Friday, September 30, 2011

Private Health Insurance Premiums Rise 9% - Top $15,000 Per Year for Family Coverage

If Private Health Insurance Is Supposed to Control Costs – Why Hasn’t It

A key element of the Republican plan for ending Medicare and replacing it with subsidized private health insurance is that by using the private sector plans the costs of medical care will not increase nearly as fast as they have.  This position was dealt a serious blow by the release of a Kaiser Foundation study that found private insurance costs rose 9% in the past year.

The information from the study is summed up as this.


The 9% average increase, reported in an annual poll of employers performed by the Kaiser Family Foundation and the Health Research and Educational Trust, comes despite a continued trend toward more limited use of medical services in the U.S. Last year, family premiums rose just 3%, the survey found.

Many families have not seen this level of increase in their own contribution to health care costs, as employers have absorbed a large portion of the increase.

Employers' average annual family premium for 2011 was $15,073, up from $13,770 last year. For a single worker, the figure was $5,429, up 8% from $5,049 in 2010. The increase in employees' average premium contribution for a family plan was far less: 3% to $4,129, according to the survey.

But before employees take too much comfort from that number, the trend where employee contributions rise far less than the total cost of health insurance is rising cannot continue.  At some point, probably very soon employers will raise the contribution from employees, or stop offering coverage altogether.

There are a number of conclusions that can be drawn from this data, and here are a few.

  1. The idea that private insurance companies, with their incentives to keep medical care costs down can actually do that is just not true.  Insurance companies are in the middle and have very little leverage over a system where costs increase under a pay-for-procedure system.

  1. The pay-for-procedure system simply cannot continue.  That system produces incentives for health care providers to increase costs not decrease them.  Such a system will ultimately produce a financial crisis in health care in the United States.

  1. The increase in medical care costs will produce even more pressure for government to shift health care costs to individuals and away from government.  This is the core of the Republican health care plan, and if enacted the burden on individuals will increase substantially.  From the New York Times is this

Eric Michael Johnson for The New York Times
Allan Evans at his home in Flushing, Queens.
Last year, his insurance company tried to raise his rates
while he was undergoing chemotherapy for lymphoma.

The higher premiums are particularly unwelcome at a time when the economy is sputtering and unemployment is hovering at about 9 percent. Many businesses cite the cost of coverage as a factor in their decision not to hire, and health insurance has become increasingly unaffordable for more Americans. The cost of family coverage has about doubled since 2001, compared with a 34 percent gain in wages.

            The Times article also illustrated its point with this summary of an individual

Allan Evans, a musicologist who was undergoing chemotherapy for lymphoma last year, was notified that his Emblem Health premium would increase 270 percent, to $2,293 a month for his family’s $5,000-deductible policy, provided through his wife’s business, a small Italian language school in Greenwich Village. Emblem had eliminated his family’s category and offered a more expensive plan. That kind of increase is not reviewable by the state.

  1. Employers, like insurance companies, are in the middle of the problem.  Employers are facing increased costs for their portion of health insurance while also facing employees whose real income is not rising and who are less and less able to afford taking on increased health insurance costs themselves.

The hope is that this one year result is an anomaly and that in the future health care costs will not be rising as fast.  Hope, unsupported by facts and historical results though is not the best basis for policy.

Airlines and Airports That Receive Massive Federal Subsidies Fight Higher Taxes

Dodge City Needs Its Heavily Subsidized Airport So Matt, Doc, Kitty and Festus Can Catch the Bad Guys

There is a federal program called Essential Air Service that almost no one has ever heard of, and no one knows about.  Here is the description.

The Essential Air Service (EAS) program was put into place to guarantee that small communities that were served by certificated air carriers before deregulation maintain a minimal level of scheduled air service. The Department currently subsidizes commuter airlines to serve approximately 140 rural communities across the country that otherwise would not receive any scheduled air service.

Wow, 140 Airports that would not have service unless subsidized by the taxpayers.  Here is just one example.

justin Merriman for The New York Times
The airport in Johnstown, Pa.,
 is named for the late Representative
 John P. Murtha and has three
 subsidized flights daily.

