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Peter Orszag's role in the healthcare debate and the formulation of health care policy proposals. One proposal of Orszag, who heads the Congressional Budget Office, is to set up a new agency with powers to cut spending and implement changes in Medicare. Says Orszag, "one of the reasons we have such disjointed and skewed incentives is that we have an excessively political process." At a recent meeting with House Democrats, one Congresswoman said her top priority is winning higher payments for oxygen suppliers, and Orszag was taken aback. For years officials have been trying to cut payments to oxygen and medical equipment suppliers, which are said to be inflated. When a new competitive bidding process was set to take effect last year, industry supporters in Congress were able to delay the plan, and these supporters are still fighting to block changes says the WSJ. Here is a 40 year old Orszag, with degrees from Princeton and London School of Economics, who got his early experience in the Clinton adminstration at age 24. He then followed this with a number of policy oriented jobs, ending with appointment to head CBO in 2007. And he faces the whole system of Congressmen from both parties beholden to interests in the healthcare industry, who provide the donations for them to finance their election campaigns. Dan Eggen describes this in the Washington Post, 7/21/2009. Max Baucus of Montana, and to some extent Grassley of Iowa, are senators from both parties who Eggen points out are beholden to the healthcare industry because of large donations they receive from the interests in the healthcare industry. These interests want to see their payments system protected. The further escalation in health care costs, which would make the whole healthcare system unaffordable even as it delivers poor results, can only be prevented by making cost control an exercize that is not influenced by healthcare industry donations. Jackie Calmes describes the huge hurdles in achieving a deficit neutral move to universal health care in the U.S. in the NYT 6/26/2009. See the link. The exchange between Grassley and Orszag on the issue of the $177 billion in savings needed from the payments to health insurers under the Medicare managed care plans- which allow seniors to obtain Medicare coverage outside the government run program -went as follows. These are dubbed overpayments by outside experts and efforts have been made to cut them in Congress. When Mr Grassley raised concerns about the impact of such cuts in a hearing, -and Grassley has opposed the cut for this overpayment to insurers- Orszag responded saying: "I very firmly believe that capitalism is not founded on excessively high subsidies to private firms. This is what this system delivers right now." ...

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The strong showing by National Front leader Marie Le Pen and her focus on the economy in France, and the lack of growth with austerity measures, is likely to change the way the eurozone countries respond to the deficits and German insistence on austerity cuts. Marie Le Pen's economic positions for more government spending to reduce unemployment and provide additional benefits is closer to Socialist candidate Hollande's position. The right wing party in Holland also voiced the same concern recently- that it did not want to hurt Dutch pensioners with austerity cuts- when it refused to support the Dutch government leading to its collapse and new elections.

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The Economist cites estimates from the Bank of England showing Britain's national output peaking at 1.5 trillion pounds in 2007 and not likely to return to that level till 2015. It points to fears of a lost decade. Meanwhile debt is rising from 600 billion pounds in 2008 to 1.1 trillion in 2012, making reducing the debt to GDP ratio by 2017 even more difficult. Lower growth affects tax revenues even as social benefit costs increase. Part of the problem is that from 2009-2010 to 2011-2012 public sector net investment declined from 48.5 billion pounds to 28 billion pounds. The Economist suggests Chancellor Osborne take up an additional investment in infrastructure of 28 billion pounds, even borrowing 14 billion pounds in the bond markets if needed, as a prudent step to revive growth. Small improvements in rail, roads and bridges could make up for a lack of large projects. Other suggestions include expanding the "funding for lending" scheme with banks to get capital to small business, finding more savings in the National Health Service, and changing the way Britain taxes development land that remains undeveloped. Britain, now joins, Portugal, Spain, France and Italy, in the failure of austerity measures alone creating a return to economic growth and lower deficits. In 2013 improving competitiveness and boosting economic growth become critical following years of austerity measures....

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Krugman points out that the U.S. Federal Reserve's forecasts in March 2012 show the U.S. will experience low inflation and high unemployment for many years. These forecasts are in sharp contrast to the expectations in the equity markets based on an uptick for a couple of months of unemployment numbers. The Fed's own statements suggest the improvement in hiring may be temporary and a response to the overreaction in hiring in 2009-2010 to the financial crisis, and not a lasting improvement. The Fed pointed out that the long term unemployed are at about 40% of the total unemployed and the share of the population that is working in March 2012 has barely budged from 58% in 2009.

