Category: Domestic Policy

Labor Day Thoughts

The Daily Escape:

Hatch Chili festival, Hatch, NM – September 2023 photo by Eddie Gomez

“If we weren’t all crazy, we’d all
go
insane
” – RIP Jimmy Buffett

Wrongo was sad to learn that singer-songwriter Jimmy Buffett died on Labor Day weekend. Wrongo isn’t a Parrothead, yet like most people, he will sing along whenever “Come Monday”, “Margaritaville”, or “Son of a Son of a Sailor” pops up on the car radio.

Labor Day kind of means the end of summer, and back to school for kids and their parents. Having Monday off is great. But what exactly are we celebrating? One answer is that knowledge workers have won the tug-of-war over work from home (WFH).

The NYT’s Sunday Business section has an article “All That Empty Office Space Belongs to Someone”. They ask the question: “What happens if the nearly 100 million square feet of workplace real estate stays empty”? They’re only talking about NYC real estate. The article quotes a real estate executive Eric Gural, whose family company, GFP Real Estate, owns and manages more than 55 properties and 13 million square feet, or about 2% of the city’s office real estate, about what happens next:

“Rents will be lower. Occupancy will be lower. We won’t be as profitable. The worst part about that is that it might affect some of the philanthropy we do.”

That’s kinda tone deaf. Why would a worker want to rush back to the office so Gural’s family can keep up with their philanthropy?

Among Wrongo’s six kids, most spend at least a few days in the office each week. Some are in the office every day. The problem generally isn’t that everyone hates the office. Mostly they hate how office work has changed during the past 20 years: Open floor plans, with people squeezed together into pods.

Then there’s the commute. Few office workers can afford to live in NYC or even a subway ride away. The average one-way commute in New York takes 40.8 minutes. That’s far longer than the US average of 26.4 minutes. That average time means that many, many commuters to NYC are in a car, train or bus for much longer than 41 minutes each way.

This means that people had a major lifestyle change when they started to WFH. No more getting up with the birds to sit on a train for an hour or more, and then stand on a 90° subway platform BEFORE they even get to their desk!

WFH also was family positive since most kids had remote schooling, which the WFH parents could supervise. At the same time, childcare also cratered. So the pinch on parents to be in attendance 24/7 for their young kids was clearly helped by WFH.

Nothing will solve the commute problems for those who live outside of Manhattan, not even giving everyone a private office. Maybe if companies offered to pay for commuting costs and childcare, people would come back. How about it, corporate America?

Another big labor issue is how long it has taken for women to return to the workforce. In the years leading up to the pandemic, women’s labor force participation rates were rising faster than that of men. Several factors were driving it, in particular the female-dominated industries, such as health care and caregiving were among the fastest-growing industries. Also, women’s educational attainment has risen substantially.

That ended during the pandemic. But CNN has reported that the labor force participation rate for women in their prime working age hit an all-time high in June of 77.8%. Prime working age is defined as 25-54. It was the third consecutive month that women between the ages of 25 and 54 have set a record high for labor force participation.

Women are doing much better in the labor market, and clearly, the pandemic’s “she-cession” is over. Yet, barriers remain: Notably, they’re still making far less than men. In 2022, women in the US earned about 82 cents for every dollar a man earned, according to a Pew Research Center report released in March. That’s a big leap from the 65 cents that women earned in 1982. But it’s barely moved from the 80 cents they were earning in 2002, and certainly hasn’t kept up with inflation.

The WFH movement helped women as well: Home-based work allowed for more flexibility in hours, and that helped improve access to childcare with schedules that allowed for easier drop-offs and pick-ups.

We should remember what else Labor Day is about. If you enjoy not having to work weekends, or having a 40-hour work week, or having sick days and paid time off, you can thank labor leaders. Thousands of Americans have marched, protested and participated in strikes in order to create fairer, more equitable labor laws and workplaces — and many are still doing that today.

So have a cookout. Go to the big box stores and spend because it helps the economy.

Here’s your Monday Wake Up Call, America! The challenge during the next year is whether the currently hot jobs market will cool off sooner than inflation. It seems likely that the Fed will be able to cool inflation without plunging the economy into a recession. If so, the jobs market will continue to offer average Americans a shot at a better life.

To help you wake up, let’s celebrate Jimmy Buffett’s life. From the Rolling Stone in 2018:

“WHILE PRESIDENT TRUMP took shots at Democrats in conservative Pensacola, Florida on Saturday, Jimmy Buffett hurled musical insults at Republicans in West Palm Beach during a Democratic campaign rally for US Sen. Bill Nelson and gubernatorial candidate and Tallahassee Mayor Andrew Gillum.

While singing his hit ‘Come Monday’ at the ‘Get Out the Vote’ rally, Buffett tweaked its lyrics to make a dig at Trump changing ‘Come Monday’ to ‘Come Tuesday, things will change. Come Tuesday, we’re making a change. It’s been two insane years and it’s time to switch gears.’”

Buffett long supported Democrats. So have a margarita, and toast ol’ Jimmy. Here’s his laid-back cover of CSN&Y’s “Southern Cross”, performed live at the Newport Folk Festival in 2018:

Note the Parrothead regalia in the audience. Anyone else think he looks like Biden?

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Why The Polls Are Wrong

The Daily Escape:

Belle, a water taxi in Camden, ME – September 2023 photo by Daniel F. Dishner

Happy Saturday, hopefully, you are getting a great start to a restful Labor Day weekend! This past week, we had friends from Los Angeles stop by the Mansion of Wrong. We had a few bottles of a delightful wine, and the question that never goes away came up again: “Why is Biden doing so badly in the polls?”

There really isn’t a good answer. The economy is doing fine, much better than the pundits expected it would be in the third quarter of 2023. But as Dan Pfeiffer points out:

“…somehow — against all common sense — the 2024 election between a competent President and an incompetent criminal — will be incredibly close. The Real Clear Politics polling average has Biden up by only 1.4%. Biden won the popular vote in 2020 by 4.5%. Given the strong Republican lean of the Electoral College, a Biden popular vote win of this size would likely mean that Trump ends up with 270 electoral votes.”

