• WisBusiness

Wednesday, September 23, 2009

One year later: An update on my E4 Initiative

By Russ Feingold
One year ago, I introduced my E4 Initiative -- dubbed E4 for its focus on Economy, Employment, Education, and Energy -- as a way to create jobs and enhance our economy by harnessing Wisconsin's unique strengths and resources. I am pleased to report significant victories this past year, and I will continue to push my initiative to help Wisconsin businesses lead the way, nationally and globally, in addressing emerging challenges.

In an ever-changing economy, it is crucial to invest in green energy and support energy efficient projects in Wisconsin. Earlier this year, one of my E4 provisions to do just that was included in the economic stimulus package. This measure will boost job growth, increase energy efficiency, and help businesses and homeowners go green by expanding the types of projects that are eligible for the Qualified Energy Conservation Bond (QECB) program.

I have heard from business leaders and others across Wisconsin about the tremendous potential for energy efficiency retrofits to generate more green-collar jobs. This provision will help programs that make energy efficiency upgrades in homes and buildings, similar to Milwaukee's proposed Me2 program, at a time when we need jobs the most.

More recently, the Senate passed one of my E4 provisions to help small businesses, the backbone of Wisconsin's economy. Passed as part of a bill reauthorizing the Small Business Innovation Research Act (SBIR), my measure will prioritize federal research funding for energy, water quality, domestic security and transportation projects--top national priorities where Wisconsin has a strategic advantage.

Wisconsin has numerous small businesses, universities and other research institutions that work on these critical national priorities, and my E4 SBIR legislation will spur small business innovation while fueling job creation. In addition, I was pleased to support an overall boost in federal funding for the SBIR program, ensuring small businesses remain the engines that drive our economy.

One year later, there's been important progress on my E4 Initiative, but there is still much work to be done. In the coming months, I plan to introduce another component of my E4 legislation, namely a bill to improve how we measure household economic well-being, which will help us develop economic policies that better serve the needs of average Americans. I also hope to see progress on my bill to allow the U.S. Forest Service to partner with universities and private entities to test new technology for the development and commercialization of advanced biofuels.

These are just a few of the ways that the E4 Initiative can help small business, support job growth in the green energy sector, strengthen workforce development, and build new education partnerships among our communities, high schools and businesses. Wisconsin is at a critical juncture, and I will do all I can to see our state is on the leading edge of the 21st century economy.

-- Feingold, a Democrat, is one of Wisconsin's two U.S. senators.


Tuesday, September 22, 2009

In defense of farmers, food and having a clue about how it gets to your plate

By Tom Still
Author Michael Pollan says we shouldn't eat anything our great-grandmothers wouldn't recognize as food. I don't know about your great-grandmothers, but much of what mine would have recognized as food was deep-fried in grease or boiled into mush in hopes it might still be safe to eat after sitting around all day in an unrefrigerated cupboard.

"In Defense of Food: An Eater's Manifesto," the book that UW-Madison Chancellor Biddy Martin selected as the inaugural offering for a campus-wide reading program, contains many other axioms intended to reduce a complicated subject into an uncomplicated creed. Who can argue with "Don't buy your food at the same place you buy your gasoline," "plant a garden," "buy locally when possible," "make meals from ingredients, not packages," "eat at the table" and "eat slowly"? Not our great-grandmothers -- or our mothers, for that matter.

Ah, but if life was as simple as Pollan's book would have you believe. Pesky realities keep getting the way, such as a century's worth of public health improvements, food science innovation and transportation breakthroughs that have made modern life possible for those 300 million Americans who don't live on their great-grandmothers' farms and who are really glad they don't.

That's why the latest effort at "sifting and winnowing," which is how the university sometimes defends decisions to poke sharp sticks in the eyes of major constituencies, has created a backlash far beyond the borders of the campus. It's not that Pollan's book is wrong-headed, malevolent or anything else than what it offers to be -- a critical view of American's eating habits and the system that helps to produce them. But it largely ignores the contributions of modern agriculture and food science to feeding a world that would have long ago starved if not for a steady march of innovation that allowed more food to be produced more safely, at less cost, and with increasingly less effect on the environment.

