The musings of a physician who served the community for over six decades
367 Topics
Downtown A discussion about downtown area in Philadelphia and connections from today with its historical past.
West of Broad A collection of articles about the area west of Broad Street, Philadelphia, Pennsylvania.
Delaware (State of) Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Religious Philadelphia William Penn wanted a colony with religious freedom. A considerable number, if not the majority, of American religious denominations were founded in this city. The main misconception about religious Philadelphia is that it is Quaker-dominated. But the broader misconception is that it is not Quaker-dominated.
Particular Sights to See:Center City Taxi drivers tell tourists that Center City is a "shining city on a hill". During the Industrial Era, the city almost urbanized out to the county line, and then retreated. Right now, the urban center is surrounded by a semi-deserted ring of former factories.
Philadelphia's Middle Urban Ring Philadelphia grew rapidly for seventy years after the Civil War, then gradually lost population. Skyscrapers drain population upwards, suburbs beckon outwards. The result: a ring around center city, mixed prosperous and dilapidated. Future in doubt.
Historical Motor Excursion North of Philadelphia The narrow waist of New Jersey was the upper border of William Penn's vast land holdings, and the outer edge of Quaker influence. In 1776-77, Lord Howe made this strip the main highway of his attempt to subjugate the Colonies.
Land Tour Around Delaware Bay Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Tourist Trips Around Philadelphia and the Quaker Colonies The states of Pennsylvania, Delaware, and southern New Jersey all belonged to William Penn the Quaker. He was the largest private landholder in American history. Using explicit directions, comprehensive touring of the Quaker Colonies takes seven full days. Local residents would need a couple dozen one-day trips to get up to speed.
Touring Philadelphia's Western Regions Philadelpia County had two hundred farms in 1950, but is now thickly settled in all directions. Western regions along the Schuylkill are still spread out somewhat; with many historic estates.
Up the King's High Way New Jersey has a narrow waistline, with New York harbor at one end, and Delaware Bay on the other. Traffic and history travelled the Kings Highway along this path between New York and Philadelphia.
Arch Street: from Sixth to Second When the large meeting house at Fourth and Arch was built, many Quakers moved their houses to the area. At that time, "North of Market" implied the Quaker region of town.
Up Market Street to Sixth and Walnut Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
Sixth and Walnut over to Broad and Sansom In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Montgomery and Bucks Counties The Philadelphia metropolitan region has five Pennsylvania counties, four New Jersey counties, one northern county in the state of Delaware. Here are the four Pennsylvania suburban ones.
Northern Overland Escape Path of the Philadelphia Tories 1 of 1 (16) Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
City Hall to Chestnut Hill There are lots of ways to go from City Hall to Chestnut Hill, including the train from Suburban Station, or from 11th and Market. This tour imagines your driving your car out the Ben Franklin Parkway to Kelly Drive, and then up the Wissahickon.
Philadelphia Reflections is a history of the area around Philadelphia, PA
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Philadelphia Revelations
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George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.
Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”
After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.
He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.
After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).
A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.
He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.
A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.
Let's make this as succinct as we can: The Trader's Option is this: what risks will the trader likely take with his employer's money, when he is placed in the position of getting half of any winnings, but when he fails, he only gets fired. Almost any newspaper reports the millions and millions commonly available to lucky traders. There are indeed some timid souls who refuse to take risks of this sort, but on Wall Street, no one wants to hire them. Wall Street wants buccaneers, unafraid of risks. Make your pile as big as you can, take your lumps when you stumble, goodbye. Most of the time, someone else will hire you after six or ten months. No one will ask whether your failures were due to lack of skill or lack of luck. Napoleon once summed it up. He didn't hate unlucky generals, he just fired them.
The odds for the trader are not bad: The Trader's Option compensates richly for the turmoil of a sudden short period of unemployment, which tough-minded traders regard as the price of doing business. But what about the employer? It was his money the trader lost; if the mistakes are bad enough, the firm will go out of business. Unfortunately, often not.
