Friday, August 21, 2009

Digging out

According to the website , there were just over four million births (in the US) in 1991. Why is that number interesting? Because those people will turn 18 this year, and 18 is the traditional age when Americans start working full time.

Some percentage will be stay-at-home moms (or dads), some will be unable to work because of health issues or physical disabilities. The actual number of people entering the work force each month is generally estimated at around a quarter of a million workers. This means that we have to create 250,000 jobs every month. We can create new jobs or fill existing jobs where workers retire or quit working for another reason; but 250,000 people need a first, full-time, permanent job every single month - forever.
This number should help you understand the news reports on the economy. Any month we don’t create 250,000 new jobs, we are loosing ground. Doesn’t matter which expert predicts that this month’s numbers show a trend, until we create 250,000 new jobs, we aren’t even close to coming out of this recession.

Economist (and reporters) use short forms for numbers because they work with such big numbers every day. One billion becomes 1 and nine hundred million becomes 0.9 with a note at the bottom “All numbers in billions”. That works for people who deal with it all the time – almost. The problem is that the number has no gut check value. It’s far too easy to loose sight of the human impact when you don’t write out the full number.

0.025 (billion) just feels like a small number while 250,000 makes it much easier to see the real, live people who need a job. Depending on the source, that 250,000 is open to debate, but whatever the number, until we crate that number of jobs EVERY month, we are nowhere close to coming out of this recession.

Monday, August 17, 2009

I’ll believe the politicians when they address the obvious issues in health care

I’ll believe the politicians when they recognize that the part of health care my employer pays for is part of my salary. When they demand that any cut in what the employer pays for health care is balanced by an increase in my hourly rate, so I can pay for the coverage my self.

I’ll believe when they demand insurance companies charge an individual the same amount as for an employee of the biggest companies for the same policy. The insurance company decided to put me in a group called individual instead of a group called company XYZ employee.

I’ll believe when they require insurance companies to accept my pre-existing condition exactly as they did when I started with XYZ Company. The insurance company decides to accept a pre-existing condition or not based on which group they assign me to.

Which group an insurance company assigns me to is an accounting fiction decided by that insurance company and nothing will change as long as it’s in the insurance companies interest (higher profit margin) to not change.

Remember, if the insurance company wasn’t making a profit selling that policy to XYZ company, they wouldn’t sell it. So it’s not a profit or no profit decision, it’s how much profit.

Tuesday, August 11, 2009

Economic shift

Kurt Andersen in Time magazine on line wrote: “as some of the huge, dominant, old-growth trees of our economic forest fall, the seedlings and saplings — that is, the people determined to produce and sell new kinds of transportation and housing and media and other merchandise in new, economically rational ways — will have a clearer field in which to grow”

One big failure of all the economists trying to formulate a government policy is really shown in this choice of metaphor. Yes, in a forest, the big trees die to make way for the next generation of big trees. The problem with his use of the metaphor in today’s economy is that it is incomplete.

The trees can represent the businesses that are constantly growing, dieing and being replaced by the next “tree”. In this metaphor there are no people. Not to push the forest image beyond reality, the people are the birds and animals that live in the forest. When the forest dies of natural causes, one tree at a time, the “critters” that live in the forest have time to adjust and only a very few loose their home or food source.

If our economy is a forest, then current conditions are a forest fire where the fire burns through the forest so fast that the critters don’t have time to escape or adjust. They just die.

In his article, Mr. Andersen talks about Aptera Motors, Fisker Automotive, Tesla Motors, and Bright Automotive as the model replacing GM and Chrysler. Kurt, how many cars will any of these new companies need to sell to get the loans for the kind of money it will take to set up an assembly line to churn out 600,000 cars a year, and remember that the average person can’t afford a $30,000 car. At the same time these new companies need to generate huge sums just to build the plant to make cars, they need to cut the selling price by half.

And if current employment trends continue, that $15,000 car price might have to shrink to $10,000 to $12,000. If the economy takes 5 years to recover, how many people living in the “Obamavilles” (remember in the great depression they called the shantytowns Hoovervilles) will be able to buy those cars?