Dispatches from the front line of the recession.....

My name is Tom, and I worry a lot. With the way the world is these days, I’d be a fool if I didn’t worry. In fact, I’m outright scared about the future.


I’m 31 years old, and probably typical of my generation. I grew up in the family construction business and am no stranger to hard work. I have degrees from a couple of good schools, at which I worked very hard and partied depressingly little, and had very good grades. Merit scholarships and federal student loans paid for most of my education. I work for an engineering company in a complicated and evolving technical field-- finding and cleaning up oil spills and toxic waste, a demanding and sometimes dangerous job. Through my job, I get a 401k and health insurance. I have a few other investments, but I play it safe--no risky high-yield CMBs or CDOs, just blue chips, CDs, and a few select tech stocks. I keep a budget and stay out of debt.


So why am I scared? I’ve worked hard, played by the rules, lived within my means, and generally been a good little capitalist trying to live the American dream. By the logic of the Republican Party and Tea Party, I’ve done everything right and kept the faith with the religion that is American-style capitalism.


I’m scared for three reasons.


The first reason I’m scared (and also very angry) is because someone else screwed up my future by playing drunken baccarat with the stock market and real estate. This country had a hell of a party between 2001 and 2008, but now the hangover has set in and the bar tab is waiting to be paid. The economic picture shows no real signs of improvement, and in fact promises to get worse. I’ve never had to collect unemployment—fortunately—but I don’t expect that lucky streak to continue much longer. Something like a quarter of my friends are unemployed, as one economic sector after another succumbs to the crippling starvation of the recession– manufacturing, construction, real estate, even professionals like engineers, architects, and lawyers.


The second reason I’m scared (and very frustrated) that the economy has me on a treadmill that makes it progressively harder for people like me to get ahead, or even to stay afloat.


The problem isn’t how hard I work, but that for most people the same amount of work gets you less these days than it used to. The Economic Mobility Project, an initiative of the Pew Charitable Trusts, found that the average income for men in their 30s in 2010 is 12% less than it was than for the same age group in 1974. Real wages have remained essentially stagnant, rising only about 3% since 1999. Inflation for the same period was 28.5%. The median wage, when adjusted for inflation, actually declined 2% between 2003 and 2006, during the glory days of the Bush Bubble.


Case in point—it’s virtually impossible for a couple in their 20s or 30s to afford a home on one salary now, since real estate prices and inflation left salaries behind fast enough to leave Back To The Future-style flaming tire tracks. In 1975, a married couple could make it on one salary, but just try that now and you’ll see how much things have changed. For thirty years we bridged the widening gap between income and costs by turning to home equity loans, credit cards, borrowing against 401ks and IRAs, and shenanigans like second mortgages, trying to rob Peter in order to pay Paul, but none of that changed the bitter reality that our own economy was leaving us behind. Even our investments have gone fallow, as the artificially low interest rates which the Federal Reserve maintains in order to encourage lending have reduced the return on investments.


Out of those proportionately smaller wages, we have proportionately higher mandatory expenditures—taxes and other things that we’re required to shell out on. I’m not really that worried about taxes—I have a realistic idea of how much of my income goes to taxes and what I get out of them. Roads, for example. I like roads. I like sewers and snowplows and fire departments and clean drinking water too. I haven’t seen any of the supposed socialist overtaxation that has the Tea Party all worked up, and in fact I pay less percentage wise than I would have paid thirty years ago. The amount I pay in taxes is tiny when compared to health care, rent, and other necessities.


Of all my financial responsibilities, health care scares me the most, and not just because I spend on it several times what I pay in taxes. It’s hard to get treatment in the US if you don’t have health insurance, which most working people get through their jobs like I do, and premiums consume larger and larger chunks of our shrinking incomes. As it is, health-care premiums for families have risen 119% since 1999, while inflation has risen 28.5% and real wages are, like I said, essentially stagnant. Our company’s health care plan premiums increased by 40% in 2009. That’s hard to swallow. To make matters worse, if I lose my job, I also lose my health insurance. Since I live in Massachusetts, where health insurance is required by law, I would have to either pay out of pocket for private insurance at a migraine-inducing rate, or apply for public insurance. This is why I supported a public option, and still do.


This situation is why I have a good full-time job, but do not own my own home, and drive a ten-year-old car. I probably could buy a house now, but haven’t done so because if I lose my job, as is possible, mortgage payments would put me under sooner or later. I have no real security. One major illnesses, bad investment, or big risk could wipe out everything I’ve managed to save.


I’ve resigned myself to the truth, which is that I just won’t be able to afford the same stuff my parents could. Forget the vacation cottage (my favorite spot on Planet Earth). Forget the big house in the country, the boat, early retirement (or any retirement at all) and a couple of hobbies—all the brass ring stuff that’s supposed to be the reward Americans work towards. Unless things take a major, long-term change, my generation will be the first to have a standard of living that’s not as good or better than their parents’.