On the outskirts of this faded steel town, the John Murtha Johnstown-Cambria County Airport boasts a modern runway, a high-tech security area and even a trendy restaurant. It lacks one thing: passengers.

Each year, Washington’s Essential Air Service program pays about $1.6 million for three daily flights between here and Dulles International Airport outside Washington. Most flights have 10 or fewer people on board and the airport is virtually deserted. Many travelers drive two hours to Pittsburgh, where fares are often lower and flights are plentiful.

So one would think that a proposal to raise airline fees to help reduce the deficit would be supported by people who are subsidized into existence.  Nope, not the case.

President Obama is asking passengers to pay a few dollars more in taxes for an airline ticket — which already is about 20% taxes and fees. And the travel industry is in an uproar about it.. . . Perhaps no part of the industry is howling louder than regional airlines. They say the $100 tax on a plane every time it takes off hits them — and the passengers who fly on their planes — the hardest.

See, American industry is all for freedom and independence of government interference, except when that interference is to subsidize their operations.  And one of the most ultra Conservative Senators in the Senate is firmly ok with government subsidies and no tax increases to help pay for them.

DC Airport.jpg
Sen. Pat Roberts, R-Kan., says flights from his hometown area of Dodge City already are struggling, although taxpayers subsidize them. If flights are canceled, passengers have to drive nearly three hours to Wichita or farther to Denver or Albuquerque

That’s okay Mr. Roberts, Matt will be guarding the wagon train all the way to Denver.

Interest Rates on Residential Housing: Another Lesson in the Limits of Monetary Policy

Another Lesson Serious People Didn't Want to Learn

Economics has two major policy tools at its disposal.  Fiscal policy is implemented by changing government spending and/or taxes.  By increasing spending or decreasing taxes expansionary fiscal policy will increase Aggregate Demand in an economy which will lead to higher employment and output than would otherwise occur.  Conservatives don’t like fiscal policy on philosophical grounds, because it requires active involvement of the government in the economy.

Monetary policy is implemented by changing to supply of bank reserves and influencing the rate of interest that borrowers pay to borrow money.  Conservatives generally like monetary policy (except when it is trying to support an economic recovery while Barack Obama is President, then they don’t like any constructive economic policy) because its effects are indirect. 

Unfortunately monetary policy is not symmetric.  Restricting the availability and supply of credit and raising interest rates can shut down an economy that is experiencing excess demand related inflation.  So the logical conclusion would be that increasing the availability and supply of credit and lowering interest rates would stimulate the economy.  That conclusion would be wrong.

The reason it is wrong is that low interest rates and high credit availability is a necessary but not sufficient condition for economic expansion.  Consumers will not spend more, and businesses will not invest more just because interest rates are low.  Consumers must have the income to be able to buy more, and businesses must have the prospects of higher sales in order to invest more.  If these conditions are not present, monetary policy will be largely ineffective in expanding economic activity.

Such is the case with housing.  Current mortgage rates have been falling for several years, and are currently at the lowest levels in decades.

the average interest rate on a 30-year fixed mortgage fell to 4.01% this week from 4.09% a week ago. This week's rate is the lowest since 1951.

The average rate on a 15-year fixed mortgage ticked down to 3.28%. Economists say that's the lowest ever for that loan.

So what is happening in the housing market?

low rates have so far done little to boost home sales or refinancing.

A second report Thursday said the number of Americans who signed contracts to buy homes fell in August, after a weaker-than-expected peak buying season.
The National Association of Realtors says its index of sales agreements fell 1.2% last month to 88.6.

A reading of 100 is considered healthy. The last time the index reached that level was in April 2010, final month that buyers could qualify for a federal tax credit that has since expired.

As for home sales, the record shows this

The pace of sales for previously occupied homes is slightly above last year's 4.91 million sold, which was the fewest since 1997. In a healthy economy, Americans would buy roughly 6 million homes each year.

In August, sales of new homes fell for a fourth straight month. This year is shaping up to be the worst for new-home sales on records dating to 1963.

