I saw this interesting story on Yahoo today, Obama Air Force Nomination Reeks of Politics, by Teri Heisler. It talked about the careers of 3 different female USAF flag officers: Lt Gen(P) Wolfenbarger, Maj Gen Masiello, and Lt Gen(ret) Gabreski. Wolfenbarger made the news because she will become USAF's first female 4-star. Heisler decried the selection because she thinks that the other two officers were more qualified, worthy, of being the first USAF female general.
The 3 generals had very distinct career paths: Wolfenbarger, an Academy grad, is a developmental engineer. Masiello is a contracting officer. And Gabreski is a maintenance officer with significant command and operational experience. Masiello deployed to Iraq once, while Gabreski served a tour in Korea. Wolfenbarger stayed CONUS the whole time, but she did have a GWOT Svc Medal. [Couldn't find where she got it from.] Heisler thought that Masiello and Gabreski are better role models because of their deployments and operational experience for an Air Force at war.
However, I think USAF went with the right choice with Wolfenbarger, both as a female role model and as AFMC Commander. Wolfenbarger is an engineer, which is exactly the raison d'etre of AFMC: to engineer weapons for the USAF. If Gabreski was in the Army, then she would have made 4-star because the Army likes operational experience. But the USAF needs an engineer to manage its technical programs, so Wolfenbarger got the nod.
Moreover, as a female engineer, Wolfenbarger is the right STEM role model. It's somewhat ironic that Heisler, who just wrote about "Women in STEM Careers", turns right back around and decries a female engineer making ranks.
[On the other hand, the current AFMC Commander, Gen Hoffman, a male, was a fighter pilot and an engineer. So when USAF female pilots come of age, we can expect AFMC commanders to stay pilot/engineers. Gabreski was operational, just not the right kind of operational.]
Showing posts with label obama. Show all posts
Showing posts with label obama. Show all posts
Tuesday, February 7, 2012
Friday, July 8, 2011
More Real Estate Shadow Inventory
NPR had a story yesterday detailing the cost Fannie Mae is incurring, to keep up with the 150,000 homes it owns due to owner mortgage default.
Well, hell, you might say, why not just go ahead and sell them, so we don't have to pay for their upkeep? Without getting into the financial wisdom of selling now or later, I will simply present this as evidence that the housing market is weighed down by all that shadow inventory. Everyone is waiting for this inventory to come to the market. With the shadow inventory staying in the shadows, the market cannot adequately price the houses on the market now. So buyers are holding out for more certainty. Fannie Mae's action is preventing the market from hitting bottom.
Well, hell, you might say, why not just go ahead and sell them, so we don't have to pay for their upkeep? Without getting into the financial wisdom of selling now or later, I will simply present this as evidence that the housing market is weighed down by all that shadow inventory. Everyone is waiting for this inventory to come to the market. With the shadow inventory staying in the shadows, the market cannot adequately price the houses on the market now. So buyers are holding out for more certainty. Fannie Mae's action is preventing the market from hitting bottom.
Wednesday, June 22, 2011
Obama And Banks Ran Out of Time
I just want to emphasize that the Obama Administration and the banking industry has run out of time, referencing my previous post where I said that they were hoping to wait out the recession. They were hoping that, by delaying the foreclosure process, they could soft land the housing market and the economy, and rebound before the banking industry and consumers run out of money. Well, as I said yesterday, the consumers have definitely run out of savings. The Greek debt drama could soon drain the banks dry, too. So yes, they have run out of time. We are now entering the second dip of the classic depression.
Tuesday, June 21, 2011
Liberal Economists' Blind Spots
Derek Thompson of the Atlantic asked, "How did 2011 go so wrong?" He could not understand why the year started out so well, with all of the economic indicators pointing toward a recovery, yet 6 months later we are stalling.
Well, he came pretty close to the answer himself: Housing. He himself said that investment (for the top 10% of Americans mostly) plus housing constitutes the savings for American households. Therefore the housing collapse, which we are still sorting through, dampens the demand. And then, at the very end, Thompson concluded, well, "The hardest thing for Washington to understand is that not every economic question can be solved in Washington."
What Thompson has conveniently forgotten is that we are still sorting through the housing wreckage because of the Bush/Obama administration's housing policy. At the beginning of the crisis in 2008/9, the presidents concluded that a "soft landing" is our top goal. Therefore, they slowed down the foreclosure process. The banks themselves, fearful of exposing their own liabilities and thus going out of business, went along. The TARP program allowed the administration to dictate foreclosure policy and pace for awhile. The Making Home Affordable program of mortgage modification gave many people the false hope of staying in their homes, and thus exhausting their savings trying to save that sinking ship of their houses. The search for foreclosure scapegoats ended up at the robo-signing title agents, which does not change the material facts behind the foreclosure cases, but simply delaying the process.
The federal government has succeeded in their economic policy of soft landing housing. The economic cost of that priority is the current malaise we're going through. We have yet to find the bottom of the housing market. There is still a huge shadow inventory in the foreclosure pipeline. The administration's TARP funding prevented the banks from running out of cash, yet the banks' safety net allowed the banks to hold onto their foreclosed inventory, hoping that the housing prices will come back up before they run out of cash, thus allowing them to still make a profit. So consumers' savings are tied up in their houses. Too many people have exhausted their savings trying to stay in their untenable houses. The rest are waiting for the market to recover before realizing their real estate savings. The real estate market is sucking the liquidity out of the market, preventing a consumer demand-driven economic recovery.
See, in a "normal" recession, housing market starts crashing. People start losing jobs and have to stop paying mortgages. They either arrange a short-sale or foreclosure. The banks start accumulating properties instead of the revenue streams of mortgage payments. Thus banks quickly runs into their own liquidity crises. Even though the rational banker wants to hold onto the properties as long as possible, to recover the investment, the liquidity crises forces him to offload properties. The glut of housing supply is quickly realized, allowing the real estate market to discover the bottom quickly. At this time, the people with cash move in. They buy the cheap houses with their savings, releasing the cash into the economy. The discovery of the bottom allows business owners to start planning for the recovery. The additional cash in the economy greases both demand and investment. Voila, recovery.
