Sunday, April 28, 2013

One Way To Never Get People To Follow You Is To Call Them 'Stupid'

'Don't Call Me Stupid'...(But 'Stupid Is As Stupid Does!')
There's several great scenes in the classic 'A Fish Called Wanda' where Kevin Kline as the dim-witted narcissistic con-man gets riled up when someone calls him 'stupid':

Generally, we have found in life that we won't follow the lead of someone who calls us 'stupid'. On the other hand, we have also found that it is very difficult to get people to follow our lead or to even like us when we call them 'stupid'.

Life just doesn't lend itself to calling people 'stupid' and getting away with it.

Unless you are Nobel Prize-winning Paul Krugman who somehow has kept his job writing for the New York Times and his Nobel Prize despite having none of his prescriptions for restoring robust economic growth ever work over the past 4 years.

He has called Home Depot founder Ken Langone an 'ignoramus' which ought to go over really well in the Langone family. By implication, he has also called everyone else who doesn't agree with his Nobel Prize-winning theories 'ignoramuses' as well.

If you click on the 'ignoramus' link above, you'll get a better feel for the hubris of Mr. Krugman. It is pretty smug and for a Nobel Prize-winning economist, pretty petty when you get down to it.

Mr. Krugman says people are 'stupid' when they believe the economy works like a family budget:
'The economy isn’t like an individual family that earns a certain amount and spends some other amount, with no relationship between the two'.
That much is sorta the vacuum of space. The economy, the government and each family have a certain amount of finite resources beyond which it is more than dangerous to exceed spending. That is one part that we think Mr. Krugman and President Obama might be just a little 'stupid' on themselves.

Mr. Krugman will go to his grave believing 'if we just spent more money on government programs in 2008-2013 (and still counting) and taken on far more debt and/or raised taxes by another couple of trillion or so, we would have slain the dragging effects of the massive economic retraction we have all been through.'

That is where we think he and President Obama are dead-wrong and dangerously so. They believe the government can 'fix' the economy. We believe the 'people operating in a free economy can 'fix' the economy assuming government gets out of their way' as Ronald Reagan preached in 1980.

Here's what we truly don't get about so-called 'Keynesians' when it comes to stimulating the economy:
'Do they know anything about the trillions of micro-economic and business decisions that have to take place to create millions of new jobs in America?'
We don't think so. That is why so many of them are living in the cloistered, ivy-walled towers of academia. It is a tough, dog-eat-dog world out there in the rough-and-tumble of everyday American capitalism.

We have often said that if ever elected to any office, we would give a Congressional Medal to any person who ever starts a business and hires one person, even it is only themselves. Why? Because the guts and perseverance it takes to start a company and then run it so it survives past its 5th birthday is monumental in scope.

It takes such an incredible amount of skill and strength to start and run a company that we almost consider it to be as high of a calling in America as serving in our armed forces, on a mission field or in the emergency rooms of the toughest of our nation's cities.

Why, again? Because these are the people who hire the rest of us, pay us wages, provide us benefits, and then pay the taxes so the rest of us can have welfare benefits, Social Security and Medicare when we need them.

It is a virtuous cycle that begins and ends with the American business person and entrepreneur.  We kill both of them with over-regulations and taxation and we have killed any hopes of a better tomorrow for ourselves and our children.

We put Mr. Krugman in the same camp as President Obama of not understanding this 'virtuous cycle' of American business simply because neither of them show any signs of 'getting it' when it comes to espousing and enacting policies that would actually 'work' to expand this economy and bring this desultory 'jobless recovery' to end.

But where guys like Krugman and President Obama fail to understand how the economy really 'works' is this:
They think all you gotta do is throw a hunk of government money (or borrow it from the Chinese or make it up out of thin air from the Fed on their balance sheet) at the 'economy' and poof! 'Lo and behold! There will be jobs created tomorrow!'
Nothing could be further from the truth, as we have proven for the past 4 years in this petri dish of economic conflagration.

There are maybe 1000 steps between the Keynesian dream of 'throwing government taxpayer money at the economy' and the actuality of someone starting a company or an existing business manager hiring one more person to work for them.

Here's a brief listing of the sorts of things a businessperson processes in their minds on a daily basis regardless of what Paul Krugman and President Obama want to 'throw at them' in terms of federal stimulus packages, infrastructure projects or just plain old pork-barrel log-rolling projects you learned about in high school civics classes:
  1. Who is going to buy my product?
  2. What is my target audience?
  3. Can I get my products made on-time?
  4. Will my products be made 100% perfectly?
  5. Can I get credit from the bank?
  6. At what interest rate?
  7. Has the local community college trained enough people to do the job I need them to do?
  8. How much money can I mortgage my house for or credit cards can I max out?
  9. Do I have enough 'confidence' to hire one more person and hope I can make more money with them than without them?
  10. Will this President along with his advisors who agree with guys like Paul Krugman ever figure out that we don't need or want more regulations and we can't pay for Obamacare and that is why we ain't hiring anyone?
That is just 10 of the things that a business person processes before breakfast time every single day they wake up and head into work.

