Right-wing and anti-Social Security forces in the U.S. have been successful in suppressing retiree benefits, workers’ wages/salaries, and programs indexed to the consumer price index (CPI).  Because of many techniques for suppressing the official measure of the CPI –advanced by conservative economists over the past few decades – middle and low income wage/salary earners and retirees have lost ground to the cost of living.

One of the gimmicks now offered by conservative economists, politicians, bureaucrats, and pundits, is known as the “chained CPI.”  What is the “chained CPI?”  This bulletin will “boil it down” and provide a catalyst for a wider discussion of this misguided notion.  In general, it must be said that in the history of big pseudo-scientific ideas, the chained CPI ranks right up there with the homunculus, Piltdown Man, the free market, the bleeding of patients with leeches, eugenics, and Lysenko genetics.

The chained CPI and its underlying justification by the Bureau of Labor Statistics (BLS) through a subset of assumptions about human behavior are little more than cynical attempts at manipulation of the CPI to the detriment of workers and retirees and to the advantage of corporations and the super-rich.  This bulletin will cover three concepts essential to the chained CPI construct: (1) “substitution bias,” (2) the “hedonic adjustment,” and (3) the geometric mean versus the arithmetic mean.

Any lay person with no more than a basic knowledge of high school math can understand these concepts and no one should be intimidated by them.  Trust me; the chained CPI is the invalid reduction of the inordinately complex dynamics of consumer behavior and price fluctuations in the world’s largest economic system to a few simple mathematical models (the U.S. officially has a GDP of nearly $16 trillion or $16,000 billion).  In the world of science, this fallacy is known as reductionism.  You will see that fallacy clarified as you read on.

Let’s look at the three concepts underlying the chained CPI construct:

Substitution Bias

Substitution bias simply means this:  when prices rise on a staple or service regularly purchased or needed by an individual or group of individuals, the individual or group of individuals will substitute a cheaper product or service for what was regularly purchased or would be purchased; ipso facto, when prices rise, the cost of living actually declines.  For instance, if you are accustomed to buying steak and the price of steak increases, you are compelled to purchase ground round; therefore, your cost of living has actually gone down.

Believe it or not, that is the theory.  That’s pretty much all there is to it.  Even though it doesn’t pass the laugh test, economists have been all too eager to come forward with complex “econometric models” to overlay this nonsense with a patina of science and mathematical validity.  As a statistics professor, I can tell you that these models are of no higher quality, i.e. statistical validity, than the nonsensical assumptions on which they are based.

Hedonic Adjustment

Do you think that higher prices for goods and services imply that you have a much better product than you had at a lower price, and therefore your cost of living actually decreases because of all of the bells and whistles on the ever expanding array of the gewgaws, electrical devices, apparel, etc. that are offered up to consumers these days?  Have you looked at the charges on your phone bill lately?  Were they there in 1950, 1960, 1970, 1980, or even 1990?

It is this notion that has led the BLS to lower the CPI in recent years in spite of so many increases in the prices of necessities without a correlative increase in quality.  What are students and families paying for education these days versus the 1960s or even much later than that?  What does your health insurance cover these days for the price increases you have seen?  OK.  Enough of this – we could go on and on about the absurdity of this notion.

Geometric Mean Versus the Arithmetic Mean

Considering that the CPI involves a survey of thousands of products in a “market basket” of goods and services, calculating averages is a major mathematical technique for arriving at changes in prices.  There is more than one method for calculating an average.  For instance, by middle school, practically all numerically literate people have a good handle on the arithmetic average.  Unfortunately, only mathematicians/statisticians have exposure to the other types of “means.”  For instance, the “geometric mean” – applied now by the BLS in calculation of the CPI – is calculated by taking the product of all values in a dataset rather than summing all of the values.

Here is an example of an arithmetic mean versus a geometric mean:  three people ages 19, 20, and 21 would have an average age of exactly 20, i.e. (19 + 20 + 21)/3 = 20.  A geometric mean would be the cube root of 19 * 20 * 21 = 19.98331943.  The geometric mean in this case is ever so slightly lower than the arithmetic mean.  Three issues are important here: (1) very small reductions in the CPI due to mathematic gimmicks are compounded over time and result in major losses of benefits and wages, (2) as the number of values and variance of the distributions of values entered into the calculation of the geometric mean, divergences of the geometric mean and the arithmetic mean increases, and (3) the CPI has been suppressed by about ½ of 1 percent each year by this technique throughout the past decade (thinks to the Boskin Commission in 1996, which is a subject for a later bulletin).

Summary

No valid, credible, empirical/scientific evidence exists to support substitution bias and quality improvement, which have resulted in the hedonic adjustments, lower CPIs, and, consequently, a call for aneven more conservative CPI known as the chained CPI. Nevertheless, the BLS, an agency responsible for fairness and economic justice involved with the determination of price increases and charged with looking out for the well-being of all U.S. citizens in adjustments in the CPI, has decided to apply a mathematical gimmick in repressing benefits, wages, and salaries.  They are, in fact, making life more difficult for the broad mass of working people and retirees.

No doubt, tracking changes in in prices of goods and services within the U.S. economic system is a massive and complex undertaking.  Nevertheless, we expect more than overly-simple models, the origins of which can be traced to conservative think tanks and the results of which advantage the wealthy and penalize the masses.

It is important that we call out the stewards of our economic well-being and demand that we have an open and honest explication of reasons for suppressed wages and benefits along with discussion of poor and middle class quality of life and how it has changed due to the disappearance of masses of good paying employment and major increases in necessities of life – including education, health care, and housing.

