Chart of the Day

Source: Heritage Foundation

Obama Town Hall: We Need Reform

I just finished watching the town hall Obama held in Montana. I felt he did a much better job than the one he held earlier this week. I actually agreed with many of the things he said. For example, insurance companies should not be allowed to discriminate against people with pre-existing conditions and that the healthcare system is definitely in need of reform.

I am still skeptical of his plan, mainly on the issue of the cost of the plan. I don't see how they can expand coverage to 47 million American without it costing trillions of dollars. The average annual cost of insurance for a single person is about $4,700 per year. Using this average, take 47,000,000 people uninsured times $4,700 and you get a cost of $220.9 billion per year. Over ten years this amounts to about $2.2 trillion, without taking into account rising costs (i.e., if they can keep health care premiums from rising at all during the next 10 years a task I find unlikely to be achieved). To give some idea about how much $220.9 billion per year is, the U.S. government will spend about $651.2 billion on defense this year.

Obama stated that 2/3's of the costs would be covered by making the healthcare system more efficient and that the government would only have to raise about $50 billion in addition revenue per year. I find these numbers quite dubious. I think best case scenario the plan will cost about $2 trillion over the next 10 years.

Also, during the town hall meeting it seemed like Obama and Dems were backing away from a public option. The public option was one of the mechanisms to control costs.

I would be in favor of a healthcare plan that is paid for by cuts in other government programs. I would not be in favor of a healthcare plan that is not paid for or one which would be paid for by rising already high taxes on the American people. Also, the costs of the plan have to be realistic numbers; the numbers that the CBO is putting out are unrealistically low.

I think some form of healthcare reform will be passed this year because the Republicans have no more credibility than the Democrats. My biggest fear is that it will not be paid for or that the government will drastically underestimate its cost.

We cannot continue to run up high deficits and expect that America will not go bankrupt some time down the road.

Friday Afternoon Linkfest: Required Reading

1. Big Pharma Loving Obama's Healthcare Bill. Big giveaways to drug companies in exchange for their support of the Healthcare bill.

2. Lobbyists Loving Obama's Healthcare bill.

3. Is the FDIC still solvent? Asks Karl Denninger.

4. How Raising Taxes Cannot Get The U.S. Completely Out of Our Budget Hole. From the NYTimes.

5. Public Spending's Day Of Reckoning. The government's profligacy could spell doom for the U.S.

6. Another Reason Australia Is So Awesome. Is the Australia central bank a model for popping bubbles?

7. Reserve Bank of Australia will have to raise the benchmark interest rate.

Happy Reading :)

Brown Manure, Not Green Shots

Economist Nouriel Roubini sees unemployment rising to close to 11% by the end of the year and that this will have a knock-on effect for the rest of the economy. He also says that job losses are even worse than what's being reported.

He also had this to say about the housing market:

It's already estimated that by the end of this year, there will be about 8.4 million people with a mortgage who have lost jobs, and therefore have little income. Therefore, the number of people who will have difficulties servicing their mortgages is going to rise very sharply.

Home prices have already fallen from their peak by about 30%. Based on my analysis, they are going to fall by at least 40% from their peak, and more likely 45%, before they bottom out. They are still falling at an annualized rate of over 18%. That fall of at least 40%-45% percent of home prices from their peak is going to imply that about half of all households that have a mortgage--about 25 million of the 51 million that have mortgages--are going to be underwater with negative equity and will have a significant incentive to walk away from their homes.

He had this to say on the budget deficits:

...deflationary pressures are going to be dominant this year and next year.

But eventually, large budget deficits and their monetization are going to lead--toward the end of next year and in 2011--to an increase in expected inflation that may lead to a further increase in 10-year treasuries and other long-term government bond yields, and thus mortgage and private-market rates. Together with higher oil prices driven up by this wall of liquidity rather than fundamentals alone, this could be the double whammy that could push the economy into a double-dip or W-shaped recession by late 2010 or 2011.

Read the whole article here.