Author: A.T.

Let me not dwell on what I imagine wound up being a tragedy in the House of Representatives this weekend and return to the other tragedy in my life.

My short sale.

So here is Amazon back in the 285 range as I write Friday afternoon (400 as you read Monday morning?) – up from 24-and-change earlier this year – and I do have this thought: Is it possible that some of those investors looking for year-end tax losses to balance out gains are covering their short positions in Amazon, helping to drive up the stock? And is it possible that those who have huge gains in Amazon are figuring they’ll put off the tax bite a year by waiting a few weeks, until January, to sell?

I actually doubt this is a very big factor in today’s price, but it might be a little of the explanation. When you’re short a few shares, as I am, you will grasp at any straw.

Meanwhile, I just took a look at www.booksamillion.com (whose own stock, BAMM, has been a source of thrills and chills), where Tom Wolfe’s best-seller, A Man in Full, goes for $15.63. The same book is $20.26 at Amazon, or 29% more. Across the board, Books-A-Million prices beat Amazon’s, and by a pretty wide margin. (You do have to pay a $5 membership to get the best discount, however.) Personally, I would rather pay Amazon an extra few dollars with every order, because they’re nice people and, frankly, because I feel sorry for them. As most people know, they’re still losing money. Also, to be fair, once you include the $3.95 shipping that both charge, it’s really barely 23% extra you’re paying. And what’s 23% extra among friends?

I firmly predict that Amazon’s customers will always be happy to pay 20% or even 29% more than they have to, for one simple reason: They all own the stock.

Seriously … Amazon does do an awfully good job. And Books-A-Million – and others – may not be able to undercut it forever. Then again, a big part of the price difference would appear to be this: BAMM gives YOU the extra discount rather than rebating it to “associates” who funnel business their way. (Me, for example – at andrewtobias.com.) So the price differential may be supportable after all.

To some, it’s actually worth a few extra bucks to be able to click a book title and go straight to “one-click” check-out at Amazon or Barnes & Noble and be done with it. If it saves two minutes, that can be a big deal. Nothing is more precious than our time. But others may choose to spend the extra two minutes to save $4, or even $1. After all, even $1 for two minutes is $30 an hour, tax free. That’s like earning $90,000 a year.

Anyway, the incredible Amazon saga continues. I continue to root for the company but not the stock. And I note with awe and fascination just how far the little sucker has come since I first wrote about it here, two and a half years ago. An analyst at Oppenheimer now predicts it will earn $10 a share in five years. So today you can snag it for just 29 times hoped-for-earnings. Just sit tight for five years, and if he’s right, the stock could then actually be worth today’s price.

To those of you who do own Amazon (Dorothy – do you still have it?), hats off to you. And don’t forget to drop a share or two into the Salvation Army bucket.

Depending on what happened yesterday, I am either immensely relieved or deeply saddened — or we’re at war. But I can’t keep writing about impeachment every day, and I write most of these comments a few days in advance (which is why I don’t yet know what happened yesterday), so I am going to make a stab at resuming our irregularly scheduled programming. You know: Gummi Bears and Amazon.com shorts — all that.

Today, two true stories.

Story #1

This friend of mine was on the phone with Delta trying to get a cheap round-trip from the Miami area to Washington, D.C. He’s a journalist and needed to go interview some hotshot. Fewer than 7 days in advance, no Saturday stay-over. In other words: He was dead meat.

So while the Delta agent is sorting through things, he’s tinkering with www.travelocity.com. She finds him a round-trip in the high “twos” — $298 or some such. He finds a round-trip fare (I couldn’t believe this) of $148. She couldn’t believe it, either, but when he told her the flight number, sure enough, there it was: his for $148 round-trip.

In short, this business about being able to click your way around the Web really does have its advantages and should only improve. (My friend lives in Miami Beach, one of the few places you can get Internet access via the cable TV company. So his connection is almost as fast as the one you have at the office. Ah, what I wouldn’t give for a T1 line.)

