California keeps up its insane attack on businesses of all kinds, this time with a proposal to force small businesses away from money-saving self-insurance plans into the arms of more costly Obama-care plans.
Sensing a fresh threat to state and federal healthcare reforms, California insurance officials are seeking new limits on a controversial form of health coverage insurers are selling to small employers.
At issue is a new type of self-insurance for small businesses with as few as 25 workers.
Critics said insurers such as Cigna Corp. are using these new plans to game the system and cherry-pick companies with healthier workers. They said this could undermine a key goal of the federal Affordable Care Act to lower premiums by pooling together more healthy and sick Americans into insurance exchanges. Premiums could continue to escalate without a diverse pool of consumers. That prospect has federal health officials weighing action against this practice as well.
Self-insurance, in which employers pay medical providers for their workers' care, has traditionally been used only by large employers that have the financial resources to pay for expensive medical claims. A Kaiser Family Foundation study found that 60% of U.S. workers with health coverage were in self-insured plans last year.
Now some insurers are chasing after much smaller customers with new plans designed to limit employer payouts for big claims using what's called stop-loss policies. This guarantees that businesses won't be responsible for anything over a certain amount per employee, perhaps as low as $10,000 or $20,000, with the rest paid by an insurer. Regulators and health-policy experts say this arrangement undercuts the notion of self-insurance since employers aren't bearing much of the risk, and it allows companies to circumvent some state insurance rules.
California Insurance Commissioner Dave Jones will unveil proposed legislation next week that would bar insurers from selling stop-loss policies below a certain amount. The specific dollar figure is still under consideration, but some experts recommend a minimum of $40,000 per worker.
Officials in the Obama administration are keeping a close eye on developments in California and other states where insurers are aggressively selling these plans.
"We are working carefully to ensure that consumers in all markets have the protections guaranteed by the Affordable Care Act and will provide more clarity on the tools available to reinforce these protections soon," a spokesman for the U.S. Department of Health and Human Services said.
Monday, the U.S. Supreme Court will begin hearing arguments over the constitutionality of the federal healthcare law and specifically its mandate that individuals purchase health insurance.
Yet Another Stab at Destroying Small Businesses
Not only does Obama want to tell you that you have to have insurance, the State of California (with Obama giving a careful eye) wants to mandate self-insured businesses be responsible for the first $40,000 per person, in healthcare liability.
If this passes, any sane business would move to another state if possible.
Those businesses with 25-40 employees who need to stay within the state will start firing employees to get below the 25 employee minimum. The rest will simply be screwed (some into bankruptcy).
This Taxifornia proposal is yet another huge step in the wrong direction, and the idiots running the state cannot even figure out why businesses are leaving.
Enough is enough. It's time to start all over with health-care. Hopefully the Supreme Court tosses out Obama-care next week.
Li Yatao of the Car Team of Zhejiang Youngman Lotus Automobile Company in Shanghai, China has made it into the Guinness World Book Of Records after successfully driving the largest loop the loop. The enormous loop had a staggering diameter of 42 feet, and a weight just under 73,000 lbs.
Weekly Address: President Obama Says House Must Pass Bipartisan Transportation Bill
President Obama is calling on the House of Representatives to pass a bipartisan transportation bill that would repair crumbling roads and bridges and support construction jobs in communities all across America. According to a new report, 90 percent of these construction jobs are middle class jobs. The Senate passed the bill with the support of Democrats and Republicans because if the bill stalls in Congress then constructions sites will go idle, workers will have to go home, and our economy will take a hit.
President Barack Obama tapes the Weekly Address to the nation in the State Dining Room of the White House, March 23, 2012. (Official White House Photo by Lawrence Jackson)
Weekly Wrap Up
Your quick look at this week on WhiteHouse.gov:
A Pint with the President: On Saturday afternoon, the President left the White House and grabbed a pint of Guinness in celebration of St. Patrick’s Day at the Dubliner, an Irish pub near the U.S. Capitol in Washington, DC.
