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December12, 2003 - CCofA Alert! Business Week Slams UMUM! >> |
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CORPORATE CRIMEFIGHTERS OF AMERICA -- Tuesday, December 09, 2003 PLEASE PAY FOR THIS SUBSCRIPTION TO SUPPORT OUR CAUSE. ADDRESS AT BOTTOM. Network with Others at our BBS: http://www.quicktopic.com/24/H/xCbDfhUX5Jyfy ====================================================== HOW RESERVE CHEATING IS DONE Webmaster's note: There was a large addendum to this article, so I am reposting the first part in full, in addition to the new part: *********************************** Money is set aside to cover claim liabilities. This money is referred to as "reserves" which for the disability insurer is equal to 100% of the potential future value of claims. (In theory) When a claim comes into UNUMP, it is "marked up" on BAS, the UMUMP payment system. At that time the system pulls a reserve into the payment system. UNUMP underwriting incorporates historical actuarial informtion into the actual $ amount, however, the figure is generally close to 100% of the future value of the monthly indemnity. When the claim is actually approved, there is an "uptake" of the insurance reserves (A Reserve Loss--or, money which is now unavailable for cashflow, salaries, operating expenses etc.) When a claim is denied we have a "reserve gain" or, immediate contribution to profit. UNUMP sets LAR's (Liability acceptance rate) at 70% or below. So it knows when setting financial targets it will pay only 70% of claims, and the processess surrounding the targets are put in place to "make it happen." This is UNUMP's profit area--70% of LAR. Above this target, you have decreasing profits, of course, so when the LAR's begin to creep up, we saw increasing harassment on the floor to deny more claims. After 9/11, UNUMP publicized and LAR rate of 98%. You CANNOT make a profit approving claims at the 98% rate for long. Remember, the breakeven profit margin is 70% or below. In addition, UNUMP has claims processes in place which deliberately manipulate the insurance reserves. i.e. not paying additional contract riders such as COLA, Income Protection Riders, Disability Plus Riders, Indexing etc. If you don't code additional benefits, then the reserve is artifically kept lower than it should be. UNUMP also uses "Reservation of Rights" in their payment of benefits to keep reserves low when they have the liability of the full benefit for a claim. The ERD's (Expected Dates of Recovery) were at one time incorporated into the reserve figures which again distorted the true future liability of the claim. The company may not spend money placed in reserves. UNUM's "recovery plan" as publicized here in the Portland Press Herald was to ADD money to the reserves since the company was found to be severely "under reserved as required by law." If UNUM's reserves decreased by 152 M it was as a result of keeping the LAR's low by denying more claims, and cutting costs. UNUM has consistently cut costs by reduction of benefits and operating expenses since the merger. manipulation of reserves is indeed illegal, but it is done mostly through the claims process and the manner in which claims are handled. 1. UNUMProvident never responds to discovery or interrogatory questions regarding insurance reserve issues. I am free to discuss any issues I observed or performed while employed with UNUMProvident, therefore, there are no proprietary issues regarding this information. UNUM is very covert about communicating information about reserves.UNUM manipulates reserves largely through the claims process and the BAS payment system. 2. A claim enters an administrative intake area where it is marked up on the BAS payment system and referred to as a MUUP. When the claim is marked up, the Consultants and Directors have access to reserve information, and manage "the business" accordingly. The reserve information is opened up at the time of the potential liability of the future value of benefits. 3. The claim is then reviewed by the claims handlers for acceptance or denial of benefits. Once the decision is validated by the Consultant, the claims handler will code the BAS Payment system to either pay or deny the claim. When a claim is coded as denied, the reserve is shut down and a reserve gain is realized. (Contribution to profit.) The reverse is also true. When a claim is approved, the open reserve is "validated" and remains on the books. 4. UNUM plays games with the claims process to manipulate the coding of claims decisions. For example, if I were to turn in denial decisions in the same month the mark up took place, there would be a "breakeven" in the reserve and no profit or loss would be recognized. (Marked up...the reserve goes up......denied....the reserve goes down.....no gain or loss) However, IF the Consultants held my decisions over to another accounting period (after the 1st of the next month) my denial would count as a reserve gain and a contribution to profit. Therefore, any reserve activity taking place in the same month may have no effect on the accounting of reserves. If you are trying to draw an Aesops fable of the financial picture, you can withhold validation of payments and create the financial picture you need. This "holding" of claims decisions to manipulate the reserve figures creates customer service issues and hardships for customers who continue to call to find out the status of their claim. The claims handlers cannot possibly deliver customer service goals and standards when the claims decisions are with held for "business reasons." Insidentially, if a claim is closed and then reopened, it has an adverse affect on the reserves. Therefore, Directors routinely hold up any claim reopens and stagger them in periods when they have a larger volume of denials, so as to balance the reserve affect. 