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Health Care Debate: Stephen Hawking Lives!

A quick update on the Stephen Hawking farce carried over from yesterday: when an opponent of health care reform wants to weigh in the discussion by using a reference to one of the world’s brightest people I think it wise that they check basic facts. Like where he was born and where he lives.

As you no doubt know by now the Investors Business Daily ran an editorial arguing against government run health care. It repeated and amplified the, by now common, right wing meme that government health care systems ‘ration’ money by, inter alia, refusing to treat difficult or long term illnesses. As an example it used the case of Stephen Hawking who suffers from crippling disease, is confined to a wheel chair, and who is now unable to talk without the aid of sophisticated machinery. The IBD said in its editorial that had poor Hawking been exposed to the British government run health care system [the ‘NHS’] he would have been refused treatment and thus the world would have been robbed of his enormous intellectual contribution.

Except of course Hawking is British and lives in Britain and uses the NHS.

Talking Points Memo caught up with him and asked his opinion. Which turns out to be quite supportive:

“I wouldn’t be alive today if it weren’t for the NHS. I have received a large amount of high quality treatment without which I would not have survived.” —Stephen Hawking, August 11, 2009

Not that this means the NHS is perfect. No system is. But it doesn’t deserve to be demonized either.

On a personal note: my father suffered from chronic kidney disease. He died very young – in his early 50’s – and his last years were made incomparably more comfortable by the NHS. The government installed, at no cost to our family, a dialysis machine in my parent’s home. They paid for all the plumbing and renovation necessary. I recall little or no bureaucratic hassle or resistance. The doctor controlled the entire decision. This was when dialysis was a new and very expensive technology – indeed it could be described as experimental at the time. Unfortunately the technology arrived too late to prolong my father’s life much – the damage was too pervasive.

This experience has made me a fervent supporter of government health care. Only those who have confronted the cost and bureaucracy of the American system in similar circumstances can understand the difference.

The issue is not about the quality of treatment or the professionalism of the doctors providing it. No. The issue is the cost and emotional burden at the heart of the American system. It is about removing the stress placed upon patients who have to understand and pay for complex and often lengthy processes that they are hopelessly equipped to comprehend; upon which they might depend for life; and for which they might have to bankrupt themselves and their families, right when they are most vulnerable.

No one would surely set out to construct a human system that places the greatest burden and stress at exactly the weakest point in a person’s life.

Except that what the American health care professionals have tolerated. Indeed they have defended it out of their own self-interest.

The NHS, for all its well known issues and its chronic under-funding, at least avoids that mistake. It is about health care. Not profit.

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Health Care: Two Quick Thoughts

Most of you already realize this, but the thought is worth repeating relentlessly: if you get your health care coverage through an employer you do not have health care insurance. You have an employee benefit. Insurance is something attaching to you wherever you are and for whomsoever you work. It is personal. If you lose your job and the health care coverage goes with it then you do not have insurance.

Conflating the two situations, insurance and employer provided benefit, is one of the greatest muddles in the current all too muddled discussion about health care.

The American system has two predominant ways to get health care coverage: government programs like Medicare which provides about 45% of all dollars spent on health care; and employer provided benefits, which provides a further 35%. Of these two only Medicare acts like insurance: the benefits relate to you regardless of your employment situation.

The other thought to carry with you as the debate rages is that Medicare, and other government provided health care such as the Veterans program, consistently receive higher customer satisfaction ratings than most, if not all [I haven’t come across any yet], of the privately provided care options. And the difference is significant.

The reason I mention these two quick thoughts is that I met my friend Joe today – I use him as my bellwether for right wing thinking – and he rolled out the standard Republican line of attack about how no one likes Medicare and about how most people have private insurance anyhow so why are we debating getting the government involved.

Lastly some of you may have seen this stupid editorial at Investors Business Daily. I am not the first to pick up on this – Paul Krugman mentioned it, as did Jay Bookman – but for those of you who want to see how absurd some of the opposition to health care reform has become here’s the key quote:

‰ÛÏPeople such as scientist Stephen Hawking wouldn‰Ûªt have a chance in the U.K., where the National Health Service would say the life of this brilliant man, because of his physical handicaps, is essentially worthless,‰Û?

