Will Collier on the GA-6 Special Election

Will put together a 40 tweet rant about this special election.  He lives in the district.  I’ve turned it into a movie.  The scrolling is uneven, but it’s readable.  Take your time and read this.




Trump on the New Air Force One

[Update December 6 17:45 GMT -8: Add to the following these facts. The cost estimate, $3.2 billion, was produced by the Government Accounting Office. It covers two of the airplanes.  And just like that the $4 billion figure quoted by President-elect Trump becomes $1.6 billion per airplane.  A positive bargain.]

Today President-Elect Donald Trump suggested that the government contract with Boeing for a new Air Force One should be canceled.

Before getting into the details, here’s a response from Iowahawk (@IowaHawkBlog):

IowahawkReAF1

(click for larger image)

There are two parts to this story. First, Boeing headquarters are in Seattle. The state of Washington voted for Hillary Clinton in the recent election. Second, Boeing’s Seattle location, home of about half the company’s total employees, is heavily unionized and has experienced frequent strikes. With one tweet, Mr. Trump managed to take a serious swipe at both the state that voted against him and labor unions. While this may seem like a good idea for public relations, it is terrible government policy because it encourages companies to engage in rent-seeking to obtain political favors.

Boeing 787 Dreamliner

Boeing 787 Dreamliner (click for larger image)

But here we are.

The Trump Statement

From Reuters:

U.S. President-elect Donald Trump urged the government on Tuesday to cancel an order with Boeing Co for a revamped Air Force One – one of the most prominent symbols of the U.S. presidency – saying costs were out of control.

It was the latest example of Trump using his podium, often via brief Twitter messages, to rattle companies and foreign countries as he seeks to shake up business as usual in Washington. Trump, who takes office on Jan. 20, took aim at what he called cost overruns even though the plane is only in development stages.

“Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!” Trump said on Twitter. It was not immediately clear what prompted the timing of his complaint. [In fact, the contract is $3 billion.]

Trump, who has vowed to use his skills as a businessman to make good deals that benefit American taxpayers, then made a surprise appearance in the lobby of Trump Tower in New York, where he amplified his comments.

“The plane is totally out of control. I think it’s ridiculous. I think Boeing is doing a little bit of a number. We want Boeing to make a lot of money but not that much money,” he told reporters.

Boeing, which has built planes for U.S. presidents since 1943, has not yet begun building the two replacements for the current Air Force One planes, which are scheduled to be in service by 2024.

Boeing has not yet been awarded the money to build the proposed replacements.

“We are currently under contract for $170 million to help determine the capabilities of these complex military aircraft that serve the unique requirements of the President of the United States,” the company said in a statement.

Let me unpack this for you, in case you don’t get it. Apparently Mr. Trump is already trying to outdo the current president in using his office for revenge. Here’s the first step to understanding.

Electoral Map

(click for larger image)

About Boeing

Boeing headquarters is in Seattle, Washington. That’s the big blue blob in the upper left corner of the previous map. And, in addition, there’s the matter of Boeing’s workers. As of November 24, 2016, the company had 151,641 employees. About half of them were located in Washington. A similar percentage were working on commercial aircraft. And five percent of their workers were located in South Carolina. (Excel workbook version of these tables is available on request.)

Boeing Employment

(click for larger image)

Workforce and Unions

Boeing workers are represented by the Machinists’ Union IAM District 751. The company’s relationship with the union has been fractious, with the first strike in 1948.

During World War II Boeing was flooded with orders for military aircraft. After the war, as business was decreasing, the company needed to reduce its workforce. This was not greeted with joy by their workforce. From Wikipedia:

April 22, 1948: 15,000 Boeing Union members went on strike. After not being able to reach an agreement with the company the Union declared a strike. [On] September 13, 1948: The Union members that were a part of Lodge 751 reluctantly went back to work. Lodge 751 “represents many men and women throughout Eastern Washington, Oregon and Idaho at various companies in trades such as aluminum workers, metal trades,

From http://www.corp-research.org/boeing

In 1989, while the company was flooded with orders and falling behind in filling them, the Machinists went on strike to pressure the company to make up for the six years without an increase in the base wage.

In January 1993 members of the Seattle Professional Engineering Employees Association (SPEEA, which now stands for Society of Professional Engineering Employees in Aerospace) staged a one-day strike to protest Boeing’s contract offer—the first walkout by the union representing 28,000 technical employees at the company.

In 1995 the Machinists struck Boeing for ten weeks in a contract dispute over health benefits and job-security issues linked to the company’s growing practice of outsourcing. The union managed to beat back management’s most aggressive demands. The company again sought major concessions and then backed down during the 1999 round of negotiations, thereby averting a strike. The following year, however, SPEEA members walked off the job for 40 days.

During the 2002 contract talks, a majority of Machinists union members rejected the company’s offer, seeing it as offering inadequate job security, but the required two-thirds did not vote in favor of a strike. The Machinists did, however, walk out in 2005 in protest of the large number of contract concessions the company was seeking. The strike ended after four weeks, with the company withdrawing its most significant demands regarding employee healthcare costs, but the new pact contained no general wage increase. The Machinists walked out again in 2008 and remained on strike for more than seven weeks until Boeing agreed to put some limits on outsourcing.

In October 2009 Boeing outraged its unionized employees when it announced that plans to open a second assembly line for its 787 Dreamliner jet in South Carolina, where it would likely be run non-union. …

In April 2011 the National Labor Relations Board, at the request of the Machinists, filed a complaint alleging that Boeing’s Dreamliner move to South Carolina represented an illegal form of retaliation against its union workers for past activism. The charge, which sparked a political firestorm, was settled the following November when the union and the company made a deal under which the South Carolina project would proceed but Boeing promised that work on its 737 MAX plane would be performed in the union’s Seattle stronghold.

In November 2013 members of the Machinists union rejected a demand by the company that they give up their traditional pension plan and make other contract concessions as a condition for locating work on the new 777X jetliner in the company’s traditional manufacturing center near Seattle. After the company began shopping the project to other states, many of which were willing to offer generous subsidies, the Machinists voted again and narrowly approved the concessions.

