“I’ve drafted an amendment [to President Obama’s housing rescue plan] so that rather than being limited to whether the loan was conforming at time of origination, it will be based on (whether it’s conforming at) the time of (modification), which will take the limit up to $729,750 in high-cost areas. This should make more people in the Bay Area eligible.”
Speier plan would aid refinancing in Bay Area [SFGate]
The Bailouts Are Coming But Is The Bay Area Dying On The Vine? [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by boing

    Who’s drafted this amendment? Nancy Pelosi or the cat’s uncle?

  2. Posted by Rillion

    Since the link is starts “Speier plan would…” I would assume it was Jackie Speier that is the “I” in the pull quote.

  3. Posted by tipster

    What the government giveth, the government taketh away, and then some. Obama wants to limit mortgage interest deductions for couples making over $250K and singles over $125K.
    That makes the after tax cost of ownership go up.
    What’s really bad about this is that there is no grandfathering provision. If you calculated that you could afford $X after taxes, and locked in that mortgage payment, you’ll find you can no longer afford it, even though you already bought and paid for it.
    Bummer for you!

  4. Posted by San FronziScheme

    Obama wants to limit mortgage interest deductions for couples making over $250K and singles over $125K.
    Ouch. With no grandfathering provision, this is similar to “bait and switch”. Get people into too much debt with tax incentives and then yank the incentive. This is probably going to affect the 1M+ SFR and the “luxury condo” markets even more.

  5. Posted by LMRiM

    I haven’t seen that provision yet. Is it any different that returning the itemized deduction phaseouts that have themselves phased out under Bush? Do you have a cite to a description?
    If it is somthing specifically targeted at limiting mortgage interest deductibility, then I have to say that that would be the first smart (and I mean the very first) smart economic/tax policy to come out of the Obama administration. In other words, I doubt it is true, and if it is, I doubt it will fly. But I’m holding out “hope” 🙂

  6. Posted by Jake

    I haven’t heard anything about this Obama mortgage interest deduction limit. Where did you hear this from Tipster?
    If it was implemented, it would most likely match the other housing programs so the limit for singles would be 200k, not 125k. In that case, I wouldn’t be surprised to see a big uptick in the divorce rate.

  7. Posted by resp

    LMRIM – why would you think that is smart?

  8. Posted by Rillion

    “It would be paid for in two ways. The first, expected to raise $318 billion over 10 years, would limit how much of a deduction high-income taxpayers may take. Instead of reducing their tax liability by their top income tax rate, they wouldn’t be allowed to reduce their bill by any more than 28%. So for every $100 in deductions, they would reduce their tax liability by $28.”
    From: http://finance.yahoo.com/news/Obama-pulls-back-the-curtain-cnnm-14479642.html

  9. Posted by Jake

    Rillion, that’s very different than the market distorting mortgage interest tax deduction Tipster id’ed. What you cited just changes overall deductability from 35% to 28%.

  10. Posted by Trip

    I think Rillion has it right — the proposal is that for those with AGIs over 125k/250k the mortgage interest deduction would be at 28% rather than the higher marginal tax rate.

  11. Posted by Po Hill Jeff

    resp: I can’t speak for LMRiM but I agree with him in this case and would refer you to this NY Times column on why the mortgage interest deduction is a Bad Thing:
    Executive summary: it’s a subsidy

  12. Posted by j

    It looks like “It’s different here!” is not valid anymore after all.
    Anyway – the first proposal Speier should include into his drafted amendment is to start checking reported income on W-2s against the number used in mortgage contracts.

  13. Posted by resp

    ok, just confirming. a political /class warfare discussion i don’t want to be part of.
    i’m too busy running around the east bay at night slapping these on cars:

  14. Posted by LMRiM

    Yes, resp, as others have noted I think the mortgage deduction is poor government policy because it leads to capital allocation distortions in the overall econonomy by favoring one activity through subsidy.
    In the case of the mortgage interest tax deduction, it is especially pernicious, as it incented a nonproductive asset class. It only received its “special” status (as opposed to the general encouragement of debt that has been pushed by the banksters) in 1986, when it alone retained personal deductibility against income (prior to 1986, most other forms of consumer debt was also deductible).
    Most problems in the economy can be traced to foolish governmental policy. Too much debt in US corporates? Look to the fact that corporations face double taxation, but debt service reduces taxable income. Too low a dividend rate of companies? Well, dividends are not deductible. Foolish short sighted behavior by corporate managers when they try to raise stock prices at the expense of long term viability? Look to the implicit subsidy provided by debt financing of share buybacks. Incentives for managers to create crazy option schemes, so that they can get huge payoffs? Look to the foolish policy of the early 1990s, when deductibility of executive salaries was limited (as an expense) to a $1M ceiling. Etc., etc., and (unfortunately), etc.
    Government is the problem, not the solution. Always. Anyone looking to government to “solve” any problem is foolish and will make poor investment choices.
    Where’s my bumper sticker 🙂

