Ah it's that time of year again. Get the kids on the yellow bus, sit in traffic and think about stuff that bugs you.
Right now, one thing is bugging me (at least more than anything else) - healthcare reform.
Yes, it's controversial and yes, it's annoying but the reality is something is going to happen this year regarding healthcare and insurance whether you like it or not. Apparently to have an opinion differing from those in elected positions makes one 'Un-American' or an extremist.
However, I am going to propose something different with this blog today. I am going to suggest that people can actually have a civil conversation and debate about creative ways to help solve this problem. Here are the rules:
1. No berating an opposing view.
2. Your argument must be supported by facts
3. Please refrain from salty language (that's only allowed by me, the host. It's the only priviledge I get to enjoy.)
4. Have fun and no solution is off limits. (That's called brain storming - something politicians in DC are incapable of doing because it involves having a brain to storm with.)
So here's my idea (yes, my bullet-proof vest is zipped up and I have my big boy pants on.)
Require surgeons to post their performance, or track record, showing how many operations they've performed, the number of medical related issues that resulted from these operations and the years of experience their staff has. Basically a surgeon would be required to give a three year history on patients after the surgery. (Think of it like the label on the back of a breakfast cereal, only something that's easily written on an 8.5 x 11 piece of paper.)
Next, after reading the 'prospectus,' allow the patient the chance to either pay A) a price that includes the ability to sue the the doctor for malpractice or B) a price that does not allow the patient to sue for pain and suffering, but only lost wages.
In the auto industry they call this 'tort' or 'no tort.'
Now before you go berzerk on me, consider the following:
According to statistics from Stanford University, in 2005 about 20 million people underwent surgery with anesthesia. 12,000 of those patients died from a surgery that was unnecessary (i.e - plastic surgery, elective surgery, etc.) 106,000 died from medication errors associated with the surgery, 20,000 from hospital errors and 80,000 from infections resulting from the surgery (National Ledger, 8/21/2009.)
Let me do the math for you. That means that .1% of all surgeries resulted in death due to hospital errors during surgery. Other patients that died were a result of surgery that was not elective and required immediacy, such as heart attacks, cancer treatment, horrific accidents, etc. Let's call these things 'unpreventable' and outside of a hospitals ability to 'fix.'
Consider some of these facts, also from the National Ledger and confirmed from other sources such as National Institute on Health.
A study conducted by the AMA revealed that despite spending $3000 more per person on healthcare here in the US compared to Great Britain, twice as many American have diabetes and we also have a higher rate of heart attacks, strokes, lung disease and cancer than our friends across the pond.
What gives?
We're overmedicated folks. A forty-year study conducted by Dartmouth confirmed that as certain areas of the country spent more on healthcare, those folks died a faster pace than areas that spent less on health care. Is less really more?
The World Health Organization in 2008 found that the US has the worst track record compared to other industrialized nations when it came to preventable deaths due to treatable conditions such as bacterial infections and and complications from surgeries (both of which occur in hospitals, I might add.)
Next, cap the number/type of prescriptions one doctor can write. Do we really need auto-refills from an answering machine at the local pharmacy? Shouldn't SOMEONE monitor how the prescriptions are working PRIOR to reordering?
From personal experience, I literally stopped taking medication because I felt better and have eliminated my acid reflux problem. I still have 97 pills left from a 100 pill order, but the auto dialer at the pharmacy called to remind me that my prescription can be refilled and to place my order soon.
I am not an automobile needing an oil change.
Instead, through preventive maintenance NOT induced by drugs (you know, running, eating better and going to bed at a reasonable time) I helped my body heal. Old fashioned approach, but something that works quite well; not just for me but for all of us. We're not unique, folks, despite what people tell us.
So there it is.
We spend twice as much as Britain for care that is worse, so the solution before you and the rest of America is to do what? Spend more money?
Money is not the answer. In fact, money is what got us into this mess. Money for the drug companies, money for the lawyers, money for victims.
No. Remove the monetary element and begin letting people choose.
I anticipate many comments, discussions and ideas. That's what this is all about.
Saturday, August 22, 2009
Monday, August 3, 2009
Improving Education
If you don't mind I'm going to pull away from healthcare reform and the stock market this week and discuss something that is near and dear to my heart - education. As a proud member of the Mars Area School Board I am a huge proponent of educating our young adults; not just so that they can get a better job and create a higher standard of living, but also so they can appreciate the gifts our world and our neighbors have to offer. Call it "education for the sake of education," I guess.
With that said, much has been said about finding ways to improve our educational system. One such proposal involves merit pay for teachers. On the surface this appears to be a great idea, and I'd challenge anyone to oppose methods for improving student performance.
However, when you look behind the numbers, it's very important to discover what the carrot tied to the stick is before implementing policies that reward teachers for improvements by their students. Additionally, it's important to evaluate administrators and their effectiveness.
Current proposals for merit pay seem to focus on improving test scores, which seems like a very real indicator of whether teaching methods are working and students are improving. After all, improved exit exams are clearly a sign that teachers are doing a better job teaching the things we deem to be important, right?
Not so fast.
Many economists have begun to analyze merit pay based upon improved scores and are discovering that teaching effectiveness actually decreases when financial incentive is tied to standardized tests such as the ones being proposed by congress. In fact, while scores certainly improve, student performance in areas goes down.
