State of Concern

Vicious circles infest state financial planning. People lose jobs, so income tax plunges. Houses fall off the value cliff, folks walk away and abandon properties, and property tax revenues plunge. People without jobs stop buying, so retail sales taxes plunge. In the last three recessions, it took states three to five years to catch up (with employment being a trailing economic indicator), but this time, the “jobless recovery” suggests that states would be lucky to get back to normal in double that time. Six years would be optimistic. So what do states do in the meantime?

AOL Money (October 4^th) tells the why and the wherefore as state revenues continue to dwindle: “Census figures show states' income taxes plunged almost 28 percent in the second quarter of 2009, falling even further in places such as Arizona and California that were among the hardest hit by the housing market collapse. States' quarterly sales taxes fell almost 10 percent compared to the previous year... Unlike the federal government, states generally must balance their budgets. That's why one-third of states have raised taxes this year. They've hit the wealthy with income tax surcharges, hiked sales taxes that disproportionately affect the poor and targeted smokers, drinkers and motorists with higher taxes and fees.”

Unemployment insurance, welfare, and Medicaid claw at state reserves and revenues. With up to two thirds of state revenues coming from sales and income taxes, just when folks can afford it least, these governments are raising fees, income taxes, college tuition and sales taxes… all “little pressures” that further prolong the agony, adding months if not a full year to this already battered economy. What else are they to do, state officials ask? Well, let’s consider one arena where maybe it’s time for a change.

Take a good look at the retirement benefits and healthcare benefits accorded to state employees… a really good look. Used to be that the trade-off for getting paid a bit less than the marketplace was alarming retirement, vacation and health insurance. Now that government workers are actually making more than those in the private sector, with vastly superior job security, isn’t it time to level the playing field and reexamine those extraordinary benefits? Retirement after 20 years’ service is breaking us. Even 25 and 30 years can be light if these folks are in their 50s.

At some point, as we debate national health insurance, we might actually want to level the benefits playing field. It’s time to ask the unions and state governments to understand how galling it is for those of us who have to write big checks for benefits that they take for granted feel about disgruntled employees who are witnessing and resisting attempts to increase co-pays and deductibles in their insurance package. I’ve asked a lot of state employees to guess what people in the private sector have to pay to get the same level of coverage that they have. The closest guess I have heard approached half of the actual cost. They don’t even know what it really costs!

It’s equally galling when government retirees have “defined benefit plans” which provide them with a precise (cost-of-living adjusted) monthly stipend when they retire. Most of the rest of us have to settle for Social Security plus whatever can be paid based on the amount in the retirement count when we need to access it. There’s nothing wrong with providing reasonable benefits to government employees, most of whom have earned the right to receive them, but when we start having to raise tuition and push education beyond the means of average families, when we have to tax people who are already facing falling income based on a failed economy, maybe we need to take another look at what seems to be excessive in this day and age.

Maybe it’s time for a reality check. We cannot afford these massive and often unfunded state employee retirement funds, silk stocking health benefits and often absurdly early retirement opportunities. It just seems strange for taxpayers to struggle to provide benefits for their “public servants” that the taxpayers cannot afford for themselves.

I’m Peter Dekom, and I approve this message.

Does the Sweet Tooth Really Bite?

The Education Department of New York City has banned… well almost totally banned… those dreaded, terrifying, death-defying, fear-inducing and downright fattening “bake sales” used by schools to raise money for everything from new books to athletic programs. No more yummy carrot cake, cupcakes, chocolate cream pie or piled-high-superrich-icing-slathered cakes-that-otherwise-defy-description sold at public schools in NYC. Junior is getting enough fat and sugar, so the folks in the Big Apple don’t want that apple in pie or cake form.

Limits on what can be sold in on-site school vending machines or student stores also removes fats and sweets from the shelves and slots. There’s even an academic reason for the new wellness campaign, a cornerstone of Mayor Bloomberg’s education agenda for the city: “Roughly 40 percent of the city’s elementary and middle school students are overweight or obese, according to the Education Department. The department also found a correlation between student health and performance on standardized tests, according to a survey it released in July.” October 4^th NY Times.

While states like California have placed severe limits on what can be sold in school vending machines, lunch programs and bake sales, New York City actually goes one giant step beyond. But kids can still bring fatty and sugary snacks with them for their brown bad moments or to celebrate a birthday.

