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
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Philadelphia Revelations
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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.
The Economist, printed in London, refers to the United States in its October 17, 2011 edition as the "World's largest currency union", but goes on to state it only became a true currency union in the Presidency of Franklin Roosevelt. That's sort of the case, even though most people suppose Alexander Hamilton unified American monetary affairs with the Compromise of 1790 which among other things traded the nation's capital away from Philadelphia. No, Hamilton only unified the Revolutionary War debts, which to be sure, at that time were the main debts of the new nation. In time, the country and the economy grew in size until our currency was no longer unified because the individual states and banks were legally free to issue their own money. Nicholas Biddle of the Second National Bank had an irritating habit of buying up the circulating currency of a weak bank and presenting it as a bagful to the teller's window. If the bank was really overextended, it then went bankrupt, and other marginal currency-issuers could observe a bitter stress test about printing unreserved paper money. According to The Economist, the main stabilizer was not a migration of money, but the migration of workers. Unemployed people by the many thousand would move to a state or territory with a labor shortage, a solution made practical by the extremely low cost of real estate. In Europe, a far more practical adjustment remains the moving of funds from one state to another, although there is today enough migration across the Mediterranean to demonstrate how disruptive it is to mix extremes of unwelcome language, religion, and culture. In comparing the American and European experiences we thus have two quite different systems to compare, although distinctive conditions often bring out the main issues. The problem of maintaining a common currency union, for example, is hard enough, while the Europeans have the similar but not identical problem of devising a stable one from a large number of different ones.
After three hundred years of fumbling America has perhaps muddled through to a currency union that works. Resting on the fact that most Americans are either debtors or creditors and the rest mostly don't care, the quantity and value of American dollars since 1913 have been negotiated between banking and the U.S. Treasury with the Federal Reserve as umpire. During that last century we have endured two major depressions and a dozen recessions, abandoned the gold standard and fought a number of wars; but the American currency union has never given serious signs of weakness. It would appear that the main problems with currency unions appear at the beginning, in putting them together. After the transition, things appear to get easier. Bank profits are improved by higher interest rates, while all governments, perpetually in debt, want lower ones. Ultimately, of course, the real tension is between the creditors and debtors, but banks and Treasury seem adequate surrogates. Most creditors place trust in the incentives of banks to prevail, debtors trust government; both sides should have learned trickiness in endless negotiations is futile. What was once a battlefield, is now mostly peaceful; these people actually respect each other. Many people may occasionally dislike an outcome, but all acknowledge the tension produces legitimate compromise.
Match Wits with Ben Franklin
Aside from some "don't ask, don't tell" mystery that somehow compels assent by regions of the country who feel betrayed by agreements their representatives have made, negotiating postures are pretty simple and clear. It is safely assumed the government wants to inflate; all governments have done so for thousands of years. Therefore, the basic Federal Reserve policy of targeting interest rates to restrain inflation is probably a concession to banks. Banks would mostly want the highest rate that does not cause a recession. Debtors do not mind lower rates leading to just a little inflation, hoping to pay off their debts later with cheaper money. Government, acting as an agent for debtors, additionally knows that rampant inflation loses elections and occasionally, as in inter-war Germany and Austria, destroys the middle class. So, with everyone else resisting inflation, debtors must be satisfied with 2% annual inflation. That's arbitrary, reflecting its origin in the haggling process. Inflation-targeting plus two percent; that's the system.
If only there weren't all those other countries in the world. If they inflate or deflate, we could just float our currency exchange rate to maintain international trade; that isn't so bad, although frequent readjustment of prices is a costly nuisance. But if some country freezes its currency at an unrealistic price, speculators will move money around to take advantage. Enter Gresham's Law (commonly expressed as "Bad money drives out the Good".) Gresham's original phrasing is actually apter: "When two currencies of unequal value circulate together, the good currency quickly disappears." So, when truant governments cheat on currency values, well-behaved countries find their own currency getting hoarded. Potentially, that leads to currency shortages, as happened to Argentina when Brazil devalued in 1999. So, countries running an honest currency nevertheless feel pressure to print more; Brazil "exported its inflation" to Argentina. Plenty of wars have been started for less provocation. When something causes that extra money to come out of hiding, there will be spreading inflation, notwithstanding attempts to isolate foreign inflation by the central banks of more responsible nations. Furthermore, runaway inflation can unsettle governments, as it did in the Argentina example, going from one extreme to the opposite. There is thus wide-spread sympathy for currency unions, even though locally independent currencies can sometimes better adjust to local commotions, typically by devaluing the currency and then rejoining the currency union at a more realistic price.
