Wednesday, March 31, 2010

Some Questions for Democrats

How much welfare is enough and how should it be structured? Not just AFDC but Social Security, Medicare, food stamps, HUD, Fannie and Freddie, Gov. education etc.

How much of their own wealth should people be required to spend on their own medical care before the state kicks in?

What marginal tax rates are acceptable for the what incomes (low and high)? Right now low income people face huge marginal tax rates. I am getting at incentives here.

Does FDIC create bad incentives that might require an eventual virtual gov take over of banking? If so how do we keep lending from becoming too politicized and corrupt?

Is there a level of regulation and complexity where more regulation is counter productive?  What is that level?
Is too regulated to fail an achievable goal? 

Single payer and monopsony the seems to be the long range goal of Obamacare, how do you think that will work?

Tuesday, March 30, 2010

A Friend Asks for Opinions on Range of Issues

He asks:

Could any of you tell me about four CONCRETE changes that are desired. If the changes are something like:








You will have to include a few words regarding how to compensate for any unwanted consequences of the change.

Respectfully - Gomor

It is difficult once these programs are started and people have become depend on them so:

I would lower the SS tax and payout the minimum payments to all SS recipients and raise the retirement age to 70.

Seniors would not like this but I would start using evidence based medicine in Medicare.  I would also put a high deductible on Medicare.  $5,000/year to start.

Means tested programs make some sense (robbing Peter to pay Paul)  but programs like SS and Medicare make no sense.  They amount to robbing Peter to pay Peter. 

I would replace the income tax with a national sales tax and excise taxes (maybe even a carbon tax).  At some point I would eliminate the SS and Medicare taxes. 

Similar to SS lower the payout to some minimum level.  Interestingly you could replace unemployment payments and SS payments with a fixed amount of money given to every citizen but that is too radical and creates some bad incentives. 

We have gobs of regulations and we still have periodic financial collapses (and BTW they have been worse since the civil war (civil war laws pretty much ended an level of free banking) and worse yet since the creation on the federal reserve and FDIC) and lest you think that this is because conservatives had power for a few years (congress and the white house) Sweden had a finical collapse in the early 1990s.  So the regulations seem not to work.  We might as well allow free banking but the  transition could be brutal so we must go slow. 

I am against foreign wars unless we are attacked. Defense only. We won everything that there is to win in Iraq and Afghanistan time to end the police work in those countries and bring the soldiers home.  We got Sadaam and we toppled the Taliban. 

We spend almost as much on military as the rest of the world combined, and the other strongest countries are our allies (France and UK).  I think that we can afford to cut military in half at least.

Monday, March 29, 2010

Population Density

What my time living in Honduras (low national pop density compared to my native Rhode Island) showed me is that crowding is generally a result a lack of a tranportation rather than population density.
Rhode Island has a population density of 900/sq mi and  Honduras has a population density 77/sq mi.  Rhode Island does not seem crowed at all.  Honduras on the other hand can seemed quite crowed.  Poverty and poor transportation cause people to crowd in together. 

People talk about crowding in Japan, and Japan does has good transportation, but you will notice that people seldom talk about crowding in the Netherlands.  I think that part of crowding in  Japan is the result of their Government's attempt to keep Japan growing most of their staple foods. Agriculture does take up land but even if that was a national goal you could achieve it without preserving so much farm land, by using more intensive agriculture. 

Some population densities:

