In this post of mine on Efficiency and Administrative costs frequent commenter Michael Reynolds wrote,
How about we take the French system plus 20%? Hell, France plus 50% would represent a staggering windfall for us. In fact, we could buy France with the savings.
I don’t think that word (windfall) means what you think it means. That the French and their health care system are heading towards the same cliff we are, just not as fast, is not what I’d call a windfall. It is arguably a reasonable first step in health care reform, but it is not the end solution. And since we’d still have a health care problem even if we implemented the French system plus 0%, no we couldn’t buy France. The problem isn’t so much that we are spending too much right now, but that the rate of growth of health care costs is unsustainable. Switching to the French system might help that problem, it might put off the day at which things get really bad, but it isn’t a permanent fix.
For the sake of argument let us assume that Medicare’s administrative costs are lower than those of the typical health insurance company. Does this imply that Medicare is more efficient than the private company? I’ve been skeptical of this view point since one thing I’ve learned in economics is that firms want to maximize profits. You don’t do this by wasting money. In fact, at the profit maximizing level of output the firm is minimizing its costs. So, does it make sense that a health insurance firm is going to spend money it doesn’t have to on administrative costs?
One commenter put forward the idea that a CEO of a $10 billion dollar health insurance company is probably going to get paid more than the CEO of a $5 billion dollar health insurance company. Probably so, however, I’d also argue that the first CEO wont be CEO for long if he gets to the $10 billion mark by incurring losses of $5 billion. So I think we can rule this one out, or at the very least it needs quite a bit more to explain it than mere assertion.
So I’m still left thinking, “Really, the government is our model for efficiency?” This is the same government that has lost billions in the Pentagon and can’t find and probably never will. But when it comes to Medicare, which is an even bigger portion of the Federal government, nope they are so efficient we should implement the same standards globally. Even Paul Krugman indicates that this is true.
But the root source of Krugman’s beliefs disputes his views.
The higher administrative costs of private plans do not imply that those plans are less efficient than the traditional FFS program. Some of the plans’ administrative expenses are for functions, such as utilization management and quality improvement, that are designed to increase the efficiency of care delivery.—page 12
And via Greg Mankiw we now have this portion of testimony by Malcolm K. Sparrow, Professor of the Practice of Public Management at Harvard’s Kennedy School of Government,
The units of measure for losses due to health care fraud and abuse in this country are hundreds of billions of dollars per year. We just don’t know the first digit. It might be as low as one hundred billion. More likely two or three. Possibly four or five. But whatever that first digit is, it has eleven zeroes after it. These are staggering sums of money to waste, and the task of controlling and reducing these losses warrants a great deal of serious attention….
By taking the fraud and abuse problem seriously this administration might be able to save 10% or even 20% from Medicare and Medicaid budgets. But to do that, one would have to spend 1% or maybe 2% (as opposed to the prevailing 0.1%) in order to check that the other 98% or 99% of the funds were well spent. But please realize what a massive departure that would be from the status quo. This would mean increasing the budgets for control operations by a factor of 10 or 20. Not by 10% or 20%, but by a factor of 10 or 20.
Now at this juncture I want to say, “Why?” Why are Medicare’s Administrative costs so much lower, if they are indeed lower, than private industry? There has to be a reason and nobody that I know of has offered one. It is simply spouted as if it is true, always has been true, that private health insurance companies are dolts, always will be true, and if we just emulated Medicare we could save lots and lots of money that we could use to insure some of the uninsured you vile evil jerks!
In other words, Medicare’s really low administrative costs might come at a cost of hundreds of billions of dollars. If we emulate them in private health insurance then we will not be saving any money but losing money. Not only that, but we will likely accelerate the rate of increase of health care costs. After all we are going to having more wasteful spending on procedures that are not needed and any legislation on the issue will likely make access to health care easier for those who don’t already have access.
Now let us take a look at a graph that Dave Schuler dug up and posted today. Notice that for the 0-64 age range the U.S. is quite competitive with other countries, including the vaunted France. In fact, in eye-balling the chart the U.S. does better in terms of spending.
Note that the problem for U.S. health care spending is due to those 65 and older. Without them the U.S. spending on health care would be very low, even compared to places like France. If part of the reason why the spending on those 65+ is due to low administrative costs of Medicare and we force private health insurance to become more like Medicare then we could end up making the portion of the graph that is 64 and younger larger. We could exacerbate the problem, not make it better.
So answering this question of why are Medicare’s administrative costs lower is somewhat important. If there is research that answers this, I’d like to see it. But the distinct lack of such evidence leads me to believe it doesn’t exist. That nobody has asked the question let alone answered it.
Are they lower? This article by the Heritage Foundation makes an interesting point.
