The American Dilemma and How We Can Fix It

Archive for the ‘fiscal cliff’ Category

‘TILL DEBT DO US PART

The wrangling, name calling and finger pointing continues apace in Washington with all parties blaming each other for everything that has gone wrong in human history since Eve tempted Adam with that non-GMO-modified apple.  It’s gotten even uglier than usual with people openly speaking out their venom in such terms as “terrorists,” “hood,” “thugs,” “radicals,” and, of course, everyone’s favorite term, “suicide bombers.”

As one might expect from his four and one half years as the Chump in Charge, Obama is leading the armies of name callers with his S. S. commandants rallying their respective platoons, Rep. Nancy Pelosi and Sen. Harry Reid filling in the gaps when vitriol from the White House abates as the Prez and his corps reload the tubs filled with boiling oil.

Yes, my fellow Americans, we are again at the precipice described as the “cliff over which there is no return,” or, more accurately, we are at the first of two as we prepare to catapult over the first cataract and into the second.

This sort of behavior would be unacceptable if it were being enacted by teenagers – and it is beyond comprehension when it is played out by those who are not only presumably adults but who are elected officials.

It’s somewhat difficult for me to understand how the Senate Majority Leader, Mr. Reid has the gall to excoriate the GOP for waiting until the last minute before we approach the September 30th deadline for having a budget (which the chamber he has led has failed to pass for three years) or to pass a Continuing Resolution that would allow government to continue to dysfunction.

My calendars, (I have two of them), both indicate the date of September 30th quite clearly as, I am sure, do the Majority Leader’s.  Given his concern that we might not reach a resolution in time, I cannot help but wonder, with his sense of urgency, why in the absence of a solution, Mr. Reid did not eschew his and his senate colleagues’ five weeks vacation and attend to the important business at hand.

It is somewhat difficult for me to understand how either Mr. Reid or his House counterpart, Nancy Pelosi are now so impassioned.  If you have ever had the misfortune of listening to either of them speak, perhaps, like me, you have been tempted to call EMS on their behalf to shock them into having a pulse.  They both exhibit about as much emotion as a clam on its way to being shucked.

But putting personal feelings aside, I suspect that, in some form or other, this drama will get resolved successfully by being put off a few days or weeks when the far more serious issue of the National Debt Limit must be dealt with before it is breached, according to Treasury Secretary Lew, on October 19th.

I wonder if Obama remembers how he excoriated George Bush, when he was running for election,  for being so wasteful by increasing our national debt.  When Bush left the White House, the “official” National Debt stood at $10.7 Trillion.  Candidate Obama vowed that “If he were unable to cut the debt in half by the end of his first term, he didn’t deserve a second one.”  Today, five years into his and his colleagues’ mismanagement, we are butting our heads against $17 Trillion.  We should have taken his 2007 campaign statement at face value.  There is little that he has said since which deserves that much regard.

Among the many fiscal problems is the granddaddy of them all, Obamacare.  As the numbers are now being released as to what it will actually cost for forced participation in this plan, it is evident that the name of the Affordable Care Act should be changed to the Unaffordable and Unworkable Care Act.  This first stab at socializing medicine will undoubtedly further accelerate our adding to the already burgeoning National Debt.

Like any good used car salesman who counters the prospective buyer’s observation that, “the tires seem pretty worn,” the Prez responds that having flatter tires makes for a softer ride.  That is pretty much the spin that recently came out of HHS Secretary Sibelius’ mouth when she spoke about how “pleased she was that the actual cost of insurance is going to be less than her department’s first estimates.”

The problem with that statement is that nobody pays from an estimate but from the actual bill.  And it is evident that for most Americans, particularly for those who are younger and healthier, most premiums will increase – and most coverage will decrease.  The one thing that I have yet to hear any official discuss is the actual cost (not just the premiums) of being insured.

Health, like auto insurance has two components.  Well, actually three.

The first is the actual cost of coverage – how much the policy owner pays in premiums.  That component is, in a rational marketplace determined by a number of factors, the most important of which is the amount of coverage that is selected.  Another important factor is your actual driving experience.  If you have had a substantial number of accidents or traffic citations, the insurance company is going to consider you a higher risk and charge a higher premium to cover you.

