Fiscal Cliff

[kenberg]

VSP=Very Sick Person?

 

 

I have been very lucky with my health but perfection is only for the gods so I recently got some generic medication. Price to me: $20. Actual price: $500. Well, I say "actual price" but of course I haven't a clue about what the actual price is. I have a piece of paper saying the actual price is $500. I do not know who gives what to whom, I just fork over $20 and get my medicine. There are a lot of us Medicares out there and believe me, I am very far from being the most in need of meds. I can see how this might run up a bill.

 

 

I have more health insurance than I can understand, I just give them some plastic, so I am not at all sure that the remaining $480 is totally picked up by Medicare. But that may not be the main point. Part of the problem must be that because it gets almost entirely paid for by some someone somewhere somehow, I have no motivation to ask if the charge is reasonable. I would like to think someone is motivated to do so, but I am at a loss to say who that might be.

[phil_20686]

In a shockingly mundane twist, respected economist continues to bang on about the blindingly obvious, while politicians insist that with only a little more persuasion, reality will take their side.

[mike777]

The concern is and has always been that central govts cannot be trusted when it comes to medical innovation if you take away free capitalist markets in health care.

 

 

It looks like Western Europe does not share this concern.

[dwar0123]

The concern is and has always been that central govts cannot be trusted when it comes to medical innovation if you take away free capitalist markets in health care.

 

 

It looks like Western Europe does not share this concern.

It will take a lot more then central government oversight to overcomes people desire to innovate how not to die.

[mike777]

It will take a lot more then central government oversight to overcomes people desire to innovate how not to die.

 

 

ok it sounds like you are not concerned if there are not free capital markets in the health care industry when it comes to innovation.

 

What do you propose if anything?

 

---

 

 

btw just to be clear the concern is not that innovation will drop to zero.

[awm]

ok it sounds like you are not concerned if there are not free capital markets in the health care industry when it comes to innovation.

 

What do you propose if anything?

 

---

 

 

btw just to be clear the concern is not that innovation will drop to zero.

 

It's important to keep in mind that these four are actually different industries:

 

(1) Drug Industry

(2) Medical Technology

(3) Health/Medical Insurance

 

Innovation in the first two of these is really critical and what leads to improved lifespans and quality of life. No one is seriously suggesting nationalizing these industries; government has some role in protecting patent rights in a reasonable way and measuring/testing product safety, but otherwise the free market should rule.

 

Innovation in the third of these is almost always detrimental to the citizens, because it generally involves finding legal loopholes to deny paying for life/health services to people who really need them. Further, economies of scale are hugely important in the insurance business, such that a very large organization (typically a government) can do a better job than a private insurer. A "free market" doesn't even really work here, because small "innovative" startups cannot compete (due to economy of scale) with large monopolies. Virtually every "civilized" country has acted to nationalize this industry.

[kenberg]

It seems that one thing, perhaps the only thing, that gets widespread agreement is that we simply cannot afford the ever increasing costs of health care. I think this inevitably leads to some really tough choices. We now can do many really good things for patients but these really good things cost a lot of money.

 

I'll spare you the details, but the $500 prescription I refer to above is really important to my health. I don't take $500 out of the petty cash drawer, but if I had to pay it myself, and it will be repeated every three months, I would do so and I would not need to take out a loan or cut back on wine. But some people are financially worse off, and medically they are much worse off. The expenses are far higher, and they do not have it.

 

If anyone thinks the answers are obvious, I think that they need to think a little harder. Meanwhile, I am pleased to be paying $20.

[phil_20686]

If anyone thinks the answers are obvious, I think that they need to think a little harder. Meanwhile, I am pleased to be paying $20.

 

If you come to western Europe you will discover that the obvious solution really does work pretty well.....

 

Nationalising healthcare does not mean nationalising the pharma industry - it just means there is a little more discretion in deciding which drugs one actually buys.

 

Its true that in a National Healthcare there are limits on what care you can receive, but the reality is that you will almost never come up against them before you are in the last year of life. Paying £100,000 a month to extend the life of a 80 year old for six more months really doesn't make sense.

 

Paying £100,000 a month to extend the life of a thirty year old parent with young kids really does make sense.

 

Most insurance policies in the US have much worse limits than the NHS in practice, either because of diseases that they will not treat, or because of high excesses, which can essentially prevent poorish people with health insurance from receiving relatively cheap care.

