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

Good Reads on a Sunday while sipping your Coffee or Tea

“Two Cheers for Corruption” and Bill Black’s Response

Plunder has become a way of life for many elite Corporate CEOs, Bill Black argues in response to Deirdre McCloskey supposition:

But corruption can be efficient and just, too. It can be good for efficiency if, say, bribes are paid to get around bad laws (such as most of the building codes in American cities) or to smooth the course of sales by U.S. businesses to the Egyptian military. And the turkey at Christmas supplied by Tammany Hall justly helped the poor—if they voted right.

Bill Black reviews the reviewer Deirdre McCloskey’s Wall Street Journal supposition of corruption being beneficial to the economy overall as it short circuits the law and government agencies by promoting economic growth. It is only ethical behavior and ethics, which can change the corporate culture. Firing back, Bill Black cites Frédéric Bastiat;

When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”,

and takes apart McCloskey’s review potentially (Deirdre denies it) favoring corporate bribery, fraud, and extortion through deregulation removing laws governing corporate behavior, desupervision by government watch dogs, and de facto decriminalization of actions by corporations and management. Without which or the subversion of such creates the environment for a corrupt corporate culture. A good back and forth by Bill and Deirdre in this and other posts on Bill’s site and worthy of a Sunday morning coffee.

Would a Car Which Can Read Speed Limit Signs Go Over in Michigan?

The speed-limiting tech can be activated via the steering wheel and briefly overridden by pressing firmly on the accelerator. Ford suggests the facility will help drivers avoid fines and could reduce the number of accidents.

Hmmm, many drivers in Michigan have no problem doing 80+ MPH on 96, 23, and 696, etc. marked at 70 MPH. The state was going to increase the speed limit to 80 MPH because of the claim the majority of drivers do 80 MPH. I guess I creep along at 72 -75 MPH. This more an effort to increase road revenue from gasoline purchases as cars and light trucks are less efficient the faster they go.

However, there is a plan afoot to beam speed limits to your car’s computer thereby giving control of the speed to the car rather than the driver. I can see a whole new industry developing, computer chips which would not be impacted by state speed-limit-beams. “No one is going to impede my speed on the highway!”

The new “Ford technology will become available to the public this August, when it launches the second generation of its S-Max cars in Europe.” This represents just a start in new auto-technology. It will progress to being able to identify humans and bike riders as well as animals in the way and apply the brakes as well as other areas such as heart attacks.

Banks may Not Donate to the Dems?

Banks are having temper tantrums over Senator Elizabeth Warren declaring banks should be broken up as they are a threat to the economy . . . no surprise there! The most recent compromise with the budget removed the barrier to banks making riskier investments and having them tied directly to the main bank. Dodd-Frank originally forced banks to spin those investments off to a 3rd party company to whichthe banks had no financial liability. Pres. Obama signed the legislation as developed by Jamie Dimon and staff allowing those investments to be associated directly to the banks. Hence, Main Street is liable for bank gambling again.

Citigroup, JPMorgan, Goldman Sachs (remember when Goldman Sachs was just an investment house?) and Bank of America recently had a meeting to discuss way in which to urge the Democrats to be kinder and gentler to TBTF. GS became a bank when it was poised to fall on its own sword from risky ventures and never went back as the Fed makes cheaper loans available to them now.

Senator Warren has openly stated Citigroup is one “banking-company” to be broken up under Dodd-Frank. She also blocked the appointment of banking friend Antonio Weiss which has angered bankers.

Suggested donation amounts by banks to political Senatorial candidates are said to be as low as $15,000.

Reducing the Prison Population . . . Duh!!!

In 1994, Newt Gingrich’s model legislation “Taking Back Our Streets Act” and Biden’s “Violent Crime Control and Law Enforcement Act” put into play a doubling of the prison population of which almost half are non-violent which I wrote about here; One in 31 in 2010.

Today Gingrich writes:

There is an urgent need to address the astronomical growth in the prison population, with its huge costs in dollars and lost human potential,”

I would wonder if it is more the former than the later? An odd consortium made up on Repubs, Dems, the ACLU, and the Koch Brothers(?) besides Gingrich are looking into reducing the prison population by 50% and agreeing it needs to be reduced.

I would suspect it is more the rising cost to house a prisoner in state and federal prisons which is ~$30,000 and growing. I would also suspect the Koch Brothers (they have a concern about prisoners?) and the law and order crowd could give two hoots about “lost human potential.” Prisons are typically placed in out of the way places like Muskegon, Kingsley, and Iona Michigan and employ the locals as guards and in other occupations. Close a prison and you affect the local economy and that costs votes in traditional Rep districts. I also suspect this prison population is getting older and the government has to take care of them beyond yanking a tooth needing a new filling. Those interested in reducing the prison population are more concerned about the aging of the prison population, the need for healthcare, and the associated costs.

