A new government report reveals that the U.S. health care system is performing worse than previously thought.  Not only are costs escalating wildly, but distribution of health care is becoming more contracted, and quality is not improving, the report states.

Some of the stats include:

• Costs are 16.2% of GDP and at $7,421 per person per year are twice that of other industrialized countries.
• The average cost of employer based health insurance is now at $12,680 or roughly equal to the annual earning of a minimum wage laborer.
• Half of all bankruptcies are due, at least in part, because of burdensome health care bills.
• Incredibly, 87 million citizens, almost one in three, were without insurance coverage at some point during the year.
• More than 80% of the uninsured are in working families.
• Over 37 performance indicators, the U.S. achieved an overall score of 65 out of 100.
• More than 98,000 Americans die each year as a result of medical errors, more than the total from motor vehicle accidents, breast cancer and AIDS.

 This situation is an embarrassment to the country.  That we tolerate the routine cruelty contained in the numbers above is shameful.  Enough already.  If you want to see more stats about this disaster, go here.

There are government services we expect, obviously, and private services we expect as well.  Comparing them where they overlap, which they often do, is frought with ideologies.  Free market, regulated market, government market.  When to use what, or a combination?

Take, for example, motor vehicle registrations.  This is the government market.  The lines are often long, as are the waits.  Grumble.  So why not supplement this government service by allowing some private participation?   Don’t want to wait so long?  No problem, go to an authorized private service, pay $20 bucks more (out of a hat estimate, just for discussion only) and you don’t have to wait.  Problem solved, one would suppose.

There are important follow on observations to make, however.  The government service is cheaper and not every citizen can afford the extra money as opposed to saving some time.  Government services typically have lower administrative costs.  Administrative costs on Social Security for example, a government retirement benefit, are a fraction of administrative costs on private benefit plans. 

It’s more expensive to hire enough people to handle wide fluctuations in demand that a private, competitive organization would need to handle in order to compete in a free market.  And of course there’s the profit a private organization must make in order to exist.

It could be argued that if the government charged that extra $20 it could hire more employees and thus drop the lines and the wait.  Oh joy.  But it’s not a given that would be the case.  Because the registrations are a revenue source, it doesn’t necessarily follow government will spend extra money generated by registrations on more employees at the Dept. of Motor Vehicles.  It may want to spend the extra money on public education instead.

Private marketers would respond that it could all be done privately.  In competition, some registration companies would go for the higher end, service oriented slice of the market.  Others would take the middle, or the lower slices.  Macy’s, Nordstrom’s or K-Mart, for example.

Fair enough.  But would that really happen?  Take health care, as an example.  Government might want to have everyone covered with affordable, widely available health care services.   A public good.  In the U.S. currently, both the public and the private markets serve this area.  Private services, so far at least, have shown that they prefer to insure profitable customers.  They cherry pick, in other words, and leave the least profitable slices of the market to government.  History has shown that, without government involvement, the lower slices of this market simply don’t get served.  Under the all private system, many people had no lines available to them.  Their wait is forever, without the government stepping in.

Back to the registration business we began with.  Would it be likely that an all private registration business would simply not service the lowest portion of the market?  It would not be profitable to offer a service at prices offered by government. 

The point is, it’s way to easy to say the government does everything poorly and then walk away figuring you’ve got it pegged.  You don’t.  All private markets invariably leave sometimes large swaths of people with no lines at all.  No health care.  No lawyers.  No car insurance.  No jobs.  No shelter.  No chance.

If your attitude is “that’s life, I got mine,” so be it.  That’s exactly why we have government.  It will attempt to help the less gifted, the less blessed by serendipity.  And for the “I got mine crowd.”  Well, you got yours.  Be thankful.

Over at Money and Markets, Martin Weiss PhD, points out that interest rate derivatives could be the next bomb to hit the Wall Street banks.

“For the first time in history, U.S. banks have suffered large, ominous losses in a giant sector that, until now, they thought was solid: bets on interest rates.

In a moment, I’ll explain what this means for your savings and your stocks.

But first, here’s the alarming news: According to the fourth quarter report just released this past Friday by the Comptroller of the Currency (OCC), commercial banks lost a record $3.4 billion in interest rate derivatives, or more than seven times their worst previous quarterly loss in that category.¹“

The banks have exposure to this particular risk many times the value of their entire capital.

If you want the skinny on all this visit the site here.

There’s a lot of inflation angst being created by the Federal Reserve’s dogged expansion of the money supply in order to “lean against” the drop in consumer spending. 

