Wednesday, April 16, 2014

Garth Brazelton — Purpose of Taxation

That may sound odd to people that think that our taxes go directly to 'fund' our federal spending, but that's the way it is. The use of taxes to fund spending is an optical illusion that gets perpetuated in the media - liberal or otherwise.

So what purpose does taxation at the federal level serve? Well, largely it's to modulate private spending demand....
I feel like many of our political disagreements would be better served by understanding these nuances as it relates to taxation. My fear is that the media and political extremists and made it virtually impossible to have an honest examination on the different role of taxes at different entity levels. It's just all black and white to them. Taxes are good or evil depending on the political persuasion, and that unfortunately does nobody an good at the end of the day.
Reviving Economics
Purpose of Taxation
Garth A Brazelton

Tuesday, April 15, 2014

Christopher King — The G20 Nations: Tracking the Globalization of Science and Innovation


The WorldPost
The G20 Nations: Tracking the Globalization of Science and Innovation
Christopher King, Editor of Thomson Reuters ScienceWatch

Brent Johnson — Chris Christie calls for unlimited campaign donations with 48-hour reporting period (via NJ.com)

Chris Christie calls for unlimited campaign donations with 48-hour reporting period (via NJ.com)
FRANKLIN — Gov. Chris Christie today said there should be no limits on how much money people can donate to political campaigns. The Republican governor and potential 2016 presidential candidate called such rules "ridiculous." Instead, he suggested…

David Edwards — Beer and bullets: Oklahoma gun range applies to sell liquor to shooters (via Raw Story )

Beer and bullets: Oklahoma gun range applies to sell liquor to shooters (via Raw Story )
A gun range in Oklahoma is thought be the first in the state to apply for a liquor license. “As a group we wanted to build a place, the first one in Oklahoma, where you could go in, shoot, enjoy the retail area and then go to the café,” Jeff Swanson…

David Edwards — Former sheriff: Women ‘need to be the first ones shot’ by feds in Bundy Ranch standoff (via Raw Story )

Former sheriff: Women ‘need to be the first ones shot’ by feds in Bundy Ranch standoff (via Raw Story )
A former Arizona sheriff who has taken the side of cattle ranchers in Nevada said this week that he would have allowed his own wife and daughters to be shot as human shields because it would look bad for the federal government on television. In a statement…

Robert Kuttner — Karl Polanyi Explains It All

In November 1933, less than a year after Hitler assumed power in Berlin, a 47-year-old socialist writer on Vienna’s leading economics weekly was advised by his publisher that it was too risky to keep him on the staff. It would be best both for the Österreichische Volkswirt and his own safety if Karl Polanyi left the magazine. Thus began a circuitous odyssey via London, Oxford, and Bennington, Vermont, that led to the publication in 1944 of what many consider the 20th century’s most prophetic work of political economy, The Great Transformation: The Political and Economic Origins of Our Time.
Polanyi, with no academic base, was already a blend of journalist and public intellectual, a major critic of the Austrian School of free-market economics and its cultish leaders, Ludwig von Mises and Friedrich Hayek. Polanyi and Hayek would cross swords for four decades—Hayek becoming more influential as an icon of the free-market right but history increasingly vindicating Polanyi.
The American Prospect
Karl Polanyi Explains It All
Robert Kuttner

Elias Isquith — Charlie Crist goes nuclear, says Rick Scott is a liar and a thief


When Republicans become Democrats....
The Republican-turned-Democratic candidate for guv is pulling no punches while attacking his GOP successor
They go for the throat while other Democrats still play nice guy or gal.

Salon
Charlie Crist goes nuclear, says Rick Scott is a liar and a thief
Elias Isquith

Matt Taibbi: The SuperRich in America Have Become 'Untouchables' in America Who Don't Go to Prison — Amy Goodman interviews Matt Taibbi

Well, this book grew out of my experience covering Wall Street. I’ve obviously been doing it since the crash in 2008. And over and over again, I would cover these very complex and often very socially destructive capers committed by white-collar criminals. And the punchline to all of the stories were basically the same: Nobody would get indicted; nobody went to jail. And after a while, I started to become interested specifically in that phenomenon. Why was there no enforcement of any of this? And around the time of the Occupy protest, I decided to write this book, and then I shifted my focus to try to learn a lot more for myself about who does go to jail in this country, because I thought you really can’t make this comparison accurately until you learn about both sides of the equation, because it’s actually much more grotesque to consider the non-enforcement of white-collar criminals when you do consider how incredibly aggressive law enforcement is with regard to everybody else.
Alternet — Democracy Now!
Matt Taibbi: The SuperRich in America Have Become 'Untouchables' in America Who Don't Go to Prison
Amy Goodman interviews Matt Taibbi

