Monday, May 30, 2011

Oh, no! The Debt.

In the current year the Federal government takes in $2.5 trillion. But it spends $3.6 trillion. It must borrow $1.1 trillion on top of the $14 trillion we owe already.

Let's put that in terms we can understand. John and Jane Doe take home $ 50,000.00 a year. But they spend $ 70,000.00. So they will need to borrow $ 20,000.00 this year. They have been living beyond their means for a number of years and as a consequence owe $200,000.00 on their house, their cars, their home surround entertainment system, their clothing, their riding lawn mower and much, much else.

Where will they be able to borrow $20,000.00 this year? No reasonable banker or lender will give them a dime because they owe a lot more than they will ever be able to repay—unless they win big in the lottery.

Unless they cut their expenses drastically—say by about almost half or $ 20,000.00—they will face bankruptcy.

It is easier for the US government to borrow money than it is for John and Jane. But our government must also rein in spending, and it must reduce the deficit in the years to come.

There are a number of reasons for that:

It is unconscionable for us to leave the next generations of Americans with a debt of $14 trillion or more.

The deficit is due to irresponsible spending and the decline of the US economy. We earn and produce less. The government therefore takes in less money from taxes and thus needs to borrow more.

After World War II, the US emerged as “the leader of the free world.” A good deal of our preeminence derived from our powerhouse economy. But today that economy is ailing. We have exported our production jobs to other countries. We are unable to provide jobs for everyone—let alone jobs that pay a living wage.

At the same time, we owe ever larger amounts of money to foreign countries, especially China. We depend on other countries to keep our government afloat. That's not the position of a preeminent nation. If we are to remain a plausible big power, we need to learn to live within our income.

So the government faces two tasks: improve the economy and cut spending. Consider cutting spending first.

A quarter of our national expenditures go to the military. A significant amount goes to subsidies, for instance, to huge agribusiness or to the large oil companies.

A budget cutting plan passed by the House of Representatives will leave military expenditures untouched as well as subsidies for big corporations.

Others propose to make serious reductions in military expenditures and to reduce subsidies to wealthy corporations.

That sounds like a much better plan.

But wait! The military recruits heavily among poor youth who cannot afford college and who have no job prospects. If we reduce the size of the Armed Forces, will we increase unemployment?

If we cut back weapons procurement, what will happen to the people who now produce those weapons?

Exxon Mobil had one of its most profitable years and there has been a lot of talk about cutting its Federal subsidies. Will Exxon Mobil keep everybody on their payroll when subsidies are cut and thus their income shrinks?

Budget cutting is bound to cut jobs. It will reduce federal income from taxes and thus worsen the deficit.

When it comes to reducing government expenditures, we are facing a lose-lose situation.

But perhaps we can improve this debt situation by improving the economy. If more people have good jobs earning them a good income, the government will collect more taxes and will have to borrow less.

There are currently two proposals for improving the economy: cut taxes on the rich or have the government spend more (borrowed) money.

If we cut the taxes of the rich, the argument goes for the first strategy, they have more money to spend and that will create jobs to satisfy the needs of the rich for larger yachts or more pretentious homes. But what if the yachts are built in the Carribean and the building materials for larger castles come largely from the Far East. The tax cut may create new jobs, but there is no telling where those jobs will be created.

What if the rich spend their increased income on diamonds that keep the civil was in the Congo going? There will be continued rape and killing in Africa and no job creation at home.

When corporations find themselves with extra money due to tax cuts, they may buy up a competitor and thus contribute to the concentration of their economic power. Mergers often loose jobs when the two, previously separate companies now combined into one, eliminate jobs and lay of workers.

Tax cutting has quite unpredictable results. It is not at all certain that it will create jobs.

So we conclude that the government must spend its way out of its fiscal crisis. But we already owe more than $14 trillion. We have limited funds to spend on stimulating the economy.

The fact is that we are stuck.

Thursday, May 26, 2011

I am happy to reprint a portion of a blog by Dr. Josh Freeman whose incisive commentary on the current state of health care and its associated industries are the delight of many health care providers. If health care is important to you, you may want to consult his blog to be instructed and edified.

Insurance company profits up and patient care down

Almost a year after the passage of the Affordable Care Act (ACA), amidst the dire predictions from the right about everything from death panels to socialism and their bloviating about overturning it, it turns out that the fears of the “left” are more accurate; that is, that it is insurance companies, not the American people, who are receiving the greatest benefits. There have indeed been benefits to consumers; notably the ability of young people to stay on their parents’ insurance until 26 and the elimination of restrictions on pre-existing conditions, and there will be more later on as 2014 rolls around. But the biggest impact of the bill so far has been inflating the coffers of health insurers.

