September 2008 – Shortwoman.com

O-genki desu ka?

Or, “Are you healthy?”

A lot has been said about Senator McCain’s proposed health insurance reform plan. He says “I want to make sure we’re not handing the health care system over to the federal government….” Interestingly enough, the federal government has taken care of his health care for his entire life. But on to the plan.

He wants to take away the tax break your employer (assuming you have one) gets for providing you health insurance, and instead give you a tax credit of up to $5000 for buying your own insurance. The thing is, I honestly believed such a plan would work 5 years ago. I now think that such a plan would have worked perhaps 10 or even 15 years ago, but it’s way too late (and frankly was probably too late 5 years ago). Critics say it will cause companies to drop coverage for employees. Yes, yes it does. And that’s the goal.

Senator McCain thinks it will work out to give you $5000 in April to pay for something that costs you $12,000, payable in monthly installments. That’s only problem one. Problem two is that in some states, citizens are required to have health insurance. Talk about raising the cost of living! Furthermore, mandates such as this completely short-circuit the “market actions” that would have brought costs down. Without such mandates, consumers might have demanded quality policies with decent coverage that cost something closer to what they would get out of the tax credit.

The goal — an admirable one — was to bring down health insurance costs by making the insurance industry more subject to the laws of supply and demand. The actual result of such a plan would be people spending way more of their income on insurance without getting a whole lot more for their money.

Just a few things about the bailout package that failed yesterday (NOT because Republicans were being babies, not because “we just don’t understand” how important it is, but rather because that particular package was BAD NEWS): it’s raining investors; consumer spending dropped last month, probably mostly because consumer income dropped on an inflation-adjusted basis (funny about not spending lots of money when you don’t have lots of money to spend); an all too true chart; Congress is — of course — scrambling to polish that turd revise the bill; and 5 lessons from the Credit Crisis.

In closing: a shout-out to those of you in Fort Worth to check out Sheila Ford, candidate for state House of Representatives; you know it’s bad when the BBC is reporting on Americans who live in their cars; a collection of links to accounts of the Great Depression; My Backpack’s Got Jets! (reference); Koizumi the younger is entering politics; Stupid Republican Tricks (what on earth was she thinking when she said that??); about time they started to investigate those fired prosecutors (does “executive privilege” apply after January?); tomorrow is World Vegetarian Day; on the possibility of a Detroit bailout (Citizen Carrie, if you have anything to say please do); and finally, Snow On Mars.

Interesting Timing

Congress has taken time out of its busy schedule saving the economy from certain ruin to recommend the pardon of a long dead boxer.

That man, Jack Johnson, was convicted under the Mann Act of transporting an unmarried woman across state lines for “immoral” activities.

This recommendation comes in the same year that Eliot Spitzer was threatened with prosecution under the same law.

In closing: what I hope is the last word on the $700B bailout; that’s not the way I would have chosen to solve our illegal immigrant problem; a man who felt overwhelmed. Enjoy the debate, since it appears to be back on.

RIP WaMu

My rundown is over at my business site.

Month-end retrospective for September 2003-2007: Why Johnny Can’t Make Ends Meet; Renters Need Not Apply; Black Hearts, Blackwater; Last Call to register to vote — it’s getting to be that time again; Moneyectomy is unfortunately both timely and dated (will we ever see $2/gal unleaded again?); another everything old is new again post, Japanese Economics Lesson; and How To Keep A Job.

The Short Version

Ok. I have read a whole lot of commentary on the Big Bailout Bill of 2008. I have been hearing a lot for the last day or so that “the root problem is that real estate prices are going down.”

That is bogus. Since we can legitimately add “because” to the end of that theory and have things to put there, it cannot be the root cause. Root causes by definition are not results of something else.

