What should we do about Medicaid?

Is switching the program to one that gives a block grant to states, as Paul Ryan suggests -- which would allow them the leeway to then govern benefits and eligibility levels -- and then tie the grant increase amount to the general inflation rather than medical inflation rate, an appropriate answer?

Moreover, is this a necessary step to avoid fiscal apocalypse? 

This post analyzes our options, using an MMT-inspired framework that accepts a consolidated Fed/Treasury world-view. 

First, an overview of the problem.

Growth in total Medicaid spending (state and federal) has dramatically outpaced not only the general inflation rate, but also the 4% or so average medical inflation rate over the past decade (Kaiser suggests Medicaid spending has grown about 6% a year).  

Unsurprisingly, as Medicaid is a countercyclical program for which enrollment and thus spending increases as income falls, this trend seems to be accelerating due the Great Recession. 

In 2010, total Medicaid spending was .389 trillion or about 2.7% of overall GDP. Without drastic reform, that percent will continue to increase even before considering the effects of the Medicaid expansion under the Affordable Care Act. While perhaps blunted by the Supreme Court’s decision that forcing states to expand Medicaid is coercion, this change is still likely to further increase spending with the federal government picking up most of the tab.

Through a proper understanding of Modern Monetary Theory, however, we know, however, that the federal government is not at risk of being bankrupted by Medicaid spending, as it is a currency issuer. Instead, the real risk is to federal government deficit from Medicaid spending is that it will accelerate to the point that it drives unacceptable levels of inflation. 

This is definitely a risk in the long term, and for that reason, once a sufficient enrollment threshold is met  (i.e. perhaps the point where there are few uninsured ineligibles and the pro-cyclical effects of rising income promotes disenrollment in favor of private plans), I would recommend tying benefits levels to medical inflation to avoid rationing of new medical technologies. But, in the present economic environment, I see no reason for the federal government to worry about Medicaid driving inflation in the short term -- instead, it is a potential source of stimulus.

So, everything seems fine?

 Nope.

While bankruptcy is not a fear at the federal level, the opposite is true for states.

Like a household, they must tax in order to generate funding for their portion of Medicaid programs. Once more, this is required spending amount that increases when revenues decrease during recessions. Thus, in the current system, states are forced to make draconian cuts to balance a budget because  growing Medicaid spending is eating up an ever greater percent of decreasing revenues.  In this way, the state Medicaid obligation contains a pro-cyclical force promoting public sector job losses – exactly what we don’t want to happen!

Under a block grant tied to inflation, states very well could reduce Medicaid spending but they would do this by likely restricting eligibility or benefits for poor residents. This solution thus results in a deplorable loss of coverage for children, families and poor people in general. Also significant is the fact that  it removes an important counter-cyclical automatic stabilizer fighting unemployment.

The correct response seems obvious enough: the federal government should cover less than 100% of Medicaid but not much less than that -- that is, enough to keep some skin for states in the game without compromising their overall budget in any real way. Thus, federal Medicaid obligations will immediately exceed 2.5% or so of GDP. In the long run, measures will have to be put in place to control the inflationary bias of this program. In the short run, the focus should be, however, on its simulative effect.

In a broader sense, it makes more sense to me at least for our government – if it is not going to provide universal healthcare -- to be in business of providing children and families’ healthcare at least, instead of the elderly as pediatric healthcare is cheaper and a produces more years of healthy future workers per dollar. Sadly, it is exactly this population that will face medical rationing if current policy suggestions go into effect.

Unless we overcome the collective delusion that we have no funds to pay for healthcare entitlements, it will be our children rather than our grandchildren who suffer.

Bombing Iran: Amputating the Arm to Save the Body

Has as, David Goldman, or Spengler, argues the time to let Israel bomb Iran finally arrived?

After years of predicting an Israeli or US strike against Iran using the powers of logic, Goldman seems exhausted. Wearily, he notes that the US establishment is perhaps at its most resistant to bombing Iran at this point,  as both the government and the public is infinitely wary of the perpetual Middle Eastern quagmire we have found ourselves in in first Iraq and now Afghanistan.

Indeed, as Goldman details, an Israeli unilateral strike on Iran would produce untold short term pain:It would further radicalize the Middle East democracy movement, probably to a point of no return. It would unleash holly hell in Lebanon. It would the price of gas through the roof.

Understandably, Americans seem to see bombing Iran as more useless, avoidable war mongering. Sailer advances essentially this position, arguing that hostility toward Iran is a product of misplaced Israeli patriotism/agression combined with deep pockets: he seems sick of war waged seemingly for Israel's benefit alone.

And yet, I think that Sailer's view is naive.