Story #2

This other friend of mine got it into his head a few weeks ago to sell short a slew of soon-to-expire, way-out-of-the-money calls on Amazon.com and Yahoo. Both were selling at such ridiculous prices (and the market itself was so high) that it was almost free money. Unless each one went up yet another 20 or 30 points, he could just keep the ridiculously generous premiums he got for writing those soon-to-expire calls. Free money! End of story. And even if — it’s a strange world we live in — they did suddenly vault yet another 30 points, or even 40 or 50 points, well, he was a big boy and could handle the risk.

A couple of clicks and the positions were his.

A week later (this is a true story), Amazon had vaulted 100 points and my friend, gazing out at the Pacific from his Santa Monica condo, had lost his entire fortune, everything he had worked his entire life to earn.

Click with care. There are huge advantages to Internet trading — I constantly marvel at being able to make trades for $13 that until recently cost me $300 — but it is easier than ever to ruin yourself. Be careful.

I don’t know what’s going to happen with the impeachment vote, but I think it’s important we look at the bright side. Namely, that this nation cares, deeply, about honesty and the rule of law.

Some believe the president should be removed from office for dancing around narrow definitions and pretending “not to recall” when asked, in a politically motivated civil lawsuit, about his private sex life. In the history of this nation, no president has ever been removed from office, but perhaps no president has ever committed an offense so grave – or been caught doing it. Finally, after 222 years, a president has committed Treason. Or taken Bribes. Or committed other High Crimes and Misdemeanors.

Most believe this is an incredibly partisan witch-hunt – but that, obviously, the president did not tell the “whole truth and nothing but the truth.” And so, like the first group, we believe some kind of punishment is, regrettably, called for.

(I say regrettably, because I think this situation was largely manufactured by the president’s enemies. And that private relations between consenting adults should be, and should have been, allowed to remain private.)

As a nation we mostly agree. Truth matters. The law matters. Untruthfulness should have consequences.

(We also agree that private relations should remain private, that overzealous government prosecutors are scary, and that Monica’s dress is a long way from Whitewater, which had nothing to do with the presidency in the first place.)

That’s the good news. Soon the House will decide what consequences are appropriate – censure and a fine, as most of their constituents want – or something more.

When I was a little boy and television was a new medium, the most popular weather guy in New York – his name escapes me, but one of you will remember – used to draw some kind of big doodle or cartoon as, occasionally looking back over his shoulder at us viewers, he “did the weather.” I don’t know that Magic Markers had been invented then, but it was that kind of idea: a big sketch of a droopy dog, say, on a two-by-three-foot easel pad, and won’t this dog be sad when it starts to drizzle later this afternoon. Annoys the heck out of me that I can’t think of his name, but I can still hear his voice. He was a good guy.

Weather forecasting has come a long way since then, but the post of the local weather guy/gal remains one that’s often filled by a ham or a happy-face or a full head of hair; i.e., we’re not talking rocket science here.

Well, actually, at Weather Headquarters it is a bit like rocket science. (Perhaps you saw National Geographic‘s documentary on the March 1993 “Storm of the Century”?)

But down at the local TV station it’s somebody grabbing the weather report off the wire service and then pointing at a blank green wall, which appears to us to be the weather map, and pointing out all the precipitation. (He manages to do this by watching his hand on a TV monitor to see what it appears he is pointing at. But to someone in the studio watching him, he is pointing at a blank green wall.)

There are exceptions. There are some local weather folk who actually understand meteorology. Indeed, there are a few who are not just “nice, bright people” but nice, really bright people, like Bryan Norcross, who does the weather in Miami.

He’s the guy widely credited with “saving Miami” from hurricane Andrew, so much so that NBC made a TV movie about his heroism. How many local weather guys have TV movies made about them? Not, of course, that he was able to divert Andrew – that would have been the stuff of a $100 million Spielberg epic, not some two-bit TV movie. But by understanding the gravity of the situation long before any of his competition and then staying on air nonstop for something like a million hours without sleep, he was able to make a real difference. Even today, people stop him on the street to thank him for the practical life- and property-saving advice and admonitions he dispensed hour after hour.

Today Norcross sees another potentially devastating storm. Only this one, happily, we can avert. So – like many of us, whatever our normal professions may be – he’s jumped into the debate to try to do just that. Avert it.

