Thursday, May 24, 2012

Leveraged Buyouts and Local Timber

Here in Southern Oregon, the timber industry used to be undisputed king.  Locally, thousands of jobs depended on logging, trucking and milling.  Then in the 1980s most of the jobs dried up.  Those of us who were here were pretty sure we knew why:  it was those darned environmentalists and that silly spotted owl.  Wasn't it?

Actually there were two factors that decimated timber jobs, neither of which received much attention at the time.  The first was exports.  From the late 1970s until the late 1980s, a decade when jobs in the industry declined, timber harvests actually went up.  Here's the data on employment by county (Source):

Oregon timber employment fell from 81,376 in 1978 to 69,473 in 1988.  At the same time, timber harvests actually increased from 8 to 9 billion board feet.  What was happening?  We were still harvesting, we just weren't milling and mills closed down.  Logs were heading straight for the port of Coos Bay for Asian markets.  And why did this change?

It changed not just because prices were higher in Asia.  It changed particularly because locally-owned mills and timberlands were bought out by investment firms, firms much like Bain Capital.  Many of these were hostile takeovers that happened when mills were struggling to make money but still owned vast assets, primarily standing timber.

I remember local headlines regularly about this local timber business or that one being swallowed up -- usually in leveraged buyouts -- by companies in Texas, Arkansas and Colorado, companies that had no vested interest in our community.  Tax laws in the 1980s became very favorable to this sort of buyout; timber profits were subject only to the 15% capital gains tax rate, could write off equipment purchases long before they fully depreciated and, if they formed certain timber partnerships, could avoid corporate taxes all together.  (Source)

When we talk about leveraged buyouts, understand that what's being leveraged is the company being bought out.  To purchase a local timber business, a buyout firm could mortgage the local business to pay for its purchase.  To make a quick profit, sell off the assets -- the timber on company lands -- and then close or dump the company.  Typically the investors were able to reap a quick and handsome profit without ever investing in the business.  The timber alone was worth more than the buyout price.  Then sell to the highest bidder, Japan.

Contrast this with the local family businesses -- Rough and Ready Lumber, Glendale Forest Products and others -- who lived and participated in their local communities.  Yes, they were interested in harvesting timber from federal forests and certainly they had differences of opinion with local environmentalists.  But what was different -- what was healthy for our communities -- was that these businesses were actual job creators, actual contributors to community efforts, actual supporters of our schools and local development.  Milling the timber harvested locally is a world away from loading logs on an outbound steamer.

When I hear talk of leveraged buyouts, I don't think about corporate offices in Boston or how wealthy some Harvard grads became.  I think about my neighbors and the good manufacturing jobs that used to support their families.

Friday, May 18, 2012

The Simple Math of Medicare for All

Yesterday I had a discussion with a friend about Medicare.  I commented how superior my husband's new Medicare coverage was to my own employer-provided plan.  I then suggested that we needed to find ways to cover everyone, not just those over 65, with Medicare.  She responded appropriately, "but how would we pay for it?"  

Okay, so I'm a few years late with this post.  It could have come in the midst of the debate over "Obamacare", as his critics dubbed it.  But this has been simmering, bubbling up in my skull, since then.  I wanted to take the simplest possible look at government-provided health care:
  • How many Americans already get their health care from government?
  • What is the average cost of that to government?
  • What obvious savings are possible to increase the size of the pool?
  • How much more would it cost to increase the pool, providing basic coverage to all who want it?
This comes with the assumption that such coverage would be better than and less expensive than private insurance.  Some of that is explained in my previous post, Privatizing Medicare?  Already Done

I didn't want to complicate this simple arithmetic with the other issues that many espouse to reform the system:  overturning fee-for-service, supporting preventive care, making doctors public employees or other more complex factors.  I just chose to look at the simplest of the data about our current system.

Who Government already Covers

47.7 million Americans are covered by Medicare
53.6 million Americans are covered by Medicaid
5.5 million children are covered by CHIP
17 million people work for government (national, state and local).
          The average family size in the US is 3.14 people.  Since government plans typically cover whole families, that means 53.4 million Americans are covered by private employer-provided insurance policies paid for by government.
2.3 million prisoners are covered by prison-provided health care
1.5 million Americans are active duty military
1.5 million Americans are in the military reserve forces and receive medical benefits
7.8 million military veterans receive federal  medical benefits

Total Americans already covered by government-provided health benefits:  173.3 million

Total U.S. Population:  312.8 million

Clearly, government already provides health coverage for well over half of Americans.

