U.S. Heathcare Costs

I just read an op-ed piece in the Washington Post  online with suggestions for President Obama for how to address rising healthcare costs.  I found some of the data deeply disturbing.  The writer appears to be very practical in his approach.  Incentives of player, and  trade-offs are addressed.

Personally I think this is an excellent idea and perhaps an activity one of my future macroeconomic classes might tackle.

A Bit Off Topic

I read this article in the Washington Post online this morning and thought "This guy should be on the talk shows!"

After the recent bitter election and during all this discussion about what to do about our national debt, here is a voice in the wilderness calling for us to come together to avoid a standoff on the economic direction of our nation.

I always return to John Anderson's claim that we can only satisfy all our wants with mirrors.  Instead we must set priorities and move forward.  These priorities will be differrent for individuals, but trade-offs we must all make.  Let's get down to business.

Speaking of Incentives

Coming home form a wonderful family Thanksgiving, I learned that the Powerball Lottery is at a record level!

What an incentive to buy a ticket!  Let's watch demand for tickets to increase.  I hope I remember to buy one.  I know that the probability of winning is super low, bult it's nice to dream.

Memories of past elections

I have been wondering when someone in the mainstream news media would interview Ross Perot about his position on the US budget deficit.  USA Today did just this.  This morning I read what I already assumed; Perot is still concerned.

Back in 1992 when Perot bravely took on both the Republicans and Democrats, I was a staunch supporter.  Friends told me I was throwing away my vote, but I believe in standing up for what you believe in.  I voted for Ross.

Since that November , I have returned to the economics profession.  I now teach 3 courses of economics at a Florida university.  Out current text is by a macro expert, former advisor to a President and chair of the economics dept. at an Ivy.  While my graduate and undergraduate educations were steeped in Chicago School/ Milton Friedman monetarist theory, I have come to understand Keynesian theory much better.  I even read blogs of another Ivy economist who is unabashedly a radical Keynesian.

I now reflect on what I believe about budget deficits and their risk to US citizens.  I am conflicted.  On the one hand, I am still worried about the effects of high government debt.  I understand the concept of compounded interest.  We must eventually get this under control.  It has been 20 years and we have done nothing to curb our love for government programs neither have we been willing to subject ourselves to higher taxes.  On the other hand, I fear another Depression.  Keynes had some excellent recommendations and we have tried some of those, at great expense to the federal budget.

There is much to consider.  Do we remove ourselves as policeman to the world and let chaos rein in some parts?  Do we weaken our social safety nets just as my generation (the biggest) ages?  Do we abandon our standard of living to compete with emerging economies' eager labor forces?  Do we offer more of our earned income to government instead of making private sector choices?

I fear it be some of all of the above.  We must make some tough decisions in the near future.  Will a democracy be able to do this?  Can we make these difficult choices with respect and dignity?  Do we need a teacher like Ross Perot?

Sadly, I remember what the culture did to Perot back in the 90s.  He was ridiculed for his accent, his appearance and his charts.  Well, folks we need to stop and think about all the tidings we don't like, but which are true.  Don't "shoot" the messengers.

Unemployment, Debt and Election

After the GOP convention and prior to the Democratic convention, CNN aired this short report on US unemployment and debt.  There are annoying ads prior to the actual video, but hey, "There's no such thing as a free lunch!"

What I find so annoying about this debate is that it is all "spun" on each side to make the other appear "guilty" for this economy.  There is plenty of blame to go around and the "good ole boys" responsible for the dangerous economic crisis are still holding their cushy Wall Street jobs.  (I just viewed "Inside Job 2 more times!)

The main problem, as I see it with our government is that as a commenter in the video says, "We have a Wall Street government."  My favorite line that I use in my classes is, "We have the best democracy money can buy!"  How do we change this?  Is everyone corrupted.  My students actually say they would take the money if offered, so where does this stop?  Can it be stopped?  Are the incentives of $ and power too enticing to pass?

I must search for the comments from Marx on capitalism and greed.  Someone told me he predicted that greed would be the downfall of capitalism!  Capitalism is an economic model that has served us very well for generations.  Can it continue?

I believe I have written on this concern before.  It just keeps rearing its ugly head .

Back to the CNN video cited above.  When I look at the US debt composition, I must hold the Bush administration accountable for most of the debt.  I keep harking back to the election of 2000, when Gore wanted to put the budget surplus in a lock box for Social Security and Medicare, because although we had a surplus then, we did not know what was down the road.  George Bush promised the refund to the taxpayers because it was their money.  The greedy voters took the refund and lowered taxes.  Thus the start of this rapid deficit pile up.

