Friday, March 29, 2013

What does “the Pursuit of Happiness” mean?

You may have missed it, but we recently celebrated World Happiness Day.

To celebrate, the United Nations published a study on happiness in most countries in the world.

That may sound like a waste of money, but one of the findings suggests that the study may serve a useful purpose.

The World Happiness Report concluded that “happiness depends on a huge range of influences, many of which can be influenced by government policy.”

The study revealed that if governments want to make their people happier, there’s more involved than making them richer.

The notion that government is somehow responsible for people’s happiness is not as silly as it may sound. 

The Declaration of Independence, America’s revered founding document, proclaimed that one of our basic rights is “the pursuit of happiness.”  Government is created to “secure” this right, it said.

The question is how to define happiness.

Some historians believe that the Founding Fathers saw happiness as economic well-being.  Government’s job would be to help people improve their incomes and wealth.

The U.N. study report is based on surveys involving tens of thousands of people all over the world.  They reveal that, while a person’s economic condition counts, a number of other factors go into making people happy.

Of course, for many, happiness starts with having a job.  Employed people are happier than the jobless.

But income as a measure of happiness is somewhat complicated.  For some people, it is a matter of how much money you have and earn.  Clearly, the poor do not usually rate themselves as being happy.

For others, economic status matters -- having more money than other people.  It may get to the point where people become increasingly unhappy as their neighbors do better.

Either way, unless a person lives in poverty, economic well-being may matter less than a collection of other factors. 

Social relationships are important.  If people believe they can turn to family and friends if they run into difficulties, such relationships contribute to their happiness.

That’s a major reason why people say that religion contributes to their happiness.  It appears that while faith is important, the social links provided by religious groups count even more heavily.

Another factor in happiness is the degree to which people feel free to live as they wish.  In other words, governments range from dictatorships to democracies, and people measure their happiness partly as a function of the form of government.

Connected to this is the degree to which government is considered to be free from corruption.  People are happier if they believe their government is operating by the rules and not to promote the personal enrichment or enhanced power of those in charge or because of the undue influence of forces outside government.

Not surprisingly, the condition of a person’s health influences happiness.  Here, too, government has a role to play, if it assists people to lead healthy lives and to have access to medical care.

People seem also to place some importance on the environment as a factor in their happiness.  They give weight to both their own living conditions and the legacy they leave for their children.  Again, in this area, government matters.

Demographic data from industrialized countries reveals that women are happier than men and that as people age they regain a degree of happiness they may have lost in middle age.

Based on the surveys, the report comes up with a rough ranking of countries.

Those that come out with the highest degree of happiness are among the richest countries.

People in these countries have greater individual wealth with less deep poverty.  They are all democracies.  Their governments have more resources than others to support programs for job creation, income support, health care, and environmental protection.

Who is at the top?  The Scandinavian countries and the major English-speaking former British colonies, including the United States.

Interestingly for Americans, as the country gains in wealth, it has not gained in happiness.  Perhaps that’s because of the way wealth is distributed.  The share of the poor here has not declined.

At the bottom in terms of happiness are mostly poor countries in Africa. 

A country with a low rating may be more likely to create international unrest.  And the crime rate among the poor in many countries is often high.  So it’s in the interest of all to alleviate poverty at home and abroad.

Altruism – helping others without personal gain – was found to be a factor in creating happiness.  Helping the poor may not only be better for all but makes us happier.

Economic Reality Transforms the American Dream

Welcome to the new version of the American Dream.

It may look the same as the old one – personal prosperity and owning your own home – but fewer people are likely to live it, and if they do, it will happen later in life.

The transition Americans are undergoing is not merely recovery from a deep recession with life soon returning to the way it was before 2008.  It is a complete redesign of the American economy.

Two news stories last week prove the point.

The situation for today's adults in their 30s and younger is particularly gloomy,” reports the nonpartisan Urban Institute.  “When it comes to building wealth -- adding to savings, owning a home, paring down debt, growing a retirement nest egg -- those under age 40 have stagnated,” it says.

Instead of earning more than previous generations, younger people get less pay than what their parents were paid when they were the same age.

We also read that two states – Maine and West Virginia – now see deaths exceeding births each year.  By one measure, Maine is the oldest state in the country with West Virginia coming in third.

They are the bellwethers of the United States as a whole.  In the first nine years of this century, the median age in the country increased by one and a-half years.

Older people have not saved enough for their retirement years, so they cannot be the big-spending consumers they used to be.  In other words, older people are a larger share of the population, and they have less to spend.

American businesses are adjusting to these new realities.  To survive and remain competitive with foreign suppliers in what is now a global marketplace, they must reduce their costs.

