The musings of a physician who served the community for over six decades
367 Topics
Downtown A discussion about downtown area in Philadelphia and connections from today with its historical past.
West of Broad A collection of articles about the area west of Broad Street, Philadelphia, Pennsylvania.
Delaware (State of) Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Religious Philadelphia William Penn wanted a colony with religious freedom. A considerable number, if not the majority, of American religious denominations were founded in this city. The main misconception about religious Philadelphia is that it is Quaker-dominated. But the broader misconception is that it is not Quaker-dominated.
Particular Sights to See:Center City Taxi drivers tell tourists that Center City is a "shining city on a hill". During the Industrial Era, the city almost urbanized out to the county line, and then retreated. Right now, the urban center is surrounded by a semi-deserted ring of former factories.
Philadelphia's Middle Urban Ring Philadelphia grew rapidly for seventy years after the Civil War, then gradually lost population. Skyscrapers drain population upwards, suburbs beckon outwards. The result: a ring around center city, mixed prosperous and dilapidated. Future in doubt.
Historical Motor Excursion North of Philadelphia The narrow waist of New Jersey was the upper border of William Penn's vast land holdings, and the outer edge of Quaker influence. In 1776-77, Lord Howe made this strip the main highway of his attempt to subjugate the Colonies.
Land Tour Around Delaware Bay Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Tourist Trips Around Philadelphia and the Quaker Colonies The states of Pennsylvania, Delaware, and southern New Jersey all belonged to William Penn the Quaker. He was the largest private landholder in American history. Using explicit directions, comprehensive touring of the Quaker Colonies takes seven full days. Local residents would need a couple dozen one-day trips to get up to speed.
Touring Philadelphia's Western Regions Philadelpia County had two hundred farms in 1950, but is now thickly settled in all directions. Western regions along the Schuylkill are still spread out somewhat; with many historic estates.
Up the King's High Way New Jersey has a narrow waistline, with New York harbor at one end, and Delaware Bay on the other. Traffic and history travelled the Kings Highway along this path between New York and Philadelphia.
Arch Street: from Sixth to Second When the large meeting house at Fourth and Arch was built, many Quakers moved their houses to the area. At that time, "North of Market" implied the Quaker region of town.
Up Market Street to Sixth and Walnut Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
Sixth and Walnut over to Broad and Sansom In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Montgomery and Bucks Counties The Philadelphia metropolitan region has five Pennsylvania counties, four New Jersey counties, one northern county in the state of Delaware. Here are the four Pennsylvania suburban ones.
Northern Overland Escape Path of the Philadelphia Tories 1 of 1 (16) Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
City Hall to Chestnut Hill There are lots of ways to go from City Hall to Chestnut Hill, including the train from Suburban Station, or from 11th and Market. This tour imagines your driving your car out the Ben Franklin Parkway to Kelly Drive, and then up the Wissahickon.
Philadelphia Reflections is a history of the area around Philadelphia, PA
... William Penn's Quaker Colonies
plus medicine, economics and politics ... nearly 4,000 articles in all
Philadelphia Reflections now has a companion tour book! Buy it on Amazon
Philadelphia Revelations
Try the search box to the left if you don't see what you're looking for on this page.
George R. Fisher, III, M.D.
Obituary
George R. Fisher, III, M.D.
Age: 97 of Philadelphia, formerly of Haddonfield
Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.
Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”
After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.
He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.
After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).
A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.
He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.
A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.
Location: Aux Anysetiers du Roy, 61, rue St. Louis en L'Isle Metro: Sully Morland or Pont Marie
7:00pm: Dinner will be served; Registration and pre-payment was required for this event.
Monday, May 12th:
9:00am - 9:15am: Arrival and registration. A light breakfast will be provided.
Location: Bistro de la Muette, 10, Chaussee de la Muette 75016 Paris Metro: Muette
9:15 am - 10:00 am: Presentation by Michael Kennedy, Head of the General Economic Assessment Division, Department of Economics, OECD, on Outlook by the OECD.
10:15am - 11:30am: Round-table discussion directed by John Silvia, Chief Economist, Wachovia Bank, including Paul Thomas, Chief Economist, Intel, Tom O'Connell, Assistant Director-General of Central Bank of Ireland, Sandra Pianalto, President of Cleveland Federal Reserve Bank, Mario Baldassarri, Senator, The Republic of Italy, and David Kotok, CIO, Cumberland Advisors. Each participant will introduce a topic of concern to the group with GIC delegates acting as discussants. Chatham House Rule will apply.
