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.
Saturday, November 27, 2010
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.
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.
Thursday, November 25, 2010
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.
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.
Friday, November 19, 2010
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.
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.
Sunday, November 14, 2010
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...
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.
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.
Tuesday, November 9, 2010
Wednesday, October 20, 2010
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....
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....
Sunday, October 10, 2010
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.
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.
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.
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.
Friday, August 20, 2010
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.
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.
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.
Thursday, June 3, 2010
Sunday, March 21, 2010
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.....
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.....
Saturday, March 20, 2010
Fix It Later..I Doubt It.
From Megan McArdle's blog at the Atlantic:
I agree with her completely. No politician will fix this thing on either side.
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.
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.
Wednesday, March 10, 2010
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
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
Tuesday, February 16, 2010
Sunday, February 14, 2010
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.
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
We Picked the Wrong Roman Dictator
Thursday, December 24, 2009
The Senate Health Bill Nonsense, Vol 1.
I am about 80 pages into the Senate Health Bill (AKA Patient Protection and Affordable Care Act or PPACA) and already the nonsense begins in gross quantities.
For instance:
‘‘SEC. 2701. FAIR HEALTH INSURANCE PREMIUMS.
Then it goes on to say:
‘‘SEC. 2705. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS AND BENEFICIARIES BASED ON HEALTH STATUS.
So as the name insurance would imply, people buy it to avoid risk and the insurance company much price the policy to provide for greater revenue than expense associated with the policy. So with the above 9 criteria removed from pricing the policy, I would imagine the insurance company will have to assume everyone has all 9 of the above risk factors and will be forced to price every policy as such. This DOES NOT mean lower premiums for current policy holders. It's impossible, or it will force bankruptcy on the insurance providers. Hummm.....maybe that's what they want so there is no option but the government option?
Can you imagine if an auto insurance company could not price an auto policy if they could not rate the insured based on driving record, number of previous accidents, etc? Everyone would be forced into a higher policy to cover all their risks.
For instance:
‘‘SEC. 2701. FAIR HEALTH INSURANCE PREMIUMS.
‘‘(1) IN GENERAL.—With respect to the premium rate charged by a health insurance issuer for health insurance coverage offered in the individual or small group Market—Even life insurers price insurance based on smoking preference. So health insurers cannot varies premiums by more than a factor of 1.5:1? Does Congress even check with the Surgeon General to assess the risks here? This factor alone means higher premiums for us non-smokers since the insurance companies will have to price insurance for the smoker first, then discount back to find the premium for the non-smoker.
‘‘(A) such rate shall vary with respect to the particular plan or coverage involved only by—
‘‘(i) whether such plan or coverage covers an individual or family;
‘‘(ii) rating area, as established in accordance with paragraph (2);
‘‘(iii) age, except that such rate shall not vary by more than 3 to 1 for adults
(consistent with section 2707(c)); and
‘‘(iv) tobacco use, except that such rate shall not vary by more than 1.5 to 1; and
‘‘(B) such rate shall not vary with respect to the particular plan or coverage involved by any other factor not described in subparagraph (A).
Then it goes on to say:
‘‘SEC. 2705. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS AND BENEFICIARIES BASED ON HEALTH STATUS.
‘‘(a) INGENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan or coverage based on any of the following health status-related factors in relation to the individual or a dependent of the individual:
‘‘(1) Health status.
‘‘(2) Medical condition (including both physical and mental illnesses).
‘‘(3) Claims experience.
‘‘(4) Receipt of health care.
‘‘(5) Medical history.
‘‘(6) Genetic information.
‘‘(7) Evidence of insurability (including conditions arising out of acts of domestic violence).
‘‘(8) Disability.
‘‘(9) Any other health status-related factor determined appropriate by the Secretary.
So as the name insurance would imply, people buy it to avoid risk and the insurance company much price the policy to provide for greater revenue than expense associated with the policy. So with the above 9 criteria removed from pricing the policy, I would imagine the insurance company will have to assume everyone has all 9 of the above risk factors and will be forced to price every policy as such. This DOES NOT mean lower premiums for current policy holders. It's impossible, or it will force bankruptcy on the insurance providers. Hummm.....maybe that's what they want so there is no option but the government option?
