness can a party have than the adoration of so empty a suit? The 2008 ticket was a match made in Democrat heaven: a Prez with a short life expectancy backed up by a Veep with no qualifications. It’s scary that they won the states they did.

Anyway, one expects Democrats to complain about GOP tactics, but rants by disaffected Republicans like me are less likely to be dismissed as partisan crap. I may be wrong, but I’m not predisposed to be where I am, and that ought to count for something.

Saturday, February 6, 2010

The Filibuster Pledge

Gail Collins has obviously been lurking on this blog. She is complaining about Senator Shelby’s hold on some 70 Obama nominees, a hold that he will release if he gets some pork for his state. Apparently, the inner workings of a senatorial hold involve the filibuster rule. I’m not sure why, maybe the senators “respect” each other so much that you can’t get forty of them to vote to ignore a hold, although I have also read that holds have on occasion been ignored. Anyway, I’ll take Ms. Collins’s’ word for it that holds depend on the tacit observance of the filibuster rule.

Yesterday, I was asked by, a liberal website, to sign a petition demanding that Shelby be made to defend his hold by actually filibustering. Again, I don’t know why that’s the issue, but since says it is, I’ll assume it is. (I signed the petition.)

Unlike Ms. Collins, who appears to support elimination of the filibuster, an elimination I would oppose, merely wants those who say they will filibuster to have to go ahead and do it. Amen to that.

So here’s a proposal for next election cycle. Every senatorial candidate must pledge that he or she (i) will not threaten to filibuster a bill unless he or she will speak for twelve hours non-stop (with pee-breaks made possible by “questions” from colleagues) against the bill, and (ii) will call for a vote on any issue that the opposition has threatened to filibuster, so that the opposition will be forced actually to filibuster bills it cares enough to do the work to stop.

Wednesday, February 3, 2010

Don’t Ask

I think every American should have the right to kill Taliban. That includes homosexuals.

But I don’t want to impair our aggregate ability to kill Taliban in order to include homosexuals in the effort. I’m not saying that including openly gay men and women in the armed forces will impair our ability to kill Taliban, just that effectiveness has to be considered in limiting membership in the force.

Effectiveness has two aspects: recruiting/retention and unit cohesion. I don’t know how permitting open gays to serve will effect either of those phenomena, but I am worried by the arguments advanced that it won’t affect them.

First is the claim that there have always been homosexuals in the army, and many have served bravely and effectively in units that have not been disrupted by their presence. The problem with this claim is that it is completely unresponsive to fears about openly gay service members. Don’t ask, don’t tell permits closeted gays to serve, presumably because closeted gays have no effect on recruiting/retention (except to expand both to include closeted gays) and no discernible effect on the performance of their units (although one cannot know what one gay soldier’s crush on another might mean in a pinch). But nothing about the experience with closeted gays tells us anything about a force that welcomes openly gay soldiers.

Second is the concern that we may lose valuable talent, specifically Arabic translators. It seems to me that this argument cuts both ways. If losing gay translators is a problem, then losing straight translators who don’t want to serve with gays would also be a problem. It won’t do to say that homophobic translators aren’t worth worrying about, because the whole point of the argument is that we need translators. Any policy change that produces fewer net translators cannot be defended on the ground that we need translators.

Third is the claim that a growing number, now a majority, of armed forces members say they would have no objection to serving with openly gay unit members. Maybe. But doesn't that imply that a significant minority of the current force and of the potential recruiting pool would be uncomfortable? And if so, would there really be enough openly gay recruits to replace those straight soldiers who quit and those straight young men who refuse to be recruited. BHO is fond of saying how his stimulus bill kept jobs from being lost. Can't we apply the same logic to claim that Don’t ask, don’t tell has prevented many resignations and abstentions from enlistment?

Fourth is the argument that Blacks were integrated in the face of similar hostility. That is true, but when Truman integrated the service, there were way more Blacks looking to serve than there are gays. History records that Truman’s Executive Order, issued in 1948, wasn’t really implemented until the Korean War demanded a larger recruitment pool. Thus, racial integration appears to have helped recruitment. By 1986, nearly 20% of the armed forces members were Black. That cannot be the case for gays. How the recruitment/retention consequences will play out is hard to predict, but the irrelevance of the Black experience seems to me safe to assume.

