How the Clinton Health Care Plan Was Killed

Yesterday Paul Krugman, whose column in the NY Times is the first one I look for every morning (in print or online), wrote:

Mr. Obama really, really doesn't want to repeat the mistakes of Bill Clinton, whose health care push failed politically partly because he moved too slowly.

It's ironic that the Clinton team should be blamed for moving too slowly, because Ira Magaziner expressed determination to move quickly as a speaker in December 1992 on a panel I attended. Magazine announced that the group drafting the health care legislation planned to get a bill through during the honeymoon period, "by June". He paused and looked toward the back of the room. Everyone's eyes turned toward a tall, lanky gentleman who rose slowly from his chair and said:

Ira, if you think y'all are going to get a health care bill through by June, y'all need to have your head examined. Y'all will be lucky to get your budget through by June.

Then he sat down. The speaker was Ernest ("Fritz") Hollings, Democratic Senator from South Carolina until 2005, and he was, alas, right in his prediction.

The charge of having "moved too slowly" is a way of saying that the bill was too complex, was prepared too secretively or made excessive concessions to the insurance industry. I haven't read, however, an explanation as cogent as the one presented by Ezra Klein in an article in the American Prospect that was posted yesterday on AlterNet. The article is not only a valuable take on the prospects for health care legislation, it's also a primer on the realities of the budget process in Washington today, especially the powerful role of the Congressional Budget Office in coming up with "the Number" for a bill's likely budget impact. The article is "Comprehensive Health Care Reform Is the Key to Our Economic Future," January 30, 2009. Here's how it opens:

"The history of health reform," explains Sen. Ron Wyden of Oregon, "is congressmen sending health legislation off to the Congressional Budget Office to die." That's not the history you often hear. Budget analyses do not make for gripping headlines. Editors want heroes and villains, narrative arcs and telling anecdotes. They do not want numbers. They do not want bureaucracies. But numbers, and the bureaucrats who decide them, can be quietly decisive in whether major policy reform lives or dies.

In the coming years, no bureaucrat will be as decisive as Peter Orszag -- the former director of the Congressional Budget Office who is now the head of Barack Obama's Office of Management and Budget -- and few bureaucracies will be as important as the CBO and the OMB. For every major policy and legislative fight, those organizations will decide the Number: the official price tag of a government program. And you can't do anything without the Number.

Go read the rest yourself here.

UK Doctors: Fewer Hours Mean Fewer Errors

BBC News is running a medical care story today that has implications for U.S. medical care. Residents who are put on a shorter 48 hour/week limit, in accordance with European Union regulations, made 33 percent fewer medical errors than those on a schedule of up to 56 hours a week. The sample size of National Health Service doctors was small but the results were significant. Thanks to Dr. Elisabeth Paice for the link - .

The relevance of the study for the United States is that U.S. hospital residents are expected to work up to 80 hours a week during their training. The New York-based Commonwealth Fund has shown that patient-reported medical errors are the highest in the United States in a study comparing it with five other countries -- Australia, Canada, Germany, New Zealand and the UK. Of the six countries, the UK had the fewest patient-reported medical errors.

The new study is reported in the Quarterly Journal of Medicine - http://qjmed.oxfordjournals.org/cgi/content/abstract/hcp004v1?ct. The sample size was 19 junior doctors in residence.

[N]ine studied while working an intervention schedule of <48 h per week and 10 studied while working traditional weeks of <56 h scheduled hours in medical wards. Work hours and sleep duration were recorded daily. Rate of medical errors (per 1000 patient-days), identified using an established active surveillance methodology, were compared for the Intervention and Traditional wards. Two senior physicians blinded to rota independently rated all suspected errors.