Of course, special interests get exceptions to these rules as well. The above Times article: “Parent groups and Parent-Teacher Associations are conspicuously given an exception: once a month they are allowed to sell as many dark fudge brownies and lemon bars as they please, so long as lunch has ended. And after 6 p.m. on weekdays, anything goes. But at that hour, most students are long gone, and as far as the Education Department is concerned, stuffing oneself with coconut macaroons and peanut butter cookies at that hour is one’s prerogative.”

The Centers for Disease Control issued a report on all this (looking at 2002-2008) in the last few days. Some conclusions:

1) Of 34 states that collected data, the average number of secondary schools that didn't sell soda or fruit drinks that weren't 100% juice went from 38% in 2006 to 64% in 2008.

Mississippi and Tennessee did best, increasing to 75% from 22% (Mississippi) and to 74% from 27% (Tennessee).

2) The average number of schools (in the 40 states that provided data) that "did not sell candy or salty snacks not low in fat" increased from 46% in 2002 to 64% in 2008. (Oct. 5^th Los Angeles Times)

So if you link this ban (and growing trend) with a recent study at Cardiff University in the U.K. – which associates high levels of sugar consumption during childhood with a later propensity to commit criminal acts – the combined impact is most interesting. The October 3^rd Los Angeles Times summarizes the report: “To test this hypothesis, the researchers used the British Cohort Study to obtain information on the frequency of sweets consumption at age 10 and on violence convictions by age 34… They found that 69% of people convicted of violence had in fact eaten sweets nearly every day when they were younger. Only 42% of those who had been nonviolent until age 34 reported such daily consumption.

“The study concludes: ‘One plausible mechanism is that persistently using confectionery to control childhood behaviour might prevent children from learning to defer gratification, in turn biasing decision processes towards more impulsive behaviour, biases that are strongly associated with delinquency. Furthermore, childhood confectionery consumption may nurture a taste that is maintained into adulthood, exposing adults to the effects of additives often found in sweetened food, the consumption of which may also contribute towards adult aggression. Moreover, although parental attitudes were associated with adult violence, the effect of diet was robust having controlled for these attitudinal variables. Irrespective of the causal mechanism, which warrants further attention, targeting resources at improving childhood diet may improve health and reduce aggression.’”

Or maybe parents who don’t know enough or care enough to control their kids’ diets probably aren’t the best parents. And remember the academic links above… aren’t less educated kids more likely to commit crimes anyway? We know there are kids with medical issues that are certainly behind many issues, but when you are in a grocery store and watch a parent stuff candy into a begging child’s mouth to shut them up… well, we’ve all seen it, and it is never pretty.

I’m Peter Dekom, and I approve this message.

Unemployment of Olympic Proportions

What do the 2016 Olympics and the September 2009 jobs report have in common? Jobs lost to overseas markets never to find replacement in the United States. Dan Burrows, writing for AOL’s Daily Finance on October 2^nd, had this glimmering note of nattering negativity for the future: “Oh, and by the way, the average unemployment forecast for the middle of next year? It's the same as today: 9.8 percent.”

The markets reacted October 2^nd, plunging at the job loss figures, 100,000 more folks than they figured (263,000 total lost) for that whopping 9.8% number (17% if you count those who want full time jobs but have either stopped looking or can only get part-time work). But “everybody knows” we’re heading north of 10%. What’s the problem? We all know that unemployment is a “trailing economic indicator” (a reflection of a recession that has passed). So what’s the problem?

The problem is that maybe, just maybe, those who define the beginning and end of a recession or depression simply based on market growth actually need to rethink this glib analysis, since it doesn’t mean a thing for most Americans. And maybe, just maybe, this period of unemployment is not a trailing economic indicator but is instead a longer-term symptom of an economy with no direction. Some call it a “double-dip” recession, but I think it is one giant economic reset of American hopes and dreams.

Just about every gain in employment has been linked to federal spending under the stimulus package or other incentives (like the cash for clunkers program). The private sector is, to put it mildly, moribund… unless you are a bankruptcy lawyer. More than a million Americans filed for bankruptcy in September, the highest since the laws were revised in 2005 and still one of the highest rates in U.S. history.

