THE LIMITS OF GOVERNMENT. Most budgets appear balanced at the beginning of the year because projected revenue has been overestimated; those deficit budgets are balanced at the end of the year by borrowing the shortfall. The most efficient level of taxation has been experimentally shown to be around 18% of the Gross Domestic Product or GDP. That's essentially shorthand for the whole national economy. If government debts exceed the GDP or even grow faster than the GDP does, no one will loan that government money. It's hard to escape the logic that if federal spending levels average 18% of GDP, budgets can be ignored. There's a marginal error in the 18%; but there needs to be a margin of error, perhaps as much as 2%. Go back and read that short paragraph three times.
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Gross Domestic Product,
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State and local governments are different; only sovereign governments can print money. State and local can be allowed to fail, and that disciplines state and local spending. Sovereigns are limited by GDP, with overall money creation linked to it, while the public makes the leap of faith that an independent Federal Reserve will match money creation to GDP. Moreover, since entitlements like Medicare and Social Security already make up most of U.S. government spending, and will soar in a few years when the baby boomers reach retirement age, demographics make Federal predictions somewhat more precise. Raising taxes is now recognized to reduce the net value of that 18% number, while infinitely rising deficits will be blocked by the bond market, first by rising interest rates, if necessary by a boycott. Unless you just ignore the recession which will eventually be caused by soaring long-term interest rates, spending must be cut severely. Just about the only remedy left is to shift the cost of entitlements back to the private sector. By increasing private savings and drawing compound interest, some unknown amount of progress might be made on this problem. The retirement age must also be increased, second careers after retirement must be encouraged, the costs of retirement must be reduced -- and all other ideas must be explored, too. But one of the main arguments for increasing private savings is that all of the ideas anybody has suggested, rolled up in a ball, are questionably sufficient to finance the approaching problem. It will simply not be possible to evade a serious examination of any suggestion, including this one. Privatize. The public sector is just not big enough to handle the matter, and if you make the public sector bigger, you will destroy the whole economy. Privatize.
DON'T LOSE FAITH IN SCIENCE. It's the common belief that financing Social Security is not nearly as difficult as financing Medicare, but that's just the extrapolation fallacy announcing again that trends in motion will continue forever. Medicare seems to be getting more expensive for three reasons, all temporary. The costs of dying are shifting into Medicare as the population lives longer; eventually, just about everyone will live long enough to die at Medicare's expense, and terminal care costs must then stop shifting. Second, the cost of dying is going to decline as medical research turns to the engineering costs involved, separate from heroic efforts to forestall dying. No one is suggesting euthanasia; just simplifying the issues once a final decision has been made. Third, the cost of chronic illness and disability needs both curative and engineering improvements. Take rheumatoid arthritis (RA) for example.
Thousands of people are painfully crippled every year by RA. They are treated, medicated, pensioned, operated on, and provided with complicated equipment. Suddenly, some new medications have come along which promise there will be a much less further progression of RA in patients who have it; if we use them, the number of cripples will eventually decline. It has a real cost to use new medications, of course; it will cost several thousand dollars a year to offer this miracle to the rheumatoid sufferer. But when the patent protection on those miracle drugs runs out, even on the inevitably improved variants of these drugs, the cost of treatment will surely go down to a thousand or so dollars a year. Meanwhile, the backlog cost of repairing the injured joints of patients who got the disease long ago will fade away. And the engineers will figure out how to make crutches, canes and electric go-carts out of plastic or equivalently cheap ingredients. Most of those patients who now have to be pensioned will be able to find gainful employment. Maybe, maybe, someone will figure out what causes this disease and invent a simple cure for it, but it isn't necessary to pray for miracles on that level in order to predict a major decline in the cost of managing this nasty disease. It is safe to predict that other diseases will follow the same trajectory as RA, leading eventually to a resolution of the fearful costs of Medicare. Social Security is something else; if everybody lives a longer healthier life, non-physicians are going to have to figure out how to pay for living it. Wiggle and squirm all you please; call me names, call the police.
