Archive for category Economics

Does Primary Care Actually Save Money?

One of the arguments for Obamacare has been the claim that increased access to primary care will result in long-term cost savings, but studies show conflicting results.  The theory in favor of this is that early detection will allow treatment in earlier stages.  The theory opposed to it is that keeping people alive costs money, as well.

Still, before we commit to a government takeover of health care, isn’t there a pretty simple experiment that we could run to find out?  If access to primary care really does save money in the long run, why aren’t insurance companies providing incentives to the insured to make more and better use of their PCPs?  There are some experiments in the works to incentivize doctors to be more accessible, and Anthem is even cutting them in on the presumed savings.

But the problem may be on the demand side as well – people just don’t like going to doctors, and not only because of the wait times.  Presumably the problem isn’t just putting off going to the doctor when you’re sick, it’s also putting off the routine physical or the annual checkup that could catch trouble early, before there are any symptoms at all.  So why not cut the co-pays?  Or why not mimic the safe-driver discounts and rebate an increasing portion of the co-pay for every year you go for your physical?  The latter would also help create the habit of going to the doctor regularly.

Insurance companies live and die on the sort of actuarial math that would let them detect any positive results from these experiments pretty quickly.  And if anyone is culturally geared not to fall for the fallacy of the seen and the unseen, it’s insurance companies.  (The fallacy states that people fall for redistributionist schemes because the beneficiaries are immediately identifiable, while the costs are distributed among the many.  In this case, presumably, the beneficiaries are largely unseen, while everyone sees the hit to the bottom line.)

So, is there are good reason that insurance companies don’t do this?  Is it just that they haven’t thought of it, or is there actual evidence that it doesn’t work?  Is anyone aware of any results from the Anthem experiment that show one way or the other?

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Tonight’s Surprise – China?

In trying to anticipate Monday night’s debate, we’re all thinking about Benghazi.  (Well, all of us except the New York Times, in whose Sunday edition the word does not appear.)  But the White House has more or less gone silent on Benghazi in the last few days, refusing to answer questions about it.  And they have to know that Romney will know the timelines backwards and forwards, ready to remind people of what they know they’ve heard.

What if, instead of trying to rebut the charges – surely a futile task – President Obama tries instead to divert attention?  Where would they turn.

I think the answer is China.  First, reports are that the administration is going to trot out a 5-year-old video from Mitt Romney’s last presidential run, showing him, ah, not hating China.  Here’s what he says:

You know, I think it’s important first for the American people and our leadership to understand that China is not like the Soviet Union of old.  The Soviet Union, Khrushchev in particular, wanted to bury us.  China doesn’t want to bury us, they want to see us succeed and thrive so that we can buy more Chinese products and they’re a competitor economically.  More power to ‘em, we know how to compete.  We want to make sure that competition is fair and legal, and that they protect our intellectual property rights and that they have a monetary policy that’s fair, so we’ve got some challenges to make sure that the playing field is level with China, but we can compete, we can be successful with China, and I will reach out to them, I’ve already met with their leadership and will do so again if I’m lucky enough to be president. Making China a partner for stability in the world will be one of my highest priorities.

China is really key in many respects as they become a very large economy; their GNP is going to surpass ours at some point just given the scale of the nation’s population.  We have to recognize that they’re going to be an economic powerhouse like us.  And with that reality we gotta make sure that we are friendly, that we understand each other, that we’re open in communicating, and that we’re collaborating on important topics, like keeping North Korea from pursuing the nuclear armament which they’ve begun, getting Iran to abandon their nuclear ambitions, China and we together will have a great deal of positive influence for stability if we’re able to work that relationship properly.

It’s unclear why the Obama campaign thinks this is damning, but I suppose you could take the words, “China doesn’t want to bury us, they want to see us succeed and thrive so that we can buy more Chinese products,” out of context, and try to portray Romney as a flip-flopper on China.  I don’t think it’ll work.  I think Romney knows what he said, and in his calm, smooth, reassuring style will remind us that he was insisting that we make China play by the rules, because it’s in everyone’s interest.

