Monthly Archives: July 2011

Social Security Trust Fund: Accounting Kabuki

The looming government debt ceiling crisis has cause Obama to threaten inability to pay Social Security checks. It’s renewed the debate, which I’ve hashed out many times (here, here, here and here, for posterity’s sake), whether the Social Security “Trust Fund” is a veritable asset or merely a convenient accounting fiction used to hide deficits.

I, of course, believe it to be the latter. But M.S., writing for The Economist’s Democracy in America blog, tries to make some analogies about the trust fund’s “accounting kabuki”:

I mean, look, our bank accounts are an accounting fiction. Everyone knows exactly how much money is in anyone else’s bank account: none. There is no money “in” our bank accounts; our banks have already spent it. Our so-called bank account is just an IOU, a promise from our bank to pay us up to the amount specified in our balance.

There are two things here. The first is that the bank account is merely a promise, which is true. This is clearly analogous to the Social Security Trust Fund. The second part, though, is the problem. Making good on the promise is the bank’s responsibility, NOT MINE.

If I want to withdraw money from the bank, they have a legal and moral responsibility to give it to me. It doesn’t matter to me where they get it, but it creates no obligation on me to get that money back.

If they told me that they’d give me my money, but they’d have to garnish my wages for the next year in return, however, I’d be a little pissed off. That’s what the Social Security Trust Fund is.

The key is that American taxpayers are the ones who are being “paid back” out of the Social Security Trust Fund, while American taxpayers are also the ones doing the paying. It’s not an accounting fiction because we have two different line items on the bill, it’s an accounting fiction because the revenues ultimately come from the same place!

From the point of view of the Social Security Administration, of course, the IOU’s are an asset. They are a claim on future government revenue that is essentially on par with the debt that China or institutional investors buy from the US. I.e. from an accounting standpoint, it is a “promise” that carries some heft. However, from the point of view of the American taxpayer, it is additional debt that must be repaid through higher taxation. They’re going to get it from our paychecks, it’ll just come from the line that says “FED INC TAX” rather than the lines that says “SOC SEC TAX” or “MEDICARE TAX”. It still comes out of the same paycheck, which means whether it’s an accounting kabuki or not, it still costs us more money.

Quote Of The Day

Is Gold in a bubble? The Economist thinks so. But instructive is something they wrote back in 1980, just before the culmination of the last major gold bubble:

In equity markets, there is much truth to the saying never sell on a strike. In the gold market, which has become in some ways the reverse image of equities, a suitable variant might be never buy on the end of the world. You cannot, after all, take it with you.

A year from now, I’d think that gold will be well under $1,000 per ounce, or as high as north of $5,000 per ounce. That’s not a recommendation to buy gold, however. If it’s north of $5,000 per ounce, that means that things in the United States will have gone so horrendously wrong that owning the gold at that price will be little solace, as you very well may not even want to trade it for dollars.

I learned years ago to never bet against my alma mater, the Purdue Boilermakers. Even if I win my bet, I’m still unhappy with the outcome. It’s much the same with gold. Betting on the end of the world sucks if you’re wrong, but sucks even more if you’re right.

My Take [So Far] On Google+

Having “grown up” online — a bit more than most of my contemporaries, as I had the techno-geek life of BBS’ing and AOHell in the early days of the internet — I’ve always had as much of an “online” presence as off. Today, this means that many of my personal hobbies, whether it be making/drinking beer, watching Purdue sports, arguing about politics, and making offensive jokes are activities coordinated and tailored to specific online forums as well. Homebrewing, Boilermaker football, and arcane anarcho-libertarian musings quickly bore the snot out of my friends and family in the offline world, and I’ve gotten in trouble with my wife more than once for those jokes.

In fact, it was the jokes that both largely made me effectively leave Facebook, and to be excited about the “Circles” feature in G+. Facebook has an inherently flat structure that ensures that if someone is your “Friend”, they can see essentially everything you post. This has two downsides:

1. It causes you to avoid friending certain people that you may not WANT to see every little thing about you.
2. It makes it bothersome to write about something that a small subset of your friends might be interested in, but others won’t care about.