It is near about 'preposterous' that well-educated and honored economists such as Paul Krugman and even our President do not understand the basic granular facts about how businesses work in America. Maybe it is because neither of them have ever held a job in the private business or marketing sector. We can not find any evidence that Barack Obama ever set up a lemonade stand or delivered newspapers while growing up in Hawaii.

Running a lemonade stand or delivering newspapers to people's doors should at least be a minimum prerequisite for any 'Nobel Prize winning economist' in the future, don't you think?

Maybe our future Presidents as well.

Then maybe they wouldn't feel compelled to call those who disagree with them so 'stupid' or 'ignoramuses'. After all, have Mr. Krugman and President Obama been proven 'right' that their way is the best way...yet after 4 years of trying it their way?

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Wednesday, April 24, 2013

Sidd Finch Had a 168-MPH Fastball....

Sidd Finch Had a 168 mph
Fastball But He Wanted to
Play the French Horn
Ever wanted to go backwards in time and embellish your record at any level of life?

Well, the Obama Administration is about to do the same thing with their economic record so go ahead, do it. No one will mind or even know the difference, right?

Here's just one sample of what they are proposing to do:
'Based on pre­liminary estimates for 2007, this change will boost the level of GDP by about 2 percent, or about $300 billion, with about two-thirds coming from private fixed in­vestment and the remainder primarily coming from government consumption expenditures.'
Yep, you read it right. The Obama Administration is going to go backwards in time and add 2% of GDP growth based on just one change that will come out of the Bureau of Economic Analysis (BEA) in July of this year.

You can read it for yourself at the link above but we do try to read this stuff so you don't have to. It is tough slogging even for budget wonks and accounting types.

A better summary can be found in a blog posting in Forbes magazine by Laura Hoffmans, 'Faster GDP, Different Rules'. At least it seems to read more like modern-day English instead of trying to translate the Chaucerian English of the BEA.

On a very cursory first reading, at the end of each section we noticed the following pattern for each change: 'This will add 1% to GDP for 2007'. 'This will add 2% to GDP for 2007' and so on.

Well, 2007 was the last decent year of economic growth before the kitchen sink was thrown out of the economy in 2008/2009 and has seemingly yet to fully recover, especially in terms of employment growth. But if we add a couple of GDP growth points to 2007, what do you think this will mean for subsequent years?

Of course! ALL of the dismal GDP 'growth' (sic) over the past 4 years will be revised upwards, ladies and gentlemen!

This is a little like the 'grade inflation' of the 1990's at American universities.  Everyone seems to be 'above average' nowadays as Garrison Keillor likes to say about Lake Wobegone due to the revaluation upwards of a 'gentleman's C' to a more respectable B.

But the question then becomes: 'When do we stop comparing apples to apples but instead to kumquats?'

Here's the official stated GDP growth rates of the past 4 years: -0.4%; -3.5%; +3.0%; +1.7%

Here's what we predict the 'new' revised figures will be when they come out in July: +1.0%, -0.5%; +6%, +4%

We haven't had the Second Greatest Economic Retrenchment in the last 90 years, ladies and gentlemen! We just didn't adequately and appropriately 'account' for it all correctly!

Maybe we will be off by a smidgen or two in our retroactive 'projections'. However, since the Obama Administration appears to be sanguine about doing so with their economic record, we have decided to 'retroactively project' our high school athletic achievements thusly:
'I was actually a 6'6" point forward on the basketball team who averaged 25 ppg; 13 rebounds and 6 assists. Oh, yeah, and we won the state basketball championship, almost forgot to add that. I threw for 10,861 yards during my high school football career, in only 2 years as a starter, that is, and accounted for 56 touchdowns through the air and 25 on the run. We won the state championship as well in football too. Yeah, that's the ticket.
I lettered in baseball, (which I hated); track, golf and lacrosse which even though it didn't come to the South until about 1990, I decided to add because the BEA said I could.
Oh yeah, I almost forgot to add that one of our most prominent guards, a Double Professor of Mechanical Engineering and Plasma Physics now at a big college in Texas, pancaked a world record 197 opposing lineman and linebackers our senior year on his way to winning the Heisman Trophy and Outland Trophy for best any level of football. (he asked me to say that)'
So go ahead, Rewrite your own history. You'll feel much better when you do,

The Obama Administration will, we guarantee you that much.  Wait til Chris Matthews, Rachel Maddow and that guy Ed whatever his name is now on Current or Al-Jazeera or whatever it is called gets ahold of this new BEA report in July!