By forcing insurers to cover all people of the same age at the same rate, including those with serious pre-existing conditions and mandate they are as insurable as a healthy person, Obamacare effectively eliminates the basis of intelligent insurance underwriting.  Naturally, this will cause great losses for insurers and the only way they can make these up and still stay in business is to overcharge those (typically younger clients) higher premiums than they should be paying..

The second component which determines your premium is how much risk you are willing to accept and how much you want the insurance company to underwrite on your behalf.  A driver who selects a comprehensive deductible of one thousand dollars will have a lower rate than the driver of a similar vehicle who chooses a one hundred dollar deductible.  A higher deductible is a money saver for the careful driver who is not involved in accidents.

The same principle applies to health insurance – a point which is omitted from Sec. Sibelius’ statements on “premium cost.”  The department made the statement that a “bronze plan,” the most minimal one available under Obamacare, will “only cost a healthy, young male about one hundred dollars per month.”

What she fails to point out is that the person who owns this plan will be responsible for the first five thousand dollars of medical expenses out of pocket before the plan pay a single cent in benefits.  So a person who selects this coverage, should he encounter a medical situation, will effectively have paid over five hundred dollars a month before he receives a dime in benefits.  This is government “accounting” and lack of honesty at its finest.

But I referred to a third point – and, perhaps this is the most important one in the discussion.  Let’s assume, for the sake of discussion that Tinkerbell suddenly pays a visit to the United States and sprinkles pixie dust over all of us.  In a moment, we all decide to sign up for Obamacare and there is not a single uninsured American left in the country.  Who is going to service all these people?

We are seeing a decrease in the number of physicians and medical staff; we are seeing hospitals close or consolidate; and to this smaller group of providers we would see a massive increase in the number of patients.  How can the system possibly handle this?  The answer is, it can’t.  Not unless medical services are rationed.  That is precisely what has happened in every country that has socialized medical treatment.  That is why people like Sarah Palin call the bureaucracies that are being created, “Death panels.”

So what does Obamacare have to do with the debt ceiling?  Even its proponents admit that in the “first few years” it will add to the amount of debt.  But the “real cost savings” show up a few years down the road.  In other words, we’re going to sink deeper into debt but “later on” Obamacare is going to “more than pay for itself.”

Having yet to see a government program that actually worked the way it was sold to the American public, I have only one comment, brilliantly expressed by comedian Bill Cosby in his routine, “Noah”.  That word is, “Right.”

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A BRIEF VISUAL DEPICTION OF THE CURRENT DIRECTION OF WESTERN CIVILIZATION

And the people cheered.

“I am the master of my fate:
I am the captain of my soul.” – William Ernest Henley

Or so we once believed …

THE ASHEN VIZIER AND THE 535 MENTAL MIDGETS

We know that if we give a junkie a dose of heroin she’s going to use it and come back asking for more.

We know that if we send government our tax dollars they’re going to spend them and come back asking for more.

We call the junkie a law breaker.  We call the politician a law maker.  That’s about the only difference between them.

If we apprehend the junkie, we the taxpayers pay for her support either in a rehab facility or a prison.  We the taxpayers who elect the politicians pay their support through our tax dollars to ensure they have ready access to what little they leave us in our pockets.

My friends used to laugh at my view of owning a car.  I summed it up one day on returning from a repair shop where I had some mechanical work done.  As I put it, “Owning a car is like having a vacuum cleaner permanently attached to and sucking at the contents of  your wallet.”

That’s a lot like the way government operates.

Many years ago my father was audited by the IRS.  For three years in a row.  The focus of their pogrom was on determining whether the business deductions he took were legitimate.  The result of these audits were three “No Change” determinations by that esteemed agency.  In other words, dad had documentation for every penny that he claimed and those deductions met the definitions of the Internal Revenue Code.

Nevertheless, it’s always stressful when you are accused of something and are assumed to be guilty until you prove your innocence – which is the approach that the IRS takes with us taxpayers.  So dad dreaded these encounters passionately.  I think that was mostly because he was an honest man and the implication that he was otherwise challenged his sense of decency.

