richh.com | a personal + political blog by rich halvorson

Free Health Care - Just like free public education!

Compared to any other developed nation, the US public schools are the worst by any measure -- we have lower graduation rates, worse test scores, and a higher pricetag than any of our 'peers.'  Every election year, we all bemoan the tragedy of American public education. Despite the fact that we already pay more per student than any other country, teacher unions always beg for more money and claim that the lack of money is the real problem.

Won't we see the same thing in our "free health care" system -- paying more, getting less, and with the wealthy opting out for their own system, leaving the middle class with lines, bureaucracy and inefficiency?  ... Won't we end up paying more and getting less?

Unfortunately, all the political power in the world cannot defy the laws of economic gravity. When people get something for 'free' they take it for granted. Offering a service on the open market creates information feedback for demand and supply as well as information regarding the equilibrium pricing of a given product or service. Whenever Uncle Sam tries to replace this mechanism as Big Brother, producers have no incentive to innovate or lower prices -- they can continue to bid prices higher against a market that has no built-in resistance mechanism.

Solving education, just like health care, has to do with creating an economic framework that makes the system directly accountable to the people it serves, and that provides a structure for incentives to reward the best and cheapest solutions. (ie, those that best serve the needs of their clients or patients)

Sorry Congress, Sorry Obama, all the votes in the world cannot buy an imagined economic utopia. We have to structure systems that comply with the economic laws of our world.

Sick Money

Our health care industry is $2.3 Trillion per year -- that's 16% of our $14 trillion GDP. ... About one dollar out of every six dollars goes towards health care. Apparently we are one sick country. While its true that we need to improve our overall health, the vital signs of our health care industry are problematic. According to the Congressional Budget Office, 30% of all spending was wasted:

"The CBO suggested that $700 billion of the approximately $2.3 trillion spent on health care in 2008 was wasted on treatments that did not improve health outcomes." 

The health care industry is taking us all for a ride through inefficiency, overpricing, and a complex payment system in which no one is accountable. A properly functioning system should put incentives on serving patients' needs most quickly and cost-effectively. On the contrary, our system is making money off of keeping us sick, and milking our wallets (and our nation's future) by driving up costs. Hospitals push costs higher, insurance companies have no incentive to keep them low, and they simply pass the pay hike on to employers -- creating a huge burden on businesses. 

Why should companies pay for our health care anyway? ... We could have a more efficient, cost-effective system if it weren't tied up with employment benefits. Let's cut the government largesse and regulation, and the twisted system that's poisoning our financial health to benefit its own bottom line.

Read more at:

http://www.technologyreview.com/computing/22852/

Economic 'Stimulus' is False Growth

When the US government creates policy that tries to shape the economy, trillions of dollars can move from certain industries towards others. The problem is that any growth in jobs or GDP based on these policies is bound to be false demand leading to apparent growth -- but both will fall away as soon as the funding stream ends.

Over the last decade, "pro-housing" policies pushed literally trillions of dollars towards the real estate industry. What it created was a huge malinvestment of capital -- overbuilding and overpricing of homes and commercial real estate. The policies created false demand that was not sustainable by the underlying real demand for homes and properties.

Similarly, wherever Uncle Sam points his finger next -- in the form of a nearly $1 trillion stimulus package -- any jobs or 'growth' created will be temporary, and not sustainable. As soon as good ol' Uncle stops footing the bill, those jobs will disappear, the economy will sag again, and we will be looking for our next economic fix.

Why do we continue to turn to various forms of "economic steroids" that create the impression of growth instead of the real thing? .... Their effects cannot last, and every dose weakends the dollar and our nation's ability to grow and succeed in a high-speed global economy.

Hello, inflation.

While we are told by official numbers that annual inflation hovers somewhere between 3% to 4%, prices on everything seem to by jumping at that rate monthly or daily. A recent report on CNN morning news relating to global food shortages found annual inflation on certain critical items to be as so:

• Flour    37%
• Eggs    35%
• Milk     23%
• Sugar   16%

On these four items, that's an average of 27.75% annual inflation. Meanwhile, if you take your dollars abroad to Europe - or even Asia, South America or Africa - they're growing weaker by the day.

