Category Archives: Politics

Stimulus efficiency in a post-industrial economy

As we move into the middle portion of 2010, we’re hitting the fattest part of the ARRA stimulus allocations. While there was a lot of pre-passage wrangling on both sides of the aisle about efficiency and multipliers, there hasn’t been much talk about the stimulus money’s effect on unemployment in recent months. Not since the unemployment rate has been trending in a positive direction. That means it’s a great time to examine stimulus. lists 682,779 jobs as “created” or “saved” as a result of the stimulus package. ARRA started doling out money on Feb 17, 2009, and through March 31, 2010, $205.3bn has been laid out. This means that $205.3bn has puchased 682,779 jobs, at a cost of $300,686 per job.

That’s pretty horrible. Apparently it’s not quite as straightforward as this, though, thanks to some fancy hand-waving that magically brings this number down to ~$160,000 through methods that I’ve yet to see explained. Regardless of what you believe, it’s really expensive for Uncle Sam to create jobs using good old fashioned Keynesian stimulus.

Capital intensity

The neoclassical production function is y = (K,L); that is, output is a function of capital (K) and labor (L). Modern macroeconomics throws a lot more into this function to account for other factors, but using the older capital-labor tradeoff is good enough to illustrate my point. In general, there is a tradeoff between capital and labor. You could hire 1,000 men to shovel the streets in the winter, or you could hire one guy with a plow, and the guy with the plow will do more in less time. This is why nations tend towards industrialization.

The United States is a post-industrial economy. Watch a documentary on the Hoover Dam and look closely at the sheer number of men at work. In today’s economy, a large percentage of these men would be replaced with machinery designed to do a specific job.

That means that money is being spent on capital instead of labor because stimulus money is allocated for specific tasks — not to employ workers, which is merely a fringe benefit — and then these tasks are completed by either the public or private sector (or both) using whatever mix of capital and labor is appropriate for the job.

Capital flight

Capital has to come from somewhere. In terms of traditional stimulus spending on infrastructure, you’re mostly dealing with heavy equipment manufacturers, the majority of which are located overseas. In some cases they’re headquartered elsewhere, and in some cases, their manufacturing is located elsewhere. Sometimes both. When one or both of these conditions is met, profit, jobs, or both are shipped across borders into other nations. In this respect, stimulus money is being used to create or sustain jobs in other countries.

It is possible to mandate that firms using government money buy from American corporations — the Fly America Act is an example — but this isn’t possible or desirable in all cases. American heavy equipment manufacturers don’t make all of the machinery necessary to complete some of the larger infrastructure projects that are on the table.

Job destruction and obsolescence

Another problem with stimulus spending is that quite a bit of the funding is to improve efficiency, particularly in sectors like health care. Unfortunately, “improving efficiency” usually means shifting away from labor. In a sector like health care, capital takes the form of computers and software. Primarily the latter. Automating billing, cutting back on administrative personnel, decreasing overhead, getting rid of physical records. These are the things that software is great at; it is a substitute for labor.

Software is a unique example, too. Not only does it destroy jobs in the short run, but it doesn’t create new jobs very quickly, except in the software-based industries themselves, because it’s a virtual good: all you need is a computer, an Internet server, and the intellectual capital required to make it. This breaks the normal supply-demand models in some interesting ways, because supply is functionally unlimited, but price doesn’t go to zero, even after a firm’s fixed costs have been covered. This leads to some very high profit margins.

History is littered with examples of capital displacing entire workforces. Textile manufacture during the Industrial Revolution is the most prominent example in modern history, with huge numbers of people losing their jobs thanks to the electric loom. The upside is that because of this creative destruction, whole new industries are born, and more jobs are created than were destroyed.

This doesn’t lessen the pain in the short term, however. While the labor market can and does adjust for this creative destruction, this obsolescence is occurring so quickly that many of these displaced workers are unable to acquire the skills necessary to find new kinds of employment in the new economy that’s being created. In times past, the technological increase was on the order of 3% per generation (pre-Industrial Revolution), but now stands at about 3% per year. The rapidity of this kind of change is difficult for the labor market to absorb. This is one of the causes of a jobless recovery: technology increases wealth (GDP) without using more workers to get the job done thanks to software advances and other capital-based technologies.