An additional factor is that, as people lose their jobs and got foreclosed on, they move to greener pastures. The liberated labor move to where jobs are, satisfying the labor needs and increasing the monetary velocity of these growth areas. The result feeds back into the overall recovery and we get onto the peaks again.
Whereas, because of the delay in the foreclosure process, we have too many people holding on in the Rust Belt (And California), instead of moving to the Sun Belt where the jobs are. This exacerbates the unemployment problem, and decreases the monetary velocity in the Sun Belt. [With less labor in the Sun Belt, employers have to bid up wages. People with higher income have lower velocity. Thus, lower monetary velocity for everybody, and slowing down recovery.]
So yes, the government can do plenty to improve the economy. They can start by encouraging people to move to where the jobs are, and speed up the foreclosure process.
Oh, and we are starting to see the voices saying that a default on Treasuries is better than austerity measures. If that happens, we are going to drag the world economy down with us. The only thing standing in the way is the Republican House. Let's hope that they hold the line.
Well, he came pretty close to the answer himself: Housing. He himself said that investment (for the top 10% of Americans mostly) plus housing constitutes the savings for American households. Therefore the housing collapse, which we are still sorting through, dampens the demand. And then, at the very end, Thompson concluded, well, "The hardest thing for Washington to understand is that not every economic question can be solved in Washington."
What Thompson has conveniently forgotten is that we are still sorting through the housing wreckage because of the Bush/Obama administration's housing policy. At the beginning of the crisis in 2008/9, the presidents concluded that a "soft landing" is our top goal. Therefore, they slowed down the foreclosure process. The banks themselves, fearful of exposing their own liabilities and thus going out of business, went along. The TARP program allowed the administration to dictate foreclosure policy and pace for awhile. The Making Home Affordable program of mortgage modification gave many people the false hope of staying in their homes, and thus exhausting their savings trying to save that sinking ship of their houses. The search for foreclosure scapegoats ended up at the robo-signing title agents, which does not change the material facts behind the foreclosure cases, but simply delaying the process.
The federal government has succeeded in their economic policy of soft landing housing. The economic cost of that priority is the current malaise we're going through. We have yet to find the bottom of the housing market. There is still a huge shadow inventory in the foreclosure pipeline. The administration's TARP funding prevented the banks from running out of cash, yet the banks' safety net allowed the banks to hold onto their foreclosed inventory, hoping that the housing prices will come back up before they run out of cash, thus allowing them to still make a profit. So consumers' savings are tied up in their houses. Too many people have exhausted their savings trying to stay in their untenable houses. The rest are waiting for the market to recover before realizing their real estate savings. The real estate market is sucking the liquidity out of the market, preventing a consumer demand-driven economic recovery.
See, in a "normal" recession, housing market starts crashing. People start losing jobs and have to stop paying mortgages. They either arrange a short-sale or foreclosure. The banks start accumulating properties instead of the revenue streams of mortgage payments. Thus banks quickly runs into their own liquidity crises. Even though the rational banker wants to hold onto the properties as long as possible, to recover the investment, the liquidity crises forces him to offload properties. The glut of housing supply is quickly realized, allowing the real estate market to discover the bottom quickly. At this time, the people with cash move in. They buy the cheap houses with their savings, releasing the cash into the economy. The discovery of the bottom allows business owners to start planning for the recovery. The additional cash in the economy greases both demand and investment. Voila, recovery.
An additional factor is that, as people lose their jobs and got foreclosed on, they move to greener pastures. The liberated labor move to where jobs are, satisfying the labor needs and increasing the monetary velocity of these growth areas. The result feeds back into the overall recovery and we get onto the peaks again.
Whereas, because of the delay in the foreclosure process, we have too many people holding on in the Rust Belt (And California), instead of moving to the Sun Belt where the jobs are. This exacerbates the unemployment problem, and decreases the monetary velocity in the Sun Belt. [With less labor in the Sun Belt, employers have to bid up wages. People with higher income have lower velocity. Thus, lower monetary velocity for everybody, and slowing down recovery.]
So yes, the government can do plenty to improve the economy. They can start by encouraging people to move to where the jobs are, and speed up the foreclosure process.
Oh, and we are starting to see the voices saying that a default on Treasuries is better than austerity measures. If that happens, we are going to drag the world economy down with us. The only thing standing in the way is the Republican House. Let's hope that they hold the line.
Thursday, March 31, 2011
Libya and Nation-State Paradigm
Well, the Obama administration sure did dodge a big fat bullet there w/ the Libya crisis. Before the passage of the UN Security Council resolution, the Benghazi people did everybody a favor by declaring independence from the Qaddafi regime. With a nominally state structure, we are now able to negotiate with Benghazi for aid and assistance. The US didn't have to figure out how to deal with a non-state actor.
But the question remains un-resolved. If Benghazi did not declare independence, could the US provide overt assistance such as a publicized shipment of ammunition? Like I said earlier, the CIA could provide covert assistance when Obama signs a presidential finding, but not the Defense Department. The weapon export regulatory regime (ITAR) requires a specific, drawn-out process to make this overt assistance happen. With this drawn out process, Congress would get involved, slowing things down further.
Maybe this Libya adventure will provide the legislative impetus for Congress to start working this problem.
But the question remains un-resolved. If Benghazi did not declare independence, could the US provide overt assistance such as a publicized shipment of ammunition? Like I said earlier, the CIA could provide covert assistance when Obama signs a presidential finding, but not the Defense Department. The weapon export regulatory regime (ITAR) requires a specific, drawn-out process to make this overt assistance happen. With this drawn out process, Congress would get involved, slowing things down further.
Maybe this Libya adventure will provide the legislative impetus for Congress to start working this problem.
Friday, May 21, 2010
Mexico: Aztecs vs Latins
Following up on my previous article on Mexico, I want to add something else I've been thinking on for the last few days: the cultural landscape of Mexico. Specifically, the mixing of Aztec and Latin culture.
As I've mentioned Prof Carroll Quigley several times, his theory of civilization re-generations have changed my view of events. Spain's colonial period has layered a Latin veneer over Latin America. The Latin-Mediterranean-Spanish culture meshes fairly well with Hispanic sensibilities, so it may sometimes be difficult to detect any leftover signs from the native civilizations like Maya or Aztec. There have been Indian revolts throughout Latin American history, reflecting the continuing undercurrent of native alienation. [Recent examples include FARC, Shining Path, basically all of the land-reform movements.]