And the place where they cut is paying their employees.  Labor costs as a share of total national production are now at record lows. 

High paying jobs have been lost, forcing many to accept new jobs with less income.  Even worse, some have been pushed out of the work force, making the unemployment rate look better than it really is.

Many people have become more realistic about having enough income to afford a new home.  While that means they must wait longer for their dream home, the chances of losing it in foreclosure are less.

There’s some good news.

Jobs that went abroad are coming home.  As wages rise in China and elsewhere in the developing world while they stagnate in the United States, imports are beginning to lose some of their attractiveness.

Taking into account transportation, heavily influenced by the price of fuels, and the narrowing labor cost difference, “Made in the U.S.A.” is staging a comeback.

While people struggle to find decent jobs, American corporations are doing well.  Unemployment may still be too high, but the stock market, which reflects what investors see as the economic future, has broken through to new highs.

U.S. manufacturing, long in decline, seems to be gaining again, thanks to the jobs that are coming home.

In fact, as American-made goods are priced close to world market prices, U.S. exports could improve, which would help promote job growth.

Business is profitable partly because labor costs are down.  Workers – from airline pilots to assembly line labor – have accepted pay reductions in order to keep their employers competitive.  Perhaps as big as government bailouts are the sacrifices made by employees.

Even with this improved outlook for business, the total picture is far from rosy.
Government programs that depend on income-based taxes will have less money to meet the growing financial needs of Social Security and Medicare. 

Rep. Paul Ryan’s proposed Republican budget would keep these programs solvent by sharply reducing benefits.  While these programs might then pay their own way, older people would suffer.

One alternative is higher taxes to help support these essential programs.  In an economy with fewer workers relative to the total population and lower pay scales, those workers might have to pay more to the government.

Another option is for people to save more for retirement.  Like higher taxes, more saving would reduce the amount people could spend.

The new American economy would depend less on consumer spending, now its main driver, as more money went either to taxes or savings.

A rapid increase in the working age population could help slow or reverse this trend.  That’s why immigration reform may turn out to be essential.

Perhaps this new version of the American Dream is not inevitable.  But nobody has yet offered a way to save the old version.

Monday, March 18, 2013

The High Cost of Health Care is Its Biggest Issue

The problem with health care is not Medicare, Medicaid, or Obamacare.

It’s what health care costs.

The United States leads the world in one area of health care – it costs more here than in any developed country. Higher cost does not mean better care.  The United States lags many other countries in length of life and infant mortality.

Most industrialized countries have some version of a single payer system in which the government is the insurer and can influence the prices it pays for various procedures and medications.

In this country, the government, insurers, and individuals all pay for health care.  And, when the government is not paying, health care providers are free to set prices that everybody must pay.

Why are hospital costs so high?  A recent report by Steven Brill in Time magazine provided answers.

He revealed that both non-profit and for-profit hospitals make money, with non-profits doing better.

Where does the money go?  It pays for more sophisticated equipment, whether it is needed or not, advertising to attract more patients, and astronomical salaries for the top officials.  

And for lobbying Congress to keep the system just as it is.  The health care industry spends more on lobbying Washington than the defense, aerospace, and oil and natural gas industries combined.

The industry is rapidly becoming a monopoly.  In most areas, there is no longer any choice among hospitals.  There is one in each area, making the concept of a “market” purely theoretical.

As the number of hospitals is reduced, so is the number of independent doctors’ offices.  In the near future, it is expected that 75 percent of physicians will be on hospital payrolls.

To boost hospital income, these doctors are often required to see more patients each day, resulting in less attention to any individual.  And insurance reimbursement is more profitable for hospitals, Brill says, with doctors in-house.

The hospitals’ big profits are obvious, when the costs charged to the uninsured based on hospitals’ “chargemaster” price lists are compared with Medicare payments.

The chargemaster sets prices well above cost and even levies outlandish charges for simple bandages, which ought to be included in overhead costs.

In one case Brill cites, a hospital bill came to $121,414, but the hospital accepted $16,949 from Medicare.

Hospitals and doctors are not required to participate in Medicare.  If they are not paid enough, they can quit the system.

But they don’t.  In fact, in Florida, where many patients are on Medicare, hospitals advertise for retirees to use their services.

Even Medicare, the largest single customer for health care in the country, is prevented from bargaining to get the lowest prices for drugs.  If one medication is better than another and cheaper, Medicare must still pay the average price of all approved drugs of the same type, which means it must overpay.

The Veterans Administration, which also buys a lot of prescription medicines, does not have such a rule, and its costs are estimated to be 40 percent less than Medicare’s.