“Real estate prices” (by which I am meaning “housing prices”) are going down for two main reasons: first, prices went up too fast earlier in the decade and we are “reverting to the old trendline” — going down to where things would be if prices had appreciated at normal levels instead of silly bubble levels; second, a combination of stagnant wages and effectively non-existent job growth means that Joe and Jane Average can no longer afford to purchase real estate, and in certain cases can no longer afford payments on real estate they purchased in happier times. More on the economic pressures faced by Joe and Jane from a little place just outside Hooterville. More on unemployment rates on a state-by-state from the Economic Policy Institute, and remember these are official government figures that do leave out certain classes of the jobless.

The only reason Joe and Jane were able to buy through most of the decade is inovative mortgage products designed to make them think it was affordable when it was not. The reasons Joe and Jane wanted to play were that they feared being priced out of the market, they thought it was an investment that would only rise in value, they thought surely their financial situation would improve, they didn’t understand the implications of their creative mortgage product, they kept being told how many benefits there were to owning their own home. See also: Fannie Mae Wants You to Own a House.

I don’t see anything in any of the various financial disaster averting proposals that does a darn thing to fix those causes of the “root cause”.

In closing: Stonehenge is older that we thought; State of the Blogosphere; speaking of functional (or non-functional) financial markets, Expert Ezra on the Insurance Markets; MahaBarbara on abortion in the world; they’ve been singing professionally for 50 years, The Peanuts are perhaps better known in the West as the Mothra Twins; and the problem with optimism. I hope to have something posted on BridgetMagnus.com about the state of the housing market in general later today. In the meantime, my top post is about an old solution to high housing prices.

Is there anybody who likes this bailout plan?

Maybe you didn’t notice, but this weekend’s bank failure is Ameribank. Usual caveats: if you have any business with them whatsoever you’ll need to make a bunch of phone calls in the morning.

So then the $700,000,000,000 bailout plan. Yesterday a lot of people spent most of the day trying to figure out what it meant. It seems that these are the points to remember:

That $700 thousand million is a minimum number. Some people say the minimum this plan will take is more like a trillion — a Million Million Dollars.

It will set up an entire government agency. I suppose that will at least create some jobs, and maybe some of them won’t be given on the basis of party loyalty.

The dealings of that agency will not be transparent, and the agency will only answer to the Secretary of the Treasury. He’s from the government. Trust him. Right.

It still won’t help all the lending institutuions — without whom Joe and Jane Average can’t get mortgages or other credit, at all. Yes, hold your nose, but we can’t fix Joe and Jane’s problems without fixing Megabankcorp’s problems.

It is theoretically modeled on the RTC, which did its job and disbanded. This agency has an initial budget almost 12 times the initial budget of the RTC.

The agency will NOT be limited to purchasing AMERICAN assets, and helping AMERICAN taxpayers.

Nor will the agency be limited to residential properties; it will also bail out commercial developments. As a proud Las Vegas resident, I should probably consider it a good thing that they are willing to buy out some of our temporary overdevelopment!

Some smart economists can’t figure out why this is supposed to work, and have already started trying to figure out who is going to profit out of the deal.

The whole darn thing is only 3 pages long — how can you create an entire government agency and fix the economy in 3 pages? — but it includes raising the ceiling on the national debt to $11.3 million million.

Even with everything that is known, there are still huge, huge questions left to be answered.

So there you go.

In closing: Other ways to enjoy The Wizard of Oz; on Young Adult Literature; we’ll miss Amy (don’t let the new show suck!); the free markets worked so well in banking, let’s do the same thing to health insurance; and somebody doing something about the furry victims of foreclosure. Holy cow, I realize that times are tough, but abandoning a family member, just because they can? I can only imagine the horrible things running through the kids’ minds.

A real fast thought on short selling

The SEC has temporarily banned short selling of 799 financial stocks.

Maybe you don’t know what short selling is. Here’s the funny explanation first:

Now here’s the not so funny explanation.

Essentially, buying a stock is betting the price will go up. Short selling is selling shares you don’t actually have, betting the price will go down, and you can “buy to cover” later. One thing to remember: when you buy, you can only lose as much as you spent but your gains are theoretically limitless; when you sell short, you can lose a theoretically infinite amount of money, but your gains are limited. This is not a strategy for Joe and Jane Average.

