Archive for March 2012

Let’s Not Mix In Voodoo Economics

March 22, 2012

The GOP/Ryan 2013 Budget Plan appears to make a mockery out of two important issues facing America.  The conflating of tax policy with healthcare has the potential of giving America the worst of both.

Ryan did not speak about healthcare.  He actually spoke about Medicare and Medicaid.  So why the confusion?

Ryan is trying to make this a government spending problem rather than access to healthcare issue

The US spends about $3 trillion on healthcare (about $9000 per capita) each year.  Our healthcare delivery system bifurcates healthcare into the private sector (for those working and buying insurance) and government run Medicare for those over 65 (and presumed not working).  Medicaid is also government run and applies to those who can not afford to pay.

In President Obama’s 2013 budget proposal, Medicare and Medicaid expenditures will exceed payroll tax collections by $500 billion.  If suddenly we were to make Medicare and Medicaid cost neutral, it would require almost a 50% increase in income taxes or a 175% in payroll taxes.  These are not small numbers.  So why are we talking lower tax rates?

It should be just as clear that Medicare and Medicaid can not be left just as they are because it is clear they will bankrupt the country with cost increases 2-3 times the rate of inflation each year.

The AHCA also is not the answer.  AHCA does end an ethical and moral defect in previous healthcare by ending the “pre-existing condition” clause used to reject some seeking coverage.  AHCA does very little, however, to bend the cost increase curve and the looming bankruptcy is still in our future.

The real danger of Ryan’s proposal is that it confuses the healthcare discussion with an equally murky tax code discussion.  Changes to the tax code, while needed, are suppose to be “revenue neutral” in the GOP plan.  If so, why worry about them now and instead, lets focus solely on health care and from health care, where exactly does Medicare and Medicaid fit?

This will not be an easy national discussion but it should not be one American’s fear as too complex.  Most all modern wealthy countries have healthcare systems as good or better than the US, and these systems cover everyone (working, poor, and retired), and cost close to one half what we spend per person per year in the US.

Changes to the tax code will inevitably produce winners and losers.  (I am betting the top 1% does pretty well.)  Fixing healthcare will only produce winners since it make affordable healthcare available with dignity for all.

Oops.  I guess we will still have a question of how we pay for healthcare.  Singling it out and using the successful models from other countries, this should be a solvable problem.

The Ryan Plan should get credit for opening the healthcare discussion.  He should also get its hand slapped for trying to sneak through tax changes that favors the already wealthy.  Given a little time, the media as well as responsible healthcare organizations will point out the consequences of the GOP plan.

Unfortunately, there is no Democratic plan to compare and contrast, and help move the discussion forward.

The Charge of the Lemmings

March 21, 2012

Representative Paul Ryan said yesterday that the GOP’s 2013 budget proposal was designed to draw a sharp distinction between Republicans and Democrats.  I think he has a reasonable chance of achieving that goal although I am unsure whether he will like the outcome.  More amazingly, I don’t think Americans are going to like the outcomes of either the current Democratic approach or the proposed GOP one.

The situation somewhat reminds me of two groups of the Norwegian lemmings.  The GOP group is trying to lead the rest of American lemmings off this cliff, and the Democrats are trying just as hard to lead American lemmings off  another cliff.

It doesn’t look promising for Americans as long as we remain lemmings.

To no surprise, the GOP budget proposal offers large tax cuts and a path towards a manageable debt.  Their path towards fiscal sanity also entails large cuts in social programs (but not defense spending).   Cleverly the GOP released not enough information in order to determine which economic groups would benefit the most from lower tax rates.  Want to guess?

Democrats have no plan.  They have words that they will not abandon the elderly, the poor, or the sick.  They simply ignore the projected financial truths that if social programs are left unchecked, Medicare/Medicaid and Social Security will bankrupt America by themselves.  The current Democratic plan will not only bankrupt the country but strangely will abandon those groups it pledged to help in the process.