1 Macau 20,824.38
2 Monaco 16,486.67
3 Hong Kong 6,571.14
4 Singapore 5,539.77
5 Gibraltar 4,486.92
6 Gaza Strip 3,090.71
7 Holy See 1,977.27
8 Bermuda 1,249.44
9 Malta 1,192.51
10 Bahrain 1,014.66
11 Maldives 1,000.73
12 Bangladesh 949.28
13 Jersey 773.46
14 Taiwan 685.47
15 Mauritius 639.03
16 Barbados 602.77
17 Nauru 505.00
18 Korea, South 477.49
19 Netherlands 466.45
20 Puerto Rico 433.94
21 San Marino 417.68
22 Tuvalu 407.23
23 Mayotte 398.23
24 Martinique 388.24
25 Marshall Islands 361.32
26 Aruba 355.83
27 Saint Vincent and the Grenadines 354.47
28 Lebanon 348.26
29 Virgin Islands 343.34
30 Guernsey 337.04
31 Belgium 336.82
32 Japan 336.72
33 India 336.62
34 Rwanda 326.85
35 American Samoa 320.53
36 Sri Lanka 295.72
37 Reunion 287.09
38 West Bank 285.66
39 Grenada 285.32
40 Israel 282.82
41 El Salvador 281.81
42 Guam 280.28
43 Philippines 266.11
44 Comoros 259.32
45 Saint Lucia 252.49
46 Haiti 249.79
47 Guadeloupe 246.74
48 Jamaica 244.92
49 United Kingdom 244.69
50 Vietnam 237.62
51 Germany 234.86
52 Cyprus - Turkish Sector 224.76
53 Burundi 223.62
54 Netherlands Antilles 216.49
55 Trinidad and Tobago 214.83
56 Liechtenstein 200.36
57 Italy 192.96
58 Micronesia, Federated States of 187.32
59 Switzerland 182.94
60 Nepal 177.65
61 Korea, North 177.61
62 Pakistan 177.37
63 Seychelles 173.99
64 Dominican Republic 168.04
65 Luxembourg 165.92
66 Saint Kitts and Nevis 159.25
67 Sao Tome and Principe 154.88
68 Tonga 151.92
69 Cayman Islands 151.29
70 Tokelau 147.10
71 Andorra 146.53
72 Antigua and Barbuda 146.01
73 Northern Mariana Islands 145.49
74 China 133.69
75 Moldova 133.67
76 Gambia, The 133.63
77 Czech Republic 130.72
78 Man, Isle of 128.72
79 Montserrat 128.53
80 British Virgin Islands 127.71
81 Poland 126.79
82 Anguilla 126.48
83 Denmark 126.36
84 Nigeria 124.98
85 Albania 122.79
86 Armenia 120.04
87 Kiribati 119.25
88 Thailand 118.43
89 Indonesia 118.32
90 Uganda 114.19
91 Guatemala 113.77
92 Kuwait 111.73
93 Slovakia 110.58
94 Hungary 110.31
95 France 108.09
96 Portugal 107.86
97 Malawi 106.30
98 Serbia 103.06
99 Cape Verde 100.68
100 Cuba 100.09
101 Austria 98.37
102 Slovenia 97.28
103 Romania 96.96
104 Syria 93.53
105 Togo 93.43
106 Azerbaijan 91.85
107 Dominica 86.51
108 Turkey 85.11
109 Cook Islands 84.17
110 Croatia 82.91
111 Ukraine 82.51
112 Ghana 82.11
113 Greece 81.86
114 Cyprus 81.61
115 Macedonia, The Former Yugoslav Republic of 81.37
116 Samoa 80.69
117 Spain 78.43
118 Bulgaria 74.13
119 Sierra Leone 73.95
120 Burma 73.10
121 Georgia 72.69
122 Costa Rica 72.53
123 Lesotho 70.15
124 Bosnia and Herzegovina 67.97
125 Egypt 67.58
126 Morocco 66.46
127 French Polynesia 66.14
128 Cambodia 65.87
129 Malaysia 65.06
130 Qatar 63.26
131 Brunei 61.29
132 Tunisia 61.24
133 Swaziland 57.29
134 Benin 57.00
