Monday, September 30, 2013

T-Minus 2.5 hours, anyone want to make bets?

President Obama had no kind words for House Republicans today:

http://www.nytimes.com/news/fiscal-crisis/2013/09/30/obama-strongly-criticizes-house-republicans/?_r=0

Is there anyone in the class who opposes the ACA and also condones the action of House Republicans? On the flip side, anyone in the class who supports the ACA and also condones Obama's actions? Where do people think the onus lies for moving the budget forward? Or are both sides of the aisle just a herd of asses?

Year-End Rush to Use It or Lose It Leads to Bad Government Spending

U.S. government agencies face use-it-or-lose-it budget rules each fiscal year. They either spend the funds Congress has allocated or return them to the Treasury.
Bloomberg News
The result? Not just more spending, but often bad spending, according to a new paper published by the National Bureau of Economic Research.
Monday is the last day of the federal government’s fiscal year. Of course, it isn’t yet clear when Congress will fund the 2014 fiscal year. But even when the process proceeds normally, it appears to lead to a less-than-ideal use of taxpayer funds.
The paper, by Harvard University‘s Jeffrey Liebman and the University of Chicago‘s Neale Mahoney, supplants anecdotal evidence on spending with hard data.
First, the authors examined contract-level information on 14.6 million purchases, totaling $2.6 trillion in government expenditures, from 2004 to 2009. That shows timing: spending in the last week of the year is almost five times higher than the average week during the rest of the year.
Next, they checked the performance of 686 major information-technology projects, accounting for $130 billion in spending. That offers an assessment of the project.
“These data show a sharp drop-off in quality at the end of the year. Projects that originate in the last week of the fiscal year have 2.2 to 5.6 times higher odds of having a lower quality score,” Messrs. Liebman and Mahoney said.
That could be due to a lack of competitive bidding or the use of cost-reimbursement rather than fixed-cost pricing during an end-of-year rush.
The authors offer a solution: allow agencies to roll over unused funding into the subsequent fiscal year.

With the Government on the verge of not funding the next could it be that cuts should be made or let the money run over? which is better?

Talks on Private Air-Traffic Control Turn Serious in U.S. - Bloomberg

Regulation versus ownership......

Talks on Private Air-Traffic Control Turn Serious in U.S. - Bloomberg

Sunday, September 29, 2013

Measuring the sequestration's potential impact

Financial Times has collated a bunch of data in partnership with the Center for Public Integrity that attempts to measure the per capita impact of the sequestration based on past federal spending per county.

http://blogs.ft.com/ftdata/2013/09/29/sequester-county-impacts/

You shouldn't need to log in to view it. Definitely worth a look.

Shutdown Nears as Impasse Shows No Sign of Breaking

WASHINGTON—The federal government moved closer to a partial shutdown Sunday as Republican and Democratic lawmakers showed no signs of negotiating through a standoff over the implementation of President Barack Obama's health law.
The standoff left little prospect that Congress could reach agreement on terms for funding the government by midnight Monday, when the current fiscal year expires. A shutdown would leave essential services operating but prompt federal agencies to suspend many functions and furlough hundreds of thousands of workers.

