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Projecting the Path of the Next Business Cycle

With the model presented in the previous post, Attractor States in the Business cycle, we could conceivably project the path of the next business cycle. How could we do this? The model shows that productive capacity regularly rose by 18%. The last rise was 17%. So I will assume a 17% rise in attractor productive capacity of the next business cycle.

attractor PC shifts beyond

The projected path of the next business cycle is the top line. In the next business cycle we would have a real GDP of $19 trillion at the current 74% utilization rate of labor and capital.

So let’s assume for a moment that this projection is quite possible… no matter what kind of fiscal or monetary policy we throw at the economy.

Now ask yourself, what kind of economy do you want to see on that path? Do you want to see an economy with high inequality? Do you want to see a cleaner economy? Do you want to see an investment driven economy? Do you want to see an economy devoted to advancing human capital? Do you want to see an economy with less working hours?

The point is this… the economy will want to go to that path. We could already see where we are headed. Now free your mind from only worrying about this business cycle. There will have to be a recession to get to the next path. We eventually welcome a recession. Why? Because it is a natural process that allows the economy to jump from one attractor state to a greater attractor state.

From my understanding, the point at which a recession would need to occur is determined by effective demand. We have some control over that.

So… What do you want the economy to look like when we get there? Do you want low interest rates that try to feed the wealth effect with higher asset prices? Do you want higher labor share so that labor has more political and economic power? Do you want lower or higher taxes on the wealthy?

We need to be more focused on what kind of economy we want… not trying to force feed an economy that we think is dying. The economy is not dying. It is just sluggish because labor share has fallen. In the moment that labor share starts to rise, we will see life return to the economy. We will eventually see a recession, but that is part of the process of expanding the economy to a greater level.

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Attractor States in the Business Cycle… Sluggishness is due to low Labor Share not low Productive Capacity

This post has been updated!

http://images.scholarpedia.org/w/images/thumb/5/56/Hopfieldattractor.jpg/400px-Hopfieldattractor.jpg

The energy landscape of a network with multiple point attractors.

I just posted about the Silly Confusion over Potential GDP. The main idea of the post is that real GDP made a transition to a new normal level after the crisis. And patterns from past business cycles show that real GDP stays close to this new level. But then two commentators (Axt113 & Mike Meyer) put forth this idea…

“Are you arguing that had we invested in infrastructure to the amount the ASCE had called for, the economy would not be churning along at a much higher level by now?

Seems to me like the lack of such investment was a huge policy mistake that was a detriment to our economic growth.”

In essence, they are saying that we could have escaped that new normal through infrastructure spending. A lot of economists are saying that. Here is my shortened and revised response…

“Real GDP made a smooth transition to a normal level. And once it settled into that level, the business cycle proceeded as normal employing labor and capital along the blue line. That has been the pattern for all business cycles before. The normal pattern is that once the business cycle settles into its level, it tends to stay close to that level.”

I am describing the attractor state of Real GDP. (link about attractor states) The blue line in this graph shows the attractor state…

real normal growth 6

“I want to call the blue line in the graph above an attractor state for the business cycle. I am not sure that is the best term, but let me go with it here.
You are saying that we could have shifted the real GDP line up above its “attractor state” blue line by infrastructure spending. I am making a case against that view…
According to past patterns, all we would have done is move up the attractor state blue line faster. Real GDP has moved up the blue line faster in the past. We would have employed labor and capital faster along the attractor state line. However, that blue line would not have shifted up. The past patterns show us that the blue line only shifts up at the very end of the business cycle as effective demand puts a profit rate limit on the utilization of labor and capital.
So Yes, real GDP would have risen faster, but we would have hit the effective demand limit faster too. Thus you would have shortened the business cycle.
Now, if increased infrastructure spending would have somehow increased labor’s share, then you would have extended the business cycle as you shortened it. The result would be a less shortened cycle.
However, past patterns show that effective demand also settles into an attractor state. It rarely shifts up during a business cycle.
So in all, I think your idea would have just shortened the business cycle.

Let’s realize that everyone acknowledges that we need to know more about how the business cycle works. And what I present is not found in any books. It is my own personal work. Yet, it shows patterns that repeat.

