December Jobs Report and Unemployment

In December the U.S unemployment rate fell to 6.7%. This should have been good news. Being below 7% should be a good thing. It should have been something that was seized on by economists as a sign that the US economy was continuing to recover and move out of the doldrums. We should have seen Democratic partisans run to the nearest microphone to take credit for Presidential economic policies that have led us to this point. (BTW the ability of ANY President-- Republican or Democrat-- to take credit or blame for a single data point in the massive system that is the US economy is far overstated but that never stops supporters or detractors from trying to give him credit or blame in good times or bad).

But this time there was no Vice-President Biden braying and bragging about a "recovery summer" on the way. That's because the greatest nation on the earth, a place that put a man on the moon and defeated Hitler and Tojo in just four years, was only able to create a net 74,000 jobs. Even by the standards of the so-called recovery we've been having this was a horrible number. The average net increase for 2012 and 2013 was a net 182,000 jobs. Even those numbers were just barely short of what was needed to keep up with population growth. The unemployment rate is only below 7% because more people gave up and moved out of the workplace. It's not because companies are on hiring sprees. They're not. At least they're not hiring in the United States.


So this number is hopefully something of a statistical fluke. Maybe there was something that was going on in December that won't be repeated again. Maybe this was the initial impact of ObamaCare. The health care sector lost 6000 jobs. Maybe this had something to do with colder weather. Maybe someone didn't get a clean compile on a program and so the number will be adjusted upwards in the coming months. We shall see. For now all we have is this data. What's more troubling than the unemployment rate is the reason why it's fallen. The overall labor participation rate is hovering at 62.8 percent, which is the lowest level in some 35 years. This is weird. I've always wondered about this because for me, there's no choice but to either be working or looking for work. I'm not yet rich enough to retire. There's no one who would be willing to work in order that I could pursue a life of leisure. So if I lost my job I'd have to keep looking for another one and/or create my own business. And I don't think I'm alone. So what are these discouraged workers doing? That's a mystery. Clearly some of them are working off the books, going back to school, relying on family and friends for food, shelter and income, going on disability or retiring. 

If the low labor participation rate was being primarily driven by retirements, that is by an increasingly older population, well then it would be nothing to worry about. The problem is though is that it's not being driven by retirements. The labor participation rate for workers 65 and older has been on a near inexorable rise since 2000 or so. People are increasingly delaying retirement because they simply can't afford it. Those old people you see in grocery stores or big box stores working as clerks or greeters aren't there because they're bored. No, they need the money, thanks in no small part to the financial sector's destruction of their retirement wealth I would guess. And even among younger workers aged 45 to 54 the labor participation rate is 79.2%, which is the lowest since 1988. As I've wondered before, we may be in a situation where thanks to automation, weak unions, outsourcing and wholesale transfer of industries overseas, the US economy simply doesn't need as many workers as it did before. Period. The average duration of unemployment calculated for December was 37.1 weeks. It was 38 weeks a year ago. So it's not as if this economy has been doing well for a long time now.

The other interesting thing about the job numbers is that not only were most of the gains in low wage sectors (retailing, leisure, and hospitality) but for the first time since 2007 ALL of the net job growth went to one gender. Women. Men had a net loss in jobs. Again, this may all be "statistical noise" which will be corrected in coming months. But right now it looks to me like we have an economy that excels in creating low wage jobs and bailing out banks but doesn't seem to be able to create jobs which support a strong middle class. As usual the black unemployment rate was twice that of the white unemployment rate while the "did not graduate high school" unemployment rate was three times that of those with a college degree. And although both political parties will use this report in their battle over extending unemployment benefits again, I think this report and the mostly anemic jobs reports that came before it only support my belief that we need some radical changes in economic policies.
Growth in jobs slows sharply

What do you think of the jobs report?

If you lost your job how long could you last without a new job?

Should unemployment benefits be extended?

Obamacare Losers

First of all, if you've got health insurance, you like your doctor, you like your plan - you can keep your doctor, you can keep your plan. Nobody is talking about taking that away from you."
President Barack Obama
7/16/2009

President Obama's statement has been shown to be untrue. I don't ascribe ill intention to the President or PPACA supporters. PPACA may prove broadly beneficial. But those who lose their current coverage and receive no government subsidies will be worse off. The counter to the claim that they're worse off is that their new plans will have increased level of (mandatory) benefits which are better for them and society. 

I am unconvinced by this argument. It's exactly like saying that instead of driving your $12,000 compact car with minimal upgrades and a low chance of being undamaged in an accident, you MUST purchase a fully loaded $60,000 large sedan, SUV, or pickup truck with a better chance of surviving a serious collision. So the government forces auto companies to stop making the $12,000 compact that you prefer. Though you have little financial capacity and less desire to drive something large which also has voice activated commands or rear view cameras, the choice isn't yours anymore.

At least 146,000 Michiganders — and possibly thousands more — with health coverage purchased directly from insurers now are learning their polices will end Dec. 31 because they don’t meet the minimum requirements of the federal health care act. Under the law, each policy must cover essential benefits in 10 categories. Instead of beefing up these policies, insurers are opting to drop them, advising consumers to consider other policies that are now available either from the insurers directly or though the Michigan Health Insurance Marketplace, also known as the state exchange. The policies that are ending were often less expensive on the individual market because they provided limited benefits and were sold to healthier consumers.

And that was fine with consumers such as Josh Mulder. Mulder had landed a plan several years ago that cost his Wixom family of four just $291 a month. That policy will end Dec. 31, according to a letter from his insurer. The policy didn’t cover things such as maternity care or prescription drugs, but, Mulder said, his family is generally healthy and he was willing to take the risk.“I had a great rate,” he said. Rates that meet the required benefits under health reform average $762.06 a month on the Michigan Health Insurance Marketplace for his family of four..

