Hair-Net

Marguerite Reardon, of CNET, has an interesting piece on her experience using an unmanaged Wi-Fi network vs. a managed 3G network. This is an interesting thought piece on the practical effects of Net Neutrality. She doesn't use this term, but this is certainly an application of "the tragedy of the commons."

The money quote from Verizon's head lobbyist:

"When you're trying to make the network flow, you can't have lawyers looking over engineers' shoulders telling them what they can and can't do."

Net Neutrality is not a free speech issue, but an attempt for content providers like Google and Yahoo to avoid distribution costs.

Here's an article from the WSJ detailing the process large corporations used to beat back a change in the tax code that would have increased their tax burden by more than $200B over the next decade. (Before people get too worked up about lobbying and buying access, go read some of Elinor Ostrom's work on how effective regulation is crafted - she just won the Nobel Prize in Economics for her analysis.)

Some of the responses from the President and his aides give amazing insight into the mind set of this administration. They give absolutely no thought to cutting spending or encouraging economic growth.

Most Americans found it "counterintuitive," [The President] said, that "businesses investing here are paying a higher tax rate than if they're investing overseas." It was important to have a tax code "that reflects those values," he told the CEOs.

Part of the problem is the US taxes corporate profits at a much higher rate than other industrialized nations. The statutory tax rate is currently 35% compared to 15-25% for most of Western and Central Europe. It's not counterintuitive that companies might pay different tax rates on profits earned in different countries; but declaring to increase the US's tax rate disadvantage is.

The president said the existing tax code "makes it perfectly legal for companies to avoid paying their fair share." He blasted tax cheats who were "shirking" their responsibilities and vowed to clean up "a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York."

If it's perfectly legal, then the President's issue is with Congress and not corporations. But again, the thought of lowering US corporate taxes to resemble those of the rest of the world doesn't seem to enter the President's mind.

In a May meeting with a Silicon Valley delegation, Mr. Summers [a White House economic adviser] acknowledged that the government was desperate for new sources of revenue... Somehow, he said, the corporate sector had to help trim the rising deficit. "I need you to be patriots," he told the group, say several participants.

This seems very counterintuitive given that higher taxes were a significant contributor to the American Revolution.

When Ms. Jarrett [the administration's aide for corporate and Mr. Summers met in mid-September with a half-dozen top executives, including Boeing Co. Chairman James McNerney Jr., deferral again dominated the conversation. But the tone was cooperative, Ms Jarrett says. "We actually put the burden back on them -- if they don't like the deferral, to think of other revenue generators," she says. "We have to do something about the deficit, so I am very curious to see what response we get back."

Jarret and Summers simply need to look at state economies to get their ideas. States with low levels of taxation and less regulation (like Texas and Florida) are burying high cost states like New York, Michigan and California. On a state level, the Obama administration's plans are proven failures - from tax policy to health care reform to regulatory environments there's, not one policy success that gives hope or inspires the kind of change this administration is calling for.

The government does not create wealth. The government is completely reliant on individuals and businesses to create the wealth needed to generate tax revenues.

The other take away in this article is the failed approach corporate leaders used in the election. Many business leaders believed that placating Obama through contributions and endorsements would protect them from higher taxes and regulation. That tactic obviously failed and they got no return on the investment from the election - otherwise they wouldn't have spent the past nine months fighting this battle. One could argue that their support last year allowed them to engage on the topic this year. But the better lesson here is for businesses to find and support the best pro-business candidate from the start instead of hoping the obviously anti-business candidate will change once elected.

Three quick points (and a longish quotes):

1) The President said his opponents lie. That's the same message Rep. Wilson was getting across and it's a message the left wanted to get across for "the past eight years" about W.

2) Neither side has clean hands on health care reform. Robert Samuelson in Newsweek distills the situation:

Obama's selling of "reform" qualifies as high-class hucksterism, but in fairness, many conservative opponents match or exceed his exaggerations and distortions with low-class fear-mongering.

The candor gap reflects a common condescension. One side believes it must fool Americans into thinking "reform" will do more than it will; the other thinks it must frighten Americans into believing that it will harm them in ways that it won't. Given Americans' contradictory expectations, any health care proposal can be criticized for offending some popular goal. We refuse to face unavoidable -- and unpleasant -- choices.