Medicare beneficiaries are by definition elderly, disabled, or patients with end-stage renal disease. Private insurance beneficiaries may include a small percentage of people in those categories, but they consist primarily of people are who under age 65 and not disabled. Naturally, Medicare beneficiaries need, on average, more health care services than those who are privately insured. Yet the bulk of administrative costs are incurred on a fixed program-level or a per-beneficiary basis. Expressing administrative costs as a percentage of total costs makes Medicare’s administrative costs appear lower not because Medicare is necessarily more efficient but merely because its administrative costs are spread over a larger base of actual health care costs.
When administrative costs are compared on a per-person basis, the picture changes. In 2005, Medicare’s administrative costs were $509 per primary beneficiary, compared to private-sector administrative costs of $453. In the years from 2000 to 2005, Medicare’s administrative costs per beneficiary were consistently higher than that for private insurance, ranging from 5 to 48 percent higher, depending on the year (see Table 1). This is despite the fact that private-sector “administrative” costs include state health insurance premium taxes of up to 4 percent (averaging around 2 percent, depending on the state)–an expense from which Medicare is exempt–as well as the cost of non-claim health care expenses, such as disease management and on-call nurse consultation services.
If you are measuring administrative costs as the ratio of total costs then I can see this being true given the two different populations that are being covered. Further, when we look at this post by Bryan Caplan that argues that there isn’t so much adverse selection as many argue but in reality advantageous selection then it makes even more sense.
Caplan argues that contrary to what the theoretical models predict what we see in market with regulations that mandate insurance is that it isn’t to bring the low risk individuals back into the market, but to make sure that the high risk individuals are buying insurance and often at a subsidized rate. I know that is how the insurance regulations work here in California. The insurance requirements aren’t so much that a low risk driver will buy insurance, but that the high risk one’s will.
Since mandates requiring health insurance are far less prevalent then it is possible that the dominant type of individual that has private health insurance is the healthy and under 65. These people are going to require less health care and by similar reason less health care costs. As such, the ratio of administrative costs to total costs is going to favor Medicare. I would think that at the very least we’d want to know what the per-capita administrative costs. After all, suppose the above is true, that the reason why administrative costs for Medicare are “low” is that people are looking at the ratio of administrative costs to total costs. If everyone were to move onto Medicare than you’d have quite a few healthy people move on and incur exactly the same costs as the unhealthy currently in the program. But total costs would not go up by the same proportion since we are talking about bringing in healthier people. Since the numerator is going up faster than the denominator administrative costs must rise. And if private insurers really are doing it cheaper on a per-capita basis, then such a move would actually cost billions not save us billions.
After seeing today’s job report from the BLS I have to wonder, is the stimulus working? I’m thinking no. There are two possible explanations as to what is going on here.
The initial forecast for unemployment was too optimistic.
The forecast was fine, but the stimulus is just not doing what it is supposed to do: create jobs.
Why do I believe 2 vs. 1? The idea behind the stimulus package was to create (or save, don’t forget this!) jobs. We were presented a graph of unemployment with and without the stimulus. Right now we are on track for the “no stimulus” scenario. Further, we have evidence that very little stimulus has been spent so far. Further, up until recently the consensus view was that fiscal policy was at best an clumsy tool for stimulating the economy and that multipliers were not significant. So, even if we had stimulus money being spent quickly enough there was some reason to believe it would have only a minor impact. In other words, whatever benefit the small amount of stimulus money actually spent would have is likely smaller than the politically motivated initial claims.
The other explanation is that without the stimulus package and its paltry spending to date we’d be in a situation with unemployment at this point well above the 10% range and probably above 11%, but we aren’t because of the paltry spending by the Obama Administration. I find it somewhat unlikely that spending merely $56 billion would result in unemploymnt being 1% lower.
So based on this I’m going to go with explanation 2. That the stimulus spending is not working. It is not working for the following reasons: the first is that that stimulus money is not being spent fast enough. Second, whatever benefit we are getting from the $56 billion spent so far, it is likely not enough to offset the effects of the recession. These were two criticisms raised by people opposed to the stimulus package. So far, the evidence seems to be in favor of those critical to the stimulus package.
So we are going to waste hundreds of billions of dollars because President Obama implemented a bad policy and was able to make it sound good…a lot like a used car salesman.
Image by Flickr user Joan Thewlis, under the Creative Commons License.
At a recent press conference President Obama had this to say about the public health care option he is floating as part of his proposal for reforming health care and its impact on private health care options,
Now, the public plan I think is a important tool to discipline insurance companies. What we’ve said is, under our proposal, let’s have a system the same way that federal employees do, same way that members of Congress do, where — we call it an “exchange,” or you can call it a “marketplace” — where essentially you’ve got a whole bunch of different plans. If you like your plan and you like your doctor, you won’t have to do a thing. You keep your plan. You keep your doctor. If your employer is providing you good health insurance, terrific, we’re not going to mess with it.
