A Moment For Meditation

I would urge each of you who have been reading last week's blog posts to reconsider this chart. 

Is a cut of $2 billion that Biden, speaking for the administration, has offered a serious offer? The Republicans must feel like they are playing chicken when the other guy wants to crash. Obama wants to crash to insure his reelection. 

Study this chart. When you understand it, you will understand the crisis. 

Our Humpty Dumpty Government

One of the reasons I titled some of my posts "Government in Wonderland" was this part of the Alice in Wonderland Story:

"There's glory for you!"

"I don't know what you mean by 'glory,' " Alice said.

Humpty Dumpty smiled contemptuously. "Of course you don't—till I tell you. I meant 'there's a nice knock-down argument for you!' "

"But 'glory' doesn't mean 'a nice knock-down argument,' " Alice objected.

"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean—neither more nor less."

"The question is, " said Alice, "whether you can make words mean so many different things."

"The question is," said Humpty Dumpty, "which is to be master—that's all."

We live in a world where the government decrees that marriage does not have to be between a man and a woman, where the State of New Mexico fines a wedding photographer $6,000 for not taking a lesbian couple as a client, where an increase in government spending is called a cut, where a supposed 2 trillion dollar cut in spending yields $2 billion in cuts the first year, where a president can authorize torture, where a president can declare war in Libya without declaring war, and where an anti-war candidate becomes a war president. In such a world my advice to you is to stay as far away from Humpty Dumpty as you can.

Even as I type Humpty is teetering on the edge. He seems to enjoy it. Sooner or later Humpty will fall. Try not to be under him when he falls. For all the king's horses, and all the king's men, cannot put Humpty together again. 

Does Our President Understand Car Insurance?

Thanks to the Blog Prof for a video of our president that has to be seen to be believed. 

 Here is the transcript:

When I was young, just got out of college, I had to buy auto insurance. I had a beat-up old car. And I won’t name the name of the insurance company, but there was a company — let’s call it Acme Insurance in Illinois. And I was paying my premiums every month. After about six months I got rear-ended and I called up Acme and said, I’d like to see if I can get my car repaired, and they laughed at me over the phone because really this was set up not to actually provide insurance; what it was set up was to meet the legal requirements. But it really wasn’t serious insurance. Now, it’s one thing if you’ve got an old beat-up car that you can’t get fixed. It’s another thing if your kid is sick, or you’ve got breast cancer.

I can understand a young Obama not understanding the difference between Collision and Liability insurance. Such knowledge has to be learned. I remember some of the embarrassing moments of my youth. But this video is from the time he was president. He still does not seem to know the difference. Why did young Obama not chose collision? I am sure the expense was the reason. When you have an old car with a deductible, Collision insurance is usually not a good investment-especially if you do not have the money.

The parallel that Obama is drawing here tells us that he does not understand health Insurance either. If he wants people to get "serious" insurance that person will need to spend serious money to get it. If someone does not have the money, they do not have the money. Forcing the young to buy insurance will not work if they are going to get treatment anyway and the fine is less than the insurance. Such insurance is not a good choice for the young. Since anyone can have an accident, the young need catastrophic insurance with a high deductible.

Will Krugman's Prayer Help?The reason insurance companies want these young policy holders is that their rate of profit on them is much higher than older customers. This is the young subsidizing the old-sounds like Social Security.

This is the man deciding things for us as we approach the debt ceiling. God help us.

Why Not Raise Taxes?

Republicans have valid reasons for their reluctance to raise taxes. Here is the blog Hot Air on this point:

We don’t need to look too far back in American history for a primer on this tactic.  A Democratic Congress convinced George H. W. Bush to raise taxes in exchange for a promise to cut spending in 1990, forcing Bush to reverse his “read my lips” pledge.  Not only did the Democrats fail to deliver cuts or tax reform, they then used the “read my lips” clip in the 1992 presidential contest.  Before that, Democrats in Congress convinced Ronald Reagan to sign an amnesty bill in exchange for reforms in border security and control, only to renege on that as well.

Here is the Bush I tax/spending cuts in graphic form. 

Another problem is that the cuts are often not well specified, and are back-loaded into the 10 year time frame. We need cuts right now that are specific, and in the next fiscal year. 

Another valid reason not to raise taxes is that Obama has already raised taxes quite a bit. From the WSJ:

For first time, the bill also applies Medicare’s 2.9% payroll tax rate to investment income, including dividends, interest income and capital gains. Added to the 0.9% payroll surcharge, that means a 3.8-percentage point tax hike on “the rich.” Oh, and these new taxes aren’t indexed for inflation, so many middle-class families will soon be considered rich and pay the surcharge as their incomes rise past $250,000 due to tax-bracket creep. Remember how the Alternative Minimum Tax was supposed to apply only to a handful of millionaires?

Obama has already raised the capital gains tax to almost 19%. Then there is the tax on health policies that is due to take effect in 2018.  From the WSJ: 

Starting in 2018, the bill imposes a whopping 40% "excise tax" on high-cost health insurance plans. Though it only applies to two years in the 2010-2019 window of ObamaCare's original budget score, this tax would still raise $32 billion—and much more in future years.

This will directly effect me as it will force a reduction in coverage for me and my employees. Of course no one's coverage will change. 

From sources at Roll Call

“How much does the Biden plan actually cut from next year’s discretionary spending budget?” the Kentucky Republican asked the room.

Obama’s Office of Management and Budget Director Jacob Lew told him, “$2 billion.”

A second source close to the original Biden group confirmed this number.

Note that this is billion, not trillion. Fake budget cuts will only make the problem worse. Obama is not serious. Even the Republicans are only slightly more serious. The 4 trillion Ryan proposal of the Republicans is a cut of 1.8 trillion.

And of course there is the possibility that the Republicans will raise taxes now, and then President Obama in 2013 will allow the Bush tax cuts to expire, raising taxes 3.5 trillion over 10 years. While I support a tax increase, the Republicans need to be careful. The Devil is in the details. 

Government In Wonderland, Part III: Social Security Ponzi Scheme

You may have heard the story of the first Social Security recipient, Ida Fuller: 

Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits.

No doubt the first reaction is amusement and maybe envy at her good fortune. But what this should tell us is that right from the beginning Social Security was a Ponzi scheme. A Ponzi Scheme is an investment scam where the early investors get a huge supposed return on their "investment."  In reality the high returns are taken from the capital of later investors.

Here is how a Ponzi Scheme works. 

The taxes that the taxpayer has paid into Social Security have become a worse and worse investment as time goes on. This is a common feature to all Ponzi Schemes. 

The unfunded Social Security liability is $8 trillion. If the Congress wanted to make Social Security solvent it would need to add that to the fund right now. There are other higher estimates based on the obvious fact that the 8 trillion will not be put into the system, and that means every year the unfunded liability goes up. Over the next 50 years Social Security will spend trillions more than it takes in. This cannot happen, the money is not there, the politicians have been spending it for 80 years. 

If nothing is done then Social Security recipients will face a cut of 22%. While this is some time away in 2036, it is a problem that should be addressed. 

While Obama's debt commission had a Social Security proposal as a part of its recommendations, there is no serious proposal to address Social Security’s problems. Both Republicans and Democrats are ostriches on this issue.

I suggest that both parties adopt a new mascot as a symbol to replace the elephant and donkey. I suggest an ostrich.