LINK

Purchasing health care is not like purchasing an automobile but the principle is the same. The government is mandating a specific choice. Maybe this is okay because the government already requires that vehicles have certain safety features and pass certain tests. You can't purchase a new car without seat belts or air bags.  

Often people who make this argument have trouble delineating any point where the federal government can't mandate or regulate. But let's take that objection seriously. It does have some validity. A government which wants to prevent vehicular carnage can surely attempt the same in health care no? I'd say no because drivers directly impact other people. The people detailed in this article are not those fierce individualists or (in some people's minds) lazy freeriders who haven't purchased insurance. They've already purchased insurance which fits their needs and budget. 

The government is making them purchase additional insurance which they don't need and may never use in order to subsidize other people's insurance choices. If I am a sixty something worker I may no longer need to cover my child until he's twenty-six. If I am a forty something man I have little use for insurance that mandates well woman visits or contraceptive coverage. If I am a thirty something fitness guru I may not desire extra coverage which allows multiple doctor visits. If I am a woman well past her reproductive years I may skip an insurance policy that includes maternity care. And so on.

Some might argue that such people are wicked selfish folks. Perhaps. But we are all self-interested. In a marketplace people are able to pursue their own self-interest. For some, the PPACA has reduced choice and raised costs. This is not a good thing.
A utilitarian may claim that it will all be worth it if the people with increased coverage and lower costs outnumber the people with the opposite. We lack that data. But if the PPACA's goal was to give coverage to those without, it may have been wiser to do a simple transfer payment. Raise taxes on everyone and give the money to those without insurance; cut taxes on those without insurance and allow them to use the money to purchase insurance, or open up Medicare/Medicaid to anyone without insurance, regardless of age or income.

Those decisions all have their own cost-benefit analyses. But they would have been more straightforward than reducing choices and raising costs for some with insurance in order to subsidize favored groups with insurance or give insurance to those without. I have no problem paying higher income taxes to get someone else insured. I have a major problem with being forced to buy coverage I don't want and lose coverage that I like. Can you afford to pay twice as much for insurance coverage as you do now? Because I couldn't. I think a law that results in that outcome needs editing. PPACA supporters may feel differently. That's fine. I simply ask that they at least acknowledge that the PPACA does harm some people. That data is in.

What are your thoughts?

Does Your Parachute Work?

Things are finally looking up for me financially. Nevertheless I still operate on a thinner margin than I would like. It's taken hard work to get where I am and will take more hard work to get where I want to be. Bad decisions made years ago have ripples down through the decades. There's nothing I can do about that except live and learn. I was reminded of all this recently while I was stopped at two different expressway exit ramps, watching two different young men hold up signs asking for help. They avoided eye contact and I'm sorry to say so did everyone else. They had what appeared to be their worldly belongings in either a milk carton or a backpack. Of course you see people like this all of the time and unfortunately you get used to it. Some people make bad decisions in life. There's plenty of work if you aren't lazy. It's not my problem. There's a decent safety net. Maybe those people all have substance abuse problems. And so on. Those are the things we privately tell ourselves in order remain convinced that WE would never fall so low as to be begging on the street.

But recent unfortunate events in my personal circle of family/friends and the news that the income gap between the richest 1% and everyone else has grown to the widest ever and that even the top 10% are also taking more than half of total income, also a record, have made me wonder (and will hopefully make you wonder), does your parachute really work? How easy is it to find another job that pays the same or more as the one you currently have? How far are you really, from begging strangers for money? 

Let's say you work for someone else. If that person died, transferred or retired, just how safe is your job? I've had the experience of a new boss arriving and wanting to hire and promote his or her own people. Depending on company culture, holdovers from the old regime might just be fired on the spot or not so subtly harassed until they transfer or quit. If your company decides that your services could be better and more cheaply performed by someone else, whether in this country or even overseas, there might not be any hint of change, just a terse email and a humiliating walk-out by company security. I've seen that happen too. It's also true that by the time you reach your forties and fifties and are at or near your maximum earning potential you are also a tempting target for a firm looking to save on salary and benefits or bring in younger and more malleable workers. If you work for yourself and make a mistake in business plan or your leverage you could also lose everything and watch your company go belly up. In any case no matter what happens to you the world will keep on turning. There are very very very few people on this planet who care quite as much about your well being as you do yourself. Because ultimately it's your life. You are the person who will reap the benefits or bear the costs of choices that you make.

If whatever you do today for money was no longer viable starting tomorrow, just how long would it be before you were on the street asking for money. My macho pride says that would never ever ever happen to me. I'm a (insert family name) and WE don't do that. But sometimes I'm not so sure. No one can see the future. Whether it's medical bills, lawsuits, divorce, bad personal habits, deaths, job loss there's always something that hits you when you least expect it. There are numerous calamities that could wipe out whatever financial stability you've attained. Winter is coming for us all. We don't know exactly when but it is coming. Count on it.

Now there are also tons of ways to deal with this risk and we've discussed some of them before. Spending less than you earn and saving the difference is the number one solution. Playing your cards right and regularly saving your money immediately after entering the workforce can give you a nice little nest egg by the time you hit your late thirties, forties and fifties and presumably start to slow down a little. Starting a side business is a great way to bring some extra income into your pockets. Keeping your skills up to date, staying in touch with close friends and family, avoiding or limiting consumer debt and getting married are also helpful. Divorce is obviously a big risk but having a second income and/or a second pair of hands to perform tasks you otherwise would have to spend time and money on is a huge advantage of marriage.

