Medicare for All? ‘Crazy,’ ‘Socialized’ and Unlikely

This article is a part of "Prescriptions" blog, which was initiated by the New York Times to shed some light on the health care debate. The article talks in particular about extending Medicare to all age groups. It is interesting because it indirectly gives an example of public failure. The author mentions "expanding Medicare would not pass because the insurance companies, which he says get a “bonanza” in premiums now, have too strong a grip on Congress through campaign donations." This essentially shows how interest groups are affecting government involvement, which leads to a public failure.

Small isn't beautiful

Since last year, car industry has been struggling because of the great recession and low demand for new cars because of consumers are reluctant to pay a big amount of money these days. I knew people prefer small cars because of tight credits these days. However, I did not know exactly what is going on with car market and the economic theory behind this situation. This article is not only explaining current trends in car market, but also containing rich economics perspective which enable to analyze the future of car industry as well. Please check out the article if you are interested in car industry.

Contents:

The article mentions about the recent trends in car industry and acknowledges U.S. government policies which actually enabled GM and Chrysler to survive. It is also amazing that not a single factory in Europe has closed so far for GM and Chrysler. When GM stock price falls below $2, there was a fear that GM bankrupts and great recession becomes even worse.

Also, the article mentions current car trends of consumers. People prefer small cars these days and it suffers producers since small cars don't make a lot of profits. (e.g., Compare between a small car such as Fiat 500 and with a sport-utility vehicle such as the Audi Q7. Fixed costs are the same and variable costs of making Audi Q7 is only $14,700 higher than Fiat 500. However, Fiat sells around $15,000 compared with at least $58,800 for Audi Q7.)

The trend comes from several reasons. First, author states that the very cheap lease finance which can boost demand for more costly cars does not exist anymore in American, Germany, and Britain. Also, second hand values of cars also decreased these days. Moreover, demographic change is a big factor. Credit Suisse says that by 2020, 40% of new car buyers in developes countries will be over 60, compared with less than 30% in 2009. Elderly people tend to choose a small, cheap car and over-65s drive 45% fewer miles than average. Furthermore, many imoprtant car markets' governments are struggling against carbon-reduction targets and big cars are generally not favorable for the environment. Then, the article mentions how the industry can tackle with the problem of overcapacity in mature markets.

Small Isn't Beautiful

Carmakers are beginning to recover from the blows dealt during the financial crisis, but they now face what is perhaps an even bigger problem: consumer preferences are changing--people don't want big cars anymore. On one hand, carmakers are feeling a sense of relief; huge production cutbacks are largely over, and volumes have started to rise. Credit is again flowing, and some carmakers may even turn a profit by the end of the year. But, while production cutbacks have occurred in the US, no car factories in Europe have closed, causing worry that the withdrawal of scrappage incentives like the "Cash for Clunkers" program that have propped up demand will cause another reduction in new car purchases. Other issues are an aging market, particularly in Europe, that likes smaller cars and increasingly stringent emissions requirements. Small cars are much more difficult to make a profit on than large cars and SUVs, but it looks like carmakers will have to find a way to do just that if they want to stay afloat.

Playing with Fire

President Obama has triggered warnings of a trade war with the decision to impose tariffs on Chinese tyres. Obama has been somewhat caught in the middle on the issue of trade. On one hand, he has been trying to rid people of the idea that he is a protectionist; on the other, he has faced pressure from unions to enforce trade laws more firmly than President Bush.

In economic terms, the new tariffs are rather insignificant. However, the success of the United Steelworkers' claim could encourage more industries and unions to seek relief, again putting Obama in a similar no-win situation. Future tariffs will undoubtedly trigger more angry reactions from China, who has threatened to retaliate against American chickens and car parts and to take America before the World Trade Organization.

In these difficult economic times, it is likely that Obama will be forced to again take a stand on trade in the near future. If he again acts in a protectionist manner, headlines like the Global Times' "America has erred before the world" are sure to resurface.

Obama's Health Plan is Tough on the Middle Class

Obama's health care plan can cost middle class citizens up to $4000 a year. Obama's administration is tossing around the idea of cutting the public insurance option from the health care bill. Health Co-ops will not get subsidies from the government which means that the moderate to low class will not be able to get premium coverage. By taking this money from the middle class, billions of dollars will be funneled to those that are uninsured and union workers over the age of 55. There is a great example towards the end of the article that shows what will happen to an employee who has to pay a small portion of his medical insurance.

The West and Russia: Less Chilly

While most of this article is about forigen policy, the question that came to mind is what type of impact will these changes in forigen policy have on the international economic policy of both the United States and Russia? Very interesting read.

Developing Countries and Global Warming: A bad climate for development

This article provides interesting insight into the effects of global warming on developing countries.