The third reason I’m scared (and pessimistic) is that I don’t know whether things will get better or worse over the next few years. This is where we step beyond my life into the jungle of economics.


The US economy is fundamentally consumer-driven these days, fueled by sales of consumer goods and services to ourselves—the US doesn’t really sell much to other countries anymore. What happens to the economy when consumers’ pockets and credit have been so thoroughly drained that they can’t afford to consume at the same rate? The whole economy runs out of gas. The laid-off construction worker can’t buy a new car, which leads to lower auto sales, layoffs of care salesmen and factory workers, and so on. That’s the sort of trickle-down economics that matter these days, not the Reagan-era wishful thinking. Robert Reich agrees with me on this.


To his credit, President Obama was refreshingly forthright when he warned the country to expect a slow recovery, since that’s the only kind we’re likely to get. The comparatively quick and stimulus-free turnaround of the early 1990s was an anomaly, not the rule. Still, there are ominous rumblings that that the Obama administration’s Keynesian “pump-priming” stimulus programs will be shut off at the tap by deficit hawks and politicians eager to score easy points by describing the unemployed as lazy drug addicts.


I have to say I’m extremely skeptical when it comes to the gospel of extreme free-market deregulation preached by Rand Paul and some of the Republicans in Congress. That’s what got us here in the first place. Capitalism is not perfect and the free market is blatantly fallible--most of the regulations that corporations find onerous were created in order to prevent a disaster like the Crash of 1929 from happening again. For example, the Glass-Steagall Act of 1933 (repealed in 1999) required separation between banks investment and depository organs, and in doing so prevented exactly the sort of bad-investment apocalypse that happened in 2008.


If their god is ‘market forces’ and their religion is free-rein capitalism, then I’m sorry to have to say it, but their god failed, and turned out to be a real jerk in the process. It gave us stagnant wages at home, millions of jobs outsourced to China as a way for corporations to save a buck, and an economic system increasingly balanced against the middle class.


If it’s all the same to you, I’d rather lose sleep over nuclear annihilation than over my health insurance.

Health Care.

One of the most noisy and contentious political and media events currently going on in the USA is the debate over health care reform.

To put it in a nutshell, most Americans these days get their health insurance through private companies such as Blue Cross/Blue Shield, CIGNA, Connecticare, etc. A smaller number, mostly people over 65 or who are disabled, get health care funding through government-run programs such as Medicare, Medicaid, or (in my state) MassHealth. Approximately forty-six million (46,000,000) people have no health insurance at all. The central problem with the lack of health care insurance is that health care expenses have skyrocketed to the point where it is difficult to get medical treatment without expensive insurance.

Speaking from personal experience, whenever I see my primary physician, I have to pay a copayment (which is a fancy term, I think, for a deductible), but the cost that is billed to my health insurance provider is about six times the copayment. If I had to pay over $200 in cash every time I had to see a doctor, the cost of such visits would rapidly become prohibitive, and I would be unable to afford health care. That is the exact situation that at least forty-odd million people are in right now.

The major reason for the high cost of health care in the United States is, in my opinion, not the cost of providing the care itself, or the medical research that goes into it, or even the (fiendishly high) insurance premiums doctors must pay. The reason is the administrative bloat, the vast overhead of bureaucrats, executives, accountants, claims processors, and support staff who manage a company such as Blue Cross/Blue Shield, and the outer manifestation of this is a system in which a health insurer can arbitrarily increase monthly premiums by 12%, with no warning or justification. As it is, health-care premiums for families have risen 119% since 1999, while inflation has risen 28.5% and real wages are essentially stagnant at about 3%.

I, for one, would gladly accept a federal tax that is stable from one year to the next instead of a private plan that could triple in costs by the end of a fiscal year, or drop my coverage entirely.

I compiled the following few salient points, which in my opinion shed a lot of light on the subject of the debate, as well as how the debate itself has been structured, managed, and skewed by business interests.

Under the current system, even if you pay your premiums all your life and are never late with a payment, the insurance company can still drop you like a hot potato if it becomes apparent to the insurer that you’re about to become an expense rather than a source of revenue—in other words, if you become sick enough to need to file an insurance claim. In fact, you're as likely to be dropped by a private insurance company when you need life-saving care as you are to get treated. Even if you aren't dropped, they have the ability to overrule your doctor's advice for life-saving treatment, and refuse to cover the proposed treatment. Translation: death sentence. Murder by spreadsheet. Life-and-death decisions made for people by faceless bureaucrats. This is the sort of thing the opponents of the proposed reforms are trumpeting, but this sort of thing is happening NOW, and as a business decision.

One-sixth of all government spending is on health care, twice as much (proportionally) as any other country spends out of its budget. This is more than four times what we spend on national defense, even while fighting two wars. Individually, many Americans spend 10% or more of their pre-tax income on health care alone. As a whole, the US annually spends $2.5 trillion on health care. I, for one, would love to know how much of that expenditure is swallowed up in profits and overhead, but it’s roughly six times (proportionally) what European countries spend.

