Peter Dorman at Econospeak comments:
I woke up this morning to Paul Ryan, describing his budget proposal, as quoted in the New York Times: “This is about putting an end to empty promises from a bankrupt government.”
Bankrupt government? Let’s consider this more closely. The normal meaning of bankrupt is negative net worth, as when your liabilities exceed your assets. By this standard, the US government is hardly bankrupt, since it has enormous hard assets and an even larger soft one, the legal right to tax the income, transactions and property of all individuals and organizations subject to US law. We should all be so bankrupt!
So I guess Ryan is not using the normal business meaning of the word. Perhaps for him bankrupt means having negative earnings over some period of time. Here is the federal government’s fiscal record since 1929:
So during what periods has the federal government been “bankrupt”? During every year when outlays exceeded revenues? That would include nearly all of modern history since the 1960s. Or when the fiscal deficit exceeded, say, 5% of GDP? That’s a smaller time frame—basically the past few years since the financial crisis hit and WWII. But if the government is bankrupt now, how bankrupt was it in the days of FDR and the struggle against Germany and Japan? And what does it mean to be bankrupt if the US could be really, really bankrupt in the 1940s and then bounce back to fiscal health almost immediately as soon as the troops came home?
And if the US government is bankrupt today, how come it can raise money at approximately a zero real interest rate?
And on a philosophical level, how does Ryan measure the financial health of government when its purpose is not to make itself rich but to support the prosperity of everyone else?
My translation of the way Ryan uses the word “bankrupt” would be “I want to scare everyone about the current fiscal deficit, and the best way to do it is to use a business-sounding term that has no meaning at all in this situation and hope that the public, and especially the journalists, are too dumb to notice.”
by Daniel Becker
I posted in 7/2009 on the issue of fixing our healthcare system based on the Massachusetts model. The first was Massachusetts is fixing the fixed healthcare system. The second was a followup to the first: Fixing the fixing. Healthcare Deja vu.
The issue was that we are dancing around. All the proposals to date have been nothing more than a relabeling of already tried organizational structuring within the private insurance model. I ended the first article with a quote from a NEJM report and a my question:
Despite these imprecisions, the difference in the costs of health care administration between the United States and Canada is clearly large and growing. Is $294.3 billion annually for U.S. health care administration money well spent?
Well, is it? Did they even ask?
I ended the second article with:
We’re talking the same old approach to what really is a problem with the product. At least in the bad socialist health care programs they recognize that a for profit third party only adds cost and thus do not have to account for that part of our problem (it’s called savings). They just need to resolve the product quality issue. It is the only common issue to all nations.
I’m taking bets on the date of the new fix of the newly fixed, fixed system.
Ok folks. The betting is closed. Time to lay the cards on the table.
US News and World Report: Mass. Health Reform Hasn’t Halted Medical Bankruptcies
“Health costs in the state have risen sharply since reform was enacted. Even before the changes in health care laws, most medical bankruptcies in Massachusetts — as in other states — afflicted middle-class families with health insurance. High premium costs and gaps in coverage — co-payments, deductibles and uncovered services — often left insured families liable for substantial out-of-pocket costs. None of that changed. For example, under Massachusetts’ reform, the least expensive individual coverage available to a 56-year-old Bostonian carries a premium of $5,616, a deductible of $2,000, and covers only 80 percent of the next $15,000 in costs for covered services,” the researchers wrote.
The results from the actual published article in The American Journal of Medicine:
In 2009, illness or medical bills contributed to 52.9% of bankruptcies in Massachusetts. In contrast, in early 2007, medical bankruptcies accounted for 59.3% of personal bankruptcies in the state (P#.44 for comparison with 2009 proportion) and 62.1% nationally (P#.02). Because the total number of personal bankruptcy filings in Massachusetts increased by 51% between fiscal years 2007 and 2009(6) the absolute number of medical bankruptcies in the state actually increased by more than one third during that period, from 7504 to 10,093.
The profile of the bankruptcies:
Most of the recent Massachusetts debtors were female (Table 1). Their average age was 48.2 years, two thirds of them had attended college, and 70.5% owned a home or had owned one within the past 5 years. The average debtor household included 2.94 persons; in three quarters of them, at least 1 adult was employed at the time of bankruptcy filing.
In 2009, 45.6% of the entire sample (86.2% of the medically bankrupt) had high medical bills or specifically cited illness as a cause of their bankruptcy, proportions that did not vary by insurance
status. The remaining 13.8% of the medically bankrupt (7.3% of the entire sample) were classified as medically bankrupt because they had lost significant work-related income because of illness or had mortgaged a home to pay medical bills.
As would be expected in a state where medical insurance is mandatory, the overwhelming majority (89.0%) of debtors had health insurance for themselves and all of their dependents at the time of bankruptcy filing…
The 2009 coverage rates in Massachusetts were higher than those for Massachusetts debtors in 2007 (before the coverage mandate was enforced), when 84.1% had insurance at the time of filing and approximately one third (34.1%) had experienced a coverage gap. In both 2007 and 2009, Massachusetts debtors’ had higher coverage rates than in our 2007 national sample, in which only 69.7% of bankrupt families were insured at the time of filing and 37.4% had experienced a gap.
