Thursday, February 28, 2013

'We Could Carve A Better Senate Out of a Bunch of Ripened Old Bananas!'

A Better Man
Carved out of a Banana
This wonderfully descriptive dig is derived from President Theodore Roosevelt who pretty much used the First Amendment freedom of speech whenever he wanted.

Oliver Wendell Holmes, whom Roosevelt had gleefully appointed to the Supreme Court 18 months previous, ruled against one of Roosevelt's signature anti-trust pieces of legislation, of which he had many.

Roosevelt erupted with his famous statement: 'I could carve a better judge out of a banana!' He used other versions to describe various political opponents who denied or frustrated him in any way. One was excoriated thusly: 'I could carve a better backbone out of a banana!'

Given today's 'Doomsday Scenario' of 'The Big, Bad Sequester' happening tomorrow, we think it is important to revisit the US Constitution and try to divine what the Founders were thinking when they formed our Republic 226 years ago.

Wouldn't they be proud of the way this President, this Senate and this Congress have worked together to keep this Republic together for the next 226 years in which our children, grandchildren and future offspring could enjoy, live and prosper?

Sadly, we think the Founders would say of today's US Senate: 'We could carve a better Senate out of a bunch of ripened old bananas!'

What is the 'missing link' in this whole process? Why has it gotten this bad?

Something has been troubling us ever since the Republicans took back control of the House in 2010 as a direct consequence of the overreach of President Obama and the Democrats who controlled both the House and Senate in his first 2 years as President. It always happens when one side or the other has unfettered power and they lord it over the other side like a sledgehammer.

Seemingly, they are oblivious to the fact that one day, perhaps soon, they will not have unfettered power to do as they please. There might be a split government or they may be in the minority once again where they all of a sudden have to respect the other side again. It happens time and time and time again in American politics.

For that, we can thank the Founders for their wonderfully created system where the rights of the minority party are protected and preserved and the checks and balances works against tyrannical control by either party or single person.

What has really troubled us is the abject abrogation of duty, leadership and responsibility by the US Senate, once known as 'The World's Greatest Deliberative Body' when such oratorical giants as Daniel Webster and Henry Clay regularly held court.

Today, the US Senate should be known as simply 'The World's Greatest Non-Deliberative, Dilatory and Responsibility-Shirking Body The World Has Ever Known!'

Seriously. What do they do up there every single day we are paying them to be up there? We would be getting the same amount of work done and final production in terms of solving things like the budget sequester crisis if the 100 US Senators were on a junket for an extended period of time.

For anyone who has worked in the US Senate for even 1 minute, the lack of deliberative, thoughtful, coherent work under Majority Leader Harry Reid is an embarrassment to us as a nation.  We have heard from various Senate staffers, observers and operatives that the US Senate 'just doesn't work anymore'.

Here's the saddest part.  Senator Reid seems to have forgotten his civics lessons from the 6th grade growing up in Searchlight, Nevada. Assuming he read them in the first place.

There is absolutely no role for any US President to be involved with the annual federal budgeting process.  Not a single solitary one. This is a constitutional role solely reserved for the US Congress made up of duly-elected people who are elected from 435 congressional districts and 2 people from each of the 50 states. All revenue bills will originate in the US House says the Constitution, not the White House or even the Senate.

Those are the rules of the game, whether you like it or not. To do otherwise would be like playing golf without reading the Rules of Golf beforehand.

The Budget and Impoundment Control Act of 1974 made it crystal clear that the ONLY thing a President could or should do in the annual appropriations process is veto any bill he/she thinks is wasteful or overspends in any way. That is in the Constitution as well in case anyone has forgotten that little fact as well.

The House is supposed to pass a budget each year, hopefully before April or May, which the Republicans under Speaker John Boehner have done for the past 2 years now and will do so again in 2013.

The US Senate is then 'supposed' to pass a budget which Senator Harry Reid has either conveniently 'forgotten' to do or just plain has wanted to be obstinate and not do for the past 1400 days.

That is over 3.83 years and counting, people. That is about 27 years in dog-years if you want to stretch it out even more.

We know there are younger, more responsible and thoughtful Democratic Senators such as Senator Mark Warner of Virginia who want to be fiscally-responsible and pass annual budgets.

Senator Reid is not allowing them to do it.

Once both the House and the Senate pass their versions of annual budgets for the US government, they go to conference and reconcile their differences. Both houses then pass the compromise budget before sending spending instructions to each of the appropriations committees (13 in the House) which tells them how much money they can spend in that specific fiscal year.

Have you noticed that nothing in this discussion so far has included the President at all?

That is because the budgets passed by Congress are 'concurrent resolutions' that are not officially 'law' as any 'Public Law #1234' would be. The President never has to sign any budget passed by both the House and Senate and reconciled in a compromise committee. Nor can he veto a budget resolution.

These are powers solely reserved to the US Congress as composed of 435 Representatives and 100 Senators.

So here's our question of the day:

'Why in the world should Speaker John Boehner and the House GOP ever discuss budget issues with anyone other than Majority Leader Reid and the Senate Democrats?'

Leave President Obama and every other US President to come out of the budget debate entirely. 'It is none of his business' one could say with an air of constitutional finality about it all.

The onus of this colossal failure to govern should fall squarely at the feet of Majority Leader Harry Reid where it rightfully belongs. He will not be remembered by future historians as a Senate Leader on the order of a Henry Clay or even an LBJ.  We feel reasonably certain in making that somewhat bold prediction.

President Teddy Roosevelt was pretty ruthless when he said he could carve better men and backbones out of bananas.

