Archive for the ‘Economics’ Category

Too Much Broccoli

March 28, 2012

Leading up to the Supreme Court hearings on the Healthcare Reform Bill there was a lot of reference to broccoli:  “If the government can force you to buy health insurance, why can’t they force you to buy broccoli?”  OK, so that was the question of partisans and pundits.  When the issue reached the supreme court it would be pursued at a whole new level, right?  No, wrong!

Yesterday, more than one judge raised this naive question about the mandate that each citizen is responsible for securing insurance to cover their own health needs.  I could not believe that the judges themselves would pursue the broccoli question.  Let me explain.

While in college I learned the maxim: “To distinguish well is to teach well.”  (I think this maxim was attributed to Thomas Aquinas.)  I would expect not only educated citizens to be capable of distinguishing well, but also judges on the Supreme Court.

Let’s take a look at broccoli, a simple commodity available in the produce department of supermarkets.  Broccoli is just one vegetable among many through which certain food values can be acquired when it is eaten.   Since it is only one vegetable among many, I can make an unforced decision to buy it.   My decision can be determined by market factors: what is the demand for broccoli?  what is the price of broccoli? or, by a simple taste test: am I hungry for broccoli, do I like it?  When broccoli is on sale, I am inclined to buy it.  When the price is up I am more likely to buy lettuce, cabbage, or spinach.

Now let’s take a look at health insurance.  First, there should be no doubt that everyone at some point in their life will need healthcare.  This need while inevitable is unpredictable, and meeting this need is very expensive.  The need for healthcare can only be met by checking in with the health care system.  While there are some market factors that will govern my choice of which providers and services I will be using, there is no option as to whether I will or will not take advantage of one of these options  (unless I simply allow myself to become less and less healthy, and eventually, bring about my own death by carelessness.)  This is a first major distinction between health care and broccoli.  I have much less choice as to whether I will receive health care, and I do not know of any case in which the failure to eat broccoli by itself can lead to death, whereas the failure to receive timely health care can.

Second, when I receive healthcare, I will be billed for it.  But the bill will not simply be a function of the current market for the healthcare that I received.  The price will be affected by my need to make a contribution to the development and maintenance of a healthcare system through which I receive the particular healthcare that I need.  That contribution will be needed to cover the cost, for example,  of the education of doctors and nurses, the cost of facilities including hospitals, and the cost of very expensive diagnostic equipment and laboratories.  Even if I do not make use of these each time that I draw on healthcare services, I make some contribution to some portion of these costs.   The price will also be affected by another important variable–the growing number of persons who can not pay for healthcare, yet receive it, and do so at the expense of all of those who can pay for it.  This is another major difference between health care and broccoli.  When I buy broccoli, that is what I am basically paying for, or not paying for, depending upon the purchase price.  By the way, I know this price before I ever put the broccoli in my cart.  When I go in for healthcare, I am altogether clueless as to its ultimate cost.  That is still another difference.

Finally, because the bills for healthcare are large and unexpected, about the only way that anyone can manage the payment of these costs is through securing insurance.  That statement is just as true whether I have insurance or not.  If I have insurance, I hope to be able to manage the cost of my healthcare.  If I do not have insurance, I may not be able to pay my healthcare costs, or these costs may  bankrupt me, or both.

So given these distinctions, why are we talking about broccoli? In particular, why is broccoli being discussed at the supreme court?  Sadly, I fear it is the consequence of two things.  First, we can never discuss any issue these days without polarizing the issue within the frame of our current politics.  This leads to gross oversimplification of issues, as well as an excessive use of rhetoric.  Secondly, it is a reflection of our lack of humane and/or moral sensitivity.  We forget that there are millions of Americans who cannot afford healthcare, and who daily forgo its benefits, or receive it without the capacity to pay for it.  In either case, these Americans do not have access to the same health care that is received by those who are insured.  Rather they receive healthcare sporadically, and without regard to their overall state of health.