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Krugman points to the connection between the failure to achieve debt reduction through debt forgiveness and the sluggish economic growth in the eurozone and U.S., five years after the global banking and financial crisis of 2009 and four years after the beginning of the eurozone debt crisis in 2010. In the U.S. debt reduction for homeowners was delayed with a wave of foreclosures, and in Europe austerity budgets were the norm as Germany pushed hard for austerity policies. In 2014 small relaxation of austerity to give relief to voters took place in Greece, France, Italy and Spain, with austerity budgets still in place. Growth also slowed in Germany to slight contraction in the third quarter and no growth in the fourth quarter of 2014. This is leading to the formulation of new policy to address growth challenges in the eurozone. Debt to GDP is growing in eurozone countries and Britain because of lack of growth, even though spending cuts have been made, showing the need for rethinking policy. ...

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John Taylor, says Obama and Alan Krueger (Obama's new head of the U.S. Council of Economic Advisors), said some of the same things in early September, 2011, that were part of Obama's old plan to revive the U.S. economy. And the old plan has failed to produce results. The part that puts construction crews to work on the roads, railways and airports was tried earlier in the stimulus plan. Because of a lack of showel ready projects, and the state governments putting most of the money in their state coffers, this only increased infrastructure by a miniscule 0.05 percent of GDP, according to research by Taylor and John Cogan. Taylor's sees the moves by the Obama administration and the Bernanke Fed as not only being ineffective, but having the opposite effect of lowering investment and consumption demand through increased concerns about the federal debt, another financial crisis or the risk of inflation or deflation. The U.S. private sector has the money to make the investments that create jobs but their concerns have led to holding back. Taylor points to the need for a comprehensive economic strategy to replace these temporary interventions. The debt limit agreement of 2011 is a part of this strategy, and he agrees with reducing spending in a gradual way in a weak economy. The other parts of this strategy he says are entitlement reform, tax reform, regulatory reform, monetary reform, including a reappraisal of the role of government in the economy. This should lead to a more stable and predictable economic environment and reduced uncertainty about the future, which is critical to improving supply and demand....

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Raghuram Rajan, Professor of Finance at the Graduate School of Business, University of Chicago, was appointed chief economist at the IMF in 2003. He presented a paper, titled "Has Financial Development Made the World Riskier," at the annual Jackson Hole meeting of economists and central bankers for 2005. Rajan says he had planned to write about how financial developments during Greenspan's 18 year old tenure had made things safer, but the more he looked the more evidence came up that the risk reward relationships in a normal functioning financial market had been terribly distorted. Market participants were being rewarded for wins but were not being asked to take on commensurate risks and impacts on their bonuses and rewards. He also cautioned about the use of credit default swaps which acted as insurance against bond defaults, and said insurers were generating big returns on this but with the appearance of little risk- even though the pain could be immense in a default. Banks were carrying credit securties on their books that posed risks to the whole financial system if things went wrong with the credit securities. Reaction from the gathering was unfavorable. Lawrence Summers, a former Treasury Secretary said, "the basic, slightly lead eyed premise of the paper was misguided."...

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Matthew Kaminski gives his assessment of Angela Merkel's years in office. He cites a former German chancellor Helmut Schmidt's words: "People who have a vision should go see a doctor." She is no Konrad Adenauer or even Helmut Kohl. A scientist by training she is dispassionate, intelligent, diligent and takes the time to understand the details of the financial situation from her advisors, then sorting out the situation in her own mind. She gets less credit for bold action than she deserves because of her down to earth manner.She gave banks no option as bondholders to share losses in late night meetings at EU headquarters, called the president of Italy and secured a change in government after Berlusconi lost the confidence of the EU. In the current impasses between the Bundesbank and the ECB's Draghi over sovereign bond purchases with Jens Weidmann, Germany's representative at the ECB, supporting Mario Draghi's position, she has navigated the fine line between the German public's reluctance to take on the debts of its neighbors in the eurozone and the need for lowering the borrowing costs of Italy and Spain to save the euro. After the visionaries from Adenauer to Monet, todays eurozone leaders are focussed more on the nuts and bolts of making this idea of Europe work, requiring the skills and ability to learn and grow that she has demonstrated....