They'll be singing 'Happy Days Have Been Here Again! (since President Obama got elected in 2008!)' like it is an Italian opera.

Wait and see.

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Sunday, April 21, 2013

Let's Look at the Underlying Problems in Medicare from a 'Fairness' Standpoint, Not Just 'Numbers'

Carlton Fisk's Home Run 1975 Home Run:
'Make it Fair! Make it Fair!'
One of the problems about dealing with and debating an issue as big and as complicated as Medicare is that most people simply don't care what it costs to take care of senior citizens.

Certainly not the senior citizens currently on Medicare. It is the best deal in the nation they are ever going to get in terms of buying health insurance for around $310-$360/month. Many self-employed people now paying close to $1000/month would give their eyeteeth and other certain parts of their body to be able to find ANY comprehensive health care insurance for anything near $350/month.

We would do that in a flat skinny nanosecond. You may be paying that much or more in withholding per month from your paycheck if you work for a large corporation. Check it out and see.

Every senior citizen in this nation has either been hypnotized or self-deluded into thinking that their $320-$360/month payment for their Part B premium covers 100% of the cost of their health insurance under Medicare. The actuarial average for covering any senior citizen is between $1200-$1500/month according to health care insurance professionals.

You, the working taxpayer, are making up that difference every month to the tune of a 75% general taxpayer subsidy to every senior on Medicare in America today. If you paid $1000 in Medicare payroll taxes in 2012, you paid for a very small part of the time a particular senior stayed in the hospital (Part A) during the year. If you paid income taxes of any magnitude, you probably paid for several months of subsidy for any single senior citizen on Part B...and not much else.

There is absolutely no way on God's green earth that any senior's payment of $320-$360/month is going to cover the entirety of their health care insurance coverage. No way. And yet many people still believe it...or wish it to be so just because they say it is so in any campaign promise to get re-elected.

If you don't have current health care coverage, the chances of your being able to buy comprehensive health care coverage under the looming Obamacare exchanges for a family of four for around $350/month is about as remote as the chances that the sun will rise in the west tomorrow morning.

As in 'None'.

Conservatives and budget wonks and wonkettes often fall into the trap of discussing the immense cost of Medicare ($551 billion last year or about 15% of the entire federal budget all by itself); the unlimited payroll tax that is mandatory on everyone's income at the same flat rate of taxation at 1.45% on earned income for every rich, moderate and poor wage-earner; and the fact that the Social Security/Medicare Trustees have been warning Americans for years now about the 'looming insolvency' of the entire program.

(Whoops! There we go again)

Nothing has changed. Certainly not under President George W. Bush and the Republican Congress who invented Medicare Part D and passed it in 2003 which will cost untold trillions when all is said and done because there was no funding mechanism or spending offsets to cover the cost of the new entitlement.

And certainly not under President Obama and the Democratic Congress from 2009-2011 who saw the Medicare (broken) model and figured:
'What the heck! Let's just pass Obamacare and act like it is Medicare Parts E,F,G,H,I,J,K,L,M,N,O,P,Q,R,S,T,U,V,W,X,Y and Z...and some other Greek and Latin letters of the alphabet to boot for good measure!'
In short, Medicare is a total mess and one of the prime upwards drivers, along with Medicaid, of our exploding budget deficits now and far into the future.

But what about the underlying 'fairness' of Medicare in the first place? That is what drives most of America political decision-making on the part of voters, not 'numbers'.

Is Medicare 'fair'? If not, then why not change it to make it more fair to everyone involved, including the future generations who have to not only pay for Medicare today but for the debt that is building up mainly because of Medicare growth over the past 25 years?

Before passage of Medicare under LBJ's 'Great Society' in 1965, millions of senior citizens were living below the poverty line. Many got there due to lack of adequate health insurance coverage when a life event wiped out their savings or cost them their homes.

No one wants to go back to those days. No one. Not even the mean old Republicans or the Tea Party.

However, seniors now living in America are living in perhaps the overall 'best' condition of any senior cohort in American history in terms of having guaranteed income and health care benefits through Social Security and Medicare support paid by working taxpayers today.

NONE of it is a result of being qualified due to financial distress or low income, by the way.

It is solely because every senior now alive who is receiving those benefits has passed the magic age of 65 to be eligible for Medicare and 66 for Social Security.

See? The retirement age has already gone up for SS as a result of the 1983 Social Security Act and no one knows the difference.

In 2022, the age to be eligible to receive full SS benefits will start to go up again in 2-month increments until 2027 when you will have to be age 67 to get full SS benefits. Again, no one knows that this is current law or else they would be screaming about it, wouldn't they?

