Tag Archives: economics

Obamacare Strikes Again

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The Obamacare law set up “risk corridors” for insurers in an effort to smooth the transition from quasi- (albeit very quasi) free markets for health insurance coverage to Obamacare’s government mandated health welfare coverage. Health plan providers that did relatively well in the transition were supposed to pay a taste of their profits into a pool—the risk corridor—from which health plan providers struggling with the transition were supposed to be able to draw to ease their losses.

There’s this snippet in Anna Wilde Mathews’ and Stephanie Armour’s piece in The Wall Street Journal on these risk corridors [emphasis added].

Federal authorities said that insurers will at first receive only about 12.6% of the money that they requested from the program, known as risk corridors, for 2014, its first year of operation. Insurers have requested approximately $2.87 billion in payments from the program based on their 2014 results. But the pool available to make those payments is just $362 million, which came from collections from other insurers that did relatively well on their marketplace business.

That doesn’t look like very many health plan providers did well last year. That does look like most of the plan providers were harmed by Obamacare. And through them, lots of Americans are going to be harmed by this Democratic Party’s law, as health plan providers withdraw from ObamaMart or from health plan provision entirely.

Debt Risk

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The PRC’s debt, at various levels, is a well-known risk to the country’s economic health. Existing loans to companies and households amounted to 207% of GDP at the start of this summer. Households had in the region of 38% of that debt as of last year. Municipal debt is approaching $25 trillion yuan ($3.9 trillion).

Now the People’s Bank of China is moving to cut the down payment required to get a loan to buy a house. The public claim the PBOC is making is that this is supposed to spur house buying and through that the economy. While it’s true enough that the cut—from 30% down to 25% down—seems like small potatoes, it still will result in an increase in household debt.

By what logic is it a useful spur to the PRC’s economy by increasing an already outlandish and out of control debt?

Capital Risk

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There are a number of forms of capital risk, which in the main represents the likelihood that an investor (person or company) will lose some fraction of his investment, up to and including all of it. Two such forms, when doing international investing is currency risk and political risk. Currency risk is the risk that the exchange rate between the [company’s] home nation currency and the currency of the nation in which that [company] is investing will move against the company. This risk exists in any international transaction (treating the eurozone as a financial intranational region).

Political risk is the risk that the government of the invested-in nation will interfere with the repatriation of any moneys—principle or profit—to the company’s home nation.

Enter the PRC. But invest there at your peril.

China has capped the amount of money Chinese holders of bank and credit cards can withdraw outside the country, in its latest effort to discourage people from moving badly needed capital offshore.

So far, this only applies to PRC citizens. Its purpose, though, is to stem the outflow of cash from the PRC’s economy. That means it’s a short walk to limiting a foreign company’s ability to repatriate any part of its principle investment or profit.

Government Responsibility

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At least one charity is figuring out the impediment that is government involvement in what is, at bottom, an individual responsibility.

Andrea Koppel, Mercy Corps’ Vice President of Global Engagement and Strategy, wants the UN’s involvement in the current Middle East refugee crisis severely downsized. Her focus is on the UN as a quasi-government, but she’s also moving further and wanting sovereign government roles downsized, too.

The better idea, Mercy argues, would be to sweep away the old institutions where they are not likely to be effective and place greater reliance on new combinations of private-sector organizations, civil society groups and different levels of government. This, the report says, would allow humanitarian organizations to take bigger risks to support local victims regardless of government response, and work faster and more easily with local communities when national governments are virtually non-existent.

It’s not an explicit call for government(s) to be the last resort rather than the first, but it’s a move in that direction.

A Cynical Distortion

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And, perhaps, a sign of growing Democratic Party desperation.

Republican Presidential candidate Jeb Bush, on a campaign stop in South Carolina last week, said this to his black audience:

Our message is one of hope and aspiration. It isn’t one of division and get in line and we’ll take care of you with free stuff. Our message is one that is uplifting and says, “You can achieve earned success. We’re on your side.”

There are few things that terrify Progressives and Democrats more than those trapped into dependency on Progressive Government escaping the trap and being able to do for themselves, without those Progressives doing for them—and collecting personal political power in the process.

So: when a Republican comes along and says he can help those trapped and want out a way out, Democrats come out of the woodwork with their distortions.

You can achieve earned success. We’re on your side. How does that get distorted in to “black folks all want free stuff?” Only a Democrat can follow that pseudo-logic.