Sunday, June 26, 2016

Brexit, Russia, and Democracy

Here is President Putin's reaction to the Brexit referendum:
"Why did he initiate this referendum?  Why did he do it?"  Mr. Putin asked.  "To intimidate Europe, or to threaten someone?  What is the point of this if he himself opposes the idea?"
Putin really doesn't get democracy.  I am not naive about power politics, but majority opinion matters in Western countries.

Politics also isn't everything in the West.  Cameron has options outside of politics - resigning isn't the end of the world for him as it would be for Putin.

Saturday, June 25, 2016

Grifters

If we had a neutral press, Americans would be thinking a lot about how Hillary and Bill Clinton managed to accumulate over $100 million during their years of public service.  Neither had significant family money, business activities, or successful professional careers.  The majority of their combined lives were spent as relatively low-paid bureaucrats and politicians.

If we read something similar about a foreign ruling couple we would assume banana republic type corruption.  

In order to deflect attention from the Clintons, Democrats (e.g. Krugman) call Republicans cheap con men, grifters, sleazy, and snake-oil salesmen.

Leaving aside the fact that snake-oil really was good for you, "sleazy" is a slur against Silesians, and that the origins of the term "grift" make the term a perfect fit for the Clinton Foundation, these attacks are designed to paint Republicans as lovers of money, while it is becoming clear that the opposite is true.

Money obsession is a characteristic of the top and bottom of the income distribution, but not so much of the middle classes.  The poor are obsessed with money in order to survive, while most of the rich are rich because they think so much about money.

In the "Brexit" vote, the rich lost a lot of money, while the middle class decided that they cared more about their country and heritage than about a percentage point or two of GDP.  Young people (who do not have much money) and poor immigrants voted to remain in the EU.  (The Scottish and Irish voted to remain for their own nationalist reasons)  In the U.S., Democrats have also puzzled over why Republicans vote against their own economic interests.

Billionaires increasingly support Democrats - Donald Trump is a traitor to his class, just as Franklin Roosevelt was, but the parties have changed from rich and upper middle against the working class and poor to top and bottom against the middle.

Trump is not bourgeois, but he is trying to articulate bourgeois positions on the issues.  Hillary comes from the bourgeoisie, but the Clintons do not represent bourgeois values.  Trump the New York CIty playboy billionaire has become the candidate of the middle class, while Clinton, the former midwestern Goldwater Girl, has become a world-class grifter.

Saturday, June 18, 2016

A Health Care Plan

I support free markets in just about everything. (maybe everything)  It is difficult to propose free market solutions to the problem of healthcare delivery, however, because most people believe that healthcare is a right, regardless of ability to pay.  Rights with no regard for cost and payment are difficult to produce in a free market.

Most people are willing to allow society to sacrifice a lot in order for everyone to have a right to healthcare, even if the care turns out to be low quality and high cost.  Since support for rights is so powerful, it is worth thinking through the best way to accomplish this goal.  It is a second-best alternative to the free market optimum, but it might be the best we can get.

