To add insult to injury, this is from the April 2019 Stanford law review:
"Almost half of all the coal produced in the United States is mined by companies that have recently gone bankrupt. This Article explains how those bankruptcy proceedings have undermined federal environmental and labor laws. In particular, coal companies have used the Bankruptcy Code to evade congressionally imposed liabilities requiring that they pay lifetime health benefits to coal miners and restore land degraded by surface mining. Using financial information reported in filings to the Securities and Exchange Commission and in the companies’ reorganization agreements, we show that between 2012 and 2017, four of the largest coal companies in the United States succeeded in shedding almost $5.2 billion of environmental and retiree liabilities."
If a company can escape their (financial, environmental, social) responsibilities by filing for bankruptcy before they have to pay out, they should be paying it forward.
In my country, pension funds are always separate companies from the employers; they have to deposit part of your wage into the pension fund, after which they can no longer touch it (because well, it's your money).
Of course, whether the pension companies handle it appropriately is another matter.
Pension funds are generally defined benefit, as opposed to defined contribution. This means that they guarantee a retirement benefit. The problem with that is the companies often invest a portion assuming an unrealistic growth rate. The problem is worse when you consider that the effects of the underlying under-investment won't be felt until the current workers retire and start drawing on their funds. In other words, the people making the investment decisions today likely won't be around for the reckoning. This leads to a situation where a business today could be held hostage by employees from 30 years ago forcing current employees to suffer, prior employees to have their benefits cut and newer companies without these legacy costs to benefit.
Defined contribution means the employer puts away a certain defined amount for every employee and the employee is entitled to that. This removes the risk of mismanagement of funds and gives employees responsibility to manage their own investments. An example is a 401k account. Most private businesses in the US switched over to defined contribution as its more sustainable and predictable. As an employee I also prefer defined contribution since my retirement is no longer dependent on the health of an employer a few decades from now.
> This leads to a situation where a business today could be held hostage by employees from 30 years ago forcing current employees to suffer
This is a very loaded characterization. You're describing pension beneficiaries as using some kind of leverage ("held hostage") to extract resources that current employees might have a better claim to ("forcing [them] to suffer").
But defined-benefit pensions are a form of deferred compensation. Those employees from 30 years ago accepted lower wages in exchange for future pension payments, and the company received something of value (employee labor) on partial credit. So pension beneficiaries aren't extracting rents from the company. They're creditors of the company, literally. There's nothing untoward about them expecting payment, and if the company has mismanaged funds, they're not the ones to bear that risk. (If the company flourishes and increases in value, pension payments don't increase. If retirees don't benefit from the upside, they shouldn't bear the downside risk, either, which is just another way of saying that pension obligations represent a debt, not any kind of equity.)
> Those employees from 30 years ago accepted lower wages in exchange for future pension payments, and the company received something of value (employee labor) on partial credit
That may be true, but that doesn't mean that another competitor without those legacy costs can come in and better compete, unless the benefit from being able to pay less for the workers from long ago is big enough to create a sustainable competitive advantage. I would also note that the term is likely much longer than many debt agreements (most debt is 5-10 years) and is not subject to the proper credit risk considerations as normal corporate debt.
> There's nothing untoward about them expecting payment, and if the company has mismanaged funds, they're not the ones to bear that risk
Employees are the ones that bear the risk as a company can always renegotiate or go out of business. I'm not sure where pension liabilities fall in bankruptcy, but I certainly wouldn't want to bet my retirement savings on my current employer's health 30 years from now.
> Those employees from 30 years ago accepted lower wages in exchange for future pension payments
That might or might not be true. You can pay everybody well now and give them a pension, leaving the next generation to figure out how to pay out the pension that doesn't have any money in it. There are laws in place that try to prevent this.
> But defined-benefit pensions are a form of deferred compensation.
Defined-benefit pensions are basically a scam. They promise you a lot of "guaranteed" money with hidden risks (what if the investment returns are lower than expected? what if the company's business fails?) and then the managers who made that deal are long gone by the time the workers find out whether the gamble that was quietly made with their retirement money actually paid out or not.
It's possible to structure them as an annuity from a financial institution that actually has the assets to back them up, but then the lower risk would be priced in, which reduces the ROI so much that it makes them highly unattractive compared to investment vehicles with greater variability and correspondingly higher returns.
