Clinics: Free Market Response To Health Care Needs

See Target Continues Expansion of Retail Clinics, from Mark Perry at Carpe Diem.

"After years of sitting on the sidelines as CVS and Walgreens rapidly opened medical clinics nationwide, Target Corp. said Tuesday it will open eight new Target Clinics by the end of July, including four in the Twin Cities. It marks the second eight-store burst in six months for the Minneapolis-based retailer, after expanding into Chicago and Palm Beach for the first time in September. The new clinics mean Target will have 44 locations in Minnesota, Maryland, Illinois and Florida.

As the health care landscape changes and consumers become more comfortable using clinics in grocery stores, hospitals, drugstores and mass merchandisers, Target may be gearing up to grab market share from the industry's two biggest players, CVS/Caremark's MinuteClinic and Walgreens' Take Care Clinics.

Nationally there are 1,227 retail clinics in 42 states, according to Merchant Medicine, a retail clinic research and consulting firm. Use of retail clinics has risen in the past year as individuals and families face high-deductible plans, said Tom Charland, Merchant Medicine's CEO. The average deductible is well over $1,000 on a basic employer-based health plan, according to a recent study of health plan trends.

"These low-end, acute care visits are the first dollars that get spent," Charland said. "People pay for these out-of-pocket expenses at a place where they understand how much it'll cost. The menu is there for them to see.""

Here is the link to the Minneapolis StarTribune article: Target continues expansion of medical clinics: Competing with CVS and Walgreens, retailer will open clinics in eight new locations, four in Twin Cities.

How Government Policy May Have Contributed To The Recession

This is from Lee E. Ohanian of the Federal Reserve Bank of Minnesota. See Accounting for the Great Recession. He discusses many causes and contributing factors, so he is definitely not saying it was all bad policy. Excerpt:

"If the financial explanation is not entirely convincing, particularly for the failure of employment to recover after the crisis, is there another story that could account more fully for the macroeconomic fluctuations of 2007-09? Many researchers offer a policy explanation—that poorly designed economic policies enacted in response to early stages of the financial crisis significantly contributed to the Great Recession by distorting incentives and increasing uncertainty. The policy explanation suggests that government initiatives such as the 2008 tax rebate, the Troubled Asset Relief Program (TARP), the American Recovery and Reinvestment Act, Cash for Clunkers and U.S. Treasury mortgage modification programs aggravated early weakness in the economy and led to a full-blown recession.

Casey Mulligan, for example, studies the effect of Treasury mortgage modification programs on the employment rate; he finds that eligibility requirements for these programs raised implicit income tax rates on some households to levels exceeding 100 percent.

John Taylor contends that a broad set of policies substantially contributed to the recession and supports his argument with a number of studies. In one recent article, for instance, he shows that some interest rate spreads, and both U.S. and foreign stock prices, deteriorated much more rapidly at the times of the TARP announcement and President Bush’s warning of a possible Great Depression than they did around the Lehman bankruptcy or other major financial events. In another study, he shows that daily sales at Target department stores dropped substantially right after the announcement of TARP on Sept. 19, 2008, but not immediately after the Lehman bankruptcy on Sept. 15. Taylor concludes that government policies contributed significantly to the recession, perhaps because policymaker communication regarding underlying economic strength increased public uncertainty.

Uncertainty, in fact, may be a primary reason why the recession deepened and persisted into 2009, well after the worst of the financial crisis. High uncertainty raises the value of delaying decisions in many economic models, which can depress economic activity. Recent and ongoing research on the impact of uncertainty on economic activity suggests that it can indeed induce recessions; in one forthcoming theoretical article, for example, uncertainty about the accuracy of government pronouncements regarding macroeconomic strength can lead households to reduce the labor hours they supply."

42.5% Of Jobs Lost Since 2006 Were Minimum-Wage

See The Minimum Wage and Job Loss from 2006 through 2010 at Political Calculations. (Hat Tip: Greg Mankiw) Excerpt:

"In 2006, the last full year in which the U.S. federal minimum wage was a constant value throughout the whole year, at least before 2010, approximately 6,637,649 individuals in the United States earned the 2010 equivalent of $7.85 per hour1 or less.

For 2010, the first full year in which the U.S. federal minimum wage was a constant value through the year since 2006, the U.S. Bureau of Labor Statistics estimates that an average of just 4,361,000 individuals in the United States earned the same equivalent of the current prevailing federal minimum wage of $7.85 or less throughout the year.

In terms of jobs lost, that means that 2,276,949 of the jobs lost in the U.S. economy since 2006 have been jobs that were directly impacted by the series of minimum wage increases that were mandated by the federal goverment in 2007, 2008 and 2009.

Interestingly, the average number of employed members of the civilian labor force in 2006 was 144,427,000. In 2010, the average number of employed members of the civilian labor force in the U.S. was 5,363,000 less, standing at 139,064,000.

So, in percentage terms of the change in total employment level from 2006 to 2010, jobs affected by the federal minimum wage hikes of 2007, 2008 and 2009 account for 42.5% of the total reduction in jobs seen since 2006."

Are Some People Poor Because They Are Irrational?