5. UNUM is notorious for not coding additional rider benefits on the BAS payment system. Each additional payment for COLA, Revenue Income Protection, Life Waiver, Disability Plus etc increases the reserves.(A reserve loss) At one point I discovered so many instances of additional payments not recorded, I suggested a project to "correct" the benefits not being paid. I was informed by my manager that such a project would be "costly" to fix and would adversely affect reserves. The result? Many claimants did not receive their additional benefits. These errors have been consistently reported to UNUM management, but have also consistently not been corrected. 6. The payment status of "Reservation of Rights" is also manipulated by UNUM. When faced with a large volume of Approvals at the end of an accounting period, the Consultant and/or Manager will tell you to approve the claim under ROR. When coded on the BAS payment system, there is NOT a FULL UPTAKE or increase in the reserve amount. Therefore, in an effort to minimize the adverse affect of large volumes of approvals, it is possible to "say" the claim is only approved under Reservation of Rights, and not realize the full liability for the claim until later. From an accounting point of view, one might say the full value of the liability was not recognized in the period in which it was incurred. 7. Finally, the pay status of Advance Pay and Close manipulates the reserve information. Under certain conditions, I can pay a claimant up to 6 months of benefits and close their claim. In this instance, the reserve on the claim is shut down when the claim is paid out and not accrued over the 6 months in which UNUM had the liability. Therefore, you have reserve gain recognized in the month paid and not accrued over the 6 months of paid liability. Shortly after the merger it was suspected that the ERD's were associated with the insurance reserves. (Expected Dates of Recovery) Changes in the ERD required Director sign off which historically has been a clear indication reserves were affected. Over time the milestone sign off has been relaxed, therefore, it is assumed UNUM has at least disassociated the ERD with reserves. The accounting effect of connecting the ERD's with accounting reserves would have been to severely underreserve. Please forward this to the person who has been asking questions. Thanks. You may of course publish this also. There is no financial advantage to UNUM claiming excessive expenses or losses on the financial statements. Quite the opposite. As long as I worked for UNUM Life and then UNUM Provident there has always been harassment to deny more claims than not. Through the payment system the denial of claims "frees up" cash flow to pay operating expenses. After the 9/11 incident, UNUM did in fact pay more claims, but not for long. The 9/11 claims paid were expensive and cost UNUM greatly. While the company was actively advertising the payment of 98% of claims, they were severely cutting operating expenses on the other end to keep the company running financially. As I said, approval of claims means less cash flow. So, the company cut health benefits removing any opportunity of participating in HMO's. STD plan was outsourced and integrated with vacation time, and it became almost impossible to buy or order "red file tabs" and "white out." UNUM Life and subsequently UNUM Provident has always been dedicated to showing profits. At one time (UNUM Life) associated the annual incentive bonus with Net EPS. If Stockholder's Equity produced a net Earning Per Share of say 4-6%, we would receive the bonus. If not, forget it. You have to keep in mind that Provident, especially, is a covert operation. Everything there is secret. They would never put "unrealized gains or losses" on the financial statements and have to disclose and foot note where they came from. The company manipulates the reserves through the payment system, which directly depends on the claims handlers and consultants staying "inside the box" and performing the exact agenda instructed to them by management. Ralph Mohoney and Tim Arnold supervise this agenda and monitor the results. The claims process is "so managed" by protocols and Consultant oversight that "bringing in" the expected target profitability is usually not a problem. UNUM Life connected performance with claims handling, so there was a vested interest on the part of the claims handlers to deny claims abundantly. Provident took the process "underground" and keeps the method secret. UNUMProvident has consistently terminated the employment of all those employees formerly employed by UNUM Life Insurance because they know how the manipulation of the payment system works, and, since the company needs their claims handlers "in the box", the risk of having this knowledge communicated to "new hires" is simply too great. Since the merger, UNUMProvident has re-hired 3/4 of its claims paying staff which makes them extremely inexperienced and ill trained. Yet, they remain "in the box" and the protocols work to produce the desired outcome. ====================================================== INSURANCE AS A DEFECTIVE PRODUCT Although I often inveigh against corporations I am not against them in their place. It's just that they have acquired far too much political