A Christmas Fight Revisited Revisited

Since I was copying posts from the Daily Kos I thought I copy this one as well from 12/16/06. This is one of my favorites and while things have stabilized in Iraq since I wrote this posting I would be surprised if things don't unravel within 10 years of our departure. Two things are sure ... the United States will never see any free oil to pay for the war and the additional debt burden from the war is more than our country could afford. The saddest thing for me is that since this post in 2006 I have moved a lot so in many ways this was my last normal Christmas. I hope in the next 4 years that changes.

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For as long as I remember my family gathered at my dad's house on the Sunday before Christmas. I'm sure the annual Christmas parties at my dad's house was no different than thousands of other families -- lots of food, football on TV, and conversations with people you haven't seen since the summer. The Christmas of 2002 was a bit different for two reasons. The first reason was that my dad had recently decided to move to Arizona and this was going to be his last Christmas party. The second was that George Bush and the Republicans had campaigned about the need to invade Iraq so the conversations that typically included grandchildren's accomplishments quickly devolved into an argument about Iraq....

I was raised in a typical Midwestern town and I think my family is typical of most although my parents were divorced when I was 8 (sadly that might be typical as well). My Dad is retired from the Navy and a registered Republican but he is probably a more of a moderate than anything else. His family members are from all over the Midwest and we always got a good cross section from the heartland ranging from typical city dwellers to hard working farmers to the slacker that the older generation wonders out loud if they will ever get a J-O-B.

I think my brother and I are pretty typical in that we are very close but also very competitive. He has been a Republican ever since the mid 80's when Reagan was in office. He has a job where he travels in a car a lot and so he gets to listen to Rush Limbaugh quite often. While I loath Rush I have to admit he is good at putting things into simple sound bites messages so that the people who listen to him at least sound intelligent. When I was growing up most people assumed that I was a Republican as well because I had a good job and frankly I just look the part. I have been asked many times why I am a Democrat and I always answer that when I went to college I actually learned to think for myself unlike most Republicans I know (usually this is said with a nod and a wink to my brother who responds with some similar sarcastic remark).

At the 2002 Christmas party my brother started the whole thing by asking me what I thought about the recent elections. I'm sure everyone here remembers the midterms of 2002 as they were brutal. The Republicans expanded their hold on Congress with what I called their "Chicken Little" campaign of fear regarding terrorism and Iraq. Almost immediately after my brother makes his comment about the election the convesation leads to a discussion about Saddam. Soon the entire family room is filled and I realize we now have at least 20 people in the room all discussing Iraq. To my surprise the question quickly went from whether we should invade Iraq to how quickly we should invade Iraq. Soon after it devolved to a situation of me versus the room. My dad's cousins from the city, my stepmom's relatives from country, and my aunt's work friends all aligned themselves against me. I thought I could have counted on my my slacker cousin without the J-O-B but was sadly disappointed. I was completely shocked because even though I knew my views were different than most people it really hit home that day. Their discussion came down to a few points.

• Saddam is evil and needs to be taken out.
• Saddam has weapons of mass destruction.
• Oil will pay for the reconstruction.
• The people of Iraq need to be free.

I couldn't believe the simplistic nature of their arguments and I couldn't get anyone to listen. I argued that wars never create a more stable country and that we were too far in debt to be able to afford to adequately rebuild Iraq. I argued that it would be at least 5 years to get the oil flowing to pay for the war. I argued that it is one thing to beat the Iraqi army but it is quite another to run their country. I informed them that Iraq has no history and is made up of multiple religious and ethnic cultures that are bound to fight one another once Saddam was gone. I hit them with every fact I could think of but they came back to the same simple points which mainly consisted of 9/11=Terrorist=Evil=Saddam (which I have come to call the Republican's 9/11 transitive property as it works with most every issue). This conversation went on for at least an hour with me getting madder and everyone poking fun at my naivity about how the world really worked. The conversation ended when my dad (who hadn't said a word) finally had enough and said simply .... "End of discussion, it's Christmas, let's get off this subject, get some food, and sit down to watch some football". He knew my arguments weren't convincing anyone and the discussion was getting so heated it was on the verge of ruining Christmas. Dads can be wise like that.

