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Health Bill Passed, will economy now pick up.

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I haven't been following Obamas Health Bill, but I read today that its Obamas highest priority.

It made me think that the economy should be our highest priority, and the health bill is probobly why things are taking so long to get going.

If the Health Bill passes do you think that Economy will take off?

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If the Health Bill passes do you think that Economy will take off?
No. I don't the two are interelated to that extent. And to the extent that they are, many of the benefits aren't paid out for a period of a few years while the liabilities (taxes) kick in next year.

Because much of the funding of the bill depends on future Congress' will to increase taxes, it will help devalue the dollar as unfunded liabilities are piled on the government. To that extent, the stock market may rise, particularly commodities. But as we all know, the stock market and the economy are not one in the same.

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Additionally, small business is the engine of our economy. The new bill requires employers that have more than 50 employees to provide medical insurance. SO, if you are an entreprenuer and you had 49 employees, would you hire 1 more? It would be cost prohibitive!

Folks this was a genuine question that didn't appear politically motivated. Lets keep it that way or the thread will be closed.

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momof5, you are just scratching the surface. The bill is a juggernaut full of all kinds of goodies that may (or may not) reach a certain social goal, but do so at the expense of the private sector, the least of which is the monstrous policy premiums and tax expenses that businesses and individuals will now face.

I don't think there is going to be any correlation between this bill and the economy in the short term however. For one thing, it isn't funded (CBO projections ignore $114,000,000,000 of administrative expenses, ignore the $30,000,000,000 passed onto states, and assume that future Congress' will raise taxes further). Our biggest problems today seem to hinge on three things- personal debt levels, elevated unemployment, and diminishing disposable incomes. For the vast majority, the bill is a wash over the next couple of years.

The economy may or may not continue to heal, but I don't think it has much to do with the person in office or this bill. One alarming trend I have noticed is that despite record low mortgage rates AND an expanded generous fully-refundable federal tax credit, the inventory of homes on the market is growing quickly again. Something like that could have a major effect on the economy that dwarfs the healthcare insurance bill.

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What I was getting is that if the BILL passes, the Obama will now make the economy the highest priority, and do things to get it going.

I other words the Health Bill is robbing the Administrations' concentration from the economy.

I agree that approval of the bill isn't goint to do much to stimulate the economy directly.

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We all wish that were the case. From what I have read in the media, it appears that Obama's next priority will be climate change, not the economy. It could be that it will be presented as "green jobs will fix the economy long term"....but there is no official definition of what constitutes a "green job". Worse yet, I don't think that you can take that unemployed factory worker and give him a green job (different technologies), nor anywhere near the same pay level (he/she has no experience in that field).

jq, I agree with your points. But I believe, IMHO, that folks are waiting to see how this plays out before getting into spending habits and employers are waiting to see how this is going to affect their bottom line before hiring. Catepillar calculated that Obama care is going to cost that company $100 million. That is just one company. Now think about businesses like restaurant chains. SOME of those "stores" are franchises (few employees), BUT there are corporate stores. If you sum up all those employees (like the Domino's driver or the waitress at Chili's), those corporate chains will qualify as large employers. Currently their management have insurance but NONE of the lower level employees do. These businesses will have to buy insurance or pay a fine of $2K per employee (if the House version passes). That will stop hiring and expansion. It may result in closed stores.

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Purely economic, I don't think there is much that the federal government can do to bolster the economy. They've tried the stimulus packages they've tried to incentivize home purchases, they've tried hiring tax credits. They don't work over long periods of time. Sure, you may get a 30 day or 60 day swell of hiring or home purchases, but all you've done is push forward hiring or purchases from one to the next.

The best thing government can do is give business a stable, predictable, low tax environment in which to operate their business. The rest will work itself out. Despite good intentions, I think the interventionist nature of big bro government over the past few years has been the antithesis of stability, and it has exacerbated our problems. :evil:

This morning's "good news" of an 0.5% increase in durable goods orders is a statistical joke. For one thing, it is +0.5% off of a much lower base than in past years. Second, it is one of the rare non-inflation or population adjusted indices, meaning that a 3-4% increase is really the baseline. IMO, these types of figures are showing further contraction. My fear is that we are becoming like early 20th century England which collapsed from dominant world player into irrelevancy over a period of a few decades.

