Posts Tagged ‘President Obama’

A Nation of Cowards

July 20, 2013

The Wall Street Journal article, “Obama: Trayvon Martin ‘Could Have Been Me’ ” discussing the President’s off the cuff remarks about the Martin/Zimmerman case was most discouraging. His attitude, reflecting that of a majority of blacks is that only the black experience matters.

“But he tried to explain the lens through which black Americans may see the case, saying that their own experiences and the country’s history with race inform how many view what happened to Mr. Martin.”

As a non-black my experience is also the lens though which I view life in general and this case as well. I have been called racist and sexist by a black woman (a third grade teacher no less) who did not like the job I was doing. Most blacks, male and female, appreciated the work I did. And even though a few had occasional complaints most did not raise the race or gender issue. I was never called racist or sexist by any non-black customers, employees or vendors.

In my small business I hired a number of temporary laborers, predominately black but not universally. Most were decent individuals who through luck, bad circumstance or poor life choice found themselves in difficult straits. I became friendly with some of these individuals and sought them out with work. However, there was one young black man who I did not like. He was only 21, had already fathered two children by two woman (both out of wedlock), did not support either child or woman, bragged about spending his money at strip clubs and railed about being disrespected by the agency manager. After all, this young man angrily stated, he was a man because he fathered two kids and therefore deserved respect. By “respect” of course, he meant his arrogant attitude should have been accepted, even embraced but never chastised.

At another time in my life I had long hair, a long beard, wore ragged clothes and was not regularly employed. Car doors would lock as I walked by as well. Being white didn’t matter. I looked suspicious. Years later when I owned a seat on the CME futures exchange I was advised not to apply for a job with a particular firm because I was not of the proper religious persuasion. Being white didn’t matter. Even today if a white as snow biker flying his colors walked by I too would lock my doors. The oft heard complaint about “locks click on the doors of cars” applies not just to blacks but to any suspicious looking individual. But only suspicious looking individuals. And yeah, aimlessly walking around in the rain wearing clothing that hides appearance in a neighborhood suffering a series of burglaries is darned suspicious. I too would be suspicious regardless of age, gender, or race. In point of fact as a post-military college student I did just that.

I noted a white male slowly walking down my street, stopping every few feet and looking around to see if anyone was observing. Being slightly hidden in my driveway my presence wasn’t evident. I observed this young, white male wearing jeans and shirt for several minutes because he was suspicious. The next day police knocked on my door and asked if I had seen anything suspicious because a burglary had been committed. I acknowledged what I had seen and gave them a description enhanced by my studied observation. It was never the persons age, gender, race or clothing but all of that in the context of his actions that raised my suspicion.

My experience is that too often some blacks (and women) assume that any slight, real or perceived, is due strictly to race (or gender). If I see a group of young black men walking towards me I might smile and say hello. They might be in military uniform or have the posture, poise and appearance of military men. If a different group of young black men came walking toward me I might be concerned and walk away to avoid them. This group would be wearing red or blue bandannas on their head, baggy pants dragging below their butt, over large shirts and they would be doing the “urban strut” down the street. It isn’t race that’s the problem. Either group could be white, black, brown, red or yellow or a mixture. It is clothing, gender, age, and race all within the context of actions.

For the President to chime in on race by offering support for only the black experience is for him to define his presidency that way as well. The President only intervenes in the public discourse when a non-black man kills a black man even though it was adjudicated as self defense. Meanwhile the President consistently ignores the massive amount of black on black violence and death. This is nothing short of disheartening. Maybe Attorney General Eric Holder was right when he said that in race discussions Americans are “nation of cowards”. Starting at the top evidently.

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The Obama Recovery

February 20, 2013

The “Obama Recovery”

The two charts shown below show “Real Domestic Gross Product” on a quarterly basis. The first chart is January 1947 through October 2012 while the second is from January 1990 through October 2012. All data has been obtained from the St. Louis Federal Reserve “FRED” data base.

What is most disturbing is that beginning in fourth quarter 2007 GDP began to diverge from the historical, exponential trendline and has not reverted to the mean since. That is, Chart #1 (1947-2012) shows many quarters of GDP growth below the trendline and many above. That means GDP “reverts” to the mean (in this case the exponential trendline) when it gets too far above or below. Of course it is also a function of the trendline itself being fitted to the data after the fact.

GDP 1947-2012 Chart1

However, starting in 4th Quarter 2007 GDP moved away from the trendline and has been on a different path ever since. This shows up in both charts but is more pronounced in Chart #2 (1990-2012)

GDP 1990-2012 Chart2

As the “R2” figure indicates the trendline “explains” some 99% of the data. For the last 5 years to diverge as significantly suggests the US economy has in fact entered a new stage. And not a welcome one at that.

The divergence from historical trend is even more pronounced when viewed in Chart #2. Even worse is the flattening of real GDP in the last quarter of 2012. Although that data will likely be revised upwards the prospect of a reversion to the trendline seems bleak indeed without major changes in federal domestic policy. The likelihood of which is dim, at least for the next four years. By that time the US economy may be on another track but millions of Americans will be left behind forever.

For Chart #2 the starting point of 1990 was based on the fact that it is more contemporary data; it starts around the end of the 89-90 recessionary period; and the GDP chart shows it is relatively flat suggesting a good starting point. Even thought the “R2” data shows a diminution from 99% to 95% that is still a fairly strong representation. For reference the starting point of Chart #1 is that it is the earliest available data.