Now one expected benefit of lower mortgage rates is that re-financing is possible.  This has the same economic effect as a tax cut, it can increase the disposable income of taxpayers by thousands of dollars a year.  Except, in the current situation so many houses are underwater, worth less than their current mortgage balance, that re-financing is not possible.  You cannot refinance a 6% mortgage into a 4% mortgage if the mortgage balance is $220,000 and the residence has a market value of $200,000.  So even this potential benefit of lower rates is reduced.
The conclusions are absolutely clear to everyone except those in economic policy positions.  Unless middle class income earners see an increase in their incomes, or expect an increase in their incomes and do not expect to lose their jobs, low mortgage rates will not increase home sales substantially.  And those conditions can only come from fiscal policy.

Lesson over, the quiz will be November 2012.  Most of the class is not expected to pass.

The Wall Street Journal Explains David Ricardo – The Great British Economist, Not the Blogger

 The Dismal Political Economist Just Wanted to Clear that Up

Getty Images
Nineteenth-century British economist David Ricardo
advised nations to focus on what
they produced best, such as his
nation's textile manufacturing industry,
pictured above, at the time of the Industrial Revolution

International trade is one of those economic things that get people all riled up, and for good reason.  Free and open trade can propel a society into a period of strong economic growth, and at the same time result in the impoverishment of a subset of individuals within that society.

The intellectual underpinnings of internal trade were best elucidated by a 19th century British economist with an Italian name.

British economist David Ricardo changed how people think about trade when he came up with the theory of comparative advantage: Countries do best, he said, by concentrating on their strengths, and then trading with others for everything else.

The result is that over time the economics profession and liberal (in the European sense) have come to believe that free trade is the appropriate economic system.  Germany is currently Europe’s strongest economy, and Ireland’s recovery, if indeed it has one, will be driven by exports.

But, and there always is a “but”

But while it holds that countries are better off for trading, that isn't always true for all people—such as textile workers. Moreover, free trade critics contend that in the real world, where governments promote and protect industries, things are lot messier than in Mr. Ricardo's model.

This is good information for ideologues of every persuasion.  Get rid of your certainties, the world is a lot messier than you think it is.

S & P Gave Triple A Rating to Dummy Investments –

 And Even a Dummy Can Figure Out Who the Dummy Was

A mortgage backed bond is a pretty easy investment to understand.  A financial firm takes a large number of mortgages and bundles them into a package.  The package is then divided up into small units so that investor can buy a fraction of the entire package.  In this way investors get to invest in mortgages, and get the diversification that comes from owning a small piece of a large number of mortgages.

These CDO’s (Collateralized Debt Obligations) get even better for investors because they can be rated.  S & P in July of 2007 rated one such CDO, something with the name of Delphinus CDO 2007-1 issued in July 2007 and this is what happened.

[CDO_chart]S&P originally assigned its highest rating to the deal based on "dummy," or hypothetical, assets, then maintained that triple-A rating even though bankers had replaced them with lower-quality assets that didn't meet the firm's ratings standards, according to emails among S&P analysts that were disclosed in congressional testimony.

As for the e-mails that support the condemnation of S & P, well here they are.

So the question here is, who exactly is the “Dummy”?  The choices are

  1. The Issuer: 

No that’s wrong.  The issuer made a huge amount of money by creating the CDO in the first place, and as far as anyone knows, no one associated with the issuer has suffered in any way.

  1. S & P

No that’s wrong.  S & P gets huge fees from issuers to provide ratings for these securities.  And even though

Moody's downgraded Delphinus from triple-A to "junk" status in January 2008. S&P followed suit in February.

The S & P company continues to be in the ratings business, and surprisingly enough doesn’t seem to have suffered any from what appears to be a monumental attack of greed and stupidity on their part. 

  1. The Investors

Yes, that’s right.  The investors, people and institutions who bought these securities thinking they were Triple A instead of “Junk” are the real dummies.  See they relied on a firm like S & P to be honest and upright, and who does that with respect to investing any more.  They bought Triple A rated bond that should have been on "double secret probation".