Cost of Government-provided Health Care

Interestingly, Americans likely to have the most complex health needs are already covered by government.  The elderly, prisoners, soldiers and the very poor all suffer a disproportionate share of maladies.  Those left -- the other 140 million -- include the healthiest Americans.

Costs by program:

Cost per Person
Individual Contribution
(25% of all expenditures are for end-of-life care)
Varies by state
Children's Health Insurance Program (CHIP)
Varies by state
Government Employee Plans
(e.g. Oregon state workers)
0% - 30% of plan costs

Soldiers and Veterans
$230 per person for veterans

Some Obvious Places to Save

There are two Medicare costs, both created by the 2003 health care bill signed by President Bush, that could be eliminated, substantially reducing per person costs:
  • Medicare Advantage:  Overpayments for these government transfers to private insurance companies cost an extra $1000 per person.
  • Prescription Drug Subsidies: These cost $62 billion per year or $1300 per Medicare beneficiary.
Eliminating both of these overly generous and unnecessary subsidies would save $2300 per person per year.  Medicare beneficiaries could still choose to purchase these benefits on their own from private insurance companies.  Actual Medicare costs per person with these savings and with the costs for end-of-life care subtracted (these are unique costs for the elderly not borne by other programs): $5350 per person

The U.S. incarcerates more citizens than any other nation, including China.  Our rates of incarceration have increased astronomically since 1970, the beginning of the War on Drugs and especially in the 1980s as sentencing laws became stricter in the states.

The costs of keeping all of these prisoners certainly includes their health care but total savings, if we simply cut the numbers of prisoners in half (to 1990 levels) would be $24 billion.

What Would it Cost to Cover Everyone?

There are 50 million uninsured Americans.  There are just under 90 million covered under private insurance plans, either through their employers or paid directly to insurance companies.  Most of these plans carry high deductibles and high out-of-pocket expenses.

The average private employer pays $5000 per covered employee or $12,000 for family coverage (2005 data).  As of 2006, only 55% of private sector workers had employer-provided plans.  

Offering coverage similar to Medicaid or Medicare might cost the same as those programs, about $5500 per year.  On the other hand, it might cost less if the population left to cover were younger and healthier, as it most likely is.  But let's use the $5500 figure for the adults and the CHIP cost of about $1500 for children (26% of population).

Cost to insure 139 million additional people: 
  • $550 billion for the adults
  • $52 billion for the children
  • Total cost:  $602 billion per year WITH NO OTHER COST-SAVING MEASURES
Where the money could come from:
  • $101 billion = savings identified above
  • $325 billion = current employer contributions 
  • $167 billion = $100/month contribution from each of the 139 million people
These three simple things would nearly cover the entire additional cost.  But I think employers (businesses) are unnecessarily burdened for health care costs.  I would cut their contributions severely, to perhaps $100 billion.  So we need to "find" $234 billion and everyone in the country would have adequate coverage, not dependent on employers and not prohibitively expensive.  Of course, some might choose to maintain their private insurance instead, an option they certainly could have.  Most I suspect would not.

My choice would be to make corrections to the tax code to fill the need.  You might prefer another solution.  In any case though, it's hard to argue that we can't cover everyone.  We clearly can.

  1. 55% of Americans already have government-provided health benefits.
  2. $5500 is the typical per-person cost of that care, EXCEPT when the government contracts with private insurance companies (as for government employees and Medicare Advantage), which makes coverage much more expensive.
  3. Both Medicare and our criminal justice systems could offer up substantial savings and we are overpaying for medical coverage for the 17 million government employees. 

Thursday, May 10, 2012

Is Romney a Sociopath?

This morning's Washington Post broke a troubling story, told by Mitt Romney's prep school colleagues.  Romney led a gang of bullies who assaulted a presumed gay student while Romney cut off the boy's hair.  When asked about it, the former governor seemed not to recall the incident, though the other boys involved had been troubled by it the rest of their lives, some contacting the victim years later to apologize.

When the story broke, my husband used the word 'sociopath' to describe the presumptive GOP presidential candidate.  I had to check.

Let me review here the characteristics of a sociopath.  These characteristics came from "Profile of the Sociopath", which I have quoted gratefully below (in orange).  These descriptions were posted in 2003, so are in no way crafted with Mr. Romney in mind.

Glibness and Superficial Charm -- What do you think?

Manipulative and Cunning -- Look not just at this incident, but Romney's history at Bain Capital and the way businesses, their employees and managers, were also victims.

