Saturday, July 27, 2013

Know What the 'Fuel' For The American Revolution Really Was?

'Don't tax you, don't tax me, tax those colonists
across the sea!'-King George III
We all know that the 'spark' was the Stamp Act, the Townshend Act, the 'Anything That King George III Did' Act that placed more taxes on the colonists, especially since the colonists did not have full or fair representation in Parliament.

We have stated this many times before but it bears repeating:

'In America today, we have taxation WITH Representation!'

So how's that working out for you?

But what was the underlying reason, the 'fuel', the basic fact that forced the King to impose such onerous taxes on tea, foodstuffs, linen, tools, rudimentary machines, anything that was used by the colonists which was imported from England (which was most of the manufactured goods at the time)?

Debt. Great Britain racked up enormous debt of £130 million during the French and Indian War from 1754-1763. *

More specifically, the problem directly faced by the King and Parliament was paying the interest on the national debt incurred by the Crown as they prosecuted the French and Indian War. With many American loyalists at the time, by the way, as Colonel George Washington from whom the English would hear from later in his life.

Actually, it was the 'interest paid on exorbitant debt' just to put a higher exclamation point on it.

What was the debt service to the King way back in 1770?

4.5 million pounds Sterling. £4.5M. Solely in interest to be paid each year on existing debt at the time. At least the interest rate was only 3.46%

Think we have trouble with exploding national debt and out-of-control interest payments at the federal level?

That £4.5M payment per year in interest on the national debt of Great Britain accounted for 50% of the entire annual budget of the English government at the time.

50%. That would be like paying $1.9 Trillion per year in interest on our national debt in the FY 2013 American federal government budget.**

Out of a $3.8 trillion annual budget.

'That could never happen to us!' some of the less alarmed 'experts' (sic) say. Or less informed, we might add.

What would it take to get our annual interest payments to equal 50% of the federal budget?

Not a whole heckuva lot if you really think about it. 11% interest rates to be more exact about it.

'Could that EVER happen in the United States of America?' you might be wondering?

'It already HAS happened in the United States of America!' Check out the interest rates from 1979-1982, right about the time many of our readers were coming out of college looking for a job in what was at least considered to be the 3rd Worst Recession Since the Depression at the time.

10-year government bond rates reached 16% in 1981. 16%. That is pretty high. But it happened.

The scary thing about our current debt situation is that it is not just its enormous size but the fact that so much of it is in short-term bonds, not long-term 30-year bonds. Meaning that as interest rates rise, as they are doing now and have to as a matter of economic cycles, most of it will be refinanced at increasing, ever-higher rates of interest until interest rates top out again once day.

Think of the problem faced by the King of England in 1770 as being akin to the dire situation faced by the city of Detroit today. Except the City of Detroit has no 'loyal subjects' anywhere else they can levy a hefty tax on to pay for their economic and fiscal mess that has basically been created and engendered by their own elected officials over the years including the corrupt Mayor Coleman Young who reigned forever it seemed.

The good news about bad fiscal practices is this, as stated succinctly by Herb Stein, Chairman of the Council of Economic Advisors under Presidents Nixon and Ford and father of Ben Stein, Ferris Bueller's Economics Teacher:

'If something cannot go on forever, it will stop"

Borrowing money due to overspending in Detroit's municipal government ended when lenders stopped lending to them. The risk of forfeiture became too high. So the money stopped flowing to Detroit.

Money can and will stop flowing to any government, business or family when it looks like the chances of getting repaid are far less than making a profit out of it in the form of interest. It stopped flowing to the Roman Empire, the Ming Dynasty, the Soviet Union and even Great Britain in 1956 when President Eisenhower shut off American funds to build the Suez Canal. That was the last nail in the coffin of Great Britain being a world superpower as they had been for most of the previous 300 years.

If our elected politicians won't address and correct the underlying cause of the buildup of debt, the free market forces of finance will do it for them. Just as we are now getting a chance to witness in real-time in Detroit, Michigan.

Interest as a part of the US federal budget is now still only around 6%, even with the explosion of debt that we have added on since President Obama was elected in 2008. Don't take it lightly though because if inflation expectations start to blow hot, interest rates will rise and will rise faster than they ever fall.

Here's the good news: Somehow, someway, Great Britain paid off this debt and interest costs declined as a part of the national budget over time. Somehow. They had another war to prosecute you might have heard of 6 years later in 1776 called the American Revolution for Independence.

Maybe our $17 trillion national debt will somehow magically evaporate in America in the next couple of years. But we sorta doubt it.

*From the great book 'Washington: A Life' by Ron Chernow

**Part of this exercise is a little bit strained by the fact that '$17 trillion in national debt' is actually more like $12 trillion in 'real' national debt 'owned by the public'. Meaning 'actual checks have to be cut to pay these bondholders, domestic and abroad every month and requires 'real money' to do so.. The interest 'imputed' on the other $5 trillion in debt relates to the intra-government debt owed to Social Security and other trust funds which is both a liability and asset for the federal government and cancels each other out.

Plus, this 'imputed' interest is not ever paid out on a monthly basis and correspondingly has zero economic impact or value according to CBO

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Monday, July 22, 2013

Detroit's Got Nowhere to Run and Nowhere to Hide

The Greatest Car Ever Made in Detroit
The 64 1/2 Mustang Convertible
Among the more fascinating discussions we have had over the past 5 years have been with people who believe this following statement with all their heart, souls and minds:

'More government spending on infrastructure, civil servants and public welfare programs is the way to solve our economic troubles ranging from unemployment, stagnant or non-existent economic growth and the heartbreak of psoriasis' for all we know.

