Is this a contest? To see which newspaper can get the most stuff wrong? The WSJ now has its own entry -- today's article on "Lessons of the Financial Crisis -- One Year Later."
Among other so-called lessons, are the following:
"Diversification doesn't always work." Really? How would a portfolio of 35 % stocks, 35 % corporate bonds and 30 percent treasuries have done in the past year? Only stocks, in this group, are down year to year. So, how did diversification fail? Only if diversification is taken to mean owning non US stocks or owning "alternative assets." Non US stocks and alternative assets give you almost no real diversification as compared, for example, to owning treasury bills. The idea behind diversification is to own different kinds of assets, not assets that are more or less all the same kind of asset but just have different names and countries of origin.
Here's another laughable lesson:
"Government works. The aggressive steps by the government seem to have helped avert an even deeper recession." Oh, really. One could make precisely the opposite argument. That government policy in September and October of 2008 created a climate of uncertainty and fear and led to the collapse of consumer confidence and spending.
I guess WSJ doesn't want the NY Times to own the only dunce cap for poor news coverage.
Monday, August 31, 2009
Sunday, August 30, 2009
Lets Face It -- David Walker is Right
"There's no question in my view that Bush was the most fiscally irresponsible president in the history of the republic." So said David Walker, Controller General of the United States during the Bush II Administration. The main villain was the infamous prescription drug bill. Walker, as he has been so often, is right on target. President George W. Bush could have vetoed the excessive spending of Congress and should never have pushed for the passage of the prescription drug bill. It is worth noting that then-Majority Leader of the Senate, Republican Senator Bill Frist of Tennessee, still touts the prescription drug bill as a great victory. I guess he likes reckless deficit spending too.
Don't be under the mistaken impression that Republicans are one whit better at fending off fiscal catastrophe than the Democrats. No party has a monopoly on virtue, when it comes to wasting taxpayer money and spiraling the US toward financial catastrophe.
Don't be under the mistaken impression that Republicans are one whit better at fending off fiscal catastrophe than the Democrats. No party has a monopoly on virtue, when it comes to wasting taxpayer money and spiraling the US toward financial catastrophe.
NY Times (Intentionally?) Flubs Again
This morning's NY Times has an article that is so flagrantly wrong on the facts that one wonders if anyone is minding the store there. In an effort to show that the entire deficit expansion over the next ten years has nothing to do with Obama, the Times article asserts that the Obama Administration estimate of $ 9 Trillion in additional deficits over the next ten years includes "adjustments" that any president would make -- Democrat or Republican.
The article, written by Jackie Calmes, says that the $ 9 trillion estimate assumes the following:
1) extending the Bush tax cuts
2) adjusting the AMT for inflation
3) Blocking cuts mandated for doctor's Medicare reimbursements.
As usual, with NY Times articles, the truth is the exact opposite. Obama's $ 9 trillion number assumes that:
1) Bust tax cuts are eliminated
2) There will be no AMT adjustments
3) There will be huge cuts in doctor's medicare reimbursements
So, once again, when one reads the NY Times, whenever it says, "X is true," make the usual correction and assume that "X is not true." It works almost every time with the NY Times.
As if outright misstatements of facts are not sufficient, the article ends with the following (political) statement (in an ostensible news article):
"As for Obama's big-ticket proposals, notably health care and energy policy overhauls, those do not add to the deficits under the agencies analyses because he has proposed savings and tax increases to offset their costs."
Is the above statement taken directly from Democratic Party political manuals? It is completely absurd. Even the Congressional Budget Office (controlled by the Democratic Party) estimates that Obama's health care plan will cost $ 1.6 Trillion in additional deficits, even with Obama's ephemeral cost-savings ideas included. What "agencies analyses" is Jackie Calmes speaking about. She doesn't say (for good reason, one presumes).
The NY Times has hit a new low for inaccurate news reporting with this misleading article.
The article, written by Jackie Calmes, says that the $ 9 trillion estimate assumes the following:
1) extending the Bush tax cuts
2) adjusting the AMT for inflation
3) Blocking cuts mandated for doctor's Medicare reimbursements.
As usual, with NY Times articles, the truth is the exact opposite. Obama's $ 9 trillion number assumes that:
1) Bust tax cuts are eliminated
2) There will be no AMT adjustments
3) There will be huge cuts in doctor's medicare reimbursements
So, once again, when one reads the NY Times, whenever it says, "X is true," make the usual correction and assume that "X is not true." It works almost every time with the NY Times.