Bottom line:  We are all greedy.  Whe do we quit "kicking the can down the road" and begin to find ways to decrease annual deficits with both tools - more tax revenue and less government expenditure.  As John Anderson suggested during the 1980s, we must set priorities and move to accomplish these goals.

My favorite candidate

Unfortunately I cannot vote for my favorite candidate.  She is running for the US Senate in Massachusetts and I live in Florida.  Reading about her in the Washington Post today, I came across an article she wrote in July that I missed at that time.  She was focused on the LIBOR scandal and the fraud it exposes in the financial system.

Currently I am designing my lesson plans for a course I will soon be teaching on Money and Banking.  I hope my students will appreciate the crucial role of the financial system in our economy and daily lives.  along with the importance of the system  is the importance of integrity in the system.  If investors and borrowers do not trust the system, it will not function efficiently.  It will cease to be the engine of economic growth that has propelled the capitalistic markets to greatness.

In my view this issue reaches beyond the noble concern of fairness to the root of the capitalistic market as the premier system for improving economic growth and prosperity for citizens.  If the system is hijacked for the benefit of the few, we will end up no better than the people under the thumbs of the communist party in the USSR.  We will be serfs under the thumbs of Ivy League good ole boys.

Let's rally around the women and men who will stand up to power.  I am reminded of the old 60's civil rights motto "Speak truth to power".  I think this what the Occupy movement was meant to do.  I believe I have become what I wasn't in the 60s, a radical!   Perhaps, I have lived to see the world from different perspectives.  Oh what reflection one can do as one ages!  My husband once had a boss whose favorite line was, "I grow older constantly learning".  Thanks Dean!

I Learn form my Students

Each week my students select a news article and write about it using economic terms they are learning in class.  Today I a  student's work and went directly to the article selected to learn more about the report.

As an undergraduate and then graduate student in the late 1960's and early 70's, I studied primarily the theories and perspectives of Milton Friedman's Chicago School of economic thought.  It came as quite a surprise to learn that these conservative economic thinkers actually considered government ownership of enterprises that were too large to be effectively regulated.  I  honestly didn't understand that these men believed government could improve on the private sector.  Evidently I was incorrect.

It appears that when the market fails to support sufficient competition in a market, some highly respected economists from this school of thought actually support socialized ownership.

This was all positioned in the New York Times by Gar Alperovitz as pertaining to our too big to fail banks.  As one who is disgusted with the track record and haughty attitude of our banking sector leaders, I find this idea quite alluring. 

I believe I will further pursue some of these teachings.  If these ideas gain support, I wonder how the bankers will respond?

Let's Take Back Our Government

On the eve of our 2012 national elections, I am getting somewhat political from an economic perspective.

I found thishttp://www.sherrodbrown.com/petition/overturn-citizens-united-a2/ link to sign a petition for a constitutional ammendment.  We need to make it clear to the Supreme Court that as human citizens, we do not want corporations to own Wahington DC and our elected officials!

This is not a partisan topic.  This applies to all areas of our national, state and local governments.  People vote and people should be the supporters of candidates for office, not corporations!  What a slew of normative statements, Ms C.

'I just had to post this opinion since every time I teach economics, I state that we have the best government money can buy.

Companies PAy more to their CEO than to Uncle Sam

While surfing the financial news on the web, I came across and articlehttp://money.msn.com/business-news/article.aspx?feed=AP&date=20120816&id=15456154 about a study ( note: by a liberal think tank) that shows several large corporations pay more to their CEOs than they pay in taxes to the US government.

Formerly I would have agreed that this is a decision best left in the hands of the corporate directors.  That was when I was an idealist who bought into the power of the market.  Now I am more critical of the decisions made by directors.  The fact that these corporations are so large means they have market power and there are probably barriers to entry, hence a low level of competition.  The market does not protect the consumers. 

These companies seem to be run by an "Old Boys" (and now some girls) Network.  You sit on my board and rubber stamp what is my best interest and I'll sit on your board and rubber stamp what you want.  If neither the market nor the directors put a lid on executive compensation, there seems to be no limiting system.  Employees (downsized and outsourced; productivity is soaring) and consumers are paying the tab.

On top of this, the government is getting less tax revenue than the CEO's pay for supplying a system of laws, courts and infra structure that benefit the corporation.  I don't think we can expect any new tax law that might mitigate this situation.  There are too many lobbyists to allow that to happen soon.  This is brought to light at a time when the US government needs more revenue to offset spending on two wars and a deep recession.

