Mitt Romney: No Apology: Chapter Seven: Healing Health Care. (The Anecdotal Argument.)

November 26, 2010 by · 3 Comments
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Romney explains his successful plan for health care in Massachusetts when he was Governor. This plan was successful in inducing 97% of the population to join through tax incentives and penalties on both employers and employees and individuals who were unemployed. Seniors of course were already insured through Medicare. The poor already got healthcare through federal- state funded Medicaid.
By redirecting federal funds for Medicaid, inducing healthy uninsured people to buy health insurance (thus enlarging the insurance pool with better risks) and by a state subsidy for the very poor to help them to buy coverage according to their means, and by tax incentives on employers and employees the state was able to achieve nearly universal coverage at a cost of approximately $350 million to the taxpayer or about 1% of the budget. Federal Medicaid funds made this possible also so the cost to the taxpayer is really not as dramatic as he would have us believe.
The Massachusetts plan does not control the rising cost of health care in Massachusetts nor does it address the cost of catastrophic health care and who should pay. It did create a plan that was affordable to at least 97% of the population. (The Tea Partiers criticize him on this because of the tax aspects. However Romney should be commended for devising a plan that provided basic health care to the vast majority of his constituents.) Also the plan is recent so the jury is still out. If costs are not contained premiums will rise and people may opt out preferring to pay the tax penalty rather than the penalty. Also the tax penalties for not participating my be unconstutional.

Romney states the Federal plan just enacted, Medicare and Medicaid will not work and are on the way to bankrupting the taxpayer and the Federal Government. The reason for this is that the incentives are all on the wrong people. Doctors are paid for the number of procedures performed. Patients have no incentive to control unnecessary tests and procedures because they are not paying for them. Also doctors are not paid for the quality of their work. Therefore the plans cited above are structurally deficient because they are not market orientated in rewarding and incentivizing health care for the best care at the most reasonable cost.
He gives numerous examples of various Health Care plans already in place in communities around the country that do work at reasonable cost. These include HMO’s like Kaiser (Kaisers premium costs are comparable to private insurance costs for the same coverage) and groups like the Mayo Clinic of Minnesota and Arizona. Also he fails to note many HMO’s are owned by insurance companies and are run for profit not cutting premium costs.
He cites and compares McAllen, Texas as one of the expensive places for medical care and gives an example of the number of tests given for one complaint (One time transitory chest pain in a woman with no prior history of heart problems.) where only one test would be given fifty years ago six would be given now.
He compares the single payer systems in Europe and Canada and finds that their statistics on satisfaction and costs are skewed. One example is infant mortalities. In many countries, including single payer ones, efforts to save high risk deliveries are not made and the statistics of babies born dead or who die in a few hours are not included in infant mortality rates. However in this country, with highly skilled doctors and nurses along with well equipped facilities, where extraordinary measures are taken, many infants survive but many die in a few days or weeks. As a result these high risk infants who die are entered in to our infant mortality rates thus making it look higher than some single payer countries or even third world countries. Another is the wait time for colonoscopies in England. 60 days according to his anecdotal account of his son’s experience. (This is not a valid comparison for many reasons including the age of his son. I doubt if any Englishmen die while waiting for a necessary test to be performed timely.)

Health Savings Accounts

Health Savings Accounts is another method Romney mentions where individuals are given a credit against Medicare taxes and place it in a savings account to pay routine medical expenses. They would back this up with a low cost catastrophic policy. (This is pie in the sky; while some people are disciplined enough to do this a Federal Plan covers all people from all walks of life. Many who live from paycheck to paycheck or borrow against the next paycheck at high rates of interest would raid these accounts to meet perceived necessities. Then of course there are those who live on food stamps and welfare and only see a doctor in an emergency room, how would they be provided for, subsidized accounts? A plan for disaster if there ever was one.

Would your friendly broker or financial consultant get into the act by alleging that he or she could increase the returns on these HSA’s. In a free and unregulated private market the sophisticated would soon make mince meat of the unsophisticated.)

