The Most Overrated Jobs

12 Oct

Have you ever thought how much better your life would have been had you climbed the corporate ladder to the senior executive level, or pushed through medical school and residency to become a surgeon? You’d command respect, you’d earn a handsome salary, you’d enjoy unmatched prestige.

Not so, says a new report from, a three-year-old Carlsbad, Calif. job listing website. Corporate executive and surgeon take the number one and two slots on CareerCast’s list of America’s most overrated jobs. Though corporate executive pays an average of $161,000, and surgeon, a handsome $365,000, both careers involve intense stress, higher than average physical demands, and a weak or unsteady hiring and employment outlook, according to data gathered by CareerCast.

While the public may think that corporate executives lead a cushy life with fat paychecks, says Tony Lee, CareerCast’s publisher, “they work incredibly long hours, they are responsible for all the people who work at that company, if they make a misstep, people lose jobs.” Furthermore, he says, executives are under constant scrutiny by shareholders and investors, and they must sacrifice family time and personal health, in the name of their jobs. Surgeons also rate high on CareerCast’s stress measure, which scrutinizes 11 different factors, including hours worked and being responsible for another’s life. The number three and four slots on the list are also in the medical field: physician, with an average income of $192,000 and psychiatrist at $160,000. Airline pilot ranked fifth, with an income of $106,000.

In Pictures: The Most Overrated Jobs

Each January, CareerCast releases a list of America’s ten best and ten worst jobs after evaluating 200 professions using five core criteria: pay, hiring outlook, work environment, stress and physical demands. (My colleague Jacquelyn Smith covered the best and worst lists here.) CareerCast uses data come from the Bureau of Labor Statistics, the Census Bureau, the Occupational Safety and Health Administration, and an array of private compensation surveys, trade association studies and state statistics.

This year, CareerCast decided to rework the data and produce two new lists, most underrated jobs, which we covered here, and now, its first list of the most overrated jobs.

Lee has been working on the best and worst jobs lists since 1995, when he, Wisconsin publisher Les Krantz and two statistics professors from the University of Wisconsin, started putting together the report for, a now-defunct site formerly run by The Wall Street Journal. After CareerJournal shut down, Lee teamed up with CareerCast and continued the project. (A link to the top jobs methodology is here.)

To produce the underrated and overrated lists, Lee says his team first looked at compensation levels and then started factoring in, and giving extra weight to, factors they deem important, like stress, physical demands and employment outlook. Lee concedes that the measures are subjective. “We said, ‘what do we, the researchers, think the most important criteria are, to make sure this job is as good as it seems.’”

While it appears that Lee and his team make a serious effort to rate particular job categories, using extensive empirical findings over a long period of time, the overrated list is sure to evoke controversy. For one thing, presumably it’s the rare surgeon or senior executive who endures the rigors of those demanding career paths absent a sincere desire to work in those fields. So while those jobs might seem overrated once Lee factors in his weighted measures of stress and employment outlook, an individual surgeon or executive could feel deeply rewarded in his or her profession, no matter what the data say.

Also, any report of this sort looks at multiple individual jobs to come up with rough averages. When I published the most underrated jobs list, which picked paralegal as the number one job because it supposedly pays well, has low stress and a low unemployment rate, I got comments from eight current or former paralegals, most of whom insisted their jobs were plenty stressful. Several commented that the compensation figure, $47,000, was way off (some said high, some said low). I also heard from a reader who runs a continuing legal education company that trains paralegals. She described the range of salaries, the varying stress levels, and the fact that CareerCast’s numbers reflect a national average. Higher-level paralegals earn as much as $200,000, she reports. Interesting, given the sixth most overrated job on CareerCast’s list: Attorney, with an average income of $113,000.


From The Great Recession to The Great Stagnation

12 Oct

The news in the New York Times this morning that household income declined more in the two years after the recession ended than it did during the recession itself will come as no surprise to anyone who has been following economic events. Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell almost 7 percent, to $49,909, according to a study by Gordon W. Green Jr. and John F. Coder. During the recession — from December 2007 to June 2009 — household income fell just over 3 percent.

Ten days ago on CNBC’s Squawk Box, Glen Hutchins, Federal Reserve Board member and co-CEO of Silver Lake gave us some interesting insights as to what is going on.

Are we entering another recession?

The interviewer began by asking Hutchins whether we were facing a double dip, in other words, were we entering another recession?

