Mish's Global Economic Trend Analysis

Expansion of Disability Fraud Under Obama: Puerto Ricans Get U.S. Disability Benefits for Inability to Speak English; Disability Deal Explained
Stupidity of Negative Interest Rates Expands to Spain; Deflation Shock Thesis
Obama's Trans-Pacific Partnership Fiasco vs. Mish's Proposed Free Trade Alternative; How Will TPP Function in Practice?

Expansion of Disability Fraud Under Obama: Puerto Ricans Get U.S. Disability Benefits for Inability to Speak English; Disability Deal Explained

Posted: 07 Apr 2015 04:56 PM PDT

New Meaning of Disability

Here is a curious story on the meaning of "disability".

Please consider Lack of English Meant Puerto Ricans Got Disability Benefits.

A federal audit has found that some Puerto Ricans living in the U.S. territory have received disability benefits in part because they could not speak English.

The Office of the Inspector General for the Social Security Administration said in a report issued this month that there were 218 cases from 2011 to 2013 in which benefits were granted under those circumstances.

The report said Social Security determined it was difficult for those people to find a job because they did not speak English, but the inspector general said they could have found work given their Spanish-speaking skills in a largely Spanish-speaking island.

More Details

The above version is from ABC News. In another curiosity, Sputnik News, appears to have far more details.

The US Social Security Administration has been offering disability benefits to Spanish speakers living in Puerto Rico based on their inability to speak English, despite Spanish being the territory's primary language.

The US Social Security Administration [SSA] has been handing out disability benefits to Puerto Ricans due to the fact that they only speak Spanish. This is despite the fact that Spanish, one of the US territory's two official languages, is the dominant tongue and is spoken by over 95 percent of the population.

According to findings released last week by the Office of the General Inspector of the SSA, the organization "has applied the medical-vocational guidelines nationally and does not make exceptions for claimants who reside in Puerto Rico, where both Spanish and English are the official languages," leading to payouts for people living in Puerto Rico who don't speak English.

Workers at the SSA use grids of medical-vocational guidelines to assess whether or not an individual is entitled to disability benefits, which can be claimed if a person is unable to communicate in English, and therefore limited in his or her ability to find a job.

"We identified 218 cases in Puerto Rico from Fiscal Years 2011 to 2013 where disability determination services used the aforementioned grid rules to grant benefits," said the report.

"Moreover, about 4 percent of the hearings we sampled involved these same grid rules." wrote the auditors. The true figure could be even higher, since those writing the report had "incomplete management information," on claimants which had been awarded disability payments according to the grid rules due to their inability to speak English.

The report referred to a 1987 US District Court judgment that "it is the ability to communicate in Spanish, not English, that is vocationally important in Puerto Rico." and recommended that the SSA "evaluate the appropriateness of the grid rules," in such circumstances.

According to data from the US Census Bureau, 95 percent of Puerto Rico's 3.5 million inhabitants speak Spanish at home, and 84 percent report that they do not speak English "very well."

Disability Fraud

This is yet another example of growing disability fraud under Obama. From a payout standpoint, 218 cases is rather minor.

Yet, it's the attitude about what is considered a "disability" that is galling.

I have written about Disability Fraud at least a dozen times.

60 Minutes: Mainstream Media Finally Catches on to Disability Fraud: 60 Minutes Reports on "Disability USA"

Steve Kroft on 60 Minutes reports on the alarming state of the federal disability program, which has exploded in size in the last six years and could become the first federal benefits program to run out of money.

NPR: Unwilling to Work; 25% in Hale County AL Collect Disability, 14 Million Nationwide

How Easy is it to Get Disability?

Hale county's Dr. Timberlake asks a simple question to all his patients. "What grade did you finish?" If you claim "back pain" and do not have a degree, Timberlake believes you are disabled.

The Disability Deal

Getting disability seems easy enough in some states, and especially easy in Hale County Alabama. But is disability better than minimum wage? The answer is yes. NPR author Chana Joffe-Walt explains: ....

States Promote Fraud: States Have an Incentive to Promote (Not Stop) Disability Fraud; So How Much Fraud Is There?

This all goes back to 1996 when president Bill Clinton promised to "end welfare as we know it". He did indeed do just that, and fraud is the result.

Why?

The federal government pays disability, but states pay part of welfare costs. This creates a huge incentive for states to actively promote disability fraud (simply to get people off state-sponsored welfare programs).