It still pays to study

After receiving advice of staying in school for as long as possible from an attorney the other day, I decided to take a look at this article. Most of us are some sort of economic majors so we know the law of supply and demand, as we increase the quantity of something, the price of it will drop. In this case, the more years of schooling under our belt, the value of it should drop. This article argues this law. It says that the more years of schooling we have the value does not decrease. We are continually getting our moneys worth according to research. The total tuition and fees included with additional years of schooling is still not outweighed by your earnings afterward. The point of this article is that the more years of schooling, the better. I am uncertain about the accuracy of the graph and numbers. I thought this would be great for students to see who plan on going to graduate school straight after college instead of geting a job.

The New Global Economic Leader? Peru

In the last couple of lectures we have discussed the many economic system transformations made by economic power houses, such as France, the UK and Germany. However, we have yet to discuss nations with far less significance to the global economic well-being. In this article, it discusses the emergence of Peru as a nation that has outperformed its larger, richer, neighbors to the north, despite being a small, poor county in the Western Hemisphere. With the help of a $13 billion stimulus package provided by the government and possessing substantial natural mineral resources, Peru has experienced a blistering 9.2% increase in growth. It is interesting to see nations with smaller economic power rise in a global market that continues to stutter.

EU to call sanctions on excessive bank pay

At the G-20 summit, European Union leaders have come up with a draft to sanction banks for the excessive payment of bonuses for executives and traders. Because prior bonuses were not necessarily related to performance, banks were taking on more risk which helped lead to the current financial crisis. Additionally, the EU wants to enforce banks to disclose more information to the public. It will be interesting to see how this will affect all of the different countries within the EU.

Recovery Underway

The Federal Reserve Chairman Ben Bernanke said on Tuesday that the “recession is very likely over.” Data released on Tuesday suggest that in the month of August people flocked to stores and spent money. With other incentives such as “Cash for Clunkers” people are dumping their money into the automobile industry as it sales have risen 2.7 percent. Bernanke also said, “"Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time, as many people will still find that their job security and their employment status is not what they wish it was.” Although the recession may be over, the job growth rate in 2010 will still likely struggle. As for the rest of the year many businesses will try to replenish depleted inventories and increase government spending.

Family Health Costs Jump 5%

This article discusses a survey that shows the costs of healthcare that continue to rise, despite drops in inflation. This applies to family health insurance coverages as well as individual insurance premiums. In the last decade alone, family health costs have risen 131%, and are predicted to continue to rise without reform to the costs of healthcare.

As costs continue to rise, a large percentage of companies said they plan to pass on these costs to their employees in the premiums they pay. Healthcare costs are currently growing at an average annual rate of 8.7%. If this continues to occur, by the year 2019, family healthcare through an employer will cost around $30,000.

This article includes statistics both interesting and pertinent to those on both sides of the healthcare debate. It also comes at a time that is pivotal in the argument over reform.

China-U.S. Trade Dispute has Broad Implications

Although the trade dispute with China is over chickens, cars, and tires it is turning into much more than those three simple goods. President Obama announced that the United States will be putting tariffs (of up to 35%) on tires from China. This clearly did not go over well with the China as they issued a "formulaic criticism" of the decision that was announced. Also, on Chinese websites there were many acts of Anti-America "rhetoric." China then announced that it was going to begin imposing tariffs on American exports of automobile parts and chicken meat.

The United States does not want to have any disputes with China and is willing to discuss the tariffs but wants to be sure that the trade complies with the World Trade Organization's rules.

The decision to impose tariffs shows that Obama is becoming more strict on trade laws, especially against China, even though China is a "world's factory."

There has been a lot of trade activity this year between China and the United States. We have imported $1.3 billion in tires from China, which is a very large number, as well as exporting $800 million in automobile parts and $376 million in chicken meat. China says that they will begin investigating certain automotive parts and chicken meat to see if they were being subsidized or "dumped," in which case they will be able to impose a tariff on the imported goods.

Is Obama making the right choice by imposing possible large tariffs on Chinese imports such as tires?

Bernanke: Recession Has Likely Ended

U.S. Federal Reserve Chairman Ben Bernanke made his most emphatic declaration yet that the recession has ended, as a separate data release Tuesday showed a rebound in retail sales. But Mr. Bernanke reiterated that tight credit conditions and a soft labor market will prove to be a challenge.

Bill Ford: Detroit needs predictability

The article proposes that a gas tax will bring price stability to gas pumps. Therefore, the automotive industry will have more information to plan better when investing in alternative forms of energy, which almost defeats the thought that information isn't as necessary in capitalism.

