Posts Tagged ‘mortgages’

June 2012: Jobs Fizzle

Monday, July 16th, 2012

80,000 was the number. 200,000 is what we need for this to feel like a recovery. And 8.2 is the number that keeps hanging on.  The nation’s unemployment rate was unchanged at 8.2% (that’s 13 million unemployed workers) for the second consecutive month, the Labor Department said Friday.   Businesses added just 84,000 jobs, while governments cut 4,000. Monthly job growth averaged 226,000 in the first quarter but slowed dramatically to an average 75,000 a month in the second quarter.

In response, the Dow Jones industrial average fell 124.20 points to close at 12,772.47, wiping out the Dow’s gain for the week, and Treasuries rose as investors moved their money into lower-risk assets. And the Presidential campaigns took the opportunity to issue a number of extrapolations and the usual host of inaccuracies and overreaches. The Democrats claimed that the unemployment rate has been trending down since hitting 10.10% in October 2009; what they forget to point out is that that’s because of the large numbers of discouraged workers – almost 1 million — who’ve stopped looking for jobs. The Republicans, on the other hand, said that the jobs report proves that the Obama administration’s policies haven’t worked, forgetting that the US was hemorrhaging 700,000 jobs a month when Obama took office. According to Politifact, Obama’s record is 22 consecutive months of private-sector job growth, beginning in Feb. 2010, during which the number of jobs grew by almost 3.16 million, or about 143,000 per month.

Putting the candidates aside, the reasons for the anemic job numbers have started to sound like a bad drinking-game song being played by the pundits as they make the circuit of the talk shows: The warm weather drew construction and manufacturing activity into January and February, but dampened spring hiring; the manufacturing sector contracted for the first time in three years in June;  retail sales were weak, Corporate profits fell in the first quarter of 2012,  the first decline since 2008, according to the Commerce Department; the European Central Bank cut interest rates – a sign of nervousness about their prospects; the end-of-year fiscal cliff sent ripples through the public and private sectors with its specter of higher taxes and reduced government spending; a lame-duck Congress couldn’t pass a Jobs Bill; Republican governors made draconian cuts and instituted public-worker layoffs at the state level; and the Administration didn’t put a big enough stimulus in place which is creating an undertow. Take your pick.

So, are there any bright spots? A few.  Friday’s report showed ticks upward in average hourly earnings (to $23.50, from $23.44 in May) and the length of the typical private sector workweek (34.5 hours, from 34.4). Also, a curious fact is that the number of teens in the workforce spiked by 140,000 to 4,528,000, or 3.2% of the entire U.S. workforce:  So why are teens making out so well in this first month of summer while everyone else, well, isn’t? The Daily Kos reports from 5 May 2012:  President Obama’s Jobs program, which is lining up commitments from the private sector and from government to create summer jobs and internships for young people, has announced commitments for 90,000 paying jobs, up from the 70,000 previously announced in January.

Will Proposed Medicare Reform Leave Seniors Out in the Cold?

Monday, April 11th, 2011

A Congressional proposal to reform Medicare will transfer a significant share of the cost to the nation’s senior citizens – a constituency that is known for high voter turnout in elections.  The Congressional Budget Office (CBO) added fodder for critics, concluding that the majority of future retirees would pay considerably more for healthcare under the “Path to Prosperity” approach — which turns Medicare into a voucher-like plan for Americans who are currently 54 and younger.  Representative Paul Ryan

(R-WI), who introduced the plan, said “We don’t want to turn the safety net into a hammock that lulls people to lives of complacencies and dependencies, into a permanent condition where they never get on their feet.”  Instead of coverage for a set of prescribed benefits, Americans in their mid-50s and younger would receive a federal payment to purchase private insurance from a choice of government-regulated plans.  If the proposal becomes law, beginning in 2022, Americans would have a vastly different experience when they became eligible for Medicare.  The age for eligibility would rise from 65 to 67, according to the CBO.

Ryan’s proposal slashes $1.4 trillion from Medicaid over the next decade.  He proposes to cut $630 billion off the budget by more or less repealing the Patient Protection and Affordable Care Act’s provisions that extend coverage to include anyone living on less than 133 percent of the poverty rate — just under $30,000 for a family of four.  Additionally, Ryan’s plan eliminates subsidies for private insurance premiums for those just above the poverty line.  According to CBO estimates, nearly 17 million people without insurance would have been covered by the Medicaid expansion.

