The politics of envy

As a Libertarian I often align with liberals on key social issues (although for different reasons many time) and with conservatives on fiscal matters.  One of the key components of liberal thinking in fiscal matters is that rich people have too much money and poor people not enough and it is government’s role to play Robin Hood and redistribute the money. Forget if it is fair to take something earned from someone to give it to someone who did not earn it, forget that most rich people are also the job creators or have worked hard for a lifetime accumulating their wealth, and forget that government cannot and should not be the arbitrator of fairness, does this policy work? Or is it just a convenient myth that sells well in the next election? Is it socialism? I call it the politics of envy.

Lets take a neighborhood street with 10 households on it. Each of the ten households has $1000 in discretionary income that they spend monthly on a variety of goods and services. If the government takes $500 from five of the households and gives it to the other five households, has the money grown at all? No, this street still has $10,000 in discretionary income to spend, although it now is spent/invested/or saved in a different manner.  Re-distribution in this manner creates no more wealth. There are other harmful effects as well as people will change their behaviors to adjust to this new reality. I’ll include a parable later to highlight that effect.

Now assume that out of the ten households, five have $2000 in discretionary income (rich) and five have no discretionary income (poor). The government steps in and takes $1000 from each of the five and gives it to the other five. Have we grown the discretionary income at all? No, but politicians have just potentially bought five votes (although they potentially lose five votes as well).

Neither of those work too well, so there is another option. The government can take money from the next street down and give it to this street. This street now has $20,000 to spend instead of $10,000 and when they spend money the politicians can point to the spending and the jobs created/saved because of it, and prove their economic wisdom. Of course the other street has $0 discretionary spending and the jobs that they supported with that spending may now be gone. But those are unseen jobs lost, so politicians don’t have to own up to that. As an added bonus, they can reward their donors and politically connected friends. But they still could lose elections due to the hardships that they placed on the now poor street.

There of course is a better option for politicians.  Make the next generation pay for it. The government can borrow the money by selling Treasuries to foreign countries, large institutional investors, regular investors, or even it’s own bank. Now both streets have $20,000 to spend, no one has had money taken away from them, and jobs have been created! This has actually worked for awhile, but now just like those in debt with credit cards, the party is over. This debt interest is adding up to some real money and if we don’t pay it, people might not lend us anymore money. Cutting programs and spending will help, but people like their programs and will respond negatively at their next election. Plus if we cut that spending, it will stifle job creation and lead to higher unemployment. What to do?

Fortunately for politicians, there is one more option. They can just print more money. Again both streets can have $20,000 in discretionary spending, but this time we don’t have to worry about interest payments on the debt. Of course there is this little thing called inflation which would make the value of those dollars less, but most people don’t understand inflation anyway, and most won’t tie it back to the decision of their Congress(wo)man.   It is essentially the silent tax, one that eats away at our savings, our 401ks, and our incomes but rarely gets talked about (except at the gas pump).

There is even another option, championed by conservatives, the government can cut taxes. So going back to our original street, taxes get cut and each person on the street gets $500 more to spend. So now each person has $1500 and the street has added $5000 in discretionary income which gets spent and creates/saves jobs. (Isn’t it strange that liberals think that taking money from rich people and letting the government spend it creates jobs, but letting rich people keep it to spend/invest/save, doesn’t create jobs? I don’t get the logic) This works, no money had to be borrowed or printed and no money was taken from one person and given to another. So why don’t we do this? Well, for one, when taxes get cut, spending usually stays the same or goes up, so you end up having to borrow or print money to fill in your deficit, ie. you have the same problems as re-distribution has. Two, it allows rich people to get richer while keeping poor people poor. This is of course nonsense, but that is the general “fact” in liberalism. In reality rich people probably get richer, but so do the rest of us. It is not always in income (although usually incomes are higher as well), but the standard of living grows for us all. Just look at what today’s “poor” standard of living and compare it to a “rich” person in the 1980s. Today’s poor live better than yesterdays wealthy.

There is one other option. Government can just do nothing. Stop trying to manipulate the economy and create jobs. Let the market work. Give people the freedom to create their own opportunities. Tax them at an appropriate level to fund the NECESSARY roles of government. Which of course is a even bigger debate, one best left to another post.

I’ll end with a few parables (yes I know they are not real, but they still help illustrate the point) about the failures of the politics of envy:

An economics professor at Texas Tech said he had never failed a single
student, but had once failed an entire class.

The class (students) insisted that socialism worked since no one would be poor and
no one would be rich, a great equalizer. The professor then said, “OK, we
will have an experiment in this class on socialism.”

“All grades will be averaged and everyone will receive the same grade so no
one will fail and no one will receive an A.”

After the first test the grades were averaged and everyone got a B. The
students who had studied hard were upset while the students who had studied
very little were happy.

But, as the second test rolled around, the students who had studied little
studied even less and the ones who had studied hard decided that since they
couldn’t make an A, they also studied less. The second Test average was a D.

No one was happy. When the 3rd test rolled around the average grade was an F.

The scores never increased as bickering, blame, name calling, all resulted in hard feelings and no one would study for anyone else.

To their great surprise all failed.

AND

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ”Since you are all such good customers”, he said, “I’m going to reduce the cost of your daily beer by $20″. Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his “fair share?” They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings. ”I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man, “but he got $10!” ”Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than I!” ”That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!” ”Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

 

 

 

An American Roadtrip

Every few weeks or so, one of my friends e-mails out a political question to a group of about 10 of my friends. Based on the responses that I read, it made me think about politics in America. Since I love a good analogy, I started to think of one. What I came up with is that as Americans we are all in a car on an American road trip. The problem is that this road trip is about to come to a catastrophic end as we are approaching a cliff.