If the traders are poorly trained and poorly controlled if the risk management is more talk than performance, the managers, of course, need to be fired, but ultimately the company goes out of business. But if the Federal Reserve comes along and rescues the company with an infusion of cash when no one else will consider it, moral hazard is created. The Buccaneers will take this rescue as a challenging dare to take even more risks in the future; in the long run, more banks will fail because of soft-heartedness than from tough love. No one worries about the offending bankers, the worry is that the innocent bystanders will get hurt. This is counterparty risk. If the bank is big enough, tangled up with every other major firm, almost everyone in the country could be an innocent bystander.
We will probably never know for certain whether the chaos from letting Bear Stearns fail would have been worse than the moral hazard we now have from rescuing Bear Stearns. What's absolutely clear is that we must quickly get out of the position where these choices have to be made. The completely sensible position is laid out in the proposal by the Federal Reserve to establish a central clearinghouse for financial instruments like Credit Derivatives, which will collect proportional assessments from all participants in the market, to be held in reserve against a market collapse. Not to protect the offending firm which mismanaged its affairs -- that firm must die -- but to protect all the innocent bystanders, the counterparties whose funds were tied up and possibly lost by the offender. The purpose of this insurance policy is not to protect the offender, but to free the hand of the Fed to snuff him out promptly. No one gets hurt here except the offender, and he better get wallopped.
Because the assumption is that a well-run firm will police its ruffians better than an outside regulator can ever hope to do, and will do so even more vigorously if there is absolutely no hope of pardon. The alternative to this bloody-minded approach is the regulation approach -- the Keystone Kops approach.
The November 2013 elections have been widely accepted to be a spectacular win for New Jersey Governor Chris Christie, suddenly making him a presidential front-runner for 2016. The only other significant election was a close win in the Virginia gubernatorial race for a fund-raising crony of Bill Clinton over the Attorney General who started the Supreme Court Case over Obamacare. In the view of the news media, there were only two elections in this off-year -- a landslide in New Jersey, and a dead heat in Virginia, for Governor.
Well, as a matter of fact, there was also an election in New Jersey for all of the members of the legislature, which means that I was running against the Democratic majority leader in the 6th Legislative District. I got 19,000 votes, but I needed more to win. At least in my family, it was a big event, particularly since no one else in New Jersey contributed a dime to my campaign, and while Governor Christie may have whispered a few encouraging words to me, there was no evidence of his assistance. But you can forget about that, too, because this election was really about the minimum wage.
The first inkling I got that something was up was receiving a sample ballot, three days before the election, where there was a referendum question about the minimum wage that no one had told me about, although it could scarcely have been a secret to get it on the ballot. And secondly, on election day there was scarcely any evidence of campaigning for Democrat candidates except for a few yard signs, but literally, dozens of campaign workers poured into the subway stations, handing out great volumes of campaign literature about the minimum wage. Even that went past me unnoticed, because who in the world would vote for a proposal which would increase unemployment during a severe recession? When I expressed the same sentiment to my Democratic friends, I was surprised to discover they all knew about it in advance. In retrospect, that was a fairly good indication that the Internet had selectively urged support of this proposition to the party faithful, but had not said one word in campaigning for it. It won endorsement by a heavy margin, as things soon turned out. What's worse, what had been endorsed by referendum had been to amend the constitution to this effect, automatically indexing it to the cost of living. It's going to be pretty hard to reverse that since all constitutions have been written to make it very hard to amend them.
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In the week after the election, I notice that several other states have been considering raising the minimum wage. An article appeared on the editorial page of the New York Times arguing that research showed there was no evidence that raising the minimum wage caused unemployment, and a few days later, Paul Krugman had a learned column on the Times editorial page to the effect that smart people all knew there was no reason to expect unemployment from raising the minimum wage, and only the hopelessly ignorant rubes would imagine there was reason to think so. Having spent some time with editorial writers, it seemed pretty evident to me that there was a nationally coordinated effort to convert this into a truism, accepted so widely it would be futile to argue against it. When it is also possible to see the existence of a campaign to impose a maximum wage (and not merely in Switzerland, where it was defeated on a ballot), the trajectory of a rising minimum wage meeting a falling maximum wage easily led to conjectures that what was really afoot was a campaign to take wages out of the marketplace. Or was that really the goal?
