Ways of the World "Briefs"
A Follow-Up on the Economic Mobility Article
We gave last week's article on income mobility a descriptive title:
". . . Steady Through Time, But
Different by City". Perhaps we
should have said it differently: "Economic Mobility Is a Social Issue". Our friend and f
aithful reader Carolyn
cut to the chase for us in a concise comment: "some of the conclusions are great: keep kids in school, help
them get work, keep commutes short, and encourage people to have a life in
their church's community. How terrific that such basics work so
well!" There you have it. In cities where those practices and features
are active, people move up in the world more easily.
The inclusion of
religion as a "significant" input into the analysis we discuss in the
article worked its way into my own psyche, and last Sunday at church, I found
myself marveling during the service over the added meaning it was all having
for me. Much of the time, I see my role
here at Ways of the World
as trying to explain and illuminate how
economics and business impact people in the church. But in this instance, the causation is going
the other way around: churches – and
synagogues and other religious institutions – are seen as playing an active
role in the economy by facilitating people's community interactions. This holds a positive and favorable role in
people's economic well-being as well as their spiritual and psychic
well-being. What do you know?
Need for Late Medical Care and Estate Planning
Debbie Loeb over
at the Geranium Farm's Hodgepodge
page has posted a wonderful graphic on the
kinds of important personal documents we all need to compile and file neatly
away for our families. When we might be
seriously ill or actually on the verge of passing away, our families need to
know how to handle our affairs. The
documents would be stored in a specific file-drawer or box and include such
things as marriage certificates, birth certificates, living wills, powers of
attorney, a will itself and so on. Go
see the "file-drawer" graphic, and if you don't have such a collection, start to put one together. This is a great exercise for Lent. And goes right along with – ahem – doing our
annual tax return exercise.
Labels: American Society, Economy, Personal Finance
Economic Mobility: Steady Through Time, But Different by City
Income inequality is in the news again these days, in
particular as President Obama has made it one of his policy concerns for this
year and as New York City's new mayor ran on a platform that included actions
to correct it. The gap between rich and
poor has indeed widened, and pretty consistently so, extending back as far as
35 years. In the US income distribution
in 2012 (latest available information), the average household income of those
at the 90% level, $146,000, was almost 12 times the income of those at the 10%
level, $12,236; back in 1975, this
multiple had been "just" 8-1/2.
Too, these income measures – both low and high – have decreased since a peak in 2006, adding to
concerns. Does the US still offer
hope for gains, especially for low income people? Are we still a "land of
Indeed, taken at face value, developments like the increase
in the rich/poor income ratio might suggest that something is fundamentally
wrong and requires any number of redistribution tactics to be taken as
Ah, well. As with
many issues we meet here at Ways of the World, the "face
value" of this trend in a set of numbers turns out to tell only part of
the story. Two brand new reports from
well-known economist scholars of the inequality situation bring out two very
significant aspects that cast all this in a different light for the United
People's Probabilities for Moving Up Have
Been Remarkably Steady
These reports are produced by The Equality of Opportunity
Project, headquartered at Harvard University and including scholars from there
and the University of California at Berkeley; see its website here: http://www.equality-of-opportunity.org
. The scholars, Raj Chetty of Harvard, Emmanuel
Saez of Cal Berkeley, three other senior scholars and a research staff, have
conducted massive analyses of IRS income tax data, using millions of individual
returns, which have been "de-identified". They are coded in such a way that a specific
person's history can be followed through a lengthy span of years, beginning as
a child-dependent of their parents and extending through their ultimate career situation
at, say, age 30 or 40. These authors can
thus make the statement that if someone grew up during the 1970s as a child in
a family in the lowest 20% of income earners, that person has an 8.4% chance of
reaching the top 20% in their own adulthood.
The point Chetty, Saez and associates make in the first of
their studies is that this probability did not change noticeably for kids born
in the 1980s who are now in their late 20s.
Moreover, other writers who've analyzed earlier periods, covering kids
born back as far as 1950, also find the same general probability
relationship. People's chances of moving
up in the world have not measurably changed despite the fact that the top has
gotten higher. Here's are two pictures from the
Equality of Opportunity website: the rungs of the ladder are now farther apart,
but the analytical work shows that our ability to climb the ladder is just as strong
as when the ladder was shorter.
So, in one sense, this is a great statement about
opportunity in America. We have farther
to move to catch up to the high-income group, but Chetty, Saez and their
associates show that we still have as much expectation of being able to do that
as older people did, and other authors carry this back even to our own parents' generation.