They never recognize the rights of others and see their self-serving behaviors as permissible. They appear to be charming, yet are covertly hostile and domineering, seeing their victim as merely an instrument to be used. They may dominate and humiliate their victims.
Grandiose Sense of Self -- Certainly his Republican primary opponents, both in 2008 and 2012, described him this way.
Feels entitled to certain things as "their right."
Pathological Lying -- The Etch-a-Sketch candidate may actually be the epitome of pathological lying.  No position has staying power and whatever wins him short-term gains flows easily from his mouth.
Has no problem lying coolly and easily and it is almost impossible for them to be truthful on a consistent basis. Can create, and get caught up in, a complex belief about their own powers and abilities. Extremely convincing and even able to pass lie detector tests.
Lack of Remorse, Shame or Guilt -- Here is where Romney's initial reaction to being confronted about this incident is most troubling.  Cruelty in adolescence is less the concern than lack of remorse.
A deep seated rage, which is split off and repressed, is at their core. Does not see others around them as people, but only as targets and opportunities. Instead of friends, they have victims and accomplices who end up as victims. The end always justifies the means and they let nothing stand in their way.
Shallow Emotions -- This is his greatest weakness as a campaigner, feigned attempts at empathy like "I'm unemployed too" and "the trees are the right height here".
When they show what seems to be warmth, joy, love and compassion it is more feigned than experienced and serves an ulterior motive. Outraged by insignificant matters, yet remaining unmoved and cold by what would upset a normal person. Since they are not genuine, neither are their promises.
Incapacity for Love -- No evidence.

Need for Stimulation -- No evidence.
Callousness/Lack of Empathy -- This behavior was evident in spades in the reports of Romney's classmates, but may also describe his tenure at Bain.
Unable to empathize with the pain of their victims, having only contempt for others' feelings of distress and readily taking advantage of them.
Poor Behavioral Controls/Impulsive Nature -- The jury is still out.
Early Behavior Problems/Juvenile Delinquency -- Clearly the case.
Usually has a history of behavioral and academic difficulties, yet "gets by" by conning others. Problems in making and keeping friends; aberrant behaviors such as cruelty to people or animals, stealing, etc.
Irresponsibility/Unreliability -- Leveraged buyouts -- Romney's prime concern at Bain Capital -- were in the business of decimating company coffers, laying off employees and undermining contracts, all for investor profits.
Not concerned about wrecking others' lives and dreams. Oblivious or indifferent to the devastation they cause. Does not accept blame themselves, but blames others, even for acts they obviously committed.
Promiscuous Sexual Behavior/Infidelity -- No evidence.

Lack of Realistic Life Plan/Parasitic Lifestyle -- Not likely.
Tends to move around a lot or makes all encompassing promises for the future, poor work ethic but exploits others effectively.
Criminal or Entrepreneurial Versatility -- Most definitely prone to changing his life story whenever convenient.
Changes their image as needed to avoid prosecution. Changes life story readily.

The jury is still out and I'll leave it to psychiatry to evaluate Governor Romney according to the new DSM V (not yet out).  But I'm personally quite troubled by the parallels Mr. Romney shares with the majority of these sociopathic traits.

Will the GOP have to abandon its front-runner and bring in a ringer to stand for election in 2012?

See also:  The Case for Obama

We Are the 48%

Occupy Wall Street's We are the 99% slogan came under prompt fire from conservatives.  Conservatives branded Occupy protesters as jealous and discriminatory toward wealthy Americans.  We should be trying to emulate the 1%, some said.  Don't hate me because I'm successful was candidate Romney's spin.  Claiming the inclusive position, the GOP countered with We are the 100%.

Liberals answered that it wasn't about hating the rich.  The protests were to draw attention to the abuses of power on the part of the richest of the rich, more like the .01%.  The economy's crash in 2008, the banks' stonewalling of Dodd-Frank, Citizens United and the millions flowing from billionaires into campaign coffers -- those were the targets of the protests.  But the slogan did say 99%, so let's give conservatives this point:  Occupy excluded 1% of Americans.

Kudos to conservatives for being so inclusive.  I assume that means they will no longer demonize...

The 4% of Americans who identify as LGBT.
The 3% of Americans who are undocumented.
The 12% of Americans who are members of trade unions.
The 17% of Americans receiving public assistance.
The 12% of Americans who are atheists or agnostics.
The 1% of Americans who follow Islam.
The 3% who have had abortions in the past 10 years.  
 Otherwise, I'm afraid they'll have to proudly proclaim...