  15. Posted by Rillion

    Jake, actually the info I posted is not any different from what Tipster mentioned. He said he heard that Obama’s plan limits the mortgage deduction. What I posted indicates how the plan limits the deduction. It limits it to 28% even if the filer is paying more a greater then 28% tax rate. I think your confusion might result from the fact that Tipster’s comment didn’t mention that it was just the mortgage deduction that was being limited but apparently all deductions were going to be limited for higher income tax payers.

  16. Posted by LMRiM

    Well, about limiting income tax dedcutions for higher income tax payers – good. That’s a dumb policy too (because of the distortion it creates at artificial income “breakpoints”). But at least it will benefit retired millionaires, who derive most of their income from favored capital gains (and savings in the down years) and have many ways of reducing taxable income and/or smoothing recognition for tax purposes.
    I’ve said it a number of times, but I’d hate to be working for a W-2, especially in California, for the foreseeable future. Good luck, folks.

  17. Posted by Trip

    Big modifications to the tax code? I can hear tax attorneys around the country rubbing their hands together in delight at all they will earn in figuring out how to get around the new rules.

  18. Posted by LMRiM

    Yep, Trip. The wealthy will figure out how to play this. The rest of the working schlubs? Well…..
    Here is a good article I found about the outlines of the proposal. Essentially, as noted above, it would limit the value of mortgage deductions to 28% for the highest income earners – the “wealthy”. Currently, its value is 33% or 35% (depending on bracket), although as we have seen many times on SS, a typical taxpayer cannot achieve these savings due to the interchange between state income taxes, federal deductibility and phaseouts.
    It doesn’t sound so bad (35% -> 28%), but remember the Bush tax cuts are going to expire at the end of 2010, and the top bracket will automatically snap back to 39.3% (at least – but give the Democrats some time, though, folks, I bet we can get that figure higher!). In addition, the phaseout of the general Schedule A deductions instituted in the 2003 cuts will also be eliminated, further limiting mortgage deductibility for anyone with AGI over about $150K.
    I can’t wait until the social security limitations on income (12.4% currently for employee incomes below about $105K) are also lifted for the “wealthy” (an early Obama campaign promise).
    It’s about time the wealthy start paying their fair share. Enjoy it, folks, because I sure am!
    (No mention anywhere – either at the Federal level OR at the California level – about levying any sort of an “intangibles” tax on the truly wealthy – again, these politicos know where their bread is buttered.)

  19. Posted by Trip

    Slightly OT but I thought of interest to some here — I received a decent, if cursory, recap of “how we got here” from one of the econ expert groups I use a lot. Nothing new, but a fair summary and some scary charts . . .

  20. Posted by Lance

    “resp: I can’t speak for LMRiM but I agree with him in this case and would refer you to this NY Times column on why the mortgage interest deduction is a Bad Thing:”
    I didn’t bother to read this article, as I’m too busy at work right now. But I was quickly looking through this thread, and I had a thought/comment on this. If the mortgage interest deduction is a bad thing, then you could make the same argument for taxing investments using long term capital gains rates. It encourages increased investment in stocks, and it effectively increases their perceived value. It also has a disproportionately bigger benefit on people who make more money. I don’t really see much difference in this and the mortgage interested deduction. So, here’s my question to LMRIM and others – what are your thoughts on getting rid of capital gains and taxing investments at the marginal tax rate instead. For the record, I think the likelihood for either of these two tax changes is extremely low (and a bad idea), but I want to hear what others think.

