This year has been incredibly interesting on many fronts. This article features observations on three of the key dynamics we see, all maddening.
1. Healthcare, akin to "Sons of Anarchy," is riddled with unintended consequences and intrigue. The healthcare system increasingly looks like some kind of version of the fascinating but violent TV show "Sons of Anarchy." There is suspense, there is anger and there are double-crosses. If you have not seen the show, please excuse the reference.
The list of problems in healthcare is long. The healthcare exchange sign-ups last year were heavily inflated, and subsidies were provided to millions who arguably are not eligible for subsidies to encourage sign-ups. The taxes borne by insurances companies will be handed off to enrollees, the savings from healthcare reform are nonexistent, and there is very little evidence of improved care quality. Also, there is greater consolidation, which some would say means higher healthcare prices.
The only great certainty is one that has been said again and again for more than 100 years: Taxes will rise or have risen.
Perhaps the single point of good news is a shift toward consumers being more oriented to the cost of their care. The growth of high-deductible health plans and the transfer of healthcare costs to patients has led to more concern, even though consumers still have a very hard time being cost savvy for non-routine treatments. Nonetheless, we see healthcare taking up a bigger and bigger part of middle class budgets. Ultimately, consumer awareness may be the best hope for actually reigning in healthcare costs.
2. Foreign policy, akin to "Homeland," looks worse than healthcare reform. As to foreign policy, the real world situation tends to be more and more similar to what plays out on the TV show "Homeland." The Middle East seems to be a greater mess than it has been in 50 to 100 years, Russia is attempting to reassert itself with a new and more refined version of Joseph Stalin or Nikita Khrushchev as its leader. For the first tine in the recent past, China has challenges with its own savings rate, which is leading to a slowdown in growth. Since China is our biggest lender, we have a vested interest in its success and growth.
In "Homeland," it seems like the worst is behind for the characters in the current plot and before another thrill unfolds. Similarly, it seems like the Mideast turmoil, the Russian reemergence and China's slowdown could all make for their own blockbuster episode. But a bigger issue awaits: More terrorist states seem on the brink of getting a nuclear bomb.
It is a challenging world we are living in.
3. Interest rate policy on steroids; core American values turned upside down by the Bush and Obama administrations. In a vast conspiracy of circular reasoning, we have been driven to a spot where interest rate policy has kept rates near zero. This has led to increased net worth inequality, and it also discourages and harms savers. The low interest rate policy results in asset inequality because there becomes no benefit to putting money in strict savings, and investors favor stocks and real estate. Then the prices of these asset classes rise, and these assets are held by those who already have assets and net worth. Thus, the interest policy ultimately helps the rich — not the poor. In an absurdity of modern times, the Democratic administration and such policy is a large cause of income inequality, yet the party campaigns on the issue of income inequality. As Jonathan Gruber pointed out, I think the administration believes the American public is too dumb to understand this.
The low interest rate environment discourages what we traditionally viewed as core American virtues. Remember the concept of a penny saved is a penny earned? Now, because interest rates are so low, the more realistic inclination is to speculatively invest that money rather than save it. The Bush and Obama administrations have done a horrible job of backing core American values. The Bush administration encouraged people to take their money and use it to drive consumer spending — i.e., don't save, but buy appliances. The Obama administration has reduced interest rates so as to discourage saving. It is literally a world turned upside down in terms of economics.