The Future of Publishing

There is an explosion in articles bemoaning the death of newspapers and publishing in general. The problem is that they see a change in distribution channels and ones that they, the owners of the current channels, have not adapted to.

Yet there are two issues here that must be understood.

First, the classic McLuhan dicta that the medium is the message is truer now than ever before. Namely the media will determine what is knowledge and an extension what is truth.

Second, "ownership" or monetization of the new distribution channels will and is disruptive and in fact is just starting, in essence it is disruptive.

Let us look at two examples of the past. First Homeric literature was an oral tradition, when one reads Homer in classic Greek, yes the only way to do so, one sees and hears a lyric and memorizable tale of glory and heroism. It literally sings itself to the listener. Second, when one looks at Thomas Paine and his writings, one sees an author who paid for his own writings to see the light of day and who never received a penny for his efforts, and in fact gave anything he received to the new States which were formed. Paine may have had his quirks but he was a true hero of the Revolution and one of the founders who articulated what we came to see as the basis of our country, albeit forgotten by some over time.

Thus the two classics, Homer and Paine, were tellers of great tales and moral acts. In contrast the bemoaners of the current change are those who have benefited financially yet are stuck in the past and will for the most part see their own demise.

In an article in the New York Review of Books states:

The transition within the book publishing industry from physical inventory stored in a warehouse and trucked to retailers to digital files stored in cyberspace and delivered almost anywhere on earth as quickly and cheaply as e-mail is now underway and irreversible. This historic shift will radically transform worldwide book publishing, the cultures it affects and on which it depends. Meanwhile, for quite different reasons, the genteel book business that I joined more than a half-century ago is already on edge, suffering from a gambler's unbreakable addiction to risky, seasonal best sellers, many of which don't recoup their costs, and the simultaneous deterioration of backlist, the vital annuity on which book publishers had in better days relied for year-to-year stability through bad times and good. The crisis of confidence reflects these intersecting shocks, an overspecialized marketplace dominated by high-risk ephemera and a technological shift orders of magnitude greater than the momentous evolution from monkish scriptoria to movable type launched in Gutenberg's German city of Mainz six centuries ago.

As one who has over 8,000 books, most of which I have actually read, with annotations, and as one who has given away most likely twice that number over the years, I am a lover of the physical book. But also as one who has been there at the beginning of the change and having moved very comfortably with it, frankly I could not do what I do without the electronic media and of course Google, I can on the one hand appreciate the sentiment of loss and also desire more rapid progress towards the future. My first books were published, my recent ones are on line in draft form, and are downloaded frequently.

The author in TNYRB states:

In preliterate cultures, the great sagas and epics were necessarily communal creations committed to tribal memory and chanted under priestly supervision over generations. With the invention of the alphabet, authors no longer depended on communal memory but stored their work on stone, papyrus, or paper. In modern times, communal projects are limited mainly to complex reference works, of which Wikipedia is an example. Though social networking will not produce another Dickens or Melville, the Web is already a powerful resource for writers, providing conveniently online a great variety of updated reference materials, dictionaries, journals, and so on instantly and everywhere, available by subscription or, like Google search and Wikipedia, free. Most time-sensitive reference materials need never again be printed and bound.

This reiterates what I have said above. The web has as a vice the creation of false truth. For now anyone can publish what they think is true, just look at blogs, yet the natural conflict that exists allows for all sides to be seen. All too often however those who migrate to politically closed thought groups stay in them and are reinforced. However there is nothing new there. For when there were more than a dozen newspapers daily in New York, those of a similar mind migrated to the paper which reinforced their positions. The old NY Post was almost a Communist paper!

Epstein finally states:

The most radical of these fantasies posits that the contents of the digital cloud will merge or be merged—will "mash up"—to form a single, communal, autonomous intelligence, an all-encompassing, single book or collective brain that reproduces electronically on a universal scale the synergies that occur spontaneously within individual minds. To scorn a bold new hypothesis—the roundness of the earth, its rotation around the sun—is always a risk but here the risk is minimal. The nihilism—the casual contempt for texts—implicit in this ugly fantasy is nevertheless disturbing as evidence of cultural impoverishment, more offensive than but not unrelated to the assumption of e-book maximalists that authors who spend months and years at their desks will not demand physical copies as evidence of their labors and hope for posterity.

The assumption of a mashed intelligence is Asimovian in its view. I would argue that for those of us who create new ideas, we use all media, and paper is still there. We find articles and information, compile it, print the ones we need to mull over, and then convert it to a digital form. I have not written a document by hand since 1981, when I got my first IBM PC from the Boca Raton factory. And I have almost all of those digital documents, 30 years worth of written documents, now all indexable by Google Desktop! I could not live or create without it.

Thus the digital world has created a new and expansive environment for the creation of knowledge. You can always print it out, you can read it on line, but most importantly you can always find it! The knowledge created now can be spread more rapidly, and found more readily, and in a sense defines our new evolving culture across national boundaries. In a way it is an amalgam of Homer and Paine, lyrical and free!

Medicare, Rep Ryan, and the Facts

In the Blair House Yalta Conference Rep Ryan stated:

Mr. President, you said health care reform is budget reform. You're right. We agree with that. Medicare, right now, has a $38 trillion unfunded liability. That's $38 trillion in empty promises to my parents' generation, our generation, our kids' generation. Medicaid's growing at 21 percent each year. It's suffocating states' budgets. It's adding trillions in obligations that we have no means to pay for it... If you take a look at the CBO analysis, analysis from your chief actuary...this bill does not control costs. This bill does not reduce deficits. Instead, this bill adds a new health care entitlement at a time when we have no idea how to pay for the entitlements we already have. What has been placed in front of [the CBO] is a bill that is full of gimmicks and smoke-and-mirrors. Now, what do I mean when I say that?