Can you imagine if an auto insurance company could not price an auto policy if they could not rate the insured based on driving record, number of previous accidents, etc? Everyone would be forced into a higher policy to cover all their risks.
Wednesday, December 23, 2009
You are locked into Obamacare.
This is a great article from an MD answering the question "Can I get out of Obamacare?"
American Enterprise Institute
Some highlights:
It is easy to see how Obama plans to lower "costs." Everyone will now have to pay for standardized care. This means more care for some, but less for others. To save money, some things will certainly be left off the Czar's approved health insurance coverage itinerary. Seems like a lot of power for any bureaucrat (or bureaucracy) to handle. Plus, how does that bureaucrat know what is good for me and my family (and for that matter, yours)? I wonder if a lower life expectancy is considered a "cost?"
American Enterprise Institute
Some highlights:
In effect, the plan creates a single national health-insurance policy. Consumers' only real option is to trade higher co-pays for lower premiums. But we'll all get the same package of benefits established by a series of new agencies and an "insurance czar" seated in Washington.
The overriding goal of this reform is to turn health insurance into a more "egalitarian" benefit that's the same for everyone, regardless of income, personal preference or need. So rules written under President Obama to implement the Obama plan are a sure bet to intentionally curtail anyone's ability to wrap around this national coverage with a supplemental policy or to contract privately with doctors to pay your way out of its limitations.
It is easy to see how Obama plans to lower "costs." Everyone will now have to pay for standardized care. This means more care for some, but less for others. To save money, some things will certainly be left off the Czar's approved health insurance coverage itinerary. Seems like a lot of power for any bureaucrat (or bureaucracy) to handle. Plus, how does that bureaucrat know what is good for me and my family (and for that matter, yours)? I wonder if a lower life expectancy is considered a "cost?"
Sunday, November 22, 2009
Tuesday, November 10, 2009
Shlaes on Hayek
I wrote the following letter to Ms. Shlaes regarding her article on Bloomberg today:
Ms. Shlaes,
I enjoyed your article in Bloomberg today, but disagree with your last point, that Americans will not embrace socialism.
A significant portion of Americans will resist, but an even greater portion will not. When half the US population pays no income tax today, socialism has already set in. Getting something for nothing and having the minority haves pay for the majority have-nots is socialism. Having government bureaucrats decide winners and losers in the economy is socialism.
Socialism sounds like a great panacea in rhetoric and we have a man in the Presidency that is one of the best at rhetoric. Unfortunately socialism's failures take time. It took the Soviet Union decades to fail. It won't be until the standard of living drops to unconscionable levels will there be a revolution to unseat the socialist movement. It is easy to sell the majority of the masses on the rob Peter to pay Paul economy without them giving consideration to the long-term ramifications.
The utopia that Socialism seems to be on paper is one thing, the reality is quite another. Hayek had perfect clarity to this fact.
Respectfully submitted,
Ms. Shlaes,
I enjoyed your article in Bloomberg today, but disagree with your last point, that Americans will not embrace socialism.
A significant portion of Americans will resist, but an even greater portion will not. When half the US population pays no income tax today, socialism has already set in. Getting something for nothing and having the minority haves pay for the majority have-nots is socialism. Having government bureaucrats decide winners and losers in the economy is socialism.
Socialism sounds like a great panacea in rhetoric and we have a man in the Presidency that is one of the best at rhetoric. Unfortunately socialism's failures take time. It took the Soviet Union decades to fail. It won't be until the standard of living drops to unconscionable levels will there be a revolution to unseat the socialist movement. It is easy to sell the majority of the masses on the rob Peter to pay Paul economy without them giving consideration to the long-term ramifications.
The utopia that Socialism seems to be on paper is one thing, the reality is quite another. Hayek had perfect clarity to this fact.
