Friday, July 31, 2009

Banks in the News

J P Morgan and Goldman Sachs did not want bailout money. They were forced to take it and Paulson set the amount they were required to take. They have already paid back the TARP money. Now enter Andrew Cuomo, Attorney General of the state of New York (currently teetering on bankruptcy). According to Cuomo, these two evil banks, among others, paid out almost as much "bailout" money in the form of bonuses as they received. Evil, evil. Except that these banks never asked for the TARP money, didn't want it, and were threatened with punitive government action if they didn't take it. These facts are left out of the media stories that are floating out there today. This is big government at its worst. Is it any wonder that business is cringing and not anxious to participate in any recovery?

The WSJournal details the new administration's "regulatory" approach to banks which is forcing banks to curtail lending to businesses. Meanwhile, the Congress and the President are excoriating these same financial institutions for not lending. Thanks President Obama: tell them to lend and then instruct your regulatory apparatus to force them not to lend. This is certainly "change we can believe in." Is it any wonder that commercial loans are hard to come by. That will continue to be the case as long as this administration is in power.

Thursday, July 30, 2009

Baucus-Grassley Won't Work Either

Senator Grassley, Republican of Iowa, is one of a long list of Republicans whose main desire is to show that he can broker a compromise with Democrats. Whether or not this is virtuous activity depends upon what is in the compromise. The Baucus-Grassley compromise, now being fashioned in the Senate, is no better than than the worst of the Congressional plans. Shifting around the deck chairs on the Titanic will not keep the Titanic afloat.

Requiring all insurance companies to sell insurance to folks with pre-existing conditions at the same price as they sell to folks without health problems distorts the market mechanism. Ultimately it means that young people (who generally don't need health insurance) will end up subsidizing older folks who smoke too much, drink too much and eat too much. Is this a good result? This also provides an incentive for folks with "bad" lifestyles to continue them and folks with "good" lifestyles to toss them aside. One reason for leading a healthy lifestyle is to avoid the health care expense that might result from leading an unhealthy lifestyle. This provision on pre-existing coverage takes away that incentive and, in fact, provides exactly the reverse incentive.

The best analogy is to the auto insurance market. Should you charge the same auto insurance rates to folks with bad driving records as you do to folks with good driving records? It is easy to see that that would be unfair and inefficient. Would it be a good idea to require all auto insurance plans to insure gas and oil purchases and tire changes and purchases? No. Then why require such stupidity with health insurance. Why not simply require a catastrophic health care policy, which is basically what most states require for auto insurance. Let people pay their own predictable, routine health care expenses

Meanwhile abortion is covered in both the House and Senate version of this bill. Does an 80 year old person need abortion coverage? Under Obamacare they have it. They also have Aids coverage, just in case. If you have "politically favored" diseases, then you're covered. Too bad if you have heart trouble or cancer (the main killers of human beings in the US). If you are also over 65, then the British system shows your get to go the back of the line. In effect, the British have decided that people over 65 are not worth saving and not worth "wasting" health care expenses on. This, presumably, is the future of Obamacare where wasteful healthcare spending (such as that on heart disease and cancer) can be eliminated for folks over 65. That is where we are headed.

Folks with pre-existing conditions and no insurance (which would not be the case if catastrophic was required by law), could be handled by something equivalent to medicaid requiring means testing. Over time, a law requiring catastrophic insurance for everyone would eliminate this problem.

The Baucus-Grassley compromise is a complete disaster. It basically paves the way for moving everyone eventually to medicare and a single payer national health care system. Don't be fooled.

The reason the health care system is broken is medicare, medical lawsuits, and tax free employer-provided health care for employees. Phase out medicare, provide tort reform and tax health care plans provided by employers. Then the simple requirement that everyone should have "catatrophic" health insurance will provide adequate health care coverage while controlling health care costs.

Wednesday, July 29, 2009

Blue Dogs Are All Bark and No Bite

The Blue Dog Democrats have cut a deal on health care that, if enacted, will destroy any hope of reasonable health care for most Americans. The bill that the Blue Dogs have agreed to destroys the few remaining vestiges of the free market in health care. If passed, it will soon move us to a single payer system, since the system being created is completely absurd and will drive health care costs dramatically higher for every American.

I guess after Obama care, we can then move on to foodicare and homeicare and everythingicare. Certainly food and shelter are at least as important and essential as health care.

China and India must be celebrating.

"We've Found the Bottom"

So says Mark Fleming, chief economists for First American CoreLogic, a data firm according to the NY Times this morning. The big news is that the Case-Shiller housing price index showed a one-half percent increase for the the month of May. Though down 17.1 percent since May of 2008, the index had its first monthly increase in 34 months. This is definitely good news.

Denver, Cleveland, San Francisco, Boston and Dallas all showed price gains. Cleveland homes were up an average of 4.1 percent in May.

Now, will their be a real recovery. If the Obama programs are defeated in Congress, the answer is yes. Otherwise, look for another leg down.

Monday, July 27, 2009

Some Encouraging Signs

To begin with, the Obama onslaught seems to be weakening. Both "cap and trade" and "health care" may not make it. It's too soon to know for certain, but public support has vanished for both projects and many Democrats in close districts and close states are having second thoughts.

The problem for the Democrats is that if these bills pass, there are no winners in the foreseeable future, only losers. Cap and trade simply raises everyone's electricity bill and imposes new burdens on what people can do with their own property. Where's the plus side of the ledger? Who gets happy? No one. Not even the environmentalists, since global carbon emissions are virtually unaffected.

