Sunday, December 30, 2012

No Adults In Charge In Washington

The fiscal farce continues with just 2 days away from the expiration of the 'Bush tax cuts' with new taxes on everyone. Obama and Democrats show that they are pathologically unserious about ANY spending cuts and cling to the tax increase for the top 2% "wealthy." Remember, for the past 4 years, only Obama has demanded new taxes--his unholy obsession.  Even Senate Democrats have had no appetite for tax increases.  And that's true even when the Democrats had a super-majority in both houses of Congress.  Proof?  There have been no new income taxes in the past 4 years.

Back to the current demand for increased taxes.  According to Ron Paul in a CNBC interview,
They are arguing over power, spin, who looks good, who looks bad; all trying to preserve the system where they can spend what they want, take care of their friends and print money when they need it.
The tax increase on the top 2% will fund the government for 8 days, ie., a trivial amount. The "spending cuts" from the W.H. include savings from wars that are over, ie., reductions of what might have been and saved interest costs, ie., no real spending cuts at all.  In reality spending will increase and the deficit will increase this year and every year into the future. This would normally continue until the bond market revolts.  But the bond market is irrelevant now the Federal Reserve will print money out of thin air to monetize the entire debt!

Even if the WH proposal passes the Senate and House, unless tax deductions and tax credits are reformed as Boehner wanted, the top 2% will find ways to minimize their tax increases.

There is no adult in charge in Washington.   Obama and Reid fiddle while the nation is passing the point of no return.  There will never be a return to fiscal sanity.

ALL of this could have been avoided if Mitt Romney had been elected: no fiscal cliff crisis, an end to Ben Bernanke's monetary madness and a more receptive climate to start to address spending.

Saturday, December 29, 2012

Shale Gas In U.K.: The Harmful Nanny-State

In a recent blog, The West Lapsing Into Totalitarian Slump, I argue that government intervention in the economies of the West are ruining those economies and now preventing recovery nearly everywhere. I also said that this "totalitarianism" is even worse in the UK and Europe.  In fact, I predict financial and economic collapse in Europe and The West in this decade.

With big and intrusive governments, central (and local) government interference in the economy limits the country's private, decentralized business atmosphere and blunts individual initiative.  Excessive taxes limit the wealth creation necessary for risk-taking ventures.  High taxes hurt business investment returns to such an extent that there are too few new businesses.  The welfare state has also stunted the self-reliance and initiative of the people.

Little Room For Entrepenuerism In Socialist Britain
If you want to see how government ruins nearly everything it touches, look no further than the recent ban on hydraulic fracturing for shale gas in Southern England due to small, nearly imperceptible tremors that occurred near several hydraulically fractured well operations.  Mind you, northern Europe is not seismically active.

First of all, there is only one group of entrepeneurs, Cuadrilla Resources UK, with the "temerity" to try to develop shale gas in the UK.  They drilled two wells before being shut down after minor earthquake activity.  Contrast this with the full-blown drilling boom(s) underway in US onshore shale basins for years now.  For instance, there was 111 drilling rigs in the state of Pennsylvania in 2011 with nearly 2900 producing wells in 2012.  Shale gas production is soaring. That's just one state!  

But there is only one or two companies trying to develop shale gas in all of the UK.    Why?  In Socialist Britain, almost nothing good or new can happen when the entire country and nearly all it's activities are regulated and controlled by nanny state bureaucrats at the central and local levels.  (We won't even go into the curtailed individuals rights and extensive surveillance there!)

Overreaction to Extremely Small Tremors
In typical governmental overreaction, the UK government banned ALL fracturing activity in the UK due to very small earthquakes occurring near the well sites in April of 2011. The magnitude of the quakes were insignificant at 1.5 and 2.3 on the Richter scale.  Most people in that area wouldn't have even noticed these small quakes.

Just as a typical example, I looked at website for Anchorage Alaska today (December 22), which reports earthquake activity.  There were 4 earthquakes in the area with magnitudes ranging from 2.6 to 3.0 on the Richter scale.  This is typical for this area and occurs nearly everyday.  There is no shale gas drilling in that area.  There were 3 earthquakes in the Los Angeles area on the same day and same magnitude. There are an everyday event in these areas. The Wunderground site doesn't even report quakes of magnitude of 2.5 or less since they are so minor.

So, in typical over-reaction of Nanny State Totalitarian government, the government bans ALL shale gas drilling activity and, after 1 1/2 years, finally allows it to resume.  Now the exploration company has to prove that any future activity won't cause earthquakes. That sounds logical but is impossible to prove or disprove.  All this for nearly imperceptible tremors!  The UK is NOT a geologically active area prone to seismic activity.

And the people wonder why the economy is so slow and that there are so few employment opportunities. I think this single example explains quite a bit.

