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Saturday, October 31, 2009

Seeking the Home-Field Advantage in the Public Option

The trigger suggestion is insane (Seeking the Home-Field Advantage in the Public Option, New York Times, October 23, 2009).

For nearly forty years, the Health Insurance industry has opposed improving coverage. They now claim that they can control costs and provide universal coverage. They are not to be believed.

Only a competing public option system will do. The call for a trigger is absurd. If the industry had the will it could have done what it proposes sometime in the past forty years. It has not, giving them a few more years would be an unreasonable waste of time during which many would remain uninsured.

The idea of small cooperatives is also un-workable. That is the same formula that the industry imposed with the Medicare drug plan -- small cooperatives can bargain with the drug cartels (I mean the pharmaceutical companies) but the government cannot bring its massive purchasing power to bear. That plan has no hope of cost reduction.

The President must stand firm on the need for a public option and Congress must vote for a public competitor to be in the mix.

I would prefer to see a single payer plan in place. The most compelling reason for moving quickly to a form of single-payer health insurance is the advancement of science.

Once genetic screening techniques are perfected, so that each individual's propensity for each and every disease is known from an early age, the only form of health insurance that makes sense will be the single-payer form. The private health insurance industry will go the way of the dodo, as no responsible U.S. Government will allow an unregulated market in which Insurance Companies can cherry pick for coverage those with a low propensity to get sick while excluding those from coverage who are likely to do so.

Sent to the New York Times

There's No Substitute for Troops on the Ground

Thee may be no substitute for troops on the ground (Max Boot, There's No Substitute for Troops on the Ground, New York Times, October 22, 2009), but do we and NATO have enough troops? He points to the town of Nawa where 1000 marines have carried out a clear and hold policy. About 400 Afghan troops assist them.

However there are 780 cities, towns and villages in Afghanistan. Do we have 780,000 troops to send east to hold and clear all those cities, towns and villages? I think not.

Could we be more optimistic and argue that when half the cities, towns, and villages were secure and flourishing, then a tipping point would be reached and that the Taliban and Al-Qaeda would acknowledge defeat? That would take some 390,000 troops, a far cry from what is proposed; but those are the kinds of numbers that counter-insurgency experts think necessary.

We need to be sure that we can win, before we commit more troops.

Sent to the New York Times

The New Untouchables

While I agree with Thomas L. Friedman that education must be the driver of our economic recovery, there is something missing in his analysis of the American decline (New York Times, October 21, 2009: A29).

He quotes approvingly Todd Martin's analysis of the loss of competitiveness. However, from 1980 to 2006, productivity rose at a rate of 2.2% per year. That is it was over 75% higher in 2006 than in 1980. On the other hand, real wages only increased 39% and from 1993 to 2006 only increased by 16%.

The fruits of increased productivity were not captured by employees but went to managers and shareholders. Clearly young people observing this stagnation in wage levels might well become unmotivated to take on the tough educational experiences that we all agree are necessary in our society today.

Sent to New York Times

Wednesday, October 21, 2009

The Pay Problem

The current compensation system in organizations is broken (The Pay Problem, David Owen, New Yorker, October 12, 2009). One solution to excessive executive compensation is to take seriously the fact that a corporation's success is contributed to by every member of the organization from the janitor -- if that role has not been outsourced -- to the research scientist at the bench, to the middle managers, up to the CEO.

Yes, each makes a differential contribution. Let this be reflected in their base salaries. But when it comes to bonuses based on the firm's performance, let each share the same percentage. In dollar terms, the differential will be there, but each will be rewarded for the firm's success.

I doubt that this can be sanctioned by law, but it seems like a good norm for companies, their compensation committees, and their shareholders to adopt.

Sent to the New Yorker

Any Bonds Today

How much better off the country would be today if we had adopted similar efforts to pay for our wars in Iraq and Afghanistan (Any Bonds Today, New York Times, October 10, 2009:A18).

By my calculations (sent to every US Senator in 2004, finally published in March 2008) a combination of a tax surcharge of 5% and a progressive forced savings regime (postwar credits: 2% for those with incomes between $50,000 and $100,000) with progressively high percentages until a millionaire was paying $16% on the amount of income over $1 million) would have paid for a large fraction of the war and kept our debt within manageable limits.

Had these suggestions been followed, we would have a much easier time now in combating the current employment depression.

ps link to publication:

(and yes I did send it to your op-ed page which showed no interest.)

Sent to New York Times

Friday, October 9, 2009

Healthy Banks Could Assume a Bailout Role

It would be funny if it weren't so tragic.

Because Sheila Bair and Timothy Geithner are acting like spoiled kindergarten kids, the Federal government has to borrow from banks at an expensive rate of interest rather than from the Treasury (Healthy Banks Could Assume a Bailout Role, New York Times, September 21, 2009: A1, 14).

When I was in graduate school over 40 years ago, one of my mentors, Chris Argyris, used to research interpersonal competence. It is a pity that the lessons learned have not survived those forty years. Bair and Geithner sure need training in that domain. The costs would be minuscule compared to the increased interest costs due to bank borrowing.

Sent to New York Times

But Who is Watching the Regulators

I do not think we can put much faith in any regulatory scheme until the two top officials who facilitated or oversaw loose regulation or deregulation are removed from office: Secretary Geithner and Presidential Adviser Summers.

They are poster children for the escalation of a losing course of action.

Sent to the New York Times

Accountants Mislead Us into Crisis

We must not allow bankers, their lobbyists, or their accountants to lull us into a false sense of security again (Accountants Misled Us Into Crisis, New York Times, September 11, 2009: B1, B4).

First of all, all 'off the books' liabilities should be banned. We need to know the true state of a company's assets and liabilities. Second we should not be seduced by pleas that some assets should be priced at their expected value rather than at market price because "the bank does not intend to sell them." The bank's intentions are irrelevant, what the investor needs to know is what those investments would fetch in the market if there were a sudden calling in of debts -- something that happened just last year.

The FASB should stand firm, the politicians should push back against the lobbyists who are trying to prevent reform. It is after all in the best interests of the banks that they have sufficient reserves against all their debts as I do not think any government will dare to bail them out ever again after they have flaunted their arrogant bonuses in the faces of the people.

Sent to New York Times

A Dream Interrupted at Boeing

One of the earliest lessons we teach at the Business School is the importance of coordination. For any complex endeavor to be successfully mounted, the interdependencies between the various stages of the project have to be carefully managed.

In our writings on downsizing, my colleagues Hugh Gunz and Michael Jalland, have emphasized that when an activity is outsourced, more managerial time and talent is required to manage the interface than was required when the activity was in-house.

Boeing (A Dream Interrupted at Boeing, New York Times Sunday Business, September 6, 2009: 1,4) seems to have forgotten this important lesson and are now bearing the costs of that failure.

Sent to the New York Times