power. why should a nonliving entity have a power that should be reserved only to living, breathing and voting citizens? There are corporations that produce useful and reliable products and services at a fair price, from food to computers, and I am glad to see them prosper. In fact, I find it inspiring when true quality gets ahead. Of course, we also have examples of bad quality dominating through monopoly power, such as Microsoft's crappy and overpriced software. Still, most companies that produce a Measurable and understandable product or service get about what they deserve. The insurance industry is unique in that it can produce a defective and fraudulent product for years yet remain in business. This is because insurance is not measurable. You buy it once and pay for twenty years but can never really test it until you make a claim, by which time it is too late. Couple this with the ability of the industry to hide their wrongs through gag orders, vacatur, bribes to legislators, the worthlessness of our sleeping media, complaisant regulatory agencies, and massive advertising, and you have a malicious situation where the public can never find out the truth. If you could see an insurer was bad as easily as you could find that a hamburger tasted rotten or your computer kept crashing, they couldn't get away with what they do. So far there is no way to do that since the weak or corrupt regulatory agencies gather only a tiny percentage of true wrongdoing, then refuse to release even that information to the public that pays their bills. Next time you talk to your state Senator, ask why your insurance commission is so secretive. You'll get a lot of baloney, excuses and sidestepping since he's probably taking industry bribes, too. ====================================================== SOME TRUE INSPIRATIONAL STORIES These are recent events that happened to a friend: My sister works with a woman in her early fifties who was suddenly widowed last year. A quarter century ago she married a man who was about 10 years her senior, and for all these years she had almost a perfect marriage. They had no children, but traveled extensively and had many common interests and were rich in friends. One night last year they were watching a TV program, sitting next to each other. They were both silent for about 10 minutes as the program ended, and she turned to him to make a comment and realized with a shock that he was dead in his chair. He had suffered a sudden, massive heart attack in silence. The wife was so devastated by grief that she only returned to work in September. She has really struggled with it, and my sister Jane talked with her about it for the first time last week. The woman tells an interesting story about something that happened in the last few weeks. Jane said she felt bad because the woman was so clearly afraid Jane would think she was crazy as she was telling her. For all the years of the marriage, the husband showered first in the mornings. During the winter, when steam formed on the windows, he would draw a heart on the window with an arrow through it for his wife to find as she came in to take her shower. Several weeks ago, as the weather turned cold, the woman got out of the shower one morning, and in the steam on the window was drawn a heart with an arrow through it. She teaches science, and is not the superstitious type. She first theorized that the oil from his hands had somehow left a trace on the window through the many months, and the steam from her shower had just recreated the pattern he had long ago drawn. She has spent enormous amounts of time since then playing with the shower in the morning, trying to recreate the conditions that would make it happen again. But she can't. She lives alone, and she can find no trace of any pattern on the window. She is gradually coming to believe that against all odds, her husband is still near and just left a little message of encouragement for her. She was relieved and maybe a little comforted to learn that Jane also believes such a thing is possible. Jane told her about the sprinkler incident that occurred just after Dad's funeral, when everyone came to the house for lunch. It was about the only bright spot in the saga of our father's death. We have an ancient automated sprinkler system in the big back yard that has been utterly impossible for anyone to figure out. We should replace that God-forsaken control box, but it's really expensive, so we haven't done it. Dad was the only one who could ever make it work at will or program it, and it ceased operation while he was in the hospital. We all just figured it had finally quit, but no. For weeks, we were watering things by hand in between trips to the hospital, trying to keep his beloved garden alive just as we were trying to save him. After lunch the day of the funeral, Dad's least favorite relatives were standing apart out in the middle of the lawn, trading gossip, probably at Dad's expense. Unfortunately for them, they chose to stand exactly where four big rainbird sprinklers converge their streams of water. Suddenly all the sprinklers, unbidden and uncontrolled, burst on at once, drenching the miscreant relatives. I was standing next to Jane as the torrent commenced and the soaked and squealing relatives scampered to get out of the shower of water. I remember Jane looking stunned, and then starting to laugh, saying "Go, Dad!" The sprinklers have never before or since come on at that time of day, let alone all together, and we have never been able to replicate that stunt, although Jane has spent a lot