This is from the White House’s very own blog, from the personal keyboard of Alan Krueger, Chairman of the Council of Economic Advisers:
The household survey showed that the unemployment rate ticked up to 8.3% in July (or, more precisely, the rate rose from 8.217% in June to 8.254% in July). Acting BLS Commissioner John Galvin noted in his statement that the unemployment rate was “essentially unchanged” from June to July.
And so is our economic recovery “essentially unchanged” from 2009 to 2012.
I want to comment a bit about one leg of our immigration policy, that of what to do about the illegal aliens currently present in the US.
Roberto Suro has a recent piece in The Washington Post that bears on this; although he talks primarily about a second leg of our immigration policy, one that also must be solved: how we let aliens into our country (an immigrant is someone who intends to settle permanently, so I’ll stick to aliens in this post). All three legs (entry, border security, the existing population of illegal aliens and immigrants), though, must be handled together, or the totality of our immigration policy will continue to be the failure that it is today.
Suro noted,
Along with the many [immigrants] looking to make a permanent home in the United States came those who had no intention to stay, and who would make some money and then go home. Between 1908 and 1915, about 7 million people arrived while about 2 million departed. About a quarter of all Italian immigrants, for example, eventually returned to Italy for good.
Today, we are much more rigid about immigrants. We divide newcomers into two categories: legal or illegal, good or bad. We hail them as Americans in the making, or brand them as aliens fit for deportation.
And
To start, we can recognize the new birds of passage, those living and thriving in the gray areas. We might then begin to solve our immigration challenges.
…
If we accept that there are spaces between legal and illegal, then options multiply.
The second part, though, is simply wrong. There can be no gray area between legal and illegal; that would only perpetuate the limbo in which the illegal aliens currently exist. Instead, we need to broaden what constitutes legal, and make it easier for these folks to comply.
Who are these folks living this shadow existence? They are crop pickers, violinists, construction workers, entrepreneurs, engineers, home health-care aides and particle physicists. These folks are active participants in a global economy driven by the flow of work, money, and ideas; they wish to come and go as opportunity calls them. They manage to have—they often are forced to have—a job in one country and a family in another. Thus, they are forced to straddle—or avoid—the laws of multiple jurisdiction, with particular emphasis in this context US law on the part of the worker.
Nevertheless, we need them in the US being productive while they’re here, and it’s unnecessary to force them to choose to be here permanently, or to lie about their intent to be here permanently as a precondition for being here legally at all in order to achieve that.
Thus, I propose the following for the current population of illegal aliens. I’ve proposed a general idea elsewhere, and Congressman Luis Gutierrez (D, IL) and Senator Marco Rubio (R, FL) have ideas that bear on this.
We should issue a “green card lite” for those who come and go at a relatively high rate—migrant workers, for instance, but not exclusively. Such a card would be good for an extended number of years, allowing the holders to cross the border multiple times as their (seasonal, perhaps) work requires, without having to go through the entry bureaucracy—or risk coyote depravations—each time they want to reenter. The folks who are here already and want such a card, though, must provide documentation to support their claimed work history.
Additionally, in support of that documentation requirement, I suggest a one year amnesty for employers of (potentially, from their perspective; I assume the good intentions of the vast majority of employers) immigrants, illegal or legal, so those employers can provide their documentation supporting the (illegal) immigrant’s application without fear of government reprisal.
Moreover, a regular green card, for those who aver a longer duration/steadier residency should be far more easily requestable and far more quickly issued, with a similar requirement for work history documentation from those who are already here and want to come out of the shadows. The employer amnesty should be extended to employers of this group for the same reason.
Note, though, that I’m not proposing amnesty for the illegal aliens themselves. As many have suggested, these must pay a penalty, variously including a fine and/or a requirement to leave the country and then to reenter legally. I believe that both penalties should be applied. The fine, though, must be sized to the illegal alien’s ability to pay, and it must be large enough to sting but not so large as to be an impenetrable barrier. The requirement to leave the country and return, though, I hold can be satisfied by traveling to the nearest consulate in the US, paying their fine, and applying for their green card from within that consulate.
On the other hand, those who’ve used falsified or stolen documentation (e.g., a false or stolen social security number) to facilitate their getting hired must pay a sterner penalty. These must leave the US voluntarily for some period of years before applying for a green card (lite), and they must apply as though they have no work history to claim (they’d a first-time immigrant, now). Failure to leave voluntarily should result in deportation, never to be allowed back in.
Finally, notice that there is nothing in this that presupposes the now legal immigrants wanting to become citizens. Nor need there be. As demonstrated by those immigration statistics at the beginning, when folks are in our country openly and freely, our country sells itself.