No small share of that innovation was born over the decades on the UW-Madison campus, which makes it all the more amusing -- and potentially grating -- that "In Defense of Food" was the first to be anointed in Martin's "Go Big Read" program.

Technology transfer is a phrase today that means moving all types of campus inventions from the laboratory to the marketplace. For most of the first 100 years or so of the UW-Madison's existence, however, tech transfer was largely about agriculture. It meant getting the latest science into the hands of farmers and others who brought nutritious foods to market. This dedication on the part of UW researchers spawned entire industries and pioneered methods to plant, cultivate, harvest and process foods that changed lives for millions of people.

In many ways, this tradition of farm innovation represented the origins of "The Wisconsin Idea," which is the notion that great ideas shouldn't be confined to the borders of the campus. Game-changing ideas produced on campus should be available to benefit the state, the nation and the world.

With that tradition in mind, it's understandable that some people in Wisconsin see a contradiction in the Chancellor's office granting special status to a book that turns its back on scientific work diligently carried out over time. Farm groups have sounded off, of course, but so have a few voices on campus.

In a commentary posted on the "Go Big Read" website, UW-Madison Professor John A. Lucey noted Pollan's antipathy toward food science and rose to its defense.

"Food science serves several critically important functions or roles in our society," wrote Lucey, a food scientist. "… With the shift in population from rural to urban areas, food science has provided the means to feed consumers who no longer have the opportunity to grow their own crops or tend their own animals… Food science has developed a range of ready to eat meals or food that require less preparation time. Food scientists study how to preserve foods during transport or storage, they study what organisms might grow on these foods and develop methods to destroy those organisms that pose a danger to consumers, and they explore how to maintain the quality of the food that the consumer expects."

Michael Pollan's world is idealistic but also more than a bit dangerous, unless you believe starvation in pursuit of over-simplification is an acceptable outcome. Let's hope the sifting and winnowing around "In Defense of Food" isn't too tone-deaf to consider that possibility.

-- Still is president of the Wisconsin Technology Council and a lecturer in the UW-Madison Department of Life Sciences Communication. He is the former associate editor of the Wisconsin State Journal.


Friday, September 18, 2009

Retirement investment: Taking a fresh look at your 401(k) allocations

By Kevin Reardon
As the government continues its efforts to right the ship of the struggling U.S. economy, now might be an excellent time to re-assess your retirement investment plans. Specifically, we're talking about the use of 401(k) savings plans.

A May survey by Hewitt Associates noted that despite record losses in their 401(k) savings in 2008, individuals stuck with their 401(k) plans. However, more people dealt with their worry about investment conditions by shifting money into more conservative investments. In addition, a significant number of companies either eliminated or seriously cut back on matching employee 401(k) contributions.

Hewitt's annual Universe Benchmarks study, which examines the saving and investment behaviors of more than 2.7 million employees eligible for 401(k) plans, showed that the average 401(k) balance dropped from $79,600 in 2007 to $57,200 at the end of 2008. 44 percent of employees lost 30 percent or more of their savings. Only 11 percent of employees were able to break even or see a gain in their 401(k) portfolios. Even still, 74 percent of employees participated in their 401(k) plans in 2008, about the same as in 2007.

However, the Hewitt survey stated that some workers are reacting to the market downfall by moving 401(k) assets into less risky investment funds to try and blunt their losses. In 2008, 19.6 percent of investors made trades in their 401(k) plans versus 18.7 percent in 2007. And the volume of money they transferred in 2008 was much higher. Nine of the 10 most active trading days were the day after a large downturn in the market, or days with an average return of negative 4 percent. Employees' average equity exposure dropped to just 59 percent in 2008 -- which is an all-time low since Hewitt began tracking it in 1997. Stable-value funds, which are considered less risky investments, experienced an 11 percent increase in asset allocation in 2008.

That's why it might be wise for investors to get a fresh start with 401(k) advice as the economy improves. For existing investors or those who have never begun to save or invest for retirement, it might be time to consult both financial and tax experts such as a Certified Financial Planner professional to make sure both personal and work-related retirement savings complement each other.