'Detroit' is going to be Exhibit A#1 in any future consideration and debate about whether that is a good idea or not. Or at least it should be.

The question should always be framed as such going forward:
'What is more important to do first: encourage solid economic growth and investment with sound economic policies and non-excessive regulations so that jobs can be created...or more government spending in infrastructure, public sector union salaries and retirement benefits named above?  
Let's look at the facts as they have unfolded:

At one time in the mid-1950's, Detroit was the nation's 5th largest city in the nation behind New York City, Chicago, Philadelphia and Los Angeles. There were over 1,849,000 people living in Detroit mid-decade in the '50s due to the automobile boom post-World War II. Businesses and entrepreneurs in the Motor City created hundreds of thousands of well-paid jobs for the assembly lines and brought many working-class families into the burgeoning middle-to-higher middle class in America.

It was a miracle of the American free enterprise system set into motion by the genius of Henry Ford and GM back in the early part of the 20th century. With that came an expanding tax base that supported the expansion of the public sector services from public school teachers to the police force to the fire department.

Private enterprise is the straw that stirs the drink of any flourishing city, state or nation. Not the other way around with the public sector leading the way as the sad case of Detroit's current bankruptcy and demise as a great American city is going to prove once and for all.

Today, Detroit is down to around 770,000 people. Detroit is the only American city to grow beyond 1 million in population to fall back below 1 million which is astounding when you think about it.

40% of the street lights in Detroit don't work. Unemployment is around 16.7% which is bad but it is an improvement from the 27% unemployment rate not too long ago when the economy collapsed and people stopped buying new cars for awhile in 2008-2010. The statistics that come out of Detroit sound more like a developing country rather than a once-proud bastion of American pride and ingenuity.

So here's the question of the day:

'Would increased amounts of federal, state or local government spending have turned Detroit around?

Based on some of the debate we heard from Big Government aficionados after President Obama embarked on the largest federal economic stimulus spending boom since FDR, there are some of you out there who would say emphatically: 'Yes!'

The theory is that more government spending will build more bridges and roads in and around Detroit and put some of these 16.7% of the unemployed people in Motown back to work. Nobel Prize winning economist Paul Krugman no doubt would be in this camp.  He thinks the federal government should spend twice as much on stimulus packages out of Washington and keep borrowing more money to get the economy moving once again. More government spending on civil servants such as teachers, police and public safety workers supposedly will be enough to jumpstart the local economy and get things back to normal.

Or so the story goes.

Here's the problem with that theory, one that has plagued big government spenders back to the Age of the Pharaohs and the Greeks and the Romans after that.

'At some point in time, people stop loaning spendthrift governments money. And then you are up the creek without a paddle' to put it nicely.

Detroit has $18 billion in public debt right now. No sane lender would loan to them giving their current financial condition which is why they had to declare bankruptcy. They can't meet their obligations.

What would it take to turn Detroit around with more government spending, assuming they can get funding from some crazy lender or political body?

Build bridges direct from Detroit to Buffalo, Erie and Cleveland across Lake Erie? Hire 10,000 more policemen and women to police the city? And then what? Where will these people spend their money...on products made in China, India or South America? That won't help anyone in Detroit get a job, will it?

There is absolutely no amount of infrastructure spending or public sector worker support that can turn Detroit around now. Can we all agree with that, even the King of all Government Stimulation Packages, Nobel Prize-winning economist Paul Krugman?

The only thing that can save Detroit is some sort of diversification into other industries as many other cities have done to recreate themselves over the years. Perhaps another Henry Ford will somehow magically combust in some now miniscule endeavor that will produce a product or service that will transform the area as Bill Gates did with Microsoft in Redmond, Washington where they employ over 42,000 people alone in the state.

The sooner Detroit goes through bankruptcy proceedings to restructure their pensions and financial obligations to current public sector workers and retirees, the sooner the city can set about finding a economic renaissance of some sort along the lines that other industrial cities such as Pittsburgh have created. Who wants to move a business or family to a dying area such as Detroit when so many other places beckon with lower costs, better weather and far less turmoil?

The thing that has killed Detroit, besides the demise of the US auto industry manufacturing solely in Detroit, that is, is the enormous amount of unpaid liabilities past mayors and city councils of Detroit have approved for public sector employees of the city. These include generous health care benefits now being paid to retirees of the Detroit teachers and civil service public unions that can't be paid for out of current tax revenues generated by the current taxpayers of Detroit.

Detroit's current unfunded liabilities total $3.5 billion and they had to seek bankruptcy protection. That's not too bad considering Chicago has at least an $19 billion unfunded liability and possibly as high as $36 billion according to Moody's. LA has unfunded liabilities officially plugged at $30 billion today. Hold on to your hat because the day of reckoning for those cities is just around the corner most likely.

There's something about elected officials and public sector unions and public sector workers: The politicians never want to disappoint the unions by not granting them what they want in terms of salary and retirement benefit packages. Meaning: 'i.e. They want the unions to get their people to vote for them in the next election'.

The elected officials who granted these benefits now obligated left office decades ago, many of them who are no longer alive. So what did they care if they left Detroit with an insoluble financial and fiscal mess on their hands 20 years into the future?

