An Open Letter to Ben Bernanke

Here's a post we did for work recently.  It's an open letter to our one-man band Fed Chairman (bless his heart).

The NCAA’s Death Penalty

You have to respect what NCAA President Mark Emmert was trying to do Monday when he effectively kicked Penn State down to the Football Championship Series for the next five seasons.  It’s his job to enforce the rules and culture of college athletics, and the athletic leadership at PSU really screwed this one up.  Turning blind eyes toward Jerry Sandusky’s hideous sins cost several boys’ their innocence and mental health.

And PSU president Rodney Erickson’s call to pull JoePa’s statue from the stadium while leaving his name on the library was deft.

But did the NCAA over-play this one?  I don’t mean morally, I mean practically.

Let’s separate Sandusky from the question.  That dude should be forced to walk the plank into a tank of almost-starved, lightly-chummed Great Whites.  Or maybe buried up to his chin in the desert, drizzled with honey, and left alone for a pleasant evening under the stars.  Better yet, how about we appoint a two-person committee of Hannibal Lechter and Kevin Spacey’s character from Seven to develop a moral improvement curriculum for Mr. Sandusky?

(You probably can’t tell, but I’m having a difficult time seeing that God wants to redeem Sandusky with the same passion as he does yours truly.  I’ll work on that.)

Let’s also separate the pending criminal charges for the living guys who covered up the abuse reports.

What I’m wondering is whether the NCAA itself is in trouble with this call. 

The fact of the matter is that even though the “WE ARE” nation is trying their best to put on happy faces right now, their football program is at the very least in a deep, deep hole.  And they may never get out of it.

PSU football was Paterno.  Bill O’Brien is probably a great guy but athletes went to PSU because Paterno won a lot of games, went to bowls, and sent kids to the NFL.  O’Brien is still untested as a college football head coach, and he just lost 20 scholarships and any hope for post-season play for 4 years.  Heck, he didn’t even recruit the stars they have now.  Why should kids like Silas Redd stay put when they’re getting calls from dozens of coaches to jump ship?  This could kill Penn State football. 

You might say, “Ho, hum.  We can all do with a little less college football.  So what?”

My question is: Who, exactly, can do with a little less college football?

The physics & chemistry majors whose brand new mass spectrometer arrived courtesy of the 19 year old kid that just caught a fingertip pass at the back of the end zone, making 100,000 otherwise docile men scream like preteen girls?
 
How about the Poly Sci prof who gets to teach a single section of 14^th Century Papal Policy, while “struggling” to crank out a single article every other year?  He might want to thank the 70 year old dude 8 blocks away that just peeled himself out of his $80 seat to buy two $60 hoodies for the grandkids.

Maybe the Title IX recipients could do with a little less college football.  I’m sure the women’s golf team is self-sustaining.  What’s that?  It’s nowhere near self-sustaining?  Hmm.  How about field hockey?  Tennis?  Swimming?

Perhaps university presidents, whose schools are somewhat more likely to receive state tax-payer funding if they have successful football programs?  No, I’m not making that up.  Read about it here, if you want (warning: this one involves math).

Indianapolis Star sportswriter Bob Kravitz recently described this issue—dealing too sternly with the big business of college football—as letting the genie out of the bottle.  I think grabbing a tiger by the tail is a slightly better metaphor, but either works.

Here’s the zinger: membership in the NCAA is voluntary.  It’s been a successful near-monopoly, but all it takes is a few large teams to feel like they’ve had enough.  Penn State starts talking to Southern Cal, who checks in with Ohio State, who then passes the message on to Florida, and so on.

As much as I respect what Emmert wanted to do with this one, part of me wonders whether the NCAA just instituted its own death penalty.  Heck, if the NCAA goes, maybe student athletes would finally start to be fairly compensated for their generous contributions to their university slop troughs.

What do you think?

The Economic Impact of the Affordable Care Act

There are all sorts of reasons why you might want to force someone to buy health insurance.  You might see it as a way of providing for the health care needs of poor people.  You might think that the “free rider” problem is a beast needing to be slain.  You might just enjoy making other people do things—you’re just sort of an authoritarian at heart.  

You could also believe, as President Obama does, that the individual mandate aspect of the Affordable Care Act will be a clear economic positive.

Well.

If that’s your conviction, I want to offer a few challenges:

1.     If the “larger pool” succeeds in driving average costs down, it can do so, actuarially, only by shifting costs from those who need health care services to those who don’t.  In essence the individual mandate converts the health insurance industry into a type of pay as you go system, like Social Security.  But even that benefit is only temporary: we have no reason to assume that Americans will on average now desire to live shorter lives, eat healthier foods, exercise more, adopt truly preventative behaviors, experience catastrophic accidents less frequently, sue their doctors less frivolously / be awarded less silly punitive damages, etc.  

2.     The negative impact on the medical device industry can’t be overlooked—how does the excise tax affect capital formation and innovation in what has been one of our areas of comparative advantage?
 

3.      I’m also not clear on the impact on small and mid-sized businesses: maybe they join pools and their premiums decline, or maybe they look at their average total cost per employee (e.g., the employer component of plan premiums) rising and decide to pay the $2k / head fee and drop the plan altogether.  In that case, can we be sure that state Medicaid pools can handle the increased enrollment?  

4.      Finally, hospital stocks were up after the Supreme Court’s decision because they have greater assurance that the ACA solves their bad debts problem.  But pharma was down (increased use of drugs still facing patent expirations + restrictive FDA = zero incremental enthusiasm), as were the insurers (these guys went for the grand bargain ostensibly because they would add a boatload of new low risk customers), and likewise the device manufacturers. 

Societal preferences aside, all of this sums to a murky economic impact at best, in my view. 

Push back--how do you see the economics of it?