Econ-Recon: August 2007: Archives

August 23, 2007

Coal Mining: Santa Claus, Stockings, & Bad Behavior genre: Econ-Recon & Six Degrees of Speculation

Lump Of Coal

I've got coal on the brain...and the news just keeps what remains of my neurons popping. As a kid, I remember thinking about my behavior and whether it had been sufficient to prevent me from receiving a chunk of coal in my Christmas stocking. Of course I soon realized that parents had simply co-opted the holiday as a means to insure that children toe the line.

Today, as an adult in America, coal has become a symbol for something far different. In many ways, it represents the inability of the United States to address our growing dependence upon foreign oil and all that has become associated with that dilemma.

By and large, coal is an outdated fuel source...but one that remains a prevalent and precious reserve in this country. Not that many years back, it appeared that coal might literally become a fossil that was shelved in favor of other energy sources...but then the world suddenly realized that oil reserves would not last forever, nuclear power wasn't as safe as we had hoped, and those with the lions share of crude weren't on the best of terms with the United States.

At that point, coal returned as king...and along with its resurgence came the concerns about its lack of a polluting well as environmental concerns resulting from the actual extraction process. Lastly, its return to prominence brought with it concerns about miner safety.

The Sago and Crandall Canyon mining disasters brought renewed attention to the travails that accompany a dependence upon coal. In the absence of a comprehensive energy intended to solve our reliance on external sources...there will continue to be controversy surrounding the coal industry and our need to exploit the reserves that exist.

An article in The New York Times highlights the controversies that can be expected to result from our efforts to balance the need for fuel alongside of our desire to preserve the many pristine locales from which coal must be extracted...not to mention the need to limit the amount of pollutants we emit into an already taxed atmosphere. The obstacles are many.

WASHINGTON, Aug. 22 — The Bush administration is set to issue a regulation on Friday that would enshrine the coal mining practice of mountaintop removal. The technique involves blasting off the tops of mountains and dumping the rubble into valleys and streams.

It has been used in Appalachian coal country for 20 years under a cloud of legal and regulatory confusion.

The new rule would allow the practice to continue and expand, providing only that mine operators minimize the debris and cause the least environmental harm, although those terms are not clearly defined and to some extent merely restate existing law.

The regulation is the culmination of six and a half years of work by the administration to make it easier for mining companies to dig more coal to meet growing energy demands and reduce dependence on foreign oil.

A spokesman for the National Mining Association, Luke Popovich, said that unless mine owners were allowed to dump mine waste in streams and valleys it would be impossible to operate in mountainous regions like West Virginia that hold some of the richest low-sulfur coal seams.

The rule, which would apply to waste from both types of mines, is known as the stream buffer zone rule. First adopted in 1983, it forbids virtually all mining within 100 feet of a river or stream.

The Interior Department drafted the proposal to try to clear up a 10-year legal and regulatory dispute over how the 1983 rule should be applied. The change is to be published on Friday in The Federal Register, officials said.

The Clinton administration began moving in 1998 to tighten enforcement of the stream rule, but the clock ran out before it could enact new regulations. The Bush administration has been much friendlier to mining interests, which have been reliable contributors to the Republican Party, and has worked on the new rule change since 2001.

Interior Department officials said they could not comment on the rule because it had not been published. But a senior official of the Office of Surface Mining said the stream buffer rule was never intended to prohibit all mining in and around streams, but rather just to minimize the effects of such work.

He said the regulation would explicitly state that the buffer zone rule does not apply for hundreds of miles of streams and valleys and that he hoped, but did not expect, that the rule would end the fight over mine waste.

Mr. Lovett of the Appalachian Center said the rule would only stoke a new battle.

“They are not strengthening the buffer zone rule," he said. “They are just destroying it. By sleight of hand, they are removing one of the few protections streams now have from the most egregious mining activities."

Like it or not, coal will continue to be an important source of energy in the United States until such time as efforts are made to establish a comprehensive energy plan designed to foster alternative sources, minimize reliance on foreign oil, and reduce the negative impacts from coal extraction and pollution. It won't be easy and it wont be cheap.

Additionally, to achieve this goal will require major changes...changes that most Americans haven't exhibited much of an inclination to make...changes that would require large and long established industries to adapt. Unfortunately, many of these same industries have strong political ties and have been major campaign contributors. They also employ influential lobbyists who insure that their interests are heard and that they receive favorable legislative treatment. Separating politicians from their political lifeline wont be easily achieved.

Unfortunately, the situation with regards to coal reminds me of the expression, "Everything old is new again". While its true that my parents are unable to use Christmas to negotiate my good behavior...and while I no longer have to worry about Santa Claus placing a chunk of coal in my stocking...I'm afraid that America's failed energy policy means that we're all going to see a lot more coal stuffed in our proverbial stockings.

It just goes to show that yesterdays lessons rarely lose their relevance. We American's need to change our behavior...or its coal today, coal tomorrow, and coal on Christmas.

Tagged as: Campaign Contributions, Coal Mining, Crandall Canyon Mine, Energy Policy, Global Warming, Lobbying, MSHA, Oil Dependence, Sago Mine

Daniel DiRito | August 23, 2007 | 11:17 AM | link | Comments (1)
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August 22, 2007

George W. Bush: Not A "Stickler" For Mine Safety? genre: Econ-Recon & Polispeak & Six Degrees of Speculation

Stickler And Murray


The Salt Lake Tribune is reporting that public records indicate that many of the statements made by mine owner Bob Murray during the Crandall Canyon Mine rescue attempt have been less than accurate.

Since the outset of the mine collapse, there has been a dispute as to the type of mining taking place at the site. According to the records reviewed by the Tribune, retreat mining was in fact taking place...despite statements to the contrary by Murray.

Records of the Mine Safety and Health Administration (MSHA) show that, after Murray acquired a 50 percent ownership in the mine on Aug. 9, 2006, his company repeatedly petitioned the agency to allow coal to be extracted from the north and south barriers - thick walls of coal that run on both sides of the tunnels and help hold up the mine.

That stands in stark contrast to statements Murray made Monday asserting that his company's mine plan, and that of the previous owner, were one and the same.

Documents on file with the Utah Division of Oil Gas and Mining show Andalex had previously decided not to mine those barriers, determining it posed a risk to worker safety.

"There was a change of philosophy there," said Tony Oppegard, a former MSHA attorney and Kentucky mine official. "It's certainly very questionable. They wanted to get as much coal out of it as they can."

Calls to the company's attorney and spokesman Michael McKown were not returned Tuesday.

In February and March, the company did "retreat mining" in the north barrier, a practice that involves cutting away the remaining support pillars to extract the last coal deposits, leaving the roof to fall in.

Those who watched Bob Murray during the rescue attempt would have been hard pressed to miss his confrontational demeanor and his air of certainty. Having been around coal mining in my younger days, Murray is typical of many of the operators I've encountered.

Why Murray would see fit to misrepresent the type of mining taking place is somewhat puzzling given the likelihood that the mining records would be made public. I suspected then, and I suspect now, that Murray has been attempting to parse words in order to deflect the inevitable criticism.

In my own experience, it isn't unusual for there to be an ongoing battle between mine operators and MSHA...with mine owners frequently involve attorneys as they attempt to avoid cost creating rulings on the part of the government agency. It's a classic case of big business seeking to subvert regulations in order to improve the bottom line.