As if outright misstatements of facts are not sufficient, the article ends with the following (political) statement (in an ostensible news article):
"As for Obama's big-ticket proposals, notably health care and energy policy overhauls, those do not add to the deficits under the agencies analyses because he has proposed savings and tax increases to offset their costs."
Is the above statement taken directly from Democratic Party political manuals? It is completely absurd. Even the Congressional Budget Office (controlled by the Democratic Party) estimates that Obama's health care plan will cost $ 1.6 Trillion in additional deficits, even with Obama's ephemeral cost-savings ideas included. What "agencies analyses" is Jackie Calmes speaking about. She doesn't say (for good reason, one presumes).
The NY Times has hit a new low for inaccurate news reporting with this misleading article.
Saturday, August 29, 2009
The Democrats Problem is Medicare
Medicare was originally a modest subsidy for health insurance for the elderly. The enabling legislation that created medicare was signed into law by President Lyndon Johnson in 1965. At the time, the American economy was in good shape, elderly persons in America received good health care, and health care costs were reasonable, though rising faster than other costs. In the 1970s, the required contribution by seniors to medicare was lowered from one-half to one-fourth.
The prescription drug bill created Medicare Part D, which went into effect in January of 2006 and added greatly to the overall cost of Medicare.
The original version of medicare required seniors to pay one-half of the cost of the insurance. The projected cost of medicare, President Johnson warned, could be as high as $ 2 billion annually. (In 2007, the total bill for medicare was $ 440 billion). Medicare is funded partly by payroll taxes collected alongside social security payroll taxes from employees and employers. The remainder is either unfunded or brought in by ever increasing mandated payments from states (this is the main item leading to catastrophic deficits for state governments).
People who use medicare are paying only a small part of the true cost of their own medical care. Even at that, the current unfunded liability of medicare is $ 34 Trillion. Within two generations, most of our gross domestic product will be devoted to medicare, leaving very little for anyone under 65 years of age to consume -- medical or otherwise.
This is the Democrats idea of a great program. But, this is also their great problem. How can they spend money on all of their other projects if medicare sucks everything up?
The answer: why not expand it? It is going to go broke anyway. So who cares?
This appears to be the Obama philosophy. If only the public would pipe down, Obama could effectively expand medicare to the entire population.
If medicare were to expand to the entire population, which is the ultimate thrust of all of the Democratic reform bills, what then? First, wait about eight years until you-know-who is out of office. Then, when the nation is on the brink of insolvency because of health care "reform" passed in the first Obama Administration, bring in the efficiency experts.
The efficiency experts will realize, as the Brits have known for a couple of decades, that a government health care plan has to sacrifice some demographic, since the system is so incredibly inefficient. In Britain, they have decided to sacrifice those over 65, who are not a priority for any medical operations. Not many of that group die on the operating table. They die, instead, in the waiting room. The vast majority never make it to the operating table. The waits are simply too long.
No doubt, the plan -- long run, is to do a similar thing in the US. Once everyone is on medicare, the only way to cut costs is to eliminate health care for certain groups of the population. Who needs cancer and heart surgery anyway? That only applies to old people. Perhaps a bit of counseling will help these old folks see the light. This kind of thinking seems to be behind the Obama health care strategy for the long term.
Meanwhile, those who need abortions will have access to all the funding they need. Similarly, obese people should turn in their gym cards. They will be covered for everything they need, so long as they have not attained the age of 65. The money saved from eliminating most coverage for surgery and other operations for the the over 65 set can be devoted to aids sufferers, drug rehabilitation, alcohol rehabilitation, and psychological adjustment counseling (depression, etc.). After all, these are becoming pretty serious matters.
Unfortunately for Obama and the Democrats, the elderly aren't all completely senile and they can see clearly that Obama has them in their sights. Even doctors and hospitals are beginning to wake up to the implications of "cost cutting" in health care. Insurance companies, who have just about the lowest profitability of any industry in America and the lowest paid senior management, are beginning to wake up and listen to Obama and others decry their non-existent profitability. Finally, the average American can see where this is headed. Obama and Pelosi and their ilk will never be subject to these plans since government largesse and their own personal wealth will keep them from ever having to access this nightmare that Obama is creating (yes, Obama purchased a $ 2 million home three years before running for the presidency...not something a non-wealthy person could even dream about).
Obama had indeed fooled most all of the people for some of the time. Thank goodness, he cannot fool all of the people all of the time. Virtually every American is beginning to see through the health care reform charade.