of time trying. It would be just like Dad, too, and everybody there knew it. After the funeral incident, the sprinklers resumed coming on at the appointed times that Dad programmed so long ago. But never again all at once in the middle of the day. You could call it a little miracle of technology, I guess. Some things are inexplicable, but there are just enough of them to convince me that the ones we love are still around occasionally, checking on us. All that love doesn't just suddenly cease, it just moves to another level. It all goes on, just in a way we don't understand well. "For now we see, as though a glass, darkly, but then, face to face. For now we know in part, but then we shall know, even as we are known." In spite of everything, I believe it. So do many, many millions of others, and not just Christians, either. My best Bosnian Muslim friend is a lawyer, a sophisticated and well-traveled European who is still young. He and his wife were imprisoned in a concentration camp, and then driven out of the country into exile first in Switzerland and then the US. As the Bosnian war ground on, his mother (to whom he was very close) essentially starved to death in her big old house, attended by only some other old people, with all of her children in exile. Only neighbors were able to attend her funeral. My friend, the woman's only son, was horrified by her death and his inability to go home for the funeral or in the immediate aftermath. Muslims believe that the dead know and can see who attends their funerals and visits their graves, and it is therefore very important in their belief systems, even (curiously) when they are not particularly religious. My friend, who is nonreligious, nonetheless kept the 30 days of Muslim fasting for a death in the family, and started working feverishly to get travel documents, which took over a year even after he got to the US. As soon as he finally received travel documents and was able to scrape together the money, he and his wife went home to Bosnia to the house where his mother died and that he still owns. The Dayton Accords had come, and a UN army made it possible for him to go home. They met his sisters and their families there, who had with great hardship traveled from exile in Sweden and Serbia to greet him and honor their mother. All together at last, they dressed in their finest clothes and took armloads of flowers to the Muslim cemetery and said the prayers they would have said at the funeral had they been able to be there. I loaned them my video camera, and they recorded the visit, essentially a recreated funeral, and sent copies of the tape to all the other relatives in exile who were unable to get home to Bosnia. Only after all that was done did they finally start to relax and plan for the future. Although he is theoretically an atheist, he did not sense the inconsistency when he told me that until he was able to go to her grave, show his respect, and say the right prayers, he wasn't sure that his mother would know how much he loved and grieved for her, and that now he felt she could forgive him for not being there. It was at that point that he stopped being so distraught about the events and began to get his life back together. He still talks about her constantly, but now he remembers the strong, confident woman of his youth, not the elderly victim of a vicious and pointless war. The rituals we keep about such things make a difference in how we are able to go forward. We have two employees in a small community in northern NM. Both are young women in their mid-thirties who have children. We've been having a lot of business problems lately, so everybody's been pretty stressed. On Thursday, one of them returned from a 2400 mile road trip to Illinois for Thanksgiving. Upon arriving home, she loaded her two children, eight and five, into the backseat of her Toyota 4-Runner and seat-belted them in, then headed to the store to get fresh milk. She was stopped on a highway with her signal on, waiting for oncoming traffic to clear so she could turn left into the grocery store. Another woman driving a Jeep Cherokee rear-ended her at about 50 mph, totaling both vehicles. Facing the setting sun, she never saw the 4-Runner. The impact was so great that it collapsed the 4-Runner right up to the back seat but stopped just short of the children. The back doors were jammed shut, so their mother unbuckled them and dragged them over the gearshift and out the driver's door, fearful that the truck would burn. She took them to safety and then turned to help the other driver escape her truck. The 4-Runner's fuel line was bent in half, and the gas tank damaged, but it didn't rupture. Miraculously, aside from bruises and strains, none of the three in that 4-Runner were hurt, and the cars did not burn. The woman in the Cherokee was injured slightly by the deployment of the airbag and apparently has some injuries to her legs, but given the high speed of that impact, it is purely a miracle that they all survived it. So we've been dealing with the fall-out from that one, hospital visits and insurance forms and much nail-biting about replacing vehicles, so necessary in that relatively remote area. Yesterday, Sunday, the other young woman, a single mom, took her 3 kids and went with another couple into the nearby mountain range to cut Christmas trees. If you've never done it, that is arduous work, hiking through snow to find a tree, getting it cut, and then transporting it out. They were getting two trees. They were done and ready to transport the trees about noon, when they suddenly