It remains to be seen whether this will actually help the financial stocks in question. Some people do think it’s a bad idea and there were other ways to solve the problem.

News Flash!

I will be attending BlogWorld this weekend. Specifically, I will be on a panel Saturday called “The Political Blogosphere In Transition.”

Here’s the official description:

The political blogosphere was born after the divisive 2000 presidential election and has matured rapidly in the eight years since. The selection of a new president in 2008 will be a key transition for political bloggers who have been inspired or infuriated by the policies of George W. Bush. How will the “netroots” and the “rightroots” react?

Moderator: Austin Bay

Panelists: Pam Spaulding, Rob Neppell, Bridget Magnus, Roger Simon

Many thanks to Joe Gandelman of The Moderate Voice for recomending me. I will be representing them as well as myself.

Financial Mess of the Day

As I write, the bell is sounding at the New York Stock Exchange, officially ending the trading day on the floor. Electronic trading continues, and other trading floors in other time zones remain open.

What’s gonna blow up next?

Bear Stearns. IndyMac. A score of small and medium sized banks. Fannie and Freddie. Lehman Brothers. All gone.

The latest financial disaster was just yesterday: AIG was saved by a huge government loan that will leave the company almost 4/5 owned by the Feds. Elrod did a great job of outlining it, so I won’t linger too long. Remember, as an insurance company, AIG is obligated by state laws to have reserves to cover claims. This being the case, I actually have great confidence that the loans will be repaid. Oh, and the New Boss — Uncle Sam — is insisting that a bunch of things be sold off to make sure of it!

And that brings me to an interesting point: this is the second time in 2 weeks that we have heard a financial institution described as “too big to fail” — so big that allowing them to go out of business would have too big a negative impact on too many innocent people. The phrase was used in the Fannie/Freddie mess, and it’s back like bad lunchmeat.

Too big to fail should be the same thing as too big to exist. I mean it.

Once you discount people who have had far too much Kool-Aid, it is clear to just about everyone sane that our current economy sucks. Oil and gold are jumping again, stocks are plummeting. As a bit of a side-note, funny how fast oil slid back under $100 per barrel as Lehman collapsed! And frankly, as I read the chart, I would not be surprised by a slide under 10,000 points, perhaps to 8600. Add to that the fact that there are more than twice as many job-seekers as jobs for them, even assuming the jobs available matched the skills and needs of the people who need work.

In spite of all this, the Fed did not cut rates yesterday. They can’t! When the Fed looks at the prices we see at the pump and in the grocery store, they can’t pretend there is no inflation. And there may also be some realization that super-low rates, rates below some magic level nobody knows, only theoretically stimulate the economy. But they can’t say either of those things in public yet. Right now, they have to fall back on the idea that “if the problem with America’s financial institutions islack of liquidity, then making lending into a money-loser is not the answer.”

The deathwatch for WaMu is already underway. Remember, I expect Wells Fargo to be toast as well. I wonder if either of them is “too big to fail.”

In closing: Nihon no neko! Cute kittens, no translation required; pie chart of contributors to the budget deficit; it’s even expensive to apply to medical school; a really good item on the current state of political thinking; pro-choice is pro-life; vintage photos of geisha and maiko (apprentice geisha); someone else gives Howard Dean some love; for an American company, GM isn’t acting like it (granted, you can see Canada from their headquarters… Does that make them foriegn policy experts?); McCain blames his computer illiteracy on — wait for it! — he was a POW! If he can’t even comb his own hair, can he really run the country?; focus on the critical issues; and Happy Constitution Day.

30 Shorties of Night

Letters from the Occupation: Journalist Elizabeth Ryan’s letters from Post-war Japan have been found, and there are hopes they will turn into a book.

Indoctrination?: Is it indoctrination to refuse to lie to students? “Teaching the controversy” is often nothing more than an excuse to give equal time to disproven theories.