This next section was updated with corrected numbers…

One thing to add… Currently real GDP is trending toward $21.750 trillion (2009 real $$) at 100% utilization of labor and capital (the limit of the x-axis for the blue line in the graph above). We have been employing labor and capital directly toward that constant level of productive capacity. Other business cycles moved toward lower yet also constant levels. Let me call it an “attractor” productive capacity.
The previous cycle before the crisis had an attractor productive capacity of $18.6 trillion (2009 real $$). The business cycle before the 2001 recession ended up with a productive capacity of $15.8 trillion. So there was a 18% jump in attractor productive capacity between those two business cycles.
The attractor productive capacity before the 1991 recession was $10.6 trillion. After that recession, the economy settled into an attractor productive capacity of $12.5 trillion, an 18% jump. Then the attractor productive capacity rose 26% to a new level during the dot.com bubble.

attractor PC shifts

The current jump from $18.6 to $21.7 trillion is a 17% jump. That is the largest jump since the 1980’s. That is a normal jump for historical data.
So doesn’t it seem to you that the current jump in productive capacity is normal? Well it is…
Productive capacity is not the problem with the economy. Economists continue to think that increasing production with monetary and fiscal stimulus is the answer.
No… the problem is demand… more specifically low effective demand from low labor share. The economy will seem sluggish and under-performing in terms of the utilization of labor and capital. For example, housing is slowing down because the rich are slowing down their purchases, and the middle and lower incomes are not strong enough. The key is to raise labor share.
Yet, labor share is in its own attractor state and will not budge until another recession can allow it to shift. Hopefully it will not shift down. So we will have to make sure it shifts up when that time comes.”

In brief, real GDP is on an acceptable level in terms of productive capacity. Yet, the economy is sluggish in terms of utilizing labor and capital because labor share has fallen so much. Monetary and fiscal policies are limited in their ability to solve this sluggishness. The solution is to institute policies to raise labor share.

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Greg Mankiw: as duteous to the vices of plutocracy as badness would require

by New Deal democrat at Bonddad blog   Re-posted with author’s permission.

Greg Mankiw: as duteous to the vices of plutocracy as badness would require

There is a drastic moral difference between those who write garbage analysis because they are mistaken, and those who write garbage analysis that is loathesome.  Greg Mankiw embarrasses Harvard with an “analysis” of inherited wealth that not only showcases the execrable insistence of many economists to utterly dismiss historical evidence, and utterly dismiss evidence of actual human behavior from the other social sciences, but also is so facile that it fatally fails even by its own logic.
Vile and illocigal.  What’s not to like?
Here’s Mankiw’s premise:

So what? What’s wrong with inherited wealth? From a policy perspective, … one might worry that inherited wealth makes things worse. Yet standard economic analysis suggests otherwise.

Mankiw starts with the truism that people love their children, but then blithely asserts, with not a scintilla of evidence, that

each person’s utility depends not only on what happens during his own lifetime but also on the circumstances he expects for his infinite stream of descendants, most of whom he will never meet.

Right now we  already have a big problem for Mankiw’s analysis.  DNA studies have suggested that after 1000 years, all Europeans are related to one another. All are descended from Charlemagne.
So, if ultimately everybody is your descendant, and if inherited wealth gives people a leg up on consumption, wouldn’t you make sure that everybody alive today inherited from you, the better to ensure that there was the maximum economic growth over the next 1000 years?  That way, by the time everybody is your descendant, they will have the biggest economic pie possible to consume.
By the way, Mankiw’s argument certainly means that the wealthy will be using all their economic muscle to prevent global warming from visiting catastrophe on humanity, a/k/a their descendants 100’s and 1000 years from now.  Oh, wait, they’re not.

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The Silly Confusion over Potential GDP

As a small economist, my views are not seriously taken seriously. But still, if I turn out to be right, I will have bragging rights. So Paul Krugman wrote today about how the IMF way over-estimated the potential growth path of GDP. His post is titled, The Damage Done

“That’s a huge shortfall.  Yet the IMF believes that the output gap is only a couple of percentage points. If so, either there was a huge coincidence — a sudden, unanticipated drop off in potential growth that just happened to coincide with the financial crisis — or the crisis, and the poor macroeconomic management that followed, have done incredible damage.”

OK… so what happened? Was there an unanticipated drop off in potential growth or was there poor macroeconomic management?

I have never been confused over potential GDP.  Mr. Krugman wants us to think that there was poor macroeconomic management. But there really was an unanticipated drop off.

Over a year ago, I saw potential GDP had started trending lower right away during the recession. Here is a graph of the CBO potential and my calculation of potential GDP (green line). (link to graph)

pot conf

While the CBO and Federal Reserve continue to adjust downward their estimate of potential GDP, my line for potential GDP started trending lower right away. It flat-lined until 2010 and then settled into a stable lower growth path. I have never had to adjust my calculations of potential GDP. Real GDP keeps moving right along my potential GDP. The confusion by economists and central banks over potential GDP will end up being expensive. Hard to say that humbly as a small economist, but from what I see, the great economists still have something to learn.