In an unrelated Senate vote, this difference in leadership could be seen again.  The vote was on an amendment to the AHCA where should Medicare spending rise to a certain level, there would be an independent panel established with the charge of cutting Medicare costs.  Republicans did not want this panel.  For some reason, Republicans decided to add a rider which put a cap on liability damages (malpractice).  Not surprisingly the bill was defeated because enough Democrats did not want to anger trial lawyers.

So here we sit.  Two lemming leaders are trying to get us to follow them.  Both paths are misleading and primed to send us off one cliff or the other.  Why can’t the GOP just propose something that has common sense attached?

Health care is costly so Medicare and Medicaid are not going to get cheaper.  Reducing the governments expenditures (with no other changes) means people will pay more or go without.  I don’t think the 1% will go without.

Cutting taxes and social safety net spending while at the same time raising defense spending is insulting.  But the current fiscal plan is just as irresponsible.

There is not enough money among the rich to balance the budget in any reasonable projection.  Returning to Bill Clinton’s tax rates is a good starting point.   All Americans are going to have to pay more if we are to maintain Social Security and Medicare/Medicaid.  This is simple math.

Increased taxes (to pre-Bush levels), lower basic health care costs (from reforming US health care delivery), higher taxes specifically for Medicare and Medicaid, slight modifications to Social Security (like means testing and on-set of benefits), and across the board cuts in all other government spending could produce something that is fiscally responsible and asks all Americans to share in solving the current deficit and debt problem.

Instead we are being asked to join one of two groups of lemmings.


The Ryan Grand Deception

March 20, 2012

House GOP leaders are about to release a 2013 proposed budget.  Representative Paul Ryan will present the budget proposal although he already admits it is unlikely to be made law this year.  So what is his strategy?

First lets review the key elements leaked so far according to the Wall Street Journal.

Can you guess that Ryan will propose cutting taxes?  If so, you are right.

The GOP will call for adopting a tax code with two levels, 10 and 25%.  They will also call for eliminating the Alternative Minimum Tax as well as lowering the corporate tax from 35% to 25%.  At this point there was no indication if any individual or corporate tax loopholes and exemptions would also be eliminated thereby lessening the sharp reduction in tax revenues.

The consequences should be evident.  With less tax revenue either the deficit will grow or there must be accompanying cuts in government expenditures.  Republicans got beat up pretty badly last year when they proposed cuts to Medicare, so what are they thinking?

Before trying to answer, consider the 2013 budget put forth by President Obama.  His budget projected an $800 billion deficit based upon Federal and corporate income taxes of $1.7 Trillion.  The budget also showed Social Security, Medicare and Medicaid expenditures exceeding payroll taxes by about $650 billion.  Eliminating the unfunded Social Security and Medicare/Medicaid expenditures would put a good dent in the deficit.  But at whose expense?

Looking at the $650 billion SS and MM excess expenditures as a percent of federal income tax ($1.359 trillion), federal income taxes would need to be increased across the board almost 50%!  This is quite the opposite of reducing the top levels from 35% to 25%.

So again, what is the Republican strategy?

A good guess is deception (which both parties enjoy playing).  The current GOP presidential field is leaving dirty linen everywhere.  Lunar colonies, no sex and home schooling (think working moms), and “I know business and the President doesn’t” (think what is the GOP’s view on the role of government) is not preparing the GOP well for the fall elections.

Enter Ryan and the free lunch.  If he says it fast enough, 10% and 25%, who would be against lower taxes?  If nothing more, this type of a plan, without any mention of spending offsets, should help GOP congressional candidates.  Lower taxes also gets the GOP out of the social and women’s issues that their Presidential candidates have laid before them.

In this light, it is not a bad strategy.

The Volunteer Fireman’s Syndrome

March 19, 2012

Over the weekend a story of a Florida tragedy made the news.  Trayvon Martin, a 17 year old youth was shot to death in broad daylight by George Zimmerman, 28.  In and of itself, this is relatively unimportant news even though it is repeated all too often in too many US cities each day.  This story, however, is different because one man was black, the other white, and one man was armed the other was not.

