How To Reduce Unemployment.

This article posted today at Real Clear Markets offers some good advice for POTUS to consider. In addition to these 5 things, I can think of a few additional items to consider.

1. Drop the corporate income tax altogether. Business make investment choices based on after-tax returns. Increasing those returns will give more marginal investments an opportunity to generate a return and produce more income to tax. This also avoids the double-taxation of business profits and put equity and debt financing on equal ground. By giving equity financing the same status a debt financing it should reduce the need for companies to take on too much debt making our businesses more stable and strong. No corporate income tax would also free up monies that no longer have to be spent to hire tax attorneys and accountants that add no value to a business.

2. Cut government bureaucracy by 50%. The more government employees you have, the more busy-bodies there are to create rules and regulations. Reduce the number of people then slash the number regulations by 50%. Do we really need a regulation of bath room fixture height? In addition, there should not be multiple government agencies with oversight of the same issues. Take customs for instance. There are no fewer than 5 different agencies with their hand in the customs clearance process. This is absurd.

3. Every state should be a right-to-work state. The federal and state government should ban unionization of their workforce. Work rules where the people paying the salaries have little to no say in those rules is wrong. A collective bargaining agreement that is under the influence of politicians is not good for the tax payers. This government unionization drives up the cost of labor with no increase in productivity. That is not good for the economy.

4. Remove the minimum wage entirely. You cannot pay $7.25 for labor that is only producing $5 in value. Sorry that is a recipe for bankruptcy or unemployment.

I am sure there are many more ideas out there. In general, government needs to get out of the way and stop driving up the cost to hire workers.

Poor get richer too...

From another of my favorite blogs....

Living the good life

One can argue that the gap between rich and poor is growing. I tend to doubt this, but as Professor Perry points out, life is getting better for everyone.

Merry Christmas.

Health Care as a "Right"

This might be the best editorial on Health Care ever written:

From Cafe Hayek and Don Boudreaux

Could not be better said...

Big Business Evil?

Nicholas Taleb's new book sounds like a good read, but this short story on CNBC's website seems a little too harsh on the Big Businesses of the world. I know where he is coming from, but Big Business is good for our economy. For one, they hire lots of people. Two, they use capital very efficiently. Finally, they have scale and scope that allows them to develop better, cheaper products for us little consumers.

So why do people think Big Business is evil? My guess is that in several cases Big Business actually does do evil things. In almost every case that I can think of, this evil is in conjunction with the government. This might be in the form of some protective tariff forcing consumers to pay higher prices for lower quality goods or some how hamper a competitor. Evil might also be in the form of some special deal with a government agency where others had no chance to compete. Even worse, it might be a special bailout where losses were hoisted onto tax payers while the profits went to shareholders or company executives. No doubt these all are terrible outcomes of some Big Business activities.

However, there is no way Big Business can be evil unless it is aided by some sort of government influence. If market forces are allowed to work, unimpeded, the companies that fail to create value will fail. If you cannot compete with the import, you should go broke. If your capital is best spent on a lobbyist to get a special contract or provision to available to others, you should go broke. If you have sufficient influence in DC to subsidize losses and privatize profits, you should go broke.

We need to encourage and enable Big Business to get there in a free market not through collusion with Big Government. Our big corporations are a treasure, not a curse. Let's hope they can avoid the temptation of being evil.

US World Dominance

I have read several articles lately and one by Michael Elliott in Fortune Magazine I found particularly interesting. In the article he basically makes the point that the US is no longer as dominate, relatively speaking, as it was after WWII and that's okay.

I completely agree. A higher standard of living around the world is a great thing. The US does not need to produce 50% of the value in the world economy like it did in the 1940's. Producing 20% of a bigger pie is great for America and the rest of the world. It means more ingenuity, creativity and larger markets for products. Higher standard of living tends to limit population growth, conserve energy and clean up the environment. Of course there is a lot of work to bring the rest of the world up to the living standards of the US, but that would be a great thing, not something to fear.

Rising world prosperity would mean a smaller role for the US (think smaller fish in bigger pond), but that would probably due our hubris some good. There will most certainly be fear mongers out there that will claim this is a reason to be concerned. It's not. With a higher standard of living, nations will be less inclined to start wars as citizen will be more content with their political world. It also might mean the US will stop getting so involved in the affairs of others and we can focus on domestic problems.

In any event, everyone living longer with a better quality of life is something to embrace, not fear. I hope we can live with that...

Visual Statistics

Simply amazing...

