Economy
U.S. Healthcare System - Is it Any Better ?
We have discussed about the U.S. healthcare system before a few times. On Thursday, the President hosted a day-long televised healthcare summit. It ended without a deal after many hours of bickering by both the parties. Its been more than a year since the President took office and yet the healthcare debate still rages on this country with no end in sight. Thousands of hours have already been wasted by all those involved including lobbyists, politicians, company executives, media pundits, etc. discussing the pros and cons of the health care reform proposals.
From a BBC news report today:
“The president and his allies want to expand health coverage to include millions of uninsured Americans.
Republicans said his plans were not acceptable and called for a fresh start.
In his radio address, he said he remained “eager and willing to move forward with members of both parties”.
“It’s time for us to come together. It’s time for us to act.
“It’s time for those of us in Washington to live up to our responsibilities to the American people and future generations. So, let’s get this done.”
None of the proposals put forward by the administration or the Republicans addresses some the key issues that should be the main points of any discussion of the U.S. healthcare system. Two of them are the soaring costs and the inefficiencies in the current system.
The chart below shows the comparison of some of the healthcare factors between the U.S. and a few other countries:
Source: WHO data via The Guardian
The U.S. spends the highest on a per capita basis on healthcare and has only 26 doctors per 10,000. Germany spends a bit above half the US spending and still has more doctors, hospital beds and a higher life expectancy. There is a precipitous drop in per capita spending from the U.S. figure to the next highest spending country Canada. Japan also spends much lesser than the U.S. and yet the Japanese have a higher life expectancy, more midwives and hospital beds. Clearly the U.S. healthcare system needs a much complete and thorough analysis and redesign than the ones currently under discussion.
U.S. Unemployment Varies Significantly Based on Income Levels
The U.S. official unemployment rate was 9.7% in January, 2010. The number of unemployed persons in the country stood at 14.8 million.
The distribution of unemployment among the major worker groups:
Whites= 8.7%
Blacks = 16.5%
Hispanics = 12.6%
Asians= 8.4%
Adult Men= 10%
Adult Women = 7.9%
Teenagers= 26.4%
While the above distribution gives us some indication of unemployment rates among various groups it does not tell us how income levels affect unemployment. For example, it does not tell us which group of workers are the most and least affected.
A recent research paper from Center for Labor Market Studies,Northeastern University, Boston, Massachusetts analyzed the unemployment issue from an income level perspective using the fourth quarter 2009 data . The study showed that jobs losses disproportionally affected American workers.
Charts:
Source: Labor Underutilization Problems of U.S. Workers Across Household Income Groups at the End of the Great Recession: A Truly Great Depression Among the Nation’s Low Income Workers Amidst Full Employment Among the Most Affluent
By Andrew Sum, Ishwar Khatiwada, With the Assistance of Sheila Palma, Center for Labor Market Studies,Northeastern University, Boston, Massachusetts
The following are some of the key takeaways from the study:
- The total number of unemployed and underemployed has doubled in the last two years
- Four year college graduates, many managers, government employees, professionals are well protected from job losses
- Blue-collar workers particularly in the construction sector, teenagers and black men have higher unemployment rates
- From the chart above, we can infer that workers in the top two deciles have unemployment rates of just 4.0% and 3.2%
- Workers in the lowest decile - those earning $12,499 or less - faced a Great Depression era unemployment rate of about 31% and the second lowest declie had an unemployment rate of about 20%
- Both Unemployment and Underemployment rates increase dramatically from high income to low income levels
The study above clearly shows that lower-income Americans are affected greatly by the current recession while people at the top of the pyramid have almost negligible unemployment rates. Since the majority of the low-income workers are employed in the service sector, they face a further bleak future as consumer spending is still down. The study confirms that the headline rate unemployment rate of 9.7% is vastly misleading since it is much worse than that for low-income workers. Most of the Wall-Street bankers, government employees and other professionals have escaped this recession unscathed while it is not the same case with the rest of the workers.