Double standard = privilege

Will Hutton — Capitalism simply isn't working and here are the reasons why

Suddenly, there is a new economist making waves – and he is not on the right. At the conference of the Institute of New Economic Thinking in Toronto last week, Thomas Piketty's book Capital in the Twenty-First Century got at least one mention at every session I attended. You have to go back to the 1970s and Milton Friedman for a single economist to have had such an impact.
Like Friedman, Piketty is a man for the times. For 1970s anxieties about inflation substitute today's concerns about the emergence of the plutocratic rich and their impact on economy and society. Piketty is in no doubt, as he indicates in an interview in today's Observer New Review, that the current level of rising wealth inequality, set to grow still further, now imperils the very future of capitalism. He has proved it....
The Guardian | The Observer (UK)
Capitalism simply isn't working and here are the reasons why
Will Hutton, The Observer

Tough sanctions: Obama Administration pays half of Ukraines gas bill due to Russia

Congress wasted no time in extending billions in low interest loans to Ukraine since the Russian annexation of Crimea. Of course no such help went to U.S. homeowners when they were getting foreclosed on left and right at the peak of the housing crisis (and it continues for many). Nor have the jobless or hungry kids gotten any sympathy as Congress recently cut unemployment insurance benefits and foods stamps.

Nothing for Americans, but our government is tripping over itself to help Ukrainians.

Now for the best part. You know how the Obama Administration has been talking tough with respect to economic sanctions on Russia? So we find out that the U.S. is paying half of Ukraine's gas bill that is in arrears to Russia.

Not only is this another slap in the face for Americans who have seen their own heating subsidies cut, but the U.S. is now subsidizing Russia by paying Ukraine's gas bills. That equates to profits to Russian gas companies. These are Obama's tough sanctions? What a joke. Does anybody in this Administration have a brain?

It's the Keystone Cops running the show.

Brad DeLong — Afternoon Must-Read: Martin Wolf: Review of ‘Capital in the Twenty-First Century’, by Thomas Piketty


Martin Wolf goes there. Unequal wealth equals unequal power and greatly unequal power spells the end of democracy.

Like I've been saying, neoliberal capitalism is antithetical to democracy in that it results in oligarchic plutocracy through the power and influence that great wealth involves in a political system based on politicians financed by donors and a revolving door between the corporate sector and government.

WCEG — The Equitablog
Afternoon Must-Read: Martin Wolf: Review of ‘Capital in the Twenty-First Century’, by Thomas Piketty
Brad DeLong

Noah Smith — Book Review: Flash Boys


Like it says, book review. But Noah takes Lewis a step further.

Noahpinion
Book Review: Flash Boys
Noah Smith | Assistant Professor of Finance, Stony Brook University

McKinsey — Myths and realities of clean technologies

Don’t be fooled by high-profile setbacks. The cleantech sector is gaining steam—with less and less regulatory assistance.
The world is on the cusp of a resource revolution. As our colleagues Stefan Heck and Matt Rogers argue,1 advances in information technology, nanotechnology, materials science, and biology will radically increase the productivity of resources. The result will be a new industrial revolution that will enable strong economic growth, at a much lower environmental cost than in the past, thanks to the broad deployment of better, cleaner technologies and the development of more appropriate business models. But how do we reconcile this bold and heartening prediction with recent challenges experienced by cleantech, the general term for products and processes that improve environmental performance in the construction, transport, energy, water, and waste industries?...
Cleantech is no passing, unprofitable fad. The sources of underlying demand—a growing middle class around the world and resource constraints2 —aren’t going away, and cleantech is pivotal in dealing with both. There are three major myths that undermine confidence in cleantech’s future.
  • Myth 1: Deployment and influence will be marginal
  • Myth 2: Technologies have underdelivered
  • Myth 3: The sector depends on regulatory support
McKinsey
Myths and realities of clean technologies
Sara Hastings-Simon, Dickon Pinner, and Martin Stuchtey

Philip Pilkington — Keynes and the “Fallacy of Aggregation” in Probability Theory

If Keynes’ fallacy of aggregation shows us nothing else, it should at least show us that when it comes to applied probability theory (i.e. econometrics) it is not so much the tools that are important as it is the person doing the work. And if the tools begin to become a fetish in and of themselves I see no good reason not to get rid of them to a very large extent.
Fixing the Economists
Keynes and the “Fallacy of Aggregation” in Probability TheoryPhilip Pilkington

Chris Dillow — What Phillips Curve?