The Things People Buy

I was watching several videos taken on Black Friday of people storming stores first thing in the wee hours to get their hands on the promotional items offer by many retailers. It never ceases to amaze me the efforts people go to in order to get the good deal.

After a few discussions with my father-in-law over the holidays it also ceases to amaze me what financial decisions people make in order to indulge in spending. One particular discussion was about the work my inlaws do at a food bank and a free clinic in northeast Oklahoma. One older gentlemen came into their free clinic one day to see a doctor. The man got to the clinic in a car that most people would not consider unsafe and that would make environmentalist keel over in disgust. As the man was talking to my father-in-law, he noticed that there was a new pack of cigarettes in this man's front pocket. So my father-in-law asked the man, "how do you afford your smoking habit?" To which the man replied, "you just learn to make choices and sacrifice."

Really? You make the choice to smoke over the choice to have regular medical care or safe (and maybe reliable) transportation? At $5/pack, I would imagine (based on the smell radiating from his clothing) that he drops a couple hundred dollars a month on Marlboros.

Unfortunately this is not single occurrence. My inlaws say they see the same choices being made when it comes many customer of the food bank. People showing up smelling of cigarettes, showing multiple tattoos and looking for free food for their multiple kids all while talking to someone on their cell phone.

For the life of me I do not understand how someone's economic priorities can be so screwed up. It really makes me think twice about charity this time of year. While I want to help the less fortunate, I don't want to contribute in any way to any one that believes Marlbors are more important than food, medical care and the basic needs of their family. By the way I do not consider Keystone Light, cable TV, internet, and cell phones basic life necessities. Call me crazy....

End of Life Care

I always DVR Frontline on PBS. It is a great program that tackles some very difficult issues. When I was going through my DVR yesterday, I nearly deleted the latest episode of Frontline as its title was "Facing Death." It would have been a huge mistake to miss this program and I encourage everyone to watch it (click on the link).

I have been through end-of-life struggles with two grandparents. It was particularly diffficult watching the decline of my grandfather who was always a larger than life figure for me. However, the way my grandfather wanted to die was perhaps the most noble thing he ever did for his family. He wanted to die at home with little modern medical interference. He only wanted the basic care that doctors, friends and family could offer and wait for the inevitable. Fortunately, the family agreed to carry out his wishes and let him conclude his amazing life the way he wanted to, at home with the people that loved him.

As for the program on Frontline, it was interesting to contrast the experience with my grandfather with those of the four families chronicled. In some cases I agreed with the actions of the families, in others I was stunned at what families did and wanted done. I guess these decisions are what make people different, but life is about living. Life is not hooked up to a respirator for a year with no consciousness.

Aside from the ethical dilemma of these decisions, I think the program failed to navigate the thorny issue of end-of-life costs. I can completely understand keeping someone on a ventilation machine for a few days until affairs can be worked out when all hope is gone. However, a year in ICU with a ventilator? That really just seems cruel to me and against the laws of nature.

Anyone that thinks remotely about economics would realize that the cost/benefit analysis in many of these situations is simple and very easy to interpret. If the family of the 87 year-old woman would have been asked to pick up a portion of the cost of this care I am confident they would have removed the tube many months earlier. There was no financial cost to them to prolong the life of their loved one. When people perceive there are no costs associated with their decisions, they will over consume. In this case they over consumed precious, and costly, medical care that was completely unnecessary for quality of life.

My position on the above does not mean I endorse death panels. End-of-life decisions need to be made by individuals and family members, not bureaucrats. It does mean these issues need to be understood and discussed openly and, in most cases, clearly documented. There also needs to be economic consequences for these decisions. Can the rich prolong their lives longer than the less fortunate? Yes it does, but it does not mean they are living.

Watch the program and DVR Frontline.

Sacrifices

I found this story about Alan Simpson to be very interesting. In it, he calls out Seniors for being greedy. I don't think it is just seniors that are being greedy, but everyone that has their hand in the government cookie jar. That includes State Governments, Unions (public sector and private sector), Green Energy, Big Agriculture, Small Agriculture, Defense, Health Care, and many many more.

So what is it going to take in the way of sacrifices for the US to find its fiscal way? I'm not entirely sure. However, I am willing to make sacrifice as I undoubtedly benefit from many government programs (defense, transportation, education, etc.). To be fair (whatever that means) I am willing to make sacrifices if the government is willing to makes changes. If the government would adopt the changes being recommended by the National Commission on Fiscal Responsibility and Reform, I am willing to give up what they recommend and maybe a little more.