While I have witnessed valid arguments coming from both sides of these disputes, all too often the impact on the actual miners isn't the primary consideration. Mining is undoubtedly a risky endeavor...both from a financial standpoint for the operators and with regards to those who actually remove the coal.

In recent years, it appears that MSHA has acquiesced to the owner/operators. Given the recent spate of accidents, I would argue that the emphasis needs to return to the safety of the miners.


I've not written about the most recent mining disaster in deference to the feelings of the families who may have lost loved ones. Given the possibility that the rescue efforts are about to halt, I felt it was the right time to address the issue and the ongoing disregard for mine safety...a disregard that has become more evident since the Sago Mine disaster in early 2006.

Thought Theater previously posted on the differences between safety standards present in the Canadian coal mining industry and those here in the United States...differences that can be directly traced to saved lives in Canada...and lost lives here in the United States. I highly recommend that readers take the time to read that posting which can be found here.

Adding to the egregious nature of this most recent disaster is the fact that the man appointed by President Bush to head the Mine Safety & Health Administration was met with significant Congressional opposition (bipartisan) due to legitimate concerns about his safety credentials...yet the President still chose to proceed...awarding the position to Richard Stickler by virtue of a recess appointment.

Today, the Washington Post offers more details on the subject...raising more doubts as to the merits of the appointment.

Members of Congress, union officials and worker advocates were skeptical before the Aug. 6 accident that Richard Stickler was dedicated enough to worker safety.

Now all three groups are pointing out mistakes they say Stickler has made in handling attempts to rescue six trapped miners. The situation grew more grim last week when three rescue workers were killed in a subsequent cave-in.

Critics think any investigation of the accident will ultimately ask why MSHA signed off in June on a mining plan for the area where the collapse occurred.

Experts have said the terrain there was already risky for the type of mining the operators wanted to do. Concerns about the roof's stability after a cave-in damaged another part of the mine in March made MSHA's approval even more questionable, they say.

But the mine workers union and others say Stickler has failed to change the climate at MSHA from one of "really coddling mine operators," said Phil Smith, a spokesman for the United Mine Workers of America, which opposed Stickler's appointment and is calling for an independent investigation of the accident.

In the early days of the rescue, the bespectacled Stickler was regularly upstaged during news conferences by the mine's blustery co-owner, Bob Murray, who used press conferences to rail against his critics and insist that an earthquake - not a structural failure - caused his mine to collapse.

Critics say Murray has a reputation as a bully in the industry and he has openly criticized MSHA's inspectors. Murray's dominance led many observers to wonder whether Stickler was able - or willing - to control the scene.

In fairness, Stickler has his defenders and he earned praise for releasing a candid report on the Sago Mine disaster. Regardless, questions remain about Mr. Stickler's allegiance to mine operators and their economic considerations. As he is confronted with requests to implement improved safety measures designed to protect the miners...measures that would be costly to operators...there is concern he will defer to the wishes of these powerful and influential company executives.

Stickler's meek performance at Crandall contrast to the brash demeanor of Bob Murray, owner of the mine...simply heightened the nagging concerns. When Stickler's actions are coupled with the Bush administration's propensity to defer to big business and afford them with significant regulatory leeway (think toys contaminated with lead), it is difficult to conclude that safety is a priority. Factor in a review of the superior Canadian mine safety measures and the picture isn't very pretty.

Sadly, it seems that miners suffer an injustice akin to that referenced in the well known adage, "Out of sight, out of mind". It's time to prioritize their well-being and enact measures focused upon improving mine safety in America.

The following video clip is from Countdown with Keith Olbermann. He discusses the Stickler appointment and speaks with Arianna Huffington on the need to pass legislation meant to provide better safety.

Keith Olbermann On Mine Safety & The Bush Administration

Tagged as: Bob Murray, Canada, Coal Mining, Crandall Canyon Mine, George Bush, MSHA, Richard Stickler, Sago Mine

Daniel DiRito | August 22, 2007 | 1:30 PM | link | Comments (0)
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August 21, 2007

Fred Barnes: Journalist, Apologist, Magician? genre: Econ-Recon & Just Jihad & Polispeak & Six Degrees of Speculation

The Wizard Behind The Curtain

Fred Barnes, in an editorial at the Wall Street Journal, offers his manifesto for Republican resurgence. Unfortunately, from my perspective, the piece is a textbook demonstration of the degree to which GOP insiders haven't a clue with regards to the concerns of ordinary Americans as well as the existing political realities. Even worse, much of the piece is an exercise in the "if only" mentality one might expect to find in the Harry Potter world of fantasy and magic. The following excerpt is wholly illustrative.

Clearly the war hurt, more than a little. Just as clearly, a turnaround in Iraq would help enormously.

But even if the "surge" is as successful as it appears it might be, there's a problem. While public support has increased recently, the war still faces deep-seated opposition. There's a widespread view that its cost in lives, money and national prestige has been too high. This won't change overnight. Public opinion isn't quite that fickle.

It's not immutable, however. What if military success by Gen. David Petraeus, the American commander, is matched by a political breakthrough engineered by Iraqi Prime Minister Nouri al-Maliki? Or matched by the acceleration of political reconciliation at the provincial rather than the national level in Iraq? Either scenario is possible.

I'm willing to concede that anything is possible in this world of uncertainty...but to assume that all of the above will transpire seems akin to Mr. Barnes believing that he holds the winning Power Ball ticket. Yes, it could happen...but it is hardly a reasoned piece of journalistic conjecture.

While Barnes is imagining a political breakthrough, Senator Levin and others are suggesting that the Maliki government is not only an obstacle to progress; it may need to be removed for any hope of political reconciliation to emerge. Shouldn't a Wall Street Journal piece offer more than the fanciful thought one might find on a slip of paper removed from a fortune cookie?

For the sake of those within the GOP who are actually seeking a blueprint for a return to relevance, may I suggest that the content of this editorial may not be the horse upon which to hitch their hopes?

Mr. Bush can't erase the memory of his inept handling of Hurricane Katrina. But if another disaster occurred and the president responded effectively, that would counteract the memory of his Katrina performance.

OK, if this is part of the Barnes plan, why not be bold and ask Pat Robertson and the 700 Club to pray that god's wrath be brought upon another sinful city so that the President can redeem his poor performance. Never mind that this sounds like Barnes is wishing America experience a natural disaster in order to achieve political gain.

As I recall, each time a Democrat has mentioned the possibility of a terrorist attack and that we are no safer as a result of the invasion of Iraq, the GOP has pounced upon such statements as vile, unpatriotic demonstrations of blatant partisanship...going so far as to argue that the Democrats hate America and calling such statements a willingness to sacrifice American lives for political capital. Conversely, is hoping for a natural disaster a noble cause if it helps the GOP?

On fiscal issues, Democrats foolishly dismissed the president's insistence on cutting $22 billion from overall discretionary spending, claiming it was a puny amount. To them, it is. To the public, it's not. A veto war on spending bills is likely to work in Mr. Bush's favor, though not if weak-willed congressional Republicans cut and run. Should it lead to a government shutdown--call it the shutdown trap--that would be all the more harmful to Democrats.

On taxes, Democrats appear confident there's no trap at all, so long as they don't raise taxes on the middle class. Thus congressional Democrats have felt free to pass tax hikes this year on energy companies, foreign corporations and cigarettes, and they're poised to repeal the Bush tax cuts for those earning more than $200,000 a year.

Republicans believe Democrats have misread their mandate on taxes. We'll see.