Well, first off, the bill has 10 years of tax increases, about half a trillion dollars, with 10 years of Medicare cuts, about half a trillion dollars, to pay for six years of spending. Now, what's the true 10-year cost of this bill in 10 years? That's $2.3 trillion. It does couple of other things. It takes $52 billion in higher Social Security tax revenues and counts them as offsets. But that's really reserved for Social Security. So either we're double-counting them or we don't intend on paying those Social Security benefits. It takes $72 billion and claims money from the CLASS Act. That's the long-term care insurance program. It takes the money from premiums that are designed for that benefit and instead counts them as offsets.

Without delving into all the details, I feel that this is as much of a distortion as those of the Democrats. Medicare is not an unfunded plan no less than any Government Bond is. Nor any whole life plan. The contributors to Medicare paid in on average 40% more than they will ever get back. The money was taken by the very same people now making the complaints. They now use current collections for current payments made upon past contributions which were themselves taken for other reasons. Rep Ryan is much of a sophist as any of the Democrats. He clearly demonstrates gross ignorance of the facts regarding Medicare.

Perhaps we should just start all over again this November, just elect anyone who has never held office and do what is done in New Hampshire, pay them $100 per year and give them free parking. That is it!

Well Rationing is Beginning

"Just Let Grandma Die!" is the mantra of the under 40s who have yet to contribute to society, unless of course if they were bankers in which case they caused this mess, the "me generation", those over-privileged who start every conversation telling you all about themselves and their travails. The ones who feel that they are owed everything, the group who have a scotoma for the hard working Chinese and Indian students who in twenty years will eat their lunches.

But today the left wing Kaiser California group presents a compelling article regarding the dis-assembly of Medicare. They state:

With a 21 percent Medicare reimbursement rate cut set for Monday, unless Congress acts to block it, some doctors are threatening to refuse new Medicare patients in their practices.

"'To our physicians, we are providing information on their Medicare participation options, including how to remove themselves from the Medicare program,' said James Rohack, president of the American Medical Association, whose more than 250,000 members include doctors, medical students and faculty members," CNN reports. Rohack says temporary delays of the yearly scheduled rate cut should be eliminated. "He said the AMA wants the current law to be repealed and a new formula used 'that more accurately reflects the cost of providing care' in determining Medicare reimbursement rates. … In the meantime, physicians are asking the AMA to prepare handouts they can give patients to prepare them for the worst-case scenario: getting dropped completely. And a new report on the AMA's Web site tells doctors how they can help their patients find other doctors if they decide to no longer accept Medicare."

A survey by the American Association of Neurological Surgeons "found that 65% of its 3,400 members said they are referring their Medicare patients to other doctors. About 60% said they were reducing the number of Medicare patients in their practice"

This means that even the Administration lap dogs in the AMA are now shaking in their boots. Medicare will just destruct on its own. This just one day after the Yalta like Health Care meeting in Blair House! Well it is one way to get rid of Grandma!

Is Blair House Another Yalta?

At Yalta the west gave away Europe based upon the ignorance, arrogance, and illness of FDR and the adroitness of Stalin. The sides were unevenly matched and the West, especially the US, was clueless.

Are we seeing the same today at Blair House and who is playing what role. Anyone who has ever negotiated a sensitive deal knows that you never do it in public, except the part where you all agree.

Just to reiterate what we have been saying for more than a year:

1. Any Plan should be a universal plan, no free rides

2. Demand management is as important as supply. Namely we want obese people to lose weight or pay more and we want everyone to pay something.

3. Medicine is evolving rapidly and genetic methods will soon displace the whack and hack of the surgeons. We should not institutionalize the past.

4. Medicare for most who have contributed has been more than paid for by those receiving it. However a balance can be made by indexing both future contributions and payouts. Namely increase the 3% to 4% and move the age from 65 to 72 over some reasonable time period. Medicare should pay for the last 15 years of life not the last 30!

5. The Federal Government should stay out of the practice of medicine. No CER or CCE, no control of who gets to do what.

6. Break down the walls; eliminate antitrust, allow cross state lines, restructure tort liability.

7. Demand individual responsibility, that is you pay out of pocket for a great deal and pay if your life style choice place you at risk.

Simple, but this ersatz Yalta Conference is getting no where.

The FCC Broadband Plan

The FCC issued a presentation last week on its proposed broadband plan. It reminds me of when I took over as COO of NYNEX Mobile, now Verizon, in 1990. You see I had spent the mid 1980s helping Motorola get into the wireless data business. They had a product, the Motorola KDT terminal, bigger and heavier than a brick, which they had built for IBM field service techs. IBM had the software and the well defined need but they needed a wireless data terminal to effect their plan, a more productive field service system.

Bob Galvin, the then CEO and son of the founder. asked me to come in and try to make a business of this product. Bob talked to me over peanut butter sandwiches in the Motorola cafeteria that when they, Motorola, made pagers, the paging service providers, Motorola's customers, made ten dollars for every dollar of equipment sold and when they made cell phones, it was the beginning of cellular, the cell service providers made tens and tens of dollars for every dollar of revenue of cell phones sold by Motorola. He saw the service business as the future of Motorola in the wireless data world.

I came from the service side, namely satellite and cable, and had done this before. But I remembered the main dicta, if all else fails listen to the customer. Thus, I went out with the team and listened to customers. None had either the software of an IBM nor the vision of an IBM. Kraft, for example, saw a potential for food distribution but it would require a massive change in what they did and how they did it. Costly as well. Thus in 1985 there was no market for data terminals sans the rest of the foods chain.

Thus, in 1990, when asked to sell data on the NYNEX network I fell back onto the adage, listen to the customer and in 1990 the customer was still not yet there. It would take another 20 years, namely now!