What is the answer?  Americans do not want their government taking over corporations.  We believe in the independence of the free market.  The problem is that smart people are finding ways to avoid the penalties of the market (too big to fail being a recent issue) and this is costing the rest of us a bundle.

Some maintain that we have enough or too many laws /restrictions on business.  I would say that if we do, they are not being enforced or they are not effective.

What do you think?

Taxing Olympians

Taxing Olympians

I will admit that I am no sports enthusiast!  However the uproar over the US "taxing" Olympic medals sounded very suspicious to me.  First of all I highly doubted that the actual medals were being taxed ( I don't think they contain that much precious metal).  It seems I was correct; please see the Slate article I read on this issue this morning.

What really got me was what a ridiculous political football this has become.  Both sides of the political campaign have jumped on a non issue (or is it) to benefit from public sentiment that is running high due to fixation on the entertaining olympic sporting events.  As I had assumed, the tax in question is on the additional prize income generated for the Olympian when a medal is won.  The tax is not a tax on the object, the Olympic medal.  It is not a special tax, but merely the result of earned income.  This is not different from taxing a bonus one receives for meeting a sales or performance objective.  What a slippery slope to start exempting these earnings from our tax base.

The saddest part of this debate is that I have heard comments form more than one source to the effect that the person speaking is outraged that the US taxes Olympic medals!  It really took hold in the American mindset that the Olympians were being penalized for winning!  That left cagey politicans from both major parties no choice but to demand an exemption.  What is wrong with this picture????

Debt versus Stimulus

Since I was a very young woman, I have been a foe of federal debt.  My commencement speech from 1966 was titled "The Future :  Can We Afford it?".   Returning to academic economics in the 21st century, I am faced with texts based on Keynesian theory, which I find quite persuasive.  When I was in college and grad school, the schools I attended were proponents of Monetary but not Fiscal Policies.

Recently I have been perplexed about the current recession.  When I show the "Boom and Bust Rap" to my students, there are always nods to both Keynesian and Austrian points being made.

Today, as I read Robert Samuelson's editorial in the Washington Post, I find something to help me reconcile my seemingly conflicting points of view.

Samuelson believes its the misuse of Keynesian theory that has led us to the quagmire we find ourselves in today.  Keynesian stimulus and monetary manipulation/policy must be saved for that rainy day when it is most needed.  Deficit spending should be the exception, not the rule.  Samuelson believes and I agree that Keynes' prescription for government action to protect the economy from massive recession has been hijacked to provide something for nothing in democracies where this offer wins votes!

It is time to try to right these wrongs.  However, in the middle of a weak economic recovery this could be suicide.  The big question is:  When is the right time and will politicians be willing to do the unpopular job of reducing the Federal Deficit?

Whenever I teach macroeconomics or Money and Banking, I cover the Federal Reserve system.  Most times when I mention it is a quasi governmental organization, my students frown and ask what I mean by that. I explain that it isn't actually a government agency, but it is a powerful force in our economy as it wields the power of monetary policy.  I then talk a bit about its board make-up which is composed of mostly bank appointed officials.  The same banks that are regulated by the Fed appoint a good number of its board members!  Then I feel obliged to point out the potential for conflict of interest in this arrangement.

It is , therefore, with much interest that I read this article in the new York Times.  I hope that one silver lining to the recent JP Morgan Chase high profile loss will be a close examination and then restructuring of Federal Reserve appointments.  However, as I read other news reports, it appears there will be little cooperation in Congress until after the election.  Of course there is no guarantee that the election will end the atmosphere of NO COOPERATION  between Republicans and Democrats in the US Congress, even when the future of our economic system might be in jeopardy.

Is Innovation Stifffled by Patent Laws? In microeconomics class, I teach that patents are designed to create powerful incentives to innovate. As I read a New York Times article , I begin to see how perhaps this is not the case anymore. Do we actually repress new uses of information and ideas by granting long term wxclusive rights to another innovator? This leads to the ultimate question for capitalism - Is the profit motive the best engine for economic growth and advancement of society? I suppose that I am being influenced also by the recent attention given to Khan Academy, a not for profit educational innovation. The creator gave up a lucrative career in hedge fund management to develop this revolutionary learning aid that I urge my students in math to utilize. As a student of economics and longtime champion of Capitalism, I am at a stage in my life where I am reevaluating my beliefs. I want to be open to alternate ideas and paths. In 64 years, I have experienced disappointments with many of my strongly held positions. I find it refreshing to be in a position to explore options. let me say, I am not ready to give up on capitalism - I see no alternative that is superior. Perhaps we need to fine tune some of the priciples of the system to take us into the future. I look forward to what this next generation of thinkers will propose. I hope our civilization will have the curiosity and flexibility to allow exploration.

