Posted on

Food stamps in America

Here is a NY Times article doing what the NY Times does well, this time looking at the use of food stamps across America.  Here are the basic details (emphasis is all mine):

With food stamp use at record highs and climbing every month, a program once scorned as a failed welfare scheme now helps feed one in eight Americans and one in four children.

It has grown so rapidly in places so diverse that it is becoming nearly as ordinary as the groceries it buys. More than 36 million people use inconspicuous plastic cards for staples like milk, bread and cheese
[…]
the program is now expanding at a pace of about 20,000 people a day. There are 239 counties in the United States where at least a quarter of the population receives food stamps
[…]
Nationwide, food stamps reach about two-thirds of those eligible, with rates ranging from an estimated 50 percent in California to 98 percent in Missouri. Mr. Concannon urged lagging states to do more to enroll the needy, citing a recent government report that found a sharp rise in Americans with inconsistent access to adequate food.
[…]
Unemployment insurance, despite rapid growth, reaches about only half the jobless (and replaces about half their income), making food stamps the only aid many people can get — the safety net’s safety net.

Support for the food stamp program reached a nadir in the mid-1990s when critics, likening the benefit to cash welfare, won significant restrictions and sought even more. But after use plunged for several years, President Bill Clinton began promoting the program, in part as a way to help the working poor. President George W. Bush expanded that effort, a strategy Mr. Obama has embraced.

The revival was crowned last year with an upbeat change of name. What most people still call food stamps is technically the Supplemental Nutrition Assistance Program, or SNAP.
[…]
Now nearly 12 percent of Americans receive aid — 28 percent of blacks, 15 percent of Latinos and 8 percent of whites. Benefits average about $130 a month for each person in the household, but vary with shelter and child care costs.
[…]
Use among children is especially high. A third of the children in Louisiana, Missouri and Tennessee receive food aid. In the Bronx, the rate is 46 percent. In East Carroll Parish, La., three-quarters of the children receive food stamps.

A recent study by Mark R. Rank, a professor at Washington University in St. Louis, startled some policy makers in finding that half of Americans receive food stamps, at least briefly, by the time they turn 20. Among black children, the figure was 90 percent.

I’m not sure how I feel about food stamps.  The classically-trained economist in me wants to point out that money is fungible, so that:

  • for people that, if they were given the equivalent amount of cash, would have bought the same amount of food,  the program largely serves to impose unnecessary administrative costs over a simple cash transfer and places a stigma on the recipients; and
  • for people that, if they were given the equivalent amount of cash, would have bought less food, the program (arguably) willfully deprives them of welfare in addition to the administrative costs and stigma.

On the other hand, we have that:

  • for the (presumed) minority of recipients that have problems with drug or alcohol abuse or have a family member that has problems, receiving aid in the form of food stamps helps ensure that there’s still food on the table (although I do assume that there is a secondary market in food stamps, not to mention in food itself);
  • for the recipients living in high-crime areas, the incentive to steal food stamps is lower than that to steal cash (even if there is a secondary market, it’ll be annoying to deal with and won’t give 100 cents on the dollar), so receiving food stamps is safer;
  • by giving people food stamps instead of cash, you reduce the possibility of a sense of entitlement emerging (one of the major problems in countries, like Britain, with comprehensive welfare systems is that recipients can come to consider the aid they receive as their right and not just (hopefully temporary) assistance); and
  • America, for some reason that is mostly beyond me, has always had trouble facing up to the moral imperative to assist those in genuine need and presenting that assistance as food stamps seems to have granted it some political cover.

Anyway, the NY Times piece comes with some more fantastic graphics.  Here are two snapshots (click-through on either of them to get to the good stuff on the NY Times website):

NYTimes_Foodstamps

NYTimes_Foodstamps_Change

Posted on

On interest rates

In what Tyler Cowen calls “Critically important stuff and two of the best recent economics blog posts, in some time,” Paul Krugman and Brad DeLong have got some interesting thoughts on US interest rates.  First Krugman:

On the face of it, there’s no reason to be worried about interest rates on US debt. Despite large deficits, the Federal government is able to borrow cheaply, at rates that are up from the early post-Lehman period … but well below the pre-crisis levels:

DESCRIPTION

Underlying these low rates is, in turn, the fact that overall borrowing by the nonfinancial sector hasn’t risen: the surge in government borrowing has in fact, less than offset a plunge in private borrowing.

So what’s the problem?