Israel backers may be nationalistic, but, as Chieften of Seir pointed out in his essay "On the Fear of Matches" years ago, when the game they play involves a nuclear arsenal, nationalistic passions assert a  higher claim to US attention, particularly when both players likely lack a second strike capability. College football this is not.

If Israel went on full nuclear alert during the first gulf war, I am guessing any credible Iranian nuclear threat will produce a similar response. And therefore I do not think Israel can reasonably be expected to hesitate in any potential stand-off, unless their second-strike capability is dramatically improved.

 More likely, they will attempt to delay the Iranian by striking first, with or without US consent. The US will then be forced to destroy Iranian capabilities through air attacks, exactly what we don't want to do.

So, where does that leave us? Ironically, it seems that the Bush doctrine of preemption -- discredited by S.  Hussein's lack of WMD's -- seems perhaps finally an appropriate response for minimizing the chance of long-run pain. While both future scenarios seem bleek, one involves a nuclear strike (likely Israel on Iran first), so I am guessing that is the worst option.

Thus, contra Sailer, this may be national game, but it the rules are more akin to Battle Royale than Oregon vs. Oklahoma State.

The question on everyone's mind: What will Obama tell Netanyaho in the coming months, as the issue is inevitably pressed?

Moral Reasoning about Sports

Back in the day, long before the word blog was ever invented, I used to teach a class called Moral Reasoning about Sports.

 On the first day, I would pass out the article coach Gundy refers to in the video below. I then asked for response from the new students. Finally, I played the YouTube video for all to see:

Usually, I wouldn't make it through the video without bawling like a new born babe. But the point was expressed all the same.

The first rule of moral reasoning:

1). never go after a kid.

So when I first learned of the Giants-Bucs kneel-down controversy, I asked myself: Is anyone going after a kid here?

No. These are grown men playing a grown man's game.

Ok.

On to the second rule:

2.) you play to win the game.

If Eli fumbled the kneel-down snap and the Bucs were left standing watching like a bunch of pansies, is that playing to win the game?

Hell no!

Save the classy pleasantries for after the final whistle blows!

In the game of football, you play every single snap to win the game.

Therefore I agree with Coach Schiano and his decision to play to win the game. 

- professor emirates lydgate

Wong Kar Wai's First Film, As Tears Go By: A Western Review

As Tears Go By is Wong Kar Wai's first movie, and his inexperience shows in its formulaic plot construction and all too predictable climatic resolution. However, the director’s flair for employing inventive camerawork and successfully integrating music into emotionally critical scenes is clearly present in developmental form at the onset of his career. This is reason enough alone=to recommend the film (it is available through Netflix streaming).

For the uninitiated, the Hong Kong triad romance picture appears to be a popular cultural archetype. A subset of the triad film genre -- a pervasive Hong Kong cinematic plot -- the tragic intersection of love and triad-life is perhaps best expressed in A Moment of Romance (also starring Andy Lau). Of course, I am not a cultural authority here. However, the concept of romantic love doomed by the male protagonist’s external commitments is clearly universal.

As Tears Go By reflects this division of its protagonists external commitments to friend and lover  in its neat division of its narrative. After the introductory sequence in which Lau separates from a past flame and meets his  cousin, his scenes going forward fit into one of two categories: either Andy Lau is building his romantic relationship with his cousin (yes, you read that right), played by Maggie Cheung, or he is futilely trying to save his spark-plug triad brother Fly, played by Jackie Cheung, from self-destruction. While the narrative attempts to 

build the mystery of which commitment will ultimately rule Lau's behavior, viewers familiar with gangster film tropes of any culture know well in advance what the final scene holds in store. 

The gap in quality between the two narratives – the slow-cooking romance, anchored by Cheung’s demure seduction, is beautiful while Fly’s descent into self-immolation is mostly boring – reminds me of Henry James’s assessment of George Eliot’s similarly divided Daniel Deronda: one wishes that only the better half existed.

And yet, Fly’s folly, tedious as it may be, is essential to the romantic narrative. After all, if there was nothing to provoke the separation of our lovers, would we not miss observing Cheung's exquisite slow motion tearing up (a scene later repeated with Zhang Ziyi in 2046)?

It should be noted As Tears Go By appears to be best known for a somewhat bizarre, extended kiss scene (The Kiss, if you will)  between Lau and Cheung in a phone-booth as “Take My Breath Way” from Top Gun plays, non-ironically, for which I will attempt to mount a defense.

The scene certainly flirts precariously with schmaltz, or rather is schmaltz, but succeeds anyway. In context, the subversion of audience expectations (receding the scene, Cheung appears to choose a doctor over Lau) coupled with the sudden explosion of passion is thrilling rather than groan inducing. While Wai would go on to produce more fully developed artistic expressions, nothing in his later work that I've seen exceeds the slight of hand, followed by release of the above scene.

