2009 - %3, October

Is Obama Plotting to Shut Down the Internet?

| Tue Oct. 27, 2009 10:15 PM EDT

The world is full of a lot of conservative anti-Obama craziness these days—Glenn Beck, the Birther movement, etc. But anti-immigration activist William Gheen might take the prize as this week's most paranoid Obama critic. On Tuesday, Gheen circulated an email claiming that the Obama administration may intend to use the swine flu epidemic as an excuse to shut down the web and thus silence his critics. Gheen’s source for his claim? A small Reuters story about a recent GAO report suggesting the Department of Homeland Security doesn't have a backup plan should millions of bored Americans, home with swine flu, overload the Internet with too many games of XBlaster. He writes:

“Ironic that Obama's DHS is telegraphing a desire to shut down 'certain websites' and civilian access to the Internet in response to this weak strain of flu, considering the fact that civilian Internet communications are the primary information sharing channels of his political opposition. The Internet combined with talk radio is the biggest threat to Obama's globalist open borders amnesty agenda. The White House clearly has resentments towards any media not under the control of their masters.”

Fortunately for immigrant bashers everywhere, Gheen’s North Carolina-based Americans for Legal Immigration PAC is going to set up alternative channels to help get its message out in the event of an Internet blackout. Gheen says, “ALIPAC is moving to create a phone bank that can be staffed with employees and volunteers to reach our supporters during such an emergency and attack on free speech.” The phone bank, naturally, will need donor support.

 

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More on Bubbles

| Tue Oct. 27, 2009 9:22 PM EDT

Speaking of asset bubbles, Steve Randy Waldman takes a crack at explaining why an expanding money supply sometimes creates ordinary consumer price inflation and other times creates asset price inflation:

Whether an economy generates asset price inflation or consumer price inflation depends on the details of to whom cash flows. In particular, cash flows to the relatively wealthy lead to asset price inflation, while cash-flows to the relatively poor lead to consumer price inflation.

Why? In Keynesian terms, poorer people have a higher marginal propensity to consume....Poorer people disproportionately use their cash to purchase goods, while richer people disproportionately "save" by purchasing financial assets. If the supply of both goods and financial assets is not perfectly elastic, then increases in demand will be associated with increases in price. If relative demand for goods and financial assets is a function of the distribution of cash, what price changes occur will be a function of who gets what.

So: as income inequality goes up, more money flows to the well-off, who use it to buy financial assets.  Conversely, less money flows to the poor and middle class, who respond by increasing their debt level.  Both of these mechanisms produce a higher demand for financial assets and therefore promote asset inflation.

Turn that around, of course, and you limit asset inflation but promote consumer inflation instead, which has to be held in check via periodic recessions.  So the question is, which would you rather have: periodic modest recessions or long periods of stability interrupted by occasional huge bubbles bursting?  The latter is typical of the "Great Moderation" of the post-1980 era, and Steve argues that it's been economically destructive in multiple ways:

First, in exchange for apparent stability, the central-bank-backstopped "great moderation" has rendered asset prices unreliable as guides to real investment. I think the United States has made terrible aggregate investment decisions over the last 30 years, and will continue to do so as long as a "ride the bubble then hide in banks" strategy pays off. Under the moderation dynamic, resource allocation is managed alternately by compromised capital markets and fiscal stimulators, neither of which make remotely good choices.

Second, by relying on credit rather than wages to fund middle-class consumption, the moderation dynamic causes great harm in the form of stress from unwanted financial risk, loss of freedom to pursue nonremunerative activities, and unnecessary catastrophes for isolated families.

Finally, maintaining the dynamic requires active use of policy instruments to sustain an inequitable distribution of wealth and income in a manner that I view as unjust. In "good times", central bankers actively suppress the median wage (while applauding increases in the mean wages driven by the upper tail). During the reset phase, policymakers bail out creditors. There is nothing "natural" or "efficient" about these choices.