The editorial uses the UK health care system [a.k.a. The National Health Service] as representative of all the evils of a government provided program. And it settles on poor Stephen Hawking who suffers from a horrendously debilitating disease as an example of the kind of person who would not be cared for on the basis of their extreme condition. Hawking being the world’s foremost physicist of the past twenty years the Investors Business Daily wants to highlight the enormous waste of talent that this lack of care would represent.

Except of course that Hawking lives in the UK and gets his care through the National Health Service.

Oops.

I suppose it would be too much to ask that opponents of reform actually have a credible argument. You know, one not littered with falsehoods and scare tactics.

Sigh.

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Productivity Jumps – Is That Good?

This week seems a bit like summer generally: very sleepy. The only data being released is second order stuff like today’s productivity report. On the surface the numbers look good, with business productivity jumping at an annual rate of 6.3% in the second quarter. this is the largest growth rate since 2003, and under normal circumstances would be greeted with great acclaim.

Productivity is the driver of wealth growth. The general notion is that the more we produce per hour, the higher hourly wages can rise. So as long as productivity climbs personal incomes will also drift upwards.

Unfortunately, however, the productivity statistic can tell a misleading story. The second quarter is such a time.

The problem is that the numbers are calculated by combining output in total and the number of hours it took to produce that output. Today’s release has a very positive productivity gain that results from two negatives: output declined by 1.8%, but since the number of hours declined faster, by 7.5%, the overall picture looks good.

Suddenly what, on the surface, looks like something to cheer about, is actually something to be concerned over. That sharp drop in hours worked has to be viewed as highly negative: it complements the employment data I discussed yesterday, and reinforces the impression that the melt down in business has become extremely severe. The private sector has imploded.

Worse still, today’s report also includes wage data. Nominal wages, that is wages unadjusted for inflation, rose very slightly by 0.1%, but that growth was swamped by inflation, which, although quite low, was sufficient to force real wages down 1.2%. Declining hourly wages are not unusual in a recession, but this time the decline has begun to persist longer than normal. If maintained such a decline would obviously undermine any chance we have of getting a sustainable recovery.

So while today’s headline looks terrific – a nice jump in productivity – all the underlying data is a bit depressing.

It is reports like this that keep adding to the view that the recovery, whenever it arrives, will be very weak. The economy has contracted very sharply. Most often such a contraction would be followed be an equally rapid reflation. This time it is very hard to make the case for rapid recovery. The hit to wages and employment have been massive. Moreover, the overhang of debt and the collapse of home prices adds an unusual burden to households: the impulse to pay down debt is very strong, and already families have succeeded in eliminating much of the frothy debt accumulated in the last decade. Even with this, debt loads remain high by historical standards and the carrying cost of that debt is rising as the big banks try to squeeze profits out of consumers. With wages sluggish and even declining in inflation adjusted terms, and with debt pay down taking a priority, no one should be surprised if consumption returns only slowly.

Since we live in a consumption driven economy that spells trouble for the recovery. Later this week we will see the retail sales figures which will help shed light on the shape of consumption. We already know that car sales have risen slightly on the back of the government’s ‘cash for clunkers’ program which has only a short term effect, so the key data to watch for is the level of sales on other goods and services. Right now the early signs are for only mediocre progress.

Meanwhile tomorrow we will get a look at the Federal Deficit. So get ready for hoots of panic from the right wingers.

Addendum:

Let’s be clear: productivity improving is a good thing in the right context. But in this case it is improving because workers have taken a beating. You will read in the financial press all sort of hurrahs over this news. It implies breathing room for profits and therefore, perhaps, less need to cut jobs.

From a working person’s point of view a productivity gain is better when it comes from business investment and enhanced know-how. If firms invest to augment labor in order to extract greater profit which then turns up as higher wages then productivity growth is good for workers.

But productivity growth that comes from replacing labor, or from a reduction in hours worked, is less obviously a good thing.