Communism had co-opted native discontent during the 20th century, but the ending of the Cold War and the narco economy has fueled an alternative model. The narco economy is serving as the instrument of the society, and the vestiges of the native culture serving as the glues of the society.
The narco death cult, Santa Muerte, may be a synthesis of Aztec death cults and Catholicism. Its veneration of death hearkens back to Aztec times. The narco industry promotes this alternative religion to increase cohesion. This definitely merits a deeper look into the cultural mixing and gestation in Mexico and the rest of Latin America.
One more note on Mexican culture: The Mexican elites (Spanish descendants) have been afraid of the Indian peasants throughout history. The current gun ban (only people with connection or bribes can get a gun permit, to buy guns of NON-military caliber like .380acp) is a symptom of that. The lack of economic reform and exporting of economic refugees into the US is another. [Holding up the status quo for the elites and send the suffering poor to the US.] The on-going Indian revolts in southern Mexico constantly reminds the elites of this problem.
One reason why the drug cartels in Mexico have gotten so powerful is because of elite snobbishness. The drug cartels arose from the Indian peasantry and gray economy. The elites saw the cartels as country bumpkins with more money than they know what to do with. The elites ignored the cartels because they're a Yankee problem, but also because they didn't expect these rednecks to start making trouble in the upper class neighborhoods. Thus they were surprised by the scale of the cartel problem today.
As I've mentioned Prof Carroll Quigley several times, his theory of civilization re-generations have changed my view of events. Spain's colonial period has layered a Latin veneer over Latin America. The Latin-Mediterranean-Spanish culture meshes fairly well with Hispanic sensibilities, so it may sometimes be difficult to detect any leftover signs from the native civilizations like Maya or Aztec. There have been Indian revolts throughout Latin American history, reflecting the continuing undercurrent of native alienation. [Recent examples include FARC, Shining Path, basically all of the land-reform movements.]
Communism had co-opted native discontent during the 20th century, but the ending of the Cold War and the narco economy has fueled an alternative model. The narco economy is serving as the instrument of the society, and the vestiges of the native culture serving as the glues of the society.
The narco death cult, Santa Muerte, may be a synthesis of Aztec death cults and Catholicism. Its veneration of death hearkens back to Aztec times. The narco industry promotes this alternative religion to increase cohesion. This definitely merits a deeper look into the cultural mixing and gestation in Mexico and the rest of Latin America.
One more note on Mexican culture: The Mexican elites (Spanish descendants) have been afraid of the Indian peasants throughout history. The current gun ban (only people with connection or bribes can get a gun permit, to buy guns of NON-military caliber like .380acp) is a symptom of that. The lack of economic reform and exporting of economic refugees into the US is another. [Holding up the status quo for the elites and send the suffering poor to the US.] The on-going Indian revolts in southern Mexico constantly reminds the elites of this problem.
One reason why the drug cartels in Mexico have gotten so powerful is because of elite snobbishness. The drug cartels arose from the Indian peasantry and gray economy. The elites saw the cartels as country bumpkins with more money than they know what to do with. The elites ignored the cartels because they're a Yankee problem, but also because they didn't expect these rednecks to start making trouble in the upper class neighborhoods. Thus they were surprised by the scale of the cartel problem today.
Thursday, May 20, 2010
Mexican Blame Game Re-Run
Now that Mexican President Calderon is here in the US, the anti-gun lobby and Mexican government are re-newing their calls for American gun prohibition. [I've previously covered the Mexican narco guns blame game here.]
They talk about explosive bullets and full-auto machine guns, implied to be US-origin, deployed by the Mexican narcos. Well, I'd like to have explosive bullets, too. Wish I can buy it from my neighborhood gunshop here in the states.
They talk about explosive bullets and full-auto machine guns, implied to be US-origin, deployed by the Mexican narcos. Well, I'd like to have explosive bullets, too. Wish I can buy it from my neighborhood gunshop here in the states.
The Newsweek article mentioned, at the very end, that the narcos likely got the grenades and machine guns from Mexican military and police inventory, in addition to supplies from China, Europe, and Brazil. Well, great, then why are we talking about the US? And if the Mexican army is a prime weapon supplier of the narco-cartels, then it's intuitively obvious we should limit what we give to them, lest it ending up with the narcos.
Admittedly, the Mexican narcos are probably buying pistols through American dealers, in small quantities. Pistols have always been a prestige weapon worldwide, and their concealability make them both desirable and more smuggle-able. American truck screening on the border would help limit the flow. If Mexican smugglers can still get people and drugs into the US, though, we have little hope of stopping the flow of pistols into Mexico.
Therefore, a border fence is an eminently sensible idea in limiting the flow of weapons. If Mexico is serious about choking off the narco-cartels. That Calderone has not advocated a border fence shows that he cares more about sending people north than stopping drug violence.
PS: Edited for links and tags.
Wednesday, May 19, 2010
More Signs of Housing Glut
The New York Times had an interesting article on the state of the housing market. In Nevada, [and some in California, Arizona, and Florida], home builders are doing a great business selling new houses, even as inventory of already-built houses loom large in the local markets. This is bad, because it means that the real estate market has yet to hit the bottom.
http://www.nytimes.com/2010/05/16/business/16builder.html?src=me&ref=business
Generally, new houses cost more than already-built houses. New houses are new, and has not depreciated. Everything works and has the "new" premium [supposedly]. The owner has a whiter canvas to play with. Only a good school district can keep up the value of already-built houses.
The article offered a couple of reasons why new houses are selling like hotcakes. 1. the recession has decreased the cost of both labor and material, giving the builders a much bigger margin to discount prices. 2. the existing homes are stuck in the foreclosure limbo: underwater owners cannot sell at a loss without bank agreement, and banks are not eager to realize their losses. So the existing inventory end up priced higher than the new inventory. In addition [not mentioned in the article], business credit lines are flowing again, following the credit freeze of 2009. The construction business greatly depend upon lines of credit to finance their operations. The re-opened taps allowed the builders to meet the pent-up demands for new construction.
