In August the U.S. Department of Labor reported that our economy lost 54K jobs overall, mainly because Census workers were let go, but gained 67K jobs in the private sector. This was touted by President Obama as progress. Compared with the economic performance of the last 2 years it can be called progress.
This is little comfort to the almost 15 million people who are still counted as unemployed and the many million more who are no longer counted as unemployed because they have given up looking for a job. This discouragement has broad and deep effects on our nation overall.
On the one hand, I can’t help but notice in my travels that many restaurants are still crowded, airports seem busy, and my local grocery store appears to be doing as it has been. You would think these places would be more vacant than they are on a Tuesday night. But the people still shop. Why?
The effects of the recession are not evenly distributed. For the vast majority of people, the 90% who are still employed, there has not been a major disruption to their lifestyle other than being more aware of debt and being more careful in some of the things they buy. We certainly don’t appear to be in the midst of a depression.
This brings up the idea that we may be in a new normal in terms of the economic structure of our economy. Europe has been known for its high unemployment rates and slow growth for several decades since an extravagant social welfare state took hold after World War II. If you are unemployed in Europe and content with a job, a paycheck, and a lot of vacation time, a social welfare state is not all that bad.
For those of us who are entrepreneurs, a social welfare state is stifling. The higher taxes are discouraging and the risk you may fail may not be worth starting a new venture or expanding a current business may not be worth it.
At this time America has to think through what country it wants to be. We are an aging population because the baby boomer generation is getting older and will require more healthcare and is likely to demand their social security checks keep coming. But who pays for their right to retire comfortably?
That’s the big question of the next 25 years in America. America needs economic growth to fund a social welfare state. Yet, the current policies of the Obama administration do not encourage risky entrepreneurial activities needed to foster growth. In certain respects it is less of a headache to simply make a decent, steady living than to start a new or grow an existing business.
The older generation will have to ask itself how much debt it is comfortable passing on to their children to pay for their benefits? Because of the trillions in dollars a year our nation is adding to its debt already, it is clear that the arrangement of having younger people pay to subsidize older people is not sustainable. With older people increasingly making up the biggest voting demographic, the prospect of them voting to cut their own benefits is unlikely. The situation is not hopeful.
Moving towards a sustainable path is the task of the current generation and policymakers. The level of debt is unsustainable. Everyone knows this. So now is the time to phase-in reduced benefits. This is a moral issue that will be left to the older, baby boom generation. Let’s hope they care enough about their children’s and their nation’s future to have a mature dialogue and separate their wants from their needs. America has been a great nation because of its sacrifice. Let’s hope that notion is not a thing of the past.
Saturday, September 4, 2010
Sunday, April 4, 2010
162K New Jobs in March
That's a great thing! Looks like Obama's policies are working. At this pace we'll be singing Kumbuya in gatherings around the country within 6 months. All the questions of macroeconomics have now been solved. Just throw government money out there, borrow trillions, tax all the Joe the Plumbers out there (but don't you dare tax me), and never get discouraged even after 15 months and several million newly unemployed persons.
The next 2 months should be even better since only 48K new government Census jobs were created, which is comparatively low at this point from a historical standpoint. The 123K new private sector jobs appeared with 48K temp workers, 27K in healthcare, 17K in manufacturing, 15K in construction. Heck, even mining gained 8K jobs.
I suspect we will get a steady-state like this for the rest of the year in terms of job gains after the Census hiring in April and May, and subsequent firing in June, comes and goes. The unemployment rate will probably go up as more unemployed people enter the labor force and are again counted in the rate. Towards the end of this year and into next year you'll probably see a downtrend again as new tax rates kick in, interest rates and borrowing costs go up, and healthcare compliance costs go up. The good news is that if employment does go up more than I expect we will likely have massive inflation or, if the Fed takes away the sugar too soon to head inflation off, a double dip recession. In the long term, all the borrowing will probably lead to a massive global depression if the foreign entities who are lending don't behave exactly as we hope and take low interest rates and cash in at just the "right times". But, in the long run we're all dead anyway right?
