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A Primer on Rules of Origin in NAFTA Negotiations and What Is Next

Richard J Nugent III
December 22, 2017

The latest round of negotiations of the North American Free Trade Agreement (NAFTA) on November 21 ended with no major breakthroughs on contentious issues such as autos, dairy and rules of origin among others. The US administration’s demand that at least half of a NAFTA-qualifying vehicle should be made in the US and 85 percent in North America met stiff resistance from Canada and Mexico. Compromise on rules of origin for the North American automotive industry will matter for the successful renegotiation of NAFTA.

What is rules of origin (ROO) and why do we need it?

NAFTA ROO can be loosely defined as a set of rules that are used to determine whether a good can be considered as being made in North America. If this is the case, then these goods are typically exempt from tariff when traded between two North American countries. Article 401 of the Agreement defines “originating” in four ways: (i) goods wholly obtained in the NAFTA region; (ii) goods meeting the Annex 401 origin rule on specific ROO; (iii) goods produced entirely in the NAFTA region from originating materials; (iv) disassembled goods and goods described with their parts that do not meet the Annex 401 specific ROO but contain 60 percent NAFTA content in transaction value. Article 403.5.a increases the value-content requirement for motor vehicles to 62.5 percent. The Trump administration has proposed increasing this requirement to 85% and adding a 50% U.S.-specific value-content requirement for motor vehicles. This would require a larger portion of the motor vehicle production process to be sourced within the region and in the United States, particularly.

The use of ROO are in principle to deter trade deflection. The objective is to prevent resources from being sourced from a country outside a free-trade region for assembly inside the region and later exported at preferential tariff rates within the free-trade region. If for example a can opener is assembled in Mexico from parts that are made in Brazil, the origin of this can opener is Brazil. Were this can opener exported to Canada or the United States, it would be subject to MFN tariffs as opposed to NAFTA preferential tariff rates.

NAFTA eliminates tariffs on most goods originating in Canada, Mexico, and the United States. The ROO for goods that are not wholly obtained from the NAFTA region are based on a tariff-shift method, regional value-content method, or technical process test:

  • Under the tariff-shift method, a product earns preferential treatment under NAFTA if it has a different Harmonized Tariff System classification than its imported inputs for a particular statistical level. This means a product can earn NAFTA-origin status if it has been modified substantially within a NAFTA country.
  • The value-content method requires a good traded within the region to contain at least 50 to 60 percent NAFTA content to obtain origin status.
  • Technical process tests can require incorporation of specific parts or require a particular method of assembly. Technical process tests are found in machinery and equipment manufacturing and the apparel and textiles industry. A common technical process test used in the apparel and textile industry is “yarn-forward.” Yarn-forward requires the yarn that is used to make fabric be spun in the NAFTA region. Thus, cotton that is imported from Pakistan to Mexico, spun into cotton yarn, and later used to make slacks can be exported to the United States at preferential NAFTA rates. “Yarn-forward” observes Mexico as these pants’ origin. However, if the cotton is spun into yarn in Pakistan and then imported into Mexico where it is used to make the slacks, the origin of the slacks is now Pakistan.

How do the ROO work?

We can answer this question by reviewing examples of tariff classification and origin rulings issued by the U.S. Department for Customs and Border Patrol. In 2004, a U.S. producer sought to import wiper blade arms from Mexico, which were made with a “non- originating” flat-coated wire. This piece might have disqualified the wiper blade arm from NAFTA preferential treatment. However, the Mexican supplier substantially modified the wire: it was imported into Mexico under Chapter 72 and exported to the United States under subheading 8512.90 as a part of the wiper blade arm, which is qualified for preferential treatment under NAFTA. In 2010, a Canadian producer sought to export vehicle door locks. The door locks were assembled in Canada using components made exclusively in China and Germany. No component of the door lock originated in Canada. As such, the locks did not qualify for preferential treatment under NAFTA, and the rate of duty assigned to the locks was 5.7 percent.