But if you’re a small business person, if the insurance that’s being offered is something you can’t afford, if you want to shop for a better price, then you can go to this exchange, this marketplace, and you can look: Okay, this is how much this plan costs, this is how much that plan costs, this is what the coverage is like, this is what fits for my family. As one of those options, for us to be able to say, here’s a public option that’s not profit-driven, that can keep down administrative costs and that provides you good, quality care for a reasonable price — as one of the options for you to choose, I think that makes sense.
Does this make sense? I don’t think it necessarily does. After all we don’t need a government grocery store, a government video store, or government car dealers (hmmm, scratch that last one), to keep prices reasonable and affordable (and even with cars we still don’t need the government to keep prices reasonable). So why would this government plan be able to offer the same types of coverage at a lower cost? What is the basis for this belief?
President Obama mentions lower administrative costs? Is he thinking that the plans in this “health exchange” will be like Medicare? But the question then becomes, why are Medicare’s administrative costs so low? Is it, at least in part, that Medicare doesn’t have to screen out for pre-existing conditions? If that is the case, then the overall costs might actually higher (lower administrative costs, but higher costs in terms of treating people with pre-existing conditions), this would preclude the viability of the public option since as President Obama already notes, the private options are too expensive. An even more expensive public option is not going to be anymore attractive.
If the above is true, the only way for the public option to become viable is for it to use taxpayer money—i.e. subsidies. But here we have another problem as seen by the following exchange,
Q Won’t that drive private insurers out of business?
THE PRESIDENT: Why would it drive private insurers out of business? If private insurers say that the marketplace provides the best quality health care, if they tell us that they’re offering a good deal, then why is it that the government — which they say can’t run anything — suddenly is going to drive them out of business? That’s not logical.
It is quite logical if the public option is subsidized by taxpayer money. In that case, private insurance providers who are seeking to maximize profits will not be able to compete if the public option plan is priced too low due to the subsidies.
The only other possible way for the public option to be cheaper and not rely on taxpayer money is if there health care insurance providers have market power and are engaging in some type of price discrimination when it comes to charging firms for employee benefits. However, even here there are possible alternative policies to creating a government run health care plan that would have tremendous pressure to use taxpayer money to fund. For example, if there is market power and price discrimination the solution is to promote more competition not reduce it. To do this would require identifying and removing barriers to entry into geographic regions for the health care insurance market. And it is quite likely that the barriers are a result of state, local and the federal governments. Various regulatory requirements may restrict entry and thereby grant incumbents in the market power to raise prices and restrict output.
And we have to keep in mind that there are going to be tremendous pressure on whatever entity is in charge of this new program and politicians as well. Rent seeking is how most people in DC make their living—finding ways to acquire income that they have not earned.
Now, by the way, I should point out that part of the reform that we’ve suggested is that if you want to be a private insurer as part of the exchange, as part of this marketplace, this menu of options that people can choose from, we’re going to have some different rules for all insurance companies — one of them being that you can’t preclude people from getting health insurance because of a pre-existing condition, you can’t cherry pick and just take the healthiest people.
Here is one possibility: the public option has only those with pre-existing conditions or is dominated by such people. After all, suppose we have two plans a public plan and a private plan. If you are healthy then the private plan may look okay. If you have a pre-existing condition you can’t sign up for the private plan unless it wants to go into the public option pool. So private plans might still exist, but “skim the cream” off the public pool options. This might “significantly lower administrative costs” but it will likely result in significantly higher premiums. In this case, the public option pool will provide no discipline for the private market as they really are no longer in competition. Further, the public pool option could end up being very expensive and the pressure to subsidize it will increase even more. I’d argue it would be almost certain that the government would subsidize it with taxpayer dollars. Now, a subsidized public pool very well could look more attractive to people on the private plan. Thus, it is basically a way to backdoor for a single payer system run by the government. And once there are no more private plans, then the government can start reducing the supply of health care.
Because once the government is the dominant player, possibly even the only player, it is now a monopsony. And a monopsony can dictate price in the market place. Now that might sound good at first glance, but let us go back to fundamental economics. If you set the price below the market clearing price what happens? Supply is less than demand. You have less of whatever good in question has a monopsony. The reason for this is simple and pretty much inescapable. With the price below the market clearing price firms that would otherwise be earning profits and producing no longer earn a profit and shut down, and firms that are shut down produce nothing. This should not be a shocking result. A market where there are many buyers and sellers is part of the definition of a competitive market. Competitive markets tend to have lower prices and more output than markets with less competition.
In the end, I can see all of this reducing the amount of health care people have access too, and maybe that is what needs to happen. However, I think it is dishonest to pretend that people can have more health care and pay less for it and reduce growth rates of costs all at the same time. That is not logical.
Photo by Flickr user Brooks Elliot, used under the Creative Commons License.
