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Richard Watson

Category Archives: Political Commentary

A Tale Full of Sound and Fury

19 Saturday Sep 2009

Posted by Richard Watson in Political Commentary

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I am about to speak ill of the dead. So naturally, the subject of this blog is health care reform, otherwise known as the “Graveyard of Politicians.”

One must admire the audacity of Congress. The bill they’ve come up with achieves universal healthcare by requiring everyone to purchase health insurance. Problem solved. In the words of Georges Jacques Danton, one of the leaders of one of the French revolutions “…audacity, more audacity, always audacity.” For that, he got le Guillotine. Families failing to obtain coverage will be fined a maximum of $3,800 if they don’t buy…not that Congress should be selling.

We were recently on holiday in France, which is my excuse for not posting a blog for awhile. France has couverture maladie universelle (universal health care coverage). But honestly, the only phrase I was able to master in French was l’addition, s’il vous plaît, which is what Congress should be asking. Countries such as Denmark, pay higher rates of taxes in order to provide universal health care. Alas poor Yorick! It is not a cheap undertaking. The Canadian government is curtailing some of the services covered by its public health care system due to rising costs, which seems anathema to the concept of universal coverage (see US neighbor swallows private sector medicine in the Financial Times).

Comparing the quality of health systems is difficult. An article in The Economist (Healthier than thou ) notes that life expectancy in Britain is 79.1 years as compared with 77.8 years in America. Does this mean Britain’s National Health Service is superior to America’s system of private insurers? The Economist goes on to state that Britain does worse than America in five-year survival rates for cancer. Part of the reason for this is that America has more “high-tech diagnostic equipment” per million people than Britain. And, “expensive new drugs generally become widely available sooner in America…”

Perhaps this is why America’s health care system is the most expensive in the world in terms of economic output. The United States spends 16% of GDP on health care (see “Heading for the Emergency Room” in The Economist ). “However, a few might be surprised to learn that Americans spend more than twice as much per person on health care as Swedes do. And many may be shocked to be told that in Miami people pay twice as much as in Minnesota, even for far worse care.” What do Sweden and Minnesota know that Miami doesn’t? Is health care cheaper in colder climates? Under what system are you better off?

I think the answer very much depends on what ails you. For instance, you are possibly better off with certain types of cancer, those that respond well to chemotherapy and radiation treatment, in America. Although consider what Robert Martensen states in A Life Worth Living – “most Americans die in hospitals these days…older Americans dying in hospitals experience an extended and agonizing process.” Our health system may extend our lives, but are we living better as a result? Can our World Wrestling Federation style of debate (sometimes called a “town hall meeting”) tease out these nuances of health care reform?

This is the appropriate place for the “speaking ill of the dead.” I found the recent HBO special on Ted Kennedy perplexing. A 1974 clip shows a young Bill Clinton introducing Ted Kennedy who gives a speech on health care reform remarkably similar to those we are hearing today. Which makes me wonder if it will take another 35 years for any kind of health care reform (at which time I won’t need it).

In 1971, Richard Nixon advocated a national health care system that would have required all employers to provide health care to employees. A subsidized government insurance program would have been available for those who were not employed. Ted Kennedy was in favor of a government insurance scheme for everyone and helped to defeat Nixon’s proposals. A comparison of the tenor of the debate between now and then is illuminating. Apparently, Americans were as alarmed then as now over the rising costs of health care.  Of course, the annual cost of the nation’s health care in 1974 was a mere $100 billion annually, or a couple of Merrill Lynch bonuses.

If we are to avoid the fate of the Red Queen over the next 35 years, what is the solution? You’ll recall Lewis Carroll’s Red Queen who tells Alice, “‘A slow sort of country!’ said the Queen. ‘Now, here, you see, it takes all the running you can do, just to keep in the same place.’”

Perhaps the only way to approach this is to recall the old joke about a physicist, a chemist and an economist lost on a deserted island. They are surrounded by cans of beans, and what not, and the said physicist and chemist have been unable to pry them open. The economist conjures up the answer – “assume we have a can opener…” So let’s assume we have “universal health care.” What does this look like to you?

I’ll close with this thought. Was Macbeth talking about health care reform before he met his end?