Thus Romney believes that a market driven system of health care would out perform a single payer system or that the systems we have in place now will eventually bankrupt the country or cause severe political unrest. Romney is right about uncontrolled medical costs but even private insurance plans have never controlled costs and have no incentive to do so when their profits (usually 20%) increase with premiums charged. Also the private market is able to cherry pick insureds leaving the worst to self insure or to welfare. Also private insurance companies frequently find ways to avoid obligations by creating or finding reasons to rescind policies when an insured faces a serious loss.
Therefore a market driven private system has already proven itself to be inadequate at providing satisfactory coverage and claims procedures at reasonable rates for everyone.
(The plan to cover everyone through has some advantages. First the risk pool is greater so the advantages of insurance are better utilized (everyone pays for some part of a major loss. Thus spreading the risk. Everyone is paying except those that don’t pay taxes. We would no longer need state insurance commissioners at least for health insurance and that would take politics out of the equation at least at the state level. With electronic reporting more complete data comparison could be made for procedures and costs. Thus limiting opportunities for unnecessary procedures, overcharging and fraud. It will lessen the need for legions of lobbyists corrupting the political system. The Federal government has the US. Attorney’s office to prosecute egregious defalcations. This would put some downward pressure on unnecessary procedures and costs but it doesn’t create the incentive driven controls necessary to make the system work.
This aspect remains the central problem of all systems public and private and must be addressed. Romney says the solution is a single visit payment instead of a payment for each and every procedure. This seems inadequate as it would encourage medical providers to schedule more visits. (Instead of fifteen minutes you would get five, but more often.)
Lastly malpractice is not a cause of the cost spiral it is the profit motive of the medical profession and the lack of involvement in paying for the procedures by the patient that is the cause. Without malpractice remedies many egregious procedures would take place like the practice of administering hysterectomies to young women with good insurance. Further it has been shown many times over that most professions are reluctant to police their own members. If malpractice suits were taken out of the equation costs would likely go up as it would embolden the profit driven to do ever more risky procedures with disastrous results for the patient and subsequent costs.)


Mitt Romney: No Apology: Chapter Six: The Worst Generation. Social Security, Medicare, Medicaid. Public Employee Benefits. Romney says, “Let Them Eat Cake To The Nations Middle Class And Poor.”

November 15, 2010 by · Leave a Comment
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Chapter Six draws its title from Tom Brokaw’s book about The Greatest Generation, the people who lived through the depression, fought WWII against Fascism and the Cold War against Communism. He doesn’t mention that these are the same people who elected Franklin Roosevelt, as their political leader during the depression and WWII, the man who was responsible for the New Deal. A policy that had a lot to do with this country remaining a democracy politically based on capitalist economic principles instead of turning to Fascism, Socialism, Communism or becoming a socialist democracy like England and other European countries.  So in the sense the way we are today is really the triumph of conservative principles when the World was going other ways.

The “worst generation” would be the generation that leaves the next generation with a bankrupt United States

The premise for this appellation is the increasing National Debt and his perception of unsustainable entitlement programs: Social Security, Medicare, Medicaid and Medicare Part D or the prescription drug program. He also addresses the benefit programs for public service workers who have unionized and extracted unsustainable benefit and pension programs from politicians afraid to say no to them.

These entitlement programs are the third rail of American politics and it is to his credit that he is willing to discuss them.

Social Security

He thinks that Social Security can be made solvent in the long run by some minor adjustments and he offers four possible solutions.

  1. 1. Raise the Social Security tax and or apply it to a greater share of an employee’s income or both. He leaves out all thoughts of a progressive tax. (God forbid.)
  2. 2. Gradually increase the retirement age. (This has been done up to 67. Not much room to move.)
  3. 3. Adjust benefits on the basis of the cost price index instead of the wage index which goes up much faster.
  4. 4. Allow earners to direct a portion of their Social Security taxes into individual retirement accounts like 401 k’s do now for private pensions. (After what Wall Street did to institutional investors recently. You wonder what would happen to individuals trying to guide their own investments with the advice of Wall Street.)
  5. 5. Another alternative not mentioned by Romney would be to continue to tax businesses for Social Security and Medicare obligations when they out source work outside the country as if the new employee was actually working in the U.S. This would preserve the social fabric of the middle and lower classes while leaving the wealthy to enjoy the stability of American society and culture.