A similar, but more complicated story, applies to the "health care" bills that are in the Congress. No one's health care will improve and no one's health insurance will become less expensive. On the negative side of the ledger, health care costs will definitely be headed higher (see the Congressional Budget Office study), taxes are definitely headed higher and most people will have major negative changes in their insurance policies that they didn't expect.

So, there aren't any real winners in any of this, but lots of losers. It is easy to see why Democrats who won close elections in the past may be getting exceedingly nervous. The bloom seems to be off the rose for Obama as well. His crude attack on the Cambridge police, an opinion not burdened by knowledge of the facts, laid an egg with voters according to the polls.

Big victories lead to extreme arrogance and arrogance breeds trouble. The Obama gang is in trouble. This is actually good news for the economy. If the Obama plans can be defeated, the economy would then stand a good chance of recovery. There might even be some hope for employment gains, but that is less likely. The Congress has already passed enough "toxic employee" legislation to make it much, much tougher for employment rolls to improve.

But things look better now than they did a month ago. Three cheers for the Blue Dogs!

Saturday, July 25, 2009

Health Care -- The Right Answer Once More

The free market's great strength is its ability to allocate scarce resources in an efficient way. Medical services would best be delivered by market forces. Having the government involved in any significant way distorts the beneficial effects of market forces and leads to problems. The biggest problems now facing health care are: 1)medicare; 2)medicaid; 3)prescription drug coverage for seniors. These three programs have the effect of increasing medical care costs without limit because they create users of medical care services who don't pay for the services (at the margin). They may pay, after the fact. Or, they may pay very small co-pays. But, basically those entitled to medicare, medicaid and prescription drug coverage are able to pass along their medical expenses to John Q. and Susie Taxpayer.

If you had an equivalent system for food, then food prices would be out of control. The problem is that creating a buyer who is getting much of the product for free creates unlimited demands on whatever the product is. You cannot produce an infinite amount of health care at minimal cost. That is not one of the available options.

The options are twofold: 1) either the market can allocate medical services according to what people are willing to spend on them or 2) the government can decide who can have medical services, when they can have them, and what they will pay for them. The latter is mostly how we now handle medical services and is the reason medical care costs are out of control. The free market has not been permitted to work.

The president and the Congress want to expand medicare to the entire population. (That is basically the ultimate destination of both the House and Senate proposals). These proposals, if enacted, will destroy the medical service industry in America and create a bifurcated health care system much like the public and private school systems now prevalent in the US. The poor and middle class will be left to wallow in the public system. High income folks will seek out private hospitals, private insurance and private health care. Obama, Kennedy, Kerry, Gore and Pelosi will use the private system just as they do today when they send their own children and grandchildren to private schools, they will send themselves to private doctors and private hospitals.

If you are worried that the relatively low income part of the population cannot afford high cost coverage, then, by all means, subsidize the costs of "catastrophic" insurance packages. Such packages are high-deductible insurance packages much like auto insurance packages that most states require their citizens to have. Any American who can afford, tobacco, beer and alcohol, cable TV, cell phones, and/or drugs, can afford "catastrophic" health care insurance and can afford to pay the out of pocket expenses that would go along with such packages.

Health care is affordable if the market is left to allocate medical services. Government run health care will simply have the government decide who can have what medical services and when they can have them. Abortion and aids will be covered (as they are in the current House and Senate bills), but surgery for heart trouble and cancer will not be (as they are not currently covered in England for those over 65 years of age). The main killers of older Americans are heart trouble and cancer. Aids kills relatively few and is mostly confined to a narrow demographic. Why all Americans should be insured for things they cannot contract (old folks are not likely to get pregnant) is beyond absurdity.

What the President and the Congress want to do is to decide which health problems are "good" health problems -- aids, abortion, etc. and which health problems for which care is not necessary -- cancer, heart trouble, hearing and sight problems. Most Americans need coverage for cancer, heart trouble, hearing and sight problems. Very few need coverage for aids and abortion. Yet the President and the Congress favor the latter group over the former.

This is all about politics and who your political friends are and has nothing to do with providing health care for the citizenry.

Frankly your health does not generally much depend upon the health care system that is available to you as almost any physician will attest. Life style choices determine most folks health care, with or without the provision of medical services. Clearly there are cases that are not correctable by life style changes. But these cases are a small minority of those treated in the health care system. Go visit any emergency room and you will see what I mean.

The good news is that there is now a good chance that Obama and Congressional Democrats may lose their current fight to destroy the US health care system. That may be why the stock market has begun to show some real strength lately.

Friday, July 24, 2009

Job Cuts Outpace GDP Fall

The Wall Street Journal joins the NY Times today with an article pointing out that joblessness, "breaking from historical patterns" is unusually high given the relatively modest decline in GDP during this recession. "Employers unusual behavior seems to have intensified as the economy has stabilized." Is Obama reading this? How about Larry Summers and Paul Volcker? Are they paying attention? Every proposal from Obama since inauguration day has provided reasons for businesses to lay off employees and to find ways to avoid hiring them if and when the economy does better. Yes this is "breaking from historical patterns." More "change we can believe in."

There will be no articles like this one written about China. They are busy promoting new jobs not destroying them. Trains passing in the night.

Thursday, July 23, 2009

Stocks Are Going to Keep Going Up

Even Obama can't keep the stock market down. In fact, his declining political fortunes may be giving the Dow Jones a needed boost.