The lessons of the Bankruptcy of Detroit should be seared deeply into the brains of every elected official in this country. Because it could be coming to a town near you very soon and there is 'nowhere to run and nowhere to hide' once things get out of hand like they have done in Detroit.

*(Note: Now if Ford Motor Company would just find the body molds to the 1964 1/2 Convertible Mustang and start making them again, we have to believe the Motor City would snap back to life overnight as long as they make them in Detroit)

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Friday, July 19, 2013

'Health Care Costs to Drop 50% in New York Due to Obamacare!'

'Look at me! I can make health care premiums
drop by 50% at the drop of a hat!'
“Health insurance has suddenly become affordable in New York,” said Elisabeth Benjamin, vice president for health initiatives with the Community Service Society of New York.
“It’s not bargain-basement prices, but we’re going from Bergdorf’s to Filene’s here.”
“The extraordinary decline in New York’s insurance rates for individual consumers demonstrates the profound promise of the Affordable Care Act,” she added.
Well, since everyone in New York seems to be right all the time, just as in the NY Times recent screed against the new initiatives and policies undertaken by the GOP majorities in the state legislature and from the Governor's Mansion, we guess whatever New Yorkers say about everything has to be true.

Except when it isn't.

Look. We don't mind the occasional gilding of the lily. That is politics. PR. Marketing. You have to sell your political ideas just like Procter & Gamble sells its soap products.

However, we do object to outright lies, fabrications and complete distortions of the truth. 'Propaganda', if you will, solely for the sake of serving your Fearless Leader.

This comment by Elisabeth Benjamin is one of them. (Bergdorf's to Filene's?)

Below is the full text of an excellent explanation of why 'some' New Yorkers, (not all) will see a 50% drop in their healthcare premiums coming up by Avik Roy, who, in the spirit of full disclosure, was an advisor to the Mitt Romney for President campaign.

He is also an expert in health care policy and has done a good job explaining why New York had completely destroyed the private individual health insurance market long ago and driven up prices for premiums to the point where any change was going to probably allow prices to come down for this very tiny sliver of the market. 17,000 folks, by some estimates, out of a state of about 20 million people.

You will see a lot of complex jargon such as 'community rating' here. Just be assured that when you do see such language, it is used when politicians who don't understand the economy or the free market start making up stuff that sounds good on the face of it (who can be against lowering costs for high at-risk people?) but actually works against the realities in the marketplace and leads to adverse outcomes.

Politicians who don't understand economics or business are just like Wile E. Coyote who always tries to come up with some amazingly complicated plan to fool Mother Nature and allow him with all of his limitations to capture the Roadrunner and finally get some food for supper.

These unschooled and impractical politicos will go to great lengths to try to outwit or outrun the basic fundamental concepts of supply and demand, elastic vs inelastic demand and basic simple free will of the American consumer and taxpayer.

Such as the complete destruction of the private insurance market in New York that started under Mario Cuomo in 1992.

Read it and weep.  The worst is about to come out about the high costs of Obamacare which are sure to put a lot more wrestling holds on the health system that will cause even more distortions and not save anything like 50% anywhere else.

7/18/2013 @ 4:11AM |139,007 views

The NY Times Tries -- And Fails -- To Protect Obamacare From Health Insurance 'Rate Shock'