135 Uzbekistan 56.66
136 Wallis and Futuna 55.22
137 Norfolk Island 55.06
138 Lithuania 54.98
139 Honduras 53.60
140 Ethiopia 53.30
141 Ireland 52.74
142 Senegal 52.35
143 Mexico 52.15
144 Iraq 51.90
145 Jordan 51.32
146 Kenya 50.61
147 Belarus 50.10
148 Cote d'Ivoire 49.74
149 Cocos 45.43
150 Ecuador 45.38
151 Fiji 44.49
152 Guinea-Bissau 44.09
153 Tajikistan 42.77
154 Burkina Faso 42.28
155 Bhutan 41.53
156 Palau 40.32
157 Afghanistan 39.88
158 Iran 39.84
159 Nicaragua 39.23
160 Turks and Caicos Islands 39.22
161 Colombia 37.84
162 Panama 36.56
163 Latvia 36.44
164 South Africa 35.60
165 Tanzania 35.29
166 Cameroon 32.92
167 Eritrea 32.84
168 Estonia 32.60
169 Yemen 32.09
170 Guinea 30.66
171 Liberia 30.35
172 United States 29.77
173 Faroe Islands 29.35
174 Zimbabwe 28.87
175 Saint Pierre and Miquelon 28.79
176 United Arab Emirates 28.29
177 Bahamas, The 28.17
178 Venezuela 26.31
179 Madagascar 25.58
180 Mozambique 24.39
181 Kyrgyzstan 23.76
182 Laos 23.43
183 Congo, Democratic Republic of the 22.26
184 Sweden 21.69
185 Peru 20.80
186 Djibouti 20.36
187 Brazil 20.32
188 Chile 20.00
189 Uruguay 19.06
190 Christmas Island 17.58
191 Saint Helena 17.43
192 Finland 16.89
193 Equatorial Guinea 16.60
194 Solomon Islands 16.54
195 Sudan 14.51
196 World 14.42
197 Norway 14.42
198 Paraguay 13.68
199 New Zealand 13.63
200 Argentina 13.42
201 Algeria 13.07
202 Zambia 13.05
203 Vanuatu 12.81
204 Oman 11.52
205 Somalia 11.38
206 Saudi Arabia 10.97
207 New Caledonia 10.63
208 Papua New Guinea 10.39
209 Belize 10.34
210 Angola 8.97
211 Turkmenistan 8.95
212 Russia 8.61
213 Mali 8.55
214 Niue 8.09
215 Congo, Republic of the 7.96
216 Niger 7.86
217 Bolivia 7.36
218 Montenegro 6.66
219 Kazakhstan 6.30
220 Chad 6.00
221 Central African Republic 5.53
222 Gabon 4.76
223 Guyana 3.58
224 Canada 3.36
225 Libya 2.84
226 Iceland 2.72
227 Suriname 2.67
228 Mauritania 2.51
229 Botswana 2.50
230 Australia 2.47
231 Namibia 2.00
232 French Guiana 1.88
233 Mongolia 1.67
234 Pitcairn Islands 1.04
235 Western Sahara .90
236 Falkland Islands .23
237 Svalbard .04
238 Greenland .03
239 Antarctica .00
239 Ashmore and Cartier Islands .00
239 Baker Island .00
239 Bassas da India .00
239 Bouvet Island .00
239 British Indian Ocean Territory .00
239 Clipperton Island .00
239 Coral Sea Islands .00
239 Europa Island .00
239 French Southern and Antarctic Lands .00
239 Glorioso Islands .00
239 Heard Island and McDonald Islands .00
239 Howland Island .00
239 Jan Mayen .00
239 Jarvis Island .00
239 Johnston Atoll .00
239 Juan de Nova Island .00
239 Kingman Reef .00
239 Midway Islands .00
239 Navassa Island .00
239 Palmyra Atoll .00
239 South Georgia and the South Sandwich Islands .00
239 Spratly Islands .00
239 Tromelin Island .00
239 Wake Atoll .00

