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.
Let's make this as succinct as we can: The Trader's Option is this: what risks will the trader likely take with his employer's money, when he is placed in the position of getting half of any winnings, but when he fails, he only gets fired. Almost any newspaper reports the millions and millions commonly available to lucky traders. There are indeed some timid souls who refuse to take risks of this sort, but on Wall Street, no one wants to hire them. Wall Street wants buccaneers, unafraid of risks. Make your pile as big as you can, take your lumps when you stumble, goodbye. Most of the time, someone else will hire you after six or ten months. No one will ask whether your failures were due to lack of skill or lack of luck. Napoleon once summed it up. He didn't hate unlucky generals, he just fired them.
The odds for the trader are not bad: The Trader's Option compensates richly for the turmoil of a sudden short period of unemployment, which tough-minded traders regard as the price of doing business. But what about the employer? It was his money the trader lost; if the mistakes are bad enough, the firm will go out of business. Unfortunately, often not.
If the traders are poorly trained and poorly controlled if the risk management is more talk than performance, the managers, of course, need to be fired, but ultimately the company goes out of business. But if the Federal Reserve comes along and rescues the company with an infusion of cash when no one else will consider it, moral hazard is created. The Buccaneers will take this rescue as a challenging dare to take even more risks in the future; in the long run, more banks will fail because of soft-heartedness than from tough love. No one worries about the offending bankers, the worry is that the innocent bystanders will get hurt. This is counterparty risk. If the bank is big enough, tangled up with every other major firm, almost everyone in the country could be an innocent bystander.
We will probably never know for certain whether the chaos from letting Bear Stearns fail would have been worse than the moral hazard we now have from rescuing Bear Stearns. What's absolutely clear is that we must quickly get out of the position where these choices have to be made. The completely sensible position is laid out in the proposal by the Federal Reserve to establish a central clearinghouse for financial instruments like Credit Derivatives, which will collect proportional assessments from all participants in the market, to be held in reserve against a market collapse. Not to protect the offending firm which mismanaged its affairs -- that firm must die -- but to protect all the innocent bystanders, the counterparties whose funds were tied up and possibly lost by the offender. The purpose of this insurance policy is not to protect the offender, but to free the hand of the Fed to snuff him out promptly. No one gets hurt here except the offender, and he better get wallopped.
Because the assumption is that a well-run firm will police its ruffians better than an outside regulator can ever hope to do, and will do so even more vigorously if there is absolutely no hope of pardon. The alternative to this bloody-minded approach is the regulation approach -- the Keystone Kops approach.
Starting with N-HSA We have just described the general outline of New Health Savings Accounts (N-HSA). Essentially, it consists of individual HSA funds for children, connected to Medicare by permitting the funds to sit in escrow from age 21 to age 66. However, the amount which can be accumulated during childhood is small, and the task it is asked to perform is large. Because children are so lacking in income, they can't be expected to accumulate much, even though their grandparents may have helped out. Consequently, that small amount multiplied by compounded income for 45 years, will probably only pay for one designated segment of the Medicare program, and it is unlikely it would be able to pay off much of Medicare's accumulated debt.
So, although it can be shown to be workable, it would look like a long run for a short slide, to an economically illiterate family. Meanwhile, its political enemies would likely describe it as meddling with Medicare, and its chances of achieving the necessary enablements would shrink. However, the grand discovery is, the Health Savings Account idea resembles how President John Adams once described his native Boston -- Every goose is a swan. Every problem we encounter, that is, seems to suggest an unexpected new improvement. Let's explain the three accompanying graphs.
Three Graphs. The top graph shows the situation, without either a bridge around or participation in, the Affordable Care Act. The HSA escrow comes to a halt for 45 years and then resumes with Medicare. There are two savings accounts, but each starts at zero and lasts two decades. One is an escrow account, unspendable until age 66.
The middle graph imagines the situation with a dormant escrow gathering interest during the 45 years. Notice the thickened blue escrow.
The bottom graph is a cutout enlargement of the transfer point for grandpa's gift, showing how easy it would be to adjust the escrow transfer from zero to $29,000. The difference between the extremes added to the escrow is the difference between solvency and riches. To imagine a small deposit spiraling out of control is probably a little fanciful, but for those who worry, here is a ready solution.
Adding Obamacare. If we achieve political consensus, and thereby add the subscribers from age 21 to 66 (the only age group which reliably produces real new wealth), the arithmetic suddenly transforms. The complete system from cradle to grave generates enormous surpluses. After studying this paradox for some time, I came to realize that what distinguished it from Lifetime Health Savings Accounts (L-HSA) was the two, eventually three breaks between programs, where the escrow fund could drop to zero, without some agreement to transfer it between insurance programs. If it drops to zero, the effect of compound interest rising at its far end is chopped off, and overall returns are much reduced. The whole idea unfortunately then becomes politically precarious and runs the risk of some small glitch somewhere unraveling it. To use our own descriptive terms, three Classical (C-HSA) funds are nice, but one Lifetime (L-HSA) is so far superior it raises grandiose questions of starting an inflationary spiral. But in a sense, the radical Right is correct. The changes to the Affordable Care Act must be drastic enough to generate public support for merging the radical plan of the left with a radical plan of the right, essentially making both of them unrecognizable. I'm no politician, but I can easily imagine the difficulties of that negotiation.