There is no solution to the cost of increased longevity, except to raise the average age of retiring from work.
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Paul Walsh
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PAUL Walsh, our local weatherman, recently addressed the GIC (Global Interdependence Center) at the Federal Reserve, and presumably because everyone talks about the weather, the meeting was well attended. While he is too experienced to get drawn into a global warming controversy, we get the general outline of his views. What we call the weather is largely a result of various clouds and wind currents blowing around the planet in response to the rotation of the planetary mixture of oceans and land masses. The familiar landscape visible to astronauts makes it easy to accept this view of things.
The global warming issue, however you explain it and where ever it may be going, is a weather cycle to be measured in centuries. Shorter cycles of about eight years in duration tend to result in American weather patterns sometimes blowing Canadian cold air toward the East Coast, and sometimes blowing California winter weather Eastward. In 2011-12 we seem to be experiencing a California winter, while the preceding two winters were unusually cold, reflecting Canadian conditions. What may or may not be happening with the hundred-year global warming cycle is not easily slipped into our daily conversations. It is probably quite irrelevant to global trends whether or not last year was a cold one, or whether our sidewalks are unusually slippery this morning.
Inquiries about the weather are the number one topic to be clicked on the Internet, reaching 17% of queries. That's nearly double the second largest category and four times the number of inquiries about the stock market. Ordinary variations of the weather have been calculated to have an economic value of $384 billion, or 3.4% of the Gross Domestic Product (GDP). Insurance claims for more severe weather abnormalities run between ten and fifty billion dollars a year. The number of hurricanes and similar disasters is highly variable, sometimes running as high as fifty in a bad year.
Predictions are improving, but ridicule of weatherman errors is still highly embarrassing to the professionals in the business. A generation ago, it was almost impossible to get a one-minute warning of an approaching tornado, but nowadays we average fourteen minutes warning for them. That's almost long enough to be useful. Hurricanes seem to be increasing in frequency, but decreasing in average intensity. But insurance claims are getting steadily higher, largely because more people are building more structures in harm's way.
Small wonder that weathermen are a cautious lot about predictions. The present party line, in case you wanted to ask, is that predictions more than ten years in advance -- are just about impossible.
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Political Cartoon
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Western civilization now takes One-man, One-vote for granted in any variant of national governance, and a good thing, too. The Romans modified ancient Greek democracy models into a Republic, allowing slightly modified democracy to become practical for larger governments. Citizens elect representatives, and it is possible to imagine groups of representatives electing their own representatives to higher bodies, and so on, up to the line. As long as democracy remains inflexibly the model for a united Europe, other mechanisms must be adjusted for the obvious inequalities of huge population masses. Since money is the main means of exchange in national systems of compromises, it is a handicap for them to freeze a monetary system in place before governance negotiations have even begun. As a reminder of the American experience, remember that in 1787 Virginia was by far the largest and richest state, not at all the case at present. Indeed, the political landscape then consisted of nine small states ranged against four big ones. Virginia, Pennsylvania, and Massachusetts are no longer considered big states, and New York is fast receding from the top tier. Organizing monetary structures around the size can prove crippling to future designs of unified government, particularly if sufficient time elapses between the two steps. At the very least, leisureliness creates an opportunity to cloak opposition to unification within delaying tactics, presenting arguments to "wait and see" how the monetary system works. At worst, it creates an incentive to make certain the monetary system will not work.