Monday, March 22, 2010

The healthcare bill of 2010 passed

The healthcare bill of 2010(my name for it) passed.  I guess that it will, in net, be bad for us (especially for those with some knowledge of how to get good heath care at a good price), but that the politicians will hide the costs very well and make the benefits obvious so that most people will like it.  IMHO we were headed into a painful but positive period in health care were more and more employers would drop coverage and raise deductibles.  That would be painful for many, but that pain would have resulted in the people forcing some much needed sanity in health care provision.

Tuesday, March 16, 2010


Iraq's GDP is $12.5 Billion, Afghanistan's is $10 billion. Estimated cost of our "war on terror" so far is nearly $1 TRILLION! Take a second to take that in.

A retired ag. economist spent time in Afghanistan about four years ago. He was one of the few who ventured out of the cities, meeting with villagers on setting up ag. co-ops.

His report: "This is just a bunch of villages, run by the village elders and the local immam. Some guy who they never met comes in once and awhile from the central government and makes promises and leaves.

Life goes on in the village.

There is no central government. These are dirt poor farmers in dusty isolated villages who have run their lives following the village elders and the local immam."

A friend of was an officer over there he told me that the day the USA army pulls out of Afghanistan it will revert back to what it was before we went in. 

I see the action in Afghanistan as a huge waste of resources.  The strategy is misguided. Centralizing control doesn't work in the US. why would it work in Afghanistan? All its doing is creating opportunities for corruption.

On top of that we are also trying to fight our irrational drug war there. The drug war creates financial opportunities for terrorists, just as it does in places like Columbia and Oakland California.

It takes a $1 million/year to maintain one US soldier in Afghanistan for one year?  You could hire about a thousand Afghans for that. 

We won all that can be won in Afghanistan we need to pull out.  We won the war it is long over.  Our soldiers can move about Afghanistan with impunity.  It is over we won lets bring the troops home!

Thoughts on the FairTax

The main complaints about the FairTax are that it is not progressive enough and that it would lead to a large black market.

People often say that the FairTax in not viable politically because the people who currently do not pay income taxes would never support it. But many Americans believe that the rich do not pay taxes and so the FairTax might appeal to these folks. Ask blue collar people if the rich pay taxes, you may be surprised. Some of the problem comes from the media who love to report that people like Ross Perot, who get most of their income from municipal bonds, pay no taxes but the municipal bonds only allow the holder to pay, through lower interest rates, taxes to local governments at a slight lower rate than they would pay to the federal government.

Here Erikson and Althaus say
On economic issues the fully informed electorate is more supportive of free-market solutions and opposed to government services. Yet the informed electorate is also more supportive of taxation. Not only would "full information" push redistributive preferences generally rightward; the biggest push would be among the poor, perhaps unexpectedly... The net result of greater awareness would not simply be a more conservative electorate economically, but also one with smaller class divisions. This is far from the vision of liberal reformers.

This would be another reason that the people might like the FairTax.

Replacing the income and SS taxes with an NST could work given…

Road taxes are already collected that way.
Most funding for fire, schools, courts and police work is from local government taxes.
Agricultural subsidies are vote buying schemes we could do without.

Seeing that the rich live much longer than the poor it would be sensible to re-work SS so that everyone gets the same amount of money. This could be done in such a way as to reduce the cost of this program. SS is already less progressive than most Democrats would want.

Medicare funding is also regressive and makes no sense since in the current formulation Gov. does not have much pricing power and since the least effective medical care spending is that spent on old people and, again, since the rich tend to live much longer than the poor, we might be able to set up a system that any American can get medical care from Gov. less that Medicare costs today.

Documentation on the living much longer than the poor:

For here in this multi-deprived inner city area, the average life expectancy of a male is just 53.9 years. In Iraq, after 10 years of sanctions, a war and a continuing conflict, suicide bombs and insurgency, the average man has a good chance of making it into his 60s; the life expectancy of a male there is 67.49. In Iran it is 69.96, in North Korea, 71.37 and in the Gaza Strip it is 70.5.

Our military budget has not yet been brought in line with the fact that the USSR is no more, it could be greatly reduced.

The black market in alcohol cigarettes and gasoline seems small and the tax rates for these are high.

Economists estimate that small business owners only pay 70% of the taxes that they are required by law to pay and farmers only pay 50%.

But the change over is very risky and may be politically unfeasible, much of the above spending cuts may not be politically feasible

Robbing Peter to Pay Peter

I understand taxing the rich to help the poor. What I can't understand is taxing everyone to help everyone. Means-tested programs like TANF and Medicaid aren't crazy; they take from Peter to pay Paul. Universal programs Social Security and Medicare are crazy; they take from Peter to pay Peter. 
[Bryan Caplan]

I have been telling people for a while that "you cannot subsidize the middle class" and "if everyone is subsidized no one is subsidized".
I would extend Bryan's comments to Government education. The rich and middle class should pay on a sliding scale to send their children to Government schools.  T

Also consider my suggestion for healthcare that subsidizes the poor encourages the competent to shop for price and value and avoid huge marginal tax rates near the point where medicaid eligibility ends.

