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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Republicans are losing elections they could win by slavishly clinging to untenable solutions for skyrocketing federal health-care costs that voters reject.

The House Budget Committee, chaired by Paul Ryan, is drafting a plan to balance the budget in 10 years. That requires lowering the trajectory of Medicaid and Medicare costs, which account for 24 percent of federal spending.

He proposes offering seniors the choice of a subsidy to buy private insurance or continuing in the existing Medicare system and giving the states block grants to manage Medicaid.

Conservatives believe seniors could shop for health insurance, as they do for groceries, to drive down prices. The states, freed from excessive federal oversight, could similarly drive down costs.

That’s absolute fantasy.

Seniors would confront large insurance companies armed with too little information, and limited choices or monopolies when they purchase drugs and hospital care.

Already, large employers operate in a similar market space-free to negotiate with health-insurance companies–and even they have not been able to harness rising health-insurance premiums.

Granny will not do any better than GM jawboning Humana and Walgreens. Federal Medicare spending could only be cut by providing inadequate subsidies that would require seniors to pay much larger premiums and out-of-pocket costs than they currently bear with traditional Medicare.

Similarly, it is doubtful that the states, acting individually, can do a better job of negotiating reimbursement rates for Medicaid services for the poor than does the federal government. In fact, the Ryan solution could drive up prices, because providers could play off states against each other.

 These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

J.P. Morgan Chase & Co.’s (JPM) $2 billion loss from betting on corporate bonds will embolden advocates of the Volcker Rule–a provision of the 2010 Dodd-Frank law that will prohibit banks from trading on their own account. Unfortunately for federal regulators, trading in securities is essential to modern banking, and busting up the big Wall Street financial houses may be the only way to better ensure financial stability.

The Glass Steagall Act of 1933 separated commercial banking–taking deposits and making loans to finance businesses, homes and the like–from investment banking–selling stocks, bonds and other securities, and making markets for investors to buy and sell those assets quickly. That separation was repealed during the final years of the Clinton Administration, and Wall Street institutions like J.P. Morgan now perform both roles.

Modern commercial banking simply won’t tolerate such an absolute separation, because banks cannot finance all the demand for loans from deposits. In recent decades, too many savers have found they can earn higher returns than at the bank by investing in money market funds, bond funds and directly buying bonds. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

When Barack Obama assumed the presidency, gas prices were less than $2 a gallon. He proceeded to shut down deep-water drilling in the Gulf of Mexico, tightened other federal restrictions on petroleum development and vetoed the Keystone pipeline. Now, even with Americans driving not a lot more than three years ago and global growth slowing, gas is nearing $4 a gallon.

The liberal theocracy in academia, the media and Democratic Party leadership relentlessly expounds that drilling for oil in the U.S. won’t much affect U.S. gas prices, because petroleum prices are set in global markets. And, more domestic oil production or U.S. access to Canadian petroleum won’t much change global supplies, or the pace of economic recovery and unemployment.

Balderdash! Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Friday, forecasters expect the U.S. Labor Department to report the economy added only 120,000 jobs in November, after scoring a nonplus 80,000 gain in October. The three-month moving average stands at 120,000 jobs, a pace inadequate to much lower unemployment.

The unemployment rate is expected to stay at 9.0%, mainly because so many displaced professionals report themselves as “self-employed,” when working only a few hours a week from home.

Even before escalating troubles in Europe and China are considered, the economic outlook is mediocre, with gross domestic product growth expected at about 2%–hardly enough jobs to absorb adult population growth. With Italy likely to default in a manner similar to Greece, and new questions raised about China’s accounting practices, fraudulent stock and bank reports, and inflation and growth statistics, all risks are to the downside.

Without more assertive efforts to address America’s structural problems–huge trade deficits with China and on oil, and ineffective and expensive regulations in banking and health care, America is headed for a protracted period of high youth unemployment and permanent displacement of many older workers. These conditions are not destiny–solutions are at hand but leadership and a genuine willingness to compromise, absent excessive partisanship, are required to progress. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Occupy Wall Street may be out of Zuccotti Park but Americans ignore its message only at their peril.

Dispossessed by police from prominent venues around the country, the forces that inspired mass, albeit unseemly demonstrations have not abated. America is rapidly fracturing into two nations–affluent players in the global economy and a growing mass facing diminished circumstances for themselves and their children.

If forces marginalizing millions are not addressed, America is headed for much worse than tent cities and baths in parks. Economic bifurcation into the super affluent and the poor will erode the institutions and values that bound together immigrants from many heritages, faiths and tongues into a single nation.

The Census Bureau reports about 100 million Americans–one in three–live in or perilously close to poverty. Many are working but rely on food stamps, government agencies and charity to feed, clothe and provide medical care to their children. Most have too few resources to see a dentist regularly or even subscribe to a daily newspaper. They rely on cars, often because decent housing is much too costly near their work, and are forced to live too inconveniently from grocery stores, other services and multiple jobs to practically rely on public transportation. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Barack Obama faces three daunting challenges–jobs, deficits and re-election. His actions reveal he places a second term ahead of fixing the economy and federal finances.