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Senator Elizabeth Warren Gets Indignant with Banker(s)

In 1998, the gov made it impossible to discharge federal student loans through bankruptcy except upon death, disability, or public service. The gov did provide certain measures to change payments then such as forbearance, economic forbearance (no interest for 3 years), and payment change. In 2005 private student loan originators lobbied to have the same privilege as federal loans of no discharge through bankruptcy. The difference for private student loans was their are no alternative measures. Either you pay or???

Watch and listen to Senator Warren deconstruct a banker.

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Just In Passing – Sunday Morning

The Absurd
Dr. “Chaps” Gordon Klingenschmitt is the Republican nominee for State Rep in Colorado Springs HD15. What qualifies him as a candidate in the Colorado State House? “‘Chaps’ as they call him, has a long history as a disgraced former Navy Chaplain who brags about having successfully performed an exorcism on a lesbian soldier and who has stated again and again that demonic spirits are behind everything from abortion to gay marriage to ENDA to President Obama to Madonna won him the support of the vast majority of GOP caucus-goers earlier this year.

As Susie Madrak of Crooks and Liars says here is a man running for Congress ‘who thinks that “Obamacare causes cancer,’ that the Bible commands people to own guns in order to ‘defend themselves against left wing crazies,’ and that the FCC is allowing demonic spirits to ‘molest and visually rape your children’ is now a Republican candidate for office.”

The Incredulous
Fox News psychiatrist and contributor Dr. Keith Ablow (hat tip: C&L) was on ‘Outnumbered’ the other Thursday morning. After the topic turned to The World Cup, how well the US was doing, and the overall support for the team; here is what he had to say:

Ablow: I am suspect because, here’s the thing. Why, at a time when there are so many national and international issues of such prominence, I’m a little suspicious of yet another bread and circus routine. Let’s roll out the marijuana, pull back the laws, and get people even more crazy about yet another entertainment event.”

What’s wrong with you?

Ablow: This is a way to distract people.

Powers: You have a very dark world view.

Ablow: This is like Rome. I can see why Obama would love the World Cup –

Guilfoyle: What are you talking about? This is encouraging for kids to get out and play sports, and you can play soccer from a young age.

Ablow: It’s overblown. . .”

The World Cup is 84 years old this year and Ablow thinks it was put on to distract us.

The Ridiculous
I am a Vietnam era Marine who had the opportunity to shoot everything up to a 155mm howitzer. I have a few rifles, but, I have nothing beyond 30 caliber. I still shoot even though it is getting harder to do so with all the loons around who wish to publically display. For me, it is a private affair. Here is a reported news event I would call ridiculous.

” A homeowner in Wyandotte, Oklahoma is awaiting damage assessments after an artillery shell entered his home. (hat tip: C&L)

It was fired at the Oklahoma Full Auto Shoot and Trade Show on Saturday, around 3 miles away.

Homeowner Gene Kelley could not fathom what he found after hearing a large crash inside his home.

[…] A 105 howitzer artillery shell, 14 and a half inches long and 3 and a half inches across, was lying on his bedroom floor.”

After ricocheting off a tree branch, the spent round penetrated an outside wall, hit the ceiling, damaged another wall and coming to rest within the house; all while the owner and his wife were in the house.

“The gun range owner says the weapon was fired safely by professionals at a downward projection.”

Aren’t they all trained professionals after something unplanned happens as the result of a firing a weapon? Hey, at least they were not firing HE rounds! The house would have disappeared with them inside of it.

March 3, 1933
Some things never change.

“Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.” FDR 1st Inaugural Address

Rights
“Then that little man in black there, he says women can’t have as much rights as men, ’cause Christ wasn’t a woman! Where did your Christ come from? Where did your Christ come from? From God and a woman! Man had nothing to do with Him. Sojourner Truth: “Ain’t I a Woman?”, December 1851

The Fifties and Matt Laeur
“But some people are speculating that you also got this job because as a woman and as a mom because people knew this company was in for a very tough time and as a woman and a mom you could present a softer image and softer face for this company as it goes through this horrible episode. Does it make sense or does it make you bristle?” he asked.” Moron ‘o the day, Digsby

Matt Lauer speaking to Mary Barra, CEO of GM. Why she did not get up and let him have it speaks of her ability to control herself. I would not have been so polite.

Water for The Elephants
“carrying water for elephants” is a phrase that means carrying a heavy load, much like carrying a secret that you can’t tell even someone you love wholeheartedly, just as in the end Jacob does for his wife.

An elephant drinks 25-75 gallons of water a day far more than any man would be able to carry at any given time. “Water for Elephants” “Sometimes when you get older . . . things you think on and wish on start to seem real. And then you believe them, and before you know it they’re part of your history.”

