Bacon's Rebellion

  • Virginia: Pretty Darn Satisfied

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    James A. Bacon

    In the previous post, EMR referred to International Living’s quality-of-life ranking, in which the U.S. scored only No. 7. Not bad, but not exactly consistent with the mantra of many that “We’re No. 1!”

    As it happens, Gallup has just produced a “well-being” ranking for the 50 U.S. states (though using a different methodology). What I find interesting is that most Americans are satisfied with the quality of life that their state offers. There is some variation between states, but that variation falls within a relatively narrow range of 82.3% (North Dakota) and 69.0% (Nevada) in terms of percent satisfied.

    Virginia falls within the “high” range of satisfaction and, indeed, is the only state east of the Mississippi River to do so. We are an outlier — most states with high well being are clustered among the northwestern plains and mountain states. The least satisfied, not surprisingly, are characterized by high unemployment and/or high poverty. Yet Gallup notes that the correlation between economic outlook and satisfaction is far from perfect. Remarkably, even as the recession deepened last year, satisfaction levels improved modestly across much of the country.

    What factors contribute to satisfaction? Gallup sheds little light. One strength of the U.S., I would suggest, is the high degree of mobility that allows people that don’t like where they live to pick up and move. The nation is sufficiently diverse in terms of climate, terrain and culture that you have to be a real misfit not to find a place you’re comfortable with.

    Why does Virginia — the 12th most satisfied state in the nation with the seventh highest quality of life in the world — fare so well? Note that we score only a hair higher than Maryland, so the Mid-Atlantic location may be a contributor. (But please note it’s not proximity to Washington, D.C., which has a significantly lower satisfaction rating. We also score significantly higher than our neighbors to the south, in North Carolina.)

    If only Gallup were conversant with the concept of human settlement patterns. It would be most interesting to poll readers by human settlement type — farm, rural, village, small town, large metro area, and various densities and varieties of urbanization. I suspect that human settlement patterns would score high as a variable affecting peoples’ satisfaction with where they live.

  • MORE ON HAITI

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    James A. Bacon

    Before the comments on “Haiti’s Last Chance” (5 Feb 10) were deflected into the dysfunctional governance structure quagmire, Larry G. asked:

    “well in the case of Haiti, we think their GDP is too low – for the resources they have. That’s the implication, right?”

    “You’ve got two countries on the same island with about the same resources but one of them the GDP is four time higher.”

    “right?”

    Discussion of the Haitian earthquake makes it PAINFULLY clear how hard it is for almost everyone to focus on the magnitude of Fundamental Transformation necessary to achieve a sustainable trajectory for civilization.

    Almost everyone hopes that reality will go away, and that they can just retreat into the cocoon of illusion and Myth spun by the political clansmen and promoted by advertising and the lobbing of Business-As-Usual Tiger Riders who benefit from Mass OverConsumption.

    Larry G. who demonstrates clear thinking and good instincts on many topics, obviously misses the point of the original post and most of the prior comments, including his own. Groveton who often exhibits a broad base of experience and insight searches for fly specks in the pepper. Comparing earthquake faults in California with ones in Haiti?

    Perhaps everyone needs to refresh themselves on the two overarching principles Jared Diamond distilled from an examination of diverse societal disasters in Collapse. See “Collapse, An Appreciation” 8 August 2005. Understanding Guns, Germs and Steel will also help.

    As Jim Bacon points out, in the original Haiti string, Diamond specifically mentions the ecological disaster that is Haiti and the difference in remaining resources and ecological buffers that distinguish Haiti from The Dominican Republic. (For an interesting perspective, see Kent Mountford’s “Nation’s fortunes often grow, fall along with their forest resources” in the February issue of Bay Journal.)

    The impact of Spain’s ‘management’ of its colonies and the abandonment of Haiti by France made ‘all the difference.’ France’s other major Caribbean colonial venture turned out much better. Martinique / Guadalupe is a ‘Department’ of France, a relationship that is similar to Statehood for Hawaii but profoundly different from the US of A’s relationship with Puerto Rico.

    By the way, France is also AGAIN this year, the worlds best place for humans to live according to Living’s Quality of Life Index. As readers of The Shape of the Future know, EMR has reservations about such surveys but there is substance and continuity in this one. It focuses on parameters that those in the middle of the Ziggurat are concerned with, not the Architectural Digest crowd or the 12.5 Percenters.

    The US of A is seventh best country in which to live and losing ground. It is behind France, Australia, Switzerland, Germany, New Zealand and Luxembourg in that order. This in spite of having per capita expenditure of energy and other key resources that is twice or three times the consumption rate of some of the other nation-states. In addition, the US of A has some indicators of citizen well being much farther down the list than seventh – happiness, health care and infant mortality for starters.

    In fact, the Seventh place ranking is a residual impact of having consumed so much Natural Capital in the past 150 year (much of it translated into the glory of prior GDP growth) and the illusions spread by advertising, entertainment and media about ‘the good life’ experienced by those depicted.

    Just so Larry understands:

    “well in the case of Haiti, we think their GDP is too low – for the resources they have. That’s the implication right?”

    No, No, No.

    GDP is a rear view mirror measure of citizen well being. Humans must evolve A NEW METRIC OF CITIZEN WELL BEING – PART FIVE of TRILO-G.

    “You’ve got two countries on the same island with about the same resources but one of them the GDP is four time higher.”

    No, No, No.

    The two quasi-nation-states ARE on the same island – and so in 1492 had similar potential – but they do NOT have the same economic, social or physical resources.

    “right?”

    WRONG

    The official body count is 211,000 and now Bill has worked himself into the hospital.

    Bill: Take care of yourself BUT DO NOT SCREW UP

    EMR

  • Can the Marlboro Man Save Our Budget?

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    James A. Bacon


    Since revenues and taxes are on just about everyone’s minds these days, new ideas are always welcome. Here at Bacon’s Rebellion, all kinds of strategies have been pushed, including some rather complex ones such as a per-mile gas tax.

    Why not consider the most obvious tax of all — tobacco. Anti-smoking lobby the Campaign for Tobacco Free Kids is using the revenue crisis in the U.S. and among the states, including Virginia, as a vehicle to push a buck a pack increase for federal and state cigarette taxes.
    Doing so would raise $9.1 billion for the federal budget. In Virginia, it could add $317.7 million to the state which faces a two-year deficit of $4.2 billion, Tobacco Free Kids says. It could help 65,1000 children choose not to smoke, help 34,100 adults to quit and help prevent 29,800 premature deaths, the Campaign says. Some $1.4 billion in health care costs could be saved — no small amount in a crisis-charged health reform climate.
    According to Bloomberg, Virginia already has the 49th lowest taxes per pack — 30 cents. The state average is $1.34 a pack.
    But the Old Dominion loves its leaf and Philip Morris USA and parent firm Altria, wield a lot of clout especially since their headquarters vamoosed from New York City to Richmond a few years back. Besides its new HQ in the old Reynolds Metals building in Henrico County, Philip Morris USA’s last remaining cigarette production facility is just south of downtown Richmond where it employs about 6,000. PM USA has closed other facilities in Louisville and Cabarrus County, N.C.
    The tobacco giant is a major contributor both to Virginia political campaign coffers and to numerous charities, which have suffered a great deal in the recession. Tobacco, however, is pretty much recession proof. In 2009, during the worst recession since the Great Depression, Altria saw sales rise 21.7 percent to $23.5 billion. Net earnings were $3.2 billion. These healthy figures come despite the fact that the number of American smokers is declining, thanks to health concerns.
    So, if the General Assembly and Gov. Bob McDonnell are really serious about dealing with the state’s budget crisis, maybe they should take a serious look at this obvious new source of revenue. But will they, given Altria’s clout?
    Not that long ago, the answer would have been a flat “no.” But the state has recently taken a more sensible and modern approach. During the Gov. Tim Kaine administration, the legislature actually passed a law banning smoking in most restaurants.
    Such limits do work. Take me. When I was a high school kid in the 1960s, cigarettes were so accepted that my high school had cigarette machines. I started smoking, Marlboros no less, when I was about 16. I stopped in my early 30s until I was posted as a journalist in Moscow. The intensity of that assignment, plus the presence of so many smokers, encouraged me to take up the habit again. The only reason I stopped was that my next post was in a Manhattan skyscraper way up 39 floors. New York City rules forbade workplace smoking, so if I wanted a smoke, I’d have to go down two banks of elevators to the street. Too much hassle. I quit.
    Of course Philip Morris USA is going to be against any new tax hikes, saying they’ve just been through one. But the firm is always trying to have it both ways. Its Web site urges viewers not to use its products. Yet it keeps making them. It wants regulation by the Food and Drug Administration while its competitors don’t. By getting FDA oversight, Philip Morris would be pretty much locked into its leading market positions.
    PM may be willing to play these logic games. But if the General Assembly wants to get taxes and improve the public’s health, cigarette taxes might make sense. They make more sense than McDonnell’s ideas of burdening North Carolinians with extra tolls on Interstates 85 and 95 if they want to drive north into Virginia or banking on offshore oil royalties from largely unexplored fields that won’t be available, if they exist, for about another decade.
    Peter Galuszka

