Stimulus Package: COBRA Subsidy Won’t Stimulate the Economy

by Cristine Shade

COBRA is an acronym for Consolidated Omnibus Budget Reconciliation Act of 1985. It provides that employers with 20 or more employees make available temporary access to medical coverage under the employer’s group plan for their employees who lose coverage (CRS. Summary). I have been a payroll accountant for the past six and half years and I am familiar with the compliance issues surrounding the provisions of COBRA. With the steadily rising cost of healthcare, this portion of the Stimulus Package will offer employees the option of retaining their coverage for a substantially less amount. Prior to the adoption of the stimulus package, the employee’s cost of continuation coverage was 102% of the premium. The additional 2% is for administrative fees and is a provision of the COBRA act. Under the recently adopted American Recovery and Reinvestment Act of 2009, sixty-five percent of the cost of COBRA premiums will be subsidized by the Federal Government. The cost of this subsidy is estimated at $24.7 billion (Senate Finance et al. 16). Unfortunately, subsidizing COBRA continuation coverage will not help the economy because it only benefits insurance companies.

A government subsidy of 65% sounds great until you read the fine print. I received an e-mail from my company’s payroll software vendor which stated that “the new law requires employers to advance the 65 percent premium subsidy on behalf of the government” (Ceridian.com). What this means to employers is that they have to be able to pay 65% of the health insurance premium each month that coverage is elected for involuntarily dismissed personnel. The money will then be credited back via quarterly tax payments. This will be a substantial burden to employers because they will have to carry the financial load for three months before seeing a return in the form of a reduction in their taxes. Some employers cannot afford to do that, especially if they lay off employees due to financial reasons. Unemployment is currently 5.8 percent in our country, and all four regions (West, South, Midwest and Northeast) reported significant increases in unemployment in 2008. Oregon reported 6.4 percent unemployment, which is up from 5.1 percent in 2007. Michigan has the highest unemployment rate in the country at 8.4 percent, and Utah has the lowest at 3.4; however, both states reported increases in 2008.

The cost of health insurance is so high that even a subsidy of 65% will not help people living on unemployment. Unemployment does not pay you 100% of your lost wages every month; your benefits are based on your prior base wages. “As of December, 2008, OR benefits ranged from $108 to $463” per week (Salary.com). How can individuals pay for health insurance, even at a reduced rate, when they have lost a significant portion of their monthly income? A survey performed by Charles D. Spencer and Associate in 2006 showed that of the individuals eligible for COBRA, only 27% elected coverage. That figure is up only slightly from 20% reported in 2004 (CRS. 7). The subsidy will make healthcare affordable for only a few more but there will still be a significant number of people without healthcare because they can’t afford it.

The clear winners of the government subsidy will be the insurance companies. Not only are they exempt from carrying any of the cost of the subsidy, their profit will be increased by the individuals that are able to elect COBRA coverage due to the subsidy. “Pharmaceutical manufacturers made up the second most profitable U.S. industry in 2006, with profits of 19.6 percent, compared with 6.3 percent for all Fortune 500 companies” (AFL-CIO). Other shocking statistics include the annual multi-million dollar salaries of pharmaceutical and insurance company CEOs, uninsured Americans number forty-seven million, and private insurance companies spend fifteen percent of their money on administrative costs annual while Medicare spends three percent (AFL-CIO). I will soon be laid of from my job. The cost of my health insurance under COBRA will be approximately $350 per month. I’m not sure how we will afford this, but I know we can’t afford to be without health insurance.

The average annual cost of treating the uninsured and under-insured is approximately $100 billion. Of that figure, hospitals are uncompensated for about $34 billion worth of services annually (NCHC 4). It could be argued that the COBRA subsidy will reduce that cost, however, the number of individuals reported to have elected COBRA in 2006 is barely over three million (CRS 8). As I mentioned earlier, there are currently forty-seven million people that are uninsured. Based on the disparity of these numbers, it is probably that a conclusion can be made that this subsidy will not help our economy.

While some individuals may benefit from finally being able to afford COBRA health care coverage, the employers bear the entire burden of the subsidy up front. With the staggering number of people uninsured and the rising number of unemployed the numbers just don’t add up. Insurance companies have no additional administrative costs or liability associated with the subsidy which proves that they will benefit more than any one else from the government subsidy of COBRA. It is also likely this portion of the stimulus package will have unforeseen costs and consequences.