I suppose it’s also possible that they’ll use the second half of the statement to claim that Romney is naive on China.  But coming from a president whose naivete on the Middle East is unsurpassed in several generations, and whose “pivot to Asia” is about to be undermined by drastic budget cuts to the Navy, that probably won’t work too well, either.

Obama may also try to use China to salvage his Solyndra payoff investment, inasmuch as that company’s remnants are suing Chinese solar companies, trying to blame them for Solyndra’s failed business model.  Doing that would give him a two-fer: getting to play the Romney-the-outsourcer card, while saying that China is eating our lunch on green technologies, and that he’s the guy to put a stop to it.  (Never mind that China’s paying a heavy price for its own market interventions, even as they continue to blame the West for it.)

So keep an eye on China this evening.  That may be where the real fireworks come from.


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PERA Gains a New Client Group

What makes it so hard to fight the growth of government is its ability to create client groups seemingly at will, with the money of the very people it’s seeking to co-opt.  I see it myself all the time at the JCRC, where what had been private, service groups are reduced to begging for scraps and favors in front of legislative committees.  At one time they thought it more expedient to do that than to make the case for the value of their work to the community they served and represented.  Now they’re caught, and even when they’re not temperamentally inclined to go along with the leftist agenda, they often do because they can no longer imagine doing business without government support.

So it happens with PERA, too, which has announced the Colorado Mile High Fund, a fund geared towards investing in Colorado entrepreneurs who have partners, but are also having a hard time finding additional capital.

“We heard from businesses around the state during the development of the Colorado Blueprint that increased access to capital is critical to their success and that of our state’s economy,” said Gov. John Hickenlooper. “The creation of the Colorado Mile High Fund will improve that access to capital and we are pleased that Colorado PERA’s partnership will benefit and help grow companies here in Colorado.”

The risks to the taxpayers and the foolishness of this sort of government adventure are all around us, but it’s hard to tell if that’s a bug or a feature of this plan.  I don’t think PERA’s out to deliberately lose money, but investing in high-risk start-ups may not be the best decision for a defined benefit retirement fund.

Even if this turns out to be one fund in the option and under-used 401(k) option, entrepreneurs and start-ups will now have a reason to support increased funding for a government-sponsored employee retirement plan, whose money much come from the pockets of the taxpayer.   The most dynamic sector of the state’s economy will be effectively recruited on behalf of its most stifling.

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Everything Ends Up Subsidized Or Illegal

We are Orthodox Jews.

We keep kosher.

And as we all know, kosher meat is expensive.  A typical cut of kosher meat is something like twice the price of a comparable non-kosher cut.  Ground beef is at $2.49 a pound?  Kosher ground beef runs about $4.99 a pound.  I just check the price of ribeye.  Treif at $6.99, it’ll run you $14.89 a pound at the East Side Kosher Deli.  (They’re not necessarily gouging here in Denver; it’s that way everywhere.)

Now, Susie just got a mailer from the Colorado Democrats stating that Mitt Romney would “[take] away vital health services for women,” by, “[signing] laws allowing your employer and your insurance company to make your birth control decisions.”  Presumably, they mean he’d repeal the HHS Mandate requiring employers and insurers to pay for employees’, without co-pay.

They’re arguing that, now that such coverage is the law, going back to making someone pay for it themselves is the same thing as “restricting” it (their word), or allowing someone else decide whether or not you use it.

So what this means is that you, every one of you now reading this piece (unless you also keep kosher), are deliberately restricting Susie and me from our Constitutional right to keep kosher.  You are in fact making our food choices for us.  Unless, of course, you take out your checkbook right now and send Susie and me a check to cover the difference in cost between kosher and non-kosher meat.  And you wouldn’t want that on your conscience, would you?

