Resistance Begins at Ohm!

Monday, December 28, 2009

Let me get this straight………………….

1.     We're going to have a health care plan
2.     Written by a committee whose head says he doesn't understand it,
3.     Passed by a Congress that hasn't read it but exempts themselves from it,
4.     Signed by a president that also hasn't read it, and who smokes,
5.     With funding administered by a treasury chief who didn't  pay his taxes,
6.     Overseen by a surgeon general who is obese, and
7.     Financed by a country that's broke.

What possibly could go wrong?

Tuesday, December 22, 2009

Carbon prices plunge - I hate it when that happens

Carbon prices plunged yesterday in the aftermath of the
Copenhagen conference on climate change, dealing a blow to
the credibility of the European Union's carbon-trading

Financial Times

I told you this was just another corrupt scheme to make rich speculators richer and the rest of us pay the freight. Increases in energy costs is the result of cap and trade. Along with a new industry just as rapacious as oil and gas, just without any real assets.

Friday, December 18, 2009

A more likely explanation?

A discussion of how cosmic radiation, influenced by solar activity results in cloud cover that (surprise) contributes to earth cooling or warming.

Cloud Mystery by Henrik Svensmark et al 52 minutes in 6 parts

But no fun since we can't blame evil man/industry/cows/oil/economy for our impending lack of doom.
The sky ian't really falling after all.

Tuesday, December 15, 2009

Reply to Senator Jim Webb regarding health care reform 12/15/2009

Thank you for your thoughtful and well-considered work. I agree with most of the things that you say here. For example, it does not make sense to me to add another generation of people between 55 and 63 to medicare, when it is bankrupt already. It doesn't make any sense to take away money from medicare, which can't cover the costs now nor reimburse providers in a sustainable manner in order to give coverage (likely equally broke) to millions more people. I also support medicare advantage programs as they provide a choice in many areas of the country that would not have adequate services for the elderly otherwise. If we took people's money with a promise that we would provide a decent program to pay for medical care in the future, then we need to make good on the promise. That includes the medicare "gap" that is not covered in the budget for the current. We need to be honest with our seniors, our medical care providers, and with America's taxpayers as well.

For Medicare Part D, the so-called donut hole, can we not provide a program similar to flexible spending accounts that will help people meet those expenses without penalizing them by treating it like an asset or taxing it like a benefit? This should be something people could fund while they are still working.

I also agree that we should import less expensive drugs. The argument that they are not safe is silly. The drugs we make here aren't safe either, as a large number of recalls, law suits and faulty research results have shown over the last decades.

Correspondence from Senator Jim Webb regarding health care reform, 12/15/2009

Knowing of your interest in the ongoing debate in Congress over health care reform, I wanted to update you on a number of votes and positions that I have taken during the process.

Together with 60 of my colleagues, I voted in favor of proceeding to debate the proposed health care reform legislation. I have yet to decide whether I will support final passage of the bill.

Friday, December 11, 2009

What is in the Clean Energy Act passed by the House?

Read Congresswoman Michele Bachmann's summary

Most disturbing to me is the politicians once again choosing winners and losers. Which category is your state in?

No doubt I am over-simplifying this but....

The EPA has declared that CO2 is a pollutant. (So is sea water and plastic, but let's not go there.)
While they have not determined how they are going to regulate it, because of their authority (the clean air act), their power is pretty much limited to setting a cap on CO2 production.

There is some debate about whether the clean air act gives them the necessary authority, and so any regulation they come up with will likely be the subject of years of legal maneuvering. The Supreme Court has already determined that the Clean Air Act is broad enough to include greenhouse gasses and that EPA is required to regulate it. This has nothing to do with scientific study, fact or climate fanatic (for or against control) opinion. It is determined based only on the clean air statute.

The House proposal is known as cap and trade. Trade in this context means trade for money. The EPA proposal would be cap and penalize. Between the two, I think cap by itself is a fairer action. But then, congress would not be calling the shots and we know how they feel about that. In the end, the government is going to get a lot of money from industries that exceed their CO2 limits.

Tuesday, December 8, 2009

Settled science?

First of all, scientific theory is not proven through a ballot. It is proven through empirical processes. It is not settled by what could happen until it really happens. And even then, a better model may come along to explain what happened.

Having said that,
17,200 scientists dispute global warming
(3,000 UN politicians disagree)

2nd CNN meteorologist challenges manmade global warming theory

Over 30,000 scientists sign a petition against the man-made theory

Even climate extremists are having a bit of trouble with the data

NASA can't make up its mind

Brit's Met Office revisiting data

Answers explanation of atmospheric composition and what contributes

updated with this source from Science Daily, which doesn't appear to have any particular bias:
No Rise of Atmospheric Carbon Dioxide Fraction in Past 160 Years

Here is a detailed discussion of factors besides anthropomorphic CO2 that affect temperatures and an explanation of the actual values instead of just percentages. Takes some time to digest. 

Wednesday, December 2, 2009

Climate Change - observations

13 reasons and counting for questioning Al Gore and company. (Not counting all of the political and financial motivations.)

1) The climate changes all on its own. This can be shown with data - lots of data.

2) CO2 (carbon dioxide) is emitted by all animals and is food for plants. It is not a bad thing anymore than oxygen is. (Oxygen is actually a bad thing - it causes most things to oxidize or burn. That is a destructive process, but it does release energy, which is why we use it to live.)

3) CO2 is a small percentage of the atmosphere. Nitrogen is by far the most prevalent gas. Depending on which parts of the atmosphere you want to include, nitrogen plus oxygen represent 99% of the atmosphere. Water vapor and argon are next, making up most of the last 1%. CO2 represents less than .03% or .0003 or 3 parts per 10,000.

4) CO2 concentrations go up and down for natural reasons like volcanos. Volcanos, the director of Goddard Space Center says, produce the most CO2 of anything. Since plant life contributes a lot to the reduction in CO2, why not blame plants? Those bad plants just haven't been busy enough, time for some genetic engineering. Of course cutting down trees doesn't help the situation, but most plant life is oceanic.

5) How many measurements does it take to find the difference that man makes in that .03%? Statistically, way more than we have available. If CO2 is such a small component, think how serious a minor error in the measuring equipment would make. Let's say I am measuring the atmospheric content and I make a .001% error (pretty small error). If that error is in measuring CO2, whoa, that's like plus or minus 1/3! Like um, the temperature is 100 plus or minus 33 degrees. Quite a variation. I hope a pigeon didn't sneeze on your probe.

6) The period in which actual temperature measurements are available starts in 1850. Everything that went on before is conjecture. And as the now revealed hoax shows, if the conjecture did not fit the desired result, they simply changed the basis for conjecture until it did. That conjecture is consistent with the desired outcome until about 1980. After that, it no longer supports the predetermined conclusion. So, they just stop using it and substitute real temperature data instead. And when real temperature data doesn't support the predetermined conclusion (which it doesn't), then they fake it some more.

Tuesday, November 24, 2009

Interest payments in the future

Look, the fact that the national debt has gone from 2tri to 12tri is worrisome just because it grew so fast. We never really think about paying down the principle on the debt, it just keeps inching up, right? As long as GDP goes up, we can afford the incremental increase in interest payments, right?

Interest payments alone are going more than triple in 10 years. Like think of it this way. You are paying $200 on your credit card now. In 2019, if you do nothing to pay down the principle, you are going to be paying $700 per month. It's just money going out the door (to China) without earning anything or doing anything productive (like build roads or schools). Yep, just money out the door before it even lands in the wallet. Consequence? Read on... (hint: health care ain't got nuthin on this problem, at least paying for health care contributes to the economy).

(Talk about your hockey stick graph.)

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.

CNBC from the NYTimes

Wednesday, November 11, 2009

Dear Senator Mark Warner

I am writing to say that I agree, the issue with health care is cost. In my opinion, government insurance programs (medicare, medicaid, CHIP) have largely removed cost-based market competition, resulting in the current complete disconnect between the price charged and the cost of the service performed. The market motive right now is get the most possible out of the government program. Given the percentage of Americans that use these programs, the private insurance companies are seriously constrained by having to play in the same market.