He didn't say anything about carving better brains out of bananas.  But he could have. We are seeing it played out live today in 'The Great Sequester of 2013'.

This might be one for the Guinness Book of World Records. For stupidity and dereliction of duty. At the same time.

Sunday, February 24, 2013

'The Booze Sequester'-Part II In Greater Detail

'The Booze Sequester'
It is like not drinking 2 out of these 100 bottles
at a frat party
Sometimes having a visual image of a complicated political issue is a good and helpful thing to use.

Our last post on 'Sequesternomics' tried to explain the basics of the upcoming sequester of the federal budget that will happen next Friday, March 1 unless President Obama and the Senate Democrats lay some concrete budget cuts on the table to match those already passed by the Republicans in the House in the last Congress.

We thought it might be a good idea to go into the sequester swamp one more time before the week starts and you start hearing how 'we are going to go into the Next Great Recession!'; 'the sky is falling!' and 'the world is ending as we know it!'.

First: Let's start with this great graph:

As you can see, federal spending is going to continue to go up,up, up, up, up, up, up, up at a rate of about 6% annually for the next 8 years. 5 years ago, the federal budget was 'only' $2.7 trillion. It is now almost $1 trillion higher at $3.6 trillion, a 37% increase in 5 years.

Has your pay increased 37% in the last 5 years?  That is how ridiculously fast the federal government has exploded in spending. It 'exploded' as a result of the Great Financial Crisis...and never returned to pre-crisis baselines.

President Obama can't find $85B to cut out of the $1 trillion or 37% increase in annual new spending that has exploded since 2007? Seriously?  You have got to be kidding, right?

Can anyone show us where overall federal spending is going down in this chart? If you can, then you must be a hypnotist who can also make everyone bark like a dog whenever you want to as well since that is simply not the truth.

The amounts of money that will be 'sequestered' going forward are almost 'decimal dust' as budgeteers would call them. $1.2 trillion in spending restraint out of a projected $37 trillion in projected federal spending over the next 8 years is 3 cents on the dollar or 3% for the entire period of time.

Second:  Let's take the 'booze' analogy that many readers commented on as being 'very helpful' to understanding what is going on with this crazy sequester issue.  It can be very complicated.

If you are a teetotaler and referencing alcohol offends your sensibilities in any way, replace the booze with a 2-liter bottle of sugary soft drink of your choice. 2 liters of soft drinks per day will not be good for your health over the long-run either.

A few very picky and persnickety observers complained that the previous booze analogy was too broad and ignored some of the particularly painful gory details of this sequester, mostly on programs they know and love (and are perhaps employed in protecting in some way or another)

To that we plead: 'Guilty, Your Honor!' We are trying to pass along the broader concepts of federal budget, tax and health care policy so you can at least keep up with the news as both sides try to spin it to their advantage, not yours from a comprehension standpoint.

So here goes another very detailed run at using 'booze' (or soft drinks) as a metaphor or visual image for what is going to happen under this sequester for the rest of FY 2013 up until October 1, 2013 and thereafter for the next 8 years.

'Suppose you budgeted to drink a fifth of booze every single day this year. A 'Booze Sequester' of similar magnitude to the overall federal budget sequester would reduce your intake to 98% of a fifth of booze per day for the entirety of this year, FY 2013 which started October 1, 2012.
However, due to the targeting of the sequester to address mostly domestic and military programs as suggested by White House aide Jack Lew and corroborated by Bob Woodward of the Washington Post, many specific programs will be hit disproportionately harder than the overall 2% number would suggest.
For example, the sequester calls for $42.7 billion in defense cuts (a 7.9 percent cut), $28.7 billion in domestic discretionary cuts (a 5.3 percent cut), $9.9 billion in Medicare cuts (a 2 percent cut), $4 billion in other mandatory cuts (a 5.8 percent cut to non-defense programs, and a 7.8 percent cut to mandatory defense programs)
To put that in 'booze'-related terms: 
  • Defense will be able to 'only' drink 92.1% of the fifth of booze allocated to them for the entire FY 2013
  • Domestic Discretionary Programs can drink 'only' 94.7% of a fifth in FY 2013
  • Medicare drinks 'only' 98% of the fifth of booze it was expected to consume in FY'13
  • Other mandatory programs can drink 'only' roughly 93.2% of the fifth of booze it was expected to consume in 2013
Now, part of the reason why this could feel like such a 'sacrifice' is that 5/12's of the fiscal year has already been completed (FY's run October 1-Sept 30) and 5/12th of the fifth of booze has already been 'drunk' by each agency in the government. Unless each agency affected above has had able chiefs of staffs and planners who made contingency plans to deal with the possibility of this sequester coming true, they will have to make these cuts out of their remaining budget for the year.
The smart and capable administrators will have set aside a commensurate amount of funds in their monthly budgets to meet these potential cuts in spending. Reductions in travel; not hiring people to fill vacant positions, holding off on purchase of new IT equipment...there is a myriad of ways to hold down spending in any government agency, just as in the private sector. 
There will be many agencies that did not believe the sequestration would ever occur that will have to cut their consumption of booze down to perhaps just under 1/2 of the fifth for the remaining 7 months since they have already consumed 5/12ths of the bottle in the first 5 months of this fiscal year. They'll still be consuming, just not as much as they thought they were going to be able to consume at the beginning of the fiscal year.
These will be 'real' cuts. No doubt about it. 
However, starting October 1, 2013 for FY 2014, each agency gets to start all over again, albeit at the reduced levels incurred by the sequester. A new fiscal year will have started presumably by then with the next appropriations bills passed and, God Forbid, maybe even a budget reconciliation bill to deal with the mandatory programs. Then, they get to add perhaps another 6.5% of a fifth on top of this year's final sequestered amount instead of the 7% increase that was included in the baseline prior to this sequester.
The 'predicted' baseline increase of consumption of booze for the future will be reduced in similar percentages for the next 8 years.  You will still be 'over-drinking' heavily...just not as much as you want to and hoped to before the Booze Sequester was activated.'
Hopefully, this will not drive you to drink but will help you understand the Sturm und Drang you are about to see unleashed on cable news shows this week, mostly MSNBC. as they seek to portray the Republicans as the nasty trolls under the bridge.

