Wednesday, September 25, 2013

Health Insurance Exchange Prices Disclosed: Government Touts Affordability: For Young Adults, Premiums Higher Than Current Plans

From The Wall Street Journal, "Prices Set for New Health-Care Exchanges: Younger Buyers May Face Higher Insurance Premiums" by Louis Radnofsky:
Across the country, the average premium for a 27-year-old nonsmoker, regardless of gender, will start at $163 a month for the lowest-cost "bronze" plan; $203 for the "silver" plan, which provides more benefits than bronze; and $240 for the more-comprehensive "gold" plan.

But for some buyers, prices will rise from today's less-comprehensive policies. In Nashville, Tenn., a 27-year-old male nonsmoker could pay as little as $41 a month now for a bare-bones policy, but would pay $114 a month for the lowest-cost bronze option in the new federal health exchanges.

Likewise, the least-expensive bronze policy would rise to $195 a month in Philadelphia for that same 27-year-old, from $73 today. In Cheyenne, Wyo., the lowest-cost option would be $271 a month, up from $82 today.
Insurers also will have to offer a more generous benefits package that includes hospital care, preventive services, prescription drugs and maternity coverage.

For consumers used to skimpier plans—or young, healthy people who previously enjoyed attractive rates—that could mean significantly higher premiums.

Tuesday, September 24, 2013

Exploding Food Stamp Entitlements Chart, 2000 To 2012

From The Wall Street Journal, Review & Outlook, "Won't Work for Food Stamps: Today's food-stamp debate has echoes of welfare reform:"

Source: The Wall Street Journal

North American Executives Least Optimistic About Future Global Economy And Most Worried About Geopolitical Instability And Domestic Political Conflicts: McKinsey & Co Survey

According to a McKinsey & Company survey, North American executives are the least optimisitc about improvements in the global economy over the next 6 months. The North American executives' are the most worried about geopolitical instability and domestic poltical conflicts.

From McKinsey & Company, Insights & Publications, "Economic Conditions Snapshot, September 2013: McKinsey Global Survey results:"
Exhibit 1

On the world economy, executives in the eurozone are the most positive (and much more so than they were in June).

McKinsey Global Survey results of economic conditions
Source: McKinsey & Co
Exhibit 4

Executives’ greatest worries are low demand and, especially in North America, geopolitical risk.

McKinsey Global Survey results of economic conditions
Source: McKinsey & Co

Contrary To Conventional Wisdom, Warnings About Serious Side Effects Increase Sales

From Association for Psychological Science, "Warning of Potential Side Effects of a Product Can Increase Its Sales:"
Drug ads often warn of serious side effects, from nausea and bleeding to blindness, even death. New research suggests that, rather than scaring consumers away, these warnings can improve consumers’ opinions and increase product sales when there is a delay between seeing the ad and deciding to buy or consume the product.
According to [Ziv] Carmon [INSEAD in Singapore] and his colleagues, the warnings backfired because the psychological distance created by the delay between exposure to the ad and the decision to buy made the side effects seem abstract—participants came to see the warning as an indication of the firm’s honesty and trustworthiness.
While conventional wisdom suggests that explicit warnings about dangerous side effect will make people think twice before taking medical risks, these findings suggest otherwise. The researchers believe that their findings are important because these kinds of warnings are so ubiquitous, accompanying many different products or services beyond medications, including medical procedures, financial investments, and sporting activities.
Link to article abstract.

Monday, September 23, 2013

Total US Productivity Growth Is Bad For The Stock Market

Productivity growth at a company level is good for individual company stocks, but overall US productivity growth is bad for the overall stock market.

From "Productivity Growth and Stock Returns: Firm- and Aggregate-Level Analyses" by Hyunbae Chun, Jung-Wook Kim, Randall Morck, NBER Working Paper No. 19462, September 2013:
Technological innovation is not a blessing for all firms, or for investors holding the market. In the late 20th century US, individual firms’ stock returns correlate positively with their own productivity growth, yet the market return correlates negatively with aggregate productivity growth, yet. This seeming fallacy of composition reflects Schumpeterian creative destruction: a few technology winners’ stocks rise with their rising productivity while many technology losers’ stocks fall with their declining productivity. Thus, most individual firms’ stock returns correlate negatively with aggregate productivity growth. Analogous reasoning explains prior findings that the market return correlates negatively with aggregate earnings.

