Tag Archives: political economy

Of Course It Is

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Now that the Obama administration’s end is near, and a new guy is being put forward to run Obama’s EPA, that agency is changing its mind about the impact of fracking.

Fracking can affect drinking water supplies in certain circumstances….

The report, written by Environmental Protection Agency scientists, includes findings that are more open-ended than those in a draft version last year, when the agency said fracking, or hydraulic fracturing, isn’t having “widespread, systematic impacts on drinking water.”

When pressed on the “updated” report, which contradicts that earlier draft, EPA Deputy Assistant Administrator Thomas Burke conceded the draft’s prior conclusion that only a small number of cases of contamination had been found—even though that was left out of this later iteration of the report.

While the number of identified cases of drinking water contamination is small, the scientific evidence is insufficient to support estimates of the frequency of contamination[.]

Even the identified instances of contamination—surface spills of fracking fluids or poorly done cement casing of a wells—have little to do with fracking, but are failures to execute.

Of course this drives the conclusion that when you can’t find the needle in the haystack, you don’t have enough evidence to say that there aren’t many needles in the haystack.  That’s some science the EPA has there.

Keep in mind, too, that this is same agency whose pseudo-science concluded that plant food—atmospheric CO2—is a pollutant.

Apparently rigorous thinking was outside of these guys’ school safe spaces.

A Bad Deal in the Offing

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The Wall Street Journal had a piece on a potential deal concerning the FCC.

We hear Majority Leader Mitch McConnell and Democrat Harry Reid are negotiating for an FCC transition in which Chairman Tom Wheeler would leave in January. GOP leaders would then reconfirm two commissioners: Democrat Jessica Rosenworcel, whose five-year term has expired; and Republican Ajit Pai, who is not up until next year and is in the mix to be the next chairman.

The WSJ suitably addressed the foolishness of the overall deal.

I have a related concern.  Why deal with Senator Harry Reid (D, NV) at all?  That man is wholly untrustworthy, and besides, he’ll be gone in January.  Why deal with the Senate Democrats at all?  As a group, all they’re interested in doing is obstructing anything Republican.  Senator Tim Kaine (D, VA) has said he’d do everything he could to prevent Republicans from acting.  So has Senate Minority Whip Dick Durbin (D, IL).  So has Senate Minority Leader-in-waiting [sic] Chuck Schumer (D, IL).  And on and on.  These folks’ word cannot be taken as reliable except as they promise to get in the way of the nation’s business for their own personal political gain.

And, courtesy of Reid’s prior dishonesty regarding the filibuster, most of the Senate’s nearby business doesn’t need these obstructionists’ participation to conclude in any event.

An Impact of Artificially Low Interest Rates?

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Recall that, since shortly before the Panic of 2008, the Fed has been suppressing interest rates to artificial, and very low, rates.  I’ve written about other impacts of these government-manipulated rates.  The table below could well be an illustration of an unrolling of the failure in the insurance industry first mentioned in the linked-to article.

It seems that two of the smaller insurers in the long-term care sector of the health insurance industry are about to be liquidated, proximately because they badly miscalculated the costs involved in paying out on long-term care policies.  Gary Hughes, American Council of Life Insurers General Counsel, had this on the reasons for the failures:

Penn Treaty [owner of the two failing insurers] is the poster child for what happens if everything goes wrong—when key assumptions on…claims, morbidity and interest rates go wrong—and then companies are unable to get justified rate increases[.]

This is true as far as it goes: actuaries need to be accurate in assessing future costs and the drivers of them, and State insurance commissions are reluctant to grant premium increases needed to cover rising costs.

However, premiums are not the only income source for insurers.  Far from it.  A significant income source comes from investments of those premiums, so they’re not just sitting around waiting to be paid out on a claim: they’re earning additional funds for the insurer, and those additional funds are critical bolsterers of the company’s ability to make its payout commitments.

To be safe, though, those premium investment vehicles focus on safety and liquidity.  That drives those investments to favor safe debt instruments: Federal instruments and commercial instruments that are highly rated by Moody’s, Fitch, and/or Standard & Poor’s.  That means that a significant fraction of the insurer’s additional income comes from interest payments on those debt instruments.