At dinner one night, I believe it was at the conclusion of the second audit, my father told us that he had said to the auditor, “Wouldn’t it just be easier if you took everything I made and then just refunded what you think my family and I are entitled to live on?”  Little did he know that would be the direction this country would turn a half century later.

As we are now little more than three weeks from the much touted precipice of the “fiscal cliff,” who is in charge of making rational decisions to repair the folly we have already wrought?  It should not surprise you that it is the very people who have brought us here in the first place.

Our players consist of the Ashen Vizier and the 535 Mental Midgets – a cartoon cast that would be the envy of both Walt Disney and Cecil B. DeMille.  (My apologies to the twenty or so responsible people in Congress who have a pulse, a brain, common sense, and the moral courage both to understand and to tell the truth).

So here’s where we are.  Stuck over defining who’s “rich” and who should pay more of their “fair share.”  As though that matters any more than renaming a school in honor of Horace Mann will provide the students inside with a better quality education.

The facts are (and amazingly both sides agree on this) that if we follow the Ashen Vizier’s plan and start taxing the “rich” more, we will raise less than three percent of the money we need to balance our budget.  In other words, this “plan” leaves ninety-seven percent of our problem unresolved.

Since it’s hard for any of us to contemplate something that has burgeoned into the size of our deficits with all those zeroes, let’s look at this from a standpoint which we all can understand because we all have to deal with it.  A family and its budget.

You and your spouse have been wasteful and indulgent of the kids.  You’ve let your finances get out of control – but you’ve finally decided it’s time to deal with reality and get yourself back on the right path.  (Those annoying phone calls from creditors might have given your decision some impetus).

So you go down to Ashen Vizier & Associates credit counseling service.  You’ve seen their ads on television (a lot) and they promise that they have the solution to your financial woes.

The nice receptionist asks you to fill out a profile of your monthly income and expenses and then you are brought in for an audience with the Vizier himself.  He is a very self-assured and impressive sounding chap.

After he reviews your situation, he astutely points out that you are spending one thousand dollars a month more than you are taking home.  You and your spouse, in awe at this wisdom, nod your heads in agreement.  Okay.  The Vizier has identified your problem.  That’s a great start.  But, you ask him, “What do we do about it?”

As he stands up from behind his desk and completes the putt he was working on when you came into his office, he says, “No problema.”  He turns to the reference library which is on the wall behind him, filled with hundreds of the largest books you have ever seen.  He immediately pulls one down from the shelf and turns expertly to the middle of this tome where he finds the solution to your difficulty.

On page 462, Paragraph 7 he shows you a program which the Federal Government has developed just for people who are like you.  All you need to do is complete the paperwork and every month thereafter you will begin receiving a special allotment of thirty dollars.  It’s the program called “A Little Something Extra For The People Who Are A Little Short Each Month Entitlement.”

it is with some trepidation that you point out that will still leave you nine hundred seventy dollars a month deeper in debt.  But the Vizier grins broadly at you and says, “Don’t worry – that will take care of itself.”

Armed with this wisdom (and the promise of an extra thirty dollars a month) you and your spouse leave the office in an upbeat mood.  You decide to go to a movie, buy some popcorn and a few sodas and spend the thirty dollars you will soon be getting plus a little more.  Like your old hero, Alfred E. Neuman and your newly found one, the Vizier you are comforted with their life-guiding principle, “What, me worry?”

Somewhere I have quite a few copies of “Mad Magazine” stored away.  I think I know where they are.  Talking about all this financial stuff always makes me a little dizzy.

If I can find them, maybe I’ll curl up with a couple and drift off to sleep.  As I think about it, they are nearly forty years old and may be worth something.  Which is more than I can say for the Ashen Vizier and the 535 Mental Midgets.

Some eye opening thoughts from a very wise blogger.

