The Front-Runner Reduction

The, or maybe a, front-runner in the Republican Party has come forth with the “solution” to Medicare and Social Security. Well, at least yet another regurgitation of a solution re-packaged and re-advertised as the path to salvation. Is it a solution? There is really only one way to tell, and let’s be serious it is not by listening to the politicians. Neither group appears to have a clue nor more pointedly neither side has demonstrated that they understand the cause-effect of the system they created, fund, manage, and (God, I hate to say this) are responsible for finding a way to secure. Our front-runner is going to use his business acumen to save us all from the folly of the past.

How does this comparatively (relative to his competition) mental giant propose to perform this miraculous feat? He is going to reduce the cost of the system of course. Is this just his easy solutions to incredibly complex problems; or just a good sounding ‘sound-bite’ for a catastrophically stupid plan? Given he is a politician the statistical bet would surely have to go to the less desirable option. Now don’t get me wrong, none of his compatriots have any better idea, and none from the Democratic party has shown any more insight or comprehension of the problems than he has. But really, the solution that we are going to be asked to vote for and then swallow is another idiotic and ill-conceived approach to addressing the problem.

The merits of the plan, more the faults actually, are: he is going to gradually raise the age of retirement. He is going to let participants choose to stay with Medicare or use a government-support voucher to purchase a plan from the market. Medicaid funding responsibility would transfer from the federal government to state governments. Federal spending would be capped at 20% of GDP, and he would cut spending by some amount. Well these certainly solve the problems, right? I mean you can judge the quality and level of intelligence represented by his and most Republicans reading from their nationally approved play-book. The Democrats are no better being equally incapable of seeing and taking the eight-lane freeway out of the disaster area and instead insisting that the steep ascent through the mountain path at the start of winter is a safe route.

Raising the age of retirement on Social Security – this eliminates more recipients so that will lower costs. The elimination is obvious right; nothing more needs to be said on that. This is similar to paying more if you retire later, which we do today. We could stop COLA that would work also. These are the same old methods that have been used over and over. Takes a real brainy type to think of these now doesn’t it. “Same old, same old.”

Now using Government supported vouchers (or any marketing researched advertising terms that polls well with the public) will certainly reduce the costs of the Medicare. Because instead of running a big government bureaucracy, the plan that solves the problem will be to have the government run just a large bureaucracy and also pay insurance companies to make up the difference. Once again, let’s not see the obvious solution that Americans have been taught over each generation will solve the problem; let’s go with a politician’s approach to diddling the public.

And think how much less it will cost when we transfer the cost of and responsibility for Medicaid from the federal government to state governments. The states will have two basic choices, the same ones the federal government has, pay the bills for what is covered or cut what is covered/delivered. It’s not likely the states will see the efficient approach that reduces costs, improves coverage, and help the economy.

And capping federal expenditures to 20% of GDP is just another way to say, I don’t know how to solve the real problem but surely if we reduce the value delivered and the benefits provided and cut more and more the problem will be solved. The consequences of the approach are not reflected in this approach, but yes it is true that if you spend less money you will in fact spend less money. I think I learned that in some elementary school math class, probably around third or fourth grade or even earlier. Why cap it as the method, why not have it reduce itself as the consequence of a smart plan? I guess he/they haven’t thought of that.

If you want to solve the health-care and safety-net problems in America, you should look to someone who can present a plan that doesn’t just do less, shift costs, pretend to provide a difference, and more importantly addresses the underlying dynamics of the cost causing principles that the currently flawed policies and plans are based upon.

Have you seen any politician who has shown even the slightest indication that are even modestly intelligent, let alone smart enough to trust with setting the direction for the nation on any of these issues?  Perhaps what we need here is another ‘stupor’ committee to produce a bipartisan plan.

American Intelligence Test #12 – Fair Tax, Equitable Strain, Just Burden

One of the divisive debates distracting the American people today is the nature of a fair tax system. The Democratic and Republican parties are predictably programmed to respond in their respective views on how to tax their constituent bases more fairly than everyone else. It’s a shame that the public and the media don’t recognize the pointlessness of these hard-coded inflexible stances the parties insist are unfair to the majority of Americans. So let’s look at what the tax system characteristics are and what would be fair. From there we can determine if the tax system is fair or not; and if it benefits the wealthier upper class, the middle income class or the lower income (poor).

So unlike previous American Intelligence tests, you don’t have the same latitude of deciding what the correct answers are. In this test, you are just wrong whether you agree or not with the answer. You will still have the opportunity to fulfill Lincoln’s paraphrased adage:

• Some of us can fool ourselves all of the time, and all of us can fool ourselves some of the time, but all of us can not fool ourselves all of the time.

Question 1:   On a dollar for dollar basis of earned income, who pays more taxes under the underlying structure of the current tax plan? Who pays the higher rate?  Someone who earns:
A.      $20K       B. $40K     C.  $100K   D. $500K    E. $1M   F. $5M   G. No one

Context: One view of fair is that the burden is equal. The question you need to ask is not: Is equal the same; but rather you should ask: Is equal unbiased?

Question 2: Companies and investors cannot grow and expand under high tax conditions.
True  / False

Context: Wealth in the US has not been created during high tax-rate periods. Employment levels decline when taxes are raised.

Question 3:  Tax credits, deductions, tax exemptions, tax deferrals, and other special tax treatments reduce taxes paid by the public.
True  / False

Question 4:   Americans are overtaxed and should have their tax-rates reduced across the board.

True  /  False

Question 5:   Which of the following resulted from over-taxation?

A.      Current recession
B.      Banking financial crisis
C.      Housing-bubble
D.      High unemployment
E.       National debt
F.       All of these
G.     None of these

Question 6:  What is the most damaging aspect of the current tax system?

A.      Redistributes wealth to the wealthy
B.      Redistributes wealth to the poor and middle class
C.      Discourages investment
D.      Over taxes the public
E.       Rewards harmful financial behaviors

Question 7: The wealthy do best when:

A.      Taxes are low
B.      Regulation is limited
C.      Taxes are high
D.      Middle class wealth increases
E.       National debt is zero

You’ve crossed the finish line, now we just need to see if you were in the right race.

1:  G       2:  F        3:  F        4:  F        5: C         6:  E   7: D

Q-1: You need to see what a progressive tax rate actually entails. And progressive does not reflect the political semantic context.

Q-2: The tax-rate does not predict the success or failure of companies or individuals unless it is so extreme that it prevents the public from being able to physically survive. The problem with the US’s present economic situation is not caused by taxes or government spending, but rather by the irresponsibility of Congress to connect the two.

Q-3: These selective tax-relief items do not reduce taxes, they simply redistribute the burden to those who cannot take advantage of them.

Q-4: Before taxes should be reduced, the public needs to be responsible for what they have allowed Congress to do as their direct representatives. If you don’t like what they did, kick them out; but you still are socially, philosophically, morally, culturally, ethically, … obligated to be accountable for what was done in your name. You must fix the problem, before you can have things the way you want them to be.

Q-5: Taxation did not cause any of these, they were all caused by the lack of a requirement of taxation that accounts for the policies that did cause them.

Q-6: It’s a classic case of unintended consequences, and it’s not because the rich are taxed to much.

Q-7: The American economy is robust, dynamic, vibrant, and healthy when the broadest range of the population does economically well. The concentration of wealth is a symptom of rot and corruption; it’s as un-American a condition as its antithesis. In other words, it reflects the status of our political parties.

I:DEA 4 – Why Are Politicians Taxed, Burdened and Straining for a Sane Tax Policy?

