Isaac Laquedem

UW Medicine tells the courts to go away until COVID-19 is under control

Lawyers occasionally send the courts and one another notices of unavailability, in which a lawyer says that he or she will be on vacation, or in another trial, or recovering from surgery for a certain period.  By rule or professional courtesy, the courts and opposing counsel won't schedule hearings or depositions during the periods when the lawyer is not available.

The federal and state courts in Washington must have been surprised to receive a notice of unavailability this week, not from lawyers in a case but from UW Medicine, the hospital system affiliated with the University of Washington.  The notice states that because of the COVID-19 pandemic, until at least April 27 all medical professionals employed by UW Medicine will be unavailable to participate in any regularly-scheduled legal proceeding.  In a polite way, UW Medicine has told the legal system that it's going to put treating patients and keeping its staff healthy above going through old files, sitting in depositions, and showing up for hearings.

Most of the judges and lawyers of our sister state will agree that UW Medicine is in line with our national priorities.  I predict, however, that at least one tone-deaf attorney will file a motion to compel someone from UW Medicine to attend some legal proceeding, and I hope the court that hears the blithe lawyer's motion orders him or her into quarantine.

You can read the full text of UW Medicine's letter to the courts below the break.  UW was thorough and also sent its notice to the state and local bar associations, the attorney general, the King County prosecuting attorney, and the public defender.

Jane Ace tells off a hospital that asked for a gift

On March 9 the Wall Street Journal published this article by Alexandra Samuel about feedback fatigue, describing how "in their eagerness to deliver a better customer experience" by incessantly asking for reviews and evaluations, "companies have created a new kind of bad customer experience: feedback fatigue."  Ms. Samuel cites two studies that discovered that customers don't like the surveys.  "Repeated surveys," she wrote, "may make customers reluctant to return."  She described a 2014 study as showing that "over-surveying by different organizations leads to exhaustion with all the requests for feedback."  

The article brought to mind one fine example of a business being less than careful with its customer outreach, way back in 1974.  The particular business was a New York City hospital, and it sent this letter to a former patient, Jane Ace.  I've shortened it a bit:

December 6, 1974

Dear Mrs. Ace:

As a recent patient you have seen how our hospital serves its community by providing a full range of medical services, offering a high level of nursing service together with physical amenities, enabling the hospital to treat the patient as a person, rather than a number.  We are appealing to former patients like yourself to contribute to the hospital's Capital Improvement Fund . . .

[Signed by the president of the hospital]

Mrs. Ace and her husband Goodman Ace were well-known radio personalities, and he was a veteran humorist.  He felt that the letter wasn't appropriate, and wrote the following response, which has stuck with me since I first read it in 1975:

December 8, 1974

Dear Sir:

As a former patient I did notice your high-level nursing service together with its other amenities, and I would dearly like to contribute to your hospital fund.  But, you see, on November 11 I died in your hospital.  Maybe we can get together later.

Sincerely, Jane Ace

 

The Laquedem coronavirus relief plan, part 2: the Airline Relief Plan

My previous post tackled student loan relief.  I'm ready to start on the airline industry's pleas for money.

The United States airline industry has been making the rounds on Capitol Hill, attempting to persuade legislators that it is so essential to the American economy that Congress should give it a priority position (early boarding?) when Congress hands out relief to businesses.  Certainly the airline industry is important to our economy, but that doesn't mean that any particular airline is itself important.  The planes, airports, and other infrastructure aren't going anywhere, even if their proprietors go broke.

Several commentators have pointed out that the major airlines would have been better able to weather the COVID-19 depression if they had used the profits of the past five years to pay down debt instead of buying back stock.  The major airlines spent billions of dollars buying back their companies' stock over the past five years, money that's no longer in their tills to get through downturns.  How much stock did they buy back?  Since March 2015 United bought back at least 134 million shares, reducing its outstanding shares by 35%.  American bought back at least 265 million shares, reducing its share count by nearly 40%.  American was so confident about its business prospects that even in 2020 it's bought back 2 million shares so far.

In the meantime ridership has plummeted -- even those Americans who can still travel don't want to -- as airlines have withdrawn from overseas service and cancelled many domestic flights, leaving airlines unable to cover their fixed operating costs.

The airlines profess that they are repenting of their sins.  The leaders of ten major passenger and freight airlines (including UPS and FedEx) have promised Congress that if Congress will grant them $29 billion in aid, they will not lay off any employees until at least August 31, they will not buy back any stock or pay any dividends until they've repaid the aid, and they will limit executive compensation in some unspecified manner.  They want the aid in the form of loans, not equity investment.  Here's a link to their letter.

