The Boston Globe has a front page story about Don Berwick and his run for Governor of Massachusetts. The title of the article is Brimming with ideas, Berwick looks for traction.

Berwick launched the Institute for Healthcare Improvement in Cambridge in 1991. The $40 million nonprofit helps governments and hospitals around the world reduce medical errors and improve care. In 2005, he earned knighthood for helping an entire country, Britain, overhaul its troubled health care system. And from 2010 to 2011, he ran Medicare and Medicaid for President Obama.

I knew that Don Berwick was a very accomplished person.  However, I didn’t really have exact knowledge of those accomplishments.  There is difference between my understanding of Berwick in this point in the campaign (at least before reading this article) and Elizabeth Warren at a similar point in her campaign.  In the Warren case, I knew exactly why she was such a superior candidate for this office.  I had seen some of her lectures, and had read some of her books.  I knew exactly how much better she understood the financial crisis and its effect on people than almost anybody else, politician or not.

With Don Berwick, I only suspected his level of understanding, but I didn’t know the details.

Another part of the story from the article is this excerpt.

Berwick’s own career path shifted dramatically after Harvard Community Health Plan put him in charge of quality improvement in 1982. In the medical field, the job traditionally meant punishing doctors who made mistakes.

But Berwick took the position just as companies like Toyota were reshaping the corporate world with management theories that promised to cut costs while improving quality.

Frustrated that error rates were not dropping at his own company, Berwick met with Swissair executives, NASA scientists, and engineers at Bell Labs, looking for advice.
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Berwick became enamored of a particular brand of management theory — “total quality management” — that seeks to enlist the entire workforce in improving quality, rather than handing that task only to managers.

In the early 1970s, I had taken an interest in “total quality management” as it applied to my profession of software engineering.  I continued that interest, and tried to apply the principles of TQM for the rest of my career.  TQM is not just about the mechanics of doing a job.  TQM understands people and how essential it is to engage them in improving the quality of what they do. So Berwick’s interest in the subject and application of the techniques just raises my esteem for him as a potential Governor.

There is one final part of the article that I want to call attention to.

Then Berwick raised a point that had been bothering him. A woman at a fund-raiser had reacted angrily, he said, when he mentioned that Hamas uses civilians as “human shields” to protect its rockets in Gaza. She had argued there were no human shields, he said.

Berwick asked where he could find reliable information on the issue. Marsh suggested trying a range of news outlets and tried to steer the candidate back to local concerns.

“For our purposes, that’s not a road I think we want to go down,” the aide said.

But Berwick persisted. “I don’t want to say anything that’s wrong,” he told Marsh.

This highlights one area where I think Don Berwick is even superior to Elizabeth Warren.  He may have been espousing the usual, unthinking talking points about Hamas that come from all politicians who claim to be anywhere near the mainstream, but he was able to hear a dissent, and he wanted to find out more.

Massachusetts would miss the chance to elect a world class Governor if it passes on Don Berwick.  We don’t get chances like this very often.  We really need to take advantage of them when they come along.

In case someone notices this, I thought I would talk about it myself.

He met the woman he would later marry, Ann Greenberg, when they were lab partners in biology class in their first week of freshman year at Harvard. She is now chairwoman of the state Department of Public Utilities.

I did not know anything about Don’s wife when I became interested in his campaign. I did not know her last name before reading this article. As far as I know, she is not related to me in any way.

The Lowell Sun has endorsed Marisa DeFranco for U.S. Congress in the 6th Congressional district. (That’s not our district, Sturbridge).  The part that the DeFranco emphasized in the email that I received is quoted below from the editorial.

DeFranco would implement heavy fines against employers who exploit immigrants, increase border and port security with targeted inspection goals over the next four years, double the number of immigration judges to process cases and deport immigrants with felony convictions, and create a path to legalization — not citizenship — for undocumented immigrants who refuse to go through the same process as legal immigrants. She’d also create an “essential worker visa’ similar to the seasonal visa that exists now.

The system is broken but “we’re not going to deport our way out of the problem,” says DeFranco, who opposes amnesty.

DeFranco campaign to unseat Tierney and defeat three other rivals in the race is an uphill battle. In our view, however, she’s articulated the best ideas to change Washington’s partisan culture and get things done. The Sun endorses Marisa DeFranco in the Sept. 9 Democratic primary race for the 6th Congressional District.