I know that my beer friends don’t care about my political rants. My political friends don’t care about the status of my latest homebrew creations. I might occasionally want to highlight something I’ve written politically to my friends/family, but they certainly don’t want to be inundated with it. And my mother-in-law DOESN’T need to hear most of my jokes. And I’ve actively avoided friending many people in the political realm, many Purdue folks I know *only* through online sites, because I had no way to filter out the topics they wouldn’t be interested in. And I’ve especially never wanted to include coworkers or business contacts on Facebook, of course, because some of the discussions I get into would be completely inappropriate for a professional working relationship.

Circles changes that, and allows one to make a much LARGER social network that is more properly segmented based on common interests. And since people can reside within multiple circles at once, I don’t have to decide whether someone goes in “Friends” or “Beer”; they can be in both if we have that interest in common.

For that reason, I think G+ is a far better platform — for me — than Facebook.

However, Circles and “following” also allows a bit of Twitter-like asymmetric information dissemination that becomes very interesting. In essence, it’s like having your G+ account be both your Facebook social network and a more interactive Twitter account. With Twitter, the people who want to see my public status updates and the people who I choose to see don’t have to be the same. Ezra Klein has been talking about this quite a bit as G+ largely replacing Twitter for him, as he can reach the same sort of people, have more substantive discussions that can be more easily followed, but doesn’t have to necessarily subject his incoming stream to the rants of libertarian crackpots like myself.

Unfortunately, this becomes worlds less useful to me. The reason is simple — I have to tag posts as “Public” for those who are “following” me to see them. Most people who choose to “follow” me that I might not want to add to circles and have them appear in my timeline are in the political realm. I don’t particularly want to make my political posts “Public”, as that means anyone in my “Friends”, “Family”, “Beer”, or “Coworker” circles can automatically see them — creating the very annoyance factor that Circles are meant to avoid. This may be acceptable for Ezra Klein, who is a public figure due to his prominence as a political journalist, but not something that my non-political friends want to be subjected to from me.

For me, then, I’m left with a dilemma. Twitter is designed to be a broadcast medium, and it’s generally understood that you take the good with the bad if you choose to follow someone. Those who want to hear about my beer or politics know to ignore me during Purdue football games, just as I ignore many of them during specific things they tweet about that I don’t particularly care about. The etiquette of the medium is different than it is on Facebook, and people who will be annoyed by seeing more than three Facebook status updates a day from one person find that to be a slow day on Twitter.

I believe that the etiquette of G+ will more closely echo that of Facebook, which is why the different circles allow you at least filter certain people out of certain subjects. Thus, I can’t see myself sending many things out as “Public”. As a result, the very benefit of an asymmetric network is lost. What I’d really like is the ability to filter certain circles out of my ‘standard’ timeline — that way I can put all my asymmetric follows into a circle, and only go and have that circle show up in my timeline on demand. Otherwise, I simply won’t add those people to any circles, and since I essentially avoid “Public” posts most of the time, they won’t be able to see almost anything I write.

Google+ has the built-in structure to fundamentally change the way that we structure social networks. People I’d never have friended on Facebook previously (i.e. work colleagues, acquaintances, people I *only* know online, etc) now have a place and I can segment my message based on the audience likely to see it. That seems like it might be a game-changer, but needs a bit of tweaking before it’ll be 100% there so that people can figure out the new etiquette of the medium.

Guest Post: A Five-Part Plan For Fixing America’s Health Care System

Today’s post was written by regular commenter Dr. Gregory Tetrault (aka “Dr. T”). Dr. Tetrault is a clinical pathologist who has directed four different medical laboratories since 1989. He was an Associate Professor of Pathology and Laboratory Medicine at the University of Tennessee Medical Center until 2009. His plan below is, IMHO, a realistic way to introduce crucial market-based reforms into our medical system while still maintaining a social safety net. Enjoy!