FOR THOSE WHO JUST DON’T GET IT (THOUGHTS ON THE LOTTERY)

I don’t anticipate a lot of “likes” on this post.  As I’ve said before, stories that appeal to our human side and are warm and fuzzy get the most people hitting that button not only on my blog but on others that I regularly read.  I understand that since I often make my “like” decisions based on whether I walk away smiling or thinking.

This is one of those “thinking” posts and it deals with one of the most banal of all subjects – economics.  I probably wouldn’t have even gotten your attention if I hadn’t changed the title to include a reference to the lottery.  But I promise to make this as painless as possible.

I have decided to use the explanation of how taxes affect productivity using the example of the lottery because for the many who have never run their own business this is an easy example for them to understand.

So what is a lottery?  If you have followed for some time you’ve probably heard my definition of it that for most Americans it is one of the two ways they view becoming wealthy.  The other one is filing a law suit.

The actual definition is “that it is a game of chance in which players pool their money which is then redistributed in a small number of large prizes after the promoters deduct their fees for operating the game.”  I think we all understand the concept.  It is nothing more or less than a scheme for wealth redistribution.

I am always bothered when I hear people say that they “invested” X number of dollars in a lottery drawing.  Sadly, this speaks to the extreme lack of financial education that most Americans share.  This is a “gamble” not an “investment” and I am in no way passing judgment on whether gambling is good, bad or indifferent.  I mean, after all, I live in Las Vegas.

So these are the economic realities of the lottery.  You buy a ticket for two dollars.  The operators (the inter-state Lottery System) immediately pocket one dollar to cover profit and operating expenses.  (Fifty percent of your money just disappeared when you completed your purchase).  The remaining dollar gets added to the prize pool.

Now that one remaining dollar “investment” is still working for you.  You have approximately a 1/175,000,000 chance of hitting the jackpot – although you might collect a smaller prize.

Fortunately for you, you were born under a lucky star and are one of the two winners of the grand prize.  You and the other winner both decide to accept the lump sum option of $384 Million which is split between you.  (Please note that this represents a 35% reduction from the advertised $587 Million amount you would have received if you took your prize as a 30 year annuity).

And now, of course, you owe taxes on your winnings to both the Federal government and, for most winners, to the state in which they reside.  So the gross amount of your prize of $192 Million each now shrinks by an additional 35% to become $125 Million.  Still, that’s more money than you had in your checking accounting the last time you balanced your bank statement so you’re a very happy camper and are probably debating which color you should choose for your new Ferrari.

If you opened a bank account with a deposit of $1,000 and got your statement at the end of the month and the bank had “charged” you $500 for opening the account, then an additional $175 for “maintenance fees” and then an additional $113.75 for “miscellaneous fees” leaving you with a balance of $211.25, you would probably be screaming at the top of your lungs that you were “ripped off” – and you would be correct.

If you do the math, of the total prize pool collected, the Federal, state governments and the Lottery wind up with well over 70% of the money that is “invested” – and the players with less than 30% of the money.  That is the economics of the lottery – but is actually not the main point of this post.

When you go to your grocery store to buy oatmeal and diapers, that store is operating on a margin of only 2 – 3 %.  So your twenty dollar purchase might net them a whopping $.60.  And yet grocery stores by rigorously controlling costs, minimizing theft and being able to negotiate favorable contracts with wholesalers are able to survive.

They struggle but they are still able to turn a profit – which is a good thing for us because if they didn’t there would be no place for us to purchase oatmeal and diapers.  Of course, they don’t pay their employees extravagant wages because if they did they would be out of business.

I wrote the last two paragraphs because of the picketing which took place during the Thanksgiving weekend at Walmart for paying its employees “low wages” and offering “minimal benefits.”  They really don’t have much choice in the matter based on the economics of their business.  Just for disclosure, I have no axe to grind regarding Walmart as I don’t own stock in the company and almost never shop there.

On the other hand, government doesn’t have that problem.  When you consider that the lottery nets them collectively 70% of the gross revenue it generates, they can well afford to pay their employees (our employees) beaucoup bucks – and they do.  When you’re swimming in cash you can afford to be careless with it – and we have been to the tune of some $16 Trillion.  And yet, that still is not the point of this post.

But we have now arrived.