There are a number of key recommendations for you to consider, including:

Save even if your company fails to match: This is not the easiest thing to do, but even if your company cuts back on matching, it's important to try and put additional money into personal retirement investments outside of work. You will still realize the benefit of pre-tax contributions made to your traditional 401(k). And, when you have money automatically taken from your paycheck you are "dollar cost averaging". That means the fixed dollar amount that comes from your paycheck buys more shares when prices are low, and fewer when prices are high. Thus your average cost per share is lower than the average price per share.

Make sure you contribute to a plan: According to 2006 data from the Profit Sharing/401(k) Council of America, more than 22 percent of eligible workers don't participate in available 401(k) plans. For the companies that are still matching, that's like giving up free money.

Continue to save while you wait to join a plan: A significant number of companies don't let you join the 401(k) until you've been working there a year. If that's the case, get in the habit of putting money away for retirement anyway. Start an individual IRA with the funds you would put in the company plan, or set aside money in a savings account so you can supplement your cash flow and put the maximum amount into your 401(k) once you're allowed to join.

Contribute the maximum: Not every employee can afford to contribute the maximum allowed by the plan, but try. In 2009, the maximum 401(k) contribution will be $16,500, and those 50 and older can make an additional catch-up contribution of $5,500.

Don't let your company do all the work: More companies are automatically enrolling their workers in their 401(k) plans, but some workers fail to take charge afterward. They don't know how much they're allowed to contribute and they don't discuss or review the types of investments they have in relation to their age or retirement plans. It might make sense to bring an outside investment advisor such as a CFP professional to review those choices with you.

Avoid poor diversification over time: It's necessary to do a yearly checkup on all your retirement savings -- 401(k) s, individual IRAs and other investments fueling your retirement goals to make sure you're on track.

Don't rely on the 401(k) alone: Particularly if matching lags for awhile, 401(k) plans can't be relied upon as a single source of retirement dollars. You must invest outside your company plans.

Don't over-invest in company stock: Most financial planners advise that you put no more than 15 to 20 percent of your whole 401(k) portfolio in company stock.

Don't borrow from the 401(k): The Employee Benefit Research Institute reports that employees contribute more to plans that let them borrow. Don't be fooled. A 401(k) shouldn't be a house fund or a source of emergency cash. You're taking money out of the account that otherwise would grow tax-deferred, and if you fail to pay back the money, you could face income taxes and penalties. Instead, build an outside emergency fund of three to six months of living expenses you can draw from.

Don't cash out: Some workers think it's a great idea to treat a 401(k) as a windfall for when they quit a job. Don't do it. You'll pay huge penalties and lose your retirement savings momentum.

Don't "lose" your old 401(k) accounts: Maybe you've changed jobs several times and never got around to moving older, smaller 401(k) accounts from past employers to current ones or into a self-directed retirement account. Always get advice about 401(k) funds when you leave an employer.

-- Reardon is owner & president of Brookfield-based Shakespeare Wealth Management Inc.


Wednesday, September 16, 2009

Emerging tech centers on UW campuses can leverage R&D value

Emerging tech centers on UW campuses can leverage R&D value

By Tom Still
Even the best seeds can take a while to germinate. A case in point is the proposal to open seven "emerging technology centers" on University of Wisconsin System campuses to better serve industry while engaging faculty and student research talent.

The UW Board of Regents accepted a report last week by a special task force that urged investing $7.7 million in the technology centers, an idea that can be traced back more than six years to "Vision 2020: A Model Wisconsin Economy." Here is what the Wisconsin Technology Council said in late 2002 in its Vision 2020 report:

"Research Centers of Excellence located around the state will be ... organized around large-scale opportunities to build high-technology businesses. The Research Centers will focus on applied research that transfers new, public-sector science and technology to the private sector to solve unique problems of a particular industry. The Research Centers will identify disruptive technology that can be expected to force changes in the competitive landscape for Wisconsin's leading industries, thereby helping to prepare market leaders for the coming challenges and to create opportunities for new entrants."