Our current driver sees the cliff up ahead, but is actually increasing speed towards it. He may be doing this out of ignorance or may even be doing it on purpose. Either way, the result is the same. Progressives (in either party) today are driving. Many despise capitalism and to some extent America itself because they believe it to be inherently unfair and even exploitive. Some just don’t understand basic economics or the limits of government power. This is a small percentage of our population, less than 10%.

The two in the back seat are arguing about the song on the radio and regardless of the genre, disagree with one another. They aren’t really paying attention to the cliff, but instead are locked in their own argument. Again this is only a small percentage of the population, maybe 20% and we hear them arguing at dinner parties, on Facebook, or on the news. These people generally like to argue about a number of political topics from healthcare laws to environmental politics. Many times they argue without most of the facts and what they miss is that while they argue about the “little” things, the government continues to grow, freedom continues to evaporate, and the car gets closer to the cliff.

Another passenger (Libertarians) is in the trunk.  So this “passenger” was put in the trunk because he was trying to grab the driver and force him to slow down and turn the car around. There is a small percentage (5%) of the population that are actively speaking out against the government and trying to highlight the abusive nature of its power. What happens? They are painted by the media as crazy or anarchists. Many are called racist or “tea baggers”. They are made to ride in the trunk where they can make some noise, but are powerless to change the car’s course. Yet, their noise is beginning to be heard and acted upon.

The last guy in the passenger seat is asleep, totally ambivalent to the cliff and the noise in the car. A large part of our population, probably over 60%,  just simply doesn’t care about politics or understand the ramifications of our national debt or annual deficits.

The road trip is as American as apple pie but this road trip leads to the most predictable disaster in history. Imagine if the Japanese had known about the earthquake and tsunami, but did nothing to prepare for it. That is what we do everyday and economic ruin lies around the bend, perhaps in the next decade.

So which passenger are you? And what are you going to do to avoid the cliff?

UPDATE:

I wrote this post month’s ago but just finally published it. Here in Maine, we have a lot of problems, a new Governor and legislature and a budget debate. Important decisions must be made to save our state from fiscal insolvency. So what have we been discussing over the last few days. A 3 year old mural that was hanging in a public building. Arguing over the radio once again.

Add Bill Gross to the list of rich assholes

We can add PIMCO founder Bill Gross to the list of wealthy Americans who think they aren’t being taxed enough.

“Of course we should” pay higher taxes, Gross says. “Higher income groups have enjoyed an enormous privilege ever since the Reagan tax cuts…and actually ever since Kennedy began the process back in the ‘60s.”

Gross admits it’s difficult to know what constitutes “wealthy” in America or what federal income tax rate serves as a disincentive to those at the top of the food chain. “But I don’t think it’s 36%,” he says. “I think high-income earners would work well into the 50% tax rate. That would certainly help balance the books going forward.”

My question is, what’s stopping him? Are we to believe that he doesn’t use all the tax loopholes or have a number of accountants figuring out how he can pay less in taxes. If he wants to pay more, than write a check and stop whining.

We have been hammered lately by billionaires and liberal advocacy groups that they don’t need a tax cut. In fact many say that want and should pay more. Let’s make them put their money where their mouth is.

It’s called the HOT tax. It stands for Higher-Rate Option Tax.  The HOT Tax would provide those who feel that their taxes are too low the satisfaction, and self-gratification, of paying a higher tax. It would be more than just sending an extra check to the federal treasury. There would be the recognition, which so many desire, of choosing the HOT tax option on an IRS tax return.

It also would be simple to implement. Just add one sentence to the IRS tax return. “If you believe your tax bracket is too low, please indicate the higher rate at which you prefer to be taxed. Multiply that rate by your Adjusted Gross Income. Send in that higher amount.” Easy as pie.

We could also allow less wealthy liberals a box on the 1040 that exempts them from all exemptions, adjustments, and credits. It seems only fair as they love to lecture us about tax rates.

The HOT Tax and 1040 Liberal box could provide the opportunity to fill the federal coffers a bit more (although somehow I doubt many will contribute the extra amount),  add some income to tax preparers’ wallets, and boost the patriotism — and egos — of scores of thousands of overpaid Americans.

Write your Congressman today to recommend this bill. No one should be denied the right to pay a higher tax rate just because Congress won’t pass a bill allowing it. This is a fairness issue. I can’t wait to see these rich people put up, or better yet, shut up.

Governor Lepage presents his budget. Cue the starving babies.

Maine’s new Republican governor released the details of a two-year spending plan so it must be time for the protests to start. All these cuts must surely hurt the poor people of Maine.

But actually, LePage’s budget proposal totals $6.1 billion, which is roughly $300 million more than the current budget designed by Gov. John Baldacci and the Democrat-controlled Legislature. LePage says that this budget was developed with one top priority – to reform and restructure state government to ensure that state government helps – not hinder – private sector job creation.

But there must be something to protest:

 

The state work force, now authorized at 13,737 employees, will shrink by roughly 80 positions, the vast majority of which are already vacant. Of those positions, 50 are within the MDOT.  Wow, we are eliminating a whole 80 positions, most of which are vacant. What a horrible person LePage must be.

Assistance to municipalities will increase by roughly $90 million over the biennium. What? Towns will receive more money, what a monster!

Total spending on Medicaid would increase by roughly $80 million in part because of additional demand. We are going to spend more money on providing medical care to the poor? When will the cuts end?