Thus the FCC's plans makes many assumptions that we rejected 20-25 years ago. They somehow believe that just having more broadband, albeit cheaper somehow, that they can effect a revolutionary change. Well I hate to rain on their parade but it is an institutional issue, it requires changes all along the food chain, and they FCC is the last place that any rational business person would turn to.

So why are they wasting time doing this? Good question. It just wastes money, which is what Washington seems good at these days! Unfortunately I have that distinct disadvantage of experience, and the folks on K Street and other such places are just reinventing the failures of the past but now with much higher price tags.

So how does this reflect on the FCC plan. Well in several ways:

1. The FCC is Doing Soviet Style Central Planning: Strange as it may seem, that is just what they are doing. Not that they are Communists, exactly, but they are central planners. They believe that they have the light and they are the sole holders of the light and that all should follow. Lawyers, follow lawyers! I think that this is a bit too much even for Washington.

2. The lack of broadband deployment is somewhat of a fiction. We do not all demand 1 Gbps speeds. That is true for two reasons. First most of us, even old folks like me who have been on line since the early 1970s with Unix email do not spend our days with HD video. Perhaps my video conferencing could be a bit better but it works. Second the main problem will be backbone gridlock and costs. The Tier 1 Internet providers still have to be there and get paid.

3. Applications drive the demand. As I discussed with Kraft versus IBM, you need to do something and the field of dreams approach while laudable is without merit. Demand drives deployment, and by that I mean an economic demand, namely someone willing to pay for value delivered.

4. Does the FCC even have the authority to do this? I think not. But that has never stopped politicians before.

So where is all of this going. The FCC Chairman can get before the television audiences and brag about how much they are doing but ultimately it is American industry who has to do the heavy lifting. Even the rather convoluted Broadband gift program may not get one anywhere. In many ways this is still a solution in search of a problem. Take their health care solutions. In 1987 I developed and delivered the first truly network broadband for Medical Imaging. Too early! It still may be too early.

Krugman and Asimov

The New Yorker has an article lauding Paul Krugman. What is most interesting amongst all the praise if the brief description of his addressing a Science Fiction convention and what motivated him to do so.

The article states:

Krugman explained that he’d become an economist because of science fiction. When he was a boy, he’d read Isaac Asimov’s “Foundation” trilogy and become obsessed with the central character, Hari Seldon. Seldon was a “psychohistorian”—a scientist with such a precise understanding of the mechanics of society that he could predict the course of events thousands of years into the future and save mankind from centuries of barbarism. He couldn’t predict individual behavior—that was too hard—but it didn’t matter, because history was determined not by individuals but by laws and hidden forces. “If you read other genres of fiction, you can learn about the way people are and the way society is,” Krugman said to the audience, “but you don’t get very much thinking about why are things the way they are, or what might make them different. What would happen if ?”

With Hari Seldon in mind, Krugman went to Yale, in 1970, intending to study history, but he felt that history was too much about what and not enough about why, so he ended up in economics. Economics, he found, examined the same infinitely complicated social reality that history did but, instead of elucidating its complexity, looked for patterns and rules that made the complexity seem simple. Why did some societies have serfs or slaves and others not? You could talk about culture and national character and climate and changing mores and heroes and revolts and the history of agriculture and the Romans and the Christians and the Middle Ages and all the rest of it; or, like Krugman’s economics teacher Evsey Domar, you could argue that if peasants are barely surviving there’s no point in enslaving them, because they have nothing to give you, but if good new land becomes available it makes sense to enslave them, because you can skim off the difference between their output and what it takes to keep them alive. Suddenly, a simple story made sense of a huge and baffling swath of reality, and Krugman found that enormously satisfying.

This is most likely more telling than any other part of the interview. For those not recently versed in Asimov, he viewed the world of the future as one controlled and managed by a central government. The world is devoid of any entrepreneurs, totally. Hari Seldon creates the field of psycho-history which is macroeconomics and behavioural economics on a super scale.

The world of Asimov is in many ways the world of techno-socialists, and Asimov creates and expands on this world and its implications. He has totally destroyed the world as we know it, capitalism and democracy. It is a world controlled by scientists who all work for the greater good whatever that may be.

Asimov is an intriguing figure. His novels are simplistic, fail to develop characters, yet are crisp and to the point. He is in many ways the last of the early socialists yet he prospered in a highly capitalist society, yet never went far from his nest.

Hari Seldon is the quintessential role model for the self important macro-economists, one who uses the Government and one who has not the single most doubt about their own certitude, and the complete failings of the rest of humanity. Hari Seldon is in many ways why got us all in this mess!

Remember that China is run by engineers and not economists!

Current President's Health Care Proposal

The Current President has released the Health Care Proposal. We will provide an analysis shortly but it is more of what has been seen in the past year.

The first section states:

The President’s Proposal puts American families and small business owners in control of their own health care.

• It makes insurance more affordable by providing the largest middle class tax cut for health care in history, reducing premium costs for tens of millions of families and small business owners who are priced out of coverage today. This helps over 31 million Americans afford health care who do not get it today – and makes coverage more affordable for many more.

• It sets up a new competitive health insurance market giving tens of millions of Americans the exact same insurance choices that members of Congress will have.

• It brings greater accountability to health care by laying out commonsense rules of the road to keep premiums down and prevent insurance industry abuses and denial of care.

• It will end discrimination against Americans with pre-existing conditions.

• It puts our budget and economy on a more stable path by reducing the deficit by $100 billion over the next ten years – and about $1 trillion over the second decade – by cutting government overspending and reining in waste, fraud and abuse.

The second point above is the revival of the Public Option. I guess the wooden stake did not work.

The Health Care Centers, revival of Public Health Systems, is given some prominence as follows:

Invest in Community Health Centers. Community health centers play a critical role in providing quality care in underserved areas. About 1,250 centers provide care to 20 million people, with an emphasis on preventive and primary care. The Senate bill increases funding to these centers for services by $7 billion and for construction by $1.5 billion over 5 years. The House bill provides $12 billion over the same 5 years. Bridging the difference, the President’s Proposal invests $11 billion in these centers.

