Medicare Trustees Report

Here’s all you need to know about the 2012 Medicare Trustees Report, which was “released” in the sense that press releases have been issued and talking points have been distributed. Have not seen the actual report language, but will post a link when I do.

The spin is that the ACA is working and will save money. And then CMS Richard Foster will speak.

Somewhere in the back of the report, Foster will write something to the effect of “these projections are based on current law and will not be viable” long term. He’ll reference the doc fix.

Count on it. So, are those pointing to the savings “wrong”? No. Are they lying bastards? Yes.

Update: Here’s the actual report.

Yep. Foster writes:

“Further, while the Affordable Care Act makes important changes to the Medicare program and substantially improves its financial outlook, there is a strong likelihood that certain of these changes will not be viable in the long range. Specifically, the annual price updates for most categories of non-physician health services will be adjusted downward each year by the growth in economy-wide productivity. The best available evidence indicates that most health care providers cannot improve their productivity to this degree—or even approach such a level—as a result of the labor-intensive nature of these services.
Without unprecedented changes in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services. By the end of the long-range projection period, Medicare prices for hospital, skilled nursing facility, home health, hospice, ambulatory surgical center, diagnostic laboratory, and many other services would be less than half of their level under the prior law.”

He goes on:

For these reasons, the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable).

Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1360.7 -14.5 -1.05%
Eurostoxx Index 2254.9 -56.4 -2.44%
Oil (WTI) 102.8 -1.1 -1.07%
LIBOR 0.466 0.000 0.00%
US Dollar Index (DXY) 79.52 0.321 0.41%
10 Year Govt Bond Yield 1.92% -0.04%
RPX Composite Real Estate Index 173.4 0.5

Kind of a soggy tape this morning to go along with our soggy weekend in the Northeast. Political woes in Europe seem to be the main culprit. A split in the Netherlands over austerity measures is causing Dutch credit default swaps to richen. Purchasing Manager Indices in France, Germany, and the Netherlands all came in below expectations. While there have been some worries over Spanish banks, EURIBOR / OIS (a measure of stress in the banking system) is still falling after peaking in early December. So at least one indicator is telling us these fears are overblown.

In the US, stock index futures are down about a percent and bonds are stronger. Bonds have had a remarkable turnaround in the last month, as the 10-year bond futures broke down and fell out of their range in mid-March, only to rally again on euro fears. The contract is now challenging resistance at 144. Incredible turnaround. MBS are up small.

In US earnings, Chevron and Kellogg both disappointed. So far, earnings have been strong overall. Homebuilder DR Horton reported better than expected sales, the question will be whether this was weather-related.

Merger Monday is back, with a couple big deals in the pharma space and a couple of old British titans – Vodafone and Cable and Wireless – are partying like it is 1999.

Speaking of Prince’s apocalyptic party song, a venerable investment bank from that era is re-launching. Smith Barney manager Frank Campanale is bringing back E.F. Hutton. Given that E.F. Hutton is a recognizable name and was not involved in the financial crisis, it makes some sense to resurrect it. One possible way to break up the big banks would be to have them spin out their non-commercial banking units – Citi could spin Smith Barney and Travelers, Chase and JP Morgan could split again, and you would basically re-establish the money center bank. Maybe the foreign banks could get involved, with Credit Suisse spinning out First Boston and DLJ, UBS spinning out PaineWebber, and Deutsche Bank spinning Bankers Trust.

I Recommend WaPo’s ‘Spring Cleaning’ – 10 articles for conversation starters

http://www.washingtonpost.com/opinions/its-time-to-toss-the-all-volunteer-military/2012/04/19/gIQAwFV3TT_story.html?sub=AR

I liked Milbanks’ take on the Cabinet –  except for the Big Four, they don’t do anything.  The Departments may be important, but the Cabinet members are mere figureheads, he claims.  He may have exaggerated (what else is new?), but I got the thrust of it.