The Vision 2020 report even identified unifying concepts built around research disciplines, such as biology, genetics and computer science, that often work together to form interlocking commercial clusters. Tissue regeneration, personalized medicine, nanometric systems, pharmaceuticals, extreme materials and electronics were some examples.

Roll forward to 2009 and the "Research to Jobs" task force, formed early this year, has recommended launching seven centers and building upon current centers at two more campuses:

* UW-River Falls: Tissue and cellular engineering, launched in early 2009.

* UW-Platteville: Nanotechnology applications, such as carbon nanotubes and graphene, for use in electronics, aerospace, computer and energy fields. This center was launched in late 2008.

* UW-Oshkosh: Super-capacity energy storage for next-generation electric cars and other energy intensive applications.

* UW-Stevens Point: Nanowire and nanostructure manufacturing for applications in solar energy, hydrogen sensors and nanoinstruments.

* UW-Whitewater: Interactive media and distance learning.

* UW-La Crosse: Pharmaceuticals based on medicinal plants and fungi.

* UW-Green Bay: Value-added products from waste, such as paper waste.

* UW-Stout: Plastics and composite materials, in collaboration with UW-Stevens Point.

* UW-Parkside: Biomedical sciences.

What's the value of these centers to the average Jane or Joe? Economic growth is the long-term answer, assuming these centers do what they're designed to do -- which is to serve the needs of Wisconsin industry.

Study after study has established links between academic research and development and job creation through what is called "technology transfer," or moving ideas from the laboratory bench to the marketplace. Wisconsin is a state that consistently ranks in the top quartile of states in academic R&D -- but it has not matched that performance when it comes to turning those ideas into jobs and economic production. That's why UW System President Kevin Reilly created the "Research to Jobs" task force and asked Carl Gulbrandsen, managing director of the Wisconsin Alumni Research Foundation, to lead it.

Over the past 80 years, WARF has done as good a job as any similar organization in transferring R&D into patents, licenses and economic activity. There are scores of companies in the Madison area that testify to the fact that UW-Madison research has moved from lab to commerce.

But most R&D apples don't fall far from the tree. The national rule of thumb is that most campus spinoff companies land within 50 miles of campus. That's why WARF spawned a related tech transfer office, called WiSys, about six years ago to handle inventions from other UW campuses. The Emerging Technology Centers proposal is an effort to accelerate the transfer of technology from those campuses -- and to spur economic development in or near those campus communities.

Executing the plan won't be easy. In addition to the UW System investment of $7.7 million over five years, about $3.9 million in industry and private funding will be needed, along with roughly $4.9 million in federal grants. It may turn out that what industry wants doesn't precisely overlap with the centers. Also, it may be necessary to involve the system's two doctoral campuses -- Madison and Milwaukee -- in some, if not many, projects.

But the payoff could be big. "We believe that each successful project (produced by an Emerging Technology Center) will result in 10-fold or more returns to the industry and UW," concluded the "Research to Jobs" task force report.

Some critics of the UW System contend its mission is divorced from the needs of private industry in the state. The "Research to Jobs" report is an effort to better align the educational mission of the UW with the needs of industry to stay competitive. It deserves a chance to grow from a seed to a plant that bears fruit for Wisconsin.

-- Still is president of the Wisconsin Technology Council. He served on the "Research to Jobs" task force and is the former associate editor of the Wisconsin State Journal.


Tuesday, September 8, 2009

Statewide school testing remake is best for students, educators and taxpayers

By Tom Still
When the statewide Next Generation Assessment Task Force gathered for an initial meeting, I asked for a show of hands among its 42 members: How many of you are generally happy with the current system for testing students? How many think it can be salvaged? How many want to replace it?

That straw poll result was an overwhelming vote to scrap the Wisconsin Knowledge and Concepts Examinations and start over. Nine months after the hands went up, the official conclusion is identical.

State Superintendent of Public Instruction Tony Evers has announced that Wisconsin will phase out its current system of testing student performance in grades three through eight and 10 in favor of a "balanced assessment system" that will more effectively guide teachers, parents and students -- and help prepare those students for college and the workforce.

