An event materialized last week and over this past weekend that exemplified why I object to any form of federal welfare. The founding fathers objected to the federal government being a redistributor of wealth because they recognized, based on examples of King George III's England, that once a central government has the power to redistribute wealth, it opens the door for rampant bribery and corruption, and ultimately the loss of the liberties of sovereign states. The founding fathers wanted the state to be the most powerful government entity in the country as far as individual liberty is concerned, but when we look at the picture today, it is obvious that the federal government holds a monopoly on deciding who gets what. This is contrary to the intentions of the founders, thus the Constitution.
As the Constitution states, it is the federal government's job to provide for the common defense, to regulate interstate commerce (the elucidation of “regulate” in the 18th century being drastically different than what it is today), and promote the general welfare. Note there is a monumental difference between promoting the general welfare and providing it. The federal government today is the provider of the general welfare. From Social Security, to Katrina relief, to economic stimulus packages that expand jobless benefits to over a year in many states, to USDA/FHA-subsidized housing loans for minorities, there is no doubt that transfer payments in the United States today hinge almost entirely on the existence of federal dollars for their sustenance.
A vintage example of the federal government promoting the general welfare occurred during President Grover Cleveland's administration:
“Although nineteenth-century government now appears remarkably constricted, politicians in those days were no less predatory and corrupt than our own. Our forebears, however, kept the government within tighter bounds because so many of them harbored ideological hostility to big government, and therefore they often refused to tolerate out-of-bounds government programs, regardless of the proffered rationale. Many things were still viewed as 'not the proper business of government,' an attitude that allowed at least some politicians to survive while resisting raids on the public’s purse and incursions on the people’s liberties. Cleveland was one such political survivor.
Cleveland believed in keeping government expenditure at the minimum required to carry out essential constitutional functions. 'When a man in office lays out a dollar in extravagance,' declared Cleveland, 'he acts immorally by the people.' He fought to lower tariffs, which the Republicans had hoisted to punishing levels, and to hold back the flood of phony pensions that congressmen were awarding in order to buy votes and to placate the Grand Army of the Republic, the most powerful political pressure group of the late nineteenth century.”1
It should have surprised no one, therefore, when Cleveland vetoed the Texas Seed Bill early in 1887. This legislation appropriated $10,000—a trifling sum even in those days—to allow the Commissioner of Agriculture to purchase seed grain for distribution to farmers in certain counties of Texas that had suffered from drought. The president’s veto message read in part as follows:
“I feel obliged to withhold my approval of the plan, as proposed by this bill, to indulge a benevolent and charitable sentiment through the appropriation of public funds for that purpose. I can find no warrant for such an appropriation in the Constitution; and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadily resisted, to the end that the lesson should be constantly enforced that, though the people support the Government, the Government should not support the people.”
Cleveland went on to point out that the private charity can always be relied upon to relieve fellow citizens in misfortune:
“The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.”
It turned out President Cleveland was correct in his assessment of the friendliness and charity of our countrymen. While he vetoed the measure introduced by congress, his public announcement promoting the general welfare to the people resulted in a massive private charity drive that raised enough seed and money to outdo congress' welfare bill by ten times the proposed $10,000 federal appropriation. Not only that, but the resources were undoubtedly delivered more efficiently than if government had administered the aid itself, while strengthening the bond between American neighbors - a very noble and American concept if there ever was one; strengthening the bond between neighbors, rather than strengthening the bond between citizens and government.
Fast forward 130 years, and we have a federal government with a budget of nearly $4 trillion this year, and growing. It is the #1 charitable giver in the nation, and growing, with more than 50% of the federal budget being transfer payments (taking from Peter to pay Paul). Every year we are moving further and further away from the federal government we were intended to have.
My gripe with this amount of power is not only that it breaks the bond between American citizens and private charity, therefore making the politicians more successful when they use rhetoric to incite class warfare ("I will make the rich pay their fair share by raising their taxes, while anyone who is not rich will not see their taxes go up a single penny!" and "I think when you spread the wealth around, it's good for everybody").
My gripe is not only that federal charity creates and solidifies an entitlement class, many of whom are undeserving and simply taking advantage of a large program that is more difficult to operate efficiently.
My real gripe with this amount of charitable power is the political corruption that entails. A prime example occurred this weekend when Senator Harry Reid inserted $300 million in additional Medicare funding to the state of Louisiana, in an attempt to bribe Senator Mary Landrieu into voting in favor of moving the Senate health care bill forward. The Senate was never intended to have such power that they could redistribute federal dollars to a particular state in order to bribe political votes.
Some more wisdom regarding the interpretation of the General Welfare clause of better men past includes:
In a letter to Edmund Pendleton in 1792, James Madison wrote:
"If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one...."
In vetoing a measure to help the mentally ill in 1854, President Franklin Pierce wrote:
"I cannot find any authority in the Constitution for public charity. [To approve the measure] would be contrary to the letter and spirit of the Constitution and subversive to the whole theory upon which the Union of these States is founded."
