when ordinary people don’t have pricing power (aka, there isn’t a labor shortage and lots of competition offering the products and services they need.) Thus, this:
And that tax cut you got me? Thanks, a lot. Didn’t even cover the jumps in the price of gas and my monthly minimum payments and my insurance premiums and my grocery bills. Didn’t offset the amount I lost in reduced hours and no more overtime and did I mention I haven’t gotten a real raise in ten years?”
Stated this would happen back when everyone was spewing about the biggest middle class tax cut. What Americans need isn’t tax cuts, it’s a working economy, which tax cuts will not lead to. Period.
2008 Budget
1) Social Security, at current rates, is not expected to run short of money before 2037.
2)The simplest way to “fix” Social Security, if you’re worried about a “problem” 27 years in the future, is simply to remove the contribution limit. End of problem. Period. Social Security is not in crisis.
3) The reason politicians want to “fix” Social Security is to increase the SS surplus, so they can use it for other things.
4) Medicare has more serious issues. However the simplest way to fix healthcare in the US is to move single payer, which would reduce healthcare per person by one-third. It has worked for every other country in the history of the world that has done it. It will work for the US. Since we’ve admitted now that everyone deserves health care, and since it’s cheaper, and better, why not use the next round of healthcare to fix Medicare by fixing health care?
Global Military Spending 2008
The unspoken entitlement is the US military. The US spends about half the entire world’s military budget. There is, actually, no one in the world who can invade or seriously threaten the US in any fashion. (Is Canada going to invade? Mexico?) You can easily slash the military budget in half and still be so far ahead of any possible combination of enemies that it isn’t even close.
And yes, taxes are going to need to go up. Here’s a simple fix—tax all income over 5 million at 90%. It won’t hurt the economy (the best economy in America’s history was back when marginal tax rates were this high in the 50’s and 60’s). It will mean that the rich, who got almost the entire bailout and whose irresponsibility threw the US into its worst economic crisis since the Great Depression will pay for it.
Oh, and change the estate tax to tax 80% of all inheritances over 5 million, too. Remember, dead people don’t need money and 5 million tax free for choosing your parents right is enough of a head start.
There are plenty of other ways to raise money and cut costs. For example, you can put a tax on buying and selling derivatives or you can slap on a carbon tax or you can reform corporate taxes so corporations making billions don’t pay no taxes.
Finally, the bottom line is this. The US owes its money in dollars. The US can print money. The US is not going to run out of money(pdf). There may be some inflation but anyone who tries to tell you that the US won’t have enough money to pay SS or Medicare is simply lying to you.
Mandos attended and took some notes. For those who couldn’t make it, worth reading. Read in particular the section on the problems of the Euro—this is why Portugal, Ireland, Italy, Greece and Spain are looking to get their clocks cleaned, and maybe bring down the world economy with them.
Seriously. I’ve suspected this for years, here’s the hardcore evidence.
Honestly, if you’re depressed the best treatment for everything short of the most severe depression is exercise. If you don’t want to exercise, get a puppy. Having someone who is always happy to see you and who needs you is what most people need.
And with luck, going on walks with the puppy will get you started on exercise. Double win.
Americans in particular, and westerners in general are horrendously overmedicated. In part I suspect this is simply because American lives, for all the material splendor, suck. Working 9-5+ overtime + 2 hour commute, always knowing that if you lose your job you’ll lose everything, eating (too much) manufactured food denatured of proper nutrients while not getting enough exercise puts people under constant stress. Added to that is the strong pressure to act “normal” and to never be seen to be sad or anxious or moody. Act in unexpected and socially unacceptable ways and pretty soon that job you need, no matter how good you are at it, starts becoming insecure.
So people medicate. Heavily. It’s the only way they can get through their lives. Anti-depressants are more addictive than opiates. More addictive that cocaine.
But hey, that’s a good business to be in. For pharma. Get people hooked on your legal drugs, make the cheap natural stuff (pot and opiates and coca leaves rather than cocaine) illegal, and clean up.
(Some quotes after the jump) read more…
Haven’t commented much on this, but let’s cut to the chase. Greece is going to default. Period. The only question is when. The Europeans can hold it off a year or two if they get their act together. All of the PIGS (Portugal, Italy, Greece, Spain and arguably Ireland) are probably going to default eventually unless the rules by which the Eurozone, which state you can’t run too high deficits, are overturned. All of the countries in the Eurozone, all of them, have been playing shady financial games to hide the real state of their budgets. Every single one.