The sacrifices that I am willing concede include raising the age in which I can collect social security to 69, dropping the mortgage interest reduction, and cutting the child credit. In fact, I am willing to forgo my entire social security check if the government would stop collecting the piece of Social Security Tax they collect directly from me. They can keep what they have already collected (over $190K) and they can continue to draw the piece my employer pays on my behalf (which is part of my total compensation by the way).

I give the chances of the NCFRR recommendations being implemented at close to 0%. Why? Because special interests will not make sacrifices. The government has created this cruel dependency over the last 100 years and people won't, and in some cases can't, go into rehab to get over this addiction. This addiction is powerful as the demonstrations in Greece, Ireland, Britain and France clearly indicate. There will be lies and misinformation, scare tactics and intimidation every time someone's handout is eliminated.

Politicians have neither the will or desire to stand up and do what is right to save this country. They only have the incentive to get re-elected, not do the prudent fiscal tasks to improve our situation. Term limits will help, but the political incentive system is unfortunately the down side of democracy. When more than 50% of eligible voters have the incentive to keep the gravy train running, there is not much that can be done to save the Republic.

It is all rather depressing, and hopefully I am wrong and the American people will awake from their funk.

Understanding Economics

I like to read a paper from my home town on line. Every so often, I like to read the LTTEs or Opinions. Here is one that I had to comment on in the Pratt Tribune. My response to letter is at the bottom, but also here:

To the Editor:

It is unfortunate there is such a misunderstanding about basic economics as this Letter to the Editor shows. It is important to first understand some facts.

US manufacturing output has grown every decade since the beginning of the 1900s. Today Americans produce more output while using less inputs than ever before. This means this country is very productive. It is this productivity that is often confused with reduced output. The confusion is the result of fewer people actually being employed in traditional heavy industry that leads people to believe there is less output. That is wrong. Fewer workers in heavy industry means we can have more people working in services, engineering, and medical care that help improve the quality of our lives as well.

Anyone that has traveled outside the US knows that US Dollars are essentially useless in most countries. The beautiful thing about international trade is we Americans get to give our trading partners pieces of green paper in exchange for goods that make our lives better. So why do our trading partners bother to give us goods in exchange for 6 inch strips of paper? Because they need those dollars to buy our goods because if you want to trade in this country you need dollars. For extra dollars that these entities have, they can put them in a vault and wait to buy more goods, or they can take those dollars and invest them in this country. That is exactly what that Chinese (and many others) are doing today when they buy US Treasuries and help finance our Government's spending addiction.

Free trade is what makes our lives better. In fact, I believe it was the free trade between States that helped create our prosperity. I like getting fresh fruit in the winter months from Chile, eating bananas and drinking coffee from Central America, and having cheap electronics from Asia. Limiting our trade means goods will be more expensive driving our standard of living lower, not higher.

So the question is how can we continue to increase our standard living and give our children a better life? Government cannot great prosperity. That has been proven time and again (think China during the time of Mao or the experiment of Communism in the USSR). Government can only created the environment where prosperity is allowed to blossom.

There are five simple things that government can do to create the necessary environment for prosperity.

1. Secure private property rights
2. Secure Rule of Law
3. Allow for spontaneous order without unnecessary regulations
4. Allow entrepreneurs to enjoy profits and endure losses without interference
5. Secure free speech and promote knowledge exchange

Isolating ourselves from the rest of the world through embargoes, tariffs, and other protectionist measures will only make matters worse for future generations, not to mention make the world less secure. After all, who wants to be at war with a good trading partner (known as killing the goose the lays the golden eggs).

I know it is easy to get caught up in politics and rhetoric. However, politicians rarely give service to good economics so let's make them accountable.

Excuse me...That's my &*$# your touching....

I absolutely love the American revolt around the new TSA procedures involving full-body scans and pat-downs. This says more about the political climate of America today than the Tea Party movement.

I have to say that I am stealing come material from Cafe Hayek, but this change in not about providing 100% assurance that no one is killed by a terrorist with an airplane. As Russ says, if that was the case then the government would just ban flying.

Airlines have a lot to lose if people do not feel safe on airplanes. They have the financial incentive to find the right balance of security and discretion. Too much security and people will pick another airline. To little discretion and people won't feel safe and pick another airline. The TSA is trying to impose more bureaucracy on an agency that is already bloated and ineffective (how about those puffer machines any one...millions down the drain) with no idea whatsoever about the costs they impose (just look at your tickets taxes the next time you fly).