What follows (with his permission) are excerpts from his letter to Rick Lazio, a good guy who represents part of Long Island. I have no idea whether Congressman Lazio has found time to read Bryan’s letter – like his colleagues, I am sure he is positively deluged with constituent mail and e-mail and phone calls. But even if he hasn’t read it, I thought it might be of interest to you as you make up your own mind and contact your own congressperson:

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Dear Congressman Lazio,

You have been identified in the media as a “moderate” Republican. I found you to be very fair during the hearing in which I participated at the National Hurricane Center some years ago. I am sure you are agonizing over the critical vote you are about to make. I think this event may affect our governmental system for the rest of our lives. Therefore, I feel compelled to offer you my thinking.

In the strongest terms I urge you to find the resolve and political will to act in the best interests of the country and vote AGAINST impeaching the President. In my opinion, this politicized impeachment process is the most dangerous governmental event of my life, even worse than Watergate. In 1974 the system worked. Now, I think it has not.

The Congress has NO responsibility to punish or even condemn an official who has sinned, or even violated the law, UNLESS the transgression is impeachable, in which case it must be a “high crime.” The power to punish lesser sins lies with the people. The fact that the House is hell-bent on doing something viewed as punishment, in my opinion, shows disdain for the people who elected them.

In my opinion, the risk to our form of government is GREATER because of this process than anything that Mr. Clinton has been alleged to have done. This politicized constitutional process will likely cause permanent harm to the carefully crafted Balance of Power that is our governmental system. The power of impeachment should only be used for the most threatening times and events.

Why are we suddenly so anxious to rip our government apart when we have used judgement in the past?

I just returned from Europe. I can tell you that 100% of the doctors and attorneys with whom I discussed the Clinton situation thought continuing to pick apart his tawdry affair, and all the vague and misleading statements about the details, is absurd and damaging, not only to the United States, but to the stability of the world. To them, it reflects much worse on the judgement of the Congress than on the President. In the totality, it reflects extremely badly on our country.

In addition, any objective view of the process that brought us to this point has to make a fair-minded person uncomfortable. Look at a small part of the list:

• A private federal lawsuit is filed years after the event, encouraged and funded by an enemy of the President.

• The so-called Independent Council, operating under a law that many members of Congress have said will not be renewed in its present form, has some peripheral involvement.

• Illegal wiretaps are involved.

• A convoluted definition of a phrase in the dictionary (sexual relations) is used (even the Judge said, “I don’t know what to do” with the definition). The President is never asked, “did you have oral sex?” (Could it be because an honest answer to that would have circumvented a future perjury claim?) Remember, Jennifer Flowers said years ago that the President does not consider oral sex to be sex. (Might the attorneys have known that?)

• And there is much more.

These are all reasons to feel uncomfortable with the underpinnings of this case. (Republicans on the Judiciary Committee even expressed some concerns). In our system, the underpinnings count. How can we consider impeaching a President, with the incredible cost to the nation, over a situation whose beginnings smell so political? The entire process lacks credibility. In fact, one after the other, prosecutors have indicated that this sort of legal case would not be likely ever to see a courtroom. Should we impeach a president, with all of the financial and political turmoil that it will bring, over a case that would likely never be tried? How can a “high crime and misdemeanor” be such a low crime as to not be worthy of prosecution?

Yes, the President acted like an idiot in fooling around with an intern. But when the risks are weighed, the opinion of the American people is considered, the tainted process is noted, and history is remembered, the United States is better off allowing the President to continue to serve. Thank you for your consideration of my opinion.

-Bryan Norcross

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What makes it all so bizarre is that no one imagines the Senate would vote to convict. So we have a practical choice: Go through months more of Monica Lewinsky and have the President stay in office. Or not go through those months and have the President stay in office.

Two routes to the same result.

If all that were at stake were a few more months of interminable and embarrassing C-Span, it might not matter which we chose. But investor psychology and economic confidence are fragile, skittish, unpredictable things. Leave aside, for a moment, what a partisan impeachment vote and a months-long, all-consuming impeachment trial could do to the future of our political process. What might it do to the fragile world economy and to hundreds of millions of people for whom life is already a struggle at best? Possibly, it would have no effect at all. But why on earth take the gamble?

So here’s what I asked a couple of months back. If perjury is such a big deal — and it is — what about those seven tobacco-company CEOs in 1994, when they raised their right hands and swore to Congress they did not believe nicotine was addictive?