And that brings me to the table, with particular attention to its middle row.interestratetable

Hmm….

Some Context For The Latest Headline Unemployment Rate

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Here are some graphs, via The Wall Street Journal, that show why that headline rate of 4.6% isn’t all it’s cracked up to be.outdidelaborforce

The WSJ emphasized two points here, aside from the fact that this age group being outside the labor force has nothing to do with retirement or being in school:

First, a small but ever growing minority of 25-54-year-old men are no longer in the labor force. In the 1960s, just 2.7% of men that age were outside the labor force. As of November, it’s 11.5%.

Second, from the 1960s to late 1990s, 25-54-year-old women became less and less likely to be outside the labor force (this is primarily driven by a decline of stay-at-home mothers, as more women took jobs). But in the last 15 years, the share of women outside the labor force has been growing too. It’s now up to 25.3% from 23.2% in November of 2000 just before George W. Bush took office.

Which might contribute to and why, perhaps, there’s so little wage growth, as shown in this graph:wagegrowth

There’s just too much slack in the population’s ability to work.

Four Pillars of a Health Care System?

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The Wall Street Journal posited this in a Wednesday op-ed.

1. Provide a path to catastrophic health insurance for all Americans.

The WSJ then supports this with old saws: being covered generally leads to better medical results, health insurance is good for the wallet, and so on.  Then they want a government solution—while they carefully avoid saying how they would pay for it:

The ObamaCare replacement should make it possible for all people to get health insurance that provides coverage for basic prevention, like vaccines, and expensive medical care that exceeds, perhaps, $5,000 for individuals.

Those Americans who don’t get health insurance through employers, or Medicare and Medicaid, should be eligible for a refundable tax credit….

They don’t even say why catastrophic health insurance should be particularly targeted by Government.  They ignore an actual market solution for this: free market competition, accompanied with lower tax rates (which leave more money in people’s pockets), and no annual or income caps or requirements for high deductible insurance plans (and no requirement for any insurance plan at all) on Health Savings Accounts.  Folks are fully capable of making their own decisions about the structure of their health insurance plans without the Know Betters of Government holding them by the hand.  And insurance companies, in a fully competitive environment, are fully capable of developing and delivering the products actual customers want without Government mandates.  If that includes catastrophic insurance plans, those will appear.

2. Accommodate people with pre-existing health conditions.

See above regarding free markets.  Of course such coverage would come at a higher cost than other sorts of health coverages; the risk being transferred to the insurer is higher.  But even this risk is not certain.  Folks who’ve had a heart attack (or more than one), for instance, have a preexisting condition (unless a single heart attack has occurred sufficiently far in the past that a medical doctor (the patient’s, not the insurer’s or a Government hireling) says it’s a one-off and not preexisting), but not everyone who’s had heart attacks will have their next one simultaneously.  Even a preexisting condition can be amortized across time given a free market that allows pooling of [those who’ve had heart attacks] so that premiums can be adjusted to match the actual payout requirements, the actual risk—just like “ordinary” insurance plans.

So as long as someone remains insured, he should be allowed to move from employer coverage to the individual market without facing exclusions or higher premiums based on his health status.

This conflates two separate questions.  The preexisting question is addressed just above.  The mobility of an insuree (or someone who’d like to buy a health insurance plan) is separate: and yes, in a free market environment, an insuree would be able to take the plan he’s purchased, whether originally obtained through his employer (unless it was the employer who actually did the purchase and the premium payments) or bought on the individual market, with him wherever he went or to whatever job he moved.  The latter case, too, would reduce or eliminate the need for the new employer to offer health insurance coverage through his benefits program.

3. Allow broad access to health-savings accounts.

There should be a one-time federal tax credit to encourage all Americans to open an HSA and begin using it to pay for routine medical bills. And HSAs combined with high-deductible insurance should be incorporated directly into the Medicare and Medicaid programs.

Another Government solution—again carefully unpaid for—and it’s much too timid.  I addressed HSAs and their market availability above.

4. Deregulate the market for medical services.

This is the only move necessary.  It’s the move to enable the free market solution.

Full stop.