He who has the gold, makes the rules
The numbers on how much various medical interests have spent on influencing Congress and the Presidency make clear why health care reform keeps getting watered down:
..the data so far suggest that the second quarter has a good chance of reaching a new high for the health-care lobby. The industry already set records from January to March, when health-care firms and their lobbyists spent money at the rate of $1.4 million a day.
Impressive… Is anyone on the side of good reform spending that type of money?
Of course they aren’t. Healthcare in the US costs 5% more of GDP than it should. That’s a lot of money, and there are a lot of people getting rich off that money. They’ll do whatever they have to in order to keep the flow coming. When you’re talking 692 billion dollars (give or take), well, what’s 1.2 million a day to keep the cash flow coming?
The fundamental truth of America’s Congress is that its first and most important function, when you take the time to look at the bills it passes, is to take money from rich special interests and then pass bills which favor them. The same, I’m afraid, is true of the presidency. Most of the 15 trillion given, loaned and guaranteed during the financial crisis was to the financial sector, and most of that was given by the Federal Reserve, which if it answers to anyone (questionable) answers to the President. But even when Congress got into play it’s noticeable that they gave 700 billion for TARP but are now insisting that health reform be “decifit neutral”. Likewise no one seems to mind giving lots of money to the military.
Interesting set of priorities. Politicians seem to always be telling us how “protecting Americans” is their most important duty. Which is how they justify spending money on a military which doesn’t seem to protect Americans from anything noticeable. And by protecting I assume they mean “save American lives.” This is odd, because health reform, properly done, would save those lives than anything else except massive reform of the way Ameiricans eat. But, unlike with the military, there isn’t a health-reform complex pushing to save American lives that is nearly as strong as the one pushing to keep the gravy train going. So suddenly, saving American lives isn’t a priority.
Whenever I read about an incident such as the one which happened with Henry Louis Gates Jr, in which a police officer arrests someone for, essentially, not paying them enough respect, the old Cartman line “respect my authoritae!” floats through my mind.
After reading the officer’s account and Gates account, I have no idea whether racism was at the core of Gates being arrested. But I will lay long odds that if Gates had done everything Sergeant Crowley had told him to do and done it snappish, well, he wouldn’t have been arrested. My interactions with police in the US have all reinforced to me that even something as simple as a question is interpreted by many policy as a direct assault on their authority, and that they have no tolerance for any such thing. If a policeman in the US asks you to do something, or tells you, you’d best do it, right now, whether he has the right to order you around or not. And if you don’t, be ready to deal with the consequences.
Which is to say, I agree with lawyer Scott Greenfield, when he writes:
But there is similarly a possibility, based upon a larger experience by those who follow the conduct of police officers, that this was unrelated to Henry Louis Gates’ race. This encounter could have, and has, happened to whites as well as black, to Hispanics as well as Asians. To old women and young men.
Henry Louis Gates was arrested for engaging in “tumultuous” behavior. Only in Cambridge would the complaint use the word “tumultuous”. But many a man forced from his castle upon the command of a police officer who refused to accept that he was at home would have been outraged. Tumult seems an appropriate way to act. The crime was Gates’ hurling words at Sgt. Crowley at a time when the sergeant commanded him to be obsequious and compliant. Gates would not calm down. There is no law that requires him to be calm because a police officer ordered him to do so. Other than the expectation that we do what an officer tells us to do, no matter what.
It may well be that what happened to Henry Louis Gates reflects, as he is accused of screaming at Sgt. Crowley, “what happens to a black man in America.” Because the black man happens to be the director of the W.E.B. Du Bois Institute for African and African American Research at Harvard, perhaps the pre-eminent black scholar, it will open a discussion that we still need to have, black president notwithstanding.
It is also possible, however, that what happened to Henry Louis Gates is the outgrowth of the conflict between law and order, order represented by police who have been empowered, in our post 9/11 age, to believe that their every command is the law, that our blind obedience is mandatory. Other than a few old-timers on the Supreme Court who live in a fantasy world where ordinary people can assert their rights and refuse to comply with the command of a police officer with impunity, this encounter between a distinguished scholar, within his own home, and a police sergeant who believes that his command is sufficient to create the divide between citizen and criminal, may offer the chance to question who commands whom in our society.