Can stocks go up while the economy lies at anchor? Yes, businesses can be profitable even if there is considerable unemployment and a sluggish economy. For one thing, the rest of the world is not following the Obama plan, so that, except for the US, the rest of the world has an excellent chance of recovering quickly from the current economic crisis. Our companies can sell to them (assuming our companies don't use coal-powered electricity and have few, if any, employees).

Labor, with a little help from its Congressional allies, in the US seems determined to price itself out of the market and will remain in excess supply (unemployment) indefinitely. But, that doesn't mean that life doesn't go on outside of the US and that employment opportunities won't be available elsewhere. They will be.

The world is going one way; the US is going the other way. The world will recover and avoid the stagnation that America seems to rushing towards. Businesses that take advantage of the freer markets and more efficient labor markets that exist outside the US will prosper. Many of these businesses are American public companies.

In the 1930s, the US found itself adopting economic policies that prolonged the depression. While the US remained mired in the depression until 1941 (from 1931 to 1941, unemployment in the US never got below 14 percent), the rest of the world (with the exception of France) had a boom. Only the US and France had a decade of misery in the 1930s. The US is now following the same path if followed in the 30s, a path of economic stagnation. It is not as bad as the 30s yet, but Obama may be finding ways to get us there. If you bought stocks in the summer of 1932 and sold them in 1941, you made better than 8 percent per year returns, even though the economy was a disaster. That's probably a blueprint for our future under the Obama regime.

So, don't be surprised if economic stagnation in the US takes place side by side with a healthy stock market. Businesses adjust. If US policy is to make employees toxic, that doesn't mean that businesses can't figure out how to make substitutes through outsourcing, through use of temporary employees or contract employees, or through the creation of subsidiaries outside the US not subject to our increasingly nonsensical economic policies.

Markets have a way of working even though governments are stupid. American public companies will make adjustments, avoid high levels of employment, and adjust to the new realities. And they will thrive. The average American will have a tough time, but stocks need not.

NY Times Sees the Light

The New York Times, took a break from bashing Sarah Palin, long enough to point out the number of misstatements by President Obama in his press conference held last night. The biggest misstatement was his comment about taking $ 2 Trillion out of the budget over the next ten years. As the Times correctly notes, $ 1.5 Trillion had already been eliminated by former President George Bush in his negotiated exit strategy signed with the Iraq government, back in 2008. (The other $ 700 billion reduction is a mirage). So much for Obama cuts. Another fabrication (this is the polite way of putting it).

The Times further took the president to task for misstating the support of the AMA and other medical groups for his proposals. Additionally, he mislead the nation about the bipartisan nature of his Senate bill. On and on. As the Times and others are learning, if you hear Obama say the "sky is blue," better go get your umbrella.

The NY Times also has an intriguing article showing that unemployment is much larger than is consistent with the decline in GDP in this recession. As the Times notes, all indications are that employment is not likely to improve much going forward. No kidding. Must be the case that businesses are keeping up with Congressional activities. It will be a rare businessman showing any interest in hiring anyone given cap and trade, health care reform and card check.

It's good to see the NY Times wake up and smell the coffee.

Wednesday, July 22, 2009

Obamacare -- Tonight's Press Conference

Obama's logic is that only the government can lower prices and make health care affordable. Can't we apply that same reasoning to housing and food and pretty much everything else? Why not let the government take over all business and all industries? That seems to be the logic of his argument. Why not foodicare? Isn't food important? Doesn't everyone have the right to food at a low price? Same for housing! Same for transportation! Doesn't everyone need a computer at a low price? Why not just nationalize everything and then let Obama tell us what we need and what we don't need? I think I've seen that system before.

Obama said that his administration cut $ 2.2 Trillion out of the next ten years budget. That is actually false. There are no Obama cuts. That number arises by assuming that Iraq war spending goes to zero in 2011 and years beyond. There are no cuts. Obama is, at best, confused, at worse deliberately misleading the public.

Obama said that there are too many unnecessary medical tests. Correct. The main culprit is the raft of lawsuits that descend on doctors who do not test for every conceivable possibility. But, Obama is supported by plaintiff lawyers. So, he supports the lawsuit bonanzas led by the John Edwardses of the world. No other country permits these lawsuits. Obama knows that. But, those are his supporters, so he supports these outrageous lawsuits. The excess tests have nothing to do with the private insurance system and have everything to do with the litigation that surrounds the medical practice. Ask any doctor. Doesn't Obama understand this?

Things would be worse now, says Obama, if we had not bailed out the banks. Really? The economy sure looks good now, doesn't it? Way to go!!

According to Obama, having the "government option" will "make sure there is some competition out there." Is he kidding? Why not have a government option in every business "to make sure there is some competition out there." Is Medicare a form of this competition? Does Obama understand anything about capitalism? Does he like the way the government runs the postal system? Is Obama kidding?

You have to wonder if Obama is getting enough sleep.

Jindal Likes Big Government Too

Today's Wall Street Journal shows that conservative Republicans are just as far off into fantasyland as the Democrats. Jindal provides his plan for "health care reform," which is basically big government brought to you by the Republicans. What it has in common with the Democratic plan is the continued view that government knows better. Jindals plan is Hillary-Obama-lite.