Finally, there is the affecting claim that forcing gays to live a lie in order to serve their country in a service that values personal honor is just plain wrong. That’s a good point. But then what? Why do people think that one good argument is all it takes for their position to win the day?

And then there’s unit cohesion. Again, the experience of closeted gays is irrelevant. The greatest threats to unit cohesion arise from (i) straight soldiers’ squeamishness about being sex objects of identifiable platoon-mates, and (ii) romantic entanglements of openly gay soldiers with each other. Undoubtedly, there are Brokeback Mountain relationships in the service now, but the number is too small to matter. If openly gay men and women are invited to join, the number of couples, and, worse, triangles, may expand exponentially.

I am not arguing here that homophobia and the resulting animosity between soldiers are a reason to exclude gays (although it could prove to be). I am talking about the real fact of serving in close quarters with someone who views you the way you view the opposite sex. A straight male soldier showering with a gay is entitled to feel as if he were showering with a woman or as if he were a woman showering with a man. An enlightened indifference toward the co-showerer’s sexual preference per se is fine, but it has no bearing on one’s comfort level in the shower with someone whose idea of a sex partner is you.

I don’t pretend to know how admitting gays into the military will work out. I do know, however, that the arguments advanced, other than fairness and “honor,” i.e., the ones not related to recruitment, retention, or unit effectiveness, are all bogus, and it would be nice if something more cogent could be offered in its support.

Finally, there is the matter of risk. Certainly, there is some risk that admitting openly gay service members will have a negative effect on recruiting, retention, or unit effectiveness. Whether that risk is small enough to run depends not only on whether the change is "right" as a matter of social policy, but also on how bad the consequences of being wrong would be and especially, how difficult reversing the policy would be if it harms our military readiness. How would that be known? Would our political machinery ever acknowledge that a drop in recruiting/retention absent a ban on gays was the result of ending that ban? Or would that old stand-by, a demand for impossibly absolute proof, be trotted out? My guess is that the genie will be permanently out of the closet.

Tuesday, February 2, 2010

Intergenerational Games

Game theory has something sad to say about the state of intergenerational relations in the US. 

Imagine that you had to support your retired parents if they could not support themselves on their savings and private pensions.  One thing would be true, at least in somewhat functional families: the intergenerational transfer from younger to older would be negotiated with some attention by the elders to the solvency and happiness of the younger generation and its offspring.  We care about our children and grandchildren.

But what if we can rely on Social Security and Medicare to care for our retired parents?  Or more, important, what if our parents do not have to impose on us directly because they get support from us indirectly?  The consequence is that there is nothing our parents can do to relieve us of the burden of caring for them.  Our payroll taxes are due no matter what.  Of course, wealthy parents can give gifts, but we’re talking about parents of modest means with parents of modest means.  Where those parents might, absent Social Security, try to accommodate their children’s economic needs, they don’t have to do that for the mass of payroll tax payers who support elders’ entitlements.  The oldsters can say “we’ve earned it,” and demand that the bills be paid by someone other than their own children, unable to do anything about the fact that someone else is making those children pay for them. 

Without socialization, we could assume that the aggregate intergenerational transfer would be the sum of what the younger generation can afford.  With socialization, the amount of the transfer is dictated by the voting power of the respective generations, or the ability of the young to impose inflation on seniors, something the latter have dealt with at the ballot box by indexing Social Security benefits and providing Medicare benefits in kind.  Because I cannot protect my kids from the tax voted by others, I might as well vote for those taxes so that I get what I've “earned.”  It’s a version of the tragedy of the commons, which is really a massively multiplayer prisoners’ dilemma game.

No one wants to ration healthcare.  But Medicare is on a bad trajectory, one that cannot be saved by tort reform or “insurance reform” or “pay for outcomes” or any other increase in medical productivity.  What we need are fewer old people consuming less care.  But not only can’t you always get what you want, sometimes, you can’t even get what you need.  Who will put the bell on that cat? 

David Brooks argues in the NYT today that we need oldsters to step up and match their aggregate demands to their kids’ aggregate ability to pay.  But where is the political will to do that?  How do we get seniors to reduce their entitlements to fund the war in Afghanistan or pay for better schools?  Or healthcare for the uninsured.  Hard to see a happy ending…