The results showed significantly lower error rates for the doctors on the new rota with fewer hours:

Average scheduled work hours were significantly lower on the intervention schedule [43.2 (SD 7.7) (range 26.0–60.0) vs. 52.4 (11.2) (30.0–77.0) h/week; P < 0.001], and there was a non-significant trend for increased total sleep time per day [7.26 (0.36) vs. 6.75 (0.40) h; P = 0.095]. During a total of 4782 patient-days involving 481 admissions, 32.7% fewer total medical errors occurred during the intervention than during the traditional rota (27.6 vs. 41.0 per 1000 patient-days, P = 0.006), including 82.6% fewer intercepted potential adverse events (1.2 vs. 6.9 per 1000 patient-days, P = 0.002) and 31.4% fewer non-intercepted potential adverse events (16.6 vs. 24.2 per 1000 patient-days, P = 0.067). Doctors reported worse educational opportunities on the intervention rota.

NYC and NY State Fiscal Problems

A Reuters story on Tuesday by Joan Gralla reports that New York City fears return to 1970s. The fear then was that the City couldn't get out from under its heavy load of short-term debt. In fact the City recovered as soon as the economy came back.

The more serious problem today is NY State's fiscal stress. Back in the 1970s NY State was not in such trouble, and it was able to bail the City out in conjunction with support from Sen. Richard Lugar (R-IN) to provide federal guarantees to the pension funds to buy the City's bonds (his help in getting these guarantees has never been properly acknowledged by the City).

Gov. David Paterson is now raising many taxes and cutting aid to local governments. The problems this creates for NYC are tacked on top of the City's own loss of tax revenue and rising requirements from the NYC employee pension funds for money to make up for their losses when an 8 percent annual return has been built into their actuarial assumptions. In addition, the volume of new tax abatements to spur development has contractually reduced the City's ability to raise taxes on some new developments. Gralla says:

While many U.S. cities worry that their economies are deteriorating to the level of the 1930s Great Depression, New York City fears reliving a more recent decade that features strongly in city lore.

But the better comparison is with 1989-1992. Gov. Paterson’s array of tax increases is reminiscent of the 22 forms of NYC tax increases during these recession years. The large number of increases, and the nuisance nature of some of them, were the subject of many news stories at the time.

A major advantage that NYC has over the state today is that property tax revenues are more stable than other taxes during an economic decline because NYC's assessed values are averaged over five years. NYC's property tax revenues continue to rise for a couple of years into a recession even though market values of property are falling. Property owners may sell and move away, but the property continues to be paid by the new owner.

All the taxes can be avoided by moving completely out of NYC. Charles Tiebout introduced the concept of “foot voting” or “voting with feet”. IU would argue that it's more serious when businesses leave town than when individuals arbitrage among residential options based on differences in property taxes.

The two explanations I have heard most widely regarding the exodus of businesses in 1989-1992 are (1) high crime rates and (2) higher taxes on incomes and businesses. It would have been better, in retrospect, to have increased NYC property tax rates more during those years to avoid increasing other taxes and to beef up spending on the police earlier than the City did. NY State doesn't have a property tax to rely on, although I am advised by a former employee of the Assembly Ways and Means Committee that NY State used to have a statewide property tax and there would be no constitutional problem with reintroducing it.

BBC Opens Up Panorama Show on U.S. Health Care

Victory. Today I received this message from BBC Panorama:

Dear John,

Thank you for your email. Due to high demand, we have now made the programme available to view around the world. Please use the link below to watch "Panorama: What now, Mr President?" in full:

http://news.bbc.co.uk/panorama/hi/front_page/newsid_7854000/7854496.stm

Best wishes,

Lila

Lila Allen
BBC Panorama

Thanks to anyone who reads this who contacted BBC Panorama about opening it up.

Good Move by Schumer - Improve Mass Transit Benefits

It's pleasing to see some early dividends from the election of President Barack Obama and a Senate and House with Democratic majorities. Senator Chuck Schumer announced yesterday that he has proposed doubling the benefits to commuters by mass transit. At the end of this post I have the URL for a site where one can express support of the bill.

Sem Schumer's concern is with the growth of New York City area commuters and with present and future MTA fare hikes:

[The] mass transit tax break has been included in the Senate version of the Economic Recovery package. The mass transit tax break would double the federal mass transit benefit for people who ride buses, Metro-North or other forms of mass transit to work, potentially saving them hundreds of dollars per year in transportation costs, increasing energy conservation, and reducing traffic, congestion and smog.

