Report Reveals Employed Physicians Losing Money for Employers

http://www.physiciansfoundation.org/uploads/default/2014_Physicians_Foundation_Biennial_Physician_Survey_Report.pdf

The Physicians Foundation has once again published their excellent report, 2014 Survey of America’s Physicians Practice Patterns and Perspectives. The Foundation once again contracted with Merritt Hawkins – a subsidiary of AMN Healthcare – to conduct the survey. For those of us who like these kinds of reports, this one carries some of the interesting trends and data from their 2012 report forward, and adds a number of pertinent and timely new questions to the mix. The 2014 report is chocked full of interesting information, trends, data points and facts about how physicians are responding and adapting to the Affordable Care Act. Over the coming days we will be assimilating more of this information and relating it to other trends, reports and raw data. Keep checking back as we do so to stay abreast of this new information as it is digested, analyzed and evaluated.

As so often happens, one small entry grabbed our attention as it is highly indicative of a trend-line that is becoming of significant concern to us and many others. The foundation reports that for 2012 the median LOSS for an employed physician – meaning a doctor that is an employee of a hospital or group practice, a Continue reading

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Fiscal Cliff: Does Familiarity breed contempt?

mw_1011_FISCAL_CLIFF_620x350

Maybe its best if we just jump!

About four years ago, I was working as an executive in a company where it became clear just such cuts needed to be made.  I counseled one of the many division presidents who reported to me that the horrible outcomes they were predicting would not happen, and as distasteful and unpleasant as the process was, in the end, her division would be much improved, her employee’s futures more secure, and the morale in her division would also improve.  Needless to say, the president, and likely many of her colleagues—although no others would openly tell me their feelings— did not share this view!  She shared this view willingly, passionately, with me on numerous Continue reading

Phillips $10 million dollar $60 light bulb: just your average government project part 4

Phillips $10 million - $60.00 light bulb

Each morning I look forward to reading the morning paper.  Since she got an iPad, a little over a year ago, my wife keeps saying why don’t you cancel the paper and just read the paper on-line.  It is a routine, I know, but this habit helps me start the day and get my mind in gear—usually.  And maybe now I am ooooollllllddddd fashioned.  Or perhaps just old, but I really appreciate the ritual—ritual sounds much more mature than routine and lends an air of distinction to this anachronistic practice don’t you think?

Well, as I was reading once again I am presented with yet one more justification on why we need to have a serious discussion about the national economy, the role of government in the economy, and why we need to move much of the ‘new found’ federal responsibility back to the states, and the private sector; as if any more justification was needed on top of, Cartagena Hooker-gate, GSA let’s all meet and have a party at the taxpayer’s expense-gate, and Solyndra-gate.

The point of today’s reflection is an article, in the Boston Globe by Peter Svensson, “Rebates to ease shock of a $60.00 light bulb.”  I think everyone needs to read this article, if you have not done so already.

Having been in the technology sector for many years, and having a few friends who have either invested in or started, “green” energy companies, I have a passing familiarity with the basis for the creation of this bulb.  There was a $10 million contest, sponsored by our federal government to stimulate the production of more energy efficient light bulbs, driven by political pandering to the let’s save the environment from the evils of incandescent light bulbs crowd.

The justification was that incandescent bulbs convert a large amount of energy to heat, therefore it is wasted.  This is a valid point.  Another point is that from these group’s figures, the average life span of a 60 watt incandescent bulb is 1,500 hours and therefore the contest was for not only a green bulb but one that lasts longer so the cost could be justified.

The contest rules were for a bulb that lasted much longer and it had to cost $22.00, or less, in the first year, with the assumption that the price would go down as adoption and production increased.  Oh yea, it was an American program, and you would think it was also to stimulate American jobs and American business? Nope!  Only one company, Phillips, and if you don’t know Phillips is based in the Netherlands, entered the contest.  Of course they won.  But there is a catch!

The bulb will cost $60.00 not $22.00 or less.  Of course the argument from the groups is they are forcing electric companies to provide rebates for the purchase of the bulb so the price will be offset by $20 or $30 dollars, but if my math is correct $60 – $30 is still $30 which is more than $22.00, last I checked.  And now, as this is coming to light (so to speak), Phillips says they will offer an initial discounted price of $50.00 so the price will be in the $20 to $30 range… Great deal isn’t it?  They got $10 million so you can bet the discount will last until they sell the first million bulbs (that’s $10 million divided by the $10 dollar discount). And let’s not even ask the question if the chemistry in these bulbs might be more hazardous to the environment once they are disposed of.

The thing that gets me about this whole program is that all of this “savings” are coming from us in the first place, so we are not saving anything.  The rebates are charged back to us in the form of higher cost per kilowatt, and the $10 million came from us in taxes.  Most importantly, we are increasing the cost of light bulbs from about $1.10 per bulb to over $50.00. And this is predicated on saving the planet, lowering our energy costs, and stimulating the American Job market . . .  Well forget the American Job market part I guess . . .