The next 2 months should be even better since only 48K new government Census jobs were created, which is comparatively low at this point from a historical standpoint. The 123K new private sector jobs appeared with 48K temp workers, 27K in healthcare, 17K in manufacturing, 15K in construction. Heck, even mining gained 8K jobs.
I suspect we will get a steady-state like this for the rest of the year in terms of job gains after the Census hiring in April and May, and subsequent firing in June, comes and goes. The unemployment rate will probably go up as more unemployed people enter the labor force and are again counted in the rate. Towards the end of this year and into next year you'll probably see a downtrend again as new tax rates kick in, interest rates and borrowing costs go up, and healthcare compliance costs go up. The good news is that if employment does go up more than I expect we will likely have massive inflation or, if the Fed takes away the sugar too soon to head inflation off, a double dip recession. In the long term, all the borrowing will probably lead to a massive global depression if the foreign entities who are lending don't behave exactly as we hope and take low interest rates and cash in at just the "right times". But, in the long run we're all dead anyway right?
Tuesday, March 23, 2010
Some Random Obamacare Comments
1. By 2019 there are reports that there will still be 21M uninsured. The new coverage to 32 million does not cover everybody since, depending on the estimate, there are more than 32M uninsured people.
2. CBO did a static analysis that yielded the "cost savings" and "no budget deficit" with this bill. There are a number of assumptions unique specifically to that bill. Put your thinking cap on though. Do you really believe you can lay a $500B tax on rich people and have no effect on investment, and thus, job prospects? CBO doesn't measure the alternative use of the $500B tax transfer from private to public sector.
3. One of my favorites is the description I saw of how children can stay on their parents plan until age 26. So 26 is now deemed a child? If my kids are still loafing on my insurance plan that long, there's a chance I've done something wrong. In any event, except for cases where young adults have handicaps, this is ridiculous.
4. The only possibly good points were the coverage for pre-existing conditions. But it could have been handled in a more efficient manner through establishing high-risk pools for these people to subsidize them or work out some sort of tax scheme. Otherwise, it's very likely insurance premiums will go up for small businesses.
5. The evil insurance companies will have to pass on the costs of these mandates. It will become less affordable and more costly as a direct result of this legislation than it would have been compared to the status quo. No doubt Obama will come out angry and blame insurance around January, after the elections, when they jack their premiums to their business customers because of the mandates.
6. Congress will not allow a tax in 2018 they couldn't stomach in 2010. This will undercut the savings that yielded a magically budget neutral effect on the overall budget deficit.
7. Holding hospitals accountable for "results" incentivizes doctors to take patients most likely to have a good outcome so they get "results". Too bad if you're old, fat, perceived as lazy by the doc...
8. Primary care docs will make references to specialists so long as the threat of a lawsuit is there. With this bill, it will likely incentivize even more pointless CYA references.
9. The idea that a central point of data administered by the center for medicare and medicaid (CMMS) will lead to great effectiveness will only be useful if the doctors use them. Medical technology has long been available. If the docs, who the hospitals revolve around, don't use it (as they haven't) it seems wishful thinking to believe they will do so now to such a degree will get major benefits. Although this is potentially ripe for benefits. But me of lil' faith!
10. Expecting CMMS to run efficiently is wishful thinking. Expecting an Agency like this to play a key role in cost containment is a joke. Who knows maybe all the GS-12s and 13s and the contractors they bring in will manage a miracle. Maybe they'll be uber-motivated to squeeze costs out. I'm sure they'll work round the clock rather than clocking out at 3:30. I'm sure.
11. This puts a ridiculous, unsustainable cost burden on the states. States share Medicare costs with the Feds. Guess how the Feds are paying for this? By cutting funding reimbursement to docs and to states who won't be able to say no. If I were the Governor of a state I would be horrified about what this is going to do to my budget over the next decade. They're already facing massive budget cuts. You ain't seen nothing yet.
12. This will also crush private health insurance in the long run. As we march towards single payer, that was the real intent anyway wasn't it?
Obama promised to take a scalpel to budget cuts in his campaign. He could have done that by dealing with the specific problems such as the problem with people with pre-existing conditions. Instead, he took out his sledgehammer and gave us all an uppercut.