Zimmerman was acting as a volunteer community watch person.  He was driving around a gated community near Titusville, Florida when he saw Martin.  Zimmerman called 911 and reported his observation of someone suspicious.  The 911 operator told him to back off and await police who were in route.

Apparently Zimmerman did not follow the 911 instructions.  The results were a black unarmed youth being shot dead.

Zimmerman has claimed self defense and is still free.  The Black Community is up in arms over what they see as racist injustice.  I wonder whether we are overlooking just as important an issue?

Volunteer fire departments are the backbone of fire protection in much of the Country.  Most volunteer units treat their roles very seriously and seek to be as professional as full time, big city fire departments.  From time to time, however, there is a volunteer who gets a rush out of racing to the station (lights flashing and sirens blasting) and then jumping on the fire truck and racing to the fire.  When this person is denied membership or when there just are not enough fires, this disturbed person helps nature by starting fires himself.

The same (or at least similar) phenomena can be seen in volunteer police units.  Normally there are no problems with these volunteer or auxiliary policemen.  No problems unless they are armed.  Being armed without extensive training is a recipe for tragedy.

The facts of the Trayvon Martin’s death may come out in time.  Justice may ultimately be done.

It is highly unlikely that the real danger presented by carrying concealed weapons as a police auxiliary or as a private citizen will be addressed.

Is Shame Dressed In Black Robes?

March 18, 2012

In eight days, the Supreme Court will begin 6 hours of hearings on the constitutionality of President Obama’s Affordable Health Care Act.  This case has been labeled a test for the Congressional legislative limits versus the bounds set by the US Constitution.

There are gobs of politicians and health care experts huffing and puffing about whether the government can place a penalty upon those who choose not to buy health insurance.  No one seems to care that both the pre-AHCA and President Obama’s plan cost almost twice as much as other modern countries (who cover everyone) and delivers only average outcomes compared to these countries.  I wonder why?

What seems to be on trial is the outdated notion that in America everyone is free to decide for themselves.  Images of conquering the old west are conjured up to tell us the AHCA will make us wimps.  Why carrying a gun and having no health insurance are the essence of being an American.

So, back to the Supreme Court.  Each side is absolutely sure their opinion will prevail.  Interestingly there will be no broadcast of the proceedings and sitting space is limited.  It seems everyone in Washington wants a seat.  “Stub-Hub” could make a fortune on this event.

The question being asked is does it make a difference what the arguments really are?  Most pundits are predicting a 5-4 verdict, either for or against.  Justice Kennedy would once again be the swing vote.

The “how can the government make a citizen buy a product” argument strikes a responsive nerve.  No one likes to be told what to do and certainly not by the government.   Yet health care is not your everyday product and insurance coverage is not like buying a Chevy versus a Toyota.

The US already has a law which makes it mandatory for hospitals and emergency rooms to treat patients regardless of their ability to pay.  The country rightly concluded that we could not allow people to die on street corners (even if they had been shot by someone else exercising their right to carry a gun).  People without health insurance are simply gaming the system by avoiding the cost while healthy and joining the program when sick.

So no matter how the Justices decide, the US will have the most costly health care delivery system after the decision as it does before the court’s ruling.  It is simply shameful that the AHCA has been elevated to a Constitutional issue when in fact it should be held to human dignity and business efficiency standards.

Making Matters Worse

March 17, 2012

Arizona is back in the news.  The State legislature is considering a bill which would require women to tell their employer about their personal medical condition for which the use of birth control pills were prescribed.  Avoiding pregnancy is not one of the allowed conditions if the women wanted to obtain the pills under their health care coverage.

What are these people thinking?

The great hue and cry, most righteously, is about not offending the employer’s religious beliefs.  How can the government make anyone go against their deeply held beliefs?

In Kentucky, there is litigation underway right now pitting a certain Amish sect’s religious beliefs against the State motor vehicle code.  The Amish avoid the appearance of self importance by not using bright colors.  No problem until they drive one of their buggies onto a State road.  The State motor vehicle regulations call for slow moving vehicles to display a red triangle on the vehicles back side to warn approaching vehicles of a slow moving car ahead.