Friday, December 28, 2012

What People Are Really Thinking

One of my favorite blog sites, Zero Hedge did something that I want to try here.  They let Google make search suggestions for some of our esteemed politicians. I'm not sure what these results mean, but it probably isn't good!     Here you go:

Thursday, December 27, 2012

Big Gov't "Management" of Medicare

Doctor Alex Valadka is a neurosurgeon in Austin Texas who is thinking about leaving his role as "medicare" doctor thanks to gross mismanagement by the Federal Government.  This is a warning to avoid the Feds managing anything.   From a article on December 9, 2012:
"At least once a year, I am taken to a precipice known as the SGR cliff (a reimbursement formula used by Congress), which mandates that reimbursement rates are reduced by significant levels unless Congress steps in with its “doc fix” and staves off the cut. This year is no different. The SGR rate will be cut by nearly 27 percent on Jan. 1, 2012 unless Congress acts.
This threatened cut, coupled with rate reductions and penalties already codified under the 2010 health care law and sequestration amount to a systematic targeting of Medicare doctors to pay for deficit reduction.
To be clear, our SGR cliff is not merely an annual exercise. In 2010, we faced no less than five cliffs, sometimes going over, then fixed retroactively after a few weeks of panic and confusion among us and our patients.
If this weren’t enough, the grand promise made to physicians to fix the SGR in the 2010 law actually worsened the situation by once again targeting reimbursement rates and adding reporting and electronic health record mandates. For good measure, the law created the Independent Payment Advisory Board as a means to further reduce reimbursements.
So when Congress went looking for more cuts during the 2011 budget debate, I assumed there would be no more hits coming my way. I was wrong.
The failure of the supercommittee to reach a deal put physicians in line for an additional 2 percent annual cut for the next 10 years in the sequester. Of all the cuts and penalties put on the Medicare provider community, this one is particularly troublesome, given that the ink had barely dried on the law overhauling our industry. But the president and Congress had no qualms in coming back for more.
What is the net effect of these unstable reimbursements, mandated payments and looming cuts? For more and more physicians, these multiple and repeated cliffs give us no choice but to limit the number of Medicare patients we see. Like it or not, this is rationing of care.
In fact doctors are leaving Medicare and Medicaid in droves. From the Houston Chronicle:
One hundred and seventy-two doctors formally ended involvement with Medicare last year, the most yet in a surge of "opt-outs" that has claimed more than 450 Texas doctors since 2008. Before 2007, the number averaged a handful a year.
ObamaCare and further government involvement with health care will severely limit options for many consumers with it's one-size-fits-all approach, mis-management as detailed above, and bureaucratic complexity and costs. The unspoken effort is to undermine conventional private insurance and force people into the arms of government programs.

Why The East Rises and The West Sinks

The East Rises
As you may know, I spend a good deal of time in Thailand where taxes are low, government is small and economic freedom is high. There is a strong sense of community there.  Most people live highly connected to their many friends and families.  This is as true in villages as in the big cities.  Everyone seems to know everyone's business! Everyone in the 'village' knows everything about everyone else!

There is no governmental social safety net to speak of in Thailand.  But there IS a safety net!  If someone finds themselves with no money or job, their first thought is to find something to sell on the street, get a job or borrow money from a friend. Friends and family ARE the safety net.  The thought of assistance from anyone other then themselves, friends and family is non-existent.  If you fall down, then you must pick yourself up.

Because taxes are low, the government small and the population is young, the economy remains strong so that people have the opportunity to pick themselves up.  Even though wages are very low and most people live on the financial "edge," the people are happy. Thai people are remarkably open, honest and comfortable.  There are people to help you when needed, there's plenty of opportunity and there's plenty to eat at a low cost.

The vibrant nature of the highly competitive, entrepreneurial Thai economy keeps prices low. For most things, there is intense competition with many providers.  For the common things like food,  prices are quite stable and well-behaved. And if you can't afford new things, there are vibrant markets for used things!   

The West Sinks
Then I travel back to 'The West' where the population is aging, government is big (and getting bigger), taxes are higher and opportunities are now suddenly limited in large part due to "activist government" intervention. The financial "panic" of 2009 gave government the excuse to intervene in the economy and now the cure is killing the patient.

People were already isolated and alienated from their neighbors and family, and now fairly sizable portions of the population are dependent upon "the state."  Mental health is poor as vast numbers of people are either obese or suffer from obsessive-compulsive disorders, on medication or abusing drugs, and/or suffering from anxieties. The people most dependent on 'The State', like African Americans, feel resentful, unhappy and entitled despite some government support. The dependence doesn't work nor promote happiness.