James Madison elaborated upon the limitation of the General Welfare clause in a letter to James Robertson:
“With respect to the two words 'general welfare,' I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators. If the words obtained so readily a place in the 'Articles of Confederation,' and received so little notice in their admission into the present Constitution, and retained for so long a time a silent place in both, the fairest explanation is, that the words, in the alternative of meaning nothing or meaning everything, had the former meaning taken for granted.”
And before any leftist steps in and tries to convince me that we can pass laws to stop politicians from taking part in this massive scheme of political bribery, kindly go jump off a cliff, because it is inherently impossible to give federal government this much money and power, and then dream that we can pass laws to stop them from utilizing it for political malice. It simply can not be accomplished. The founders knew this, and that is why they structured our government to give the federal government limited power. Presidents Grover Cleveland and Franklin Pierce, too, recognized this in their writings and their vetoes. We chose to ignore their advice throughout the 20th century, and today the federal government is larger and more corrupt than ever, with no end in sight.
A formula we all need to remember is: Political corruption is directly correlated to the amount of money and authority they have access to. That means, the more tax dollars they raise, and the more regulations they have the authority to implement and oversee, the more corruption exists. To think otherwise is naive. Recall the massive overhaul of "Congressional Honesty" that took place when the new congress took power in 2007. What good has it done us? Needless spending, travel, and benefits have increased to record highs. We wont even delve into the rational fallacy of expecting a group of individuals at the top of the totem pole to pass and enforce rules that limit their own well being.
Quis custodiet ipsos custodes?
1 Robert Higgs – The Independent Review
Tuesday, November 24, 2009
Friday, October 23, 2009
Internet "Fairness Doctrine" on Fast Track for Implementation...
"The FCC voted unanimously yesterday to move forward in an effort to formalize net neutrality guidelines."
I mean, net neutrality? Who wouldn't be against that, right? It's like "PATRIOT Act!" Hooah! God Bless America. It sounds all free and righteous, right? Well, it isn't. And like the PATRIOT Act, or the radio Fairness Doctrine that Ronaldus Magnus shot down as being unconstitutional in the 80s, the internet version of the Fairness Doctrine is on the way, and it's very un-American... be prepared.
Proponents of net neutrality, such as the writer of this PCWorld article, like to make us think net neutrality, just the very threat of it, has already had success in "keeping the private sector in line":
"Comcast tried to throttle peer-to-peer networking traffic and only changed policy after the threat of FCC net neutrality rules. AT&T sought to block customers from using VoIP services from its wireless network, but changed policy out of fear of the net neutrality rules. The trend seems to be that these providers only do the 'right thing' when the net neutrality gun is pointing at their head."
Wow, so chock full of factual information. How does he do it? Those greedy capitalist pig organizations! It's good that the government is here to keep them straight. And everything the author wrote in that article would make perfect sense... if only it were true. Unfortunately it's false... or only half false. Yes, "the threat of net neutrality" was in the air at the time, but so was "fear" in downtown Manhattan on 9/11. Does that mean "fear" brought down the WTC towers? The real reason providers backed down from bandwidth caps and throttling is because their customers voted with their voices and their wallets if necessary. When Comcast was blocking P2P traffic, customers shifted to their local DSL companies, to other cable competitors like Cox and TimeWarner, or to, God help them, satellite. TimeWarner was going to do the very same thing with bandwidth caps here in NC. Funny enough, their bandwidth caps were only going to be implemented in areas where TW has complete control of the cable market; they weren't going to implement bandwidth caps in any of their service areas that had competing cable companies... food for thought.
They're ridiculous bandwidth caps, too. Something like 5GB of bandwidth @ 7mbps for $40, and then some hellacious charge for every 1GB above that. But those bandwidth caps were never implemented. Why? Because TW customers voted with their voices and their wallets, and due to public outcry, TW backed down.
The proponents of net neutrality say it is to make sure providers aren't discriminating against people, and to ensure "people who pay more or have more power aren't getting faster service."
Now I know all the little Marxists on here are jumping with joy at the sound of that. After all, why should I only be limited to 3mbps internet because it's all I can afford to pay for. I think I truly deserve 6mbps internet, I just can't afford it... and while we're at it, why should I be driving a Bronco because it's all I can afford to drive? I see all these people on the road driving 5-series BMWs and Infiniti QX56s, I think I deserve one of those, too.
On the surface net neutrality seems "fair and free market," but what it does is it gives the FCC authority to monitor and dictate internet bandwidth and usage. It also violates the very simple rule that "government can not create free markets. A government free market is an oxymoron, it doesn't even make sense. The government currently wastes billions of dollars giving big line companies like AT&T funds to subsidize internet expansion into rural and higher risk areas, putting smaller localized line and provider companies at a tactical disadvantage to compete with the el-humongo datatel company AT&T. Net Neutrality will only expand this ridiculous program of putting smaller companies at a disadvantage against the mega-companies. Free market my ass.
Once the federal government has control of the bandwidth and the oversight, they have control of the access to information. After all, with so many billions of federal dollars invested in our internet infrastructure, it would be silly for the federal government to allow "just any old information" to be sent through those lines, right? After all, it is the government's job to be impartial and unbiased, and if there is a disproportionate amount of info crossing the government's lines that is one-sided, it makes the government look bad, so it is the FCC's responsibility to regulate that information to balance it out. Sound ridiculous? It may be ridiculous, but it's also true.
