July 2009 Archives

20,000 Americans killed by invisible healthcare rationing every year

The United States healthcare system is #1 in costs and #37 in outcomes, according to The World Health Organisation (WHO). A primary reason we waste so much money is because we’re the only advanced economy on Earth that denies basic medical treatment to millions of our citizens, something even many poor countries — like Cuba — provide.

Now that we’re attempting to take a baby step toward healthcare sanity, health insurance companies are scaring people with the threat that faceless government bureaucrats will “ration” healthcare if government creates a public health insurance option. Scaring people about the creation of an additional option that anyone can ignore in favor of whatever health insurance they already possess is disingenuous. Further, our private health insurance system already rations healthcare. 45,000,000 to 50,000,000 Americans already have no health insurance. That’s rationing by wealth and social class. And tens of millions of “insured” Americans — most unknowingly — are in danger that some day, if they’re unfortunate enough to become very sick, their insurer will refuse to cover them or will charge them unaffordable amounts. (Michael Moore profiled this latter group — who believed they were insured… until they were dropped by their “insurer” — in the outstanding movie “Sicko.”)

Solving the twin problems of out-of-control U.S. healthcare spending and shockingly poor health outcomes will require taking money away from astonishingly expensive drugs and procedures keeping terminal patients alive a bit longer (often in agony) during their last year of life and re-directing that money toward cheaper treatments that allow younger, healthier patients live much longer, healthier lives. Why? According to Harvard professor David Cutler:

Spending in the last year of life is about 10 times [higher than] spending outside the last year of life.

Strangely, American government allows 45+ million Americans to risk death-by-lack-of-health-insurance even while it pays (via Medicare) for super-expensive treatments that slightly extend the (often painful) lives of terminally ill elderly. Even more astonishingly, we’re spending hundreds of billions on terminally ill old people, many/most of whom would be happier in a low-cost hospice setting, like the one recently profiled in The New York Times, than an uncaring, unloving hospital room. This makes no sense!

Princeton University bioethics professor (and all-around thoughtful, caring guy) Peter Singer raises this hugely important question (“Who should receive what treatment?”) that many, if not most, Americans never consider. We must answer it as a society, if we hope to prevent skyrocketing healthcare spending — which buys consistently lousy health outcomes for average Americans — from becoming 1/3 of the U.S. economy, as some project it’s on course to. (It’s already 1/6th of the U.S. economy… a much larger fraction than in any other country.) Professor Singer writes that even U.S. emergency rooms — which are required by law to treat everyone — ration healthcare, with deadly consequences:

[E]ven in emergency rooms, people without health insurance may receive less health care than those with insurance. Joseph Doyle, a professor of economics at the Sloan School of Management at M.I.T., studied the records of people in Wisconsin who were injured in severe automobile accidents and had no choice but to go to the hospital. He estimated that those who had no health insurance received 20 percent less care and had a death rate 37 percent higher than those with health insurance. This difference held up even when those without health insurance were compared with those without automobile insurance, and with those on Medicaid — groups with whom they share some characteristics that might affect treatment. The lack of insurance seems to be what caused the greater number of deaths.

When the media feature someone like Bruce Hardy (whom Britain’s health system initially denied a kidney cancer medication that would likely add six months to his life at a cost of $54,000) or Jack Rosser (also initially denied the $54,000 medicine by Britain’s health system), we readily relate to individuals who are harmed by a government agency’s decision to limit the cost of health care. But we tend not to hear about — and thus don’t identify with — the particular individuals who die in emergency rooms because they have no health insurance. This “identifiable victim” effect, well documented by psychologists, creates a dangerous bias in our thinking. Doyle’s figures suggest that if those Wisconsin accident victims without health insurance had received equivalent care to those with it, the additional health care would have cost about $220,000 for each life saved. Those who died were on average around 30 years old and could have been expected to live for at least another 40 years; this means that had they survived their accidents, the cost per extra year of life would have been no more than $5,500 — a small fraction of the $49,000 that NICE recommends the British National Health Service should be ready to pay to give a patient an extra year of life. If the U.S. system spent less on expensive treatments for those who, with or without the drugs, have at most a few months to live, it would be better able to save the lives of more people who, if they get the treatment they need, might live for several decades.