The counter to this is that “cops everywhere are cops”. Now there’s certainly some truth to that. But I will say this. I don’t fear Canadian police the way I do American ones. My sample size isn’t large, but I’ve found that unless there’s a real crisis or threat (ie. not an unarmed 60 year old man), most of them don’t demand instant obseqious obedience to their every demand and are willing to answer reasonable questions.
In the US my experience has been that unless I want things to get unpleasant, I’d better click my heels, cringe and do as commanded.
So, racism? I don’t know. Could well be. But I don’t think it’s necessary to invoke racism to explain officer Crowley’s behaviour. He was disrespected by someone who didn’t obey his every command. To his mind he was even lenient, he gave his orders multiple times. Gates stepped out of line and needed to be put in his place, not because he was black, but because he was a civilian who wasn’t doing what a police officer told him.
The real dividing line may not be black and white, the real dividing line may be the blue line. You either wear the blue, or you don’t, and Gates didn’t.
(Addendum: I read the police report when it was released. When I went looking for it today, it had been taken down both by the Boston Globe and the NY Daily News. How… interesting. Fortunately someone saved a copy. I’m so glad the press has an adversarial relationship with authority.)
Bottom Line On the Financial Sector: fewer bigger companies and a repeat of the financial crisis
I think the obvious needs to be pointed out: after this crisis is over, there will be fewer large financial firms who control a larger percentage of the business. There will be less large (and small) banks and less brokers. The market will be closer to an oligopoly, and those involved in it, even if they don’t formally collude, will take advantage of their market power to increase their profits. It’s already happening, as (amusingly) BlackRock founder Fink pointed out:
Larry Fink, BlackRock’s founder and chief executive, on Tuesday took aim at the “luxurious” trading profits enjoyed by Wall Street banks, saying that they have taken advantage of reduced competition to charge their customers more for even basic trades.
“There are fewer players. There is very little capital being committed by these dealers,” Mr Fink said.
“They’re just taking the spread between the bid and the ask [the price gap between buyers and sellers] and they are making very luxurious returns,” he added.
It is hard to feel Blackrock’s pain, of course, but increased bid/ask spreads and increased fees aren’t in the interest of market liquidity or efficiency. It is, in the purest sense, rent-taking (getting money for your position in a system, rather than for making the system better).
It is basic economic theory that the fewer actors in a sector of a private market (I won’t call it a free market, it isn’t) the worse for customers an the more the actors will be able to squeeze out oligopoly profits simply because of their position.
This is also something that every Congressperson and pundit who ever squeals about “competition” should find ominous—fewer and fewer firms competing in what is America’s most important sector. (It must be America’s most important sector because America has spent going on 14 trillion defending it.)
Add to this that the appetite for risky credit default swaps has recovered and there is no move to ban or significantly regulate them; that firms like Goldman Sachs are back to their old ways; and that the ratings agencies have escaped any significant overhaul and it becomes a virtual certainty that the financial disaster we are going through was only the first. The system is now more concentrated and more unstable than it was before. The market actors are even larger than they were before: even more “too big to fail”.
When the horse bolts the barn and you refuse to even close the door after you’ve put it back in the barn, it becomes clear that you have no intention to stop it from happening again. That’s what Washington’s actions tell us. They truly believe this was a one off affair, that no one could have anticipated (because Summers and Geithner sure didn’t anticipate it, and they are sure they are the smartest people around) so therefore there’s no need to make real systematic changes. All that is required are some minor regulatory changes and to give primary responsibility to the Federal Reserve, they not only failed to stop the last disaster but enabled it to occur and since of all regulatory agencies they are the most removed from Congressional control.
Welcome to your future. It is going to look a lot like the present and the recent past.
This is a story I had missed. It seems that insurance companies determined rates for “out of network” medical services by looking at an independent database run by a company called Ingenix, United Health Group.
But the way the database “independently” determined the going rate was by having insurance companies enter data on how much the rate was for given services. And for a decade they systematically entered prices which were lower than the actual prices being charged by doctors.
The result was that patients would get a larger bill than expected, the insurance companies would redeem the doctors for less than expected, and often the gap would never be made up. A win for insurance companies, a loss for patients and doctors.
Companies involved, include (but I’m not sure if are limited to):
United, WellPoint, Aetna, Cigna, GHI/HIP, Capital District Physicians’ Health Plan, Independent Health, Excellus, MVP Health Care, HealthNow and Guardian Life Insurance Co
They have all “settled” with NY Attorney General Andrew Cuomo’s office and promised to use a new, more transparent database as soon as one is available. They have given 100 million to make the new database. And, of course, none have admitted they did anything wrong.