12:15pm - 1:30pm: Lunch at Bistro de la Muette, sponsored by Cumberland Advisors and Wachovia.
1:30pm-7:00pm Free Time
7:00pm - 7:30pm: Cocktails and Hors d'oeuvres.
Location: Cercle de L'Union Interalliee, No. 33 Rue du Faubourg Saint-Honor' 75008 Paris Metro: Concorde or Madeleine, 5-10 minute walks
7:30pm: Private dinner with Paolo Garonna, Deputy Executive Secretary United Nations
Economic Commission for Europe and sponsored by Cohen and Company. Dress code for the club requires a jacket and tie, no blue jeans or tennis shoes please.
Tuesday, May 13th:
8:45am-1:10pm: GIC & CEPII Conference "Monetary Policy and the Exchange Rate: The Euro and the Dollar"
Location: Maison des Arts et M'tiers, 9 bis Avenue d'I'na, 75116 Paris, Metro: Iena
Full Program will be distributed at the event. Speakers and moderators include:
William Dunkelberg, Chairman, Global Interdependence Center
Agn's B'nassy-Qu'r', Director, CEPII
Lionel Fontagn', CEPII
David Kotok, Chief Investment Officer, Cumberland Advisors
David Woo, Head of Foreign Exchange Strategy, Barclays Capital
Manuel Balmaseda, Chief Economist, CEMEX
Denis Verret, Senior Vice Preside of Operations and Sales, EADS
William Clark, Director, New Jersey Division of Investments
Laurence Boone, Chief French Economist, Barclays Capital
Sandra Pianalto, President, Federal Reserve Bank of Cleveland
Christian Noyer, Governor, Banque de France
1:10 pm ' 2:30 pm: Luncheon for conference attendees at the Maison des Arts et Metiers sponsored by Barclay's Capital
7:00 pm: Dinner hosted by Christian Noyer, Governor of the Banque de France.
Location: Banque de France, Gold Library, 39, rue Croix des Petits Champs ' 75001.
Please enter via 2 rue Radziwill, at the north end of the Bank. Recommended metro stops for the Banque de France are Bourse, Palais Royal-Louvre, Louvre-Rivoli or Pyramides, all a ten-minute walk to the Banque de France. Dress code for the evening requires a jacket and tie. For security purposes, please bring invitation and photo ID and allow an extra ten minutes for security processes.
Wednesday, May 14th:
9:30 am: Arrive at the French National Archives, for security process. Please bring your passport for security purposes.
Location: French National Archives, 1 rue Roberty Esnault Peltierie, corner of 37 Quai d'Orsay, 75 007 Paris Metro: Invalides
10:00 am: Private tour of French National Archives where GIC delegation will have a viewing of French historical treasures such as the Louisiana Purchase signed by Thomas Jefferson, Original Treaty of Alliance signed by Benjamin Franklin, Original Treaty of Versailles as well as other historical documents.
1:00 pm: Luncheon hosted by Mr. Arnaud de Bresson, Managing Director, Paris EUROPLACE.
Location: Place de la Bourse, Palais Brongniart, 75 002 Paris Metro: Bourse (line #3)
Lunch will be followed by the presentation of the Paris financial market place.
4:00 pm ' 5:00 pm: Travel to meeting with Christine Lagarde, Minister of Finance. Please arrive by 4:30 to pass through security.
Location: Ministry of Finance Building,139 Rue de Bercy, Paris 12 Metro: Bercy.
5:00 pm ' 6:00 pm: Private meeting with Christine Lagarde, Finance Minister of France. Please bring a passport for security purposes.
It's a convenience for the insurance company perhaps since it reduces the insurance cost by 20% and is easily figured on the back of a salesman's envelope. Therefore it helps in the three-way negotiation between the employer, the insurance company, and the union. The union calculates how much income tax the employees save by how much income is split between the "fringe benefits" (non-taxable) and the "pay packet" (taxable), and the negotiations shift around these offsets, usually at the end of grueling collective bargaining.