I have a certain sympathy for the predicament in which the airline companies find themselves.  At the same time, it's time for them to eat some of their own financial cooking.  They've gotten away with serving "airline food" for years.  It's time for them to eat their own cooking.  Hence the Laquedem Airline Relief Plan.

The first element is that the United States will provide the $29 billion in aid, but with a few financial twists:

    1.    The United States will provide the aid, not as a loan, but by buying stock in the airlines, at the lowest price at which the stock has traded in the past three months.  For example, United stock hit a low of $21.28.  If the aid to United is set at $2.128 billion, then the government will buy 100,000,000 shares of United stock at $21.28/share.

    2.    The airline may buy the government's stock back at cost plus 6%/year simple interest, any time in the next 5 years, if the airline has made an operating profit for 4 successive quarters and if the airline is not borrowing money to buy the stock back.  I envision that the airlines that survive the depression will buy the government's stock back, a few shares at a time.

    3.    All existing stock option grants to management and the board of directors will expire 60 days from the date of the aid.  The option owners may exercise them within the next 60 days, or not at all.  The airline may not reprice them to allow the executives to exercise the options at today's price instead of the price at which they were granted.  This effectively makes the stock options worthless, which is the idea - since the senior managers and directors participated in the company's bad decisions, they should not profit from the bailout.

    4.    The airline will not issue any new stock options, repurchase any private shares, or pay any dividend until it has purchased all of the government's shares.

    5.    Executive compensation is capped at $750,000/year, or in the alternative at 30 times the salary of the lowest-paid full-time employee as of March 1, 2020.

I accept the industry's argument that it is something in the nature of a public utility, an essential service for American business and consumers.  In recognition of the claims of its managers that it provides a public service, the Laquedem Airline Relief Plan also has two operational requirements.  One is to provide better service to communities and the other is to improve the passenger experience in the air:

    6.    The federal government will require each recipient airline to provide daily passenger jet service to at least one community that had daily passenger jet service at any time since 1986 and that has since lost its jet service.  I picked 1986 because that's when the federal government deregulated the industry and stopped ensuring that communities that needed air passenger service would receive it.  The principle is the same as the one that gives electric power companies exclusive territory in exchange for their promise to serve everyone within the territory.

    7.    Within one year after receiving federal aid, each recipient airline will refit its coach sections to have at least 34 inches of seat pitch.  (Seat pitch is not the same as legroom.  It is the distance between a point in one row of seats and the same point in the next row of seats.)  The sale of any seat with less than 34 inches of seat pitch will be prohibited after a certain date.  If we taxpayers are going to save the airline industry we should require the lucky beneficiaries to improve the quality of the product.  There's no reason for coach travel to be comfortable only for people of the stature of Martin van Buren.

Let's use the airlines' need not just to make them improve their financial management but also to make them offer a better product.

The Laquedem coronavirus relief plan, Part 1: Student loans

This post is the first in a series to describe policy initiatives to help the United States economy recover from the depression that the COVID-19 pandemic has caused.  Based on the slow national response to the pandemic and the growing wave of stay-home and shelter-in-place orders, I sadly expect it to be a long series.

The Republican leadership in Congress (there is none in the executive branch at the moment) is supporting some relief for consumers and a lot of relief for large businesses.  "The devil is in the details," as the saying goes, and Congress is going to be occupied for some time in negotiating the details of any business bailout.  

Any relief program should start by providing some help to many people, instead of a lot of help to very few people.  I propose that Congress start with a simple step that requires little administration and provides debt and expense relief to 45 million Americans.  The step is to pay off the $1.6 trillion of student loans that those 45 million Americans owe to public and private lenders.  Some of those 45 million borrowers are in deferment; many of them are making monthly payments, often from the earnings of jobs that don't now exist.  Paying off the student loans has two immediate effects: first, the borrowers who are making payments will have more disposable income when conditions return to normal; second, the lenders that are now holding the loans will have $1.6 trillion of liquidity that they can redirect to more productive uses.  They might, for example, use the cash to make masks and toilet paper.

The Laquedem Student Loan Payment Plan will come with three conditions, each of which Congress can mandate.  The first condition is that the borrowers will not report the repayment as income from cancellation of debt.  Lenders will not issue 1099-C forms to the students.  The repayment will be treated as if Grandma had paid tuition directly to the schools, which under current tax law is neither a taxable gift from Grandma nor taxable income to the student.  The second condition is that the government will neither make nor guarantee student loans for tuition at any proprietary (for-profit) school.  The third condition is to again make student loans cancellable in bankruptcy.  