How can this be?
In order to analyze this, one needs to look behind the numbers and look at motivators. What motivates someone to teach?
First and foremost, it's pretty safe to assume that one enters the teaching profession to impact others first and make money second. In fact, the same holds true for police officers, social workers, nurses and healthcare workers and other community related type of professions. Motivators for this group would be things that impact the world socially first. Economists call these "social motivators (we're not much for creativity when it comes to naming things. Sorry.)
As a result, improving big societal topics like reducing childhood obesity, reducing violent crimes, reducing illiteracy, etc. are things that these groups would find quite endearing and they'd be happy to be a part of the solution. The evaluation process is cumbersome, time-consuming and difficult to measure; particularly over a short period.
However, when the "carrot" becomes something easily measurable, such as improved test scores, increased attendance or reduced drop out rates, the workers can and do modify their behavior so that they achieve the desired results.
Think about it for a minute. If you were given the opportunity to earn a 10% bonus based upon your product (children) improving their test scores, would you modify your teaching plans to include everything on the test? Absolutely. However, you might be overlooking true learning that occurs day to day; what everyone, including our President, is calling 'teachable moments.' Should we sacrifice teachable moments for the sake of a 1%, 2% or 5% improvement in test scores?
Study after study is beginning to reveal that merit pay for teachers might not be a fundamentally sound idea for this very reason. Imagine a police officer that worked on commission, earning $10 for every speeding ticket he or she generated. How about a firefighter that earned a commission on every fire they put out? (Would this lead to an increase in fires as well?) Maybe a doctor should earn commission on the number of surgeries he or she performs (aren't we going down this road already? How's that working out?)
Additionally, studies are showing that the amount of money spent per pupil does not actually equate to improved student scores. This flies in the face of everything we're being told by legislators, yet we continue to believe that spending more money per pupil is the only solution. After all, money fixes everything here in the US. In fact, we spend more per pupil in the US than any other country in the Western Hemisphere. The return our investment is less than stellar if measured in economic terms.
Perhaps an overhaul of our education system is needed. Let's start with reptition. How can we expect students to learn and retain anything when they only need to go 1/2 of a year?
No. There needs to be merit based performance incentives, but the carrot needs to be something other than test scores. It needs to directly tied to things that the instructor can control, such as his or her daily attendance, improving communications with parents or guardians (both positive and negative communications) and representing the employer (in this case the school district) in a favorable light through community involvement, fundraisers, etc. - things that occur outside of normal school hours so that they can continue to do what they do best, which is teach.
Perhaps congress and the current administration could dangle a carrot tied to going year-round or districts that offer longer school days. Imagine how much your personal performance at work would improve if you were required to work 45 hours per week. Currently students in Pennsylvania high schools have to have 5.5 hours per day, five days per week, of instruction time. That's 27.5 hours per week, 180 days per year. If you want to stretch this over the entire year, it would be the equivalent of working a part-time job 13 hours per week, or a day and a half per week, all year. You can't learn anything of substance in this timeframe.
And we want to tie teachers down with more standardized tests? It's counter-intuitive, but it tugs at our emotional reasoning.
This is called Behavioral Economics, by the way.
I know that my ideas are not popular right now, and most likely, society is going to put merit pay in place based upon test scores. Additionally, I don't see any politician suggesting full-time, 8 hours per day for students aged 12 and older. Don't look for it anytime soon, either.
Let me be one of many others to verbally come out and say this is a bad idea and will ultimately lead us to a decrease in efficiency as a society. If you have any doubts, look at the runway of failed education reforms like No Child Left Behind, Standardized Exit exams, etc.
We're not solving the bigger problems which is teaching students to embrace learning for learning's sake. That's too hard.
With that said, much has been said about finding ways to improve our educational system. One such proposal involves merit pay for teachers. On the surface this appears to be a great idea, and I'd challenge anyone to oppose methods for improving student performance.
However, when you look behind the numbers, it's very important to discover what the carrot tied to the stick is before implementing policies that reward teachers for improvements by their students. Additionally, it's important to evaluate administrators and their effectiveness.
Current proposals for merit pay seem to focus on improving test scores, which seems like a very real indicator of whether teaching methods are working and students are improving. After all, improved exit exams are clearly a sign that teachers are doing a better job teaching the things we deem to be important, right?
Not so fast.
Many economists have begun to analyze merit pay based upon improved scores and are discovering that teaching effectiveness actually decreases when financial incentive is tied to standardized tests such as the ones being proposed by congress. In fact, while scores certainly improve, student performance in areas goes down.
How can this be?
In order to analyze this, one needs to look behind the numbers and look at motivators. What motivates someone to teach?
First and foremost, it's pretty safe to assume that one enters the teaching profession to impact others first and make money second. In fact, the same holds true for police officers, social workers, nurses and healthcare workers and other community related type of professions. Motivators for this group would be things that impact the world socially first. Economists call these "social motivators (we're not much for creativity when it comes to naming things. Sorry.)
As a result, improving big societal topics like reducing childhood obesity, reducing violent crimes, reducing illiteracy, etc. are things that these groups would find quite endearing and they'd be happy to be a part of the solution. The evaluation process is cumbersome, time-consuming and difficult to measure; particularly over a short period.