Officially, the CPI has increased at an average of 2.1% from 2000 through 2011.  Even considering the negative -.34 CPI change in 2009, it would seem as though 2.1% is an unbelievably low average increase in the CPI over the first decade of the current millennium.  Enough is enough.  We expect fairness and will demand it.

The Latest Stage in Creeping Corporatism

What do employees think about paying income taxes that can be kept by their employer for 10 years to use, interest free, as management desires?  Do they even know?  Do the citizens who are looking at draconian cuts in government services – including Medicaid for the poor and elderly – know?  Kansas and nineteen other states have just such a program.  In Kansas it is euphemistically called the “Promoting Employment across Kansas,” or “PEAK” program.

PEAK works this way:  move your jobs to Kansas and you can annually keep $4,800,000 of your employees’ state income taxes for up to 10 years and pay no interest.  In other words, taxpayers are providing corporations with an interest free loan up to $48,000,000 over a 10 year period.  One company that qualified for such a deal is AMC Corporation – the second largest owner of movie theatres in the World.

AMC was purchased a few years ago by a consortium of investment firms, including Bain Capital and the Carlyle Group.  Movie theatres are not an investment with a bright future.  Nevertheless, the owners of AMC were able to dump the company on the Chinese owned Wanda Dalian Group. It was Bain, et al. that moved the company across the state line to Kansas with all sorts of sweet deals.

Why Does China Want to Expand Its Role in the Movie Industry?

As David Denby discusses in the latest issue of the New Republic, the movie industry has, for the most part, degenerated into a shallow, boring, digital form of entertainment designed to appeal to a generation raised on video games.  Movies goers with a bent toward artistic depth and averse to having their intelligence insulted are staying away from theatres in increasing numbers and profits in the industry are sagging.

Adding 5000 screens in the United States to their vast entertainment empire, Wada Dalian Group has grabbed a prime opportunity to spread Chinese culture in this country.  Look for them to retain very talented Hollywood professionals in production of highly sophisticated and subtle propaganda.  Given the American public’s apathy, acquiescence, and lack of critical thinking skills, impact of subliminal and even clever overt messages will escape the attention of most movie audiences.

Let’s keep in mind that the rulers of China are autocratic, totalitarian, thugs who will stop at nothing in maintaining and expanding their power.  Furthermore, let’s not underestimate their cleverness.

Why the PEAK program now?                                                                                                      

For decades, corporations have been colluding with state and local governments in foisting give-aways on taxpayers in the form of property tax abatements, factories built by taxpayers at no cost to the companies, and other incentives to move jobs into a particular state or locale.  In Kansas, corporations have, in addition to all of the usual goodies, received practically all lottery money through two programs known as Kansas Industrial Trainingand Kansas Industrial Retraining – otherwise known as “KIT-KIR.”

The sad truth is that all of this does nothing for declining job opportunities on a national basis and very little at the state and local levels.  Nevertheless, taxpayers have rolled over for these rip offs because the jobs dangled in front of them, but not necessarily materializing, fulfill a basic human psychological drive to eliminate worry about jobs.  That’s about as far as the public’s thinking goes when it comes to these anti-democratic, corrupt deals.  Very few Kansans even know their lottery money has been handed over to the likes of Boeing Corporation for decades, which is now pulling up stakes and leaving the state.

For some time now, the public has been tested by corporations with the help of rubes on city commissions and in state legislatures.  With very few exceptions, citizens have acquiesced in this government-corporation merger.  Why not push it to ridiculous limits and see how it works.  Employees can now pay their taxes directly to the corporation, which can keep them for a considerable period of time.  So far, it’s working.

Historically, Corporatism and Fascism Have Developed Simultaneously

A Fascist ruling elite doesn’t concern itself with what citizens think, need, or want.  Democracy withers way, incrementally, and government evolves eventually into a government for servicing corporations – especially in the financial services in this day and age. The wealthy elite also sees to its interest – while at the same time an ideological right wing political party is stoked and appeased.

Bureaucratic operatives dare not defy the wishes or the best interests of the corporate power structure.  I experienced this when I called the Kansas Department of Revenue and inquired about the AMC deal and the PEAK program in general.  The gentleman to whom I was referred refused to tell me anything by claiming the right of welfare laden corporations to “confidentiality.”  Citizens have no right to know the amount of revenue lost through this latest and most outrageous funneling of tax money to corporation.  Check it out for yourself.  I spoke to a Mr. Richard Cram at the Kansas Department of Revenue.

I called the Department of Commerce, the entity responsible for negotiating these deals with corporations, and was referred to a Mr. Wayne Groves.  This gentleman did acknowledge that AMC had received the deal but wouldn’t tell me much else.  For instance, I asked for a list of all corporations receiving the PEAK benefits.  Most certainly, for Cerner to move across the state line, it would need as sweet a deal as AMC. All Mr. Groves would say that the Department of Commerce has a database of companies participating in PEAK and that I had no right to know who they are without a freedom of information request.

This Is Just the Beginning of this Story on This Blog

As the Brownback experiment in Christian Fascism and Corporatism proceeds, we will see elderly suffer from underfunded Medicaid programs – in fact, it will be interesting to find out if the few companies receiving managed care contracts will be in the PEAK program.  Tax money handed over for use of private industry will be unavailable for poor children and adults, many of whom will experience hunger and homelessness as food and housing prices continue to escalate.

This is a serious and alarming story that needs to be told.  It will be told on the Tallgrass Activist.

Another mainstream media assault on people born between 1946 and 1964 appeared today in the form of an Op-ed piece by New York Times columnist Bill Keller (see “The Entitled Generation,” July 30, 2012).  The author was later given a forum by Neal Conan on NPR’s Talk of the Nation program – during which he was not challenged by Conan.

