First and foremost, I would like to apologize for my lack of publications in the recent weeks. My day job and personal life have taken a heavy toll on my free time to write and let alone, read the economic news in detail as I like it. Nevertheless, much of that has been taken cared of and I now have the time to focus on the news at hand.
So, in order to catch up in the recent news that has come out in the last few weeks, I will be doing a quick run through of what has been reported. In the upcoming week, I will be back on schedule with timing posts.
The number was not too hot for the first quarter of 2017 with the Gross Domestic Product only increasing at a rate of 0.7%. However, these advance estimates are never very accurate and history has shown that GDP is usually weak in the first quarter.
Is the reporting weak? Yes but lets wait until May 26 to get a better reading.
Employment rate dropped down to 4.4% in April and the U.S. added 211,000 more jobs. This comes after a very weak reporting for March of only 79,000 jobs. Employment keeps increasing through the U.S. as more workers move into the work force but one thing stays unchanged. Wages. Wages have become increasingly stagnate for years and just barely staying on top of inflation but why?
Economics 101 tells us that wages tend to rise with lower unemployment. Since unemployment is low, there is more competition among employers for workers and one way to lure workers to their companies is by offering higher wages than the competition. This obviously hasn’t been the case.
The excuse some have used is that companies are waiting for the policies coming out of Washington D.C. before implementing any raises. Companies are hoping for a huge tax relief in the future especially since the President has talked about reducing the corporate tax rate from 35% to 15%. With the business owners having extra cash, the so called “trickle down” effect would commence and workers would see an increase in wages. Supposedly.
The gap in productivity and wages has also increased dramatically but please read The Economic Policy Institute’s article on The Productivity-Pay Gap.
American Health Care Act
Okay. The Congressional Budget Office hasn’t released their report on how much this law would cost and so on, so there isn’t too much economic news to report on besides politics but I feel I must mention it. As I mentioned, the CBO has NOT released a report on this law so how could Congress, most notably Republicans, move ahead with this and pass it through the House? This could cost tax payers billions of dollars and worse, make them lose their health insurance. How so? Let me explain.
The law states that people with pre-existing conditions can lose their insurance and will be placed in high risk pool where the government will have money aside to pick up the tab but recent reports and analysts say it will not be enough. The problem with this is that health care insurers get away with more money in their pockets. People pay for premiums but people will also pay for those in the high risk pool. How? Well, who funds the government? Tax payers.
Next, the mandate to force people to be insured is gone. You will not need to buy insurance every year, which is a problem. Young people tend to not buy insurance but if young people do not buy insurance, then older people will see premiums rise dramatically. We need young people to buy insurance to curve the costs since young people make up the greater population of the U.S. The argument by the GOP is that their bill lowers premiums for the young which makes insurance attractable.
Lastly, Medicaid is rolled backed from its expansion from Obamacare and cut even deeper of almost $880 billion over 10 years. Poor people might find it difficult to get insured.
The Senate has already stated that they will wait on the CBO before even considering the American Healthcare Act.
Moving this swiftly just to fulfill a campaign promise is a joke. A bill of this magnitude will affect millions of people and the loss of coverage for some could lead to death. Sorry for sounding grim, but as a person with a pre-existing condition, I too take this bill very seriously.