Posted by Carl from Chicago on 30th November 2013 (All posts by Carl from Chicago)
Originally when I started over at Chicago Boyz I used to write regularly about tax policy. I haven’t written as much lately on that topic because the news has been completely dispiriting… at every turn it seems that the Federal, State and Local governments have taken positions to make the system more complex, confusing, and dysfunctional.
The goal of a tax policy should be to:
1. Achieve the revenue goals that they set out to meet
2. Do so in a way that has causes the least amount of distortions to the economy
Recently the idea of “fixing” our tax policies and incentives, for me at least, is aligned with recent discussions on the idea of raising the minimum wage. The minimum wage is $7.25 / hour, although this varies with state and local laws as summarized here. A suburb in Seattle, near the Seattle-Tacoma airport (Sea-Tac), recently passed an ordinance to raise the minimum wage to $15 / hour. This ordinance is a bit more clever than most, since the airport is unlikely to close or take significant actions due to the immense capital costs and constraints associated with doing so, and has a strong public element (politicians can just try to pass the costs on to air travelers).
These same discussions come up in Chicago, as fast food workers also have had some (small) demonstrations to try to raise the minimum wage to $15 / hour. While their campaign has sputtered out, it will likely re-surface and be championed by our governor.
The obvious difficulty with raising the minimum wage is that employers are not sitting ducks. There are many low wage workers in River North, for instance, working in bars, restaurants, cleaning services, and in various security related occupations (virtually every building has a set of doormen). If you doubled the minimum wage, for instance, all of these businesses and institutions would immediately embark on a host of labor saving initiatives and automation efforts. I am not an expert in these sorts of automation experts but can imagine people being replaced by computers, call centers handling service, and moving to self-service for customers in other instances. It is highly unlikely that they would just attempt to pass on the price increases and keep the same level of staffing; that would be economic suicide, especially with their competitors scrambling to reduce their labor expenses. Efforts that could not be automated would rise in price, which would likewise discourage consumption, until an equilibrium was reached.
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Posted in Big Government, Taxes | 9 Comments »
Posted by Carl from Chicago on 23rd November 2013 (All posts by Carl from Chicago)
Recently I was riding on the Metra, the commuter rail system that connects the suburbs to downtown Chicago. I picked up “On the Bi-Level”, the flyer that Metra management makes available to riders and was browsing through it when I came upon this innocuous sounding statement:
I certainly will not argue that Metra is without challenges. Perhaps the biggest challenge, and one that will impact many of our plans, is our needs for more capital money to invest in our system. We estimate Metra will need about $9.7 billion over the next decade to achieve a state of good repair on the system, and we expect to receive about a fourth of that amount from traditional federal and state sources. Riders need to understand that fares help us cover our operating costs but have never been a significant source for capital expenses – we must rely on Washington and Springfield for that funding.
Within the utility community there is a concept called “generation equity”. This implies that you need to spread the burden of replacement and renovation across the life cycle of users, rather than hitting them all on the first riders, such as in the case of a train line. On the other hand, you cannot just ignore ongoing capital costs and let the system run into ruin by paying the minimal upkeep costs every year.
In this article, Metra lays bare the facts that:
- Fare costs (riders) only “help” them cover their operating costs
- Funding from other sources (and debt) helps them cover the rest of their operating costs
- Then they rely on largess from the state or Federal governments for about a fourth of their capital costs
- And who knows where they are going to get the rest of the funds for capital replacement
In fact, it would be impossible for Metra to re-build the train lines that they have today in the current regulatory and legal environment. Permits, lawyers, litigation, politically favored contractors, and a welter of archaic tools and practices would make the costs impossibly high and the deadlines incredibly long. By “capital” costs, they are generally talking about replacing bridges, stations and sections of existing track rather than “true” expansion, although they do occasionally add some incremental lines or stations.
It is important to understand that things have gotten more EXPENSIVE but they haven’t gotten BETTER. The infrastructure that we take for granted might as well have been built by the ancient Egyptians given how herculean the task would be to replace them. Americans will never see another major dam built in the USA and likely few to no additional incremental nuclear or coal plants in the next 25 years. Even major transmission lines are going to be few and far between, which will only be built because it is absolutely necessary to get electricity to new population centers. This is all due to the layers of process and regulations and lawyers that we have overlaid atop the simplest tasks, and you can see the contrast when you go to China and see cities being built overnight.
At some point we are either going to need to radically re-structure how we build and pay for things or go to a completely private system where you pay for what you receive in terms of capacity, reliability and performance. States and cities that make it impossibly expensive to build and expand will inevitably suffer relative to other locations that are freer in terms of rules and regulations, unless (as is likely) the entire US is burdened with Federal regulations that make it impossible to escape this yoke.
Posted in Big Government, Chicagoania, Economics & Finance | 9 Comments »
Posted by Jonathan on 22nd November 2013 (All posts by Jonathan)
A great post by J. E. Dyer:
1. The problem with Obamacare is that it fundamentally changes the relationship of government to the people. The change is wholly malign. There is no way to operate the Obamacare system and also force the government to respect the people’s rights. Obamacare will, at every step, increase the risk at which government holds our rights.
We’re already seeing that with the roll-out, which has promptly violated the president’s best-known and most categorical promises – an indication of his complete lack of respect for us – as well as the people’s rights to decide what to do with their own property (in this case, their earnings), and to execute private contracts according to their own preferences.
What matters about Obamacare is that it has forced so many people to do so many things involuntarily. It will continue to do so. Obamacare is about government force, about limiting people’s options, and about constraining the people to do or not do certain things. That’s what government is about, which is why it’s what Obamacare is about. Government is incapable of being about anything else.
The public debate right now treats the Obamacare fiasco as if the central proposition is that taking over one-sixth of the economy is a technological challenge. The reality that matters is that government taking over the network of human decisions involved in “health care” is a moral outrage. Doing that is applying the model of regulatory force to a vast complex of human questions that have no universal, “right” answers. We might as well let the government tell us what to eat, what to wear, where to live, and what God to believe in – and if Obamacare stands, our government will eventually do just that.