“Most recently former NY Lt. Governor Betsy McGaughey in the WSJ (August 8th) commented on the ACA in ‘ObamaCares’s Phoney Deficit Reduction’ choosing to carry water for the Republican candidates Romney and Ryan with the hope she can convince voters President Obama’s ACA will not reduce the cost of Medicare and instead will rob the Medicare TF. By her words alone, Ms. McGaughey can not change the numeric of Medicare expected and occurring reduced growth and costs resulting from the passage of ACA. In her, Romney and Ryan’s minds the logic of how the robbery of benefits and the Medicare is all too real even when the proof of the opposite is self-evident. The three will have to do double time if they are to provide enough water to conflate the ACA to the public if in fact they are to make them believe the illusion.” Medicare Cuts: What is the Fight About?

I am hearing that part of the contraction in GDP is due to less expenditures in healthcare as a result of more people being insured due to the PPACA. So far, the detractors have been wrong on the PPACA and they “still” can not carry enough water to prove it otherwise.

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The Hill – “GOP struggles to land punches at ObamaCare insurance hearing”

HT :Washinton Monthly, Ed Gilgore: “House GOPers Face to Face With Unfriendly Facts on Obamacare”

Democratic lawmakers were emboldened to defend the Affordable Care Act with renewed vigor and levity, creating a dynamic rarely seen in the debate over ObamaCare.

Adding to the irregularity, exits on the Republican side at a subcommittee hearing led by Rep. Tim Murphy (R-Pa.) allowed multiple Democrats to speak in a row and let heavy Democratic criticism of Republicans go unanswered, a contrast with the heated exchanges of last fall.

The discussion was not always favorable to the healthcare law, as it touched on health plan cancellations, the potential for premium increases in 2015 and problems that still plague the back end of HealthCare.gov.

Witnesses from the insurance industry were also careful in their comments and promised to submit several answers to the committee at a later date.

But Republicans were visibly exasperated, as insurers failed to confirm certain claims about ObamaCare, such as the committee’s allegation that one-third of federal exchange enrollees have not paid their first premium.

Four out of five companies represented said more than 80 percent of their new customers had paid. The fifth, Cigna, did not offer an estimate.

That is absolutely terrible, the PPACA might be working and people are paying their premiums? What is this world coming to? All the critics said the PPACA would never work, people would not sign up, and if they did they would not pay their premiums . . .

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How Much Will You Pay for Health Care in 2015? What You Need to Know About Healthcare Inflation

Maggie Mahar: You probably have seen headlines like this one: O-Care premiums to skyrocket.”

The warning, which was posted on The Hill, seemed designed to cheer conservatives distraught by Obamcare’s enrollment numbers. It began by announcing that next year, “premiums will double in some parts of the country. The sticker shock will likely bolster the GOP’s prospects in November and hamper ObamaCare insurance enrollment efforts in 2015.”

Where did the reporter get her information?  The story is based on interviews with “health insurance officials.”

Why would they issue such dire predictions? Perhaps they are trying to soften us up so that when insurance rates rise by “only” 7% to 10%, we’ll be surprised and grateful? (This is just a thought.)

The truth is that there is absolutely no reason to believe the same old, same old, fear-mongers who claim that in 2015, rates will spiral “by 200% to 300%.”

But what about those who predict double-digit hikes? Wellpoint, the biggest commercial insurer in the Exchanges, recently told Bloomberg that it may ask for “double-digit plus” increases when it proposes 2015 rates sometime next month.

Wellpoint can propose whatever it wishes, but I very much doubt that state regulators would accept such stiff increases. A combination of regulation and competition will keep a lid on premiums both in the Exchanges, and off-Exchange, just as it did this year.

My guess is that, in most states, rates will rise by no more than 2% to 4%. Meanwhile, government subsidies will climb to cover those increases for most who buy policies inside the Exchanges. (This year 80% of those who purchased insurance in the state marketplaces received tax credits to help premiums.) Folks who purchase coverage off-Exchange won’t receive subsidies, but, by and large, carriers selling policies to individuals outside the government’s online marketplaces will have to compete with prices inside the Exchanges.

Why am I so optimistic?

The Underlying Cost of Medical Care Is Slowing

Americans have become so accustomed to hearing about “runaway health care inflation” that most do not realize that we have finally “broken the curve” of rising health care costs.

Granted, for most of this century, rates soared: “From 2000 to 2009, health insurance  premiums climbed 84%,” Zeke Emanuel, a former White House healthcare adviser and author of Reinventing American Healthcare: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System., recently told NBC’s “Meet the Press.”

By contrast, “for the past three years, health care cost growth has dramatically slowed and is just about even with growth in the economy. Some of this is due to lingering effects of the recession in 2008,” he added. “But a part of it is undoubtedly due to the ACA.”

Drew Altman, President of the Kaiser Family Foundation, points out that, despite the aging of the population, ”the Congressional Budget Office projects that Medicare will cost significantly less in the future than previously thought,in part because of the ACA’s changes to Medicare’s payments. (As I have explained, those cuts do not reduce benefits,but they do force hospitals to cut waste and provide better value for our Medicare dollars.