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The dangers to Turkey from external short term borrowings to finance its current account deficit. Turkey's current account deficit reached 10% of GDP in 2011. It is 8% in 2012 and is considered high by experts. The problem is short term borrowing from overseas which is sent through its banks for increasing levels of personal and housing loans. Were this flow to dry up because of a sharp downturn in the Eurozone economies it would damage Turkey's financial position. Bank short term external debt has doubled in 2011-2012 to $70.3 billion, or 9% of GDP, according to Capital Economics. The U.S. Fed and the ECB have eased global liquidity concerns, but risks are high as long as Turkey relies on short term borrowing. An escalation of the conflict with Syria also poses risks with fears of scaring away investors.

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Sales of automobiles in China in July 2012 declined 12.6% from the prior month according to the China Association of Automobile Manufacturers. There are two parts of China's automobile sector, the foreign brands of GM, Toyota, VW, Ford and others, and the Chinese brands. There are 48 Chinese domestic carmakers for 30% of China's automobile market, with sales of 87,500 per brand on average, according to J.D. Powers. Many of these carmakers will not survive even with subsidies from local governments. China's car buyers prefer foreign brands because of the better quality and reliability. Foreign carmakers face an oversupply of cars as GM, Honda, Ford, VW have continued to add capacity. Total automobile manufacturing capacity is about 28.5 million cars and commercial vehicles. This is 9 million more than the expected sales in 2012, according to J.D. Powers. The most recent company adding large capacity is Ford Motor Company, which was relatively late in the Chinese market, and decided to boost capacity from 450,000 in 2011 to 1.2 million in 2015, to make it the largest manufacturing location outside of its home base of Michigan. This creates the prospect of foreign carmakers having to offer larger incentives and discounts to manage inventory and operating with higher levels of unused capacity, reducing profits in future years. Most of the plans to increase capacity were made when China's GDP growth was over 10%, it is now slowing to 7.5%....

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Bank of England Governor warns that British banks are undercapitalized in Nov. 2012 and need to add to reserves for additional losses.

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In the current situation where the "too big to fail" problem for banks has only worsened since the crisis with the remaining banks even larger after mergers, and no dividing wall between speculative trading in securities and the utility banking of collecting deposits and making loans, the country depends on regulators to do the job of supervision. Regulatory reforms have faced resistance from the banking industry and the reforms have been watered down in Congress. It is in this environment that Patrick Parkinson takes on the job of head of bank supervision at the Federal Reserve. He will work with Daniel Tarullo, the Fed governor who heads the committee of governors overseeing bank supervision. But he is also one of the old faces at the Fed when the Fed failed in its role of bank supervision. From 1993 to 1998 he was the top staff advisor to the Fed chairman, for matters considered by the President's Working Group on Financial Markets.

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The U.S. Senate voted 51 to 49 on a Democratic party measure for further reductions in 2012 Social Security payroll taxes for workers and employers, including a surtax on incomes over $1 million. A measure supported by the Republican party to pay for the payroll tax cut by reducing the Federal payrolls was defeated, with half the Republicans voting against it. Democrats hope to use this issue to show Republicans favor the rich over the middle class, as the payroll tax cut benefits most Americans. Polls show Americans by a large majority see Republican policies favoring the rich. A New York Times/CBS poll in October showed 7 of 10 Americans feel this way. Pollster Geoff Garin says the income inequality issue is beginning to override other issues including antigovernment feeling. This is one way in which the Occupy Wall Street Movement's slogan of "the 99 percent" has resonated with U.S. public opinion. The Democratic party sees this as an opportunity to define the campaign issues for 2012, with Republicans running for reelection cautious about being seen this way....

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Matt Vela responded to Shailen's comments on this article on the BW site. Comments were on NYTimes columnist Tom Friedman's remarks, about the dangers of overdependence on Mideast oil vs. GM and Ford's efforts to simply move cars off the lot. A quick reading of reader comments about 5-6 (all comments) shows a huge perception and marketing gap for Ford and GM if this is even anywhere near a representative sample, because they were heavily negative. Friedman said in the NYT, that "GM is more dangerous to America's future" than any other company, that "its like a crack dealer" addicting Americans to SUVs in the face of higher gas prices- by offering buyers of its least fuel efficient SUV's gas capped at $1.99 per gallon. He also said GM is in cabal with Ford and DaimlerChrysler to buy votes in Congress. BY May 2006 compared to 2003, in just 3 years, once popular midsize SUV's like the Ford Explorer, Chevy Trailblazer, and Dodge Durango saw a sales plunge of 50%. And this after the gas promotions such as the Ford one for free gas upto $1000 with aprepaid Master Charge debit card, enough for 6000 miles. Add to this zero percent financing. GM offered rebates of $2500 to $3500 per SUV. In this manner the whole profit structure of SUV's is being lowered, and no new strategy is being developed to deal with changing conditions and changing consumer preferences, and a changing global situation....