My blog post on a healthcare compromise

The state would provide insurance to all Americans but the annual deductible would be equal to the family’s trailing year adjusted income minus the poverty line income (say $25,000 for a family of 4) + $300. So a family of 4 with a trailing year adjusted income of $30,000 would have a deductible of $5,300. A family of 4 with a trailing year adjusted income of $80,000 would have a deductible of $55,300. Middle class and rich people could fill the gap with private supplemental insurance but this should be full taxed. This would encourage the middle class and rich, who are generally capable people, to demand prices from medical providers and might force down costs. They could opt to pay for most health-care out of pocket while the poor often less capable would be protected.

I see 3 possible ways to cut medical spending:

A friend wrote: 

I have a very simple change in proceedure that could appreciably reduce health care costs: Mandate that the cost of each proceedure must be stated before the patient decides to choose whether to have it done;

I have three excellent examples - a year ago I was planting and scuffed my Achilles tendon. The doctor said why don't we get a MRI just to be sure - I said OK and it was done. Nowhere was it stated that the MRI would cost $1700 and waiting a few days would give the same answer. About the same time I had a skin specialist look over some scruffy looking places. He sprayed them with liquid nitrogen and they went away - but I had a little bump and he said why don't we get it biopsied? I said OK and later got the bill for about $700. If I had known the cost, I would have said why don't we wait a little while and see if it goes away? A few years earlier I had a mild distress in my chest and went to the emergency room. Whiz - Bang and I am in the "Heart Catheter Lab" with a thin probe doing its work in one of my cardiac arteries. A few hours later I find that I have incurred a bill for $35,000. Much later I learn that a medical approach has as high a success rate as angioplasty with a stent.

In all of these cases, if I had been told: "This is what the cost will be - do you want to do it?" I might have been inclined to save the money.

This is non-partisan - What do you think?

I see 3 possible ways to cut medical spending:

1. Put more of the costs of medical care on the patients. 

My friend's comments above beg the question of why costs of procedures are not stated or even asked for! 

I think the answer is because few people pay directly for medical care.  Putting more of the costs of medical care on the patients means most people should have deductibles and copays in the tens of thousands of dollars per year.

This would be facilitated by a separation of health insurance from employment.  I do not think employers would have taken on provision of health insurance for their employees if it was 17% of the economy when they started.  Spending 17% of the USA economy needs the attention of everyone each with his specific and individual knowledge of his own circumstances, delegating it to employers when it was 4% of the economy made more sense.

2. Monoposony

Single payer where the government like in Canada and Japan pays for all medical care and so can set the price pretty low.  This though, creates shortages but the shortages are somewhat mitigated because governments through excessive regulations and licensing have created a shortage of provision and so some of the shortage would be absorbed. 
Further even if quality and access is reduced it seems that medical care beyond vaccinations, antibiotics, trauma care and a few other cheap things yields very little improvement in health, so lowering quality and access is not so bad.

Still the government of Canada socialized medicine when it was only about 2% of GDP.  It is now 8% of GDP in Canada and this seems to be loosening monoposony's grip.  Again they need more people actively working to lower the spending.  Also the shortages can still be a drag even though somewhat mitigated. 

2. Making some procedures illegal

Researcher after researcher has shown that back and neck surgery do not work. Heart bypass other than for the upper left ventricle has be shown to be less effective than non surgical treatment. One could go on and on. These non effective procedures could be banned. The problem here that people would not like this and it could effect future innovation.

I choose option 1 and the good news is that the bad news in healthcare, that employers are dropping coverage and increasing deductibles, is moving in that direction.
The current bill is a complete joke. 

Monday, March 8, 2010

Is the USA Healthcare Market Moving in the Right Direction?

I have been paying close attention to the debate on health insurance for a few years. Lately I been hearing of more and more employers dropping health insurance or raising the deductibles for their employees.  Judging from people I know, when their employer is not providing health insurance and people buy their own insurance they opt for high deductibles.  This is IMO what needs to happen.  Insurance should be only for what you cannot afford not for what you can afford.  I think most Americans would be better off and have a better relationship with their insurers and health care providers if they had annual deductibles of $20,000 to $50,000.  This would also cause some healthy price and spending consciousness.  Today nobody is looking to save money on treatments and that has lead to absurd and spiraling health care spending. 