Taxes are the cornerstone issue in the current national political contest for party dominance in the up-coming elections. There will be plenty of other issues: jobs, jobs, jobs, defense & security, social safety net areas (Social Security, Medicare, Medicaid, Health-care); but interwoven into all these issues will be the heated core issue of taxes. This is not really surprising if you step back and consider that the entire concept of government is based on an understanding that there is “no such thing as a free lunch’. If there is to be a function of government then there has to be taxes to pay for it. So for the radical few that contend that the government has no right to tax people, they need to resolve two things; first: you need to get everyone else to agree that they don’t need anything from the government, second: you need to clarify what the Founding Fathers meant by tax in the Constitution.

So if you acknowledge the necessity of taxes, you are also smart enough to move to the next step concerning the taxes issue. The tax issue is presented by the various interested Parties as the government overtaxing the country, the government has allowed special interest groups to bias the tax code into benefiting the few to the detriment of the many, the government’s tax policies are discouraging/preventing businesses from investing and creating jobs, the tax code is not fair and equal, the big government-types want to redistribute wealth in the country, the government can’t create jobs, or ya-da-ya-da-ya-da. And oddly, none of these are a good, intelligent, informed, prudent or worthwhile representations of the tax issue. That probably explains why our politicians relate to them so well.

The tax issue is: what is an appropriate tax policy that enables the government to fulfill its multitudinous roles and responsibilities and simultaneously promoted a vibrant and robust society and economy? To answer that issue and to present a candidate specific (or Party-specific which is more the norm) approach requires your candidate to develop a detailed plan. Have you seen an actual plan that is well, a real plan, and a real policy?

If the current tax system works for you, then the candidate doesn’t have to do anything except say: “It’s working fine, don’t change a thing.” Not hearing a lot of that now are you? So we need to start hearing their alternatives.

This means that the proposal will have to explain what it means to tax the public fairly, equitably and beneficially. At the same time the tax plan proposal should explain how it will reward the creation of jobs and protects the viability of the private sector. And the tax approach will have to account for all the obligations that the government is intending to deliver, and what it is not going to deliver.

Independents should not expect too much here, since if politicians really had any good ideas they would hardly be waiting around to be elected to fix the country. They would present a rational plan that people would see the merits of and then see that it got implemented. Then getting elected would be a piece of cake. But politicians don’t know how to create a tax plan that is fair, because fair doesn’t make sense to them. The problem is that fair isn’t a simple and easy concept here. Fair requires an understanding and appreciation of any obligation of the poor in America. Fair needs to account for protections and privileges given by the government to one group but not to others in a free and equal society; so saving businesses at the cost of taxpayers is not equitable just because it is claimed that everyone benefits from it. Being saved imposes an obligation of returned value to the public. Fair has to accounts for the fact that an increasing concentration of wealth is dangerous to our freedoms, corrosive to our society and values, and injurious to the health of the nations’ economy. Being fair will have to go way beyond who pays more and who gets exemptions and credits. Being fair must accommodate the relationship that taxes have on how wealth is created and how a proper tax system would promote and maximize the creation of wealth within our society. Fair makes the nation stronger, more productive, safer, and preserves our freedoms. If you think this is easy, then either the politicians are really stupid or clearly it is not. Although I do have to admit that politicians are really stupid, despite the difficulty of developing a sound and fair tax system for the county.

Independents should be pressing and seeking better, clearer and smarter details on a candidate’s tax strategy and policy. When the answers you get don’t convince you that their plan shows you why it is fair and reasonable, you have to say that their plan is just another weak politician’s answer.

Congress Helping the Needy, Uh – Corporations?

Praise the Lord! Finally, Congress is doing something to help the average American; and this is a bipartisan effort. Yes, both Republicans and Democrats are stepping up hand-in-hand to offer some relief to those who need it most. What are they planning and who does it help? Well, American corporations that have oodles and oodles of profits stashed away in banks holding profits that are from foreign corporate divisions and entities where the profits are claimed to have been created. The corporations want Congress to grant them a tax-exemption (or tax holiday) where they are permitted to bring the profits home and pay a small tax on them; 5% is a probable target. And of course they are telling your Congress-persons that if they do this that the tax break will stimulate the economy; and that is how we will all benefit.

Now this all makes sense of course. The last time that Congress did this, it might not have worked to do anything to create jobs. But this time of course, it will because this time the corporations are truly intent and serious about doing something that would help the economy. If I were an officer of a corporation, I would want to encourage Congress to do this because I am going to get a lot more money out of it. So it won’t bother me that I hire and pay lobbyists, who use to work for members of Congress or for the current or former Administrations, to solicit the support of the folks that they worked for.

The corporations aren’t doing anything wrong here; because it’s Congress that set-up the tax code that produces and encourages the results that produced both the corporations’ overseas profits holdings and that discourage investment in American business infrastructure. As usual, Congress in their complete ignorance of what they are doing have masterfully allowed the Corporations to make the bulk of their revenues in the United States and then transfer this wealth to foreign countries to the detriment of America. Why Republicans and Democrats are so eager to rob America of its strength and vitality I don’t understand; but it must be something that the majority of Americans want. They put these folks in office and support their insane and insipid policies and principles.

You would think that the politicians would see how to address this problem. As it most often is, the solution is simple and direct. It would benefit the corporations, the economy, and the American job market. Who am I kidding? Congress, do something to solve a problem! Wouldn’t they have to see it as a problem rather than as just another opportunity to get campaign donations?

Perhaps the electorate should be asking the candidates for the up-coming offices to explain why they don’t fix the problem rather than reward corporations who took advantage of the staggeringly stupid tax code for multi-national corporations that the Republican and Democratic parties put in place to start with.

Whom Is The Middle? A Taxing Question

Mitt Romney has an idea to create more saving by Americans. He proposes to eliminate taxes on interest, dividends, and capital-gains (hereafter: savings’ earnings) from middle class savers. This obviously has two advantages: first, it reduces the middle classes reliance upon a governmental program like Social Security for their retirement needs; and second, it adds to the financial resources available to help stimulate the economy. Sounds like a good idea doesn’t it? But if a politician proposed it, doesn’t that mean that there is something inherently wrong, stupid and untrustworthy about it?

Well, let’s not go to the typical extremes that politicians go to and start judging things based on some ideological basis without any need to think, understand or evaluate. Let’s not be a Democrat or Republican; rather let’s be intelligent just to try something different.

To make such an assessment there are a couple of things that we would need to know. For example, what is the middle class? What is the income level that qualifies someone for not having to pay taxes? This is important because who and how much someone can benefit from this depends upon simple things like what the cut-off point is, or what counts in setting that cut-off: wages only, rental income, royalties, all the varieties of income forms that will allow for the unanticipated and unintended consequences of what seemed like a good idea at the time.

I assume that anyone below this middle-class upper limit would be qualified to get the no-taxes on savings’ earnings. So even those who don’t earn enough to get by can save and reap the bounty of this idea. Ok, it doesn’t do anything directly to help the poor; but it’s not a program aimed to help the poor so being criticized on that is not really fair.

For those that do manage to have some money that they can prudently set aside for some other purpose than subsistence that they could choose to save it. So we can imagine that there is a population of individuals that range from those who can save very small amounts each year to those who can elect to save considerably more up to the limit of income or some fixed limit that may be imposed upon the program. The tax benefit thus derived from this program will be proportionately larger for those most likely to be able to save the most, those at the upper middle income level.  Assuming I am one of these high-end beneficiaries, this makes perfect sense to me. It does of course seem to do this at the expense of those less fortunate than myself, but again I am better off so that is clearly the socially responsible thing for a constitutionally structured democracy would intend. I think that I lack a sense of why the government should be implementing a program that preferentially benefits me more than those of our nation that are unable to take advantage of it. Well we do that a lot already, like for the very wealthy which I would like to become one day, so it is a consistent approach to serving citizens unequally.

Now what about those poor hundred people who just missed the middle-class savings’ limit by one dollar? They get classically screwed! So I guess we will have to find a way to adjust the program so that it is somehow progressive. There are at least a half-dozen variations on the theme that could be adopted here, so I am sure that Congress will find a way to pick an approach that is really bad or at least the most inequitable form that can be made to sound fair and balanced.