Sen. Schumer is essentially equalizing the benefit to be obtained for mass transit riders and those who drive to work.

Under current law, employers are able to offer employees a monthly tax-free transit benefit of only $120 to cover mass transit commuting costs, but they are able to offer up to $230 to help cover parking costs for people to drive to work.

The $230 benefit would be indexed to inflation.

The transit and parking benefits were initiated by the late Senator Daniel Patrick Moynihan. Employers to offer employees up to $120 per month in transit benefits, which are tax free. A corresponding benefit of up to $230 tax-free is provided for parking costs. In the New York metro area, the benefit saves commuters more than $150 million a year. Employers have saved more than $35 million since the benefit went into effect in the New York area. Sen. Schumer says that 15,000 companies in New York offer the transit benefit, covering about 650,000 employees.

Here is the site where individuals can post their support of the bill: http://schumer.senate.gov/new_website/contact.cfm.

BBC Panorama on U.S. Health Care

My sister Brigid Marlin lives in the UK and a few days ago was watching a BBC program on health care in the United States. She sent me an email reporting that it was a shocking portrayal of the high cost and low coverage of U.S. medical care:

They were discussing the problems that Obama faces in meeting his promise to provide health care for poor Americans. The program showed an English medical team that set out to provide medical services to poor people overseas. They ended up spending 60 percent of their time helping poor Americans, as they are the most needy! We were shown people getting up at 4 am and driving for hundreds of miles to be early in a huge queue for a doctor's help.

The program was produced by BBC's Panorama, the world's oldest television documentary program, begun in 1953.

The Panorama team managed to get inside a briefing that a large US insurance company was giving its staff, awarding them huge bonuses for finding loopholes in the clients' policies, so they didn't have to pay up! They boasted that one employee had saved the company $7 million by giving them the basis for refusing to pay out because of a tiny flaw in the way they had filled out the form. This story was contrasted with the company's television ads, where a kindly fatherly figure assures clients that they will be safe and looked after.

The BBC describes the program as follows:

Barack Obama takes over as U.S. President with a promise to dramatically change America and make it a fairer place. He is inheriting the worst economic crisis in almost a century, and a country so unequal that 23,000 people die every year because they cannot afford basic healthcare. To close the gap between rich and poor Obama will have to take on the might of the corporate world, which wields enormous influence in Washington. Can he change the world's most powerful country, and should he?

My sister's message to me goes on:

The drug companies are just as bad, Panorama shows. They have bumped up their prices so that Americans pay twice as much for their medicines as the same companies charge to other countries. It seems that the drug companies are uncontrollable because they wine and dine the senators so no votes are cast against their policies. The program showed the drug companies supporting senators with money for electioneering and their favourite charities. They are determined not to allow a comprehensive health care system in America!

Well, I did a little research to see whether I can give you a link to the program. It was broadcast on BBC One, 8:30 pm, January 19. It's a half-hour show produced by Jeremy Vine. My sister is not the only fan of the show. It is posted as a "pick" by blogger “Up Your Ego: Love Your Inner Geek”. The blogger is trying to emulate the "brilliant" Watchification, Telegraph iPlayer Pick of the Day and the Radio Times Downloads index, and says:

My pick is the Panorama special on the USA health care system. I really enjoyed Michael Moore’s Sicko but it was a little (ok a lot) one sided. A great piece of entertainment and a good piece of journalism when preaching to the choir BUT lacking slightly in balance. The BBC tries to look at both sides of the story. Watch it HERE.

Unfortunately, when I tried it, I got a message that the link won't work in the United States. So the best we can do is try to get a PBS station to bring it over.

The program's e-mail address is: panorama@bbc.co.uk. I have written an email asking to be advised if the health care show has been or will be aired in the United States. You could do the same.

Word of the Year - Bailout - Limericks

I reported on Huffington Post that Bailout was the Word of the Year of the American Dialect Society

To which LimerickSavant posted:

So "bail-out" was Word of the Year?
As a verb, we expected to hear
It used one of the times
When, for myriad crimes,
Those crooks went to court to appear!