The Federal Reserve in our case would be forced to raise interest rates sky high, promptly triggering housing and stock market crashes. So the point returns; if our Federal Reserve system works so well, why can't everybody does the same thing on an international level. In fact, what's the matter with having one big world currency?
Maybe, some say, we could have a World Reserve Bank, issuing a common international currency. What we now have in place is U.S. money serving as a Reserve Currency for the world. The force behind this system is again Gresham's Law, that since we have the strongest currency in the world when it circulates in other countries in the company of weaker local currencies, it quickly "disappears". That is, it is hoarded out of sight until nothing but local money remains visible. Under these circumstances, only the United States with the world's Reserve currency is able to print money without creating inflation. Unfortunately, that implies that if it should ever weaken, it will quickly reappear and flood the host country with inflation, whereupon the host government will ship it all back to enjoy your own inflation, thank you. Thus, being the reserve currency for the whole world allows you to have some inflation and ship it abroad, but if it ever comes back home, there could be a painful disruption. The last time this happened was when the British Pound surrendered the reserve role to the American dollar. It was a bad time for the British economy.
The question periodically arises whether it might be better to use a "basket" of currencies as the reserve against temporary monetary shortages, with the United States trading away some of its free ride on inflation in return for reducing the risk of someday getting it all back at once.
Using a basket of everybody's money as a pool of international reserves might smooth out the tidal waves, but it probably would not create the same stability from tempests we enjoy with the Federal Reserve. If you regard a country's money supply as one big short-term bond, then a basket of currencies is a basket of bonds, issued by a world full of debtors. In that situation, pressure for worldwide inflation is inevitable. In a world with nationalized banks and/or subsidized banking systems, it is hard to imagine any international banking voice without a strong political component. Mandatory contributions of gold bullion might be considered, but it is hard to think of an adequate substitute for the flexibility of adversary tension between permanent creditors and permanent debtors. The situation is not permanently hopeless however, just remote. The enduring risk is that some nations always have more to lose from a collapse of trade than others. Continuing improvement in world economic conditions may one day make a unified world currency feasible. As St. Augustine famously said, "Make me chaste, but not yet."
REFERENCES
Runaway America: Benjamin Franklin, Slavery, and the American Revolution, David Waldstreicher ISBN-13: 978-0809083152
A bank has depositors' money in custody and makes a profit from loans of it. This amounts to borrowing money from depositors at a low-interest rate, then loaning it to borrowers at a higher rate. Banks can also borrow from other banks, or effectively a loan to the Federal Reserve by buying U.S. Treasury bonds. At one time, banks set interest rates for loans by leaning back in the chair and negotiating with the customer; interest rates were whatever the traffic would bear. After a long and complicated history, which includes the Catholic Church's forbidding interest-bearing loans, Henry VIII of England confiscating Church property, the Medici family in Italy and a political battle between Andrew Jackson and Nicholas Biddle, we got to the point where J. P. Morgan more or less decided which banks deserved to fail and neglected to rescue them in the next bank panic. He was in that position because of European, largely British, banking connections. In 1913, the Federal Reserve system was created, with government officials nominally but not totally in charge. Although it now seems pretty natural for the government to be in charge of the nation's money supply, it must be remembered that Robert Morris personally financed the Revolutionary War, Stephen Girard financed the War of 1812 out of his own bank, and J. P. Morgan financed the Spanish American War -- in each case because the government couldn't do it alone. On the other hand, the Civil War (and later, the two World Wars) showed that the nation had outgrown the control of a single private banker. We floundered through gold and silver standards, then bimetallism, then off metal standards entirely.
At the heart of it was an important difference of opinion. The banks were private businesses and didn't want outsiders setting their prices. They particularly didn't want the government to set interest rates after the government itself became a permanently big debtor. It left to them, banks want higher interest rates, governments want lower rates; neither one is a trustworthy referee for the whole country. The 1913 reform locked the two of them in secret struggles within a marble tomb. After eighty years, with one bad inflation, at least two bad depressions, and a dozen stock market crashes, the two combatants seem to have evolved a workable system of agreement on suitable goals and how best to achieve them.