Other Countries Do Better at Lifting People
Some argue – perhaps some of you – that other countries do a
better job of lifting people up than the US does. In international comparisons compiled by the
OECD, the correlation of income brackets between generations is closer in the
US than in most western European countries, Canada and Australia: that is, whatever level your parents are in,
you are more likely to be stuck there in the US than in nine of 11 other
countries. The correlation measures are
in fact about three times lower in Denmark, Norway, Australia and Finland. So children seem to have far better chances
of moving ahead of their parents' economic position there than in the United
But Some US Cities Are as Effective as Denmark
Chetty and Saez have a response to this seeming indictment
of the US in their second study, "Where Is the Land of Opportunity? The Geography of Intergenerational Mobility
in the US". The US is, of
course, a huge country with widely varying climates and cultures in its
regions. Because Chetty and Saez have
examined millions of tax returns, they can break out their information by
cities as well as for the nation as a whole.
In some pioneering work on these topics, they find great differences in
mobility for people who grew up in the different cities: Salt Lake City and San
Jose have populations as economically mobile as those of Denmark and its
neighbors, while mobility is far lower in other places, including some in the
South and the upper Midwest, lower even than in any developed nation for which
such figures have been published. New
York and Boston rank sixth in rankings of the 50 largest metropolitan areas
while Charlotte, NC, ranks 50th.
These differences immediately beg the question: what on
earth accounts for these positions? Aren't
New York and Boston places where classes are really well defined? and the
opposite for Midwest and Southern locales?
So Chetty and Saez and their associates looked at some characteristics
of the cities that might help explain.
Social Structures, Not Economic Ones Make
the Main Differences
Surprisingly, at least to us, a city's economy has had
little to do with the economic mobility of its residents. The mix of industries and the concentration
of managerial and professional occupations had such weak relationships with
mobility measures that the authors didn't even bother listing any numbers about
them. There are just loose correlations
with overall labor force participation and the role of manufacturing. Two economic items do have noticeable
effects, existing income inequality and the teen-age labor force. The existing income distribution seems
logical as a force for or against mobility.
We'll comment further below on the teen-age workforce.
Otherwise, the really significant forces pushing on mobility
are social ones. And they come into play
early in people's lives, not just when they are graduating school and doing
entry-level career planning.
Race. Areas with large shares
of African-Americans have weaker mobility.
Please note that this is a numerical fact, not a subjective comment. Also, it reflects more than skin color, since
whites in those regions also have weaker mobility than in other areas. Greater degrees of segregation of races and
of groupings of affluent and impoverished populations also exacerbate mobility.
K-12 school systems.
Elementary school test scores and the high school drop-out rate are
highly significant. Teacher-student
ratios and spending per student in a city have only a mild impact. The point this suggests is that it's the
results of primary education, not just inputs to education that are
important. Also, while college
attendance has an obvious and structural influence, the presence of colleges
right in a given city doesn't noticeably help or hinder mobility in that city.
Social capital. This jargony
term calls attention to people's participation in society besides their jobs. Do they vote?
Do they return Census forms? Do
they belong to local civic associations?
These items constitute a social capital index. Important separately in its own right, do
people belong to religious groups?
Family structure. The factor
with the closest relationship to economic mobility is family structure. Specifically, children born to single mothers
face the biggest odds against moving ahead later in their own lives. In general, on the contrasting side, cities
with the largest proportions of parents who are married and with the lowest
divorce rates provide more support to children moving ahead.
These social factors, education, socialization and family
structure, all impact young people. Again,
that's "young" people, in childhood and the teen years. As we noted above, teen-age labor force
participation is also important in helping set people up to move ahead into and
through adulthood. Learning work skills,
routines and disciplines gives a measurable boost toward a better future as
well as an introduction to financial responsibility. There is an additional aspect to the
segregation issue, and that is commuting distance to work. Cities with a preponderance of short commutes
are more supportive of mobility. A
concentration of corporate parks in suburbs or the need to take a train and a
bus to work put added barriers in the way of lower income families.
Ideas about Policies That Might Help
The factors that show as most closely related to mobility
point to some public policies that might be more supportive. Working with single mothers and encouragement
of marriage would help. The need for
strong public education comes up time and time again, and the statistical
results we cite here add to that emphasis; in particular, "teaching to the
test" would seem to be effective as well as encouraging teen-agers to stay
in school and also to get jobs. Perhaps
many city governments have policies that might shorten commutes by encouraging businesses
to install facilities in low-income neighborhoods, but more could clearly be
done. Making commuting easier also
argues for upgrading transportation systems and city infrastructure.
We knew there was no simple answer to inequality issues, but
some of the inputs we learned about here are not necessarily the ones we'd have
thought of first. Supposedly simple
approaches, such as raising taxes on the rich may help on the surface, but
those funds shouldn't automatically just be distributed through low-income
family welfare programs. Instead, more structural qualitative policies
and attitudes are needed for the long-run changes and real shifts in inequality
relationships that are desired. Not all
of this comes from governments. Even, we
see, churches have an identifiable role as they support the dignity of every
human being, promote community participation by low-income people and mix low,
middle and upper income people in common settings and organizations.