American should revolt and push back on these new procedures. They are an infringement on privacy and liberty. If people don't feel safe, they won't fly. If airlines can't provide the right level of safety, people won't fly. The current TSA policies are not market based. These ideas are big-brother based where a few do-gooders are imposing their own ideas of safety on the public.

It won't stop here. The bigger government gets, the more do-gooders will impose there will on the public. Before long, people won't have their own choices to make, the do-gooders in DC will be doing that for you. There will also be times when do-gooders conflict with other do-gooders as more and more people want to impose there will on you. How about one part of the Dept of Ag giving away cheese (who doesn't what to help the down trodden Dairy Farmer) while another dept, within the Dept of Ag, decries the fat content that Americans consume (who wants to have all these obese Americans).

There is no doubt in my mind that all these d0-gooders want to make America a better place (at least what is better in their mind). Better for me is to let me (and others) choose what airline has the balance of safety I want. Better for me is to let me decide what I want my America to look like. Chances are that is a much different vision America than that of many other folks. That's what makes America great and that my friends is what Liberty looks like.

Rich vs Poor

I usually read Frank Rich's work in the New York Times every week. As a result I usually get frustrated that a writer with as much influence as this man can write materials like this that are just plain nonsense. His Op-Ed this week is no different, but slightly more irritating.

The first thing that hits me about this column, which is primarily about income inequality, is that the author makes no case for why differences in income are bad. He just frames up the issue that there are people that are have nots and other people that are haves. What exactly is wrong with this?

Mr. Rich wants higher taxes on the rich. Is it not enough that the top 10% of income earners pay 68% of the income tax in this country? Even worse, 47% of people pay nothing or get money back at tax time.

From the column...

the superrich who have gotten spectacularly richer over the last four decades while their fellow citizens either treaded water or lost ground. The top 1 percent of American earners took in 23.5 percent of the nation’s pretax income in 2007 — up from less than 9 percent in 1976.

Why did the top 1% of earners get 23.5% of the nation's income? Did they steal it? Did they cheat someone out of it in a game of poker? No, they got wealthy because the created value for people that bought their products and services. Bill Gates became a multi-billionaire because his software allowed millions of people to create even more wealth using his products.

I also have to argue that non-superrich lost ground. Relative to the top 1% maybe they did lose ground by comparing relative incomes by class (most like not the same people), but does that mean their standard of living fell? I doubt it. My guess is that most people in the bottom 20% of incomes enjoy a much higher standard of living today than people in the same economic class 40 years ago. I would bet that they enjoy things like color TV, cable, cell phones, microwave ovens, computers and many other things that only the superrich/rich had access to 40 years ago.

It is easy for newspapers to write articles that get the middle class fired up and play on the jealous attitudes of people that feel victimized. While this might be good for newspaper sales, it just makes it more apparent that people are more uninformed than ever about facts and have no basic understanding of economics. This is the real crisis, not income inequality.

Games Politicians Play

From Cato

High Taxes=Less Economic Growth

A lot has been written lately about the effect of taxes on incentives to work. Most of the articles focus on the incentive of entrepreneurs to take on extra "work" to make more money. Essentially does the incremental effort make the incremental income worth it. I tend to agree with this logic, especially at very high marginal tax rates (like 60-70%). However, I do not think 36% to 39% makes much difference.

This by no means implies I am for a slightly higher tax rate, especially for entrepreneurs and small business. Even small changes in tax rates can make the difference in a project having a positive net present value and not. Expansion projects and new business can only be built if there is profit involved (unless you happen to be financed with a huge trust fund). So what does this mean?

When business people make the decision to build, expand, etc. they look at the after tax return on investment. So the take the gross margin a business is expected to return and multiply that figure by (1 - tax rate). So the closer the tax rate comes to 1 (or 100%), the less likely a business will chose to make a said investment because it will be more difficult to generate a sufficient return for the risk involved. Obvisouly high gross margin project will still be done because (1- tax rate) even for high tax rate situations can still be done. However, if an expansion plan is marginal to begin with, a 3-5% change in the tax rate could very well make the project economically unfeasible.

So who decides if the plan is unfeasible? Most likely the bank that is financing this new operation. The bank will look at the after-tax return and decide if they are willing to take the risk and loan the entrepreneur the cash to fund the venture. Lower taxes mean a higher return and less risk for the bank.

