Results for “from the comments” 1938 found
From the comments, on seasonal business cycles
ohwilleke reports:
While “Christmas” is new, the notion of a consumption splurge after the fall harvest, followed by a lean late winter-early spring season (Lent/Ramadan) before the spring harvest is deeply rooted in pre-modern agricultural reality. When you have an abundance of perishable goods it makes sense to consume them before they go bad, and then to string out the more limited supply of durable foodstuffs when fresh foodstuffs are scarce. In the same way, summer vacation is rooted in the need to free up children for agricultural labor at times of peak demand. As noted above, spring weddings supply a consumption boost after the Spring Harvest and also are timed to minimize the likelihood of critical parts of a first pregnancy taking place during the lean late winter-early spring (although these days it has more to do with the end of the school year).
Only with cheap and fast trans-hemispheric shipping (together with a lack of significant piracy for most of that trade), and advances in food preservation and refrigeration in the last half century or so, have those agricultural considerations become irrelevant (although, of course, excess and lean times should fall at different parts of the year in the Southern hemisphere and in places like Southern India, the Sahel, and the tropics of Asia, African and South America that have different seasons).
Japan and China use end of year bonuses (often as 6-12% of annual compensation) as a significant part of annual compensation as a way to share rather than leveraging macroeconomic risk for firms and the economy as a whole. In good years, when there is more supply, lots of people get big bonuses; in bad years, scarcity is widespread. The main virtue of this approach is that it makes firms more robust and puts them under less pressure to engage in cyclic layoffs but making labor costs look more like equity and less like debt. This too was well suited to an agricultural tradition rooted in sharecropping or the equivalent that was once widespread in all feudal economies as well as in neo-feudal economies in places like the American South. This isn’t a strategy limited to the orient. It is also the quintessential Wall Street economy model utilized by major financial firms like investment banks and the large law firms that serve them.
The pressure from the “real economy” – both the goods and services supply side and the labor demand side – to have punctuated consumption is much weaker now than it once was, particularly in economies or sectors of economies without the strong annual bonus tradition. The largest sectors of the modern economy that are both strongly cyclic in terms of business cycles and very seasonal within each year, are construction and real estate – and these cycles also drive a fair amount of durable goods consumption. Both construction and real estate are weakest in the winter. Agriculture’s share of the economy is now much more stable from a consumer’s perspective and much smaller as a percentage of the total economy. Real estate handles cyclic shifts by being largely commission based. Construction relies on highly fragmented project specific team building through networks of general contractors and subcontractors rather than integrated firms (a pattern also common in the film industry and theater industry).
Bottom line: The finance oriented macroeconomic models obsessed with interest rates, inflation, GDP growth rates, unemployment rates and size of the public finance sector are ill suited to analyzing optimal seasonal business cycle patterns. A more fruitful analysis looks at the roots of current seasonal patterns in economic history and at the way that the “real economy” has changed with technology to see if those patterns still make sense, perhaps for new reasons.
You will find ohwilleke’s blog here.
From the comments, on lotteries and education
John S. wrote:
States don’t use lottery proceeds to *increase* funding to schools. They tie the lottery to education as a marketing gimmick, both to sell it to the voters initially, and then to deflect criticism (what do you mean you don’t like the lottery — are you anti-education?) See http://goo.gl/f5b55R
We’re told we need lotteries because people would gamble anyway, and yet a large fraction of lottery revenues go toward advertising, presumably so that people don’t lose interest in it.
I also liked the remarks from ant1900:
This (http://en.wikipedia.org/wiki/Racino) suggests that the appeal of racinos is being able to bring in slot machines to an existing race track. After reading only a few pages of ‘Addiction by Design’ I can see why. The smart machines are now subsidizing the humans and the horses. The horses are probably the hook that convinces voters to allow horse tracks to expand into slot machines (‘we have had the hose track for many years and that has worked out ok, and they are already regulated and already in the gambling business, so let’s let them expand into slot machines, which is not a huge leap from betting on horses’).