Boeing in South Carolina

Nikki Haley

Nikki Haley (click for larger image)

It takes quite a bit of time to build a 747. Interrupting the workflow is very costly. Faced with an ongoing pattern of strikes, Boeing decided to open an assembly plant in South Carolina, announcing that the new 787 Dreamliner would be assembled there. Former governor Mark Sanford lured the company to his state with a $170 million loan package and a state law that limits union contracts.

“We can’t afford to have a work stoppage every three years,” Jim Albaugh, then the chief executive officer of Boeing Commercial Airplanes, told the Seattle Times.

Naturally the Machinists’ Union tried to organize the new plant. They faced a formidable obstacle: opposition from the new governor, Nikki Haley. The IAM eventually gave up on their organizing efforts. Boeing later used this plant as leverage in union contract negotiations in 2013, forcing the union to accept a defined-contribution pension plan instead of their long-time defined-benefit system.

Conclusion

And there you have it. Hitting two birds with one stone. And never mind the fact that Boeing is one of the country’s biggest exporters and one of only two global manufacturers of large-scale commercial airframes. After all, the country doesn’t need foreign trade. Oh, wait …




The OPM Intrusion

Update June 18 2015 6:00 pm GMT -8: Candice Lanier has an excellent article that goes into some detail about what changes are needed in government security.  Highly recommended.

For those of you who have been vacationing on Mars (or get your news from the main-stream media), OPM is the Office of Personnel Management, an independent agency that handles human resources for much of the federal government. As far as I can tell, OPM reports directly to the President. And the agency experienced a major intrusion to their IT systems in the last week.

Data Breaches The OPM Intrusion

A chart of data breaches is shown on Capitol Hill on Tuesday as witnesses testify before the House Oversight and Government Reform Committee’s hearing on the Office of Personnel Management data breach. (Photo: Cliff Owen/AP) (click for larger image)

Jonah Goldberg describes this as a “cyber Pearl Harbor.” And he’s right. What’s truly awful, however, is that OPM was warned repeatedly and did nothing. And the reason can be traced directly to the White House. It looks like the main criterion for appointment to high-level OPM positions was to have worked for President Obama in the past. I’ll postpone the rest of that story until we get through the grim details.

It Wasn’t a Hack

Calling this intrusion a “hack” is an insult to hard-working hackers everywhere.

Calling this intrusion a “hack” is an insult to hard-working hackers everywhere. Do you call it a burglary if you leave your front door wide open with a sign saying, “We won’t be back for three days?” That’s pretty much what happened at OPM. An OPM contractor granted root access to OPM servers. ArsTechnica broke the story:

Some of the contractors that have helped OPM with managing internal data have had security issues of their own—including potentially giving foreign governments direct access to data long before the recent reported breaches. A consultant who did some work with a company contracted by OPM to manage personnel records for a number of agencies told Ars that he found the Unix systems administrator for the project “was in Argentina and his co-worker was physically located in the [People’s Republic of China]. Both had direct access to every row of data in every database: they were root. Another team that worked with these databases had at its head two team members with PRC passports. I know that because I challenged them personally and revoked their privileges. From my perspective, OPM compromised this information more than three years ago and my take on the current breach is ‘so what’s new?'”

How Bad Is It?

How bad is the breach? “Why Are We Ignoring a Cyber Pearl Harbor?” asked Jonah Goldberg at the National Review.

Countless current and past federal employees are now extremely vulnerable to blackmail and even recruitment by Chinese intelligence operatives. Millions are open to identity theft (the files included all of their personal information, including Social Security numbers, and in many cases medical, family, romantic, and substance-abuse histories). My wife, who previously worked for the Justice Department, may have lived a fine and upstanding life, but I don’t relish the fact that some chain-smoking Chinese bureaucrat is going over her personal information.

The Navy Times, among others, points to the Standard Form 86 as a real goldmine of information. This is a 127 page questionnaire that asks prospective government employees to “disclose information about family members, friends and past employment as well as details on alcohol and drug use, mental illness, credit ratings, bankruptcies, arrest records and court actions.”

“They got everyone’s SF-86,” one Pentagon official familiar with the investigation told Military Times.

They got everyone’s SF-86

What makes the SF-86 even more valuable is the content beyond what the applicant supplies. Investigators sometimes interview neighbors, former spouses, and anyone else listed. These interviews become part of the SF-86 record. In other words, if someone you knew in the distant past doesn’t like you any more, they become a target for potentially learning more about you.

Pearl Harbor? Mr. Goldberg was optimistic.

Who Is At Risk?

“It is going to keep many folks at Langley busy for years, and it’s not like they weren’t busy already… When you add this to Snowden, it’s really not a good time to be posted abroad anywhere less safe than maybe Canada or Australia.”

Writing in The Daily Beast, John Schindler (whose Twitter profile says he is a “recovering spook”) says, “China’s Hack Just Wrecked American Espionage.” He added →

“But wait,” you’re thinking. “OPM doesn’t handle records for the CIA, NSA, or Defense Department.”

That may not help much. Intelligence officers serving in other countries often use covers, false identities. To be credible the identity must have a “credible narrative” and be “backstopped.” The cover must look real and check out if tested. If someone says they work for the Census Bureau doing survey work there better be an employment record at Census. Which necessitates a record at OPM. Which gives the Chinese a great place to start hunting. Does the purported Census employee actually seem to be doing work for which they are qualified? It’s a bit of work to track this down, but the workload is reduced considerably when you have a list of employees and their employment status.

Schindler points out that this can be a matter of life and death. Agents posted to a country where they could be killed or captured are very nervous right now. Even more depressing: the list of those countries today in the age of the Islamic State is depressingly long. Joel Brenner, a top counterintelligence officer from 2006-2009 says this hack is the “crown jewels material, a goldmine” and goes on to note, “This is not the end of American human intelligence, but it’s a significant blow.”