Unless you own the business.

Remember: the only aspect of the economy that flourished in the Bush era was corporate profit. Wages barely improved at all. They are now back where they were in 2001. So far it has been a lost decade from labor’s point of view. And when you take into account the taxpayer burden to bail out the mess made by high rolling Wall Street types – which adds to the loss of the lost decade – I am surprised that the voters are not more surly.

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Muddle Over The Fed [Or How John Taylor Can’t Think Straight]

Today’s Financial Times has a couple of articles in it concerning the Federal Reserve Board and Ben Bernanke. The general thrust of each is to diffuse criticism of the Fed and to advocate it’s independence and the overall record of Bernanke himself. One piece is an editorial favoring Bernanke’s re-appointment as Fed chairman. The other is an op-ed by the well known economist John Taylor – he of the ‘Taylor Rule’ – arguing against expanding the Fed’s role as a regulator, and defending it’s role as ‘independent’ overseer of monetary policy.

It is this second piece that I want to address.

I was originally going to entitle this post something like: ‘John Taylor’s an Idiot’, but thought better of itbothout of deference to him, he has that rule named after him, and he teaches at Stanford, and because I didn’t think anyone reading my blog would know who he was.

Should you all care?

Yes: he is influential, and his views are a good reflection of the muddle that neo-classical economists can get themselves into when they want to defend their rotten theories from attack and, at the same time, deflect blame for the economic crisis away from those theories. Taylor often pops up with a right wing viewpoint, so he’s worth listening to in order to understand why our economic elite has so little to offer as we fumble our way out of the crisis.

So let’s get to his article.

He begins with a very ordinary argument against expanding the Fed’s powers as a regulator. I find myself in agreement with Taylor that the Fed should be highly limited. But when he slips into his patronizing justification that the government department’s are best forced to focus on limited objectives he let’s his orthodox slip show a tad too much. I get the feeling he’s thinking that those government employees are just too dumb to handle several tasks at once, unlike the heroes over at Citigroup, for instance. Hmmm. A bit of bias creeping in there Professor Taylor?

Then he goes on to argue for the Fed to be limited because extending its oversight remit would raise the risk – gasp – of political interference. And in neo-classical ideology nothing – and I mean nothing – can be worse than political interference. this is because we all absolutely ‘know’ that the government is always inefficient when compared with the smooth operation of the free market – right Professor Taylor?

So we want to remove politics from the Fed so as to sanitize it from the taint of government. That way it can take those hard decisions raise interest rates and prevent bubbles without having to worry about what the politicians think, or what would happen to those big banks it regulates.

Taylor is right: a Fed that has big ‘systemically important’ banks as it regulatory target might be more inclined to do things to help those banks avoid trouble – after all it will know what kind of mess they are in and it wouldn’t want to be blamed if one went belly up.

But this raises a conundrum for Taylor and all ideologues like him:

If the Fed is independent of government and thus making decisions based upon purely economic grounds – informed by standard economic theory no less – how do we all account for its recent performance?

Taylor does this by eliding straight into an attack on government.

The second part of his article talks about how the current crisis stems from a failure of government. He puts it succinctly::

“The financial crisis was caused in large part by government actions such as monetary authority that aggravated the housing boom.”

Let’s think this through rigorously rather than sloppily.

The housing boom was, according to Professor Taylor, abetted by lax government actions. Ergo to avoid future recurrences we need to slap government into shape rather tan extend its role by giving the Fed more oversight.

But Professor: is the Fed not independent of the government? Is it not your fear that the Fed might lose that independence? Have you not just spent half an article arguing that extending the Fed’s role would jeopardize that independence?

I think the Professor has his proverbials in a twist.

He has run plumb into the neo-classicists ideological trap.

Yes the Fed is proudly independent. Yes it would lose that independence were it to take on more regulatory responsibility. That is why I want to strip it of all regulatory responsibility.

But that’s the point Professor: it is and was independent. It has been since 1951, when as the Financial Times editorial points out the heavy hand of Treasury [i.e. government] meddling was cut away.