 Raj Chetty, Nathaniel Hendren, Patrick Kline, Emmanuel
Saez and Nicholas Turner. "Is the
United States Still a Land of Opportunity?
Recent Trends in Intergenerational Mobility". National Bureau of Economic Research Working
Paper 19844, January 2014. Available
without cost on http://www.equality-of-opportunity.org.
 Raj Chetty, Nathaniel Hendren, Patrick Kline and
Emmanuel Saez. "Where Is the Land
of Opportunity? The Geography of
Intergenerational Mobility in the US".
National Bureau of Economic Research Working Paper 19843, January
2014. Available without cost on http://www.equality-of-opportunity.org. Ratios and numerical factors for the cities covered
in this study are available for download without charge from the website, as
the authors encourage further analysis by anyone interested in these issues.
Other recent discussions of this material:
Labels: American Society, Economy, Government Policies
Health Care Costs Might Be Slowing Down
As the Affordable Care Act insurance plans make their faltering
debut, our interest is caught up in new health care spending numbers for 2012
reported earlier this month by the Centers for Medicare and Medicaid Services
(CMS). The Affordable Care Act (ACA), as
we noted here a month ago, was intended in large part to foster more affordable
health care by giving greater access to health insurance and trying to require
its use by younger, healthier people.
Other aspects of the law seek to restrain some costs, such as Medicare
But interestingly, health care costs seem to have already been
slowing, before the main insurance features of the Affordable Care Act have
come into force. We'll describe some of
this slowdown for you and then try to highlight why it might be that you're not
sure how health care costs could possibly be slowing down.
Health Care Spending Growth Cut in Half
In 2012, the total of health-care-related outlays in the country
grew by 3.7%, making a fourth straight year of less than 4% growth. By contrast, from 2000 to 2008, this spending
grew 7.3% a year. Also for 2012, the health-care
sector expanded less than total gross domestic product (GDP) for a second year,
so it absorbed 17.2% of the total economy, down from a peak of 17.4% in 2009
The spending moderation is evident in most segments of health care
delivery. On average over the last four
years, expenditures on hospital care have grown at 4.9% compared to 7.3% from
2000 to 2008. Outlays for physicians'
services rose at just a 3.3% average from 2008 to 2012, down from 6.8% from
2000 to 2008; physicians' compensation reflects this, increasing at a 2.0% rate
in the latter four-year period after a 4.6% pace from 2000 to 2008. Prescription medications and other medical
supplies expenditures have grown at just a 2.1% pace recently, from 8.5%
The last, more extreme move on drug outlays partially relates to a
number of brand-name drugs whose patents expired, so they are now sold in
generic form at much lower prices. Other,
more general slowing forces have been at work.
The recession is the prime factor named by many experts, as the
associated declines in employment meant many people lost their employer-based
health insurance, perhaps forcing them to postpone elective medical treatment. If this is the weightiest factor, then it may
result, these experts opine, that as soon as the economy picks back up, health
care costs will surge anew. Clearly as
well, if costs have slowed because fewer people have access to care, that's
Fortunately there are some other, more favorable factors at work. As we mentioned in our introductory
paragraph, the ACA has some cost-cutting features that are already in place,
including the limits on Medicare payment rates.
The law also penalizes hospitals
with above-average readmission rates; this last has apparently already shown
some identifiable effect in reducing readmissions, according to a Wall
Street Journal op-ed by Jason Furman, the chair of the President's
Council of Economic Advisers. Other analysts note that the reduction in
readmissions actually started ahead of the enactment of the ACA, so hospitals
had clearly been working on the causes beforehand. We read occasionally about hospital-acquired
infections, and there are, in fact, efforts in place to reduce those.
Electronic Records, More Efficient Clinical Set-ups
There are some other structural forces helping to slow costs. Does your doctor use electronic medical
records (EMRs)? We had thought of that
as helping coordinate care, but it's also a restraint on costs as it improves
the efficiency of the office's operations.
For hospitals, having doctors' orders in type-written electronic form is
reducing medication errors measurably.
Adoption of EMRs has lately been quite rapid: in 2009, 48% of doctors'
offices used them, and by 2012 the share had risen to 72%. Among hospitals, 44% were running them in
2012, nearly three times as many as just two years earlier. Use of these even reduces the number of
necessary lab tests, since patients' histories and records are more organized.
Have you noticed all the "store-front" clinics popping
up in shopping malls and, in one local example for us, the streets of downtown Brooklyn,
where one is replacing a KFC-Tim Horton Coffee franchise? These "urgent care centers" are
more than doctor's offices but less than full-fledged hospital emergency rooms. These "retail" medical centers are
staffed by doctors, nurse practitioners and physician's assistants; they can
handle flu, other infections, simple wounds and fractures. They can save money by taking more routine
health issues out of expensive emergency room settings.