Near the end of his article, Schindler makes this telling point:

Espionage covers were already under threat on many fronts. In the Internet age, such cover stories are easier than ever to check out – and perhaps expose as fraudulent. The OPM hack makes this already dicey situation much worse. Biometrics only further complicates matters. With computerized fingerprint checks at frontiers and biometric passports becoming commonplace, and a person’s true identity being established with database checks in just seconds, James Bond’s cover will be blown long before he gets to the baccarat table to order a martini. These two broad technological shifts could make traditional covers may soon be a thing of the past, a development that will significantly change how the spy business is conducted around the world.

Why Did It Happen?

Returning to the Navy Times article for a few paragraphs,

Signs are mounting that OPM officials were aware their security clearance data was vulnerable. In November, the OPM inspector general issued a report concluding that the data was at risk, a “Chinese hacker’s dream,” according to a New York Times report.

Elizabeth Newman, an attorney and security clearance expert, said the hack was a clear OPM failure.

“It means that OPM was pretty incompetent,” she said. “They knew that their systems were vulnerable and were warned but did nothing to secure them.”

How was that possible? To answer that question, let’s go back to December 19, 2013. An interesting article appeared on the FederalNewsRadio website. With the innocuous title, “OPM staffs up, reshuffles senior leadership,” you wouldn’t expect this blockbuster content:

A little more than a month into Katherine Archuleta’s tenure at the Office of Personnel Management, the agency is staffing up and reshuffling a handful of leadership positions.

Archuleta, who most recently worked as the national political director for President Barack Obama’s 2012 reelection effort, is bringing on board two fellow campaign staffers to serve as top advisers.

Ann Marie Habershaw, the former chief operating officer of Obama’s reelection effort, has been hired to serve as Archuleta’s chief of staff. Chris Canning, also a 2012 campaign veteran, will serve as a senior adviser to Archuleta.

In addition, OPM has hired Donna Seymour, former deputy chief human capital officer for the Defense Department, to serve as the agency’s chief information officer. Seymour’s prior tech experience includes a stint as associate chief information officer for information technology policy oversight at the Transportation Department and as the CIO of Transportation’s Maritime Administration. Chuck Simpson had served as acting OPM CIO beginning in February.

OK, the three top positions were handed to political hacks (the real “hack” in this case). Understanding Ms. Seymour’s background takes a bit of parsing. “… deputy chief human capital officer” means HR. “… associate chief information officer for information technology policy oversight” most likely means either a purchasing officer or an auditor. “CIO of Transportation’s Maritime Administration” means processing routine paperwork.

And there you have it. President Obama’s pattern of staffing the top three or four levels of every single federal agency with people whose only qualification is loyalty to him personally has just put American lives and security at risk. A lot of risk.

I once believed the next president would only have some significant messes to clean up. I now believe it will be at least a decade before the U.S. recovers from this administration’s sheer incompetence.

 




Anna Schwartz for the Ten Dollar Bill

Wednesday Treasury Secretary Jack Lew announced that a woman’s face will be on a redesigned $10 bill. It’s not clear if Alexander Hamilton’s visage will be replaced. Other possibilities include two faces on the bill or two different versions of the bill (one with Hamilton and another with the selected female).

I’m going to ignore the obvious political reasons for this announcement. But I will say it’s another case of this administration yelling “SQUIRREL‼” when something embarrassing happens. In this case it’s the “hack” of the Office of Personnel Management (OPM). Actually it wasn’t a hack. OPM gave root access to the servers to a contractor working in China.

Why Anna Schwartz?

Anna J. SchwartzBack to the point. Dr. Anna Schwartz is well-known among economists. Along with the late Milton Friedman, she co-authored A Monetary History of the United States, 1867–1960. Prof. Friedman was awarded a Nobel Prize in part for his work. To their everlasting discredit the Nobel committee did not see fit to accord Prof. Schwartz the same honor.

I don’t usually rely on Wikipedia but this entry is factually accurate:

Milton Friedman and Anna Schwartz were working at the National Bureau of Economic Research (NBER) when the future chairman of the Federal Reserve, Arthur Burns, suggested that they collaborate on a project to analyze the effect of the money supply on the business cycle. Schwartz was already gathering much of the relevant historical data at that point, while Friedman was already a professor at the University of Chicago and also at the NBER. They began work in the late 1940s and eventually published A Monetary History through Princeton University Press in 1963. The Depression-related chapter “The Great Contraction” was republished as a separate section in 1965

Monetary History Cover

Wikipedia includes this in her biographical sketch:

Schwartz was born Anna Jacobson on November 11, 1915 in New York City to Pauline (née Shainmark) and Hillel Jacobson. She graduated from Barnard College at the age of 18 and gained her master’s degree in economics from Columbia University in 1935, when she was 19. She started her career as a professional economist one year later. In 1936, she married Isaac Schwartz, a financial officer and fellow Columbia University graduate, with whom she raised four children. Her first published paper was in the Review of Economics and Statistics (1940), in which she, along with Arthur Gayer and Isaiah Finkelstein, wrote British Share Prices, 1811–1850. She earned her Ph.D. from Columbia in 1964.

In 1941, she joined the staff of the National Bureau of Economic Research. She worked in the New York City office of that organization from then right up to the time of her death. When she joined the National Bureau, it was engaged in the study of business cycles. Though she held teaching positions for only a short part of her career, she developed younger scholars by her willingness to work with them and to share her approach, a scrupulous examination of the past, so as both to understand it better and to draw lessons for the present.

David Henderson has written a very nice appreciation. Economists will probably enjoy the 1989 appreciation by Karl Brunner and Milton Friedman.

Anna J. Schwartz

Anna J. Schwartz

If you can think of a better choice for the $10 bill I’d like to hear it. However, along with others, I believe Dr. Schwartz should share that real estate with Mr. Hamilton.