From the Fund for Healthy Maine — a program that uses tobacco company settlement payments for health and wellness initiatives — $18 million will go toward Medicaid, eliminating funding altogether for some programs within the fund. Oh, here it is. We are shifting $18 million from health, wellness, and prevention programs into actual health care. House Minority Leader Emily Cain (D) said she worries that taking $18 million from the Fund for Healthy Maine for Medicaid programs could hurt the state’s successful health, wellness and prevention programs. This isn’t even a cut and by what measurement are these programs “successful”. Even so, this is hardly worth protesting.

 

So what else is there? There must be cuts to education. But LePage’s budget also proposes $63 million in new spending on K-12 education and contains no cuts to higher education, essentially flat-funding the system of public colleges and universities. (Think tuition will stay the same? Don’t bet on it.) Ok, so it’s not education.

It must raise taxes. But the administration’s budget also contains a number of tax cuts, many of which would conform Maine’s standards and exemptions to the federal tax code. LePage has proposed reducing the state’s top income tax rate from 8.5 percent to 7.95 percent. It also eliminates the marriage penalty, conforms to federal tax law for business equipment depreciating and allows personal exemption deductions for kids and adults. It also reduces the estate tax by raising the exemption level from $1 million to $2 million. Ok, I must be missing something here.

Ah Ha! I think I found it! As outlined during a speech Thursday, LePage is recommending that the retirement age for most state employees increase from 62 to 65. He also has proposed continuing the freeze on cost-of-living adjustments for current retirees and capping future increases at 2 percent, down from the current maximum of 4 percent. ( This made one local ex-city councilman to exclaim that ” you can’t hire someone 30 years ago and promise them benefits and then just before they retire, take away ALL of it) This proposal hardly sounds that draconian to me.

Additionally, state employees would be required to contribute another 2 percent from their paychecks toward the pension system to help pay down the estimated $4.4 billion unfunded liability. State workers currently chip in 7.65 percent of their salary to the pension system. Of course the alternative would be reduced benefits. This seems reasonable to me, since as a private sector employee, my full retirement age is 67 and my monthly “benefit” is much less. I also contribute 7.65% to Social Security and Medicare but again I get far less benefits which without a raise in the payroll tax will require me to take a 25% cut in my benefit in 2037. That’s according to my Social Security statement.

What else we got in there? LePage has proposed a five-year lifetime limit on receiving welfare benefits, which is consistent with federal policy. It would also require that legal non-citizens live in Maine for at least five years before receiving welfare — or eliminating so-called “instant eligibility” — which would save $19.5 million over the biennium. I would think a five-year safety net (still bordering on a hammock to me) is acceptable. I would also think that it may be a good idea to not let people just move here to get welfare. LePage specifically ran on this proposal so it isn’t like he is trying to sneak one by us.

All of this sounds good to me. If anything, it does not have enough cuts, but if the budget balances than I can accept that. I am not sure if it has any debt reduction in it, but LePage has said he would not support any new bonds. That is a good thing, unless you are in the Legislature where lawmakers from both parties have introduced a number of bond package proposals. Nothing is as easy as borrowing money to buy votes.

But yet, we will still have to hear about the starving babies and senior citizens. Advocacy groups expressed concerns that the proposed cuts to MaineCare — the state’s Medicaid program — and the Temporary Assistance for Needy Families program, or TANF, could hurt the very groups the governor is pledging to protect.

Sara Gagne-Holmes, executive director of Maine Equal Justice Partners, pointed out that a recent, yearlong study of TANF participants found that the typical beneficiary is a single mother with two children. ( Does anyone else find it strange that a 22-year-old female making $20,000 per year would not qualify for any assistance, but if she has a kid, she all of sudden does? If only she had the choice to have children or not. I suppose that if not for the state the child would and probably the mother would just die of starvation. Those are the two only options. Get help from the state or die, right?)

Holmes, whose group advocates for low-income Mainers, said the budget also makes drastic cuts to the Drugs for the Elderly program.

“In his budget address on Thursday, Governor LePage said he would defend older Mainers, those suffering with disability and those fighting mental illness with every ounce of his being,” Gagne-Holmes said in a statement. “Our research shows that, along with children, those are the people who are protected by assistance programs such as TANF, MaineCare and Drugs for the Elderly.” Ah, the twofer. Why just mention kids when you can bring in Granny as well?

All in all, from what I can tell, this is a very well thought out budget proposal, except for the dying kids and old people of course.

Is this past week our future?

It has been quite the week for politics in Washington and across the nation. It started with President Obama’s budget and is ending with a large protest in Madison, Wisconsin. That protest is sure to be coming to a neighborhood near you soon.

When you are $14 trillion dollars in debt and have promised another $75 trillion in un-funded benefits to your citizens, it is probably time to question your fiscal sanity. If this last week is any judge, what we are witnessing is that one party is committed to denying the reality of the changes we face and like an ostrich is sticking their heads in the sand, and that the other party is at least starting to come to terms with our current fiscal situation.

Make no doubt about it, both Democrats and Republicans are to blame for our current predicament. They are also at fault for ignoring it and denying it for so long. But this week was very telling which party seems willing (at last) to lead the way. Will the voter’s notice? Or punish them for their attempts?

Let’s start with Obama’s budget which was released Monday. It proposes none of the steps required to address our fiscal situation. In fact it continues the same direction of the last 10 years, namely more spending, large deficits, and more European welfare state regulations and “investments”. It offers no tax reform, no real entitlement-spending reform, and no real discretionary spending reform.