I have long supported fixing the immigration issue on the employer side of the problem rather than on the employee side.  As far back as 2006, I have been publishing on the subject.

I am not so much a fan of some of the other things The Lowell Sun likes so much about her.  When I was growing up, the paper was pretty heavily Republican oriented.  I have no idea how much the paper has changed since I left Lowell for good in 1967.  If they still carry even an iota of their previous leanings, then maybe I can understand why they like the other aspects of DeFranco’s campaign that they mentioned.  I don’t so much disagree with what DeFranco says on these other issues.  It is the way she  says it that I think is a little off. (Or at least the way The Lowell Sun interprets it.)

Naked Capitalism has the fourth installment, Real Fiscal Responsibility 4; Carter: Education Reform, in its series. I think the greatest contribution of the series so far, and it is only beginning, is the insight quoted below.

This pattern was reinforced further by the activities of the Congressional Budget Office (CBO). The relatively new CBO (established in 1974) evaluated pending or proposed legislation based on whether their models projected fiscal neutrality for that legislation. But, it was never part of its charge to evaluate legislation passed or pending for its impact on the various aspects of public purpose. So, CBO, in its very purpose and mission, has been directed at a faux problem of fiscal responsibility rather than any of the real ones that actually exist. And its very formation represents a misdirection of the Congress away from real problems that are aspects of public purpose and toward two proxies, the debt subject to the limit and the annual deficit which are not real problems related to the public purpose of the Federal Government. We need an end to that kind of orientation. And the Government during the Carter period mostly reinforced it.

I have high hopes that this series will refocus the discussion on what really are the legitimate public purposes of our government. We need to re-examine the tactics we invented in another time to accomplish the public purpose. We need tactics that meet the challenges of the present time.

New Economic Perspectives has the third installment, Real Fiscal Responsibility 3; Carter: Inflation and Health Care, of its series. I’ll just excerpt one quote that addresses my complaint about the second installment.

Cost-push inflation cannot be eliminated without killing the economy if one relies on increased taxes, reduced Government spending and high interest rates, which is the deficit hawk prescription. All that will and did do is to move toward macroeconomic and microeconomic austerity. The way cost-push inflation has to be fixed is through bringing alternative sources of supply, wage and price controls, and rationing online.

I guess I had outsized expectations for this explanation. The comment I posted, slightly edited, is shown below.

Thank you for saying what Carter should have done to rein in Cost Push Inflation.

The explanation was not as overwhelmingly irrefutable as I had hoped. Perhaps that was a bit much to expect.

Wage and price controls had been tried by Nixon and Ford as my faulty memory tells me. It did not work for them. You alluded to the enforcement by a Carter staff that was only 10% the size of what Nixon had. So how come it didn’t work for Nixon either? Admittedly the size of the staff doesn’t guarantee success of a poorly conceived program.

Rationing of gasoline happened almost automatically with the long gas lines, alternate day purchasing, and more. Of course, I don’t remember any rationing of other pertroleum based products.

Of course, in WWII there were many more far-reaching and effective programs to hold down inflation. I even have now come to understand how selling war bonds was not a way of financing the war, but was a way of controlling inflation.

As for Reagan’s solution to the problem. I always attributed it to the near depression he caused. This cut the demand for oil so much that it broke OPEC’s ability to control the prices. That was a very effective way of ending cost push inflation, although at the price of great pain to a lot of people. So, despite talk of supply side economics that was supposed to increase supply without the need to have increasing prices, it was actually demand side economics that worked – cut the demand for oil so prices would stop rising. I have not done any research on the myriad factors that could have been responsible for the end to inflation, so I could very well be wrong in my story, no matter how plausible it might sound to me.

New Economic Perspectives has the article Where Danger Lurks: The Dark Recesses of the Orthodox Mind.

Is there an alternative? Here’s Rogoff’s proposal, cited by Blanchard:

“Harvard Professor Kenneth S. Rogoff, former head of the IMF’s Research Department, has suggested solutions other than higher inflation, such as the replacement of cash with electronic money, which could pay negative nominal interest. That would remove the zero bound constraint.”

