A Healthcare Plan Focused on the Needy

This morning NPR's Morning Edition did a piece on McCain on Healthcare.

McCain wants to encourage people to manage their own healthcare and "to rein in" spending on Medicare and Medicaid.

It's great to encourage people to manage their own healthcare. Having healthcare linked to people's jobs benefits no one. It gives businesses an extra task unrelated to its business. It creates complications for employees when changing jobs.

The case for reducing government health care programs is less clear. Having something like Medicaid, but not necessarily in its current form, is very important. It's unacceptable to have a segment of the population that is near or below the federal poverty line (around 20%) and therefore unable to afford medical care. Not only is it a moral issue, but it creates problems for the healthcare system when people unable to afford care turn up in the emergency room once their problem has become critical.

It's unfortunate that our choices in politics are

• Republicans who rightly talk about getting government out of healthcare but don't address what will be done for the poor
  
• Democrats who rightly want to help the poor but wrongly want to do it by expanding government involvement

No matter how you slice it politically, around 20% of the population will have a hard time affording basic healthcare. Another 20% can afford it, but can't afford to help other people. The remaining 60% has the ability to help others and absolutely must do it if we want a society where access to basic healthcare is universal.

Critics will say that fewer than 60% has the ability to buy their own healthcare and to subsidize others. If that's true, we're in trouble because that's the bulk of society. There simply aren't enough rich people to pay for everyone else's services.

It's in politicians' interest to convince people that if they jigger the system just right, somehow we can provide healthcare to the poor without paying additional money. It's similar to the dieting industry trying to convince people there are ways to lose weight that don't involve exercising away more calories than they consume.

It's so important, IMHO, to reduce the government's influence in the average person's life that I might prefer McCain's despites its lack of an aggressive plan to help the poor.

Masking the Real Estate Bust Using Inflation

The American Enterprise Institute in an editorial in yesterday's Wall Street Journal calls for expanding the money supply and ignoring the resulting inflation: The Inflation Solution to the Housing Mess

The least bad option is for the Federal Reserve to print money to help stabilize housing prices and financial markets. Yes, use reflation to soften the pain for Main Street and Wall Street. If instead we let housing prices fall another 25%-30% – as predicted by the Case-Shiller Home Price Index – it's almost certain that Washington will end up nationalizing the mortgage business.

I predicted over a year ago (unfortunately before this blog's existence) that this would happen. Lowering rates without regard to inflation has already been the Fed's policy since the housing bust started in earnest.

It's surprising to hear calls for loose monetary policy from a rightwing source. The article says they would rather accept inflation now, though, than deal with excessive action from Congress, which would be harder to undo than a monetary policy decision.

The Fed will allow inflation to happen, not because of rightwing fear of regulation, but because there are quite a few highly leveraged homedebtors who stand to benefit.

The article doesn't mention two other repercussions from the higher nominal interest rates that come with inflation:

• There will be increased pressure to balance the federal budget.
• Higher mortgage rates will intensify that effect of falling inflation-adjusted real estate prices.

These things aren't horrible. They're side effects of over-medication of the economy. This over-medication is a response to living on the economic edge, i.e. excessive risk taking and insufficient savings.

The right thing is for the Fed and Congress to act moderately. The economy is a problem primarily for people who took big risks. Risk takers getting hurt once in a while is supposed to be part of an economic system.

Balance between Freedom, Government Services, and Low Taxes

Here are some comments from me that the Wisconsin State Journal printed yesterday:

In a Thursday letter to the editor, a supporter of motorcycle helmet laws argues they are justified because they save taxpayer dollars by reducing Medicaid costs.

There are three competing goals that cannot all be achieved: freedom, subsidized health care for the poor and low taxes. Most people agree that those are all worthy goals.

By arguing for helmet laws on the basis that they help control Medicaid costs, the writer is saying that Medicaid and low taxes are more important than freedom. If we accept that position, government should attempt to control people's diets and exercise patterns and any risky behavior people wish to participate in.

Although I believe in helping the poor and keeping taxes as low as possible, the goal of personal freedom has to be of paramount importance.

