Posted by Marc Hodak on March 27, 2010 under Invisible trade-offs | 
Bart Stupak gained recognition–and notoriety–for holding the health care reform bill hostage over his anti-abortion demands. The 11th hour pledge by President Obama in the form of a promised executive order to meet those demands sealed Stupak’s support, and passage of the landmark bill. Stupak’s stance has infuriated folks on both sides of the abortion debate.
The pro-life faction considers an executive order to be a lame bulwark against a law that otherwise allows federal subsidies for abortion, and feels betrayed:
Michigan for Life took away the endorsement he has enjoyed for 18 years.
The staunch liberals, who generally favor abortion-rights, also feel jacked around:
“The fact that he was willing to threaten health-care reform for this narrow, pro-life issue just burned me up, and it had meant he had lied to us.”
Well, this post is not about health care or abortion. It’s about how Stupak will win re-election despite all of the animus directed against him from both sides, including the high-profile defections of powerful supporters.
Read more of this article »
Posted by Marc Hodak on March 26, 2010 under Government service |
Boston Scientific, maker of those ultra-cool, implantable defibrillators, made some minor changes to the way they manufactured them. There was nothing wrong with the devices under the old manufacturing method–they just felt that they could do better. Unfortunately, the company ran afoul of the bewilderingly complex FDA documentation rules that require any manufacturing changes to be reported to them. As a result, Boston Scientific has been forced to recall a bunch of perfectly good, life-saving devices, and submit their manufacturing changes for FDA review before being allowed to resume manufacturing. FDA review times run from 8 to 30 days.
Boston-Scientific tried to calm their medical customers (and investors) by hinting that the urgency of this matter should warrant a shorter review period. During this period, doctors are doing without the device (“Hang in there Charlie! We’ll get that thing implanted in the next few weeks.”), and Boston-Scientific is losing $5 million a day. If ever we needed those high-priced government services, this would be it, right?
FDA officials said in an interview that they have given Boston Scientific’s applications a preliminary look and the submissions appear to be in order. But the officials said the agency hasn’t begun an in-depth review of the material and the company will have to wait its turn.
Boston Scientific’s filings are “in the queue, and we’re going to take it when it comes up,” said Gladys Rodriguez, an enforcement director at the FDA’s Center for Devices and Radiological Health who is involved in the review. “At this point, we’re not expediting.” The FDA has 30 days to do a review, Ms. Rodriguez said.
Translation from bureaucrat lingo: “We can’t be bothered.” I mean, c’mon, it’s not like its their lives or money on the line.
Posted by Marc Hodak on March 25, 2010 under Collectivist instinct |
Congressmen are reacting to vandalism and threats following passage of the landmark health care bill:
“I don’t want this to be a distraction” to the work of Congress, Ms. Pelosi said. But she also asserted that such violence and threats of reprisal have “no place in a civil debate in our country” and must be rejected.
She is certainly correct that civil debate cannot co-exist with threats of violence. But one can’t help but see the irony of Ms. Pelosi and many other Democrats (and a few Republicans, I might add) not equating the imposition of laws as a threat of violence. Harry Reid, for instance, is totally clueless on that distinction.
Read more of this article »
Posted by Marc Hodak on under Reporting on pay |
You should have guessed there’d be a “however”:
…However, that type of cascading salary payout, which is generally welcomed by shareholder activists such as (“socially responsible”) Ethos Foundation, is likely to draw more attention in coming days.
Gee, what would be the reason for that attention?
Posted by Marc Hodak on March 24, 2010 under Collectivist instinct, Invisible trade-offs, Politics, Stupid laws |
The Senate Banking Committee is now taking up the Dodd bill to re-make the financial services sector more into the image of how the government thinks it should be run, e.g., more beholden to Congressmen. Senator Menendez (D-NJ) offered an amendment to include disclosure of pay disparity, i.e., the ratio of CEO pay to the pay of the average (non-CEO) employee in the company. It’s clear that this amendment is meant to inflame passions about CEO pay, and nothing more. It won’t change what CEOs are paid because the premise behind this amendment, like so much else about pay regulation–that CEOs are paid arbitrarily high amounts–is wrong. CEOs are, on average, paid what the market says they’re worth, a law of supply and demand that Congress cannot rewrite or amend, only distort.
One of the many possible distortions that come to mind would be an increasing trend to outsource low-skilled (and, therefore, low-paid) help, either to temp or admin agencies, or overseas. That would help reduce that ratio. It would also help to bring in-house the employment lawyer who will have to make the silly legal distinctions between who is an “employee” for the purposes of this bill. Would a part-time worker be included? Interns? A lawyer skilled at such useless arcana would presumably bump up the average.
