There's a small boomlet today in blog posts trying to explain what Martin Wolf is saying in his Financial Times column today. If you just want the conclusion, it's easy: Europe is screwed and no one knows what to do about it. But the details are a little trickier.

Roughly speaking, Europe's problem is easy to understand. Countries like Greece and Ireland are borrowing huge amounts of money to stay afloat. This money is coming from healthy economies like Germany and France, which aren't willing to continue loaning vast sums forever. So unless the debtor countries get their finances in order quickly — which seems unlikely — they might eventually be forced to default on their sovereign debt. The problem is that this debt is largely held by banks in healthy countries like Germany and France, and if the weak countries default, those banks are in big trouble. The German and French governments would have to undertake a bank rescue using taxpayer money, so in the end German and French taxpayers will be the ones paying the piper no matter what happens. What's more, the aftermath of such a default and rescue operation would likely be catastrophic.

Drilling down a bit further and using Greece as an example, what's happening at an operational level is that the German central bank is withdrawing credit from German commercial banks and loaning that money to Greece. But Wolf, relying on the testimony of Hans-Werner Sinn, president of the Ifo Institute for Economic Research, says that this can't go on much longer even if we wanted it to:

Prof Sinn makes three [] points. First, this backdoor way of financing debtor countries cannot continue for very long. By shifting so much of the eurozone’s money creation towards indirect finance of deficit countries, the system has had to withdraw credit from commercial banks in creditor countries. Within two years, he states, the latter will have negative credit positions with their national central banks – in other words, be owed money by them. For this reason, these operations will then have to cease.

If I understand this correctly, the basic mechanism is that commercial banks create money, central banks are borrowing it and loaning it to other central banks in weak countries, and once there it ends up being loaned to commercial banks that are losing deposits because no one trusts them to stay solvent. But soon commercial banks in strong countries will no longer owe money to their central banks and this mechanism for fiscal transfers will have to stop.

Paul Krugman describes this as a "slow-motion bank run," and it doesn't end well. But restructuring debt in Greece and elsewhere would provoke a bank crisis in Germany, and that in turn would likely produce another financial collapse like 2008. Felix Salmon quotes a Merrill Lynch report:

While volatility is low, correlations are still very high. And that’s a combination which tends to presage nasty price crashes across many asset classes. In other words, markets are exhibiting a lot of fragility right now, and something drastic like a Greek restructuring could easily send them into a Lehman-style downward spiral.

So there's no answer. As Wolf says:

The eurozone confronts a choice between two intolerable options: either default and partial dissolution or open-ended official support. The existence of this choice proves that an enduring union will at the very least need deeper financial integration and greater fiscal support than was originally envisaged. How will the politics of these choices now play out? I truly have no idea. I wonder whether anybody does.

I don't wonder at all. I think everyone understands the basic state of play and knows perfectly well that there's simply no decent solution. Every possible path is catastrophic in one way or another, and it's human nature to try to avoid a certain doom as long as possible. The fact that waiting just makes it worse hardly matters.

OK, technically that headline isn't true. In fact, ADP estimates that employment grew by 38,000 jobs last month. But the American economy needs to generate about 150,000 new jobs each month just to keep up with the number of new workers entering the economy thanks to population growth. So just as you should adjust price levels for inflation, you should adjust new jobs for population growth. And on that scale, we lost about 112,000 jobs last month.

But quick! Medicare might start having funding problems in 2025 and Social Security might go into the red in 2040. Those are obviously the problems we should be dealing with right this second. And we should deal with them by cutting spending on a bunch of other programs because, um, um, um......

I forget. But I know there's a reason. My TV keeps telling me there is. Something about the rest of the world forcing us to screw the poor and destroy our economy today in order to save it tomorrow. So let's get on with the destruction.

Fear the Knife!

Aaron Carroll writes today that modern American medicine is even worse than you thought. It turns out there's compelling evidence that arthroscopic knee surgery has no actual effect, but doctors keep doing it anyway. We could save money by just making a fake incision in your knee and doing physical therapy instead.

This made me wonder if I've been the victim of this dramatic placebo effect, since I had arthroscopic surgery on my knee about a decade ago and it worked great. But I guess not. My surgery was to repair a torn meniscus, and a torn meniscus is probably a very real thing. The useless variety of knee surgery is arthroscopic lavage, which is apparently a procedure that cleans out random crud from around your knee. Turns out the crud didn't need to be removed, though. All these knees needed was ordinary physical therapy, which they'd get along with the surgery anyway.