The problem is this. Interstate business and national politics demand uniform national interest rates. But any national rate will be too high for some regions, too low for others. Such an impossible deadlock can only be solved by choosing between tyranny and payoffs. Just how the regional losers in these endless arguments are pacified is not entirely clear, but a recent remark is interesting. One regional governor of the Federal Reserve remarked that you might expect each regional governor to argue for the benefit of his own region, but in fact, there is little of that. No one with experience in politics would conclude from that remark that governors are filled with altruism. But it will apparently take more time before the mechanics of this balancing act are fully understood.
The Federal Reserve Bank
For now, the Federal Reserve can be described as a place where representatives of the regional banks negotiate with a federal appointee, behind closed doors. The question of enforcing a uniform national interest rate was effectively settled for good, shortly after the creation of the Federal Reserve. Texas defied the national rate and lowered Texas rates to meet Texas conditions. Almost instantly, everybody wanted a loan from Texas banks, but no one would deposit money in them. Texas came crawling back to conformity, and the national rate was thenceforth not only legal and ratified, but it was also seen to be self-enforcing. The European Union has recently gone through the same experience, with everyone learning there is simply no way to cheat the system.
One other thing needs mentioning. Total price control of all interest rates would cause rioting in the streets. India and other countries which tried to nationalize their banks have taken thirty years to recover from the experience. The Federal Reserve only controls short-term interest rates, while long-term bond interest remains set by the marketplace. This seems to work well enough for the purpose of regulating the supply of money, but it affects consumers and small businesses who do most of their borrowing through banks. Large corporations generally borrow money by issuing long-term bonds. This difference in application causes a certain amount of grumbling about fairness. But the wisdom of the arrangement was repeatedly illustrated to President William J. Clinton. We hear it reported that time after time some proposal of his was quashed by his Secretary of the Treasury, Robert E. Rubin, quietly commenting, "The bond market won't let you."
Chairman Alan Greenspan
That's how matters stood until the 2007-2009 debacle. The bond market was funded by corporations, overseen and controlled by investment bankers in the IPO process, and effectively ceding control of long-term interest rates to the investment banks, and providing them with a somewhat cheaper source of capital because it came in larger lumps, wholesale. It was in tension with, but essentially out of the direct control of, the government in the form of the Federal Reserve. The commercial banks raised capital by collecting deposits in dribs and drabs, a more expensive but more comfortably stable source. Short term interest rates were related to the overnight lending process between banks and controlled by the Federal Reserve. For many years it was satisfactory for the Fed to influence long term rates without directly controlling them, and the resulting prosperity and stability seemed to vindicate this indirection. However, when the far east and middle east started dumping huge amounts of liquidity into the international monetary pool, the carry trade and direct purchase of U.S. Treasury bonds by foreigners started to pull the two main banking systems apart, first destroying the control of the Federal Reserve over long term interest rates, and ultimately short term as well. Chairman Alan Greenspan exclaimed in the 1990s that the peculiar behavior of long term rates was a "conundrum". His successor, Ben Bernanke, was to find it was reversing the process; long term liquidity was affecting short term rates, and hence distorting the monetary supply. That might have been a workable rearrangement, except that the markets froze up in 2007, confusion was suddenly widespread, and panic reaction caused disorderly markets. Whether from confusion, expediency or deliberate choice, the Fed rescued the commercial banks while allowing the investment banks to go under. Those few investment banks who survived did so by wrapping themselves in a shell of commercial banking. They became one-bank holding companies.
It will be some time before we can judge whether Bernanke made the right choice or not. Commercial banking was on its way to extinction when it allowed itself to become an arm of the Federal Reserve, and perhaps instead it should have been allowed to die. Commercial banking based on collecting deposits is a more expensive way to raise capital than borrowing it wholesale. With credit cards, commercial credit, and asset-backed securities, the other functions of banking were effective enough to make it possible that no one really needed any of the products of commercial banks. The one thing investment banking cannot supply is an unchallengeable monetary standard. Having given up gold and other precious metals, having toyed with using real estate as a surrogate monetary standard, having tried oil and other commodities, we are left with government fiat as the world monetary standard, and commercial banking as the only tested way to make that system work. Going back to the origins of coinage in Lydia, governments have universally proven they cannot be trusted with the currency. Nevertheless, there seems to be no alternative in sight.
