Economy

Many Insurers Propose Hefty Rate Increases

New York Times: “In a sign of the tumult in the health insurance industry under the Affordable Care Act, companies are seeking wildly differing rate increases in premiums for 2016, with some as high as 85 percent, according to information released on Monday by the federal government for the 37 states using HealthCare.gov as their exchange.”

“The data from the Centers for Medicare and Medicaid Services included only proposed rate increases of 10 percent or more, and federal officials emphasized that it would be months before final rates were set. Regulators in some states have the authority to overrule rate increases they deem to be too high.”

Politico: “Insurers cite increased medical costs, particularly drug expenses, as a primary driver of the proposed increases. In addition, Obamacare programs designed to entice insurers into joining the marketplaces by protecting them from financial risk are starting to be phased out, meaning companies are directly bearing more of the costs of covering exchange customers.”

“The Obama administration doesn’t have much power to hold down rates. It can’t negotiate with insurers or kick them out of the marketplace if their rates are deemed unreasonable. What federal officials can do is essentially shame health plans proposing unreasonable hikes through public transparency. The ability of states to challenge rates varies, too. A dozen states have no authority to reject premium hikes.”

Wall Street Journal: “Some observers said the requests reflected other ominous signs. The companies with the biggest market shares are raising rates, signaling they don’t care if that causes them to lose enrollment … ‘This is not a good sign,’ … ‘These people are saying they don’t care if they keep the business. They don’t want it if it’s not profitable.’”

Economy Shrinks 0.7% in First Quarter

Washington Post: “The U.S. economy shrank at an annualized pace of 0.7 percent in the first three months of the year, according to government data released Friday morning, a tumble for a recovering nation that until recently seemed poised for takeoff.”

“The contraction, the U.S.’s third in the aftermath of the Great Recession, provides a troubling picture of an economy that many figured would get a lift from cheap oil, rapid hiring, and growing consumer confidence. Instead, consumers have proven cautious and fracking companies have frozen investment — all while a nasty winter caused havoc for transportation and construction and a strong dollar widened the trade deficit.”

Wall Street Journal: “Most economists expect the economy to regain steam as the year unfolds, and early signs point to a slight spring rebound. GDP is expected to grow at a roughly 2% pace in the current quarter under economists’ latest projections.”

“But underlying demand appears to have reverted to sluggishness after a surge in output last summer sparked hopes of the economy finally shifting into a higher gear. Compared to a year earlier, the economy grew 2.7% in the first quarter, though that figure is exaggerated by a sharp contraction that occurred in the first quarter of 2014.”

Where Can Low-Income Workers Find Affordable Housing? Nowhere.

Ezra Klein: “There is no state in the union where a full-time, minimum-wage worker can afford to rent a one-bedroom apartment for less than 30 percent of his paycheck (which is a standard measure of housing affordability).”

“That’s the depressing takeaway from a new report by the National Low-Income Housing Coalition. The paper includes this map tallying the hours a worker would have to put in at her job each week to rent a one-bedroom apartment without it eating more than 30 percent of her wages:”

 

“What that chart shows, basically, is that there’s almost no way for low-income workers to live in the cities where the best-paying jobs are. And so, often, they don’t. As Joseph Stromberg wrote in an excellent piece, being forced to live far from jobs is a key impediment to moving up the income ladder.”

Is the Rate of Innovation Slowing?

The Wall Street Journal reports on a new analysis showing that the “breakneck pace of innovation is showing signs of a slowdown.”

“More than 2.15 million patentable inventions were created world-wide in 2014, 3.3% more than in 2013. But the pace of growth seems to be slowing, according to Bob Stembridge, a Thomson Reuters intellectual property analyst: It was 17.7% in 2013, 20% in 2012 and 7.3% in 2011.”

“A different measure of innovation, the global rate of publication of scientific papers, also is slowing. The total number of research papers in 12 key industries fell beneath 250,000 last year… The number was around 300,000 in 2013. It peaked in 2008—just before the economy entered a recession—at 350,000.”

Is the Technological Revolution Overhyped?

Paul Krugman: “A growing number of economists, looking at the data on productivity and incomes, are wondering if the technological revolution has been greatly overhyped — and some technologists share their concern.”

“New technology is supposed to serve businesses as well as consumers, and should be boosting the production of traditional as well as new goods. The big productivity gains of the period from 1995 to 2005 came largely in things like inventory control, and showed up as much or more in nontechnology businesses like retail as in high-technology industries themselves. Nothing like that is happening now.”

“So what do I think is going on with technology? The answer is that I don’t know — but neither does anyone else. Maybe my friends at Google are right, and Big Data will soon transform everything. Maybe 3-D printing will bring the information revolution into the material world. Or maybe we’re on track for another big meh.”

“You see, writing and talking breathlessly about how technology changes everything might seem harmless, but, in practice, it acts as a distraction from more mundane issues — and an excuse for handling those issues badly.”

