Tag Archives: political economy

Obamacare and the Sequester

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Sequester—that invention of President Barack Obama, with which he intended to extort Republicans and Conservatives into acceding to his taxing, spending, and borrowing economic policy—is starting to cause trouble for Obamacare, now.  The sequester is blocking a set of subsidies that were supposed to help pay deductibles and co-pays under Obamacare.

Amy Payne, writing for The Foundry, quoted Chris Jacobs in The Wall Street Journal on impacts:

There are two possible outcomes.  The first is that individuals who have managed to enroll in subsidized health insurance will find they’ve been misled about their copays and deductibles.  Families who currently think their plan will charge a $20 copayment for doctor visits may instead face a $25 charge when the sequester kicks in.  Individuals who now believe they face maximum out-of-pocket costs of $2,000 may end up paying hundreds more.

Wonderful performance by a President who’s a better policy wonk than his policy staff.

And So It Begins Anew

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Senate Majority Leader Harry Reid (D, NV) is at it again.  Interrupting his Nevada NPR host, he demanding that all talk of cutting taxes be stopped.  This Progressive does not approve of such speech, and so we have no right to hear it.  He also

said Republicans would have to agree on tax-revenue increases for Congress to achieve a large-scale agreement, but they instead have their mind set on “nothing more on revenue.”

“And until they get off that kick, there’s not going to be a grand bargain.  There’s not going to be a small bargain.

Straight from the horse’s mouth.  Never mind the $600 billion in tax rate increases he got earlier this year.  He wants more, with no spending cuts (that’s just “happy talk,” he says), or he’s perfectly willing to, once again, blow up negotiations and to threaten the viability of our economy.

All for Progressive ego.

Unemployment Payments as Stimulus

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It has been claimed—Congresswoman Nancy Pelosi (D, CA) is the most famous proponent of the theory—that unemployment payments to the unemployed are inherently stimulative: the recipients promptly spend the money.  The stimulus is assumed to come from what’s called the velocity of money.

The velocity of money is a concept in economics that looks at how many times a dollar gets turned over in a local economy: a man buys groceries and pays rent, the grocer pays his clerk, who buys…, and the landlord hires maintenance workers, who then spend on….  The velocity aspect comes from measures of how many times that dollar gets turned over before it disappears from—has been consumed by—the local economy.

There are holes in the premise that unemployment payments are stimulative; here are some.

Unemployment payments are from tax money taken out of the private sector—which means it’s money not turning over in the private sector until it’s returned as those unemployment payments.  Moreover, those unemployment payments are less than what was originally collected for the purpose—the difference is lost to the friction of government.  The amount of money that can be turned over is lessened.

Further, the unemployed don’t buy the more expensive things with their unemployment payments; they buy the low cost items in the grocery store.  These are low-margin items for the grocer, though, and so they lower, a little, the overall margins of the store.  The grocer thus has a little less money with which to do his own purchasing (and perhaps hiring).  Turnover is slowed.

On the other hand, money (left) in the private sector gets spent on a variety of things (60%-70% of our economy is consumer spending), including on more expensive items in that grocery store—which helps expand, a little, that store’s overall margin.  Turnover is greater.

Money left in the private sector, rather than returned to it as unemployment payments, also gets saved, to an extent (a large part of the remaining 40%-30% after consumer spending), or used to pay down existing debt (another significant fraction of those 40%-30%).  Saved, or returned to a financial institution as debt payment, these funds improve the credit-supporting aspect of our economy: they’re funds financial institutions can lend out to support credit card-supported purchases or to support the purchase of big ticket items like cars and houses.  More money is available to be turned over.

Savings and debt repayments also are funds financial institutions can lend to businesses for capital improvement and/or expansion and to startups to support their gutsing up or subsequent growth.  Here are jobs in the making, and an expansion of the money in the private sector—in the hands of individuals.    Here, also, is a reduction in unemployment and so of the need for unemployment payments.  More money is available to be turned over.

This is not to say that unemployment payments must never be made under any circumstances.  However, a more accurate understanding their real effect on our economy will enable us to make more efficient use of such payments.

Economic Incompetence Continues

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We must increase our debt limit so that we can pay our bills.

This is the thrust of President Barack Obama’s insistent demand that our debt ceiling be raised, and that it be done with no strings attached.  The graph below, via Zero Hedge, however, illustrates the foolishness of continually expanding our country’s debt.  It shows government debt as a percentage of GDP compared to the annualized rate of change in economic growth.

It’s hard to get any clearer than this demonstration of the inverse relationship between government debt growth and economic growth.  It’s not just that growing debt impedes economic growth; the reverse is true, also: reducing government debt (not just reducing debt growth rate) allows the economy to grow.

If you borrow money to pay your bills, you aren’t paying your bills, you’re just changing creditors.  I’ve said it before, and I’ll say it again: it isn’t sufficient simply to raise our debt ceiling.  Any raise must be coupled with commensurate real spending cuts—that is, cuts in current year spending, not pseudo-cuts in the out years.  It’s only by reducing current spending below current revenues that the current deficit can be reduced—which by itself still isn’t enough.  The current deficit must be reduced to the point it disappears, and a current surplus is generated.  Year after year.

Current deficits, after all, are current borrowings, and these only add to existing debt.  The only way we can reduce our country’s debt, and so to eliminate the need to raise the debt ceiling—the only way—is to cut current spending to levels below current income.  Any junior high student on an allowance understands that.

More Obamacare, or Is It Obamacare IT?

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…or does it matter?

Here are some examples that Paul Bedard, writing for the Washington Examiner, described:

  • CNNMoney reported one family “found a bronze-level plan for roughly $357 a month, after their subsidy…[b]ut it comes with a $12,600 family deductible”
  • Enormous rate increases.  A research group found that a 30-year-old male nonsmoker “will see his lowest cost insurance option increase 260%”
  • Some who already buy their own insurance are seeing their policies non-renewed, with replacement offers only for expensive new policies.  The Christian Science Monitor reported on a North Carolina family who had been buying Blue Cross and Blue Shield insurance for $380-a-month.  “BCBS is offering them a new plan for three times the cost, $1,124.50 a month…with an $11,000 deductible”
  • A California couple [told the Fresno Bee] that the Obamacare policy suggested to them included a 40% increase in their doctor’s office co-pay.  “Our co-pay skyrocketed from 0% to 40%, and the maximum out-of-pocket increased an additional $2,300”
  • Kaiser Health News found a lack of competition in some pockets of the country.  “18% of counties have only one insurer offering plans, and 33% of counties have only two insurers competing”
  • Little uniformity to premiums charged around the nation.  “For instance,” Kaiser also reported, “Cigna is offering 50-year-olds one of its midlevel plans for $614 if they live in Flagstaff, AZ; that same plan, with different hospitals and doctors, will cost $428 in Phoenix and $395 in Nashville.”

Whether these (especially the deductibles and the enormous premiums) are actual costs to be inflicted or more IT failures to match up government-snooped personal information accurately, the train wreck is in progress.