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I'm of the school that thinks that the housing market needs to be fixed still in order for things to really take off. Just look at LoanSafe.org any given time and you'll see upwards of 200 visitors per each bank's category.

This and the horror stories you see in the news (B of A Foreclosing on the wrong home.....) Just one example of that:

http://consumerist.com/2010/03/bank-of-america-seizes-wrong-house-holds-parrot-hostage.html

It's really kind of sad, having been through the modification process myself that it's like going to the dentist for a root canal.

First, you don't get any kind of credit help. Actually, a modification is counterproductive to fixing your credit, because while you're in it, you're being reported as late per the original loan contracts, at least EMC, WellsFargo, and BoA do it this way.

Then, instead of taking the hit to the principal that they were supposed to (They got TARP money for a reason), they insatead recapitalize the loan. Dear GF got sick in 07, had paid down the 150000 loan to 140,000 in a year, and then got sick. Next thing you know, loan recapitalized to 122,000. That's not how this program is supposed to work.

I hope that now the Health Bill has passed that Obama starts to look at the economy with less divided attention. But as part of that, we have to restabilize the real estate markets before any other sectors will really be able to flourish.

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1) the purpose of credit reporting is to tip off potential future creditors about creditworthiness. By definition, those in a modificatio of a loan are not meeting their financial obligation due to financial hardship. Even the pro-consumer federal government is taking this stance.

2) Banks did not receive TARP to lop off principal. They received TARP to ensure solvency of the American banking system.

3) Every "beneficial" reduction in principal obligation to a borrower results in an equal amount of charge-off to a lender (there is symmetry here), so the net aggregate effect for the economy is nil. Despite widespread beliefs that we have a magic money well, there is none. So what you are proposing is that we need to allow more borrowers breach their contract with those holding a security interests without losing the collateral. I beg to differ that this is a good idea on any level. But then again, I'm thinking like a taxpayer and not someone who wants a handout.

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I suppose one would have to go through the modification process to see the flaws of it. In the example I'm intimately familiar with, the entire process was designed to "trap" the consumer into a relationship with the mortgage servicer. The mortgagee was told by home retention reps "not to make payements, so that a modification could be put in place." Had this individual known that this was going to trap her into a relationship with Countrywide (now BAC Home Loans), she would have simply kept paying an a toxic loan (The appraisal was analyzed by two independent, disinterested parties and show to be inflated to the tune of about 30k) and eventually refinanced. That option is gone for her now.

I agree with the definition to an extent, but only in as far as the consumer isn't meeting the financial obligations. It may or may not be due to financial hardship, and in the case I'm familiar with, it wasn't.

In a sense, yes, I am proposing that borrowers be relieved of some of their financial obligation. Not through breach of contract per se, but because of the lending practices that could be considered Racketeering (and several lenders are being tried for this very cause). When you have a housing market that inflates property values, purposefully makes toxic loans, and then expect their hand out from the backs of the taxpayers, do you not agree that the affected borrowers should also be helped?

In short, when you make a loan on a house that wasn't worth 200k, but was inflated through the process to look like it was worth 200k, and thus a loan was made for that amount, you (the lender) should be held accountable for that practice. And if that means "eating" some of the principal, so be it.

In the case mentioned above, B of A took the TARP money, and nearly immediately paid it back. In an ideal situation, B of A would have fixed the loans that could be fixed (now I realize that some borrowers intentionally gamed the system to get into houses they could never reasonably be expected to afford, but not all of them were in this boat), ate the loss of a principal reduction, then after that was all sorted out, finally repayed the TARP money. It just didn't happen like this.