However, when the "carrot" becomes something easily measurable, such as improved test scores, increased attendance or reduced drop out rates, the workers can and do modify their behavior so that they achieve the desired results.
Think about it for a minute. If you were given the opportunity to earn a 10% bonus based upon your product (children) improving their test scores, would you modify your teaching plans to include everything on the test? Absolutely. However, you might be overlooking true learning that occurs day to day; what everyone, including our President, is calling 'teachable moments.' Should we sacrifice teachable moments for the sake of a 1%, 2% or 5% improvement in test scores?
Study after study is beginning to reveal that merit pay for teachers might not be a fundamentally sound idea for this very reason. Imagine a police officer that worked on commission, earning $10 for every speeding ticket he or she generated. How about a firefighter that earned a commission on every fire they put out? (Would this lead to an increase in fires as well?) Maybe a doctor should earn commission on the number of surgeries he or she performs (aren't we going down this road already? How's that working out?)
Additionally, studies are showing that the amount of money spent per pupil does not actually equate to improved student scores. This flies in the face of everything we're being told by legislators, yet we continue to believe that spending more money per pupil is the only solution. After all, money fixes everything here in the US. In fact, we spend more per pupil in the US than any other country in the Western Hemisphere. The return our investment is less than stellar if measured in economic terms.
Perhaps an overhaul of our education system is needed. Let's start with reptition. How can we expect students to learn and retain anything when they only need to go 1/2 of a year?
No. There needs to be merit based performance incentives, but the carrot needs to be something other than test scores. It needs to directly tied to things that the instructor can control, such as his or her daily attendance, improving communications with parents or guardians (both positive and negative communications) and representing the employer (in this case the school district) in a favorable light through community involvement, fundraisers, etc. - things that occur outside of normal school hours so that they can continue to do what they do best, which is teach.
Perhaps congress and the current administration could dangle a carrot tied to going year-round or districts that offer longer school days. Imagine how much your personal performance at work would improve if you were required to work 45 hours per week. Currently students in Pennsylvania high schools have to have 5.5 hours per day, five days per week, of instruction time. That's 27.5 hours per week, 180 days per year. If you want to stretch this over the entire year, it would be the equivalent of working a part-time job 13 hours per week, or a day and a half per week, all year. You can't learn anything of substance in this timeframe.
And we want to tie teachers down with more standardized tests? It's counter-intuitive, but it tugs at our emotional reasoning.
This is called Behavioral Economics, by the way.
I know that my ideas are not popular right now, and most likely, society is going to put merit pay in place based upon test scores. Additionally, I don't see any politician suggesting full-time, 8 hours per day for students aged 12 and older. Don't look for it anytime soon, either.
Let me be one of many others to verbally come out and say this is a bad idea and will ultimately lead us to a decrease in efficiency as a society. If you have any doubts, look at the runway of failed education reforms like No Child Left Behind, Standardized Exit exams, etc.
We're not solving the bigger problems which is teaching students to embrace learning for learning's sake. That's too hard.
Sunday, July 26, 2009
Stock Market Update
So are you feeling any richer today than, say, last Sunday?
You should be, at least if you have an IRA, 401k, 529 college savings account or any other investments in the stock market.
The market did suprisingly well last week, with the Dow closing above 9000. Led by strong earnings reports, the new question is "can the market keep chugging?"
There is a lot on the agenda this week, so investors need to take note.
First up, a deluge of earnings is scheduled to continue with Dow, Exxon, Chevron, Disney and Verizon leading the charge. If reports are good look for a strong finish to July.
However, August has been a traditionally slow period, as investors and bankers take vacations for the month. It might create opportunities for short-sellers looking to capitalize upon a very dicey economic recovery in both the United States and abroad. Combined with a White House that is fiercely arguing its points on healthcare reform, traders are apprehensive to call this a recovery - at least not yet.
There are far too many questions left unaswered at this point, and if anything, the economy will continue to weigh down a true recovery for the next 60-90 days. Unemployment will likely go above 10% when the government reports next and experts aren't sure where it will top out. Housing starts are not showing tremendous signs of recovery and consumer confidence barely exists. Throw in Microsoft and Amazon missing estimated earnings and it's clear not much has changed.
However, several conversations with purchasing managers this past week indicate a small uptick in orders occurred in metals and fluids, indicating that there is something going on out there. Perhaps it is stimulus dollars making their way into the economy or commitments that finally developed over many months ago. Regardless, it seems to me that next year at this time the economy will be heading back into full gear.
Feel free to leave a comment or two and please visit our sponsors!
You should be, at least if you have an IRA, 401k, 529 college savings account or any other investments in the stock market.
The market did suprisingly well last week, with the Dow closing above 9000. Led by strong earnings reports, the new question is "can the market keep chugging?"
There is a lot on the agenda this week, so investors need to take note.
First up, a deluge of earnings is scheduled to continue with Dow, Exxon, Chevron, Disney and Verizon leading the charge. If reports are good look for a strong finish to July.
However, August has been a traditionally slow period, as investors and bankers take vacations for the month. It might create opportunities for short-sellers looking to capitalize upon a very dicey economic recovery in both the United States and abroad. Combined with a White House that is fiercely arguing its points on healthcare reform, traders are apprehensive to call this a recovery - at least not yet.