The hurried legislation adopted by a Congress voting under the threat of sudden global economic collapse led to hidden tax breaks for firms in dozens of industries. They included builders of Nascar auto-racing tracks, restaurant chains such as Burger King Holdings Inc., movie and television producers — and London’s Diageo.
“It’s kind of like the magician’s sleight of hand,” says former House Ways and Means Committee Chairman William Thomas, a California Republican who ran the committee from 2001 to 2007 and oversaw all tax legislation. “They snuck these things in a bill that was focused on other things.”
Congress inserted the tax benefits for companies other than banks in a fog of confusion and panic after the House of Representatives rejected the first attempt to fund the bank support effort urged by then President George W. Bush and Treasury Secretary Henry Paulson.
Rubber Stamped
Lawmakers rubber-stamped the package of arcane, if innocuous-sounding, tax items with one eye on the calendar. An election was only a few weeks away, and legislators were desperate to return home to campaign for their own re-election.
A year later, lawmakers and the public are just now discovering some of the curious subsidies tucked into TARP and the government’s other massive intervention programs. Four months after TARP took effect, President Barack Obama pushed through a $787 billion bill intended to pump up the nation’s economy.
[…]
“You had this remarkable brief period with no transparency, filled with backroom deals being made and an absolute blackout of information,” says Jim Lucier, a senior political analyst at Capital Alpha Partners LLC, a Washington firm that tracks legislation for hedge funds and institutional investors.
Referring to TARP tax breaks, he says, “It’s ridiculous and it’s a product of the legislative sausage-making machine.”
Baucus didn’t know until months later, Sullivan says, that one of those added provisions would steer about $2.7 billion to Diageo over the next three decades. That’s because Diageo wasn’t even mentioned in the bill and lawmakers didn’t realize they were ratifying deJongh’s deal by extending the underlying tax policy that made the agreement possible in the first place.
One, championed by Michigan Representative Dave Camp, the top Republican on the tax-writing House Ways and Means Committee, and supported by Baucus, is saving Nascar track builders $109 million in taxes this year by allowing more generous write-offs.
[…]
It also effectively cements a $33 million break for companies that invest in American Samoa. That benefit had been targeted at tuna canners such as Del Monte Foods Co., which owned the StarKist tuna brand until Seoul, South Korea-based Dongwon Group bought it in June 2008. Del Monte is based in House Speaker Nancy Pelosi’s San Francisco district.
Matt Welch writes,
Remember this, the next time some politician or editorial board talks of “the cost of doing nothing” (which will be today, tomorrow, and every day that Congress debates health care and climate change). This list above, multiplied a thousand times, is the routine and utterly predictable cost of doing something. Politically connected industries and companies will be given micro-targeted tax breaks and subsidies, while the rest of us shlubs will not only pay for them, we’ll get an earful of sanctimony from the Washington Post, David Brooks, and even the Wall Street Journal editorial board, especially those who have the nerve to say “Hold on a sec.”
This is quite right. And health care will make this look like chump change. The idea that Obama and his Administration are different is just simply not true. This is how things have been done in Washington D.C. for decades, and it is how things will continue to be done. Each and every one of these big sweeping proposals President Obama wants to enact will likely carry the same problems with it.
Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.
In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.
In a letter to the CEO’s of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold “may be too onerous” and could lead condo buyers to shun new developments, according to the paper.
The legislators asked the companies to “make appropriate adjustments” to their underwriting standards for condos, the paper added.
Just another example of the failure of the market. When will we just be done with this silly market thing and switch over to a command-and-control economy with politicians in charge?
…how about some movie passes? From Radley Balko comes this story of a wrong door raid and the counties offer for compensation was some free movie passes. Yes, free movie passes.
Kenyan immigrant Nancy Njoroge had been living in the United States for a year when a Montgomery County SWAT team burst into her Gaithersburg apartment at 4 a.m., handcuffed her and her two teenage daughters, and searched her apartment, court records show. Police found nothing.
The reason: Njoroge lived in No. 202 of her apartment complex. The police had a search warrant for apartment 201.
After rejecting an offer from the county’s claims adjuster of a “couple of movie passes,” the American Civil Liberties Union is suing the county on the family’s behalf for unspecified damages, according to ACLU records filed in court.
The ACLU said the purpose of the lawsuit was to hold the police department accountable for its mistake. “Officers had but one apartment to locate, in a quiet and well-lit hallway in the dead of night, without distraction and with clearly marked doors and numbers,” ACLU lawyer Fritz Mulhauser said in a letter to the county.
Sounds fair to me, have your door kicked in, put on the floor handcuffed and had assualt weapons pointed at you at 4 am for doing nothing wrong….yeah movie passes, sounds reasonable.
Court records don’t give a clear reason why the police raided the wrong apartment, and the county attorney assigned to the case did not respond to inquiries for the story. But in court records, a SWAT team leader indicated that it was an isolated incident.
