Health Insurance
Wednesday, June 15, 2005, 10:51 PM - Politics, Economy
Just heard about another self-employed person who had to go back to work for a large company to get health insurance. What a mess. Affordable access to health care is considered a necessity, and rightly so. Yet honest sweat of thine own brow isn't enough to cover the necessities.The marketplace doesn't seem to be handling this one very well. In a culture where money is the prime measure of things, there is little respect given to non-monetary qualities, such as the financial selflessness of a dedicated teacher.
This cultural attitude negatively affects the health care field. Nurses and Physician Assitants aren't respected. Even doctors, excepting the superstars, are falling into chumpdom. Why would smart, caring people want to go into medicine under these conditions?
One wonders how to build an American civilization where many measures of success are properly respected. Where a successful businessman and a successful and a successful family doctor are all accorded respectful status, recognizing that the yardstick of success in each case is different.
Almost-free Music
Wednesday, March 9, 2005, 01:51 PM - Economy, Tech
This suggestion makes a lot of sense to me. I'm not a music afficiando. I don't follow the trends. I don't listen to music that much.I buy music on a whim, and 15 bucks per whim is more that I'm willing to fork out. Even a buck per track makes me hesitate. Instead, I'm willing to spend the time scouring the web for legitimate free mp3s. But a nickel, even a dime, per track is something I'd seriously consider, particularly if there's the ability to stream a preview of the track and a link to the performer's site.
See, for me, scouring the web is in itself entertainment. If I'm sitting down for a couple of hours of mp3 searching, checking out the visuals and content of sites is as much fun as finding a good couple of free tracks. So the purchase threshold for me is very low.
Even the annual-fee, unlimited-download sites make me pause. Since my purchase barrier is about a dime, that means I need to buy about 250 or so tracks per year. I'm not going to make that kind of commitment for something that's a whim. It reminds me of the times I've signed up for gym memberships - great intentions that didn't pan out.
On top of it all, I'm offended with the current pricing because it has no relation to the cost of production. I don't buy the industry song-and-dance about the ancillary costs such as talent development, marketing, etc. and etc. I feel like I'm getting taken, particularly when I read that the artists still get squat out of the deal.
I think there's plenty of folks out there like me. Give us a price point that makes sense, and we'll fork over the money. Otherwise, we'll either a) keep scouring, b) download illegally, and-or c) ignore that market.
Ownership
Friday, January 21, 2005, 10:24 PM - Economy
A friend recently moved to Italy. She wanted to take her car with her. To avoid taxes, she had to prove she had owned the car for more than six months (I think the time is correct, but it really doesn't matter.) No problem, she had bought the car about three years ago.Not so. It turns out that the Italians have this quaint view of ownership, e.g. they mean that you really own it. If there is still a note on the car, then you don't own it.
I keep thinking of this little story when I hear talk of an Ownership Society.
Social Insurance
Tuesday, January 11, 2005, 06:54 PM - Economy
A good write-up on The Agonist by Numerian on the distinction between Social Security as an insurance system and Social Security as an investment program. It's an important distinction to make.Recently I've read pundits (can't find a link) who, in support of the Bush "reforms", brand Social Security as a Ponzi scheme, where the first in reap all the benefits. By this logic, one could brand all insurances as Ponzi schemes. For the past how-many years, I've paid my health insurance premiums. Yet, fortunately, I have in no way received a suitable return on this "investment". That lack of return is not a reason to dismiss health insurance.
Similarly, Social Security is an insurance vehicle. I'm not just insuring a modicum of retirement income, I'm insuring against disability and I'm insuring my family against certain financial shocks in the event of my untimely death. I do not expect to get rich off my Social Security insurance any more than I expect to get rich off my health insurance.
Just as I am perfectly happy to NOT reap a return on my health insurance premium payments, I will be ecstatic if, when the time comes, my personal good fortune allows me a comfortable retirement so that I can decline to receive my Social Security payments. And I will in no way feel taken, because that's how insurance works.
And yes, Social Security is a forced-participation insurance program. But then, so is car insurance a forced-participation system: you can't register a car without proper insurance. Forcing car insurance is justified because it protects others from your possible negligence. So too, Social Security protects both me and others from the depradations of economic disaster with the ensuing social ills of unnecessary poverty visited upon hard-working people, one of whom just may be me.
The Republican "reformers" point to the supposed benefits of investing in the Market as a justification for their proposals.
It was in the 1970's that Wall Street began to propagate the notion that equities provided superior returns to all other investment alternatives. The academics who first propounded this view were cautious to point out that this superior return was the product of long term averaging, and interregnums of flat or down markets could last many years. This reality became lost in Wall Street's avidity to look at stock market performance as the only true and reliable indicator of a company's success.By placing all their eggs in the one basket of the Market, the "reformers" are gambling that the inevitable market corrections won't impact retirees' investment accounts. But isn't that how investments work? When the market is up, invested value goes up. When the market is down, invested value doesn't stay up.
What becomes clear is that the true "reform" that's being proposed is not of the Social Security system per se, but of the very nature of the social contract embedded in the Social Secuirty system. To me, taking away my insurance and replacing it with an investment gamble is a bad and irresponsible reformation of the social contract.
