Weekly Indicators for June 22 - 26 at XE.com

 - by New Deal democrat

My Weekly Indicator post is up at XE.com.  The recent new crosscurrents are persisting.

International Economic Week In Review For the Week of June 22-26; More Good News, Edition

This is over at XE.com

Why I Support Obamacare, or Scotus Care, Or The ACA

My Personal Stake In the Matter

 

     First, a bit about me.  I am 48 years old and weigh between 195-200 pounds.  I have regularly exercised since the spring of 2001. In the last 8 years, I can count the number of days I have missed working out on three hands.  Two days after recent surgeries (see below) I was doing light weight lifting – I’m that compulsive about it.  If I look at the clock and see it’s mid-afternoon and I haven’t hit the gym, I get itchy.  I take a vitamin pack and supplements daily.  And, in general, my diet is good, with the exception our weekly Tex-Mex meal.  But, we live in Texas and that just goes with the territory.  I mention all this to demonstrate that I am in very good health and take very good care of myself.

     However, about four years ago, I learned I had a condition called hip impingement.  In layman’s terms, my hips are mal-formed.  No amount of exercise or any other non-invasive procedure could solve this problem.  Thanks to modern orthopedics, this problem is easily solved; I’ve had both my hips “resurfaced” -- think of it has hip replacement light.  But, these procedures were obviously very expensive and, without insurance, we would not have been able to afford it.

     More importantly, I now have a “pre-existing condition” that, under previous laws, would have allowed an insurance company to discriminate against me, denying me coverage.  This would be a huge problem because I eventually will need at least one more hip replacement and, depending on my life span, two.  This would obviously be devastating to my family, because, while our business has been successful, we don’t have a spare $250,000 lying around for surgery.  This makes the prevention of discrimination based on pre-existing conditions of paramount importance to me.  Hence, a big reason why I support the legislation.

     But, consider the possibility that, when I was diagnosed with this problem, I didn’t have insurance and the old rules still existed.  Then, a successful entrepreneur with a medical condition that he couldn’t cure through diet and exercise (and who was clearly very responsible about his health), would have been subjected to a slow and painful degradation of his joints, eventually leading to decreasing productivity, and in the worst case scenario, the need to go on long-term disability.  Ask yourself this question: is this situation – which is increasingly common as the population becomes more athletic – a good public policy outcome?  If so, I hope you have perfect genetic health.  But, a lot of people don’t. 

     So, as we say in Texas, I have “a dog in this hunt.” 

Was the Old System that Bad?

 

      Yes it was.  First, there was the ability to discriminate.  But that’s not all.  Before the healthcare law was passed, medical bills caused 60% of all bankruptcies:

This year, an estimated 1.5 million Americans will declare bankruptcy. Many people may chalk up that misfortune to overspending or a lavish lifestyle, but a new study suggests that more than 60 percent of people who go bankrupt are actually capsized by medical bills.

Woolhandler and her colleagues surveyed a random sample of 2,314 people who filed for bankruptcy in early 2007, looked at their court records, and then interviewed more than 1,000 of them. Health.com: Expert advice on getting health insurance and affordable care for chronic pain

They concluded that 62.1 percent of the bankruptcies were medically related because the individuals either had more than $5,000 (or 10 percent of their pretax income) in medical bills, mortgaged their home to pay for medical bills, or lost significant income due to an illness. On average, medically bankrupt families had $17,943 in out-of-pocket expenses, including $26,971 for those who lacked insurance and $17,749 who had insurance at some point.

Overall, three-quarters of the people with a medically-related bankruptcy had health insurance, they say.

Think about the basic conclusion from the above study: even with insurance, a majority of bankruptcies were caused by medical costs.  That indicates very clearly that the old system simply did not work; hence the need for change. 

 

But, is the current structure of health care the best answer? 

Given the political realities, the answer is yes.  However, before I explain that, let me provide a bit more personal background.  One of my legal specialties is the formation of captive insurance companies; I’m co-author of the leading legal text in the field.  As a result, I’m more than a little familiar with the mechanics of underwriting risk

     The ACA (or is it now SCOTUS care) is based on a “three legged stool:”

The Court (minus the three stooges) understood that the ACA is designed to work via the “three-legged stool” of guaranteed issue and community rating, the individual mandate, and subsidies. All three elements are needed to make it work, which is why it was obvious to anyone who paid any attention that the lawsuit was nonsense

As I noted above, the biggest problem with the previous system was the denial of coverage for pre-exiting conditions.  But, to incentivize the insurance companies to provide coverage for everybody, they needed to have a really big pool of potential insureds.  From their perspective, the bigger the pool, the lower the total cost for providing insurance.  This explains the underlying reason for the individual mandate – the requirement that everybody have insurance.  And, the same logic that requires all drivers to have auto insurance applies to health insurance.  While you may not need or use medical insurance now, there is no way you’re never going to use it; everybody gets sick.  It’s just the price of being human.  When you’re younger, you use it less, but you still use it.  As you get older, you use it more.  Welcome to life.

