Senator Elizabeth Warren says it well:
Transcript is found at Floor Speech by Senator Elizabeth Warren The Retirement Crisis November 18, 2013 As Prepared for Delivery.
I am nearing the end of my 16 day jaunt starting in China and ending in Thailand. It has been 7 years since I have been in Thailand and the same for China other than an overnighter plus a day in Shanghai, China. Both places are surging in infrastructure and in business. Let me explain why I say such.
I am a Global Procurement Manager for a $500 million division of an $8 billion corporation. My VP and I have been hitting the machining, die casting and casting, extrusion, forging, fabrication, and steel manufacturers in both countries at the rate of 2-3 per day. We have traveled by train, plane, and automobile in China and plane and automobile (besides tok-tok) in Thailand.
The China pros: The 200 mph train ride to Ningbo, Suzhou, etc. The seats were comfortable, the stops few, and the time sent moving between cities quick. A lot of infrastructure building going on in the cities and outside of the cities. A company I visited (TonTech ) was making a $1 billion investment in a milling machine / fabrication facility and another $1 billion investment in a casting and forging facility. We stopped to see a needle bearing facility which can meet our needs and beat McGill with a lower cost and similar capability. It is a startup and the owner lives on site with his family and one huge dog. The food is good and the people mostly friendly.
The China Negs: Air Pollution is everywhere. The quality of air is typically poor to bad on most days without a strong wind. Haimen, China I thought had the worst for quality of air. It was always smoky and the air irritates. Even with license plates exceeding $10,000 per vehicle for Shanghai, China; traffic is still horrific with travel measured in hours during certain parts of the day. Shanghai is one of the biggest cities in the world. Some of the Chinese are just plain rude to each other.
The Thailand Pros: It is warm for sure and in the nineties even now. The sky train above Sumhumvit Road in Bangkok is cool. Again there are many small businesses at $2 million to $250 million which would suit our needs. The intelligence of how to machine and extrude is excellent and they bring things to the table. Remember what I have always preached, it is about Overhead and not Labor in Asia when comparing against the US. Travel in Bangkok and the surrounding areas is easier even with poor roads.
The Thailand Negs: It is hard not to walk the streets and see crippled people, moms with kids, and the elderly begging for coins. If you have a soft heart, carry plenty of small change (20 baht) in your pockets. Safety at machining is a lesser priority than what you would find in the US. There is civil unrest with the government and corruption also. There is a fair amount of pollution; but, it is not a serious as China.
In general inequity is far more wide spread in China and Thailand than in the US; however, China with all of its infrastructure building and investment in domestic improvements will overtake the US in in time as we continue to invest in Defense and tax breaks for a few. It is just a matter of time before the US is a Tier 2 nation.
Simple explanations are always suspect. So do with this what you will. It’s my basic framework for thinking about how economies work. It of course doesn’t explain everything; the headline here is tongue-in-cheek. But I find it very useful in thinking about everything else.
This thinking clashes quite definitively with traditional economic teachings. But it conforms very nicely with economic understandings that have demonstrated those teachings to be bunk. (Think: the Cambridge Capital Controversy, wherein the traditionalist economic powerhouse, Samuelson, admitted that his model — the model that almost all economists and many others even today run natively in their heads — was “definitely false.”)
It starts with money.
There is a pool of financial assets, financial “capital.” Stocks, bonds, money (bank deposits and currency), etc. etc.
People and businesses can transfer those financial assets between themselves.
Some of those transfers are in exchange for real goods and services (things that humans can consume immediately or over time to derive real human utility).
Some of those transfers are simply exchanges of one financial asset for another.
Transfers in exchange for real goods (“purchases,” “spending,” “expenditure”) create income, and spur production.
Production yields surplus. (That surplus is monetized through trade, supported over time by new financial-asset creation by banks and governments — allowing producers to turn their surplus into generalized claims, hence giving them incentive to produce.)