Regular readers will be unsurprised that I generally agree with all this, although I might put it a little more pithily: rich people tend to do really stupid things when they have too much money lying around for too long.  So do poor people, of course, but in their case "too much money" is only enough to buy a bigger TV, not enough to blow up the world.  That's why I think getting a handle on rising income inequality is important.  To paraphrase William F. Buckley, if I had an extra million dollars to divvy up, I'd rather give it to the first thousand names in the New York City phone book than to the CEO of Goldman Sachs.

5 Creative Uses for: CDs

| Tue Oct. 27, 2009 7:24 PM EDT

I still remember my first CD: En Vogues' Funky Divas. I think this artifact of my preadolescence is probably still somewhere in my parents' basement, not having made the cut of stuff I wanted to cart back and forth across the country with me. (It's not that the music didn't withstand the test of time. Try "Never Gonna Get It" next time you do karaoke. Trust me.) For my parents' sake, it's high time I figured out something else to do with Funky Divas. Some ideas from AltUse and Squidoo:

1. Make a coaster. Decorate it...or for a music-themed coffee table simply plop it down.

2. Scare off birds: Take old CDs and hang them with fishing line. As they twirl in the breeze, they shoot small reflections around your garden. These reflections scare off the birds.

3. Bike safely: Tape a CD to your bike wheel as a reflector.

4. Create Christmas ornaments or party decorations: Take two CDs of the same size, put the printed sides together, tie them in two-to-four places with pretty ribbon, and hang them outdoors or dangle them from your balcony.

5. Catch candle drips: Place your candle over a CD to save your table. Works well for short, stubby candles that don't fit in holders.

Big Bubbles, Little Bubbles

| Tue Oct. 27, 2009 5:33 PM EDT

One of the problems with the notion that central banks should respond to asset inflation (in addition to normal price inflation) is that asset bubbles are hard to identify.  Even in retrospect, for example, there's still no consensus on whether the huge runup in oil prices in 2007-08 was a bubble.

But maybe we don't have to identify every single bubble out there.  Martin Wolf today glosses a proposal from Andrew Smithers that suggests central banks limit themselves to tracking just three big asset classes:

Mr Smithers suggests that policymakers should monitor the price of stocks, houses and liquidity. If one of these, and especially if all three, are flashing red central bankers should respond. He recommends measures that raise capital requirements of banks in the boom. I would also support measures that directly limit the leverage among borrowers, as asset prices soar, particularly house prices.

Obviously I'm not going to argue with Wolf's suggestion that we toss some leverage restrictions into the mix, but the main virtue of Smithers' proposal is that it's specific enough to argue with.  For measuring stock bubbles, he proposes using either Tobin's q or CAPE, both well-known and understood metrics.  For housing, there are several good measures of froth, including price-rent ratios, mortgage payments as a percent of personal income, and long-term trends.  That just leaves liquidity, and I'm not sure if there's a broadly accepted measure there.  But there might be something good enough.

Anyway: it's an interesting idea, and it goes beyond a generic suggestion that "central banks should respond to asset bubbles."  It won't solve the world's problems, but it might be enough to keep future bubbles merely painful, not catastrophic.

Cute Animal in Danger: Cuscus

| Tue Oct. 27, 2009 4:53 PM EDT

The cuscus is a marsupial native to Australia and New Guinea. This nocturnal tree-dweller has opposable toes and fingers like a monkey which help it keep hold of slippery branches. It can also use its long, prehensile tail to keep its balance. The cuscus is actually a member of the opossum family and ranges in length from about one to two feet (with the tail an additional two feet long) and weighing in around 10 lbs. The bottom of their tales are furless, rough and scaly so as to have a better grip. Cuscuses generally eat fruits and leaves, but will snack on eggs and small mammals if it can get them. Though, since the cuscus's low metabolism and body temperature, they're slow like a sloth and rarely catch other animals. The cuscus's main predators are pythons and birds of prey; because cuscuses are largely arboreal, ground-dwelling predators are generally not a problem. Other than man, of course, which sometimes hunts and eats them.

