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2010 June 29 Tuesday
Defensive Medicine Minor Cost Overall

Much is made of the costs of defensive medicine where doctors order extra tests in order to protect themselves against medical malpractice lawsuits.

"About $60 billion is spent annually on defensive medicine and many physicians feel they are vulnerable to malpractice lawsuits even when they practice competently within the standard of care," said Tara Bishop, MD, Associate, General Internal Medicine at Mount Sinai School of Medicine, and co-author of the study. "The study shows that an overwhelming majority of physicians support tort reform to decrease malpractice lawsuits and that unnecessary testing, a contributor to rising health care costs, will not decrease without it"

But how about some perspective?

US health care costs grew by $134 billion in 2009 over 2008. So one year's cost growth is more than twice as great as the cost of defensive medicine. Yet defensive medicine is frequently cited in some quarters as a major source of high health care costs. Next time you hear that claim ask yourself whether the person making it is ignorant or deceptive.

Over a longer period of time the growth in US health care costs has been enormous.

Expenditures in the United States on health care surpassed $2.3 trillion in 2008, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980.

...

In 2008, U.S. health care spending was about $7,681 per resident and accounted for 16.2% of the nation’s Gross Domestic Product (GDP); this is among the highest of all industrialized countries. Total health care expenditures grew at an annual rate of 4.4 percent in 2008, a slower rate than recent years, yet still outpacing inflation and the growth in national income.

US health care costs were 17.3% of GDP in 2009. The costs of defensive medicine add up to less than half a percent of GDP. That's much less than the rhetoric about defensive medicine would lead you to expect.

It might be possible to cut defensive medicine costs via tort reform. However, a different approach focused on quality improvements seems a better bet. It is certainly possible to cut medical costs by a much larger amount by reducing medical mistakes and improving the quality of performance of medical providers. That'd cut the lawsuits and lower medical malpractice insurance costs while simultaneously improving quality of care and health outcomes.

By Randall Parker 2010 June 29 09:28 PM  Economics Health
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Milton Friedman On Open Borders And Welfare State

The late great free market economist and monetary theorist Milton Friedman argued against open borders immigration as long as the welfare state exists.

Q: Dr. Friedman should the U.S.A. open its borders to all immigrants? What is your opinion on that?

A: Unfortunately no. You cannot simultaneously have free immigration and a welfare state.

Q: Do you oppose a unilateral reduction of tariffs and if not how can you oppose open immigration until the welfare state is eliminated?

A: I am in favor of the unilateral reduction of tariffs, but the movement of goods is a substitute for the movement of people. As long as you have a welfare state, I do not believe you can have a unilateral open immigration. I would like to see a world in which you could have open immigration, but stop kidding yourselves. On the other hand, the welfare state does not prevent unilateral free trade. I believe that they are in different categories.

The statement of the truth needs frequent repetition against a background din of falsehoods. Hence this post.

By Randall Parker 2010 June 29 09:03 PM  Immigration Welfare State
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2010 June 28 Monday
Lower Returns Seen For College Education

The economic value of a college education is wildly exaggerated.

But new research suggests that the monetary value of a college degree may be vastly overblown. According to a study conducted by PayScale for Bloomberg Businessweek, the value of a college degree may be a lot closer to $400,000 over 30 years and varies wildly from school to school. According to the PayScale study, the number of schools that actually make good on the estimates of the earlier research is vanishingly small. There are only 17 schools in the study whose graduates can expect to recoup the cost of their education and out-earn a high school graduate by $1.2 million, including four where they can do so to the tune of $1.6 million.

The top two schools are MIT and CalTech. Take extremely smart people, teach them skills with high market value, turn them loose and they make far more than, say, a sociology major with 30 points lower IQ.

Speaking of IQ, it is of course the one obvious cause of these different outcomes that the article of course does not mention. Never mind that mental horsepower is just like car horsepower: The more you have the faster you can go. IQ is just beyond the pale. Imagine physics where the physicists had to ignore gravity or electromagnetism. That's how the fields education, sociology, political, sociology, economics, and other supposed social sciences approach the study of human nature. Just ignore one of the most powerful causes of differences in human behavior and achievement and pretend like you are making sense.

Since the kids who attend the top schools are a couple of standard deviations above the average in intelligence what's needed to measure the ROI of education is to adjust for IQ. If a kid with 135 IQ attends MIT to study a given major instead of Georgia Tech, Purdue, Cal Poly SLO how much more money does he make? A proper study on ROI of institutes of higher education would measure IQs and find out what the real added value of paying top dollar at a pricey private school.

The article argues that a college degree doesn't offer as much financial benefit as it used to. But to expand college education to a much larger fraction of the population required lowering of standards to enable less bright students to even get thru their freshman year. Dumber majors were created. Grades were inflated. The result: lots of college graduates who aren't very bright with degrees in easy majors that involve a heavy element of indoctrination into mythologies such as absurd theories of education and assorted intellectual fads in humanities.