There are far too many questions left unaswered at this point, and if anything, the economy will continue to weigh down a true recovery for the next 60-90 days. Unemployment will likely go above 10% when the government reports next and experts aren't sure where it will top out. Housing starts are not showing tremendous signs of recovery and consumer confidence barely exists. Throw in Microsoft and Amazon missing estimated earnings and it's clear not much has changed.
However, several conversations with purchasing managers this past week indicate a small uptick in orders occurred in metals and fluids, indicating that there is something going on out there. Perhaps it is stimulus dollars making their way into the economy or commitments that finally developed over many months ago. Regardless, it seems to me that next year at this time the economy will be heading back into full gear.
Feel free to leave a comment or two and please visit our sponsors!
Sunday, July 19, 2009
Health care reform
Let me be the first to admit that I seldom, if ever, need my employer-sponsored healthcare package. I'm probably one of the lucky ones. I'm also not a doctor (and I've never played one on TV) so I don't know the total story when it comes to billing, paying, services, wait times in emergency rooms, elective surgeries, etc.
With that said, however, I understand business, finance and people...in that order.
So it's no surprise that business people despise the new healthcare reform package offered up by the government. And to be fair, who can blame them? The current tax system already imposes 15-35% income tax on businesses, and individual states throw more on top. Mix in 7.5% taxes into the social security fund, 1.65% into unemployment on the first $7,000 earned by each employee and most businesses can fairly say they pay upwards of 45% to the government. That's a lot of money, particularly on small business owners, which make up 80% of all employers in the US according to the Small Business Administration. If you owned a business that made $100,000 per year before taxes, how would you feel if you only took home $55,000 -$60,000 per year and were being asked to pay more?
Not sure about you, but I'd hire fewer people and actually consider firing a few, too. That doesn't sit too well ever, but especially now given our current 9.5% (reported) unemployment.
On the finance side, the system stinks worse than the Pittsburgh Pirate's front office (maybe) and there's no end in sight. How can an insurance company charge one fee, accept another from the healthcare provider and not be held to better standards? While I fully support price discrimination, as most economists would (if you don't know what price discrimination is, think "Ladies night" or "kids eat free" or the way the airlines price tickets and you'll understand the concept) health insurance price discrimination makes no sense whatsoever from a financial point of view. The pricing scheme is so convoluted that I actually do know why things cost so differently from one provider to the next - they don't know how to price their product or service.
People. Now this is a different story entirely.
Shame on us. We know better, yet we continue to try and get something for nothing or ask for more support so that we don't need to modify our behavior that lead to the problem! Rather than asking Uncle Sam to come up with a solution, maybe it makes more sense to modify our diets, exercise more, smoke less and eat more veggies so that we don't need to go to the doctor's office as often. If we go less, the demand for the product goes down and providers would need to find a better method to attract our business, such as, oh I don't know.... LOWER COSTS?
Ah, the "preventive" maintenance argument. That one hurts the most, as it actually involves personal responsibility, but it makes the most sense.
Think about it. If fewer of us needed to go to the doctor's office, emergency room, surgeons, etc. because our bodies were better equipped and healthier, those needing services would have quicker access, less tired healthcare providers and insurance companies that weren't questioning everything?
I'd love to call it innovative, but it's as old as the hills.
So consider my healthcare reform today by reforming your old habits. Take a walk, turn off the television and put down that bag of chips.
With that said, however, I understand business, finance and people...in that order.
So it's no surprise that business people despise the new healthcare reform package offered up by the government. And to be fair, who can blame them? The current tax system already imposes 15-35% income tax on businesses, and individual states throw more on top. Mix in 7.5% taxes into the social security fund, 1.65% into unemployment on the first $7,000 earned by each employee and most businesses can fairly say they pay upwards of 45% to the government. That's a lot of money, particularly on small business owners, which make up 80% of all employers in the US according to the Small Business Administration. If you owned a business that made $100,000 per year before taxes, how would you feel if you only took home $55,000 -$60,000 per year and were being asked to pay more?
Not sure about you, but I'd hire fewer people and actually consider firing a few, too. That doesn't sit too well ever, but especially now given our current 9.5% (reported) unemployment.
On the finance side, the system stinks worse than the Pittsburgh Pirate's front office (maybe) and there's no end in sight. How can an insurance company charge one fee, accept another from the healthcare provider and not be held to better standards? While I fully support price discrimination, as most economists would (if you don't know what price discrimination is, think "Ladies night" or "kids eat free" or the way the airlines price tickets and you'll understand the concept) health insurance price discrimination makes no sense whatsoever from a financial point of view. The pricing scheme is so convoluted that I actually do know why things cost so differently from one provider to the next - they don't know how to price their product or service.
People. Now this is a different story entirely.
Shame on us. We know better, yet we continue to try and get something for nothing or ask for more support so that we don't need to modify our behavior that lead to the problem! Rather than asking Uncle Sam to come up with a solution, maybe it makes more sense to modify our diets, exercise more, smoke less and eat more veggies so that we don't need to go to the doctor's office as often. If we go less, the demand for the product goes down and providers would need to find a better method to attract our business, such as, oh I don't know.... LOWER COSTS?
Ah, the "preventive" maintenance argument. That one hurts the most, as it actually involves personal responsibility, but it makes the most sense.