Bites & Pieces (Appetizers)

We’re having a small party next Saturday and so I’ve been thinking about the menu and what kind of appetizers to serve.  I’ve asked a few family members for suggestions and all of them requested this one.  It’s not the healthiest dish on the planet but since it’s one of those things I only make on rare occasions it falls into the eat in “Moderation” category.  Below I’ll jot down another recipe for an eggplant dip that’s quite a bit more nutritious although Michi may have already given us a similar one.

When I was growing up the popular appetizer at cocktail parties was Rumaki (chicken liver, water chestnut, bacon) so I guess mine isn’t any worse than that.  My father was the Rumaki King and so my sister and I helped make and serve a lot of it…………………………….yuck.

Fried Artichoke Hearts (serves 4 to 6)

Ingredients:

1 can artichoke hearts, not the marinated variety, you can buy them whole or quartered.  Quartered are more work but go further with a crowd.

3/4 cup flour

salt and garlic powder added to flour (dash of salt, 1 tsp garlic powder)

2 eggs lightly beaten

3/4 to 1 cup panko bread crumbs

oil for frying

2 to 3 tablespoons butter

juice of 1/4 lemon

Parmesan, freshly grated or Kraft

Directions:

Drain artichoke hearts.  Measure the seasoned flour and bread crumbs into individual bowls and likewise the eggs.  First coat the hearts with flour, then dip into the eggs coating thoroughly and last, roll in bread crumbs.  I generally do three or four at a time and use a separate fork for each bowl to keep my fingers from building up with all the sticky ingredients.  Place in a single layer on a plate and cover.  Refrigerate for several hours as they are best fried when really cold.

I generally fry them in a hot pan with just a 1/4″ layer of oil on the bottom and flip them several times until they turn a golden brown, but you can deep fry them it you want.  Drain on paper towels for a few minutes and while they’re draining melt the butter and add lemon juice.  Place the hearts into a serving dish and drizzle with lemon butter and sprinkle the top with Parmesan cheese………………Voila!!!!!

Eggplant Dip (Serves 4 to 6)

Ingredients:

5 large eggplants

5 cloves garlic

Juice of 1 large lemon

1 to 2 tablespoons tahini

5 green onions, chopped

salt and black pepper

Directions:

Heat the oven or grill to 400.  Roast whole eggplants on a baking sheet in the oven or directly on the grill for 40 to 50 minutes until soft and let cool.  Scoop out the insides of the eggplants and put them into a bowl, discard the peels.  Mash the eggplant and then let stand for about 30 minutes.  Discard any accumulated juices.

Add the garlic, lemon juice, tahini and green onions to the eggplant and mix together.  Add salt and pepper.  Keep refrigerated until serving.  Serve with crackers, cut vegetable or bread cubes.

And lastly, this piece from the Nation might clarify a few things for the girls here, or at least the ones who used to be here.  I’m not trying to start another fight please, just thought the girls might find something useful from this perspective.

TRES FAUX MORNING REPORT

Vital Statistics:
Last Change Percent
S&P Futures 1381.3 8.8 0.65%
Eurostoxx Index 2311.0 26 1.1%
Oil (WTI) 103.58 1.31 1.3%
LIBOR 0.466 0.000 0.00%
US Dollar Index (DXY) 79.55 .01 0.00%
10 Year Govt Bond Yield 1.977% .0277%
Odds Texas will sign Pollard unknown
Bloomberg offers that there is a jump in German confidence, US Airways and AMR are closer to merger, and that Microsoft and GE posted good profits.
FT reports that Wall Street has enjoyed its best quarter for bond trading in two years, rounded off with a surge in revenues at Morgan Stanley and Bank of America, in spite of a steep decline in risk-taking and the introduction of new regulations.
The new Economist leads with the digitalisation [their word] of manufacturing.

Revisiting the American Dream, or Dusk in America

A little uplifting reading for you.
National Journal: In Nothing we Trust

It’s long but covers Americans’ increasing indifference to our institutions — government, churches, corporations, etc.

