April 2012’s slight improvement in unemployment rate ( 8.1% ) is overshadowed by an avalanche of Americans dropping out of the labor force.  The civilian labor force slumped by 342,000 between March and April.  The participation rate stands at 63.6%.   For those lacking a high school diploma, the participation rate is 45.2% compared with 76.2% for those holding a bachelor’s degree or better.   But it’s not just years in school – occupational choice matters a lot.  For occupations with roots in STEM, compensation is consistently high.

Those heading to college this fall, will have a post-college career of about 45 years, so they should choose a career path as rewarding and secure as possible.  None of us knows the international competition and technological changes that will buffet an occupation over a half-century.

Internationally, educational attainment in STEM is improving.   A labor force with good STEM skills and a government that invests in relevant high-tech industries can create a strong comparative advantage – leading to higher exports and incomes.  Conversely where skills and capital are insufficient, labor can be a commodity without pricing power – that’s not where our high school graduates want to compete.  College graduates in STEM majors and particularly those with advanced degrees face brighter prospects than others, but over a 45 year horizon, there are no guarantees even for such plumb occupations as architecture and medicine.

For example, pharmaceuticals have been successfully developed and manufactured offshore.  Medical services seldom come from an “offshore” provider to the U.S. domestic market.  Exceptions are medical tourism in Thailand, India, and Central America, and tele-radiology for reading nighttime X-rays and for U.S. locations with skill shortages.  By 2020, when electronic health records become the norm, medical diagnosis and treatment planning could be provided by offshore practices staffed by U.S. accredited physicians.  This would cut health care costs and depress the incomes of U.S. physicians.

In architecture, a split will likely develop between aesthetics on one hand and mechanical-engineering-cost control aspects on the other.  Augmented by a database of “looks,” aesthetics will remain the province of humans but the rest could be merely applications for a “Watson-like” computer under minimal human oversight.  Aesthetic and oversight roles will be far less labor intense than today’s architecture and we’ll need far fewer professionals.  Drafting as an occupation may be entirely eliminated by an architectural “Watson.”

As an engineering example, the telecommunications sector has been on a rollercoaster.  For more than a century, copper “twisted pair” was the main physical transport.  It was replaced by fiber optics, shielded coax, point-to-point microwave, and recently by radio spectrum.  The format in which voice and data are carried went through even more changes – with internet-style packets over spread spectrum being the dominant form for mobile communications.   An electrical engineer who joined a telco after graduating 45 years ago has needed frequent re-education.  U.S. demand for expertise in twisted-pair systems is approaching zero.   A viable skill-set today would include depth in many IT topics, most of which were undeveloped in 1967.

College-bound students are choosing a career path that they will live with for decades.  It is impossible to know how those careers will change, but it’s clear that STEM-based careers can start them out with a big advantage and that frequent educational tune-ups will be needed.

Alan Daley is a retired businessman who follows public policy from the consumer’s perspective.

Consumers are hit hard by the spectrum crunch.  As more people utilize the current wireless broadband infrastructure, service will get poorer and spottier, and prices will rise to meet the demands of stressed network.  We’re already seeing evidence of higher prices after the blocked merger of AT&T and T-Mobile, which has caused prices for consumers of both providers to rise due to the lack of spectrum as both desperately need to provide for their expanding consumer base. 

As FCC Chairman Genachowski recently noted at CTIA’s annual conference, wireless devices now reach more people globally than electricity or running water.  And this immense growth will only continue in the coming years as more and more of the developing world adopts wireless devices.  So what does that mean for consumers? 

For years, wireless broadband providers, analysts and the tech industry have been explaining the need for more spectrum for innovation and to better serve consumers who expect faster speeds and higher quality service at an affordable price.  Unfortunately, there’s still a lot of hard work that needs to be done to bring new spectrum to market.  Congress recently passed legislation to authorize the FCC to conduct incentive auctions of broadcast spectrum – a great first step – but it will be years before any of this spectrum is actually deployed to service consumers.   In addition to the pending incentive auctions, the government and the mobile broadband industry must work closely together to identify additional spectrum resources that could be repurposed for commercial uses.  While these long-term initiatives are critical to meeting the crunch over the coming years, secondary market transactions are critical to alleviating short-term spectrum needs. 