Health Care was NOT ‘Responsible Legislation’

February 6, 2010
Is It Possible to Pass Responsible Legislation?
February 6, 2010 · by Austin Frakt · Posted in Health Policy 

This post originally appeared on 1 February 2009 on The New Republic’s The Treatment blog.

The purposes of comprehensive health reform are noble: expansion of coverage and control of costs. Yet, the latest attempt to begin to address those goals is near death. For nearly a year Democrats shepherded bills through the complex legislative process, revising and merging them to accommodate the congressional process and political realities. Ultimately two bills, similar in broad structure and differing only in detail, passed the chambers of Congress.Yet, at the brink of completion support for them has waned. What can be learned from this experience?

First, it is worthwhile appreciating how unlikely it is that policy-makers have brought health reform legislation this close to passage. It doesn’t clearly benefit all influential interest groups, a condition that normally dooms major reform. To have even pursued it was, therefore, a political risk. That Democrats, and Obama, took responsibility for attempting to solve the large and important problems of the uninsured and health care costs is laudable. In doing so they managed to mollify the concerns of major stakeholders.

One might think that support for reform would increase as more and more interest groups embraced it. That it has not has more to do with the glacial, agonizing, and ugly process of production of legislation than it has to do with its content. The spotlight hasn’t been kind to health reform. Opponents have been able to focus it on the less savory elements of legislative sausage making and on the least popular aspects of the bills, whether they exist (the individual mandate) or not (death panels).

Still, the overall structure of both the House and Senate bills is sound. The individual mandate, the low-income subsidies and other provisions are required to make the insurance reforms like the ban of pre-existing condition exclusions possible. Without the mandate people would buy coverage only when ill, increasing premiums for all. And one cannot expect low-income individuals to purchase insurance they cannot afford.

In a panicked response to the Massachusetts election, policy-makers considered chopping up the logical structure of the bills into separate legislative proposals. That’s a recipe for unworkable policy. The bills are large and complex not because policy-makers want them to be, but because they must be. It would be irresponsible to attempt to solve one component of the problem without addressing the whole. That begs the question: can comprehensive reform of the health care system or of anything else ever occur? If government controlled by one party (including a super-majority in the Senate) cannot bring about responsible reform, what can?

I wish I had an answer. We need one. I understand why reform is hard: too frequent elections, too great minority power (the filibuster), too much special interest money, among other reasons. But knowing these doesn’t lead directly to an easy fix because the process of implementing a solution is subject to the same forces that are the source of the problem. It’s a deep and difficult hole from which to legislate egress.

If health reform succeeds despite all the hurdles it will be a major accomplishment that has eluded presidents and policy-makers for decades. But if it fails (again), it will be in large part due to the challenges of governance and the imperative to win the next election. Even the best ideas face substantial risk of failure. Even for good ideas offered by responsible leaders, Congress is a graveyard.

Some say reflexively that government is not the solution to our problems. Usually proponents of markets or libertarian ideals view government as an impediment to good outcomes. The experience of health reform has revealed another sense in which government may not be the solution–because it can’t get out of its own way. That is, our government is improperly structured to solve the problems we face. It isn’t necessarily that government can’t be a solution or that government can’t propose a solution, it is that government can’t pass a solution, at least not very often. Even if health reform ultimately passes, it is clear that an historically rare level of single-party control was required to pull it off.

Unfortunately, when it comes to health care the market is not a solution either. And so we’re stuck (or may be), with a set of problems that can’t be addressed with either broad system at our disposal. It could be that the health system we have, the one resulting from a far from perfect market and a far from ideal set of government regulations, is the only one we can get. The sad consequence is that it leaves so many under-served and wastes so much of our treasure. I’m confident we can prod government into doing a little better, but without comprehensive reform, not much and not soon.

The gap between our ideals and reality is large, and even with the will and the votes the obstacles to closing it are nearly insurmountable. That’s the most troubling lesson of all.

Comments

One Response to “Is It Possible to Pass Responsible Legislation?”

  1. RedSt8r on February 6th, 2010 5:05 pm | permalink

    @AF: First, I challenge the premise. Neither proposed health care “reform” bill constituted “Responsible Legislation”. What they did constitute was a single party attempt to force selective changes to a large portion of the economy. This can hardly be called responsible.

    “One might think that support for reform would increase as more and more interest groups embraced it. That it has not has more to do with the glacial, agonizing, and ugly process of production of legislation than it has to do with its content.”
    It had everything to do with the content as only those interest groups that (a) were on the left wing of the Democrat party or (b) were bought off by either political patronage – Louisiana, Nebraska, Florida, unions or (c) bought off by false promises of enhanced profits – insurers, AMA, big pharma. When the content was so one sided the process exacerbated the issues to the point of failure.

    Why could Richard Nixon open up China? Because as a Republican he was trusted on national defense. Hence he could open up China to the US without being seen as weakening US national defense. Why could George Bush (43) pass the Medicare D (drug insurance) with bi-partisan support? Because again, as a Republican he was trusted not to squander taxpayer dollars (so much for that trust). Why could Bill Clinton reform welfare? Because he was trusted to protect the poor at least to some degree.