Fred, where have you been while this President has nearly doubled the national debt from 5 trillion to 9 trillion? Have you forgotten that this is the President who enacted the largest entitlement program in recent history with the passage of his prescription drug benefit? When the Democrats fail to get excited about 22 billion dollars, they do so while pointing to the borrow and spend backdrop that has typified the Bush administration.

As to the tax hikes which Barnes feels will hurt the Democrats, clearly the number of Americans impacted by such increases is miniscule...but then again, I doubt Barnes spends much time with ordinary citizens. Frankly, Barnes might want to consider the possibility that voters have grown weary of tax cut promises from the GOP. Putting a few dollars into a voters pocket...while at the same time taking it out through inflation, wage stagnation, a suspect economy, declining home prices and sales, tightening credit, and the expenditure of 10 to 12 billion dollars each month on an endless war effort...doesn't seem like much of a winning strategy.

They practically invited Democrats to trump them on ethics and lobbying reform. And they've allowed their obsession with illegal immigrants to get out of hand. This drives away Hispanic voters and leaves the impression that Republicans are small-minded, ungenerous and nasty. The worst offenders are the presidential candidates, who would be wise to tone down their rhetoric on immigration.

Yes, nothing like embracing a strategy premised upon the notion that a leopard can suddenly lose its spots. The glaring omission in this suggestion is any understanding of where the GOP actually stands with regards to immigration...other than where Barnes posits may be most politically advantageous. Perhaps the fact that the Republican Party seems to treat this and so many other issues as nothing more than political calculations is what is troubling voters?

From my vantage point, Republican candidates have spent years using the immigration issue to pander to competing constituents such that the majority of the wells have been poisoned and the kool-aid is no longer potable. Weaving a workable message at this point would be akin to pulling a rabbit out of a hat.

As Karl Rove has noted, Republicans need a big idea. The best available is the one Mr. Bush abandoned: ownership. Allowing private investment of payroll taxes for Social Security would only be a start. An Ownership Society would allow individual Americans, rather than government, to control how and where their health care, public education, 401(k) and IRA funds are spent.

I'll give Barnes credit...if you're in the last act of a show that is undoubtedly destined to go might as well pull out all of the stops. Sadly, like most men who become enamored with their own self-interest, Barnes' Ownership Society finale is little more than the wish list of a man and a Party that has not only sought to raid the cookie jar...but has also decided that it is entitled to devour all of the delicacies on the dish.

In the ultimate miscalculation, Barnes' final words ring hollow to the many voters who can't afford this months rent, who work jobs that do not provide health insurance, who couldn't put money in a 401K even if the company offered one, and who haven't the time or the energy to invest social security funds for a future they can't begin to imagine as they try to scrape together the means to put enough food on tonight's dinner table.

I hate to be the one to break this to Fred...but after reading his manifesto, the final thought that crossed my mind was that it would be far easier for voters to simply vote for the Democrats than for them to hope that the Republicans can shed their sullied skin and suddenly become the compassionate conservatives they so masterfully marketed as none other than George Bush.

In the end, the Barnes piece has served one valuable has made it abundantly clear why voters will likely relegate the GOP to the sidelines for the foreseeable future. In the meantime, maybe Mr. Barnes and his fellow Republicans can craft the next iteration of an ill-conceived illusion. One thing is certain, they would be well advised to choose a better that isn't quite so visibly unable to manipulate the machinery as the drapes of deception are dismantled.

Tagged as: 2008, Fred Barnes, GOP, Immigration, Iraq, Katrina, Ownership Society, Social Security, Wall Street Journal

Daniel DiRito | August 21, 2007 | 10:29 AM | link | Comments (0)
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The Economy: Foreclosures Make Big Jump In July genre: Econ-Recon

Greenspan And Bernanke

The most recent economic news continues to disappoint...and the housing industry seems to be leading the way. Specifically, foreclosures rose by nine percent from June to July with a total of nearly 180,000 reported.

To understand the magnitude of the problem, these numbers, while much higher than the prior month, are 93 percent higher than July of the prior year.

From The Associated Press:

In all, 179,599 foreclosure filings were reported during July, up from 92,845 in the year-ago month, according to Irvine-based RealtyTrac Inc.

A total of 164,644 foreclosure filings were reported in June.

The national foreclosure rate in July was one filing for every 693 households, the firm said.

"While 43 states experienced year-over-year increases in foreclosure activity, just five states — California, Florida, Michigan, Ohio and Georgia — accounted for more than half of the nation's total foreclosure filings," said RealtyTrac Chief Executive James J. Saccacio.

In recent months, the mortgage industry has been battered by rising defaults and foreclosures, primarily driven by borrowers with subprime loans and adjustable rate mortgages.

There is little reason to expect the housing crisis will improve in the near term. In fact, one might be safe to conclude that we have yet to reach the bottom. As I understand the outstanding issues, we have just begun a major period of interest rate adjustments on loans that were written during the boom period of refinancing. As those loans are reset at higher rates, we may well see another burst of foreclosures as well as additional downward pressure on home prices.

Adding to the economic uncertainty is the newness of the Bernanke era at the Federal Reserve. Since he assumed the lead at the Reserve, Bernanke has been focused on keeping inflation in check. Unfortunately, the current financial crisis seems to have caught the Fed chief by surprise...leaving many financial types skeptical of his grasp of the problems and uncertain of the measures he will take to effect a gentle and much needed correction.

From Bloomberg:

Aug. 21 (Bloomberg) -- Federal Reserve policy makers don't expect to know for days whether their Aug. 17 discount-rate reduction will succeed at calming markets, Fed watchers say.

"What the Fed wants to do is buy time to sort these things out,'' said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

Bernanke would prefer not to resort to an emergency cut in the benchmark interest rate, which hasn't happened since 2001, said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.

"The Fed doesn't want to bail anybody out,'' LaVorgna said. "If they can get through the next couple of weeks, maybe cooler heads will prevail.''

American capital markets continued to show signs of stress in the second day of trading since the Fed's Aug. 17 discount- rate reduction. Investors fled even money-market funds, considered among the safest instruments, on concern that the funds, which hold $2.5 trillion, have invested in risky collateralized debt obligations backed by subprime mortgage loans.

I'm a bit puzzled by the apparent surprise exhibited by the new Federal Reserve Chairman...though it likely makes sense since Bernanke did work under Alan Greenspan and was apt to agree with the policies of his predecessor.

At the same time, many observers believe that the prior Chairman is responsible for the housing crisis as a result of employing artificially low interest rates and enabling easy access to mortgage funds by individuals with suspect credit...all in hopes of sustaining economic growth.

Frankly, the current housing mess is simply an indication that the market is finally enacting the adjustments one would expect in reaction to the questionable practices. While Greenspan's actions may have prevented a slowdown, the end result may well be the makings of a recession.

Unfortunately, Bernanke will be pressed to review and respond to a difficult and dynamic environment with very little room for error. I don't envy his situation.

Tagged as: Alan Greenspan, Ben Bernanke, Federal Reserve, Foreclosures, Housing, Sub-Prime Lending, U.S. Economy

Daniel DiRito | August 21, 2007 | 8:45 AM | link | Comments (19)
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August 20, 2007

Mama's Don't Let Your Babies Grow Up To Be Poor genre: Econ-Recon & Hip-Gnosis & Polispeak

Health Insurance


More good news for parents and children! The Bush administration, in conjunction with China, sought to limit the testing of imported products for lead contamination...which includes children's toys.