By Randall Parker 2010 June 28 09:50 PM  Education
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2010 June 27 Sunday
Senator Kyl Or Obama Lying On Immigration Policy?

Republican Senator Jon Kyl of Arizona that Barack Obama told him that Barack doesn't want to control the US border with Mexico because he wants to use the unsecured border as leverage to get immigration amnesty. "The president said the problem is if we secure the border, then you all won't have any reason to support comprehensive immigration reform."

Barack's spokesman denies Barack said that.

Bill Burton, a White House spokesman, said, "The president didn't say that. Senator Kyl knows the president didn't say that."

"But what everybody knows because the President has made it perfectly clear is that what we need to do is everything that we can to bring about comprehensive immigration reform," he added. "And that includes not just securing the border, but doing a lot of other things."

Oh come on Bill Burton, stop telling a blatant lie. "Comprehensive immigration reform" amounts to amnesty and a way for the people who cross illegally to instead cross legally. We've had amnesties in the past where the promise was after each amnesty then finally immigration law would be enforced. The promise of immigration law enforcement is the standard lie dangled in order to get support for amnesty.

If Obama wants to prove that it is Senator Kyl and not Barack who is lying then all Obama has to do is what he so far refuses to do: Build a massive multi-layer wall along the US border with Mexico and stop all illegal crossings. Then do vigorous interior enforcement of immigration law. He does not need "comprehensive immigration reform" to enforce the law.

By Randall Parker 2010 June 27 10:52 PM  Immigration Politics
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2010 June 24 Thursday
Obama Against Local Immigration Law Enforcement

Barack finds another way to oppose local immigration law enforcement. Why does he do this? Because local police are best positioned to enforce immigration law. There are far more police and they come into contact with large cross sections of their communities. They've got excellent sources of information and lots of contacts. So naturally opposing their ability to enforce immigration laws is a logical position for some politician to take if they want to let in millions of illegal aliens.

The Obama administration has tapped an outspoken critic of immigration enforcement on the local level to oversee and promote partnerships between federal and local officials.

Harold Hurtt, a former police chief in Houston and Phoenix, has been hired as the director for the U.S. Immigration and Customs Enforcement's Office of State and Local Coordination. Starting July 6, Hurtt will supervise outreach and communication between ICE, local law enforcement agencies, tribal leaders and representatives from non-governmental organizations.

As a police chief Hurtt opposed having police check the immigration status of local residents. So basically Obama's appointment of Hurtt is a big "fuck you" to the state of Arizona and to all the local police forces around the country that want to enforce immigration law. Here's the destination of his policies.

This move is consistent with the rumors that Obama will move to grant de facto amnesty to existing illegal immigrants.

Time to tell your elected representatives that you favor local immigration law enforcement and oppose immigration amnesty by executive fiat.

By Randall Parker 2010 June 24 07:20 PM  Immigration Policy State Local
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Clueless Stanley McChrystal Fired By Clueless Obama

What kinds of guys become US generals? Apparently, guys who need everyone to know that they aren't pussies.

"I'd rather have my ass kicked by a roomful of people than go out to this dinner," McChrystal says.

He pauses a beat.

"Unfortunately," he adds, "no one in this room could do it."

With that, he's out the door.

"Who's he going to dinner with?" I ask one of his aides. 

"Some French minister," the aide tells me. "It's fucking gay."

That's from the Roling Stone article that got Stanley McChrystal fired by Barack Obama.

McChrystal probably has an accurate take on Obama. But McChrystal and his aides come across as incredibly foolish for telling a reporter what they really think. Could McChrystal possibly be smart enough to competently direct the US war in Afghanistan while simultaneously being foolish enough to allow a reporter to get the material to write the following paragraph?

Even though he had voted for Obama, McChrystal and his new commander in chief failed from the outset to connect. The general first encountered Obama a week after he took office, when the president met with a dozen senior military officials in a room at the Pentagon known as the Tank. According to sources familiar with the meeting, McChrystal thought Obama looked "uncomfortable and intimidated" by the roomful of military brass. Their first one-on-one meeting took place in the Oval Office four months later, after McChrystal got the Afghanistan job, and it didn't go much better. "It was a 10-minute photo op," says an adviser to McChrystal. "Obama clearly didn't know anything about him, who he was. Here's the guy who's going to run his fucking war, but he didn't seem very engaged. The Boss was pretty disappointed."

The US government is not competent to fight wars in the Middle East and Afghanistan. Obama's way in over his head. His generals do not show signs of riding the clue train. Americans do not have enough curiosity or ruthlessness about the world to run an empire. The US military ought to withdraw from some of hits far-flung holdings.

Douglas Macgregor makes sense to me.