When we talk about a "magic money well," It's only the consumer that sees it as magic. The banks knew from the beginning that they were creating money where there was none, hence their impending insolvency. So, am I to take the comments at face value and say, the tax payers should ensure the solvency of the banks, but receive no relief in turn?

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I don't think any lender should have received TARP. TARP was a fraud from the beginning. Both lender and borrower can sort it out amongst one another. It has been like this for hundreds of years. Why now do we inject the funds of innocent 3rd parties who are forced to pay for a bad deal between two anonymous parties?

You are conveniently narrowing the definition to taxpayers down to those selective few who would receive benefits under principal reduction. At most, this would be limited to a few million. This year, there will be 140 million taxpayers who file individual returns. 95% of which don't need or qualify for reduction of mortgage for wehatever reason. Some are old, some own their home outright, some rent and can't afford a home at all. What you are asking for at the end of the day is for this collective pool of 140 million, some of which will never experience home ownership or forego medications, to bail out the few million of underwater homeowners. That doesn't seem right to me. So when BoA paid back TARP, as a taxpayer I was just happy to get paid back. Not all TARP recipients will be so lucky.

When I talk about taxpayers, I mean in aggregate- the ones paying the bill, not the tiny subset of may receive benefit. And your collusion theory is interesting, though I think ignores the fact that BoA didn't represent any value of any home. They merely provided purchase money in exchange for a security interest. Maybe you should sue the Federal Reserve for leaving interest rates at basement bottom lows for an extended period and pouring gasoline on the fire and creating a feeding frenzy. Why is it that a borrower gets to keep all of the upside of appreciation but gets to dump some or all of any depreciation onto others?

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Well, at least we're in total agreement that TARP was utter CRAP.

I wouldn't say the definition was conveniently narrowed down inasmuch as it was used to show that, even if a small percentage of the total number of people that pay taxes are going to receive benefits, this intervention by the 3rd party government was the catalyst that led to the small benefit for the few on the backs of millions. Again, another example of the inefficiency of TARP. I think we agree on the ineptitude of the program, but I'm just looking at it from the standpoint that a.) it has already been perfected and there's no going back and changing that and because of (a) b.) it needs to be used more efficiently.

If you look at the alternative of principal reduction, you have loan mods that simply recapitalize interest to date (which is good for the bank), that may or may not lower the homeowner's payments (which in the latter is good for the bank), and no credit file modification (which is again good for the bank, as the customer has to stay with that bank).

You're right about BoA not putting up any money on the loan. It was actually GMAC, who had bought rights to the loan (at least the one I'm speaking of) from a subprime lender before the loan even closed. It was then already ready to be packaged into an MBS, sold on the secondary market, and then dumped off on Countrywide after it went to the secondary market.

I can see no other logical reason why the highest percentage of toxic assets got dumped on CW. Seems they were the scapegoat from the beginning. After all, the initial investor GMAC, had already been paid off for it's investment by the investors on the secondary and tertiary markets. And in the event the default, the bank used a "credit default swap" another opaque financial instrument, to claim insurance on the loan from their own self appointed trustee for the MBS. It's all there in the SEC filings if one cares to look hard enough and try to understand the financial gymnastics of moving self-created money from one pocket to the other, to the next ad nauseum. It's not the Gov't that created this "magic money well' it was the banking system itself and their "brilliant minds."

I was of the opinion form the beginning of the whole process that the banks should have fell if they were on the verge of insolvency. "Too big to fail" was also a fraud from the beginning.

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If you are expecting the government to manage the business cycle, I have a unicorn ranch you should see.

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If you are expecting the government to manage the business cycle, I have a unicorn ranch you should see.

I've seen it, it's right next to the bridge in Brooklyn that I own.

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Well, at least we're in total agreement that TARP was utter CRAP.

That would depend upon how you define CRAP.

For the banks which got TARP money and have now repaid it, the rate of return to the American taxpayer was pretty phenomenal. The stock warrant auctions yielded some money, but not as good as was hoped.

Among the banks which have not repaid, news stories continue to pour in of banks repaying their TARP money because of the negative publicity.