From McClatchy:

WASHINGTON — The Bush administration and China have both undermined efforts to tighten rules designed to ensure that lead paint isn't used in toys, bibs, jewelry and other children’s products.

Both have fought efforts to better police imported toys from China.

Now both are under increased scrutiny following last week’s massive toy recall by Mattel Inc., the world’s largest toymaker.

The Bush administration has hindered regulation on two fronts, consumer advocates say. It stalled efforts to press for greater inspections of imported children’s products, and it altered the focus of the Consumer Product Safety Commission (CPSC), moving it from aggressive protection of consumers to a more manufacturer-friendly approach.

“The overall philosophy is regulations are bad and they are too large a cost for industry, and the market will take care of it," said Rick Melberth, director of regulatory policy at OMBWatch, a government watchdog group formed in 1983. “That’s been the philosophy of the Bush administration."

Today, more than 80 percent of all U.S. toys are now made in China and few of them get inspected.

“We’ve been complaining about this issue, warning it is going to happen, and it is disappointing that it has happened," said Tom Neltner, a co-chairman of the Sierra Club’s national toxics committee.

So not only does our President oppose providing health care to children in need, he has no problem exposing them to the risks of lead long as its good for the know...the robust economy that has allowed China to gain a virtual stranglehold on U.S. currency.

From a public relations standpoint, I can't imagine a worse scenario given the recent confluence of events. Here we not only have the Bush administration issuing a change in policy designed to limit the number of children who will have access to health care during a Congressional recess...we have a report that the same administration has put the health of these same children at risk.

I'm not sure how one could make the situation worse...but perhaps if we give it a day or two, the powers that be can announce another measure intended to assure Americans that George Bush is nothing short of Mr. Scrooge. I can't wait to see what the administration may have planned for Christmas. Perhaps the government can assure the voting public that there will be a lead laden toy in every child's Christmas stocking?


The Bush administration loves children...really they do. First they promoted and passed No Child Left Behind...and failed to properly fund it. Then they agreed to provide insurance for children living in households that are unable to afford health insurance...and followed that with a new set of guidelines designed to limit the number of children eligible for the program.

Perhaps this is just a tough love message for that is intended to let them know that there is no time like the present to get out there and find a the Bush twins did. It's also possible the President is hoping to spare children the scourge he felt when political opponents joked that the Bush family had lived a life of privilege...complete with a silver spoon. Regardless, nothing says I love you quite like punishing innocent American children.

Administration officials outlined the new standards in a letter sent to state health officials on Friday evening, in the middle of a month-long Congressional recess. In interviews, they said the changes were aimed at returning the Children’s Health Insurance Program to its original focus on low-income children and to make sure the program did not become a substitute for private health coverage.

After learning of the new policy, some state officials said today that it could cripple their efforts to cover more children by imposing standards that could not be met.

As on other issues like immigration, the White House is taking action on its own to advance policies that were not embraced by Congress.

In the letter sent to state health officials about 7:30 p.m. on Friday, Dennis G. Smith, the director of the federal Center for Medicaid and State Operations, set a high standard for states that want to raise eligibility for the child health program above 250 percent of the poverty level.

Before making such a change, Mr. Smith said, states must demonstrate that they have “enrolled at least 95 percent of children in the state below 200 percent of the federal poverty level" who are eligible for either Medicaid or the child health program.

In his letter, Mr. Smith said the new standards would apply to states that previously received federal approval to cover children with family incomes exceeding 250 percent of the poverty level. Such states should amend their state plans to meet federal expectations within 12 months, or the Bush administration “may pursue corrective action," Mr. Smith said.

Completely ignored in the issuance of this policy statement by the Bush administration is whether or not insurance is available to a family or whether a family has the means to afford the cost of such insurance. Even worse, the letter indicates that some children must be dropped from the program in order to meet the new guidelines.

The fact that this new policy rationale attempts to portray the issue as a matter of choosing between private insurance and that which would be provided by the government program is laughable. Reality tells us that the choice is actually between having any insurance and having no insurance.

I'm sorry, but this is the same administration that routinely justifies the United States invasion of Iraq as a moral necessity intended to end the mistreatment of the Iraqi people by the Hussein regime. Maybe this new policy letter should have instructed the parents of uninsured children to pack up and move to Iraq...that country where the American compassion compass continues to matter.

Those parents who fail to understand the decision to limit the availability of health care need to understand that the 10 to 12 billion dollars being spent each month in Iraq is for a noble that our president believes is in keeping with his divinely inspired mandate.

After all, it should come as no surprise that this President only takes orders from his heavenly father. As such, its really quite simple...all these parents need to do is convince their uninsured children of the need to pray a little more frequently.

Tagged as: Childrens Toys, China, George W. Bush, Health Care, Insurance, Lead Poisoning, Poverty

Daniel DiRito | August 20, 2007 | 8:19 PM | link | Comments (0)
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A Thoroughly Modern America...Think Again? genre: Econ-Recon & Polispeak & Six Degrees of Speculation

Think Again?

We Americans like to think of ourselves as evolved individuals who embrace freedom and equality for all...and in many ways our history has demonstrated the truth found in this assumption. At the same time, we haven't encountered that many recent opportunities to test the merits of our hypothesis.

As I read the news this morning, I found myself wondering if we may be on the verge of moving in the opposite direction...or, at the least, if our stated commitment to such beliefs might be little more than a nice piece of veneer applied to a hidden harbor of hostility.

The events of 9/11 undoubtedly created a heightened level of fear...a level we Americans have rarely been forced to face. In its aftermath, we have seen a growing willingness to suspend some of the civil liberties which have highlighted our purported belief in an open society and a transparent system of governance.

While I understand the inclination and the necessity to act in this manner (within reason), I find myself concerned that such actions may be a slippery slope towards the adoption of other attitudes that serve to undermine the principles upon which this nation was founded.

I suspect many readers may be thinking I'm about to discuss the efforts of our President to allow for greater clandestine surveillance along with other measures he has sought to detect and minimize terrorist threats. While I do view such measures with a healthy degree of skepticism, my observations today are focused upon the thoughts and beliefs we each hold as individuals and which impact America's status as a beacon for the tenets of democracy and equality.

For some time now, I've expressed doubts to friends and acquaintances about the potential of a woman or a black man to be elected to the presidency...not as a function of their competency to lead...but as a function of inherent prejudices that lurk within the psyche of some segments of our society. Simultaneously, I've felt that the growing opposition to our rapidly expanding immigrant population contains an element of ethnic bias in addition to the many legitimate concerns that can be associated with shoddy border control.

Today, three articles caught my attention and lent support to my suspicions. The following excerpts are from the first article.

From McClatchy News:

DES MOINES, Iowa - A pair of Sen. Hillary Clinton's worst nightmares trudged past a giant blue "Hillary for President" sign outside the Iowa State Fair here with palpable disgust.

"Hillary can go to hell," said Alice Aszman, 66, a Democrat from Ottumwa. "I'll never vote for her. I don't think a woman should be president. I think a man should. They've got more authority."

Her husband, Daniel, 50, also a Democrat, agreed: "I think women should stay home instead of being boss."

A July poll of likely Democratic caucus-goers by the University of Iowa found that Clinton had 30 percent support among women and 18 percent among men. By comparison, there was no difference in gender support for Illinois Sen. Barack Obama, who got 21 percent from both men and women.