Estimates of the number of U.S. deaths caused annually by the absence of universal health insurance go as high as 20,000…

[T]he U.S. system also results in people going without life-saving treatment — it just does so less visibly. Pharmaceutical manufacturers often charge much more for drugs in the United States than they charge for the same drugs in Britain, where they know that a higher price would put the drug outside the cost-effectiveness limits set by NICE. American patients, even if they are covered by Medicare or Medicaid, often cannot afford the copayments for drugs. That’s rationing too, by ability to pay.

Posted by James on Jul 15, 2009

America's fastest-growing group: The long-term unemployed

During Reagan’s reign, the marvelous Bruce Hornsby sang:

Standing in line marking time

Waiting for the welfare dime

‘Cause they can’t buy a job

The man in the silk suit hurries by

As he catches the poor old ladies' eyes

Just for fun he says “Get a job”

Welfare has been scaled back since Reagan, and long-term unemployment is exploding:

The number of people who have been unemployed for more than 27 weeks has more than tripled since the recession began, to 4.4 million. The median time people go without a job has increased to more than four months, from slightly more than two months at the outset of the recession in December 2007.

“We have never seen a duration of that magnitude,” Lynn Reaser, vice president for the National Association for Business Economics, said. “There are a lot of ramifications. A lot of these people become discouraged, and they drop out of the work force. It affects their spending, their whole psychological frame of mind.”

…Jeffrey Jones, 40, is feeling the weight of eight months without work. He has not found anything since losing his job as a cook at a senior center in October, and he worries about paying rent and caring for his four children. His blood pressure is up, he said, and some nights he stays up and watches television to distract himself from the worries that keep him from sleeping.

Millions of unemployed Americans today would love nothing more than to “get a job,” but can’t.

America must address its long-term unemployment problem, which grows more dire by the day, esp. as the long-term unemployed burn through their life savings:

“I don’t see any job growth outside of health, education and government spending through the end of the year,” Mr. Silvia of Wachovia said. Some 6.5 million jobs have now been lost since the recession began, and the number of unemployed people has grown to 14.7 million.

As more people hunt futilely for jobs or give up their searches altogether, they burn through their savings, fall behind on bills and mortgages, and eventually add to the strains on already strapped aid programs, from government unemployment insurance to private food pantries.

“There are going to be massive, massive numbers of people who are out of work for long periods of time,” said Andrew Stettner, deputy director for the National Employment Law Project…

Some people give up looking for jobs and join the 800,000 discouraged workers.

Nearly one million “discouraged workers”! That’s a government euphemism for people who have desperately and unsuccessfully sought work for so long that they’ve given up hope and aren’t even bothering to look for work any more.

The government doesn’t count those 800,000 workers as “unemployed” because they’re no longer actively looking for work. If they were counted, the official unemployment rate (which doesn’t take into account millions of under-employed Americans) would already be in the double-digits:

[T]he seasonally adjusted percentage of unemployed workers, including discouraged workers, is 10% for June. That’s up from 9.8% in May. As you can see, those numbers are significantly worse — a half percentage higher than reported unemployment in June.

My solution: A negative income tax. The government would guarantee every American an amount sufficient to cover no-frills, basic living expenses. Taxes on income would reduce the amount of government benefit received by low- and moderate-income Americans.

Sound like a crazy liberal-socialist idea? Jodie Allen writes, “The idea of a negative income tax (NIT) is commonly thought to have originated with economist Milton Friedman, who advocated it in his 1962 book, Capitalism and Freedom.”

A negative income tax would save lives and sustain spending and the economy during recessions. It would prevent the long-term unemployed from becoming depressed and despondent. (Depressed, despondent people are not only far less likely to again become economically productive members of society but are also far more likely to engage in anti-social activities, from wife-beating to crime.)

A negative income tax would provide all Americans fearful of losing their jobs with some peace-of-mind. It would help cushion the devaluation of houses, cars, boats, etc. during periods of heavy unemployment. It would help prevent communities from being torn apart through widespread foreclosures. It would help protect mortgage lenders against foreclosures and the plummeting value of foreclosed houses.