Wouldn't it be more 'fair' just to raise the retirement age to 67 for both Medicare and SS by say the year 2020 and get it over and done with, say this year? There can be exemptions for severe disability or early benefits such as exists for SS, even though we think early eligibility should be moved up to age 65 instead of staying at age 62 due to the much longer lifespans Americans are enjoying, despite our atrocious diets and lack of exercise.

But beyond that, is it really and truly 'fair' that every senior should be able to get full medical coverage under Medicare without ANY regard to their financial net worth; retirement income and general financial status?

We can buy the argument that perhaps low-income seniors and many moderate-income retirees may need some graduated assistance to buy market-priced health care insurance.  But should Warren Buffett, Bill Gates and other super-wealthy people honestly be 'eligible' for what amounts to massive taxpayer financial assistance each and every year that makes what we pay in the form of welfare to poor families seem positively puny by comparison?

A super-wealthy person who gets a new heart, lung, knee, shoulder or hip may have Medicare paying hundreds of thousands of dollars to their surgeons and doctors, all because of the mere qualification that they are over the age of 65 and by virtue of having paid into Part A for their working careers and $360/month for Part B while in retirement.

Warren Buffett. Bill Gates when he retires. Super-wealthy seniors such as these two fellows who can buy 10 hospitals on their credit cards and we more modest-income taxpayers are massively subsidizing their health care costs in America today?

Is that fair?  We say it is not.

Here's another thought-bomb that is sure to break up a good dinner party discussion with any senior citizen you may know or be related to:
The Cheetos/Twinkies/Beer/Burger Diet
'Is it 'fair' to just pay every Medicare claim put before the CMS bureaucrats just because someone is over the age of 65? Or does every senior have the personal duty and responsibility to improve his/her own diet; stop smoking; quit drinking moonshine and a case of beer every night while eating bags of Cheetos and boxes of Twinkies and not exercising one step any day of the week, month or year?'

Again, we think not.  We think that whenever taxpayer money is involved, our elected leaders in Congress or the state legislatures not only have the right but the responsibility to put conditions on the behavior of the receiving party so as to protect the hard-working taxpayer from having to pay money for others who don't take responsibility for their own behavior and actions.

That is only 'fair'. Since 'fairness' might be the one noun that binds us all together as Americans other than the 'freedom' our forefathers and ancestors fought so hard to give to us in the first place, it might be high time that we start demanding 'fairness' in the ways we point out above in Medicare to start with.

'The Hounds from Inflation Hell!'
'Fairness' is easier to sell than 'the threat of having national debt reach 200% of GDP' which no one really cares about....until and unless the 'Hounds from Inflation Hell' are released as a result, right?

By then, it is too late. We would prefer to see America take control of its own destiny. Discussing 'fairness' might be the best way to do it.

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Wednesday, April 17, 2013

'Imagine There's No Trust Fund...It's Easy if You Try'

(with all due apologies to John Lennon and his song, 'Imagine')

We are constantly reminded of just how great of a job FDR's advisors did in the Great Depression 'selling' the American people on the whole notion of Social Security being some form of 'insurance' or 'pension' plan.

Which is it: 'Insurance' or 'Retirement'? Or both? Who the heck really knows nowadays almost 80 years later?

People always balk at the notion of 'cutting' Social Security, or Medicare for that matter, since they insist they 'have paid into the system all my life and now I want to get MY money back out of it with interest!'

'It is MINE!' they always say. Always.

Well, we hate to be the ones to burst your bubble...but all that money you have paid into Social Security and Medicare over the course of your working lifetimes ain't 'there' anywhere in the federal government. It 'ain't yours' anymore than any dollar in tax you have paid to support the defense of our nation, the protection of our environment or sending space probes to the outer regions of the next solar system.

It ain't in a bank account. It ain't in a trust fund building interest somewhere. It ain't in a Baggie in someone's basement where it is totally 'safe' from any vagaries in the national economy or employment situation.

If you want to know where your money has gone that you paid into Social Security and Medicare, look no further than your parents and grandparents and their peer group. ALL of the money you paid each week or each month in FICA taxes went DIRECTLY into checks that were sent to them to pay for their retirement and medical needs during their golden years.

Your money, then, is flat simply GONE! Forget the so-called 'Social Security Trust Fund'. Forget the Medicare 'trust fund'. The money you have paid each month in FICA taxes is nowhere today because it was spent 10, 20, 30 years ago about 10 nanoseconds after it was received by the US Treasury in Washington, DC.

One way we have asked people to get a better handle on where their tax money has gone in terms of income versus payroll taxes is to do the following:
Push the reset button in your head and just think of every tax dollar you have paid over the years as being treated exactly the same once it is collected in Washington.
That's right. Your payroll tax, the general taxes you have paid for defense, transportation, education, the gas tax you have paid on every tank of gas you have purchased for your Denali...just erase your preconceived notions of any of those dollars as being treated special for any set purpose such as 'your' retirement or health care needs.