realized that our gal's oldest child, a boy of eight, was missing and nobody had seen him in over an hour. After several hours of frantic searching, they saw that the weather was turning bad and they called in search and rescue. The searchers are highly experienced and brought tracking dogs with them. The area is very rugged wilderness, and populated with bear and cougar. The one break is that it is remote, and there are very few humans who go up into that area, so they didn't have to much worry about human predators. By 5pm, it was dark, and a cold, driving rain had begun with wind. The search dogs, wet and exhausted, became confused about the scent, and could not track. Human searchers continued until about 10pm, using infrared scopes, but found no trace of the boy as the weather got worse and worse. The rain eventually turned to a steady snow, and they called off the search for the night. The temperature had dropped to the 20's. The boy's mother spent the night on the mountain with searchers, waiting for daylight, and anxiety was very high. Today dawned clear and cold, with a blanket of fresh snow. Dozens of people suited up and volunteered to search for the boy, but the rescue team turned them back, fearful that they would confuse the tracking dogs and disturb tracks in the fresh snow. Finally late in the morning, the dogs did their thing, and trackers found the child cold, hungry, and exhausted, but otherwise unscathed. Apparently he had found himself a little spot under a bank or something to get through the long night. We are all so relieved, but his mother is a basket case with all the stress. The younger people in our group are rattled, and think I'm weird because I'm so calm. I just tell them it's the difference in age. Back when I was their ages, I'd have been hysterical that all this has happened to us, that contracts have been suspended, that trucks were wrecked and the child lost, and my mother injured. At this age, I know that contracts can be renegotiated, trucks can be replaced, and I am just grateful that there were no fires and few injuries in the accident, that the child was found alive and well, and that my mom just has some cracked ribs. It's inconvenient, but I am old enough now to know it's been a week of miracles, all things considered. An army of angels must have labored to get us through all this without the probably outcomes of any of those events, and I am counting our many blessings. I spent the afternoon arguing against taking my mother into the hospital, because I also know at this age that she is better off to be resting quietly in her own feather bed, surrounded by devoted caretakers and family who love her. The medical types find it insulting that I have so little faith in their greater wisdom. That's a result of age and experience, too. ====================================================== SEARCHING TIP http://www.completeplanet.com/ Although google.com is the best overall search engine, Complete Planet is a "deep" search engine, that searches resources not usually available on the web, such as databases and library indexes. This resource is estimated to contain 500 times more information than is available on google, the web's best overall engine. It may be good for comprehensive searches for legal discoveries, for instance. You have to use simple Booleans, such as this AND that. This is a Resource finder so you don't go for particulars, which you look for once you find the resource. You would search for insurance AND litigation, not for "UNUM Provident" for instance. As an example, using this I found the Findlaw Law Crawler at http://lawcrawler.findlaw.com/ which is a very useful resource. If you then put UNUM Provident in the law crawler you get Lots of stuff, but narrowed to legal, whereas with a regular search engine you would get too much on other subjects. Using that I got this interesting article: UnumProvident Memo Shows Intent to Use Law to Save Money Wall Street Journal - Christopher Oster 01/16/03 - As state regulators scrutinize the claims practices of disability-income insurer UnumProvident Corp., a document obtained by policyholders' attorneys shows the insurer's intent to use a law meant to protect workers' retirement savings to help it save money on claims, Thursday's Wall Street Journal reported. The memo, written in 1995, says Provident Corp., which merged with Unum Corp. in 1999, had formed a "task force" to identify policies covered by the Employee Retirement Income Security Act of 1974. "The advantages of ERISA coverage in litigious situations are enormous," reads the memo, written by Jeff McCall, at the time an assistant vice president in the claims department at Provident. " There are no jury trials. There are no compensatory or punitive damages." UnumProvident said the memo was merely an attempt by the company to better comply with Erisa, which governs many of its claims practices. But the memo, a copy of which was reviewed by The Wall Street Journal, adds fuel to critics' complaints UnumProvident in some instances has been overzealous in denying claims. The insurer says it pays all legitimate claims and that critics, including some former employees who recently have given sworn statements to plaintiffs' lawyers, have distorted its approach, which is geared toward getting employees back to work. The Chattanooga, Tenn., company's claims-handling procedures are being scrutinized by state insurance regulators in Georgia and California. Erisa long has been a frustration for plaintiffs' lawyers. Under the law, a policyholder who sues an insurer alleging