Last point I have on this subject is, if the statistics I hear quoted about incandescent bulbs are accurate, then I am the luckiest S.O.B. in the whole world because . . .

The earth killing $1.11 incandescent light bulb

They claim that an incandescent bulb only lasts for 1,500 hours.  I have by a quick count at least twenty-eight, 40 – 60 watt incandescent bulbs in my house now.  I have been in this house for over ten years. I replace on average two bulbs a year. Most of the lights in my house burn five hours a day, some more, some less, but this is my best guess on the average.  So, my lights are lit about 1,825 hours per year.  Given the 1500 hour average life, according to these green groups, I should be buying and replacing about thirty bulbs a year.  But you know what, I don’t . . .  I never have.  In fact, the reason that incandescent bulbs burn out as quickly as they do, albeit much more slowly for lucky me, is because the vacuum in the bulb at manufacture is not as complete as it could be.  And it only costs me $1.11 cents to buy these evil, world destroying, 60 watt bulbs, or $2.20 per year.  This means, I theoretically change them all once every fourteen years.

Now, if I buy twenty-eight of these new bulbs that are supposed to last twenty years, even with the discount, it will cost me $840.00.  I can buy 756 of my old bulbs for that price, which would have lasted fifty-four years at my current replacement rate.

Light bulb manufacturers, all the way back to old Tom Edison, knew they could make bulbs that lasted for a long, long, time—10 to 30 years. In fact, they have, by accident and random chance.  My grandfather’s house had some of the original Edison bulbs with a base the size of a ping pong ball and a filament that looked as thick as a pencil lead.  If they were not broken over time, they would all probable be burning today. Good for homeowners, but bad for GE, Sylvania, etc.  These guys new that bulbs could be cheap because you bought a lot of them every year, and if you only buy a few every twenty years then they will cost a whole lot more.  And guess what, they were correct back then and they are correct now!

Since I am now living in California, and I can’t buy many incandescent bulbs because they have been outlawed, I have a few CFL bulbs, and so far I have had to replace these bulbs at least once a year and in one case, in the globe ceiling fixture in my closet that has two 40 watt bulbs, much more frequently.  In fact, if one of these suckers blows out in the fixture, the other one dies, seemly out of sympathy, in just a few days.

Due primarily to labor and benefits costs, and secondarily because we have a dwindling lower wage labor pool because everyone must go to college, we are already non-competitive in manufacturing.  Now, we will begin increasing the cost of lighting by almost fifty times as we move to these “save the planet” bulbs.  Many supporters of these bulbs argue that in the long run we are going to save so much more in costs of energy because of their efficiencies.  Well, due to past experience I am both skeptical of the claim, and dubious that the short term increase of costs on an already non-competitive economic structure will ever be offset.  And even if it theoretically will lower costs in the long run, I am starting to doubt we will be around as a vibrant economy for it to matter anyway; which means we won’t be buying a lot of $60 light bulbs because we won’t be able to afford them.

While I am all for limiting the impact we have on the environment, like everything else in life we need to also maintain some viability.  In this case, the viability is tied to our cumulative cost and its impact on our economic i.e. national and cultural viability. Perhaps If we really want to save the planet then we should likely all agree to commit suicide now.  Then we will no longer have an impact.  I guess, that is, after the ecosystem once again returns to stasis after the population blooms of bacteria, predators, carrion feeders, etc. — all go through their own population explosion-die off cycles as the excess food sources from the rotting polluting corpses we leave behind are finally consumed and absorbed into the ecosystem.  On second thought, this will likely be a bigger polluting source that all the incandescent bulbs so maybe we should just keep the incandescent bulb and balance it by what we save by not committing suicide in the first place—Cap n’ Trade at its finest.

Oh yea, can’t use cap n’ trade, cause the state is going to use that to pay for the High-Speed Rail to nowhere!

“Pass My Job’s Bill NOW!”: Unions and Immigration – two sides of the same coin

Unions and Immigration dominate news along side of jobs

Reader Warning, this may be a long one! Please be patient.  No sound bites here!

The Argument

In his speech today, President Obama, once again called for congress to pass his jobs bill – NOW!.  The President stated that if they do not pass his jobs bill, which he views as perfect – without any flaw – and will, in his opinion, inevitably return us to prosperity, then the American people, who he states are overwhelmingly on his side, will harshly judge the republicans who are simply resisting for idealistic reasons.  He implied that the American people are tired of the republicans looking out for millionaires and billionaires.  He chose his words very carefully to imply that the Solyndra loan was the result of the prior administration’s programs – that he doesn’t own this one.  In doing so, once again he uses language to obscure this administration’s role in this specific loan. A loan that was denied by the prior administration and recommended by his own administration as not ready to be funded – but yet was funded anyway!