Well, what I hear is that officials don’t trust the demand for long-term government debt, because they see it as driven by a “carry trade”: financial players borrowing cheap money short-term, and using it to buy long-term bonds. They fear that the whole thing could evaporate if long-term rates start to rise, imposing capital losses on the people doing the carry trade; this could, they believe, drive rates way up, even though this possibility doesn’t seem to be priced in by the market.

What’s wrong with this picture?

First of all, what would things look like if the debt situation were perfectly OK? The answer, it seems to me, is that it would look just like what we’re seeing.

Bear in mind that the whole problem right now is that the private sector is hurting, it’s spooked, and it’s looking for safety. So it’s piling into “cash”, which really means short-term debt. (Treasury bill rates briefly went negative yesterday). Meanwhile, the public sector is sustaining demand with deficit spending, financed by long-term debt. So someone has to be bridging the gap between the short-term assets the public wants to hold and the long-term debt the government wants to issue; call it a carry trade if you like, but it’s a normal and necessary thing.

Now, you could and should be worried if this thing looked like a great bubble — if long-term rates looked unreasonably low given the fundamentals. But do they? Long rates fluctuated between 4.5 and 5 percent in the mid-2000s, when the economy was driven by an unsustainable housing boom. Now we face the prospect of a prolonged period of near-zero short-term rates — I don’t see any reason for the Fed funds rate to rise for at least a year, and probably two — which should mean substantially lower long rates even if you expect yields eventually to rise back to 2005 levels. And if we’re facing a Japanese-type lost decade, which seems all too possible, long rates are in fact still unreasonably high.

Still, what about the possibility of a squeeze, in which rising rates for whatever reason produce a vicious circle of collapsing balance sheets among the carry traders, higher rates, and so on? Well, we’ve seen enough of that sort of thing not to dismiss the possibility. But if it does happen, it’s a financial system problem — not a deficit problem. It would basically be saying not that the government is borrowing too much, but that the people conveying funds from savers, who want short-term assets, to the government, which borrows long, are undercapitalized.

And the remedy should be financial, not fiscal. Have the Fed buy more long-term debt; or let the government issue more short-term debt. Whatever you do, don’t undermine recovery by calling off jobs creation.

The point is that it’s crazy to let the rescue of the economy be held hostage to what is, if it’s an issue at all, a technical matter of maturity mismatch. And again, it’s not clear that it even is an issue. What the worriers seem to regard as a danger sign — that supposedly awful carry trade — is exactly what you would expect to see even if fiscal policy were on a perfectly sustainable trajectory.

Then DeLong:

I am not sure Paul is correct when he says that the possible underlying problem is merely “a technical matter of maturity mismatch.” The long Treasury market is thinner than many people think: it is not completely implausible to argue that it is giving us the wrong read on what market expectations really are because long Treasuries right now are held by (a) price-insensitive actors like the PBoC and (b) highly-leveraged risk lovers borrowing at close to zero and collecting coupons as they try to pick up nickles in front of the steamroller. And to the extent that the prices at which businesses can borrow are set by a market that keys off the Treasury market, an unwinding of this “carry trade”–if it really exists–could produce bizarre outcomes.

Bear in mind that this whole story requires that the demand curve slope the wrong way for a while–that if the prices for Treasury bonds fall carry traders lose their shirts and exit the market, and so a small fall in Treasury bond prices turns into a crash until someone else steps in to hold the stock…

For reference, here are the time paths of interest rates for a variety of term lengths and risk profiles (all taken from FRED):

interest_rates_1monthinterest_rates_3monthsinterest_rates_30years

To my own mind, I’m somewhat inclined to agree with Krugman.  While I do believe that the carry trade is occurring, I suspect that it’s effects are mostly elsewhere, or at least that the carry trade is not being played particularly heavily in long-dated US government debt relative to other asset markets.

Notice that the AAA and BAA 30-year corporate rates are basically back to pre-crisis levels and that the premium they pay over 30-year government debt is also back to typical levels.  If the long-dated rates are being pushed down to pre-crisis levels solely by increased supply thanks to the carry trade, then we would surely expect the quantity of credit to also be at pre-crisis levels.  But new credit issuance is down relative to the pre-crisis period.  Since the price is largely unchanged, that means that both demand and supply of credit have shrunk – the supply from fear in the financial market pushing money to the short end of the curve and the demand from the fact that there’s been a recession.