The conversation was over but the conversation in my mind continued. I asked myself, "How could I be so out of touch with my family and my country"? I'm pretty stubborn and was mad at myself for not being able to articulate the right argument to convince anyone. Of course in hindsight I realize that to convince someone they have to be willing to listen.

Over the next few years my brother has enjoyed tweaking me whenever something positive happened like when Bagdad fell or Saddam was captured or when the Iraqi elections occurred. I rarely brought it up because it sucks to have a position where to win an argument something bad has to happen like more American soldiers dying or more money wasted. I have never stopped believing that the war was wrong and we could have gotten much better results some other way.

In the past year it is now obvious that everything I said is coming true. Since my dad moved to Arizona we've moved Christmas from relative to relative and this Sunday is the first Christmas at my house. I'm sure everyone who was there 4 years ago has probably forgotten the discussion and may even believe today that they were one of the few that stood against the war. I'd love to tweak my brother one more time with a sarcastic question about the 2006 election but I'm not sure I can do it. The Democrats did all I could have hoped for but I have felt an emptiness ever since their victory. At first I thought it was the fact that I was so focused on seeing that the Republican get kicked out of office that the actual fact of them leaving took away one of my life motivators. I've come to realize that it is something else and something sadder. It's because people like me weren't able to convince enough people that the Republicans were wrong back in 2002 that we find ourselves in our current situation. While I know it is silly to think that way I can't help but mourn the lost men, money, and our country's reputation that the Republicans needlessly squandered. I'm happy the Democrats won the election but they can never bring back the past. So this Sunday I will follow my dad's advice once again only this time I'll end the discussion before it begins and simply say,

"Merry Christmas everyone.... help yourself to some food, there's football game on the TV".

But I want to say so much more......

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The Coming Health Care Crisis - 4 years later

Copy of a post I made to the Daily Kos on 1/23/06 -- interesting read 4 years later
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I feel the same as most of you about national health care but feel that way for what I'm sure is a different reason. I head a regional finance department of a billion dollar company and review the cost of our medical expenses every month. I have been in my job for over 10 years and have seen the cost of medical care grow from about $1,500 per employee to almost $10,000 in that time.

The issue described in detail below....

Part of the issue is our aging work force. Part of it is due to bad luck on the part of some of our employees. But most of it is because the cost of medical procedures and prescription drugs are growing at a rate 8-10x greater than inflation. In the last few years this cost has eaten up our profits to the point where we had no choice but to cut costs in this area. Co-pays on doctors visits and drug benefits weren't enough so we are now increasing the annual deductibles. Last year we eliminated our retirees health plan and long ago froze our pension plan. This is the equivalent of a higher, regressive "tax" on our employees but my company really has limited choices. I tell my Republican co-workers, many of whom are the lower paid people I just mentioned, that a national health care plan would resolve many of the issues. They just look at me like I'm Michael Moore in wingtips. They repeat Republican talking points like "it's not the job of government to run health care". I respond by asking where it is written that it is business's job either. If anyone with half a brain would look, business is stepping away from that responsibility because they can no longer afford it. The doctors and drug company's know that they can continue to charge ever increasing rates and businesses will pay the bill. But business will only do this to a point and then either cut benefits or pass the cost on to consumers in the form of an inflation "tax". Most companies are doing both. Our leaders in Washington have been bought and sold on this issue by the lobbyists even though most have to know this is a real problem. Government might not be the ideal solution however it will be a much better option that what is going to happen with business health care plans in the next 10 years. I just hope when the politicians aren't too late when they finally decide to act.

Note: I originally wrote this in reply to margot's post about public pension plans. I decided to post it in a Diary since it kind of left that topic.

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The Simple Employment Math of Health Care

I post from time to time over on the "daily Kos" and thought I'd copy my latest entry here.

