September 26th, 2016
If you had to believe one of the following people, who would you choose?
Heather Bresch, CEO of Mylan, makers of the EpiPen: “The misconception about our profits is understandable, and at least partly due to the complex environment in which pharmaceutical prices are determined.”
John Stumpf, CEO of Wells Fargo: “First of all, this was by 1% of our people.”
Janet Yellen, chair of the Federal Reserve Board: “In general, I would not say that asset valuations are out of line with historical norms.”
Two of the three people above were brought before Congressional committees so they could be scolded by U.S. Senator Elizabeth Warren and other upstanding, ethically pure members of Congress. Which two?
And finally, which of the three people above have had the greatest impact on you and on the economy?
Mr. Stumpf’s days as CEO of Wells Fargo are apparently numbered, because some of his company’s minions decided to open accounts for bank customers who never authorized them to be opened. This was done by employees to make quotas and earn bonuses. Read the rest of this entry »
September 19th, 2016
Citizens of many countries would envy us for having the right to vote, the right to express our opinions, the right to practice whatever religion suits us, and the right to say, do and think pretty much whatever we want.
Yet many of us take these freedoms for granted. Many people neglect to vote. Others vote, but shouldn’t because they don’t know what they’re voting for. While “get out the vote” efforts have become popular, it’s unlikely that anyone who won’t make the effort to cast a ballot is going to make an effort to know what the issues are and where the candidates stand on those issues. Voting when you don’t know the issues dilutes the democratic process.
So take this simple quiz. Maybe it will help to inform you. Maybe you’ll decide after taking it that you shouldn’t vote. And maybe it will just reinforce what you already believe.
True or false. The Affordable Care Act (aka Obamacare) is making healthcare more affordable.
False. Health insurance is becoming increasingly unaffordable and, shortly after the November election, the new open enrollment period will bring double-digit rate increases for many. Healthcare costs jumped 1% just in the month of August, which was the largest increase in 32½ years. Read the rest of this entry »
September 12th, 2016
The big news last week, if you believe it, is that the Affordable Care Act (aka, Obamacare) has reduced the number of Americans who do not have health insurance to only 8.6% of the population.
In other words, if you provide heavily subsidized insurance and tax those who fail to take it, you can reduce the number of uninsured Americans to 8.6%. But, in spite of the penalties and giveaways, the number of uninsured is still high. Even before Massachusetts initiated healthcare reform in 2006 under then-governor Mitt Romney, the uninsured rate in the state was only 7%.
Regardless, all but a small percentage of Americans are now insured, if you believe the estimates of a government agency–the Centers for Disease Control–talking about a government program–the Affordable Care Act (aka, Obamacare). And it’s taken only five years!
As residents of Massachusetts, we can be proud that we’re number one. That is, we have the lowest percentage of uninsured residents in the country (although the stats we found put the number at anywhere from 2.5% to 3.5%).
Well, that’s great … but are Massachusetts rates low because of Obamacare or because of its predecessor, Romneycare? And what has the cost of Obamacare compliance been for Massachusetts residents? Read the rest of this entry »
September 6th, 2016
Until now, about the only thing good you could say about the Federal Reserve Board in recent years is that it hasn’t followed central banks in Europe and Japan by lowering interest rates below zero.
But that may be where we’re going next.
Fed Vice Chair Stanley Fischer told Bloomberg Surveillance last week that he and his Fed colleagues believe that negative interest rates are a legitimate tool for central bankers to use in their efforts to achieve full employment and economic health.
If by Fed colleagues, he means his imaginary friends, we should be okay. But if he means his gal pal Janet Yellen et al, look out below. Over the cliff we go.
Negative rates would be doubling down on failed policies. If you’re a political figure, like Fed Chair Yellen and her Fed brethren, it would be anathema to admit that you’re wrong about anything, so if something doesn’t work, you rationalize that you just didn’t pour enough gasoline on the fire and you pour more.
Anyone who has to pay for health insurance will recognize the doubling-down approach being used in the coming election by the Democrats who gave us Obamacare. The Affordable Care Act, to the surprise of no one who is not a Democratic member of Congress, has become unaffordable, with a majority of exchanges shutting down because they are losing money. But, with premiums increasing by about 30% this year in some states, Democrats believe the answer is more government control of healthcare. The insurers, of course, are the bad guys, because they are no longer willing to lose billions propping up Obamacare. Read the rest of this entry »
August 29th, 2016
As the first country to mass produce everything from automobiles to computers, America has a well-deserved reputation for innovation, thanks to its manufacturing sector. U.S. government employees, conversely, are most adept at producing paperwork, as we’ve previously noted.
So which sector do you think employs more people in the U.S.—those who produce or those who bog down production with new regulations?
The answer—and it’s not even close—is that government employees outnumber employees working in manufacturing. In fact, as of a year ago, there were 21,995,000 government employees and 12,329,000 manufacturing employees. That’s 1.8 government employees for each manufacturing employee, or one employee to produce and nearly two employees to regulate.
Granted, not all government employees are regulators and many serve valuable roles … but is it healthy for the economy to have nearly twice as many employees working in government as we have working in manufacturing?
It didn’t used to be this way. Until August 1989, manufacturing employees outnumbered government employees. But that month, government employed 17,989,000 and manufacturing employed 17,964,000. The two sectors have been going in opposite directions ever since. Read the rest of this entry »
August 22nd, 2016
“You loan me ten bucks. I photocopy the bill four times, give you back one of the copies, and announce that we’re square. That’s monetizing the debt.” From Lionel Shriver’s The Mandibles
In the private sector, it would be called a Ponzi scheme. When the Federal Reserve Board does it, it’s called “monetizing the debt.”