  21. Posted by steve

    lance, I think you could just as easily argue the opposite and suggest that there should be no tax on long term capital gains. in any case we would be much better off with a VAT or a flat tax (even if progressive). a policy aim should be to minimize the distortions created by tax laws — and decrease the money wasted on “compliance”

  22. Posted by LMRiM

    At the Federal level, investments should be taxed at 0% (the income used to purchase the investments was already taxed at confiscatory rates). Corporate tax rates should be 0% (customers pay the tax, not the corporations). Income tax rates should be 0% (work should b incented, not discouraged). Essential government functions should be funded through transparent sales and excise taxes. This would stabilize funding (people need to consume) and would force government to shrink when economic activity does (another good thing, as government’s share of the economy crowds out the poductive sector).
    Government would be a lot smaller, and we would all have had a lot fewer problems if this had been the case (as it of course was for much of US history, with the exception of a few periods coinciding with big wars).
    People might be surprised, but corporate and income taxes only account for something like 40% of Federal revenue (I’m pretty sure). Social security and medicare tax (pure giveaway welfare programs) account for as much as the income tax, on the revenue side.
    Leviathan has grown so large that it has convinced everyone that no one could live without it. LOL. Nice racket if you’re a politician I guess.
    (Uh oh, diemos is going to jump all over me about this proscription. “There, I said it” 🙂 )

  23. Posted by LMRiM

    Not to belabor the deductibility issue that tipster, Rillion and others brought up (this is supposed to be a thread about the Speier proposal for recharacterizing mortgages to meet the “jumbo conforming” limits), but this general proposal to limit deductibility of itemized interest will affect the Bay Area.
    California income tax is also a schedule A deduction at the Federal level for itemizers. As California income tax rates rise (already agreed to go up by 0.25%, and it WILL go even higher because CA will be broke again within 6 months), and as Federal marginal tax rates rise with the expiration of the Bush tax cuts, the high income earners of the Bay Area will get a double whammy! Higher state taxes, and less benefit at the Federal level.
    It would be great if CA harmonizes its code with the Federal approach and limits CA deductibility of mortgages for the “wealthy” as well. That would be a triple whammy!
    I think that this is smart policy by Obama. (The “useful idiots” of CA can be relied upon to vote democrat in the 2010 and 2012 elections. It’s smarter to focus scarce Federal resources on shoring up large blocks in potential swing states, especially Florida. With 0% income tax rates there, and the likelihood that the Feds will bail out the homeowner insurance problems there by having the taxpayer subsidize insurance for the wealthy coastal dwellers there, it’s looking more atttractive all the time.)

  24. Posted by location

    LMRiR, Yes, because clearly anyone who doesn’t want to live in your neo-feudal libertarian fantasy world is an idiot. What part of Marin are you in? San Quentin? Is that what is keeping you in CA? Smiles!

  25. Posted by Trip

    LMRiM’s just playing around (sort of). But his broader point is that tax policy causes people to change their behavior — may be for the better (increase charitable contributions) or for the worse (contributes to housing bubble) — and the gummint does not always think things through very well. Also, that these policies affect the “little people” far more adversely than those who can get around them (here’s an example, through some slick lawyering by my firm, I’m able to put about $200,000 into my “pension” pre-tax every year — quite a bit better than the 16.5k 401(k) limit for most).
    We may soon see a really, really interesting example of this concept in the extreme. Recall that under GW Bush the estate tax completely disappears for a death in 2010 then reappears in spades in 2011. Assuming this is not softened, and it may not be given the new Congress, my bet is you will see an awful lot of very wealthy individuals passing away in 2010. Sick, but I’d bet on it.

  26. Posted by Mole Man

    Doesn’t the Alternative Minimum Tax pretty much wipe all this out at typical bay area homebuyer income levels?
    Talk of smaller government is usually just that. An excellent example of this is Atherton which has a strongly tax averse population which is subjected to onerous taxes because of chronic mismanagement and seemingly endless expensive yet useless lawsuits by citizens against their own local government. It is a nice idea, but in reality people demand a high level of services that cost a lot of money and even more when needs are deferred.

  27. Posted by asiagoSF

    LMRiM I really hope you’re just playing with us and are passing better values to your kids than this monotonous and cynical f**k the government message that is a constant subtext to half of your posts. I am a top 1% income earner and I don’t like paying (more) taxes and I know there is inevitable waste in Gov, but I would never ever call SS and MC “pure giveaway welfare programs”. C’mon man, do you really think that all of the civilized world is wrong in their pursuit of social equality and we -lonely beacon of self-righteous civilization- should instead move into the opposite direction?
    You’re 10x smarter and 20x richer than most people on this board, myself included, but -man- do you pass as the arrogant son of Entitlement with no compassion whatsoever!
    I mean it, I do hope your kids manage to see beyond your cynicism and come eventually to believe that taking $1 out of your own pocket to spend 50 cents on helping the less fortunate may leave this world a better place for the next generation.