If the goal is mass job creation as quickly as possible, then the government should employ fiscal stimulus as inefficiently as it can. Employ workers where the private sector would use machinery. Employ dozens of people with slide rules instead of one physicist with a computer. Build roads by hand instead of using machinery. In short, pretend we’re a pre-industrial civilization instead of a post-industrial one. This will get you the biggest bang for your buck in terms of rapid, low-cost employment. The work isn’t desirable, and people will jump ship back to the private sector when it starts creating jobs as a result of people spending their money.

In this case, inefficiency props up the labor market in the short term.

The downside to this is that it doesn’t create jobs in the long-term growth sectors like technology, health care, and education, which are physically and intellectually capital intensive. It does, however, get a lot of people employed very quickly.

The death penalty in civilized society

Today, Bob Herbert in the New York Times had a piece on Cameron Todd Willingham, a man executed by lethal injection for the arson murder of his children. Analysis published on August 17, 2009 by Dr Craig Beyler concluded:

in the end, the only (basis) for the determination of arson … is the burn patterns on the floor of the children’s bedroom, the hallway and the porch interpreted as accelerant spill. None of these determinations have any basis in modern fire science.


the state fire marshal who investigated the case and testified against Willingham “seems to be wholly without any realistic understanding of fires.” He said the marshal’s approach seemed to lack “rational reasoning” and he likened it to the practices “of mystics or psychics.”

These are some pretty damning statements.

Now, I am against the death penalty, though I wasn’t always, and I posted the article on Facebook as a textbook example of why I believe the death penalty should be abolished. It garnered a few comments, one of which I want to address in a more comprehensive way.

So let’s spend millions of dollars keeping inmates locked up for life, build new prisons, take care of their health problems, etc rather than run the very slim risk that there may be a mistake?

All eliminating the death penalty does is guarantee that people who commit lesser offenses such as manslaughter and rape will be released after the minimum required sentence (or less) due to overcrowding.

I’ve heard this, and similar arguments many times over the years. In the past, I’ve even said similar things myself. However, these arguments are spurious.

  1. It is more expensive to execute a prisoner than it is to lock one up for life. “Fixing the appeals process” is incompatible with lowering that cost, because the marginal cost of holding one more prisoner is quite low, and the appeals process is necessarily time- and labor-intensive. (More below.)
  2. The people who are likely to be released from prison in a real, honest-to-God prison reform are nonviolent criminals. (Drug users and the like) Of the 2.2 million prisoners, 1 million of them are non-violent.

That report, by the way, is from 1999… ten years ago. Many of these nonviolent offenders are in prison for drug-related crimes. Regardless of your opinion of whether or not drugs should be legalized, drug abuse is a medical problem, not a criminal justice problem. As such, it should be dealt with by the healthcare system, not the criminal justice system. Indeed, in any graduate-level mental health program, a significant portion of the curriculum is spent on substance abuse and its treatment. In fact, the federal government itself recognizes this, as it has quite a few openings for substance abuse experts.

There’s plenty of room to improve our criminal justice system from redesigning prisons to reforming the law itself to rethinking how we imprison people instead of just the “why”. Looking back at history offers some lessons as well (long-term imprisonment as a concept is only 200 years old (PPT)). Continuing to execute individuals, and justifying it using counterfactual ideas like “cost savings” doesn’t make sense. If we could reform our criminal justice system to the point where executing one more person made fiscal sense, then we will have made significant headway in criminal justice policy in general. And I would go so far as to argue if we ever get to that point, we won’t need to execute people at all because there won’t be any crimes committed that justify execution.

But of course, we’re nowhere near that point, so it’d be purely a game of “what-if”.

Some numbers:

  • 3,297 people on death row
  • 2,310,984 total prisoners
  • 0.1% of the prison population is on death row

You’re not going to save the system much (if any) money even if you executed all of these prisoners tomorrow.