The ACA is fostering experiments with other kinds of delivery
systems, notably the Accountable Care Organization and patient care medical
homes. These clinical centers manage
patients' overall care and are encouraged to limit hospital admissions and many
other costly kinds of treatment when at all possible. Physicians are generally salaried, so they
are not paid on a per-service or per-appointment basis as most have been
traditionally. It's not known yet
whether all this will really work to the benefit of the patients and the payers
in the long run, but such organizations as CalPERS, the enormous California
state employees health plan, have found marked cost reductions right away.
But Some Consumers Pay More of the Bill
Now, you may well be saying, "how can health care costs be slowing
down? MY health care costs just keep
going up and up!" Ah, yes. Consumers' total healthcare outlays have been
increasing more than their incomes: data from an annual Labor Department survey
show that healthcare expenses – insurance, doctor bills and drugs and supplies
– have risen from 4.8% of people's incomes in 2008 to 5.4% in 2012, with every
broad income bracket showing a similar magnitude increase.
A main factor in this is the so-called "consumer-directed
health plan" or CDHP, which mainly consists of insurance plans with bigger
deductibles and higher co-pays. If
consumers have "more skin in the game", it is thought, they will take
a more active role in their own health care decision-making and a more cautious
role in utilization. Some parts of this
are quite positive: people do have more information
about healthcare choices and treatments.
There is even more information these days on costs for specific
treatments and specific providers. We've
started to see the word "shop" applied: that is, we might
"shop" for a doctor and/or treatment based on their cost-effectiveness. Indeed, next time you need something more
than routine care, ask about the cost.
Ask your doctor if that new med she is prescribing is the cheapest one
that will do the job.
In all probability, as the process of cost moderation evolves, with
all the various innovations we've described here, healthcare should become less
financially burdensome for people, companies and governments. Hospitals and doctors should be able to
figure out how to conduct their practices more economically and efficiently to
save on their own costs without imposing undue anxiety on their patients. But for consumer patients themselves, the
intervening transition period may not be much fun. In fact, even among people who had private
health insurance throughout the last recession, another government survey shows
that, in 2011, a larger portion, 7.4%, did not get or delayed getting medical
care due to cost, more than the 5.9% in 2005. This was clearly not a sign of progress. It's a bumpy road. But at least, the latest spending data show
that we've started down the right road.
Kaufman and Grube.
Kaufman and Grube.
Tracy Yee, et. al. "The Surge in Urgent Care Centers: Emergency
Department Alternative or Costly Convenience?" Center for Studying Health
System Change: Research Brief. July
Note that the authors do express some ambivalence about current cost
effects, but they expect the growing need for primary care facilities will
increase the importance of urgent care centers.
Kaufman and Grube.
Labels: Economy, Health Care and Pensions
The Ways of the World at Christmastime
The Ways of
the World: often, the ways of the world come across as wrong-headed, such as a
news anchor seeming to make a racial comment about Santa Claus, or as totally
inept, such as the implementation of a new Government-designed health insurance
program that so far has resulted in more people losing their current insurance
than being granted easy access to better coverage.
So, when the
ways of the world yield good things, we can rejoice specially. The Spirit
of Good indeed does come to dwell among us. Here are three current
Magazine's editors picked Pope Francis as their designated Person of
the Year. If we may say so ourselves, isn't he a breath of fresh air as a
religious leader? Warm-hearted and welcoming. So of all the people
who made news in 2013, isn't it lovely that the Time editors
picked the nicest one?!
some sentences from Managing Editor Nancy Gibbs' tribute in the December 23rd issue (page
". . .
. he is . . . saying what Popes before him have said, that Jesus calls us to
care for the least among us – only he's saying it in a way that people seem to
be hearing differently. And that may be especially important coming from
the first Pope from the New World. A century ago, two-thirds of Catholics
lived in Europe; now fewer than a quarter do, and how he is heard in
countries where being gay is a crime and educating women for leadership roles
is a heresy may have the power to transform cultures in which Catholicism is a
growing, even potentially liberating force. . . .
"The heart is a strong
muscle; he's proposing a vigorous exercise plan. And in a very short
time, a vast global, ecumenical audience has shown a hunger to follow
him. For pulling the papacy out of the palace and into the streets, for
committing the world's largest church to confronting its deepest needs and for
balancing judgment with mercy, Pope Francis is Time's 2013 Person of the Year."