Mario Cuomo adjusted
Former New York Gov. Mario Cuomo (D.) (Photo credit: Wikipedia)
Yesterday, fans of Obamacare were cheering. A front-page story in the New York Times announced that individuals shopping for health insurance in New York would see their premiums halved, based on figures released by the Andrew Cuomo administration. It was an “extraordinary decline” that “demonstrates the profound promise” of Obamacare, said one supporter of the law. But the cheerleaders are wrong. New York’s premiums will remain among the costliest in the nation, after Obamacare becomes fully operational. And the unique history of how the Empire State destroyed its individual health-insurance market—using policies quite similar to Obamacare’s—will translate, at best, to only a handful of other states.
We’ll start our discussion with a recounting of that tale, of the unflattering history of the individual health insurance market in New York state.
Mario Cuomo destroyed the New York insurance market
Our story begins in 1992, during the third term of Gov. Mario Cuomo, the liberal lion of his day. In July of that year, Gov. Cuomo signed into law the most draconian health insurance regulations drafted in recent times. Insurers were barred from charging different rates based on age, gender, or health or smoking status, what wonks will call pure community rating. In addition, insurers were not allowed to deny coverage based on pre-existing conditions, a.k.a. guaranteed issue. The state mandated that all plans cover a specified set of benefits, and restricted certain cost-sharing practices.
Within four years, these changes resulted in a mass exodus of health insurers from the individual market, for all the reasons that will be familiar to regular readers of this blog. If you charge the same amount to healthy and sick people, and to young and old people, young and healthy people suddenly find themselves paying thousands of dollars for insurance they don’t need. They recognize this as a bad deal, and drop out of the market. Only the sickest people, who need the insurance, stay in the pool, leading prices to go up and up in an adverse selection death spiral.
Gov. George Pataki, Cuomo’s Republican successor, made several attempts to patch up the market, though he never repealed the 1992 law. Most notably, in 2000, he signed the Health Care Reform Act, which created an exchange for individuals of modest means who didn’t get coverage from their employer, called “Healthy New York.” Small businesses could also use the exchange to partially subsidize coverage for their workers.
While Healthy New York has been reasonably successful for the portion of the individual market it served, it doesn’t serve everyone, because of its eligibility restrictions. The other half of the individual market continued to worsen. From 2001 to 2010, as my Manhattan Institute colleague Paul Howard has chronicled, enrollment in the non-Healthy New York individual market dropped by 76 percent.
“You have a mandate that’s accessible in theory, but not in practice, because it’s too expensive, Mark Scherzer told the New York Times in 2010. “What you get left clinging to the life raft is the population that tends to have pretty high health needs.” By 2009, when Obamacare was winding its way through Congress, New York had the priciest market for individually-purchased insurance in the nation, something that surprised no one who understood the economics of health insurance.
New York premiums have nowhere to go but down
There are two ways to improve an insurance market that has been wrecked the way New York’s was. The first is to eliminate the market distortions that caused the problem in the first place; for example, by eliminating age-based community rating, so that young people can buy insurance whose price is more closely related to their actual health-care consumption, instead of being asked to pay thousands of dollars more for insurance they don’t need.
The other approach is to do what Obamacare does: to impose an individual mandate that dragoons the healthy into subsidizing the sick, and to subsidize the cost of the inflated health premiums for some low-income individuals, so at least they can afford coverage.
In the vast majority of states, Obamacare has the net effect of raising premiums by a lot, which has given rise to the term “rate shock.” In California,for example, a healthy 40-year-old today can pay $94 per month in the individual market; that rises to $234 a month under Obamacare: an increase of 149 percent.
Obamacare even drives up costs in heavily regulated states. In 1993, Washington instituted progressive reforms similar to those of New York, though Washington’s were somewhat less punitive. This led me to expect that Washington, along with New York and a handful of other states, could see individual-market rate decreases under Obamacare. Much to my surprise, it turns out that even in Washington state, Obamacare will drive premiums upward by 34 to 80 percent. The average of the five lowest premiums for a 40-year-old in Washington today is $162; Obamacare will drive that up to $243.
But New York, today, is in worse shape than Washington, and far worse shape than California. In 2010, according to the Kaiser Family Foundation, the average premium in the New York individual market was $357 a month. By my calculations—aided by my Manhattan Institute associate Yevgeniy Feyman and our summer intern Paul Chung—today, that figure has climbed to $495 a month.
As a result, Obamacare does have the effect of lowering premiums in New York, to a weighted average of $301 a month: a 39 percent decrease from 2013 rates, and a 16 percent decrease from 2010 rates. According to several studies of the New York market, the biggest driver of the improvement is the fact that the mandate and the subsidies will encourage healthier people into the insurance pool, driving average costs down.
It’s always better to see rates go down rather than up, but you have to remember the context. New York’s rates will still be three times higher than those found in California before Obamacare. And the Times inflated the impact of the ACA, implying that average premiums in New York City exceed $1,000 today vs. $308 under Obamacare; by our analysis, using a fairer comparison, the five-borough average for affordable coverage was $695, with a much lower average upstate.
Indeed, there is wide regional variation as to how the state performs. As you can see from the chart above, New York City and its suburbs will fare best under the law, with rates falling by an average of 55 percent. That’s encouraging, as that is the densest part of the state. However, much of eastern New York, including Albany, will face rate increases, of between 30 and 39 percent.
Some New Yorkers will also benefit from Obamacare’s exchange subsidies, though others will pay the taxes needed to fund those subsidies. For a lengthier discussion of the impact of subsidies on the Obamacare exchanges,go here.
What happens in New York, stays in New York
People who aren’t familiar with Empire State’s unique circumstances have been quick to presume that rate reductions in New York under Obamacare mean that the law will bring down rates nationwide. The Times was content to leave its readers with this misunderstanding.
I’m told that President Obama will even give a speech today at 11:30 a.m. ET to tout the New York results. But lower rates in New York is hardly a surprise; as Obamacare advocate Timothy Jost put it, “If there was any state that the ACA could bring rates down, it was New York.”
Massachusetts is another state that, prior to Romneycare, had a dysfunctional individual insurance market. I wrote a month ago that “there are a handful of states that have Massachusetts-like problems in their individual markets: Maine, New Jersey, New York, Vermont, and Washington. Those states are unlikely to see much impact from Obamacare on insurance premiums; indeed premiums there might even go down. But nearly every other state will endure significant disruptions as Obamacare goes into full effect.” So if you live in those states (other than Washington), you may do okay in the individual insurance market. If not, you likely won’t.

As a guy who lives in Manhattan, I’m glad to see Obamacare move the city’s individual insurance market in the right direction. But New York’s rates will remain far higher than they are in other states. And in those other states—states like California and Ohio—premiums are set to go up dramatically.
Some people think that the Yankees are America’s Team. And some people hope that if New Yorkers gain from Obamacare, so will America. But just as in baseball, New York’s gain is not necessarily the nation’s. As we learn more about insurance premiums in the Obamacare era, we will be repeatedly reminded of that fact.
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METHODOLOGY NOTE: To conduct the above analysis, I and my Manhattan Institute colleagues, Yevgeniy Feyman and Paul Chung, compiled data from the five least-expensive plans on the traditional individual insurance market in the most populous ZIP code of each New York county, via, the federal government’s health insurance web site. By taking the average of those five plans, while adjusting for the impact of the individual-market component of the Healthy New York exchange, we established a “current rate” baseline for each New York county. We then compared those rates to the average rate of the five least-costly Bronze plans in each ACA rating region. No adjustment was needed for denials, surcharges, or age, because New York prohibits charging different rates based on health status, gender, and age.