This sequester is a budget mechanism proposed by Jack Lew and President Obama and agreed to by the House Republicans in the fiscal cliff negotiations starting in 2011. The Republicans have laid out their version of spending reductions they are willing to pass to avoid the sequester.

The ball is now in President Obama's court. Will he come to the bargaining table with real spending cuts to negotiate with the Republicans? Or will he let the sequester hit on March 1 and cause all the damage to domestic and military programs that he says it will cause?

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Friday, February 22, 2013

'Sequesternomics-101'- What To Believe Or Not Believe

Which Part of the Pig to 'Sequester'?

'se·ques·ter transitive verb \si-ˈkwes-tər\ se·ques·tered se·ques·ter·ing

Definition of SEQUESTER

1: a: to set apart : segregate

b: seclude, withdraw
2: a: to seize especially by a writ of sequestration
b: to place (property) in custody especially in sequestration
3: to hold (as a metallic ion) in solution usually by inclusion in an appropriate coordination complex
Examples of SEQUESTER-The jury was sequestered until a verdict was reached.He was sequestered in his room. 
Middle English sequestren, from Anglo-French sequestrer, from Latin sequestrare to hand over to a trustee, from sequester third party to whom disputed property is entrusted, agent, from secus beside, otherwise; akin to Latin sequi to follow

First Known Use: 14th century'
Leave it to American politics to come up with a new definition of a word to describe what we do here versus the rest of the sane universe.

The 1974 Budget and Impoundment Control Act was passed by Congress, not surprisingly when you think about it now with hindsight, to limit President Nixon's power to 'impound' or not spend money appropriated by Congress in the annual budget process.

This bill was signed into law on July 12, 1974. President Nixon resigned in disgrace on August 9, 1974, less than 2 months later. No correlation between the two, of course.

There has always been a tension between the Congressional power to spend tax money and executive power to veto Congressional spending and not spend tax money. Nixon wanted to 'impound' money from being spent on $12 billion in 'unworthy, wasteful programs' in his opinion in 1973-74 to help curtail then-considered 'explosive' federal spending and curb inflation fears.  Congress wanted to cut his presidential power to do so.

The debt was a 'whopping' $343 Billion in 1974. Federal spending amounted to a 'terrible' amount of $269 billion (not trillion). The federal budget deficit in 1974? You guessed it. A 'horrendous' $6 Billion. (see CBO Budget Table)

However, a Congress of 435 House Representatives and 100 Senators seems to be organically incapable of figuring out how to meet the needs, wants and desires of all elected officials and do so in a way that balances with tax revenue coming in the Treasury each year.

So in 1985, Congress passed the Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act which was the first bill to use the new power of 'sequester' to cut federal spending across-the-board with a meat cleaver if Congress and the President could not come to an agreement on the annual budget.

We remember it vividly because it cut 10% out of the congressional budget we were operating under during the first year of the term of former Congressman Alex McMillan (R-NC) in Congress.

Sequesters work. We had close to $100,000 cut out of our congressional office budget at the time which did not make our newly-hired staffers very happy I seem to recall.

Sequesters since then have been mainly used as 'threats' to force deals to be cut in the legislative process. 'No one in their right mind would ever let such indiscriminate cuts happen!' has been the prevailing attitude since 1985.

But that presumes that everyone in Congress and the Senate and the White House has a 'right mind' to begin with.  As in a mind that can read and write, add and subtract, cogitate and persuade and aim towards a balanced budget, one of the most basic concepts of civilized societies that survive for any length of time.

We have abject empirical proof in Washington for the past 13 years that there is not a working majority of 'right minds' in Congress and the White House, now don't we?  If we did, we could have avoided ringing up a national debt now of $16 trillion...and counting; the financial collapse of 2008; a collapse in our public education systems across the nation and so on. Add your favorite peeve.

Here's some things to keep in mind when the silliness of this sequester Kabuki Dance gets splayed all over the cable news shows and talk radio:

  1. The $85B in sequester cuts represent about a 2% cut in the entire federal budget
  2. The $85B in sequester cuts represent less than 0.5% of US GDP for 2013
  3. The $85B in sequester cuts are less than the total economic impact of Hurricane Sandy and the Drought of 2012..and the American Republic and economy survived both of them.
  4. The $85B in sequester cuts represent a portion of the accumulated growth in federal spending that has been bottled up in 'future baseline projections' for the last 10 years.
  5. Reducing federal spending by $85B in sequester cuts this year will not take FY 2013 spending down below where it was for FY 2012.
  6. Invoking the sequester now will not cut a damn thing in absolute terms in future spending for the next 9 years! Every single year, federal spending will continue to increase over the previous fiscal year, except at a slightly lower rate of growth.
  7. Instead of averaging 6.5% annual growth, for example, federal spending would 'only' average perhaps 5.9% growth for the next 9 years after this sequester is enacted.
  8. Every year, the federal government would be spending more than the rate of inflation in the general economy.