real miracle. Last Tuesday, December 17, a blind man felt faint on the
A-train subway platform at 125th Street in
upper Manhattan. His guide dog, named Orlando, tried to keep him from
falling, but couldn't, so as Cecil Williams fell, Orlando jumped down onto the
tracks with him. Then he licked Cecil's face to try to keep him
alert. Bystanders, who all too often are known for just doing that,
standing by, instead got the attention of MTA personnel who knew a train was
bearing down on the station. They got man and dog to lie flat in a trough
between the rails, and they radioed the engineer to come in as slowly as he
could. A car-and-a-half rolled over Cecil and Orlando. But they
were safe and crews were able to pull them out from under the train; they
did send Cecil to a hospital to have a cut stitched and for some badly needed
There a part
two to the story that's also sweet. Orlando is 11 years old and due to
retire. Cecil will be getting a new, younger dog soon and doesn't have
the money to support Orlando in his retirement. But as soon as this story
got around, money poured in from well-wishers more than enough to make it
possible for Cecil to have two dogs. Or if he chooses, the funds can go
to the guide dog agency to assist with Orlando's comfortable old age.
simple man and his dog ready for a very merry Christmas.
sports story. Indeed. But a bittersweet one. We casually
glanced over the list of memorable sports events of the year as compiled by
Jason Gay, a lead sportswriter for the Wall Street Journal. The last one
in his list is the Boston Marathon. But how could such a tragedy be in
anybody's Christmas list? Ahh, listen to what Gay says:
The 2013 Boston Marathon: It
might seem strange to include a terror attack on a list of sports moments
mostly filled with superlatives and happy memories. (Sports Illustrated put
this atop their list of 2013, and I believe this is correct.) What happened on
April 15 was a tragedy, impacting many lives. And yet in the minutes and months
afterward, the heroism, resilience and generosity showed by Boston and beyond
was representative of the very best of what sports is about. A race is about
finishing, and in elite cases finishing first, but the best athletic events
reveal the heart of a community. Next year there's a Winter Olympics and a
World Cup, but the next Boston Marathon will be among the biggest sports
moments of 2014. Count on it.
And a footnote: the recent modest brouhaha over the Fox News anchor and the race of Santa Claus gleaned us
this fascinating bit of information from a priest-friend. We knew that St. Nicholas was Greek and lived
in Myra, in Turkey, in the first half of the 4th Century. Our friend explained that not only was he a
nice local bishop who helped his people by giving well-chosen gifts, but he was
also a leader of the Church at large and a signer of the Nicene Creed. So there's a lot to Santa's story besides the
North Pole and the chimney of Clement Moore fame.
A Very Merry Christmas to all of our readers from Ways of
We have promised and promised that we would write about
health insurance and the Affordable Care Act, but every day that comes seems to
crowd and cloud the scene with more confusing information. We hardly know where to begin and where to
expect that all this information might take us.
But we can try to do something.
Let's start at one of the beginning places: according to a summary of the
"Affordable Care Act" by the Kaiser Family Foundation, the main
object of the law is to require everyone to have health insurance. A tabulation by the Census Bureau shows that
during 2012, just over 47 million Americans under age 65 had no health
insurance. These people represent
almost 18% of the "nonelderly", the population under age 65. This sounds like a simple enough
connection. A lot of people have no
health insurance, which causes all kinds of extra distress and added cost when
those people become ill. So we'll devise
a law that provides ways to try to correct that: an expansion of Medicaid for
those with low incomes and a standardized collection of insurance policies sold
through online exchanges for everyone else.
For those in the latter group with somewhat limited incomes, we'll
subsidize their premiums with refundable tax credits. This is what the ACA tried to do.
But so far, it hasn't turned out that to be simple at
all. A couple of major complicating
conditions exist before we even get to the badly designed websites and payment
systems. Maybe it will help to be aware
of some of this complexity.
Varying Periods of Uninsurance
First, people are not simply "insured" or
"uninsured". They move in and
out of insurance status perhaps more than we think. One of the surveys the Census Bureau takes
follows income and welfare trends across several years among groups of specific
individuals, called "waves"; the same people are interviewed
repeatedly for a span of four years.
Professors at Penn State and Harvard School of Public Health analyzed
the individual responses from the 2004-2007 wave, that is, the wave that
concluded just before the financial crisis and the Great Recession. In an article published in the journal
Medical Care Research and Review in December 2012, they report that a survey
number equivalent to 89 million nonelderly people experienced some period of
"uninsurance", that is, twice as many as were seen in a separate poll
to be without insurance at one particular point in time. The 89 million amounts to 36% of the
nonelderly population, well over one-third of them.
About 20% of those were without insurance for a span of 1 to
4 months, another 20% for 5 to 12 months, 20% for 13 to 24 months and 40% for
more than 24 months, that is, two years of the four-year duration of the survey
wave. There were several patterns of
uninsurance; 13.5% of the people were uninsured throughout and almost 26% had
repeated spells of uninsurance. Other
people started with insurance and lost it once and for all; some picked up
insurance and still had it at the conclusion of the survey. Some had a temporary gap in coverage; others
had a single period of coverage which then lapsed. Another transition involved shifts from
private insurance to public, especially shifts into and out of Medicaid. Children often had different patterns of
coverage than adults.