a claim was mishandled can't collect any court award other than restoration of policy benefits and in some cases attorneys' fees. Erisa doesn't allow awards for punitive damages. Webmaster's note: Incidentally, our website shows up on the first search page, just like it does with google. You really can't look for UNUM Provident on the web without finding gus ;') Also, here's the direct link to the findlaw pages on UNUM (15 of them) http://lawcrawler.findlaw.com/cgi-bin/lc.pl?entry=unum+provident&sites=wlegal And another really excellent page with a Lot of UNUM info: http://www.1800lawinfo.com/practice/news.htm?topic=Unum%20Provident%20Fraud Here's a shorter link for that if it broke up: http://makeashorterlink.com/?F210513C6 ====================================================== ANOTHER BETRAYAL FOR BIG PHARMA The Government buys cheaper Canadian drugs - disproving the corrupt FDA's claims they aren't safe even though they have the same manufacturer - but we can't. The new prescription drug bill, virtually written by pharmaceutical lobbyists for the Bush Adminnistration, forbids citizens from doing what the government does. The fix was in as Bush and his bandits bent over and whored themselves for millions in big bribes from the pharmaceutical industry. Is there no end to the Naked corporate corruption of "our" government? Still, I think of the inspirational stories up above and hope there is some higher power some day that will expose the evil bastards in the government and corporate worlds and send them where they belong. Sorry for the strong language but whenever I think of corruption I can't avoid it. As long as I've been alive I've felt that betrayal and breaking your word is the worst of sins, and our so-called representatives sell us out to the corporations every day of the week. There is a special place in hell for them. Similarly, an insurer sells Nothing but trust, so theirs is also an ultimate betrayal when they cheat. Well, the Christmas season is upon us. The years are still coming quickly, yet nothing basic seems to have changed. We still have an absurd economic system that heaps massive rewards on crooks and loafers, but leaves little for the people who actually do the work of the world, and who have to work harder and harder despite all these computers that were supposed to be doing the work for us. The twenty-first century was supposed to be better, according to all the futurists. What went wrong? What went wrong, of course, was a series of betrayals of the middle class, which started to prosper and steadily improved their lot after the Second World War, largely due to the GI Bill and better education. But around about the eighties our rulers, enticed by corporate bribes, decided we were doing too well and slowly cut the slats out from under us, one by one. It was a purposeful grab by the elite to get back all the power they had over us, that was largely the cause of war in the first place. If you stand back, you can pretty much see the pattern of steady disenfranchisement and malicious decisions. But I still have hope they will be exposed as the source of many more disasters than you might think, and that some day their power will be broken by the common people - you and me. Below are a couple of articles describing how our economy is slowly being wrecked as jobs are shipped overseas ( Eventually leading to wages of about 50% of what we now expect, according to one article in Business Week.) If you think this is all just an accident, don't wait up too long for Santa Claus. ====================================================== LOOTING THE FUTURE http://www.nytimes.com/2003/12/05/opinion/05KRUG.html Date: Fri, 05 Dec 2003 18:17:09 GMT By PAUL KRUGMAN One thing you have to say about George W. Bush: he's got a great sense of humor. At a recent fund-raiser, according to The Associated Press, he described eliminating weapons of mass destruction from Iraq and ensuring the solvency of Medicare as some of his administration's accomplishments. Then came the punch line: "I came to this office to solve problems and not pass them on to future presidents and future generations." He must have had them rolling in the aisles. In the early months of the Bush administration, one often heard that "the grown-ups are back in charge." But if being a grown-up means planning for the future in fact, if it means anything beyond marital fidelity then this is the least grown-up administration in American history. It governs like there's no tomorrow. Nothing in our national experience prepared us for the spectacle of a government launching a war, increasing farm subsidies and establishing an expensive new Medicare entitlement and not only failing to come up with a plan to pay for all this spending in the face of budget deficits, but cutting taxes at the same time. Recent good economic news doesn't change the verdict. These aren't temporary measures aimed at getting the economy back on its feet; they're permanent drains on the budget. Serious estimates show a long-term budget gap, even with a recovery, of at least 25 percent of federal spending. That is, the federal government including Medicare, which Mr. Bush has given new responsibilities without new resources is nowhere near solvent. Then there's international trade policy. Here's how the steel story looks from Europe: the administration imposed an illegal tariff for domestic political reasons, then changed its mind when threatened with retaliatory tariffs focused on likely swing states. So the U.S. has squandered its credibility: it is now seen as a nation