Surplus from production is the source of aggregate “saving.” (Though for clarity I prefer to call it accumulation. National/world wealth is about accumulating real stuff, not claims on real stuff, a.k.a. financial assets).
Transfers in exchange for other financial assets may result in better allocation of real resources.
There is a declining marginal propensity to spend (on real goods) out of wealth. So a person with ten million dollars in financial assets will spend a smaller percentage of that each year than a person with ten thousand dollars.
If wealth is more concentrated, that declining propensity means there is less spending per the amount of financial assets; the turnover is lower.
So there’s less production. And less surplus. And less income. And less saving/accumulation. And there’s less pressure/incentive for banks and governments to create and fund new financial assets, because there’s less surplus that needs monetizing. (Paradoxically, spending causes saving.)
Arithmetically, more-equal distribution of wealth means more spending, income, production, surplus, and accumulation.
There are limits, of course. Perfectly equal distribution would result in seriously problematic incentive effects. But with the wildly unequal wealth distribution we see today, it’s not crazy to suggest that the straightforward arithmetic effects utterly overwhelm those incentive effects.
Cross-posted at Asymptosis.
Lane Kenworthy has done some of the best work on this subject. Read all his stuff.
One great piece, on determinants of growth:
Only one institutional factor is strongly supported as a determinant of growth in prosperous countries, according to Lane’s really excellent statistical work: “corporatist concertation.”
Corporatist concertation is not what you think. It’s euphemistic sociologist-speak for labor having a strong place and voice at high-level bargaining tables — not just in labor negotiations, but in determining the institutional and policy structures that set the rules of the game.
Labor power is the strongest determinant of growth in prosperous, advanced countries. More labor power, faster growth.
I’d love to see equally well-executed statistical work analyzing labor-share of income and wealth relative to economic growth across prosperous countries.
Cross-posted at Asymptosis.
After 10 days scurrying around the Shanghai, China area; I am now sitting in Bangkok, Thailand and reading more of the news. Such is the life of a Global Purchasing Manager dealing with automotive and industrial. I have been reading and watching the typical media reporting about the PPACA while drinking my green tea.
Greg Sargent as reported on Crooks and Liars – How the Obamacare numbers actually look pretty good picks up on what the numbers to date mean for the PPACA. So what is the big deal???
That confirms two things we’ve long known to be true: the website is a disaster, and short term enrollment figures are a serious political problem for the White House and Democrats. But to Larry Levitt, a vice president at the nonpartisan Kaiser Family Foundation, another very telling number is this one: over 975,000 have been determined eligible for a marketplace but haven’t yet chosen a plan.
‘That’s one of the most telling numbers — a million people have been determined eligible,’ Levitt tells me. ‘That means if the website had been working well, and a million people had gotten to the end of the process, we’d be looking at a very different trajectory now. We heard about the surge in traffic when HealthCare.gov went live. This suggests there is in fact a lot of interest.’”
We can establish the PPACA website which was more or less designed as a backup to expected state run exchanges and did not function as expected. We can also safely say > half of the states who were supposed to have systems in place declined to implement state exchanges much less pass the PPACA. My experience as a part of multiple MRPII/ERP implementations where businesses decided to either change source code or make other extensive changes has always resulted in system issues. this leaves me to say, the crowing about commercial enterprises being far more successful in system implementations is just plain nonsense. Even so, the federal exchange was never meant to handle the traffic which showed up at its doorstep due to obstinate political and moneyed interests (such as in Michigan) who are more interested in seeing a President in failure than helping their constituents. 20 years since Hillarycare and little has happened to help the uninsured or stem the rising cost of healthcare (sans insurance).