Respectfully submitted,
Monday, November 9, 2009
Why Would Business Hire New Employees?
The recent House Bill restricting health care in this country is bound to have a nasty side effect, more unemployment.
Now that employers are mandated to provide coverage it will be prohibitive to hire new employees whose productivity does not warrant the cost of insurance on top of an already high (relatively speaking) minimum wage.
Minimum wage legislation has already forced the unemployment rate of those ages 16-24 over 25%. Health care mandates will make a bad situation even worse. Those people in our economy with few skills are going to experience a very bleak future and will not get the skills and experience needed to move up the economic ladder.
For the party that claims to watch out for those at the bottom of the economic food chain they sure do all they can to harm them.
Now that employers are mandated to provide coverage it will be prohibitive to hire new employees whose productivity does not warrant the cost of insurance on top of an already high (relatively speaking) minimum wage.
Minimum wage legislation has already forced the unemployment rate of those ages 16-24 over 25%. Health care mandates will make a bad situation even worse. Those people in our economy with few skills are going to experience a very bleak future and will not get the skills and experience needed to move up the economic ladder.
For the party that claims to watch out for those at the bottom of the economic food chain they sure do all they can to harm them.
Sunday, November 1, 2009
Letter To Washington
Dear Congressman:
I am a constituent that is a frequent letter writer to your office. Normally, I am writing to you about a particular issue that is in the headlines, today I am not. Instead, I am writing to give you an idea how the decisions you, and the rest of Congress, are making are paralyzing the economy and business.
While I am not writing the letter on behalf of my company, the issues that I am going to outline drastically effect the decisions made by me and the company that employs me. As a direct result of your actions in Washington, you and the other members of Congress are affecting the competitiveness of our nation and the standard of living that all Americans enjoy today.
My job involves trading a commodity by-product of refineries. These are the refineries that produce transportation and heating fuels that make our economy so productive. State of the art technologies at work in these plants give consumers and businesses the lowest cost energy anywhere in the world. This means that consumers can consume more and business can invest in more machinery that leads to our high, relative standard of living. Congress is threatening this industry with regulation and taxes that will hurt the competitiveness of our domestic refining infrastructure. Whether it is over-reaching environmental legislation or cap-and-trade taxes, this kind of burden adds tremendous cost. This cost must be passed on to consumers or the businesses will close. Either one of these consequences is devastating. Higher costs mean less economic growth and a lower standard of living. Instead of consumers consuming more goods and services, they will be pressed into spending more money on energy. If business cannot pass on these new costs, they will close. This means loss of high-paying jobs in the industrial sector the means so much to the country’s prosperity.
The company I work for is dedicated to following the letter of the law. However, there are so many conflicting and overlapping agencies at all levels of government that it is paralyzing our business and many others. When a business does not know the rules and legal expectations, they are very hesitant to make investments. In addition, they are forced to tie up more capital and resources to maintain compliance thus reducing the investment in plants, property and equipment that to are key to economic growth. Government has to become less burdensome and complex so business feels confident they can make investments that will make our economy more productive.
Congress must also stop subsidizing inefficient businesses in this country with legislation. Inefficient business mean a loss of productivity that is the key to economic growth. Two prime examples are agriculture and shipping, but there are hundreds more examples I could choose. A few examples in the agriculture segment are dairy and sugar farming (not to mention feed grains like corn, wheat and rice).
Today there is a glut of milk on the market. Consequently most dairy farmers are now looking at producing milk at a loss. The reason the price of milk is so low is over supply based on current levels of demand. When this happens in any other industry, the highest cost producers go out of business and the market corrects itself with no help from government. This situation leaves only the very best, most efficient producers operating dairies and redirects the other resources to more efficient areas of the economy. No doubt this creates localized pain when a farmer goes out of business, but why should the taxpayers be left with the burden of supporting that farmer? If that farmer were making paper, furniture or computers the government would not support him. The agriculture lobby has gotten strong because there is money in it. Washington needs to get tough and say no to handouts.