that honors promises only when it's politically convenient. What really makes me wonder whether this republic can be saved, however, is the downward spiral in governance, the hijacking of public policy by private interests. The new Medicare bill is a huge subsidy for drug and insurance companies, coupled with a small benefit for retirees. In comparison, the energy bill which stalled last month, but will come back has a sort of purity: it barely even pretends to be anything other than corporate welfare. Did you hear about the subsidy that will help Shreveport get its first Hooters restaurant? And it's not just legislation: hardly a day goes by without an administrative decision that just happens to confer huge benefits on favored corporations, at the public's expense. For example, last month the Internal Revenue Service dropped its efforts to crack down on the synfuel tax break a famously abused measure that was supposed to encourage the production of alternative fuels, but has ended up giving companies billions in tax credits for spraying coal with a bit of diesel oil. The I.R.S. denies charges by Bill Henck, one of its own lawyers, that it buckled under political pressure. Coincidentally, according to The Wall Street Journal, Mr. Henck has suddenly found himself among the tiny minority of taxpayers facing an I.R.S. audit. Awhile back, George Akerlof, the Nobel laureate in economics, described what's happening to public policy as "a form of looting." Some scoffed at the time, but now even publications like The Economist, which has consistently made excuses for the administration, are sounding the alarm. To be fair, the looting is a partly bipartisan affair. More than a few Democrats threw their support behind the Medicare bill, the energy bill or both. But the Bush administration and the Republican leadership in Congress are leading the looting party. What are they thinking? The prevailing theory among grown-up Republicans yes, they still exist seems to be that Mr. Bush is simply doing whatever it takes to win the next election. After that, he'll put the political operatives in their place, bring in the policy experts and finally get down to the business of running the country. But I think they're in denial. Everything we know suggests that Mr. Bush's people have given as little thought to running America after the election as they gave to running Iraq after the fall of Baghdad. And they will have no idea what to do when things fall apart. Copyright 2003 The New York Times Company ====================================================== BUT, BUT, IT'S ALL JUST A SERIES OF ACCIDENTS. SURE IT IS. Remember that Paul Krugman said that an economic collapse is exactly what the Bush Administration wants. It's the only way to get the public to accept the dismantling of programs like Medicare and Social Security. The Great Depression the reason for creating Social Security because old people were experiencing the greatest hardship. Their families were unable to take care of them with breadwinners out of work. Of course, this was under FDR, called a "traitor to his class" by his contemporaries. http://www.washingtonpost.com/wp-dyn/articles/A37123-2003Dec4.html Fiddling While the Dollar Drops By David Ignatius Friday, December 5, 2003; Page A31 Something ominous is happening when the United States reports its biggest surge in productivity in 20 years, as it did Wednesday, and yet the dollar plunges to an all-time low against the euro. The dollar is sinking these days on good news and bad, and the explanation is pretty simple: Investors around the world are worried that the Bush administration's policies are eroding the value of the U.S. currency. So they're rushing to unload greenbacks, in what could soon become a full-blown financial crisis. "The dollar crisis is the story," warns James Harmon, an investment banker who headed the Export-Import Bank during the Clinton administration. "A lot of smart money has moved out of the dollar in the last six months," he explains. "Now the latecomers are rushing to sell, and that's adding to the momentum." The "smart money" includes financial guru Warren Buffett. He disclosed last month in Fortune that since the spring of 2002, he has been making "significant investments" in foreign currencies for the first time in his career. What worries Buffett is that the U.S. trade deficit has "greatly worsened," and is now running at more than 4 percent of GDP. That puts the U.S. economy at the mercy of foreigners, and their willingness to hold surplus dollars. So long as global investors believed that U.S. authorities were ready to protect the dollar as a reserve currency, they kept adding to their stashes of greenbacks, despite the trade deficit. But that confidence may finally be disappearing. The dollar's decline during the Bush presidency has been remarkable. It has tumbled about 44 percent from its October 2000 high of about 83 cents to the euro. Over the past year alone, the decline has been more than 15 percent. Investors who trusted in the dollar as a store of value have been clobbered, so it's not surprising that they want to sell, even at current depressed prices. They fear that worse is coming. "I'm appalled at what's happening to the dollar," says investment banker Felix Rohatyn, a former U.S. ambassador to France. "A basic responsibility of a government is to maintain the value of its currency." Rohatyn argues that the Federal Reserve should signal that it "will not allow a dollar crisis to happen" by raising the Fed funds rate at which banks can borrow money overnight, from