As it is now payroll taxes would have to increase by 40 percent in twenty years to meet its Social Security obligations. This has to be considered with the fact there will be fewer workers supporting each retiree. An untenable political situation. (Obviously minor adjustments would solve the situation and would preserve a plan that works well and is valued by many.)

The Deficit Stategy

(He failed to mention that  the Bush tax cuts for the top 2% of  the wealthiest and unsupported by  cuts in spending  was a principle cause of the National Debt to balloon during his administration along with the War on Terror and the wars in Iraq and Afghanistan.  The 2% tax cut is unsustainable and it cost the government 700 billion in the last ten years and more in the future if not eliminated. Also it has no social, economic or political benefit to the stability of our democracy.

This tax cut of course is in line with the Republican orthodoxy of creating deficits, the brainchild of Grover Norquist and others, as means of cutting programs that benefit the middle class and the poor. 50% of retirees get half their income from Social Security and have medical peace of mind through Medicare.  This deficit strategy on all levels of government where conservative republicans have sway seems to be ubiquitous.  Witness the inability to fund programs for disabled children and the raising of student university fees seen in so many states today.)

Romney uses the deficit and reduced taxes as a rational for justifying reducing entitlement benefits and curbing benefits to public service workers. (While these problems are universally recognized, the methods of dealing with them differ. Boehner and McConnell cannot give up the idea that the 2% tax cut on the wealthiest which started the deficit spiral is sacred ground more so than the Entitlement programs that benefit all Americans in a positive way.)


However Romney says Medicare, which if unchecked will increase pay roll taxes by 250 percent in 20 years, cannot go on without major changes.   Romney suggests a flat rate per visit instead of an itemized charge for each thing done during a visit. A  Medicare program that is free to the patient and profitable to the provider who can order evermore diagnostic procedures and treatments will soon bankrupt the country.

Public Employee Benefit Programs

Benefit programs to public service employees will also bankrupt the communities they serve. (If they haven’t done so already.) Romney cites his experience when he ran for Governor of Massachusetts. He sought the support of the firefighters unions. He supported their commitment to fire safety, interoperable communications and other issues. However they wanted him to support a 25-75 plan.

After 25 years of service a firefighter could retire with 75% of the average of his highest three years salary. This meant that a man who began at 20 could retire at 45 and the state would pay benefits for the next thirty years, more than it cost for his 25 years of salary.

This individual could work elsewhere even for the state in another capacity. This would be an unsustainable cost to the public and he rejected the idea at the loss of union support. This problem is endemic throughout the United States and threatens to bankrupt the Cities, Counties and States who must tax its citizens to support these unreasonable benefits.


Medicaid is for the poor and a percentage is paid by the federal government with the balance borne by the individual state. Romney states a principle problem with Medicaid is that the wealthy escape the burdens of long term care by giving their wealth to their children and qualifying for Medicaid benefits to pay their nursing home bills.

In Sum

These problems must be addressed and soon or we will fall into a deficit trap it will be difficult if not impossible to escape.


Mitt Romney: No Apology: Chapter Five: Part B: What Went Wrong and What To Do Now . Romneys Economic Wish List. The Devil Will Be In The Details.

November 7, 2010 by · 2 Comments
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Chairman Grenspan Of The Federal Reserve Testifying To Congress That He Never Expected Bankers To Act Against Their Own And Share Holders Self Interest In Regard To The Real Estate Bubble.  




Romney explains his take on what caused the subprime mortgage bubble. He notes that housing price growth had increased steadily for around fifty years. The U.S Average Housing Price Index had risen from 105 in 1950  to 120 By  2000.  Suddenly in 2006 it had jumped to 200 in just 6 years. The cause of this according to Romney was: first politician’s wanted to increase  home ownership so the Federal Loan guarantors Fannie Mae and Freddie Mac were pressured to loosen creditor requirements. Home loans were made to persons with doubtful ability to repay the loans. However, prices were going up so even if a doubtful risk could not repay the loan he could always sell and get out with a profit after repaying the loan.   Banks kept making ever bigger loans to ever more doubtful creditors. Wall Street was happy to securitize packages of loans and sell them to investors.