How do ROO impact trade?

ROO exist to protect the interests of the countries participating in a multilateral free trade agreement, but could potentially distort trade flows. Distortions are particularly pervasive where global supply chains are big players in shaping the way trade occurs between two countries. The role of supply chains increases with the prevalence of global value chains in international trade. Studies have demonstrated that the expansion of these value chains means that production has become increasingly fragmented and supply chains are being vertically integrated across countries. Many firms in different countries are taking part in particular stages of the production process, together forming a global supply chain. This form of fragmented production results in intermediate inputs crossing international borders several times before final delivery. ROO therefore have rigid and costly implications for the way goods are produced and traded in global markets. Where global supply chains exist partially outside of a free trade agreement, a change in ROO could be potentially deleterious. When goods cross multiple borders or cross borders multiple times as in the fragmented production processes, they are exposed to more trade costs which can accumulate and compound before the goods are sold for final consumption. Thus, production which is labeled non-originating by a change in ROO can be very costly.

A study on how the characteristics of U.S. industries helped to shape NAFTA ROO finds that industries characterized by larger returns to scale sought tougher ROO, while industries dependent on global supply chains sought more permissive ROO. Firms that face ROO decide whether to comply with the rules so as to export at preferential tariff rates, or to not comply with the rules and source inputs unconditionally. Researchers who study this decision by Mexican firms find that the ROO for final goods led to a 115 percentage point reduction in imports of intermediaries from non-NAFTA countries after the implementation of NAFTA.

ROO are a useful component of free trade agreements in their role to prevent trade deflection. However, the rules can be exploited in the objective of industry protection and can potentially distort trade flows. Additionally, if ROO are changed in a way that disrupts global supply chains, the costs of delivering some goods could mount considerably. Furthermore, if the parties renegotiating NAFTA stand firm regarding the motor vehicles regional content requirement, the future of NAFTA could be in a precarious place.

A Primer on Rules of Origin in NAFTA Negotiations and What Is Next2018-07-04T19:37:47+00:00

December 21: U.S. GDP Rose 3.2 Percent in Q3, Revised Downward from 3.3 Percent

Real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the third quarter of 2017, according to the “third” estimate released by the Bureau of Economic Analysis. The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 3.3 percent. With this third estimate for the third quarter, personal consumption expenditures increased less than previously estimated, but the general picture of economic growth remains the same. Read more

 
December 21: U.S. GDP Rose 3.2 Percent in Q3, Revised Downward from 3.3 Percent2018-07-04T19:37:47+00:00

December 01: the New York State Department of Labor Reported a Loss of 14,000 Jobs Statewide in October

The New York State Department of Labor reported a loss of 14,000 jobs statewide in October, following revised job losses of 15,000 in September. Total employment is up 1.1% in the state over a year ago compared to 1.4% for the nation. The Bureau of Labor Statistics reported that New York City gained 19,000 jobs in October, more than offsetting losses of 15,000 jobs in September. Employment in the city is up 1.5% over a year ago. Read more

December 01: the New York State Department of Labor Reported a Loss of 14,000 Jobs Statewide in October2017-12-01T23:42:44+00:00

Why Does It Still Not Feel Like Recovery? A Look at Industry Performance

The Economic Studies Group
November 30, 2017

The recovery of activity following the Great Recession got off to a slow start compared to previous cycles. The recession was characterized by deep declines in output (GDP) and the largest increases in the unemployment rate since the 1930s, and it wasn’t until six years into the recovery that the level of aggregate real GDP returned to its potential. In this post, we look at the growth of output in individual industries since the recovery began. While the performance has varied, many industries have also shown a relatively weak recovery, particularly when compared to previous cycles. The analysis indicates that industries are in quite different situations as the economy enters a period of rising interest rates.