"The entire COIN strategy is a fraud perpetuated on the American people," says Douglas Macgregor, a retired colonel and leading critic of counterinsurgency who attended West Point with McChrystal. "The idea that we are going to spend a trillion dollars to reshape the culture of the Islamic world is utter nonsense.

Update: The US officers who blabbed to Rolling Stone really did the country a great service. We get to hear what they really think, rather than what the Administration has instructed them to say. So while they were foolish to speak to this Rolling Stone reporter the article is very much worth reading in full to find out more about the US war in Afghanistan and the politics of how the US runs a war than you'd otherwise get a chance to find out.

Ross Douthat relays the argument that during WWII lots of officers including general were sacked for poor performance and the US military improved greatly as a result. But in that war officers sacked other officers and the sackings were rarely over politics or war goals. Who is competent to do the sackings today? Certainly not leftist activist Barack Obama. Both Obama and his generals support a war goal that is absurd on its face. We do not have an objective reasonable goal or a willingness among the politicians or generals to admit to the absurdity.

By Randall Parker 2010 June 24 06:05 PM  Military Warrior Culture
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2010 June 22 Tuesday
State Pension Cuts Too Far In Future

A New York Times article by Mary Williams Walsh outlines many ways that state governments are cutting pension benefits that they can not afford. But there's one big twist: the states are not cutting benefits for existing workers. So the states are still going to run out of money in their pension funds decades before the cuts will start to cut outlays.

But there is a catch: Nearly all of the cuts so far apply only to workers not yet hired. Though heralded as breakthrough reforms by state officials, the cuts phase in so slowly they are unlikely to save the weakest funds and keep them from running out of money. Some new rules may even hasten the demise of the funds they were meant to protect.

Lawmakers wanted to avoid legal battles or fights with unions, whose members can be influential voters. So they are allowing most public workers across the country to keep building up their pensions at the same rate as ever. The tens of thousands of workers now on Illinois’s payrolls, for instance, will still get to retire at 60 — and some will as young as 55.

I can understand not taking back benefits already earned. But why should it be illegal to tell existing employees they will no longer earn additional benefits at such a fast rate?

The article reports Colorado as an exception because the state is cutting benefits for existing employees. Some other states are on course to run out of money in their pension funds in less than 10 years.

Joshua D. Rauh, an associate professor of finance at Northwestern University who studies public pension funds, predicts that at the current rate, Illinois’s pension system could run out of money by 2018. He believes the funds of other troubled states — including New Jersey, Indiana and Connecticut — are also on track to run out of money in less than a decade, unless they make meaningful changes.

Illinois would need to spend half of all tax revenues on pensions after 2018 if it does not cut benefits. It is no wonder that insurance for Illinois state debt prices in a high risk of default higher than California's.

Many US states are headed for a fiscal disaster. My advice: Do not move to a state whose state government is fiscally unsound. Avoid the cuts in service, the increases in taxes, and damaged economy as industries flee. The fiscal disaster will be even worse than forecast by economists because another approaching financial disaster is going to choke economic growth and cut into expected tax revenues.

By Randall Parker 2010 June 22 10:06 PM  Economics Sovereign Crises
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2010 June 20 Sunday
Illinois Passes California In Debt Default Risk

The CMA Sovereign Risk Monitor calculates probability of default within 5 years by sovereign credit issuers in the US and other nations using market prices for credit default swaps (CDSs). They now have Illinois at greater risk of default in 5 years with Cumulative Probability of Default (CPD) of 23.26% versus California at only 22.73%. Both states beat Latvia at a mean 21.71% but lag behind Iraq at 23.79%.

The US states have been very irresponsible in promising big pension benefits that they can not afford to pay. I am expecting lots of sovereign defaults. The dominoes will start falling fast when peak oil hits.

By Randall Parker 2010 June 20 11:44 PM  Economics Sovereign Crises
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Penn Jillette: Nancy Pelosi As Crazy As Sarah Palin

Penn Jillette points out that Nancy Pelosi is as religious as Sarah Palin.

As an atheist Jillette sees all religious people as crazy. He's right to point out that Pelosi, as an apparently real believing Catholic, is just as crazy as Palin if being religious makes you crazy. To look down on Palin for her religiosity while not looking down on Pelosi is therefore, in Jillette's view, inconsistent. But this reaction to Palin versus Pelosi isn't surprising because if Palin supported positions of the Left and was religious then her religious beliefs would be either forgiven or celebrated for how they support the Left's agenda.

Here's Nancy expressing the depth of her belief in the same religion that Sarah embraces.

Jillette also thinks more politicians should be like Rand Paul. He wants more politicians to say what they really believe.

His rant is about how when Rand Paul argued for a right to free association in the private sphere the Left attacked him for not being more sensitive to what the populace wants to hear. Of course, the Left was really attacking Paul for saying things that they do not want the populace to hear. Unqualified support for right of free association is an idea that works against the goals of the Left.

