The title says it all. Yes, researchers have studied the effects of cell phone use on your driving skills. They found that using a cell phone while driving is equivalent to having a blood alcohol level of 0.08%--the legal limit for driving under the influence of alcohol.
It’s also equivalent to having a couple of noisy kids in the backseat throwing their stuffed toys at you and screaming, “Mommy! Mommy! Bobby hit me!” It’s equivalent to eating a hamburger with one hand and sipping a soda with the other, or plucking your eyebrows, or checking your email on your crackberry, playing video games, listening to your IPod, or fiddling with your overpriced, underwhelming satellite navigation system—all things that people do every day while they’re behind the wheel: drive while distracted.
About 6,000 people die per year, every year from distracted driving—mostly because of cell phone use while driving. Tragically, it’s often not the cell phone user/driver who’s killed, but the pedestrian, bicyclist, passenger, or other driver who gets nailed by the thoughtless jerk who couldn’t wait to answer that text message or phone call.
Of course, most people involved in cell-phone-use-while-driving accidents aren’t killed outright. They’re injured and have to go to the hospital or see a doctor. They often end up needing a series of treatments for chronic pain, or neck or back injuries that can take years and endless physical therapy sessions and surgery to help them heal. If they fully heal, and many don’t.
Approximately 800,000 people every day drive with a cell phone in hand. The Insurance Institute says that it makes no difference whether you hold the cell phone in your hand or use a hands-free device; both are equally distracting. In fact, the hands-free device may be more dangerous, since it gives us a false sense of safety.
An easy way to save millions in healthcare costs each year would be for Congress to pass the bill introduced in the Senate by Charles Schumer (D-NY) and Amy Klobuchar (D-Minn) that would force states to pass laws banning driving while text messaging or risk losing 25% of their federal highway funding. Currently only 18 states ban text messaging while driving.
Only 7 states ban cell phone use in the car. The US public could save a lot of money passing a federal law that bans cell phone use while driving, except to allow drivers to dial 9-1-1 in case of an emergency.
Simple, yes, but is anyone proposing a bill? Hello? Is anyone there?
Thursday, October 8, 2009
Tuesday, October 6, 2009
Sheila Bair's Big Gamble
Last week the FDIC shut down another three banks, bringing total bank failures in the US so far this year to 98. Last year there were 25, and in 2007, there were only 3.
The Federal Deposit Insurance Corp. is not just the government entity that insures your cash deposits in the bank; the FDIC also has the unenviable task of unwinding banks that have run up massive debts and have no cash on hand to pay them off or cover their customer’s needs. When too many customers (depositors) learn of the rickety state of their bank and line up to demand their money, it’s called a run on the bank. Runs can drain a bank down to nothing, and the FDIC has to make the call when it’s time to close the doors and sell off the remaining deposits and assets to another, healthier bank, thus avoiding a situation where the FDIC has to make good on all the remaining cash demands of the depositors and creditors of the bank long after all the cash has been drained away.
Unfortunately for the FDIC, the pool of healthy banks willing (and able) to buy up the assets of ailing banks has dwindled, leaving the FDIC with a lot of assets on its hands that may in the long-term be worth money, but right now can’t be sold for even pennies on the dollar. The FDIC’s own cash pool, which comes from annual fees paid by banks (about 12 to 16 cents for every $100 of deposits) has dwindled.
In 2008, the FDIC spent $20 billion of its cash reserves on 25 bank failures; this year, that figure is more than $30 billion. Last week, the FDIC’s cash reserves went into the red—meaning that they need to raise cash fast to cover more expected bank failures. The FDIC estimated earlier this year that they would spend approximately $70 billion total by the end of next year, but raised that estimate recently to $100 billion, so the need for cash is hanging over FDIC Chair Sheila Bair like the sword of Damocles.
Big investment banks, like Goldman Sachs and JP Morgan, have been keeping an eye on the situation and trying to figure out how to make money from it all. Last month they proposed loaning money to the FDIC so Sheila Bair, who’s been a major critic of how Fed Chief Ben Bernanke and Treasury Secretary Timothy Geithner have run the financial industry bailout (without strengthening regulation in the process), can avoid going to her enemies for a loan.