As the judges weigh the issues of  the healthcare reform bill and the mandate which it includes for personal responsibility for the purchase of health insurance, they would do well to remind themselves that there is on way to interpret the Constitution by considering only the words which it contains.  If they know very little about contemporary theories of language, they will still know that the meanings of words are not something which are attached to the very words.  The meaning of words depends upon their use in a much broader context, including the whole “system” of behavior of humankind.  Given the comprehensive context in which any text must be interpreted, the justices will do well to weigh carefully the consequences of their decision.  A question for all of us to consider is whether once they have weighed in with their decision they will still be worthy of being called “justices”, or whether they will simply be politicians holding a different title.

Whose in charge?

June 16, 2010

Last evening the common response of those commenting on the President’s speech was distress that he had not really made it clear to the American public that he was in charge of the oil spill and of recovery from it.  This view of things began approximately one to two weeks after the spill began.  Initially, most folks recognized that it was BP that had caused the spill, and therefore, it was BP that was responsible for capping the spill and cleaning up after it.  

 But when time went on and the oil kept gushing from the well and spreading out over the Gulf the entire development came to be perceived as a national catastrophe which the federal government was responsible to manage, including stopping the gushing and spearheading the recovery.  The fact that the spill continues and that at best the recovery only drags along leads folks to charge the president with a failure of leadership in handling this crisis.

To charge the President with a failure of  leadership in this crisis is at best naive, and at worst downright perverse.  It is naive if it fails to recognize the controlling realities that give shape to this crisis.  It is perverse if it undermines such leadership as the President is providing and deflects public attention away from those controlling realities.

The controlling realities are:

first,  that the crisis was created by a private coroporation, BP, that put a higher premium on earning profits for shareholders than on looking after the safety of its workers and the reduction of the risks surrounding its activities;

second, that neither BP (nor any other oil companies)  have developed technologies or protocols for addressing the possibility of  failures such as that of  the Deep Horizon well and the potential aftermath that would follow from such failures;

third, that whether the federal government should or should not have anticipated such failures and developed the necessary technologies and protocols for addressing them, this was never on any politician’s agenda, nor were the American people pressing the government to do so;

fourth, that any extant technology for adressing well failures or spill recovery is owned and under the management of BP, and by extension other oil companies and related industries;

fifth, and most importantly, were the President to insist that he is in charge, and to claim that he was taking charge, this would in effect shift responsibility from BP to the federal government, even though the federal government as such was powerless either to cap wells, or to put in place the equipment and operations necessary to contain the spill;

sixth, if from the outset the President had insisted on being in charge of capping the flow and containing the spill, he would have committed political suicide;  much lesser agressive measures relative to the nation’s financial institutions and the major automobile industries have led to charges as extreme as socialism and nazism.  The President is accused by all of his opponents of exceeding the limits of reasonable federal power.  What would they have thought if he had in fact taken control of BP, which would have been the only way that he could have effectively taken control?

It is time to recognize that we all share in the consequences of the gulf catastrophe and that it is, therefore, in our mutual interest to support  the President in his efforts to hold BP accountable and responsible for both capping the well and cleaning up the mess.  The President should not take charge of a situation created by private industry and for the resolution of which private industry holds all of the available technology and equipment , however inadequate that technology and equipment may be.

So who is whining?

July 24, 2008

Recently, a top economic advisor to the presumptive Republican nominee indicated that the perception that the American economy is in trouble is psychological, rather than an objective indicator of the state of the economy, that the fundamentals of the economy are sound, and that the American people are just a bunch of whiners.  This should not have come as a surpise.  President Bush has consistently maintained that the economy is in good shape, and John McCain himself indicated only a few months back that he thought that most Americans were better off than they had been at the beginning of the Bush presidency, and that the economy was doing well.