Ben Bernanke
For months, the Federal Reserve Chairman has been emphasizing that the Fed must obey two mandates: to maintain price stability and to minimize unemployment. Meanwhile, the dirty little secret among economists has been that unemployment is the main obstacle to inflation in the face of a massive enlargement of the money supply. Unemployment is currently at 7.1% and falling, while the Fed has lifted the veil of "transparency" to reveal it made a promise in double-speak to start selling some of the bonds it issued to combat the recession when unemployment reaches 6.5%. As time has gone on, Mr. Bernanke has seemed to back away from that promise. He is not so sure that unemployment is a good measure of unemployment, other measures may be a better measure of what we are driving at. He never meant to start selling bonds when unemployment reached 6.5%, he only meant that he might reduce the number he planned to buy. He never meant to make a promise, he only was being transparent about the current thinking of the Board. And anyway, Janet Yellen will take over his job in a month, so you can't very well bind your successor to do anything at all. What's this tap-dancing all about?
Well, it simply won't do, to suggest that the Federal Reserve isn't as independent of politics as it pretends to be. But everyone noticed that the stock market had a bad fainting spell when he suggested a few months ago that the Board had been discussing the matter; just imagine what it would do if he actually made a promise to act, let alone actually taking an action. By itself, such an announcement would probably send interest rates on a rise toward normal levels. The stock market mostly anticipates the future, so it would jump ahead of whatever action was taken. Since the United States is now the largest debtor on earth, a rise of interest rates would immediately add huge amounts to the current deficit and the projected national debt. The stock market would almost surely drop, possibly severely, in response to such commotion in the debt markets. And the national economy would certainly feel the deflationary effect of such activity in the financial markets, sending markets even lower. Fear of such a reaction would surely persist longer than the real need for monetary easing, making the resultant inflation even worse than it had to be.
Is it possible the Obama Administration prefers a little extra unemployment, to risking a stock market crash before a coming election?
Minimum Wage Uproar
And so comes the rumination that perhaps raising the minimum wage has some merit, after all. Under the peculiar circumstances of looming inflation with high unemployment, with the economy unresponsive to huge monetary expansion, with the banks refusing to lend until the economy is deleveraged, perhaps the minimum wage can be raised, briefly and temporarily, without increasing unemployment. Perhaps, that is, the "research" published recently is not the product of some Administration poodle, but actually shows a true effect. Perhaps it remains true that if you raise the price of something (wages), you will get less of it (employment). But any businessman faced with this situation has a choice. He can either hire fewer hamburger flippers, or he can raise the price of hamburgers. Which one he will choose will depend on whether he has streamlined the efficiency of his workforce as much as he can, or whether he has already raised prices as much as the market will bear. That is, whether there is more "elasticity" in prices, or labor, at that particular moment. And it seems entirely possible that nearing the end of a recession, and the end of monetary expansion, wages may be the more elastic of the two. And so raising the minimum wage may have a counter-intuitive effect of preventing unemployment from falling further, or else he can sustain profitability by raising prices. At some later time, it is equally likely that price resistance may be stronger, and the full force of a mandatory wage increase would again result in increased unemployment. The tricky part would be to guess the proper timing of the end of QE3, using blunted signals. Could it be even remotely possible that the Obama Administration prefers a little extra unemployment, rather than risk precipitating a stock market crash just before a coming election? It's easy to believe the President would go to the stake rather than admit such a thing.
In an era of desperate experimentation with the simultaneous solutions of several problems at once, perhaps the best conservative response to this paper is to seek ways to relax its inflexibility. The political process, particularly the amendment of state constitutions, is a lengthy and cumbersome impediment to agile management of the economy. It is fairly unlikely that a secret springing of a referendum trap can be repeated. The greater risk is that we will know what should be done, but become unable to do it quickly.