Americans are still figuring out what they can do to make a living. With new Social Security retirement claims 23% higher, it’s clear many of us have just given up. With almost one in five of us under or unemployed (and that excludes the above retirees!), the toll on our notion of self-worth is staggering. We all feel like Chicago as it lost its bid for the 2016 Olympics.

The harsh reality is that the economic missteps of a well over a decade of regulatory abuse and stupid government “laissez faire” policy-making has left the future of this great nation very much in question. While President Obama probably bit off a whole lot more than he could possibly chew in his opening months of the presidency, he has to feel a lot like a ship captain getting a new command: the Titanic just after it hit an iceberg. But even though he hardly caused this mess, he may just be stuck with responsibility for it in the eyes of the voting public.

With the average wage-earner in the U.S. working 32-33 hour weeks, there is also a lot of extra capacity that would have to be absorbed before new jobs are brought back or created. The solution may be hindered by the fact that most of what will eventually become a “recovery” (maybe in a few years) probably will not be born in our legacy companies. We need new inventions, new directions, new technologies, new employers and new jobs.

And the fuel for such nefarious opportunities has to be education – oh, despite lots of federal rhetoric to the contrary, we are actually cutting education budgets at virtual every private and state level – and reasonable access to credit for small businesses – ah, this beast is drugged dormant with little hope for any near-term relief. So as stock prices hover at what appear to be unsustainable highs (albeit lows compared with early 2008) – after all under and unemployed people struggling with mortgages in overleveraged homes does tend to spend the money on goods and services to support those stock prices. Back to the drawing boards Mr. Obama, and start with catching and rebuilding our educational system before it falls beyond repair and address the credit issue that is decimating the small business men and women of America.

I’m Peter Dekom, and I approve this message.

$254.8 Billion

That’s how much of the $700 billion in Trouble Assets Relief Program (TARP) money – the fund set up to bail out our financial system – is yet uncommitted. That does tell you than we’ve spent $445.2 billion, and according to CNN Money (October 3rd), here’s how we’ve fared:


· We’ve probably lost $100 billion. Bye-bye? But many think we avoided the Second Great Depression. Maybe? Maybe not?

· The government bought into preferred shares or convertible debt (about half of the total they have spent to date) of the big financial insitutions, and has received repayments of $71 billion and preferred stock (pretty safe) of $12 billion.

· The mortgage foreclosure relief program has spent about $22.3 billion (out of $50 billion allocated), and most of this is a total loss.

· GM and Chrysler sucked up about $83.5 billion, $2.1 billion of which has been repaid, $50 billion is sunk (and that might be right word) into GM and $15.2 into Chrysler… Treasury thinks that almost $30 billion of that will be lost or at least underperform. Are these bad boys heading south anyway as consumers just are not spending to buy big ticket cars, except with extraordinary incentive plans (cash for clunkers)? Is bankruptcy (and a big taxpayer hit) inevitable?

· Treasury has pumped about $44 billion into troubled insurance giant, AIG, and there is still TARP money available for that company. “[E]conomists are dubious about getting the whole thing back. The company has pledged to repay its TARP loan in three to five years, but the insurer has missed three dividend payments already and won't pay back most of its other loans.” Hey, those economists!

· “Treasury converted its entire $20 billion emergency loan to Citigroup … into common stock. Financial industry experts note that though Citi's stock is up 365% from its March low, Treasury didn't convert the stock into common shares until the end of July, missing the vast majority of that rally.”

· “Economists are also doubtful that companies like GMAC [$13.5 billion], Bank of America [$45 billion] … and CIT [$2.3 billion and close to bankruptcy] … will pay back all or any of their loans.”

We’ve rescued the 19 biggest financial institutions and left the regional banks to wallow in hard times and severe credit impairment. And for the most part, the biggest banks seem to be in reasonable shape. Our carmakers are facing a consumer base with little desire to make big ticket expenditures, and their future, notwithstanding the bailout, is anything but certain.

Has the hurricane passed? Why do I think we are at the eye of the storm? The weather report is not exactly what most of us want to see. Happy Belated Birthday, TARP (October 3^rd)!

I’m Peter Dekom, and I approve this message.