In Favor of Hamilton

Over at The Federalist, Mollie Z. Hemingway writesWe Don’t Deserve Alexander Hamilton On Our Currency.” The sub-head is “We’ve rejected our founders’ views on self-government, why have them on our money?” Excerpt:

Some in the media are doing wonderful work interrogating the seriousness of the [OPM] breach. But when it comes to many others, they seem curiously incurious about the severity of the problem. On the front page of the Washington Post site as I write this, there is not a single word about this “calamity.” Instead, there’s this:

Pullquote

Yes, as the world burns from Ukraine to Iraq to the South China Sea, as we face a catastrophic seizure of data on all of our military and federal personnel, as the country faces real civil unrest and discord, the Obama administration has decided to turn its focus on the “problem” of a great immigrant Founding Father’s presence on our currency.

Robert Tracinski chimes in withFour Reasons Alexander Hamilton Needs to Stay on Our Money.” Excerpts:

1) He was a self-made man.

Alexander Hamilton was a classic American immigrant success story. Born in the West Indies, he was orphaned at about 11 years of age. …

Within months of the British withdrawal from America, Hamilton became the founder of the Bank of New York, which today is America’s oldest bank, and he became the central figure in the new nation’s financial center.

2) He stabilized America’s finances.

Hamilton was the country’s first Secretary of the Treasury under George Washington, and boy did he have a mess to clean up. He convinced the federal government to assume responsibility for the debts of the states, …

I’ll leave you to decide for yourself what he would have thought of $16 trillion in government debt. So maybe there’s a reason today’s Treasury Department doesn’t want to be reminded of him.

3) He was a founding father of Wall Street.

Alexander Hamilton was the first person to have a foot both in the Treasury Department and in Wall Street. Alas, he wasn’t the last to do so. But in that long and inglorious history, he has this distinction: he helped start both of them.

4) He was an early advocate of a central bank.

Alexander Hamilton was one of the first and most influential advocates of an American central bank, the Bank of the United States, that would give the federal government influence over the financial system.

Conclusion

Support Schwartz and Hamilton!

 

 




The President Wants to Cut Hawai’i Loose

King KamehameObama The President Wants to Cut Hawai'i Loose

King KamehameObama

The President wants to cut Hawai’i loose. Redstate.com has uncovered a set of proposed rules that would, at best, allow “native Hawai’ians” to “establish a government-to-government relationship with the Native Hawaiian [sic] community?” Here’s their quote from the Department of the Interior’s Advance Notice of Proposed Rulemaking that does exactly what the failed legislation set out to do.

  • Should Interior implement a rule reestablishing “a government-to-government relationship with the Native Hawaiian community?”

  • Should Interior assist the Native Hawaiian community in “reorganizing its government?”

  • If so, “what process should be established for drafting and ratifying a reorganized Native Hawaiian government’s constitution or other governing document?”

  • Should Interior “instead rely on the reorganization of a Native Hawaiian government through a process established by the Native Hawaiian community and facilitated by the state of Hawaii?”

  • If so, what conditions should Interior “establish as prerequisites to Federal acknowledgment of a government-to-government relationship with the reorganized Native Hawaiian government?”

Background

Again, from the Redstate article:

For at least the last ten years, two Democrat senators from Hawaii have tried to pass legislation—the Native Hawaiian Recognition Act—accomplishing this.  Congress has, correctly, declined to pass this, for many reasons, not the least of which is it would violate the 15th Amendment, and create a legalized racial class based not on treaties, but solely on blood heritage.

But Obama is unilaterally doing what Former Senator Daniel Inouye and Senator Daniel Akaka (D-Hawaii), could not get through Congress. 

Why Now?

The Obamas have made no secret of their plans to move to Hawai’i after Barack leaves office in 2016. Is it possible that he is planning to become King KamehameObama? And what about taxes? If Hawai’i becomes a separate country (even in part) they can set their own taxes. Is this possible a tax dodge by the Obama family?

The Irony

One of the reasons the legislation has failed in Congress is that no one has been able to produce a workable definition of a “native Hawai’ian.”  Centuries of genetic intermingling have reduced the number of 100 percent pure Hawai’ians to about 518,000 according to the Centers for Disease Control.  But that number is undoubtedly inflated because it is the result of self-reporting in a survey.  (The cited source is the U.S. Census.)  In fact, the number is probably very close to zero.

Conclusion

The Obama administration is trying to establish government-to-government relationships with a non-existent group that has no government.  Even for this administration, this is an amazing display of incompetence.




Is Gaza One of the Most Densely-Populated Areas on Earth?

[Revised April 5, 2014 to improve readability.]

“Gaza is One of the Most Densely-Populated Areas on Earth”

We’ve been hearing this statement on the news lately. I decided to do a small investigation. Is Gaza one of the most densely-populated areas on earth?

To cut to the chase, the answer depends on the basis of comparison. The population density of the Gaza Strip is 5,045.5 people per square kilometer. But Gaza is neither city nor country.  Comparisons are, necessarily, difficult.  Comparing Gaza with countries and city-states (including Hong Kong), Gaza is number three.  But looking at cities instead, Gaza is number 46.  (The second table below shows Gaza as number 47, but it counts Singapore twice.)  And two cities in India – Mumbai and Kolkata — have densities over 20,000 per km². Finally, a quick look at Ralah via Bing maps satellite view seems to show large areas of open space.  My conclusion: locating rockets near schools and hospitals is a choice made by Hamas, not a necessity caused by overcrowding.

Details

First, using Bing maps’ satellite view, I found Ralah, Gaza, near the site of a recent Israeli airstrike.[1] Then I looked for nearby large open spaces. Here’s the result. (Click the image for a larger view.)

Rafah Vicinity

Rafah Vicinity

Next, naturally, I decided to look at the data.[2] Courtesy of the CIA World Factbook, I calculated the following:

Densities From CIA

Densities From CIA

Gaza apparently has the third-highest density in the world. However, let’s consider cities. (Hong Kong and Singapore[3] are, after all, city-states.)

Cities' Density

Cities’ Density

(The WordPress image manager did not cooperate giving me the image size I wanted.  If you want a full-size version of the above image click here.)

Gaza is, indeed, densely populated. But anyone who has visited London, Athens, or Istanbul can tell you there is a fair amount of open space. All this suggests there is plenty of open space in Gaza. Placement of munitions is a choice, not a necessity.