The only worthwhile thing that Jindal suggests is to curb the completely absurd lawsuit frenzy that plagues American health care. No other country in the world permits the kinds of lawsuits that have become routine in the US, fattening the pockets of people like John Edwards, while raising the costs of health care for everybody else. On this point, Jindal is right. But, this one is obvious. Only the plaintiff bar (and Obama) are opposed to reforming this nonsense.

Less obvious are all the mishmash of "reforms." The right answer is to eliminate the exclusion of health care benefits from employee income for tax purposes. Make employees pay directly for their own health care insurance (and subsidize those who cannot afford it). If you do this, employees will choose high-deductible catastrophic health insurance plans just as they do with auto insurance and home insurance. The current system is equivalent to having auto insurance that covers gas, oil, tune up, and so forth. Comprehensive health insurance plans belong in the junk pile.

Finally, phase out medicare. Medicare doesn't work. It was a stupid idea in the beginning and is a budget buster that may eventually bankrupt the country. Get rid of prescription drug coverage for seniors -- another stupid idea. (These programs basically are "reverse Robin Hood" packages that subsidize relatively well off folks at the expense of average middle class Americans). There is no reason for the government to be funding individual's health care. Isn't food and shelter more important? Why don't we have foodicare and homicare to cover food and shelter for everybody? All of this is ridiculous of course and so is medicare and the prescription drug coverage.

Republicans are just as absurd as Democrats on the topic of health care.

Tuesday, July 21, 2009

"Health Care Reform" & Health Care Costs

The Obama Team continues to make the rather strange argument that their "health care reform' bills will "control costs" in the future. An interesting argument! Without question the so-called reform bills will increase the demand for health care. Isn't that the point of the legislation? -- to allow better access to health care for more Americans. Doesn't that mean more health care for more people. How does that control costs?

Well, one thought that the President has offered on a number of occasions is that "preventative care" will do the trick. No serious medical expert buys into that one. In fact, the opposite is true. More preventative care, which, by the way is a good idea, will ultimately increase the demand for health care not lower it. So, that won't do the trick.

Here's another idea. Have the American Medical Association announce that they will find hundreds of billions of dollars of savings without any specifics. That should work.

The cold hard facts are that the so-called "health care reform" will dramatically overburden our existing health care facilities by expanding the use and overuse of such facilities. Instead of controlling costs, costs will escalate further as they have since the introduction of medicare and medicaid (and for the same reasons).

Only by outlawing actual health care procedures, which is what other countries have done, will costs be contained. For example, if you just add the addendum that everyone is covered but we only provide care for folks under 65, then you can save a lot of money. In effect, that is essentially the British system today. Welcome to the new world of Obama care. It's great unless you happen to get sick.

Cap and Trade Once More

No one seriously believes that cap and trade legislation will have any impact on climate change anymore. India, this week, and China, week after week, have made it clear that they are not signing on to carbon emission caps....period. If China and India don't sign on, then it doesn't make any difference what the US does. Hillary Clinton went so far, last week, as to say, in India, that it isn't fair to ask less developed countries to "make sacrifices" when they are so far behind the developed countries. They agree. So forget about reducing global carbon emissions. That isn't happening -- cap and trade or no cap and trade.

So, the Obama crowd now sings a different tune. Now, cap and trade is about "energy independence." How interesting! I suppose if we destroyed our domestic corn crop we would be promoting "food independence." Or suppose we burned down all of our trees, we would be creating "wood indendence." This is a novel theme. By destroying our domestic coal industry, we promote energy independence. Heck, why not just outlaw the use of energy in the US in any form. That would create "energy independence" overnight. Perhaps, China and India would go along with outlawing energy in their countries as well. Sounds like a plan.

Sunday, July 19, 2009

Where's The Recovery?

The Obama Administration predicted, way back when (in January of this year), that the stimulus package would almost instantly show results. Well, there has been quite a bit of economic news since then. Unemployment has gone from 7 percent when the Obama folks opined optimistically about their stimulus package to 9.5 percent and counting. The Obama folks predicted that unemployment would top out at 8 percent. That prediction was proved wrong eight weeks later by an unemployment rate that exceeded 8 percent. So much for Obama Adminstration predictions.

It wasn't realistic for the Administration to make rosy forecasts at a time when the economy was slipping into the abyss. The Obama folks were too optimistic by far. Now that businessmen see the taxes and regulations ahead, the employment prospects are much, much worse. The stimulus bill is now an unfunny joke and a fiscal catastrophe. Even many Democratic Congressmen are beginning to run for cover. Obama may end up making Hoover look good.

The Obama folks are now back to blaming George Bush. But George Bush didn't say that unemployment would top out at 8 percent. That prediction was made in the budget bill that Obama submitted by Obama's advisors. At the time it looked silly. It looks much worse now. Forget George Bush. Concentrate on the here and now.

There is good news and here it is: There is a growing chance that "cap and trade" and health care may fail in Congress. Support for both in Congress and around the country is collapsing for these job killing proposals. People want to see some jobs, not political payoffs to Obama's pals. Obama better wake up and smell the coffee. It looks like the public may be waking up.

Take note of the meeting of the nation's governors Sunday in Biloxi, Mississippi. Check out the statements of Governors Bedesen, Gregoire, Richardson, and Ritter. All four are Democrats and highly critical of the Obama health care bills. Not a single Governor spoke up in support of Obama's health care plan. According to today's NY Times: "Governors in both parties revolted, trumpeting their opposition in a conference call last week with Senator Max Baucus, the Montana Democrat who leads the committee." Even many Democrats are beginning to wake up and smell the coffee.