Perhaps since his budget didn’t include any of these things, the president had to turn to lying about it, saying “what my budget does is to put forward some tough choices, some significant spending cuts so that by the middle of this decade our annual spending will match our annual revenues. We will not be adding more to the national debt.” In truth, at no time in the next decade does his budget balance (the smallest deficit is $600 billion), is based on rosy scenario numbers that most likely won’t occur, and actually doubles our national debt in 10 years. This is not the budget proposal (essentially the president’s vision) of a man or a party that understands our fiscal situation.

But is it ignorance or just part of the plan? Many on the left, particularly the Progressives, must understand that this will all come to a head soon enough. Perhaps they are hoping for the collapse in hopes that they can impose a new form of government with them on top of course. Have the failures of socialism not broken through their thick skulls?

The Republicans in the past, after re-gaining power in the House, might have been content with status quo and not wanting to risk re-election, might have just followed the Democrat’s suit and denied the fiscal problem. But this seems to be a new set of Republicans who in response to Obama’s budget said their budget would:

“include real entitlement reforms so that we can have a conversation with the American people about the challenges we face and the need to chart a new path to prosperity.  Our reforms will focus both on saving these programs for current and future generations of Americans and on getting our debt under control and our economy growing.  By taking critical steps forward now, we can fulfill the mission of health and retirement security for all Americans without making changes for those in or near retirement.  We hope the President and Democratic leaders in Congress will demonstrate leadership and join us in working toward responsible solutions to confront the fiscal and economic challenges before us.”

The Democrat’s response was to paint every proposed cut with the potential to starve babies and destroy the middle class. It seems that going back to 2008 spending levels (which are still way to high) would cause mass starvation and un-heard of poverty. The Democrats even held a press conference with a 6 foot aardvark named Arthur to decry the cuts to PBS and NPR funding. Perhaps they should have picked a different animal to parade in front of the cameras instead of one from a show that is sponsored by large corporations such as Chuck E Cheese, Juicy Juice, McDonald’s, and CVS.

Senator Jim DeMint countered with numbers ( I guess Cookie Monster was busy) and said this, “Shows like Sesame Street are multi-million-dollar enterprises capable of thriving in the private market. According to the 990 tax form all nonprofits are required to file, Sesame Workshop President and CEO Gary Knell received $956,513 — nearly a million dollars — in compensation in 2008. And, from 2003 to 2006, Sesame Street made more than $211 million from toy- and consumer-product sales. When taxpayer funding for public broadcasting ends, rest assured, Cookie Monster will still be fed.”

Surely these cuts must be small potatoes in the grand scheme of things and compared to a $14 trillion-dollar deficit, they are but again as Demint says, “Last year, the Corporation for Public Broadcasting was allocated $420 million by Congress. And, President Obama is asking Congress to give a whopping $451 million to CPB in his new budget, even though the nation is more than $14 trillion in debt. To put that in perspective, it would take Count Von Count more than 42 years to count the 451 million, one ‘Ah! Ah! Ah!’ dollar at a time. . . .” Yes, these are small cuts but the last I checked $451 million is a lot of money.

If we are to have this type of debate on this “small” cut, what will happen when we have to make larger cuts, including cutting whole programs, or when we try to tackle our entitlement crisis, or when we ask for public employees to pay more towards their own health benefits and pension plans.

This week also gave us the answer to that last question. In Wisconsin, a newly elected Republican governor has proposed to have many of the state’s public employees, including teachers, start contributing more towards their health benefits and their pensions. You see, Wisconsin (like many states) faces a $3.6 billion budget shortfall over the next two years. Governor Walker’s first move is a bill to address an immediate $137 million hole by, among other things, requiring most public workers to pay half their pension costs (up from zero) and 12.6 percent of their health-care costs (up from about 6 percent). This is still lower than what most private employees have to pay for their benefits. It essentially ends up being about a 7% cut in their pay. I understand that this is tough to accept, but they have been continuing to get raises all along while most in the private sector have not. Life is not always fair.

I believe that there are actually two ways to look at this. One, there is an unofficial (made more official by unions) pact with public employees that was made some time ago that they would have to take less pay, but in exchange they would get job security and generous pensions. Over the years, thanks in part to guaranteed raises, pension rules, and other deals made by politicians, public employees salaries have actually grown higher than their private counterparts while their benefits have remained or have even become more generous. The average annual salary and benefits for Wisconsin teachers (who will be effected by this law) is $89000. The national average for private employee’s salary and benefits is $61,000. Clearly something is not right, and just in the case of fairness, this is a problem that needs to be addressed, not just in Wisconsin, but around the nation.

Second, although all of number one is true, regardless of those facts, we simply cannot afford to keep paying public employees this way. Politicians lied to them and promised them benefits that they could not pay for. The unions have worked to elect politicians, then have sat across a bargaining table from them — and, lo and behold, got what they wanted. That has now come to an end, more public employees are going to have to make some sacrifices, pay more towards their benefits, or reduce their salaries or hours. It is a simple fact, the status quo will not work. In fact, if this bill cannot pass, in order to close out the budget holes, public workers will have to be laid off. The Republicans find themselves the only willing party to tell people that the party is over.

So considering these two points, you would think that there would be little controversy and the bill might pass fairly quickly. You would be wrong. The unions have reacted with their usual class and public-spiritedness. Teachers in Madison have staged a sickout, and brought their students with them to demonstrations at the state capitol. The lecturing that has clouded the nation’s airwaves for weeks about the need for civility is apparently lost on the protesters. They carry signs comparing Walker to Hitler, putting a target on his face, and denouncing him as a dictator. A Washington Post writer penned a column — picking up a slur from the governor’s opponents — suggesting Walker is America’s answer to Hosni Mubarak. Worse, 14 Democratic state senators have fled the state to avoid voting on the proposal, essentially preventing the Republican’s from voting on it as well, as at least one Democrat has to be present.