Friday, July 12, 2013

'All The News That Is (Not Necessarily True Or) Fit To Print'

'We Don't Care If It Is True As Long As We Agree With It!'
The New York Times venerated (sic?) editorial board recently handed down their decision on the state of the State of North Carolina from their offices apparently located on Mount Olympus which has somehow mysteriously been transported to downtown Manhattan.

Strange how anyone in a state that has lost 18 electoral votes (that is 18 Congressional representatives!) since 1940 can purport to tell any other state what they are doing wrong, isn't it?  People seem to be moving lock, stock and barrel out of New York as fast as they can for some reason. Could it possibly be the very high rates of taxation and regulation in the state of New York, hmmmm?

North Carolina has picked up 2 electoral votes in the last couple of redistricting efforts and should have picked up one more last time around.

At this rate of attrition, New York will be down to 11 electoral votes by 2060 and North Carolina will be up to 21! Who will be the 'Big State' then?

Anyway, we thought it might be helpful to try to address some of the many inaccuracies in the NY Times article that might have been one of the most poorly researched pieces in a long time.

It is a darned shame...the New York Times used to have some excellent writers and apparently good-to-great researchers in the 1970's and 1980's when we started reading it to learn something. Long about the mid-1990's, the NY Times became almost unreadable due to its clouded partisanship hidden behind its facade of 'All the News That is Fit to Print!' banner on the front page. One could hardly get to the facts of an issue trying to wade through the London fog of the overt biases of the editors.

Below is the opinion piece that has been circulated in North Carolina perhaps more that any circuit judge or circuit preacher has ever done in history in case you haven't read it. (Edited in blue are some comments designed to illuminate more than argue since arguing with someone who has not taken the time to do their homework is often 'simply a waste of time')

The New York Times
July 9, 2013
The Decline of North Carolina (how about 'The Decline of New York' as mentioned before?)

Every Monday since April, thousands of North Carolina residents have gathered at the State Capitol to protest the grotesque damage (how about inserting some non-biased language such as 'changes in policy'?) that a new Republican majority has been doing to a tradition of caring for the least fortunate (or how about with regard to balancing the budget and setting spending priorities and running state government better and more efficiently?)

Nearly 700 people have been arrested in the “Moral Monday” demonstrations, as they are known. But the bad news keeps on coming from the Legislature, and pretty soon a single day of the week may not be enough to contain the outrage (of the protestors on Jones Street alone. There are no marches in the streets anywhere else in the state other than about 100 yards away from the legislative building).

In January, after the election of Pat McCrory as governor, Republicans took control of both the executive and legislative branches for the first time since Reconstruction. (A lot of bad practices can build up over 140 years, don't you think?) Since then, state government has become a demolition derby, tearing down years of progress in public education, tax policy, racial equality in the courtroom and access to the ballot. (Seriously. Do your homework, NY Times! The state government is going to be BIGGER in size next year versus last year in terms of spending! That is considered a 'demolition derby'? Use your hyperboles a little more judiciously as in, say, using the words 're-evaluated priorities'?)

The cruelest decision by lawmakers went into effect last week: ending federal unemployment benefits for 70,000 residents. Another 100,000 will lose their checks in a few months. Those still receiving benefits will find that they have been cut by a third, to a maximum of $350 weekly from $535, and the length of time they can receive benefits has been slashed from 26 weeks to as few as 12 weeks.

The state has the fifth-highest unemployment rate in the country, and many Republicans insulted workers by blaming their joblessness on generous benefits. In fact, though, North Carolina is the only state that has lost long-term federal benefits, because it did not want to pay back $2.5 billion it owed to Washington for the program. (This almost worthy of being called a complete and total falsehood! The actions the GOP legislature and Governor took earlier this year had to be taken to PAY BACK the loans the previous Democratic Governor allowed to ring up with absolutely zero plans to ever pay them back!) The State Chamber of Commerce argued that cutting weekly benefits would be better than forcing businesses to pay more in taxes to pay off the debt, (Businesses in North Carolina went along with a large HIKE in taxes to pay off unemployment debt owed to the Federal UI (unemployment insurance) program in the next 2 years!) and lawmakers blindly went along, dropping out of the federal program.

At the same time, the state is also making it harder for future generations of workers to get jobs, cutting back sharply on spending for public schools. Though North Carolina has been growing rapidly, it is spending less on schools now than it did in 2007, ranking 46th in the nation in per-capita education dollars. (North Carolina has been controlled by a non-GOP party for the past 140 years....and THEY are now to blame for public education spending that has been falling since 2007??? What happened in 2008, 2009 and 2010 when the Democrats held 100% control of the state government and in 2011 and 2012 when there was still a Democratic Governor in the Mansion?) Teacher pay is falling, 10,000 pre-kindergarten slots are scheduled to be removed, and even services to disabled children are being chopped.