This is the reductio ad absurdum of the liberal line that not having someone else pay for something legal that you want is the same thing as restricting it.  So ultimately, everything is either free or illegal.

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Children of the Corn

My latest for Who Said You Said:

“When everyone says you’re drunk, you’d better sit down.” When both The Wall Street Journal and NPR have questions about a policy, it’s time to rethink it.

The Renewable Fuel Standard’s ethanol mandate requires an increasing amount of ethanol be blended in gasoline every year. Last year, more than a third of America’s corn crop went to ethanol; this year, with decreased production and increased diversion, that proportion is expected to rise to at least 40%. This requirement has pitted ethanol producers against food and feed consumers of corn, driving up corn prices even faster than normal supply shortages would dictate.

The EPA could, if it chose, suspend the ethanol mandate altogether for the year, but so far has chosen not to do so. Not only Agriculture Secretary Tom Vilsack, but Interior Secretary Ken Salazar have been strong supporters of ethanol. On July 16, 2008, Salazar, then a U.S. Senator from Colorado, spoke on the floor of the Senate in terms of ethanol’s contribution to America’s “energy independence,” its importance in keeping gas prices down, and the jobs that were then being created on Colorado’s eastern plains in the new ethanol plants being opened there.

The Obama Administration may have been caught off guard by the severity of the current drought, but questions about price distortions caused by the mandate aren’t new. Last year, in February of 2011, Vilsack addressed exactly these same concerns at a press conference [See video above]:

“Certainly not worried in the long term about our capacity to produce enough corn to meet our food and feed needs as well as our fuel needs. The last time we had any issue relative to food prices when this issue was raised about ethanol production, our studies indicated that the ethanol production was a very, very, very small percentage of the food price increases.

“When you look at food price increases, you’re looking more at marketing, advertising, refrigeration, transportation, expenses that are incurred in the food chain. And you’re also recognizing that farmers are receiving an ever shrinking share of the retail food dollar. There are a lot of folks that have to be satisfied out of that retail dollar.

“So I’m not concerned about it. We obviously will continue to look at what the Spring will bring, in terms of cropping decisions. Part of what’s happening worldwide is the result of weather conditions in a number of countries. Export controls and restrictions by some countries have made it a little more difficult. But here in this United States, we’re anticipating food prices to rise somewhere between 2-3%, which is relatively moderate.”

The problem, of course, is that neither people nor livestock can wait for the long run to eat. It may be easy enough for us to adjust to some food price increases, but folks living closer to the margin, as in Mexico, don’t have that luxury. See Egypt for what happens when entire countries have to choose between food and fuel.

And while Vilsack has correctly identified the price inputs into food production, he’s forgotten that prices change because of action on the margin, and the price of corn has proven to be especially volatile, but also especially remunerative to farmers in recent years. A large part of this increase is a result of the ethanol mandate. And contrary to Sec. Vilsack’s protestations that little of the money is flowing through to farmers, agricultural land values have been shooting through the roof, indicating that investors see corn production as a good investment.

The winners include ethanol producers, who are guaranteed a market for their product, corn farmers, who see the results of the government bidding against private ranchers and farmers for their product, and fertilizer companies, whose nitrogen-based product is needed to save the soil from the increased corn crop. Much of the increased corn planting takes place at the expense of soybeans, which replenish the soil. (As a side note, a major component of fertilizer is natural gas; the combination of falling natural gas prices and rising corn plantings has been a windfall for those companies, so to the extent that the farm vote is in play, look for politicians to make hay with that.)

The losers include ranchers, who are having to bid against the government for corn to feed their herds, and you. Because not only are food prices rising faster than your paycheck, there’s little to no statistical evidence that all this diversion of food to fuel is keeping gas prices down. And in spite of the mandates, ethanol plants are shutting down, anyway.

