Jeff, difficult for me to comment on direct US experiences since I’m down here in sunny South Africa. Inflation is running at 9%, interest rates are 14.5%, food price inflation (which isn’t included in CPI) is running at 20%, and we have 40% unemployment. The rand (our currency) can’t even keep up with the collapsing dollar, having lost 15% in the last 3 weeks against the greenback. Yet GDP growth is still 4.5%. We don’t have a recession, but try telling that to the poor and unemployed majority.

And I’m fairly sure that, as the US runs into an election year, it doesn’t much matter what the headline figures say. Blue-collar workers are being paid relatively less than they have in the past five years, inflation is high, their house values are shrinking (and it’s their only capital asset) and they’re uncomfortable about the future.

This makes it rather unlikely that any politician hoping for future election is going to tell those same people, “Listen, I know it’s tough, but I have to tighten up on your benefits a little.”

I merely offered some hard data courtesy of the US government, suggesting that things aren’t as bad as the media portrays. If there is a recession, it will be an election year media driven one, like the one in 91-92. However, we won’t know if there is a recession until the end of next quarter.

If we’re indeed in a recession, then it’s a good time to buy stocks. It’s a good time to buy mortgages right now, as the discounted prices and yields are outstanding. The old axiom “Buy on the cannons and sell on the trumpets” has been time tested for over 600 years.

Jeff

You know a big saver in medical costs, in my opinion, would be stop over-prescribing drugs such as statins and anti-depressants, and perhaps not doing every conceivable diagnostic test when there are good ones available at a lower cost like a sigmoidoscopy versus a colinoscopy.

Carol, as regards covering people with existing conditions. Difficult one. Lung cancer as a result of life-long smoking? Failed suicide? Child got hit by a bus? Easy to agree to finance the latter, but why pay for the results of other people’s self-imposed foolishness?

However, this won’t be my decision. It will be an elected official promising to spend other people’s money. Go figure.

–Yearly Percent Change–
Jan. Dec. Nov.
2008 2007 2007

Total new orders 7.2% 6.4% 5.2%
Ex-transportation 7.7% 5.6% 7.2%
Excluding defense 7.2% 5.5% 6.7%
With Unfilled Orders 5.0% 7.8% -1.1%
Capital goods 12.9% 12.6% -1.0%
Nondefense 14.3% 7.8% 5.6%
Ex-aircraft 5.3% 2.3% -2.6%
Defense 3.5% 48.1% -43.1%
Consumer goods 11.1% 8.1% 11.8%

non-manufacturing

Feb. Jan. Dec.
2008 2008 2007

Composite Index 49.3 44.6 53.2
Business Activity 50.8 41.9 54.4
Prices Paid 67.9 70.7 71.5
New Orders 49.6 43.5 53.9
Backlog of Orders * 49.5 46.0 49.0
Supplier Deliveries* 50.0 49.0 52.5
Inventory Change * 50.0 44.5 50.5
Inventory Sentiment* 60.5 57.0 64.5
Employment 46.9 43.9 51.8
New Export Orders * 46.5 52.0 50.0
Imports* 49.0 41.5 50.5

*NOT seasonally adjusted

This will either turn out to be the biggest head fake in the history of economics, i.e., no recession, or the most well advertised one with the longest advance notice.

Note….I do agree with y’all that Medicare and Medicaid needs reform, major reform.

Jeff

As an entirely market-driven system only those who know that they are ill (or likely to become ill) will join a medical insurance scheme. Healthy people (especially the young) tend to stay out until they, in turn, become unhealthy.

Since the insurance companies know less than their clients, they tend to get stuck with people making a few payments and then demanding huge claims. They get defensive, and you wind up with the system you have.

Unfortunately, Europe has the complete opposite problem. In the US people probably go see doctors infrequently, and get less care than they need, all to reduce the cost.

In Europe patients don’t pay directly (everyone is taxed) and so they tend to clog the system with every little ailment they can think of. Plus, instead of you deciding that you want eye surgery, some government bureaucrat gets to decide on your behalf. Which means you wind up queuing.

And universal health cover is fiendishly expensive. In many ways, they US system has a lot further to go before it hits a wall than the European version. European baby-boomers retire earlier and receive more benefits than in the US. Plus, many European countries have serious population decline. I.e. fewer taxpayers covering ever greater benefits for every more people.

It’s a little complex, but a recent suggestion is a mix of both public and private. Regular, tax deductible, mandatory, savings schemes for each person – with top-ups from the taxpayer for those who cannot afford them – to cover basic medical needs (like colds, broken bones, etc.) and then catastrophe insurance for everything larger.

So far the only country in the world with something like this is Singapore. And their cost of care per head (and return on that investment) is amongst the highest in the world.

Whythawk – I realize that this isn’t necessarily a U.S.- only problem, but I’m not tied well enough into the detailed workings of other governments (election cycles, for example) or the economic workings of other economies to feel confident that they all suffer from the same short-sightedness problem. In fact, there are a few European economies that seem to have avoided this problem, but I haven’t looked deep enough to know for sure.

I’d never heard that Greenspan quote, but I like it. I just wish that Clinton hadn’t borrowed it from Bush, and that Bush hadn’t borrowed it again from whoever happens to succeed him. We can only do that for so long before the repo man comes to collect.

Jeff

Ultimately it is up to voters to stop robbing their children and grandchildren of a future.

As Alan Greenspan so eloquently put it when Bill Clinton asked him where the Social Security debt came from, “Well, Ronald Reagan borrowed it from you.”

Unfortunately, I have little faith that our current crop of Congresscritters (or any of the three candidates for President) will it in as timely a manner as is required. Which means the pain will be just that much worse when it finally is changed.

I wish I knew whether to blame the people, the corporations, or the government for our national inability to focus beyond next quarter or next year. Short term gain usually comes at the cost of long term performance, a fact that doesn’t seem to be taught anymore.

Yow. This stat puts even more teeth into this.