Health care ironies

Nobody – not even medical personnel – are immune to our screwball health care system.

First of all, we have the story from the Peoria Journal Star about how OSF Healthcare is cutting compensation for its employees because of the swelling ranks of unemployed – and therefore uninsured – patients using its emergency room.

And then a different story on a more personal note – I’ve talked to a local doctor who was essentially laid off from a local health care system. The biggest concern for this doctor is finding a new job with health insurance coverage for the doctor and the family. Our employer-based health care system strikes again.

What’s in it for Peoria in health care reform?

So, President Obama spent his press conference the other night trying to convince America that health care reform is essential and important for everyone. The New York Times reports that he had mixed results. I don’t think that’s too unexpected. It just illustrates how critical health care is to people’s lives and sense of security and well-being. Nobody wants to lose what they have.

But it’s important to keep in mind the alternative to health care reform. Steven Pearlstein from the other day in the Washington Post:

Among the range of options for health-care reform, there’s one that is sure to raise your taxes, increase your out-of-pocket medical expenses, swell the federal deficit, leave more Americans without insurance and guarantee that wages will remain stagnant.

That’s the option of doing nothing, letting things continue to drift as they have for the past two decades as we continue to search in vain for the perfect plan that would let everyone have everything they want and preserve everything they already have while getting someone else to pay for it.

By the way, President Obama seemed to lift these words straight into his presentation, or Pearlstein got it from talking to the administration. From a CBS transcript:

Just a broader point — if somebody told you that there is a plan out there that is guaranteed to double your health care costs over the next 10 years, that’s guaranteed to result in more Americans losing their health care, and that is by far the biggest contributor to our federal deficit. I think most people would be opposed to that. Well, that’s the status quo. That’s what we have right now.

But even that’s a bit abstract. Now, we have a concrete example of what can happen to people in Peoria without expanded health insurance, and from a medical system no less. From the Peoria Journal Star we learn that OSF Healthcare System is freezing wages and cutting compensation. Spokesperson Jim Farrell tells us why:

Farrell said the changes are in response to a dramatic increase in uninsured patients being served at the hospital amid high unemployment and a struggling economy.

So, at least in this case, a lack of universal health insurance means that OSF employees go without raises, lose bonuses, and lose paid vacation days.

As for everybody else, take a look at David Leonhardt’s great piece in the New York Times the other day trying to come up with numbers for how much everyone is overpaying for American medical care.

And to finish on a Peoria note, a (supposed) native son is featured in an article in the Onion!

Karl Rove in Peoria

So, Karl Rove came to Peoria to speak. I applaud everyone who turned out to protest.

What was most interesting to me is, though, is this: I moved here about a year-and-a-half ago. I have read the Peoria Journal Star almost every day, including the stories and columns by the designated political reporters.

But I learned more about the politics of the Peoria area from the stories that came out surrounding this event than anything else during all that time, and that includes election coverage. Here’s one of the articles.

We have labor leaders criticizing business leaders. We have people naming names and laying blame. We have various agencies and elected officials all pointing fingers. Wow.

So, what was it? Does the Employee Free Choice Act really drive divisions that deep? Was it the fact that the oh-so-delightful Karl Rove was involved?

I’m not sure, but I’m sure glad he came. At least now I understand the clans, fissures, and issues of Peoria politics a bit better.

Two new data points on Peoria’s economy

The Peoria Journal Star has two articles today with measures of Peoria’s economy. They both appeared in the print edition, but I couldn’t find them online.

In the first, Manpower Inc. has released the result of a survey that shows area employers plan to keep roughly the same number of workers between April and June. That’s a sign of stability in the local job market, which is undoubtedly a good thing. But it’s important to remember that job quantity is one thing, while job quality is quite another. I wonder if the new jobs being created will have wages and benefits that are comparable to the jobs being lost.