If you need a vivid, visual way to think about the sequester, consider this as you look at this graph and ponder how such small cuts overall could cause the turmoil some are predicting:

Suppose you like to drink a fifth of booze every single day this year. A 'Booze Sequester' of similar magnitude would reduce your intake to 98% of a fifth of booze per day until October 1 of this year, 2013.

For FY 2014, instead of being able to consume 1 fifth of booze plus 7% of another fifth of booze per day, you will 'only' be able to consume 1 fifth of booze plus 6% of another fifth of booze. Per day.

Your 'predicted' baseline increase of consumption of booze for the future will be reduced in similar percentages for the next 8 years.  You will still be 'over-drinking' heavily...just not as much as you want to and hoped to before the Booze Sequester was passed by your spouse and family.

Who would be rightly concerned about your consumption habits. Because they know that it will eventually lead to your mental, physical and spiritual demise.

President Obama is now 'decrying the terrible, catastrophic effects!' of this sequester on out nation's economy and people.  What he is not 'decrying' is the documented fact that is was he, himself, or someone acting on his behalf in negotiations with the 'dirty rotten scoundrels of the GOP!' who suggested that the sequester be used in the first place to hopefully force both sides to come to the bargaining table in the last couple of years to hammer out an agreement to avoid just such a conflagration. (see Bob Woodward)

After not seeing any meaningful, real spending cuts come out of this White House in the last four years, and watching the 'fiscal cliff' deal culminate in what was essentially only a tax hike on those making over $400,000 then, which settled the 'fairness' debate in our book, we think the best thing to do is to see the sequester go into effect on March 1.

It will be the first and only 'true' spending restraint seen come out of Washington in over a decade. 

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Tuesday, February 19, 2013

'There Must Be A Pony In There Somewhere!'

The Pony in the Horse Manure Pile
One of Ronald Reagan's favorite stories had to do with two young boys, one a pessimist and one an optimist.

'A psychiatrist came in to treat the young pessimist. Trying to brighten his outlook, the psychiatrist took him to a room piled to the ceiling with brand-new toys. But instead of yelping with delight, the little boy burst into tears.

"What's the matter?" the psychiatrist asked, baffled. "Don't you want to play with any of the toys?" "Yes," the little boy bawled, "but if I did, I'd only break them."

Next the psychiatrist treated the young boy who was the ultimate optimist. Trying to dampen his outlook, the psychiatrist took him to a room piled to the ceiling with horse manure. But instead of wrinkling his nose in disgust, the optimist little boy issued the yelp of delight the psychiatrist had been hoping to hear from his brother, the pessimist. Then he clambered to the top of the pile, dropped to his knees, and began gleefully digging out scoop after scoop with his bare hands.

"What do you think you're doing?" the psychiatrist asked, just as baffled by the optimist as he had been by the pessimist.

"With all this manure," the little boy replied, beaming, 'there must be a pony in here somewhere!'*

If you look at the mess that is now known as 'Medicare' and the general American health care system, you simply have to be an optimist and figure 'there must be a pony in there somewhere!'

We just have to think clearly about what our objectives are as a nation when it comes to health care policy regarding 'insurance' versus pre-paid health services for everyone.  There is a huge difference between the two.

We have said this many times before: We can not continue along the lines of delivering health care under the current multi-variegated, quasi-private but mostly federal government-run and mandated structure dominated by Medicare and Medicaid and soon-to-be further complicated by a factor of 1 million under Obamacare.

Try to read the bill in its entirety and see if you can understand it.

Like the little optimist, we think there are seeds in this current broken system that can be part of the solution going forward.

Such as this one:
'Why not use the $300-$360/month Part B premium now paid by every senior citizen to buy catastrophic high-end insurance coverage? That is what 'insurance' is supposed to do, right? Protect everyone from being wiped out by the high costs of debilitating disease that lands you in the hospitals for months if not years on end?'
We saw in our last post that 1% of all citizens consume 35% of all health care expenditures each year. 5% consume 60% of every dollar spent on health care. We just don't know which individual is going to suffer such a catastrophic event and treatment each year which is why insurance was invented in the first place.

Ben Franklin established the first home insurance plan in 1752 in Philadelphia where homeowners made contributions to a plan that would help prevent fires. His fire company would send out teams of firemen to help put out fires in the homes with paid-up insurance. They would 'conveniently' pass by the homes where the tenant refused to buy his insurance in the first place.

There is an analogy in that story for modern-day 21st century American health care insurance, we just know there is.

But here is the beauty of this idea:  It is simple. It is fair. It can be easily communicated to the public. 100% of the seniors now covered by Medicare would be covered 100% for any catastrophic health care event that might afflict them going forward from Day One. Which is the main fear everyone has has they age anyway, right?

The younger taxpayers who know that Medicare is simply unsustainable in its current form will breathe a huge sigh of relief that their payroll taxes won't double for a program they will never get any benefits from as it stands today anyway.

Similar plans could be set up for Medicaid recipients out of existing resources in that second highest risk group of people for high-cost medical ailments and long-term treatment.

We have heard from health insurance actuaries in the past that catastrophic insurance, which presumably would include long-term care, would cost perhaps $300/month per person if the entire population of 310 million people were covered.  Perhaps the number for 100% of all seniors would be $350/month or $400/month; we won't know until we ask for a more complete analysis. But it is in the range of current Medicare monthly Part B payments by over 44 million senior citizens.

'And what we we do with the roughly $1 trillion of federal tax dollars now being spent every year on Medicare and Medicaid?' the harrumphers like Paul Krugman and other big government-spending addicts will harrumph.