Think about it. If fewer of us needed to go to the doctor's office, emergency room, surgeons, etc. because our bodies were better equipped and healthier, those needing services would have quicker access, less tired healthcare providers and insurance companies that weren't questioning everything?
I'd love to call it innovative, but it's as old as the hills.
So consider my healthcare reform today by reforming your old habits. Take a walk, turn off the television and put down that bag of chips.
Friday, July 10, 2009
Let's try this again
There ain't no cure for the summertime blues - that much is sure.
And the worldwide economy seems to support this theory, plodding along painfully slow like a Pittsburgh Pirate's baseball season.
The question I get most from students and friends is "when will it end?" Sadly, I don't know and I'm not sure anyone knows. Experts are currently feuding over another stimulus package, and I promised my wife and kids that I wouldn't get angry this summer so I won't touch that hot potato. Instead, I want to focus on the good things I see happening, despite unemployment at 9.5% (closer to 13% when you put part-time employment into the mix and assume they'd prefer to be full-time) and a California government writing I.O.U's while a Pennsylvania government can't do the one job they are elected to do - pass a budget.
I want to count the good things today, and there are many.
First and foremost is that there is finally productive conversations taking place at very high levels, unlike the previous six months of political maneuvering. I think that some (not all) of the politicians recognize that times are tough.
Gas prices are about $1.40 less this year than last year and we have already passed the traditional 'high mark' of July 4th. This bodes well to improve consumer sentiment in the coming months.
The stock market is flat, which beats the heck out of investments falling faster than a kid doing a cannonball at the local pool. Folks have finally seen the bleeding on their 401k's, IRA's and college savings accounts stop. In fact, they most likely saw the balances improve last quarter and they should be up about 10% year to date.
The herd is finally getting thinner as companies have begun to realize the impact of their cost cutting measures and the consumer is benefiting from the slimmer margins. I'm not suggesting we're spending more, but I am suggesting that we're at least spending the same and the feeling of doom and gloom is gone. There's light at the end of the tunnel.
Housing is near the bottom in most major markets, but not all. Here in Western PA, while the market is anything but robust, it is steady and homes are selling.
I am not about to call a bottom on a market, or a top for that matter. But I can observe, and right now, it seems to me that the worst is well behind us. And while we might not enjoy 6-8% growth for many years to come, I am going to suggest that a moderate 2-4% growth rate is not always a bad thing and beats the alternative of negative growth.
We're living within our means and that's a good thing. Banks are making loans to people who deserve them and those who pay their bills on time. How can that be bad?
Oh, and the best thing about July is that I go on vacation at the end of the month. I'm refreshed and ready to write, so please look for weekly updates. I also joined the Examiner.com staff as a freelance writer and will be tackling local business issues on a fairly regular basis. Add this site to your favorites please and leave some comments!
And the worldwide economy seems to support this theory, plodding along painfully slow like a Pittsburgh Pirate's baseball season.
The question I get most from students and friends is "when will it end?" Sadly, I don't know and I'm not sure anyone knows. Experts are currently feuding over another stimulus package, and I promised my wife and kids that I wouldn't get angry this summer so I won't touch that hot potato. Instead, I want to focus on the good things I see happening, despite unemployment at 9.5% (closer to 13% when you put part-time employment into the mix and assume they'd prefer to be full-time) and a California government writing I.O.U's while a Pennsylvania government can't do the one job they are elected to do - pass a budget.
I want to count the good things today, and there are many.
First and foremost is that there is finally productive conversations taking place at very high levels, unlike the previous six months of political maneuvering. I think that some (not all) of the politicians recognize that times are tough.
Gas prices are about $1.40 less this year than last year and we have already passed the traditional 'high mark' of July 4th. This bodes well to improve consumer sentiment in the coming months.
The stock market is flat, which beats the heck out of investments falling faster than a kid doing a cannonball at the local pool. Folks have finally seen the bleeding on their 401k's, IRA's and college savings accounts stop. In fact, they most likely saw the balances improve last quarter and they should be up about 10% year to date.
The herd is finally getting thinner as companies have begun to realize the impact of their cost cutting measures and the consumer is benefiting from the slimmer margins. I'm not suggesting we're spending more, but I am suggesting that we're at least spending the same and the feeling of doom and gloom is gone. There's light at the end of the tunnel.
Housing is near the bottom in most major markets, but not all. Here in Western PA, while the market is anything but robust, it is steady and homes are selling.
I am not about to call a bottom on a market, or a top for that matter. But I can observe, and right now, it seems to me that the worst is well behind us. And while we might not enjoy 6-8% growth for many years to come, I am going to suggest that a moderate 2-4% growth rate is not always a bad thing and beats the alternative of negative growth.
We're living within our means and that's a good thing. Banks are making loans to people who deserve them and those who pay their bills on time. How can that be bad?
Oh, and the best thing about July is that I go on vacation at the end of the month. I'm refreshed and ready to write, so please look for weekly updates. I also joined the Examiner.com staff as a freelance writer and will be tackling local business issues on a fairly regular basis. Add this site to your favorites please and leave some comments!
Friday, January 30, 2009
Stimulate this
So Congress is set to throw another $900 billion into the crapper on a stimulus package.