From the comments, negative T-bill rates of return
On my somewhat complicated post on negative rates of return from last week, Robert Sams writes:
Very interesting post and #5 is crucial (it’s a geometric process). Two points.
1. I think that we can substitute “ability to leverage at near-treasury rates” for “special trading technologies” and get the same implied predictions yet put the relevant institutional factors into relief.
2. Your #1-3 still works with the wrong model of Treasury returns, as it implicitly models demand as if it’s coming from a “real money” portfolio sort of buyer. Those guys exist of course, and they’re basically buyers at any price (central banks, regulatory demand, etc.). But if we ignore CB policy expectations, the valuation is set in the leveraged market, which is much larger, and treasuries trade rich /not/ so much b/c people want safety and therefore want to buy them, but rather they trade rich because people want to /short/ them for hedging purposes (e.g., investor wants corporate credit w/o the interest rate risk.)
Sounds paradoxical, I know, but failure to appreciate this fact is the basic misconception of the entire “risk premia” way of modelling this stuff.
For any given treasury issue, X billion were sold by Treasury, but the outstanding amount of people long the issue will be many times X because of all those repo leveraged buyers of UST’s, and for every one of those repoed longs, there is a short on the other side doing reverse repo. The market clears with the repo rate, which can often be much lower than fed funds and indeed can go up to -300bps at times if the (primarily hedging) demand from shorts is extreme. (The effective repo rate in this market is rather different from the general collateral series you can pull from public sources.. it’s hard to get good data as it’s proprietary to the big IDB’s… why the Fed tolerates this degree of opacity, I’ve never understood.)
Treasuries can therefore be seen as a special financial “currency”, and the treasury market can be modeled as type of free banking regime, where the public debt is base money, the much larger qty of leveraged UST positions is broad money, and the repo market is an interbank lending market where USD cash is collateral instead of money.
Looked at this way, the phrase “shadow banking system” is a quite literal description. Turn a market monetarist lose in this parallel universe, and the low rate conundrum is due to UST “base money” not keeping up with demand and the Treasury is a tight fisted CB.
In this universe, the real return of treasuries isn’t the relevant variable, it’s the spread between the repo rate and the treasury yield, which acts as a sort of “fee” for the guy who wants a hedged Investment in a riskier asset and pari passu a benefit to the party who wants a leveraged bet that the Fed means what it says about ZIRP. In finance-land with its UST currency, that spread /is/ the ST interest rate, which is volatile and well-above zero.
Now we can define quite precisely your “entry fee” thesis: the entry fee is the relative credit terms (haircut’s, etc) you’ll get in this repo market. In a world of only non-bank dealers and traders, those terms are symmetrical b/c counter-party risk is broadly symmetrical. In the world of TBTF, naturally only the bank holdco’s get the best terms. So, to win the wealth-accumulation game in this world, be a bank or be a very good client of a bank.
Ponder at your leisure!
From the comments, on Dodd-Frank
This is on the Volcker Rule:
My own view (and I’m a banking lawyer) is that the ban on proprietary trading will have an immaterial effect on the asset size of banking organizations. It might reduce their complexity.
An overlooked issue is that Volcker applies throughout the banking organization. That is, the ban on proprietary trading is not limited to the federally insured depository institution and restricts the activities of all of the affiliates of the depository institution. That’s a dramatic expansion in scope, with questionable policy justifications.
Another overlooked issue is that Volcker also bans investments in certain types of investment funds. Some think this is simply a ban on investments in private equity and hedge funds that is intended to avoid regulatory arbitrage around the proprietary trading restrictions. The statutory definition of covered funds was sloppy, and so the covered fund restrictions are actually much broader – and without any apparent policy purpose. This is particularly a problem for foreign banking organizations, as it looks that Volcker will have a broad extraterritorial scope.