About 2.5 Times As Many Mortgage Refinancings As Purchase Mortgages: Almost Half of Purchase Mortgages Were With Very Low Or No Down Payment

From The Wall Street Journal, "Eight Takeaways on Mortgages After the Housing Bust" by Nick Timiraos:

Purchase, Improvement And Refinancing Mortgages Chart
Source; The Wall Street Journal
1. Lending is up, but there’s a big asterisk. While the number of mortgage loans made in 2012 increased by 38%, most of that came from refinancing. The number of loans made to people actually buying homes increased by 13% to levels that were still shy of every year between 2000 and 2009.
2. Borrowers are having trouble making big down payments. Loans made by the two federal agencies with the easiest terms today—the Federal Housing Administration, which requires down payments of just 3.5%, and the Department of Veterans Affairs, which makes loans to veterans and doesn’t require any money down—accounted for almost 45% of owner-occupant home-purchase loans.

Sunday, September 22, 2013

Increase In Single Moms Lowers Growth Rate Of Median Family Income

From The Wall Street Journal, Real Time Economics, "Number of the Week: Rise of Single Moms Drives Down Overall Income" by Ben Casselman:
Change in median income compares the typical household of the past to the typical household of today — and the typical American family looks a lot different now than it did two decades ago. Back then, Americans as a whole were younger, whiter and less educated than they are today.
Take families with children, for example. The median income for all families with children under 18 was just under $60,000 last year, up about 3% since 1990 after adjusting for inflation. But what might once have been considered the “typical” American family — a married couple, living together, with at least one child under 18 — has done quite a bit better: Their median income was $81,455, up nearly 16% from 1990.

The trouble is, such families have become significantly less common over time. In 1980, married couples made up 80% of all families with children. A decade later, that figure had fallen below 75%. Today, it’s less than two-thirds. The number of families headed by single moms — any mother with no spouse present, regardless of whether she has a live-in partner — has increased more than 30% since 1990, to more than 10 million.

In terms of income growth, single moms aren’t actually doing much worse than their married counterparts — their median income is up 14% since 1990, nearly as much as for married parents. But they earn far less in absolute terms. The median income for a family headed by a single mother was $25,493 in 2012, which means roughly 5 million single mothers earn less than $25,000 a year. [Emphasis added.]

Friday, September 20, 2013

Medicare And Social Security Benefits Received Versus Taxes Paid By Decade Of Birth: CBO

From Congressional Budget Office, "Medicare and Social Security Payroll Taxes and Benefits for People in Different Birth Cohorts" by Noah Meyerson & Julie Topoleski:
Medicare Benefits And Taxes
According to CBO’s projections, under the assumption that all scheduled benefits are paid, real median lifetime Medicare benefits (net of premiums paid) and real median lifetime payroll taxes would be greater, in general, for each successive cohort (see the figure below). Over their lifetime, beneficiaries born in the 1940s would, on average, receive about $160,000 in benefits (net of premiums paid) and pay about $45,000 in payroll taxes (both figures are expressed in 2013 dollars). Those born in the 1950s would receive, on average, about $205,000 in benefits and pay about $60,000 in payroll taxes, CBO estimates. And those born in the 1960s would receive, on average, about $270,000 in benefits and pay about $65,000 in payroll taxes.
Median Lifetime Medicare Payroll Taxes and Benefits for Various Cohorts, by Decade of Birth
Source: CBO
Social Security Benefits And Taxes
According to CBO’s projections, under the assumption that all scheduled benefits are paid, real median lifetime Social Security benefits and real median lifetime payroll taxes would be greater, in general, for each successive cohort (see the figure below). Over their lifetime, beneficiaries born in the 1940s would, on average, receive about $190,000 in benefits and pay about $205,000 in payroll taxes. Those born in the 1960s would, on average, receive $240,000 in benefits and pay $245,000 in payroll taxes; and those born in the 1980s would, on average, receive $310,000 in benefits and pay $260,000 in payroll taxes. For workers born from the 1940s through the 1980s, taken all together, lifetime payroll taxes would be roughly equal to lifetime benefits. But benefits for earlier generations were considerably larger than their payroll taxes, and that historical imbalance contributes to the system’s ongoing financial shortfall. (Because Social Security benefits are more predictable than Medicare benefits, CBO has extended its projections for Social Security further into the future.)
Median Lifetime Scheduled Social Security Payroll Taxes and Benefits for Various Cohorts, by Decade of Birth
Source: CBO
The calculations of lifetime benefits and payroll taxes are based on a real discount rate of 3.0 percent, the average long-term interest rate projected by CBO for securities held in the trust funds for Medicare and Social Security.