Inflation Protection. Let's imagine the typical individual has reached the point where he is writing his will at the age of 90. He has followed our advice, created an HSA, dutifully funded it, and reached the point where his medical expenses are mostly behind him, but -- he has a meaningful amount of money left in the HSA. The existing legislation is pretty relaxed about that, allowing him to convert his HSA into an IRA, and follow its rules for inheritance. That's fine because it has created an incentive all these years, to save just a little extra money in the HSA for contingencies; after paying taxes, he can spend it as he pleases.
The Escrow Fund. It may be fine, but it eventually comes to an end in the face of terminal care costs; at that point, the future is damned. Since most people never know for certain which episode will be the last, indifference to insured costs is fairly general. There needs to be additional restraint against medical cost inflation. We propose that a compartment of Medical Savings Accounts be designated as a single-purpose escrow fund, adhering to the model of buying a life membership in a club, except in this case, it can only buy lifetime health coverage from Medicare. Annually, his fund manager transfers a sum to the individual escrow fund, calculated to reach a buyout price for Medicare coverage at some later age, and assuming the investment income achieves a stated goal. The individual may borrow against the escrow to pay current medical expenses and may need a subsidy to do so, but the escrow may not be spent down. (It continues to generate investment return to the fund which in normal circumstances would exceed the loan interest). At any time he has enough money, our Medicare subscriber can make a voluntary deal with Medicare as follows: If he will turn his escrow fund over to Medicare at his death, then Medicare will no longer collect his full Medicare premiums, starting today. That's a good offer or a bad one, depending on his life expectancy and how much is in the escrow fund; as of today's rules that would typically be several thousand dollars. That's a bad deal for the government if there is inflation. However, for individuals at any age down to age 26, it would seemingly always have made a better deal if he had only made it a year or two earlier. If it had been offered at age 65, it would have made a tremendously better deal than at age 90, because so many more premiums would lie ahead. And before that, if the deal were offered to a working person it could extend to skipping the 6% Medicare payroll tax deductions, which could be a stupendous deal. So let's go back and make a counter-offer using this inflation restraint. It's called the accordion plan, where both the government and the individual must agree on the best year to clinch it, depending on how everything is going. Unfortunately, any system like this requires an unimpeachable monitor.
Buying Out of Medicare. The average person over age 65 is haunted by the possibility that his living expenses will someday exceed his income, so he likes to have as much of his anticipated expenses pre-paid as possible. (He likes to be offered life membership in a club, for example.) So, he proposes to Medicare that they do the arithmetic and tells him at what age they think he could stop paying payroll taxes and/or Medicare premiums to Medicare and pay them into his escrow fund so that he becomes paid-up and no longer cares about medical cost inflation. And if there is no point in time when the two are clearly equal, then how much would he have to supplement the escrow fund from his savings to reach the goal. Since the law of large numbers enables Medicare to predict its average costs with greater precision than the individual can predict his own, a difference between the two prices represents the individual's fear that he might incur substantially higher than average costs. Half of the Medicare beneficiaries will, and half won't, but any individual's actual chances are largely a lottery. So, a substantial number of people would take the deal on terms favorable to Medicare. This isn't exactly the proposal we plan to make, but it illustrates the principle.
Part of the secret of the current proposal is that the individual can have the advantage (and bear the risks) of investing in the equity of private companies, whereas we would squirm if the government owned a big chunk of American private business. Notice for example how quickly the government sold back the stock of General Motors after it had bailed it out. Private individuals might indeed make 10% return on index funds of the entire U.S. stock market, given a 90-year horizon, (and under the discipline that you can't buy high and sell low, because we won't let you sell other than for medical costs). Furthermore, the government can't sell it for you, because you own it independently. This deal would fall apart if inflation unbalanced it, but the value of stocks and the cost of medical care will respond to inflation at about the same rate, providing you wait long enough and use big enough numbers. Nevertheless, it would only seem prudent to appoint an independent agency to monitor and control matters, particularly because stockbrokers are not considered to be fiduciaries, putting the client's interest ahead of their own. In spite of that fact, most people would be astonished at how fast a fund will grow at 10%. Medicare can't get such investment income, because in 1965 it was decided to use the "pay as you go" system, but it is clear that Medicare would sustain much higher debts if we abruptly cut off its payroll tax and premium income. So this process should require each individual to take at least ten years to switch completely, holding each person's "paid up" goal as ransom if he participates in reckless medical spending, and delaying the government's acquiring the escrow if they permit such spending. We are apparently never going back to using gold bars to frustrate government-endorsed inflation of the currency, so we have to devise other self-balancing restraints like this one.