The West, now in the hands of Keynesians and Socialists, is in a vicious downward circle of 1) increasing government interference in the economy which ruins the private, decentralized business atmosphere and blunts individual initiative, 2) more government spending and higher debt slows the economy,  3) higher debt levels reduce the efficacy of deficit spending so there is demand for even more spending and 4) eventually interest costs rise. The cycle continues with 5) higher taxes to pay for this gov't "interference" which leads to lower tax revenue and calls for yet more taxes. The tax and spend downward spiral concludes where we began: with a sick economy and 6) more excuses for further government involvement.  Our current administration loves crisis--so they can "take advantage" of it.

The population in the US (and Europe) is now so economically illiterate and/or so dependent on a gov't program that they are unable or unwilling to break the cycle.  The recent election in the US was a choice between a Leftist and a conservative candidate who MIGHT have been able to break the downward spiral with pro-growth policies.  The people voted for the downward spiral!

Please see my blog "The West Lapsing Into Totalitarian Slump."

Higher taxes, big government and onerous regulation in many Western economies, like the UK, have a tendency toward inflation (and stagnation).  Inflation is the principal reason for income inequality as the wealthy have ways of avoiding inflation loses.  The UK, in recent years, has had 5% inflation despite a slumping economy.  Government "totalitarianism" and high taxation limits entrepreneurial efforts because few people have enough after tax income and savings to take risks.  This leads to a lack of "supply" in the Supply-Demand equation.  Also, government controlled enterprises are notoriously noncompetitive (think US Postal Service) leading to rising prices.  Also, taxation of business is passed onto the consumer in the form of higher prices. Socialism leads to stagnation AND inflation!

The Downward Spiral Will Eventually End!
Charles Hughes Smith echoes many of these sentiments in his Christmas day blog article entitled "Why I'm Hopeful"

"I often mention that the U.S. has much to learn from so-called Third World countries that are poorer in resources and credit. In many of these countries, the government is the police, the school and the infrastructure of roadways and energy.  

Rather than something to be embraced and lobbied, involvement with the State is something to be avoided as a risk. In everyday life, people rarely encounter the government except in law enforcement or schooling.  As a result, people depend on their social capital and community for sustenance, support, work and connections.

This is not altruism, it is mutually beneficial.

Once a community dissolves into atomized individuals who each get a payment from the Central State, then they no longer need each other. Rather, other dependents on the State are viewed as competitors for the State's resources.

These atomized, isolated individuals have a perverse relationship with the State and what remains of the community around them: lacking the self-worth earned from work or engagement/investment in a community, then their only outlet for self-identity is consumption: what they wear, eat, drink, etc. as consumers.

This dependence on the State also serves the State's goal, which is a passive, compliant populace of dependents, and distracted, passive workers who pay their taxes. Thus dependence on the State and a hollow consumerism are ontologically bound: one feeds the other.

The era of debt-based consumption as the engine of "growth" and "prosperity" is coming to an end. Adding debt via credit no longer creates growth; it actually takes away from the economy by expanding debt service (interest payments).

The vast majority of developed-world people have had the basics of life since the late 1960s -- transport, food, shelter and utilities. The "growth" since then depended on cheap, abundant oil and a consumerist mentality in which one constantly re-defines and renews one's identity not from social investments in others or the shared community but from consumption.

Not coincidentally, this dominance of consumption as the only metric for "growth" (as opposed to, say, productive activity) has been paralleled by the dominance of the Central State.

The end of credit-based consumption will be a very positive development, as will the devolution of the Savior State. The Savior State is like oil--both are at their peaks and are starting their inevitable slide down the S-curve. The world they created was not as positive for human fulfillment and happiness as we have been told.

Indeed, study after study has found that people with the basics for life, a higher purpose that requires sacrifice and a tight-knit community are far and away happier than isolated, atomized, insecure consumers, regardless of their wealth and consumption.

This potential to re-humanize our economy is why I am hopeful."

Friday, December 21, 2012

Fed. Spending: Even Cavemen Could Understand

Obama and the Democrats continue to ignore spending "cuts" in the current budget debate related to avoiding the "fiscal cliff".   (Remember "cuts" in Washington are only reductions in "planned increases").

President Obama's proposed tax increases on the top 2% of earners would fund the federal government for about eight days.

Democrats are exceedingly unserious about addressing the most serious budgetary issue of the day: spending.   Pretty much every serious person in this nation admits that entitlement spending trajectory now and in the future is unsustainable.  But you can see below, that's it's not only entitlement spending that's out of control.  It's virtually every major budget category that is out of control!

There continues to be no adult in charge in Washington.  Obama is not, and never has been, up to the task of leading the nation, tackling any serious problem, nor negotiating with anybody.  Pro-growth policies are the only way out of our budget morass.