Eventually, TARP will go in the hole for billions that was given to GM, Chrysler, AIG, et al.

That money is gone--along with the $180 billion AIG got separate and apart from TARP.

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Additionally, small business is the engine of our economy. The new bill requires employers that have more than 50 employees to provide medical insurance. SO, if you are an entreprenuer and you had 49 employees, would you hire 1 more? It would be cost prohibitive!

Just think how prohibitive the costs are to the individual. However, more to the point of your comments, a small business would buy through one of the exchanges so they'd have more bargaining power for a lower price than they do today.

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Just think how prohibitive the costs are to the individual. However, more to the point of your comments, a small business would buy through one of the exchanges so they'd have more bargaining power for a lower price than they do today.
This could have been done a variety of other ways. But this thread topic had an economic focus- with that said, Bloomberg ran an article today that stated that corporate earnings are being reduced immediately to account for healthcare plan costs. It already started. CAT said the law will cost them $100,000,000 this year. Oher companies are following suit and expensing it immediately, pushing down earnings projections. Now that the law is in effect, GAAP requires the cost to be accounted for. I think the expected annual cost to US companies was something to the tune of $14,000,000,000. So I'm not sure this is a boon to US industry.

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There's obviously more than a couple of issues with healthcare reform. The one I find to be of the most importance is establishing it as a right rather than another à la carte consumer item--like televisions and cars.

On the issue of the economy, we know that medical bills, job loss, and family breakup are the Big Three of bankruptcy. In bringing healthcare to all, how much do we improve productivity because people have a safety net with healthcare insurance? How many bankruptcies are avoided?

There's a Gestalt effect in play.

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The one I find to be of the most importance is establishing it as a right...
I'll hold back on my personal feeling here, but constitutionally, the federal government can't do this. We have a government structure where all federal capabilities not specifically enumerated default to the state government. Your state can raise taxes to whatever level they deem appropriate and provide all citizens of your state with whatever rights & privileges they so choose. That's perfectly acceptable. And that's the beauty of federalism. One state can be a utopian dream. Another can be one with a razor thin social safety network. May the best state win, and preferential policy will spread outward to other states who desire similar results. And, it better reflects the will of the people within the state.

And that is the crux of the liitgation that was triggered by the passage of the bill (albeit, on much narrower points). The supremacy counterargument is a red herring. We don't get to supremacy until you establish grounds that the feds have affirmative constitutional authority to do what they did. From a legal standpoint, this constitutional challenge is a slam dunk by any measure.

This is entirely separate from the good/bad policy argument, which is of course moot at this point.

Edited by jq26

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From a legal standpoint, this constitutional challenge is a slam dunk by any measure.

I'm neither a constitutional attorney nor an attorney of any other predilection. However, a great many constitutional scholars have expressed the opposite view. It remains to be seen what the MIB (Men In Black) and WIB have to say.

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I know that I was happy when my state's Attorny General filed suit against the Obama health care bill. This is the USA, not Canada....... Why follow a broken system. I am in the medical field myself and many doctors are going to find new professions if this Bill does become a reality. Long waiting lists for doctor visits are sure to come. MRI's at a local office are booking 7 months out as we are right now..... it will only get worse. This administration needs to fix other things before they make a mockery of health care. In my opinion, taxing the hell out of Americans is not going to boost the economy. Just look at Canada and how they have a failed health care system. Why copy it?

I editted this post because some poeple cant stand reality

Edited by red1gtrubodsm
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Remove the last posting or it is sure to get locked. Everyone was careful to keep it within the scope of economics. And then you post an opinion piece on policy.

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I editted this post because some poeple cant stand reality
I've noticed a lot of these kinds of comments lately. First, completely unrelated to the thread, you would likely find that MANY PEOPLE AGREE WITH YOU. The issue here is that this isn't the forum. The scope of the question was what is collectively next for us economically now that the healthcare bill is behind us. If you feel muzzled, then please, please, please speak out and get your point of view heard. Just not here.

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