Quite frankly, I think the advice to Republicans to simply stand silent and “let Obamacare implode” is foolish. There is no hope of Obamacare imploding. It’s not a malformed bomb, governed by physical principles. It’s a man-made political arrangement. Its defenders will keep moving the goalposts and changing the rules to keep it on the field. It will get all the overtime it needs. The only way to defeat Obamacare is to actually counter it with a plan and a principled argument.
Read the whole thing.
Posted in Big Government, Health Care, Medicine, Obama | 2 Comments »
Posted by Michael Kennedy on 19th November 2013 (All posts by Michael Kennedy)
UPDATE: The Wall Street Journal on how to fix the Obamacare crisis.
What can be done is Congress creating a new option in the form of a national health insurance charter under which insurers could design new low-cost policies free of mandated benefits imposed by ObamaCare and the 50 states that many of those losing their individual policies today surely would find attractive.
What’s the first thing the new nationally chartered insurers would do? Rush out cheap, high-deductible policies, allaying some of the resentment that the ObamaCare mandate provokes among the young, healthy and footloose affluent.
These folks could buy the minimalist coverage that (for various reasons) makes sense for them. They wouldn’t be forced to buy excessive coverage they don’t need to subsidize the old and sick.
Who knows ? Maybe Jenkins reads this blog. It’s so obvious that the solution should be apparent even to Democrats.
We are now learning that a large share of the Obamacare structure is still unbuilt. This is not the website but the guts of the system.
The revelation came out of questioning of Mr. Chao by Rep. Cory Gardner (R., Colo.). Gardner was trying to figure out how much of the IT infrastructure around the federal insurance exchange had been completed. “Well, how much do we have to build today, still? What do we need to build? 50 percent? 40 percent? 30 percent?” Chao replied, “I think it’s just an approximation—we’re probably sitting between 60 and 70 percent because we still have to build…”
Gardner replied, incredulously, “Wait, 60 or 70 percent that needs to be built, still?” Chao did not contradict Gardner, adding, “because we still have to build the payment systems to make payments to insurers in January.”
This is the guy who is the chief IT guy for CMS.
If the ability to pay the insurance companies is not yet written, how can anybody sign up ?
Gardner, a fourth time: “But the entire system is 60 to 70 percent away from being complete.” Chao: “There’s the back office systems, the accounting systems, the payment systems…they still need to be done.”
Gardner asked a fifth time: “Of those 60 to 70 percent of systems that are still being built, how are they going to be tested?”
The answer was the same way the rest was tested.
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Posted in Big Government, Health Care, Medicine, Obama, Politics, Systems Analysis | 8 Comments »
Posted by Michael Kennedy on 13th November 2013 (All posts by Michael Kennedy)
I don’t want to wear out my welcome with posts but this is a topic that has interested me for many years. When I retired from practice, I spent a year at Dartmouth trying to learn how we can improve health care delivery and reduce cost without reducing quality.
The Obamacare web site now has lost its happy photo of the Obamacare girl. The fact that she is a non-citizen seems appropriate. The web site is supposed to be fixed by November 30. Will that happen ? Well, maybe not.
On Friday, the man tasked with the digital fixes said the site “remains a long way from where it needs to be” as more and more problems emerge.
“As we put new fixes in, volume is increasing, exposing new storage capacity and software application issues,” Jeff Zients told reporters on a conference call.
And at Tuesday’s White House Press Briefing, Press Secretary Jay Carney again said there was “more work to be done” on repairing HealthCare.gov.
Carney, along with Zients and other administration officials, have repeatedly said the November 30 deadline is to get the health care website working for a “vast majority” of Americans looking to enroll in the Obamacare exchanges.
So, what happens December 2, the Monday after the “glitches” are fixed ? First, they won’t be fixed. The contractor that designed the program, not just the web site, has a terrible record.
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Posted in Advertising, Big Government, Civil Society, Economics & Finance, Health Care, Leftism, Medicine, Obama, Politics | 11 Comments »
Posted by Michael Kennedy on 8th November 2013 (All posts by Michael Kennedy)
Our health care system has been built up over the years in a jury-rigged, ramshackle fashion. Before World War II, there was very little health insurance and what there was often was the product of labor union contracts. The early years were concerned with accident insurance and workers compensation laws.
The American life insurance system was established in the mid-1700s. The earliest forms of health insurance, however, did not emerge until 1850, when the Franklin Health Assurance Company of Massachusetts began providing accident insurance, to cover injuries related to railroad and steamboat travel. From this, sickness insurance covering all kinds of illnesses and injuries soon evolved, but the first modern health insurance plans were not formed until 1930.
The Baylor program for school teachers was the first in 1929.
Medical insurance took stride in 1929 when Dr. Justin Ford Kimball, an administrator at Baylor University Hospital in Dallas, Texas, realized that many schoolteachers were not paying their medical bills. In response to this problem, he developed the Baylor Plan – teachers were to pay 50 cents per month in exchange for the guarantee that they could receive medical services for up to 21 days of any one year.
In those days, the concern was lost wages more than hospital care.
In 1939, the American Hospital Association (AHA) first used the name Blue Cross to designate health care plans that met their standards. These plans merged to form Blue Cross under the AHA in 1960. Considered nonprofit organizations, the Blue Cross plans were exempted from paying taxes, enabling them to maintain low premiums. Pre-paid plans covering physician and surgeon services, including the California Physicians’ Service in 1939, also emerged around this time. These physician-sponsored plans combined into Blue Shield in 1946 and Blue Cross and Blue Shield merged into one company in 1971.
The modern insurance plans were very recent in origin. I was there for much of it. The commercial insurers fought the status of Blue Cross, which was not required to have reserves. Blue Cross asserted that it promised hospital care, not payment, so reserves were not necessary.
The 1940s and 1950s also saw the proliferation of employee benefit plans, and the included health insurance packages became more and more comprehensive as strong unions negotiated for additional benefits. During the Second World War, companies competing for labor had limited ability to use wages to attract employees due to wartime wage controls, so they began to compete through health insurance packages. The companies’ healthcare expenses were exempted from income tax, and the resulting trend is largely responsible for the workplace’s present role as the main supplier of health insurance.