    Had Obama and the Democrat majority taken on their interest groups – trial lawyers, unions, politicians – and truly reformed the process they would have earned the abiltiy to pass other legislation that might have had an actual positive impact on both health care cost and availability. As it was they were clearly seen and it was clearly understood this was a left wing bill designed to serve only left wing (or bought off) interests and worse, to do so while penalizing the people. The elderly saw Medicare cuts, the young saw expensive insurance mandates, those of us in between saw a loss of personal freedom for no gain. It was a lose lose for us.

    Responsible legislation requires challenging ones interest groups not the opponents. Republicans can and should be trusted to raise taxes in the most responsible manner. Democrats can and should be trusted to reform social welfare programs in the most responsible manner. When each attempts to work in the others camp failure results.

Sun Tzu, Scott Brown and the Debt Bomb

February 2, 2010

The post below is an interesting take on the Scott Brown election and the concomitant debt bomb. It was written by a virtual friend noted as “VF”. VF’s original remarks follow the dashed line, RedSt8r comments are labeled as such and any follow up comments from VF are also labeled.

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VF:         Sun Tzu, the 7th Century BC military strategist once said “When your enemy has the high ground do not attack.”  Scott Brown, the Tea Party activists and the RNC took that advice to heart. Late last year, in the dead of winter, the Brown campaign circled around the Coakley camp and made her abandon her high ground (a sense of entitlement and arrogance).  But as soon as she had pivoted, Brown moved on to skirmish elsewhere using the media to drive his message.  Coakley never regained her balance.  The Coakley team, like the army of the Chinese emperor of Chu, was defeated by a much smaller force, nimbler and smarter.  A year ago the Republicans looked much like the Confederate army after Gettysburg, defeated by losing sight of strategic goals (fiscal prudence), being distracted by tactical changes on the ground (Obama’s occupation of the center) and fighting battles that should not have been fought (defending the Bush record).  Today they look like Obama’s guerilla army of volunteers in 2008 rising up, this time, in the midst of the bluest of blue. 

RedSt8r:          The left, liberal, democrat condescension is that Coakley gave Brown a gaping opening when she left town for a vacation as opposed to Brown running a better campaign and, more importantly, having a better message. Add to those positives some RNC cash and staff and the win was a little less like a guerilla war than a Sun Tzu style defeat of a larger enemy by a smaller force.

The Republican comparison to the Confederates post Gettysburg is quite apt as is the defeat of Coakley “by a much smaller force”. I do think the Congressional Republicans had little alternative to defending Bush’s record since they were so much a part of it. Even they couldn’t pivot that far, that fast to disavow their own participation in that fiscal disaster. 

 VF:      Bush got derailed by Paulson, Geitner and Bernake.  Frankly, he blinked.  But we’ll never know for sure how the markets would have sorted it out.  I for one was terrified  that my pension would evaporate as asset values would plummet so far so fast that payments would have to be reduced or suspended to preserve capital, so I blinked, too.

 RedSt8r:          My great fear is that the independents and Tea Party activists will get swallowed by the traditional Republican morass rather than being the very much needed thorn in their side.

 VF:      The good thing is that the RNC is just providing support but where there is money there is payback, the Tea Partiers need to deliver. 

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VF:         In politics where there is victory there is always defeat.  The one politician that was defeated this past Tuesday was Obama not Coakley.  In an instant he saw his agenda collapse and what we saw on Thursday was that Obama and the Democrats will continue the “Coakley Pivot” to the populist message of ‘evil bankers’.  With the release of Glass-Steagall Lite  (T-shirts available soon) and his response to the SCOTUS decision on political speech we see him grasping at anything where he can claim victory or win populist polling points.  He is reverting to the position most recent presidents have taken, use the institutions of government to advance domestic policy and do it through regulation, the tax code and rhetoric and not much reliance on new spending programs. 

RedSt8r:          Sad to say you are spot on here. Early “leaks” (wholly intentional to test the winds I’m sure) of Obama’s State of the Union speech continue the faux populist message with budget freeze (on 17% of the budget) and “middle class” entitlement expansion. Oh joy, more rubber checks for the workers. No jobs, just rubber checks. 

VF:      That again is Obama smoke and mirrors because all that is fungible is payroll and as I said only about $100 billion is politically possible unless there is a consensus on major reform. 

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VF:         It looks like Healthcare Reform is dead and Cap and Tax Trade is on life-support (the coal states and Midwest power producing states will likely kill it) and all that is left of the Obama agenda is to put Wall Street in the stocks and supply the rotten tomatoes.  And this is a new beginning, a new era, eh?

RedSt8r:          Change and hope, hope and change, hallelujah! Dang that was short lived. The king is dead. Long live the king. But he’s got three more years to resurrect stuff or use the “regulation, the tax code and rhetoric” avenue. I don’t believe any of it is really dead unless a wooden stake is driven through the heart. We won a battle, the war rages on.

VF:      I disagree the budget realities have hit home, they have lost a strategic advantage of striking fast and hard before their enemy could awaken and counter.  Obama is trapped and permanently.  The only thing that will rescue him is economic growth.  And that is all anyone really wants.  But that is always a function, in the short run,  of a normal economic recovery. 