If one were to challenge the Presidents statement based on the inference inherent in the phrasing and timing of the language he used, his administration will seek the cover that was carefully crafted into this statement.  Jay Carney likely will respond, “that is not what he said…”  “What he said is that the “loan program” was begun under the prior administration…”  Continuing with the obfuscation, the President then presents “his” argument that this program is designed to make America competitive again.  As he makes this statement it is phrased so that he now owns this ideal of making America competitive. He would like us to believe that now “He” is making America competitive again. But is he?

He also repeated his mantra that, we need to make education more accessible and affordable and make sure every American goes to college.  His Education tzar, Arnie Duncan, in a recent radio interview, stated, that it is the U.S. governments responsibility to “provide a cradle to career assurance!” Is it?

In his speech he goes on to state that they are funding these loans to subsidize industries in order to get us “competitive” in a world where we no longer can compete.  He continues to state that we can’t compete against China who “subsidizes” their industries.  But if you talk to the manufacturers in China, as I have, – who the President claims the Chinese communist government is subsidizing – they will laugh at this assertion.  Again if you dig below the Presidents rhetoric, or if you challenge him on this statement, you find again that his words have been chosen most carefully.  The President’s administration will tell you that what he means is that China, through its Central Bank, is unfairly manipulating its currency.  Why, because they refuse to artificially inflate their currency, and overpay or over-benefit  their workers to become uncompetitive in the one world economy?

The Truth

In a whitepaper published by McKinsey & Company – September 14, 2011, written by Lowell Bryan, Sven Smit, and John Horn; They state that the current economic fundamentals remain unfixed.  Some of their main points include:

  1. Even if the developed governments, including the U.S. government, had been able to pass greater stimulus measures earlier – including isolating toxic assets – this would not have fixed the longer term fundamentals.
  2. The recent focus on debt ceilings in the U.S. and the sovereign debt crisis in southern Europe has also overwhelmed the public debate and shifted away from the failing economic fundamentals.
  3. In the U.S., the downward trend in labor participation has become pronounced.
  4. Structural economic fixes are needed such as;
    1. Stimulating private investment and savings
    2. Undertake an orderly de-leveraging of households (i.e. get Americans to stop borrowing and start saving – the exact opposite of what we are doing)
    3. Increase participation of labor (production level jobs) in the economy (as opposed to middle-level management and non-producing jobs)
    4. Reform long-term entitlement programs and tax policies to reduce the uncompetitive economic cost structure of American Businesses
    5. Reform education to produce more skilled labor
    6. Reform legislation to simplify and speed commercialization of innovation
    7. Rebuild failing infrastructure.

Like the Affordable Care Act, the President wants us to force congress to pass this legislation quickly before, as former speaker of the House, Nancy Pelosi, said we can read what is in it.  More importantly, it is not the reading – but the understanding of whether or not this will work.  The President is becoming very long on his implied -“trust me” plans.  He seems to either not recognize, or not care, that the majority of Americans no longer trust him or his advisers as their track record is putrid at this point.

While the focused effort at fomenting insurrection based on converting class envy into class warfare is getting quite a bit of play in the main stream media, it is not really playing in Peoria, or Winnemucca.  How will Americans feel if this concerted effort to stir up hate and discontent in the willingly disenfranchised boils over into a true insurrection?

The Presidents Jobs Bill, is being resisted, not because of republicans love for millionaires and billionaires or a reliance on them for campaign funding.  All of our professional political class (republicans AND democrats) loves, courts, and whores themselves to the so called millionaires and billionaires.  The bill is being resisted because most economists – outside of the presidents supporters – and good common sense find serious flaw with much of the underlying logic of his plan.  Further, history, including very recent history, shows that many of these approaches are not addressing the fundamentals and do not work.

The Kaiser Excuse

The Solyndra loan is one that this administration, the President, and the Vice President, own  lock-stock-and-barrel!  The prior administration had clearly and distinctly passed on this “so-called” investment.  Upon arrival in DC, and after some very in-judicious meetings with the lead investor – and big Obama bundler – George Kaiser; the administration decided not to simply revive this investment opportunity, but to expedite it and use it as a major public relations asset for both the Vice President and the President.

Now that this issue has blown up in the face of the President, his press secretary has characterized the meetings between George Kaiser and the President as discussions on his “non-profit ‘family foundation'” gifts program.  Once again they use carefully constructed phraseology to obscure the issue.  In this seemingly simple statement, most Americans will draw the connection to the Kaiser Family Foundation.  The Kaiser Family Foundation is a venerated non-profit known for its tremendous philanthropy and commitment to health care and the primary legacy of Henry J. Kaiser.