Now, Wrongo never relies on Real Clear Politics’ average of polls, but they’re not alone in offering up grim polling data, and the one thing Trump beats Biden on in surveys is running the economy, a very scary number :

While the actual economic numbers are good, people mostly look at how much money is in their pockets, asking: “What can I buy, given what I’m earning”? The August jobs report showed continued solid gains in aggregate pay for nonsupervisory workers even after inflation is taken into account. From the Bondad blog:

“Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.06, or +0.2%, to $29.00, a YoY gain of +4.5%….”

YoY is year over year. By comparison, the most recent Consumer Price Index for July was 3.3%. Pay increases have been outpacing overall CPI inflation this year. So wages are creeping up, inflation is almost under control, and there’s no recession on the horizon.

A helpful statistic is that spending on pleasure boats is near previous highs, Axios reports:

“Why it matters: You don’t buy a boat unless you’re feeling fairly confident the economic wind is at your back. So this is a good sign for the economy. The ongoing boat-buying binge — which began during COVID shutdowns — is another strike against the once dominant “looming recession” narrative.”

One million used boats sold in the last 12 months! One guess as to who’s buying all of these boats: It isn’t the antifa-BLM Marxist globalists from big cities and blue states. Florida and Texas are in the top three states in revenues from boating.

And you won’t buy a boat unless you’re fairly confident that the economic wind is at your back. That means despite what people are telling pollsters, people are feeling pretty good about the economy.

Pfeiffer notes that all isn’t lost. As of now, Biden is in better shape politically than Obama was at this juncture. August of 2011 was the first (and only) time Obama’s approval dropped below 40%, and he was losing to a generic Republican. More:

“The primary reason for the statistical tie in the race is that Trump is holding onto more of his 2020 vote than Biden. In a NYT poll, 91% of Trump’s 2020 voters are supporting him again while only 87% percent of Biden’s voters plan to vote for him in 2024.”

More:

“Among Biden’s 2020 voters, only 77% percent of Democrats in the poll have a favorable opinion of Biden, compared to 80% of Republicans for Trump.”

But Pfeiffer says we shouldn’t panic, because convincing people who have already voted for Biden to vote for him again is doable, and easier than convincing a Trumper to vote for Biden. But despite that, given the Reddish tilt to the Electoral College, we should assume that 2024, like the 2020 presidential election, will depend on a number of voters smaller than the number of attendees at a Taylor Swift concert.

A second point we talked about was Biden’s age. There are two referendums that will be a part of the 2024 presidential election. First, on Trump and his 91 counts. Second, on Biden’s age and whether he seems up to the task going forward.

It’s one thing for Biden to tell us about all that his administration has accomplished in 3 years. His results should be pitched to turn his vulnerability as an older person into a perception of wisdom. He needs to convince voters that the country is on a good path and that Biden, our captain, with his age and experience, has steered us to where we’re starting to see success.

Charlie Sykes suggests the pitch should sound like this:

“We’ve done the hard work. We took the punches. We had a plan and now it’s starting to turn around. So the question is, as we come back, who do you want in charge for the next four years?”

And when Republicans spew their litany of racial hatred, and class warfare, Biden should be saying:

“Working folks like you need cheaper prescription drugs, you need to be able to spend more time with your family by getting better wages for your labor…”

Ultimately 2024 will be about voter turnout. Convincing younger voters and those who aren’t fired up about Biden to come out to the polls will decide America’s fate.

Now take a beat and forget about the many crises we face. Let’s focus instead on our Saturday Soother. We’re expecting beautiful weather in the northeast, and much of our time will be spent outside. So join Wrongo in pulling up a comfy chair in the shade and spend a few minutes watching this lovely video of a Loon family swimming on a lake in a thunderstorm. It’s guaranteed to improve your outlook. You may want to bookmark this video to use whenever our politics are driving you nuts:

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Biden’s Plan To Cut Drug Prices

The Daily Escape:

Mars on left, Earth on right – image by alofeed

The Biden administration released its list of 10 prescription medicines that will be subject to the first-ever price negotiations by Medicare. This is a big deal because Medicare covers 66 million older Americans, people who routinely take very expensive drugs.

Until recently it was illegal for Medicare to negotiate prices with drug companies. But the Inflation Reduction Act (IRA), passed last August, gives Medicare that power. It also forces companies to pay a rebate to Medicare if their drug prices rise faster than inflation. The Congressional Budget Office estimates that price-capping measures will reduce Medicare expenses (and the federal deficit) by $96 billion by 2031.

The list includes drugs for diabetes, arthritis, and Crohn’s disease, and could sharply lower medical costs for patients. Reuters says that the US Centers for Medicare & Medicaid Services (CMS) spent $50.5 billion between June 1, 2022 and May 31, 2023 on these 10 drugs. That was about 20% of the total cost of drugs in the Medicare prescription drug program known as Part D.

The WaPo had an opinion piece by David Goldhill, CEO of SesameCare.com, a digital marketplace for discounted health services: (brackets and emphasis by Wrongo)

“The pharmaceutical industry earns almost 50% of its worldwide revenue here [the US], as do medical information-technology firms. [Medical] Device makers earn 40% of their money in the US. And this understates things, because US revenue is generated from higher prices, so margins are greater. If the US accounts for half of a company’s revenue, it probably contributes at least 75% of its profits.”

This has always been the business plan for Big Pharma: Make your money in the US and take whatever scraps of profit you can get in other markets.

That market subsidy is paid by American taxpayers generally (through the funding of Medicare) and by US pill-takers specifically when they pay higher co-pay prices for the drugs that help with their chronic conditions. The Economist points out that prescription medicines in America cost two to three times more on average than in other wealthy countries:

The blue dots are the price paid in the US for brand name drugs. The grey dots are prices paid in the various countries for all US drugs sold in those countries. The comparison of brand name to generics shows how much greater the cost is to an American.  It also follows that US patients’ out-of-pocket expenses, (the slice of drug costs not covered by insurance), are among the highest in the world.

It’s understandable why Biden’s move to start negotiations on some of the most expensive drugs has been fiercely opposed by the pharmaceutical industry. Essentially, high US drugs costs underwrite what amounts to a subsidy for buyers of the same drug sold when it’s outside the US.

Many of the Big Pharma have jumped on the legal bandwagon, challenging price-setting provisions in the IRA. More from the Economist:

“Since the law’s passage over 50 companies have blamed the IRA in earnings calls for clouding their prospects.”