The same poll found that 32 percent of women strongly agreed that Clinton was electable, while only 14 percent of men did. And 30 percent of women strongly agreed that Clinton was the Democrats' strongest candidate, while only 17 percent of men did.

In a general election however, it could be a major problem, because men traditionally vote for Republicans at a higher rate than women vote for Democrats.

"She has to be careful the men don't split against her more than women split for her," Smith said.

As I read the article, two items stand out. One, we tend to view bias or prejudice as coming exclusively from those who are different than the one at whom the bias or prejudice is directed...meaning bias towards women should come from men and bias towards men should come from women. Unfortunately, that assumption isn't accurate and the the case of Senator Clinton...pours out of the mouths of other women who embrace established societal notions that gender can and should be a limiting factor in certain circumstances.

Two, the long established view that women should have narrowly defined roles in society...roles that are predominantly subservient to men...remain well established among men in America and women who operate outside these parameters are frequently met with derogatory characterizations. While a strong male figure receives the admiration of many males, a strong female is frequently viewed as acerbic and the object of misogynistic ridicule.

Moving onto the next article, the following excerpts point to the underlying obstacles faced by a black man when seeking to hold the highest office in the land.

From The Philadelphia Enquirer:

A computer search finds 464 instances in which Obama's name appears in print in conjunction with the phrase black enough. The first was in the Chicago Sun-Times in 2003 when he was preparing to run for the Senate. Writer Laura Washington recalled his loss in an earlier House race to a South Side incumbent. "Whispers abounded," she wrote, "that Obama was 'not black enough.' "

Washington went on to recall how her uncle, a retired black railroad worker, had seen Obama wearing "a thousand-dollar coat" while visiting a public-housing project. Her uncle, she said, "dismissed him as an 'elitist.' "

And isn't that telling? A black rapper who visited that same housing project wearing a thousand-dollar coat would be celebrated and emulated. A black politician who does so is an elitist.

Man, I wouldn't walk in Barack Obama's shoes for a million dollars. Oh, he seems like a swell guy. But it must get real old real fast being America's tabula rasa, its blank slate upon which it projects unresolved racial aspirations and fears. If it has been painful watching some conservative white Americans project upon him the latter (Is he too black? Is he Muslim? What about that weird name?), it has been just as painful, if not more so, watching many black Americans grappling with the former.

So the question of whether he's "black enough" reveals more about the people asking than the man being asked. Liberal, and black, and conservative, and white, we have projected our own realities upon this guy, have written like mad upon the blank slate.

Again, we see much the same with regards to Senator Obama. His obstacles are twofold. He must overcome the objections that emanate from within his own racial profile. Senator Obama, much like a woman candidate for president, has to contend with the objections of blacks who see his success as an indication that he has abandoned his racial constituents in favor of winning the approval of whites.

I was particularly struck by the comparison made with regard to the expensive coat. The success achieved by a senator with a good education and excellent credentials can potentially be viewed to be inferior to the success of a rapper. In that dynamic, one can't help but notice the built-in resistance to change and the peer pressures that exist to prevent certain types of social, cultural, and economic mobility.

At the same time, the senator is confronted by the bias and prejudice that one might well expect to be directed at his candidacy from those racial groups which have had a history of viewing blacks as lesser and unfit to serve as president.

The following excerpts from the final article confront the question of immigration and the growing animosity that permeates the topic.

From McClatchy News:

Scores of organizations, ranging from mainstream to fringe groups, are marshalling forces in what former House Speaker Newt Gingrich calls "a war here at home" against illegal immigration, which he says is as important as America’s conflicts being fought overseas in Iraq and Afghanistan.

While most of the groups register legitimate, widespread concerns about the impact of illegal immigration on jobs, social services and national security, the intense rhetoric is generating fears of an emerging dark side, evident in growing discrimination against Hispanics and a surge of xenophobia unseen since the last big wave of immigration in the early 20th century.

The Alabama-based Southern Poverty Law Center, which monitors hate groups, said the number of "nativist extremist" organizations advocating against illegal immigration has grown from virtually zero just over five years ago to 144, including nine classified as hate groups, such as the Ku Klux Klan and Aryan supremacists.

Demographers and immigration experts say the passions over illegal immigration in the opening decade of the 21st century are comparable to those that swept through American cities with the surge of immigrants who descended on U.S. shores from the 1900s to the 1920s.

The latest wave of immigrants — both legal and illegal — is predominated by Mexicans and other Latin Americans who are venturing deep into the U.S. interior to follow the job market, often settling in towns and cities that, just a few years earlier, were unaccustomed to Hispanics.

The resulting demographic impact on local communities can often lead to social tensions that help explain the intensity of feelings over illegal immigration, said Meissner and other experts.

John Trasvina, president of the Los Angeles-based Mexican American Legal Defense and Education Fund (MALDEF), said the backlash over illegal immigrants is clearly generating widening anti-Hispanic sentiments, often exemplified in hate rhetoric on talk shows and over the Internet.

MALDEF has thus far prevailed in legally defeating municipal immigration ordinances, but Trasvina said that "a poisonous atmosphere" remains.

"What these ordinances do is add tension to the communities," he said. "So a woman in the grocery is talking to her daughter in Spanish. It emboldens the person standing in line behind her to say, 'Hey, speak English.'"

It seems to me that the growing opposition to the expanding Mexican and Latin American immigrant populations may be the best example of the pervasive nature of bias and prejudice. I would argue that the recent outcry results from the perceived threat to our established cultural structure has reached a point of critical mass.

For well over two decades, the influx of immigrants served our interests...interests which included cheap labor in the form of migrant workers, nannies, housekeepers, landscapers, and other roles which Americans viewed to be inferior. While these immigrants remained in the background such that their impact on society was difficult to observe, many Americans were willing to benefit from their presence.

As these immigrant populations became a visible and measurable force in society, their presence has met with a growing disfavor...some of which results from racial prejudice and has led to such vocal and vehement opposition. Efforts to portray the negative impact of immigrants upon society has suddenly overwhelmed much, if not most, of their positive contributions.

In the end, these three articles paint a troubling picture. Despite numerous admirable attributes and an historical willingness to be welcoming and inclusive, I have to wonder if we aren't standing upon the precipice of a period of exclusion and a re-kindling of old, yet inextinguishable inequities.

While the current administration seems to be focused upon exporting our way of life to the obviously oppressed, we at home may well be in the process of dismantling or erasing the hard fought principles this country has toiled to achieve...the same principles this president has so persistently sought to promote. At the moment, I find myself struggling to view this as a win-win situation.

Tagged as: 2008 Election, 9/11, Barack Obama, Equality, Hillary Clinton, Immigration, Prejudice, Racism

Daniel DiRito | August 20, 2007 | 11:16 AM | link | Comments (0)
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August 15, 2007

Politicians & The Inflation Disconnect genre: Econ-Recon

The President and a number of politicians are scratching their heads as they attempt to understand why average Americans aren't all that enthused about the U.S. economy. The solution to this "puzzling" lack of optimism is found in a new article at McClatchy News...and it clearly demonstrates the degree to which our elected officials lack an understanding of the travails that face many of their constituents.

MIDLAND, Va. — The Labor Department’s most recent inflation data showed that U.S. food prices rose by 4.1 percent for the 12 months ending in June, but a deeper look at the numbers reveals that the price of milk, eggs and other essentials in the American diet are actually rising by double digits.

Already stung by a two-year rise in gasoline prices, American consumers now face sharply higher prices for foods they can’t do without. This little-known fact may go a long way to explaining why, despite healthy job statistics, Americans remain glum about the economy.