Meanwhile, the politicians are designing things and politicians like things simple. The Republican solution is to pass a minimum wage, but keep its benefit slightly below the entry-level wage; they get credit for passing it, but it has almost no applicability. The Democrat approach is to make a big noise about passing a meaningless bill, promising they will make it up with off the balance sheet entitlements, like health care and college tuition. Either way, usually nothing much happens after the election is over.
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Throughout this discussion of the design of Health Savings Accounts, lifetime version, we have attempted to follow the underlying design of what we already do. That is, parents usually pay for children, old folks usually pay out of savings. So, once the money is in the Account, we try to imagine how it is now usually disbursed for healthcare, and even occasionally what the sources of it are. Our general choice is to follow established patterns where we can. Nevertheless, we favor debit cards in place of insurance claims forms, for all outpatient claims which fail to trigger the re-insurance deductible. Paying 10% for someone to pay your bills for you, is just unacceptable.
Children almost always have their medical bills paid by their parents or their parents' insurance. Where to place the upper limit on childhood is a puzzle, but recent law has included children up to age 26 on their parents' health insurance. Since that seems to meet general approval, we adopt it, although it might be wise to allow emancipated children to opt out. Regulations on the use of parents' HSAs for their children are a little unclear, but we assume they would be easily changed if they conflict with reasonable practice. That parents-pay-for children system does complicate a smooth estimation of the future growth of the parent's Account, however, particularly in the event of a divorce of two parents with such accounts. It also interferes somewhat in the child's future right to claim compounded growth, so there is a brief temptation to give it to all three at once. However, the deposit was only one deposit.
In some ways, it is easier to have both parents contribute to the child's one-time initial deposit, in order to have longer for their compounding to continue, and to have the child's account begin with their contributions. This makes a $150 contribution at birth become $300, and you really can't keep responding to problems that way, without destroying the universal appeal of the plan. However, it is easier to imagine acceptance of double contribution with a later rebate of half of it, than to imagine a single contribution later cut in half. Perhaps it is easier to give people their choice of the two approaches, but it certainly muddles future projections. We opt for double contributions, with an optional rebate of the half at the child's 26th birthday, if the parents have had a falling out. With double contributions, there should always be a small surplus in the child's account, whereas sharing even minimal deficits is apt to cause more trouble in an already strained marriage. Double deposits as a default, single deposits as an option. Optional rebate at child's age 26.
Immediately we must expect an outcry about poor mothers who can't afford it. But every other proposal suggests a government subsidy for this purpose, and so do we. The ultimate savings to the government of putting up $150 per baby, would be enormous, but they would not be totally realized until the child was forty, and the government would be "loaning" the expenses in the meantime. An important reservation is the health expenses of the indigent are usually higher than average, obscured by the fact that many of them are not paid.
Grandparents. Children are repaying a debt to their parents, which parents frequently forgive; the parents initially pay it out of their own accounts. With the elderly, there are often no children or grandchildren; the elderly either have some savings, or they are indigent. Where there are descendants, they are not always willing to back the defaults of the elderly. If they bought out Medicare (with roughly $40,000, adjusted) after attaining age 65, they will, in summary, stop paying Medicare premiums, pay outpatient costs with a credit card, and their catastrophic insurance will pay the hospital an updated (we hope) version of the Diagnosis Related Groups (DRG) for inpatients. To adjust for contingencies the insurance might make a deposit in the patient's HSAccount for other medical costs (ambulances, for example), which the patient pays by credit card. Emergency care may well fall into this ambiguous category. The catastrophic insurance company is expected to have negotiated reasonable charges with the hospital, and to defend the patient against unreasonable ones. Rent-seeking in the outpatient area is more the patient's responsibility to detect, to object to, and to negotiate below a certain amount. Generally, the principle sought is to assume no responsibility for recognized overcharges, unless they have been agreed to in advance of the service.
