The Cliff Notes: Insurance for 31 million people who don't already have insurance.
Congress is trying to accomplish the following: Insure all Americans (excluding illegals), prevent insurance industry "abuse", check or reduce skyrocketing healthcare costs, and have the medical profession adopt a model that incentivizes results, not expensive procedures.
Most changes take effect in 2014, but there will be some small changes taking place immediately should the bill pass. Some of the small changes include:
The Good
--uninsured people with pre-existing conditions will get temporary affordable coverage
--children will be protected from exclusion due to pre-existing conditions
--children will be able to stay on their parents' plan until age 26
--preventative care, like check-ups, won't cost anything out-of-pocket
--no annual or lifetime caps on coverage
--medicare beneficiaries will have help buying prescription drugs
The Bad
--Insurance companies, medical device makers, and drugmakers will be subject to material tax increases and will probably pass on the cost.
--nothing important will happen for most people right away
Premiums
If you buy your own insurance, your premiums quite possibly may increase. Although, depending on your income, your premiums may actually drop due to federal subsidies. If your insurance is covered through your employer, the legislation should have very little effect on your premiums. But why would premiums rise? The law would require to offer more comprehensive coverage, which would be partly offset by the larger pool of people buying insurance. President Obama claims premiums will fall by 14-20%, but that only applies to people who buy their own insurance and who choose plans with similar coverage to what they would be able to buy currently.
Taxes
Your taxes will go up, starting in 2013, if you make more than $200,000 per year, or $250,000 as a couple. Theoretically, the law could raise everyone's taxes indirectly if it ends up adding to the federal deficit (Congressional Budget Office estimates this bill will REDUCE the deficit by $130 billion).
Federal Budget Deficit and COSTS
We are about to fund a $930 billion project over the next 10 years, and most critics agree that the CBO and democrats are far too optimistic as far as the actual costs are concerned. The portions of the bill that were written to stem rising healthcare were watered down or dropped during the shaping of the final version of the bill.
Individual Mandate
Starting in 2014--with the exception of some low-income individuals--everyone will be required to have health insurance or pay a fine. That same year will see the start of healthcare exchanges where individuals will able to shop for private policies.
Employers
If your employer doesn't offer insurance, they will have a strong incentive to do so. For companies with 50+ employees, a $2,000 fee will be charged for each worker who gets government-subsidized insurance.
So what else is happening in 2014? The government will stop subsidizing private Medicare Advantage programs, potentially forcing seniors to enrolled in them to pay more or switch back to traditional Medicare. The biggest drawbacks are tightening regulation of private industry and a potentially higher budget deficit. Also, adding 10's of millions of people to the healthcare system has raised concerns that there will be longer waits for doctor visits and surgeries. People who wanted a government-run public insurance option or even a single-payer Medicare-like system for everyone are also disappointed at the limited scope of this plan.
Source:theweek.com
Friday, March 19, 2010
Monday, March 8, 2010
1970's Inflation: Can We See This Again?
The economic conditions of the 70's brought about inflation, unemployment, and recession. These conditions led to price controls and new programs to combat poverty and the employment situation. Vietnam was also causing political and social unrest during this time.
Possible Causes:
-August 1971 wage and price controls
-Price shock due to the Oil Embargo in 1973
-Disruption in oil supply in 1979
-Renegotiation of Union Contracts
-Women entered the workforce in material numbers
It is interesting to note that from 1970-74 the unemployment rate was 5.4% (it is 9.7% today) and inflation was at an uncomfortably high 6.6%. As the decade progressed, the pessimism worsened: 7.9% unemployment with inflation pacing at 8.1%. What is interesting is the deficit the US was running, at the beginning of the 70's it was about 42% of GDP, and 10 years later it was about 37% of GDP. It steadily flattened; this could not have been a source of inflation. Today, all the talking heads expound (read: Larry Kudlow) that current deficits are going to cause massive inflation. Let's recall that inflation requires a rapid increase in velocity (the number of times the supply of money is used to buy final goods and services), and we are not quite seeing that yet. As long as we have cheap credit--not to be confused with easy credit--and no increase in lending, we will not have inflation in the general sense. This does not mean we will not see a rise in prices of certain assets (like stocks and commodities)--it simply means that on average prices should remain stable.