It was once explained to me that Co-pay was very popular with negotiators for unions and management because it was easy to calculate the total cost of it for an entire self-insured corporation. If a proposed budget for the employees was known, and the budget for health benefits was agreed, the arithmetic was easy. If the company has a 20% co-pay, it can reduce the company's total insurance cost by 20%, and if it doesn't come out right, you can negotiate 18% or 22% or whatever. Late at night when these negotiations characteristically get serious, the cost of the offer and counter-offer can be quickly calculated. By contrast, if a deductible is proposed, you have to know how many people use the program, how often they would get sick per year, and even so the calculation is difficult, requiring actuaries or at least accountants. So, the explanation ran, everybody, likes co-pay, and everybody hates deductibles. The insurance people present especially like co-pay, because there will soon be a demand to add it to the package as second insurance, and the premiums for that are also easily quoted, up or down as the negotiations proceed. When it got to involve Medicare and Medicaid, the Congressmen were in essentially the same position of only wanting to know what bulk costs of the whole program would be. In short, co-pay is easy to "score". But the best that can be said for it is, it's just another short-term benefit for which long-term costs are increased because there are diminished incentives for the third-party to hold them back. Just kick the can down the road.
It has never seemed completely credible that anyone would base expensive decisions on considerations so trivial, but you never know. Having invented Medical Savings Accounts with John McClaughry in 1980, for me the mysterious resistance to high deductibles has never seemed adequately explained. Negotiators must easily see that two (or three) insurance policies will be more expensive to administer than just one. They must immediately acknowledge that being 100% insured will increase costs by making the beneficiary ignore the cost, and they are probably willing to accept (off the record) the American Actuary Association's estimate that costs are thereby increased 30%. That much alone would free up about 5% of the Gross Domestic Product since we are currently spending 18% of GDP on Health care. There has almost seemed no point to go on that wages could be increased by diverting this wasted money to the pay packet, to say nothing of the frustration many doctors feel at having no idea of the true cost of what they order, and hence little interest in making the number smaller. Obviously, if true costs are concealed, they go up. This blinding of the doctor to true costs is what makes cost-shifting easy to do without criticism. The absence of a pool of deductibles makes it impossible to generate compound interest, and that in turn makes it less practical to consider "portability" of health insurance from one employer to the next. It is at the very root of fictitious costs for medical care of all sorts, which somehow seem to the advantage of many participants in the health field. Eliminating co-pay would result in a small saving, and it probably would result in a big saving in healthcare costs. The aggregate national savings would be astonishing. Health Savings Accounts are slow to be adopted, not because they fail to save money, but because state laws have imposed mandatory insurance benefits for small-cost items, apparently passed for the main purpose of undermining deductibles.
Most people initially resist the idea of a high deductible on the ground that poor people can't afford it. When it is explained that what is intended is basically to give the poor the money to pay for it, most resistance disappears. A more correct description is that some method is constructed to give them the money, but in a way that allows them to spend money left over from healthcare, for something else they want to buy. The ability to buy something else is not the same as wasting it, and safeguards are only prudent. Retirement is the use most commonly considered. Because interest rates are being suppressed by the Federal Reserve, this proposal may be somewhat retarded for a year or two, until interest rates return to normal levels. Addition of an inflation-protection feature (like TIPS) might well enhance its attractiveness. Ultimately, the first step would be to eliminate Co-pays. Completely and permanently.
The Henry Kaiser caper. In 1943 during the Second World War, Henry Kaiser has given "Liberty Ship" contracts to build freighters for the Pacific Theater. To build ships in East Coast shipyards was to invite German U-boats to sink them as they headed for the Panama Canal. There was a price-control mandate from the War Production Board, seeking to restrain wartime inflation by prohibiting raises or bonuses. So Kaiser protested he had difficulty attracting steelworkers to California because he could not offer incentives to move. By whatever means of persuasion, Kaiser was able to obtain an exemption, permitting him to treat healthcare fringe benefits as non-salary, thus exempt from income taxation. As Cicero noticed, "In times of war, the Law falls silent." Other expedients may have been allowed, just in order to win the war, but such loopholes were apparently closed after victory was achieved. This one persisted.
Henry J. Kaiser
In later post-war years, just exactly who negotiated with whom remains unclear, but in essence, the IRS continued to treat employer health benefits as tax-exempt gifts and still does, eighty years later -- provided the employer pays the premium. This unintended post-war extension is fiercely defended by organized labor whenever someone brings it up, and they are quietly supported by the management of a big business. Congressmen are scared of the whole subject because of bad experiences with united lobbying, linking unions, and big business. In Washington, such an alliance unites the support of the leaders of both political parties. It must be mentioned here that Government itself is one of the biggest beneficiaries, acting as a huge employer offering fringe benefits, itself. Consequently, Congress itself finds it has a conflict of interest when the subject is on the floor.