At the heart of the deadlock on the fiscal cliff is the question of raising taxes on “the rich.”  Warren Buffett recently offered a suggestion that we should consider “the rich” as a family which earns $500,000 per year rather than the $250,000 that President Obama made a campaign theme.  Those earning that or more would see an increase in the percentage of Federal Income Tax that they paid.

The Republican House has been adamant, so far, in its position that there shouldn’t be any tax increases on the “most productive members and the job creators” in our society because this will undermine our economic recovery.  (This is commonly described as “trickle down economics”).  Of course, this notion is pooh-poohed by their opponents in this debate.

So let’s get back to the lottery as a frame of reference to investigate the “fallacy” of this theory.

If you’ve read this post diligently and have followed the math, you are now aware that government is already collecting 70% of the revenue from lottery sales and winnings.  With only a 30% return to the players people are still lining up in droves to buy tickets.  If government decided to up their stake to 80% of the money spent on the lottery we would probably see some decrease in the amount of sales and at 90% an even further decline in interest in the game.

So what if they decided to raise that to 100% of the amount collected?  How many people do you think would be lining up at convenience stores to purchase tickets, knowing that if they “won” they would have to turn over all prize money to their state and the IRS?  And that’s the problem with “trickle up” taxation.  You see, at the point where government confiscated all the profit, even someone who had invented a time machine and knew what numbers would be drawn would have no incentive to play.

Similarly, a small business owner, burdened with some of the highest tax rates in the industrialized world combined with needing to comply with regulations which in many cases serve more to provide someone a job to oversee them than to accomplish anything productive will ask himself the question – do I want to play this game anymore?  Those business owners (and people who have considered opening their own new business) have looked at the way the game is structured and said, “No.”  And that is why we are unable to make any serious progress in reducing our rate of unemployment.

Of course this does suggest a solution to the “fiscal cliff” debate which is ongoing in Washington.  As you have seen, the Lottery is an enormously profitable scheme for the operators (making anything that Wall Street has concocted look like mere child’s play).  So I would like to offer this solution to our financial conundrum which I hope will make its way to our legislators and the President.

If you want to get the country out of debt, balance the budget and have money left over to waste on who knows what, simply require that all left over money that a wage earner has at the end of a month must be “invested” in buying lottery tickets.

I can already visualize the headlines now:

“Lucky Hoboken resident splits $239 Billion Lottery Jackpot with 157 other winners.”

America – what a country!

QUOTE OF THE DAY–11/29/12

In an interview with Rep. Charles B. (“Charlie”) Rangel  (D NY 15th District), CNBC co-hosts Bill Griffeth and Maria Bartiromo got very little new information regarding the discussions on the “fiscal cliff” from the 82 year old congressman.  Ms. Bartiromo suggested, in much the way the Roman Catholic Church’s College of Cardinals deals with electing a new Pope that, “they should lock them all in a room until they work out a deal.”

The two anchors went on to observe that the parties involved seemed to be talking past rather than with each other.  It was obvious that the amount of non-information which Rep. Rangel and Senate Majority Leader Harry Reid had provided earlier was frustrating – which led Ms. Bartiromo to utter the quote of the day:

“Why are we paying these people?”

Now that’s a question for the ages.

Rep. Rangel has been a long term representative of the district seat that was formerly held by Adam Clayton Powell, Jr. who spent more time at his place on the island of Bimini than in the House of Representatives where he might have done some good for his Harlem constituents.

Rep. Rangel has had his own problems.  Beginning in 2008 he came under investigation by the House Ethics Committee which focused on his improperly renting rent-stabilized apartment units he owned and for failing to report income he received in renting out his villa in the Dominican Republic.

Because of the investigation, in 2010 he was forced to resign his Chairmanship of the powerful House Ways and Means Committee.  (That’s the one that determines who and how much taxes we are all going to pay).  He was convicted on 11 of these charges and the full House approved a “sanction of censure” against the Congressman.  (N.B.  The Congressman never vacated his seat owing to these convictions and was again re-elected to another term in the November 6th election).