In the process, it should also help businesses in search for workers with 21st century skills, and Wisconsin taxpayers who have a stake in more effective use of local, state and federal dollars.

The Next Generation Assessment Task Force was made up of 42 people from across Wisconsin, primarily educators but also citizen members of school boards and some business leaders. It was formed by then-Superintendent Elizabeth Burmaster to examine the status quo, which aspires to meet state and federal requirements, and consider alternatives. It didn't take long for the group to conclude it was time to scrap the Wisconsin Knowledge and Concepts Examinations -- but considering what comes next was more complicated.

The task force agreed the state Department of Public Instruction should produce a system that focuses on three types of assessments, each of which provide different kinds of information to teachers, students and parents.

* Formative assessments: These are daily evaluation strategies, usually in the classroom itself, that provide immediate feedback.

* Benchmark assessments: These are administered periodically to gauge student progress or to evaluate how well a program is working.

* Summative assessments: These monitor national, state, district, school or even classroom progress. These may include end-of-course exams or college placement tests such as the ACT and the SAT.

Other states have remade their testing systems. Some, such as Oregon, have developed an Internet-based system, which dramatically shortens reporting time and allows for repeat tests for those who want to improve. Michigan requires the ACT test in its system, which lowers the statewide average score (a Wisconsin bragging right for decades) but serves to encourage more students to continue their education after high school. Other examples studied by the task force included Nebraska, which built a statewide assessment system from classroom and district best practices.

Wisconsin's new testing system will be built over time and the current exams will remain in place for two or three years. For many observers, the change cannot happen fast enough.

"A more complete assessment system that incorporates classroom, district and state testing, instead of one high-stakes test, will benefit students and offer accountability to the public," said Mary Bell, president of the Wisconsin Education Association Council, the state's largest teachers union. "State-level assessment is a necessary part of the balanced approach, and we need to make those examinations better measures of skills our students need to be successful as they move through school and into the workplace."

Bell added that assessments developed and delivered in the classroom and across school districts are also important, as they provide immediate guidance for instruction.

"Educators can use those results to monitor the impact of a classroom or district innovation, or a given set of resources," she said.

Groups that follow education reform in Wisconsin are also optimistic. They see it as a chance to raise standards to reflect the need for global competitiveness. It may eventually save some money because so many districts, unhappy with the Wisconsin Knowledge and Concepts Examination, have purchased their own testing systems.

Another possible benefit: Attracting our fair share of federal dollars. Wisconsin ranks a miserable 49th among the 50 states in per capita federal spending on K-12 education, according to one recent study, but there are federal dollars available to help states improve school testing.

What will replace the Wisconsin Knowledge and Concepts Examination remains to be seen. But the state is now poised to install a more innovative system -- similar to what other states have done. It can help students at the right times, help teachers do a better job, and provide the kind of accountability the public and private businesses demand.

-- Still is president of the Wisconsin Technology Council. He was co-chairman of the Next Generation Assessment Task Force.


Thursday, September 3, 2009

Deciding when to take Social Security

By Kevin McKinley
To some people, Social Security is an arrangement set in stone. You (and your boss) are generally required to pay into the system pre-established amounts, based mostly on your earnings.

That lack of flexibility is also present when you get your benefits in retirement, because once you decide to initiate the payments, what you get is pretty much what you get.

But the "when" of taking your Social Security is up to you, within certain limits. And depending on your situation and longevity, the decision could make or cost you several hundred thousand dollars.

Here's how to determine the right time to take your Social Security payments in retirement.

Taking it sooner

The first age at which most recipients can initiate Social Security is 62, and you wouldn't be human if you weren't at least a little bit tempted to begin getting your money at the earliest possible date.

But your impatience could be expensive in the long run, especially when compared to waiting until "normal retirement age" (it's 66 if you were born from 1943 to 1954, progressing gradually up to 67 if you were born after 1960).