Thursday, September 29, 2011

Are Stand Alone Children’s Hospitals Part of the Health Care Problem or Part of the Solution

Venturing into An Area Where Few Commentators Want to Go

Nemours Children's Hospital in Orlando will rank
among the more expensive children’s hospitals
ever built when it is completed next year
(Photo by Joe Burbank

Kaiser Health News has undertaken a study of 39 large, independent non-profit  Children’s Hospitals.  They wanted to take a look at the economics of the operations of these units.  The natural assumption is that a hospital devoted to children would be operated by dedicated professional who were devoted to maximizing the amount of care provided for children, regardless of  remuneration to the institution or themselves.  Alas that has not turned out to be the case. (Thanks to Aaron Carroll of The Incidental Economist for the reference)

The Kaiser study produced some surprising results.  The first one is how much money these “Non-Profit” institutions are making.

In 2009, the elite children’s hospitals reported $1.5 billion in profits – what nonprofits call surpluses. The top 10 alone earned more than $800 million in profits. Children’s Hospital of Philadelphia reported a $197 million surplus

Uh oh, and what about executive compensation, which usually goes along with making a lot of money in the private sector.

In 2009, most CEOs at the nation’s largest children’s hospitals were paid $1 million or more, public tax returns show. Randall L. O’Donnell, CEO of Children’s Mercy Hospital in Kansas City, led the list at almost $6 million, including a special payout of $4.1 million based on his years of service. Five other CEOs collected more than $2 million. Many of the executives received hefty bonuses, country club memberships, cars or other perks.

And what about the charity of these non-profits, well there is this

The 39 largest hospitals, KHN found, had accumulated $21 billion in stocks, bonds, real estate and other investments as of 2010 – more than enough to provide an entire year’s worth of medical care for free They had net assets – the equivalent of net worth for nonprofits – of $23 billion . . . Even with their tax breaks and wealth, top children’s hospitals provide relatively little charity care. On average, about 2 percent of what children’s hospitals spend is for free medical care, according to the National Association of Children’s Hospitals and Related Institutions (NACHRI), an industry group. Some of the largest and richest children’s hospitals spend less than one percent

And in terms of costs of care, well given how much money these hospital are making and how much they are paying their CEO’s one would expect the costs to be pretty high.  One would be right

The big, freestanding children’s hospitals generally have a huge advantage in the marketplace: They face little competition and provide an essential service, giving them leverage to negotiate favorable prices with health insurers. At some, charges have risen sharply, increasing two to three times inflation, records and interviews show. That has encouraged aggressive expansion and spending on new facilities, costly technology and executive pay.

 In fact, their costs have risen so much that

Children’s Hospital of Boston, arguably the nation’s best known hospital for children, listed $2.6 billion in stocks and other investments in bond filings.
Last year, the 400-bed hospital was cited as having some of the highest charges in Massachusetts in a report critical of hospital charges filed by State Attorney General Martha Coakley.  Hospital officials declined numerous requests for an interview, but noted on their website that they have lowered the rate of their increases.

There are major efforts on the part of these institutions to help the community

In an e-mail, a spokeswoman noted that Texas Children’s used more than $80 million of its own money to fund research, teaching and other community-based initiatives as part of its charitable mission. Other children’s hospitals point to clinics and public health programs as examples of their community outreach. They say those efforts exceed the value of their tax exemptions.

But what is happening now is that these institutions are engaging in major and very costly expansions. 

There are other reasons for high costs. Many of the new hospitals are architectural showcases. They feature atriums, rooftop gardens, indoor playgrounds, flat panel televisions, on-demand movies and video games and work stations for parents, among other amenities.
Martin Gaynor, an economist at Carnegie Mellon University who has written extensively about hospital spending, says he was stunned when he toured the new Pittsburgh hospital. “I couldn’t believe it,” he said. “It’s a beautiful, beautiful facility. It’s a very nice facility for the families and kids.
“It’s a very awkward question to ask,” Gaynor added, “but at some point one wonders just how nice does this have to be?”

So don’t expect health care costs at children’s hospitals to come down soon.  