I think the second-best plan might look something like this:
  1. License health insurance companies.
    • Licensed companies could sell policies anywhere in the U.S.
    • All policies sold would meet a minimum standard of items covered, deductibles and copayments.
    • Policies could not be canceled, but companies could trade or sell them to other insurance companies. (prices might be negative)
    • Insurance companies would have a senior claim on all income and assets of their customers to cover premium payments.
    • The market for insurance covering additional items and luxury care would be unregulated.
  2. Every U.S. citizen would receive a free, one-time, mandatory medical examination.
    • All newborns would receive free, mandatory examinations
    • All medical information and financial information on every citizen would be stored in a central database accessible by insurance companies.
  3. A percentage of national income going to basic healthcare, X, would be chosen.
  4. Insurance companies would bid to insure people listed in the database.
    • Winning bidders would receive the right to tax the fraction X from the insured's income for life.
    • Winning bidders would be required to pay for all of their insured's medical bills for life, minus deductibles and copayments.
    • If the high bid is negative, then the federal government would pay that amount to the insurance company.  If the high bid is positive, then the insurance company would pay that amount to the federal government.
    • X could be chosen so that the federal government breaks even on the entire enterprise.
    • Individuals could pay an insurance company to purchase their policy from another company.
  5. Insurance companies could sell the right to serve customers to other insurance companies.
    • If a company goes bankrupt or loses its license, its customers would be auctioned to the remaining insurance companies.
  6. For all non-emergency treatment, insurance companies could require customers to obtain care from the cheapest provider within a certain radius of the patient's location.
    1. Emergency care pricing would be regulated.
  7. All healthcare providers would be required to post prices of all services they provide.
    1. Providers would be required to provide care at the posted price.
    2. Providers would not be allowed to offer care at prices other than posted prices.
    3. Posted prices could be changed daily. 
How would this work?  Suppose I am young and my income is $100,000 per year.  Given the results of my medical examination, suppose my healthcare costs are expected to be $5,000 per year.  Suppose X is 10%, so the insurance company would collect $10,000 per year in taxes.  Expecting profit of $5,000 per year for a long time, the top bidder to insure me might bid $60,000.  The high bidding company would pay $60,000 to the federal government, and would then be able to collect 10% of my income, but it would also be required to pay my medical bills for my entire life.

Now suppose I am old, earning only a small amount from a pension, and my health costs are expected to be $25,000 per year for the four years I am expected to live.  The top bid from insurance companies might be negative $110,000.  The federal government would pay the company $110,000, and the company would tax my pension and pay my medical bills, for an expected profit of $10,000.

The same bidding process would occur for every newborn baby, and every new U.S. citizen.  Insurance companies would estimate likely incomes and health risks in order to decide how much to bid on each person.  Companies might specialize in people with different health profiles, as they gained expertise in estimating expenses and negotiating prices with doctors and hospitals.  They might also specialize in people with different financial profiles as they gain expertise in premium collection.

Once this system was in place, it could also be used for Social Security.  Companies would bid to collect a tax and disperse retirement and disability payments.

I would love to hear any ideas about why this system wouldn't work!

Sunday, June 12, 2016

Starving in the USA?

A heated discussion the other day and a recent article in our local paper has me thinking about starvation in the U.S.  My position is that the poor have problems, like crime and poor schools, but lack of food isn't one of them.

The technical term for starvation is protein-energy malnutrition, and it is also known as kwashiorkor.  It is a very rare cause of death in the U.S., according to a CDC database.  By running cross-tabs, I found that the incidence of malnutrition is much higher in older people, because it is almost always associated with chronic diseases.  An article in a medical journal explains just how rare true starvation is in the US, and that the cause is not economic.
Rare cases of kwashiorkor in affluent countries unrelated to chronic illness have been reported...Most cases were due to nutritional ignorance, perceived milk intolerance, or food faddism. Half of the cases were the result of a deliberate deviation to a protein-deficient diet because of a perceived intolerance of formula or milk. Financial and social stresses were a factor in only 2 cases, and in both cases social chaos was more of a factor than an absolute lack of financial resources. 
Knowing that true hunger is not a problem in the U.S., activists have renamed the problem "food insecurity."  The USDA classifies households as food insecure if they say in a survey that they ever worry that they might run out of food, that they cannot afford balanced meals, or that they had ever skipped a meal.  60% of food insecure households report no reduced food intake as a result of financial difficulties, and only 8% of food insecure households included children that experienced any food intake reduction at all.  The USDA admits that “children are usually protected from substantial reductions in food intake even in households with very low food security.”

Missing a meal is not starvation, and most food insecure people don't even miss a meal, but this survey is how the USDA is able to say that 14% of all US households are food insecure.

Food has become cheaper over the past several decades, even for the very poorest households.  Using Consumer Price Index data, I constructed a food staple price index using items that had prices going back to 1980.  My index is equally weighted by the prices of rice, ground beef, eggs, frozen orange juice, and frozen vegetables.  This index has increased by 112% since 1980, but the minimum wage has increased by 133%.  The overall CPI has increased by 208%, which means that the real price of these food staples has fallen by 31%.  Using the minimum wage as an inflation index, food prices have declined by 9%.