The FDIC has two ways to raise more money. It can borrow money from the US Treasury (with Timothy Geithner’s approval) or it can levy a special assessment on banks. But the FDIC had already issued a special assessment last May, and Bair’s critics wailed that another special assessment would only drive more ailing banks into the ground. Bair didn’t much like the prospect of borrowing money from Goldman or JP Morgan at usurious rates or, heaven forbid, at adjustable rates (a type of loan that should be illegal, after all the damage it’s done to the economy and to people’s personal balance sheets, but of course it’s not—that would stifle business). So Bair came up with a compromise.
The FDIC will ask banks to pre-pay their annual assessments through 2012. In other words, Bair is taking an interest-free loan from banks. In order to avoid harming the banks that are still struggling, she gave them the okay to not report the prepayments on their financial statements, so their cash reserves will look better than they really are.
How is this different from the accounting tricks that banks have been using to hide their debts and overvalue their risky investments to make their cash reserves look good? According to Bair, the difference is in degree. The few pennies that make up the FDIC assessment will be small change compared to the other expenses on banks’ financial statements. But those assessments will add up to $45 billion to replenish the FDIC fund.
The other, more important question is this: will this $45 billion be enough? By the FDIC’s own estimate, they’ll need at least $50 billion to get through the end of 2010. By asking banks to pay their assessments through 2012 right now, that leaves a gap of two years when the FDIC can expect zero income from its main source but will still have to close down troubled banks. A taxpayer bailout will be inevitable.
The fact that Sheila Bair—the only top regulator in this country who’s been outspoken about the causes of the crash—can’t turn to either the Obama administration or to Congress to replenish the FDIC’s fund is a symptom of just how sick our system is. She’s betting that things will get better between now and next year, that new financial regulation will be in place, that the economy will turn a corner, and that Congress and the American people won’t view a request from her to replenish the FDIC’s fund with taxpayer money as a taxpayer bailout that marks her as the same kind of leach as Kenneth Lewis of Bank of America or Franklin Raines of Fannie Mae.
I hope she’s right.
The Federal Deposit Insurance Corp. is not just the government entity that insures your cash deposits in the bank; the FDIC also has the unenviable task of unwinding banks that have run up massive debts and have no cash on hand to pay them off or cover their customer’s needs. When too many customers (depositors) learn of the rickety state of their bank and line up to demand their money, it’s called a run on the bank. Runs can drain a bank down to nothing, and the FDIC has to make the call when it’s time to close the doors and sell off the remaining deposits and assets to another, healthier bank, thus avoiding a situation where the FDIC has to make good on all the remaining cash demands of the depositors and creditors of the bank long after all the cash has been drained away.
Unfortunately for the FDIC, the pool of healthy banks willing (and able) to buy up the assets of ailing banks has dwindled, leaving the FDIC with a lot of assets on its hands that may in the long-term be worth money, but right now can’t be sold for even pennies on the dollar. The FDIC’s own cash pool, which comes from annual fees paid by banks (about 12 to 16 cents for every $100 of deposits) has dwindled.
In 2008, the FDIC spent $20 billion of its cash reserves on 25 bank failures; this year, that figure is more than $30 billion. Last week, the FDIC’s cash reserves went into the red—meaning that they need to raise cash fast to cover more expected bank failures. The FDIC estimated earlier this year that they would spend approximately $70 billion total by the end of next year, but raised that estimate recently to $100 billion, so the need for cash is hanging over FDIC Chair Sheila Bair like the sword of Damocles.
Big investment banks, like Goldman Sachs and JP Morgan, have been keeping an eye on the situation and trying to figure out how to make money from it all. Last month they proposed loaning money to the FDIC so Sheila Bair, who’s been a major critic of how Fed Chief Ben Bernanke and Treasury Secretary Timothy Geithner have run the financial industry bailout (without strengthening regulation in the process), can avoid going to her enemies for a loan.