The lead article in the New York Times, May 14, 2011, by Reed Abelson, is "Health Insurers Making Record Profits as Many Postpone Care." In his wonderful daily commentary on health news, Quote of the Day, Dr. Don McCanne simply observes “The headline says it all.” That’s the gist of it, but it does deserve a little more discussion. For one thing, the health insurance companies, despite record profits over the last two years, are continuing to raise their premiums very significantly, justifying this by saying that they expect that, as the economy improves, people who have been delaying getting health care will begin to do so and create a great demand.

Yet the companies continue to press for higher premiums, even though their reserve coffers are flush with profits and shareholders have been rewarded with new dividends. Many defend proposed double-digit increases in the rates they charge, citing a need for protection against any sudden uptick in demand once people have more money to spend on their health, as well as the rising price of care.”

Excuse me? This is a justification for raising rates now? That people, insured people, find the co-pays and deductibles currently in place to be so high that they are denying themselves needed care, so maybe later they’ll want to get it, so then it will finally cost the insurers money, so let’s pre-emptively raise premiums to cover it? Meanwhile, what it actually does is to ensure that even fewer people access care because the higher rates mean that they opt for policies with even greater co-pays and deductibles or even drop their insurance altogether.

The article quotes a number people, including physicians, describing how they or their patients have gone without or put off obtaining health care.

“’I am noticing my patients with insurance are more interested in costs,’ said Dr. Jim King, a family practice physician in rural Tennessee. ‘Gas prices are going up, food prices are going up. They are deciding to put some of their health care off.’ A patient might decide not to drive the 50 miles necessary to see a specialist because of the cost of gas...”

While the insurance companies are using the opportunity to stash away even more money for the flood that may, or may not, come: the Times quotes an industry analyst as saying about demand for health care services “The big question is whether it is going to stay weak or bounce back…Nobody knows.” They are raising their rates by double digits (for example, an Oregon Blue Cross/Blue Shield raised them by 22%), while having big profits (“…big insurance companies have reported first-quarter earnings that beat analysts expectations by an average of 30 percent.”) 

Saturday, May 21, 2011

Dark days for democracy II

In a previous blog I noticed how democracy, in our day, has become government by, of and for the rich. As if that were not bad enough, no one seems to be particularly disturbed about this change. It is public knowledge but no one seems to care.

At the heart of democracy is the belief that the vast majority of people are very well able to make the major decisions about their individual lives, as well as about the life of their communities. If they are allowed to do so, everyone's life will be better. Having someone else – whether that be a government official or a bureaucrat in a private corporation-- make decisions for ordinary citizens will bring few benefits. Secure in that faith, defenders of real democracy work tirelessly to insure all citizens the right and the ability to run their individual and collective lives by electing representatives that will protect their interests and beliefs.

But we have lost this faith in the ability of ordinary people to run their lives by their own lights. We do not believe that about American citizens can do it. We believe it even less about people abroad.

The Obama government hesitated noticeably before it threw its support behind the uprisings in Egypt and Tunisia. It has now participated in bombing Libya for several weeks, ostensibly in support of democracy. At the same time it has little to say about the Syrian government killing its own people in order to put an end to mass demonstrations in favor of popular self government. It has not responded to the Saudi troops invading Bahrain in order to support the monarchy there against the demonstrations by the citizens. 
Our government was willing to support rebels in Egypt because the Egyptian military was ready to take command of the country. Stability was assured. The people's democracy was going to be kept within very tight limits by the Egyptian military – armed by us.

When our foreign policy “experts” speak of stability they are looking for an institution that is not responsive to the many currents and cross currents of popular opinion. They are looking for an established institution, preferably run top-down, and armed to enforce its decisions. Underlying all this search for stability is a profound distrust of ordinary people and an intense fear of popular movements. Our government wants other stable governments with whom they can talk and make secret deals. They want other governments whose conduct is predictable and whose ability to maintain themselves – if necessary by armed violence – makes them reliable partners over the long haul.

Obviously that leaves out genuinely democratic governments that are responsive to popular demands and the fluctuations of popular debates and opinions.

When our government claims that it is supporting democracy, it is speaking of a democracy in which the electorate is manipulated and deceived. In that sort of democracy real power is lodged in small groups, either military or corporate. The elections do not have serious effects on who holds power. They are exercises in deceiving the public.

These are very dark days for democracy indeed.

Tuesday, May 17, 2011

Dark days for democracy

The House of Representatives has passed a bill that will abolish Medicare. Instead, older Americans will receive vouchers to pay for private insurance. 