Working people, age 26-65, and/or their employers. At present, much of the health care of working people are voluntarily paid for by employers. Therefore, it is their choice what to do about a diminishing cost, absorbed in this system by their employees. Since the source of most of this windfall is an investment in the stock of their companies, perhaps everyone will benefit. Time alone will answer that issue, and perhaps it is too early to be making decisions about it. So for the moment we abstain from the fairness issue and do not greatly object to a gradual adoption of the HSAccounts for Lifetime Health Insurance, which is inherent in making it voluntary. However, it is clear that the employees are often spending for what they formerly got free, and as a beginning might well be gratified to have a roll-over of their Flexible Spending Accounts into Lifetime Health Savings Accounts. That would require the passage of no law, and perhaps ought to be requested politely. A surrender of industry's stance against income tax equity on health expenses would be nice, even though the Editorial Page of the Wall Street Journal cautions restraint in this effort, even restraint of the Tea Party members of the Republican Congress. I'm afraid I disagree on this significant point, which seems to put me to the right of the Tea Party.
That would seem to leave working-age people paying for themselves, their children, maybe their parents, and the indigents. Before that, for many of them, it was once all free. With that description, it is natural to expect some grumbling. But the cost to them is only a fraction of the former cost to the nation, and they get a great deal more control over an important part of their lives. It must be obvious that the old way was too expensive to continue, and it won't continue long. If for no other reason, unions will demand that everyone else feel some pain. Working-age people will end up with a bill of thirty or forty dollars a month, an undisturbed medical system, and no more yearly health insurance premiums. The employer has the employee health insurance cost gradually lifted from his back, and know very well that he will be pressed to spend some part of it for employee costs. Let him pay some into the HSAccounts, particularly during the early transition stage, when there will be very little investment "cushion".
And finally, it must be pointed out the federal government has been supporting a lot of this cost for nearly fifty years, but their instinct is to hide it. Fifty percent of Medicare costs are paid for with general tax money, quite effectively concealed in the budget term "Transfers from the General Account". Borrowing from foreigners is largely traceable to this source, and no one can be sure what will happen to world finance if it stops. Because this fifty percent subsidy would have to be extended to every citizen if we adopted a Single Payer system, even extreme liberals hesitate to press that solution, or imaginary solution to our problems. For now, leave it alone, and see how things are progressing.
Premiums and payroll taxes*
Catastrophic Insurance=
Debit Cards*
Revised DRG=
Personal funds*
Direct Marketing=
Internal loans*
Escrow funds*
Federal Reserve monitoring and midcourse adjustment.
Deliberate overfunding of HSA*
Times change. The Japanese have been defeated in "the" war. The spirit of sacrificing anything else to survive an external threat has subsided. California has become a blue state, and is fast becoming a minority-dominated one. A new generation has appeared, and unmindful of historic beginnings, has come to accept old expedients as simply the rules of the game. In particular, fringe benefits are no longer a bonus, but just a part of earnings which for some reason are tax-sheltered.
To sum it all up, Chief Financial Officers no longer feel they are cheating when they maximize tax "benefits". It's legal, isn't it? Obviously, an employee receiving a big gift finds it more welcome than paying for it himself, especially since it is tax-free and other people don't get the same treatment. Economists who have examined the matter are fairly unanimous that fringe benefits are all soon merged in the minds of employers and employees alike as "employee cost." Within a few years in a competitive environment, both sides of the gift soon treat fringe benefits as only a tax benefit, with comparable reductions in the pay packet to adjust for them. The cost of the gift soon equilibrates, only the tax deduction is a true transfer.
Nevertheless, there are economic limits, if not legal ones. Issues like Portability, Job-Lock, pre-existing conditions, and individual choice would disappear if health insurance were freed of linkage to employers since these issues are all traceable to the mandatory link between health insurance and losing your job. We really do have an employer-based system, but it has a price. Lifetime healthcare insurance policies would place considerable strain on portability and choice, so employer-basing stands in the road of multi-year insurance. Maybe, just maybe, we should reconsider the advantages and disadvantages of having it remain a gift from employers. The growing suspicion it has been the main impetus for cost escalation is worth testing.