Glen Hutchins: You can’t solve a problem unless you understand it. You certainly can’t make predictions about something until you understand it clearly. Most of the people who are talking about the economy plunging off a cliff are the same people who, several months back, were expecting some cyclical rebound and recovery.  Those people don’t understand the situation. We are not in a cyclical set of problems. There were some cyclical problems in what happened in 2008. They are largely behind us.

What we now have is a long-term structural problem of our economy known as a balance sheet adjustment. Other countries have experienced this. The United States during the Depression, for instance, although I am not saying this is like the Depression, but it has features that are similar. Japan over the last twenty years is another example.

The Economy: Not The Flu—Diabetes

There’s a very good book written by Ken Rogoff and Carmen Reinhart,This Time Is Different: Eight Centuries of Financial Folly (Princeton, 2011). It’s a very good guide to this economy. What it tells you is that in economies that have experienced what we have, which is the accumulation of debt over ten to thirty years, in every aspect of our society, with a massive asset boom, and an associated financial crisis, the nationalizing of private debt is the normal response to the crisis. What you then get is a decade-long period of low growth and high unemployment, punctuated by sovereign debt crises as a result of accumulating the debt that you took on during the crisis in order to smooth out the problem.

When you look at the situation now, people tend to think that we have had something like the flu: we’re going to be sick for a couple of days and we are going to be right back to where we were. This is more like having diabetes and being a hundred pounds overweight. We are going to have manage our health for a decade before we are going to be healthy again.

Interviewer: So you are saying we are going back into a recession?

GH: To ask that question is to misunderstand the problem. We might or might be going back into a recession. Asking whether we are going into a recession misunderstands the problem. We were not in a robust recovery before. Neither are we in some plunge following that. What we are in is a long period of long-term low average growth.

Interviewer: So what heals us is time?

GH:   And hard work and tough choices.

Interviewer:  So we just have to wait for time?

GH: It takes time but you don’t wait for time. You have to get to work and get it done. A couple of things that can be done and that are really important.

If you look at the public sector, the important thing that our leaders in Washington can do in terms of stimulating the economy and long-term job creation is to get their own fiscal house in order. It’s the one thing that is out there that is in their own control to do. Something along the lines of the Simpson-Bowles plan that has at least $4 trillion in debt reduction and gets the primary debt in balance and brings the overall debt down over some time period and is binding, like Ulysses in The Odyssey bound to the mast, so you know when it is going to happen. That’s a key thing.

Four structural problems

That’s because there are several structural problems that accumulated in this balance sheet recession.

  • One of them is debt in the public sector and that is the only one that is growing and that is the one that is contaminating the problem.
  • Another is debt in the household sector.
  • Another is housing.
  • And there is also very high unemployment.

Those things accumulate into considerably muted consumer spending which is 70% of our economy.

You have to go after each of those four problems. Each one of those problems has a remedy that has to be put into place. Each one takes hard work and time.

Interviewer: So you think that CEOs make decisions based on what they see in Washington DC?

GH: In part. Not entirely.

Interviewer: So what is driving their thinking in terms of not wanting to spend on new initiatives?

GH: By far the biggest problem is the lack of demand. I’m in the tech sector. We’ve got growing demand and we are investing around it. The primary problem is that other sectors of the economy were based on consumer debt and got themselves way out of whack with primary demand today. They don’t have the demand necessary to make investments. We are still way below average capacity utilization across our manufacturing sector. That is the primary issue.

There is another feature in that there was a blow to confidence all across our economy both with consumers and with board rooms. And that was a failure to get our public debt resolved this summer. Every single CEO that I talk to says that in quite vociferous terms. There was some notion that we were close to getting that problem removed and create a glide path for us to get somewhere. And now that glide path has gone. That was part of a transition in people’s thinking from, “We’re in the early days of a cyclical recovery,” to “We’ve got a long-term problem that we have to think differently about.”

The bubble economy: 1980-2008

In effect, we have been living in a bubble economy for the last couple of decades.

Now the bubbles have burst and turned into great weights on the economy:

What will it take to solve these problems?

We have to get realistic about the scale and depth of the problems. A focus on one of the problems, like reducing the deficit, will not solve the overall array of issues. In fact, focusing solely on that issue will cause the other problems to get worse.

As Hutchins points out, it will take a lot of hard thought, hard work and courage to work through this array of problems and bring the economy to anything resembling health.

It will resemble treating diabetes, not a bout of the flu, with a multi-year course of medical treatment and change of life style. Political parties will have to join together to solve problems, rather than scoring political points.

How do you make money in the Great Stagnation?