First, your payments will be lowered by 5/9 of 1% for each month prior to reaching full retirement age, up to 36 months. If you take Social Security more than 36 months before NRA, the reduction is 5/12 of 1% for each month over 36, and then 5/9 of 1% for each of the original 36 months.

That means a recipient scheduled to get $2,000 per month as a 66 year-old at normal retirement age would get $1,500 if he instead starts the payments at age 62.

And as an added injury to his income, if he earns any money while receiving the benefits before reaching NRA, he'll lose $1 in benefits for every $2 that his annual earnings exceed a certain amount ($14,160 in 2009, and how can anyone possibly be confused by all this?).

Waiting to take it

The advantage gained by postponing your benefits doesn't stop just because you've reached normal retirement age. For every year past NRA that you wait, your eventual monthly check will grow by 8%.

So the retiree who would get $2,000 per month at an NRA of 66 could get over $2,700 per month if he waits until age 70, which is the longest he could delay his payments.

Live longer and prosper

Sharp-eyed readers will point out that if the above-mentioned retiree waits until age 70 to get the greater monthly check, while waiting he will miss out on 48 monthly payments of at least $2,000, totaling $96,000.

So the question becomes, "How long do I have to live to make it worth my while to wait?" The answer depends on an individual's circumstances, but most scenarios point toward a breakeven age of around 78 or so.

That may seem to be far off in the distant future, but the Center for Disease Control says the average current life expectancy for a 66 year-old American male is about 82, and 85 for his female counterpart.

In which category are you?

Generally, you should take your Social Security payments sooner rather than later if you need the money to survive. Also, it should be considered by those who have poor health, or who have been made poorer by a decline in the stock market.

Delaying payment is probably smarter if you enjoy good health and better genes, don't necessarily need the money, or are still working into your sixties.

If given the choice between working more or retiring and taking Social Security, you're usually better staying on the job as long as you can stand it, as your benefits are based in part on your 35 highest years of earnings.

But whenever you decide to start taking Social Security, there are several strategies you can use to increase the amount you eventually receive.

You'll learn more about them next month. In the meantime, please know that the best way to the get the most from Social Security is to live a long life -- so take good care of yourself.

-- After graduating from the University of Wisconsin with a degree in economics and history in 1988, McKinley became one of the youngest licensed financial advisors in the country. He is now a Certified Financial Planner practitioner, and owner of McKinley Money LLC, a registered investment advisor in Eau Claire, Wisconsin that provides fee-based financial planning and investment management to individuals and families. Read McKinley's complete bio


Wednesday, September 2, 2009

President Obama's health-care plan may stall, but problems won't go away

By Tom Still
A friend who sells new cars, and who is happy to see the "Cash for Clunkers" federal rebate program end, described the somewhat creepy procedure used to permanently disable the engines of the trade-in vehicles. After draining the oil in the aging trade-in, the dealer was required to pour in a solution of sodium silicate and run the engine at 2,000 RPMs until it wore down, seized up and turned into unsalvageable scrap metal.

If there are federal death sentences for cars, can "life-or-death" committees for elderly patients be far behind?

The question is mostly in jest; no one should seriously believe that health-care reform will lead to government-ordered euthanasia in nursing homes. But many Americans judge proposals to expand federal influence over their lives based on their impressions of how other federal programs have worked, whether it's the IRS or a one-time car rebate.

If 690,000 clunkers have been scrapped and dealers have yet to be paid for the discounts on the new cars they sold, what does that say about the ability of the feds to reimburse doctors, hospitals and clinics for millions of medical procedures across America every day? Perceptions matter, and it's no wonder so many people are skeptical.

Those perceptions help to explain why President Obama may not get his wish to reform health care during his first year in office, especially now that the non-partisan Congressional Budget Office has reported the White House plan could cost twice as much as estimated. Most Americans won't trade the devil they know for a more expensive demon that may not work.

But what are the costs of doing nothing? Health care in America suffers from multiple ailments, most of which won't go away even if the Obama plan and others like it fail. Some examples:

* Many employers wonder how long they can continue to underwrite the health insurance costs of their employees. Over the last decade, employer-sponsored health insurance premiums have increased 119 percent, according to national statistics.