“In six years as the supervisor of the tactical section, I have led approximately 600 raids,” Sgt. Darin Magee, whose job was to lead the SWAT team to the correct apartment, said in a statement. “This is the first such error that I have made and I hope this will be considered when the situation is judged.”
I love this. Its always an isolated incident. And we have know way to verify if Sgt. Darin Magee is lying or not. Until quite recently there was no requirement to record anything about SWAT raids in Maryland. Whether they were successful or not, whether it was on the on the right address, whether drugs or whatever else was found, injuries, etc. All we have to go by is the word of a cop, who if he’s had more than one bad raid could affect his career (no incentive to lie there, nope). And the city/county has no reason to keep records an a huge incentive not too–lawsuits. Oh wait, I know how they can spin it, by not keeping records and not offering up a clear account of how many botched raids there have been, the police are protecting citizens from having to pay out large settlements for their incompetence. Yeah, that’s the ticket.
Even if police always got the right house and every raid were performed flawlessly (and that’s obviously not the case), the image of police dressed as soldiers routinely breaking into private homes to serve warrants for non-violent crimes is one we ought to find disturbing. At one time we did. There’s an old Cold War saying, “Democracy means that when there’s a knock at the door at 3am, it’s probably the milkman.” Masked government agents dressed in black barging into private homes in the middle of the night was once an image we associated with totalitarian states. We seem to be troublingly comfortable with it, now.–emphasis added
Indeed we seem to like the fact that police officers are armed with machine guns, tasers, databases, and can enter our homes on even the flimsiest of evidence.
Radley Balko continues to cover “wrong door no-knock raids” and police militarization here.
The Supreme Court has ruled (a 5-4 decision) that a person who has been convicted of a crime, and when there is DNA evidence present that could conclusively prove innocence or guilt, there is no Constitutional right to have the DNA tested or requirement for the prosecutors to hand the evidence over to the convict’s attorney.
Chief Justice John G. Roberts, Jr., writing for the majority in District Attorney’s Office v. Osborne (08-6), noted that DNA testing provides “an unparalleled ability” to prove innocence or guilt, but its availability “cannot mean that every criminal conviction, or even every criminal conviction involving biological evidence, is suddenly in doubt.”
This is statement is problematic because upon testing the DNA the probability of guilt or innocence will likely change, and in the case of where there is not a match the probability of guilt will fall. How much depends on each case, but it could fall by quite a bit. For example, in a case where you have a young girl (say a pre-teen) and DNA evidence is from semen, the likelihood that the semen is from someone other than the guilty party is unlikely. Even if you were 99% sure that the person now convicted of the crime is guilty the probability of guilt could drop by quite a bit. Conditional probabilities are actually the ratio of two probabilities and as such are non-linear and can move in unpredictable ways. So while the statement is true on its face in that not every criminal conviction involving biological evidence is suddenly in doubt, some of them might very well be very much in doubt. Sweeping those under the rug is based on a poor grasp of probabilistic reasoning.
The task of writing rules to control access to DNA evidence “belongs primarily” to the legislature, the Chief Justice wrote. Pursuing a “freestanding and far-reaching constitutional right of access” to DNA evidence through a civil rights lawsuit, Roberts wrote, would “short-circuit” efforts now being made by the federal government and many states to develop tools on access to such evidence. “There is no reason to constitutionalize” access through the courts when elected officials are making “a prompt and considered” response to the DNA phenomenon, the opinion concluded.
What an interesting time to suddenly find one’s federalist views. I would think that the interest of justice would indicate that you wouldn’t want a patchwork of different approaches to the problem. And we should keep in mind that it is often the case that prosecutors will actually try to stop a convict from testing the DNA evidence it would seem that forcing the issue sooner vs. later in the name of justice would seem the right thing to do.
From the NY Times article on prosecutors denying access to DNA testing,
A recent analysis of 225 DNA exonerations by Brandon L. Garrett, a professor at the University of Virginia School of Law, found that prosecutors opposed DNA testing in almost one out of five cases. In many of the others, they initially opposed testing but ultimately agreed to it. In 98 of those 225 cases, the DNA test identified the real culprit.
What is not being pointed out here is that eye-witness testimony is not nearly as reliable as some might initially think. These people were not convicted without other evidence. I’m sure than of the 98 where the real culprit was identified many of those cases relied on eyewitness testimony, but that that testimony was simply wrong.
Back the SCOTUS decision:
In an opinion written by Justice Samuel A. Alito, Jr., he and Justice Anthony M. Kennedy also said that, if a defense lawyer fails to seek DNA testing during trial, and does so for tactical reasons, there is no constitutional right to seek access following conviction.
