Resolution for 2014 - Bring back the middle class!

Erie, PA, is nearly a perfect example. Situated on a rare natural harbor at the confluence of major railroad lines and highways, Erie grew to become a crown jewel in the armory of freedom. Foundries and metal working abounded. Huge factory buildings lined 12^th Street, employing tens of thousands of skilled and semi-skilled and even illiterate workers. During and immediately after World War II, this was a booming manufacturing economy.

But then in the 1970s, recession and the beginnings of globalization struck. Companies went bankrupt. Plants were relocated or closed. The noon whistle summoned far fewer workers to open their lunch buckets. It was the beginning of the squeeze on the middle class. Today, 12^th Street is lined with derelict factory buildings, windows broken and boarded up. This is what "the rust belt" means.

And the same is true of Lowell and Fall River and Pawtucket, where mill workers' jobs first moved south and then overseas. Attleboro, where jewelry making had supported many families for many years, has seen those jobs evaporate.

One would think that manufacturing is a game that we have lost, and we’d better get used to it.

But the truth is dramatically different. The United States is a huge contributor to the world’s manufacturing output. With nearly $2 trillion generated from manufacturing in 2011, the US equaled the total output of Germany, Italy, South Korea, Brazil, and Russia combined.

If this is the case, then, why is our middle class suffering? Why is our unemployment rate still over 7%?

The answer is that there is a huge skills gap for manufacturing jobs. This can be explained in part by the enormous productivity of the American worker. China requires nearly ten times the workers to generate the same manufacturing output as the US. Largely this is due to our manufacturing mix. They are making consumer electronics and hardware while we are making supercomputers and airliners.

But there is more. Even locally, in Erie PA and Attleboro, there are manufacturing and skilled trades jobs open that can’t be filled. Employers are looking for workers who can program a CNC machine, not just turn a wrench. Illiteracy, or worse, innumeracy, are huge disqualifications. So nationwide, millions of jobs go unfilled for want of qualified candidates. Students who fail to graduate high school can’t possibly compete for these jobs. And worse, many graduates lack the necessary skills that employers require.

When we see educational rankings by country, with the US listed 26^th in math, how can we expect to fuel our high tech manufacturing sector with qualified workers? It’s a serious problem when only 75% of American students graduate from high school, and many who do graduate are weak in STEM (science, technology, engineering, and math). The needs of the future are clear – we will require more literate, STEM-qualified workers, not fewer.

So in this new year of 2014, what can we do? What can you, in particular, do? Here are a few suggestions.

1. Support your local literacy center. In Attleboro, it is the TLC (www.theliteracycenter.com). Literacy centers help retool adults who need a boost. Donate funds, volunteer as a tutor.
2. Support your local schools. But be demanding. What are they doing to reward and replicate the accomplishments of successful teachers? Are they cranking out graduates who need remedial training in the real world? Are local employers lining up at the door to snap up graduates?
3. Educate yourself and vote. Forget the party line. Vote for whomever explains how to improve the educational attainment of our youth. If that’s through the public schools, how?  Parochial or charter schools? Elevating the importance of trade schools? German-style apprenticeship programs?

If we want to see our middle class revitalized, the key is to rebuild our manufacturing and trades sectors. But to do that, we need to equip prospective workers with something of value. Employees must be able to fluently navigate the literacy and engineering and math requirements of the modern manufacturing job. And we can help them achieve that. 
 
The bottom line is that you can be an active part of the solution if you inform yourself and take action. This is a case where bottom-up social activism can be effective, but only if enough of us care. Make this a resolution for 2014.

Start with a call to your Literacy Center.

Happy New Year!

Merry Christmas

Call it the miracle on Smith Street. In nearby Providence, Governor Chafee this year caved in and termed the state’s festively decorated spruce a “Christmas Tree.”

The governor noted that his past insistence on calling it a “holiday tree” had been “a focal point of too much anger.” Apparently this anger was the fault of intolerant religious nuts (nearly 50% of Rhode Islanders are Catholic) and had nothing to do with his own intolerance. The governor got in his symbolic licks, though, by absenting himself from the lighting ceremony. A speech to students at Princeton University was deemed a higher calling.

Just as there is room in the public square for Menorahs and synagogues, crescent moons and mosques, Sikhs and their temples, and agnostics and atheists (the last of whom take on faith that God does not exist) there is also room for Christmas trees and churches. We are big hearted and tolerant enough to embrace them all.

Those who battle the Christian religion, such as the Freedom from Religion Foundation, (whose very name gets it wrong) get it wrong. “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…” This powerful clause of our first amendment properly enshrines our right to freedom of religion, not freedom from religion. It fully supports atheistic belief systems as much as any other belief system. All are allowed; none are prohibited nor mandated.