What a week! The Democrats are shaming themselves on the premise that American voters can’t handle the truth. Republicans, whether by choice or by default, are taking up the challenge of telling voters the truth about our problems and persuading them that effective, responsible, and gradual solutions are possible — without taking benefits from current seniors and without abandoning our obligation to fellow citizens in need.

Which one will the people listen to? Will the people act like adults or cry like children? The future of our nation is in that answer.

I really like my TIVO!

I was an early adopter of Tivo back when it first came out and I think it is one of the greatest inventions in history. Not just because it makes TV watching so much easier and better, but it also has great features like Kidzone and the ability to access Netflix instant streaming. This allows for my child to watch shows with no commercials, preventing her from pestering me for the latest toy, and me to make sure that she only watches quality educational shows and avoids the rest of the filth on television. In fact, Tivo is a great family uniter as it helps limit the amount of time you watch TV while still enjoying quality entertainment. In fact, I think Tivo is so great that everyone should have one and that the government should give everyone who buys a Tivo  a tax credit for $250.

Sounds absurd, right? But substitute the words “electric car” for Tivo and you essentially have what is going on now courtesy of our government. Since a few elites in Washington DC think that electric cars are a good idea (although most probably don’t drive one), they help subsidize them with tax breaks to help people buy them. Forget that the market for these cars is very small (what percentage of the population can pay $40k for any car?), that electricity they use mostly comes from coal or other pollution causing energy sources, or that the private market has essentially decided that they aren’t worth building or selling. Washington elites think they are good for the country and they will use their power to support it, with your money of course.

So I ask, where is my Tivo tax break?

EPA fills (usurps) Congress’ void (power)

In today’s Bangor Daily News, you state “Congress has repeatedly failed to take any action on these climate-change related gases. In the absence of congressional action, the EPA has no choice but to step in.”

You also infer that:

“Doing nothing means the U.S. will remain dependent on oil from volatile regimes and forgo investment in the next generation of energy technology, which means jobs will be created in other countries, not here. It means that droughts, fires and floods will ravage growing parts of the world, causing food shortages that lead to government overthrows, as the Pentagon warns. Growing numbers of Americans will suffer health problems due to pollution, diminishing their lives and raising health care costs.”

Article 1 Section 1 of the Constitution states “All legislative Powers herein granted shall be vested in a Congress of the United States.” I guess I must have an old copy because I miss where it says, “unless they cannot come together and therefore nameless, un-elected, un-accountable bureaucrats can make laws instead.”

The EPA should not even exist, let alone be able to usurp the power granted to the legislative branch.

As for your scary paragraph, how does the EPA (through a cap-and-trade system) prevent our dependence on foreign oil? Will we need less oil after they implement cap-and-trade? No, but it will be more expensive, which will of course have people demanding alternative sources of energy. Of course this demand for alternative energy already exists. President Carter and every president since has stated the goal to get off foreign oil. President Obama is now calling it the energy source of the past, but yet it remains the primary energy source. Why? Because it is cheap. You don’t think so? Next time you gas up, notice what you are paying for a gallon of gasoline and then go into the store and look at the price for a gallon of water, or even milk. Oil must be pumped from the ground, many times in the middle of the desert or deep on the ocean floor, shipped to ports, shipped to ports of origin, shipped to refinery, refined into gasoline, shipped to distributors, and finally shipped to the local gas station (I am sure I missed a few steps as well). The fact that we can buy it for around $3 a gallon is practically a miracle.

But not even that is preventing the private market from looking at alternatives. They simply have not yet found something as effective or inexpensive as oil. I look at this as the market at work. When demand goes down and prices go up, people will look to other sources of energy. Here in northern Maine, when the price of oil spiked in 2008, many people rushed out to buy pellet stoves and practically overnight, pellets were the new rage. Of course eventually the price of oil fell again and I assume so did the sales of pellet stoves and pellets. It is the same with wind power, nuclear power, hydro power, etc. Since none of the alternatives (especially the “greener” technologies) can compete on a pricing or on an efficiency model, they need to be subsidized to make them competitive. The EPA, through a cap-and-trade system, wants to raise the price of oil (and other “non-green” energy sources) and therefore electricity in the hopes of making us use less and search out alternatives, which at the current time are only attractive due to subsidies. Even with subsidies, few people are willing to go off of oil.

Which brings me to your next point, “It will make us forgo investment in the next generation of energy technology?” I have to assume that you believe that only the government can make these investments. My bet is that there are millions of people working at thousands of companies who are investing money and trying to find the next great energy source. Not because of some doom and gloom about foreign or peak oil, or through their altruistic, save the world ideals. No, they are doing it, because the person or company that figures that out, will make trillions of dollars. In fact the EPA imposed cap-and-trade system will increase energy costs for all of us, leaving fewer dollars for this very investment.

This takes us to this statement, “which means jobs will be created in other countries, not here.” This is nothing but more fear mongering. Regardless of where the idea comes from, when a new energy source is found or developed, it will provide ample job opportunities for people of all nations. However, most of those new jobs will simply replace the existing jobs in the energy sector. The “green job” myth is exactly that. Any job gained at the pellet factory or through windmills will most likely replace a job at the oil company or coal plant. Cap-and-trade does not create demand for more energy and therefore more jobs, it aims to actually decrease energy demand and therefore jobs.

