In a continuing effort to provide words of wisdom from beyond the walls of Zacks, here are a few things that I think people should find interesting. The views expressed in the articles are not always shared by myself or Zacks, but I do find them thought provoking.
Uwe Reinhardt, an Economics Professor at Princeton, takes on Paul Ryan’s claim that “Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy.” There’s a big difference in that the Congressional plan is fully indexed to medical cost inflation, while the Ryan plan would only be indexed to the CPI, and historically medical costs have risen much faster than overall inflation. Also, it should cost a lot more to insure an 80 year old than a 65 year old, but the value of the voucher does not increase to reflect the aging process, meaning that each year future Seniors (the current seniors get to keep the current Medicare plan) will have to cough up more and more.
Comparing Ryan’s Medicare Plan to What Congress Gets
Bill McBride of the Calculated Risk Blog suggests breaking down the deficit into four parts: the cyclical deficit, the general fund deficit excluding health care, health care (Medicaid/Medicare) and Social Security. He argues we should first focus the general fund excluding health care, then on health care. He argues that the cyclical part will take care of itself, and Social Security is not that much of a problem. I agree, but might be a bit more inclined to work on the Health Care side before the rest of the General Fund deficit.
Paul Krugman, Nobel Laureate, Princeton Professor and New York Times Columnist, discusses the relationship between the financial crisis and recent Chinese inflation. The imbalance of savings and investment between the U.S. and China can only be resolved in one of three ways he argues: currency appreciation by the Yuan, inflation in China or deflation here. Deflation here would be the worst option for us. I agree. China’s inflation is China’s problem, not ours, and if they want it to stop, they will let the Yuan rise.
Revenge of the Global Savings Glut (Wonkish)
Mark Thoma, a Professor at the University of Oregon and of the Economists View Blog, collected the comments of several knowledgeable commentators on S&P putting the U.S. on Credit Watch: Negative. Since the U.S. Debt is all in U.S. dollars, and we own a printing press, the only way the U.S. could default on its debt is if the debt ceiling is not raised. Outside of that, talk of a U.S. default is just plain silly, just as silly as the AAA that S&P handed out like candy on Halloween during the housing bubble. Note that T-notes rose in price/fell in yield sharply today, while the dollar was strong. Not exactly the behavior one would expect if the markets really thought there was a chance that the U.S. would default.
The S&P’s Negative Outlook for US Debt
Geoffrey James, a reporter at CBS B-NET, has a somewhat humorous, but very much on target assessment of the things that politicians say about business and the economy that just are not true. Who knew that politicians are not 100% honest?
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