Congress Should Push For Mandatory Gun Insurance

What an outstanding idea!

Congress Should Push For Mandatory Gun Insurance

Update #1: In ten states you are more likely to be killed by a gun than a car.

Update #2: Liability Insurance for Guns Skips a Step—You Need Liability First

Update #3: More posts on the subject -

A California bill would make gun owners pay for gun violence by purchasing liability insurance

Should Gun Owners Have To Buy Liability Insurance?

Are the GOP's problems Obama's fault?

Jonathan Chait:

It’s certainly true that Republicans are undergoing some internal strife right now over the tax issue. Daniel Henninger, also on the Journal editorial page, mourns that the president is “dismantle[ing] their party by letting its most basic conservative principles disappear.” But how this is Obama’s fault, I can’t quite figure out. It was Republicans who elevated the unpopular cause of low income tax rates for the rich to a sacred principle, built an entire party theology around punishing even the slightest dissent from that principle, and then enacted the sacred agenda through a rickety budget mechanism that caused it all to expire after a decade. That was a bad idea. Since Republicans are at least considering how to rebuild their party at the moment, my advice would be to do something else next time.

It's really hard to calculate the rate of inflation

Matt Yglesias has an excellent blog post about calculating the rate of inflation.

Best seatbelt ad

Nate Silver, Superforecaster

Pick your own sports hero analogy. Nate Silver, who runs the blog fivethirtyeight, is the Michael Jordan of election forecasting, or Muhammed Ali, or Peggy Fleming, or Michael Phelps, or Cy Young. Or Serena and Venus Williams rolled into one.

If election forecasting were baseball, Nate Silver nearly pitched a perfect game in November of 2008; the results in 49 out of 50 states, as I remember it, followed his most likely outcome. If that was nearly a perfect game, then four years later, he pitched a perfect game without an opposing batter ever making contact with the ball. The results in every state, including Florida, followed his most likely outcome. He did so much better than everyone else, he really isn't playing the same game.

But people misunderstand something about forecasting when they say Silver predicted on November 5th, 2012 that Obama would win the next day.  What Nate said is that Obama had a 90.9% chance of winning.  Obama did in fact win, which is to say Silver was 90.9% right and 9.1% wrong.

Here's another way to think about it. If we reran November 6th 1,000 times, in the style of the movie Groundhog Day, Silver said that, most likely, Romney would win 91 times and Obama would win 909 times.

Silver clearly knows a lot, but what really sets him apart from most prognosticators is that he knows what he doesn't know. That is, he knows he can't predict the future with perfect accuracy, so he designed his model around probabilities, not predictions.

There's a hint, however, that his model overstates the odds of the underdog, suggesting the model is overly cautious. This time around, in six states Silver gave the underdog (Romney in five cases; Obama in one) a chance of winning between 15 and 49.7%. Yet in none of those cases did the underdog prevail. Even with long odds like this, one might expect one upset, or maybe even two. In reality, since results in different states are highly correlated - had Romney upset Obama in Ohio, for example, he almost certainly would have also won Florida - you would expect either very few upsets or a whole lot of them. Nevertheless, it's curious that there was only 1 upset out of presidential elections in 100 states (50 in 2008; 50 in 2012).

There are plenty of angles Silver could pursue in enhancing his model; to cite just a few, he could consider incorporating data about voter registration, early voting, the extent of voter suppression and get-out-the-vote efforts, different economic and polling data,etc. While he does that, he might also consider re-calibrating the odds produced by his current model.

Fordham University President's eloquent comments regarding bad speech

When Fordham University's College Republicans invited Ann Coulter to speak, Father McShane, the University President, had this to say, as reported on Salon.com:

There are many people who can speak to the conservative point of view with integrity and conviction, but Ms. Coulter is not among them. Her rhetoric is often hateful and needlessly provocative — more heat than light — and her message is aimed squarely at the darker side of our nature.

...

Still, to prohibit Ms. Coulter from speaking at Fordham would be to do greater violence to the academy, and to the Jesuit tradition of fearless and robust engagement.

The Republican group withdrew the invitation.  (They claim they had decided to withdraw it prior to the President's statement.)

We enthusiastically endorse President Obama, who has earned a second term; Mitt Romney offers dangerous ideas, when he offers any.

New York Times

Mitt Romney, the former governor of Massachusetts, has gotten this far with a guile that allows him to say whatever he thinks an audience wants to hear. But he has tied himself to the ultraconservative forces that control the Republican Party and embraced their policies, including reckless budget cuts and 30-year-old, discredited trickle-down ideas. Voters may still be confused about Mr. Romney’s true identity, but they know the Republican Party, and a Romney administration would reflect its agenda. Mr. Romney’s choice of Representative Paul Ryan as his running mate says volumes about that.

Why did the Financial Times and other defenders of the free market endorse Obama? Because Romney can't be trusted

Free market defenders agree: Vote Obama

"For both [the Financial Times and The Economist], the primary issue comes down to trust. Romney’s constant shifts in ideology make it difficult to believe in anything he says. Even worse, if you take him at face value right now, he makes no sense.

"The Financial Times:

The more serious objection to Mr Romney is that he has gone through so many contortions to win his party’s nomination that it is hard to see how he would govern in practice. His wishlist includes an aspiration to raise Pentagon spending by a fifth while cutting everyone’s taxes and still somehow balancing the books. Such fiscal alchemy is an exercise in evasion, not a recipe for sustainable economic recovery.

"The Economist:

Obama’s shortcomings have left ample room for a pragmatic Republican, especially one who could balance the books and overhaul government. Such a candidate briefly flickered across television screens in the first presidential debate. This newspaper would vote for that Mitt Romney, just as it would for the Romney who ran Democratic Massachusetts in a bipartisan way (even pioneering the blueprint for Obamacare). The problem is that there are a lot of Romneys and they have committed themselves to a lot of dangerous things."

Suroweicki: Beware of Romney(candidate)care

James Suroweicki, whose book The Wisdom of Crowds I highly recommend, has an insightful article in the New Yorker titled "Beware of Romneycare," but which perhaps would be better titled "Beware of Romneycandidatecare," since he's not referring to what Romney did in Massachusetts.

As for Romney/Ryan's plan to voucherize Medicare, Suroweicki says:

the government would spend less, but only because it would provide less, and Americans would get less. It’s like saving on defense by protecting only two-thirds of the country.