So right at the moment, many people are trying for an
initial enrollment in an ACA-designed policy, and it is important to note that
this will hardly be their only encounter with the system. It wasn't clear to Professor Short and her
colleagues, the authors of this time-lapse study, whether the ACA system was
designed to facilitate such changes seamlessly and to facilitate the movement
of the premium subsidies up and down with falls and rises in incomes. Perhaps it is, but since we haven't gotten
through the first step, it's hard to know how affairs will carry on in the
Differences in Uninsurance Among the States
The other major complication of "uninsurance"
concerns geography. Apart from the Medicare program, health care is generally
financed and administered at the state level.
So there are as many as 50 different insurance systems in existence
which must be taken into account. As an
example of how complex this can become, we cite Edie Sundby, a cancer patient who
wrote an essay in the Wall Street Journal at the beginning of November. Her existing plan was being cancelled, but her
coverage could not be duplicated because the new ACA-conforming plans would not
cover her in a different part of her own state, California, from where she
lived: in her former plan, she had been receiving some of her treatment in the
north, Berkeley, even as she lives in the south, San Diego. Further, the coverage she had for treatment
at a specialized hospital in Houston, Texas, was also eliminated.
With the state-focused coverages, it's obviously important
to be aware of the patterns of uninsurance that characterize each state. Writers from Vanderbilt and Harvard used separate
data on health care in the states together with the "wave" data from
the Census Bureau to produce localized estimates of insurance and uninsurance. The populations of the various states differ
greatly in age mix, race, professions and rural vs. urban locations. So people in different states experience very
different trends as they move into and out of coverage and, obviously, as they also
move from state to state. In Colorado,
if you had insurance at the beginning of this study period, you had a 15.8%
chance of experiencing a break in your coverage at least once during the following
two years. But in neighboring New
Mexico, the chance of a break was noticeably greater, at 25.8%. If you were already uninsured at the
beginning of the study, the variation was wider still: in Pennsylvania, the chances you might remain
uninsured were 14.4%, but in Florida, they were more than twice as much, 30.1%.
These writers, John Graves and Katherine Swartz, point out
that differences in uninsurance may occur because some people have simply
chosen not to buy insurance while others may have lost a job. The variety of reasons for being without
insurance mean "the uninsured" can have very differing incomes. Strategies states need to use to arrange and
encourage use of various insurance programs thus also differ. We're seeing TV commercials now aimed at
young adults, who might be convinced to sign up for at least the bronze plans,
while getting the word out to low-income people about the availability of
Medicaid requires a different kind of outreach.
As Grave and Swartz explain, such outreaches are important and will
bring long-run cost-saving to each group as they could be encouraged to visit
primary care physicians more regularly and as they might take other preventive
actions. More, use of differing
approaches in different locations is significant.
A Decentralized System Is Natural in the U.S., A Badly Designed Website Is Not
When we first wrote about health care in 2009, one of the
points we made is that, unlike most countries, the U.S. population is highly diverse. It's no wonder to us that a fragmentary
health care system emerged from our spread-out and historically decentralized
society. Health care is seen as highly
personalized. Imposing standardization
on such a structure is really hard.
Central planners can't possibly think of everything, as we see with Mrs.
Sundby. It is all the more complicated
then when the underlying website technology was badly designed and
organized. Just this week as we have
been writing this article, we see that the Obama Administration is doing
something for Healthcare.gov that they should have done at the outset: an
overall manager has been named, Kurt DelBene, recently president of Microsoft's
Office Division. Thus, finally, a senior
official with significant experience building software and, in its most recent
version, developing it into a "cloud" version, will oversee the
internet connections in the new insurance exchanges. Issues like security and the payments system,
which are incomplete, can be given greatly needed and rigorous attention.
All of this is very complicated. We hope we have gotten a start here. We will continue after the Holidays with at
least two other articles, one on innovations in delivering health care and one
on health itself. Toward the latter, the
growth of health care costs slowed over the three years through 2011 and we
think one of the reasons might have something to do with the drastic reduction
in smoking, along with numerous other factors.
There's also some interest in employer insurance plans and we'll have to
figure out how to talk about those too.
Pamela Farley Short, Deborah R. Graefe, Katherine Swartz
and Namrata Uberoi. "New Estimates
of Gaps and Transitions in Health Insurance", Medical
Care Research and Review, Vol. 69, No. 6, December 2012. Pp 721-736.