I can hardly wait for this proposal to make it way through the corridors of Congress and into law. The opportunities for fraud and abuse are already percolating in my head. Well, what has Congress ever done that wasn’t fraught with greater problems and harm than the imaginary benefits that it would provide?

Who Do You Trust? – A Ranking Business

The sky is falling! The sky is falling!

Apparently this is the cool, calm and calculated professional assessment by the keenly knowledgeable financial markets experts of the downgrading of the US’s long-term sovereign credit rating by S&P. So we have heard from every possible source the different assortment of explanations and assessments of this action to make sure that there are plenty of directions and targets on which to place the blame. But here’s an interesting question: What nation do all these experts think is safer and more secure then the US? Is it the UK and Germany? So the rest of the world can turn to them to insure the stability of their own financial stability?

I am not disagreeing that the US’s financial condition is riskier than it has been in a long time, but I am not sure I think that there is any other nation that is less risky. So isn’t the downgrading, justly deserved or not, a relative event? Didn’t the economic future of every other country become a little more risky along with the US’s? So, why is the financial market in such a panic? Because the panic is not a rational behavior, it is well a panic. So who do we trust?

The credit rating agencies, we must be able to trust them. They have nothing to gain by being wrong, and have never failed us in the past. That is if you overlook things like the US’s housing mortgage and collateralized debt catastrophe or the tech bubble or any of the other financial melt-downs of smaller note. I am not saying that they miss such events intentionally, just that they are not showing any signs of being actually better than anyone else.

How about the financial market itself? Oops! Right, they didn’t do too well with the housing crisis, the tech bubble, the savings and loan disasters, unforeseen risks with computerized trading, or ya-da-ya-da-ya-da. Not a trustworthy group there either.

The US Government, now here is a group we can put faith in. Hmmm!  Congress? I think not.  The President/Administration? You can’t be serious. Let’s just move on.

America’s Corporate businesses, now here is a group that we can rely upon. We don’t see CEO and other corporate executive letting us down, taking advantage of their positions, draining enormous sums from the companies’ coffers and leaving ruined wrecks in their wake. Well, maybe sometimes or actually a lot of times.

The answer is you don’t trust. You’re not supposed to trust. What you are supposed to do is pay attention, be responsible, be realistic, and demand value for reward. And there is the heart of the problem. If you don’t act this way, and the politicians you elect don’t act this way; what exactly do you think will happen.

What will happen now is that the American people will be taxed at a higher rate, and so will most of the rest of the world. It isn’t the kind of tax that many American’s are so irrational about, it much worse. It the kind of tax that you don’t have someone to blame for, but you probably will anyway. It’s an increase in the cost of everything. With a US debt at $14 trillion and the downgrading to a double-A rating, if that downgrade were to cost only 0.1% more in interest then the US government is looking at only $14 billion more on that total amount; hardly a nickel per person. But that nickel, it is not the impact that will hurt us; and if it cost a whole 1% more it still is not debilitating. Here is where it’s going to hurt: The cost to business will be higher for their loans, the cost to consumers for credit will be higher, the cost for students for tuition will be higher, and on and on. Some businesses will benefit from this in the immediate view, and it may be impossible to prove that they would have been better off if the downgrade didn’t happen. But you will pay. You will be less well off. And you are also heavily invested in the responsibility for this.

Mostly because the folks that are leading our nation are neither prepared to deal with the complexity of such issues nor are they capable of acting in intelligent, rational or serving the public-interest ways. There is a simple principle here: Don’t go to the butcher for medical advice. Don’t go to the plumber for legal advice, and don’t go to the lawyer for a plumbing problem. Don’t hire a banker to herd your cattle, nor an English teacher to fix your car. Sure you may get lucky and find someone who can actually assist you, but the odds are not in your favor. Oh, yeah. Don’t go to the casinos to invest your retirement funds.

You should start looking for someone who is more intelligent to send to Congress. If you’re lucky they might even be more intelligent than you.

Connections: The Missing Factor

The lack of jobs growth in the US’s economy is perplexing the experts and the not-experts (the politicians). Republicans have their pat-answer: lower corporate taxes and the jobs will come. While that has its ever popular consumer attraction appeal, it is an answer that is not really based on any statistical or historic evidence. Democrats have a less monosyllabic and more varied approach with their guesses: tax-credits, more stimulus/investment, infrastructure, training, and the list goes on. There is a reason that the politicians are clueless, aren’t they always clueless! The economists on the other hand have N*(N-1)/2 possible theories on what is preventing slow or no job growth under whatever circumstances exist at the time; where N is the number of economists questioned. The problem is that the economists are almost as bad as the politicians when it comes to guidance on what to do to turn the job situation around. If one of them (or a small group of them) is right there is unfortunately no way to figure out which one it is.

As for the politicians, since they don’t know what to do anyway; they fall back on their preferred decision making method: do what their respective special-interest contributors tell them to do. This may benefit the special-interests, but these special-interests are not concerned with jobs or anyone else for that matter. They are just seizing the opportunity to gain some monetary advantage at the expense of everyone else.

The nation’s problem is that unless the politicians begin to understand just a little about what is causing our jobs problem and what needs to be done to effectively do something about it that the economy will continue to limp along and suffer from the drag that unemployment puts on all facets of our economy.

Let’s take a look at the “tried and true” adage that small businesses create most of the new jobs in the economy. Even if you look at that in a simple-minded manner, you know like a politician, the data is questionable on that ‘fact’. In ‘fact’, it may be that small businesses hinder job creation. The real fact is that size of company is not the determining variable. Newness of company is much more salient, as both a creator of jobs, and as a destroyer of jobs (almost half don’t last five years). So using the big “small” word is one of the many ways that politicians miss the ‘fact’. All in all, politicians shouldn’t get the job based on their interviews so far.

But even if politicians and policy-makers began to appreciate this part of the equation, they still wouldn’t be able to do the math required to impact job growth. Just knowing that new businesses create new jobs doesn’t really tell you what to do that would actually help get more new businesses started; and one might ask “why is the government trying to create jobs” shouldn’t the market place do that? Just another political-economic concept that the politicians don’t know what they’re talking about.

What do politicians need to start learning? Thought it is beyond their innate abilities, we can hope that they have someone on the staff and advisory committee that is sufficiently competent to find some expertise to train the politician to stop making political plans and start supporting plans and policies that are prepared by more knowledgeable and accountable people. The accountable part is critical.

First lesson, jobs are created due to a number of factors in any economy; but in our economy there is more than just the number of factors. While each factor contributes to or detracts from job growth, there is also a higher math facet to the equation; in addition to adding its own contribution to the equation different factors may influence the effectiveness of other factors. So it can get very complex, very fast. So in the real world it is important to understand the most powerful factors, particularly those that you can influence, and construct your “influencing” policies and programs around them. You also want someone monitoring the one’s you can’t and looking into the impact that the middling and minor factors are having which may undermine all your good intentions.

Now here is a thought provoker: Big businesses create jobs (B-jobs), which cause middle-size businesses to create jobs (M-jobs), which cause small businesses to create jobs (S-jobs). The number of S-jobs is typically going to be greater than the number of B-jobs and maybe M-jobs. The number of M-jobs is likely to be as great as or greater than B-jobs. Now before you jump off the cliff that your political leaders have already flung themselves over, while they are shouting that you should jump now before you are left behind, don’t conclude that is therefore best to emphasize S-jobs. You know why of course.

Yes, that’s right; the majority of S-jobs and even M-jobs are created because of the B-jobs. This is one of those intertwined relationships in the jobs creation equation. Now please, don’t go running off thinking that all you have to do then is create B-jobs. You would be right if you could just go do that, which you can’t without understanding many of the other factors. And, you would also have to make sure that you were creating B-jobs that were; well, valuable. This is not a job for politicians; you need a group of people of at least modest intelligence for this and you need to set up your economic systems to support and not inhibit beneficial results.