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Bitting Gold Coin
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However, a bridge player must play the cards as they are dealt with him, and Europe has decided on a piecemeal approach to organizing an eventual political union. The first step of monetary union is in its tenth year, and in deep trouble. Therefore, a new alternative to be considered is whether to have a monetary union without a government to oversee it. Since the Spanish doubloon was for centuries the medium of maritime exchange for the whole western world, it can be done. The doubloon was a gold coin worth its weight in gold, the so-called "piece of eight". Since that kind of money proved entirely workable, the issue of feasibility is one of backing for the currency. When gold from the New World ran low, it was hard to support a growing world economy with a shrinking currency; the price of everything went steadily downward, and local shortages were common. So silver was substituted, and then the coinage became fractional. That is to say, paper money was issued in a fixed ratio to the gold in government vaults. Finally, paper money had no metal backing at all and was issued by central banks in response to the prevailing prices of goods. Using an arbitrary figure of 2% to represent population growth, if the consumer price index plus 2% goes down, the Federal Reserve (or equivalent national central bank) prints more money. Conversely, if it goes up, the Federal Reserve bank stops issuing paper money. The currency is thus "inflation indexed" and its worth guaranteed by the government against an international financial panic. World opinion has a lot to do with the value of a national currency, although in theory, the financial reserves are the sum total of all businesses and property available to the government to confiscate. By encumbering its national property, the government monetizes its assets. Even if it were possible to arrive at a tolerably accurate estimate of the total net worth of a nation, much of it is illiquid and has a considerable cost to monetize it. In practice, however, everyone realizes that the government will never sell an island or peninsula, probably going to war to prevent it happening, or simply going bankrupt or defaulting on its debts. The reserves which are listed as backing its money supply are largely frozen in the face of an actual financial panic. Everyone could name a dozen nations which would probably default, should creditors ever trust them, and there are many more who would seriously consider it. However, there are enough "speculators" who take a chance on this scenario for a fee, to keep the system running. If things start looking ugly, these intermediaries quickly disappear and the "markets are frozen". To protect their economies from this sort of chaos, governments look to merging their currencies, or to promising to rescue other member nations in trouble. A big pool of reserves is inherently safer than a small one, so currency unions are attractive to almost everyone.
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GooseStepping
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Currency unions, however, look like sausage factories when you get inside and look at the details. Some parts of New England are essentially piles of pebbles with a thin layer of topsoil, while the topsoil in Illinois is mostly four feet deep. Some rivers are full of fish, others are full of pollution, and so forth. As long as we are one united country, local differences are largely ignored; if you can't farm the pebbles in Connecticut, you can move to Greenwich and sell Credit Default Swaps. If that doesn't work, you can move to Illinois, and if you don't like big city political machines, you move to Utah. There's a frictional cost to all of this, but it remains a practical alternative. For Europe, it's not so easy to learn a new language, the schools are not so good in Kosovo, and the price of a taxicab in Paris is astonishing. If you are a gypsy, you are very likely to encounter pitchforks after your first night in the campground. No doubt most of this difference between the continents would disappear after fifty years of political unification, but there would be enough problems to make the survival of the E. U. somewhat questionable for two generations, at least. During all of that time, interest rates would reflect the existence of a real risk, and occasionally crises will appear. Madison, Jefferson, and Hamilton were bosom chums in the 18th Century; within five years of the new nation, they were at each other's throats. Founding Father Robert Morris, one of the richest men in America, was denounced and his motives questioned on the floor of the Legislature by a Western Pennsylvania nobody, within weeks of the Constitutional Convention. Vice President Aaron Burr put a bullet through Secretary of the Treasury Alexander Hamilton. Social upheavals are just that: upheavals. The problems associated with piecemeal approaches to the monetary union and the political union have been mentioned. The other side of it may be that many of the unique monetary problems of Europe have been brought to the surface by the current financial panic, and political solutions to monetary difficulties can be devised in advance if anyone has time to do it.
The political side of Europe is becoming plain. The Germanic tribes to the North are rich and have a history of trying to conquer all of Europe; the Latin tribes of the South are poor and nurse a fairly recent memory of defeated military occupation. The Germans are nevertheless the only possible rescuers of the present financial panic. It will not be easy for the Latin component of Europe to humble themselves before a German financial rescue, but they must do so for decades into the future. Although both groups suffer from the debility of a Welfare mentality, the South has it worse and their financial reserves are very questionable. Unless they are ready to do unlikely things like selling real estate sovereignty, they are going to find the ownership of their companies in German hands, and very likely have to endure the sight of the children of Wehrmacht officers managing their local economy. They will have to be tolerant. The Germans are not happy to work long hours so the Greeks may work shorter ones, and must be forgiven for indignation that German funds donated to rescue the Greek Welfare state are diverted for the personal use of corrupt Greek officials. Nevertheless, such affronts eventually become tolerable; a dozen American cities are at least as corrupt, and the California beaches appear to be utterly devoid of the famous American work ethic. Nevertheless, the most likely stark alternative would seem to leave only America, India and China in charge of major viable economies.
