Marketplace: News Archives

Federal Reserve Chairman Alan Greenspan is trying to perfect his role as master of the economic balancing act. During his second appearance on Capitol Hill in less than a week, the Fed Chief said today the central bank's main goal is to sustain the economy's expansionary run. But he's concerned that if things keep speeding along at their current clip, we could be headed for a nasty bump.

Greenspan: "Then we are like the boat heading towards the dock, and instead of turning so we don't go slamming into the dock, we go straight into the dock, and find out that we should have turned, at least partially, in order to come into, to create a triple metaphor, I guess, a soft landing."

In other words, the combination of a tight labor market and strong consumer spending powered by stock market gains could send the economy hurtling into inflation. The Fed has raised interest rates four times in the past eight months in an effort to steer clear of that threat. And Mr. Greenspan indicated that the central bank is prepared to raise rates again, if necessary.

The National Association of Business Economics thinks the Fed is on the right course. During a seminar in Washington, D.C. this week, the group released a survey showing the majority of its members think the Fed will be forced to raise interest rates several times this year to keep the economy on the straight and narrow. Diane Swonk is President of the NABE. She says this is an about face for her many of her colleagues, who just a year ago thought the economy would gear down on its own. But several factors, including stronger-than-expected growth, higher oil prices, and the tight labor market, have now convinced many economists that the Fed will have to take action.

Swonk: "You're starting to even see some outliner examples of small businesses that have had to actually cut back on their business because they simply can't find the workers they need to fulfill the orders they have. That's a sign of an economy that's beginning to build imbalances, particularly in labor markets."

In fact, some members of the NABE are now concerned that the Fed may be moving too slowly and that it has to act more quickly to fend off inflation.

That's not the case with James Galbraith. An economist at the University of Texas at Austin, he believes the Fed has taken a wrong turn.

Galbraith: "I would stop raising interest rates. There is absolutely no reason for this campaign. We do not face an inflationary threat which needs to be combated by raising interest rates. If the Federal Reserve is concerned about speculative activities in the stock market, then they should put up the margin requirements, that is to say, make it harder to borrow in order to purchase stock. And they should ask Congress to pass a tax on stock transactions."

Galbraith believes such a tax would encourage consumers to invest their wealth more widely into other assets such as housing, which in turn would help extend the current economic boom.

How do you feel about the fact that a chunk of your doctor's income depends on how cheaply he or she can treat you? That's basically the issue that came up for debate before the Supreme Court today, where the justices are considering whether financial incentives breach the duty a doctor owes a patient. From the Marketplace Health desk, Helen Palmer has the details.

Palmer: "At issue is the case of Cynthia Herdrich. Her doctor delayed ordering an ultrasound for stomach pains until one could be scheduled at a hospital affiliated with her HMO. Her infected appendix burst, requiring emergency surgery. She won a malpractice case but it's the more fundamental argument, that HMO's financial incentives cause doctors to poorly serve patients, that's now reached the Supreme Court. Gregg Bloche teaches Health Policy and Law at Georgetown University."

Bloche: "It's now commonplace for physicians to see 20 percent or more of their expected annual income at risk based on how much money they spend on care."

Palmer: "That sets up an obvious conflict of interest, he says, between a doctor's professional Hippocratic duty and his own bottom line. What's caused this, he thinks, is a shift in the cost containment strategy of managed care. Patients hated the scenario of 'faceless bureaucrats denying claims' so passionately that by the mid-1990s, HMOs started to put the onus on doctors by rewarding their frugality. But the President of the American Association of Health Plans, Karen Ignani, says what's now under threat, should the plaintiffs prevail, is the very existence of managed care."

Ignani: "Any tool that health plans use to promote high quality, more affordable health care could be put in jeopardy."

Palmer: "The big problem here, say both sides, is that what Americans want is inconsistent: the best possible care when we're sick, and low health care costs. From WGBH Boston, I'm Helen Palmer for Marketplace."

The High Court is expected to hand down a ruling by July.

And that's the top of our news for Wednesday, February 23rd. The Dow Jones Industrial Average fell 79 points or about 0.75 percent today, but the NASDAQ charged up 3.8 percent to a new high.

The WTO and U.S. Taxes
The World Trade Organization appellate body is expected to rule on Thursday on the legality of a U.S. tax scheme affecting hundreds of billions of dollars of U.S. exports. Stephen Beard reports.

Shopping in the Buff
An Austrian department store promotes 385 dollars of clothing credit to the first four customers to enter their stores au natural. Marketplace's Mitchell Hartman has the latest.

Women Battle for Business Funding
Women's groups are pushing for a piece of the federal funding set aside for non-white owned business. Bonnie Erbe talks about their argument.

Umbilical Cord Blood Banks
Stem cells are the latest possible remedy for many incurable diseases, and the place to find them is in the umbilical cord. Karen Brown looks into how much parents are willing to pay to save their baby's blood.

"Boiler Room" Review
L.A.Times critic Kenneth Turan reviews the newest and controversial film starring Giovanni Ribisi.

Look-Ahead
Coming up on 2/24/00: Host Cheryl Glaser talks with the CEO of UPS in the Marketplace studio about shipping, fuel prices, e-commerce and more.