Rebalancing the Economy: Germany

This short video describes Germany's reliance on exports to get out of economic slumps, and how their policies will need to change in the future. It gives a good summary of some aspects of the German economic system we discussed in class, such as the impact of Eastern Germany reuniting with the West and the change of currency to the Euro in 1999. An interesting point to note is that although Germany ran a surplus since the early 2000s, their overall investment took a deep dip downward- this is opposite of typical economic assumptions. One very important and relative quote in the clip refers to barriers to entrepreneurship and services which is leading to more investment going abroad, as foreign economies are more efficient. Germany needs to direct their consumption inward in order to maintain the health of their economy, and allow domestic firms to fund research and development and increase efficiency.

Flaw in Free Markets: Humans

This article discusses why Alan Greenspan was wrong to think that markets would protect themselves from financial risk, and how Adam Smith's invisible hand theory played into Greenspan's false assumptions. This is a great read about Smith's invisible hand argument and what is required for it to work. This article seemed perfect for our class to read. 

U.S. Relations With Eastern Europe Are Strained

Although this may not be the most important issue in today's global news, it relates to today's class lecture.

Since the Cold War, eastern Europe and the U.S. have had good relations, but recent acts have upset countries such as Poland, and Czech Republic. One reason for the recent upset is that the Obama administration is rethinking a planned missile-defense program that would have placed interceptor missiles in eastern Europe to protect from Iranian missile attacks. Eastern Europe thinks that the sudden re-consideration of the plan is to satisfy Russia's agenda.

Also in this article is a bar graph showing that relations between the U.S. and western Europe, particularly Germany, are soaring.

Under 21? No Credit Card for You.

This article presents a bill that was signed by President Obama back in May, called the Credit Card Accountability, Responsibility, and Disclosure Act of 2009. It includes various provisions, such as barring credit card companies from raising interest rates without warning, charging excessive fees, and punishing customers who pay on time. However, the aspect of note involves a new age restriction. Beginning next February, those customers who are under 21 are restricted from getting credit cards, unless they are able to prove sufficient income or get a cosigner - a spouse or parent.

While this bill may appear offensive to those underage, it is actually aimed to be helpful for them. It is supposed to protect young adults who have not had sufficient experience in handling credit, and are targeted by the credit card companies for that reason. This bill has been controversial in its predicted success, and a whole host of problems are expected to arise because of it - mainly the difficulty getting credit cards later, as well not being guaranteed people are any more well equipped to handle credit cards at 21 as opposed to 18.

money markets not unscathed

The article is about money market mutual funds, diversified portfolios of short- term securities such as Treasury bills or commercial paper. The author starts by mentioning the most shocking event in the history of money funds, the collapse of the Reserve fund (the nation’s oldest money fund) in September 2008. The article then continues with the features of money funds and their vital role in the money market.

Obama Turns Efforts to Financial Reform

President Obama will head to Wall Street in an effort to overhaul the financial regulatory system. With much of the recent attention focused on the president’s health care policy many have forgotten to realize the poor actions that were taken on Wall Street that lead this country to economic failure. Obama said, “to take responsibility, not only to support reforming the regulatory system but also to avoid a return to the practices on Wall Street that led us to the financial crisis”. President Obama will be in New York tomorrow. 

US penalizes Chinese tires, infuriating Beijing

On Friday, the President upheld a ruling by the US International Trade Commission that imports of Chinese produced tires were hurting US producers. Thus, a 35% tariff will be levied on such imports, which will decline to 30% and 25% in the second and third years. We know that tariffs result in dead weight loss, which isn't good. This is also trade protectionism, and coupled with the "buy American" provision in the stimulus package, has infuriated many trade partners.

So then, what is the rationale behind this decision?
Is it government failure, since politicians have to carry the interests of their constituents? (The article mentioned winning support for the health care proposal).
Is it a good decision to protect the American tire industry? What about innovation and adapting to changing markets?
Will other countries retaliate with their own trade protectionism legislation?

The Return of the Deal

A possible recent rise in mergers and acquisitions is being viewed as yet another sign that the economy is improving. Kraft's $17 million dollar bid for Cadbury, though rejected, has triggered speculation that other food companies such as Nestle, Hershey, and Mars may also bid on Cadbury.

August was the worst month for mergers and acquisitions since 2003, and would have been the worst since 1995 if not for Disney and Baker Hughes deals. But is this really a sign of an economic turnaround, or could it be that executives are only now finalizing deals that were postponed until they returned from vacations in the tropics? It's hard to say, but deals around the world, including the sale of Skype, have many people hoping that this will lead to more merger activity and help bring about an economic recovery.

A golden chance (Indonesia Special Report)

This article highlights the total country turnaround, both economic and governmental, in Indonesia.

Protests over Obama health reform

This article talks about how people are protesting against Obama's plan towards health care as they believe that if the government uses its tax money on government run health insurance it may lead to inflation and will ruin the economy? interesting? take a look...