The war produced much of this as wage limitations were in force but fringe benefits, like health insurance, were permitted. A lot of this history is contained in Paul Starr’s book The Social Transformation of American Medicine.
From the first, commercial insurers focused on employer plans while Blue Cross and Blue Shield (which was founded by the California Medical Association to pay doctor bills) were individual plans.
In 1954, Social Security coverage included disability benefits for the first time, and in 1965, Medicare and Medicaid programs were introduced, in part because of the Democratic majority in Congress. In the 1970s and 1980s, more expensive medical technology and flaws in the health care system led to higher costs for health insurance companies. Responding to higher costs, employee benefit plans changed into managed care plans, and Health Maintenance Organizations (HMOs) emerged. Managed care plans are unique in that they involve a particular network of healthcare providers that have been verified for healthcare quality and that have agreements with the insurer about price and related issues. HMOs were originally primarily nonprofit, but they were quickly replaced by commercial interests, and managed care only succeeded in temporarily slowing the growth of healthcare costs.
Two major changes came in the 1970s. In 1978, the federal government established what were called Professional Standards Review Organizations or PSRO. All doctors had to receive training in how to do these reviews and it was immediately apparent that cost was the only consideration, not quality of care.
I decided to educate myself and took a course from an organization called “The American Board of Quality Assurance and Utilization Review Physicians. I took the exam and passed, then attended the annual meeting. This was about 1986. People I met at that meeting informed me that the exams were graded by throwing them up in the air. Any that landed balancing on one edge were flunked. Nonetheless, the experience was valuable because I could see what was coming.
I was president of the Orange County Medical Association that year and had served for eight years on the Commission on Legislation of the CMA, now called The Council on Legislation. This gave me an opportunity to meet many legislators, many state level and some federal. The impression they made on me was that few knew anything about medicine and most were not very intelligent.
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Posted in Big Government, Book Notes, Current Events, France, Germany, Health Care, Medicine, Politics | 19 Comments »
Posted by Michael Kennedy on 4th November 2013 (All posts by Michael Kennedy)
Obamacare debuted on October 1. It is now November 4 and the mess is worse. I have been posting about it, here, and here, and here, and even here.
The political left is trying very hard as can be seen here.
It’s kind of complicated so I will summarize. You are screwed !
There are accusations that insurance companies are using this to drop high risk subscribers. Maybe that is true but it is the consequence of ignorant people designing Obamacare. Did these guys ever set up a new business ? As Casey Stengel once said to the Mets , “”Can’t anybody here play this game?”
I guess not.
The New York Times has done what it can.
We are also told that “in all the furor, people forget how terrible many of the soon-to-be-abandoned policies were. Some had deductibles as high as $10,000 or $25,000 and required large co-pays after that, and some didn’t cover hospital care.” Never mind that we have seen cancellations of insurance policies with deductibles much lower, and customers forced to purchase replacement policies with higher deductibles, and with premium increases of 100%, if not higher.
Then there is this argument.
Why can’t people opt out of mental health coverage if there is not a reasonable chance that they will need that coverage? Why can’t they get mental health coverage when it is needed? After all, pre-existing conditions can no longer be denied, so in the event that mental health coverage is needed down the line, it can be obtained and the insurance companies cannot deny people who already have pre-existing mental health conditions. The Times assures us that over-coverage–and the high premiums that come with it–is “one price of moving toward universal coverage with comprehensive benefits.” They don’t explain why having unnecessary coverage is a step towards social justice, but as we saw from the beginning of this intelligence-insulting, repulsively dishonest op-ed, the New York Times is less about explaining, and more about covering up a disastrous rollout with disastrous policy consequences for the country.
Peggy Noonan, who has frustrated me with her obtuseness at times, gets it now.
Politically where are we right now, at this moment?
We have a huge piece of U.S. economic and social change that debuted a month ago as a program. The program dealt with something personal, even intimate: your health, the care of your body, the medicines you choose to take or procedures you get. It was hugely controversial from day one. It took all the political oxygen from the room. It failed to garner even one vote from the opposition when it was passed. It gave rise to a significant opposition movement, the town hall uprisings, which later produced the tea party. It caused unrest. In fact, it seemed not to answer a problem but cause it. I called ObamaCare, at the time of its passage, a catastrophic victory—one won at too great cost, with too much political bloodshed, and at the end what would you get? Barren terrain. A thing not worth fighting for.
So the program debuts and it’s a resounding, famous, fantastical flop. The first weeks of the news coverage are about how the websites don’t work, can you believe we paid for this, do you believe they had more than three years and produced this public joke of a program, this embarrassment?
She assumed that it wasn’t worth it if it worked !
The problem now is not the delivery system of the program, it’s the program itself. Not the computer screen but what’s inside the program. This is something you can’t get the IT guy in to fix.
They said if you liked your insurance you could keep your insurance—but that’s not true. It was never true! They said if you liked your doctor you could keep your doctor—but that’s not true. It was never true! They said they would cover everyone who needed it, and instead people who had coverage are losing it—millions of them! They said they would make insurance less expensive—but it’s more expensive! Premium shock, deductible shock. They said don’t worry, your health information will be secure, but instead the whole setup looks like a hacker’s holiday. Bad guys are apparently already going for your private information.
This is the worst that could be imagined.
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Posted in Big Government, Bioethics, Civil Society, Current Events, Health Care, Leftism, Medicine, Politics | 20 Comments »
Posted by David Foster on 2nd November 2013 (All posts by David Foster)
…said Richard Nixon, famously. Comes now Joe Biden, with “I am not a geek.” Specifically, in responding to questions about the problems with the Obamacare website and its supporting systems, Biden said:
“Neither (the president) or I are technology geeks and we assumed that it was up and ready to run.”
I don’t think the main problems with this implementation have to do with a lack of geekitude–most likely, there are many quite competent software developers working on this project–but rather with a lack of effective management. (And if there is a shortage of competent developers on the project, well, that’s a management issue, too, isn’t it.)
