In Which We Take A Break From Partisan Bashing

No one particularly likes government. How can we disagree? It's expensive, instrusive, and bloated, and from a distance appears to be populated only by venal public servants who can't process our passport request on time.

So we can all agree that government would be best served by getting a great deal smaller. Of course, that's a tricky thing to do:



The world would be a much nicer place if government were smaller. But people like their government services. And, as we've previously pointed out, that covers a lot of ground.

Europe Redux

Sometimes, the Strawman Blogger wonders: Why think at all when others can do it for you?

For a much more detailed and intellectual take on the mess in Europe, read Krugman. It's clear, informative, and adds quite a lot to our previous protestations that little Europe is thoroughly screwed.

An additional note: Krugman points out the impossibility of deconstructing the Eurozone. But given the fractured political nature of Europe, I don't see how any meaningful integration can be achieved at all.

Tricky.

In Which We Wonder Why Corporations Are So Levereged

And outsource the task to Felix Salom here.

Click the link - it's instructive. Corporations that finance operations through debt pay a negative six percent tax rate. They simply raise enough debts that they pay more in interest than they earn in income. The tax deductibility of interest payments takes care of the rest.

In a world where everyone would like to return to some semblance of thrift, subsidizing companies to take on debt and taxing equity at rates in excess of thirty percent, can politely be called "a large misalignment of priorities."

Healthcare Redux: In Which We Declare Victory In The Blogosphere

A mere four days after we pointed out the conservative ideas already included in the healthcare bill, venerable blogger Ezra Klein points out the conservative ideas already included in the health care bill.

Of course, this would all hang together better if we hadn't gotten the idea from him in the first place. But we feel that this could be considered points on the board.

Objectively speaking, though, he writes better than we do. Bastard.

The (New) Most Important Graphic I've Seen

If you want to discuss America's deficit problem, you need to be familiar with this graph:



More info at the New York Times. It's created in part to show how little you accomplish with a non-defense discretionary spending freeze, but it's also instructive on the nature of government.

There's a pervasive myth that big government it some sort of mistake, and we can reduce is spending while still receiving the services we like. It's not: Government spends most of it's money on services we ask for.

My Big Fat Greek Monetary Crisis

I don't have much to say about the ongoing crisis in Greece - Eurozone monetary policy is not my area of expertise.

It does bear to mention, though, that this highlights the dangers of giving up control of your money supply without getting any political clout in return. It also raises some pretty significant questions about the viability of the European Union, at least for smaller member countries.

Back in the heady days of aught-five, I started to have my doubts about the EU. At that time, Ireland was being held up as the conservative European model: low regulation, low wages, and low taxes was spurring a rage of economic growth. It was, as I recall, something of a favoured son for the new conservative movement.

Since then, things have gone badly off the rails. Ireland is a telling case study. They had a great policy in the boom times, but when the bust came, they had no way of responding to the sudden drop in global demand.

What Ireland's export-heavy economy could use is a fair to drastic devaluation of their currency, to help float demand and keep them above water. But the European Central Bank has no intention of devaluing the Euro - generally speaking, the ECB does what it's largest member states, like France and Germany, tell it to do.

It was a bit of a horse-before-the-cart problem: joining the Eurozone has always meant that the ECB takes control of your monetary policy, while the Union promises political unification at some undetermined point in the future.

That doesn't work. We tried something similar once (sans central banking) back in the days of the Second Continental Congress. What we ended up with was a loose confederation of states that didn't pay much heed to a central political authority.

At some point, the EU is going to have to press for more control over the economic behavior of it's member states. Either that, or countries like Greece and Ireland should start to question why they signed up for the union in the first place.

A Note On Incentives

The Strawman Blogger is quite the fan of the dismal science - because of this, we find it stimulating to look at the world as a system of incentives. For example:

As we've discussed previously, you have no reference point about the cost of your insurance. Because of that, the only feedback you can provide is based on quality. Did you see you favourite doctor? Did you get your treatment? Was your copay too large?