The Aggregate Economy

The figure below plots an index of annual real GDP from the formally designated start of the recovery in 2009 (year 0 in the chart) to 2016 and, for comparison, a similar index of real output in the first seven years of previous recoveries. The figure shows that seven years since the downturn ended real GDP is up only 15 percent from the trough. This growth is relatively weak compared to the recovery from the early 2000s recession and to an average of the recoveries in the 1980s and 1990s.

Data Source: Federal Reserve Bank of St. Louis and ESG Calculations

All cycles are different, of course, and the recent recession was preceded by a buildup of unsustainable levels of debt, particularly housing debt, and the subsequent need for a deleveraging of business and household balance sheets. The period was challenging for policy as well. The Federal Reserve (Fed) initially turned to reductions in the Federal Funds rate in an effort to stimulate the economy through the transmission of these lower rates to other short-term market rates. Despite the Federal Funds rate in the range of 0.0 to 0.25 percent, the economy failed to pick up significantly. The Fed turned to what has been described as an unconventional monetary policy, quantitative easing, whereby it purchased bonds, mainly U.S. Treasury and housing agency securities, to help smooth the operation of credit markets. This recovery was notable for the lack of stimulus through fiscal policy. Stimulus packages were passed during the downturn in 2008 and 2009, but fiscal stimulus was far less expansionary in the recent recovery compared to historical averages.

By the end of 2015, the Fed began to increase the Federal Funds rate and by 2017 the economy was showing a number of signs of strength. But the deep recession and slow recovery had been experienced to different degrees across industries.

Industrial Performance

Below we show the recent output growth rates in the recovery (2009 – 2016) in a group of 19 industries that together make up the economy. The industry definitions and the corresponding production data are both based on the NAICS (North American Industry Classification System). The list of industries and the growth in their output over the past three years are shown in the figure below.


Data Source: Federal Reserve Bank of St. Louis and ESG Calculations

The top performers include the Information industry, which consists of both traditional publishing firms and electronic publishing outlets as well as firms in the relatively newer areas of data hosting and web service portals, the business-oriented Professional, Scientific and Technical service industry and the more consumer service-oriented Arts and Entertainment industry. Modestly above-average growth is seen in the Healthcare and Social Assistance, Retail Trade (which includes traditional department stores as well as electronic shopping) and the Accommodation and Food Service industries. Weaker growth is seen in the Manufacturing, Educational service and Finance and Insurance industries, and Government.

How does the recovery in these industries compare with past recoveries? To answer this question we select several industries. The figures below use the same technique used in the graph of GDP to examine the relationship of the performance of these industries in the current recovery to past recoveries.

Data Source: Federal Reserve Bank of St. Louis and ESG Calculations

The figures show that while the recovery of output in the Professional, Scientific and Technical Services, Accommodation and Food Service and Retail industries was quite strong and roughly on par with the 2000s recovery, in all cases output growth was considerably weaker than in the combined recoveries in the 1980s and 1990s. After a slow start, the growth of output in the Healthcare and Social Assistance industry has matched its growth in the 1980s and 1990s but it is still less robust than its recovery during the 2000s. Both the Manufacturing and Finance and Insurance industries are experiencing the weakest recovery of any of the past cycles.

Going forward, interest rates are projected to rise and the monetary accommodation through quantitative easing to be reduced. How vulnerable these industries are to a monetary tightening will depend on their exposure to a variety of factors:

  • The level of corporate debt: Higher interest rates carry risks for industries as they raise the cost of new borrowing as well as the cost of existing debt service thus leading to pressures to curtail operations and put off investments.
  • Consumer spending. Higher rates can affect consumer spending as the availability and terms of consumer finance are key factors, particularly for relatively big-ticket items such as automobiles and other durable goods.
  • Housing demand. Mortgage interest payments and availability of credit are a key influence on housing affordability.
  • International trade and exchange rates. In theory, higher interest rates on U.S. assets increase the demand for dollars and lead to a dollar appreciation. As a result, exports become more expensive in dollar terms abroad and, correspondingly, imports become less expensive to U.S. residents. These effects can be particularly important for U.S. manufacturers of consumer and capital goods that face stiff competition in foreign markets, as well as industries related to travel and tourism.