So yes, you don’t want to tax businesses beyond rational levels; but equally important you don’t want to be rewarding businesses to do things that are disadvantageous for our economy but benefit the business. You know, exactly what politicians do.

Congress, You Stupid Sheep! How Much Did You Save With A Shutdown?

The bickering blowhards, immoveable idiots and lackluster leaders have accomplished another great victory for the American people. They appear finally to have managed to shutdown the government, rather than continuing their ineffectual haranguing of the public through the media about their herculean struggles to bring about the meaningful change that they see as their mission in life. Never mind that none of the various ego-centric groups have actually taken the time or made the effort to think. We have just another round of ideologically arranged politicians that are only able to feed their political base the same rose fertilizer that seems to keep them content in their blissful ignorance.

Should they manage to navigate around some last minute ‘Hail Mary’ continuing resolution to perpetuate their deranged attempts to do their pathetic version of a bait-n-switch fire-sale; it won’t be because they have understood anything, it will merely indicate they want some more time to play politician at the public expense. I can’t wait for the old clichéd “the American people” want me/us to do whatever asinine bumper sticker slogan they saw on their drive to Congress.

Perhaps the news media should start a tote board on how often Congressional members are asked why they don’t address the budget areas that are the substantial cost-causers in the budget, and then proceed in not answering. Maybe reporters, pundits and new anchors could ask them if these problem solving politicos can name in order the top five budget-gobbling entities* in the federal budget. For those who claim that as a group that they were elected to deal with this specific problem this should be like reciting “Twinkle, Twinkle, Little Star”. If by some miracle they actually know, our hollow heroes should be asked why they are not proposing how to address the unsustainable tax-sucking economic vampires that these budget entities represent. Is it because they don’t have a clue? That they never had a clue? Or, that the concept of having an idea is too foreign to their mentality for them to even attempt it?

Should the government shut-down, the vast majority of tax dollars that are misspent will continue to be misspent. In one case, if these penny-pinching spendthrifts succeed they will increase the excessive funds thrown at one of the least well managed rat-holes available to them. What spending did the shut-down stop? Less than 15% of the budget. How much of that 15% is just delayed spending, and is not a savings at all? How much will the shut-down cost in lost effort, and is thus just more wasted money that we can credit directly back to Congress? How much damage will the shut-down do to the rest of the economy?

Certainly, our elected legislators have considered and calculated the financial value of a shut-down versus spending their time and effort in actually addressing the real problems that face our nation. And if you believe that then you should hear about this investment group that this guy, Bernie Madoff is forming and he is looking for investors.

I don’t mind political comedy, but I prefer it not being the primary and singular job of the members of Congress.

* Top Five: 1- Soc. Sec., 2 - Dept.of Def., 3. Medicare, 4. Medicaid, 5. Other Mandatory programs, 6. Interest on National Debt (a special adder for the reader).

GE’s Motto – “Imagination At Work”: Not Eligible for Congress

The public ire over GE’s non-tax bill illustrates a much too prevalent example of the American public’s understanding of reality. They get their hackles up about some issue and go charging off half-cocked to battle the injustice or situation that they believe is just down-right un-American. Fortunately, the public is encouraged by the news media which reports on events by providing just the facts (well, in many cases the facts) and not worrying about any assessment or explanation of the event and what brought it about. So we have the outrage and demands for action without any comprehension of what produced the flammable conditions that a simple fact ignited into a media-relations firestorm for GE.

Now what exactly is a large portion of the public foaming about? These hyper-active attention deficit disordered individuals are incensed that a large international American corporation will not pay any taxes in 2011 on their 2010 $14.2 billion of profit. Some of them may feel abused because they have to pay taxes on a lot less money than GE made; assuming that they are not in the approximately 40% of US tax-payers who do not pay federal income taxes. [The term tax-payer here clearly is a grouping that only indicates a possibility not an actual fact.]

Based on this non-payment by GE, there are public calls for investigations and for the removal of GE’s CEO from the chairmanship of the President’s Jobs Creation advisory panel. But what has GE or it’s CEO done that is wrong or illegal? Unless some new facts, not presently in evidence, are brought to light neither GE nor its management has done anything illegal nor acted in any way that is not in accordance with the law. In fact, GE was operating just as Congress had intended. It was not GE who wrote the tax code. It was not GE who determined what was a fair and balanced approach to applying the tax code to corporations. It was Congress.

Congress creates the federal laws and rules for taxing everyone and everything in America. They develop the policies and programs that help adjust and tune the tax code so that we encourage investments that will benefit the pubic, the economy and the nation; that will encourage job creation; and that will insure that the tax-burden is fairly borne by all.

So shouldn’t we be irate and ‘mad as hell’ at Congress? Isn’t this just another example of how Congress will take any task and achieve a complete state of snafu? But not to fear, Congress is diligently at work to cut the budget and have their flash-light like intensity semi-focused on that endeavor. We can all rest in comfort that Congress will provide us with a national budget that will meet all the standard criteria to reach fubar status.

We have Senators and Representatives who are absolutely sure that the only problem is that the maximum corporate tax rate is too high, and if we just lower it that all will be well with the world. What a shame that Congress nor the public hasn’t connected the tax code to Congress encouraging corporations to move jobs overseas, to Congress promoting corporations stashing profits in other nations, and to Congress undermining the overall US economy. Great job Congress! Keep up the good work at the budget cutting; I wouldn’t want you to spend any time or effort on fixing your errors that have brought the nation to its sorry state.

I guess the adage about fools is not only applicable to their rhetoric but also to their ability to serve the public. Not only is it better to remain silent and be thought a fool then to speak and confirm it; but it is better to pass no laws and be considered incompetent then to pass laws and prove it.

What Does It Profit a Congress to Make Law, If It Loses Our Economy?

Congress, it appears, has struggled to solve a problem. Alright I know, when has Congress ever solved a problem, as opposed to just causing them? But the real question is: how is it possible that a body comprised of individuals that include a mix of backgrounds with roughly 40% in law and 40% in business and they cannot come to grips with a legislative approach that will incent businesses to create jobs in America and that incents them to avoid overtly stashing corporate profits overseas. Now I know it would be odd to expect experienced lawyers and business-persons to have any expertise for such problems. Who would expect Congress to be able to apply any talent to crafting such legislation, nor to understanding the ramifications of allowing our tax code to either promote the out-sourcing of jobs internationally or to enable corporations to squirrel profits in overseas accounts, or both? So here we are as usual left the lame, inept and ill-conceived efforts we have come to depend upon from our Congressional representatives.

I presume someone in the Department of Treasury, maybe even someone from the IRS, has attempted to explain to Congress that efforts to make it more attractive to create jobs in the US and to have corporations treat profits originating from American as taxable under the US code rather than to foreign nations have spectacularly failed. It’s even possible that some members of Congress could have figured out that campaign funds received from their corporate contributors along with said contributors’ sage advice and counsel regarding tax law might have consequences that it would be important even essential to understand. But even if they did understand the consequences, why would they care? Their vision has a horizon that only goes as far as the contribution check which either blocks everything else from view or which demands their total intellectual capacity.

Consider the recent news item concerning GE’s 2010 corporate tax responsibility, all $0.00 of it. While GE may have made $14.2B in profits, not income, PROFITS; they don’t owe any income tax to the federal coffers. Just like you and I, GE can use the tax code to contribute a fair and reasonable share of their profits to support our nation. And Congress has been the instrument that created the means by which GE and other corporations (and you and I, of course) have been able to achieve this burden relieving accounting. How wonderful and helpful of Congress, to enact the laws that so obviously benefit our economy and nation.