Aaron's point about this isn't just that this is a pretty amazing result, but that it's been largely ignored by both doctors and patients. Doctors still want to cut into knees and patients still want their knees cut into. Who wants a bunch of crud floating around in there, after all?

But now you know. If your doctor recommends arthroscopic lavage in the future, you're going to turn it down. Right?


Jon Huntsman in the Wall Street Journal today:

I admire Congressman Paul Ryan's honest attempt to save Medicare. Those who disagree with his approach incur a moral responsibility to propose reforms that would ensure Medicare's ability to meet its responsibilities to retirees without imposing an unaffordable tax burden on future generations of Americans.

This is arguable, but I won't argue it. Competing plans are good. But can I point out that Paul Ryan hasn't proposed a plan to save Medicare either? He's essentially provided us with a single sentence: "Give seniors a voucher for private health insurance that grows at a much smaller rate than actual healthcare costs."

That's not a plan, it's a soundbite. Ryan has declined to provide any serious details about how his idea would work, and there's a reason for this: he knows perfectly well that details would make his voucher scheme even more unpopular than it is now. With real policy and real numbers attached, people would realize just how little premium support there is, just how far down the income scale higher costs would go, and just how miserly the subsidies would be. A fleshed-out Ryan plan would inevitably be shockingly stingy thanks to his ideologically inspired notions of cost control, and if he were forced to admit just how stingy it was, the ballgame would be over.

So maybe critics of honest plans have an obligation to offer alternatives. But Ryan has produced a plan that's neither honest nor serious. When he does, then maybe Huntsman will have a point.

Several years ago I published a series of blog posts from Jonathan Dworkin, a medical student at Mount Sinai School of Medicine in New York. He spent a year organizing a collaboration between Kurdish and American doctors in order to assess the long-term consequences of Baathist chemical attacks on the Kurdish civilian population of Halabja, and in 2006 he spent several months travelling in Iraqi Kurdistan and sending occasional dispatches about his travels. You can find them here (scroll to the bottom for a complete list).

Jonathan is now an infectious diseases fellow at Brown, and has spent the past few weeks in Kurdistan working to develop the public health infrastructure. He's back now, and has written a series of three posts on how things have changed since his first visit, hitting on themes of transparency in the economic system, willingness of the government to peacefully transfer power, freedom of journalists, independence of public institutions (like the university), and relations between Kurds and Arabs. Kurdistan has pretty much fallen off the radar of the U.S. media, so this is stuff you won't find anywhere else.

Part 1 is below. The next two parts will follow on Thursday and Friday.

“Basis of life is sleep, sex, nutrition. I am nutrition.” That’s what the cook said, and then he handed me a meatball. Kurdistan has changed a lot in five years, but the cook at the dar is an example of how it hasn’t changed, and hopefully never will change. After spending two days in a hotel I moved to the residence for medical house officers, which everyone here calls the dar. This is one of Kurdistan’s primary mechanisms for alleviating the economic hardship of prolonged training and the social hardship of deferred marriage. The dar is a place for young doctors to live together, study together, and tease one another. And in a characteristically class levelling way, the teaser in chief of this dar is the cook. “Doctor is survivor of electro-shock therapy,” he explained while puffing on a cigarette and indicating the young psychiatrist sitting to my right. “He is very crazy man. He will sleep next to you tonight.”

The ostensible reason I’m in this situation is to conduct public health research for Brown University. The research is part of my training as an infectious diseases doctor. During my previous visit to the Kurdish autonomous region of Northern Iraq in 2006 I saw several cases of typhoid fever, but our small team wasn’t equipped to characterize them in any systematic way. This time we are armed with data collection tools and grant funding. Burden of disease studies — a simple form of public health work — are often precursors to interventions such as vaccine programs or infrastructure investments. But all of this is largely beside the point. The real reason I’m back, doing this typhoid project in this province, as opposed to another, is because I love Kurdistan. In medicine it’s the people that draw you in, and the work is an expression of solidarity.