The 'accounting' for each dollar is different, that is true. There are accounts, sub-accounts, functions and subfunctions galore that purport to allocate the money you have paid in taxes into some form of recognizable logic which leads most Americans to think and believe strongly that their payroll taxes are treated with reverence completely separate from their income taxes paid that doesn't.

But the cash going to DC is not treated differently. It goes in the government bank account on day 1.On day 2, it is sent to some person, agency or defense contractor to perform some legislated duty as determined by a previous Congress and signed into law by a past President.

And to further complicate matters, 75% of the Medicare expenditures each year in Part B are NOT paid for by payroll taxes or premiums paid by seniors but rather from, guess where, class?

'General taxpayer revenue dollars'. Yup, from yours and my income taxes and what we can borrow from the Chinese (still) or make up out of thin air at the 'Ben Bernanke Prestidigitation Clinic' commonly known as the US Federal Reserve.

75% of the Medicare Part B program is NOT paid by participating seniors with their monthly premium. It is paid for by general taxes paid by non-seniors for the most part. So how in the world can everyone be so misled to believe that Medicare is 100% 'self-funded' by senior citizen Part B premiums in the first place?

It is because that is what everyone WANTS to believe. We all want to believe that we can get something for nothing, in essence, don't we?  That is the true 'American Dream', as misguided as it may be, isn't it? When politicians lie about it and offer to give 'something for nothing' to a critical voting base such as the 44 million senior citizens out there today, well, that just becomes part of the electoral landscape and very hard to dislodge from the public psyche, yes?

For a very long time, early retirees on Social Security got far more money out of SS than they ever put into the program. My dad paid a maximum of $40/year into SS in his first job out of college...and probably bitched and snorted about every dime of it being deducted from his paycheck. He paid $41 the next year and so on.

When he turned 65 in 1982, he started receiving Social Security. He probably received all of the money he put in during his first 3 years of retirement. The rest was pure serendipity, 'gravy' if you will, until he passed away.

All of the money in his Social Security checks came from payroll taxes paid by people working between 1982 and 1989. Not from a dedicated source of funds locked away in some government bank safely ensconced in the mountains for West Virginia for security purposes.

The point of all these mental gymnastics? The point is that once we all understand and accept the fact that there is not a fairyland where everyone's retirement and health insurance needs are being funded by each of our own individual payroll tax contribution, we can then talk about taking the practical steps necessary to convert to a defined contribution model for every young person today that will transition them to a new plan for the future.

That is the only fair thing to do while we also honor our obligations to current retirees and people who are soon-to-be retired.

Here's a graphic representation of where the money goes each year in the federal budget. If anyone can tell us how we can balance the budget without reforming Social Security, Medicare and Medicaid and moving towards a more defined contribution approach rather than the defined benefit method we have employed since 1935, then we will buy you the biggest steak we can possibly find anywhere on the planet.

You may die of high cholesterol and hardening of the arteries but you will have provided an enormous benefit to the rest of us before you meet your eternal reward, that is for sure.

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Saturday, April 13, 2013

'President Irrelevant' Finally Introduces His 'Smoke-and-Mirrors' Budget to Congress

'Mr. Irrelevant' Chandler Harnish, 2012
Know who 'Mr. Irrelevant' is?

He is the last player drafted in every NFL Draft each year. He is considered the least important player with the lowest possible chance of making an impact on a NFL roster come regular season.

Know who 'Mr. Irrelevant' was for 2012?   QB Chandler Harnish of the Northern Illinois Huskies selected by the Indianapolis Colts as pick number 253.

How can President Barack Obama be considered 'Mr. Irrelevant' when it comes to managing the most important problem facing us today in America, the federal budget and its attendant deficit and debt complications?

Let us count the ways:
  1. He is late on introducing it by over 2 months. Guess all that vacationing and playing golf and entertaining music legends at the White House during the 'dreadful sequester' takes up a lot of Presidential time and energy, huh?
  2. The House has already passed their budget. On-time again for about the 3rd straight year since the Republicans took back control from Nancy Pelosi and the Democrats.
  3. Even the lowly and wayward Senate has passed their budget for the first time in over 1200 days. As in close to 4 years under the steadfast, bold leadership of Senate Majority Leader Harry Reid of Nevada, who most likely will never have a Senate building named after him.

So why even introduce it all, Mr. President? Your budgets have collected a grand total of ZERO votes in the US Senate and House when they have even taken the time to consider your budget submissions in the past. All your budgets have done is destroyed a few thousand trees to make the paper it was printed on in 2000+ page volumes.