The reasons for the three conditions are simple.  The first condition ensures that students whose loans are paid off don't incur a tax liability for which they aren't receiving cash with which to pay it.  The second condition recognizes that the default rate on loans to students to attend for-profit schools is far higher than on loans to students who attend public and private non-profit colleges.  In 2016, the latest year for which I can find statistics, the default rate on loans for private college tuition was 6.6%, the default rate on loans for public college tuition was 9.6%, and the default rate on loans for tuition at for-profit schools was 15.2%.  The default rates for public and private non-profit schools were heavily skewed upward by defaults on loans for students who attended for less than four years.

The third condition corrects one of the missteps of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which made student loans mostly nondischargeable in bankruptcy.  We should not expect 18-year-old borrowers to be smarter than the large and sophisticated banks that make the loans.

Instead of giving the lenders money and trusting them to do the right thing by their borrowers, let's remove the debt from the borrowers.

My next post on the topic will synthesize ideas for rescuing the domestic airline industry.

Sweet Sixteen

Sixteen years ago yesterday I wrote my first blog post, opining on the then-hot controversy about the Ninth Circuit Court of Appeals wanting to cut a hole in the foundation of the Pioneer Courthouse for access to secure parking.  Since then the driveway onto the transit mall has become part of the background.  I surmise that most of the pedestrians who walk by each day have forgotten the fight, or think of it as "just a few years ago."  It really was sixteen years ago, as you can tell by the politicos whom I named:  Commissioner Francesconi and Congressman Wu.  

The blogging world has changed since 2004.  Many of the blogs I followed then have fallen silent, often to disappear from the web altogether.  Much of the sophisticated political discussion, and some of the mindless political invective, no longer appears on independent pages of opinion; now it's on Facebook.  (How can you trim your Christmas card mailing list instantly? Post something political on Facebook.)

I plan to continue blogging for some years to come, even though I've acknowledged the reality of Facebook (probably how you came across this post), and to stick to four principles:

• • • Attack problems with logic, and ensure that percentages add up to 100.
    • Meld unrelated ideas into solutions (something like recombinant DNA), particularly with the Laquedem Plans to Improve the Universe.
    • Tell the stories of the Portland and the Portlanders of yesteryear.
    • However much I may savage the policies of an elected official (and I sometimes do), I will be polite in referring to the official.  It takes a lot of courage - maybe foolhardiness - to run for elective office.  Here the incumbent president will be "the president," or "President Trump," or "Mr. Trump," or on repeated reference "Trump," and not a nickname.  Besides, it's more fun to make a point with a stiletto than with a bludgeon.

  (photo credit: Barbara A. Campagna, FAIA.  Used with permission.)

Justice Holmes and John Maynard Keynes explain the Democratic primary

A great number of creative and energetic Democrats put themselves forward as candidates for the nomination to run against Donald Trump.  Some advocated for the interests of the overlooked middle class.  Others supported redirecting part of our bloated defense budget to improve the lives of Americans.  One promised to outspend the coming Republican campaign.  Yet the party appears to be headed toward nominating the antithesis of creativity and energy: Joe Biden, the longest-serving politician in the race and second-oldest of the initial slate of candidates, younger only than Senator Sanders.  (How old is Vice President Biden?  If he is elected and takes office in 2021 he will be 77 days older than Ronald Reagan was on the day that Reagan retired.)

 Why, then, has the party so thoroughly rejected innovation and retreated toward Joe Biden?  Oliver Wendell Holmes Jr., who died on this day 85 years ago, offers one explanation:  "Most of the things we do, we do for no better reason than that our fathers have done them or our neighbors do them, and the same is true of a larger part than what we suspect of what we think. "  John Maynard Keynes proposes a more academic reason by analogy to a newspaper's contest in which the readers are asked to choose the six most attractive faces from a field of 100.  Persons who choose the six faces that attract the most votes will win a prize.

Many entrants, he said, will choose the six faces that they find most attractive.  Cleverer entrants, he posited, will disregard their own standards of beauty and choose the six faces that they think the other entrants will like best.  Even more ingenious entrants will choose not the six faces that they like the best, nor the six faces that they think the general public will prefer, but the six faces that they think the general public will believe that the general public will prefer . . . and so on ad infinitum.  The Democratic primary is now a Keynesian beauty contest - the pundits are urging Democratic voters to support, not the candidate that they best like, but the candidate whom they believe the Republicans will least dislike.