'Well, for one thing, after we figure out how to build and support more community health centers to serve the under-served and poor populations better, why not return all the payroll taxes in the form of the ultimate payroll tax holiday as in 'abolish payroll taxes for Medicare'? General tax revenues can be allocated during the normal appropriations process as the need is determined.

Another option might be to eliminate the federal budget deficit in one fell swoop with this one single simple change.

'Ockham's Razor' posits that the best solution is usually the most simple solution. We have already proven the opposite of Ockham's Razor with close to 40 years of Medicare, Medicaid, a mountain of ERISA-regulated benefits plans and now Obamacare: 'The worst solution is the most complicated solution'

Let's look into this 'simple solution' and see if it will work before continuing down the path that we know will not work and may be heading us to financial ruin.

There might be a pony in there somewhere.

*Adapted from 'The Pony In the Dung Heap: When Life Buries You, Dig'-Peter Robinson

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Sunday, February 17, 2013

Slaying The Big Four Horsemen of the Health Care Apocalypse

Not the 4 Horsemen of Health Care
  1. 1% of the US population, about 3.1 million people, use 35% of all health care expenditures each year. The specific people in this number change each year due to death or recovery.
  2. 5% of the US population, about 15.5 million people, use 60% of all health care expenditures each year. The specific people in this number change each year due to death or recovery.
  3. Many, if not a majority of these people are in the Medicare and Medicaid programs.
  4. Health care now consumes 18% of GNP. It is expected to consume 20% of GDP by 2021.
  5. Chronic disease such as diabetes, heart disease, cancer and strokes, account for most of our expenditures. 
  6. Anywhere from 35%-50% of all health care expenditures can be attributable to these four conditions.
  7. 35% of all health care expenditures is almost $1 trillion per year, $900 billion to be exact.  50% is $1.3 trillion.
  8. These 'Big Four Horsemen of the Health Care Apocalypse' can be 'solved' if everyone in America did the following things right now: a) stopped smoking; b) stopped excessive drinking; c) stopped over-eating and lost 25% of the body mass weight soon and d) exercised 45 minutes per day which could include just walking or climbing stairs instead of taking the elevator or escalator.
  9. The average life expectancy of the US population has increased from 48 years in 1900 to 81 in 2012 over these past 113  years.  
  10. 60% of Americans are overweight. 
  11. 75% of American young people can't qualify for military service for mostly physical fitness reasons.
  12. 17% of our adolescents are obese.  
  13. 3 out of 4 Americans of draft age are not eligible to serve in our military due to lack of education, criminal record or can't pass physical fitness parameters. The latter makes up more than 50% of the inability of recruits to qualify to serve in our armed forces.*
We don't make these statistics up.  These come from various governmental resources and presentations we have seen lately. And there are some people out there who think medical care cost inflation is going to flatten out in the near foreseeable future?

You don't like Obamacare? Or the insurance companies? BCBS? Paying for Medicare or Medicaid through your tax dollars? (Seniors get a nice 85% subsidy from every working person young and old through Medicare)

You have it in your hands to reduce the impact of all of them on your daily lives as well as the federal taxpayer. You can take better care of yourself as noted above. We all can.

But, you can also contact your elected representatives in Washington and your state capital and start to demand that in return for any state or federal taxpayer-subsidized health care payments, the recipient must agree to a managed health care plan to help them stop smoking, stop over-drinking, end any drug addiction they might have, stop over-eating and exercise 45-minutes per day even if it only means walking around the parking lot hundreds of times.

The time has long since passed in this country when welfare money issued by the state or federal government, which includes Medicare as well as Medicaid, can be handed out without any conditions or responsibilities on the part of the willing recipient.

If you want to smoke 4 packs of cigarettes per day, drink a case of beer and a fifth of liquor every night, eat Burger King Whoppers for breakfast, lunch and dinner and wash it down with a 64 oz Big Gulp, and stay on your couch all day watching reruns of 'I Love Lucy' with a remote in your hand, that is fine. You are more than free to do it.  On your own dime and time and conditions, however. Buy your own health insurance and then you can do with your body whatever you want to, good or bad.

However, if you want any hard-working, responsible taxpaying citizen to subsidize your health insurance and health care costs, you should be required to submit to some firm regimen of health care maintenance and cost containment simply because you are asking your fellow citizen to help pay the cost of repairing your health.

In some circles, that may sound 'draconian' and 'unfair'. For most of American history, this would be considered 'personal responsibility', 'honor' and 'duty'.

We don't mind helping out the older citizen, the young and the poor with some form of social assistance. Especially if they simply can not do so on their own.

The time has now arrived when we can not throw any more taxpayer money at rising costs of health care for conditions that can and should be managed by the individual.  Every individual, you and me included.

Between 35-50% of all health care costs are preventable.

Let's start taking action to make it so.

*thanks and a hat tip to Dr. Randall Williams of Raleigh, North Carolina for compiling and sharing some (most) of these stats

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Friday, February 15, 2013

'We Don't Have A Spending Problem!'

'Actually, we just more of the rich people's money!'
So many leading Democrats have espoused this opinion lately that you gotta believe it is in weekly talking points put out by David Axelrod or David Plouffe. From President Obama to Nancy Pelosi to Senator Tom Harkin.

'The Campaign of President Barack Obama Will Never End' apparently.

Listening to them on the news shows or reading such comments on-line makes you think they must also believe in the Tooth Fairy, the Easter Bunny or that this asteroid passing us today has more intelligent life on it than Planet Earth.