I started thinking about this issue when a politician at a rally told the audience, in the context of discussing a national health plan, that people needed live healthy lifestyles to keep costs down. I am skeptical of a national health plan, but I think there is some merit to the idea of increasing the size of the risk pool and asking the people on the winning side of the genetic lottery for good health to subsidize care for the sick. Hearing a national politician enjoining us to live healthful lives made me think of a side-effect of spreading the risk of illness: The costs of risky behavior are now borne by all of society. It becomes society's business how I live my life. This is precisely contrary to the spirit of the US Constitution.

Predicing the Real Estate Bust and Transferring Risk

There is a good story on Calculate Risk on predicting how long it will take the housing bubble to deflate. If it follows that path of the LA housing bust in the early 90s, it will mostly deflate by 2010 and bottom out in 2013.

This is interesting, but market risk shouldn't matter too much to families buying a residence if the property costs less than the family's net worth.

Consider a family with a net worth of $300k in a $200k house. If real estate falls 15%, their house is worth $170k. They have lost 10% of their net worth. The costs of owning a home (insurance, taxes, maintenance, interest) predominate over movement in housing costs.

By contrast, if their net worth had started out at $30k, the change in housing prices would have wiped them out.

Both the $300k and $30k families should weigh the costs of ownership vs. the cost of renting and, all things being equal, should take the lower cost choice. The difference is the $300k family can afford to accept more risk. The $30k family might forgo owning a home even if it were the less expensive choice if they feel they cannot accept the risk of market fluctuations wiping them out. If they rent, their landlord is making a profit for taking the risk off of the family.

This payment for risk transfer is similar to insurance. Poor people pay for towing insurance on their auto policy until they save up enough money that they can easily handle the costs if their car should need to be towed. Similarly, people increase the deductibles on all their insurance policies as their reserves of emergency cash increase.

Poor people end up paying the rich to carry risk for them. Is this unfair? Should the economic system be changed to reward those who do work rather than those who take financial risk? These questions are way beyond the scope of this post.

The point is people should calculate how much risk their taking versus the benefit they're getting for taking the risk.

In my area this is a moot point when it comes to housing because the costs of renting a home are less than or equal to the cost of owning one. As the bubble deflates (probably in the form of nominal rents rising faster than nominal property values) and it becomes profitable again to be a landlord, people will have to ask if lower property costs are worth the market risk.

What Makes for "Hate-Filled" Rhetoric

The past Sunday guests on the Sunday morning talk shows were still talking about the controversial excerpts from Reverend Wright's sermons that I'm told have been playing on TV a lot recently.

A Clinton supporter, Philadelphia Mayor Mike Nutter, said American's reject "that kind of hate filled rhetoric" and the he would have left the church if the pastor gave a sermon like that.

Obama wasn't even present when these sermons were given. Do we really expect him to be responsible for everything the pastor says? If I worked in politics, would I have to get a copy of the sermons from Sundays when I slept in to make sure the pastor didn't say anything offensive? Would I have to be in 100% agreement with everything the minister said. I don't know how it works at other churches, but if Unitarians were required to agree with everything the minister said, the place would be empty.

An Obama supporter said that the publicizing of these excerpts "was big", yet it didn't affect is popularity. This shows, he said, that Obama can weather a scandal.

It doesn't show that at all, IMHO. The biggest scandal Obama has faced involves comments someone else made years ago while Obama was not present. That means Obama has not faced a scandal.

The comments themselves were not even very scandalous:
1. The Sept 11 attacks were blowback from US foreign policy mistakes in the past. People hope that good foreign policy will prevent future attacks, so it seems reasonable to ask whether bad foreign policy might have had a role in the Sept 11 attacks. I'm not saying the claim of blowback was right. I'm just saying it's a valid question, not hate-filled.
2. The US government mistreated indigenous peoples and African Americans.
Is there even any debate whether this is true?
3. The "drug war" has hurt African Americans disproportionably.
There is room for debate about whether a war-based approach is the best way to deal with drugs, but either way it seems reasonable that the war-based approach that started around 1970 affected African Americans more than other races.