Both in the public sector and in the private sector,  “Overall health spending is growing at the slowest rate in 50 years,” Altman observes,  (dating back to when the government first started tabulating health expenditures.)”

“The key for the future is not to eradicate premium increases entirely,” Emanuel adds. The goal “is to make sure [that these increases] aren’t Excessive.” He stresses that there is still much to be done to rein in healthcare spending. But for the moment “the exchanges are stable,” says Emanuel. “Premiums are likely to rise a little but not excessively.”

If you don’t believe Emanuel and Altman, take a look at the graph below, comparing outlays for all medical services (the orange line) to the PCE (personal consumption expenditures–the blue line) from 2009 to 2014. As you can see annual spending on healthcare services is now growing by well under 1% a year. (For a larger version of the graph, click on the link above.)

 

 

Originated at Health Beat Blog, Maggie Mahar

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“The messenger wore a skirt,” says Marna Tucker, “Could Alan Greenspan take that?”*

by run75411

Re-posted from New Agenda April 2009, Bill reminds us of some of the history leading up to today:

Editor’s note: We are pleased to present this guest post by Bill H, who’s known around the internet as run75441, and who can usually be found writing in his area of expertise: finance.

Recently, Stanford Magazine did a nice article on one of the University’s former law review presidents who graduated at the top of the 1964 class. The first female to hold either distinction of graduating first in her class and also as president of the school’s Law Review. “Prophet and Loss.” April 2009.

“Well, you probably will always believe there should be laws against fraud, and I don’t think there is any need for a law against fraud,” Alan Greenspan

“I thought it was counterproductive. If you want to move forward . . . you engage with parties in a constructive way,” Rubin told the Washington Post.

“My recollection was . . . this was done in a more strident way” … “characterized as being abrasive.” Arthur Levitt

It would seem these three, coupled with Larry Summers’s push back in Congress on the regulation of derivatives, had the problem and not Brooksley Born. Since then, all three men have suggested there should have been more regulation of the derivatives market that Greenspan has called its recent collapse a “once in-a-century credit tsunami.” Called a modern day Cassandra by Stanford Magazine, one could only wonder where we would be today if the economic and financial wizards had heeded her words.

Short histories on CDO/CDS . . . Collateral Debt Obligations (CDO) were invented by Drexel Burnham Lambert (Milken) as a way to package asset based securities. The CDO was tranched into similar asset backed securities of the same rating allowing investors to concentrate on the rating rather than the issuer of the bond. Ten years later, JP Morgan invented Credit Default Swaps (CDS) was used as a mechanism to bet on a 3rd party default. In 2000, CDS were made legal with the passage of the Commodity Futures Modernization Act and any regulation of them was stymied with this bills passage. Later on, an investment firm decided to team CDS and CDO together, transferring the risk from the CDO to the issuer of the CDS, and creating a synthetic CDO.

It was 1994, that Bankers Trust lost ~$800 million from various derivative investments. The chief losers were P&G and Gibson Greetings. Bankers Trust was formed by a consortium of banks, shedding the loan image for conducting trades. Bankers Trust was successfully sued by P&G for its losses by claiming racketeering and fraud. Bankers Trust also became known for its remarks about Gibson Greetings not knowing what Bankers Trust was doing. In 1998, Bankers Trust pled guilty to institutional fraud due to the failure of certain members of senior management to escheat abandoned property to the State of New York and other states. Again in 1998, LCTM was struck by a downturn in the market when Russia defaulted on government bonds, a security LCTM was holding. To make a significant profit on small differences in value, the hedge fund took high-leveraged positions. At the start of 1998, the fund had assets of about $5 billion and had borrowed about $125 billion. When investors panicked and sold Japanese and European bonds and bought US treasuries, the spreads between LCTM holdings increased, resulting in a loss of ~$1.8 billion by August 1998. LCTM was saved by an orchestrated Fed bailout utilizing private investors.

It was in 1998 and Brooksley Born testified to Congress about the dangers of the unregulated derivatives market referencing the LCTM losses as a recent example. It was also then that deputy Treasurer Larry Summers testified to Congress that Born’s desire to regulate is “casting a shadow of regulatory uncertainty over an otherwise thriving market.” Larry’s testimony set the stage for Congress to rein in the power of the Brooksley Born’s CFTC and the passage of Phil Gramm’s Financial Service Modernization Act of 1999 prohibiting the regulation of the derivatives market (In 2005, the revised bankruptcy laws would place derivatives outside of the laws also making it the first to receive compensation). W$ and banks had clear unregulated sailing in the sea of laissez faire in 2000 with a closing of the door for debtors in 2005. It was little better than a roach motel, you could check in but you can not check out.

