The polls seem to be showing solid doubts and opposition to the health care agenda being advocated by President Obama and congressional leaders.
For example, a Rasmussen Reports survey released on August 27 found the following:
• “The latest Rasmussen Reports national telephone survey show that 43% of voters nationwide favor the plan working its way through Congress while 53% are opposed.”
• “While supporters of the reform effort say it is needed to help reduce the cost of health care, 52% of voters believe it will have the opposite effect and lead to higher costs. Just 17% believe the plans now in Congress will reduce costs.”
• “Additionally, by a 50% to 23% margin, voters believe the proposed reforms would make the quality of care worse rather than better.”
• As for breakdown by political party, 87% of Republicans oppose the plan and 55% of those not identified with either major party are opposed, while 75% of Democrats are in support.
The majority of voters are right on the mark. This big government health care plan, if passed, would raise costs, and diminish quality. It’s time for elected officials to catch up with their constituents on this critical issue.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Thursday, September 03, 2009
Obama Trade Test
On the campaign trail, Barack Obama played the protectionist card to pander to labor unions and the environmental movement. Since moving into the Oval Office, though, President Obama has been quiet on the trade front.
Quiet is not good, as the U.S. needs to be aggressively pushing for free trade in order to expand opportunities for U.S. businesses, and multiply choices for consumers. Of course, small businesses count themselves amongst exporters (97% of U.S. exporters, in fact, are firms with fewer than 500 employees), importers and consumers of imports.
On August 28, The Wall Street Journal reported: “President Barack Obama has until Sept. 17 to rule on a U.S. International Trade Commission recommendation that the White House put a 55% tariff on low-grade car tires imported from China. The ITC's finding followed a complaint by the United Steelworkers that a flood of cheap Chinese tires in recent years had cost more than 5,000 union jobs.”
In reality, imposing three-year tariffs on Chinese tire imports would accomplish nothing in terms of U.S. tire production or “union” jobs, as U.S. firms do not produce these low-end tires. Instead, consumers, including small business owners, would be hurt due to higher tire prices.
Who will President Obama align himself with – labor unions or the rest of the economy?
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Quiet is not good, as the U.S. needs to be aggressively pushing for free trade in order to expand opportunities for U.S. businesses, and multiply choices for consumers. Of course, small businesses count themselves amongst exporters (97% of U.S. exporters, in fact, are firms with fewer than 500 employees), importers and consumers of imports.
On August 28, The Wall Street Journal reported: “President Barack Obama has until Sept. 17 to rule on a U.S. International Trade Commission recommendation that the White House put a 55% tariff on low-grade car tires imported from China. The ITC's finding followed a complaint by the United Steelworkers that a flood of cheap Chinese tires in recent years had cost more than 5,000 union jobs.”
In reality, imposing three-year tariffs on Chinese tire imports would accomplish nothing in terms of U.S. tire production or “union” jobs, as U.S. firms do not produce these low-end tires. Instead, consumers, including small business owners, would be hurt due to higher tire prices.
Who will President Obama align himself with – labor unions or the rest of the economy?
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Wednesday, September 02, 2009
Small Biz Health Care Daily: Commerce Secretary and Health Care Reform
President Obama’s Commerce Secretary, Gary Locke, wrote a piece in the August 28 Wall Street Journal about business and health care reform. Locke, of course, was arguing in favor of the health care agenda being pushed by the President and congressional leaders.
Locke focused in on the current high cost of health care coverage for businesses. For example, he wrote: “The cost pressure is particularly acute for small businesses, which, on average, pay 18% more per worker than large firms for the same health-insurance policies. They pay more because they have a smaller risk pool and have to absorb higher broker fees and administrative costs per worker. As a result, many small businesses don't offer health coverage. Just 49% of firms with three to nine workers and 78% of firms with 10 to 24 workers offered health plans in 2008, while 99% of firms with over 200 workers did.”
Locke concluded: “President Obama has articulated three broad criteria for reform. Reduce costs, protect Americans' choice of doctors and insurance plans, and assure quality and affordable health care for any American who wants it.” And then he added: “The bills working through Congress are moving in the right direction, and despite some setbacks, this nation is closer to fundamental health-care reform than we have ever been.”
Of course, rising health care costs are a burden for business, especially smaller firms. But the assumption that more government involvement, as spelled out by President Obama and congressional leaders, is the answer makes no sense. When has more government involvement in anything ever produced lower costs? Instead, what we see are higher costs and diminished quality.
Part of the current cost problem is the expanded role of government funding in health care. Consider, for example, that in 1960, government funded 21.4% of personal health care spending. By 2006, government’s share had more than doubled to 45.3%. At the same time, out-of-pocket payments plummeted from 55.2% in 1960 to 14.6% in 2006. In addition, private health insurance’s share increased from 21.4% to 36%.