For example, for routine blood tests (the usual annual panel) a lab submits charges of $150.00 to BCBS. The allowance is $25.75. Neither of these amounts have anything to do with the actual cost for performing the service. When I negotiated prices for surgery, lab and xray for my (uninsured) son's surgery, I could get reductions of 35-50% for cash in advance. This was for professional services as well as facility costs. (Always get it in writing before paying.)

I do not see how a federal program covering even more people is going to change that market dynamic. I believe consumers are far more effective in driving the cost of service down. Currently, they have no influence in the process, let alone motive. Most people have very few choices for providers (under private or government programs) and little knowledge about service costs because the bill goes to the insurance company. They have no way to make any decision about the price of the service before it is performed.

If consumers have choices and incentive to choose lower cost alternatives among service providers, not insurance policies, costs will go down. As long as the government is getting the bill, it's just a game managed by lobbyists and law makers, who despite what they say, aren't concerned about the price. It always comes back to political motives which is how we got in this situation in the first place.

Saturday, November 7, 2009

Results count

To the Congress:

The U.S. Postal Service was established in 1775 - you have had 234 years to get it right; it is broke.

Social Security was established in 1935 - you have had 74 years to get it right; it is broke.

Fannie Mae was established in 1938 - you have had 71 years to get it right; it is broke.

The "War on Poverty" started in 1964 - you have had 45 years to get it right; $1 trillion of our money is confiscated each year and transferred to "the poor"; it hasn't worked and our entire country is broke.

Medicare and Medicaid were established in 1965 - you've had 44 years to get it right; they are broke.

Freddie Mac was established in 1970 - you have had 39 years to get it right; it is broke.

Trillions of dollars were spent in the massive political payoffs called TARP, the "Stimulus", the Omnibus Appropriations Act of 2009... none show any signs of working, although ACORN appears to have found a new source: the American taxpayer.

And finally, to set a new record:
"Cash for Clunkers" was established in 2009 and went broke in 2009! It took cars (that were the best some people could afford) and replaced them with high-priced and less-affordable cars, mostly Japanese. A good percentage of the profits went out of the country. And the American taxpayers take the hit for Congress' generosity in burning three billion more of our dollars on failed experiments.

So with a perfect 100% failure rate and a record that proves that "services" you shove down our throats are failing faster and faster, you want Americans to believe you can be trusted with a government-run health care system?

20% of our entire economy?

With all due respect,

Are you crazy?

Sunday, November 1, 2009

1948 cartoon extension dept., Harding College

This is a fascinating perspective. You can see how far we have come - or how far gone we are.
National Juggernaut

Saturday, October 17, 2009

And this makes a lot of sense....

Under both house and senate proposals, insurance companies would not be able to drop you if you are sick, nor deny you a policy because of a prior medical condition. So, can't turn you away if you are or have ever been sick. Nor can they charge you more in premiums because of your medical status. But may the Lord save you if you have an unhealthy lifestyle (in whose opinion???)...

Under current regulation, incentives based on health factors can be no larger than 20 percent of the premium paid by employer and employee combined. The legislation passed by the Health and Finance committees would increase the limit to 30 percent, and it would give government officials the power to raise it to 50 percent. For example, families with premiums of $13,375 — the combined average for employer-sponsored coverage, according to a recent survey — could have $6,687.50 at risk.


Whether you look at it like a discount or a penalty, makes no difference. If you smoke, have high cholesterol, are overweight, don't exercise, eat too many carbs, have high blood sugar, and whatever else the government and your insurance company come up with has risk factors, you are going to pay more. Now you will have your insurance company inspecting your every body function to determine if they can either charge you more or deny you some discount. You will need to get this test, that exam, some other procedure, to determine if you measure up to your insurance company's standards. Now isn't that a pleasant thought? If you don't submit, well then you are going to pay all the penalties. Your insurance company, your employer and your government are now going to be right there overlooking your every day behavior, reminding you that you have a personal and financial responsibility to live your life their way, not your way.

I think I'm going to puke! Oh crap, that will make my rates go up, I might be bulimic!.

Monday, October 12, 2009

Everyone benefits when I spread your wealth around

Remember the NYT writer that had an idea how we could regulate lawyers like we treat physicians under medicare? This guy explains wealth redistribution with a new grading system. Mike Adams

The lastest "you can't be that stupid" moment:

1) Young people (who pay a lot more in premiums than they use in benefits) only have to pay 10% of the premium if they don't get insurance. So of course, they will get the insurance, right?
2) Insurance companies can reduce premiums by offering low cost policies to more sick people.
3) Your premiums won't go up if we tax the hell out of the insurance companies.

Why is it that they get "spread the wealth" but they don't get spread the risk?
Why is it that we privatize the profits and socialize the losses? The losses are not an asset, duh! And the losers should not be spreading the risk, they should be eating the whole thing.

Wednesday, September 30, 2009

Abraham Lincoln, a lesson not learned (oh yeah, he was a Republican, too)

You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away people's initiative and independence.
You cannot help people permanently by doing for them, what they could and should do for themselves.

......Abraham Lincoln

Wednesday, September 16, 2009

Sure, that makes sense (?)

Health care is too expensive. So we need reform to lower the costs. Oh, and we need to pay for health care insurance for the uninsured. So we are going to tax health care insurance (if you have a decent plan) with a 35% surcharge.
And if health insurance now needs to provide coverage for all the assorted things congress is now going to require - whether you need it or not - won't a policy cost like $8000 a year, especially if a high deductible is not permitted?
Won't that make having good insurance as expensive as not having insurance??? Unless you can't get insurance in which case it will be free.
Somehow, I don't think this is about the cost of insurance or health care. I think it is about making sure everyone has the same crappy coverage and lack of alternatives.

Where have I heard this before: The government is going to collect a tax and put the money away so they can pay for future health care costs???? Oh yeah, that was medicare, which is bankrupt because the government spent the money instead. Now that they have to pay for medicare, they need to go collect some more money for another future promise. Bernie Maddoff anyone?

Friday, September 11, 2009

Just the facts Ma'am

Comments on the alleged lies and distortions:

A physician would rather amputate someone's foot than treat the underlying diabetes. OK, only a lawyer would think like that. Physicians, while not perfect, are in business to care for people. If all you care about is the money, maybe you are practicing plastic surgery. This is insulting, but then again, consider the source.

A person who intentionally lies on an application for insurance is not a victim when the insurance company finds out an cancels the policy. The insurance company is a victim of attempted fraud, which in most places is a criminal act. The story about the woman who failed to report acne and had her policy canceled turns out is not entirely true. Another case of "I'll do anything I want in order to get what I want, nuthin wrong with that."

The solution to this problem is not to nationalize health care. It is to keep medical records private so that insurance companies can't go snooping around looking for a nail sticking up. And neither could the government. But that's not the plan. Instead, Congress proposes to connect your health records with your tax records.

If that's the best reason Obama can come up with, I really don't see a reason to reform health care. I see a reason to reform personal values, but then again, consider the source.

“What's your solution?” Obama said. “And you know what? They don’t have one. Their answer is to do nothing.” I think that's a case of finding only what you are looking for. And since Obama is not looking for alternatives, he isn't finding any. But here they are, dozens of alternatives, plenty of suggestions (download pdf) Well, he hasn't read the house bill, either so consider the source.

And the people of the USA need government run health care because we are the only industrialized nation that doesn't have it. But wait! Half the health care cost IS covered by government run health care -- called medicare and medicaid. But we need health care reform because medicare and medicaid are going to bankrupt the country, he says. Well duh, why on earth would we order up more medicare and medicaid then????

We should have the public option because the government is much better at doing these kinds of things and managing these kinds of programs. To wit: Fannie Mae, Sallie Mae, the US Post Office, Veterans Affairs... If I had that for references, I couldn't get a job cleaning gutters.

It doesn't add up, but then consider the source.