For decades, as their agriculture became a running joke, the Soviet Union used to blame chronic food shortages and poor crops on the weather. A Russian history professor of mine responded to a student’s question about Gorbachev’s political prospects, “Well, he’s got his main rival (Yeltsin) in charge of agriculture, so I’d say he’s in pretty good shape.”

It’s doubtful that Barack Obama felt threatened by Vilsack’s presidential ambitions (his abortive presidential run ended in early 2007, about a year before his home-state Iowa Caucuses), but it’s likely that Vilsack will end up as collateral damage of this Administration’s misbegotten economic and energy policies, nevertheless, when he finds himself – hopefully – looking for work after the November elections.

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I Guess We Are the 1%

This afternoon’s mail brought a letter from UnitedHealthcare, my insurance company from a previous job.

“They never write you to say they’re giving you back money,” said Susie.


The Affordable (sic) Care Act requires UnitedHealthcare Insurance Company to rebate part of the premiums it received if it does not spend at least 80 percent of the premiums [it] receives on health care services…

In 2011, UnitedHealthcare Insurance Company spent only 79% of a total of $58,159,006,54 in premium dollars on health care and activities to improve health care quality. Since it missed the 80 percent target by 1% of premium is receives, [it] must rebate 1% of the total health insurance premiums paid by the employer and employees in your group health plan.

I’m always happy to get money back, and getting money back from an insurance company is particularly delicious.  But you know, it’s a little like finding out you won that game with Florida State three years ago because they committed a recruiting violation.

In all seriousness, what business is it of the government’s what G&A margin a private company has.  For some reason, 20% is exactly right, but forcing 0% borrowing on these clowns is a violation of every holy democratic republican principle since the Romans.

Of course, we’ll take the money, though.

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Adolescence Just Keeps Getting Longer

Two posts getting some attention today.  First, this from Derek Thompson at the Atlantic:

And then this, from Taylor Cotter over at the Huffington Post:

I suppose that I’m grateful that I can make all my car payments and start saving for retirement while most of my friends are living at home and working part-time jobs — but I often find myself lamenting the fact that I’m not living at home and not working a part-time job. From my perspective, these are just some of the life-changing, character-building experiences that I may never have.

Now, it’s easy to laugh at Taylor, and Lord knows, I have.  Oh, the struggles of not starving, not having to live at home.  The horrors of being able to go out for drinks and read a book from time to time.  The sheer insipidness of knowing that your rent is paid and there’s food on the table.  Really, who wants to live like that?

But at a more serious level, the fact that she seriously thinks that she’s missing out on something by not spending mandatory time in her parents’ basement or her old room, shows that that may slowly be turning into the norm.  It slows down adulthood, accumulation of both social and financial capital, and becomes harder and harder to reverse.  Subsidizing the trend by putting 25-year-olds with masters degrees on their parents’ health insurance only aggravates the problem.

As young Taylor shows, it can become a desirable thing to start off your life that way.  And when you think about it, why stop at 26?  Or 30?  Why not keep going all the way to early retirement.  (Retirement from what? If you have to ask, man, you just don’t get it.)  Well, the Greeks and the Spaniards show why.

Michael Barone likes to say that American has the worst 18-year-olds and the best 30-year-olds.  That’s because the time immediately after college toughens kids up, and teaches them what the real world is like.

God help us when 40 becomes the new 30.

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WalMart Hatred and Racism?

I don’t tend to post a lot on purely social issues.  But there are times when the two issues intersect in their own very illuminating way.  During the June 26 hearing on the Colorado Health Care District redevelopment, one gentleman, one of three African-Americans in the room, took exception to some of the concerns being expressed by the neighbors of the proposed project:

“I’m a civil rights activist and a member of this community.  I have family and friends who live here in this community.  I’m here tonight – I thought I came here for peace and unity.  But I see, that’s not going to be the case.  Why?  Because I sit over there, stood over there, and heard you all use all these buzzwords and code words.  ‘We don’t want that element out here.  We don’t want our property values to go down.  Those are code words to say we don’t want black and brown people…”

(Shouting and yelling)

“You say ‘No,’ then why don’t you…”

“We don’t want the people who shot the police officer.”