A quick primer on drugs. Most medicines are either small-molecule drugs or large-molecule drugs. The former are the kind of pills that line our medicine cabinets. Large-molecule drugs, (also called biologics), are more complex and must be injected. The IRA grants biologics 13 years of pricing freedom after a drug is approved, while small-molecule drugs get only nine years post-approval before they must face Medicare’s bean counters. The industry estimates that small-molecule brands could lose between 25% and 40% in overall revenue due to the earlier cap on prices.

PhRMA, the pharma Industry’s lobbyist argues (and Republicans back them) that high US prices reflect the high cost of drug development. The pharmaceutical manufacturers are, of course, suing to stop the price negotiations. They say that allowing the government to negotiate lower bulk prices for drugs will stifle innovation, and will cut funds for research.

One thing that Big Pharma wants to avoid showing us is that they rely on smaller, more agile biotech firms for ideas. Between 2015 and 2021, 65% of the 138 new drugs launched by Big Pharma originated mostly from smaller firms. So, while innovation isn’t totally gone from the big firms, what they’re mostly doing is marketing the intellectual property of small pharmaceutical firms.

It didn’t take long for Republicans to jump on the decision to allow Medicare to negotiate drug prices. From Politico:

“Piggybacking on the pharmaceutical industry’s strategy, Republicans are working to persuade Americans that the Biden plan will stifle innovation and lead to price controls.”

Politico quotes Joel White, a Republican health care strategist:

“The price control is a huge departure from where we have been as a country….It gets politicians and bureaucrats right into your medicine cabinet.”

Politico says that the GOP effort to reframe the drug price debate may hurt them, since they plan largely to run on inflation, while the Biden plan will lower drug prices. Also they quote a new poll from the Kaiser Family Foundation (KFF) that shows 58% of independent voters trust Democrats to lower drug costs compared with 39% of Republicans.

Our politicians and pundits have bleated at us for years about being an “exceptional nation” – but what we really are is exceptionally gullible. As long as the large healthcare and pharmaceutical companies insist on standing between American consumers and their health needs, maximizing their profit will always come first.

We also continue to elect leaders who lobby for keeping corporations unleashed so that they can make as much profit as possible, while saying that the “market” will decide where the public good is prioritized. This keeps us hopelessly mired in a grossly expensive, and often ineffective healthcare system.

We continue to let ourselves be convinced by corporations and our politicians that reforming healthcare is impossible. That the solutions and methodologies used by other developed nations are substandard, and/or somehow immoral.

The Hill reported that the 14 leading US drug companies paid out more in stock buybacks and dividends from 2016 to 2020 than they spent on research and development. Those firms spent $577 billion from 2016 to 2020 on stock buybacks and dividends, $56 billion more than the $521 billion they spent on R&D. So, it’s oblivious how Big Pharma could easily fund their R&D with lower drugs prices.

It is also useful to remember that America has more healthcare billionaires AND healthcare bankruptcies than any other country. Those two things are inextricably linked.

As long as the pharmaceutical companies can maximize profits by buying politicians rather than by charging higher prices in other countries – the American people are the ones who will continue to get screwed.

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Homeschoolers Want Your Tax Dollars

The Daily Escape:

Rich Mountain Fire Tower, Marshall, NC – August 2023 photo by Michael Morris. This photo has a painterly quality to it.

Americans’ interest in homeschooling has soared in recent years. Migrating from mainstream education to homeschooling tracks with the rising fears among parents that schools are failing their children.

For parents frustrated with their child’s public school education, the pandemic provided another reason to give homeschooling a try. Homeschooling has become a significant element in education in the US. According to the National Home Education Research Institute (NHERI), there are 3.7 million homeschooled students in the US, about 6.7% of the school-age children in K-12. The popularity of homeschooling is growing rapidly, with an annual growth rate of 10.1% between 2016 and 2021.

Home schooling is legal in all 50 states, with the highest number of homeschoolers in North Carolina, Florida, and Georgia. About 10% of states have strict laws regulating homeschooling: New York, Vermont, Rhode Island, Massachusetts, and Pennsylvania. Another 18 states have no to low regulation, while 11 states provide complete freedom to parents regarding homeschooling. In New Jersey, parents do not have to let anyone know about their decision to homeschool their children. They don’t even have to produce any kind of proof at any time, explaining that their kids were homeschooled. Here’s a view of homeschooling regulation in the US:

Source: HSLDA

In many states, there is little oversight of homeschooling. And for many, what regulations do exist were adopted in the 1980s, when homeschooling was almost exclusively provided by a family member at home. Now, with the number of homeschool students soaring, much of the educating is now being provided by third parties.

The WaPo reports that there is an emergence of “microschools” provided by for-profit companies, such as Prenda which provide online courses and syllabi to the microschools. Last year, Prenda served about 2,000 students across several states by connecting homeschool families with microschools that host students, often but not exclusively in homes. The local educator is called a “guide” for students who study math and reading online while depending on the “guide” for other subjects. Families pay Prenda $2,199 per year, plus additional fees set by the guides, which can range from $2,800 to $8,000 per child although there is often a multi-child discount.

Many similar options to Prenda are transforming home schooling in America. More from WaPo:

“Demand is surging: Hundreds of thousands of children have begun homeschooling in the last three years, an unprecedented spike that generated a huge new market. In New Hampshire, for instance, the number of homeschoolers doubled during the pandemic, and even today it remains 40% above pre-covid totals.”

More:

“For many years, homeschooling has conjured images of parents and children working together at the kitchen table. The new world of homeschooling often looks very different: pods, co-ops, microschools and hybrid schools, often outside the home, as well as real-time and recorded virtual instruction. For a growing number of students, education now exists somewhere on a continuum between school and home, in person and online, professional and amateur.”

Still more:

“Microschools sometimes provide all-day supervision, allowing parents to work full time while sending their children to “home school.” Hybrid schools let students split their days between school and home. Co-ops, once entirely parent run, might employ a professional educator.”

All of this is adding to the conundrum of how K-12 education is financed in the US. The WaPo says that about a dozen states allow families to use taxpayer funds for home-school expenses. Education Savings Accounts, or ESAs, direct thousands of dollars to families that opt out of public school, whether the destination is a private school or their own homes.