People only like them because they're perceived as guaranteed even though they carry significant risk. It feels a lot like the mortgage crisis in that way -- people rating high risk mortgages as AAA because they expect to be long gone by the time the dust settles.
The DB deficit is mostly down to the accounting rules used I have had briefings (off the record Chattem house rules) for one of the UK's Largest DB schemes - One that recently sacked one of the Big 4 and now runs self managed.
You do wonder if the Accounting profession deliberately altered the rules around DB pensions to allow employers to shut them down.
Basically in the UK if the worst case scenarios that DB pensions have to match came true you would be talking about a major break down in civil society and making sure you had a shotgun to defend your stash of tinned goods.
The accounting rules were necessary to prevent understatement of liabilities, because as the previous poster wrote, today’s decision makers won’t be around when the problem happens 30 to 60 years into the future.
Employers shut them down because insuring such risks decades into the future is too costly, not to mention the inability to reliably predict events that far into the future.
Ah yes but are the accounting rules fit for purpose or where the accountants lent on to adjust the rules to deliberately make the alleged deficit bigger to give the employers an excuse.
If you think I am joking look at the recent audit scandals in the UK by the Big 4
If anything it was historically the opposite. You had pension funds assuming guaranteed 8% returns. Compare this to actual returns on low-risk investments like treasury bills.
You could historically get close to their targets with higher risk investments (although even then they were optimistic), but that involves the risk of losing a significant amount of the principal. Which doesn't mesh with providing a guaranteed payout to retirees. But if you stick to lower risk investments, the amount of the shortfall is enormous.
So it was historically fraud. They guaranteed a payout and then did things that may have resulted in them not having the money. Once you do the accounting accurately and restrict yourself to investments that can't result in being unable to make the promised payouts, it turns out the cost of a guaranteed payout is large.
> Why do you take what the accounting "profession" and employers /politicians at 100% face value - you don't see they may have an agenda here.
You don't have to trust them at all, you can do the math for yourself.
> and you are ignoring the fact that DB schemes are immortal or very very long lived.
That's the fraud. Nothing actually lasts forever. When you use today's payments to pay yesterday's benefits, you have nothing to pay what you owe to today's workers. If the company's business ever fails, the workers lose their retirement because the money they paid in was already paid out to their predecessors.
On top of that, companies with huge unfunded pension liabilities have a competitive disadvantage against newer companies without them, which makes it more likely those companies will fail.
And the same is true of governments. A state that promises retirees half its GDP is going to have low economic growth, low population growth because young people can't afford to start a family there, and reduced immigration because people won't want to to move to a place where they pay half their income in taxes to fund a retirement program that will be bankrupt by the time it's their turn to collect it.
My taxes going up because the government is severely underfunded and is sending 1 out of every 3 dollars to pay for labor from 30 years ago instead of funding schools, infrastructure, and quality of life for my kids.
It’s pretty well established that if you give a small group of people control of a large pot of money and the ability to fudge numbers decades into the future, it’s going to be corrupted and the future is going to end up paying.
Unless, of course, it's the US Postal Service that's offering the pension, in which case HNers jump out of the woodwork to give elaborate justifications of why pre-funding pensions doesn't make sense because "lol it doesn't pay out until later, what's the problem?"
The example you're looking for is insurance, where it's an obvious problem. You can't just open an insurance company, take people's premium payments, and then go broke when there's a claim.
But for other companies, normal limited liability bankruptcy is the default solution. Nobody thought coal companies would be a special risk in the sense of having liabilities way after their income. It's like if you invent an ice cream that turns out to give people cancer in 20 years, there's no recourse beyond what money the company has at that time.
I think it isn't a case of "nobody knew" so much as "everybody was in deep denial". Black lung was long known along with the effects of poor air as not good for your health.
I have noticed a chain of rationalization cropping up a lot with preventable human health crises - often on a generational time scale.
The sequence seems to be similiar to an ironic reshuffled subsection of stages of grief.
1. Bargining: "Yeah it is bad but is better than the alternative." (It makes money/keeps us from freezing to death.)
2. Acceptance: "It is a neccessity now." (Most of our industrial and personal exonomy is dependent on it.)
3. Denial: "It can't be harmful!"
4. Anger: "How could we know that it was bad?"
Reminds me of: climate change, American government, inequality & the flaws in capitalist systems, using free internet services (fb, google), sedentary lifestyle and poor (processed food and excessive refined sugar) diet.