“You know something, I don’t either, I don’t want them either, and I’ve stood  on the front line saying put his butt in jail.  But at the end of the day, what I’m saying is this.  You want to be fair about it, Wal-Mart has been a friend of the African-American community, and I think that it will continue to be a friend to our community, and we need their help, and we need your help.”

Right after he finished, one of the audience members yelled after him something about Wal-Mart keeping wages down.  But that wasn’t his point.  His point was twofold: first, without Wal-Mart, many of those people wouldn’t have jobs at all, and second, Wal-Mart keep prices down, making many things more affordable to people with lower incomes.

Now, I don’t think most of the people in the audience were consciously racist.  But I do believe that the charge stung precisely because, as good liberals (the precincts surrounding the development voted from 75% to 85% for Obama in 2008), they believe themselves to be incapable of racism.  And to be sure, their bias isn’t the kind that leads someone to put on the bedding and burn crosses.

But it is paternalistic.  They are unable to imagine that they have neighbors who can’t afford the options they’d put in the place of WalMart, and who would welcome a WalMart in walking distance.  And they were stunned to hear from a black man that he very much wanted something that they were convinced he had no business wanting.

Almost 60 years ago, Billy Wilder had Humphrey Bogart, in the character of Titan of Industry Linus Larabee, explain things to his ne’er-do-well kid brother, William Holden, in the 1954 Paramount picture, Sabrina:

Wilder wasn’t a corporate shill.  In The Apartment,  he showed that he understood as well as anyone how to satirize the business world.  But this is a lesson that many of those yelling about Wal-Mart that warm evening might bear in mind.

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Obama Wins, 9% – 42%

The last jobs report was about as bad as it could have been without actually putting us back in recession.  A downward revision of April’s job creation, coupled with a May net of 69,000 wasn’t even enough to keep the unemployment rate flat.  The last 27 months of anemic growth have let the rate drift down only because massive numbers of Americans are giving up looking.

Almost everyone who was paying attention knows this was a bad report.  A Gallup poll had 9% of people calling it positive – probably people who think anything not negative is good, or people who found jobs – while 42% called it negative to some degree.  Ten percent had no opinion, and 40% called it “mixed,” which is pretty much the “no opinion” for people who don’t want to admit they weren’t paying attention.

Naturally, Postblogger Ezra Klein runs a piece headlined: “Most Americans didn’t think the last jobs report was bad news.”  It’s true that the number of people who think things are getting worse hasn’t gotten worse, and the additional 3% who think rate it “poor” is pretty much statistical noise.

But people can go a long time before realizing that changes are permanent.  In the mid-90s, I worked for a while in Johnston, Pennsylvania, and many people talked about how they were waiting “for the Mill to come back.”  The Mill had been closed for many years, and wasn’t coming back, that, or any other century.

The economy can tread water for a long time, not getting better or worse, slogging along an a Euro-stupor, or a sushi-style lost decade.  People won’t necessarily rate things as getting worse, even though they know they’re not getting any better.

But that doesn’t make losing 9-42 any less of a loss.


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An Evening With Arthur Brooks

Also last night, Susie and I went to go hear Arthur Brooks of the American Enterprise Institute speak, at the Young Americans Center for Financial Education. The Center is truly a wonder, set up to teach grade schoolers about business, finance, and economics. Brooks spoke in Young Ameritowne, a large hall set up like a town square, ringed by mock storefronts – sponsored by actual businesses – that the kids role-play at operating. Go see it. (Now if they could only devise a program targeted at state legislators, we’d be golden.)