  28. Posted by anonn

    Didn’t LMRIM move up to Marin for the public school system? LOL.

  29. Posted by gowiththeflow

    I don’t agree with LMRiM most of the time regarding social issues and do agree the post come across a bit arrogant. However to be fair I am actually very thankful for all the post 1) They are honest which is hard to come by these days 2) I appreciate the financial tips and heads up that cost all of us $0 and a lot of the time they are dead on. 3) Post are interesting, again even if I don’t agree I enjoy hearing various points of view.
    I can only hope the LMRiM bashing does not deter LMRiM from posting.

  30. Posted by LMRiM

    Why is government the only way to encourage “compassion”? Have you visited inner cities lately and seen the result of “government” help? (I lived through it growing up in the Bronx in the 1970s, BTW.) I honestly believe that governmental pursuit of “social equality” will inevitably lead to the opposite, and perhaps even tyranny.
    There is nothing noble or “compassionate” about stealing money from one portion of the population and giving it away to another – to say nothing of the perverse incentives it creates. Return the money to the people, and you’ll see all sorts of voluntary efforts spring up to fill in the vacuum. The system that we have now allows some to game the system at the expense of others, and exacts tremendous costs in the form of bad incentives and terrible outcomes. It also allows for a disclaming of responsibility by liberals (“I pay my taxes, what else do you want me to do? Leave me alone to enjoy my privileged status”).
    About welfare, social security is nothing more than an intergenerational Ponzi scheme whose sole purpose when it was set up was to help FDR get elected in the 1936 elections. When it was pointed out that it was a Ponzi scheme and suggested that it be a funded program, the response was that the elderly voters needed cash now (meaning, of course, that FDR needed the votes now). In the absence of social security, people would have saved more, and there would be greater loyalty among family members and nongovernmental institutions ike churches, synagogues and fraternal organizations, the imprtance of which in society in case you haven’t noticed has declined precipitously as Leviathan has increased.
    Government perversion of health care (through medicare and the tax distortion of the insurance system) has led it to become unaffordable, just like government perversion of pricing structures for education and housing.
    Most small government types have really thought through these issues. We might be wrong, but the argument that appeals to emotionality over reason (“man, you guys are so mean”) really misses the point.
    When the US health care system works like the Post Office, don’t blame me 🙂 Similarly, when mass inflation hits and the social security system provides next to nothing to the suckers who believed it would, don’t blame the small government types.
    About what the rest of the world is pursuing, I do think they are wrong. The history of the twentieth century should disabuse people of the notion that Europe has hit on some “magic formula” of social cohesion and smart policy. People are very short sighted when they look at a post-war Europe that was sheltered by a dominant United States that was willing to spend up to 10% of its GDP on military deterrence (and even ill-considered “misadventures”). How did the experiments with large government go in the Soviet Union, or in China of the 1960s?

  31. Posted by Jimmy (No Longer Bitter)

    I’ve gotta say that generally I am extremely pleased with the service I get at the post office (for the price). I can send documents overnight for $12.80, compared to $30+ with FedEx Priority Overnight, and 3-day priority mail is $4.80 compared to $12+ for Express Saver with FedEx.
    For international shipments, Express Mail International is likewise about 1/3 the cost of FedEx (minimum about $200 to send anything to Europe by FedEx).
    The point of which is that the federally-funded system (USPS) costs me about 1/3-1/2 of what the private sector (FedEx / UPS) charges.
    Maybe the same would hold true for medical care.
    No reason you couldn’t supplement the minimum standard with a private policy if you wanted to (the major failure of the Canadian healthcare system and advantage of the UK system in my opinion).

  32. Posted by chip

    So LMRiM – You are a real estate investor – made your money in CA right? You send your kids to public school and support prop 13?

  33. Posted by gowiththeflow

    Jimmy I would like to hear you say that when your healthcare is socialized, you become part of an assembly line system and have to wait for that life threatening surgery you can pay for out of your own pocket but can’t get in for because you are on the bottom of some list. Talk to those in Canada that have lived it, and end up coming to the US in some cases to save the life they may get to live after they try to jump hurdles.
    I get the feeling most of the LMRiM bashers have not had to utilize or live amongst the social system LMRiM discusses. For most the system sounds great, for those of us that were ever in a position in life of needing to use it, or having to live amongst it, it is not always as it seems.
    I am not completely bashing it but perspective changes when your fate end’s up in others hands, you have little or no choice and you feel like the only way to change that is take care of yourself. Again I appreciate the gov, and in many cases have been thankful for it’s help, I have many relatives that are part of the system but I do think one’s view of it all is skewed depending on where or how you grew up.