Besides the negative income tax’s many tangible benefits, providing America’s least fortunate a basic living income is the decent, moral thing for our society to do.

Posted by James on Jul 02, 2009

Fed paying banks NOT to lend!!!

When we learned that Citibank, Bank of America, et al. all had negative equity but Washington refused to restructure them (because, they claimed, absurdly, improved economic conditions would rescue bank balance sheets… as we headed into a severe recession), I wondered whether the secret Obama/Fed plan was to shovel free money to mega-banks… enough money — both above and below the table — that they could become “profitable” and puff up their stock prices from the $0 they were worth absent government gifts.

TARP was a step in that direction. So was the still secretive Fed program that let banks unload TRILLIONS of dollars of junk assets on the Fed in exchange for vaults full of crisp, clean $100 bills.

We may today have discovered another way the Fed is shoveling cash to its big bank friends: paying banks high rates of interest to park their money at the Fed rather than lend it out to businesses and consumers.

This has not been confirmed, but statements by Federal Reserve Chairman Ben Bernanke plus a HUGE increase of bank money parked at the Fed strongly suggest the Fed is paying banks not to lend.

Bloomberg reports:

[B]anks’ excess reserves at the Fed rose to a record $877.1 billion daily average in the two weeks ended May 20, from $2 billion a year earlier. Excess reserves — money available for lending that banks choose to leave with the Fed instead — averaged $743.9 billion in the first two weeks of this month.

What incented banks to increase their Fed deposits from $2 billion to $877 billion? Apparently, high interest rates:

Reuters reports:

By setting [a high] interest rate on reserves the Fed essentially creates a magnet for banks to place those reserves with the Fed rather than lend them out into the financial system — creating a floor under short-term market rates.

This is because banks generally will not lend funds in the money market at a rate lower than they can earn risk-free at the Fed.

“Raising the interest rate paid on balances that banks hold at the Federal Reserve should provide a powerful upward influence on short-term market interest rates, including the federal funds rate, without the need to drain reserve balances,” Bernanke wrote.

So, strangling the economy during The Great Recession is a good thing, Mr. Bernanke?!?!?!

The Fed’s argument is that interest rates are at record lows and must rise. But rates aren’t really at record lows because businesses and consumers can’t borrow at anything like the official near-zero rates. Bribing banks not to lend raises the risk-free interest rate banks receive (which appears part of the master plan to bailout banks with under-the-table money), and it raises the already much-higher rate at which businesses and consumers can borrow.

If the Federal Reserve cared about unemployment — officially nearly 10% but really much higher if you include the underemployed and those who want work but have given up looking because prospects are so bleak — they would be encouraging lending.

Instead, they’re claiming the inflation boogey-man is just around the corner. That’s their “justification” for paying banks NOT to lend during The Great Recession!

Posted by James on Jul 23, 2009

How will humanity end itself: Super-robots or climate catastrophe?

The New York Times reports “Scientists Worry Machines May Outsmart Man”. This long-standing fear of countless science fiction stories will likely come true in my lifetime:

Impressed and alarmed by advances in artificial intelligence, a group of computer scientists is debating whether there should be limits on research that might lead to loss of human control over computer-based systems that carry a growing share of society’s workload, from waging war to chatting with customers on the phone…

[T]hey agreed that robots that can kill autonomously are either already here or will be soon.

The short-term threat is not super-intelligent robots but idiot-savants. Militaries — esp. the U.S. military’s DARPA — are pushing very hard into robotic warfare. Because successful killing machines require the ability to make split-second kill decisions, militaries will inevitably hand lethal power to their metallic soldiers long before those soldiers possess the wisdom and empathy to make human-like decisions. (Of course, humans make plenty of deadly mistakes, and much of the killing we glorify in the purported name of national defense is quite unnecessary and quite arguably immoral.) Further, pretty soon, police departments will want their own robots, and we could wake up to life in an iRobot world.