Labor disputes were a major topic during the turbulent 70's. 210,000 Postal workers, 4 railroad unions, 2 major longshores (strikes closed ports in both coasts as well as the gulf), 80,000 Pennsylvania state employees, coalminers, and 219,400 truckers went on strike and ended up renegotiating their wages and benefits. The added costs to operators and businesses was--without a doubt--passed on to the end-user. These labor disputes were not all bad as they led to the creation of ERISA and the Revenue Act. The former adopted the Pension Benefit Guarantee Corporation (which insures employees' pension benefits should an employer terminate the plan for whatever reason) and the latter adopted the 401k (which allowed employees to defer taxes on their earnings until retirement). Another added benefit that set higher standards for working conditions was the establishment of OSHA. Finally, in 1974 legislation changed the way Social Security benefits were calculated every year. The amendment including a cost-of-living adjustment--a mechanism that would force the US Treasury to overhaul Social Security through the aid of Alan Greenspan. The cost-of-living adjustment would have worked well in times of low inflation but that was not the environment we were in during the late 70's and early 80's.
Women in the workforce
Only 15% of females between the ages of 25 and 45 participated in the workforce in 1890; in 1985 the number was 71%! The biggest contributor to this number came after World War II. In 1950, only 10 percent of mothers with children under 6 years old were employed, and by 1985 HALF the mothers in the same demographic were working. From 1970 to 1984, the number of female butchers in packinghouses rose by 33%, and by 1980 80% of bartending jobs went to women. These statistics may seem astonishing on the surface, but there is more than meets the eye. The Sexual Revolution is merely a reflection of the Industrial Revolution. The entrance of women into the workforce has accompanied, at a slower pace, their departure from farms. Nearly 36% of families were involved in farming in the early part of the 20th century, by 1985 that number shrank to 3%. Although the statistics show a record number of women coming into the workforce, the fact is that they have always worked. The only difference is how their labor was accounted for. The statisticians never counted farming. The rise of the two-income family gave rise to "consumerism", the pinnacle of the rise of the middle-class. Women entering the modern workforce allowed families to consume beyond their basic needs, creating new industries and growth of fledgling services. Christine Frederick said it best, "the way to break the vicious deadlock of a low standard of living is to spend freely, and even waste creatively".
From 1970-1979 average Personal Consumption Expenditure (the biggest contributor to GDP) was 1.98%, and from 1981-1990 it rose to 2.27%. This is significant as it is a difference of billions and billions of dollars in inflation-adjusted numbers. That is what I call a rise in the standard of living. Let us not forget that the exponential rise of technological power also contributed to a rise in the standard of living. It was perhaps a shift in technology that required women to shift their efforts to support the growth of telecommunications and computer industries.
My conclusion is that a number of factors played a role in the severe inflation of the 1970's that are not showing up in today's economy: unions, price controls, and supply shocks of commodities. A major factor that can play a contributing role in future inflation is the expansion of capital expenditure by businesses. As they build inventories and hire staff, they will have to borrow money from financial institutions, which will have a direct impact on the cost of goods and services. This is currently not happening as lending to small business is still tight and expansion by big business is yet to be seen. Another potential contributor is the wage rate; this can be further affected by political interference. A few great market indicators to watch are the Employment Cost Index, ISM, and the 10-year Treasury yields.