Secession Today – a Texas scenario

March 30, 2012

It’s a popular idea in Texas that the Lone Star State — once an independent republic — could break away and go it alone. A few years ago, Texas Gov. Rick Perry hinted that if Washington didn’t stop meddling in his state, independence might be an option. In his brief run for the White House, he insisted that nearly anything the feds do, the states — and Texas in particular — could do better.

So we’re putting Perry’s suggestions to the test — NPR is liberating Texas. We asked scholars, business leaders, diplomats, journalists and regular folk to help us imagine an independent Texas based on current issues before the state. (Though, to be clear, no one quoted here actually favors secession.)

We begin our exercise in Austin, capital of the new Republic of Texas, where the Independence Day party raged until dawn to the music of Austin’s own Asleep at the Wheel. Lead singer Ray Benson announced to the crowd, “We have severed the ties with the United States of America. Texas is free!” and the masses roared in response.

The former state has reinvented itself as a sort of Lone Star Singapore, with low taxes, free trade and minimal regulation. It enters the community of nations as the world’s 15th-largest economy, with vast oil and gas reserves, busy international ports, an independent power grid and a laissez-faire attitude about making money.

Texas Is ‘Open For Business’

The Texas Association of Business advertises the new nation’s economic potential with a radio ad that declares, “Texas: Now it is a whole other country — and it’s open for business … C’mon over. Be part of our vibrant free-market nation.”

Driving around Texas, it’s not uncommon to spot bumper stickers that tout the idea of an independent Longhorn nation.

“What we have been able to do since we threw off the yoke of the federal government is create a country that has the assets necessary to build an incredible empire,” says Bill Hammond, the association’s president.

Imagine airports without the Transportation Security Administration; gun sales without the Bureau of Alcohol, Tobacco, Firearms and Explosives; land development without the Endangered Species Act; new congressional districts without the Voting Rights Act; and a new guest-worker program without Washington gridlock over immigration reform.

Indeed, new immigration laws sailed through the Texas Congress. Immigrant workers are now legally crossing the border to frame houses, mow lawns and clean hotel rooms.

“We now have a safe and secure guest-worker program that allows immigrants to come and go as the jobs ebb and flow, and fill the jobs that Texans are unwilling to do,” Hammond says.

The new normal is a leaner government that bears little resemblance to the full-service nation it left behind. The Tea Party faithful who embraced nationhood early on say it’s a lot better than being beholden to Chinese bankers.

“What is the Republic of Texas charged with actually doing? [It’s] charged with defense, charged with education, charged with a few things that you have to do, and the rest is wide open,” says Felicia Cravens, a high school drama teacher active in the Houston Tea Party movement. “Liberty may look like chaos, but to us it’s a lot of choices.”

Under statehood, the U.S. government contributed 60 percent of all Texas aid to the poor. In an independent republic, federal benefits like food stamps, free school lunches and unemployment compensation would disappear, according to two Dallas Tea Party leaders.

“Liberty may look like chaos, but to us it’s a lot of choices.”

“The nation of Texas is a living experiment into what we call the empowerment society. It is no longer a caretaker society,” says Ken Emanuelson, founder of the Grassroots Texans Network.

Texas Tea Party member Katrina Pierson adds, “There’s a safety net that’s always been out there. We don’t have that anymore. You will be a productive member of society and our environment doesn’t allow for people to not be productive.”

Southern Methodist University political scientist Cal Jillson imagines that low-wage Texas would become a new magnet for assembly plants that might have considered setting up shop in Mexico or Malaysia.

“Since Texas has become independent, we are surprised — and some are pleased — to see that maquiladora [or foreign-owned] plants are springing up on the south side of the Red River and on the Sabine [River],” Jillson says. “The American South is complaining because some plants are moving to Texas.”