I’m no expert on the law, but it seems to me that this could be very bad. After all, many requests for DNA testing are from cases that pre-date DNA testing, but where the DNA was preserved (i.e. part of a rape kit). If, post conviction, a person cannot get access to the DNA simply because of this reason then an injustice has been done. I guess it depends on how one interprets not asking for DNA testing. In 1979 when there was no testing, then using the “not asking rule” here could possibly further instances of injustice.
And going back to the article on prosecutors hampering access to tests,
In a case before the Pennsylvania Supreme Court, for example, Lynne Abraham, the Philadelphia district attorney, argued that the defendant, Anthony Wright, was not entitled to DNA testing because of the overwhelming evidence presented at trial, including his confession, four witnesses and clothing stained with the victims’ blood that the police said was found at Mr. Wright’s home. The Pennsylvania DNA statute requires the courts to determine if there is a “reasonable possibility” that the test would prove innocence.
This weakens both the Chief Justice’s arguments and those of Alito, in my view. What exactly is a “reasonable possibility” and how do you square it with the DNA results? If in the above case the DNA test comes back and points towards exoneration of Mr. Wright, what then? There is the issue of initial precision and final precision in statistics. Initial precision is where one is concerned mainly with procedures. That is the researcher is confident that following a set of procedures will generally give the right result (hence the term confidence intervals). Final precision is concerned with accuracy of the estimate after the sample information is observed. This strikes me as the problem with the “reasonable possibility” test above. It is focusing on procedure vs. the accuracy of the final result. When we are talking about incarcerating people for a long time and in some cases state sanctioned executions, perhaps we should take a final precision view point. Do the damn test and be double damn sure.
I really don’t see what the problem is at this point with granting access. It is almost as if the prosecution has something to hide and the Supreme Court is going to help them hide it.
UPDATE (James Joyner): Alito’s point makes some sense, in that we don’t want to give convicted felons a second bite at the apple if their first strategy fails. But I’m generally in agreement that, if DNA testing would be conclusive, it should be done. As technology changes, so does the definition of “due process.”
Once someone has been convicted, the burden of proof switches to them to prove their innocence; they are no longer considered innocent and the “reasonable doubt” standard no longer holds. Nor should it. But there has to be a way to craft a standard that simultaneously allows legitimate exculpatory evidence and doesn’t turn every conviction into an infinite circus.
UPDATE II (James Joyner): Glenn Reynolds, who unlike Steve and myself is not only a lawyer but a lawprof, weighs in:
This is, alas, consistent with prior law, which made evidence of “actual innocence” surprisingly unimportant post-conviction. It’s also something that can — and should — be corrected by legislation. Will Congress act? It should, and so should state legislatures. Anyone who criticizes such legislation as “soft on crime” should be immediately pantsed, as it would, of course, benefit only the innocent.
Those of us who are objectively pro-innocence should hope so.
Photo by Flickr user gravitywave under Creative Commons license.
Its behind the WSJ subscription but here are the basics of the story,
And so the WSJ recounts the tale of a security based on $29 million (par) worth of subprime loans in California, half of which were already delinquent or in default. Betting that the loans weren’t worth $29 million sounds like easy money, and the smart guys were willing to pay 80 to 90 cents for each dollar of CDS insurance.
It appears from the WSJ account as if little Amherst Holdings of Austin, Texas was happy to sell the big guys like J.P. Morgan Chase, Royal Bank of Scotland, and Bank of America something like $130 million notional CDS on a $27 million credit event, used the proceeds to buy off and make good the underlying subprime loans, and pocketed $70 million or so for their troubles. The big guys, on the other hand, paid perhaps a hundred million and got back zip.
Said big guys, naturally, are screaming bloody murder, trying to bring in the lawyers to show that Amherst wasn’t playing by the rules of the game.
Brilliant. Of course it was not without its risks. If the security went bad before they collected at the money to make the loans good they’d be holding the bag for tens of millions. Still this was a smart an obvious move. Once the dollar value being wagered on a credit event exceeds the value of the credit event itself those issueing credit default swaps have an incentive to buy the object, relieve the debtor of his debt and be out only the dollar value of the credit object itself.
Of course, if you want to stop this kind of thing then, as Prof. Hamilton notes, you’d have to prevent the notional value not exceed the actual value. That is you cannot sell CDS past the actual value of the credit object at issue. In the case above, at most you could sell only $29 million in CDS. Either that or some sort of law requiring disclosure on how much in CDS a particular credit object has. Once the notional value equals the par value stop buying the CDS.
MEDICARE expenditures threaten to crush the federal budget, yet the Obama administration is proposing that we start by spending more now so we can spend less later.
This runs the risk of becoming the new voodoo economics. If we can’t realize significant savings in health care costs now, don’t expect savings in the future, either.
I think this is right. I’d love to see the success ratio of programs that started out by spedning more money, then later spent less. I’m thinking the list of successful programs is going to be really dang small.