Thus, we anticipate that sectors such as construction and manufacturing that require big projects consisting of purchases of equipment, machinery, and land will be vulnerable to interest rate hikes for two reasons. First, the cost of undertaking such projects will be higher. Second, the demand for their products depends on consumers’ borrowing that will be impacted by high rates. Manufacturing also has a large export component that is likely to be hurt by potential loss of competitiveness. Sectors such as retail and services sectors are unlikely to be severely affected by interest rate changes since these sectors neither invest in costly long-term projects nor have a demand that require consumer borrowing.

Why Does It Still Not Feel Like Recovery? A Look at Industry Performance2018-07-04T19:37:48+00:00

Greek Debt in Historical Perspective: An Opinion Article

Anthony Rodolakis
November 22, 2017

Current fiscal proposals are projected to lead to a sizeable increase in U.S. debt and while people point to the Greek crisis to warn about high debt, a closer look at Greece’s debt history reveals few similarities. Modern Greek economic history is a history of debt. Greece is the country with more years in default to its creditors than any other European nation, being in default in 48 percent of the years since 1826.

[1] As of 2016, Greek debt stood at roughly 181 percent of GDP and more than twice the average of the Euro area (19 countries). In this post, we present a brief narrative of some selected major episodes of the buildup of debt in Greece to highlight the different sources of Greece’s debt problems over its recent history.

The 19th Century

By the late 1700s Greece’s proximity to Europe and a flourishing trade had allowed the development of a rich merchant class which was able to benefit from the European intellectual enlightenment – and to a large extent precipitate the ground for political independence from the Ottoman Turks. The vast majority of the peasantry, however, had been left in a semi-feudal status and beholden to the local oligarchies for favors.

Greece gained independence in 1830, following a turbulent revolutionary war. The debt buildup of that period was largely for loans to finance the war expenditures. The debt burdens the country had accumulated during the war lingered through the 1830s and 1840s and eventually led to a default in 1843. Fifty years were to elapse before the default was terminated.[2]

Following the final settlement of the default in 1878, Greece tapped the French capital markets for close to 500,000,000 francs. The terms, however, contained substantial “haircuts,” which was often the case. For example, an 1884 loan of 170,000,000 francs was offered at 68.5 percent, though even then it was undersubscribed with net proceeds of only 100,000,000 francs.[3] In all cases, bondholders were pledged a variety of receipts such as from the state monopolies of petroleum, matches, playing cards, tobacco consumption taxes, and port custom receipts. Nevertheless, both British and French financial experts sent to Greece around this time to examine the stability of finances and the ability to repay the contracted loans on behalf of their banking institutions concluded that bankruptcy was inevitable.[4]

The inability to maintain external debt obligations together with the expenses for the program of internal infrastructure development as well as renewed military expenditures led to the 1893 suspension of payments.

The 20th Century

During the first decade of the 20th century, Greece pursued a strict policy of monetary restraint and fiscal discipline that led to an appreciating drachma. Greece enjoyed rapid growth in certain sectors with the shipping industry exploiting the expanding trade opportunities. The fiscal and monetary self-discipline of those years paid off with net positive capital inflows from abroad. By 1920, the end of the Balkan wars and World War I saw a doubling of the territorial size and population of Greece.

Fast forwarding, the end of World War II found Greece and Europe in ruins, but Greece endured another round of fighting. Through 1949 Greece fought a bloody civil war between communists and the National Army that devastated the country, with widespread infrastructure destruction and rapid migration abroad. The Civil War retarded political and economic advances in Greece for several decades, handicapping the country’s economic growth compared to other European nations.