Budget Battle

Government workers brace for another potential shutdown, with the possibility of no back-pay, while Americans are wondering if they'll get their mail. Laura Meckler joins the News Hub with what to expect when you're expecting a government shutdown. (Photo: AP)
Early Sunday morning, after a late night of votes, the House passed a bill delaying the health law by one year and attached it to a plan to fund the government through Dec. 15. It also includes a provision repealing a tax on medical devices that is intended to help finance the health law. That legislation now goes back to the Senate.
Senate Majority Leader Harry Reid (D., Nev.) denounced the House GOP vote as "pointless," and the White House said Mr. Obama would veto the House bill, which delays his signature first-term health-care law.
Facing the first shutdown since 1996, officials from both sides of the aisle took to the airwaves Sunday to lament the prospect while explaining why the other party would be responsible.
The Senate's No. 2 Democrat, Sen. Dick Durbin, said he expects the government to shut down, saying the Republicans' move to delay the federal health-care law is a nonstarter in the Democratic-controlled Senate. The Illinois senator said on CBS that he would be willing to discuss changes to the law, known as Obamacare, but not "with a gun to my head."
With the two chambers at an impasse, the future remained unclear Sunday. There was no sign that negotiations were being scheduled among congressional leaders. The Senate isn't scheduled to reconvene until Monday afternoon, just hours before the end of the fiscal year, when government funding for many federal functions expires.
House Speaker John Boehner (R., Ohio) blasted Democrats for not reconvening the Senate sooner, saying in a statement that waiting until Monday afternoon to meet "would be an act of breathtaking arrogance."
"They will be deliberately bringing the nation to the brink of a government shutdown for the sake of raising taxes on seniors' pacemakers and children's hearing aids and plowing ahead with the train wreck that is the president's health-care law," Mr. Boehner said.
Sen. Ted Cruz (R., Texas) on Sunday described Senate Democrats as absolutists unwilling to compromise.
"So far, Majority Leader Harry Reid has essentially told the House of Representatives and the American people, 'Go jump in a lake,' " Mr. Cruz said on NBC.
And in an apparent acknowledgment that a shutdown is likely, the House early Sunday also approved legislation to ensure that military personnel would be paid in the event no funding measure is enacted. Sen. Tim Kaine (D., Va.) said Sunday that the Senate would likely pass similar legislation to continue paying military salaries.
Republicans have been determined to use the budget deadline as leverage in their long-running battle to undercut the health-care law, which reaches a landmark moment on Tuesday, when one of its most important components takes effect. On that day, people can begin to sign up for health-insurance policies through new online marketplaces.
Mr. Boehner was under pressure from conservative House members to carry the fight against the health law as long as possible.
"Pushing until the very, very last minute has been one of the mainstays of the House GOP's negotiating strategy on budget issues," said Stan Collender a former aide to the House and Senate Budget Committees who is now a budget specialist at Qorvis Communications. If House Republicans eventually accede to a simple funding bill, shorn of changes to the new health law, it won't likely be until the 11th hour on Monday, he said.
Some Republicans held hope that the Senate would agree at least to repeal the medical-devices tax, giving the House GOP a victory. In votes earlier this year, senators from both parties backed a repeal, but Democrats were unlikely to do so as part of the current budget fight.
Some 800,000 of more than two million federal workers were furloughed in a 1995 shutdown, with fewer workers affected in a following shutdown that stretched into early 1996. The number who would be furloughed this time is unclear and would vary by agency. The Pentagon has said that 400,000 civilian defense workers would be sent home.
Postal and air-traffic-control services would continue, and Social Security checks would be mailed. But many federal functions would be suspended, such as surveillance of flu and other diseases by the Centers for Disease Control and Prevention. National parks and museums would close.
In the vote to delay the health law, two Republicans broke from their party to oppose a delay. They were New York Reps. Chris Gibson and Richard Hanna.
Two Democrats voted in favor of the one-year delay: Reps. Jim Matheson (D., Utah) and Mike McIntyre (D., N.C.).
The White House and congressional Democrats are opposed to delaying the health law but have indicated they would entertain changes to improve the bill. But they have firmly opposed talking about even modest changes as part of negotiating the government funding bill.

With obamacare possibly collapsing, how could it be rational to fund obamacare if it will put a hold on hundreds of thousands of jobs?

Saturday, September 28, 2013

How To Think About Obamacare « The Dish

How To Think About Obamacare « The Dish

Read this little article.  So what is wrong with the notion of covering more people with health insurance?  It may not be the pareto optimal solution but it is welfare-enhancing, isn't it?

Friday, September 27, 2013

Recovery on its way, or just a load of hype?

Richard Wolff is a prominent figure in Economics, particularly in the field largely dubbed "heterodox economics." Today he took US institutions to task on their soft claims of steady recovery:

http://www.theguardian.com/commentisfree/2013/sep/27/recovery-hype-capitalism-weapon

In his article, Prof. Wolff referenced a comprehensive article in the usually conservative WSJ, which had pointed out the stagnation facing much of Main Street America.

What does everyone else think? Is Wolff just an old semi-closet Marxist fogey, or is has he pinpointed some serious flaws in our current economic system and the attitude surrounding it?