A brilliant analogy, in my opinion.

Curiously, James didn't mention Accountable Care Organizations (ACOs), which have the potential for simultaneously improving quality of care while reducing costs.  I'd be very interested to hear what he thinks of them.

Romney's tatoos

Another example of how a picture can say so much.

A kernel of truth wrapped in preposterous arithmetic

The Romney-Ryan tax plan has a kernel of truth wrapped in preposterous arithmetic.  Consider a graph of the relationship between tax rates and tax revenue:

This is known as the Laffer Curve, named after Alfred Laffer, an economist in the Reagan administration.  If the tax rate were 0 percent (point A), everyone understands that tax revenue will be zero.  However, many don't ponder the fact that if the tax rate were 100 percent (point E), tax revenue would also be zero, because no one would do any work.  At tax rates higher than 0 percent and lower than 100 percent, tax revenue is above zero.  Point C represents the tax rate where tax revenue is maximized.  Point B, between A and C, represents a situation where increasing the tax rate would increase tax revenue (in calculus-speak, the derivative of the Laffer Curve is positive at point B).  Point D, between C and E, represents a situation where decreasing the tax rate would increase tax revenue (in calculus-speak, the derivative of the Laffer Curve is negative at point D).  

There is nothing at all to argue about so far.  But what is the actual tax rate represented by point C?  Clearly, tax rates higher than that point don't make sense.  When JFK took office, the maximum marginal federal income tax rate was over 90 percent.  He lowered the maximum marginal rate to 70 percent.  Although it's hard to determine cause and effect, it's plausible to assume that a marginal tax rate of 90+ percent put us on the right side of the Laffer Curve.  So JFK's change probably increased revenue.  

Reagan lowered the maximum marginal federal income tax rate to 28 percent, while eliminating many deductions and equalizing the tax rates on wages and long term capital gains.  

Did that place the country on the left side of the Laffer Curve?  A decade later, in the Clinton administration, we ran an experiment that pretty definitively proved it had.  Clinton raised the maximum rate back up to 39.6 percent; the economy boomed, and the federal government ran large surpluses.  Bush 43 lowered the maximum marginal rates to 35 percent on wages and 15 percent on long term capital gains; the economy struggled and the federal government ran large deficits. That suggests that if we raised current rates, tax revenue would rise, and if we lowered them, tax revenue would fall.  Most credible estimates place point C, the peak of the Laffer Curve, at 50 to 70 percent.

Romney and Ryan, however, live in a fantasy world where the the Clinton/Bush experiments never happened.  If JFK could reduce tax rates to 70 percent from 90+ percent and see tax revenue increase, then, well, tax cuts always increase tax revenue, regardless of the rate you are starting from.  That is preposterous.  

Pay no attention to the numbers behind the curtain

"You heard what I said about my tax plan. The top 5 percent will continue to pay 60 percent, as they do today."  -- Mitt Romney, October 16, 2012

With that one fascinating statement in the second debate, the self-described "severely conservative" candidate made a severely cunning move.  Amazing as it may sound, Romney could reduce the effective tax rate on the top 5 percent, and have it rise for everyone else (i.e. the bottom 95%), yet the top 5 percent would continue to pay 60 percent.

The reason for this has to do with income inequality, which has been rising in the U.S. and is currently on par with Uruguay, Argentina, and Ecuador. If it continues to rise, as it is likely to do, and will almost certainly do under a Republican administration, then the aggregate income of the top 5 percent will grow while everyone else's income stagnates, at least in relative terms.

(Sidenote: I'm assuming Romney is correct that the top 5 percent currently pay 60 percent of taxes.)

The top 5 percent then would receive a higher proportion of the nation's income while their tax burden stayed the same - hence, lower effective tax rates.  Everyone else would receive a lower proportion of the nation's income while their tax burden, currently 40 percent, stays the same - hence higher effective tax rates, at least relatively speaking.

This isn't the only way Romney could shift the tax burden away from the wealthy and onto the less wealthy, while abiding by his promise.  Stating that the top 5 percent pay 60 percent of taxes says nothing about how the tax burden is shared across the top 5 percent.  The tax burden could simply shift away from, say, the top 1 percent onto the top 2-5 percent.

As you go up the income ladder, over the past couple of decades the rungs have been getting farther apart.  Reducing marginal tax rates across the board guarantees a windfall for the super-wealthy in two ways:

1. The tax rate on long term capital gains, a form of income heavily skewed to the super-wealthy, is already very low, contrary to the spirit of Ronald Reagan, who argued the tax rates on long term capital gains and wages should be the same.
2. Many tax deductions are already phased out for the wealthy, so they are in large part immune to any efforts to further restrict deductions.

That windfall would be paid for by everyone else, while the top 5 percent would continue to pay the stated 60 percent of taxes.

Say what you will about the motives of Romney, Ryan, and their advisors, but surely they had a reason to focus on 5 percent, as opposed to 20 percent, or 10 percent, or 1 percent, or the .1 percent to which Romney personally belongs.  The cynic in me says it's because the 5 percent stratum allows Romney to shift the tax burden downward the most while sounding like he's not doing anything of the sort.  The end result is a less progressive, more regressive tax structure.

Take a second, careful look at everything the severely conservative candidate promises to do:

• Make permanent, across-the-board 20 percent cut in marginal rates
• Maintain current tax rates on interest, dividends, and capital gains
• Eliminate taxes for taxpayers with AGI below $200,000 on interest, dividends, and capital gains
• Eliminate the Death Tax
• Repeal the Alternative Minimum Tax (AMT)

And remember Romney is on record claiming he can do all this in a revenue-neutral fashion.  Most comments focus on the fact this is severely impossible.  And that's maybe where the focus should be.  But I find it fascinating how Romney chose a statement that sounds good but would allow him to shift the tax burden downward.

Cut taxes.  Don't cut taxes. What's clear is this severely conservative candidate has done a lot of damage to his own positions as well as to basic arithmetic.

Update: The Economist has a thought provoking opinion piece on "Inequality and the world economy."