To me, one of the more interesting aspects of Volcker is its implications for administrative law. There are many who would prefer that Congress delegate less to the administrative agencies and instead legislate with particularity. The Volcker experience suggests that might not always work well. The statute defines “private equity and hedge fund,” “proprietary trading,” “solely outside the United States,” etc. with particularity, but those definitions are generally not well-connected to the underlying policy concerns. The statutory language really left the regulators with few options to salvage a good and sensible rule. We probably would have been better off had Congress deferred more to the agencies here.
Finally, as a general matter, the difference between “security” (subject to the proprietary trading ban) and “loan” (not subject) probably isn’t a distinction that matters when it comes to the safety and soundness of banking organizations. Stepping back a bit, it’s hard to imagine what, why and how Volcker is up to.
From the comments, John Goodman on health insurance subsidies
Commenting on yesterday’s post, John Goodman writes:
Two points:
1. The premium the individual pays is not fixed as a percent of income. The subsidy is fixed, based on the second lowest silver plan premium and that amount is based on income. But the consumer is free to buy any plan. Remember, the second lowest priced silver plan may be a really lousy plan. It might have a very narrow network, for example. So, all the plans are competing against each other, with one fixed subsidy and an array of premiums. The premium an insurer charges will matter very much. 2. After 2018, the out-of-pocket premium for the second lowest priced silver plan will no longer be fixed as a percent of income. Premium subsidies as a whole will grow no faster than GDP + 0.5%, the same rate of growth that is in the Obama budget for Medicare.
The thread has some other good comments as well.
From the comments (Dan Hanson on ACA)
Dan writes:
The front end technology is not the problem here. It would be nice if it was the problem, because web page scaling issues are known problems and relatively easy to solve.
The real problems are with the back end of the software. When you try to get a quote for health insurance, the system has to connect to computers at the IRS, the VA, Medicaid/CHIP, various state agencies, Treasury, and HHS. They also have to connect to all the health plan carriers to get pre-subsidy pricing. All of these queries receive data that is then fed into the online calculator to give you a price. If any of these queries fails, the whole transaction fails.
Most of these systems are old legacy systems with their own unique data formats. Some have been around since the 1960′s, and the people who wrote the code that runs on them are long gone. If one of these old crappy systems takes too long to respond, the transaction times out.
Amazingly, none of this was tested until a week or two before the rollout, and the tests failed. They released the web site to the public anyway – an act which would border on criminal negligence if it was done in the private sector and someone was harmed. Their load tests crashed the system with only 200 simultaneous transactions – a load that even the worst-written front-end software could easily handle.
When you even contemplate bringing an old legacy system into a large-scale web project, you should do load testing on that system as part of the feasibility process before you ever write a line of production code, because if those old servers can’t handle the load, your whole project is dead in the water if you are forced to rely on them. There are no easy fixes for the fact that a 30 year old mainframe can not handle thousands of simultaneous queries. And upgrading all the back-end systems is a bigger job than the web site itself. Some of those systems are still there because attempts to upgrade them failed in the past. Too much legacy software, too many other co-reliant systems, etc. So if they aren’t going to handle the job, you need a completely different design for your public portal.
A lot of focus has been on the front-end code, because that’s the code that we can inspect, and it’s the code that lots of amateur web programmers are familiar with, so everyone’s got an opinion. And sure, it’s horribly written in many places. But in systems like this the problems that keep you up at night are almost always in the back-end integration.
The root problem was horrific management. The end result is a system built incorrectly and shipped without doing the kind of testing that sound engineering practices call for. These aren’t ‘mistakes’, they are the result of gross negligence, ignorance, and the violation of engineering best practices at just about every step of the way..
…“No way would Apple, Amazon, UPS, FedEx outsource their computer systems and software development, or their IT operations, to anyone else.”
