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Thursday, January 30, 2014

No Surprises There, But An Interesting Story

I refer, of course, to Q4 GDP. This is the first release and there will be revisions.

There are several interesting things about this, but the takeaway is real disposable personal income, which explains the subdued inflation. If you refer to Table 7, you'll see that 2013 racked up an astounding 0.7% increase in real disposable personal income. In total. Of course that's due to tax changes, and also to the drawing-forward of dividends and investment proceeds in Q4 of 2012 in order to evade the 2013 tax increase. 

But still. ... FICA increases of course hit the average wage earner the hardest. Final sales of domestic product increased 1.7%, and final sales to domestic purchasers increased 1.5% for 2013. This is probably a better measure of economic activity than fficial 2013 GDP increase (1.9%) is

There are some other interesting aspects of this release, such as residential fixed investment (see Table 3) which fell 12.7 billion in the fourth quarter. In fact, even with the addition of the "intellectual property products" to GPDI, we still only picked up 22.2 billion in Q4. Fixed investment, which excludes inventory builds but now includes software, R&D and the creation of sculptures from dung by highly enterprising community-funded artists, only increased by 5.6 billion. Of that, intellectual property products accounted for 5 billion. You may perhaps be relieved to know that the mission-essential investment in Duck Dynasty episodes and dung sculptures only accounted for 0.1 billion of that, with software and R&D having a much more significant contribution. But still, I would cautiously comment that since this category was a 2013 invention, in effect we had no increase in fixed investment in Q4. 

Personal income is not quite as bad as it seems, because the investment payout pop in Q4 2012 had such  strong influence. If you will refer to Table 10, you'll see that real disposable personal income was 11,743 billion in Q4 2012, and then fell to 11,502 billion in Q1 2013. After that it rose for two quarters quite strongly to return to 11,704 in Q3, but in Q4 it only increased a bit to 11,726, thus ending 2013 year at a lower point than the end of 2012. But such increases in income have a delayed effect on spending, so Q4 2012's money contributed to the economy in 2013, and the later rebound will show up somewhat in 2014. 

So, for 2013 the official increase of real GDP was 1.9%, the actual real increase was closer to 1.7% and what is the forward trajectory for 2014? 

Here's my guess as to that question. First, it is highly unlikely that we could ever exceed 2.4%, because I think both housing and autos are near sustainable tops. But I also think that the floor is close to 2%, because although both are near the top money wants to come into the US, and neither are totally overblown. There is a downshift in the US economy now, but it's not a bad one. 

The thing that stuns me mostly is that there is so little change in forecast. Last year in the fall I calculated that the end June/early July 2014, the 10 year Treasury should be yielding around 2.83 or 2.84, and I don't come up with anything very different. Perhaps 2.78%? 

I  do expect income gains in the US to be quite subdued this year, partly due to last year's overhang, partly due to ACA effects, and partly due to whacky government policies which include actual impediments to growth, especially in regulation and taxation, which is now grossly unfavorable to actual investment.

Friday, January 24, 2014

Yes, yes, yes

I got rather sick. I survived. 

I have been watching the ACA meltdown with some fascination. It's hard to top stuff like this, but it is not funny for those who have paid their insurance bill, or had their accounts double-debited, and are still having to pay out of pocket for medicines and treatment. How long will it be before someone goes postal? 

From the provider side it's not much better - if you signed up to deal with this it is administrative chaos that has the potential to destroy a practice. 

It is not going to get better as the year wears on. The backend mechanisms aren't there, and several of the state sites are so bad they will probably be canned. The fixed expense/medical payout ratio in the law means that companies can't hire enough staff to straighten this out. Moody's is quite right.

I don't think that the government premium subsidies are being paid to the insurance companies, which is a big problem. From the insurance companies' perspectives, they are not getting paid the premiums, yet they have the problem of trying to straighten out the mess, and they have to pay claims without having received the premiums. It leaves little incentive. 

And then consider that a very small minority of their total insured counts have the capacity to overwhelm their entire customer service system - they must be scrambling to set up different numbers and try to segregate ACA customers from their paying customers. That's reality, folks, and it's why CA ACA "customers" can't get through to a human being.The government pretends to pay for your insurance, and then your insurance company pretends to provide insurance, and then your provider has to figure out what to do with patients who may or may not be insured.

From the provider perspective, all these people in healthcare limbo pose a distinct threat to your finances. If you provide care without getting payment, you are going to be in a hole, and if you don't provide care, you may get sued. In any case, straightening out the fuss for these patients is likely to chew up your customer service staff's time and cause problems for your entire patient base.

Again, this is not going to get better as the year wears on. It's going to get worse, and access to care for ACA insured people is going to degenerate as providers start to tumble to the fact that insurers are mandated to carry the policy for 90 days if the premium was paid once, but not mandated to pay claims after the first thirty days. It's going to convert to a cash-up-front deal, reimbursement later in a lot of circumstances.

Your pie-in-the-sky liberal thought of the day: It takes a village to dig a small child out of the global warming drift, although it goes somewhat faster if you use solar panels as improvised global warming shovels!!

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