David Brooks, Medicare, and the Perils of Ideological Labeling

Like Matt Yglesias and David Brooks, I have a healthy respect for the ability of free markets, if designed properly, to solve problems. But Matt makes an interesting point about using ideological labeling to perform analysis:

If you read the column, I think that what you'll find is that basically all the analytical work is being done by a project of ideological labeling. Brooks describes this as a plan that works "through a market system" featuring "normal market incentives." He twice calls it a "market-based approach" and once refers to critics as scoffing at "market-based strategies." The idea of a market has positive emotional resonance with many people, so if you convince them that you have a "market-based" alternative to price controls that will sound good. But a system of government-funded subcontractors is only market-based if you squint at it really funny. Or, rather, it's very much a market but it's a market for political influence.

The human toll of our broken individual health insurance market

In A Possibly Fatal Mistake, Nicholas Kristof recounts how a dysfunctional individual insurance market encourages people, including his freshman-year college roommate, Scott Androes, to gamble with their lives, while racking up huge medical bills paid for by everyone.

It is easy to blame Scott for not signing up for insurance when he could have, and he freely acknowledges the mistake.  However, both Scott and Nicholas gloss over the fact that getting covered in the individual insurance market is time-consuming and by no means assured, even for the healthy, as I learned first-hand.  Moreover, consider how Scott explains his decision:

I didn’t buy health insurance because I knew it would be really expensive in the individual policy market, because many of the people in this market are high risk. I would have bought insurance if there had been any kind of fair-risk pooling.

On January 1st, 2014 Obamacare will enable the individual insurance market to function properly by eliminating the adverse selection problem.  It will also discourage free-loading, the tendency for people to gamble more when others bear the financial cost if they happen to lose the bet.

Nicholas Kristof:

Already, Obamacare is slowly reducing the number of people without health insurance, as young adults can now stay on their parents’ plans. But the Census Bureau reported last month that 48.6 million Americans are still uninsured — a travesty in a wealthy country. The Urban Institute calculated in 2008 that some 27,000 Americans between the ages of 25 and 65 die prematurely each year because they don’t have health insurance. Another estimate is even higher.

You want to put a face on those numbers? Look at Scott’s picture. One American like him dies every 20 minutes for lack of health insurance.

Paul Krugman makes similar points in Death by Ideology.

Simply blaming 48.6 million people, Ayn Rand-style, for their irresponsibility makes no sense for four reasons:

1. It's not their fault the individual insurance market is unable to function properly.
2. Many of those 48.6 million people want to participate as customers in the individual insurance market, but can't due to its dysfunction. Thanks to Obamcare, they'll get the opportunity to be customers in 2014.
3. No first-world nation can blithely dismiss the deaths of 27,000 people annually as simply a lesson in personal responsibility.
4. Even if you blithely dismiss the human toll, you still have to consider the resulting huge medical bills which we all pay for

Mitt Romney debates himself

Watch this great debate between Mitt Romney and Mitt Romney.

Best online political ad

http://www.romneytaxplan.com/

Is Romney really a job creator? Ronald Reagan’s budget director takes a scalpel to the claims

In the Mitt Romney: The Great Deformer, David Stockman, Ronald Reagan's budget director, employs his 17 years of private equity experience in analyzing some of Bain Capital's most profitable deals during Romney's tenure there.  It's adapted from his book, The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy, which will be published next year.

Stockman:

Indeed, the next president’s overriding task is restoring national solvency—an undertaking that will involve immense societywide pain, sacrifice, and denial and that will therefore require “fairness” as a defining principle. And that’s why heralding Romney’s record at Bain is so completely perverse. The record is actually all about the utter unfairness of windfall riches obtained under our anti-free market regime of bubble finance.

When it comes to lies and half-truths, Romney saves his best stuff for foreign policy

Fred Kaplan declares today's speech Mitt Romney’s Most Dishonest Speech.

Joan Walsh's article covers the same speech, pointing out some of Romney's "magical thinking and mendacity."

Update: After Dick Cheney blamed Obama for the deaths of four Americans in Libya, Will Saletan pointed out the irony.

Romney would boost abortion rates

By repealing Obamacare, a new study suggests Romney would significantly increase abortion rates. As reported in a Salon.com article, the study,

by the Contraceptive CHOICE Project in Obstetrics & Gynecology, found that providing women with no-cost birth control, as does Obama’s Affordable Care Act, and educating them on effective protective measures dramatically reduced unwanted pregnancies.

...

Abortion rates among these women were less than half the regional and national rates, with 4.4 to 7.5 abortions per 1,000 women compared to 19.6 per 1,000 women. The birth rate among teen girls ages 15-19 was 6.3 per 1,000 — less than a fifth of the national rate, which is 34.3 per 1,000.

And Republicans placed him on the House Science Committee

For another entry in the "Republicans have Jumped the Shark" contest, consider the comments of House Science Committee member Paul Broun (R-GA), speaking at the Liberty Baptist Church Sportsman’s Banquet last month:

“All that stuff I was taught about evolution and embryology and the Big Bang Theory, all that is lies straight from the pit of Hell.  And it’s lies to try to keep me and all the folks who were taught that from understanding that they need a savior.”

Note that Paul Broun should not be confused with fellow House Science Committee member Todd Akin (R-MO), who questioned whether women who were the victims of "legitimate rape" could get pregnant.

Update: For six additional "Jump the Shark" members of the House Science Committee, see the Least scientific members of the House Science Committee.

Update #2: While Paul Broun ran unopposed in the 2012 election, the Augusta Chronicle reports that Charles Darwin

received more than 4,000 write-in votes in Athens-Clarke County in balloting for the 10th Congressional District seat retained Tuesday by five-year incumbent Republican Paul Broun.

That's an impressive result for Darwin, considering (1) he wasn't even on the ballot, and (2) he's been dead for 130 years.

Update #3:  Marco Rubio, Republican member of the Senate Commerce, Science, and Transportation Committee, joins the party.

Update #4: Republicans will likely take the gavel of the House Committee on Science, Space and Technology away from a science denier, and give it to another science denier.

No, "Moderate Mitt" isn't back

Steve Kornacki:

Comparisons between Romney now and George W. Bush in 2000 are becoming popular, since Bush employed the same basic strategy [of striking a moderate tone] in his campaign that Romney used in the debate. There’s an important difference, though: Bush’s platform actually included some nods to moderation. With Romney, it’s only his words.