We can sympathize with those who are leery of religion. We wouldn’t want radical Islam forced upon us by government decree. (Not moderate Islam as practiced by millions of peaceful Americans, but the fanatical variety that subjugates women and murders those who don’t share their convictions). Equally, a government mandate imposing the repugnant Westboro Baptist Church on us would be just as horrific. But the same first amendment that protects us from them also requires us to hold our collective noses and recognize their right to their beliefs.

It is odd how secular America so vehemently rejects Christian values. ABC Family, a subsidiary of Disney Corp., sells morning airtime to the Christian Broadcasting Network (CBN). (This is because of the channel’s origin as evangelist Pat Robertson’s TV ministry, which morphed into the Family Channel and then was eventually acquired by ABC/Disney).  Prior to airing this objectionable Christian content, they make it emphatically clear, on screen and with accompanying narration, that “the following program does NOT reflect the views of ABC Family.”

Apparently the risqué “Secret Life of the American Teenager” featuring promiscuity, teen pregnancy, and drug use is more Disney’s idea of admirable family values.

Perhaps old fashioned Christian values such as “thou shalt not kill” and “honor your mother and father” are outdated and out of fashion. They have served this country well since the Pilgrims landed almost 400 years ago, but perchance it’s time to retire them.

Or, on the other hand, we can call our Christmas trees what they are and wish each other peace on earth, goodwill to all of us.

Merry Christmas.

Obamacare - Mind-numbing Complexity

"Professor Butts and the Self-Operating Napkin"

The implementation of the Patient Protection and Affordable Care Act is causing some considerable perplexity and dissension among the citizenry. But its goal is crystal clear.  According to Kathleen Sibelius, Obamacare’s primary objective is to “make coverage more secure for those who have insurance, and extend affordable coverage to the uninsured.”

This presumes that expanded insurance coverage will improve health, and well it might. But this is not a given – there are many other factors affecting the nation’s health. (Hint – obesity, alcohol, tobacco).

A secondary goal of Obamacare is to “bend the cost curve”, that is, to make health care (and hence insurance premiums) cost less than it otherwise would have. Again, this is within the realm of the possible, perhaps over a long time frame. But early experience shows 2014 insurance premiums increasing at an alarming rate, often double the cost of 2013.

A key feature of Obamacare is its complexity: a multitude of tightly interdependent moving parts. The inauspicious roll out of Healthcare.gov (termed a "debacle" by the administration) is only a symptom of the law's impenetrable convolution. 

One might make reference to Rube Goldberg, whose contraptions were fantastically complex. But in the end, they could actually be made to work. The administration is fervently hoping for such good fortune.

As well meaning as it is, Obamacare has two fundamental shortcomings:

1. Mind-numbing complexity

1. Valiant but misdirected goals

To the first point, Obamacare features a flurry of economic features intended to fund the program. These include requiring all policies to provide a broad range of “essential” services regardless of whether the policyholder wants or needs those services. For instance, young single men do not require maternity coverage but will be forced to pay for it. Older folks do not need pediatric care but are obligated to purchase it. This is not “essential” coverage at all but, rather, hidden taxes.

But Obamacare has plenty of obvious taxes, too. From a sympathetic website (www.obamacarefacts.com), here is a partial list of Obamacare taxes:

• 2.3% Tax on Medical Device Manufacturers

• 10% Tax on Indoor Tanning Services

• Blue Cross/Blue Shield Tax Hike

• Excise Tax on Charitable Hospitals which fail to comply with the requirements of Obamacare

• Tax on Brand Name Drugs

• Tax on Health Insurers

• Elimination of tax deduction for Rx drug coverage with Medicare Part D

• Employer Mandate $2000 to $3000 per employee

• Medicare Tax on Investment Income of 3.8%

• Medicare Part A Tax increase of 0.9%

• 40% Excise Tax on "Cadillac" plans

• Annual $63 fee per subscriber to fund “risk corridors”

• Medicine Cabinet Tax (OTC medicines no longer qualified as medical expenses for HSA/FSA)

• Additional Tax on HSA Distributions

• Contributions to FSAs are Reduced

• Medical Deduction Threshold tax increase

• Individual Mandate (the tax for not purchasing insurance if you can afford it)

Using static scoring, the Congressional Budget Office has projected the revenue to be garnered from these sources. But humans aren't static and behavior easily morphs. Another source of complexity and uncertainty.

This combination of mandates and complicated funding sources (not to speak of over 11,000 pages of regulations) has made the program mind-numbingly complex and led to the first of many unintended consequences (the recent cancellation of millions of “non-conforming” policies). People are perplexed, puzzled, and, perhaps, a little bit scared.

To the second point, the stated goals of Obamacare are misdirected in that what we want, what we really really want, is to directly improve the health of the American public. Obamacare assumes that insurance for all will improve general health. And it might.

But if we’re in a mandating mood, then let’s mandate that sugar and fructose and salt and unhealthy fats be removed from our diets. Require that people eat high fiber, low glycemic-index diets under threat of penalty. Demand that everyone walk 10,000 steps per day (age adjusted) or pay a sloth tax.