As always, my Excel workbook is available by clicking here.

 

[1] See, for example, http://news.yahoo.com/strike-near-un-school-gaza-leaves-10-dead-111639142.html accessed August 4, 2014.

[2] Sources: Gaza, Hong Kong, Singapore, Pakistan, India data from the CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/in.html. City population densities from http://www.citymayors.com/statistics/largest-cities-density-125.html.

[3] Singapore is on the cities list twice. The figure in red is my calculation from the CIA World Factbook. Three rows above at number 29 is from citymayors.com. My guess is that the CIA figures are more current.




President Obama Has a Solution to a Problem Created by the ACA

"...he is out of touch with planet earth."

President Obama has a solution to a problem created by the ACA.  The ACA is better known as Obamacare.  The problem in question is employers cutting employee hours to less than 30, thus exempting the employer from some of the ACA mandates to business.  (It’s safe to assume that most businesses will have at least a few full-time employees who will be subject to ACA requirements — at least if there are 50 or more employees.)

The President’s solution?  Increase the minimum wage!  That’s a great idea — instead of just getting hours cut, some of those employees will find themselves with their work hours reduced to zero.  These are the employees who lost their jobs du to the minimum wage hike.

Mr. Obama is as bad at economics as he is at math.




Why I’m Supporting a Health Insurance Industry Bailout

The signs are everywhere: “No Insurance Industry Bailout.”  Just today on Twitter a guy I admire a great deal said this: “Health Insurers Now Fighting To Save ObamaCare …  I HOPE THESE PIGS GET BUTCHERED FOR THIS SCAM.”  In this post I’ll explain why I’m supporting a health insurance industry bailout — and why you should, too.

Be careful what you wish for.  The alternative to bailing out these companies is single-payer.  That’s right — if we don’t bail out the private health insurance companies, we will end up with what the left has wanted all along: government-run healthcare.  Is that really what you want?

Revenge is a Dish Best Served Cold

I’m as disgusted as anyone with these companies.  Most were complicit in Obamacare.  Apparently their executives could only see the forecasted vast quantity of new enrollees.  They never bothered to read the fine print.  This puts them in roughly the same intelligence group as airline executives (Southwest and the newer startups excluded).  “Room temperature IQ” is too kind a description.

But would you rather have a bunch of bureaucrats running the system?  With the pre-Obamacare system at least you could vote with your feet.  If you didn’t like your current plan you didn’t have to keep it.[1]

I understand the desire for revenge.  Please don’t let your emotions override your good judgment.  This is important. There will be time for revenge after 2016.  Or we will be able to write off the once-great U.S. economy.

Obamacare Economics

Many of us pointed out at the time that the economics of Obamacare would most likely lead to single-payer.  Insurers are faced with the following requirements:

  1. An 80% payout rate, leaving 20% to cover costs.
  2. A long list of newly-mandated services which has caused premiums to rise, the quality of insurance products offered to decrease (higher annual deductibles, fewer doctors available under your plan), and fewer plans available.[2]
  3. No ability to price discriminate based on age, gender, pre-existing conditions, or much of anything else.

Under these circumstances, any economist worthy of the name could have described the outcome with one phrase: moral hazard and adverse selection.  In this case, the phrase simply means those who are most likely to need healthcare are the most likely to sign up for ACA care as soon as they can.  Those who are young and healthy are being offered a terrible deal.  The expected benefit from any ACA plan being offered to them is far less than they will pay in premiums.  Rationally, many are saying no to this offer.

And they should.  They are being asked to subsidize the care of older, sicker people.  The cruel irony is that the president who relentlessly rants about income inequality has, in his name, enacted a program that transfers income to the young and relatively poor to the old and relatively wealthy.  Obamacare, as designed, will make income and wealth even less equal.[3]

Conclusion

This is a terrible post to write.  We are faced with two horrible choices.  I vote for keeping the private sector in business as long as possible.  My hope is that the 2014 and 2016 elections will wrest control of the government from the far left Democrats (including Nancy Pelosi, Harry Reid, and Barack Obama).  If that happy day arrives, I’d like to have the private sector companies around to get the system back to where it was in 2008.  Right now, there are probably more uninsured Americans than there were two years ago.  This is the direct consequence of Obamacare.  Under the previous system, 85% of people surveyed were happy with their coverage.  I doubt you can get even half that figure today.



[1] Yes, I know this is far from universal.  One example is those with pre-existing conditions who sometimes find themselves basically tied to their current employer for life.  This is not good.  But government-run healthcare would be worse.  “All the efficiency of the DMV” is what I used to say.  Now all I have to say is, “All the efficiency, care, and competence of Healthcare.gov.”

[2] In fact, there are only four plans offered: bronze, silver, gold, and platinum.  Compared to the rich, diverse offerings in this market before, any claim that the ACA gives consumers greater choice is laughable.

[3] In a future post I hope to point out several other ways in which the government redistributes income from the poor to the rich.  For now, consider those who are recipients of “green” government subsidies.  It’s no coincidence that the city with the highest per-capital ownership of Teslas is Atherton, California, near Palo Alto.  Atherton is also one of the wealthiest cities in the U.S.




Vaccines, Autism, and Low-Information Voters

Flu Vaccine

Flu Vaccine

[Update March 12, 2013: Sarah A. Hoyt has written an autobiographical tale about the damage public schools are doing to children.  Highly recommended.]

“Low-information voter” is the term applied to voters who really don’t bother investigating issues in any depth before they vote.  I have argued elsewhere that lack of information is only half the problem.  The other half is their apparent inability to process information in any meaningful way.  They cannot discern the logic that if A causes B and B causes C then A must cause C.

In this article I’ll offer an example of one of these voters.  I’ve transcribed about 15 minutes of a Science Friday episode made over two years ago.  The complete transcription is at the end of this article, along with a complete citation and a few observations that are not transcribed directly.  I have done my best to accurately transcribe the audio, but there may be errors remaining.  If you spot any mistakes, please let me know so I can correct them.  (As far as I can tell the audio of this segment is not available for downloading and no transcript seems to exist at ScienceFriday.com.)  The subject under discussion was vaccines and autism.  This article relates vaccines, autism, and low-information voters.