Yeah agreed. Not clear what the solution is though. It's a bit blunt to just not allow limited liability, which is useful for a lot of things. But then what do you do instead?
1) People must be held responsible for their actions no matter if it's in their free time or at work. You do it, you are responsible for it.
2) Those that give unlawful tasks to others as their boss must personally be held responsible no matter whether the task actually got implemented, or not.
3) The investors of avtivities must personally be held responsible for the activities they fund. It's their responsibility to know what they are funding.
Simple solution, provide a bond as condition to start.
But it won't get implemented, why? It would be in many billions because the bond needs to cover clean up costs, etc. Companies want this risk to be borne by government and indirectly, the population/environment.
If you start out you won't yet have destroyed a lot of land and you won't have many miners. Just require a fixed amount of money as a bond for every ton of coal produced. This could also cover CO2.
The cost of cleanup is in no way linear with the amount of coal being produced; that solution would be complicated and impractical.
A better approach is to make the mine operator come up with some sort of remediation plan as part of the approvals process and then insist that they follow it, backed with the threat of massive fines. Se a standard so that remediation has to be ongoing or commence before the economic phase of extraction is over (to prevent bankruptcy from being a rational out).
That does front-load the costs and so push out smaller operators from starting mines; but that is pretty much inevitable when tightening environmental standards. If the goal is to force a company to do something that isn't economically rational, a determined regulator is a reasonable way.
Not really. When coal wasn’t getting crushed by natural gas, cleanup costs for seem mines were easily covered (assuming co2 not priced in as is standard right now).
This is why limited liability is a terrible idea, just another way to privatize the gains and socialize the losses.
When you buy a stake in a corporation(especially one that comes with voting rights), and the corporation goes on to cause damages to life, property, the environment etc, you should be held personally liable in proportion with your share(or voting share).
I can see the argument for limited liability in case of debts: the issuer of the debt has the opportunity to do due diligence and take the risk of bankruptcy into account. But in the case of damages, I don't see how limited liability can ever be justified.
We've had limited liability for centuries, and it's completely critical for getting people to invest in businesses. Without it, nobody dares open anything larger than a lemonade stand, unless they're already extremely wealthy.
For a handful of organisations, yes - though the adoption of limited liability structures en masse dates only to the late 19th Century, at least in England.
To put it another way, we managed to run the industrial revolution with pervasive unlimited liability, so it seems likely that 'completely critical' is substantively overstating it.
We can split hairs about what adjective applies, but the point is that limited liability is a fantastic idea and a big positive in letting people get involved in a business. Limited liability makes it substantially easier for small-time investors to get involved in economic windfalls.
We should be striving to equalise access by both the poor and the wealthy to making money. Limited liability makes it safe for little investors (the people who can't afford a personal lawyer and accountant) to invest in a company.
Take away the limits, and it is no longer safe for small investors to invest in large companies. A big scandal and small shareholders could be wiped out. People who, realistically, had no actual control over the corporation and who were just trying to tap in to the wealth creation engines of the broader economy.
Removing limited liability provisions (1) doesn't target the executives, who are decision makers and (2) tips the field towards an "only the wealthy can afford the risk of investing in stock" equilibrium - even if just a little bit.
LLC isn't a serious mechanism to "privatise gains, socialise losses". That is achieved when the US government sweeps in and gives large cash infusions to incompetent bankers so they can pretend that bankruptcy is a mysterious phenomenon that threatens consumers rather than being a realisation of the incredible damage that they are doing with their own bad decisions. You can easily have both well remediated minesites and LLC laws in the same story. Just beef the regulation up a little.
1. $200 is what it costs if you do it yourself, $1000 with the help of an attorney and accountant.
2. What's a lot? Losing even a $100K house is devastating. Having a failed business's creditors take away everything because a customer fails to pay a bill in a timely manner and causes a cascade of failed bill payments from the business is crazy... which is the main reason you incorporate - routine business risks are... riskier than most people's personal life.
Limited liability is a tool for everyone and I would argue matters more the less wealthy you are. I say that having started four businesses, with about a month worth of operating cash... Started three part time on the side, and without the corporation self-employment tax alone would have crushed the business, let alone a lawsuit against my family because of a routine business issue. It also helps in reverse - a financial problem a partner in a small business has generally is not able to reach through the business to take assets from the company. It might change who the owners are, but it doesn not allow people to reach through to the business.
