A Rolling Train Wreck

Eli,
Bob Laszewski, in my opinion has been the most honest, consistent and accurate commenters on Obamacare. His latest piece on the failing Obamacare Co-ops is worth a read. Eight of the co-ops, government sponsored insurance companies, designed to bring more competition to the insurance market have failed. They were supposed to be budget neutral, that is, the profitable co-ops would subsidize the loss-making co-ops but that is not the case:

the health plans, including these co-ops that lost money in Obamacare, lost it at a rate eight times greater than the relatively few health plans that made money under Obamacare, a difference of $2.5 billion!...

Let me also suggest that these struggling Obamacare co-ops are tantamount to the canaries in the Obamacare coal mine.

These plans are exclusively in the business of the Obamacare insurance exchanges. If you want to segregate the Obamacare insurance business model from the overall insurance business to examine it, the co-ops are pure Obamacare.

There's more. Worth a read.

Bill

The Minimum Wage Works!

Eli,

I stand corrected. The minimum wage works.

From the Wall Street Journal:

The world’s largest retailer expects per-share profit would drop between 6% and 12% in fiscal 2017, which starts in February. The company also said Wednesday it now expects sales growth for the current fiscal year to be relatively flat. In February, the company had called for sales growth of 1% to 2%.

Shares of the retailer dropped more than 9% in midday trading—one of its biggest single-day declines—as executives revealed their targets during a meeting with financial analysts in New York. The stock has now declined nearly 30% this year and is on pace for its worst year since 1973.

The company’s chief financial officer, Charles Holley, who announced plans last week to retire at the end of December, said the company’s program to raise hourly wages accounted for 75% of the lowered earnings target. He said the company expected to spend an additional $1.2 billion on wages this fiscal year and another $1.5 billion in fiscal 2017.

I think one of the goals of the advocates of a government mandated wage is to re-allocate wealth. The 10% drop in Wal-Mart is worth about $18 billion. That is, an $18 billion loss by investors. That will pay for about 10-15 years of increased wages.

Of course, portfolios will shift, reducing their positions in Wal-mart, and other companies with similar exposure to minimum wage increases, and increasing positions to companies not so situated. And that will result in more growth capital for companies with fewer minimum wage workers and less growth capital for higher minimum wage workers. But we don't need to worry about that, none of that will make headlines. Instead we will just see fewer opportunities for low-skilled, low-experienced workers.

Bill

Calling George Santayana, Or Why Didn't Bernie Sanders Take an Econ Course from Milton Friedman?

Eli,

Bernie Sanders and Mrs. Clinton's opposition to free trade is, I suppose, proof that George Santayana's maxim that those who cannot remember the past are condemned to repeat it. Who knows what Mrs. Clinton really thinks, but it is distressing that Bernie Sanders, a graduate of the University of Chicago, home of Milton Friedman, believes the poppycock that he, Bernie Sanders, does on free trade. Even a cursory study of trade barriers, like Smoot Hawley, shows how dangerous and expensive they are.

It seems like we are in a race to the bottom this election. The Republicans, led by Trump are outbidding themselves to build a wall, and the Democrats are outbidding themselves to commit economic suicide. 

Bill

Trumpism in a pantsuit

Eli,

I loved this line from Ben Domenech's "Hillary’s Trade Flip-Flop Shows How Dumb She Thinks We Are," which discusses Mrs. Clinton's recent rejection of the TPP.

As an expression of throwback reflexes on trade and growth, it amounts to Trumpism in a pantsuit.

As you know I don't think Mrs. Clinton will be the Democratic nominee.

Bill

Obama on Oil Exports

Eli,

I know expecting consistency in anyone, particularly politicians is unreasonable.

President Obama, December 9, 2010

Recognizing that 95% of the world’s consumers live outside the United States, President Obama has worked to create jobs at home by expanding exports of U.S. goods and services abroad. Under the National Export Initiative (NEI) that he launched in January 2010, the President set the ambitious goal of doubling U.S. exports while supporting millions of new jobs over five years.

Statement of Administration Policy October 7, 2015

The Administration strongly opposes H.R. 702, which would remove restrictions on the export of crude oil.

I think when energy is the topic of discussion normally rational people suddenly become irrational and inconsistent.

Bill