I suppose the hate filled part is when he says, "God damn America" for its role in these problems. It wouldn't be appropriate for someone running for president of the United States to say this, but it seems very appropriate for a religious leader to criticize the US gov't vehemently. Part of the job of the president is to listen to critics of the US government, including vehement critics, and to try to improve it.

The motivation behind this story is probably that there is no other scandalous video available that you can play on TV and have its meaning understood in seconds. That's unfortunate because there's a racial element to the appeal of the Wright videos. Wright's style is not familiar to members of churches that are not predominately African American. Maybe the comments give some people a visceral reaction of: There's someone who doesn't look like me or talk like me condemning the US government. Maybe he would condemn me? If Obama is tied to him, maybe Obama would condemn me or at least not understand my interests.

If that visceral reaction is why this is still being mentioned on the Sunday morning political shows, it's shows the vestiges of racism are still alive and well.

Does the Democratic Party Lack a Coherent Message?

Listening to the Democratic candidates in the primary season has made me question whether the Democratic party has a coherent message. It seems they focus on a laundry list of problems that the government could help people with without any coherent ideology to tie it all together.

I wondered why they can't just take something like the tenets of neo-liberalism and only talk about the anxieties of the day in the context of that ideology. Now that's a coherent ideology, I thought.

Then I realized the reason is that neo-liberals are just a subset of Democrats just as neo-cons are a subset of Republicans. Republican neo-cons believe in energy independence, while the regressive wing of the GOP wants to make life just a little harder for gay people. So you could cast Republican ideology as a laundry list too. It does seem like they have a greater divide yet do a better job avoiding the circular firing squad.

I have to remember that political parties need to be a big tent. A few months ago a retired factory worker told me that neo-liberalism destroyed the world she grew up in, and she's sort-of right. I didn't know what to say. That's why they need a big tent, which sometimes feels like a laundry list.

If broad tents stop working and the political parties collapse under their own weight, maybe that's okay. The framers of the Constitution wanted to discourage political factions. The parties, though, appear to be here to stay, so we have to work within the imperfect system we have.

Energy: One of the Great Challenges for Engineering

The National Academy of Engineering (NAE) created a list of the great engineering challenges for this century and released it in February of 2008. The first three items on their list of fourteen deal with energy production:

• Make solar energy economical
• Provide energy from fusion
• Develop carbon sequestration methods

The world's economy runs on fossil fuels. In general, you need to put in a unit of energy to get a unit of GDP. Some production is more energy efficient than others, but we will not be able to reduce fossil fuel use and CO2 emissions by conservation alone.

There are two problems with getting energy by burning fossil fuels:

1. They contribute to global warming.
2. They are non-renewable.

Since fossil fuels are non-renewable, at some point we will have to accept decreased global economic production or find something else with same energy density and a way to extract that energy easily. Although it would not be as bad as people imagine, accepting decreased production (i.e. a "lower standard of living") is antithetical to a world that feels the need to produce more-and-more each year. Therefore, some source of cheap energy must be found.

Nuclear fusion is a likely source. There must be an energy vehicle with high energy density like gasoline from unlimited nuclear energy. The challenge will be to find an energy vehicle with the energy density of gasoline but that does not emit greenhouse gases when the energy is used. This means we need to create a fuel cell technology that stores energy without burning or we need to find a way to contain the carbon produced by burning.

Solar energy is a piece of the energy puzzle over the next century. In the long-run, however, given how much energy we would like to use, it's hard to see solar being a major energy source.

This is a timely issue with oil prices at record levels. Those prices will encourage the search for more energy. We need to make sure most of that search takes the form of finding sustainable energy and not just exploring for more oil. Exploring for oil is important, but within this century what's now called alternative energy sources will just be energy.

Improving urban infrastructure, which also made the list, could turn out to be the most import energy issue. In new energy technologies don't work out, it would be to have cities designed to be energy efficient. If energy becomes a problem and affects GDP growth, it will be a pity to be using our scare resources to carry 1200kg of metal around with us wherever we go to accommodate cities design in the era of cheap energy.