  • HAITI’S LAND CHANCE

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    James A. Bacon

    The first draft of this Post was titled “Oh Haiti! How We Have Failed You.”

    The first draft was also much longer but we added the references below to document US of A actions vis a vis Haiti since 1804.

    Then something happened that has the potential to reverse 206 years of calmity.

    Before we get to the good news, a few facts and a bit of background:

    Haiti, the second European colony to stage a ‘successful’ revolution in the Western Hemisphere has been a pitiful economic, social and physical doormat of a nation-state for over two centuries.

    Now, the planet is ending 150 years of glutenous resource Mass OverConsumption. This will leave Haiti – and other neglected and overpopulated nation-states – to compete with until-recently rich and powerful Regions for increasingly scarce and expensive resources, goods and services.

    The data is crystal clear:

    Haiti was a basket case BEFORE the January 2010 earthquake.

    History is also crystal clear:

    Haiti is a basket case because of the criminal acts of its ‘leaders’ and because leaders of other nation-states turned their back on the Haitian people. These ‘leaders’ have failed over and over to do the ethical thing as opposed to what would benefit them the most in the short term. They failed to deliver on their own promises. The US of A, the biggest, richest neighbor has been one of the worst offenders – intentionally and unintentionally. See “Why does Haiti suffer so much?” Elizabeth McAlister CNN 18 Jan 2010 and “Troubled History: Haiti and US” Vanessa Buschschluter BBC News 16 Jan 2010.

    In the 60s National Geographic ran a story with a title something like “Haiti – West Africa in the West Indies.” Then and now, only in Africa and on scattered islands in the South Pacific can one find the poverty, depravation and intentional neglect of obligations comparable to that with which Haitians have suffered.

    And then the earthquake…

    Why does EMR care? He is embarrassed by the US of A’s record in Haiti. On what does he base this? He has been there AND he has read the history.

    EMR was only there once, but what but what a trip and what a lasting impression! [For a recently updated sketch of the April 1968 trip see Attachment One.] Many who have visited Haiti and most who understand Haiti’s history have the similar reactions to the US of A’s role.

    In the limited number of days the party spent in Haiti, EMR did not get far outside of Port-au-Prince on the ground. But the group had a Cessna 206 and plenty of fuel so coming and going from Puerto Rico they got a good look at the Countryside.

    EMR has a 35 mm record of the settlement pattern – the charming architectural gems in the Urbanside and physical abuse of the environment in the Countryside. The appalling deforestation and erosion was evident in April of 1968. For the first time, it was easy for one trained in ecosystems to visualize how the glutenous appetite of the Roman Empire for wood, fuel, food and other resources had led to the deforestation and desertification of much of North Africa and the Middle East. It was spread out like a roadmap to Collapse on half of a potentially verdant Caribbean Island.

    Haiti is not just an economic and social basket case. The citizens have been forced to mine the Natural Capital (aka, the environment) to survive and there is not much left. Google Earth confirms that in spite of best efforts, the trajectory has been down since 1968.

    Of all the things that the US of A has done as a nation-state outside its borders, the treatment of the citizens of Haiti is what EMR is least proud of as a citizen. From 1804 on the US of A hardly ever did the right thing. In spite of millions of hours by thousands of well-intended volunteers, and the work of many Haitians – in the US of A and in their homeland, the wrongs of Agencies, Enterprises and Institutions has not been righted.

    Every time another tragedy of governance surfaces, it dredges up memories of what the US of A has done: Sending in the military and promising to make things better but then not delivering.

    Photos of Port-au-Prince in ruins hit EMR hard – like the photos of New Orleans after Katrina. Unlike New Orleans and the Louisiana low country, EMR had no role in analyzing or suggesting a way to avoid disaster. Until last month, EMR was not even aware that Port-au-Prince was near a earthquake fault. However, a lot of others did and they published warning after warning.

    As we noted last month in an Email to the friend who was the pilot on the 1968 Haiti trip: “The news from Haiti is disturbing on many levels. In a way, it is Katrina all over again. With Haiti, it is empathy and outrage at incompetence but without the direct connection created by the effort to solve the problem.” See “Down Memory Lane with Katrina” 5 September 2005 and “A Second Stroll with Katrina” 4 September 2007.

    Now the good news:

    An item on CNN.com on 3 February – the lead was that the death toll from the earth quake was now over 200,000 – reported that Bill Clinton has been given an expanded role to oversee Haiti relief and rebuilding for the UN.

    As readers of The Shape of the Future know, EMR is no fan of Bill Clinton’s administration vis a vis human settlement patterns and resource consumption. His administration looks good primarily for balancing the budget and in comparison to the administration the followed Clinton / Gore.

    But there is more to this story that most know. Only recently did it become general knowledge that Bill and Hillary spent their honeymoon in Haiti in 1975. From the descriptions of their trip they must have had some of the same experiences that our party had in 1968. These experiences are also similar to what others have experienced. Further, the details of what Clinton tried to do in Haiti while president – although largely thwarted by the elephant clan – are encouraging.

    The bottom line is Bill Clinton has a chance to do the right thing. There is no other person on the planet who has the experience, the stature and the connections to pull off setting Haiti on a sustainable trajectory.

    Perhaps best of all, Bill does not need to be home at 6 because his wife wants to go to the Country club. She has more on her plate that any Secretary of State since Cordell Hull.

    So many past failures in Haiti…

    We have five little words for Clinton:

    Do NOT screw up Bill.

    You and you alone have the ability and the position to do the people of Haiti right. You have the power to eclipse thousands of broken promises and the billions of wasted dollars.

    You can move beyond your and our collective prior transgressions and stand beside George W. And Abe L. as a president who did truly great things for the US of A. In this case – and in these times – it is perhaps more important to help others than to provide aid to the citizens of the US of A. Citizens of the US of A have, by-in-large, created the economic and environmental quagmire in which they now find themselves. “We have met the enemy…”

    On a flatten but very bumpy earth, UN action that establishes a sustainable trajectory for Haiti may be the most important accomplishment that we can expect anywhere from anyone.

    It is an accomplishment that can set the standard for not just UN aide but for self-help by citizens of the until-recently rich Regions.

    Do NOT screw up Bill, with the planets resources dwindling, this is Haiti’s last chance.

    And perhaps citizen’s last chance to understand the components of a sustainable trajectory for civilization.

    EMR

    ATTACHMENT ONE

    May 1968 / Updated through January 2010

    Haiti was impacted in diverse ways by the Castro’s Cuban revolution in 1959. By the mid 60s, Haiti was in desperate need of hard currency. The dictatorship of President for Life Francois Duvalier (Papa Doc) was getting more and more bad press. It was time for an image change. In the late 60s, Papa Doc acquiesced to the advice of his son-in-law who had recently returned from exile in France: He moved to lift restrictions on, and encourage expansion of, tourism.

    A spruce up program was started, selected tour ships were allowed to dock, Air France started scheduled flights from Montreal, limited Pan Am service was reestablished.