We propose the development of a lifetime health insurance product, for the main purpose of gathering investment income on the insurance premiums. It reduces the cost of health care by adding that new revenue source, which at the moment is simply lost. The longer compound interest is allowed to work, the more income will be produced, to the point where it can be imagined that this income source would more than cover the cost of health care. For the most part, it would really only cover a portion of the cost, but a very large one. If things are cheaper, more people can afford them, so the problems of the uninsured are eased. This system would take many years to make the transition to wide-spread coverage, so many features of the Affordable Care Act might be temporarily useful. Many people who resist Obamacare are unable to see an end to it. As a transition, Obamacare would become a success if some other program is a success, first.
First, the law requires two things to be purchased at once: an investment account, and catastrophic health insurance. Deposits into the Account are tax-exempt. Withdrawals are restricted to health costs, not including the premiums of the catastrophic insurance, but the internal investment income on the deposits compounds tax-free. The framers of the enabling act apparently did not anticipate that many or most children would, under Obamacare, already have mandatory coverage on their parent's policies up to age 26, under their parents' policies, so the overlap is a little ambiguous. Apparently, however, there is no limitation to single health policy, so dual policies appear to be allowed. As long as the law requires money to be withdrawn from an Account only for health expenses, many people during the transition will find they already have health insurance, but not enough money in the account to cover the required minimum deductible. Unless they can make a deposit and see it grow, they will never be able to start an account. So, especially for children, the required deductible should match the amount in the account, not the other way around. It scarcely matters which it is, except the child rarely has control over the parent's policy, so the law should be amended to allow an HSA to be created without catastrophic coverage, until such time as some flexible minimum deductible is reached, even if it is necessary to prevent all withdrawals until the minimum is reached.
Perhaps this issue could be addressed for children with a single-payment deposit. It seems a great pity to prevent lifetime accounts which could be made for a nominal single payment, simply because the parent has a low-deductible policy and cannot or will not change it. Alternatively, it is an equal pity to require a child to have two other health insurance policies, when the reality is the healthiness of such children seldom requires even one policy. Since lifetime health coverage is within reach for a single payment of less than a thousand dollars, it is much easier to envision subsidies for the poor of that amount. Lifetime average health expenditures in the range of $300,000 are largely made up of inflation costs which reduce a dollar to the value of a penny, over an ensuing century. There are few ways for the poor to escape inflation, but this would be one of them.
That gets us to age 26 when employer-based insurance makes an appearance. Or makes a disappearance, replaced by Obamacare; we must wait to see what happens. Present law permits a deposit of a maximum of $3300 in the accounts, until retirement at age 65, when Medicare takes over. That could result in a deposit of $128,700 at age 65, which with 7% compound income within the account would amount to $610,000 total in the account, but an unknown amount subtracted for exceeding the insurance deductible. Since additional deposits are not permitted to people receiving Medicare benefits, $610, 000 will have to last for the duration of life expectancy, calculated to be age 90 by then. Assuming the same 7% return on investment, that amount is short of the $3 million single payment deposit which would be required (at age 65) to pay for average health costs to the end of that life at 2014 prices. And probably not nearly what year 3004 prices might become. To achieve that, 10% compounded income would be necessary, both to reach the end of life, and to augment those deposits of $3300 yearly to $4.5 million, the point where they and their investment income would meet the need. Although Ibbotson's curve encourages the hope that 10% return might persist for a century, there is little doubt that long periods of 1% income would bankrupt the system, resulting in only $156,000 gross before illness expenses at age 65, and unguessable effects on medical costs after that. Large numbers of people would not even be able to afford annual $3300 deposits into their Accounts. But there are two ways out of this trap.