Tomorrow, and tomorrow, and tomorrow,

Creeps in this petty pace from day to day,

To the last syllable of recorded time;

And all our yesterdays have lighted fools

The way to dusty death. Out, out, brief candle!

Life’s but a walking shadow, a poor player

That struts and frets his hour upon the stage,

And then is heard no more; it is a tale

Told by an idiot, full of sound and fury,

Signifying nothing.

(Macbeth, William Shakespeare, Act V, Scene V)

Tour-Eiffel

Don’t Worry About Bernie

04 Wednesday Mar 2009

Posted by Richard Watson in Economics and Taxation, Political Commentary

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The US District Court is sending Ms. Madoff on a shopping spree! Page 16 news in yesterday’s Financial Times (“Madoff Freeze Partially Lifted, March 3, 2009) states that Bernard Madoff’s wife gets to keep the $62m in her bank accounts because it is “unrelated” to her husband’s alleged $50bn fraud. We must thank the Court for providing us with a useful legal blueprint for would-be alleged fraudsters. Just transfer it to the wife’s “housekeeping” account and all will be forgiven.

The law requires us to use the term “alleged” in front of the term “fraud,” because only a court of law possesses the wisdom to declare whether a fraud has been committed…even though people are out $50bn and some change…and we all know what that is – a good weekend at Bernie’s!

Hit the Road Ike

28 Saturday Feb 2009

Posted by Richard Watson in Economics and Taxation, Political Commentary

≈ 1 Comment

Ninety years ago, then U.S. Army captain Dwight D. Eisenhower went on a recce across the country. Joining a convoy comprising various trucks, passenger cars, mobile field kitchens and repair shops, the caravan departed from near the White House lawn on July 7, 1919, and arrived in San Francisco two months later on September 6. Its purpose was “…to demonstrate the potential of motor transportation and to dramatize the need for better highways” writes author Daniel Yergin in The Prize – The Epic Quest for Oil, Money & Power. Yergin notes that this trip “…signified the dawn of a new era – the motorization of the American People.”

If its birth was 1919, the adolescence of the “motorization of the American people” has to be the 1953-54 recession. It seemed to Eisenhower, now President, that the economy needed stimulating. No doubt recalling his youthful road trip, he signed the Interstate Highway Bill in 1956, providing for 42,500 miles of new highways. The big losers at that time were the railroads, perhaps much like the automobile industry is destined to become the big loser this time around. Although in their case it is more like an assisted suicide.

Today’s Financial Times discusses the fallout from the 1956 stimulus in “Highway to Hell Revisited,” pointing out that massive government spending has unforseen consequences years down the road. Noting that “road lobbyists and real estate developers colluded against meaningful regulation and planning…the result was a distorted market and tax system.” In 1958, according to the FT, journalist William Whyte “…warned that sprawl was not just bad aesthetics but bad economics. A subtler and more serious problem than blight was that, for local authorities, the cost of providing utilities and other services was exorbitant. ‘There is not only the cost of running sewers and water mains and storm drains out to Happy Acres…but much more road, per family served, has to be paved and maintained.'”

Just think how different our country would now be with an efficient rail and transportation system and no reliance on foreign oil. Decisions made in the present can have dramatic repercussions 90-years on…Obama’s largest building project in the American Recovery and Reinvestment Act is $27bn for roads.

The Wisdom of Governments

Then as now, fear was used to convince the public. Monty Python fans know that the three – sorry four – weapons of the Spanish Inquisition  “…are fear, surprise, and ruthless efficiency…and an almost fanatical devotion to the Pope.” Invoking the Cold War, President Eisenhower told the populace that “…in the case of atomic attack on our cities, the road net must permit quick evacuation of target areas.” And here I can’t resist another digression.
You may recall that part of President Reagan’s missile defense program apparently involved plenty of shovels. In 1981, a Pentagon official told reporters that nuclear strikes were survivable and that the country would fully recover within four years if people took to digging lots of holes – covering them, of course, with wooden doors. According to the Pentagon, “if there are enough shovels to go around, everybody’s going to make it.”

The Department of Homeland Security followed this line of reasoning twenty-two years later by recommending that Americans stock up on duct tape, suggesting that it would help keep you safe in the event of a biological attack. I’m sure science will bear out the efficacy of such precautions, and we will eventually learn that the Bush administration actually held a high regard for science and education – you’ll recall his deft use of the intransitive plural subjunctive tense in his sentence “rarely is the question asked, is our children learning?”