This will tear a huge hole in the social safety net. Under Medicare, the government provides health insurance to older Americans. When the cost of health care goes up, Medicare will continue to pay for it. Under the new plan each individual person will face a very large insurance company. Will the vouchers automatically increase if the insurance company raises its rates? There is no indication of that. Even if the vouchers pay for adequate health insurance today, they will certainly not do so five years from now. Healthcare for all Americans will become a privilege of the well to do. People who worked all their lives will find themselves unable to pay their doctors and hospital bills or pay for their medications.

For anyone approaching retirement age, this is alarming news.

For anyone concerned about democracy in our country, it raises serious questions. The congressmen-and-women who voted for this assault on health care for all Americans were elected by the people, often those very older Americans who are now under attack. If you thought that democracy meant that ordinary people can ensure that their interests will be heard and heeded by the government, think again. Here are representatives elected by people concerned about their taxes, about their shrinking disposable incomes. They may have been frightened by Sarah Palin's talk about “death panels.” So they voted for a conservative candidate who promised to protect the limited incomes of the elderly. Once elected those same representatives throw the elderly on the harsh mercy of the private insurance market and tell them to sink or swim. For sure many of them are going to sink. They have been betrayed by the people in whom they put their confidence.

Clearly the voters made bad choices. Clearly the candidates misrepresented their real agendas. Given ill-informed voters and deceptive candidates, democracy will not function to protect the people. Instead it will protect the growing wealth of insurance companies.

But I am not hearing an outcry about the failures of our democratic process, although more and more frequently observers note that democracy, as we practice it, is government by, for, and of the rich. No one seems to be in a hurry to address that problem.

We supported – if somewhat reluctantly – the democratic uprisings in Egypt and Tunisia. We are bombing Libya supposedly to support the democratic rebels in that country. Unfortunately we are not prepared to lift a finger to restore democracy in the United States.

Saturday, May 14, 2011

A preventable crisis?

The Federal Crisis Inquiry Commission, appointed to find out why banks and financial institutions collapsed in 2008, has reported to the nation. They found that the current economic crisis could have been prevented.

The report points out that banks and other financial institutions took irresponsible risks. The government agencies created to oversee financial institutions failed in their task of keeping risk taking within safe limits. In order to prevent future economic crises, all we need is more vigilant government oversight.

Not to worry.

Once again, the powers that be once again reassure the public that our economic system, even with more than 8% of the workforce unable to find work after three years of “recovery”, with millions of Americans losing their homes, is still the best in the world.

But all of that is propaganda. The truth is that as long as our economic system remains unchanged, economic crises will recur at regular intervals. It is the price we pay for the blessings of capitalism.

Here is how it works.

Imagine that you are running a bank. You are a sensible, conservative person and when other banks lend money to people with poor financial credentials, you just shake your head. But those other banks are, at the moment, making a lot of money selling mortgages to low income people. Your rate of profit is lower because you are more cautious. But you don't own the bank. You just manage it for the stockholders and the stockholders are angry at you because their returns are below those of the stockholders of other banks. They demand that you raise profits by making risky loans to home buyers. You can resist the clamor and lose your job or hold on to your position by engaging in what you regard as unsafe banking practices.

In a system aiming above all at private profit, the temptation to take excessive risks is always present. That's why we experience a series of economic bubbles that regularly burst and leave some people out in the financial cold. No well-meaning admonition by a federal commission will change that. It is built into the system.

The federal inquiry commission also criticizes government agencies for insufficient oversight over financial markets, over mortgages, and credit cards.

Having heard that criticism, will the government regulatory agencies do a better job?

Let's be real. Government regulatory agencies enforce legislation passed by Congress. Congress is under constant assault by thousands of well-paid lobbyists advocating for the interests of their wealthy clients, such as the banks, financial institutions, and credit card companies. Congress passes legislation slanted towards the interests of people with money. Ordinary citizens who suffer through an economic crises such as the currently unemployed or underemployed have no money to pay lobbyists. Their interests are not represented in Congress – with very few exceptions.

But that's not all. The same companies hire lobbyists to lean on the regulatory agencies to interpret congressional legislation in ways that favor banks, and hedge funds, and credit card companies.

Finally, there is a revolving door between the halls of Congress, the lobbying offices on K St. in Washington DC, and the government regulatory agencies. These agencies are run by people predisposed to favor the people they are supposed to regulate. They will never do a job sufficient to the needs and rights of the rest of us.

As long as our democracy is for sale, government will not represent the interests of common citizens. The government will be on the side of – not to say in the pocket – corporations and the rich. Regulatory agencies will do a half-hearted job.