Make Mine a Buick

Congress thinks those who have Cadillac health insurance policies should be taxed on the excess benefits. But they are having one hell of a time figuring out what that is. As you get older, health insurance costs staggeringly more, even for basic plans. And many union representatives, noting that healthcare costs were easily outpacing the general cost-of-living increases, have opted to focus their new contracts on getting more benefits (lower deductibles and co-pays are particularly popular) versus higher hourly wages. But if healthcare benefits are substituting for higher pay – since higher pay would be subject to tax – shouldn’t we simply tax policies with such clear financial benefits. And have politicians lose union support?! Yeah, right!

The October 1^st Washington Post: “Many proponents of taxing high-end employer-based coverage have singled out the titans of Wall Street finance and industry, whose insurance might pay for regular EKGs, CAT scans and weekend health retreats at tony spas. The California Health and Longevity Institute, for example, offers ‘comprehensive physicals’ over several days that include personalized counseling on wellness, fitness and nutrition… But insurance plans that cover those types of things are rare. More common are the generous health benefits that many union workers receive -- plans with high employer-paid premiums, low deductibles, prescription drug coverage, vision and dental care, and low or no co-payments.”

The conundrum is obvious: “‘It's the old Washington, D.C., law of unintended consequences,’ said Robert Laszewski, president of Health Policy and Strategy Associates, a consulting firm. ‘They went after the Goldman Sachs partner and they ended up with the fireman in Brooklyn.’” (Post article above). For anyone faced with buying health insurance, even basic policies in high cost areas can run over $1,500/month for families, so where’s the line? $1,700? $2,000? Does age factor into this (younger insureds are always cheaper). Do we forget about taxing this benefit? Address “abusive luxuries” if we can figure out how to quantify them?

Presidential candidate, Republican John McCain, started this focus on eliminating tax-free corporate medical benefits to "those people who have the gold-plated Cadillac insurance policies that have to do with cosmetic surgery and transplants and all those kinds of things." Good luck finding coverage for all those wonderful little extras. Not that common. What is common, particularly among union and governmental employees (who tend to be older and live in expensive urban centers), is pretty high insurance rates for demographic factors they actually cannot control.

Senate Finance Committee Chairman, Max Baucus (D-Mont), author of the current plan being hotly discussed on the Hill, suggested initially that there be an excise tax of 35% on insurance plans that cost more than $8,000/year for individuals and $21,000 for families, but soon he found some pretty heavy opposition from high risk workers (coal miners, firefighters, etc.). Sen. John D. Rockefeller IV (W.Va.): “I want people to know -- particularly the coal miners in my state -- that I will work to protect plans for high-risk workers from an excise tax… Taxing these higher-priced insurance plans is simply unacceptable.” Baucus then suggested $750/month for individuals and $2,000/month for families as the new adjusted threshold. As time passes, these limits rise (1% per year), but I suspect, this issue has a long way to go before any semblance of taxing this benefit actually winds up in and actual legislation. What are your thoughts?

I’m Peter Dekom, and I approve this message.

Faster than a Speeding Bullet

As our unemployment rate soars to 9.8% nationally – 263 thousand fewer jobs in September – there is a clear vector to creating new job openings that the government seems to be fighting tooth and nail! It seems our leaders are concerned that texting, speaking on cell phones and – perish the thought – entering data on a computer, all while driving, should be banned. OK, these activities only kill about 6 thousand people a year (and some of those might not actually have jobs that will need to be replaced) – so that won’t improve the jobless rate very much, but it’s a start. What, you say, why don’t we just let lawyers continue these activities so that we can get of that plague?

At the Federal level, the President has signed an executive order stopping federal employees in federal vehicles (or on federally-issued phones in private vehicles) from texting. Bummer, federal employees! Transportation Secretary, Ray LaHood (you never hear from these secondary cabinet appointments, do you), following a conference on “distracted driving,” suggested that the feds use the “big stick” of cutting off federal funds to states that don’t curtail texting by law – a practice that worked well when the feds wanted to push states to raising the minimum drinking age to 21 across the land.