You have to be kidding. How do you think SAP makes a living? Or Oracle? Or PeopleSoft? Or IBM, which has become little more than an IT service provider to other companies?
Everyone outsources large portions of their IT, and they should. It’s called specialization and division of labor. If FedEx’s core competence is not in IT, they should outsource their IT to people who know what they are doing.
In fact, the failure of Obamacare’s web portal can be more reasonably blamed on the government’s unwillingness to outsource the key piece of the project – the integration lead. Rather than hiring an outside integration lead and giving them responsibility for delivering on time, for some inexplicable reason the administration decided to make the Center for Medicare and Medicaid services the integration lead for a massive IT project despite the fact that CMS has no experience managing large IT projects.
Failure isn’t rare for government IT projects – it’s the norm. Over 90% of them fail to deliver on time and on budget. But more frighteningly, over 40% of them fail absolutely and are never delivered. This is because the core requirements for a successful project – solid up-front analysis and requirements, tight control over requirements changes, and clear coordination of responsibility with accountability, are all things that government tends to be very poor at,
The mystery is why we keep letting them try.
From the comments, on the economics of food stamps
In response to my earlier food stamps post, here is Brian Donahue:
Context:
http://www.fns.usda.gov/pd/34snapmonthly.htm
Economic conditions have been improving, grudingly, for three years now. But between October 2010 and October 2013, the cost of the program has risen 25%. I understand the concept of ‘countercyclical stabilizers’. This is something else. The idea of a 10% cut in this context…ok.
Food stamps aren’t being singled out here. Just because entitlement reform is paralyzingly hard, it doesn’t mean we don’t keep moving on the other stuff. Summing up 2013: fiscal cliff tax increases on rich, medicare investment tax on the rich, ending payroll tax holiday, sequester (half defense.) Republicans are playing ball – at some point along the way, food stamps get a look. If a 10% cut here is a sacred cow, we’re not close to having the stomach for the real fights to come.
And here is PLW:
Explaining the Rs food stamp focus is a little more complicated. First of all, labeling the House nutrition title of the Farm Bill as “going after” the program seems unfair. The House food stamp proposals include uncoupling categorical eligibility for food stamps with receipt of a trivial non-cash TANF benefit (a technique used by many states to waive all asset requirements for food stamps and raise the net income test to twice the poverty line), getting rid of a loophole (i.e., “LIHEAP loophole”) that a small number of states in the (primarily in the Northeast) use to artificially reduce the net income of food stamp beneficiaries in order to raise their level of benefits, and taking away the Secretary of USDA’s work requirement waiver authority for non-disabled adults without dependents.
Second (and this is where it gets complicated), many of the policies that the Rs are pushing in the context of the Farm Bill are going after policies that were put in place as direct result or an unintended consequence of other R policies. For instance, the coupling of categorical eligibility to non-TANF cash benefits is the result of the 1996 welfare reforms which ended AFDC (how one used to become categorically eligible for food stamps) in replace of a much less clear TANF benefit (rather than cash linked to AFDC, one might receive a service in the form of a 1-800 hotline for pregnancy prevention linked to TANF), but continued to bestow eligibility for food stamps to the recipients of AFDC’s successor. At the same time, the 2002 Farm Bill streamlined eligibility by creating a number of state options for food stamps with the intention of pacifying the states who were getting penalized for having high food stamp error rates (those same error rates the USDA now brags about) as the result of having more food stamp participants with earned income as the result of the 1996 welfare reforms (i.e., administratively, it’s more difficult to assign benefits to people with earned income rather than unearned income… especially if those low-income people are in and out of work through the course of a month).
From the comments — why are the ACA exchanges behind schedule?
The primary issues are political and legal barriers to properly build a workable solution.
