Fw: When Is The Truth Going To Hit Home?

(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.com/t/AQ/xQI/yvE/AAEb9A/AQ/AinOxg/6qth> than housing for much of the last 25 years. Like all good bubbles, it must come to an end. The 32% tuition increase at the
University of California system could be the sign of higher education’s final “blowoff rally.”

(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.)


Anonymous said...

To summarize:

First they blame Obama and the Dems for trying to do something and spending too much money.

They they blame them for NOT doing enough and not spending enough money (presumably wasting it to help those deadbeats who can't pay their mortgages).

Then they have a convoluted rant about higher eduction costs and try to tie it to the government and Obama without every actually saying why such a connection makes any sense.

Wildly inconsistent in message, but consistent in blaming Obama no matter what.

Anonymous said...

To a point, the progressive in me has to agree to at least part of this. I don't think Obama did enough to pressure the Democrats into putting together a united front so that we could get meaningful health care legislation passed. There's no public option. No Medicare extension. There will be less abortion coverage than we have now-- even in situations where it would be needed, such as multifetal pregnancy reduction. There are no real price controls. The only thing left is a mandate to buy health insurance.

Granted, it's exactly what the right asked for, but they're not the ones who voted for Obama and the Democrats last year, either. I wanted single payer.

gruaud said...

The main reason that HAMP failed is that many
lenders see it as to their advantage to just take
the house back through foreclosure, rather than
work with borrowers to modify the loans.

HAMP would have worked except the bankers are being greedy, as usual.

And Agora Financial knows this.

gruaud said...

And this deserves comment, as well:

"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."

Hey, financial geniuses -- do you know why
tuition is going up and the California is in a
catastrophic financial crisis in the first place?

Does Proposition 13 ring a bell?

Anonymous said...

Why is it that the minute I see a mix of colors and fonts, I just KNOW it's not going to be worth reading?

ferschitz said...

Can't be bothered to read this, as I'm staying in Glennbeckistan, othewise known as the retirement place where my olds live.

Being as it's Xmas, everyone is being more silent about politics than normal, so I count my blessings.

Sadly, I think progressives and teabaggers have more in common than meets the eye. It would be nice to make common cause with them to fight for our rights against the corporate/oligarch dominated (and bought) Congress, but I don't see being able to ever "reason" with teabaggers, so we seem doomed to more of the same nonsensical rants... some bits of which make sense, but the overall perspective is dumb & dumber.

And yes: Prop 13 did a giant number on CA's once fine education system. It's quite sad what it's become, but on the other hand, we have loads & loads & loads & loads of McMansions on golf courses. So there you go! Bliss on a golf club brought to you by selfish wingers who don't see any value whatsoever in educating the next generation.

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