The Goose is a Swan. But I came to see that what makes it impractical is the same as what makes it so glamorous. The possibility of linking the healthcare fund to the stock market would likely be brushed aside by the explosions of a money machine -- the system as originally envisioned for L-HSA generates almost any amount of money you please. That's a pretty intolerable effect of inflation heedlessly disregarding any monetary standard, even a return of a gold standard.
But if the HSA is more or less denominated in index funds, it essentially has a monetary standard built in and could maintain it if someone held a meat ax in reserve. Some impregnable threat is needed to control the monster, and it is provided at the three linkage points, where the three existing insurance programs connect.
Three Meat Axes. The connection after the children's escrow fund is the most leveraged and therefore the most sensitive since we have already demonstrated how the difference between zero transfer between two funds, and the transfer of $27,000, is the difference between marginally paying Medicare bills, and having money to burn. If some totally reliable monetary angel could be discovered and put in charge of it, the discretion about inflationary consequences could be placed in one pair of hands.
But the history of inflation has been that even Kings, Popes and Emperors have succumbed to the temptations of such power. Remember, this fund is truly generating $350,000 of new wealth per person (in a nation of 300 million inhabitants) if it operates precisely as hoped, so it starts with some latitude. There are several Presidents of the nations of the world, who might fairly be suspected of raiding their own currency right at this moment, however. Wisdom suggests more caution is necessary. For example, Congress could permit a discretionary band within which the Executive branch could operate, perhaps in consultation with the Federal Reserve. That might permit Congress to create some very difficult hurdle for the process to jump, for widening the limits of the band, such as a Constitutional Amendment.
There's an End in Sight. And also remember, my colleagues in the research department are busy looking for a cure for cancer and Alzheimer's Disease, and I feel confident they will eventually have success. Just cure diabetes, schizophrenia, or birth defects, and our problem with Health Savings Accounts would transform into how to turn them off. In the meantime, we must modulate the ups and downs of medical costs which are steadily becoming less urgent. Take warning from the recent example of the price of tetracycline, which a year or two ago was 35 cents retail for fifty capsules, and suddenly jumped to $3.50 for a single capsule. And then with a new owner, jumped to thousands of dollars. If things like that continue to happen, we might be ready for another pet scheme of mine, the limitation of health insurance coverage to covering the first year of life, and the last year of life, by eliminating most of the disease in-between. Because of the helplessness of both these population groups, and the universality of the need for their coverage, in their case alone drastic interference with market mechanisms might appear justified, to those who are injured by them. The rest of us ought to have a say in something like that. But that's another book, for another time.
We're some way from seriously having that type of problem, so let's get back to details. For this purpose, paying patients arrange themselves into only three groups, children, working folks, and Medicare recipients. Thus there exist three breakpoints between these three programs for different ages, assuming Congress authorizes transfers between them, especially from grandparent generation to grandchildren, incidentally relieving the middle generation of a lot of cost-shifting. There is now so much (necessary) cost shifting, it is nearly impossible to sort out the cost numbers. So I won't try to do it, except in a sort of general way. Rationing is a sort of a lip-service concession to the wide-spread liberal endorsement of a single payer system, endorsing but without facing the resultant deficits in every direction. Instead, we encounter the worrisome potential for generating too much money, even though that is hard to believe without endorsing galloping inflation. There is little difference between external transfers -- between insurance plans, and internal transfers -- within one mega-institution -- except, in this case, one approach creates impossible deficits, and the other approach raises a real concern about inflation. A compromise might be devised, but it requires some sort of conciliatory response from both sides, for even a beginning.
Meanwhile, I don't scoff at the legal issues of who is responsible for those bills, if we destroy the family unit with exciting new social liberties. And I haven't forgotten the problem of corporate finance officers, who have run a confidence game for eighty years, making money for the stockholders by giving away health insurance to employees, as long as they can conceal what they are really doing. We've suggested in this book, we should offer the business a reduction of their corporate income tax to levels comparable to individual tax levels, in return for getting them out of the health insurance business. In a sense, it returns the favor of making a profit by giving away a service benefit, by -- generating revenue for the public sector in return for reduced taxes in the private sector. I'm entirely serious about offering major corporations a one percent cut in corporate taxes for each two percent reduction in fringe benefits tax exemption, down to the point where the top corporate income tax rate is equal to the average individual tax rate. That benchmark is selected because of the temptation otherwise created, to elect Subchapter C to S inter-conversions, exploiting such tax differences. The international corporate flight is another serious consideration. Meanwhile, it is always possible to equalize employee tax exemption by allowing HSAs to purchase catastrophic insurance through the HSA itself, if the law would permit it.