2. CBO did a static analysis that yielded the "cost savings" and "no budget deficit" with this bill. There are a number of assumptions unique specifically to that bill. Put your thinking cap on though. Do you really believe you can lay a $500B tax on rich people and have no effect on investment, and thus, job prospects? CBO doesn't measure the alternative use of the $500B tax transfer from private to public sector.
3. One of my favorites is the description I saw of how children can stay on their parents plan until age 26. So 26 is now deemed a child? If my kids are still loafing on my insurance plan that long, there's a chance I've done something wrong. In any event, except for cases where young adults have handicaps, this is ridiculous.
4. The only possibly good points were the coverage for pre-existing conditions. But it could have been handled in a more efficient manner through establishing high-risk pools for these people to subsidize them or work out some sort of tax scheme. Otherwise, it's very likely insurance premiums will go up for small businesses.
5. The evil insurance companies will have to pass on the costs of these mandates. It will become less affordable and more costly as a direct result of this legislation than it would have been compared to the status quo. No doubt Obama will come out angry and blame insurance around January, after the elections, when they jack their premiums to their business customers because of the mandates.
6. Congress will not allow a tax in 2018 they couldn't stomach in 2010. This will undercut the savings that yielded a magically budget neutral effect on the overall budget deficit.
7. Holding hospitals accountable for "results" incentivizes doctors to take patients most likely to have a good outcome so they get "results". Too bad if you're old, fat, perceived as lazy by the doc...
8. Primary care docs will make references to specialists so long as the threat of a lawsuit is there. With this bill, it will likely incentivize even more pointless CYA references.
9. The idea that a central point of data administered by the center for medicare and medicaid (CMMS) will lead to great effectiveness will only be useful if the doctors use them. Medical technology has long been available. If the docs, who the hospitals revolve around, don't use it (as they haven't) it seems wishful thinking to believe they will do so now to such a degree will get major benefits. Although this is potentially ripe for benefits. But me of lil' faith!
10. Expecting CMMS to run efficiently is wishful thinking. Expecting an Agency like this to play a key role in cost containment is a joke. Who knows maybe all the GS-12s and 13s and the contractors they bring in will manage a miracle. Maybe they'll be uber-motivated to squeeze costs out. I'm sure they'll work round the clock rather than clocking out at 3:30. I'm sure.
11. This puts a ridiculous, unsustainable cost burden on the states. States share Medicare costs with the Feds. Guess how the Feds are paying for this? By cutting funding reimbursement to docs and to states who won't be able to say no. If I were the Governor of a state I would be horrified about what this is going to do to my budget over the next decade. They're already facing massive budget cuts. You ain't seen nothing yet.
12. This will also crush private health insurance in the long run. As we march towards single payer, that was the real intent anyway wasn't it?
Obama promised to take a scalpel to budget cuts in his campaign. He could have done that by dealing with the specific problems such as the problem with people with pre-existing conditions. Instead, he took out his sledgehammer and gave us all an uppercut.
Monday, March 22, 2010
No Market Crash Yet
I came in this morning and the stock market is actually up after they passed Obamacare last night. I was expecting a massive selloff. Healthcare stocks are up!
The past 18 months have thrown a monkey wrench in my former belief that I've held all my life about the stock market being basically rational. I always knew there was an emotional twist. But the path the stock market has followed is almost purely emotional and irrational. I believe success in investing requires the ability to forecast the likely moods of the herd. Thinking that the stock market will not grow by 50% in the same year that millions more people are unemployed, would be rational. Despite the layoffs and general malaise the Dow keeps going up. Why? There is really little connection between main street and wall street. You may be able to make money from that if you can reasonably understand the likely mentality of herds. Maybe tracking sentiment somehow. I haven't figured it out yet.
The Dow Jones is at about 10,800 today. It keeps going up. I had thought the Obamacare debacle would trigger a selloff. Maybe it will happen later in the week but not yet. The Dow is greatly over-valued. I still expect the Dow to plummet to about 8500 by the end of this year. We'll see what happens.
