Ideas

A Simple Guide to Defending CentrePointe

With my post on the Urban County Council's questionable-but-unanimous decision to support a fraudulent new financing scheme for CentrePointe, I hoped to raise important questions about the wisdom of proceeding with public funding for the long-stalled project in downtown Lexington.

To some degree, that effort succeeded. That long article is now the most-read post in the short history of CivilMechanics. (Thank you!)

A Webb Companies DevelopmentWhat remains is to get answers for the questions raised there. I expect that council members, developers, Tax Increment Financing proponents, and their allies will face much more challenging questions as citizens and the local press begin to look for those answers.

I have attempted to explain why I think CentrePointe is a bad deal for the public and for investors. But I don't have a monopoly on information about CentrePointe and its most recent developments. Despite my best efforts, I may have made mistakes or missed important details. So I welcome information which helps clarify matters. But 'clarifying information' hasn't always been easy to get with CentrePointe.

Given past interactions with CentrePointe defenders, and in the spirit of fostering fair and healthy debate, I offer this helpful guide to defending CentrePointe.

Hopefully, these useful suggestions will help anyone sympathetic to CentrePointe formulate better, more thorough, and more effective answers than they have contrived in the past.

For all of you CentrePointe defenders out there, enjoy!*

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A Simple Guide to Defending CentrePointe

1. Refuse to attack your critics.

Although those rascally critics might infuriate you, try not to attack their character, their motives, their style, or their knowledge. Some examples:

  • "Mr. Morris has been against this project from the very beginning..."
  • "What Mr. Morris fails to understand is..."
  • "Mr. Morris feels that he is entitled..."
  • "Mr. Morris may be a competent businessman in his field, but obviously he knows little..."
  • "Mr. Morris said mean | slanderous | libelous things about us..."
  • "Mr. Morris is a crazy, no-good, rotten, dirty scoundrel obstructionist, who..."

If you find ourself beginning to respond with any variant of the above, stop immediately. 

While all the above assertions may be true, attacking your critics in this manner (or assuming that you know what they think, feel, or understand) sounds condescending.

It also betrays your lack of more substantive responses to legitimate questions.

2. Avoid resorting to 'privileged information'.

Secrets fail to bolster your case.

Referring to privileged information - secret plans, documents, financiers, underwriters, bond offerings, etc. - reinforces the impression that you are hiding something, and undermines the notion that you have a viable and legitimate plan. 

After last week's vote, we're all in this mess together now. So you might as well share all of that special, super-secret stuff that only you know.

Don't try to win the argument by referring to McCarthy-esque secret documents. In the end, everyone will know that you're bluffing.

3. At all costs, refrain from bullying and intimidation.

Don't pull $20,000 in advertising from publications which ask legitimate questions about your project. Don't berate critics in the newspaper. No. Really. Don't berate critics in the newspaper. And try not to imply that you may resort to legal action against your critics. 

Such desperate attempts only reveal how tenuous your position really is. (Besides, the discovery process of an actual legal case could get really messy. Lawsuits don't help you preserve secrets.)

People in true positions of strength don't issue such weak threats.

4. Try not to say 'private property' or 'private development'.

While these phrases have been quite effective for you in the past, they have worn whisper-thin.

By now, everyone understands that you are using public financing to help fund your development. Everyone knows that you are requesting that public agencies issue bonds to be paid back with public tax revenues.

So don't try to maintain the elaborate charade of privacy. Everyone knows it is a charade.

5. Suppress any impulse to play the victim.

You are powerful people who make big, important decisions. Most of you get paid very well (I'm excluding council members here). Pretending you are some sort of victim - especially a victim of bloggers and other commentators - is unbecoming of someone of your stature.

Besides, everyone now knows that you plan to be the recipient of a huge taxpayer-funded payday | bailout | bonanza. So lose the 'poor me' act.

If you are losing the war of words and ideas, try using better ones. 

6. Use facts and logic to support your case.

Believe it or not, this might be the most effective tool you have in your arsenal!

If your critics are wrong, use detailed facts and impeccable logic to spell out why. If you've got secret information which proves your critics wrong, start sharing it now.

Your critics have spelled out their cases. Now be detailed, thorough, and crystal clear in yours.

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Hope this helps!

Love,

Rob

* The rest of us can use this as a simple guide to separate the CentrePointe nonsense from the CentrePointe substance - our very own B.S. detector!