In these days of burdensome health insurance costs, it is useful to consider how health insurance might emulate what is normally done with "whole-life" life insurance. Most life insurance clients to understand that total premiums amount to less than the face value of the policy, while considerably more than the face value is often paid out to the beneficiary. The apparently miraculous appearance of extra money is accounted for, by the ability of the insurance company to invest the premiums until they are needed for benefits. True, life insurance has also prospered from the stretching of longevity by improved healthcare, but that windfall also applies to health insurance. In both cases, improved longevity is hoped-for but not guaranteed, and adds to the safety reserves. The issues to be pondered are how to set final rates so far in advance. Or, if you wait to see how costs actually develop, how to give a useful benefit to someone who by that time is already dead. The life insurance companies have devised their way of managing this awkwardness, which requires public trust in the good faith of their counterparty. Results vary between companies, but in the long run, it doesn't pay to cheat.
The Need for Transparency and the Image of Fair and Square. Transition from an old system to a new one is a familiar problem for legislators. In our case, it may actually facilitate matters by restraining the impulse to take on too much difficulty, all at once. Every citizen is covered for hospital costs in Medicare Part A, and the great majority are covered for physician and outpatient costs by Medicare Part B. Part C is only partial and voluntary, Part D is still on trial. For this discussion, we need not describe the varying ways that Medicare Part A, B, C, and D collect premiums or the historical reasons why they differ. It should be emphasized early, however, that overall direct income falls short of covering overall Medicare benefit costs by 50%, so Medicare is 50% subsidized, and therefore not nearly as stable as the public assumes. It would help a lot, for example, if debt just stops being called an asset on the balance sheets. Everybody enjoys getting a dollar for fifty cents, so the program is more popular than it would be if euphemistic revenue descriptions were discontinued. It is particularly worrisome, that the popular alternative of a "single-payer system" implies simply extending Medicare to persons of all ages. But it also implies extending the 50% hidden tax subsidy to all ages so single-payer consolidation would add an even more unsustainable burden to the national deficit. This apparently irrelevant comment helps explain why the public expected Obamacare to be cheaper than it proved to be, and adds considerably to the urgency to find other revenue sources during a protracted economic recession, for what are proving to be unexpectedly high prices. Hence, the need for more subsidy than was anticipated. The consequent income redistribution is widely resented. Time and again we return to George Washington's central maxim as president: honesty is the best policy.
How To Recycle the Income
Terminal Care is Mostly Medicare
Go With the Flow. To return to the point, almost everybody now dies with terminal expenses covered by Medicare. The medical industry waits for about six months, and eventually gets paid for its services by Medicare, incompletely perhaps, but for the most part. From this is derived the insurance shorthand concept of the "last year of Life costs" which largely represents terminal illness. Along with the obstetrical costs of being born, these two costs are the only two we can safely assume will continue forever. Everything else is like the Federal Reserve's Quantitative Easing. We can be certain it will stop, but we have no idea how long it will take. While we can perceive that medical progress is largely a matter of removing diseases from the list, the allied perception is that younger people are always going to be somewhat healthier than older ones. There will be exceptions like HIV/AIDS, but the perception is probably permanent. Since progressively older people are supported by savings and wealth transfers, the concept of investing the savings of younger people in order to sustain them when they get older, seems a dependable one. It also seems safe to assume that people will resent it less if it is their own money, rather than drawn from a public pool. That is, savings will be resented less than taxes, incentives will be resented less than coercion, and the final outcome will be the accumulation of more savings within private hands than within national treasuries.
Now add the idealized extra specifics: if subscribers by contribution, gift or subsidy create a Health Savings Account early in life, and Medicare can be induced to reduce its own premiums out of recognition of equivalent reserves in the funds, the future payment of (at least) last-year-of-life costs could be assured -- and current premiums for Medicare could be accordingly reduced, putting the money back in people's pockets. In this way, Medicare and the subscriber would adjust to the benefits of a major new revenue source, the investment proceeds of the Health Savings Accounts. A whole bundle of uncertainties absolutely do remain -- the zig-zag of interest rates, the volatility of the stock market, the elimination of some diseases, the creation of expensive new treatments, the actual longevity of the population, and the constant menace of inflation -- but one certainty survives. To a significant degree, a new source of income would effectively lower the cost of health care, even though it may not have paid for all of it precisely. No rationing, no income redistribution, no great change in how medicine is practiced. The opportunity seems too attractive to dismiss, but it must be continuously and openly monitored.