A more benign possibility is that such thinking is a way of smuggling demand management into monetary policy. The belief (or statement!) that a big output gap would reduce inflation allowed the Bank to slash rates in 2008-09. In truth, the claim "bugger inflation: let's try and save the economy" would have done just as well, but waffle about spare capacity allowed the Bank to appear to reconcile demand management with inflation targeting.

There is, though, a nastier possibility which Michal Kalecki famously pointed out - that the possibility of fuller employment makes many capitalists rather jumpy. But then, Kalecki can't possibly have been right, can he?
Stumbling and Mumbling
What Phillips Curve?
Chris Dillow | Investors Chronicle

Bill McBride — Key Inflation Measures Shows Slight Increase, but still Low in March

On a monthly basis, median CPI was at 2.6% annualized, trimmed-mean CPI was at 2.4% annualized, and core CPI increased 2.5% annualized.
These measures suggest inflation remains below the Fed's target.
Calculated Risk
Key Inflation Measures Shows Slight Increase, but still Low in March
Bill McBride

Timothy Shenk — Thomas Piketty and Millennial Marxists on the Scourge of Inequality


Piketty's Capital and Marx's Kapital.

The Nation
Thomas Piketty and Millennial Marxists on the Scourge of Inequality
Timothy Shenk, doctoral candidate in history at Columbia University

Libertarian Charles Murray: The welfare state has denuded our civic culture


This would be like former President GW Bush all of a sudden coming out and saying "we" should never have gone into Iraq, with this alleged libertarian talking about "civic culture".

But this article here at PBS is otherwise interesting too in that this Murray guy, who alleges himself a 'libertarian', makes the case for a Basic Income Guaranty and he even has a proposed amount per month; which is not nearly high enough imo but at least what we see here may be a crack in the libertarian armor starting to manifest.

Another thing that is nice to see is that this (alleged) libertarian doesn't fret about "how are we going to pay for it?!" or "redistribution!" or "what will it do to the deficit!?" or any of the usual fiscal ignorance we always see from these libertarian type people.

Here are some excerpts:
Charles Murray: The society is too rich to stand aside and say, “We aren’t going to do anything for people in need.” I understand that; I accept that; I sympathize with it.  [Ed: Then you are not a libertarian Murray.... helllloooooo!]
What I want is a grand compromise between the left and the right. We on the right say, “We will give you huge government, in terms of the amount of money we spend. You give us small government, in terms of the ability of government to mess around with people’s lives.” 
So you have a system whereby every month, a check goes into an electronic bank account for everybody over the age of 21, which they can use as they see fit. 
They can get together with other people and then combine their resources. But they live their own lives. We put their lives back in their hands.

Murray addresses some of the reasonings against the idea of a BIG (pot smoking all day, surfing, etc...) so this might be interesting to our readers who are BIG advocates.

I'd advise this Murray to consider that he is truly not a libertarian.

Yet Another Reminder That Attention To Basic Operations ALWAYS Matters - IMF Bureaucracy & Failings Of The euro Currency



Commentary from Bill Mitchell, reviewing the sorry tale of how the euro currency was created, and recalling things said about the IMF, one of the contributors to our current mess.
"The IMF is like so many bureaucracies; it has repeatedly sought to extend what it does, beyond the objectives originally assigned to it. As IMF’s mission creep brought it outside its core area of competency in macroeconomics, into structural issues such as privatisation, labour markets, pension reforms and so forth …" Joseph Stiglitz


As summarized in posterity, these issues were clearly visible in a fogged-up
mirror, from the start.