This dramatic shift to third-party payments – in particular, to government funding – has been a major cost driver over recent decades. Health care consumers and providers have few incentives to be concerned about prices and utilization, while those in government care little about costs as they are spending other people’s (i.e., the taxpayers’) money.
That all adds up to increased health care costs. Still more government obviously is not the answer.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Locke focused in on the current high cost of health care coverage for businesses. For example, he wrote: “The cost pressure is particularly acute for small businesses, which, on average, pay 18% more per worker than large firms for the same health-insurance policies. They pay more because they have a smaller risk pool and have to absorb higher broker fees and administrative costs per worker. As a result, many small businesses don't offer health coverage. Just 49% of firms with three to nine workers and 78% of firms with 10 to 24 workers offered health plans in 2008, while 99% of firms with over 200 workers did.”
Locke concluded: “President Obama has articulated three broad criteria for reform. Reduce costs, protect Americans' choice of doctors and insurance plans, and assure quality and affordable health care for any American who wants it.” And then he added: “The bills working through Congress are moving in the right direction, and despite some setbacks, this nation is closer to fundamental health-care reform than we have ever been.”
Of course, rising health care costs are a burden for business, especially smaller firms. But the assumption that more government involvement, as spelled out by President Obama and congressional leaders, is the answer makes no sense. When has more government involvement in anything ever produced lower costs? Instead, what we see are higher costs and diminished quality.
Part of the current cost problem is the expanded role of government funding in health care. Consider, for example, that in 1960, government funded 21.4% of personal health care spending. By 2006, government’s share had more than doubled to 45.3%. At the same time, out-of-pocket payments plummeted from 55.2% in 1960 to 14.6% in 2006. In addition, private health insurance’s share increased from 21.4% to 36%.
This dramatic shift to third-party payments – in particular, to government funding – has been a major cost driver over recent decades. Health care consumers and providers have few incentives to be concerned about prices and utilization, while those in government care little about costs as they are spending other people’s (i.e., the taxpayers’) money.
That all adds up to increased health care costs. Still more government obviously is not the answer.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
The Full Picture on Business Income
When talk focuses on business income, the number almost always analyzed is corporate profits. But there’s another part of the business income story that warrants attention, i.e., proprietors’ income.
Proprietors’ income is mainly about the income generated by sole proprietorships and partnerships.
This is anything but insignificant. In the second quarter of 2009, for example, while corporate profits registered $1.25 trillion, proprietors’ income came in at $1.03 trillion.
In fact, it is not unusual for proprietors’ income to top corporate profits in a given year. That happened, for example, in 2001 and 2002.
What’s the recent trend been?
Corporate profits recently peaked in the third quarter of 2006 at $1.66 trillion, and fell unevenly to $1.25 trillion in the second quarter of 2009. Over the last two quarters, however, corporate profits resumed some growth.
Meanwhile, proprietors’ income recently hit a high in the second quarter of 2006 at $1.13 trillion, followed by a smaller, uneven decline. Recently, though, proprietors’ income fell from $1.14 trillion in the third quarter of 2008 to $1.03 trillion in the second quarter of 2009.
Looking ahead to some kind of economic recovery, it is just as critical for the economy to see proprietors’ income growing, as it is to see corporate profits on the rise.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Proprietors’ income is mainly about the income generated by sole proprietorships and partnerships.
This is anything but insignificant. In the second quarter of 2009, for example, while corporate profits registered $1.25 trillion, proprietors’ income came in at $1.03 trillion.
In fact, it is not unusual for proprietors’ income to top corporate profits in a given year. That happened, for example, in 2001 and 2002.
What’s the recent trend been?
Corporate profits recently peaked in the third quarter of 2006 at $1.66 trillion, and fell unevenly to $1.25 trillion in the second quarter of 2009. Over the last two quarters, however, corporate profits resumed some growth.
Meanwhile, proprietors’ income recently hit a high in the second quarter of 2006 at $1.13 trillion, followed by a smaller, uneven decline. Recently, though, proprietors’ income fell from $1.14 trillion in the third quarter of 2008 to $1.03 trillion in the second quarter of 2009.
Looking ahead to some kind of economic recovery, it is just as critical for the economy to see proprietors’ income growing, as it is to see corporate profits on the rise.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Tuesday, September 01, 2009
Small Biz Health Care Daily: Life Expectancy, Mortality and Other Positive Trends
The National Center for Health Statistics recently published preliminary data on life expectancy and death rates for 2007. A few highlights were:
• “Record high life expectancy was recorded for both males and females (75.3 years and 80.4 years, respectively).”
• “The U.S. mortality rate fell for the eighth straight year to an all-time low of 760.3 deaths per 100,000 population in 2007 -- 2.1 percent lower than the 2006 rate of 776.5. The 2007 mortality rate is half of what it was 60 years ago (1532 per 100,000 in 1947.)”