Krista's Economic Paper

Have you ever written a $787 billion dollar check?  As of February 13, 2009 President Obama can say yes; just by signing a huge stimulus plan to improve our economic crisis.  Reporters and politicians have attacked and argued over this bill since the idea was introduced.  Sixty-six percent of Americans support the 2009 Economic Stimulus Package because of the education benefits being offered as well as many other anticipated improvements (http://people-press.org).  These benefits include creating and saving jobs for teachers, updating schools, and preventing already budgeted programs from disappearing.  If the stimulus plan follows through as predicted many students will gain the knowledge and experience promised to them as American citizens.

Saving our teachers' jobs is beneficial in many ways to parents, teachers, and their students.  Educators in grade, middle and high schools are walking into their classroom anticipating the worsts. They are not only worried about their own kids and family; teachers are concerned about the kids whose lives have been impacted.  In New York City alone nearly 14,000 teachers will retain their jobs because of 2009 Economic Stimulus Plan.  In Oregon 44,000 jobs will be saved, 3,000 of which are geared toward education (http://www.nydailynews.com/ny_local/2009/02/12/2009-02-12_obama_stimulus_plan_may_mean_huge_infusi.html).  The future of Americans lies in the hands of our educators.  They have devoted their life to education and promote a healthy future for America.

A critical part of preparing students for the 21st century is updating our schools with learning tools such as computers and other necessary systems.  The plan concentrates on providing and updating technology for the classrooms, labs and libraries.  Keeping up with the never ending advances among computers and programs can be costly but important.  President Obama recognizes just that when he puts part of the money aside to support updating our schools.  The libraries will be updated with new edition reference materials to ensure students have the most accurate information at their fingertips.  These much needed classroom materials will be provided.  The materials are new  textbooks and renovations to update teaching techniques such as replacing dust filled chalkboards with sleep, easy to clean white boards.  All our students will benefit form these updates (http://www.edweek.org)

After school and during school programs are great to keep students occupied with safe and fun learning activities.  With financial cuts being discussed for programs all students will not have the same opportunity.  Most parents can't afford to set money aside for their child's favorite extracurricular activity like they are now being asked to do.  After school events keep kids safe, and away from drugs and other challenges in our society.  Sport teams are also suffering and penny pinching.  Being a member of a team teaches students to work together and also keeps them healthy by promoting physical activity.  The program previously known as Future Farmers of America now just he FFA Program promotes working together and efficiently.  The FFA students focus more on scholastic and problem solving skills.  And like similar to sports, students get to travel to different schools to compete.  Taking these programs away will definitely have a large impact on our kids.  All students should be allowed the same opportunities as they were just years ago.  Now parents have to scramble to find daycare for their kids after school because after school because after school programs are no longer dependable.

Now we have to remain positive and trust the largest investment in the United State's history will be worth the debt and other sacrifices (http://www.boston.com/news/politics/politicalintelligence/2009/02/with_history_an.html).  Education is something very important and affects almost everyone.  I hope the money is used wisely yet generously to improve the environment in which students have the right to find themselves and discover who they are.  Many still fear President Obama has continued to dig us into a larger hole that will take years and years to pay back.  Many officials are monitoring the progress of this plan very closely in order to avoid unnecessary expenses for us as taxpayers.  Only time will tell if this plan is really what America needs to move forward.

Krista's Advertising Essay..ehh..

The bright orange unusually skinny cheetah has become a face recognized by most people in America; his name is Chester Cheetah.  This devious cat made his first appearance in 1986 as a cartoon character.  His writers and illustrators consider him a "hip cat."  Before long he captured our hears and his popularity grew.  Cheetos are a crunchy corn snack enjoyed by millions everyday but originally in Australia during the 1980s (http://www.smiths.com.au/student/cheetos.html).  Chester quickly became the face of Cheetos and is currently occupying that position today.

Good products like Cheetos will continue to strive.  like most anything in the world, advertisement changes looks, quality, and approaches to attracting new and maintaining consumers.  Chester is forced into always discovering new methods to keep his audience entertained and to keep the Frito-Lay product on the shelf.  The slogans "Dangerously Cheesy" and "The Cheese That Goes Crunch" are words often not far from the deceitful cheetah's mouth.  Chester is known throughout his commercials and even his appearance on Family Guy for being crafty and mysterious.  The plots of his most recent commercials focus on using Cheetos for an unintended purpose.  Examples of these behaviors include putting Cheetos in a dryer full of clean, white clothes or messing up a co-worker's cubical by leaving crumbs behind.  The Frito-Lay Company is constructively looking for original ways to leave a leasing impression on snack-goers; in my opinion it works.