If you don't get want you want, you complain. And insurance companies have every incentive to respond to your complaint. They can make preferred provider plans more expansive, provide better access to treatment, and reduce your copay.

This, of course, costs money. Your employer, certainly, can shop for more affordable policies, and they do. But in the war between quality and price, there's really only one thing you respond to.

If that doesn't sound crazy, it should. Think about it - Everything else you purchase is a balance between quality and price. The Strawman Blogger does not drive a Subaru Impreza because it suits his bloody image. We make decisions about food, clothing, shelter, and transportation, all based on the premium we're willing to pay for the product we get. Everything except healthcare.

Boggles the bloody mind.

In Which We Interact

Over the weekend, someone raised a laudable point in our comment thread: "Why?" they ask. Why healthcare, why the expense? In other word: Why worry?

Life isn't perfect. If 10% of the population lacks health care - well, 10% of the population should try harder. It's America, dammit.

And we can see their point. The Strawman Blogger is no friend of the lower classes. We were born with the silver spoon so far up our mouth that it seriously impaired our gag reflex. Our trust fund is so large it exerts a significant gravitational pull. In our minds, poor people should only be seen at charity events, or when we happen to drive past a bus stop.

But the problem of health care is not a problem of the poor. It is a problem for all of us. And the Strawman Blogger has perfectly selfish reasons to extend health care to the underclass.

Our Perfectly Selfish Reasons

The Strawman Blogger is a man of almost unlimited patience. But even we are beginning to tire of repeating the same, basic refrain: In America, healthcare is broken.

This is a very important point. Let's repeat it:

American healthcare is broken
American healthcare is broken
American healthcare is @$^*% broken

We feel better.

Somewhere Along The Way, Life Happened

But why is it broken? you ask. My healthcare is just fine. I can see any doctor. Get any surgery. All without coughing a single bloody cent.

That's the trouble with American healthcare. It feels free. But it's not. And it's designed in such a way to screw over exactly one person, and screw them so thoroughly and deeply that they may never walk the same again.

You.

Getting Screwed By American Healthcare: A Reference Guide

Part 1 - Costs are Out Of Control

Each year, health care costs rise. Usually, somewhere between 5-12%. By comparison, a vibrant economy grows about 4-6%. Middle-class wages average a terrible 0% - over the past ten years, they haven't grown at all.

Given these rates, health care will consume 50% of government spending by 2082. That's money required for transportation, law enforcement, debt payments and Social Security.

It would be bad enough if health care were pretty cheap already. But it's not. Health care in America is more expensive than any other industrial country in the world:



This is a graph of our health care costs and our health care outcomes. On the left is how much we pay for health insurance - on the right, how long we live. America doesn't just pay more for health care. We pay a LOT more, over 40% more than anyone else. Maybe this would be a good deal if we lived longer, but we don't: our outcomes are rated 37th in the world.

Wondering where that money comes from? The Strawman Blogger is glad you asked.



This graph comes from the eminitable Ezra Klein. Click on it: he has a lot more like it. It's about unit costs - the cost of a procedure in America versus a procedure in other countries. They are not comparable, and they are not cheap. Unit costs are killing us.

Part 2 - You Don't Feel It

Surely you exaggerate, you say. If things were that bad, I would know.

But you wouldn't, you poor simpleton. And here's why: For godawful reasons practically lost in the midst of time, your insurance is provided to you by your employer. Why this should be the case defies all belief. The Strawman Blogger cannot imagine a world were his employer provided his auto, home, or renters insurance.

As long as you're employed, you don't feel health care getting more expensive. Your employer simply soaks up the excess cost behind your back. Whenever health care costs rise, your company absorbs the difference, then hands out any money left over as wages. If costs rise too much, you just get a smaller raise that year.

Skeptical? You probably shouldn't be.