Still although it is ultimately on the individual to find his way through life I can't help but wonder if the changes we've made in our political economy over the past forty to fifty years have really helped more people than they've hurt. The economy is a man made entity. We can make changes in how we do things. There's not any good reason that we have to accept that the work participation rate in the US is at a 35 year low. Whatever bad decisions a particular homeless person might have made they did so against the backdrop of a US economy that is not producing enough jobs for everyone who wants one. But on my own I can't change that. I would need your help and that of millions more. But I can change my financial situation. To do that I need the help of much fewer people. So that's what I try to do.

Questions

If after you read this your current income was abruptly eliminated what would you do?

How long could you survive at current spending habits without income?

Do you have people who'd be willing to support you? How long? Indefinitely?

Do you have sympathy for the homeless? Do you give money? Volunteer at shelters?

ObamaCare Employer Mandate/Fines Delayed

In case you missed the news the Obama Administration announced that by the authority vested in it from (I'm not sure exactly since the implementation date was specifically written in law) it was delaying the requirement of the employer mandate to provide health insurance or face fines until January 1st, 2015. It thus gave something of a victory to conservative and business groups who had argued that the employer mandate would cost jobs, lower wages and make the cost of doing business more expensive. Because most large companies already offer health insurance coverage for their workers the impact on worker coverage is not expected to be that great.  

Of course, many people who were against the law popularly known as ObamaCare had already pointed this out and claimed that the employer mandate was a tremendous interference in the private marketplace which was largely unnecessary. The Administration had previously ignored these complaints but for some reason recently changed its mind.

Employers who don't provide health insurance will be spared penalties of up to $3,000 per worker until 2015, a one-year delay of a major component of President Barack Obama's health care reform law, the Treasury Department announced Tuesday. Under Obamacare, companies with at least 50 full-time employees are required to provide qualifying health benefits to workers or face financial penalties called "shared responsibility payments." The provision of the law aims to shore up and strengthen the system that provides health benefits to most covered Americans. Under regulatory guidance to be published next week, the Obama administration will free companies from this mandate and from rules that they report information about their health benefits to the federal government next year.

"During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage," Mark Mazur, assistant secretary for tax policy at the Treasury Department, said in a statement. The change does not affect people who will buy health insurance on their own or small businesses that will buy coverage through the law's health insurance exchanges.

More than half of Americans, 170 million people, are covered by employer-sponsored health insurance, according the census data. Of companies with at least 50 workers, 94 percent already offer health benefits, a survey by the Henry J. Kaiser Family Foundation shows. The one-year delay of the penalties won't have a meaningful effect on jobs being the leading source of health care coverage, said Paul Fronstin, a senior research associate with the Employee Benefit Research Institute.

"The fact is, employers have been offering coverage voluntarily for how many years now. They didn't drop it before the law was passed. They offered it for business reasons," Fronstin said. "I don't think you'll see a mass exodus because of this."

LINK

I am among other things an IT project manager, albeit a relatively low ranking one. Missing the implementation date is usually a very bad thing. It normally means that the project manager, team leaders and other project sponsors proceeded on bad information or that somebody at a higher level withdrew their support. It is definitely the kind of thing which gets you dinged on your performance review. Make a habit of it and you can expect to see a few "did not meet expectations" in your 360 degree comments. Pick up a number of those and you can forget about staying on track for your next promotion or salary increase. You might not get a good project the next time and/or be exiled to an undesirable area of your company. But I digress.  

The Administration and supporters will probably wish to spin this as no big deal. And they may well be right. Things get delayed and pushed back all the time, (remember Bush's Medicaid Modernization Act ?) especially in an organization as huge as the US government. Trying to enforce employer mandates may have been a small section of ObamaCare and some supporters are arguing it wasn't even that important anyway.  And for now anyway the mandate for individuals to purchase insurance is still planned to proceed on time.  But this is at least the second time this year that the Administration has decided that what the law required wouldn't actually work and either delayed implementation or gave people a pass. In April the Administration admitted that workers at small businesses wouldn't actually be able to choose their own health care and would instead need to accept what their employers offered. I was not and am not a supporter of ObamaCare. I do not like the individual mandate. I do not think that premiums will drop for most people. But what really interests me about this latest move are two things.

1. What gives any President and/or his Administration to suspend implementation of a law. The fact that other Presidents have done this is of little interest to me. If President Obama can say well we aren't going to require this until 2015 what if anything prevents a future conservative President, as unlikely as that seems now, from saying we won't require it until 2175? So it's not technically a repeal, it's just a refusal to enforce the law. I'm not sure I'm fond of executives deciding which laws to enforce. Yes I know it may be necessary sometimes but this particular law had a hard date written into it. So let's stick to that date.
2. Am I being somewhat cynical in noticing that the new planned date for employer mandates just happens to be after midterm Congressional elections? To me that means that in the short term at least the Administration does not expect the benefits of employer mandates to be immediately obvious to voters. Because if they did they would be moving up the implementation date, not delaying it by a year. 

But who knows. Perhaps I am just a dead-ender on this issue. I don't say no to that. I do find it somewhat humorous that people who waved bloody shirts and told us that any delay to this law in its entirety would make people DIE and opponents would be responsible, are now seemingly ok with a year long delay for, what looks like to me, primarily political reasons. I think, my feelings about this law aside, the Administration is setting a bad precedent by seemingly giving in to constant criticism. Because I can absolutely guarantee that now that the employer mandate has been delayed, people opposed to other sections of the law will now gleefully ask, why don't we delay these parts as well.

What's your take?

Fight Over Online Sales Taxes: Marketplace Fairness Act

Occasionally I might or might not purchase items from Amazon and other online retailers. When I file my tax returns the State of Michigan insists that I give it a listing of online purchases and estimate and provide the sales tax I then owe to the state. Now it takes more than a bit of chutzpah to bogart your way into a private transaction that neither involved you nor took place in your jurisdiction and then claim that the actual parties to that transaction owe you a cut and need to let you wet your beak, or else. But that's how states tend to behave when there's money at stake.