'The irony or should we say the exemplification of what went wrong in European policy making circles was revealed in the opening paragraphs of the Lisbon conclusions. 
We read, on the one hand, that the “Union is experiencing its best macro-economic outlook for a generation … [as a result] … of stability-oriented monetary policy supported by sound fiscal policies”. 
On the other hand, it is stated that these “strengths should not distract our attention from a number of weaknesses. More than 15 million Europeans are still out of work” and the “employment rate is too low”. 
An amazing disconnect that only those blinded by the neo-liberal ideology could make!' Bill Mitchell


Jeff Cox — Here's the one trend to watch in earnings season

The first-quarter earnings season looks to offer something the market hasn't seen in years. Subsequent quarters likely will have to keep up or it could be an ugly year for corporate America.
Total sales could top bottom-line profits, a turnaround that comes after corporations had spent quarter after quarter slashing costs through layoffs and other forms of austerity. At the same time, revenue lagged amid weak demand and a general lack of confidence.
So in some respects this could be what the market has been waiting for since the financial crisis and the accompanying recession—that point where consumers are willing to take the handoff and generate growth....
Corporations have utilized the Fed's zero-interest-rate policy to run up huge levels of cheap debt, which they then used to buy back shares of their own stock. More than $1 trillion of buybacks have reduced share counts and thus boosted earnings-per-share levels to record highs.
The question now is whether companies can begin to drive earnings organically once the Fed ends QE, which has sent the central bank's balance sheet to nearly $4.3 trillion.
If revenue doesn't grow, "the market will say these valuations are more and more based on QE," Krosby said. "The market is trying to find that equilibrium: What is fundamentals and what is QE? Top-line growth is really key. It's so important because it feeds into a spectrum of analysis that goes beyond just the typical company."
NetNet
Here's the one trend to watch in earnings season
Jeff Cox

Is the American consumer reviving?

Links of interest

Result of the government shutdown.

Crooks and Liars
Devastating New Poll: GOP In Danger Of Losing House In November
Susie Madrak

***********

Cliven is starting resemble Ted.

Cliven Bundy And Pals Planned To Use Women As Human Shields
Karoli

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As I wrote last March, ‘those of us who have looked to the self-interest of lending institutions to protect share-holder’s equity, myself especially, are in a state of shocked, disbelief. Such counterpart surveillance is a central pillar of our financial market state of balance. If it fails, as occurred this year, market stability is undermined.’

************
Read an excerpt of "The Divide: American Injustice in the Age of the Wealth Gap," by Matt Taibbi, who will join us Tuesday to discuss his new book that "lays bare one of the greatest challenges we face in contemporary American life: surviving a system that devours the lives of the poor, turns a blind eye to the destructive crimes of the wealthy, and implicates us all."
READ: Matt Taibbi on "The Divide: American Injustice in the Age of the Wealth Gap"
Democracy Now! Blog

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In short, the political system imposed a new draconian regime to impose more personal responsibility in one sphere, while orchestrating a laissez-faire loosening of standards of individual responsibility in another sphere.
Demos
How Unequal Justice Makes Us Super Cynical
David Callahan

************
I get hot under the collar thinking about all the effort the US government is expending to monitor who we call and where we are when we do it–in the hundreds of millions!– and about all the surveillance of American citizens of Muslim faith, when the American fascists receive much less focus. If a group is armed and announces its purpose is to spread hate of another group, wouldn’t that warrant some surveillance?
Informed Comment 
US Press once again Declines to Call White Terrorism in Kansas, Nevada, White Terrorism
Juan Cole

*************
The basic goal of any sensible grand strategy should be to end conflict on terms that do not sow the seeds of future conflict. Yet the United States seems to be careening out of control in the opposite direction.
The Blaster
How Obama's Rhetoric Reinforces America's Grand Strategic Pathway to Catastrophe
Chuck Spinney

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So-called US "national debt" (= savings accounts at the Fed) Has No Historical Correlation With Inflation.

Image hat tip to Auburn Parks at SeekingAlpha.

US National Savings Accounts co-plotted with CPI.



Can't repeat this viewing often enough. We have at least 10 million citizens to reach, just to start making a dent. 

Can someone please show this to Simpson & Bowles, and to Maya MacGuineas, at the "Committee for a Ridiculous Federal Budget"?

The only question remaining is who is sitting on the bulk of those currency assets? The distributed consumers/investors/users previously known as the US MiddleClass ...... or,  ..... a collection of oligarchs?