Oh, and Germany needs to put a cork in it. Trade and balance of payments are ZERO SUM. Every nation cannot run surpluses, it is mathematically impossible. The more countries that do, the less Germany’s surpluses will be. Germany’s surpluses are only possible because other countries run deficits.
When the Greeks get crammed down, hard, either through readjustment packages or because they go off the Euro and default (what I would do, but my by European friends inform me this is unthinkable to all good Eurocrats), when Spain, Ireland, Italy and Portugal get crammed down, that’ll lead to a nice demand collapse, which means less imports and worse balance of payments. Which will make things worse for everyone else—because while balance of payments and trade are zero sum games in the sense that it has to come out to zero, prosperity is not. If overall demand drops or grows very slowly, everyone is hurt. Refusing to deal properly with these problems by putting Europeans and American to work by using deficit financing properly (as opposed to wasting it on tax cuts, bank bail outs and badly designed “stimulus” measures) would help everyone and pay itself back, as long as it was done in a way which also dealt with the oil bottleneck at the same time.
But that ain’t happening. So at best we get a lousy few years economic cycle where over 80% of productivity gains go to corporate profits, wages stagnate and unemployment doesn’t recover anywhere near pre-crisis levels—or we get a second downleg of this financial crisis when China and Europe both crash out. (It ain’t about America, babes.) I’m waiting till the end of the summer to see where I’ll put my money (literally). In the meantime, hold on tight. I’d tell you to pray, but I’m not sure if crashing out or stumbling around with a bloody bandage on the stump is preferable. I suppose the bandage. I doubt even a second crash would be enough to make the powers that be understand they need to make fundamental changes.
Meanwhile, in the US, the strongest part of the recovery comes in medical, insurance, finance and construction. As I said long ago, the fundamental Obama play was to try and reboot the bubbles. Yay.
Bloody depressing, if you’ve ever been poor, but worth reading–especially take some time to read the comments. Don’t put on country music or the Blues at the same time, I don’t want to be responsible for you slitting your wrists.
I will add that much of this is entirely unnecessary.
Chinese and American flags flying together
Is when will the Chinese property bubble burst.
Urban property prices increased a record 11.7% y/y in March 2010, up from 10.7% y/y February 2010, according to the National Bureau of Statistics’ property price index. Prices rose y/y in all 70 cities in the index, with prices in some cities like Haikou on Hainan Island up more than 50% y/y. In m/m terms, prices accelerated as well, according to the index, rising 1.1% in March, up from 0.9% in February. Real-estate investment saw a 35% y/y jump in Q1 2010, partially due to base effects and potentially also due to developers pulling their projects forward to avoid regulatory restrictions.
The bubble has been going on for years. Many cities have had 20% housing inflation since the 2000’s. The bubble has been fueled by very easy credit, and a great deal of fraud. Sound familiar?
Bubbles end when the last sucker buys. At that point housing prices implode, and banks have tons of loans go bad on them. They either write them off and probably go bankrupt, or they are allowed to keep them on the books as non-performing loans, which means they become zombie banks, unable to loan effectively. Meanwhile local governments, highly reliant on the bubble, are forced to start cutting back services and employment.
The government at that point may choose to print a great deal of money (the Chinese are much less reluctant to do that than many Western governments), in which case they risk either inflation (if it gets into the real economy) or the Japanese disease, in which case China gets substandard growth. Since growth is what the Communist party offers Chinese in exchange for staying in charge, low growth risks the Chinese communist party being overthrown. And by overthrown, I mean killed. The Chinese are really big into mass violence, riots and so on.
The majority of the world’s growth, at this point, is coming from China, with Asia ex-Japan providing most of the rest of it. If China goes under, it takes the world with it.
And, from a longer perspective, if you’re worrying about a Great Depression and using the last one as your model, China is what you want to watch. Though not dominant in gross terms in the way the US was in the 1920’s, it is the major surplus nation in the world, just as the US was then.
I don’t know how this is going to play out, but there’s no question that China has a huge property bubble. All bubbles pop eventually. The question is when, and how that popping is handled.