Taking his cues from the Wall Street front group the Third Way* (a supposedly moderate wing of the Democratic Party),  Keller joined an ongoing deficit hawk rant, by which an imaginary “baby boom generation” is blamed for every catastrophe from economic collapse to juvenile diabetes.  The Op-ed piece is nothing less than a smear of tens of millions of Americans – a large proportion of whom are suffering serious economic losses and are looking forward to considerable hardship in their old age.  Indeed, he is supporting a long-running, concerted effort by various wealthy conservatives to reify everyone born between 1946 and 1964 into a “thing” that can be demonized and thereby serve as justification for continuing cuts in Social Security (which have been taking place since 1983).

What did Keller have to say?  He launched his smear by borrowing several quotes from pundits and politicians.  For instance, he uses the following pearl of wisdom from former Clinton staffer Paul Begala’s Esquire article entitled “The Worst Generation:” “The Baby Boomers are the most self-centered, self-seeking, self-interested, self-absorbed, self-indulgent, self-aggrandizing generation in American history.” Knowing what I know about the Clinton “West Wing” crowd, this is most certainly a mere projection of one personality onto an entire mass of people.  At any rate, the quotes presented run in this vein throughout the column.

Keller’s point in all of this is what?  Well, in addition to so many other man-made catastrophes, the “baby boom generation” is, in his mind, the cause of the fine fiscal mess in which we, as a nation, now find ourselves.  It is not, as Nobel Laureate economist Joseph Stieglitz has indicated, multi-trillion dollar wars, a tax code obscenely tilted toward the rich, Wall Street/banking industry corruption, collapse of a housing bubble and so on and so forth.  Oh no folks – it is that demon the “baby boom generation.  Consequently, as Americans not of the uber-rich class retire, they must sacrifice an already tenuous safety net to further slashing – namely in the form of Social Security and Medicare cuts.

Although he claims to be a “fellow boomer,” Keller is actually part of a very privileged journalistic set that has a propensity to talk to the rich and famous while displaying little knowledge of the plight of millions upon millions of Americans who fit his creation known as the “entitled.”  He needs to do a couple of things: (1) leave his lofty intellectual perch in New York and travel across America and get to know his “fellow boomers,” and (2) base his generalizations about such matters as longevity, the deficits, and other important issues pertaining to public policy on adequate research.  He should also include his fellow journalists Thomas Friedman, David Brooks, Jackie Calmes and other New Times writers in these endeavors.

What he and his colleagues will learn is this:

Beginning about 1983, masses of working Americans, many of whom are now entering retirement, were forced to forego defined benefits retirement programs and forced into 401(k)s or defined contributions programs– many were offered nothing.  By 2009, the median 401(k) was worth about $50,000 (Pew Research Center report).  Furthermore, in 1983, Congress implemented the Greenspan Commission recommendations by slashing eligibility by 2 years and by increasing the payroll tax.  Those two years, today, would be worth, on average, approximately $33,600.

In other words, the “entitled” group to which Keller refers began to give back and take cuts a long time ago –  at about the same time that the very wealthy began to receive an increasing amount of government largess in the form of overt tax cuts and opportunities for massive tax avoidance.  Do the NYT journalists understand who economists are speaking and writing about in regard to inequality of wealth and income?  Presumably that middle class which has lost considerable ground in the past few decades through a massive transfer of their wealth to the top 1% is comprised mostly of individuals born between 1946 and 1964.

Furthermore, for Keller to say that tax reform and reform of military spending would not adequately address the budget deficit is not factually incorrect.  For instance, it is estimated that efforts by the super-rich to park their money in overseas accounts alone is costing approximately $150 billion per year.  This is not to mention the volumes of tax code with enough loop holes to qualify them as a shelf full of sieves.  What about asking the affluent and rich to contribute fairly to what is now a regressive Social Security income tax?

With cynical manipulation of the consumer price index by the Bureau of Labor Statistics (through such nonsense as the “hedonic adjustment” and other such fallacious techniques), the current and future retirees depending on Social Security have given and given and given.  Make no mistake about it; these methods for suppressing measures of inflation are fallacious and hurtful – particularly as they pertain to the elderly.  Would Peter G. Peterson and his cronies such as Jonathan Cowan – founder and President of the Third Way – be willing to admit that keeping inflation low is what the “bond market” desires?  Do they really want to get into that discussion?

In his column, Keller relies on a 15 year increase in life expectancy as justification for reducing the quality of life for the elderly, which is ludicrous.  His point is that they can apparently work longer.  He apparently doesn’t understand that most of that increase is due to a reduction in infant mortality.  The senescence of human cells has not changed in the past 50 years.  An old person is still an old person.  And “old” often means vulnerable – particularly in an ageist, youth-worshipping society.

It is dismaying to observe Keller’s adoption of the right wing strategy of smearing advocates currently fighting draconian cuts as proposed by Alan Simpson and Erskine Bowles as some kind of “60s-radical-hangover types.” One tactic used by “the right” to undermine passionate efforts to end the worsening quality of life for the elderly is to make advocates out to be a bunch of wild-eyed, radical, “leftists.”  They create a narrative in which the term is pejorative and sounds somewhat un-American.  Conversely, Keller and his fellow writers at the New York Times never use the term “rightists” when referring to the proponents of the Simpson-Bowles plan.

In summary, it is important for readers of this blog post to realize that creation of mythological things called “generation this, that, and the other thing” is just another form of stereotyping.  There is no such thing as “the greatest generation,” “the worst generation,” “generation X,” or any other imaginary type of grouping of people born between a couple of dates.  If you are a fan of NPR or the New York Times, and you fail to push back on these smears, you do so at your own peril.  At your own peril, that is, unless you are very rich.