Romney's "truthiness" score: 85 seconds per lie

http://thinkprogress.org/politics/2012/10/04/958801/at-last-nights-debate-romney-told-27-myths-in-38-minutes/

Paul Krugman calls Romney's health plan a "sick joke"

I often disagree with Paul Krugman, and last week was no exception when he called Romney's health plan a "sick joke,"  Krugman was being far too kind to Romney.

Not only does Romney's plan not work for those with preexisting conditions, as Krugman points out, it doesn't even work for people such as myself who are healthy and have been continuously covered since the day they were born. Those with group insurance and those on Medicare have no idea how bad things are for people like me with access to neither. Under current law - that is to say, Obamacare - the problems will be fixed a little over a year from now.

Romney talks about banning exclusions of preexisting conditions for those who have been continuously covered, but would let insurance companies simply refuse to offer insurance policies to those people (one company refused to offer my healthy daughter a policy because they claimed she had acne). You'll never hear that in Romney's stump speech, but one proof that Romney opposes "guaranteed issue" is a reference on mittromney.com to "high risk pools." Second, Romney remains silent regarding insurance companies charging higher premiums for those with preexisting conditions, a reprehensible practice that, under Obamacare, becomes illegal on January 1st, 2014. Finally, by not ensuring virtually everyone is covered, Romney does nothing to address the high rate of medical bankruptcies, and does nothing to solve a nasty problem called "adverse selection."

Krugman correctly points out that Romney's plan does nothing for the uninsured or those who have had gaps in their coverage. But Romney's plan won't even work for people like me who are healthy and have been continuously covered.

Another Romney pre-mortem

Joan Walsh in Salon:

In the end I think Romney killed his own campaign, not because he’s a bad person – he may be – but because, in addition to his ineptness, he came to symbolize what’s wrong with our economy, in every way. The tax rate he pays is a scandal. Shoveling millions of tax-free dollars to his sons is, too. Bain Capital was no job creator (unless you count Bain execs); the firm borrowed money to buy companies, saddled the companies with their debt and made huge fees, whether or not the firm survived.

I disagree.  Romney comes across as inept only because of the ludicrous etch-a-sketches forced upon him by the unhinged.  He made a terrible mistake accepting the nomination of a party taken over by the lunatic fringe.  Yes, the tax rate he pays is a scandal, but if he had simply said "I'm going to raise taxes for people like me," the scandal would have instantly become a campaign asset.  He could have run on, not run away from, Romneycare.  He could have become, to paraphrase Sally Cohn, "the mature adult in the room," leading "not with bullheaded self-righteousness but with self-reflection and deliberation."

Better to let your opposition write their own ads.

Mitt Romney, advertising manager for the Democratic National Committee.

Mitt Romney, advertising manager for Barack Obama's campaign.

 As for the latter, Jonathan Chait says this in The Poetic Justice of Romney’s Self-Immolation:

What's devastating about the ad, aside from the juxtaposition of Romney's words against photos of regular Americans, is something I only noticed the second time I watched it. It's the sound of silverware clinking on china in the background as Romney speaks. That detail contrasts the atmosphere Romney inhabits with the one in which most Americans live. You can tell, even though you're not seeing this, that the remarks are being made to people enjoying a formal dinner.

The Republican brain drain

Richard Cohen in the Washington Post:

In 1980 Ronald Reagan won the Republican nomination. He beat a future president, George H.W. Bush; two future Senate majority leaders, Howard Baker and Bob Dole; and two lesser-known congressmen. This year Mitt Romney won the GOP nomination. He beat a radio host, a disgraced former House speaker, a defeated Senate candidate, a former appointee of the Obama administration, a tongue-tied Texas governor, a prevaricating religious zealot who happens to serve in the House of Representatives and a cranky libertarian doctor. Where did all the talent go?

Update: here's what Jonathan Bernstein says in Can anyone save the GOP?

Many of us argue that there’s something really wrong with the current GOP. It’s not that it’s conservative; it’s that, well, to be blunt, it’s nuts. Or, to put it more gently, it’s that there are strong incentives for being dysfunctional, such as the profit motive for those who stand to make a lot of money from the party being out of office (when talk show ratings go up and wacky conspiracy theory books about Democratic presidents sell like hotcakes).

The result is a party more hospitable to, say, Sarah Palin than to Richard Lugar. And a party which takes presidential candidates such as Michele Bachmann, Newt Gingrich and Herman Cain at least somewhat seriously. That is, it’s a party which frequently ignores reality and rejects the normal compromises of the U.S. political system. And every candidate the GOP nominates either shares in the crazy or is hostage to it – which is what we’ve seen from Mitt Romney throughout the campaign.

David Brooks' reacts to Romney's "47%" comments

David Brooks in the New York Times:

Sure, there are some government programs that cultivate patterns of dependency in some people. I’d put federal disability payments and unemployment insurance in this category. But, as a description of America today, Romney’s comment is a country-club fantasy. It’s what self-satisfied millionaires say to each other. It reinforces every negative view people have about Romney.

Personally, I think he’s a kind, decent man who says stupid things because he is pretending to be something he is not — some sort of cartoonish government-hater.

Robert Bork named Chairman of Romney's Justice Advisory Committee

There is now another entry in the "Republicans have Jumped the Shark" contest.  Romney has named Robert Bork the Chairman of his Justice Advisory Committee.  After citing a number of Bork's controversial views, the New York Times called him "a polemicist for ultra conservative ideas,"

Why I love Obamacare

I am an independent conservative.  I believe in American ingenuity, and in free market capitalism.  When I think of problems our country faces, sometimes I dream up free market solutions that no one ever thought of.  I understand the perverse consequences of high marginal tax rates, and can explain the Laffer curve.  I’ve voted for lots of Republicans.

All of this suggests, you would think, that I oppose Obamacare, which Republicans have labeled socialism.  You would be wrong.  I’ll vote for the guy who wants to keep it and against the guy who wants to “Repeal it on Day 1.”  This is the story of why I love Obamacare. 

Of course you’re now thinking I suffer from a terrible cancer.  You are wrong again.  I am healthy, thank God.  My wife, son and daughter, thank God, are all healthy too.  I can afford insurance.  All four of us have been continuously insured since the day we were born.

Imagine someone starting off on his own as a consultant after years of employment.  There are millions of people like this, including me.  We need to move from my group insurance policy at Blue Shield to an individual insurance policy at Blue Shield.  We have been with Blue Shield for years.  This will be easy, because this is America, and America is exceptional.  Whatever faults the health insurance market may have, and some argue it has many, I know it has no problems at all dealing with healthy families that have been continuously covered and can afford insurance. We are the perfect health insurance customers.  It may not be fair, but financial services companies of all kinds fawn all over me in their attempts to win my business. 