Meeting with economic writers last week, President Bush dismissed several polls that show Americans are down on the economy. He expressed surprise that inflation is one of the stated concerns.

“They cite inflation?" Bush asked, adding that, “I happen to believe the war has clouded a lot of people's sense of optimism."

But the inflation numbers reveal the extent to which lower- and middle-income Americans are being pinched.

Rising Food Prices

We've all seen a politician tripped up by a reporter asking them the price of a gallon of milk...and we've often discovered that they either can't answer the question or the answer they provide is woefully inaccurate. Therein lie the problem with many of our elected officials...they simply can't empathize because they don't face the same problems.

It goes well beyond inflation and the price of food staples. There are other examples. During a recent Democratic debate in Chicago, a gentleman was nearly in tears when he asked the candidates what they would do to fix the situation which allowed him to work for thirty years at a company only to end up losing a large portion of his retirement along with his family's health insurance when the company filed bankruptcy.

Frankly, the experience of our elected officials lacks the same realities faced by voters. The fact that they receive generous retirement benefits and the best health care without having to worry that it could suddenly be lost leaves them sorely lacking an appreciation for the daily concerns that plague the average voter. The fact that politicians haven't moved to protect their constituents from such situations only exacerbates the impression that they are out of touch.

Why are food prices rising?

It's partly because of corn prices, driven up by congressional mandates for ethanol production, which have reduced the amount of corn available for animal feed. It's also because of tougher immigration enforcement and a late spring freeze, which have made farm laborers scarcer and damaged fruit and vegetable crops, respectively. And it's because of higher diesel fuel costs to run tractors and attractive foreign markets that take U.S. production.

To make more milk, or raise more chickens that lay more eggs, farmers need feed corn and other feed products. But corn prices have soared over the past year as Congress pushes ethanol, a renewable fuel made from corn. Fields that previously grew soybeans are now yielding corn, and that’s driven up the price of soybeans as they become scarce.

Again, these situations point out the lack of awareness found in Washington. Politicians, in their haste to demonstrate their concerns about U.S. dependency upon foreign oil, fail to realize that the average American stands to pay the price at the grocery store. Year after year, these same politicians drag their feet on passing legislation requiring automakers to improve the mileage standards on the vehicles they produce.

While I understand that such requirements might also have detrimental effects, it is clear that our elected officials pass laws without a full appreciation for who might benefit and who might suffer. Further, the ability of interest groups to impact legislation further relegates the concerns of voters to a secondary role as politicians pander to those groups that can afford to hire high powered lobbyists and bankroll a candidates campaign.

Recent abysmal approval ratings for Congress suggest that voters are keenly aware of the many inconsistencies and that they are growing increasingly weary of the apparent disconnect that exists. Perhaps a few more politicians should forego the next free trip to some remote region of the world in favor of an excursion to the neighborhood grocery store?

Tagged as: Economy, Energy Prices, Ethanol, Inflation, Mileage Standards

Daniel DiRito | August 15, 2007 | 9:38 AM | link | Comments (0)
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August 7, 2007

Economic Concerns Grow: China Threatens Dollar genre: Econ-Recon

Currency Manipulation

In a growing sign that the U.S. economy is vulnerable, China has hinted that it could liquidate its huge holding of U.S issued bonds if the United States enacts sanctions intended to impact the strength of the Chinese currency...the yuan.

In recent years, China has reportedly amassed over $900 billion of U.S. bonds...a sum large enough to impact the U.S. economy if they suddenly elected to sell large portions of their holdings.

From The Telegraph:

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession.

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decisions being made in Beijing, Shanghai, or Tokyo".

She said foreign control over 44pc of the US national debt had left America acutely vulnerable.

Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.

"The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles," he said.

A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.

The news comes at a time when the U.S. economic outlook is particularly uncertain. Inflation, a housing slump, a tightening of credit guidelines and higher interest rates, and the expanding sub-prime lending crisis have left many concerned that a recession is inevitable. Others are hopeful the economy will weather the storm with little more than a slowdown in GDP.

Should China decide to unload its holdings, it would be difficult to imagine the U.S. could avoid a recession. Further, the fact that China is aware of its growing ability to manipulate the value of its currency relative to the dollar only makes it more difficult for the United States to pressure China into more favorable trade scenarios.

The situation is another indication of the shifting global economy and the obstacles faced by the United States as it attempts to remain competitive while at the same time avoiding the loss of jobs that has accompanied that effort.

Some have argued for more protectionist policies, but many feel that such a move would only trigger the enacting of such policies around the globe...creating further economic instability and uncertainty as well as damage the tenuous financial balance that exists. At the same time, many contend that the actions of China to manipulate their currency must be challenged.

From Forbes:

BILLINGS, Mont. (Thomson Financial) - US Treasury Secretary Henry Paulson today defended his 'good cop' approach to China on trade and foreign exchange policy and said the anti-China currency bills now being considered in Congress would only hurt US economic prospects in the coming years.

Baucus countered Paulson by saying that: 'China needs at the very least a nudge. No country out of the goodness of its heart ever lowers a trade barrier.'

In remarks before a forum on community jobs here, Paulson reiterated the administration position that increasing trade protectionism is a 'worrisome trend' that threatens to reduce jobs and income in Montana and other states.

Unfortunately, the free trade approach has led to speculation that corporate influence has led the Bush administration to disregard the plight of U.S. laborers. Clearly, the shifting global economy will continue to present difficult choices for the United States.

Of more concern is the prospect that current U.S. policies have already allowed China to achieve a favorable position which may leave us with limited options and even less ability to force corrective measures and actions.

Tagged as: China, Dollar Value, Protectionism, Trade Deficit, U.S. Bond Market, U.S. Economy, Yuan

Daniel DiRito | August 7, 2007 | 1:31 PM | link | Comments (2)
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August 3, 2007

Keeping A Watchful Eye On The Economy genre: Econ-Recon

A Watchful Eye

Despite assurances from the Bush administration, the factors for instability in the economy continue to provide evidence that a recession...or at the minimum...a significant slowdown in Gross Domestic Product is just around the corner.

The following three excerpts provide a quick review of the numerous issues that will undoubtedly exert influence on the degree and the depth of any such occurrence.

From The New York Times:

Keep Your Eyes On Adjustable-Rate Mortgages

In fact, the mortgage meltdown has arrived at something of a turning point. So far, most of the loans gone bad were among the worst of the worst. Some were based on outright fraud, either by the lender or the borrower.

But the pool of people falling behind on their house payments is starting to widen beyond this initial group, and adjustable-rate mortgages are the main reason. Starting in the spring of 2005, these mortgages began to get a lot more popular, largely because regular mortgages no longer allowed many buyers to afford the house they wanted.

They turned instead to a mortgage that had an artificially low interest rate for an initial period, before resetting to a higher rate. When the higher rate kicks in, the monthly mortgage bill typically jumps by hundreds of dollars. The initial period often lasted two years, and two plus 2005 equals right about now.

The peak month for the resetting of mortgages will come this October, according to Credit Suisse, when more than $50 billion in mortgages will switch to a new rate for the first time. The level will remain above $30 billion a month through September 2008. In all, the interest rates on about $1 trillion worth of mortgages, or 12 percent of the nation’s total, will reset for the first time this year or next.