The FDIC has two ways to raise more money. It can borrow money from the US Treasury (with Timothy Geithner’s approval) or it can levy a special assessment on banks. But the FDIC had already issued a special assessment last May, and Bair’s critics wailed that another special assessment would only drive more ailing banks into the ground. Bair didn’t much like the prospect of borrowing money from Goldman or JP Morgan at usurious rates or, heaven forbid, at adjustable rates (a type of loan that should be illegal, after all the damage it’s done to the economy and to people’s personal balance sheets, but of course it’s not—that would stifle business). So Bair came up with a compromise.
The FDIC will ask banks to pre-pay their annual assessments through 2012. In other words, Bair is taking an interest-free loan from banks. In order to avoid harming the banks that are still struggling, she gave them the okay to not report the prepayments on their financial statements, so their cash reserves will look better than they really are.
How is this different from the accounting tricks that banks have been using to hide their debts and overvalue their risky investments to make their cash reserves look good? According to Bair, the difference is in degree. The few pennies that make up the FDIC assessment will be small change compared to the other expenses on banks’ financial statements. But those assessments will add up to $45 billion to replenish the FDIC fund.
The other, more important question is this: will this $45 billion be enough? By the FDIC’s own estimate, they’ll need at least $50 billion to get through the end of 2010. By asking banks to pay their assessments through 2012 right now, that leaves a gap of two years when the FDIC can expect zero income from its main source but will still have to close down troubled banks. A taxpayer bailout will be inevitable.
The fact that Sheila Bair—the only top regulator in this country who’s been outspoken about the causes of the crash—can’t turn to either the Obama administration or to Congress to replenish the FDIC’s fund is a symptom of just how sick our system is. She’s betting that things will get better between now and next year, that new financial regulation will be in place, that the economy will turn a corner, and that Congress and the American people won’t view a request from her to replenish the FDIC’s fund with taxpayer money as a taxpayer bailout that marks her as the same kind of leach as Kenneth Lewis of Bank of America or Franklin Raines of Fannie Mae.
I hope she’s right.
Sunday, October 4, 2009
Don't Break Out the Champagne Yet
Economists have been spewing happy talk lately like it’s going out of style. I thought they would have learned something from the last two stock market bubbles fueled by irrational optimism. Apparently not, because the consensus now is that the recession is over and that the US economy has entered a “slow” or “Jobless” recovery.
At least they’re being somewhat cautious about their excess exuberance. I can’t say the same thing about investors, who’ve driven the stock market over 10,000 again without any sign that these stock prices are justified. We might blame the Fed for this, with Ben Bernanke’s insistence that a summertime bump in housing sales means the recession is over; never mind that sales are mostly in the low-end of the market, and overall housing prices are still falling in most parts of the country. No one knows what will happen once the First Time Homebuyer Credit expires later this year.
The phenomenon of a “jobless recovery” is an interesting one, worth more discussion than it usually gets in the media. Economists toss out the term as if we all should understand intuitively what it means, leading to a widespread suspicion that it is, in fact, a meaningless term. But it does have a meaning—just one that, for political reasons, economists and politicians would like to keep secret from the average American.
In US economic history, recessions (including the Great Depression) were followed by periods of economic recovery during which business activity expanded. This meant that employment increased, too, since businesses had to hire more workers. But a curious thing has developed over the last twenty years: recessions have been followed by long periods of high unemployment. We’ve had three opportunities to witness this: first, in the early 1990’s (coinciding with the first Gulf War and high oil prices), in the late 1990’s (the bursting of the tech stock bubble), and the current mess we’re in right now. In all three situations, businesses have reported upticks in their economic activity or improvements in their balance sheets, but they’re not hiring people, and most are laying people off.
Some of that is related to “increased worker productivity,” a term that means bosses are laying off people and expecting the remaining staff to pick up the extra work. But there’s only so much slack in that rope before employers have to go looking for new employees. Unfortunately, many of them are looking overseas, where labor is cheaper. Outsourcing is a phenomenon that started in the 1980’s with US manufacturers relocating their production plants overseas. US government foreign aid programs (with the help of the World Bank and the IMF) provided money to developing countries to build “infrastructure” to attract business investment—in other words: factory buildings, roads, and port facilities for US companies that wanted to relocate abroad to take advantage of a cheap labor force. And cheap oil made it even easier to produce everything overseas and ship it all back to the US for consumption. In the 1990’s, even the US service industry got on the bandwagon by setting up call centers and customer service centers in India to save money.