In another, less exceptional country, this trivial change from “group” to “individual” insurance could be a bureaucratic nightmare.  But in America, staying with the same insurance company, a paragon of private enterprise efficiency, it’s a single, two-minute phone call.  Three minutes, tops.

Wrong.  After about 6 hours filling out the world’s most humiliating medical underwriting form, plus another three hours in follow-up phone calls, Blue Shield decides to issue an insurance policy for me and my son, while refusing to cover my wife and daughter at any price.  At.  Any.  Price.

Did I mention my wife and daughter had been insured by Blue Shield for years?  Did I mention my wife and daughter are healthy, and that they have been continuously covered since the day they were born? 

What does it say when a free market can’t even address the needs of its ideal customer? 

I don’t blame this fiasco on Blue Shield, and you shouldn’t either.  Blame it on an individual insurance market that’s unable to function properly due to a problem called adverse selection, where the people who buy insurance tend to be those the insurance company will lose money on.  This is a market failure.  Every free market capitalist knows that markets can fail.  This is, however, where American ingenuity shines.  We’re exceptionally good at structuring free markets such that they can function properly and work their Adam Smith magic.

And we know exactly how to make the individual health insurance market function properly.  Although it gets technical, a properly functioning health insurance market requires four critical characteristics:

(1) Guaranteed issue – an insurance company can’t cherry pick the best customers, and neither can its competitors.

(2) A ban on exclusion of preexisting conditions.

(3) Community rating – everyone in a given age group pays the same premium.

(4) The widest possible risk pools – virtually everyone is covered, as is the case in the group insurance market and with seniors, solving the adverse selection problem.

That is exactly what Obamacare delivers on January 1^st, 2014, a date that cannot come soon enough.  A humiliating, bureaucratic, expensive, nine-hour medical underwriting process?  Gone.  A decision to decline coverage, or charge more?  Illegal.  You should be able to go to a web page, supply your name, address, birth date, social security number, credit card and expiration date, and, paraphrasing an iconic Silicon Valley entrepreneur, boom, you’re covered.  As fast as an Amazon book order, except for the two additional pieces of information (birth date and social security number).  It would be impossible for Blue Shield to make these improvements unilaterally, because if they did, it would put them in an adverse selection death spiral.

As you probably know, there are other narratives about Obamacare.  There’s the Supreme Court decision; the death panel conspiracy theory; the Blunt amendment which, had it succeeded, would have allowed any employer to exclude any medical service from coverage for any reason, and which caused Olympia Snowe to retire from politics.  There are the people with cancer who can’t get coverage; the businesses of all kinds stiffed by medical bankruptcies; the poor.  There are the Republicans incensed by “socialist” Democrats, and the Democrats incensed by “heartless” Republicans.  There is the “Medicare-for-all” crowd.

I empathize with all those narratives and the emotions behind them.  And I believe a country without universal health insurance can’t call itself a first-world nation.

But these narratives don’t reflect my story.  I neither expect nor deserve your sympathy.  There is trouble in paradise, however, when a market can’t even address the needs of its perfect customers, and, by the grace of God, I am a perfect customer.  I love Obamacare because it represents American ingenuity at its finest.  I revel in the audacity of a classical American question: Can we make the individual health insurance application process not twenty percent faster, not twenty times faster, but two hundred times faster?

Maybe you support Obamacare for one or more of its other provisions: the ban on lifetime caps; the filling of the Medicare drug benefit donut hole; the refunds when premiums are too high; the ‘no one left behind’ expansion of Medicaid; the subsidies for those who can’t afford insurance; the incentives for small businesses; the provisions related to accountable care organizations; the ban on co-pays for certain preventive services.

Maybe you oppose Obamacare, or maybe you don’t love Obamacare as much as I do, because, like many, you are covered by group health insurance or Medicare, and the fact that the individual health insurance market can’t function properly is irrelevant to you, at least for now.  Or you’re a medical underwriter, and the humiliating, time-consuming process we experienced represents good money.  Whether you support it or oppose it, however, Obamacare represents an ingenious free market solution.  Anyone who calls it socialism doesn’t understand free market capitalism. 

To those of you who have to apply for individual health insurance prior to 2014, you have my deepest sympathies.  It will not be like ordering a book from Amazon, although it should be.  If you’re 26 or younger, Obamacare provisions that have already taken effect might spare you from the horror I experienced.  If not, and if you are any less perfect a health insurance customer than I am, I shudder when imagining what your experience could look like.  I pray you survive until January 1^st, 2014, when you can join me in celebrating American ingenuity.

(Postscript: after enduring a second humiliating medical underwriting process, my wife and daughter are now insured by Aetna.  Having two insurance companies means our family deductible is essentially twice what it should be.)

An outstanding article from an outstanding author

Warning - if you're like me, once you start reading this article, you will not be able to stop.

Michael Lewis: Obama's Way

Famous words from the moon

Neil Armstrong's death over the weekend brought back memories of the lunar landing as well as the time I met Gene Kranz, Apollo 11's launch director, when I arranged for him to speak at a user group meeting.

Neil is best known for the "... one giant leap for mankind" quote, but after reading Gene's book Failure is Not an Option, some other words spoken by Neil, what many consider to be the best test pilot ever, and his lunar module colleague, Buzz Aldrin, are equally memorable for me.

"Forty feet, picking up some dust, thirty feet, seeing a shadow ... contact light ... engine stop ... ACA out of detent."

What's memorable about these words aren't the words themselves, but the equanimity with which they were spoken by Buzz, at Neil's side in the lunar module, during a nerve-wracking landing, with a descent engine running on fumes, as if they had performed hundreds of lunar landings before, which of course they had, in practice. Buzz transitions to the descent engine shutdown checklist without a trace of emotion, during an event Gene Kranz compares to Columbus wading ashore in the new world. (Checklists would continue in the lunar module as well as at mission control, making tough "stay/no-stay" decisions at two minutes after touchdown, eight minutes, and two hours.)

"Houston, Tranquility Base here.  The Eagle has landed."