Houston we have a problem!  George Kaiser is no relation to Henry J. Kaiser nor is he connected in any way to the Kaiser Family Foundation.  He does have a family foundation, and he is a big contributor to charities including his Tulsa Community Foundation.  It is perhaps simply convenience that the administration chose this term to refer to his meetings and our own bad judgement to draw the conclusion that it was not “the” Kaiser Family Foundation – our bad!

All Jobs Are Not Created Equal in Fixing the Economy!

As the President is pushing his Jobs Bill he is really pushing Union jobs.  He is speaking about infrastructure, make work jobs.  Yes, it is true the infrastructure in America is in disrepair and needs to be rehabbed but this does not translate into making America competitive.

In his lecture to America this morning, he stressed the need to make us competitive again in the new world economy which he strongly supports.  We clearly need to become competitive again. And it is also very clear, that we are not competitive with China, Singapore, Taiwan, India, Hong Kong, Malaysia, Mexico, and many other nations around the world.  But will Union jobs and government subsidies really bring us back to being competitive?  The short answer is, no!  Looking at the U.S. Economy on the whole, taking tax money from the U.S., in any form, and passing some of that money back to companies to lower their specific costs or to provide incentives to people in America to buy their products does not make America any more competitive to the rest of the world.  It is just a zero sum game.

Think of this as your own piggy bank.  You have ten pennies in the bank.  If you pull 5 of them out of the bank to give to your friend to buy a stick of gum from you (that you paid three cents for) and you put them back in your piggy bank.  You still have only ten pennies in that bank.  Yet, you not only did not make a profit on the gum, you lost three cents overall.  This is the same shell game.  Lets take a look at some more realistic numbers.

The cost per man-hour to build a car varies widely in the world and even here in the U.S.  No matter whether you are building a luxury car or an inexpensive bare bones vehicle, the cost per man-hour is relatively the same.  It is the number of man-hours, and the price of the basic materials that changes the total cost of the car.  If you look to Detroit, the estimated costs for labor are approximately $85.00 per man-hour to make a car in this shining star of American manufacturing (at least according to the current administration).  If you look to Japan the per man-hour cost averages about $46.00.  If you look to Alabama, where some Japanese car manufacturers have moved their manufacturing the cost is about $28.00.  And some estimate the cost in India, at $18.00.  Is it any wonder that Detroit cars are not competitive in the world market?  And why the difference between Alabama factories and Detroit?  Can you say Unions?

Now I am not against unions – nor am I against union workers.  Unions have done some very good things historically for America’s labor pool – particularly related to dangerous employment conditions and mistreatment.  But Unions have also done some very bad things, perhaps knowingly, to America’s ability to compete in a one world market.

To coin a phrase, this is something we are “fundamentally” ignoring!  Our problem with being labor competitive comes in two basic areas:

  1. We have almost no natural labor pool left
  2. The labor pool we have costs way too much compared to the rest of the world.

There are other things that impact our competitive position in the world like, we no longer produce much in the way of raw materials, much of our business is based on middle-man transactions. And most of what we produce at the higher costs are sold at home doing little to reduce the steadily increasing trade deficit.  While these things are also very important, let us hold them for a later article.  The intent of this article is to focus on jobs and labor and the Presidents increasingly unfathomable position.

Why no labor pool?

Along with the focused drive, since 1972, by the banks and government to get us to stop saving and start spending, and the modification of the push to foster credit based purchasing, we have also been purposely closing trade schools and tech centers and redirecting those who would have gone into the skilled labor category to go to college. We are now a nation that does not value  the base laborer.  The person who creates valuable goods and services with their own hands has been left in the dust and become a second class citizen in a nation of college educated plumbers, welders, carpenters, cabinet makers, taxi drivers, and fast food managers.  I have repeatedly seen companies requiring a college degree for many professions like basic sales that should be more reliant on people skills simply to reduce the number of applications.  Most of the top sales people I have know in my career were without a college degree.  They learned their skills at the school of hard knocks.  I saw at least one such individual rise to one of the top sales positions in one of the top tech companies.  He almost single handedly took this company from a start up spin out to one of the premier producers in its class. In the end he was displaced by a policy decision that now required all executives to have a college degree.  It is no coincidence that within a few years they fell from favor in the market.  In some cases “book learnin'” does not compensate for real in the market experience.

While it is emotionally fulfilling to know these people have gone to college and perhaps studied the teachings of Confucius, or the writings of Chaucer; but has this made them better plumbers of has it just added to the expense of training them and increased their expectations and lifestyle and driven up their cost structures?  Is there value to them from this education?  Of course there is, but is there really value economically to America in their labor role?  No, it is in fact an unnecessary expense economically. Please remember I am not making a moral judgement here and I am not saying people who choose to, or end up forced to, practice a trade should not be allowed to go to college.  I am simply pointing out that this may not be the best economic solution for our world competitiveness problems.