Income is fairly predictable,
Future Costs are not.
Balancing the Books
Simplify. Since the ultimate outcome is uncertain and will surely vary from predicted, adequate provision must be made for both the possibility of surplus and deficiency. Because of possible surplus, residuals should be allowed to pass through inheritance, or to be spent for non-medical purposes, or both, as incentives to compliance rather than circumvention. Because of potential shortfalls, some process for early detection and freezing of shortfalls should also be created, leading to subsidies, and restitution of subsidies, under defined circumstances. To the maximum degree feasible, the "accordion" principle should be employed, whereby benefits are expanded or contracted to reflect surplus and deficiency in the individual Health Savings Account, and indirectly, the growing success or failure of the scheme. Furthermore, the use of average costs rather than specific ones is encouraged, thus making it easier to deal with average lifetime health costs. In a computer age, it is almost as easy to report 300 million individual accounts as to measure by average performance, but it leads to intolerable public confusion about what is happening to the program. If achievable, a transformation from annual bills to lifetime costs would allow the elimination of pre-existing condition exclusions almost without effort, since lifetime liability would remain unlinked to HSA balances, and even largely unaffected by individual catastrophic illness if pooling is added. It might require considerable research, however, to detect the creation of unforeseen loopholes to game the system. Ultimately, that is a gigantic undertaking. The more we can simplify it with self-enforcing incentives, the more likely we can perform the essentials well, side-stepping all the work and aggravation of playing cops and robbers.
Get Started. The two quickest ways to induce large numbers of people to create Health Savings Accounts would be to add a permanent rollover feature to Flexible Spending Accounts, which currently contain a use-it-or-lose-it feature. Because of the cost to employers, it would be a useful opportunity to remind them of the inequity they have enjoyed from seventy years of Henry Kaiser tax exemption. And the second accelerant would be to eliminate the income tax discrimination against it, by allowing health insurance premiums to qualify for purchase by Health Savings Accounts, and thus to become tax-deductible like almost everybody else's health insurance.
IT was spoken hurriedly, and I don't remember who said it. But the gist was that Philadelphia had been the richest city in the world in 1900. In the World, mind you. I can scarcely believe that, but the way it stuck with me shows it had some substance. Rather than comparing Philadelphia with London, New York City, or Paris, I must now compare that exuberance with the dirty, dejected, defeated old wreck of a Philadelphia I first encountered in 1948. Baltimore, Newark and a dozen old American cities sort of crumbled into dust after 1929, but Philadelphia briefly seemed to be picking up in 1948. Richardson Dilworth was getting ready to run for Mayor, and the town's newspapers even enjoyed the idea of a Philadelphia revival. But then the Pennsylvania Railroad collapsed, and after that, we just struggled along, neither dying nor recovering. Some of both, perhaps, but more dying than recovering, and making it credible to believe that Philadelphia just never did recover from the 1929 crash. Just think of that; from top to bottom in thirty years. There just had to be some better explanation than bad management of one railroad.
Until recently, I had accepted the general wisdom that stock market crashes are followed by depressions. Perhaps I am a little slow, but there never seemed to be any question of that analysis, since all major crashes really were followed by recessions, going back to 1792 when Philadelphia had the first American version, and the first financier villain, someone named William Duer. Or maybe it was Robert Morris. Or maybe it was Thomas Mifflin, but in any event, it was someone very rich who did something very reprehensible which toppled the stock market and plunged the rest of us poor victims into protracted suffering. In other scenes of carnage, it had been John Bull, or William Whitney, or Nicholas Biddle. Or J.P. Morgan, that monster. In the 2007 crash, it wasn't so much one villain as one company, Goldman Sachs, or maybe Lehman Brothers. Since the recent crash was so recent, and news coverage so rapid, it might be easier to trace out who the villain was. But there was no one real villain, and even if we found one, it was hard to see why a few days of choked markets would still be causing unemployment seven years later. No one seemed to know, or at least no one wanted to tell me, why stock market crashes cause depressions. They are certainly followed by depressions.
