theatlantic.com
This article from The Atlantic is well worth reading; quoting from this article,
“… when asked what they wish they’d done differently in college, “choosing a different major” wasn’t the top answer. The most popular answer, given by half of all respondents, was “gaining more work experience.” Choosing a different major was the fourth most popular response, after “studying harder” and “looking for work sooner.”
The underlying idea behind “Options Away” is quite interesting. I can’t help but wonder why the airlines and/or the various intermediaries such as Expedia and Orbitz haven’t already implemented similar arrangements.
The “insurance” described in the article referenced below is different from traditional travel insurance which requires purchasing a ticket prior to buying the insurance. Here, one can purchase a call option that locks in a favorable fare today without obligating the consumer to actually purchase the ticket.
Options Away: Insurance Against Airfare Hikes
“Options Away… will sell you the right to buy a plane ticket within a certain timeframe at a certain price. If the airfare goes up within your option’s time frame, good for you—you can buy the ticket, paying your optioned fare, and Options Away pays the difference. If the airfare goes down within your option’s timeframe, you simply ignore your option and buy your ticket at its now lower fare. Either way, you’re out the option fee, but you are not obligated to buy the ticket.”
About Social Security’s future… Social Security is a compact between generations. Since 1935, America has kept the promise of security for its workers and their families. Now, however, the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today’s younger workers are ready for retirement. Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 77 cents for each dollar of scheduled benefits.* We need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations. * These estimates are based on the intermediate assumptions from the Social Security Trustees’ Annual Report to the Congress. ]]>
Quoting from my annual Social Security Statement; I can’t help but wonder what the numbers are for “optimistic” assumptions and for “pessimistic” assumptions (see the “fine print” by the asterisk below):
About Social Security’s future…
Social Security is a compact between generations. Since 1935, America has kept the promise of security for its workers and their families. Now, however, the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today’s younger workers are ready for retirement.
Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 77 cents for each dollar of scheduled benefits.* We need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations.
* These estimates are based on the intermediate assumptions from the Social Security Trustees’ Annual Report to the Congress.
One of the feature articles in the current issue of The Economist is entitled “Risk off: Why some people are more cautious with their finances than others”. Here are some key takeaways from this article:
1. Economists have long known that people are risk-averse; yet the willingness to run risks varies enormously among individuals and over time.
2. Genetics explains a third of the difference in risk-taking; e.g., a Swedish study of twins finds that identical twins had “… a closer propensity to invest in shares” than fraternal ones.
3. Upbringing, environment and experience also matter; e.g., . “…the educated and the rich are more daring financially. So are men, but apparently not for genetic reasons”.
4. People’s financial history has a strong impact on their taste for risk; e.g., “… people who experienced high (low) returns on the stockmarket earlier in life were, years later, likelier to report a higher (lower) tolerance for risk, to own (not own) shares and to invest a bigger (smaller) slice of their assets in shares.”
5. “Exposure to economic turmoil appears to dampen people’s appetite for risk irrespective of their personal financial losses.” Furthermore, a low tolerance for risk is linked to past emotional trauma.
Here’s a list of articles that I have been reading and videos that I have been viewing lately:
www.bloomberg.com
“The head of the think tank where I work believes he has discovered the secret of happiness, and he wants to share it with everyone. Don’t worry: I’m not in a cult.”
Obama Administration Makes Secretive Last-Minute Deadline Change to Obamacare
reason.com
“Deadlines? Who needs ’em? Not when it comes to Obamacare anyway. Today was set to be the final day to sign up for coverage that begins on January 1.”
Incompetence
blogs.wsj.com
Brilliant essay from Peggy Noonan… “The alarming news about the Obama administration.”
The Late, Great American WASP
online.wsj.com
“The old U.S. ruling class had plenty of problems, but are we really better off under today’s meritocracy?”
Obama’s Misguided Obsession With Inequality
online.wsj.com
This article calls to mind the famous Benjamin Disraeli quote, “There are three types of lies — lies, damn lies, and statistics”. “Chris Christie economic adviser Robert Grady writes that the President uses statistics that ignore taxes and transfer payments. Faster growth is what the poor really need.”
America’s 8 million missing jobs –in one chart
www.aei-ideas.org
From the Economic Policy Institute: “In November 2013, the labor market had 1.3 million fewer jobs than when the recession began in December 2007…”
The Most Grumble-Filled Time of the Year
online.wsj.com
“Christmas has something for everyone—even those who see Scrooge as a role model.”
Flurry of tweaks to Affordable Care Act leaves insurers rattled
online.wsj.com
Tweaks to Health Law Rattle Insurers (and consumers)… “A spree of surprise changes to the health-care law in recent weeks has rattled insurers, who say the Obama administration’s pronouncements could undermine the law’s new marketplaces.”
Obama’s extreme use of executive discretion
washingtonpost.com
“Obama ignores the separation of powers to suit his purposes. Will Congress challenge him?”
washingtonpost.com
“The nation finally wakes up to how radical Obamacare is.”