Redistribution to the wealthy

Paul Krugman is a Nobel winning economist who has staked out the liberal neo-classical position over the past few years.  He writes a  blog in the New York Times which is must reading for economists, macro-policy makers, and politicians.  In the past week, he has been writing about the views of the very wealthy and how they feel persecuted by public opinion.

In part he says:

This is important. Sometimes the wealthy talk as if they were characters in “Atlas Shrugged,” demanding nothing more from society than that the moochers leave them alone. But these men were speaking for, not against, redistribution — redistribution from the 99 percent to people like them. This isn’t libertarianism; it’s a demand for special treatment. It’s not Ayn Rand; it’s ancien régime.
Sometimes, in fact, members of the 0.01 percent are explicit about their sense of entitlement. It was kind of refreshing, in a way, when Charles Munger, the billionaire vice chairman of Berkshire Hathaway, declared that we should “thank God” for the bailout of Wall Street, but that ordinary Americans in financial distress should just “suck it in and cope.” Incidentally, in another interview — conducted at his seaside villa in Dubrovnik, Croatia — Mr. Benmosche declared that the retirement age should go up to 70 or even 80.  The thing is, by and large, the wealthy have gotten their wish. Wall Street was bailed out, while workers and homeowners weren’t. Our so-called recovery has done nothing much for ordinary workers, but incomes at the top have soared, with almost all the gains from 2009 to 2012 going to the top 1 percent, and almost a third going to the top 0.01 percent — that is, people with incomes over $10 million.So why the anger? Why the whining? And bear in mind that claims that the wealthy are being persecuted aren’t just coming from a few loudmouths.  (see here for complete blog entry)

So, do you idolize the very wealthy?  Do they deserve their wealth because they are special people?  Or are they lucky people in the Rawlsian sense?

Is this democracy in action, really?

A Republican Ransom Note - NYTimes.com

Thursday, September 26, 2013

Firms Drop, Rather Than Upgrade, Cheapest Health Plans

http://online.wsj.com/article/SB10001424052702304795804579097422592424860.html?mod=WSJ_business_LeadStoryRotator

Do you believe that making the decision to not give their workers fair, with part of the rationalizing be that working people live longer? 

Are banks finally receiving the crackdown citizens wanted?

JP Morgan Chase & Co. is the largest US Bank, and was one of many whose investment banking division was at the heart of the 2007-2008 collapse. There has long been popular calls for the government to hold big banks more accountable, and today it looks like the government might be finally making good on its promise to do just that:

http://www.theguardian.com/business/2013/sep/26/jp-morgan-talks-penalty-sub-prime-bonds

"If the new payout reaches $11bn the bank will have had to pay $30bn in fines and settlements over the past four years"

This potentially huge settlement come on the heels of two fines slapped on JP back-to-back last week amounting to $920m & $390m each.

To put this into perspective, JP Morgan has over $2.5 trillion dollars in AUM as of 2012. So are the banks finally getting spanked, or is this just another cost-risk that JP took into consideration years ago?

Where did the median voter go?

'No middle' in DC anymore: Former Obama adviser

The impact of a government shutdown will be real

 Macroeconomic Advisers ran the numbers and came up with: a 0.3 percentage point drag on gross domestic product in the fourth quarter. They assume a two-week shutdown starting Oct. 1, and note that the output would rebound in the first quarter of 2014.

The GDP impact from a brief government shutdown - Capitol Report - MarketWatch

Social welfare functions and the elimination of poverty

 It would take only 1 percent of GDP, or a fourth of what we spend on defense every year, to lift every American below the poverty line up above it. 

How Much Money Would It Take to Eliminate Poverty In America?

This article casts the problem in terms of what could be given up:  for instance,

It might be helpful to put the $175.3 billion magic number in perspective. In 2012, this number was just one-fourth of the $700 billion the federal government spent on the military. When you start hunting through the submerged spending we do through the tax code, it takes you no time to find enough tax expenditures geared toward the affluent to get to that number as well. The utterly ridiculous tax expenditures directed toward the disproportionately affluent class of people called homeowners—mortgage interest deduction, property tax deduction, exclusion of capital gains on residences—by themselves sum to $115.3 billion in 2012. Throw in the $117.3 billion in tax expenditures used to subsidize employer-based health care (also a disproportionate sop to the rich), and you’ve already eclipsed the magic number.