Now was there mismanagement of the macroeconomy? This is the real question? Was the economy hurt somehow by some policy? Would real GDP have trended faster upward if we had done something “correctly”?

From what I see, economic growth has been on a normal path in this business cycle. So no, I do not see any real damage, Mr. Krugman. The economy is growing normally. Let me explain with the model for effective demand.

ED 1

I only want to focus on the blue line, which shows how real GDP grows as more labor and capital is utilized. The blue line has a y-intercept of zero. (see post for explanation of model) Now ask yourself, as the business cycle goes through its expansion phase, would real GDP really tend to rise up that blue line on a straight trajectory? or would it take lots of different angles?

If real GDP tends to rise up that blue line on a regular basis, we could conclude that when real GDP moves up that blue line, the economy is expanding normally… and that there are no real shocks to normal growth.

Here are a series of graphs using real data for the model above. The blue lines that you see below have y-intercepts of zero. You will see that real GDP (the green lines) has always risen along this blue line during the expansion stage of previous business cycles. Then look at the last graph to see that real GDP in the current business cycle is once again rising normally.

real normal growth 1

real normal growth 2

real normal growth 4

real normal growth 3

real normal growth 5

And finally, the current data. You will see real GDP settle into its new trend by the middle of 2010 and began following the standard rise of the blue line.  … And has been very close to the blue line ever since.

real normal growth 6

So when all the economists pull their hair out over how real GDP rises or falls from quarter to quarter, they look pretty silly. Real GDP is rising according to its standard path.

Real GDP has been growing on a very stable path in spite of policy mistakes that people may try to point out. However, the mistake of keeping interest rates low in hopes of growing the economy back to where it was before, has not hindered nor really helped growth. Low interest rates will be a problem when the business cycle starts ending earlier than economists think.

Sidenote: Look closely at the above graphs. The real instability at the end of a business cycle comes when real GDP begins to deviate to the upside of the blue line. Real GDP is currently staying on the blue line and rising normally. So relax everyone. The economy is behaving normally… and there is no apparent disaster from macro mismanagement. The economy simply adjusted to a new level very early on in the crisis and has been following that new level.

The real disaster is how great economists, like Mr. Krugman and many others, have gotten potential growth wrong from the beginning and continue to do so…

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Consumption Income Wealth and Expectations

I learned a fact from Chris Dillow who went on to conjecture that “consumers -in aggregage – have genuine foresight”

I agree that “confidence” is a non-explanation for fluctuations in consumer spending. Such fluctuations can, for the most part, be explained by observable economic variables such as incomes, unemployment and credit availability, as John Muellbauer, for example, has shown. Insofar as spending is forward-looking, it’s not because of confidence, but because consumers – in aggregate – have genuine foresight; this is why consumption-wealth ratios help predict equity returns.

I won’t pretend that I have an open mind on the question of whether there is any sign of genuine foresight in the economy and will just jump to my counter arguemnt (in a comment so addressed to him).

There is an equivocation on the part of the post about consumption. When discussing determinants of consumption other than expectations you list

“incomes, unemployment and credit availability,” When claiming that expectations matter and are close to rational (at least positively correlated with rational expectations) the other variables suddenly change to wealth “consumption-wealth ratios help predict equity returns.”

Clearly the analysis is invalid. You have to say that consumption relative to that expected given wealth, incomes, unemployment and credit availability is correlated with equity returns.

I personally have no doubt that the correlation you mention is due to the effect of irrationality on equity returns. In aggregate (and the cross section) low p-e ratios are correlated with high returns. Equity returns over 5 years periods are negatively correlated. Other things equal low equity prices are correlated with high returns. Other things equal low equity prices are correlated with low wealth. Consumption is smooth (whether because permanent income is smooth or because of habit formation) .

I think what you report is if you take two smooth series (a moving average of corporate profits and consumption) and then look at the ratio each to insanely bouncing equity prices to each you find the ratios are positively correlated so (consumption/wealth (including equities)) is correlated with smoothed earnings/equity prices which is known to be correlated with equity returns.

I have no doubt that your evidence for some rationality is based on extreme irrationality. In particular I know for a fact that a high ratio of consumption to disposable income is not correlated with high growth of disposable income. This is obviously a much more reasonably way to decide if there is anything to the PIH.