Now onto the most ridiculous statement, “It means that droughts, fires and floods will ravage growing parts of the world, causing food shortages that lead to government overthrows, as the Pentagon warns.” Is the EPA magic? They really have the ability to just rid the world of these scourges and they haven’t yet? History is littered with these natural catastrophes and no human law or action can prevent them. Do you want to know what leads to food shortages and government overthrows? Poverty. The places most prone to government overthrows, famine, droughts, fires, and floods are the poorest places on Earth. They are also the most likely to suffer catastrophic results from earthquakes, hurricanes, and floods while wealthier nations are better able to plan and defend against these natural disasters. The EPA might want to hire a few economists to put on staff since their environmental rules will always also have an economic impact, one which I argue is much more damaging to the world and the environment.

Lastly, “ Growing numbers of Americans will suffer health problems due to pollution, diminishing their lives and raising health care costs.” We have some of the cleanest air and water in the history of civilization and compared to third world countries, we cause far less damage to our planet. Scientific “proof” of climate change is marginal at best and the so called solutions can promise very little overall change to the environment. Once again, poverty is the bigger threat to the planet. The EPA’s goal is to make us poorer in the name of protecting us. No thanks.

During the “greatest economic calamity of our time”, the EPA’s budget grew from $7.4 billion to $10.3 billion, so it’s safe to say they have a stake in this game. The debate on climate change is not done, should be held within Congress, and households across America. But the EPA, whose livelihood depends upon it, should not be the final judge and has no power to take any action.

On a side note, since I love these type of numbers:

The EPA’s budget in FY2009 was $7,643,674,000 but grew to $10,297,864,000 in FY2010, yet their website says this:

“EPA’s proposed budget for 2012 reflects the President commitment to ensuring the government lives within its means while ensuring that EPA can carry out its mission. The proposal represents about a 13 percent decrease from 2010.”

A 13% decrease would mean their budget would be $8,959,141,680 for FY2012 (there was no budget for FY2011, just a continuing resolution). Since when is a $1,315,467,680 increase from 2009 considered “living within its means”?

Don’t you just love how the government describes its budget? The EPA will cry about (and make tough choices) their reduced budget when in actuality it grew by 17% since 2009. Did your salary grow by 17% since 2009? Are we to believe that in just 3 years, the EPA cannot function with only a 17% raise in it’s budget?

Is NBC relevant to anyone?

We have a lot of problems in this country, but NBC just keeps beating the “birther” drum instead of asking questions that matter to people’s lives.

Since David Gregory seems so intent on the  ”facts”, lets look at some of them.

Outside of the left media and at some back yard get together, very few people in this country actually believe that Obama was not born here. Most that do are probably not well-educated and/or not too serious about it. Some may be only guilty of wishful thinking.

In fact, about the same amount of people think that George Bush (who they ironically think was so incompetent) was responsible for 9/11. I don’t remember NBC demanding Democratic political leaders to stand up against those allegations. In fact, I don’t see them doing it now, even as those allegations continue. Are those who have either of those views ignorant? That is not really for me to say, unlike Gregory I don’t presume to know everything and cast all those with differing opinions as being ignorant. But I will say that having those beliefs is not any more ignorant than Gregory’s support of Keynesian economics, or his support of a minimum wage, or his support of Obamacare.

His other point was that Obama is a Christian and that again Speaker Boehner must stand up to the ignorance of those who believe him to be a Muslim, and set them straight with the facts. What facts do we have? Obama’s words are not facts. Is spending 20 years in a “Christian” church that seemed to spread more hate and politics than religion a fact of his Christianity? Is leaving that church after the controversy proof that he is no longer Christian?

I personally don’t know what religion Obama prescribes to, nor do I care, but it is no more a fact that he is a Christian than I am. In face, just going to church does not make me or anyone else a Christian. Those who question his religious beliefs are not ignorant to do so and again it is not Speaker Boehner’s job to set them straight.

If David Gregory and NBC are so hell-bent on preventing ignorance from spreading, they might want to start by cancelling his show.

 

 

Is Obama smarter than the market?

President Obama, in his State of the Union Address, talked about cutting government spending ans also about increasing “investment” in key areas to position the United States to “win the future”. I despise that slogan since it implies that we must beat someone else (and Obama mentioned the Chinese a lot), but that is just nonsense. Prosperity in other countries isn’t bad for the United States, in fact greater prosperity around the globe is a good thing for all people regardless of nationality. But for people like Obama who believe that fat people can only get fat by exploiting skinny people, it is natural to believe that Chinese successes come at the expense of Americans.

So we must invest (which means spend tax payer money) on key technology or infrastructure so that we can compete on the global market. Of course investing usually means taking risk, but the government is immune to risk and in fact, if they don’t get the return that they want/need, they can always pump in more dollars.

It is important to understand that politically, government spending (investments) make perfect sense. You get to invest with someone else’s money with no risk of loss. You reward (with government contracts) key supporters and other politically connected groups. You create a lot of short-term jobs and a few long-term “seen” jobs (of course a lot of unseen jobs will not be created at the same time) during the initial start-up. You get to throw money at key states that can help in the next election. If the project fails, it will most likely be after you are long out of office or will rarely be tied back to you.  Talk about a winning proposition! Is there any wonder that all politicians of any party or so willing to spend (invest) in “winning the future.”

Milton Friedman’s four ways of spending money could not be more relevant to this phenomenon.