* About 700,000 Americans are forced into bankruptcy each year because of medical bills.

* National health spending is expected to reach $2.5 trillion in 2009, accounting for 17.6 percent of the gross domestic product. By 2018, national health care expenditures are expected to reach $4.4 trillion—more than double 2007 spending.

* National competitiveness is being hurt. Because U.S. health-care costs are so high, due in large part to huge administrative costs, our competitors have an advantage when it comes to producing goods and services. Japan is a ready example. In "The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care," author T.R. Reid notes that Japan spends about $3,400 per person per year on health care versus $7,000 in the United States. That is despite the fact that Japan's population is older and sees doctors at three times the American rate.

What's the solution? First, let's acknowledge America already has government-run health care in many ways. More than 46 percent of all medical service in the United States, or about $1 trillion per year, is paid for directly by taxpayers who finance Medicare, Medicaid, the Veterans Administration hospitals and state-run programs such as Wisconsin's BadgerCare. Private insurance covers 42 percent, and the rest is paid out of pocket.

In some ways, the American system is more "socialized" than those in many countries often cited as examples to avoid. While many of those nations have universal coverage, it's often provided through private doctors, hospitals and insurance plans.

Some of the best-managed private plans in the United States cost about $3,500 per person, per year. What are the practices that make them efficient? Why are some states -- Wisconsin included -- ranked high in terms of health-care quality and others are dismally low? Are insurers beginning to move away from denying coverage to people with pre-existing conditions, a step that many reformers believe is essential? Can a "public option" government plan force real competition without destroying private plans?

Examining those questions and leveraging America's built-in penchant for innovation may provide much-needed answers. The Obama plan may not pass this year, but the "clunker" that characterizes parts of American health care must be traded in, sooner or later.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.


Tuesday, September 1, 2009

Commentary on Mercury Marine potentially leaving Fond du Lac

Click below to read commentary pieces on the situation in Fond du Lac, where Mercury Marine may be moving hundreds of manufacturing jobs to Oklahoma.

The economics of nationalized health care and your financial plan

By Kevin Reardon
The great debate has begun pertaining the future direction of our healthcare system in the United States. Few would disagree that our healthcare system could be improved and that changes need to be made. However, rather than debate whether health coverage and patient care could be improved in a government controlled program, we instead would like to focus on the economics of nationalizing healthcare. Although the almighty dollar shouldn't always be our primary focus, we can't neglect the long term economic impacts of any legislation.

Right now, healthcare-related services consume over 15% of our Gross Domestic Product. Americans are spending a significant percentage of their family budgets to purchase health services. That number will continue to grow as the population ages and the cost of health services continues to go up.

Keep in mind that this significant outlay for healthcare isn't all negative. The dollars we spend on healthcare go to people working in the healthcare field and to companies who sell healthcare goods and services. Obviously doctors, nurses, and other workers earn a living from our healthcare expenditures and they, in turn, invest into our economy when they own a home, purchase goods and services, save money into their retirement accounts, etc.

As opportunists, we can earn a return on our investment by purchasing publicly traded companies in the healthcare field. The healthcare sector is split into various sub-industry categories, including pharmaceutical, biomedical, medical devices, services, insurance, hospitals, and many other sub-categories. Many of these companies provide life-saving medical devices, prescription drugs, prosthetics, medical equipment, and countless other valuable goods and services. These companies frequently produce positive earnings through their innovations, research and development as they strive to serve the greater population. If the companies produce a product or service that isn't desirable, or that is priced too high, we can choose not to buy it.

The Affordable Health Choices Act of 2009 would create a public health insurance alternative and require coverage for most Americans and from most employers.

In considering the nationalization of our healthcare sector, we begin to see what my grammar school English teacher called a 'double negative.' In order to pay for expanded coverage of healthcare for everyone, the government will have to impose higher taxes. One proposal is a mandatory tax on employers who don't offer credible healthcare benefits. Before we proceed, it is important to point out that individuals pay taxes, not "employers". Behind every company are individual owners or shareholders, and WE (you and me) will pay any tax that is imposed.