State and local governments oft give line companies and utility providers de jure monopolies in most areas. So, if you are unhappy with the current system, but you also don't want the federal government stepping in to, for lack of a better term, take it over, the course of action is to vote and write your local representatives encouraging them to allow more competition in your area. No one said democracy was a cakewalk.
I mean, net neutrality? Who wouldn't be against that, right? It's like "PATRIOT Act!" Hooah! God Bless America. It sounds all free and righteous, right? Well, it isn't. And like the PATRIOT Act, or the radio Fairness Doctrine that Ronaldus Magnus shot down as being unconstitutional in the 80s, the internet version of the Fairness Doctrine is on the way, and it's very un-American... be prepared.
Proponents of net neutrality, such as the writer of this PCWorld article, like to make us think net neutrality, just the very threat of it, has already had success in "keeping the private sector in line":
"Comcast tried to throttle peer-to-peer networking traffic and only changed policy after the threat of FCC net neutrality rules. AT&T sought to block customers from using VoIP services from its wireless network, but changed policy out of fear of the net neutrality rules. The trend seems to be that these providers only do the 'right thing' when the net neutrality gun is pointing at their head."
Wow, so chock full of factual information. How does he do it? Those greedy capitalist pig organizations! It's good that the government is here to keep them straight. And everything the author wrote in that article would make perfect sense... if only it were true. Unfortunately it's false... or only half false. Yes, "the threat of net neutrality" was in the air at the time, but so was "fear" in downtown Manhattan on 9/11. Does that mean "fear" brought down the WTC towers? The real reason providers backed down from bandwidth caps and throttling is because their customers voted with their voices and their wallets if necessary. When Comcast was blocking P2P traffic, customers shifted to their local DSL companies, to other cable competitors like Cox and TimeWarner, or to, God help them, satellite. TimeWarner was going to do the very same thing with bandwidth caps here in NC. Funny enough, their bandwidth caps were only going to be implemented in areas where TW has complete control of the cable market; they weren't going to implement bandwidth caps in any of their service areas that had competing cable companies... food for thought.
They're ridiculous bandwidth caps, too. Something like 5GB of bandwidth @ 7mbps for $40, and then some hellacious charge for every 1GB above that. But those bandwidth caps were never implemented. Why? Because TW customers voted with their voices and their wallets, and due to public outcry, TW backed down.
The proponents of net neutrality say it is to make sure providers aren't discriminating against people, and to ensure "people who pay more or have more power aren't getting faster service."
Now I know all the little Marxists on here are jumping with joy at the sound of that. After all, why should I only be limited to 3mbps internet because it's all I can afford to pay for. I think I truly deserve 6mbps internet, I just can't afford it... and while we're at it, why should I be driving a Bronco because it's all I can afford to drive? I see all these people on the road driving 5-series BMWs and Infiniti QX56s, I think I deserve one of those, too.
On the surface net neutrality seems "fair and free market," but what it does is it gives the FCC authority to monitor and dictate internet bandwidth and usage. It also violates the very simple rule that "government can not create free markets. A government free market is an oxymoron, it doesn't even make sense. The government currently wastes billions of dollars giving big line companies like AT&T funds to subsidize internet expansion into rural and higher risk areas, putting smaller localized line and provider companies at a tactical disadvantage to compete with the el-humongo datatel company AT&T. Net Neutrality will only expand this ridiculous program of putting smaller companies at a disadvantage against the mega-companies. Free market my ass.
Once the federal government has control of the bandwidth and the oversight, they have control of the access to information. After all, with so many billions of federal dollars invested in our internet infrastructure, it would be silly for the federal government to allow "just any old information" to be sent through those lines, right? After all, it is the government's job to be impartial and unbiased, and if there is a disproportionate amount of info crossing the government's lines that is one-sided, it makes the government look bad, so it is the FCC's responsibility to regulate that information to balance it out. Sound ridiculous? It may be ridiculous, but it's also true.
State and local governments oft give line companies and utility providers de jure monopolies in most areas. So, if you are unhappy with the current system, but you also don't want the federal government stepping in to, for lack of a better term, take it over, the course of action is to vote and write your local representatives encouraging them to allow more competition in your area. No one said democracy was a cakewalk.
Wednesday, October 21, 2009
It Looks Like Social Security is Going to be Bankrupt Sooner Than We Thought... Shocker.
The media is in a ruckus over the new numbers released regarding the prognosis of Social Security. It's not looking good. So, as I was sitting down today, rather than doing what I was supposed to be doing, my mind began to wander...
