Friday, October 30, 2009

Nothing Perplexing About San Francisco Real Estate Prices

A recent article on the rise in house prices in San Francisco in the San Francisco Chronicle elicited this closing comment. "Perplexing. What makes this city so impervious to the ecomonic meltdown of California in general?"

Well, as Homer Simpson would say, "d'oh." San Francisco may be the prime example of geographic areas in which there are "high barriers to entry" for real estate development, i. e., for various reasons increasing the housing stock by any meaningful amount is close to impossible. It may be environmentalists, it may be NIMBYs, it may be opponents of traffic congestion, it may be preservationists, or it may be building requirements that add tens of thousands of dollars to the basic cost of building a new home. But the effect of these forces is to make the cost of residential housing much higher than it is in an area not burdened by such influences, e.g., Texas. It should be noted that even during the dot com bust, Bay Area housing prices did not decline. so the effect of these artificial restrictions on housing supply is strong. It was only with the catastrophic economic downturn that we've seen housing prices in San Francisco and Los Angeles finally buckle. It would also seem that as the economy recovers, housing prices in high barrier to entry locales such as San Francisco, Los Angeles and Orange County should have a disproportionate price recovery. Certainly it'll be a long time before Adelanto, Palmdale and Murietta recover, but for the coastal areas of California, the recovery may be more vigorous than may be commonly expected.

Sunday, October 25, 2009

Medicare As An Example For Public Option

Amazingly, some supporters of the public health insurance option are pointing to Medicare as support to back up their position. While there might be some arguments for a public option, the use of Medicare as an example makes as much sense as using Octomom or the Gosselins as examples of good parenting. It's bad enough that Medicare is on track to go bankrupt due to its unfunded obligations. However tonight's 60 Minutes show contained an horrifying segment on Medicare fraud that even shocked me. I know how doctors game Medicare to supplement their reimbursements, and I've heard about clinics "hiring" homeless people for the purpose of performing unnecessary medical procedures and getting fat Medicare reimbursements. What I was unaware of is how Medicare pays scam artists billions of dollars for phony claims for medical products. These payments are made to "providers" of medical equipment and prescription drugs, who often set up shop it what turns out to be empty storefronts. All they need is the name, address, birth date and social security number of a patient (available for purchase for $10 per name), and they are free to submit claims for the cost of wheelchairs, artificial limbs, prescription drugs, etc., with reimbursement guaranteed within 15 to 30 days. Yes, there are after the fact audits, but by that time the scam artist has folded up his tent and opened a new one. One such scam artist interviewed said he had received $20 million in reimbursements from Medicare. A pharmacy was routinely reimbursed for an amount of prescription claims equal to six times the volume of the largest Walgreen's in Florida. Patients who receive these "benefits" do see them show up on their Social Security statements. Some even report these items to Medicare, but these receive little if any follow up. This is such easy money that street criminals have migrated to Medicare fraud. Sadly, this is just another example of government inefficiency. Politicians are always talking about weeding out government waste and inefficiency, about cutting the fat and preserving the meat. The trouble is that by its nature, government is incapable of operating efficiently. Government has no shareholders to watch the bottom line. If they're lucky, there may be watchdogs to reduce some of the waste. But that's the best one can hope for.

Friday, October 23, 2009

MTA Gold Line--Everything That's Wrong With Government

The Gold Line is an expensive train line that currently runs from Pasadena to downtown Los Angeles. Nobody uses it. The trains only go 20 to 25 miles per hour due to local noise and safety requirements, so it's not especially convenient. Indeed, the SCRTD didn't want it in the first place, knowing full well that it was not a key element of the Los Angeles master transportation plan. However, that did not stop San Gabriel Valley politicians from forcing a San Gabriel Valley leg onto the rapid transit map by mandate from the California Legislature. And why did the San Gabriel Valley politicians push so hard for a rail line? Not because anybody would ride it, but because they felt that their region deserved their fair share of the transit pie.

So the Gold Line was built and not surprisingly usage is well below projections. However, this has not stopped San Gabriel Valley politicians from demanding more. They have plotted the extension of the Gold Line to Azusa and then Claremont. And frighteningly they have just convinced the MTA to commit to the extension of the Gold Line and to seek federal funding. As far as I can tell, the Gold Line extension is just another version of the infamous "Bridge To Nowhere". Except that in the case of the bridge, "nowhere" was an uninhabited island in Alaska, while "nowhere" here is in sunny Southern California.

Of course, building useless transit systems is nothing new in Los Angeles. The Green Line stops a mile from LAX, and empty buses drive up and down the dedicated upper level Harbor Freeway roadway Private industry has equity owners who keep an eye on the bottom line. But nobody watches the bottom line when government spends on ill advised projects.

Friday, October 9, 2009

President Obama Wins Nobel Peace Prize

When I heard that President Obama won this year's Nobel Peace Prize I immediately thought of an item that ran in Mad Magazine about 1960. It was a fake news story announcing a forthcoming movie about the life of Paul Anka, who had scored his first hit record in 1957, and followed it up with several other hits in 1958, 1959 and 1960. The punch line was that the running time for "The Paul Anka Story" movie would be three minutes. Quite similarly, in the same way that 1960 was too early for a biopic on Paul Anka, 2009 is too early to award President Obama with the Nobel Peace Prize. Not to diminish Obama's accomplishments to date (whatever they might be), but this is as premature as deciding how to spend your lottery winnings before you buy a lottery ticket. What this year's Nobel prize does show to me is that the European view of the United States has changed overnight, doing a 180 turn from being looked at with suspicion, if not disdain, to one of admiration, which certainly is not bad. And somewhere in there I think there's a message to George W. Bush. Perhaps he deserves a separate honor as Nobel Enabler.