Update: I'd like to note that I do not see religious people as any crazier than the bulk of the rest of the population. I find certainty about the God stuff among some atheists to be tedious and irrational. Atheists can't prove God does not exist. Atheists can't explain why reality exists at all (and I can't either). There are things beyond our ability to understand and a certain amount of humility is called for.

While I'm at it: I find the term "crazy" is overused. Lots of people are wrong, deluded, ignorant, too stupid to understand key topics of public policy, or any combination of the above. But that does not make them crazy. It just makes wrong or deluded or ignorant or dumb or some combination thereof.

Certainly lots of people (including people who make to to the Oval Office) are so irresponsible about how they form and promote their beliefs that they are dangerous. But, again, that does not make them crazy. It just makes them dangerous and irresponsible.

A lot of looking down at religious people amounts to claims of higher status. "Oh look at those crazy religious people. I am so superior." More often than not the committed secularist who strikes such poses has embraced deluded secular beliefs that are a greater threat to the commonwealth than the religious views he's deriding. As someone points out in the comments, Penn Jillette sounds just plain crazy about immigration (total open borders). Well, Jillette isn't really crazy. But he's irrational and irresponsible, kinda like Sarah Palin and Nancy Pelosi.

By Randall Parker 2010 June 20 12:23 PM  Cultural Wars Religious
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2010 June 18 Friday
New Crackpot Education Theory Against Best Friends

Anything that hints at exclusivity is evil - especially at the most exclusive liberal private schools.

Most children naturally seek close friends. In a survey of nearly 3,000 Americans ages 8 to 24 conducted last year by Harris Interactive, 94 percent said they had at least one close friend. But the classic best-friend bond — the two special pals who share secrets and exploits, who gravitate to each other on the playground and who head out the door together every day after school — signals potential trouble for school officials intent on discouraging anything that hints of exclusivity, in part because of concerns about cliques and bullying.

“I think it is kids’ preference to pair up and have that one best friend. As adults — teachers and counselors — we try to encourage them not to do that,” said Christine Laycob, director of counseling at Mary Institute and St. Louis Country Day School in St. Louis. “We try to talk to kids and work with them to get them to have big groups of friends and not be so possessive about friends.”

“Parents sometimes say Johnny needs that one special friend,” she continued. “We say he doesn’t need a best friend.”

Real life apes Brave New World. Do they even know they are trying to recreate a bizarre classic science fiction society? Will they next teach against marriage because it tends to encourage exclusivity? This is the next logical step. Legalize gay marriage just in time to work for a ban against marriage and a ban against long term relationships.

We can expect nothing better from an education establishment that enforces an ideology over empirical evidence.

By Randall Parker 2010 June 18 10:26 PM  Cultural Wars Western
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2010 June 17 Thursday
Medicare Drives Oncologists To Push More Chemo

Unintended consequences can take many forms. Faced with lower US federal government payments for their time oncologists restored some of that lost income by selling more expensive chemotherapy treatments. Keep this in mind if you or a loved one comes down with cancer. Objective expertise is hard to buy.

Boston, MA (June 17, 2010) — In healthcare, less money doesn't always mean less service.

The 2005 Medicare Modernization Act, which substantially reduced Medicare payments to physicians for administering outpatient chemotherapy drugs, has had a somewhat paradoxical effect. Rather than resulting in fewer treatments, as one might expect, a new study finds that the Act has actually increased chemotherapy treatment rates among Medicare recipients.

"This sort of dynamic runs contrary to what most people would expect, but economists often encounter this sort of thing," says Joseph Newhouse, the John D. MacArthur Professor of Health Policy and Management at Harvard University and faculty member at Harvard Medical School, Harvard Kennedy School, Harvard School of Public Health, and the Faculty of Arts and Sciences, who carried out the study with colleagues Mireille Jacobson, now at RAND, Craig Earle, now at Sunnyside Medical Center, and Mary Price.

Chemo was prescribed at higher rates and more expensive forms of chemo were used.

In the first-ever study to test this critique, Newhouse and his team looked at Medicare claims for 222,478 beneficiaries who between 2003 and 2005 were diagnosed with lung cancer. The researchers found that on average, within one month of diagnosis, chemotherapy treatment increased 2.4 percent after the Medicare Modernization Act, from 16.5 percent to 18.9 percent. What's more, use of more costly chemotherapy drugs increased, while use of less expensive drugs declined.

"Physicians don't always respond to incentives the way most people expect," says Mireille Jacobson of RAND, the study's first author, "but in this case they do respond in a way that makes sense to economists. It seems logical on the one hand that when you pay less you get less. However, in this case, since a high proportion of an oncologist's income depends on prescribing, paying less per drug results in more drugs."

My advice: When faced with a serious illness use your own cash to pay the best medical expert you can afford to analyze what other doctors are trying to sell you.