So like, who really opposes such laws? Couldn’t really have a serious lobby on this issue, right? Well guess again. The trucking industry is up in arms about the thought that truckers can’t communicate with their dispatchers through laptops and built-ins while they are driving those multi-ton loads of crushing destruction on less sleep than an insomniac in a construction zone. Gotta sympathsize with them. They have a good point… efficiencies in maximizing deliveries, communicating delays, and managing shipments do appear to be more important than a few lousy lives, whose death may help ease our unemployment burden.

And truckers aren’t alone. The distracted driving conference had lots of folks who are under increasing pressure to deliver more (particularly since so many of their peers have been laid off, pushing an increased workload on those remaining) in decreasing spans of time. The October 1^st New York Times: “Real estate brokers, pharmaceutical sales people, entrepreneurs, marketers and others say they have little choice but to transform their cars into cubicles. In this merciless economy, they say, they have to make every minute count, and respond instantly to opportunities and challenges… And they argue that the convenience of constant contact — and the chance to tick off items from an endless to-do list while driving — far outweigh what they think are slim chances that it could lead to a wreck… Truckers, plumbers, delivery drivers and others are tethered to dispatchers with an array of productivity devices, including on-board computers that send instructions about the next job and keep tabs on drivers’ locations. Such devices can require continual attention — distracting drivers who are steering the biggest vehicles on American roads.”

Look at the opportunities and jobs that such activities promote within this fading economy: insurance claims adjustment, collision repair shops, medical and legal opportunities, disability claims management, human resources and employment agencies, morticians, accident investigation, police work… and I am sure you can think of a few more. Do we really want to deprive the people in these budding fields of the obvious growth opportunities? Hey, since we have already placed $5 million as the value of a human life (the maximum in lifetime benefits under most health insurance policies) and there are lots of unemployed statisticians, why don’t just let those statisticians run some “efficiency” and “cost benefit analysis” numbers and tell us if perhaps “society” is generating more economic value from allowing such “mobile data-inputting” than in banning it! Death = growth opportunities. Wow, I’m just a font of new job-creation ideas! Pull over! Please!

I’m Peter Dekom, and is inputting a destination on your navigation system texting?

We’d Rather Swiss than Fight

Yodel-lay-hee-hoo! I’ve blogged about the Massachusetts model for governmentally administered healthcare, but the focus is now shifting to one “government” – notoriously efficient Switzerland – that covers the entire spectrum of its national healthcare with a plan that is run solely through the private insurance companies. As Blue Dog Democrats seems to be putting the kibosh on the “public option” – where the government itself would provide “one choice” in consumer alternative healthcare options (and by creating an alternative that doesn’t have a profit margin, create a cost competition to force insurance companies to cut costs to be in the game) – folks are looking at what else is out there that works.

Having just come back from a business trip in Canada, the talk up there is about how stupid we seem in battling over the evils of national healthcare and how we think the people up there would much rather have the choices we have. Not for anything! To a person, they fiercely defended their system. And it’s a pure public option plan.

When I told my Canadian friends how much I spend on health insurance (plus co-pays and deductibles), they simply blanched. They smiled smugly and said, while they did have to share some of the costs when they accessed the system and the wished some treatments could move along faster, they truly appreciated the fact that they never every worried about medical issues. They thought the number of American families who go bankrupt every year was supremely callous.

But that form of government-provided plan is dead in the water in the US. We’re still going to pay through the nose, but we seem to be heading towards legislation that will run healthcare through the private insurance carriers, eliminate rejection or termination for pre-existing conditions or extreme medical issues, create “pools” of policies at various levels that can be accessed by anyone, mandate health insurance coverage even for the “young invincibles” and subsidize those who cannot afford the cost of coverage. The insurance carriers love that we are forcing people to become their customers!

The Swiss do it a bit differently. They require the carriers to offer a basic plan as an option (for which they are not permitted to make a profit!), but anything beyond that basic plan is simply “business as usual” for these profit-seeking companies. Carriers cannot exclude or refuse any applicant for any reason. Seems almost like a public option being provided by the private carriers as a tradeoff for building their business. Everyone is required to have coverage. The Swiss government subsidizes those who cannot afford coverage, and has no separate plan for the elderly.

The October 1^st New York Times: “The Swiss government does not ‘ration care’ — that populist bogeyman in the American debate — but it does keep down overall spending by regulating drug prices and fees for lab tests and medical devices. It also requires patients to share some costs — at a higher level than in the United States — so they have an incentive to avoid unnecessary treatments. And some doctors grumble that cost controls are making it harder these days for a physician to make a franc.