In addition to cheaper food, poor people have food stamps, food banks, and other assistance programs available to them.  America has never had significant starvation, but 50 years ago the average BMI was below optimal levels, and during the world wars the military did reject a fair number of recruits who were too skinny. Sometime in the 1960s the average BMI crossed the line between underweight and overweight.  Obesity is far more of a problem among low and very low income people than is malnutrition.

The Press-Citizen article argues that poor people in Iowa City live in food deserts, because grocery stores are not within walking distance.  Iowa City recently allowed Uber to operate, and my Uber app tells me that the fare to a large grocery store from anywhere in town is $4 for 4 people, with a waiting time of 4 minutes.  This means that four neighbors could share a ride, and each would pay $2 for a round trip, which would be less than 2.1% of the cost of a week's groceries, even for the poorest families. Uber requires a credit card and Internet access, but pre-paid cards and smartphones are available at Walmart, and most poor people have them.  Out of four neighbors sharing a trip, one is very likely to have a card and Internet access.

We could make food cheaper by discouraging organic farming, since organic farms have lower yields, and organic produce has no health benefits.  We could also make food cheaper by eliminating government farm programs that reduce supply.  There is no serious movement to do either of these things because most people realize (often without admitting it) that no one really starves in this country.

If there is no starvation, why do some people try so hard to convince us otherwise?  One reason is that the left wants to humble the wealthy and uses propaganda like this to build support for high taxes and big government.  Another is that government bureaucracies and private charities need the perception of an ongoing crisis to justify their budgets.

Providing food is the easiest way for people to help the poor, but additional food assistance is no longer what the poor need.  Their other problems, like crime and bad schools, are much harder to deal with.  It is difficult for charities to raise money for these things, so they continue to raise false alarms about hunger in America.


Wednesday, June 8, 2016

Chevy Volt

A candidate for County Supervisor here suggested that the county could save money by purchasing Chevy Volt electric cars.  I was curious about whether money would really be saved.

The cost of a Chevy Volt is currently $33,220, while a comparably sized Ford Fiesta costs $14,580.  The candidate suggested that the cars would be driven 50 miles per day, or 12,500 miles per year.  A Fiesta goes 31 miles on a gallon in city driving, and gas is $2.19 per gallon, for a total annual fuel cost of $883 per car.  At 10.82 cents per kwh and 2.7 miles to the kwh, the annual electricity cost of the Volt is $501, for a saving of $382 per year.  Even assuming zero interest and a 10 year life of the cars, less than a quarter of the extra cost would be recovered in fuel savings.  Even if electricity were free, less than half of the extra cost would be recovered in 10 years.

Not counting the Sheriff’s office, ambulances, buses, and road equipment, the county annual report shows that the county owns 39 cars.  Spending an extra $700,000 to replace them with Chevy Volts instead of cheaper cars does not seem like a wise financial choice.

Sunday, May 29, 2016

Payday Lending

An editorial in today's Des Moines Register opens by saying "Payday lenders gouge the poor."  It goes on to accuse the industry of earning "extraordinary profits" by charging an average interest rate of "nearly 260 percent."  Payday lending is "sinful" and should be eliminated, the editorial says, and "credit unions and banks should do more to provide emergency loans to low-income consumers."

I would love to see the editorial writers attempt to provide short-term emergency loans at lower rates than payday lenders and survive.  Suppose a typical customer needs $100 until next month and agrees to repay $120.  After overhead, cost of capital, and defaults, will profits really be extraordinary?  A default rate of even 10% would be likely to wipe out net profit, but the implied simple annual interest rate is 240%, and the compounded annual rate is 892%.  The cost of capital for the industry is high because of the threat of regulation - in other words, the Register is increasing the cost of payday loans by editorializing in favor of regulation.