The bubble grew while interest rates were low, however when interest rates started to tick up in 2008 the rate of foreclosures increased, housing values stalled and started to decline. Then the bubble burst. The securities sold by Wall Street declined in value or could not be assigned a value at all and investment banks holding securities for themselves or in hedge funds they managed  went bankrupt while others required a government bailout, including the insurance companies that insured the securities.  This spread into the general economy when millions of people learned their homes were worth less and  their pension plans and 401k’s were worth about half of what they were worth as a result of the bond market losses spreading to the stock market.

Consumer confidence went down and demand fell. A recession set in and layoffs multiplied.

(Here’s what he doesn’t mention. After 9/11 the Federal Reserve led by Chairman Greenspan lowered interest rates to less than one per cent to stimulate the economy. This actually was a negative interest rate when inflation, which was low, was added in. Low interest rates made it easier to buy a house . The Federal Reserve had the regulatory power to set requirements for creditors to meet for a home loan. Greenspan and other members of the Federal Reserve did not exercise this power because the prevailing philosophy of the Bush Administration and the Federal Reserve was the less regulation of the economy the better  and  that a  free market will always regulate itself .

Later, Greenspan testified before Congress on this issue saying, I never thought bankers would act against their own self interest, [in making and securitizing bad loans.] However whatever  the Federal Reserve thought a free market did not exist and probably could never exist in an economy as complex as the U.S economy.  Private interests acting in their own, short sighted, self interest did things like issuing and later securitizing NINJA loans to home buyers (No Income, No Job, No Assets.)

None of this would have happened if interest rates were not so low in the first place. After 9/11 purchasers of high grade bonds like pension funds , insurance companies, endowment funds and conservative investors in general had nowhere to invest to receive a reasonable return to beat inflation.  

Wall Street met that demand by securitizing packages of home loans and by sleight of hand arranging for rating agencies like Moody’s to give them the highest rating for safety.  This satisfied trustees and others that they had met their fiduciary requirements when they bought the bonds from the Wall Street salesman who operated on the principal of caveat emptor or let the buyer beware.

Thus if 9/11 had not happened, if interest rates were not lowered to stimulate the economy, if the Federal Reserve had enforced the regulations on the standards for home loans, if  buyers of bonds had exercised more discretion, if Congress had acted, if banks had acted more discreetly in lending and most of all if Wall Street had not deceived their institutional clients that they were buying low risk bonds when they were actually buying high risk trash maybe the subprime bubble would not have occurred.  What would have happened if  9/11 never occurred is anybody’s guess.)


Romney is in agreement with the two stimulus packages that have been passed to restore the economy. Although he thinks the second stimulus package came late and many parts  of the stimulus packages, especially the democratic package contained pet projects that did not stimulate the economy or create needed jobs.

Now the bad parts of the stimulus packages should be redirected to business development and taxes on business should be lowered. This would stimulate the economic engine and jobs would be created.

(This is an oversimplification as  American business has ample cash in their treasuries already. If every business hired a pro rata share of the unemployed this would end high unemployment put cash in the hands of consumers and create greater demand for the goods and services of American business. Then there would be no need for stimulus packages or further bailouts.)


Romney thinks the following are also necessary to stimulate the economy and promote growth , low taxes, dynamic regulation, educational achievement, investment in research, robust competition, free trade, energy security, purposeful immigration, elimination of government waste,  elimination  of excessive litigation, control of unsustainable entitlement liabilities, control of runaway healthcare costs and energy independence. This he says is his economic agenda for America. (Sounds like Mitch McConnell, No.)

(These are all pie in the sky generalities of course. The devil will be in the details and deciding whose ox will be gored. There is nothing in here about climate change, or green technology or even the application of nuclear power which the index says will be discussed later.)   


Mitt Romney: No Apology: Chapter Five: Part A: A Free And Productive Economy: Book Analysis. A Nelson Rockefeller Republican or Reagan Republican?

November 1, 2010 by · 3 Comments
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 The first part of this chapter concerns itself with the fact our Gross Domestic Product is the foundation for our standard of living, ability to defend ourselves and the basis of our being the preeminent power in the world. He deals with Social Security and entitlements in a later chapter.