The American Idea

My wife and I are one-percenters.  

We have amassed a small fortune - built over some 20 years of climbing our respective corporate ladders, saving very aggressively, and making some favorable investments.  

We worked very hard to build our wealth.  

But we are also incredibly lucky.

We were both winners of what Warren Buffett has dubbed "the uterine lottery": through no effort on our part, we were both born into safe, stable, American, loving family environments where hard work and academic success were built-in expectations.  We were granted this huge headstart in life and had no part in earning it.

That early headstart only snowballed as it helped us accumulate advantage upon advantage in our early lives.

We benefitted greatly from our society's investments in all sorts of public goods, public works, and public innovations.  

More bluntly, because of our unearned headstarts, we benefitted disproportionately as we often extracted more value and more opportunity from these public goods than did our less-advantaged peers.  

In our youth, we both got into honors-level courses at great public schools.  We both had great professors at our public universities, where we both received advanced degrees.

In our professional lives, we continued our disproportionate wins, taking greater advantage of public investments in roads, airports, research, computers, the Internet, housing, and police and fire protection.

As a business owner, I continue to receive disproportionate share of the benefits from the public investments which deliver customers and vehicles and qualified employees into my shop.

My wealth is - in great part - the result of decades of personal hard work, constant learning and creativity, and deep thought.  

But my wealth is also the product of decades of unearned advantage which allowed me to receive an undeserved greater share of our society's prosperity.

For my disproportionate bounty, I owe a disproportionate debt.

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This "disproportionate debt" is the basis of the American system of progressive taxation - the reason that those with higher incomes and greater wealth pay taxes at higher rates.  The wealthy owe more to the nation which co-produced their wealth.

As President Obama's jobs proposals and the Occupy Wall Street protests have gained favor among independents and an increasing proportion of Republicans, the national conversation has begun to focus on the responsibility of the wealthy in creating, perpetuating, and resolving our current economic woes.  

In polls, the overwhelming majority of Americans support greater public investments in infrastructure, education, and public safety in order to create jobs.  And they support raising historically-low taxes on the wealthiest Americans to do it.

And yet, an increasingly-prominent conceit of conservative ideology holds that every person is merely the product of their own singular efforts, and that those with success owe nothing (or owe very little) to the society which made their success possible.

Purveyors of this ideology live in a kind of denial - conveniently ignoring the significant roles of simple luck, coupled with public investments in infrastructure, education, and research, in improving their own lives and in enabling the lives of the wealthy. They contend that the wealthy pulled themselves up by their bootstraps, and everyone else should as well.

After Warren Buffett - history's most successful investor - argued in August that the very wealthy have a duty to pay more in taxes, Harvey Golub - former Chairman and CEO of American Express and former Chairman of AIG - expressed the "bootstraps" mentality in his opening to an indignant Wall Street Journal screed [emphasis added]:

Over the years, I have paid a significant portion of my income to the various federal, state and local jurisdictions in which I have lived, and I deeply resent that President Obama has decided that I don't need all the money I've not paid in taxes over the years, or that I should leave less for my children and grandchildren and give more to him to spend as he thinks fit. I also resent that Warren Buffett and others who have created massive wealth for themselves think I'm "coddled" because they believe they should pay more in taxes. I certainly don't feel "coddled" because these various governments have not imposed a higher income tax. After all, I did earn it.

The corollary to Golub's "I earned it" meme is that poverty and joblessness are presented less as a result of unfortunate circumstance than they are as a reflection of moral failings on the part of the poor or unemployed.

When asked about the Occupy Wall Street protests, for instance, GOP presidential candidate Herman Cain told the Wall Street Journal [emphasis added]:

"Don't blame Wall Street, don't blame the big banks, if you don't have a job and you're not rich, blame yourself!"  

At a book signing in Florida one day later, Cain added that the OWS protesters were un-American and anti-capitalist for protesting against Wall Street banks because "they're the ones who create jobs" - despite overwhelming evidence to the contrary.  At a Republican debate a couple of weeks later, Cain was asked if he stood by his remarks, and his affirmation garnered the night's biggest applause from the partisan crowd.

Paul RyanBut perhaps no one in today's politics defends the rights of the wealthy quite like Wisconsin Congressman Paul Ryan. Ryan, who requires his staff to read Ayn Rand's Atlas Shrugged for its policy insights, is the chair of the House's Budget Committee.  

