Post Office Default, Do We Really Need USPS?

In what seems to be great news the Post Office announced that it will default on its $5.5 billion payment for future retiree health benefits. The United States Post Office (USPS) will also owe $1.5 billion in workers compensation and millions in interest payments. As I have pointed out here, here, and here despite the USPS best efforts of cutting jobs, talking about cutting back services, and closing down certain facilities USPS will lose $14 billion this year. What is even worse is that since the inception of the United States Post Office has lost $33 billion and counting since the founding in 1789. This figure actually understates the true amount spent since USPS is exempt from paying taxes on things like vehicles, tires, and other goods they purchase.

Technology like e-mail, online payments, and even cheap cell phones made sending things snail mail obsolete. If grandparents want a picture of their grand children parents no longer have to go to Eckerd’s (now CVS) or Walgreens to develop pictures and then send them in a package to their loved ones. Today in a few seconds people can snap a picture and e-mail it without any postage. Banks and payment transfer companies are also to blame since they developed ways for people to transfer money electronically. The Federal Government is going to stop mailing paper checks next year for people who receive Social Security and instead pay direct deposit or by debit cards.

Why USPS is still operating is beyond me. People worry if USPS was no longer in business who would deliver the mail. My answer would be FedEx, UPS, DHL along with other logistics providers. Cities or neighborhoods could decide who they wanted as their provider.  Have you ever heard about how great of an experience someone had with USPS? Profit seeking companies like FedEx and UPS have to make sure they not only deliver in an efficient manner but also create shareholder value which makes employees accountable. USPS employees are not held accountable and not until 2008 was an employee actually laid off.  USPS has 546,000 employees in 2012 which is a large decrease from the 752,949 employees it had in 2002. If USPS were to disband other companies like FedEx, UPS, and DHL could absorb these employees and would need more since they would have more things being delivered. Profit seeking companies would also want to make sure people in rural areas got their mail or else they couldn’t make profit. Given how inefficient USPS is not only would profit seeking companies need more help they would be hiring workers who would be paying more in taxes, and the companies themselves would have more profit which means they would pay more in taxes.

Do people really even need mail besides for sentimental things considering people e-mail, scan, fax, or call us if they really need something important? Not having to get all those advertisements in the mail would be a positive thing but of course we just trade off those for spam.  I really can’t understand why anyone with a pulse would want USPS to still exist given the billions that is wasted, the inferior service, and the lack of accountability.

Lowest Blood Supply in 15 Years and How General Blood Can Help

I saw this recent headline that the blood supply was at its lowest level in 15 years. This is quite interesting because our population has only grown dramatically since 1996. The article blames the low supply on the weather and the fact that Fourth of July fell in the middle of the week which of course is utter nonsense. Donations of blood have been increasing at 3% per year while demand has been increasing closer to 6%-8% per year.

What the article failed to mentioned was how the American Red Cross has a monopoly on the supply of blood. I go back to one of the basic principles of economics: when there is a shortage look to incentives to determine the cause. A few weeks ago while waiting in a doctor’s office I read this article about how a company called General Blood is trying to change that. General Blood buys blood cheap from blood centers and then distributes them overnight to hospitals all over the United States. Blood is also worth different prices in different markets. For example a pint might be worth $210 in Wisconsin while $265 in New Jersey.  

The market for blood is a $4.5 billion business and currently the Red Cross controls 44% of this. As a result every year 1.3 billion pints of blood go to waste (between 5%-14%). Apparently 1 pint of blood can save three lives. So in theory the amount of wasted blood adds up to 3.9 billion people. Surgeries One thing the blood market doesn’t have is an exchange which would make it much more efficient to match types of blood, what areas need blood first, and the best way to get blood to where it needs to go in the shortest amount of time possible.  The federal regulations with blood are burdensome ridiculous and should be scaled back since real people are suffering and even in some cases dying because they are unable to get blood in a timely fashion.

One hope this is on the horizon is artificial blood. This article claims that artificial blood could be here within the next decade or so but I won’t hold my breath. The blood would just be a temporary place holder for people in emergency situations which would be positive.

The position the government takes on regulation the sale of organs, blood, and everything else under the sun causes more harm than good. As I mentioned in this post about bone marrow, this post about kidneys, and this post about organ donation the government only gets in the way of people making voluntary choices about their own body. As economist Dr. Walter E. Williams would say the true test of whether you own something is whether or not you can sell it. According to the government we do not own our own body since we are able to be compensated for our own body parts or organs and create a market for them. 