In the first place, no one claimed that 99% of future medical costs must be met by this approach. The claim is only that large amounts would be "found money", not found at present; don't be greedy, since not a penny of this money is being utilized at present. And secondly, it would be manifestly unfair for Medicare to continue to collect payroll taxes from one age group, and Medicare premiums from another, if the plan is for this individual to bear his own costs. Accordingly, these payments could partly be waived, and partly deposited directly into the Accounts rather than into the U.S. Treasury. The Treasury itself would be amply compensated by putting an end to the present 50% subsidy of Medicare costs by the taxpayer, assisted of course by foreign loans, mostly Chinese. There is a political risk, of course, that opposition politicians would encourage the elderly to believe that Medicare is about to be taken away from them. Almost everyone enjoys getting a dollar for fifty cents and is suspicious of claims that, otherwise, they will get a penny for a dollar. It would thus seem better timing to begin at the other end of the age spectrum, building up a constituency for compound interest, the Ibbotson curves, and Health Savings Accounts, and meanwhile waiting for competitive proposals to flop. It would take six months of intensive publicity to convince people who don't want to believe it, that Medicare is 50% taxpayer subsidized. It would take another six months to iron out all the unsuspected technical flaws in the proposal.
And it would take time to create a bipartisan think-tank, to collect the necessary data and make the necessary calculations. Perhaps some philanthropists will offer to do it privately, saving us from the criticisms of agencies like the Federal Reserve, which are accused of being less "independent" than they claim to be. The first step would be to put it somewhere other than Washington DC since there is no need to be seen as close to those who threaten your independence. The divergence between costs and revenues must be monitored and adjusted to; sudden changes in direction must be responded to.
At present, average American lifetime costs of health care are thought to be roughly three hundred thousand dollars in the year 2000 currency, per individual. Females cost more than males, mostly because they live longer. Much of the original data was produced by Blue Cross of Michigan and confirmed by two Federal agencies. Our goal is to see if it is reasonable to hope: that a "small" subsidy at birth, invested in total stock market index funds over a reasonably projected life expectancy, might (in addition to lifetime healthcare) pay whatever retirement income it is reasonable to expect over anticipated longevity. The tricky part is that good health leads to less health cost, but it also leads to higher (longer) retirement costs. This last age differential seems to be most pronounced toward the end of life. The age differential is almost enough to count on, but not quite.
Our Answer: It turns out in theory, confirmed by historical experience from the stock market, that a total subsidy of $400 at birth will just barely scrape by at 6.5%. But the transition would be such a close thing, Congress might have to increase contribution limits to impart more safety. We assume the law as presently written, using a "term insurance" approach with technical amendment. The transition would no longer be a serious issue, using a "whole life" approach, but its duration becomes so extended it might be politically unfeasible. We end up recommending: an extension of the contribution limits, then starting with the safer "term insurance" approach first. A few years to study emerging outcomes of the term approach should lead to a safer whole-life projection since assumptions would become less fuzzy. No one seriously questions "pay as you go" is more expensive. What's difficult to arrange is a transition from the more expensive to the cheaper system.
Specifically, the politically tolerable subsidy was selected to be $400, the average future life expectancy was projected to be 90, and the modal retirement age was chosen as 65. Since both theoretical projections and backward analysis of a century of Standard and Poor 500 data do confirm it is practical to expect success with this approach, a practical way to achieve it could then be offered in the present Health Savings Account, using American total stock market index funds as an investment. The biggest problem encountered would be the transition from present healthcare finance to the proposed one. A crisis might precipitate action, while a cure for cancer might make it unnecessary. The fallback position is if HSA proves not to cover all of healthcare and retirement for everyone, at least it would provide a large part of it. In that sense, it appears superior to present systems.
That is, we recognize the superiority of a "whole-life" approach, rather than the present proposal, which is based on "one-year term" coverage. However, the time periods are so long it seems unwise to commit such huge sums to untested theories for nearly a century. We feel a purely political decision would come to the same general conclusion, even though the application of many minds could undoubtedly improve on this approach. Nevertheless, we explore whole-life approaches in the hope of adding them piece-meal to a term approach, which is less comprehensive but safer to try.