its current low level of 1 percent. Fed Chairman Alan Greenspan insisted recently that there isn't any dollar crisis, which only made some investors more nervous. If you haven't already gagged on your raisin bran, consider this nightmare scenario -- outlined by an investment banker who for many years headed his firm's currency-trading operations. This veteran trader contends that the markets have entered a cycle in which "overshooting" -- meaning a further sharp fall in the dollar's value -- "is a distinct possibility." The core problem, he argues, is that China and Japan have been determined to keep their currencies cheap -- China by fixing the yuan at an artificially low level and Japan by intervening in exchange markets to keep the yen from rising. With their undervalued currencies, the Asians can export massively to the United States and accumulate ever-larger surpluses of dollars. Hence the nightmare scenario: Between them, China and Japan now hold more than $1 trillion in U.S. Treasury bonds, the trader estimates. But with the declining dollar, the Asian giants have suffered severe losses on these portfolios. If they decided to hedge just 20 percent of their dollar exposure, they could drive the dollar down from this week's low of about $1.21 against the euro to $1.35, contends the trader, and other sellers would trigger a further weakening to $1.45 or so. Facing that sort of decline, the Fed would have to boost interest rates to protect the currency. And higher rates, in turn, would drive down the U.S. stock market. The Bush administration seems comfortable with a cheaper dollar because it's a way of stimulating demand for American products abroad and sustaining the U.S. economic recovery. In other words, it's good politics. But paradoxically, the U.S. recovery will only worsen pressure on the dollar by sucking in more imports. To prevent a full-blown crisis, the administration must take prompt action. It should pledge to cut the deficit; it should stop playing politics with free trade; and it should signal that it will intervene in currency markets when necessary to protect the dollar's value. Those steps might convince global investors that somebody at the White House is at least minding the store. davidignatius@washpost.com Webmaster's comments: Before someone writes accusing me of being a conspiracy theorist, it is Not natural for me to think this way. In fact, I avoid it and am pretty much non-paranoid. (You have to be when you go after big insurance companies year after year.) But I've been around a long time and keep watching the pieces fall into place as the middle class sinks into peon-hood. It's getting harder and harder not to be smacked upside the head by a rather grim vision. It's all too close to what the corporations and people in power want: a massive concentration of wealth in a small bunch of oligarchs and billions of peons to do their bidding - what I call the Mexicanization of America. Fewer billions, though - the world population has to be rid of the "superfluous" and "unimportant" through diseases, disasters and wars. The folks in charge are supposed to be the best and the brightest, after all, so either they are Much more stupid than we thought or they are doing exactly what they planned to do. The whole point of America is that it's supposed to be a meritocracy, with the best people rising to the top. Well, if this is the best that the best can do, we need to just give the planet back to the insects and see if something sane evolves next time. Of course, maybe this is the best they can do -- for themselves. But don't get too far down. We have the inspirational stories above versus the evil and rapacious men mentioned just now. They are not all-powerful and there are a lot of good people, too. I am throwing my lot in with the good guys and we will see who wins in the end. Personally, I have no doubt of the outcome - it's just going to be a long fight to get the truth out. ====================================================== OR MAYBE WE'RE JUST OFF TO SEE THE WIZARD "I'm the Supreme Dictator of all, and I'm elected once a year. This is a Democracy, you know, where the people are allowed to vote for their rulers. A good many others would like to be Supreme Dictator, but as I made a law that I am always to count the votes myself, I am always elected." L. Frank Baum, in "Glinda of Oz" (1920, Posthumously) (Quote from "The Second American Revolution" (1983) p.65 - Vintage edition) ====================================================== I HOPE TO HAVE ONE MORE EDITION BEFORE XMAS With really bad news about the most evil disability insurer in America - but I have to wait like everyone else. It don't happen until the fat lady sings and I never count on the media until I see it in print. So many people doubted me that the Dateline and Sixty Minutes exposes were going to happen that I've decided to wait until the key is in the door this time ;') ====================================================== PLEASE PAY FOR THE SUBSCRIPTION TO SUPPORT OUR CAUSE - $15/YR MINIMUM, MORE IF YOU FEEL THIS IS IMPORTANT WORK. James Mooney PMB # 106 4495-304 Roosevelt Blvd Jacksonville, FL 32210-3381 OR Via Paypal at: https://www.paypal.com/affil/pal=cybervigil@earthlink.net Jim Mooney, webmaster: www.micethatroar.com www.corporatecrimefighters.com UNUM'S SECRET "DESTROYED" CLAIMS MANUALS NOW AVAILABLE - Email manuals@micethatroar.com for details. Newsletter Archives are at: http://www.corporatecrimefighters.com/html/newsletter_archives.html |
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