Ryan is well known - and mystifyingly well-regarded as a "serious thinker" - for his attempts to use the budget process to accelerate social inequality.  Ryan's 2011 budget plan, dubbed The Path to Prosperity, was an audacious reverse-Robin-Hood attempt to slash safety nets for the most vulnerable even as it it further slashed taxes for the already-wealthy.

With the President's jobs agenda and the Wall Street protests gaining popularity, and the national conversation now squarely focused on jobs and inequality, Republicans have been losing control of the political narrative they dominated during this summer's debt crisis.  

In a much-anticipated speech, "Saving the American Idea: Rejecting Fear, Envy, and the Politics of Division", delivered to the conservative Heritage Foundation last week, Ryan attempted to recast that narrative with an ideological agenda nearly worthy of an Ayn Rand protagonist.

In that speech, Ryan outlined the American Idea as defined by the "principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense".

 After chastising the President for promoting his jobs initiatives while "sowing social unrest and class resentment," Ryan laid out the contours of his new narrative.

The central problem of economic justice in America doesn't revolve around a wealthy class which isn't doing its part, Ryan asserted, but around a social welfare system which inhibits economic opportunity and economic mobility.  Ryan contends that progressives don't understand this because they confuse "equality of opportunity" with "equality of outcome" [emphasis added]:

These actions starkly highlight the difference between the two parties that lies at the heart of the matter: Whether we are a nation that still believes in equality of opportunity, or whether we are moving away from that, and towards an insistence on equality of outcome.

If you believe in the former, you follow the American Idea that justice is done when we level the playing field at the starting line, and rewards are proportionate to merit and effort.

If you believe in the latter kind of equality, you think most differences in wealth and rewards are matters of luck or exploitation, and that few really deserve what they have.

That’s the moral basis of class warfare – a false morality that confuses fairness with redistribution, and promotes class envy instead of social mobility.

There are a couple of major problems with Ryan's new "equality of opportunity" narrative.

First, the playing field is never level at the starting line. Unmerited inequalities exist, and they often grow exponentially over time.

Ryan would have us believe, for instance, that a child born some forty years ago with dark skin to an impoverished single mother in, say, inner-city Detroit had all of the same advantages and opportunities afforded to a child born some forty years ago into a stable, upper-middle-class white family in, say, Janesville, Wisconsin.  

The circumstances of the starting line matter.  And it is all-too-convenient for those given headstarts to pretend they don't.

Second, economic justice doesn't stop at the starting line.  We must also assure that the race is run fairly.

Running the race fairly isn't about insuring "equality of outcome", as Ryan contends.  Most participants will not "win" the economic race. But it is about making certain - through establishment and enforcement of the rules - that participants do not cheat or exploit one another. It is about making certain that we flatten very real hurdles of race, gender, and income (to name just a few).

And asking the wealthy to pay disproportionately into the system which helped provide their disproportionate prosperity isn't "redistribution" - it is merely the repayment of a disproportionate debt. It is fairness.

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I'm sure that Harvey Golub, Herman Cain, and Paul Ryan all worked incredibly hard to achieve their successes.  But somewhere along the way, as they deified their individual efforts and accomplishments, they forgot - if they ever recognized in the first place - the enormous and undeniable roles that luck and public welfare played in their successes.  

In a town hall two weeks ago, for example, Ryan told a student that the Pell Grant program (federal assistance for lower- and middle-class students) was "unsustainable", and Ryan noted that he worked three jobs to pay off his student loans.  Good for him.

But Ryan also leveraged his public school and public university education to get his start in Washington.  And while he promoted his private sector student loan as some sort of ideal, Ryan failed to mention that he also used his father's Social Security death benefits to help pay for college. He went on to a taxpayer-supported career in Washington, including the last 13 years as an employee of the very government he regularly demonizes.

With no trace of apparent humility for their remarkable good fortune (nor apparent blush for their remarkable hypocrisy and greed), these successful men promote the mythology of the completely self-made success.

But no one with wealth got that wealth solely on the basis of their own virtues.  On their paths to success, each got help - sometimes deserved, often not.  To ignore the help we have received is to ignore our obligations to one another.  Worse, it betrays an unfortunate ungratitude.

The wealthy and successful extract greater value (and wealth and success) from our public goods, and thus owe a greater debt to the communities which contributed to their successes.