What Samuelson neglects to mention is that it's the top leadership of the Democratic Party, including the four most powerful people in the government, engaging in this "high-class hucksterism." Disgraced former VP-candidates and radio talk show hosts are engaging in the right wing feat mongering.

3) Actually, the President is also engaged in fear mongering and gross distortions of the truth. Scott Harrington, in the WSJ, demonstrates the President's lack of truthfulness in his Wednesday night speech:

To highlight abusive practices, Mr. Obama referred to an Illinois man who "lost his coverage in the middle of chemotherapy because his insurer found he hadn't reported gallstones that he didn't even know about." The president continued: "They delayed his treatment, and he died because of it."

[The man's sister] testified that her brother received a prescribed stem-cell transplant within the desired three- to four-week "window of opportunity" from "one of the most renowned doctors in the whole world on the specific routine," that the procedure "was extremely successful," and that "it extended his life nearly three and a half years."

The president's second example was a Texas woman "about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne." He said that "By the time she had her insurance reinstated, her breast cancer more than doubled in size."

[The woman's testimony] suggests that the dermatologist's chart may have described her skin condition as precancerous, that the insurer also took issue with an apparent failure to disclose an earlier problem with an irregular heartbeat, and that she knowingly underreported her weight on the application.

These two cases are presumably among the most egregious identified by Congressional staffers' analysis of 116,000 pages of documents from three large health insurers, which identified a total of about 20,000 rescissions from millions of policies issued by the insurers over a five-year period. Company representatives testified that less than one half of one percent of policies were rescinded (less than 0.1% for one of the companies).

Harrington also corrects some of the President's assertions about competitiveness in insurance markets. You can read the article to see what the President said before Congress was somewhat different than the truth.

I won't call the President a liar, but the truth speaks for itself.

A few weeks ago Paul Krugman equated opposition to health care to the "birthers," and basically made the argument that only a racist would disagree with health care reform that radically changes 16% of the US economy.

Today, Maureen Down declares:

Surrounded by middle-aged white guys — a sepia snapshot of the days when such pols ran Washington like their own men’s club — Joe Wilson yelled “You lie!” at a president who didn’t.

But, fair or not, what I heard was an unspoken word in the air: You lie, boy!...

I’ve been loath to admit that the shrieking lunacy of the summer... had much to do with race.

But Wilson’s shocking disrespect for the office of the president — no Democrat ever shouted “liar” at W. when he was hawking a fake case for war in Iraq — convinced me: Some people just can’t believe a black man is president and will never accept it.

I know that was hard for her to write. She admits to having to abandon fairness and obviously does something she is "loath" to do. This is certainly a profile in courage.

Dowd goes even further than Krugman and finds a South Carolina Democrat who basically claims his state is full of paranoid, racist lunitics:

“A good many people in South Carolina really reject the notion that we’re part of the union,” said Don Fowler, the former Democratic Party chief who teaches politics at the University of South Carolina. He observed that when slavery was destroyed by outside forces and segregation was undone by civil rights leaders and Congress, it bred xenophobia.

“We have a lot of people who really think that the world’s against us,” Fowler said, “so when things don’t happen the way we like them to, we blame outsiders.”

It's good to know your elected leaders have faith in you and your ability to engage in civil society. No wonder Democrats think government is the solution to every problem; if I thought the population was as dysfunctional as Fowler does I'd advocate for government intervention to save them from themselves as well.

Krugman and Dowd have abdicated the debate on health care reform. They refuse to engage in the issues and the specifics of the proposed plans and instead have played the race card. It's very telling when health care proponents can't offer details about what they want to do and instead look to destroy their opponents. I thank the NYT for bringing these tactics into the light of day.

Paul Krugman is a smart person. He is a tenured professor at Princeton and won the Nobel Prize in Economics. His theories help explain the evolution of industries diverse as civilian aircraft makers to new media.

But in his latest column he couldn't make an argument for Obamacare. Instead, he can only invoke racism as the best explanation for opposition to health care reform.