This lie was part of a decades-long attempt to addict millions of people to a product that, in about 400,000 cases a year in the U.S. alone, leads to premature death often preceded by terrible suffering.

Why is that perjury not worth even a little investigation or censure? Yet the Republican-led Congress — financed not insignificantly by the same tobacco interests that so hate Clinton — has in four years called for no action whatever in this regard.

So come on, everybody. Let’s get real. What the president did was wrong. But it wasn’t treason, it wasn’t bribery, it wasn’t assassinating a political rival or some other egregious “High Crime.” He just couldn’t bring himself to admit to an embarrassing affair. (And what has the world gained, really, now that it knows? Are we so much better off? Are Linda Tripp and Ken Starr and Richard Mellon Scaife heroes we should be thankful to for all of this?)

Though I feel for the president, I agree with the Republicans, and many Democrats, who think he really did something unacceptable. And I suppose he must pay the consequences. (I say “I suppose” because, in the face of all the good he’s done, in my view, one might make the case for forgiveness.) But what are the appropriate consequences? An historic censure and loss of a year’s pay would certainly chasten you or me. If people feel the need, I suppose they could even attempt to put him in jail on criminal perjury charges after he leaves office. He could be prosecuted for this like anyone else. But in the meantime, we should get back to the business of running the country and trying to help lead the world away from the financial precipice.

And hey, Mr. Hyde. Hey, Mr. Chabot and the rest of you fellows — what about those seven tobacco CEOs? Is it just that they helped fund your campaigns that kept you from saying a peep when they lied under oath?

Punish the president — but don’t punish the country (and the rest of a fragile world) by putting us through an unnecessary, unwarranted impeachment trial that almost all seem to agree will fail to result in conviction anyway.

And when you’re done, don’t forget to punish the guys who not only lied under oath but also compounded the sin significantly by lying about something important.

I suppose it seems odd to be reading about auto insurance reform — three of last week’s columns — when the whole nation is on the brink of shooting itself in the foot.

I don’t think we will go over the brink, but we sure are coming close. (With brinks, can one ever not?)

I speak here, of course, of the possibility that the House, against the wishes of a majority of the people it represents, will impeach the president. It is very Alice-in-Wonderland-like if for no other reason than this: Everyone agrees the president will not be convicted and removed from office. (To be sure, some feel he should be, but no one thinks two-thirds of the Senate will so vote.)

So this is purely an exercise in theater. We would be choosing to tie up the Chief Justice of the Supreme Court and the entire Senate and no small portion of the executive branch (how can they not be consumed by this, even if not directly involved?) — for months — for the purpose of making a point. The point: that no one, least of all a president, should lie — in common sense terms if not in legal technicality — and especially not under oath.

It is an important point.

Much of the country and many of the Republicans in the House, given the choice, would opt for censure to make that point — and so would I. (In truth, it seems to me the point has already been made.) “Censure and move on” is the operative phrase.

Censure is no trivial thing. Clinton would be only the second president in history to be censured (and Andrew Jackson’s censure was later repealed). And maybe they’d dock him a full year’s pay. This is a very big deal. Point made!

But three or six more months of Monica Lewinsky?

Hello … we have Iraq and a global financial crisis and Russia and the Year 2000 problem to deal with. Not to mention education and Fast Track and Social Security and everything else.

If we absolutely had to do this, because the president were attempting to subvert our democracy by, say, setting the IRS upon his political enemies, as Nixon did, or by using the CIA to thwart an FBI investigation into illegal wiretaps of the opposition party, as Nixon also did, or by authorizing operations to break into a psychiatrist’s office to obtain patient files … then of course we would do so. (And it wouldn’t just be theater; the chances are, there would be a conviction.)

But the president was just trying to keep from admitting an embarrassing sex thing between himself and a consenting adult.

That really is different.

If the president were robbing us blind, we might put ourselves through this. (Nixon wasn’t robbing us blind, but he did commit serious income tax fraud — a terrible example to set to the American people. Yet neither the Democrats nor the Republicans on the House Judiciary Committee at the time felt that this rose to the level of Treason, Bribery, or other High Crimes and Misdemeanors. It was deemed a personal infraction.)