The dark side of this trip begins with the fact that it almost didn’t happen. In February, during the beginning of the Arab spring, protests erupted in Kurdish Sulaimania. The reasons for the opposition were varied, but at its core the protests were against the patronage system established by the ruling Kurdish parties. For two months the opposition occupied Sara Square, in the center of the city, and the protests ended when the authorities deployed Kurdish units of the Iraqi Army. Hundreds were wounded and several people died in the worst internal violence since the 1990s.

The original plan for my trip was to come with my family and live for a month in an apartment my friends had picked for me. The apartment was in a comfortable neighbourhood called German Village. After the protests erupted unidentified gunmen stormed the area and burned down an opposition television station. Nothing will ruin the reputation of a nice neighbourhood faster than a secretive militia affiliated with a political party. The German Village becoming more like Beirut, I changed my plans and arrived alone.

Now the streets are quiet. German Village is well-kept and calm, deceptively German. There is no heavy security presence in Sara Square, though party buildings are well defended. The economic and cultural life of the town appears uninterrupted, at least on the surface. In fact the city is larger and more vibrant than five years ago. Electricity is better. Water quality, though imperfect, is better. Construction projects and new businesses are everywhere. The hospital is functioning on a much higher level. Not only are routine diagnostic tests available 24 hours per day, but advanced interventions such as cardiac bypass surgery and kidney transplantation are now offered. One of the ironies of recent history here is that the government’s moment of crisis ought to be a moment of triumph. The Kurdish region never descended into violence, despite what happened in the rest of Iraq. There was a contested election, opposition parties, and a critical press. All of that success is threatened by the recent violence.

Spending a weekend with my friends before beginning data collection, it’s easy to pretend this is the Sulaimania of five years ago. You can still walk the streets safely and encounter friendly smiles as an American. You can still go to a cafe and talk politics over rice, vegetables, and grilled meat. There’s an openness one feels around Kurdish people, particularly in Sulaimania, that reminds me of why I fell in love with this town in the first place. But probe deeper and you find a poisonous pessimism that is taking root. It is that despair, and the realization that a bold attempt to build a new Kurdish civic society may end in failure, that is the real story this spring in Sulaimania.

I think I've now read at least half a dozen mainstream media figures lamenting the absurd level of coverage that the mainstream media is giving to Sarah Palin's bus tour cum summer vacation cum presidential campaign tryout. Note to the nation's editors: your own reporters think that chasing her around like a starstruck junior high school kid is nuts. Isn't it time to pull the plug and let her tour the United States with the privacy she allegedly wants?

What's Your Problem?

Gallup says today that doctor-assisted suicide is the "most controversial cultural issue" in its recent poll. Why? Because it's the issue where opinion is divided most closely. I'm not sure that's really much of a proxy for "most controversial," but I guess it's their poll, not mine.

What struck me about their list, though, was how few of these things I object to. Out of 17 issues, there were only four I objected to, and even there my objections depend on circumstances. There really wasn't a single one that I just flatly, always think is morally unacceptable. I'm not sure what this says about me.

Anyway, here's the list. See if you can guess the four I found kinda-sorta unacceptable. (Hint: I don't really have a problem with human cloning, though I suppose I might change my mind if a cloned race of superhumans takes over the world and enslaves the rest of us.)

Dana Goldstein, writing about our need for better teachers, sums up my skepticism over the entire ed reform agenda in one sentence:

But what if the United States is doing teacher reform all wrong?

Well, yes. What if we are? Unfortunately, this is a question that hangs over practically every initiative to improve our schools. We just don't know for sure if they work, and studies to prove things one way or the other are almost impossible to conduct properly.

So what's the problem with our efforts to build better teachers, anyway? Are we doing it all wrong?

That’s the suggestion of a new report from the National Center on Education and the Economy, a think tank funded mostly by large corporations and their affiliated foundations. The report takes a close look at how the countries that are kicking our academic butts — Finland, China and Canada — recruit, prepare and evaluate teachers. What it finds are policy agendas vastly different from our own, in which prospective educators are expected to spend a long time preparing for the classroom and are then given significant autonomy in how to teach, with many fewer incentives and punishments tied to standardized tests.

OK, fine. Here's some anecdotal evidence that this might be true. It comes from my mother, who was talking to one of her old teacher buddies, who recently got a job teaching teachers how to teach students to write critically about literature. Apparently it's to improve the performance of kids in AP English classes, who have been immersed in the wretched five-paragraph format their entire lives and don't know how to write coherently about abstract subjects.