Bottom line on this is that the amount of money they saved (ripped off) is almost certainly more than their “settlements”. So the entire scheme has been worth it, especially since no one went to jail. Just another cost of doing business.
This is how large american corporations operate. Law breaking and immoral behaviour is simply a cost-benefit matter. If the money saved by doing something illegal is more than the cost of doing something illegal (including legal costs), too many of them will do it.
I would suggest that the only things which would really get executives to stop doing these sorts of things are to either treat them as criminal matters (and send CEOs to jail) or to treat them as what they are: clear collusive action to use an oligopoly position to control prices, and break them up. But the second is no longer possible after the Supreme Court ruled that actions which suggest collusion cannot be taken as evidence of collusion, overturning prior precdent.
And, of course, senior executives rarely go to jail for screwing ordinary people, let alone committing massive fraud (or half Wall Street would be heading for the hoosegow) so real criminal charges certainly won’t happen.
I wonder what other scams the insurance companies are running we don’t know about? What other ways they are fixing the books? Only a fool would bet they aren’t.
This is a story I had missed. It seems that insurance companies determined rates for “out of network” medical services by looking at an independent database run by a company called Ingenix, United Health Group.
But the way the database “independently” determined the going rate was by having insurance companies enter data on how much the rate was for given services. And for a decade they systematically entered prices which were lower than the actual prices being charged by doctors.
The result was that patients would get a larger bill than expected, the insurance companies would redeem the doctors for less than expected, and often the gap would never be made up. A win for insurance companies, a loss for patients and doctors.
Companies involved, include (but I’m not sure if are limited to):
United, WellPoint, Aetna, Cigna, GHI/HIP, Capital District Physicians’ Health Plan, Independent Health, Excellus, MVP Health Care, HealthNow and Guardian Life Insurance Co
They have all “settled” with NY Attorney General Andrew Cuomo’s office and promised to use a new, more transparent database as soon as one is available. They have given 100 million to make the new database. And, of course, none have admitted they did anything wrong.
Bottom line on this is that the amount of money they saved (ripped off) is almost certainly more than their “settlements”. So the entire scheme has been worth it, especially since no one went to jail. Just another cost of doing business.
This is how large american corporations operate. Law breaking and immoral behaviour is simply a cost-benefit matter. If the money saved by doing something illegal is more than the cost of doing something illegal (including legal costs), too many of them will do it.
I would suggest that the only things which would really get executives to stop doing these sorts of things are to either treat them as criminal matters (and send CEOs to jail) or to treat them as what they are: clear collusive action to use an oligopoly position to control prices, and break them up. But the second is no longer possible after the Supreme Court ruled that actions which suggest collusion cannot be taken as evidence of collusion, overturning prior precdent.
And, of course, senior executives rarely go to jail for screwing ordinary people, let alone committing massive fraud (or half Wall Street would be heading for the hoosegow) so real criminal charges certainly won’t happen.
I wonder what other scams the insurance companies are running we don’t know about? What other ways they are fixing the books? Only a fool would bet they aren’t.
Goldman Sachs Nominee Bob Hormats Helped Fund Sudan Genocide
Yesterday I satirically noted that what Washington really needs is another Goldman executive in a position of power. But today I read that Bob Hormats, a Goldman vice chairman, was involved in an IPO for PetroChina, which has Sudanese holdings. He claimed, at the time, that none of the money would be used to work in Sudan (do people not understand that money is fungible and scarce? The claim is absurd on the face. Even if PetroChina used none of that money for work in Sudan, it would free up other money to be used in Sudan).
However, even if you ignore how money works, it turns out Hormats lied:
- These statements later proved to be inaccurate and misleading. Several large institutional investors, including Harvard, have since divested from PetroChina, citing human rights concerns.
- The SEC later cited Hormats’s remarks as evidence of illegal market tampering, or “market conditioning,” in a larger case against Goldman Sachs, which the bank settled for $2 million.
I hate to be a stickler, but this is a bit more serious than just being a Goldman boy. Lying to help fund genocide may be business as usual for some folks, but I’d like to think it still disqualifies someone to serve in the Obama administration. Since I’m guessing the Obama administration doesn’t agree (pretty sloppy due diligence if they didn’t know) I hope the Senate does and refuses to confirm Hormats.