Regulation Nation

H/T Ron Paul Facebook

Russ Roberts: How To Talk About Liberty (Israel)

Here is a recent video (May 2012) of EconTalk's Russ Roberts giving a speech on how to talk about liberty. Russ Roberts and Dr. Walter Williams do the best job of taking something explaining economics and the principles of liberty.

GlaxoSmith $3 Billion Fraud, Off-Label Use, and Dr. Drew

I woke up this morning and read a story about GlaxoSmith paying out $3 billion in a fraud settlement. At first I was thinking some plaintiff must have been injured however when I read the story I learned that GlaxoSmith was ordered to pay out billions of dollars simply because they were marketing drugs for what is known as “off-label” uses. Off-label use occurs when say a drug is approved for cancer but a doctor prescribes it for something else because they believe it will help. In Glaxo’s case they had a drug Paxil which was used for treating depression however wasn’t approved for treating in depression in anyone under 18. This is somewhat bizarre considering it is treating depression for different age group. How exactly is this an “off-label” use? The other drug was Wellbutrin which was approved for depression however GlaxoSmith promoted from 1999 until 2003 for ADHD, weight lost, sexual dysfunction, and substance addictions. Speaking of substance addiction Dr. Drew was actually linked to this case as he was paid $275,000 for in the 1990’s for being involved in a two year project that looked at intimacy and depression.

What is curious however is that this was labeled as fraud yet how many consumers where hurt? Actually many people were hurt by not being allowed to use the drug for off-label use that could have benefitted them. Patients are not going to take something for an off-label use unless they first go to an American Medical Association approved doctor and then have that doctor write a prescription for a drug that was approved for some other use (which cost the drug company $1 billion to make and at least ten years of research.  The reason there is so much off-label use is because the FDA is zealously over regulates even approved drugs. Even if a FDA drug is approved for one illness it has to go through the whole FDA process again to get approved for another illness. This increases the cost to the drug company which is just passed on to the consumer in the form of higher drug prices.

As I have said many times two things that would drastically decrease the price of health care is getting the American Medical Association out of the business of determining who becomes a doctor and getting rid of the FDA. In a free-market consumers would decide whether or not a drug was effective. If a drug company sold people drugs that didn’t work the drug companies would still get sued. Fraud is frowned upon in free-markets since companies do have reputations which affect the value of the company. The effect of having the FDA regulate drug companies to death is only a few companies with blockbuster drugs.  If the FDA was abolished there would be more drug companies, more options, which would in time lead to more effective and safer drugs.

Top Ten Free Market Ways to Fix Healthcare in America

 Here are my top ten ways to fix healthcare in America...

1. Allow drugs that pass Phase I testing from FDA to be used by patients and allow them and their doctors to determine if they are effective. This will dramatically reduce the price and number of people suffering since many of the costs occur in Phase II and Phase III (and there are even costs are the drug is approved Phase IV). Allowing patients to experiment and share information with others will work wonders in understanding how drugs affect the body to see if they really work. No two bodies are alike.

2. Get rid of the deductibility of health insurance for corporations. Health insurance is a benefit that employees get for working for a company. Companies get a deduction for this however employees really are stuck with whatever plan their company has and if the employee leaves their healthcare benefits are lost as well. A better solution would be for companies to give the employees the compensation as cash and allow them to go out and negotiate individual policies which would allow employees to carry their insurance wherever they go. The market would allow people to buy insurance policies against pre-existing conditions as well

3. Get rid of the AMA (American Medical Association) and their cartel. The AMA restricts who can become a doctor and who can’t become a doctor which drastically increases the cost of healthcare

4. Allow nurses to see and treat patients

5. Remove the barriers to entry regarding opening privately owned hospitals.

6.  Allow insurance companies to sell across state lines. Premiums would no doubt decrease if this happened as insurance companies have so much paperwork and costs related to complying with each every state’s insurance law

7.  Reduce the regulations and barriers to entry regarding getting into the insurance business. How many new insurance companies have there been in the past 5 years?  Allowing more insurance companies into the game would increase the number of options and reduce prices

8. Legalize the use of medical marijuana in order so the health benefits can be studied.

9. If people want free healthcare they must trade their medical information for the government to study in order to get free healthcare. The government can then study that information and share with medical researchers, doctors, and the public.