The ones carrying the placards are seldom running the show.
Protest Politics
The central feature is, the employer must give a gift of insurance to the employee; self-employed and unemployed persons are not entitled to it, nor would employees be, if they bought it for themselves. After a while economists agree the gift becomes an accepted part of the wage cost and the pay packet gradually falls to adjust for it. However, other taxes and charges are based as a percent of wages, and so the gift results in even greater tax benefit than the same amount in wages would. How long it takes for wages to adjust an equivalent amount can be argued, but after eighty years, it is safe to say they are fully adjusted. Since the corporate income tax is about double the individual rate, the savings to the employer are appreciably greater than the savings to the employee.
The clamor to retain this tax ruse is joined by non-profit charities and state, local and federal businesses, who are included in the favored tax-excluded group -- even though it would appear the employers do not share in this feature. Their revenues are often fixed, and their budgets have shifted to expect this gift; consequently, their noise is equally loud when discontinuation is suggested. My own medical society employees participate. As James Madison feared when he designed the Constitution, the number in the wagon being pulled outnumber the people pulling the wagon. In the lobbying case, the ones carrying the placards are seldom the ones running the show, and seldom fully understand the issue.
Small businesses are entitled to the tax exemption but many do not avail themselves of the opportunity when they discover premium rates for their group of employees are often higher than the individual rate. Furthermore, small businesses are overall less dependably profitable than big ones, so their tax rates are usually lower. The essence of the self-interest of big business for "employee" health benefits tends to concentrate in those companies who make big profits, and thus pay high corporate taxes; less profitable businesses have less tax liability to play games with. Things take time to emerge, but after eighty years there has been plenty of time for the "gift" to be taken for granted, and the pay packet gradually adjusted to recognize that fact. Nothing remains to justify it except the tax deduction.
While it is hard to be precise, it is obvious that when things get less expensive they attract more buyers. Generally speaking, higher-wage businesses have lower health insurance premiums, because they can be more selective in their hiring, partly as a consequence of lower costs in their experience rating. Moreover, if an employee somehow gets a gift of his insurance premium, his employer actually saves more than he does, although less attention gets drawn to it. If there is anything a big business gets fierce about, it is to be deprived of savings which seem to result from its own cleverness. In this case, that argument seems more acceptable than it really is, since the benefit is now almost exclusively sustained by lobbying. The employee would have had to pay a higher income tax on a higher salary if he bought his own insurance with after-tax dollars. But that tax is based on his gross before-tax cost, including Social Security, Medicare, and other assessments, which the employer pays less of, on a lowered salary. Nor must he pay half of this and half of that, itemized on the pay stub, in matching money. This part of his cost is reduced by about 35% when he gives away the health insurance, and everything else is a tax wash. That is, other taxes have been warped to take advantage of the tax exclusion, with the result the employer community is not entirely unwilling to have unions demand they be coordinated that way.
The overall result is both employee and employer are better off than by just a straight tax deduction on the insurance premium, while the employer is far better off because he can multiply it by the number of his employees. Google, for example, has 55,000 employees, some of whom are paid extraordinary salaries. And then, the employer's tax deduction is against a 40% tax rate instead of against a blended tax rate for the employees of perhaps 20%. And finally, the insurance premium is reduced below the individual rate by forming a group and demanding hospital discounts. All of this is the result of gifting health insurance premiums on behalf of the employees. For executives with a very high salary, it can probably accomplish remarkable savings for the shareholders by giving the executive a Cadillac plan. Because it makes a good smoke-screen, no one troubles to correct wide-spread misapprehensions, especially among others who are already tax-exempt.
Gifts to employees are more tax-sheltered than equivalent salary would be.
Indeed, a little multiplication is convincing that tax abatement is not only supporting a substantial proportion of health insurance, but it represents a noticeable portion of corporate profits. So, although a major portion of this distortion would soon readjust to a new climate of opinion, any move in the direction of removing it abruptly would probably unnerve the stock market for an indeterminate time. It took eighty years to build up to this condition, and it cannot be corrected in a few days. It would, therefore, be important to have a solution to it, ready to be announced. Here's my proposal.