So this week President Obama announced two “investments”:

1. Vice President Joe Biden announced a six-year, $53 billion plan to expand high-speed passenger trains.

Again with the trains. Politicians for years have tried to push these high-speed trains. Of course we already have many options when we travel, we can drive, take the bus, fly, or take a train. Out of these only train (Amtrak) is materially subsidized. User fees pay virtually all the costs of airlines and airports, which (together with connecting ground transportation) link any two points in the nation within a day. The highway system goes everywhere, and nearly all of it was built with user fees paid by drivers, truckers, and bus companies.

High speed rail will be different we are told, but in most countries that have it, it has been a budget buster. It added 10% to the national debt of Japan. Part of the problem is they underestimate the cost. Most projects come in 40% to 80% over budget. Some overruns in Korea were 200% to 300%!

One of the first proposed routes in America would be from LA to San Francisco. Just the first approved section has already saw costs escalate 50% to $45 billion. How much are we willing to continue to spend on rail in this country? Politicians, of course, have no limit of your money that they will spend.

2. Obama promotes plans for wireless expansion:

In the State of the Union address, Obama talked of his plan to expand access to high-speed wireless to 98% of the population in five years. It doesn’t matter that it will cost billions of dollars and that companies such as AT&T and Verizon is just now building the technology. In theory the government could pay for this by auctioning off space on the radio spectrum to commercial wireless carriers. It is estimated that could bring in $30 billion over 10 years. If the government stopped there and let the commercial carriers do the rest, it might be fine, but instead Obama plans to use at least $10 billion to develop a national broadband network for public safety agencies and another $5 billion for infrastructure to help in rural areas. Government just can’t stop helping and investing.

Anytime the government thinks they want to invest in something they should have to hire consultants and developers to see if they would invest their own or clients money in the project. Most would pass on these type of investments because if they were profitable, someone would already be doing it. The market is amazing in that regard. No one has to tell it what to invest in.

Lawrence Reed, of the Foundation for Economic Education, explains it this way:

“They respond to market signals, to prices. Prices tell them what’s needed and how urgently and where. And it’s infinitely better and more productive than relying on a handful of elites in some distant bureaucracy.”

“In a market society, the bits of information that are needed to make things work — to result in the production of things that people want — are interspersed throughout the economy. What brings them together are forces of supply and demand, of changing prices.”

Perhaps no product better highlights this than the common pencil.

As John Stossel writes, “No one person can make a pencil. Vast numbers of people participate in making the materials that become a pencil: the wood, the brass, the graphite, the rubber for the eraser, the paint and so on. Then go back another step, to the people who make the saws and machinery that are used to make the materials that go into a pencil. And before that, people mine iron to make the steel that makes the machines that make the materials that go into a pencil. It’s all without central direction, without these people even knowing they are all working ultimately to make pencils. Thousands of people mining, melting, cutting, assembling, packing, selling, shipping — and yet you can buy pencils for a few pennies each.”

Smart people (like President Obama) always think they know better than others. I say they should put their money where their mouth is and invest their own money, but it is so much more fun to gamble with other people’s money. Truly smart people know that they don’t know better than others. Sure they may have a great idea for “winning the future” but so do lots of people. Most don’t have the power to spend other people’s money chasing their dreams. Politicians should learn that just because they have that power (although technically the Constitution denies this power) doesn’t mean they should use it.

 

 

The “Right” to Healthcare

How healthcare is delivered in this country is far different from almost every other type of good or service. The results are exploding costs, restricted access, government intervention, and eventually rationing and a lower quality of care.

So the obvious question is why don’t we handle healthcare like we do any other service, such as mechanics or hair salons? The liberal answer is that healthcare is a right. But is it? Do I have a right to use another’s skills and services for no cost?  Of course not, just like I have no right to live in a house or rent an apartment without paying for it.

Somehow we have convinced ourselves that healthcare is different because it is necessary for life (although to my point, so is shelter), and so we have created this monstrosity of a system that we have now. We have turned insurance into something that it is not designed to be, we have involved the government in almost every level including as the primary payer for most care done in America.

So I propose that we run a test and take another item that is necessary for life and build that system to be like the healthcare system. Let’s take the food industry which is much more vital to life than healthcare so I don’t see how we can let people profit off of something that we need to live.

So all grocery stores are now non-profit. Farmers and distribution firms can still be for profit and restaurants can still exist. Instead of going to the grocery store and picking up your items and paying cash/credit for them, you now pay a premium to a food service company (can be for profit or non-profit). If you are over 65, you will pay your subsidized premium to the government and if you are below certain income guidelines, you will have this service provided for you with no premium or a heavily subsidized premium, also by the government.

When you need to go to the grocery store, you can go in and pick out the food that you need and take it home with you. There may be a small co-pay based on the food service plan you have. In some cases, you may actually have to pay for the first $2500 of food out-of-pocket before the food service plan kicks in.

But no worries, since the cost of food will quickly skyrocket, you will have no problem hitting that “deductible” quickly. Of course your premiums will also rise, but let’s not think of that, we can just blame the greedy food service company and their evil profits.

Why would costs go up you ask? Well, would you get ground beef or steak? Why not grab a few lobsters while you are there? Don’t need all that chicken, no worries just toss it out, you can always go back and get more under your plan. Of course food would get more scarce, farmers would have to raise prices, distributors and restaurants would also have to raise their prices. Food service premiums would have to raise every year to cover these additional costs or the food service companies would not be in business. Hopefully the government can step in and force the food service companies to add additional benefits to their plans and castigate them when they raise their premiums to cover these additional costs. If we are really lucky, the government can just take over all the food service companies and provide everyone with this service. They can pay the farmers, restaurants, distributors, and grocery stores less, which I doubt will effect the quality of the food. They may eventually have to ration us if tax dollars don’t cover the tab, but at least we don’t have to deal with the food service companies anymore.