Mike Shedlock at Global Economic Analysis has done a great job at summarizing the latest decade of government spending increases.   We may have a temporary revenue problem due to the "great recession" of the past few years, but we have a worse spending problem.   Here's his accounting of spending by various government departments

Here's a handy table from his latest blog:  Congressional Spending Problem in Easy To Understand Format:

Department20002012 estimatePercentage Increase
Legislative Branch2,8715,25382.97
Judicial Branch4,0577,58186.86
Department of Agriculture75,071150,680100.72
Department of Commerce7,78811,32645.43
Department of Defense--Military Programs281,028688,254144.91
Department of Education33,47698,467194.14
Department of Energy14,97138,998160.49
Department of Health and Human Services382,311871,836128.04
Department of Homeland Security13,15960,443359.33
Department of Housing and Urban Development30,78156,78884.49
Department of the Interior7,99811,24140.55
Department of Justice16,84634,556105.13
Department of Labor31,873127,157298.95
Department of State6,68729,937347.69
Department of Transportation41,55584,135102.47
Department of the Treasury390,524579,61848.42
Department of Veterans Affairs47,044129,186174.61
Corps of Engineers--Civil Works4,2299,184117.17
Other Defense Civil Programs32,80151,99158.50
Environmental Protection Agency7,2239,35229.48
Executive Office of the President28341446.29
General Services Administration741,0831363.51
International Assistance Programs12,08725,554111.42
National Aeronautics and Space Administration13,42817,63731.34
National Science Foundation3,4488,281140.17
Office of Personnel Management48,65587,46279.76
Small Business Administration-4213,157
Social Security Administration (On-Budget)45,121188,552317.88
Social Security Administration (Off-Budget)396,169638,50961.17
Other Independent Agencies (On-Budget)8,80353,199504.33
Other Independent Agencies (Off-Budget)2,029-5,120
Undistributed Offsetting Receipts-173,019-279,28961.42
Total outlays1,788,9503,795,547112.17

Mike summarizes the situation for Defense, Medicare and Medicaid:

Medicare 2000: 200,588
Medicare 2012: 480,202

Medicaid 2000: 117,744
Medicaid 2012: 283,597

Medicare spending is up 139%
Medicaid spending is up 140%

When you add up Homeland Security, Defense and Veteran's Affairs here's the tally:

2000 Total (281,028 + 13,159 + 47,044) = 341,231
2012 Total (688,254 + 60,443 + 129,186) = 877,883
Defense Spending Percentage Increased 157%

From Senator Rand Paul, (R, KY), says in a recent article regarding the fiscal cliff 'discussions',
Is it any wonder people are fed up with their government? The president announces we have no time for spending reforms, but when the deadline passes I predict not one committee will step into the breach to begin the process of reform.
Why? Because Democratic leadership still insists that Social Security and Medicare are just fine. Meanwhile, Social Security actuaries tell us that Social Security this year will spend $165 billion more than it receives. Medicare will spend $3 for every $1 it collects. Yet, the president says he doesn't have time for entitlement reform.
Rolling Back Federal Spending to 2008 Levels Balances Today's Budget

From the same article from Rand Paul,
Estimated revenue for 2013 is $2.9 trillion if the Bush tax cuts expire. Our 2012 revenues were $2.4 trillion, which included all of the Bush tax cut regime. The Bush tax cuts would only make a difference of $500 billion this year — about one third of our entire deficit — but would also further harm our economy due to the job market decline that always accompanies any rise in taxes. History has proved this point time and again.
But if we spent only at 2008 levels combined with the revenues of 2012, next year we would have a deficit as small as $89 billion. An $89 billion deficit would represent less than 1% of GDP. The 2012 deficit was as high as 7.3% of GDP.
Can it be any clearer??   Even a caveman could understand it.  Why aren't the politicians in Washington doing anything about the SPENDING problem??

Friday, December 14, 2012

Fiscal Treadmill To Hell

US Budget Deficit Increases Again
News out yesterday (12th December '12) that the US ran up a budget deficit of $292 billion in the first two months of fiscal 2013---up from  $236 billion from a year ago.   So, get ready for another $1 Trillion budget deficit next year.   Tax revenues are rising but spending is rising faster.  From AP,
With the economy and hiring improving a bit, the government is receiving more tax receipts. Overall tax revenue rose 10 percent in the first two months of the budget year to $346 billion. But spending has risen faster, up $87 billion or 16 percent.
Obama wants Tax AND Spending Increases
Bad news from the fiscal cliff discussions is that Obama is not interested at all in spending cuts.  In fact, he wants tax AND spending increases going forward.   Obama is a "tax and spend" Democrat on steroids.  I wonder if some in his party are getting nervous?  I think they should be.