A Season of New Beginnings: In a video message Tuesday, President Obama sent his best wishes to all of those who are celebrating Nowruz around the world – a holiday when many Iranian families come together to celebrate the hope that comes with renewal. Noting the continued tension between the two countries, the President reaffirmed that “there is no reason for the United States and Iran to be divided from another.”
A Timely Visit from Taoiseach Enda Kenny: On Tuesday, President Obama welcomed Irish Prime Minister Enda Kenny to the White House. Besides discussions on the economy and the benefits of trade, commerce, and investment between the two countries, the Taoiseach’s stay in Washington included breakfast at the Naval Observatory, a St. Patrick’s Day lunch at the United States Capitol and a St. Patrick’s Day reception in the East Room hosted by the President and the First Lady.
Solar Power in the Silver State: The President headed west to discuss energy, making his first stop in Boulder City, Nevada at the Copper Mountain Solar 1 Facility – the largest photovoltaic plant in the country, with nearly one million solar panels powering 17,000 homes. Increasing the use of solar power is one piece of President Obama’s strategy to develop every available source of American-made energy – thereby reducing our dependence on foreign oil, creating jobs, and keeping our environment clean.
Domestic Oil Production on Second Stop: Following his trip to Nevada, the President proceeded to the Maljamar Cooperative Association located on federal lands outside of Maljamar, New Mexico – a place that is home to more than 70 active drilling rigs. Drilling is one part of an all-of-the-above strategy for American energy, and the President is committed to expanding oil and gas production. Domestic oil production has increased each year he has been in office and is currently at an eight year high.
Sooners’ Energy Production: On Thursday, the President visited an oil town that is a major hub for connecting our nation’s crude oil supply with refineries along the Gulf Coast – Cushing, Oklahoma – where he discussed the Administration’s commitment to expanding domestic oil and gas production by modernizing pipeline infrastructure and expanding its ability to deliver oil to refineries and consumers around the country.
The Buckeye Bullet: The final stop on the President’s energy tour was at Ohio State University, which is home to the Center for Automotive Research and the Buckeye Bullet – an electric car that has already traveled at speeds in excess of 300 miles per hour. “I am not going to cede the wind and solar and advanced battery industries to countries like China and Germany that are making those investments,” the President affirmed. “I want those technologies developed and manufactured here in Ohio, here in the Midwest, here in America.”
The Affordable Care Act Turns Two: Two years ago, President Obama signed the Affordable Care Act, giving hardworking, middle-class families the health care they deserve. Though not fully implemented until 2014, the law is already making a real difference in many people’s lives.
West Wing Week: Your video guide to everything that's happening this week at 1600 Pennsylvania Avenue. Watch here.
Our lives are lived in compartments, like panels in a cartoon strip.
Where you sit and when you leave and how you walked in--they are all markers, ways we space things out. Walking into the doctor's office or the principal's office or the parole office are physical acts that change our psyche.
Don't underestimate the power of having a customer walk into the dressing room or on stage or to the cash register. Don't forget that as soon as your audience walked into the conference room, they changed.
One way to change the story, then, is to change the markers. To move people from one spot to another when you want them to change their attitude (inside the movie theatre is very different from the popcorn-sales counter in the lobby).
Lakshman Achuthan, Co-Founder & Chief Operations Officer, of ECRI just released an exceptional 9-page document on supply chains and decoupling called The Yo-Yo Years.
Here are a few snips but those bullish on emerging markets, commodity producers, as well as those who think the US is going to decouple from the global economy should take the time to read the entire document.
The idea of "decoupling" often comes up as a way for one part of the world to dodge weakness elsewhere. But, over the last two decades, a key driver of the greater coupling of economic cycles had been the increasing interdependence of world economies, with more openness in the flows of capital and trade – especially merchandise trade. Indeed, the export dependence of most economies has risen dramatically in this period. We see that export/GDP ratios have increased sharply since the early 1990s across all countries, which is evidence of the intensification of global integration through trade.