So if Americans are really whiners, who is doing the whining?  Oops! Maybe that is the wrong question.  We should be asking who has been helped economically by Republican policies, and who has been hurt. The key policies in question are, first, the unfettered operation of a global free market.  The Bush administration has been a strong supporter of free trade, and has not set down any preconditions for free trade.  Specifically, the present administration has not addressed the working conditions, or the wages and benefits paid to workers, or the levels of government subsidy of manufacturing in countries with whom trade is being carried out.  American companies have been free to establish plants in other countries with no accountabiliy to the federal government with respect to these matters.  Nor have any expectations been set forth to other governments for their native industries whose goods are finding their way to US markets.  Moreover, many American companies have created a legal fiction that their headquarters are in some low tax overseas locality in order to avoid the payment of taxes in the United States.  Such policies have indirectly put the American worker in the position of having to accept lower wages and fewer benefits when it has seemed important to keep American industries competitive with those in other countries.  

Secondly, the policies of Republican administrations, as well as the Democratic administration during the Clinton years, have inclined toward deregulation.  Historical regulations of the creation of secuirities as well as of the trading of commodities have been set aside.  This has led to such practices as the bundling together of loans that are then sold as securities, although the loans may not be well secured.  It has also led to extensive trade in commodities by persons who are not in the supply and demand chain of those commodities, but are interested in no more than buying and selling futures with no interest in ever receiving delivery of those commodities, in other words, speculators.  These are just two practices that have contributed to current economic problems.

Thirdly, Republican administrations have consistently pressed for tax cuts which benefit large investors such as reductions in capital gains as well as the general lowering of tax rates on high end incomes.  While middle class workers have received some reduction in their taxes as well, the greatest beneficiaries of the Bush tax cuts have been for those in higher income brackets. 

In any capitalist economy there are investors and there are those whoe livelihood depends on the prodction of goods or the provision of services.  Investors make their living by risking their capital by purchasing shares in companies that provide goods and services.  Providers of goods and services make their living by their labor whether mental or physical.  To be sure, to the extent that providers of goods and services own shares in pension funds, or have their own IRA they are also among the investors.  It is clear that all of the Bush economic policies have favored the investors, rather than the providers of goods and services.  Republican policies have resulted in the creation of jobs domestically.  But they have also had two results which adversely affected the providers of goods and services.  First, they have resulted in the massive movement of manufacturing jobs, as well as many service jobs, overseas.  Secondly, they have driven down wages and benefits for those working in the United States. 

So if there is whining going on, it is far more likely that those who primarily depend for their livelihood on making investments are the ones who are whining.  They are whining because there are circumstances that have made their life more difficult–a credit crunch, the decline in the value of the dollar (although that benefits those selling goods and services in foreign markets), foreign competition, inflation, the possibility of higher interest rates, etc., etc.  As for those who depend for their livelihood on the provision of goods and services, it is clear that the policies that have favored investors have hurt those who live by the value of their labor.  Average, middle-class white collar, or blue collar workers, are not whining.  They are reeling from the consequences of the reduced value placed on their labor even as the prices which they have to pay for goods and services are rising rapidly.

Hello World!

July 17, 2008

First, let me extend a welcome to any reader who is interested in serious (but, hopefully, at times, humorous) discussion of issues in philosophy, religion, or politics.  Philosophy is the discipline through which I prepared for my career.  I have strong avocational interest in religion.  And I have spent the last four years completing an unpublished book on American politics entitled “Beyond Polarization.” 

