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What We Read Today 04 January 2017

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Topics today include:

  • Why Trump's 4% GDP Growth will Remain Elusive

  • 5 Things People Don't Understand about the National Debt

  • The Problem in the U.S. is Private Debt

  • What Most Discussions about National Debt are Missing

  • National Accounting:  Flow of Funds and Sectoral Balances

  • The Nature of War

  • Repealing Obamacare is a Bigger Mess than Keeping It

  • Obamacare is not in a 'Death Spiral' - It's Growing

  • Donald Trump Backs Julian Assange on Lack of Russian Involvement in Hacking

  • Tesla Gigafactory Starts Production

  • Seasoned Ambassador Appointed as UK's New Envoy to EU

  • Sweden Liked 6-Hour Workday but Can't Afford It

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • Republicans Want to Kill Obamacare Without the Blame (Bloomberg)  Republicans have a problem. They’ve vowed to repeal Obamacare, but they don’t want to take the blame when some of the 20 million people who get health insurance under the Affordable Care Act lose it. The GOP strategy is to argue that they aren’t actually killing Obamacare; all they’re doing is giving it a proper burial. “People must remember that Obamacare just doesn’t work; and it is not affordable,” President-elect Donald Trump tweeted on Jan. 3. “It will fall of its own weight - be careful!” he added the next day.  These statements are not supported by facts - see the next article.  If Obamacare were in a death spiral, it would show up in declining enrollment. In fact, enrollment appears to be growing.

  • Obamacare Sign-Ups Reach 8.8 Million as Repeal Efforts Start (Bloomberg)   Obamacare sign-ups for 2017 coverage rose about 2.3% from the same time last year, as efforts to repeal President Barack Obama’s health care reform begin in Congress.  About 8.8 million people enrolled in individual insurance plans through the HealthCare.gov website as of Dec. 31, compared with 8.6 million last year, the Centers for Medicare and Medicaid Services said in an e-mailed statement. The figures are the first to include automatic re-enrollments, providing the most complete picture to date of participation.  The GOP claims Obamacare is in a “death spiral”, but statistics show the opposite:

Yet Obamacare’s problems don’t fit the death-spiral description. To economists, a death spiral is a very specific type of failure. It’s what happens when premiums are too high for the healthiest people, who don’t expect to need much care. So those people drop out, leaving behind a slightly sicker population that’s more expensive to care for. Insurers raise premiums, which forces out the next tier of healthy people, making the remaining insured population even sicker, and so on, until the system breaks down completely.

The authors of Obamacare equipped it with a circuit breaker that prevents a death spiral from ever getting started. Everyone, even the healthiest, must be covered or pay a tax penalty. More important, more than 80 percent of people who buy insurance through the exchanges qualify for subsidies. The credits also insulate them from premium increases: If premiums go up, the tax credits go up as well. Since healthy people don’t feel premium increases, they have no reason to drop out of the risk pool. Because they don’t drop out, insurers can continue to have a profitable mix of healthy and not-so-healthy people in their pool of coverage. The tax credits are “an enormous stabilization force,” says Linda Blumberg, a senior fellow at the nonprofit Urban Institute think tank.

  • Mike Pence promises Obamacare repeal but shares few details on alternative (The Guardian)  VP-elect Mike Pence, a frequent conduit between Trump and lawmakers, urged Republicans to unite in condemnation of Obamacare but offered few clues as to what its replacement will look like.

  • Obamacare repeal would cost New York state at least $3.7 billion: governor (Reuters)  The repeal of the Affordable Care Act, the goal of Republicans in Washington, would cost New York state $3.7 billion and strip 2.7 million residents of health coverage, Governor Andrew Cuomo said on Wednesday.  Cuomo, a Democrat, also said counties in the state could lose nearly $600 million of federal Medicaid funding combined if the law, otherwise known as Obamacare, is repealed. New York City would lose the most, more than $433 million.   Cuomo said:

"The cost of a repeal of the Affordable Care Act, to state and local budgets and to the New Yorkers who depend on its health care coverage, is simply too high to justify."

  • Donald Trump backs Julian Assange over Russia hacking claim (BBC News)  President-elect Donald Trump has backed Wikileaks founder Julian Assange in casting doubt on intelligence alleging Russian meddling in the U.S. election.  Mr Assange said Russia was not the source for the site's mass leak of emails from the Democratic Party.  Mr Trump has now backed that view in a tweet. He wrote: "Assange... said Russians did not give him the info!"  The president-elect has repeatedly refused to accept the conclusions of the US intelligence community.  Several US agencies including the FBI and the CIA believe Russia directed hacks against the Democratic Party and the campaign of its presidential candidate Hillary Clinton.  The information, released through Wikileaks and other outlets, was intended to help Mr Trump win the election, say the FBI and CIA.  On Tuesday evening, Mr Trump said an intelligence briefing he was due to receive on the issue had been delayed.  But U.S. intelligence officials insisted there had been no delay in the briefing schedule. The president-elect wrote:

 "Perhaps more time needed to build a case. Very strange!"

