Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. 4Q GDP Up 5.7%, Wages/Benes At Record LowBrad DeLong thinks that the GDP reading suggests that next week's productivity numbers will be around 7%, adding yet another astonishing number to that series. This is not good news for employment; it suggests that workers can continue to be squeezed, notwithstanding all the sweat and tears of the last year.On the GDP numbers, here's Calculated Risk: Any analysis of the Q4 GDP report has to start with the change in private inventories. This change contributed a majority of the increase in GDP, and annualized Q4 GDP growth would have been 2.3% without the transitory increase from inventory changes. Unfortunately - although expected - the two leading sectors, residential investment (RI) and personal consumption expenditures (PCE), both slowed in Q4. PCE slowed from 2.8% annualized growth in Q3 to 2.0% in Q4. RI slowed from 18.9% in Q3 to just 5.7% in Q4. Note: for more on leading and lagging sectors, see Business Cycle: Temporal Order and Q1 GDP Report: The Good News. It is not a surprise that both key leading sectors are struggling. The personal saving rate increased slightly to 4.6% in Q4, and I expect the saving rate to increase over the next year or two to around 8% - as households repair their balance sheets - and that will be a constant drag on PCE. And there is no reason to expect a sustained increase in RI until the excess housing inventory is absorbed. In fact, based on recent reports of housing starts and new home sales, there is a good chance that residential investment will be a slight drag on GDP in Q1 2010. Read the rest of the post The Wages/benefits story is from the Wall Street Journal JANUARY 29, 2010, 4:16 P.M. ET Wage and Benefit Growth Hits Historic Low Staff Reporter of The Wall Street Journal Wage and benefit costs, both before and after adjusting for inflation, grew more slowly in 2009 than in any year since the U.S. government began tracking data in 1982, as double-digit unemployment weakened workers' ability to command higher pay. In the past 12 months, the cost of wages and benefits received by workers other than those employed by the federal government rose 1.5%, according to the Labor Department's employment cost index. In the same period, consumer prices rose 2.7%. Adjusted for inflation, wages and benefits fell 1.3%, after rising by 2.8% in 2008, the first year of the recession. The inflation-adjusted cost of wages and benefits at the end of 2009 stood just 1.1% higher than at the end of the previous recession in 2001, the Labor Department said. The Employment Cost Index measures the cost of labor independent of the influence of changes in compensation caused when high-wage sectors grow more or less rapidly than low-wage sectors. Unlike widely cited data on wages, the index includes the cost of benefits, which account for about 30% of total compensation costs. Before adjusting for inflation, the index rose 0.5% in the fourth quarter, slightly higher than the 0.4% increase in third quarter. "The weak labor market will help keep inflationary pressures benign," said economist Anika Khan of Wells Fargo Securities. "As such, the Federal Reserve continues to have the flexibility to keep short-term interest rates at the current level." State and local government workers' compensation in 2009 grew 2.4%, twice the pace of the 1.2% increases in the private sector. State and local government employees' compensation has outpaced private-sector increases for the past several years. Private employers' health-insurance costs rose 4.4% in 2009, after increasing 3.5% the year before. The 2009 increase, though, was the second-lowest rate of increase in more than a decade, according to the survey. The Labor Department noted that this reflects, in part, employers' reducing their contributions to employees' health insurance or switching to lower-cost health plans. It added that the data in this part of its quarterly survey weren't as reliable as the rest of the report. Labels: Brad DeLong, Calculated Risk, economic indicators, employment cost index, GDP, health insurance, productivity, wages and benefits Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Mankiw on StatinsOrthodox economist Greg Mankiw weighed in on the health-care debate in Sunday's New York Times, with a heavy dose of cost-benefit analysis, plus a personal note about the doses of cholesterol-lowering statins he takes every day. Makiw reasons that since his daily pill costs roughly "$150,000 for each year of life saved," this shows that health care can't be equal. "Society" just can't afford to keep everyone healthy!Here is a nice response to Mankiw from economist Jeff Ely, on the blog Cheap Talk: The centerpiece of Greg Mankiw’s column in the New York Times is this paragraph about the little white pill he takes every day:Not long ago, I read that a physician estimated that statins cost $150,000 for each year of life saved. That approximate figure reflects not only the dollars patients and insurance companies spend on the treatment but also — and just as important — an estimate of how effective it is in prolonging life. (That number is for men. Women have a lower risk of heart disease.) For a more in-depth discussion of statins and how they relate to "monopolized drugs