Romney in writing this book says he consulted with experts and friends on the various chapters. So the beginning of this chapter is a text book explanation of capitalism and how it works through, innovation, investment, creative destruction and the statement that capitalism requires a free society. Romney adds some anecdotes of his experience as a venture capitalist as a partner at Bain and Company.  However the people who contributed to this book may be candidates  for his administration if he is ever elected.

 Capital formation, innovation and education create the matrix that drives the creativity and technology that makes  our society dominant in the world.

In our society there has to be pools of  capital or methods of raising capital with educated risk takers to find and support the creators of new inventions and technology. Over regulation, unnecessary taxation and deficit spending  are the enemies capitalism  

In Romney’s view government will never succeed in the venture capital business however once a new invention or  technology has been identified and recognized for its potential but requires massive capital investment then the government may become involved.

The Post Office is a necessary service in this country. In the beginning it was organized and promoted by the government. However it has never been profitable and remains so today even though it has been privatized. (The USPS remains unprofitable because by law it must carry and deliver certain types of mail at reduced rates). Fed Ex and UPS are innovative and profitable private companies allegedly because they are private and would go out of business if not profitable. (True, but they have taken the most profitable part of the postal business and don’t have to charge reduced rates to support communication in the public interest. The reason the government created the postal service in the first place was not for profit but to foster the exchange of ideas.)

IBM on the other hand could never master the desk top computer business and lost control of its own creation to more innovative companies. (This may have been a conscious decision on the part of IBM because it had survived a long and bitter antitrust law suit brought by the government. So it probably did not want monopoly status in the computer business.) Romney’s point is well taken that a free and productive society creates pools of capital, the universities, individuals and institutions that create new inventions and technologies. (True up to a point: The Tennessee Valley Authority, rural electrification and the benefits they have created are but one example that required government intervention because the electric companies although wealthy and in possession of the necessary expertise would not do it.)

Romney believes some regulation by government is necessary but over regulation tends to stifle productivity, creativity and creative destruction by maintaining certain inefficiencies for political reasons. Unions are also necessary to give voice to the needs of the workers but they also can stifle productivity and necessary changes through work rules, strikes and unsustainable benefit programs; witness the automotive industry (and also the steel industry.) Therefore a balance between these forces must be struck to keep  GDP, creativity and innovation high.

In writing this chapter Romney appears to be  more of a Nelson Rockefeller Republican rather than a follower of Ronald Reagan or even the Bush II wing of the Republican  Party in the case of domestic policy. Maybe because he actually got through Harvard Business School on his own rather than  on his father’s clout.

However he is for lower taxes and elimination of the deficit. Apparently he believes that lowering  taxes gives rise to greater investment which will expand the economy and government revenues needed to reduce the deficit will increase. (This sounds like a good idea but the fact is that  the majority of economists agree American companies are holding billions if not trillions of dollars in their treasuries and are not investing in the American economy. Probably because globalization is draining the manufacturing jobs from this country so there is no need to invest in new factories or equipment here. Green technology is still in the venture capital stage but it could be a venue for investment by the corporations with swollen treasuries. Major infrastructure investment like rebuilding highways and bridges have usually been a government responsibility.)  So far Romney tells us what worked in the past but does not give concrete ideas what will work in the future. Also he fails to point out that as a percentage of GDP debt service is now less than in the 1980’sand 90’s (3% : because interest rates are lower.) His idea of reducing taxes and the deficet, which is  at a higher percentage of GDP than in the 80’s and 90’s and government spending to bring us out of the recession are not valid criticisms of the present administration. Government spending should be higher during a recession to stimulate the economy but taxation should be lower, which Obama proposes for the middle class but not the top 2% of tax payers. (the 2% would have a diminimus effect on the economy anyway.) So technically  but not sustantively, he is half right.

His problem is in order to win the Republican nomination for president he must secure the support of the conservative wing of the Party who, for the most part, have an unreasonable view of fiscal and monetary policies.

These are the people who are always looking to the past for the solution to problems like energy, globalization, stimulus packages and tax policy not to the present and future for creative ideas and policies.