Legal reform ala health care reform

Dr. Richard B. Rafal has a plan for legal reform based on the same ideas in Obama care. Definitely worth the read: WSJ Satire

Friday, August 14, 2009

5 Key Freedoms You Lose under Obama Care

From CNN/Money, a pretty reputable source, IMHO.

Read the stupid bill!
I never thought I would be linking to the Huffington Post -ever- but this is just too choice to pass up. Turns out the WH has been negotiating with the pharmaceutical companies behind closed doors. Hoodathot!

Monday, August 10, 2009

Why the mortgage crisis?

Because of all the variable rate mortgages, they say. People who bought houses with no money down, interest rates guaranteed to go up, and not enough income to pay when the bill comes due.
OK, some people probably did go out and get way more house than they were ever going to be able to pay for, even in good years. Some people signed up for ARMs that were destined to be painful. Without having the hard data, I'm finding this isn't adding up. They say 1 in 10 mortgages is at risk of foreclosure. I am not able to believe that 1 in 10 home buyers got into a mortgage they couldn't pay, all other things except interest staying the same. Here's what doesn't add up:
1) Mortgage companies and banks don't want to own real estate. Their business is to loan money. A foreclosure really messes up the balance sheet. They don't make money selling the real estate - not in ways that improve their bottom line. So they don't want people to default.
2) People don't put their hard earned money into a house if they don't believe they can keep it. Even if they don't have a lot of down payment, the process of buying a house, taking care of a house and moving is expensive, financially and emotionally. Some people may be flipping, but no way it's anything like 1 in 10. Many people have families, children, pets and they just don't flip like eggs.
3) Some people have to walk away from their home for other reasons: they need to move for work, they need to move in order to survive, they lost their jobs, they got sick. Or maybe there are other reasons the house isn't affordable. Looks to me from examining some foreclosure notices that some houses are going to foreclosure after years, not months. Why?

Could it be the price of gas doubling in 2 years? People need gas to go to work. The first round that took gas to $3 seemed to suck up the personal budget surplus.

Could it be the price of energy doubling in 2 years? Meaning electricity because of the price of oil plus deregulation, the price of heating oil, natural gas and propane all nearly doubled. (I can't figure why natural gas did that, it's a different resource from oil. I'm not sure switching to natural gas is a good idea without some regulation.) Energy is at the foundation of the economy - everything depends on it. It isn't a luxury. Without energy, no food, no internet, no education, no medicine and therefore no jobs.

Could it be the price of groceries which went up anywhere from 20% to 100% depending on the product? The price of milk doubled, and it hasn't come down. Fresh vegetables are much higher. Everything seems to have taken at least a 10% increase since fuel doubled. Packaged goods like cookies and cereal are a lot higher. Chicken on deep sale is about the same as you could get before, beef - not. Pork - not. Fish - not.

These basics: food, utilities and transportation costs put a 20-30% hit on monthly budgets. In some cases 50% or more. In Maryland, electricity doubled. Bad the mortgage is going up. An insurmountable problem when the electric bill is as big as (or bigger than) the mortgage.

You think maybe that had something to do with it?

But wait, oil went down, right? Yup, but groceries haven't, utilities haven't, and gasoline is creeping back up. Business is passing on the increased costs they have in their operational budgets, just like you have in your budget. It's a difficult inflationary cycle. Those losses the banks took, they are going to pass on the costs, too. In interest. The government money will only last 2 years and they have massive interest payments looming themselves.

So, what are we doing to pay for this economic plan? Taxing energy. Oh yeah, that makes a lot of sense. So utilities, groceries and transportation (personal and public) can increase even more.

To me, that means those families who went essentially bankrupt because of their operational expenses (food, energy, medical care), not because of their capital investments (houses, 401k/retirement, even cars) are never going to be able to afford that house again. There is nothing in the future that will change their financial situation, only more pain.

Another factor looming in the very near future: state and local tax increases to cover revenue losses of astronomical proportions. You can only cut so much. Their operational costs went up just like yours. Try a 20-30% increase in non-federal taxes on top of your energy penalty, increased food and medical costs. Folks, the news you hear is bad enough. The news you are about to hear is really awful.

Where is all this money going to come from???!?!!?

I expect you will see a lot more mortgage foreclosures as the tax bite on top of the other operational costs takes yet another layer of citizens into the poverty zone.

Monday, August 3, 2009

What is really the problem with healthcare costs?

It's medicare. There are millions of Americans about to retire and enter into the medicare rolls.
It is an entitlement they have been paying for their entire working life.
The government did not set aside the money they have been collecting. They have been spending it on a host of domestic and international agendas from wars against terrorism (where is that country anyway?) to 40,000 trailers for Katrina victims (many of whom apparently did not want to pay for flood insurance).
So now, with the millions of retiring Americans entering the medicare system, there isn't enough money to pay for their medical care.

What to do?
It seems pretty simple. Either the costs need to come down or the enrollment needs to be reduced. Or some combination of the two. It's not rocket science. Can't afford it? Buy less, buy cheaper or don't buy.
What am I missing here?
So, let's look at the approach we have been using - buy cheaper. That has translated, at least for medicare recipients, into higher fees and copays. It has also translated into much lower reimbursements for the people providing care - from doctors to labs to hospitals. Everyone is taking a smaller payment except the pharmaceutical industry. There is competition there however, so prices are low for a long list of prescription medicines. There is also some competition for medicare part B however, the premiums are higher for the private programs. Well, duh, they do have a lot of administrative overhead just for the privilege of competing with the federal government program. The pressure to reduce costs for services to medicare-eligible people has the effect of shifting the cost burden to people who aren't getting medicare (or medicaid, but that's another story). The people who aren't getting medicare fall into three categories, people who have their own insurance, people who have no insurance and people who are getting medicaid. For the most part the people who have no insurance aren't helping pick up any of the costs, they are just creating more costs that aren't paid for. Just because the government won't pay doesn't mean the costs go away. Someone is paying for the difference between medicare reimbursements and business costs. Business costs include the losses from treating the uninsured. It all ends up getting tacked onto the bill for the people who do have insurance. Hence the premiums go up faster than the rate of inflation.
Congress is saying well, if we just have more people paying into the program, then we'll have more money to pay for the people who are using the program. If all the customers are a losing proposition to medical professionals, what happens? They quit working. Or they can't get financing to do business. Credit swaps and the car industry all over again. Maybe we can't sustain the status quo, but we can't sustain that either. Adding people onto the rolls for public insurance doesn't work unless they are paying their own way plus paying for all the free rides. Your private insurance is not going to survive - it can't. The government needs to spread the financial pain for mismanagement and stupid decisions across a much broader base of people. Like everyone. And more than once.
One of the cost savings that is being looked at is the larger premium paid for medicare alternatives. The effect of eliminating those programs will be to reduce the margins providers receive for service, create more gaps where treatments are not covered, and add a lot of demand on providers who really don't want any more medicare business. So, you can reduce the cost of the premiums, but you aren't going to reduce the cost of the care. You are just going to shift it over to people who have insurance. Private health insurance premiums go up again. Government costs may be reduced, but only at the expense of the people who are on medicare and the rest of us. Plus, many of the options that medicare eligible people now have for care (such as HMOs) are eliminated. Pretty much you get what the government gives you and you pay for everything else yourself. You won't be able to choose a plan that best meets your needs - there will only be one plan. And the insured are not getting any choices about their premiums either.
The insurance companies use the same strategy. Buy cheaper by increasing payments from patients (copays and deductibles), and cutting the reimbursement costs for participating providers. Buy less by reducing the amount of care (eliminating wellness visits, chiropractic, routine labwork).
At some point, there really isn't much more to be squeezed out by just paring away at the edges. There is a point of diminishing return, and a point of catastrophic collapse. Let's face it, if you are losing money providing service to 20% of your customers, the other 80% are picking up the difference. The more customers in the losing side of the equation, the higher the costs to the full-pay customers. Ever wonder why the bill for that lab test is $225 but your insurance company only paid $30? Something is wrong with that picture. The price for the service is nearly completely disconnected from its cost. Everything else ($195 in this example) is related to the cost of doing business, not the cost of the test. The principle is the same whether you are talking about the portion of people paying the premiums or the portion of people paying the taxes. The people in the middle between poor and wealthy (who probably aren't paying income tax to begin with), between the young and the old, the ones who are working and by and large not sick already, are going to be paying the bills for everyone else. That's just the way it works. The more people receiving services who aren't paying their full share, the more the rest of us are going to pay.
One thing that would be particularly effective for both the government programs and for the privately insured is to reduce the cost of doing business. Two big areas there are malpractice insurance and record keeping. Every insurance company has their own way of paying claims. Providers need to send information in a format that a particular insurance company wants. So, if there was only one payer (single payer), then there would be only one way and that would make things much easier (cheaper). But does that mean the government and only the government should be the one payer? No, it doesn't. It would make a lot more sense to standardize on the claims process. Besides, the government itself will have different requirements for medicare vs. medicaid vs everyone else.
Another business cost is maintaining patient medical records. If those records could be standardized, supposedly everyone would be using the same system for recording, maintaining and sharing information. Electronic records are easier than paper ones - except when people refuse to use them. The government wants to have all medical records in an electronic form. And they also want access to all medical records. And of course, that will cost money. Plus, what are they doing with those records? Whatever it is, it will cost more money. What they are doing with the records is another subject, but if you value your privacy at all, you should be very very concerned.
Why is it that no one is discussing things the federal government could do to reduce the cost of malpractice insurance? In many places for certain specialties, malpractice insurance cost has already arrived at the catastrophic point where physicians simply refuse to practice because the premiums are too much. Congress could reform the area of law that deals with malpractice and reduce the amount that could be awarded. Really, who is going to spend 80 million when they are already dead. The lawsuit lottery seems to be untouchable, perhaps because congress is pretty much just a bunch of lawyers who can't make it in private practice apparently. Another option would be to tax the hell out of those judgments and put that money back into the public programs. It doesn't do any good to put the money back in the treasury where it will be used for something else like $4500 car rebates.