Going further, the argument seems to be one of ideology: having an opinion and working backwards to justify it rather than letting the evidence guide one to a logical conclusion — even if it is a conclusion that one would otherwise not prefer. Speaking for myself, I have no problem with the concept of putting someone to death, though I could never do it myself. I’m apathetic about the death penalty as an institution, but what gets me going is the possibility of error. If there is a chance that an innocent person could be put to death, the whys and hows of execution are irrelevant. Life in prison is reversable. Execution is not; ergo we don’t kill people. Moral arguments over the right-ness or wrong-ness of killing someone cease to matter.

There are too many possible points of failure. Arguing that we should lower the costs of execution, by streamlining the appeals process while still doing “due justice” to satisfy some moral compunction reeks of trying to alter the world to conform to what one would prefer rather than making policy based on reality.

I have no patience for this kind of thinking.

Other links of interest:

What the stimulus vs tax cuts debate misses

A week or two ago, Greg Mankiw and Nate Silver had a bit of a back-and-forth on stimulus vs tax cuts. In order:

  1. Mankiw’s NYTimes article
  2. Silver’s response
  3. Mankiw’s “teachable moment” reply
  4. Silver’s retort

Ignoring the attitude readily apparent on both sides, I was struck by how much this tiresome debate over taxes vs direct stimulus actually misses. Indeed, many of the other macroeconomic factors seems equally important, and without solving these other problems, the current debate — while fun and exciting — is ultimately pointless.

Tyler Cowen’s 8 reasons we are in a recession:

  1. We have zombie banks.
  2. There is considerable regulatory uncertainty in banking and finance.
  3. There is a negative wealth effect from lower home and asset prices.
  4. There is a big sectoral shift out of real estate, luxury goods, and debt-financed consumption.
  5. Some of the automakers are finally meeting their end, or would meet their end without government aid.
  6. Fear and uncertainty are high, in part because they should be high and in part because Bush and Paulson spooked everyone.
  7. International factors are strongly negative.
  8. There is a decline in aggregate demand, resulting from some mix of 1-7.

I don’t think any serious person would argue with this list.

As I see it, the problem with stimulus seems to be that it doesn’t address anything but decreased aggregate demand. A real problem, sure, but not the only problem.

To my way of thinking, tax cuts will do a couple of things:

  1. Offset some of the negative wealth effects associated with depressed home and asset prices.
  2. Offset some of the longer-term effects of our debt-financed consumption of the last 8 years. I see a tax cut as being better for individual credit card companies and loan companies than it is for the economy as a whole. If the money returned to the taxpayer is used to pay down debt, it does nothing for the macroeconomy in the short run.

Stimulating demand directly through government purchasing/construction/etc sidesteps these two problems. But it also does nothing to help with anything except problem #8, especially if you’re looking at a multiplier of ~1.

All in all, which one is “better” is a pointless argument because a sound plan would have both. (And indeed the recovery act has both.)

So where are the policy debates over zombie banks? There’s debate over better regulation, but it’s not especially informed debate; it’s more like “Omg we need more regulation!” where regulation is left undefined for all intents and purposes as far as I can see.

Why aren’t we talking about negative wealth effects? We can impact them somewhat directly via tax credits, but nobody is talking about tax credits for this specific reason. Maybe because explaining what a negative wealth effect is to a layperson is difficult to do? I don’t know. It’s not sexy? That seems a more likely explanation. It’s not terribly partisan? That seems even more likely.

The auto industry is obviously being hotly debated, and conservatives seem to think that a chapter 11 restructuring is the best way to go. I don’t necessarily disagree with that, but going through chapter 11 requires financing… otherwise it turns into a chapter 7 liquidation, which is clearly undesirable. How about making the auto bailouts contingent upon using that taxpayer money to restructure, in effect making the taxpayers the DIP financiers? I haven’t heard that mentioned as a possibility, but I hardly think I’m the only person on the planet who hasn’t wondered if this could be done.

How can we restore consumer confidence? The new administration taking office will help with that somewhat, but I don’t see any ready-made solutions in the economists’ handbook except for (maybe) time and getting the other 7 factors under control.