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Paul Ryan is right, but inadequate: the American Idea does revolve around rewarding individual merit, effort, and ingenuity. But that isn't all.  That isn't nearly enough.

The American Idea also revolves around our ability to work together to do and build great things. Our civic commitments to greatness - especially in times of crisis - mark our national identity and our national success every bit as much as (maybe even more than) our individuality does.  

Many of our nation's greatest accomplishments - Social Security, Interstate highways, successes in World Wars I and II, the Civil Rights Act, National Parks, and even the free enterprise system itself - are built upon a foundation of mutual cooperation and mutual sacrifice.  

The American Idea is simply not the either-or cartoon presented by Paul Ryan.  

We are a great nation because of our individual efforts, of which we are justifiably proud.  And we are a great nation because of our mutual commitment to one another, of which we are profoundly humbled.  We must ensure both to build upon our greatness.

That is an American Idea worth saving.

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One final note: I find it increasingly difficult to tolerate condescending, one-sided lectures on the virtues of individual effort and private enterprise (and on the evils of "redistribution") when they come from political mercenaries who have financed their professional careers with public money.  

And, yes, I'm looking at you, Paul Ryan.


On Compromise

Last night, Congress passed the $900 billion tax compromise reached between President Obama and Republican leaders.  

In the end, progressives and conservatives alike lambasted the deal.  And that might be a very good thing.

I'm no fan of the bonus tax cuts for the wealthy that Obama conceded to congressional Republicans; Despite Republican claims, those cuts fail to create significant job growth.

Lost in much of the analysis over what Obama conceded, however, is just how many bigger concessions he won back from Republican leaders, as Ezra Klein points out with this chart:

Tax Cut Compromise Proportions

Unproductive and unneeded tax cuts for the wealthy make up only one-eighth of the compromise. The other seven-eighths of the deal are much more stimulative to our economy and to job production.  

In essence, this tax deal is a second "stimulus" which is much-needed at this stage of our fragile economic recovery.

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During the Constitutional Convention in Philadelphia in 1787, representatives of each state teetered on the knife's edge between walking away from the proposed Constitution for what they might have to give up, and giving up important principles (and power) in order to gain something better, stronger, and more resilient.

While the present compromise is not nearly as momentous, it does remind me of what Benjamin Franklin - then 82 years old - said when addressing that convention in September, which galvanized the representatives into agreement:

I confess that there are several parts of this constitution which I do not at present approve, but I am not sure I shall never approve them: For having lived long, I have experienced many instances of being obliged by better information, or fuller consideration, to change opinions even on important subjects, which I once thought right, but found to be otherwise. It is therefore that the older I grow, the more apt I am to doubt my own judgment, and to pay more respect to the judgment of others. Most men indeed as well as most sects in Religion, think themselves in possession of all truth, and that wherever others differ from them it is so far error. Steele a Protestant in a Dedication tells the Pope, that the only difference between our Churches in their opinions of the certainty of their doctrines is, the Church of Rome is infallible and the Church of England is never in the wrong. But though many private persons think almost as highly of their own infallibility as of that of their sect, few express it so naturally as a certain french lady, who in a dispute with her sister, said "I don't know how it happens, Sister but I meet with no body but myself, that's always in the right - Il n'y a que moi qui a toujours raison."

In these sentiments, Sir, I agree to this Constitution with all its faults, if they are such; because I think a general Government necessary for us, and there is no form of Government but what may be a blessing to the people if well administered, and believe farther that this is likely to be well administered for a course of years, and can only end in Despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic Government, being incapable of any other. I doubt too whether any other Convention we can obtain, may be able to make a better Constitution. For when you assemble a number of men to have the advantage of their joint wisdom, you inevitably assemble with those men, all their prejudices, their passions, their errors of opinion, their local interests, and their selfish views. From such an assembly can a perfect production be expected? It therefore astonishes me, Sir, to find this system approaching so near to perfection as it does; and I think it will astonish our enemies, who are waiting with confidence to hear that our councils are confounded like those of the Builders of Babel; and that our States are on the point of separation, only to meet hereafter for the purpose of cutting one another's throats. Thus I consent, Sir, to this Constitution because I expect no better, and because I am not sure, that it is not the best. The opinions I have had of its errors, I sacrifice to the public good. I have never whispered a syllable of them abroad. Within these walls they were born, and here they shall die. (...) I hope therefore that for our own sakes as a part of the people, and for the sake of posterity, we shall act heartily and unanimously in recommending this Constitution (if approved by Congress & confirmed by the Conventions) wherever our influence may extend, and turn our future thoughts & endeavors to the means of having it well administered.