and dysfunctional health care insurance," check out the article by Mark Hyman, MD on Why Cholesterol May Not Be the Cause of Heart Disease (on Huffington Post; hat-tip to CKS). Even though I, too, take my dose of statins every day (and I'm willing to bet that my dose is higher than Greg's!), I don't have any trouble understanding Hyman's argument: that part of the reason it is widely believed that high (LDL) cholesterol causes heart disease is that the pharmaceutical companies have developed a pill that lowers (LDL) cholesterol! In fact, as Hyman points out, the causes of heart disease are much more complex. Yet more evidence that it may be easier for an MD to be critical about economics and policy than it is for an economics PhD. Labels: cholesterol, Gregory Mankiw, health care, health care reform, health insurance, pharmaceutical industry, statins Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Obama vs. the Lobbyists (TomDispatch)From Tom Engelhardt of TomDispatch; a link to Andy Kroll's article follows:Congressman Joe ("You lie!") Wilson is undoubtedly not completely ignorant about how our health care system actually works. After all, in the course of his career, according to the Center for Responsive Politics, he's received $244,196 in contributions from the health-care profession -- and that doesn't even count another $86,150 from the pharmaceutical industry or the $68,000 that came in from hospitals and nursing homes. In fact, if you go to the page at that organization's OpenSecrets.org website on Congressional contributions and start clicking around among the members of Congress, you'll be struck by how many times the health and pharmaceutical industries (and their lobbyists) pop up. It's not so surprising, of course, since there are staggering sums of money at stake, which means striking amounts of the same to inject like some potent drug directly into the bloodstream of our political system. Consider but one figure: since 2002, according to Harper's Magazine, the profits of the top 10 health insurance companies have increased by 428%. And the CEOs of those top insurers have a personal incentive for ensuring that those profits don't slide due to new health-care legislation; after all, they made a combined $690 million in the last nine years. In fact, any administration arriving in Washington wanting to do anything these days walks into a blizzard of money, not to speak of the fact that the wind at its back, the campaign wind that got it there, was already blowing strong with similar contributions. TomDispatch regular Andy Kroll offers a vivid portrait of that world at this moment and what it means for the Obama administration. —Tom Read Andy Kroll's article. Labels: Andy Kroll, health care reform, health insurance, insurance industry, Joe Wilson, TomDispatch.com Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). How Tort Reform Can Raise Health Care CostsTexas has been a magnet for doctors since they enacted tort reform a few years ago. (See Doctor's Flock to Texas After Tort Reform from the Wall St Journal).The result? Insurance premiums have nearly doubled. From the Austin American Statesman: Insurance premiums rose 91.6 percent in Texas Link to the study by Families USA (pdf). Labels: families USA, health care, health insurance, tort reform Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Baucus's Public OptionYes, here it is (thanks to Emptywheel for bringing it to our attention):Health Insurance Exchange. The Baucus plan would establish the Health Insurance Exchange through which individuals and small businesses in the market for insurance could obtain affordable health care coverage. ... This is from “Call to Action: Health Reform 2009,” put out by Sen. Finance Committee Chairman Max Baucus. The title may have you confused for a few minutes; why is everyone saying the Baucus plan has no public option? But then you notice the date on the document: November 12, 2008. A few interesting numbers from the current Baucus plan: The plan puts limits on insurance company “rating”—i.e., charging higher or lower premiums based on characteristics of the insured such as age. (The plan allows rating based on age, tobacco use, and family composition.) With the limits, premiums for the same-size family could vary by 7.5 to 1. That sounds pretty unaffordable for the late-middle-aged smoker. The plan defines affordability: as long as the lowest-cost plan available has annual premiums equal to 10% of household income or less, then “affordable” coverage is deemed available and the mandate to have insurance will apply—enforced by fines of up to $950/year for an individual and $3,800/year for a family. Labels: health care reform, health insurance, Max Baucus, public option Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Whole Foods and Health CareJohn Mackey, the CEO of Whole Foods (or as we call it here in Boston, Whole Paycheck), wrote a hide-bound and ideological op-ed for the Wall Street Journal last month (find it here). The first tip-off that it's going to be silly is that it calls health-care reform "Obamacare" (nothing like a little derision right in the title of an op-ed to command the interest of the readers of the WSJ opinion pages). What follows are all the usual canards of the Right's views on health care, and all their