The president was not robbing us blind. No, the Whitewater prosecutor (who reported no presidential wrongdoing with Whitewater) found only that the president gave in to sexual temptation with a consenting adult and then did all he could to keep it from coming out.

The world should not be paralyzed over this. We shareholders do not deserve to see our portfolios plummet if the market loses confidence during an impeachment trial. People at the bottom of the economic ladder do not deserve to have their jobs jeopardized over this if a gloomy mood leads to recession here, or to prolonged agony in the already depressed economies overseas. We need our government’s attention focused on the real problems. Censure and move on.

I’m not predicting apocalypse if there were an impeachment trial. But don’t underestimate the possible impact, the power of psychology in markets and economics.

Remember when the world was in crisis just a few weeks ago and — bang — the crisis passed when the Fed lowered interest rates a quarter of a point between regularly scheduled meetings? Overnight, an amazing change in world confidence. It wasn’t the quarter point that mattered, it was the psychology of the thing. Psychology and confidence and moods matter in markets. I don’t know for sure what the impact would be of our being mired in months more of this mess, but I do know it couldn’t possibly be a plus. And that it could possibly be a big minus.

So why do this to ourselves? Are we that certain this is what Thomas Jefferson and the others had in mind when they wrote of Treason, Bribery and other High Crimes and Misdemeanors? If we’re not certain (and many of us, of course, are certain this in fact is not the case), then let’s give ourselves a break. Censure — for only the second time in the nation’s history! — and move on.

And that’s all I have to say.

(Except that through the miracle of hyperlinks, for those who do want to split a few hairs — irrelevant to the larger points made above — click here.)

The president and Monica knew their behavior was wrong, just as, presumably, a married 42-year-old Henry Hyde and the married woman he had a five-year affair with knew it was wrong and Thomas Jefferson and the slave with whom he had a long affair and a child knew it was wrong.

And so, like many in this situation, they tried to keep it secret. There’s more one could say about how inappropriate this was — an intern? the Oval Office? But he really didn’t have much option to go to a Motel 6. And this was hardly an unwilling child reluctantly seduced.

So the president gambled that he and Monica could get away with keeping their secret, thus sparing themselves and their families and his office and the nation the embarrassment. He lost.

Did he lie in the Paula Jones testimony? Well, the part about not recalling having been alone with Monica seems by any stretch to have been a lie. This is a guy who remembers everything. I think he remembered that. But on top of feeling an incredible invasion of his privacy (this never happened to Kennedy!), I wouldn’t be surprised if the president didn’t also feel this: He really did try to restrain himself. He really didn’t “go all the way,” as we used to say in high school. He really didn’t have a full-fledged affair of the type Henry Hyde or Thomas Jefferson had. And so (one can imagine his feeling, as he agonizes over this) doesn’t he get any credit for that? He obviously resisted some temptation, just not enough. And the first definition of “sexual relations” in my dictionary is “sexual intercourse.” (The problem is that, at least in my dictionary, the alternate is: “any sexual activity between individuals.”) To the two of them, what they were doing — stopping so far short of “the act,” so far short of ski-chalet weekend trysts — was, technically, not the real deal.

Of course, it’s just this kind of legal bobbing and weaving that got him in so much trouble, so I’m not making the case that backed into a corner by his political enemies, he didn’t screw up. He truly did. He agrees. He should be censured, maybe fined. We should move on.

Anyone who looks at America’s lawsuit-based auto insurance system has to conclude that, except in Michigan, it provides poor value for the consumer dollar and a terrible surprise for most of the worst-injured victims.

(The surprise: High as the premiums are, the benefits from your lawsuit, when you’re badly hurt, are zilch, if your injury was caused by a hit-and-run driver or a driver you cannot prove was at fault or a driver who has no insurance or assets to sue for — which is a high proportion of the accident causers … and next to zilch if you are hit by a driver who did stay around to be sued and whom you can prove was at fault and who did have the legally mandated insurance — which in California, for example, will entitle you to only $15,000 (less legal fees) even if you have $1 million in medical bills, excruciating pain, terrible disfigurement, and can never work again a day in your life. In Michigan, where insurance costs less, you would, in this situation, have all your medical and rehab bills paid, and some wage loss reimbursement. But the lawyers claim to think Michigan’s system is worse for consumers and victims. Vastly better protection at significantly lower cost? They see that as a bad deal, because there’s little money in it for them.)