The past 18 months have thrown a monkey wrench in my former belief that I've held all my life about the stock market being basically rational. I always knew there was an emotional twist. But the path the stock market has followed is almost purely emotional and irrational. I believe success in investing requires the ability to forecast the likely moods of the herd. Thinking that the stock market will not grow by 50% in the same year that millions more people are unemployed, would be rational. Despite the layoffs and general malaise the Dow keeps going up. Why? There is really little connection between main street and wall street. You may be able to make money from that if you can reasonably understand the likely mentality of herds. Maybe tracking sentiment somehow. I haven't figured it out yet.
The Dow Jones is at about 10,800 today. It keeps going up. I had thought the Obamacare debacle would trigger a selloff. Maybe it will happen later in the week but not yet. The Dow is greatly over-valued. I still expect the Dow to plummet to about 8500 by the end of this year. We'll see what happens.
Sunday, March 21, 2010
Obamacare Details
What is particularly interesting is how the numbers work. At a cost of $940B over 10 years, the Congress is assuming it will cost $29,375 for each one of the $32M uninsured people. This is about $2,937 per year as a median assuming the $940B takes account of normal inflation. Given what my current insurance policy costs, this seems low to me. Between your portion and your employer portion, who really pays $3K annually for healthcare? It is probably more like $10K but even if it is only $5K instead, it ups the cost by several hundred billion dollars.
The other features are the "savings" of raiding Medicare, which is like robbing Peter to pay Paul because Medicare is still paid for by the federal government, even if it is not an "on-budget" item. Medicare is intended to take the 2.9% payroll tax and pay it out to beneficiaries, as a sort of pay-as-you go fund depending on the type of enrollment. But Medicare is projected to go insolvent by around 2017 http://www.commonwealthfund.org/Content/Newsletters/Washington-Health-Policy-in-Review/2009/May/May-18-2009/Trustees-Report-Projects-2017-Insolvency-Of-Medicare-Hospital-Fund.aspx . Since the 2.9% is not really adequate, I wonder what they're really going to with it? Cutting $500B probably makes it go insolvent quicker and/or gives doctors an even greater incentive to refuse these patients since they will be paid even less for serving them. Since it was an Alice in Wonderland entitlement to begin with, maybe that's ok.
There are so many other bizarre things that this bill does that it will take several more posts in another day. The thing that's kind of funny to me is if this is so urgent and such a great moral crusade, why wait until 2014? It seems a lot of folks looking for free guvmint healthcare tomorrow are going to be disappointed.
From a CBS news article:
I. Cost:
$940 billion over ten years.
II. Deficit:
Would reduce the deficit by $143 billion over the first ten years. That is an updated CBO estimate. Their first preliminary estimate said it would reduce the deficit by $130 billion over ten years. Would reduce the deficit by $1.2 billion dollars in the second ten years.
III. Coverage:
Would expand coverage to 32 million Americans who are currently uninsured.
The other features are the "savings" of raiding Medicare, which is like robbing Peter to pay Paul because Medicare is still paid for by the federal government, even if it is not an "on-budget" item. Medicare is intended to take the 2.9% payroll tax and pay it out to beneficiaries, as a sort of pay-as-you go fund depending on the type of enrollment. But Medicare is projected to go insolvent by around 2017 http://www.commonwealthfund.org/Content/Newsletters/Washington-Health-Policy-in-Review/2009/May/May-18-2009/Trustees-Report-Projects-2017-Insolvency-Of-Medicare-Hospital-Fund.aspx . Since the 2.9% is not really adequate, I wonder what they're really going to with it? Cutting $500B probably makes it go insolvent quicker and/or gives doctors an even greater incentive to refuse these patients since they will be paid even less for serving them. Since it was an Alice in Wonderland entitlement to begin with, maybe that's ok.
There are so many other bizarre things that this bill does that it will take several more posts in another day. The thing that's kind of funny to me is if this is so urgent and such a great moral crusade, why wait until 2014? It seems a lot of folks looking for free guvmint healthcare tomorrow are going to be disappointed.
From a CBS news article:
I. Cost:
$940 billion over ten years.