With people of this moral caliber integrally involved in the question of taxation and reducing spending, is it any wonder that we are at the precipice of a financial disaster?  Is there anyone out there who does not now understand why our official debt now stands at $16 Trillion?  Is there any rational person who would dispute Ms. Bartiromo’s question:

“Why are we paying these people?”

THE FISCAL CLIFF AND APPLE PIE

The negotiations on the fiscal cliff, if I may use that term to describe the posturing in government that is underway, drag on at their same slow pace as before the election.  We’ve all heard about it – and some of us have taken the time to understand its implications.  Probably just a few of us.  Perhaps the reason so few of us concern ourselves with the matter is that, as I review today’s “Trending News” on Yahoo, the subject didn’t make it into the top ten.  We have higher priorities.

Of the top five items on that list of what Yahoo viewers found important, four were concerned with “celebrities” and their activities which included one law suit; one romantic breakup; one engagement and one speeding ticket.  Rounding out the list just in time for the next $500 Million Powerball drawing was a seven time lottery winner’s advice on how to increase your chances of winning in the random game – a subject which he covers in a book which has sold thousands of copies.

Of course, none of these has anything to do with our subject – but in reviewing the list of today’s news items, there were two entries which I found that did pertain.  These were stories about whether doctors should prescribe the “morning after” pill to teen girls without parental consent and a report about the CDC’s engaging in a three year program to educate minority gay and bisexual men about AIDS prevention.  Whoever said, “Money is the root of all evil” must have lived before the time of our sexual liberation.

According to the CDC report they estimate that 1,000 “young people” whom they define as being between the ages of 13 and 24 are infected monthly with HIV.  The cost of drug therapy to control the virus is approximately $400,000 per person over their lifetime.  This report focuses strictly on people in that age group and does not address older people who are similarly infected.

Since most people in that age group don’t have the benefit of a trust fund from Grandma to pay for the drugs they will need, the taxpayers, monthly are incurring an ultimate liability of an additional $400 Million to add to the amounts we are already spending on Medicaid – which will no doubt be the provider of the drugs that they will require.

Now I don’t want to sound like one of those stodgy old conservatives who is merely concerned about his or her own welfare and that of their family.  Actually, I think of myself as a warm and caring person who generally makes decisions based on logic, tempered with compassion.  But I do become mildly rankled when I read stories like this.

At the heart of the fiscal cliff discussion is the issue of “entitlement” programs which include Social Security, Medicare and Medicaid.  While those three are lumped together under the same heading, I believe that the only one of them which actually qualifies as an “entitlement” is Medicaid – the healthcare program for those who cannot afford treatment because of their limited financial circumstances.  The other two, Social Security and Medicaid are funded by the working taxpayer and by their employers who pay into both funds in similar amounts.  In the latter two cases if people receive benefits it is because they are entitled to do so because they paid for them.

As we know, Social Security and Medicare are nearly bankrupt.  That is because the Federal government has regularly engaged in financial chicanery and pillaged the funds which taxpayers paid into them to use them for other purposes.  One of those purposes has been to fund Medicaid – to which no one has every directly contributed a dime.

If you read through Obamacare, it is clear that health services will soon be rationed.  A panel of fifteen as yet unnamed bureaucrats (who may or may not have any medical background) will determine what services you and I are “entitled” to receive.  In the absence of any realistic, soundly based principled attempt to cut waste and fraud and the overhead costs engendered by a bureaucracy to administer these programs (and now we will be adding to that, digging ourselves yet deeper in debt) it had to come to that.

So with my empathetic view toward life I theorize that I am one of those fifteen people who will have the responsibility for determining who shall receive and who shall be deprived of health benefits and two cases come before me.  There are only enough funds to treat one of these patients.

The first is one of these young, newly-infected HIV patients.  He is in his present situation because he was uneducated or careless or unconcerned about the consequences of his liaisons.  The second is your grandmother who has worked all her life, paid her taxes and raised a family.  She got into her condition through the natural process of getting old.

I don’t mean to sound heartless but I’m sorry HIV “victim,” you’re out of here.  I made my decision based on the “greater good.”

Grandma makes a terrific apple pie.

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