John A. Graves & Katherine Swartz. "Understanding State Variation in Health
Insurance Dynamics Can Help Tailor Enrollment Strategies for ACA Expansion",
. Vol. 32, No. 10, October 2013. Pp. 1832-1840 plus online Appendix: www.healthaffairs.org
Labels: Government Policies, Health Care and Pensions
About Someone Else Who Died November 22, 1963
Another major figure of the 20th Century also
died on November 22, 1963. His name is
C.S. Lewis. As yesterday's Christian
Science Monitor noted, Lewis's passing was far overshadowed by JFK's assassination
and few people paid attention. The
Gospel Coalition website explains that Lewis collapsed and died at his home in
Oxford early that evening, apparently just an hour or so before Kennedy was
The Episcopal Church does pay attention today, though, and since
2003 has remembered Lewis in its calendar of Lesser Feasts and Fasts. The commentary there highlights the fact that
Lewis did not come by his religion easily, but went through a long period of
atheism from his adolescence in the 1910s until 1929. The profile also notes that his reconversion,
fulfilled in 1931, "inaugurated a wonderful outpouring of Christian
apologetics in media as varied as popular theology, children’s literature,
fantasy and science fiction, and correspondence on spiritual matters with
friends and strangers alike."
Here are a few quotes from Lewis, taken from a variety of
his writings and assorted websites:
"I believe in Christianity as I believe that the sun
has risen: not only because I see it, but because by it I see everything else."
As we copied-and-pasted those words a little while ago, we
didn't know, but quickly learned, that they now appear on the plaque which just
yesterday was dedicated to Lewis in Poet's Corner in Westminster Abbey.
Some other of Lewis's words:
"Courage is not simply one of the virtues, but the form
of every virtue at the testing point."
"If you look for truth, you may find comfort in the
end; if you look for comfort you will not get either comfort or truth only soft
soap and wishful thinking to begin, and in the end, despair."
"Whatever men expect, they soon come to think they have
a right to: the sense of disappointment can, with very little skill on (the
devil's) part, be turned into a sense of injury."
"You cannot make men good by law: and without good men
you cannot have a good society."
“Each new power won by man is a power over man as well. Each
advance leaves him weaker as well as stronger.”
"Friendship is born at that moment when one person says
to another: What! You too? I thought I was the only one."
"Aim at heaven and you will get earth thrown in. Aim at
earth and you get neither."
"The trouble about trying to make yourself stupider
than you really are is that you very often succeed."
And here is the Collect for this Day in Lesser Feasts and
Fasts, 2006 (page 465):
O God of searing truth and surpassing beauty, we give you thanks for Clive
Staples Lewis, whose sanctified imagination lights fires of faith in young and
old alike. Surprise us also with your joy and draw us into that new and
abundant life which is ours in Christ Jesus, who lives and reigns with you and
the Holy Spirit, one God, now and for ever. Amen.
Finally, one other notable also passed away that day: Aldous
Huxley, aged 69, died of cancer in Los Angeles at 5:20PM PST, seven hours after
Kennedy's shooting and eight hours after Lewis's death in England.
Labels: Christianity, Episcopal Church, People, World
The Policy Mess in Washington Is Hurting the Economy
Maybe it goes without saying that
the wrangling and indecision among Federal government policymakers would have a
detrimental effect on economic activity.
But a new report by an economic consulting firm we've known well during
our Wall Street years actually puts this in some pretty clear context. There's a measurable impact on employment and
on the risk premium financial markets charge even fairly good quality corporate
borrowers. A separate study from one of
the Federal Reserve Banks highlights the impact on small business expansion
plans, the source of much economic growth in this country.
We're not talking about actual government
policy actions and their impact, but the recent severe and protracted disagreements
in government over what those policies should be. Specific policies, such as tax increases, can
slow the economy, as businesses and/or individual taxpayers set aside more of
their income to pay the government. But
at least they can plan ahead and run their companies or scope out their own
household purchasing and investments with the law in mind. However, if there is disagreement about what
the laws should be, then no one outside government can make any plan. Some people might spend away, trying to get
what they want before government takes their money. But they'd likely hold up any financial
investment decisions or long-range planning.
And businesses too would be hesitant to act. If their specific company is doing well and
they might want to open a new store or even a new plant, they don't want to get
in the middle of such a major project and then see their taxes hiked or their
regulations tightened or, if government spending cuts are being considered,
they don't want to see their contract or grant cancelled in midstream, right
after they've leased their new property or whatever. So, most often, they will hang back and wait to
do anything until they can see what laws are finally enacted. Thus, economic activity would slow below what
it otherwise might be while the policy debates play out.
The Economic Policy Uncertainty Index
This "hanging back"
effect is visible and measurable. Macroeconomic
Advisers, LLC, based in St. Louis, calls our attention to the Economic Policy
Uncertainty Index[1, 2]. This series was
compiled by economists at Stanford and the University of Chicago. It combines three items, a count of news
stories in papers around the country about policy disagreements, a schedule of
tax law changes (such as the expiration of the Bush tax cuts) and measures of the
differences among various professional economists' economic forecasts as they
try to take account of new policies.