As a senior citizen I can not recall a time when my concern for the future of the country has been greater.   Over the last forty years,  as both parties became less pragmatic, and more ideological in their focus, American politics has become very polarized.  During this period of time, very serious problems have developed which need to be addressed.  The United States has not adjusted to the free market global economy.  While both political parties have been supportive of a free market approach and for less regulation, neither party has addressed the negative consequences that have resulted from this approach for large segments of the American population.  The gap between wealthy Americans and those living in poverty has grown larger with fewer Americans falling in between.  The Social Security System will be facing major problems when large number of baby boomers begin to retire, but no political solution has been found.  The number of Americans without adequate health care insurance is approaching 50 million.  For those Americans who do have health care coverage, the cost of that coverage is escalating at an unsustainable rate.  The nation is facing a growing energy crisis as the demand for oil increases around the world, and the per barrel price of oil moves toward $150.  Major concerns are developing concerning the environment.  The American education system at the elementary and secondary levels is falling behind in the global context.  All of these problems are recognized by both political parties, but very little progress has been made   To the extent that the problems facing the nation cannot be addressed through the political process, that  process has become dysfunctional. 

Another sign of the dysfunctionality of the American political process is the struggle over the appointment of judges to the Supreme Court.  At this point the most significant variable in the appointment of these judges is their ideological stance.  Their position on a specific set of issues has become a litmus test for their appointment.  Their experience and qualifications as lawyers and judges has become less important. 

A final evidence that the U. S. political process has become diysfuncitonal is that because the two parties are polarized by ideological differences, it has not been possible for the two parties to work together and to compromise their respective positions so as to arrive at pragmatic solutions.  Historically, compromise has been the key to working toward the solution of problems through the US political process.  But with ideological differences being assigned the relative importance which they have for both parties, compromise has been out of the question.

One sign that ideology is at the heart of the current polarization of the political process is the role that religion has come to play in American politics.  Christian conservatives believe that America has been formed in a covenantal relationship with God to serve as a beacon on a hill to all the other nations of the world.  They believe that the founders of the nation were Christian, that the American Constitution rests on Christian principles, and that it is legitimate to use the political process to impose these principles on all Americans.  The traditional separation of state and church implied in the non-establishment clause has been challenged by Christian conservatives.  And in the most recent primary season candidates stumbled over one another to make public their allegiance to the Christian faith in spite of the fact that the Consititution includes the specific prescription that there shall be no religious test of office.  A major problem for Obama has been created by a minority of Americans who are convinced that he is Muslim.  This problem has been addressed by Obama and his defenders by repeated insistence that he is a Christian.  The sad part about this is that even if he were Muslim, this should not stand in the way of considering him for public office. 

It is my intention to use this blog site to explore issues in philosophy, religion, education, and politics in the hope of assisting others to move beyond polarization toward a pragmatic and effective political process.

Economics and Education

July 15, 2008

When those who support a global free market are asked whether the United States can maintain low unemployment with so many manufacturing jobs being shifted overseas, the usual response is affirmative.  That affirmative answer depends in part on the transformation of the American economy from a manufacturing economy to a service economy.  It depends further on the belief that in a service economy a higher level of skill is required for most jobs than is the case in a manufacturing economy.  Higher levels of skill require more education.  American success, especially, in the area of post secondary, or higher education, is in part responsible for the transformation of the economy to a service economy.  It also holds the key to the future growth and development of the American economy. 

Those public figures who make a more realistic assessment of American education. may be somewhat less confident about the future success of the American economy, especially, in sustaining low unemployment.  Alan Greenspan, e.g., believes that the American economy can be successful as long as there is a well-educated work force.  He recognizes that the American educational system, especially, at the elementary and secondary levels is not being successful at the present time.  He basis his hopefulness on the capacity to attract an educated work force from other countries.  To the extent that the success of the American economy depends upon attracting educated workers from other countries, there may be huge segments of the American workforce that may end up unemployed because of their lack of the higher order skills on which a successful service economy ultimately depends. 