She was never convicted: Lizzy Borden only allegedly took an axe, and gave her mother 40 whacks. Now she is a museum subject.

Altogether too true: A little chart of national media election coverage.

Netroots Voter Registration Drive: Seriously people. Register to vote already. It’s important. And it’s even more important that you get your butt off that chair and vote in the elections. You waive your right to complain if you won’t do **** **** about the status quo. No excuses, no nonsense about jury duty (that list often gets pulled from the drivers license database, anyway). Take 3 minutes to register to vote, and commit to making your opinion known.

Need something to be an activist about?: Proposed changes to the Department of Health and Human Services guidelines would make it easier for just about anybody who works in any sort of medical facility to prevent women from receiving some medical services and medications on “moral grounds”. This proposed change potentially effects 98% of all women in the United States. We have until the 25th to make it clear that this is not acceptable.

If you think these aren’t related, you’re wrong: USA Today goes on about how too few medical students are opting for the un-glamourous world of General Internists. Scroll down and you’ll see “Members of the medical school class of 2007 graduated with an average debt of $140,000….” That’s up from $60,000 in 1990 and $95,000 in 2000. Then USA Today went on some more about “Medical schools, journals start to fight drug industry influence.” Maybe if these young men — and let’s not use gender-neutral language to hide the fact that they are mostly men — didn’t graduate with the equivalent of an extra house payment hanging over their heads (and committed to 3-5 years of underpaid overwork if they ever want a “real” job), they wouldn’t need gifts from the drug companies. We won’t successfully “reform” the system without addressing how medical school gets funded.

I’ve said it before, but I’ll say it again: the kind of employer who doesn’t mind ignoring illegal immigrant workers is the same kind of employer who is willing to ignore other labor laws.

The Governor Sends His Regrets: We must stop using that airport because it’s too convenient.

Somebody ran the numbers: Obama won’t raise your taxes unless you make a whole lotta money. McCain won’t lower your taxes unless you make a whole lotta money. Lest you think this is the ranting of a buncha liberal latte sippers, the data is from Business Week.

Gotta supress this science stuff: Experiments consistently prove that junk food is junk.

He finally said it: Obama has finally called a lie a lie.

Squeeze: American workers caught between high gas prices, high health insurance costs, and falling wages.

And just a brief rant: Victoria’s Secret has pants. They have them in a cut called The Bridget Fit. This is misleading advertising, as I would have to be at least 6-8 inches taller than I am to fit into that.

If the sky isn’t falling, why is that cloud down here?

Let’s get all these economic stories out in one place so we can look at them as a whole.

Economist’s View has charts showing that even as the economy has grown, the American worker has gotten very little out of it.

CNN tells us that there is “no jobs turnaround on [the] horizon“, and that was before Friday’s abysmal numbers. At that point, the Department of Labor had admitted that our economy has lost 463,000 this year through July. Then the August numbers came in and “deflate[d] Wall Street“. It has officially gotten to the point where the official statistics can no longer hide unemployment: August’s loss of 84,000 brings our unemployment rate to a 5 year high of 6.1%, and once you include “marginally attached workers”, real unemployment is over 10%. That’s a huge jump, and makes many economists think this has to be a recession. Some economists are making fun of other economists who say it’s not here yet.

There’s a lot of chatter about how much, in what manner, and why the official stats are manipulated and whether that’s actually a good thing.

I am not the only one trying to put everything in one place. Here’s Citizen Carrie and Cogitamus’s Sir Charles (Cogitamus is Latin… should that be Cogitami?). Robert Reich falls back on an old line to describe the big picture: It’s the economy, stupid.

I haven’t even gotten to the ballooning of the FDIC watchlist, nor the expected Federal takeover of Fannie and Freddie (more on that over at BridgetMagnus.com).

In closing: hurricane tracking website; on private contractors in Iraq; crashing a motorcycle going 239 MPH is certain death, but what a way to go; what were you wearing in 1977; Happy Birthday Little Prince.