There is a push for technology as well:

Use of Technology for Real-Time Data Review. The President’s Proposal speeds access to claims data to identify potentially fraudulent payments more quickly. It establishes a system for using technology to provide real-time data analysis of claim and payments under public programs to identify and stop waste, fraud and abuse. (Source: Roskam Amendment offered in House Ways & Means Committee markup)

He seems to have sidestepped the abortion and CER issues. Also there is a wholesale overhaul of Medicare which should be mandated. More later.

The Recession Statistics

The St Louis FED has been providing data on the current Recession as compared to previous ones. They list the Business Cycle peaks as:

United States Business Cycle Peaks:

• November 1948
• July 1953
• August 1957
• April 1960
• December 1969
• November 1973
• January 1980
• July 1981
• July 1990
• March 2001
• December 2007

They also state:

On November 28, 2008, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) declared that a recession began in the United States in December 2007.1 This committee defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.” The U.S. economy has experienced six recessions over the past 40 years. On average these recessions have lasted 10.7 months. The longest recessions— beginning in November 1973 and July 1981—each lasted 16 months. The shortest recession—beginning in January 1980—lasted only six months.

They provide data on several factors during Recessions, average, max and min. We show some of these below:

First, Personal Income has dropped after a significant increase and remains at low levels.



















Second Industrial Production is also low. It is in fact lower than any prior recession. That should be quite worrying and is so since it shows a long drawn out period of low production is expected.



















Third, employment has set and continues to set the lowest level of any recession on the index basis. This is the major concern since this drives the deficit to the greatest degree. There are lower taxes received and greater expenditures on unemployment support. This may also presage a fundamental structural change in the economy.



















Fourth, the GDP has reached a new low but is recovering ever so slightly as shown below:



















Fifth, exports are improving despite the unemployment and lower production on an indexed basis. Perhaps the dollar changes may put pressure on this recovery element in the near term.



















Sixth, imports also show some improvement which is consistent with GDP growth. They are however still well below the peak.

Comparative Effectiveness Research: The Debate Continues

In the NEJM there is an article describing the next steps that are to be taken with CER. They state them as follows:

Institute of Medicine’s Recommendations for a National System of Comparative-Effectiveness Research (CER).

1. Prioritization of CER topics should be a sustained and continuous process, recognizing the dynamic state of disease, interventions, and public concern.

2. Public participation (including participation by consumers, patients, and caregivers) in the priority-setting process is imperative for ensuring that the process is transparent and that the public has input into the delineation of research questions.

3. Consideration of CER topics requires the development of robust, consistent topic briefs providing background information, an understanding of current practice, and assessment of the research status of the condition and relevant interventions.

4. Regular reporting of the activities and recommendations of the prioritizing body is necessary for evaluating the portfolio’s distribution, its effect on discovery, and its translation into clinical care in order to provide a process for continuous quality improvement.

5. The secretary of HHS [Health and Human Services] should establish a mechanism — such as a coordinating advisory body — with the mandate to strategize, organize, monitor, evaluate, and report on the implementation and impact of the CER program.

6. The CER program should fully involve consumers, patients, and caregivers in key aspects of CER, including strategic planning, priority setting, research-proposal development, peer review, and dissemination.

7. The CER program should devote sufficient resources to research and innovation in CER methods, including the development of methodologic guidance for CER study design — for instance, on the appropriate use of observational data and approaches to designing more informative, practical, and efficient clinical trials.

8. The CER program should help to develop large-scale clinical and administrative data networks to facilitate better use of data and more efficient ways of collecting new data to inform CER.

9. The CER program should develop and support the workforce for CER to ensure that the country has the capacity to carry out the CER mission.

10. The CER program should promote rapid adoption of recommendations based on CER findings and conduct research to identify the most effective strategies for disseminating new and existing CER findings to health care professionals, consumers, patients, and caregivers and for helping them to implement changes based on these results in daily clinical practice.

The analysis of these objectives leads to further insight as to where these folks are going. To reiterate, CER, as best as I understand their meaning, albeit inferentially, since one cannot find a delimited definition, it is expansively defined by what it does, a typical Government program, is a Government program targeting clinical studies, with the participation of a broad based of interested parties, who will in some undefined manner develop and recommend, perhaps mandate, clinical procedures related to the delivery of health care to Americans.

Frankly this is the antithesis of how medicine or any science is practiced. Imagine is we have had such a group in physics, chemistry, engineering, a centralized Government entity telling us what the problems are that we should consider and then seeking the input from many third party interest groups who may totally lacking in any expertise and then setting up what the truth is. Would we have an Einstein, a Schrodinger, a Feynman, a Wiener, or perhaps a Banting, where would those ideas come from that were initially non-conformists? Frankly are these people just plain Orwellian!

The authors, clear supporters of this plan, state:

First, the national CER program must develop an overall funding strategy. It could follow the traditional biomedical research model by inviting proposals on any of the 100 high-priority topics and awarding grants to the scientifically strongest proposals. However, the research interests of individual investigators would then define the national priorities. Instead, we believe that the national CER program should decide on a coordinated portfolio consisting of research on priority topics, infrastructure enhancement, and studies of translation and adoption.

Medical research has been around for over a century and it continues to evolve as we learn more. It is iterative and it modifies itself as we learn more. Some studies are well posed at their initiation but flawed by the time they are completed. I come back to the classic prostate cancer studies. They were started when a PSA of 4.0 was considered the gold standard. Over the years we have found that a PSA of 2.0 is as important for a younger man as 4.0 is for an older and also that PSA velocity is more a predictor. It is iterative and in some ways combative. A national CER program is consensus driven, worst of all worlds.