I'd like to spend the next few paragraphs explaining how this stimulus, designed to help Americans, is actually going to have a negative impact.
The stimulus, while containing some details, has one really significant piece of data that shows up - any company taking funds from the stimulus and/or tarp will be required to utilize products and services from American companies. This is being done as a way to create jobs.
Here's where I'm going to get in trouble, especially living in the rust belt.
It's going to KILL the economy rather than stimulate the economy. Here's why.
If a company, let's say Caterpillar, decides to take stimulus funds they are now immediately handcuffed to American suppliers, regardless of price. As a result, and through a really miserable few quarters, the American suppliers will not be required to go through competitive bidding to ensure they are a low-cost provider and high quality provider. This will result in higher priced materials going to Caterpillar.
Now Caterpillar, while certainly concerned about consumers, has also suffered in the past few quarters. Do you think that they will actually swallow the added costs associated with dealing with only a few suppliers? Yeah right. That cost will be passed on to the consumer through higher prices. (this is what we economists and finance folks call "Inflation.")
Given our current unemployment levels of about 7.5%, most real folks would have a hard time swallowing higher prices; especially since they, or someone they know, are probably unemployed.
Now, let's bring in the REALLY big issue with this stimulus. How would you feel if America did this and you were, oh, I don't know, China? Remember that little country that is home to nearly a third of the world's population? Oh yeah. By the way. The own a lot of our debt.
The Chinese Government probably wouldn't take too kindly to not being able to bid on American projects. And while I'm sure they'd like to play nicely together, maybe they'd decide that they would stop accepting bids from American companies. This is not a good scenario, but it is highly likely.
Also likely is the fact that they could literally deflate our currency by 25-40% overnight by simply selling the debt we owe them back into the market. This would create "hyper inflation," which is as scary as it sounds. Think "inflation on steroids" and you'll see my point.
Imagine walking into your grocery store today and paying $1 for a loaf of bread. Three days from now that same bread might cost $1.35. Next week it could be $1.60.
Finally, a good rule of thumb with regard to printing money and giving it away (that's what we're doing) is this: $1 trillion of new debt equals about $3000 per person additionally owed to pay back the national debt. We're currently paying over $1 billion per day in interest on this debt. Guess who gets to pay that? My kids. The cost to a family of four is about $126,000
Leave them alone. They are currently on the hook for about $33,000 (each) toward the debt.
Can't we show SOME responsibility and begin taking control of our financial lives? You CANNOT create consumer demand and solve financial issues by creating additional debt. For crying out loud, that's what got us into this mess in the first place!!!
If this makes you as angry as it makes me, check out the Adam Smith Institute blogsite to learn more about taking control of government finances.
And call your congressional representatives. Don't write them. Call them and wait to talk to a live voice. Tell them enough is enough and to stop spending your kids money.
I'd like to spend the next few paragraphs explaining how this stimulus, designed to help Americans, is actually going to have a negative impact.
The stimulus, while containing some details, has one really significant piece of data that shows up - any company taking funds from the stimulus and/or tarp will be required to utilize products and services from American companies. This is being done as a way to create jobs.
Here's where I'm going to get in trouble, especially living in the rust belt.
It's going to KILL the economy rather than stimulate the economy. Here's why.
If a company, let's say Caterpillar, decides to take stimulus funds they are now immediately handcuffed to American suppliers, regardless of price. As a result, and through a really miserable few quarters, the American suppliers will not be required to go through competitive bidding to ensure they are a low-cost provider and high quality provider. This will result in higher priced materials going to Caterpillar.
Now Caterpillar, while certainly concerned about consumers, has also suffered in the past few quarters. Do you think that they will actually swallow the added costs associated with dealing with only a few suppliers? Yeah right. That cost will be passed on to the consumer through higher prices. (this is what we economists and finance folks call "Inflation.")
Given our current unemployment levels of about 7.5%, most real folks would have a hard time swallowing higher prices; especially since they, or someone they know, are probably unemployed.
Now, let's bring in the REALLY big issue with this stimulus. How would you feel if America did this and you were, oh, I don't know, China? Remember that little country that is home to nearly a third of the world's population? Oh yeah. By the way. The own a lot of our debt.
The Chinese Government probably wouldn't take too kindly to not being able to bid on American projects. And while I'm sure they'd like to play nicely together, maybe they'd decide that they would stop accepting bids from American companies. This is not a good scenario, but it is highly likely.
Also likely is the fact that they could literally deflate our currency by 25-40% overnight by simply selling the debt we owe them back into the market. This would create "hyper inflation," which is as scary as it sounds. Think "inflation on steroids" and you'll see my point.
Imagine walking into your grocery store today and paying $1 for a loaf of bread. Three days from now that same bread might cost $1.35. Next week it could be $1.60.
Finally, a good rule of thumb with regard to printing money and giving it away (that's what we're doing) is this: $1 trillion of new debt equals about $3000 per person additionally owed to pay back the national debt. We're currently paying over $1 billion per day in interest on this debt. Guess who gets to pay that? My kids. The cost to a family of four is about $126,000
Leave them alone. They are currently on the hook for about $33,000 (each) toward the debt.
Can't we show SOME responsibility and begin taking control of our financial lives? You CANNOT create consumer demand and solve financial issues by creating additional debt. For crying out loud, that's what got us into this mess in the first place!!!