Let's look at the other part of this side of the equation - reducing enrollment. Insurance companies use different techniques, but one that is particularly vexing is eliminating pre-existing conditions. That is managed to some extent in employer-provided plans. In individual plans, it isn't. I'm not saying it is the right thing to do. I'm just pointing out the logic behind an insurance company saving money by not paying for claims for people they know are already sick. In the public plan, the concern is that costs for treatment will be compared with whatever the government decides is the remaining useful life expectancy. If your hip replacement is $100,000 and you can be expected to have 5 decent years left, then the cost per year is $20,000. If that is too expensive in the opinion of the government, oh well, take two aspirin and call me in the morning. It's the same basic idea as pre-existing condition it's just at the other end. Your pre-existing condition is your age and your chronic lack of health. And it could include your poor lifestyle choices such as smoking, obesity and alcohol use - things the government has already decided shorten your useful life expectancy.
Another strategy for reducing enrollment is to increase the age of eligibility. Of course, in a single payer government run public program, every one is eligible. Death is the only sure exit. Abortion and euthanasia come to mind.
And finally, there is an approach I'll call selective ineligibility. That would be where a waiting period is imposed, either explicitly (like you only get 1 doctors visit a year whether you can pay or not) or implicitly (like the waiting period for a doctors' appointment happens to be 12 months). You are ineligible because you had a pre-existing service rather than a pre-existing condition.
So, that pretty much rounds up what I see as the options before us. What Congress is talking about doesn't seem to have much to do with the problem or the solutions. It seems to be mostly marketing hype about how great it will be when we have it.
Here's an alternative idea: What if we got rid of medicare and medicaid, the government run programs? What if we used insurance companies with a common claims process? What if the government got out of the business of managing care? For that matter, throw Veterans' health care system in the pot as well. Most veterans I have spoken with are far less than satisfied with what they are getting. It is basically rationed, costs are increasing and benefits are decreasing. The promise has not been fulfilled. Skip that huge bureaucracy, make the military pony up the premiums and let veterans choose what type of program best meets their needs. People can and should be allowed to choose for themselves whether they want a traditional cost-reimbursement insurance program, a managed care program or a hybrid. One size does not fit all.

A note about future cost savings. Congress always seems to exempt itself from basic accounting practice and principles of capital investment. If a company is considering making a big down payment, cost outlay, investment or up front expense (whatever you want to call it), they will look at the return on that investment in very concrete mathematical terms. It isn't esoteric - well somewhere down the road, we'll find some savings to make up for it. For example, parts of the formula are the cost of money (interest), the projection of payments due in the future (like bonds where you need to have your cost savings in the bank before the bill comes due), and the value of money. The value of money says that spending $100 today in order to save $100 ten years from now, is costing you at least the price of inflation compounded. So, unless you are saving at least $140 ten years from now, you aren't saving squat. I don't hear congress talking about the interest we will have to pay for spending all this money we don't have right now. Even if you say we're spending it already, you have to look and see if it is actually cash spent or is it cash borrowed. Cash borrowed for whatever reason is a lot more expensive than available cash spent. Spending more cash you don't have isn't saving a dime unless you are saving more that the sum of the cash, the interest and the lost value due to inflation. And the more you spend, the more inflation goes up and then the more interest goes up. To make up for a $trillion spent now, we would have to find a $trillion in savings from what we would spend otherwise. That's not going to happen. So, we are then tossing out the current program, and starting over. Except we are ignoring how much it will cost to change and how much it will cost to "settle the old debts." All those costs need to be compared to what we are doing now, and what the status quo will cost in the future. Just saying so doesn't make it so. It just makes them look stupid.

A note on medicaid - this is a program that the federal government pretty much requires the states to administer. States have a lot of latitude with this program, as long as children are insured (and they don't even need to be poor children). That situation leaves accountability for program costs unclear. This piece is not so easy, and I am not sure how a public program would affect the states. We know as long as the States have a large stable tax base, medicaid seems to be OK. The last 2 years have taught us there is no such thing as a large stable tax base. The eligible population isn't stable either. So, I'm going to set this aside until I have a chance to study it some more.

Thursday, July 23, 2009

What did the Mayo Clinic really say?

Extracted from the letter to POTUS

Under the current Medicare system, a majority of doctors and hospitals that care for Medicare patients are paid substantially less than it costs to treat them. Many providers are therefore already approaching a point where they can not afford to see Medicare patients. Expansion of a Medicare-type plan without a method to define, measure, and pay for healthy outcomes for patients will move many doctors and hospitals across this threshold, and ultimately hurt the patients who seek our care. We should not put more Americans into the current unsustainable system.

Get the full copy here:

Sunday, June 14, 2009

On fixing healthcare

One word - medicare/medicaid.
That's what you get with this government running health care. No one really believes these programs are working well for patients or practitioners, do they? Practitioners get paid so little, they can't afford their liability insurance. Patients can't get the diagnostics they need because either they are limited to how many per year, or they just can't get in the door. Recipients are still responsible for large out of pocket expenses. And a lot of things are not covered.

$1 trillion for a new program. At the same time, they are cutting payments for the current ones - why? Because we can't afford the programs!

So, how will we pay for the new one? By taxing health care programs, of course. The system is broken because no one can afford the premiums for health care insurance, let alone health care itself. So, let's make it more expensive.

This crew is so stupid, and for some reason, everyone is buying this nonsense.

Thursday, June 4, 2009

$1 in $6 of American's income is coming from Federal or State coffers

Say what!???!!?!
Yup. Take a $5 bill out of your wallet. Now, take $1 and give it to someone else.

From USA Today

By Dennis Cauchon

Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports. That's the highest percentage since the government began compiling records in 1929.

In all, government spending on benefits will top $2 trillion in 2009 — an average of $17,000 provided to each U.S. household, federal data show. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008.