In the Asia-Pacific region, this proportion roughly doubled for Japan, more than tripled for India and Korea, and advanced to roughly 75% from 42% for Taiwan. In China, the share of exports relative to GDP had also doubled by about 2007. Since then, there has been a gradual decrease, with exports still accounting for about a quarter of Chinese GDP. Meanwhile, in the Eurozone, exports as a percentage of GDP have jumped to 44% from 26% in 1995. In the U.K. the proportion increased from 19% in 1990 to 30% at present. In the Americas, the proportion of Canadian exports increased from 25% in the early 1990s to 45% in 2000, before falling back to around 34%. Similarly, Brazilian exports almost doubled as a share of GDP from roughly 7% in early 1991 to around 14% in late 2006, only to fall back and settle at around 12% recently. Meanwhile, Mexican exports have tripled their share of GDP, while the U.S. ratio of exports to GDP has almost doubled from 7% in 1990 to nearly 14% now.
The implications of this increased interdependence based on trade linkages are magnified by the workings of the Bullwhip Effect.
The Bullwhip Effect
End user demand is moderately cyclical.
Supplier demand is more cyclical.
Supplier-to-supplier demand,furthest up the supply chain, is most cyclical. But supply is relatively insensitive, so prices become highly cyclical.
We agree with the consensus that developing economies have become a key driver of long-term secular global growth. But, in cyclical terms, developing economies are very much subject to the Bullwhip Effect, where small fluctuations in consumer demand growth get amplified up the supply chain into big swings in demand as we move away from the consumer. So, smaller shifts in end consumer demand growth translate into larger fluctuations in intermediate goods demand, and even bigger ones in input material demand, and especially, raw material prices.
Even a modest decline in consumer spending growth in developed economies like the U.S. and Europe can help trigger a significant downdraft in the level of demand from suppliers and, in turn, a serious downturn in the level of demand for "suppliers to suppliers."
Meanwhile, the development of global supply chains and the rise of several economies, such as Taiwan, Korea and China, as supplier economies, and others such as Canada, Australia and Brazil as commodity suppliers to those economies, leaves them highly vulnerable to the Bullwhip Effect.
Indeed, a look at industrial growth cycles in the countries examined earlier suggests a good degree of synchronization across all country pairs. Essentially, cycles in industrial growth are highly synchronized, and this synchronization is likely to broaden and deepen as global supply chain networks expand further.
Conclusions
More frequent recessions
Decoupling is a mirage
"Yo-yo years" for both developing and developed economies
So cyclical ups and downs in asset prices are hardly going away.
This warns against a complacent buy-and-hold mentality. In fact, the world is a much more dangerous place than many appreciate, but there are still going to be opportunities for investors, as long as they consider the timing of cyclical risk.
No BRIC Decoupling
I commend Achuthan for an excellent document.
His views are in agreement with those of Michael Pettis at China Financial Markets. Pettis is an excellent teacher about the dynamics of global trade.
Via email, Michael Pettis at China Financial Markets shared his outlook for China, Europe, and the world last August. The overall outlook is not pretty, and includes a breakup of the Eurozone, a major slowdown for China, and a smack-down of the much beloved BRICs.
August is supposed to be a slow month, but of course this August has been hectic, and a lot crueler than April ever was. The US [debt] downgrade set off a storm of market volatility, along with bizarre concern in the US about whether or not China will stop buying US debt and the economic consequence if it does, and equally bizarre bluster within China about their refraining from buying more debt until the US reforms the economy and brings down debt levels.
What both sides seem to have in common is an almost breathtaking ignorance of the global balance of payment mechanisms. China cannot stop buying US debt until it engineers a major adjustment within its economy, which it is reluctant to do. Until it does, any move by the US to cut down its borrowing and spending will trigger a drop in global demand which will cause either US unemployment to rise, if the US ignores trade issues, or will cause Chinese unemployment to rise, if the US moves to counteract Chinese currency intervention.
The Big Picture
Rather than try to wade through all the news this month, much of which doesn't seem to have much informational content, I thought I would duck out altogether and instead make a list of things I expect will happen over the next several years. We are so caught up in noise and market volatility – as the market swings first in one direction and then, as regulators react, in the other direction – that it is easy to lose sight of the bigger picture.