So: it was not ‘government actions’ that contributed to the financial crisis, was it? No not at all. It was the independent Fed under the leadership of Alan Greenspan and Ben Bernanke.

There you have it.

Taylor is playing the usual right-wing bait and switch game.

He is saying the Fed should remain independent because that suits his anti-government bias. But then he turns around and blames the government for the financial crisis. And the government agency he pins the blame on is the same Fed whose independence he lauded but two sentences previously.

Now the Professor is academically very rigorous no doubt – tainted by his ideology, but so are most academic economists – but he allows himself to be extraordinarily sloppy in this article. He surely wouldn’t give himself a very good grade.

So why does he commit his error?

Because there is something even more sinister than government interference in his mind: criticism of orthodox economic theory.

It turns out that the independent Fed executed flawlessly along the lines expected by textbook theory. And thereby contributed mightily to the crisis.

So the good Professor is trapped into defending the Fed as independent when it works well, and then contradicting himself and labeling it as a government agency when it screws up.

How rigorous!

How non-scientific!

How totally political!

How ideological!

That’s textbook economics for you.

No wonder economists are the subject of ridicule.

A true scientist -something Taylor evidently is not – would look at the evidence and reformulate his hypothesis in the light of revealed facts. Not those neo-classicists! No. They reformulate the facts in order to preserve their hallowed theories.

Elsewhere in the FT another columnist – Tony Jackson – calls out the neo-classicists. He relates the story of Robert Schiller – a renegade in economics – getting a cold reception at an economics seminar when he used the word ‘bubble’. Schiller says that word was received like talk of zodiac signs at a meeting of astronomers. For those of you who don’t realize it: there can be no bubbles in a neo-classical world. The market is always correct in its valuations no matter how erratic or absurd.

It is that level of denial that allows Taylor to double talk in his article.

Back on planet earth, and away from the world Taylor and his ilk inhabit, it is the neo-classicists who are the astrologers.

Ben Bernanke as palm reader-in-chief. Now that has a ring to it.

Addendum:

More bad news for the Professor. Here’s a quote from the Wikipedia entry that describes the ‘Taylor Rule’ – a piece of economic thinking that the Professor is no doubt proud of:

“Although the Fed does not explicitly follow the rule, many analyses show that the rule does a fairly accurate job of describing how US monetary policy actually was conducted earlier under Alan Greenspan“

Hmmmm.

The Fed clearly followed the Taylor Rule during the Greenspan era. Right when the Professor claims that the Fed, qua government agency, was contributing to the financial crisis.

Now we’ve got him.

Apparently it was the Taylor Rule that contributed to the financial crisis.

Ouch!

That’s got to hurt.

No wonder he’s muddled about the Fed. They use his rule, and drive the ship onto the rocks. Oops. No wonder he’s angry at them.

Maybe it’s a different Taylor?

Nope. Sorry Professor: you’re part of the problem.

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Employment: Not As Good As It Looks

Back from a hiatus I want to begin by making a couple of comments about the unemployment data from the end of last week.

The unemployment report was fraught with analytical land mines. From one perspective the data looks good: the unemployment rate fell to 9.4% and the number of lost jobs was ‘only 247,000’ – the lowest for some time. Given the horrendous situation we are in these figures appear to be good.

“Economically: we need to focus on the number of jobs we create. Not the number we destroy.”

I suppose we have become so inured to the flow of disastrous information that the loss of a quarter million jobs can be viewed as positive. Frankly I think that’s absurd. We have been bleeding jobs now for nineteen straight months. That is catastrophic. We have lost over 6.7 million jobs during this down cycle – there is no way that fact can, or should, be glossed over. We seem to have developed a bunker mentality where we – those who are still employed – feel immense relief that, so far, we have survived that worst. So the announcement of a ‘mere’ quarter million lost jobs is taken as some sort of triumph. Nowhere is this ridiculous outlook more in evidence where stock prices react to the ebbing flood of misery with an immediate surge in expectation for corporate profitability. Such a reaction may be sensible given the drivers of Wall Street, but from the perspective of normal Americans it is superficial and short term.