Great News!

This morning I read this exciting article in USA Today online. I wanted to share it with my students and decided to post it on my blog for all. As a baby boomer who witnessed America's great manufacturing era, I am more than pleased to read of the resurgance of this sector of our economy. I believe it is truly the path to economic growth which in turn is the most commonly acceptable path our of our federal deficit situation. Most importantly it is a healthy way to insure a large middle class so crucial to a democracy!

Musings on the JP Morgan Chase $2B Loss

Reading the morning news online, I came across an op-ed piece in the Washington Post with an interesting link that had the following commentthe following comment on financial markets: ".... financial markets are inherently unstable. They will neither self-correct nor self-regulate. Their instability poses a threat to markets and economies and people across the globe. Therefore, they need to be regulated. That's not to say that anyone knows the best way to do this yet in order to balance the necessity of oversight with the dynamics of the markets. We don't know where to set the speed limits. It must be an iterative process." This is a sentiment that needs to be examined and understood by thoughtful citizens. Especially important is communicating the need for oversight of fianancial institutions during this high flying, high stakes period of gambling by our biggest banks. I know I am showing my age and I understand that finding effective regulators with no specail interest is almost impossible, but I would like to see a return to smaller, more local banks with perhaps relationshhips with each other to benefit consumers. For example ATM machines that have recipricol arrangements for no fee arrangements. Of course , this would mean less profits for banks, but then again why do they need to pay such high salaries and bonuses? Extraordinary compensation under capitalism is for innovators and individuals that take risks with their own assets, not employees of institutions using public funds or insured by the public.

For years I have told my economics students that in the US we have the "best democracy money can buy." Having just read Matt Taibbi's May 2012 article "How Wall Street Killed Financial Reform", I see I am not alone in this belief. It makes me crazy to read how our elected officials and government employees sell out to the special interests with money, even if it means putting our entire economy at risk once again. This is boring, confusing stuff, so they get away with gutting important regualtions while the American public worries about whether or not an adorable TV/movie star is a homosexual. What is important? I can only hope that my students will want to pay attention to these issues after they finish my economics classes.

Macroeconomics - fises for economic growth

I read an online report that two prominent, independent, credible economists actually agreed on some fixes for the US macroeconomy! The main point of agreement was that the Bush tax cuts need to fade away. I felt vindicated when I read that they agreed these cuts were ill-advised when passed. During the election campaign of 2000, I maintained that retuning the surplus to the public was not the best economic choice. I actually like the idea of Gore's lock box for social Security and Medicare at the time it was proposed. Looking back many who disagreed will probably admit in hindsight that would have been a better chlice. (Please pardon my spelling; I'm quite dependent on spell check!)

To make my position stronger, I will share that our family has benefited nicely from said tax cuts. These past few years we actually received refunds instead of the normal additional due in April. I am actually arguing against a tax measure that benefits me personally. Why is this? I am concerned about the US economy. I understand the eventual threat of a debt run wild, but I fear a relapse into another recession. While a return to a higher tax rate will pinch in April, another deep recession will demolish my life savings. The trade-off is not negative.

Threats from income inequality

Today I read an interesting item from USA Today dealing with the importance of concern over the growing income inequality in the US.

I understand the argument that the American dream requires wealth accumulation appear attainable for everyone, but is that really the case? In my 20s and 30s as we were working digently to accumulate what little wealth we have attained, I was idealistic and believed that the moon and stars were ours to attain with hard work and prudent spending. My husband and I have acutally built a family savings that should make us comfortable, if no major crisis in the markets occurs in the next 30 years. That said, experience and observation also lead me to worry about concentrated power in the political and financial arenas of this great nation.

I am not a history buff, but my general education did include some knowledge of the French and Russian revolutions. When wealth and power are concentrated in the hands of a few who exploit and dismiss the larger portion of the citizens, havoc ensues and "heads roll". Perhaps this is why I am watching and waiting to see where we are headed as a nation. Will the power brokers gain more and more by hoodwinking the majority of the voters? Will those who believe they are part of the elite wake up and see where they actually stand?

I stood on the sidelines of the protests of the 60s, but many of the changes provoked by my peers turned out ot be best for the nation. Today, I know I am not among the 1% and never will be. Do I stand with Occupy Wall Street or the Tea Party? Which message resonates with my experience? I'll take my chances with the young people in the Occupy movement.

What should we do about the US safety net?