Real managers, real executives, don’t assume that important things will be ready when they’re supposed to be ready, and they aren’t satisfied with superficial answers to superficial questions, either. These effective leaders are people who have developed effective questioning skills so they can find out what is really going on. They establish open, non-fear-based organizational cultures so that people with concerns feel able to bring them forward. As I noted in my post about Benghazi (excusing failure by pleading incompetence), it is the responsiblity of an executive to establish an information and decision-flow architecture…including clear assignment of responsibilities…to ensure that the right things are seen and acted upon by the right people at the right time. Failure to do this..and to maintain and tune the system over time…will predictably result in catastrophes.
Later in the interview with Biden, the Vice President also said he didn’t know the specifics of why the website isn’t working, but that he was told the platform “is fine, but they have to change an awful lot of the inputs.”
“Look, all I know is they talk about 50,000 lines of this and this, I don’t know the technical reasons,” Biden said.
”So I don’t know, I wish I could tell you, that’s why I became a lawyer,”
A pretty flippant response to a serious situation. Slow Joe might not be able to understand the technical reasons for the failure, but he should be able–if he were competent at his job–to investigate and understand the management reasons for the failure.
Some of the questions that come to mind about this debacle are: How were the contractors selected? Why was it decided to have the government (CMS) act as prime contractor, rather than choosing an external company for that role? What do the contracts with the outside contractors actually specify, in terms of deliverables? What remedies are provided in the contracts for failures in delivery? If these remedies are inadequate, why did the government not require that they be more stringent? What coordination vehicles were there between the government group writing and interpreting the Obamacare regulations and the separate group that was attempting to act as prime contractor? Was there a single individual in charge? What project scheduling and tracking methods were employed throughout this effort?
These are not issues that are specific to software technology–the above questions are ones that any good executive, whether his background is in construction or in theater or in wholesale distribution, would understand that he should ask.
A United States President is not elected as a philosopher king; he is elected to run the executive departments of government and to faithfully execute the laws passed by Congress. The members of the present administration have repeatedly demonstrated their utter incompetence to perform these tasks.
An administration that seeks endless expansion of government’s role–but is at the same time completely incompetent at carrying out basic executive tasks–will drive expanding circles of chaos throughout ever-broader reaches of American society and the American economy.
Posted in Big Government, Health Care, Management, Tech | 23 Comments »
Posted by Michael Kennedy on 1st November 2013 (All posts by Michael Kennedy)
Today, Belmont club has a post, with a link to another blog post, that I think explain a lot of the Obamacare fiasco.
Fernandez begins with a discussion of Obama’s technique with favored columnists.
get him in an off-the-record setting with a small group of opinion columnists — the David Brooks and E.J. Dionne types — and he’ll talk for hours. …
“It’s not an accident who he invites: He reads the people that he thinks matter, and he really likes engaging those people,” said one reporter with knowledge of the meetings. “He reads people carefully — he has a columnist mentality — and he wants to win columnists over,” said another. …
These people are, like him, unsophisticated in technology. They are lawyers or journalists and the numbers of math and science courses represented in the room are few.
The other blog post is titled “Government is magic.”
Our technocracy is detached from competence. It’s not the technocracy of engineers, but of “thinkers” who read Malcolm Gladwell and Thomas Friedman and watch TED talks and savor the flavor of competence, without ever imbibing its substance.
These are the people who love Freakonomics, who enjoy all sorts of mental puzzles, who like to see an idea turned on its head, but who couldn’t fix a toaster.
This strikes me as a huge insight into why this administration doesn’t understand the trouble it is in.
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Posted in Big Government, Chicagoania, Education, Health Care, Human Behavior, Management, Politics, The Press | 14 Comments »
Posted by Trent Telenko on 30th October 2013 (All posts by Trent Telenko)
…and the Obama Administration is having a worse than “Hurricane Katrina” class credibility meltdown unseen in the West since Israeli Prime Minister Ehud Olmert’s political collapse in July 2008.
Health and Human Services Secretary Kathleen Sebelius made the outrageously untrue statement in Congressional hearings today about the Affordable Care Act (Obamacare) that: ‘The website has never crashed.’
As this Instapundit link makes clear that the split screen between her testimony and objective reality is well into the Muhammad Saeed al-Sahhaf AKA “Baghdad Bob” territory in terms of “Who are you going to believe, me? Or your lying eyes?”
The bottom line of Pres. Obama’s spokesman for his signature achievement as President getting laughed at as a Democratic Party version of “Baghdad Bob” is a “Pres. George W. Bush after Hurricane Katrina” moment.
The Obama Administration’s credibility on domestic policy is now as crippled as his foreign policy was after his Syrian Nerve Gas “Red Line” misadventure. It is all downhill from here.
The final fate of Israeli Prime Minister Ehud Olmert now awaits Pres. Obama.
Posted in America 3.0, Big Government, Current Events, Health Care | 10 Comments »
Posted by Sgt. Mom on 30th October 2013 (All posts by Sgt. Mom)
So, the main-line establishment GOP – apparently seeing the writing on the wall and determined to make themselves even more irrelevant – is now going to go all-out against Tea Party sympathetic candidates in the next elections. They have seen the enemy and they is us … that is, us small-government, strictly-Constitutionalist, fiscally-responsible, and free-market advocates, who were the means of ensuring certain outcomes in hotly contested races, and that Mitt Romney even had a ghost of a chance in the last round. Nope, obviously those partisans who feel that our government should be guided by strict adherence to the Constitution, not spend more than it takes in, and not be rick-rolled by crony capitalists and the lobbyists who do their bidding, are – to put it frankly – dangerous radicals who must be excised from the GOP organization.
Because, you know, it is so much better to be a meek and polite little opposition party occasionally allowed to dip a snout into the trough. Insisting on a degree of fiscal responsibility, adherence to the Constitution, and truly free markets is apparently just too dogmatic, too radical, and un-collegial within the rarified inside-the-beltway establishment GOP.
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Posted in Big Government, Civil Society, Conservatism, Politics, Tea Party | 29 Comments »
Posted by Michael Kennedy on 28th October 2013 (All posts by Michael Kennedy)
The latest meme I’ve noticed on the Obamacare implosion is that the Republicans are to blame. After all, it’s Romneycare, or it’s the idea of the Heritage Foundation.