Jim Capretta of the National Review has done a pretty good job of summarizing just how 'irrelevant' President Irrelevant's FY 2014 Budget really is. It is so full of 'smoke-and-mirror' accounting that this budget gives 'smoke-and-mirrors' a really bad name.

Here's Mr. Capretta's analysis with comments added in italics or color to add emphasis to the points you should pay close attention to:
'The Obama administration has taken great pains to cultivate the impression in the media that the president’s 2014 budget plan is a genuine effort at compromise. According to the president’s team, if the GOP were to reject this offer, it would be a sure sign that Republicans were not interested in budget-cutting, or entitlement reform, or preventing a debt crisis — because that’s what the president’s 2014 budget would supposedly deliver.
The budget’s numbers betray a far different reality. Consistent with Obama’s prior budget submissions, this one embodies the president’s statist governing philosophy and his indifference to the urgent need for serious changes to the operations of the nation’s entitlement programs.
Starting with the big picture, the president’s budget would add nearly $7 trillion in new debt on top of the $6.6 trillion added since 2008. Debt would remain above 70 percent of GDP for the coming decade, and that’s assuming the economy never fell back into recession.
The president has repeated over and over again the slogan that a budget plan needs to be “balanced,” by which he means the spending cuts must be matched with comparable tax hikes. His own budget fails this test miserably. The only deficit reduction in it comes from a net $1.1 trillion tax hike over ten years (on top of the $0.6 trillion tax hike in the fiscal-cliff deal and $1 trillion in Obamacare). There are zero net spending cuts in the budget. Zero. When the “doc fix” for Medicare physician fees and a smaller change in Pell Grant funding are removed, as they should be, from the administration’s current-law baseline and placed instead with the other policy choices the budget reflects, the budget results in a net $10 billion spending increase over the coming decade.
The reason there is no net spending restraint in the budget is that, well, the president likes to spend taxpayers’ money. That is apparent from the laundry list of new initiatives he wants to launch. There’s an expanded-preschool proposal ($66 billion over ten years), new funding for “teacher stabilization” ($12 billion), various “investments” in special transportation efforts ($125 billion), and on and on. And of course the president wants to do away with the sequester ($900 billion) and the cuts in Medicare physician fees ($245 billion) without ever really acknowledging the costs of doing so.
Much has been made of the president’s supposed political courage in sticking his neck out on entitlements. This is absurd. In the budget, the president proposes to make a modest change in how inflation is measured, and this would modestly alter future Social Security cost-of-living adjustments as well as indexation of income-tax brackets. It is not remotely close to a serious reform. It is minor tinkering with the status quo.
On health care, the net spending reduction in Medicare and Medicaid is less than $150 billion over the coming decade when the “doc fix” is included in the numbers. And for the most part, the cuts that the budget does suggest in Medicare and Medicaid are of the kind that the GOP should reject. Most of the savings comes in the form of further tinkering with the byzantine payment regulations according to which Medicare pays hospitals, doctors, and other providers of medical services. These payment cuts, coming on top of the $700 billion in cuts in Obamacare, would do nothing to improve the efficiency with which care is delivered to patients. They would only reduce what the government paid to providers of health care, forcing either cost-shifting or reductions in the quality of care. Other cuts would import into the part of Medicare that is working best — the drug benefit — price controls that would drive premiums up for many seniors. And the “structural reforms” in Medicare that the administration is touting would produce only very modest budgetary savings over the next decade.
If there ever was going to be a “grand bargain,” the president needed to embrace entitlement reform of a kind that is anathema to the Democratic party — namely, “premium support” for Medicare, as proposed by Representative Paul Ryan and others. That is the model that has the potential to transform Medicare and produce serious and beneficial changes throughout American health care. Instead of embracing such a reform, the president used his opposition to it to cement his reelection with demagogic political attacks. In the end, this tactic appears to have been ineffectual — polls indicate that Governor Romney and Congressman Ryan more than held their own with voters on Medicare. The president’s attacks did, however, succeed in making a grand bargain nearly impossible to achieve.
What the president is offering now can be summed up this way: another massive tax hike in exchange for swapping the sequester cuts with more price controls in Medicare, the “chained CPI,” and other minor tinkering with mandatory spending programs. Total federal spending would not change.
Some deal, huh? Congressional Republicans’ acceptance of it would be a political and economic disaster.
Come to think of it, we think President Obama should keep on vacationing 4 weeks per month at taxpayer expense and entertain every music legend there is still left standing alive in the White House every single night of the week and turn it into the greatest cabaret show in American history.

At least both of those activities are more productive than what he is putting out there in terms of solving the greatest problem we face today: chronic over-spending and massive persistent deficits and a national debt that could spiral out of control should interest rates ever return to even slightly-above-normal historical rates.

Barack Obama singing 'Sittin' on the Dock of the Bay' with Justin Timberlake might take its place alongside Nero's violin one day. He ain't even trying, ladies and gentleman. Sadly for us all.