Here are the facts as we know them today, February 15, 2013:

  1. Federal spending accounted for 22.8% of GDP in 2012, down from 25% in 2009 when The Financial Crisis began. 
  2. If our US economy ever returns to 'normal growth' of 5%+ in the years following most every other recession in American history and then settles into annualized 3% growth per year, federal spending may fall back under 21% GDP where it has been for the past 30 years.
  3. A recovered economy would return federal revenues as a share of GDP from a historically low 15.8% level in 2012 to over 19.1% of GDP by 2015.
  4. The historical rate of tax collection in the US has been 17.9% for the past 40 years.
The facts are that, given current economic trends, as slow and as desultory as they have been compared to other recoveries under different presidents and congresses, we are on track to return to historically normal levels of spending in terms of ratio to GDP and higher-than-historical ratios of tax collection to GDP in the next 2 years.

So what is the real problem, spending or under-taxation under that scenario?

President Obama basically punted his last chances to return taxation collection to the same levels as existed under President Bill Clinton in the '90's with 2 decisions that were his and his only:
  1. He signed into permanent law 98.5% of all the tax cuts passed by President George Bush and a GOP Congress in 2002/03.  Total amount of tax collection foregone: $4 trillion in the next 10 years. Mostly from the middle-class who paid the bulk of these taxes under Clinton but not today.
  2. During the fiscal-cliff negotiations, he said he wanted higher taxes on the rich by going back to the rates they were under Bill Clinton.  He essentially got that and raised $600 billion from them over the next 10 years, at least on CBO paper that is. Next question.
The real problem in our opinion is that there is a surfeit of caveats and concerns in the CBO report about spending levels staying on current baselines for a number of reasons. Plus the fact that entitlements remain totally untouched and unreformed makes us think this is a recipe for future spending to explode.

#1 is the concern that the recent dip in medical cost care inflation which lowers projected spending baseline trends in Medicare and Medicaid, is just a mirage or a lull before the storm when Obamacare hits with full-force. Many insurance and health-care companies may have just 'laid low' in the last couple of years waiting to see how the Obamacare rules and regulations would sort out. But now that they have seen these promulgated rules, many expect to see health premiums sky-rocket as a result of compliance with them.

#2 is the concern that 'current law' such as the sequester and the Medicare physician fee cost reductions will be side-stepped by President Obama and Congress and hundreds of billions in proposed spending cuts will never materialize.  

We share that concern because of Telemachus Axiom #34,507: 'If a President who doesn't like smaller government butts heads too often with a divided Congress that really doesn't want to cut spending won't happen'.

We have thousands of them. Axioms, we mean.

Plus we know that if we could just sit down with any person reading this article right now who is a big government advocate and make them read the entire federal budget with us as their sherpa, they would become fiscal tightwads in about the 3 days it would take to do so.  Here's just one short list of the sort of wasteful spending we allow to happen in every single appropriations bill and every single entitlement every single year.

Some of the oldie but goodies:
  • The feds once gave Alaska Airlines $500,000 “to paint a Chinook salmon” on the side of a Boeing 737
  • The federal government spends 25 billion dollars a year maintaining federal buildings that are either unused or totally vacant
  • Research funding for a study to determine if cocaine makes Japanese quail engage in sexually risky behavior: $175,587
  • The U.S. Dept of Agriculture gave researchers at the University of New Hampshire $700,000 to study methane gas emissions from dairy cows.
I mean, c'mon. Are these the types of expenditures that even a concentration-of-power-in-Washington-DC Founding Father such as Alexander Hamilton would be proud to see his beloved American Republic spend hard-earned taxpayer money on 230+ years later?

So, do we have an over-spending problem or an under-taxation problem?

We know we have an over-spending problem. How do we know that? Because we can read and have done so with the federal budget many, many, many times over.

Read the federal budget for yourself. You'll agree with us. If you ever finish it, that is.

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Sunday, February 10, 2013

"The Problem With Liberalism Is That Eventually You Run Out Of Other People's Money!'

Prime Minister Margaret Thatcher
People under the age of 40 in America probably know very little about Prime Minister Margaret Thatcher of England.

You should. She said a lot of things like the title of this posting that made sense, especially when it came to government debt, over-spending and high taxes. All of which those of you under the age of 40 are going to have to deal with for the rest of your lives.

Unless you collectively do something about it. Such as vote against candidates and incumbents who want more of all three and start voting for people who are against all three.

It is up to you. Not your parents, your grandparents or anyone who might not be around 40 years from now. Certainly it is not up to President Barack Obama who doesn't even feign concern about anything that will seriously address our burgeoning deficits or debt.

Just today on the Sunday morning talk shows, Minority House Leader Nancy Pelosi once again said: 'It is a false argument to say we have a spending problem'.

What planet are such people coming from anyway?

Maggie Thatcher presaged the election of Ronald Reagan as the American President in 1980 by about 8 months. It used to be said that what happened on 'the other side of the pond' in British politics influenced what happens on our side of the pond soon thereafter.

Wonder when the next Maggie Thatcher will erupt on the British political scene? Soon we hope.

Let's look at what her pithy comment is really saying at its core:

'The problem with liberalism is that eventually you run out of other people's money'.
  1. There is an inherent assumption by big government believers that there is an unlimited supply of money that can be taken 'from other people' (not me!) in any tax proposal for more government spending at any level.
  2. 'Rich people can afford it' is another generally-accepted notion behind any new proposal to use other people's money for something you want to see done.
  3. Nothing will change in the behavior, spending or tax-avoidance proclivities of anyone in the targeted tax category after the new tax is imposed or expanded to pay for the new program. As in 'the rich people won't hide their income from taxes and just willingly pay it because we told them so'.
  4. People who are taxed will 'willingly' pay for the new program simply because you think 'it is the right thing to do!'
  5. People who want more government really believe spending more money on any federal program will solve all of our targeted problems. 
'If we just had more money...' is one of the key presumptions of most big government advocates who support any and all government programs.

