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dkf's Journal
dkf's Journal
December 8, 2012

Amid new taxes and no work despair chases Greece.

Karagaitanaki’s family can’t afford gas to heat their home this winter and will rely on electric blankets in the chilly northern Greek city. They live on the 785 euros ($1,027) a month their mother collects monthly from their late father’s pension. Two years ago, Karagaitanaki sold her jewelry for 3,000 euros, which she gave to her two sons. Her blood sugar is rising because she can’t afford the meat and vegetables her doctor recommends and instead eats rice and beans she gets from the Greek Orthodox Church.
“We are waiting every month for my mother’s pension,” Karagaitanaki said. “If my mother dies, what can I do? Everyone here is dependent on their parents' pensions.”

For many unemployed Greeks, the vaunted European social safety net doesn’t exist. Only 17 percent of the 1.2 million jobless receive unemployment insurance, said Manos Matsaganis, an assistant professor at the Athens University of Economics and Business.

Greece’s effective poverty rate has risen to 36 percent from about 20 percent in 2009, Matsaganis said. About 8.5 percent of Greeks now live in extreme poverty and can’t afford a basic basket of goods and services, he said.

The crisis is shredding the middle class, which is feeling the brunt of public-sector salary reductions and private job losses while paying higher taxes, said Elias Papaioannou, an associate professor of economics at London Business School.


December 8, 2012

Medicare is directly connected to the deficit. 40% of its funding is the general fund.


Medicare is funded primarily from three sources: general revenues (40%), payroll tax contributions (38%), and beneficiary premiums (13%) (Figure 3):
 Part A is financed primarily through a 2.9% tax on earnings paid by employers and employees (1.45% each) (accounting for 86% of Part A revenue). For higher-income taxpayers (more than $200,000/individual and $250,000/couple), the payroll tax on earnings increases by 0.9 percentage points, from 1.45% to 2.35%, in 2013.

Part B is financed through general revenues (72%), beneficiary premiums (25%), and interest and other sources (3%). Beneficiaries with annual incomes over $85,000/individual or $170,000/couple pay a higher, income-related Part B premium reflecting a larger share of total Part B spending, ranging from 35% to 80%; the ACA froze the income thresholds through 2019, which is expected to increase the share of beneficiaries paying the higher Part B premium.

Part D is financed through general revenues (74%), beneficiary premiums (13%), and state payments for dual eligibles (13%). Similar to Part B, enrollees with higher incomes pay a larger share of the cost of Part D coverage.
December 7, 2012

Briton says she was raped in the UAE - but gets fined for drinking

A British woman who was allegedly kidnapped and gang raped by three men in Dubai has been prosecuted for drinking without a licence, throwing a spotlight on the United Arab Emirates’ archaic legal system, which rights groups say does not do enough to protect victims of sexual assault.

The woman, who cannot be named for legal reasons, claims she was raped repeatedly by the three men who filmed the attack after they lured her into their car as she returned from a night out with friends.

After reporting her ordeal to the police, the 28-year-old found herself in the dock because she admitted she had been drinking earlier that night.

Lulled into a false sense of security by the drinking culture encouraged in the five-star hotels that line the shores of the oil-rich Emirate, expatriates often find themselves on the wrong side of the country’s strict laws. The Foreign and Commonwealth Office says British nationals are more likely to be arrested in the UAE than anywhere else in the world.


December 7, 2012

If we want to keep Medicare as is we should demand a payroll tax for part B and part D.

The biggest risk to Medicare as we know it is that for doctors and drugs, the premiums only cover 25% and the rest comes from the income tax. As the interest on the national debt grows and grows along with other obligations it will crowd out the capability of the general fund to keep paying the entire obligation to Medicare as Medicare competes with education and housing and food stamps and defense and medicaid and aid to the states and infrastructure and r & d and all the other areas the Federal Government subsidizes.

Having a dedicated fund for Medicare part B and D will keep the programs from being cut. Moreover the tax needs to rise as medical costs rise.

Health costs are only going to grow as a percent of GDP. Without dedicated funding it will only become more of a political football as it competes with every other obligation and promise of the federal government.

Of course we could do something to overhaul the entire health care system which seems preferable to me, but without a huge change in the system itself, it needs a more reliable and dedicated source of funding than income taxes.

December 5, 2012

Structural reasons for slow growth

Why is it so hard to be someone these days, to pay for college, get a good-paying job and retire comfortably? That really was the economic question of the 2012 election towards which very few specifics were applied from either side. “There’s a better life out there for us,” Governor Romney bellowed to a crowd of thousands in Des Moines, Iowa just days before the election, but in truth he never told us how we were going to achieve it or, importantly, why we weren’t realizing it in the first place. The president’s political mantra of “Forward” was even more vague.

Their words were mum if only because the real cause of slower economic growth lies hidden in a number of structural as opposed to cyclical headwinds that may be hard to reverse. While there are growth potions that undoubtedly can reduce the fever, there may be no miracle policy drugs this time around to provide the inevitable cures of prior decades. These structural headwinds cannot just be wished away as we move “forward” whether it be to the right, the left or dead center. Last month in a major policy speech at the New York Economic Club, Fed Chairman Ben Bernanke concurred that the U.S. economy’s growth potential had been reduced “at least for a time.” He in effect confirmed PIMCO’s New Normal which has been in place for three years now, laying the blame in part on the financial crisis, diminished productivity gains, and investment uncertainty due to the near-term fiscal cliff. We do not disagree. However, there are numerous other structural headwinds that may reduce real growth even below the New Normal 2% rate that Bernanke has just confirmed, not only in the U.S. but in developed economies everywhere.