Given the above, this is really why I am for lower taxes, especially lower corporate income taxes. I can only imagine the projects that would be done in this country if the corporate tax rate was zero. The negative NPV projects at 36% tax rates might be feasible at a tax rate of zero. This means more capital investment and ultimately more economic growth. More capital investment also means more jobs and income that is taxable. Increased capital investment usually means more productivity growth that translates into income growth. Growth in income means more tax revenues for Uncle Sam.

I also believe as companies expand they will grow their dividends as a result of this new investment. These dividends will also be increasing source of tax revenues. Small percentages in taxes matter. They make the difference in a project green light or dusty book shelf. Projects that never get done have never created jobs. We need more projects....

If want higher taxes...pay them.

Articles like this absolutely drive me insane. If you are "rich" and want to pay more taxes, you can voluntarily send a gift to the US Government any time you like. You can do it here:

Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782

The are willing to take unconditional gifts by check or money order.

I would love to know how many of these folks will actually follow through and give their extra little bit to the government? My guess is very few.

Personally, I would rather wealthly people keep their money. Most wealthy folks got that way because they provided goods or serives that others valued. This in turn created jobs and economic activity that benefited society. Giving more money to the Government will only go to make the leviathan even bigger. But it will allow the for spending millions on horse bridges, toad crossings, and social programs that have done nothing to alleviate poverty since the Johnson administration.

But if you are wealthy and just to throw your money in the money pit, feel free to use the address above. As for me, I think I can spend it better than Uncle Sam.

Chinese Currency

There has been a lot written recently about the Chinese manipulation of its currency. It should be the Chinese that are mad about a weak currency, not Americans. Here's why:

1. A cheap yuan and expensive dollar makes consumer goods made in China cheaper for all of us. That is a great thing. That means more income available to buy more cars (maybe even ones made in this country), more life saving drugs, and attend more leisure activities like movies.

2. The only way the Chinese can keep their currency cheap is to flood the market with yuan and buy dollars. This makes goods for Chinese consumers very expensive. That's why is hard for Chinese to buy US-made products and it is an impediment for them to increase their standard of living.

3. If the Chinese have a strong relative currency, it means they can go out and buy even more resources. They are aggressive today, can you imagine what they would be buying if they had the world's strongest currency? That has been a luxury that we have enjoyed in the US for decades and the main reason energy is so cheap in this country.

So let the Chinese do whatever they like with their currency. I hope they keep it weak so all my "Made In China" crap remains cheap.

Less Govt, more Capitalism

Forbes has published a great article recently written by Brian S. Wesbury and Robert Stein. In this article, they make the case that our recent problems are not the result of capitalism run a muck, but rather the crowding out of the private sector by a government that is growing ever larger. I could not agree more.

I really like the point they make that the world's standard of living began to accelerate about the time when the US Constitution was established. This amazing achievement set forth a limited set of rules that unleashed the potential of free men.

So how far have we regressed? The Constitution is essentially just a few pages legislation. In these few pages, there is everything present to run a Federal Government. Now we have a bill that is in excess of 2000 pages, and all it deals with is Health Care. Do you think that might have something to do with fact that entrepreneurs have trouble navigating today?

Going back to the Forbes article, the comments amaze me. There are so many people out there that think bigger government will save the day. They give government the credit for a better life. One poster said most of the life expectancy gains come from better sewers, paid for by government. But you have to ask, where did government get the means to build those sewers? It came from a free society that produced wealth, that could in turn be taxed.

I don't dismiss that government can't provide necessary and valuable service to society. But I am confident that is does not need to spend $3 Trillion to provide that service. Government has to create the environment that inspires wealth creation. That's providing safety through a sufficiently strong military, establishing rule of law with a fair and just legal system, protecting private property rights with unwavering commitment, and keeping the confiscation of wealth low by keeping taxes low regardless of any person's accumulation, and protecting the free speech of all.

Government should be easy. Our elected officials have made it unreasonably complicated by imposing their will on the citizens of this country. Capitalism and small government have contributed more to the rising standard of living than any other force in the last 2000 years. Yet so many people want to sack capitalism and grow government? I doesn't make sense.

Why China Is Not A Threat.

Jonah Goldberg does a great job of explaining why the latest news about China passing Japan is not that big a deal.

see the article at Townhall.com

In fact, per capita income is lower for China than it is for many African nations. The last I saw, China was #99 out of about 185 countries in terms of per capital income. That is no threat to the US. Of course 1.3 Billion people can produce a lot of cheap plastic garbage. However, I don't think many people would trade their middle-class lifestyle in the US or Japan for that of middle-class China.