If Obama runs on the economy, he loses. Too many voters are unemployed, underemployed, standing discouraged on the sidelines, or watching their paychecks dwindle for Obama to win. And most voters recognize, had President Obama’s economic policies permitted the economy to grow as it should, deficits in Washington and state capitals would be much more manageable.

If he runs on handling the financial crisis, he loses. He inherited a mess, but trillions in bailouts for Wall Street, Chrysler and GM rewarded the best-paid white collar and blue collar workers for lousy management and worse, while the other 98% watch their paychecks shrink in value. Now charges of fraud in his solar energy program and revelations about White House management dysfunction cast a president lacking judgment and leadership qualities.

On both jobs and the deficit, the president seeks to present a sharp contrast with his eventual GOP rival premised on “fairness”–presenting himself as guardian of the working family, and his prospective Republican opponents as champions of privilege.

An additional $447 million in stimulus and tax cuts, over two years, if spent smartly, could create about 2.5 million jobs for that period. However, he proposes paying for teachers by cutting aid to states for health-care workers and that won’t create many jobs. Extending the payroll tax holiday for the middle class by taxing those who earn over $200,000 only adds marginally to new spending and few jobs. Continue reading…

These are the views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

Clearly, financial markets thirst for clues from the prepared remarks of Chairman Bernanke and President Obama on Thursday. But the reality of the situation is that policy recommendations from the president and chairman are not likely to sail through without hurdles and bumps.

Given the earlier extension of the September FOMC meeting to two days to allow for more collective discussions, it was apparent that Bernanke was unlikely to litter meaningful hints in his speech roughly two weeks prior to the meeting. Indeed, the latest speech from Bernanke more or less mirrored the gist of the August FOMC minutes and his Jackson Hole remarks about two weeks ago. The most likely outcome is for the FOMC to embark on some type of asset maturity extension, perhaps by raising and flexibly targeting the average maturity of the Treasury portfolio, together with additional guidance on the future level of overall security holdings (while maintaining the size of the balance sheet) at the September meeting. Continue reading…

U.S. policy needs a complete overhaul to save the economy from a second Great Recession, but instead the president promises more of the same policies that have failed–stimulus spending, higher taxes and onerous, ineffective business regulations and health-care costs.

Domestic demand for what U.S. workers and businesses can make remains inadequate to ensure full employment. Americans are spending more these days, but too many of those dollars go abroad to purchase more expensive imported oil and Chinese consumer goods that do not return to purchase U.S. exports and create jobs.

Instead of addressing these problems, the president proposes a package that will do little to boost domestic demand, and that will permanently hamstring the economy with higher taxes and mindless bureaucracy.

The president proposes spending an additional $140 billion on roads, schools and other infrastructure, but wants Congress to pay for this with cuts in spending on Medicare, Medicaid and other programs. How will adding construction workers to the national payroll, while laying off health-care workers boost employment?

The proposed privately funded infrastructure bank is a great idea; but it will take some time to get going, and it will lend money to state and local governments that must be repaid.

Many jurisdictions are already at the limits of their borrowing capacity. While the bank would alter state and local priorities in favor of spending on needed public investments–instead of more local officials to harass homeowners and businesses–the near-term impact on domestic spending and employment would not be large. Continue reading…

 These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:   

Although, initially a Category 1 hurricane and now only a tropical storm, Irene is testing flood-level records in New York City and in much of the northeast, raising casualty loss estimates to $20 billion. Two days of lost economic activity, over a period of a week, is almost certain, and adds another $20 billion. Longer term, rebuilding and postponed business activity will make up much of the near-term impact on the economy.

  Revised estimates of the direct damage caused by Hurricane Irene are in the range of $20 billion. Add to those the loss of about two days economic activity, spread over a week, across 25% of the economy, and an estimated of the losses imposed by Irene is about $40 billion to 45 billion.

  However, rebuilding after Irene, especially in an economy with high unemployment and underused resources in the construction and building materials industries, will unleash at least $20 billion in new direct private spending–likely more as many folks rebuild larger than before, and the capital stock that emerges will prove more economically useful and productive. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Commerce Department reported the deficit on international trade in goods and services was $48.2 billion in March, up from $45.4 billion in February. The deficit on oil surged $5.8 billion on higher prices and increased volumes.

This trade deficit subtracts from demand for U.S.-made goods and services, just as a large federal budget deficit adds to it. Consequently, a rising deficit slows economic recovery and jobs creation and limits how much Congress and the President may cut the deficit without sinking the economic recovery.

Rising oil prices and imports from China are driving the trade deficit up, and these are major barriers to creating enough jobs to pull unemployment down to acceptable levels over the next several years. Continue reading…