Again in 1999 and in the Senate that opposition arose to the passage of the Financial Services in the form of Senator Dorgan of North Dakota. An excerpt from the Senator’s speech that day before the bill was passed:

“I, obviously, am in a minority here. We have people who dressed in their best suits and they just think this is the greatest piece of legislation that has ever been given to Congress. We have choruses of folks standing outside this Chamber who spent their lifetimes working to get this done, to say: Would you just forget all that nonsense back in the 1930s about bank failures and Glass-Steagall and the requirement to separate risk from banking enterprises; just forget all that. Time has moved on. Let’s understand that. Change with the time. 

We have folks outside who have worked on this very hard and who very much want this to happen. We have a lot of folks in here who are very compliant to say: Absolutely, let me be the lead singer. And here we are. We have this bill, which I will bet, in 5, 10, 15 years from now, we will be back thinking of this bill like we thought of the bill passed in the late 1970s and early 1980s, in which this Congress unhitched the savings and loans so some sleepy little Texas institution could gather brokered deposits from all around America and, like a giant rocket, become a huge enterprise. And guess what. With all the speculation in the S&Ls and brokered deposits and all the things that went with it that this Congress allowed, what did it cost the American taxpayer to bail out that bunch of failures? What did it cost? Hundreds of billions of dollars. I will bet one day somebody is going to look back at this and they are going to say: How on Earth could we have thought it made sense to allow the banking industry to concentrate, through merger and acquisition, to become bigger and bigger and bigger; far more firms in the category of too big to fail?

Senator Dorgan’s Speech, November 4, 1999 on “Gramm-Leach-Bliley Act” also known as the Financial Services Modernization Act

Larry Summers has been present throughout much of this change, supporting it, denigrating the opposition, and now claiming his experience at D. E Shaw gives him an insider’ knowledge as to how the derivatives market works. While President of Harvard University; Larry received a letter (May 12, 2002) from Iris Mack, a new employee of the Harvard Management Company managing Harvard’s endowment funds. A Doctorate in Mathematics from Harvard and a former employee of Enron who dealt in derivative trades, she expressed concerns about the trades (swaps and other complex financial instruments) being made by the funds and the lack of understanding of the trades by the traders. On July 1, Iris was called into the office of Jack Meyer, the chief manager of Harvard Management. On July 2, Iris was fired for making what Harvard Management termed as: “baseless allegations against HMC to individuals outside of HMC.” “Ex-Employee Says She Warned Harvard of Risky Moves” Boston Globe, April 3, 2009. While Harvard Management Company claims above normal returns on its endowment funds, it has spent much of last year selling off private equity and investments to raise cash.

The attitude expressed by our head of the Economic Council is one of “trust me now” as I have all of the experience necessary to fix the current economic and financial problems even though he has helped to initiate today’s issues by denigrating Brooksley Born’s request for regulatory power to Congress, even though he ignored the advice of Iris Mack at Harvard University, even though he consulted to D.E. Shaw, a hedge fund, and making ~$5.2 million while being the financial engineer’s engineer, and even though he has been repeatedly wrong in his direction and advice to Congress and Industry. In the name of deregulation and global efficiency, Larry was its cheer leader while signing off on a letter encouraging the dumping of toxic wastes in Asia at the World Bank. He helped to shepherd China into the WTO claiming:

“’The agreement with China is a one-way street,’ Summers said. ‘China opens its markets to an unprecedented degree, while in return the United States simply maintains its current market access policies,’ he said. ‘It is difficult’, Summers added, ‘to discern any disadvantage to the United States in passing this legislation.’”

— Robert Waldman, Economist, Angry Bear blog.

Personality, ego, and a blind belief in the ability of the market place to dictate the proper path and the correction has gotten in front of common sense. Maybe it is time to sideline Summers and his protégé Geithner in favor of Born, Mack, and Dorgan. Each has shown more foresight into how today’s problems and issues were created and how to resolve them.

“I certainly am not pleased with the results,” she adds. “I think the market grew so enormously, with so little oversight and regulation, that it made the financial crisis much deeper and more pervasive than it otherwise would have been.”   

Brooksley Born, Stanford Magazine, April 2009

*“The messenger wore a skirt,” says Marna Tucker, a Washington lawyer and a longtime friend of Born. “Could Alan Greenspan take that?”

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Geithner’s Baa Humbug to Jobs and Labor

Dan here…Taking a look back to 2009:

Geithner’s Baa Humbug to Jobs and Labor 12/25/2009

(h/t Run75441)

“Ebenezer: Since you ask me what I wish sir, that is my answer. I help to support the establishments I have named; those who are badly off must go there.”

Daniel Gross at Slate interviews Tim Geithner here: “We Will Be Judged on How We Dealt with the Things that were Broken” Some rather revealing statements by Tim Geithner to Daniel Gross’s questions:

GROSS: There’s a perception that you regard your portfolio narrowly, as primarily focused on the health of Wall Street, with Main Street a distant second.