My basic sense is that we are at the end of one of the six or so major globalization cycles that have occurred in the past two centuries. If I am right, this means that there still is a pretty significant set of major adjustments globally that have to take place before we will have reversed the most important of the many global debt and payments imbalances that have been created during the last two decades. These will be driven overall by a contraction in global liquidity, a sharply rising risk premium, substantial deleveraging, and a sharp contraction in international trade and capital imbalances.
To summarize, my predictions are:
BRICs and other developing countries have not decoupled in any meaningful sense, and once the current liquidity-driven investment boom subsides the developing world will be hit hard by the global crisis.
Over the next two years Chinese household consumption will continue declining as a share of GDP.
Chinese debt levels will continue to rise quickly over the rest of this year and next.
Chinese growth will begin to slow sharply by 2013-14 and will hit an average of 3% well before the end of the decade.
Any decline in GDP growth will disproportionately affect investment and so the demand for non-food commodities.
If the PBoC resists interest rate cuts as inflation declines, China may even begin slowing in 2012.
Much slower growth in China will not lead to social unrest if China meaningfully rebalances.
Within three years Beijing will be seriously examining large-scale privatization as part of its adjustment policy.
European politics will continue to deteriorate rapidly and the major political parties will either become increasingly radicalized or marginalized.
Spain and several countries, perhaps even Italy (but probably not France) will be forced to leave the euro and restructure their debt with significant debt forgiveness.
Germany will stubbornly (and foolishly) refuse to bear its share of the burden of the European adjustment, and the subsequent retaliation by the deficit countries will cause German growth to drop to zero or negative for many years.
Trade protection sentiment in the US will rise inexorably and unemployment stays high for a few more years.
Click on above link to see detailed explanations of each of the above points.
In response to that post, a friend emailed Achuthan's article.
Differentiating Between Difficult and Mathematically Impossible
Said Achuthan in his report...
The rising export dependence of these economies [China, India, Japan, Korea, Taiwan, Brazil and Germany], with growing involvement in global supply networks, makes it increasingly difficult for economies to decouple, especially for suppliers of early-stage goods that have embedded themselves further up the supply chain and farther away from the final consumer.
I would go even further than Achuthan, who says "increasingly difficult for economies to decouple" to a more stern "mathematically impossible".
Let me put this another way: Greece cannot become more like Germany unless Germany becomes less like Germany.
In and of itself that is meaningless because Greece is too small to matter. However, this is also true: Greece, Spain, Portugal, Italy, and Ireland cannot become more like Germany unless Germany becomes less like Germany.
That does matter, and that is why rebalancing will be very painful to Germany, either by sovereign defaults of Spain, Portugal, Ireland, etc, or by the bottom falling out in German exports, perhaps a combination.
Two Key Principles
Germany cannot possibly keep its vaunted export machine humming in the face of increased austerity in Spain, Italy, France, and Portugal
Global trade imbalances are such that Spain, Italy, Portugal, and Greece cannot increase exports except at the expense of Germany
The believers that Ben Bernanke and Mario Draghi "saved" the world, are soon going to be in for a rude shock, when global trade sinks, the exporters take a hit, and countries respond with tariffs and other protectionist measures. Rebalancing is going to prove very painful, and the brunt will be borne on the trade surplus nations, one way or another, exactly the opposite of what most believe.
In the last year, the civilian population rose by 3,584,000. Yet the labor force only rose by 1,569,000. Those not in the labor force rose by 2,014,000.
In February, the Civilian Labor Force rose by 476,000.
In February, those "Not in Labor Force" decreased by 310,000. If you are not in the labor force, you are not counted as unemployed.
Participation Rate rose .2 to 63.9%
Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.
Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.
The key is not how we got here, but rather where the unemployment rate is headed next.