The defense lawyers who represent insurance companies are not keen on Michigan-style no-fault either, because if most lawsuits were eliminated, so would be most of their incomes.

In the November issue of Crossroads, published by The Auto Insurance Compensation Project of the University of Wisconsin at Milwaukee, Jackson Williams, a spokesperson for the defense attorneys, offers six suggestions to try to improve the situation without clamping down too hard on lawsuits:

1. Repeal the Collateral Source Rule. This would allow juries to be told when someone was already covered by health or disability insurance and so didn’t necessarily need to be reimbursed for already-reimbursed medical bills or lost wages. (In deciding the damages to award, juries could choose to ignore this information, but they would have it.) This would likely lower the cost of settling many claims and reduce the incentive to sue in the first place.

2. Allow a Seat Belt Defense. Right now, though a victim may have violated the law by not wearing his seat belt, the jury can’t know that or take it into account in deciding how much compensation he is owed. The defense lawyers argue this shifts some of the cost of injuries to those who do wear seat belts.

3. Adopt Medical Injury Profiles. “Injury profiles representing the medical consensus as to what treatments are required for minor injuries should be admissible in lawsuits to help jurors identify excessive medical expenses.”

4. “No Pay/No Play” for Uninsured Plaintiffs. California passed this by referendum, prohibiting uninsured drivers to sue for pain and suffering. (They can still sue for all their medical, rehab and wage loss.) In other words, if you make $6 an hour and can’t afford $1,400 to buy auto insurance, you’re not entitled to sue for pain and suffering if you’re hurt. It would seem fairer to cut the cost of auto insurance by eliminating most of the legal expense and fraud, so low-income people could afford to obey the law and buy it. Then maybe such a provision might be warranted.

5. Require Contingency Fee Disclosure. The idea here would be to force personal injury lawyers to tell their clients at the end of a case how much time they had spent on it, and if they felt outraged (“I’m paying you $32,000 for 17 hours’ work?”), they could “negotiate for a reduced fee.” But even assuming each attorney were candid about his hours, what leverage would the consumer have in these “negotiations”? Ordinarily, the contingent-fee agreement is signed up front, and the lawyer is the one who receives the cash, takes his fee and expenses, and passes on the remainder to the client.

6. Experiment with Procedural Reforms. Like changes to the rules of discovery, mandatory arbitration and the like.

Even if there is merit to some of these — as I think there is — you can be all but certain the personal injury lawyers will not allow them to happen. And note that the savings these reforms would achieve are achieved almost entirely by reducing what crash victims get. You’re poor and couldn’t buy insurance? You get less. You weren’t wearing your seat belts when your head was bashed in? You get less. You were already reimbursed for these expenses you’re suing for? You get less.

Some of that may in fact be warranted.

But where are the reforms that would cut out the legal expenses and fraud? And why not just do what Michigan does? It’s been working there for 25 years.

(The one important tweak: as suggested yesterday, Michigan needs to allow low-income drivers to buy a less generous, more affordable benefit package.)

The problem: Consumers pay too much for auto insurance and, if they’re badly hurt, get far too little. In California, for example, consumers pay something like $7 billion for the "people" portion of auto insurance (auto theft and damage are additional). But if they’re badly hurt — $100,000 or more in medical expenses and lost wages — they recoup on average just 9% of their actual losses from that $7 billion pool. Imagine your $200,000 house burning down and recouping just 9% — $18,000 — from your insurance company, after paying high premiums all those years.

So where does all the money go? In California, more than half goes to lawyers (both yours, fighting for your claim, and the insurance company’s lawyer, fighting against it) and to fraud. Why so much fraud? Because the current system actually encourages people — even normally honest people — to strike back at the insurance companies and recoup some of those years and years of exorbitant premiums by saying their necks hurt when they don’t, or exaggerating their injuries.