II. Deficit:
Would reduce the deficit by $143 billion over the first ten years. That is an updated CBO estimate. Their first preliminary estimate said it would reduce the deficit by $130 billion over ten years. Would reduce the deficit by $1.2 billion dollars in the second ten years.
III. Coverage:
Would expand coverage to 32 million Americans who are currently uninsured.
IV. Health Insurance Exchanges:
- The uninsured and self-employed would be able to purchase insurance through state-based exchanges with subsidies available to individuals and families with income between the 133 percent and 400 percent of poverty level.
- Separate exchanges would be created for small businesses to purchase coverage -- effective 2014.
- Funding available to states to establish exchanges within one year of enactment and until January 1, 2015.
V. Subsidies:
- Individuals and families who make between 100 percent - 400 percent of the Federal Poverty Level (FPL) and want to purchase their own health insurance on an exchange are eligible for subsidies. They cannot be eligible for Medicare, Medicaid and cannot be covered by an employer. Eligible buyers receive premium credits and there is a cap for how much they have to contribute to their premiums on a sliding scale.
Federal Poverty Level for family of four is $22,050
VI. Paying for the Plan:
- Medicare Payroll tax on investment income -- Starting in 2012, the Medicare Payroll Tax will be expanded to include unearned income. That will be a 3.8 percent tax on investment income for families making more than $250,000 per year ($200,000 for individuals).
- Excise Tax -- Beginning in 2018, insurance companies will pay a 40 percent excise tax on so-called "Cadillac" high-end insurance plans worth over $27,500 for families ($10,200 for individuals). Dental and vision plans are exempt and will not be counted in the total cost of a family's plan.
- Tanning Tax -- 10 percent excise tax on indoor tanning services.
VII. Medicare:
- Closes the Medicare prescription drug "donut hole" by 2020. Seniors who hit the donut hole by 2010 will receive a $250 rebate.
- Beginning in 2011, seniors in the gap will receive a 50 percent discount on brand name drugs. The bill also includes $500 billion in Medicare cuts over the next decade.
VIII. Medicaid:
- Expands Medicaid to include 133 percent of federal poverty level which is $29,327 for a family of four.
- Requires states to expand Medicaid to include childless adults starting in 2014.
Federal Government pays 100 percent of costs for covering newly eligible individuals through 2016. - Illegal immigrants are not eligible for Medicaid.
IX. Insurance Reforms:
- Six months after enactment, insurance companies could no longer denying children coverage based on a preexisting condition.
- Starting in 2014, insurance companies cannot deny coverage to anyone with preexisting conditions.
- Insurance companies must allow children to stay on their parent's insurance plans through age 26.
X. Abortion:
- The bill segregates private insurance premium funds from taxpayer funds. Individuals would have to pay for abortion coverage by making two separate payments, private funds would have to be kept in a separate account from federal and taxpayer funds.
- No health care plan would be required to offer abortion coverage. States could pass legislation choosing to opt out of offering abortion coverage through the exchange.
**Separately, anti-abortion Democrats worked out language with the White House on an executive order that would state that no federal funds can be used to pay for abortions except in the case of rape, incest or health of the mother.
XI. Individual Mandate:
- In 2014, everyone must purchase health insurance or face a $695 annual fine. There are some exceptions for low-income people.
XII. Employer Mandate:
- Technically, there is no employer mandate. Employers with more than 50 employees must provide health insurance or pay a fine of $2000 per worker each year if any worker receives federal subsidies to purchase health insurance. Fines applied to entire number of employees minus some allowances.
XIII. Immigration:
- Illegal immigrants will not be allowed to buy health insurance in the exchanges -- even if they pay completely with their own money.
Saturday, March 20, 2010
The Implications of Obamacare
It looks like Obamacare is going to pass in the U.S. House tomorrow.
The long term implications, to me, range from complete disaster to little effect. In the complete disaster scenario America is on a course to look like Western Europe for the next generation. This is great if you enjoy structural unemployment of 12%, lack of opportunities for entrepreneurship, and having to deal with bureaucrats to get a sign off on basic medical procedures.
