The Week of November 2nd, 2015

Care

1. A high ruling from the high court

Mexican Supreme Court and marijuana

Mexico’s Supreme Court (SCJN) ruled this week that four members of the Mexican Society for Responsible and Tolerant Personal Use (known as “Smart” by their Spanish acronym) could grow and smoke their own marijuana without legal punishment. The Supreme Court’s 4–1 ruling comes six years after authorities permitted individuals to legally carry up to five ounces of marijuana. Despite legal carry, and now the right to grow for personal consumption, selling marijuana remains a crime in Mexico.

Activists argue that legalizing marijuana is one step in the process of ending Mexico’s drug violence. Presently, marijuana comprises one-fifth of Mexico’s drug cartels’ revenue, approximately $1.5 billion per year. Activists hope that legalization in the United States and Mexico will ultimately weaken the cartels by driving down demand for the cartels’ marijuana. They hope this proves more effective than the American-led war on drugs, which, despite harsh measures to punish drug offenders, has only increased the power and violence of the cartels.

The language of the SCJN’s ruling has been called a “paradigm shift” in drug policy. Members of Smart, the plaintiffs in the case, argued that punitive drug policies are not only ineffective and counterproductive but also contrary to personal liberties and rights. The court agreed, making its case for legalizing the growth, transport, and personal consumption of marijuana on the grounds of human rights and as in Colorado or Washington state, the SCJN’s ruling has undoubtedly set the groundwork for more moderate drug policies in a country long plagued by drug-related violence.

2. Kicked out of the nest

Japan Post privatized

The 144-year-old Japan Post Holdings Co. shifted to the private sector on Wednesday, the culmination of a 10-year privatization plan which began under the administration of former Prime Minister Junichiro Koizumi. The Japan Post IPO, valued at $11.9 billion, marks the third-largest such deal in Japanese history.

Japan Post Holdings Co. is a tripartite conglomerate with two distinct subsidiaries, Japan Post Bank and Japan Post Insurance. In addition to being Japan’s primary postal service provider, Japan Post is also the country’s largest bank and life insurer.  The commercial side of the banking and insurance arms operate out of Japan Post’s nearly 24,000 post offices nationwide, at which consumers can take out loans, mail packages and purchase insurance. The banking and insurance subsidiaries hold most of the promise for growth and profit within the Japan Post conglomerate, accounting for 71.8% of Japan Post Holdings Co. net profits for the April-June quarter of this year. Though the suzerainty of the holding company is clear, the Japan Post IPO consisted of three separate IPOs: one for Japan Post Holdings Co., one for Japan Post Bank and one for Japan Post Insurance. They closed 26%, 15% and 56% above IPO price, respectively.

The move to privatize Japan Post is seen as an attempt by the Japanese government to induce investment rather than savings by individual Japanese citizens. According to Heizo Takenanaka, former economics minister under Mr. Koizumi and steadfast supporter of the privatization, “a quarter of Japanese savings are sitting in the postal bank, and for the sake of the economy we need this to become risk-taking money.” The government plans to eventually sell off two-thirds of the holding company as well as fully privatize the banking and insurance subsidiaries, and hopes that this trend towards equity and away from debt finance will allow Japan Post (particularly Japan Post Bank) to invest more freely and invigorate Japanese asset markets. As of the IPO, 51.8% of Japan Post Bank’s investments were held up in low-yield Japanese government bonds.

3. Can’t stop me now

Turkish elections

After struggling since June to form a coalition government, Turkish President Recep Tayyip Erdoğan called for a snap election this past August. The results are now in and President Erdoğan’s Justice and Development Party (AK) has emerged with a clear majority – exactly what the president sought in calling the election. AK attained nearly 50% of the vote and will take 316 seats in the 550 seat parliament, enough for it to form the government on its own under Prime Minister Ahmet Davutoğlu. Parliamentary losses for AK in June were partly due to Turkish voters’ concerns about President Erdoğan’s authoritarian tendencies. For some time now, Mr. Erdoğan has been pushing for a constitutional referendum to centralize more executive power in the presidency. Armed with a clear electoral mandate, Mr. Erdoğan has renewed his call for such a reform.