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The Obama first family and its many mulicultural faces from Kenyan, Indonesian, Chinese to African American and White abolitionists from Missouri. Truly a new face of the American continent. About 25% of white Americans have interracial marraiges and nearly half of all black Americans belong to a multiracial family, according to estimates made by Joshua Goldstein of the Max Planck Institute for Demographic Research. What it does is wake one up to the reality, the changes that have already ocurred in the country which most people had not realized. With Blacks, Hispanics, Jewish people, Asian Americans, the 25% of whites in interracial marraiges, recent immigrants, white women, and white males making up this mosaic of cultures and communities that makeup America. And the geographical mix is also just as varied, with the west and the northwest and the midwest and east having a bigger share of this mosaic than the south and the mountain states. Whites in interracial marraiges tends to breakup the traditional white protestant insular demographic. On the religious side there is a breakup of the traditional white demographic with Irish Americans especially those in the east tending to move away from the traditional white protestant insular demographic because of their own particular historical and cultural narrative. The Obama story is one of tapping into these different demographics and changing faces of America at the right time, when the conservative southern demographic, represented by the Bush family, combined with related demographic groups in counties and neighborhoods around the country had lost popular support from two wars and a failing economy....

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U.S. Federal Reserve governor Daniel Tarullo tells the Council on Foreign Relations that so much remains to be done four years after the financial crisis. The law firm of Davis Polk says 67 percent of deadlines were missed for new rules required to be set in place by the Dodd-Frank legislation, including the Volcker Rule. Tarullo said: "It is sobering to recognize that more than four years after the failure of Bear Stearns began the acute phase of the financial crisis, so much remains to be done." Tarullo fears that crucial momentum may be lost because of the long delays stemming from resistance by the banks. Tarullo met with bank CEO's in April 2012. Banks have protested that Fed stress tests have not revealed the parameters for the testing. Tarullo's response given at a recent Fed conference in Chicago were that this would let banks game the exercize by running the Federal Reserve model and not improving risk management and capital planning, making this a mechanical compliance exercize. Banks have particularly opposed a requirement that limits the risk in business between two banks to 10% of their credit risk....

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The critical exchange between oil companies and auto companies about who is at fault for the energy crisis. In one ad that ran last year, Chevron argued that "if automakers improved fuel economy across the board by just 5 mpg, we'd save over 22 billion gallons of gasoline a year." The criticism is also sparked by the high price of oil which is hurting sales of pickups and large SUV's that the automakers depend on for profits. One ad by Exxon Mobil shows a cartoon of a large SUV filling up at a gas station and hints that the problem rests with the automakers who have failed to build the kind of highly fuel efficient vehicles that are needed. The ad says that the average fuel economy of new U.S. autos has not gone up much in two decades, the small gains have been offset by the increases in the size and weight of vehicles.

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This letter in the WSJ praises Chancellor Angela Merkel for her sense of decency and humanitarian sensibility. It asks what else could she have done in the refugee crisis. It says Merkel's "we can do it," is also the same spirit Germany showed for successful reunification of the country.

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The US House of Representatives voted 245-189 in favor of repealing the health care law. Only 3 Democrats joined the entire Republican caucus in voting for repeal, compared to 34 Democrats who voted in March 2010 against the health care law. This is a largely symbolic move as the Democrat controlled Senate will not consider the repeal, and even if it did the President would veto it. Republicans favor some aspects of the health care law which allow children to be on the parent's insurance till age 26, and a ban on insurers denying coverage due to pre-existing conditions. Opinion polls show 46% of respondents opposed repealing and eliminating the law, and 45% favored repealing it. The health care issue ranks third among the economic issues important to respondents, behind unemployment and reducing the federal budget deficit.

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Criticism of the EU's handling of the Greece crisis by IMF officials in a report. The report says the actions taken for debt restructuring in 2012 should have come much earlier to reduce the debt burden and the size of austerity measures in Greece. Similiar criticism has been voiced by president Hollande of France and in editorials by the WSJ. President Samaras of Greece says the sharp cuts in spending reduced potential for growth in the economy.

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The Italian government sold 5 billion euros of three year bonds in Jan 2013 at an interest rate of 1.85%, the lowest since 2010. This is a remarkable change from 2012.