The failure of conservatism and free-market forces to arrest the country’s leftward drift for almost a century now should be of profound concern, and should be a puzzle to those of us fighting the fight. AEI was founded in 1938. Go back and read some of the Intercollegiate Studies Institute’s journals from the 1950s, 60s, 70s, and you’ll see two types of articles. One it the neo-confederate and near-neo-confederate type, of which we are well rid, and which come from a world as alien as Gilbert & Sullivan.

The others are those that could have been written any time in the last four years, changing only the names of the programs and actors. Those arguments didn’t carry the day back then, yet we expect that they’ll work this time.

Why, when all the empirical evidence is that socialism doesn’t work, capitalism does, that less freedom produces greater misery, why have we been losing the fight for 100 years, since Wilson’s election? This despite poll after poll that shows that Americans continue to embrace capitalism under that name, and reject redistributionism, by overwhelming margins?

This question has been bothering me for well over a year now, because even with all the intellectual ammunition at our disposal, it doesn’t bode well for this fall, or for what comes afterwards, with so much at stake. And too few conservatives and libertarians seem to be asking it at all.

What a relief, then, that someone with Brooks’s intellect has recognized the same problem, and what a pleasure that he’s actually got a persuasive answer.

Brooks is such a clear thinker and gifted speaker that I can reproduce the bulk of his argument from memory a day later, and I have a terrible memory. He gives you just what you need to remember, and he gives you the pegs to hang it on. When Susie and I saw him speak at the Western Conservative Summit in 2010, we thought his was far and away the best talk of the weekend.

Brooks contends that both the liberal answer – that Americans secretly want socialism – and the conservative answer – that all we need is better data – are flawed, because they don’t address the moral arguments that people find persuasive.

What we’ve been missing is a moral defense of capitalism, one that doesn’t take an 1137-page hardback “novel” to summarize. Moral arguments deal with people, and arguments that deal with people are always more persuasive than arguments that deal in numbers.  Too often we dismiss that sort of thinking as “feelings over facts,” but Brooks contends, correctly, I think, that that’s a mistake.  It’s how people actually come to conclusions and make decisions, and winning the argument means reaching people on their terms, not making it necessary for them to come to us.

Brooks’s case consists of three parts:

1) Earned Success.  That is what truly defines happiness, not mere wealth. Earned success means linking success and its rewards to talent and effort. When results are decoupled from action, you get, “learned helplessness,” a recipe for unhappiness and frustration, since you’ve learned that you can’t really control your future.

2) Fairness. Conservatives like Milton Friedman resist talking about fairness, largely because we think it’s too subjective. But it’s also persuasive, and those same polls that show people love capitalism also show that they crave fairness. Well, what could be more fair than letting people keep what they earn, and decide how to use their own wealth? It’s a critical battlefield, one we can own, but not if we don’t show up for the fight.

3) Capitalism is good for the poor. Mere wealth may not be the measure of happiness, but poverty is a pretty good measure of misery. And it’s capitalism that reduces the misery that is a hand-to-mouth existence, not socialism, not all the good intentions in the world.

Moral defenses of capitalism abound. From Michael Novak’s The Spirit of Democratic Capitalism, to Hayek’s The Road to Serfdom, people have been thinking for generations about why a free system is a better system. But Novak is an academic, and neither Americans nor Europens feel tyrannized by the welfare state. The Greeks may yet provide a contemporary illustration, but thus far, most people see serfdom coming from the barrel of a gun, not a food stamp debit card.

The beauty of Brooks’s defense is that it not only speaks about people, it speaks to people, on terms that relate to their lives.  It does it without policy prescriptions that strike people as weird, or re-opening arguments that were dealt with 170 years ago, when we decided we didn’t like polygamy and did like internal improvements.

The YA Center promptly violated 1) and promoted learned helplessness by giving out copies of Brooks’s new book, The Road to Freedom, which promises to tighten up the argument, and explain, for instance, why direct help with the best of intentions can have very bad results.

I’m looking forward to reading it, and reviewing it.


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