Wednesday, March 30, 2011

Health Care Act

There are many things to like in the Health Care Act.
1.Strengthens Medicare by lowering drug costs for seniors and by adding preventative services.
2. Improves insurance coverage for those with pre-existing conditions.
3. Expands coverage by allowing parents to keep their cildren on their policies until age 26.
4. Gives new options to plan and pay for long term services through a voluntary insurance program.
So why are the Republicans so rabid in their opposition? Because many of them have nice coverage through their employers and begrudge it for others. And, because it mandates that everyone must have insurance. But, one of the principles of insurance is that the base must be broad for the average needed care to be supported. This is why group plans have favorable rates.

Friday, March 25, 2011

European Austerity

Austerity is not the answer for Europe’s debtor nations. The UK has gone that route and the economy has tanked. Others, as noted below in an article in the New York Times, are destroying themselves. And Why are we all doing this when the physical ability to produce is still there? Eichengreen’s suggestion makes sense. It could be combined with writing off some of the bad loans held by banks as I have suggested before. We are killing ourselves at the altar of paper.

“In Greece, the central bank is forecasting that unemployment will hit 16.5 percent this year. Support for the Socialist government of George Papandreou and his reforms continues to erode, with a recent poll showing that just 35 percent of Greeks would vote for him again.
In Ireland, it now seems that the banks whose bad lending brought the country to its knees may need even more than the 35 billion euros already allocated to them by the European Commission and the I.M.F.
Finally, in Portugal, after four cost-cutting austerity packages that have covered the usual areas like pension reform, spending reductions and tax increases, the people have had enough.
The lesson is clear, argues Barry Eichengreen, an economist and an expert on the euro and its origins — sustained austerity that is not supplemented by some form of debt reduction in which the holders of bank or government debt are forced to take a loss is not just unworkable but unfair as well.
“When you reduce the incomes of the people who service the debt but you don’t reduce the incomes of the bondholders, you won’t reduce the level of debt,” he said. “Some might call it shared sacrifice, but some people are not sharing.”

Wednesday, March 16, 2011

Smaller Government

The Radicals are finally getting what they want--a smaller government, meaing reduced state and local government spending. Oh well, we don't need police now that everyone in Michigan can carry their own iron. And, who needs public schools since youth are having trouble finding jobs anyway. It's the theater of the absurd!

Monday, March 14, 2011

Bad Banks

There are three major ways that reduced asset values have been dealt with by different countries:
1. Asset guarantees. This was used in the US for Citigroup and Bank Of America. This was done to make them more attractive for merger. This doesn't cost the government much initially, but future liability to the taxpayer is uncertain.
2. "Bad Banks" Used in a limited way in the US for Bear Sterns (that was allowed to go bnkrupt) and AIG (government became majority stockholder). Sharply reduced valued assets were removed from the balance sheets of these firms. Liability of taxpayers is not clear to me. This approach could be similar to removing the rule that non-performing loans are a charge againt a bank's capital ??(the method I have been advocating).
3. Public Asset Management Companies (AMCs) Distressed real estate related assets purchased by an AMC. (I am not clear about the public liability, but I suspect the government is left holding the bag.) Ireland used this method, buying $97 billion constituting 44 percent of GDP.

Wednesday, March 9, 2011

Underwater Mortgages

The number of Amricans who owe more on their household mortgages than their house is worth now exceeds 11 million (23% of all mortgaged homes).
One of the marvelous things about capitalism is that a peoples' wealth can increase without any effort on their part as prices increase. The reverse is also true. Through no action on the part of the asset holder, wealth can decrease--occasionally dramatically as in 2008 when housing prices plummeted 20 to 30 percent. Such a big swing in value can make old contracts impossible to honor.

Of course, this was a paper phenomenon, not a tornado that made people homeless, though the physical result was similar. The banks are resisting reducing their mortgages because then they would have to admit they are bankrupt under current banking rules. The government could have changed the rules one-time to allow banks to write-off say 20% of their mortgages' value without it being a charge against their capital in exchange for a similar reduction in what home owners owe.
We celebrate the glory of capitalism, but don't have institutions that acknowledge its inherent volatility.

While You Weren't Looking

While the attention of the average American was distracted by trumped-up terrorism (WMD), fear of gays and abortion, the rich have stolen their purses! Income inequality has grown since the 1970s and spurted since the 1980s.
Everytime this is pointed out, the radicals say the speaker is engaged in shameful class warfare. Well, it has been systematic class warfare, and the middle class is losing big time.

Tuesday, March 8, 2011

Conservative Fraud

Using the word "conservative" is inappropriate when applied to the Republicans and their Tea Party allies. They are not conserving, but rather are radicals attacking unions and public schools.

Sunday, March 6, 2011

Arab Democracy

Sometimes other writers capture my thoughts so well I can only quote them.
"When one looks across the Arab world today at the stunning spontaneous democracy uprisings, it is impossible to not ask: What are we doing spending $110 billion this year supporting corrupt and unpopular regimes in Afghanistan and Pakistan that are almost identical to the governments we’re applauding the Arab people for overthrowing?" Thomas Friedman, New York Times, 6 March 2011.