Seems quite sensible to me.  Not to this Amish group, however.

Is this religious prosecution?  Is this an invasion of religious freedom?  The courts will decide soon.

The birth control issue and the Amish red triangle have one thing in common.  In both cases, religions have stepped into the secular world and have tried to impose their religious views on others.

Catholics as well as many other fundamentalists believe strongly that birth control should not be allowed, not just for themselves, but for everyone.  The Amish live peaceful and respectful lives and normally just prefer to be left alone.  When they drive their buggies on State roads, however, they represent a potential danger to others.

So back to Arizona.  The intrusion of religious freedom is seen when employers “have to give” birth control as part of their employees’ health care coverage.  Why should an employer have to pay for birth control when they don’t believe in it?  When you say it fast, it almost sounds reasonable.

The conflict arises over two points.  A secular process has reached the conclusion that birth control coverage is a valuable options.  If an employer offers health care coverage, birth control has to be part.  The second point is that the employer is not giving anyone anything.  Health care is just wages not paid.  On top of that the employer and the employee get favorable tax breaks from the government for having provided health care coverage.

Consider also, that the spot light has been on birth control but opening the door for the principle of religious based exemptions will cast a much broader shadow.  Same sex couples could be subjugated to second class status.  Racial discrimination could be open again.  And, religious intolerance could flourish since religion A believes they are the only ones destined for the next world.

Religious beliefs are fine and should be honored.  By their very nature, however, beliefs for the holder and not ever be pushed for mass distribution.

The Strange Case of Gregory Smith, Or Is It?

March 16, 2012

This past week, Gregory Smith scored his Andy Warhol 15 minutes of fame.  Smith resigned from Goldman Sachs and on the final day wrote an unflattering opinion column for the New York Times.  The question is whether this is a strange case for a senior executive or is there more to the story?

Smith alleges he is leaving the company because the “tone at the top” no longer places the customer as Goldman’s principle focus.  Today, Smith says, Goldman’s culture encourages its executives to get as much money as possible from its clients and not worry about their future.  Smith says it was not always that way.

One has to wonder whether Smith suffered a career incident?  Did he suddenly realized he was not destined for some promotion or attractive career path to partner status, and just decided to cut the cord?

Actually a Goldman smear campaign, even if true, would not be very effective.  Smith has just said what anyone with a heartbeat already knows.  It was Goldman Sachs who in 2007 and 2008 tried to load customers up with mortgage back securities.  Goldman labeled them as top notch and assured their customers of this solid investment.  At the same time, Goldman was betting against these mortgage backed securities saying they would fail.  Worse, Goldman knew the securities were worthless and failure was only a matter of time.

So tell me about Goldman and ethics?

But is this a Goldman issue?

I don’t think so.  I think it is a disease that has infected much of American business.  With the rise in MBA programs where the allure of Wall Street and big bucks has attracted bright students whose goal is to extract money, not actually produce anything of value.  Where is the sense of creating value?  Where is the sense of ethics?

Is it a mystery why so many corporate executives rewards themselves so handsomely, or why there is such a widening gap between the very rich and everyone else?

Consider that for years, the entire Investment Industry has seen no problem with high speed computer stock trading.  In fact each of the major companies has employed rooms full of physicists and computer engineers to make ever faster trading algorithms.  What’s unfair about that, shouldn’t the spoils go to those who work and succeed the best?

The problem is that the winners are clear but the losers are not.  Every ordinary citizen who wishes to trade get their pocket picked.  Who realizes that their trades are subject to unannounced and undetectable “light speed” trading theft by the big Wall Street players.  With their high speed programs, fractions of a point of share price are erased (and put in Goldman’s or other major firms’ pocket).  This seems an obviously unethical situation.

Gregory Smith has said what most people have been thinking.  Maybe the most amazing aspect of this so far is that Goldman has done little to deny or correct the public image.  Goldman must be content with extracting as much profit as possible, for as long as possible.