Something’s Gotta Give: New York in Crisis

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerI’ve been in a funk since the 2009-10 state budget passed. The state’s elected leaders entered the budget negotiations confronting a potential $20 billion deficit, up from the $14 billion estimated when the Governor released his original budget proposal. That is, the state would have run a $20 billion deficit in 2009-10 if spending and revenue continued without changing anything structural (like tax rates or spending formulae). The faltering economy could no longer satisfy the state’s addiction to ever-greater spending.

Given such a dire forecast, we all wondered how the state would manage to find the money to avoid a major reduction in spending. Imagine our surprise when the Legislature and Governor pulled a rabbit out of the budgetary hat and increased budgeted spending by $12 billion, nearly 9% more than in 2008-09.

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High Deductible Health Plans: Not for Everyone

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerI’m in the third month of my high deductible health plan (HDHP) experience. And we’ve had some big bills to pay—I’m thinking that we may actually reach that family deductible early in the year. No surprises, though. I’ll let you know how it turns out. (If you’d like to read my earlier series on this subject, find the link to our blog site at www.cgr.org.)

A good friend sent me a column penned by someone who feels differently. The title tells it all: “I regret enrolling in an HSA.” Author Kelley Butler is having a major case of buyer’s remorse.

Kelley Butler is the editor of Employee Benefit News and her article can be found at http://ebn.benefitnews.com/news/regret-enrolling-hsa-2670271-1.html.

Kelley liked everything about her old health plan—except the price: “I knew we couldn’t afford the premiums we’d have to pay to keep our beloved PPO.” So she signed up for the high deductible health plan with a health savings account (HSA) and “hoped for the best.”

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The First Step in High Speed Rail is Fixing the Existing System

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerEvery day we see more evidence of the buckets of cash Congress has made available through the stimulus bill. Eager to see public dollars replacing lackluster business and consumer spending, our elected representatives have filled the pipelines of countless federal programs.

Public projects that were hopeless dreams in September have been reborn. One that has garnered particular attention in New York State is high speed rail.

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The Stimulus: Too much and not enough

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerAfter I made some cautionary comments on the pending fiscal stimulus plan on a local television news program, a friend said that I “sounded like a Republican.” I never did find out whether this was intended as a compliment or a criticism. Regardless of her intent, I found her comment troubling. Should caution have a partisan label?

I despair that elected officials seem to remember only half of a course in economics. We get more-or-less balanced policy in normal times because they remember different halves. Republicans remember 18th Century political philosopher Adam Smith proclamation that competition can harness initiative and build a stronger economy—yet forget Smith’s injunctions against concentrations of economic power. In this crisis, Democrats remember 20th Century economist John Maynard Keynes’ observation that public spending can stimulate the economy—yet forget that what we spend our money on and the amount of debt we incur matters rather a lot.

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Making Sense of Health Savings Accounts

Posted by & filed under CGR Staff, Rochester Business Journal.

Originally published in Rochester Business Journal
1/9/2009, 1/16/2009, 1/23/2009

Kent GardnerPart One

Early signals from our health insurer led us to expect another double-digit increase in our insurance premiums—perhaps a 15% hit. Frankly, I thought that we were just being softened up for something lower—If I were led to expect 15%, then a mere 11% bump should make me (relatively) happy. I was stunned when the final price of the most popular of our plans would go up 21% in 2009.

The big increase in price led us to explore cheaper plans, particularly a policy that includes a “Health Savings Account” (HSA). The discussion below refers to the specific plans we were offered by Excellus BlueCross BlueShield.

CAUTION: The remainder of this column discusses insurance premiums, deductibles, out-of-pocket maxima and other arcane health insurance jargon. Readers looking for lighter fare might prefer IRS Publication 17 or, perhaps, a William Faulkner novel.

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The state’s deficit problem is political, not technical

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThis week’s conference on the state’s budget crisis—sponsored by the Empire Center on State Policy and the Center for Governmental Research Inc.—was organized around a technical question: What can be cut from New York’s budget to fix a deficit estimated (today, at least) at $12.5 billion? Yet the overriding problem is not technical but political. My colleague Erika Rosenberg, moderator of one of the sessions, asked the panelists this question: “What’s it going to take for the Legislature to make the unpopular decisions that are needed to balance the budget?”