Results of Clinton Ending Welfare "As We Know It"

Every month 14 million Americans receive a disability check.
In 1961 the leading cause of disability was heart disease and strokes, totaling 25.7% of cases. Back pain was 8.3% of cases.
In 2011 the leading cause of disability was a hard to disprove back pain, totaling 33.8% of cases. The second leading cause was an equally difficult to disprove "mental illness" at 19.2%. Strokes and heart disease fell to 10.6%.
In West Virginia, a whopping 9% of the population collects disability checks. In Arkansas, 8.2% are on disability, and in Alabama and Kentucky, 8.1% collect disability. In Alaska, Hawaii, and Utah, the figure is 2.9%.
In Hale County Alabama 1 in 4 receive disability checks.
Nearly every case in Hale County Alabama has Dr. Perry Timberlake in common.
Those on Supplemental Security Income, a program for children and adults who are both poor and disabled is nearly seven times larger than 30 years ago.
Once people go onto disability, they almost never go back to work. Fewer than 1 percent of those who were on the federal program for disabled workers at the beginning of 2011 have returned to the workforce.

Dr. Timberlake asks a simple question to all his patients. "What grade did you finish?" If you claim "back pain" and do not have a degree, Timberlake believes you are disabled.

Timberlake gets paid for his "analysis".

States are willing to go along thanks to Bill Clinton who "ended welfare as we know it", creating an even worse disability fraud scheme in the wake.

There has been no president since, Republican or Democrat, willing to stop fraud at the federal level. And clearly Obama is doing his best to expand fraud.

Disability Deal Explained

If Democrats give enough free benefits to enough people, no one can ever vote them out of office.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Stupidity of Negative Interest Rates Expands to Spain; Deflation Shock Thesis

Posted: 07 Apr 2015 01:23 PM PDT

Spain Joins the Negative Interest Rate Club

Reader Bran emailed a link this morning to an El Pais Article that showed interest on a 6-month treasury auction in Spain went negative.

Rather than translate, please consider the Wall Street Journal report Spain Joins Negative Yield Club.

Spain has joined the sub-zero debt club, just.

The Spanish Treasury on Tuesday issued short-term debt yielding a shade under 0%. The €725 million ($796 million) in six-month Spanish debt delivers an average yield to investors of -0.002%. Buyers were still keen, placing bids worth five times that amount, according to the Treasury.

Another slug of 12-month T-bills, also issued Tuesday, yields just 0.006%.

This is quite a turnaround for Spain. The country was at the heart of the eurozone debt crisis at its darkest hour. In June 2012, it sold similar short-term debt yielding 3.237%.

Negative Interest Rate Thesis

Ben Bernanke made the claim "In the weak (but recovering) economy of the past few years, all indications are that the equilibrium real interest rate has been exceptionally low, probably negative."

Quite frankly, that's idiotic.

In the absence of central bank monetary foolishness, negative interest rates cannot happen. I discussed that briefly in Thrown Under the Bus: Another Look at the Self-Serving Launch of Ben Bernanke's Blog and the Brookings Institute's Pandering Role.

Pater Tenebrarum's article Ben Bernanke's Apologia for the Fed that discusses why in detail, but a simple question is all it takes to prove the absurdity of it all.

Simple Question

Ask any person on the street, at random, if they would rather have a dollar today or 97 cents five years from today and they will probably look at you as if you were nuts for asking.

I believe the average 4th grader would understand the stupidity of the question. One would not even need a clear grasp on the subject of "time preference" to understand the absurdity of it all.

Heck, ask a 4-year old kid if he would rather have two lollipops today or one tomorrow. As long as the kid understands the question, I assure you he will know how to answer.

Natural Rate Can Never Be Negative

The "equilibrium" or "natural" rate can never be negative.

Interest rates are negative because central banks unleashed more money than anyone wants to borrow. Given deposit insurance only covers $250,000 and given money needs to find a home, depositors accept negative interest because they have no other choice. On top of that, the Swiss National Bank explicitly set deposit rates negative.

But the key reason rates are negative in many places is central banks use newly created money to buy bonds, and investors front run the trade. For further discussion, please see Another Definition of Deflation: Antal Fekete Defines Deflation as a "Pathological Slowing in the Velocity of Money".

The intention of the Fed (central banks in general) is to get businesses to invest and consumers to borrow. But what if businesses see little chance to make profits by expansion? What if credit-worthy customers do not want to borrow?

Deflation Shock Thesis

Central bank actions did not spur lending, so they buy more and more bonds, apparently under the theory "if it doesn't work, do more of it, until it does work". The ECB and Bank of Japan have taken over where the Fed left off.

Such idiocy has led to yet another asset bubble of enormous magnitude, in part fueled by corporations borrowing money at low rates to buy back their own shares at ridiculous prices.