(North Carolina passed the Education Lottery in 2005, ostensibly to 'bolster' state spending on education. Under a Democratic Governor and Democratic Legislature. The lottery was sold as a delta 'increase' in the amount of money that would be spent on education in North Carolina by an amount equal to the net monies earned by the lottery. Many experts have said that all that the lottery money has done is allowed other parts of the state budget to expand while keeping the education funds relatively constant. That is one area the new GOP legislators need to investigate and find out where all that money has been going for the past 8 years now and counting)

“We are losing ground,” Superintendent June Atkinson said recently, warning of a teacher exodus after lawmakers proposed ending extra pay for teachers with master’s degrees, cutting teacher assistants and removing limits on class sizes.

Republicans repealed the Racial Justice Act, a 2009 law that was the first in the country to give death-row inmates a chance to prove they were victims of discrimination. They have refused to expand Medicaid (because the existing Medicaid computer and accounting systems were so corrupt and obsolete that the GOP legislature has had to put a $495 million finger in the dyke to stem the losses in Medicaid for 2012 and expect to do the same to the tune of $600M in 2013! It makes no sense to expand coverage when there are such gaping holes in the current accounting systems for Medicaid plus there are ways to revamp and reform Medicaid to serve the Medicaid population in the future) and want to cut income taxes for the rich while raising sales taxes on everyone else. The Senate passed a bill that would close most of the state’s abortion clinics. (In 1975, abortion clinics in North Carolina had to get CON (Certificate of Need) and surgical care licenses in order to operate in the state in order to insure 'safe' and legal abortions. Don't ask how we know...but 'we know' this for a fact)

And, naturally, the Legislature is rushing to impose voter ID requirements (Voting is about the ONLY activity left in America that doesn't require a photo ID! We got carded the other day at a Beach Music Festival in Raleigh!) and cut back on early voting and Sunday voting, which have been popular among Democratic voters. One particularly transparent move would end a tax deduction for dependents if students vote at college instead of their hometowns, a blatant effort to reduce Democratic voting strength in college towns like Chapel Hill and Durham. (If you had heard the stories we have heard from college students who admitted they voted absentee in their home states AND in person in Durham or Chapel Hill in 2008 and 2012, your hair would spontaneously combust into flames) 

North Carolina was once considered a beacon of farsightedness in the South, an exception in a region of poor education, intolerance and tightfistedness. In a few short months, Republicans have begun to dismantle a reputation that took years to build.

(Our fingers are so tired from rebutting the venerated NY Times 'editorial board' that we just can't go on. We have taken on the Republicans in the past when they were wrong. We have taken on the Obama Administration and the Democrats when we thought they were wrong in the past. So what is taking on the 'venerated' (sic?) New York Times when we think they are wrong as well?)

Suffice it to say that we hope you will look at this widely disseminated opinion piece and wonder how they could write such a piece that now looks like swiss cheese with blue holes in it all over.

Is there any wonder why newspapers have dropped by about 25% in circulation annually for the past 20 years. Why, at that rate, they are sure to disappear in the ground sooner than when New York state will get down to 11 Electoral Votes!)

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Thursday, July 11, 2013

What Is More Important To America: Professional Referees or Public Elected Officials In Congress?

'Zebras are more important than
Congressmen and Senators in America!'
We got to thinking the other day about what was 'more important' to the United States of America:
Having great referees in our professional sports leagues....or having great representatives and senators in Congress in Washington?
Apparently, based on the way we pay our elected representatives versus professional referees, we 'value' the services of NFL/MLB and NHL referees at or around the same level as we 'value' our elected officials in this nation.

We know, we know: 'The market values rare talent'. Alex Rodriguez, LeBron James and Peyton Manning are those 'rare talents' and command massive salaries up to $25M per year. 'They put fannies in the seats and sell advertising on the tube!' team owners and general managers say to justify such exorbitant salaries.

Babe Ruth said it best when asked why he was paid more for hitting home runs than Herbert Hoover was paid for being President of the United States in 1929:

'I hadda better year than he did!'

People will say that we have to have 'the very best officials...because that is good for the game (of football/basketball/baseball)

If that is true for sports (and for the Las Vegas bookies), isn't that true also for our elected US Representatives, Senators and Presidents?

The new eight-year NFL referee contract gives the union referees a pay bump from $149,000 a year in 2011 to $173,000 in 2013. The pay will rise to $205,000 by 2019.

Umpires in Major League Baseball make around $141,000 annually. NBA referees make around $128,000 annually and the NHL officials earn around $139,000 annually.

US Congressman and Senators both make $177,000/annually. Which, when you think about it, is more than a little odd since a Senator in a state such as North Carolina now serves 13 times more people than a single Congressman or Congresswoman does. A US Senator in the state of California serves 53 times more people than any single Congressional rep does.

Maybe Senators should get paid at least double for the work they do on behalf of the entire state?

Let's compare the relative importance of professional referees/umpires and public officials:
  1. Referees and umpires 'govern' and 'regulate' professional sports games. 
  2. US Congressmen and Senators 'govern' and 'regulate' (sic?) our $3.7 trillion annual budget.
  3. NFL refs work 16 days per season, 4 hours at a time.
  4. Congress is in session for most of the calendar year.
  5. Refs and umps call fouls and strikes.
  6. Representatives and Senators decide about going to war and paying for our military protection.
  7. Refs tell irate coaches to shut up and 'you are outta here!' when they get mad.
  8. Reps and Senators bring Administration officials from the IRS to testify about why they target political groups solely for their political beliefs.
  9. Refs and 'Blues' (as some call baseball umps) have to avoid players spitting tobacco on their shoes
  10. Congressmen and Senators have to worry about crazy people attacking them verbally and physically.
You get our point. Our US elected officials are charged with doing very important work for us. Professional umpires and referees....are refereeing and umpiring older adults playing what essentially are children's games.