In fact, the mandate was promoted by Hillary in 2008 and opposed by Obama. Of course, he doesn’t know much about what is going on so we can understand. In fact, the entire website fiasco, slipped by him, unnoticed.
President Barack Obama didn’t know of problems with the Affordable Care Act’s website — despite insurance companies’ complaints and the site’s crashing during a test run — until after its now well-documented abysmal launch, the nation’s health chief told CNN on Tuesday.
Of course he may just rewrite the code himself. After all, he is so talented that he is bored.
David Remnick, editor of The New Yorker, quotes White House senior adviser and longtime Obama friend Valerie Jarrett: “I think Barack knew that he had God-given talents that were extraordinary. He knows exactly how smart he is. … He knows how perceptive he is. He knows what a good reader of people he is. And he knows that he has the ability — the extraordinary, uncanny ability — to take a thousand different perspectives, digest them and make sense out of them, and I think that he has never really been challenged intellectually. … So what I sensed in him was not just a restless spirit but somebody with such extraordinary talents that had to be really taxed in order for him to be happy. … He’s been bored to death his whole life. He’s just too talented to do what ordinary people do.”
Oh well, at least we know if we really get in trouble, we have someone who can bail us out. I don’t doubt the comment about him never being challenged intellectually.
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Posted in Big Government, Civil Liberties, Health Care, Leftism, Obama, Politics | 3 Comments »
Posted by Jay Manifold on 23rd October 2013 (All posts by Jay Manifold)
My profession is much in the news at the moment, so I thought I would pass along such insights as I have from my career, mostly from a multibillion-dollar debacle which I and several thousand others worked on for a few years around the turn of the millennium. I will not name my employer, not that anyone with a passing familiarity with me doesn’t know who it is; nor will I name the project, although knowing the employer and the general timeframe will give you that pretty quickly too.
We spent, I believe, $4 billion, and garnered a total of 4,000 customers over the lifetime of the product, which was not aimed at large organizations which would be likely to spend millions on it, but at consumers and small businesses which would spend thousands on it, and that amount spread out over a period of several years. From an economic transparency standpoint, therefore, it would have been better to select 4,000 people at random around the country and cut them checks for $1 million apiece. Also much faster. But that wouldn’t have kept me and lots of others employed, learning whatever it is we learn from a colossally failed project.
So, a few things to keep in mind about a certain spectacularly problematic and topical IT effort:
- Large numbers of reasonably bright and very hard-working people, who have up until that point been creating significant wealth, can unite in a complete flop. Past performance is no guarantee, and all that. Because even reasonably bright, hard-working people can suffer from failures of imagination, tendencies to wishful thinking, and cultural failure in general.
- Morale has got to be rock-bottom for anybody with any degree of self-awareness working on this thing. My relevant moment was around the end of ’99 when it was announced, with great fanfare, at a large (200+ in attendance) meeting to review progress and next steps, that we had gotten a single order through the system. It had taken various people eight hours to finish the order. As of that date, we were projecting that we would be doing 1,600 orders a day in eight months. To get an idea of our actual peak rate, note the abovementioned cumulative figure of 4,000 over the multi-year lifespan of the project.
- Root cause analysis is all very well, but there are probably at least three or four fundamental problems, any one of which would have crippled the effort. As you may infer from the previous bullet point, back-office systems was one of them on that project. Others which were equally problematic included exposure to the software upgrade schedule of an irreplaceable vendor who was not at all beholden to us to produce anything by any particular date, and physical access to certain of our competitors’ facilities, which they were legally required to allow us into exactly two (2) days per year. See also “cultural failure,” above; most of us were residing and working in what is one of the most livable cities in the world in many ways, but Silicon Valley it ain’t.
- Not to overlook the obvious, there is a significant danger that the well-advertised difficulties of the website in question will become a smokescreen for the fundamental contradictions of the legislation itself. The overall program cannot work unless large numbers of people act in a counter-incentived (possibly not a word, but I’m groping for something analogous to “counterintuitive”) fashion which might politely be termed “selfless” – and do so in the near future. What we seem likely to hear, however, is that it would have worked if only certain IT architectural decisions had been better made.
This thing would be a case study for the next couple of decades if it weren’t going to be overshadowed by physically calamitous events, which I frankly expect. In another decade, Gen-X managers and Millennial line workers, inspired by Boomers, all of them much better at things than they are now, “will be in a position to guide the nation, and perhaps the world, across several painful thresholds,” to quote a relevant passage from Strauss and Howe. But getting there is going to be a matter of selection pressures, with plenty of casualties. The day will come when we long for a challenge as easy as reorganizing health care with a deadline a few weeks away.
Posted in Big Government, Book Notes, Commiserations, Current Events, Customer Service, Health Care, Internet, Law, Medicine, Personal Narrative, Politics, Predictions, Systems Analysis, Tech, USA | 6 Comments »
Posted by Michael Kennedy on 23rd October 2013 (All posts by Michael Kennedy)
UPDATE: I posted this as much for myself as for others to read. Today, Peggy Noonan weighs in. In case this is behind the paywall, here is her conclusion.
Even though it’s huge, and those who are reporting the story every day are, by and large, seasoned and have seen a few things, no one seems to know how it will end. Because it’s new territory. Does anyone believe the whole technological side can be fixed quickly? No. The president may eventually accept a brief delay in implementation—it is almost unbelievable that he will not—but does anyone think that the economics of the ACA, the content as set out and expressed on the sites, will flow smoothly, coherently, and fully satisfy the objectives of expanding health-insurance coverage while lowering its cost? You might believe that, but early reports of sticker shock, high deductibles and cancelled coverage are not promising. Does anyone think the president will back off and delay the program for enough time not only to get the technological side going but seriously improve the economics? No. So we’re not only in the middle of a political disaster, we’re in the middle of a mystery. What happens if this whole thing continues not to work? What do we do then?
This is the Titanic, folks.
I have watched the failed rollout of Obamacare this past three weeks and wondered where it was going. I have some suspicions. There is a lot of talk about delaying the individual mandate, as Obama did with the employer mandate. Megan McArdle has a post on this today. I think it is too late to fix or delay Obamacare.