Unemployment Rate Factors
Whether the unemployment rate rises or drops is a function of two factors
How many jobs are created or lost
How fast the labor force is rising or contracting
Bernanke estimates it takes about 125,000 jobs a month to keep up with population growth. Demographically speaking, I agree with that number but it should decline over the next few years as boomers retire.
The math is straight forward, all things being equal (they aren't) the labor force should rise by about 1.5 million jobs per year.
Household Survey Data
click on chart for sharper image
Recall that the unemployment rate is based not off the payroll survey, but the household telephone survey show above. This past month the BLS reported a "seasonally-adjusted" gain in employment of 428,000 workers.
The unemployment was steady because the BLS reported a "seasonally-adjusted" gain in the civilian labor force of 476,000.
Both unusually warm weather and questionable seasonal adjustments are at play.
The following numbers are from the "payroll survey" not the "household survey" but they may help give you a perspective on jobs.
Monthly Job Growth 1999-2011
Chart courtesy of BLS. Annotations in red by me, numbers are in thousands.
Key Points
At the height of the internet bubble with Greenspan stepping on the gas out of irrational fear of Y2K problems, the economy managed to gain 264,000 jobs a month.
At the height of the housing bubble in 2005, the economy added 208,000 jobs a month.
At the height of the commercial real estate bubble with massive store expansion, the economy added 172,000 jobs per month.
Neither the housing boom, nor the commercial real estate boom is coming back. Nor is there going to be another internet revolution.
Use those thoughts and whatever else you wish to decide how many jobs the economy will realistically add per month for the next several years. You can factor in a recession or not. It's up to you.
Next determine how many jobs it will take per month to keep up with demographics. Bernanke thinks 125,000 but you also need to decide how many of those 2 million people who gave up looking for work decide to start looking again.
Thanks to Ross Perez at Tableau Software for the above interactive map.
I had this idea from the first moment I saw Tableau Software. A recently introduced feature, the ability to map user generated input, is what made the graph possible.
Assuming 150,000 jobs a month and a labor force rise of 125,000 jobs a month, the unemployment rate would not cross below 8% until April of 2013.
Note the "Hover Over" effect. Put your cursor at any point on the line to see point-in-time details.
If disgruntled workers come back into the work force faster than job growth, regardless of what that job growth is, unemployment will rise. In general, that would be a good thing economically were it to happen, but it could mean a difficult time for those expecting the unemployment rate to drop as it has over the last couple years.
This year at WonderCon 2012, thousands of fans gathered in Anaheim, California for a celebration of all things sci-fi and comic book related. Which costumes were your favorites of the bunch? Which do you think were the most impressive? What characters would you have liked to see?
Pet Insurance 101 is a fun infographic designed by Trupanion to answer some of the basic questions pet owners who are considering pet insurance may have. Within the Pet Insurance 101 information graphic you will find some fun facts about pet insurance and answers to some questions like what is pet insurance, why pet owners may like to consider pet insurance, how pet insurance works, and how much the average monthly premiums are.
The options for pet insurance are growing every day and can be confusing, so we have also provided a pet insurance checklist for consumers to compare policy features, terms, and conditions so that they find the right pet insurance policy for them and their pets.
Two Year Old William Stokkebroe has seen his parents, Kristina and Peter and the dancers of studie43 practising so many times that he is able to perform as well. William grabs everybody's attention as he dances around the dance floor to 'Jailhouse Rock' by Elvis Presley.
The 1999 "American Pie" premiere vs. The 2012 "American Reunion" premiere. It is set to hit the theaters on April 06, 2012 in the United States. The film stars Jason Biggs, Alyson Hannigan, Seann William Scott, Mena Suvari, Tara Reid, Chris Klein, Eddie Kaye Thomas, Shannon Elizabeth, Thomas Ian Nicholas and Jennifer Coolidge.
You might not play online games like World of Warcraft with the intention of meeting your soulmate, but according to recent studies—you're more likely to meet your love match in a virtual fantasy world than an online dating network. And according to the studies aggregated in the infographic below, the meaningful connections gamers make over online adventures go a lot further toward relationship building.
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