The 1950s and 1960s saw rapid rates of growth in the Greek economy premised on large public investments on infrastructure, foreign direct investment, residential investment and a strengthening commercial shipping sector. Despite this growth, “the development during this period is dependent on foreign funding and is asymmetric and unproductive.”[5] In 1950 a Daily Herald correspondent concluded that there are two Greek kingdoms: that of the new-rich of the center of Athens and the aristocratic suburbs and that of the rest of Greece where malnutrition and tuberculosis reigned.

With the entry into the European Economic Community in 1981, Greece was able to participate in a community of advanced and wealthy nations. However, the availability of development funds was to prove a double-edged sword. “According to OECD data, between 1981 and 1988, the number of central government public sector employees increased six times more than the active population of the country during the same time period, and public expenditures as a percent of the domestic product skyrocketed from 21 percent in 1976 to 51 percent in 1988.”[6] Overall, between “1975 and 1987, in 13 years, $18.4 billion in loans were contracted, of which $14.8 billion, or 80.6 percent, were allocated for the servicing of existing debt”[7] and not for development. At the end of the decade, the debt/GDP ratio stood at 66 percent.

The 1990s saw Greece struggling to implement the conditions required by the European Union (EU) convergence criteria on its path to full monetary union within the Eurozone. Successive Greek governments attempted to contain inflation and largely succeeded, but inflows from EU funds continued alongside the inability to balance the budget. The conservative government of the early 1990s increased debt by 295 percent, which pushed total debt as a share of GDP above 100 percent. Total debt servicing consumed 151.2 percent of regular government receipts as of the end of 1993.[8]

With the entry of Greece into the Eurozone in 2001 a new era of optimism and GDP growth had begun, unfortunately, premised on loans at deceptively low-interest rates. In the 2000s Greece was exposed to an international financial environment flooded with liquidity and without any real convergence with the “core” of the EU, continued lack of fiscal discipline, and with already high levels of debt. Greece was allowed to accumulate a debt of over 300 billion Euros that was to allocate the funds to its preferred oligarchic economic cartels that controlled construction projects and other outlets for the contracted loans, as well as allow largesse to the ever-expanding public sector.

The 2000s, much like the 1980s and the 1990s, proved a lost decade. The long-promised and much-needed deregulation of cartels across industrial sectors, labor market liberalization, privatization of publicly controlled enterprises, improvement of public administration, restructuring of public and private pension systems, and efficient absorption of EU funds for infrastructure upgrades were delayed or outright ignored by stakeholders. Political leaders avoided any and all direct conflict with their constituencies that tended to be concentrated in the public and private sector unions.

In Sum

The staggering Greek debt accumulated over the last 20 years is not a unique phenomenon for present-day Greece. Since the 1820s historical, political, demographic, and sociological circumstances have led to multiple periods of borrowing, default, and setbacks to growth as the nation struggled to repay its debts. The record-setting level of the current debt makes Greece extremely fragile and vulnerable to unforeseen circumstances.

[1] “This Time is Different: Eight Centuries of Financial Folly”, Carmen M. Reinhart and Kenneth S. Rogoff, Princeton University Press, 2011.

[2] “State Insolvency and Foreign Bondholders: Selected Case Histories of Governmental Foreign Bond Defaults and Debt Readjustments”, William H. Wynne, 1951, p. 298.

[3] Ibid. p. 298.

[4] Ibid p. 304

[5] Ibid. p. 271.

[6] “Foreign Loans at the birth and development of the New Greek State 1824-2009,” T. M. Hliadakis, 2011, Mpatsioulas Publishers, p. 364.

[7] Ibid. Page 393.

[8] Ibid. Page 419.