    In the late 60s EMR was working as a consulting planner for the Puerto Rican Planning Board and taking every opportunity available to learn about the Caribbean. Within weeks of an announcement in the San Juan Star that tourists could now visit in private airplanes he was on the way. EMR and two fellow planners, one with a commercial pilot’s licence, rented a Cessna 206 ( N4892F) and took off in April of 1968 for a few days in Port-au-Prince.

    It turned out to be the most memorable and eventful of the score of similar trips the group took to islands in the Carribean. Between 1967 and 2000, EMR spent time on most of the islands between the Mona Passage and Tobago. What he learned in Haiti helped inform his travels, his work and his ownership or land in the Eastern Caribbean.

    The flight from Puerto Rico to Haiti was uneventful but the appalling deforestation and erosion was evident from the time we crossed the Dominican Republic border.

    The landing in Port-au-Prince WAS eventful.

    Not having a map of the Region, we first approached the runway of what turned out to be a military airport east of Port-au-Prince’s commercial airport.

    That brought frantic instructions from the control tower – which we had contacted upon entering Haitian airspace: “Do not try to land there, Areoport Francois Duvalier International is ahead of you several miles with the large white terminal building.” Later we recalled that expat rebels had tried to bomb the military airport with a World War II B-26 just weeks before. Good thing they did not have itchy fingers on the anti-aircraft guns.

    On landing at the correct airport (now Areoport Toussaint Louverture International – in 1968, EVERYTHING was “Francois Duvalier …. something or other”) we found the Cessna’s landing wheel brakes were not working. After just barely getting off the main runway in time to avoid being run over the by-weekly DC-9 Air France flight, EMR jumped out of the plane on the taxiway and rode on the tail to keep the tail wheel on the ground so that the pilot could rev up the prop and use the rudder to steer the Cessna to a safe place to stop. More frantic instructions from the control tower. “Get back in the airplane! You are not allowed out of the airplane on the runways… Repeat …”

    At the time we believed – and still do – that we were the first private plane to land in Haiti after years of prohibition against small aircraft. After an unauspicious opening act it was good that we had the telegram authorizing our entry form the Ministry of Tourism.

    We were met on the tarmac by a young Haitian Air Force Lieutenant who was assigned as our guide and chaperon. He also had a copy of the telegram and after looking at our passports, waived further processing. Well spoken and polite, he quickly figured out that the five adults and two children dressed in baggy shorts and armed with cameras were not be a threat to national security.

    Five adults and two children under six years old in a six passenger plane? One of Jim Bacon’s Nanny State social workers would see cause to take children out of a household if parents exposed children to such dangers. The two children turned out to be a passport to places not otherwise open to visitors.

    The Lieutenant arranged for an ‘agent’ (“Cowboy”) to oversee getting the brakes fixed, filling the tanks with fuel and guarding Cessna during our visit. Cowboy was armed – as were many “officials” we encountered – with a well worn pearl handled Colt 45. The guard slept at night under the tail of the plane during our stay. When we returned to the airport the gas tanks were full and the brakes seemed to work.

    Who in their right mind would get in a plane and fry over mountains and open ocean following an aircraft maintenance procedure such as that? That is another story.

    Our chaperon also arranged for a driver and car. The drivers name was Francois, of course. The Lieutenant was to accompany us on our travels but the seven of us left no room in Francois’ old four door sedan so the Lieutenant, having assured himself we were not a threat took some time off.

    We saw all the places tourist’s usually visited and a lot more. As we would drive from site to site we would see something of interest. Often Francois would caution against going there. We almost always ignored his advice and scored a number of interesting encounters. A dramatic but peaceful encounter with the Ton Ton Macoute in charge of the charcoal dock for example. We took long walks down streets lined with trees and delightful architecture and full of people but devoid of cars. Later we found the same person showing up in picture after picture – apparently the Lieutenant was not the only one paid to keep track of our activities.

    We had read “The Ugly American” before moving to Puerto Rico and did our best to avoid the tourist stereotype. Graham Greene’s “The Comedians” was recently published and a topic of discussion in Haiti. Following our visit we read Haitian history and still do from time to time – most recently “Haiti 1959: The Year That Changed Everything” (2007)

    The party stayed at the Hotel Plaza, visited Hotel Olafson and passed by Hotel Montana. Hotel Montana has been the subject of much press after the quake because so much (too much?) of the international rescue effort was focused on rescuing expats at the hotel. In 1968 the Olafson was THE place as it was when Graham Greene stayed there in 1956 while Hotel Montana was still just a curiosity – a place called “Montana” in Haiti?!

    We also had a reliable source to provide accurate data on the level of poverty, depravation and corruption. This is complicated so follow carefully: The pilots wife’s sister had a college roommate who married a senior staffer at Care. Somehow we made contact and got their perspective on Haiti. The Care staffer’s name was Van Damme according to a notation on a 35 mm slide. He was, as you might guess Dutch, Americans were not trusted in Haiti even in aide jobs.

    For a dirt poor urban Region, the streets were remarkably clean. There was no trash, no tin cans, no litter. Every resource was used. What was liter in San Juan as used in Port-au-Prince. If it was burnable it was fuel, if it was organic, it was fed to the pigs, if it was metal it was turned into lanterns and utensils.

    What impressed us most – and what impresses almost everyone who visits Haiti – is the indomitable spirit and innate friendliness of the people. Put away the camera and they were eager to talk. They were well informed and articulate.

    Also interesting was the artistic ability of many citizens. We left Haiti with all the artifacts and decor items that we could afford and that the 2006 would hold along with 7 passengers. We tried to buy directly from the artists and artisans who make the goods.

  • McDonnell’s Lame Jobs Plan

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    James A. Bacon

    Creating jobs in this jobless economic recovery is the priority for every politician of either party. It was President Barack Obama’s major goal during his State of the Union speech as it was for Virginia Gov. Bob McDonnell who gave the rebuttal that was televised nationwide.

    Neither man seems to have much to offer in ideas, however. Besides stimulus spending, Obama wants tax credits for businesses, especially small ones, that hire new employees.
    McDonnell’s ideas are a mish-mash of corporate welfare, the old familiar economic recruiting in the old familiar areas, a couple of strange plans and demands for oil and natural gas drilling offshore of Virginia in areas where there are no known, workable fields and whose efforts in the best conditions wouldn’t yield revenue for at least another decade. (for more, read my

    commentary in Style Weekly)