Health care costs have increased far faster than the general rate of inflation for decades. The most important cause was the transition from out-of-pocket payments for routine medical care (common in the early 1960s) to employer-based or government-based insurance or health maintenance organization (HMO) coverage. This produced price insensitivity among consumers, who believed that their insurance premiums paid for all the medical care as they wanted, and allowed medical costs to rise rapidly. We cannot rein-in health care costs without making drastic changes to our health care payment systems. My five-part proposal, if implemented, could reduce health care costs.

  1. Dissociate health insurance from employment.

    Employers don’t provide home insurance or vehicle insurance. They should not provide health insurance, either. A disadvantage of the current situation is that workers with chronic health problems become tied to their employer—if they switch employers their new health care plan typically will not cover their existing medical problems. Another disadvantage of the current situation is that most employers offer only a few health insurance options. Workers who opt out rarely get fully reimbursed for what the employer would contribute, cannot deduct health insurance premiums from their income taxes, and usually pay more for health insurance because they aren’t in a group plan.

  2. Require all adults to either purchase catastrophic health insurance for themselves and their dependents or provide proof that they can afford a moderately expensive hospital stay.

    This proposal is similar to the requirements in most states that all vehicle owners buy insurance or provide proof that they can pay for damages. The requirement violates libertarian principles, but it is necessary because clinicians and hospitals must provide medical care even if the ill or injured patient cannot pay. A fully libertarian approach would mean refusing to care for patients who cannot recompense providers at a mutually acceptable price. We aren’t ready for that much libertarianism.

  3. Require health insurance companies to accept all customers (no cherry picking) with only moderate stratification of premiums based on age and controllable risk factors (such as smoking).

    Insurers and others apparently forget that the purpose of insurance is to spread the costs of catastrophic events across the pool of insured persons. Insurers should not be classifying, sub-classifying, and sub-sub-classifying individual risks before calculating premiums. They should lump similar persons into large groups and charge everyone in each group the same premium. Example groups: 40- to 49-year-old male non-smokers, 20- to 29-year-old female smokers, 0- to 5-year-old children, etc. As an incentive for healthy behavior, insurers could offer discounts to those who can prove they are fit and in above-average health.

  4. Give a tax credit for health insurance premiums based on the cost of a minimal coverage policy to lessen the financial impact on the lower middle-class.

    This credit would replace the tax-deduction given to employers who provide health insurance to employees. The credit is capped at the cost of the minimum required health insurance plan to prevent large tax credits for those who buy expensive, low-deductible or full-coverage insurance.

  5. Create a taxpayer-funded (or, better yet, a charity-funded) health insurance voucher program for low income persons.

    This would replace Medicaid. Eligible persons would choose a health insurance provider and a coverage plan and use vouchers to pay all or part of the premiums. The eligible persons would be responsible for their out-of-pocket health care expenses, but health care providers could offer discounts, delayed payment plans, or free care (something that is not allowed under current Medicaid and Medicare rules).

This five-part proposal will give workers bigger paychecks (no employer health insurance deductions) and return most routine care to an out-of-pocket payment system. The mandatory catastrophic health care insurance will prevent bankruptcies after serious illnesses or injuries. The proposal allows people to purchase however much health insurance they desire from HMOs, preferred provider organizations (PPOs), or other types of plans. Implementing this proposal would make people aware of the full costs of health care services. Some people will refuse expensive care or negotiate lower charges. Such actions will reduce overall health care costs.

Businesses will be pleased because this proposal reduces operating costs: no administrative personnel will be needed for handling employer-based health insurance. Productivity would rise slightly because employees would not spend working hours choosing employer-provided health insurance plans or solving problems related to health insurance claims.

Health care providers will experience reduced billing costs because most people will pay directly for routine medical care, dentistry, prescriptions, laboratory tests, and imaging studies such as x-rays and simple ultrasound exams. Elimination of Medicaid with its poor reimbursement and excessive documentation requirements will greatly benefit many providers.

The losers if this proposal is implemented are: employees who work in health insurance benefits subdivisions of businesses, government bureaucrats who hoped to control the health care economy, and advocates of ‘nannystate’ government who believe that Joe and Jane Average are incapable of making health care financial decisions lose. The winners outnumber the losers by at least 1,000 to 1.

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