I think that it is clear that the PIH was a turn down a blind alley. The evidence you present has absolutely no effect on my beliefs, as it is obviously of little relevance to the question.

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Think Obamacare’s not working? Think again

Republicans seem obsessed with the idea that Obamacare is a failure; that it is a “train wreck” exacerbating unemployment. But is that really so?

First of all, the claim that the Affordable Care Act is a job killer flies in the face of reality, as Dan Diamond at Forbes reports:  Since the law was signed in March 2010, the economy has added 7.7 million jobs, 982,300 of which are in the healthcare field. If Obamacare is a drag on employment, its effect is being drowned by other factors. Of course, the fact that healthcare is gaining jobs at a healthy clip suggests it’s not a drag on employment at all.

Diamond also highlights important differences between states that expanded Medicaid and those which did not. He cites a Colorado Hospital Association study of 465 hospitals in 15 expansion states and 15 non-expansion states, which show sharply divergent patterns in the two groups on the number of people seen at the hospital without insurance, and the volume of charity care per hospital. Here is his chart, a selection from that available in the CHA study.

 

BpVX9bdIEAIur92.png-large

Source: Colorado Hospital Association, June 2014, link above

 

As we can see, hospitals in both expansion and non-expansion states were seeing between 4.5% and 5% uninsured quite consistently in 2012 and 2013. (Note that the study did not include Texas or California, the biggest state in each category, both of which had high overall uninsured rates.) In the first quarter of 2014, as new insurance began to kick in, there was an immediate drop to 3.1% in the expansion states, while the figure actually edged up in the non-expansion states to 5.0% from 4.8% a year previously.

For charity care, there was already a noticeable difference between the two sets of states over 2012-2013, where hospitals in expansion states provided an average of $3 million in charity care per quarter vs. about $4 million in non-expansion states. Again, we see an immediate improvement in the expansion states in the first quarter of 2014, falling by about 1/3 to $1.9 million, compared to a slight increase in the non-expansion states relative to the first quarter of 2013.

Meanwhile, rural hospitals are closing in non-expansion states, prompting the Republican mayor of Belhaven, North Carolina, where Vidant Pungo Hospital is closing, to call on the state to accept the Medicaid expansion made optional by the U.S. Supreme Court’s ruling that upheld the ACA’s individual mandate.

In another post, Diamond underlines other dimensions of Obamacare that usually go under the radar. Perhaps the most powerful, but rarely discussed, effect is that on healthcare quality. Diamond catches a December 2013 study from the Centers for Medicare and Medicaid Services (CMS). As Diamond explains, one early ACA initiative allowed CMS to reduce Medicare payments to hospitals that had high re-admission rates, which is generally an indicator of poor care. Specifically, as the study says, re-admissions within 30 days “often means there have been unclear instructions to patients or lack of follow-up care.” Here is the 30-day re-admission rate for Medicare from 2007 through August 2013.

 

Line chart. Shows annual readmission rates holding steady at 19 percent from 2007-2011, then declining to 18.5 percent in 2012 and 18 percent for the first 8 months of 2013.

 

Source: Office of Information Products and Data Analytics, CMS (link above)

 

As we can see, there was virtually no change from 2007 through 2011. But in 2012, the rate fell by a full half-point, and by even more than that in the first eight months of 2013. As Diamond points out, this is pretty hard to spin as anything but a success for Obamacare. He also provides a map from the study which shows that virtually the entire country had an improvement (see link to the study or his article). In only six states were there any areas seeing worse performance, defined as an increase of over 0.25 percentage points. Numerous states saw increases in all of their CMS regions, and plenty of regions saw improvements greater than 1.5 percentage points, including Las Vegas, Memphis, and almost all of Kansas.

Finally, let’s look at the issue that has dominated the discussion: Are more people actually insured? Paul Krugman sends us to the Gallup poll on the percentage of uninsured Americans. The poll, based on more than 30,000 interviews in April and May, showed that the uninsured rate dropped 3.7 percentage points for all adults from the 4th quarter of 2013 to April-May 2014 (see graph below). It dropped 6.2 percentage points for African-Americans and 6.0 points for those with an income below $36,000.

 

Percentage Uninsured in the U.S., by Quarter

 

The best estimate of total ACA enrollments continues to come from Charles Gaba at ACAsignups.net, who estimates a range from 23.6 to 28.2 million gross enrollments.

Finally, don’t forget the PP in PPACA, patient protection. Everyone can now get insurance regardless of pre-existing conditions, no one can have their insurance canceled because they get sick, and no one has annual or lifetime insurance caps anymore. Indeed, these factors may well lead us to see a decrease in the country’s bankruptcy rate, as medical bankruptcies become less frequent.