Proposal 4: That a schedule of reduction of both the tax exemption of employer-based health insurance and the corporate income tax be prepared along the following lines: That in consultation with economists, the corporate income tax rate be reduced until it matches the average blended individual tax rate. And the tax exemption for employer-based health insurance be reduced in a step-wise fashion until it disappears. The process shall take no longer than three (3) tax years, keep the two reductions in balance, and be commented upon by the Federal Reserve, and overseen by an appropriate committee of both House and Senate.
While it is conventional to ascribe a tax evasion to the employee and to blame it on those dreadful unions, the employer gets somewhat more tax benefit than each employee, multiplied by thousands of employees in the bigger firms -- but it's just a tax dodge for both shareholders and employees, with the shareholders coming out somewhat ahead. Nevertheless, the employer advantage mostly derives from comparing an individual employee gain with an aggregated corporation gain. It may reflect union salesmanship that the aggregate employee gain is usually not displayed since that immediately makes the two more nearly equal.
Since salesmanship has come up, I might as well apply a little of it to my own proposal. I believe sober analysis reaches the conclusion that the tax exemption is about all that matters, to anyone. Following the proposal, the government would gain taxes and corporation stakeholders would have to pay them. The shareholders would be compensated by a corporate tax reduction, but the employees would not. Although the employer might argue either side, the employees would be the ones who would surely complain. But let's take it another step.
Let's recall what happened in Ireland when the corporate tax rate was reduced to 12.5% in 1983 from its former rate of 50% in 1982. Essentially nothing happened to government revenue, which has only varied at much as 10% between 1975 and 2015. There was hardly a ripple in 1983. That's not to say nothing happened, it just did not affect government revenue much. For that to be the case, it is mathematically necessary to have more corporations, each paying less tax. That's indeed what seemed to happen, but it took twenty years to convulse the Irish economy, starting from a comparatively low level. Ireland is mostly a rural nation, and new corporations came in from abroad (UK and Scandinavia, mostly) to locate primarily in Dublin, as city dwellers. That started a housing boom, which required mortgages, and eventually toppled the banks. The
Irish corporate tax rates remained at 12.5% before, during and after the crash. The present American state and the federal tax rate are the highest in the world, and our situation is that corporations are fleeing abroad to escape it. The corporate tax refugees in Ireland have so far generally remained in Ireland, probably because it is disruptive to move and the people speak English.
Judging by the Irish experience, America could similarly expect the fundamentals might change more slowly than might be guessed, but probably more quickly than they did in Ireland. The net effect on government revenues would be negligible, but the effect on employment would be strikingly positive. With higher employment, wages would rise. Somebody would lose, but it wouldn't be America; a deft new President might even be able to deploy some new power abroad, peacefully but firmly.
The current President might have to ride a bucking broncho for a few weeks. So in summary, most of the economic turmoil to be feared would likely be short-term and in the financial markets. I can easily imagine the skepticism with which the affected employees would greet this analysis and all the op-ed columns in the usual newspapers. Balanced against that, American medical care would at least get a lot of distortion wrung out of its accounting processes, and surely would be improved in the long run, by regaining control of its own finances.
Let's return to the details. It is sometimes argued the gift of insurance premiums is an addition to the salary, but almost all economists agree the salary soon re-adjusts up or down, to reappear in the pay packet. Stop calling it wages and treat it as total wage costs, and you soon see the point. No doubt it takes time to adjust, and it seems fair to say the employer benefits from corporate tax reduction more quickly than the individual employee does. The tax amount comes close to $2000 per year per employee. Because the hidden benefit lies in taxes, the profitability of the company enters in as well, and what is true of one employer may not be as true of another. In particular, it is not true of the government and non-profit sectors, who have no corporate income taxes to pay. There may be some political hope in that.
If a business is profitable to the full limit of corporate taxes, the nominal benefit is the full limit of the employee's tax bracket, but the offset to the employer can be about twice that rate in corporate taxes. Here, we assume a blended income tax rate of 20% for the employee and 39% top state and federal rates for the employer. In companies with 10,000 employees, financial saving alone can be considerable. Almost all corporations listed on an exchange are profitable most of the time; there might be more swing in smaller businesses.