Much of the “jobless” aspect of the last two recoveries can be accounted for by outsourcing. But there’s no indication that outsourcing is playing the dominant role in the current “recovery” (if you believe that we’re really in one, which I don’t). The most recent unemployment figures show that the US lost 263,000 jobs in September. More important are the revised figures for the first quarter of this year. The rule of thumb has been that we lost about half a million jobs each month at the beginning of this year. In fact, the figures are much, much worse, culminating in a revised total for March 2009 of 824,000 jobs lost in that month alone. Currently, the official number of people looking for work is 15 million, or about 35.6% of the unemployed. This doesn’t count the underemployed (those working part-time or as temps who are searching for full-time, permanent employment). Some economists put the real unemployment figure (which counts everyone who’s out of work, including the “discouraged” who no longer looking for work) at close to 20% of the US adult population—one in every five people.
So what is accounting for the profits on the balance sheets of US corporations? Well, for one thing, most of them are paring down by selling off pieces of their businesses. The business press has been full of headlines announcing mergers and sales, many of which are being financed by US taxpayers through the federal government’s bailout plan, one aspect of which is to provide low or no interest loans to businesses, ostensibly to help them fund operations. (The US government is doing this because banks won’t—that’s what they mean when they say “credit has dried up.”) But once the money goes into the bank accounts of American businesses, the Treasury and the Fed have no means to ensure that the money is being spent on day-to-day operations and not being used to buy up other distressed companies. In fact, Fed Chief Ben Bernanke and Treasury Secretary Timothy Geithner are satisfied that funding mergers is a legitimate use of taxpayer money, because that’s what the US government did with the Bank of America/Merrill Lynch bailout in 2008 (which was engineered by Bernanke and former Treasury Secretary Henry Paulson, but Geithner was on the board of the New York Federal Reserve at the time, and he pushed for these kinds of bailouts).
Your taxes and mine are paying for the “jobless” recovery and sparking a run-up in stock prices, which is keeping the rich happy, and naturally leading to lots of happy talk. But there’s another, more sinister reason why US businesses have healthy balance sheets.
There’s been a lot of talk about increasing financial regulation, but not much action. For example, it’s still legal, eight years after the Enron and Worldcom collapses, for businesses to hide their debts in off-balance-sheet entities. In other words, they set up special “holding companies” that only hold debts or worthless “assets,” like mortgage-backed securities. And in March, the Financial Accounting Standards Board extended another benefit to US businesses by repealing the mark-to-market rule that forced companies to value mortgage-backed securities and similar derivatives at current market rates (the prices they’d get if they tried to sell the securities today—for many of those securities that price would be $0.00).
These accounting tricks, which contributed to the last stock market bubble, are still be used by businesses today to hide the true state of their finances. So, no, I don’t believe that we’re in a recovery. In fact, I think we’re heading into yet another bubble…with another implosion headed our way.
At least they’re being somewhat cautious about their excess exuberance. I can’t say the same thing about investors, who’ve driven the stock market over 10,000 again without any sign that these stock prices are justified. We might blame the Fed for this, with Ben Bernanke’s insistence that a summertime bump in housing sales means the recession is over; never mind that sales are mostly in the low-end of the market, and overall housing prices are still falling in most parts of the country. No one knows what will happen once the First Time Homebuyer Credit expires later this year.
The phenomenon of a “jobless recovery” is an interesting one, worth more discussion than it usually gets in the media. Economists toss out the term as if we all should understand intuitively what it means, leading to a widespread suspicion that it is, in fact, a meaningless term. But it does have a meaning—just one that, for political reasons, economists and politicians would like to keep secret from the average American.