The first is that the ACA gives states the right to build and run their own exchanges. However, even if they rake the money HHS is still required to step in and fill the gap if they fail. So many states took the money (who wouldn’t) but the program is left to implement a system of unknown size. Just that would doom most IT implementations. In addition there weren’t any IT firms interested in helping to tackle the Federal system, instead they went to the bigger states where they don’t have to navigate the crazy laws that govern IT projects at the federal level. This also allowed them to integrate smaller less complex systems outside the gaze of an IG department who publishes reports that get national attention in their zeal to protect public money.
Second is that funding is discretionary and even though they mapped out the required headcount they Didn’t have the budget appropriated to hire even half what was needed (as defined by outside consultants like MITRE) which left them severely understaffed. My wife’s ‘team’ of 5 was actually 2. There is no chance that Congress would appropriate more money to fix this. It also isn’t like these people are all that great at their jobs. No person really good at their job in the private sector is going to take a big pay cut to work for HHS. These jobs aren’t a bunch of overpaid airport security people but are jobs that pay much much better in the private sector. This means promoting the inexperienced from within and there is no institutional experience to implement a complex system.
Next there is the political decision to fold the exchanges into CMS (Centers for Medicaid and Medicare Services). The congressional Republicans were using every power they could to harass the executives so HHS tried to shield them behind Medicare. However, it wan’t like CMS was any good at this type of implementation and it was now not the only priority for the contract shops to worry over.
The other problem on a technical level was the near impossible task of verifying eligibility of users for subsidies. All the data has to be verified to avoid fraud, this include income. That data is segregated at the IRS and they are prevented by law from sharing ANY of that information with other parts of the government. Thank Johnson and Nixon for their abuse of IRS info. So there is no easy way to automate the approval process based on tax returns. The only sensible way is to have the IRS do it, but that would require funding and no contract manager is going to go to jail to solve a problem without a new budget appropriated for them.
Last is just the factor that any large IT system like this has a horrible failure rate. Supposedly the success rate in the private sector is now above 50% but there aren’t many major news stories when private companies waste a billion dollars on a system that never does anything. The Government is even worse because of the hundreds of pages of regulations meant to ensure money isn’t “wasted”. Sure, the Federal Government generally gets the best pricing there is on products, but the massive overhead eats all of that up and delays the process by months. I think there is a reason that private companies don’t have the complex rules you see in the government. They also don’t have to worry about going to jail if they do break the rules.
I find it a miracle that there is ANY chance that the exchanges might actually be working in time. However, I think it would be wrong to say that it is some inherently governmental problem that couldn’t be solved with smart reform of the laws and congressional support to fix things. One party is invested in always excusing governmental problems and the other is opposed to the idea of trying to fix problems because they are invested in highlighting government failure for the simple purpose of killing it.
From the comments
This is from Ted Craig:
Another way to look at the effect of mechanization is to look at how it affected the other living employees of farmers. The U.S. horse population peaked at 26.5 million in 1915. It declined rapidly after that, hitting a low of just over 3 million in 1960. While it is about 9 million now, that’s because of increased ownership as pets.
I’m not saying humans will be destroyed like horses, but it raises some questions about the ease of transition.
From the comments, on high frequency trading
This is from a high frequency trader, in response to my link to this paper (pdf), favoring batch auctions:
The author’s purported cure is far worse than the disease. Positional externalities from shaving latency are indeed real, but they’re not really that large relative to market size. A good way to estimate their magnitude is by how much money has been spent on cutting down the Chicago-NYC messaging latency, the two most liquid and hence profitable trading centers. The cost recently spent on this infrastructure (largely microwave relay networks) is about $500 million. Assume that the infrastructure depreciates in about a year and generously assume that the spending on intra-market latency is about the same.