Posted on

The contradictory joys of being the US Treasury Secretary (part 2)

In my last post, I highlighted the apparent contradictions between the USA having both a “strong dollar” policy and a desire to correct their trade deficit (“re-balancing”).  Tim Geithner, speaking recently in Tokyo, declared that there was no contradiction:

Geithner said U.S. efforts to boost exports aren’t in conflict with the “strong-dollar” policy. “I don’t think there’s any contradiction between the policies,” he said.

I then said:

The only way to reconcile what Geithner’s saying with the laws of mathematics is to suppose that his “strong dollar” statements are political and relate only to the nominal exchange rate and observe that trade is driven by the real exchange rate. But that then means that he’s calling for a stable nominal exchange rate combined with either deflation in the USA or inflation in other countries.

Which, together with Nouriel Roubini’s recent observation that the US holding their interest rates at zero is fueling “the mother of all carry trades” [Financial Times, RGE Monitor], provides for a delicious (but probably untrue) sort-of-conspiracy theory:

Suppose that Tim Geithner firmly believes in the need for re-balancing.  He’d ideally like US exports to rise while imports stayed flat (since that would imply strong global growth and new jobs for his boss’s constituents), but he’d settle for US imports falling.  Either way, he needs the US real exchange rate to fall, but he doesn’t care how.  Well, not quite.  His friend Ben Bernanke tells him that he doesn’t want deflation in America, but he doesn’t really care between the nominal exchange rate falling and foreign prices rising (foreign inflation).

The recession-induced interest rates of (effectively) zero in America are now his friend, because he’s going to get what he wants no matter what, thanks to the carry trade.  Private investors are borrowing money at 0% interest in America and then going to foreign countries to invest it at interest rates that are significantly higher than zero.  If the foreign central banks did nothing, that would push the US dollar lower and their own currencies higher and Tim gets what he wants.

But the foreign central banks want a strong dollar because (a) they’re holding gazzilions of dollars worth of US treasuries and they don’t want their value to fall; and (b) they’re not fully independent of their political masters who want to want to keep exporting.   So Tim regularly stands up in public and says that he supports a strong dollar.  That makes him look innocent and excuses the foreign central banks for doing what they were all doing anyway:  printing local money to give to the US-funded investors so as to keep their currencies down (and the US dollar up).

But that means that the money supply in foreign countries is climbing, fast, and while prices may be sticky in the short term, they will start rising soon enough.  Foreign inflation will lower the US real exchange rate and Tim still gets what he wants.

The only hope for the foreign central banks is that the demand for their currencies is a short-lived temporary blip.  In that case, defending their currencies won’t require the creation of too much local currency and they could probably reverse the situation fast enough afterward that they don’t get bad inflation. [This is one of the arguments in favour of central bank involvement in the exchange-rate market.  Since price movements are sluggish, they can sterilise a temporary spike and gradually back out the action before local prices react too much.]

But as foreign central banks have been discovering [1], free money is free money and the carry trade won’t go away until the interest rate gap is sufficiently closed:

Nov. 13 (Bloomberg) — Brazil, South Korea and Russia are losing the battle among developing nations to reduce gains in their currencies and keep exports competitive as the demand for their financial assets, driven by the slumping dollar, is proving more than central banks can handle.

South Korea Deputy Finance Minister Shin Je Yoon said yesterday the country will leave the level of its currency to market forces after adding about $63 billion to its foreign exchange reserves this year to slow the appreciation of the won.
[…]
Brazil’s real is up 1.1 percent against the dollar this month, even after imposing a tax in October on foreign stock and bond investments and increasing foreign reserves by $9.5 billion in October in an effort to curb the currency’s appreciation. The real has risen 33 percent this year.
[…]
“I hear a lot of noise reflecting the government’s discomfort with the exchange rate, but it is hard to fight this,” said Rodrigo Azevedo, the monetary policy director of Brazil’s central bank from 2004 to 2007. “There is very little Brazil can do.”

The central banks are stuck.  They can’t lower their own interest rates to zero (which would stop the carry trade) as that would stick a rocket under domestic production and cause inflation anyway.  The only thing they can do is what Brazil did a little bit of:  impose legal limits on capital inflows, either explicitly or by taxing foreign-owned investments.  But doing that isn’t really an option, either, because they want to be able to keep attracting foreign investment after all this is over and there’s not much scarier to an investor than political uncertainty.