Which States Rob From the Poor to Give to the Rich?

Christopher Ingraham: “We don’t usually think as much about the impacts of state taxes on inequality. A team of researchers at the Federal Reserve recently released a paper exploring the topic and found something, if not surprising, discouraging.”

Many states “actually undermine the federal government’s anti-inequality measures.”

“In essence, they take from the poor and give that money to the rich. I’ve mapped each state’s contributions to inequality reduction below. States in green have tax policies that build on the federal tax code, making the gap between rich and poor smaller. States in purple have tax laws that undo federal measures to address inequality.”

Screen Shot 2015-05-26 at 7.21.53 AM

“In some cases, the magnitude of the effects are quite large. The tax code of Tennessee, for instance, decreases federal anti-inequality efforts by nearly one-third.”

“‘State-levied taxes, on average, work to exacerbate income inequality.’ There are a number of factors driving this, including state-level gas taxes, which tend to be regressive (everyone pays the same rate) and serve to moderately increase inequality.”

The Return of Go-Go Years for Wall Street

Neil Irwin: “Seven years after a crisis that shook Wall Street to its core, the financial sector’s economic imprint has largely recovered. The number of people working in the securities business nationally has returned to 2007 levels, as has the gap between the compensation of Wall Street workers and that of everyone else. The financial sector as a whole is reporting profits that are as large a share of the overall economy as in the early 2000s and more than double their average level over the 70 years ended in 1999.”

“This time, Wall Street has largely returned to a state more reminiscent of the go-go 2000s than of the middle decades of the 20th century. Average pay per full-time worker in the securities industry averaged 2.2 times that of the average American worker for the 70 years that ended in 1999 and peaked at 4.2 in 2007. It has rebounded to 3.6 times as high in 2013, and looks likely to have risen further since then.”Screen Shot 2015-05-21 at 9.48.25 PM

 

While Poor and Minorities Shoulder Debt, College Presidents Rake in Top Salaries

Washington Post: “Amid state cuts in higher education funding and modest increases in federal grant aid eclipsed by rising tuition, African American, Latino and low-income students … must borrow to get a degree, according to a new report from liberal think tank Demos.”

“Eighty-four percent of college students with Pell grants graduate from four-year public schools with debt, compared with less than half of students without the need-based grants, the report said. While less than two-thirds of white graduates from public schools borrow, four out of five black graduates take out loans for college. And black students who do borrow come out with more debt than their peers.”

Mark Huelsman of Demos: “We see worrying signs around the impact of student debt on the ability to build wealth and assets, find a satisfying or civic-minded job or start a business.”

Meanwhile, Frank Bruni reports on the staggeringly lucrative salary deals for college presidents that “have become almost commonplace.”

“Their extravagance strikes an especially discordant note in light of the challenges confronting higher education today, and it undercuts their moral authority.”

“The lofty pay of college presidents is part of higher education’s increasingly corporate bent, of the blurred lines between the campus and the marketplace.”

Do Wealthy Countries Need Big Government

Noah Smith in Bloomberg argues that the claim among conservatives that big government is bad “only holds locally. If you do an empirical study and you find that more government bureaucracy is bad for the economy, what you’ve found isn’t that this is true in general — only that it’s true at one particular moment in time.”

“Look at how U.S. total government spending has grown as the country has become richer and richer:”

gov't share chart

Are we supposed to believe that rich countries are rich in spite of the fact that they all have big governments? Should we believe that government is a parasite that always, without fail, finds a host in the body politic of every single country that reaches first-world status?

“Or should we conclude that big government is a necessary ingredient for countries to get rich?”

“According to MIT economist Daron Acemoglu — who is one of the most respected economists in the business, and who specializes in development and growth economics – it’s weak states, not overbearing ones, that hold back growth in much of the developing world.”

“In other words, big government is good — up to a point. And people know that big government is good, so they allow it. This is what Acemoglu calls a ‘consensually strong state.’”

 

The GOP’s Fraternity of Failure

Paul Krugman observes that “refusal to learn from experience, combined with a version of political correctness in which you’re only acceptable if you have been wrong about crucial issues, is pervasive in the modern Republican Party.”

“Take my usual focus, economic policy. If you look at the list of economists who appear to have significant influence on Republican leaders, including the likely presidential candidates, you find that nearly all of them agreed, back during the ‘Bush boom,’ that there was no housing bubble and the American economic future was bright … and that nearly all of them predicted that Obamacare, which went fully into effect in 2014, would be a huge job-killer.”

“Given how badly these predictions turned out … you might think that there would be some room in the G.O.P. for economists who didn’t get everything wrong. But there isn’t.”

“What’s going on here? My best explanation is that we’re witnessing the effects of extreme tribalism … So the only ‘experts’ left standing are those who made all the approved mistakes. It’s kind of a fraternity of failure: men and women united by a shared history of getting everything wrong, and refusing to admit it. Will they get the chance to add more chapters to their reign of error?”