The Shutdown Media Circus: Today is day 24 of the partial US government shutdown and for all the talk of politicians wanting a strong economy, will their their actions, or lack of them, start to see a real impact on 1st quarter GDP growth?
According to the White House Economic Counsel itself, they estimate that every two weeks of the shutdown will shave off 0.1% of GDP. JP Morgan Economist clarified in their estimates that the shutdown would shave 0.1% off of annualized GDP growth in the 1st quarter, with the impact expected to be reversed when furloughed workers receive their back pay once the budget impasse is resolved. This “snap back” as it were, is key to understanding why politicians would take this gambit in the first place.
Kiplinger, an economic forecaster estimates 2019 GDP growth to be 2.5% down from the 2.9% full year 2018 figure they expect. Given that there will be a temporary impact to growth, you can see why politicians, though lamenting the impact in the popular media, are continuing to dig in their heals, hoping that the media coverage of workers missing mortgage payments and TSA workers taking sick days en masse, pushes the other side to capitulate. Since growth is still expected to be positive and hard times are not in the media spotlight like during a recession, the political showmanship may continue for some time as opposed to the initially expected 3 weeks predicted by many forecasters.
Hospitals Begin Publishing Their Prices: As part of the Affordable Care Act, Hospitals as of January 1, 2019 are required to make prices a for their services available to the public. Just as any private enterprise being forced to report however, the hospitals have come to realize that the law was created with no data standardization requirement. The result is a chaotic data dump.
There are already complaints that the information is completely indecipherable, which negates the intended impact it was supposed to have on the cost of service by encouraging competition on prices for services between hospitals. Besides requiring to standardize the data, the authors of the bill could have had a bit more foresight to at least time the roll out of price transparency to a month or two before elections, so any errors like this could be quickly cleaned up.
Instead, having this happen at the beginning of the calendar year risks losing the momentum in the media cycle, especially during the shutdown. Hospitals are likely crossing their fingers that the storm will die down so that they don’t have to devote resources to standardized reporting, similar to what banks and other highly regulated industries already have to do.
New World Bank Head Rumors Swirl: Jim Yong Kim announced that he was leaving his post as President of the World Bank effective on February 1 of this year and the search for a permanent replacement has begun in earnest.
Mr. Kim was not due to leave until 2022 but apparently has cashed out to a private equity firm in New York called Global Infrastructure Partners.
It took a bizarre turn yesterday as it was announced that Ivanka Trump was reportedly being considered for the top job. This would be an ironic turn as according to The Guardian before Kim took over the bank had laid down criteria for appointing future presidents designed to exclude those who lacked relevant experience.
The World Bank along with the IMF are the legacy of the post World War II Breton Woods pact which was supposed to govern the worlds financial system. The underpinning was to be the dollar which was in theory to be backed by gold. Since the dollar was decoupled from gold under president Nixon, these organizations have had a larger role more as development institutions than anything else. The convention is that a European will head the IMF and an American will head the World Bank.
Mr. Kim skillfully played the bank off against the US, securing $13 billion in additional capital commitments from its owners, of which the US is the largest, to counter the Asian Infrastructure and Investment Bank (AIIB). The AIIB, whose focus is infrastructure in Asia has the Chinese government as its largest shareholder and has been busy funding projects partially or wholly focused on the government’s Belt and Road Initiative, which many think will further project Chinese influence across the region.
Ivanka would not be the first brazen political appointment to the post, which was famously occupied by Robert McNamara from 1968 to 1981 after what was deemed his failure Vietnam as defense secretary. However, she would by far be the least qualified to run such a large and vast organization.
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