On the whole, Sir, I can not help expressing a wish that every member of the Convention who may still have objections to it, would with me, on this occasion doubt a little of his own infallibility, and to make manifest our unanimity, put his name to this instrument.

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Progressives hate what was conceded in this deal.  So do conservatives.  And everyone should be concerned over how much this deal grows our national debt.

Both sides wanted their leaders to stick to core principles - no matter the cost.  But that's demogoguery, not democracy.  It isn't how our country works.  It isn't how our country was formed.

"Compromise" has become a foul word in this political season.  

But it is the very heart of a functioning democracy.


A Small Business Perspective on Jobs and Tax Cuts

Lowell's

In late July, one of our technicians left our award-winning auto repair shop to return to his hometown.  He has been our only employee to leave since I bought the business over two years ago.  

His departure raised a question for us that a lot of small businesses have faced in this economy: Do we accept the risks of hiring a new employee to replace him?

The answer, I think, is instructive for many of the economic and political issues facing our country.

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Impatient voters punished Democrats two weeks ago for not giving enough focus to our nation's sputtering economy after the near-implosion of 2008.

With our nation's unemployment rate hovering just under 10% (and 'real' unemployment much higher), voters sent a clear signal that they want government to focus on creating jobs and growth.

According to the Small Business Administration [PDF Link], small businesses like ours make up 99.7% of employer firms, and account for two-thirds of new job creation.

Both Republicans and Democrats have reiterated the importance of getting small businesses hiring to get our country's economy moving again.  

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This week, congress reassembles in the wake of the elections to consider extending temporary tax cuts  implemented under the Bush administration in 2001 and 2003.

Republicans want to extend the entirety of the Bush tax cuts, which would add $5 trillion to the national deficit over the next ten years, and vastly expanded the national debt over the past decade.

Democrats want to extend the tax cuts as well, but would let them expire for the highest-income households which make over $250,000 per year.  The Democratic plan would cost almost $700 billion less than the Republican plan over the next ten years.

Republican leaders claim that giving tax breaks to top earners is critical to generating the new jobs that the economy needs to recover.

Unfortunately, they're wrong.

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Just how would the Republican proposal affect small business jobs? A hypothetical example from my industry might help us get to an answer.

A very healthy auto shop might have annual sales of $1,000,000 - an amount which would put it well into the top 5% of shops nationwide.  If that shop is exceptionally well-run, it might see net profits of 30%, or $300,000.

For those few shop owners in such a fortunate situation, what are the implications of extending the Bush tax cuts for those making more than $250,000?  Under the Republican plan, that shop owner would save an incremental $1,500 in taxes over the Democratic tax cut plan.  

As a small business owner, I'd happily take the $1,500.  But such a small amount would give me zero incentive to undertake the much greater expense - and risk - of hiring a new employee.  

So while extending the Bush tax cuts would certainly line my pockets, they would do little to encourage me to create jobs in my small business.    

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Some observers might contend, as incoming House Budget Committee Chairman Paul Ryan did on CNBC yesterday, that most job growth comes from larger "small" businesses and that my example above isn't really that relevant to job creation.

So let's pretend, for a moment, that our hypothetical business is actually 10 times as large as the example above: It has annual sales of $10,000,000, and its owners see profits of $3,000,000 per year.  

Under the Republican plan, that business owner would save an additional $125,000 in taxes over the Democratic tax cut plan.  Now, this seems like an amount which might let a business hire a couple of additional employees.

But while the tax savings might be enough to hire additional employees, it provides little actual incentive to use that newfound money to hire in an uncertain economic environment.  

A tax windfall fails to meet a prudent business owner's criteria for making a hiring decision. Business owners don't hire because we have extra money laying around. We don't hire out of charity. We hire when there is more work to do.  

Again, I'd happily take the $125,000.  But I'd also know that a drop of just 1% in my sales - a fairly likely risk in our current economy - would wipe out my tax savings.  If I were that business owner, I'd stash my cash as a hedge against an uncertain economy.  Net effect: no new jobs created.

The criteria for hiring is scalable: Whether a business has $1 million, $10 million, or $100 million in sales, the decision to hire is based on needing employees to meet demand - not on having spare cash supplied by tax cuts.