And that's fine. But my reaction was the same as my mother's: aren't AP English teachers supposed to know how to do this already? Why do they need a coach? What have they been doing their entire teaching careers if they haven't been teaching their kids how to write about literature?

So that's that. But of course, the plural of anecdote is claptrap, so this doesn't mean anything. The real question is whether better trained teachers in the Finnish mode are really what we need to get better schools. Considering the almost universal contempt that teachers and everyone else have for ed schools, that's either hard to believe or else self-evidently true. I can't quite tell which. But there are a lot of other reasons that Finnish and Chinese schools might produce better test scores than ours, and adopting their models of teacher training would be fantastically expensive. So we had better figure it out before we commit to some massive nationwide program to train better teachers.

But how do we figure it out? Good question. See the beginning of this post for my non-answer.

Robert Pear reports that hospitals are unhappy over new federal regulations that pay them based on the cost of care they provide to Medicare patients compared to other hospitals:

For the first time in its history, Medicare will soon track spending on millions of individual beneficiaries, reward hospitals that hold down costs and penalize those whose patients prove most expensive....Hospitals could be held accountable not only for the cost of the care they provide, but also for the cost of services performed by doctors and other health care providers in the 90 days after a Medicare patient leaves the hospital.

....Under the new health law, Medicare will reduce payments to hospitals if too many patients are readmitted after treatment for heart attacks, heart failure or pneumonia. In addition, Medicare will cut payments to hospitals if they do not replace paper files with electronic health records, and it will further reduce payments to hospitals with high rates of preventable errors, injuries and infections.

In related news, Aaron Carroll reports that physicians, who used to be rabidly opposed to national healthcare, are now substantially in favor of it:

Remember, this was support for federal legislation to establish National Health Insurance. That’s far more radical than the PPACA. And 59 percent of physicians supported it. That was an increase of 10 percent from what we found five years earlier, and it was statistically significant. More than half the respondents from every medical specialty supported it, with the exception of surgical subspecialties, anesthesiologists and radiologists. That means support included a majority of general surgeons, medical subspecialists and obstetricians/gynecologists.

Aaron calls this a problem for the AMA, and I suppose it is. But I think it's also a problem for hospitals: to a large extent, the interests of hospitals and physicians are not only diverging, but becoming actively opposed. In the past, physicians probably would have been as opposed to these new Medicare regs as hospital administrators, but I'll bet that's largely not the case anymore.

As an analogy, this strikes me as having mirror-image similarities to No Child Left Behind, another piece of legislation designed to force efficiency on a particular sector of the economy. At first, parents were largely in favor of NCLB while teachers and school administrators were largely opposed. But as time has passed and suburban schools have started to suffer from the law (either because they're given failing grades or because inner city schools start competing effectively for the best teachers), the ground has shifted: parents and teachers now find themselves frequently in agreement that NCLB has gone further than they like. This provides a growing political coalition to change or water down the law.

In healthcare, it's the same dynamic in the opposite direction: a political coalition is breaking up. Doctors and patients are starting to align one way, while hospitals and insurance companies are aligning in another way. The good news is that this makes it less likely that healthcare reform will be repealed. There just isn't a united political coalition in favor of it.

Like me, you've probably been hearing for years that small businesses are the engine of job creation in the United States. But that's an outdated view. The number of new startup businesses has declined sharply since the beginning of the recession, while the number of jobs created by startup businesses has been declining for over a decade. As this chart from the BLS shows, the number of jobs created by new businesses peaked in 2000, began declining at the start of the Bush administration, and has been plummeting ever since:

The number of new establishments for the year ending in March 2010 was lower than any other year since the series began....The number of jobs created by establishments less than 1 year old has decreased from 4.1 million in 1994, when this series began, to 2.5 million in 2010. This trend combined with that of fewer new establishments overall indicates that the number of new jobs in each new establishment is declining.

....The number of jobs created from establishment births peaked in the late 1990s and has experienced an overall decline since then. The decrease in birth-related employment during the latest recession is the largest in the history of the series, followed closely by the period of “jobless recovery” after the 2001 recession.

Since the recession began in 2008, the biggest net generator of jobs has been neither small businesses nor large businesses. It's been medium-sized businesses.