Anyway, healthcare is expensive, has a fair amount of waste, and certainly costs more than it used to. No one would write a check based on such a summary, but the goal of the question is more modest. Whole-life insurance is acknowledged to be appreciably cheaper than term life insurance. So, after a few chapters on other details, we examine how much cheaper lifetime health coverage might be than year-by-year ("term") funding. Admittedly, it would introduce intermediary costs. To roll all the complexities into one monthly premium for life would indeed introduce great efficiency. It must be remembered the savings account approach captures the largest component of growth, the flexibility to begin saving at any age, and the accommodation of any variations to the duration at the other end where income is more certain.
If it's vital to recognize how much difference small differences in interest rates matter it's also important for public opinion to be in favor of price stability, remembering 1980. (That's when the Federal Reserve found it was necessary to incite a recession deliberately, in order to stop rampant inflation.) A third subtle variable of investor growth is the frequency of compounding (see below), which should match the quarterly distribution of dividends, but may not if the investor is unwary.
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Will We At Least Cure the Expensive Diseases? Several thousand diseases are currently recognized, and more can be expected to turn up. But the National Institutes of Health, largest research-funder in the world, calculates eight or ten diseases currently account for 80% of current costs. Remembering NIH also distributes 33 billion dollars a year, it seems possible for one or two of the expensive ones to be picked off by lucky research in the next decade or two. Perhaps it is possible for all ten expensive diseases to be cured in three decades. There are at least two main disappointments lurking in such projections, however.
Diseases requiring institutionalization consume more resources than other conditions.
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The first is the heaviest contributor to cost has long been the need to admit the patient to an institution. When Thorazine came along, President John Kennedy jumped the gun a little and effectively closed five hundred thousand chronic psychiatric beds. In retrospect, it might have been wiser to restrain that impulse by a quarter or a half, so we might now find fewer psychotic souls lying on sidewalk steam grates in the winter. Nevertheless, the general idea was understandable that diseases requiring institutionalization consume more resources than other conditions which might be judged more dire by a different standard than governmental cost. In a sense, institutional costs are a variable, independent of the cost of treatment. These are "low-hanging fruit", as the saying goes, and could be used up fairly quickly, except that shortening the length of stay may simply increase daily costs -- and so end up at about the same place, by adding a lot of administrative overhead. Some time ago, I wrote a little paper on the diseases afflicting the patients in bed at the Pennsylvania Hospital on July 4, 1776, the very first Independence Day. There was considerable similarity with the present, because of the tendency of leg conditions and brain conditions to require help with daily living, not because the treatment hadn't changed a lot. What with air conditioning, high-speed elevators and private rooms, daily living costs have also risen faster than the cost of living.
Quarantining contagious diseases is another costly treatment approach, similarly mixing treatment cost with the cost of daily living. An independent, less satisfactory, factor contributing to institutional cost is cultural; providers and manufacturers failing to exercise self-restraint in black-mailing helpless patients to achieve unwarranted profits. You do see some of that, particularly near vacation areas where patients are generally strangers. Perhaps we should re-classify these as vacation costs. Our culture has discovered a deeper artificial cost issue: rationing always provokes shortages, which are ultimately self-defeating in a free society. When you threaten this balance in matters of life and death, you find you get still higher costs. Perhaps someone should try reclassifying rationing costs as independent variables.
Unfortunately for prediction purposes, five or six thousand uncured conditions have a way of expanding to fill vacancies created by the diseases we cure, since everybody has to have something to die of. Generally, this transfer cost makes its appearance as a cost of lengthened longevity.