Democrats Loving the Bush Tax Cuts
Another stunning "flip-flop" from the Obama camp is how much they love the Bush tax cuts, so much that they want to extend them for 98% of tax payers.  Obama is now saying that it's the Republicans who want to raise their taxes!!   What an asshole!   Obama, in his typical intellectual incoherence, agrees that if income taxes go up that it would hurt the economy.  So, increasing taxes on the top 2% won't hurt the economy?   You can't have it both ways.  The truth is that increased taxes are always a "brake" on the economy.  If the economy is very strong, the drag may be welcome in the same way the Fed raises interest rates in a strong economy:  to dampen the 'enthusiasm.'  But increasing taxes in a weak economy is risky---even when the tax increase in on the top 2%.

The Federal Reserve Now Monetizing $1 Trillion per Year
And what's worse news for the long term health of the US economy is that the Federal Reserve announced that it will be buying a total of $85 billion per month of bonds.  Notice that, at this rate, the Federal Reserve will be monetizing $1 Trillion or buying bonds nearly equal to the entire year's deficit.    So, we've arrived at the end of the world as we know it when one arm of the Federal government, prints money out of thin air to buy $1 Trillion of debt--almost equal to the annual amount of out-of-control Federal spending.  Ladies and Gentlement, this is called "debt monetization."  This is the stuff of the great hyperinflationary episodes in world history.

The Fed is now the "great facilitator" or "co-dependent" of a dysfunctional Congress supporting extreme levels of government deficit spending.  In doing so, it prevents any pressure to Congress to reform spending and especially entitlement spending.  It's a $1 Trillion stimulus package every year (not really as only sudden increases or decreases in gov't spending will impact GDP).

Since, in the US, this newly created money doesn't go into circulation until it's loaned out, there has been no big inflation event yet.  It doesn't appear that it's going to happen anytime soon.  But this is a dangerous game the Fed Reserve is playing---a game that's never been played before in this country but a game that's ended in disaster historically.

Keynesian Boobs Like Krugman Want Even More Spending
People like Paul Krugman say that we must spend even more!  To him, I ask: "on what exactly?"  Traditionally, the answer is often another war!  That is not a good answer.

We saw what a joke the so-called 2009 "stimulus" was!  A paltry 5% of the money went to 'infrastructure' projects and the money is still not spent.  Deficit spending and "stimulus" didn't work in the 1930s, it hasn't worked since 2009, and it hasn't worked in modern day Japan for the past 20 years.  Japan is on stimulus #20 and government debt of over 229% of it's GDP and something like 20 times their annual tax revenues.  This means that this debt can never be paid back!

Imagine if we took Krugman's advice and pissed-away even more money.  Since there is NEVER any cuts in government spending, can you imagine our nation running routine government deficits of $1.5 trillion or $2 Trillion?   Can you imagine how much worse---even calamitous---such spending would increase during a recession?   Or worse, if that spending had to be suddenly reduced due to "unfavorable market conditions?"

Add Krugman, Bernanke and Obama to the list of "intelligent" idiots---the worst kind of idiot.

There Can Never Be Any Fiscal or Monetary Discipline Again
As debt piles up for the Federal Government, it will be difficult to raise interest rates when inflation rises further (inflation is already 2% with 0% interest rates--rates should be 2 or 2.5% now!).   Why?  Because the increase of interest payments on outstanding debt will increasingly blow a hole in the budget.  We're already spending some $360 billion in interest payments with interest rates at zero percent!

When you have $16 Trillion, soon to be $20 Trillion, in outstanding debt, a 1% rise in interest rates equates to $200 billion increase in interest payments.   If inflation pops up to 3%, the Fed can no longer raise interest rates to 3 or 3 1/2% (which would raise longer term debt rates to 4 or 5%).   The increase of rates by 3% equates to $600 billion INCREASE in interest payments portion of the budget (or about the same as current US defense budget).  That's on top of $360 billion in interest today.

It will be difficult for the Federal Reserve to fight inflation in the future--especially if it's "stagflation" where inflation is rising in a slack economy.  Not only will interest payments crowd out other government spending, but there will be pressure to increase entitlement spending for the next 40 years.  The budget will never again be balanced.

Can you see a vicious circle here? Budgets can never be balanced, inflation can't be fought. I call it a treadmill to hell.

Wednesday, December 12, 2012

America Needs More Qualified Immigration!

Michael Bloomberg, mayor of New York City, Mort Zuckerman, Chairman of Daily News and Eric Schmidt of Google attended a recent "STEM in the City" conference in New York recently to discuss ways of improving education and employment in Science, Technology, Engineering and Math (STEM) disciplines.