The problem now is that productivity is soaring and is a permanent feature of the world economy.  Where output per remaining worker continues to grow, constraining hiring in those industries where output grows but headcount falls.  Returns to labor ala a production function are increasing but money wages are constrained by unemployment. This is structural unemployment and the only way that it has changed in the past is when new industries emerge or population growth is so rapid that the economy bumps up against a capacity constraint and has to expand.  We saw it in the 1920s and we saw it again in the 1990s but in all prior periods the rebound was buoyed by demographics. 

The next wave of creative destruction will be when a new domain of technology sweeps through the economy reaching into every part of life from the household to the factory.  But it has to be doubly strong as its effects will no longer be buoyed by demographics and will actually be constrained by negative demographic trends.  New jobs that require new skills will have to multiply by the millions to absorb the unemployed as well as new entrants. 

As Ray Kurzweil has opined, “GNR” (Genetics Nanotechnology Robotics).  Genetics is about ready to begin paying dividends in the area of curing disease and increasing healthy lifespan.  Because genetics is an information technology a Moore’s Law of genetics should begin to apply as these mappings and codings escape the cost increasing nature of current healthcare.  Nanotechnology is probably about 10 years out and Robotics is about 5 years out with “just good enough” AI.  As these three technologies sweep through the economy and combine with each other and existing technologies a radical new domain will be created. 

The automobile did not truly change life until highways were built out.  Computer tech did not truly change life until the internet was built out.  The automobile had reached its end of radical influence when the last stretch of interstate highway was built and is now constrained by capacity, expensive to add.  The internet can increase capacity by simply changing optical switches, cheap to add.  In 1999 we measured speed at the gigabit level now it is terabit and we’re headed to petabit and higher.   The interconnectedness of the world will only enable these new technologies to spread faster and deeper.

In technological evolution a new technology usually leverages and is built from existing technologies. AI and Robotics is probably where we’ll see the deepest personal effects as they will augment our abilities and move education as an expensive investment over many years to an inexpensive continuous process.  But the true unfolding of the other technologies of genetics and nanotechnology will leverage these innovations and expand them further.  Nanotech and Genetics will penetrate the economy at every level as we will manipulate nature from energy harvesting to materials science. 

The physical world will be built up by the virtual world in design and simulation and direction of building and in some cases the two will be indistinguishable. But our understanding of it will only be enabled by the prior AI and robotics revolutions.  We only grasped the meaning of the automobile because we had the analog of the railroad and horse driven coach.  Early references to automobiles were to horseless carriages and Fisher body works had its roots in making horse carriages. In fact its symbol was an early carriage largely indistinguishable from a horse driven carriage. We only understood the internet because we accessed it through a familiar technology, the computer.  We will only understand these new technologies because we are familiar with their building blocks or conceptual foundations.

But what does this have to do with Obama and the Democrats and Scott Brown’s victory?  It is interesting to note that Obama’s attention has been in preserving failing or mature industries with large union representation and in expanding entitlements that belong to a world dominated by a labor force with little or no bargaining power.  This is a static vision of the world where domestic industries have to be defended and the government has to intervene to extract a living wage and other benefits for a labor force pressured by a reserve army of the unemployed.  Though some elements of this vision appear to rest on solid ground today that ground shifts with every innovation, every change in technology. 

The base of support of the Democrats has ironically fallen to the educated class of college graduates away from the traditional rank and file working stiff.  It is fitting because it is that class that has the most to lose when the ground shifts.  As advanced skills and deep knowledge are easier to acquire and certify and vet the advantages of money and position will diminish.  Those who already have skills will be under pressure as competition increases.  With barriers to entry falling the professional class will no longer have that exclusive position.  Their alignment with Obama with his policies of preserving the status quo and increasing the distribution of a fixed pie to constituencies that seem to be moving away from him is a curious on the ground development.  It is as if those who have the most to gain from technological innovation are moving away from Obama and those who have the most to lose are supporting him.  If this is indeed the case then the Republicans have a chance to seize the future and be the party of innovation and change. 

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VF:         Obama is now an institutionalist out of necessity not an ideologue by choice.  He is trapped (Bush was too, as was Clinton to a lesser degree) by a government budget that is on autopilot. More than 85% of the fiscal 2010 3.6 trillion dollar budget is comprised of payments to individuals including government employees and defense spending. The remainder, this year, is some remaining stimulus spending ($85 billion) and unemployment insurance payments to the states, some $135 billion is allocated to net interest payments the remaining $346 billion will be spent on the cabinet departments from Agriculture to State.   Again, this is mostly autopilot spending leaving perhaps $100 billion that could be cut without political consequences but you have to track that down in every agency, in every city and town in America to do it.  This leaves little for policymakers to do all they can really do is tinker with the tax code (Bush did it and so did Clinton) and regulate (and they did that really well).  So, what’s a politician to do or a former community organizer for that matter?  Surrender to the budget and go to Hawaii, frequently, and don’t forget to take off your shirt and walk on the beach.

RedSt8r:          Would that he were trapped by the budget. Apparently he doesn’t believe in budgets as I’ve recently seen estimates of 9-12 TRILLION in new deficits/debt in the next 10 years based on current administration plans. It remains to be seen if he’s trapped or just circling the bait. I’ll buy him a mojito if he does retire to the beach.

VF:      Remember that there is a difference between gross federal debt and the privately held public debt.  Debt service payments on the privately held public debt affect the budget and payments on the intragovernmental debt to the trust funds does not. 