Second, the CER program should establish an initial list of priority topics and evaluate the current state of knowledge about each. For the first of these tasks, it should build on the priority-setting work of the IOM committee. It could develop a portfolio chosen from the top 25 IOM topics by applying the already-published prioritization criteria of the IOM

The portfolio is already there as a matter of ongoing research. Why redo the effort? Is this nothing more than justification for billions of more dollars spent by the Government. The money os spent well now why do we need change.

Third, the CER program, with the help of expert advisory committees and the research community, should choose the research methods that will fill gaps in the evidence for a specific topic. In an investigator-initiated research program, the grant applicant typically chooses the methods. The cost of studies using the methods of CER (whether clinical trial, observational study, or qualitative research) varies widely.

Evidence is always changing. Back to my prostate example. We know also that 5-10% of prostate cancers are highly aggressive. The question is why? Perhaps the four or five gene hits, ultimately knocking out PTEN, leads to the aggressiveness. Perhaps many men have genetically had the hits and they are predisposed, possibly there are epigenetic factors as well. These are the issues we should be working on, and these are the issues which the highly motivated and competent researchers are already working on. Why do we need another group? That question has never been answered. Perhaps to create approved methods to just "kill of the old folks" and replace the "death panels" with "death procedures".

Fourth, the program should strive for a balanced portfolio of high-impact research topics. Although it could simply rank topics in order of importance and fund them in ranked order until the money ran out, we recommend developing a portfolio that addresses a balanced distribution of topics, outcomes, and target populations, as well as keeping the total portfolio cost within budget and producing a body of evidence sufficient to influence health care decisions.

The nature of the portfolio changes as we learn more each step. Dynamic portfolios are common in the way we do research now. The "hot topic" appears and researchers follow the path. Having a bunch of Government chart preparers do this is frankly insane!

Fifth, the CER program should evaluate progress and report to the public. To meet this obligation, it should do large-scale, ongoing observational research and evaluation to measure CER’s effects on clinical practices and patient outcomes.

This I really do not understand. Medical research is always publicly available, NEJM is on line, as is JAMA and the list continues. Clinical trials are an every day affair, just read NEJM and JAMA and the hundreds of other journals. So what is the point? Just spending more money.

The only possible reason for CER is Government control. Control over what the Government will pay for and worse the control over what physicians can do. This is not the code of civil procedure used in Federal Courts, this is science, and as such changes. Having the Government as the regulator of change is not just stupid it is immoral.

Medicare: Facts or Confusion

The Republican Blogger and former Bush White House adviser, Keith Hennessey, has written the following:

Medicare spending this year will be $516 billion. Seniors will pay about $78 B in premiums, and taxpayers will pay the other $444 B, making it the second largest item in the federal budget after Social Security (at about $700 B). The taxpayer cost of Medicare is projected to grow about 6.6% per year over the next decade, while the economy is projected to grow 4.5% per year over the same time period. If the projections are right, our economy will grow 54% (in nominal dollars) and Medicare will grow 89%. The cost to taxpayers will grow from 3% of GDP to 3.5% of GDP. (All data is from CBO.)

Now let us go back and deal with a few facts. He states that the taxpayers will pay the remaining amount. Excuse me Mr Hennessey, but Medicare Recipients had already more than paid their total share for years! It was the 3% Medicare Tax, and perhaps you have forgotten that Sir! Now it is not like me to rant at Republicans, but alas this is a Bush Republican, and they seem to have been a bit, shall we say, less than top rate, not that the current Democrat batch is anything to write home about either.

You see folks, you and I and all others who have worked and the few of us who have built business that have put people to work, and yes I have done that too, have, since 1968, paid out Medicare Insurance payment religiously every year! That was in anticipation of drawing down on that payment. It was not a tax, and those paying in now should be considering it as their future benefit. Hennessey, in my personal opinion in a grossly misleading manner, appears to attribute the Medicare tax as a tax on the current taxpayers to pay for the benefits for those on Medicare. No Mr. Hennessey, those on Medicare contributed their fair share and much more and you politicians confiscated that money along the way and spent it on programs to maintain yourselves in office.

So let me stop ranting and deal with facts.

1. The following chart depicts personal income annualized by month since January 2007. We can see the dip due to the Recession and we further see the recovery at the end of the last President's term. Slow and steady, it is recovering. Yet it is not yet where it was at the peak on an annualized basis.



















2. The number of Medicare Recipients are shown below for the same period. Note that they are increasing. This is nothing new and it is pure demographics.



















3. The following are the total Medicare Receipts annualized. Here one must be a bit careful. Hennessey seems to state that one is a tax, the 3% of gross income and the other is what Medicare Beneficiaries pay, the $100 per month. In reality the Medicare beneficiaries have been paying for 40 plus years the 3% of their gross income before they received dollar one. Either they get credit for that or perhaps the Government would like to refund their payments with interest! Hennessey seems to deny the existence of this FACT! Perhaps it is statements of the type he makes that have gotten us in this mess in the first place.



















4. We now show the total Receipts and the total Outlays, each annualized by month. Now we see a gap. Outlays are growing greater than Receipts. Why? Two fold answer. First, Gross Personal Incomes are down due to the Recession, and that is the prime driver. Second, as we stimulate the economy, the stimulus seems to be SEIU directed, thus actually driving up health care employment and in turn costs! We demonstrated that in a earlier posting. The current Administration is drawing people from the ranks of private commercial employment and placing funds into union controlled cost increasing elements. Thus, the double whammy to Medicare. This is a "Government caused" problem, and perhaps Mr Hennessey should have the insight to see that and state it as such!



