Thrilling Race To The Bottom At Draghi Downs.

   (Commentary posted by Roger Erickson)



It's just astounding that such polar opposite views can exist at this level, in one profession. 
Draghi on the euro
Is it a mistake to let academic economists and/or politicians/oligarchs with ZERO commercial/reserve banking experience try to manage a Central Bank?

Does any MiddleClass anywhere have a horse in this race anymore? Which Horse Are YOU Betting On? The one with the MMT saddle, or the one with Draghi Do-wrong riding backwards in the saddle?






Yet Another Claim That The US Is An Oligarchy, Not A Democracy: So Much For Rational Agents Having Access To ALL Necessary Pricing (or other) Data! :)

   (Commentary posted by Roger Erickson.)



US Is an Oligarchy Not a Democracy, says Scientific Study

Although it always worries many when a study group goes to the length of stating that they ran a "scientific" study.

Semantics.

Everything is "scientific," so just look at the details of the study terms and weigh relevance for yourself.

Note, that it is can seem problematic when articles in peer-refereed research journals are "leaked" to the public ahead of actual publishing (since it's not clear if all the reviews are in). When is that crossing the borders between politics, PR and double-blind research studies? Sometimes when it's politically convenient? Sometimes when the TEMPO of discussion outweighs worries about validity? C'est la Vie. There's no reliable answer.

OpenSourcing the article in question to the lay public, for full AND TIMELY public review, certainly helps the rate of dissemination of public discourse, and public learning from the diverse components of itself. Overall, that's why most of nature openly broadcasts most data, and then races to recognize new patterns and discern their implications for new contexts.

In this case, we have both occurring, though asynchronously. The authors of this study are Martin Gilens and Benjamin I. Page, and their article is eavailable from their edu website as a pdf, entitled:
"Testing Theories of American Politics."
So why bother with subsequent publication in a peer-reviewed journal operating behind a paywall? One reason is simply the layers of tenure-track processes that this publishing process involves, for both authors and reviewers. University academic operations are quite as due for a systemic overhaul as our banking system is. Most people outside of academia simply aren't familiar with the arcane, outmoded operations involved in University management.

Given all that, go get 'em, USA. How do YOU spell "D.E.M.O.C.R.A.Z.Y?"

Personally, I think this article should be discussed by every classroom & household in the country. We'll worry about how scientific it is throughout the ongoing discussion. Whether oligarchy or democracy, the big point to remember is that success tracks the quality (including tempo!) of distributed decision making. That reminds us that it's always a war between Central Planning (by any other name), and effective Democracy.

Monday, April 14, 2014

The Financial Sector is a Parasite?

   (Commentary posted by Roger Erickson)



Ben Strubel, Investment Manager, Speaks.

Teaser headings:
The Role of the Financial Sector
The Grift in Your Retirement Plan
Institutions and the Rich Have the Same Problem
Speculation in Commodities Costs Main Street Billions
Corruption of Public Infrastructure
Interest Rate Manipulation
Foods Stamps and Welfare
If those topics don't get more citizens up in arms .... what will?

Ben's summary: 
"A bloated and out-of-control financial sector does not add any value to society. Society benefits when the financial sector is kept as small as possible."
No argument here.



David Bollier — The New Economic Events Giving Lie to the Fiction That We Are All Selfish, Rational Materialists


On the development of the politics and economics of the commons going on under the radar of mainstream focus. David Bollier riffs off Jeremy Rifkin's new book, The Zero Marginal Cost Society.

"Commoning" has been increasing in scale since the Sixties, and it is well developed now. Yet most people are unaware of it unless they or friend and acquaintances participate in it. Nor is it required to drop out to participate. All that is needed is to tune in. There are plenty of defectors in place already participating in commoning in some way or other. Those committed to self-sufficiency know the value of community and that the commons is indispensable unless one inherits great wealth.

AlterNet
The New Economic Events Giving Lie to the Fiction That We Are All Selfish, Rational Materialists
David Bollier

Noah Smith — R vs. g

In his new book, Thomas Piketty argues that R, the rate of return on capital (which is different than the safe interest rate "r") is greater than g, the rate of economic growth, and that this fact can be expected to continue into the indefinite future, resulting in an ever-rising capital share of income and an ever-falling labor share. The big question is whether R really will be greater than g into the foreseeable future.