If this makes you as angry as it makes me, check out the Adam Smith Institute blogsite to learn more about taking control of government finances.
And call your congressional representatives. Don't write them. Call them and wait to talk to a live voice. Tell them enough is enough and to stop spending your kids money.
Thursday, January 15, 2009
Chain of Blame
Well it's been some time since I've posted, and please let me apologize in advance for the content below; but I need to vent.
Over the past two months we've witnessed some of the most ridiculous, political grandstanding since...well, the last Senate ethics committee hearing.
What I'm talking about is the continuous volley between Wall Street, Detroit and Washington. And while I'm certainly a novice when it comes to playing games of "cut throat" in racquetball, these guys aren't even on the same court and they're throwing each other softballs to knock out of the park instead of kill shots in the corner!
How DARE anyone who is a member of the Senate or the House of Representatives chastize someone for mismanaging money! The folks responsible for spending $11 trillion more than they have are being critical of a publicly traded company overspending by a billion? Are you kidding me? This is the equivalent of Kojak criticizing George from Seinfeld for his receeding hairline!
And for Detroit to 1.) Criticize Wall Street for not supplying "liquidity and 2.) ask Washington to fund an obviously tired, non-productive, unprofitable business model to "save the American worker" does a total disservice to those of us who actually DO care about creating sustainable businesses that make products we want.
Finally, shame on Wall Street for allowing $50 billion or more to be pilfered from investors courtesy of an unchecked, unpunished maverick, slick talking money manager in Madoff. The rules were in place, but no one really cared to see if they were being followed, and those that suspected something was "too good to be true" were correct.
This is almost like watching the Three Stooges, only it's not funny.
Now, however, there is a fourth, very ugly element that has fully entered the picture - the media. I can't tell you the number of stories I've read in the past six weeks about workers losing their jobs, retirees losing their pensions, newly married couples losing their houses, etc. I'm willing to bet that you know someone that has lost their job as well. It's easy to blame the new "BIG THREE," as I call them (Detroit, Washington and Wall Street.)
I think that I actually have a solution or two if you care to read on.
It's apparent that the American worker really is the one who is paying for this, both through TARP funds to banks that lent money faster than Britney Spears can get married and divorced, as well as through job losses, cutbacks, unfunded pensions/retirements, cutback in benefits, etc. from outdated business models from GM and Chrysler. Incidentally, Ford has stayed out of the muddy mess so far.
The problem is simple; Wall Street and Detroit have NO vested interest in the communities they reside in. Therefore, they don't really care if workers lose jobs or houses. It's about the bottom line, and (gulp) I can't believe a free market capitalist like myself is saying this - it's not always about the bottom line.
Even Adam Smith would agree that the invisible hand has been severed from the entire arm at this point and something needs to be done to make sure the other hand doesn't get cut off. As a result, I am proposing that the first 1% of every dollar of gross profits earned by any company goes directly to the community that has a branch, factory, office of a company receiving TARP money. For instance, if GM has gross sales of $100 million, a total of $1 million would be dispersed to the communities that have GM plants in their town. Additionally, I am suggesting that half a percent goes directly to a fund that would assist workers that lose their job during the next three years in order to help them continue paying their mortgage. That means another $500,000 would be dispersed to those same towns.
The half a percent never gets used and in fact, would be refunded, if a company doesn't use it because they don't lay anyone off. They'd get the funds back in partial payments after three years if they A.) had net profits, not losses B.) paid all TARP funds back and C.) continued to stop laying off workers.
The dispersion would go directly to a LOCAL bank that avoided the mortgage debacle, and the funds would be split based upon the total number of employees as a percentage on payroll or contracted. Since the funds go to a local bank, their ability to lend grows as well due to FDIC reserve requirements, thus spurring local businesses and new ventures.
If you're wondering, in 2007 GM had about $180 million in gross revenue. That would equal about $22 million divvied up among communities; towns that really could use those funds to stay alive right now.
Now before anyone goes crazy on me and calls this idea "socialism," hear me out. I don't like mandating where a company has to put its money from profits, but this is after the fact folks. We've already shelled out $700 billion. It's gone and can't come back.
As a result, I believe that the taxpayer (this includes workers in Detroit and Wall Street) have a right to say "keep some of that money in my hometown."
This also creates an incentive to NOT layoff workers. Imagine the incentive, approximately $4 million per year, to keep an eye on the bottom line.
The way to the bottom line, of course, is by creating products that people want and need. This goes for mortgages, too.
Create something of value to the consumer, not just hedge funds, traders and speculators - but bona fide consumers that want to drive a fuel efficient, sophisticated model car while making payments on a fixed rate mortgage loan in an area of the country that won't be prone to speculative, shoddy, lending practices geared to investors that couldn't find the location of the property own on a map.
Again, I am a free market capitalist and I think that it's time we asked for some direct results from our money. I won't call it my money, but some of it is my money, and damnit, I want to see my money being spent wisely to ensure that by the time my children become tax payers, we aren't in debt up to $25 Trillion. We currently pay $1 billion PER DAY in interest... how do you like them apples?
Call your representative and tell them to put serious constraints on this money.