While America has fostered the “everyone goes to college” mantra, closed its labor and trade schools and become dependent on immigration, legal and otherwise, to provide the required base level workers; places like Singapore still track a large percentage of their youth into labor and trade related programs.  Only a select few get stimulated to go to college.  Is this better morally?  Who knows, let the philosophers sort that out.  But economically, they are one of the countries kicking our asses, and we can’t blame that on the “subsidies of communism.”  By the way, kids that really want to go to college can choose to do that in Singapore, they are simply encouraged to go into trades and they venerate their trade workers and laborers.

So why is the President fostering class warfare, cradle to career assurance, union based infrastructure jobs and subsidizing industries to be competitive in the one world market?  Come to think of it why is the President such a supporter of this one world view?

The Reason

To start with,  who is this guy we elected?  Was he a prominent businessman?  No!  Was he a skilled civic executive?  No!  Was he a well  know economic theorist? No!  Was he a person who was well schooled in international relations?  No!  Was he an accomplished leader of any sort?  No! Well Maybe, if you consider he was elected as a state senator and then as a U.S. senator – in both capacities he quickly focused on the next step of his career but he had few accomplishments other than electability.

Look, I am not saying President Obama is incompetent!  I am pointing out that in the related experience he has little to qualify his views on this subject or to make some of the decisions that he appears to be making.  He is in fact relying on others to tell him what to do and these others, like most of our professional political class are corrupted by hidden agenda.

The President was trained as a community activist.  He apparently was very good at that.  What is the primary tool of a community activist?  It is to disrupt the status quo by using class envy as the pivot to foment unrest.  By convincing those that have less, that the ones that have more have attained it to their detriment.  In propagating this issue they gain the leverage, the power, to force changes.  These forced changes do not come about because they have been derived based on reason, due diligence and careful consideration.  They are forced into the stream based solely on the emotion of the moment.  Good community activists can get the minority so agitated that even the mere mention of due diligence or careful consideration becomes more evidence of the supposed evil intent of those who have more.

So why are we surprised to see this now?  And more importantly, why are we so blind to the real implications and the lack of focus on the economic fundamentals?  Could it be that another fundamental issue that is failing us is our education system?  McKinsey seems to think so, but I am not sure their reason coincides with mine or perhaps yours.

Additionally, our President has aspired, in fact worked hard, to become part of our professional political class.  He has in fact obtained the pinnacle of this class.  By doing so, he has assured that his future is taken care of by, and on the backs of, the same people that elected him to this office.  He is beholding to all that got him elected in the first place and is further constrained in his actions by those he will need to get himself reelected.  As I have said before in a prior article “Our Professional Political Class: An Island Cannot Rule a Continent!“, his currency is votes, and he appears willing to pay all of our collective equity in order to continue to gain these votes.

The Reality

I started this essay with the supposition that Unions and Immigration are two sides of the same coin.  While it has taken me much longer than normal to come back to this point, I feel in this case the preamble was both necessary and poignant.  Further, I think that the preamble is where we will find solutions – if we really want to solve this.

Since we have all but eliminated our labor class through the closure of trade schools, technical schools, and primary production industries (like farming, fishing, mining, oil and steel) and attrition through the aging of our population.  We have created a false expectation that everyone should go to college and our economy can not only absorb the expense but also have appropriate jobs available for these college graduates who all expect to be doctors, lawyers, Indian chiefs etc. – anything but “common laborers.”

We are left with no where to go but immigration to find those willing to work in the jobs we don’t want and at wages we can afford to pay, and still find you college educated plumbers willing to buy America’s goods and services.  We have unions who are, by their own claims – their own mantras, only looking out for the workers not American competitiveness.  But many of the workers they increasingly represent are not laborers but middle managers and low level executives.  The Unions, it appears, are dead set against immigration to solve the labor dilemma and they are dead set against relying on one world competitive wages as it would decimate the wages of the working class and the resulting stream of dues the leadership survive on.

Caught in the middle is the President. If our hypothetical coin is a quarter, then the President represents the low grade copper core.  On one side he has the silver representing the unions, the silver on the other side – immigration.  He can actually solve neither and have the solution be in the best interest of Americans.  He is left with obfuscation, and diversion.  He is in crisis mode as his pole numbers collapse.  And in crises he is falling back to the tried and true tool-set of community activists world wide – class warfare. We cannot count on this President, nor this congress, to solve this one.

In the end if we don’t solve it – we will all suffer!  At least he has acknowledged, that we are not competitive in the one world economy.  That is a step.  Not a step for the President, who can’t see or refuses to see the real implications of what he is advocating.  It is a step in that it take one more vague disingenuous argument off the table.  It takes the recently repeated ad nauseaum statement that “we are the most competitive nation in the world” – off the table.