GEITHNER: “My first and essential responsibility was to fix and reform the financial system. That was necessarily going to be the principal part of what people saw. About half my time from the beginning has been spent on the design of the broader economic strategy. The idea that we did not do much for the broader challenges facing the country is completely unjustified. The Recovery Act itself was not just a sweeping, essential force for growth but included a bunch of targeted investments in education, energy, environment, health care that will have huge long-term benefits.”

(Run here: Geithner misses the point or makes the point that finance is the number one concern over Main Street, even though Main Street is financing the rescue of W$. The constituency doesn’t want charity in targeted investments in education, energy, education, and environment when it can pay for those investments itself if they are working. Main Street wants jobs? Main street is still waiting for that tsunami of job creation which is one of the broader challenges of any administration and no administration has put into play any package to stimuli it or companies to do more. Jobs are left to free market influences which is content with investing profits elsewhere other than job creating infrastructure.)

GROSS: So you don’t think the bailouts were too friendly to Wall Street?

GEITHNER: “The idea that the strategy was unfair and has principally benefited a small number of institutions in New York is a mischaracterization of the design and result of the strategy. I thought people would have understood this after the failure of Lehman Bros. But when you do too little and you leave the system with real fear that everything is going to fall apart, like any financial crisis, it hurts the poorest most. A just and fair strategy, even if it is politically hardest to explain and justify, is to use well-designed but massive force to stabilize the system.“

(Run here: Over at Naked Capitalism, they are debating whether Goldman Sachs drove the collapse of AIG by calling for the mark down of CDO by companies holding too many of them thereby forcing AIG to raise collateral after it was downgraded and eventually paying off on CDO that never were expected to payoff. While AIG is at fault for seeing too many pie in the sky dollars in risk and having too little collateral to cover it, one has to wonder why Goldman Sachs should have received 100% on the dollar on its CDS for its risk with AIG and not knowing how over leveraged AIG was at the time. Goldman Sachs certainly benefited by Geithner’s negotiated settlement of AIG’s liabilities at 100% on the dollar.)

GROSS: The biggest downside surprise?
 
GEITHNER: “The [high] level of unemployment relative to what was happening in the economy as a whole. I’m not an economist, but almost all forecasters missed that. And that’s hugely consequential, because it’s the prism through which most people view basic economic health.”

(Run here:He is kidding right? During every economic downturn, it has consistently been Main Street that has been shown the street from their jobs or homes.)

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Healthcare Reform; Socialism or Fascism?

by Run75411

Healthcare Reform; Socialism or Fascism?

Whole Foods CEO John Mackey in 2009 originally called President Obama’s healthcare plan a form of Socialism while writing an op-ed for the Wall Street Journal:

“The problem with socialism is that eventually you run out of other people’s money.” Margaret Thatcher”

and added to Thatcher’s statement:

“While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system,” he wrote.

Mackey joins other CEO’s (Papa Johns, Olive Garden, Applebees, etc.) (Raising the Cost of Pizza 10 to 14 cents); who refuse to understand the need for healthcare reform, support a commercial healthcare insurance and industry solution even though both have done little to voluntarily rein in costs, are willing to penalize their employees for the PPACA, and ignore the results of doing nothing and associated increased costs. Since Hillarycare (1994), the industry has ignored increasing costs and has not provided solutions to mitigate them. As shown in Figure 1 annual healthcare cost has grown much faster than inflation. Figure 4 shows the increase in House hold expenditures since 1994 when Hillarycare was considered.

“American Healthcare since 1994” Center for American Progress

Recently during an NPR interview, John Mackey changed his opinion calling the PPACA fascism instead of Socialism:

“Technically speaking, it’s more like fascism. Socialism is where the government owns the means of production. In fascism, the government doesn’t own the means of production, but they do control it — and that’s what’s happening with our health care programs and these reforms.” Obamacare Is Fascist, Not Socialist

In a short period after labeling the PPACA as fascism, John Mackey reconsiders his words after a public uproar and retracted his name-calling of President Obama as a fascist and the PPACA as fascism. All of this from a Liberal now turned Libertarian.

The term fascism today stirs up too much negative emotion with its horrific associations in the 20th century,” he said. 

“I believe that, if the goal is universal health care, our country would be far better served by combining free enterprise capitalism with a strong governmental safety net for our poorest citizens and those with preexisting conditions, helping everyone to be able to buy insurance. This is what Switzerland does and I think we would be much better off copying that system than where we are currently headed in the United States.Whole Foods CEO Regrets . . .”

It has only been since the passage of the PPACA (see S&P Healthcare Indices) has the healthcare industry begun to rein in costs as reflected in Medicare, Medicaid, and SCHPS through efficiencies. Much of this is due to the healthcare industry rapidly preparing for the 2014 final implementation of the PPACA. More will come after 2014.