Nonprofits, including school-choice advocates, are directing millions of dollars in charitable giving toward homeschool organizations, linking two powerful but traditionally separate movements into one interest group that seeks to move taxpayer money away from the local public school system into private hands.

In the past, homeschoolers and school-choice activists didn’t see themselves as aligned. The latter group wanted taxpayer money to pay for charter, private and religious schools, whereas homeschoolers looked to limit any government involvement.

But since the pandemic, they found themselves in common cause. Historically, homeschool advocates have been wary of any government money or involvement, for fear it would lead to rules and regulations.

But many school-choice advocates incorporate support for homeschoolers into their advocacy work, including for school vouchers that give these families tax dollars to pay education costs. Where they used to be a defensive constituency, today they have become partners.

And venture capitalists have invested tens of millions of dollars in new businesses to serve what they see as a growing, and potentially huge market. One entrant is Outschool, an online marketplace for classes, which has raised $255 million since 2015. This year, Outschool has delivered 500,000 live learning sessions to more than 150,000 students globally.

WaPo says Prenda has raised about $45 million. Primer, another microschool company formed to serve homeschoolers, has raised about $19 million, though its campuses are becoming more like tiny private schools, an example of the fuzzy line between traditional and home schooling. WaPo spoke to Michael Moe, founder of GSV, a venture capital firm in the Silicon Valley, who has invested in several education technology start-ups: (brackets by Wrongo)

“The mega trend of [school] choice is wildly important to us…All these shifts create opportunities for companies providing solutions that allow parents and communities to take more control of the learning.”

That’s “venture capitalspeak” for more privatizing of the commons in search of higher financial returns.

Vouchers that once paid only for tuition at private and parochial school can now, in some places, be used for homeschoolers. Most sweeping are Education Savings Accounts, or ESAs, which allow families to claim state tax dollars to use at their own discretion for any education expense.

This increasingly means taxpayer money is following the student out of the public school. It flows to whatever a family chooses. That can include things like Prenda’s fees, online classes or home-school curriculum, as well as tuition at private schools.

In Detroit, a program called Engaged Detroit , is a cooperative that’s part of a network specifically to serve Black families looking for schooling options in response to the pandemic. Among Engaged Detroit’s backers is the VELA Education Fund, which has made more than 2,400 grants totaling more than $28 million since 2019. VELA’s primary funders are longtime advocates for school choice: the Walton Family Foundation and the Charles Koch foundation, Stand Together.

There are pluses and minuses to homeschooling. There are situations where it’s appropriate to homeschool, but the loose oversight and lack of expertise might mean that some homeschooled kids are going to be at risk. When parents say they don’t trust the trained/educated teachers in their public school, but instead want their kids to get the viewpoints of only one or two specific people, the kids are entering a small world. Later in life, they’ll have to adjust to a larger reality.

Wrongo is fully aware of the weaknesses of our public school systems. It’s possible that SOME of these small private schools that they say are “home schools”, are teaching those kids better than some public schools do. So Wrongo is ok if kids learn there. But there should be no problem with requiring these kids to take end-of-year minimum standards tests, proving that they learned the base-level material in each subject.

Without some testing, society has no idea if these kids learned anything. The lack of oversight, particularly in those situations where taxpayer money was diverted to homeschooling, seems well—Wrong.

The literature is clear: Some homeschooled children have attended Ivy League schools and won national spelling bees. Some have also been the victims of child abuse. Some are taught using the classics of ancient Greece, others with Nazi propaganda.

Many parents say home education empowers them to withdraw from schools that fail their children. Or they want to provide instruction that better reflects their personal values. But should the rest of us pay for those individual decisions?

Time to wake up America! Homeschooling may offer certain advantages, but also comes with a set of disadvantages that should also be considered. And it’s clear that those who would privatize K-12 education want to take funding from the public school systems wherever they can.

To help you wake up, listen to Steely Dan’s “My Old School” from their 1973 album “Countdown to Ecstasy”. Steely Dan always used outside musicians, and on the record, they had the late Skunk Baxter on guitar and four (!) saxophones. But Steely Dan didn’t like to tour. Today, we’re going to see a rare video of a Steely Dan live performance on “The Midnight Special” where Skunk had a blistering solo for the song’s finale:

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Rural Hospitals Are No Longer Providing Maternity Care

The Daily Escape:

Perseid meteor shower, from Mt. Evans, CO – August 13, 2023 photo by Paul Blais Photography

Welcome to our Saturday Soother, but first, Wrongo intends to spin you up before eventually letting you slow down.

There’s a crisis in rural healthcare in America. Rural hospitals are closing at a rapid rate. Our county (Litchfield) in Connecticut has one of three remaining hospitals that are designated as rural in the state (Sharon Hospital).

A problem for rural hospitals is that many are closing down their labor and delivery services in order to try and remain economically viable. WSHU, a CT-based NPR affiliate, has covered the impact of these closures to Connecticut. They quote Peiyin Hung, a researcher on maternal and rural health at the University of South Carolina:

“My team has been tracking nationwide, hospital-based obstetric unit closures since 2008 up to 2022,…. Almost 300 hospitals closed their OB units.”

WSHU points out that more than 60% of those closures were in rural areas. Why are so many hospital groups moving away from delivering babies in rural locations?

WSHU quotes Dr. Robert Roose, chief medical officer at Johnson Memorial, a hospital in rural Stafford Springs, CT that closed its obstetric unit. He said that it’s a safety issue. Hospitals with fewer than 200 deliveries a year, like Johnson Memorial, are considered low-volume birthing centers:

“There is a clear and critically important correlation between volume and quality of services provided when it pertains to labor and delivery and maternity care…”.

Three years ago, Hartford HealthCare’s Windham Hospital in Willimantic, CT stopped delivering babies, citing the same concern.

Also, malpractice insurance rates go up for low birth-volume hospitals because insurers feel the risk is higher if doctors aren’t getting sufficient practice with birthing. Hung says another problem is the level of reimbursement:

“Medicaid…pays half as much on average [as] private insurance pays for labor and delivery across the country”.

That’s important because about four in 10 of all Connecticut deliveries are covered by Medicaid. Simply put, delivering babies doesn’t pencil out for many rural hospitals.