So I responded:

The reason I cry in my beer
Is the trillions of bailouts, I fear,
Will add up too soon
And stretch to the moon,
We may wish that we had them still.

Obama - Please Fund Tech Innovation - SBIR - DARPA

My friend Professor Henry Etzkowitz was very helpful when I was working on a study of the software industry in New York City in 1999. Our work can be found here. He is an expert on the history of science and serves as Chair of the Management of Innovation, Creativity and Enterprise Program at the Newcastle University Business School.Henry and I met recently in New York City to talk about President-elect Obama's stimulus program. This will be a gigantic investment in America's future. Should the Obama Administration use a portion of this funding to spur technological innovation? Or is this "picking winners" and is that a bad thing?

Those who oppose the government's picking winners argue that this is not the job of government and government employees have no expertise in culling business ideas and plans. So government's role has mostly been to lend money through programs like the Small Business Investment Company program, and leave it to private SBIC managers to pick among the possible investments.

Henry sent back to me some followup thoughts. I am excerpting, with his permission, some highlights of his thesis that the U.S. government has actually played a big and successful role in picking technological winners and that this role should be expanded.

The SBIR Program. The Small Business Innovation Research (SBIR) program has been a success, Henry says, in supporting high-tech firms.

SBIR was begun by program officers at the National Science Foundation (NSF) in the early 1980's. SBIR extended NSF's research programs by setting aside a relatively small percentage of research budgets, to support projects that demonstrate potential commercial as well as scientific merit. Researchers apply for SBIR grants and use them as the first step toward firm-formation, moving research ideas forward to commercialization.

In effect SBIR has served as a form of public venture capital, filling some of the gap, the so-called "Valley of Death" that business angels and private venture capital firms are typically unwilling to enter until a firm has proven itself through demonstrated earnings. Government has provided the seed capital to take many nascent firms to the point of private sector take-up. But government is not doing this task by itself. It relies on experienced private sector technology experts to serve as peer reviewers to judge the commercial potential of the new technology even as it continues to rely on academics to certify its scientific and technological potential. SBIR was extended from NSF to all government agencies with research budgets of more than $100 million.

The ATP. The European Union created Framework Programs to support collaborative industrial research, led usually by large firms. The U.S. response to this was the Advanced Technology Program (ATP) initiated during the Bush 41 presidency.

Opposition to the ATP led to a scale-down of grants, from tens of millions to large-firm led consortia to the low millions for innovative start-ups. This unintended consequence of reduced appropriations turned ATP into a useful follow-on to the SBIR, helping start-ups with new technologies through the "Valley of Death," the gap between government R&D funding and venture capital take-up. ATP is currently in "deep freeze" in the National Institute of Science and Technology, its sponsoring agency, receiving no new funds in recent years.

The ATP could be revived and SBIR could usefully be scaled up further, but the individual projects it supports are a necessary but insufficient technology policy for the current crisis. Larger scale initiatives are necessary to take advantage of the opportunity crisis offers to renew existing industries and create new techno-economic paradigms as the basis for future industries.

DARPA. The SBIR-ATP approach is relatively laissez-faire, choosing among competing ideas that arrive in response to general requests or over-the-transom proposals. The more tightly focused and directed approach is taken by the Defense Advance Research Projects Agency (DARPA). Under its demilitarized name ARPA, DARPA created the ARPANET as a communications system without a center, the origin of the Internet. DARPA's primary strength is its program-officer networks.

The DARPA officer is a highly skilled broad-gauge technologist, often a visionary drawn from a university, like psychologist J.C.R. Licklider who envisioned a new format for computer communication that led to the Internet. Following the DARPA format, invented in response to the Sputnik shock of the late 1950's Licklider had the freedom and the resources to establish a consortium of firms and universities to realize his vision.