Let’s not forget, though, the other two legs of our immigration problem. We also need to look at the difficulties we inflict on those who want to enter our country for legitimate purposes—to settle here, for instance, or to “make some money and then go home.” And we also need to get serious about securing our borders so that we do a better job of filtering out the ones who come here with nefarious purposes so that only those who want to come here to settle and contribute, perhaps (but not necessarily) to become citizens, or to be here for a time and then go home, can do so.
The question of universal health coverage is one well worth discussing at the national level; the goal of universal coverage is to make health care services ubiquitously available, for rich and poor alike. It’s a laudable goal. However, in order to have a coherent discussion, it’s necessary to review the terms of the subject.
Too often, though, the discussion assumes that health care and health insurance are so much a part of each other that they cannot be had separately. This is wrong. Health care is what you get from your doctor or hospital. You’re getting treatment for a medical condition, advice about how to treat a medical condition, advice about how to avoid getting a medical condition. In return for these health care services, someone pays the doctor or hospital money.
Many people pay for these services with cash out of their own pocket, and many more would prefer to do so, were they given the choice.
Others—the vast majority of Americans (I’m eliding the free riders in the market)—pay for these services by buying something we call insurance: they pay a periodic premium to a health insurance provider for a policy that obligates the insurance provider to pay (most of) the costs of a medical condition should that condition actually arise at some time in the future. The insurance company makes its money by selling lots of such policies on the bet that few enough people actually will incur the covered condition within a given time frame that the aggregated premiums over that time frame will more than cover the actually required medical payouts. That’s what insurance is, including health insurance: it’s one person transferring part, or all, of a risk of something untoward happening to him to another—an insurance company, for instance—in return for an agreed upon fee. For that fee, the entity accepting the risk, or the agreed part of it, agrees to cover the cost of that untoward event should it actually occur, with the aggregated fees over lots of such agreements, being enough to cover the required cost payouts.
Health care and health insurance, thus, are entirely separate industries: one is the actual provision of services, and the other is simply a means of paying for those services.
But for the risk transfer, or insurance, industry to work, though, two things must occur: the first is that the fees charged for the risk assumptions must be voluntarily agreed to between the two parties to the risk transfer. If the fees are dictated to one or the other side, without any market flexibility, they run a very strong risk of being too high for the one party to afford, or too low for the other party to be able to cover the agreed costs.
The other thing that must occur is that the fees must be consistent with the risk assumed. To take an over-simplified example, if a man has a risk of a medical condition that costs $1,000 to treat, and the likelihood of his incurring that condition within the next year is very high, and he wishes to transfer 80% of that risk to an insurance company (i.e., get the company to pay $800 should the condition arise), then the insurance company must be able to charge a premium that, over the course of a year, sums to $800 in order to break even. Of course, if the insurance company were to sell that same policy to lots of folks subject to that medical condition, actuarially it’s highly unlikely that all of them—even with the same risk—will incur that condition in the same year. This would allow the insurer to sell the policy for a lower premium than it could if the customer population were limited to that original single person.
With lots of companies in the market selling policies for a given coverage, competition ensures that a single company does not abuse single-company monopoly power and overcharge. Nation-wide marketability of that policy both enhances the competition and expands the customer base with the insured-against condition, thus increasing downward pressure on the policy’s premium—the risk transfer fee. This downward pressure makes insurance more accessible to more people.
The actual situation facing us, though, is a market structure of government limits on the policies offered, government limits on the premiums allowed to be charged, and two critical government mandates: every individual must buy health insurance—must buy those government-limited policies—and every insurer must accept all customers. There is little to no market flexibility—or pressure—to structure coverages to match the risks being transferred, nor is there much flexibility to match the fees charged to the risks being transferred. This combination of government limits and mandates is a health welfare program of universal coverage.
My own view is that universal coverage is unnecessary, never minding its laudability, and that health welfare (or welfare generally) is actively suboptimal when it’s the first resort, rather than the last resort after market forces have taken their effect on prices and availability.
Because the welfare program’s risks and fees do not match, and because competition among health insurance purveyors is limited, inefficiencies will rapidly develop in the form of coverage payouts being too great for the premium income in some areas and too little for the premium income in others, with a strong bias toward too little premium income. While companies’ desires to charge more, including “too much,” would be heavily constrained by competitive pressure, the government’s bias is to hold down costs to its voters, without regard in the short term to the market consequences, and the bias is unchecked.
This drives the welfare program to one or more of three outcomes: the insurance companies must prevail on the regulatory authorities to raise premiums, they must get tax dollar help from the government to make up the shortfall, or they must stop providing that insurance coverage. All of these represent stark cost increases to the insurees: either they pay higher premiums today (even for conditions for which they do not want coverage or whose risks are very low, because those conditions are included in the required coverage allowed to be sold), their taxes go up tomorrow, or next week they lose their insurance coverage altogether until they move to another company—if one is left in business. Indeed, this is the rationale for the Individual Mandate requiring everyone to buy insurance: all those extra premiums, hopefully from young, healthy Americans who aren’t likely to need a payout (and who also aren’t likely to want to buy the coverage) are intended to provide those extra monies and so avoid any of the three outcomes.