See Why Do the Poor Commit More Crime? by Bryan Kaplan. Excerpt:

"Crime is just one of many, many "social pathologies" that are over-represented among the poor: alcoholism, drug abuse, smoking, obesity, illegitimacy, etc. None of these are good escape routes from poverty. So instead of trying to explain why "poverty causes crime" or "poverty causes obesity," it makes sense to look for common causes of poverty and social pathologies.

Like what? In a paper just accepted by Kyklos, Scott Beaulier and I point to a simple candidate: irrationality. People who have biased beliefs about practical matters, and/or exercise poor impulse control, are likely to screw up their lives across the board. So it's hardly surprising that poverty and self-destructive behavior go hand in hand. Rather than being a natural response to poverty, a lot of crime can be seen as objectively self-destructive behavior that happens to have an unusually large amount of collateral damage."

Here is the link to that Kyklos paper: Behavioral Economics and
Perverse Effects of the Welfare State

The Truth About Fannie and Freddie’s Role in the Housing Crisis

This is from Veronique de Rugy at Reason. Excerpts:

Myth 1: The government-sponsored housing finance companies Fannie Mae and Freddie Mac had nothing to do with the housing crisis. They were simply innocent bystanders caught in the crossfire. Economist and New York Times columnist Paul Krugman, for instance, has argued that Fannie and Freddie’s role in the housing market was insignificant between 2004 and 2006 because “they pulled back sharply after 2003, just when housing really got crazy.” According to Krugman, Fannie and Freddie “largely faded from the scene during the height of the housing bubble.”

Fact 1: Fannie and Freddie contributed to the housing crisis by making it easier for more people to take out loans for houses they could not afford. Beginning in 2000, Fannie and Freddie took on loans with low FICO scores, loans with low down payments, and loans with little or no documentation.

Myth 2: Fannie and Freddie’s role in the housing market increased homeownership, especially for first-time buyers and lower income earners.

Fact 2: The small increase in homeownership rates were temporary and artificial, driven by unsustainable incentives. In the best case scenario, Fannie and Freddie may have increased the homeownership rate from 63 percent to 69 percent, but the rate has now fallen back to 66 percent. Moreover, Fannie and Freddie did not make housing more affordable and even priced many first-time buyers out of the market.

As business journalist Bill Bonner explains in The Christian Science Monitor:

Armed with these advantages, GSEs increased their book of business from $13 billion in 1965 to $1 trillion by 1990 and $3.4 trillion in 2003. Once the great real estate bubble had concluded by year-end 2007, Freddie and Fannie combined had purchased $4.9 trillion of mortgages, repackaging 70 percent of these into guaranteed securities for the secondary market.

This (along with Ginnie Mae) gave the GSEs roughly half of the $11 trillion mortgage market, but their share of new originations has become near dominant.

Many sources peg this at 70 percent, but an interesting take from TIME magazine business and economics columnist Justin Fox takes into account the impact of refinancing into GSE-backed loans. Juxtaposing GSE total volume ($ 539 billion) against new originations ($313 billion), GSE market share was 172 percent for the first quarter of 2008.

Myth 3: Fannie and Freddie are essential for maintaining a working mortgage market. Without them, interest rates will increase and homeownership will plummet as more people are priced out of the housing market.

Fact 3: Interest rates are likely to go up. Yet it is not clear what impact this will have on homeownership rates. In the 1980s, interest rates on the average 30-year mortgage were significantly higher, yet homeownership rates were almost the same as they are today. Besides, the alternative to homeownership is not living on the street.

Gary Becker On Recent Events In The Middle East

See The Middle East Uprisings, their Economies, and the World Economy-Becker. He discusses many issues. Here is one excerpt:

"Saudi Arabia and Turkey have the highest index of overall economic freedom of any of the larger MENA countries (Middle East and North Africa). Their levels of economic freedom place them in the “moderately free” category. Then come Morocco, Egypt, and Tunisia, with indexes in the “mostly unfree” category. Syria and Yemen have even less freedom, while Iran and Libya are close to the bottom of all 179 countries considered, with indexes of economic freedom in the “economically repressed” category."

How Regulations Hurt Business, Especially Small Business

See How to Help Small Businesses by Ryan Young at the Competitive Enterprise Institute Blog. Excerpt:

"Paychex, Inc., a payroll service provider that works with many small businesses, recently commissioned a survey. They asked small business owners their thoughts on the economy, and what the biggest obstacles are to growing their businesses. The most common gripe? Regulation. 47 percent of small business owners say that regulations have “slowed or prevented” their business from growing.

The Rochester Business Journal reports that the types of regulations that most concern small business owners are “tax changes (56 percent), health care reform (39 percent) and state regulations in response to budgetary challenges (25 percent). The research found 61 percent of respondents have seen more government regulation over the past five years.”

If Congress is genuinely interested in helping small businesses while speeding up economic recovery, it’s time for a different approach.

Transferring money from taxpayers to small businesses doesn’t help the economy on net. It actually hurts it. One reason is that the prospect of free money encourages small businesses to redirect their energy from entrepreneurship to K Street. Another is that government largesse tends to be given out according to political interests, not consumers’ interests.

Federal regulation alone costs $1.75 trillion to comply with. Congress should lighten the load. 47 percent of small business owners say that regulation has made their business grow more slowly. Letting that 47 percent grow more quickly would go a long way toward getting the economy growing again."