By Randall Parker 2010 June 17 10:05 PM  Economics Health
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2010 June 16 Wednesday
Gates And Buffett Quest Will Lower Investment Quality

Warren Buffett and Bill Gates are lobbying other billionaires to give away half their wealth. This is a bad idea for a few reasons:

  • If wealth is spread more evenly more of it will go to consumption rather than investment. The effect will be to shift wealth abroad to foreign billionaires as Americans consume more and invest less.
  • Since people capable of accumulating billions are better investors on average the effect will be to shift wealth into the hands of poorer asset allocators and hence slow economic growth. So return on investment will decline as the average quality of investment decision goes down.
  • Philanthropy tends to go to kooky left-wing causes that damage society. Bill Gates' foolish attempt to raise high school student performance is an example of this phenomenon. So are many of the big charitable foundations. The Howard Hughes Medical Institute is a notable contrary example where the money actually goes to very talented medical researchers. But HHMI stands out as an exception.

"I have everything in the world I want, and then I've got all this surplus around - and I give away the surplus," Buffett said.

Buffett waited until his late 70s to give away a "surplus". Okay, question: Did he not have a "surplus" when he was in his 50s? How many billions did he need to have before any of it became a surplus?

I'll tell you why Buffett didn't give it away sooner: He enjoyed making money so much that he wanted to hold on to what he had to use it to make more. He maximized his pleasure by keeping and compounding his billions. He also ensured many corporations with good business plans were well financed and managed.

By Randall Parker 2010 June 16 09:08 PM  Economics Philanthropy
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San Diego Grand Jury Recommends Govt Bankruptcy

Joe Mysak points to a recommendation by a San Diego County Grand Jury to use bankruptcy to escape from government employee pension obligations.

June 16 (Bloomberg) -- The city of San Diego should consider Chapter 9 municipal bankruptcy to help it reduce fringe benefits, pension and health obligations.

That’s one of the suggestions made by the San Diego County Grand Jury, which does the normal duties of recommending indictments as well as reporting on local governments and special districts.

It would be fun to have a way to bet on whether Los Angeles or San Diego will file for bankruptcy first. Will Antioch California or Miami Florida beat them to the punch?

I see this as inevitable. The younger generations in California will have much lower earning power. High school drop-outs can't maintain a society as technologically advanced and productive as the society that made high wages for government employees possible. California is a shadow of its former self. Something has to give. With much fewer net taxpayers in future generations government's reach has got to pull back to more modest goals that fit with much more modest means. The last generation of white civil service workers will feel screwed up this process. But they did nothing to stop the processes that will seal their fate. The die is cast. Empires rise and fall and California is no exception. Neither is Texas. The nation as a whole is going to have to start thinking about the need to scale down the number of people in the military.

Demographics and huge pension burdens already spell financial armageddon. But wait. there's more. The 2010s are going to be an era of intense shocks. Better to mentally accept the changes now so that you do not feel psychologically shocked as you navigate thru what is in store. My advice: Adjust to what's coming before circumstances force change. If you change jobs, careers, move, lower your living standard or make other changes before forced to do so you can make these changes with less stress, less of a feeling of loss, and with much better outcomes from each change. Change from a position of strength rather than wait till you have to change from a position of weakness.

By Randall Parker 2010 June 16 08:00 PM  Economics Sovereign Crises
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2010 June 14 Monday
Moody's Downgrades Greek Debt To Junk Status

Presented here purely for entertainment value.

ATHENS, Greece -- Moody's Investors Service slashed Greece's credit rating to junk status on Monday in a new blow to the debt-ridden country that is under intense international scrutiny after narrowly avoiding default last month.

Moody's must have discovered some previously secret facts about Greek debt in order for it to lower Greece's debt by 4 notches. Either that or they got around to reading the newspapers from January.

You got to admire how Moody's and the other ratings services are so on top of the Greek sovereign debt situation. With a downgrading like this you might begin to think that Greece will have a hard time raising money on the capital markets, what with the capital markets now apprised of Greece'e debt problem. Maybe European governments might try to get together to do a bail-out. Or maybe credit default swaps in Greek debt will soar in price. Oh wait. That already happened weeks and months ago.

Why do credit ratings agencies still exist? Anyone know? Do they have some carefully concealed purpose? Their predictive powers are a joke.

Update: Credit default swap prices seem a surer way to judge the odds of default.

Greek credit swaps signal a 48.5 percent probability the nation will default within five years. The cost of insuring $10 million of Greece’s bonds for five years jumped $55,500 to $811,000 a year, making the nation’s debt the third most expensive to protect after Venezuela and Argentina, according to CMA DataVision.

I think Greece has a near 100% probability of default. So even the credit default swap prices seem to underestimate the odds of default.

