Relevant and even prescient commentary on news, politics and the economy.

Socialism At Its Finest

The Grey Matter Blog does a nice little bar chart on insurance profitability; “Socialist” Obamacare a boon to insurance companies” since the passage of the PPACA in 2010. I gotta say this is nothing like what I would have expected to happen; but, I have to acknowledge my other blogger-foil’s told-you-so remarks to me repeatedly.

With all of those socialism programs we liberal put out there, who would have thought the healthcare insurance racket would do so well under government regulation? Only one insurance company failed to outperform the S&P.

Insurance

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How the Democrats Should Deal With the AnthemBlueCrossCare Issue. Really.

Today, the House of Representatives will take up GOP Rep. Fred Upton’s proposal to ”fix” Obamacare by undermining it, and the vote is being widely cast on a referendum on whether Dems will continue distancing themselves from the law. Meanwhile Senate Dems are also still considering fixes of their own that could undermine it, though that’s subsided.

The Morning Plum: For Democrats, it’s gut check time, Greg Sargent, Washington Post, this morning

The Washington Post’s Ruth Marcus is not among my favorite political pundits, but the apt title of her column today–Obama’s political malpractice–sums up not just the current Obamacare-related debacle but my abiding assessment of Obama dating almost to the outset of his presidency.  Marcus’s column makes the point that Obama’s attempts, such as they have been, to gain control of this spiraling situation just make the situation worse. But that’s par for his course.

Actual smart and competent congressional Democrats and party leaders–four senators who come quickly to mind are Elizabeth Warren, Sherrod Brown, Jeff Merkley, and Dick Durbin–need to grab the reins and use Democratic Party funds to establish a massive phone bank, and rent small neighborhood offices, where people who have received cancellation notices of their teensy-coverage plans can get quick easy assistance in learning of their actual options.  These Dems need to get the word out, loud and clear, that insurance agents are engaging, en masse, in misleading these people by, most conspicuously but not exclusively, telling them that the particular “replacement” policy they are offering or suggesting is the individual’s cheapest option.

I call it AnthemBlueCrossCare, because nearly every one of these misleading cancellation letters that I’ve read about is from one or another state’s Anthem Blue Cross or Blue Cross company; I keep wondering whether that is the only company that has been offering these teensy-coverage policies, or whether instead this company has just perfected the strategy to a science.

Occasionally, some diligent journalist will actually investigate the situation and will find that the individual or family actually has options that provide better coverage at about the same or less cost.  The 46-year-old woman, for example, who chafes at being forced to buy a plan that includes maternity care can get a plan for that costs the same or less than the one being cancelled that does not.  But by now, largely thanks to mainstream news media organizations such as the New York Times that have credulously published the Anthem-Blue-Cross-is-canceling-my-policy-and-only-offering-one-at-a-500%-increase-in-premiums-and-I’m-forced-under-pain-of-prison-to-not-look-elsewhere-for-health-insurance anecdote–and thanks (surprise, surprise!) to Obama’s failure to inquire into the actual options of these anecdotal victims–journalists’ refutations of these stories is, as my mother would say, like pushing back the sands.

But surely actual smart congressional Democrats and party leaders recognize that what matters to these people is not being able to keep their current plan but in not having to pay more, or a least not a lot more, to get acceptable coverage.  The 46-year-old woman who doesn’t want to pay for maternity coverage or, as she complains, coverage for stage-four-cancer treatment, or for sex-change surgery (surely something that represents most of the additional 500% increase in premiums from Blue Cross that this woman inferred was her only option since Blue Cross didn’t mention any other, because of the commonness of this surgery), might be happy to pay, say, an extra $100 a month for doctor and hospitalization coverage–which apparently her soon-to-be-cancelled policy does not include, since if it does it would have been the best-kept-secret-about-the-best-insurance-for-the-price-in-this-entire-country; hospitalization coverage for $100 a month!–in case, y’know, she needs an appendectomy or surgery for a broken ankle.