Before taking a look at education in the United States it is important to recognize that, presently, the expansion of jobs in the service sector that require less skill will not solve the problem of unemployment for many American citizens.  This can be seen by reflecting on the immigration debate.  Those politicians defending temporary work permits for immigrants often argue that the presence of these immigrants in the workforce is necessary because American citizens will not work in the jobs that immigrants typically fill.  This claim overlooks two major realities.  First, the nature of the jobs being filled by immigrants is not a fixed pool..  Over the past ten years immigrants are seen doing more and more jobs beyond those which they were filling ten years ago.  Ten to twenty years ago immigrants were most frequently observed working in agriculture.  Today immigrants can be observed working in restaurants, engaging in domestic work, and more importantly, filling positions in the construction industry.  What is of interest with respect to all of these positions is that prior to their being filled by recent immigrants, they were routinely filled by American citizens with varied racial and ethnic backgrounds.   The second reality overlooked by those defending temporary work permits for immigrants is that If these jobs are no longer appealing to the American citizens who previously held them, it is because the wages and benefits associated with these jobs have dramatically declined.  One cannot sustain even a modest lifestyle for a family on the basis of the compensation received for these positions.  Immigrants are able to sustain a lifestyle by having multiple families occupy the same household and pooling incomes, as well as by working multiple jobs. 

It should be noted further that the development of a service economy with jobs requiring higher levels of skill will not automatically result inthe availability of more jobs in the United States.  Many service sector jobs for which higher levels of skill are needed are being shipped overseas along with manufacturing jobs.  This is true for many jobs in the area of customer service, computer technology and programming, and in such business functions as accounting. 

But is it possible that through education a sufficient quantity of jobs in the service sector can be created to assure that there will always be jobs available in the United States both for those with lesser skills, and those whose skills can only be developed through post-secondary education?  An affirmative answer to this question depends on the effectiveness of the American educational system.

So how effective is the American educational system?   The National Center for Educational Statistics has reported the following trends in high school education:

[NCES publishes an annual report that allows readers to compare dropout rates over time (McMillen et.al., 1994)].

1.    Nationwide, dropout rates have declined during the last decade:

·        The status dropout rate for 16- to 24-year-olds declined from 14.6 percent in 1972 to 11.0 percent in 1992 and 1993;

·        The event dropout rate for ages 15 through 24 in grades 10 through 12 has fallen from 6.1 percent in 1972 to 4.5 percent in 1993; and

·        The cohort rate [3] for students who were sophomores in 1980 and dropped out between grades 10 and 12 was 11.4 percent, while the cohort rate for a comparable group of 1990 sophomores was 6.2 percent.

 

2.    Even though the rates are declining, they still represent a large number of people. In 1993, approximately 381,000 students in grades 10 through 12 dropped out of school, and approximately 3.4 million persons in the United States ages 16 through 24 were high school dropouts.

3.    Dropout rates are about the same for males and females, but the rates are not the same for students from different ethnic groups or different income levels. In general, rates are higher for minority students and students from disadvantaged backgrounds. The 1993 status dropout rate was:

·        7.9 percent for white students, compared to 13.6 percent for black students and 27.5 percent for Hispanic students; and

·        2.7 percent for students with a high family income level, compared to 23.9 percent for students with a low family income level.

 4.   Rates for American Indians and Alaska Natives are quite high, while those for Asian-American students are quite low.  The dropout rate is greater in cities than in other locations, and is highest in the West and South (OERI 1993).

              

Education has been seen as a prerequisite to getting a job.  Education has been seen as the key to assuring that even as lower skilled manufacturing jobs shift overseas, the American workforce will have sufficient knowledge and skill to qualify for higher-skilled jobs, primarily in the service sector.  To this end, the federal government with the support of both parties has strongly supported two forms of post-secondary education: education that focuses on vocations or careers that involve primarily technical skills, and traditional college or university education leading to professional degrees, or liberal arts degrees that can be utilized to achieve appropriate employment. 

Both parties have emphasized teaching and learning in the schools and the need for accountability for both teachers and students.  Achievement levels have been set and frequent testing has been introduced.   Administrators, too, have had their feet held to the fire.  Under the No-Child-Left-Behind Act, entire schools are threatened with a loss of federal support if they are not effective in educating students.  Here and there one can find evidences of some improvement.  Democrats have continued to stand behind the public school system and have supported the provision of the necessary financial resources to fund improvements in facilities, in technology, and in the compensation of teachers.  Republicans have inclined toward taking a market approach to education, offering parents a choice among the public schools in their districts, as well as offering a choice among private schools by means of a voucher system. 