There are other factors: Rural America’s demographics skew older. Young families in general prefer living in the suburbs or exurban areas. Couple that with America’s lower birth rate and rural hospitals really can’t maintain the birthing volume they need to remain economically viable.

The Center for Healthcare Quality and Payment Reform, (CHQPR) a Pittsburg-based health policy group published “A Crisis in Rural Maternity Care in the United States” which shows the problem:

“Fewer than half (45%) of the rural hospitals in the US currently offer labor and delivery services, and in 9 states, less than one-third do. Over the past decade, more than 200 rural hospitals across the country have stopped delivering babies”.

More:

“Hundreds of additional communities are at risk of losing maternity care because of the financial challenges rural hospitals are facing….More than 1/3 of the rural hospitals that still have labor & delivery services have been losing money on patient services, so their ability to continue delivering maternity care is at risk.”

CHQPR reports that more than half of small rural maternity care hospitals lost money in 2021-22.

They suggest that a primary reason rural hospitals are losing money is that private insurance plans pay them less than what it costs to deliver many of the services they offer patients, not only maternity care. They point out that while rural hospitals are losing money on uninsured patients and Medicaid patients, the losses from private payers have the biggest impact on their overall profit margins.

CHQPR suggests that a potential solution is to require that health insurance payments actually cover the cost of rural maternity care. With more than 40% of births (on average) in rural communities paid for by private health plans, having the private insurers pay more would help keep rural maternity care viable:

“Payment amounts must be higher in communities that have difficulty attracting staff, and payments must also be higher in communities with smaller numbers of births to ensure that revenues cover the fixed costs.”

This means that the fee-for-service model isn’t working in low-volume hospitals. Rural hospitals are only paid when they actually provide a service, but a small hospital has proportionally higher overheads than larger hospitals, since they must be staffed and ready to deliver a baby at all times, even if there are no deliveries at all. Read CHQPR’s report “A Better Way to Pay Rural Hospitals”.

Back to Connecticut, Sharon Hospital has proposed closing its labor and delivery unit. There will be a public hearing to consider the closure later this year. But Sharon is about an hour from its affiliated hospital (Danbury Hospital) that has a fully-staffed labor and delivery facility. Sharon may actually be closer to two other unaffiliated hospitals in New York state than it is to its own parent facility.

It’s now time for our Saturday Soother. Litchfield County is having beautiful weather this weekend. We’re taking advantage of it by going to a live Baroque music concert, and possibly heading off to the annual fair in a local town.

To help you relax and zone out from all of the Trump indictment analysis, grab a chair outside in the shade and watch and listen to “Gortoz a Ran” (I’m Waiting) sung by Denez Prigent and Lisa Gerrard. The language in the song is Breton, spoken in Brittany, France. It is closely related to Cornish and Welsh, and all three are Celtic tongues. When the Angles, Saxons and Jutes invaded Britain in the fifth century (400-500 AD), many of the Britons in Cornwall, Devon, and the West Country fled across the English Channel to France. Because of the influx of Britons, the region became known as Brittany.

Most of the images in the video are of Scotland, England, Wales, and Brittany. Lisa Gerrard isn’t singing in any language; she’s just vocalizing. The Uilleann pipes, an Irish instrument, are heard at 3:50:

Lyrics: English Translation

I was waiting, waiting for a long time
In the dark shadow of grey towers
In the dark shadow of grey towers

In the dark shadow of rain towers
You will see me waiting forever
You will see me waiting forever

One day it will come back
Over the lands, over the seas

The blue wind will return
And take back with it my wounded heart

I will be pulled away by its breath
Far away in the stream, wherever it wishes

Wherever it wishes, far away from this world
Between the sea and the stars

The song describes waiting, possibly forever: Aren’t we all waiting? What are we waiting for? For whom are we waiting? Happy Saturday!

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Reshoring The Semiconductor Industry: The Chips Act

The Daily Escape:

Sunset in Yarmouth Port, Cape Cod, MA – July 2023 photo by Cynthia Maciaga

The semiconductor industry is big, complex, and important. Semiconductors are also an important test case for America’s ability to revive its domestic manufacturing base. There’s a lot riding on Biden’s Chips Act that became law one year ago. It is a $50 billion package of subsidies, tax credits and other sweeteners designed to bring advanced chipmaking back to America.

As a result, Taiwan Semiconductor Manufacturing Company (TSMC) is investing $40 billion in Arizona. Samsung is investing $17 billion in Texas. Intel, America’s biggest chipmaker, will spend $40 billion on four semiconductor fabrication plants, or “fabs” in semiconductor parlance, in Arizona and Ohio. Both Democrats and Republicans regard it as a bipartisan legislative triumph.

But, finding highly skilled labor is key to the Act’s success. While America still has world-class semiconductor researchers and designers, we no longer have the kind of skilled labor that turns silicon wafers into electronic circuits. Chief Investment Officer magazine quotes Joseph Quinlan of Bank of America (BOA):

“America’s manufacturing renaissance could either be delayed or derailed by mounting structural headwinds….The US will have graduated only 108,000 technicians (who operate, maintain and fix electronic gear) by 2030, but demand is for 130,000 by then….Similarly, the nation will have produced 42,000 engineers and 21,000 computer scientists at that point, yet will need 69,000 and 34,000, respectively.”

BOA says that the other shortfall is construction workers. Construction of US factories has climbed 80% from a year ago, yet the nation has 374,000 unfilled construction jobs. We’re already seeing the problem. From the Economist:

“…The first of TSMC‘s factories was due to start production next year. But in July it announced that the launch would be put back to 2025 because it could not find enough workers with the expertise to install equipment at such a high-tech facility.”

The problem is during the delicate final phase of installing the most high-end equipment. Mark Liu, TSMC’s chair, said in a July earnings call:

“…there is an insufficient amount of skilled workers with those specialized expertise required for equipment installation in a semiconductor-grade facility.”

As a result, TSMC is sending skilled workers from Taiwan to teach Americans how to do the job. The Commerce Department forecasts that about 100,000 workers may be needed for the construction of these new fabs in the US.