Overall, this is bad on two levels:
1. Obviously, we still have lots of room at the bottom. Obama [and American people generally] are playing a dangerous game, trying to out-wait the recession. The mortgage modification program is only succeeding at buying time. We have not solved the fundamental problem of excess supply.
2. In addition, with so much inventory in the foreclosure pipeline, we will have an increasing problem of sub-urban blight, with the attendant law-enforcement problems. The housing problem is primarily a suburban issue, and the suburbs have less revenue to patrol their current areas.
So although the economic signs are still good, it is still a time for hedging your investments. And that will include guns and ammo for the suburban homeowners.
http://www.nytimes.com/2010/05/16/business/16builder.html?src=me&ref=business
Generally, new houses cost more than already-built houses. New houses are new, and has not depreciated. Everything works and has the "new" premium [supposedly]. The owner has a whiter canvas to play with. Only a good school district can keep up the value of already-built houses.
The article offered a couple of reasons why new houses are selling like hotcakes. 1. the recession has decreased the cost of both labor and material, giving the builders a much bigger margin to discount prices. 2. the existing homes are stuck in the foreclosure limbo: underwater owners cannot sell at a loss without bank agreement, and banks are not eager to realize their losses. So the existing inventory end up priced higher than the new inventory. In addition [not mentioned in the article], business credit lines are flowing again, following the credit freeze of 2009. The construction business greatly depend upon lines of credit to finance their operations. The re-opened taps allowed the builders to meet the pent-up demands for new construction.
Overall, this is bad on two levels:
1. Obviously, we still have lots of room at the bottom. Obama [and American people generally] are playing a dangerous game, trying to out-wait the recession. The mortgage modification program is only succeeding at buying time. We have not solved the fundamental problem of excess supply.
2. In addition, with so much inventory in the foreclosure pipeline, we will have an increasing problem of sub-urban blight, with the attendant law-enforcement problems. The housing problem is primarily a suburban issue, and the suburbs have less revenue to patrol their current areas.
So although the economic signs are still good, it is still a time for hedging your investments. And that will include guns and ammo for the suburban homeowners.
Wednesday, September 23, 2009
Honduras: The Drama Continues
Heard on the news today that Zelaya is back in Honduras, holding out at the Brazilian Embassy. Brazil's Lula is calling for a peaceful solution to the crisis. Yes, that would be waiting for the planned December elections! Why can't people just wait three more months?!
But anyway, this embassy standoff will be revealing on Brazilian embassies' preparedness procedures. It appears that the Brazilian embassy was not prepared for Zelaya's appearance nor the subsequent standoff. Now that the utilities have been cut off, the embassy has to rely on its stored supplies.
In general, without previous preparation, people can hardly hold out for more than three days. So if the embassy can hold out for more than three days, we can conclude that Brazil has a quite robust preparedness protocol for its embassies. That would be an interesting indicator on Brazil's worldview in general.
But anyway, this embassy standoff will be revealing on Brazilian embassies' preparedness procedures. It appears that the Brazilian embassy was not prepared for Zelaya's appearance nor the subsequent standoff. Now that the utilities have been cut off, the embassy has to rely on its stored supplies.
In general, without previous preparation, people can hardly hold out for more than three days. So if the embassy can hold out for more than three days, we can conclude that Brazil has a quite robust preparedness protocol for its embassies. That would be an interesting indicator on Brazil's worldview in general.
Thursday, August 6, 2009
More Somalia and Nation-State Paradigm News
Another report supporting my previous piece on Nation-State paradigm and Somalia. Any good scientist knows to chuck the model when it no longer fits the reality. Perhaps Obama and Hillary Clinton should have studied science (or engineering) back in college.
Sunday, July 5, 2009
Corroborating Evidence of Afghanistan Economy of Force Ops
Gen (ret) Jones stated that we will not be sending more troops to Afghanistan. That is in keeping with Col (ret) Lang's thesis that we are moving the strategic main effort from the conventional forces to the commando forces. Consequently, the conventional forces need to change their mission to meet their objectives as the supporting element. I advocated for a refugee mission to meet the new strategy earlier. The situation remains favorable for this mission.
Thursday, June 25, 2009
Somalia Policy: Trapped in Nation-State Paradigm
The Obama administration is sending a shipment of small arms to the Somalia Transitional Federal Government. This is a symptom of the Nation-State Paradigm that I have previously discussed. As I pointed out in my earlier post, the Transitional Federal Government is a government only on paper. It has ambassadors and ministers, but it cannot even control their capital, Mogadishu. Its sovereignty power only extends to the few tribes represented by the ministers.
We are giving weapons to the Transitional Federal Government because we are bound by the International Traffic in Arms Regulations, a law passed by Congress. ITAR says that we can only give weapons to the official government of a country. We cannot give weapons to a particular tribe in Somalia, for example, because we would be violating the sovereignty of Somalia, nevermind that the TFG does not have any trapping of sovereignty in the first place.
Right now, Somalia is a collection of principalities, with dynamic borders. The TFG of today may very well disappear tomorrow, breaking apart into its component tribes. These tribes stood up the TFG because we can only give money and weapon to an official government. They're sticking together only to milk us out of money and weapons.
We need to cut the TFG loose. As it is, we are backing a lost cause. If we need to recognize anybody, Somaliland and Puntland are more worthy candidates than the fictional TFG. Our goal in Somalia should be supporting the islands of stability in sea of chaos. If we want to support certain tribes in the TFG, we should channel our aid directly to them, instead of going through the middlemen of the TFG. We need to stop imposing our outdated Nation-State Paradigm upon Somalia and start recognizing reality.
We are giving weapons to the Transitional Federal Government because we are bound by the International Traffic in Arms Regulations, a law passed by Congress. ITAR says that we can only give weapons to the official government of a country. We cannot give weapons to a particular tribe in Somalia, for example, because we would be violating the sovereignty of Somalia, nevermind that the TFG does not have any trapping of sovereignty in the first place.
Right now, Somalia is a collection of principalities, with dynamic borders. The TFG of today may very well disappear tomorrow, breaking apart into its component tribes. These tribes stood up the TFG because we can only give money and weapon to an official government. They're sticking together only to milk us out of money and weapons.