Here are some quick calculations I ran that piss me off to no end: Our take-home pay is decreased by 12.4% due to our "contributions" to the Social Security system. That money of course, like any other ponzi scheme, is immediately sent from the Treasury to the mailbox of some geriatric in West Palm Beach. It seems like a logical system to politicians, but the reason it's called a ponzi scheme is because current investors, who have an effective basis of $0, are kept afloat by new investors. When the new investors dry up, the current investors' bases of $0 are fully realized, and the system collapses. Madoff went to jail for this exact same thing; the only difference being Madoff's investors were voluntary, whereas we are forced to pay into this scheme at gunpoint. The very politicians who favor expanding and taxing even more the social security contributions of individuals, are the same ones who were lambasting Madoff for running the very same operation they are running! Hypocrites! Idiots! If I had my way they'd all be drawn and quartered on the Capitol lawn, and their limbs thrown to the rabid ducks in the scum-infested reflecting pool in front of the Lincoln Memorial.
The average American takes home a little over $40,000 per year. Without a Social Security tax, our incomes would be closer to $45,000. If we all used that extra $5,000 to invest in our Roth IRAs every year from our 20s onward, we could retire at 65-70 as MULTI-MILLIONAIRES. Instead... we give that $5,000 to the federal government, which, of course, immediately disappears. But when we reach age for withdrawal, the average American receives $1,153 per month from Social Security. $13,836 per year. Assuming we live a very liberally estimated 25 years from the day we withdrawal benefits, that is a total of $345,900 nominal dollars over 25 years. Annual cost of living adjustments (COLAs) are made to the benefits, but the real purchasing power of those checks will remain about equivalent to what $345,900 would buy today.
On the flipside, those of us who opted to manage our own retirement, would wisely begin withdrawing (tax free, of course) funds from our Roth IRAs as soon as we hit 59.5 years old, ratably with the timing of the market at that time, and placing the withdrawals in safer investments like money markets, CDs, and low yield bonds. That way when we reach 65 or 70, or whatever age we decide we want to cruise around the world, we will have several hundred thousand dollars more than the social security folks. Oh, and the best part? We won't be paying income taxes on the adjusted principle of our withdrawals, the social security folks may be.
That being said, is our method of retirement a little riskier than social security which is "backed by the full faith and credit of the US government?" Yes it is, but high risk, high reward. And it's worth it to me to have hundreds of thousands more disposable dollars upon retirement. Some people may not be willing to go through with that, and may opt for something safe and low yield like social security, and that's fine. If we want to be socialists and give them that option (rather than simply allow individuals to invest that same money in equally safe investments via the private sector...), they can have that opportunity, but my argument is, why do we all have to be forced to pay for it!? It all boils down to my gripe with the public option. If we want to be little leftists and have a public option, OK, but why will we all be forced to pay for it!?
So now, I will have paid God-knows-how-much into Social Security, and by time I reach the federally mandated retirement age (which at that time will probably be 80+), I will be means tested and denied compensation at worst, or receive compensation less than the principle I paid in over the remainder of my shorter life at best. Either way, this is a very long-term investment that we are all going to take a loss on, and it angers me. It should anger all of us. There's no magic to the social security system. They can only pay out what they bring in, and when there isn't enough coming in to cover what's going out, they either reduce the benefits of the recipients (means testing), or reduce the number of recipients altogether (increasing retirement age).
None of this is complicated, and it angers me that I am having to pay for all this, and tens of millions of people in America are going through the same thing and don't even realize it. Worse yet, a lot of those who do realize it are OK with it! And why shouldn't they be? After all, "we're from the government, and we're here to help."
Here are some quick calculations I ran that piss me off to no end: Our take-home pay is decreased by 12.4% due to our "contributions" to the Social Security system. That money of course, like any other ponzi scheme, is immediately sent from the Treasury to the mailbox of some geriatric in West Palm Beach. It seems like a logical system to politicians, but the reason it's called a ponzi scheme is because current investors, who have an effective basis of $0, are kept afloat by new investors. When the new investors dry up, the current investors' bases of $0 are fully realized, and the system collapses. Madoff went to jail for this exact same thing; the only difference being Madoff's investors were voluntary, whereas we are forced to pay into this scheme at gunpoint. The very politicians who favor expanding and taxing even more the social security contributions of individuals, are the same ones who were lambasting Madoff for running the very same operation they are running! Hypocrites! Idiots! If I had my way they'd all be drawn and quartered on the Capitol lawn, and their limbs thrown to the rabid ducks in the scum-infested reflecting pool in front of the Lincoln Memorial.
The average American takes home a little over $40,000 per year. Without a Social Security tax, our incomes would be closer to $45,000. If we all used that extra $5,000 to invest in our Roth IRAs every year from our 20s onward, we could retire at 65-70 as MULTI-MILLIONAIRES. Instead... we give that $5,000 to the federal government, which, of course, immediately disappears. But when we reach age for withdrawal, the average American receives $1,153 per month from Social Security. $13,836 per year. Assuming we live a very liberally estimated 25 years from the day we withdrawal benefits, that is a total of $345,900 nominal dollars over 25 years. Annual cost of living adjustments (COLAs) are made to the benefits, but the real purchasing power of those checks will remain about equivalent to what $345,900 would buy today.