In US economic history, recessions (including the Great Depression) were followed by periods of economic recovery during which business activity expanded. This meant that employment increased, too, since businesses had to hire more workers. But a curious thing has developed over the last twenty years: recessions have been followed by long periods of high unemployment. We’ve had three opportunities to witness this: first, in the early 1990’s (coinciding with the first Gulf War and high oil prices), in the late 1990’s (the bursting of the tech stock bubble), and the current mess we’re in right now. In all three situations, businesses have reported upticks in their economic activity or improvements in their balance sheets, but they’re not hiring people, and most are laying people off.
Some of that is related to “increased worker productivity,” a term that means bosses are laying off people and expecting the remaining staff to pick up the extra work. But there’s only so much slack in that rope before employers have to go looking for new employees. Unfortunately, many of them are looking overseas, where labor is cheaper. Outsourcing is a phenomenon that started in the 1980’s with US manufacturers relocating their production plants overseas. US government foreign aid programs (with the help of the World Bank and the IMF) provided money to developing countries to build “infrastructure” to attract business investment—in other words: factory buildings, roads, and port facilities for US companies that wanted to relocate abroad to take advantage of a cheap labor force. And cheap oil made it even easier to produce everything overseas and ship it all back to the US for consumption. In the 1990’s, even the US service industry got on the bandwagon by setting up call centers and customer service centers in India to save money.
Much of the “jobless” aspect of the last two recoveries can be accounted for by outsourcing. But there’s no indication that outsourcing is playing the dominant role in the current “recovery” (if you believe that we’re really in one, which I don’t). The most recent unemployment figures show that the US lost 263,000 jobs in September. More important are the revised figures for the first quarter of this year. The rule of thumb has been that we lost about half a million jobs each month at the beginning of this year. In fact, the figures are much, much worse, culminating in a revised total for March 2009 of 824,000 jobs lost in that month alone. Currently, the official number of people looking for work is 15 million, or about 35.6% of the unemployed. This doesn’t count the underemployed (those working part-time or as temps who are searching for full-time, permanent employment). Some economists put the real unemployment figure (which counts everyone who’s out of work, including the “discouraged” who no longer looking for work) at close to 20% of the US adult population—one in every five people.
So what is accounting for the profits on the balance sheets of US corporations? Well, for one thing, most of them are paring down by selling off pieces of their businesses. The business press has been full of headlines announcing mergers and sales, many of which are being financed by US taxpayers through the federal government’s bailout plan, one aspect of which is to provide low or no interest loans to businesses, ostensibly to help them fund operations. (The US government is doing this because banks won’t—that’s what they mean when they say “credit has dried up.”) But once the money goes into the bank accounts of American businesses, the Treasury and the Fed have no means to ensure that the money is being spent on day-to-day operations and not being used to buy up other distressed companies. In fact, Fed Chief Ben Bernanke and Treasury Secretary Timothy Geithner are satisfied that funding mergers is a legitimate use of taxpayer money, because that’s what the US government did with the Bank of America/Merrill Lynch bailout in 2008 (which was engineered by Bernanke and former Treasury Secretary Henry Paulson, but Geithner was on the board of the New York Federal Reserve at the time, and he pushed for these kinds of bailouts).
Your taxes and mine are paying for the “jobless” recovery and sparking a run-up in stock prices, which is keeping the rich happy, and naturally leading to lots of happy talk. But there’s another, more sinister reason why US businesses have healthy balance sheets.
There’s been a lot of talk about increasing financial regulation, but not much action. For example, it’s still legal, eight years after the Enron and Worldcom collapses, for businesses to hide their debts in off-balance-sheet entities. In other words, they set up special “holding companies” that only hold debts or worthless “assets,” like mortgage-backed securities. And in March, the Financial Accounting Standards Board extended another benefit to US businesses by repealing the mark-to-market rule that forced companies to value mortgage-backed securities and similar derivatives at current market rates (the prices they’d get if they tried to sell the securities today—for many of those securities that price would be $0.00).
These accounting tricks, which contributed to the last stock market bubble, are still be used by businesses today to hide the true state of their finances. So, no, I don’t believe that we’re in a recovery. In fact, I think we’re heading into yet another bubble…with another implosion headed our way.