Oh sure, and with interest rates up by 50%, energy costs soon doubling, and inflation eating something like 10% of our spending power each year - we can afford it. Noooo problemo.

Friday, May 29, 2009

A Matter of Perspective?

In an article in Pravda, titled American Capitalism Gone With a Whimper
Summary: American decent into Marxism is happening at breathtaking speed.
Essentially, after a 70 year experiment in Russia (paid for with US $ according to the author), the government has finally figured out how to implement Marxism without a struggle.
Not just policy, but operations are now being handled by a bunch of appointed, not elected, officials working czars or tiger teams. Primarily, wallstreet bankers and investment managers.
These unelected, unconfirmed "officials" (stooges) are busy.
  • Tax system to be overhauled "by the very thieves who used it to bankroll their thefts, loses and swindles of hundreds of billions of dollars."
  • Government fired the CEO of GM, and determines salaries and bonuses (and decides which creditors get paid, collateral be damned).
  • Government to reinvent the auto industry (heck they own most of it) in the image of what the Whitehouse thinks you should be driving.
  • Oh, and is reinventing the energy sector based on behavior modification, not supply and demand.
  • Spends incomprehensible amounts of money without Congressional authorization
And how was this done? Well, read the article: Stanislav Mishin for Pravda
A very interesting read, given the source.

Tuesday, May 26, 2009

Exploding debt threatens America

Exploding debt threatens America
John Taylor
Published: May 26 2009 20:48
The writer, is a professor of economics at Stanford and a senior fellow at the Hoover Institution

The short version:
The federal debt was 41% of GDP at the end of 2008. the CBO estimates it will double to 82% in 10 years.
In order to balance the budget, a permanent 60% across the board increase in taxes will be required. The alternative is a 100% rise in inflation.
There is no economic theory or evidence that shows that deficits in 5-10 years will help us get out of this recession. Assuming that the CBO is accurate and we will be back to normal in 2014, the responsible thing to do at that point is to reduce deficits, not continue spending with total abandon.
“But we will cut the deficit in half.” CBO analysts project that the deficit will be the same in 2019 as the administration estimates for 2010, a zero per cent cut.
The current administration is all about fixing the "systemic risk" in the private sector (finance, banking, automotive). The real systemic risk is the government and unabated spending.

Thursday, May 7, 2009

Green Jobs - or working for unprofitable industries

Think Chrysler and GM in this discussion

But what about all those green collar jobs we will be creating? They will be created by government run industries who do not need to produce a profit. They just need to keep sucking up your taxes. Without profit, there are no investors and these companies cannot survive on their own without investment capital. (This sounds a lot like small defense contractors to me.) But, if this administration remains consistent, they will be union jobs.

And what Obama proposes to fix that profit problem is to kill the competition through carbon taxes. He will make current energy (electricity from coal, oil and natural gas, plus consumer products like natural gas itself, oil, diesel, gasoline, propane) so unaffordable that you as a consumer will be forced to purchase the green alternative. At a cost increase of maybe 150% (we really have no idea except we know green energy isn't competitive and we didn't see a lot of it show up when gas went to over $4 per gallon). All to pay that new tax (regardless of your income) on energy and to sustain unprofitable ethanol, windmills and such. How do I know that? He said so in a radio interview when he was the temporary US Senator from Chicago. One thing you do need to give him credit for, he does mean it when he says "as I have said before." We just don't listen.

Cap and trade just means new taxes - what you trade are pieces of paper you bought from the government allowing you to produce carbon dioxide, which by the way, trees need to survive. This is the government creating a market for something that itself has absolutely no intrinsic value. Sort of like extortion/protection schemes run by street gangs.

The consequence of cap and trade (energy taxes) is that everything you buy, not just energy, becomes more expensive. Creating goods, packaging products, getting it to market all require energy. That 20-50% price hike in your grocery products over the last 2 years were a direct consequence of fuel prices doubling. It's not that the cows were more expensive, it's the energy to process the milk (pasteurize and chill), put it in more expensive packaging and deliver it with more costly diesel that makes the milk more expensive.

Well one caveat here, under cap and trade, cows will be more expensive because you will need to buy government credits in order to permit them to fart - a dangerous and climate changing emission of methane. Imagine what that will do to the price of beans.

Stimulus Math

Obama said at the non state of the union address back in February:
For $784 billion dollars, we are going to save or create 3.15 million jobs.

$787,000 million divided by 3.5 million = $224,857.00 per job!
Hey, I want one of those jobs!
And my taxes won't go up one dime because I don't make more than $250,000!

Seriously, though, how do we know which jobs were saved? Could this statement NOT be true, even if we created no jobs? As long as we don't end up with fewer than 3.5 million people employed - they have all been saved - this claim has to be true.

So, basically, we could spend $787,000 million, create zero jobs or lose more jobs (and that's what increasing unemployment means - more people lost jobs) and Obama could STILL declare this plan is spectacular success! Well, I suppose it depends on what your definition of "is" is.

That is one extreme, but even a realistic person is going to come to the conclusion that we will never know which jobs were created as a consequence of this plan or which jobs were saved, with one exception: Federal government jobs. But what does that do for you? I don't know of any government jobs that actually create wealth. Paying those salaries diminishes wealth. The revenue that pays for those jobs comes right out of the GPD in the form of taxes, and creates no industries or businesses that do not rely on taxes to fund. Transferring our nations wealth to the government, expecting that somehow more businesses will result who will employ more people is -- well -- silly. It just results in a bigger bill to the taxpayer. The taxpayer spends less, reducing commerical activity, resulting in fewer businesses, less investment and more unemployment.

Tuesday, May 5, 2009

I have enough wool over my eyes to knit a nice sweater

information for 2006 tax year - see notes and references below.

Total number of returns 92,741,000
Total number of returns where income (AGI) is less than $100,000 = 65,012,000
Total number of returns where income (AGI) is greater than $100,000 = 16,097,000
Percentage of returns with AGI greater than $100,000 = 17%

The number of taxpayers is greater than 92,741,000
The number of taxpayers who make more than $100,000 is less.

The percentage of taxpayers that Obama says are paying less tax by up to $400 each or $800 for a couple filing a joint return = 95%

And by deduction, if 2% earn more than $250,000 per year, and 5% earn more than $100,000, then 3% earn between 100,000 and 250,000, which we know is not the case.

Just for the sake of the argument, let's say that all returns with $100,000 or less AGI represent 2 income earners and all returns over $100,000 represent 1 earner.

The taxpayer count (rather than the tax return count) works out like this:
taxpayers earning less than $100,000 = 185,472,000
taxpayers earning more than $100,000 = 16,097,000
and the percentage of taxpayers with AGI greater than $100,000 would be 8.68%
I have taken the extreme measure for each estimate which would result in the smallest percentage of taxpayers with AGI over $100,000,
In fact, according to this source,, people who earn more than $108,904 represent 10% of total taxpayers.
If you make more than $100,000, then you are not eligible to receive a $400 tax break - not last year, this year or next year.
Where does the idea that 95% of us are getting a tax break come from? The only explanation I can come up with is that as many people who make more than $100,000, there is an equal number of people who get tax refunds with an AGI of zero or less - in other words, a handout. How else would this average out to 5%?

Obviously someone is playing a shell game. Obama or IRS.
Obama promised that households earning less than $250,000 won't see their taxes increased by "one single dime."
And all that campaign rhetoric about only the top 2% of taxpayers, those making more than $250,000 were going to get a tax increase? Bogus! The numbers just don't add up. If your tax return has income greater than $100,000 (and that means for both of you on a joint return), you are looking at an increase of 8 percentage points - from 33% to 41%, or in other words your tax bill is going to increase by 25% And you are supposed to be feeling good about that.

How's that change working out for you?

Information for tax year 2006, last year I was able to find with this level of detail.
Source IRS,

The total number of tax returns is not the same as the number of tax payers as joint returns would represent two tax payers in cases where both parties have income. The tax returns counted here are those where the taxable income is greater than $0. There are also returns filed where taxable income is less than $0, and those are not enumerated here. It is not known how many of those would receive a tax refund because of the Obama $400 credit, however, the assumption is that few would since it would not apply to people who do not earn income. Or is it?