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A good friend of mine continually tells me that it "isn't productive to worry about things over which I have no control". Of course he is right but unfortunately I am not wired that way. I obsess about many things and the mere mention of health care will put me on my soapbox for a few hours. My family has gotten to the point of avoiding the subject for fear of me going off on it as my views on the subject are well known to them.

I see health care from a different angle than most as I have worked in the finance department for a Fortune 500 company for much of my business career and watched as these costs have steadily risen to alarming levels. In the last few years I started advising managers about what I called the health care overtime break-even whenever we were looking to hire new employees.

If the term "Health Care Overtime Break-even" doesn't make sense to you I'll explain it in more detail after the break.

I firmly believe that the long term future of every country's economy is directly tied to the employment levels of people that make, ship, and sell goods and services. These employees are the lifeblood of the economy and this is exactly the hardest hit segment in the United States over the last 30 years. Health care costs have made this situation even worse by depressing the number of people that companies can afford to hire. I like to think of this in a simple formula of:

x = y / (0.5z)

At first glance, perhaps this formula isn't that simple. Let me explain...

x = Overtime Hours Break-even
y = Benefit Cost
z = Hourly Wage Rate

When a company hires an employee, there are two components to the cost. The first is the actual salary paid to the employee and the second part is the benefits. Salary is easy to understand as in most cases it is an hourly wage rate. Benefits are more difficult for people that don't look at them closely as it includes every other piece of compensation paid to employees (Health Care, Long/Short Term Disability, 401k, Employer FICA match among others). Truthfully, most employees don't care about the cost of benefits as they look at them one of two ways -- they have them or they don't. For this example we are going to lump all benefits together as one fixed cost. I do realize that the FICA match isn't fixed but I want to keep this simple and the answer is directionally correct using this assumption.

If you notice, what I described in the previous paragraph is the basis for the formula. "Y" is fixed cost per employee for benefits and "Z" is the Hourly Wage rate. Let's do an example:

Using a Benefit Cost of $10,000 per year and an Hourly Wage Rate of $15 per hour, I get an answer of 1,333 hours annual (or 25.6 per week). What does this number mean? This is the number of hours over 40 that a company should work an hourly employee so that they maximize profits to the company. In this example, the cost of the overtime premium is greater than the cost of benefits when an employee works more than 65.6 hours in a week.

To hopefully make it even a bit more clear I have done the math below for a company that has 60 hours worth of work:

Weekly Cost of Benefits per employee = 200 (10,400 annual)
Wage per hour = $15

Cost of 1 Employee = 60 hours x $15 + 20 OT hours x $7.5 + 200 or $1,250

Cost of 2 Employees= 30 hours x 2 Employees x $15 + 200 x 2 or $1,300

Notice that the cost of 1 employee working 20 hours of overtime is actually cheaper that working 2 employees 30 hours. The formula I listed above is the break-even that shows at what point additional overtime hours are actually costing them money.

What does this mean to the average worker? Let's look at the formula again.

Overtime Hours = Benefit Cost / (0.5 x Hourly Wage Rate)

In the last few decades benefit costs have increased 8-10% per year while hourly wage rates have increased around 2-4%. The impact is that the overtime breakeven has steadily increased over that time.

This has put downward pressure on hiring which didn't matter much when we were at full employment but is a barrier today. I know when I entered the workforce in the late 80's my company's average hourly wage was about $10 and benefits were around $2,000 per employee or an overtime break-even of 7.7. Today's numbers are about $16 and $10,000 or an overtime break-even of 24.0. At one point it made sense to hire more people when we had more work but now it makes more sense to work our existing workforce harder and sadly this will only get worse in the future.

I realize that this is only one small piece of a large issue. Anyone in business that is being honest will agree that the current health care system is a huge disadvantage for American companies. I believe that many CEOs would be delighted if they could remove anything related to health care from their planning discussions. The current health care reform is a good first step to getting this done and I really hope the Democrats have the leadership to make this happen. Because if health care reform doesn't occur, the long term implications are disastrous not only to people who aren't covered today but to every American business.

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