Anyway, sometimes it just seems more attractive for small businesses to have Subchapter S tax treatment. On that subject, it is a little difficult to say what pressures motivate small family businesses. Some people allege the whole Subchapter S complexity is a reaction to utilizing this distinction and therefore should be counted as an indirect benefit of the Henry Kaiser gambit. During the 2009 Tea Party agitations however, it was noticeable that small businessmen at the microphone were extremely vocal in their opposition to Obamacare. Unfortunately, it is hard to know how well small business understands the inside operations of big businesses. As they say, Macy's doesn't tell Gimbels.
With regard to all employees as a class, it seems safe to say, people who are well enough to be employed, have mostly lower healthcare costs, and therefore seem more attractive in the eyes of their health insurance company. That would maybe result in lower premiums. Since only 25% of persons aged 25-34 are insured, Obamacare calculated they would break even if they enrolled 40% of the "young invincibles" at average rates. Generally speaking, that would be males, who -- without the Henry Kaiser gimmick -- might have an 80% avoidance rate. But remember, there's also the automobile insurance phenomenon: compulsory auto insurance induces a great many to stop paying premiums after the first month or two.
With Obamacare, the dropout rate is reported to be 13% during the first year of operation. The kids resent being overcharged for something they feel they don't need and calling them "young invincibles" inflames rather than softens that feeling. The much more important point is they don't get anything back when they are older , except sympathy. That's the central flaw in employer-based one-year term insurance, and let's hope you notice the Health Savings Account corrects the injustice. With auto accidents, young people have higher rates, and that's accepted as normal. With health insurance following the same logic, it ought to be the other way around, shouldn't it?
Taken all together, it is pretty easy to see why big business demanded a one-year exempted delay from Obamacare, which later was extended another year. No doubt they intend to keep a low profile but will keep demanding "temporary" exemptions, at least until the recession is over, and possibly forever. Until we see the eventual experience with employees, the largest group affected, it will be impossible to predict the limits of the subsidy program for the uninsured. Nevertheless, it is fairly obvious this essentially political impasse is being treated as an untouchable issue, and believable estimations of "fairness" will be a long time in coming. Businesses of all sizes like to present themselves as a big happy family. But in fact, the large common market produced by our continental boundaries means a comparatively small amount of American trade (but admittedly a growing one) is international. The main competition for big American business is small American business, and don't you forget it.
To a fairly large extent, this split is also a split between family-controlled business and stockholder-controlled business, between Subchapter S and Subchapter C corporations, and between university-educated management and small-college educated bosses. It's geographic, it's regional; it's R and it's D. If you ever watched a pro football game with businessmen in the audience, you know both large ones and small ones always feel challenged, and both intend to win, even when they might both end up losing.
Solutions: Nevertheless, the issue of revenue neutrality, at least for employer-based health insurance, is easily summarized. You don't have to be a professional negotiator to see that something close to a 2/3 exemption for everybody could make it revenue neutral. And then, through inflation and other traditional means of attrition, mid-course corrections might whittle it down.
But that's only part of it. Remember, the employee payroll deduction is only half of the issue. The employer gets the other half, by paying lower corporate taxes. His total payroll cost ends up much the same, but by this time the reader should see that doesn't matter. Corporate taxes are too high, probably in part because of class antagonisms. We have a flight of corporations abroad, and we see the Irish example that you shouldn't go too fast. But a reassuring part of this problem is we have Congress to negotiate it. Having learned how to raise food stamps by raising farm subsidies, they don't need any lessons in triangulation. No need to mention volume discounts on the insurance premiums, and discounts the insurance company shifts to the hospital. The details of such features are not public information.
Taken altogether, it sometimes appears equal treatment might be easier to attain than the elimination of the tax exemption. If everyone received a tax exemption, at least in part, we might at least eliminate the distortions imposed by rent-seeking the loopholes. It might raise healthcare prices at a time we need to lower them, so a stepwise approach might turn out to be the only feasible one. This is a time when healthcare is so expensive that only a really radical approach might be noticeable. Perhaps it is time just to get rid of the inequality, so later sacrifices for the economy will not seem so hypocritical.
There's one other misconception to be wary of. A tax reduction at the 50% employer rate is not at all the same as a 50% reduction of the employer's taxes, although it may sound like it. It's likely to be far smaller.