> Having a failed business's creditors take away everything because a customer fails to pay a bill in a timely manner and causes a cascade of failed bill payments from the business is crazy... which is the main reason you incorporate - routine business risks are... riskier than most people's personal life.
Bills and other debts can be subject to limited liability when the other party explicitly agrees to it.
My point was that damages to 3rd parties who didn't agree to the conditions of limited liability, like people affected by hazardous chemicals(see https://en.wikipedia.org/wiki/Bhopal_disaster), unsound structures, unsafe workplaces, environmental damage and so on should not be denied restitution because of limited liability. Neither should the taxpayers pick up the tab in such cases.
Being poor — or indeed normal —means not having $200 to spare on making yourself resistant to bankruptcy. Tech workers like us are much richer than most: I started on my country’s national lifetime average salary, and most recruiters now expect me to ask for double the local national lifetime average.
Plenty of normal people incorporate... It isn't about resistance to bankruptcy... It is about avoiding a whole swath of life altering problems that a corporation prevents.
It is not true for everywhere in the world: often in lower income countries it is often far less expensive to incorporate. The legal protections vary, too.
The inability to keep assets hidden ("safe") means an LLC would be more valuable for a non-wealthy person. While a wealthy person squirrels away their assets somewhere, a poorer person needs LLC protection exactly so their personal assets don't get taken away.
To the last point, losing everything, even if it's less, would be more devastating than a richer person losing half of what they have in a judgement. So a poor person needs a LLC to avoid the calamity of everything being taken.
Before LLCs it was only established families or folks with very wealthy patrons/backers who started companies. Now millions of people from every financial status do so. The proof of the pudding is in the eating.
You're assuming that if the law changed the wealthy would sit there and accept the liability. They wouldn't. Without any expertise whatsoever I can imagine a massive pools of capital lending to companies at extortionate rates (~13%, or whatever predicted profits are + 5%), and the owners of the companies would be shell entities or some patsy to take the fall. That way the profits could be harvested across ownership boundaries and the people with the capital would be protected as lenders not owners.
The people with resources would set up ad-hoc schemes like that would limit their liability somehow, slipping loopholes in to the legal system. The small players wouldn't have the resources to play that sort of game. The more there is to lose the more effort would be diverted into protecting it.
So what do you think happened BEFORE limited liability companies existed? And what do you think happens in countries that don't have limited liability companies? And what about all the people who create businesses without creating a limited liability company?
As someone else says, partnership structures. These have a very limited ability to raise external capital.
I'm slightly surprised to have to argue on a site built on providing venture capital as equity to startups that also issue equity to employees that exposing all those investors to the risk of losing their homes as a result of action by those they have only a very limited control over is a bad idea.
> what do you think happens in countries that don't have limited liability companies?
There is an excellent book on this, The Other Path by the economist Hernando de Soto, on extra-legal systems in Peru.
And in Third World countries where you don't have good formal legal systems, the environmentally destructive exploitation projects still happen, with the complicity of the political structure - and often substantial amounts of extra-legal violence. At least in the US you can sue Cloud Peak Energy without getting your legs broken.
It's also worth looking at what happened to the Lloyds "Names", who were supposed to be unlimited-liability reinsurers.
None of this is to say that coal companies should be allowed to commit environmental damage and get away with it, but it does mean that the system needs to be better in preventing this in the first place.
A lot of countries don’t let their professionals incorporate. Usually for the reason that victims of professionals shouldn’t end up paying the costs of their victimization.
It’s also why you’ll see professionals put their home in their spouse’s name, just in case.
People without connections got made examples either for actual misconduct or as a pretense for felony interference with a business model, the connected got away with literal murder, but no matter how harsh the punishment didn't deter the desperate masses of aspirants from trying to make it big fast through dodgy means. See China and CEO misconduct for an example.
People can still get insurance that allow the risk to be priced in. Without such a mechanism, the risk is completely ignored, and society has to bear the cost when things go wrong. If taking this risk into account slows down investment, maybe we don't need such reckless investment that puts people's health, lives and the very future of the species at risk.
Its funny that every time when poor people ask for something like student debt relief, the familiar old sermons about personal responsibility are trotted out. But when the rich are asked to be held to the same standards, we are told that it is just not possible, society itself would collapse and so on.
In the context of this discussion, I read it as more of an argument that requiring a cleanup cost bond or some mandatory specialist insurance before mining operations can begin is a better solution than removing unlimited liability.
