Category Archives: markets

More Failed Government

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This example isn’t a demonstration of dishonesty, and it isn’t unique to this administration.

Market-sensitive information vitally important to health-insurance companies has once again reached Wall Street before the public, and this time it appears to have come from the government itself.

On Dec 3, an official with the agency in charge of Medicare spending held a conference call for industry officials.  During the call, he provided data suggesting that federal funding for private Medicare plans would likely fall more than expected.

Word soon reached Wall Street, prompting a selloff in insurance shares.  In the subsequent 10 trading days, shares of several major health insurance firms lost between 3% and 9% of their value.  Over that same period, the S&P 500 was down 0.5%.

There’s this to color that failure:

Government departments are struggling with a fundamental tension between their duty to keep the public informed and a need to keep market-moving information from reaching investors.  The tendency toward openness has helped fuel a burgeoning business of government insiders who mine Washington for information that could affect stock prices.

There’s no need for the tension to exist, though, especially in a 21st century of online investing and trading, discount brokering, and Common Man doing much of that.  There’s also no need for the tension to exist given the falseness of the premise that market-moving information should be prevented from reaching investors.

Keep us informed.  Release all the data, to all of us simultaneously.  How to do so isn’t rocket science.  It isn’t even Internet science.  And it would eliminate a class of government insiders.

Obamacare Jobs Impact

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The American Health Policy Institute has some data [emphasis in the original].  Although their study concerned itself primarily with the cost impact of Obamacare to large employers—those with 10,000 or more employees—the study’s outcome has implications for our economy’s jobs picture.

  • The cost of the ACA…is estimated to be between $4,800 to $5,900 per employee.
  • These large employers will see overall ACA-related cost hikes of…4.3 percent in 2016 and 8.4 percent in 2023 over and above what they would otherwise be spending.
  • The total cost of the ACA to all large US employers over the next ten years is estimated to be from $151 billion to $186 billion.

This comes after a downward trend in employer cost increases—to no and nearly no increase just prior to Obamacare’s passage—for employee health care benefits has been completely reversed by Obamacare, as this graph from the study demonstrates:

Now for those implications:

At the US median annual wage of $51,000 in 2013 (a decrease from 2012, an added bonus of President Barack Obama’s economic policies), and just taking the lower bound of the 10-year cost range, those $151 billion in added dollar costs work out to a jobs cost of nearly 3 million jobs over that decade—300,000 jobs per year—in a static analysis that ignores the economy’s response to the loss of those jobs: a loss that would increase by some amount each succeeding year as the economy actually responded.

Alternatively, that $151 billion cost is money not being spent on R&D or product development.  To put this in perspective, US companies spent some $424 billion on R&D in 2013; at $15.1 billion/year over the decade, that works out to a 3.6% cut in R&D.  This is a very large drop in a company expense that’s already very low in an increasingly competitive global economy (if not particularly competitive anymore in the US)—Apple’s R&D spending, for instance, amounted to just 3% of net sales in 2013; IBM and GM spent just 5-6% of total revenue on R&D.  This reduction leads directly to a commensurate cut in company profitability, with its own cascade effect on jobs in the US.

Of course, the true outcome will be somewhere in between—a loss of fewer than 3 million jobs, but still a large loss, and a cut in R&D of less than 3.6%, but still a significant cut—each and both with still significant cascade effects in future job losses.

Value of Your Tax Bill

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…if the money were left in your hands to put toward your own retirement.  WalletHub has looked at the differing state and local tax bites that they charge you for the privilege of living in their fair states.  Not surprisingly (to some of us) Red states take a sharply lower bite out of your money than do Blue states, as the figure below illustrates. 

But what does this mean in practical terms?  I looked at how the tax money could be used for an individual’s or family’s retirement program were the money left in the pockets of the earner.  Even though this study indicated that Wyoming’s state and local tax bite was the lowest, at $2,365, I used Texas’ more middling $5,193 take (middling because, even though Texas was rated as having the 7th lowest collection rate, the difference between Wyoming and Texas was $2,828, and adding that to Texas’ number got me to the neighborhood of DC’s $8,034, which was ranked 37th lowest) as my baseline because that’s where I live.

I also made a couple of heroic assumptions: working from WalletHub‘s assumption of a single filer, I fleshed that out to say he’s just turned 30 (yeah, he’s late to marriage), and he can afford to set aside the amounts identified below in his retirement program (actually, he chooses to afford, since he already can afford—he’s paying the taxes already).  Those amounts are the differences between the state and local taxes he’d pay in the state indicated in the table below and the taxes he’d pay in Texas.  I also assumed our young man can get a 3% return on investing his money, thereby roughly matching historical inflation.  As a 30-year old, he’ll work for 37 years before retiring.    Finally, this is a static analysis; it assumes no tax differential changes over those 37 years.