On the flipside, those of us who opted to manage our own retirement, would wisely begin withdrawing (tax free, of course) funds from our Roth IRAs as soon as we hit 59.5 years old, ratably with the timing of the market at that time, and placing the withdrawals in safer investments like money markets, CDs, and low yield bonds. That way when we reach 65 or 70, or whatever age we decide we want to cruise around the world, we will have several hundred thousand dollars more than the social security folks. Oh, and the best part? We won't be paying income taxes on the adjusted principle of our withdrawals, the social security folks may be.
That being said, is our method of retirement a little riskier than social security which is "backed by the full faith and credit of the US government?" Yes it is, but high risk, high reward. And it's worth it to me to have hundreds of thousands more disposable dollars upon retirement. Some people may not be willing to go through with that, and may opt for something safe and low yield like social security, and that's fine. If we want to be socialists and give them that option (rather than simply allow individuals to invest that same money in equally safe investments via the private sector...), they can have that opportunity, but my argument is, why do we all have to be forced to pay for it!? It all boils down to my gripe with the public option. If we want to be little leftists and have a public option, OK, but why will we all be forced to pay for it!?
So now, I will have paid God-knows-how-much into Social Security, and by time I reach the federally mandated retirement age (which at that time will probably be 80+), I will be means tested and denied compensation at worst, or receive compensation less than the principle I paid in over the remainder of my shorter life at best. Either way, this is a very long-term investment that we are all going to take a loss on, and it angers me. It should anger all of us. There's no magic to the social security system. They can only pay out what they bring in, and when there isn't enough coming in to cover what's going out, they either reduce the benefits of the recipients (means testing), or reduce the number of recipients altogether (increasing retirement age).
None of this is complicated, and it angers me that I am having to pay for all this, and tens of millions of people in America are going through the same thing and don't even realize it. Worse yet, a lot of those who do realize it are OK with it! And why shouldn't they be? After all, "we're from the government, and we're here to help."
Saturday, September 5, 2009
The Simple Alternative to "Health Care Reform"
There are a couple of very simple and relatively inexpensive things that can be done to help us all out here:
1) Federal government allows insurance companies to compete across state lines.
2) States stop mandating what insurance policies in the states "must" cover. I don't smoke, I'm not a drunkard, nor am I a crackwhore. Why do I have to pay for smoke/alcohol/crackwhore rehab coverage on my insurance policy? Because the state says so...
3) Federal government allows catastrophic/high deductible plans and Health Savings Accounts (HSAs) to continue existing. They are great investments for young, healthy people with average incomes.
Let the insurance companies carry policies across state lines to get more healthy, low-risk people on their rosters, spread the risk, and lower costs logically, safely, and for a LOT less money that what the federal government is wanting to do. Conversely, allowing policies to carry over state lines will also allow them to create larger pools of riskier, unhealthy people, which will succeed in spreading the risk and lowering the cost for them as well. It's a win-win, and more importantly it doesn't cost $1 trillion to implement, it just costs the politicians giving up some of their centralized power... but we can't have that!
In a market that already has thirteen hundred (1,300) participants, it's foolhardy (read: stupid) to believe that ONE (1) more insurance provider will have this dramatic effect of lowering costs and leveling the playing field.
All of you out there who pay out the ass for private insurance are doing so not because the private system as we know it is broken, it's actually working exactly how it's supposed to. It's because you are paying the costs rolled over to private insurers by providers who are not getting paid enough by the existing public option, which already controls nearly 50% of the health care market. Creating a public option that charges artificially low rates and brings more and more people into the public system will only succeed in costs being rolled over to private insurers more and more, causing the premiums we pay for private plans to sky rocket until it is literally unaffordable for any one except for the richest Americans. Meanwhile, the rest of us "average folk" are hung out to dry with an inefficient system plagued by lower quality care and supply shortages.
Happy voting.... unfortunately the decision about the future of our health care has already been made, and is at this point irreversible. We made the health care decision in November 2008. Prepare for private policy costs to continue to increase. Prepare to be forced on to the government plantation, whether you like it or not.
1) Federal government allows insurance companies to compete across state lines.
2) States stop mandating what insurance policies in the states "must" cover. I don't smoke, I'm not a drunkard, nor am I a crackwhore. Why do I have to pay for smoke/alcohol/crackwhore rehab coverage on my insurance policy? Because the state says so...
3) Federal government allows catastrophic/high deductible plans and Health Savings Accounts (HSAs) to continue existing. They are great investments for young, healthy people with average incomes.
Let the insurance companies carry policies across state lines to get more healthy, low-risk people on their rosters, spread the risk, and lower costs logically, safely, and for a LOT less money that what the federal government is wanting to do. Conversely, allowing policies to carry over state lines will also allow them to create larger pools of riskier, unhealthy people, which will succeed in spreading the risk and lowering the cost for them as well. It's a win-win, and more importantly it doesn't cost $1 trillion to implement, it just costs the politicians giving up some of their centralized power... but we can't have that!
In a market that already has thirteen hundred (1,300) participants, it's foolhardy (read: stupid) to believe that ONE (1) more insurance provider will have this dramatic effect of lowering costs and leveling the playing field.