*If you have trouble believing that the Third Way is dominated by Wall Street types, check out its board of trustees at http://thirdway.org/trustees.  It is interesting that amongst that business-oriented body of mostly investment bankers is William Daley, who, prior to serving as President Obama’s chief of staff, served as a vice-chairman for J.P. Morgan Chase.  Jonathan Cowan, the President and supposed founder of the Third Way is an old protégé of anti-Social Security billionaire Peter G. Peterson.  In the 1990s, as a co-founder (with Peter G. Peterson’s money) of  an organization known as Lead or Leave, Cowan served as a front man in Peterson’s ongoing attempts to foment inter-generation conflict by blaming people born between 1946 and 1964 for any and all adverse economic condition of people born after 1964.

Where do your health care dollars go? 

The U.S. expenditure on health care is approaching $9,000 per capita .  Indeed, the medical/health industry now accounts for 18% of GDP.  This is far more than the $3 to $4 thousand per capita and less than 10% of GDP spent by most advanced industrial countries.  Have you ever wondered where all of that excess U.S. expenditure goes?

How about this: into the pockets of Wall Street moguls and investors.  Of course! It must! Where else would it be going?  Paul Krugman, in his latest book, End this Depression Now writes about Lawrence Feinberg of Oracle Partners, a hedge fund specializing in the medical-industrial field.  Mr. Feinberg purchased a mansion in Greenwich, Connecticut for $18 million, razed it to the ground, and built a 30,000 square foot palace that has been compared to the Taj Mahal.

And Mr. Feinberg engaged in all of this lavish expenditure on a Gilded Age lifestyle before the Affordable Care Act has actually been implemented.  Imagine how well investors and hedge fund managers will do upon the infusion of literally trillions of dollars of taxpayer money into hospitals, insurance companies, the pharmaceutical industry, and medical device manufacturers – just to name a few.  That is, until the money runs out.  Or until as much can be squeezed out of the masses as is tolerable.  Given a compliant, complacent, and easily manipulated U.S. population that seems to be a fair piece down the road.

In 2009, Barron’s business weekly quoted Mr. Feinberg as saying that healthcare reform would benefit hospital, drug, and biopharmaceutical companies.  It will benefit him immensely also but he didn’t say that – at least he didn’t say it to Barron’s.  Oh yes, and keep in mind that Mr. Feinberg, as a hedge fund manager, pays taxes at a maximum rate of 15% – it’s called “carried interest.”  I doubt if he pays even that much but you can rest assured he won’t be paying any more than that.

As a person with no animus towards capitalism per se and no problems with a “free market,” I think it is OK if investors earn a reasonable return on their investments. I also have no problems  with individuals becoming wealthy.  I do have a problem with rigging markets so that we don’t actually have a free market.  And that is exactly what has happened in health care.  We have a medical industrial complex, the members of which are able to persuade (bribe) congresspersons to rig prices or, at the very least, fail to regulate anti-competitive practices.

The Affordable Care Act will be funneling massive amounts of taxpayer money into these rigged markets.  The excess will be siphoned off and ploughed into lifestyles of the rich and famous.  In the process, taxpayers will not be getting the health care they need and deserve.  Those who can afford something better will be headed for the concierge medicine realm.  Those who can’t will take what they can get.  And, I imagine, it will take some sharp elbows and/or good luck for most people to make it into the system.

Yesterday, the Supreme Court issued its much anticipated ruling on the Affordable Care Act.  It allowed the “mandate” to stand and the law, for the most part, will remain in effect, and will, in some fashion, move forward.  I wish I could say that I feel like celebrating, but I don’t.  This is not the first time and it won’t be the last time that I have been out of sync with the liberal weltanschauung.

So how do I feel do I feel about the U.S. health care system after the decision yesterday?  Just like I did before the decision: disgusted, ashamed, discouraged, and angry are good words.  Why am I not jumping aboard the celebratory band wagon?  Let me count the reasons.  All of the many reasons could be subsumed under the overriding characteristics of the U.S. medical system, or, more aptly, the “medical-industrial complex.”  The characteristics that best describe that system are: immoral, bio-ethically depraved, corrupt, inefficient, and ineffective.  The ACA won’t, unfortunately, fix this state of affairs.  Thanks to all of the corrupt practices put in place by congress and the medical-industrial complex, the U.S. health care system will collapse of its own weight – it is inevitable.

I will explain exactly what I mean by these characterizations but first let me make it clear that I respect President Obama and laud him for taking a run at the problem.  He did the best he could under the circumstances.  He was faced with a juggernaut of wealthy industrialists and their high priced lobbyists, “blue dog Democrats” (along with a panoply of spineless Democrats), an army of misguided fools, funded by billionaires, known as the Tea Party, and an ill-informed media with barrels of ink and gobs of face time.

It should be noted that the Netherlands and Switzerland have implemented  similar “managed competition” models with a mandate for purchase of insurance from an exchange.  It is working rather well in those two countries – especially in the Netherlands.  But no one in the press, congress, or anywhere else has bothered to mention that.  It probably won’t be working here anytime soon because the medical-industrial complex dominates congress.