Here we go folks, the table is open. Taking new bets.
The NYT has a story on what look to be ‘ruthless’ bankruptcies in store for companies who sought or were forced to take too much leveraged debt:
American companies currently have more than $1.7 trillion in S.&P.-rated bonds and loans maturing from 2011 to 2014. The total debt load coming due will climb steadily over the next four years, with the proportion of debt in the speculative category growing, the credit rating agency said.
In 2011, there will be about $300 billion in debt due, of which 41 percent is considered speculative. But by 2014, the amount of debt due climbs to about $550 billion, 72 percent of which is speculative.
“We believe that many borrowers at the low end of the ratings scale will encounter serious hurdles to their refinancing needs in 2013 and 2014,” John Bilardello, a managing director at Standard & Poor’s, said in the report. “Unlike investment-grade entities, for which the main issue is the rising cost of capital, speculative-grade borrowers may find that financial institutions and investors are wary of lending to them.”
Much of this debt currently owed by American companies was a result of heavy borrowing during the leveraged-buyout boom, which lasted from 2005 to 2007.
Private equity firms borrowed enormous sums of money from banks to finance the buyout of companies and then loaded the target companies up with debt.
But the target companies have since had a hard time paying down their debt because of the down economy, which blunted profits.
S.&P. believes that these companies have been successful in pushing back their debt maturities past 2010, avoiding a potential rash of defaults and bankruptcies this year…
First, you hear the high heels. These are not the pretty heels of Ginger Rogers, floating in ostrich plumes for some impromptu dance across a marble floor.
No no, these are the no-nonsense high heels whose rhythmic ticktock, louder and louder, signify the approach of authority – firm, fair and with eyes that see through every excuse. It’s Dr. Warren, and she’s ticked.
Elizabeth Warren, head C.O.P. over at the Congressional Oversight Panel which is “charged with the job of reviewing the state of the markets, current regulatory system, and the Treasury Department’s management of the Troubled Asset Relief Program [and] required to report their findings to Congress every 30 days.” She is a longtime researcher of bankruptcy and professor of bankruptcy law, and she saw the crash of the middle class coming from miles away.
In videos like “The Coming Collapse of the Middle Class” (early 2008) and her various net-based reports, TV appearances, and appearances before Congress, she combines absolute clarity of message with a mildness that tempers that message, often dismaying in its implications, enough so it can be heard and digested.
Messages like this graph. And those numbers are from 2001.
She’s just been named the ‘Bostonian of the Year‘ by the Boston Globe, complete with an interesting video that catches her offstage persona. It’s a lot like her camera persona, but madder. Worth watching, if only to see her berating Timothy Geithner, (about 3.02) whose smirking response should infuriate anyone who sees it. Read the accompanying article, too.
A few Elizabeth-quotes from the Globe video:
“The mortgage lenders have behaved abominably.”
“It seems to me that far to often women are the people who do what needs to be done. It’s about how the old boys club who brought us not just to the brink of ruin, but beyond that, they still want to play the same way. And, well, somebody’s got to say no. If all the old boys want to roll their eyes over it, well then let them roll their eyes over it.”
“AIG was not a bank!”
“Here we are in the middle of a financial crisis. The market is broken. We have a system where very large financial institutions systematically take advantage of hardworking American families. The role of government is just to level that playing field a little bit, and the financial institutions are fighting that tooth and nail. They’re willing to spend hundreds of millions of dollars to block that kind of legislation, and I’ll just tell you, I find that deeply and profoundly shocking.”
“I am not looking for jobs with these guys. My job is not to get out there and kowtow to these guys so they’ll be nice to me. I figure this is the one time I will have a true public-service job. I’m going to do everything I can to execute this job the way it ought to be done. If there’s some politician, Republican or Democrat, who has a problem with that, I just don’t care.”
Every couple of weeks I scan the internet looking for new reports and video from our COP on the beat. So should we all.
Bravo, Dr. Warren.
From Lenny Dyksytra’s letter to friends about his bankruptcy filing yesterday:
William McKinley filed for protection while serving as Ohio’s governor in 1893. He was in debt to the tune of $130,000 (an insurmountable sum in those days!) before some friends eventually helped to bail him out. Three years later, he occupied a desk in the Oval Office. [emphasis mine]
That seems much clearer than declaring you’re “not a quitter” while wearing hip-waders while your lawyer claims your multimillion dollar book deal (and private fortune) aren’t enough to deal with the cost of ethics charges against you.
Also, Jim Cramer may want to avoid Lenny for a while:
Ulysses S. Grant went bankrupt after leaving office when a partner in an investment-banking venture swindled him. (I can certainly identify with this one.) [emphasis mine]
Good thing Dykstra doesn’t pretend to be an investment advisor.
Oh. Well, at least no one ever sang his praises in the mass media, right?
Dykstra in 2012, on a platform of Fiscal Responsibility. “Returning to the Glory of the McKinley Era.”
Seems as likely to work as anything else.