All of you out there who pay out the ass for private insurance are doing so not because the private system as we know it is broken, it's actually working exactly how it's supposed to. It's because you are paying the costs rolled over to private insurers by providers who are not getting paid enough by the existing public option, which already controls nearly 50% of the health care market. Creating a public option that charges artificially low rates and brings more and more people into the public system will only succeed in costs being rolled over to private insurers more and more, causing the premiums we pay for private plans to sky rocket until it is literally unaffordable for any one except for the richest Americans. Meanwhile, the rest of us "average folk" are hung out to dry with an inefficient system plagued by lower quality care and supply shortages.
Happy voting.... unfortunately the decision about the future of our health care has already been made, and is at this point irreversible. We made the health care decision in November 2008. Prepare for private policy costs to continue to increase. Prepare to be forced on to the government plantation, whether you like it or not.
Sunday, January 4, 2009
All Americans Will Experience a Tax Increase
With the Fed and politicians injecting liquidity into the economy like jelly into a donut, what can we expect to come out of all this? While many independently intelligent Americans may have voted for Barack Obama due to his message regarding tax cuts for all Americans (except the ones who worked the hardest and earned the most), one thing that is being overlooked is the hidden tax that an Obama administration and all-leftist congress will place on the heads of all Americans - inflation.
While an income tax is a government action that decreases the purchasing power of the individual, price inflation is essentially no different. With an income tax, money is taken from your gross income to decrease your purchasing power, and with inflation, the government is printing so much currency as to lead to its devaluation, thus the inflation of the price of goods and services, which also hurts an individual's purchasing power. The dollar you earned today does not buy the same amount of product as the dollar you earned six months ago; this is a tax, and everyone who consumes goods and services in the US pays it. If price inflation was 5% last year, and your total income increased 2%, you effectively paid an extra 3% in taxes that will not be listed on your 1040 this year.
It's not all bad news, however. A time of high inflation, for a responsible consumer, can be a great time to save money. With estimates floating around of 7-9% annual inflation over at least the next year, a good way for you to save money is to not buy anything with cash. Instead, buy items using your credit card and pay it off on the next billing statement, being careful not to accrue any interest or penalties. By doing this, you can potentially save up to half a percent on your items. Assuming annual inflation is a conservatively estimated 7%, delaying payment of your goods by one month will place inflation at .58%, effectively making the amount of money you pay for your goods .58% less than they would have been if you would have paid for them in cash one month earlier. Do this for most of your consumer goods for one year, and savings can easily be in the hundreds of dollars. This maneuver also has the added benefit of improving your credit score. In a down economy, banks are generally less apt to loan to people with poor credit ratings or history. Responsibly handling your credit cards and paying off items promptly will do wonders for your credit score, and make your life a lot easier during the recession and even after the economy swings upward.
While an income tax is a government action that decreases the purchasing power of the individual, price inflation is essentially no different. With an income tax, money is taken from your gross income to decrease your purchasing power, and with inflation, the government is printing so much currency as to lead to its devaluation, thus the inflation of the price of goods and services, which also hurts an individual's purchasing power. The dollar you earned today does not buy the same amount of product as the dollar you earned six months ago; this is a tax, and everyone who consumes goods and services in the US pays it. If price inflation was 5% last year, and your total income increased 2%, you effectively paid an extra 3% in taxes that will not be listed on your 1040 this year.
It's not all bad news, however. A time of high inflation, for a responsible consumer, can be a great time to save money. With estimates floating around of 7-9% annual inflation over at least the next year, a good way for you to save money is to not buy anything with cash. Instead, buy items using your credit card and pay it off on the next billing statement, being careful not to accrue any interest or penalties. By doing this, you can potentially save up to half a percent on your items. Assuming annual inflation is a conservatively estimated 7%, delaying payment of your goods by one month will place inflation at .58%, effectively making the amount of money you pay for your goods .58% less than they would have been if you would have paid for them in cash one month earlier. Do this for most of your consumer goods for one year, and savings can easily be in the hundreds of dollars. This maneuver also has the added benefit of improving your credit score. In a down economy, banks are generally less apt to loan to people with poor credit ratings or history. Responsibly handling your credit cards and paying off items promptly will do wonders for your credit score, and make your life a lot easier during the recession and even after the economy swings upward.
Monday, December 1, 2008
A Recipe For Failure... And America Doesn't Bat an Eye
As president-elect Obama has so diligently and strategically pointed out, America is due for a "significant recession." I suppose I could go on a tangent about how this recession came to be, but I'll save that epic novel for a later post. For this short blog I will expound on the methodology the next government plans on using to go about stimulating economic growth.
With the Fed again having interest rates nearing rock bottom and the economy still stuttering, it will no doubt be the federal government's fiscal hand that makes or breaks this recession. In two general terms, the government has two options of stimulating economic growth: temporary and permanent infusions. We are all-too familiar with Washington's beloved temporary infusions; most of us got one this past summer in the form of a $600-1200 check. These handouts did a little to increase consumer spending in the summer months. Congress and the president-elect have mentioned another temporary infusion much larger than the first. The goal of this infusion, again, is to stimulate aggregate demand and send the economy soaring into the 21st century. Some of the proponents of this use the first Bush stimulus package in 2002, which was very successful, to support their argument for another rebate check. What these politicians don't mention is that Bush's initial rebates were coupled with massive cuts in personal income and capital gains taxes, or permanent infusions.