The Islamic world operated on partnerships rather than corporations up until quite recently. Some important parts of society (GPs, law firms, auditors until a few years ago) still do.
Limited liability is crucial to your pension savings. Without that, you would either have to have all your savings in assets that cannot lose value, or you would risk having all of your savings wiped out by losses in any single asset. Considering that, do you still think it's a terrible idea?
Yes. You can get your investments insured, so that the risk is priced in. With limited liability, it is a viable strategy to invest in things that have a likelihood of a mild reward, but a risk of catastrophic failure that hurts and damages a large number of people(the proverbial pennies in front of a steamroller). And it is society that bears the costs for such failures. However, insurance for such a project would be very expensive or impossible to get.
Also, with pension funds, you generally don't have the power to vote. In the case of an uninsured pension-like fund, I prefer it that the fund manager/whoever holds the voting power be the one that is primarily held accountable. If institution managing the fund is wiped out and the liability still remains, then we can move on to the the shareholders without voting rights.
You're suggesting that insurers would provide limited liability without having having a stop-loss mechanism themselves.
My guess is that insurers would look for ways to make their risk assessable and stop the potential losses by insuring you only against assessable risks. They'd insure you against a list of types of events, and nuclear war, force majeure, Nick Leeson and Knight Capital wouldn't be on the list.
Society does provide limited liability, without having a stop loss mechanism. You are defending a system where the cost of catastrophe falls on everybody but the ones who encouraged the dangerous behaviour in the first place.
Why not both? The management acts on behalf of the shareholders. If they break the law, go after the officers with criminal charges, and make the shareholders liable financially. It'll make management less short-term/risk-loving and shareholders will pick their management much more carefully.
> go after the officers with criminal charges, and make the shareholders liable financially
Even if the officers serve a prison term and forfeit all personal fortune, companies will still put them on some comfortable position (pre-bribing other officers as a side effect) after they get out.
Easier to just restrict limited liability to enterprises that operate as worker cooperatives or commons trusts. If investors want to limit their liability, that should mean giving other stakeholders the defining voice in corporate governance.
Companies shouldn't be allowed to offer pensions. They also should be forced to fund government mandated liabilities.
Companies don't have a good track record of lasting more than 60 years. It's only a matter of time before they go bankrupt. And when bankruptcy is a way of shedding your pension obligations, they'll go out of their way to go bankrupt to shed it.
Unlike government entities, private companies are legally obligated to keep pensions fully funded at all times. And they're also required to pay a fee into a federal agency designed to cover the costs of the federal government bailing-out failed pension funds.
There are ways that companies can and do game the system. For example, during a merger the company might claim that the combined pension fund is overfunded and then stop making payments until the supposed net liability returns to 0. The "excess" funds often find their way into executives' pockets as bonuses, compensation for the several quarters where the company's ledger miraculously showed unexpected profits.
There are problems that need to be resolved, but they're resolvable. Private pensions can work, and have worked. Don't believe the rhetoric about pensions--it's largely driven by executives trying to raid pension funds. Executives don't like them because as compared to 401(k)s the ratio of executive compensation to worker compensation is lower. There are federal rules that require workers receive the same benefits as executives, and for various reasons executives will come out ahead with 401(k) packages.
The book Retirement Heist by then WSJ investigative journalist Ellen Schultz explains all the gory details.
Municipal pensions are irreparably broken, though, precisely because the federal rules regarding funding don't apply to them.
Most private companies don't offer pensions anymore (for new employees) because companies don't like them. One reason is that pensions incur risk to the employer, while a 401k shifts the risk to the employee.
Until the cash is in the employee’s accounts, the employee is still at risk of not getting paid due to bad investment returns or the employer going under. And it’s not like the pension fund is doing any better than any other index fund the employee can invest in.
Pension plans may not be able to get better returns, but they can specifically balance their assets and liabilities better by picking specific investments and/or buying/operating private companies.
An index fund will underdiversify by only selecting public companies, and over-represent companies with short-term interests (the total opposite of a pension plan!).
The underdiversification or index funds is a particular issue ex-US where stock markets only represent a few sectors.
Pension plans can sure screw up, but they can also be unbeatable.
They all have short term interests, since the people doing the investing aren’t going to be around for the whole ride. In theory, defined benefit pensions are great, but in practice I haven’t seen any evidence that they have sufficiently superior performance to make up for the possibilities of bad investments, corruption, etc.