Obamacare not working? Don’t believe the hype.

Cross-posted at Middle Class Political Economist.

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Cantor’s Defeat—What It Does Not Mean

Shocked by House Majority Leader Eric Cantor’s defeat in last week’s Virginia primary, many in the media have decided that this “earthquake” has re-shaped the political landscape.

Immigration reform is dead, they say, and tea party radicals are far stronger than many suspected.

Meanwhile, the alarmists warn, political polarization has divided the country, poisoning our democracy. On that last point they are half-right; Republican voters have moved to the far right, while politically active Democrats are beginning to shift toward the left.

But polarization is not a threat to the Republic. Debate can clarify the issues– and underline what is at stake. Conservatives are making it clear what they are willing to sacrifice for the sake of their ideology, and mainstream Americans are becoming alarmed. “The nomination of someone like Brat—who would like to slash Social Security by 2/3—could bring them out to vote in  mid-term elections.

As I will argue in part 2 of this post, a national debate on what are, ultimately, extraordinarily important issues, could  strengthen the nation. In Congress, Republicans and Democrats remain gridlocked.

In  mainstream America many citizens are disengaged. “I’m just not interested in politics,” they say. Or, “I’ve given up on politicians.”‘

A democracy needs a passionate, engaged electorate. Indifference is what will poison the Republic.

Cantor’s Loss Does Not mean that “Immigration Reform is Dead”

The conventional wisdom says that, until recently, President Obama had been waiting for the House to act on immigration reform. Supposedly, Eric Cantor, the House Majority leader, was open to some sort of compromise on an overhaul of immigration law, and this is why he lost the primary.

Not so fast.

First, this is not all up to the House. Obama could use his executive authority to limit deportations.

Speaking at a fundraiser the day after the primary, President Obama said: “It’s interesting to listen to the pundits and the analysts and some of the conventional wisdom talks about how the politics of immigration reform seem impossible now. I fundamentally reject that.”

An Army of Refugee Children Flood Our Borders–What Should We Do?

Even as the president spoke, thousands of children from Central America continued to surge across our border, seeking an escape from the violence and poverty of Central America.

Once minors get into the U.S., they typically turn to immigration agents for protection. Under U.S. law they must be held pending arrangements for deportation or release. They have no rights to representation, though Legal Aid attorneys have been trying to help many.

On Fox Special Report with Bret Baier, political analyst Brit Hume paid tribute to these lone childrens” struggle and their courage: “The immigrant children illegally crossing American borders by the thousands have triggered a logistical, humanitarian and law enforcement crisis to which current US immigration policy has no satisfactory answer.

“It may be tempting to call for their deportation,” he added, “but that ignores an important consideration: what the minor children, most of them unaccompanied by adults, had to go through just to get here.

“Nearly all are from Guatamala, El Salvador and Honduras, three countries plagued by extraordinary levels of drug and gang violence. Honduras now has the highest per capita murder rate in the world.”

“I have seen some of these kids,” Hume told his audience. “A youth home where I serve on the board here in Virginia has taken in dozens of them.  They are remarkable kids from what I have seen of them.  They are well behaved. When meals are served some of them weep at the fact that they’re eating better than their families can back home.  They wait till all are served before they’ll eat. They turn up at prayer services.  . . .  They potentially could make an enormous contribution to this country if we can find a way to house them and care for them and let them stay”. (Hat-tip to Digby for calling attention to Hume’s impassioned speech.)

The flood of young refugees, crossing into this country daily– and overflowing holding centers—casts a spotlight on their plight, making it clear that illegal immigration is not a problem that we can ignore. We just don’t know what to do with these children.

One Boy’s Story

“‘Where I live, parents are obligated to give a son to the gangs,’” Carols, a 17-year-old from Honduras told Bloomberg, while fighting back tears.

An uncle who tried to defy the criminals paid with his life.

Another child showed Bloomberg his right hand: before he fled Honduras, a gang had accosted him on the street and amputated the tips of two fingers

“If you want to live, you have to leave your family,” a third 16-year-old confided.

“Carlos’ journey of 1,700 miles (2,700 kilometers) took about a month by bus and foot,” Bloomberg reports. When he arrived in northern Mexico, just a quarter mile from the border, he  explained that he hasn’t decided whether he’ll try to reach an uncle in Houston clandestinely or voluntarily surrender to border agents.