    McDonnell plans on framing a major jobs push around an initiative led Lt. Gov. Bill Bolling with a goal of creating $311 million in new revenue streams over five years and creating more than 29,000 jobs over two years.
    To get there, McDonnell plans typical meat and potatoes projects such as boosting the bennies available through the Governor’s Development Opportunity Fund to attract relocating industries, a slew of expanded tax credits, easing up on capital gains taxes, boosting small businesses and increasing the percentage of state contracting in special rural and depressed area business zones. He backs more public-private investments and more biotechnology — everyone’s panacea for economic growth.
    Curiously, the governor’s fund would offer goodies to such rich firms as Northrop Grumman which is thinking about relocating from Southern California to the greater Washington area. Not only does this give big firms special benefits, the idea is hardly new. Former Govs. Tim Kaine and Mark Warner reached into the goodie bowl to get defense contractor SAIC, Hilton Hotels, Volkswagen and Rolls Royce.
    Other McDonnell ideas are a bit goofier. Miffed that an upcoming Disney movie about Secretariat, the champion racehorse reared in Hanover County, is actually being filmed in Kentucky, McDonnell wants expanded tax credits for any movie companies that spend at least $250,000 for production in Virginia. And he wants some of the tax from the sale of wine used to market Virginia’s growing but small wine industry. Speaking of alcohol, McDonnell’s plan to privatize state-run ABC stores would probably cut more jobs than it would create.
    It remains to be seen how helping the tinsel and Chardonnay crowds will really address business sectors where Virginia is hurting most. According to recent Virginia Employment Commission data, the most stressed sectors are construction, manufacturing and information. Other laggards are finance, professional services and transportation.
    Of all the state’s metropolitan areas, Richmond was the worst, next to Winchester, according to Employment Commission Senior Economist Ann D. Lang. Among the capital area’s losses are more than 12,000 well-paying jobs following the implosion of three marquee-name companies.
    Among the dead are LandAmerica, fatally hurt by the subprime mortgage lending meltdown, computer chip maker Qimonda, which got caught in a global market squeeze, and retailer Circuit City, the victim of bad internal management. It isn’t clear how any of McDonnell’s initiatives would alleviate such damage or prevent it in the future.
    Curiously, however, McDonnell is making a major deal about the iffy prospect of drilling for oil and natural gas off the Virginia coast. Taking a chapter from Sarah Palin’s “Drill Here, Drill Now,” campaign playbook, McDonnell made offshore drilling a big part of his campaign.
    He hadn’t even been sworn in as governor when he fired off a letter in December to Obama’s Interior Secretary Ken Salazar urging that the federal government hold a lease sale in 2011 of a triangular tract of underground ground about 100 miles off the Eastern Shore. Citing a study by Old Dominion University president James Koch in 2005, McDonnell believes that enough oil and gas could be found to create 2,578 jobs, $7.84 billion in capital investment, payrolls of $644 million and $271 million in state and local taxes.
    As McDonnell put it in his address: “In Virginia, we have the opportunity to be the first state on the East Coast to explore for and produce oil and natural gas offshore. But this Administration’s policies are delaying offshore production, hindering nuclear energy expansion and seeking to impose job-killing cap and trade energy policies.”
    There are a few problems with McDonnell’s statement. Obama is planning on increasing the level of federal loans guarantees for new nuclear reactors. Some form of cap and trade is inevitable whether McDonnell likes it or not. Cutting carbon emissions may kill some jobs, but it will create others in “green” technologies. Curiously, power firms Duke and Dominion back some version of cap and trade.
    Most problematic is McDonnell’s lunge for offshore. First, no one really knows how much petroleum is in the area, says Karen Matusic of the American Petroleum Institute. Koch, the past ODU president, says that his data showing the jobs was actually a quickie extrapolation and more review is needed. McDonnell wants state revenue from oil production to help solve transportation issues, but even in the best case, oil wouldn’t flow until nearly 2020. And, a number of other interested parties, including environmentalists, the New Jersey seafood industry and former high-ranking naval officers, have all taken issue with drilling off Virginia.
    Even though Obama pushed offshore oil and gas in his State of the Union speech as well, federal officials have postponed the lease sale past 2011, drawing McDonnell’s wrath. And, earlier attempts to explore off the Mid-Atlantic have come to nothing. In the late 1970s, for instance, oil patch construction firm Brown & Root leased large land tracts near Cape Charles to fabricate giant offshore drilling platforms. The land eventually became a luxury golf course after no oil was found and a moratorium on offshore drilling was begun in 1983.
    If McDonnell wants to create jobs, he might consider playing to the state’s strengths. The fastest growing job sector, according to the employment commission, has been in federal jobs.
    That has its own ironies. A staunch conservative, McDonnell says he wants “limited” government and tough curbs on spending. Yet Virginia’s economic ace in the hole is its proximity to Washington and rich mix of federal defense and security employment. Such jobs mitigated recession damage in Northern Virginia and Hampton Roads. Richmond’s woes would have been much greater had it not been for expansions at Ft. Lee in Petersburg.
    That brings up another McDonnell irony. He loves to advertise his Army service and that of his daughter while lashing into the typical, right-wing bug-a-boo of the evil federal government.
    It seems that the new governor has a few things to sort out. For ideas on winning jobs, he’s presenting retreads and goofballs. Nothing appears to go to the heart of Virginia’s unemployment problem.
    Peter Galuszka

  • Great Minds Thinks Alike

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    James A. Bacon

    I don’t know if George Hoffer, a VCU professor of economics, has ever read the Bacon’s Rebellion blog, but his ideas about transportation funding are very similar to mine. Maybe it’s a case of great minds thinking alike. Not only has he advocated a road-funding scheme for Virginia that is nearly identical to mine, but he has added some subtle improvements. Read his column in today’s Times-Dispatch and weep – – for joy.

    Hoffer recognizes that the gasoline tax is living on borrowed time. “By the 2016 model year,” he writes, “the average fuel efficiency for all the new cars and light trucks will have increased from the current 25 miles per gallon to 35.5.” In its place, he recommends a “highway user tax system,” the centerpiece of which is a variable charge based upon the number of vehicle miles driven the previous month.

    Replacing the current 17.5-cent-per-gallon gasoline tax would require a charge equivalent to 1.1 cents per mile. (I have not double-checked his arithmetic, but I assume that it is accurate.)

    Think about it: The IRS allowance for business travel is $.50 per mile. The per-mile tax would be equivalent to about two percent of the total cost of car ownership! Hoffer proposes dedicating the revenues to maintenance, as I do, so it should be easy to justify raising the charge an extra penny per mile (or whatever is needed) to pay for the privilege of driving upon safe, well-maintained roads, including the cost of fixing our backlog of decrepit bridges. (Alas, Hoffer also suggests that the fee could be raised to cover the cost of new construction, a point with which I disagree.)

    Hoffer would modify the base charge as follows: a lower fee for travel on unpaid roads and a higher fee for heavier vehicles. (I had never considered an adjustment for unpaved roads.)

    Hoffer also backs the idea of a separate charge based upon the number of miles driven in a congested area. Writes Hoffer: “This tax/user fee is designed to better utilize existing roads and to cover the cost of capital for new roads where excess demand exists.” Exactly.

    Finally, Hoffer explains in his column how the GPS satellite-based billing system would work. He also has some ideas on how to deal with the problem of taxing out-of-state drivers.

    Sooner or later, the citizens of Virginia will understand that someone has to pay the maintenance of existing roads and construction of new ones, and politically the idea of getting someone else to pay for them just won’t fly. Sooner or later, citizens will grasp the principle that the people who use and benefit from the road system are the people who should pay for it. Once they grasp that fundamental principle, we’ll move on to the idea that they should pay other location-variable costs.

  • Good Reading on a Snowy Sunday

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    James A. Bacon

    Sunday newspaper reading is always fun on a snow-bound morning. Amazingly my newspapers arrived on the driveway, except for The Washington Post which I had to drive to WaWa to buy.
    Of course, my mind is filled with the musings of Baconauts on Baconomics, which is actually a fairly simple body of knowledge.
    All you have to know are that deficits are awful and we Boomers are facing Armageddon worse than the biblical type because wild-eyed liberal Barack Obama and his Congressional cohorts are loading us up with lots of deficits. This school of thoughts tips its hat at the excesses of George W. Bush, but, mind you, the Baconauts were silent when “W” was loading us up with debt (where were they, anyway?)
    Another theorem of Baconomics is that free markets and deregulation are the life-giving milk of any economy and that government and its read tape are the enemies.
    So,I was pleased to read two of my favorite columnists this morning.
    The first one is Frank Rich, you actually ran a little alternative newspaper in Richmond back in the day. His New York Times column quotes Obama during the State of the Union as noting that:

    “..most of the debt vilified by Republicans happened on the watch of a Republican president and Congress that never paid for “two wars, two tax cuts, and an expensive prescription drug program.” The president’s indictment could have been more lacerating. “
    As for the real roots today’s deficits, consider this:

    “Crunching Congressional Budget Office numbers, David Leonhardt of The Times calculated that of the projected $2 trillion swing into the red between the Clinton surplus and 2012, some 33 percent could be attributed to Bush legislation and another 20 percent to Bush-initiated spending (Iraq, TARP) continued by Obama. Only 7 percent of the deficit could be credited to the Obama stimulus bill and 3 percent to his other initiatives. (The business cycle accounts for the other 37 percent.)”
    So how come the Baconauts are always saying that it is Obama’s deficit spending that is the problem?
    The second column has to do with Davos, the Swiss gala where the George Soros types of the world gather and think the Big Thoughts. I have always wanted to go to Davos and hob-nob with the mighty, but none of my past employers was willing to foot the bill.
    Even so, David Ignatius of The Washington Post has an interesting view of “globalization,” which means that’s perfectly OK when thousands of textile or silicon chip jobs are lost in Danville or Eastern Henrico County because some stateless board of directors of some multi-national company has found better cost synergies elsewhere. Here is his opinion piece:
    “Americans need to understand that the 2008 financial crisis proved a point that many Europeans and Asians have been arguing for decades: Economic “liberalism,” of the sort found in Britain and the United States, creates a dangerous over reliance on the market. During the boom years, their complaints seemed like just so much whining. Not anymore.”
    Interesting reading.
    Peter Galuszka

  • The Moral Foundations Test

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    James A. Bacon

    Here’s a fascinating online test being conducted by Jonathan Haidt and his colleagues at the University of Virginia that explores the differences in moral values between liberals and conservatives. You can take the “Moral Foundations Questionnaire” here. Here are my results.