Friday, October 2, 2009
Slashing Healthcare Costs, Tip #1: Stub Out Cigarettes
How can we cut health care costs? You’d think it was a hard problem to address—with all this moaning and finger-pointing in Congress and the mainstream media. But, as it turns out, scientists and researchers are finding easy answers to this question.
Take, for example, two studies released last week on the effects of secondhand cigarette smoke. Both studies looked at the same data: a compilation of individual studies that followed more than 24 million people in the US, Canada, and Europe who were living in states, provinces, and municipalities that had passed laws banning cigarette smoking in public places like bars, restaurants, and workplaces.
Researchers at the University of Kansas School of Medicine found that, in the first year of a ban on smoking in public places, the incidence of heart attacks in the general population fell by 17%. By year three, heart attack rates fell by 26%. That’s not only statistically significant, it’s indicative of a major public health crisis caused by secondhand smoke. A nationwide ban on smoking in public places would not only prevent 150,000 heart attacks in the first year alone (think of all the pain and suffering we could prevent), it would save massive amounts of money.
And that didn’t even look at the myriad other illnesses caused by cigarette smoke: lung cancer, throat and stomach cancers, hypertension, asthma, migraines—the list goes on and on. If the data on heart attacks is so dramatic, we can expect equally steep reductions in these other expensive illnesses, too.
The second study, done by researchers at the University of California at San Francisco, looked at the same data as the first study, but analyzed it slightly differently. The UC researchers found the same 17% decrease in heart attacks in the first year of public smoking bans, but found an astounding 36% drop in heart attacks by year three.
Right now there’s no bill in the House or Senate that calls for a nationwide ban on cigarette smoking in public places, but there should be. Currently, only 17 states and about 350 cities ban smoking in bars, restaurants, and workplaces, which means that only about 40% of the US population can dine out, listen to music, or go to work in a smoke-free place. A partial ban exists in about 14 other states, but the remaining 19 states—primarily in the South and Midwest--have no ban at all.
We should heed the information that scientists provide us. Remember, just because the Bush administration did its best to undermine the work of scientists and researchers doesn’t mean we need to continue operating in ignorance. We have one easy way to save millions, if not billions, of dollars currently being spent on health care, and we’re choosing to ignore it. That’s just stupid.
Take, for example, two studies released last week on the effects of secondhand cigarette smoke. Both studies looked at the same data: a compilation of individual studies that followed more than 24 million people in the US, Canada, and Europe who were living in states, provinces, and municipalities that had passed laws banning cigarette smoking in public places like bars, restaurants, and workplaces.
Researchers at the University of Kansas School of Medicine found that, in the first year of a ban on smoking in public places, the incidence of heart attacks in the general population fell by 17%. By year three, heart attack rates fell by 26%. That’s not only statistically significant, it’s indicative of a major public health crisis caused by secondhand smoke. A nationwide ban on smoking in public places would not only prevent 150,000 heart attacks in the first year alone (think of all the pain and suffering we could prevent), it would save massive amounts of money.
And that didn’t even look at the myriad other illnesses caused by cigarette smoke: lung cancer, throat and stomach cancers, hypertension, asthma, migraines—the list goes on and on. If the data on heart attacks is so dramatic, we can expect equally steep reductions in these other expensive illnesses, too.
The second study, done by researchers at the University of California at San Francisco, looked at the same data as the first study, but analyzed it slightly differently. The UC researchers found the same 17% decrease in heart attacks in the first year of public smoking bans, but found an astounding 36% drop in heart attacks by year three.
Right now there’s no bill in the House or Senate that calls for a nationwide ban on cigarette smoking in public places, but there should be. Currently, only 17 states and about 350 cities ban smoking in bars, restaurants, and workplaces, which means that only about 40% of the US population can dine out, listen to music, or go to work in a smoke-free place. A partial ban exists in about 14 other states, but the remaining 19 states—primarily in the South and Midwest--have no ban at all.
We should heed the information that scientists provide us. Remember, just because the Bush administration did its best to undermine the work of scientists and researchers doesn’t mean we need to continue operating in ignorance. We have one easy way to save millions, if not billions, of dollars currently being spent on health care, and we’re choosing to ignore it. That’s just stupid.
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