We need to cut the TFG loose. As it is, we are backing a lost cause. If we need to recognize anybody, Somaliland and Puntland are more worthy candidates than the fictional TFG. Our goal in Somalia should be supporting the islands of stability in sea of chaos. If we want to support certain tribes in the TFG, we should channel our aid directly to them, instead of going through the middlemen of the TFG. We need to stop imposing our outdated Nation-State Paradigm upon Somalia and start recognizing reality.
Wednesday, June 24, 2009
The Four Components of Healthcare Spending: Thoughts on Healthcare Reform
Yesterday Darshak Sanghavi has a great Slate article about the Massachusetts Health Reform Experiment. Dr. Sanghavi found that people had medical coverage, but the deductible [the part that you pay before insurance kicks in] was so high that the working poor, who are the target of the healthcare reform movement today, ended up right where they were, skipping and skimping on expensive medical services. He fears that we Americans will end up with the same result, lots of money spent with no change in outcome.
The American medical system is state of the art, yet we have many systemic problems: MediCare, that legacy of the Great Society, is driving our Federal government into bankruptcy. Healthcare spending is going higher and higher, yet our physical wellness ranking is at the Third-World level. The poor and rich are covered, but the middle class is finding medical care increasingly unaffordable. The United States is facing severe pressures, but we are not alone. Other public health care countries are experiencing greater-than-inflation healthcare increase as well, as a result of an aging, diabetic population.
To clarify our thinking and understand our objectives in healthcare reform, I will break up our healthcare spending into four different categories. Each of these four categories have different economic characteristics, which means that we really should devise four different policies to target each of the four sectors.
The four sectors are:
1.) Preventive and Maintenance Cost
2.) Accidents & Infectious Diseases
3.) Chronic Conditions
4.) Pharmaceutical Cost
1.) Preventive and Maintenance Cost: This category covers the general prevention and maintenance treatments we all are supposed to have: Annual Physicals, Vaccinations, Physical Exercises, etc. An ounce of prevention, and all that. This sector is fairly low cost and foreseeable. Public health science has figured out a schedule of vaccinations everyone should get. Everyone should get annual physicals to catch problems while they are cheap to treat. Inexpensive physical exercises will minimize expensive Type II diabetes down the road. This category is where we can group together to exploit monopsonic leverage. We know exactly what we need. Doctors know exactly how to provide the services. We can put primary care providers on a salary to meet this need. This cost category is amenable to a government solution.
2.) Accidents & Infectious Diseases: This category covers trauma medicine/surgery and infectious diseases. Sometimes we catch the flu. Some of us get into car accidents. We cannot drive these probabilities to zero, but actuarial modelling allows us to budget for this cost category well in advance. This category is the "Insurance" part of health insurance. At the same time, we can use risk management techniques to control this cost. For example, enforcing handwashing in schools and airports can vastly decrease the severity of our annual flu outbreaks. The individuals and families opposed to vaccinations can opt out of vaccines, but they should have to pay more money for increasing disease transmission, and hence, our overall financial burden in treating infectious diseases. People who have a history of STDs, for example, should have to pay a higher insurance premium for engaging in risky behavior. Same thing goes for speeding and drunk driving: Reckless driving is the 6th killer in the United States, ahead of firearms and STDs. In addition to stiff traffic tickets, higher insurance premium for risky drivers is only right to responsible drivers everywhere.
This cost sector is not exactly suited to a government solution, because there would be too much political pressure to lower the insurance premiums for the speeding drivers and irresponsible vaccine opponents. A regulated insurance industry is best in this case: You get sick or in an accident, you get paid for the treatment, depending on your insurance coverage. The more responsible you are, the cheaper your premiums. The ones with the Need for Speed and vaccine opponents can opt out of insurance. It is their choice to engage in risky behavior, but we do not have to pay for their resulting medical needs. Actuarial incentives might even encourage responsible behavior, just like car insurance. Universal coverage is not a good policy for this cost category.
3.) Chronic Conditions: This category covers chronic, non-infectious diseases like cardiovascular diseases and diabetes. This cost category is one of the two main drivers for our runaway medical spending in the US [the other being drugs]. I will limit my discussion here to the non-pharmaceutical treatments, because drug is so big it needs its own cost category. So MRI, dialysis, specialty surgeries, etc, fit into this category.
This category is fairly predictable for the ones who suffer from these conditions. The treatment options are fairly standardized; doctors and hospitals are always sharing their best practices. However, our aging population have increased the input into this cost category: old people. Ironically, our success in anti-smoking campaigns have increased our spending on chronic conditions.
Here our course of action is more nebulous. Insurance is not exactly the right model here, because all of us will end up with cancer if we live long enough. Some government subsidy will help people to afford this care: MediCare, for example. Personal savings will help some people to get treatment. We can have government pay for everything here, but we know for sure that Medicare will exceed our federal budget by 2075, if we keep on the current course.
One option is to increase our use of hospice care. For example, this study found that last-year-of-life expenses constitute 22 percent of all our medical expenditures. If we can minimize expenses for terminal patients, we will have that much more money to improve infant mortality. Given the AARP, I don't expect we can take money from old people to give to babies, but that is an option.
4.) Pharmaceutical Cost: Drugs are getting more expensive everyday. We've all received those internet pharmacy emails promising cheap drugs from Canada and Mexico. Here the problem is based on the business model of the pharmaceutical industry: The companies spend years and millions of dollars to shepherd a drug through our regulatory gauntlet. They recoup their investment by holding a high price here during their patent years. In other countries they sell the drug at a lower price to compete with copy-cat drugs and to generate demand.
The pharmaceutical industry raises the valid concern that, if we mess with their business model, we will have many fewer drugs reaching market. The drug companies have been responsible for much of our medical innovations this past century. Despite occassional safety concerns, these drugs have been effective in treating their target conditions.
For this cost category, a combination of practices may help control the cost without the unwieldy clubs of government regulation. For example, universal physical training will reduce the incidences of diabetes and cardiovascular diseases, reducing demand for the currently profitable blockbuster drugs. The expansion of hospice care will reduce demand for these drugs as well by decreasing life expectancy. Patients can encourage doctors to prescribe generics where possible [coinsurance would maintain the generics incentive for the patients] .