In fact, the shareholders usually get a bigger gift than employees do. State and local corporation taxes vary, but a profitable corporation pays 38% federal corporate tax, and the total corporate tax burden approaches 50% if you include mandated sharing of other fringe benefit costs, the highest in the developed world. By defining fringe benefits as a tax-deductible cost of doing business, some major corporations effectively increase their net income by half.
To understand how that is possible, just look at any payroll tax stub next payday. All these features were intended to redistribute wealth, but the CFOs, turned them into shareholder advantages. Tax deductions from the pay packet total about 15% of net pay. But the employer must match most of that deduction with his own contribution, which brings him to 30%. And furthermore he pays twice as high a tax rate: about 40% tops compared with a blended individual rate of 15%, so it all adds up to 60%. Let's use the imaginary example of a $10,000 health insurance premium, where the employee gets a $1500 tax reduction, but the employer gets $3000. It's after-tax money, so the employee effectively gets $1726 and the employer $4200. For a big employer, multiply that by 10,000 employees and you get a noticeable amount of money. It's so much money you can imagine what the stock market would do, if a proposal to abolish it looked as though it might be enacted. But would you believe it -- that's not the worst of the situation.
The worst is -- the employer has been given a very large financial incentive to raise the cost of healthcare. The higher the better, and shareholders ought to love it. Physicians have the same incentive because we would love to raise our fees, as Adam Smith so tersely put it in The Wealth of Nations. But at least we doctors took the Hippocratic Oath, and most of us are a little ashamed of this conflict of interest. Whereas, a stockholder controlled company has hired a manager with the mandate, to make as much profit as he legally can. Let's summarize: we have engineered a system where it is well known among CFOs that you can often make extra profits by giving a gift of health insurance to the employees. And if that isn't a tax gimmick, I don't know what would be. We have finally reached the point where the health system costs 18% of Gross Domestic Product in spite of closing 500,000 mental health beds, all of the tuberculosis sanatoria, all of the polio beds, and lengthened human longevity by thirty years. Maybe you can blame that paradox on doctors, but I doubt it.
We have simply got to stop telling fairy tales about Henry Kaiser and Liberty ships eighty years ago. This is a tax gimmick and it has to stop. I would be happy to meet with the Business Roundtable to discuss how we could stop it without crashing the stock market, but it has got to stop. My two-part proposal is pretty short, however:
Proposal : Employers should discontinue providing free health benefits to their employees, at the same time corporate income taxes should be capped at the same rates as individual income tax. The speed by which this is to take place might be determined by the Federal Reserve in response to economic conditions, but in no case longer than three years to complete the process.
The competitors deserve a word, here. About half of business is made up of big business, and half is small business. Wall Street and Main Street, if you will. The opportunities which Henry Kaiser stumbled upon in 1943 mostly apply to big business, and probably much of that anomaly can be traced to the fact that bigger businesses are more likely to be profitable, and more likely to be engaged in international trade, where competitors don't get a vote. Some of the tax benefits for small business like Subchapter S, probably represent an effort by Congress to help domestic competitors without helping foreign ones.
But self-employed people, and unemployed ones, are excluded. Very likely, much of the politics of healthcare is intended to help these people, without helping small business or big business, and without helping foreign competitors. Pretty soon, you have a tangle of interests affected by removing the obvious tax inequity which Henry Kaiser is given credit for discovering. Just about everybody has something to gain, something to lose. So it begins to be impossible to say, on net balance, how much the country would be improved by abolishing it. That's particularly true, with the Affordable Care Act on trial.
Just how bad things are, is hard to say. But plenty bad enough. We know about job lock and the other features directly attached to employer-based insurance, and we decided to live with them. But the escalation of healthcare costs, and the soaring international debts used to pay for them, are becoming too much to handle. We can tolerate a lot of things, but it's not clear we can tolerate 18% of GDP devoted to healthcare, particularly if the price keeps rising. It's hard to imagine anything people would prefer to spend their money on, then on longevity. But when serious people, or at least people who take themselves seriously, start talking about euthanasia as a solution to our health cost problem, you know the costs are starting to hurt. So get this: you can only do it once, so euthanasia isn't as useful a solution as tax reform.