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VF:         But why did Obama’s agenda unravel so quickly?  It unraveled partly because of overreach and arrogance of purpose and partly because America is a center right country whose citizens are skeptical of government.  Put these two things together with entrenched interests at the public trough, job losses and foreclosures and the apparent government spending of trillions of dollars with little observable impact you have the Tea Party movement and Scott Brown toppling a political dynasty.

 RedSt8r:          A fascinating aspect is gleaned from the center left/left wing economic blog comments that actually complain Obama is governing from the center right and that’s why Brown won and Obama is failing. Huh? The left is congenitally unable to accept the reality of a center right country. They consistently believe we’re too stupid, their message was unclear and if they just double down on the program budget it will make it right with the world.

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VF:         In just 12 months in office this administration has increased the privately held public debt by almost 3 trillion dollars.  The shortfall in tax receipts was about 14.5% of the prior year’s budget but spending increased by over 40% over the prior year and relative to receipts it increased by over 50%.  (Most of this spending can be classified as countercyclical and the deficits resulting are cyclical deficits not structural)  The spending increase was driven in part by a jump in unemployment insurance claims, the $700 billion dollar stimulus, the auto bailouts, the continuing financial sector bailouts and other spending increases in Medicaid, Food Stamps and other automatic stabilizers that kick-in in a recession. 

This fiscal year spending will decline by $500 billion from 2009 and remain stable through 2011 but by 2014 something interesting occurs, the net interest payments on the outstanding privately held public debt soars in fact it increases by 240% over fiscal 2010 by 2014.  This is partly a result of the assumptions in the budget projections about interest rates and the unwinding of the Fed’s balance sheet but it grows so much so fast that the economy cannot grow fast enough to keep up.  It will be the signature achievement of the Obama administration, a structural deficit driven by debt service obligations.  If current politicians are hamstrung by the autopilot budget just wait, we’ve got something better for the next crop, a debt bomb.  If the deficit continues to hover around $500 billion a year that debt service obligation will continue to grow at about 20 billion dollars a year.  Barring higher interest rates, this is manageable but our recent experience has been that the privately held public debt is doubling every 6 to 8 years so, by 2022 debt service obligations will be closing in on 900 billion dollars per year which would indicate perhaps a much higher structural deficit over those years than $500 billion, try $1.5 to $2 trillion, now that’s a deficit.

RedSt8r:          Few reasonable folks will complain about the extended unemployment benefits, some more will complain about the growth in Medicaid, food stamps and such. But those areas were actually quite minimal relatively speaking. It’s the humongous rest of the spending that has “us” in such an uproar. Your review is both accurate and frightening. A quick and simple calculation assumes the total public debt (that is, Federal only!) at $24 Trillion (current $14T + $10T from Obama) with 10 year Tnote rates at 6% will cost $1.44 Trillion a year just in interest payments. And for what? Banker bonuses? Goldman Sachs? Handouts to State and local governments?

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VF:         The only solutions to a structural deficit are budget cuts or tax hikes or some combination of both the solution is never more spending.  But the problem here is that the autopilot budget continues to grow largely driven by demographics.  Sometime around 2020 our existing entitlement system will need to be partially financed through general revenues rather than solely through payroll taxes as is currently the case.  The focus then needs to be slowing the growth rate of entitlement spending.  Obama’s healthcare reform was meant to “bend the curve” on health expenditures but what finally emerged out of the Senate was a compromise that would ironically increase costs not reduce them.  It is fortunate that this bill died in the House.

RedSt8r:          Yes, we are all fortunate that the Brown election win has – so far – stopped the healthcare reform masquerade. I don’t yet see the wooden stake but I’m hopeful. Still, there is one other solution to a structural deficit owing to debt service payments. A national debt default. Not pretty but Argentina did it twice and they can still borrow. Well, after they settle their little argument with the President of their Central Bank. Details, details.

VF:      A default would reduce our credit rating and raise the premium on future borrowing so that is unlikely. It would also spark inflation as the dollar falls and import prices soar.  A reduction in our sovereign credit rating is around the corner anyway when an increasing share of receipts will be used to pay Medicare and Social Security beneficiaries.

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VF:         The director of CBO, Doug Elmendorf said in a speech last year, “The country faces a fundamental disconnect between the services people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services. The fundamental disconnect will have to be addressed in some way if the budget is to be placed on a sustainable course.”  I think that pretty fairly sums up our situation.  There are very difficult choices ahead and we need politicians who can make those choices .

RedSt8r:        Elmendorf has earned some respect for his work although it would be a lot more if he identified the flaws of the work he was asked to do. Scoring a healthcare bill as deficit neutral (or positive) by counting 5 years of expenses and 10 years of revenue is hardly reasonable.

VF:      Elmendorf did caveat on language that could be read to say if you really believe these budget fictions. In their scoring of the senate bill on their blog they stated:

” These longer-term calculations assume that the provisions are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments, and legislation to do so again is currently under consideration in the Congress. The legislation would put into effect a number of procedures that might be difficult to maintain over a long period of time. Although it would increase payment rates for physicians’ services for 2010 relative to those in effect for 2009, those rates would be reduced by about 23 percent for 2011 and then remain at current-law levels (that is, as specified under the SGR) for subsequent years. At the same time, the legislation includes a number of provisions that would constrain payment rates for other providers of Medicare services. In particular, increases in payment rates for many providers would be held below the rate of inflation (in expectation of ongoing productivity improvements in the delivery of health care). The projected longer-term savings for the legislation also assume that the Independent Medicare Advisory Board that would be established by the bill is fairly effective in reducing costs—beyond the reductions that would be achieved by other aspects of the bill—to meet the targets specified in the legislation.