The United States has spent tens of trillions of dollars on an inflation-adjusted basis over the past 50 years beginning with LBJ's 'War On Poverty' programs in 1964...and we have 46 million fellow Americans still mired in poverty in 2013. 15% of the population. (Here's an interesting article on poverty and how it is calculated that might ring your bells some: Tim Worstall)

What Margaret Thatcher brought to England in 1979 and Ronald Reagan brought to the United States in 1980 was a clear-eyed vision that more freedom and more free-enterprise gives everyone more opportunity to enhance their own station in life than more government, taxes, regulations and debt were doing at the time. Or ever can do really.

For some reason, we have been spared the severe painful side effects that usually accompany out-of-control spending and massive accumulation of national debt: rampant inflation and depreciation of currency value. Maybe all of the QE-1,2 and 3 quantitative easing and purchasing of bad mortgage debt from financial institutions by the FED has forestalled the day of reckoning til later.

All we know is that we saw what happens when government bungles its fiduciary duty to our nation in abundance from 1978-1982 when inflation hit 12% per year in America and interest rates sky-rocketed to 21%. Don't kid yourself, we Americans are not totally immune to the immutable laws of economics and physics 'just because we are Americans.'

It could happen here again.  We would prefer to take proactive steps to avoid it happening again because it is most detrimental to the elderly and the poor and the young, the very people the liberals purport to want to help all the time.

We think now is the time for a strong-minded leader to bring confidence to the American economy and world markets by working with Congress to pass a comprehensive spending reduction bill that will drive our deficits to balance by 2020 and remove the impediments to our economic growth today which includes tax reform and moderating the impact of Obamacare on our nation's business.

With the rest of the world's economies in shambles or at least in question such as the EU, now should be the golden opportunity for the United States to regain firm control as the economic and moral superpower in the world once again. The sooner we get our act together, which means decisive leadership from the White House in Washington, the sooner we can all get back to work and living somewhat 'normal' lives again as was the case before 2008.

That leader has to be President Barack Obama. We won't have another president for the next 4 years. Otherwise, we will have to wait for an adult to come into the White House in 2017 to help clean up the mess like the parent who goes to Mexico for an extended vacation only to come home to find out you have held not one, but two huge parties with your entire high school student body on successive weekends.

Republicans are typically viewed as 'The Parents'. The Democrats as the Teenagers who throw 'The Party'.

The new Governor of North Carolina , Pat McCrory and his new team uncovered $1.4 billion in Medicaid spending that was over budget for the past 3 years under the previous Democrat their first 2 weeks in office. Talk about parents coming in to clean up a mess fast.

We have run out of money and we are about to run out of time to fix the problems that ail us. Maggie Thatcher had it right.  It is about time we heed her sage advice.

Wednesday, February 6, 2013

10 Things The Latest CBO Report Says About Future US Finances

'Let's Storm the Court When WKU Beats MVS!'
Sometimes, it is just smarter (and easier) to let people who are smarter than you explain complicated things.

Such is the case with Chuck Blahous, a long-time friend from Washington DC who is now a trustee on the Social Security and Medicare Trust Fund.

We were about to plow through the CBO update on long-term economic and budget projections that came out yesterday when we saw Chuck's summary come in our email inbox.

CBO reported that 'deficits would fall below $1 trillion!' for the first time in 4 years. People from the White House on down, including the President, seemed to want to bask in the warm sun of accolades and congratulations from an adoring public and news media for a 'job well-done'.

We feel like this is premature celebration at best. Primarily because there are plenty of caveats and 'what-ifs' and 'what-fors' in the CBO report to make it highly unlikely that anything substantial has been accomplished in the first four years of President Obama's tenure in the White House regarding the budget deficit.

Celebrating the $845 billion deficit today is a lot like the fans of Western Kentucky storming the court in the First Four play-in games of the NCAA basketball tournament in 2012 after their scintillating late-game comeback over Mississippi Valley State. They got blasted by eventual champion Kentucky two days later.