Overweight Older Adults Live Longer

From ScienceBlog, "Older Adults Live Longer With A Few Extra Pounds – If They Don’t Add More:"
In fact, the nationwide study found that people who were slightly overweight in their 50s but kept their weight relatively stable were the most likely to survive over the next 16 years.

They had better survival rates than even normal-weight individuals whose weight increased slightly, but stayed within the normal range.

Messy Rooms

From xkcd:

Source: xkcd

Thursday, September 19, 2013

CBO Presentation On Causes Of Slowdown In Healthcare Spending

From Congressional Budget Office, "The Slowdown in Health Care Spending" by Doug Elmendorf, Presentation to the Brookings Panel on Economic Activity, September 19, 2013:

PDF version of the above presentation.

Last Year, More Immigrants Came To The US From India Or China Than Hispanic Immigrants

From The Wall Street Journal, "Asian Newcomers Drive Immigration: Larger Net Inflow Suggests U.S. Is Shaking Off Effects of Recession" by Neil Shah:
Behind the latest increase was a jump in the nation's foreign-born Asian population of more than 309,000, well above 2011's 207,000 rise, according to an analysis of the Census data by demographer William Frey of the Brookings Institution, a think tank in Washington. The increase in foreign-born Hispanics—47,000 new immigrants in 2012—was relatively modest. More Mexico-born people left the U.S. last year than came in.
The U.S.'s India-born population rose over 111,000 last year, compared with around 76,000 increase a year earlier, according to Mr. Frey's analysis. There were over 61,000 new China-born residents in 2012.

On An Inflation Adjusted Basis, The S&P 500 Index Needs To Increase By 40 Points, 2.32 Percent,To Surpass Its Oct 9, 2007 High

On September 18, 2013, the S&P Index closed at a new all time closing high of 1,725.52, but the S&P Index is still about 40 points below its Oct 9, 2007 high on an inflation adjusted basis. The S&P 500 needs to increase by 2.32 percent to surpass its October 2007 high on an inflation adjusted basis.

On October 9, 2007, the S&P 500 Index closed at 1565.15. In inflation adjusted dollars, the closing high is equal to 1,765.45 in today's dollars. On October 11, 2007, the S&P 500 Index had an intraday high of 1576.09. In today's dollars, the intraday high equivalent is 1,777.79.

Wednesday, September 18, 2013

An Analysis Of Each State's Unfunded Pension Liability

An analysis by State Budget Solutions, a 501(c)(3) non-profit, finds that State pension plans are on average only 39 percent funded. The included table below shows each State's pension numbers.

From State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers" by Cory Eucalitto:
Comprehensive research into the funded status of state level defined benefit public pension plans reveals that public employee retirement promises are underfunded by $4.1 trillion. Combined, state public pension plans are just 39 percent funded.

Figures were drawn from state Fiscal Year 2012 Comprehensive Annual Financial Reports, as well as the Comprehensive Annual Financial Reports and actuarial valuations published by individual plans. In each case, figures were from the most up-to-date valuation available at the time of research. Plans were compiled based on the United States Census Bureau's Annual Survey of Public Pensions and state-level financial reports. Therefore this includes municipal pension funds that are administered by the state.

StateActuarial AssetsMarket LiabilityFunded RatioUnfunded Liability
New Hampshire$5,861,896$19,751,86730%$13,889,971
New Jersey$85,938,988$257,614,70233%$171,675,714
New Mexico$21,397,284$64,212,78133%$42,815,497
New York$230,680,400$490,756,06247%$260,075,662
North Carolina$78,403,200$145,436,34054%$67,033,140
North Dakota$3,498,700$10,806,86232%$7,308,162
Rhode Island$7,533,391$22,540,48133%$15,007,090
South Carolina$29,555,334$82,721,84136%$53,166,507
South Dakota$7,935,490$15,141,57252%$7,206,082
West Virginia$10,220,671$29,152,50535%$18,931,834

[HT: Newmark's Door]