By Randall Parker 2010 June 14 11:30 PM  Economics Sovereign Crises
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2010 June 13 Sunday
Hospitals Lose Immunity To Recessions

The depth of the recession and the huge portion that health care takes in the economy have finally made health care spending susceptible to recessions.

During past recessions, the financial stability of hospitals seemed to be nearly indestructible. But researchers at the University of Michigan Health System and St. Joseph Mercy Health System say the current national economic crisis may be an exception.

Hospitals are reporting declining profits, likely as a result of Americans losing health insurance as they lose jobs. As a result, hospital plans for renovation and new construction are being scrapped, and hospitals are being forced to reduce hospital staff, according to an analysis in the just-released May/June issue of the Journal of Hospital Medicine.

The researchers speculate hospital cutbacks may risk the quality and safety of health care delivery, and urge the federal government to improve public awareness of overcrowding emergency services, nurse-to-patient ratios and use of information technology.

The medical industry used to cruise thru recessions little affected. But with medicine now over 17% of GDP and rising it is just too large a pie slice to remain immune to downturns. Governments can't afford to fully compensate for declines in private sector spending.

We aren't many years away from the point where medical spending will actually drop from one year to the next. An approaching shock to the economy will cause a large enough economic contraction that per capita medical spending will fall in spite of an aging population and in spite of more government intervention in health care.

By Randall Parker 2010 June 13 11:19 PM  Economics Health
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NY Governments To Borrow From Pension Fund

State and local governments in New York State will borrow money from the state pension fund which they will use to make their yearly payments to the same pension fund. So basically they will pretend to pay their pension obligations.

ALBANY — Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund. And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.

They are hoping that in a few years they'll have a lot more money with which to pay both past and current pension obligations. I doubt it will play out that way. I expect high energy costs to prevent a big economic recovery. So all the governments trying to kick the problem down the road a few years are just setting themselves up for an even bigger crisis in a few years.

Municipal bankruptcies will occur at rates last seen in the Great Depression of the 1930s. Whether governments go into bankruptcy will depend on whether they can cut retirement benefits without bankruptcy. State and local tax increases will be hard to implement because the US federal government will raise taxes to deal with its own dire plight. The people will feel overtaxed just from federal taxes without getting hit harder by state and local taxes.

The states are in deep financial trouble, especially where government employees are allowed to form unions. I expect a migration away from the states which have strong government employee unions.

All the US states have unrealistically high assumptions for rates of return in their pension plans. The extent of their underfunding of their pension plans is therefore far larger than it looks. When Peak Oil causes a sustained economic contraction the size of their unfunded pension liabilities will soar to levels that will force states to declare bankruptcy if they can't cut pension benefits short of bankruptcy. Only one other development would allow them to avoid bankruptcy: hyperinflation. If the federal government inflated away their debts and obligations. But if their retiree pension benefits are indexed to inflation then even hyperinflation might not help them much.

By Randall Parker 2010 June 13 06:33 PM  Economics Entitlements
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2010 June 11 Friday
California Skills Decay Due To Immigration

A new report from the Center for Immigration Studies finds that California has slid to the bottom of the national work skills heap due to immigration.

Between 1970 and 2008 the share of California’s population comprised of immigrants (legal and illegal) tripled, growing from 9 percent to 27 percent.1 This Memorandum examines some of the ways California has changed over the last four decades. Historically, California has not been a state with a disproportionately large unskilled population, like Appalachia or parts of the South. As a result of immigration, however, by 2008 California had the least-educated labor force in the nation in terms of the share its workers without a high school education. This change has important implications for the state.

For this and other reasons I am very bearish on California government debt. Add on top the power of the government worker unions, a leftward shift in the state's politics driven both by immigration into the state and more conservative white-flight out of the state, and the approach of Peak Oil, and I expect the state will experience many municipal bankruptcies.

It is a tragic waste that this sort of deterioration has to be visited upon a state which has such great climate in its coastal regions. It is hard to move somewhere else with comparable mild climate. One pretty much has to leave the United States to find comparable climate.

Oh how the mighty fall.

  • In 1970, California had the 7th most educated work force of the 50 states in terms of the share of its workers who had completed high school. By 2008 it ranked 50th, making it the least educated state. (Table 1a)

  • Education in California has declined relative to other states. The percentage of Californians who have completed high school has increased since 1970; however, all other states made much more progress in improving their education levels; as a result, California has fallen behind the rest of the country. (Table 1b)

  • The large relative decline in education in California is a direct result of immigration. Without immigrants, the share of California’s labor force that has completed high school would be above the national average.