A change in life-style is also due for the private sector. Making money in this economy for the private sector, once they have cut costs to the bone, is going to be very difficult for companies practicing traditional management, suchWal-Mart-and-the-futility-of-traditional-management/” target=”_blank”>Wal-Mart [WMT], Cisco-vs-juniper-delight-or-die/” target=”_blank”>Cisco [CSCO] OR GE [GE], because there will be little demand for their products and services. A probable decade of weak demand will put a lot of traditionally managed companies out of business.

By contrast, companies practicing radical management such as Apple [AAPL],Amazon [AMZN] and Salesforce [CRM] will find little difficulty in making money because radical management creates its own demand. By delighting their customers, these companies have people lining up outside their doors to buy their products and services, even in the depths of the Great Stagnation. Why don’t more companies practice radical management? Why would anyone invest their money in companies not being managed this way?

Do College Interviews Really Count?

12 Oct

Danny Peters wore khakis, a button-down shirt, and “decent shoes, only because my father made me.”  He was going to his interview at a New England liberal arts college. “Brattleberry” College – here disguised to protect the innocent – puts great stock in the college interview.  Young Peters needed to make it count because neither his grades nor his SAT scores were anything to brag about.  In fact, both were below Brattleberry’s median scores.

But young Peters rose to the challenge: he was charming, thoughtful, and articulate.  He explained why he thought Brattleberry was a perfect fit, and what he could contribute to the campus.  By the end of the interview, the admission officer, suitably impressed (or charmed), and told Peters he would be accepted.

Such instant decisions are the exception but they do happen.  Bard College has an “Immediate Decision Plan” where the candidate participates in a seminar conducted by a Bard faculty member and then meets with an admission counselor. The admission decision is mailed the next day. Other colleges have been known to let a candidate know almost immediately when a candidate is clearly qualified and tells the college that the school is his first choice, he will attend if accepted, and doesn’t need financial aid.  (Being a “full pay” student in the current economic environment doesn’t hurt.)

What is the norm is how important the interview is for many smaller college admission decisions.  At Pomona College in California, Associate Director of Admission Malisha Richardson says that although their literature states that interviews are “highly recommended” there is an expectation that if you live in Southern California, you better get to campus —or at least show strong evidence that you tried.  Applicants from other parts of the country will be offered alumni interviews.

John Young, Admission Director at Hobart, goes one step further.  He states: “If you can’t get to us, we will get to you.  And if that doesn’t work, we’ll Skype an interview.”  Welcome to the world of technology where no student has a reason not to  interview.

Back in the “old days” – when the parents of today’s college applicants were themselves applying – interviews were required at virtually all the top colleges.  Today, interviews with admission officers at the Ivy League colleges and the larger universities are not part of the admission decision mix.   There are simply too many applicants.

All of the Ivies and other highly selective schools do, however, offer applicants the option of being interviewed by alumni interviewers in (or near) the student’s hometown.  Do these alumni interviews “count?”

John Birney, Senior Associate Director of Admission at Johns Hopkins shares: “They are one more part of the folder.  They are not a significant factor in the vast majority of cases.  But for a kid who is on the bubble, where the decision could go either way, a fantastic interview with an alumni could make the difference. “ But he also  adds, “The flip side is also true.  A kid who come across as arrogant or nasty or ill-informed about the college can trigger a negative interview report.  It is rare that it happens but it does.  And when it does, it can be what tips the scale. “

Remember, all of the top schools have far more qualified applicants than they can handle.

And if you are a  “no show” to an alumni interview — or refuse one — you can be sure that that it is passed on to the admission office.

Many smaller selective colleges – like Brattleberry – make interviews “optional.”

Are these interviews really optional?

Not if you want to get accepted.

Daryl Jones, Senior Associate Director of Admission at Gettysburg explains,   “A student who doesn’t take the time to visit the campus and schedule an interview is sending us a message that they are not very interested in us.  Strongly recommended means we expect students to interview if they are serious about Gettysburg.”

Many selective colleges keep track of every communication an applicant has with the school.  Campus visits, e-mails, overnights, classes sat in on.  They all add up to an expression of just how interested in that college the student really is.

The nature of the interview has changed as well.  In the “old days” it was not uncommon for the admission officer to pose some esoteric – make that whacko – question.   There was a senior Brown admission officer who used to terrorize high school kids with, “If you were any type of vegetable, what would it be?”  Happily, questions like that are rare.

But what kids say during the interview does count.  Admission officers want to see if a student has really thought through why they want to attend that particular college.  Whether they can distinguish between places and taken the time to do real research about various colleges and tried to discern the factors that comprise a good fit.