So they have to wait until America raises it’s own rates.  But that won’t happen until America sees a turn-around in jobs and the fastest way for that to happen is for US exports to rise.

[1] Personally, I think the central bankers saw the writing on the wall the minute the Fed lowered US interest rates to (effectively) zero but their political masters were always going to take some time to cotton on.

Posted on

The contradictory joys of being the US Treasury Secretary

Tim Geithner, speaking at the start of the G-20 meeting in Pittsburgh:

Sept. 25 (Bloomberg) — Treasury Secretary Timothy Geithner said he sees a “strong consensus” among Group of 20 nations to reduce reliance on exports for growth and defended the dollar’s role as the world’s reserve currency.

“A strong dollar is very important in the United States,” Geithner said in response to a question at a press conference yesterday in Pittsburgh, where G-20 leaders began two days of talks.

Tim Geithner, speaking in Tokyo while joining the US President on a tour of Asian capitals:

Nov. 11 (Bloomberg) — U.S. Treasury Secretary Timothy Geithner said a strong dollar is in the nation’s interest and the government recognizes the importance it plays in the global financial system.

“I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar,” Geithner told reporters in Tokyo today.
[…]
Geithner said U.S. efforts to boost exports aren’t in conflict with the “strong-dollar” policy. “I don’t think there’s any contradiction between the policies,” he said.

Which is hilarious.

There is no objective standard for currency strength [1].  A “strong (US) dollar” is a dollar strong relative to other currencies, so it’s equivalent to saying “weak non-US-dollar currencies”.  But when the US dollar is up and other currencies are down, that means that the US will import more (and export less), while the other countries will export more (and import less), which is the exact opposite of the re-balancing efforts.

The only way to reconcile what Geithner’s saying with the laws of mathematics is to suppose that his “strong dollar” statements are political and relate only to the nominal exchange rate and observe that trade is driven by the real exchange rate.  But that then means that he’s calling for a stable nominal exchange rate combined with either deflation in the USA or inflation in other countries.

Assuming my previous paragraph is true, 10 points to the person who can see the potential conspiracy theory [2] implication of Nouriel Roubini’s recent observation that the US holding their interest rates at zero is fueling “the mother of all carry trades” [Financial Times, RGE Monitor].

Hint:  If you go for the conspiracy theory, this story would make you think it was working.

Nov. 13 (Bloomberg) — Brazil, South Korea and Russia are losing the battle among developing nations to reduce gains in their currencies and keep exports competitive as the demand for their financial assets, driven by the slumping dollar, is proving more than central banks can handle.
[…]
Governments are amassing record foreign-exchange reserves as they direct central banks to buy dollars in an attempt to stem the greenback’s slide and keep their currencies from appreciating too fast and making their exports too expensive.
[…]
“It looked for a while like the Bank of Korea was trying to defend 1,200, but it looks like they’ve given up and are just trying to slow the advance,” said Collin Crownover, head of currency management in London at State Street Global Advisors

The answer to follow …

Update: The answer is in my next post.

[1] There better not be any gold bugs in the audience.  Don’t make me come over there and hurt you.

[2] Okay, not a conspiracy theory; just a behind-the-scenes-while-completely-in-the-open strategy of international power struggles.

[1] There better not be any gold bugs on this list.  Don’t make me
come over there and hurt you.

[2] Okay, not a conspiracy theory; just a behind-the-scenes-while-
completely-in-the-open strategy of international power struggles.

Posted on

Not raising the minimum wage with inflation will make your country fat

Via Greg Mankiw, here is a new working paper by David O. Meltzer and Zhuo Chen: “The Impact of Minimum Wage Rates on Body Weight in the United States“. The abstract:

Growing consumption of increasingly less expensive food, and especially “fast food”, has been cited as a potential cause of increasing rate of obesity in the United States over the past several decades. Because the real minimum wage in the United States has declined by as much as half over 1968-2007 and because minimum wage labor is a major contributor to the cost of food away from home we hypothesized that changes in the minimum wage would be associated with changes in bodyweight over this period. To examine this, we use data from the Behavioral Risk Factor Surveillance System from 1984-2006 to test whether variation in the real minimum wage was associated with changes in body mass index (BMI). We also examine whether this association varied by gender, education and income, and used quantile regression to test whether the association varied over the BMI distribution. We also estimate the fraction of the increase in BMI since 1970 attributable to minimum wage declines. We find that a $1 decrease in the real minimum wage was associated with a 0.06 increase in BMI. This relationship was significant across gender and income groups and largest among the highest percentiles of the BMI distribution. Real minimum wage decreases can explain 10% of the change in BMI since 1970. We conclude that the declining real minimum wage rates has contributed to the increasing rate of overweight and obesity in the United States. Studies to clarify the mechanism by which minimum wages may affect obesity might help determine appropriate policy responses.