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In my shop, the economic slowdown - coupled with a nearby street closing for almost a year - contributed to a sales decline of over fifteen percent from our record 2008 levels.  The declines would have been worse if not for our solid reputation, our increased community involvement, and our vigorous marketing.

In fact, our business has more customers than ever before; It's just that each one is investing far less in their cars.  We see a lot more folks putting off needed maintenance and hoping that their cars won't break down.

And as I look at replacing the technician who left in July, this drop in sales has been my primary consideration.

An extra $1,500 from tax cuts wouldn't induce me to hire a new technician.  Neither, frankly, would an extra $125,000.  

I'll hire when our core business is better - when there is more work to do - and not just when I have a convenient pile of cash.

And to make our business better, we need more customers with more money - and more willingness to spend. 

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To encourage small business hiring, policymakers need to encourage spending.  In particular, they need to encourage the kind of spending which reverberates through the economy as that money is spent and respent in the form of wages, further buying, more wages, and - ultimately - hiring.  

This respending feedback loop is key to creating enough demand that businesses like mine will start to hire again.  It is key to driving our nation's self-sustained economic growth.

The fatal flaw of tax cuts for the wealthy is that the cuts don't foster respending at a scale which drives significant hiring.  As seen in my examples above, a large chunk of each dollar given out in tax cuts to the wealthy is stowed away in savings - thereby stunting the benefits to the economy.

Mark Zandi, Moody's Chief Economist, has found the same phenomenon in his research (Full PDF Here).  

Tax cuts to the rich don't yield as much overall economic benefit because the wealthy don't need to (and won't) spend that money, thus diminishing the virtuous feedback loop.

Zandi

Government spending which goes to those in need - the poor, the unemployed, state governments - does get respent (often out of necessity) and the feedback loop is much, much stronger than with tax cuts.

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If I'm looking at my bank account, the tax cuts seem like a fantastic idea. More money for me!

But if I'm looking at my business, my employees, their families, and my community - I want the government to focus on assisting those in need.  I want the government to encourage buying (especially from small, local businesses).  That's what will help my business for the long term. That's what will - ultimately - encourage me to hire. 

Lose the tax cuts.  Give me customers instead.


Health care reform: A small business perspective

This week, we're finalizing our shop's health insurance requirements for the next year.  Our policy will be 25% more this year for the same coverage.  Last year, it grew by 16%.  Compounded, that's 45% in two short years.  No other cost increases on that scale for us.

As a small business, the spiraling costs of health care hit us particularly hard each year.  And the need for a new approach to health care is particularly acute, for us and for our employees.

I've been puzzling over health care for a long while - and I won't claim to have the answers here.  But I thought it could be helpful to step away from the town hall and cable channel histrionics and fear-mongering to share some observations on health care from a small business perspective.

Insurance companies are like casinos: The house always wins.
Insurance companies have received a lot of criticism during the health care reform debate.  But they are doing precisely what they are designed to do.  They make money for investors by taking bets on the health requirements of their customers. 

Insurance companies operate like casinos or racetracks: the table is always tilted in favor of the house.  They may lose big on a single 'jackpot', but across the full array of customers they nearly always win.  And when they don't win 'enough', they'll raise the cost of making bets with them. 

When we enter into agreements with insurance companies, we're always taking a sucker's bet that we're very likely to lose.  The only reason an insurance company takes our money is because they 'bet' that we won't need that amount of medical care.

Ultimately, as with the casino, the house wins.

The oddity of employer-provided health insurance.
We don't really question it much today, but it is just plain strange that something as personal and as private as health care is mediated by employers at all.  We don't usually involve our employers in house payments or banking or appliance purchases or car insurance.  But, somehow, we've come to expect them to provide health care insurance.

Employer-provided insurance is an historical artifact from negotiations between General Motors and labor unions in the late 1940's and early 1950's.  Charles Wilson, GM's CEO, saw it as a last-ditch concession to help prevent the 'nationalized healthcare' system that Harry Truman was championing - which Wilson saw as a threat to the integrity of the free enterprise system.  (Funny how many things just don't change.)  Soon, other employers adopted health care coverage as a standard part of their benefits packages, and employer-provided insurance became the norm.

But, really, why are we employers involved at all?

Leverage
One reason that employers remain involved is that they often have more buying power than individuals.  Over the past 60 years, we've been able to provide leverage which lets us negotiate somewhat better plans with insurers and medical providers. 