Following links form blogs I am reading this day before Valentine's Day, I came across this piecefrom the New York Times. It is very interesting to read others' perspectives on government taxing and the social safety net in this country.

In some cases the individulas appear to understand just how they will be affected by their own political positions and in other cases one cannot help but think that these people do not understand the consequences.

Several citizens want to grandfather seniors over 55 to the old benefits. They expect anyone under 55 to have the time and fortitude to save enough to survive in old age with less government assistance. Is this a reasonable assumption? I have my doubts. I truly believe that people will need to make belt tightening decisions much earlier than age 55. As young people they must start saving with 401K plans at work and private IRA savings accounts. As I talk to young people I encounter, I find they often do not even know about these incentives to save.

Also, personal debt and family size have a major effect on income available for savings. To implement less generous safety nets, society must address these early choices households and individulas make and the effect they have on future financial security.

Stimulus efforts and deficit

As my macroeconomics classes end, we explore the current political discussion of the federal deficit and how to reduce it. This recent article I encountered online explains the Federal Reserve Chairman's concern about the efforts to reduce the deficit also creating set-backs for an economic recovery.

This is an example of economic trade-offs. Economists tend to sound unsure or even obtuse when they make recommendation or respond to lay questions. This is because there are often no easy answers.

"There is no such thing as a free lunch!" I would credit the originator of this phrase but I cannot ascertain to my satisfaction who that was. I do know we used it extensively in economics classes in the 60's. I believe it was a phrase popular with the late Chicago economist, Milton Friedman. Somehow someone pays for everything!

US losing high tech jobs to Asia

This Washington Post article explains that we are losing professional, scientific jobs to Asian countries, particularly China. One reason is the sheer numbers, but also because of massive Asian governments' investment in education and research.

I believe there is a lesson here for the US government with respect to measures considered for reducing the budget deficit - do not reduce spending on education or research! It is just these areas that are integral to economic growth for our country. The good news is that the article also says US workers are more productive. Highly productive well educated scientists coupled with research dollars can produce innovations that could be the key to our future economic success!

Note should be taken that math and science are primary areas for educational investment. As the article points out, we need only so many generalists; and we need more specialists in the areas of technology and science. One of my pet positions is that everyone should know their multiplication facts and that's only scratching the service of this iceberg!

Should Wall Street bail out Main Street?

Alan Sloan writes about a plan to reduce the interest rates on government backed mortgages that would benefit homeowners and cost investors who have already been bailed out by the US government. What do you think? Is this an unfair changing of the rules in the middle of the game or a leveling of the playing field?

As usual in economics, one needs to think about the opportunity costs and the unintended consequences that may occur.

Questioning Senior Discounts

There are several reasons an article on senior discounts in USA Today caught my eye.

* By most accounts I am a senior. I am eligible for Social Security, but I continue to work full time.
* I live in Florida where there are an abundance of seniors and discount programs to provide incentives to spend.
* In our microeconomics class we discuss discriminatory pricing. In our macroeconomic class we discuss the funding of Social Security and Medicare versus reducing the federal deficit.

This USA Today article raises a lot of interesting questions for us to ponder. However, I see it as a response to the relative frugality of seniors compared to a youth culture that heavily discounts the future(savings).

I completely understand that I am over generalizing. My parents were survivors of the great depression and far more frugal than my husband and me. My daughter who is in her late 20's is also frugal (could be genetic)! My husband and I have been married 40 years and have a comfortable nest egg (let's see what the market does to it next), but we are discussing how to budget for his fast approaching retirement. We are a very savings conscious family of three generations. So perhaps attitudes toward savings are more about experiences and family tradition. If so, it will be interestingt to examine how this next generation reacts to the lessons of the great recession. The housing market will be a good sector to watch.

Following Inside Job; regulator gets hired by those he once regulated

Our macroeconomic class jsut viewed "Inside Job" and today I am reading Matt Taibbi in RollingStone: Revolving Door: From Top Futures Regulator to Top futures Lobbyist.

This just adds to the caution on regulation. For regulation to mean anything, the regulators must be ethical. It is difficult to be ethical when the incentives are so enticing. Does anyone out there know who first said to the effect "Everyone has his/her price."?

Why the middle class is important

I read an online Washington Post article that rings the alarm for concern about an eroding middle class. Since this has been a concern of mine for some time now, I found it thought provoking.

The most alarming part of this piece for me is found in the last two paragraphs. I have found myself thinking that the Chinese system is attempting to utilize parts of our capitalist system along with their centrally planned government. David Ignatius, in this article, warns me why admiration of this hybrid system is a slippery slope.