And we don’t have to only look at Congress’ tax-relief gift to corporations to see the far-reaching efforts that Congress undertakes in America’s best interests. In addition, Congress has encouraged these same corporations to create jobs, not of course in the US, but in foreign countries and economies. Not intentionally I would suspect, but isn’t that a rather pitiful excuse for Congress to fall back on when they also managed the out-sourcing of American jobs and did so when it was a perfectly predictable and expectable outcome? But not to worry, Congress is on the job! In these times of economic chaos and disaster, Congress is focusing on cutting the federal budget because the country is living beyond its means. If they apply their standard skills and competencies in this endeavor, and they will, we can all rest uncomfortable in the knowledge that Congress will succeed yet again in wrecking havoc upon us.

Not only will not addressing the tax code problems that endanger our freedom and existence, but failing to act will continue to erode America’s business climate. You have to wonder how it is possible that Congress cannot see how to use this opportunity to reduce our deficit and debt, expand our economy, grow domestic jobs, and revitalize American industry. Well, wonder no longer; they’re Congress.

Congress Can’t: Solving the NPR CPB government funding dilemma

Congressional conservatives, particularly Republicans, are eager to cut government funding for National Public Radio (NPR) and some would want to include the Corporation for Public Broadcasting (CPB). Whether they are after this cut because it will contribute to solving America’s budget crisis or whether they are seizing the opportunity to hopefully eliminate a media source that is indifferent to their personal views and perspectives is not the real issue. The real issue on the table is whether Congress is applying its great and vast intellect to the budget crisis in a constructive and responsible manner. And we all know how dependable it is to rely upon Congress to do anything right. So the House passed a bill to cut $50M for NPR funding from the CPB’s budget. The Senate just cut CPB’s budget $50M which evidently leaves it up to them to figure out how to apply the reduction. And thank God these moves will substantially solve our budget problems. Well, I can’t blame them for cutting something from every entities budget, but I doubt that was the motivating factor here. So perhaps Congress should receive a message broadcast from the public.
What we have here is a moment in history when any numbers of forces are conspiring to bring change to the world as we know it. And in this particular instance, to place the value of a public funded media channel into the direct hands of the public at large, rather than relying upon the pernicious machinations of Congress. This action would cause some disruption in the pubic broadcast arena, but it need not be a negative nor fatal prognosis; it could be a vast opportunity to increase the viability of public broadcasting by changing the dynamics at play.

Today Congress takes our taxes and in their infinite wisdom identifies how to spend it. At some past point Congress decided that America would benefit in any number of ways by supporting public broadcasting in a minimal way. And in looking back over what those public funds delivered, there have been benefits to the public. But times change, and Congress believes that NPR is not beneficial because many of them are not shown in the light and grandeur to which they believe they are due. Hiding behind the need to cut the budget is the typically cowardly way of using their power to punish anyone of whom they don’t approve. After all, cutting the budget is a reasonable and rational position and policy, although we are talking about an amount that is less than $0.000015 from every $1.00 of the federal budget; hardly a noteworthy amount to be spending the time they probably have spent on it already. The cut is not very honorable when we understand that the House’s bill is specifically identifying and targeting a particular entity that this part of the funding. I guess it is not surprising to see such crass behavior from these representatives of our society, and well isn’t it exactly what the public expects of “politicians”.

Have the politicians won, have they achieved their goal? Not yet, but they will get there. So what to do if you support or believe in public broadcasting? The answer is simple. Remove Congress from the equation. And if you are really interested in sending Congress a message then consider the following:

If just 50 million Americans set aside less than 1 penny a day or 6 cents a week, they would fund NPR (or CPB) with $150M; thrice what Congress is cutting. And here is the beauty, that contribution is tax deductible. So the public could cut Congress’ funding by about $50M at the same time. Now perhaps 50 million Americans is a lofty goal, and we may have to strive for only 10 million. That’s just 29 cents a week or 4 cents a day. These are not the kind of contributions that are even noticeable in most peoples’ personal budgets.

The solution to such abusive exercises of power on the part of Congress is to apply good old Yankee ingenuity. These folks are not even close enough to smart, to be able to prevent the public from getting what they choose to be in their interest. And CPB an NPR have access to a wide range of individuals, the public, that can show them how to create the processes that will free them from the bonds Congress will always want to impose.

Congress on Failure: It's Our Motto

And now for the final part on how our political leaders succumbed to their lesser sides of their philosophies.

Congress passed and President Obama signed the extension of the Bush (now Obama) era tax-rates. Everyone in fool-ville is hooting for joy because they all agreed (compromised in agreement anyway) that this is best thing since Congress figured out how they could just raise the nation's debt ceiling. It's not just the the middle-class got a couple more dollars in temporary tax relief (temporary because with the debt increase they will have to pay it back and even more), but most importantly the very well to do got really big tax relief gifts from the politicians. These abundant and lavish gifts are a repayment by our legislators' to the wealthy for their control of the political funding machinery that runs the parties' campaign financing processes.

Now we cannot fault the politicians for bowing to the pressures that the well-healed special-interest groups exert, after all the most important thing is getting elected not what you have to give up or agree to to get there. This is a parallel to the public's lemming-like race toward whatever politician promises to support some totally meaningless or inconsequential policy or position that is more critical to the electorate than any of the responsibilities of a free and democratic society. Besides you can flood the media with tons of lies that satisfy and entertain the public while completely avoiding any meaningful discussion of issues and solutions to the problems that are the true business of the government and the governed.

But surely the continuing the tax-rates at this time are essential to the economy, and particularly the lower tax rate for the rich. All the economists that the government consulted agreed that now was not the time to raise taxes, because consumer spending accounts for the bulk of the economy and … Uh, Wait! The consumers, most of them anyway, are not wealthy and the upper rate tax rate doesn't apply to them. I am sure that the upper 1% spends a lot more than you or me, but I also know that it is the rest of us that makes and sustains the economy. So the tax-cuts for the rich isn't needed because of their spending, which they will continue to do and are able to do regardless of this tax-cut.

I know, the tax-cut for the 1% is because these are the people who create jobs for the rest of us. And if we tax them more, then more of us won't get employed. Yeah that must be it. Wait! If these folks create the jobs that make the economy robust then why haven't they been creating these same jobs already? In fact, shouldn't the bad economy have provided a better opportunity for these folks to have created lots of new jobs by now? Oh, and are most of these folks the small-business owners that we hear about creating most of the jobs in the country? Surely, they're not the CEO of large corporations that are so essential that only they can run our major industries effectively, the heads of the banking and finance institutions that have protected us from fiscal irresponsibility so well, the lawyers and law-firms that do most of their work pro bono just to benefit society, or the politicians who serve the public at great expense to themselves and their families.

Ok, but then the tax-cuts for the rich were necessary because we need to give the Republicans this tit-for-tat in order for the Democrats to get their important gifts. And these Democratic party needs were also essential to the economy because without them the economy would suffer. I guess this just means that our legislators and we ourselves are so stupid that we can't figure out that you could let one bill fail and propose another bill that addresses everything else but that didn't include the cornucopia for the rich.

But now that we have the extension, we can all look toward an economy that will absolutely recover. And if it doesn't work out at least we can't hold the politicians responsible because they did everything that was possible.

Besides the politicians need to start focusing on how to make everyone pay their fair share for the debt we just increased. And they need to make damn sure that the 1% don't get hrt by that.

How To Fail Again. Again (Part 2)

Before getting to the main Christmas gift from Congress – extending the Bush/Obama-era tax-cuts, there are still more lessor gifts tucked, shoe-horned, wedged, cobbled, and stuffed under the national tree. Given it's a tax bill, it's not surprising that Congress used their hammer to pound more and more tax cuts/credits/exemptions/deferments into the bill as a compromise to gain support. Now compromise isn't a bad thing, in fact it's an essential ingredient in politics. The structure of our legislature is a compromise, the Constitution is a compromise and the Bill of Rights is a compromise. So the fact that Congress and the Administration compromised in drafting the bill is to be expected, especially since neither the Republicans nor Democrats could get a bill through Congress and signed by the President without some give and take. Whether its a good bill or not is not tied to the compromises that have been made, that question has more to do with the all-or-none nature of the tax-rate extensions, its affordability, and the true worth and impact that it will have to the nation's economy. But that is for the Part 3. Here let's shake all those other boxes chock-full of goodies for those who have been uhh! Is it naughty or nice?