So, take heart. This stuff is not law yet and the opposition is growing.

"I Want To Be Very Clear"

"I want to be very clear. I will not sign on to any health plan that adds to our deficits over the next decade...." This strange comment was made by Obama in his weekly radio address and reported in this morning's NY Times. Congressional Budget Office, controlled by the Democratic Party, is estimating that the health care proposals before Congress will at, at a minimum, add $ 2 Trillion to the national debt over the next ten years. Not only will Obama sign such legislation destined to either wreck the US health care system or lead to national bankruptcy (or both), Obama is pushing legislators to vote on the package essentially sight unseen. He is demanding an early August date of passage, which would mean that Congress would have virtually no time to consider this package before being forced to vote on it. More "change we can believe in."

Is Obama making these statements on purpose to mislead the public or is it possible he is unaware of the Congressional Budget Office's detailed analysis of the cost of his health care program? It is becoming more and more difficult to give Obama the benefit of the doubt about his public statements. He calls "cap and trade" a "jobs bill." That's like calling abortion a method of increasing the population. He says the health care bill won't add to the deficit. More and more, if you are looking for the truth from this President, it is necessary to believe that he means the exact opposite of what he says, because the truth is, more and more, the exact opposite of what this president says.

Saturday, July 18, 2009

The Coming Health Care Disaster -- Just Say No

Our current Medicare and Medicaid nightmare was proposed in the Kennedy Administration. It ultimately passed in 1965 and was signed into law by President Lyndon Johnson. Later in the first Nixon Administration, Richard Nixon and Congressional Democrats would greatly expand Medicare and Medicaid, as well as Social Security, and make both of these entitlement programs unsustainable. It is just a matter of time until the country goes broke and/or the benefits promised or reduced or mostly eliminated. These ideas were absurd in the first place.

True, generations of old folks have taken advantage of Medicare, Medicaid and Social Security at the expense of younger workers and future unborn generations to come. This was basically a transfer of resources from one group of citizens to another and most of those footing the bill have not been born yet, so they had no vote on this. But, they will pay for it.

This is a cruel, unfair system. The wealthiest tend to live the longest, so most of this is a transfer from one set of folks to a set of folks that have more income and resources than those footing the bill. Minorities, especially, are victimized by these systems as their death rates are much higher than that of non-minorities.

Those who oppose the expansion of medicare, medicaid and social security, typically looked for compromises. That's the wrong thought process. The right policy would be to eliminate these systems. Grandfather current recipients and eliminate any future recipients on some kind of sliding scale -- the sooner the better.

Now, Obama proposes to make an unfair system a feature of the landscape. The health care reform that Obama proposes destroys our health care system and will lead to a national bankruptcy of the United States. This plan can only avoid bankrupting the country if its promises are not kept. This plan will require arbitrarily letting people die rather than receive health care, something that is not a feature of present day America. This plan is cruel and financially ruinous.

There is not an acceptable compromise to this impending disaster.

The right health care system is a free market system -- which we do not currently have because of government interference in every phase of our health care system. Tax deductibility of business health plans for their employees should be eliminated (On this one issue, Obama is right). If employees bought their own health insurance, they would buy the same kind of policies that they buy for their car insurance and home insurance -- large deductible policies. That is what is needed. Also, the absurd punitive damage suits that have all but destroyed sensible health care procedures should be eliminated. Let doctors practice medicine, not spend their time looking over their shoulder for John Edwards and his ilk.

There is virtually no one in the United State who cannnot afford catastrophic health care coverage with high deductibles. Many of the so-called uninsured have no problem affording alcohol, cigarettes, and drugs. Let people decide for themselves what they consider important, not the government. If people prefer drugs, cigarettes, and alcohol, let them consume them. Why force people to do what they do not want to do? That is opposite of a free country. Is freedom, only the freedomto do what Obama considers appropriate?

There should be no compromise with Obama and others that are bent on destroying health care for Americans through the ruse of expanding insurance coverage. Get the government out of people's way. Health care was always affordable before we discovered medicare and could be again.

Friday, July 17, 2009

Congressional Budget Office Weighs In

Thank goodness for the CBO (the Congressional Budget Office). The truth shines upon the health care bill now rampaging through Congress. As the CBO pointed out yesterday, the health care bill will dramatically increase health care costs, not the reverse. This is exactly the opposite of what Obama has been saying. In fact, Obama claims that the main reason to enact "health care reform" is to lower health care costs. The CBO, controlled by the Democrats in Congress, says no way. Obama is wrong according to the CBO.

This won't deter the president, however. He seems to believe that if you repeat something that is false long enough and often enough, people will be fooled. Thanks to the CBO that may not happen on health care.

Just as "cap and trade" is not a "jobs bill" but a job killer bill, the health care bill could easily bankrupt the US unless costs are controlled by outlawing most health procedures that are routinely available to all Americans today with our existing health care system.

Hopefully, the Congress will face up to the truth about these initiatives before significant long term damage is done to the country -- damage that may not be easily reversible. It would be a shame if this damage was built upon a foundation of misleading and false statements from the president.

Thursday, July 16, 2009

Tale of Two Countries

Second Quarter results are in:...."strong auto and housing sales, a soaring stock market and solid retail sales have helped renew confidence here...economy grew by 7.9 percent in the second quarter of this year..." Wow! Sounds good doesn't it...but it doesn't sound familiar does it? That's because these are China's results not ours.