“’If I do that, they could deport me,” Carlos explained

“That could be fatal” the reporter observed.

Pressure on President Obama

In the U.S., reform advocates continue to press Presidebt Obama to lower the number of deportations, and to extend amnesty to the parents and guardians of “Dreamers”—children who have been in this country for five years.

“Just because Cantor lost doesn’t mean that all of those other conversations and criticism of immigration goes away,” Julian Zelizer, a Princeton University historian recently told CNN.” The likelihood was that the President was planning to use executive action anyway regardless of what happened to Cantor.”

I’m at all certain that Obama was poised to act.  Friday, White House representatives disappointed reformers by saying that “they are still leaving the window wide open for Congress to pass an immigration bill by the end of the summer — before the White House makes moves to implement more limited fixes on its own.”

Kevin McCarthy- The Man of the Moment

But Majority Whip Kevin McCarthy, the California Republican who is replacing Cantor as the Majority Leader of the House, could emerge as an unlikely reform advocate.

McCarthy hails from California’s 23rd congressional district, an area that is 35% Latino, and where the local business community depends on immigrant labor to pick local crops.

We have spoken with Congressman McCarthy and his staff about immigration reform and its importance to our local and regional economy,” Cynthia Pollard, president and CEO of the Greater Bakersfield Chamber of Commerce recently told CNN.

“I led a delegation of several other business leaders in a meeting with Congressman McCarthy last fall in Washington, D.C., to discuss the issue,” Pollard added. “He expressed . . . his commitment to a step-by-step assessment and overhaul of the system that is clearly broken.”

Indeed, McCarthy has said that he favors extending legal status to undocumented immigrants, if not full citizenship.

No surprise, the immigrants’ advocates are ready to turn up the heat: “As the person responsible for scheduling House votes, when it comes to immigration reform, McCarthy will either be a hero or a zero,” Frank Sherry, executive director of America’s Voice, an immigration reform advocacy group recently told CNN.

“He can save the GOP from itself by quickly scheduling a vote on historic legislation that the majority of the House, the country and even his district supports; or he can squander the opportunity . . . The future of the GOP may well hinge on his choice.”

According to CNN “immigration groups that have staged sit-ins at McCarthy’s district offices in the past vow they are poised to do so again if they sense he’s unwilling to tackle reform.”

Clearly, immigration reform is not dead.

To the contrary, in some ways I’m more hopeful than I was before Cantor lost his primary. At most, Cantor’s support for reform was lukewarm.  In fact, there is a strong argument to be made that Cantor lost, not because he was ready to compromise on immigration, but because his supporters didn’t turn out to vote. They thought he had the election locked up.

McCarthy, on the other hand, is going to be feeling serious pressure from businessmen back home, and they, along with the flood of young refugees from Central America, will keep the issue front and center.

Finally, it’s worth remembering that last January McCarthy was the first member of House GOP leadership to support legal status for undocumented immigrants.    He  pointed out that: “42 percent of the people who are here illegally came here legally on a visa.” He believes that “we need a guest workers program.”  He also co-sponsored the ENLIST Act, with fellow Californian Rep. Jeff Denham, which would have provided a pathway to citizenship for certain undocumented youth who serve in the military.

Granted, if McCarthy supports virtually any type of reform, House Republicans who are up for re-election and fear Cantor’s fate will feel obliged to take a very hard line—even if that means standing up to their new majority leader.  But when Rupert Murdoch is begging his party to act on immigration reform, you know that Republican opposition is cracking.

My guess is that the debate over immigration will come to a head either toward the end of July, or during the midterm elections.

Cantor’s Defeat Does Not Mean that the Tea Party is Alive and Well

Since Cantor took a drubbing, more than one commentator has insisted that David Brat’s win is proof that “the tea party is resilient.”

This theme goes hand in hand with the notion that immigration reform is dead. “Now many in the Beltway will simply say immigration is untouchable because the tea party wants it that way and if the tea party can beat Cantor it can beat anyone” one pundit declared.

Not true.

First, it is important to recognize that Brat was not supported by the National Tea Party. His cheerleaders represented a small fringe group in one Virginia district. And Virginia’s 7th district is not just another Republican district. For 43 years it has been a GOP stronghold. The last Democratic congressman elected from the 7th left office in 1971.  Since then, gerrymandering has only intensified political passions in that neck of the woods.

Secondly,  Brat himself is not a typical tea party activist who believes in small government.Consider his views on a range of issues:  Reportedly, Brat supports slashing Medicare and Social Security payouts to seniors by 2/3.  He wants to dissolve the IRS. He doesn’t fear global warming. And he doesn’t believe in the “common” good.