So let’s close with FDR’s quote “…the only thing we have to fear, is fear itself.” It causes us to follow leaders blindly.

National Thrift Week

1919 also saw the Treasury Department encouraging civic organizations to promote National Thrift Week. The purpose of National Thrift Week, according to the New York Times (01/15/1922) was “…to help the individual to think straight and act wisely about money matters…” A ten-point financial creed was espoused that advised, among other things, to “pay your bills promptly – the curse of debt has put the goal of success beyond the reach of many men.” Contrast this with the message coming out of Washington today that banks need to start lending again to stimulate consumer spending and you see that the politicians are unable to grasp the fundamental problem of this economic crisis. Remember that “mortgage” is Latin for “death-grip!”

Stimulated

19 Thursday Feb 2009

Posted by Richard Watson in Economics and Taxation, Political Commentary

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Our legislators should probably be accountants rather than lawyers. I just took a glance at the budget plan on the California Budget Project website and instantly recalled Shakespeare’s thoughts on lawyers:  Henry VI, Part II, (Act IV, scene ii) – with apologies to my lawyer friends. But at least this solves the problem of what to do with all my federal stimulus dollars. Under the tax cuts Obama just signed into law, workers can expect to see an extra $13 per week in their paychecks for the second half of 2009. California just increased its sales tax by one percentage point and increased its personal income tax by 0.125 percentage points. So that popcorn I was planning on buying at the weekly movies with my stimulus money will now get forked over to the state coffers. But at least Hollywood gets $100 million per year in tax credits over the next five years under the new state budget…that should help keep the glitz in the Oscars, but how will we afford our popcorn?

Does this sound like our legislators are looking out for our interests? More later…

In Defense of the Silly Question

29 Thursday Jan 2009

Posted by Richard Watson in Political Commentary

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In a January 2009 USA Today article  a business professor confesses to not understanding the financial crisis. His point, which is excellent, is that we sometimes act as if we understand the answer to a question for fear of appearing dumb. Each semester, in what must be an enlightening class, he introduces his “…students to a key idea: I want them to join me in the fight against the fear of looking dumb. Overcoming that fear can save them from serious traps.”

“In 2001, for example, Fortune magazine reporter Bethany McLean asked Enron CEO Jeffery Skilling a dumb question: How did Enron make money? Skilling attacked, calling her an ill-prepared incompetent. Yet, McLean’s article was the first to rightly ask whether Enron was overpriced…”

I thought of this article today, because I was reading about “India’s Enron,” Satyam Computer Services. The Satyam fraud is estimated at more than $1bn and may have been committed through the use of 13,000 fictitious employees. “The former chairman…inflated the size of the outsourcing company’s workforce by nearly one-quarter and siphoned off the wages of the fake employees…” according to the Financial Times (Why Analysts Failed to Spot the Books Being Cooked). Along with the chairman of the company, two PwC auditors have been arrested in connection with police investigations.

And here’s where the silly question comes in. When an analyst asked why a $1bn cash reserve (which apparently doesn’t exist) was not earning interest, the chief financial officer stated that the money is “…in overnight deposits and all that, so now we have placed them into normal-term deposits so next quarter onwards we will see that as part of the deposits.”

What???

Go forward and ask the silly questions wherever you find them…

No Time for Silence

23 Friday Jan 2009

Posted by Richard Watson in Economics and Taxation, Political Commentary

≈ 2 Comments

The time for silence has ended. I’ve decided to start a blog, mainly to comment on what I see happening in the world economy these days and to pass on interesting news stories.

The one that pushed me over the edge yesterday was a piece in the Financial Times that reported Merrill Lynch paid its executives up to $4bn in bonuses days before it was acquired by Bank of America. BofA has been threatening to back out of the deal due to “material adverse conditions,” so the government has pledged to give more bailout money to help…this means taxpayers funded Merrill Lynch bonuses.

The New York attorney general has rightly begun an investigation. Note to Obama: our government should make a statement to the effect it will freeze the assets of such individuals who are being unduly enriched with bailout money until such funds are repaid – much like it would do for those who launder drug money or fund terrorist operations. Because really, aren’t these Merrill Lynch executives economic terrorists?

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