Emphasis is mine.  There is an obvious candidate for the mechanism:

  1. Minimum wages, in real terms, have been falling in the USA over the last 40 years.
  2. Minimum-wage labour is a significant proportion of the cost of “food away from home” (often, but not just including, fast-food).
  3. Therefore the real cost of producing “food away from home” has fallen.
  4. Therefore the relative price of “food away from home” has fallen.
  5. Therefore people eat “food away from home” more frequently and “food at home” less frequently.
  6. Typical “food away from home” has, at the least, more calories than “food at home”.
  7. Therefore, holding the amount of exercise constant,  obesity rates increased.

Update: The magnitude of the effect for items 2) – 7) will probably be greater for fast-food versus regular restaurant food, because minimum-wage labour will almost certainly comprise a larger fraction of costs for a fast-food outlet than it will for a fancy restaurant.

Posted on

Variation in US unemployment

The NY Times brings us a another wonderful graphic.  As of September 2009, white women aged 25 to 34 with a college degree had an unemployment rate of just 3.6%, while black men aged 18 to 24 without a highschool diploma had an unemployment rate of 48.5%.  Change that last group to white men aged 18 to 24 without a highschool diploma and it falls to 25.6%.

Posted on

Media bias and people who are WAAAY out on the political spectrum

Andrew Sullivan points to this research by Pew on how American’s view the bias of the major television networks.  It’s nicely summarised in this diagram (from Pew):

Public perceptions of news network ideology

Andrew makes the obvious and easy comment bashing on Fox:

Clearly the public understands that the network MSM is skewed to the left. But there’s a difference of magnitude between that assessment and that of Fox. Quite simply, most Americans see Fox for what it is: an appendage of a political operation, not a journalistic one. Its absurd distortions, its relentless attacks on Obama from the very start, its hideously shrill hosts, and its tawdry, inflammatory chat all put it in a class by itself.

Personally, I don’t necessarily agree that the MSM is, on average, biased to the left (although maybe that’s just my internal biases talking).  I’ll get to that in a moment, but first …

14% of respondents consider Fox News to be mostly liberal in it’s bias!  That’s almost one in seven.  Just how far out in the political spectrum are those people? What would Fox need to do to convince them that they were neutral?  Actively promote the KKK?

Back to perceptions of bias.  Here is another graphical illustration of the Pew Research data:

US Perceptions of MSM Bias (Pew)

It seems safe to assume that anybody who thinks Fox News is liberal will consider the rest liberal as well, so that explains a large fraction of the “liberal” responses for the rest.  So, excluding the people who are personally so conservative as to consider Fox News to have a pro-liberal bias, this is what it looks like:

US Perceptions of MSM Bias (excl. people who think Fox is liberal)

In other words, when we restrict our attention to people who are not insane [1], the American public agrees with me: by and large, the non-Fox networks are pretty evenly balanced, although MSNBC  is pro-liberal.

[1] Okay, they may not be insane.  I have no evidence than any larger fraction of them are insane than in the rest of the population.  But they do strike me as having some pretty whacky personal beliefs.

Posted on

The death throes of US newspapers?

Via Megan McArdle’s excellent commentary, I discovered the Mon-Fri daily circulation figures for the top 25 newspapers in the USA.  Megan’s words:

I think we’re witnessing the end of the newspaper business, full stop, not the end of the newspaper business as we know it. The economics just aren’t there. At some point, industries enter a death spiral: too few consumers raises their average costs, meaning they eventually have to pass price increases onto their customers. That drives more customers away. Rinse and repeat . . .

[…]

The numbers seem to confirm something I’ve thought for a while: we’re eventually going to end up with a few national papers, a la Britain, rather than local dailies. The Wall Street Journal, the Washington Post, and the New York Times (sorry, conservatives!) are weathering the downturn better than most, and it’s not surprising: business, politics, and national upper-middlebrow culture. But in 25 years, will any of them still be printing their product on the pulped up remains of dead trees? It doesn’t seem all that likely.