In the final analysis, I want to know why we are beating the stimulus vs tax cuts drum exclusively when there are so many other factors in play. Krugman’s hammering of the Keynesian, great depression angle seems incredibly narrow because this recession strikes me as being somewhat different, and supply-siders like Mankiw hammering the tax credit/cut/rebate angle miss so many other factors that need to be talked about. (Though to be fair, Mankiw doesn’t talk exclusively about the tax angle the way Krugman seems to with his Stimulus Now! rhetoric.)

Am I totally off-base in thinking that both sides are being somewhat partisan, here, which is ultimately bad for meaningful discussion?

9 bills on the table in front of the 111th Congress:


TARP reform with fulltext. Introduced by Barney Frank (D-MA).

On Executive compensation:

SPECIFIC REQUIREMENTS- The standards established under paragraph (1) shall include–

(A) limits on compensation that exclude incentives for senior executive officers of an assisted institution which received assistance under this title to take unnecessary and excessive risks that threaten the value of such institution during the period that any assistance under this title is outstanding;

(B) a provision for the recovery by such institution of any bonus or incentive compensation paid to a senior executive officer based on statements of earnings, gains, or other criteria that are later found to be materially inaccurate;

(C) a prohibition on such institution making any golden parachute payment to a senior executive officer during the period that the assistance under this title is outstanding;

(D) a prohibition on such institution paying or accruing any bonus or incentive compensation, during the period that the assistance under this title is outstanding, to the 25 most highly-compensated employees; and

(E) a prohibition on any compensation plan that would encourage manipulation of such institution’s reported earnings to enhance the compensation of any of its employees.

Good, good. There’s lots more in that bill if you’re interested. Moving on…

  • H.R. 391: To amend the Clean Air Act to provide that greenhouse gases are not subject to the Act, and for other purposes.
    Greenhouse gases aren’t toxic to people per se, the way the other pollutants covered in the Act are. As much as it pains me to say it, this restriction probably makes sense. Greenhouse gases should be addressed in their own bodies of legislation instead of being shoehorned into a bill that was never meant to account for greenhouse-type externalities.

  • H.R. 374: To require the closure of the detention facility at Guatanamo Bay, Cuba, to limit the use of certain interrogation techniques, to prohibit interrogation by contractors, to require notification of the International Committee of the Red Cross of detainees, and for other purposes.

  • H.R. 426: To amend the Internal Revenue Code of 1986 to reduce the depreciation recovery period for certain roof systems.
    Fulltext not available, but if it’s what I suspect it is — an amendment to the IRC that allows for a quicker accounting depreciation schedule for roofing systems — it’s a win for whatever businesses have these systems. The quicker you can write off a capital expense, the better it is for your bottom line.

  • H.R. 448: To protect seniors in the United States from elder abuse by establishing specialized elder abuse prosecution and research programs and activities to aid victims of elder abuse, to provide training to prosecutors and other law enforcement related to elder abuse prevention and protection, to establish programs that provide for emergency crisis response teams to combat elder abuse, and for other purposes.
    My family owns a homecare agency for seniors and disabled, and elder abuse — usually through neglect — is quite common. I’ll be interested to read the fulltext when it’s available.

  • H.R. 429: To permit the televising of Supreme Court proceedings
    Change we hope to believe in… continuing the opening up and focus on transparency of government procedure. Sponsored by a Republican, no less.



  • H.R. 423: To provide compensation for certain World War II veterans who survived the Bataan Death March and were held as prisoners of war by the Japanese.
    The Bataan Death March took place in 1942… 67 years ago. Most of these folks are probably already dead. Why now? I’m not against it; it just seems a little late.

  • H.R. 364: To restrict nuclear cooperation with the United Arab Emirates, and for other purposes
    The fulltext of this bill is not available, unfortunately. It’s a bipartisan bill, which surprised me; I would have pegged it as a Republican machination. In general, I am in favor of nuclear power, and while I realize that there’s not a single country on Earth that has nuclear power without some nuclear weapons capability, nuclear power is ultimately a clean, environmentally-friendly means of generating electricity. I don’t see the UAE as a particularly dangerous entity. They’re fairly progressive as Muslim nations go, and they’re interested in moving away from a petroleum-based economy, which is a good thing.