“Based on the extrapolation described above, CBO expects that Medicare spending under the bill would increase at an average annual rate of roughly 6 percent during the next two decades—well below the roughly 8 percent annual growth rate of the past two decades (excluding the effect of establishing the Medicare prescription drug benefit). Adjusting for inflation, Medicare spending per beneficiary under the bill would increase at an average annual rate of roughly 2 percent during the next two decades—much less than the roughly 4 percent annual growth rate of the past two decades. Whether such a reduction in the growth rate could be achieved through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care is unclear.”

VF:      Basically saying that the uncertainties and political realities will be cost increasing and that the bill is based on a political view where everyone can just hold hands and sing camp songs.

RedSt8r:          But I disagree with him on the “fundamental disconnect”. The fundamental disconnect is between politicians who promise expansive benefits with little cost (and usually to someone else) and a public that never gets told the true and full cost to each of them over the long term. A secondary disconnect occurs to those who become enmeshed in the “benefits for older Americans” after having paid in to a system all their working lives and who now find themselves facing restrictions and limitations. They paid what they were told and now expect to get what they were promised. There is a complete lack of understanding how SSA, Medicare, et.al. were (are) just giant Ponzi schemes that would make Bernie Madoff blush with embarrassment.

SSA Bureaucrats and Obama’s Health Care Plan

October 1, 2009

The WSJ had a very interesting article the other day (“Social Security Owes ‘Fugitives’ Millions”, September 26, 2009 by Ellen E. Schultz) describing how the Social Security Administration (SSA) withholds benefits payments from “fugitive felons”. The article describes a well intentioned process to withhold SSA benefits payments from “fugitive felons”. This was done to save taxpayers money, of course. And, it was done with the best of intentions no doubt. 

The “Personal Responsibility and Work Opportunity Reconciliation Act of 1996” began to withhold benefits such as food stamps, housing, temporary assistance to needy families and the like. In 20001 it was extended to veterans benefits to include veteran’s dependents. By 2003 HUD (Housing and Urban Development) was also included. Continuing the trend of these good works the 1996 act was finally extended to SSA in 2005.

There are several levels of concern. First, keep in mind that the bureaucrats in charge of Obama’s health care plan will also have detailed operations manuals instructing them in every detail of the nation’s health care. Details such as who qualifies for a particular medical procedure and which medications are going to be available to what patient. Now, let’s go back to Ms. Schultz’s article. She writes that the SSA bureaucrats “… relied on an operations manual stating that anyone with a warrant outstanding is a fugitive felon …”. This meant that if you forgot (or failed) to pay some parking tickets and a bench warrant was issued you might be classified as a “fugitive felon”. Even though you are neither a fugitive nor a felon SSA would classify you as such and would then withhold your benefits. Okay, so the bureaucrats are a little energetic. No real harm right?

Second, the SSA bureaucrats would not even use a common sense understanding of the operations manual. As a result of their wanton disregard for even a shred of common sense, a 79 year old retired woman who only had the same first name, maiden name and birth date as an actual wanted felon was denied benefits. But the felon was a different race and gender, had a different social security number, different middle name and his last name was different from the woman’s actual, married last name (remember, only her maiden name was the same). Those benevolent bureaucrats didn’t check SSA numbers, gender, race, age, middle or actual names but nevertheless concluded this woman should have her benefits denied.

Not bad enough? Third, the SSA bureaucrats had to be forced to correct their obvious error. The woman contacted the New York City police where a detective gave her a letter stating she was not the fugitive in question. The SSA bureaucrats would not accept the letter. Apparently they knew better than some NYC police detective who was actually looking for the felon. The poor woman had to get help from a legal aid attorney to get her benefits reinstated. But what about the other “… at least 200,000 elderly and disabled people who lost their benefits …” you might ask? Who helped them?

Now consider a public, national health care system similar to Canada or Britain. It’s bad enough to have your SSA benefits unfairly denied. But what if some bureaucrat deep inside the Obama’s health care system decides their operations manual does not permit someone in your circumstance to obtain a surgical procedure or medication? Perhaps they mistook you for someone older and sicker. Or their operations manual was so confusing they had no idea what to do and so did nothing. Now what do you do? Call Congress? What ought to scare the bejeebers out of everyone is the prospect of a massive contingent of bureaucrats inside of Obama’s health care plan implementing  their operations manual in a manner similar to that of the SSA bureaucrats and fugitive felons.

Fourth, let’s look at the “fugitive felon” situation from another view. Take the other side so to speak. The act initiating the “fugitive felon” process was passed in 1996. It took NINE YEARS for it to get all the way over to SSA. Suppose it was a beneficial medical procedure. How happy would you be to see Californians getting the procedure while North Carolinians were still being denied?

Of course, if you die all these concerns become moot for you. Gosh, that’s too bad for you. If your health merely worsens while you attempt to straighten out the disagreement will a bureaucratic “my bad” make you feel better? Maybe, but it’s not likely. Will you have to hire a lawyer to get the issue resolved? Won’t that be fun?