The prescription drug bill created Medicare Part D, which went into effect in January of 2006 and added greatly to the overall cost of Medicare.
The original version of medicare required seniors to pay one-half of the cost of the insurance. The projected cost of medicare, President Johnson warned, could be as high as $ 2 billion annually. (In 2007, the total bill for medicare was $ 440 billion). Medicare is funded partly by payroll taxes collected alongside social security payroll taxes from employees and employers. The remainder is either unfunded or brought in by ever increasing mandated payments from states (this is the main item leading to catastrophic deficits for state governments).
People who use medicare are paying only a small part of the true cost of their own medical care. Even at that, the current unfunded liability of medicare is $ 34 Trillion. Within two generations, most of our gross domestic product will be devoted to medicare, leaving very little for anyone under 65 years of age to consume -- medical or otherwise.
This is the Democrats idea of a great program. But, this is also their great problem. How can they spend money on all of their other projects if medicare sucks everything up?
The answer: why not expand it? It is going to go broke anyway. So who cares?
This appears to be the Obama philosophy. If only the public would pipe down, Obama could effectively expand medicare to the entire population.
If medicare were to expand to the entire population, which is the ultimate thrust of all of the Democratic reform bills, what then? First, wait about eight years until you-know-who is out of office. Then, when the nation is on the brink of insolvency because of health care "reform" passed in the first Obama Administration, bring in the efficiency experts.
The efficiency experts will realize, as the Brits have known for a couple of decades, that a government health care plan has to sacrifice some demographic, since the system is so incredibly inefficient. In Britain, they have decided to sacrifice those over 65, who are not a priority for any medical operations. Not many of that group die on the operating table. They die, instead, in the waiting room. The vast majority never make it to the operating table. The waits are simply too long.
No doubt, the plan -- long run, is to do a similar thing in the US. Once everyone is on medicare, the only way to cut costs is to eliminate health care for certain groups of the population. Who needs cancer and heart surgery anyway? That only applies to old people. Perhaps a bit of counseling will help these old folks see the light. This kind of thinking seems to be behind the Obama health care strategy for the long term.
Meanwhile, those who need abortions will have access to all the funding they need. Similarly, obese people should turn in their gym cards. They will be covered for everything they need, so long as they have not attained the age of 65. The money saved from eliminating most coverage for surgery and other operations for the the over 65 set can be devoted to aids sufferers, drug rehabilitation, alcohol rehabilitation, and psychological adjustment counseling (depression, etc.). After all, these are becoming pretty serious matters.
Unfortunately for Obama and the Democrats, the elderly aren't all completely senile and they can see clearly that Obama has them in their sights. Even doctors and hospitals are beginning to wake up to the implications of "cost cutting" in health care. Insurance companies, who have just about the lowest profitability of any industry in America and the lowest paid senior management, are beginning to wake up and listen to Obama and others decry their non-existent profitability. Finally, the average American can see where this is headed. Obama and Pelosi and their ilk will never be subject to these plans since government largesse and their own personal wealth will keep them from ever having to access this nightmare that Obama is creating (yes, Obama purchased a $ 2 million home three years before running for the presidency...not something a non-wealthy person could even dream about).
Obama had indeed fooled most all of the people for some of the time. Thank goodness, he cannot fool all of the people all of the time. Virtually every American is beginning to see through the health care reform charade.
Wednesday, August 26, 2009
Home Prices Increased in June!
The dire predictions that home prices would plunge another 25 percent look increasingly less likely. Home prices, according to the Case-Shiller index (that measures home prices in 20 cities) showed home prices increasing in 18 of the 20 cities that are included in the index. Combined with a National Association of Realtors announcement of a five percent increase in July home sales over the same period in 2008, strongly suggests that the worst is over for the housing market in the US.
This is more confirmation that the economy has hit bottom. If there were any stimulus at all in the so-called "Stimulus Act of 2009," we should be expecting a strong economic recovery this Fall. Don't count on it. Look for further increases in unemployment and secular stagnation as the economy improves sluggishly and fitfully, laboring under the enormous burden of the Obama Administration.
The announcement that the Obama folks grossly underestimated the fiscal impact of their spending program (now admitted to add at least $ 9 trillion more to the national debt by 2019) may be just enough confirmation of reality to block the Obama program in Congress. If that happens, recovery stands a chance. Keep your fingers crossed.
Look for unemployment to go above 10 percent, inflation to begin to show up, and economic growth to be anemic. Even with that background, stocks are still a reasonable bet from here.
