Top Quotes of the Week: Federal Deficit Edition

“Come on, you and I, let’s lock arms and we’ll jump out of the boat together.” House Speaker John Boehner (R-Ohio), in May, urging President Obama to do a ‘big deal’ on the federal deficit.

“I want to get there, but it takes two to tango, and they’re not there yet.” Boehner, speaking about the Democrats last Sunday. Boehner then blew-up talks surrounding a $4 trillion ‘big deal’ he had been discussing with President Barack Obama.

“I’m prepared to take significant heat from my party to get something done. And I expect the other side should be willing to do the same thing.” Obama, responding to Boehner.

Inaction on the debt ceiling “would be catastrophic for the economy…no responsible leader would say the United States of America, for the first time in its history, should not pay its bills, meet its obligations.” Treasury Secretary Timothy Geithner.

“This is a misnomer that I believe that the President and the Treasury Secretary have been trying to pass off on the American people, and it’s this: if Congress fails to raise the debt ceiling by $2.5 trillion, somehow the United States will go into default and we will lose the full faith and credit of the United States. That is simply not true.” GOP presidential candidate Michele Bachmann.

“The astonishing feature of the federal fiscal position is that revenues are forecast to be a mere 14.4% of GDP in 2011, far below their postwar average of close to 18%. Individual income tax is forecast to be a mere 6.3% of GDP in 2011. This non-American cannot understand what the fuss is about: in 1988, at the end of Ronald Reagan’s term, receipts were 18.2% of GDP. Tax revenue has to rise substantially if the deficit is to close.” Martin Wolf, chief economics commentator at the Financial Times, London.

Olive Oil Protects Against Stroke. Consuming copious amounts of olive oil may dramatically reduce stroke risk for older adults, according to a population-based study.

New Study Adds to Confusing Debate over Cell Phones and Cancer. A new study published in the American Journal of Epidemiology found that cell phone radiation generally cannot reach the cells where most brain tumors are located (Pizaazz will comment on this study this Wednesday).

HHS Announces Initiative to Stimulate Adoption of EHRs in Minority Communities. The Department of Health and Human Services’ Office of Minority Health and Quest Diagnostics have announced a program in which Quest will donate electronic health record  software and services to physicians in small practices serving minority populations in Houston.

US Births Fall Again on Weak Economy. The United States birth rate apparently fell for a third year in a row, but the declines may have hit bottom, the CDC said.

Restrict Imaging Studies, MedPAC Says. The Medicare Payment Advisory Commission has called on Congress to place restrictions on doctors who order substantially more diagnostic imaging services than their peers.

The Great Recession may have done something that countless public health campaigns and the billions of dollars spent to fund them could not: reduce our nation’s appallingly high teen birth rate.

According to CDC data released last month, the birth rate among girls between the ages of 15 and 19 dropped to an all-time low of 39.1 per 1,000 in 2009, the first full year of the worldwide economic recession. That was 6% lower than the previous year and the lowest rate since the government started tracking the statistic 70 years ago.

The trend among teens was consistent with drops in virtually all age groups, with the overall birth rates reaching a historic low of 13.5 per 1,000 females in 2009, down 4% from 2008. The drop was seen in teens in all races and ethnic groups. Among Hispanic teens, the birth rate in 2009 fell a full 10% to a still ridiculously high rate of 70.1 per 1,000 females. In African-American teens, the rate fell to 59.0.

Many scientists said it was too soon to conclude that the recession was responsible for the precipitous drop. Relevant data, like that referable to contraceptive use is still being collected for 2009. But even if there were a spike in such responsible behavior, the question remains why would that have happened? After all, the educational programs designed to promote contraceptive use have been around for years.

At a minimum, the recession is likely to be an epiphenomenon, a large contextual issue that drives more obvious relations between cause and effect. Would-be teenage moms “see parents who have lost jobs or houses. They’re very aware of how tough it is now, and I think that causes teens to be more cautious,” Sarah Brown, chief executive of the National Campaign to Prevent Teen and Unplanned Pregnancy told the Wall Street Journal. (more…)

Somehow, it seems a bit odd that classical microeconomic theory should apply to the price of a flu shot. After all, the jab has proven to be effective in reducing mortality from an infectious disease that kills about 36,000 Americans each year. But it does. Perfectly.