When I lived in Colombia in 2003, the exchange was US $1.00 to 3,000 pesos. As of today, it's down to 1,781 pesos per dollar. That's more than a 40% loss in the dollar's value against the peso in only five years. During the same period, we've lost nearly 30% against the Korean Won and the Euro.

Somehow we're told that a weak value is "good for exports". Yet exports are measured as physical goods -- those often produced by low-skill labor in factories. To continue our growth, progress and advancement as an economy, we should be exporting knowledge and consulting, technology, business management skills, intellectual property, music and film, and other goods that often aren't tracked as an "export" but that sustain and grow our advanced knowledge economy, rather than our basic labor economy. While I'm not against the latter, we will see that as a nation, its growth is a symptom of economic contraction rather than growth and progress. It may appear to be good for one sector, but what it truly means is that we're failing to educate ourselves and stay on the cutting edge of the global economy.

With a weak dollar, Americans can't travel, our own domestic prices are rising rapidly, and our economy continues to teeter on an even larger looming collapse. It would appear that our real inflation rate is closer to 8% to 10% against other currencies, and perhaps even higher when considered as a CPI (consumer price index) function. Despite the common sense we see in front of our faces, the official numbers still tell us that inflation is low and will remain so.

Finally, the only price that seems to be falling is housing. The one area that we all told one another to invest - in our homes - now appears to be a significant liability. Why did we all buy too much house? Because the Fed made it cheap to get loans by holding interest rates down -- the real level of risk was hidden behind an artificially low interest rate.

And now to deepen and extend the crisis even further, we are making our dollar still cheaper -- the Fed continues to push rates downward. Heck, we're even giving the dollar away -- look for a few Benjamins in millions of mailboxes across the nation. And that's our sorry excuse for a solution?

If we'd stop giving money away, perhaps real inflation wouldn't be so high -- and the economic "cycle" wouldn't be so deep or protracted. Everyone keep your hands and feet inside the boat.

Euros Accepted in New York City

With Ellis Island and the Statue of Liberty, New York City is a global symbol of the American Dream. But, it is no longer so friendly to the falling US Dollar.

Merchants in New York City are beginning to accept Euros and other currencies besides the dollar. What have we done to our precious currency that it has devalued so much, and weakened so much that we will take other currencies in lieu of our own?

There was a time when the US Dollar was the most stable currency in the world. Now, we're on a significant downward slide that weakens the dollar against everyone else. This is a direct result of overspending and overprinting our money.

Sadly, many people view a 'weak dollar' as a benefit because it 'boosts our exports'. The reality is that a weaker dollar is a weaker economy -- the import-export issue hides the fact that a weaker dollar and weaker economy means that we are likely producing lower-value goods rather than higher-value ideas and innovations.

The trend toward cheap money continues because we treat money as cheap -- we print dollars like nobody's business, artificially lower interest rates, give easy credit, and then overspend on all fronts. If we can reverse this trend, treat the dollar as valuable, we can stabilize our currency and some of the central levers of our economy.

Reuters: Euros Accepted signs pop up in NYC

Dear Congress - Please keep my $500 check.

Looks like Congress just approved a $168 billion "economic stimulus" package. The reality is that this policy will only further bankrupt our country and devalue our currency. The whole reason we are in this economic crisis is because of overspending and more overspending. That's the cause -- giving us more of the same is surely not the cure.

If we want a prosperous and stable future, we need to produce before we consume, not the other way around. What we have learned to do on a personal and political level, is consuming first and consuming more as a path to economic growth -- well, that's just completely backwards.

To combat our economic malaise, we need to figure out how to maximize our national production, not our national consumption. A higher valued production is what makes a family wealthy, and it's what makes a nation wealthy.

Please, President Bush, keep my $500 check. I care too much about the future of our country to spend us further into national ruin. Whatever economic blip this further spending might create only prolongs and compounds the size of the 'correction' ahead, and further devalues our currency because we simply can't pay our debts, and we just keep printing more of that green papery stuff.