Meanwhile, improved housing does make it possible for more people to die at home, or at peace with their fate in some other location. Some houses even have elevators, and almost all apartments do. The spread of higher education makes it more expensive to provide kindly, basic care, and our instinct to use automation to replace caregivers, somewhat coarsens the substitution. Architects report it is always more expensive to build vertically than horizontally; therefore calling into question whether we have fully considered the high-rise incremental cost, or the alternate cost of moving institutions to the suburbs. In a nearby high-rise office building, I noticed the elevator shafts took up fully half of the floor space on upper floors. Someone has to commute; whose time is cheapest? Putting patients in hospices and calling it scientific care has not improved costs much, at least so far. Whatever else you might think of HIV, its swift eradication is a marvel of science, so the degree of patient clamor has to be a consideration. Copyrights and patents do run out, competition does work if unobstructed by regulation, so the prospect is for future health care to proceed through spurts of astonishment, but on balance for healthcare to get slowly cheaper, per year of added life. Much of the cost problem will nevertheless be buried in a mountain of double-talk, simply renaming retirement issues, and possibly employing some sugar-coated euthanasia.
Will Support-Environments Become Friendlier to Medical Cost-saving? In my opinion, improvements in the supporting environment hold at least as much promise as medical research itself, for making medical care cheaper. Improved support systems could also make medical care more expensive. Medical research is somewhat force-fed at the moment, in the hope of breakthroughs which may emerge from expanding chromosome and protein chemistry. Changes in architecture, infrastructure, clothing technology, and similar drab subjects are probably due for a major upheaval from advances in electronics, which have so far neglected such prosaic matters. My own insight into such matters was advanced by seeing how greatly medical efficiency has been enhanced by widely-denounced advances in finance and banking. How much a one percent change in interest rates can affect medical costs, barely scratches the surface of what can potentially happen. If people can commute to work in half the time, or must commute in twice the time, makes all the difference in the hidden costs of healthcare. When the millennial generation gets back on its feet, they will be more surprised than we will be, at how much they can accomplish with comparatively prosaic advances.
Frequency of Compounding and Depositing. A feature of compounding is, the more frequently you compound and the more frequently you deposit, the faster it grows. That is, if you pay $365 at a dollar a day, it will grow considerably faster than if you deposited $365 on December 31, but less than if you had deposited it all on January 2 of the same year. If you compound the money in a similar manner, it gets another boost. Most stock dividends are issued quarterly but on dates of the company's choosing. Once the money is invested in an index fund, the bulk of it compounds nearly continuously, but the dividends compound a little less than quarterly. Overall, an index fund indexes a little oftener than quarterly, but quarterly is easier to show on a graph. That's an appreciably better return than annual compounding, which is often how the results are shown in publications. Just who profits from these subtleties is not commonly revealed but is something to keep in mind. With a single deposit of $400 at birth, the compounding frequency, often left unclear, is generally assumed to be quarterly. In actual practice, fresh deposits extend from age 20-65, somewhat at the whim of the depositor's trips to the bank. The expenses of doing it are a negative factor, so at least you should inquire about these two features when comparison shopping. Of course, the bank may change its frequencies over long periods of time.
We next show the single-deposit for escrow accounts, which guarantee long-term rates to a fund which guarantees not to withdraw until the end, modified by the frequency of compounding. The following graph shows what is possible from the multiple-deposit, which reaches its extreme with depositing the annual limit of $3350, modified by starting at different ages. More probable actual results lie somewhere between these two examples.
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And then, who knows? Somebody with a bomb may blow us all to cinders, taking our premises with it. Predicting future revenue might prove easier than predicting future costs, and force us to cut our suit to fit our cloth. That probably leads to rationing, so it's a last resort. But it ignores the central fact that "costs" respond quickly to available reimbursement.
What emerges is that small variations in the frequency of compounding, plus small variations in investment income, plus small variations in longevity -- combined -- are somewhat within our control, and collectively make an enormous difference. But fundamentally it was the increase in longevity which put this new vision before us. It will be up to financiers and politicians to make this vision come within our grasp, or oppose it, fighting it every inch of the way. But it was fundamentally the medical profession, responding to the tub-thumping of that Rainmaker, Abe Flexner, who made it even seem possible in our lifetimes.
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.
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!
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.
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.
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.