For obvious reasons I won't discuss my answers to my state's nosy little questionnaire. But in general some higher sales tax states and "brick and mortar" retailers aren't pleased with the explosion in online sales. Apparently some of my fellow true blue Americans don't see the point of paying taxes to their state for transactions in which that the state had no role. Even excessively honest people tend to get amnesia about the $1500 or so they spent online last year without paying sales tax. Retailers who aren't primarily online get annoyed with people using their stores as a showroom or to price check for items they intend to purchase online. Some consumers visit a bookstore or electronics shop with no intention of purchasing anything therein. All they're doing is getting a hands on experience before ordering elsewhere. This makes some retailers rather peeved, as you might imagine. They have less money to kick up to their mob captain, state.

Some people have come up with a solution. That is a solution from their point of view, not necessarily mine. This solution will of course require you to pay more taxes. It's only fair right? I mean why should some states go without what they view as their tax revenue just because some consumers have decided it's better to order things online on occasion.

Legislation that would empower states to tax online purchases cleared a key hurdle in the Senate on Monday after winning an enthusiastic endorsement from President Obama. 

Senators advanced the bill in 74-20 procedural vote on Monday evening, just one vote short of the backing it received in a test vote last month. Twenty-six Republicans joined Democrats in moving forward with the bill..

Major retailers are putting all their lobbying muscle behind the legislation, arguing it would close an unfair loophole that benefits online merchants over brick-and-mortar stores. The National Retail Federation, which represents chains such as Macy’s, and the Retail Industry Leaders Association (RILA), which counts Target and others among its membership, announced it would score lawmakers’ votes. But signs of trouble for the bill also emerged as Wall Street groups urged the Senate to slow down and eBay began marshalling its users in a massive campaign to kill it.

The Securities Industry and Financial Markets Association and the Financial Services Roundtable said the measure could pave the way for financial transaction taxes on the state level, an idea that Wall Street and its supporters fiercely oppose.  “It’s important for Congress to explore all the possible outcomes and costs of the proposal, especially the impact on consumers,” Scott Talbott, the senior vice president of public policy for the Roundtable, said in a statement...The Marketplace Fairness Act would empower states to tax out-of-state online retailers, but would exempt small businesses that earn less than $1 million annually. 

Under current law, states can only collect sales taxes from retailers that have a physical presence in their state. People who order items online from another state are supposed to declare the purchases on their tax forms, but few do. The proposal has the support of a host of governors, including Republicans Chris Christie of New Jersey, Rick Snyder of Michigan and Bob McDonnell of Virginia. Passage of the bill could bring billions of dollars in new revenue to state governments. The bill has split the tech industry, pitting eBay against the retail giant Amazon. 

In email to eBay users, eBay CEO John Donahoe argued that the bill would “penalize small online businesses,” urging the site’s millions of users to contact their members of Congress and voice opposition.The company is lobbying for Congress to increase the small-business exemption from $1 million to $10 million.  Donahoe also took a shot at Amazon, a key supporter of the legislation. “Amazon, for example, has fought harder than any other company to require all businesses to collect sales taxes online, while also seeking special tax benefits as it expands its warehouses throughout the country. It’s bad tax policy,” Donahoe wrote....

LINK
So as you can see some of this is a case of the elephants fighting and the grass getting trampled. I don't think that Wall Street cares about whether I pay the proper use tax on books or cd's I order online. But Wall Street is very concerned about states attempting to put financial transaction taxes on services that take place in cyberspace. For example California, which has a political class much friendlier to higher taxes than some other jurisdictions, might decide that every transaction which takes place between consumers in California and bankers or financial service companies based in say New York, is now subject to a California tax.

This sort of backdoor tax was disallowed in a 1992 Supreme Court ruling in which North Dakota attempted to tax Quill Corporation, a business which had no sales force, retail outlet or other physical location in the state. Amazingly North Dakota tried to argue that Quill's floppy disks and sales flyers were physically located in the state and therefore so was Quill. The Court rejected this line of reasoning but evidently said that Congress could change the law if it wanted to do so. And now it looks like Congress wants to do so.

I think this is a bad idea and also unfair. If you're a business who is only physically located in one state why in the world should you have to figure out the tax policies of 49 other states, and various counties, cities, townships and territories. That's expensive. Additionally this new online tax proposal would seem to discriminate between online purchasers and physical purchasers. There are states who do not have sales taxes or have different sales taxes than my state. That's their right. If I happen to drive across the border to purchase goods or services that's my business and my right to do so. My money doesn't automatically belong to my state or the businesses that reside within. If I order something online from a state with no sales tax like New Hampshire my state wants to be able to track that transaction and get its cut. But if I drive to New Hampshire and purchase something my state is just out of luck? Does that makes sense? Or is Michigan also going to try to put GPS on my car to track down any such trips? 

If the states feel that their tax structure is no longer feasible because of a change in consumer behavior then they are free to do things more efficiently OR raise other taxes on businesses or individuals within their state. I don't think states should be able to compel other businesses or other states to adopt their tax policy on "their" citizens. I think all this law would do, if passed, would be to squeeze out smaller businesses. It's not coincidental that Amazon is in support. Amazon just happens to be selling new tax policy software and has already negotiated tax exemptions for itself. Or maybe I'm just being selfish. Maybe I'm just opposed to paying my "fair" sales taxes on goods I hypothetically order online...

What's your take?

Michigan: Right to Work State?

My home state of Michigan is in many ways ground zero of the modern industrial labor union movement. Even as unions have lost ground nationwide and been all but outlawed in the South, unions in Michigan have persevered even though they have but a shadow of their former strength and militancy. Roughly 18% of Michigan workers belong to a union. In some respects the union movement is on life support. But if there's one thing the Republican establishment agrees on it's dislike of unions. So the Republican dominated House and Senate passed bills that would establish Michigan as a "right to work" state. Michigan governor Rick Snyder, who had previously cast himself as a moderate technocrat and said that he thought such legislation was divisive and not very useful to the Michigan population, has done a 180 and said that he could sign the measures into law as early as today.