• “Between 2006 and 2007, mortality rates declined significantly for eight of the 15 leading causes of death. Declines were observed for influenza and pneumonia (8.4 percent), homicide (6.5 percent), accidents (5 percent), heart disease (4.7 percent), stroke (4.6 percent), diabetes (3.9 percent), hypertension (2.7 percent), and cancer (1.8 percent).”
Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, observed:
• “Record high life expectancy was recorded for both males and females (75.3 years and 80.4 years, respectively).”
• “The U.S. mortality rate fell for the eighth straight year to an all-time low of 760.3 deaths per 100,000 population in 2007 -- 2.1 percent lower than the 2006 rate of 776.5. The 2007 mortality rate is half of what it was 60 years ago (1532 per 100,000 in 1947.)”
• “Between 2006 and 2007, mortality rates declined significantly for eight of the 15 leading causes of death. Declines were observed for influenza and pneumonia (8.4 percent), homicide (6.5 percent), accidents (5 percent), heart disease (4.7 percent), stroke (4.6 percent), diabetes (3.9 percent), hypertension (2.7 percent), and cancer (1.8 percent).”
Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, observed:
“The general trends in the United States regarding life expectancy and mortality rates are overwhelmingly in the right direction. For all the criticisms leveled at the U.S. health care system, it’s still the best in the world. It’s a shame that the President and congressional leaders seem to ignore this critical fact. Health care reform should build and improve on what works in the current system. We should not be looking to rework health care to fit political desires. As the latest data from the National Center for Health Statistics makes clear, health care is too important to hand over to the government.”
State Employment and the Private Sector
As noted in a previous post, according to U.S. Bureau of Labor Statistics data released on August 25, nonfarm payroll increased in July in 21 states and the District of Columbia, compared to the previous month.
Thankfully, this was not all about government employment.
In 17 states, nonfarm payroll growth would have been positive without government payrolls being included. And while growth in Washington, D.C., was overwhelmingly about government, there was a tiny increase in the private sector.
However, in four of these states – Alabama, Kansas, Montana and Vermont – private payroll growth was either flat or negative.
The key to economic growth is private sector risk taking – not government handouts and/or subsidies. Private investment and entrepreneurship in turn lead to robust job and income growth. Federal and state governments need to get the policies right for entrepreneurship and investment to flourish, and that means, primarily, low taxes and a light regulatory touch.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Thankfully, this was not all about government employment.
In 17 states, nonfarm payroll growth would have been positive without government payrolls being included. And while growth in Washington, D.C., was overwhelmingly about government, there was a tiny increase in the private sector.
However, in four of these states – Alabama, Kansas, Montana and Vermont – private payroll growth was either flat or negative.
The key to economic growth is private sector risk taking – not government handouts and/or subsidies. Private investment and entrepreneurship in turn lead to robust job and income growth. Federal and state governments need to get the policies right for entrepreneurship and investment to flourish, and that means, primarily, low taxes and a light regulatory touch.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Monday, August 31, 2009
Small Biz Health Care Daily: The More Choice-Competition Option
In an August 31 small business column for Newsday, Jamie Herzlich touches on some of the advantages for employers in offering employees health savings accounts (HSAs) or health reimbursement arrangements (HRAs). She notes that HSAs “are paired with high deductible health plans, which can be 25 percent to 30 percent cheaper that traditional managed care plans.” In addition, Herzlich points out: “An employer can contribute to an HSA, but money in the account ultimately belongs to the employee, which in turn makes him or her more conscious of health care expenditures…”
Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, added:
Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, added:
“Market measures like tax-free health savings accounts (HSAs) are the kinds of reforms that Congress and the White House should be building on, rather than pushing more government involvement in health care. Big government health care will only lead to higher costs and reduced quality of care. In contrast, more choices in the marketplace – especially reforms like HSAs that make consumers and providers more conscious of costs – is exactly what the system needs. Enhanced consumer choice and control, and increased competition will boost health care quality, and help to control costs. Health care consumers do not need the ‘public’ option; they instead need the more choice-competition option.”
The States and Employment: 29 Down, 21 Up
The Bureau of Labor Statistics released revised state employment and unemployment data for July on August 25.
Interestingly, the BLS reported that nonfarm payroll in July fell in 29 states, but increased in 21, compared to the previous month. That perhaps feeds some hope that the economy has hit some kind of bottom, or at least, is close to it.
However, compared to a year ago, 49 of the 50 states had lower payrolls in July.
The only state that was up from July 2008 to July 2009? North Dakota.
It should be noted, though, that North Dakota’s nonfarm payrolls declined in July versus the previous month of June.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Interestingly, the BLS reported that nonfarm payroll in July fell in 29 states, but increased in 21, compared to the previous month. That perhaps feeds some hope that the economy has hit some kind of bottom, or at least, is close to it.
However, compared to a year ago, 49 of the 50 states had lower payrolls in July.
The only state that was up from July 2008 to July 2009? North Dakota.
It should be noted, though, that North Dakota’s nonfarm payrolls declined in July versus the previous month of June.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
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