Representative Chris Van Hollen (D-MD), the ranking Budget Committee Democrat, said Republicans are protecting tax breaks for corporations and the wealthy to the detriment of the middle class and the poor.  “It doesn’t reform Medicare, it deforms and dismantles it,” Van Hollen said.  As for Medicaid, Ryan’s proposal “rips apart the safety net” for poor and older people.  “A typical beneficiary would spend more for healthcare under the proposal,” according to the CBO analysis.  “Although the uncertainty in future federal spending on healthcare would decrease under the proposal, that uncertainty would be transferred to future beneficiaries,” the CBO analysis said.  “If the volume, complexity, and costs of medical services turned out to be greater than expected, future beneficiaries would pay higher premiums and cost-sharing amount than are currently projected.”

Ryan’s budget resolution would improve the nation’s overall fiscal health, cutting projected deficits in President Obama‘s budget and moving the federal government towards a surplus by 2040, according to the non-partisan CBO.  Ryan believes that the cuts are necessary to save the programs.  “This is not a budget.  This is a cause,” he said.  “The social safety net is fraying at the seams.”  Chip Kahn, president of the Federation of American Hospitals, said that Ryan’s proposal would “result in the loss of health coverage for millions of low-income Americans, reduce critical benefits for others, and make it more difficult for hospitals, clinicians and other healthcare providers to deliver the care so many need.”  Other critics maintain that Ryan’s approach will shift the higher costs to individuals, much as the change from defined-benefit pensions to 401(k) plans has increased retirement risk.  Senior citizens, the disabled and the poor likely will pay more for healthcare, even as Washington pays less.  Additionally, Ryan’s plan would permanently extend George W. Bush’s tax cuts.

“The idealized notion that older consumers would be making these annual choices may have some merit as an idea, but it doesn’t seem to be taking place in practice,” said Patricia Neuman, director of the Medicare Policy Project at the non-partisan Kaiser Family Foundation.  Picking the right health plan could become even more critical if premiums outpace federal subsidies.  In 2010, 50 percent of the nation’s Medicare recipients reported incomes of less than $21,000 a year, according to a Kaiser Family Foundation analysis.

In an opinion piece in the Seattle Post-Intelligencer, the “Monday Morning Economist” Stephen Herrington writes “The tax cut proposal is not getting the attention it deserves.  If it shapes up to be anything like was described in Ryan’s Road Map, it will create massive dislocations and disruptions in the economy.  Ryan’s plan was/is to cut the top tax bracket from 35 percent to 25 percent with the promise/expectation that this would not impact revenues.  In a departure from the standard ‘trickle down’ excuse for tax cuts, Ryan meant/means to offset the admitted loss in revenues by eliminating all manner of deductions.  The deductions in our current tax code, such as medical, mortgage and state income tax expense are there for a purpose.  Eliminating them will introduce wild distortions in markets and effectively push the tax cuts for the rich onto the other 98 percent of us.  Elimination of the medical expense deduction will intensify the impact of the Medicare/Medicaid part of the plan.  It is as if Ryan thinks the magic of the free market can absorb any shock in real time.  No more mortgage deduction?  No problem, I just won’t buy a house at all until the lack of the mortgage deduction causes prices to fall by half.”

In Recessionary Times, Private Capital Drives Healthcare Development

Monday, April 6th, 2009

The recession has put the health care industry’s importance to our economy in sharp relief. It accounted for 17 percent of GDP and added 371,600 jobs last year.  Even when the economy lost 651,000 jobs during February, healthcare added 27,000 new positions.pj-am329_pjnurs_200805061826111

In terms of the construction of new facilities during 2009, healthcare development is expected to fall by five or eight percent.  Yet, the drivers that historically have made the healthcare market so strong – obsolescence, new technologies and demographics – are still very much in place.

The collapse of the $330 billion auction rate securities market which let healthcare systems borrow money long term while paying short-term interest rates – cut off a principal source of capital for new development.  Hospitals have investment portfolios tied to Wall Street, another source of capital that is being cut off.  Endowments are drying up as even the most dependable philanthropists see their fortunes shrink.  Access to long-term debt vehicles, such as variable-rate demand bonds backed by letters of credit, is available only to healthcare systems that are A-rated or even better.  Even when a provider has superior credit, interest rates to borrow money may be as high as six to 6.5 percent.  For some hospitals and healthcare providers, the cost of credit – if they can get it – is too expensive.

To fill the gap, healthcare providers are considering private sources that have the capital necessary to finance projects.  The upside of private capital is that it can be committed over the long term to help hospitals and providers fulfill their strategic expansion plans without the same balance sheet implications – something hospitals are focused on in order to maintain a good standing with the ratings agencies.

In a 0 percent federal rate environment when 30-year fixed-rate mortgages have come down to 5.29 percent, capital is competitive with traditional hospital financing, compared with other cycles.