  34. Posted by LMRiM

    You are a real estate investor – made your money in CA right? You send your kids to public school and support prop 13?
    No, chip. I don’t have a huge fortune, but we are comfortable. I made my money as a hedge fund manager in the 1990s (East Coast). Never made a dime in CA property (unfortunately), but we only got to SF in mid-2002, so it worked out well that we didn’t buy a house then in light of how it has all played out, at least for us.
    I don’t support Prop 13, and rail against it repeatedly. I am also philosphically opposed to public school. The (amateur) economist in me recognizes the tremendous distortions inherent in these structures.
    Nevertheless, the trader in me recognizes an arbitrage when I see it, and how could a good trader pass it up in good conscience? Prop 13 means that the owner of my rented home in Marin (owned by a chld of the original purchaser) only pays $1500 per year in property tax. That, among other reasons, allows the price distortion of houses selling for literally 3x the “rental equivalent” value.
    It’s diabolical that the recent purchasers who are now absorbing large drops in home values are nevertheless paying the property taxes that allow the renters’ kids to go to these great schools.
    There is talk of a parcel tax to support education here. I bet the renters all vote to increase the tax! Eventually, “other people’s money” will run out (as Margaret Thatcer famously said of socialism), but for now we’re profiting from it 🙂 Nothing hypocritical or unethical from my point of view. Government sets up laws – we follow them.
    Public school up here in Tiburon seems very good. Public school seems to work well when everyone aound you is rich, most moms are stay-at-home, and the kids are supported by a stromg family structure that is reinforced by daily life, playgrounds, play groups, etc. I’d hate to be someone trapped in a city public school with no hope of “change” from the current administration.

  35. Posted by Jimmy (No Longer Bitter)

    Actually I grew up in Canada and left in 1998 at the age of 22. And my dad is a doctor in BC so I got to hear about the various failures of the system first-hand growing up. He left in the mid-90’s because he couldn’t stand the system anymore. Now he works as a locum for $1800/day up north … 3x better pay than he ever received as a full-time doc in Canada.
    So I probably know more about it than you might imagine. Which is why I would personally favor a system that allows you to purchase private insurance to supplement government services, should you so desire. Particularly for MRI scans and other diagnostics that for some inexplicable reason are in short supply.
    Another improvement would be user co-pays (5-10%, capped at some reasonable dollar amount which is a function of your income). That helps prevent abuse of the system by malingerers.
    But the basic core of a universal and accessible healthcare system would be a massive improvement here. Just look at the number of companies who are headed for bankruptcy due to unfunded pension and healthcare liabilities?
    This is a real problem & the status quo is not satisfactory.

  36. Posted by jessep

    “Government is the problem, not the solution. Always. Anyone looking to government to “solve” any problem is foolish and will make poor investment choices.”
    LMRIM, that is such a lie.
    Are you listening to that morbidly obese drug addict again?
    I have an incurable chronic illness that is lethal without medication. I got that under no fault of my own, breathing spores in outside (vally fever meningitis). No insurance company will cover me now, for ANY PRICE.
    Luckily, I have been grandfathered into my parent’s HMO, but I’m terrified I could lose coverage. I work out daily, eat right, and am not promiscuous. Do I deserve to die under your theory?
    To some problems (I’m sorry) there is no private sector solution. Sorry.

  37. Posted by San FronziScheme

    You don’t know what you are talking about. Please go live in one of those countries with what you call “socialized” health care. This is the level of ignorance brought to us by Rush Limbaugh and Faux News anchors. A lie becomes a truth if you repeat it again and again and again as we have learned these past 8 years.
    I have one member of my family with very serious health problems in France. The level of care and speed of intervention is second to none. I just come back from one month at his bedside. Best doctors, best treatments, no expense spared. He is in the best care possible and I am happy he is not fighting HMOs along with his cancer. I welcome every initiative that will bring us to the level of care that I have seen.
    Oh, and his co-pay was $500 because he wanted his own room and cable TV for a month…
    I don’t mean to be rough, but reading your comment pushes me to set the record straight. Repeating what you hear on talk radio or Fox News doesn’t help th debate.