The Balance explained that, “The Federal Reserve monetizes debt any time it buys U.S. Treasuries. When the Federal Reserve buys these Treasuries, it doesn’t have to print money to buy them. It issues credit and puts the Treasuries on its balance sheet. Everyone treats the credit just like money, even though the Fed doesn’t print cold hard cash.”
The process lowers interest rates, because the bonds taken out of circulation reduce supply, driving demand higher. But if reducing the supply of bonds drives prices higher and interest rates lower, shouldn’t more dollars drive the value of the dollar lower and the price of goods higher?
Logically, if you were to double the supply of money tomorrow, a dollar should be worth half of what it is worth today. Prices would double, so the rate of inflation would be 100%.
And yet even with boatloads of new money, the inflation rate has barely budged. The M1 money supply, which includes cash, checking accounts and other liquid monetary assets, is about 245% higher than it was eight years ago, when the Federal Reserve Board began its easy money policy. Meanwhile, the Fed has been reluctant to increase interest rates in part because it has not been able to reach its targeted inflation rate of 2%. Read the rest of this entry »
August 15th, 2016
Listen, this whole system of yours could be on fire and I couldn’t even turn on the kitchen tap without filling out a twenty-seven B stroke six … bloody paperwork. Harry Tuttle in “Brazil”
Americans didn’t used to like being told what to do. We fought the Revolutionary War so that we wouldn’t have to take orders from England. We fought the Civil War to end slavery and make every American free. We fought two world wars to hold on to that freedom.
And then along came big government. Medicare to help the old. Medicaid to help the poor. Food stamps and medical leave, help for the disabled and guaranteed wages, regulations to reduce pollution and prevent financial wrongdoing. And much, much more.
Some of it was good. Some of it was needed. But much of it wasn’t. Do we really need more than 80 federal welfare programs to provide money, food, housing, medical care and social services to low-income Americans? Wouldn’t maybe three or four be more efficient?
It’s difficult to pinpoint exactly when regulations got the better of us. You could argue that it goes back to 1930, when the protectionist Smoot-Hawley Tariff Act helped cause the Great Depression and the New Deal made the impact worst. You could argue that it was during the ’60s, when the Great Society programs and the War on Poverty took place. As we (and many others) pointed out last year, during the 50th anniversary of the War on Poverty, after spending $20.7 trillion (based on 2011 dollars), the poverty level today is essentially unchanged at about 15% of the American population. Read the rest of this entry »
August 8th, 2016
“My reading of history convinces me that most bad government results from too much government.” John Sharp Williams
We’ve made our disapproval of both presidential candidates clear, but suggested that, given this year’s poor choices, voters consider the platforms of both parties before deciding how to vote.
Last week, we dissected the Democratic platform, and concluded that the party’s problems extend beyond having an untrustworthy candidate. While both Hillary Clinton and Donald Trump deserve their high unfavorable ratings, the party platforms showcase the differences between the two parties.
If a Congressional majority is from the same party as the president, the party platform provides a guide for what to expect. Neither candidate, if elected, is likely to veto major legislation that’s overwhelmingly approved by his or her own party and both have signed off on their party’s platform.
Based solely on the party platform, if you want slow growth, higher taxes, more government and an activist Supreme Court with little regard for the U.S. Constitution, vote for Hillary. It’s all outlined in the platform, which makes 10 references to the right to unionize, but not a single word about the need for tort reform.
While there’s no guarantee that if Donald Trump is elected president the economy will grow again, the Republican platform at least doesn’t abandon the free-market capitalism and Constitutional rights that have made this country the freest and most prosperous country in history. Read the rest of this entry »
August 1st, 2016
Finally, the candidates are no longer presumptive.
American voters and their delegates have chosen, yet somehow we’ve ended up with candidates from both parties that almost no one likes. Both are liars. Both are power-hungry narcissists. Both have questionable morality. Most of us would use the term “sleazy” to describe actions both have taken to add to their personal wealth. Few of us would trust either of them enough to buy a used car from them.
But come November, barring a third-party candidate, a coup or an act of God, we’ll be choosing either Hillary Clinton or Donald Trump as president. If our founding fathers were alive today, they might be thinking that a monarchy doesn’t seem so bad after all. Never has the phrase “lesser of two evils” been so literal.
So which candidate is the greater lesser? Or, more to the point, which candidate should get your vote?
One way to decide is to review the platforms each party passed at this year’s convention. A party’s platform, of course, is just a guide. Either candidate, if elected president, may ignore the party platform. Congress will have an influence, too, even if the next president follows President Obama’s precedent and pretends that Congress doesn’t exist. Read the rest of this entry »
July 25th, 2016
Apparently, there are two Americas.
In one, corporate profits are soaring, the economy is booming and jobs are available for the asking.
In the other, corporate profits are dismal, America is in or close to a recession and more than 100 million Americans have left the labor force.
In one America, more people approve than disapprove of the job President Obama is doing (49.2% approve, 46.8% disapprove, according to Real Clear Politics). In the other America, more than two thirds of the country believe the country is on the wrong track. Real Clear Politics found that 69.3% of Americans believe the country is on the wrong track, while only 22.5% believe it is on the right track.
While media are increasingly reporting that the economy is at or near full employment, that America is at odds with reality. As we’ve written, participation in the labor force has dropped to 62.6%, which is near a four-decade low.
The America where the economy is booming is even more delusional. Some may say that it’s all relative. They may concede that U.S. growth in gross domestic product (GDP) is sluggish at best, but typically add that it’s better than GDP growth in the rest of the world. Read the rest of this entry »