Flu shot providers from retail drugstores to physician’s offices are slashing prices for this year’s seasonal flu vaccine in response to consumer demand that has been much weaker than expected.

Just one year ago, enormous media coverage and public uncertainty surrounding a burgeoning pandemic of H1N1 flu motivated 110 million Americans to get the H1N1 vaccine. Nearly equal numbers of people took the seasonal flu vaccine as well.

Those in charge of planning and producing this year’s seasonal flu vaccine figured that people would remember the hysteria from a year ago, and those memories would drive up demand for the jab this winter. They also took into account new CDC recommendations, which call for everyone over the age of 6 months to get vaccinated.

They eventually decided to produce 163 million doses of the vaccine, a 50% increase over last year’s supply. Commercial outlets and doctor’s offices stocked-up on the vaccine in anticipation of the rush.

But the predicted increase in demand never materialized, at least not so far. Why? To date, the flu season has been mild, and press coverage of the annual flu season has been sparse. It seems that when flu is out of sight, it’s also out of mind.

And with vaccine demand in the tank, flu shot distributors have responded by cutting prices on flu shots, just as economists would predict.

For example, Rite Aid is distributing discount coupons for beauty items to folks who come in for a shot. The retail giant told the Wall Street Journal last week that it has dispensed 635,000 vaccines so far this year, and that it now expects to inoculate 300,000 less people than originally planned. Walgreen’s is also on record as saying its initial goals for flu vaccines were “aggressive.”

For its part, Kroger, the nation’s largest grocer, recently cut the price of its flu shot by $5 to $19.99 in most areas of the country.

Physicians’ offices haven’t been immune to the fall-off in demand. “We can’t give them away,” Thomas Haugh, a practice administrator in Raleigh, N.C. told the Journal. Demand is off 25% at his clinics, and that prompted a price cut from $25 to $15.

In normal years, the flu shot is a financial winner for retail distributors and doctors alike. They usually charge between $20 and $30 per shot, and achieve profit margins of 30-50% on the service. But the downside is that the shots must be ordered months before they’re needed, and they can’t be returned because the vaccine changes each year in response to never ending mutations in the virus that causes seasonal flu.

Of course, it’s not too late for suppliers of the flu shot. Flu season isn’t half-way over yet. An upsurge in reported cases, perhaps associated with some press coverage could result in a sudden surge in demand for the vaccine.

Economists have already told us what that would do to the price of a flu shot.

Throughout recorded history, men and women—particularly the latter—have sought ways to enhance their appearance. Egyptians used eye shadow and painted their faces. So did the Greeks and Romans. Tattoos and body piercings have been used by people in many cultures for centuries. The goals of these efforts include finding a suitable mate, increasing self-confidence and signaling wealth or power.

But as women slowly gain equal footing in the workplace, it’s appropriate to ask whether such efforts have a positive impact on their careers. Recently, economists Bradley Ruffle and Ze’ev Shtudiner examined one aspect of this matter by designing a study to assess the impact of physical attractiveness on success during a job search.

Their study revealed that good looks help men who are looking to secure a job interview, but they have a negative impact on women who are after the same thing.

To reach these conclusions, the scientists distributed 5,000 résumés to 2,600 Israeli employers that had advertised job openings. They sent 2 nearly identical résumés to each employer; one contained a photograph of the job-seeker, and the other did not. In some cases, the photo showed an attractive person; in others, the photo showed a plain-looking person.

Judgments about the attractiveness of the people in the photos were made by men and women that were not affiliated with the investigators. The photos included pictures of people with apparently mixed ethnic backgrounds to remove any possible effects of racial bias.

The employers reached-out to request an interview from 14.5% of the job candidates, overall. Among the male candidates, 13.7% with plain-looking photos, and 19.9% with attractive photos  were contacted to set-up an interview. Only 9.2% of those whose resumes contained no photo were called-in.

The results were strikingly different for women, in whom 16.6% who didn’t send a photo were invited for an interview, as compared with 13.6% of those who had submitted a plain-looking photo and 12.8% of those who had submitted an attractive-looking photo.

Interestingly, none of these differences was noted when employment agencies were responsible for deciding who would be interviewed. The differences were present only when the applications were sent directly to the hiring company.