China is headed in the right direction -- no "cap and trade" and "health care reform" for these guys -- nope! China is interested in jobs and economic growth and they are getting them. Three cheers for China!! Within a generation, China will be leading the world economy by adopting policies that promote economic growth not stagnation. What a great historical irony!

Meanwhile back in fantasyland: House Democrats announced a new $ 100 billion tax on health insurance companies in their continued pursuit of self destruction. I guess that's another in their "no new taxes" concepts and a move to "reduce the cost of health care." Too bad if you need health insurance. Prices are headed up thanks to the Democratic Congrass. Look for the American economy to continue to fade as long as Obama, Pelosi, and Franks are in control. But, the rest of the world is not so foolish...thank goodness.

So, CIT is likely to join Lehman getting no government help. We continue to pick winners and losers. Geithner Bernanke and Company don't like CIT I suppose, so goodbye CIT. And the beat goes on....

Wednesday, July 15, 2009

The 8 Percent Solution

In case the new taxes from "cap and trade" and the 5.4 percent surtax on high income taxpayers and the elimination of the Bush tax cut is not enough in new taxes to satisfy you, try the 8 percent payroll tax that is part of the health care bill now before the House of Representatives. One way of cutting that 8 percent tax is to reduce payroll. No doubt, that will be the response.

Keep it up Obama and Congress: 25 percent unemployment is doable....especially with these policies.

The economic recovery that by now would be well on the way is not coming anytime soon. Not until this Congress is gone.

Tuesday, July 14, 2009

How to Pay for Health Care: Adopt a Job Killing Strategy

The House Democrats with Obama cheering from the sidelines have proposed a 5.4 percent surtax on the highest income brackets. The Wall Street Journal notes today that six of the ten taxpayers effected are, in reality, small businesses, filing as a subchapter S or LLC. Thus more jobs will be whacked out of the economy to finance the health care plan.

The combination of the new surchange and the end of the Bush tax cuts is a massive, nearly twenty percent, increase on the very people that provide jobs for the economy -- small business.

Between cap and trade and the financing of health care, Obama and the Congress seem bent on getting us back to the 25 percent unemployments achieved in the Great Depression.

This is certainly change we can believe in....sadly. China must be loving it.

Jobs and the Climate Change Bill

Proponents of the "cap and trade" legislation continue to argue that this legislation "creates jobs." Their argument is the following: by effectively taxing coal, the price of energy created by coal (and other carbon emitting sources of energy) will increase. This price increase will lead companies to substitute other energy sources -- green energy sources -- for the now more expensive coal or other carbon-emitting sources of energy.

The argument that coal and other other carbon emitting sources of energy will become more expensive is correct. No doubt about it. That will clearly reduce jobs in industries that produces those sources of energy. That will just as clearly reduce the jobs in industries that will now face a higher cost of sources of energy -- principally the electricity generation industry. So, no doubt, many, many jobs will disappear from the implementation of "cap and trade."

Where is the job creation? Obama calls this legislation a "jobs bill." Really?

Obama has a novel concept: put a multi-hundred billion tax on an industry, kill it off, and then hope that alternatives thrive! This is an absurd view of how economies work. More likely, the result of the Obama war on carbon and the economy will dramatically reduce the standard of living of most Americans, do nothing for global carbon emission, and guarantee a generation of economic stagnation for the American economy.

Monday, July 13, 2009

Goldman Sachs' Results -- Terrific

Goldman Sachs will announce earnings today and the bottom line is said to exceed $ 2 billion. That is super good news!!! If the government would remove its stranglehold on Citi and BAC, we could, potentially, see a real recovery in the financial sector. The Obama plan seems to go in the opposite direction and has effectively dried up US credit markets for all but the well heeled. But, markets have a way of doing an end run around excessive government interference. Maybe that can happen here.

The significance of the Goldman news is that maybe....just maybe...the free markets can survive the Obama attacks and the economy can regain its step. Contrary to the conversation emanating from the White House, the past 30 years were among the best, economically, in our history. Americans got used to prosperity. They could get used to it again, if the Obama crowd would lay off.

Watch for the Obama crowd and their Congressional allies to attack Goldman Sachs as an example of greed and corruption, as this plays out. Seeing people succeed through hard work and effort seems to grate on Obama and his allies.

Saturday, July 11, 2009

Where are the Predatory Lenders When We Need Them?

This morning's NY Times pretty well tells the story of the aftermath of the Obama Administration's attack on housing lenders -- new home buyers with reasonable credit, but limited history, cannot find mortgage loans. Thanks, Barrack.

This is the result of demonizing lenders and altering the rules abruptly at Fannie Mae and Freddie Mac, going from one extreme to the other. Perfectly predictable.

The new Obama regime has done the same thing with credit cards and with the same results. Middle income folks with good, but not great, credit are toast in this market as well, thanks to the President.

This freezing out of the average guy in the mortgage and credit card market will have a serious dampening effect on the nation's ability to get out of the current mess. Indeed, it will make the current recession worse.

Obama policies have consequences, unfortunately..

Rangle's Recovery Plan

Charlie Rangle, Chairman of the House Ways and Means Committee (the committee responsible for initiating tax legislation), has put forth a new plan to propel the economy forward -- soak the rich. There's a new idea. For incomes above $ 280,000, Charlie proposes a 1 percent surcharge that increases at the $ 400,000 and then $800,000 level. That works about to above 3/4 of an employee at the $ 280,000 level, rising to nearly three employees at the $ 800,000 level, for every small business showing those income levels. This plan would basically stimulate more job losses, probably several hundred thousand lost jobs in the next two to three years.