With independence, the epic battles between the state of Texas and the Environmental Protection Agency would finally be over. The state sued the EPA repeatedly for telling Texas how to run its refineries and coal-fired power plants. Business experts say the new republic would rely on voluntary pollution controls with minimal oversight — a boon to the industrial sector. But how would that go over with residents of refinery towns who have to breathe the air where they live?

“I am very, very skeptical that the nation of Texas will do a good job at protecting the health and safety of the people, because the EPA is no longer in the equation,” says Hilton Kelley, founder and director of the Community Empowerment and Development Association in Port Arthur. “It’s all about petroleum; it’s all about money.”

‘Peeling Back The Onion’ Of Texan Independence

As an independent country, Texas’s red granite capitol building would no longer fly the American flag, only the Lone Star. The new nationalism that breaks out inside the new government would soon be tempered by an independence hangover.

“Every day we’re peeling back the onion and finding another level of complexity that I don’t think anybody initially anticipated,” says Harvey Kronberg, longtime editor and publisher of the Texas political newsletter Quorum Report.

According to Kronberg, a modern sovereign nation requires more — not less — government than a state would. Consider all the new departments it would need to monitor things like foreign affairs, aviation and nuclear regulation. And then there are all the expenses Washington used to take care of — things like maintaining interstate highways, inspecting meat and checking passports.

“Reality is beginning to stagger the folks in the [capitol] building,” Kronberg says.

Public education is a good example. In 2011, the Texas state Legislature slashed billions of dollars from school systems at a time when Texas was already 43rd among the states in per pupil spending and dead last in the number of adults who completed high school.

Steve Murdock, the former Texas state demographer and current director of the Hobby Center for the Study of Texas, expects that things would not improve under the budget of a struggling infant nation.

“For Texas to be the competitive nation that we would all wish it would be, it has to make major improvements in education,” Murdock says, “because right now it’s falling short.”

Texas writer Joe Nick Patoski sits on a bench in downtown Austin, ruminating on the hassles of self-rule.

“You can’t get in the car and go to New Orleans [and] be there in six hours anymore,” he says. “Listen, have you been to the Louisiana checkpoint in Vinton? They’re extracting some kind of revenge, the way they treat us as Third World citizens.”

Patoski imagines losing a number of friends to the post-secession “Texodus,” when U.S. citizens fled Texas for the Upper 48 states. He says he’s rooting for the republic, but he’s anxious for its future.

Today, all that marks the state line between Texas and Louisiana are welcome signs. After independence, those signs would most likely be replaced with the customs and immigration checkpoints that come with any border crossings.

“I’m still proud to be a Texan,” he says, “but I wish they would’ve thought this through before they jumped and cut the cord.”

Step 1: Don’t Go To War With Oklahoma

During the state’s first run as a republic, from 1836 to 1845, Texas established diplomatic relations with England, France, the Netherlands and the United States. Today, the modern nation of Texas would find even more countries eager to build embassies in Austin, says Carne Ross of Independent Diplomat, a New York firm that advises fledgling nations.

“Because of Texas’ wealth — [it’s the] 15th-largest economy in the world — [foreign nations] do not want to have bad relations with Texas,” Ross says. “There are many countries, China for instance, that want to preserve their ability to access countries with major oil and gas reserves, so Texas fit into that.”

Unlike the first republic, a modern nation of Texas needs to have positions on things like the Israeli-Palestinian conflict.

“But what was interesting was that Texas’ positions were often quite different from the remaining United States,” Ross says.

What would Texas’s foreign policy entail? Country singer and humorist Kinky Friedman imagines what he would do as the Texas secretary of foreign affairs.

“I think the first thing we would do is go to the Third World countries and teach the women how to grow big hair and give the men Rick Perry wigs,” he says. “I will keep us out of war with Oklahoma. And one of the first countries we’ll open free trade with is Cuba. We will be opening cigar stores all over Texas. We’re not supporting their economy; we’re burning their fields.”