  • H. J. Res. 17: Expressing support for designation of the month of October 2009 as “Country Music Month” and to honor country music for its long history of supporting America’s armed forces and its tremendous impact on national patriotism.
    Introduced by Ted Poe (R-TX). I’m not sure how this particular bill could possibly reinforce certain stereotypes more than it already does. It’s like a pre-packaged joke just begging to be used in a bad sitcom. And I resent the insinuation that music is patriotic because it may include jingoistic overtones and the glorification of “small town” values.

Well at least they were candid…


Q: “Will you consider legalizing marijuana so that the government can regulate it, tax it, put age limits on it, and create millions of new jobs and create a billion dollar industry right here in the U.S.?”

– S. Man, Denton


A: President-elect Obama is not in favor of the legalization of marijuana.

I’m happy to see that the administration didn’t skip over this kind of question. I think it shows an unusual level of political inclusiveness.

Personally, I am in favor of legalizing marijuana — and I believe it’s only a matter of time — but now isn’t the time or place. Doing such a thing would have very little overall benefit, while burning copious amounts of precious political capital. (Which I believe Obama will use to push through his green programs and his healthcare proposals.)

I also disagree with the assertion that marijuana will create a multi-billion dollar industry, because once you let supply and demand function more freely, the scarcity premium is minimized. (Though this slack may be taken up by higher bureaucratic costs.)

In terms of demand, I see marijuana more like the cigar business than the cigarette business: while there is doubtless a large number of regular users, I suspect they are the relative minority in the pot-smoking demographic.

On that note, I think I feel a larger drug post coming on soon in the next couple of days…

Brokaw quizzing Obama on Pigovian gas taxes

Right around the 7 minute mark on this past weekend’s Meet the Press. (The video should start playing just as Brokaw asks him about it.)

Obama’s response pretty much jives with what I said last week about now not being the right time, but when Brokaw pushed him, he kind of waffled on the possibility of a gas tax hike in the future. Impossible to read into his response at all because it’d be detrimental politically to do so. (Though if he slipped it in at the beginning of his term, it might be forgotten at the end of four years.)

It’s right around the 7 minute mark, and the video should start playing right as Brokaw asks the question.

Now is not the time for a Pigovian gas tax

Wrote this a little while back. The macro policy bits in the second to last paragraph may or may not remain my opinion in the light of some of the data that Mankiw has posted here. Let’s just say my thinking is… fluid on the more Keynesian bits I’ve referenced. I’m going to have to read the whole paper (PDF) in the near future.

Several weekends ago, the Washington Post editorial board came out in favor of a Pigovian gas tax. A guest op-ed in the New York Times advocated essentially the same thing. For those unfamiliar with the concept, a Pigovian tax is a fee levied on a particular good or service designed to reduce consumption of that good or service to compensate for a negative externality. Even if the revenue raised from the tax is returned to the public in the form of an income subsidy, it has a real tendency to reduce consumption of that particular good or service, even though an individual has experienced no real drop in income. (They have not dropped to a lower indifference curve.)

In the case of gasoline, the tax has many reasons: pollution generated by the combustion of fossil fuels isn’t accounted for because clean air never enters a market system, therefore it has no market price so we treat it as free. (Obviously clean air has value even though we don’t buy or sell it.) Another externality is the US’s reliance on foreign oil, often provided by otherwise hostile nations who derive their economic power from US petrodollars. There are several other, more wonkish reasons for desiring a Pigovian gas tax as well.

In general, I consider myself a bandwagon fan of the Pigou club. I agree with their aims, and Pigovian taxes have demonstrated a remarkable ability to meaningfully compensate for externalities otherwise unaccounted for in a free market system. However, now is not the time to institute such a tax. At a time when the federal government is considering a large-scale stimulus package that certain Keynesians think needs to be in the neighborhood of US$600 billion to have any chance of working — a figure that jives with China’s US$585bn package — the tremendous drop in gas prices is equivalent to a US$318 billion stimulus package that Uncle Sam doesn’t have to ultimately borrow from China or sovereign wealth funds to put into play in the here and now.