Chuck has written an in-depth report about the CBO recent projections. We have printed his very good summary below and hope it will shed some light on the larger CBO report that we hope you will read yourself as well. It is only 72 pages; once you read it, you will know more about our budget deficit and debt problem than anyone you will listen to on talk radio or or watch on cable tv.
'#1: Federal debt is projected to grow faster than the economy can sustain. Federal debt has risen dramatically relative to our economic output. In President Bush’s last full year in office, federal debt was 40.5% of GDP. This year it’s 76.3%. CBO’s latest projections indicate that under current law not only will we fail to bring federal debt back to historical norms, but that it will ultimately rise faster than the economy can sustain.
#2: It’s probably worse than that. If lawmakers override Medicare physician payment cuts as they have in the past, and if they also extend certain expiring provisions of tax law as well as override the so-called “sequestration” spending cuts, federal debt will grow out of control even faster – reaching 87% of GDP by 2023 as opposed to the 77% shown.
#3: The problem is not a lack of tax revenue.  By 2015 federal tax revenues will hit 19.1% of GDP, taking a tax bite from the economy well exceeding the historical average of about 18%.
#4: Spending is the problem. In 2009 federal spending jumped to a post-World War II high of 25.2%. It still remains far higher than historical norms and is projected to resume growing faster than the economy later in this decade. Unless this spending problem is fixed, Americans will be subjected to unprecedented levels of taxation, indebtedness or both.
#5: Projected spending growth is driven primarily by four programs. Spending growth is projected to resume rising faster than the economy in 2017, growing from 21.5% of GDP (a level already higher than historical norms) to 22.9% in 2023 and rising further thereafter. This projected spending growth is entirely attributable to growth in Social Security, the major federal health programs and interest on the national debt.
#6: The Social Security spending explosion is already hitting us. At first glance it might appear that future Social Security spending growth is significantly less of a problem than growth in the health entitlements. But this is partially an illusion borne of the fact that Social Security spending has already exploded over the last four years.
#7: Going forward, federal health spending is a huge problem. While Social Security has been the fastest-growing program in recent years, the biggest growth going forward will be in the federal health entitlements. Net costs for Medicare, Medicaid and “Obamacare” are expected to grow more rapidly than GDP going forward, from 4.9% of GDP today to 6.2% by 2023, faster than projected growth elsewhere in the budget.
#8: Controlling health cost inflation isn’t enough to fix the budget problem. Last year CBO estimated that over the next quarter-century, cost growth in the federal health entitlements and Social Security will be 75% attributable to population aging and only 25% to health cost inflation.
#9: Health care reform as enacted in 2010 made the problem worse, not better. CBO now projects that the law’s new health exchange subsidies will add $949 billion to federal spending from 2014–2023, while federal Medicaid costs will rise from $265 billion this year to $572 billion annually by 2023. One of the best things that can be done for the budget is to scale back expenditures scheduled under the 2010 health reform law.
#10: The fiscal strains caused by “Obamacare” may be underestimated. In its long-term budget outlook published last year, CBO warned that if lawmakers instead act in line with historical precedent and allow the new health exchange subsidies to grow in proportion to participants’ health care costs, then the program’s eventual cost will be much higher than now projected.
In sum, the CBO report paints a disturbing portrait of unsustainable federal debt accumulation driven by spending, and by entitlement spending in particular. To spare our children and grandchildren from unprecedented levels of taxation and/or indebtedness, entitlement reforms that slow these programs’ growth are desperately needed, the sooner the better.'

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Saturday, February 2, 2013

$1.4 Billion in Medicaid Funds Spent Over Budget in North Carolina Over the Last 3 Years

North Carolina's Medicaid Program
To those of you out there who are 'wasteful government spending deniers' when it comes to entitlements and any government program you happen to like, think again.

Because you are wrong.

Take a good look at this 2/1/13 Raleigh N&O news article, '$1.4 billion Medicaid funds' for the short and sweet (sour) story about just how terribly the state government has monitored and tracked your hard-earned tax-paid money over the past 3 years.

Once your stomach has stopped roiling and your blood pressure has calmed down a bit, sit down and read this Audit Report by State Auditor Beth Wood in its entirety. If you can't open the link for some reason, here's the .pdf version that should be easily readable for you.

Take your time because we really want you to consume all of this in-depth analysis in all of its gory details and desultory glory.

We hate to say 'we told you so' but...'we told you so'.

The problem?  We are of the opinion that this is just a tip of the iceberg. Nationwide, this has to be the case in perhaps half the 50 states. In the others, perhaps it is only a smaller egregious act of mismanagement by a degree or two.

$450 million per year in North Carolina means what nationwide? $22.5 billion per year in wasted, overspent budgets in Medicaid? $15 billion? $50 billion?

If the North Carolina Medicaid budget has been administered this poorly, what in the heck is the figure for New York, California, Florida and Texas, our 4 largest states by population?

$50 billion per year spent in this unwise manner amounts to over $500 billion over a decade which is the usual time frame for budget scoring of such matters. Half a trillion dollars.  At a time when we are desperately searching for $4 trillion in spending cuts, perhaps close to $500 billion could be found just by running the state Medicaid budgets in a more professional, 21st century sort of way. Well over half of that is your federal taxpayer dollars, the rest of it is your state taxpayer dollars.

Either way, it is mismanagement of your taxpayer dollars which we have been arguing for the past 4 years now.  Many people have pooh-poohed it and said: 'How dare you suggest that any entitlement program be cut in spending? All you fiscal conservatives want to do is throw old people, poor people and babies out into the street!'

Wrong.  All grown-up, clear-eyed, small government, fiscal conservatives want is the same thing everyone should want:

Their tax dollars being spent in the most efficient and economical way possible.

We know programs can be slashed and reformed and eliminated in the following government programs:

All of them.  At every level of federal, state and local government across this nation.

Businesses, charities, churches and families have downsized over the past 4 years and gotten rid of their inefficient spending practices and 'programs' they couldn't afford any longer. Government is the next frontier to confront and conquer.

We think government should protect and defend us from attack and danger, from within and without. 

A secure safety net should be in force to help people rebound from economic setbacks and personal distress but we should encourage eleemosynary institutions to do all that they can since they have typically done a better job of it over the course of our nation's history. 

We need government to do the things that are specifically outlined in the Constitution, Article 1, Section 8 such as build roads and protect copyrights.

We don't think the average taxpayer should subsidize businesses, services or activities that are not generally available to them or the general public. Research on blind albino squirrels might be 'nice' to do...but it is not worthy of federal or state taxpayer support. 'The Friends of the Blind Albino Squirrel Foundation' can be formed by people who are concerned about such things and raise money for such research outside of any taxpayer support in our opinion.

We hope this story of the North Carolina Medicaid program stays in your mind for a long time.  It is just the tip of the iceberg in North Carolina and across the nation.

Ronald Reagan once said: 'Government is not the solution to our problem. Government is the problem'.

When we clean up and fix and 'right-size' government spending, lower the tax burden to pay for smaller government and stop frittering away your hard-earned money as just found in the North Carolina Medicaid program, we will find a lot of things start to go right again in this nation.

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