That is atypical from what I see in the US. In the US, if the pension fund is doing well, that means the politicians offer the government employees unions better benefits, and so all the union members vote for them and since not enough other taxpayers vote against them, we just end up with inflated benefits.
Pensions are a great thing if you work for the same company from 23 (right out of collage) until you retire at 65. How many reading this will work at the same company for 42 years though? For many the company you worked for is no more, others were laid off through no fault of their own. Most of the rest could stay at that first company in theory but there was a better opportunity that you had to not take (even if it turns out worse in hindsight). That doesn't leave very many to make it to retirement working for one company.
Then there is inflation. $5000/month for retirement sounds good now, but will it be when you actually get to retirement?
I wouldn't mind a defined pension. It's easier to plan for and also I think more efficient. With a 401k you have to save up a boatload of money just in case. If you live too long you may run out of money, if you don't live long, then you have a lot of money left. So it seems to me that it would be better to average it out over a lot of people. Pretty much the same as with health insurance where one people will need more, some people will need less so it's better to average out out over a large number of people.
The problem with opt-in annuities is that the seller charges a boatload to account for the risk of your longevity. I guess you would advise buying an annuity and stock in the annuity seller?
My chief complaint about semi-forced annuity purchases is that those that opt-out and retire without savings get back-stopped by the state anyway.
I tell everyone to figure out how much they need to live and put just enough in an annuity to give you that (rent, heat, food, insurance). The rest of your 401k (if anything!) is fun money.
Don't forget that you should have long term care insurance that covers a good nursing home (get this as soon as you retire when it is still cheap because odds are you will never need it).
With this plan you can outlive your savings and still have an okay life.
Just because something is regulated doesn’t mean it’s safe and definitely doesn’t mean it’s guaranteed. For example, US social security funds are solvent until 2035 according to our own government accounting[1].
It's not like it will disappear after 2035. Some adjustments have to be made like probably raising the retirement age but that doesn't mean that the system doesn't work.
Public pensions like the ones in Canada would be nice. From both the worker and government perspectives, they provide a lot of stability and can be planned for. Of course, it won't happen in the USA, I think, sounds too socialist for many people on the right.
What public pensions? Canada has the same setup as the US, and in fact, the US Social Security is a larger program per capita than Canada’s (I.e. high payouts).
We have basically three programs to provide income to retirees:
1) Canada Pension Plan, a worker-funded defined benefit pension managed by the government via an arms-length investment board.
2) Old Age Security, a guaranteed income program for everyone 65 and older.
3) Registered Retirement Savings Plan, an income tax sheltering program where you can contribute up to 18% of your income into registered accounts and have the contributions deducted from your taxable income. This gets drawn down during retirement for income.
Has it ever occurred to you that some people think complaining about the existence of rich people is not an issue that needs to be “solved” by risking the destruction of an economy that encourages innovation?
Ya, the same way Medicare and SS ruined it. What if, instead, security nets amplified risk taking given American culture? I’m told that New Zealand has a huge extreme sport industry because of its generous medical system.
If we had strong single-payer, we would see a 100 fold increase in startups. And these startups would self funded and creatively bootstrapped. Without the burden and complexity of securing private health insurance, anyone with a couple months rent saved up could try starting a business. We'd probably even see old people do it.
Speaking of which, I'd love to see the temporal evolution of a histogram of ages of founders of all the IPOs in a given year. In a good economy, I bet it would be a fixed density across the spectrum, in an ok economy it might be bimodal and in a poor economy it would be a single peak.
> If we had strong single-payer, we would see a 100 fold increase in startups. And these startups would self funded and creatively bootstrapped. Without the burden and complexity of securing private health insurance, anyone with a couple months rent saved up could try starting a business. We'd probably even see old people do it.
This is a good thought! You've identified a factor holding people back and thought about what might happen if it was removed.
Yet, is it perhaps possible that there could be more complexity to this? Several countried with strong single-payer health care systems spring to mind. France and Germany and the UK are not generally regarded as having 100x the startups as the US. Self-funding and creative bootstrapping has not replaced VCs.
It could be worth considering the possibility that access to health care might not be the thing preventing endless fields of startups. Perhaps there could be some other factors at work?
Single-payer is a policy whose time has come in the US. But it might not be a silver bullet for conjuring startups ex nihilo.
> Several countried with strong single-payer health care systems spring to mind. France and Germany and the UK are not generally regarded as having 100x the startups as the US.