You would think this would be enough? At the same time, the Republicans are calling for cuts to the three programs to lower deficit spending; the President is offering to consider modest cuts and shows willingness to sell-out the citizens to achieve his Grand Deal. Cuts in any of the programs will do nothing to lower healthcare industry cost as these programs are a reflection of the industry. In the end, such a Grand Deal will lay the burden of healthcare costs on the elderly, the poor and the children of this nation. The “I Made This” John Mackeys of the world who became rich as a result his customers buying from Whole Foods will absolve themselves of any social responsibility.

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SCOTUS Chastises Congress and the Executive Branches

by run 75411


Update:  Beverly Mann adds this note lifted from comments:

The Supreme Court is rarely in session. It’s seasonal, part-time work. They usually hear argument in 10 cases a month, seven months a year. In December, they didn’t hear even that many.
There’s really sooo much that can, and should, be said about the issue of (virtually universal lack of) access to the Supreme Court, and its repercussions. Roberts’ bizarre, cutesy annual report is … oh … I don’t know …characteristically hubristic?



SCOTUS Chastises Congress and the Executive Branches

A pencil and piece of paper was all Clarence Earl Gideon needed to state his case of being denied council in court after being accused of robbery and sentenced to prison. Gideon did get a review of his case under a violation of his 6th Amendment rights to council. Today it is near to impossible for the same to occur and the probability of achieving a review by SCOTUS would be akin to a grain of sand on a Florida beach. The highest court in the nation reviews issues and issues opinions for an ~85 cases/year few of which would be of the same stature as Gideon’s. It is all about who gains access to the court. Filing a petition is no easy task and the cost of which runs ~$3,000 for a dozen or so copies. The days of Gideon are long gone.

Why would I bring this up on an Economics board? Most recently Chief Justice Roberts got into the Congressional/Executive fray and their battle over finding a solution to the hypothetical fiscal cliff.

Our country faces new challenges, including the much-publicized ‘fiscal cliff’ and the longer-term problem of a truly extravagant and burgeoning national debit,” he wrote. “No one seriously doubts that the country’s fiscal ledger has gone awry. The public properly looks to its elected officials to craft a solution.” 

Chief Justice Prods Congress to Resolve Budget Talks and Control National Debt, http://www.nytimes.com/2013/01/01/us/chief-justice-roberts-prods-congress-on-fiscal-matters.html?_r=0
Roberts goes on to add;

The federal judiciary makes do with a budget appropriation of about $7 billion, he wrote, “a mere two-tenths of 1 percent of the United States’ total budget of $3.7 trillion.”
“Yes,” he went on, “for each citizen’s tax dollar, only two-tenths of one penny goes toward funding the entire third branch of government!”




That is notable cost control and Roberts cites how much it costs each citizen to have access to SCOTUS. The Robert’s SCOTUS saw an ~ 64 cases last year which is down from the typical 75-85 cases seen yearly and down even further from the 1963 cases reviewed by SCOTUS. By reviewing fewer cases, the Roberts SCOTUS controls costs and further reduces the probably of another Gideon achieving review. This is not true cost control, his waxing elegantly on how SCOTUS achieves reduced costs is suspect, and comes at the expense of the citizenry. Instead of working 8 hour days (if they were hourly), SCOTUS now works 7 hour days and produces less.

Less throughput and a selective one at best.

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Raising the Price of Pizza 10 to 14 cents. . .

by Bill aka run75441

Raising the Price of Pizza 10 to 14 cents. . .

Will pizza and food prices really have to increase to cover healthcare costs for the mostly young employees of the Olive Garden’s, Denny’s, and Papa John’s restaurants?

A 10 to 14 cents increase per pizza is being proposed by Papa Johns’ to pay for the PPACA. At the same time, Papa John’s is advertising a 2 million-pizza giveaway with the help of Peyton Manning “Two Million Free Pizzas” (must be a freebie?). Not sure myself how I might decide to account for the cost; but, here is a try; free pizza for 2 million NFL fans to increase sales, . . . cut employee hours to avoid the PPACA and keep the price, . . . raise prices 10 to 14 cents per pizza to have healthcare insurance for the restaurant staff, . . . or maybe a kind of half cheese/half sausage combo. . . healthcare and free pizzas with Peyton Manning promoting the social responsibility of Papa John’s?

Maggie Mahar at The Health Beat Blog “Can US Businesses Afford Obamacare?” points to an interesting article by John Padua of Managed Care Matters discussing who bears the healthcare reform cost if restaurant owners opt out while Forbes Caleb Melby runs the numbers and questions the increased costs suggested by Papa’s John’s CEO “Papa John’s Obamacare Math” .

The issue(s): The Affordable Care Act dictates that full-time employees (30 hours or more per week) at companies with more than 50 workers need to be provided health insurance. CEO John Schnatter has further claimed that some employers will cut employee hours to avoid providing them with healthcare.