So all the carnage in the mortgage market thus far has come even before the bulk of mortgages have reset. “The worst is not over in the subprime mortgage market," analysts at JPMorgan recently wrote to the firm’s clients. “The reason for our pessimism is that loans originated in late 2005 and all of 2006, the period that saw peak origination volumes and sharply decreased underwriting quality, are only now starting to reset in large numbers."

So while we hear the apologists suggesting that the sub-prime lending crisis will not be broad enough to push the larger economy into a recession, we rarely hear discussions of the pending adjustable-rate fiasco. While these loans haven't begun to reset in large numbers, the out of sight, out of mind mentality won't prevent the inevitable surge in loan failures that will accompany this significant event.

Further, even those borrowers who don't default will have to constrain their spending...and that will further slow an economy that many, myself included, believe has been largely built upon equity lending fueled by rising home values. Lastly, it may also lead to lower home prices as homeowners unable to sustain the higher payments feel forced to sell.

Imagine the convergence of events...higher interest rates on new loans and adjustable rate loans, slowing home sales and a glut of existing homes for sale as well as declining prices, a tightening of available capital and more stringent lending standards, and the shrinking equity available to fuel spending and the associated economic growth. That's not a very pretty picture.

From The Denver Post:

Is Recession Already With Us?

U.S. Bank regional economist Tucker Hart Adams, a.k.a. "The Duchess of Doom," put a high probability of a recession in her 2007 forecast at the beginning of the year. She did not think it would hit until the fourth quarter.

"Now, I'm wondering if it is going to hit us sooner," she said.

It's almost impossible to tell what's going on. The market has grown too complex, and all the signals are mixed.

"I don't think the unemployment numbers are telling us anything," said Adams. "If you lose your job in construction and a hospital needs 600 nurses, does it matter?"

Adams also thinks illegal immigration is affecting the numbers. When illegal workers lose their jobs, they don't show up in the unemployment lines.

And inflation?

"If you don't drive a car, or eat, or heat or cool a house, that's a real good indicator," Adams said.

I often wonder how much of the recovery from the last recession (which officially ended in November 2001) was borrowed.

It seems we collectively lost our jobs at Internet companies and took out home-equity loans to keep spending.

With interest rates at historic lows, this made sense. But now, interest rates are higher and borrowers are increasingly defaulting. A spate of home foreclosures is finally wreaking havoc on Wall Street.

Adams has been a mainstay in providing information on the economic conditions in the region and few would question her ability to reasonably forecast the future. Never one to sugar coat her thoughts, everything Adams states in this article seems not only plausible, but straight forward and consistent with the thoughts of a number of other economists who are anticipating a significant slowdown.

Her insights into unemployment and inflation caught my attention. All too often the numbers provided by the government mask factors that will ultimately drive the situation. In the last few years, adjustments in how these statistics are being compiled have arguably made them less reliable indicators of what has happened, is happening, or will happen in the market. Add to that the growing complexity which Adams points to and it leaves one even more suspect of those who argue all is well with the economy.

From The New York Times:

Job Growth Slowest In Months

The job market lost some of its punch last month as employers added 92,000 jobs — the fewest number in five months, the Labor Department said today.

In a further sign that hiring has slackened somewhat, the government also reported that job growth in May and June was slower than first estimated and that the unemployment rate edged up last month to 4.6 percent from 4.5 percent.

Wage growth in the current economic recovery has been unusually weak. The real average wage for rank-and-file workers actually fell from the start of 2002 to late 2006, despite solid economic growth. As job growth picked up, wages surged in the second half of last year, before falling back this year.

One cannot overemphasize the meaning of the last paragraph in the above excerpt. The fact that real wages have actually declined in the last four years supports the theory that much of the economic growth in this recent period of expansion has been fueled by debt and the low interest rate housing bubble.

This means that the poor performance in wage growth and an apparent stagnation in the upward mobility one would expect to accompany job growth hasn't materialized...which, in my opinion, suggests that the margin or cushion one might expect to accompany a period of economic growth is going to be much smaller than otherwise expected.

In other words, this recent run of expansion has lacked the depth found in prior periods of growth making it much more vulnerable should we experience a measurable and sustained period of decline. That would suggest that a recession could also last longer and be far deeper than anticipated.

Predicting the economy is a daunting task but this current merger of ominous factors is reason for concern...and we haven't even discussed the huge costs of prosecuting the war in Iraq, the expanding national debt, the huge trade deficit, and the infrastructure deficiencies being brought to light by the bridge collapse in Minneapolis.

Tagged as: Economy, GDP, Housing Bubble, Interest Rates, Recession, Sub-Prime Lending, Unemployment

Daniel DiRito | August 3, 2007 | 8:43 AM | link | Comments (0)
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August 2, 2007

New Poll: Voters Still Looking For The Good News genre: Econ-Recon

A new Wall Street Journal/ NBC News Poll suggests that voters are unhappy and doubtful about the future of the economy. They are also closely watching the 2008 presidential candidates...looking for plans and proposals which are focused upon the concerns of ordinary Americans.

At the moment, the Democratic candidates appear to have the edge on most issues...including those areas in which Republicans have typically been viewed more favorably. All in all, voters feel that those in positions of authority are motivated by self-interest...leaving voters particularly skeptical and cynical.

More than two-thirds of Americans believe the U.S. economy is either in recession now or will be in the next year, a new Wall Street Journal/NBC News poll shows.

In addition, the poll shows a lack of confidence in economic leaders. That includes not just Mr. Bush and Congress, both of whom have the approval of fewer than one-third of all Americans, but the financial industry, large corporations in general and energy, drug and insurance companies in particular.

"There's a combination of anxiety and loathing," Mr. Hart said. "There's a sense that every single one of these institutions is totally out for their own betterment, versus the public they serve."

Wall Street Journal Poll

Democratic politicians are reflecting those sentiments in the 2008 presidential campaign and in legislative proposals in Congress. Populist lawmakers in the House and Senate have targeted oil-industry tax breaks, and challenged pharmaceutical companies on issues from drug prices to generic substitutes to imports from foreign companies.

Efforts by Republicans and the business community to raise fears about Democratic tax increases, spending excesses or economic mismanagement have proved unsuccessful. In what Mr. Newhouse called a "world turned upside down," Democrats enjoy an edge in public approval that extends beyond such party strengths as health care and education, where Republicans trail by more than 20 percentage points.

Democrats lead by 35 percentage points on handling gas prices, by 24 percentage points on energy policy and 10 points on dealing with immigration. Even more notably, Republicans lag by 16 percentage points on controlling government spending, 15 percentage points on dealing with the economy and nine percentage points on dealing with taxes.

I find voter sentiment on economic issues to be the most significant finding in this poll...especially the belief that Democrats are better able to control government spending and taxes.

Over the last few years, many conservatives have accused the President of abandoning long held GOP standards of fiscal responsibility and it appears that a majority of voters have also lost confidence in the Republican Party's ability to manage the economy.

Complicating the terrain for GOP candidates is ongoing opposition to the handling of the war in Iraq and the perception that the President continues to lead the country in the wrong direction...none of which can be good news for those GOP candidates looking for some much needed traction as the 2008 election approaches.

"These are sobering numbers for the Republican brand," Mr. Newhouse noted. With Republicans weighed down by Mr. Bush's 31% approval rating, he said, "These party comparisons aren't going to change anytime soon until we get a nominee."

The biggest drag on Republican fortunes remains the Iraq war, which has depressed the nation's mood across the board. Just 19% of Americans say things in the nation are headed in the right direction, while 67% say the country is off on the wrong track.