A key part of AK’s platform for this election was a call for stability and security, specifically in regards to a longstanding conflict between Kurdish rebels and the Turkish government. With Mr. Erdoğan’s victory, the Kurdistan Workers’ Party (PKK) ended a temporary truce which took place during the elections. This is perhaps due to the fact that Mr. Erdoğan has taken a rather strong stance against the militants, vowing after his party’s win at the polls to “liquidate” the PKK. At the same time, the pro-Kurdish People’s Democratic Party (HDP) won 59 seats amidst claims that the elections were conducted unfairly.

Following the Sunday elections, both the Turkish lira and the Istanbul stock market have risen. These financial indicators reflect a greater degree of confidence in the market that comes in part from the perceived stability of the new government. President Erdoğan has a great deal of work ahead, but his new parliamentary majority has only strengthened his hand. Only time will tell whether Turkey will achieve Mr. Erdoğan’s promises of economic growth and stability, as well as whether or not any constitutional referendum will alter the basic structure of Turkish government.

4. Lords have mercy

Cut to UK tax credits defeated

George Osborne, Britain’s Chancellor of the Exchequer who has been tipped by many to be the country’s next prime minister, suffered a political blow when the House of Lords rejected his plan for welfare reform. Mr. Osborne’s star initially rose when his austerity policies helped his Conservative Party to a surprise majority in May’s parliamentary election. Part of the Conservatives’ platform was to reduce government spending on benefits, and Mr. Osborne duly took aim at tax credits, which are wage supplements for low-income workers. Mr. Osborne proposed having private companies offset the loss of income by hiking the minimum wage to £7.20 (about $11) per hour (and £9 by 2020).

Even before this defeat, Mr. Osborne’s plan had been criticized; evidence suggests that the rise in minimum wage would not cover the loss in personal income from the cut to tax credits (which is what led the House of Lords to block the plan). Others argue that such a large rise in the minimum wage and the loss of the tax credit incentive would negatively impact hiring and job-seeking, respectively. While Mr. Osborne’s long-term political career is probably not in jeopardy, the government will have to rethink their welfare reforms. However, Mr. Osborne remains committed to cutting tax credits, as he believes it necessary for the budget’s sake.

The event also opens up questions about Britain’s unelected upper house. Prime Minister David Cameron is in the frustrating situation of commanding a majority in the House of Commons but not the House of Lords; as a result, there has been much legislative conflict between the two chambers. Members of the House of Lords, who are mostly serving terms for life, and the government have traded blows over whether the formers’ intervention violated long-held parliamentary convention. This may reignite a dormant Conservative plan to reform the House of Lords, but for now, the Conservatives will probably settle for the passage of their (modified) finance bills.

5. An unhealthy situation

Nonprofit Obamacare co-ops failing

On Friday, Arizona-based nonprofit health insurance provider Meritus Health Partners announced that it would no longer be providing plans for 2016 and end its operations by the end of this year, due to a shriveling cash flow and poor financials. Meritus is Arizona’s nonprofit health insurance company that offers insurance plans on the state’s federally run marketplace, alongside for-profit giants like Humana and UnitedHealth. It provides health insurance to 59,000 Arizonans, who will now need to enroll in a new insurance plan before January 1st. That is when newly bought plans for 2016 begin and federal tax-relief subsidies (as well as tax penalties) kick in. The failure of Arizona’s co-op is having effects far beyond the Southwest. In fact, Meritus is the 11th nonprofit insurer to fail so far this year. By the end of this year, more than half of co-ops across the county will have gone under.