Of course, if you're unlucky enough to be fired, or if you happen to be on the individual market, the pain is very real. Insurance companies don't care how broke you are, or how hard you've worked. They'll simply calculate how much your illness could cost them, and they'll make you pay it. And if it gets too expensive, they'll stop insuring you. You've just been the victim of recission, and it happens every day.


Part 3 - The System Screws You

So that's our situation: We have out-of-control costs, hidden from you by your employer, that you'll rarely see but will be quite the nuisance if you ever lose your job. Perversly, people are quite happy with this situation.

Employers love it because it gives them power. Sure, they're loving it less and less over time, because power is ungodly expensive. But as long as they provide health care, you can't change jobs or quit without risking the individual market. They get to make you unhappy, and you get to take it.

Insurers love it because they don't have to bargain prices down. In a normal world, insurers would have to negotiate with doctors over their fees. The companies that were better at it would be able to offer cheaper policies, and thus would get more customers. The free market in action. But because the costs are hidden by your employer, they don't have to bother. They can pay your doctor whatever he asks for and pass the bill on to you.

Doctors love it because they get paid a lot. Much, much more than doctors in any other industrial country. Remember that unit cost graph? That's what you're paying so your doctor can buy another yacht. It's no coincidence that Medicare, the one insurer who can be ballsed to negotiate with it's doctors, controls costs better than it's private counterparts.


Part 4 - It's About To Get Much Worse

So we've set up a system that doesn't just allow costs to get out-of-control: it encourages it. And if everyone is having second thoughts, if insurers and employees are thinking, "Slow down, we might have underestimated the size of this particular fucking problem," it's too late.

The individual market is already a mess, but it's going to get much worse. The only way insurers can control costs is through recission - they just stop insuring people who are too expensive. As costs rise, more and more people simply won't have access to insurance. It will be too expensive, and insurers aren't a bloody charity.

Employers don't have that option. So healthcare costs will continue to exert downward pressure on American wages. Eventually, they'll stop offering health care all together, or they'll ratchet down the quality of your policy until it makes no difference. Either way, you'll have to get something on the individual market. Good luck.


Final Lesson - There Are Other Options

Let's not kid ourselves. The current system isn't free market. There's nothing free about it. You have no choice - your employer chooses for you. You have no information - if you're an individual, insurance companies are required to tell you $%*# all.

It can be fixed, though. You can have a public option, like Medicare, that uses it's size and market position to bargain aggressively with providers. You can have government owned hospitals, like the VA, that simply sets the wages of their staff. Or you can try reform through a mix of subsidies, regulation, and oversight of the existing private market, and hope that incremental policy changes and public awareness will begin to move prices downward.

That last bit is the administration's plan. And it does a fair job of it: It shaves over 100 billion off the deficit over the next ten years. Of course, you say, that's not near enough to rein in costs - and I agree with you. But given how hard you fought the most conservative piece of healthcare legislation in history, you'll forgive us if we don't sing the praises of the public option quite yet. The Strawman Blogger will take what he can get, thank you very much.


And if all this isn't enough? Well, we can always make a moral argument. Over 45,000 people die a year from underinsurance. That's not 45,000 car accidents, 45,000 random murders, or 45,000 people who died because they were just too fucking lazy to go to the hospital. It's 45,000 preventable, treatable illnesses that went untreated, simply because we chosen an asinine, jackass way of running a health care system. And it's a number that's only going to get larger.

In Which The Fed Robs Me Of My Remaining Years Of Peace

A short note: A world with 9.7% unemployment, anemic economic growth, 10-year treasury yields that have barely blinked in the face of a massive expansion of the monetary base, and a Fed that seems to think its job is done is not a world the Strawman Blogger wants to live in.

But surely not even Fate herself could not be that cruel to your dedicated correspondent ...

What's that? Eh? Ah. I see.

