QUOTE OF THE DAY
Reason: Obamacare’s Failed State Exchanges
The federal government spent more on broken state-run exchanges than it did on its own troubled system. Of the 14 states, plus the District of Columbia, that established their own health insurance coverage under Obamacare, seven remain dysfunctional, disabled, or severely underperforming. Development of those exchanges was funded heavily by the federal government through a series of grants that totaled more than $1.2 billion—almost double the $677 million cost of development for the federal exchange.
Here’s a rundown of the troubled state exchanges and the federal grants they qualified for.
Oregon
No exchange failed more fully or more spectacularly than Cover Oregon. The site was touted as an ambitious, expansive vision for what a state-run exchange could be, with The Washington Post declaring that it could be the White House’s favorite exchange. The project received a $48 million “early innovator” grant from the federal government, which hoped that the exchange would be a model for other states State officials announced early on that the exchange’s launch would be delayed by a few weeks in order to get every detail right. But months later, the exchange remained offline and unusable. Reporting by The Oregonian later revealed that independent consultants paid to monitor the project had warned early on that it was headed for disaster, but that leadership in the Oregon Health Authority attempted to silence criticism by withholding payment. The state official in charge of building the exchange has stepped down, and a group of Republican congressional representatives have called for a federal investigation.
Quartz: This chart proves that unions can’t offer job security anymore
In 2002, desperation and dwindling membership led the United Auto Workers (UAW) union to recruit folks like me: graduate students at Columbia. After all, we too are undervalued, exploited, and a left-leaning bunch.
Except I was in the economics department, which actually crunched the data on membership dues, taxes, and perks. We emerged feeling lukewarm on the prospects of membership—unlike other disciplines. A strange quirk of academic culture is how alliances are formed. Economists judge people based on their math ability: friendship is fine with a physicist, but not an English student. Political scientists are tolerated because they validate our belief that economics is the most important and difficult subject. (If economists are the Mean Girls of academia, political scientists are our Gretchen Wieners.)
In the end, our union movement died when Columbia successfully appealed the ruling that we could unionize in the first place (though it recently resurrected itself at New York University).
Bloomberg: Free-Market Bashers Aren’t Helping the Poor
Republicans in Congress are trying to convince Americans that conservatism offers better answers than liberalism to the problems of poverty.
Larry Bartels, a political scientist at Princeton University, is having none of it. In the Washington Post, he makes a provocative argument: The free market that Republicans laud “has done nothing at all” to help the poor over the past 40 years. Government programs have alleviated poverty, he argues, but our free-enterprise economy has “failed abjectly” at that task.
That’s a thoroughly wrongheaded and counterproductive way to think about poverty.
New York Times: Feburary Employment Increase Suggests Spring Thaw
The American economy appeared to emerge from a winter hibernation in February, creating more jobs than in either of the previous two months and suggesting that momentum in the labor market might gradually build with the arrival of spring.
While analysts cautioned that the report on Friday from the Labor Department was hardly cause for celebration, it eased fears of another prolonged slowdown, which had been raised by weak figures for hiring in December and January and mixed signals from recent releases of other data. The improvement last month led some experts to conclude that a hard winter, not a fundamental downshift, was the prime mover behind the economy’s lackluster performance at the end of 2013 and the beginning of 2014.
With employers hiring 175,000 workers, the payroll gain in February was still well short of the pace needed to return the economy to full employment anytime soon or to quickly reduce the ranks of the long-term unemployed. But it was twice the number of jobs added in December, when the cold and snow arrived, and it came against a backdrop of more wintry weather last month.
WSJ: Donald Boudreaux and Liya Palagashvili: The Myth of the Great Wages ‘Decoupling’
Many pundits, politicians and economists claim that wages have fallen behind productivity gains over the last generation. This “decoupling” explains allegedly stagnant (or in some versions of the story, declining) middle-class incomes and is held out as a crisis of the market economy.
This story, though, is built on an illusion. There is no great decoupling of worker pay from productivity. Nor have workers’ incomes stagnated over the past four decades.
The illusion is the result of two mistakes that are routinely made when pay is compared with productivity. First, the value of fringe benefits—such as health insurance and pension contributions—is often excluded from calculations of worker pay. Because fringe benefits today make up a larger share of the typical employee’s pay than they did 40 years ago (about 19% today compared with 10% back then), excluding them fosters the illusion that the workers’ slice of the (bigger) pie is shrinking.
The Detroit bankruptcy is offering a hard education in the risks of lending to deadbeat governments, which are increasing as state and local pension obligations swell. Investors who have enabled these unsustainable promises may be in for a lot more pain.
Public pension funds have posted double-digit gains four of the last five years, and asset levels have never been higher. Yet government pension costs are soaring as the bills that politicians postponed during the hard economic times come due. No less than Warren Buffett warned this week that “local and state financial problems are accelerating, in large part because public entities promised pensions they couldn’t afford.” Moody’s MCO -0.08% last month advised investors that “contribution requirements for pensions will remain high and trending upward in most cases.”