Some people have pushed for universal drug coverage as part of the universal healthcare reform. However, I fear that the pharmaceutical industry will band up with the AARP and push for ever greater drug subsidies, distorting market incentives and bankrupt the Federal government.
Ob/Gyn & Reproductive Care
The OB/GYN sector has experienced tremendous cost growth this past century, with the increased maternal age causing more complications(twins, etc), spreading popularity of c-sections driving up expenses, and declining fertility (from maternal/paternal aging) demanding more reproductive assistance. This growth in cost has come with an unfortunate increase in infant mortality, due to increased premature births. [Twins and triplets are more likely to be born prematurely. Maternal complications also increase premature births.]
It is important to control our OB/GYN cost because babies are our future. Their productive potential is much higher than the potential of our Retired Persons. At the same time, the OB/GYN cost growth is in part driven by societal changes, not medical advances. Therefore, healthcare reform is not the whole answer to fixing our OB/GYN sector.
If families are postponing births due to career plans, they should increase their savings to account for the cost increase from advanced maternal age. For this particular segment, perhaps a tax-deferred savings plan is the answer. For example, mothers and fathers can draw on their IRAs and 401K's tax-free and penalty free, to pay for birth/reproductive expenses. This will give young men and women a concrete reason to save money, as opposed to that nebulous retirement 40 years away.
The recent rise in twins, triplets, and beyond, is linked to increased maternal age, and correspondingly, IVF practice of multiple implantation. IVF multiple implantation is risky to the mother and disproportionately stressing the OB/GYN sector. Correspondingly, a national healthcare system should not cover multiple implantation on cost concerns. This is a scenario where personal finances, rightly, should be the driver.
Conclusion:
Given the above analysis, the AARP is emerging as a grave threat to our fiscal health. As I am counting on that Army pension to finance my retirement life, I cannot support healthcare reform when the Federal government is already wasting 30% of its Medicare money. I hope that my four categories have helped you understand better our current healthcare reform debate. Please let me know of any improvements we can make to this four component cost model.
PS: See my following post about expanding healthcare access through public financing.
The American medical system is state of the art, yet we have many systemic problems: MediCare, that legacy of the Great Society, is driving our Federal government into bankruptcy. Healthcare spending is going higher and higher, yet our physical wellness ranking is at the Third-World level. The poor and rich are covered, but the middle class is finding medical care increasingly unaffordable. The United States is facing severe pressures, but we are not alone. Other public health care countries are experiencing greater-than-inflation healthcare increase as well, as a result of an aging, diabetic population.
To clarify our thinking and understand our objectives in healthcare reform, I will break up our healthcare spending into four different categories. Each of these four categories have different economic characteristics, which means that we really should devise four different policies to target each of the four sectors.
The four sectors are:
1.) Preventive and Maintenance Cost
2.) Accidents & Infectious Diseases
3.) Chronic Conditions
4.) Pharmaceutical Cost
1.) Preventive and Maintenance Cost: This category covers the general prevention and maintenance treatments we all are supposed to have: Annual Physicals, Vaccinations, Physical Exercises, etc. An ounce of prevention, and all that. This sector is fairly low cost and foreseeable. Public health science has figured out a schedule of vaccinations everyone should get. Everyone should get annual physicals to catch problems while they are cheap to treat. Inexpensive physical exercises will minimize expensive Type II diabetes down the road. This category is where we can group together to exploit monopsonic leverage. We know exactly what we need. Doctors know exactly how to provide the services. We can put primary care providers on a salary to meet this need. This cost category is amenable to a government solution.
2.) Accidents & Infectious Diseases: This category covers trauma medicine/surgery and infectious diseases. Sometimes we catch the flu. Some of us get into car accidents. We cannot drive these probabilities to zero, but actuarial modelling allows us to budget for this cost category well in advance. This category is the "Insurance" part of health insurance. At the same time, we can use risk management techniques to control this cost. For example, enforcing handwashing in schools and airports can vastly decrease the severity of our annual flu outbreaks. The individuals and families opposed to vaccinations can opt out of vaccines, but they should have to pay more money for increasing disease transmission, and hence, our overall financial burden in treating infectious diseases. People who have a history of STDs, for example, should have to pay a higher insurance premium for engaging in risky behavior. Same thing goes for speeding and drunk driving: Reckless driving is the 6th killer in the United States, ahead of firearms and STDs. In addition to stiff traffic tickets, higher insurance premium for risky drivers is only right to responsible drivers everywhere.
This cost sector is not exactly suited to a government solution, because there would be too much political pressure to lower the insurance premiums for the speeding drivers and irresponsible vaccine opponents. A regulated insurance industry is best in this case: You get sick or in an accident, you get paid for the treatment, depending on your insurance coverage. The more responsible you are, the cheaper your premiums. The ones with the Need for Speed and vaccine opponents can opt out of insurance. It is their choice to engage in risky behavior, but we do not have to pay for their resulting medical needs. Actuarial incentives might even encourage responsible behavior, just like car insurance. Universal coverage is not a good policy for this cost category.
3.) Chronic Conditions: This category covers chronic, non-infectious diseases like cardiovascular diseases and diabetes. This cost category is one of the two main drivers for our runaway medical spending in the US [the other being drugs]. I will limit my discussion here to the non-pharmaceutical treatments, because drug is so big it needs its own cost category. So MRI, dialysis, specialty surgeries, etc, fit into this category.
This category is fairly predictable for the ones who suffer from these conditions. The treatment options are fairly standardized; doctors and hospitals are always sharing their best practices. However, our aging population have increased the input into this cost category: old people. Ironically, our success in anti-smoking campaigns have increased our spending on chronic conditions.
Here our course of action is more nebulous. Insurance is not exactly the right model here, because all of us will end up with cancer if we live long enough. Some government subsidy will help people to afford this care: MediCare, for example. Personal savings will help some people to get treatment. We can have government pay for everything here, but we know for sure that Medicare will exceed our federal budget by 2075, if we keep on the current course.
One option is to increase our use of hospice care. For example, this study found that last-year-of-life expenses constitute 22 percent of all our medical expenditures. If we can minimize expenses for terminal patients, we will have that much more money to improve infant mortality. Given the AARP, I don't expect we can take money from old people to give to babies, but that is an option.