In Which Normal Service Will Be Resumed

The Strawman Blogger arrives very late to this party, but it does deserve a mention: GDP grew at 5.7% in the fourth quarter. And the result? Nothing much. It is an inventory bounce, full of sound a fury, signifying nothing.

Final demand was, I'm afraid, an awful 2.2%. At this rate, we'll have have reduced unemployment below 8% by 2013.

In Which We Solve The American Debt Crisis For All Eternity – Part I

There must be some kinda way outta here,
Said the Joker to the Thief
There’s too much confusion here,
I can’t get no relief – Bob Dylan

Spending freezes. Monetary tightening. My credit card balance. Yes, the debt crisis is everywhere these days, to the point where your wandering correspondent can’t safely travel the blogosphere without tripping over threats to raise the Fed fund rate.

Originally, I had hoped to solve this problem in a single blog post. But it seems you’ve gotten yourself in quite the mess. Even my venerable intellect would be taxed to clean it up in a mere seven hundred words.

So instead we’ll take it easy: follow-through is important here. From time to time these posts will crop up, and I’ll explain the basics of our debt problem – its characteristics, its management, its cyclical and structural issues, until, much farther down the line, we’ll arrive at the obvious solution. All written in prose so clear and lucid that even a peasant like you can understand it.

But first, we’ll have to clear up this strange confusion between the debt and the deficit.

Debt and Deficit – Two Entirely Different Ways To Screw Yourself

Details, details. The debt is simple – it’s the measure of the outstanding liabilities of the U.S. government. Like all debt, its value rests on the expectation of timely payments from the borrower. It takes many forms: treasury bills, notes, and bonds, TIPS, and assorted other government securities. Indeed, it is the management and sale of these securities that forms an important part of our monetary policy.

The debt is also, in nominal terms, quite large.

The Deficit – Some Problems Find You

The deficit, on the other hand, is not a current obligation. Rather, it’s the difference between the money our government acquires and the money it spends. It is the rate at which we add money to the debt.

Now, those of you who have been poorly educated, are of weak constitution, or who cannot be ballsed to keep up with current events, will be troubled by this. “Tis Obama!” you cry. “And his terrible, socialist, no good health care policy. Or perhaps the bailouts.” Which brings us quite conveniently to our first important point:

Our First Important Point

Ponder, if you will, this graph:



Here, we find something very clearly demonstrated. That there a two ways to run a deficit – and, in evils, they are worlds apart.

Lesson The First – The Cyclical Deficit

The cyclical deficit. The hurricane in otherwise peaceful financial waters. Like a seasonal storm, it swoops down among our nation’s finances to wreak untold havoc. Like a seasonal storm, it passes quickly, leaving nary a trace behind.

In normal times, the government raises money through taxes, and spends it in the budget. During a recession, tax revenue falls, while our spending remains the same. A deficit ensues.

Falling revenue alone is enough to cause a deficit. But of course our government is not content with a merely passive role, so they engage in assorted types of expensive action designed to bring the economy back to health. And the deficit increases.

Once the economy is chugging nicely along again, the cyclical deficit all but disappears. Tax revenues go up, spending drops back to it’s original level, and cyclical factors – like the much maligned fiscal stimulus and the Troubled Asset Relief program – fade into tiny lines in the future horizon.

Lesson The Second – The Structural Deficit

The structural deficit is an altogether different animal, nasty and full of venom. A structural deficit is not a product of a recession. It is always there. It is simply a feature of the things we cannot afford, and the things we refuse to pay for.

The cyclical deficit ebbs and flow. The structural deficit does not. Like cancer, it just grows and grows. An increasing part of it is caused by health care costs, which will absorb 49% our GDP by 2082.

It’s also caused by programs that have no tax offset. Since raising taxes is so politically unpopular, we stopped doing it – between 2000 and 2008, we simply put everything on the credit card. The wars in Iraq and Afghanistan, the Bush tax cuts, the 2003 Medicare Part D Prescription Drug expansion – all of these were enacted without a single offsetting piece of revenue, in the midst of an already growing deficit.