Looking at the chart, Larry Levitt of the Kaiser Foundation points to the “975,000 being determined eligible in the marketplace but not having yet chosen a plan.
if the website had been working well, and a million people had gotten to the end of the process, we’d be looking at a very different trajectory now. We heard about the surge in traffic when HealthCare.gov went live. This suggests there is in fact a lot of interest.” A lot of interest in having some type of healthcare insurance
Because we have issues with the PPACA software; the proposal by Republicans, tea-baggers, and those who simply dislike the president is to scrap the PPACA this decade and wait for another decade or two to implement another version? Hmmmmmmmmmm, nope! There is no way another bill would get past the Republican held House in this decade. I have not participated with a commercial interest yet which has shut down when there have been software issues and we should not be so willing to back away from the PPACA. The companies worked through the issues and went onward for the most part. When the TSA was blowing $200 million a year (since 2007) trying to read your personality in conversations while you were getting x-rayed and patted down, no one was calling for an immediate halt to it. 6 years later, > $1.2 billion spent, and the TSA finally determined their Vulcan mind-meld methodology did not work. Even so, we do need to move forward much faster with a PPACA website fix.
”’Assuming the website gets fixed, I would assume a surge of enrollment in December, and another surge in March,’ KFF’s Levitt explains.”
But what about the lowly numbers (100,000) who did get insured through the state and federal exchanges? This is an extremely low number when compared to expectations for the individual market place; but, the critics and pols conveniently side step the 400,000 who were made eligible for Medicaid in states which embraced the expansion. Isn’t this about insuring more people whether through the individual exchanges or through Medicaid?
”‘In total that’s over 500,000 people who signed up for insurance in the midst of a tumultuous launch,’ Levitt says. ‘People make a distinction between the marketplace and Medicaid, but those are both elements of the Affordable Care Act — both are mechanisms to get people insured.’” 500,000 in one month?
The argument put forth by the Obama foes have been about people experiencing negative impact (as if the Republicans actually cared for their constituents as opposed to the moneyed interests) from the PPACA website failures, purposeful insurance company cancellations, and higher rates due to broader coverage. All of this is occurring in the individual market as opposed to the much larger group market. The cancellations have been made by companies, the increased costs have mostly been disproven, and the website is being worked on feverishly. Going forward, the answer to today’s issues and the success of the PPACA will be determined by the numbers who benefit from coverage. As a result, the outlook is still unsettled but positive when the entire numbers are reviewed as shown. The PPACA is moving forward albeit slower than expected. It is accomplishing at a less than spectacular rate on the exchanges what it is supposed to do . . . cover people. Given time, it will succeed.
“What the Obamacare enrollment numbers really tell us,” Greg Sargent, Washington Post November 13, 2013
Lifted from reader rjs newletter:
Synopsis below the fold:
Larry Summers’ recent speech (and Paul Krugman’s paean to it) have brought the issue of secular, decades-long stagnation to the front of the econoblogosphere agenda. Tyler Cowen, of course, made it prominent some time ago. But he posited a tech cause: we’ve picked the low-hanging innovation fruit. Summers, Krugman, et. al. suggest that policies and institutions (fiscal and monetary) are much more central.
I’m with them. In the 70s we saw an economic correction for arguably overvalued labor wages, a painful correction the economy enforced via inflation and (with Volcker’s help) unemployment — driving down labor compensation both nominal and especially real. (Even Ed Lambert, commie pinko that he is, has found real compensation per hour was overvalued given the state of the economy back then.)
And just about the time that that imbalance was clearing out in the 80s, we saw the rise of policies and politics systematically designed and deployed to destroy and restrict real labor wages and compensation. Those policies have achieved exactly that proximate goal, brilliantly. They have not, of course achieved their purported ultimate goal: bigger pie, rising boats, city on the hill. All that rot.
Instead we’ve gotten thirty years of secular stagnation.
The eternal economic justification for those policies? The imbalance that existed, briefly, thirty years ago, and which mostly corrected itself.
But those policies and politics have continued for three decades, always justified by resort to “70s-stagflation” hysteria.
It doesn’t take long before a stopped clock is very, very wrong.
Cross-posted at Asymptosis.
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.
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.