4.) Pharmaceutical Cost: Drugs are getting more expensive everyday. We've all received those internet pharmacy emails promising cheap drugs from Canada and Mexico. Here the problem is based on the business model of the pharmaceutical industry: The companies spend years and millions of dollars to shepherd a drug through our regulatory gauntlet. They recoup their investment by holding a high price here during their patent years. In other countries they sell the drug at a lower price to compete with copy-cat drugs and to generate demand.
The pharmaceutical industry raises the valid concern that, if we mess with their business model, we will have many fewer drugs reaching market. The drug companies have been responsible for much of our medical innovations this past century. Despite occassional safety concerns, these drugs have been effective in treating their target conditions.
For this cost category, a combination of practices may help control the cost without the unwieldy clubs of government regulation. For example, universal physical training will reduce the incidences of diabetes and cardiovascular diseases, reducing demand for the currently profitable blockbuster drugs. The expansion of hospice care will reduce demand for these drugs as well by decreasing life expectancy. Patients can encourage doctors to prescribe generics where possible [coinsurance would maintain the generics incentive for the patients] .
Some people have pushed for universal drug coverage as part of the universal healthcare reform. However, I fear that the pharmaceutical industry will band up with the AARP and push for ever greater drug subsidies, distorting market incentives and bankrupt the Federal government.
Ob/Gyn & Reproductive Care
The OB/GYN sector has experienced tremendous cost growth this past century, with the increased maternal age causing more complications(twins, etc), spreading popularity of c-sections driving up expenses, and declining fertility (from maternal/paternal aging) demanding more reproductive assistance. This growth in cost has come with an unfortunate increase in infant mortality, due to increased premature births. [Twins and triplets are more likely to be born prematurely. Maternal complications also increase premature births.]
It is important to control our OB/GYN cost because babies are our future. Their productive potential is much higher than the potential of our Retired Persons. At the same time, the OB/GYN cost growth is in part driven by societal changes, not medical advances. Therefore, healthcare reform is not the whole answer to fixing our OB/GYN sector.
If families are postponing births due to career plans, they should increase their savings to account for the cost increase from advanced maternal age. For this particular segment, perhaps a tax-deferred savings plan is the answer. For example, mothers and fathers can draw on their IRAs and 401K's tax-free and penalty free, to pay for birth/reproductive expenses. This will give young men and women a concrete reason to save money, as opposed to that nebulous retirement 40 years away.
The recent rise in twins, triplets, and beyond, is linked to increased maternal age, and correspondingly, IVF practice of multiple implantation. IVF multiple implantation is risky to the mother and disproportionately stressing the OB/GYN sector. Correspondingly, a national healthcare system should not cover multiple implantation on cost concerns. This is a scenario where personal finances, rightly, should be the driver.
Conclusion:
Given the above analysis, the AARP is emerging as a grave threat to our fiscal health. As I am counting on that Army pension to finance my retirement life, I cannot support healthcare reform when the Federal government is already wasting 30% of its Medicare money. I hope that my four categories have helped you understand better our current healthcare reform debate. Please let me know of any improvements we can make to this four component cost model.
PS: See my following post about expanding healthcare access through public financing.
Tuesday, June 16, 2009
Iran: Time for an Embassy
We need to can all this talk about Supporting the People's Will in Iran. Paradoxically, our outpouring of support for the protesting students and people in Iran is making things worse. We are cutting them off from the military support they need. Instead, we need to initiate a military and diplomatic rapprochement with Iran, to allow the Iranian military to support the people.
The Iranian people are protesting and counter-protesting over their presidential election results. The unrest is similar to the protests of the Ukrainian Orange Revolution, the Tiananmen Square event, and the Berlin Wall. (Or the Israeli and Indian independence movements.) What happens next will depend very much on the bureaucratic actors in Iran. The American response therefore needs to shape and influence these bureaucratic actors.
As Mao Zedung famously observed, "Political power comes from the barrel of a gun." Political transition cannot occur without military power. It is all fine and good that people are marching in the streets, but they cannot change the government if the military balance is against them. For example, in Ukraine and in East Germany, the military sat out on the protests, neither embracing nor opposing the marchers. The people could march in peace and effect change. In Israel and India, the independence movements attacked the British colonial administration with sabotage and assassinations. The British government decided to stop fighting and withdrew. In Western democracies, the military protects the political transitions of elections. Without a military component, protests will cry unheard.
Therefore we need to look at the military dimension in Iran right now. The military opposition in Iran is very small. For example, Michael Totten visited some Iranian Communist Party militia in Iraqi Kurdistan in 2006 [Correction: 2007], and they numbered in hundreds at most. We hear about ethnic separatist violence in Iran from time to time (Iran is an empire), but they were few in number and limited in effect. The student protesters do not seem to have a military wing, judging by my perception that there have been few assassinations of the secret police officials in Tehran. For the Iranian protest to become an Iranian revolution, we will have to look toward the government bodies.
Iran has several militaries. There are the usual Iranian Army, Navy, and Air Force. There is also the Iranian Revolutionary Guards, which has ships and planes of its own. There is the Iranian National Police, which shares the paramilitary and law enforcement portfolio with the Revolutionary Guards. How will they respond to the protest and possible constitutional crisis?
Ahmadinejad came from the Revolutionary Guards, so the Guards will probably side with Ahmadinejad. More importantly, however, the Guards exists to support the Iranian Guardian Council, so they will do what Khamenei says. The Iranian military, on the other hands, competes with the Revolutionary Guards on military matters, so may be inclined to support the students. On the other hand, the Iranian military probably views the current unrest as an American/Israeli conspiracy. Therefore, we need to give the Iranian military the breathing space to make up its mind.
We need to signal the Iranian military that we are not going to take advantage of their current political weakness. We can employ confidence building measures such as officer exchange programs and military visits. These things take time to set up, but by starting the planning process for them, we demonstrate our intentions to the Iranian military. Further, we should decrease the military tension when possible. Our forces in the Persian Gulf can stand down their tempo of operations, such as decreased patrols and training flights. The US Army can minimize its patrols near the Iraqi-Iranian border.