  38. Posted by resp

    ha ha, just as i predicted.
    a political and class warfare has erupted on ss.
    sorry, i’m too busy working to squirrel my money away now so when da big man comes to take it in 2011 i can temporarily retire, enjoy spending time with my children, and not give a red cent of my hard earned money to the lazy folks with their hands out.
    spring and summer will return some day.

  39. Posted by San FronziScheme

    Not a class warfare. I can afford my dad all the care he needs. Go search somewhere else, like humanity or compassion.

  40. Posted by diemos

    Re: socialized medicine
    Okay LMRiM, how about this for a system. Flat 4% tax on all earned and unearned income divided equally between all legal citizens above age 18 and placed into personal health care accounts. Individuals purchase their own health care, insurance, etc out of the accounts.
    To prevent monopsony behavior of insurance companies differential pricing by health care providers between individuals and insurance companies is forbidden.

  41. Posted by jessep

    “Public school seems to work well when everyone aound you is rich, most moms are stay-at-home, and the kids are supported by a stromg family structure that is reinforced by daily life, playgrounds, play groups, etc.”
    That’s it. I’m plugging out, the amount of hubris and attitude on this blog makes me sick. There’s no reason to use your success to revel in other people’s failure.

  42. Posted by asad

    Just off the top of my head countries that have far better health care than CA: Singapore, Taiwan, Germany. I’ve been to hospitals in all those countries after small accidents and in one case a bad diving trip.
    There is this ridiculous myth that somehow the average American is getting better health care and has a better lifestyle than Europeans. It’s a fantasy created by those who haven’t spent much time overseas. 0.0001% of Americans who can afford it have better care but just look at infant mortality rates and see where US is ranked http://tinyurl.com/24s4d7 then come back and say we don’t need socialized health care.
    Or look at health care stocks and their profits. Satchle likes to rant about how much retired cops make let me tell you VPs/Directors/Managers at pharmaceutical companies make far far more.

  43. Posted by Mark

    I think LMRiM is making an interesting point between the lines of his liberal-baiting: even if robust government social safety nets are ideal, they are not proven to be viable over the long term. If you grant the notion that Canada, France, Germany, et al have better healthcare, retirement, and education systems, you still have to confront the fact that all of these countries have over the past few years become very anxious about the financial sustainability of their systems. It is not at all clear that in 10 years the European social model will be the apparent role model that it is today.
    LMRiM’s point about how the US has subsidized western nation defense efforts for 50 years is also crucial. European nations would love to re-arming to balance new threats from Russia (and to compete with the US), but they’re finding it heard to increase their defense spending from 1% and below to anything like the level required by a military force capable of projecting strength. Canada spends even less than Europe on defense–were it to have to suddenly triple its expenditures to, say, the pre-WWII levels when it was one of the larger militaries in the world–we would likely be hearing less about its universal health coverage.
    All of this is to say that comparing the US at present to some of the more ideal-seeming models out there may be akin to comparing the current value of a Sunset 2/1 to its 2007 values: a comparison with a temporary distortion.

  44. Posted by anoanon

    Way to pull the discussion back into real estate. Although I am enjoying the tangential discussions….

  45. Posted by NonSocialist

    All the people who support socialized healthcare, can you name one medical/pharmaceutical invention from that system in the last 20 yrs?
    Why do people make a big fuss about 2000-3000$/yr deductible when they spend so much money on their lifestyle/month (car, rents, big house, eating out..). Where is the personal responsibility? If you want good health, pay for it (it will cost less than your dinner expenses).
    Socialized healthcare is only for the poor people who can’t afford anything (homeless….well they can afford a lot in SF…). Our county hospitals provide that already (May be it can be improved…)
    Why should health insurance be any different from car insurance?
    I think government should provides means so that the healthcare is cheap (not socialialize it.) {like…allowing more doctors from other countries to move to US, encourage more competition in the industry by giving sops to new biotech companies……)