It occurs to me that this is just the "robots vs. globalization" argument all over again....
These explanations aren't mutually exclusive, of course. But in terms of policy, if the "rise of the robots" is the biggest factor, we need to think about all kinds of difficult policy decisions and welfare arguments. But if globalization is the main reason for R>g over the last 4 decades, then all we can do - and all we should do - is wait for the big wave to end.
Why either-or and not both-and? Seems to me that both factors are operative. The result of technological innovation has been greater distributed leisure and we can expect that to continue as long as workers maintain bargaining power.

However, it is going to be along time before the global labor glut has been overcome considering the situation in most of the world. During this time — the foreseeable future — workers in emerging countries can look forward to improving job opportunities and rising wages, while workers in already developed countries can look forward to few job opportunities, job opportunities of generally lower quality, and lower pay.

In addition the rate of growth in the developed world is lagging and promises to lag for the foreseeable future, while the rate of growth in the developing world is forging ahead. However, global ownership is dominated by investors from developed countries and so the rate of capital accumulation in the developed countries can be projected to greatly exceed the growth rate.

Noahpinion
R vs. g
Noah Smith | Assistant Professor of Finance, Stony Brook University

Joseph P. Joyce — Capital Liberalization and Inequality

Inequality, which has drawn a great deal of comment and analysis following the publication of Thomas Piketty’s Capital in the Twenty-First Century, has sometimes been seen as a byproduct of increased international trade. But now other international economic linkages are being investigated. The International Monetary Fund’s Managing Director, Christine Lagarde, has acknowledged the need to take distributional consequences into considerationwhen designing IMF policy programs. Moreover, Fund economists have contributed to the research on the linkages between financial globalization and inequality.
Davide Furceri and Prakash Loungani of the IMF have investigated the effect of capital account liberalization on inequality. They looked at 58 episodes of capital account reform in 17 advanced economies, and found that the Gini coefficient (a measure of inequality) increased by about 1% a year after liberalization and by 2% after five years. One channel of transmission from the capital account to inequality could be the increased borrowing by domestic firms that allows them to hire skilled workers, who pull ahead of the less-skilled workers....
Neoliberalism is advocacy not only of free markets, but also free trade and free capital flows, where "free" and "liberalization" mean deregulation and privatization.

Economonitor
Capital Liberalization and Inequality
Joseph P. Joyce | Professor of Economics at Wellesley College and the Faculty Director of the Madeleine Korbel Albright Institute for Global Affairs

Edward Fulbrook — “Meritocratic Extremism”


More on Piketty
Piketty: "There is a fundamentalist belief by capitalists that capital will save the world, and it just isn’t so. Not because of what Marx said about the contradictions of capitalism, because, as I discovered, capital is an end in itself and no more.”
Real-World Economics Review Blog
“Meritocratic Extremism”
Edward Fulbrook


Sam Stein and Jeffrey Young — CBO: Obamacare Will Cost Less Than Projected, Cover 12 Million Uninsured People This Year

The Congressional Budget Office has released updated estimates on the Affordable Care Act's impact on both the budget and the health insurance industry. The findings show that the president's signature health care law is actually growing cheaper to implement, costing the government $5 billion less in 2014 than was previously projected. The law also is projected to cover more individuals than previously believed, owing, in part, to some broader workforce trends.
But a significant portion of the population will remain uninsured even with the law fully implemented. And the costs to individuals and employers, while lower than previous estimates, still provide critics of the law with ample fodder....
Even with those gains, a good chunk of the country will still lack coverage. The number of uninsured in 2014 will be 42 million people, according to the CBO. It will fall to 36 million in 2015 and 30 million in 2016 and 2017.
Most of them will remain uninsured because they will have declined coverage, the CBO said. Forty-five percent of them will have access to private insurance through the exchanges or an employer, while 20 percent will be eligible for Medicaid but will not sign up. In addition, 30 percent will be undocumented immigrants, who aren't permitted to use the health insurance exchanges or enroll in Medicaid, and 5 percent will be legal residents eligible for Medicaid but living in states that refused to expand the program under the Affordable Care Act....
The Huffington Post
CBO: Obamacare Will Cost Less Than Projected, Cover 12 Million Uninsured People This Year
Sam Stein and Jeffrey Young