Hotels charge hundreds of dollars per night for tiny rooms with no kitchens - this amounts to rent of thousands of dollars per month!  Why isn't this unconscionable gouging?  It is because it costs more to provide short-term rentals than long-term rentals.  Similarly, secured 30 year mortgages are cheaper to provide than unsecured short-term loans.  If credit unions and banks got into the business they would also charge high rates - they don't enter the business because of the risk of being on the wrong side of editorials like these.

In the same edition of the paper on page 2A, the Register advertises the Iowa Lottery - why isn't that gouging the poor?

Poor people need credit.  Borrowing $100 and paying $120 in a month can save a job when a car that is needed to commute breaks.  When the payday loan industry is eliminated, poor people will be worse off.  It is true that some people borrow too much, but the doughnuts our corner bakery sells are also bad for people who consume too many of them.  This fact does not mean that the baker is a bad person or should be put out of business.

Editorial writers do not care about poor people, or they would think through issues more carefully.  Poor people are props and tools in their struggle for social dominance over the wrong kind of white people.  Payday lenders are definitely the wrong kind of white people.

Sunday, May 22, 2016

Report from the Iowa Republican Convention

The Iowa Republican Party held its state convention yesterday in Des Moines, and I was a delegate.  I was interested to see how enthusiastically the party will support the nomination of Donald Trump.

Party leaders and elected officials are now 100% behind Trump.  They believe he has a good chance to win, and more importantly, a better chance of winning than any possible alternative.

The vast majority of delegates have accepted this reality - they will vote for Trump, and they will be part of the party machinery that gets out the vote in November.  I would say that a large minority was enthusiastically behind Trump, while the majority now sees him as an acceptable second choice.  Only a small minority was hostile to Trump, and they were remarkably well-behaved.  There was one minor dispute about rules, and only one attempt to subtly oppose Trump through a platform amendment, which was voted down by a large margin.

Four people ran for two presidential elector positions.  There were three long-time party activists and one open Trump supporter - the two activists with the most party service won, and the Trump supporter received the fewest votes.  More than half of Iowa's delegates to the national convention were selected at the state convention. (the remaining national delegates were selected at district conventions)  The process is very different than at district - a nominating committee chose a slate of delegates and alternates, and there was an up-or-down vote on the slate.  No attempts were made to amend the slate, as happened four years ago when Ron Paul supporters attempted to take over the convention.  As a national alternate delegate I attended the meeting of national delegates after the convention, and there were no signs of dissent from the convention theme, which was preventing Hillary Clinton from becoming president by supporting the nomination of Trump.

Trump's name was not mentioned very often - phases like "taking back the White House" and "our party's nominee" were common.  It seemed to me that party leaders were walking on eggshells, trying to avoid upsetting party loyalists who just two months ago thought their favorite, Ted Cruz, was going to win the nomination.  Interestingly, party leaders never liked Cruz, and Governor Terry Branstad worked against him in the February caucuses.  Branstad was probably the boldest Trump promoter, using his name and the phrase "Make America great again."

Conventions provide a first glimpse of fall campaign strategies.  The two I noticed were Trump's supreme court selections and federal policy on local school bathroom usage.  Trump's court selections were clearly reassuring to conservatives, and the Obama administration gave Republicans a gift last week by directing local school districts to allow transgender students to use bathrooms designated for their new gender identity.

The letter from the administration to schools is remarkable.  When Title IX was passed in 1972, some worried that the law might eventually require single-sex bathrooms, but their fears were put to rest with language in the law and regulations allowing "separate but equal" facilities.  No one at the time could possibly have guessed that 44 years later the federal government would recognize a right to change gender identity and have a choice of which bathroom to use.  According to the letter, "gender transition can happen swiftly," and  gender transition is when "transgender individuals begin asserting the sex that corresponds to their gender identity instead of the sex they were assigned at birth."

In other words, if a boy says he is a girl, he must be given access to the girl's locker room and bathroom.  There is nothing in the letter giving schools any judgement or leeway.

I wouldn't be surprised if 10 years from now school bathrooms and locker rooms are all unisex, perhaps with urinals removed and individual stalls for showers, but we will not be there on November 8, 2016.