Okay, well, Obama apparently recognizes this too.  He just can’t trouble himself to assign a few people within the administration to, maybe, look into these anecdotes and report on their accuracy.  But the Democratic Party can pick up the slack, and the actual smart and competent congressional Democrats need to start aggressively picking up the slack and making that happen and getting out the word.

I’m sure they recognize by now that the next three years must be devoted to aggressively picking up the slack on a veritable slew of important policy matters and presenting facts and policy proposals clearly, loudly, and often, to the public.  Sure it would be nice to have the president do this, but the president won’t do this, probably because he can’t do this. I mean that literally; he lacks not only the desire but also the ability to do it.  But it’s critical that it be done.

And that it start en force immediately.

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Columbia U. Conference Shows Incentives Pervasive but Controls Work

Columbia U. Conference Shows Incentives Pervasive but Controls Work

 Day one of the Columbia International Investment Conference in New York has concluded, and the takeaways are very clear. The topic is investment incentives, prompted by Louise Story’s “United States of Subsides” series last December. Story moderated panel 1, which covered the pervasiveness of subsidies. How widely used are investment subsidies? As the presentations made clear, they are used by virtually every country in the world. That is depressing takeaway number one.

The second big lesson is that for most types of foreign direct investment, the use of incentives has no effect at all. Resource companies, companies seeking strategic assets, and companies needing to sell in a particular market are coming regardless of the use of incentives. (I would qualify the last part to say that only applies when coming to markets that aren’t divided into a number of competing jurisdictions, such as the US and EU, where the member states can engage in subsidy wars, related but gated article here.) It is only for “efficiency seeking” or cost minimization investment that incentives can make some difference in location decisions.

Third, one of the biggest cost of incentives consists of funds given to firms that were coming to your location even if they had not received the subsidy, according to Louis Wells, the panel 2 moderator. He says most studies place this at 60% to 70%. A more recent study by Peter Fisher (p. 8) says that a more typical figure for the amount of jobs is only about 9%, versus the 30-40% implied by Wells. This means that the real cost per job of projects is at least 2.5 times as large as reported cost per job, and may be up to 11 times higher. And don’t forget that there is also a big opportunity cost based on the value of other possible uses of the funds given away. As I have pointed out, all the public sector jobs lost since December 2007 could be replaced if incentives were abolished.

Fourth, the good news is that there are control methods that do work. I have written before about this, and a conference presentation by Investment Consulting Associates (p. 3) illustrates this with a comparison of incentives in the United Kingdom and the Czech Republic. Recall that European Union state aid policy aims to direct bigger incentives to poorer regions of the EU. ICA’s database shows that the mean incentive was more than twice as large ($8.61 million vs. $3.41 million) in the Czech Republic than in the UK; the  mean “aid intensity” (subsidy/investment) was 36% in the Czech  Republic compared to just 15% in the UK; and mean cost per job was $67,088 in the Czech Republic versus only $20,288 in the UK. These are precisely the outcomes the European Commission wants to achieve with the state aid rules, creating a reliable bias in favor of poorer regions (and at the same time the poorer regions have subsidy limits holding down what investors can receive).

Tomorrow (Thursday, November 14) will have panels on “What are the alternatives” and my panel, “The way forward,” where we will discuss EU rules and other methods of controlling out-of-control incentive wars. You can follow the action on Twitter at #CIIC13.

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State and local government austerity is over…

Bill McBride at Calculated Risk points us to some apparent better news State and local government austerity is over

I think most of the recession related state and local government layoffs are over, and it appears state and local government employment has bottomed.  Of course Federal government layoffs are ongoing, but it appears state and local government austerity is over (in the aggregate).

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2008… Let me be clear: I will not do either. Candidate Obama

Via Business Insider:

While campaigning for President in 2008, candidate Barack Obama promised to not alter the way that cost of living adjustments were calculated for Social Security, a policy that is now a key feature of his 2014 White House budget.