So what brought us to this point? Well a lot of different things actually. You can't just point to one item. There has always been a struggle between labor and capital simply because the interests are different. If capital could go back to the bad old days of the 1920s or before when they had no unions, compliant politicians, non-existent worker protections and virtual immunity from legal consequences they would do so. If labor could get back to the 1950s when they had strong large popular unions they would do that as well. But the proximate cause of this fight is strangely enough not something in Michigan at all. Michigan unions, and their supporters, deeply worried about labor rights in the wake of Wisconsin governor Scott Walker's successful trimming of labor protections in his state, backed an amendment to Michigan's Constitution. This Proposal 2 would have enshrined labor rights in the Constitution by guaranteeing public and private sector employees the right to organize and collectively bargain for wages and benefits. This was decisively rejected at the polls.

Well as the saying goes, elections have consequences and payback is a muyerfuyer. Republicans saw the Proposal 2 amendment failure as a shot across their bow that had to be responded to, proof of union weakness or as the excuse they needed to implement long desired ideas. So that's how we arrived at this point. Republicans are in the majority. Majority writes the rules. It's been called a lame duck majority because when the new members arrive in the next session there won't be quite as many Republicans and/or possibly not even the support for "right to work" legislation. But just as Scott Brown's election didn't stop the PPACA, Republicans similarly intend to work with the numbers they have while they have them. Ironically Scott Walker says he has no interest in "right to work" legislation.

So what is "right to work" legislation? It's quite simple. It plays on people's financial incentives and uses the free rider problem to destroy unions. When a union is established in a given arena it has to represent everyone in that workplace, whether they joined the union or not. It can't restrict higher wages and better benefits only to union workers. It can't force union membership.It would be a good thing if the union could restrict better wages to those who joined the union but that's against the law. Certainly no employer would ever go for that. So as a result unions have to have a method by which to ensure that there is some ability to ensure that everyone in the workplace has some skin in the game. For union members this is where union dues come in. For non-union members this is where "fair share" provisions come in. These monies are part of what allow the union to continue to exist and have the wherewithal to fight back against management overreach, whether that is in court or simply by organization and communication among workers.

"Right to work" legislation strips unions of the ability to obtain monies from people in a shop where there is a union. This sounds good no? It's expanding the worker's choice no?

Not really. This means that everyone, union worker or not, then has a MASSIVE incentive to withhold dues or fair share provisions because they get the benefits of union representations without the costs. Over time the union can't economically function with all the free riders and can't legally or politically function with smaller and smaller membership. So goodbye union. In other arenas people understand the free rider problem.

This is no different from giving someone like me the option to withhold taxes from the US government because I am bitterly and profoundly opposed to its foreign policy. I have no intention of leaving the US and going to live in another country. I just don't want to pay taxes. If everyone did that the US could not continue to exist. Now unions aren't nation states but the concept is exactly the same.

Do "right to work" states have better economic outcomes as companies that were avoiding the state because of grasping, overreaching unions, come flooding into the state?

The evidence seems to say no those "right to work" states aren't better off. "Right to work" states are associated with lower income and higher numbers of uninsured people. If you want a low wage state with fewer worker protections, then by all means support "right to work" legislation.

And this soon to be law can't be overturned by referendum because the Republicans were smart enough to add appropriations to the bill. Under Michigan's constitution, doing that means that the law is not subject to referendum of the people. Assuming that Governor Snyder signs the legislation, the only way to overturn it would be to replace Snyder and a sizable number of Republicans in 2014. So we're living in interesting times in Michigan.

Questions

1) Do you support Right to Work legislation?

2) Do you live in a Right to Work State?

3) If Snyder signs the bills, what should the response of the labor movement be?

Trucks, Carbon Taxes and Global Warming

There have been a few unfortunate financial setbacks of late but nevertheless if all goes according to Evil Overlord plan I intend to purchase a new vehicle in the next few months. And the vehicle won't be a hybrid. It won't be a small car. It won't be an electric car. It will probably be a large American truck that MIGHT get 18-23 MPG on a good day. Dedicated environmentalists may gnash their teeth and cut sharp looks at me but on this issue I don't care. I want what I want and I'm not interested in other people's opinions on the matter. I drive a minimum 50 mile daily commute, sometimes more, and I would like to do so in a vehicle that is large, safe, comfortable and actually has some extras that I like. If the rest of you want to drive Priuses that is just fine with me but don't expect to see me in one. And someday soon when I get real money then I would ditch the modern truck and get a gas guzzling classic car from the 40s to 70s period. But that's just me-frustrated lowrider and occasional blogger.

If you haven't noticed from the ridiculously mild winter we've been having so far in the US there is a serious problem with human caused climate change.

The amount of heat-trapping pollution the world spewed rose again last year by 3 percent. So scientists say it's now unlikely that global warming can be limited to a couple of degrees, which is an international goal.

The overwhelming majority of the increase was from China, the world's biggest carbon dioxide polluter. Of the planet's top 10 polluters, the United States and Germany were the only countries that reduced their carbon dioxide emissions.

Last year, all the world's nations combined pumped nearly 38.2 billion tons of carbon dioxide into the air from the burning of fossil fuels such as coal and oil, according to new international calculations on global emissions published Sunday in the journal Nature Climate Change. That's about a billion tons more than the previous year.

The total amounts to more than 2.4 million pounds (1.1 million kilograms) of carbon dioxide released into the air every second.