But small businesses have scant more negotiating leverage than an individual.  Often, our employees choose to get independent coverage rather than participate in our group plan. 

When Lowell's bid out to three other health insurance companies, the results were disheartening.  The other three companies offered rates that were 200% to 300% higher than our current rates with Anthem.  So we're 'trapped' with Anthem.

Expanding waistlines, increasing costs.
As a nation, we're getting a lot unhealthier.  We eat more.  We exercise less.  We sleep less.  We're in worse health.  We're living longer.  And we need more care.

We don't spend much time, effort, or money on the preventative health care and self-care which would help eliminate the much more expensive catastrophic care.  We're too busy to exercise.  We don't want to pay for the mammogram.  We don't like waiting in the doctor's office. 

And we require more medical care as a result.  Often, we get that care after a catastrophe built upon years of self-abuse: We have a heart attack.  Our knees fail.  The cancer spreads.  (We see the same phenomenon with routine maintenance in the car business - put it off, put it off, put it off, then replace an engine.)

Health care is getting more expensive, in part, because we are getting unhealthier.

Rising expectations, increasing costs.
We've come to expect more from our medical system.  We expect our doctors, staff, drugs, equipment, and facilities all to improve.  And we should expect improvement as medical science advances.

But those advances are costly.  The astronomical research and development costs for the medical 'miracles' of MRIs and cholesterol-fighting drugs and 'little blue pills' have to be paid for in some fashion.

And doctors, hospitals, and insurance companies won't simply absorb those costs.  They will pass them on to patients.

Health care is getting more expensive, in part, because health care is getting better.

There are no painless solutions.
We've seen politicians, lobbyists, pundits, and fellow citizens all offer various versions of 'painless' solutions to the healthcare problem.

They promise that government should bear more of the burden. Or that government shouldn't bear any of the burden.  Or that we just need full, universal insurance.  Or that insurance companies should pay.  Or drug companies.  Or hospitals.  Or doctors.  Or that we shouldn't have to pay for the chronically uninsured.  Or that we should just collar all the lawyers and their malpractice suits.  Or we should just have more competition.

Nobody says that we must bear the responsibility.  But we must.

If we refuse to provide insurance or government coverage for the roughly 45 million uninsured Americans, what happens to those who can't pay?  Hospitals and emergency rooms will still provide care.  Their costs will go up.  And they will pass those costs to other patients in the form of, say, an $8 dose of ibuprofen.  We pay.

If we provide government-paid health care to them (or to ourselves), what happens?  Our national deficit will rise.  This week's projection of a $9 trillion deficit over 10 years amounts to about $30,000 per man, woman, and child.  Which will have to be funded through taxes.  We pay.

If we have full universal coverage in a government program, what happens?  Because they don't bear the initial brunt of the costs, patients get more health care than they really need.  And doctors and medical institutions will happily provide (or suggest) that profitable care.  More deficit.   More taxes.  We pay.

If we squeeze insurance company profit (or put greater requirements on them), what happens?  They will likely refuse coverage for the riskiest, least profitable customers.  Unable to find private coverage, those customers will opt to go without coverage or to go with a public plan.  More $8 (or, now, $10) ibuprofen.  More taxes.  We pay.  

If we squeeze drug or equipment company profits, what happens?  They have less to invest in research and development.  They take fewer risks, and release fewer blockbuster drugs or fewer equipment breakthroughs.  Improvements in our medical care falter.  We pay.

If we collar lawyers and malpractice suits, what happens?  Doctors' malpractice insurance costs will likely go down.  But a few careless doctors who commit malpractice may inflict injury or death without significant penalty.  And who ultimately bears the cost of that irresponsibility and that injury or death?  We do.  We pay.

If we allow more competition between insurance companies, what happens?  The insurance companies look at the same basic actuarial tables.  They evaluate risks in the same way.  They put a price on the 'bets' they are willing to take in the same way.  And their prices remain about the same as without as much competition.  We pay.

We want ever-better medical care.  We are getting unhealthier.  We want someone else to pay for it.  But they won't.  We must bear the responsibility.  We must pay.

Can government, insurance companies, hospitals, and doctors get more efficient?  Sure.  Are there opportunities to eliminate waste?  You bet.  Can we patients get healthier and do more preventative care?  Absolutely.  But it will cost us in some way.

There are no painless solutions.  In the end, we all pay.