10. Allow the United States to import doctors from other countries 

Obamacare and Healthcare

Today the Supreme Court ruled in a 5-4 decision that the government can force people to buy health insurance. What the Supreme Court did in essence is place a tax on people for not doing something. The legislation entitled Patient Protection and Affordable Care Act plans to try to provide more people with health insurance. I like the key word “affordable”. If you ask someone what is the cost of an affordable house, college, or health insurance could they give you a number? The AMA endorsed the plan in this press release. According to a Gallup Poll done in December 2011 around 17.7% of Americans didn’t have health insurance. This turns out to be close to 50 million people. However, this paints a false picture. Around 25% of these people who are counted as uninsured can get Medicaid and the State Children’s Health Insurance (S-SHIP) but never enrolled. Another 20% of the people who are counted as uninsured are not legal immigrants. Also greater than 33% of people have incomes over $66,000 yet many choose not to purchase healthcare since they are young. Also a very small percentage of people (2.6%) of people go without health insurance for three years or longer.

Another big question is about pre-existing conditions. I would say on this there are some people who through no fault of their own have conditions that they had no fault in causing. However, the idea of insurance is to plan for unforeseen events. One problem is that health insurance is often tied to employment. You can’t take your health insurance policy with you from company to company since the company is paying for it. A better system would be companies just to increase the pay by the amount of what the insurance is worth and let consumers purchase their own health insurance. Also since people can’t purchase health insurance across state lines it artificially increases in the price of insurance. This requires insurance companies to comply with different regulations and restrictions which impose costs on them which are passed on to the consumer. If you don’t believe that there is much regulation in insurance can you even name three new insurance companies in the past five years?

The government does a poor job of managing the money taxpayers give it. Medicare fraud is estimated at $48 billion for 2010. Total spending on Medicare was around $528 billion which means 9% of spending on Medicare is payments to bogus people. If any private organization had a business like this they wouldn’t even exist. If people were paying with their own money instead of a third party paying this wouldn’t occur. Speaking of Medicare according to this article the last two months of a patient’s life cost Medicare $55 billion and it estimated that 20%-30% of the expenses have no impact yet the government keeps spending money.  

The idea of free markets is to create competition which drives down prices and increases options which would allow more people to have health insurance. Two other things that increase cost as I have pointed out here and here the lack of not enough private hospitals and FDA also increase the cost of healthcare. If we had more hospitals it would increase competition and bring down costs. The FDA limits the type of drugs that can go on to the market which artificially increases the price since drugs that the FDA doesn’t approve will never end up in the hands of patients even though some people in the clinical trials benefit. Allow patients to use drugs after the drugs were tested for safety in Phase I and you would see more innovation and prices for drugs drop like a rock. Healthcare isn’t complex we just need more free market solutions. 

Obamacare and Taxes

Richard Epstein: Killing the Long-Term Flow of Technology

Richard Epstein hits a home run on this one.

The Koch Brothers: Inside Koch World (Bill Koch The Other and Misunderstood Koch Brother)

(Continued from Part 1 here). David and William Koch during the 1970’s also joined Koch Industries (William was later fired) and Frederick is the only one who never got into the family business. Frederick in recent years reportedly spends $20 million on his art collection and castles while living in Monte Carlo and London. David also went to work for Arthur Little after graduation and then worked at Amicon Corporation and Scientific Design Company. David joined Koch Industries in 1970 and founded the New York office. By 1979 he was managing Koch Engineering and became executive vice president. William also joined Koch Industries in 1968 and founded Koch Venture Capital. Apparently William lost $90,000 and Charles was not too happy about this. He then ran Koch International Company for a short period before founding Koch Carbon and then became vice president of corporate development for Koch Industries.  William was successful as a chemical trader however he struggled. Some of his ideas included purchasing Checker Cab and funding an onion pill to lower cholesterol. These ideas were both flops. William was then fired by the board after he tried to take over. William had always claimed the dividend payout was $5 million in 1983 which is around $11 million in today’s dollars. William complained that the dividend payout was so low that he had to borrow money for his house and he was one of the wealthiest men in America. Around this time the Koch brothers were sharing dividends between $20 to $30 million per year (according to an article the company only paid out a dividend of 7% of its annual earnings). This is actually a small amount considering 90% of Koch Industries earnings are plowed back into the company which has led to a substantial growth.  