But [people opposed to Obamacare are] probably reacting less to what Mr. Obama is doing, or even to what they’ve heard about what he’s doing, than to who he is.

That is, the driving force behind the town hall mobs is probably the same cultural and racial anxiety that’s behind the “birther” movement, which denies Mr. Obama’s citizenship. Senator Dick Durbin has suggested that the birthers and the health care protesters are one and the same; we don’t know how many of the protesters are birthers, but it wouldn’t be surprising if it’s a substantial fraction.

The point of Krugman's article is to show those asking hard questions about Obamacare as kooky racists who want shut down the debate. And to drive that point home he tries to delegitimize the people with whom he disagrees, hoping to shut them out of the debate.

What's worse is Speaker Pelosi and Senators Durbin and Schumer are doing the same thing.

During the primaries I wrote this about then Senator Obama's stump speech - "This is what makes Sen. Obama's brand of populism so deceptively attractive. He can evoke envy and jealously of those who have worked hard to achieve success and he can make those dark feelings feel virtuous."

The pattern still holds. From Wednesday night's presser:

"The problem is, now that the financial system has bounced back, what you're seeing is that banks are starting to make profits again...

And we also think it's a good thing that they're profitable again. Because if they're profitable, that means that they have reserves in place and they can lend. And this is America, so if you're profitable in the free market system, then you benefit.

But what we haven't seen, I think, is the kind of change in behavior and practices on Wall Street that would ensure that we don't find ourselves in a fix again, where we've got to bail out these folks while they're taking huge risks and taking huge bonuses."

The first sentence was reflexive. That is his default position.

But he knows the vast majority of people disagree with him so he has to walk back from his reflexive position. But then he gets back into default mode and his underlying argument doesn't go away:

• Banks took on too much risk looking for profits
• That risk doomed us all
• Banks (notably Goldman Sachs) are making profits
• Banks are still taking on too much risk and will doom us all again
  

The banks making money now outperformed their peers because they've been damned good at managing risk. Some banks (like Goldman) sold products they didn't invest in themselves, but there's no law, nor ethical code, that says financial intermediaries need to co-invest with clients. Most companies don't use their own products - are they bastards too?

The issue is quality of management not purity of motive.

Electronic health records are supposed to be a major driver for savings under the various plans proposed on Capitol Hill and by the White House. It is true moving away from paper based systems could eventually streamline processes, reduce overhead and unlock an invaluable store of information.

But the cost is going to be very high.

A quick action item list required to create a system of electronic records includes:
1) Lay out governance structures to oversee the implementation program and ongoing maintenance of records
2) Define definitions for describing data in medical records covering tens of thousands of conditions
3) Create processes for maintaining data definitions that accommodate ever changing medical knowledge
4) Define the protocols to maintain patient privacy and security
5) Detail assurance that records are available to health care provides 100% of the time
6) Develop the databases to store information
7) Create networks to link databases across health care providers ranging from small private practices and large medical centers
8) Train tens of thousands of health care providers in use of new electronic data capture and reporting systems
9) Transfer hundred of millions of medical records from paper forms to electronic versions, ensuring patient records with multiple doctors and facilities are correctly matched
10) Build out the support systems required to run and maintain these new databases

The White House is calling for all this to take place and for benefits to be realized by 2016 - just seven years from now.

A major oil company took 5 years to move half their business to a single accounting system. A global agriculture company is planning a re-engineering of their internal business processes to take over a decade. These are both well run companies with a clear value proposition for their projects and clear lines of authority.

There are hundred of state and federal agencies involved in health care, over 1,300 health insurance providers, thousands of hospitals, tens of thousands of private practices and 308 million potential patients (most with multiple records). Electronic health records are far more complicated than accounting or HR, with far more stakeholders and far greater potential risks if something goes wrong.

This would be the most massive process re-engineering program in history with the costs for federal agencies alone running into the billions of dollars.

I'm not saying moving to electronic records couldn't - or shouldn't - be done. But when the cost savings used to justify the overhaul of 17% of our economy hinge on this working one needs to remember the IRS and FAA have been trying to overhaul their systems for the better part of twenty years.