There's a little more emotion here. Tranquility is a reference to the area of the Moon where they landed, the Sea of Tranquility. What's remarkable is that in all the preparations for Apollo 11, no one had ever uttered "Tranquility Base," a term conveying a confidence that did not naturally arise from the circumstances. I don't remember where I heard this back story, or whether Neil ever said how he came up with it.

A table saw that cuts wood but can't cut fingers

This is pretty impressive technology: http://www.sawstop.com/.  It detects the electrical characteristics of blood, and stops the sawblade in 3-5 milliseconds.  Making some reasonable assumptions, about 90% of that time is spent in detection, making the stop decision, moving the brake into position, etc.  Once the brake finally comes into contact with the sawblade at the end of that process, it takes roughly 500 microseconds to bring the sawteeth from 120mph down to zero, the equivalent of roughly 12,000G's.  The general contractor who showed me the saw says you hear a loud BANG!, the sawblade has vanished (the effects of angular momentum cause the blade to retract into the table faster than you can see), and all you have is a small nick on your finger that barely warrants a band-aid.  Replacing the blade and the brake will set you back about $100, but that is cheap compared to the alternative.  One flaw I noticed is the brake system requires power, so if there's a power failure, there's no finger protection until the sawblade comes to a stop.

Patients Would Pay More if Romney Restores Medicare Savings, Analysts Say

Current law includes $716 billion in Medicare savings, endorsed by the AARP. This article in the New York times points out that Romney's promise to revoke those savings means seniors would pay more for healthcare:

Marilyn Moon, vice president and director of the health program at the American Institutes for Research, calculated that restoring the $716 billion in Medicare savings would increase premiums and co-payments for beneficiaries by $342 a year on average over the next decade; in 2022, the average increase would be $577.

Beneficiaries, through their premiums and co-payments, share the cost of Medicare with the government. If Medicare’s costs increase — for instance, by raising payments to health care providers — so, too, do beneficiaries’ contributions.

Ryan's budget uses those same savings to pay for tax cuts for the wealthy, and only balances by including artificial spending caps that would push even more costs onto the elderly.  By contrast, Obamacare uses those savings to pay for healthcare.

A Tale of 2 Plans

The essay A Tale of 2 Plans in the Journal of the American Medical Association points out a political irony: on the political spectrum, Obamacare is to the right of Ryan's Medicare plan in key (but not all) respects.  Yet Republicans oppose the former and support the latter, while Democrats support the former and oppose the latter.

Update: Over the weekend the New York Times had a great article on Medicare Advantage.

Ryan may be amiable, but his budget plan is full of myths

Peter Orzag covers Five myths about Paul Ryan’s budget in the Washington Post.

Evidence suggests Medicare would be worse under Ryan's plan

In a New York Times column titled Evidence vs. Ideology in the Medicare Debate, Laura D’Andrea Tyson, University of California Professor and Chairwoman of the Council of Economic Advisers under President Clinton, says there is no evidence that Paul Ryan's plan

would control Medicare spending more effectively than the current Medicare program strengthened by Affordable Care Act reforms. Indeed, the evidence points decisively in the opposite direction.

Update: Also see Jonathan Cohn's Definitive Guide to the Medicare Debate.

The likability problem

Neither presidential candidate exudes warmth, in my opinion. LZ Granderson, a CNN contributor who probably isn't a Republican, had an interesting way of describing Romney's likability deficit:

" ...he comes across like the guy who doesn't wave when you let him into traffic, because in his mind, he was able to merge on his own."

Why Romney’s tax agenda doesn't add up, even if it isn’t a middle-class tax hike

http://taxvox.taxpolicycenter.org/2012/08/02/why-romneys-tax-agenda-doesnt-add-up-even-if-it-isnt-a-middle-class-tax-hike/

Of course, Romney doesn’t have to raise taxes on the middle-class. He could fix this problem with less ambitious rate cuts on ordinary income, or by raising taxes on capital income. He could pay for his initiative outside of the individual income tax system by increasing corporate taxes—though he says he’d cut them. He could cut spending even more deeply than he’s already promised, though that would hurt low- and middle-income households too. Or he could just add to the deficit.

Thus, the right question to ask Romney is not whether he wants to raise taxes on the middle-class. The right question to ask is which of his campaign promises he will abandon.

For your amusement, try out the Obama campaign's tax calculator.

Update #1 - David Firestone writes about A Tax Plan That Defies the Rules of Math in the New York Times.

Romney's role in Marriott's "abusive" tax shelters

http://www.cnn.com/2012/08/08/opinion/canellos-kleinbard-romney-taxes/index.html?hpt=hp_c1

279 economists: Obamacare will significantly strengthen our nation’s economy over the long haul

http://waysandmeans.house.gov/UploadedFiles/THOMPSON_Economists_Letter_1-26-11.pdf

We write to convey our strong conclusion that leaving in place the Patient Protection and Affordable Care Act of 2010 will significantly strengthen our nation’s economy over the long haul and promote more rapid economic recovery in the immediate years ahead.

An epic hacking caused by Apple and Amazon security flaws

http://www.wired.com/gadgetlab/2012/08/apple-amazon-mat-honan-hacking/all/

This story highlights a terrible lesson: those who shouldn't have to - and certainly don't want to - understand computer security must nevertheless understand computer security.

What should you do?  The prominent technology blogger Farhad Manjoo writes about four things you need to do right now to avoid getting hacked.  Frankly I'm not totally clear on all of his recommendations.  But I'll add one more that I did just now, after reading Mat Honan's article: I logged into Amazon.com and deleted every credit card they had on file for me.

Only in America

Matt Miller in the Washington Post:

Only in America could a Democratic president pass Mitt Romney’s health plan and fund it partly through John McCain’s best idea from the last campaign (taxing some employer-provided plans) and be branded a “socialist.”

Repeal health care law? Forget about it.

http://www.cnn.com/2012/07/25/opinion/ario-jacobs-aca/index.html?hpt=hp_t3 

On Tuesday [July 24th], the Congressional Budget Office added another reason to drop the politics and get down to the hard work of health care reform. The nonpartisan organization released a report that finds the cost of repealing the reform will balloon government deficits by $109 billion between 2013 and 2022.

...

With great fanfare, House Republicans held a hearing earlier this month to profile how health reform interferes with patient care. There's one problem: They are [sic] unable to feature the leading voices of patient care -- the American Medical Association and American Hospital Association -- because those organizations support reform as good for patients.