We have an environmental gift for renewable energy development. Good intentions no doubt, but couldn't Congress have thought about how to make it target market conditions that impede the development of renewable energy?

There's a gift from Social Security rates, wage earners will find that the government's hand will leave more behind in their pockets as it withdraws its take this year. While few like the pay-day mugging, is reducing the extraction really going to help address the real problem with Social Security? It's underfunded and proceeding toward yet another crisis, and the solution that's going to help is postpone doing anything about the growing cancer in the system itself. Yeah, now that's leadership!

The stockings are filled with all sorts of credits and incentives: child-care, college, use of mass-transit, hybrid cars, energy efficient products, and economic development support for Gulf Coast states. All things that lots of people like, support and don't want to give up. But all things that either cost money or redistribute wealth. (FYI, redistributing wealth is a given in government and societies; but usually the redistribution, as in this case, is not from the wealthy but to the wealthy.)

The justification of everything is that it will help the economy and will create jobs (or will prevent more jobs from being lost). Sounds good, sounds important, sound critical doesn't it. But do you really believe these politicians? When was the last time that they were right? When was the last time that they did something that people liked and then turned out to help the public, as opposed to when they did something that the public thinks was completely wrong but probably was both necessary and benefited the nation?
Everyone likes getting the presents under the tree at Christmas. But how often do people regret the costs that they have to struggle to pay after Christmas because they went out and bought things that they should have known were extravagant or beyond their mean.

Politicians’ Progress: One Steps Sideways, Two Steps Back

We need to cut taxes! We need to cut spending! We need to protect the Military’s budget and allow it to grow! We need a balanced budget!

These themes seem to echo from some recent national exercise just barely beyond the recollection of the public awareness, an attention span deficit disorder if ever there was one. Given the citizenry’s ire about their government and the collective perception of an inept governmental vision, we have every politician and political party panicking and trying to find some course to sail their leaking and unseaworthy skiffs through the winds of this erratic Zeitgeist.

Let’s do the math!

The Military and Social Security are competing for the top position in the Federal budget. Social Security will win in 2010, but the Department of Defense is projected to take the lead in 2011. Health Care comes in next, although if you slice the pie a little differently it may be able to take first place in either year. We then get to Welfare and Interest on the Debit. We are now well past 80% of the budget. And let’s face it, we haven’t done much actual government yet! But we have accounted for $2.84 Trillion of the $3.55 Trillion 2010 budget. Surely if we cut half of the remaining $710 Billion, that’s $355 Billion for those Americans who helped put us in the 34th place in math among leading industrial nations, we would all save such an enormous amount that all our problems would disappear. Now if there are ~310M citizens (let’s not go there, it’s not a salient point here) then that budget cut would reduce taxes by $1,145.00 per person. Now I would like to have another thousand dollars to use to benefit myself; but I am not at all sure that it is enough to make up for a lot of that stuff that the federal government, albeit it very poorly and inefficiently, did with that money. And I am pretty sure that in the long run I would be better off if that $355 Billion were applied to paying down to national debt.

Returning to our political leaders (sorry I can’t think of a more apropos term but it’s hard to identify what they represent since it is not leadership), they are all about to line up behind the tax-cut, spend-cut, grow military, and balance budget scam under which they will do nothing significant to solving America’s problems. Cutting taxes and cutting spending while sounding good is not a guaranteed or even a likely solution to the deficit, to the economy, to jobs, or to the long-term interests of the American people. But it will do the one thing that is important, the one thing that is more important than the costs that every citizen will incur, the one thing that every politician pursues at any expense and at any consequence – their re-election.

Before these sycophantic plague bearers venture forth to save us with their promised solutions, perhaps it would be wise to remember the capitalistic maxim: caveat emptor. You are going to get what you paid for with your vote. Can you at least not whine about it when you get it!

Bagging Bank Bonuses – Another Miss

The Obama administration and many politicians are looking to score big with the public by going after the ‘fat cat’ bankers. With the recent announcements that exceedingly large bonuses were in the offing for major financial companies there was a seismic-scale reaction among the new media, the public, and therefore of necessity the politicians. Everyone in their own appropriate way predictably went postal.

Now I can understand how this little factoid would prove to be a highly effective irritant given the current economic problems and difficulties that have affected everyone, not just domestically but internationally. It doesn’t require any special insight or intuitive feel for the emotional and subjective reactions that have and are playing out in public and private. And I have to admit that I also thought that the bonuses were inappropriate and that the banking and financial institutions executives and probably many of the employees receiving such bonuses should be held to account for the “wrongness” of these bonus amounts/levels. But I think that my reasons for believing that the bonuses are unjustified are different than the vast majority, if not everyone else.

I also think that the remedies that are being pursued are either mis-guided and/or ill-conceived.

So as to why the bonuses are wrong, let’s see where I deviate from the norm.

Everyone* holds that the financial institutions and banks were the primary actors responsible for the financial crisis due to their unconstrained willingness to take risks that they did not understand or probably in some cases did not care that they understood. I agree that these players were essential parties in the disaster, and that they exercised exceedingly poor judgment given their fiduciary responsibilities. They were not alone however. Politicians, policy-makers, government bureaucrats, and let’s face it the public in general were all contributors to the fiasco in any number of ways. Some are more guilty than others, but it would be irresponsible to make just the ‘bankers’ the scape-goats for this mess. I don’t want to let them off the responsibility-hook, but I think there are others to consider for their own appropriate remedial repercussions.

Now since the disaster and the bail-out that saved their (and our) collective asses, the economy has struggled and started to recover. And these companies have also experienced improvements in their status, which is the very thing that set the stage for their action to award the big bonuses. In fact, given that the companies that took TARP money when they were in trouble, these institutions deliberately and aggressively sought to re-pay the bail-out funds. And they did this with full intention of getting out from under any Government over-sight or influence in their operations. Now free of such constraints, they decided that their successful rebound from the precipice is sufficient justification to warrant awarding very good (perhaps obscene) bonus amounts. And that’s where everyone says, hey it’s not fair. We bailed you out, and got nothing or worse; and now you’re getting rewarded for you part in the crisis.

I don’t see it that way. They aren’t being rewarded for their part in some of the stupidest investment decisions that they could possibly have made. And it is not true that we did not get anything out of the bail-out. We did save ourselves from the greater disaster that could have come from hiding our heads in the sand and doing nothing.

What the bankers and their ilk are being rewarded for is the inevitable. The economy had to recover to the current point eventually (or else it had to crash), and in this case it recovered in part because the excessive fear of a collapse had abated. Investments were returning and the economy was and is improving. Did this recovery really happen because of the banks? Did the financial institutions and their management really do anything that ‘caused’ the recovery to the point that we have now? Or did our bail-out produce the stability? And did not the return of our businesses and industry to a positive growth outlook create an economic value that required the banks to attain “profits” from the positions that they had caused their businesses to have sunk to from their own mismanagement?

So my problem with the bankers is that they are rewarding themselves for returning to profitability that they were not directly responsible for, and perhaps not even contributory to. So if the bankers are just benefiting from our risk, for our actions, and from our work; I think the bonuses are misplaced.