There are a few different kinds of cuscuses. The spotted (pictured above) and gray varieties are not endangered, but the large, splashy-coated black-spotted cuscus is battling poachers for survival. It lives mostly in New Guinean rainforests and is suffering devastating habitat loss from logging and agriculture; it's also been hunted extensively both for its meat and distinctive, woolly coat. It's now considered "critically endangered" and due to its remote habitat, it's not even certain how many of the animals still exist today. Only 18 specimens have ever been collected. As one book said, its "outlook" seems increasingly "bleak."

Charge Your Cell Phone with Light, Any Light

| Tue Oct. 27, 2009 4:32 PM EDT

I was just wishing for something like this the other day and now see that SunCore of Irvine California has a patent pending on technology making it possible to charge a cell phone using room light, sunlight, or any light.

The OC Register reports that SunCore's upcoming Novacell external solar charger system gets power from the entire spectrum (up to ultraviolet, down to infrared) and is efficient enough to charge a cell phone in a normal room. You plug and charge via a USB connection. It'll also charge most mobile internet devices (MIDs), iPods and the likes, GPS units, digital still cameras, video cameras, and other gadgets.

The first chargers are headed to China. SunCore's preparing an $800,000 test order for China Mobile, followed by a $21 million order if successful.

The company's also developing embedded light-powered batteries enabling virtually any phone to be retrofitted before or after manufacturing. In theory, you'll be able to buy a light-powered phone that's ready to go. Or you can rip the back off your current phone and hack a SunCore light-powered battery into place yourself. Plug and play.

Cell phone maker HTM has ordered 100,000 of the company's embedded batteries for a market test. RIM, makers of the Blackberry, are also apparently testing the SunCore batteries. According to the OC Register:

"The only behavior change that we have to ask of consumers is that when they put their phone down they put it back side up. It's actually a small change in behavior to more or less continuously charge your phone," says SunCore CEO Steve Brimmer.

Price? Timeline? I am so ready for this. Can they get a few to Copenhagen, maybe as conference goodies to lure our reluctant and lackluster leaders?
 

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The Public Option Redux: Carper's Folly

| Tue Oct. 27, 2009 3:45 PM EDT

While;proponents of health care reform celebrate Majority Leader Harry Reid's pledge to support a public option in the Senate bill, nobody—journalists or politicans, advocates of opponents—seems to know what it is he's supporting. It's quite possible that the latest reincarnation of the public option will simply lay out one more circuitous route back into the insurance industry, with a a public entity subcontracting the actual insurance back to a private insurer in something akin to an outsourcing scheme.

Apparently, the Senate plan is likely to follow the lines of an idea originally suggested by Senator Tom Carper, a Delaware Democrat. Earlier in October, Carper talked to reporters and, according to an account in TPM, set forth his ideas in some detail.

I think at the end of the day there will be a national plan probably put together not by the federal government but by a non-profit board with some seed money from the federal government that states would initially participate in because of lack of affordability.

How would it work? First, this won’t be a government run, government funded enterprise. Two, there should be a level playing field so that this non-profit entity that would be stood up would have to play by same rules basically as for-profit insurance companies—the idea that secretary of Health and Human Services [will be] running or directing the operation of this—no way.

We ought to have a non-profit board—it could be appointed by the President but a non-profit board. They’d have to retain earnings, create a retained earnings pool, so that if they run into financial problems later on the financial needs of the plan could be met by the retained earnings.

Carper’s plan begins to sound very much like Blue Cross-Blue Shield, long ago launched as a non-profit cooperative that over time turned into a hellish health insurance conglomerate that includes both for-profit and non-profit franchises. (The huge—and hugely loathed—WellPoint is now the largest member of the network.)

Carper and other designers of weak-assed public options;like to say “non-profit” over and over again, as if this were some cure to all the ills of the private insurance industry. This is far from the case: As I wrote back in June:

Almost half of Americans with private health insurance are currently covered by non-profit plans. As a whole, they haven’t proven themselves much—if any—better or cheaper than the for-profit insurers. The giant Kaiser Permanente is a non-profit. And while some of them have privatized, many of the Blue Cross-Blue Shields are still non-profits as well—and, in fact, got started as co-ops. Some of these non-profit insurers are well known for paying huge executive salaries and hoarding huge reserves, while charging the same high rates and offering the same rationed care as private plans—and enjoying tax exemption to boot. One report by the Consumers Union found the non-profit “Blues” stockpiling billions in cash even as they raised premiums and co-pays.