  46. Posted by LMRiM

    LOL, guys. Seems like a lively discussion.
    I lived in Europe (England) for a few years in the 1990s. LOL about “quality of life”. I also visited a hospital once for a broken hand (bicycle accident – I used to race bikes in college and sometimes think I can still ride – I can’t 🙁 ). LOL about that hospital experience – MUCH worse than the emergency room experience I had when racing bikes in the US in college.
    The best quote is jessep’s:
    “That’s it. I’m plugging out, the amount of hubris and attitude on this blog makes me sick.”
    This from someone who was born very wealthy, is 24 yeasr old, purchased SF property for cash from family money (he mentioned that his family always pays cash), and yet stil somehow thinks the taxpayer should pay for his medical care. Jessep – I have no jealousy whatsoever for your circumstances – I wish you the best, and am sorry to hear of your medical condition! But come on. Your illness is a random fluke, as is your wealth (as were the poor financial and social circumstances I wa born into). Before you demand that everyone pays for your medical care (including my children by the way), at least have the decency to run through your assets first 🙂 You definitely do not “deserve to die”. No one does. But you don’t have the right to take others’ property, and it seems to be bad form to demand it before even running through the value of your own property, doesn’t it?
    @ diemos – I like your suggestion philosophically and economically. It might not be ideal from a free market point of view, but infinitely better than the system we have. The only addition to the theme you develop would be to eliminate interstate distortions of insurance coverage, and allow insurers to compete across state lines. That should reduce political pressures and the possibility of monopolistic rent-seeking.
    If I am understanding your differential pricing concern, I think you are really identifying the adverse selection problem. That’s a tough one – I guess I’d support the inability of an insurer to drop coverage or alter individual pricing for other than “class of indured” purposes. But that is a very tough problem to solve. My suspicion is that health care would become dramatically cheaper as health care decisions are more aligned with financial decisionmaking, thereby making the adverse selection issue less of a financial danger.
    Obviously, though, I’d prefer a more individual-based system, with some basic government regulation over type of care, standards, etc. Health care is a tough isue, especially as the pricing structures have been so dramatically distorted for so long.

  47. Posted by Jake

    I think the devolution of this thread could win as most off-topic ever.

  48. Posted by diemos

    Adverse selection is also a concern but I was thinking more of the fact that a hospital will charge an individual more than they would charge an HMO for an identical procedure.

  49. Posted by gowiththeflow

    san fronzi,
    With all due respect I don’t subscribe to Rush Limbaugh or his views actually, or listen to Fox.
    I mentioned Canada not France; different country, different debate.
    I pay for a PPO not HMO and in the context you note, I agree the HMO system in the US is sub par.
    Thing is, I appreciate but do not expect that anyone should pay for my healthcare, I want to make my own decisions.
    Catch is even paying a higher deductible so I have the option of selecting to a certain extent whom I seek care from I still am getting juggled between the system to treat medical conditions because doctors run on the limited visits = higher bonus network.
    Diemos I think you hit it spot on.
    Re: socialized medicine
    Okay LMRiM, how about this for a system. Flat 4% tax on all earned and unearned income divided equally between all legal citizens above age 18 and placed into personal health care accounts. Individuals purchase their own health care, insurance, etc out of the accounts.
    To prevent monopsony behavior of insurance companies differential pricing by health care providers between individuals and insurance companies is forbidden.

  50. Posted by San FronziScheme

    Britain, sure. Thatcher killed the NHS by preventing it from growing into a decent system. For dentistry, Brittons chunnel to France for dental care for Christ sake!
    A friend in Toronto who is quite familiar with the French system didn’t see much difference there. Maybe the doctors wanted to impress a foreigner when they were accepting his 2-day notice appointment…
    HMO/PPO = Simply because a Healthcare company gives you one peek at freedom doesn’t mean you’re free. You are still at the mercy of a non-medical number cruncher who will ultimately decide on your coverage and maybe your life. PPO/HMO = Pepsi/Coke. Of course I exagerate, but not by far.
    The issue of universal healthcare is not whether people should care for themselves. Ask anyone from the ages of 18 to 55 if they want to pay for someone else’s treatment: they’ll say no. Ask them if they want someone else to pay for their care. They’ll probably say no too. We do not need any assistance when we are healthy. But we were all young at some point, and hopefully we’ll all grow old.
    Say you are 57 with a typical 150K asset (more or less what people have in the rest of America) and you have a heart condition (my dad 16 years ago).
    The HMO/PPOs will cover some expenses, but you’ll have to take medicine all your life. Surgeries, hospital expenses, expensive medication. You’ll have to re-mortgage up your house or sell it. You’ll suck it up. You’ll survive.
    Say you’re now 73 and have another catastrophic event. What do you have to sell? You’re going to see your kids sacrificing their own savings to help you if they can.
    Did I mention the doctor makes house calls to my dad every week from his doctor (for 5 Euros extra) and a nurse comes every frigging day for free. How’s that for decent treatment?

  51. Posted by San FronziScheme

    As an annex here is the report from the WHO about healthcare in the world.
    Look at the ranking table by country.
    A good and cost effective healthcare system can be achieved in the US too.