  • There is no indication that California will soon close the educational gap. California ranks 35th in terms of the share of its 19-year-olds who have completed high school. Moreover, one-third (91,000) of the adult immigrants who arrived in the state in 2007 and 2008 had not completed high school.2

  • In 1970 California was right at the national average in terms of income inequality, ranking 25th in the nation. By 2008, it was the 6th most unequal state in the country based on the commonly used Gini coefficient, which measures how evenly income is distributed. (Tables 2a and 2b)

  • California’s income distribution in 2008 was more unequal than was Mississippi’s in 1970. (Tables 2a and 2b)

  • While historical data are not available, we can say that in 2008 California ranked 11th highest in terms of the share of its households accessing at least one major welfare program and 8th highest in terms of the share of the state’s population without health insurance. (Tables 3 and 4)

  • The large share of California adults who have very little education is likely to strain social services and make it challenging for the state to generate sufficient tax revenue to cover the demands for services made by its large unskilled population.

California Dreaming is pretty much about the past at this point.

California public school teachers are the best paid in the United States. So the idea that California schools are so pathetic due to poor teacher pay is bogus.

What most amazes me about this huge decline: It brings us no closer to a realistic elite public acknowledgment of innate limits of ability. Rather, the official fantasy gets maintained in the face of copious evidence against the secular religious faith in equality of ability. As John Derbyshire points out, in elite circles public protestations of faith in education to raise up poor performers continues unabated. It is remarkable that during the Middle Ages the Catholic Church abandoned its faith that the Earth was the center of the universe under the weight of far less evidence than the amount of evidence that exists today for the view that group differences in student performance are due to group differences in average ability. Our secular left-liberal defenders of their faith demonstrate far stronger public attachment to irrational beliefs than the Catholic Church did in a supposedly far less rational era of faith in the supernatural.

Update: Where will this decay lead? Eventually some intellectual will propose charter cities for California. They'll have interesting rationalizations for why this concept will work.

Update II: Why is all this happening? Read about the Voldemort View: the View That Must Not Be Named.

By Randall Parker 2010 June 11 10:19 PM  Immigration Dumbing Down
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2010 June 08 Tuesday
Big Spending Cuts For UK Government?

New British Prime Minister David Cameron is going to try to shift Britain off the road to financial ruin. Meanwhile, the Obama Administration and Congress are putting the pedal to the metal as they speed down that road the Brits are trying to get off.

Prime Minister David Cameron's government has been selling the current recession as a once-in-a-generation chance to reduce the role of government in British society and get control of an annual budget deficit that has grown to about 12 percent of gross domestic product – about four times the level that the European Union deems safe. The government has promised that spending cuts are being considered everywhere, from defense to schooling.

Whether Cameron's minority government can pull this off remains to be seen. But the Brits seem to realize they've got to cut spending or face ruin. So they've got that big advantage over, say, the people inside the Washington DC beltway or the Americans (notably retirees) who are sucking off the government teet.

In the Wall Street Journal Fred Barnes argues that if the Republicans gain control of the House of Representatives the result for the nations finances could be quite salutary. Bill Clinton showed some spending constraint once the Democrats lost in Congress.

Here are the numbers: Average nondefense discretionary outlays per year under Nixon and Ford increased 39.7% over those of Presidents Kennedy and Johnson, followed by another 39% boost under Mr. Carter, a 14% drop under Mr. Reagan, a 12% jump under the first Mr. Bush, a 7.6% hike under Mr. Clinton, and a 31.2% increase under the second Mr. Bush.

Only four times in the past half century have nondefense discretionary expenditures in real terms decreased in a two-year congressional cycle. And only Reagan's first Congress—controlled by Democrats—cut more (15.5%) than the Republican Congress that Mr. Clinton faced after the 1994 election (3.7%). The other two reductions came under Reagan (2.5%, the 1986-87 budgets) and the younger Mr. Bush (.01%, the 2006-07 budgets).

America has changed demographically so much since the Reagan era that financial rectitude just might not be in the cards. A sovereign debt crisis combined with a stagnant economy seems a more likely outcome. I expect Peak Oil wil assure this outcome.

By Randall Parker 2010 June 08 10:47 PM  Economics Government Costs
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2010 June 07 Monday
Iraq War Veterans Suffer Mental Illness

Iraq, the war that keeps on taking.

Between 8.5 percent and 14 percent of soldiers returning from Iraq report serious functional impairment due to either posttraumatic stress disorder or depression, according to a report in the June issue of Archives of General Psychiatry, one of the JAMA/Archives journals.

"A growing body of literature has demonstrated the association of combat in Iraq and Afghanistan with post-deployment mental health problems, particularly posttraumatic stress disorder (PTSD) and depression," the authors write as background information in the article. "However, studies have shown varying prevalence rates of these disorders based on different case definitions and have not assessed functional impairment, alcohol misuse or aggressive behavior as comorbid factors occurring with PTSD and depression."

The mental problems have got to be much worse for the soldiers who realize the pointlessness of what they have gone thru. The war harmed US national interests. The war weakened the country, burdened it with more debt, and burdened it with the future costs of taking care of all the physically and mentally damaged veterans.