(And if Hormats wishes to claim “I didn’t know”, then I’m willing to take him at face. In which case, he’s not a liar, he’s a fool with bad judgment, and still doesn’t deserve to be confirmed.)
Some devastating analysis from the Rockefeller institute (pdf) shows how bad the situation of many states is:
State tax collections for the firstquarter of 2009 showed a drop of 11.7 percent, the sharpest decline in the 46 years for which quarterly data are available. Combining the Census Bureau’s quarterly data with its annual statistical series, which extends back to 1952, the most recent decline in state tax revenues was the worst on record.
While almost all taxes (except property taxes) are showing a big decline, income taxes are notably declining:
The personal income tax decline was particularly sharp, an unprecedented 17.5 percent in nominal terms. The inflation-adjusted decline in state personal income taxes was the greatest in the 46 years for which quarterly data are available.
But that was the first quarter! Well, the second quarter isn’t looking better:
Early figures for April and May of 2009 show an overall decline of nearly 20 percent for total taxes, a further dramatic worsening of fiscal conditions nationwide. Preliminary figures for the state fiscal year 2009 indicate around 8 percent decline in total taxes, 13 percent in personal income taxes, and 5 percent in sales taxes.
There is one spot of good news, however:
The local tax slowdown has been less pronounced than the state tax slowdown. In the first quarter of 2009, local tax collections rose by 3.9 percent, driven by 7.4 percent growth in property taxes.
Even this, however, has a grey lining—property taxes are still based on older valuations which are no longer accurate in most municipalities. People are paying property taxes for more than their properties are worth, and given that many are suffering from large income declines (or there wouldn’t be the huge decline in income tax), this means many are paying more than they can afford. This is also a lagging measure, and as properties are revalued we can expect this number to start to decline.
Sales taxes are also down a wopping inflation adjusted 9.5%, also the worst on record (the previous worse being the third quarter of 91 at 6.9%.
This downturn, then, has put a massive hurt on States. California is the worst off, followed by New York, but most are hurting.
There are some where taxes are up: Maryland, Indiana, Iowa, North and South Dakota, Arkansas , Kentucky, Alaska, Montana and Oregon. Everyone else is down.E
The results of state cuts to services, which are happening and will continue to happen, will be devestating. In an economic downturn government needs to increase spending to offset the fact that private spending is down. If government does not do so, especially in a severe downturn (I think we can agree this on is) it risks making the recession or depression even worse. This is why, next to making 40% of the federal stimulus bill tax cuts, cutting aid to the states was the stupidest part (or rather, not part) of the bill.
California, in its budget “compromise” took 4 to 5 billion from the munipalities (since their tax base is doing better than the state’s) and cut 6 billion from education. While other states cuts will not be as brutal (and other states can raise taxes, unlike California, thanks to its completely dysfunctional proposition and majority requirements) they will still be ugly, and will both deepen and lengthen the recession.
This is your government on conservative ideology: push key spending down to states, which can’t tax or borrow the way the federal government can; insist on tax cuts over real stimulus, and then wonder why the stimulus doesn’t work. None of this is unpredicted, at the time of the stimulus cuts economists said the state relief was one of the most important parts of any good bill.
What we got wasn’t a good bill, and the consequences will continue to pour in. Dysfunctional states plus a dysfunctional federal government, plus conservative ideology equals devestating cuts on services people need most during a downturn, and which the economy needs most.
I am pleased to see the the Obama administration adding a Goldman Sachs executive to the team:
Robert Hormats, a vice chairman of investment bank Goldman Sachs, has been tapped for a key U.S. State Department post, White House officials say.
Hormats was named by the Obama administration Friday to be the department’s undersecretary for economic, energy and agricultural affairs, an official announcement indicated.
The good Lord knows, the problem with government these days is that the views of high finance, Wall Street and Goldman Sachs in particular are not given enough weight. If we had listened to them when they wanted Glass-Steagall repealed, wanted limits on leverage weakened, wanted to make sure comlex derivatives weren’t regulated and so on, well, we wouldn’t be in this pickle.
So let me just be the first to say how wonderful it is that Goldman’s, and Wall Street’s, influence continues to grow in Washington.
(More seriously, putting a Goldman man into an economic diplomacy spot indicates that keeping the credit flows moving is very important to the Obama administration.)