[The scientists] focused particular attention on the specter that criminals could exploit artificial intelligence systems as soon as they were developed. What could a criminal do with a speech synthesis system that could masquerade as a human being? What happens if artificial intelligence technology is used to mine personal information from smart phones?

The researchers also discussed possible threats to human jobs, like self-driving cars, software-based personal assistants and service robots in the home…

The idea of an “intelligence explosion” in which smart machines would design even more intelligent machines was proposed by the mathematician I. J. Good in 1965. Later, in lectures and science fiction novels, the computer scientist Vernor Vinge popularized the notion of a moment when humans will create smarter-than-human machines, causing such rapid change that the “human era will be ended.” He called this shift the Singularity…

How would it be, for example, to relate to a machine that is as intelligent as your spouse?

While no robot could ever be THAT smart (in case my wife’s reading!), I’ve long feared the apparently inevitable approach of super-intelligent computers and long doubted humanity will be able to prevent sliding down a slippery slope of increasing dependence on intelligent robots.

But perhaps my fear is overblown. We may well do ourselves in via climate catastrophe, biological weapons or nuclear weapons before our robots get us.

Posted by James on Jul 27, 2009

Matt Taibbi says Goldman Sachs destroying America's economy to enrich itself

Matt Taibbi’s latest — an all-out assault on Goldman Sachs in Rolling Stone titled “The Great American Bubble Machine” — is an absolute must-read. RollingStone.com has only an excerpt, but I found the entire article here.

It’s a long article and starts slowly, so I suggest starting with “Bubble 2: Tech Stocks.”

Reading the last two-thirds of the article, my jaw kept dropping. Scandal after scandal seemingly orchestrated by Goldman Sachs for Goldman Sachs and the government — largely run by Goldmanites — doing nothing. Brief excerpts from the long, Pulitzer-worthy article:

Tech Stock Pump-and-Dump:

Companies that weren’t much more than pot-fueled ideas scrawled on napkins by up-too-late bong-smokers were taken public via IPOs, hyped in the media and sold to the public for megamillions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.

It sounds obvious now, but what the average investor didn’t know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system – one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman’s later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry’s standards of quality control.

“Since the Depression, there were strict underwriting guidelines that Wall Street adhered to when taking a company public,” says one prominent hedge-fund manager. “The company had to be in business for a minimum of five years, and it had to show profitability for three consecutive years. But Wall Street took these guidelines and threw them in the trash.” Goldman completed the snow job by pumping up the sham stocks: “Their analysts were out there saying Bullshit.com is worth $100 a share.”

The problem was, nobody told investors that the rules had changed. Everyone on the inside knew,“ the manager says. "Bob Rubin sure as hell knew what the underwriting standards were. They’d been intact since the 1930s.”

Jay Ritter, a professor of finance at the University of Florida who specializes in IPOs, says banks like Goldman knew full well that many of the public offerings they were touting would never make a dime. “In the early Eighties, the major underwriters insisted on three years of profitability. Then it was one year, then it was a quarter. By the time of the Internet bubble, they were not even requiring profitability in the foreseeable future.”

Taibbi then describes two dirty tactics — “laddering” and “spinning” — Goldman used to further enrich itself while inflating the Bubble.

The Housing Bubble:

[F]or decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.

None of that would have been possible without investment bankers like Goldman, who created vehicles to package those shitty mortgages and sell them en masse to unsuspecting insurance companies and pension funds. This created a mass market for toxic debt that would never have existed before; in the old days, no bank would have wanted to keep some addict ex-con’s mortgage on its books, knowing how likely it was to fail. You can’t write these mortgages, in other words, unless you can sell them to someone who doesn’t know what they are.

Taibbi then showed HOW Goldman did it and how it protected itself from the garbage it was selling to foolishly trusting buyers:

The bank might be taking all these hideous, completely irresponsible mortgages from beneath-gangster-status firms like Countrywide and selling them off to municipillities and pensioners – old people, for God’s sake – pretending the whole time that it wasn’t grade-D horseshit. But even as it was doing So, it was taking short positions in the same market, in essence betting against same crap it was selling. Even worse, Goldman bragged about it in public. The mortgage sector continues to he challenged,“ David Viniar, the bank’s chief financial officer, boasted in 2007. "As a result, we took significant markdowns on our long inventory positions, … However, our risk bias in that market was to be short, and that net short position was profitable.” In other words, the mortgages it was selling were for chumps. The real money was in betting against those same mortgages.

