Iceland, the IMF and Austerity Protest

The story sounds familiar: neoliberal economic policies lead to a period of rapid economic growth followed by a debt crisis, imposition of IMF austerity policies and a surge of protests. But, this isn't Latin America in the 1990's, it's Iceland in 2008-2009. A Reykjavik radio station predicts that a quarter of Iceland's population could take part in a two-week, loan-repayment strike. The IMF's response to the financial crisis was a reported $10 billion dollar bailout plan conditional on huge cuts in public spending. The cuts are set to take place next year when "serious unrest is expected".

What's different about this story from Latin America in the 1990's is that Iceland's population appears to have widely participated in the bubble economy ("In just five years, the average Icelandic family saw its wealth increase by 45 per cent"). In Latin America, the growth spurt of the 1990's was accompanied by deteriorating social conditions.

The IMF might argue that it is not responsible for the policies of member countries and is doing the best that it can in a difficult situation. Hyman Minsky took a little broader view of our unstable, boom-bust-bailout financial system. The IMF is part of the system and the system needs to change.

Medicare and the Public Option

In today's Senate Finance Committee debate on the Health Care Public Option, Sen. Schumer (D-New York) asked Sen. Grassley (R-Iowa) if in addition to being opposed to the public option he was also opposed to Medicare. The consensus answer form a number of Republican's seemed to be that the Public Option would be like Medicare and that's what they didn't like about it (even though they were not opposed to Medicare) because the public plan might limit payments to physicians.

Medicare has had a difficult time controlling payments to physicians. In 2010, physicians face an across-the-board cut in Medicare payments of over 20%. This is about what would be necessary to keep growth in payments to physicians in line with growth in the US economy and is a result of Medicare's Sustainable Growth Rate formula (SGR). The SGR has been strongly resisted by the AMA and legislation since 2002 has consistently overridden the formula.

These circular arguments (we can't control costs even with a public option like Medicare even though costs are out of control) leave me a little despondent about our ability to control health care. But, just focusing on physicians, it begs the question of whether physicians in solo or small-group practice can effectively control costs. Do physicians need to move to larger, multi-specialty practices where there are economies of scale and control over prices for physician's services. And, if so, how do we get there?

Secession and the Massachusetts Model

Two news stories caught my attention today. First, Massachusetts is being watched carefully as a laboratory for health care reform. As a universal-coverage system, it is dealing with a lot of problems that will need innovative solutions. Second, the secessionist movement, which started in Texas, is spreading to other States on the East Coast and the Northwest. Evidently, there is growing sentiment that some States want to do things their way. Maybe there are Red States that simply don't want health care reform and don't want to have it forced down their throats by the federal government.

If we let States go their own way on health reform, here's what I predict will happen. States with universal coverage or single-payer systems will become magnets for (1) innovative small business that can't offer reasonable health benefits and (2) people looking for quality health care. Certainly, that's the case for Massachusetts. Laggard States will either become backwaters or be forced to provide some form of universal coverage that is as good as the single-payer States.

State-level experimentation might diffuse some of the secessionist turmoil and allow those who are angered by federal government initiatives to take their destiny in their own hands and live with the consequences. Hopefully, the federal government will do everything possible to help Massachusetts succeed.

More Problems with Health Savings Accounts

There are lots of problems with Health Savings Accounts. Here's one problem: people at lower income levels don't use HSAs. Here's another: it's very difficult to know how much to set aside each year since it's very difficult to find out what health care procedures actually cost. These are really deep problems with our health care system (and our society) that would have to be solved before relying on HSAs and catastrophic health insurance.

Earth System Complexities

In an earlier post I tried to simplify the IPCC findings on climate change. There still remains a lot of complexity and poorly understood feedback loops within the world system. Can that too be boiled down?

The graphic above gives some sense of the complexity of the known feedback loops within the earth system. Basically, the physical climate system would be in equilibrium without external forcings. So anthropogenic (human) forcings (in addition to other forcings such as incoming solar insolation, meteor strikes and volcanic eruptions) send the system in to disequilibrium.

The simplified graphic above, focusing just on disequilibrium, shows that there are still two somewhat unpleasant feedback loops the will return the Earth system to equilibrium. If climate change has a negative impact on human activity (such as flooding of the Mekong Delta as a result of rising sea levels), it will reduce land-use and CO2 forcings.

To avoid unpleasant Malthusian checks on human activity, we have the policy options (+/-) of reducing our land use patterns and reducing our CO2 emissions ("Feedback Loops in the Earth System" was the topic of today's "Global Warming Debate"). The simplified graphics is, I think, as simple as it can be put while still retaining the systemic aspects of the problem (Earth scientists would certainly disagree). Future posts will discuss some of the proposed policy solutions.

Is a Mandate a Tax?

This topic (from an earlier post) has also attracted the blogosphere (see Greg Mankiw's blog) with more substantive economic analysis having been provided in a 2001 paper by Larry Summers. The answer: it depends on how people value the mandated benefit. For those who do not value health care very highly, the mandate is a tax and is a cost to be avoided since it provides no benefits--until they get sick when they can become free riders.