That’s a total cost of about $1 billion/yr in market costs imposed by latency based positional externalities. American equity markets trade $24 quadrillion in value a year (and that’s only counting shares, not derivatives). Which means the cost to the typical investor of the latency externalities comes out to an upper bound of $4.5e-05 per dollar traded, or for example to trade one share of MSFT: $0.0016. That’s the upper bound of cost savings by perfectly eliminating latency externalities. The cost certainly isn’t trivial, but it is much lower than the forced imposition of $0.005 in bid-ask trading costs because the SEC refuses to decrease the minimum $0.01 tick size. With an economical tick size the average bid-ask spread would easily go in half. (Plus it would reduce the latency externalities since market makers could price improve rather than rushing to jump first in line the order book queue). My point being is that if we’re that worried about reducing costs to investors there’s an alternative that we’re already ignoring that both has a larger impact and poses much less risk than completely tearing up the foundations of the market structure.
Finally the authors assume that batch auctions don’t come with any of there own structural costs. Not only do they indeed have substantial defects themselves, but they don’t even eliminate the latency externalities. The market already uses batch auctions at market open and close. As any trader will tell you these are far more manipulated than continuous trading. During a batch auction an indicative price is published prior to crossing based on the currently resting buy and sell orders. A trader can easily change this indicative price or imbalance by entering a large order and canceling it before auction. Analogous strategies aren’t impossible, but are much harder in continuous trading because a resting order can be crossed at any time, and hence poses real economic risks to the trader. To paraphrase Alex continuous trading acts as a tax on bullshit.
The flip side of a pre-cross indicative price is that traders will wait for as long as possible before the cross to enter their orders. No trader using proprietary signals is going to want other market participants to see his order for any longer than is absolutely necessary. The counter-strategy being shaving down your latency even further so you get to see others’ orders first. Then modify yours accordingly by trading even closer to the cross time using your lower latency. So what frequently happens in opening and closing batch auctions is that the order book and indicative price is pretty much garbage until a few milliseconds before the cross, at which point the real price formation occurs. When I worked in a much larger HFT firm I was a continuous guy, but sat next to the batch auction guys. We certainly cared about our latency, but generally we focused much more on our signals and execution algorithms. The auction guys in contrast were always obsessed with their latency.
Switching to batch auctions will not reduce the cost of latency positional externalities, and is pretty likely to increase them. On top of all that it will give us a much lower-quality and less efficient market structure. There are certainly better ways to tackle the latency externality costs. But it’s important to recognize the perfect’s the enemy of the good here, I doubt we can ever fully eliminate them under any sane structure. It’s better to think of moderate improvements that work on the margin, rather than centrally planned grand sweeping re-designs of the entire market structure.
At the first link, in the comments, he has several follow-up explanations, all recommended.
From the comments — on dynamism
Responding to this link, Ryan writes:
I think the secular decline in various measures of dynamism is a pretty important topic, largely because we haven’t been able to figure out what’s causing it. We’re seeing it not only in worker flows but also job flows, migration, startup rates, etc.
Industry composition effects make the puzzle even bigger–retail and services are typically more volatile than manufacturing, so the larger employment share they’re seeing means we should expect to see HIGHER rates of churning rather than lower (see http://updatedpriors.blogspot.com/2013/02/job-flows-industry-composition-and.html).
One thing that DOES help explain secular declines in gross flows is firm age stuff. Startup rates and employment shares among young firms are on secular decline (see http://updatedpriors.blogspot.com/2012/12/startups-and-great-recession.html); since dynamism typically declines as you go up through the age classes, lower young-firm activity means we should expect lower flows. But it’s not clear that this is a sufficient explanation; and, more importantly, it’s only explanatory in an accounting sense. We don’t know why entry is declining. And this is a secular trend, so common political explanations may not work.
Whether we should be worried really depends on what is causing all of this. After all, churning is costly. If churning is declining for good reasons, we should applaud it. But that may not be the case.
From the comments
Rahul writes:
Just for the heck of it, I tried an alternative list:
1. Ramp up drastically the training output of new doctors and nurses: More med schools, larger intakes per school, elimination of 4 years of pre-med university etc. More med school student scholarships and subsidies?