According to Harvard Health, the medical costs of poor diet and obesity run nearly $200 billion per year to treat diabetes, cancer, heart disease, etc.  That amount, if even partially avoided, would most assuredly “bend the cost curve”.

But we are Americans, free of spirit in our loose fitting clothes. We’d rather purchase mandated “essential” insurance coverage than have our love affair with junk food disrupted. As voters, that’s our prerogative. And who knows - it just might work.

Bitcoin - a Layman's Guide

A physical bitcoin.

A recent computer virus infection at the Swansea, Massachusetts, police department brought the topic of bitcoin to local attention. This nasty virus encrypted several computer files, effectively holding them for ransom. If the cops wanted their files back, the perps demanded to be paid in bitcoin. Luckily, all ended well with no damage, injury, or loss of confidential data. But it did require the very real expenditure of $750 to buy two bitcoins.

What the heck is a bitcoin?

One thing is certain – bitcoin is extremely popular on the web. As of this writing, Google reports nearly 35 million hits on the term. Most of the descriptions are highly technical and loaded with computer jargon. Let’s try to demystify it.

Bitcoin is a virtual currency. This means that no physical bills or coins are required to represent value – bitcoins live in computers. While this may seem odd, consider that our own dollar has very nearly become a virtual currency. For many folks, it is common to have their wages (or government pension) automatically deposited into their bank account. Bills can then be paid using the bank’s online bill paying system. Groceries, restaurant meals, gasoline, and untold other goods may be purchased using a credit card. Nary a dollar bill is seen.

Another characteristic of bitcoin is that it can facilitate anonymous transactions. (That’s why the perps required the Swansea police to pay in bitcoins). But this is not an unfamiliar characteristic of our dollar. While credit card and banking transactions are easily tracked, a suitcase full of cash is fairly anonymous (unless the bills are marked).

Bitcoin differs from the dollar in one significant way: it is not a fiat currency. Fiat currencies are issued and backed by central authorities such as the Federal Reserve Bank (dollar), European Central Bank (euro), or Bank of England (pound). For citizens living in these stable countries, a fiat currency is a good thing. But not so for those living in economic paradises such as Venezuela and Argentina, where bitcoin is gaining popularity as an alternative to the uncertainties of high inflation rates, devaluation, and the risk of expropriation. Further to their credit, bitcoins cannot be counterfeited.

Where did bitcoin come from? The idea was first presented in a 2008 paper written by "Satoshi Nakamoto" (which may be a pseudonym for an individual or group). The currency is only possible because of developments in powerful yet affordable computers, high speed networks, and distributed processing. It is very much a child of the Internet Age. Bitcoins are “mined” by enthusiasts with powerful computers searching for the solution to a very difficult cryptographic problem. When a new bitcoin is discovered, its existence is added to a distributed, public ledger.

Each bitcoin is unique and the total number of bitcoins is limited (mathematically) to some 21 million. All of the easy bitcoins have been discovered and it is becoming progressively more difficult to find (solve) each new one. This insures that bitcoins will never be devalued by “printing money”, which governments are wont to do.

Bitcoins are stored in (and spent from) electronic wallets. Your wallet might be an iPhone app or a discrete (miniature computer) device. You can buy bitcoins from a broker and store them in your "wallet". From there, they can be spent to buy goods and services in much the same way as a debit card. Physical bitcoins are available from vendors such as Casascius. These physical coins each contain the unique identifiers of the virtual bitcoins they represent.

How is all this working out in practice? Pretty darned well. On October 30, Time Magazine reported that “Bitcoins took yet another step toward mainstream use on Tuesday, as the world’s first ATM converting the virtual currency to conventional cash, and vice versa, was introduced at a coffee shop in Vancouver, Canada.” In a recent Wall Street Journal article (11/14/13), the story of the Craigs was chronicled. Austin and Beccy, an adventurous couple, successfully paid all of their expenses using bitcoins during a 100 day, three continent odyssey (albeit with some difficulty at times).

Are bitcoins here to stay? The signs are good. At a Senate committee hearing on Monday 11/18/13, US authorities termed bitcoin a “legitimate financial service.” The concern of illicit activity was felt to be manageable under existing banking and currency laws. Federal Reserve Bank Chairman Ben Bernanke, in a letter to the committee, wrote that virtual currencies “may hold long-term promise, particularly if the innovations promote a faster, more secure, and more efficient payment system”. Bitcoin prices surged on the Tokyo Mt. Gox exchange in response.

At one time, ATMs were new and strange to many of us. But given time, this brave new world of virtual currency will become equally ordinary. This is how science fiction comes true – one iPhone app at a time.

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Update 11/21/13 - "Bitcoin now accepted as tuition payment at Cyprus university."