Does Dane County Need an RTA?

In 2009, the Wisconsin State Legislature passed legislation enabling Dane County to create a Regional Transit Authority (RTA). The justification for the RTA was provided by the Transport 2020 Report. A careful reading of the report can be quite frustrating for those who have tried it. There are many inconsistencies, questionable assumptions and illogical conclusions. However, for me the "Summary Problem Statement" in Chapter 2 provides the easiest way to understand what's going on.

The graphic above is my summary of the issues. The problem is that population growth and other factors are putting pressure on the Dane County transportation system resulting in increased congestion, decreased air quality and decreased safety. Adding or expanding the road system is not an option since land is locked up in the Isthmus that runs between Lake Mendota and Lake Monona.

The rest of the report discusses the policy response comparing solutions based on either Rail Transit or Bus Rapid Transit (or both). The big questions left unanswered by the report are whether either response will actually reduce transportation system pressure and what will be the (1) sales tax consequences (since the RTA can levy a county-wide sales tax), (2) land use impacts and (3) CO2 reductions?

Another question left unanswered is what will happen if we do nothing. Will negative feedback from transportation pressure reduce population pressure and other factors creating transportation problems?

Since Dane County is in the middle of wrestling with these and other RTA-related issues, I'll have more commentary if future posts.

Are Health Insurance Mandates a Tax?

Tonight on the PBS News Hour, Johathan Gruber of MIT and Michael Cannon of the Cato Institute debated health insurance mandates. Evidently, Mr. Cannon thinks that mandating health insurance coverage or a least charging a penalty to those who refuse to purchase insurance is a tax. To me, it seems more like a parking ticket for failing to plug the meter in the public health care parking slot. Minimally, it's an avoidable free-rider tax. Of course, if you are opposed to all taxation, then anything that can be called a tax is objectionable.

Mr. Cannon's charge should not be confused with the Baucus Health Care Plan that does place an excise tax on "cadillac" health care plans. When a plan provides "cadillac" coverage is debatable, but given the collapse of GM it's no surprise that both executives at Goldman Sachs and some blue collar workers might have to pay the tax. Of course, the excise tax is a way to pay for universal coverage without increasing taxes.

A lot of this would go away if the Federal government made it attractive for states to pursue single-payer plans or anything else they think might increase coverage and reduce costs.

The Most Important IPCC Graphic

The Intergovernmental Panel on Climate Change (IPCC) has published a great deal of material on climate change. The Fourth Assessment report release in 2007 consisted of four volumes. It's not easy reading. Could it be boiled down to one graphic?

The IPCC AR4 WG1 SPM Fig. 2 is a good candidate. It compares the anthropogenic (human) climate forcings to natural forcings. The color blue indicates cooling effects and red indicates warming. Each source estimate (greenhouse gases, ozone, water vapor, surface albedo, aerosols, linear contrails and solar irradiance) is provided with error bars. Finally, the total net anthropogenic forcing is given with error bars, in other words, warming as a result of human forcings even given the error bars.

This graph was the topic of the last few lectures in a course I'm auditing, "The Global Warming Debate" being taught this semester at the University of Wisconsin by Jack Williams.

Single Payer in the States

Tammy Baldwin, D-Wisconsin, has been promoting the idea of allowing states to experiment with different health care systems. Since current healthcare reform measures might fail, state-level experimentation is an important idea. In this model, the role of the Federal government would be very different. Federal rules covering Medicare and other programs would have to change. The states would need help with single-payer systems during economic downturns since the state's cannot run deficits (maybe a state-level health savings account in the Federal bank). My own research supports state-level experimentation and suggests techniques to help structure the state programs.

The State of Macroeconomics

I've been following the debate about Macroeconomics triggered by the Subprime Mortgage Crisis and Paul Krugman's OpEd piece in the NY Times. An interesting rejoinder to Krugman's critique of the profession was posted by David Levine in the Huffington Post. One of Levine's comments "I feel a little like a physicist at the cocktail party..." caught my attention. I realize that some economists view themselves as physicists but Krugman seems to be talking about what happens when economists enter the policy debate or apply simple models to real systems. It brought to mind both Nassim Taleb's comments on "econophysics" and its role in the Subprime Mortgage Crisis and the role of neoliberal economic policies in the IMF Austerity Programs. There is certainly much to critique here...

Kettle Moraine Jazz Festival

On September 11, my wife and I went to the Kettle Moraine Jazz festival in West Bend, WI. I was interested in seeing Craig Chaquico who was the lead guitarist for Jefferson Starship and now fronts his own smooth jazz group. Craig works back and forth between classical and rock guitars and as my friend Gil Jevne would say "he's a slayer".

Goals

This blog will be devoted to informal comments on my research topics: the US Health Care System, the US Economy and the World System.