The DARPA program officer, a public entrepreneur, is the key to the DARPA model. He or she has the resources and capability to fashion a technology development team from across university, industry and government laboratories and the remit to carry it from "blue sky" research all the way to commercialization and use. More recently a DARPA data-mining initiative provided the research resources and objective that provided the framework for the invention of the Google algorithm. Although DARPA is limited to achieving military goals, many of its initiatives have had significant spillover into the civilian economy. There have been various proposals for a civilian DARPA over the years but the political will has been lacking. Only military objectives have been granted an exemption from the dictum of government's supposed inability to pick winners. The current downturn offers a pressing opportunity to utilize this successful response to Sputnik to achieve broader socio-economic objectives. These models of R&D success, with mixed university-industry government elements and joint leadership, provide exemplars to creating a sustainable path to renewal, without relying on reviving past bubbles or inventing new ones.

As the Obama Administration seeks to maximize the long-term benefit from its stimulus funding, it should consider stepping up support of SBIR-ATP-DARPA initiatives.

Sweatshops - Dream or Nightmare?

Nicholas Kristof makes a provocative statement in this morning's NY Times. It has put the cat among the pigeons. He says: "What the world's most impoverished people need isn't fewer sweatshops, but more of them." What's a kind-hearted liberal like him doing protesting ethical trading and labor standards? What's wrong with consumers being willing to pay more for products from factories and farms certified to the SA8000 decent work standard or to Ethical Trading standards? In a British airport or train station, it's hard to buy coffee that is not promoted as ethically traded.

Kristof fears that if President-elect Obama imposes minimum labor standards on developing countries, it will end orders from developed countries for manufactured goods from developing countries. So kids there will have to choose between being slumdog scavengers or child slaves.

He fears that the anti-sweatshop cause is being used a smokescreen for protectionist trade policies.

The Obama-Biden campaign website did promise to “fight for a trade policy that opens up foreign markets to support good American jobs [and] spread[s] good labor and environmental standards around the world.”

But it takes some work to read higher labor and environmental standards as protectionism. The fact is, factory jobs are being lost both in the United States and overseas because the harsh realities of unprecedented asset deflation. With half of their retirement savings gone, many Americans only have change left, and not much of that to spare.

It's surely unfair to condemn multinationals for seeking to comply with the labor laws of the countries where they operate or buy goods. Is it unfair for the United States to ask the governments of developing countries to do more to enforce their own local labor laws? What's wrong with brands giving preference in their buying to factories to abide by labor standards?

In fact higher labor standards have significant benefits for companies that embrace them. Better workplaces in developing countries have higher retention and productivity rates, fewer rejects and better quality goods. The jobs that these standards protect are the jobs in these factories and farms.

(Disclosure: John Tepper Marlin has been married for 37 years to Alice Tepper Marlin, President of Social Accountability International, which created the SA8000 labor standard.)

Word of the Year - Bailout - Alas, Not New

The Word of the Year 2008 is bailout, according to the American Dialect Society, which balloted yesterday in San Francisco. The word is understood by the Society to mean “rescue by the government of companies on the brink of failure, including large players in the banking industry.”

This word-of-the-year is only 19 years old, or the Society would have run into it before, in the late 1970s when "bailout" was used in connection with the proposed first rescue of the Chrysler Corporation.

It's easy for me to remember because the unflappable lady who handled this for Senator William Proxmire's Banking Committee was Elinor Bachrach. Since she also handled New York City's rescue and a couple of other institutions in trouble, she was then known as Billion-Dollar Bailout Bachrach – and there may have been another adjectival prefix before the word Bailout, like Boondoggle or Basket-Case.

So if the American Dialect Society had been a little older, the word bailout might be taken and the winner could have been one of the other words, like:
- Most creative: recombobulation area, at Milwaukee’s Mitchell Airport where passengers who “have just passed through security screening can get their clothes and belongings back in order."
- Most unnecessary: moofing, i.e., “mobile out of office,” working with laptop and cell phone.
- Most outrageous: terrorist fist jab, a knuckle-to-knuckle fist bump, or “dap,” traditionally performed between two black people as a sign of friendship, celebration or agreement and described as “the terrorist fist jab” by newscaster E. D. Hill, formerly of Fox News.
- Most likely to succeed: shovel-ready, an infrastructure projects that can be started quickly when funds become available.