In 1983 William started Oxbow Corporation and set up business in Florida to avoid state income taxes (I guess incentives do mater). According to this article, William is a very detailed oriented boss who hired smart people and compensated them well.  Although, his experience at Koch Industries didn’t work out William seemed to work pretty hard being the first one in at 7 a.m. and would make sure employees were prepared and sometimes could lose his temper. William does have a softer side. He enjoys collecting art and wine. In fact he has a wine collection of 40,000 bottles of wine that are worth more than $12 million. His art collection consists of over 400 pieces and according to this article he transports them to his 42,000 square foot home in Florida to Cape Cod. On a single afternoon he spent $240,000 for centerpieces for flower arrangements according to this article. William also likes to sail and in 1992 won the American Cup for sailing after paying $55 million in 1992 according to this Sports Illustrated article. His love for sailing began when he was 13 years old and continued at a summer school naval program in Lake Maxinkuckee, Indiana. Then in 1984 he bought his first bought a 75 foot Hood cruiser.

His house is worth close to $26 million according to this recent article. According to this article he has so much art in the house that he actually had to start hanging it from the ceiling. William has more than $100 million of art and furniture in his house (I hope he has an insurance on all that art). He has used his house in the past for charity purposes however decided to cut this back in the early 2000’s. Not only does William like to collect art and wine he also use to collect women similar to his brother David. David in his playboy days had 3 dates per day. 

While already married to Joan Cranlund in 1995 he tried to evict model Catherine de Castelbajac from a $2.5 million condo that he owned at the Four Seasons Hotel in Boston according to this article. William claims that from October 1994 to August 1995 de Castelbajac ran up a bill of $47,000 at the Four Seasons hotel. William was seeing three women at one time (his wife, de Castelbajac, and Marie Beard). Just one year after he married Joan Cranlund he married Angela who was almost two decades younger than him. According to a 2001 New York post article Angela Browder Gauntt was a stunning blond with green eyes, unpretentious who herself was already divorced when a mutual friend suggested her and William get together. For their first date they went to the Commander's Palace in New Orleans. He sent flowers the next day but they only saw each other once or twice in the next nine months. Part of the reason was because he was still trying to handle Catherine de Castelbajac and he also had a daughter with another another lover named Marie Beard. William had been with many woman and was ready to have a real family. 

Only after five dates William purposed in May 1996 and then they were married in November 1996.  However, there was no honeymoon after the wedding. William was also traveling with his job so it made it hard to made time for his family. Things however got worse. In July of 2000 Angela successfully issued a restraining order according to this article against William for punching Angela in the stomach. The restraining order required Bill to live in the guest house or beach house while his wife Angela lived in the main house. Also Koch was not allowed to drink alcohol 24 hours before he visited his children. William openly talked about the fact that he went to rehab in 2000. 

Angela however did alright in the end as she was paid $16 million in addition to making monthly child support payments of $21,800 ($10,900 per kid) for the two kids that they had together as seen here. In addition to this William also agreed to pay for college for the children. This agreement overruled an initial prenuptial agreement where Angela would have only got 1% of William’s net worth. At the time in 2000, he was worth $650 million which would have been a little less than $7 million. After the divorce from Angela William had former lover Marie Beard moved into his $30 million 30,000 square foot mansion. At the same time William reportedly trying to romance Barbara Chevellard. William is now married to Bridget Rooney who was married to Kevin Costner. 

Speaking of family William also wants to build his own town in western Colorado that will just be for his friends, family, and historians. In 2007, William spent $51 million on four properties in Aspen, Colorado. One of the properties is 17,000 square feet. This of course was after Charles and David each purchased $2.5 million homes in 1992. This article talks about how beginning in 2007 William started to buy up land in Bear Ranch which is near the Ragged Mountains. The town has its own train station, saloon, and firehouse. William also uses his money for charity as well. In 1994, William gave $5 million to help fight crime in Kansas and founded the Koch Crime Commission according to this article.  According to this profile William donated $64.6 million in 2011. He created and funded Oxbridge Academy for $50 million. Speaking of education William also had three degrees from MIT including a doctorate in chemical engineering which was 372 pages and entitled "Flow of Light Gases, Through the Voids, On the Surface, And In The Solid of A Solid Microporous Media" where the citation can be found here from the MIT library. Truly William Koch is an interesting man.