It's no surprise that the crisis in Greece is worsening, and may take down the entire European Union, starting with collapse of the euro. At root, the EU formed a currency union before it had a fiscal union or a political union.
As it is, the member states retain their political independence and some keep their currency independence, even while maintaining fiscal independence. Member states go into debt without a strong enough central bank to bail them out if needed, while other member states push for austerity to solve economic problems that austerity cannot solve.
America set up a free trade union in its earliest years, and a currency union along with a political union of the member states. Moreover, the member states of the American union must operate with a balanced budget; only the federal government can operate at a deficit. Moreover, the federal government and the Federal Reserve (America's central bank) can step in to bail out individual banks as well as member states when economic tragedy strikes.
The tragedy of Greece is not only misbehavior and miscalculation on the part of the Greek government, but also the refusal of other member states -- particularly Germany -- to provide help in resolving the crisis. The European Central Bank, moreover, seems unable or unwilling to withstand pressure from other member states.
It would be like New York, Pennsylvania and Massachusetts pressuring the federal government and the Federal Reserve to withhold aid to Florida, Alabama or California when a housing or other economic bubble burst.
Years ago, when Winston Churchill called for the removal of trade barriers, he used the phrase "a United States of Europe." Whether he had in mind a full repeat of the United States of America is an open question.
In any case, Europe has been trying to form a free trade union -- no trade barriers between member states, as is the case in America -- without a full political union, or a full fiscal union.
It's not working. A free trade union and a currency union are good first steps, but without fiscal and political union, the EU is increasingly likely to collapse, and the Greek domino will take down the other members. Unless they step out of the line and abandon the union, in which case the EU is no more.
Monday, June 29, 2015
Thursday, June 25, 2015
Health Care Wins
For all the fuss and fury about the Affordable Care Act, very little opposition has come from the insurance industry itself. All the dire warnings and complaints have come from politicians. We haven't heard of any from the industry.
As noted on this blog several days ago, the nation cannot afford not to have universal health care, any more than it should cancel other types of insurance programs.
At root, the Affordable Care Act is a federal law that requires everyone to have health insurance, and for those who don't have it and can't afford it, there is a government subsidy to help pay for it. The law is no different from earlier federal laws that require everyone to have unemployment insurance, or old-age pension insurance (Social Security), or old-age medical insurance (Medicare). In each of these, individuals pay for coverage, and the fees are deducted from paychecks. Even for retirees, Medicare premiums are deducted from monthly pension payments. There are also laws that require all car owners to have automobile insurance, or homeowners to have fire insurance.
So the idea of a government mandate for insurance coverage is not new. And in the current debate over health insurance, the industry itself has not mounted serious opposition. Rather, it is a business opportunity. And as with any insurance program, the more people who have coverage and pay premiums, the lower the cost will be as the risk is spread to a wider population.
Where, then, is the opposition coming from? Almost entirely from politicians who are unable to claim credit for establishing health care for all.
Today, the U.S. Supreme Court upheld for the second time the legality of the Affordable Care Act. Even so, the Radical Righteous -- mostly conservative politicians -- immediately resumed their rant against it.
We have yet to hear any complaints about it from the insurance industry. It is, after all, a lucrative business opportunity, subsidized by government aid when needed.
So much for the concept of doing business entirely devoid of government influence or intervention of any kind, ever.
As noted on this blog several days ago, the nation cannot afford not to have universal health care, any more than it should cancel other types of insurance programs.
At root, the Affordable Care Act is a federal law that requires everyone to have health insurance, and for those who don't have it and can't afford it, there is a government subsidy to help pay for it. The law is no different from earlier federal laws that require everyone to have unemployment insurance, or old-age pension insurance (Social Security), or old-age medical insurance (Medicare). In each of these, individuals pay for coverage, and the fees are deducted from paychecks. Even for retirees, Medicare premiums are deducted from monthly pension payments. There are also laws that require all car owners to have automobile insurance, or homeowners to have fire insurance.
So the idea of a government mandate for insurance coverage is not new. And in the current debate over health insurance, the industry itself has not mounted serious opposition. Rather, it is a business opportunity. And as with any insurance program, the more people who have coverage and pay premiums, the lower the cost will be as the risk is spread to a wider population.
Where, then, is the opposition coming from? Almost entirely from politicians who are unable to claim credit for establishing health care for all.
Today, the U.S. Supreme Court upheld for the second time the legality of the Affordable Care Act. Even so, the Radical Righteous -- mostly conservative politicians -- immediately resumed their rant against it.
We have yet to hear any complaints about it from the insurance industry. It is, after all, a lucrative business opportunity, subsidized by government aid when needed.
So much for the concept of doing business entirely devoid of government influence or intervention of any kind, ever.
Wednesday, June 24, 2015
Bull Market Trip
Beware of "irrational exuberance."
New home sales are up, existing home sales are up, housing prices are up 5 percent over the year, the stock market is in its sixth year of a bull run, and personal income is rising in most states. But the overall economy is losing what little momentum it had, as total output has gone negative. What's going on here?