Higher taxes on "employers" result in less money available for wages, employee benefit plans, and other expenditures. Those other expenditures include less money to be spent with a company's vendors, building and maintenance expenses, research and development, capital equipment and improvements, legal and accounting services, marketing budgets, community outreach programs, charitable contributions, etc. The trickle down effect of higher taxes simply means that less money will be available for individuals.

The second negative of nationalizing healthcare will be the destruction of the private healthcare industry including companies and individuals involved in health insurance, pharmaceutical drugs, biotech research, medical devices, and more. First, imagine a private health insurance company competing against a government sponsored health insurance plan. The government sponsored health plan, as is true for most government sponsored programs, can and will operate at a loss. Individuals and corporations that operate at a loss eventually go bankrupt. The introduction of a government sponsored health insurance plan will lead to the destruction of private health insurance companies.

Now imagine a healthcare company trying to sell their product or service in an environment where the government is in control. What if the government won't pay the market price for a medical device, prescription drug, imaging system, etc.? The end result will be fewer profits for companies competing in the healthcare field and less incentive to create the next generation of products. Less profits trickles quickly down to the individuals (you and me) in the form of less opportunity, lower wages, and fewer jobs.

Are people willing to pay the double negative of higher taxes and fewer jobs for universal healthcare coverage? Some people are willing to pay that price, and others aren't. But we need to be clear that this will be one of the ramifications of nationalized healthcare.

So what is the best answer? It is up to ALL of us as Americans to make that decision, not just Congress and the President. Let's slow down the rush to pass a healthcare bill and start asking some tough questions, such as:

1. The Government is currently in the business of healthcare with the programs of Medicare and Medicaid, along with other government sponsored programs and agencies. Why?

2. What part of the U.S Constitution and Bill of Rights talks about Life, Liberty, and the pursuit of Healthcare?

3. Are people happy with the way Medicare and Medicaid work? How about the VA Medical System? Based on how these government sponsored healthcare programs work, do we want to expand more power and control to the government?

4. How is it that Grandma and Grandpa lived their whole life without government run health insurance?

5. When Grandma and Grandpa incurred a medical bill, why did they feel compelled to pay their bills and while so many people today view that to be someone else's responsibility?

6. Why do we allow frivolous lawsuits, which drive up the cost of everything, from healthcare to car insurance?

7. If someone incurs significant medical bills, shouldn't they be expected to pay those bills over their lifetime? If they die owing medical bills, shouldn't they have to use remaining assets (home, retirement accounts, bank accounts) to pay those bills back before their assets are distributed?

8. Is health insurance more important than your cellular phone? If so, why is that many people without health insurance own a cellphone, have cable/satellite TV, own an automobile, or even own their own home? Health insurance must not be that important.

9. If you are comfortable having the government run the healthcare system, how about the government running our banking, insurance, and auto industries? How about government run utilities?

10. If healthcare is Right, and not a privilege, should owning a home also be considered a Right? Should we have government run housing?

We have started down the slippery slope of government intervening in key aspects of our private life. If this continues, imagine what life will be like in ten years. When you go to purchase a new car, you would be given a government financed and insured electric automobile. You can drive home to your government sponsored house and plug into an outlet with government produced electricity. Of course, when you get sick, the government ambulance will come pick you up and take you to the shiny new government hospital where government paid doctors and nurses will happily care for you.

Such utopia will never exist, not because government bureaucrats won't try to give it to us, but because the financial equation of government sponsored programs never works. Instead of asking if people want universal health coverage, we should be asking if people want high unemployment, high taxes, and an economy that doesn't grow.

One footnote: Having a safety net, like Medicaid or BadgerCare, for those who are truly poor and indigent or for those with preexisting conditions is important. We shouldn't do away with these programs. Catastrophic illnesses do happen, and after the individual has exhausted significant effort and assets trying to pay the bills, we should have programs that help people in these situations.

-- Reardon is owner & president of Brookfield-based Shakespeare Wealth Management Inc.


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