In Michigan — the one state that does this almost right — there are 7 fakeable claims (e.g., whiplash) for every 10 unfakeable ones (e.g., a broken arm). But they’re probably not fake, because there’s no incentive to fake them. Neither are they likely underreported, either, because if your neck really hurts, why wouldn’t you tell your doctor and try to get the pain to stop?

In California, by contrast, there are not 7 fakeable claims (e.g., whiplash) for every 10 unfakeable ones, as in Michigan — there are 25! The extra 18 are presumably fraudulent, but the insurance companies can’t tell which they are … so they pay them, and the cost of that fraud is added to the cost for everyone else. But, perhaps understandably, they pay them grudgingly and with suspicion (because they realize there’s a good chance they’re being conned), which means that they treat everybody badly, including the "7" of those 25 who deserve real sympathy and support.

Could people and lawyers and chiropractors really misuse the system so starkly?

You bet. In Massachusetts, when its first-in-the-nation "no-fault" bill was passed in 1971, you could only sue for pain and suffering if you had medical bills and lost wages of $500 or more. But people quickly learned to treat that $500 not as a threshold but as a target. (How hard is it to rack up $500 in medical bills?) Then in 1988, to try to rein in the lawsuits, the target — sorry, I mean the "threshold" — was raised from $500 to $2,000. The next year, the average number of doctors’ and chiropractors’ visits after an auto accident jumped from 13 to 30. So, yes, people do game the system. The "no-fault" the lawyers like to discredit as not having worked largely hasn’t — because the lawyers, way back when, saw to it that there would be these low "thresholds" above which the old lawsuit system took over. In short, they sabotaged it. Only in Michigan did a "real" no-fault system squeak past the personal injury bar … and it has been working well for 25 years.

In most states, more money goes to lawyers after an auto accident, on average, than to doctors and hospitals and nurses and chiropractors and rehabilitation expenses combined.

Auto insurance in every state except Michigan is, to a greater or lesser extent, terrible And even Michigan has a flaw. (Yes, it’s significantly cheaper than in California; and yes, the compensation you can expect to receive is closer to 90% than 9%. Yes, relatively little of your premium goes to legal expenses and fraud, because you can sue only in the most severe cases. But the flaw is: If you can’t afford to buy it, you are not entitled to the benefits. Michigan needs to allow low-income drivers to buy a less generous, more affordable benefit package.)

Why don’t all states just follow Michigan’s example (with that one tweak to accommodate low-income drivers)? After all, it’s worked for 25 years. People pay less, yet get vastly better protection against severe injury. Consumers Union long called for just such reform.

Because the lawyers won’t allow it. In California, the lawyers take about $2.5 billion a year from that $7 billion pool. They have shown they will do virtually anything to keep from letting go of it. They will certainly lie and defraud the public — and the public, in such situations, has no real recourse.

(Most insurance companies aren’t keen on a system of lower premiums, either. Only the mutual companies, owned by their policyholders, support no-fault.)

In an ideal system, a good chunk of the premium would be blended into the price of gas and collected automatically. That would eliminate sales costs, end the uninsured motorist problem (nearly half the accident causers in California drive uninsured), and — well I wrote a whole little book about how this could actually be a fairer system than today. (Bad drivers would still pay more.) But the nation’s insurance agents and insurance companies and oil companies are simply not going to allow pay-at-the-pump … so let us, reluctantly, put it aside in our discussion. Though it would help, the really big gains to be had in auto insurance reform come from eliminating the incentive to fake and exaggerate claims and the need for lawsuits — namely, from adopting Michigan-style no-fault insurance.

But, as I say, the lawyers won’t allow it. They’re probably still kicking themselves that a coalition of labor unions, consumer groups, and others managed to get this passed in Michigan in 1973. (Michigan, by the way, is a place that ought to know something about automobiles.)

Herewith, the personal-injury lawyers’ suggestion for fixing the problem: Blame it on the insurance companies. No system is acceptable to them that merely helps the victims, a la Michigan. The lawyers must be paid. It is their right. Michigan may compensate the badly injured far better, and it may cost consumers less but is only secondarily of concern to personal injury lawyers. Of primary concern are their legal fees. And under the Michigan system, these are cut way, way back. So that’s unacceptable.

Tomorrow, I will describe the defense attorneys’ prescriptions for reform. They don’t make as much from the current system as the personal injury attorneys, but nationwide it still amounts to billions of dollars a year.