The other example I referred to is sugar. Perhaps no other example is so wrapped up in special interest and government interference. Because of import tariffs and production limits on sugar, US consumers pay two to three times the world market price for sugar. Why? To protect a very small industry, primarily in Florida, with tremendous clout and to support the high price of corn syrup in grain growing regions of the country. No doubt this has saved jobs in these industries, but it has cost many more as consumers had to pay more for sugar than they should have. Industries where sugar is a primary ingredient have moved production overseas because they cannot be profitable paying more than market prices for sugar. This particular situation plays out in any industry where government gets involved. No matter the temptation, government has to stop determining winners and losers in business and let markets decide who succeeds and who fails.
As a taxpayer, I am appalled at what the US Government does in the shipbuilding business. Due to the legislation passed in 1920 known as the Jones Act, the US Shipbuilding business has enjoyed a position in the world market for ships that has made it terribly inefficient and driven the cost of vessel freight between US ports to unreasonable levels. In addition, it has driven the cost of Naval vessels for our own defense to ridiculously high costs for the taxpayers.
I recently received a quote for a vessel that would move the commodity that I trade. If I were to build a Jones Act vessel (one that could move between US ports), the price would be over $100 Million. I can have the same vessel made in Korea today for $30 Million. Not only is the price cheaper, but I can also have it a year sooner. Unfortunately, I cannot take that Korean vessel, loaded, between US Ports due to the Jones Act. This is a terrible outcome for businesses that are trying to compete. I cannot buy and sell with my own countrymen at a price that is competitive with foreign traders in foreign flagged vessels that only move product in or out of the US. To make matters worse, I hear the Navy is buying several high-speed ships at a cost of nearly $400 Million each. I can only imagine how much these vessels would cost if the US Shipbuilders had cost structures that forced them to compete with the Asian builders. The US Taxpayer is getting fleeced only to protect a small industry with very good political connections that have been in place for nearly 100 years.
If the citizens of this country are to continually see our standard of living rise and enjoy the fruits of economic growth, then business has to be allowed to thrive. After all, this is where real jobs are created and real wealth built. There is no better way to do this than to reduce, or even eliminate, corporate income tax. No better stimulus could be designed than a program to eliminate the corporate income tax.
Corporations make capital investment based on after-tax returns. When the government takes nearly 40% of all income on investments, it means that business must have incomes that are 40% higher in order for a capital investment to yield a return that warrants the risk. Imagine all the investment that businesses could make if the return threshold was lowered by 40%! This new investment would mean more jobs for everyone since someone would have to build the new machinery, buildings and transportation networks that new investment would require. Consumers might also enjoy lower prices as the cost of taxes is passed on directly to them. If not, companies would either pay more in dividends (that are taxed as income) or have even more money to invest in productive assets starting this entire cycle over again. A zero tax environment would attract scores of foreign investment, as the US would again be the best place to invest.
Growth in the Federal bureaucracy means more human resources and productive capital are in non-producing, government jobs rather than in production of consumer goods and services. These are jobs that play no role whatsoever in economic growth as they do nothing but force more cost on society. More government jobs mean more taxation on an already stressed private sector. Even worse, this bloated government bureaucracy has over-lapping regulatory authority that complicates all compliance matters as it relates to business. Washington must realize that it is impossible to create greater prosperity and a higher standard of living with a bigger government machine.
The US is losing its competitive edge. It is not too late to stop the decline, but Washington has to make it happen. This is not a Republican or Democrat issue, it is a matter of securing the country’s future. I want my kids to enjoy a better quality of life than mine, just like I enjoy a higher quality of life than my parents. Unfortunately, that history of prosperity and economic growth is now at risk due only to decisions made by politicians catering to special interests. What needs to be done is take the incentive out of lobbying the government for money or special protections, stop having the government determine winners and losers in commerce, and eliminate the tax burden on business. These very simple steps are all that are needed to turn the country around.
Congress is truly destroying the goose that lays the golden eggs and that goose is the entrepreneurial spirit that is historically unique to the United States of America.