Both of the programs mentioned are key subsidies for the middle class.  Rawls would go for the trade while Samuelson et al wouldn't.  Would you?

The Average American Family Pays $6,000 a Year in Subsidies to Big Business | Alternet

I thought this piece was fascinating.  We talk about inefficiency in government and wasteful programs so much I almost feel like I should put quotes around the term.  And yet, a lot of governmental resources are used to subsidize private sector activity in efficient ways.  Some are cataloged in the article below.


The Average American Family Pays $6,000 a Year in Subsidies to Big Business | Alternet

Wednesday, September 25, 2013

Senate Clears Hurdle on Spending Bill

By SIOBHAN HUGHES WASHINGTON—The Senate voted unanimously on Wednesday to move forward with a bill to fund federal agencies through mid-December, advancing past the first hurdle in what likely will be a contentious and deadline-driven debate over next year's federal budget. The Senate vote came after Sen. Ted Cruz (R., Texas) ended a 21-hour speech in opposition to the new federal health law. Mr. Cruz and like-minded conservatives say that no measure to fund the government in the next fiscal year should be approved unless it eliminates money for the health law. Enlarge Image image Associated Press Sen. Ted Cruz talks to reporters as he emerges from the Senate Chamber Wednesday. Related Articles Cruz Ends Speech Against Health Law Highlights of Cruz's 21-Hour Speech Cruz Eclipses Length of Paul Filibuster Long Talks: Comparing Cruz, Paul, Davis In the end, even Mr. Cruz voted to allow the Senate to begin debate on the legislation. In a complicated calculation, he had considered trying to delay the bill, even though he favors a provision in it that strips money from the health law, because Democrats have the votes to restore the money and are on track to do so in the next few days. At issue is a House-passed measure that funds the federal government through mid-December but eliminates money for the health law. Congress must approve some kind of funding mechanism by Oct. 1, the start of the new fiscal year, or the federal government will have to suspend many of its activities and services. The Democratic-controlled Senate is now expected to restore money for the federal health law and send the measure back to the Republican-led House. Senate Democrats may also shorten the time that the bill funds federal agencies so that funding expires in mid-November instead of mid-December. Some Democrats believe this will give them a better chance to pass a spending bill for the full fiscal year that restores money for scheduled budget cuts known as sequestration. "This process is all about, sadly, the Democratic majority not listening to the American people," Mr. Cruz, his tie loosened, said before Wednesday's vote as he wrapped up more than 21 hours on the Senate floor. Six days remain before the next fiscal year begins, but any Senate bill is sure to return to the House for additional action, perhaps as late as Sunday. That would leave only two days before the deadline for passing a funding measure. House Republican leaders have not said what they would do in that case. "We should get this matter back to the House as soon as we can," Senate Majority Leader Harry Reid (D., Nev.) said on the Senate floor. He complained that Republicans were intent on damaging the basic functions of government. The budget fight comes at the same time as discussion over the terms for raising the nation's debt ceiling. Treasury Secretary Jack Lew on Wednesday predicted that the U.S. would run out of extraordinary methods to avoid hitting the debt limit on Oct. 17, and would have only $30 billion in cash on hand, not enough to pay all of its bills. Republicans have said they want to attach conditions to another increase in the borrowing limit, but the Obama administration has said that the debt ceiling is not negotiable and that it is the responsibility of Congress to raise the debt level so the U.S. can make good on its obligations.

Very interesting to see a hurdle be passed but yet we are not aware if we can fund obamacare but yet we can clear a hurdle on spending, what are your thoughts on this?
Here's more on the budget debate, if you aren't tired of it yet:

http://www.nytimes.com/2013/09/26/us/politics/senate-budget-battle.html

Sen. Cruz finally finished his marathon filibuster speech--with absolutely no end result. Check out the quote below.

"Mr. Cruz’s marathon session — which began Tuesday afternoon, went straight through the night and ended at a predetermined noon deadline — did not win over senators from either party, and in fact Mr. Cruz even voted to open debate. After the vote, Senate Mike Lee, Republican of Utah and a Cruz ally, said Mr. Cruz never intended to oppose the motion to take up the bill, a position contradicted by his words and procedural motions for days before the tally.