On the other hand, maybe this will mean nothing because business people in America won't care in the long term about how heavily they're taxed. In the short term they'll of course be angry and declare Obama the embodiment of evil. Ultimately, the rich are the people who will pay the bills under our new bizzaro world politics universe. You will have a whole lot of people who will essentially get free healthcare now. That's great for them. Who wants to pay for something when you don't have to? This assumes the rich will mindlessly continue to make a whole lot of money for the Feds to take. I know enough rich people to know that a lot of them care little for anything other than making money. Practically, you probably can tax people up to 60% to 75%. What else is an entrepreneurial guy going to do? Write poetry? If the rich sheep keep working and investing, all will be good.
So maybe Obamacare will be a great thing. Maybe all the people who are adamently opposed to it will be among the first to get in line to collect the benefits. Last I checked, nobody is refusing to cash Social Security checks or receive their Medicare benefits. It all hinges on the rich. Keep on working you rich people. Keep my gifts coming.
The long term implications, to me, range from complete disaster to little effect. In the complete disaster scenario America is on a course to look like Western Europe for the next generation. This is great if you enjoy structural unemployment of 12%, lack of opportunities for entrepreneurship, and having to deal with bureaucrats to get a sign off on basic medical procedures.
On the other hand, maybe this will mean nothing because business people in America won't care in the long term about how heavily they're taxed. In the short term they'll of course be angry and declare Obama the embodiment of evil. Ultimately, the rich are the people who will pay the bills under our new bizzaro world politics universe. You will have a whole lot of people who will essentially get free healthcare now. That's great for them. Who wants to pay for something when you don't have to? This assumes the rich will mindlessly continue to make a whole lot of money for the Feds to take. I know enough rich people to know that a lot of them care little for anything other than making money. Practically, you probably can tax people up to 60% to 75%. What else is an entrepreneurial guy going to do? Write poetry? If the rich sheep keep working and investing, all will be good.
So maybe Obamacare will be a great thing. Maybe all the people who are adamently opposed to it will be among the first to get in line to collect the benefits. Last I checked, nobody is refusing to cash Social Security checks or receive their Medicare benefits. It all hinges on the rich. Keep on working you rich people. Keep my gifts coming.
Monday, March 8, 2010
So, Where We At?
It's been over 2 months since my last entry. And nothing has really changed. 3 days ago, we learned that another 36K jobs were lost in February. We're still said to be in "recovery". The healthcare bill is still not passed. And our president is still putting up rinky dink "job creation" proposals every day saying we need to get the economy started again. Yep. I heard that one before. It's March 2010. Is it still Bush's fault? Next month will be the month we start gaining jobs. Yep. And if we lost more jobs in March, we'll get some the month after that.
Meanwhile the country's deficit is ballooning. It's slated to expand by almost $10 Trillion through 2020 thanks to Obama's latest budget proposal. That assumes we grow signficantly during that timeframe. For a labor force of about 150M people, I'm sure that's nothing to be too concerned about. It'll probably work itself out. That $10T divided by 150M equals almost $67K per worker. I'm sure future workers can afford to pay the extra $67K after 2020 to make it up since we'll be so prosperous thanks to Obama's new hope and change utopia.
Meanwhile the country's deficit is ballooning. It's slated to expand by almost $10 Trillion through 2020 thanks to Obama's latest budget proposal. That assumes we grow signficantly during that timeframe. For a labor force of about 150M people, I'm sure that's nothing to be too concerned about. It'll probably work itself out. That $10T divided by 150M equals almost $67K per worker. I'm sure future workers can afford to pay the extra $67K after 2020 to make it up since we'll be so prosperous thanks to Obama's new hope and change utopia.
Saturday, January 2, 2010
What Does Obama Not Fund?
I saw an article from a state-controlled media outlet, commonly known as the Associated Press, in which they had the following comment in regard to the US Labor Dept Head:
"They follow through on President Barack Obama's campaign promise to boost funding for the Occupational Safety and Health Administration, increase enforcement and safeguard workers in dangerous industries."