I do not think employers would have taken on provision of health insurance for their employees if health care spending was 17% of the economy when they started. Spending 17% of the USA economy needs the attention of most all users with their individual situations and demands. Delegating the spending of 4% of the economy it to employers is much more sensible than delegating the spending of 17% of the economy to employers.

So aren't these trends likely to slow the rise in medical spending which is the only real problem with health care in the USA and if so is this just a needed adjustment?

One unrecognized fact that I have learned about health care is that health care beyond vaccinations, antibiotics and trauma care has very little impact on health. This idea has popped up again in the debate over how many lives would be saved if everyone had health insurance. 

In theory universal health insurance save the person who due to a lack of insurance does not have a symptom checked until it is too late and so dies. Advocates of Government provided heath insurance like to cite a poorly done study that showed 40,000 premature deaths per year in the USA due to lack of health insurance but startlingly many more studies can find no additional deaths.

Everyone insured or uninsured gets the most effective basics; vaccinations, antibiotics and trauma care. Thankfully vaccinations, antibiotics are very cheap and affordable, they are cheap enough for public provision. Trauma care can be expensive but it is uncommon and has a big payoff, the patients are often young and most can completely recover and so can pay down a large bill over time.

Let me make a note everyone knows cancer survivors who are grateful that early treatment  saved their lives but autopsies often find that people had cancer for over 30 years and died of something other that cancer. Also cancer treatment takes some lives, operations and hospitals are dangerous. We really do not know how many lives Cancer treatment saves because some cancer is slow growing and probably would not have killed and fast growing cancer often kills despite treatment. It is only in cases of moderately growing cancers that lives are saved.  We do know which particular cases of cancer are slow growing which is why it is mostly treated

Some people may counter that if one life is saved then we should do it, but this is inconsistent and counter productive. It is inconsistent in that we know a lower speed limit could greatly reduce deaths due to auto accidents but we do not want that.  It is counter productive in that if it makes us poorer we could loose lives for other reasons (one simple example is that driving is much more dangerous than flying and the richer we are the more likely we are to fly than drive on long trips).

Financial crisis of 2008

The problem with the banking system is not corrupt people (people are always corrupt).  The problem is that the system is not robust to corruption.  The current system has feedbacks that magnify rather than reduce problems. One big bank failure should strength all other banks, instead it weakens them.

Part of the problem is that the green back is too strong.  It is too highly desired.  It is treated by most people as safer than real assets despite being just paper. In a contractionary banking crisis people want greenbacks and Federal Government bonds over real assets. If this was not so people would rush to spend their cash and Government bonds on real assets like Restate and loans would be strengthened. 

We need fundamental change.  the old saying,  "anything that can happen will happen holds".  If greed can break the system it will.  
We need a fail safe mechanism.

I have seen 3 proposed solutions: 

Possible solution 1. The post Keynesians say that Government should stop selling bonds at all and use seniorage  (the creation of money) in recessions and depressions to increase aggregate demand and taxes in inflationary periods to reduce aggregate demand.  As far as I can see this should work.  The down side is that it separates taxing from spending giving more power to the state.  Also would require the raising of lowering of taxes and spending in response to economic conditions.  Politicians have real problems reducing spending and raising taxes. 

Possible solution 2. Some free banking advocates advocate currency made by banks backed only by bank assets.  The banks would never have to pay out in Gold, so there would be no danger of bank runs.  If the demand for currency was to rise they would just print more.  If bank assets value falls so does their currency but only relative to other bank's currencies.  we generally are not aware of it by currency is not that different from checks and bonds.  

Possible solution 3. 100 percent reserve banking.  Noble economist James Buchanan has come out for this option.  This was once only proposed by fringe economists.  Presumably savings accounts would no longer exists but would be replaced by bond funds that fluctuate with the bond market and the strength of the bank's portfolio. The money market accounts would become short term government bond funds.  A better term for fractional reserve banking is "maturity-transformation" , it makes things clearer. like 02/maturity-transformation-cat-bag-out.html

We can never be sure if either system would work to prevent bouts of high unemployment but we do know that what we have now produces bouts of high unemployment.