usual free-market, individualistic, deregulatory policy solutions.A movement has developed to boycott Whole Foods because of Mackey's opposition to meaningful (i.e., single-payer) health-care reform. The group Single Payer Action is also part of this boycott. Now would be a good time to shift over to farmers' markets and food co-ops to send Mackey and Whole Foods a message. Here's an interesting tidbit from the Boycott Whole Foods website: Michael Pollan, author of The Omnivore's Dilemma and other books about food and food production, has weighed in against the boycott, because although Mackey is wrong about health care, "Whole Foods is often right about food," Pollan tells us. According to the Boycott Whole Foods website, Pollan has spoken at a conference put on by America's Health Insurance Plans (the main lobbying organization for the health insurance industry), on a panel entitled "Leaving the 'Fast Food Nation' Behind: Challenging American's Attitudes Towards Personal Responsibility and Health." (The other speaker on that panel was Richard Thaler, co-author of the pop-behavioral economics book Nudge.) And he posted against the Whole Foods boycott on the website of archconservative David Frum (newmajority.com). Now, I don't begrudge Michael Pollan an appearance at an AHIP conference (Howard Dean also spoke on a panel at the conference), or a comment on a website "dedicated to the modernization and renewal of the Republican party and the conservative movement," as its "About" page says. The man is pretty much omnipresent, so why not in these venues? But it doesn't surprise me that he doesn't seem to get the importance of collective action. I heard a radio version of a talk he gave a couple of years ago--it was about the prevalence of corn in the American diet (via corn syrup, mostly, but also as feed for the animals that become our meat), and the history of overproduction of corn post WWII. A terrific talk--the whole time I was craving broccoli (which I don't usually care for too much), because I figured there's no way they'd figured out how to make broccoli with corn. But in the question period, someone asked him early on what we could do about this, and all he had to say was something about making good choices about what we eat, choosing to shop at places (like Whole Foods) that offer fresher food, etc. There doesn't appear to be a truly political bone in his body--for him it's all about individual consumer choice. (It reminded me of Al Gore's otherwise terrific movie, ending with rousing call for us to change our lightbulbs.) So I'm not surprised that Pollan blandly opposes this boycott. Joel Harrison, who wrote this terrific article for us last year, has written a point-by-point rebuttal of John Mackey's WSJ op-ed. Here are the basics; click on the links to get the details on each point. YES, TO HEALTHCARE FOR ALL, NO, TO MACKEY'S WHOLE FOOD CARE Labels: David Frum, health care, health care reform, health insurance, Joel Harrison, John Mackey, Michael Pollan, single-payer, Wall Street Journal, Whole Foods Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Life Insurance SecuritizationIs Obama planning to kill grandma? Probably not, unless grandma is Afghani or Pakistani, and the murder weapon is an aerial drone. Or maybe you consider capitulation to private health insurance companies in health care reform an indirect way of killing grandma, given that the true death panels are the ones convened by those companies to deny coverage to, among other people, some grandmas.But another industry that the Obama industry is busy capitulating to—Wall Street—has figured out another way to profit from grandma's death: securitizing her life insurance. Here's how it works, according to an article in today's New York Times: Investment banks would give policy-holders cash for their policies, which would then be securitized and bundled as "life settlements" (with fees going to the bundlers), sold, traded, resold—just the way subprime mortgages were. And there are similar possibilities for fraud and conflict of interest as with the complex derivatives that played such a big role in the current financial crisis. The most striking aspect of this new scheme, though, is that it bets against grandma: "The earlier the policyholder dies, the bigger the return—though if people live longer than expected, investors could get poor returns or even lose money." Hat-tip to Mike P., who points out: "The article gets better the farther you read. It's like a description of the mortgage bubble written before it happened. You can picture gangs of insurance salesmen ripping through elderly housing complexes, badgering old deaf people to sell their life policies. On the first page of the link, to the left of the article, is a fascinating graph showing that 'the market for mortgage securities has shrunk to less than a fifth of its peak size'—a picture of a bubble." Read the full article. Labels: aerial drones, Afghanistan, health care, health care reform, health insurance, life insurance, life settlements, Obama administration, Pakistan, securitization, Wall Street Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Empire and the RobotsFrom The Hindu. Fidel claims that those lacking health insurance in the United States are "mostly blacks and Latinos"—is that true? The