We noted earlier this month that there was too much statistical fog to see a clear future for the American economy. This week, that outlook became even more foggy.
Today, the government reported that real gross domestic product (GDP) -- the total value of all goods and services produced -- decreased at an annualized rate of 0.2 percent in the first three months of the this year. Earlier estimates had put GDP growth at -0.7 percent, compared to a positive figure of 2.2 percent in the fourth quarter of 2014. So the drop wasn't as bad as previously estimated, but a change of less than one percentage point in either direction means the economy is barely moving.
Even so, sales of new single-family homes in May rose by 2,2 percent from the month before, state-level personal income grew 0.9 percent in the first quarter -- down from a 1.1 percent rise in the fourth quarter -- and Wall Street investors continue on their bull run.
Meanwhile, there are reports that more people are renting rather than buying homes, and the rise in employment is not what it could be. On a larger scale, that has prompted the Federal Reserve to back off once again on its plan to boost interest rates -- which means the economy is improving -- and the International Monetary Fund said energy has been sapped from the American growth potential.
So even as the economy staggers, housing sales and prices are rising, which raises this question: Who can afford to buy the homes that are selling?
New home sales are up, existing home sales are up, housing prices are up 5 percent over the year, the stock market is in its sixth year of a bull run, and personal income is rising in most states. But the overall economy is losing what little momentum it had, as total output has gone negative. What's going on here?
We noted earlier this month that there was too much statistical fog to see a clear future for the American economy. This week, that outlook became even more foggy.
Today, the government reported that real gross domestic product (GDP) -- the total value of all goods and services produced -- decreased at an annualized rate of 0.2 percent in the first three months of the this year. Earlier estimates had put GDP growth at -0.7 percent, compared to a positive figure of 2.2 percent in the fourth quarter of 2014. So the drop wasn't as bad as previously estimated, but a change of less than one percentage point in either direction means the economy is barely moving.
Even so, sales of new single-family homes in May rose by 2,2 percent from the month before, state-level personal income grew 0.9 percent in the first quarter -- down from a 1.1 percent rise in the fourth quarter -- and Wall Street investors continue on their bull run.
Meanwhile, there are reports that more people are renting rather than buying homes, and the rise in employment is not what it could be. On a larger scale, that has prompted the Federal Reserve to back off once again on its plan to boost interest rates -- which means the economy is improving -- and the International Monetary Fund said energy has been sapped from the American growth potential.
So even as the economy staggers, housing sales and prices are rising, which raises this question: Who can afford to buy the homes that are selling?
Friday, June 19, 2015
Affordable Number Care
Repealing Obamacare may well be far too costly to warrant serious consideration, according to a glance at numbers provided by the nonpartisan Congressional Budget Office.
The agency estimated that federal deficits could increase by more than $353 billion over a ten-year period, assuming the repeal took effect on Jan. 1, 2016. Moreover, the number of non-elderly people without health insurance would increase by 19 million in the first year after repeal, by 23 million in the next three years, and by 24 million in all subsequent years through 2025. And the number of people with coverage either purchased individually or through Medicaid would drop by more than 30 million.
Look again. That means 50 million people would lose health insurance as soon as the plan is dropped, and budget deficits would soar as the economy slows, production drops, tax revenue falls and more people come to depend on government aid. And over a ten-year period, more than 100 million Americans of working age would wind up without health insurance.
And, of course, as people get sick and can't afford to pay medical bills, the death rate is likely to increase.
So the question becomes whether we can afford the economic and social chaos of canceling health care, especially for those who don't have policies subsidized by employers.
The agency estimated that federal deficits could increase by more than $353 billion over a ten-year period, assuming the repeal took effect on Jan. 1, 2016. Moreover, the number of non-elderly people without health insurance would increase by 19 million in the first year after repeal, by 23 million in the next three years, and by 24 million in all subsequent years through 2025. And the number of people with coverage either purchased individually or through Medicaid would drop by more than 30 million.
Look again. That means 50 million people would lose health insurance as soon as the plan is dropped, and budget deficits would soar as the economy slows, production drops, tax revenue falls and more people come to depend on government aid. And over a ten-year period, more than 100 million Americans of working age would wind up without health insurance.
And, of course, as people get sick and can't afford to pay medical bills, the death rate is likely to increase.
So the question becomes whether we can afford the economic and social chaos of canceling health care, especially for those who don't have policies subsidized by employers.
Friday, June 5, 2015
Challenges
There are some signs that the U.S. economy may be gathering its strength for a good future, but there are still some hints of warning, with conflicting reports piling out of research offices.
The Labor Department reported that 280,000 jobs were added last month, even as the unemployment rate ticked up to 5.5 percent, probably as more people entered the workforce and began looking for jobs.
At the same time, momentum in the U.S. "was sapped in recent months," said the International Monetary Fund, "by a series of negative shocks." Because of that, the IMF said, the Federal Reserve should defer any boost in interest rates until there are stronger signs of economic strength. In addition "a range of challenges linked to poverty, productivity and the fiscal health of the U.S. economy remain largely unaddressed," the IMF said.