Friday, May 1, 2009

We have been robbed!

Quick, call Joe the plumber!
OK, this is a little convoluted, but if it were straightforward, I'm sure there would be a lot of screaming right now.
1) The US Gov't gives Chrysler $4 billion in Feb or there abouts
2) The Gov't tells Chrysler to give its brand name assets to Fiat because Chrysler does not make cars that people want. Like Fiat does. Like minivans and Dodge trucks aren't every-freakin-where.
3) Hold-up, Chrysler Financial is a major liability at this moment, so something has to be done with that first.
4) The Gov't declared GMAC a bank a while ago, making it eligible for TARP funds (money to GM that is not part of the $17 billion bail-out gift-loan). The Gov't promptly gave GMAC enough to keep it viable at least on the books and pawned it off on Cerberus, which coincidentally (?) owns Chrysler. The idea is to merge GMAC and Chrysler Financial, thereby giving Chrysler auto a better chance. And I suppose we are to believe that two losers will make a winner somewhere along the way. Cerberus, by the way, isn't a TARP beneficiary. I guess that makes them an investment vulture. Must not be friends of Barry.
5) OK, now we are back on track, so the next problem are the investors who hold $6.9 billion in collateralized debt. Collateralized, meaning that they hold title to the company. 70% of the debt holders are banks and other not-until-now banks like Golman-Sachs (meaning non-vulture investment companies) that received massive TARP and non-TARP Federal Reserve bailout money (the Federal Reserve has been printing money and giving it to banks outside of TARP). But 30% of the debt holders aren't on the TARP carousel where everyone gets a few gold rings. And 30 cents on the dollar for secured loans when other unsecured lenders get more isn't fair now is it? That's what they say. Barry says they are just greedy hedge funds. That cash for debt payment would be $2.25 billion courtesy of the federal government just to get rid of the $6.9 billion problem. That the money does not have to be returned to taxpayers.
6) Chrysler threw in the towel today and basically said, feds, union, it's all yours. Cerberus is the group that really gets screwed in this because they are stuck with Chrysler financial as well as GMAC. Maybe they get paid off with non-TARP funds. I doubt they will see any 30% return and they actually own the company.
7) So for $6.25 billion of your tax dollars, the government gives United Auto Workers retirement health care fund 55% of Chrysler, the government taxpayer gets 25% and Fiat gets 20% in exchange for their technical know-how. If you were born before 1975, I'm sure you have a less that favorable opinion of Fiat's technical knowhow. Wait, did you notice that? UAW gets a 55% share of Chrysler? If you were born before 1975, I'm sure you have a less-than favorable opinion of UAW's ability to manage anything involving money and future obligations.

Conclusion: for more than $6.25 billion, the government gives Chrysler (at the expense of investment firms that did not take your tax dollars) to UAW. And a European company known for making really crap cars gets a minority share, all brand rights and a dealer network.
The investor losses on Chrysler debt, 70% of $6.9 - 2.25 billion or $3.25 billion is probably paid for by a combination of TARP and Federal Reserve "lending" to the same Wall St. banks and investment companies that have had their hands seriously in your pockets since last September. Shweeet! For them. If you aren't a TARP welfare case? Well, you can just suck wind, you greedy, capitalist investment vulture.
Chrysler essentially becomes a non-commercial cooperative. Like that's going to get you your $6.25 + $3.25 or $9.5 billion back.
The government will guarantee your car warranty, at a future risk of unknown dollars, but given UAW history, Chrysler isn't going to cover it.
I have no idea what Fiat did to get this deal.
In other words for something like $10 billion or your tax dollars to be paid in future years, the Obama administration has essentially transferred a privately held corporation to UAW by paying off Chrysler lenders and giving them 55% of the company.
The alternative being that the company could have gone into bankruptcy back in January without your $10 billion, pretty much to the same effect except the UAW would have stood in line with the rest of the unsecured creditors. And Fiat probably would have had to pay something for what they got out of the deal. If I have this figured out correctly (my calculators don't have enough digits for billions), that is $33,333 for you and me and every other card-carrying citizen of this country.
This has to be one of the most sophisticated (because of the number of hands involved) and devious (because Congress never voted for this) transfers of wealth since Venezuela confiscated US oil company assets.

Is anyone paying any attention to this?

Friday, April 17, 2009

Government Spending and Revenue - Now and Then

Total public debt subject to limit April 16      11,125,587
Statutory debt limit 12,104,000
Total public debt outstanding April 16 11,183,899
Operating balance April 16 257,351
Interest fiscal year 2009 thru February 148,762
Interest same period 2008 198,518
Deficit fiscal year 2009 thru February 764,525
Deficit same period 2008 264,541
Receipts fiscal year 2009 thru February 860,877
Receipts same period 2008 967,153
Outlays fiscal year 2009 thru February 1,625,402
Outlays same period 2008 1,231,694
Gold assets in March 11,041

These numbers would be in millions.

Wednesday, April 15, 2009

Happy Tax Day!

You have not worked enough this year to pay all your taxes, but hey, have a party.
Have a Tea Party!

Charlotte NC party

Cincinnati Tea Party

Saturday, April 11, 2009


I'm picking on this guy just because. He is only one of several economists/prognosticators that predicted the crash of 2008/09. They seem to be uniformly predicting that the result of the massive spending spree is going to be inflation.
Reuters on Kevin Phillips

Hellloooooo!!!!! Have you been to the grocery store lately? Like this month? Been by a gas station recently? Now why would gas go up 50 cents or basically 30% when the inventory of crude and of refined gas is higher than it has been in a decade? Your dollar at work, saving (bankers) jobs and solving a debt problem by increasing the debt by a factor of three. Solving the housing crisis by making sure you can no longer afford the payments on your house, regardless of its value or the low fixed rate on your mortgage. Hey, what crisis? There are plenty of houses.

Ummm, calling for something that is already happening isn't a prediction, it's a reality check. Duh!

Wednesday, March 18, 2009


I need to preface this post with some explanation. My son is 30-ish, and does not fit into any ideological pigeon hole. I have called him libertarian (small l) at times and a communist at others. We have been having this discussion off and on over several years. I have invited him to post here. Alas, I have only his permission to repost with editorial rights. This is not something I believe you will find on your typical political/ideological blog. It is really interesting!

Okay, I finally got through a fair portion of this. I'm just going to say that I never believed in borrowing money from entities who loaned for profit. It just didn't seem plausible. The assumptions never worked for me. Wages are decided principally by what employees need to survive in a manner they can accept.

When banks loan money to those same individuals, they enter into direct competition with their employers. Inflation goes up by three to five percent annually, wages run behind at one and a half percent. The entities who loan for profit are looking to get the same fifteen percent profit all companies need. This necessitates the passing around of an unnatural deficit like a hot potato. While everyone who wants to engage the individual consumer will have to touch it, they need to be sure it doesn't remain on the books long enough to permanently scar their efforts. Before this concept became the norm, companies were careful to provide products that people could buy with actual money they had saved. Not so much anymore. The potatoes are becoming more numerous and exponentially hotter.

I believe the only way to get out of this mess will be the gradual readjustment to these old ideas or the total collapse and gradual rebuilding of another equally fallible system of self depreciation.

The real truth of the matter is that you can't continue to make money doing nothing. This is the same idea I was trying to convey previously when you thought I was trying to take someone's earned money out of their hands. Investments ultimately don't work because they lead to a psychological shortsightedness which generally seems to reenforce itself.

I know these ideas seem to leave a lot of real successes out but in the end everything has it's useful cycle. People, businesses, and institutions all come upon a time when they can no longer pass muster. The problem with the latter two are that there are always interests that suffer losses when their vehicle for investment ultimately breaks down.

The only survival I see for a truly global community is a society that gives and walks away from the vehicle they have been expecting to carry them. And it is the the institution of economy that is failing us. We need to get back to creating the goods and services that further our causes rather than the ones we think can make a quick buck before getting too hot.