Republican Senator Quits Leadership Position to Pursue Compromist and Immediately Demands No Compromise

This Wouldn’t Happen in a Country with a Free and Independent Press

As the government lurched towards its latest shutdown problem, The headline in the Washington Post reads this way

Shutdown looms: Spotlight now on Senate after Boehner wrangled House GOP votes

Leaving of course the clear impression that it was the Democratically controlled Senate that has to act to meet Republican demands.  And the New York Times has this favorable story on Tennessee Republican Senator Lamar Alexander

Tennessee Senator Takes a Stand for Compromise

whom they commend for stepping down from his Senate leadership post to work for compromise, conveniently omitting the fact that Mr. Alexander’s “compromise” position for the Senate on this issue was that Senate Democrats should just shut up and take the House Republican’s bill as is.

Sen. Lamar Alexander (R-Tenn.) said on the same program: “Everybody knows we’re going to pay for every single penny of disaster aid that the president declares and that FEMA certifies. And the House sent over a bill that does that and the Senate should have approved it.”

Well no thanks to Sen. Alexander a compromise was reached and the government will not shut down over this issue. 

But yes, you have that correct.  That is the way Republican Senators work for compromise, and that is why such a person is lauded by the New York Times, and that is why we need to go back to the time where the United States did have a free press and actually paid attention to what was going on and what people said and did.

UAW Approves GM Pact, Slovakia Now Controls Europe’s Fate, Republicans Want to Cut Benefits for Wealthy People to Pay for Tax Cuts for Rich People,. .

And Other News that is In the News

After GM and the UAW reached tentative agreement on a labor contract, the contract was submitted to a vote.  It appears that about 65% of those voting approved the agreement.  The NYT reports this

At several large plants, fewer than 40 percent of eligible workers made the effort to vote, based on results posted online, evidence of considerable apathy toward the agreement. 

That sounds about right.  The contract was a good, basic agreement that should not have excited the union members nor discouraged them.  In this case the cited apathy is a good sign.

Finland has approved the new new new (as opposed to the new new) European bailout plan.  Why does anyone care what Finland does?  Well approval for action takes a unanimous vote by the European countries involved, so one country can veto the entire operation. 
Finland was considered a potential problem since that country wants guarantees and collateral before it will approve funding. 

Before anyone gets too excited, there is this.

The 103-to-66 vote, with 30 legislators absent, still leaves 7 of the 17 members of the euro zone yet to ratify a bailout fund that, despite expanded resources and power, is considered much too small to fend off further market attacks on Greece and other wounded countries.

And this

Finland can now be checked off the list, the next holdout may prove to be Slovakia, where there was talk a vote on the bailout fund might be delayed until late October, past the unofficial deadline of midmonth. Many Slovakians resent having to help bail out Greece, which, despite its problems, is wealthier.

So now the western world waits on Slovakia for the next crisis point.

Memo to Europe:  All of us are getting a little tired of this saga, can you come up with a new crisis to entertain us?

Washington Post Columnist Marc Thiessen reports on the fact that Republicans are not the pro-rich people you think they are.  In fact, according to Mr. Thiessen they want the rich to get less benefits, and want to do so in part by means testing Medicare and Social Security so benefits for wealthy people are less or removed altogether.

Now you are probably thinking this is a great way to reduce the deficit.  Well, not so fast according to Rep. Paul Ryan (R, Wi)

The GOP’s difference with Obama, Ryan says, is that the president “sees closing tax expenditures as just raising revenues,” while Republicans want to “use that revenue to reduce tax rates so we can get faster economic growth and job creation.”

Yes, Republicans want to reduce benefits for wealthy people and big business so they can cut taxes on wealthy people and big business.  After you stop laughing, try to remember that Mr. Ryan and his colleagues are considered “serious people” in Washington.

California recently passed a new fiscal year budget that was balanced by spending cuts alone, as Republicans refused to allow the issue of tax increases to go before a public referendum (democracy is just not their thing).  Now the budget may not be all that balanced, particularly after California pays huge legal fees to fight lawsuits against its budget.

School officials, including those at the L.A. Unified School District, said they would file suit Wednesday alleging that Gov. Jerry Brown and state legislators illegally manipulated California's voter-approved education funding formula to shortchange them by $2 billion. And a coalition of disability-rights activists said they planned to sue Wednesday as well to block nearly $100 million in cuts to services for the developmentally disabled. . .