Mayor Bloomberg said on December 6th:
“In the United States today, about 50% of the doctoral degrees granted in mathematics, physics and computer science computational sciences in general, go to foreign-born students that are here on temporary work visas.
About the same number of people leave the United States — leave unwillingly because their time has run out. And unless we think about this human capital that we are losing, we are just in dire straits.”
Bloomberg called on voters to “stand up and fight against those who would close our borders” and harm the nation’s future.
The mayor has advocated loosening U.S. immigration rules for years and called on the two presidential candidates to tackle the issue during the 2012 race.
He threw his support behind the STEM Jobs Act in November, which would set aside 55,000 green cards for foreign-born grads of American universities who have earned advanced degrees in STEM fields.
The House of Representatives voted to approve the Republican-backed bill on Nov. 30, but it faces an uphill battle in the Democratic-controlled Senate.
Mortimer Zuckerman also commented that high tech immigrant quotas are stuck in post-tech bubble levels and are hurting the country.
Zuckerman, saying that when he met with President Obama at the start of his first term, one of the things he asked for was 195,000 visas for foreign grad students in high-tech fields — a number that was reduced to 65,000 after the dot-com bubble burst in 2000. [Did Obama ever do anything about that?  What do you think?  Forget about it!]
“This is one of the simple areas where we could make such a huge difference because it is critical to everything that we’re doing, and these jobs create more jobs,” he said.
It’s a message that resonated in the room.
Eric Schmidt, Chairman of Google and IBM President Stanley Litow added:
“I think we are underselling the importance of this,” said Google Chairman Eric Schmidt, of STEM education. “This solves all the problems in America.”
The business, education and technology leaders in attendance agreed that “a massive overhaul” of the schools in New York and around the nation would secure the country’s future.
IBM Vice President Stanley Litow, who helped create the city’s innovative Pathways in Technology Early College High School, a six-year program where students earn associate degrees in STEM, said that partnerships between industry and education are key to that effort.
“Businesses desperately need people with the kinds of skills that are coming out of a program like this,” said Litow. “Does this model work for other districts and schools around the country? Absolutely, it does.”
Obviously the nation needs more dedicated people who clearly see the way forward; people like Mayor Bloomberg, Mort Zuckerman, Eric Schmidt and Stanley Litow.  That Congress and the President have done during the past 4 years is a sorry excuse for governance.

Better technical education is key, but we need the students interested in Math, Science, Biology, Chemistry, all types of Engineering.  I don't think America has enough young students interested in these subjects.  

The answer:  more immigration!

In my blog "Medicare and Medicaid Enrollees Exceed Full-Time Workers"  I argue that we're running out of taxpayers to pay for retirement and entitlement programs for the retiring baby boomers.  The situation gets nothing but worse as unfavorable demographics will cause beneficiaries to grow quickly relative to those working and paying taxes.

We need immigrants with skills to fill high tech jobs and to start families here.  In this way, they will buy or occupy housing, furnish homes by buying furniture and appliances and pay taxes.

In the 4th of a 4 part Mega-blog series on Solving America's Problems, I argue that immigration could be helpful to overcome demographic "drag"on the economy and "mop-up" excessive housing supply:  I recommend to take the following steps:
  1. Expand immigration from developed and developing areas of the world (from Asia and China) and much less from 3rd World Nationalities.
  2. Invite foreign graduate students, master's and doctoral candidates, to immigration interviews.
  3. Target highly skilled immigrants using a point system like Canada.
  4. Offer visas to foreigners who buy used homes in the US (to mop up oversupply).

Higher Death Tax to Feed Federal Gov't 'Monster'

From Washington Examiner on December 11, 2012
New legislation that jumps the death tax to 55 percent of estates exceeding $1 million threatens 526,421 family farms, of about 25 percent of all farms in America, according to a Senate analysis.
According to the analysis from the Senate Republican Policy Committee, chaired by Wyoming's John Barrasso:
 If President Obama and Senate Democrats do not act [to stop this new tax], the federal government will begin taking more than half the value of family farm estates exceeding $1 million beginning next year. This summer, Majority Leader Harry Reid and Senate Democrats passed legislation (S.3412) on a party-line vote that allows Washington to take up to 55 percent, a huge increase over today's top rate of 35 percent, and drop the tax's exemption from $5.1 million to $1 million. The lower exemption -- combined with soaring farm real estate values -- could put more than 420,000 additional farm estates at risk from the death tax.
Farm values are largely tied up in non-liquid assets like land, buildings, and livestock. Many farm and ranch families would be forced to sell their assets to satisfy Washington Democrats' insatiable appetite for tax money. Up to 24 percent of America's farm and ranch families could be forced to hand over a large chunk of their heritage to the Internal Revenue Service when a family member dies. This would economically devastate rural communities.
Welcome to the heavy-handed and confiscatory nature of the Federal Government.  I've said it again and again that Big Government is a threat to your liberty!   It doesn't happen all at once, but one step at a time. First ObamaCare ruins the medical business by driving doctors out of the business and driving up costs, then inheritance taxes rise.  Next up:  Cap and Trade which is about taxing and not about warming. 