And since I never bought in to begin with, none of this is particularly scary at all. I have no assets to lose.
end quote

Seriously, if you are reading this, you will need to think about what he is saying. He makes some big jump-skips. Just because you may not see his connections doesn't mean they aren't there. I had to think about this for quite awhile before I understood the whole message as well as it's parts. I'm not saying I agree with his conclusions about furthering our causes. What if our cause is to create wealth? But the point about financial institutions being at the root of the problem and making money without earning it as the core value in error - well he does have an interesting construct there. And it is so old-testament!
Still some things I am not getting like system of self-depreciation. Until I get it all, I don't want to try and wordsmith around his thought jumps as I might jump totally off-point, making an ass of myself.

Gross domestic product and national debt

Since Reagan, both parties have been whistling this tune past the graveyard:
As long as I keep making more, I can keep borrowing more.
What this means is that our politicians have been relying on an ever increasing economy to fund an ever increasing debt obligation. (And when it becomes apparent that the debt is getting out of hand, well we just take those obligations out of the budget - don't count them at all)
In the beginning of 2008 and even late 2007, the economy started to shrink. And tax revenues also started to shrink. As a country, we have less money (I believe because of the 2007-08 price of oil and other energy), we spend less, therefore companies sell less and employ fewer. Unfortunately, it also means tax revenue goes down substantially, driving up the deficit and increasing the percentage of your money that goes to the government. Start the cycle over. The only people who come out ahead are the ones that don't have any money and therefore nothing to lose. But we feel bad for them, so we will give them some money to lose in hopes that it will make things better for the rest of us. Huh?

Fortunately, the decline in business and employment means a decline in the use of and therefore the price of oil. Remember, the money we pay for oil goes overseas, not back into our economy for the most part. We tripled the amount of money we sent overseas for oil between 2006 and 2008. And then we wonder why we don't have any money left to spend here. Duh. The housing bubble was happening before oil prices peaked. But I digress and should probably put this in another post.

Of course, the other side of debt is the ability to pay it. The gross domestic product (GDP) is the total value produced by the economy in the course of a year. In 1980, the debt was about half of the GDP. Last year, it was about 75% (three quarters) of GDP. In 2009, the GDP will be less and the debt will be substantially more. In 2008, the estimated GDP was $14.3 trillion.

As of February 5, 2009, the total U.S. federal debt was $10.71 trillion [2], or about $37,703 per capita. 2009 GDP is estimated at $13.26, -3.86% from 2008. 2009 is also expected to add at least $2 trillion to the debt (not counting the future payments of benefits, nor the federal reserve lending). Basically, it looks like the GDP and the national debt (as figured on a cash basis) are going to be about the same in 2009, closing that 25% gap in just about 15 months.

Disturbing: It took 25 years to have the national debt go from 50% of GDP to 75% of GDP. It is taking less than 2 years to go from 75% of GDP to 100% of GDP - the same relative distance in less than 10th the time. The future of the national debt is increasing far faster than any rosy best scenario for the GDP. So in 2011, the debt could be 125% of GDP (if the rate stays constant) or 200% of GDP if it follows the current trend. This is an astounding, possibly disastrous shift in federal policy with implications far into the future (decades upon decades). Yet we have not discussed this in Congressional hearings, in national debates, in political campaigns at all.

National borrowing and interest payments

A significant chunk of change paid out with each year's budget is for interest. $451,154,049,950 in 2008 according to the Treasury. It would be one thing if the interest payments were going back into the US economy, but they aren't. About half the debt is now held by foreign countries and investors. So, not only are we sending huge amounts to China for goods, India for services, and the middle east for oil, we are sending something like 20% of federal government revenues ($2.521 trillion in 2008) somewhere else besides the US. You think maybe the economy would get a boost if we weren't doing that? By the way, before 1980, we did not sell our debt to foreign countries. But the debt got so big, we couldn't afford as citizens, to buy it all ourselves.

Not even the Government Accounting Office believes we can continue down this path. But we have to reverse the direction, not just stop where we are now. The solutions will be painful and it comes down to how many generations you want to feel the pain.

We can not keep borrowing more and more money. Eventually we will not be able to pay even the interest. Foreign investors will want their money back before we get to this point. What are we going to pay them back with? Carbon credits?

Thursday, March 5, 2009

Credit Crisis explained

I like this video - it is a plain language explanation of how mortgages and investments are related. Check it out.
Crisis of Credit
Great job, Jonathan Jarvis!

This is Charles Krauthammer's explanation of the Obama soution. WTG!

Clever politics, but intellectually dishonest to the core. Health, education and energy -- worthy and weighty as they may be -- are not the cause of our financial collapse [see above]. And they are not the cure. The fraudulent claim that they are both cause and cure is the rhetorical device by which an ambitious president intends to enact the most radical agenda of social transformation seen in our lifetime.

Friday, February 27, 2009

So, is there an end to the money?

Would not seem that way...

You know there has to be an end - the value is the same, it's just the number slices in the pie, the number of bills in the bank. We consumed a lot of pie in the form of lost market and real estate equity. Printing more money is just like selling more slices out of what's left. Twenty tickets or 120 tickets, the pie is the same. Eventually, a slice isn't worth the energy required to transfer from fork to mouth. The end.

A thought exersize on the price of debt

Using a well respected web-based resource to perform the regression ( and using the following assumptions:
National debt (2/26/09 based on debt clock) 10,844,284,645,794 or $10,844 billion
Interest rate .03 or 3% (you know it can't stay at zero and expect anyone to buy treasury bonds, do you???)

(I didn't want to freak out bankrate, so honestly, I just cut out the last NINE, count 'em 9 numbers IN FRONT, yessiree, of the decimal point)

Results: at 3% interest (you should be so lucky) and 3% minimum payment:
Time to pay the total debt: 160 years
Total interest: 970 billion
Principle: 10,844 billion or 10.8 trillion
Total of payments: 11,814 billion or 11.8 trillion

Results at 6% interest (more likely where we are going) and 3% minimum payment
Time to pay the total debt: 175 years
Total interest: 2,134 billion or 2.1 trillion
Principle: 10,844 billion or 10.8 trillion
Total of payments: 12,978 billion or 12.9 trillion

Oh wait, you can't afford any payment because you can't cover your day to day costs - you are still racking up debt on your credit cards. Let the good times roll....

A reality check and the math of money

Oxymoron: 401k / assets

Oxymoron: real estate / equity

Oxymoron: rich / Americans - if we could deduct our loses from our income taxes over the next 5 years

Oxymorons: rich / Americans and middle class / Americans, after we pay for this $&!* (See mathematics item 3)

Maybe we're just plain morons - afterall we voted for this crew.

Mathematics: You could spend a million dollars a day, every day, since Christ was born, and you could still not pay for the economic recovery plan.

The new era of responsibility budget will cost each taxpayer (who paid income tax in 2007) $25,573. Note that is a 1 year budget. Another oxymoron: responsibility / 2010 budget

Taking the entire taxable income, a tax rate of 100%, of everyone earning more than $75,000 (in 2006, mind you, last year for granular data and a very good year) would have barely yielded enough to cover the $4 trillion Congress will spend in 2010.

That's why they need what's left of your 401k, too. Next they will be encumbering your real estate assets to pay for your neighbors deficit. Oh wait, they already did that, didn't they. That's why you don't have equity anymore.

Sunday, February 15, 2009

Well I suppose there is some good news...

Social Security is more solvent?
If the value of most peoples' 401K or other equity-based retirement funds is down by 40%, that's a lot fewer people who can afford to retire and live on social security instead. I mean, I would defer my benefit and then get a bigger monthly payment later if I know I can't afford not to work anyway.

Folks counting on guaranteed distributions aren't going to be too happy either. Assuming that the funds behind your benefit are still solvent next year, let alone when you retire, inflation in the next few years is going to eat your lunch and dinner, so to speak.