“The Swiss government also provides direct cash subsidies to people if health insurance equals more than 8 percent of personal income, and about 35 to 40 percent of households get some form of subsidy. In some cases, employers contribute part of the insurance premium, but, unlike in the United States, they do not receive a tax break for it. (All the health care proposals in Congress would provide a subsidy to moderate-income Americans.)”

The cost of healthcare in Switzerland is 10.8% of their GDP (versus our 16%). Doctors cost less as well: “[S]pecialists in Switzerland earn three times more than the nation’s average wage, compared with 5.6 times for American specialists. General practitioners in Switzerland make 2.7 times more than the average wage, versus 3.7 in the United States.” And if it is determined that a doctor ordered an unnecessary treatment, well, that doctor is required to pay the system back and refund the money!

We do have choice, and we do need a system in place now to end this soon-to-be unaffordable-for-almost-everybody cost of healthcare. Think a bill will pass this year?

I’m Peter Dekom, and I approve this message.

Losing Hearts and Minds

The absolute worst policies for any militant group to follow are those which are either specifically directed at innocent people or those military campaigns with excessive “collateral damage.” Most people simply want to live their lives with as little dangerous jeopardy as possible; they simply want to be left alone to participate in normal family life, have secure homes, sufficient food and medical care where possible (or at least not need more because of war-inflicted trauma) and be able to work and farm without fear.

While militant and explosive anger can hold the attention and dedication of a population for a short time – particularly in reaction to a perceived injustice – as time passes, constant instability and daily risks to life and limb wear thin in the minds of almost every society that has ever grappled with these issues. The image of civilian slaughter and destruction – even the sons and daughters of your enemy – can actually become repulsive. Even Americans, gung ho to react in Vietnam or Iraq, grew weary of the conflicts that didn’t remotely turn out to be “as promised.”

What may have once been a compelling recruiting tool in times of perceived threat may become an old, worn-out message after years of killing, maiming and annihilation “for a cause” – particularly when the results either never materialize or simply result in the imposition of a different corrupt or power-hungry regime. We’ve seen these patterns of eroding popular support for Soviet apparatchiks or terrorist leaders in Northern Ireland.

And now, we are seeing an erosion of the staying power of religious militants who impose “foreign fighters” in local conflicts, who lord it over the regional incumbents, and who draw sharp, targeted military counter-attacks whenever they appear on the scene. Al Qaeda is seeing just such a decline in their popularity.

The September 26^th NY Times: “Many students of terrorism believe that in important ways, Al Qaeda and its ideology of global jihad are in a pronounced decline — with its central leadership thrown off balance as operatives are increasingly picked off by missiles and manhunts and, more important, with its tactics discredited in public opinion across the Muslim world… ‘Al Qaeda is losing its moral argument about the killing of innocent civilians,’ said Emile A. Nakhleh, who headed the Central Intelligence Agency’s strategic analysis program on political Islam until 2006. ‘They’re finding it harder to recruit. They’re finding it harder to raise money.’” Awe and respect have given way to disillusionment and resentment. But don’t smile too soon; there are new military terrorist groups forming in the wings.

Which is why American-led counter-insurgency movements, particularly in the Afghan conflict, must be exceptionally wary of becoming viewed as the “foreign invaders” – as the Soviets were perceived in their Afghan conflict that ended in 1989 – with little or no concern for the innocents who perish in seemingly every conflict? To many Americans, “they all look alike.” Bearded men with weird caps… they’re all the same. If that were indeed the case, we’d have a good argument for total nuclear destruction, but most of these people just want to live their lives and be left alone.

We live far from the conflict; 9/11 was the last real attack by foreign militants on U.S. soil. We cannot be attacked and be expected to sit idly by… but the world looks at our actions, failures, “collateral damage,” our arrogant “contractors,” accusations of torture and judges us accordingly. I know who we are… for the most part, pretty damned good people who respect individuals’ rights and believe in life, liberty and the pursuit of happiness… and sometimes we have to fight. Let’s just remember that Golden Rule… and act accordingly.

I’m Peter Dekom, and I approve this message.