When those who expressed pessimism were asked to identify a reason, the Iraq war was cited by the highest proportion, 56%. For the first time since the Sept. 11, 2001, terrorist attacks, a plurality of Americans say the U.S. is less safe than before the attacks.

Failures in the health-care system are next on the list at 31%, as Americans continue to struggle with rising costs and coverage gaps.

While it is undoubtedly premature to ascertain how the Bush presidency will be treated by historians, I'm inclined to believe that his legacy will include the designation as the Republican politician who facilitated the dismantling of a sustained GOP ascendancy. Not only did George Bush travel to the pinnacle of GOP power, his subsequent actions likely triggered one of the more rapid declines in modern history from such a lofty point.

It is hard to imagine that this is the same president who, following his reelection in 2004, boldly told the American public that his victory had afforded him ample political capital that he intended to spend.

In an ironic twist, this and other polling indicate that the voting public has concluded that George Bush hasn't managed his political capital any better than the fiscal responsibilities that were entrusted to him in his role as the president.

Tagged as: 2008 Election, George Bush, Health Care, Taxes, U.S. Economy, Wall Street Journal/NBC News Poll

Daniel DiRito | August 2, 2007 | 9:53 AM | link | Comments (0)
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August 1, 2007

Rudy's Health Plan Comes With A Tax Break & A Tiara genre: Econ-Recon & Polispeak

Mr. and Mrs. Giuliani

GOP presidential candidate Rudy Giuliani offered his notion of a national health care that sounds fit for a king or a queen...but not the average citizen.

Then again, if the recent Vanity Fair article on the latest Mrs. Giuliani is accurate, its the kind of plan one might expect from a man whose wife wore a tiara to her wedding and who also needs an extra airline seat for her Louis Vuitton handbag.

No doubt that remark is unfair but this laughable attempt to deliver a plan for reforming the health care system warrants a heavy slathering of sarcasm.

From The New York Times:

In his speech here, he excoriated Democrats for advocating a “socialist" solution to solving the problem of the nation’s 44.8 million uninsured, saying the party’s candidates encouraged a “nanny government" by proposing a greater government role in health care.

Instead, he proposed tax exemptions of up to $15,000 per family, allowing individuals to direct that money toward the purchase of health insurance and other medical spending. He also said he opposed any government mandates that would require people or businesses to buy insurance, which is central to the universal health care plan neighboring Massachusetts passed in April 2006 when Mitt Romney, a Republican rival, was governor there.

And to help the poor or others struggling to afford health insurance, Mr. Giuliani said he would support vouchers and tax refunds, but he gave no details about how he would pay for them.

In proposing a tax exemption of up to $15,000 for a family and $7,500 for individuals, Mr. Giuliani said that money could be used by consumers to buy an insurance policy of their liking. The money left over, he said, could be put into a “health savings account" to be used to pay for deductibles or other uncovered medical expenses.

Where to begin! For Mr. Giuliani's plan to be appealing to an employee, that employee would have to be making significant money such that the tax benefit both offsets the potential loss in company provided benefits and is needed to reduce a large tax burden.

To be clear, my assumption presumes that an employee is working for a company that pays some portion of the employees health insurance. In many such instances, employees who opt out of company provided health insurance do not receive an equal increase in compensation resulting from the money the company save by not having to pay some or all of the employee's insurance.

So the bottom line is that Giuliani's plan would benefit a very narrow segment of society. The vast majority of employees simply could not afford to pay for private insurance. The reasons are many.

First, if their tax burden isn't large enough to warrant the need for the tax break, the tax break is meaningless. Secondly, individual policies are currently rated differently than group policies and they are primarily priced for those who have no pre-existing conditions. Further, if an individual or a member of his or her family have any pre-existing conditions, they either would be excluded from coverage or the costs of the anticipated care would be reflected in the policy pricing.

In essence, only those with perfect health would have the potential to find cheaper health insurance...leaving all others to pay significantly higher rates since they wouldn't benefit from the combined averaging done when insurance companies price group policies. The result of this scenario is that those in greatest need of care would be burdened with the highest costs...which, in my opinion, should lead one to view Giuliani's proposal as an illness penalizing plan.

Some examples might be beneficial. Suppose a family of five includes a child with juvenile diabetes. That family...with great need for coverage...would undoubtedly pay higher premiums...if they could find a company willing to issue a policy. If that same family of five included a mom who had survived breast cancer some five years prior would have the same problem.

Giuliani then glosses over the means to cover those who receive no coverage from their employers and already lack the means to purchase private insurance. He indicates his plan might provide tax refunds or vouchers. Rudy, my friend, poor people don't pay any significant what taxes would you refund? Additionally, if they are paying any taxes, I'm fairly sure it isn't much and the refunds you're talking about would be a mere drop in the bucket towards their insurance costs.

So we're down to vouchers. If 45 million Americans can't afford health insurance...and if the taxes they pay would only return minimal tax returns, then the money needed in vouchers to make up the difference is still going to be a huge number.

Pardon my cynicism, but the bottom line is that Giuliani's plan is tossed out for the edification of those who would stand to benefit (perhaps the well to do friends Rudy rubs elbows with?)...and those in great need will remain an afterthought or an asterik swept under the proverbial rug in typical GOP concerns for an obvious need...transform it into a benefit for the wealthy...and leave those in need to fend for themselves.

Let's be honest, the closest these people trapped at the bottom of the totem pole are going to get to health care is working in nursing homes for minimum wage and caring for Mr. Giuliani's discarded parents.

From The New York Times:

Mr. Giuliani said the resulting flood of competition among insurers for customers would lead them to reduce the costs of their policies, estimating that only 20 million to 30 million of the 120 million who currently get their insurance through an employer would need to sign up for individual insurance plans for that to happen.

For instance, he offered no assurances that insurance companies would not “cherry pick" by insuring only healthier people, or by charging much higher rates to more vulnerable people — like those with chronic diseases.

Instead, he said, moving to a market system would create incentives for people to remain healthy.

Currently, he said, “there is no incentive to wellness."

Yes those 20 to 30 million will be those who benefit from the tax break...people who can already afford insurance...people who can afford to pay a premium for insurance if it is offset by a tax benefit. The remaining 90 to 100 million employees will either be penalized by higher costs for employer sponsored plans or they might even lose their coverage as employers are allowed to cease offering company sponsored group plans altogether.

As to cherry picking...ask anyone who has a chronic ailment how they are viewed by insurance companies. Not only do insurance companies look for opportunities to penalize those with persistent diseases, they will no doubt seek the means to refuse coverage or price it so it becomes prohibitive.

Lastly, as to wellness incentives...give me a break. For years, insurance companies have fought physicians on the particulars of preferred preventative plans as well as the implementation of aggressive, early, and frequent diagnostic testing.

Mr. and Mrs. Giuliani have apparently been removed from the realities faced by millions of hard working Americans for far too long. While Mrs. Giuliani worries about commandeering a seat for her handbag, I'm afraid that the average working Joe and his wife are struggling to afford a first class car seat for their new know...the same infant for which they owe the local hospital a few thousand dollars because they couldn't afford health insurance.

Image courtesy of Denis Reggie/Getty Images via Vanity Fair

Tagged as: 2008 Election, Healthcare Reform, Insurance, Rudy Giuliani, Tax Breaks

Daniel DiRito | August 1, 2007 | 8:31 PM | link | Comments (0)
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