What a Tangled Web We Weave.For the most part, only economists are familiar with the rather well-established fact that wages in the pay packet soon decline to recognize the value of other items in the total wage cost. In this case, it is the 15-20% tax reduction as a result of the Henry Kaiser tax dodge. After eighty years, news of this theory has seeped into the minds of labor unions and is slowly becoming common parlance among union membership. So inevitably, bickering about tax subsidies for poor people gradually reached the same point of recognition. Negotiators who have won an economic victory on an esoteric point, often find it difficult to restrain their boasting of it afterward.
In the case of subsidies for the poor to pay for national health insurance, the subsidy was based on whether the individual's income was a certain percent of the poverty level. When the individual's income falls in the border zone, it may make a big difference whether or not to include the tax deduction as wages. A decision on this point affected eligibility for subsidy of millions of low-wage employees of big business. And that in turn affected their personal decision whether to buy health insurance in the exchanges or to continue to get it through the employer -- which way would be cheaper? With millions of dollars at stake, it is small wonder the negotiations apparently broke up and agreed on a two-year postponement of including employees in Obamacare. Since the political makeup of Congress had changed since the law was passed, the law itself could not be adjusted to smooth out this difficulty. The implication (pretense?) has been circulated that somewhere buried in legislation there exists some relief from this situation, but it will not be effective until 2018. It scarcely seems likely a useful compromise could be devised during that time window, or during a Republican administration afterward, so stay tuned.
A related issue might also be involved in the mysterious revival of the minimum wage by union politicians. It seems possible the reasoning is that, since you can't lower the threshold for subsidies, perhaps you could raise wages to meet the threshold. Some pretty sophisticated people are apparently advising these politicians about a pretty obscure economic point. Ordinarily, the market wouldn't tolerate such manipulation, but having gone off the gold standard, perhaps it now seems possible to give it a try. All in all, the arguments for a minimum wage are so tenuous, it seems more likely that inflation is being toyed with, as a possible way to expunge indebtedness.
America only needs to price its sovereign bonds to a small spread below the prices of its many component corporate bonds, whereas the common market drives multiple sovereign nations to compete in bond prices. Consequently, half of the member nations will oppose consolidation. because bond rates and prices go in opposite directions. The economically stronger nations, no matter who they happen to be, will always have an incentive to oppose bond consolidation because they see it as the richer nations subsidizing the poorer ones when they wanted to believe their success was their own ingenuity and hard work. When survivors of a previous war are still alive it gets even harder to raise your own costs on behalf of a former enemy. The poorer nations, for their part, pay dearly for the opportunity to inflate away government expenditures. Texas surely nursed feelings of this sort in 1913 when the Federal Reserve demanded national bond rates. But only the ignorant ones feel that way, today. New York is constantly looking for ways to escape subsidizing Alabama, but eventually, the tide will turn. New York and California are eternally bemoaning their high taxes, so there is probably an upper bound to what will work. Meanwhile, stocks in a panic fall further than they should have because they had risen too high.
There are no perfect alternatives, but the volatile nature of interest rates creates opportunities to introduce variable mixtures of active and passive bond pricing, depending on circumstances, as an outgrowth of the obvious need to introduce a new currency gradually. The American experience of having state and federal bond systems coexist may well provide useful guidance, and in any event, shows unification can be accomplished.
109 Volumes
Philadephia: America's Capital, 1774-1800 The Continental Congress met in Philadelphia from 1774 to 1788. Next, the new republic had its capital here from 1790 to 1800. Thoroughly Quaker Philadelphia was in the center of the founding twenty-five years when, and where, the enduring political institutions of America emerged.
Philadelphia: Decline and Fall (1900-2060) The world's richest industrial city in 1900, was defeated and dejected by 1950. Why? Digby Baltzell blamed it on the Quakers. Others blame the Erie Canal, and Andrew Jackson, or maybe Martin van Buren. Some say the city-county consolidation of 1858. Others blame the unions. We rather favor the decline of family business and the rise of the modern corporation in its place.