Higher death tax will also affect small business creation. One of the reasons that individuals and families create a business is in the hope that it provides a livelihood for the next generation. That can't happen when you have to sell the business to pay the confiscatory 55% tax.  Potential entrepreneurs will already pay over 50% of tax to the government (including FICA and Medicare taxes) and now anything that they create must likely be liquidated to pay the inheritance tax.   Some will say "why bother?"  I don't blame them.

Remember, if you have a significant net worth, it's done after tax: after income tax, after sales tax, after dividend and interest taxes.  Then after you die, you have to pay 55%??    Of course, this will force entrepeneur's to do something to avoid the tax.   They will find a way.  

Wednesday, December 5, 2012

Reid Blocks Vote On Obama Deficit Reduction Plan

From The Hill

"Senate Minority Leader Mitch McConnell (R-Ky.) on Wednesday offered an amendment to force a vote on President Obama’s deficit-reduction plan, but Senate Majority Leader Harry Reid (D-Nev.) was having none of it.

“Last week [Treasury] Secretary [Timothy] Geithner brought up a proposal that was so unserious,” McConnell said on the floor, “I would like to see if my Democratic friends would like to support it.”

McConnell suggested that the Senate vote on what he called the president’s “ridiculous” plan as an amendment to the Russian trade bill that is being considered.

Reid, however, objected to McConnell’s suggestion, saying the Russian trade bill, H.R. 6156, is about job creation, not political stunts from Republicans. McConnell added that he'd be happy to have a stand-alone vote on the president's plan rather than attaching it to legislation as an amendment.

“The purpose of this bill is to protect American jobs,” Reid said. “Are we going to get serious here and legislate or is this more of the political stunts that the Republican leader is going to pull today?”

The majority leader's objection removes the amendment from consideration.

McConnell said he wasn’t surprised Democrats didn’t want to vote on Obama’s plan, which he said raises taxes on small businesses.

“Not a single Senate Democrat has stepped forward to support it, and if you look at it you can see why,” McConnell said. “It increases taxes.”

Obama’s plan, released last week, calls for $1.6 trillion in tax increases and $400 billion in cuts to entitlement programs, plus a new $50 billion stimulus plan. Democrats want to raise taxes on those making more than $250,000 a year. The plan would also allow the president to raise the debt ceiling without action from Congress, something lawmakers heavily oppose."

Hall of Shame: Liars In Government

A good example why the US nation is in trouble is when so many politicians are liars and/or economic illiterates.  That and the public is as illiterate or worse.  In my recent post correctly calling the Social Security Trust Fund a myth, it's amazing the confusion created by politicians about a relatively simple matter.

The trust fund "balance" of $2.6 Trillion that's supposed to "last" until 2032 is an unfunded liability to the US Government.

As I said in my blog, the Social Security Trust Fund holds special issued Treasury Bonds.  But these bonds are just obligations to pay from one branch of the government to another. The money has been spent long ago!  When cash goes out to beneficiaries, since there are no cash assets in the "trust fund", the US Treasury must sell bonds to generate the cash (when the gov't is in a budget deficit condition).   This is technical discussion since the government will continue to pay these benefits.  No one would be silly enough to argue that.  But for the bottom line: social security is adding to the deficit now and as far as one can see into the future.  So all of the Politicians that put Social Security reform "off limits" during budget negotiations are liars and/or incompetent.

Here's the increases in future budget deficits from Social Security:
The confusion comes because, if you or I hold Treasury bonds or notes in our portfolio at Fidelity or Etrade, it is an asset.   That's because we exchanged cash to buy bonds as an investment.  We receive cash when we receive interest payments.

But when the government holds a Treasury bond, it remains a liability; an obligation to pay.  When it comes time to pay or redeem those bonds, the government has to come up with cash money to pay out and must do so by raising revenues by current budget taxation or by issuing debt (unless the government is running a surplus).   As I've said before, how rich are you if you owe yourself $1 million??   Not very.

You Should Know Who's Lying

Feb. 20, 2011: Sen. Richard Durbin of Illinois, on NBC’s “Meet the Press”: Durbin: "Social Security does not add one penny to the deficit . Social Security untouched will make every promised payment for more than 25 years."

Feb. 20, 2011: Sen. Chuck Schumer of New York, on CNN’s “State of the Union” with Candy Crowley: Schumer: "Social Security, however, does not contribute one penny to the deficit and won’t until 2037."

