The ACA as recession insurance

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The ACA private plan marketplace was always and obviously under-subsidized. A healthy young adult earning, say, $31,000 per year is not likely to feel enthusiastic about paying $220 per month for a benchmark silver health plan with a deductible averaging just over $4000 (albeit often with many services not subject to the deductible).  It's true that if this person were insured through her employer, her premium for somewhat better insurance would average $575 per month and consume 22% of her pre-tax compensation. But with the employer contributing 83% of that premium on average, most people don't recognize how much of their compensation is eaten up by premiums.

Costs in excess of what many people consider affordable is a principle reason that enrollment in the exchanges, averaging about 10 million per month, is less than half what the Congressional Budget Office forecast in 2009.  That said, the ACA marketplace has always faced other headwinds. One is the well-documented one of Republican sabotage (through Congress, from 2010 forward, and via Trump's HHS as well since 2017).  A second is unbroken job growth since mid-year 2009, reducing the number of people who need to look to the individual market for health insurance. From March 2010 through January 2019, the economy added just shy of 21 million jobs.

Conversely, the marketplace -- along with the ACA Medicaid expansion -- stands in reserve as a shock absorber when the next recession or financial crisis hits.

"He made it worse"...compared to what?

ca·su·ist·ry... n. pl. ca·su·ist·ries

1. Specious or excessively subtle reasoning intended to rationalize or mislead.

Mitt Romney is having a hard time convincing people that he hasn't been relentlessly lying about Obama's economic record since he officially kicked off his campaign. Let me offer my assistance.

In the fundamentally misleading speech with which Romney launched his campaign, he said this about Obama:

When he took office, the economy was in recession. He made it worse. And he made it last longer.

A  video by DemRapidResponse catches Romney saying substantially the same thing repeatedly since then, e.g., in the GOP debate:

What this president has done, is slowed the economy. He didn't create this recession, but he made it worse. And longer.

Challenged yesterday by an NBC reporter who pointed out that the economy is, in fact, growing, Romney said:

 "I didn't say that things are worse. What I said was, that the economy hasn't turned around."

That is really as clever as Clinton's "There is no sexual relationship." It's true, Romney did not say things are worse. He said that Obama made it (the recession) worse, presumably starting on Jan. 19, 2009, and made it "last longer."

Wolf, crying; Obama, rebalancing

Can massive fiscal and monetary intervention slow and shorten a Depression?

Martin Wolf's answer: maybe, somewhat. But recovery will be slow, uncertain, fraught with danger.

Today he casts a cold eye on the present, a colder eye on the future, and walks us through four conclusions:

1) Measured by falling output and bank activity, the current crisis is worse than the great Depression.
2) Unprecedented intervention by governments and central banks is likely to break the fall to a degree.
3) Those interventions will create a whole new set of problems and dangers and will be difficult to unwind.
4) We have not begun to cope with the global trade imbalances that made the growth preceding the current crisis unsustainable.

Wolf's quick sketch of Great Depression II took my breath away. Perhaps these facts are well known to economists; they were a slap to me:

In the US, the rate of decline of manufactured output compares with that of the Great Depression. Japan’s output of manufactures has already fallen by almost as much as in the US during the 1930s (see chart). The disintegration of the financial system is, arguably, worse than it was then.

He then offers some apparent comfort in a similarly compressed overview of worldwide government response, which in the aggregate looks almost coordinated:

If the world experiences a “Great Recession”, rather than a Great Depression, the scale of policy support will be the explanation. Three of the world’s most important central banks – the Federal Reserve, the Bank of Japan and the Bank of England – have official rates close to zero and have adopted unconventional policies. The real OECD-wide fiscal deficit is forecast at 8.7 per cent of gross domestic product next year, with a structural deficit of 5.2 per cent. In the US, the corresponding figures are 11.9 and 8.2 per cent. Governments of wealthy countries have also put their healthy credit ratings at the disposal of their misbehaving financial systems in the most far-reaching socialisation of market risk in world history.

But what about the morning after?

What is most disturbing, moreover, is the scale of the policy action required to halt this downward spiral. This raises the big question: how and when might the world return to normality, with sustainable fiscal positions, strongly positive short-term official interest rates and solvent financial systems? That Japan has failed to achieve this over 20 years is surely frightening.

Not to mention the underlying problem, still to be addressed:

The danger is that a turnround, however shallow, will convince the world things are soon going to be the way they were before. They will not be. It will merely show that collapse does not last for ever once substantial stimulus is applied. The brutal truth is that the financial system is still far from healthy, the deleveraging of the private sectors of highly indebted countries has not begun, the needed rebalancing of global demand has barely even started and, for all these reasons, a return to sustained, private-sector-led growth probably remains a long way in the future.

Wolf might have noted that Obama, for one, agrees with him about the core problem and has worked to focus the world's attention upon it. Perhaps the keynote of his G-20 appearance was this, from his April 1 press conference in London:

"In some ways, the world has become accustomed to the United States being a voracious consumer market and the engine that drives a lot of economic growth worldwide," Obama said, hinting that this position may not be sustainable. "We're going to have to take into account a whole host of factors that can increase our savings rate and start dealing with our long-term fiscal position as well as our current account deficits.

Reinforced by this, on April 3 in Baden-Baden, Germany:

...the whole point is to move from a borrow-and-spend economy to a save-and-invest economy.

Now, the U.S. will remain the largest consumer market, and we are going to make sure that it's open. One of the principles that we very clearly affirmed in London was that protectionism is not the answer. It's not the Germans' fault that they make good products that the United States wants to buy. And we want to make sure that we're making good products that Germans want to buy. But if you look overall, there is probably going to need to be a rebalancing of who's spending, who's saving, what are the overall trade patterns.

And it, by the way, it doesn't just include developed economies like Germany and the United States; it also means we want to encourage emerging markets to consume more. If you start seeing China and India improve the living standards of its people, now those are huge markets where we can sell. And that's why the last few days that I've spent talking about the international economy relates directly to the jobs that are being lost in the United States.

Talk not action, one might say. And yet, with the eyes of the world upon a new U.S. President, talk is action. When the time comes for tough negotiations about exchange rates and trade barriers, this overall strategic framework - cast as a shared framework for sustainable global growth -- will be in place.