There, also either fortuitously or perversely, was recent news that the US may be sitting on more oil than even Saudi Arabia possesses. This was of course attacked and arguably debunked by experts in the field. 

On Nov. 12, the International Energy Agency’s annual World Energy Outlook report caused quite a stir by asserting that by 2020, the United States would overtake Saudi Arabia as the world's top oil producer. Mainstream journalists eagerly repeated this claim. 

But the truth is that it relied on a very loose definition of "oil." Saying that the United States will surpass Saudi Arabia in oil production is a bit like saying that a 12-ounce latte contains more caffeine than 12 ounces of espresso. It might make for an exciting headline and be useful as political fodder, but it's simply not true.

I can't call it. But I do know this. Despite the current US Administration's enthusiasm for green energy, super high CAFE standards and neutral to negative outlook on fossil fuels the reality is that neither the internal combustion engine or our reliance on oil, coal and natural gas is going away anytime soon. There doesn't look like there's anything yet to replace the big three in terms of cost, reliability, and efficiency. Perhaps a physicist or engineer can chime in on the efficiency question.

That hasn't stopped some more impatient environmentalists from proposing a carbon tax, something the Administration has hinted support for, even as it has refused to follow a EU carbon tax that would have impacted American airliners in Europe. Since pollution is a negative externality (the cost of an activity is not borne solely by those in the market) theoretically a carbon tax would more closely approximate the true cost of using fossil fuels which means people would be less likely to use fossil fuels and thus contribute less to climate change. So everyone wins. Or at least the planet wins.
The issue though is not only would a carbon tax slightly reduce economic activity and hurt the economy but obviously a carbon tax in the US is no good if other countries don't also impose one. Otherwise industry would just move to the areas without carbon taxes. China, India and Brazil are the big new contributors to climate change. They, historically have been less than enthusiastic about the idea of limiting their economic growth because of what the United States or Europe wants to do. It is easy to tell someone else don't do the bad things you did when you still have the benefits of doing those bad things. And if you did bad things to those people (imperialism, colonialism, slavery) you can't really blame them if they aren't eager to listen to your ideas about their economies. It's only when people see a personal/national benefit to taking steps to control climate change that they do so. This is slowly starting to happen. Maybe too slowly.

The big problem of course is that there are a tremendous number of things that contribute to warming the planet. Everyone finds it easier to point fingers at people doing things that they don't like or do while finding excuses for activities they enjoy-thus my example of getting a new truck. If you happen to live in a densely populated urban area with all sorts of mass transit you may say to yourself why shouldn't we discourage single passenger transportation, create outrageously unrealistic CAFE standards and force auto companies to produce carbon friendly vehicles. Someone who lives in the large interior or rural areas of our country may have a different point of view. If you are a vegetarian or vegan you might look at the massive cattle farms and their issues with runoff and deforestation or the horrible overfishing that's occurring and honestly suggest that meat usage needs to be reduced, forcibly or not, as part of a First World diet. 

If you are in the First World, you might cast a worried eye at the massive populations of China, India and Africa, and mutter about planet carrying capacity. You may agree with Agent Smith and point out that the best solution for climate change is that those populations get incentives (or be forced) to stop their growth. Obviously your POV might change were you in the Third World. Then you might become an expert on the incredibly wasteful lifestyle that we take for granted in the US. You might think that Americans needed to lose some weight, drive less and move towards a more "natural" lifestyle, one that may be more common outside of the US or Europe.
So there's the problem. Most people agree that human caused climate change is real and something ought to be done about it. The question is what are you willing to give up? How do we balance economic activity and reduction of carbon emissions?  If someone wants a 4000 square foot home are we going to tell that person he can't have it because heating it is wasteful? And since this is a global problem, how do we get everyone on board? Theoretically the US could twist people's arms raise people's consciousness within our borders. But we can't tell other nations what to do. And their calculations of national or corporate interest may not be what we would like them to be.

Thoughts?

What are you prepared to do?

Is there a global solution?

ObamaCare and Healthcare Costs: Revisited

A classical economics truism is that in an efficient market there is no way to make one person better off without making another person worse off. This is often used as an excuse not to make any changes. This could also be why the study of economics often seems to attract people who are invested in maintaining the status quo. This argument's weaker form is something that many people would agree with even though it tends to be associated with right-wing libertarians. This idea, famously made popular by libertarian speculative fiction author Robert Heinlein is TANSTAAFL (There Ain't No Such Thing As A Free Lunch). This means that every decision we make has costs and consequences. We need to account for these when we make policy choices. Again, someone who likes the status quo will piously invoke this saying and then refuse further investigation to see what the actual costs are. That's wrong.

But it's also wrong for someone who wants to change the status quo to ignore the unpleasant fact that there usually are costs. We have to at least review the costs to see if they're worth the change. This ultimately slides into a bit of utilitarian type of thinking, which is ok if you're trying to decide what a taxicab badge should cost or how much your property tax should be, but may not be the correct frame to use in questions of justice. For example no one, well few people anyway, will question the cost of liberating slaves or giving women the right to vote or stopping the arrest of homosexuals for being homosexual. If those things are right, then costs simply don't matter and you're probably a pretty cold heartless SOB for even bringing that question up.

So then if you want to change something but don't want people to think about costs you definitely need to frame the change as a question of justice. If you don't want change and wish to avoid arguments about justice you need to focus on costs and unintended and unforeseen consequences. We saw some of this play out in the arguments over ObamaCare. However as it turned out both sides (pro and con) strongly believed they had an excellent argument about justice (the individual mandate vs. the numbers of uninsured or the importance of universal birth control coverage) and as a result the popular discussions over the PPACA didn't really focus on costs. Rather cannily the Obama Administration and Congress set up the legislation so that most of the more unpleasant changes would arrive AFTER the 2012 election. Well that election will shortly be completed and absent an extremely unlikely sequence of events the PPACA is here to stay. As a result companies and organizations have begun to adapt to the law's less pleasant incentives. It's important to realize that these things aren't bugs. They're features.