Uhhm. Can someone please slap Rogoff and explain to him that lowering interest rates is not a solution to a problem of low rates and deflationary pressures? Rates are already so low on treasuries that low net interest paid by government to savers is depressing demand. What, he wants to push that below zero so that American savers have to pay government? And that is supposed to stimulate the economy?

Clueless as usual.

Electronic money? Really? What world does he live in? Like George Bush, Sr, has he never been to a grocery store? Is he yet to discover zebra codes and credit cards?

Money is 99.9% electronic already. And much of it already has negative returns. Called fees.

One wonders what passes for reality in the hallowed halls at Harvard.  You have to give people like Rogoff credit for their tenacity.  They can hold onto an idea no matter what the evidence to the contrary.

I found another quote quite remarkable.

In other words, like the drunks who look for their keys under the street lights, Blanchard preferred to model impossible worlds because the math was easier. The world—obviously—is not linear, but the math skills of economists were not sufficient to model real, nonlinear worlds.

I don’t know what the big deal is with nonlinear equations, I spent at least the first 20 years of my career on software that solved non-linear equations.  Let me introduce you to the Newton-Raphson method, Professor Blanchard. Actually one of my very first assignments in my college freshman computer course was to write a Newton’s method solver in assembly language.

New Economic Perspectives has a second installment, Real Fiscal Responsibility 2; Carter: Stagnation and Unemployment, in its series that I first mentioned in my previous post Real Fiscal Responsibility I: Preliminaries. I have excerpted part of the explanation for the second post as follows:

In this second post, I begin my evaluation of the extent of fiscal responsibility or irresponsibility of the Federal Government during the Carter Administration by covering two of the primary problems reflecting public purpose, and what the Federal Government did or did not do about them with its fiscal and monetary policies. The two are: ending economic stagnation, and creating full employment at a living wage.

I thought it would be really interesting that the author, Joe Firestone, had chosen to start his story in the Carter administration. This article disappoints me as I posted in my comment to the article as follows:

Your article fails to address a major issue that you seem to think you can hide under the phrase “demand pull inflation rather than cost push inflation”. Without addressing how Carter should have handled the “cost push inflation”, you leave a big hole in the article. As I remember it, inflation was a major concern for everybody in the years from the end of the Johnson administration to the beginning of the Reagan years. MMT claims that there are no limits to the US government spending as long as it does not bring on inflation. There is some talk under MMT of what to do if inflation should rise. If you ignore this issue when inflation was running rampant, then it feels like MMT is only paying lip service to the worries about inflation.

I am not saying MMT has no prescription for inflation, but I am saying that if an MMT proponent misses the opportunity to address the inflation issue during a historical period when inflation was rampant, then you give unnecessary ammunition to the people who do not want to believe in MMT and you cut the legs out from under the people who do want to believe in MMT.

MMT is the acronym for Modern Money (Monetary) Theory. It is a frequent subject of my blog. The New Economic Perspectives blog is a major source of my information and links to information about MMT.

I hope to get a lot of enlightenment from the response to my comment.

September 1, 2014

I did get a response to my critique.

Joe Firestone | September 1, 2014 at 5:02 pm | Reply

I didn’t miss the “opportunity.” I just decided that this post would cover two of my 15 or so aspects of public purpose 1) ending stagnation, and 2) creating full employment with a living wage. Creating and Maintaining price stability; i.e. the inflation issue, is another aspect of public purpose, and is covered in my next post.

Please keep in mind that this a blog series, and that blog posts are not supposed to be long pieces. I’m trying to keep each one to 1500 words or so. So, if you think I’ve missed something,perhaps wait a few posts and then point that out if it’s still an issue.

Thanks to Nancy Weinberg for posting this on her Facebook page and giving me the idea for the title above.

This is the kind of vision I would like to believe in. Yes, I know, the world isn’t this simple, but it doesn’t hurt to set your goals high.

The New Republic has the article Remember This Moment When the Next Financial Crisis Strikes: The SEC could have fixed our broken rating agencies. It whiffed.

Too much of the financial industry relies on duping investors about the quality of investments. The SEC is supposed to be the first line of defense against that, but has failed in that mission repeatedly in recent years. That feeds skepticism about its seriousness in combating fraud at the rating agencies, especially since it refused to alter the inherently flawed compensation model. As long as the rating agencies get paid by issuers, they’ll have incentives to please them with high ratings.