In the last fifty or so years, American life expectancy has increased by thirty years, enough extra time for three extra doublings at seven percent. So, 2,4,8. Whatever money the average person would have had when he died in 1900, is now expected to be eight times as great, since he dies thirty years later in life. And even if he should lose half of it in some stock market crash, he will still retain four times as much as he formerly would have, at the earlier death date.
The lucky reason increased longevity might rescue us is the doubling rate started soaring upward at about the time it got extended by improved longevity in 1900 (when life expectancy was 47). In particular, look below at the whole family of curves. Its yield turns increasingly upward for interest rates between 5% and 10%, and every extra tenth of a percent boosts it appreciably more. Let's take a small example. Why don't we invest everything in "small" capitalization companies? Because there aren't enough of them to support such a large diversion to a frozen account. We are therefore forced to concentrate in large capitalization corporations, yielding only 11%. A few tenths of a percent extra yield might be squeezed out of this curiosity. Life expectancy is slowly but steadily lengthening. And so on. It's useful for the nation to realize that having everybody live longer is a good thing, just as long as too many extra people don't get sick with something expensive.
In the past century, inflation has averaged 3% per year, and small-capitalization common stock averaged 12.7%. That results in an after-tax growth of 9.7%. Some people consider 3% inflation to be good for the economy, many do not. The bottom line: many things have changed, in health, in longevity, and in stock market transaction costs. Those things may have seemed to have deviated very little, but with the simple multipliers we have pointed out, that upturn in income at the end of life becomes steadily magnified. If you do nothing at 3%, your money will be all gone in thirty-three years. That is if you leave your savings in cash. While it is true there are risks with all choices, the option of being a deer in the headlights is a poor one. There's a small but critical margin, and everyone must collectively struggle for very small improvements in it.
If you work at things just a little, you take advantage of the progressive widening of two curves, also shown on the graph: three percent (for inflation) remains pretty flat, but seven percent (for investment income) starts to soar much earlier. Up to 7%, there is a reasonable choice between stocks and bonds; but if you need more than 7% you must invest in stocks. Future inflation and future stock returns may remain at 3 and 7, forever, or they may get tinkered with. But the 3% and 7% curves right now are getting further apart with every year of increasing longevity. Some people will get lucky or take inordinate risks, and for them, the 10% (large-company stocks) investment curve might widen from a 3% inflation curve a whole lot faster. But except for desperate gamblers, every single tenth of a percent net improvement, will cast a long shadow. That means blue-chip common stocks are best, except during a black swan crash where all bets are off, but bonds are probably least bad.
Save it, or Spend it.
You can't do both.
But never forget the reverse: a 7% investment rate will certainly grow much faster than 4% will, but if people allow this windfall to be taxed, gambled or swindled, the proposal you are reading will fall short of its promise. We are offering a way to minimize taxes, the other two risks are your own problem. Our economy operates between a relatively flat 3% and a sharply rising 4-5%. In other words, it wouldn't have to rise much above 3% inflation rate to be starting to spiral out of control. Our Federal Reserve is well aware of this, but the public isn't. A sudden international economic tidal wave could easily push inflation out of control, in our country just as much as Greece or Portugal if they leave the Euro. Another issue: As developing, nations grow more prosperous, our Federal Reserve controls a progressively smaller proportion of international currency. Therefore, we could do less to stem a crisis that we have done in the past.
To summarize, on the revenue side of the ledger, we note the arithmetic that a single deposit of about $55 in a Health Savings Account in 1923 might have grown to about $350,000 by today, in the year 2015, because the stock market did achieve more than 10% return. It might be more realistic to say $250 at birth rather than $55. but the principle is sound. You can't do it twice, but it ought to work, once. There is therefore considerable attractiveness to the expedient of extending HSA limits down to the age of birth, and up to the date of death. It's really up to Congress to do it.
If the past century's market had grown at merely 6.5% instead of 10%, the $55 would now only be $18,000, so we would already be past the tipping point on rates. You do have to leave some extra room. In plain language, by using a 10% example, $55 could have reached the sum now presently thought by statisticians -- to be the total health expenditure for a lifetime. But by accepting a 6.5% return, the same investment would have fallen well short of enough money for the purpose. Unlike the municipalities that gambled on their pension fund returns, that sort of trap must be anticipated to be avoided.