    Fairness values:

    • Fairness as egalitarianism (e.g., “ideally, everyone would end up with the same amount of money)
    • Fairness as equity or proportionality (e.g., “people who work the hardest should be paid the most”)
    • Fairness as retribution (e.g., “an eye for an eye, a tooth for a tooth”)
    • Fairness as personal responsibility vs. freeloading (e.g., “whether or not everyone is pulling their own weight”)

    Liberty values:

    • Personal liberty (e.g., “everyone should be free to do as they choose…”);
    • Freedom from government (e.g., “the government interferes too much in our everyday lives”);
    • National autonomy (e.g., “I want my nation to stay clear of treaties that will limit…”)

    Take the test then post your results in the comments section. I’d be very interested to see how regular B.R. commenters (and anyone else who cares to identify him/herself) compare on moral values.

  • OBAMA’S LAST CHANCE?

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    James A. Bacon

    The speech President Obama will deliver in a few hours may be his last chance to make a difference over the next three years.

    In order to get elected he had to offer hope and belief in a change for the better.

    After an inspiring Inaugural speech, instead of taking on a thousand windmills, he should have taken stock and then a few weeks later started to prepare citizens for the future.

    The current administration inherited a incredible number of problems that have been mishandled and made worse over the past 37 years by both political clans.

    In addition, the current administration inherited the smoldering ruins from specific responses to crises that arose over the past decade. It is as if someone (Uncle Dick?) said: “What is the worst way to respond to this event?”

    And THAT became the administration’s policy: 11 September 01 (“go shopping,” while we start two wars) economic stagnation (lower the interest rates to stimulate ‘growth’ and subsidize Large, Private vehicles); citizen well being (Buy more house than you need in places you can only reach with a Large, Private vehicle); protect health and safety (Do not enforce existing health and safety regulations); the list is endless…

    Today’s WaPo has a nice one pager (A-4) that outlines seven broad categories of Obama promises and how far he has gotten. Not far.

    There is a bigger problem:

    Joel Achenbach nails that problem in “Americans are all for being against everything” also in today’s WaPo

    Citizens are not prepared for the Transformations that will be necessary to achieve a sustainable trajectory for civilization. They want an economic ‘recovery’ that will take them back to where they think that they do not have to worry about anything beyond optimizing their short term profit and pleasure form Mass OverConsumption and Business-As-Usual.

    After all, that is what both major political clans have promised would happen if you vote for “our” candidate.

    We will explore why this is the case in more depth in “What the Future Holds” forthcoming, but here is a quote from the rough draft:

    “Lets start with what is behind and beyond ‘The current fiscal status of nation-state, state and municipal Agencies.’ In the comments following Peter’s 30 November post “Going Vertical,” Groveton said:

    “In the end, a nation only has so much wealth. We have overspent our asset base many times over. Our exploding entitlement programs get the current politicians votes at the cost of our country’s future.”

    “From the example given, it appears Groveton is equating “nation” and federal Agencies. There is solid fact behind that statement but it is only the tip of the iceberg.

    …………

    “The problem with Groveton’s observation, the MainStream Media headlines (omitted here) and Ruth Marcus’ first grim reality (a brief paraphrase of Jim Bacon’s Boomergeddon) is that they are not comprehensive enough.

    “It is NOT just nation-state Agencies or even ALL Agencies that have over spent. That is still just the first layer – to use the Hazel Henderson analogy. It is the tip of the only iceberg THAT IS NOT MELTING.

    “Not just Agencies but Citizens, Households and Enterprises have overspent. They were led to believe “a growing economy raises all boats” regardless of what makes it ‘grow.’ Mass OverConsumption is sinking all boats. It is sinking the private boats of the vast majority of citizens and their Households. It is also sinking the collective boats of citizen’s Organizations – Enterprises, Institutions AND Agencies.”

    EMR tends to agree with what Peter and the early comments on his Obama post (“Its Really Business As Usual”) but how is that grim reality going to change / Transform? Only if citizens believe it must change / Transform.

    Can Obama pull it off? If he does not, it may be a decade before citizens are ready to listen again and in a decade how much of the once bountiful resource base will be left to support the Transformation?

    As readers of Chapter 1 of The Shape of the Future know, Clinton’s State of the Union speeches play and important role in depicting why Clinton / Gore were not able to understand human settlement patterns or contribute to evolving a sustainable trajectory. Hopefully Obama will do a better job.

    The best preparation for tonight’s speech may be to reread (surely you have read it at least once) Amitai Etzioni’s 17 June 09 The New Republic essay “Spent” that has been republished by Utne as “Get Rich Now” in the Jan / Feb issue.

    Etzioni does an incredible job of laying out the difference between consumption and consumerism (aka, Mass OverConsumption) the Green Menace. In four pages he wraps up the Communitarian and Transcendental alternatives to Mass OverConsumption. The essay outlines the fundamentals of “A New Metric of Human Well Being” (PART V of TRILO-G)

    We can only hope Obama read Etzioni when he was framing what he was going to try to communicate in preparing citizens for the future.

    EMR

  • It’s Really Business As Usual

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    James A. Bacon


    One of the troubling things about this blog are the perceptions revealed by some of the commentators, especially about economic policy.

    There’s a steady drumbeat from some who take a rather unsophisticated view that President Barack Obama is some kind of wild socialist out to ruin free market economics. Dark and hidden agendas abound from nationalizing banks and health to setting up death committees to getting rid of all individual freedom.
    It is unfortunate that such rhetoric falls to the Sarah Palin level (“I can see Russia from my house!”) when the truth is that economic policy is made pretty much by the same group of Wall Street bankers, economists from elite Eastern universities and well-educated civil servants who move gracefully from multi-national groups such as the World Bank and IMF to the Federal Reserve to the White House, and so on.
    What you have is basically the same group recommending policy for Bill Clinton, George W. Bush and Barack Obama. The common thread is a belief in free markets, deregulation, and government bailouts when the going gets tough. The same basic medicine that worked in Mexico in 1995 and in Southeast Asia in 1997 works for the U.S. in 2008-2009. You toss in a lot of dough to clear things up and get things moving and then it’s back to business as usual.
    What is interesting, if not stunning, about some of the Bacon’s Rebellion commentators is that they really see Obama as a kind of Trotsky, when, in fact, he is propped up by exactly the same club of advisers that propped up Clinton and Bush. The truth is that Obama’s is non-intrusive and rather limp when it comes to the kind of federal oversight these smart and greedy people really need. Despite the whining from the right, one year into his presidency, there hasn’t been one solid and successful step to reign in the financial sector. But let’s connect the dots:
    • Goldman Sachs. This is the gold-plated investment bank on Wall Street, the uber-institution that all kneel before..It produced Robert Rubin, who was Clinton’s second Treasury Secretary, who backed dereg of all sorts, including ending Glass Steagall which had kept investment and commercial banking separate. Globalists such as Clinton badly anted to dump the law. Henry “Bazooka in My Pocket” Paulson, Bush’s second Treasury Secretary came from, you guessed it, Goldman Sachs. Paulson masterminded the 2008 government bailout and the TARP act, which gave all kinds of bennies to companies deemed “too big to fail.” Mind you, this was long before Obama won the election.
    • Academics and the Fed. Two others who fit very much into the dereg, most anything goes mold come from academia and the Federal Reserve. Current Fed Chief Ben Bernanke, a Princeton Professor and Fed member, was one. Another is current Treasury Secretary Timothy Geithner who had been an academic and a bureaucrat in multinational groups before become head of the New York Fed. In that role, Geithner worked closely with Paulson to arrange the TARP bailouts and played a sometimes questionable role in forcing Bank of America to bail out Merrill Lynch without apparently coming clean about how bad the books were.
    • Ones straddling everything. Larry Summers comes to mind. He’s been everywhere — president of Harvard, last of Clinton’s Treasury Secretaries, World Bank. With Clinton, he worked alongside Rubin to dump Glass Seagall and save Mexico and Asia. He’s now chief economic adviser to Obama and pretty much follows the same course in Clinton-Bush-Obama. Summers’ reputation for abrasiveness, especially to women, got him kicked out of Harvard. I knew him when I was a correspondent in Moscow during the Clinton Administration and he gave us very useful and entertaining background briefings, sort of like graduate student seminars.