The drop-out rates, especially, for inner city schools, completely undermine the strategy of using education as a door to opportunity.  The situation is compounded by the lack of preparedness of students who do graduate from high school for college level work.  A recent report indicated that half of the students currently entering the nation’s colleges and universities require remedial work.  The failure of the educational system to provide graduates not only of high school, but also of college, with the necessary knowledge and skills for better paying jobs, mostly in the service sector, thwarts the nation’s strategy for keeping the United States economy competitive in a global, free-market economy. 

It is easy enough under such circumstances to cast about looking for persons and institutions to blame.  More recently, Democrats have joined Republicans in stressing the importance of the family, specifically, of parents in working toward the success of schools.  Both parties have emphasized the need for transmitting moral values and developing character through such institutions as the family, the church, and also the schools themselves.   But the schools themselves, administrators and teachers (and the National Education Association, the teachers’ union) have been assigned most of the blame for what many readily describe as the failure of the schools. 

There is, however, a reality with which both parties need to come to terms.  There is an inverse relationship between the expectations that are directed toward schools and the capacity of schools to meet those expectations. As the expectations directed toward schools have increased, the capacity of schools to meet those expectations has declined.  For example, for the past forty years the schools have been the battle ground for combating racial discrimination.  Schools and the children attending them have been expected to achieve a level of integration which the parents themselves have been unwilling to achieve in their own personal lives, and especially, in their neighborhoods.  Schools are expected to feed children who come to school hungry, to provide hygiene and health care for those children who have no support for or access to these through their homes.  It has become the responsibility of the schools to prevent very young children from coming to school with loaded fire arms, or with various illegal drugs in their possession.  It has become the responsibility of schools to provide personal counseling to students who come from homes and neighborhoods in which there are repeated patterns of irresponsible and sometimes violent behavior, or homes from which a parent, or parents, are missing.  It has become the responsibility of schools to care for children before and after school while a parent, or both parents, are working.  There is nothing pertaining to the total experience of the child for which some expectations are not directed toward the schools.  In an urban school system millions of dollars are spent on the retention of a school police force to assist in maintaining discipline. In these schools there may be more social service providers than teachers.

The families and the neighborhoods from which the children come to urban, intercity schools are not looking for the government to intervene and begin to control their lives and the lives of their children.  It is far better for many of the problems of the inner city to be addressed by those living there, and for the solutions to the current problems surrounding the lives of children to be developed by the family and neighbors of those children.  But some government initiatives and some government funding may be needed.

It should also be pointed out that inner cities and urban school systems are not the only contexts in which the circumstances described are to be found.  Increasingly, similar problems are to be found in suburban and small town and rural communities.  Columbine High School which witnessed one of the worst events ever to occur in a school was a suburban high school.  In all of these contexts the expectations being directed toward schools go far beyond the qualifications, experience, and resources of those responsible for education.  Simply throwing programs, especially, federally-developed programs at cities, suburbs, towns, and neighborhoods will not solve the complex problems to be found in these places.  The problems in society—in cities, suburbs, towns, and neighborhoods—will not be solved without government funding, but this funding should not take the form of simply throwing large sums of money in the direction of problems in the hope that somehow they will be solved.   For the problems that stand in the way of schools carrying out their proper functions simply to be discovered and addressed, not to say, solved, there needs to be immense involvement of citizens, families, religious institutions, voluntary associations, and as an initiator and facilitator, government, especially, local government, with financial support from the state and federal governments.  But it is time for practical politics to enter the scene, for ideological critiques of the American social order and the endless playing of the blame game to be set aside.  The pubic interest in education must be at the front of center stage.   Partisanship needs to give way to rolling up the shirt sleeves and getting down to hard work.