With Nov. 1 storming toward us and the health insurance exchanges still not working, we face the daunting possibility that people may not be able to sign up for January, or maybe even for 2014. The possibility of a total breakdown — the dreaded insurance death spiral — is heading straight for us. The “wait and see if they can’t get it together” option no longer seems viable; we have to acknowledge that these problems are much more than little glitches, and figure out what to do about them.
She has already described the insurance death spiral. I think it is here.
Am I exaggerating? I know it sounds apocalyptic, but really, I’m not. As Yuval Levin has pointed out, what we’re experiencing now is the worst-case scenario for the insurance markets: It is not impossible to buy insurance, but merely very difficult. If it were impossible, then we could all just agree to move to Plan B. And if it were as easy as everyone expected, well, we’d see if the whole thing worked. But what we have now is a situation where only the extremely persistent can successfully complete an application. And who is likely to be extremely persistent?
Very sick people.
People between 55 and 65, the age band at which insurance is quite expensive. (I was surprised to find out that turning 40 doesn’t increase your premiums that much; the big boosts are in the 50s and 60s.)
Very poor people, who will be shunted to Medicaid (if their state has expanded it) or will probably go without insurance.
Levin points out: It is now increasingly obvious to them that this is simply not how things work, that building a website like this is a matter of exceedingly complex programming and not “design,” and that the problems that plague the federal exchanges (and some state exchanges) are much more severe and fundamental than anything they imagined possible. That doesn’t mean they can’t be fixed, of course, and perhaps even fixed relatively quickly, but it means that at the very least the opening weeks (and quite possibly months) of the Obamacare exchanges will be very different from what either the administration or its critics expected.
The insurance industry is already reacting to Obamacare and this will quickly become irreversible. This article is from September.
IBM, Time Warner, and now Walgreens have made headlines over the past two weeks by announcing that they plan to move retirees (IBM, Time Warner) and current employees (Walgreens) into private health insurance exchanges with defined contributions from employers.
The article calls it “maybe a good thing” but that supposes the exchanges will function. What if they don’t for a year or more ? What will health care look like in November 2014 ?
What happens next — as we’ve seen in states such as New York that have guaranteed issue, no ability to price to the customer’s health, and a generous mandated-benefits package — is that when the price increases hit, some of those who did buy insurance the first year reluctantly decide to drop it. Usually, those are the healthiest people. Which means that the average cost of treatment for the people remaining in the pool rises, because the average person in that pool is now sicker. So premiums go up again . . . until it’s so expensive to buy insurance that almost no one does.
Will that be apparent a year from now ? I’m sure the administration, and the Democrats, will do almost anything to avoid that. What can they do ? They’ve already ignored the law to delay the employer mandates. It’s too late to delay the individual mandate because individual policies are being cancelled right now.
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Posted in Big Government, Economics & Finance, Health Care, Leftism, Medicine, Politics, Predictions | 7 Comments »
Posted by Dan from Madison on 23rd October 2013 (All posts by Dan from Madison)
Today, the trial begins to determine if Detroit can enter chapter 9 bankruptcy. I have been trying to read a lot about what this means for the muni bond markets. As of right now, not much. But in the future, possibly a lot.
Here is a great piece on the subject and one that I will refer to through this post. It is written by the Chicago Fed, and explains what is going on, and how the Emergency Manager, Kevyn Orr, is going about trying to right the ship. The document is short, but somewhat dense. I had to read it three times and making some notes helped me understand it better.
After making this diagram, I joked to myself that this is probably a better flow chart understanding of the City of Detroit’s debt than any sort of financial documents the city of Detroit had prior to the EM taking over. But I digress.
After the issue of letting Detroit go Chapter 9 is resolved (I guess I don’t really see any other option) there are several interesting issues that may affect the muni bond market moving forward.
The debt looks like this, in simplified form:
Water and sewer debt – $6bb
General Obligation debt (limited tax backed and unlimited tax backed) – $1bb
Pension Obligation Certificates and associated swaps – $2.3bb
Pensions – $3.5bb
Other Post Employment Benefit Obligations – $5.7bb
First, Orr has decided that the only things that he will be treating as secured debt will be the water and sewer system bonds (backed by a pledge of revenues from the utility system) and the “double barreled” UTGO (unlimited tax general obligation) and LTGO (limited tax general obligation) bonds. Double barreled means that these certain bonds have separate income streams derived from the State of Michigan. This is significant because no General Obligation bond in the muni universe in any Chapter 9 filing has ever been impaired (with the exception of the disastrous Jefferson County, Alabama filing in 2011). Basically, Orr is offering ten cents on the dollar to EVERYONE that is not secured. This includes pensions, OPEB (other post employment benefit) plans, pension obligation certificates, swaps, and all the rest. In the middle of this, the fact that Orr treated the UTGO debt (which can be funded by unlimited property tax levies) just like all of the other debt is a first. This will also be settled in court, and will affect the perception of a lot of other cities’ GO debt as relates to the backing by property tax levies.
The next Big Deal to the muni bond universe is that there is a conflict between state and federal law as to if Orr can pound down the pensions and OPEBs. Law in the State of Michigan says he can’t but federal law has no issue with it. There is no law on record that addresses this and I am sure it will be a bitter battle to the end. If there is some sort of sweeping Tenth Amendment ruling that says that you can’t touch the pensions, this will affect the debt of a LOT of large cities that have similar state laws in place, such as Chicago, LA and others that have giant unfunded pension obligations. But to me, winning this in court is one thing for the pensions, actually getting the money out of the city of Detroit, that has none, is quite another. I am sure that they would at that time try to get preferred secure status over the utility bonds, but I don’t think that will really happen.
So far, the markets have just shrugged their shoulders at this whole affair, with the small exception of punishing the bonds slightly from places in the State of Michigan. I am sure that as this disaster winds its way through the courts, that this may change. Being an investor in the muni market, I will be keeping a close eye on how this plays out, as well as the soon to be crisis in Puerto Rico.
Cross posted at LITGM.
Posted in Big Government, Investment Journal | 7 Comments »
Posted by Jonathan on 15th October 2013 (All posts by Jonathan)
Watching CNBC. Bove says that because the stock market isn’t in a major sell-off the pols can’t get away with the kind of bad deal (my interpretation) that they want. He warns investors: “The only good strategy at the moment is to get out of the way. The politicians will get the panic they seek.”