Between 2004 and 2007, Jeffrey L. Thomas, Ph.D., of the Walter Reed Army Institute of Research, Silver Spring, Md., and colleagues collected anonymous mental health surveys of 18,305 U.S. Army soldiers three and 12 months following deployment. The soldiers were members of four Active Component (non-reserve) and two National Guard (reserve) infantry brigade combat teams. They were screened for PTSD, depression, alcohol misuse and aggressive behaviors, and asked if these problems caused difficulties doing work, taking care of things at home or getting along with other people.

"Using the least stringent definition, we observed PTSD rates across Active Component and National Guard study groups, study time points ranging from 20.7 percent to 30.5 percent, and depression rates ranging from 11.5 percent to 16 percent," the authors write. "Using the strictest definitions with high symptom rates and serious functional impairment, PTSD prevalence ranged from 5.6 percent to 11.3 percent and depression prevalence from 5 percent to 8.5 percent."

The US is going to become increasingly unable to afford foreign adventures. The federal government is accumulating too many debts, too many unfunded liabilities for social programs, and a deskilling of its population due to immigration and demographic changes that flow from that immigration. The US peaked. Look at its greatness in your rear view mirror.

By Randall Parker 2010 June 07 10:37 PM  Mideast Iraq Costs
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Roissy The Wicked Saves Marriages

He didn't set out to do this. Roissy the Pick-Up Artist explains how to manipulate women and some guys use his techniques to save their marriages. The question arises:

“How could anyone who writes such horrible things be a force for good in the world?”

The truth is very powerful. You shouldn't shrink from the truth just because cabals and gangs who control media outlets and academia suppress a realistic view of human nature. The truths that are most suppressed are the most useful because the gap between their actual use and potential use is so large.

A good place to start on the road to enlightenment.

By Randall Parker 2010 June 07 06:05 PM  Cultural Wars Marriage
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2010 June 04 Friday
Americans Support Arizona Immigration Law

The Arizona state legislature passed a law that instructs and empowers local law enforcement officials to enforce US federal law on immigration. All the groups that do not want immigration law enforced, groups that favor amnesties for illegal aliens, have predictably denounced the law as racist, xenophobic, and a threat to civil liberties. Of course they would say that, wouldn't they? The majority of the American people support the Arizona law.

In Arizona and beyond, the law has many supporters. A CBS News poll last month found that 52 percent of respondents nationally think the Arizona law is "about right" in its handling of illegal immigrants. Seventeen percent said it does not go far enough. Twenty-eight percent said the law goes too far.

Given that the liberal media disagrees with the majority of the American people it is impressive that the majority of the American people can form opinions that the liberal media tries so hard to keep them from forming.

The vast overwhelming majority of Americans do not think that illegal aliens should be treated as legals. The American people think we should live by rule of law.

A Zogby Interactive poll of 2,108 adults conducted from April 16-19 found broad support for major immigration reform and immigration regulations that are more restrictive. “79 percent do not agree that illegal aliens are entitled to the same rights and basic freedoms as US citizens,” said the poll..

Barack Obama disagrees with the majority of the American people and Barack Obama does

A plurality in New York State want a similar law.

According to a new Quinnipiac University poll, 48% say they want their state to pass an Arizona-style immigration law.

Steve Poizner, running against Meg Whitman in the California Republican primary for governor, says he would enforce the equivalent of the Arizona law in California and go even further.

"I would take all of what they're doing in Arizona here to California plus a whole lot more," said Poizner.

"If I find a company in California that's hiring people illegally and breaking the law, I'll revoke their business license. I don't need anyone in the Legislature to give me permission to do that," Poizner said.

Obama favors amnesty before enforcement. This means that all the illegals will be turned into legals so that the law can't be enforced against them. Cheeky of him.

Obama has called the measure “misguided” and instructed the Justice Department to monitor its enforcement for possible civil liberties violations.

“She’s got a point of view that you have to do border security first, the president has a view that we have to have comprehensive immigration reform,” White House press secretary Robert Gibbs told reporters at today’s daily briefing.

If Obama really favored enforcement and border security he would do enforcement, deport all the illegal aliens (just like Ike Eisenhower did), and build a huge wall on the entire border to keep out most illegal border crossers. Of course, Obama does not really favor enforcement and Obama does not really want border security.

On the bright side: Arizona Governor Jan Brewer sounds like she would make a good replacement for Obama as president in the 2012 election.

In my meeting with President Obama yesterday, I personally invited him to visit Arizona and see our open borders for himself. Only then might he understand that border security is the mandatory first step in any real effort to battle illegal immigration.

Unfortunately, the President declined to commit to a personal visit.

He also declined my request to increase the National Guard commitment, did not commit to build and extend the fence, and refused to pay the federal obligations for incarceration expenses – over $750 million just since 2003.

By Randall Parker 2010 June 04 07:17 PM  Immigration Law Enforcement
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