Here's a picture of the policy
uncertainty index since 2000. You can
see that its long-term average is 100, but since 2009, it has averaged 150,
that is, 50% higher. You can also see spikes
when this got more extreme: one in September 2001, around 9/11, a second during
the financial crisis of 2008-09, a third in the summer of 2011 over the first
debt-ceiling fight, and the latest one.
The jump we show at the very end is an approximation of October's value
based on a separate daily index of news story counts on these issues, compiled
by the same Stanford and Chicago group.
The Macro Advisers firm has performed
statistical analysis estimating the numerical relationship of the Economic
Policy Uncertainty Index to financial market risk, GDP growth and the
unemployment rate. They find that the
high levels of this index in recent years have resulted in GDP growth since
2009 that is 0.3% lower each year, cutting average growth to 2.1% from the 2.4%
it would have been if policy decisions had been made more promptly. Hitting closer to home, this is associated
with an unemployment rate that has averaged 0.6% higher than it otherwise would
have been. So the unemployment rate that
lately has been 7.2%, would be closer to 6.6%, and there could be as many as
900,000 more jobs by now. Corporate
borrowers in bond markets have paid nearly 0.40% higher in interest costs due
to the policy uncertainty factor alone; this erodes some of benefit of the low
interest rates being fostered by the Federal Reserve's recent bond buying
Notably, the Macro Advisers
analysis stops in mid-2013, so the very latest episode of policy wrangling is
not yet factored in. We have seen some
estimates that GDP growth in the fourth quarter will be reduced by about 0.5%
from the 17-day government shutdown, not counting the extra uncertainty element
we describe here.
Small Business Gets Hurt Too
Another study of the effect of
policy uncertainty on business came in the summer and fall of 2011 during and
immediately after the upset then over the federal government's debt ceiling and
the credit downgrade by one of the financial rating companies. Publicity at the time about the ramifications
of the disagreements for business plans was based on anecdotes and scattered
commentaries by pundits, politicians and the occasional CEO. Some argued that the developing recovery in
employment and capital spending was being hamstrung, while others said citing the
policy brouhaha was just some sort of excuse. Economists at the Federal Reserve Bank of
Cleveland thus did some work on the relationship of the Economic Policy
Uncertainty Index to small business hiring and expansion plans. Such data from small businesses are collected
monthly through a survey by the National Federation of Independent Business, a
nonpartisan, nonprofit advocacy organization of some 350,000 small businesses
The Cleveland Fed analysts
calculated statistical relationships between the EPU Index and the NFIB
measures of small business hiring plans and capital spending plans. These regression measures imply that during
the 2011 policy-making debacle, heightened policy uncertainty was associated
with a reduction of 6 percentage points in the share of businesses planning net
increases in the number of employees; so instead of the 4% or 5% actually
reported in the survey, the share could have been 10-11%, closer to the
long-term average of 14%. Recent
readings have been 9-10%, a substandard level surely related to the policy
uncertainty issue. The Cleveland study
calculated a similar 6% cut in the share of businesses planning some form of
construction or capital equipment purchases, holding that at around 22% in 2011
instead of the 28% that might otherwise apply.
The long-run average is 33%.
Recent figures have been about 25%, which is thus also subpar.
Another of the NFIB survey items
asks participants if "now is a good time to expand the
business". That question got yes
answers from an average of 18% of survey participants prior to the economy's
peak in December 2007; it fell, of course, after that, but has not recovered at
all, hovering in a range of 5 to no more than 10% since the middle of
2008. This measure has a decisive 70%
negative correlation with the EPU Index, suggesting that at least some of its
recent sluggishness is tied to the government's disarray.
How Can We Encourage Government To Be More Responsible?
We were going to write an article
for you on the government policy disputes anyway, and an economist friend
lately sent us a note giving us even more inspiration: "You need to write
an article on the hypocrisy and self-interest of politicians who are putting self-interest
ahead of the best interest of their country." As we began our work on these issues, we had
expected that our commentary would be mainly some kind of rant expressing that
view. What we learned in doing our
research the last few days is more substantive: there are in fact real,
identifiable costs to this in terms of fewer jobs and higher financing rates. Small business leaders seem especially
discouraged. These come over and above
the direct costs generated by any actual tax hikes, spending cuts, or most
currently, the 17-day shutdown.
We wish we knew something to do
about it all. We might say, "write
your Representatives and Senators and urge them to respect each other's views
and work together toward middle-ground solutions". So we did say it. Send your letters to your local newspapers;
post them on your Facebook pages; get the word out. More such text might be "stop the
blame-game; that doesn't help anyone".
Finally, "most concretely, can the Conference Committee, chaired by
conservative Paul Ryan and liberal Patty Murray, fulfill their mission to
devise a real budget for the fiscal year that's already a month old?! What do we pay you to do there in
Labels: Economy, Government Policies