CNBC spins this as: lawmakers need a reason to act to avoid gridlock. What Bove is actually saying is that there is a conflict of interest between the pols, particularly the Democrats, who want to bust the sequester and force the full implementation of Obamacare as scheduled, and American taxpayers. This is why Obama says, “this time I think Wall Street should be concerned”. Nice stock market you’ve got here, pity if something were to happen to it.
It appears that Obama is trying to do with the markets the same thing that he did with the national parks: make the government shutdown costly for ordinary Americans, whom he hopes will then find new cause to support him. The media will keep trying to reframe this crass partisan shakedown as Obama working to prevent disaster, but what he’s really doing is transparent to anyone who pays attention.
Posted in Big Government, Markets and Trading, Obama, Politics | 9 Comments »
Posted by Michael Kennedy on 14th October 2013 (All posts by Michael Kennedy)
I hadn’t thought of this situation, only because I didn’t have enough imagination to see that politics trumps all with Obama.
A growing consensus of IT experts, outside and inside the government, have figured out a principal reason why the website for Obamacare’s federally-sponsored insurance exchange is crashing. Healthcare.gov forces you to create an account and enter detailed personal information before you can start shopping. This, in turn, creates a massive traffic bottleneck, as the government verifies your information and decides whether or not you’re eligible for subsidies. HHS bureaucrats knew this would make the website run more slowly. But they were more afraid that letting people see the underlying cost of Obamacare’s insurance plans would scare people away.
This just didn’t occur to me. It should have. After all, what was Benghazi about ?
This political objective—masking the true underlying cost of Obamacare’s insurance plans—far outweighed the operational objective of making the federal website work properly. Think about it the other way around. If the “Affordable Care Act” truly did make health insurance more affordable, there would be no need to hide these prices from the public.
It is just amazing that the politicians know so little about technology (this was the guy with the Blackberry who made fun of McCain) that they did not understand that saying something doesn’t make it happen.
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Posted in Advertising, Big Government, Health Care, Obama, Organizational Analysis, Politics, Tech | 26 Comments »
Posted by TM Lutas on 10th October 2013 (All posts by TM Lutas)
Normal Legislative practice:
Vote for this must pass bill even though we’ve loaded it with pork barrel spending and changed a few bits of unrelated legislation into it. You’ll hurt the country worse if it doesn’t pass.
Tea Party terrorism:
Vote for this continuing resolution to fund the government while we change/defund the Affordable Care Act.
See the difference?
Cross posted on Flit-TM
Posted in Big Government, Politics, Tea Party | 2 Comments »
Posted by Michael Kennedy on 8th October 2013 (All posts by Michael Kennedy)
Since I am a Department of Defense contractor, examining military recruits. I expected that we would not be called to come in after Monday but I worked Tuesday and was told they expect no slowdown. Of course, maybe they won’t pay us but that is still in the future.
UPDATE: Today is the 8th and I have been called again for tomorrow.
So far, the shutdown seems to be working with the assistance of Democrat verbal and active mistakes. I always thought Gingrich fumbled the ball in 1995. This time, the GOP strategy of passing small directed bills to fund popular programs, seems to be working. Certainly the Democrats like Harry Reid and the National Park Service are helping all they can.
Washington politicians may have the time to debate how to fund the government, now that their pig-headedness has shut it down, but the nation’s World War II veterans don’t.
“World War II veterans are dying by the hundreds every day,” says Fred Yanow, of Northbrook, Ill., who spent 1942-45 in the Pacific theater as an Army private. “It’s a shame that they don’t care about World War II veterans when so many of them are dying off.” The 16 million men and women who wore their nation’s uniform in the so-called “Good War,” from 1941 to 1945, are leaving for eternal R&R at the rate of 650 a day.
Which Washington politicians ?
Harry Reid ?
Claire McCaskill had some clever comments.
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Posted in Big Government, Conservatism, Current Events, Obama, Political Philosophy | 25 Comments »
Posted by Trent Telenko on 6th October 2013 (All posts by Trent Telenko)
Secretary of Defense Hagal has recalled most Department of Defense (DoD) civilians back to work Monday. The legal reasons why were in the NY Times Sunday 6 Oct 2013 edition this morning.
The following is the fine print behind the “Mostly” –
“I expect us to be able to significantly reduce — but not eliminate — civilian furloughs under this process,” Mr. Hagel said.
Mr. Hagel warned that “many important activities remain curtailed while the shutdown goes on,” and he cited disruptions across the armed services.
Late Saturday, the Defense Department comptroller, Robert F. Hale, said that Mr. Hagel’s order would recall Pentagon employees who work in health care, family programs, commissaries and training or maintenance.
Additionally, the order will recall to work those civilian Pentagon employees whose jobs, if interrupted, would cause future problems for the military; those categories include contracting, logistics, supply and financial management.
While the numbers have not been finalized, officials estimated that only 10 percent of the furloughed employees would not be recalled, including Defense Department civilian employees who work in auditing, some in legislative and public affairs, and Pentagon employees who service other government agencies.
Most of DCMA will be back to work Monday, as will DFAS, DCAA and DLA.
The DoD Inspector General (I.G.), civilians in the various uniformed Service I.G. offices and DoD civilians involved in things like planning DoD assistance to disaster relief efforts are still going to stay home.
Posted in America 3.0, Big Government, Business, Civil Society, Current Events, Military Affairs, Miscellaneous | 3 Comments »
Posted by Jonathan on 5th October 2013 (All posts by Jonathan)
What was genuinely terrifying was the [Obamacare] rollout, which demonstrated unequivocally that the power elite had become too corrupt to even defend itself properly. The Obamacare exchanges are the single best measure of how competently they are handling foreign policy, national security and economic strategy.
Even though their political fortunes depended on it, the Obama administration was too politicized, inefficient, and compromised to even hire a competent contractor in time to roll it out half-decently. Just think of it. The same administration that brought you this monumental screwup is charge of protecting the world. And before the GOP crows, think this. That bunch of jokers must be more competent then the GOP since they beat them every time.