Currently, the FCC is reviewing an important secondary market transaction as Verizon Wireless is attempting to purchase a large block of fallow spectrum from SpectrumCo.  Verizon Wireless is committed to deploying this spectrum quickly to better service its customers and build out its LTE network.  The FCC should encourage transactions like this and any others that help ensure that dormant or underutilized spectrum is put to its best use to meet consumer demands and drive the deployment of new technologies.  A robust and well-functioning secondary market is critical to meeting the goals of the FCC’s National Broadband Plan and approving this deal will send a clear signal that the FCC is committed to fostering a healthy secondary market.

All of these consumer benefits could be derailed by the looming spectrum crunch.  Fortunately the crunch can be alleviated if spectrum is allocated appropriately with a comprehensive approach to spectrum policy that includes a healthy secondary market, open incentive auctions and continued efforts from the government to identify and repurpose spectrum.

Zack Christenson writes on digital tech issues of the American Consumer Institute

The real problem with the article is that it is such a departure from the mainstream thinking that it reeks of manipulation.  The placement, tone and coordinated pairing articles on the same page appear to support a political objective and candidate.  Is it a mere coincidence that the article’s first paragraph suggests the “troubling incident” was linked to a student’s sexual orientation, and then another article (immediately to the left on page 1) discusses the President’s evolution on gay marriage?  A look at page 2 confirms the coordination with an article suggesting that the Republican candidate is a bully.  Whatever happened to the real news — the economy, the falloff in job creation, workers leaving the job market, the deficit, and so on. 

Was this biased reported an isolated incident?  No, it is happening at an increasing rate and at other newspapers too.  The placement, tone and coordination of the articles should require a “paid for” disclaimer – but there is none to be found.  As a result, I could finally read no more.  So, like so many others before me, today I cancelled my subscription to the Washington Post.

Today, banks have a 95% share of business lending, despite a significant drop-off in lending to small businesses.  Last year, banks rejected 60% of small business loan applications, and they reduced small business loans by 20% during the last recession.  On the other side, credit unions increased loans by 40% during the last recession, but their lending has been capped by an outdated law that suppresses small business access to capital and deters smaller credit unions from serving these businesses. 

To improve small business access to capital, Congress has proposed to increase the current credit union lending cap from 12.25% to 27.5% of assets.  For small businesses, which typically account for 60-65% of job growth in an economic recovery, increasing access to capital would mean investment and growth.  In fact, the proposed change would generate $13 billion in investments and create 140,000 new jobs, as well as indirect economic benefit.  On the other hand, keeping the cap in place maintains an economic barrier to entry that protects near-monopoly status for banks that collectively control the small business lending market. 

Warren Stephens is right in that we need public policies that encourage competition.  In this case, we need to remove market entry barriers that suppress small business lending.  Ending these market barriers would increase competition and stimulate economic investment, and do so without increasing government spending. 

Steve Pociask is president of the American Consumer Institute Center for Citizen Research, an educational and research organization.

Phoebe:  “Grandpa?”

Me:  “What do you need, hon?”

Phoebe:  “I need an iPad like Grandma’s.”

In silence, I pretended to focus on our shopping list, hoping the 5-year-old’s attention span would let the request lapse quickly.

Phoebe:  “I really, really need an iPad, pleeeease.”

Me:  “But you have a Wii and you’re good on Guitar Hero and the other games.”

Phoebe:  “Grandma’s iPad has better games.”

Me:  “Which games does she have?”

Phoebe:  “Angry Birds and Water and she lets me download other ones.”

Me:  “Grandma said she’d help you use Khan Academy.”

Phoebe:  “Grandma says her games help me learn.”

In silence, I recall that Mossberg said to wait until fall to buy any laptop or PC since by then Windows 8 will be out and new PC’s will have touch screen technology.  PCs are better bang for the buck; faster, more storage, and more durable – a compelling argument.   But, on second thought, do I really want Phoebe exposed to the malware and privacy loss typical on Internet Explorer?  I’m left without a better idea, but I avoid mentioning a laptop or desktop anyway.

Phoebe:  “I can read some of the games.”

Me:  “Well, iPads might break easily.”