The moral obligation
"Is health care a right or a privilege?"

It is a question that we don't talk about enough, and which underlies much of the national divide about health care today.  Is health care a right to which all people are entitled?  Or, is it a privilege bestowed only upon those who have earned it?  

It is an interesting question, and the health care debate has hinged upon how people answer it.

Except that I think that it is the wrong question.

The "right or privilege" question presupposes that rights and privileges are somehow separable. I don't think that they are.

I think of health care in many of the same ways as I think of citizenship or, even, to being a human being.  As citizens and as humans, we have certain 'inalienable' rights.  Heck, our country was built upon them - "Life, liberty, and the pursuit of happiness".  

But those citizen's (and human) rights come with deep responsibilities.  We must participate.  We must act in certain ways.  We must work together to improve our nation and our well-being.  We can't abuse the fundamental rights we have been given.

For me, health care comes down to a moral issue.  I can't tolerate 45 million fellow citizens living without a safety net.  I can't tolerate wasteful spending on needless tests and procedures on the public dime.  I can't tolerate 45% increases in insurance costs over 2 years.  I can't tolerate 'competition' which triples my existing rates.  I can't tolerate people (including me, unfortunately) who don't take good enough care of themselves.

I can't tolerate the status quo.  Can you?

For me, health care is a citizen's right.  And an earned privilege.  We must strive to provide health care for fundamental human needs whenever possible, while simultaneously striving to ensure we grapple with the responsibilities that come along with that privilege.

So to the politicians, lobbyists, pundits, and citizens engaged in the public debate, I say: Grow up.  Step up to the plate.  Quit attacking.  Get realistic.  Have adult discussions.  Lose the scare tactics.  Work together.  Compromise.  Take responsibility.  Live up to your moral obligations.

Then, maybe, just maybe, we can build a better health care system.  For our nation.  And for one another.

LowellsSquare

Discovery tale: Do you have a Bugatti in the garage?

1937-bugattiThe recent discovery of a classic, rare, and dusty 1937 Bugatti in an old English garage got me thinking.

The Bugatti fits neatly into the popular imagination as a kind of "discovery tale".  Discovery tales are those romantic, hopeful stories about finding some valuable piece of treasure in an unexpected place.

The discovery tale permeates our culture:

  • The Rembrandt (or Picasso) in the attic
  • The winning Lotto ticket
  • The mid-19th-century stock certificate left by a long-lost aunt
  • The pot of gold at the end of the rainbow
  • The gambler who wins the big jackpot in Vegas
  • The starlet discovered in the drugstore
  • The search for El Dorado
  • Cinderella
  • The Antiques Roadshow

These are all stories built around the discovery tale.  Usually, the tales result in untold millions for the "discoverers": the family who found the Bugatti will be getting nearly $4.5 million.

It is a compelling story.  Except that it is totally unrealistic.

Don't get me wrong -- I really like these stories, too.  As long as they are treated as fun, fantastical tales.

When the discovery tale becomes a personal strategy for wealth or success, it is a problem.  It is deadly when it becomes a build-it-and-they-will-come business strategy.

It is a problem in two ways.  First, it promotes faith in a highly unlikely outcome.  What do I mean?  Let's be generous and suppose that there are 100,000 Bugattis (or Rembrandts or jackpots or stock certificates) in the world.  Only a fraction of those Lotto tickets are going to be found in any one year (it took nearly 50 years for the family to find the Bugatti - there's a reason that such discoveries are so rare and notable).  Again, let's be generous and assume that 5% of these (5,000 or so) are discovered per year.

At this point, there is literally a one-in-a-million chance that you will be the discoverer of the next Bugatti in 2009.  And that's after being generous with our assumptions.

If you are now tinkering with the assumptions -- "Maybe there are really a million Bugattis and there's really a 20% chance of finding one..." -- please STOP.  It is nice to hope, but it is destructive to manipulate the odds in order to justify hoping.

The second big problem with discovery tale strategies is that they are passive.  Discovery tales encourage waiting and hoping as a substitute for industry and ingenuity.  People put off getting a better job or starting their own business while they wait for "things" to get better or for their lottery ticket to come in. 

So am I a total cynic?  No.

Everyone has undiscovered treasure.  But you don't find it.  You use it.  Your treasure lies in your hands and between your ears.  You are the garage -- go make your rare Bugatti.

[where: United Kingdom]