Who Provided the Basic Design of the ACA?    

     Guys, the mandate was a Republican idea:

The mandate made its political début in a 1989 Heritage Foundation brief titled “Assuring Affordable Health Care for All Americans,” as a counterpoint to the single-payer system and the employer mandate, which were favored in Democratic circles. In the brief, Stuart Butler, the foundation’s health-care expert, argued, “Many states now require passengers in automobiles to wear seat-belts for their own protection. Many others require anybody driving a car to have liability insurance. But neither the federal government nor any state requires all households to protect themselves from the potentially catastrophic costs of a serious accident or illness. Under the Heritage plan, there would be such a requirement.” The mandate made its first legislative appearance in 1993, in the Health Equity and Access Reform Today Act—the Republicans’ alternative to President Clinton’s health-reform bill—which was sponsored by John Chafee, of Rhode Island, and co-sponsored by eighteen Republicans, including Bob Dole, who was then the Senate Minority Leader.         

 

 

     And the market place was a bi-partisan solution.  It’s simply a central place where consumers have the ability to compare and contrast insurance plans and options.  In short, it prevents the inherent advantage insurers used to have that was derived from a heavily fragmented market.

     And, the basic structure was used in Massachusetts, in a system proposed by a Republican governor who, if memory serves, also ran for another larger office.

Are the Republican Alternatives Viable?

     No.   If you strip out the individual mandate, but keep the non-discriminatory provision, the system will collapse.  There just isn’t a big enough pool of risk to make it work.  It’s that simple. 

A Final Thought

     The US is one of the only developed countries that doesn't have a single payer system.  Think about that and ask yourself, "why do other countries do it differently?"  It it's so bad, why haven't these countries -- which are democracies -- changed their system of providing health insurance?   It socialized medicine is terrbile, shouldn't there be a massive ground-swell of activity to change the system?  Just sayin.'

          So that’s it.  Hope you’ve found this helpful.

 

 

 

A note on Greece

  - by New Deal democrat

Cullen Roche of Pragmatic Capitalism has a good post up on Greece this morning. Basically I agree up until his forecast.

He thinks Greece will stay in the Euro and suffer the consequences because European integration is inevitable. When I read statements like that, I think of the  Norman Angell's 1910 book, "The Great Illusion,"  which forecast a Teh Awesome 20th century for Europe, because countries that trade with one another as much as European nations did back then, never make war on one another.

Ooops!!!

In short, just because something is rational, doesn't mean that emotional, stubborn human beings won't make a wrong or stupid choice.

This situation is playing out almost exactly as I expected at its start.  Both sides have every interest in staking out maximalist demands at the start, and not significantly compromising until the very last moment. But ultimately, it is a question of human choices, and they may or may not make rational sense.

Ultimately there were only two critical unknowns in the scenario:
1. would Greece have the guts to actually walk out on the Euro?
2. if so, how would the rest of the EMU react to Greece walking out on the Euro?

Why are those the two critical points?  Because up until (1), Europe has all the power.  But if Greece actually does (1), then Greece has all the power.

Before that point, inevitably someone had to blink first. The only question was, who would blink first.  That has been answered:  Greece.

Next, how would the other side react?  With compromise (rational), or with a boot crushing the adversary's face in the mud (emotional)?  It sounds like we have the answer to this as well.  Kaiser Wilhelm of 1914, meet Herr Schauble of 2015.  But, of course, a brilliant move - so long as Greece doesn't have the guts to walk out on the Euro.

So it looks like we are rapidly coming up to the point of getting an answer on the first critical unknown.  Up until now, Herr Schauble et al could have great confidence, since the polls indicated Greeks wanted debt relief.  But by a huge margin, the also wanted to stay in the Euro.  And a pony.

Well, the most recent polls show a marked increase in Greeks willing to leave the Euro.  If Tsipras has played his cards in such a manner as to make sure he is not blamed for leaving the Euro by, say, 40% or more Greeks, he can actually go through with (1).

But it is a human decision.  Just as the reaction by the rest of Europe will be a human decision if he does so. Europe will surely let out a collective gasp of shocked disbelief.  And then it will either compromise, or it won't.

Unlike Roche, I do not think continued European intergration is inevitable.

There is a structural medium term compromise which can be implemented, if Europe is willing to acknowledge that the Eurozone, in its present state, is flawed.

That compromise is the three R's: Resignation, Restructuring, and Re-entry

Resignation: the peripheral Euro states are allowed to resign from the Euro, on a temporary basis, in order to devalue.

 Restructuring: the peripheral zone states then restructure their tax and/or welfare systems to bring them into balance (either California with California-style benefits, or Mississippi with Mississippi-style benefits, or anywhere in between, but not Mississippi with California-style benefits.)

Re-entry: the restructured states re-enter the Euro at a more neutral value.

If the program is agreed up front, then it is a decent coping meachanism.