A post-study analysis revealed that in companies that did their own hiring, young, typically single women were responsible for screening those resumes. When questioned by the scientists, these company-based screeners indicated that when a man included a photo, it showed confidence and helped assure that the candidate was “presentable.” When a woman did the same, the screeners perceived it negatively; the woman was “attempting to market herself via her appearance.”

The economists concluded that company-based personnel responsible for hiring new staff appear to discriminate against attractive women and that “female jealousy” was the most likely explanation for this.

“Our results show that beauty distorts the hiring process,” the researchers wrote. “Suitably qualified attractive women and plain men and women may be eliminated early on from the selection process.”

The write-up appears on the Social Science Research Network.

In the words of John Maynard Keynes:

“Capitalism is the extraordinary belief that the nastiest of men for the nastiest of motives will somehow work for the benefit of all.”

‘Nuff said.

Last month, 40 US billionaires including Bill Gates and Warren Buffett agreed to donate at least half their fortunes to worthwhile causes. Their actions reflect a keen sense of social responsibility and are consistent with a tradition first established by Andrew Carnegie, John Rockefeller and other successful entrepreneurs of the past 2 centuries. 

In the broadest sense, these behaviors can be seen as part of a virtuous cycle of American capitalism, in which our uniquely entrepreneurial culture creates both wealth and the philanthropic mechanisms by which that wealth can be recycled.

Some suggest that this cycle is the defining characteristic of American capitalism. In fact many conservatives and supporters of private enterprise believe this is single most important mechanism by which our economy differs from socialist economies, in which government takes responsibility for recycling wealth, and the economies of developing nations, in which the fortunes of those in control are almost never recycled.

These are the same people that believe low tax rates, small government, and light-handed regulatory strategies are the proper elixir for long-term economic growth.

The problem with this approach, according to Washington Post columnist Steven Pearlstein, is that it ignores other mechanisms that serve to buffer the economic inequalities that inevitably result from the US brand of capitalism. Pearlstein cites unions, “which ensured a fair distribution of corporate profits,” as well as antitrust laws which prevent large companies “from snuffing out entrepreneurial competition,” for example. He also mentions “tax-supported schools, playgrounds and hospitals that were good enough to be used by rich and poor alike.”

Pearlstein contends that regardless of which party has governed our country in the past 2 decades, the American political system has progressively savaged these other buffers to a point where economic inequalities in the US are greater than they have been in the last century. CBO data from 2007 show for example, that the richest 20% of US households amassed 52% of the country’s after-tax income. The top 1% earned a whopping 17% of such income. In the 2 decades before 2007, “the average after-tax, inflation-adjusted income of households in the middle of the ladder increased 25%; for the top 1 percent, it rose 281 percent,” Pearlstein wrote.

As these inequalities increase, poor people find it increasingly difficult to improve their economic position. In fact, a recent study by Isabel Sawhill and Ron Haskins of the Brookings Institution showed that while US citizens born into the middle class remain quite mobile economically, those born into wealth and poverty tend to stay there throughout their lives. Shockingly, US citizens nowadays enjoy less economic mobility their counterparts in France, Germany and Canada, at least according to some measures.

“The idea that equality of opportunity is a distinctly American strength is a myth,” concluded Sawhill and Haskins.

The endemic problem of economic “stickiness” was easier to swallow when the US economy was growing robustly, creating jobs and income opportunities for much of our population, but the Great Recession of 2008-2010 has changed that. It has imperiled the most fundamental American dream: that with hard work and some old fashioned ingenuity, people, or at least their children, might be able to improve their standing in society. 

No one argues that Gates, Buffett and their wealthy contemporaries did a marvelous thing last month. Their generosity will help millions of people. But as Pearlstein says, “it will take much more to revive the virtuous cycle by which wealth begets opportunity which in turn begets more wealth. Whether at an individual company or in the country at large, it is the feeling that we are all in it together that creates the basis for a truly vibrant economy and just society. Trickle-down alone won’t cut it.”

To help offset a drop in Harvard University’s enormous endowment, Harvard Medical School has cut a deal with its affiliated teaching hospitals that calls for the hospitals to contribute $36 million to the school over the next 3 years.