2.Massively expand other lower tiers of the medical system: Physicians assistants, Nurse Practitioners etc.
3. Liberalize drug imports both commercial and personal. Allow direct import of any FDA-licensed drug sold in equivalent nations (western EU / Canada etc.). Mostly ignore Big Pharma’s opinions in this context.
4. Fully recognize all medical degrees from similarly developed nations (e.g. Canada / UK / Japan / Australia etc.) to the point that doctors from these nations can register and practice almost instantly in the US. Provide an almost limitless immigration quota for doctors from western nations. Even better, aggressively recruit doctors from abroad. Mostly ignore APA’s opinions in this context.
5. Allow and encourage Medicare / Insurance procedures to be carried out abroad where cheaper locales (Mexico? Canada? Argentina? ) exist. Incentivize recipients using these options. Premium rebates? Encourage private insurers to offer plans that economize on major procedures by treating abroad.
From the comments
This is from Mark A. Sadowski, who makes some other good comments in the same thread:
Marcus Nunes’ post caused me to reread E. Cary Brown’s “Fiscal Policy in the “Thirties: A Reappraisal” (American Economic Review, Vol. 46, No. 5, December 1956, pp. 857–879) and Larry Peppers’ “Full Employment Surplus Analysis and Structural Changes” (Explorations in Economic History, Vol. 10, Winter 1973, pp. 197–210), both of which are mentioned in the Douglas A. Irwin’s paper on gold sterilization and the recession of 1937-38 which Marcus discusses in his excellent post.
Peppers’ paper shows how to calculate cyclically adjusted budget balances from Brown’s paper. By my arithmetic, according to Brown’s data the cyclically adjusted general government balance increased by 3.0% of potential GDP in calendar year 1937. Peppers only looks at the federal budget, and he finds that the cyclically adjusted federal government balance increased by 3.5% of potential GDP in calendar year 1937 and another 0.1% in 1938 for a total of 3.6% of potential GDP.
According to the April 2013 IMF World Economic Outlook (WEO) the U.S. general government structural (cyclically adjusted) balance will increase by 3.9% of potential GDP between calendar years 2010 and 2013. And the March 2013 CBO estimates of the cyclically adjusted federal budget balance show it will rise by 4.6% of potential GDP between fiscal years 2009 and 2013.
So apparently we have repeated the fiscal mistakes of 1937 with approximately a 30% bonus and yet the economy has not plunged into a renewed depression.
We know what Scott Sumner would say. Furthermore he would be right. It’s called “monetary offset.”
Still looking in vain for that darned liquidity trap Krugman keeps talking about!
From the comments
Hazel Meade wrote:
The banning of catastrophic-only plans infuriates me the most. Those are the only plans that are actually financially sensible for a healthy individual to purchase. Everything else on the market is a perverse by-product of the employer-based insurance system.
Worst case scenario with a catastrophic-only plan is you end up with $10,000 in debt. That’s a debt load many times smaller than what the Federal government thinks students should take out to get a college degree. We’ll let you borrow $100,000 to get a sociology degree but, we think that $10,000 is an unconscionable amount to pay for medical expenses? So unconscionable that we have to FORCE YOU to buy a plan with more extensive coverage?
Of course, we all know the real reason for this. it’s meant to force healthy young people to subsidize healthcare for older sicker people. Just force them to pay more for insurance than they ought to, and force them to buy more extensive coverage than is rational.
Questions that are rarely asked (from the comments)
The fact that the US is running a persistent trade deficit and experiencing significant net capital inflows seems like very strong evidence that we are not in a traditional Keynesian situation, where we have ‘excess saving.’
If we have excess saving, why are we having a capital inflow rather than a capital outflow?
If combined private and public demand were below the economy’s productive capacity, why are we running a trade deficit? Doesn’t the existence of a persistent trade deficit indicate that our demand is in excess of our supply?
Very much not our grandma’s recession.