The views and opinions expressed in this article are those of the author and do not necessarily reflect any policy or position of the New York State Assembly.
Greek Debt in Historical Perspective: An Opinion Article2018-07-04T19:37:48+00:00

The Future of Health Care in America: A Panel Discussion at the Graduate Center

Merih Uctum
October 31, 2017

On October 2, 2017, the Graduate Center hosted a debate on healthcare policy with distinguished panelists: Jonathan Gruber, MIT, one of the main advisors on Obamacare, and the previous health reform known as Romneycare in Massachusetts; Dana Singiser, the Vice President for Public Policy and Government Affairs at the Planned Parenthood Federation of America; Avik Roy, the co-founder and President of the think tank the Foundation for Research on Equal Opportunity; and the Nobel Prize-winning economist, Paul Krugman, Distinguished Professor of Economics at the Graduate Center.  The discussion was moderated by the New York Times columnist Margot Sanger-Katz who covers health care for The Upshot and was sponsored by the Stone Center for Socioeconomic Inequality at the Graduate Center.

Where do we stand?
The discussants first summarized where we stand on this issue now and where they believe we will go. J. Gruber started by pointing out that the issues are difficult and the debate can be summarized by the 20/80 rule. First, 20% of Americans currently spend 80% of the healthcare dollars. Financing their healthcare costs is not possible for these 20%, so there has to be some risk-sharing. Second, 80% of Americans are satisfied with their health insurance. Given this, any change would require convincing them that a new program is superior to something with which they are pretty satisfied.

Singiser indicated that some issues are not being sufficiently emphasized in the dialogue about healthcare, particularly those that affect women. The efforts to repeal and replace Obamacare over the past few months have all included the defunding of Planned Parenthood. She pointed out that there are not always good options for women who utilize the services of Planned Parenthood, and states that did not allow it to operate saw a dramatic increase in unintended pregnancies, maternal mortality, and STDs. Singiser also underlined the innovative approaches that these health care centers have implemented using technology.

Roy stated that it is critical for any new approach to healthcare to focus on the needs of people with relatively low income. Single-payer systems have a role here as do more market-oriented universal healthcare approaches that stress competition, innovation, and private-sector consumer choice. The U.S. has the third highest per capita health care costs, with 18% of GDP being spent on health care compared to 9-11% in Europe. If we make health care more affordable and stop subsidizing the wealthy, we can cover more people and reduce costs.

Finally P. Krugman added his views on how we can go about covering as many people as possible. He indicated that there are two ways of doing it. First is the single payer. However, given the current US system and the difficulties of changing people’s opinion, he argued that this is not an easy option. The second way is to induce the private system to deliver the outcome of the single payer through a combination of regulation, subsidies, and mandates. The ACA attempted to combine both systems by expanding the Medicaid and creating a system of regulations, subsidies, and mandates, which had the disadvantage of being underfunded. The states that embraced this system reduced substantially the proportion of uninsured. He concluded that despite its flaws, the ACA gave the Americans the conviction that basic healthcare is something that everyone should have access to.

Why was it so hard to repeal and replace Obamacare?
Sanger-Katz said that various polls lead to somewhat conflicting results: a small majority of Americans looking favorably upon single payer yet many being happy with their existing arrangements; Republicans have many times tried and failed to muster the vote to repeal the Obamacare. She asked the panelists why was change so hard.

Roy argued that although Republicans had a unity around repealing the ACA, they did not have the same unity to replace it. Part of the difficulty is that large constituencies on the existing system were happy and not willing to see a change: those on Medicare, employer-based systems, including wealthy people who are over-subsidized, and Republican voters. But the existing system is costing the government $400-$500 billion in lost tax revenues and risks blowing up the budget.  If we don’t get health care expenditures in the form of Medicare and Medicaid under control, future cuts will ultimately hurt society’s most vulnerable people. The only way to prevent such hardship is to cut the health spending by subsidizing the poor and not the upper-income people.