5. The annualized Medicare current account deficit is shown below. The issue is then how does the Government cover this? The Democrats proposal is to cut the payments to the providers. Unfortunately the physicians do not belong to SEIU and those who do have unbreakable contracts. So what happens is we drive the best physicians out of Medicare and leave the dolts to care for the old too poor to pay for it themselves. I really love Democrats, don't we all.



















6. So what can we do? The chart below makes a few suggestions. We look simply at raising the Medicare tax from 3% to say 4% and then to 5%. It is logical to pay for what you will get.



















And what do we see? Well 4% breaks even assuming minimal recovery from the Recession, and 5% actually creates a surplus. So what should we do with a surplus. Well again this is an insurance plan, not a piggy bank, and it should be saved and invested prudently, perhaps buy some Chinese debt, just kidding.

The Hennessey article raises many truly concerning and disturbing issues which we have tried to highlight here. The debate on Medicare will go into full swing shortly and both sides want to take a whack at it. Perhaps we need a voice of truth somewhere who can at least do a back of the envelope analysis.

Let me reiterate my conclusions:

First, there is a mind set in Washington amongst both parties that Medicare is being paid on an as is basis and that past payments into this insurance plans do not count. Namely those who are reaching 65 now contribute only what they do in the current year and the past 40+ years of contributions count for nothing. That is a bald face falsity. This was set up as an insurance plan and any insurance company who ran it this way would be bankrupt, alas the Federal Government is going that way.

Second, making Receipt and Outlays balance should not be placed solely on the shoulders of those who paid in. Namely the answer is not just reducing payments and thus care. That is a breach of contract. The alternative is a balanced plan of increasing the Medicare Fee, delaying Medicare eligibility, and using some form of means testing, namely making the fee per month dependent on income.

Third, Congress at some point should be prohibited from absconding with funds earmarked for special purposes, Social Security and Medicare. That is the prime cause for all the current problems.

Fourth, Congress and its erstwhile Stimulus is in and of itself a cause of the increase in health care costs by driving up spending on health care. It is a deadly cycle they are creating and it appears as if it will just get worse.

Fifth, there must be some intelligence in Washington to look at simple set of numbers, ascertain the problem, suggest a solution and explain it simply! But alas that may be an ever unfulfilled hope!

Debt and Thomas Paine

Some thoughts from Thomas Paine and Common Sense:

Debts we have none: and whatever we may contract on this account will serve as a glorious memento of our virtue. Can we but leave posterity with a settled form of government, an independent constitution of its own, the purchase at any price will be cheap. But to expend millions for the sake of getting a few vile acts repealed, and routing the present ministry only, is unworthy the charge, and is using posterity with the utmost cruelty; because it is leaving them the great work to do, and a debt upon their backs from which they derive no advantage. Such a thought's unworthy a man of honour, and is the true characteristic of a narrow heart and a piddling politician.

The debt we may contract doth not deserve our regard if the work be but accomplished. No nation ought to be without a debt. A national debt is a national bond; and when it bears no interest, is in no case a grievance. Britain is oppressed with a debt of upwards of one hundred and forty millions sterling, for which she pays upwards of four millions interest. And as a compensation for her debt, she has a large navy; America is without a debt, and without a navy; yet for the twentieth part of the English national debt, could have a navy as large again. The navy of England is not worth at this time more than three millions and a half sterling.

It is always worth a thought in light of the most recent Romer comments:

"I think when we're through this, when scholars actually sit and look at this, they will say, 'My goodness, look at all of the trajectory, look at where we were going, my goodness, it would have been dramatically worse [without the stimulus],' " Romer said Friday....Romer said frustration partly stems from the fact that Americans haven't been able to compare the current economic situation to one that would have been more dire if the stimulus hadn't been enacted.

"We're inherently in the world of the counterfactual, right? We know we're still losing jobs; [the] unemployment rate has gone up steadily. In that world, if you ask people, 'Are things working?' they say, 'God, no, things aren't working,' " she said.

Asked why the public hasn't supported Obama like they did with President Franklin Roosevelt after his New Deal efforts to combat the Great Depression, Romer noted that people had been "suffering like crazy" for the three years before Roosevelt took office.

"At some level, they had seen the counterfactual, they had to see what happens when you don't do something," Romer said. "I think this unbelievable sense of relief that someone was doing something did keep them with [Roosevelt] for a while."

I know Thomas Paine, Thomas Paine is a friend of mine, and Ms. Romer you are no Thomas Paine.

Another Look at the Employment Stats

The recent monthly data on employment is often quite cumbersome to go through for a variety of reasons the most significant being that the Labor Department only issues it in pdf format which takes hours to convert to Excel format. It is straightforward yet time consuming.

Now to the most compelling chart seen below. Here we depict the annualized rates of change of Government, Education and Health Care and Manufacturing. It is clear that we are starting to pull out of the dip even in January 2009, which was the lowest month. That being the case the White House assertions to the contrary, we have looked at prior recessions and it appears that there is reason to believe that the actions of the White House may actually have prolonged this one, yet not deepened it. The Romer analysis of over a year ago is what most likely started all of this off since she appeared to conform her report to purely political ends. Thus the chart below is one of key importance.



















Now the following two charts show the division of labor between January 2007 and January 2010. The first is the 2007 baseline as shown below.



















Second we have 2010 below and clearly we see the growth of Government and Health Care and Education.



















We now show the employment in the key sectors over this period by month (in 000s).



















Goods Producing and Trade, the core elements of the economy, show drops which are dramatic but Government and Health Care and Education continue to grow. This should be of great concern because this is the first time in our economy that Goods Producing ever was less than Government and Ed & HC! We now have less people creating value than spending its rewards! This very fact should be of monumental concern to the people!

At the other extreme where utilities and the like reside the chart below shows the results:



















In all there has been some decline but not to the extreme we have seen in core business.