Does any of this happen today with private insurance companies? Sure. But it is unlikely to happen nationwide as it did with SSA and most certainly will with Obama’s health care plan. Bureaucrats are the same mindset the world over. Still with all the flaws of private insurance you at least have the ability to appeal to the courts for assistance. And when you do, you know that the government does not have a vested interest in the outcome. Not so with Obama’s health care plan.

Obama’s health care plan promises no harm and great benefit for the many. Given every other government program it is far more likely to do the opposite. Harm the many and benefit the few. If you want health insurance for the few people who can’t afford it and who are here legally then all that has to be done is extend Medicaid and raise all our taxes. If you also want insurance reform then debate the issues and give the public an opportunity to decide. The Medicaid extension can be done quickly. There is time to debate insurance reform.

Budget Cuts: Obama vs Bush (who cares?)

May 8, 2009

comment on Budget: Baby Terminator by KeithHennessey.com

Comparing proposed Bush discretionary spending cuts with Obama’s is a wasted exercise. GWB-43 threw away any Republican claim to responsible fiscal policy. Regrettably it was much the same with GWB-41. Both declined to present their case to the public to rein in spending and instead took the easy way out. GWB-41 reneged on his “read my lips” promise and quickly raised taxes. GWB-43 just signed every spending bill that hit his desk, deficits be damned.

For Democrats to hold Clinton up as a great economic master ignores the fact that he stepped into an economic recovery from the 90-91 recession + the internet/technology boom + Greenspan monetary pump priming. And he left a emerging recession for GWB-43 to boot. To gain his surplus Clinton let defense spending lag and signed a welfare reform under pressure from a Republican congress. Clinton enjoyed his rare surplus due less to his efforts than a political split between the White House and Congress. My outrage is over the wasted opportunity to reform SSA, Medicare/Medicaid and Defense (mostly Clinton’s fault but also partly Republicans). That failure stings even harsher today.

Obama today does not hide his plan to drastically restructure the US economy. He will double the national debt in a very few years and is apparently eager to have government take over large portions of our economy. Favoring a president is not a zero sum game. I do not have to be (and I am decidedly not) a fan of GWB-43 to oppose Obama. Frankly, a pox on both their houses.

As I have read more and more blogs (economics, politics and markets) I have come to the conclusion that much of what I read is analogous to quarreling about who arranged the deck chairs – and whether to buy more or fewer – on the US Titanic. I am far more interested in helping to find a better captain who will steer away from the obvious icebergs and run a tighter ship or, failing that, finding a lifeboat.

Global Warming Contradictions

April 24, 2009

Copy of a letter sent to the Editor; Wall Street Journal.

 

Today’s editorial, “Reckless ‘Endangerment’” speaks to President Obama’s global warming agenda. It seems evident to me that a reasonable analysis of global warming just might include some historical data. For example, the Viking settlements in Greenland, circa 800-1200 AD bear witness to significant historical episodes of global climate change and global warming. A quick search of the internet turns up a wonderful web site by Professor Scott A. Mandia.

 

Scott A. Mandia
Professor – Physical Sciences
T-206 Smithtown Sciences Bldg.
S.C.C.C.
533 College Rd.
Selden, NY 11784
(631) 451-4104
mandias@sunysuffolk.edu
http://www2.sunysuffolk.edu/mandias/

 

 On the web site Professor Mandia provides a very readable history of the Vikings in Greenland and the climate conditions that made it possible. However, the professor also feels obliged to include a disclaimer. 

Note to general public:

My position on the current global warming is the same as the overwhelming majority of international climate scientists: the current rate of global warming is unprecedented and is being caused by humans. In no way should my summary of the research regarding climate change and the Viking civilization/Little Ice Age be used to “prove” the current global warming is due to a natural cycle. Human forcing (output of greenhouse gases) was just not as large a factor before the 1900s as natural forcing mechanisms. That would be like comparing the number of traffic fatalities today vs. a time when there were no cars!  

I highly recommend that you read the information being presented by the Intergovernmental Panel on Climate Change (IPCC) at http://www.ipcc.ch/. Please view my two .PDF files Global Warming: Man or Myth? and IPCC WGI FAQ which address many of the questions asked about the human impact on the current climate change in a very simple format.  

It is true that there are natural climate change cycles but most of these are on the order of thousands of years to millions of years. The current global warming is not a natural cycle and is of utmost importance because modern-day humans live on time scales much smaller than the natural cycles. Therefore, mankind cannot just simply wait thousands of years for a natural cooling to occur.  

It is my opinion that those who still proclaim that “the jury is still out” or that modern-day climate change is natural, are either ignorant about the scientific evidence or are politically motivated to ignore it.  

It is not possible for me to tell if the disclaimer is aimed at the professor’s job security, is an attempt at dry humor or is inexplicably false based on his own research. Note the sentence below: (emphasis added)

 

It is true that there are natural climate change cycles but most of these are on the order of thousands of years to millions of years.

 

On a separate page of his web site Professor Mandia describes the cycle of climate change affecting Greenland.  

 

A careful examination of the climate record reveals that Europe experienced a prolonged warm period known as the Medieval Warm Period (hereafter referred to as MWP) between the years 600 and 1150, cooling of the climate between the years 1150 and 1460, a brief warming between the years 1460 and 1560, followed by dramatic cooling known as the Little Ice Age (hereafter referred to as LIA) between the years 1560 and 1850.