Feb. 16, Senate Majority Leader Harry Reid of Nevada: Reid: "Social Security has contributed not a single penny to the deficit. So we can talk about entitlements as long as you eliminate Social Security. . . . Social Security is not part of the problem we have in America with the deficit."

[From Forbes] President Obama’s budget director, Jacob Lew, explained all this last February 2011 in USA Today:    “Social Security benefits are entirely self-financing. They are paid for with payroll taxes collected from workers and their employers throughout their careers. These taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. … Even though Social Security began collecting less in taxes than it paid in benefits in 2010, the trust fund will continue to accrue interest and grow until 2025, and will have adequate resources to pay full benefits for the next 26 years.”

All misleading statements!!!  You cannot trust these people in any way!

Hall of Shame

Senator Charles Schumer,
Senator Richard Durbin
Senate Majority Leader Harry Reid-nincompoop-in-chief
W.H. Management and Budget director (and nincompoop), Jacob Lew- serving as Budget director with no serious budget in 4 years.  Now, he's rumored to be Obama's Chief of Staff.  Wonderful!

Who Said It?

Who said it?   From ZeroHedge and a speech given by a certain legislator in March 2006:

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

Over the past 5 years[from 2001 to 2006], our federal debt has increased by $3.5 trillion to $8.6 trillion. That is “trillion” with a “T.”
 That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.

Numbers that large are sometimes hard to understand. Some people may wonder why they matter. Here is why: This year, the Federal Government will spend $220 billion on interest. That is more money to pay interest on our national debt than we’ll spend on Medicaid and the State Children’s Health Insurance Program. That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined. ...

And the cost of our debt is one of the fastest growing expenses in the Federal budget. This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on.

Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities.

This same person is now demanding more spending despite a $1.2 Trillion budget "hole", increased taxes in a still-weak economy, and worse still:  the right to ignore any federal debt limit at all!   Oh, and vilify and punish  anyone who calls for fiscal sanity.

Checks and balances are so inconvenient!

Monday, December 3, 2012

Palestinians: Epic Failure Explained

What follows is a brilliant explanation of everything you need to know about the so-called "Palestinian problem."  From Lea Labi, who is an Aunt of my friend Ami.  She lives in Israel: 
"The Palestinian celebrations over their being awarded Observer status at the UN, are misplaced. Exactly 65 years ago, to the day, the UN resolved to create a Palestinian state alongside the State of Israel. Israel immediately got down to the work of building a state: absorbing millions of refugees; fighting several unwanted wars for her very existence; developing cutting-edge science, technology, military, agriculture and medicine. We've made the desert bloom and sprouted cities where there was once only desolate sand dunes, and created one of the leading economies of the twenty first century;

And what did the Palestinians do? They've spent the last six-and-a-half decades stewing in hatred, blaming Israel for all their self-made troubles. They nurtured a society based on the cult of death, terror and violence - defining themselves solely by their unrelenting and vicious hatred of Israel, which has become their raison d'etre. Despite hundreds of billions of aid dollars from the UN [and Europe], they have not managed to produce anything of value. Their main contribution to the world: terrorism, rockets and suicide bombers. And perpetual victimhood.
Palestinians could have had all that Israel has, and more. They could have built a prosperous and productive society rather than their current cesspit of poverty, hate and violence - for which they obviously blame Israel. What makes them think that the (supposed) upgrade to "observer status" will change anything in their national or individual DNA? Will this change their ideology of hatred and destruction and alter the trajectory of their failed society? Palestinians should be mourning their missed chances and getting down to the very real and hard work of building a state and country, if that is what they want."
The root problem is Islam itself.   It's an ideology of hate and retribution and authoritarianism. Islam is NOT a religion of peace hijacked by a few misguided individuals, it is the world’s largest and most intolerant cult bent on global domination.

The Palestinians, true to this description, have had several opportunities over the years to make peace and to have a nation but each time their failed leadership chose continued Jihad.  Why?  In part, because it pays!  There's big money in "victim-hood!"   Also, they will not give up to their war against the Jews dating back over 100 years (See my Blog "Palestinians: 100+ Years Of Hatred") nor acknowledge Israel's right to exist.  On any fine morning in the past 65 years, the Palestinians could have decided to wake up, give up their hatred and work with Israeli people and benefit from the only democratic and prosperous economy in the region.  

Their financial supporters, the UN and Europe, have paid up, prolonged the misery and prevented the 'pressure' that would have long ago forced the Palestinians to finally give up and work with Israel in a productive way.  Instead, the Palestinian Authority steals billions of dollars, squirrels it away in Swiss Bank accounts for corrupted officials and lets the people live in enough misery to keep 'Jihad' alive.