The conclusions are quite clear:

1. The turn started at the end of the last administration.

2. The actions of the current administration may not have improved things they may very well have prolonged them

3. The loss of manufacturing base and the expansion of government means that we have less people working making things than we have government employees regulating them! We are becoming Greece and we know where that goes.

A Challenge for Google, or Someone Else

There is a statement I have paraphrased frequently which is; the question is more important than the answer. Posing the right question often is what leads scientists to finding really interesting facts. Posing the right question helps on getting the best out of a PhD thesis.

In reading Mankiw's blog I found him saying at the end:

Here is a project for some ambitious blogger: Go to old ERPs, which list the CEA members and staff, and collate them with data on citations. That would provide one way to judge objectively (albeit imperfectly) the quality of CEA economists over time.

This is a brilliant question, not necessarily for the purpose for which he apparently set if forth, which was interesting in and of itself. The reason I think is is important is that it would be great if you could ask this question of say Google. The question is a simple and elegant example of the next step in search. We know that the lists of economists are somewhere in a text, and frankly I just want the list, and we know that the citations are somewhere if we have the names, just look at his link, and we know how we want the data presented, number of citations per year, or in some similar manner. These meta objects of search can be readily identified, culled, sorted, cross referenced and then given as the desired result.

At the other extreme try getting economic data from many Government Department web sites, you are lucky if it is in pdf format and then you cut and paste. The St Louis FED is a God send but they are not really Washington types.

So if anyone at Google is listening, there is most likely some computer type, one of my great great great student descendants solving this problem now, all they have to do is monetize it!

Do Macro Economists Have a Clue?

The Hill reports today:

Christina Romer, chairwoman of the president's Council of Economic Advisers, said the stimulus that pumped about $800 billion into the economy has been an "unsung hero of the past year." Roughly 700,000 jobs were lost monthly before the stimulus was passed in February 2009, far more than the 69,000 jobs lost per month during the last quarter of 2009, the report noted.

The problem is that her January 11, 2009 report from the soon to be White House was so far off that there is zero credibility from anything she says. In addition her January 11, 2009 report contradicts the reports she and her husband had published just a year earlier. At what point do facts count?

Romer also published a report today discussing the economy. Here is what she touts as acomplishments:

Working with Congress, we have already achieved a great deal. The extension of the Children’s Health Insurance Program will bring coverage to as many as 4 million more children. The Recovery Act provided support for unemployed workers to help them maintain health insurance benefits and made pioneering investments in health information technology, health centers, and research into which treatments are likely to work best. Both houses of Congress have passed reform legislation that would do so much more to slow the growth rate of health care costs, and make insurance coverage more secure for those who have it and affordable for the millions of Americans who do not. Successful completion of reform legislation is essential to our long-run economic prosperity, taming our government budget deficit, and making American families more secure in their health insurance coverage.

In fact the economy was failing due to the collapse as perceived of the financial institutions and the housing market. Frankly little has been done to restart housing other than taking over Freddie and Fannie. It is still stalled. Wall Street on the other hand has recovered as evidenced by the re-institution of their bonus pool, built on free money from the FED. The Congressional Health Care Plans create massive Government controls over health care, evidenced by the Comparative Clinical Effectiveness fiasco! And Romer considers this progress. At what point does an honest macro economist say that they really do not have a clue! Perhaps Diogenes would never have found an honest one.

Google and Fiber

In writing this I feel like the French after leaving Indochina telling the Americans that they are getting themselves into a swamp. You see we tried exactly what Google wants to do albeit with much less cash. We did have RUS backing, and even there we did not take a penny, because the swamp pulled us down before we had a chance. We started this broadband project after having achieved success in eastern Europe, in over a dozen countries. Yet nothing could prepare us for the towns, the very thing which makes America, can break America, they control the cable franchise boards. The River Styx is a better vacation spot!

Now on to Google, but remember we have the distinct disadvantage of experience.

Google today announced its intent to build fiber to the home in selected communities. They are asking for responses'

Specifically they state:

Google is planning to launch an experiment that we hope will make Internet access better and faster for everyone. We plan to test ultra-high speed broadband networks in one or more trial locations across the country. Our networks will deliver Internet speeds more than 100 times faster than what most Americans have access to today over 1 gigabit per second, fiber-to-the-home connections. We'll offer service at a competitive price to at least 50,000 and potentially up to 500,000 people.

From now until March 26th, we're asking interested municipalities to provide us with information about their communities through a Request for information (RFI), which we'll use to determine where to build our network.

This is an interesting move. The question still is, what business is Google in and what business do they think they are in?

Adding a FTTH operation takes their Android gPhone and expands its to FTTH, a fixed platform. How does none monetize this opportunity, triple play, triple play plus.

If Google wants to "own" the customer, does this play into that hand? How would this change the value of Google as a stock and how much would this cost.

Here is what they say:

Our goal is to experiment with new ways to help make Internet access better, and faster for everyone. Here are some specific things that we have in mind:

• Next generation apps: We want to see what developers and users can do with ultra high-speeds, whether it's creating new bandwidth-intensive "killer apps" and services, or other uses we can't yet imagine.
• New deployment techniques: We'll test new ways to build fiber networks; to help inform, and support deployments elsewhere, we'll share key lessons learned with the world.
• Openness and choice: We'll operate an "open access" network, giving users the choice of multiple service providers. And consistent with our past advocacy, we'll manage our network in an open, non-discriminatory, and transparent way.

Like our WiFi network in Mountain View, the purpose of this project is to experiment and learn. Network providers are making real progress to expand and improve high-speed Internet access, but there's still more to be done. We don't think we have all the answers – but through our trial, we hope to make a meaningful contribution to the shared goal of delivering faster and better Internet for everyone.

This will be interesting to follow. It is also interesting that they are where we were almost ten years ago when we looked at municipal fiber. We detailed what their goals are over seven years ago, Also our town network plans detail what they are seeking. It is always good to see that it just took them eight years. Good luck!