Young adds: “Take the time to prepare for that interview, whether it be on campus, with an alum or via Skype.  We want to know what you know about Hobart and why it would be a good fit for you.  We want to answer your questions too about study abroad, potential majors or advanced degrees., so prepare good questions in advance for your interviewer.”

Admission officers are also keenly attuned to fit.  And as they listen to a kid try to “sell himself” the AO is assessing whether that 18 year old would contribute to the vitality of the campus.  Because colleges are looking for the well-rounded class – and not the well-rounded kid – the AO is trying to determine which of several kids who have say, a journalism hook, or a dance hook, or a chemistry hook would make the best contribution to the overall class.  Is this kid a grade-grubber or a true intellect?  Is the journalist someone who will be as comfortable in a junior reporter role working her way up the ladder or only interested in the editorship?

The interview can help the AO understand the student; and it can it can make a real difference in the overall admission decision.

There are two other types of interviews worth noting.  The first is the on-campus “information interview.”   These typically take place at the start – or at the end — of a family’s visit to a campus.  They are sometimes combined with the initial orientation session that takes place in a college’s admission office.   These sessions never have any impact on the admission decision.  The purpose is to answer questions about that college.  And it is pretty pathetic to see parents – often as frequently as kids – try to “get noticed” by admission officers.

The second type of non-interview interview takes place when college admission officers visit high schools and meet with small groups of students. These on-the-road sessions are also designed to introduce college to prospective applicants and answer questions.  But they have the added advantage of providing short one-on-one nice-to-meet-you opportunities.  These aren’t true interviews, but they establish a first-impression, and more importantly, give the student the opportunity to follow-up, via e-mail or during a later on-campus interview.

Not all selective colleges agree on the importance or value of the interview.  Amherst College, one of the most prestigious and selective colleges in the country, ended interviews almost twenty years ago.  Veteran Dean of Admissions Tom Parker shares three reasons why:

”First, location.   The relative ease of getting to Amherst via I-91 meant the numbers got out of control.  Were we more remote and needed to gauge interest, it might be more important. “  (Note – Parker, who spent many years in admissions at Amherst’s chief rival – Williams College.  Williams is located on the other side of the Berkshire Mountains, is more remote and difficult to get to.  It still offers “informational” interviews.

“The second reason,” says Parker, “is impact.  We agree with a study by Warren Willingham at the College Board study that argued that interviews predicted nothing about college success.  So why do they?”

“The third reason is socio-economic bias.   Even though Amherst is easy to get to, it is still the more affluent families who can get here more easily.  Given our commitment to diversity at Amherst, putting an emphasis on interviews would go against our principles.”

Parker is widely considered to be among the most thoughtful college admission deans.  And his thinking – along with Amherst’s prestige – is likely to influence other colleges in the future.

But for now, the bottom line remains that for the vast majority of small selective colleges, interviews still count – a lot.  So the term “strongly recommended” means you better prepare for the interview,  take it seriously, and get it done.

This article was written with Mike Muska, Dean of College Relations at Poly Prep in Brooklyn, New York, and co-auhtor of Getting In!

The Economics Nobel Goes to Sargent & Sims: Attackers of the Phillips Curve

12 Oct

This morning when Thomas Sargent of New York University (along with Christopher Sims of Princeton) won the Nobel Prize in economics, it marked the lucky seventh time the Nobel has been given for work critical of the “Phillips curve.” The Phillips curve being one of the greatest of Keynesian warhorses. It’s a graph that was developed in the 1950s showing a trade-off between unemployment and inflation. When one goes up, the other goes down.

Readers of this column will recall that back in March I had occasion to marvel that six Nobels – if you’re counting, for Edmund Phelps, Edward Prescott, Robert A. Mundell, Robert E. Lucas, Milton Friedman, and F.A. Hayek – dating back to 1974 have been given for torching the Phillips curve. And then comes today’s citation for Sargent:

“In the early to mid-1970s, Sargent wrote a number of highly influential papers, where he showed how rational expectations implied a radical reinterpretation of empirical macroeconomic phenomena and rendered invalid conventional statistical tests of macroeconomic relations….Taken together, these papers had a profound impact on central hypotheses about the role of monetary policy and the Phillips-curve tradeoff. Compared to other researchers at the time, Sargent focused more on actual data and on ways to evaluate theory by taking active expectations formation into account. He was thus able to show why earlier tests had gone wrong and how new, more accurate, tests could be constructed.”