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Tuesday, April 9, 2013

'Equality-Part II- 'Why Not Have A Background Check...For Everyone?'

'What Do You Think I Am, Blind?'
The recent call from President Obama and advocates of stricter gun control laws for 'universal background checks' brought to mind this one unifying thought:

'Why not do this for everyone?'

Think about it. Much of what separates us as a nation has to do with what any certain faction wants to do to another group of people in our society. 'We' think 'they' should be better regulated; restricted, prevented from having the same freedoms as we do, primarily because we think something is 'wrong' with them.

Right? Be honest with yourself. We have all done it at some time or another.

We are not trying to diminish the horrific murders at Newtown or Aurora, Colorado or any other place where a deranged killer has gotten ahold of a gun from his mother's closet or stolen one from someone's house. We do think it is somewhat impossible to predict who is going to go completely berserk at any particular point in time and hope 'universal background checks' will prevent them from gaining access to a gun of any sort.

Crazy people are simply crazy people. Our mental health laws were weakened in the 1980's such that many people who were previously institutionalized are now living at homes in suburban neighborhoods without sufficient oversight or treatment.

If a mother or gun-owner is careless about locking up their guns in their home, chances are that a person with a serious mental illness in the family or neighborhood will find a way to get their hands on that gun regardless of how many 'universal background checks' we have on the national or state books.

But follow us on this point. If universal background checks are good enough to monitor and manage the right of people to own guns under the 2nd Amendment, why not use them to govern every aspect of our collective life together?

Photo ID has come under fire from certain circles as being 'unfair' to certain people in our population. Well, if EVERYONE had to be subject to the same background check, then who could be discriminated against? Use universal background checks to make sure everyone is who they say they are and they are legally registered to vote, just as they would be legally cleared to own a gun under the 2nd Amendment.

How about universal background checks to make sure every doctor who treats Medicare/Medicaid patients is 'legal and honest' and has never filed a false claim or reimbursement from either federal taxpayer-supported program? 1 illegal or improperly filed claim by said doctor and it goes on their permanent record to be constantly updated in the national 'universal background check'. It would become the de facto equivalent of the credit bureau where every person's personal credit worthiness is available at a moment's notice.

What about controlling illegal immigrants and the companies that hire them without reporting them to the federal authorities? Use 'universal background checks' with spot audits on the job to make sure that everyone who is working on a job site is legally eligible to work in America. Employers who use them will be put out of business overnight with excessive fines and penalties.  They will stop hiring illegal workers immediately.

There is a problem with welfare applicants falsely receiving benefits from a complicated welfare system between state and federal guidelines? 'Universal background check' them all to make sure they are 1) who they say they are and 2) have never received duplicative or falsified benefits anywhere else in the nation.

How about college athletes trying to cheat their way through college and staying eligible so they can help their team with a bowl game or the NCAA title? 'Universal background checks'...make sure the work the athletes do is their own, not a tutor's or a girlfriend. If negative, then throw them not only off the team but out of college.  They are supposed to be there to learn something other than how to cheat in life.

Maybe we need to be thinking about how everyone can be treated on an equal basis once again.  If a national database is deemed necessary and set up for gun owners, why not expand it to cover everyone in every controversial aspect of American life nowadays?

Treat everyone exactly the same. Isn't that what the Founders wanted?

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Saturday, April 6, 2013

'It Doesn't Matter Which Way You Go- So Long As I Get Somewhere'

'We are all mad here!'
We were talking to a friend yesterday about the stock market recovering to exceed its peak of 2007, right before it fell to its valley when the banking system nearly evaporated in 2008.

Remember? That was not that long ago, you know.

'There's something that just seems 'odd' about it all', he said.

The current state of affairs in America reminds us of that great Socratic philosopher in 'Alice in Wonderland', the Cheshire Cat when he counsels Alice on where to go to get to where she wants to go:

"Would you tell me, please, which way I ought to go from here?"
"That depends a good deal on where you want to get to," said the Cat.
"I don't much care where –" said Alice.
"Then it doesn't matter which way you go," said the Cat.
"– so long as I get somewhere," Alice added as an explanation.
"Oh, you're sure to do that," said the Cat, "if you only walk long enough."

Here's something that will really make it very odd one day if it happens: higher interest rates. Of any magnitude over the current absurdly low interest rates of 1%, 2% or 3%.

We currently have close to $17 trillion of 'official' national debt on the books of the US Treasury. In actuality, the 'real' debt is closer to $12 trillion since this is the debt that absolutely has GOT to be paid back each and every month in the form of clipped interest coupons or direct payment to bondholders around the world.