If you do send a check -- please send it in Euros. Thanks.

The US Real Estate Market

You need a $2.5 million home mortgage... 

             Bad credit? No problem!
             No income? No problem!

After buying up homes under this mantra for years, bidding up prices against one another, and telling ourselves it's an "investment," the housing market is on a scary precipice. The early fallout of the US subprime (ie, 'bad loans') housing market is already causing ripple effects around the globe, in prime loans and other debt markets.

Does this all sound arcane? Basically -- we've spent far more than we're producing, and the jig is up.
Some conservative observers worry about a 'correction' or 'recession'. Others foresee a full-fledged 'depression' spreading across the US economy. By nature, I'm very optimistic, and I don't want to see a depression. But let's just say, after years of overspending, there are dark clouds on the horizon.

Hand Over Your Children

In the US today, most families - about 90% - have their children in public schools. For suburbanites with clean streets and wholesome neighborhoods, this isn't a problem -- their nearby public school is often as good or better than the local private school.  This phenomenon occurs because about 40% of American families practice a form of school choice known as "residential choice" -- they choose where they will live based on good schools for their kids. This phenomenon results in deeper and wider divides along the lines of income, race and opportunity. For the 60% of Americans unable to participate in "residential choice" (ie, they can't afford the crisp stucco home in the shiny new neighborhood), money moves out, poverty moves in, and schools often become a homogeneous population of lower-income and minority students. I witnessed this phenomenon up-close as a teacher -- where in my 'lower-income school' (why should a free country have 'lower income' or 'inner city' schools?  -- do we purposefully segregate the disadvantaged? does our system further create and reinforce ghettos? yes.)  over 95% of students were from families of extremely limited means -- and about the same number of ethnic or minority background. The reason for this segregated system? Our government tells children where they must attend schools. Many (or most) of the parents of my students were desperate to get a good education for their children, but they found themselves trapped in a terrible school simply because they lived in a poor neighborhood. When we no longer attach schooling and housing, we will stop creating a sharp ghetto-suburban divide along school district boundaries. Why not hold schools accountable to parents rather than to Washington bureaucrats?  The excellent book Feds in the Classroom (pictured above) gives a historical autopsy of our tragically failed school system. Sadly, when the government says "hand over your children" to the 60% of American families who cannot practice 'residential choice', they have little choice but to comply -- committing their precious little ones to a system that knows it has failed, is failing, and will continue to fail them.

What is Global Fast?

Beginning this year, Ash Wednesday comes with a new twist – millions fasting not only for personal piety, but to create global change.

One American giving up one day’s food cost can provide clean water for one person in Ethiopia for ten years. Ten Americans giving up their day’s food expense can provide a micro-loan to help a struggling family start a business in the Philippines – a business that will help provide food, employment, and shelter for years

Global Fast is about personal charity as collective action – giving of ourselves for others – on a large scale.

( view full article >> )

Immigration and Poverty

With 500,000 immigrants and supporters marching in Los Angeles, immigration quickly arrives at the fore of the week's national dialogue. Why do immigrants come to America? Not because they're bored of their own countries or cultures. Most immigrants wish they could stay in their own countries, but are worn down by oppressive poverty and a dearth of opportunity to feed, clothe, house, and care for a family. It's the tension between poverty and opportunity that drives so many to seek entry at our shores by any means possible.

Why do we have so many immigrants wanting to come and stay here? Opportunity. Although we are far from perfect, it's clear that United States provides opportunity for employment, advancement, enrichment, and freedom beyond perhaps any other nation on earth.

What can we do? The answers for how to handle immigration--legal and illegal--are murky at best. One thing, however, is strikingly evident: We can promote foreign policies and global economics that create prosperity in other nations. If other countries provided similar opportunities to our own, there would be no such need to arrive poor and desperate at American shores.

All nations that foster good policy and sound economics can expand the American Dream beyond our borders to be the universal ideal it should be -- freedom, opportunity, and prosperity for our entire global family.