But, it may not be that bad. Wealthy folks have a unique ability to shift their income from one category to another and minimize taxes. In fact, there is no reason for folks like Bill Gates or Warren Buffet to even have taxable income. They could simply borrow enough to live and not even bother file a tax return. That's probably not their plan, but it is suggestive of the moves that wealthy folks take to avoid onerous taxes. More likely, the new tax rates will just create incentives for wealthy taxpayers to income-shift and therefore pay lower taxes overall. So, realistically, under Charlie's new tax proposal revenues will most likely fall, adding to the already astronomical federal deficit. Sounds like a plan.

The great middle class can't income-shift. They receive w-2's and 1099's every year, leaving no place to hide. Eventually, their tax rates will rise to make up for Charlie's soak the rich scheme. It is now estimated that middle income tax rates (folks making between $ 25,000 and $ 65,000 per year) will face marginal tax rates above 65 percent to finance Obama's schemes. This sounds like "change you can believe in." It is certainly change.

The grand Obama wealth redistribution scheme is, in reality, a wealth destruction scheme. Charlie Rangle is certainly doing his part. Tax hikes in the middle of a devastating recession is a stroke of brilliance!

Friday, July 10, 2009

Trouble in River City

That's right...trouble...starts with T and ends with e. The economy is continuing to weaken. There are just no green shoots to speak of. Today, the consumer confidence numbers confirmed what most of us have been sensing. Folks are reluctant to spend; businesses are reluctant to hire.

Looming large is the set of problems faced by state and local governments. The next shoe to fall will be layoffs of teachers and other state and local government employees. State and local government finances are in free fall. California is by no means a unique situation.

A real stimulus plan might have helped. We will never know, since the stimulus plan was converted into a relief plan by the Congress and President Obama, pretending this was the real deal, signed it into law. It has done no good. It has simply added another trillion dollars to our national debt for no good reason. And now we are back to square one.

So, what do we do now? Obama has basically run out of ammunition. "Cap and trade" is a depressant, not a stimulus. All "cap and trade" does is increase electricity bills with no real impact on global carbon emissions. Health care reform is a budget buster. No stimulus impact there either. Congress is busily rigging our banking and financial system so that serious lending will by stymied for years to come. That won't help much. "Card check" is on the horizon. That's a job depressant. Meanwhile the Obama folks still trumpet the "greed and corruption" theme that discourages businessmen from taking any positive actions. The Obama legislative program penalizes businesses that hire and rewards those who don't hire. It's not obvious how that helps.

Tragically, there is no Obama recovery plan.

This economy may be headed for another leg down. This seems more and more likely. The Obama Adminstration has fumbled away their opportunity to be helpful. Sooner or later, even the fawning media will have to face the reality. This Administration is on the wrong track. Beating up on the business community is not an effective way to promote job growth. Wasting taxpayer dollars and running up massive deficits for no reason is not much of a plan either.

Wednesday, July 8, 2009

The NY Times Gets a Wake-Up Call

After relentlessly cheerleading one spending program after another in both the Bush Administration and the Obama Administration, the NY Times has two articles in today's edition that have a dose of unpleasant reality. The country cannot afford it.

One article discusses the growing fiscal nightmares of local communities in NY State, facing massive pension fund contribution increases. Keep in mind that those receiving these pension benefits are wealthier and have higher income on average than those paying the taxes to support them. This is the "reverse Robin Hood" nature of modern state and federal spending. Take from the average taxpayer and give to the priveleged state and local employee, many of whom in NY state and In California are retiring on six figure annual retirement packages. Some take the six figure retirement income and go right back to work at the same old jobs (doing virtually nothing). Nice work, if you can get taxpayers to fund it and that is precisely what is going on.

Another articles quotes various prominent left wing economists (and one right wing economist) that the country is on an unsustainable fiscal path. (This is before the so-called health reform adds another $2 Trillion in additional debt to the mix). There seems to be general agreement that the US is rapidly becoming a banana Republic. Meanwhile, the economy is getting worse.

The Obama crowd will no doubt soon propose more wasted spending putting taxpayers deeper in the hole with no real effect on the economy. That's basically what happened with the first stimulus package, with its almost non-existent infrastructure spending and no payroll tax cuts, both items that Obama had promised in the days leading up to his inaugural. But, sensible pollicies gave way to politics-as-usual and tha Obama-Pelosi team simply wasted another $ 800 billion in taxpayer money, rewarding their political allies, and tossed the economy under the bus.

Glad to see that the NY Times is waking up and smelling the coffee. Maybe, Krugman will see the light some day. But, that might be too much to ask.

Sunday, July 5, 2009

How to Crush The Housing Market by B Obama

The latest Obama inspired intiative to crush the housing market (wonder why Obama would want to do that?) is the little noticed requirement in the "cap and trade" bill that passed the House of Representatives that would require homeowners to certify that their home was "energy efficient" before they could sell the home. Great idea! People are having trouble selling their homes already. With this in the law, maybe folks will just give up entirely. That should reduce the inventory of unsold homes by discouraging people from trying to sell them in the first place. Another "smart" idea from the Obama team.