It’s not the profits of the drug companies or the overhead of the insurance companies that make American health care so expensive, but the financial incentives for doctors and medical institutions to recommend more procedures, whether or not they are effective. So far, the American people have been unwilling to say no.
Not so sure about this. Not that I don’t think it is happening, I just don’t think the U.S. health care problem can be summarized so…neatly. Dave Schuler has gone a long way to convincing me that there is indeed a supply problem. Heck, we actually import nurses from places like the Phillippines vs. training our own even though U.S. nursing schools have long waiting lists for admission. I also think that the incentives are screwy. For example, a young person might think that obtaining health care is a suckers game. So long as he doesn’t have much in the way of assets why not gamble that he’ll not need health care and spend that money elsewhere? Then, there is employer provided health care which comes with a nice tax break. People would have much leaner health care benefits packages if they had to pay for it with after-tax dollars.
Still this is not a big problem for the next several paragraphs in the story. These look at using comparative-effectiveness studies as a way of redcing Medicare expenditures. A great idea actually. Yes its limiting what procedures people can get. Yes its a type of rationing. So what. It is also an attempt to say, “We aren’t going to subsidize every possible medical procedure out there.” And the market/price mechanism rations resources.
Prof. Cowen closes with,
The demand for universal coverage sounds like a moral imperative to “take care of everybody,” but in reality it would make only a marginal difference when it comes to the overall health of the American population. The sober reality is that universal coverage is another way to spend money, which may or may not be a good idea.
The most likely possibility is that the government will spend more on health care today, promise to realize savings tomorrow and never succeed in lowering costs. It is rare that governments successfully cut costs by first spending more money.
Mr. Obama has pledged to be a fiscally responsible president. This is the biggest chance so far to see whether he means it.
I agree here. If we are going to get health care savings we need to get them now, not later.
Paul Samuelson has written a rather short and bleak article on our current economic situation.
Up until now, China has been willing to hold her recycled resources in the form of lowest-yield U.S. Treasury bills. That’s still good news. But almost certainly it cannot and will not last.
Some day — maybe even soon — China will turn pessimistic on the U.S. dollar. That means lethal troubles for the future U.S. economy. When a disorderly run against the dollar occurs, I believe a truly global financial panic is to be feared.
China, Japan and Korea now hold dollars not because they think dollars will stay safe. Why then? They do this primarily because that is a way that can prolong their export-led growth.
I am not alone in this paranoid future balance-of-payment fear. Warren Buffett, for one, has turned protectionist. Alas, protectionism may well soon become more maligned.
President Obama struggles to support free trade. But as a canny centrist president, he will be very pressed to compromise. And he will be under new chronic pressures. His experts should right now be making plans for America to become subordinate to China where world economic leadership is concerned.
The Obama team is a good one. But will they act prudently to adjust to America’s becoming the secondary global society? In the chess game of geopolitics between now and 2050, much stormy weather will take place. Now is the time to prepare for what the future will likely be.
As I’ve noted in my last post and in comments to other posts that currently the U.S. relies to a considerable extent on foreigners to buy U.S. government debt. Further, without these foreign buyers of U.S. government debt the U.S. would likely have to offer its debt at a higher interest rate.
At the same time the current recession will likely result in a budget deficit of at least a trillion dollars this year and probably next. Further, we have TARP, the current stimulus plan and a $75 billion dollar proposal to help bailout homeowners sideways on their mortgages and talk of TARP 2.0. All of this could add close to $2.3 trillion dollars to the national debt. Adding on the deficits just due to reduced tax revenues and we are looking at $4.3 trillion dollars, at least. Currently the national debt is around $10 trillion. So in a few years we could be looking at a national debt of $14 trillion dollars. [1]
In addition as I have mentioned several times Medicare and Social Security are in actuarial imbalance to the tune of at least $40 trillion dollars. Further, the problem with Social Security and Medicare are not that far off.
All of this combined could make foreign buyers of U.S. government debt very cautious of buying even more. The U.S. could have to offer such debt at a higher interest rate. The effects of this would be to reduce potential economic growth for the foreseeable future.
Foreign demand for long-term U.S. financial assets fell in April as both China and Japan trimmed their holdings of Treasury securities.
The Treasury Department said Monday that net purchases of stocks, notes and bonds obtained by foreigners fell to $11.2 billion in April, from $55.4 billion in March.
China, the largest holder of U.S. Treasury securities, trimmed its holdings to $763.5 billion in April, from $767.9 billion in March. Japan, the second largest holder of Treasury securities, reduced its holdings to $685.9 billion, from $686.7 billion a month earlier.
Treasury Secretary Timothy Geithner traveled to Beijing earlier this month to assure the Chinese government that the Obama administration is determined to get control of an exploding U.S. budget deficit, which is projected to hit a record $1.84 trillion this year.
China’s holdings of Treasury securities represent about 10 percent of America’s publicly held debt.