Phoebe:  “I play with Grandma’s iPad when I sit in her big comfy chair.  I don’t take it outside.”

Me:  “Yeah, but all the really cool kids want cellphones – not those iPads.”

Phoebe:  “Nuh-uh, no one of my friends has a cell phone.”

More silence, while I pick up grocery items pretending to be focused, but really just lacking argument ideas except for the outrageous cost of iPads.

Phoebe:  “Donny says old people don’t understand iPads.”

Me:  “Oh hey – look over there, the checkout line is really short.   Here’s our list – check that everything on it is in our basket.”

Phoebe:  “If I got an iPad, I could teach you how to use it.”

Alan Daley is a retired businessman living in Colorado following public policy from the consumer’s perspective and learning to not underestimate grandchildren.

• TCPalm on 4/26/2012 (click here to go to the page)  
• The Ledger on 4/28/2012 (click here to go to the page)

Banks’ recent history of callous unfairness toward consumers undermined their credibility.  But now, they want us to believe that the well-behaved, tiny, local credit unions are a looming threat to the banks’ dominance in commercial loans.  They are complaining loudly that the Senate might pass S.2231, a bill that would allow credit unions to loan up to 27.5% of their assets to small businesses, gradually, and subject to careful staffing, monitoring, and other safeguards.

The banks’ complaint is a shameful fabrication; banks control 95% of the business loan market, and even the so-called “community banks” (banks with assets below $20 billion) control 58% of the small business loan market.  And it’s not just aggregate market share; the average credit union has assets of $122 million and the average bank has $1.8 billion in assets – it’s the difference between a hamster and a hippopotamus.   The hippos have nothing to fear.

Hoping to add a little credibility to their whining, the banks dragged in Fitch, a European ratings agency.  Fitch is paid to do ratings work by 3,500 banks, but it failed to foresee the banks’ U.S. mortgage crisis that led to TARP.  Fitch was just as myopic as S&P, Moodys, and the banks themselves.  In its press release on credit unions loaning to small businesses, Fitch admitted it rates no retail credit unions, and that it was relying on what the bank lobbyists told it.  Fitch then added something diffuse concerns about commercial loans adding to “risk.”   But Fitch did not dig very deeply.  It failed to mention that the business loan loss ratio at banks is three-times-higher than the loss ratio at credit unions.   So much for Fitch’s opinion on “risk.”

S.2231 is tailored to add a little competition for small business loans.  It builds on what has been a successful and prudent loan practice by credit unions over many decades.  The Senate can safely pass it.   The banks, credit unions, and small businesses will all survive quite nicely.

Alan Daley is a retired small businessman who writes for the American Consumer Institute

Government has been a major factor in increasing health care prices.  It increases the prices everyone else pays to health service providers through cost-shifting, and it increases the taxes we must pay to offset the subsidies it ladles out to its favored beneficiaries.

Government demands huge “take-it or leave-it” discounts from physicians and hospitals for the services given to Medicaid and Medicare patients.  This has been going on for decades.  The health service providers recover those discounts by jacking up the “rack rates” paid by individuals and hiking the “wholesale rates” paid by big insurance companies.

E.g. in July 2011, a Medicare beneficiary went to a clinic with severe flu symptoms.  The clinic charged $212.00 for services (its rack rate).  Medicare offered $129.33 which the clinic accepted (39% discount).  The patient’s Medicare “gap insurance” paid another $32.33 (15% of total).  The patient paid nothing.

E.g. in another clinic, in July 2011, the same patient was charged a rack rate of $140.00 Medicare paid $82.62 (41% discount) and the “gap insurance” paid 20.66 (15% of total).

For those who pay nothing for health care, Government’s cost-shifting may feel benign.  For everyone else it means higher out of pocket costs.  In the proposal, government is entitled to a volume discount geared to any documented efficiency it delivers (in administration) for the service providers – but it is not entitled to discounts related to its powers of clout and retribution (interactions with IRS, FDA, DoJ).  Government cost-shifting should be limited to documented efficiency.  Likewise, insurance company discounts should not exceed the efficiency they deliver to providers.   These proposed “green eyeshade” measures will decrease the prices that consumers pay directly.