 

Look down the world life expectancy charts:

 

1)Japan: universal healthcare

2)Israel: universal healthcare

3)Italy: universal healthcare

4)Australia: universal healthcare

5)Spain: National Health Service

 

In fact, ignoring small countries (less than 1 million persons), every country in the top fifteen has universal healthcare funded by the government, now, there is some variety among how you actually do it. For example, israel still has a private insurance sector, it is just compulsory to have health insurance, but most of them are just single payer systems. Sometimes with some copay.

 

Single payer systems are just better, and in life, just keep aiming for better, and leave perfection to those poor fools who think it is achievable........

[phil_20686]

ok it sounds like you are not concerned if there are not free capital markets in the health care industry when it comes to innovation.

 

 

btw just to be clear the concern is not that innovation will drop to zero.

 

There is very little evidence that capital markets are any better at allocating capital to R&D projects than governments. There is quit a lot of evidence that capital markets are better at taking a functioning idea and turning it into a consumer product.

 

I mean, can you imagine a modern corporation funding basic research at all? Real game changing inventions have always come out of the blue, and almost never from corporations.

 

I am going to list a bunch of inventions, and you pick the one whose invention was funded by the capital markets:

 

(1) The transistor

(2) LED

(3) Light bulb

(4) Electricity generators

(5) Touchscreen

(6) The internet

(7) Universal Logic Engine (i.e. a computer)

(8) Pneumatic tyre

(9) Universal Joint

(10) Superconductors

(11) Nuclear Fission

(12) Nuclear Fusion

(13) Lasers

 

Its a trick question, these were all inventions that came out of publicly funded research. Pretty much the only exception was the telephone. And that was really only an incremental improvement over the radio. Capital markets are great for making incremental improvements to existing tech, but terrible for funding speculative research.

[Winstonm]

There is very little evidence that capital markets are any better at allocating capital to R&D projects than governments. There is quit a lot of evidence that capital markets are better at taking a functioning idea and turning it into a consumer product.

 

I mean, can you imagine a modern corporation funding basic research at all? Real game changing inventions have always come out of the blue, and almost never from corporations.

 

I am going to list a bunch of inventions, and you pick the one whose invention was funded by the capital markets:

 

(1) The transistor

(2) LED

(3) Light bulb

(4) Electricity generators

(5) Touchscreen

(6) The internet

(7) Universal Logic Engine (i.e. a computer)

(8) Pneumatic tyre

(9) Universal Joint

(10) Superconductors

(11) Nuclear Fission

(12) Nuclear Fusion

(13) Lasers

 

Its a trick question, these were all inventions that came out of publicly funded research. Pretty much the only exception was the telephone. And that was really only an incremental improvement over the radio. Capital markets are great for making incremental improvements to existing tech, but terrible for funding speculative research.

 

The old Bell Labs would have a quibble or two with your claims.

[dwar0123]

(3) Light bulb

(4) Electricity generators

 

Ugh, I agree with you, but I can't help myself.

 

I think you listed light bulb instead of telephone.

 

Also, I thought electricity generation was also done by Edison.

[phil_20686]

Ugh, I agree with you, but I can't help myself.

 

I think you listed light bulb instead of telephone.

 

Also, I thought electricity generation was also done by Edison.

 

The light bulb was not invented by Edison, but by the chemist Warren De La Rue, about 1800. Edison turned it into a consumer product forty years later....

 

The dynamo is normally attributed to Faraday.Supposedly the first dynamo actually built was commissioned by Faraday from his violin maker, but that might just be legend.

 

Telephone was very definitely a commercial invention, but it was also something that was a relatively small step from radio. It was just about getting it sensitive enough to carry voice rather than just beeps of a telegram.

[dwar0123]

The light bulb was not invented by Edison, but by the chemist Warren De La Rue, about 1800. Edison turned it into a consumer product forty years later....

 

The dynamo is normally attributed to Faraday.Supposedly the first dynamo actually built was commissioned by Faraday from his violin maker, but that might just be legend.

 

Telephone was very definitely a commercial invention, but it was also something that was a relatively small step from radio. It was just about getting it sensitive enough to carry voice rather than just beeps of a telegram.

Edison improved both to the point that they became commercially viable. He didn't take an existing commercial product and incrementally improve it. He took a commercial non entity and made them a commercial success.

 

Regardless, even if we discount Edison, the earlier research and development of both products was not government funded, so far as I know.

[phil_20686]

The old Bell Labs would have a quibble or two with your claims.

 

Bell labs was a fairly unique place. They closed it down only in 2008 I think, "to focus on more immediately useful research" or some such. A lab that had more nobel prizes than most famous universities (seven Nobel prizes).