But at political calculations it is pointed out that a strong indicator of future inflation, or not, is the number of people leaving employment (retiring) compared to the number of people entering employment.  Apparently if more are leaving than entering consumption drops, as does inflationary pressures.

Well guess what big, big group is starting to retire?  The boomers.  And this group is much larger than the group entering the workforce.  The lag is about two years.  So, sometime between 2011 and 2012, consumption should begin to drop in a serious way.

Of course the recession and destruction of boomer savings may delay quite a few of those retirements.

OK, it’s pretty obvious that playing nice isn’t getting it done.  Tossing trillions at Wall Street isn’t getting it done, for starters.

The moment Congress gives you the tools, it should be takeover time.  Say something true and obvious like “Instead of throwing all our money into Wall Street, how about we spend some on ourselves for a change?”

Health care reform.  Our current system is bankrupt because it has a built-in Value Added Tax, collected by private players all along the line.  They cherry pick the profitable, and throw everyone else under the bus.  That’s what’s going on.  State the truth.  Propose a sensible single payer system, put the current VAT tax into the public realm as a public, identifiable, tax then make administration non-profit, take the lawyers out of the picture in malpractice resolution, make medical school free and more available, and put doctors on salary.  So French.  So effective, both qualitatively and quantitatively.  Better health care for all, and it costs less! 

Energy reformation.  Big oil just collects the Republican/OPEC gas tax.  This tax is only going to rise, and without an alternative, it will keep America weak and dependent.  

Let the opposition rise up and identify themselves to the public.  You want health care for all, but they won’t allow it.  You want to end the Republican/OPEC gas tax, but they won’t allow it.  You want to create jobs but Wall Street won’t allow it.

Flush them out.  There is no lack of them, and they all fear the public knowing who they are.  You don’t need to point them out.  Simply make just proposals treating the middle and working class fairly.  The enemies will do all the rest for you.  And once they do, their power will be broken in Congress.  One nice thing about Congress, they really, really fear the voter.  Even more than they like the financial support of big, vested interests.  Fear trumps greed every time.

You will be advised to take it easy.  Don’t spook Wall Street and the capital markets.  Wait for better times.  You could collapse everything and make it worse.  Sorry that’s not how it works.  Real change occurs only in crisis.  Markets react negatively to earnings.  And with all the entrenched Oligopolies you face, earnings are never going to make a substantial move upward without real economic, and ethical, change.

Time to inject a good dollop of fear in the enemy camp.   It is a war, after all, against big Oligopic industries that have, and still, treated average Americans unfairly.

There’s a growing sense that Washington is in fact captive to Wall Street.  Despite the Obama administrations protestations about “responsibility,” and Secretary Tim Geithner’s remarks that government should act forcefully “and do what government is supposed to do,” the sense increases that this isn’t true when it comes to Wall Street.

“Looking just at the financial crisis (and leaving aside some problems of the larger economy), we face at least two major, interrelated problems. The first is a desperately ill banking sector that threatens to choke off any incipient recovery that the fiscal stimulus might generate. The second is a political balance of power that gives the financial sector a veto over public policy, even as that sector loses popular support.”  This from former International Monetary (IMF) Fund Chief Economist Simon Johnson, now a professor at MIT’s Sloan School of Management.  Johnson, who authors the blog baselinescenario.com, writes this in a terrific article in the Atlantic magazine here.

Later Johnson says what the IMF would do, and has done many times in the past.  “The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.”  Today that would cost taxpayers, Johnson estimates, about $1.5 trillion.

But even that is not enough.  There’s a deeper problem Johnson sees in the US, and one he saw many times in other countries in financial distress when they had to come to the IMF for help.

“This may seem like strong medicine. But in fact, while necessary, it is insufficient. The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.

“Oversize institutions disproportionately influence public policy; the major banks we have today draw much of their power from being too big to fail. Nationalization and re-privatization would not change that; while the replacement of the bank executives who got us into this crisis would be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would change only the names of the oligarchs.

“Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.”

This is basically the same prescription being offered by a number of powerful economic voices, including Nobel prize winners Paul Krugman and Joseph Stiglitz as well as economist Nouriel Roubini, who loudly and accurately predicted our current problems.   And many, many others, including Mark Thoma of economist’s view, have deep misgivings about the Obama’s administration’s clear attachment to preserving Wall Street’s status quo. 

For our part, we still hold some hope that Treasury Secy. Geithner will somehow see the wisdom of dismantling the old Wall Street, and re-making it into a smaller and no doubt less dangerous banking financial system. 

Not doing so, warns Johnson, will only prolong the recession, limit recovery–and still leave the U.S. with an unchanged financial Oligopoly that guarantees further collapses.