China needs to tamp this down, keep building its internal economy, and get off the mercantalist treadmill. The rest of the world is not going to buy enough Chinese goods to allow them to fully industrialize through mercantalist policies—they are going to have to switch to an internal consumer society. A Japanese style status quo is not feasible for China, both for political reasons and for the simple reason that their population is just too large.
China’s been grabbing up resources as fast as they can with all their export earnings:
Since becoming a net oil importer in 1993, China has rapidly overtaken everyone but the US in its thirst for the world’s crude. If one could quantify a country’s eagerness to control this vital resource, though, China would surely be number one. Aggressive investments in Africa’s resource sector have led some to dub its policies there the “Great Chinese Takeout”. Its latest move, a $20bn loans-for-oil deal with Venezuela, coming on top of an existing $8bn commitment, is its largest. This follows last year’s $25bn loans-for-oil deal with Russia and separate agreements for $10bn each with Brazil and Kazakhstan.
On face value, China’s energy grab appears naive. Extending below market rate loans and investing in areas like Venezuela’s Orinoco Belt, recently eschewed by many multinationals, mean that it may earn a low risk-weighted return. Even if these projects are ultimately successful, procuring actual barrels halfway around the globe is inefficient and unnecessary. Oil is a fungible commodity so buying a distant barrel simply frees up a nearer one for someone else. Financially speaking, China is in effect entering massive, long-dated commodities futures contracts.
Ok, oil is only partially fungible even now. Oil has to be refined, and refineries are built to handle specific types oil. Asphalt-quality oil from the Canadian tar sands, which powers much of the western US, for example, simply cannot be refined in refineries not set up for it.
More to the point, if there are absolute shortages of oil which can be refined by the current crop of refineries coming up, and there are, and if it takes years to build new refineries, and if cheap oil is or has come to and end (if it hasn’t, which depends on your definition, it is going to, and soon) then oil is not fungible.
Any country which does not have enough domestic supply of oil for its own needs should definitely be locking in oil supplies. Because there just isn’t going to be enough of it, and soon.
China has done relatively well these past 30 odd years because they tend to think ahead. Oh, they say, we’re near peak oil, we should lock in supplies. Oh, they say, we don’t need a big army, we should put that money into the economy so that if or when we do need a big army our economy can afford one. Oh, we’ve got a population problem, we should cut back on population growth. Oh, we’re choking on smog, we should invest in green technology in such a way that in 10 to 20 years we’ll probably be the biggest producers.
That’s not to say they’re forward thinking on everything (for example, they aren’t handling water well at all, or desertification) but compared to most other countries, they’re cracker jack.
And folks like the FT’s Lex team are living, not just in the present, but in the past. Maybe it’s time that the West’s “intellectual” class started staring the future, or even the present, in the eyes?
Communist Dictatorship China Reaffirms It Will Never Do a Nuclear First Strike, Unlike US
Retired People’s Liberation Army Major General Xu Guangyu said in the newspaper commentary that China wanted a minimal nuclear deterrent and would avoid any arms race. “China resolutely adheres to a defensive nuclear strategy, and has always adhered to a policy that it will never be the first to use nuclear weapons at any time and under any circumstances,” wrote Xu
The Barack Obama administration’s declaration in its Nuclear Posture Review (NPR) that it is reserving the right to use nuclear weapons against Iran represents a new element in a strategy of persuading Tehran that an Israeli attack on Iranian nuclear sites is a serious possibility if Iran does not bow to the demand that it cease uranium enrichment.
Although administration officials have carefully refrained from drawing any direct connection between the new nuclear option and the Israeli threat, the NPR broadens the range of contingencies in which nuclear weapons might play a role so as to include an Iranian military response to an Israeli attack.
A war involving Iran that begins with an Israeli attack is the only plausible scenario that would fit the category of contingencies in the document.
The NPR describes the role of U.S. nuclear weapons in those contingencies as a “deterrent”. A strategy of exploiting the Israeli threat to attack Iran would seek to deter an Iranian response to such an attack and thus make it more plausible.
In other words, if Israel attacks Iran, the US says it might nuke Iran if Iran strikes back after an Israeli attacks.
Say what? Oh, I see “You’re going to let my friend Israel beat the shit out of you, or I’m going to pull the trigger of this gun I have pointed at your head. Because you’re a bad country, and Israel and the US are the good guys.”