And the efforts to tax the banks to get our funds back is not unreasonable; but the approach will be used by the banks to make this a cost that we pick up and pay for. And they will still pay large bonuses whether they do a good job or a bad one. And it’s not just the banks that are stealing money from your pockets in this manner. The executives of most large corporations are using the same approaches to rewarding themselves huge bonuses. Rewards for achievements that “only they could have delivered” and that is why we have to give them these fortunes; otherwise we can not “keep these special individuals working at the company” without these large payments. If they would leave to be paid more elsewhere, well let them go. If enough of them leave, the price for their high-caliber talent will either crash like the economy did, or we will find that there are a lot of even more talented people who will do even better then them.

Notes:

* I concede there is always some none-zero subset of people who will be an exception, but in this case it is certainly a uniquely small subset.

Owing Not Owning Your Future: Your Deficit / America’s Deficit – Another Intelligence Test

It’s a new year, so it seems appropriate to take another perspective on the state of intelligence in America. Due to some recent mentions of the country’s budget and its deficit, this just occurs to me to be an appealing theme for a test. So I will follow the usual format, I will present a handful of questions, and some commentary to place a particular context for the questions, and at the end I will provide my answers to these questions. As before, your score is your responsibility to assess. And a willingness to deceive yourself as to the accuracy of your answers or beliefs is just another measure of the actual intelligence level that is being measured. To paraphrase Lincoln:

Some of us can fool ourselves all of the time, and all of us can fool ourselves some of the time, but all of us can not fool ourselves all of the time.

So now we can get to it.

Question 1: If the United States were a person, let’s say it was you, would you say that you are managing your household budget prudently, responsibly and within your means?

Yes No

Context: Your household budget is what you are spending on all the things that go along with running the house (country). So are you spending what you have wisely given what you are getting in return, and given that it all has to come out of what you earn (here your taxes are the same as your wages, they both come from the same place – what you get paid).

Question 2: The U.S. Government has promised to pay a number of people a fair amount of money every year for, well the rest of their lives. Now since big-G doesn’t put aside any money for this purpose they have to get it from you (citizens) every year. Big-G doesn’t have enough to pay out what they promised, so what should they do?

A. Increase your taxes

B. Pay less than promised

C. Borrow more money

D. Cut all spending (everything) equally

Question 3: Who is responsible for creating the budget deficit?

A. Politicians

B. Political Parties

C. Voters

D. All of the Above

Question 4: Many economists will say that some deficit spending can be advantageous for the economy, or can be necessary under certain situations in order to help prevent or recover from economic downturns. If it’s good for the economy then it’s good for everyone, and the more we do the better it will be. Many people use their credit cards in this fashion. They keeping adding to their balance, buy more products, and help stimulate the economy. The financial industry grows its credit business and the economy is booming. No reason this should not go on forever.



Shouldn’t we therefore let our deficit grow every year?

Yes No

Question 5: Congress prepares and submits a budget each year. They get input from all the departments, bureaucracies, lobbyists, special interest groups, and every entity reaching out for a piece of the pie. And every year Congress approves the budget with full knowledge from the Budget Office how much more it adds to the deficit. Every once and a while Congress has to approve raising the debt limit allowed, and yes they approve raising it every time.

Who will actually pay for the spending decisions that Congress continues making each year?

A. The Government

B. Businesses

C. You, the public

D. Investors in Government bonds

The Critical Question X: Think how you think your preferred Congressional representatives would answer these questions. Are they answering the same as you or differently? Given the deficit problem, isn’t at least one of you really doing a bad job?

A. Yes, me B. Yes, the politician C. Yes, both of us D. No, there is no problem

Ding! Times up. You are done, and you can now decide if you scored high, low or in the middle. For anyone with an interest, here are my answers.

Q1: No    Q2: D     Q3: D     Q4:  No    Q5: C      QX: B

You can probably tell that I hold the citizens responsible for the situation we are in. It’s not hard to have a poor opinion for people who do not accept the basic responsibility for their Government’s actions, and disregard for their obligation to prevent their elected officials from frittering away their heritage. If you want something from your Government, then you should be willing to pay for it (and not expect everyone else to pay for it).

Facing Consequences: What It Mean When You’ve Been Living Beyond Your Means

Let’s see if I can present a reasonably accurate description of the situation that is occurring ubiquitously throughout the United States. And by ubiquitous I do mean everywhere. It will not be surprising to you, once identified, that this situation has a national scope. The situation’s reach is pervasive in our governmental system; and while I do not maintain that the situation effects every governmental organization regardless of jurisdictional levels and across the entire range of size and geography, it does reach into the majority. The “situation” is the un-affordability of governmental structures and operations. I am not proposing that every individual and every type of governmental organization conceivable is by it’s nature unaffordable (though that is hard to avoid), only that in the US we have been sufficiently complacent to allow most such structures to have evolved into unprecedented levels of un-affordability.

This un-affordability of Government operations has surfaced under the harsh light of hard economic times. Politicians (of most any stripe) and bureaucrats will maintain and say that the current budget short-fall (read that un-affordable) situation is only because of the hard economic conditions that we are experiencing at the moment. And they will add that once the economy recovers then we can return to the normal operations which we had before the downturn. This position lets them help allay the inconveniences, difficulties and pain that spending cut-backs and lay-offs are causing throughout municipal, state and federal entities.

They were and are not incorrect in that the problems that have surfaced were because of the near catastrophic financial contraction of the economy, but they appear to continue to turn a blind-eye (I prefer, dead-brain) to the real problem. That real problem, it’s that US citizens are allowed to be unaccountable for their choices and are unwilling to accept the consequences of their demands upon government entities. We elect politicians who promise not to spend more money, who will not raise taxes, and who will make sure that our tax dollars are not wasted on unnecessary programs. Then once they get into office they do nothing to curb costs, they find essential reasons to create some new spending program or government task that requires additional funding, and they add a special interest earmark that they add each time a new bill comes before them. Gradually they pile more and more costs onto the budget and then complain how there is nothing that they can do to prevent it.

Compound this spendthrift approach to an illogical expectation that once we get through these economic problems that we will have learned our lessons and not let ourselves get into this situation again. We will be wise and prudent and not spend more than we can afford. After all, we have shown that after every previous time when we had gotten into a dire economic situation or when the cost of government was clearly more than what was affordable that we recognized the problem and did not allow it to happen again. OOPS! How did we get here again? We lived beyond our governmental affordability. We let the politicians and bureaucrats find ways to spend more and more and more. These illustrious leaders did these things sometimes with our eager agreement, sometimes because we were afraid, and sometimes because we were blissfully ignorant of what they were doing. But they were only able to do it because we are willing to elect such as these as our representatives. We are willing to hope that we will not have to pay the price for what we want and that it will come from someone else’s pocket. Well, we are as wrong as the anointed and elected few.

Do I expect that we will learn to do better from this situation? I do not! I think that we will go right back to beliveing that we can just choose what we want and not worry about what it really is costing us. I believe that we will ignore responsibility and thoughtful decision-making because it is hard and the people we elect are not trained in these techniques, nor are they aware of their limitations.

A Solution Path to Health Care Reform

If Congress wanted to be successful at Health Care Reform then they should look to use an approach that would be foreign to them. I don’t mean foreign as in a system perhaps more typical of international country’s form of health care. I don’t believe that the health care systems of other countries are founded upon a superior operating for funding approach. Those systems are simply structured to obtain their funding through their government’s own preferred forms of taxation.

What I mean by an approach foreign to Congress is one of which they could never conceive. An approach that implements a system and process that is not based on Congress’, or their supporting political staffs’, or lobbyist groups’ knowledge or ability; or more importantly their collective lack thereof. For such an approach Congress would have to pursue a creative solution; one that does not solely rely upon their power to tax, appropriate, or to earmark (graft) funds according to their usual methods.