Israel: A Leader in High Technology
A new report from Silicon Valley nonprofit groups Joint Venture: Silicon Valley Network and Silicon Valley Community Foundation casts doubt on the future prosperity of the region and mentions that the valley’s innovation engine is at risk.
From a news report:
“Silicon Valley’s innovation engine has driven the region’s prosperity for 60 years, but at the moment we’re stalled,” said Russell Hancock, CEO of Joint Venture, in a statement. “What’s hard to say is whether we’re stuck in neutral, which has happened before, or whether it’s time now for a complete overhaul.”
Like the rest of California, the region has taken a serious hit during the recession. According to the “2010 Silicon Valley Index,” Silicon Valley lost more than 90,000 jobs since 2008, commercial vacancy rates jumped 33 percent, and more than 14,000 homes were foreclosed on.
Moreover, the region’s companies aren’t able to attract the same numbers of talented foreign workers, which it called Silicon Valley’s “lifeblood,” according to the report. And the number of foreign students receiving degrees stateside in science and engineering has been steadily declining since 2003.”
While the Silicon Valley and other regions of high tech innovation in the U.S. are struggling, start-ups are flourishing in Israel. In the past few decades Israel has become a leader in the hi-tech field. According to some estimates, Israel has a higher density of start-ups than any other country in the world. One of the main reason for this high rate of success is the amount spent on R&D by Israel.
Source: High-Tech Israel, OECD
Israel spends about 5% of its GDP on R&D, the highest among OECD countries and more than double the OECD average of 2.3%. It is interesting to note that the U.S. lags Israel, Sweden and Japan in R&D spending.
Richard Koo: The Ying Yang Cycle of Bubbles and Balance Sheet Recessions
An interesting chart from a presentation by Richard C. Koo, Chief Economist, Nomura Research Institute, Tokyo:
Click to Enlarge
Source: The Age of Balance Sheet Recessions: What Post-2008 U.S., Europe and China Can Learn from Japan 1990-2005 by Richard C. Koo, Nomura Research Institute
China vs. USA - A Comparison of Government Finances and the Economy
In this post lets take a look at some of the differences between China and USA. The chart below shows the comparison of government finances between the two countries.
Source: Der Speigel
China has the world’s largest foreign currency reserves. Though the chart says it is $1.9T, the more recent figure was $2.4 Trilllion at the end of December 2009.
The public debt as a percentage of GDP for the U.S. is more than double that of China at about 38%.
China’s total external debt is just $400B. China is the creditor nation while the U.S. is the debtor nation. Currently the gross external debt of the U.S. is a whopping $13.75 Trillion. According to the U.S. Office of the Treasury the majority of this debt is in the form of long-term bonds and notes.
Clearly the U.S. has long ways to go before it can eliminate the public debts to low levels and be become a creditor nation again.
The services sector forms about 80% major part of the U.S. economy whereas in China it is just 40%. Since the majority of the U.S. manufacturing was off-shored to developing countries, this sector accounts for just 19% of the U.S. economy. In China manufacturing accounts for 49% of the economy. A significant portion of the service sector economy in the U.S. was based in the FIRE (Finance, Insurance and Real Estate) industries.Since the credit crisis, the financial and real estate sector have laid off thousands of workers and the industries are still in shaky grounds. For example, it may many years before a meaningful recovery takes place in the real estate industry.
One way for the U.S. to accelerate the economic recovery would be to invest heavily in the manufacturing sector and increase exports.
List of Countries for Possible Downgrades
From “The Numbers” section of the latest edition of Bloomberg BusinessWeek:
Governments around the world haven been borrowing heavily in the past 10 years so much that the debt level has now more than doubled to $55 Trillion.
CNBC has published a list of The World’s Biggest Debtor Nations based on the total outstanding external debt as a percentage of GDP. Greece ranks ahead of the U.S. at number 16.