    The curious thing about Obama is that he seems to be getting economic advice from the same old, same old that advised all presidents, Democrat or Republican, since 1992. Since Obama has close ties to the University of Chicago, one wonders why he hasn’t picked up some of the free market magic that evolved from there, Uncle Milton Freidman and all that.

    During the 2008 campaign, there were articles predicting that Obama might actually come up with U of Chicago free market stuff with a modern twist one it, a la “Behaviorist” economics which, (at least as far as I get it) is laissez-faire with the government sometimes coming in and using tools like taxes and the like to push public behaviors in directions it wants. Unfortunately, the Chicagoans are few and far between when it comes to economic (although not political) influence, it’s all very Northeastern and the same old crowd.
    A commentator to one of my blogs, probably an illiterate, right-wing Republican, made a big deal about the stock market tanking for a couple of days when Obama proposed taxing proprietary trading by banks. This was supposed to have been some kind of socialist plot.
    Well, it turns out that ideas like that, along with other ideas about getting tough with self-serving bankers and their minions, don’t come from Che, or Fidel or Mao or even Barney Frank (who, BTW, gets most of his campaign money from big banks and investment funds).
    Nossir. The ideas come from Paul Volcker, the celebrated former Fed chief, who helped bail the nation out of Jimmy Carter’s inflation swamp through some very tough love monetary policies. It was Volcker who set up the decade of prosperity under beloved Republican Ronald Reagan (along with Reagan’s deficit spending sprees).
    In sum, we’re not facing a takeover by the subversive left. We are facing business as usual.
    Peter Galuszka

  • Bring Out Your Dead

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    James A. Bacon

    There’s a scene from “Monty Python and the Holy Grail,” in which Eric Idle plays a corpse collector making the rounds of a plague-ridden village in the Dark Ages, crying “Bring out your dead, bring out your dead.” One peasant tries to pass off an old fellow as dead. The old guy moves, saying “I’m not dead.” “He says he’s not dead,” says Eric Idle. “Yes, he is,” says the peasant. “No, I’m not,” says the old guy. “Well, he will be soon,” says the peasant. “He’s very ill.”

    That scene brings to mind the late lamented healthcare reform package. For the most part, all that remains to do is clear away the bodies. But it would be a big mistake if we hauled every single piece of the legislation off to the pauper’s grave.Some parts could make genuine, if limited, contributions to improving quality and addressing long-term costs.

    I would hope that Title III of the Senate version of the bill, entitled “Improving the Quality and Efficiency of Health Care Act,” could be resurrected as a stand-alone bill. I believe it would gain bipartisan consensus and quickly win passage. Perhaps Sen. Mark Warner, who took a special interest in this aspect of reform, could lead the effort. Here is a section of a chapter from “Boomergeddon” that describes the benefits and limitations of Title III.

    Bending the Cost Curve, Obama-Style

    President Obama and his Congressional allies had two major preoccupations in approaching health care reform. First, they wanted to extend medical coverage to the 15% of the population that lacked it, a liberal Democratic priority since World War II. Second, they had a keen understanding that the nation could not long afford medical care if the cost continued to escalate some 2.5% a year faster than the general inflation rate over the next 40 years as it had for the past 40 years.

    The tumultuous debate that ensued revolved mainly around the question of how to achieve universal insurance coverage, how to pay for it, and what impact the legislation would have on the federal budget. Different versions of the legislation were estimated to cost in the vicinity of $800 billion to $1 trillion over a 10-year period. Congress spent months identifying one group after another — the rich, the young and healthy, beneficiaries of high-cost health plans, consumers of soft drinks, cosmetic surgeons, tanning parlors — that could be shaken down for enough money to make the initiative “budget neutral.” But lawmakers faced a hard reality in this zero-sum game: For every winner (someone who gained access to medical insurance), there was a loser (someone else who paid for those benefits). And the losers raised hell.

    The O Team cut deals with Big Pharma, Big Insura, Big Labor, the hospitals, doctors and even senators from Nebraska and Louisiana to buy their acquiescence. But in the end, it wasn’t enough. Health reform sputtered as Congress tried to reconcile the competing visions of the Senate and the House of Representatives. After the January election of Republican Scott Brown to the Massachusetts Senate seat previously occupied by Teddy Kennedy, the initiative collapsed. It was clear even to members of Congress: Far more Americans saw themselves as loser than winners from the legislation.

    It’s a shame that the Obama administration tied the fate of the controversial universal-care provisions to the productivity-and-quality reform elements of the bill. Had those components been carved out in their own bill entitled, “Improving the Quality and Efficiency of Health Care Act” (as Title III of the Senate version the bill actually was slugged), it likely would have won bipartisan support and sailed to easy passage. The measures enumerated in Title III were not in themselves sufficient to “bend the curve,” as I shall explain, but they would have moved the U.S. health care system in the right direction and set the stage for the next round of market-oriented reforms.

    Under the Obama plan, the commitment to efficiency and quality would start at the top. The Secretary of Health and Human Services (HHS) would develop a national strategy to measure results, identify best practices and goad hospitals, doctors and other providers into changing the way they practice medicine. In place of the current fee-for-service system, which reimburses providers on the basis of how many procedures they perform, regardless of the outcome, Medicare would reward them on the basis of how successfully treat the disease. Superior results would get more money; sub-par results would get less. Additionally, Medicare would pioneer the “bundling” of payments so that teams of medical specialists with different disciplines could be paid for delivering coordinated care over the course of a patient’s entire cycle of care, from prevention and diagnosis to treatment and recovery. These ideas are very similar to those propounded by Michael Porter and Elizabeth Teisberg, the business school professors whose analysis I have quoted admiringly [elsewhere].

    In the same vein, the national health care strategy also would tackle the problems of costly medical errors, infections acquired in hospital settings, and the all-too-frequent problem of patients being readmitted to the hospital for the same medical episode. These are all areas where cutting costs and improving quality go hand in hand. Another important initiative would devise more effective ways to deliver care to patients with chronic conditions, which account for more than half of all medical spending. To carry out the Quality & Efficiency strategy, the president would convene a working group, the Interagency Working Group on Health Care Quality, to coordinate the activities of some 23 federal agencies and departments and work with the private sector.

    Among the specifics identified in the bill, HHS would establish a “hospital value-based purchasing system.” Each hospital would be assigned a “hospital performance score” based upon its quality and performance metrics. Medicare payments would be raised or lowered in tandem with the score, rewarding excellence and punishing failure. Scores would be posted on a “Hospital Care” website, where it would be accessible to the public.

    Likewise, the bill would create a physician quality reporting system. Physicians would be required to submit quality data to HHS, which would massage the data and then inform physicians how their “patterns of resource use” compared to that of other physicians. To avoid punishing docs who took on the hardest cases, the data would be adjusted for the severity of the patients’ conditions as well as demographic factors such as income and ethnicity.