Addressing the AARP in September 2008, then-Senator Obama drew a major contrast between his policies and those of his Republican rival John McCain:

John McCain’s campaign has gone even further, suggesting that best answer for the growing pressures on Social Security might be to cut cost of living adjustments or raise the retirement age. Let me be clear: I will not do either.

But things have evidently changed. A critical element of the President’s new budget involves cutting cost of living adjustments through the adoption of chained CPI — a policy that will result in compounding benefit cuts for current and future retirees:

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Social Security and Me: Ayn Rand, the Four Freedoms, the Road to Serfdom and the Leninist Strategy

What the —! Well it occured to me, and not for the first time, that a lot of people really don’t understand my Social Security project and particularly what even some of my friends and allies think is a narrow focus on the nuts, bolts and numbers of Social Security financial reporting. It seems to them to often miss the point entirely. But there is method to my madness (although all madmen claim the same) although that method is based on an apparent paradox: the battle over Social Security is NOT about numbers and in most respects never has been. So why focus on them? And why set up a so-called game called ‘Total Security on Elsinore’ that seeks to abstract Social Security from all societal and economic context? Well the clues are in the post title and hopefully will be explicated below the fold.

But fair warning. There will be a lot about “Me” here. And for people who find me and my writing some combination of irritating, innumerate, illogical, intemperate, and worst of all interminable this probably isn’t the post for you. For others, friends, allies, and foes —–

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Total Security on Planet Elsinore: a Social Security Thought Game (Part 1)

Lets play a game. The ultimate point of the game is to understand certain aspects of Social Security but to keep complications from creeping in too early (wait for later parts) we are going to start with simple game play on a board far, far away. In fact on distant yet oddly Earth-like Planet Elsinore.

Setting the map. Elsinore has two large land masses named in order of discovery by the dominant tribe as Old Elsinore and New Elsinore. Elsinoreans are much like Earthlings except that they are universally numerate and logical (which makes them not much like us at all). The land mass of New Elsinore is shaped like an hourglass which has led our logical (if unimaginative) Elsinoreans to dub them North New Elsinore and South New Elsinore. Two centuries ago certain inhabitants of North New Elsinore established a democratic republican polity under the name of the United States of Elsinore. (Which name cheesed off every other inhabitant until the warlike and heavily armed USErs explained to them ‘Shut UP’).

Any way the citizens of what they liked to call the Good Ol’ USE established a program a hundred years back designed to deliver a minimum income to retired citizens of USE which they called Total Security or TS. This program is financed by an individual income tax starting from the first dollar with no exceptions, exemptions, deductions or caps at a rate of 10%. The overseers of TS were quite naturally known as the TS-tees and among other things were mandated to report on the finances current and projected of TS on an annual basis. So that is the map.

Game One and Special Rule One.
All citizens of the USE agree that under no circumstances should the current schedule of TS benefits be cut either now or in the future.

Game One Scenario. The TS-Tees report that Total Security faces a shortfall starting in Year 20 that would require a 20% cut in benefits overnight. This shortfall amounts to 2 percentage points of current income. This could be backfilled by an immediate boost in dedicated income tax from 10 to 12%, itself a 20% increase in tax. Or it could be phased in over the 20 years in a way that reduced the sticker shock up front but by deferring portions of the fix to future years would mean a higher rate in the end, how much depending on the phasing schedule.