We, now recognize that we need to become competitive again or we lose to those throughout the rest of the world who are willing to do the menial, tough, hard, exhausting jobs that we wont.  We also recognize that most of the rest of the world will do the jobs that we are actually willing to do for far less than we will! .  Until we begin to again rebuild primary production and manufacturing in America, and are able to staff the jobs with workers that are willing to not only do the job efficiently, but also at a pay rate that allows the American production to be cost competitive in the one world economy, we will fail.  No amount of robbing Peter to pay Paul, to build it, or buy it in America, will bring us back to successfully compete with those that will do what it takes for less.

America has an inordinately long row to hoe to get back to where we were.  We need to discontinue myth building, and begin to focus on the pragmatic.  We need to reject the community activist play book of class envy – come – class warfare and focus on resetting expectations.  We need to retrain many workers in production level jobs.  We need to review our educational policies and reopen trade schools.  We need to change the mind-set that everyone should go to college.  Not everyone should go to college.  Sending everyone to college lowers the standards of a college education and in the end lowers the value of education in general.  It is not necessary to get a good base education through the end of high school if everyone is also going to go to college. Also, after we send these kids to college they expect to be pad at rate commensurate with their education and its expense/investment. We need guidance counselors to again guide students into the most appropriate occupations.

Finally, we need to venerate the workers in America – the laborers in America.  We need to reduce the occupation of these required labor jobs by those expensive, excessively educated and overly trained persons with people appropriately costed and trained.  We need to once again elevate the community value of the individuals that convert the raw materials to valuable products, who convert their raw talent and effort to desired commodities. We need to have the unions and all groups, cartels, associations and members to recognize that unless we begin to put our nations ability to compete ahead of entitlements, grants, gifts, gimmes, and subsidies, we will become yet another backwater on the road of history.

I will leave you with this final thought.

It has been estimate that over 1/2 of all Americans receive at least 50% of their compensation directly or indirectly from the federal government or government sponsored programs.  By 2016, it is also estimated that this number will grow to a whopping 65% of the population receiving over 70%.  Our combined trade deficit since 1972 is almost $12 trillion.  In other words, we have purchased from the rest of the world $12 trillion more than we have sold to them.  How long can the business, that is the United States of America, continue to take in so much less than we sell.  This has been the case since prior to 1972, and in order to survive we simply increased the $500 billion in total currency then to over $16 trillion today.  But our piggy bank is empty, since most of this newly created currency has just gone to pay, by today’s numbers, 50% of the population 50% of their wages so they didn’t really notice there was a problem and the professional political class could continue to get their votes.

As Hot-Rod Swales said to me one day in 1965, “It do make you think – don’t it?”

Semantics: Its just not for politicians anymore.

America Circling the Drain

America CTD?

Word games – we all love to play them. On occasion it is fun to pit ones intelligence against another and use words to obscure what we are saying or twist another’s words into something they clearly would never have said. But, has an intellectual challenge for some, become a threat to our national existence?

 we have lost connection with the little engine that for over two centuries made us, that little engine that could…

It seems the word games we all learned to play as children have become the weapons of war on ourselves, wrought by others for their own gain and power. The diatribe that is now offered as debate in all phases and venues of our public discourse – from the popular media to the halls of our congress (once the proud battlement of high ideals and lofty goals) has become a bitter, petty and self-serving process. Its practitioners now use language to obfuscate, confuse, deflect, disguise, denigrate, excoriate, and disrupt anyone and anything, usually in pursuit of goals that no clear majority would support.

As a result of this semantic game, we have lost connection with the little engine that for over two centuries made us, that little engine that could. By using words to cloak and obscure the faults in our economic systems, created by years of short-sighted decisions and weak temporary corrections, the economic crisis some have long predicted appears to be on our door step at last. But unlike 70 years ago, the “our” is no longer the American “our.” It is now most of the world’s “our!”

 A reader commented – without the government subsidizing this purchase, regardless of the long-term economic sense of the investment, the industry would not exist…

In 2007, Ellen Hodson Brown, J.D. published a book titled, “Web of Debt.” In it she chronicles the rise of the fractional reserve banking systems, how this historical standard architecture was flawed, and how we could expect to see evidence of its predictable mathematical failure. This book is a very good read, whether or not you are an economist or even mathematically inclined. It will get you thinking, and whether you agree with Ms. Brown’s conclusions or not, she will help you see some things you have yet to see about one of the main processes that provide us our modern existence.