Now, we will be first in line to say that many of our elected officials are not doing a great job. In fact, over the past 10-20 years, the lack of success and progress on any major issue of magnitude we face as a nation makes it embarrassing to say we are paying most of the people in Washington anything when it comes right down to it.

A roomful of 535 chimpanzees with calculators and credit cards wouldn't have run up a $17 trillion national debt, would they? $6 trillion has been rung up in the last 4.5 years.

At least in some professional sports, namely football, you can cut a player right away for not performing well or missing 3 field goals from the 10-yard line. We assume professional refs and umps can be 'fired' as well for making bone-headed calls such as last year when the Seattle Seahawks 'beat' the Green Bay Packers

It is not so easy with our elected representatives and senators. Once they are elected, they assume the 'powers of incumbency' such as the ability to out-fundraise their opponents 10-to-1; the ability to mass-mail and mass-market their positions on the issues by the millions and the presumption by their constituents that 'they must know what they are doing or else they wouldn't ever have been elected in the first place!'

We only get the chance to 'throw the bums out' from Congress every 2 years and every 6 years for Senators. And Presidents (who make $400,000/year) every 4 years.

We also understand the point that the free market is paying the salaries of professional athletes and referees and umpires. They can be paid $10 billion as long as enough people pay high enough prices for tickets to the games and buy enough product to justify all the television ads they will have to sit through to watch a 60-minute game. It might take 24 hours to do so, however.

We do think there is some truth that paying our elected leaders higher salaries will attract a better crop of candidates to run for political office across the board. State elected leaders get paid paltry amounts relative to the time they spend in the state capitals. Mayors, city councilmen and county commissioners are essentially working for free when you tally all the hours they work and figure out what they are getting paid on an hourly basis.

It might have been a noble notion at the founding of the American Republic to have people want to serve our nation and states essentially on a voluntary basis and get paid as little as possible to serve in office.

It might be time to re-think that vision. Think we wouldn't attract a better slate of candidates for Congress across the nation if the base salary was $250,000? $300,000? $500,00 per year? Wouldn't you consider it at least?

That would take away 1 big excuse we always hear when very qualified people say they 'don't want to take a pay cut to go to Congress!'

Think about it this way: If we had paid 535 people $500,000/year knowing they knew how to balance the budget each year, we would have saved $6 trillion in new debt accumulation since 2009 alone. For $267,500,000 per year, we would have saved that $6 trillion in new debt and then some since supposedly they would also ferret out all the waste in the the federal government. (We know it is there)

$500,000/year is enough for anyone to leave their private sector position and maintain two households, one in the Washington, DC area and one back home.

Isn't it?

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Saturday, July 6, 2013

The Carolina 'Yay/Boo Cheer' Applied to Obamacare

'Yay, Health Care!
'Boo, Costs!'
Everyone was all a-twitter last weekend when a lower level deputy Treasury secretary, not President Obama, announced in his blog, (not the President's) that the onerous employer-mandate section of Obamacare (just that part, nothing else) was going to be suspended for a year.

Until after next year's mid-term elections. (see Wall Street Journal's scathing on-line piece 'Employer Mandate: Never Mind')

Of course. More political gamesmanship from this President on health care. Every time there is a 'cost' associated with Obamacare, that gets pushed to the out-years while the bennies of Obamacare get shoved to the in-years from day 1 (coverage of children til age 26, etc)

Why didn't the President stand up at the Rose Garden, announce this major policy change, take his lumps and bear responsibility for this action?

JFK took full blame for the Bay of Pigs fiasco in Cuba early in his Presidency. Couldn't President Obama have taken the blame for the poor implementation of his own health care program that has now had 3 years to find its sea-legs and try to stand up and walk on its own?

This episode reminds us of the 'Yay/Boo Cheer' that we heard about at Carolina back in the day, although don't remember actually seeing or hearing since it may have happened in the 40's and 50's when Charlie 'Choo-Choo' Justice was tearing up the countryside with his amazing runs from the Tar Heel backfield.

The 'Yay-Boo' went something like this:
'We're going to have a party after the game!'
But you're not invited!
Unless you bring your own booze!
...and so on for days, weeks and years at Chapel Hill, apparently.
Let's take a look at this recent decision to delay the employer-mandate of Obamacare through the eyes of a head Carolina cheerleader leading the 'Yay/Boo Cheer':
  • 'The Employer-Mandate is delayed for 1 year!'. (Yay!)-(No penalty for companies with over 50 employees to pay for 1 more year at least.)
  • 'The deficit is increased by at least $13 Billion'. (Boo!)-(CBO was counting on this much in penalties to be paid by non-compliant companies to help pay for the subsidies for enrollees into Obamacare)
  • 'Companies can start hiring more people again!' (Yay!) (Without the mandate, companies under 50 full-time employees can hire without having to pay the $2000/head penalty if not covered by a company health plan)
  • 'Companies won't hire more permanent employees now only to fire them in 2015' (Boo!) (Companies will only hire more part-time folks since if they keep them as permanent, they will have to pay the $2000 penalty in 2015 if they don't provide health insurance)
  • 'The IRS is not set up to track every company's health coverage plans!' (Yay!)
  • 'Hey, Wait a Cotton-Picking Minute! You mean the Obama Administration wants the IRS to start tracking our health care coverage plans ON TOP OF our taxes??? (Boo! Boo! Double Boo!)