  • Tesla Flips the Switch on the Gigafactory (Bloomberg)  Elon Musk meets a deadline: Battery-cell production begins at what will soon be the world’s biggest factory - with thousands of additional jobs.  The start of mass production is a huge milestone in Tesla’s quest to electrify transportation, and it brings to America a manufacturing industry—battery cells—that’s long been dominated by China, Japan, and South Korea. More than 2,900 people are already working at the 4.9 million square-foot facility, and another 4,000 jobs (including temporary construction work) will be added this year through the partnership between Tesla and Panasonic.  By 2018, the Gigafactory, which is less than a third complete, will double the world’s production capacity for lithium-ion batteries and employ 6,500 full-time Reno-based workers, according to a new hiring forecast from Tesla. The company’s shares, up $10.15 to $227.14 at 3:10 p.m. in New York trading, rose to their highest point since August.

 

UK

  • Sir Tim Barrow appointed as UK's new ambassador to EU (BBC News)  Senior diplomat Sir Tim Barrow has been appointed the UK's new ambassador to the EU, replacing Sir Ivan Rogers.  Downing Street described the former ambassador to Moscow, who will now play a key role in the UK's Brexit talks, as a "seasoned and tough negotiator".  Sir Ivan's exit, which came earlier than planned, sparked a row with his resignation note criticising "muddled thinking" from ministers.  Some MPs had accused him of being "half-hearted" towards Brexit.

Sweden

  • Swedish Six-Hour Workday Runs Into Trouble: It’s Too Costly (Bloomberg)   Swedes looking forward to a six-hour workday just got some bad news: the costs outweigh the benefits.  A two-year experiment cutting working hours while maintaining pay levels for nurses at Svartedalen old people’s home in the Swedish city of Gothenburg is now nearing the end. The take away was largely positive, with nurses at the home feeling healthier, which reduced sick-leave, and patient care improving.  But the city has no plans in making the measure permanent or broadening it to other facilities. To do that it would need much more money and even help from the national government. To cover the reduced hours for the 68 nurses at the home it had to hire 17 extra staff at a cost of about 12 million kronor ($1.3 million).  According to Daniel Bernmar, a local left-wing politician responsible for running the municipality’s elderly care:

“It’s associated with higher costs, absolutely,” “It’s far too expensive to carry out a general shortening of working hours within a reasonable time frame.”

Other Scientific, Health, Political, Economics, and Business Items of Note - plus Miscellanea

  • Why Trump's 4 Percent GDP Will Remain Elusive (Lance Roberts, NewsMax)  LR is a regular contributor to GEI.  For the umpteenth year in a row, mainstream economists and analysts are once again planting the seeds of hope for a return to stronger GDP growth. The White House has hoped for it for the last 8-years, and now President-elect Trump is all but promising a surge in economic growth.  LR says that debt overhang limits growth.  Real potential GDP is not what it used to be because of debt.  The weakness in this discussion is that LR does not distinguish between sovereign national "debt" (which is never repaid without economic contraction in our monetary system - unless there are trade balance surpluses) and private sector debt (which must be repaid or defaulted) - see following article.

  • 5 Things Most People Don’t Understand About the National Debt (Money)  This is a simpified discussion for laymen about the U.S. monetary system.  An important factor that should be in the discussion and is missing:  The U.S. current account balance (trade and financial transactions with the rest of the world) is not mentioned. The five items:

  1. The federal government’s books are not like a family’s finances

  2. Even if government finances were like a family’s checkbook, things aren’t at a boiling point — yet.

  3. American households aren’t victims of the national debt — we’re benefiting from it too.

  4. There are some unintended consequences to lowering the debt.

  5. Even if the debt isn’t at crisis levels, it is an important issue.

  • Private Debt in the U.S. is the Problem (Econintersect)  As mentioned above, the national debt has a completely different character than private sector debt:  the first is never repaid without either an economic contraction or a current account surplus; the second must always be repaid or defaulted.  For more information, see the next article.

debt.us.total.and.gov.600x376.annotated

While the government’s deficit is always discussed, what is never discussed it that the government’s deficit is equal to the surplus of the private sector. The approach of examining changes in the economy by looking at different sectors in the economy is known as the sectoral balances approach, which was popularised by British economist, the late Wynne Godley. It highlights the accounting tautology that shows:

Private Balance = Government Balance + Trade Balance

The private balance is private savings minus private investment spending, the government balance is government spending minus tax receipts and the trade balance is exports minus imports. This equation is always true whether there is a government deficit, surplus or balanced budget. Here you can see a graphical representation* by way of illustration using real data for the UK.


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