In the second article, a study shows that far fewer home-owners in the Peoria are “underwater” than the nation as a whole. “Underwater” means that people owe more on their homes than they could get for selling the home. Some economists argue that, when homeowners get “underwater,” they are more likely to simply walk away from the house, leading to foreclosure, dramatic drops in home values, further economic problems, etc. Personally, I’m not sure exactly how true this is. I think there’s an ethic to debt that would lead many people to keep paying if they could. Also, it’s no small thing to get a huge ding on your credit report. Either way, it’s good to see that the Peoria area is more stable on this front, too.

Yet another ugly day for the job markets

The national unemployment report was bleak. We now have an official unemployment rate of 8.1%. But it’s also important to look at the Labor Department’s broader measure of unemployment, especially in today’s economy. It includes people who are unemployed and still looking for a job, people who are unemployed but have given up looking, and people who have part-time jobs but want full-time employment. That gauge stands at 14.8%.

And in Peoria, the losses keep adding up, as well. The Peoria Journal Star reports that the Workforce Network will report on Tuesday that more than 5,100 workers have lost their jobs in the Peoria area in the last five months.

Harder to keep that rosy view of the local economy. But it’s likely still better than the national economy.

New economic numbers are ugly

The government has posted its revised GDP numbers for the last three months of 2008, and they are ugly – a 6.2% annualized rate of decline. I link to the New York Times story on the GDP, which includes this nugget:

Among the more distressing aspects of the report, according to Joseph Brusuelas, a director at Moody’s, were the numbers for business investment. Investment in equipment and software, for example, fell at an annualized rate of 28.8 percent.

“We’re not going to have a consumer-led recovery out of the recession,” Mr. Brusuelas said. It will instead be led by the technology industry and businesses’ spending on capital investments he said, which makes the fourth quarter G.D.P. figures numbers “somewhat troubling.”

So, to emphasize what is said here, consumers will not save the economy (an idea I criticized in a post yesterday), and businesses will have to pick up the slack. I wonder where Cat will fit into this picture.

Also, just to build on something from my postscript in that same post yesterday, the article says “the last quarter of 2008 was the worst since the 1982 recession.” Let’s keep in mind that today’s numbers might be similar to the early-80s recession, but these two recessions are not at all the same. The early-80s recession was caused by the Federal Reserve cranking up interest rates to kill the economy in order to kill inflation. That recession was also ended by the Fed reducing interest rates once it felt inflation was dead. This time around the Fed is already at zero-percent interest rates, and we’re still struggling. Hence, the need for the stimulus bill.

Peoria Area World Affairs Council

Just a shout out to the Peoria Area World Affairs Council, which is holding what looks to be a really interesting conference on Pakistan this weekend: “Pakistan: Dangers, Insights & Strategies.”

It starts tonight. The Pakistani ambassador to the U.S. speaks tomorrow afternoon. A pretty good “get” there!

Peoria’s economy really better off?

In the Peoria Journal Star today, Paul Gordon writes about a report produced by the Peoria area’s economic development organization. The report is designed to make everyone feel better about the local economy. Apparently, the Heartland Partnership has gotten some grief over its ad campaign that says “It’s better here,” even with the poor economy and layoffs at Cat.

I’m not convinced.

From the article:

The numbers show the area is faring better now than in earlier recessions, largely because of the way the local economy has diversified in the past 25 years and reduced its reliance on manufacturing, namely on Caterpillar Inc., the Partnership said during a news conference at its office Wednesday.

I would imagine that the local economy is less reliant on Cat. But is this true economic diversification, or has Cat’s contribution to the local economy shrunk to the point where the local economy just looks more diversified?

To think of this a different way, go check out the pie chart that was published along with the article. The economy looks diversified because Cat’s pie piece is relatively small. Now, imagine that the yellow Caterpillar pie piece was more than three times as big, as it was in the past. The economy now looks less diversified. This new economic “diversification” we seem to enjoy could just be the relative decline of Cat, while other parts of the economy remained largely fixed. Job figures cited elsewhere in the article might point to an answer to this question:

Another key statistic, the Partnership said, is the number of people working. In the five-county Peoria “metropolitan service area” – Peoria, Tazewell, Woodford, Marshall and Stark counties – there were, on average, 194,577 people working in 2008, before the layoffs began. In those same five counties in the late 1970s, before the recession of the 1980s, there were about 178,000 workers on average. By the end of 1985, that was down to about 146,000.