“That’s how audacious these assholes are,” says one hedge-fund manager. “At least with other banks, you could say that they were just dumb – they believed what they were selling, and it blew them up. Goldman knew what it was doing.”

I ask the manager how it could be that selling something to customers that you’re actually betting against – particularly when you know more about the weaknesses of those products than the customer – doesn’t amount to securities fraud.

“It’s exactly securities fraud.” he says. “It’s the heart of securities fraud.”

Artificial oil price bubble:

Oil futures in particular skyrocketed, as the price of a single barrel went from around $60 in the middle of 2007 to a high of $147 in the summer of 2008…

So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help – there were other players in the physical-commodities market – but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures – agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing.

But Goldman effectively got the law revoked.

Killing off competitors and orchestrating the “gift” of tens (possibly hundreds) of billions in taxpayer cash:

Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers – one of Goldman’s last real competitors – collapse without intervention. (“Goldman’s superhero status was left intact,” says market analyst Eric Salzman, “and an investment-banking competitor, Lehman, goes away.”) The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.

Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35-year old Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding – most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs – and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.

Converting to a bank-holding company has other benefits as well: Goldman’s primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflict-of-interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank-holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman – New York Fed president William Dudley – is yet another former Goldmanite.

Paying, basically, no taxes:

Fourteen million dollars. That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion – yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.

And even a future scandal-in-the-making:

Cap-and-trade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and-trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private tax-collection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it’s even collected.

Posted by James on Jul 03, 2009

Oxymoron of the day: "Conservative scientist"

The Pew Research Center for the People & the Press surveyed 2,533 scientists and 2,000 non-scientists. It found that scientists overwhelmingly consider themselves liberals and Democrats:

23% of the public — but only 6% of scientists — call themselves “Republican.”

37% of the public — but only 9% of scientists — consider themselves “conservative.”

Apparently, using your brain to study facts for a living protects against the insanity of voting Republican.

It’s a shame education has been so severely dumbed down in America that many Americans can’t (or don’t) study the facts and draw conclusions independent of what corporate mouthpieces/blowhards like Limbaugh, Hannity and Coulter tell them to believe.

Posted by James on Jul 13, 2009

Pessimism, the new realism

Robert Reich offers a pessimistic — i.e., realistic — view on the economy in his blog post “When Will The Recovery Begin? Never.”:

[T]he whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops, the faster it gets back on track. And because this economy fell off a cliff late last fall, they expect it to roar to life early next year. Hence the V shape.

Unfortunately, V-shapers are looking back at the wrong recessions. Focus on those that started with the bursting of a giant speculative bubble and you see slow recoveries. The reason is asset values at bottom are so low that investor confidence returns only gradually.

That’s where the more sober U-shapers come in. They predict a more gradual recovery, as investors slowly tiptoe back into the market.

Personally, I don’t buy into either camp. In a recession this deep, recovery doesn’t depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.

Problem is, consumers won’t start spending until they have money in their pockets and feel reasonably secure. But they don’t have the money, and it’s hard to see where it will come from. They can’t borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water — owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving….

This economy can’t get back on track because the track we were on for years — featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere — simply cannot be sustained.

Economists expecting the current Great Recession to track past recessions are making the same mistake financial analysts who valued assets based on the past, say, ten years of financial data made. They’re failing to see how dramatically — “structurally,” to use the economics profession’s phrase — current economic and financial conditions have changed. Mean reversion applies only when the system isn’t too far from equilibrium. When the economy takes the kind of whack it’s taken in recent years, all bets are off.

Our economy has flown off the rails. Yet many economists think the train has just slowed down and is due to speed up again soon. Expecting the present to look like the past in the face of such massive structural change is plain dumb.

Posted by James on Jul 10, 2009