[phil_20686]

Edison improved both to the point that they became commercially viable. He didn't take an existing commercial product and incrementally improve it. He took a commercial non entity and made them a commercial success.

 

Regardless, even if we discount Edison, the earlier research and development of both products was not government funded, so far as I know.

 

This isnt right. Its not like they had "grants" per se, but warren de la rue, and Faraday were faculty at English universities. Also, Edison's venture to market electric lights (eventually) failed because he based it on DC rather than AC currents. Famously, Edison invented the electric chair as a marketing stunt to show how much safer DC was. lol.

[y66]

Changes in life expectancy between 1960 and 2010: Canada, Cuba, UK and US.

[dwar0123]

This isnt right. Its not like they had "grants" per se, but warren de la rue, and Faraday were faculty at English universities. Also, Edison's venture to market electric lights (eventually) failed because he based it on DC rather than AC currents. Famously, Edison invented the electric chair as a marketing stunt to show how much safer DC was. lol.

You are nitpicking.

 

Everything fails(eventually) and it was privately funded research and development that led to a commercial product, even if it was incrementally improved and supplanted upon by Westinghouse shortly thereafter.

[phil_20686]

You are nitpicking.

 

I am nitpicking? You questioned my list claiming the light bulb was invented by Edison, which it wasn't, you also claimed that edison invented electricity generation, which he didn't, then you claimed that earlier work on the lightbulb wasn't government funded, when it was, and then you claimed that edison turned it into a commercial product when his company failed.

 

Since the first incandescent filaments making better ones has been a product of trial and error to get longer lasting filaments. Its not rocket science! It has continued with marginal improvements right up to the present day. Filament lamps now last tens of thousands of hours, when once they lasted only a few hundred.

 

Obviously Edison made some pretty huge contributions, but he was not primarily responsible for either the light bulb or electricity. Unlike, say. the duplex telegraph, and the phonograph, which were definitely his almost from scratch. I mean I think he has like 1000 patents or something.

[phil_20686]

There is quit a lot of evidence that capital markets are better at taking a functioning idea and turning it into a consumer product.

 

 

it was privately funded research and development that led to a commercial product, even if it was incrementally improved and supplanted upon by Westinghouse shortly thereafter.

 

It seems like you are saying exactly what I said: remind me again what we are arguing about?

[mike777]

What is the fiscal cliff?

 

The fiscal cliff is an inapt metaphor for the looming consequences of some very bad congressional decisions.

 

On or around Jan. 1, about $500 billion in tax increases and $200 billion in spending cuts (see table 1) are scheduled to take effect. That’s equal to about four percent of GDP, which is, according to the Congressional Budget Office, more than enough to throw us into a recession (more on that later).

 

 

Data: Economic Policy Institute

 

Analysts disagree on exactly how quickly the recession would begin. That’s why the “cliff” metaphor is inapt. If financial markets freak out, it might happen very quickly, proving the “cliff” imagery correct. But it might happen gradually, affirming those who’ve argued it’s a “slope.”

 

Either way, both parties agree it shouldn’t be permitted to happen at all. But that’s the rub. The reason that the fiscal cliff could push us into another recession in 2013 is because it enacts too much deficit reduction upfront, not too little. And yet, deficit reduction is something that most members of Congress support, at least in the abstract. So both sides want to replace the fiscal cliff with…something. The question is, with what?

 

What is the fiscal cliff in one sentence?

 

Much too much austerity, much too quickly.

 

 

 

http://www.washingtonpost.com/blogs/wonkblog/files/2012/11/cliff-by-cost1.jpg

[dwar0123]

No matter what I say as regards to whether or not Edison did any innovative research, you will nitpick about irrelevant details that have no bearing on the topic.

 

It doesn't matter that Edison wasn't personally commercially successful, his research led to commercial success.

 

I have no idea how research was funded at English Universities back in the day, but when I think of government funded research, I think of the government funding someone for a specific result, not funding someone for whatever they happen to want to work on.

 

We seem to have a different idea on what the word innovation means.

http://en.wikipedia.org/wiki/Innovation

[mike777]

So many want to cut the budget but 200/B in 2013 is too much.

So many want to increase revenue but 500B in 2013 is too much.

 

deficit for 2013 is around 900-1000B

 

Just what is the right amount in 2013?