Respectfully submitted,
I am a constituent that is a frequent letter writer to your office. Normally, I am writing to you about a particular issue that is in the headlines, today I am not. Instead, I am writing to give you an idea how the decisions you, and the rest of Congress, are making are paralyzing the economy and business.
While I am not writing the letter on behalf of my company, the issues that I am going to outline drastically effect the decisions made by me and the company that employs me. As a direct result of your actions in Washington, you and the other members of Congress are affecting the competitiveness of our nation and the standard of living that all Americans enjoy today.
My job involves trading a commodity by-product of refineries. These are the refineries that produce transportation and heating fuels that make our economy so productive. State of the art technologies at work in these plants give consumers and businesses the lowest cost energy anywhere in the world. This means that consumers can consume more and business can invest in more machinery that leads to our high, relative standard of living. Congress is threatening this industry with regulation and taxes that will hurt the competitiveness of our domestic refining infrastructure. Whether it is over-reaching environmental legislation or cap-and-trade taxes, this kind of burden adds tremendous cost. This cost must be passed on to consumers or the businesses will close. Either one of these consequences is devastating. Higher costs mean less economic growth and a lower standard of living. Instead of consumers consuming more goods and services, they will be pressed into spending more money on energy. If business cannot pass on these new costs, they will close. This means loss of high-paying jobs in the industrial sector the means so much to the country’s prosperity.
The company I work for is dedicated to following the letter of the law. However, there are so many conflicting and overlapping agencies at all levels of government that it is paralyzing our business and many others. When a business does not know the rules and legal expectations, they are very hesitant to make investments. In addition, they are forced to tie up more capital and resources to maintain compliance thus reducing the investment in plants, property and equipment that to are key to economic growth. Government has to become less burdensome and complex so business feels confident they can make investments that will make our economy more productive.
Congress must also stop subsidizing inefficient businesses in this country with legislation. Inefficient business mean a loss of productivity that is the key to economic growth. Two prime examples are agriculture and shipping, but there are hundreds more examples I could choose. A few examples in the agriculture segment are dairy and sugar farming (not to mention feed grains like corn, wheat and rice).
Today there is a glut of milk on the market. Consequently most dairy farmers are now looking at producing milk at a loss. The reason the price of milk is so low is over supply based on current levels of demand. When this happens in any other industry, the highest cost producers go out of business and the market corrects itself with no help from government. This situation leaves only the very best, most efficient producers operating dairies and redirects the other resources to more efficient areas of the economy. No doubt this creates localized pain when a farmer goes out of business, but why should the taxpayers be left with the burden of supporting that farmer? If that farmer were making paper, furniture or computers the government would not support him. The agriculture lobby has gotten strong because there is money in it. Washington needs to get tough and say no to handouts.
The other example I referred to is sugar. Perhaps no other example is so wrapped up in special interest and government interference. Because of import tariffs and production limits on sugar, US consumers pay two to three times the world market price for sugar. Why? To protect a very small industry, primarily in Florida, with tremendous clout and to support the high price of corn syrup in grain growing regions of the country. No doubt this has saved jobs in these industries, but it has cost many more as consumers had to pay more for sugar than they should have. Industries where sugar is a primary ingredient have moved production overseas because they cannot be profitable paying more than market prices for sugar. This particular situation plays out in any industry where government gets involved. No matter the temptation, government has to stop determining winners and losers in business and let markets decide who succeeds and who fails.
As a taxpayer, I am appalled at what the US Government does in the shipbuilding business. Due to the legislation passed in 1920 known as the Jones Act, the US Shipbuilding business has enjoyed a position in the world market for ships that has made it terribly inefficient and driven the cost of vessel freight between US ports to unreasonable levels. In addition, it has driven the cost of Naval vessels for our own defense to ridiculously high costs for the taxpayers.