Perhaps the biggest pension landmine outside of Detroit is Chicago. The Windy City next year must make a $1.07 billion balloon payment—equal to a third of the city’s operating budget—on $19.4 billion of pension debt. The pension payment could cover salaries for 4,300 police officers or the resurfacing of 16,000 blocks of road, and Mayor Rahm Emanuel has warned that property taxes may have to double to pay the bill.
Washington Post: Texas isn’t just leading the nation in job growth—it’s doing it more equitably, too
You might be inclined to think that the Lone Star state is bad at creating good jobs. It is, after all, second only to Idaho in the proportion of its population earning the federal minimum wage or less, according to the Labor Department. And it has the ninth-highest Gini coefficient, a measure of income inequality. So it’s only natural to assume that the state is bad at adding good jobs, right? Wrong.
Texas experienced stronger job growth than the rest of the nation from 2000 to 2013, according to the Federal Reserve Bank of Dallas. Not only that, a pair of researchers note in a Thursday research publication, but Texas leads the nation in creation of jobs at all pay levels, too.
“Texas has also created more ‘good’ than ‘bad’ jobs,” they write. “Jobs in the top half of the wage distribution experienced disproportionate growth. The two upper wage quartiles were responsible for 55 percent of net new jobs. A similar pie chart cannot be made for the rest of the U.S., which lost jobs in the lower-middle quartile over the period.”
The Republic: 5th lawsuit challenging pension law filed by University of Illinois professors
A fifth lawsuit has been filed by state employees challenging Illinois’ new pension law.
The lawsuit from current and former employees at the University of Illinois at Champaign-Urbana and Parkland Community College was filed in Champaign County Circuit Court Thursday.
It says the legislation passed by the General Assembly in December violates several provisions of the state constitution, which says retirement benefits should not be diminished or impaired and private property should not be “taken or damaged for public use.”
Reuters: Don’t let Chicago’s crisis go to waste
Moody’s cracked the whip and downgraded the rating of Chicago’s general obligation bonds to Baa1 from A3 this week. It’s only a one-notch downgrade, but no American city should wear the scarlet letter of BBB. Chicago’s Mayor Rahm Emanuel is seemingly frozen in place and having a tough time addressing the city’s fiscal problems. His behavior belies his famous 2009 quip to never let a serious crisis go to waste.
Moody’s in its rating comment about the city’s $8.3 billion general obligation and sales tax debt seems to think Chicago is in pretty rough shape:
The negative outlook reflects our expectation that, absent a commitment to significantly increase revenue and/or materially restructure accrued pension liabilities to reduce costs, the city’s credit quality will likely weaken. The formidable legal and political barriers to these actions are incorporated in the outlook.
St. Louis Post Dispatch: Illinois pledges $20.7M to keep brokerage in state
Illinois is promising more than $20 million in performance-based incentives to an insurance brokerage company that was considering a move out of state.
Arthur J. Gallagher & Co. will keep its headquarters in Illinois, but will move from one Chicago suburb to another.
Crain’s Chicago Business reports Gallagher is moving from Itasca to Rolling Meadows where it plans to add 500 jobs over five years.
Daily Herald: Illinois unemployment rate 8.7 percent for January
The Illinois Department of Employment Security says the state’s unemployment rate was 8.7 percent in January, down from the previous month’s revised rate of 8.9 percent.
The agency said Thursday that the state lost 27,600 jobs from December to January. Officials blame record-setting snow and cold for restricting construction growth. The retail sector was hurt by the end of holiday-driven sales.
The falling unemployment rate and job losses seem to conflict. The agency says that’s possible because employment figures come from individuals and job numbers come from employers.
Washington Post: The February jobs report debunked the weather blame game
The February jobs report is a perfect illustration of why the weather has been unfairly blamed for the weakness in hiring this winter. To understand why, you have to dive into the boring logistics of how the Labor Department calculates its data.
Let’s start with the government’s estimate of job creation. The number is based off what is called the Establishment Survey, which polls businesses about how many people are on their payrolls. The survey typically occurs during the week that includes that 12th of the month.
In order for weather to have an effect on the government’s tally of job growth, two things need to happen: First, the bad weather needs to coincide with the days when the pollsters are making their calls. If it hits at the end of the month, for example, the survey is not going to capture it. Second, the weather needs to knock someone out of work for the entire pay period in order to be discounted from the payroll estimate. In other words, a construction worker who is paid by the week needs to miss the entire week due to bad weather. Here’s the government’s own language:
Politico: The Obamacare money under the couch cushions
The Obama administration is dropping some new hints about how it has moved money around to fund Obamacare without Congress — but not nearly enough to put the controversy to rest.
Forced to reveal more details under a provision tucked in this year’s bipartisan budget deal, HHS declared Friday how it used Secretary Kathleen Sebelius’ authority to move about $1.6 billion in departmental funds around last year — the cabinet secretary’s version of looking for change under the couch cushions and hitting the jackpot.
But HHS didn’t say exactly how it spent the money, and it didn’t lay out the kind of detail Republicans sought. So now the Republicans will have to decide their next move, whether it’s just more records requests or new efforts to tie the Obama administration’s hands in future appropriations bills.
CARTOON OF THE DAY