When various bubbles in equities, junk bonds, and housing pop, the result will be an enormous deflation shock, the very deflation the central bank fools believe they are preventing.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Obama's Trans-Pacific Partnership Fiasco vs. Mish's Proposed Free Trade Alternative; How Will TPP Function in Practice?

Posted: 07 Apr 2015 11:06 AM PDT

Reader Richard asked me to comment on Obama's Trans-Pacific Partnership (TPP) proposal.

For starters, it's one complicated mess.

The Washington Post "Wonkblog" said in 2013 here's Everything You Need to Know About the Trans Pacific Partnership.

If you're just now hearing about the Trans-Pacific Partnership, don't worry: It's not too late to get up to speed. Negotiations over the huge trade agreement — which, when finished, will govern 40 percent of U.S.' imports and exports — were supposed to wrap up this past weekend in Singapore, but, well, they didn't quite make that deadline, which means meetings will likely continue into the new year.

The talks, as with all trade agreements, have been conducted largely in secret. Global health advocates, environmentalists, Internet activists and trade unions have deep concerns about what the deal might contain, and are making as much noise as possible in order to influence negotiations before a final version becomes public. Here's what you need to know.

1. What is the Trans-Pacific Partnership?

Basically, it's a giant free trade deal between the U.S., Canada, and 10 countries in the Asia-Pacific region that's been under negotiation for nearly a decade now (it began as an agreement between Singapore, Chile, New Zealand and Brunei before the U.S. took the lead in 2009). It's expected to eliminate tariffs on goods and services, tear down a host of non-tariff barriers and harmonize all sorts of regulations when it's finished early next year.

....

6. Wait, so how much does this thing actually cover?

The treaty has 29 chapters, dealing with everything from financial services to telecommunications to sanitary standards for food. Some parts of it have significant ramifications for countries' own legal regimes, such as the part about "regulatory coherence," which encourages countries to set up a mechanism like the U.S.' own Office of Information and Regulatory Affairs to conduct cost-benefit analyses on new rules. USTR has a rough outline, and for a more comprehensive rundown, read this Congressional Research Service report.

7. That doesn't tell me much. What are countries still fighting over?

Where to start? Most countries have their own individual issues, and it's difficult to tell what's been resolved since the details aren't public...

Reasons to Be Suspicious

Since the negotiations are secret, it's hard to say precisely what the agreement contains (and that alone is reason enough to be suspicious of it).

Nonetheless, many details have been leaked that give us serious concerns.

Bloated with Environmental Regulations

The Washington Post describe TPP as a "giant free trade deal".

Leaks and disclosures show the Washington Post is way off base with that description.

For example, the White House Blog says Environmental Advocates Point to the Trans-Pacific Partnership as a Historic Opportunity to Protect Our Oceans, Forests, and Wildlife.

Through TPP, the Obama administration is doubling down on its commitment to use every tool possible to address the most pressing environmental challenges. We aren't just talking about holding trading partners accountable for protecting wildlife, forests, and oceans; we plan to make those environmental commitments fully enforceable in the core of the TPP agreement, on equal footing with the economic obligations our trading partners take on.

That paragraph all but ensures the framework will include a mass of costly global warming nonsense. Even if one agrees with global warming agenda, it does not belong in a free trade agreement.

Why the Deal is Secret

On March 27, 2015, the Huffington Post proclaimed Now We Know Why Huge TPP Trade Deal Is Kept Secret From the Public.

A key section of the secret Trans-Pacific Partnership (TPP) trade agreement has been leaked to the public. The New York Times has a major story on the contents of the leaked chapter, and it's as bad as many of us feared.

Now we know why the corporations and the Obama administration want the TPP, a huge "trade" agreement being negotiated between the United States and 11 other countries, kept secret from the public until it's too late to stop it.

The section of the TPP that has leaked is the "Investment" chapter that includes investor-state dispute settlement (ISDS) clauses. WikiLeaks has the text and analysis, and the Times has the story, in "Trans-Pacific Partnership Seen as Door for Foreign Suits Against U.S.".

The WikiLeaks analysis explains that this lets firms "sue" governments to obtain taxpayer compensation for loss of "expected future profits."

Let that sink in for a moment: "[C]ompanies and investors would be empowered to challenge regulations, rules, government actions and court rulings -- federal, state or local -- before tribunals...." And they can collect not just for lost property or seized assets; they can collect if laws or regulations interfere with these giant companies' ability to collect what they claim are "expected future profits."

The Corporate Influence Over the TPP

Largely ignored by the media -- until now -- the TPP has been in a negotiation process for more than five years. The TPP has 29 "chapters" covering various issues, but only five of these chapters cover what would normally be considered "trade".