Will he express these views during the campaign? If he does, it is possible that alarmed centrists (particularly seniors) could come out in force, handing victory to his Democratic opponent, Jack Trammell.

I am not saying that this will happen But  Brat is an inexperienced, unpredictable politician who might do or say anything.

For example, he has called for extreme cuts to funding for education. On “You.Tube” he explained: “My hero Socrates trained Plato on a rock. How much did that cost? So the greatest minds in history became the greatest minds in history without spending a lot of money.”

(Aristotle and Plato on a rock? Imagine what Jon Stewart could do with that as a model for how we should redesign our public schools.)

Nor is Brat simply another right leaning economist. His CV shows that his scholarly work includes “God and Advanced Mammon — Can Theological Types Handle Usury and Capitalism?” and “An Analysis of the Moral Foundations in Ayn Rand.”

How many grass roots tea partiers talk about Ayn Rand, Mammon and Usury?

In sum, Brat is not a garden-variety Tea Partier. A fringe candidate, he was elected by a fringe of the electorate in an unusually conservative district.

As Ezra Klein has pointed out: “Eric Cantor wasn’t beaten by the Tea Party. . . “CANTOR’S LOSS LAST NIGHT CAME AT THE HANDS OF ABOUT 5 PERCENT OF HIS CONSTITUENTS.” [his emphasis]

Some have suggested that Brat will embolden other Tea Party types to crawl out of the woodwork and run for office.  But I doubt that we’ll see many Brat look-alikes joining Congress.

Professor Brat is sui generis  Or to put it another way, he is somewhat unhinged. In this, he reminds me of Sarah Palin. I can’t help but wonder: can he see Russia from Richmond?

Originated at Health Beat Blog, Maggie Mahar

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TISA

The Trans Pacific Partnership (TPP) trade pacts, the increased desire to ‘invert’ ownership and headquarters by ‘American’ companies, TISA (published only by Wikileaks?), points us to a world managed by what organizations?

Via Alternet comes a note in TISA, a trade agreement that tries to frame itself in the private/government rhetoric, but we need to substitute ‘free’ for ‘managed’ trade in our discussions, and figure out ‘managed for what and who’:

As with leaks from the secret Tran-Pacific Partnership negotiations, this leak shows that the largest corporations are working to bypass recent efforts by governments to rein them in by pushing through “trade” agreements that override their ability to write their own laws and regulations.

This time the leak is the “Financial Services Annex” of the Trade in Services Agreement (TISA). It shows that the TISA negotiations are an effort to not only undo the minimal regulation of Wall Street that occurred after the financial crash, but to further deregulate financial markets worldwide.

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The VA, Still The “Best Care Anywhere”

Today, “Economist’s View showcased Paul Krugman’s latest NYT article“Veterans and Zombies”. Paul discusses how the hyped-up VA issues are being used as an example of under performing government healthcare to emphasize how bad the much larger PPACA healthcare reform could be if allowed to proceed. Of course this is not true; but both Mark and Paul missed the data found by the most recent VA audit. The results of the audit were released June 9th. I left a long reply on the thread detailing the findings of the recent VA audit.

There is no comparison to be made of the VA healthcare to private healthcare. The VA is ahead of private healthcare and where private healthcare should be if it were going to improve. In a nutshell, the VA is well beyond the typical private healthcare system in providing “evidence-based protocols of care — not inadvertently ordering up dangerous combinations of drugs, or performing unnecessary surgeries and tests just to make a buck and treating the whole patient and not just one part at a time.” The services for fees cost model does not exist in VA healthcare for veterans.

If you remember, I had recently written “Wait Times at the VA” detailing what the recent Inspector General had discovered in the audit of the VA as reported June 9th “U.S. Department of Veterans Affairs VA Access Audit & Wait Times Fact Sheet System-Wide Overview”. Phillip Longman the author of the “Best Care Anywhere” featured the Inspector General’s report on the Washington Monthly “Just How Long Is The Wait”

“The nationwide Access Audit covered a total of 731 separate points of access, and involved over 3,772 interviews of clinical and administrative staff involved in the scheduling process at VA Medical Centers (VAMC), large Community Based Outpatient Clinics (CBOC) serving at least 10,000 Veterans and a sampling of smaller clinics.” Included in the finding were these issues:

– A complicated scheduling process resulted in confusion among scheduling clerks and front-line supervisors.
– A 14 day wait-time performance target for new appointments was not only inconsistently deployed throughout the health care system but was not
attainable given growing demand for services and lack of planning for resource requirements.
– Overall, 13% of scheduling staff interviewed indicated they received instruction (from supervisors or others) to enter a date different than what
the Veteran had requested.
– 8% of scheduling staff indicated they used alternatives to the official Electronic Wait List (EWL). In some cases, pressures were placed on
schedulers to utilize unofficial lists or engage in inappropriate practices.