The administration has said while its aggressive moves to fight the recession and a severe financial crisis will push up the budget deficit temporarily, it intends to reduce the deficit as soon as the economic situation permits.
And that final comment about reducing the deficit is just short term, the longer term picture is indeed bleak. Medicare, Social Security, Obama Care, and so forth will likely mean that the deficits will start to rise shortly after the end President Obama’s first term in office. The Chinese, Japanese, and other investors are not stupid. They have undoubtedly read the reports on Medicare, Social Security and so forth. They also likely know that pledges to reduce budget deficits are standard political cheap talk as well.
With the government’s borrowing needs soaring, there have been some concerns that foreign interest in holding U.S. debt might falter, causing interest rates to rise.
The administration contends that recent increases in the interest rates for U.S. Treasury securities were not a sign of investor unease but a reflection of improving economic conditions.
Yeah, a great economic recovery is just around the corner (ask Brad DeLong). Don’t get me wrong, I want DeLong to be right and I have to eat my words. It is just that in looking at data I have available, data Prof. Hamilton has put together, and keeping in mind the long lag time for unemployment to recover from the past two recessions I don’t think Brad DeLong is going to be right.
I think the answer to Paul Samuelson’s question is no.
This article on how the International Olympic Committee picks host cities is a great way of demonstrating the problems with voting and Arrow’s Impossibility Theorem.
In selecting a host city, the IOC, acting like a papal conclave, takes a series of votes until a candidate receives a majority. Each of the 100-plus IOC members gets one vote, and after every round the city with the fewest votes is eliminated. In the competition for the 2012 Games, Moscow expired in the first round, New York in the second. Madrid was the top vote-getter in Round 2, but it got the ax in Round 3. London edged out Paris, 54–50, in the final vote.
This violates the independence of irrelevant alternatives part of Arrow’s theorem. That is the rankings of a subset of the possible choices should be the same if we increased possible choices. But this isn’t always the case. Removing the city with the least number of votes can change the outcome each successive round of voting. That is, if Madrid was at the top in the second round it shouldn’t have plunged to the bottom by the third round if the independence of irrelevant alternatives is to hold.
For centuries philosophers, mathematicians, political scientists and economists have searched for the best method of voting. Fifty-eight years ago the economist Kenneth Arrow (later a Nobel laureate) decided to see whether any voting rule could avoid the problems we’ve illustrated. Fix them all at once, he found, and you get–a dictatorship. One voter calls the shots every time. Arrow’s “impossibility theorem” demonstrates that no system of voting always gives the “right” result.
Which I think also goes along well with the quote by Winston Churchill,
Many forms of Government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.
These two stories indicate that Obama just isn’t serious about limiting spending and deficits. The first is about how President is trying to earn some credibility for fiscal responsibility.
President Barack Obama sought on Tuesday to show he was serious about improving the U.S. budget picture as he called on Congress to pass new limits on tax cuts and spending programs to avoid adding to deficits.
Obama urged passage of “pay-as-you-go” legislation that would require any new tax cut or automatic spending program to be paid for within the budget.
“The ‘pay as you go’ principle is very simple. Congress can only spend a dollar if it saves a dollar elsewhere,” Obama said in a speech at the White House attended by several Democratic members of Congress.
“Entitlement increases and tax cuts need to be paid for. They are not free,” said Obama, who has been criticized by Republicans for proposing a hefty domestic agenda that includes overhauling the health care system, bolstering education and tackling global climate change.
Now that isn’t too bad, although taking it too far could be bad if it leads to a situation like in California where the state is having to cut spending at precisely the wrong time.
This next bit is rather amusing,
“The reckless fiscal policies of the past have left us in a very deep hole,” Obama said. “Digging our way out will take time and patience and tough choices.”
Indeed and considering President Obama’s own role in creating these reckless fiscal policies I guess he knows what he is talking about. And yes, to be sure it isn’t all Obama’s fault, but his budget this year does rack up a rather impressive deficit by just about any measure.
Then we get the second article that has President Obama saying that don’t worry that “pay-as-you-go” thing, well not for health care. For health care, borrow as much as you want.
President Barack Obama on Tuesday proposed budget rules that would allow Congress to borrow tens of billions of dollars and put the nation deeper in debt to jump-start the administration’s emerging health care overhaul.
The “pay-as-you-go” budget formula plan is significantly weaker than a proposal Obama issued with little fanfare last month.
It would carve out about $2.5 trillion worth of exemptions for Obama’s priorities over the next decade. His health care reform plan also would get a green light to run big deficits in its early years. But over a decade, Congress would have to come up with money to cover those early year deficits.
Guess he didn’t want that fiscal responsibility credibility anyways.
The federal deficit is on pace to explode past $1.8 trillion this year, more than four times last year’s all-time high. The record borrowing is credited with pushing up interest rates, which could imperil chances for a recovery later in the year.