I have read that cities like Seattle are interested also suggested was Cambridge, Mass. Well I do not know Seattle well, but we did the plan for Belmont, Mass, the town adjacent to Cambridge. We did it assuming cooperation with the power company. Even than it was a stretch. As for those Vermont towns, again we did many there and in New Hampshire and Massachusetts, walked every street, mapped and photographed every pole, spoke to thousands in determining interest, well those Vermont towns are good for cows but not economical for fiber.

And oh by the way, remember the franchise, some town cable board head will want your first born! We wrote extensively about the franchise problem. It is really an untenable issue that Goggle is lacking knowledge of. Will Goggle get a franchise. Yes, they will get it! All at a price, welcome to politics.....but you will learn that first hand I surmise.

And one last comment, my Indochina metaphor forgot the Vietcong, in this case they are the cable companies. If one thinks they will sit by and do nothing when this represents a clear and present danger then Google must truly be dreaming. The Vietcong won the War by tactics that just wore away their enemy. Add to that the NVA, the fortified war hardened troops from the north, and you will have a very formidable enemy. They will track you through the jungle, follow you through the tunnels, and you have little chance of winning. History has many repeats, and one should learn.

Krugman and the Stata Center

The MIT Stata Center is the leaky and poorly laid out center for Electrical Engineering and Computer Science at MIT. It is in reality two divided towers, one for Computer Science and one for the more analytical EE studies. Of course the sides never really meet as was the intent. As they say, Function follows Form, or whatever.

Paul Krugman gave a talk there last week on economics. It was reported on in the MIT news and I comment briefly here. One is struck by the contrast of location since the Economics Department is located way across Campus and the only thing on the first floor of Stata worth the interest is the Day Care Center. One can see a great deal of symbolism in all of these items.

Now to Krugman. He states:

“In the Dark Ages, people forgot what the Greeks and Romans had learned.” It is an analogy Krugman favors these days when he thinks about his own profession. “We’re living in a dark age of macroeconomics,” Krugman said during his lecture, before an audience of several hundred students (and several of his former MIT colleagues) in the Stata Center. “Economists themselves are confused,” he added. “It’s been really amazing within the economics profession to see how much has been lost.”

One can immediately see that Krugman has limited historical knowledge. For example if one looks at the 7th Century, one sees Columbanus, the Irish scholar, founding dozens of schools, teaching Latin, Greek, Hebrew, and Aristotle and the other classics. The schools of Columbanus ranged from France, through Germany and down to northern Italy. They prospered and lasted quite a while. Further to the east we had the Library of Alexandria, which lasted until destroyed by the onslaught of the Arabs as they worked their way west to Spain. Yet even there they were again rebuilt at Cordoba and others sites. Isidore of Seville during this Dark Period drew together his great encyclopedia. There was a great deal of intellectual thought. Perhaps not what Mr Krugman would value however.

Krugman continues:

Thus Krugman believes the United States has benefited from the $787 billion federal stimulus package that was signed into law in February 2009; it consisted of a combination of spending programs on things like infrastructure, education and research, along with some state aid and tax cuts. Although unemployment has risen from 8.2 percent when the stimulus was passed to 9.7 percent today, Krugman thinks the legislation helped alleviate the recession’s effects. “We would probably have 12 percent unemployment in the U.S. if we didn’t have the stimulus,” he said. Yet the seemingly long odds against additional government spending are leading Krugman to think we may well be headed for a double-dip recession — the contemporary counterpart to the slump that occurred in 1937, just as the U.S. economy was recovering from the worst of the Great Depression.

It is not at all clear that the benefit was what he believe it was. Again as we have said monthly, the Romer data was never satisfied, we overshot on unemployment, yet did not exceed the level of the early 1980 Recession that resulted from Carter. Will there be a double dip, one thinks that given the confusion from Washington that there very well may be, and a significant one at that. The dip due to Washington's actions, or resulting confusion, rather than a dip due to Washington inaction.

He then comments on the efficient market theory, or hypothesis, as follows:

Additionally, Krugman thinks, efficient-markets ideology has allowed many misconceptions to flourish, including one he has frequently written about — the notion that government spending crowds out private investment, which Krugman believes to have been refuted long ago. “There are insights that have been hard-won, but they were hard-won 70 years ago, and were lost in the interim,” he told the MIT audience.

As to Government spending crowding our private investment, one need look no further than the current shabby state of the venture community. When the Government drives trillion dollar plus deficits one asks where does the money come from, it comes from sources which could place it in non-Government investments. Why do the investors choose that path, because of the anticipated uncertainties the Government has thrown in front of private investments, from taxes to fees to restrictions to overall market uncertainty.

Krugman goes on to say:

"By avoiding utter disaster,” Krugman said, “we’re avoiding looking at our own failings.” Referring to Ben Bernanke, chairman of the Federal Reserve, Krugman offered, “I have a high regard for my former department chair [at Princeton], but I’m not sure the fact that the world didn’t end is enough reason to make Ben Bernanke [Time magazine’s] Man of the Year.”

Perhaps he regrets that he was not man of the year! This comment has been made by him several times now and frankly it is in my opinion in poor taste, but one supposes he must say something.

Krugman ends his talk with one suspects is his form of humor:

As Krugman made clear, he does not expect that current policy stasis to change any time soon. Winding up his remarks, Krugman paused, looked down at the podium, then sized up the audience again. “I left a little [space] in my notes here that says, ‘Come up with something optimistic to say at the end,’” he remarked as the audience laughed, “but I don’t have anything.” Call it black humor for the new dark age.

The optimistic view is that we can and must reduce the debt exposure. There are many ways to do this, but simplicity and clarity of purpose are essential.


















That is what seems to be lacking in Washington, and in Princeton, in my opinion.