----------

 

----Krugman in the past has said we didn't have a short-term deficit crisis and we should focus on creating more near-term demand via larger stimulus packages. But he has said we have a long-term deficit problem that needs to be addressed. However, his column today is straight out of Modern Monetary Theory, which calls for as much deficit spending as necessary, for as long as necessary, to provide for strong economic growth. Followers of Modern Monetary Theory believe that since the U.S. federal government can print money and can never go bankrupt, that fiscal policy should be focused only on economic growth and inflation and not on the status of the debt. It remains unclear if Professor Krugman has now partially adopted their viewpoint or fully adopted their viewpoint. Either way, Krugman has called for a fundamental re-thinking of the direction of the fiscal cliff talks and fiscal policy.

 

http://seekingalpha.com/article/1029601-paul-krugman-s-call-for-re-thinking-the-debt-and-deficit-crisis

 

----

 

 

What has changed? For one thing, the crisis they predicted keeps not happening. Far from fleeing U.S. debt, investors have continued to pile in, driving interest rates to historical lows. Beyond that, suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much. For that’s what the “fiscal cliff” — better described as the austerity bomb — is all about: the tax hikes and spending cuts scheduled to kick in at the end of this year are precisely not what we want to see happen in a still-depressed economy

 

http://www.nytimes.com/2012/11/26/opinion/krugman-fighting-fiscal-phantoms.html?_r=1&

[mike777]

Another viewpoint from Eugene Fama:

 

Litterman: What impact will the big expansion

in the Federal Reserve’s balance sheet have on the

markets?

 

Fama: It has basically rendered the Fed powerless

to control inflation. In 2008, when Lehman

Brothers collapsed, the Fed wanted to get the markets

moving and made massive purchases of securities.

The corollary to that activity, however, is

that reserves issued by the Fed and held by banks

exploded. An explosion in reserves causes an

explosion in the price level unless interest is paid

on the reserves. So, the Fed started to pay interest

on its reserves, which means that the central bank

issued bonds to buy bonds. I think it’s a largely

neutral activity.

Before 2008, controlling inflation was a matter

of controlling the monetary base (currency plus

reserves). But when the central bank pays interest

on its reserves, it is the currency supply that determines

inflation. But banks can exchange currency

for reserves on demand, which means the Fed cannot

control the currency supply and inflation, or

the price level, is out of its control. The Fed had the

power to control inflation, but I don’t think it does

under the current scenario.

 

 

Litterman: How does that relate to the debt

issues that the United States is facing?

 

 

Fama: The debt issues are entirely different.

The debt issues are about how much we want to

sacrifice the future for the present and whether we

get anything in the present for the future we’re sacrificing.

This has been the big debate between the

Keynesians and the non-Keynesians since 2008.

 

 

Litterman: But isn’t one way out of our debt

problem to inflate it away?

 

 

Fama: Yes, that’s one way to handle it, but it’s

far from a great solution. If the Fed were to stop

paying interest on its reserves, we’d probably

have a big inflation problem. The monetary base

was about $150 billion before the Fed stepped in

in 2008. Currency plus required reserves are still

in that neighborhood, but the Fed is holding $2.5

trillion—trillion!—worth of debt financed almost

entirely by excess reserves. The price level could

expand by the ratio of those two numbers, and that

translates into hyperinflation. Economies typically

do not function well in hyperinflation. The real

value of the government debt might disappear, but

the economy is likely to disappear with it.

 

 

Litterman: What would your suggestion be for

monetary or fiscal policy at this point?

 

 

Fama: Simple. Balance the budget. I heard a

very prominent person say in private that we could

balance the budget by going back to the level of

government expenditures in 2007. The economy

is currently about the size it was then. If you just

rolled expenditures back to that point, I think it

would come close to balancing the budget.

 

http://www.cfapubs.org/doi/pdf/10.2469/faj.v68.n6.1

[ArtK78]

As long as I have been able to understand the meaning of the U.S. Public Debt, the number has been astronomical. In the 1960s the amount of the Public Debt dwarfed any other number which had any meaning. And yet, looking back on those numbers, they seem insignificant to the current amount of the Public Debt.

 

So, what has been the consequence of the massive amount of the U.S. Public Debt over the last 50 years? Virtually nothing.

 

I completely ignore the amount of the debt. If anyone were to ask me about the massive amount of debt that we are putting on the shoulders of our children and grandchildren, my response would be that I am sure they will muddle through somehow.

[mike777]

Interesting that given the current economic climate the discussion comes down to:

 

1) greater deficit spending will lead to riots in the streets and a collapse of inv and savings or hyper inflation.

2) greater deficit spending will lead to a thriving economy.

3) neutral, virtually nothing.