Let’s compare U.S. costs – our country with 100 million or nearly one-third of our citizens un or under insured – with the Netherlands and Switzerland, both of which have approximately 1.5% of their populations uncovered by insurance.  In 2010 the U.S. spent $8,233 per capita on medical care.  The Swiss spent $5,270 per capita and the Dutch spent $5,056 per capita.  It must, however, be noted that countries such as Japan, Italy, and Germany, with single payer systems and all citizens covered spend less per capita than the Swiss and Dutch: approximately $3,035, $2,964, and $4,338 respectively.  Need we say more?  Isn’t it clear that something is very, very wrong in the U.S. that will not be fixed by President Obama’s laudable efforts?

Where does the difference between $4000 per capita and $8000 per capita in health care expenditure go?  Ah, that is the question.  The answer is simply this:  into the coffers of the insurance industry, medical device manufacturers, the hospital industry, pharmaceutical companies, and, let’s not forget, that portion of the medical profession which places greed over the Hippocratic oath (not all physicians are greedy or bio-ethically challenged but some are and they are certainly represented by a bio-ethically depraved organization known as the AMA).

In the days ahead, this blog will discuss corruption in the medical system and how corrupt congressional-industrial collusion has caused the U.S. health care system to be a disgraceful mess.  I believe that the big problem is, as explained by Nobel Laureate economist Joseph Stieglitz, an anti-competitive practice known as “rent seeking.”  Through lobbying and campaign contributions, various industries and companies are able to keep prices for medical goods and services artificially high.  This has resulted in a massive transfer of wealth from the middle class to the very wealthy segment of the population.

Furthermore, funds are drained off of the U.S. health care system through un-regulated industry practices.  Let me give you but one costly example.  The U.S. is the only advanced industrialized country with no registry or database containing each and every implanted medical device such as a hip, pacemaker, stent, and so forth.  We have no way of knowing defective from well-working devices.  It is only after a long run of tragedies and inordinate costs that we are able to recognize a product that is defective.  Five hundred thousand metal hips were implanted before it became clear that we had tragically implanted a defective device.

When a defibrillator goes bad, it is a very big, costly, and tragic deal – make no mistake about it.  Not only do we not have a database with these products so that we can spot trouble right away, the FDA doesn’t even require clinical trials before they are approved.  And a majority of the Supreme Court has held that medical device manufacturers cannot be sued for product liability if the FDA approved their device.

Look for more on how the U.S. health care system runs in the days ahead – including lies about and scapegoating of the elderly.

In 1994, Charles Murray, with funding from the eugenicist and racialist Pioneer Foundation, co-authored The Bell Curve –  a nasty piece of bigoted pseudoscience in which he and co-author Richard Herrnstein concluded that the plight of African Americans was due to genetic inferiority. Now comes Mr. Murray’s latest pseudoscientific effort to provide cover to corporate/economic elites for failure to meet the needs of working class Americans (black, white, brown or otherwise) while they – the elites – enrich themselves at an unprecedented rate. He has compiled completely biased and unscientific research into his latest tome entitled Coming Apart.  In this book, he blames working class suffering on unwise and immoral behavior on the part of the working class itself.

Ensconced along with other “neo-conservatives” at the ultra-right-wing American Enterprise Institute, Murray’s role is to produce junk science for the purpose of explaining why the poor are poor and the rich are rich. What is really annoying about the appearance of this type of corporate shilling through propaganda and pseudoscience is the reaction of liberal writers such as Nicholas Kristof of the New York Times (see “The Decline of White Workers, NYT Op. Ed., February 9, 2012).

Journalists like Kristof write about anything that comes into their minds, regardless of whether or not they understand the topics in enough depth.  When it comes to Charles Murray’s bigotry, this is nothing new.  Consider, for instance, a favorable 1994 New York Times Book review of three books by known racialist crackpots (including Charles Murray).  The reviews, entitled “What is Intelligence & Who Has It?” were written by former science reporter Malcom Browne.

As a statistics professor with a fair amount of research background in racial issues, I read the Bell Curve and the other works (they are still on my bookshelf) because of the quantitative and testing claims put forth by the authors.  Furthermore, the premises on which Murray and Herrnstein based their “African-American inferiority” theory were supported by IQ testing and the interpretation of results from such testing.  At the time, I was professionally engaged in evaluating mental measurements for an educational consulting organization.

I had discovered that all of the authors had received funding from the white supremacist and eugenecist Pioneer Foundation, which had provided the  racialist philosophical underpinnings for German Nazis’ policies.  I also discerned that all three works were merely a rehash of the racialist IQ theories used to justify extermination of Jews and a variety of other people deemed undesirable by the Hitlerian regime.

I wrote Malcome Browne a letter in which I expressed dismay that he would do a “puff piece” on books extolling the theoretical framework for Nazi extermination.  In a letter dated October 20, 1994 – still in my files – Browne responded to my complaints by saying, amongst other things, the following:  “I have no patience with those who would halt research on grounds that it is tainted by the errors of its practitioners.”  This said to me that he didn’t understand the issues, the history, or the science of IQ theories as they have been applied to ethnic groups.  Furthermore, it is typical of the ill informed journalist – liberal or otherwise – who thinks it is courageous and even a bit cool to jump in on the side of research in which a  modern economic class or ethnic group is stereotyped as inferior or at fault for their own plight.

Nicholas Kristof and Charles Murray are both quite wealthy.  Obviously, neither of them have any sensitivity to the desperation, depression, hopelessness, and despair besetting millions upon millions of  middle and low income Americans.  I do know that Murray is highly paid by his corporate bosses for putting out stuff that covers up the real causes of under and unemployment and all of the human distresses that accompany it.

It is our job as thinking Americans to push back on propaganda designed to justify increasing economic inequality.  It is important to arm ourselves with objective data and research and let journalists like Kristof know what we think of his misguided attempt to be a cool, intellectually independent, tough minded thinker.  It would be OK if he were that if he knew enough about the subject and had an inkling about economic oppression.