So, the United States pays more per capita than any other country on the planet for the privilege of being thirtieth (out of 195) in life expectancy, after most of Europe, South Korea, Japan, Bosnia-Herzegovina, Canada, and Jordan. Although one of the frequent talking points of the opponents of public-option health care is that you can die waiting for care in Canada, the average Canadian family spends less than $2000 a year on health care with no waiting periods for life-saving care. The average American family spends $16,800 a year, waiting for private insurance companies to approve life-saving treatments (or to be callously dropped).

These costs accumulate. Nearly two-thirds of American personal bankruptcies are related to health care costs, largely in cases where massive medical bills pile up due to cancer or other serious illness or injury, which insurers do not (or will not) cover.

The costs accumulate for business, too. Businesses - particularly small businesses – increasingly cannot afford to provide health insurance for their employees under the current employer-based private insurance system, and will be forced to either drop their coverage or cut costs in other areas, such as laying off employees (who then lose their health coverage). In the case of Massachusetts, this burden is particularly acute. The Romney administration in 2006 signed into law a requirement that everyone must have health insurance. This plan had some teething troubles, but currently provides health coverage to almost half a million people who didn’t have it before.

Every independent estimate says the public option will save us—the government and private citizens alike—lots of money. The most conservative estimate, from the Congressional Budget Office, estimates a savings of $150 billion.

It’s well worth repeating. As of 2006, forty-six million Americans were uninsured. An estimated fourteen thousand more lose their health insurance every day. Most of those who lose it, lose it either because they lose their jobs, or because they can’t keep up with the premiums. It’s actually pretty hard, in this richest nation on earth, to get health care if you don’t have expensive health insurance.

Eighteen thousand Americans die each year due to lack of health care. That works out to fifty people per day, who die because the system is structured so that they can’t get what they need. This doesn’t count the number of people who get their only health care from charitable clinics or emergency rooms, because they can’t get it anywhere else.

$2.5 trillion is a lot of money. In fact, it’s more than the 2008 gross domestic product (the market value of all final goods and services from a nation in a given year) of Russia. That’s right. If you managed to agglomerate all the value of everything created, sold, or done in Russia in 2008, from caviar to oil wells to dry-cleaning, it wouldn’t suffice to pay the United States’ medical bills. With that much at stake, it’s only to be expected that the health care insurance industry has launched a frenzied counterattack to protect their captive market.

As has become usual in the United States, political and corporate interests are trying to structure the public debate, even to the point of introducing blatant lies as facts. Private insurance companies are spending over a million dollars a day to kill the public option by inventing phony citizen groups and sending letters on behalf of retirees who’ve never heard of them, busing in people to protest at town meetings. Sarah Palin’s “death panel” comments only make things worse—though, to be sure, one should simply Google Natalee Sarkisian.

Would public-option healthcare be better than the private sector? Maybe. Maybe not. I just don’t see how it could be any worse. Medicare and Medicaid have provided high-quality care (or rather, the funding for it) for decades.

At least if I die while on a government plan, I’d know it wasn’t a profit/loss decision.

The role of the government is not to make money. That’s what private enterprise is for. The role of the government is to do what private industry either cannot or will not do—to provide essential services and to do things that are so big or so obnoxious that no non-governmental entity will tackle them, or to do things where (as in this case) the financial incentive runs contrary to the public good.

Consider the Manhattan Project. The federal government poured the equivalent of $24 billion and the man hours of 130,000 people for several years into a project to produce a nuclear weapon, which was by no means certain to work. In fact, it wasn’t certain whether the A-bomb would work at all until three weeks before the first one used in anger (and thankfully, as of this writing, the second to last) was dropped on Hiroshima. No private venture would ever have undertaken that sort of venture.

There is a persistent myth in the history of the United States that the greatness of this country is the product of free enterprise and unbridled capitalism alone. This is flatly untrue. Most of the events, undertakings, or other things that made the US what it is today have been brought about with no small government involvement, though in many instances the government’s role consists of offering subsides or reduced regulations as incentives to encourage private industry to undertake something for the common good, but for which (without government intervention) there would not have been a market. The drawback to a profit-centered system, you see, is that if there is no profit in it, it will not happen.

Even the transcontinental railroads of the late 19^th Century, which were relatively simple works of civil engineering by comparison, were subsidized with huge (yes, I know, Python fans take not) tracts of land, granted by the federal government, which the railroad concerns could then sell off as they chose.

The extraction of the vast (but, it needs to be emphasized, not limitless) resources of the West, which fueled such juggernauts of industry as Andrew Carnegie’s US Steel, were made possible by artificially low rates for leases on government-owned lands. The General Mining Act of 1872 fixed the per-acre cost of leasing federal lands for resource extraction at $1.25 annually, half of what the real value was in 1872. Thanks in large part to resistance from members of Congress from states such as Colorado and Wyoming, this cost has never been adjusted to keep pace with the times, in effect creating a federal subsidy for mining companies who get the land essentially for free.

So yes. I’m in favor of the public option plan.