Things are not entirely hopeless, because 6.5% would remain adequate if our hypothetical newborn had started with $100, still within a conceivable range for subsidies for the poor. But the point to be made provides only a razor-thin margin between buying a Rolls Royce, and buying a motorbike. If you get it right on interest rates and longevity, the cost of the purchase is relatively insignificant. That's the central point of the first two graphs. For some people, it would inevitably lead to investing nothing at all, for personality reasons. Some of the poor will have to be subsidized, some of the timid will have to be prodded.
This is more of a research problem than you would guess: a round-about approach is to eliminate first the diseases which cost so much, choosing between research to do it, or rationing to do it. Right now we have a choice; if we delay, the only remaining choice would be rationing.
Commentary.This discussion is, again, mainly to show the reader the enormous power and complexity of compound interest, which most people under-appreciate, as well as the additional power added through extending life expectancy by thirty years this century, and the surprising boost of passive investment income toward 10% by financial transaction technology. Many conclusions can be drawn, including possibly the conclusion that this proposal leaves too narrow a margin of safety to pay for everything. The conclusion I prefer to reach is that this structure is almost good enough, but requires some additional innovation to be safe enough. That line of reasoning will be pursued in a later chapter.
Revenue growing at 7% will relentlessly grow faster than expenses at 3%. As experience has shown, it is next to impossible to switch health care to the public sector and still expect investment returns at private sector levels. Repayment of overseas debt does not affect actual domestic health expenditures, but it indirectly affects the value of the dollar, greatly. With all its recognized weaknesses, a fairly safe description of present data would be that enormous savings in the healthcare system are possible, but only to the degree, we contain next century's medical cost inflation closer to 2% than to 10%. The simplest way to retain revenue at 7% growth is by anchoring the price leaders within the private sector. The hardest way to do it would be to try to achieve private sector profits, inside the public sector. This chapter describes a middle way. Better than alternatives, perhaps, but nothing miraculous. .
America only needs to price its sovereign bonds to a small spread below the prices of its many component corporate bonds, whereas the common market drives multiple sovereign nations to compete in bond prices. Consequently, half of the member nations will oppose consolidation. because bond rates and prices go in opposite directions. The economically stronger nations, no matter who they happen to be, will always have an incentive to oppose bond consolidation because they see it as the richer nations subsidizing the poorer ones when they wanted to believe their success was their own ingenuity and hard work. When survivors of a previous war are still alive it gets even harder to raise your own costs on behalf of a former enemy. The poorer nations, for their part, pay dearly for the opportunity to inflate away government expenditures. Texas surely nursed feelings of this sort in 1913 when the Federal Reserve demanded national bond rates. But only the ignorant ones feel that way, today. New York is constantly looking for ways to escape subsidizing Alabama, but eventually, the tide will turn. New York and California are eternally bemoaning their high taxes, so there is probably an upper bound to what will work. Meanwhile, stocks in a panic fall further than they should have because they had risen too high.
There are no perfect alternatives, but the volatile nature of interest rates creates opportunities to introduce variable mixtures of active and passive bond pricing, depending on circumstances, as an outgrowth of the obvious need to introduce a new currency gradually. The American experience of having state and federal bond systems coexist may well provide useful guidance, and in any event, shows unification can be accomplished.
109 Volumes
Philadephia: America's Capital, 1774-1800 The Continental Congress met in Philadelphia from 1774 to 1788. Next, the new republic had its capital here from 1790 to 1800. Thoroughly Quaker Philadelphia was in the center of the founding twenty-five years when, and where, the enduring political institutions of America emerged.
Philadelphia: Decline and Fall (1900-2060) The world's richest industrial city in 1900, was defeated and dejected by 1950. Why? Digby Baltzell blamed it on the Quakers. Others blame the Erie Canal, and Andrew Jackson, or maybe Martin van Buren. Some say the city-county consolidation of 1858. Others blame the unions. We rather favor the decline of family business and the rise of the modern corporation in its place.
Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
Start in Philadelphia, take two days to tour around Delaware Bay. Down the New Jersey side to Cape May, ferry over to Lewes, tour up to Dover and New Castle, visit Winterthur, Longwood Gardens, Brandywine Battlefield and art museum, then back to Philadelphia. Try it!
Millions of eye patients have been asked to read the passage from Franklin's autobiography, "I walked up Market Street, etc." which is commonly printed on eye-test cards. Here's your chance to do it.
In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.