Basically, the Peoria area economy has generated 16,577 new jobs in 30 years – 552 jobs per year. I would want to look up some more comparative statistics, but given the growth of the overall U.S. economy in the last three decades, that does not strike me as anything to celebrate. And remember, none of this takes into account the layoffs taking place right now.

I also wonder if this idea of Cat’s reduced importance as an employer fails to capture the remaining essential reliance of the Peoria area’s economy on Caterpillar. Look at that pie chart again. How many of those other sectors (like leisure and hospitality, education and health, professional and business services) would decline precipitously without that sustaining wealth creation that Cat generates by brining in profts from around the globe?

Back to the article:

Saying he did not want to belittle the strife the area has seen during the recession, including recent layoffs at Caterpillar and other companies, McConoughey said the statistics nonetheless show “we are weathering this and doing fairly well. It is not better here than it was a year ago, that’s true, but it is when compared with recessions of the past and with how other areas are doing now.”

I think this is essentially true. If you compare the Peoria situation to where the economic bombs have really been going off (Florida, New York), we’re doing okay. Just consider the housing market. I was talking to a realtor I know yesterday, and he said that prices are holding up in Peoria. That’s certainly not true elsewhere.

However, that’s probably because Peoria never had as big of an economic run-up as other parts of the country. Think of all of the huge banker bonuses that bolstered the New York economy during the last few years. That point does come out in the article at one point:

Housing values have stayed steady because this area did not experience the housing bubble burst that occurred on the coasts and in Florida.

Moving on, according to the article, McConoughey made what, to me, was an alarming statement:

It’s important people know that, he said, so confidence can be restored. “We don’t want people to bury their money out in the back yard and then hole up waiting for the recession to end. We need to spend our way out of the recession,” he said.

Confidence is important, but I think this is dangerous, if not negligent, economic advice for individuals and households.

Consumers do represent about two-thirds of our nation’s economy. But part of the reason this recession will prove so disastrous is the debt overhang that individuals and consumers have from years of over-consumption. Quite sensibly, consumers are cutting back, especially when their jobs seem so insecure.

But that leads us right into Keynes’ Paradox of Thrift – the idea that what’s good for individuals separately is a disaster for everyone together. Everyone cutting back on their consumption will tank the economy, which will feed back into reducing people’s confidence, more job cuts, etc.

This, by the way, is the essential argument behind the stimulus bill. Government can act as that spender of last resort in the short-term, while consumers weather the economic storn, clean out their debt, and prepare to become stronger engines of the economy down the road. This kind of advice makes me think back to the “go shopping” rhetoric we got a couple of years ago.

And finally, things are likely to get worse:

Acknowledging the most recent layoffs by area employers, including Caterpillar, are not reflected in the December rate, the Partnership cited Bradley University economists as saying they don’t expect the region’s unemployment to reach beyond 9 percent during the current recession.

Yikes. Well, at least we won’t see 10 percent.

We’ll see if the Heartland Partnership can produce such an optimistic sounding report a year from now.

P.S. One last thing about that early 1980s recession that clobbered Peoria, much of the Great Lakes region, and the U.S. economy. I think it’s important to remember that that recession was not some sort of natual disaster. The Federal Reserve (under then-chairman Paul Volcker, now an Obama advisor) made a deliberate choice – with the backing of political leaders at the time – to crash the economy so as to kill inflation. Now, there’s a solid economic argument to be made for containing inflation. But that recession was done to us, in the name of saving the overall economy. It just happened to break the back of much of the industrial Midwest in the process.

I wonder at what point we’ll finally decide to break up the banking sector for the sake of the larger economy?

P.P.S. I happen to think that Paul Volcker is one of the best economic minds that Obama has near him right now. Far better than Larry Summers or Timothy Geithner. But unfortunately, signs have been that he’s not part of the inner circle.