Recently, in a brief post I wrote relating to a local news article on the purchasing of solar panels for Yosemite National Park, a reader responded with the comment that I was failing to see the whole picture. He stated that, without the government subsidizing this purchase, regardless of the long-term economic sense of the investment, the industry would not exist as no one would be able to afford the products and therefore we would not get the benefits from them or have these options for future generations.

This got “me-to-thinkin’” as they used to say where I grew up. Is it possible that, what I see as desperately flawed logic could make some sense? Even though many of my recent posts appear to be more based on our economy, what I am most focused on is our health care system, or lack of a system to be more precise.

As I researched my upcoming book, “The History and Evolution of Health Care in America: The untold backstory of where we’ve been, where we are, and why health care needs more reform,” I learned that many of the drivers of our currently unsustainable health care system have their roots in; semantic based obfuscations, bad economic policy decisions of the past and the political fostering of the entitlement philosophy we have today.

In the area of health care, and retirement, we are now of the mind that these are our due. We believe we should be able to receive any care we want, at any time that we want, and if we can’t afford it then the government, i.e. everyone else, owes this to us. And just between you and me – we never really can afford it, can we? I mean, with all the modern conveniences we also want; like the large flat panel, and the vacation every year, and the new car, and the second home, and for all of our kids to go to college and become doctors and lawyers; I mean it’s not right to expect us to not have these things in order to pay for retirement or health care later now is it?

…have the government subsidize the cost of the product so we can buy it. Now, in a vacuum this logic can make some sense…

Thinkin’ more on this, I also came to the belief that another flaw of this logic is the base economics of the decision itself. To recap, we can’t build the product at a price that people are willing, or able to pay. Therefore, we need to have the government subsidize the cost of the product so we can buy it. Now, in a vacuum this logic can make some sense. If the consequence of these decisions was not exclusionary to other things we need then, assuming we all agreed, taking some money from each of us to pay the cost of a non-sustaining industry with the hope that it would become sustaining, may be something we would choose to do. But we are not in a vacuum. Every decision we make in our economy to subsidize one industry is taking monies we need for other things-like health care and retirement.

The larger problem today, is that we have inflated our domestic costs so much already, in this new world economy, few, if any, of the things we build here in the U.S. are cost-effective. Solar is yet another great example. Comparing the cost of U.S. designed and built solar panels with those made in China shows a stark reality. We are in the long run subsidizing a business we will never gain from. This is exactly what we have been doing for the last 75 years. First Japan, then China, next Indochina, now India, we have subjugated ourselves to being pioneers in technology, and letting the rest of the word dominate by base production. Their base production margins dwarf our pioneering margins. In this new world economy, we are now in competition to all others. Throughout the past 75 years we have either lost, or purposely abandoned, many of the market segments that gave rise to our industrial and economic power.

So in our semantic fed delusion, first, let’s tax, or fine, some group, who we can use semantics to argue has more than us and if possible demonize how they got it from us unfairly in the first place. Next, since, according to the semantic, they abused us in some way to get it, the government needs to subsidize it because a different, and semantically disadvantaged, abused, and often relatively small group wants it be paid for, at least in part so they can have it. One other key to this semantic process of entitlement is this group must be, or have a semantic appeal to another group, large enough to represent a significant voting bloc.

Now, just like the Yosemite solar panels someone, actually all of us, must pay for them. Some say, “We all pay for them!” Others say, “Oh no! We will make the ‘Rich’ pay for them!” This brings up other faults in this tortured logic tree. Whether it is taxes, fines or fees, the additional costs reduce profits, increasing prices, decreasing discretionary spending, lowering domestic sales, increasing relative costs, lowing profits, driving down wages, and shifting higher margin to other countries production. This very observable and familiar Zero Sum Game process now requires more subsidies. This progression is referred to by a very technical term (CTD) “Circling the Drain.” If you have any difficulty grasping this problem, you can go back to the beginning of the paragraph and repeat, reading until it becomes clear. For some this clarity happens just after they hear the big flushing sound! Woooooooooooossssssshhhhhh!

As I thought more about this issue, I realized if Ellen Brown is correct, and I suspect she is, continuing to apply this logic is not only dangerous, it is fatal economically. Normally, when a government prints new money, it is not inflationary, but stimulative, as historically this new currency is offset by real work product with real value that has a lingering effect in our domestic economy.

I just wonder if this new world economy, combined with our current lack of competitive margin based productivity, exacerbated by the governments current practice of allocating new currency to be created for non-value based activities like paying interest, or for goods and services where the bulk of the effect of the capital is being transferred to those countries manufacturing the goods. These are the same countries where the components or primary materials yield high margins due to their significantly lower costs.

I am starting to wonder if this process is causing that WOOOSSSSSSHHHH’ing sound I am hearing? Or maybe it’s just the semantic wind, whistling though the solar panels.