Possible Causes:
-August 1971 wage and price controls
-Price shock due to the Oil Embargo in 1973
-Disruption in oil supply in 1979
-Renegotiation of Union Contracts
-Women entered the workforce in material numbers
It is interesting to note that from 1970-74 the unemployment rate was 5.4% (it is 9.7% today) and inflation was at an uncomfortably high 6.6%. As the decade progressed, the pessimism worsened: 7.9% unemployment with inflation pacing at 8.1%. What is interesting is the deficit the US was running, at the beginning of the 70's it was about 42% of GDP, and 10 years later it was about 37% of GDP. It steadily flattened; this could not have been a source of inflation. Today, all the talking heads expound (read: Larry Kudlow) that current deficits are going to cause massive inflation. Let's recall that inflation requires a rapid increase in velocity (the number of times the supply of money is used to buy final goods and services), and we are not quite seeing that yet. As long as we have cheap credit--not to be confused with easy credit--and no increase in lending, we will not have inflation in the general sense. This does not mean we will not see a rise in prices of certain assets (like stocks and commodities)--it simply means that on average prices should remain stable.
Labor disputes were a major topic during the turbulent 70's. 210,000 Postal workers, 4 railroad unions, 2 major longshores (strikes closed ports in both coasts as well as the gulf), 80,000 Pennsylvania state employees, coalminers, and 219,400 truckers went on strike and ended up renegotiating their wages and benefits. The added costs to operators and businesses was--without a doubt--passed on to the end-user. These labor disputes were not all bad as they led to the creation of ERISA and the Revenue Act. The former adopted the Pension Benefit Guarantee Corporation (which insures employees' pension benefits should an employer terminate the plan for whatever reason) and the latter adopted the 401k (which allowed employees to defer taxes on their earnings until retirement). Another added benefit that set higher standards for working conditions was the establishment of OSHA. Finally, in 1974 legislation changed the way Social Security benefits were calculated every year. The amendment including a cost-of-living adjustment--a mechanism that would force the US Treasury to overhaul Social Security through the aid of Alan Greenspan. The cost-of-living adjustment would have worked well in times of low inflation but that was not the environment we were in during the late 70's and early 80's.
Women in the workforce
Only 15% of females between the ages of 25 and 45 participated in the workforce in 1890; in 1985 the number was 71%! The biggest contributor to this number came after World War II. In 1950, only 10 percent of mothers with children under 6 years old were employed, and by 1985 HALF the mothers in the same demographic were working. From 1970 to 1984, the number of female butchers in packinghouses rose by 33%, and by 1980 80% of bartending jobs went to women. These statistics may seem astonishing on the surface, but there is more than meets the eye. The Sexual Revolution is merely a reflection of the Industrial Revolution. The entrance of women into the workforce has accompanied, at a slower pace, their departure from farms. Nearly 36% of families were involved in farming in the early part of the 20th century, by 1985 that number shrank to 3%. Although the statistics show a record number of women coming into the workforce, the fact is that they have always worked. The only difference is how their labor was accounted for. The statisticians never counted farming. The rise of the two-income family gave rise to "consumerism", the pinnacle of the rise of the middle-class. Women entering the modern workforce allowed families to consume beyond their basic needs, creating new industries and growth of fledgling services. Christine Frederick said it best, "the way to break the vicious deadlock of a low standard of living is to spend freely, and even waste creatively".
From 1970-1979 average Personal Consumption Expenditure (the biggest contributor to GDP) was 1.98%, and from 1981-1990 it rose to 2.27%. This is significant as it is a difference of billions and billions of dollars in inflation-adjusted numbers. That is what I call a rise in the standard of living. Let us not forget that the exponential rise of technological power also contributed to a rise in the standard of living. It was perhaps a shift in technology that required women to shift their efforts to support the growth of telecommunications and computer industries.
My conclusion is that a number of factors played a role in the severe inflation of the 1970's that are not showing up in today's economy: unions, price controls, and supply shocks of commodities. A major factor that can play a contributing role in future inflation is the expansion of capital expenditure by businesses. As they build inventories and hire staff, they will have to borrow money from financial institutions, which will have a direct impact on the cost of goods and services. This is currently not happening as lending to small business is still tight and expansion by big business is yet to be seen. Another potential contributor is the wage rate; this can be further affected by political interference. A few great market indicators to watch are the Employment Cost Index, ISM, and the 10-year Treasury yields.
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