The article was typical drivel. The thing that caught my eye was Obama's promise to boost funding for this Agency. It made me think: What does he not fund or how does he decide we're not going to spend money on this or that? This is like an individual person who just decides one day that he wants a new TV. So he gets a new HD TV. The next day he wants to order Pizza so he orders pizza. Maybe the day after that he's sick of his old Ipod. So he gets a new one. If you want it you get it. Why wait or budget or delay getting what you want?
At what point does President Obama stop and make a judgment about what might be nice to have and what we as a nation can't keep spending money on? Now that we're almost $2 Trillion in the hole in just a single year of his presidency, when does he decide that enough is enough?
"They follow through on President Barack Obama's campaign promise to boost funding for the Occupational Safety and Health Administration, increase enforcement and safeguard workers in dangerous industries."
The article was typical drivel. The thing that caught my eye was Obama's promise to boost funding for this Agency. It made me think: What does he not fund or how does he decide we're not going to spend money on this or that? This is like an individual person who just decides one day that he wants a new TV. So he gets a new HD TV. The next day he wants to order Pizza so he orders pizza. Maybe the day after that he's sick of his old Ipod. So he gets a new one. If you want it you get it. Why wait or budget or delay getting what you want?
At what point does President Obama stop and make a judgment about what might be nice to have and what we as a nation can't keep spending money on? Now that we're almost $2 Trillion in the hole in just a single year of his presidency, when does he decide that enough is enough?
Wednesday, December 23, 2009
What Will Business Do?
Yesterday, a caller to Rush Limbaugh made a point that small businesses across America should shut down for a few weeks, lay off their employees, and help flood state unemployment offices with new applicants in response to the healthcare bill. Not just the healthcare bill but the raft of new taxes that will fall on people earning $250K or more. These are small business owners. The basic crux of what he was saying was that business runs the country and not politicians. They should shut down the money spigot and this will make big government plans unworkable.
There is an idea in economic theory regarding tax policy and how high the tax rate has to be to discourage new investment. At what point do excessive taxes literally make it preferable for business people not to work and just shut it down? The president's economic team believes it is 60%. This means that the federales have to take 60 cents of every $1 for business people to finally say: Enough!
How small business responds to their new tax obligations will be interesting. I know enough wealthy people to know that I may have been wrong in thinking that a 40% marginal tax rate was already discouraging. The relatively small sample of wealthy folks I know will probably not scale down the business as a form of protest. Thus, they deserve to be taxed. If you are unwilling to take a stand and shut it down at some sacrifice to your own income than you deserve to have people in Congress tell you what you can and cannot keep. Most of the people in Congress, including the President, have never actually produced much in their lives or created a job or done much more than basically tell others what to do via academic writings. Many of the people passing these laws tend to view business people as mindless sheep with no real intellectual depth beyond just seeking to make a buck. They may be right.
That's why I am interested to see what's going to happen and how the people who are going to pay for all this will respond. I assume they'll take it on the chin, huff and puff, and ultimately just shut up, rollover, and pay the extra taxes Obama and the liberals have in store for them. If they do, they deserve to pay every tax that's been levied on them. And in the coming years when we need to do a massive fix to pay for the looming Social Security crisis, these people will be tapped for that. And the same for Medicare. And the same for Cap and Trade. Politicians are getting away with letting the majority make no sacrifices in terms of paying extra taxes to get these types of giveaways. Why would an average person be against this healthcare reform? Since they pay literally no to little in taxes and will now get healthcare benefits that is cheap and free in many cases, why would you not be for that?
The healthcare taxes are just the first of a lot of future taxes the rich will be paying. I hate to agree with Rush Limbaugh's caller because in almost any normal time it would seem wacky. But this is not normal times and we are morphing into a socialist welfare state that is not the America I thought I knew. I don't happen to be in the position where I have a few million in assets and an income in the $500K+ range so that I would be the one faced with this decision. I acknowledge it's easier for me to write this than for someone else to do this. If the rich can't stand up now, they deserve what they get and should shut up and pay their masters.
There is an idea in economic theory regarding tax policy and how high the tax rate has to be to discourage new investment. At what point do excessive taxes literally make it preferable for business people not to work and just shut it down? The president's economic team believes it is 60%. This means that the federales have to take 60 cents of every $1 for business people to finally say: Enough!
