Category Archives: Economics

Miscellaneous economy stuff

Federal Control(s)

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This is how the central government gets its subordinate states ensnared in the Federal power trap.  Much has been written already on the entrapment of the states in the Medicaid, education, and so on honeypots, with the Feds having gotten the states dependent on Federal monies for those programs, and then using that addiction to control the states’ behavior vis-à-vis those programs—and other useful state considerations—lest those funds have something happen to them (albeit descriptions have not been this blunt).

Here’s an explicit example, this time aimed at New Orleans and through this city the state of Louisiana.

Engineers consider it a Rolls Royce of flood protection—comparable to systems in seaside European cities such as St. Petersburg, Venice, Rotterdam and Amsterdam.  Whether the infrastructure can hold is less in question than whether New Orleans can be trusted with the keys.

The Army Corps estimates it will take $38 million a year to pay for upkeep, maintenance and operational costs after it’s turned over to local officials.

Local flood-control chief Robert Turner said he has questions about where that money will come from.  At current funding levels, the region will run out of money to properly operate the high-powered system within a decade unless a new revenue source is found.

“That’s been the eternal problem with flood-protection systems,” said Thomas Wolff, an engineer at Michigan State University.  “You build something very good and then give it to local interests who are not as well-funded.”

However, the Feds will blame the locals for the failure:

Congressional investigations found the old Orleans Levee Board more interested in managing a casino license and two marinas than looking after levees.  Though the Army Corps of Engineers had responsibility for annual levee inspections, the local levee boards were responsible for maintenance.  Still, the boards spent millions of dollars on a fountain and overpasses rather than on levee protection.

Never mind that the locals have a local economy that needs looking after, else there’s nothing for a (Cadillac) Federal program to…protect.

As Richard Fernandez notes in his post,

The problem with free stuff is that someone has to pay for it.

And when the Federal government sighs and says, “OK, we’ll pay,” it then also exerts control over the program being centrally funded and over the entity “benefiting” from that program.  And so the entity and its citizens also “pay for it,” with their freedom of action.

So much for federalism.

Disingenuosity

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On the Sunday talk shows, yesterday, President Barack Obama’s Treasury Secretary Tim Geithner said, that

[T]he White House plan has “balance” and “detail” but he’s willing to hear suggested improvements.

Then he said with his wide-eyed innocent expression,

But what we cannot do is figure out what works for them.  The ball really is with them now.

This cynically ignores the fact that he knows full well “what works for” the Republicans.  They’ve made that clear through two House-passed budgets; although it’s possible (barely, but this is Geithner, who misses simple things like his personal taxes) Geithner missed this since Senate Majority Leader Harry Reid (D, NV) refused to allow even talk about these budgets to occur on the Senate floor.  Republicans made clear all last summer and fall “what works for them,” also.

An Obamacare Outcome

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Dr Peter Weiss, a practicing physician, describes one.

I have now posted a notice in my office and each exam room stating exactly what Obamacare will cover for those yearly visits.  Remember Obama promised this as a free exam—no co-pay, no deductible, no charge.  That’s fine and dandy if you are healthy and have no complaints.  However, we are obligated by law to code specifically for the reason of the visit.  An annual exam is one specific code; you can not mix this with another code, say, for rectal bleeding.  This annual visit covers the exam and “discussion about the status of previously diagnosed stable conditions.” That’s the exact wording under that code—insurance will not cover any new ailment under that code.

What this means:

If you are here for that annual exam, you will not be covered if you want to discuss any new ailment or unstable condition.  I cannot bait and switch to another code—that’s illegal.  We, the physicians, are audited all the time and can lose our license for insurance fraud.

Yeah.  A separate appointment, separately scheduled for your new ailment.  Further, during your scheduled annual, note that bit above: “discussion about the status of previously diagnosed stable conditions.” That’s the exact wording under that code….  Your doctor’s discussion concerning your annual’s results are largely scripted by Uncle Sugar.  Talk about snake oil.

Oh, and good luck scheduling that separate appointment.  Keep in mind that your doctor, if you get to keep him at all, is part of a shrinking collection of doctors, and their work loads are exploding from all the new patients Obamacare is foisting off on them.  There are only so many hours in a day.

 

RTWT

Apocalypse Now

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…or is it?

Here are some interesting graphs published by Spiegel Online International that show some estimated effects of a departure from the eurozone by Greece, Greece plus Portugal, those two plus Spain, and those three plus Italy.  Frankly I think the latter two departing is unlikely; they’re not is as poor shape, yet, as they’re made out to be.

This is chump change for the seven year period, even including Portugal: it compares to Germany’s 2012 GDP of €2.5 trillion ($3.2 trillion).  Even losing all four would “only” hurt badly, not inflict debilitating damage—and only relatively briefly, at that.  See a graph below for expansion on this point.  Notice, also, that the red bars are losses in growth, not loss of growth.

Here’s that “graph below:”

Look at  that.  A burble in 2014 until we look at all four nations departing.  Then Germany gets a sharp recession.  However, notice that in the most likely scenarios—Greece only and Greece plus Portugal leave—growth goes back positive by 2015, and by 2017 if we throw Spain into the mix.

What do things look like for the rest of the EU, not just Germany, and for the US?

The UK and the US—not members of the eurozone, interestingly—hardly notice the losses.  Germany feels the sting, but as can be seen from the earlier graphs, not so much compared to its overall economy.

In short, a departure of these nations from the eurozone will hurt the remaining, and other nations, a little.  But against this must be balanced both the pain for those nations of continuing the present charade of bailouts and the benefits to Greece (and Portugal, Spain, and Italy) of stopping the bailouts, letting them go bankrupt, and letting them depart the eurozone.  And the affected nations can, with this much warning, mitigate the effects by reducing their holdings of Greek (and Portuguese, Spanish, and Italian) sovereign debt.

Unfunded Liabilities

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We’ve already seen counties and cities brought low and into bankruptcy by their blithe accumulation of future liabilities that they have no hope of honoring.  Jefferson County, AL, comes to mind, from a bond sale they had every reason to believe, a priori, that they could not honor in the future.

So does Stockton, CA’s bankruptcy, flowing from a public union pension and insurance program that they, also, must have known in advance that they could not support in future.

These are well understood, and the data that would have predicted these failures easily available to any who cared enough to look—and to face the impending problem squarely.

What of our nation’s debts, though?  Chris Cox and Bill Archer describe in a recent Wall Street Journal the hidden—and unfunded—liabilities at the Federal level that make our public national debt of $16 trillion look minor.

These hidden, but too real liabilities—debts—include

the unfunded liability of Medicare, $42.8 trillion

the unfunded liability of Social Security, $20.5 trillion

the unfunded liability of federal employees’ future retirement benefits, $23.5 trillion

But these data are carefully hidden from public scrutiny.  Federal Treasury “balance sheets” don’t include things like the debt represented by those Medicare, Social Security, and retirement unfunded liabilities.  No, the data are carefully squirreled away in the individual social welfare accounts.  You have to know where to look and what to look for—knowledge that heavily trained and experienced folks like Cox and Archer have, but which our politicians know the average American constituent lacks.

This is a time bomb that demands out entitlement programs be brought to heel, our entitlement mentality as a nation to be curbed.  Else we’ll go the way of Stockton.  And for a nation, that won’t be pretty.  Think of Greece today.  Think of Weimar Germany of the last century.