My Summary

One of the guests on Science Friday January 7, 2011 was Dr. Paul Offit, the author of Deadly Choices: How the Anti-Vaccine Movement Threatens Us All.  Dr. Offit has examined the many, many studies done on this subject and has concluded that there is no causal relationship between vaccines and autism.  At about 8 minutes 15 seconds into the interview, host Ira Flatow takes a call from Leslie in Oakland (presumably California).

Leslie opens with a statement that includes this: “… I think he’s cherry-picking when he cites this one study that has been widely discredited when there are literally dozens of studies whose methodologies have been impeccable and have not been discredited.”  She is referring to the discredited work by Andrew Wakefield that seemed to show such a relationship.  (A summary of Wakefield’s “research” is in the following section.)

Dr. Offit replied by detailing the problems with Wakefield’s work.  He then pointed to fourteen separate studies on three different continents, each including hundreds of thousands of children, that unanimously reported that vaccines don’t cause autism.

Ira Flatow then asked Leslie whether there was any amount of research that would change her mind.  She replied yes, with disparaging references to “… the yahoos who just don’t look at scientific processes at all and people who blindly trust what clinicians tell them …” adding that there was “something between” the two groups. She then states that “… the vast number of immunizations that you’re requiring at such a young age really is taking a toll on the immune system. I think that’s just logic.”

Dr. Offit patiently replies that the number of immunological components in all 14 vaccines combined was 160. By contrast, each of the 100 trillion bacteria that our bodies host contain somewhere between 2,000 and 6,000 immunological factorsIf the human immune system was really that fragile, the human race would have died out millennia ago.  (There is additional talk about the mercury in preservatives, but today’s childhood vaccines no longer contain thimerosal, the preservative that includes ethyl mercury.)

Leslie replies, “I can’t accept what you’re saying. It just sounds like pap to me, it sounds like panacea. A two year old cannot accept this kind of chemical onslaught.”  But, of course, two-year-olds have the same 100 trillion bacteria on their skin that all of us have.  After a few more interruptions, the following exchange ensues:

Ira Flatow: “… Leslie, it doesn’t look like anything he’s going to tell you is going to change your mind.”

Leslie: “Well, I’m not hearing anything that sounds credible to me as an educated adult.”

Got that?  Leslie was presented with a mountain of scientific evidence.  She simply refused to believe it.  It’s not a lack of information.  It’s an inability to process information when it’s presented.

A Longer Summary

The guest on Science Friday was Dr. Paul Offit, the author of Deadly Choices: How the Anti-Vaccine Movement Threatens Us All.  Dr. Offit has examined the many, many studies done on this subject and has concluded that there is no causal relationship between vaccines and autism.  At about 8 minutes 15 seconds into the interview, host Ira Flatow takes a call from Leslie in Oakland (presumably California).

Leslie opens with a statement that includes this: “… I think he’s cherry-picking when he cites this one study that has been widely discredited when there are literally dozens of studies whose methodologies have been impeccable and have not been discredited.”  She is referring to the discredited work by Andrew Wakefield that seemed to show such a relationship.  Wikipedia describes Mr. Wakefield’s “study” thus:

On 28 January 2010, a five-member statutory tribunal of the GMC found three dozen charges proved, including four counts of dishonesty and 12 counts involving the abuse of developmentally challenged children. The panel ruled that Wakefield had “failed in his duties as a responsible consultant”, acted both against the interests of his patients, and “dishonestly and irresponsibly” in his published research. The Lancet immediately and fully retracted his 1998 publication on the basis of the GMC’s findings, noting that elements of the manuscript had been falsified. Wakefield was struck off the Medical Register in May 2010, with a statement identifying dishonest falsification in The Lancet research, and is barred from practising medicine in the UK.

In January 2011, an editorial accompanying an article by Brian Deer in BMJ identified Wakefield’s work as an “elaborate fraud”. In a follow-up article, Deer said that Wakefield had planned to launch a venture on the back of an MMR vaccination scare that would profit from new medical tests and “litigation driven testing”. In November 2011, yet another report in BMJ revealed original raw data indicating that, contrary to Wakefield’s claims in The Lancet, children in his research did not have inflammatory bowel disease.

Wakefield’s study and public recommendations against the use of the combined MMR vaccine were linked to a steep decline in vaccination rates in the United Kingdom and a corresponding rise in measles cases, resulting in serious illness and fatalities. Wakefield has continued to defend his research and conclusions, saying there was no fraud, hoax or profit motive.

Leslie is willing to admit that the Wakefield paper is invalid.  But she refers to the “dozens of studies whose methodologies have been impeccable and have not been discredited.” Of course she never gives a citation for any of them.

Dr. Offit replies with an explanation of the many fraudulent aspects of Wakefield’s paper.  He then goes on to say that, “… if you want to answer the question, the way you answer that question is that you look at hundreds of thousands of children who did or didn’t get MMR vaccines to see whether the incidence of autism is greater in the vaccinated group. That’s been done by fourteen different groups of investigators on three different continents and the answers have been very clear and consistent and reproducible. So we can say with comfort that MMR vaccine does not cause autism.”

Ira Flatow then asks Leslie whether there is any amount of research that would change her mind.  Leslie replies, “”Oh, absolutely. This is what I’m saying is that he’s presenting a false dichotomy. There is something between the yahoos who just don’t look at scientific processes at all and people who blindly trust what clinicians tell them, of which there are a number, many, many people. You know, getting 26 vaccines, in some cases before the age of two, is a devastating thing for a person’s immune system. I’m 49 and …”

Mr. Flatow attempts to interrupt the incessant flow of words without a great deal of success.  When he finally gets her attention he asks her for evidence that the 26 treatments (actually 14 vaccines, some have multiple doses) have detrimental effects.  She mentions the preservatives that use mercury (which has been removed from all childhood vaccines in the U.S.), then says “…the vast number of immunizations that you’re requiring at such a young age really is taking a toll on the immune system. I think that’s just logic.”

