More On Legal & Compliancefrom The Advisor's Professional Library
- Use and Misuse of Social Media Social media is an inexpensive and effective way to communicate with established and prospective clients. Nevertheless, when RIAs utilize social media to promote their advisory practices, they risk compliance problems for their firms.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
As President Obama signed the sweeping healthcare legislation on March 23, he probably would have wanted the director of the Congressional Budget Office, Douglas W. Elmendorf, sitting nearby. The preliminary estimates of the reform bill's costs released March 18 by the CBO helped bolster support for the bill three days before the House voted.
But those estimates came with a warning about the long-term viability of those projections.
The estimates by the nonpartisan agency landed right near the targets Obama had outlined for the bill's costs. The CBO, which revised its estimates on March 20, said that over a 10-year period, ending in 2019, the new insurance provisions would reduce the deficit by $143 billion and cover 32 million people who lacked insurance. (The CBO said $19 billion of that savings stems from the education provisions that are attached to the health bill.) The CBO said the bill would not cover about 23 million people, a third of which were illegal immigrants.
The warning on these deficit-reduction numbers, comes not from dubious outsiders, but Elmendorf himself. He said in a blog posting in March that stretching the CBO's projections through the 2020s would reduce the deficit around one-half percent of GDP. But the hedge on that prediction, he wrote, would assume that "the provisions of the legislation are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation." Elmendorf added, "The current legislation would maintain and put into effect a number of policies that might be difficult to sustain over a long period of time."
It's just those budget-busting uncertainties about the bill that have some economic analysts sounding the alarm about the country's financial future.
"The administration's own forecast suggests that the federal debt by 2020 will be $18.6 trillion," said David Kelly, managing director and chief market strategist at J.P. Morgan Funds. "It is $8.3 trillion today; it has gone up by $3 trillion in the last year, and they are proposing to increase it by $10 trillion over the next 10 years. It just can't be done."
Kelly said that neither the administration's 2020 forecast nor the CBO's deficit forecast of $20 trillion is viable for a properly functioning economy. "Something is going to give," he said.
Read the full text of the CBO's estimates on the healthcare bill.
Read the view of the National Association of Insurance Commissioners (NAIC) on the healthcare bill from the archives of InvestmentAdvisor.com