Economic Populist Commentary

Economic commentary by a pro-capitalist, economic populist. Demand-Side Economic theory. Consists of author's economic views. Questions & comments appreciated. Dissenting views are VERY welcome and encouraged. Main "agenda" is crafting and advocacy of a "populist" economic agenda. A secondary goal is prevention of an economic Armageddon. Encouraging open discussion of US economy.

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Location: Southern California, California, United States

The author is a physician by profession, and a "student economist" by necessity. The current status of our economy necessitates the latter. The intent of this blog is to explain and discuss economics in layman terms. It is designed to promote thought and discussion. It is written by a layman. Comments and critiques of these theories and letters are welcome and ENCOURAGED. Dissenting comments are also WELCOME! They form the basis for discussion.

Friday, December 22, 2006



Today's Construction Spending and Manufacturing reports provided still further evidence of a sinking economy. The 2 graphs below from show the overall trend.

Construction Spending declined 1%, leaving an annualized, seasonally-adjusted rate of $1.16 trillion. This was the largest decline since the recession in 2001. Residential Construction fell 1.9% in the last month. Residential Construction spending has also fallen for 7 consecutive months.

Since March, 100,000 housing-related jobs have been lost. Economist Zoltan Pozsar from Moody's, in today's Yahoo News estimates that 300,000 more housing-related jobs will be lost in the next year.

Manufacturing also declined in today's report. This is the first contraction in the Manufacturing sector in almost 4 years. Manufacturing employment also declined in November, with the ISM Manufacturing employment index declining to 49.2 in November from 50.8 in October. (Readings under 50 indicate a contraction.)

The dollar has dropped 3% in relation to the Euro in the last week, and 1.4% since Thursday morning (11/30/06). The stock market has declined for the 2nd straight week. All of this follows November 28th's Durable Goods, which was much larger than predicted. The original Durable Goods orders prediction was for a decline of only 6.0%. The actual change was a -8.3%. Though much of this was simply an offset from last months increase "alleged" 8.7% increase, October's total is still 0.3% less than August's, and 0.38% less than July's. The August through October numbers can be seen on the chart below from the U.S. Census Bureau. The Durable Orders totals are underlined in red, as are the "Excluding Transportation" totals.

More importantly, Durable Goods orders have declined compared to October 2005, for a same month change of -1.8%. This can be seen from the composite chart below, made from the superimposition of monthly Durable Orders reports from the previous months, with information on the furthest month back coming from the January 2006 report by the Census Bureau. (October 2005's total was not available, so it was extrapolated from the percentage increase given between October - November 2005 change, shown in the far right column.) Once again, the Total and Ex-Transportation numbers are underlined in red. From the above chart it appears Durable Orders peaked In December 2005, and have been generally declining since that time. Compared to December 2005's peak of $230.754 billion, October of 2006 is down 9% to $209.974 billion.

Meanwhile, the Corporatists and the NeoCon-Artists continue to claim the economy is "the strongest ever" and claim the statistics support them. Of course, they never give those "supporting" statistics. There's a reason for that. There aren't any. The economy is sinking and a recession is very likely within the next year. All the Right-Wing propaganda in the world isn't going to change this.

12-19-06 update

Below is copy of an analysis and prediction of the upcoming recession in 2007. It comes from an article by economist Dean Baker from CEPR. Note that Baker predicts a year-over-year GDP growth of -0.7%, a job loss of 1.2 million, and an unemployment rate of 6.3% by 4th quarter of 2007.


Economic Populist Forum

The economy needs balance between the "means of production" & "means of consumption."


Anonymous lib-slayer said...

"Meanwhile, the Corporatists and the NeoCon-Artists continue to claim the economy is "the strongest ever" and claim the statistics support them"

Why don't you show me where they have claimed this?

6:16 AM  
Anonymous mayor mccheese said...

Mike -

I saw your post on from 10/30/06 ranting about HMOs. I have to point out a major flaw in your argument. According to you: "The largest part of health care spending goes toward administrative costs."

That is a major myth that is no where near true. In fact, a recent report by the California Medical Association published in the Los Angeles Times (August 2006) compares the five largest medical insurance programs in California ranked by the percentage of revenue spent on medical care, and the results do not support your view in the least:

Kaiser Permanente 93.0%
PacifiCare 86.1%
Health Net 85.7%
Blue Shield 83.4%
Blue Cross 78.9%

KP at 7% administrative cost is downright impressive for any business let alone health care for 8 million people... The non-profits certainly do better than the for-profits, with Blue Cross the least efficient and most questionable on profit-taking and spending.

I agree with you that there is much room for improvement in healthcare delivery and financing in the US, but you are way off target in attacking HMOs for health care cost increases. The real drivers behind the problem have nothing to do with HMOs.

4:27 PM  
Blogger unlawflcombatnt said...

"I saw your post on from 10/30/06 ranting about HMOs. I have to point out a major flaw in your argument. According to you: "The largest part of health care spending goes toward administrative costs.

That is a major myth that is no where near true.

No, in fact, I'm completely correct. The AMA has published numbers showing that physician compensation is only 9% of total health care costs.

Common sense and recent events completely support this. Medicare reimbursements, which are the basepoint for Insurance company reimbursements, were reduced by 4% this year, and have been increased much less than inflation over the last several years. I'm well aware of Medicare rates as they send me notifications of intended reductions.

What you're doing is popularizing a truly malignant myth that health care costs are rising due to increased reimbursements to doctors. Nothing could be further from the truth. The cost increases over the last 10 years have been almost exclusively due to increased administrative costs and other non-physician services, including pharmaceuticals.