And then suddenly I realized, or maybe someone just broke the news to me, that I had it all backward. Market crashes don't cause depressions, depressions cause market crashes. First, the markets get overheated, everyone gets uneasy, but everyone is making the most money in his life. Suddenly, someone sells out, like shouting "fire" in a crowded theater, and everyone tries to get out the door at the same time. The catastrophe makes everyone see that stocks or real estate, bonds or tulip bulbs, had become ridiculously overpriced, so nobody will buy them at any price. But let's not get down into the weeds of market technicality; prices got disconnected from real values. We overproduced something or even everything, and things wouldn't improve until somebody needed something he had stopped needing, several years earlier. Maybe there were villains, there are always plenty of villains. But we wanted somebody to blame because otherwise, everybody has to take some blame. We needed, in short, a scapegoat.
So let's ask the question again: what caused the great depression of the thirties? And the best answer to come back was the First World War. Philadelphia was the arsenal of democracy, the maker of ships and gunpowder and uniforms. The great transatlantic ocean port, the embarkation point. If we weren't sending troops we were sending tanks and airplanes. The duPonts were sending gunpowder to France, a way of paying back Beaumarchais for sending gunpowder from France to the Battle of Trenton. After their wars were over, one Frenchman went back to making wristwatches and writing plays, and the other munition maker swore off gunpowder and concentrated on nylon stockings. That's far too simple. Philadelphia had expanded and expanded to exploit its wartime advantages. When the war was over the boom was over, but the Roaring Twenties roared. They built mansions, clear out to Paoli and beyond. Movies were written about our hero, who left their jewelry in the vaults of the Girard Bank after the opera while they went back to the horse country at four in the morning. It seems a virtual certainty that no one who acted like that knew what every MBA from Temple now knows: real estate is just about the only link for ordinary people between interest rates and consumption. All assets contribute somewhat to the "Wealth Effect", but real estate is usually the only channel the average person can find, as a way to translate major assets into consumer goods. And since a stock market crash will lower interest rates, the ensuing low cost of mortgages stimulates a real estate boom. Office buildings in the city, mansions in the horse country. But then the city loses its postwar boom and soon loses a million or more population. Result: empty office buildings, empty mansions. Along Spruce and Pine Streets, people moved out of the grand houses and into the servants' houses in the back alleys. Easier to heat.
A friend of mine, whose occupation is locating real estate for businesses, tells me the startling news that land around Philadelphia is too expensive for factories. It seemed hardly credible that real estate could seem so hard to sell, with "For Sale" signs lining the curbs, and yet seem too overpriced for a company to locate here. Suburban Philadelphia house prices were depressed during the Depression so that a seven bedroom Main Line house couldn't find a buyer, but the land was still too expensive for a factory, and anyway, the zoning wouldn't permit a business. Our suburban and exurban land got chopped up into residential real estate, streets were built, sewer lines were extended for miles, trees and ornamentals were planted. Schools and shopping centers were built, maybe some museums and hospitals. But none of that was attractive for a business, and you can't attract an executive to residential real estate without a place to go to work. The features attractive to his wife were not enough to attract him and his business. He wants cheap open land to build factories and vast parking spaces for employees. He doesn't want to get fifty miles away from the port that made Philadelphia prosperous. And he particularly doesn't want to spend his time going to protest meetings about smoke and pollution or go to court to defend his ownership of what someone else polluted, a century earlier. He particularly doesn't want to go to Planned Parenthood meetings with his wife, in order to be hassled about carbon fuels or greenhouse gases in China. Sorry, he's going to build his new plant in North Carolina. And the residential real estate couldn't be made cheap enough for that purpose without tearing down the house, and the schools, and maybe the shopping center. Once the land becomes dedicated, you have to choose: either a nice suburb or a place favorable for a business.