Hey, Senator, if you’re looking for useless ratios, why not mandate disclosure of the highest price product sold by a company versus its average priced product? Or something slightly more productive like the ratio of the highest tax versus the average tax jurisdiction they operate in?
HT: Broc Romanek
Posted by Marc Hodak on March 23, 2010 under Reporting on pay |
The Gray Lady reports:
Of the 104 senior executives whose pay was set by the federal pay regulator in the last two years, 88 executives, or nearly 85 percent, are still with the companies even though their pay was drastically cut back, according to people briefed on the government data.
The relative stability, at least within the executive suite, suggests that a soft job market, corporate loyalty and personal pride helped deter the feared management exodus at the companies hardest hit by the pay rules.
I’m sure every board is ready to apply that magic to their own companies.
Oh, some questions left out in this analysis:
– What was the senior executive turnover of peer companies not subject to these restrictions in 2009? Is it close enough to 15% to render “relative stability” as the appropriate verdict? (Best guess: peer turnover would be in the 9 to 12 percent range last year.)
– What was the composition of that turnover? Did they lose their best people (as is usual in a cash crunch) or their average people (who tend to hunker down in bad times)?
– What about the effect of promised future compensation? Lloyd Blankfein and Jamie Dimon had a sense that whatever they gave up in 2009 they could kind of make up in 2010 to 20??. What would these restrictions do if the Pay Czar threatened to hover around for several more years? (Hint: We got a clear sense of that at AIG, what could only be called an exodus of their top people. We’ll see how it works at Government Motors.)
Posted by Marc Hodak on under Executive compensation, Reporting on pay |
Ford CEO Alan Mulally made the news today with a $17.9 million payday for 2009. This included a $1.4 million salary and $16.5 million in stock and options–a total of about $1 million more than Mr. Mulally made last year. The article noted, as journalists always will, that the CEO got his increase in a year when he secured significant union concessions. This brings us to the first view of his pay:
“It’s an outrage after all the sacrifices we have taken and the pay he gets,” said Gary Walkowicz, a bargaining-committee member for UAW Local 600, representing workers at Ford’s Dearborn truck plant. “His pay is coming out of our concessions.”
So, the CEO got the union to reduce their pay, and he got more pay. Ergo, his pay was coming out of their concessions.
According to this view, Ford Motors is kind of a zero-sum game; the pie is fixed, and the shareholders or the CEO get more if labor gets less, or vice versa. In this view, it’s not fair if the CEO drives down compensation to improve the profitability of the company, only to suck some of that profitability back for himself in the form of higher pay. That is the view implied by this article. It’s the view assumed by most of the readership.
Another view is that Ford is part of a market. Several markets, actually:
Read more of this article »
Posted by Marc Hodak on March 22, 2010 under Futurama, Unintended consequences |
So, the Democrats have gotten their legislation. They are promising:
– Lower insurance premiums
– Near universal health insurance coverage
– Preservation of Medicare’s benefits
– Reduction of the budget deficit
– Lower medical costs
Since I am now petrified to put any of my long-term savings into the stock market, I need to find creative ways to boost my returns. So, here is what I’m willing to wager against anyone who wishes to bet against me. By the end of 2014:
– Insurance premiums will be higher
– The percent of America’s uninsured will fall far short of the target
– Medicare’s benefits will be reduced
– The federal budget deficit will be higher than currently projected
– Medical costs will be higher than currently projected
My over/under is that at least four of these five predictions will come true. If you’re particularly gutsy or liberal, then I will be happy to offer 2:3 odds that at least three of these predictions will come to pass, or take 3:2 odds that all five of them come to pass.
To be more specific;
– The national average for health insurance premiums per year is currently $4,824 per person and $13,375 per family; I am wagering that premiums for 2014 will be higher than those numbers plus the rate of inflation. Why? Because insurance companies will be required to accept all comers despite pre-existing conditions (just the kids, at first, then adults in 2014), which will increase their costs, especially in the individual market. Also, to the extent that mandates work to push more people into the insurance pools, greater demand will enable higher prices, notwithstanding the adverse selection that mandates are supposed to fix.