“There’s a fundamental business incentive for ratings inflation, and there’s got to be something on the other side,” said Marcus Stanley of Americans for Financial Reform. “This rule could do that, but it’s a very tough challenge.”

One commenter on the article had a really brilliant idea.

A small suggestion that would not be susceptible to any regulatory capture: set a formula for fines to be paid by the raters a[t] the payment rate of the securities they rate at any level falls below a certain level. Some explanation of payment rate, 100% would be a bond issue making all interest payments and returning the principal at the maturity date while 0% would be going bankrupt and an intermediate value would be a default and payment of part of the interest and/or principal. The aggregate payment ratio for a rater would be weighted by the value of outstanding securities under its rating.

Higher ratings would have higher requirements for payment ratios. If a rater’s payment ratio for a particular rating fell below the requirement, the fine would be proportional to the total value of securities rated and the size of the shortfall and possibly higher for higher ratings. It should be set just high enough to dwarf any goodwill that the rater could hope to gain with securities issuers through issuing higher than deserved ratings.

We know that the raters have an incentive to err, to the least, on the side of giving higher ratings. Instead of relying on inspectors, why not lay out exactly what the consequences are for erring high in their ratings, with no chance to argue for a reduced penalty, and that the consequences of such errors are greater than the benefits of such errors?

This is such a good set of controls that I think it would put an end to all ratings agencies.  I would change it so that this rule only applies to ratings agencies where they are paid by the people whose financial instruments they are rating.  The only way to get out from under these rules would be to have the ratings agency agree to do no business with any entity that it rates.

If a ratings agency has a legitimate need to do business with an entity that it might have to rate, it would just be forced to abstain from rating that entity and publicly say that it abstained.   You wouldn’t be able to find ratings for all entities in one place anymore.  You would have to go to a different agency for a rating of an entity that your favorite source decided to do business with.

Political Garbage Chute has the article Bummer, Elizabeth Warren, Bummer by James Schlarmann.  This is a diatribe against Warren’s recent comments about Israel.

I’ve never once defended Hamas for their part in this shit-show. I’ve never once said that Hamas has a right to fire rockets into Israel. But I will never tire of pointing out the fact that Israel has the people of Gaza pinned down and penned-up. Where are the people of Gaza supposed to go when they are warned that the building they live in, or worse the building their sick children are getting care in, is about to be blown to smithereens? Senator Warren’s comments on the violence are extremely disappointing in their black-and-white portrayal of the situation.

In the article is a link to a report on Huffington Post which seems to be nothing but assuming too much from a story in Cape Cod Times – Warren explains positions on Israel, Pilgrim.

From past comments on foreign policy by Elizabeth Warren, I had already developed a suspicion that she buys the standard narrative hook, line, and sinker.  She fails to apply the skepticism that has been so good on the oligarchy that is ruling the financial markets of the world.

One commenter on the Schlarmann artice had the following to say:

One thing not mentioned in the article is that it is political suicide in the USA to publicly criticize Israeli conduct. Elizabeth Warren is one senator. She’s no idiot and probably has a pretty good idea what is going on in Gaza. But she has her own fledgling political agenda which would go no further than the next election if she said even one phrase critical of Israel.

While I recognize the truth to this comment, I had been hoping against hope that Elizabeth Warren could find a way to be true to her principles and yet avoid political suicide.  I fear that not only has she not found this path, but she may actually believe what she said at the meeting on Cape Cod.

New Economic Perspectives has just published the first part, Real Fiscal Responsibility I: Preliminaries, of an ongoing series by Joe Firestone.

It should be interesting to see how this series goes by starting from these two basic definitions from the article.

fiscal sustainability is the extent to which patterns of Government spending do not undermine the capability of the Government to continue to spend to achieve its public purpose, and

fiscal responsibility is fiscal policy intended to achieve public purpose while also maintaining or increasing fiscal sustainability.

Rather than assume any particular historically mandated action is fiscally responsible, he first defines fiscal responsibility and then attempts to determine what actions will be fiscally responsible.  I think this is a very instructive approach if you can let go of your preconceived ideas of what is fiscally responsible.  If you put your preconceived notions aside just as a thought experiment  so that they won’t interfere with your ability to read what he is saying, I think that would be beneficial.  If you don’t like where it ends up, you can always go back to pick up your preconceived notions, no harm done.