Economic theory and graphs aside, let us just look at this from a common sense perspective. If you give an individual a one-time check, what are they going to do with it? Save it. Use it to pay bills. Maybe they'll spend some of it. However, if you sit the person down and tell them you are going to cut their taxes by 5% for at least the next 8 years, what are they going to do? The increased security and predictability of the permanent infusion will encourage the individual to invest that money into long-term assets like businesses, capital, employees, and best of all, financial institutions!
One of the problems in the economy right now is uncertainty amongst lenders over which prospective customers are worth the institution's investment. In the available-for-sale securities market between financial institutions, are these packaged securities really worth what they say they are? The government already took the wrong course of action in their $850 Billion & counting Bailout package in October, which did nothing to unfreeze inter-institutional trading and lending, because it did not remove the uncertainty of valuation from the securities that make up the balance sheets of these respective institutions.
Since we have failed to tackle this problem from the business-end, the government still has the opportunity to help fix the problem from the consumer end. A permanent infusion (tax cuts) will give consumers the extra cash flow to then infuse financial institutions with fresh loans for business expansion and new equipment. This form of infusion can work. Another huge temporary infusion may very well succeed in boosting consumer spending for one quarter and printing off even more money that we don't have, but it will not succeed in the ultimate goal of stimulating long-term economic growth. The president-elect saying this will be a "significant recession" is simply giving himself a cushion to fall back on when their next poor investment backfires.
The only problem with a tax cut is that it would require the government to cut spending and do with less, and the government shrinking in size and scope would most assuredly lead to a lapse in the space-time continuum and the implosion of the known universe.
My next post: The real problem with the Big Three
With the Fed again having interest rates nearing rock bottom and the economy still stuttering, it will no doubt be the federal government's fiscal hand that makes or breaks this recession. In two general terms, the government has two options of stimulating economic growth: temporary and permanent infusions. We are all-too familiar with Washington's beloved temporary infusions; most of us got one this past summer in the form of a $600-1200 check. These handouts did a little to increase consumer spending in the summer months. Congress and the president-elect have mentioned another temporary infusion much larger than the first. The goal of this infusion, again, is to stimulate aggregate demand and send the economy soaring into the 21st century. Some of the proponents of this use the first Bush stimulus package in 2002, which was very successful, to support their argument for another rebate check. What these politicians don't mention is that Bush's initial rebates were coupled with massive cuts in personal income and capital gains taxes, or permanent infusions.
Economic theory and graphs aside, let us just look at this from a common sense perspective. If you give an individual a one-time check, what are they going to do with it? Save it. Use it to pay bills. Maybe they'll spend some of it. However, if you sit the person down and tell them you are going to cut their taxes by 5% for at least the next 8 years, what are they going to do? The increased security and predictability of the permanent infusion will encourage the individual to invest that money into long-term assets like businesses, capital, employees, and best of all, financial institutions!
One of the problems in the economy right now is uncertainty amongst lenders over which prospective customers are worth the institution's investment. In the available-for-sale securities market between financial institutions, are these packaged securities really worth what they say they are? The government already took the wrong course of action in their $850 Billion & counting Bailout package in October, which did nothing to unfreeze inter-institutional trading and lending, because it did not remove the uncertainty of valuation from the securities that make up the balance sheets of these respective institutions.
Since we have failed to tackle this problem from the business-end, the government still has the opportunity to help fix the problem from the consumer end. A permanent infusion (tax cuts) will give consumers the extra cash flow to then infuse financial institutions with fresh loans for business expansion and new equipment. This form of infusion can work. Another huge temporary infusion may very well succeed in boosting consumer spending for one quarter and printing off even more money that we don't have, but it will not succeed in the ultimate goal of stimulating long-term economic growth. The president-elect saying this will be a "significant recession" is simply giving himself a cushion to fall back on when their next poor investment backfires.
The only problem with a tax cut is that it would require the government to cut spending and do with less, and the government shrinking in size and scope would most assuredly lead to a lapse in the space-time continuum and the implosion of the known universe.
My next post: The real problem with the Big Three
Thursday, October 16, 2008
Obama's "Tax Cuts"
The big issue in the media nowadays regarding Obama's venerable tax plan is how the numbers behind his "tax cuts" don't add up. Right now almost one third of the American workforce pays no income taxes once they receive their standard deductions and refundable credits. Obama's tax plan will essentially expand refundable credits to the lower income earners and put about 40% of the workforce off the tax grid completely. I have my personal gripes with the public policy effect of having this much of the voting population with no equity in the federal budget (namely apathy in regards to where that money goes), but I'll limit this post to facts behind the numbers. Recently the McCain campaign has been abandoning the Bill Ayers story, which they should have been concentrating on months ago, and is now shifting to policy issues. They have been harping on Obama for his comments about "spreading the wealth" and his "tax cuts for 95% of America" statements.