 

Unless my math is grossly incorrect this process of warming (600-1150), cooling (1150-1460), warming (1460-1560) and ultimately the “Little Ice Age” (1560-1850) all occurred over time periods ranging from decades to hundreds of years. The entire, warm, cool, warm, freeze was all of 1250 years. This hardly constitutes “… thousands of years to millions of years.” What’s going on? How can such historical evidence be denied by the very researcher who describes it?

 

The professor also considers possible causes of this climate change, notably sun spots. Again, from the Professor’s web site. 

 

Sunspot Variation

Because the sun is Earth’s greatest source of energy and is the driving force behind its atmospheric circulation, any variation in solar output will influence the weather. Scientists have observed that the number of sunspots on the surface of the sun has been determined to correspond to solar output variability. More sunspots correspond to a higher solar energy output while fewer sunspots correspond to a lower solar output. A record of sunspot numbers has been recorded through time by various indicators including naked eye observations, auroral reports, and C14 isotope concentrations in tree rings (Schaefer, 1977.) Fig. 8 shows that during the MWP there was a high number of sunspots referred to as the Medieval Maximum, while during the LIA there were two periods of very low sunspot numbers called the Spörer Minimum and Maunder Minimum. Although a direct link has not yet been established between sunspot variability and climate change, the data is highly suggestive.

 

But the professor points us to the United Nations Intergovernmental Panel on Climate Change (IPCC) for more information on global climate change/warming. Presumably why humans are solely responsible for same? Also, Professor Mandia provides two additional pieces of information “explaining” his take on the human responsibility for the current global climate change/warming versus his own historical research. Note: I haven’t bothered to read them. What’s the point when the good professor disclaims his own evidence.

 

I believe this attitude is the driving force behind the push for government regulation of economic activity under the guise of an environmental – read global climate change/warming/whatever – emergency. In short, Professor Mandia, the eco-regulators (EPA, Obama, Congress, liberals and environmentalists) all choose to ignore the historical evidence plainly available. I believe they choose to ignore it because it contradicts their ideology. America’s economy will be held hostage to such ideologically scrubbed environmental evidence.

 

Mortgage Bailout or Voter Buyoff?

February 18, 2009

President Obama unveiled his latest bailout plan today. It is a $75 billion plan to give irresponsible homeowners a partial free ride on a home they could not afford.  This is done by burdening all responsible homeowners with ever increasing federal debt AND even worse, preventing the market from clearing the home inventory overhang. In fact, the aura of housing market price manipulation is perhaps the least appreciated flaw in this bailout scheme.

By and large we aren’t talking about homeowners who were laid off or who have suffered medical setbacks. They certainly exist and may, emphasize may, be deserving of some assistance. No this bailout is aimed directly at the reckless and the stupid who bought homes they could not afford with money they did not have.

The pro-bailout argument, heard repeatedly on CNBC and elsewhere is that if “we” don’t bail “them” out then homes in “our” neighborhood will be foreclosed and “we” will suffer a price decrease. It is hard to believe that people with a triple digit IQ making, well, lots of money can make that argument with a straight face. By that logic if my neighbor loses money in a mutual fund I need to bail him out in order to preserve the value of my mutual fund. If my neighbor is at risk of having his car repossessed I need to bail him out or my car will lose value. Apparrently no one anywhere should take any kind of loss ever for any reason whatsoever because it will lower the value of everything everywhere. Where does it end?

Asked another way, what reasonable person will now trust the manipulated “market value” of a home? The claim that a foreclosed home in my neighborhood will diminish my market value may or may not be true. If it was the buyer who bought what they could not afford and a new set of responsbile home buyers appears then I suffer little or no drop in value. If the home was overpriced as well then I deserve to lose some value since my home too is likely overvalued. Too bad for me.

But if homes that should have been foreclosed upon are left in the hands of reckless buyers in order to prevent a drop in value then the market value of all homes are being manipulated by the government. Why would a responsible person trust such a manipulated market value. Who will buy a home whose value is manipulated? What would be a fair price? How would anyone know? What will now happen to home prices? And if I want to sell will the government let me price my home lower than my neighbors? Won’t that also lower their value? Will we end up with a socialized housing market?

Frankly, I believe that all the bailout schemes are directed not at economic salvation but the salvation of the Democrat voter/donor base. Now to be honest I believe the Bush bank bailout was aimed at friends of Ben, principally the Goldman Sachs crowd that has run the treasury for multiple administrations. If you look closely at the Obama bank bailout it isn’t quite as friendly on the surface but underneath the noise the banks continue to get what they want. The car company bailout and the mortgage bailout, every bailout actually is aimed at protecting, preserving and rewarding the Democrat voter/donor base.

For me this Machiavellian outlook explains a great deal about the  design of the bailouts since Economics 101 is clearly not at work. If a bailout is not expressly aimed at the voter base, as in the UAW in the case of the car companies then step back and ask where’s the money? Goldman Sachs, all the former investment banks as well as most corporate executives are big time donors to the Democrats. Got to protect that voter/donor base. So, let’s buy their financial support and votes with taxpayer money and we’ll call it a bailout to protect the little guy. Nice.