It was a “the Emperor has no clothes” moment for me. The power elite in Washington is inbred to the point of being genetically retarded. They believe their own propaganda now. They promote their own ridiculous mediocrities. Look at Anthony Weiner! Look at Bill Blasio, or Al Sharpton. Holy Smokes are we in trouble.
The reason its falling apart for them now is because it had to. How were they going to pay for Obamacare assuming they could get anyone to enrol on its ‘Exchanges’? Why are they raising the Debt Limit? To pay for their useless programs? And where are they going to get the money to pay for this debt?
Nobody has any answers. They probably haven’t even thought of the questions.
Read the whole post.
Posted in Big Government, Obama, Politics, Tea Party | 22 Comments »
Posted by Sgt. Mom on 4th October 2013 (All posts by Sgt. Mom)
For all the times that this federal government shutdown repeated fiscal game of chicken has been played – and I have been through this rodeo a number of times – it’s the sheer, petty spitefulness of this iteration which has raised my hackles. Barrycading off the open-air monuments along the Mall – including the WWII and Vietnam War monuments – blocking off scenic overlooks and the parking lots at Mt. Vernon, and forcing the closure of a number of otherwise self-supporting attractions which have the ill-luck to be on federally-owned property. I am glad to know that the governor of Wisconsin is telling the feds to go pound sand, and suspect that the governor of Arizona may be coming close to doing so, likewise. Meanwhile, the commissary at Andrews AFB is closed, and the golf course is open. Yes, I know that they are under different funding organizations, but the optics of this are really, really bad. If this were a Republican administration, I suspect we’d be hearing all about it, with video and stills of tearful and hungry military dependents all over the news, but then if my aunt had testicles, she would be my uncle. For all I know the junior enlisted troops are happily shopping at Wally-world and the generic shelves at the local grocery stores and not missing the commissary very much at all … but knowing that President Barrycade likes to golf there and takes every opportunity to do so … really, as I said – bad optics.
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Posted in Big Government, Business, Civil Society, Current Events, Customer Service, Health Care, North America, Obama, Politics | 6 Comments »
Posted by Dan from Madison on 3rd October 2013 (All posts by Dan from Madison)
Since the government is in a partial shutdown, I decided to very carefully keep track of the things that I miss. I have also been keen to keep tabs on my wife, to see if she has noticed anything in her circle that is closed, altered, inconveniences her, etc. She really hasn’t said anything as of yet (I am not asking or prompting, just listening to hear how her day is, waiting for her to say “such and so was closed”, or something of that nature).
The one thing so far that I have been blocked on is the NOAA radar website that I visit every day, to get some weather news. I am in the HVAC industry and as such it is important that I keep up on the weather. The NOAA site now redirects here, with an ominous message.
Of course, this is bullsh1t, as even though I don’t know how these things work, I imagine that the federal government pays its server fees far in advance, and this is just plain old punishment for the “regular folks”, just like closing the national parks is punishment for those who have planned vacations. The amount of money needed to keep our parks and websites like NOAA open is so tiny it is almost laughable when compared to the enormous benefits and waste that the government is involved in and it is simply a stick in the eye to us.
So that is it so far – one website down that has affected me so far. And it isn’t like there aren’t any other places where I can get the weather.
Posted in Big Government, Personal Narrative, Politics | 19 Comments »
Posted by Carl from Chicago on 28th September 2013 (All posts by Carl from Chicago)
I saw the movie “Inequality for All” starring Robert Reich, the former labor secretary for Bill Clinton and a very short guy (he’s 4′ 11″) who is pretty personable and funny. Reich uses his day job as a university professor while teaching a class to illustrate his thoughts on inequality from the movie.
In the movie he attempts to link:
- decline in average wages, in “real” terms (adjusted for inflation)
- growth in the highest wages (the top 1%)
- with various factors, including globalization, automation, declines in unions, and the financial bubble
- income inequality with lower marginal tax rates on the rich
There are certainly some concepts in here than anyone can agree with. It would be good if more people in the USA earned a higher salary, had better educations, and were more productive.
In the movie he mentions Warren Buffett, who famously pays a lower marginal tax rate than everyone else in his office, which is due to the fact that he receives long term capital gains and dividend income which are taxed at a lower rate. This is grist for the “raise taxes on the wealthy” discussion, as Buffett plays the likable old man. However, what he fails to mention is that Warren Buffett is the very candidate that the ESTATE TAX is designed to catch… rather than nickel and dime him every year on his assets as they rise in value (and cause friction and force him to sell them off to meet the tax bill), the estate tax would be levied on the super rich and it would effectively make up for the lower marginal rate during his lifetime by taxing increases on his wealth at a rate of 40%, for all amounts greater than about $5M. However, Warren Buffett is choosing to “evade” these taxes by setting up trusts and / or giving it away to his favorite causes; if Warren couldn’t avoid his estate tax through these loopholes (the same way you or I can’t avoid the payroll or sales taxes) then 40% of his $60B estate ($24B) would go to the Federal government, to fund the “investments in people” that Robert Reich is so passionate about. Funny that Reich didn’t call that out (didn’t follow his narrative, apparently).
Another element he fails to mention is the growth in illegal immigration in the USA, and the havoc that this causes with unskilled labor (as they are willing to work for far less). It is funny because two professions he specifically mentions, meat packing and short order cooks, are magnets for immigrants and their arrival is a direct cause for falling wages in these fields. Not surprisingly, Reich didn’t want to alienate a core Democratic group.
There is a rich “pillow manufacturer” who makes $10M+ / year who also describes how ridiculous it is in his opinion that his marginal rate isn’t higher. That same entrepreneur says that he invests in “funds of funds” and due to this he makes money without creating any jobs. That is quite a statement – what do you think those hedge funds invest in? They invest in commodities, stocks, real estate and debt (I’m assuming). When you are an investor and you provide money for stock and debt you are supporting companies that, in turn, hire staff. I can’t believe that Reich let this comment slide, but since it was what Reich wanted to hear, why interject?
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Posted in Academia, Big Government, Economics & Finance, Taxes | 27 Comments »