A former President of a Federal Reserve Bank located a thousand miles from Philadelphia was recently here for a conference, and at loose ends for someone to chat with. To my astonishment, he exploded with rage when he contemplated Mr. Obama's refusal to sign permission to build a pipeline from Canada to the Gulf of Mexico. To him, it was obvious that the main thing holding back the American economy was a refusal of American businesses to invest in new plants and equipment. The banks were stuffed with money, but the business refused to borrow it. The Federal Reserve was powerless to stimulate an economy that didn't want to expand, forever pointing to uncertainties of expanding in the face of a regulatory authority which seemed determined to thwart them, to browbeat and humiliate them in front of the TV. It isn't personal, it is serious; because the quarrel is ultimately about important economics. A dollar in 1913 when the Federal Reserve was created, is now worth a penny, and there is every indication of administration eagerness to see the present dollar only worth a penny, far sooner than a century from now. The man speaking was obviously sincere and deeply upset, and what seemed to bother him most was the perception that "the environmentalists" are equally sincere, and thus equally unready to give an inch. The economist regarded the argument of the environmentalists as irrelevant to what was really important, just as surely as the environmentalists were heedless of any legitimacy in the arguments for savaging wildlife. Neither side saw this in terms of the city versus suburbs, or agriculture versus commuters. Neither seemed to acknowledge that a city based on concentric rings had to break the ring pattern in order to maintain a harmonious balance between living well and making a living. That is until the two sides recognize they are talking about the same problem on some level, it will be a dialogue of the deaf, offering no possible resolution except war to the death. It's become a religious conflict, with both sides heedless of things vital to the other side.
They say the main function of real estate brokers is to maintain high prices for property values. But in the long run, if a region isn't prosperous, its residential property will lose value, not gain it.
The Right Angle Club, now in new quarters in the Pyramid Club, was recently visited by Professor Kenneth Burdett of the Universities of Pennsylvania and Cornell. A charming fellow with a Scottish burr (he mentioned being born in England), the professor told of a new twist to economics, which mostly employs familiar data in unfamiliar ways. Many concepts central to macroeconomics actually become less informative as net values or ratios of other expressions, losing useful information in the name of abbreviated elegance. "Unemployment" was offered as a handy illustration.
Mark Rank
We tend to think of 230,000 new jobs this month as a hard fact, whereas employment might be more precisely described as a set of several million people switching jobs each month, offsetting several million others who gain new jobs, along with almost as many who simply decide to leave the workforce and retire. We always sort of knew unemployment was a combination of gainers and losers, but few of us recognized that net turnover affected far larger volumes of people going opposite ways at slightly different rates. The reasons underlying a large flux, in other words, may be much more important than small net overall fluctuations. Or, far larger population upheavals may produce deceptively similar net results. We've been accustomed to judging smaller final ratios than to many-times larger underlying flows, or at least implying undue importance to a small subset of change. What usually happens is vastly larger numbers of people lose their jobs during a depression, but almost as many millions more re-enter the workforce, too, but at a lower wage level.
Thomas A. Hirschl
Curiously, a new book by Mark Rank of Washington University, and Thomas A. Hirschl of Cornell (!) called Chasing the American Dream: Understanding What Shapes our Fortunes has just appeared, saying much the same thing. Their approach is to develop a figure for the risk of being unemployed for a year in the next 5, 10, or 15; at the moment the answer for unmarried white persons sometime during the next fifteen years in the future, is 32 percent. That seems to be a much more scary projection than setting the present aggregate total unemployment at 4.6%. We'll have to wait 15 years to see which prediction really is more descriptive, or if it has the same consequences we immediately assign to it. But it would appear many assumptions are about to be set on their head, and the quality of our projections is about to shift dramatically. For example, Chairman Bernanke of the Federal Reserve placed great stock on wage inflation being "core" inflation, but these calculations suggest much more can be made of the data than that. Since somehow it is suggested the present recession has eight more years to run, current oversupply may require eight more years to run down; old data restated in this new way may have different implications for policy.
Chasing the American Dream
Right Angle members who lean both right and left seemed impressed and befuddled by a new view of an old topic, and that's probably a good thing. There seems no question of the validity of the approach, no question of significance, and little doubt of its ability to change attitudes. We look forward to many more such insights from the Dismal Science, of this nature. For instance, this professor of many students of the rentier class remarked at how repeatedly he had been struck by students able to afford red convertibles (and the Princeton tuition cost) were nevertheless willing to throw themselves into the scrum of Wall Street, to make even more money.
He regarded that as a strength of the American economy, in stark contrast to that in Europe, where the first sign of prosperity sent his old acquaintances straight to the pub, to relax a bit. In the British aristocracy, "entering trade" is a low-class thing to do, whereas sitting on the sidewalk sipping wine is the mark of really high class. The American version is reversed, but possibly that's a more useful misconception.
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.