It's really disturbing to read a post from someone who's so completely bought into the Corporate media propaganda about the cause of increased healthcare.

Private insurance reimbursements for doctors are based almost exclusively on Medicare reimbursements. If Medicare reduces rates, so do private insurers. Though insurers may pay more or less than Medicare, they use Medicare rates as their guidline. In addition, if doctors accept Medicare payments as payment, they are forbidden by law to charge more than the Medicare-allowed payment for services. (Doctors can "bill" for more, but they are legally prohibited from even accepting a larger amount, much less trying to collect it.)

Regarding your alleged "information," where do you think the information about the percentage of money going to medical care came from? It came from the insurance companies so they can justify raising rates, while blaiming the increase on doctors. It simply is not true, and can't possibly be true due to virtual price controls placed on physician fees by Medicare.

Also, who knows what they're including as "medical care"? They can include anything under the sun.

Also, health insurance companies are not liable for medical malpractice, despite the fact that they make many medical decisions. Only the physician is held liable for medical decisions, despite the fact it may have been made by an HMO administrator.

Show me a reliable source for your numbers, and what their definition is of "medical care."

When I worked for an HMO back in the late 90's, the state of California paid the HMO $2,100,000/year for the 2,500 patients I was medically and legally responsible for. I was paid a fixed salary (no bonuses) of $95,000/year. Where do you think the rest of that money went? To nurses? For drugs?

"but you are way off target in attacking HMOs for health care cost increases."

No, you are way off base in your defense of HMOs. I worked for one as a physician. And I know exactly what the numbers were and what they had to pay out. HMOs and insurance companies are 100% responsible for high cost of medical care. The only "driver" of high medical costs is the profit motive of insurance companies and HMO management.

I do thank you for alerting me that there are people out there who are as badly misinformed as you are.

I'll try to change that.

6:26 PM  
Anonymous mayor mccheese said...

Doctor, either you did not read what I wrote or you have lost your marbles.

1. I did not mention anything about MD compensation in my post. The factoid you are touting (that MD compensation is only 9% of health care spending) I am not disputing... but it is irrelevant to my point about HMOs and administrative costs.

2. I also did not say that health care costs are rising primarily due to MD reimbursement. You are putting words in my mouth. I hope you are more attentive in listening to your patients.

3. In fact, I did not say anything very specific about what IS driving costs, I only said that HMO's/administrative costs are NOT the primary driver as you are purporting. If you want me to tell you what I DO think is driving costs I would be happy to do so... I'm not sure you are interested, though, since you appear to have made up your mind already.

4. Your commment about "corporate media propoganda" seems a little nutty. If anything, the corporate media bashes HMOs regularly. That is what you are doing now, so who is buying that lie? HMOs are not perfect, and some are worse than others, but for the most part the HMO bashing in the media (and in your blog) is misdirected and sensationalized.

5. My "alleged information" comes from the CMA and was published in the LA Times in August 2006. Let me know if you want me to send you the article. Wait, is the CMA part of your HMO conspiracy theory too?

6. There are a myriad of costs and cost drivers in the medical care system beyond MD salaries... too many to list. If you think the other 90% of the health care dollars go only towards HMO profits you are high as a kite.

From what I can tell, you had a bad experience with a former employer and you feel the need to vent...and vent... and vent some more. Perhaps you are too disgruntled and too focused on your own personal issues (i.e. how much money you make) to have a reasonable discussion with anyone else. Perhaps I am wasting my time talking to a wall.

I leave you with this, from my view, you haven't even come close to hitting on the real issues. There are larger systemic problems that need to be addressed to make our healthcare system better .. paying MDs more money has nothing at all to do with it.

12:21 AM  
Blogger James B. said...

Dude, you have been predicting an imminent recession for the last 3 years. Don't worry, if you hang in there long enough, eventually you will be right!

11:56 PM  
Blogger unlawflcombatnt said...

Mayor McCheese,

Like most posters with no tangible argument and no references to support their alleged "facts," you resort to personal attacks such as my being "high as a kite."

You're comment about HMO profits: "if you think the other 90% of the health care dollars go only towards HMO profits you are high as a kite. " is typical Right-Wing distortion of what I said. I said administrative costs were over 90%. Again, unlike you, I have the actual numbers. When I worked for the now defunct Universal Healthcare, the company received $70/month per Medi-Cal patient. (Almost 100% of our patients were Medi-Cal.) I had been "paneled" 2,500 patients. In case you can't do the math, I'll do it for you.

12 months x 2,500 patients x $70/patient = $2.1 million/year. My salary was $96,000/year.

My salary was 4.6% of the total amount of money the HMO received. Medications dispensed were purchased by the HMO for 1/10th to 1/20th of the price that a private individual would pay at a pharmacy. Hospital payments by the HMO were capitated (i.e., the HMO paid a fixed amount for unlimited hospital care).

Clearly payment to physicians was a minuscule part of their costs. Since we used Medical Assistants, instead of Registered Nurses, the cost for ancillary help was also relatively small.

The HMO also received special deals on lab work. The basic Chem-12 that would cost a private patient $100 cost the HMO only $5.

Yet with all of these cost controls, and limits on payouts, insurance companies and HMO's continue to raise rates at an astronomical rate.

Again, the increased cost of medical care is due to increased administrative costs, increased salaries of HMO and insurance company management, and increased profits for shareholders.

3:17 PM  

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