Dr. Offit replies that the critical issue is the number of immunological components in the 14 vaccines.  Today there are 160 such components. And we know a lot about the human immune system.  Each of us has about 100 trillion bacteria on our body.  And each bacterium has between 2,000 and 6,000 immunological components.  If our immune systems were really that fragile, human life would have been wiped out millennia ago.

Leslie replies, “I can’t accept what you’re saying. It just sounds like pap to me, it sounds like panacea. A two year old cannot accept this kind of chemical onslaught.”  In other words, actual scientific data  and facts — information — are irrelevant.  Ira Flatow tells Leslie that it doesn’t look like anything Dr. Offit says will change her mind.  She replies, “Well, I’m not hearing anything that sounds credible to me as an educated adult.”

Educated, perhaps, but completely unable or unwilling to appreciate science, the scientific method, or logic (despite her statement to the contrary).

Conclusion

It’s not just an information problem.  It’s an information processing problem.  Until we can figure out a way to get these folks to think, the country will remain in a lot of trouble.

Appendix: The Complete Transcript

This is my transcription of the audio of this show available at http://sciencefriday.com/segment/01/07/2011/paul-offit-and-deadly-choices.html.

One of the guests on Science Friday January 7, 2011 was Dr. Paul Offit, the author of Deadly Choices: How the Anti-Vaccine Movement Threatens Us All.  Dr. Offit is an expert on vaccines and autism. He has also written Autism’s False Prophets: Bad Science, Risky Medicine, and the Search for a Cure. Here’s a very brief summary of the first eight minutes of the show:

There is a great deal of evidence against any linkage between childhood vaccines and autism.  Dr. Offit’s wife is a GP who struggles with this issue all the time. If parents reject vaccines, she has to be careful because she wants to keep them coming into her office so they don’t go to a chiropractor or other “alternative medicine” practitioner instead.  So she has to be careful about how she approaches this issue.

The telephone call in question starts at 8 minutes 15 seconds of the segment.

Leslie in Oakland: “Hi, thank you very much for having me, my name is Leslie, I’m calling from Oakland. I want to make a statement regarding the doctor’s artificial, I believe, polarization of the issue. I think he’s cherry-picking when he cites this one study that has been widely discredited when there are literally dozens of studies whose methodologies have been impeccable and have not been discredited.”

Ira Flatow: “Let me get an answer. Dr. Offit?”

Paul Offit: “If she’s referring to the Wakefield publication as being a study that was discredited, first one should say that nothing was studied. That wasn’t a study, that was merely a series of eight children who had received the MMR vaccine who then, within a month, developed symptoms of autism. Dr. Wakefield postulated that the vaccine had caused intestinal damage which then allowed for brain damaging proteins to enter the body and cause autism. That wasn’t a study.  In fact, now we know that even what was presented was incorrect. Some of those children were said to have autism and they didn’t. Some of those children were said to have received the vaccine just before they got symptoms of autism. That wasn’t true, they’d either  received it afterwards or well before. None of that was right.  But if you want to answer the question, the way you answer that question is that you look at hundreds of thousands of children who did or didn’t get MMR vaccines to see whether the incidence of autism is greater in the vaccinated group. That’s been done by fourteen different groups of investigators on three different continents and the answers have been very clear and consistent and reproducible. So we can say with comfort that MMR vaccine does not cause autism.”

Flatow: “Leslie, let me ask you the same question I asked of Chantelle [sp?] in 2008. Is there any amount of research that could be presented to you that would change your mind?”

Leslie: “Oh, absolutely. This is what I’m saying is that he’s presenting a false dichotomy. There is something between the yahoos who just don’t look at scientific processes at all and people who blindly trust what clinicians tell them, of which there are a number, many, many people. You know, getting 26 vaccines, in some cases before the age of two, is a devastating thing for a person’s immune system. I’m 49 and …”

Flatow [interrupting]: “How do you — Leslie — Leslie …”

Leslie [continuing] “… I had six or seven and I think they were great, I had polio, I had measles, [Flatow continuing to say her name] you name it I had the things that we know are really bad. Meningitis I’m on the fence about, I don’t know much about that one …”

Flatow: [raising his voice]: “Leslie — Leslie — could I interrupt.  You said it was devastating to get 42 immunizations. Can you tell us what evidence you have that it’s devastating?”

Leslie: “26.  …”

[Talking over each other.]

Flatow: “Well, tell me what evidence you have …”

Leslie: “there’s really a lot of evidence that the preservatives that are used include mercury. And the vast number of immunizations that you’re requiring at such a young age really is taking a toll on the immune system. I think that’s just logic.”

Flatow: “All right, let’s get an answer from Dr. Offit.”

Offit: “Leslie raised two issues. I’ll actually do it, if you don’t mind, in the order in which she raised them. The first was she raised the notion that, it’s actually 14 different vaccines that can be included in as many as 26 inoculations. But, certainly, if you look 100 years ago we only got one vaccine. Today we get 14 different vaccines and certainly the number 14 is greater than one. But the critical thing is whether the number of immunological components in the vaccines, which is to say the immunological challenge in vaccines, is greater today than it was 100 years ago. The answer, interestingly, is no. You actually receive about 160 immunological components. By that I mean bacterial protein, bacterial polysaccharide, or viral protein, as compared to the smallpox vaccine which was the only vaccine we got 100 years ago which contained about 200 immunological components. Secondly, the notion that vaccines would overwhelm the immune system just flies in the face of everything we know about the immune system. You know, when you’re in the womb you’re in a sterile environment. When you enter the birth canal and the world, you’re not. And very quickly you have living on the surface of your body trillions of bacteria, literally trillions, I’m not trying to sound like Carl Sagan, it’s literally trillions, you actually have 1014 which is 100 trillion bacteria on the surface of your body. That’s actually ten times more than you have cells in your body. …”

Leslie: [Interrupting] “Aren’t immunological viruses engineered in a laboratory, it’s not naturally occurring in nature?”