Did you hear the one about the robber that stuck a gun in the face of the victim and said, “your money or your life?”  Here’s the punch line:  the victim said, “take my life, I am saving my money for my old age.”  This joke conjures up the behavior of world monied elites and their high paid technocrats.  Let me explain.

The Sick Joke

Saving in a capitalist system is a desirable and economically beneficial behavior.  However, hoarding is not a good behavior.  Bottling up too much money in sovereign wealth funds, college and non-profit foundation endowments, off-shore accounts, etc. reduces tax revenues, investment in plant and equipment, and direct fiscal stimulation of the economy   We have so much “super hoarding” throughout the world that demand for goods and services is weak while the world sits on piles of capital and idle factories – otherwise known as low demand, excess liquidity and excess capacity.  Not a good thing.

The government of China now has a current account surplus of $3 trillion – much of which is invested in low yield U.S. bonds. Yes U.S. treasuries are considered one of the safest places to park oodles and piles of excess dollars today.  What does that say about the validity of the S&P downgrade of U.S. debt?  With the price for a barrel of oil at the $100 mark, the SWFs of the oil exporter nations will keep growing at a phenomenal pace.  The top 40 university endowments are sitting on at least $200 billion.  With thousands of university endowment funds plus huge amounts of super-rich family dollars parked in 501(c)(3) or some other form of tax shelter, trillions of dollars that could be invested in roads, bridges, schools, housing, and other projects – in the people of all the countries of the world – is moved about the financial markets as the super rich attempt to enhance and/or protect their “hoarded wealth.”

The problem is this:  too much capital flowing into countries like Greece, Italy, Ireland, Spain, and Portugal from countries like Germany, from massive hedge funds, or from the petro-dollar recyclers in London and the U.S., fuels crony capitalism, speculative bubbles, politically popular too-low tax rates,  and ill-conceived and wasteful governmental programs (think farm subsidies, war, and other give-aways that do nothing for the betterment of society).  This became a particularly glaring problem when the world-wide economic weltanschauung morphed into the Reagan-Thatcher promoted “dog eat dog,” “winner take all,” deregulated, free market belief system.  In other words, grab all you can get and don’t give a damn about your fellow humans, the planet, and the future of the human species.

The Sick Punch Line

The super-rich and bankers in countries that invested heavily in bonds of countries like Greece fueled out-of-control consumerism – made possible by government fiscal policy.  Ostensibly, this was irresponsible behavior only on the part of the debtor countries.  However, as in the case of Europe, the consumerism of debtor countries fueled the very robust economic growth of  creditor countries.  In other words, the healthier economies of Northern Europe were recycling their export Euros back to the less healthy economies of Southern Europe so they could keep up their consumer madness.  It was a crazy feedback loop.

Eventually, all of this hot capital flow had to end badly.  The Southern European nations can no longer service their massive debt and, with bond yields rising rapidly, this can only get worse.  With U.S. and European banks heavily exposed in the European bond markets, this financial collapse will eventually be devastating.

But wait!  There is a solution.  The European Central Bank could step in and “bail out” the Greeks, Italians, Portugese, and so forth.  They could stop this catstrophe from happening and keep everyone from suffering badly – including the Germans.  If the collapse continues – and it may be too late to stop it – we are looking at a very deep world-wide recession and perhaps a depression.

Here is the sick punch line:  Just as in the United States, the super rich of Europe – particularly the Germans and bankers of Germany – are demanding that economic collapse be solved through austerity.  Lay off teachers, cut pensions, increase unemployment – make the people suffer.  Teach those profligates a lesson.  This will be disastrous for the bankers, super rich, and nations calling for punishment of the debtor nations’ peoples.  As demand continues to dissipate from their economies,  bonds held by the bankers and other investors won’t be worth diddly squat.  But they will ride this thing down before they share some wealth to save the whole system.  Take their lives – they are saving their money for their old ages.

The Solution

Nations must regain control of their economies and their wealth.  The way to do this is to equalize their tax codes, control their own capital markets, invest – through direct fiscal stimulation and creation of meaningful jobs and projects – in their people.  Taxation must be designed to produce adequate government revenue for equitable housing, education, health care, for infrastructure, research and development, and all of the other things that modern, progressive countries should and could do (and all nations should become modern and progressive).

However, if the rich and powerful persist in punishing debtor nations gone bad, and if they persist in hoarding their wealth in endowments, 501(c)3s, in off shore accounts, and through finding various and sundry other forms of legal gimmicks for escaping their tax responsibilities, the current catastrophic failure mode of the world economy will end very badly for them as well as for all of us.

The American Health Care System is Despicable

Just how despicable is the U.S. health care system?  Although the U.S. spends over $8000 per capita and 18% of GDP on health care – more than any other country – at least 50 million Americans are uninsured.  According to the Organization for Economic Cooperation & Development (OECD), countries such as Japan, Sweden, Canada, France, Germany, Italy, and England generally spend half as much per capita and as a percentage of GDP  while providing health care access to all of their citizens.

So who pays and who benefits from  the bloated, corrupt, immoral U.S. health care system?

Here is a list of who pays: (1) all wage & salary earners who pay a 1.5% tax on everything they earn, (2) the U.S. government, i.e. taxpayers in general, which transfers the 1.5% tax and hundreds of billions more to the medical-industrial complex, (3) businesses offering health insurance to their employees, (4) employees lucky enough to have employers provided health insurance, i.e., premiums, co-pays, and deductibles, (5) Medicare beneficiaries forced to pay large premiums, co-pays, and deductibles, and (6) uninsured patients and consumers stuck medical bills that often drive them into bankruptcy.