The state is already in court battling redevelopment agencies over an attempt to take $1.7 billion from them. And California officials are pleading with the Obama administration for permission to reduce Medi-Cal spending by $1.7 billion. . . .

If state income falls short of lawmakers' budget forecast, automatic cuts inserted as a fiscal safeguard will go into effect, slashing spending on schools, universities, libraries and programs for the needy. Some school districts could shorten the academic year by up to seven days.

Meanwhile Republicans continue to tout American Exceptionalism, you know, how much better the U. S. is than everyone else.  Hard to see how California is going to lead the way in Exceptionalism.

A Republican Congressman, Don Young of Alaska, wants to repeal every regulation that the government has issued since 1991.

"My bill is very simple, I just null and void any regulations passed in the last 20 years," Young told the Anchorage Downtown Rotary Club.

The proposal may have been been too extreme for his audience

At least some members of the Rotary crowd appeared taken aback by the breadth of what Young appeared to be saying, given all of the passenger jet safety, pesticide, food safety, banking and other regulations that have come into place since 1991.

Rep. Young does not consider himself a radical,

he started his speech by talking about the need for Congress to become more moderate and less politically partisan

but apparently he was absent from class the day they taught what “moderate and less politically partisan” really means.  Mr. Young  apparently thinks it means that everyone should think, (if "think" is the operative word here), like he thinks.  The Dismal Political Economist doesn't think so.

Groupon Walked Away From $6 billion Last Year, and Now a Lot More May Be Walking Away from Groupon

Greed, Like Pride Sometimes Goeth Before a Falleth

When Google offered to buy Groupon, the Company that pioneered on-line coupon sales for $6 billion the immediate reaction by savvy, knowledgeable financial types was “take the check, get to the bank before it closes and make sure it clears”.  This was also the reaction of non-financial experts, in fact it was the reaction by almost everyone who had a pulse. 

Groupon CEO Doogie Howser  Andrew Mason

The only people who did not have this reaction were Groupon shareholders.  They envisioned a public offering that would value the company at $20 billion.  An so they filed to go public this summer, expecting to sell shares at that valuation and make themselves incredibly rich.  The forgot several things however,.

The first thing they forgot was that Google was offering hard currency, whereas after a public offering all they would hold is public shares that had a theoretical value, but not a realizable one, at least not in the short run.  This was because even after the stock went public the owners could not dump all their share on the market without depressing the value of the stock. In fact there was no guarantee that a public offering could be successfully done at all.

More importantly, the second thing they forgot was that Groupon did not have a monopoly on its business model.  There are no real barriers to entry.  There is no real way to protect the company from competition which duplicates the Groupon process exactly.  And so the public offering, as expected, is running into difficulty.

Groupon, which filed to go public in June, has sought a valuation of $20 billion in one of the most highly anticipated stock offerings among a new crop of Web companies. But questions have emerged since then about its prospects amid an influx of competition and rising costs to acquire customers that are cutting into its profits.

The offering has also faced intense scrutiny from the Securities and Exchange Commission, which led Groupon on Friday to amend its offering filing to reduce reported revenue for 2010 to $312.9 million from $713.4 million. The SEC required the company to include only what it keeps from daily deal offers, excluding the amount it shares with merchants.

Recent experience with new IPO stocks has not been all that good.

Some of the tech stocks that soared after their IPOs earlier this year have tumbled lately. Business-networking service LinkedIn Corp., which went public in May, is down 31% from its peak in July. Online music provider Pandora Media, which went public in June, is off 46% from its peak. And online realestate data provider Zillow Inc. is off 28%.

Now this is not to say that Groupon will not ultimately be a great investment, many companies were pronounced overvalued failures before  they were big successes, Amazon being the most famous.  Still, that $6 billion in good old American dollars probably looks a lot better today, and if Groupon shareholders were to come across a time machine and be able to go back to the Google offer, well let’s just say the outcome might have been a little different.

Is the Other Rick Perry Going to Show Up for the 2012 Campaign?