This trumps any marginal environmental benefit that might be gained by instituting a Pigovian tax at this moment in time.

Recession economics suggest that when all normal tools of correction have been tried, the government should increase spending and/or cut taxes. Trying to close a budget deficit while in the middle of a recession will only exacerbate the economic turmoil, and you run a very real risk of pushing a recession into a depression. (Though a nation’s long-term stability obviously requires fiscal responsibility, which the US has been lacking in recent years.) Raising taxes takes money out of consumers’ pockets, and cutting government spending tends to lead lead to lost jobs. Obviously lost jobs and decreased consumer buying power are undesirable. Doing nothing can cause the recession to deepen, and doing too little is no better than doing nothing at all. The question isn’t whether we need a stimulus package, the question is how big it needs to be. Therefore we should take what the burst petroleum speculation bubble has given us, and let it ride until the current economic crisis has passed.

It would have been better for the WaPo and NYTimes to have published these pieces back in the spring and summer — not in the middle of a recession. During the Democratic primary, Senator Clinton suggested rolling back the federal gas tax, which was a pretty bad idea. Ironically, if we still had $4/gallon gas prices today, her ideas might make more sense, except that a temporary reprieve of the relatively small federal gas tax wouldn’t amount to very much. However given petroleum’s relatively low cost right now, rolling back the gas tax temporarily wouldn’t amount to much in the way of meaningful consumer relief. ($31.46 billion on the generous side — an amount in the same ballpark as the recent Citigroup bailout.) When the seas are calmer, then we should discuss nifty tricks like Pigovian taxes and other consumption taxation vehicles as part of a responsible long-term fiscal policy.

Now is not the time to balance the budget. While there will always be arguments over timing, it seems obvious to me that instituting a Pigovian gas tax today — or even this year — isn’t in the US’s, or the world’s best interest. Let’s revisit this idea sometime in 2010. Hopefully by then, we’ll have weathered the worst of this recession.

Massachusetts: a less than perfect healthcare model

I will have a large writeup on real, honest-to-God ways we can reform healthcare in this country without resorting to re-distributionist tactics in the next couple of days. No hand-waving. No pie-in-the-sky. I promise. But until then…

By Frank Micciche from the New America Foundation/Providence Journal:

439,000 people have acquired health insurance since the reform became law — an astonishing 9 percent increase in coverage at a time when the national rate increased by one-half of 1 percent.

Nearly 200,000 of the newly insured acquired private, unsubsidized coverage, mostly through their employers.

Written another way: “More than half of the individuals are subsidized with taxpayer money.”

Libertarians will have a field day with the other piece of puzzle: many individuals would rather pay the fine associated with forgoing the mandatory medical insurance than pay the premiums. Why? The fine costs less. Many healthy people simply don’t want to buy health insurance. The original projections for the number of unsubsidized signups ended up being wildly optimistic:

Massachusetts’ financing challenge emerges from its success in covering the state’s neediest residents. Enrollment in the fully subsidized Commonwealth Care program has been higher than expected, while enrollment in the unsubsidized Commonwealth Choice plans has been lower than anticipated. Therefore, costs to the state have risen dramatically.

Micciche spins it another way:

The state’s success enrolling lower-income households in the subsidized “Commonwealth Care” program has driven overall costs above original projections, but the actual cost per person covered is lower than expected, as is the average premium.

From an economic standpoint, enrolling lots of lower-income households is not success unless it is offset by sufficient numbers of unsubsidized enrollees.

Obviously it follows that the average premium is lower than anticipated because the majority of enrollees are subsidized and therefore pay lower premiums.

This isn’t rocket science econometrics, folks.

In the fiscal year before passage of health-care reform, Massachusetts spent $710 million to reimburse hospitals and community health centers for unpaid bills. 81 percent of these costs were incurred by individuals without insurance.