Fraudulent H1N1 Products

| Tue Oct. 27, 2009 2:44 PM EDT

The FDA has published a list of fake swine flu remedies. Highlights include:

  • Flu Away, an "inhaler containing eucalyptus and tea tree oils"
  • Nozin, a "nasal sanitizer"
  • Extreme Immunity, a supplement containing "100 percent pure Immunolin"
  • TCM Help Me, a "flu prevention tea"
  • Silver Shampoo, for which no description is given. Let your imagination run wild.

Seems like some of these products have been taken off the market since the FDA posted its warning, but the Internet still abounds with dubious H1N1 remedies of all kinds.

The Politics of Opt-Out

| Tue Oct. 27, 2009 2:03 PM EDT

Andrew Sullivan thinks the "opt-out" public option is a piece of political genius.  Imagine, he says, what happens next if it passes:

Well, there has to be a debate in every state in which Republicans, where they hold a majority or the governorship, will presumably decide to deny their own voters the option to get a cheaper health insurance plan. When others in other states can get such a plan, will there not be pressure on the GOP to help their own base? Won't Bill O'Reilly's gaffe — when he said what he believed rather than what Roger Ailes wants him to say — be salient? Won't many people — many Republican voters — actually ask: why can't I have what they're having?

....Imagine Republicans in state legislatures having to argue and posture against an affordable health insurance plan for the folks, as O'Reilly calls them, while evil liberals provide it elsewhere. Now, of course, if the public option is a disaster in some states, this argument could work in the long run. But in the short run? It's political nightmare for the right as it is currently constituted. In fact, I can see a public option becoming the equivalent of Medicare in the public psyche if it works as it should. Try running against Medicare.

I was mulling over the exact same scenario last night and couldn't quite make up my mind about how this would play out.  In the end, though, I think Andrew's argument is pretty compelling.  As Rich Lowry complained over at The Corner, "Does a state get to opt-out of the taxes too?"  That's technically a moot point if the public option is truly self-funding, but in the reality of the political world it's powerful whether it makes sense or not.  It's like Republican governors turning down stimulus money: it sounds good on the stump, but who's going to do it in the real world?  It's crazy if you're paying for it anyway.

So yes, this could be a huge winner.  If it passes, then for the next four years Republican state legislators all over the country will be teaming up with the universally loathed insurance industry to try and deny their citizens access to a program that, to most of them, sounds like a pretty good deal.  I don't know if Harry Reid was deviously thinking exactly that thought when he decided on this, but I'll bet someone was.  It's hard to think of something that could force the GOP to make itself even more unpopular than it already is, but this might be it.

The High Cost of Technology

| Tue Oct. 27, 2009 1:25 PM EDT

Ezra Klein quotes Kaiser Permanente CEO George Halvorson on the cost of healthcare:

The point is that CT scans in this country cost a multiple of what everyone else pays. It costs a few hundred dollars in Europe and over $15,000 here. You can't find a place in Europe than costs $15,000. You can't find a place here that costs less than $15,000. Anyone who is looking at the cost of care and is not looking at the unit cost of care is missing the point. ... To have a health care debate in this country that isn't aware of the price differential is not an informed debate.

Hmmm.  This doesn't sound quite right.  CT scan prices vary depending on the procedure, but in general they seem to range from around one thousand to a few thousand dollars.  $15,000 seems like a stretch.

Still, CT scans and MRIs do cost a lot more here than overseas — upwards of 5x as much in some cases.  Why is this?  I sort of understand why doctors are paid more here and why prescription drugs cost more.  But a CT machine is a CT machine.  Siemens sells them for the same price in the U.S. as in Europe, don't they?  So what accounts for the fantastic cost difference?  And why don't insurance companies bargain the price down?  This really does seem to be a little more mysterious than high physician salaries and high drug costs.