idea of replacing Congress with robots is hilarious.The Empire and the Robots By Fidel Castro Ruz A short while ago I dealt with the United States' plans to impose the absolute superiority of its air force as an instrument of domination on the rest of the world. I mentioned the project that by 2020 they would have more than a thousand latest generation bombers and F-22 and F-35 fighter planes in their fleet of 2500 military aircraft. In twenty more years, every single one of their war planes will be robot-operated. Military budgets always count on the support of the immense majority of American legislators. There is hardly any state in the Union where employment does not depend in part on the defence industries. On a global level and with constant value, military expenses have doubled in the last 10 years as if there were no danger at all of any crisis. At this moment, it is the most prosperous industry on the planet. By 2008, approximately $1.5 trillion were invested in defence budgets. The U.S. spends 42 per cent of world expenses in this area—$607 billion—not including war expenses, while the number of people who go hungry in the world has reached the figure of 1 billion. Two days ago a western news dispatch informed that in mid-August the U.S. army exhibited a tele-guided helicopter along with robots capable of working as sappers, 2500 of which have been sent into combat zones. A company marketing robots maintained that the new technologies would revolutionise the manner of directing the war. It has been published that in 2003 the U.S. barely had enough robots in its arsenal and, according to AFP, "today it has 10,000 land vehicles as well as 7,000 air devices, from the small Raven that can be hand-launched right up to the gigantic Global Hawk, a spy plane 13 meters long and with a 35 meter wingspan capable of flying at great altitudes for 35 hours." This dispatch lists other weapons as well. While the United States is spending such huge figures in killing technology, the president of that country is sweating buckets trying to bring health services to 50 million Americans who don't have them. There is such confusion that the new President said that he felt he was closer than ever to achieving reform of the health care system but that the battle is becoming fierce. He added that the story is clear, that every time health care reforms seem closer on the horizon, special interests fight with everything they've got applying their leverage, launching publicity campaigns and using their political allies to scare the American people. The fact is that in Los Angeles 8,000 people—most of them unemployed, according to the press—turned up in a stadium to receive medical care from a travelling free clinic that provides services to the Third World. The crowds had spent the night there. Some of them had travelled from as far away as hundreds of miles. "'What do I care whether it's socialist or not? We're the only country in the world where the most vulnerable people have nothing,' said a college-educated woman from a black neighbourhood." According to the report "a blood test can cost $500 and a routine dental treatment more than $1,000." What kind of hope can that society offer the world? The lobbyists in Congress make their profits working against a simple law intended to provide medical care to tens of millions of poor people, mostly blacks and Latinos who lack it. Even a blockaded country like Cuba has been able to do it and is even cooperating with dozens of countries in the Third World. If robots in the hands of the transnationals can replace imperial soldiers in the wars of conquest, who will stop the transnationals in their quest for a market for their artefacts? Just as they have flooded the world with automobiles that today compete with mankind for the consumption of non-renewable energy and even foods converted into fuel, so too they can flood the world with robots that would displace millions of workers from their workplaces. Better yet, scientists could also design robots capable of governing; that way they could spare the U.S. government and Congress that terrible, contradictory and confusing work. No doubt they would do it better and cheaper. Labels: Cuba, Fidel Castro, health care reform, health insurance, militarism Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Sick for ProfitRobert Greenwald's Brave New Films, which has produced hard-hitting documentaries like "Outfoxed," "Wal-Mart: The High Cost of Low Price," and the newly released "Rethink Afghanistan," has started a campaign to publicize health insurance industry profits and to counter the industry's campaign against reform.From the "Sick for Profit" website: Welcome to the American health insurance industry. Instead of helping policyholders attain the health security they need for their families, big insurance companies get rich by denying coverage to patients. Now they're sending lobbyists to Washington, DC to twist the arms of lawmakers to oppose reform of the status quo. Why? Because the status quo pays. Watch the video, read patients' stories, and see the obscene salaries of health insurance profiteers at the "Sick for Profit" website. Labels: Brave New Films, health care reform, health insurance, Robert Greenwald Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