Obamacare’s Atomistic Individualism
“Obamacare is pushing people away from cooperation and community and toward atomistic individualism.”
Lessons from Dutch Welfare Reform
“Welfare advocates regularly urge Americans to look to the European welfare state as a model. At least in the case of the Netherlands, they might be on to something.”
Did the Three Kings Bear Gift Receipts?
This essay by AEI’s Kevin Hassett is an “oldie but goodie”. On a related note, be sure to check out the results of a poll of the nations top economists in they they provide responses to the following proposition: “Giving specific presents as holiday gifts is inefficient, because recipients could satisfy their preferences much better with cash.” (@ http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_1z4X7kmHnVYo28d)…
They Know Not What They Do—Philip Jenkins on the world’s most persecuted faith.
online.wsj.com
“Philip Jenkins reviews John L. Allen Jr.’s “The Global War on Christians: Dispatches From the Front Lines of Anti-Christian Persecution.””
Venezuela Is the Next Zimbabwe
online.wsj.com
“In The Wall Street Journal, Leopoldo Martinez writes that as inflation rages, Nicolás Maduro seizes private farms and companies, arresting businessmen for ‘speculation.'”
The Most Memorable Words of 2013
online.wsj.com
“In The Wall Street Journal, Declarations columnist Peggy Noonan recalls the year’s most memorable statements, including a billionaire’s worry: ‘Every time I hear the stock market went up I know the guillotines are coming closer.'”
Merry Christmas from Baylor University: “Hark! The Herald Angels Sing”
youtube.com
Hear the McLane Carillon ring in the Christmas season from Founders Mall to all of Baylor Nation in this performance of “Hark! The Herald Angels Sing”!
Chris Christie dresses down ‘Pajama boy’
“New Jersey Gov. Chris Christie co-opted the lampooned “Pajama Boy” image promoting Obamacare in order to send his own message about volunteering.”
Obamacare’s Top 10 Constitutional Violations
“There’s much more to the ACA’s problems than the individual mandate-tax, botched website, and not being able to keep your policy.”
America’s Polygamous Future
online.wsj.com
“In The Wall Street Journal, Charlotte Allen writes that a Utah court ruling on Mormons is likely to spread to Muslims and others.”
Obama’s Prozac Presidency
online.wsj.com
“In The Wall Street Journal, Wonder Land columnist Daniel Henninger writes that for Barack Obama, 21st-century Americans live with a wolf at every door.”
Unmasking the Mortgage Interest Deduction: Who Benefits and by How Much? 2013 Update
reason.org
“The case for supporting the mortgage interest deduction has been resoundingly refuted, both as an effective tool for social engineering and as fiscally responsible tax policy. It is time to end support for the mortgage interest deduction.”
Gallup: Record High (72 Percent) Say “Big Government” Biggest Threat To US
reason.com
“When Gallup first began asking the question in 1965 only 35 percent of Americans said “big government” would be the biggest threat to the country.”
The Right Minimum Wage: $0.00 – New York Times
www.nytimes.com
Quoting from this (dated, yet relevant New York Times article from 25 years ago), “The idea of using a minimum wage to overcome poverty is old, honorable – and fundamentally flawed. It’s time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little.”
With Affordable Care Act, Canceled Policies for New York Professionals
www.nytimes.com
More on the Affordable Care Act as a case study in unintended consequences… “Thousands of New Yorkers who supported President Obama’s health plan are finding that their insurance plans are canceled and that they may have to accept inferior coverage.”
ObamaCare’s Troubles Are Only Beginning
online.wsj.com
“In The Wall Street Journal, Michael Boskin writes that we should be prepared for eligibility, payment and information protection debacles—and longer waits for care.”
Federal Judge Rules Against N.S.A. Phone Data Program
www.nytimes.com
“A decision finds that keeping records of Americans’ phone calls probably violates the Constitution and orders the government to stop collecting data on two plaintiffs.”
The vast majority of the ads shown on the www.doyougotinsurance.com website promote health insurance as an “enabling technology” that facilitates various risky behaviors; e.g., uncelibate sex, binge drinking, bungee jumping, white water rafting, etc. These ads are (condescendingly and stereotypically) targeting millenials whose overpriced premiums are needed in order to cross-subsidize premium costs for older, sicker people. It turns out that the financing model underlying the so-called Affordable Care Act (ACA) critically depends upon such cross-subsidies in order for ACA to be financially sustainable. Without these cross-subsidies, the more likely outcome for ACA is what Cutler and Zeckhauser (1998; cf. https://www.degruyter.com/view/journals/fhep/1/1/article-fhep.1998.1.1.1056.xml.xml) refer to as an “adverse selection death spiral” (see also AEI Resident Fellow Scott Gottleib’s Forbes piece on this very same topic @ http://is.gd/jnh04G).