The chip market breaks down into “leading edge” chips, followed by “advanced” chips and “trailing edge” chips, sorted from the smallest chips to the largest. The Economist says that by 2025, American chip factories expect to be churning out 18% of the world’s leading-edge chips (see chart below):

This seems highly optimistic if we can’t get these new plants built or staff them. Leading-edge fabs that are built in America will take longer to build and will be smaller than those in Asia. In China and Taiwan, companies can build out a new fab in 650 days. In America, the average construction time is expected to be 900 days, or 40% longer. Construction costs, therefore, can be 40% more in America than in Asia.

Regarding size, in Arizona, TSMC plans to make 50,000 wafers a month—equivalent to two “mega-fabs”, as the company calls them. In Taiwan, TSMC operates four “giga-fabs”, each producing at least 100,000 wafers a month. Size matters: The more chips a fab makes, the lower the unit cost.

More from the Economist: (emphasis by Wrongo)

“America will produce enough cutting-edge chips to meet only about a third of domestic demand. Apple will keep sourcing high-end processors for its iPhones from Taiwan.”

Overcapacity is a possible threat. The Economist says that in 2019, China made one fifth of “trailing-edge” chips, which go into everything from washing machines to cars and aircraft. But by 2025 it will produce more than a third of them. It’s possible that excess supply from China will put downward pressure on prices. In the long run, this could hurt higher-cost American fabs.

So, while there has been substantial progress in just a year, the US isn’t going to undo 20+ years of offshoring chip manufacturing in the next 24 months. The Commerce Department says it wants companies to collaborate on building up a construction workforce, so that workers trained for one project can move on to other fabs that are being built. In this respect, TSMC’s plan to import Taiwanese trainers is less of a bug than a feature, part of the process of helping to build knowledge.

Once the fabs are built, they’ll need technicians to operate them. Such workers have historically required two years of training at a community college or a vocational school. But companies and educators are experimenting with much shorter courses. Columbus State Community College in Ohio, where Intel is building two fabs, is offering a one-year program. The aim is for students to be job ready for Intel as their fabs come online.

But, will these companies be willing to put candidates with one year’s training anywhere near the multi-million-dollar machinery inside their fabs?

The fabs also need engineers to run them. Universities near some of the fabs under construction, including Arizona State and Ohio State, have expanded their offerings of semiconductor courses as part of degrees in engineering and physical sciences. Leading the charge is Purdue University in Indiana: last year it launched a semiconductor degree program for both undergraduates and graduates.

And the flow of students seems encouraging. Intel expected 100 registrants for its quick-start courses, but 900 showed up. At Purdue enrollment has also been very strong. Handshake, a job platform for recent graduates, reported that applications for full-time jobs at semiconductor companies were up by 79% compared with last year, versus 19% in other sectors.

Returning to having a strong, vibrant high tech manufacturing industry in the US is good, both strategically and economically. But for the immediate future, it remains a gamble: We’re saying that the economic reasoning for moving manufacturing offshore in the past still exists. But it’s important enough strategically that we (and these profit-seeking corporations) will somehow underwrite the cost disadvantages.

Relearning basic skills such as cutting wafers into chips and packaging them in hard plastic casings will take time. The welcome news for these new fabs is that colleges and universities see an opportunity in helping train the new labor force.

But we will still be dependent on other countries. We do not have a secure domestic supply of lithium, nickel, graphite and other minerals needed to expand production of solar panels, wind turbines, semiconductors and electric vehicles. BOA points out that American imports of lithium-ion batteries from China more than doubled in 2022, to $9 billion.

So, while there’s lots going on that may someday be positive, China represents a potentially dangerous choke point given that US-Sino bilateral relations are at a decade’s low. We’re depending on them to continue providing much of the materials crucial to our new manufacturing capacity, while we’re in the middle of a serious rift with them.

Reshoring manufacturing, especially high value manufacturing is America’s dream. But it will take unprecedented cooperation between the government, multinational firms and our higher education system to make it happen.

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The Problems With Childcare

The Daily Escape:

Sunset with Cosmos flowers, Blue Ridge Mountains, Franklin, NC – August 2023 photo by Amy Barr

Monday’s Wake Up Call is that we’re in the middle of a childcare crisis, one that dates back to WWII. Daycare costs too much, daycare workers don’t earn enough, and many daycares don’t make money and are going out of business.

Today, anyone who has tried shopping for day care knows that it’s a tough marketplace. Care.com, an online platform where people can hire housekeepers, pet caretakers, nannies, and more, publishes a yearly Cost of Care Report to help US families understand the cost of childcare. Their June 2023 report found that on average, US parents spend 27% of their household income on childcare expenses:

 “Households with children make up 40% of the total US population. And with a national family median household income of $91K, child care costs for the typical American family are even more staggering:

– 45% of families earning less than $100K annually will spend more than $18,000 on childcare in 2023, amounting to 18% of their household income (HHI).

-43% of families earning less than $75K will spend more than $18,000, amounting to 24% of their HHI.

-39% of families earning less than $50K per year will spend more than $18,000, amounting to a whopping 36% of their HHI.”

And increasingly, economists are saying that more women would be working if childcare was available. From Axios:

“In a research note about Friday’s jobs report, the chief economist at consulting firm RSM US did something surprising: Instead of talking about rate hikes or soft landings, he made the case for universal child care.”

Axios quotes RSM’s Joe Brusuelas:

“Childcare for kids under the age of 5 is increasingly an issue for more mainstream economists who are concerned about the prospect of long-term labor shortages in the US. Universal childcare is the most realistic way to help expand the labor force at a time when the economy needs workers the most,”

More:

“The US needs more workers, and there are more women sitting on the sidelines of the labor market than men.

-Right now, close to 86% of working-age men are employed compared with 75% of women. That’s a record for women, but it’s also far below the rates for men — there’s room to grow.

-Substantial childcare investments, like those proposed in the now defunct Build Back Better bill, could increase mothers’ employment by 7 percentage points, with bigger jumps for low-income families, according to estimates in an NBER paper published last year.”

The underlying problem is the economics of childcare. First, it’s difficult to get information about childcare costs either online or over the phone: Daycares often only share their prices after you have visited their facilities. And many daycares have waitlists stretching from six months to a year.