You get the picture. For every positive thing that is now coming out about Obamacare being delayed here or adjusted there, there still remains some very negative downsides to having this bill as law in the first place.

Perhaps the delay of the employer mandate will lead to other provisions of Obamacare being delayed as well. As the Wall Street Journal said:

 '...Delaying (the employer mandate) is like Ford saying its electric car is ready to go, except the electric battery doesn't work.'

There is reason to hope for some moderation of health care costs just in the natural course of daily business from what we have seen and learned lately.

Medicaid costs have been stopped dead in their track of their upwards death spiral in the states of Texas, Mississippi and Kansas due to the adoption and implementation of responsible, patient (client)-focused managed care in each state by the Governor and state legislatures of each state.

People are finally beginning to realize that one way or another, they are going to be paying more for their health insurance coverage regardless of whether Obamacare is fully implemented in 2015, 2016 or 2020. The one tried-and-true way to avoid paying those costs is to take better care of their own health to begin with: stop smoking; stop drinking too much alcohol all the time; get some exercise and eat some leafy greens such as kale and chard instead of fried chicken in lard.

The delay of the employer-mandate in Obamacare might be just the first domino to fall in its repeal and ultimate demise one day. (Yay!)

But don't count on it. (Boo!)

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Monday, July 1, 2013

Want A Real 'Independence' Day This Year, July 4, 2013?

'Retirement and Economic
Independence Day, 2013'
Consider throwing your incumbent Congressman and Senator out of office in 2014 who has voted time and time again to saddle us with a 1935 version of 'dependence' that has not kept up with the times: Social Security.

Replace them with someone who will vote for the greatest economic freedom and independence package the world has ever known for each and every American citizen, young and old.

'The New Great Deal' that really is one and doesn't just pretend to be.

What would you say if you saw one of the hucksters or carny barkers on a television ad hawking gold who said this:

'Put 5% of your income every week for the next 45 years of your life into a gold fund...and we will guarantee you that you will get $1200/month for the rest of your life after age 67 (that is what the retirement age will be around 2026) ...(assuming you don't die before you get to age 67, that is in which case we will keep all your contributed funds and your family will get nothing)

You would, or should call, write and email the SEC and the FTC in Washington immediately to report these guys as insane idiots who are trying to pull a fast one on you, the typical American financial consumer.

Well, guess what? Those 'carny barkers' are your elected representatives and senators who have steadfastly refused to improve and modernize the Social Security System in America for the past 78 years. They know that this is true but they are afraid of the AARP revving up the senior population against them in the next election if they even mouth the words: 'Social Security Reform'.

Granted, there have been a few very brave souls who have jousted with the AARP and Claude Pepper and Nancy Pelosi and tried to talk some sense into them about how SS is actuarially out of balance and how it is already running a current year deficit since 2009. There were not enough of them to win, sad to say.

'It is the greatest thing in the world!' these yay-sayers such as Nancy Pelosi still say. 'Don't touch it or else we will drive you to an early political grave!' they threaten.

Take a cold hard look at the facts and decide whether they are right or not. Or just simply are so dense and thick in the head that they can't see where the current SS system is keeping people at or near poverty in their golden years when the 'New Great Deal' could make millionaires of them all.
In 2012, the average Social Security benefit ran just over $1,200 a month.

For that, you are taxed 12.4% of your take-home pay from your first day of work until your last. All but a small group of high-income workers pay that tax on nearly 100 percent.

Compare that to this: A married couple, each earning ten dollars an hour and investing only 10 percent of their earnings at a modest 5 percent return, retires with an annual income of about $50,000 a year—assuming they never touch the nearly $1 million principal they will leave to their children.

That 5 percent is conservative: The average inflation-adjusted return on the S&P 500 since 1950 has been 8.62 percent. Assuming an 8 percent return gives the theoretical couple above nearly $3 million for retirement.
Most important, such pensions would be heritable—enabling the building of multi-generational wealth in communities in which that currently does not exist. Solving the problem of poverty among the young begins with solving the problem of pensions for the old.

We can do that for less than most Americans are paying in Social Security taxes today.

$50/week starting from birth produces a retirement nest egg of $1.6 million at 5 percent returns, or $5 million at 7 percent returns.
If we want people to make responsible decisions, we should begin by ceasing to punish them for making responsible decisions.*
*(Facts taken from 'The End Is Near (And It Is Going To Be Awesome!) by Kevin D. Williamson)

You are not still riding around in the 1935 Chevrolet your grandparents or great-grandparents drove around in, are you? (If you are, stop right now and take it to an antique car dealer to get it ready for an auction cause it worth more selling it than driving it)

Let's face it: We are not living in the 1930's, 40s, 50s, 60s, 70s, 80s, 90s, or even the 2000s any more. We have to have a modern retirement system reflective of the times. We also need to start using the power of compound interest and economic growth to help every American build the real wealth needed to retire and then pass on to their heirs on which to build more wealth and real economic security.

Let's start today. Let's start a 'Second Revolution for (Economic) Independence' that our children and future generations will celebrate the fact that we had enough brains and guts to start when they set off fireworks on July 4, 2062.

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