This is more confirmation that the economy has hit bottom. If there were any stimulus at all in the so-called "Stimulus Act of 2009," we should be expecting a strong economic recovery this Fall. Don't count on it. Look for further increases in unemployment and secular stagnation as the economy improves sluggishly and fitfully, laboring under the enormous burden of the Obama Administration.
The announcement that the Obama folks grossly underestimated the fiscal impact of their spending program (now admitted to add at least $ 9 trillion more to the national debt by 2019) may be just enough confirmation of reality to block the Obama program in Congress. If that happens, recovery stands a chance. Keep your fingers crossed.
Look for unemployment to go above 10 percent, inflation to begin to show up, and economic growth to be anemic. Even with that background, stocks are still a reasonable bet from here.
Tuesday, August 25, 2009
Entitlements Must Go
The US budget problem is strictly a problem of entitlements. The growing disaster at the state level is a combination of federal entitlement matching and absurb state employee and teacher compensation packages -- especially health care and retirement packages. The hard cold truth is that these entitlement programs -- social security, medicare, medicaid and the Bush prescription drug act -- are not affordable. They will bankrupt the country. They are promises that cannot be kept.
These programs encourage Americans not to save for their old age and not to save for future medical contingencies. As a result, Americans do not save for these things. We have the lowest savings rate in the civilized world -- even now. But, we didn't have a relatively low savings rate before medicare came in the early 1960s and was expanded in the 1970s. Our low savings rate is a result of these entitlements.
The Obama answer is, of course, to ration medicare and medicaid benefits. (That is the ultimate end game of Obamacare). The right answer is to phase out medicare. Let people save for their own future medical needs. Obamacare would force the elderly to live in constant fear that their medical needs will not be met. And the truth is, they will not be met. The money is simply not there and they know it.
None of this should be any great surprise. Asking current workers to provide for twenty years of retirement and medical benefits for other people (the elderly) is ridiculous. People should pay for their own retirement and their own medical needs. That is the only affordable system that works.
The elderly are not poor. But, they are becoming poorer as private savings disappears because of the expectation of government largesse. That expectation will not be fulfilled.
This is a wealthy country, but that wealth can be destroyed by consuming now and paying later. That is what we are doing. Eventually, this shell game will fall apart. The end result is not in doubt. The only open question is how soon the end will come.
Every European country faces exactly the same problem that we do. They are going bankrupt as well and for the same reason. The demographic changes do not permit the ponzi schemes to continue. There is not an advanced economy in the world that is not on a course to bankruptcy. Interestingly, only the Asian countries have resisted the grandiose entitlement schemes of the West. The future for the Asian countries is bright. For the West, things look grim.
These programs encourage Americans not to save for their old age and not to save for future medical contingencies. As a result, Americans do not save for these things. We have the lowest savings rate in the civilized world -- even now. But, we didn't have a relatively low savings rate before medicare came in the early 1960s and was expanded in the 1970s. Our low savings rate is a result of these entitlements.
The Obama answer is, of course, to ration medicare and medicaid benefits. (That is the ultimate end game of Obamacare). The right answer is to phase out medicare. Let people save for their own future medical needs. Obamacare would force the elderly to live in constant fear that their medical needs will not be met. And the truth is, they will not be met. The money is simply not there and they know it.
None of this should be any great surprise. Asking current workers to provide for twenty years of retirement and medical benefits for other people (the elderly) is ridiculous. People should pay for their own retirement and their own medical needs. That is the only affordable system that works.
The elderly are not poor. But, they are becoming poorer as private savings disappears because of the expectation of government largesse. That expectation will not be fulfilled.
This is a wealthy country, but that wealth can be destroyed by consuming now and paying later. That is what we are doing. Eventually, this shell game will fall apart. The end result is not in doubt. The only open question is how soon the end will come.
Every European country faces exactly the same problem that we do. They are going bankrupt as well and for the same reason. The demographic changes do not permit the ponzi schemes to continue. There is not an advanced economy in the world that is not on a course to bankruptcy. Interestingly, only the Asian countries have resisted the grandiose entitlement schemes of the West. The future for the Asian countries is bright. For the West, things look grim.
Sunday, August 23, 2009
Obama and the Economy -- Now What?
It is now very clear that the economy is far worse than the Obama crowd thought as recently as late January. Unemployment, which Obama economists forecasted to remain below 8.5 % is currently 9.4 %, headed north. Obama economists, last week, dramatically raised their estimates of the path of the national debt, increasing the national debt (increase) estimates for 2019 from $7.1 Trillion to $ 9 Trillion. This $ 9 Trillion is on top of the existing national debt of nearly $ 8 Trillion.