Since the ACA is designed to vastly expand Medicaid and offer subsidies to households with incomes up to 400% of the federal poverty level, then somebody has to pay for it. And if the plan works as it is supposed to, young middle class workers will have to enroll in droves to pay for overpriced insurance. However, based upon the early returns from enrollment at the Federal and state websites, this does not appear likely. Thus the aggressive ads designed to convince otherwise reticent millennials to sign up for overpriced insurance. Apparently health insurance can be “fun” because it makes it possible to not have to fully internalize the costs of risky behaviors. This would be the Peltzman effect on steroids…
The aforementioned website (doyougotinsurance.com) is “…a project of the Thanks Obamacare campaign, created by the Colorado Consumer Health Initiative and ProgressNow Colorado Education to educate everyone about the benefits of the Affordable Care Act.”
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The vast majority of the ads shown on the www.doyougotinsurance.com website promote health insurance as an “enabling technology” that facilitates various risky behaviors; e.g., uncelibate sex, binge drinking, bungee jumping, white water rafting, etc. These ads are (condescendingly and stereotypically) targeting millenials whose overpriced premiums are needed in order to cross-subsidize premium costs for older, sicker people. It turns out that the financing model underlying the so-called Affordable Care Act (ACA) critically depends upon such cross-subsidies in order for ACA to be financially sustainable. Without these cross-subsidies, the more likely outcome for ACA is what Cutler and Zeckhauser (1998; cf. https://www.degruyter.com/view/journals/fhep/1/1/article-fhep.1998.1.1.1056.xml.xml) refer to as an “adverse selection death spiral” (see also AEI Resident Fellow Scott Gottleib’s Forbes piece on this very same topic @ http://is.gd/jnh04G).
Since the ACA is designed to vastly expand Medicaid and offer subsidies to households with incomes up to 400% of the federal poverty level, then somebody has to pay for it. And if the plan works as it is supposed to, young middle class workers will have to enroll in droves to pay for overpriced insurance. However, based upon the early returns from enrollment at the Federal and state websites, this does not appear likely. Thus the aggressive ads designed to convince otherwise reticent millennials to sign up for overpriced insurance. Apparently health insurance can be “fun” because it makes it possible to not have to fully internalize the costs of risky behaviors. This would be the Peltzman effect on steroids…
The aforementioned website (doyougotinsurance.com) is “…a project of the Thanks Obamacare campaign, created by the Colorado Consumer Health Initiative and ProgressNow Colorado Education to educate everyone about the benefits of the Affordable Care Act.”
Several friends of mine have been complaining lately about experiencing “sticker shock” when they have shopped for health insurance at http://www.healthcare.gov. Unfortunately, what many of them apparently consider to be a “bug” which needs fixing (along with the website itself) is actually a “feature” of the so-called Affordable Care Act (ACA). According to the American Cancer Society’s summary of federal rating rules (see http://bit.ly/Oyrsii), “Health plans will be allowed to adjust premiums only for the following factors: 1) Self-only or family enrollment; 2) Geographic area; 3) Age (except the rate cannot vary by more than 3 to 1 for adults) and 4) Tobacco use (except the rate cannot vary by more than 1.5 to 1).” By severely limiting risk classification, the ACA is consequently designed from the ground up to make good risks pay too much for coverage and consequently cross-subsidize the premiums paid by bad risks who pay too little.
The problem with this pricing scheme is that it dissuades good risks from buying insurance in the first place. The ACA addresses this problem by imposing an “individual mandate”. Under the individual mandate, if you refrain from purchasing insurance, you are obligated to pay a “penalty” (redefined by the Supreme Court’s 2012 ACA decision as a “tax”). The penalty/tax paid by a single adult for failing to comply with the individual mandate during 2014 will be $95 but will increase within 3-4 years to $695 a year for such an individual and $2,085 a year for a family (or 2.5 percent of household income (whichever is greater); source: http://on.tnr.com/11wWS0i). In many cases (particularly for otherwise healthy individuals and families who don’t qualify for ACA premium subsidies; see http://kff.org/interactive/subsidy-calculator/ to see whether you qualify), people will forego insurance and pay the penalty. With “good risks” dropping out, this implies that average claims costs (and therefore prices that need to be charged to cover these costs) will likely increase over time. As prices increase, expect to see even more (healthier than average) individuals and families drop their insurance coverage and pay the penalty/tax instead. This dynamic process is commonly referred to as “adverse selection” (see my blog posting from a couple days ago entitled “Adverse Selection – a definition, some examples, and some solutions” for more on this topic).
As bad as this all seems, adverse selection also pretty much wreaks havoc upon the business models of insurers participating in the health insurance exchanges. AEI resident fellow Dr. Scott Gottlieb writes in a recent Forbes article that the ACA faces a ‘death spiral’ which turns not only on rising premiums (due to the adverse selection problem described above) but also upon declining participation over time of health insurance plans and doctor networks provided by such plans; see http://onforb.es/1g6zwGL for details).