Furthermore, we need to tell the Iranians what we are doing. President Obama can put his mega-watt smile on TV and tell the Iranians that we are standing down militarily to show them we harbor no ill will toward them. He can make a historic announcement to normalize our diplomatic ties with Iran, such as setting up an embassy in Tehran. He should tell them that, regardless of who ends up being president of Iran, the United States will continue the rapprochement. We need to show respect for Iran's constitutional process so that the Iranian military can stop focusing on us and start focusing on their constitutional crisis.
Many commentators in America are saying that we need to "Show our solidarity with the Iranian people and support their democratic dreams." That, in my opinion, is precisely the wrong thing to do. Our support will only feed the Iranian conspiracy theory that the protest is an American/Israeli plot. Instead, we need to back off on the aggressive democratic talk, and demonstrate our respect for Iran's institutions. We need to do what we can to let the Iranian Army support the students.
Edited: The Stimulist looks at the next step here. Anne Applebaum wants to up the democratic rhetoric. Patrick Lang looks beyond the current protest stage, toward the possibly next stage of armed revolution. Adam Silverman analyzes revolutions in general.
Edited for format and inserted links.
Sunday, June 7, 2009
Fictions of the "New Medicare"
On March 5 at CNN, President Obama said that the rising cost of healthcare will destroy any healthcare reform initiative, unless we do something about it. White House then came out with a report claiming that we can save 30% of Medicare's costs. The blog world tried to square this claim with Obama's healthcare reform initiative, the obvious question being, Why is the government wasting 30% of our Medicare money? The followup question is, How do we know that the Federal Government won't screw up Obama's healthcare reform, or what I'd like to call the "New Medicare"?
Well, some people have already started thinking about how the New Medicare, envisioned by President Obama and Peter Orszag, will look like. This is an on-going story, being posted in a serial fashion. It is an engrossing and sad vision of our future.
People who have faith in a government solution should be careful. They might get what they wish for.
Well, some people have already started thinking about how the New Medicare, envisioned by President Obama and Peter Orszag, will look like. This is an on-going story, being posted in a serial fashion. It is an engrossing and sad vision of our future.
People who have faith in a government solution should be careful. They might get what they wish for.
Wednesday, April 29, 2009
Obama, New York, and Air Force One
This past Monday, a VC-25 flew over New York City. A lot of people got nervous and upset. A scandal ensued. The White House Military Office chief, Louis Caldera, took responsibility. President Obama condemned the photo op along with everybody else.
It is sad that Obama missed an opportunity to appear presidential. In hind sight, the photo op was insensitive. Obama getting "furious", however, is unnecessary. If Obama had taken responsibility publicly, then leaked out Caldera's role, then he would have looked magnanimous for shielding his subordinate. He would also have stopped the public witch hunt, because all of the hunters wanted to link Obama with this "mistake" anyway. Him taking responsibility would pre-empt their objective, removing their incentives to keep this scandal on the air. His critics would have little else to talk about. The talking heads would talk up the leaked Caldera story and absolve Obama of all blames. Obama would emerge looking better, this story would quickly burn out, and he would have earned the loyalty of Caldera.
So Obama missed a big leadership opportunity this week. Casting stone after Caldera along with everyone else is uncalled for. His "damage control" efforts make him appear weak and a bad judge of character. He has only cemented his reputation for "throwing people under the bus". His excessive focus on his own image is detrimental to his leadership of the country.
It is sad that Obama missed an opportunity to appear presidential. In hind sight, the photo op was insensitive. Obama getting "furious", however, is unnecessary. If Obama had taken responsibility publicly, then leaked out Caldera's role, then he would have looked magnanimous for shielding his subordinate. He would also have stopped the public witch hunt, because all of the hunters wanted to link Obama with this "mistake" anyway. Him taking responsibility would pre-empt their objective, removing their incentives to keep this scandal on the air. His critics would have little else to talk about. The talking heads would talk up the leaked Caldera story and absolve Obama of all blames. Obama would emerge looking better, this story would quickly burn out, and he would have earned the loyalty of Caldera.
So Obama missed a big leadership opportunity this week. Casting stone after Caldera along with everyone else is uncalled for. His "damage control" efforts make him appear weak and a bad judge of character. He has only cemented his reputation for "throwing people under the bus". His excessive focus on his own image is detrimental to his leadership of the country.
Monday, March 2, 2009
Mexico: DoD Leads the Way, Again
It is sad that the media has continued to spread the misconception that Mexico's ongoing civil war is all the fault of the American gun industry. Hello! Why aren't we taking the Mexican border police to task for not clamping down on the gun smuggling?! Is it America's fault that Mexican customs agents are slacking off?
In other news, Dr. Gates said, over the weekend, that the US military will start helping Mexico in fighting its civil war.
It is sad to see that the Obama administration has not learned anything about the post-Cold War world we live in. He spouted some rhetoric about using America's "soft power" to meet our challenges. Yet, with the Second most dangerous threat to American security, [first is Pakistan], Obama has reacted instinctively with the Defense Department, again. "Hope and Change" in the case of US foreign policy is now, "Hope the Military Can Change".
The only "soft power" Obama has done with regard to Mexico is a call to Congress to re-enact the Assault Weapon Ban, a cause for the Brady Campaign. Rahm Emanuel said, "You never want a serious crisis to go to waste." Indeed.
Hat tip to Galrahn for noting this.
PS: updated the tags to include Obama, 30APR2009
In other news, Dr. Gates said, over the weekend, that the US military will start helping Mexico in fighting its civil war.
It is sad to see that the Obama administration has not learned anything about the post-Cold War world we live in. He spouted some rhetoric about using America's "soft power" to meet our challenges. Yet, with the Second most dangerous threat to American security, [first is Pakistan], Obama has reacted instinctively with the Defense Department, again. "Hope and Change" in the case of US foreign policy is now, "Hope the Military Can Change".
The only "soft power" Obama has done with regard to Mexico is a call to Congress to re-enact the Assault Weapon Ban, a cause for the Brady Campaign. Rahm Emanuel said, "You never want a serious crisis to go to waste." Indeed.
Hat tip to Galrahn for noting this.
PS: updated the tags to include Obama, 30APR2009
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