The citation goes on:

“[Sargent and his co-authors’] estimates suggest that the central bank was initially fooled by an incorrect belief about the Phillips curve, which led to a gradual increase in the inflation rate. But the sequence of shocks in the 1970s, along with a revision of the central bank’s beliefs, generated a subsequent fall in inflation.”

As citations go, it’s actually pretty coy. For the “incorrect belief about the Phillips curve” was that the curve was wholly inaccurate. But when you’ve given seven Nobels for the same thing, it’s time for some circumlocution.

The 1970s, when Sargent did the work that resulted in this prize, inflation and unemployment were together doing a mad tango where they kept scaling ever more dizzying heights. First there was the recession of 1969-1970, when unemployment and inflation were both at the moderate-to-high level of 6%. Then there was the double-dip recession of 1974-1975, when unemployment touched 9% and inflation 11%. Then there was the soul-crushing 1980-1982 experience, when inflation scratched 14% and unemployment 11%.

And then there were the beauteous Reagan-Clinton decades when inflation plunged to 3% and unemployment to 5%.

No wonder at one point in the citation, it dryly states that Sargeant proposed that the Phillips curve might be “vertical.”

This time, the Nobel committee is striving to say that this prize was given specifically for Sargent’s corrections to the initial criticisms of the Phillips curve. Not that the curve is cogent; it’s just that the initial remonstrations (for which all those other prizes were given) were not as penetrating as they could have been.

I ask friends in the sciences if Nobels are ever given for the same discovery made over and over again, if in different ways. They say of course not. Seems to be the same thing in literature and peace: uniqueness all around. But in economics, you have to repeat yourself to the point of folly.

Yet Sargent’s prize remains pertinent. Just last month, the president of the Chicago Federal Reserve, Charles Evans, strongly implied that the Fed should fight unemployment with a gusto worthy of the Phillips curve; the president’s former top economist, Christina Romer, has been extolling its virtues lately; and it very much seems to be part of Fed Chairman Ben Bernanke’s toolkit through the Quantitative Easings and Operation Twists.

In the Gospel of Christianity, it is asked, “How many times should I forgive my brother? Seven times?” Jesus’s response is no, “seventy times seven times.” If the Phillips curve is a sin (and you can bet it is), the structure of experience suggests that in the eons ahead of us, many dozens of prizes are yet to be awarded for meritorious service in striving to hack it down.

Obama’s Phony Fight For Housing

12 Oct

This story appears in the Oct. 24 edition of Forbes magazine.

For people who profess their desire to get the depressed housing market back on its feet the Obama Administration has been singularly inept. Despite numerous programs to allegedly help people keep their homes and prop up housing prices, the housing crisis continues, and home building is at a fraction of its levels before the bubble that began a little more than a decade ago. Here are things Washington would do if it were genuinely serious about alleviating this crisis:

• Order Fannie Mae and Freddie Mac to let homeowners whose equity is temporarily underwater refinance their mortgages as long as they have equity in their houses and are making their monthly payments. These folks are stuck with mortgages at rates of 5% and 6%. Since they have “skin in the game” and are servicing their mortgages, why not let them get the current lower rates? Obama professes to be the scourge of the rich, yet it’s high-income Americans who are reaping the most refinancing advantage from today’s minuscule mortgage interest rates.

• The Administration claims it wants to make it easier for repossessed or unoccupied houses to be turned into rentals. Good idea. But Fannie Mae and Freddie Mac both severely restrict the number of houses an entrepreneur can acquire for that purpose: ten at Fannie, four at Freddie. Remove the restrictions entirely. If someone is willing to risk capital to buy a lot of houses to rent out, by all means let them. It’s their money at stake, not the taxpayers’.

• Dust off an innovation used more than 20 years ago, when the real estate market in Texas and elsewhere collapsed during the savings-and-loan crisis: Let homeowners who can’t make their mortgage payments have the option—if they qualify—of signing a five-year lease on the house. Monthly payments would be lower, and there would also be less likelihood of abandoned houses depressing neighborhood property values. The lessees would have the option after five years of buying their houses at a discount or moving on.

• Drop the damaging lawsuits Fannie Mae and Freddie Mac filed against banks for alleged wrongdoing in underwriting packages of mortgages during the housing mania more than five years ago. This was less a crime than multitudinous stupidity. Let banks focus on the future instead of spending their efforts and capital on fighting government shakedowns. If banks are to be held criminally liable for what happened, then the biggest culprits of all—the easy-money Federal Reserve and the government-sanctioned monopolies, Fannie and Freddie—should be headed (pun intended) for the guillotine.