If you are starting to find the overall situation increasingly frustrating and perhaps scary come check out http://www.mugwump.co (yes that’s CO not COM)

A Zero Sum Game: When will you actually get it?

We have all become inundated with a daily dose of how unfair the world is to all of us. Thanks to the media in general, and the partisan public relations engines of both parties, it seems we have nothing to worry about regarding our future, other than getting what we want by taking what others have. Or for a select few – and you know who you are – having others take what we have worked so hard to earn.

Oh yeah, some of you didn’t really earn it did you? You got it from your parents, didn’t you? And of course your parents didn’t really earn it either, they took it from the masses. They had the audacity many years, or generations ago, to start a business and be successful. And of course they were successful because people, mostly middle-class people no doubt – the robber barons always sell their insidious goods to the middle class don’t they?

Yes they made their widgets and sold them to the people. And at first it all went well and everyone was happy. The businessmen (robber-barons) made the things we want in the U.S. and we paid them for them and then IT happened…

We found out just how much money you were making, even though each of us only paid a small amount – and at the time that small amount seemed ok. But you committed a heinous crime. You got successful. Not just successful – too successful. You made too much money and you moved up town… How could you?

Then as we complained to our congress people about how you were simply robbing us all, they stepped in and enacted, rules, and laws and taxes to make it fair. So we could get some of our money back in our pockets by redistribution.

And then you made it worse! As your profits went down you didn’t hire as much, in fact you laid off some of us. And then when we bought less because some were out of work you raised prices. Then we could not afford to buy your products as often and your sales dropped and you laid off some of us people.

The Chinese saw your success and your rising costs and they started to build the same product you did. We bought theirs because it was cheaper, and also to teach you a lesson. Soon, you on your own decided if you didn’t find cheaper workers you would be out of business. So you moved your factory to Mexico, or Singapore or China. How could you?

So, we asked our congress-people to fix this again, and they slapped on import duties. Yea, that will show them – and you… But, you both just raised the retail price and we ended up paying more for the same thing. Yea, our wages were not going up as fast as the prices but we had some tricks up our sleeves yet.

Since you and the other businessmen (robber barons) were now hiring cheaper and cheaper workers, we formed unions and made you pay us more and give us more stuff just to work for you. If you didn’t unionize, we got congress to increase the minimum wage and legislate some of the great free things you need to give us just cause we work for you – again we showed you. Now again, you had to pay us what we wanted if you hired any of us. Sure, you could no longer sell much of your product to the rest of the world cause it was too expensive and the quality was no longer any good because we don’t really have to meet any standards for you to pay us, but you were sharing your prosperity with us weren’t you? It’s only fair!

Of course, you again raised your prices to cover these new costs and you complained that you were no longer competitive and foreign products were taking the market and your company could not export anything either because of price and quality. Look, when we saw that what you said was true we stood up to help didn’t we? We are not uncaring after all! We came to your rescue and we asked congress to give you some tax breaks and subsidize our purchase of your products.

I know what you’re going to say! Sure, all of our taxes went up to pay for the cost of the programs to give the tax breaks and subsidies – but look even you understand the money has to come from somewhere. And rightly so, most of it came our of your share. That’s why you raised your prices again isn’t it? When will you learn, Mr. Robber Baron, that you can’t fool us! Yea, you say you’re not making any money, but we don’t believe you! You live uptown. You made a lot of money. We see your cars, your yachts, your corporate jets… So what if we are only paying a few cents profit for your product when we buy it, you sell a lot of it to us don’t you. Look you owe us! Without us you would not exist. What do you take us for, common workers? We don’t do common labor – don’t you get it! We are Americans, not some third-worlders. We don’t work cheap buddy. It’s about time you figured that out. And don’t try to hire those illegal immigrants either. We won’t let you exploit them like you used to exploit us!

So you better get a clue. It is not important if you can produce a product cheap enough so we can afford to buy it. We don’t need your product. We can buy the one from India, or Sulawesi. America is the import master of the world don’t you see? Why do you think we have such a huge trade deficit – we have bought over $11 trillion more in goods than we sold since 1972 – only American’s can do something like that bub!

You know we don’t need your kind in America – I mean you manufacturers, and oil producers, and steel companies, and commercial fishers, and lumber companies, farmers, and miners, and others like you. You are not nice to the environment, you harm animals, you exploit workers, you make noise, and you don’t create the kind of jobs we deserve. We went to college you know. We deserve high paying non-labor jobs anyway. We buy all that stuff from other countries anyway. Let their people not go to college and do that hard messy and dangerous work.

You know, it doesn’t matter anyway. When we want more, we will just increase regulations, increase taxes – on you, and get our legislators to increase what the government owes us, and what you have to pay for, or give to us – that is if If we debase ourselves enough to actually work for you. Yea sure, you can try to increase the prices but you know what we will do about that – now don’t you?