The rest of the debt is the 'imputed' interest ascribed to each 'trust fund' (which is fake as well in terms of being a 'true' trust fund in the traditional banking sense of the word). This is a number that is basically 'made up' every year by OMB and CBO analysts to estimate 'what would have been the interest paid' to the SS Trust Fund and others had money actually been paid to them.

We know that sounds confusing: 'fake' interest 'imputed' to be paid to the 'fake' trust funds. Welcome to Washington where even Alice in her Wonderland would have never ceased to be amazed.

So let's use $12 trillion in debt as the base of our discussion today and give our law-makers and budget-breakers in Washington the benefit of the doubt and some very lenient credit.

Today, we are spending close to $220 billion in net interest costs to service that $12 trillion in national debt. Probably half of the interest checks are going to bondholders in China and other overseas foreign sovereign powers. The average interest rate on these bonds are an absurdly historically low 2%.

But that is not the only thing to consider. Almost all of our national debt today is in very short-term maturities, 2 years or less. When interest rates are low for your mortgage, what do you do? You refinance for the long-term, up to 30 years if you can, right?

Well, the United States of America can't sell any 30-year bonds anymore because who would be crazy enough to hold onto $12 trillion in debt for the next 30 years? When interest rates return to some form of 'normalcy' again, say at 5% or so, anyone left holding these bonds will see the value of those bonds drop anywhere from 5-15%.

The people who would otherwise hold those bonds to maturity would get 2% interest per year for 30 years and then get their money back for sure at the end of the term. But do you seriously think that earning 2% per year is going to do you any good if inflation returns to say 3% per year? 5% per year?

You'll be going backwards into wealth destruction if you pursue that strategy. 'Don't do it!' is all we can say.

Here's our question for you to noodle on today:

What happens when interest rates do return to their normal historical rates one day?

If we are not careful, the answer could be any of the following answers: 'total chaos'; 'rampant inflation' or 'really, really bad news for the President and incumbent congressmen and senators serving at the time'.

Let's make it simple and assume that all the debt we are really going to ever pay for in cold hard cash is the $12 trillion today, not the $17 trillion on the books. That is going to swell to about $18 trillion by 2020...regardless of if President Obama and Congress cut the Grandest of All Grand Budget Compromises the World has ever known!

It is already baked in the cake. With Obamacare looming as one of the biggest vacuum sucker-uppers of federal debt and deficit-spending in our nation's history, it could be $20 trillion or $25 trillion. Make no mistake about it: Obamacare is already costing 3 times what President Obama, Nancy Pelosi and Harry Reid 'promised' it would cost when passed in 2010.

We are just shocked it hasn't already been estimated to cost 10 times its original cost. That is the nature and history of massive programs passed by an ambitious President and a compliant Congress.

The entire federal budget today is around $3.7 trillion. Interest costs make up about 6% of that cost or around $224 billion. Not too bad, you might say. Today.

Since none of this debt is locked in at 2% for the next 30 years, it will have to be 'rolled over' or refinanced every couple of years from now on. So if we have to rollover $12 trillion today for 2 years, and interest rates suddenly jump to an average of just 4% which is not 'crazy' under any historical American standard or measure, what will be the interest cost for the next two years in the federal budget?

$480 billion per year. $12 trillion times 4%=$480 billion. Pretty easy calculation to make.

Ok, but we have already established that the national debt is going to be $18 trillion by 2020 regardless of what President Obama and Congress does this year, next year or in the last and final year of his 8-year presidency in 2016. What will the annual interest costs be then if interest rates stay around 5%?

$900 billion. Per year. Or close to $1 trillion of your hard-earned taxpayer dollars going to pay for nothing for this country's roads, schools, farms, military, social safety net or the environment. Instead, all of these taxpayer dollars will go to pay off past obligations and debt and that is it.

Let's just have some fun with numbers and see what the interest rate costs might be in 2020 if somehow, someway interest rates spike to 10%. It could happen. They were 21% just over 30 years ago when many readers were still in college or high school.

$18 trillion times 10% is $1.8 trillion. Not 1.8 billion dollars. 1.8 TRILLION dollars. Per year.

The entire federal budget in 2020 is expected to total only $5 trillion to begin with. Interest rate costs could approximate close to 40% of the annual federal budget in 2020!!!!

See for yourself. CBO Budget Projections  We are not smart enough to make this stuff up on our own, you know.

So whenever someone says: 'Gee, you know, something just seems a tad bit 'odd' about this current stock market run and the economy in general', you'll know the underlying cause for this concern.

It is called 'Math'. 'Economic and Fiscal Reality'. 'Truth'.

Something this President doesn't seem to want to acknowledge during his entire Presidency. He seems to be the modern-day Cheshire Cat with his bright cheery smile and quick quip at the podium or even when he missed 20 out of 22 shots the other day on the basketball court.

It is time for leadership. Who will provide it?

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