• At the same time urge the courts not to upend the settlement Bank of America made over allegedly questionable activities perpetrated by Countrywide Financial, the company it acquired in 2008. Some state attorneys general want a bigger payoff than the $8.5 billion BofA has offered. The Administration should tell them, as the Brits would put it, to “bugger off.” To mix metaphors, if the pols overmilk this BofA cow they could well flip its mortgage entities into bankruptcy, and the AGs would get far, far less than that $8.5 billion.

• Stop the Federal Housing Administration from guaranteeing mortgages with ultralow down payments and other questionable underwriting practices. The FHA is well on its way to joining Fannie Mae and Freddie Mac as a big financial disaster.

Economic Policy In The E.U.: More Bailouts, More Debt, More Crises

12 Oct

BRUSSELS—Belgium’s capital dates back to the sixth century, but today the modern dominates.  As the headquarters of the European Union, Brussels is filled with contemporary office buildings overflowing with meddlesome bureaucrats.  What began as a system of economic cooperation has turned into quasi-continental government.

But the so-called European Project risks collapse.  While establishment elites want more political integration, Europe’s financial crisis is turning its people inward.  So far the E.U.’s confused response to Greece’s fiscal crisis has exacerbated the continent’s long-term economic and political problems.

Proposals for European integration go back decades, even centuries.  After World War II pan-European cooperation was seen as the best way to reintegrate Germany.

However, the Eurocrats — a mix of politicians, academics, businessmen, bureaucrats, journalists, and others — wanted more.  The Common Market was turned into the European Union, with expanded powers.  Even that was not enough to transform the continent into a country, a Weltmacht which could act as a great power.  Complained French President Nicolas Sarkozy:  “Europe cannot be a dwarf in terms of defense and a giant in economic.”


A bit like the Israelites of old who asked God for a king to be like other nations, the Eurocrats demanded a president to be like America and China.  Explained Wilfried Martens, a Member of the European Parliament (MEP):  “the E.U. must be united and able to speak with one voice on the world stage.”

But the European people were far less enthused about the European Project.  In 2005 voters in the Netherlands and France rejected a new constitution to shift power from member nations to Brussels, reduce the requirement of unanimity for E.U. action, expand the authority of the European Parliament, and create an E.U. president and foreign minister.  The measure was repackaged as the Lisbon Treaty, which did not require popular approval, except in Ireland, where the constitution mandates that treaties be put to a vote.  Then the Irish said no, leading to a frenzied but successful effort to force a revote — with the “correct” result.

On Dec. 1, 2009 the Lisbon Treaty took effect.  Officials believed they finally had answered the derisive question asked by U.S. Secretary of State Henry Kissinger years ago: What is the phone number for Europe?

Now there’s a phone number.  In fact, there are several phone numbers.  But the 27-member E.U. is no closer to becoming a functioning country.

Baroness Catherine Ashton, the High Representative for Foreign Affairs, has made no policy of note and struggled with only indifferent success to establish her authority against other E.U. officials as well as member states.  The new E.U. diplomatic corps just adds more Europeans for other governments to talk to.

Herman van Rumpuy was chosen to be president of the European Council, but Jose Manuel Barroso remains president of the European Commission.  And member states continue to rotate as presidents of the Council of the European Union; Poland will hold the slot until year end, when Denmark will take charge.  No one outside of Europe treats this tri-headed bureaucratic curiosity seriously.

The 17-member eurozone is in even greater trouble.  The euro entered circulation in 2002, even though some supporters recognized the danger of instituting monetary union without fiscal union.  German Chancellor Helmut Kohl called the system “a castle in the air,” but he still agreed to give up the fabled Deutsch Mark.

In fact, the euro’s objective was as much political as economic — to drive European federalism.  Create the national currency and the nation will come.  That was the hope, anyway.  Gerhard Schroeder, Kohl’s successor, contended that Europeans eventually would have to abandon “some erroneous ideas of national sovereignty.”  Any problems could be solved by increasing political and economic integration and transferring more national powers to Brussels.

Now the entire E.U. is under siege, with the threat of financial crisis in several countries and spreading “contagion” which could take down banking systems and even national economies.  Greece appears headed for a default.   Ireland and Portugal also have received bailouts.

Spain’s economy is almost twice the size of the other three combined and the government suffers from a rapidly increasing debt load.  Moreover, noted theEconomist:  “Spain shared several of the smaller economies’ weaknesses, like a loss of competitiveness and big current-account deficits.”  Italy, with Europe’s fourth largest economy, recently had its credit rating downgraded by three levels.