From Texas To La Republica De Tejas

Texas might see itself as culturally akin to its former fatherland, but as time goes on, the nation’s destiny would be determined by its genetic ties to the south. If current demographic growth continues, Texas will become majority Hispanic within a generation. The prospect of Texas as the newest Latin American nation amuses Austin cultural marketing consultant Mando Rayo.

“Texas becomes La Republica de Tejas,” Rayo says. “The panhandle city of Amarillo becomes Amarillo, and our national pride, the Dallas Vaqueros, win the Super Bowl.”

But would the U.S. let Texas go or would there be a constitutional standoff and opposition from the remaining united states? University of Texas, Austin, presidential scholar H.W. Brands doesn’t anticipate a painful separation.

“The Texans were all set for a fight,” he says. “I don’t know, maybe they were a little bit surprised — maybe they were miffed — that much of the rest of the country said, ‘Well we’ve had enough of the Texans, let ’em go. We’ll be better off without ’em.’ ”

The premise of an independent Texas isn’t actually all that popular in the Lone Star State. Last year, Public Policy Polling asked Texans if they favored secession, and fewer than 1 in 5 were for it. As for the 18 percent that said yes — they can just consider our simulation food for thought.

John Burnett is an NPR national correspondent who lives in Austin and plays in a band, so he is not atypical of Austin. He put this together for NPR at the end of March.

Morning Report

Vital Statistics:
 
  Last Change Percent
S&P Futures 1374.5 -3.8 -0.28%
Eurostoxx Index 2312.0 -15.8 -0.68%
Oil (WTI) 102.1 -0.6 -0.58%
LIBOR 0.466 0.000 0.00%
US Dollar Index (DXY) 79.54 -0.002 0.00%
10 Year Govt Bond Yield 1.95% -0.03%  
RPX Composite Real Estate Index 172.8 0.6  
 
Markets are flattish after a successful Spanish bond auction and generally good earnings reports from a slew of companies. Bank of America and Ebay were standounts. Spanish bond yields are starting to increase and the Spanish equity market (The IBEX) is under pressure. US Treasuries and MBS are flat to up.
 
US Leading economic indicators fell. The Philly Fed Business Outlook Survey noted regional manufacturing activity expanded modestly in April, but fell slightly from the previous month. Both indicators seem to imply the economy is still expanding, but not as rapidly as a few months ago. Existing home sales fell to 4.48 million.
 
The press is pointing out the strong demand for the Spanish bond auction. As Bill Gross mentioned, banks are buying all of the excess supply in the Spanish bond auctions, which he views as artificial demand. The interesting question is that sovereign bonds are treated as riskless assets for bank capital requirements. If it turns out they are not riskless… Investors are noticing, and bidding up credit default swaps for Spanish banks.
 
Initial Jobless claims came in at 386k, ahead of the 370k expected. Last week was revised upwards. Interestingly, when I re-ran the data series, the government had revised virtually every week up from the beginning of the year. Not sure what is going on there..
 
A University of Chicago economist gives a theoretical explanation why principal reductions are better for borrowers than interest rate mods which merely lower the payment. In effect, mods which target a percent of income (usually 31%) end up penalizing workers as they earn more – in effect they can be hit (in theory) with a 100%+ marginal tax rate. Not sure I buy the idea that this is influencing behavior, but it is an interesting take on payment vs principal mods.
 
The National Association of Home Builders weighs in on tax policy, urging Congress to increase certainty (read: extend the Bush tax cuts) into the tax code. As the economy slows, Washington will come under increasing pressure to push the 2013 tax hikes further into the future.
 
Do the government’s inflation numbers seem to not jibe with your actual bills? One explanation is the change in methodology over the years. Someone went to the trouble of recalculating inflation using the older methodology, and unsurprisingly, it is higher. The government disagrees.
 