Or else the Europeans find out that indeed integration can work in reverse.

Consumer spending, income, and savings: a trifecta of good news

 - by New Deal democrat

This post is up at XE.com.  This morning's report on personal income, saving, and spending puts the last nail in the coffine of the most recent Doomer thesis: the the savings in gas prices to US consumers would do more harm than good.

Ed Morrissey: The Economic Cluelessness Burns

     Yesterday, we had a gem of analysis from Ed Morrissey over at Hot Air.  In a piece titled, "Durable goods decline 1.8%, business investment a mixed bag in May," he, once again, tries to downplay any economic advancement in the name of partisan politics.  It's actually pretty standard fair from a political blogger. 

 

     However, after reading his column, ask yourself the following questions: does he mention:

 

1.) The strong dollar and how that is hurting exports?

2.) The oil slowdown and how that is hurting mining/raw materials?

3.) The overall slow growth nature of the world economy and how that is also hurting exports?

 

For anyone who has been paying attention over the last year (as theoretically he has been), you'd know that oil's crash has led to massive capital expenditure cuts in the oil patch.  In fact, you can pretty much coordinate the starting point for weakness in industrial production and durable goods with this news event.  And, if you read such sources as Zacks on corporate earnings, you'd know the strong dollar has hurt international operations for the last two quarters.  And then there is the overall weakness in international sales, thanks to a variety of factors like the Chinese slowdown and EU weakness.  The latest anecdotal information from the latest ISM Manufacturing report highlights two to these points:

 

"Economy is showing signs of improvement." (Food, Beverage & Tobacco Products)

"Automotive is still strong. However, steel prices have dropped due to overcapacity and the strong US dollar." (Fabricated Metal Products)

"Overall business is steady. Employment in this area is up, a good sign." (Transportation Equipment)

"Strong spring demand in agriculture." (Chemical Products)

"The exchange rate on the dollar is hurting our sales in Asia. The conversion rate is lowering our profit in Europe where we sell in Euros." (Computer & Electronic Products)

"Sales are starting to stabilize and show improvement from prior months, Year to Date (YTD). Concerns still exist with the overall economy." (Apparel, Leather & Allied Products)

"Continued challenges in markets related to oil and gas industries." (Miscellaneous Manufacturing)

"Oversupply is continuing to tighten profit margins." (Wood Products)

"West Coast port issues have eased up and our incoming imports are flowing again." (Machinery)

"Chemicals pricing seems to have bottomed and is slowly rising again." (Plastics & Rubber Products)

 

(you'll also note the ISM report talks about the negative effects of the West Coast port strike, which he also downplayed in his 1Q GDP summation). 

 

     Morrissey likes to think he's a well-researched and thoughtful economic analyst.  However, he's nothing more than a partisan hack who waits for headline grabbing negative news to drive a political narrative.

     Quick Update: This is from the latest BOJ Meeting Minutes:

The U.S. economy continued to recover solidly, assisted by household spending, although adjustments had been seen in the industrial production sector mainly on the back of the decline in crude oil prices and the appreciation of the U.S. dollar. Business fixed investment had been relatively weak, partly due to a decline in investment related to energy; exports had also been somewhat weak due to the effects of external demand and developments in foreign exchange markets. However, private consumption had rebounded from a decline observed last winter, supported in part by a favorable employment and income situation. Housing investment had also followed a moderate pick-up trend. As for prices, the year-on-year rate of increase in the consumer price index (CPI) for all items less food and energy, or the core CPI, had been more or less flat while that for all items had been at around 0 percent, mainly due to the decline in energy prices.

Wow.  The Board of the Bank of Japan knows more about the domestic investment situation than Morrissey.  Go figure.
 

The update ain't done till the Apps won't run?

 - by New Deal democrat

It used to be said of Microsoft that "The upgrade ain't done until Lotus don't run." Microsoft's OS "improvements" were notorious for rendering perfectly good older third party programs inoperable.

Well, apparently I'm not the only one whose iPad was turned into a virtual brick by the latest Apple software update.  Here's Atrios:

Also, too, thanks for bricking my inlaws' iPad with your "software update" and then lying about it to me. No I won't forget

 It took me two trips to the Genius Bar, one a marathon 3 hour session, to get my iPad back close to where it was before the latest softaware update.  My old photo library is still out there somewhere, and I have had to change how I post both here and at XE.com to get around new problems with Safari.

Apple blames everybody else for not keeping up with their OS updates.  But I never had a problem like this with Apple before. Software updates always seemed to make sure that older programs were still compatable.

Oh, and unlike Microsoft, once you update Apple you can never uninstall and go back.

Memo to Duncan Black:  call the manager of the Apple store in Center City Philly and insist that they fix the problem in store.  If you tell them you are a highly paid independent contractor, and your business depends on the iPad not being turned into an expensive brick, it helps.

US Equity and Economic Review For the Week of June 15-19; Better News But Still A Touch Slog, Edition

This is over at XE.com