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Ripping Off College Students’ Economic Future

Previously, I had written on Fair Market Value and its use by the CBO’s Douglas Elmendorf to rate the risk of Student Loans as advocated by both The New America Foundation and the Heritage Foundation. A rebuttal answer to a partisan CBO, the right-leaning New America Foundation, and the conservative Heritage Foundation on the usage of Fair Market Valuation methodology in the same manner as what I would have used it for to rate the return on a piece of capital equipment is simple. It is inappropriate for student Loans as there is little or no risk to loaning students money which can not be discharged through bankruptcy. The news media has been pandering to students promoting  a generational war by advocating the theft of student’s futures by such programs as Social Security, Medicare, Medicaid, etc. The Tom Friedmans, James Freemans, and others suggest baby boomers are ripping-off the X, Y, and Z generations with these programs.  From the well-heeled segment and do not have to work anymore 1-percenter population, we find Stan Druckenmiller, Pete Peterson, the Koch brothers, etc. spending portions of their $billions advocating the discontinuance of Social Security to save the country, students, and themselves. Some are taking to college campuses with false data and advising students to protest the rip-off of their futures in a Days of Rage manner. All tend to ignore the real threat to students and their future. The threat is not likely to come from Social Security, Medicare, etc.

What is threatening the future wealth and income of college students is the increasing debt taken on by students seeking the education necessary to have a chance in a global economy where investments are seeking fewer Labor intensive opportunities.  The increased funding necessary to go to college is the result of decreased governmental funding of schools, declining or stagnant household incomes, financial strategies delineating the increased risk of student loans  (CBO, The New America Foundation, Heritage Foundation, etc.), and the increased cost of attending colleges and universities (which as Alan Collinge of Student Loan Justice Org. states cost increases have outstripped CPI and even Healthcare) .

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The Map Office Still Calling: Israeli capabilities for striking Iran

Back in 2009 I put up a post with the title Joe Biden? The Map Office is Calling! after Joe had apparently given a green light to Israel to bomb Iranian nuclear facilities. In it I pointed to a study by Toukan and Cordesman Study on a Possible Israeli Strike on Iran’s Nuclear Development Facilities . On my reading the authors, without explicitly saying as much, concluded that such a unilateral strike was impossible simply on a logistical basis, while Israel had the offensive punch to deliver such a strike it just didn’t have the in-air fuel supply capacity to get the planes safelyback out of Iranian airspace and returned to their bases. You can read the study for yourself and my take on it but the IIRC longish comment thread it sparked didn’t survive the transition to Word Press from Blogger.

Be that as it may the talk of Israel finally running out of patience with the U.S. and taking out Iran’s nuclear capabiity on its own still persists today. Leading me to wonder if Israel had in the intervening years actually beefed up its in-air refueling capability in a way that would allow it to successfully carry out this strike today. And through the miracle of Google I found what is essentially an September 2012 update by Toukan and Cordesman Analyzing the Impact of Preventive Strikes Against Iran’s Nuclear Facilities Like the first piece this latest study contains an amazing wealth of detail on both the Israeli and Iranian Order of Battle for both a conventional aerial attack or one launched by ballistic missiles as well as detailed information on the nuclear programs both military and civilian for both parties. so it is well worth reading for that alone.

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How to Sound Insane by Talking Like a Bi Partisan Expert on Social Security

by Dale Coberly

How to Sound Insane by
Talking Like a Bi Partisan Expert
on Social Security

I apologize for the next couple of paragraphs because they sound overworked and insane,  but that’s what happens when you try to illustrate the way Washington talks about Social Security.

Try to imagine you have to buy a medicine that will save your life. You need 100 pills, and the doctor firmly said, “Finish the Medicine…  if you stop too soon the infection will come back worse and you will die.”

So you go to the pharmacy and the pharmacist tells you the price of the medicine has gone up and your insurance will only pay for 98 pills.   You say, “Okay, I’ll pay for the last two pills myself.”

But the pharmacist tells you,  “I can’t let you do that.  I can only give you the number of pills your insurance will pay for.”

This is what the “debate” about Social Security amounts to:   You are going to need Social Security when you get old.  The cost is going to go up by then about two percent.   Washington has decided they can’t let you pay the extra cost. The only solution they are willing to consider is cutting the amount you will get… to less than it will take to keep you alive.

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