Wiser is the view that, while the storm is abating, the really hard work lays ahead.

Why?

Because the data is misleading.

Yes the number of jobs being lost has obviously turned a corner: the blood letting is coming to an end. Corporations have defended profitability, and thus survival, by taking drastic and retrenching tactical steps. Amongst which they have slashed costs and cut jobs. Both these steps diminish the economy. They are retreats, not advances. And, even though the figures are better than the recent past, we are still in retreat.

To paraphrase Winston Churchill when he commented about the euphoria surrounding the evacuation of Dunkirk in World War II – a minor miracle if ever there was one: wars are not won through a series of brilliant retreats, no matter how brilliant they are. Sooner or later we need to go on offense.

Economically: we need to focus on the number of jobs we create. Not the number we destroy.

Lost in the data is the fact that the number of long term unemployed is now higher that at any time since the Great Depression. Plus, we are constantly falling behind our potential: even in good times our economy has to create over a quarter million new jobs a month just to stay even with population growth.

Think about that. Its like par in golf: just to keep our heads above water in terms of the unemployment rate we need to add – each and every month – the same number of jobs we lost last month.

So last month’s actual score vis a vis our ‘required employment level’ was that we fell half a million jobs further down.As of now we have lost 6.7 million jobs. Given that, in the same time we have been sinking, we should have created about 3 million new jobs this leaves us 9.7 million jobs short of full employment.

Not so good.

This is why it is naive to view the problems as ending any time soon.

There have been two critical aspects to this downturn right from its onset: how far down would we go? and how would we manage the exit?

There is no doubt – none at all – that the only reason we dodged a fully fledged depression was the huge role of government in the economy. It saved millions of jobs and bolstered the economy just as the private sector imploded.

This bolstering came not simply from the stimulus, which has saved about a million jobs so far, but also from the ongoing programs the government runs: Social Security, Medicare and Medicaid, unemployment insurance, and even defense spending. All these programs kept on running and thus kept money flowing. This flow provided an invaluable ballast to offset the retrenchment and outright retreat in the private sector.

It is unquestionable, by any reasonable person, that this stabilizing impact of government in the economy was the single reason we avoided depression. This should obliterate the Reagan/Bush mantra that ‘government is the problem’.

Just how much misery do Republicans and their ideological allies in academia want to inflict on society in order to ‘prove’ the superiority of their free market philosophy? The bizarre claim some of them have made that government should tighten its belt in order to show the nation that Washington ‘gets it’ is a negation of both leadership and patriotism of the first order.

And to make that claim from within the sanctuary of tenure, as many free market academics do, is putrid morality combined with appalling personal weakness. It is amazing to me that these folks can still criticize ordinary people trying to defend their livelihoods by resisting wage cuts by arguing that such resistance throws a wrench into the market’s ability to right itself.

Apparently their vision of ‘righting itself’ is when the boat finally settles at the bottom of the ocean. After we have all drowned.

Yet this is what they keep peddling.

Finally: just this morning [Monday] I read ‘analysis’ from Wall Street that the recent surge in stock prices is under threat as investors adjust to the likely nature of the recovery. It is now being described as a ‘U’ rather than a ‘V’. In other words the notion that we may be in for a slow and difficult climb back is finally settling in. Well, I suppose it’s better late than never, that investors reach an understanding that sustainable profitability will depend not on those brilliantly executed retreats but on the long strategic slog back to growth.

In a nutshell: the private sector collapsed; the public sector stopped us from drowning; now it’s up to the private sector to rejuvenate itself.

Let’s all see just how smart all those highly paid executives are: cost cutting is the easy part, and there are 6.7 million Americans who know the sharp end of corporate survival. Growth is much harder. There are 9.7 million Americans depending on corporate America to get out of its foxhole and get on with the real business of expansion.

Meanwhile: none of us should fixate over the ‘success’ of losing only a quarter million jobs. Yes its one small step along the way to a turn around. But no, it’s not a success.

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