Immediate Actions to Be taken as a result of the Audit:

– VA has accelerated care for Veterans currently waiting for health care services. VHA is in the process of contacting in excess of 90,000 Veterans
during the first phase of VA’s “Accelerating Access to Care Initiative.” The first phase is the first appointment.
– VHA will provide Veterans who do not currently have an appointment, or are waiting for additional care or services longer than 30 days the option
to be rescheduled sooner if VA capacity exists, keep their scheduled appointment, or be referred to non-VA providers in the community.
– VA has suspended all VHA Senior Executive Performance Awards for FY14
– VHA will remove 14-day performance goal from employee performance plans
– VHA will revise, enhance and deploy Scheduling Training
– VHA will implement a site inspection process.

What is so different about this if one were to compare the VA to private healthcare is, if the issue occurred in private healthcare nothing would have happened or reported to correct the issue. The VA had set up guidelines for scheduling people, a 14 day window, and a procedure to report on it. People created work-a-rounds to the procedures and processes to surpass the reporting and they got caught. The issue went public. Little if any of this reporting occurs in private healthcare, much less public reporting. Yet Congress and critics think that closing down the VA and turning veterans over to the private healthcare system is a benefit to veterans. It is not a benefit to veterans and is a detriment

Audit Findings: Long Term and Other Actions:

– VHA will overhaul the scheduling and access management directive.
– VHA will roll out near-term changes to the legacy scheduling system.
– VHA will acquire and deploy long-term scheduling software solutions.
– VHA will reassess and establish access timeliness goals.
– VHA will strengthen accountability for integrity in scheduling and access management.

The VA is implementing change to again take on scheduling of Veterans for appointments. That the VA even had a 14 day goal for appointments is far beyond what can be see in private healthcare except if one goes to the ER.

Wait Time Information

On May 15th, the VA had ~ 6 million appointments scheduled across its system. ~57,000 Veterans are waiting to be scheduled for care. ~ 63,000 veterans over the past ten years have enrolled in the VA healthcare system and have not been seen for an appointment. The VA is making contact with those who need scheduling and the new enrollees to clear up the backlog.

– Of the 6,004,350 total appointments scheduled, 96% of them or 5,763,291 appointment were made in 30 days or less.

– Conversely, 242,059 veterans or 4% of the 6,004,350 scheduled appointments were made after 30 days.

– The audit shows that even appointments at the Phoenix, AZ VA (the ground zero of the VA scandal), 89 percent of people enrolled in the system
received an appointment in less than 30 days. The average wait for established patients to see a primary care doc coming to just over 14 days.

– Most everywhere else in the VA system, average wait times for established patients to see a primary care doc are in the range of 2 to 4 days, as
are waiting times to receive specialty care.

Mind you, three months for a doctor’s visit is too long; but, it is not so out of the ordinary as what is being experienced in private healthcare today. The audit did reveal there are ~ 57,000 veterans who have waited for a doctor’s visit longer than 90 days and representing ~ 1% of the 6 million vets taken care of by the VA. Furthermore, there are ~ 63,000 veterans who are more-than-likely not the newly arrived veterans from Iraq/Afghanistan as claimed by CNN and the rest of the media. Much of this numeric can probably be explained by the relaxing of VA regulations on admission into VA care. Many Vietnam Veterans have reapplied to the VA with the idea we may be accepted. I would urge any veteran to apply as the regs do change as well as your income and you can be grandfathered even if the next president tightens the regulations as Bush did.

The VA is not flawless as many of veterans today know and I surely do. Of the 57,000 veterans waiting for an appointment, some veterans may have been forgotten by the VA, some may have moved to another city and missed the appointment, some may have gotten group insurance, and many may have enrolled immediately upon discharge to insure grandfathering and not need an appointment. This was the broad base upon which CNN made up its news story along with other media outlets and politicians with unsubstantiated data which is proving to be more hyperbole than fact.

Sending veterans to private healthcare after breaking up the VA is what CNN, the media, and the politician’s call a “benefit” bestowed upon Veterans. It is not a benefit and will only make healthcare treatment worse for veterans.

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