Does this all sound insane? Well it is, but it is almost exactly how we run our healthcare system today. Obamacare did nothing to address this, in fact in most cases it made it worse. But what if we treated healthcare  like purchasing any other good or service?

First we have to take two things into consideration.

1. Healthcare services are provided by people/organizations that deserve (must) be paid for that service. Otherwise they won’t offer it.

2. Rationing must exist. Costs are natural rationing tools for most purchases. Absent of costs, most of us would spend as much as we wanted. So the question is, who do we want to control the rationing. The patient or the third-party payer (insurance company or government)

So what about this. At age 18 or maybe 22, I can no longer be on my parent’s health insurance plan. I have the ability to go out a purchase an individual plan of my choice, or go without health insurance and pay my health bills out-of-pocket. Because I am young and relatively healthy, a number of insurance companies from around the country (inter-state sales allowed) will offer me a number of plans that I can choose from. I cannot be denied for a pre-existing condition and I can’t be “rated” for a pre-existing disease. I can be “rated” as a smoker or if I am obese (just like in life insurance or long-term care insurance). All plans must also include an annual physical at no cost.

Based on my income, I may receive vouchers to help me pay my premiums. (What we spend on Medicaid today would buy almost all recipients a high deductible plan, and fund their HSA with 80% of the deductible) Since I am young and healthy, I choose an individual policy with a HSA plan and start my career. I now have health insurance for life, as long as I choose to keep it, and as long as I pay the premiums. It is not tied to my employer, although employers can still play a role by competing for my services by offering to pay part of my premium, funding my HSA, or funding a HRA to help cover the cost of my deductible. Again this will be the choice of the employer and my choice as an employee.

I don’t have to choose a high deductible plan, I can choose a full coverage Cadillac plan if I am willing to pay the premium. The “low-income” or “Medicare” voucher would be a set amount based on income and not the type of plan that I had. If the premium of the plan was lower than my voucher amount, the excess could be deposited into my HSA.

Every year, I must renew my policy and based on my annual physical I may get discounts for good behaviors (going to the gym, low BMI, etc.) or I might get rated (if I picked up smoking or ate too many cheeseburgers). Of course the policy would go up a bit each year for inflation, but I would be able to shop around for other carriers. I can’t be denied care, I cannot be denied based on pre-existing conditions, and cannot be rated for a disease. (Although I think this should be addressed. If I am a life long smoker that has lung cancer, isn’t it logical for me to pay more for my insurance?)

Hospitals and healthcare clinics would have to change as well. They would have to actively compete for business now and price their services competitively and make them transparent. (Does anyone know the cost of a cholesterol test today?)

Government’s only role would be to provide the vouchers (handled on the local and state level) and uphold the rule of law, meaning ensuring that providers and insurance companies followed the rules, and enforcing contracts. Why?

Because what if I still can’t or won’t pay for my care? Hospitals cannot deny me care, so I might just stiff them and hope the eat the cost or pass it on to other consumers. But providers will be given options:  they can put me on payment plans, garnish my wages, or even maybe have me arrested (debt prisons?). Perhaps I can pay off my debts through “volunteer” services as well.  Healthcare clinics staffed by altruistic doctors, medical students, or interns could also play a role to help those who struggle to pay. But remember that this type of system would dramatically reduce the cost of healthcare (because people would ration themselves, providers and health insurance companies would compete, and people would save more in a HSA for medical expenses. The bottom line is that there can be no free lunch. Getting services and then not paying for them is stealing and should be treated as such.  Back to my food analogy, if I steal food (even though I need it to live), do I not get arrested?

I know that some of that sounds cruel and the next item may even be c=more cruel but it has to be addressed. The big issue with Obamacare is the individual mandate. How do we get around having a mandate,  since it clearly isn’t Constitutional nor moral to force someone to buy something, but we also can’t have people waiting to get sick to pick up insurance. I don’t have a great answer, but for argument’s sake, let’s say I choose not to buy insurance, I go to the doctor and they find out I have colon cancer. I go to apply for insurance knowing I have a lot of bills to pay soon. The insurance company can’t deny me for coverage, but maybe they can put on an elimination period of up to one year, and for that period I have to pay out of my pocket. Sounds so evil, but I made the choice not to have health insurance, I have a personal responsibility to myself and my family, I should suffer the consequences of my actions. To punish others is more cruel in my opinion.

Is it a solution? I don’t know. We have fifty states, why not test it somewhere? Obamacare has been tested in places like Massachusetts and we are already seeing its failures. It addresses all of the wrong problems with our healthcare system and double downs on the bad parts.

My “solution” eliminates Medicare and Medicaid by turning them into a voucher system. It puts patients in charge of their healthcare decisions and makes them the primary payer for the services they desire. It creates competitive markets that are proven to drive down costs in almost all other goods and service transactions. It virtually eliminates government intervention, other than the true role of government which is to uphold the rule of law.

This has already been tested in a way. Lasic surgery is not covered by any insurance plan so people who want this medical procedure must pay out-of-pocket for it. It has been around for a little over a decade and what has happened? The procedure has gotten better, more efficient, and less expensive. Doctors spend a lot of money on competing for patient’s business, have great, clean facilities, and invest in the latest and best technology to best serve their patients. Doesn’t that sound like something we should strive for with all healthcare?