Moral Hazard
Tuesday, January 4, 2005, 04:42 PM - Economy
A daughter used the phrase "moral hazard" the other day. I followed up with a little bit of googling. I ran into this:The government can and sometimes does take a similar approach. It can give so little aid to those in distress that it provides little encouragement for people to put themselves in the situation, but it then provides little help for those in distress. As it expands a program to provide more aid to those in distress, it also encourages people to put themselves in distress. If people are paid to be poor, some will become poor. If people are paid to have children out of wedlock, some will. If people are paid to be unemployed, more will be unemployed. Thus government programs that act to insure citizens against some misfortunes have a basic tradeoff that cannot be escaped.Fair enough, I guess. Unstated, but worth noting, is that there is a moral hazard in not providing a program; a person without unemployment insurance and no job can tend to steal. So the question to ask is which morally hazardous situation is better to accept - freeloaders or theives and the consequensial additional costs to the jurisprudence system.
That doesn't mean that all situations are governed by moral hazard calculations. The view that they are only leads to thinking typified by this insufferably arrogant and pompous quote culled from Peter Gosselin's article in the LA Times (via DeLong):
Some financial industry executives and Bush administration officials suggest that the rise in bankruptcies reflects profligacy among Americans. They are particularly incensed about Chapter 7 bankruptcies, which let people effectively wipe out their debts after forfeiting most of their assets but not their future earnings. These critics of the law want to change it by making it harder to go bankrupt.This suggests that everyone who buys fire insurance intends to burn down their house.
A Chapter 7 filer is a predatory borrower, Assistant Treasury Secretary Wayne A. Abernathy suggested in a speech last year, someone who "in a calculated way borrows as much as he can, with little thought of paying it back, or in some cases, with no intention of paying it back."
Abernathy's type of reasoning does not take in the full context of a moral hazard. For instance, with no Chap.7 protection, lenders are incented to allow clients to over-extend. This is the way the company stores used to work. It's called economic slavery. I would hope that Mr. Abernathy is not in favor of that.
TCF on Social Security
Monday, December 20, 2004, 06:34 PM - Economy
The Century Foundation has 12 reasons why privitization is a Bad Idea. My take on the twelve points:1. Social Security is not just a retirement program. It's also a disability/survivors benefit program. This aspect is not adequately addressed either in plan or rhetoric.
2. Diverting 17% of social security contributions into private accounts will create a crisis, not prevent one. The current system is solvent until, pessimistically, 2042. Privitization will cut this to, optomistically, 2030. (Currently 12% of salary goes to FICA. Privitization will divert 2% of salary. 2% is 17% of 12%)
3. The proposals currently under consideration will add 1% of GDP per year to the national deficit.
4. Privitization has been tried elsewhere and doesn't work.
5. Poor investment decisions by individuals -- not a strong argument, in my opinion, but a real concern.
6. The useful value of a privitized account will depend on whether one retires in an up market or a down one.
7. Brokerage fees will eat a significant portion of the account value.
8. The federal bureaucracy would mushroom to manage all the little accounts which Wall Street won't touch.
9. Young people will be worse off. They're the one's being sold on this, and they're gonna take it on the chin. They will get to pay for the additonal deficit in addition to getting less return.
10. Women will lose. They depend more on survivor and spousal benefits, which are not addressed, i.e. they're eliminated.
11. There's a disproportionate impact on poor, and thereby minority, workers because retirement benefits are based solely on lifetime earnings, unlike the current system.
12. No protection against inflation.
Krugman on Social Security
Monday, December 20, 2004, 01:39 PM - Economy
From Paul Krugman's recent article in the NY Times:the U.S. news media have provided their readers and viewers with little information about international experience. In particular, the public hasn't been let in on two open secrets:One of the things I'm trying to understand is the "ideological thing" of this administration and its approach to Social Security and the economy in general.
Privatization dissipates a large fraction of workers' contributions on fees to investment companies.
It leaves many retirees in poverty.
More than 99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead. In Chile's system, management fees are around 20 times as high. And that's a typical number for privatized systems.
A reasonable prediction for the real rate of return on personal accounts in the U.S. is 4 percent or less. If we introduce a system with British-level management fees, net returns to workers will be reduced by more than a quarter. Add in deep cuts in guaranteed benefits and a big increase in risk, and we're looking at a "reform" that hurts everyone except the investment industry.
Privatizers who laud the Chilean system never mention that it has yet to deliver on its promise to reduce government spending. More than 20 years after the system was created, the government is still pouring in money. Why? Because, as a Federal Reserve study puts it, the Chilean government must "provide subsidies for workers failing to accumulate enough capital to provide a minimum pension." In other words, privatization would have condemned many retirees to dire poverty, and the government stepped back in to save hem.
For the record, I don't think giving financial corporations a huge windfall is the main motive for privatization; it's mostly an ideological thing. But that windfall is a major reason Wall Street wants privatization, and everyone else should be very suspicious.
More Social Security
Friday, December 17, 2004, 05:26 PM - Economy
From the NY Times:President Bush said on Thursday that addressing the long-term problems in Social Security would reassure the financial markets...Seems strange that the main selling point is to reassure Wall Street. I understand corporations playing to Wall Street, but the government?
The assumption, of course, is that privitization will "fix" Social Security. What I'm looking for is an explanation on how privitization is a fix.
The stuff I've read in support of privitization focuses on political theory. Rather than address the financial details, like growing lengths of eligibility, the supporters talk about Social Security as big government intrusion, privitization as promoting individualism and, voila, problem solved. That these are the same people who want to ban books and limit civil liberties, acts which impinge on my individualism, leads me to question their real motives.
That being said, if there is a real crisis, let's deal with it straight up. It strikes me that they are standing around a house with termite damage and saying that if we make it look like a Tudor, rather than a Ranch, the problem will be fixed.
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