Other nominees that caught my eye:
lipstick on a pig: An adornment of something that can't be made pretty.
game-changer: In business and politics, something that alters the nature of a marketplace, relationship, or campaign. From sports. "something that changes a match or contest."
Palinesque: Pertaining to persons who have extended themselves beyond their expertise, thereby bringing ridicule upon a serious matter.
long photo: A video of 90 seconds or less. Used by the photo-sharing web site Flickr.
First Dude: The husband of a governor or president.
bromance: A very close relationship between two heterosexual men.

Muni Bonds Bid-Rigging Investigation

The NY Times today has a prominent story on the "Nationwide Inquiry on Bids for Municipal Bonds" by Mary Williams Walsh. It starts:

The federal investigation that prompted Gov. Bill Richardson of New Mexico to withdraw his nomination as commerce secretary offers a rare glimpse into a long-simmering investigation of possible bid-rigging, tax evasion and other wrongdoing throughout the municipal bond business. Three federal agencies and a loose consortium of state attorneys general have for several years been gathering evidence of what appears to be collusion among the banks and other companies that have helped state and local governments take approximately $400 billion worth of municipal notes and bonds to market each year.

The background to this is that the Treasurer of New Mexico resigned in October 2005 facing 21 federal counts of extortion. The NY Times story continues:

E-mail messages, taped phone conversations and other court documents suggest that companies did not engage in open competition for this lucrative business, but secretly divided it among themselves, imposing layers of excess cost on local governments, violating the federal rules for tax-exempt bonds and making questionable payments and campaign contributions to local officials who could steer them business. In some cases, they created exotic financial structures that blew up.

After the NYC fiscal crisis in 1975 and concerns about the municipal securities market, the Municipal Securities Rulemaking Board was created. In 1978, the Council on Municipal Performance produced, with the assistance of the law firm of Chadbourne Parke, a ten-volume study of the municipal markets, the Municipal Securities Regulation series. Referencing this study, a NY Times editorial called for greater regulation of the municipal bond market. Twenty years later, SEC Chairman Arthur Levitt said in a
March 30, 1999 Speech:

Today, a new form of pressure exists on those who manage public funds. The pressure comes from the ever-escalating costs of political campaigns and the temptation to use control over public monies to raise funds to cover those costs. The pressure I'm talking about is "pay-to-play" – the selection of investment advisers to manage public funds based on their political contributions. I've been talking about pay-to-play since the very beginning of my tenure as SEC Chairman. Up until now, that discussion has focused on the municipal bond market. And, I'm proud to say that after a sustained period of cooperation between the private sector, self-regulatory organizations and the SEC, much has been done to address this insidious practice. Six years ago, the municipal securities business was rife with pay-to-play practices. Because of the importance of those markets, I placed banishing these practices at the forefront of our agenda, and in 1994, we approved the Municipal Securities Rulemaking Board's Rule G-37. It requires a two-year time out from doing business with a government client after a firm or its executives makes a contribution to an elected official. Some called the rule too strong a medicine. Well, when the patient is suffering and the fever is contagious, merely drinking a lot of liquids probably isn't the right or most effective solution. It's worth noting that a group of investment bankers were the first to confront the ethical implications of pay-to-play. They placed a voluntary ban on political contributions to officials with whom they did business. And just a few months ago, a group of financial advisors that help municipalities structure bond offerings met with me to announce a self-imposed ban on the same activity. Late last year, I asked the Division of Investment Management to look into the question of whether the Commission needed to address pay-to-play in the public pension area. After months of work on the issue, the Division has uncovered strong indications that pay-to-play can be a powerful force in the selection of money managers of public pension plans.
We found allegations of this activity in at least 17 states. Pay-to-play has affected both the largest of pension plans and the smallest of plans. The comptroller of a large state raised $1.8 million from pension fund contractors – many of whom are out-of-state. A former treasurer of a small state raised virtually all of his campaign contributions – $73,000 – from contractors for the state retirement system.

The SEC after Levitt doesn't seem to have dealt with the problem. Now we read in today's NY Times:

Pay-to-play in the municipal bond market is endemic,” according to a retired IRS manager in charge of overseeing the market.