Admonitions by an Inquiry Commission will fall on deaf ears. Brace yourself for the next economic bubble. They are NOT preventable.

Sunday, May 8, 2011

Evaluating teachers

Evaluating teachers is very important. Evaluating teachers is also very difficult.

A recent proposal, that promises to make evaluating teachers simpler, proposes to link the assessment of teachers to their students' performance on standardized tests. If your students improve, you are a good teacher. Students' failure to improve casts doubt on the ability of the teacher.

For several reasons, this is a really terrible idea.

It is well-known that student performances in school are closely correlated with the economic condition of the parents. Poor children, on the whole, don't do as well in school. Are we really going to hold teachers responsible for the poverty of families in the neighborhood of the school?

These standardized tests, at least where I live, in Massachusetts, do a poor job in estimating the achievement of high school students. A significant number of the college students I teach, who have passed the state standardized tests, have serious difficulties understanding what they read. They just don't grasp ordinary expository prose. One problem is that many students have very limited vocabularies. In a recent class someone wanted to know what the word “superfluous” meant. Another student suggested that that it was synonymous with “superficial.” Both students were bright and interesting. But their high schools did a poor job of preparing them to read and communicate in college. The standardized test did not catch that deficit.

Should teachers be evaluated by tests that do not provide an accurate estimate of a student's intellectual skills?

Putting great weight on students test accomplishments in teacher evaluations is also unacceptable because it overlooks the most important information: the assessments by people in a position to know—other teachers, students and parents. Other teachers are one excellent source of information about a teacher's performance. Teachers work in the same school and pretty soon get a fairly reasonable idea of who is a good teacher and who is not.

When you evaluate teachers you must, of course, talk to the students. You want to ask them whether their teachers are well prepared, whether they are helpful to students, whether they are aware of student problems, whether their classes are interesting and engaging, and whether students believe that they learn something from this teacher. Is this teacher any kind of role model for students? Is the teacher fair but also understanding of special difficulties?

Finally the parents need to be consulted. They may very well have an idea of how the teacher influences their children or whether the child is particularly happy in this teacher's class.

Schools are communities of sorts. Everyone in the community needs to be consulted when it comes to evaluating teachers. The proposal to evaluate teachers by their students' test scores is one more top down bureaucratic project. Here the school is not seen as a community but rather as a hierarchical organization, much like the military, where the higher-ups have the power to foster the advancement of their subordinates or to end their career prematurely.

It stands to reason that schools that are run like military organizations are less likely to promote learning as an enjoyable and exciting activity. A flexible environment encourages learning and exploration. A rigid environment produces people who can follow rules but who will never be independent learners.

Basing teacher evaluations on student test scores is a bad idea.

Sunday, May 1, 2011

Starbucks Socialism

Pres. Obama has been accused of being a socialist. Now socialism appears to be invading corporate front offices. Listen to this story about Starbucks:

The founder of Starbucks, Howard Schultz, retired in 2000 a billionaire. In 2008 he returned to the front office because Starbucks was having serious problems.

As part of his effort to restore the company to its former luster, Schultz flew all of the 10,000 managers of Starbucks coffee shops to New Orleans. There each had to do five hours of community service in the devastated and neglected Ninth Ward and then they had a one hour meeting. That meeting was “about rekindling and reminding people about the values of our company and the core purpose, which is not always about making money.” (Boston Globe 4/24/11; my italics) Having just done five hours of community service, the managers were, we suppose, to understand to that community service was as important a value of Starbucks as making money.

Capitalism is all about making as much money as possible. Once you start saying that making money is not always that important, and that it may well be less important than serving the community, you are suggesting that, maybe, capitalism is not so desirable. You are beginning to think that, maybe, service to the people and to the common good is more important than private profit. Having said that, you have set foot on the road towards socialism. It rejects making money as the primary purpose of our economic activity suggesting that, instead, we should work to make life as good for as many people as we can.

Is the CEO of Starbucks considering socialism? That's pretty amazing. Fortunately, when we come to the end of the article, we find that Mr. Schultz recovered his capitalist good sense just in time. After the meeting in New Orleans that was to remind all of the managers of the importance of public service and the relative unimportance of making money, Starbucks closed stores that weren't making any profit and – the article did not mention that of course – laid off a bunch of managers who had just been told that making money was not their primary purpose.

But that just turned out to be so much talk. The bottom line was, after all, the bottom line.

What a relief! We don't really have to worry about Starbucks going socialist. Maybe we shouldn't worry so much about Pres. Obama's socialism either.