Here is a list of who benefits from the massive wealth transfer through health care gouging: (1) for profit hospital chains, (2) nursing home chains, (3) pharmaceutical companies, (4) medical device manufacturers, (5) corporate owned physician practices, (6) insurance companies, and (7) senator and congresspersons who receive untold millions in political contributions from the medical-industrial complex.

The American Medical Association Has Played a Major Role in Shaping the Shameful U.S. Health Care System

The Occupy Wall Street Movement needs to turn some of its attention toward Occupy the American Medical Association.

Amongst political groups fighting to block humane and decent health care, the American Medical Association – the association representing healers of sick people – has  been one of the most effective and potent forces throughout the past century.  It is hard to understand how an organization representing physicians, who have taken an oath to heal, could fight universal health care and, by virtue of that fight, insure that tens of millions of U.S. citizens will suffer and often die due to medical neglect.

Who are the 50 million uninsured Americans resulting from AMA efforts?  A couple of years ago, I spent two days volunteering at a free clinic sponsored by the National Association of Free Clinics at Bartle Hall.  I met some of the 50 million medically neglected people in our country.  By the thousands, they streamed through the convention center – humbly, thankfully, without rancor and resentment.  They came for help with complications of diabetes, hypertension, abscesses, tumors, and generally the full array of ailments needing medical attention.

The AMA and the politicians they pay off to perpetuate the current national health care embarassment should have spent a couple of days at Bartle Hall looking the uninsured in their eyes and explaining why they scream socialism and extol the virtues of an unbrided free market health care system that has failed our country so miserably.  Perhaps this representative of doctors could come forth and explain how its fight for a cruel health care system is compatible with medical ethics.

Who are the Politicians Raking in AMA Dough and Other Medical-Industrial Complex Pay Offs?  Let’s Take a Look at One Democrat on the Undemocratic, Super-Secret, Super-Committee

Democratic congressman Chris Van Hollen of Maryland is a darling of the medical-industrial complex.  If you check the top contributors to the members of the undemocratic, super-secret, super-committee, you will notice that Van Hollen does best amongst health care industry lobbyists and better amongst that group of givers than other members of the committee.  For instance, the AMA, which donated $22,000 to Van Hollen, ranks 27th in the amount donated out of the nearly 3,000 contributors to the senators and congresspersons.  Van Hollen received more than other members from the AMA and other medical-industrial givers.  Nevertheless, Democratic congressman James Clyburn did very well amongst the this group of givers as well.

According to the Sunlight Foundation, Dr. Jeffrey Drezner, owner of Clinical Care options and a founder member of the CME Coalition (a medical industry front group) held a fund raiser for Van Hollen days after the first meeting of the super committee.  The foundation blog noted that “Drezner sent tens of thousands of dollars to multiple committees associated with Van Hollen from 2007 to 2010, including the Democratic Congressional Campaign Committee, which Van Hollen led during those years, according to to data from the Center for Responsive Politics” (http://reporting.sunlightfoundation.com/20ll/van-hollens-alternative-fundraising-vehicle-wakes/).

Congress and the President are seriously considering a cut in Medicare benefits.  There is no doubt that Republicans are itching to cut both Medicare  and Social Security benefits.  I will not be surprised if the proponents of cutting Medicare and Social Security as a means of reducing the federal deficit succeed – especially considering Obama’s and many Democrats’ willingness to cave in to the whacky right wing. 

Propaganda blaming a growing elderly population for health care inflation and, consequently, a ballooning Medicare budget, is pervasive, and unquestioned.  The mainstream media has bought, lock-stock-and-barrel, the narrative created by power-elite and conservative think tanks such as the Cato Institute, the Heritage Foundation, the Committee for a Responsible Federal Budget, the Bipartisan Policy Commission, etc., etc.  This narrative – i.e. all these old people are busting the budget – is, at best, based on ignorance. At worst it is an out and out lie.

As CBO research determined in 2008, an increase in the elderly population adds very little to health care cost inflation (see Technological Change & the Growth of Health Care Spending at http://www.cbo.gov/ftpdocs/89xx/doc8947/01-31-TechHealth.pdf). Furthermore, the so-called “Baby Boom” generation will not become eligible for Medicare instantaneously.  Currently, the 65+ population comprises 13% of the U.S. population.  This age group will gradually increase to 21% by 2035.  The elderly population will level off at 21% and remain at that level into the foreseeable future (U.S. Census Bureau at http://www.census.gov/population/www/socdemo/age/).

What you don’t hear on NPR, PBS, NBC, ABC or read in the New York Times, USA Today or in any other media outlet is this:  the United States devotes approximately 17% of GDP and nearly $8,000 per capita to health care.  The following GDP and per capita health care expenditures pertain to some other industrialized nations – none of which come close to spending what the U.S. spends:  (1) United Kingdom, 9% GDP & $3,200 per capita, (2) Sweden, 10% of GDP & $4,000 per capita, (3) Spain, 9.2% of GDP & $3,000 per capita, (4) Japan, 10% of GDP & $3,000 per capita.  Norway is the country that comes closest to the U.S. in per capita spending: $5,500 per capita.  However, health care spending is only 10% of GDP in Norway.  You can check health care spending in all advanced industrialized countries at http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html.

All of the countries listed above – along with all other countries listed by the OECD – provide health care to all of its citizens, while 50 million U.S. citizens have no health insurance and at least 150 million are under insured or at the mercy of power health insurance companies that could terminate coverage under some pretense or other.  Another thing happens in the U.S. that happens in no other country of the world:  the U.S. Congress and the “medical industrial complex” collude to restrict competitiveness and reward corporate conglomerates.