Passed in 2010, the Affordable Care Act provides for a federal grant program to establish 23 nonprofit, cooperative health insurance providers. The provision was proposed by progressive congressional Democrats frustrated by the lack of a public option – government-run insurance plans – in the marketplaces established by the law. The co-ops were to provide comprehensive insurance plans on the marketplaces that would drive down premiums by increasing competition. By design, they would offer comparable plans to those offered by for-profit health insurance companies, but because they weren’t geared toward making a profit, they could offer a better balance of cost-to-care. For-profit health insurance companies seek to charge the highest premium possible and attract the healthiest customers so that they can offset the costs of providing extensive coverage to their least healthy customers. The co-ops were designed to offer lower premiums and better coverage. The result for the more than 500,000 customers who bought plans from the eleven failed co-ops, however, was no health insurance at all. They will all need to return to open enrollment on the state and federal marketplaces to buy plans from for-profit providers.

In the past month, as co-ops have fallen like dominoes, Republicans and Democrats have blamed each other for the failure of this important – though relatively small – piece of the Affordable Care Act. Republicans in the House and Senate have opened investigations into the federal funding of the co-ops and blamed the Obama administration for trying (and failing) to subvert market competition.

Democrats, meanwhile, have blamed Republicans for repeatedly slashing federal grants that were allocated to capitalize the co-ops. The ACA originally provisioned $10 billion in block grants to the 23 nonprofit providers, but after several successive budget deals, Republicans cut that down to $2.4 billion. The Obama administration has tried to sell their failure as a mark of the success of competition on the marketplaces, with Press Secretary Josh Earnest commenting that those who lost co-op plans can “now go into the marketplace and have options.” But with at least $1.1 billion already down the drain with the eleven co-ops that have already failed, the situation supports the initial arguments of both congressional Democrats who saw the co-ops as toothless alternative to a public option and Republicans who didn’t want the federal government to have any hand in providing insurance.

Don’t Care

0. Meta-debating

GOP debates how to debate

Much has been made of financial news channel CNBC’s moderation of the third GOP presidential debate on October 28. Although the channel promised a debate on substantive issues – focused on the economy – it was blasted by the candidates for alleged hostile questioning. Senator Ted Cruz (R-TX), campaigning on his outsider status, earned the loudest ovation of the night when he attacked the moderators and their questions as the reason why the American people do not trust the media. The second question of the debate, posed by moderator John Harwood to celebrity businessman Donald Trump, questioned whether his campaign was “a comic book version of a presidential campaign.” To many, it seems a fair question.

The questions were not only not inherently or intentionally hostile, but indeed some of the most substantive of the three debates thus far. The questions only sounded hostile because many of the candidates’ policy proposals are so outlandish. The moderators’ attempts to ask Ben Carson, the current front-runner in Iowa, how he would cover the $2 trillion fiscal gap created by his 10% flat tax plan, were not hostile, but an example of questioning on behalf of the American people. Information, or lack thereof, is crucial in elections; an LGBT rights referendum was defeated recently in Houston partly because of a campaign of misinformation. America would do well not to have a similar result in their presidential election.

Following the debate the Republican Party suspended their next scheduled debate with NBC, who owns CNBC, and issued a list of demands for any channel wishing to host a future debate. The list includes bans on showing candidates using their notes and reaction shots of the audience. Allowing the draconian demands of a single party to dictate the style and content of a debate threatens to make this already laughable presidential election into an outright farce. Such restrictions are positively un-American and undermine the United States’ supposed commitment to free speech. President Barack Obama has already chimed in with his thoughts on the spectacle, arguing that the candidates’ complaints indicate an inability to govern. Mr. Obama added that, if the Republicans cannot handle CNBC’s moderators, it does not bode well for their ability to negotiate from a position of strength with Russian President Vladimir Putin. One wonders what the candidates’ list of demands for negotiations with Mr. Putin might look like.

Alexi Stocker, Max Rowe, Liam Conway-Pearson, Wooyoung Lee, Will Kirkland, and David Gernon contributed