 

The Cheetos commercials touch on a different aspects of the advertising trends.  The number one method the consumer notices is the suspensfulness f it all.  The commercials draw you in by demonstrating extreme measures and behaviors in different but realistic scenarios.  A particular commercial starring a high-maintenance, spoiled girl seems to be a perfect example.  The setting for "Spoiled Girl" takes place at a downtown cafe where a Cheetos enjoyer overhears a bad-mannered girl loudly discussing her unpleasant thoughts and ungrateful actions.  Chester of course isn't too far away plotting with the other women and talking her into throwing a pile of Cheetos on the ground by her feet.  The purpose is to attracted pigeons and eventually cause a scene.  Of course the cat was right and successfully manipulated another seemingly innocent person.

The overall theme of Chester's commercials sends multiple messages to the audience.  The commercial reaches out to those who are afraid to express themselves in a way that promotes bad behaviors.  Or perhaps to bully already bad behaved people to be more respectful.  The message comes across to the view and is followed up with not asking the customer to purchase the Cheetos but rather visit the website (cheetos.com) to see more.  I logged onto this sight to get a feel from the theme.  The website is drawn around the commercials including the friendly faces of victims, vandals, and of course the mastermind himself, Chester.  The website outlines the different stories and refers to them as "challenges" which is a word that inspires many consumers.

There are ongoing and pending arguments regarding whether or not Chester Cheetah had gone too far with this last approach to attract patrons.  Some argue he is overplayed by trying to fulfill too many roles over the last twenty-two years.  Some analyzers ponder how a "hip-cat" changed into a mysterious, complex character with dark motives (http://www.slate.com/id/2186601/).  I admire that advertising technique put forth for potential buyers.  The commercials are aimed for an audience with a dark sense of humor and I believe during these hard times a little laugh about a strange, quirky Cheetah is just what we all need.

Katie Allen
Ms. Cook
Writing 122
3 March, 2009
Green Economics and the Stimulus Plan

The American Recovery and Reinvestment act that President Obama signed into law last month was designed to increase employment, ensure the sustainability of the country’s infrastructure and energy sources, and put money back into America’s economy following the crushing impact of the recession. Barack Obama has pledged a total of $787 billion towards reaching these goals, $7.22 billion of which will be put towards projects and programs overseen by the EPA (environmental protection agency).
The Stimulus Plan is expected to generate 3.5 million jobs overall, with $500 million going to help train workers for environmentally friendly, or “green collar” jobs (Greenblatt, A). These employment opportunities will help train new workers to make renovations to our buildings (weatherization to help cut energy costs); renovations to the automobile industry (research into hybrid and electric cars); and renovations to the public transit system (improving it so that more people will utilize it instead of driving). Taking these steps will increase the likelihood of future generations of Americans adopting and sticking to more sustainable forms of energy production and transport, and will result in fresher air and a cleaner water supply. All in all, it is expected that making green choices now will mean a healthier and more prosperous future for the country, a future in which we are a great deal more energy and economically independent than we are today.
One of the areas hit hardest by the recession has been the construction industry. Construction virtually halted in December of 2007, resulting in a devastating loss of jobs. As of right now, an estimated 10.8% of our country’s construction workers are unemployed. My own mother and stepfather have been negatively affected by the lack of building going on: They had to relocate to Wisconsin in September because my stepfather (who is a general contractor) could not find work, resulting in the family not being able to afford to stay in their Oregon home.
One of the first things that this package aims to do is create construction jobs. The Clean Energy Corps, along with more than 80 labor, environmental, and civic national organizations are supporting a proposal that would apply energy efficient improvements to over 15 million buildings (Morley, J). This would mean that there would immediately be an increase employment in the construction sector, which is an obvious benefit to the nation’s economy (seeing as how people generally can only put money back into the economy when they are earning money themselves). This move would also help address the energy crisis: by adding insulation and replacing inefficient appliances, the owners of the improved buildings would see a marked decrease in energy costs. The best thing about this proposal is that it can be instated immediately.
Much of the “green” section of Obama’s Stimulus plan is driven by a sense of urgency. Obama says that there will be a division of funds that supports giving the most money to plans and programs that can go into effect soonest, and will allow states to have a say in how the funds are invested. The EPA’s inspector general is responsible for the oversight and review of the money, but a basic breakdown of the funds proposed looks something like this: $5 billion will go towards the weatherization of homes and buildings; $300 million will support rebates for buying energy efficient cars and appliances, thus encouraging people to buy green, $6 billion will be invested in improving water quality; $100 million will be spent on grants to evaluate and clean up former industrial and commercial sites called “brownfields”; $300 million will pay for a diesel reduction plan; $200 million will clean up petroleum leaks; and $600 million will go towards finding a solution for the hazardous waste management problem.
These fundings are of course intended to be beneficial. By pouring money into programs that support the creation of jobs which in turn support a healthy environment, future generations are being set up to inherit a greener world, which most will agree is an excellent prospect. There has, however, been much debate as to weather we are wise to invest so much money in programs that we have not previously tested. Analysts say that government spending only diverts money from the private sector through taxation, and argue that as a nation already in so much debt, we have no business investing in things such as green job creation. Still others will say that Obama’s plan is not green enough, citing accusations that many of the jobs created by the plan are not, in fact, as environmentally friendly as they seem. These jobs have been termed “gray” jobs, and include such projects as the $8.5 million reconstruction of a bridge in rural Missouri. These critics allege that construction like this will only encourage more driving, which is not very green at all.
The long and short of it is that there is a massive amount of oversight and accounting for the way funds are being spent that must be taken into consideration. If Obama can appoint someone who is well qualified and who will take seriously this country’s need for a move towards green economics and sustainable jobs, then the stimulus package’s chances of success will be better. Hopefully the higher ups who are in charge would like to achieve this. Conversely, if the oversight is poor, the potential for misspent funds is great.
If Americans want to improve the future, we must act as a whole, and that has been proven a difficult task, since it is true that key decisions will always be made by a powerful few. Hopefully, these powerful few have the right ideas in mind. In the meantime, the best thing the individual can do is keep his or herself in check with regards to the ways in which we live our lives. Cut back on frivolous spending. Try to carpool or use mass transit more often. Recycle. Hopefully the government will follow suit.