...

Little known effect of Obamacare: health insurance prices for women set to drop

http://capsules.kaiserhealthnews.org/index.php/2012/07/health-insurance-prices-for-women-set-to-drop/

Women spend $1 billion more annually on their health insurance premiums than they would if they were men because of gender rating, according to a recent report by the National Women’s Law Center.

Under the health care overhaul, the practice is banned starting in 2014.

Saletan: Mitt Romney sucks up to his next audience by triangulating against his last one.

Badmouth Habit is another of Will Saletan's insightful and well-researched blog posts, pointing out a pattern in the sequence of Mitt Romney's speeches:

Romney, contrary to his boast, does say different things to different audiences. Among politicians, that’s nothing unusual. What’s unusual is that Romney, for further advantage, told each audience what he wouldn’t tell the last one. First he talked pro-choice Republicans into giving him millions of dollars. Then he told the gay-rights guy he was pro-life. Then he told the NAACP he was against gay marriage. Then he told the Montanans he had pissed off the NAACP. Romney didn’t just hide things from each audience. He dissed them.

Will Saletan also wrote the definitive articles on Mitt Romney's flip flops on on abortion and taxes. (Dean Obeidallah, who CNN describes as a political comedian, has a different take on flip flops: it's exactly what a CEO should do.)

Update #1 - Will Saletan's latest article chronicles Romney's dog whistles to the "Obama isn't a real American" crowd.

Update #2 - After another abortion flip flop, Will Saletan points out Romney's "weasel words."

Venture capitalist: "... we have rigged the economic system in a way to destroy my customer base."

Venture capitalist Nick Hanauer on NPR:

"I reject the idea that I am advocating higher taxes for myself and other wealthy people because I'm a good person or because I love you," Hanauer tells weekends on All Things Considered host Guy Raz. "Let me just be very clear: I do not love you. I value you as a potential customer, and we have rigged the economic system in a way to destroy my customer base."

Ten things you may not know about Obamacare

Why people like Obamacare
People are suspicious of Obamacare in the abstract, 
but when it gets to the specifics they tend to like it a lot
http://www.salon.com/2012/07/05/why_people_like_obamacare_salpart/

Romney is wrong on healthcare

On his campaign website, Romney says he will “pursue” the following policies:

Prevent discrimination against individuals with pre-existing conditions who maintain continuous coverage

Ensure flexibility to help the chronically ill, including high-risk pools, reinsurance, and risk adjustment

Ensure flexibility to help the uninsured, including public-private partnerships, exchanges, and subsidies

In order to accomplish them, Romney will have to do precisely -- nothing.  Obamacare already includes provisions for guaranteed issue, community rating and the widest possible risk pools, which as of January 1st, 2014 ensure that people can get health insurance at the same rate as anyone else regardless of pre-existing conditions.  It also includes exchanges and subsidies.

Yet, if elected, Romney would seek to repeal each of those provisions. 

Romney is wrong.  In the ultimate irony, his vague promises don’t even fully address what’s needed in the individual insurance market:

(1) They would not solve the adverse selection problem.

(2) They mean that applying for insurance would still involve medical underwriting, a time-consuming process that I know from personal experience to be both humiliating and bizarre.

(3) They mean those with pre-existing conditions would still pay more for insurance.

(4) They provide little comfort to those who have difficulty getting insurance.
(5) They would not solve the freeloader problem.

Obamacare fixes all five of these issues.

Moreover, just what does “flexibility” mean?  People want insurance, not ambiguity.  The need is clear: guaranteed issue, community rating and the widest possible risk pool.  On January 1^st, 2014, that is what we will have, provided Romney does nothing.

How adverse selection destroys insurance markets

I have not seen an adequate explanation of adverse selection, a key issue in the debate over Obamacare, so I am offering one here. Consider a simple scenario: one insurance company, Acme, with three potential customers. Alice, who is very healthy, has only $30 in medical expenses in a typical year. (I’m making the numbers small in the interest of simplicity; if it makes you feel better, add some extra zeroes to every number.) Bob, who is of average health, has $90 in medical expenses in a typical year. Caroline, who was born with a genetic defect, has $300 in medical expenses in a typical year. To account for the unpredictability of medical expenses, here’s one additional twist: one of these unlucky souls will have an accident that leads to an additional $210 in medical bills.

While each person knows their typical medical expenses, and knows they face a one-third chance of an additional $210 in expenses, all Acme insurance knows is that the total costs for all three are $630 ($30 + $90 + $300 + $210). That’s $210 per person; Acme decides to charge $220 per person (the extra $10 goes for administrative costs) for a policy that covers all medical costs. Is this a smart decision?

No, it isn’t. Take a look at the financial landscape from each person’s perspective:

	Minimum possible costs	Maximum possible costs	Insurance premium
Alice	$30	$240	$220
Bob	$90	$300	$220
Caroline	$300	$510	$220

Insurance looks like a fairly good deal for Bob and Caroline, but Alice is skeptical. Insurance would be a whopping $190 higher than her minimum expenses, and $120 higher than her expected costs of $100 ($30 plus one-third of $210). In the worst scenario, she only saves $20. Alice decides not to get insurance. This is the tragedy of the insurance business: the most profitable customers have the least motivation to buy insurance.

With Bob and Caroline as customers, Acme collects $440 ($220 from each), but can expect to pay out a total of $530 ($90 + $300 + two-thirds of $210), for a loss of $90.

Acme must set a higher price for insurance. If it knew Bob’s and Caroline’s costs, it could, for argument, set a price of $270 per person, 22% higher than before. Take a look at the adjusted financial landscape:

	Minimum possible costs	Maximum possible costs	Insurance premium
Alice	$30	$240	$270
Bob	$90	$300	$270
Caroline	$300	$510	$270

It’s an even worse deal for Alice, but now Bob is also skeptical. Insurance would be $180 higher than his minimum expenses, and is $110 higher than his expected costs of $160 ($90 plus one-third of $210). In the worst scenario, he only saves $30.

Bob decides to skip insurance too, and Acme can expect to lose $100 on Caroline’s policy. What’s happening here is called the adverse selection death spiral. For all intents and purposes the market for insurance has disappeared, and Caroline is left to deal on her own with the financial consequences of her genetic defect. Absent external forces (such as subsidies or government regulation) Adam Smith’s invisible hand cannot establish a price for insurance at which the market will clear. The way this market is defined, Acme cannot offer insurance at any price.