No doubt, these numbers are still underestimates. Other than Obama economists, no serious economists had subscribed to the Obama numbers in the first place. Certainly not the Democrat-controlled Congressional Budget Office economists. The CBO has been citing the $ 9 Trillion number since January, when the Obama economists were insisting on living in fantasy land. Now the dreams are over and the haunting reality is that we are soon to push through ten percent unemployment and the national debt is exploding.
What of the stimulus? There was never any real stimulus in the so-called "stimulus" package. So, don't count on that. The bill that passed Congress and was called "stimulus" was mostly a redistribution package benefitting friends of Obama and penalizing his enemies. That doesn't stimulate anything (especially since most people who provide jobs in American are viewed by Obama as his enemies). The economy has stabilized on its own, as economies always do. Nothing the government has done has been of any benefit whatsoever. The only people that believe that the government has helped are the folks in the media, who will believe anything.
The stark reality is that there has been no "recovery" package ever put on the table. Nothing in any of the Obama Administration proposals would ever encourage anyone to hire anyone. Without hiring, there can be no serious recovery. At what point is the Administration going to get that message? Cap and trade does for energy what burning this year's corn crop would do for household nutrition. All of the Obama plans are punitive (except those that provide money for Acorn to support pro-Obama demonstrators at the town halls).
Punitive measures design to punish businesses and business people are the main policy initiatives of this Administration. Is this likely to boost hiring?
So, now, here we are. What does Obama intend now that his polls have collapsed, his major policy proposals are in complete disarry, and the economy is getting worse? Maybe he can find some way to continue to pin his problems on "W" and the evil financial community.
Incidentally, commercial real estate is now suffering the same fate as residential real estate has been suffering for several years. Can you blame the collapse in commercial real estate on predatory lenders?
You wonder if Obama didn't have someone to blame for our economic troubles, then he wouldn't know how to proceed. Obama looks for enemies, someone to blame. There always has to be someone he can blame and then punish with legislation. How does that kind of policy stimulate anything?
When will this hubris end? It is past time for the Obama folks to put something rational on the table. Look for the economy to get worse not better as long as the Obama folks maintain this course.
No doubt, these numbers are still underestimates. Other than Obama economists, no serious economists had subscribed to the Obama numbers in the first place. Certainly not the Democrat-controlled Congressional Budget Office economists. The CBO has been citing the $ 9 Trillion number since January, when the Obama economists were insisting on living in fantasy land. Now the dreams are over and the haunting reality is that we are soon to push through ten percent unemployment and the national debt is exploding.
What of the stimulus? There was never any real stimulus in the so-called "stimulus" package. So, don't count on that. The bill that passed Congress and was called "stimulus" was mostly a redistribution package benefitting friends of Obama and penalizing his enemies. That doesn't stimulate anything (especially since most people who provide jobs in American are viewed by Obama as his enemies). The economy has stabilized on its own, as economies always do. Nothing the government has done has been of any benefit whatsoever. The only people that believe that the government has helped are the folks in the media, who will believe anything.
The stark reality is that there has been no "recovery" package ever put on the table. Nothing in any of the Obama Administration proposals would ever encourage anyone to hire anyone. Without hiring, there can be no serious recovery. At what point is the Administration going to get that message? Cap and trade does for energy what burning this year's corn crop would do for household nutrition. All of the Obama plans are punitive (except those that provide money for Acorn to support pro-Obama demonstrators at the town halls).
Punitive measures design to punish businesses and business people are the main policy initiatives of this Administration. Is this likely to boost hiring?
So, now, here we are. What does Obama intend now that his polls have collapsed, his major policy proposals are in complete disarry, and the economy is getting worse? Maybe he can find some way to continue to pin his problems on "W" and the evil financial community.
Incidentally, commercial real estate is now suffering the same fate as residential real estate has been suffering for several years. Can you blame the collapse in commercial real estate on predatory lenders?
You wonder if Obama didn't have someone to blame for our economic troubles, then he wouldn't know how to proceed. Obama looks for enemies, someone to blame. There always has to be someone he can blame and then punish with legislation. How does that kind of policy stimulate anything?
When will this hubris end? It is past time for the Obama folks to put something rational on the table. Look for the economy to get worse not better as long as the Obama folks maintain this course.
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