The Cost: John Schnatter estimates that Obamacare will end up costing his company $5-8 million annually.

The Price Increase: 10 to 14 cents per pizza

Checking John Schnatter’s Math: Last year, Papa John’s International captured $1.218 billion in revenue. Total operating expenses were $1.131 billion. If Schnatter’s math is accurate (Obamacare will cost his company $5-8 million more annually), then new regulation translates into a .4% to .7% expense increase. It is difficult to set that ratio against the proposed pie increase and across all sizes given size and topping differentials, but many of their large specialty pizzas run for $16. Remarkably, a 10-14 cent increase on a $16 pizza falls in a comparable range of .6% to .9%; but, the cost transference becomes less equitable if you are looking at medium pizzas which run closer to $12, meaning a .8% to 1.15% price increase.

Lets say that Papa John’s sells exactly half medium/half large specialty pizzas. Averaging the ranges for both sizes, then averaging that product yields a .86% price increase — well outside the range of what Schnatter says Obamacare will cost him.

So how much would prices go up, under these 50/50 conditions, if they were to fairly reflect the increased cost of doing business onset by Obamacare? Roughly 3.4 to 4.6 cents a pie.

3.4 to 4.6 cents does not seem like such a huge increase to bear by either customer or the business and if the advertising is done right; it might prove more positive than giving away 2 million freebie pizzas during the NFL season . . . a little like Schooner Tuna in the movie “Mr. Mom,we are in this together for the long haul.'” What customer would not buy into this?

The Issue(s): From the annals of I made this; “Everyone is looking for a way ‘not‘ to provide insurance for their employees. It is essentially a huge tax on all us business people,” declares Denny’s RREMC Franchise Owner CEO John Metz on Fox News. To offset costs further, John adds; “he also will slash most of the staff’s time to fewer than 30 hours per week” to start January 2014.

Talk about giving a long notice for plant closures to employees. What happens if franchise owner sidesteps the insurance provision of the PPACA and cuts hours to fewer than 30? John Padua of Managed Care Matters says the cost falls back on the US citizenry, employees, and customers of these restaurants.

If companies do not provide insurance for low-paid workers, we taxpayers have to. That is the way Obamacare works; folks with incomes below 400% of the FPL can get subsidized coverage. If restaurants cut workers’ hours so as not to insure employees, all of us taxpayers get to pay for their health insurance. These companies are avoiding their responsibility and increasing our tax burden. “The Cost of Obamacare -14 cents per pizza”

The Cost: Maggie Mahar raises the question in her “Can They Afford It???” post. Metz employs 1,200 associates at his Denny’s RREMC franchise. Taking the extreme case of all 1200 employees going into the state exchange and being subsidized up to 400% of FPL; by slashing everyone’s hours to 28, Metz avoids the $2,000 penalty (~$2.34 million in total) for those going into the state exchange.

The Price Increase: 5% surcharge to all meals in 40 Denny’s in Georgia, Florida and Virginia. (note: I wonder how that will appear on the bill?)

Checking The Math: The CBO (which forever appears to be anti-healthcare reform) found in a recent study, 2014 comprehensive healthcare insurance could be had at $3,400 for an employee up to 30 years of age and single. Understanding we are not talking about writing off Metz’s employee expenses from his corporate income tax yet and knowing the PPACA requires an employer to pay 65% of the employee’s healthcare insurance, the $3,400 per person (down from a projected $6,700 without the PPACA) now becomes $2,210 per person.

Denny’s franchise owner Metz is angry with Obama, the PPACA, and his employees. Granted, the example is as much an extreme as Metz’s knee jerk reactions and posturing; but, it points to the overall fallacy in the too-much-healthcare- cost is a drag on my business argument. Both of these entrepreneurs did take grief for their stances. Denny’s CEO John Miller did call john Metz to discuss his stance and John Schnatter has been called out in various blogs and is the subject of multiple boycotts.

Much of this sounds like sour grapes starting with SCOTUS affirming the PPACA and is carryover from the re-election of Barack Obama to the Presidency. Some have protested the validity of the PPACA claiming it was immoral to force business owners to pay for employee healthcare insurance. In an email exchange, John Paduca answers:

“In response to your query as to when it became an employers’ responsibility to provide health insurance, that would have occurred when PPACA was passed, signed into law, and upheld by the Supreme Court. Laws run this country, not morals. If ‘morals’ did, we never would have invaded Iraq or water-boarded prisoners or interned Japanese Americans or overturned legitimate governments in Africa and Central America or supported the Shah of Iran. ‘Morals’ are personal; laws are societal.”

Maybe it is just Republicans having to cancel their airline tickets to Boston for the celebration on November 7th which has placed both Johns in a bad mood. Or could it be pent up anger with the very people who elected Barack to The White House for a second term? You know, those 47 percenters who might make up the bulk of the restaurant workers.

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