I think I will email the Obama team with an idea that fits with their current thinking on housing. Why not cut the unemployment rate by forbidding unemployed workers from looking for a job unless they can prove that they are "energy efficient" people? That should cut down on the number of the unemployment looking for work and therefore cut the unemployment rate. It would also give lip service to "energy efficiency" without really doing anything.

Saturday, July 4, 2009

Krugman Wants More Spending

Paul Krugman, a polemicist who writes for the NY Times (and also has a Nobel Prize in Economics), has written an article for the NY Times today that makes one wonder about the Nobel Prize committee. For Krugman, government spending is absolutely anemic. Since the first two stimulus plans (don't forget the Bush Stimulus in January of 2008) seemed to have done us no good, why not more of the same opines Krugman.

Krugman is overjoyed with "cap and trade" and "health care reform," but, in his view, the government needs to get much bigger, much faster. In his article, Krugman expresses his annoyance at his fellow economists who have noticeably been jumping off the Obama-Krugman bandwagon on economic policy. Krugman laments: "And, as an economist, I'd add that many members of my profession are playing a distinctly unhelpful role." You are right on Paul -- the truth is often not helpful -- especially to politicians.

China is right; Obama is wrong

Once again, China is preaching capitalism and Obama is preaching big government protectionism. Yao Jin of the Ministry of Commerce said yesterday: "China has consistently advocated that the international community face climate change together, but some developed countries have advocated using carbon tariffs against imports. This violates basic WTO rules. It only pretends to protect the environment, but really it protects trade. To put out carbon tariff policies during the economic crisis and ahead of the annual climate change conference is not timely. It doesn't strengthen faith in the international community's cooperation against the crisis."

Which country is the larger emitter of greenhouses gas: China or the US? The answer: China. Without coming to some kind of understanding with China, what difference does it make what the US does? China is making its position pretty crystal clear. Obama and the Congress have their head in the sand (or somewhere).

In 1930, Herbert Hoover got the Congress to pass the highest tariff walls in history, known infamously as the Smoot-Hawley Tariff. Many argue that the S-H Tariff is what turned a mild hiccup in the stock market into the Great Depression. Obama seems to think that Hoover was on the right track. Obama says that he "has doubts" about the trade restrictions in his "Cap and Trade" legislation. But, as has done time and time again, Obama will speak against something and then sign it into law. That way he ends up on both sides of every issue.

Obama had similar doubts about the trade-restrictive "Buy American" provisions in the stimulus bill that he signed into law in February. Look for Obama to continue to say he supports free trade as he pushes the country toward higher and higher tariff walls and trade restrictions. Our imports and exports are collapsing partly due to the economy and partly due to Obama and his cohorts in the Congress. Obama and his union allies won't be satisfied until we no longer have trade relations with anyone (except Iran and Venezuela).

Friday, July 3, 2009

Time Magazine Wades In

The July 6th issue of Time Magazine is chock full of friendly advice for Barrack Obama: "What Barraack Obama Can Learn From FDR." The article begins with a pretty frank admission that FDR was a flop when it came to engineering a recovery to the Great Depression. Time seems to agree with the growning consensus that FDR only made matters worse. Here, Obama seems to be following FDR pretty closely and should achieve similar results.

But, Time argues, FDR was a great war leader and provided economic "security" to the nation. The Federal Housing Authority, godfather of Fannie Mae and Freddie Mac, was cited as one of FDR's accomplishments. Don't we all feel more secure with Fannie and Freddie. Social Security was another great "accomplishment."

Social Security is a ponzi scheme. If you like Madoff investment strategies, you will love Social Security. There will definitely be winners. There were winners in the Madoff scheme. Madoff himself, for years, was a big winner. But, there were plenty of others. Sooner or later, all ponzi schemes come to a bad end. Social Security is no different.

So, I suppose that Time Magazine is right. Obama is on the FDR trail. Look for economic recovery and single digit unemployment in about fourteen years. That was FDR's timetable.

Thursday, July 2, 2009

Who Pays for Employer Mandates?

The Obama Administration is planning to load many new very expensive mandates on businesses that have employees (if you don't have any employees, you are exempt from all of this nonsense). Does this mean that employers pay for this?

In the very short run when first implemented, employers pay and reduce their work force accordingly. So, at first, there will be new unemployed (plus workers that would have been hired that are never hired...but no one counts these up). And, employers pay.

But, what happens over time? Does a company care how their costs per employee are distributed between wages, health care, social security tax, unemployment tax, paid sick days, insurance for potential litigation, etc. No. The only thing that employers care about is the total dollar cost per employee. Long run, the market sets this cost and the cost is independent of the mandates that the government imposes.

Put another way, if employers are required to pick up health care costs for their employers, they will simply pay lower wages to those employees in the long run. That doesn't happen immediately. The immediate effect is they hire less people. But, over time, as they hire new people, employers will factor all of these new costs into the picture and offer a significantly lower wage to future employees. This means that the burden of all of these mandates eventually shifts to the employees.

What the government is really doing is taking away the right of an employee to decide how to spend his income. Employer mandates are a way to mandate that employees must: 1) buy health insurance; 2) take paid sick days; 3) pay for their own unemployment insurance; 4) pay social security tax, etc., etc.

You often hear that employee take home pay has fallen over the past few decades. Yes, that is true. Employer mandates (plus Congressionally inspired litigation) are the main culprits.

Under Obama, over time, employee discretionary take home pay will stagnate or fall because of these mandates. That assumes the employee has a job. Under Obama plans, having a job may prove to be a difficult thing to do.