James Suroweicki: Was the health-care decision good for Republicans?

http://www.newyorker.com/online/blogs/newsdesk/2012/06/was-the-health-care-decision-good-for-republicans.html

Atul Gawande on "wicked problems" and the "perversity," "futility," and "jeopardy" theses.

http://www.newyorker.com/online/blogs/comment/2012/06/something-wicked-this-way-comes.html

If Medicare Is OK, Obamacare Should Be Too

http://www.tnr.com/blog/jonathan-cohn/101970/obamacare-mandate-like-medicare-payroll-tax-social-security

When will medical underwriting be illegal?

Medical underwriting will be illegal in the U.S. in:

Dirty Harry remake of Chrysler Super Bowl ad

For fans of Dirty Harry, here’s the script for the remake of Clint Eastwood’s Chrysler Super Bowl ad:

I know what you're thinking.

Did we just play two quarters, or four?

Is it halftime, or is it game over?

Well, to tell you the truth, in all this excitement I kind of lost track myself.

But being as this is America, with the most powerful engines in the world, you’ve got to ask yourself one question:

Do you think we’ve run out of gas?

Well, do ya, punk?

An Insanely Great Week

There is some very interesting stuff happening in the textbook market - see my post at the College Open Textbooks blog.

The Two Pillars of a Foundation

Do well.  Then, do good.  In short, that is what a foundation is all about.   I recently heard a talk by someone who happens to work at the Hewlett Foundation, one of the country's largest, with $6 billion in assets.  He's on the investment - "do well" - side, not the program or grant-making - "do good" - side.  I think it's unfortunate that investing tends to be associated solely with the "do well" side, since making grants is a form of investing; it's just that the return is measured differently.  But I'll stick with the convention.

Having some experience with investing to do well, and unrelated experience with nonprofits (such as College Open Textbooks, a Hewlett grantee I have helped out) which aspire to do good, I wanted to know: how does a foundation organize itself to do both at the same time?  

Like most foundations, Hewlett keeps the "doing well" and "doing good" sides relatively independent, with the former sending the latter roughly 5% of its assets every year to fund grants.  But in some respects, both sides engage in similar thought processes.  Here are four common themes that span both pillars:

(1) Portfolio strategy

Before making any specific decisions, the investment side needs what you might call a portfolio strategy.  For example, many investment managers would decide to allocate funds to three types of investments: stocks, bonds, and real estate.  There are more decisions to make, however.  What percent of assets should be in each category?  Some managers will invest only in public stocks; others are willing to venture further.  Some will restrict investments to a particular region, such as North America, while others decide to spread their investments across the globe.

The program side makes similar strategy decisions.  What general themes should we focus on?  In Hewlett's case, they've focused on things like education, global warming, performing arts, etc.  If someone wanted a grant for vaccine research, I suspect Hewlett might turn it down no matter how compelling it was.  From what I have read about the Gates Foundation, they might take a much more serious look.

(2) Analysis

Investment managers analyze more than the numbers: management, vision, ability to execute and potentially many other factors should be considered.  It's the same on the program side.  Both sides need to decide what information they will need in order to perform a proper assessment, then analyze the information when they receive it.  If you've ever applied for a grant, you likely felt like it was a lot of work, and it is.  Just remember it takes a lot of work to assess grant proposals.

(3) Risk

Ahh, our good friend risk.  It is one of the most misunderstood areas of investing.  You would think that investment managers try to minimize risk.  You would be wrong.  Depending on the objectives as well as how risk is defined, an investment manager might actually want more of it, to maximize "risk-adjusted returns."  A common strategy is to make risky investments but mitigate the risks through diversification.

So it goes as well on the program side of the foundation.  Neither the grant-seeker nor the grant-approver wants to see a grant fail.  Yet the Hewlett Foundation knows that if they don't take risks, they’ll never accomplish big things.  Wildcatters in the oil industry do not mourn a dry hole; it's a fundamental part of the business.  The famous baseball player Babe Ruth set home run records; people conveniently forget the records he set for striking out.  

In contemporary literature, failure is the new black:  

Tavis Smiley titles his book Fail Up: 20 Lessons on Building Success from Failure.  That's fine and dandy, but is it possible to build success without failure?  Good question!  Tim Harford answers it in his new book Adapt: Why Success Always Starts with Failure (you can read excerpts on slate.com here and here). Malcolm Gladwell strikes similar themes in Creation Myth.  There is a class titled "The Art of Failure" at the Monterey Institute of International Studies (disclosure: I am a friend of the professor).

In fact, Hewlett takes steps to cultivate a risk-taking culture on the program side, celebrating failure as a key element of their program strategy.  One example is an $8m grant they made to the schools of San Diego.  When key members of the school board did not win reelection, the grant did not meet its objectives.  Contrast that with Hewlett’s efforts in Open Educational Resources (OER), which they view as a grand slam home run by any measure.

(4) Time horizon

There’s almost exactly a 50% chance that the stock market will be higher tomorrow, and almost exactly a 50% chance it will be lower.  In fact the person who gave the talk motivating this blog post, renowned in his field for investment acumen, went out of his way to say he had no clue what the stock market would do this year (others have won Nobel prizes for proving the wisdom of his humility).  Intelligent investing involves thinking outside of the blinders that a one-day or even a one-year time horizon manifests.  This is very hard.  Evolution has given humans a good grasp of time frames from roughly seconds to weeks, but not the decades needed for intelligent investing.

Thinking on the right time horizon is just as important on the program side.  In 2012 Hewlett is almost guaranteed to see both progress and setbacks.  It’s only over long time horizons that powerful trends become apparent.  As one Microsoft executive said, people consistently over estimate the progress that will occur in the short term, while consistently underestimating the progress that will occur in the long term.  Open Educational Resources are a case in point.  With Encyclopedias going in roughly 20 years from $1,600 apiece to free, how can we possibly imagine what will happen in the next 20 years?

Breaking News: Feds Falsely Censor Popular Blog For Over A Year, Deny All Due Process, Hide All Details...

http://www.techdirt.com/articles/20111208/08225217010/breaking-news-feds-falsely-censor-popular-blog-over-year-deny-all-due-process-hide-all-details.shtml