Now we spend that money getting these people the insurance they need so when they go to the ED, they aren’t “uninsured”. Instead we buy these people insurance with taxpayer money so we don’t have to spend taxpayer money reimbursing hospitals directly.

What’s not mentioned is that this is good for the hospitals. A lot of “free care” ends up not being reimbursed at all, meaning hospitals have to eat the costs of treating those who cannot afford to pay. The upside for hospitals is that now that these folks have insurance — subsidized though it may be — hospitals can get reimbursed for services they provide that wouldn’t have been reimbursed in the past. It will be interesting to see if there’s an effect on the number of hospital closures and bankruptcies going forward from here.

Costs aside, all agree that sporadic treatment of the uninsured through emergency rooms and clinics is much less effective medically. The commonwealth took on the problem by diverting much of its uncompensated care pool dollars into subsidies to buy private insurance by lower-income individuals and families. Quarterly costs for free care have subsequently dropped 40 percent.

From one money hole to the next. Yes, that has “sustainability” written all over it. Payments to hospitals have dropped by 40%, and that’s a good thing. Except that that money went to the Commonwealth Care program instead. Instead of being red ink in one set of books, it’s red ink in another.

Clearly there’s a difference between red ink and politically-acceptable red ink. At the end of the day, though, the same people end up paying the piper:

The subsidized insurance program at the heart of the state’s healthcare initiative is expected to roughly double in size and expense over the next three years – an unexpected level of growth that could cost state taxpayers hundreds of millions of dollars or force the state to scale back its ambitions.

State projections obtained by the Globe show the program reaching 342,000 people and $1.35 billion in annual expenses by June 2011. Those figures would far outstrip the original plans for the Commonwealth Care program, largely because state officials underestimated the number of uninsured residents.

Back to Micciche:

And the individuals who acquired private insurance now receive coordinated, cost-effective care that will improve overall health outcomes and reduce the need for more expensive late-stage intervention.

An oversimplification. Many of the patients that are now insured — both subsidized and unsubsidized — cannot find primary care physicians because the program didn’t even attempt to solve one of the major problems with healthcare today: there aren’t enough practicing primary care physicians to handle the influx of new patients. Why? Because being a PCP isn’t a financially attractive proposition. Attempts to alter the landscape of our medical system are continually undercut by talk of reducing Medicare reimbursements to primary care physicians — the very people who will bear the brunt of that manufactured demand. This, in turn, sends the wrong signals to medical students weighing a career in primary care as opposed to a more lucrative specialty.

This dearth of PCPs isn’t unique to Massachusetts, either.

Look, I’m all for increased access to healthcare when it makes sense, and I don’t think ED overusage and overcrowding is sustainable or desirable. I know that health outcomes are worse when non-emergent cases are seen in the ED. ED care is also inherently more expensive. In short, you get less bang for more bucks — and it potentially endangers those who are at the ED for real emergencies by diverting the limited resources to non-urgent cases.

I would like to think that everyone in this country can have their own primary care doctor, but I know that our infrastructure cannot support it. I am not a Darwinian capitalist. I don’t hate poor people. But I do know what is sustainable and what isn’t.

It worries me that if the nation looks to Massachusetts as some kind of prototypical model to be copied, we’re going to be manufacturing big problems, because coverage is only a superficial issue.

Healthcare coverage is not the same thing as healthcare access, even though it is politically expedient to conflate the two concepts.

Universal health coverage will manufacture healthcare demand in dramatic fashion, and the existing healthcare infrastructure isn’t equipped to deal with the kind of patient influx that that kind of universal program would create. We don’t have the human capital to meet that demand. We need to work on our healthcare infrastructure before we dump millions of new patients into the system overnight.

The most interesting thing that strikes me when you look at these numbers is what they say about real demand. Demand for universal health coverage by those that can afford to pay for it is less than our models predict. Even by making health insurance mandatory and enforcing it with a fine, many people are still opting out; they find that their money is better spent in other ways.

Maybe we need to revisit our models and (certainly) our cost projections.