For those of you that like your information in pictoral form, here it is:

First, the data.  Look at the Mean/Median/Weighted Mean figures.  That really is an horrific collapse in sales.

US_Newspaper_circulation_data

Second, the distribution (click on the image for a full-sized version):

US_Newspaper_circulation_distribution

Finally, a scatter plot of year-over-year change against the latest circulation figures (click on the image for a full-sized version):

US_Newspaper_circulation_scatterplotAs Megan alluded in the second paragraph I quoted, there appears to be a weak relationship between the size of the paper and the declines they’ve suffered, with the bigger papers holding up better.  The USA Today is the clear exception to that idea.  Indeed, if the USA Today is excluded from the (already very small!) sample the R^2 becomes 30%.

To really appreciate just how devestating those numbers are, you need to combine it with advertising figures.  Since newspapers take revenue from both sales (circulation) and advertising, the fact that advertising revenue has also collapsed, as it always does in a recession, means that newspapers have taken not just one but two knives to the chest.

Here’s advertising expenditure in newspapers over recent years, taken from here:

Year Expenditure (millions of dollars) Year-over-year % change
2005 47,408
2006 46,611 -1.7%
2007 42,209 -9.2%
2008 34,740 -17.7%

Which is ugly.  Remember, also, that this expenditure is nominal.  Adjusted for inflation, the figures will be worse.

So what do you do when your ad sales and your circulation figures both fall by over 15%?  Oh, and you can’t really cut costs any more because, as Megan says:

For twenty years, newspapers have been trying to slow the process with increasingly desperate cost cutting, but almost all are at the end of that rope; they can’t cut their newsroom or production staff any further and still put out a newspaper. There just aren’t enough customers who are willing to pay for their product what it costs to produce it.

Which, in economics speak, means that the newspaper business has a large fixed cost component that isn’t particularly variable even in the long run.

Tyler Cowen, in an excellent post that demonstrates precisely why I read him daily, says:

I believe with p = 0.6 that the world is in for a “great disruption.”  It has come to MSM first but it will not end there.  In the longer run I am optimistic about the results of this change — computers will free up lots of human labor — but in the meantime it will have drastic implications for income redistribution, across both individuals and across economic sectors.  For a core metaphor, the internet displacing paid journalism and classified ads is a good place to start.  The value of newspapers has been sucked into Google.

[…]Once The Great Disruption becomes more evident, entertainment will be very very cheap.

Which may well be true, but will be cold comfort for all of those traditional journalists out there.

Posted on

Just a smidgen more on US healthcare reform

My previous comment on US healthcare reform, which was actually a comment on the current Australian system, got quite a few eyeballs thanks to John Hempton’s shout-out.  Anyway, I thought I’d highlight a couple of new developments for my little audience.

First, Republican Senator Olympia Snowe (of Maine), who sits on the Senate Finance Committee, has said that she will vote in favour of the suggested bill being proposed by that committee’s chairman, Max Baucus.  That is good for the Democrats as it will provide valuable political cover.  It’s no guarantee that she will vote in favour of whatever the Senate as a whole end up producing, or for whatever the Senate and House then negotiate as the final bill, but it’s still a significant move and the probability of her voting for those later versions has just increased.

Second, we have the fact that the healthcare insurance industry has recently done an about-face, from actively promoting reform to actively fighting against it.  Nate Silver points out why:

Take a look at what’s happened to the share prices of the six largest publicly-traded health insurance companies since Labor Day, which was about the point at which the Democrats appeared to regain their footing — at least up to a point — on health care.

Weighted for market capitalization, these insurance stocks have lost 11 percent of their value since Labor Day, wiping out about $10 billion in value. And that’s understating the case since the major indices have gained 5-8 percent over the same period — the insurance industry stocks are underperforming the market by just shy of 20 percent.

So why have they tanked in the stock market?  Nate suggests two reasons:

Firstly, the individual mandate has been weakened to the point where it’s arguably a tokenish provision. There are good, policy reasons to be worried about this, although the insurance lobby’s reasons for being opposed — they’ll have less guarantee of an incoming phalanx of high-margin customers — are not necessarily the same as the public’s at large. The second factor is that the Baucus bill in certain ways treats the insurers fairly harshly, both taxing them directly as well as levying a surcharge on high-cost insurance plans.

I’d also suggest that the compromise version of the public option (that it be in the bill, but with states able to opt out if they wish [Paul Krugman, Talking Points Memo]) will have scared the insurance companies and investors as well.