Gruber reminded the audience that the Congressional Budget Office showed Americans that if you want to cover the sick, someone else has to pay; the Republicans were eager to cut funding for the ACA but not ready to replace it. The ACA brought the government, employers, and the individual mandate on healthy individuals to fund the system. They were not up to the challenge of replacing the individual mandate which maintains a common risk pool that allows insurers to price fairly. This is the most conservative way of covering as many people as possible without costing much more, and the reason why Republicans couldn’t replace Obamacare. Further, the ACA created some losers, about 3% of the population, the upper-income people who had to pay higher taxes, and some winners, about 17% who gained coverage but it didn’t affect about 80% of Americans.

Krugman brought up two facts about the Obamacare and its repercussions. The first was that since its implementation, the rate of increase in health care costs slowed down substantially with lower Medicare costs and private employer-based premiums, resulting in an improved forecast for the US budget outcome. The second was that the impact of the healthcare funding on the deficit matters for this administration.

Why does the US healthcare system have such high cost?
Sanger-Katz stated that as discussed before, the US is paying an ever-increasing share of its GDP to pay for health care expenses and asked why this is the case and what can be done about it.

Gruber confirmed that since the 1950s the health care spending in the US has quadrupled but its quality also increased compared to half a century ago. Although other countries with lower healthcare costs also saw improvements in their health care system, Gruber argued, one million visitors a year who come for a treatment here is evidence of the high quality of this system. Our excessive cost is due both to waste, in part because patients are over-treated, and simply that we pay too much for many features of our system.  .  We went from regulated hospital prices in the 1970s to a more managed competition model and this is where we are stuck.

Roy countered that the high costs are due to over-subsidizing the wrong people and he gave a historical assessment of how the American system ended up like this. In the World War II, labor shortages put an upward pressure on wages. Fearing massive inflation, the administration imposed wage controls but employers avoided them and competed for workers by offering health insurance. The administration later enacted a change in the tax system, which excluded employer-provided health benefits from an employee’s taxable wages. This led to increasingly higher prices charged by hospitals, doctors, and drug companies. Medicare in 1965 was built on this employer-based system. These policies had two implications. An entitlement system was created for the upper-middle class, creating $400 billion a year in lost revenue to the Treasury and the Medicare system that benefits many rich people. We could have the single-payer system where we regulate prices, access, limit costs and choice like in Canada. This would be fiscally more responsible than the system we have. Alternatively, we could have a market-based system where upper-middle class and rich people buy their own coverage and the government provides a safety net for the poor. This would reduce spending and control inflation.

Krugman disagreed strongly with A. Roy on two accounts. First, he maintained that the number of people who can pay for their own healthcare without government subsidy is about 2-3% of the population, which creates negligible savings for the Treasury. About 5% of patients account for about 50% of heath care expenditure but no individual knows when and if they will be in that 5%, and serious sickness can easily bankrupt even those in the upper-middle class. Private insurance markets don’t work unless they are heavily regulated with rules, subsidies, and mandates. Second, none of the other systems that are cheaper than us have a market-based structure but instead, have heavy government involvement. Our system has bad incentives for the providers and rewards doctors for expensive and unnecessary practice. This contrasts with Medicaid, which is more efficient and is more like other cheaper systems because it has more control over costs and a lot of bargaining power. Krugman finished his thought expressing optimism about achievements so far in terms of growth of costs.

Singiser observed that when women are able to control the timing and spacing of their families they are more likely to get education and be economically independent and rely less on Medicaid and other services. Although the economic advantage is undisputable, she added that what is important is that family planning allows women to have a say about their lives.

Panelist at this point started answering questions from the audience.  See the full report here

The Future of Health Care in America: A Panel Discussion at the Graduate Center2018-07-04T19:37:48+00:00

October 27: U.S. GDP Growth at Above-Forecast 3% in Q3

Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the third quarter of
2017, according to the “advance” estimate released by the Bureau of Economic Analysis. In the
second quarter, real GDP increased 3.1 percent. Read more

October 27: U.S. GDP Growth at Above-Forecast 3% in Q32017-10-29T15:11:14+00:00
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