Obamacare will not fix the problem.  It can only create competition among insurers, though one of the players in each state will be a non-profit company. 

Opponents of Obamacare see this so-called “exchange” as being able to underprice the private companies so that it ends up as the single payer.

That would have to happen at some point in the indefinite future if the non-profit insurer could ever be powerful enough to force the industry to bring its costs under control. 

Meanwhile, the health care industry is increasingly acts like an unregulated monopoly where, for the time being at least, the insurers have little ability to place a brake on its charges.

Experience shows there are essentially only two ways to deal with the pricing power of “natural” monopolies, those that cannot simply be broken up, because of the type of services they provide.

We can see how such controls work, because both approaches having been applied to electric utilities, which are natural monopolies.

One is regulation, where “just and reasonable” prices are set by independent regulatory bodies, acting like judges.  Those areas where competition is possible – electric generators or equipment manufacturers in the health care sector – are left largely unregulated.

The other solution is government as the single payer.  For electricity, government takes the form of the municipal utility.  It makes no profit and bargains for what it will pay for power.

We seem to be moving toward the point in health care where regulation or the single payer or both will become essential and inevitable.

Friday, March 8, 2013

Cutting government waste better than “sequester”

A few months ago, I helped a municipality deal with a U.S. government agency that wanted to buy services from the town. 

My experience revealed a lot about why the federal budget is out of control.

The amount of the contract was less than $200,000, but I dealt with five federal officials for about two months to get an agreement that should have taken one person about an hour.

The officials questioned the profit margin in the deal, so I had to convince them that the town charges actual cost and makes no profit.

When we received the federal contract, it referred to about a dozen previously unmentioned requirements that were tacked onto it.  The town would have to agree to them before it could supply the federal government with a municipal service that it usually provided to anybody within its borders – without any contract.

It took some effort to find out what these other documents contained.  When I finally saw them, they were mostly irrelevant.  Under one, the town had to promise that its employees would not text while driving.  There was no driving involved in the contract.

At the end of the process, I was convinced that the federal government could have saved thousands of dollars, if it operated more efficiently.

But presidential appointees heading such agencies are unlikely to spend the time and effort to manage agency operations to eliminate such waste. 

With all the talk about cutting government spending, most critics want to slash entire programs, each with its own constituency, rather than really getting serious about efficiency and wasteful spending.

Sen. Tom Coburn, an Oklahoma Republican, is an archconservative who would like to cut back government.  But he has come up with a non-ideological idea that could work.

In 2010, he got Congress to ask the non-partisan Government Accountability Office to draw up a list of all government programs.  The GAO was also to show where they overlapped.

It may amaze some that there was no single list of federal government programs.  Less amazing is the fact that of the hundreds of programs, many overlap.

For example, the GAO found 47 job training and employment programs being carried out by nine different agencies.  These programs had budgets totaling $18 billion a year. 

And the politically neutral agency reported that all but three of the programs overlapped one another.

Without proposing that any of the programs should be eliminated, the report showed that there were many duplicative managerial and administrative offices that could be dropped.

One of the major risks when many programs do the same thing is that outside organizations can apply for and receive grants for the same activity from several different agencies that have no idea what others are funding.

Why can’t such overlap be eliminated?

Many federal programs, including those run by the Defense Department, are supported because they create jobs.  For a member of Congress to bring new jobs to his or her state or district is far more important politically than the tasks performed.

And then there’s turf.  Various programs doing just about the same thing are under the jurisdiction of separate congressional committees.  Each is reluctant to give up control of any subject or agency on its agenda.

Even more serious are the turf empires of the major departments themselves.  Power and influence may be measured in Washington by the number of employees in an agency or the size of its budget.

Each agency lobbies congressional committees to preserve its programs, each of which is “essential.”

Shouldn’t there be one central office responsible for reducing the inefficiency that results from duplication?

That should be the White House Office of Management and Budget, which finally got around to looking at Coburn’s initiative last year, but only selected a few agencies for a pilot program.  Since then, nothing more has been heard from OMB.

At the beginning of March, the first automatic cuts in federal spending – called the sequester – went into effect.  They amount to $85 billion in the remaining seven months of the federal fiscal year.

Eliminating duplication in the government programs found by GAO in just the first two years of its review plus requiring greater efficiency might well produce that amount of saving not only this year but every year.

No activity needs to be eliminated, though jobs would be cut and the size of government reduced by simply making it more efficient.

Sequester?  We can do better.  After all the empty political promises about cutting government waste, Coburn has helped us know just what to do.