Gee, the idea of those crazy Iranians getting nukes seems so much scarier than the US having them, doesn’t it?
A force for peace, and the home of the free, indeed.
I had to go through this language for another purpose, so let’s see how HCR affects recissions and denial of care. (A recission is cancelling the policy, denial of care means denying a specific treatment.)
Here’s the recission language.
‘‘SEC. 2712. PROHIBITION ON RESCISSIONS.
‘‘A group health plan and a health insurance issuer offering group or individual health insurance coverage shall not rescind such plan or coverage with respect to an enrollee once the enrollee is covered under such plan or coverage involved, except that this section shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage. Such plan or coverage may not be cancelled except with prior notice to the enrollee,
The denial of care and appeals language is as follows.
‘‘SEC. 2719. APPEALS PROCESS.
‘‘A group health plan and a health insurance issuer offering group or individual health insurance coverage shall implement an effective appeals process for appeals of coverage determinations and claims, under which the plan or issuer shall, at a minimum—
‘‘(1) have in effect an internal claims appeal process;
‘‘(2) provide notice to enrollees, in a culturally and linguistically appropriate manner, of available internal and external appeals processes, and the availability of any applicable office of health insurance consumer assistance or ombudsman established under section 2793 to assist such enrollees with the appeals processes;
‘‘(3) allow an enrollee to review their file, to present evidence and testimony as part of the appeals process, and to receive continued coverage pending the outcome of the appeals process; and
‘‘(4) provide an external review process for such plans and issuers that, at a minimum, includes the consumer protections set forth in the Uniform External Review Model Act promulgated
by the National Association of Insurance Commissioners and is binding on such plans.’’.
I’ve taken a look at the NAIC model reg referenced. As I read it:
If company A denies care or rescinds:
a) the client must appeal to the company itself.
b) if that fails, the client may appeal to an external arbiter. However, either the company has to agree to this or the insurance commissioner has to override the company’s decision. (The criteria are pretty straightforward and making a false negative would be hard to do absent just lying.)
If care is urgent and the doctor agrees the client may skip the internal appeals process and go straight to external appeal, with the same caveat that the insurer must agree or the insurance company must override the decision of the insurer.
Actually, this is pretty decent. The obvious ways to try and game it are:
1) to force as many non-urgent appeals to take the maximum time in the internal review (30 days), then kick them to external (between everything, 3 to 4 months).
2) Snow the external review organizations under by denying as much as possible, and forcing times up. This won’t do squat on recissions, but on denial of care a certain # of people will die (or get better) and that will save some money. You do pay for external reviews, but it’s unlikely to be more than the cost of really sick people’s care.
3) Game the insurance commissioner. The insurance commissioner decides who does the external review. Some reviewers will find for the companies/plaintiffs more than others.
Like any compliance based activity this bill requires the compliance agencies to do their jobs, but actually, this is written fairly tightly. I think, from a strict bottom line perspective, it’ll probably turn out to be worth still trying to deny care to really sick people who aren’t mortally ill, to buy yourself 3 or 4 months worth of surcease from bills. Also, the harder you make it to get care, the more likely they are to drop your company and find a new one, so hassling them into the ground might be good business practice.
In terms of recissions, it really is a matter of the definition of fraud. If forgetting to put anything on the application form or getting something wrong on the form (say getting dates slightly wrong about some illness from 2 decades ago) is fraud, they can still get a lot of people rescinded. If not, and if you can’t deny care due to prior conditions, then why would they be, then in fact it will be damn hard to rescind policies.
Another question is simply of penalties. If I, as a company, simply say “no, I don’t care what the law is I’m not going to obey it”, what is the penalty? As with coal mining companies who simply accept fines as a cost of doing business, it may be worth breaking the law.
The final point is that much of this seems (if I’m reading this correctly) to be handled by the State Insurance commissioners. Some of them are really good (New York, for example). Some of them are captured by the industry or have very few resources.
Bottom Line: Recissions as such are probably a thing of the past once the bill goes into full effect, unless regulators completely fall down on the job. Denial of care will probably still continue, though you’ll eventually be able to force them to give it to you, they can and probably will deny as often as they can to drive down costs and try and drive you to another company, if you’re an expensive (ie. very sick) customer.