The Auto Industry Bailout

The Auto Industry Bailout

“The part of the General Motors (GM) request for money that is very clear is that, in exchange for $16.6 billion, the company will fire 47,000 people…The Administration knows that it has to save GM as part of steadying the economy, but it has put itself into a policy position where killing some jobs is the excuse for saving others” (McIntyre). We see how the economy is affecting all of us every day. Gas is constantly going up and so is the price of all goods. Plane tickets are also on the rise because of this trickle down effect. Automakers are not adjusting their industry fast enough to keep up. GM is still making vehicles that get less than 20 miles per gallon and they wonder why Americans are not purchasing new vehicles. When large companies fall it makes room for smaller businesses to flourish. We should not continue to bail out auto companies because these businesses have had poor business habits and are not continuing to better. If we let this empire fall, then maybe we will have a new industry will rise out of the ashes of the falling industry to meet the needs of the consumer.
Mark Zandi of Moody’s Economy.com told Congress back in December that it could take up to $125 billion to bail out GM and Chrysler. When GM and Chrysler asked for $17.4 billion we had no idea how much more that they would ask for. In addition to the $17.4 billion GM received another billion and now are asking for yet another $30 billion if you add it all up you see that it is nearly $50 billion. According to an article in time.com, “GM says it needs more money for the federal government or it will run out of cash next month” (McIntyre).
The government should let GM sink. Businesses have rise and fall that is the way the economy works.

Instead of bailing out these companies who have no interest in thinking of the big picture of the little guy, maybe we should be thinking of ways that we could invest our precious funds in several businesses that will better the economy and environment in the long run. Perhaps the government could invest in a business that will make jobs for people instead of cutting them. “It may be the only time in U.S. history where the government will pay to put tens of thousands of its own citizens out on the street” (McIntyre). We should not be rewarding bad business habits by giving more money to waste only to see more people suffer. We need to take action in things that will be better now and in the future.
“Analysts believe that GM going into Chapter 11 would put hundreds of thousands of Americans at the car company and its suppliers out of jobs…Congress and the Administration may have to keep GM on life support indefinitely” (McIntyre). That would be a good argument if the company had shown by the government giving them money they could save jobs. However this is not the case, GM still continues to make poor decisions and invest poorly. Instead of CEO salary cuts GM cuts 47,000 jobs. Does America really need to be investing in a company that truly only thinks about profit and not the people who work so hard for them?
After spending billions upon billions in bailing out companies that fail to meet our expectations, are we really going to sit by and watch our government, give more of our money away? We should cut our losses let the businesses go under and make room for more businesses. We should reinvest in smaller businesses that have a chance in doing good and thus creating more jobs. Job loss is going to occur in either situation, it should be on our terms. Fighting for businesses that will in fact work and be better for the economy.