The Current Incarnation is Not Ready for Prime Time

The surprise so far of the political season has been the performance of Texas Gov. Rick Perry in the Republican Presidential debates.  Mr. Perry’s performance in his third debate has been largely criticized, and may have resulted in his losing a rather meaningless straw poll in Florida over the weekend.  Politico has this story

Mr. Perry and Republicans
Before the Debates

First, Perry drew a round of scathing reviews for his unfocused debate performance in Orlando Thursday night. Then he suffered a thumping defeat in the Florida GOP’s straw poll – to long-shot candidate Herman Cain, no less – that amounted to a vote of no confidence from dissatisfied activists.

And the Wall Street Journal has this story

Fergus Cullen, a former New Hampshire GOP chairman, said Mr. Perry looked like "a fourth-grader'' when he criticized Mr. Romney, delivering lines with his head down and voice muffled. "I still think he has considerable potential. But when you come into a race with as high expectations as Rick Perry had two months ago, you really have to deliver,'' said Mr. Cullen, who isn't affiliated with any candidate in the race.

The interesting thing is how mild and passive Mr. Perry has been.  He came into the campaign as a battling politician, one who would do anything, say anything and always attack his opponent.  He campaign adviser is known as an individual who wants to win, in any way possible.  In Mr. Perry’s comeback campaign against Sen. Hutchinson for the Texas Governorship last year, the head of Mr. Perry’s campaign

poured money into targeted TV ads, with a heavy emphasis on negative ads blasting Sen. Hutchison's voting record

and the largely negative campaign won going away.

There would seem to be two reasons for Mr. Perry’s poor showing so far.  First of all Mr. Perry has clearly underestimated what it takes in terms of stamina and preparation to engage in a series of Presidential debates.  The second, which relates to the first is that Mr. Perry’s political history is 100% Texas, and he knows Texas thoroughly.  Indeed he is so well versed in Texas details that he cannot be attacked on that subject because he can answer with facts and figures that only he knows.  .

Because of his fluency in Texas government, Mr. Perry apparently has felt he has fluency in national politics, which is clearly does not. He does not know what he does not know.  He has some time to gain knowledge and poise and delivery.  He has some time to convince skeptics that his main weakness, which is on immigration where he favored in state college tuition for illegal immigrants who had been brought to the U. S. as young children and graduated from Texas high schools is not an evil thing.

Two new polls have heightened the concerns Mr. Perry should have.  An American Research Group poll of likely Iowa Caucus goers shows Mr. Romney in front, followed by Michele Bachmann with Mr. Perry behind her.  And in Florida Mr. Romney has also taken the lead over Mr. Perry, with a Public Policy Poll showing Mr. Romney up 30% to Mr. Perry’s 24%.

If the Republican race was down to two people by the time Florida votes, Romney would lead Perry 45-36 in a head to head.

The Dismal Political Economist did warn everyone that Mr. Perry’s lead in the CNN poll taken right after the last Florida debate could be misleading

Mr. Perry should now know what he has to do. The question is does he have the will and the knowledge and the motivation to do it.

Wednesday, September 28, 2011

Conservative Virginia Attorney General Cuccinelli Takes the Correct Position in Criminal Case

Conservative Principles Often Work When Conservatives Embrace Their Principles

In a wrongful conviction case in Virginia, a man served 27 year after being convicted in a rape case. 

P. Kevin Morley/Richmond Times-Dispatch, via Associated Press
Thomas Haynesworth after being released from prison
 in March. DNA proved he did not commit two
of the rapes he was tried for.

DNA has since proved that he did not commit two of the rapes he was tried for. The DNA from those two cases pointed to another man, in prison for having committed multiple rapes in the same neighborhood that occurred after Mr. Haynesworth’s arrest. That man, Leon Davis, who identified himself to victims as “the Black Ninja,” is serving multiple life terms plus 100 years

Now a typical result in thee situations is that the prosecutors and the state refuse to admit error, even in the face of incontrovertible evidence that the conviction was incorrect.  Since the Attorney General of Virginia is a strong Conservative, the expectation was even greater in this case that the state would insist on the guilt of the person and never, ever admit that a mistake was made.

This was not the situation in Virginia.  Everyone agreed that the defendant should be declared innocent by a court of law.

