(Excerpt from Agora Financial's 5 Minute Forecast, December 21st)
We begin a new week — shortened by the onset of Christmas and liable to see little big-time market action — by stepping back and surveying the three areas of the economy in which government interference has relentlessly driven up costs across a period of decades. We’re talking about the three Hs — health care, housing and higher education.
We assume you’ve heard by now the health reform bill overcame a big procedural hurdle in the Senate around 1 a.m. Today. If you’ve been too resigned and/or disgusted to pay attention beyond that, here’s the deal…
- The Senate version of the health bill will likely be passed this week, maybe Thursday
- After the first of the year begins the process of “reconciling” differences between the Senate version and the House version.
So in all likelihood, a health bill of some sort will become law early next year. At that point, three things will happen — none of which the politicians on any side of the issue want to talk about…
- For the first time in U.S. History, you’ll be required to buy a product or service from a private party as a condition of your residency in the country
- The costs are sure to far outstrip the Senate projection of $871 billion over 10 years or the House projection of $894 billion. We remind you that when Congress brought Medicare into existence in 1965, the cost was $3 billion, and Congress projected it would reach $12 billion (adjusting for inflation) by 1990. That was off only by — oh, about an order of magnitude. The actual 1990 cost was $107 billion
- What the Federal Reserve has done to monetary policy over the last century, a new Independent Medicare Advisory Council will do to health care. The IMAC would set the fees that Medicare pays doctors, hospitals and other providers — a job now performed by Congress. Like the Fed, the president would choose its members and the Senate would confirm them.
It’s as if the executive and legislative branches have realized what an utter botch they’ve made of health care over the decades… so now, they’re palming off the big decisions onto a Fed-like panel so the politicians won’t have to take the heat. And if Congress decides it doesn’t like what the IMAC is doing and proposes legislation to scale back its powers, no doubt its members will squawk just like the Fed about how its “independence” would be compromised.
Mark our words — this is a monster in the making.
So what about housing? Well, the Obama administration’s program that professes to help struggling homeowners has been revealed to be an utter sham.
In 10 months of existence, the Home Affordable Modification Program (HAMP) launched 759,000 trial mortgage modifications. In theory, those three-month trials of lower payments are supposed to turn into permanent new loans. But that’s happened in only 31,382 cases — about 4% of the trials, and just a wee bit off the 75% the White House was hoping for.
Some homeowners keep up the payments but still find their applications rejected with no notice until the sheriff shows up to throw them out. How many, HAMP administrators won’t say. (Maybe they think disclosing that would compromise their “independence.”)
We suspect what’s going on here is another variation on “extend and pretend.” The number of successful modifications is so pitifully small because to make this sort of thing really work, the lender has to reduce the principal. But that means the lender has to take a hit to the balance sheet. Can’t have that now, can we?
We’ve found a unique indicator of what could be a bursting bubble in higher education — yet another sector of the economy where government meddling has driven up costs across the decades.
Short story: Mamas, don’t let your babies grow up to be language or literature professors.
The Modern Language Association forecasts that new faculty positions for teachers of Dreiser and deconstructionism are down 37% from 2008… and the 2008 figure was down 26% from 2007.
"Students thinking of going to graduate school in English should understand that right now their chance of landing a job that provides them a livable wage is 50-60%," the MLA’s Rosemary Feal tells The New York Times. "What I often hear from grad students is, ‘I had no clue it was this bad.’" Especially if their concentration is 20th-century American literature, where a single opening gets up to 400 applicants.
We don’t say this just to snicker at the job prospects of humanities students. (Indeed, we have a soft spot, having majored in philosophy.) Again, we suspect this is an early sign of a bursting bubble in higher education — where costs rose at an even higher clip <http://clicks.dailyreckoning.
(Oh, and now they’re talking about a 1% tuition tax to help reduce the state’s budget deficit. You can’t make this stuff up.)