Economists say that long waitlists are a classic sign that something’s wrong with that particular marketplace. In this case, waitlists indicate that daycare prices are too low. But parents say that the price for daycare is actually too high. NPR reports that the median price in daycare for an infant in a large county in the U.S. is $17,000 a year. Also, more than 60% of families can’t afford the full cost of quality day care.

Meanwhile, daycare owners can barely afford to stay open. NPR interviewed a daycare provider in Iowa who said that salaries are 83% of their monthly budget:

“Five percent goes to their loan payment. 4% is operating expenses, cleaning supplies, snow removal, play kitchens, things like that. Three percent is utilities. Another 3% goes to groceries….And 2% is for their insurance and their building insurance and worker’s comp.”

Along with labor, that equals 100%, meaning the center makes no profit. It’s probable that the daycare owner’s pay is in the 83% labor total, but still it means zero profit. The Iowa daycare pays its staff between $12 to $15 an hour, while the local Chick-Fil-A advertises $16.75/hour to start. The Iowa daycare has a census of 72 kids, which requires 25 staff.

Daycares are required by law to hire a ratio of staff/per child, a higher number than other low-wage industries, like fast foods need. In fast food, labor is about 25% of the total costs, and the volume of sales is in the tens of thousands, not the 72 kids that a wage increase would effect in the Iowa daycare.

Since labor costs are such a  high percentage of total costs in daycare, increasing wages means prices paid by families of children in daycare have to rise drastically to cover the higher costs. Wrongo did a back of the envelope calculation for the Iowa center. If their base pay was $12/hour and it was raised to $15, the average monthly charge for one of the 72 children already in daycare would increase by $360/month, or about 47%!

The broken system is made worse in the US because we don’t have long maternity and paternity leaves.

Funding for childcare that was put in place during the pandemic is set to run out in September. Once we hit that “childcare cliff,” 3.2 million children will lose federal funding. More centers will either have to raise prices, cut staff or shut their doors.

Universal childcare has a tortured history in the US. During World War II, women replaced men in the domestic workforce. But who would take care of the children? The US government answered by enacting the Lanham Act, the first and only universal child care program in American history. An estimated 550,000 to 600,000 children received care through these facilities, which cost parents 50 to 75 cents per child, per day. The program ended in 1946.

Nixon vetoed a universal childcare bill in 1971 that would have created federally-funded public childcare centers across the US because Conservatives argued that the bill was communist and that it would be the end of the American family. A group called Iowans for Moral Education asked “Whose Children? Yours or the State’s?”

Time to wake up America! If you don’t want society to help take care of kids, you’re an asshole no matter what reason you give for being against funding. These kids didn’t ask to be here and they have done nothing to deserve not having societal support. If you think you can make America great again by making it harder to take care of kids, you’re wrong.

To help you wake up, watch and listen to a scene from the 2003 film “Daddy Daycare”. In this scene, Charlie (Eddie Murphy) and Kim (Regina King) try to find a good preschool for their son Ben, but it turns out to be impossible. Life’s still like this 20 years later:

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Monday Wake Up Call – July 17, 2023

The Daily Escape:

Comb Ridge, UT & AZ – July 2023 photo by RC Bullough Photography

Wrongo and Ms. Right were urban pioneers in NYC in the early 1980s. We rented a loft on Maiden Lane in the financial district. Back then, we had to go uptown or to Hoboken, NJ for groceries because there were so few people living amongst the downtown forest of office towers.

But by the 2020 census, lower Manhattan was the fourth fastest-growing residential neighborhood in NYC. Since the pandemic, downtowns have looked more like the ghost towns of the 1980s with so many workers adapting to remote work. And they seem to be staying away.

Things are going to get interesting. We may be at the beginning of a massive structural change, not just a temporary blip impacting office towers: It seems that companies have figured out they won’t ever need this vast amount of vacant office space. Brookings says that office utilization averages less than 50% across major US downtowns. While The Gothamist reports that national office vacancies are at a high of 19.2% (compared to 12.6% in early 2020). They also report that McKinsey predicts that remote work will erase $800 billion from urban office real estate values.

This has many cities thinking about conversion of office space into residential space. In NYC, 25 Water Street, which was once home to the Daily News and JPMorgan Chase, has a plan to gut the offices, carve out courtyards and add 10 floors to the 22-story structure. GFP Real Estate and Metro Loft bought the building, formerly known as 4 New York Plaza, in December for about $250 million.

One loophole is that the Financial District doesn’t require that the conversions include any affordable housing. So this project will not have any apartments with capped rents for low-income units. That isn’t true in other parts of the City, like Midtown, Queens or the Bronx.

Boston is testing an incentive program for developers to convert empty downtown offices into housing. Mayor Michelle Wu announced that the owners of repurposed buildings could get up to 75% off on their property taxes. Boston’s office market vacancy rate climbed to 14.2% in the second quarter, the highest level in 20 years, according to data from CBRE Group Inc. And median monthly rent for a one-bedroom apartment has jumped 8% in the past year to $2,800.

Boston’s downtown has about half of the city’s office space. An October 2022 report commissioned by the city found that economic activity downtown remained 20% to 40% below pre-pandemic levels for industries like retail.

Back in NYC, Mayor Eric Adams is also proposing incentives to designate 136 million square feet of office space for conversion to residential development. It’s worked before: A 1995 tax break for conversions helped create 13,000 new apartment units in Lower Manhattan.

Brookings raises the question of what the taxpayers’ interest should be in these conversions:

“To what extent are current high office vacancies a market problem whose burden falls on the private sector (property owners and investors) and to what extent do they represent a market failure and policy problem to which government must respond with financial support from the public?”

The advocates of tax breaks and other financial incentives say it will:

  • Help drive foot traffic to downtown businesses struggling from a lack of commuters.
  • Bolster municipal coffers, as cities often rely on property taxes from office buildings.
  • Supply much-needed housing amid a shortage that has many paying exorbitant rents.

It seems that office-to-home conversions are no more a comprehensive remedy for housing than e-bikes are for transit issues. Few office buildings are truly suited for conversion. It’s often more straightforward for developers to knock down the existing structure and build condos from scratch.

Moreover, the best thing that cities can do to encourage more housing is to loosen zoning restrictions, allowing multi-use and apartment buildings to be developed rather than just supply tax breaks.