Now Mr. Haynesworth, 46, is asking for full exoneration on all of the rape convictions, although DNA from the other two cases is not available. But the circumstantial evidence supporting Mr. Haynesworth’s claims of innocence is so powerful that along with his own lawyers, the prosecutors from both jurisdictions where the rapes occurred support his efforts, as well as the attorney general for the commonwealth, Kenneth T. Cuccinelli.

One would have to look very hard to find a more doctrinaire Conservative than Mr. Cuccinelli.  But he did, or has tried to do the right thing.  However, for inexplicable reasons the state court in Virginia has, so far, not agreed to exonerate Mr. Haynesworth.

in July, a three-judge panel of the Court of Appeals of Virginia said, in essence, “Not so fast.” The court called for additional briefs in the case, which will be heard again on Tuesday by all of the judges of the court.

It is a move that has left legal experts astonished. “It’s very rare for a court to set a case for argument when all the parties are agreed,” said Stephen J. Schulhofer, an expert in criminal justice at New York University law school, adding that “it’s essentially unheard of” for a court to take matters into its own hands, instead of appointing a special advocate to argue on behalf of the interests that they believe are unrepresented.

Exactly why the court is so skeptical is unknown, one suspects it is part of the attitude expressed earlier that government, once it has convicted, is loathe to change the outcome.  At any rate, the saga is not over, and one hopes that justice is ultimately done.  In the meantime, kudo’s to Mr. Cuccinelli, The Dismal Political Economist is more than happy to see a person do the right thing, particularly when it goes against the grain of the attitude of many others who share the same political philosophy.

Life Settlements Market is Setback – More Evidence the Financial Sector Corrupts Everything It Touches

Ruling In Delaware Moves Unsavory Investments on Death Closer to Death

About 20 years ago, with the advent of the Aids epidemic, victims of that disease and other life threatening diseases with life insurance policies determined that they could sell those policies and use the funding to help pay for their medical treatment.  There was nothing wrong with this, in fact there was a lot of “right” with this.  In effort, the sale of the policy was a covered loan in which the desperate patient got money for life extending treatment and the lender got the assurance of a return of funds from the life insurance policy.

You See a Critically Ill Person
Wall Street Sees a Way to Make a
Fast Buck

Wall Street, as it does with many things, did not see this process as a decent and humane way to help seriously ill people.  It saw it as a way to make money.  And so it developed a new financial product.

During the boom years of the mid-2000s, some Wall Street firms began packaging policies into investments. Demand for the policies surged, prompting commission-hungry agents and other middlemen to fill the pipeline. Market experts estimate that thousands of people took out policies for quick flipping to investors between 2004 and 2008. The industry, like many financial markets, froze in 2008.

This was an investment everyone could understand.  An investor bought into a pool of policies, paid the remaining premiums and as the pool insureds died off, they collected a nice return on their investment.  Of course, the greed of investors and Wall Street firms led to abuses. Old or sick people were lured into buying policies, then immediately flipping them to investors. Here is a typical example

a $9 million policy issued in 2007 by Phoenix on the life of Price Dawe, then 71 years old, through a Delaware statutory trust. Mr. Dawe claimed a net worth of $14 million and annual income of $500,000 in applying for the policy for estate-planning purposes, court filings show.
Mr. Dawe died in 2010. As Phoenix investigated the death claim, according to the insurer's filings, it learned the GIII investing entity purchased the beneficial interest of the Dawe trust for $376,111 less than two months after the policy went into force. As for Mr. Dawe's alleged wealth, he actually had "negligible income and assets," the insurer's filings state.

So the good news is that a court in Delaware has ruled insurance companies can argue fraud, even after the normal two year period for protesting a policy has passed. 

The decisions arm the insurance industry with valuable ammunition for shedding what it argues are unsavory policies that could tarnish its reputation with consumers and lawmakers. . . The rulings also threaten to stifle a potential revival of the so-called life-settlement market, which already is reeling from a three-year downturn.

One now hopes that the Delaware rulings do indeed stifle the revival of the life settlement market, in fact we hope it kills it outright and that it does not have any life insurance coverage.