Malpractice lawsuits are a massive waste of the health care dollar.  Tort lawsuits cost 1% of health spending ($27 billion per year) and are responsible for another 4.7% ($124 billion/year) in “defensive” medicine.  “Defensive medicine” is the ordering of extra tests and procedures that are not required by the patient’s condition but are required to insulate the physician from accusations of medical malpractice or inadequate treatment.  Malpractice attorney talking-points include platitudes about making health treatment safer, but clearly their aim is to become very rich on their 1/3^rd share of lawsuit winnings.  While victims of inappropriate treatment should have a right to sue, awards should be limited to actual damages, court costs (the loser pays) and a cap on pain and suffering (e.g. $100,000 or less).  So far, politicians have not restrained the cottage industry of trial attorneys.

In the proposal, legislators must scrap the malpractice gravy train (cap on pain and suffering, and loser pays court costs), and physicians are not off the hook.  They need to stop wasting 5% of health costs on CYA behaviors such as “defensive medicine,” and at the same time, physicians and hospitals need to address the 44,000-85,000 U.S. deaths of each year from iatrogenic illness, (illnesses acquired as a result of medical error, drug interactions, hospital–acquired infection, etc.).  The cost of iatrogenic illness treatment is $35 billion per year of imbedded costs borne by consumers.  ACA advocates claim 1.8 million of those injuries and 60,000 deaths could be averted.  But those adverse outcomes do not automatically justify invasion by the malpractice pirates.  Instead, the public deserves unbiased review by medically competent specialists.  There’s no value in the deeply emotional frenzy that malpractice attorneys whip up to influence judges and juries.

The AMA conducts medical peer reviews where skilled arbiters assess the care given to the patient.  If the AMA wants to retain its control over the practice of medicine and see malpractice suits brought under control, it needs to do more medical peer review, remove deficient practitioners and most of all, it should publicize the results.

Patents on pharmaceuticals and medical devices offer copycat protection to manufacturers who invested resources to invent or refine new technologies.  The patent allows manufacturers to set a higher than competitive price, but it is not a license to treat American consumers unfairly by setting a higher wholesale in the U.S. than they set for outside the U.S.  In this proposal, U.S. consumers should not be denied access to the lowest “high price” the manufacturer sets for an equal volume.  If the manufacturer refuses to offer U.S. consumers his best price, then the patent protection can be rescinded.  In the wake of patent protection loss, the consumers can benefit from another manufacturer making a competing “generic” version of the product.  The government does not need to set prices, nor should it grant pricing advantages to a firm that discriminates against U.S. consumers.

Electronic health records (EHR) are used by 35% of physicians now and will be the norm for documenting the patient’s treatment plan and history before the end of the decade.  In an EHR, handwriting-error is greatly reduced, medical coding and charging can be automated, and patient records are ready for consults on treatment.  Administration costs can be reduced through EHR, and the costs associated with pursuit of inappropriate treatment plans can be cut.   From EHR gear, there are additional benefits such as faster communication among treatment teams, coordination of referrals, and highly relevant in-service training for health professionals.  If EHRs are required for large institutions that participate in government-paid and insurance company-paid services, the uptake of EHRs can be accelerated and health care costs reduced.  Rand estimated $80 billion in yearly EHR cost savings, but recent studies say that some doctors order more tests because EHRs make that so easy to do – perhaps defensive medicine is showing its ugly head.

An aging U.S. population and the one-in-six who remain uninsured are increasing the demand for health services, but the supply of health professionals does not appear to be keeping pace.   The successful experience with nurse practitioners and other specialized non-physician health care providers suggests a way for the U.S. to add capacity to meet health care demands.  Widespread EHR availability should readily accommodate the physician “supervision” that the AMA arrogantly thinks is needed.  No doubt the AMA will see consumer benefits from increasing the supply of professionals.

And finally, the walk-in clinics sprouting up at Walmart and other big-box stores cut 30% to 40% off the cost of the same service rendered at a doctor’s office.  These clinics are often run by a nurse-practitioner.  Patients seem pleased with the service and delighted with the convenience.

The proposals above are intended to provoke discussion on ways to cut the cost of health care for consumers.  We welcome other perspectives that can promote the same goal.

Alan Daley is a retired businessman living in Colorado who follows public policy from a consumer’s perspective.