- lydgate

What should Republicans Learn from [Romney's Loss]?

Another blogger recently posed the above question. My response:

I am breaking with most commentator here who are obsessed with racial politics. While important, the Republicans are ignoring a substantive opportunity to attack Democrats on the issues, which, despite popular opinion, can be important.

 The Republicans need to develop a novel platform attacking the Bush/Obama Washington centrist consensus with respect to 1.) fiscal policy and 2.) the foreign policy of Bush/Obama.

 With respect to fiscal policy, Republicans continually get stuck on lower taxes for the rich, and lower taxes on investment. These taxes cuts are targeted at high savers and therefore are the least stimulative taxe cuts. Voters intuitively know this and scoff at "trickle down economics," deservedly so.

Instead, The Republicans should press the message that wage-earners  are over taxed in this country and that they are the party that will deliver you more of your take-home pay for every single pay check. This amount should be substantial, and it should not be off-set by spending cuts.

To get there, you have to admit that higher G doesn't crowd out private investment and that, as Reagen proved, deficits don't matter (except for inflation risk -- a real potential issue). Only then will Republicans have something to offer the wage earning electorate.

On foreign policy, which most voters don't seem to care about -- but still -- Republicans should criticize  Obama's reckless interventions in Libya/Egypt/Syria as idealistic grandstanding that will as a harbinger of future danger, instability, and, crucially, painful US-led interventions. Instead, Republicans compete to denounce Obama for not supporting rebels enough -- truly mind-blowing. I don't think a single Republican denounced the assassination of Gaddafi.

Another potential area of Republican innovation is reviving economic mercantilism with respect to jobs on US soil. As we are all aware, Apple and other major companies contract with Chinese companies to build products on Chinese soil etc. etc. Yet, neither party seriously questions the assumed dictum from Heaven that free trade is beneficial. Republicans could build serious popular support for government instituted trade regulations to support jobs on US soil (something the masses tend to prefer but economists hate). Again, I have not seen any evidence that Republicans are even open to this.  

- lydgate

Bronte Capital on Chinese Kleptocracy

For those of you who have read Bronte Capital over the years as I have, the egregiousness of a new Chinese Reverse Merger Fraud no longer even registers.

For anyone interested, John Hempton has a long series of posts on the Carlyle-and-company bid for Focus Media, asking whether the company is genuine, fake or a mixture (with only fakery representing a bad investment for the PE bidders).  Interestingly, the commentators on the latest post have begun to speculate on whether Carlyle and the other bidders know the company is fake (after all, could the most politically well-connected PE firm in the world really be duped so brazenly) and are merely using the big to gain political favor with the Chinese political elite.

Hempton layes out his essential thesis -- that China, due to its astronomical growth-rate and its prevention of earning a decent return on savings -- is kleptocracy of a scale never before seen in human history -- here.

While I'm unsure that Hempton's argument that dampening inflation will promote revolution is sound -- with spoils flowing around so freely, won't a self-interested peasant attempt to climb his way up rather than upheave the system -- his description of the rampant looting of State-Owned companies is an important message to disseminate to Western observers who, perhaps impressed by annual growth rates that would make Obama or Romney envious, might look East to invest. We wouldn't want you to become  the next John Paulson with respect to Sino-Forest.

While the world has perhaps never seen seen a kleptocracy of quite this scale before, the basic model is surely familiar to Russians, Indians, Medieval European peasants, even Romans -- history repeats itself -- the substantive American Middle Class appears to be an aberration, eroding even in our own country as the 1% steadily accumulate a greater and greater share of the wealth.

It will fascinating to see if China can eventually develop Western rule-of-law to go along with rule-of-the-dollar. Until that day, China is surely the land where fortune can be made or lost -- but, be careful, no matter how clever you may be, when there is no one to appeal to the that the game is rigged, you might just loose all the same.

Lydgate

Signs of Life from Mr. Cameron Giles?

So I was at a bar Saturday night, nursing my Coors Light and trying to ignore the crowd of PUA's palm reading girls' hands behind me (I wish it were a joke) when the following track broke through the depressing muddle of what apparently passes for club music this decade:

Now I am vaguely aware of Nikki Minaj as more than the girl Lil Wayne rhymes with "retard" on Upgrade U off Da Drought 3 (see here) and from the admittedly pretty sick verse that ends "Monster" (apparently she has had some hits.)

The ascent of Rick Ross from punch-line to Bawse God, of course, I am fully cognizant of, and will post about soon.

But, batting clean-up was a familiar voice...

 Could that really be Cam'Ron breaking out a sweet double-time flow in 2012, 8 years after Purple Haze? 

Google soon confirmed that it was none other than the Dipset Don. Here's hoping, if Killa Season II ever comes out, it will sound something like this rather than like anything off of Crime Pays.