How small business responds to their new tax obligations will be interesting. I know enough wealthy people to know that I may have been wrong in thinking that a 40% marginal tax rate was already discouraging. The relatively small sample of wealthy folks I know will probably not scale down the business as a form of protest. Thus, they deserve to be taxed. If you are unwilling to take a stand and shut it down at some sacrifice to your own income than you deserve to have people in Congress tell you what you can and cannot keep. Most of the people in Congress, including the President, have never actually produced much in their lives or created a job or done much more than basically tell others what to do via academic writings. Many of the people passing these laws tend to view business people as mindless sheep with no real intellectual depth beyond just seeking to make a buck. They may be right.
That's why I am interested to see what's going to happen and how the people who are going to pay for all this will respond. I assume they'll take it on the chin, huff and puff, and ultimately just shut up, rollover, and pay the extra taxes Obama and the liberals have in store for them. If they do, they deserve to pay every tax that's been levied on them. And in the coming years when we need to do a massive fix to pay for the looming Social Security crisis, these people will be tapped for that. And the same for Medicare. And the same for Cap and Trade. Politicians are getting away with letting the majority make no sacrifices in terms of paying extra taxes to get these types of giveaways. Why would an average person be against this healthcare reform? Since they pay literally no to little in taxes and will now get healthcare benefits that is cheap and free in many cases, why would you not be for that?
The healthcare taxes are just the first of a lot of future taxes the rich will be paying. I hate to agree with Rush Limbaugh's caller because in almost any normal time it would seem wacky. But this is not normal times and we are morphing into a socialist welfare state that is not the America I thought I knew. I don't happen to be in the position where I have a few million in assets and an income in the $500K+ range so that I would be the one faced with this decision. I acknowledge it's easier for me to write this than for someone else to do this. If the rich can't stand up now, they deserve what they get and should shut up and pay their masters.
Monday, December 14, 2009
Paul Samuelson Isn't Dead Yet
Today the renowned economist Paul Samuelson died. His legacy made mathematics a central part of graduate economics and his influence is felt today in Obama's economic policies. He basically believed the geniuses he trained at MIT could and should manage the U.S. economy.
Unfortunately, these views still prevail every time Obama steps out and pronounces that we spend more to rejuvenate the economy. Paul Samuelson essentially advocated that when the economy is bad, government should step in and prop it up by spending as a short-term measure to stimulate demand. He basically helped advocate Keynesian economics for a new generation of the best and the brightest in the 1950's and 1960's.
Reading the old timers like Samuelson, John Kenneth Galbraith, and even Keynes is like reading up on early 20th century phrenology or eugenics. It's interesting for the time. But we have a better, or should have by now, a better idea of what's under the hood. No, head size is not a meaningful measure of intelligence. Nor is the idea that any central planner no matter how high an IQ can truly manage the complicated interaction of a vast economy.
Let's hope that as the old masters die away, their ideas die away with them. So that we can finally move ahead and improve the lives of millions of people who are struggling with unemployment, confusion, and bosses who don't know what's going on in the nation's capital.
Unfortunately, these views still prevail every time Obama steps out and pronounces that we spend more to rejuvenate the economy. Paul Samuelson essentially advocated that when the economy is bad, government should step in and prop it up by spending as a short-term measure to stimulate demand. He basically helped advocate Keynesian economics for a new generation of the best and the brightest in the 1950's and 1960's.
Reading the old timers like Samuelson, John Kenneth Galbraith, and even Keynes is like reading up on early 20th century phrenology or eugenics. It's interesting for the time. But we have a better, or should have by now, a better idea of what's under the hood. No, head size is not a meaningful measure of intelligence. Nor is the idea that any central planner no matter how high an IQ can truly manage the complicated interaction of a vast economy.
Let's hope that as the old masters die away, their ideas die away with them. So that we can finally move ahead and improve the lives of millions of people who are struggling with unemployment, confusion, and bosses who don't know what's going on in the nation's capital.
Subscribe to:
Posts (Atom)