    A Center for Medicare and Medicaid Innovation would create cutting-edge payment and service-delivery models with the potential to improve the quality of care for patients at less cost. Such experiments would include sending doctor-nurse teams to elderly patients at home rather than waiting for them to arrive in the emergency room, medical homes focused on women’s unique health needs, and primary care physician groups that took lump-sum or salary-based payments in lieu of fee-for-service reimbursements. Another idea, Healthcare Innovation Zones centered around teaching hospitals, would deliver a “full spectrum of integrated and comprehensive health care services” while incorporating novel methods for training future health care professionals.

    The legislation also would have endorsed an innovation called “accountable care organizations” (ACOs), which are comprised of a hospital, primary care physicians, specialists and other medical professionals. Accountable for the cost and quality of care for Medicare populations of 5,000 patients or more, ACOs would employ quality and cost measures along with new technologies such as remote patient monitoring to continually ratchet up the quality of care. As incentive, ACOs would be eligible to receive payment for shared savings.

    These ideas represent the best thinking of the medical establishment. If enacted, Medicare would evolve over time from its fee-for-service system, which reimburses doctors and hospitals regardless of results, into a system that paid providers based on results over the full cycle of care. Data would be collected, massaged to identify best clinical practices, and spit back to the doctors, hospitals and other health professionals to guide them in improving their results and their public standing.

    The Limits to Top-Down Reform

    Title III would bring real improvements to the U.S. health care system. But let us be honest. It would not represent a dramatic breakthrough. Many of the ideas embodied in the legislation are being implemented by forward-thinking hospitals and physician practices already, even without the carrot/cattle prod of Medicare reimbursement reform. More significantly, Congress would entrust the Department of Health and Human Services to lead the charge. In other words, reform would be top-down and it would unfold at the same lethargic pace at which the federal government moves.

    … After law firms, health care professionals pumped more money into the system than any other industry — $13.6 million. (That doesn’t even include the vast sums donated to the presidential campaign.) One of the advantages of being an established player like a multibillion-dollar health plan, a Fortune 500 pharmaceutical company or a billion-dollar health system is that you have lots of money to hire lobbyists and spread around PAC donations. Start-up entrepreneurs who might challenge your market dominance don’t have big bucks to throw around — they plow every penny they’ve got into growing their business. So, when it comes to translating the law into the fine print of rules and regulations, whom do you think will dominate the process? The big guys with offices in Washington, or the little guys trying to meet payroll on Friday? To ask the question is to answer it.

    Here’s the challenge: It does not suffice to collect quality metrics for the nation’s hospitals and doctors, as necessary as that is to building a transparent, market-driven health care system. It is not enough to redesign Medicare’s payment system, although that, too, is an important step forward. Missing from Obama’s health care reform was any recognition of how change is driven by entrepreneurial innovation. As I shall explain in Chapter 11, the only hope we have of “bending the cost curve” fast enough to avoid Boomergeddon is to radically restructure the health care industry, rejecting the idea that hospitals must provide all services regardless of how well they do so, and jettisoning the notion that physicians should organize their practices around functional areas like oncology, nephrology, orthopedics and the like. The way to achieve dramatic gains in productivity and quality is by reorganizing health care providers around medical conditions in multi-disciplinary teams with dedicated facilities that provide focused treatment across the full cycle of care and use data to drive continual quality improvement.

    Here are some of the barriers that block the adoption of entrepreneurial business models in U.S. health care:

    • The third-party payment system. With employers and insurers acting as intermediaries between patients and doctors, medical entrepreneurs have to gain the acceptance of bureaucratic insurers.

    • Lack of price transparency. The Obama plan would have made performance data available. That’s half the value equation. But it’s only half. There is no price transparency in U.S. health care. Without quality and price transparency, patients cannot make informed consumer decisions. Instead, they rely upon referrals, usually from other doctors. If those docs are tied into integrated health systems that feel threatened by the competition, they make not refer patients to interlopers.

    • Monolithic health care systems. The players with the most to lose from specialty hospitals are giant hospital systems, which provide a broad spectrum of health care services, usually excelling in only a few of them. As demonstrated repeatedly in the past, they will use their bargaining power with physicians and insurers to freeze competitors out of the market.

    • Certificate of public need. Hospital giants can block new competitors in this bureaucratic forum by making the case that there is no “public need” for “duplicative” and “redundant” hospital facilities. They also can argue that the interlopers will “skim the cream,” leaving the unprofitable patients for the hospitals. The argument doesn’t have to be true to be effective.

    • The Stark law. The law prohibits physicians from referring patients to a medical facility in which he/she has a financial interest. That could stymie physician/entrepreneurs from taking an equity position in a specialty hospital they set up.

    • Tort law. Indiscriminate lawsuits against physicians imposes many costs on the health care system, the least of which is the cost of paying for medical malpractice insurance. A larger cost, as is commonly observed, is the cost of defensive medicine, as doctors order extra tests, often unnecessary, to protect themselves in the event of a lawsuit. The biggest cost may be the chilling effect that fear of lawsuits has on the corporate culture of healthcare organizations. What doctor or hospital would want to systematically collect data on misdiagnoses and medical errors for quality-improvement purposes knowing that it could be used to crucify them in the court of law?

    None of these issues were addressed by Obamacare.

    The United States has pioneered awe-inspiring breakthroughs in genetics, cell chemistry, medical imaging, non-invasive surgical tools and related technologies. But innovation in business management and delivery models has slowed to a crawl. Labor productivity has stagnated. Despite the massive amount of information that exchanges hands in the course of medical care, implementation of information technology lags that of other industries. And quality control techniques remain in a state of barbaric simplicity compared to best practices like Six Sigma and Total Quality Management in the manufacturing sector.

    The corporate culture of the health care industry desperately needs to change. An entrepreneurial revolution that builds new patient-centered and quality-focused businesses from the ground up is far more likely to succeed than diktats handed down by the U.S. Department of Health and Human Services.

  • Virginia is for Shooters

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    James A. Bacon


    It used to be that Virginia is for lovers. Now it seems that Virginia is for shooters.

    For the second time in nearly three years, Virginia is the scene of mass killings with firearms. In another horrific episode, Christopher Speight, a contract security guard with a permit to carry concealed weapons, is accused to slaughtering eight people in rural Appomattox County, including his sister, brother-in-law and a four-year-old boy. When State Police tried to corner him with a helicopter, Speight is said to have nearly shot it down.
    According to media accounts, Speight, described as a low key, “Christian” man, had anywhere from 25 to 40 guns in his possession and lived to target shoot and, on occasion, hunt. He had had a concealed weapons permit for about 10 or so years, but the press says he liked the evil-looking .233 cal, AR-15 variations of the venerable M-16 assault rifle.
    The media can only speculate on what triggered Speight. The Norfolk-born man who had had no previous record started acting strangely when his mother died a few years ago. He suspected that his sister and her husband, both of whom he is accused of shooting, of scheming to wrest property from him.
    This might be just another horrific domestic situation, save for another horrific fact. On April 16, 2007, Seung-Hui Cho, a Virginia Tech student, dressed himself up in a flak jacket and went on a campus shooting spree that resulted in 33 deaths, including his own by his own hand. Cho managed to buy guns and ammunition despite serious questions about his mental stability. He was able to arm himself without being noticed by the National Instant Criminal Background Check System, which is supposed to flag criminals and the mentally ill..
    It was the worst campus massacre in this country, but it didn’t seem to cause much of a dent in Virginia’s pro-gun focus. I remember blogging about the need for gun control after the Tech slaughter and I was told to “shut up” by another Bacon’s Rebellion columnist.
    Now, we have a pro-gun governor, Bob McDonnell, who is a staunch defender of what he believes are Second Amendment rights of individuals to bear arms. But McDonnell is not exactly passive on the issue. As Attorney General he filed an amicus brief supporting a legal challenge to the District of Columbia’s ban on handguns, something other large urban areas have adopted to check violent crime. It seems to work.
    The gun lobby has high expectations for McDonnell. On the day to honor Martin Luther King Jr., who was shot down by a gun-toting sniper in 1968, several hundred people rallied for gun rights. They want Virginia to loosen gun laws to allow people to carry handguns in more places and make access to them easier. They are backing about 30 bills that would let one buy more than a gun a month, allow concealed handguns in bars if the toter doesn’t drink booze and prohibit businesses from banning legal handguns from cars parked in company lots.
    Del. Charles Carrico wants the state to ban federal authority over guns made and sold in Virginia, giving them some kind of special Old Dominion stamp of approval.
    Don’t get me wrong. I’m not totally against guns. I got my one and only weapon when I was 11 or 12 and lived in the country where all boys had to to have guns. It is a Savage 63, single action, bolt .22 cal. with a Mannlicher stock. It is still in my closet although I haven’t fired it since the early 1970s when I took out a cottonmouth in Carolina with a head shot.
    I don’t mean to be flip. Virginia can’t shed this crazy gun love. Speight seems to be a stunning example of the love of gunpowder and bullets that the atmosphere in this state helps foster.
    But there’s a price to pay for going easy on firearms. Ask the families of the 32 at Tech or the eight in Appomattox.
    Peter Galuszka