I recently received a quote for a vessel that would move the commodity that I trade. If I were to build a Jones Act vessel (one that could move between US ports), the price would be over $100 Million. I can have the same vessel made in Korea today for $30 Million. Not only is the price cheaper, but I can also have it a year sooner. Unfortunately, I cannot take that Korean vessel, loaded, between US Ports due to the Jones Act. This is a terrible outcome for businesses that are trying to compete. I cannot buy and sell with my own countrymen at a price that is competitive with foreign traders in foreign flagged vessels that only move product in or out of the US. To make matters worse, I hear the Navy is buying several high-speed ships at a cost of nearly $400 Million each. I can only imagine how much these vessels would cost if the US Shipbuilders had cost structures that forced them to compete with the Asian builders. The US Taxpayer is getting fleeced only to protect a small industry with very good political connections that have been in place for nearly 100 years.
If the citizens of this country are to continually see our standard of living rise and enjoy the fruits of economic growth, then business has to be allowed to thrive. After all, this is where real jobs are created and real wealth built. There is no better way to do this than to reduce, or even eliminate, corporate income tax. No better stimulus could be designed than a program to eliminate the corporate income tax.
Corporations make capital investment based on after-tax returns. When the government takes nearly 40% of all income on investments, it means that business must have incomes that are 40% higher in order for a capital investment to yield a return that warrants the risk. Imagine all the investment that businesses could make if the return threshold was lowered by 40%! This new investment would mean more jobs for everyone since someone would have to build the new machinery, buildings and transportation networks that new investment would require. Consumers might also enjoy lower prices as the cost of taxes is passed on directly to them. If not, companies would either pay more in dividends (that are taxed as income) or have even more money to invest in productive assets starting this entire cycle over again. A zero tax environment would attract scores of foreign investment, as the US would again be the best place to invest.
Growth in the Federal bureaucracy means more human resources and productive capital are in non-producing, government jobs rather than in production of consumer goods and services. These are jobs that play no role whatsoever in economic growth as they do nothing but force more cost on society. More government jobs mean more taxation on an already stressed private sector. Even worse, this bloated government bureaucracy has over-lapping regulatory authority that complicates all compliance matters as it relates to business. Washington must realize that it is impossible to create greater prosperity and a higher standard of living with a bigger government machine.
The US is losing its competitive edge. It is not too late to stop the decline, but Washington has to make it happen. This is not a Republican or Democrat issue, it is a matter of securing the country’s future. I want my kids to enjoy a better quality of life than mine, just like I enjoy a higher quality of life than my parents. Unfortunately, that history of prosperity and economic growth is now at risk due only to decisions made by politicians catering to special interests. What needs to be done is take the incentive out of lobbying the government for money or special protections, stop having the government determine winners and losers in commerce, and eliminate the tax burden on business. These very simple steps are all that are needed to turn the country around.
Congress is truly destroying the goose that lays the golden eggs and that goose is the entrepreneurial spirit that is historically unique to the United States of America.
Respectfully submitted,
Tuesday, March 17, 2009
We Should All Be Afraid
Regardless of your opinion on the recent bonus payments to AIG executives, what the CONgress is considering just might be the greatest loss of liberty in the history of the USA.
If Congress was serious about not paying bonuses to AIG, they should have stopped giving them money months ago. Instead, we now learn that a few hundred million is being paid out of the $150B they received. In the grand scheme of things, this is a very small percentage. Kind of like the small percentage that a few billion in earmarks that CONgress just authorized in the form of earmarks in several hundred billion in omnibus spending. After all that was their argument for the earmarks.
Now for the scary part. If CONgress can target individual people with specific taxes that aim to take 100% of what they earn/make, we should all be afraid. This means that CONgress is no longer the voice of the people, but instead a group of power hungry bureaucrats that will do anything to anyone to stay in power. Now I do not like the idea of giving AIG executives a penny, they obviously did not earn it. However, if the company did not have the money they could not pay it. CONgress created that animal with money and a specific set of rules. This is just another example of how CONgress cannot respond effectively to market activities.
Once these members of CONgress realize they now have the power to target individuals, the AIG confiscation will just be the beginning. Wait until they target people that have different social views, religious views, or any of host of reasons (think gun ownership, etc).
Americans are losing more and more liberty every day. We should all be afraid.
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