Over the next 18 months, between one quarter and one half of Americans who get insurance coverage through their employers will pay more of their doctor bills themselves as companies roll out health care plans with higher deductibles, benefits consultants say. The result: sticker shock.

"They have huge out-of-pocket costs before they get any insurance coverage, it's a real slap in the face," said Ron Pollack, the executive director of Families USA, a health care advocacy group. High-deductible plans set a threshold for medical expenses that an individual must pay for, often in the thousands of dollars, before insurance kicks in. Studies show people on these plans are three times more likely to delay or skip care than people on traditional plans, where doctor or emergency room visits are covered by a relatively low co-payment.

These plans have been around for years, pushed by employers, insurers and industry experts who believe that consumers with "skin in the game" will drive demand for better quality care at a lower cost. It is a rationale also backed by President Barack Obama's Republican challenger Mitt Romney.

But now corporate America's adoption of high-deductible plans is accelerating, partly because of Obama's health care reform, which requires insurance plans to provide more expansive coverage such as preventive care.Several industry surveys forecast a two-percentage-point increase in the number of companies offering only high-deductible plans in 2013 to about 19 percent, and a larger jump of anywhere from 5 to 25 percentage points in 2014.

LINK

This is a really important concept. Because insurance companies are being forced to provide more expansive coverage, can no longer correctly and routinely rate coverage differently by gender and age and must include people on their parents' coverage until age 26, their costs will increase. In order to mitigate some of that cost increase the insurance companies intend to share this cost with the sucker insuree. As the article briefly references there is also a philosophical belief among the people who brought you "health care reform" that a big reason behind health care cost rises is that people just demand and consume too damn much health care. And how better to cut down that demand than to raise the price, hence the increase in high deductible plans. See how well this works out for everyone? Well maybe not you but heck at least more people will have health care coverage and everyone gets free birth control!! YAY!!!!

The problem with this line of thinking is of course that with few exceptions no one just runs down to his or her doctor and starts requesting hysterectomies, colonoscopies or angioplasties just for the heck of it. No one looks at their health care coverage plan, sees that he only has a $250 co-pay for major procedures and promptly books himself into the hospital for a weekend dialysis session. I mean for just $250, how could you pass up that deal?

People go to the doctor or hospital when they're sick, when a loved one urges it, when an insurer or employer demands it, or for a regular check up (yearly, quarterly, monthly, etc). Price isn't really a consideration. The demand for doctors is not very elastic. I will switch car washes if the new car wash costs $1 less and has the same quality. The same is not true of doctors. Trust is a huge element here. When I "shop around" for doctors I am more concerned with trust, experience and expertise than with cost. Lower cost doctors might actually give me a BAD feeling. Money matters but doctor and patient do not share the same level of knowledge. If my doctor tells me I need to undergo this procedure or take this medicine, generally speaking I am not qualified to question his decision or try to jaw him down about costs. At best I can go with a gut feeling or maybe get different opinions but if every doctor I see says "Yes you need to take this medicine and/or have this procedure done or you will die/be crippled/live in horrible pain for the rest of your life" then that's what I'm probably going to do. No one who is having a heart attack demands to be taken to Dr. X instead of Dr. Y because he has a 10% off coupon from Dr. X. Very few of us could afford to pay the true cost of a required procedure. That's why we have insurance. Delaying your car's scheduled oil change until next month's paycheck is one thing. Ignoring that new spot on your body or that cough that won't go away involves an entirely different set of consequences.

As the higher deductible plans roll out employed people will pay more out of pocket for health care coverage. This contradicts the President's breezy assertion that "If you like your health care plan you'll be able to keep your health care plan, period. No one will take it away no matter what." I guess strictly speaking it's still your health care plan but the price will have gone up and the coverage may have shrunken. So it really won't be what you had before the PPACA. This makes employed people unambiguously worse off.

This really stinks because as an employed person I lacked real complaints about my health care coverage. And for those who didn't have health care coverage because they weren't employed or their employer refused to offer the benefit, I would have supported opening up Medicare/Medicaid for them. That would have made more sense than the PPACA but because the Administration was determined to keep the private health care industry happy it made the decision not to go down that path. So if you're employed you get to enjoy higher deductible plans and most likely higher premiums as well. Let the good times roll!!

Time will tell if PPACA was a good idea. I think not. Others may think differently. But at the very least we should all realize that it was not cost-free. There really ain't no such thing as a free lunch.

Thoughts?

The Supreme Court, ObamaCare and Moral Claims of Freedom

The Supreme Court has spoken. The constitutional battle over ObamaCare is over. The President and his much derided solicitor general won on most of the legal merits and the policy implementation. Even as the Supreme Court (rightly in my view) rejected the Administration's argument that the Commerce Clause allowed a mandate to purchase health care coverage, it (wrongly in my view) allowed the individual mandate to stand by wrongly characterizing it as a tax. Very few people besides Lauryn Hill, Wesley Snipes or Irwin Schiff question the government's ability to tax and spend so the Supreme Court called the mandate a tax and allowed it to stand.


So that is that. Short of a (currently unlikely) Romney victory and (quite unlikely) total Republican November sweep of the House and Senate, the Patient Protection and Affordable Care Act is a settled issue. There are some Republican governors who are threatening, as is their right, to refuse to set up exchanges or expand Medicaid while for the 33rd time the House voted to repeal the law but those are die-hard responses that won't "pull up ObamaCare by its roots" as some desired.


One thing that I've noticed is that partisans on either side make the mistake of personalizing the Patient Protection and Affordable Care Act (hence the name ObamaCare). This explains the insane "I will break him" attitude of many Republicans and the joy of some PPACA supporters who didn't really look at the fine print.