Bibliography

http://www.usnews.co/blogs/flowchart/2009/02/18/9-bailout-surprises-from-gm-and-chrysler.html By Rick Newman

www.time.com GM Bailout: Billions to Put People Out of Work By Douglas A. McIntyre

Auto Bailout: Why Aren’t the Shareholders Paying?
Elisa Lindquist


What comes to mind when we hear the word “economy”? I think about trillions of dollars going to save the financial industry, or the failing stock markets, and of course, the Big Three Bailout. The proposed bailout of GM, Ford, and Chrysler has been a hot button issue for millions of people due to the fact that these companies have been making billions of dollars from the beginning and throwing it right into shareholders and executives pockets. As necessary as the bailout of the Big Three may be, there are some serious flaws to the situation. Allowing Ford, GM, and Chrysler to take the easy way out is wrong because these companies should be sacrificing as much as, if not more than, every other middle and lower class tax payers who will be paying for this bailout. The big business CEO’s need to empty their coffers before we empty ours!
When the newscasts exploded with news of the proposed bailout last year, the projected assistance package raised many questions but produced few answers. At About.com one journalist explained why it would affect almost every person from coast to coast: “In December 2008, the auto industry asked the government for a $34 billion bailout to avoid bankruptcy. The Big Three stated that their demise would trigger three million layoffs within a year, plunging the economy further into recession” (Amadeo 1). Unfortunately it is not as easy as saying “let’s let the big wigs pay out of their own pockets and go down in flames!” because the issue trickles down to millions of workers.
If Ford, GM, and Chrysler went under it would create a catastrophic landslide effect for our country. An article put out in Huffington Post in December, 2008 explains that both GM and Chrysler have been forced to idle plants and lay off thousands of workers across the United States. These companies also explained that without the government assistance that they could face bankruptcy within a matter of weeks. Although the Senate Republicans were completely against the idea, former President Bush gave in to the auto makers wishes. Bush decided to tap into the $700 billion dollar financial rescue fund for a temporary quick fix to keep the Big Three in business throughout the end of 2008. The government officials were not ruling out the prospect of bankruptcy of one or more of these companies, they just wanted to help in the reorganization process and hope they could make a difference.
Many find themselves wondering how on earth three of the biggest auto makers in the united States could end up in such a predicament When you take into consideration how much the shareholders and head honchos make, you then have to add how much they spend on labor and production. An article CNS News released says, “It costs over $73 per hour on average to employ a union auto worker, according to University of Michigan at Flint economist Mark J. Perry. For U.S. workers at Toyota, however, the per hour labor cost is around $47.60, around $43 for Honda and around $42 for Nissan, Perry added, for an average of around $44” (Winn 1). Those numbers don’t come from straight pay; they also come from insurance benefits as well as retirement plans, etc. Having union workers can become very spendy. The auto companies cut around five thousand jobs through buyouts and early retirement packages by the end of November, and plan on drastically reducing vehicle production in the first quarter of 2009 by 250,000 units. These numbers mean big problems for these financially distressed auto companies. GM, Ford, and Chrysler will still be paying huge salaries through pensions and early buyouts, and when they are cutting production that means big problems for already troubled companies. How are the manufacturers supposed to offset these costs when they are also cutting production?
Finding the enthusiasm to support such a bailout is proving to be a difficult task. One of the hardest pills to swallow with the avoiding bankruptcy situation is that the CEO’s of these multi-billion dollar companies still get to keep their six and seven figure incomes. They should be contributing to the bailout with their own money since they could not keep control of their own business in the first place. The aid for these big companies come from people like myself and other hardworking Americans, when ironically, most of us couldn’t afford to drive the vehicles that are being produced by these companies. Our government needs to decide when the taxpayers have had enough and quit bleeding us dry.
One stipulation of the bailout is that the auto companies make some changes to manufacturing and spending. I know one big one is to “go green’ and be more environmentally friendly. That is really one of the only positive aspects of the bailout that might ease Americans’ minds and soften the financial blow to our own pocketbooks. The companies will also be under strict regulations and must comply with the rules that the government has laid out for them. A few of those regulations include; Labor costs must be competitive with other automakers in the US like Toyota, Honda, etc., they must show a positive net value by the end of March, and current President Obama can renegotiate these terms at any time he sees fit. Hopefully the assistance the government is offering will make a positive impact on the auto industry and possibly give a nudge to help turn the economy around.
One fact is if the big auto manufacturers went under, it would surely throw us into the depths of a full blown depression. I can understand that we need to take care of this nasty mess before it turns toxic to our country, but I also believe that the CEO’s and company big wigs need more than just a slap on the wrist and probation. It’s about time that we show big companies that times are changing and they can’t run the show anymore. It’s time to be honest and take responsibility for their arrogance and greed. This is their one and only shot at making things right, so hopefully they don’t flush it down the toilet.