American Shareholders Association

Recession--The Dog That Didn't Bark?

The "recession" everyone assumes the U.S. is in may end up being the dog that didn't bark.

Today, BLS released the monthly jobs data.  While the payroll survey saw a modest dip of 20,000 jobs, the household survey reporting led to a lower rate of unemployment--5%.  Not too long ago, that was considered full employment.  Even by the strictest standards, unemployment is not a problem.

Then there's the all-important GDP growth data (don't forget that shorthand for a recession is two consecutive quarters of GDP contraction).   According to the Bureau of Economic Analysis, GDP growth was 0.6% in the first quarter of 2008.  This was on the heels of another 0.6% growth rate in the fourth quarter of 2007.  For all of 2007, GDP increased at a 2.2% rate.  These are below-trend and hardly-stellar numbers, but they beg the question: where exactly are these negative quarters going to come from, considering we may be past the worst?

It's possible that things will take a severe dip from here, but shouldn't we have seen something by now?

Responding to HSA Distortions

Yesterday, more good news came out about HSA enrollment.  Predictably, opponents of consumer choice in health care immediately trashed it:

• GAO released a study claiming that HSAs were only for the rich (interesting considering eHealthinsurance.com, who sells HSAs, has reported that half of new HSA plans were to households making less than $50,000
• The WSJ has an article claiming that people are shocked--shocked--that saving money by having a higher deductible means that they actually have to...meet the deductible!  File this under the same category as people who eat lots of donuts and wonder why they get fat
• Congressmen Henry Waxman (D-CA) and Pete Stark (D-CA) decry the fact that HSA holders are saving a few hundred dollars in their accounts every year beyond what's needed to pay medical bills.  I guess they don't know what the "S" in "Health Savings Account" stands for

Thankfully, there is some sanity:

• Dan Perrin, author of America's Health Care Crisis: Solved has a good article explaining how HSAs fit into the McCain health care plan
• McCain himself has a good article explaining his plan
• The always-helpful Republican Study Committee has a good point-by-point refutation of the GAO study (link forthcoming).  They also have a solid analysis of why the "47 million uninsured" is bogus

HSA Enrollment Spikes Up 33% in One Year

According to the latest industry report, the number of lives covered by an HSA-qualified health insurance plan grew from 4.7 million in 2006 to 6.1 million in 2007 (a 33% increase).

Other highlights:

• This number represents 3.4% of all Americans covered by a private sector health insurance plan
• Employer coverage (both large and small group) represent a growing majority of covered lives--this is no longer an individual-market phenomenon
• The most HSA-saturated state is Minnesota (9.2% market share)
• The most HSA-stingy state is Hawaii (0.1% market share)
• The average HSA balance is $1382.  HSA owners, on average, disbursed $1083

McCain and Health Care Reform

McCain coming out with a few more health care reform details today.  Here's how the plan would work:

• Employers still get to deduct health insurance provided
• Value of health insurance provided added to worker's income (like wages)
• All Americans get tax credit of $2500 ($5000 family) for getting health insurance
• Credit would be refundable (i.e., you get the full credit even if taxes are zeroed out)
• People could buy health insurance across state lines to get a better deal

The big issue here is the refundability.  By definition, giving money to non-taxpayers is not a tax cut, but spending.  You have to be very careful how you pay for that, and it's very easy to stumble into a tax increase without realizing it (by paying for this spending with a tax increase offset).

What President Barack Obama Will Do To Your 401(k) and Roth IRA

It's pretty intuitive that higher capital gains and dividends tax rates will result in a decline in stock prices.  One of the frustrating things, though, is that this effect has not been easily quantified.

Until now.

According to former ASA Executive Director Dan Clifton at Strategas Research Partners,

If the current 15% tax rate on both capital gains and dividends, which has been in force since President Bush pushed them through in 2003, are made permanent beyond the 2010 expiration date, the estimated fair value of the Standard & Poor's 500-stock index would be 1523, nearly 9% higher than Friday's close of 1398, says Strategas. In contrast, if Democrat Barack Obama wins and boosts the capital gains tax rate to 28% and dividends to pre-Bush levels of 39.6%, the fair value dips to 1375, or 1.6% below the market's current level.

Put simply, if you have $100,000 in an Roth IRA, having those higher Obama rates in place would reduce your nest egg by $1600. If, though, current law remains in effect, you'd get another $9000.  That's a $10,600 difference to your retirement.  It doesn't matter that the Roth IRA is tax-free.  Your nest egg goes down nonetheless.

Who says politics doesn't matter?