The consensus is that it's too hard to fire in those countries. (Look at the lawsuit that bankrupted Mandriva for an especially pointed example). I'm not aware of any country that combines socialized healthcare with US-style at-will employment, but perhaps that's the ideal combination - you can lose your job at any time, but losing your job does not mean losing access to medicine.
> Self-funding and creative bootstrapping has not replaced VCs.
It sort of has. VCs have shown very poor returns and a lot of companies have bypassed them.
> Single-payer is a policy whose time has come in the US. But it might not be a silver bullet for conjuring startups ex nihilo.
There's a noticeable spike in people starting businesses once they reach medicaid eligibility age (50 I think?) So while it won't fix everything it should make a significant difference.
> The consensus is that it's too hard to fire in those countries.
I've heard the same. I know it's true that it's very hard to fire in many places. At the same time, it might be worth considering that this could be more silver bullet thinking.
It is perhaps more likely that instead of there being one thing holding back an endless wave of startups in each country, there is instead a series of interacting forces producing the same effect.
Doing so with the expectation that one change will permanently 100x something might be considered by some to be slightly less than maximally reasonable.
France and Germany have different cultures as well. Single payer isn’t the difference. We waste a lot of time and money in America on a broken system. That time and money could go elsewhere while encouraging more risk-taking.
I also wonder about non-medical insurance costs and how much that is propped up by high medical costs. Would my business’s general liability or workers comp be half the price if we had single payer? A lot less? After all, most injury claims are for cost recovery.
> Without the burden and complexity of securing private health insurance, anyone with a couple months rent saved up could try starting a business.
How expensive is private health insurance in the US? I've seen numbers as low as $6k a year, but from your post it sounds more like $20k a year.
I doubt that it would massively increase the amount of startups. We have all that (and more) in Germany, and you don't see companies popping up everywhere, and the ones that are founded are mostly copy cats.
At a minimum, for the healthiest young males, health insurance premiums are at least $300 per month with a $3.5k deductible. Older people are in the $600 or more range per month.
I would budget $500 per person per month with a $7.5k deductible for a family.
That’s two separate factors. Different insurance plans have different contracted providers, and different employers subsidize different portions of their employee’s health insurance premiums. Some employers might subsidize 50%, some 80%, some $100, etc.
I was referring to the cost of insuring someone, regardless of who is paying. I’ve compared costs on healthcare.gov to employer based options in a few states, and they’re not far off from each other unless the employer has many younger employees and few old employees.
I’m a serial entrepreneur that’s hired hundreds of people. I’m well aware of Obamacare. In fact, my wife is an insurance and benefits broker for large groups.
Actually I think you do. Compare these two systems:
European style welfare: Big government which takes care of people so companies don't have to.
American style welfare: Small government which doesn't take care of people, but lots of regulations on companies forcing them to provide welfare normally provided by government.
If someone ever figures out a class action suit to represent people living near coal plants that are suffering from (or have died from) the side effects of living in a polluted area, it's going to be pretty much game over for the coal industry. At this point they can't really claim ignorance. Bringing this up because class action suits are quite common in the US and have also caused a lot of trouble for e.g. the tobacco industry.
The case for continuing to kill people with smog is pretty weak and cleaning up remaining plants is not going to make operating them any cheaper. It's also a great argument against building more (although entirely redundant considering the economics of coal in general).
Where on the bankruptcy hierarchy of financial obligations do environmental liabilities fall? I would think they should be higher priority than shareholders and debt holders.
The old bankruptcy procedure simply halted operations and sold off the assets. The new procedure allows the company to continue operating under the direction of a judge. A judge, of course, knows nothing about running a business. Worse, it allows the people running the company to strip its assets for their personal gain.
"Almost half of all the coal produced in the United States is mined by companies that have recently gone bankrupt. This Article explains how those bankruptcy proceedings have undermined federal environmental and labor laws. In particular, coal companies have used the Bankruptcy Code to evade congressionally imposed liabilities requiring that they pay lifetime health benefits to coal miners and restore land degraded by surface mining. Using financial information reported in filings to the Securities and Exchange Commission and in the companies’ reorganization agreements, we show that between 2012 and 2017, four of the largest coal companies in the United States succeeded in shedding almost $5.2 billion of environmental and retiree liabilities."
https://www.stanfordlawreview.org/print/article/bankruptcy-a...