Senator Harry Reid of Nevada, the majority leader, greeted the conclusion of Mr. Cruz’s performance by declaring it “a big waste of time."" 

Does anyone think that Congress is still pursuing this debate because they believe in their position as a matter of fact, or is this just pure ideology/political hand-wringing?

How much does it matter if the national government shuts down?

The financial markets are grappling with that question.

 Treasury Secretary Jack Lew had a chilling message yesterday: the government may have only $50 billion in cash on hand by mid-October; inflows and outflows sometimes exceed that amount every day.  This is a looming train wreck; a government shut-down, on the other hand, wouldn't affect much that's essential, and the public would hardly notice a brief shut-down.  

The problem is this:


The White House has said it won't negotiate on the issue. The GOP has no appetite for a clean raise. And the growing Democratic left will hem in The White House, preventing any possible deal. There's just no basis for a deal, nor is there one being worked out in the background.

ANALYST: A Genuine Crisis Is Looming For The Markets Due To The Debt Ceiling - Business Insider

Tuesday, September 24, 2013

Consumer Confidence Drops to Lowest Point in Four Months

Bloomberg reports that consumer confidence dropped this month to its lowest point since early summer. Of course, since consumption drives the American economy, it's vital that consumer confidence stays high and that people don't pull out their investments.


As mentioned in the article, confidence dropped from a 81.8 to a 79.7 - about a 2.6% decrease. How do you feel this translates to consumption overall, and what should the government do (if anything) to keep confidence high?

Obamacare: One blow after another - Jennifer Haberkorn and Carrie Budoff Brown - POLITICO.com

This is a longish article but if you don't know much about the mechanics and politics of Obamacare, it is a great primer.

Obamacare: One blow after another - Jennifer Haberkorn and Carrie Budoff Brown - POLITICO.com

Monday, September 23, 2013

Conservative Groups Aim to Discourage Young People from buying Health Insurance

*While it is not my week to post, I found this article extremely interesting and would like to hear other people's thoughts.

With the exchanges scheduled to open next week, young people are being highly targeted by ads related to Obamacare. Here is an article that discusses some of the negative ads that have been created. Watch these two commercials; what do you think about these videos and tactics? Does this conservative group really have the interests of young people in mind, or are they just trying to avoid "losing"?

What a Government Shutdown Means for You

If the government were to shut down, what would change in your daily life? That's what CNN asks in this article, showing ten ways that you would be affected just going about your day. Out of the posts I've done so far, I find this one the most interesting - we talked on day one about what the government does, and we don't necessarily take the time to feel the effects of everything it handles on a day-to-day basis. 



Take a minute to read the list of ten things and feel free to comment here about which ones you didn't really think about. Also, think about which ones would be most detrimental if a shutdown was sustained over a long period of time.

Saturday, September 21, 2013

By the Numbers: The Incredibly Shrinking American Middle Class | Smart Charts, What Matters Today | BillMoyers.com

By the Numbers: The Incredibly Shrinking American Middle Class | Smart Charts, What Matters Today | BillMoyers.com

Go to the site and scroll down to read some of the statistics and look at the graphs.  Do your eyes glaze over before you get to the end?   Too bad because the information is really sobering.  The middle class is getting poorer.  

Friday, September 20, 2013

House Passes Bill Gutting Obamacare

The House of Representatives is at it again. We mentioned on Tuesday that republicans have threatened to shut down the federal government if Obamacare is put into effect - and it seems today that they're following through on that promise, according to USA Today.

John Boehner 
Of course, everyone in politics knows that trying to compromise is just showing weakness and both parties should stick to their guns if they want to get anything done.

Why is it that our political system is so polarized - and what can we do about it?


'

Global warming: if you ignore it, will it go away?

 11000 years temperatures
 Temperature chart for the last 11,000 years

 The Climate Commission in Australia was dismantled this week as a new government took office:
 
Mr Hunt said the decision to axe the commission - which had been well flagged by the Coalition before its win at the September election - was about streamlining government processes and would save $1.6 million a year. He said future advice and analysis on climate change would now be provided by the Environment Department.  Mr Hunt also signed off on a brief ordering legislation be prepared to dismantle the independent Climate Change Authority as part of the government's plans to axe the carbon price.  The authority was created to advise the government on national emissions-reduction targets and carbon price caps. It is due to release a draft of a report on targets and caps next month.The moves to shut down the institutions came as the government faces hurdles with closing another body, the $10 billion Clean Energy Finance Corporation.