  52. Posted by Jimmy (No Longer Bitter)

    All of you finance types should recognize that the standard deviation in outcomes is reduced as the population size increases (square root of the sum of squares).
    Wasn’t that the whole basis of the model of bundling mortgages into CDOs? Or all insurance in general? Some people will never use it, some people will consume $1M in care. On average everyone pays a manageable amount.
    Which is why a socialized healthcare system is “better for everyone” (overall). E.g. my Blue Cross PPO plan increases its premiums 25% every year … while Medicare costs go up 6-7%/year.

  53. Posted by gowiththeflow

    “HMO/PPO = Simply because a Healthcare company gives you one peek at freedom doesn’t mean you’re free. You are still at the mercy of a non-medical number cruncher who will ultimately decide on your coverage and maybe your life. PPO/HMO = Pepsi/Coke. Of course I exagerate, but not by far.”
    Fair and I completely agree but what makes you think that in the US socializing HC would change this for the better vs. the worse? Unfortunately having been through my own crisis I have dealt with the control of the current PPO system directly (for the worse) thus I don’t trust the system having any more control than it does now.
    I am all for helping the bulk but with out too much control which is why I vote yes for the Diemos plan.
    I am afraid if it is not planned appropriately a socialized HC system will become a bread line, or a VIP line where the person with the most money get’s in first/ eat’s first. Not too different than the current system but actually it would be worse.
    We need to find a happy medium for all.

  54. Posted by Rillion

    I support taxing the rich to provide social programs for the poor for the same reason that the Romans used to give food (“dole”) to the poor. To keep the poor from realizing that if they really get pissed off enough they can bring down any government.

  55. Posted by IthoughtThisIsaREsite

    Actually the universal healthcare in taiwan is killing the business there. My sister told me that you have whole bunch old people hanging out in the hospital because they have nothing to do. They make appointments to go see doctors for every little small thing because they want to talk to someone instead of sitting at home. They get all these medicines they don’t really need but they get them because they are free. Business in Taiwan not only pays employee insurance to the government, but also universal insurance fee. Basically double taxation of health insurance fee. Somebody has got to pay for the insurance right? It’s becoming so expensive for people to run business in Taiwan so everyone is shifting to China because not only labour is cheaper, but they don’t have this ridiculous double health insurance fee. So who suffers? The unemployed. I also lived in London awhile. Luckily I never had to visit a hospital there. However, the locals tell me if you can, you buy your own private insurance and go see private doctors. You get a better care that way. Not sure if that’s true or not. Universal healthcare is an excellent social idea but who’s gonna pay for it?

  56. Posted by LMRiM

    I support taxing the rich to provide social programs for the poor for the same reason that the Romans used to give food (“dole”) to the poor. To keep the poor from realizing that if they really get pissed off enough they can bring down any government.
    How did that work out for the Romans? (Gibbon talk a lot about that very aspect of the Roman state, and the libertarian often pull up that example of the “warfare-welfare” state that leads to unsustainable tyranny in the end.)
    You’re right, though, Rillion. That is a very common justififcation, especially for people who have never been poor or lived around poor people. At its root, it is a desire IMO to retain the privileged status that the political elites enjoy, and of course they’ll spend the middle class’s money all day long to ensure that outcome 🙂

  57. Posted by Rillion

    “How did that work out for the Romans?”
    Pretty well for a very long time. They are still the western worlds longest reigning superpower and we have a few hundred years to go if we want to equal their time at the top.

  58. Posted by anonn

    The Roman civilization lasted about 1000 years. The empire was at the top for around 700. We have been a republic for 232 1/2 years and a superpower for about 125 years.

  59. Posted by asad

    Trying to blame Taiwan’s economic woes on its health care is one of the funniest things I have read on this site, let’s forget that they are an export driven country and that their main exports is chips the price of which has been dropping like a rock in the past year. Yeah it’s healthcare that’s killing it and old ladies hanging out at hospitals that is the huge cost.
    This Ayn Rand fantasy that if you can somehow make money you should just go for it without any regards for the rest of society just doesn’t work. You want to see what happens when the difference between the classes gets too big head down to Brazil. Go to a mall in Sao Paulo. Take a look at the armed guards. They are there to keep the poor away from killing you because they have no reason not to. That’s what happens when you have a small percentage of rich people and the rest of the population lives in abject poverty.
    Please give me an example country that has no safety net for the poor and continues to function.

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