They are:

1) Debt/Delevering
Developed global economies have too much debt – pure and simple – and as we attempt to resolve the dilemma, the resultant austerity should lower real growth for years to come. There are those that believe in the “Brylcreem” approach to budget balancing – “a little dab‘ll do ya.” Just knock a few percentage points off the deficit/GDP ratio, they claim, and the private sector will miraculously reappear to fill the gap. No such luck after 2–3 years of austerity in Euroland, however. Most of those countries are mired in recession and/or depression. Political leaders there should have studied the historical evidence presented by Carmen Reinhart and Ken Rogoff in a critically important paper titled, “Growth in a Time of Debt.” They conclude that for the past 200 years, once a country exceeded a 90% debt/GDP ratio, economic growth slowed by nearly 2% for both developed and developing nations for an average duration of nearly a decade. Their work displayed below in Chart 1 shows the result in the United States from 1790–2009. The average annual U.S. GDP rate growth, while clearly influenced by the Great Depression, was -1.8% once the 90% barrier was exceeded. The U.S., by the way, is now at a 100% debt/GDP ratio on the basis of the authors’ standard measuring yardstick. (Note as well the 5½% average inflation rate during the same periods.)

In addition to sovereign debt levels which were the primary focus of the Reinhart/Rogoff studies, it is clear that financial institutions and households face similar growth headwinds. The former needs to raise equity via retained earnings and the latter to increase savings in order to stabilize family balance sheets. The combined need to increase our “net national savings rate” highlighted in last month’s Investment Outlook is a long-term solution to the debt crisis, but a near/intermediate-term growth inhibitor. The biblical metaphor of seven years of fat leading to seven years of lean may be quite apropos in the current case with the observation that the developed world’s growth binge has been decades in the making. We may need at least a decade for the healing.



December 5, 2012

Medicare isn't cheap...

If you had to pay the entire premium medicare looks pretty exorbitant to me

"Social Security Explained, 2012 Edition

Learn More »
CMS announces Medicare premiums, deductibles, and coinsurance rates for 2013
Part A premium: Most individuals do not pay a monthly Part A premium because they (or a spouse) have 40 or more quarters of Medicare-covered employment. However, for 2013, the Part A premium will be $243 per month for those individuals having 30-39 quarters of Medicare-covered employment and $441 per month for those who are not otherwise eligible for premium-free hospital insurance and have less than 30 quarters of Medicare-covered employment.

Part B premium: The standard Medicare Part B monthly premium will be $104.90 in 2013, which is a $5.00 increase over the 2012 premium of $99.90."


Okay so the unsubsidized cost of Part A is $441 a month. The part B premium of $104.90 only covers 25%.

So just for hospital and doctors and not counting drugs, we are looking at a premium of over $800/month for one person. Wow.

December 5, 2012

Obamacare architect leaves White House for pharmaceutical industry job

When the legislation that became known as "Obamacare" was first drafted, the key legislator was the Democratic Chairman of the Senate Finance Committee, Max Baucus, whose committee took the lead in drafting the legislation. As Baucus himself repeatedly boasted, the architect of that legislation was Elizabeth Folwer, his chief health policy counsel; indeed, as Marcy Wheeler discovered, it was Fowler who actually drafted it. As Politico put it at the time: "If you drew an organizational chart of major players in the Senate health care negotiations, Fowler would be the chief operating officer."

What was most amazing about all of that was that, before joining Baucus' office as the point person for the health care bill, Fowler was the Vice President for Public Policy and External Affairs (i.e. informal lobbying) at WellPoint, the nation's largest health insurance provider (before going to WellPoint, as well as after, Folwer had worked as Baucus' top health care aide). And when that health care bill was drafted, the person whom Fowler replaced as chief health counsel in Baucus' office, Michelle Easton, was lobbying for WellPoint as a principal at Tarplin, Downs, and Young.

Whatever one's views on Obamacare were and are: the bill's mandate that everyone purchase the products of the private health insurance industry, unaccompanied by any public alternative, was a huge gift to that industry; as Wheeler wrote at the time: "to the extent that Liz Fowler is the author of this document, we might as well consider WellPoint its author as well." Watch the five-minute Bill Moyers report from 2009, embedded below, on the key role played in all of this by Liz Fowler and the "revolving door" between the health insurance/lobbying industry and government officials at the time this bill was written and passed.

More amazingly still, when the Obama White House needed someone to oversee implementation of Obamacare after the bill passed, it chose . . . Liz Fowler. That the White House would put a former health insurance industry executive in charge of implementation of its new massive health care law was roundly condemned by good government groups as at least a violation of the "spirit" of governing ethics rules and even "gross", but those objections were, of course, brushed aside by the White House. She then became Special Assistant to the President for Healthcare and Economic Policy at the National Economic Council.


December 2, 2012


SEOUL, South Korea (AP) — Shin Cheol-soo no longer sees his future in the United States.

The South Korean businessman supplied components to American automakers for a decade. But this year, he uprooted his family from Detroit and moved home to focus on selling to the new economic superpower: China.

In just five years, China has surpassed the United States as a trading partner for much of the world, including U.S. allies such as South Korea and Australia, according to an Associated Press analysis of trade data. As recently as 2006, the U.S. was the larger trading partner for 127 countries, versus just 70 for China. By last year the two had clearly traded places: 124 countries for China, 76 for the U.S.

In the most abrupt global shift of its kind since World War II, the trend is changing the way people live and do business from Africa to Arizona, as farmers plant more soybeans to sell to China and students sign up to learn Mandarin.


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