 
Chart: Initial Jobless Claims:
 

Secession revisited

Last week was the 151st anniversary of the beginning of the Civil War, and yesterday was the 151st anniversary of Virginia’s declaration of secession from the United States. The outcome of the Civil War itself seems to have put an end to any questions about the constitutional legitimacy of secession, but there is no reason it should have. Might, as the cliche goes, does not make right, and so the constitutional question of whether the federal government is acting within its rightful powers to prevent a state from peaceably withdrawing itself from the Union cannot have been settled simply because the federal government was able to do so successfully. And of course, the Confederacy did itself and the underlying question no favors by firing on Fort Sumnter, making the withdrawal not so peaceable and providing Lincoln with a justification for sending in the troops. But I think the question still remains: Does the constitution prevent states from seceding from the Union?

It is interesting to note that between December 20, 1860 and April 12, 1961, the day on which Confederate troops fired on Fort Sumnter, 7 states declared secession from the Union, and neither President Buchanan nor President Lincoln, despite his rhetoric, took any official action against the seceding states. Following the war, Jefferson Davis was arrested for treason, but was never in fact tried, and while there were plenty of political reasons for the blanket pardon granted to those in the Confederacy, uncertainty about the lack of constitutional legitimacy of secession was certainly among them. And the southern states were not even the first to contemplate secession. During the War of 1812, a delegation of Federalist representatives from New England broached the subject of seceding, with the Massachusetts governor even considering coming to terms of a separate peace with Great Britain.

Certainly, in any event, it is difficult to square a view of the constitution as prohibiting secession with the foundation of the United States itself, of which an animating feature was the very presumption that a people could, by right, “dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them”. Indeed, reading the Declaration of Causes of Seceding States, one can’t help but hear the echo of the original Declaration of Independence, upon which they were so obviously modeled.

So, putting aside the moral question with which the secession movement of 1861 was inextricably linked, ie slavery, was the Federal government justified in waging war against the South, and does a proper reading of the constitution really grant it the power to wage such a war?

Morning Report

Vital Statistics:

Last Change Percent
S&P Futures 1381.5 -2.1 -0.15%
Eurostoxx Index 2331.1 -35.9 -1.52%
Oil (WTI) 104.3 0.1 0.06%
LIBOR 0.466 0.000 0.00%
US Dollar Index (DXY) 79.78 0.307 0.39%
10 Year Govt Bond Yield 1.99% -0.01%
RPX Composite Real Estate Index 172.2 -0.2
Equity markets are slightly weaker this morning on a disappointing earnings report from Intel. IBM and Yahoo also reported last night.  Abbott Labs and Halliburton beat estimates this morning. Spanish bond yields are lower. Bonds and MBS are slightly higher. No economic data this morning.
Part of the reason for the strong market rally yesterday was a strong Spanish bond auction. Many have noted that the Spanish banks have been large buyers of Spanish government debt. Bill Gross called the market “artificially controlled” on CNBC, and he doesn’t trust it. Bloombergnotes the bad debt exposure for Spanish banks, and the possibility for the government to take on contingent liabilities. Spain has the 12th largest GDP in the world (Greece is something like 35th), so don’t think a crisis would be a repeat of last fall.
Housing advocates are worried that a President Romney will take aim at HUD. Of course HUD could remain as the alphabet soup of government housing agencies get re-organized. For all intents and purposes, the US mortgage market is nationalized, and while the GSEs may go away in name, their function will be handled by some other entity. It would take roughly 500 billion to fully capitalize the GSEs and that kind of money can’t be raised in the private sector.
US Bancorp is noting that demand for credit is increasing. CEO Richard Davis told CNBC yesterday that mortgage demand was the highest in the bank’s history. The Minneapolis-based bank had reported better than expected numbers earlier that morning. So, this is one positive data point to throw in the mix of negative ones we have been seeing lately.
Ever done a quick fix on your home with the intention of doing a full repair later, but never got around to it? Here are some good ones (note the uses of hockey pucks)