Offit: “OK, I can address that, too, but, you know, a person makes grams of immunoglobulin-G every day, grams of secretory immunoglobulin-G to handle that sort of natural insult, so the 160, and remember each bacteria [sic] has between 2,000 and 6,000 immunological components. If we were overwhelmed by vaccines, our species would not survive. Believe me, that’s not a problem. Secondly, the issue of mercury, you know, the quantity of ethyl mercury that was contained in vaccines is less, and remember ethyl mercury is excreted from the body much more quickly than methyl mercury, and ethyl mercury is essentially out of vaccines given to young children. It still is contained in some multi-dose preparations of the influenza vaccine. It’s the quantity that matters. Obviously mercury at high quantities is a neurotoxin, but we’re all exposed to levels of mercury because we live on this earth and the earth’s crust contains mercury, so mercury is in the water we drink, it’s in breast milk …”

Leslie: [Interrupting] I can’t accept what you’re saying. It just sounds like pap to me, it sounds like panacea. A two year old cannot accept this kind of chemical onslaught.”

Offit: “Of course they could …”

Leslie: “Maybe an adult could.”

Offit: “But a child does  …”

Flatow: “Let me just jump in, this is Science Friday from NPR.  Leslie, it doesn’t look like anything he’s going to tell you is going to change your mind.”

Leslie: “Well, I’m not hearing anything that sounds credible to me as an educated adult.”

Flatow: “Ah. OK. Thanks for calling.”

Leslie: “You’re welcome.”




Health Care Shift to Electronic Medical Records Led to Rent-Seeking

“We called it the Sunny von Bülow bill. These companies that should have been dead were being put on machines and kept alive for another few years,” said Jonathan Bush, co-founder of the cloud-based firm Athenahealth and a first cousin to former President George W. Bush. “The biggest players drew this incredible huddle around the rule-makers and the rules are ridiculously favorable to these companies and ridiculously unfavorable to society.”

Part of the American Recovery and Redevelopment Act (ARRA) was incentives for the health care industry to switch to electronic medical records.  A recent New York Times article (Feb. 19, 2013) looked at what went into this $19 billion pie.  They concluded that the health care shift to electronics medical records led to rent-seeking behavior by the “big three” suppliers of electronic medical records. The three companies were  Cerner Corp., Allscripts and Epic Systems of Verona, Wis. The three lobbied heavily to have the $19 billion included in the bill.  And, of course, the requirements for suppliers were oriented toward systems produced by these three.  No problem?  Oh, wait, these companies are old and produce what should be legacy systems.  I’ve written before about Jonathan Bush of Athenahealthcare.  Here’s what he has to say about this clause in ARRA →

But if the customers are happy, who cares?  Well, it turns out the customers are not all that happy.  Again, from the Times article:

The records systems sold by the biggest vendors have their fans, who argue that, among other things, the systems ease prescribing medications electronically. But these systems also have many critics, who contend that they can be difficult to use, cannot share patient information with other systems and are sometimes adding hours to the time physicians spend documenting patient care.

“On a really good day, you might be able to call the system mediocre, but most of the time, it’s lousy,” said Michael Callaham, the chairman of the department of emergency medicine at the University of California, San Francisco Medical Center, which eight months ago turned on its $160 million digital records system from Epic. Michael Blum, the hospital’s chief medical information officer, said a majority of doctors there like the Epic system.

And, naturally, all that rent-seeking paid off:

Four years later, in December 2008, H. Stephen Lieber, chief executive of the group, wrote an open letter to President-elect Obama calling for a minimum government investment of $25 billion to help hospitals and physicians adopt electronic records. The industry ultimately got at least $19 billion in federal and state money.

In the months after that windfall arrived, sales climbed for leading vendors as hospitals and physicians scrambled to buy systems to meet tight timetables to collect the incentive dollars. At Allscripts, Mr. Tullman soon announced what looked like a game-changing deal: the acquisition of another records company, Eclipsys, for $1.3 billion.

“We are at the beginning of what we believe will be the fastest transformation of any industry in U.S. history,” Mr. Tullman said when the deal was announced.

Last spring, some of the Eclipsys board members left after a power struggle; Mr. Tullman left in December. He is now at a company he co-founded that focuses on solar energy — another area that, after Obama administration and Congress expanded government incentives in the 2009 stimulus bill, has been swept by a gold-rush mentality, too.

But Has It Paid Off For the Stockholders?

As a good economist, I believe that corporations should act in the best interests of their owners, the stockholders.  And it appears that Cerner has done pretty well.  Let’s look at stock prices and financial summaries. It happens, however, that Epic is privately owned.  No financials from them. If you’re looking for information about them, their name is just Epic, not Epic Systems as they are called in the Times article. (Those who want the financial statements as Excel workbooks should click here to download a zip file containing three workbooks. Also, data and charts shown in this section are from Yahoo Finance.)

Cerner Stock Price

Cerner Stock Price

Cerner Financials

Cerner Financials

They’ve done OK. But Allscripts is another matter:

Allscripts Stock Price

Allscripts Stock Price

 

Allscripts Financials

Allscripts Financials

But, interestingly, Mr. Bush’s company (Athenahealth) has also done pretty well:

Athenahealth Stock Price

Athenahealth Stock Price

Athenahealth Financials

Athenahealth Financials

Conclusion

Economists know that companies engage in rent-seeking behavior because it increases their profits.  But apparently that can’t compensate for bad management (see the earlier material about Allscripts).  Are electronic medical records a good idea? Probably.  Should the federal government have kicked in $19 billion to encourage medical care providers to purchase, install, and train their employees on these systems?  That sort of subsidy inevitably leads to inefficiencies.  In this case, systems are being installed that use out of date technology, some medical care providers are switching to electronic records before they are ready (to take advantage of the subsidies and tax breaks), and newer companies such as Athenahealth, face new barriers to entry.  All of this is cause by the government picking winners.  We’ve seen too many examples to count showing why government does a bad job at picking winners.  Those who are skilled at lobbying government are unlikely to also be good at managing a company.