Too many PPACA supporters make the mistake of assuming that all opposition must, by definition, be based in dislike for the President. This is not the case. There are two major objections to the PPACA, which are shared in different ways by principled dissidents on both the left and right as well as some libertarians across the board.
First, there has been a reduction in freedom. This is the critical issue to people who tend libertarian and/or are opposed to the mandate. 


Unfortunately many people on the left and/or supporters of PPACA miss this entirely. They assume that anyone who invokes this concern is either a useful idiot (if they're leftist) or a liar (if they're on the right). Well maybe. But remember we talked recently about how many people on the left place equality and compassion as the highest and in some cases only moral values. This is an excellent example of that. In order to supposedly move towards equality and compassion the people who support the mandate are perfectly willing to reduce your freedom to make choices about what sort of health care you want. Now think about some of the other power-mad people that are in executive office around the nation. Can you imagine what a President Bloomberg might do with such powers? What sort of nation do you want? Do you want an activist relatively unrestrained centralized government?

I live in Michigan which has a higher than normal amount of truly obese people of all races. It's especially bad for Hispanics and Blacks. All else equal, obese people cost the public and private sector more in medical coverage. They clog the health care system with their (preventable) diseases and conditions. The slender, underweight, normal sized or moderately overweight workers pay money into a system that transfers much of that money to obese care. Why should I pay money to subsidize some free-loading fattie? So OBVIOUSLY we need a mandate that obese people (BMI of 31 or greater, or body fat pct of 32% or higher) join a health club and maintain that membership until their BMI falls to 28 or lower. To make it nice and constitutional we'll just levy a tax on porcine people who refuse the new mandate or can't lose the weight. Sound good?? Well if I happened to own a health club I would love this idea. 
People that drive trucks use more gasoline, contribute more to global warming and damage roads more quickly. And those doggone people won't stop buying trucks even as gasoline stays above $3/gallon. So OBVIOUSLY we need a mandate that everyone purchase either a Volt, a Focus, a Leaf, or a Nano. So those of you who like your Rams or F-150s sorry pal. You're hurting the economy. But why stop there?

There's a doctor shortage, This affects health care. And that's commerce. Too many smart people are going into law or finance. This is an OBVIOUS resource misallocation. Don't these people know that they owe it to us all to make the right choice? We'll just mandate that certain people become doctors. After all chances are that they're receiving some form of government tuition assistance. And should they disagree well that's no problem, we'll just refuse them student loans and make them pay added penalties on any income earned outside of the medical field. We'll soon have more doctors to treat the expanded patient base.
Now that we've accepted that anything (including inactivity) that impacts commerce can be taxed and mandated why not just go for broke. Business hiring decisions have a much larger immediate economic impact than health care provision health care. Corporations are sitting on trillions in cash and refusing to hire people. This hurts the economy. In fact it's economic treason. So let's just mandate that corporations hire people until the unemployment rate is at 5% or lower. Those companies that refuse will have to pay a penalty tax. The Secretary of Commerce and the Secretary of Treasury will oversee this program.

And so on. You may think I am being ridiculous. Maybe I am. You may think there are political, legal or constitutional barriers. You may even think some of those are good ideas. But I don't think any of them are good ideas. And I think they are slightly more likely than they were a month ago. The government has unparalleled coercive powers. I don't think it's a coincidence that after the PPACA was upheld we see NYT editorials endorsing the idea of using eminent domain to seize homes that are underwater and give them to other investors for resale or using the power to draft to create a national service cadre of lower paid/unpaid young workers that would undercut unionized labor.


Secondly, the law doesn't solve the problem it was meant to solve. It does not bend the cost curve. How could it? Big pharma maintains protection from cheaper generic drugs. Hospitals have greater incentives to merge. There is no legal mechanism to limit or prevent premium increases. All else equal there will be greater demand for roughly the same supply of services. That means, premiums will increase, as mine already have. It makes it more difficult, if not impossible to push for a single payer program in the US and may increase medical costs abroad.

Who are the people who lack health insurance. Well some are the long-term unemployed. Others are illegal immigrants, who will still be uncovered under this plan and will still be seeking assistance in the ER. Others are people with conditions that are simply so expensive to treat that their insurer has kicked them off their plan and/or other insurers have refused to cover them. Others are employed people who either can't afford coverage or who work somewhere where coverage isn't offered. And finally there are people who, affordability aside, have made a rational choice they they don't currently need health care insurance. 
This last group (the smallest) has received much scorn and opprobrium for supposedly driving up insurance premiums. People speak of them with contempt. They tend to be younger and/or in better health so they are much desired as customers by insurers because they will tend to pay premiums but cost very little in coverage. I don't understand why it is okay to speak with disdain of people standing on their own two feet but if someone has an unkind word to say about a welfare recipient, who is taking from the system, then that's a bad thing. At the very least it's safe to say that this law will have some unintended consequences.


Obviously some people are not fans of the 9th amendment, the 10th amendment or of a Federal Government with limited enumerated powers. That's fine. Evidently portions of the Constitution don't mean what I thought they meant. Cool. Hey I'm no constitutional scholar. I'm just an IT guy.


But, if we did decide that we really really really wanted a Federal Government with limited and enumerated powers and that the 9th and 10th amendments were actually meaningful amendments rather than the redheaded ugly stepchildren of the Bill of Rights, what changes would we need to make to the Constitution since evidently some parts just aren't clear??? This is not a rhetorical question. My concept is that government should stick to its limited roles but otherwise leave me alone.

Now that the issue has been settled, at least in the courts:

What are your thoughts?

Do you at least understand the opposing side (whatever side that is)?

Do you think this will be an issue in the November election?

Do you want a limited federal government or a large unlimited federal government?