State, Local Taxes

Tax Difference from Texas

3% Investment Return

New York

$4,525

$172,300

California

$4,316

$164,400

New Jersey

$3,637

$138,500

DC

$2,841

$108,200

Even with that middling difference between Texas and DC, DC’s “state” and local tax bite is worth more than $100,000 over our man’s remaining working lifetime were he allowed to keep his money.  What does he get for that extra tax money taken?  A higher cost of living, and not much else.  More restrictions on individual freedom and responsibility—gun laws, for instance—and a denser population; although lots of folks like that part.

But think about what our man can do for himself with all that extra money—like visits to states with denser populations for all those attractions, while living more cheaply when he’s done with his vacation.  And more support for charities of his choice, through means of his choice, rather than those of government’s choices.

The Liberal Justice and the Birth Control Mandate

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Justice Elena Kagan had a number of questions—as did Justice Sonya Sotomayor—in Tuesday’s oral arguments on Obamacare’s Contraceptive Mandate.  Indeed, counsel for the mandate’s challengers, Paul Clement, wasn’t even allowed to get into his argument, so little were these Justices in a listening mode, but that’s for another post.  Kagan had one “question,” though, which was very telling:

One religious group would opt out of this and one religious group would opt out of that, and everything would be piecemeal.  Nothing would be uniform[.]

Yeah, and, Madam Justice?  So what?  Why must everything fit into a Liberal’s—or Big Government’s—Procrustean bed?  Opting out is part of the Free Exercise Clause—it goes right to the heart of it.  If things do get…piecemeal…where is the problem?  Government convenience is not a reason to deviate from the Constitution on the bench—or to truncate liberty from anywhere.

If it isn’t government convenience, then the Liberal just seems terrified of the noisiness of republican democracy.

Birth Control “Mandate”

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In the Twitter to-do surrounding the Supreme Court’s hearing two cases related to this, Planned Parenthood linked to one of their favorite posters, reproduced just below.  The poster is so mendacious, it cries out for a post in point-by-point response.

1. 99% still can—and 99% already were, long before Obamacare came up.  Neither case before the Court has anything to do with women’s access, only whether employers, or insurers, must cover birth control in every plan offered.  And it’s always been cheap, too, including for guys (why aren’t condoms mandated, by the way?  Whatever happened to equality of the sexes?).  WalMart, for instance sells birth control pills for as little as $4/mo.  The doctor’s appointment to get the prescription still is extra.  WalMart sells condoms for as little as $15 for three dozen.  No doctor’s appointment required.

2. Birth control for health reasons isn’t birth control; it’s medicinal use for treating an illness or other condition unrelated to pregnancy.  As a medicine, it’s already covered in other aspects of a health plan.  If it isn’t, that would be a legitimate gripe, but it would be legitimate only between customers and plan purveyors.  It would remain no business of government.

3. 27 million women still can; this is wholly unrelated to any question of the legitimacy of a contraceptive coverage mandate.  See #1 above.

4. 70%?  That depends on who’s polling.  Of course there’s a bias involved: who doesn’t like free stuff?  Especially when they’re not the ones paying to make it “free.”

5. Who, indeed, are the plaintiffs?  Two families with deeply held religious beliefs who live their religion in their business operations, too—like charity toward all, family nurturing practices vis-à-vis their employees, and so on.  What products they offer to sell matters to this debate how, exactly?

6. Slippery Slope?  This is a cynically offered straw man.  No one is regulating women’s access to birth control here except the government.  No one is looking to regulate access to vaccines, transfusion, etc—except, perhaps government as it attempts to start down this slope.  The only thing the plaintiffs in these two cases want to do is to not be regulated in this arena.  As to access itself, see #1 and #3 above.

7. First time for whom, actually?  Businesses always before have had the choice to offer health coverage plans (back when they actually resembled insurance policies and not Obamacare’s mandated health welfare plans).  Now it’s government that wants, for the first time, to eliminate that right to choose.  And, of course, with this point, Planned Parenthood ignores the fact that in opposing the plaintiffs, they’re seeking nakedly to impose their own personal beliefs on others.  This whole argument also cynically elides the fact that it’s a market choice, not business’ or government’s, that determines what gets included in a health coverage plan.  At least in a free country.

As to the Twitter hashtag #Notmybossbusiness, indeed it’s not.  The employer has no business providing birth control to his employees, “free,” or otherwise.  The use of birth control is a personal choice, not an employer’s.