Consider for example having Congress pass a Health Care Reform act that instead of just finding different groups to tax, or restricting the insurance plans and offers that can be offered in the marketplace, or creating obligations that do not contain future costs; would rather have Congress structure the reform act to motivate competition, reward effectiveness, and control costs. If instead of assuming that Congress is capable of creating a system that will work, why not create a process that will leverage the knowledge, abilities and innovation of the marketplace. Not only would such a creative approach stimulate the marketplace to find better ways to provide health care services than the current proposal. An innovative approach would also avoid having insurance companies, medical service providers and the other health care industry companies from investing their time and efforts in finding ways to leverage the loop-holes in the proposed versions of the bill, the misguided requirements, and the politically-intended abusive provisions to make their products as profitable for themselves as possible.

How would a creative approach differ from the Congressional approach(s)? In either case at the heart of the plan is a taxation funding method. You cannot propose to provide services that are not covered today if you don’t have a funding source, and the Government only has one funding source. But maybe the taxation method could be a reinforcing action rather than a punitive one. If the income tax rate schedule was appropriately calibrated to incorporate a minimal health care cost component then a health care tax-credit could be allowed for tax filers who have paid for an entire year of insurance coverage. This allows the Government to collect health care funding from individuals who would be ‘fined’ under the Congressional plan but would not require the Government to find and collect the funding. A similar tax provision for employers would also allow companies who do provide health care to receive a competitive advantage to companies that do not provide health care. On the corporate tax credit level, the credit would have to be based on number of employees and not total amount of insurance cost incurred; otherwise the gilded insurance packages granted to executives would be subsidized inappropriately.

Another area that a creatively structured act could improve upon the Congressional plan’s approach would be to specifically reward an insurance company that provides either more coverage in a market than their competitors at the same premium rate or who provide the same coverage at a lower rate. The Government could identify upfront the tax credit or exemption levels that a company can earn if they can achieve a superior cost performance than their competitors; and can provide an incentive formula that increases the taxes on insurance companies that generate additional revenues at a higher cost structure. Thus companies earning more but not improving the cost effectiveness of their products relative to their competitors will contribute more of their profits to the health care system. Such a design will make it obvious to insurance company executives where they are failing or succeeding, and their stockholders will be able to view an independent fiduciary evaluation of how well the executives are performing in maximizing their stakeholder value in the companies.

On the medical service providers’ side of the equation, a similar tax incentive can be created. A lower tax rate for low-cost providers and a higher tax rate for excessive-cost providers would incent the providers to find better ways to deliver their services.

The thing that distinguishes the Health Care system that Congress will produce from a better approach is that Congress’ plan does not recognize nor provide for rewarding that which works from that which does not. It does not generate an evolutionary force into the medical and insurance businesses but will stagnate the ineffectiveness that has produced the failed system we are trying to address and correct.

If you want to improve something then you have to change not how it is paid for, but you have to change what causes the providers and competitors to aggressively seek better costs, better services and better quality; and Congress’ plan does none of these.

It’s Only a Trillion Dollars, and It’s Just Tax Dollars

Congress passed a $1.1 Trillion spending bill yesterday. It was mostly passed by Democrats but there were a couple Republicans who joined in. The Republicans did not support it because, well they’re Republicans, and since it was not their bill to spend a trillion dollars they put on their self-righteous suits and denounced the bill. Had the situation been reversed, I have no reason to think that the Democrats would have decried the bill against virtual unanimous Republican support. We all know that some of the items covered by the spending would have been on a few different things, but both sides would have found their cause célèbre with which to denigrate the other.

The public will predictably divide into their Republican and Democratic cadre and a few splinter groups all of whom will be taking positions on why it’s too much, too little, being spent on the wrong things and needs to be spent on other things, or is a conspiracy by their favorite scapegoat cartel. What will not be noted or talked about is that the Government doing nothing different than they have been doing forever. They are crafting spending plans, spending commitments, spending objectives and spending pay-offs. The bill is compiled by Congress, for Congress, and of Congress. And therein lies the problem. Congress has willfully deceived itself into believing that the Constitution gave it the right to decide upon how the taxes of the country are to be spent.

What the Constitution really provides for is that the responsibility for all appropriations of the federal government being vested in the legislature. And the salient term that the politicians have for their own convenience left unattended to is that Congress has the “responsibility” vested in their hands. And they do not recognize that they are responsible. Responsible in the sense that they are to held accountable to the public for the proper and appropriate use of these funds for the benefit of the nation and its populace.

How do we know that the politicians are not responsibly spending our tax dollars? If they were acting responsibly then they would be seeking better ways to ensure that every tax dollar that was spent was being used to its utmost value. A responsible Congress would find ways to get more benefit for fewer dollars, not the spend more dollars without any benefit even expected. Where is Congress even employing any of the successful capitalistic processes that have been so powerful in creating the enormous wealth of the nation? Congress has made itself an un-responsible assembly. Congress has neither leaders, members or supporters that understand or even recognize their moral obligation to public service for which they were elected and to which they pledged their lives and honor.

The huge deficit that imperils the United States is and has been dutifully crafted by each successive Congress regardless of party. And the public continues to place the blame on whoever is not their preferred political group. It’s always easier to blame the other side, rather than accept that the responsibility is your own. Kind of makes you wonder where Congress got the idea of abrogating their responsibility.

You Can Have Anything You Want At Congress’ Restaurant

Ever wonder why the wealthiest nation and economy in the world has a deficit? It’s because the Republicans and Democrats have individually and collectively chosen to be the extreme versions of what they claim they are not. The Republicans claim that they want to protect the American people from Big Government and guarantee states and individual freedom from governmental bureaucracy, and low taxes. The Democrats claim that they want to ensure equal treatment under the law and protect individual rights, and to have affordable government.

The problem with these parties’ objectives is that the politicians of both stripes completely abandon and disregard the fundamental responsibility that is essential to any viable system of government. That is, the parties do not hold themselves responsible to insure that the Government that we have is the Government that we can afford. The parties and politicians are so greedy and self serving that they sacrifice everyone and everything to their view. We establish government programs that commitment the Government and therefore the citizens to fund and pay for ever increasing items. Whether these are social programs to guarantee that members of the society are kept out of poverty, even thought we have poverty that is not addressed by these programs. We have programs committed to keeping the nation secure and strong even as they weaken the economy and the strength of our social system. We feed the insatiable hunger of each little political idea that belongs to some special interest group which is constructed to benefit them not for the sake of the society but for their own benefit at the expense of everyone else.

Can you really say that you don’t understand what it means to fund US war efforts off-the books? Can you not recognize what accepting unfunded mandates will require of you eventually? Do you really think that promising to pay-out pensions and benefits based on future revenues does not require you to understand the price you will pay when (and I don’t mean if) there is an economic in-balance between the revenues coming in and the expenditures required to go out? And do you truly believe that you do not actually understand the ultimate responsibility that you will be called upon to stand up and deliver?

Well, if you haven’t accepted or understood that everything that the Government does is dependent upon you paying for it via your taxes. There is no money but your money. Whether you want the Government to provide security and military capabilities to protect the nation; to provide a social safety net to prevent the elderly, retired and children in our country from falling into crushing poverty; to subsidize one industry or area of the economy or another from some threat or to insure a level of independence to that area; or to provide basic social services such as education there is one fact that you can hide from or refuse to acknowledge but you cannot avoid. The Government is no different than you home. You have to pay for everything you want in your home.

And it is this responsibility that the Democrats and Republicans have purposely chosen to turn a blind eye to. They are afraid of and dumbfounded by the issues that this responsibility presents. These politicians have no courage to confront this issue or the integrity to put this issue before the voters in a clear and honest manner. We are already seeing the consequences of this cowardice.

And at the very heart of this irresponsibility is the public. The politicians’ failure is only possible because the public allows them to be unaccountable. The fault and guilt stands before you each and every time you stand before a mirror. The failure is the populace and its irrational desire to get more out than you have put in, or worse to get something for nothing. America can no more afford to operate as if we were fools or stupid as Congress.