The conventional wisdom in Europe is that the way to combat too much debt is to issue more debt.  The way to transform bad banks is to turn the European Central Bank into a bad bank.  The way to respond to opposition to more political integration is to impose more political integration.  Council President Van Rompuy summed up this approach:  “we’ll do more.”

European leaders recently agreed to double the European Financial Stability Facility, the EU’s bail-out fund.  Where is the money to come from?  Warned Gideon Rachman of the Financial Times, the bailouts “impose a financial strain on countries that fund the emergency loans but are themselves heavily indebted.”

In fact, many Europeans doubt the wisdom of turning the onetime continental free market into a debt and transfer union.  Slovakia’s government is having trouble rounding up the necessary votes for passage.  Malta has delayed its decision.  Finland earlier demanded that Athens provide collateral for any Finnish aid.

Moreover, while German Chancellor Angela Merkel won the necessary parliamentary consent, most Germans oppose the bailouts and a majority of Germans want to return to the D-Mark.  Bundestag member Frank Schaeffler, a member of the Free Democratic Party, Merkel’s coalition partner, has collected signatures from five percent of FDP members requiring a party referendum on the E.U.’s permanent bail-out mechanism.  The result would bind FDP parliamentarians and could threaten Merkel’s government.

With money goes control, so E.U. leaders want to assert greater authority over members’ fiscal as well as monetary policies.  For instance, Juan Manuel Barroso advocated a “single, coherent framework to deepen economic coordination and integration, in particular in the Euro area.”

Many Eurocrats see Eurobonds as a panacea.  Explained Barroso, “Once the euro area is fully equipped with the instruments necessary to ensure both integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all.”  Advantageous for everyone but Germany, anyway, which would share its top credit rating with Greece, whose bonds trade as virtual junk.

European leaders continue to deny that Greece is likely to default.  But virtually everyone believes otherwise.  Michael Fuchs, the Merkel government’s deputy parliamentary floor leader, observed:  “Greece is bankrupt.  Probably there is no other way for us other than to accept at least a 50% forgiveness on its debt.”

Such a write-down would be painful for investors across the continent.  The cost would be particularly high for European — and especially German and French — banks, which hold much Greek debt.  Also threatened would be the ECB, supposedly the continent’s economic guarantor, which has been buying bonds from Greece and other over-extended member nations at face value.

Moreover, the ECB has been lending to weak banks to maintain their liquidity.  Concern over the stability of Europe’s banks led E.U. finance ministers to promise to recapitalize financial institutions, which means another bail-out financed by already heavily indebted states.

Today everything depends on unending German munificence.  Juliet Samuel ofCityAM noted that “Markets and European politicians are tying themselves in knots [attempting] to convert junk bonds into triple-A rated bonds. … Whatever the details, the aim is the same:  Brussels wants to underwrite Greek debt with German cash — all without letting the voters know.”  British Foreign Secretary William Hague was equally blunt, warning:  “Germans will have to accept that they are going to subsidize those countries for a long time, really for the rest of their lifetimes.”

To keep the money flowing European leaders have played upon German guilt persisting out of World War II.  However, Daniel Hannan, a British member of the European parliament, doubts this tactic will work on Germany’s young, whose formative experience was the fall of the Berlin Wall, not Adolf Hitler’s seizure of power.  At some point the German people are likely to say Nein! to subsidizing their more profligate European neighbors.

Moreover, while the Eurocrats may consider extending Brussels’ control over member states to be the only answer, doing so would require a new treaty, which would generate fierce and perhaps insurmountable opposition.  Germany’s constitutional court already has set limits to Berlin’s transfer of sovereign powers.  Moreover, Great Britain, which refused to join the eurozone, has resisted continental intrusions on its sovereignty.  The price demanded by London for its assent to any new treaty could be high:  Prime Minister David Cameron indicated the ongoing fiscal crisis may provide Britain “future opportunities” to repatriate some national powers back to London.

Earlier this year the majority of E.U. members said no to a German and French proposal for a “grand bargain” involving greater control by Brussels over deficits, pensions, retirement, and more.  Euroskeptic political parties have been gaining strength across Europe.  French economists Dagustin Landier and David Thermar argue that “voters opposed this big step towards federalism, and politicians know it.”