The battle lines are drawn. The 25 Water St. developer said state and city lawmakers will have to pay up if they actually want to turn vacant offices into homes:

“The politicians, if they want to create housing in New York City out of these buildings, they will need to provide significant incentives….And if they want to provide affordable housing, those incentives would have to be even higher.”

Time to wake up America! We can’t let our mayors give away more tax revenues to developers! We’re unsure if the current rate of office utilization will improve or not, so cities need to be smart about what they do next. To help you wake up, we dust off an oldie. Here are the Rolling Stones with “Salt of the Earth” from their album “Beggars Banquet”. Performed live at the Rolling Stones Rock and Roll Circus in 1968. This was the first tune where Keith Richards had the lead vocal:

Sample Lyric:

Raise your glass to the hard-working people
Let’s drink to the uncounted heads
Let’s think of the wavering millions
who need leaders but get gamblers instead

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Sunday Cartoon Blogging – July 16, 2023

The WaPo has an excellent briefing on Biden’s new border policy. If you’ve wondered why there’s no longer mass chaos at the southern border since Title 42 was lifted, it’s because the Biden administration has completely transformed how migrants, asylum-seekers, and those who enter illegally are treated.

You have to apply to enter the US legally by making an appointment using an app. It can take up to six weeks to get the appointment, but once you do, you are interviewed, photographed, and released to a social service agency that helps migrants, or a relative or sponsor who has registered with the feds. (Plus the app uses GPS to track your movements.) You then wait for your application for asylum to be processed and your claim adjudicated.

If you enter illegally, you are sent to a massive tent city to be fed and given necessities. You get your health checked out. And then you are sent back over the border with instructions on how to apply legally via the app.

The two processes illustrate the extent to which the Biden administration has transformed the way asylum seekers and migrants are processed along the southern border. As a result, illegal crossings have dropped by close to 70% since early May. Yes, 43,000 asylum-seekers get into the US every month. But until Congressional Republicans agree to a sensible immigration policy, controlling the influx in this manner seems to be the best alternative. On to cartoons.

What the GOP cares about:

We won’t fight climate change, so you’ll have to:

The GOP’s latest tangent:

The GOP decides the FBI is liberal:

It’s ironic that the GOP wants to defund the FBI which has always been a Republican bastion. And if the Elephant wants help with his minor surgery, Wrongo’s happy to assist. It’s doubtful that the FBI is about to start prosecuting illegal corporate activities with the same eagerness they showed when chasing after BLM and Occupy Wall Street.

Trump’s latest delay tactic:

Hollywood’s on strike:

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Two Data Points That Say Much About Our Economy

The Daily Escape:

Another Alaska pic: Wrongo was in a kayak about 20 yards from this big guy asking himself whether he could out-paddle a charging grizzly. June 21, 2023 photo by Kristina Rau for the cruise line.

Today let’s talk about two interrelated economic issues. First, with more than 200,000 jobs created in the US economy in June, nearly 4 million more people are now employed than just before the pandemic.

Heather Long at the WaPo looked at who’s getting them. Along the way, she busts a few Right Wing myths:

“The mistaken notion that Americans don’t want to work can now be put to rest. Nearly 81% of Americans ages 25 to 54 are working, the highest share since 2001.”

Long reminds us that in March 2022, Fed Chair Powell argued the labor market was “unhealthy”:

“There was a misguided belief that it would take a recession to get supply and demand for goods — and workers — back to more normal levels. But what many experts missed was how many workers of color and immigrants wanted to work and were still looking for opportunities.”

Long provides the demographic breakdown for our recent job gains:

“Fewer White people are employed now than pre-pandemic. In contrast, over 2 million more Hispanics are employed now, over 800,000 more Asian Americans and over 750,000 more African Americans.”

Before the pandemic, companies were complaining that they couldn’t find workers, while the experts were saying the nation was at “full employment.” However, every month, Black and Hispanic people (largely women) kept entering the labor force and getting jobs.

Also, more than 2 million more foreign-born people are employed now than before the pandemic. This means that more than half of the new workers have been immigrants.

This is partly a result of low unemployment. Blacks and Hispanics often do not get hired until late in an economic recovery. In the past year, there’s also been a strong uptick in jobs in government and health care, two sectors in which women of color have historically found employment opportunities.

Employers have also loosened their hiring criteria, offering improved pay and benefits, and removing requirements for college degrees for many positions. Long says:

“This past spring, for the first time, Black Americans were as likely to be employed as White Americans.”

What a change! Hard to see much “socialism” in this new jobs analysis.  This is good news that disputes the old Right wing bromides about how “these folks don’t want work; they want to sit back and get free stuff”.

Second, the WaPo’s Department of Data, a new statistical analysis feature, answered the question:

“Which states contribute the most to the federal budget in taxes, and which get the most back in terms of benefits?”

They start by reminding us where tax revenue comes from:

“The vast bulk of the $4 trillion in revenue the federal government received in 2021 came in the form of income taxes and payroll taxes for Medicare and Social Security. Most of the rest comes from corporate income taxes and excise taxes on goods such as gasoline and alcohol.”

And just 4.5% of that income (customs duties and earnings on Federal Reserve deposits) cannot be traced to individual states.

But let’s get to the good stuff. Just eight blue states, (CA, NY, NJ, MA, CT, WA, NH, and CO) pay more in taxes to the federal government than they receive in federal benefits. They therefore subsidize all other states. Every other state receives more federal money than they pay in taxes.

And unsurprisingly 9 of the 11 top recipients of federal benefits are red states (KY, WVA, MS, AL, AK, LA, OK, AK, SC).

Nine of the 10 states that sent the most to the federal government, per person, voted for Biden in 2020. Nine of the 10 states that sent the least voted for Trump. So who’s got the bigger stake in socialism?

Its important to remember that when Republicans complain about “out of control” federal spending, most of them live in a state that receives more from the federal government than they contribute.

If we ever called their bluff, Republicans would scramble to decide what federal benefits their home states would be willing to give up in order to cut federal spending.

But of course, they would simply bluster on about socialism in the cities.

Maybe we should divide America into the MAKER states and the TAKER states. It’s nice to see that the data again shows Blue states are far more productive. Maybe another question for the Department of Data is:

“Why is higher income so closely aligned with support for Democrats?”

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