Thursday, September 19, 2013

Food Stamp Program Cut

The New York Times reported today that the House of Representatives passed a bill passed a bill cutting millions from food stamps.


Republicans claim that the bill "closes loopholes," and requires employment to receive welfare - ideas they claim come from Clinton. Democrats argue that the cuts are "draconian," and will "plunge millions into poverty."

With the budget getting farther and farther out of control, it's clear that something has to give - but what? 

Public policy is an interesting thing, in that bad policies are often passed due to a small group benefiting strongly and making their voices heard. For example, if the government were to pass a bill saying that all members of our class get $1,000,000 by taxing everyone in the U.S. an extra $.04, you can be sure that we'd be in D.C. urging lawmakers to pass the law - while the rest of the nation is apathetic. And of course this works the opposite way as well - which is why "the rich" seem to always get their way. If the government introduces a bill to raise their taxes, they're vehement while the general populous doesn't feel the effects.

So how do we decide where to cut, and how do we do it in a way that benefits the most people?

"The SEC approved its settlement with J.P. Morgan by a two-to-one vote, according to a person familiar with the vote. Democratic commissioners Luis Aguilar and Kara Stein approved the settlement, and Michael Piwowar, a newly appointed Republican commissioner, voted against it, the person says." This quote is from the this article talking about JP Morgan's "Whale probe." I find it interesting that even at this level we find divide between Republicans and Democrats. Do you the vote was ideologically influenced? Do the think there is more to why other Republicans recused themselves beyond previous employment?

Wednesday, September 18, 2013

The Fed Continues Stimulus

Reuters reported today that the Fed will continue to purchase bonds at a rate of $85 billion a month, due to concern about a rise in borrowing costs. Many financial markets were considering the opposite news - and thus the DOW is up over 100 points after a slow start to the day and the S&P has hit a record high.

The Fed chooses to continue its open-ended stimulus program
Of course, the Federal Reserve has stated that they will continue to buy bonds as long as inflation is not an issue - and mention that while the economy is currently stabilizing, it is not growing. How much longer do you feel the Fed will continue to buy bonds at this rate - and what effect would stopping the stimulus have on the economy as a whole?

The Money Behind the Shutdown Crisis - NYTimes.com

 An editorial from the New York Times today talks about Republican Party politics in Congress:
 
If you’re wondering why so many House Republicans seem to believe they can force President Obama to accept a “defunding” of the health care reform law by threatening a government shutdown or a default, it’s because these groups have promised to inflict political pain on any Republican official who doesn’t go along.Heritage Action and the Senate Conservatives Fund have each released scorecards showing which lawmakers have pledged to “defund Obamacare.” When a senator like Tom Coburn of Oklahoma refuses to pledge, right-wing activists are told: “Please contact Senator Coburn and tell him it’s dishonest to say you oppose Obamacare, but then vote to fund it. Tell him he swore an oath to support and defend the Constitution. Mr. Schock and 10 other lawmakers considered suspiciously squishy by the Club for Growth were designated as RINO’s (Republicans in name only), and the club has vowed to find primary opponents and support them with cash — a formidable threat considering that it spent $18 million backing conservative candidates in the 2012 cycle. Americans for Prosperity, a Koch brothers group that has already spent millions on ads fighting health reform, is beginning a new campaign to delay the law’s effects.These groups, all financed with secret and unlimited money, feed on chaos and would like nothing better than to claim credit for pushing Washington into another crisis. Winning an ideological victory is far more important to them than the severe economic effects of a shutdown or, worse, a default, which could shatter the credit markets. 

An article in the Wall Street Journal  (go here) discusses the same issue.  Note how reasonable the wrangling sounds....just politics as usual.

So...its a good time to take a public finance courseWe get to see if a government shutdown really occurs.  And spend some time trying to understand why Obamacare is so despised.  Secret money....defunding programs that are mandated by law.  Doesn't sound very democratic to me.  What do you think?


The Money Behind the Shutdown Crisis - NYTimes.com