Fact is, people wise enough to know Social Security is anything but secure have been lured into stashing their hard earned income into investment and retirement accounts with government incentives (pre-tax when contributed) and employer matches. Hey easy enough for the employer since once they make the contribution, they are done with their obligations. But for the most part, your employer's contribution has been erased in the last 6 months, and probably a lot of your account earnings as well. The rub is that you can't take what is left of your money out without paying a mean penalty of another 20%.

In some cases, people have been investing their earnings in guaranteed benefit accounts or annuities. Eliminating 40-50% of the value of those plans sets you the employee back unless you can to retire now and can take your one-time distribution. Because the funds themselves are going to sustain only half the people in retirement. Think about it, basically there is nothing but principle left and the principle will be reduced by the next wave of retirees, leaving nothing to pay you, let alone invest for your retirement.

The US has committed itself to a massive expenditure of money with no long range value or equity. Paying for things like healthcare, unemployment and food stamps, as noble as it may sound, is an operational expense, not a captital investment. We don't have the money, we won't have the money anytime in the forseeable future, and there isn't a return on investment where no investment is made.

US plans to do to raise the cash by selling treasury bonds. With the interest rate so low at the moment, and with the equity markets already in the tank, those bonds aren't looking too attractive. So the federal reserve is planning on printing up a whole bunch of money to buy the US debt. Now that sounds ludicrous on the face of it. The inevitable result is that interest rates must go up.

Let's say you had a 100 gold pieces and you wanted to sell a hundred shares at 1 goober each. Your plan is to trade the goobers for dollars. But wait, you need 200 dollars. Just because you need sell another 100 shares doesn't make the gold pieces worth anymore. It just makes your goobers worth less - by half. Same deal as the federal reserve and treasury bonds. Your goobers are going to be worth less at the end of this spending spree. When the dollar is worth less, it's called inflation and we're in for a an ugly bout of it.

If you needed a few hundred thousand, no one would lend you money and your bank account was dry, would you just print more checks?

So much for that guaranteed benefit. It gets wiped out by inflation.

I wonder if it has occurred to the politicians that there aren't any rich people left to tax? We didn't spread the wealth around, we spread the poorth.

Saturday, February 14, 2009

Here's some change I could believe in

When a company falls on difficult times, one of the things that seems to happen is they reduce their staff and workers. The remaining workers need to find ways to continue to do a good job or risk that their job would be eliminated as well. Wall street, and the media normally congratulate the CEO for making this type of "tough decision", and his board of directors gives him a big bonus.

Our government should not be immune from similar risks.

Therefore: Reduce the House of Representatives from the current 435 members to 218 members and Senate members from 100 to 50 (one per State). Also reduce remaining staff by 25%.

Accomplish this over the next 8 years. (two steps / two elections) and of course this would require some redistricting.

Some Yearly Monetary Gains Include:

$44,108,400 for elimination of base pay for congress. (267 members X $165,200 pay / member / yr.)

$97,175,000 for elimination of the above people's staff. (estimate $1.3 Million in staff per each member of the House, and $3 Million in staff per each member of the Senate every year)

$240,294 for the reduction in remaining staff by 25%.

$7,500,000,000 reduction in pork barrel ear-marks each year. (those members whose jobs are gone. Current estimates for total government pork earmarks are at $15 Billion / yr )

The remaining representatives would need to work smarter and would need to improve efficiencies. It might even be in their best interests to work together for the good of our country?

We may also expect that smaller committees might lead to a more efficient resolution of issues as well. It might even be easier to keep track of what your representative is doing.

Congress has more tools available to do their jobs than it had back in 1911 when the current number of representatives was established. (telephone, computers, cell phones to name a few)

Congress did not hesitate to head home when it was a holiday, when the nation needed a real fix to the economic problems. Also, we have 3 senators that have not been doing their jobs for the past 18+ months (on the campaign trail) and still they all have been accepting full pay. These facts alone support a reduction in senators & congress.

Summary of opportunity:

$ 44,108,400 reduction of congress members.

$282,100, 000 for elimination of the reduced house member staff.

$150,000,000 for elimination of reduced senate member staff.

$59,675,000 for 25% reduction of staff for remaining house members.

$37,500,000 for 25% reduction of staff for remaining senate members.

$7,500,000,000 reduction in pork added to bills by the reduction of congress members.

$8,073,383,400 per year, estimated total savings. (that's 8-BILLION just to start!)

Big business does these types of cuts all the time.

If Congresspersons were required to serve 20, 25 or 30 years (like everyone else) in order to collect retirement benefits there is no telling how much we would save. Now they get full retirement after serving only ONE term.

National Debt vs Deficit

I thought the deficit in 2008 was $455 million? Well, no actually, that was just the shortfall between revenue (what came in) and expenditures (what went out). The annual deficit includes off-budget commitments for things like federal emergency aid or much of the costs for the wars in Iraq or Afghanistan. It doesn't include things that were authorized but not yet spend like TARP, or money the government borrowed and guaranteed in prior years.

The national debt includes the shortfalls from 2008 and all of the prior years. It also includes the $4.5 trillion or so that is held by the public in securities such as Treasury bills, savings bonds, state and local government securities. Neither the deficit nor the national debt reported by the Congressional budget office take into account entitlements due in future years. They do not include the potential liabilities for Freddie Mac, Fannie Mae, pension benefits guarantee or Federal deposit insurance corp, beyond what has already been explicitly funded. One reason is because the liabilities are not actually known.

Just for the heck of it, let's put this in terms that represent a more or less typical American family.

Let's say in 2008, you earned $100,000 and you owed $75,000 not counting your 30 year mortgage of $650,000. At the end of 2009, you make about $97,000 and you owe about $95,000. Your interest rate is going to increase a couple of percentage points, let's say from 8% to 10% and your loan repayment plan is for 10 years (e.g., a 10 year T-bill) Your monthly loan payment is $1321.00 and your mortgage is $3691.00. Together, your loans are $5012. Your monthly income is $5254 after 35% in taxes. You have $242 to live on (food, utilities, gas, healthcare, entertainment) per month, meaning you will be running a deficit again this year, probably about another $10,000 on your credit cards.

(Oh, and you are obviously not putting any money aside for your retirement. Plus your house is now worth about $500,000, meaning you couldn't sell it if you wanted to.)

Do you see a problem with this trend? What is your answer, spend (borrow) another $20,000? Do you think anyone would lend it to you?

How big is the national debt

Bigger than the gross domestic product of the entire world!
Your share? $216,666.00 not counting the stimulus bill, TARP II or the federal reserve loans which are also close to a $trillion.

Assumptions: 300,000,000 US citizens, $65,000,000,000,000 of debt including entitlements that have been paid for and earned, but not paid out.

This article explains pretty clearly (IMNSHO) just exactly what the United States owes, and just how bad it is getting.

The national debt today:

I've heard about the national debt my whole life, what is the big deal? The US has had a debt every year since it borrowed money to pay for the revolutionary war. The debt made some pretty big jumps along the way to fund things like wars and the last depression/recovery. Remember, the debt we are talking about here does not include any future payments for social security, medicare or other federal retirement benefits. Between 1980 (around the time the national debt crossed the landmark $1 trillion level) and 1990, the debt more than tripled. Fifteen years later in 2005, it was 8.7 times the 1980 total at a bit less than 8 trillion. Since 2005, it has increased another 2.8 trillion or 11.5 times the total debt in 1980.

These numbers don't look anything like $216,666 per person to me, so why should I be concerned? Again, the national debt reported by the Congressional Budget Office does not include the future liabilities for social security, medicare, government guarantees and other federal retirement programs for veterans and civilian employees. Yet, the money collected for these programs is used directly to pay for expenses in the same year they are collected (stolen) from you.

Aren't entitlements just money that the government gives away to people? I mean, if we don't have the money, we just won't give it away, right? No, most of the entitlements the government owes are the ones that its citizens have already paid for through payroll taxes for social security and medicare. In other words, the government has already collected the money from its citizens and owes it back to the very same citizens, by law.