These negotiations have been conducted in secret, but more than 500 corporate "trade advisors" have access to the text of the agreement. Many of the negotiators themselves are past (and/or likely expect to be future) corporate attorneys or executives. U.S. Trade Representative Michael Froman, for example, "received over $4 million as part of multiple exit payments when he left Citigroup to join the Obama administration," according to a report, "Obama Admin's TPP Trade Officials Received Hefty Bonuses From Big Banks," by investigative journalist Lee Fang.

Only 5 of 29 Chapters Covers Trade

We have had five years of secret backdoor discussions on trade. The resultant document has 29 chapters of which only 5 are about trade.

It's highly unlikely those 5 chapters have much to do with "free trade".

TPP Opens Door for Foreign Suits Against U.S.

The New York Times says Trans-Pacific Partnership Seen as Door for Foreign Suits Against U.S..

An ambitious 12-nation trade accord pushed by President Obama would allow foreign corporations to sue the United States government for actions that undermine their investment "expectations" and hurt their business, according to a classified document.

The Trans-Pacific Partnership — a cornerstone of Mr. Obama's remaining economic agenda — would grant broad powers to multinational companies operating in North America, South America and Asia. Under the accord, still under negotiation but nearing completion, companies and investors would be empowered to challenge regulations, rules, government actions and court rulings — federal, state or local — before tribunals organized under the World Bank or the United Nations.

Supranational Court

Julian Assange, WikiLeaks editor said: "The TPP has developed in secret an unaccountable supranational court for multinationals to sue states. This system is a challenge to parliamentary and judicial sovereignty. Similar tribunals have already been shown to chill the adoption of sane environmental protection, public health and public transport policies."

New TPP World

Image courtesy of Wikileaks.

Free Trade Blocks

Traditionally, the biggest blocks to global free trade deals have been the US and EU, and agricultural tariffs are often at the heart of the issue.

The US typically says something to the effect of "we will agree to eliminate agricultural tariffs if the EU does", and of course France will never agree to let the EU do any such thing.

Mish's Proposed Free Trade Agreement

To call TPP a "free trade" agreement is ridiculous.

I am in favor of free trade. An excellent free trade agreement would consist of precisely one line of text. I propose the following agreement:

"All tariffs and all government subsidies on all goods and services will be eliminated effective June 1, 2015."

Pick your own starting date, including "immediately" if you like. Let the wrangling on all the other stuff take place elsewhere. Trade discussions ought to be about trade. History shows that alone is hard enough.

Notice that I did not mention "fair trade". The only "fair trade" is "free trade" whether or not any other country reciprocates or not.

Lead by Doing, Not Talking

I firmly believe the first county that fully embraces free trade would come out ahead, regardless of whether or not any other country reciprocates.

From that standpoint, there is no need for discussion at all. The US could and should set the model for the world simply by ending tariffs and subsidies on its own accord.

How TPP Will Function in Practice?

If this damn thing passes as is, TPP will create an "unaccountable supranational court for multinationals to sue states", precisely what one might expect after five years of secret backroom deals led by Obama.

Here's how it will work.

Obama crammed down a bunch of global warming regulations. To get companies to go along, Obama concocted a supranational tribunal court that would allow every company to sue for lost revenue due to those regulations.

Taxpayers will lose three ways: first on needless regulations, second on corporate handouts to pay for grievances, third for having to pony up for the creation of the new supranational court.

I can smell boondoggles, and this one is massive.

Why Five Years?

Q. Why did the deal take five years to put together?

Obama had to win over every global warming group, no matter how extreme.
Obama also had to include language for the explicit benefit of companies like GE that actively promote solutions that only "work" with huge government subsidies. GE's mission was to ensure subsidies would be big enough to make a fat profit no matter what happened down the line.
Obama also had to appease companies that stand to lose from the hype. To get those companies on board, he had to create a supranational tribunal court.
To get the lawyers on board, he needed their approval of the tribunal formulation and process.
To get the Congressional ducks lined up, each sensitive group was shown only those things that were in their favor, while hiding everything else.

Open Mind

I have an open mind about this. There is a slim chance I have it wrong. The way to prove me wrong is to release the full and complete text of the deal for the public to scrutinize.

My fear is this will be another one of those things "you have to pass to find out what's in it".

No thanks.

Alternative Proposal

I submit my one sentence alternative a second time: "All tariffs and all government subsidies on all goods and services will be eliminated effective June 1, 2015."

That's what free trade is really about, whether or not I am off base on some of my suspicions listed above.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.

Economy News

7.4.15

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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