It’s good to see that American stock analysts/prognosticators aren’t the only ones who are no good at the task. This is no knock on the Spiegel Online journalist, because no one is. Nevertheless, it’s instructive to see his remarks.
In the last 10 days, the DAX, Germany’s blue-chip stock index, has fallen by 16 percent. On Monday it fell below the 6,000 point benchmark for the first time since January and has continued its plunge on Tuesday. Has the crisis, which for so long seemed to leave Germany untouched, finally reached Europe’s largest economy?
…last summer, when the DAX lost 30 percent within just a few weeks, sparking a wave of politicking. The widespread belief in Germany was that only the financial markets were acting up.
That is probably the biggest problem the Germans have in the now two-year-old euro crisis. In a sea of misery, Germany was an island of bliss.
But now, though, even its most stubborn adherents have begun realizing that this concept cannot work.
Here’s a chart similar to what this writer is looking at for the DAX, courtesy of Yahoo!Finance. It looks at the DAX over the five days ending 5 Jun 12 (not the ten that the writer describes; however, if you follow the link, select the one month view, and look back those ten days, you’ll see the preceding five days are generally flat, so little is lost to the point).
Pretty damning, isn’t it? Nobody likes the German government’s euro, euro zone, or EU moves, and they’re trashing the German stock market over them. Chancellor Merkel and Finance Minister Schaeuble must change their policies.
But here’s that same chart put into some sort of perspective, also courtesy of Yahoo!Finance. This one looks at the DAX over the last five years. 
That five day period is the tiny, little down-tick on the far right end, where you almost can’t see it against the five-year backdrop. Indeed, the whole period from the Aug-Sep 2011 period to the end is little different from the period from October-ish 2010 and that Aug-Sep 2011 other than speed of occurrence. And both periods are trivial compared to the period surrounding the onset of the Unpleasantness of late 1999-early 2000, which had a wholly different set of “causes.”
This time it’s different, though. Yeah. Sure it is.
Two purchasing managers indexes for China fell in May, and Indonesia had its first trade deficit in nearly two years, while the Republic of Korea’s exports fell for a third straight month. Nomura Securities’ chief Asia economist, Rob Subbaraman, attributed this in part to “The crisis in Europe.” The debt crisis is having two effects in Asia: European banks are husbanding their resources for domestic and European commitment, and so they are only able to extend less credit in Asia—including for trade finance. Moreover, the crisis is reducing European demand for Asian goods and services directly.
Within Europe, the debt crisis is becoming a self-fulfilling prophecy. Heineken NV, for instance, worried about its euro holdings in a Greece that might leave the euro zone (and convert those euros to drachmas of sometime value), is taking its cash out of Greece and the euro zone altogether, which creates liquidity problems for Greece and the euro zone. Of course, Heineken isn’t that big, but their move is typical of a whole lot of businesses that, in their aggregate, approach being big enough. Additionally, Greek companies are starting to max out their existing credit lines and then expatriating the cash. Other businesses, in both the non-financial and the financial arenas, are making similar moves in anticipation of a Greek departure. This caution by everyone is part of the pathway through which the debt crisis is contributing to a slowing European economy—and to a reduced demand for Chinese and US exports. That slowing European economy is evidenced by sustained unemployment of 11% and a falling purchasing managers index (to 45.1—a level that means actual shrinking) in May.
Coincident with Europe’s reduced demand, our own economy, whose cyclic business recovery is being held back, has suppressed our business’ health and thereby reduced American demand for Asian exports. The poor US economy, not helped by our reduced exports, is indicated by the recent job creation number—69,000—for May that is the third straight month of falling job creation rate, and by an unemployment rate holding above 8%—8.2% in May.
Our economy is at the core of the global economy, and so much of the rest of world depends on an economically healthy US for their own prosperity. Yet our health depends on their economic health, too. It’s not quite a chicken and egg thing, though; we really are the engine, and so we really do need to right ourselves rather than wait on Europe, for instance, to right itself. The foregoing just shows the integration of the global economy; it is not an excuse for our own government’s policy failures. The buck stops—and starts—with this administration.
Our path is amazingly simple, too, except that politicians are artificially complexifying things. Our government needs to get out of our business’ way. It needs to stop spending—and borrowing—at its current profligate rate. It needs to reduce spending and tax rates in real terms, not just with accounting gimmicks and a promise to pay us Tuesday for that hamburger today (which, if Mayor Bloomberg were to have his way, won’t be for sale soon, anyway [/snark]).