– The bill is expressly designed to drive coverage from the current level of about 85% to “near-universal” level of 95%; I am wagering that the percentage of Americans with health insurance by the end of 2014 will be no higher than 88%. Why? As costs go up (see above), there will be less incentive for healthy individuals to obtain coverage, especially if they can get covered whenever they get sick, which will exacerbate the adverse selection problem insurers now face. The $695 penalties will be tiny compared to the $10,000 premiums, so you’d have to be a sucker to pay the latter when you can get away with just paying the former, and be guaranteed coverage anyway.
– It’s difficult to quantify Medicare benefits; one indicator is the percent of doctors accepting new Medicare patients. That number is currently about 75% nationally. I predict that number will drop, even if Congress adopts the budget-busting repeal of Medicare cutbacks, i.e., the “doc fix,” that was hidden from this legislation to help it’s CBO score. Why? Because Medicare will have to suffer some kind of cutbacks in order to keep costs from exploding as much as they otherwise would, and because one of the cost-control measures is likely to be more bureaucratic hurdles for doctors to leap in an attempt to limit fraud. Both of these trends will continue to turn off doctors, especially the successful, experienced ones who don’t need Medicare patients to maintain their lifestyles (or sanity).
– The fact that Congress will immediately make a mockery of the CBO score by adopting the “doc fix” is just one reason that the deficit will continue to climb. The Obama budget projects $2.1 trillion in deficits over the next two years. I am wagering that deficits will exceed that amount. Why? Congress has consistently underestimated the costs of its entitlement programs. This one, too, will be higher than projected. The higher taxes and fees that Congress is imposing to pay for this law will slow economic growth, resulting in disappointing government revenues.
– According to HHS, the national health expenditures were about $2.4 trillion in 2009, or $8,000 per person, and accounted for about 16% of GDP. They have projected 6.1 percent per year growth over 2010 and 2011, which means the expense will rise to about $9,100 per person for 2011. I am betting that the total cost per person will be higher than that. Why? More money will be funneling into the health care system, which will drive up prices, just as student loan subsidies have driven up college costs. In addition, the regulations flowing out of the 2700 page law like topsy will increase the cost of our health care system, which will be reflected in the prices people will pay as both consumers and taxpayers.
There you have it. Anyone with some liberal convictions and cash can put them both on the line here. Otherwise, this simply serves as a detailed warning for the time when those liberals will claim that nobody could have predicted how badly this law could have turned out. Just before they blame the insurance companies for the outcome.
Don Boudreaux, as usual, sums it up best;
Putting any part of the economy into the hands of politicians is like putting the space program into the hands of astrologers.
Posted by Marc Hodak on March 18, 2010 under Reporting on pay |
The headline and sub-title read:
Govt rewarded bank auditors with big bonuses: As banks binged on risky mortgages, govt rewarded regulators with taxpayer-funded bonuses
Wow, this sounds like it’s gonna be good! Their bonuses were funded by taxpayers! And we didn’t get to vote on them! So, how much did these Wall Street overseers earn?
During the 2003-06 boom, the three agencies that supervise most U.S. banks — the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Office of the Comptroller of the Currency — gave out at least $19 million in bonuses, records show.
Oh. What does that come out to per employee? Like $350?
Some government regulators got tens of thousands of dollars in perks, boosting their salaries by almost 25 percent. Often, though, rewards amounted to just a few hundred dollars for employees who came up with good ideas.
OK. So, these bonuses went to the examiners who’s banks failed, when the signs were obvious at the time, right?
Because most bank inspection records are not public and the government blacked out many of the employee names before releasing the bonus data, it’s impossible to determine how many auditors got bonuses despite working on major banks that failed.
…”In retrospect, a stronger supervisory response at earlier examinations may have been prudent,” FDIC’s inspector general concluded.
In retrospect. I see. This is my favorite part:
In government, as on Wall Street, bonuses are part of the culture. Federal employees can get extra pay for innovative ideas, recruiting new talent or performing exceptional work. Candidates being considered for hard-to-fill jobs may be offered student loan reimbursement or cash bonuses to get them in the door and keep them from leaving.
Ah, yes, the Bonus Culture. This is exactly like a trader at Goldman making a little extra–like $5 million–for getting a few extra trades per month done.
Do you get the feeling that the press runs after anything called a “bonus,” the way dogs run after tailpipes?
Posted by Marc Hodak on March 17, 2010 under Practical definitions |
What the AP reporter must have done with this story:
An AP review of unverified driver complaints found 105 such reports since Feb. 15. That’s a 75 percent increase from the 60 reported earlier this month by the National Highway Traffic Safety Administration. [Emphasis mine]
Comparing two fifteen day periods. With Congressional hearings in between. They aren’t even trying anymore.