For its part, the Fed said in its Beige Book report on the economy, "overall economic activity expanded" in the past two months. As usual, however, there were caveats in regional reports and summaries.
Meanwhile, the Commerce Department noted a dip in total output in the first three months of the year of 0.7 percent, compared to a narrow rise of 0.2 percent in the fourth quarter of 2014.
The Federal Reserve is rarely known for clarity in its announcements on strategy, although it has indicated it would wait through the summer until stronger data signals come in to justify any change in monetary policy. If the economy slides again in the second three months of 2015, that would fit the definition of recession: two consecutive quarters of negative GDP growth.
Conclusion: There's too much fog in the economic weather to make any firm forecasts.
The Labor Department reported that 280,000 jobs were added last month, even as the unemployment rate ticked up to 5.5 percent, probably as more people entered the workforce and began looking for jobs.
At the same time, momentum in the U.S. "was sapped in recent months," said the International Monetary Fund, "by a series of negative shocks." Because of that, the IMF said, the Federal Reserve should defer any boost in interest rates until there are stronger signs of economic strength. In addition "a range of challenges linked to poverty, productivity and the fiscal health of the U.S. economy remain largely unaddressed," the IMF said.
For its part, the Fed said in its Beige Book report on the economy, "overall economic activity expanded" in the past two months. As usual, however, there were caveats in regional reports and summaries.
Meanwhile, the Commerce Department noted a dip in total output in the first three months of the year of 0.7 percent, compared to a narrow rise of 0.2 percent in the fourth quarter of 2014.
The Federal Reserve is rarely known for clarity in its announcements on strategy, although it has indicated it would wait through the summer until stronger data signals come in to justify any change in monetary policy. If the economy slides again in the second three months of 2015, that would fit the definition of recession: two consecutive quarters of negative GDP growth.
Conclusion: There's too much fog in the economic weather to make any firm forecasts.
Thursday, June 4, 2015
Defense Spending
As the money spent for education barely rises, Congress wants to boost defense spending to $604.6 billion for the coming fiscal year. That's an increase of 5 percent from the current year, according to an estimate by the Congressional Budget Office, or $26.2 billion.
All that as spending for education stalls, rising by less than 1 percent. The Census Bureau, in a report noted here several days ago, said the nation's school districts spent an average of $10,700 yearly to educate one pupil.
Total expenditure by public school systems totaled $596.3 billion in fiscal year 2013, up 0.5 percent from the prior year, the Census report said. This breaks a three-year trend of decreasing total expenditures for elementary and secondary education.
In short, more money is being spent for military purposes than is spent on educating young people in the nation's public schools.
Priorities.
All that as spending for education stalls, rising by less than 1 percent. The Census Bureau, in a report noted here several days ago, said the nation's school districts spent an average of $10,700 yearly to educate one pupil.
Total expenditure by public school systems totaled $596.3 billion in fiscal year 2013, up 0.5 percent from the prior year, the Census report said. This breaks a three-year trend of decreasing total expenditures for elementary and secondary education.
In short, more money is being spent for military purposes than is spent on educating young people in the nation's public schools.
Priorities.
Tuesday, June 2, 2015
School Funding
Despite the clear relationship between education and prosperity, spending per pupil barely rose as the nation struggled to recover from its economic doldrums.
The Census Bureau said per-pupil spending averaged $10,700 nationwide in 2013, in a new study released June 2. That was an increase of 0.9 percent from the year before. New York State led the state rankings, spending $19,818, the government report said, followed by Alaska at $18,175, the District of Columbia at $17,953, and New Jersey at $17,572. Pennsylvania ranked tenth at $13,864.
Trailing everyone was the state of Utah, spending $6,555 per pupil for the year.
Among various school districts, Boston spent the most, $20,502, and New York City ranked second at $20,331. Further down the list, Baltimore spent $15,050 per pupil in 2013, and Philadelphia spent $12,271.
All this gives new support to the position that education yields powerful leverage to building a more secure economy, for the benefit of all.
The full report is available at the Census Bureau's web site, census.gov.
The Census Bureau said per-pupil spending averaged $10,700 nationwide in 2013, in a new study released June 2. That was an increase of 0.9 percent from the year before. New York State led the state rankings, spending $19,818, the government report said, followed by Alaska at $18,175, the District of Columbia at $17,953, and New Jersey at $17,572. Pennsylvania ranked tenth at $13,864.
Trailing everyone was the state of Utah, spending $6,555 per pupil for the year.
Among various school districts, Boston spent the most, $20,502, and New York City ranked second at $20,331. Further down the list, Baltimore spent $15,050 per pupil in 2013, and Philadelphia spent $12,271.
All this gives new support to the position that education yields powerful leverage to building a more secure economy, for the benefit of all.
The full report is available at the Census Bureau's web site, census.gov.
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