Mish's Global Economic Trend Analysis

Obamacare will Work Really Well By 2017, Promise! Website Unstable but Fixed for Vast Majority (Defined as 80%)

Posted: 01 Dec 2013 05:18 PM PST

David Plouffe, former Obama senior adviser and ABC News contributor says Obamacare Will 'Work Really Well' By 2017

Former Obama senior adviser and ABC News contributor David Plouffe said on "This Week" Sunday that the Affordable Care Act will "work really well" when all states run their own health care exchanges and fully expand Medicaid – actions that may not be seen until President Obama is out of office in 2017.

"This program was designed to be implemented by the states. And in most of the states that are running their exchanges it's going quite well," Plouffe told ABC's George Stephanopoulos. "You talked about Medicaid expansion. I think it's just a fact, and it may take until 2017 when this president leaves office, you're going to see almost every state in this country running their own exchanges eventually and expanding Medicaid. And I think it'll work really well then."

Video

Work "really well" for who? If Plouffe means the average (and shrinking) middle-class worker, he is out of his mind.

Website "Unstable" but Fixed for Vast Majority (Defined as 80%)

ABC News reports White House Declares Obamacare Website Fixed, But Problems Persist

Two months after the troubled launch of its signature health care initiative, the Obama administration on Sunday announced that its online insurance marketplace now functions smoothly for the "vast majority" of consumers seeking to shop for and enroll in coverage.

Today "is not a magic moment but a process of continual improvement over time," said Julie Bataille, communications director for the Centers for Medicare and Medicaid Services, which manages the website.

The report identifies as root causes of the problems "hundreds of software bugs, insufficient hardware and infrastructure." It says technical teams have implemented 400 fixes, with more than 300 coming online in the last three weeks.

"We now believe the HealthCare.gov site works for the vast majority of users," Bataille said. The administration has defined "vast majority" as 80 percent of consumers looking to enroll online.

Still, significant problems persist with the system.

The report implies that the website continues to experience unscheduled outages at least 5 percent of the time, and officials signaled that there are still concerns about slow-downs during high traffic periods.

HHS Secretary Kathleen Sebelius advised consumers in a blog post Saturday to visit the site at off-peak times — mornings, nights and weekends — to avoid delays and potential congestion. Officials said today they are not yet ready to begin aggressively summoning people to the site until it's demonstrated to be stable.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Puerto Rico the Next Detroit?

Posted: 01 Dec 2013 09:57 AM PST

Puerto Rico has been in recession for 8 years. The unemployment rate is 15% and debt has piled up to the tune of $70 billion. For Comparison purposes, California public debt is $96 billion and Detroit debt was $18 billion. Wall Street rates Puerto Bonds at one step above junk.

How did Puerto Rico get into trouble? The short answer is the same way as Detroit: loss of industry coupled with lavish pensions.

The Washington Post reports Puerto Rico confronts a rising economic misery.

Boxes and wooden crates filled with household items bound for the U.S. mainland are stacked high in the Rosa del Monte moving company's cavernous warehouse, evidence of the historic rush of people abandoning this beautiful island.

The economy here has been in recession for nearly eight years, crimping tax revenue and pushing the jobless rate to nearly 15 percent. Meanwhile, the government is burdened by staggering debt, spawning comparisons to bankrupt Detroit and forcing lawmakers to severely slash pensions, cut government jobs and raise taxes in a furious effort to avert default.

Officials in San Juan and Washington are adamant that a federal bailout is not on the table, but the situation is being closely monitored by the White House, which recently named an advisory team to help Puerto Rican officials navigate the crisis.

The island's problems have ignited an exodus not seen here since the 1950s, when 500,000 people left for jobs on the mainland. Now Puerto Ricans, who are U.S. citizens, are again leaving in droves.

Puerto Rico lost 54,000 residents — 1.5 percent of its population — between 2010 and 2012 alone. Since recession struck in 2006, the population has shrunk by more than 138,000 to 3.7 million, with the vast majority of the outflow headed to the mainland.

The brutal combination of a long recession, a shrinking population and overwhelming debt has left Puerto Rico's political leaders struggling to manage a conundrum: How do they tame at least $70 billion in debt while marshaling the resources to grow a shrinking economy and battle corrosive social problems, including a homicide rate that is nearly six times the U.S. average?

Like states, the commonwealth of Puerto Rico cannot file for bankruptcy. Also, Puerto Rico's constitution offers bondholders strong guarantees that they would be paid before pensioners and public workers if the government went broke.

Puerto Rico's expansive web of debt includes standard government bonds as well as those floated by public corporations, including authorities for water and sewer, highways and electric power. Together, those bills have nearly tripled since 2000, as successive administrations turned to the bond market to plug gaping budget deficits. In addition to the $70 billion in government debt, the government also faces $37 billion in unfunded pension obligations, according to Morningstar.

Since 1996, the number of factory jobs in Puerto Rico plummeted from 160,000 to 75,000.

And while government workers make up about a quarter of the commonwealth's workforce — much higher than the U.S. average of 16 percent — their ranks are shrinking as the pervasive debt and economic problems careen toward a reckoning. Now, just over 41 percent of working-age Puerto Ricans are in a job or even looking for one.

As work has disappeared, more Puerto Ricans have relied on the government to survive: About a third of the commonwealth's population relies on food stamps, and residents of the island are twice as likely as those on the mainland to receive Social Security disability benefits, according to researchers.

Public Debt

Municipal Bankruptcies

Homicide Rate

Expect Default

Job flight, high crime rates, and huge pension woes in Puerto Rico seem similar to the problems in Detroit. However, there is no constitutional provision that allows US states and Commonwealths to declare bankruptcy.

Compounding the problem, Puerto Rico passed a massive set of tax hikes including corporate taxes, a broadened sales tax and a new gross receipts levy, hoping to get its budget under control. Given that tax hikes in the middle of a recession are about the worst possible choice, the situation is ominous.

So how is Puerto Rico's debt going to be paid back? The answer is it won't. Although, bankruptcy is out of the question, nothing can stop a default except a bailout by the US. Given that handouts from this Republican Congress are unlikely, look for Puerto Rico to default.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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