Medicare has served as a conduit of U.S. taxpayer money to corporations such as G.E., Johnson & Johnson, Merck, and Siemens (a German company that helped exterminate Jews during the Holocaust).  As the eminent economist Dean Baker has indicated, health care in the U.S. operates outside of the basic free market concept of “marginal cost pricing.”  The cost of an X-ray is not priced at what the next X-ray costs to provide plus a profit.  The price of X-rays and all other medical services set by oligopolies in collusion with the government.

The elderly are not responsible for out of control government spending.  Corruption in the U.S. Congress is responsible.  It will be the poor and the middle class that will take the blame while the health care industry continues to reap the benefits.

Some of the major “buzz” amongst Washington insiders and the national media these days is about a so-called “moderate” group of Democrats who are eschewing extremists on the left of the Democratic Party and making ready to make the “hard choices” on the budget deficit. This relatively new organization is called the Third Way.  Since this group is just one more power-elite and Wall Street front group, you can translate “hard choices” to mean “cut the budget deficit on the backs of the middle class by reducing Social Security and Medicare benefits.  “Extremist” can be translated to mean any Democrat unwilling to buy into the mean spirited Simpson/Bowles recommendations, e.g.  Representative Jan Schakowsky, Senator Sherrod Brown, and all other progressives in the Democratic Party.

Democrats associated with this “let’s whack Social Security” wing of the Democratic Party includes a smattering of rather moderate Democrats plus some very conservative current and past office holders.  Past office holders include Blanche Lincoln, Mark Pryor, and our very own Kathleen Sibelius.  Current office holders associated with the Third Way include Claire McCaskill, James Clyburn, Kay Hagen, John Dingell, Chris Coons and others.

I can’t find any evidence that these Democrats display much interest in reining in the defense budget or restructuring the tax system in such a manner that it is not rigged against the middle classes.  Perhaps that has something to do with the Third Way Board of Trustees – almost all of whom come from Wall Street.  The following is the list of the Third Way Board of Trustees:

·         John L. Vogelstein: Chairman, New Providence Asset Management, LLC and Senior Advisor to Warburg Pincus, LLC

·         Bernard L. Schwartz:  Chairman & CEO of BLS Investments, LLC.  Mr. Schwartz retired in 2006 after 34 years as Chairman of the Board and Chief Executive Office of Loral Space & Communications Inc. (NASBAQ:LORL)

·         David Heller:  Global Head of Equity Trading for Goldman Sachs.

·         Dwight Anderson:  a Principal and Portfolio Manager of Ospraie Management, LLC, an $8billion investment firm focused on four investment strategies in the basic industry and commodities sectors – hedge fund, private equity, incubation/seeding and long only.

·         Georgette Bennett:  Sociologist, criminologist, and journalist

·         Jonathan Cowan:  a co-founder of Third Way, has served as a high level bureaucrat in the Clinton administration.  With funding from the anti-Social Security billionaire Peter Peterson, founded a Social Security benefits reduction group called Lead or Leave

·         Lewis Cullman:  Founder and President of Cullman Ventures, Inc.

·         John Dyson:  Chairman of Millbrook Capital Management, Inc. (MCM) – A hedge fund.

·         Robert Dyson:  Chairman and CEO of Dyson-Kissner-Moran Corp., a privately owned, diversified invest holding company that was founded by his father Charles H. Dyson in 1954.

·         Brian Frank:  Director and Portfolio Manager at MSD Capital, L.P., the private investment firm founded by Michael Dell.

·         Michael Goldberg:  Joined Kelso & Company in 1991 as a Partner and Managing Director.  Prior to joining the firm, he spent two years as a Managing Director and co-head of the mergers & acquisitions department at The First Boston Corporation.

·         Peter Joseph:  Managing Director of Palladium (investment firm).

·         General Claudia Kennedy:  First woman to achieve the rank of three-star general in the U.S. Army.

·         Derek Kirkland:  Managing Director and Co-Head of the Global Financial Institutions Group at Morgan Stanley’s Financial Institutions Group in Investment Banking

·         Reynold Levy:  President of Lincoln Center for the Performing Arts

·         Daniel Loeb:  CEO of Third Point (investment firm).  Prior to founding Third Point, Mr. Loeb was Vice President of High Yield sales at Citigroup.

·         Thurgood Marshall, Jr.:  A Partner at Bingham McCutchen LLP, and a Principal of Bingham Consulting Group (lobbyist for Wall Street)

·         Herbert Miller:  former CEO and Chairman of The Mills Corporation, one of America’s most innovative and successful mall developers and managers

·         Michael Novogratz:  President and Director of Fortress Investment Group LLC (spent 11 years at Goldman Sachs)

·         Andrew Parmentier:  Founding and Managing Partner of Height Analytics (has worked in the financial services industry since 1997)

·         David Roberts:  Senior Managing Director of Angelo, Gordon & Co. (manages the firm’s private equity and special situations area)

·         Howard Rossman:  President and Founder of Mesirow Advanced Strategies, Inc, and a Vice Chairman of its parent, Mesirow Financial Holdings Inc.

·         Tim Sweeney: President and CEO of the Denver-based Gill Foundation

·         Ted Trimpa: Lawyer active in conservative wing of the Democratic Party

·         Barbara Manfrey:  Specialist in venture capital and specialized equity investing.  A past Partner of Apax Partners & Co. Ventures, a leading worldwide venture capital firm

·         Joseph Zimlich:  Chief Executive Officer of Bohemian Companies, a group of family-owned real estate and private equity holdings.