Gov. David Paterson made the correct technical decision in calling the Legislature back for a special session on Nov. 18. Yet the brutal reality of New York politics eliminated any possibility of progress. With control of the state Senate still in question and the political risks starkly clear, the session never convened.

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Can you hear me now?

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerBack in 2002, CGR reported on the many buildings around the state bearing the names of elected officials. To illustrate our point, we included a picture of the Joseph L. Bruno Stadium at Hudson Valley Community College, built with $14 million contributed by the generosity of then Senate Majority Leader Bruno. Of course, he was being generous with OUR money.

Bruno Statium

Bruno Stadium

In hindsight, it was risky to use the Bruno example. A political friend told me what he’d have done to me had he been on Bruno’s staff. Standards of decency and editorial policy prevent me from saying more.

A lot of money flows to community projects through the goodwill of legislators. The NYS Legislature has long divvied up $200 million in “member item” cash—money from the annual budget that can be allocated by a member of the legislature with no more process than the permission of his or her political leader. In 2006, my colleague Erika Rosenberg reported that the problem extended to several billion dollars in additional money that was borrowed to fund projects sponsored by individual members. We called these funds “Capital Pork.”

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Savings! Too Much of a Good Thing?

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerIn an essay in last week’s City newspaper, former Rochester Mayor Bill Johnson mentioned “Depression era conditions.” It wasn’t clear what he meant—fortunately, however, we’re a long way from reaching such depths of despair. After all, GDP actually rose at a 2.8% rate through the second quarter of 2008. Unlike the 25% unemployment of the Great Depression, we’re just over 6% now. I’ll be astounded if the unemployment rate doesn’t continue to rise and GDP begin to fall—but this isn’t the Great Depression.

A friend asked yesterday if we should mount a “public works” program and attempt to “jumpstart” the economy through direct spending or, perhaps, by encouraging the public to spend more by sending out another wave of government rebate checks.

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Are We All Predictably Irrational? Or Just the “Behavioral Economists”?

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThe following is based on a book review I delivered on behalf of the Rochester Public Library’s “Books Sandwiched In” series.

Dan Ariely’s Predictably Irrational comes from a field called “behavioral economics,” a branch of cognitive psychology focused on economic decision-making. Folks in the field attempt to figure out why apparently rational people behave irrationally so much of the time.

That markets are influenced by irrational behavior is easily demonstrated. Let’s consider recent trends in oil prices. When oil was trading at over $140 per barrel, relatively few oil industry experts would defend the price on the basis of pure supply and demand. Sure, some would cite rising demand in China or the number of cars added to the road every day in Mumbai. Many authoritative voices had been saying for months that they while they could rationally explain a spot price around $100 per barrel, the arithmetic simply didn’t justify $140 per barrel. So why were apparently smart people betting big dollars on a higher price? How did the price get to $147 per barrel? Largely because they believed that other people believed that prices were going to rise. And they believed that they were smart enough to buy when prices were rising and to sell before the bubble burst.

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Let’s grow pineapples in the Finger Lakes. Well, maybe not…

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThe proposition that we should “Buy Local” is appealing. We may continue to buy apples from Chile and lettuce from California, but we have the common decency to feel guilty about it.

But do we need to?

American producers of beet and cane sugar have long supported a Buy Local policy. Dominated by a relatively small number of large and politically savvy producers and processors, these “buy from us” sugar interests keep prices high through official U.S. policy that includes a robust quota and tariff regime. Protectionist trade policies for American sugar acquire additional political weight from the powerful Midwest corn lobby, as cheap sugar from Brazil, Thailand and other countries also competes with corn sweeteners. Corn sweeteners—only 13 percent of total sweetener deliveries in 1970—surpassed beet and cane sugar in 1986 and now contribute 20 percent more to the sweetener market than refined sugars.

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