Inflation Protection. Q. Now, wait a minute. If we permit a money machine to be built, what is to prevent it from resembling the galloping inflation which ruined the Weimar Republic? And if we devise a way to keep the United States from going down that road, how do we prevent a hundred small foreign states (Zimbabwe, for instance) from doing it deliberately in order to use their sovereign status to acquire the index funds held by Health Savings Accounts?
A. You've almost answered your own question about Zimbabwe. Even without freely floating currencies, the markets are quick to detect changes in the value of the foreign currency. Zimbabwe can force its own people to accept pennies disguised as trillion-dollar bills, but everybody else avoids them, whereas bitcoins don't even have sovereign power. And as for our own domestic currency, I propose we enact a band of fluctuation in consultation with the Federal Reserve, within which the dollar can float, and beyond which the band may not be expanded without a Constitutional Amendment, again in consultation with the Federal Reserve. In two hundred years, the amendment process has only let one matter (Prohibition of alcohol) slip past, which had to be revoked after the experience with it. Almost every other indiscretion has proved to crumble in spite of the temptation to raid the cookie jar.
Watchdogs. Three breakpoints, one between each age group, with wildly different medical needs and financial viewpoints, need watchdogs. Since going to zero between any two of the three insurance programs could bring inflation to a halt, and since venality knows no political boundaries, I suggest each breakpoint be governed by a different political entity, composed of a board nominated by a different branch of government, and each ratified by a different process. It may or may not be necessary for them to share the same information agency, since think tanks are very popular right now, but may not continue to be. We will need another conference in a resort hotel to work out a paper but keep in mind that foreign powers will be anxious to infiltrate and subvert it. So maybe we need two conferences, one to review the other. After all, we are talking about 18% of the gross domestic product, and Benjamin Franklin isn't available anymore.
Newsmedia speak of medical "prices", the government speaks of medical "cost" -- what's the difference? Well, for fifteen years in my practice, and before that for thousands of years, prices and costs were nearly the same thing, or at least bore some relation to each other. The person who did the work set the price, and the person who paid the bill agreed to the price.
But out on the West coast they told us Henry J. Kaiser during World War II had expanded the idea of the Mayo Clinic into a pre-paid health system of clinics and pre-agreed patients, paying a set annual fee for all the care you could use in a year. By 1970 I was sent by my local medical society to see what this was all about. I learned a lot, including the main thing which made it so cheap rested on two government tax exemptions, one for the employer and a second one for the employee. They recruited doctors with the promise of relieving them of the business nuisances of medicine, plus instant practice-builders of employee groups of patients. Doctors in the neighborhood didn't like Kaiser at all, particularly after the Maricopa decision of the U.S. Supreme court made it an antitrust violation for doctors to do the same thing. For lawyers reading this, it is a particular irritant that this decision was 4-3 (not a majority), based without a trial of the facts, solely on upholding a motion of summary judgment.
Turning from historical legalities to practical economics, turning that is, from one doctor both doing the work and setting the price, into a third party with no doctors setting the price, the third party (the insurance company) paid its own reimbursement price. So not only did the physicians eventually lose control of pricing their own work, but that price rapidly drifted away from the audited cost in a capricious manner, responding to forces entirely unrelated to medical care. The accountants protested this lack of relationship between cost and price, and it was a legal requirement for hospitals to report (but not make public) the ratio of prices to cost. While the ratio was always high, it was also extremely variable. In effect, a fact demonstrated when the "diagnosis-related" system fixed inpatient costs by groups rather than individually, the disparity was only used to compete for out-patients with outside market prices. However, instead of forcing hospital prices down, it enticed drug companies to force prices up, often to absurd levels. Some hospitals negotiated discounts and applied them as invisible mark-ups to the uninsured patients. Cheap mortgages stimulated hospital building, and the situation spiraled out of control, as it does in any inflation. Nobody ever cured an inflation, except with brute force and lots of pain.
In our system, the money supply is governed by the Federal Reserve issuing and/or buying bonds. In so doing, it is issuing unheard-of amounts of debt for which there is no market, forcing interest rates down. Although the Japanese allow their central bank to buy common stock, Congress is adamant that buying ownership of corporations amounts to Communism with a demonstrated history of universal failure. Congress will probably never permit government take-over of corporation ownership, but Mr. Obama simply spent money beyond Congressional limitation and dared Congress not to pay the bill (and thus to ruin our national credit). Congress is not compelled to make a rational choice between inflation and government control of the private sector, but you can be certain it has been discussed.
I never took a course in economics but it seems to me, a couple of million individual citizens building up half-million dollar portfolios of indexed common stock might provide an adequate balance for three trillion dollars of excess debt. That is, holders of Health Savings Accounts would hold voting control of corporations, without the organization to abuse that power, and that power could never pass into foreign hands because it is contingent on American-based health care. Plenty of other regulations, good and bad, would have to be added for the system to become stable and tamper-proof, but it's a suggestion for debate and study of a possible solution to an entirely unrelated subject. One for which there has been an international shortage of fresh suggestions.
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.