  • Richmond: Lobbying Powerhouse

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    James A. Bacon

    Virginia has always struck me as a lawyer-heavy state, perhaps because of its tendency to worship the legal profession. The late Supreme Court Justice Lewis Powell seems to be revered more than any artist, scientist or other creative type.
    Add to that lobbyists.
    Indeed, Richmond seems to be quite heavy in the lobbying department and many of these folk are, of course, lawyers. Take a look downtown. the logo of the McGuire Woods law and lobbying shop dominates on skyscraper while the logo of a competitor, Williams Mullen will be on a new tower under construction.
    Because it is the political and (arguably at least) the business capital of the state, Richmond wields more overall clout in influence peddling than say, Annapolis or Raleigh. It may not be on a par with Atlanta, but it’s up there.
    And now that it is General Assembly time and a new governor and the other party are in charge of the governorship, the lobbyists are quite busy. For more, took at the story I wrote for Style Weekly this week.
    The revolving doors are whirring like turbine blades in a jet engine:
    “As the governorship of Republican Bob McDonnell gains steam, the tectonic plates are once again shifting along lobbyist-thick Cary and Main streets downtown. Eric J. Finkbeiner, once a power broker for former Gov. George Allen, is leaving McGuireWoods to be McDonnell’s policy chief. Former Virginia Beach Del. Terri Suit is leaving Williams Mullen to become the new governor’s homeland security maven. Former Republican attorney general and unsuccessful gubernatorial candidate Jerry Kilgore is leaving Williams Mullen for McGuire Woods as is Christopher R. Nolen, who worked for Kilgore in the attorney general’s office. Preston Bryant, Kaine’s secretary of natural resources, is also joining McGuire Woods. Meanwhile, outgoing Attorney General Bill Mims is moving over to giant law firm Hunton and Williams.”
    The go-to shop for the new Republican era is McGuire Woods, which has long had political ties, including several former governors as partners. Losing out appears to be Williams Mullen, which saw Nolen, Kilgore and Suit defect in a little more than a week’s time. One firm spokesman put it succinctly, “We are in a state of disarray around here.”
    A few other trends in the advocacy world:
    • Younger legislators don’t like to be wined and dined the way their predecessors did. There are still outings, but the “Pinehurst Invitational” to the lovely golf resort in the Carolina Sandhills appears to be a thing of the past. It was favored three decades ago by such lawmaking luminaries as A.L. Philpott.
    • Lobbyists say they can be of most value by offering straight dope on complex matters. I buy this insight since many lobbyists are actually honest folk who do represent a point of view for pay, but so do lawyers. Being good at gathering info can help.
    • Virginia’s Amateur Hour legislature that has to get things done in 60 days while legislators hold down day jobs means that lobbyists have to be extra flexible.
    • In this era of Tweets and Twitters, many lawmakers would rather get their info in a text message rather than having to spend “face time” with a lobbyist.
    • Lobbying is morphing into boutique shops and firms that do extensive data mining and fund raising. Common Cause says that mixing lobbying with fundraising is a legislative catnip that is extremely dangerous.

    My article notes that despite Richmond’s growing sophistication as an advocacy center, the Average Joes tend to get left out. Consumer and environmental activists sure felt this way when utility giant Dominion pushed through a complicated bill to re-regulate electricity three years ago. They managed this impressive feat even though the Assembly was in a short 45 day session.

    You do have to ask, though, why it is so easy for top-ranking state officials to breeze in and out of lobby shops. Elected officials can’t lobby their old posts for one year but non-officials can. And, Virginia has an anything goes system where’s there’s no limit on gifts or contributions but they have to be reported. The claim is that by having no limits, you avoid corruption because if you get a lot, everyone knows it. And, unlike states such as Illinois, Virginia does not have much of a history of indicted and convicted public officials.
    Perhaps, but you do have to wonder about a former secretary in the state government or a deputy attorney general easing over to a lobby job paying maybe in the mid six figures the day after the offices change. There may be no Rod Blagoevichs here. But is this Virginia’s idea of public service?
    Peter Galuszka

  • In Praise of Kaine’s Economic Development Team

    Posted on

    by

    James A. Bacon

    I have never hesitated to criticize Gov. Tim Kaine for his budgetary policy, but now that he’s gone, I must give him and his economic development team credit for work well done. The inspiration for this sudden generosity of spirit on my part comes from IBM’s “Global Location Trends” annual report, published in October 2009, which I’ve just gotten around to reading.

    IBM draws upon its global database of 80,000 corporate investment deals recorded since 2003. The 2009 report summarizes corporate investment flows in 2008, the year that marked the beginning of the Global Financial Crisis. Globally, investment activity declined 25% from the year before, as one might expect from the worst recession since the 1930s. The United States fared well, ranking No. 2 in the world after India, as investors sought countries with stable business environments.

    The good news for Virginians is that ye olde Dominion was the second hottest destination for inward investment in North America that year, exceeded only by the province of Ontario. (Virginia had ranked 10th continent-wide the year before.) Here’s the IBM chart:

    (Click on image to enlarge.)

  • Marcellus on the Corporate Income Tax

    Posted on

    by

    James A. Bacon

    Between state and federal corporate income taxes, the United States has the highest tax rate on corporate profits in the world, writes Bob Marcellus, the hedge fund manager who is acting as point man for the business initiative to scrap Virginia’s corporate income tax, in an op-ed in today’s Times-Dispatch. “While other countries have been slashing this tax, America has been asleep at the switch.”

    Marcellus acknowledges the fiscal challenges of balancing the budge while abolishing the state’s 6% corporate income tax, which is anticipated to generate about $660 million in revenue this year. His solution is setting the date the tax cut goes into effect 12 to 24 months in the future, “creating a ‘wow’ factor for growth while still building tax revenue until the actual implementation.”

    Marcellus also anticipates attacks on his idea on the grounds that it is anti-labor.

    “It would be easy to criticize this tax as a give-away to major corporations. But this initiative is …overwhelmingly pro-labor. … National and provincial governments across the political spectrum have been working to cut this tax and have experienced increasing tax revenues as a result. People don’t understand how destructive this tax is to jobs, investment, and business growth. They certainly don’t understand that labor ultimately pays the highest price.”

    I concur. Workers make gains only when the economy is growing, jobs are being created, and employers compete for labor by bidding up wages and benefits. The Bush/Obama era has demonstrated that bailing out too-big-to-fail banks and propping up failed automakers while starving small business of credit is no way to expand the number of jobs. Virginia can’t un-do the failed policies of the federal government, but we can stimulate investment and job creation here in the state. We need to get rid of the corporate income tax.

Now Available

Book cover of 'Dust Mites: A Second American Revolution' by James A. Bacon, featuring astronauts planting a flag with a blue and white emblem on a lunar landscape, with Earth visible in the background.
For sale on Amazon.com

The year: 2075. The American colonies on the Moon are getting restless under Washington’s tyrannical rule….

This second edition of “Dust Mites” has a snazzy new cover, includes helpful lunar maps, and is 5,000 words tighter than the original. The sequel, “Trogs,” is scheduled for publication this summer.

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Bacon’s Rebellion is Virginia’s leading politically non-aligned portal for news, opinions and analysis about state, regional and local public policy. Read more about us here.

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