The figure represents but a fraction of the medical school’s $580 million budget, but it may signify the onset of a new kind of relationship between the school and its affiliates.

Before the deal, Harvard was probably the only medical school in the country that didn’t derive financial support from its teaching hospitals. The school does not own its teaching hospitals, as do most others.

The peculiar arrangement means Harvard Medical School has been unusually dependent on government research funding and endowment income, which exhibit cyclical variations beyond the control of the school.

The ongoing worldwide financial crisis thus hit Harvard Medical hard: Harvard University’s endowment fell by 27%, to $26 billion during fiscal year 2009. That caused a 20% reduction in endowment income for the medical school.

In response, Harvard Medical School froze salaries and dropped 70 FTEs from its labor force via layoffs and early retirement in 2009. It expects to break even in the current fiscal year, but needs more money to expand programs and develop new ones so it can maintain its exalted status.

At a meeting last summer involving medical school dean Jeffrey Flier and teaching hospital execs, Massachusetts General Hospital CEO Peter Slavin said Flier “had to convince us this is the fairest thing to do.’’

Although the Harvard teaching hospitals are profitable, insurers, politicians and regulators are all pressuring them to cut costs.

In return for their largesse, the hospitals asked the medical school to handle physician promotions more quickly, among other things.

The year-long tailspin in venture-based activity ended on an up note, according to Dow Jones VentureSource. In Q4, 2009, venture investors invested $6.3 billion in 743 deals, up slightly from the $6.1 billion invested in 619 deals during the previous fourth quarter.

Overall, there were 2,489 deals completed and $21.4 billion in venture capital invested in 2009 in US companies. That represented a 31% drop from 2008, when $31 billion was invested in 2,817 deals.

“Venture capitalists are still treading lightly when making investments,” said Jessica Canning, global research director for Dow Jones VentureSource. “In the fourth quarter, venture deal activity returned to levels seen before the collapse of the financial markets, but capital invested continued to lag as investors gave companies just what they need to reach the next milestone.”

2009 was also notable in that for the first time ever, the healthcare industry raised more VC capital than the Information Technology (IT) sector. Healthcare deals garnered $7.7 billion across 701 deals last year, a 14% drop from the previous year. That compared favorably to IT, in which VCs risked $6.1 billion in 817 deals last year, a 35% drop from 2008 and the industry’s weakest year since 1996.

The majority of VC money in health care went to biopharmaceutical companies, which raised $4.2 billion over 302 deals. Medical devices came in second at $2.9 billion for 291 deals.

The Energy & Utilities sector experienced a profound decline in VC investment last year. Companies in this sector raised just $1.2 billion in 87 deals in 2009, less than a third of the amount raised in 2008.

The median round size of venture deals in 2009 was $4.7 million, down from $6 million in 2008, according to VentureSource. Later-stage deals accounted for the largest slice of deal activity, attracting $11.4 billion in investment, whereas seed- and first-round deals garnered $3.7 billion.

More women than ever are better-educated than their husbands and in nearly 20% of marriages, they earn more than their husbands, according to a report released last week by the Pew Research Center. 

To reach these conclusions, Richard Fry and colleagues examined Census Bureau data for US-born married couples between the ages of 30 and 44, an age group that was the first ever to feature more women with college degrees than men.

The Pew study revealed that men nowadays tend to get an economic boost when they marry someone with as much or more education than they have. 

“Marriage now is a better deal for men,” Fry told the Washington Post. “Now when men marry, often their spouse works quite a bit. Often she is better-educated than the guy.”

According to the report, more than half of all married couples nowadays feature spouses with nearly equal levels of education. In 28% of all marriages, the wife had more education, whereas in 19% the man had more.

Even so, 78% of married men make more money than their wives, although the gap is narrowing.  In 1970 for example, 96% of married men earned more than their spouses.

This income gap is narrowing across all economic strata. For example, in 1970, 4% of male high-school grads had wives that earned more money than they did. That number is now 24%. The numbers are nearly identical for those with “some college” education. For male college graduates, 3% had wives that earned more than they did in 1970. That number is now up to 18%.

Currently, the median income for men is about $46,000, about 30% higher than the median income of women. Back in 1970, men’s incomes were twice that of women’s.