Well, the PARADE story on credit cards that many of you helped me with reached 41 million households and generated tens of thousands of requests for more information.

You know those laundry baskets prisoners use to escape from penitentiaries in the movies? They’re under the shirts and get rolled out by unsuspecting guards and then jump out of the truck once they’re clear of the prison walls? We’re talking about enough mail to more than fill one of those.

And that was just the physical mail to the Consumer Federation of America, which had offered an informational brochure. What about the e-mail? I liked this one from George Yurgaitis:

“I’m 31 now and have 2 credit cards. When I was 23, I had over 30 cards. I carried most with me, but thankfully never used them. It was a game to collect as many as possible. I did notice one part of the PARADE story that I had to laugh about. I started collecting the credit card offers that arrive in my mailbox on March 1 of this year (okay, so I forgot in January and February), just as one of the profiled people in PARADE had done. He received 34 credit card offers. 34?! To date, my wife and I have received over 120 – with the big month of December to go. To boot, my two-year-old son has received four offers in the past six weeks as well. I haven’t even been including the store credit cards and the mortgage equity loan offers in my count. I haven’t decided, but I may mail the card offers I have received back to the card companies with a note to see what sort of response I’ll get in return.”

George and his wife very rarely carry a balance. When they do, they shift the balance to a new card with a low introductory rate and pay it off before it climbs to the regular rate.

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We picked five of those tens of thousands of letters out of the laundry cart last week (OK, maybe they’re how terrorists get out of hotels – don’t hold me to the specifics), and in addition to its little brochure, CFA will be sending each of those folks $1,000 to help jump-start their debt-repayment regime.

Repeat after me, yet again: Credit cards are for convenience only. Borrow against them – run a balance – only in true emergencies.

From Dave Davis: “My lunch mate sends me a joke every morning (which he receives from a friend who is an executive at one of the major advertising agencies in Chicago). Here’s the latest …

“Three buddies die in a car crash. They immediately find themselves at orientation in heaven. During this introduction, they are all asked: ‘When you are in your casket and friends and family surround you in the mortuary, what would you like them to say about you?’

“The first guy says: ‘I would like to hear them say that I was the greatest doctor of my time and a terrific family man.’

“The second guy says: ‘I would want them to say that I was a wonderful husband — and a fine school teacher who made a huge difference for our children and their future.’

“The third guy says: ‘I would like to hear them say … LOOK! HE’S MOVING!’”
A.T.: And speaking of car crashes, let’s talk a little about auto insurance reform — about which you should be furious, because so little has been done, except in Michigan (which for 25 years has had it nearly right).

Here’s a little idea from an enterprising Farmers Insurance agent in New Mexico whose name I have temporarily misplaced — oh, no! — but it’s a good little idea. His idea is to modify the proof-of-insurance card your insurer sends you. He would add a small perforated tear-off section that has printed on it all the information you need to exchange when there’s an accident.

Think about it. It’s raining, it’s dark, you’re late. You’re in an unfamiliar part of town, you only have a pencil and the point’s broken, cars are honking or whizzing by dangerously close to you — and the other person is not necessarily someone you’re thrilled to be spending time with. Perhaps she’s screaming at you, perhaps in a language you do not immediately recognize, perhaps gripping a tire iron. Is this a good time to be trying to remember the information you need to get? To give? No. And now, with this little perforated stub, you don’t have to. You simply tear off the Accident Information Card, hand it to the other person, motion for her to do likewise, get it (checking briefly to see that it matches the description of the car) — and, if it’s a minor accident to which the police are unlikely to respond, off you go. Even if the police do come, it’s easier and faster for everyone.

Two years ago, this fellow — Tom Gregory, that’s his name — sent me the idea wondering how he could get companies to adopt it. Farmers, his own company, had ignored him.

I suggested he send the idea to Progressive, among others — because they are progressive. And here we are two years later and, guess what, Progressive did it! They’ve added a tear-off Accident Information stub to the bottom of their proof-of-insurance form. Knowing how the insurance industry operates, now that Progressive has adopted it, others will follow — in about 30 years.

Thursday: Some Bigger Ideas