In addition, a rich China does mean more markets for US goods and that's a good thing. So a strong China is good for everyone even if it means they are more competitive with the US for world domination. Rising standards of living in China do not have to mean a zero sum gain or a reduction in US standards of living.

Why Government Fails The People, Education Edition.

This is a prime example how government is ineffective in delivering products or services outside or Courts and Military protection.

LA Times

There are two problems here. One, administrators are doing nothing to address the performance of teachers. Two, teachers have no idea how they are really performing. I'm sure all of the LA teachers think they are above average. Statistically, that's impossible.

The really scary thing is that many kids get poor teachers in back-to-back years. My guess is that a study of these kids in 15 years will reveal the true cost of a poor education. Data would suggest that the problem is not more money, but truly teacher performance.

My own kids have had both good and not-so-good teachers. I think we knew it before the first parent teacher conference. Shame on us for not doing more to address the issue as it hurt our kids. Fortunately, I do not think we ever had a back-to-back situation.

One thing I am going to do is check standardized test results. I want to see this information for myself.

Freedom vs Central Planning

Great video

Great Videos from www.BankruptingAmerica.org.

Finally A Reason to Get In Shape

Now that the government seems destined to take over health care, albeit in 4 years even though we will be paying for it next year, I guess I now have the incentive to get back into shape. Afterall, the last thing I want to be is dependent on a health care system that has bureaucrats like B Hussein, Harry Reid, and Nancy Pelosi in control of my life.

We should all be very scared that the will of majority has been completely ignored and that a select group of Congressmen have hijacked government. While I am confident that November will see the Democrat-controlled House end, the damage is done.

So what will B Hussein do to the American people next? My guess is hire more of the unemployed to work for the government at 150% of the prevailing private sector wage and benefits. So who will be the last to actually create economic value in this country? We may know soon enough.

Off to the gym.....

Fix It Later..I Doubt It.

From Megan McArdle's blog at the Atlantic:

But this I am confident of: they're not going to "pass this bill and then fix it," and the people saying that this should be the priority of people who are against the bill--including people like Rep. Lynch--seems borderline delusional. You think the Democrats are going to take up health care again this term? Given that they look more likely than not to lose the House, you think Democrats are going to take it up again before these laws go into effect?

Those like my colleague Andrew, who want Republicans to turn to the task of improving this monstrous bill--how is that going to happen? The "fixes" are all the unpopular stuff: the taxes, the spending cuts. You think that now that Democrats got to hand out the goodies, Republicans are going to be the nasty folks who volunteer to hand around the bill for a law they didn't even want to pass?

Every time I hear comments on this sort of thing, I want to say, "And what other things have you been wondering during your visit to our planet?" I am not perfectly confident about much in regards to this bill. Maybe I'm wrong and politicians won't step in to stop the unpopular stuff already in the bill from happening. Maybe they'll actually bend the curve. Maybe this won't impact innovation (I don't see how that could possibly be, but whatevs, maybe my imagination is limited).

But there is one thing of which I am nearly perfectly certain: If we pass this thing, no American politician, left or right, is going to cut any of these programs, or raise the broad-based taxes necessary to pay for them, without any compensating goodies to offer the public . . . until the crisis is almost upon us. I can think of no situation, other than impending crisis, in which such a thing has been done--and usually, as with Social Security, they have done just little enough to kick the problem down the road. The idea that you pass a program of dubious sustainability because you can always make it sustainable later, seems borderline insane. I can't think of a single major entitlement that has become more sustainable over time. Why is this one supposed to be different?

I agree with her completely. No politician will fix this thing on either side.

Letter to the Editor

Second submission this week to the Wichita Eagle...

Dear Editor,

Much has been made of the recent health care debate. Among those advocating more government involvement in health care are people that claim that a country as great as ours should provide health care for all its citizens.

The point these people are missing is what got America to this point? Was it bigger government and state controlled enterprise that made us great? It most certainly was not. It was the Founders’ ideals of small government and individual freedom and accountability that got us to the pinnacle of history’s standard of living.

German economist Adolph Wagner theorized over 100 years ago that once countries reach a certain level of prosperity the populace will eventually vote themselves ever more benefits accompanied by growth in government. As government grows and more citizens find themselves dependent on those social services, one can only imagine a decline in the overall level of our prosperity as fewer people are actually producing the goods and services that created history’s most prosperous society.

Health Care Process Explained....

New Editorial for the Eagle

Still trying to decide whether or not to send it to them....