Runaway inflation is next folks. Too much money is going to hit the system too quickly, and while many economists are preaching about deflation, I am going to suggest the exact opposit. If you need proof, look at gas prices. They are going up even though the cost per barrel is going down. Speculators know that $700 billion is about to hit the proverbial fan. I'd prepare to be out of the firing line.
Over the past two months we've witnessed some of the most ridiculous, political grandstanding since...well, the last Senate ethics committee hearing.
What I'm talking about is the continuous volley between Wall Street, Detroit and Washington. And while I'm certainly a novice when it comes to playing games of "cut throat" in racquetball, these guys aren't even on the same court and they're throwing each other softballs to knock out of the park instead of kill shots in the corner!
How DARE anyone who is a member of the Senate or the House of Representatives chastize someone for mismanaging money! The folks responsible for spending $11 trillion more than they have are being critical of a publicly traded company overspending by a billion? Are you kidding me? This is the equivalent of Kojak criticizing George from Seinfeld for his receeding hairline!
And for Detroit to 1.) Criticize Wall Street for not supplying "liquidity and 2.) ask Washington to fund an obviously tired, non-productive, unprofitable business model to "save the American worker" does a total disservice to those of us who actually DO care about creating sustainable businesses that make products we want.
Finally, shame on Wall Street for allowing $50 billion or more to be pilfered from investors courtesy of an unchecked, unpunished maverick, slick talking money manager in Madoff. The rules were in place, but no one really cared to see if they were being followed, and those that suspected something was "too good to be true" were correct.
This is almost like watching the Three Stooges, only it's not funny.
Now, however, there is a fourth, very ugly element that has fully entered the picture - the media. I can't tell you the number of stories I've read in the past six weeks about workers losing their jobs, retirees losing their pensions, newly married couples losing their houses, etc. I'm willing to bet that you know someone that has lost their job as well. It's easy to blame the new "BIG THREE," as I call them (Detroit, Washington and Wall Street.)
I think that I actually have a solution or two if you care to read on.
It's apparent that the American worker really is the one who is paying for this, both through TARP funds to banks that lent money faster than Britney Spears can get married and divorced, as well as through job losses, cutbacks, unfunded pensions/retirements, cutback in benefits, etc. from outdated business models from GM and Chrysler. Incidentally, Ford has stayed out of the muddy mess so far.
The problem is simple; Wall Street and Detroit have NO vested interest in the communities they reside in. Therefore, they don't really care if workers lose jobs or houses. It's about the bottom line, and (gulp) I can't believe a free market capitalist like myself is saying this - it's not always about the bottom line.
Even Adam Smith would agree that the invisible hand has been severed from the entire arm at this point and something needs to be done to make sure the other hand doesn't get cut off. As a result, I am proposing that the first 1% of every dollar of gross profits earned by any company goes directly to the community that has a branch, factory, office of a company receiving TARP money. For instance, if GM has gross sales of $100 million, a total of $1 million would be dispersed to the communities that have GM plants in their town. Additionally, I am suggesting that half a percent goes directly to a fund that would assist workers that lose their job during the next three years in order to help them continue paying their mortgage. That means another $500,000 would be dispersed to those same towns.
The half a percent never gets used and in fact, would be refunded, if a company doesn't use it because they don't lay anyone off. They'd get the funds back in partial payments after three years if they A.) had net profits, not losses B.) paid all TARP funds back and C.) continued to stop laying off workers.
The dispersion would go directly to a LOCAL bank that avoided the mortgage debacle, and the funds would be split based upon the total number of employees as a percentage on payroll or contracted. Since the funds go to a local bank, their ability to lend grows as well due to FDIC reserve requirements, thus spurring local businesses and new ventures.
If you're wondering, in 2007 GM had about $180 million in gross revenue. That would equal about $22 million divvied up among communities; towns that really could use those funds to stay alive right now.
Now before anyone goes crazy on me and calls this idea "socialism," hear me out. I don't like mandating where a company has to put its money from profits, but this is after the fact folks. We've already shelled out $700 billion. It's gone and can't come back.
As a result, I believe that the taxpayer (this includes workers in Detroit and Wall Street) have a right to say "keep some of that money in my hometown."
This also creates an incentive to NOT layoff workers. Imagine the incentive, approximately $4 million per year, to keep an eye on the bottom line.
The way to the bottom line, of course, is by creating products that people want and need. This goes for mortgages, too.
Create something of value to the consumer, not just hedge funds, traders and speculators - but bona fide consumers that want to drive a fuel efficient, sophisticated model car while making payments on a fixed rate mortgage loan in an area of the country that won't be prone to speculative, shoddy, lending practices geared to investors that couldn't find the location of the property own on a map.
Again, I am a free market capitalist and I think that it's time we asked for some direct results from our money. I won't call it my money, but some of it is my money, and damnit, I want to see my money being spent wisely to ensure that by the time my children become tax payers, we aren't in debt up to $25 Trillion. We currently pay $1 billion PER DAY in interest... how do you like them apples?
Call your representative and tell them to put serious constraints on this money.
Runaway inflation is next folks. Too much money is going to hit the system too quickly, and while many economists are preaching about deflation, I am going to suggest the exact opposit. If you need proof, look at gas prices. They are going up even though the cost per barrel is going down. Speculators know that $700 billion is about to hit the proverbial fan. I'd prepare to be out of the firing line.
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