The obvious alternative is to let Greece default and restructure the Euro, either creating a two-tier currency, divided between strong and weak members, or dropping Greece and other heavily indebted states from the eurozone.  However, EU leaders worry that doing so would kill the larger European Project.  Warned Chancellor Merkel:  “If the euro fails it’s not just the currency that fails, but Europe and the idea of European unification.”  French President Sarkozy, said, “The euro is Europe, and Europe is 60 years of peace on our continent.”

The failure of the euro might be complicated and costly, but it would not plunge the continent into chaos.  Nevertheless, for dedicated Eurocrats failing to continue European integration would be almost as bad as war.  It would invalidate their main political agenda.

Europe is not alone in its economic distress.  Washington’s public finances are even worse in some ways. However, the E.U. remains a collection of nations rather than a nation, with continental government as distant as ever.  Instead of giving the E.U. more power, Europe’s leaders should start emptying those imposing buildings which fill Brussels.  Europe desperately needs more liberty, not more bureaucracy, and more growth, not more debt.

Higher Health Insurance Premiums This Year? Blame ObamaCare

12 Oct

Most Americans saw their insurance bills jump this year, according to a new study from the Kaiser Family Foundation. The average employer-based premium for a familyincreased a startling 9% in 2011. Over the next decade, rates are expected to double.

The Kaiser report is only the latest piece of research to indicate that ObamaCare isn’t driving down health care costs, as its proponents promised, but is instead accelerating their rise.

This year, the average premium for a family hit $15,073 — $1,303, or 9%, higher than the year before. And that’s on top of increases of 5% in 2009 and 3% in 2010.

Employees are picking up a substantial portion of that tab. They paid an average of $4,129 for their family insurance premiums this year — more than double what they shelled out 10 years ago. And that figure doesn’t include out-of-pocket health expenses.

These premium hikes have outpaced general inflation and salary increases — and thus are swallowing a greater share of American households’ budgets. A study published in the September 2011 issue of Health Affairs found that burgeoning health costs have decimated nearly an entire decade’s worth of income gains. In 2009, the average American family had just $95 more to spend at will than it did in 1999.

Worse, there’s no relief in sight. Next year, employers expect premiums to rise 7.2%, according to the National Business Group on Health.

Over the next ten years, American families can expect rising health costs to continue to offset pay raises. According to the Kaiser study, premiums are set to reach a whopping $32,175 by 2021. And more than 50% of employers have stated that they plan to shift a greater share of health-insurance costs onto their employees.

ObamaCare is to blame for much of these impending increases. Richard Foster, the Chief Actuary for the Centers for Medicare and Medicaid Services (CMS), reports that America will spend an additional $311 billion on health care in the next decade because of the law.

CMS estimates the growth in health insurance costs will increase 10 extra percentage points in 2014 because of ObamaCare — a 14% increase, versus 3.5% without the law.

In 2020, the net cost of health insurance is estimated to be $271 billion. Without ObamaCare, that number would have been $248.7 billion — a difference of more than $22 billion.

ObamaCare drives up the cost of insurance by piling mandates and required coverage benefits onto every single policy.

Consider the so-called “slacker mandate,” which requires all family policies to cover adult children until they turn 26. According to a recent federal report, nearly 1 million young adults gained health coverage this year thanks to the mandate.

Of course, adding them to their parents’ policies isn’t free.

Towers Watson found that the rise in young-adult enrollment was responsible for premium increases of as much as 3% at many firms.

Even the feds admit that the mandate means that families will pay more. According to HHS, each new dependent will tack on an additional $3,380 to their parents’ insurance costs this year. By 2013, extra dependents will add $3,690 to families’ annual insurance bills.

That cost impact is even more significant because most of those who seek coverage through their parents know that they’ll need care. This “adverse selection” issue results in a sicker — and thus costlier — overall insurance pool.

Or take the “essential benefits package” — the list of healthcare services that all policies must cover. Already, benefit mandates at the state level force up premiums by an average of 10.5%, according to Pacific Research Institute scholar Dr. Benjamin Zycher.

Slathering federal mandates on top of existing state mandates will drive costs even higher — and thereby make coverage unaffordable for more people. Massachusetts Institute of Technology economist Jonathan Gruber — a supporter and architect of ObamaCare — estimates that a 10% hike in the cost of the essential benefits package could increase the number of uninsured by 1.5 million.

There’s no way around it — ObamaCare isn’t saving anybody money. Americans should agitate for its full repeal and replacement– before they watch the cost of their health insurance consume yet another year’s worth of salary gains.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is The Truth About ObamaCare (Regnery 2010).