Dear Eagle Editorial Staff,

It appears that health care reform is not going to go away in Washington. There are many considerations to be made on both sides of the issue. However, one thing is known for certain and that is health care consumes a significant portion of US GDP.

Health care is expensive today because most individuals have no incentive to hold costs down. Employers or insurance companies pay most of the costs. Nothing in the current legislation addresses this problem. Bureaucrats want to control escalating costs by capping what insurances premiums are, not what health care actually costs.

Health insurance has become a means to health care payment rather than protection from catastrophic loss. If the US is to tackle these escalating costs, Health Insurance must return to be just that, insurance. High-deductible plans with Health Savings Accounts are fantastic alternative for people to have coverage and still be accountable for cost. These are all available today with no more legislation or interference. They just need to be encouraged and put into practice.

I also know that another certainty is that Congress will get health care wrong. The Washington Times reports recently that Congress expected Medicare to cost $12 billion by 1990 when they made their projections in 1967. Unfortunately they were wrong as Medicare cost $98 billion 23 years later. They missed their projections by 800% and regrettably the US Government has not improved their forecasting in recent years with Medicare and SCHIP following similar miscalculations. Can citizens of this country really afford to have the government to miss projections by this wide margin again? We are now looking at trillion dollar miscalculations.

Under proposed legislation, insurance companies will be forced to insure people that normally would not be insured and cover conditions they would not normally cover. Furthermore, they will be forced to hold premiums down while taking more risk. This is bound to drive many, if not all of them, out of business. After all, healthy people will still not buy insurance and will wait until they are sick to buy coverage. The insurance companies cannot deny them under new rules. How is this different than a driver buying auto insurance after he wrecks his car and expecting full coverage? It is not a sustainable business model.

The competitive market for quality health care is starting to show signs of life. Retail clinics are appearing in malls and shopping centers. These clinics give consumers an affordable alternative to the doctor’s office. Many pharmacies now have $4 generic prescriptions, driving drug costs down. Quality care is also being marketed in foreign countries where surgeries can be done at a fraction of the price one would expect to pay in a US hospital. These are all market-based solutions that need to be encouraged, not sacrificed to special interest groups representing corporations and health care professionals. Cosmetic surgery and laser eye surgery are all very good examples of how market forces can lower the cost and raise the quality of care in this very way.

I do not believe anyone, on either side of the issue, wants to deny anyone access to quality health care. Ironically, the proposals being circulated today may just do that very thing. Let’s let the markets work and hold down costs through competition in health care, not insurance. Let’s also get health insurance back to actually being insurance. Make individuals accountable for costs and let markets work through a market-based system of affordable, high-deductible health insurance and Health Savings Accounts. This alone will determine what the right portion of GDP health care should consume. These small changes can save all of us from rising costs, further government interference and additional misguided projections from Washington.

-Doug

May the real cronies please stand up....?

From John Stossel's great new show...

My Draft Plan to Save the Country

B Hussein keeps saying he is willing to listen to all ideas to balance the budget and get the US Financial House back in order. So I have thrown a few ideas that I believe we will move us back to what we need to be to ensure the economic freedom that is the backbone of our prosperity.

1. Eliminate the following Departments Completely:
a. Education-Not needed. Leave education funding and standards up to the states. Do it now.
b. Agriculture- The Forest Service moves into Dept of Interior. Eliminate the rest immediately. If States want to fund Ag subsidies, then let them.
c. Energy-Not needed. Eliminate it. Nuclear power can be regulated by Commerce Dept.
d. HHS-Move FDA and NIH into Commerce Dept. Eliminate the rest completely. I believe the Indians have been given enough and can sustain themselves.
e. Homeland Security-This should be in the Justice Dept or Defense Dept. and drastically scaled back.
f. HUD-Close it over 3 years to ween people off the dependency of government aid. Sell HUD assets to private individuals. Sell off Fannie, Freddie and the clan. Stay out of the mortgage market forever.
g. Labor-This should be managed by the States. Parts that deal with Veterans move into the Defense Department.
h. Veterans Affairs-Again, move this into Defense Dept.

