Marketplace Scratch Pad

Morning Reading

Scott Jagow Aug 19, 2009

Some good stuff this morning, from Wall Street to health care to Cash for Clunkers. Let’s begin with the lightning rod of the wealthy:

At Investor’s Business Daily, former Fed economist Michael Cox offers some interesting ideas in lieu of President Obama’s revenue policy being “let’s tax the rich”. Clink on the link to read the list, but here’s how Cox sums it up:

Obama’s fiscal straightjacket leaves a stark choice — unless he risks political suicide by raising taxes on the middle class. One way, he can wage war on the rich, saddling himself with a legacy of high taxes, big deficits, stagnant growth and high unemployment. It won’t look good to voters in 2012.

The other way is surely more palatable for a politician bent on re-election: Make peace with the rich and do what’s necessary to create an environment where they’ll be fruitful and multiply, so tax revenues will rise and deficits will shrink.

There’s a wicked irony in Obama needing the rich, but they should be more than happy to bail out his presidency.

They win. He wins.

At Slate, former New York governor Eliot Spitzer says the small investor still has very little chance to succeed on Wall Street:

Recent rebounds notwithstanding, most people now are asking whether the system is fundamentally rigged. It’s not just that they have an understandable aversion to losing their life savings when the market crashes; it’s that each of the scandals and crises has a common pattern: The small investor was taken advantage of by the piranhas that hide in the rapidly moving currents. And underlying this pattern is a simple theme: conflicts of interest that violated the duty the market players had to their supposed clients. It is no wonder that cynicism and anger have replaced what had been the joy of participation in the capital markets.

At Real Clear Markets, Steven Malanga makes some good points about health care. He says a public option wouldn’t be necessary if health insurance worked like other forms of insurance:

Consider auto insurance, which is typically required of us by states, and home insurance, which mortgage lenders demand. Both give us protection from financial ruin at more reasonable prices than health insurance because our options are greater and the scope of the coverage narrower.

When we buy home insurance we are essentially purchasing security against a catastrophic event that could cost us our investment in our home and possibly ruin us financially. We don’t expect this insurance to cover everything that goes wrong on the property. Instead, we accept that we will pay out of our own pockets the tradesmen who come and install our new water heater, fix our electrical short-circuits and repave our driveway. Many of us haven’t gotten a health care bill in years equal to what we paid the plumber for his last visit because the cost of a home insurance policy that covered every leak and crumbling piece of pavement would be prohibitive.

I think he’s on to something there. Meanwhile, NPR looks at the co-op idea:

Robert Laszewski, who heads a Washington, D.C.-area consulting firm, says, “I think they’re the single dumbest idea I’ve heard in 20 years of being in Washington and working on health care policy.”

Laszewski says there’s no need to promote co-ops. They can already form on their own…. Laszewski says any kind of new insurer will need a lot of cash on hand to line up doctors and hospitals willing to treat patients, and to set up health IT and billing systems.

But NPR also talked to a spokeswoman from Group Health, a co-op in Washington state:

What kind of care do members of Group Health get?

We have really different kinds of packages. You can buy individual coverage for your family with a high deductible that would look very much like any other insurance package. We offer full coverage through employers and Medicare Advantage plans. Some people purchase a policy that allows them to go to any doctor; other people purchase something that’s a little more restrictive that just allows them to go to Group Health doctors.

So how would a member feel the difference?

You would feel in control; you have access on e-mail to your doctor; you can make appointments on e-mail; you have access to your medical record. Overall, there’s a sense of transparency, with you being in the middle and calling the shots.

Elsewhere, the Fundmastery Blog tears apart the Cash For Clunkers program:

Let’s review the scoring here. First, Joe Consumer turns in a decent car, which gets destroyed. He then buys a new car for, let’s say $25,000. Government borrows $4,500 and pays auto company the dough, which offsets that portion of the cost of Joe’s car. However, Joe Consumer has to come up with the balance of $20,500 which has to come from his savings or from a loan. Of course, when Joe drives the car off the lot, the value drops by 20% or so.

Joe Consumer: Loses older car that was paid off. Now, he’s making payments on a loan of $20,500 on a car worth $20,500.
U.S. Government: Now owes another $4,500 to bondholders.
New car company: One new car sale
Other consumer product retailer: One less sale
Environment: One more scrapped car plus environmental costs of making new car
Environment: Slightly higher average mileage for gasoline
Charities: Fewer folks donate old cars to needy charities
Used Car Buyers: With used car costs soaring, those who need a decent car end up paying more
U.S. Taxpayer: Grab your wallet

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