When asked about how his administration does not have a socialist platform with a third of the workforce effectively receiving income tax refunds for income taxes they never paid, his campaign and The Tax Foundation responded by saying that the refundable credits would also help to offset the burden placed on them by "payroll taxes, corporate income tax, excise taxes, etc."
It's all very fancy verbiage that, to the uninformed voter, seems fair. But here's my take on the Obama campaign's burden-offsetting refundable credits:
Payroll Taxes: "Oh, but this is to also refund their payroll taxes!"
Ah, well in that case, it means their contributions to medicare and Social Security are also being refunded... this is 40% of the population with little to no basis in the system who will be drawing checks in the future based on a number they supposedly paid in in the present. Where's that money coming from in the future? They tax "the rich" for it, and deny "the rich" the privilege to withdraw it when their time comes. Problem solved.
Corporate income tax: I don't know what they're trying to get at here. These lower 40% of wage earners aren't "corporations," they're people, so I am assuming these guys are talking about the lower 40% who have equity stakes in S-corps, partnerships, etc. Now that I think I know what they're talking about, it still makes no sense considering S-corps and partnerships are flow-through entities anyway, and what that means is the income of the "corporation" or partnership is distributed to the "corporation's" shareholders, and taxed at the shareholders' marginal rate on the 1040 - which makes the "corporate tax" argument null and void, and not even worthy of being mentioned in the explanation because it has no effect on their income taxes. Any "corporate" income will have already determined whether they are in the marginal bracket to receive an "Obama tax cut" or not - but it does jazz it up a bit to make the future welfare recipients seem as if they are contributing to the system rather than parasitically sucking from it.
Excise taxes: Ah, so now they are getting their gas taxes refunded, which means 40% of the people aren't contributing to the funds to rebuild and maintain our roads and highways. They're getting their cigarette taxes refunded so now they aren't paying for their fair share of SCHIP (how much do you want to bet some of those lower 40% of earners have kids subsidized by SCHIP?) Plus, I thought excise taxes were meant to discourage despicable things such as smoking, shooting, and drinking... why do these people deserve to get that money refunded to them? After all, the DC liberals are the ones who enacted those taxes in the first place. Seems kind've counter-productive to me, but then again I'm not a fan of the federal government partaking in social engineering via taxes either, the DC liberals are; thus they have more 'splainin' to do for this kind of thing than me.
So these taxes listed by the Tax Foundation that are supposed to put us at ease with the fact that we are becoming a nation of redistributionist socialists are null and void in regards to determining the Obama "tax cuts."
When asked about how his administration does not have a socialist platform with a third of the workforce effectively receiving income tax refunds for income taxes they never paid, his campaign and The Tax Foundation responded by saying that the refundable credits would also help to offset the burden placed on them by "payroll taxes, corporate income tax, excise taxes, etc."
It's all very fancy verbiage that, to the uninformed voter, seems fair. But here's my take on the Obama campaign's burden-offsetting refundable credits:
Payroll Taxes: "Oh, but this is to also refund their payroll taxes!"
Ah, well in that case, it means their contributions to medicare and Social Security are also being refunded... this is 40% of the population with little to no basis in the system who will be drawing checks in the future based on a number they supposedly paid in in the present. Where's that money coming from in the future? They tax "the rich" for it, and deny "the rich" the privilege to withdraw it when their time comes. Problem solved.
Corporate income tax: I don't know what they're trying to get at here. These lower 40% of wage earners aren't "corporations," they're people, so I am assuming these guys are talking about the lower 40% who have equity stakes in S-corps, partnerships, etc. Now that I think I know what they're talking about, it still makes no sense considering S-corps and partnerships are flow-through entities anyway, and what that means is the income of the "corporation" or partnership is distributed to the "corporation's" shareholders, and taxed at the shareholders' marginal rate on the 1040 - which makes the "corporate tax" argument null and void, and not even worthy of being mentioned in the explanation because it has no effect on their income taxes. Any "corporate" income will have already determined whether they are in the marginal bracket to receive an "Obama tax cut" or not - but it does jazz it up a bit to make the future welfare recipients seem as if they are contributing to the system rather than parasitically sucking from it.
Excise taxes: Ah, so now they are getting their gas taxes refunded, which means 40% of the people aren't contributing to the funds to rebuild and maintain our roads and highways. They're getting their cigarette taxes refunded so now they aren't paying for their fair share of SCHIP (how much do you want to bet some of those lower 40% of earners have kids subsidized by SCHIP?) Plus, I thought excise taxes were meant to discourage despicable things such as smoking, shooting, and drinking... why do these people deserve to get that money refunded to them? After all, the DC liberals are the ones who enacted those taxes in the first place. Seems kind've counter-productive to me, but then again I'm not a fan of the federal government partaking in social engineering via taxes either, the DC liberals are; thus they have more 'splainin' to do for this kind of thing than me.
So these taxes listed by the Tax Foundation that are supposed to put us at ease with the fact that we are becoming a nation of redistributionist socialists are null and void in regards to determining the Obama "tax cuts."
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