2. Change the remaining departments as such:
a. Commerce-Manages inter-State commerce and inspection of foreign goods (safety) only. There will be no tariffs or duties as we will be a market where lower priced international goods will make products cheaper for US consumers and businesses. US Businesses will have to compete head-to-head with the world's best. This will make us stronger, not weaker. It will also eliminate the special interest and political pandering that goes on in Congress today. After all, if there is no money at stake lobbyist will disappear. In addition, get 20% smaller in 90 days. Give terminated workers one year of pay and benefits.
b. Defense-Come on, do you really need more money than the rest of the world spends on weaponry combined? There has to be some where to save. I will give you some time (2 years) before I get involved.
c. State-You get a reprieve, for now.
d. Treasury-get 20% smaller in 90 days. Give terminated workers one year of pay and benefits.
e. Interior. Same 20% rule from above applies. Start selling government owned land that is not part of the National Park System. Consider leasing a few national parks to private business to operate. Plan on making it system-wide in 10 years.
f. Justice. Reprieve, for now.
g. Transportation. Fix the FAA. Eliminate 10% of your positions within the year. All terminated employees get 1 year salary and benefits. Another 10% next year.

3. Taxes.
a. Eliminate the Corporate Income Tax. This will make US businesses the most competitive in the world. It will reduce the return threshold for projects by nearly 40% meaning more growth and capital expenditures. All corporations that are profitable must pay out 30% of profits as dividends to shareholders that will then be taxed as income to those that receive dividends.
b. Total tax receipts cannot exceed 20% of GDP. If they do, everyone gets a proportional refund based on taxes paid. This number drops .25% for the next decade.
c. Eliminate the estate tax. This is really just a way for Life Insurance Companies to sell more policies and produces very little in the way of revenue.
d. Top marginal tax rate is 25%. Why should anyone give the government more than a quarter of your income?
e. Institute at 1.5% Federal sales tax on all non-food goods and retail services. Everyone needs to pay something to the Federal Government to live here, even those that are illegal or bypass the 1040 form (although this will now be the size of a postcard).
f. Income deductions-Most are gone, including charity and mortgage. The self-employed and non-covered can deduct health care coverage. Retirement and Education savings are also deducted as with 401(k)-type mechanisms today.

4. Entitlements.
a. Social Security-FICA maximum tax frozen for 5 years. SS payments frozen for 5 years. After that, FICA is a function of taxes collected in the prior year. Sorry folks it is a Ponzi scheme and your Congressmen lied to you. It's this or nothing.
b. Medicare-Medicare has to get back to providing basic medical care only. No more motorized wheel chairs for everyone that turns 65 and new bionic knees. If you want that coverage, seek alternative coverage or pay for it yourself. Co-pays have to be levied that encourage prudent use of health care resources. Ideally, everyone would have an HSA they have been saving into for 20-30 years to would cover most of these co-pays. Free care encourages over-consumption and has to be controlled.

5. Policy Changes
a. If is not in the Constitution, it is the individual States' responsibility. We want the States to compete. If their balances of taxes and benefits are wrong, people and business will move. It is a great market system at work.
b. Term limits. Senator get 2 terms (or whatever your state decides, see below) and Representatives get 6. No more that 12 years in office. If you can't get it done in 12 years, you failed.
c. Add more Representatives. Makes it harder for special interest to buy votes. The number could be twice what it is today. Need to think about this more.
d. Repeal 17th Amendment. State Legislatures must elect Senators. This government puts more power into the hands of State Government and they must have a voice at the Federal level.
e. No foreign aid until the US financial house is in order. If you are broke, you shouldn't be letting others use your Visa.
f. Immigration. We have laws. Follow them. If you cannot follow the process then please stay home or risk being shot at the border. Given that, we need to encourage legal immigration, especially for those that are talented (aka college graduates). An aging country is not a good thing. Japan and Russia are in trouble for this very reason. You can speak your language at home, but everything else will be in English at the Federal level.
g. No more United Nations or NATO. We know who our friends are.
h. Banks lend money and pay savers. That's it if you want deposit insurance backed up by the Feds.
i. No more FEMA. If you live in a dangerous area, be prepared. No more Federal Flood Insurance. If you live in a dangerous area, be prepared or get out. That includes those nice beach front homes.
j. Earmarks have to be posted on Congressional web pages and why the funding was provided. President gets a line-item budget veto on all matters of spending.

I am not advocating a Federal balanced budget. However, I am advocating deficits that grow less than the overall economy. A surplus would be good now and then to insure we can weather any downturns (they will happen). States have to take back the power. People have to regain Independence from the Nanny State. The courts have to preserve rule of law and property rights. A smaller Federal government has to be the end in mind with more powerful State governments. With this, maybe we can get back to what the Founders envisioned.

Fabians....

This is one of the best articles I have read in some time. It is a time of hope and alarm. Let's hope the Fabians don't win.


We Picked the Wrong Roman Dictator