Truly, people. How the current Republican party became a model of fiscal prudence is insulting in its audacity. They passed a massive, budget busting tax cut that primarily benefited the richest Americans, along with an expansion to Medicare that cost $1 trillion dollars, and did not bother to come up with a single dime.

In closing: What have we learned?

1) When we fix our debt problem, we cannot focus on cyclical factors. We must concentrate on the structural problems that threaten our solvency.

2) Using quick, back of the envelope calculations, the 10-year financial impact of both the Troubled Asset Relief Program and the fiscal stimulus have exactly this much impact: F@%&-all.

3) When passing the largest tax cut in American history, it’s best to find a way to pay for it, first.

Things I Ponder When Woken In The Middle Of The Night In A Cold Sweat Over Fears For America’s Deficit

Net savings from Senate Health Care proposal: $132 billion a year.

10-year cost of the unfunded, Republican Medicare Part D Act: $1 trillion.

Clear Leadership We Can All Believe In

It was not a nice world this, not a nice world at all.
It was an old testament land he found himself in, a land
of barbarity and retribution. - Ian Rankin, Knots and Crosses
With all the grace of a drunken Labrador slamming into the closed glass door of a 7-Eleven, Mike Pence, the third-ranking leader in the House Minority, advances his alternative plan for health-reform:

“Well, look, you know, I was, uh, yeah, yeah, look, uh.”

Ahh. Bless.

In Which We Consider The Awful, Terrible, No Good Socialist Health Care Proposal

You can’t always get what you want
No you can’t always get what you want
But if you try some time, you might find
You get what you need. -
The Rolling Stones
So several times in the past two weeks, when the topic of health care reform is broached, my conservative family and friends have offered some familiar personal advice:

“You, [Strawman Blogger], are just another socialist.”

Now, I take no offense. If there’s one thing your intrepid blogger enjoys, its being considerately labeled a no-good-red-commie-Mao-loving-Trotskyite. But unlike that time we were caught with the minister’s daughter, these allegations are without a shred of truth. So very shortly, and with damning finality, I shall clear my name.

But before I begin, we need to know what the bill is. And for that, we’ll need a shorter version of the bill in question. If only I had one lying around …

The Awful, Terrible, No Good Socialist Health Care Proposal: A Shorter Version

So this is how the bill works:

Each state sets up an exchange, where individuals who are uninsured (or uninsurable) are allowed to buy insurance from private companies, such as the ever-caring Blue Cross/Blue Shield. The individuals benefit from purchasing insurance at cheap group rates, and the insurers benefit from access to new customers.

In order to be listed on the exchanges, insurers have to meet some minimum qualifications. They have to qualify in price – their policies must be cheap enough. And they have to qualify in quality – they have to provide a basic level of health care service. In return, individuals are allowed to rate their level of satisfaction with their insurance, and these ratings must be made public by the insurers – the community rating system.

But what does the government do? In short, not much. The government provides subsidies to purchase insurance to the mostly poor (people earning up to about 300% the federal poverty line, or around $32,000 for an individual). They also help set up the exchanges.

But, as far as reform goes, that’s it. The government doesn’t employ any doctors, and they don’t tell you what policy to buy. And they don’t insure a single person.

If this all seems terribly conservative, well, it is. It’s so conservative that it’s basically identical to the proposals endorsed by Bob Dole and Tom Daschle. It’s so conservative that some basic elements, like a selling insurance across state lines, were suggested by McCain on the campaign trail. It’s vastly more conservative than the health-care plan advanced by Richard Nixon, and it’s conservative in part because over 160 amendments were accepted from Republicans in the Senate HELP committee.

A Brief, Irritated Aside

Oh. And the end-of-life counseling provision, the late and unlamented father of the death panel rumours? It was included in the GOP’s 2003 Medicare prescription drug bill.

And Back to Our Original Point

So I hope you can understand the uncomfortable position of your Strawman Blogger. Here I stand, accused of all types of nefarious socialism, for the crime of being slightly further to the right than Richard Nixon.

And we’ve sacrificed along the way. We’ve given up on the strong public option on a federal exchange, the federal exchange, the strong public option on a state exchange, the weak public option on a state exchange and, finally, the public option all together. We’ve given up stronger subsidies, on ending the employer-tax exclusion, on Medicare-for-all. We’ve given it all up in a hopeless effort to get a single Republican vote, and now have lost it all, all because a Massachusetts politician doesn’t see the value in shaking hands outside of Fenway Park.

And for this, you accuse me of being a socialist. For shame.

Back to the Future

So where does this leave us? It’s very simple.

Health care is broken. It’s broken enough that we spend 40% more than any other country, but rank 32nd in health outcomes. It’s broken enough that it will bankrupt the country by 2070. It is, in immortal words of Steven Pinkner, well and truly unsu-fucking-stainable.

Of course, if something cannot go on forever, it stops.

Solution #1 – Like Our Sex Life in High-School: We Do Nothing

This, ignorant louts that you are, is the option you’ve chosen. We continue merrily on our present course, while each year health care costs increase, and each year more and more people will be denied, or will be unable to afford, insurance. Eventually this will increase to the point where the system of private insurance will be, for all intents and purposes, broken.

Solution #2 – Like Our Sex Life in College: We Do Something, Anything, At All

There are options for fixing health insurance. Hell, we’re the only country who can’t do it right. We can squeeze insurers and providers with a public option. We can set up a risk-equalization pool. We can nationalize the whole bloody system. But these are all much, much more liberal than the proposal you’ve just rejected.

So this leaves me in a confused position – I am left defending a conservative health care proposal from the conservatives who invented it, when the status quo doesn’t work and all the other options are deeply, terribly more liberal.

Just what is your better idea?

Welcome To The SMB

Really, if the lower orders don’t set us a good example, what on earth is the use of them?"
- Oscar Wilde
There was once a time, back in the day before MySpace became overrun with drug dealers and people looking to sleep with other people they once knew in high school, I kept up a small unremarkable blog. And it was good.

Although I blogged it up for awhile, it lapsed with the passage of time. But lately the blogging urge has struck again. Surely, I think to myself, the world can still benefit from my always clever, often timely, and admittedly vast pool of personal wisdom?

Of course it bloody well can. It is, for example, full of people like you, and that does it very little credit. The world, I modestly accept, could use me.

So came about the Strawman Blogger. Here, we’ll find social commentary, with frequent diversions into the field of economics, and occasional forays into the merely curious.

But before we begin, it would help to have the House Rules.

The House Rules

1) A sense of humor is required.

2) Your comments will rarely be deleted. Your frequent and entertaining displays of childlike reasoning don’t concern me – they embarrass only yourself. However, we will delete any material deemed to be offensive to any gender, ethnic, religious, or other interest group, anything deemed off-subject, any material my girlfriend does not like, and, on rare occasions, any time I really, really feel like it.

3) We will try not to offend you.

4) These things do not amuse us: Manchester United, the EMH, Michael Bay, the Treasury View, Eugene Fama, the Wall Street Journal Editorial Board, Casey Mulligan (It’s because they don't want to work, Casey? Really? Really?), anything ever recorded by Nickelback, the actual band members who comprise Nickelback, prawns (Tiny legs. Can’t trust them.), James Patterson, and Kokanee beer. Liking anything above doesn’t disqualify you from participating in this blog. It will, however, raise grave doubts about your level of taste.

5) Actually, scratch (3.). We will try to offend you all the time. For example: “I privately admire the willpower of anorexics.”

6) From time to time, if comments are slow, we will resort to outright bribery. Participating in the blog can be lucrative as well as edifying.

And, finally:

7) In the beginning, there was Liverpool.

And that about covers it. Let’s get it started: