Questions and Observations

Free Markets, Free People

Podcast for 01 Nov 09

In this podcast, Bruce, Michael and Dale discuss the state of the economy, and the health care bill that came to the house floor this week.

The direct link to the podcast can be found at BlogtalkRadio.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

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BlogTalk Radio – 8pm (EST)

Call in number: (718) 664-9614

Yes, friends, it is a call-in show, so do call in.

Subject(s):Economy (is the recession over?), health care math, NY-23 (what does it mean if anything?), California (no interest loans to the state from worker’s paychecks), Afghanistan (is the decision again delayed?), Honduras, etc.]

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A hypothetical for QandO readers

From a short post about The Wire by Jonah Goldberg at The Corner:

A lot of conservatives today are too quick to think that because liberals have some affinity for Marxist sentiments that they are actual Marxists. Liberals often make the same mistakes as Marxists, but they’re not Marxists.

I suppose this is true, but it got me to wondering. So I have a question for QandO readers.

Suppose, completely hypothetically, that Obama were a hard-core Marxist who wanted to go in the direction of Marxist programs as quickly as the system in place in this country allowed him to move.

Looking at his history in office so far, do you think there are any decisions that the hypothetical Obama-the-Marxist would obviously have made differently than the real Obama? If so, which ones?

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Don’t Tell Anyone, But The Recession Is Still With Us

Despite all the happy talk from the administration and the lap-dog press eagerly parroting the “good news” that the recession is over, the numbers just don’t support the talking point.  Liam Halligan delivers the news:

So I was pleased last week when I heard that, after four successive quarters of contraction, America’s economy grew by an impressive 3.5pc between July and September, compared to the quarter before. “The US is out of recession” numerous newspaper headlines screamed. No wonder share prices surged.

As ever, the numbers warrant a closer look. For one thing, this is annualised data. So the US economy actually expanded by only 0.9pc during the third quarter – a fact most newspaper reports ignored. What growth we did see resulted from a 3.4pc annualised rise in US consumption between July and September, which was in turn caused by a 22.3pc spike in spending on consumer durables.

As mentioned here that “spike” was driven by “cash for clunkers” and the $8,000 first time homeowners tax exemption. Halligan agrees. It wasn’t a trend, it was exactly what Halligan reported – a spike. So digging into it, what are the real numbers?

In other words, this latest US growth spasm stemmed from one-off government “giveaways” – with the public only able to take advantage of such gimmicks by going deeper into debt. The rise in US consumption coincided with a 3.4pc fall in household disposable income and a plunging savings rate too. With government and household debt spiralling anew, America’s so-called “return to growth” is nothing but a return to higher leverage. [emphasis mine]

Not quite what the administration cracked it up to be, is it? And Halligan reminds us:

Over the last 40 years, all US slumps have been interrupted by at least one quarter of positive growth, followed by a renewed downturn.

Of course, with an administration desperate for any good news, ignoring history is to be expected. After all, they’re quite the masters at ignoring the laws of economics and expecting results which run counter to them, aren’t they? Why shouldn’t they believe that one quarter of government give-aways equals pulling out of the recession? Can’t wait to hear the excuses when we’re back in the negative GDP growth trend next quarter. And you can also expect to hear the inevitable cries for a second stimulus (Porkulus II) crescendo.

~McQ

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California – “We Need The Money More Than You”

Who was it who said “the government powerful enough to give you things is powerful enough to take things away”?

Well that has never been more true than in California where the state has decided to arbitrarily increase withholding by 10% because it couldn’t manage its debt. IOW, Californians take less home so the state can pay its debt:

Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.

Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.

You’ll get a “larger” refund if the state has the money to pay refunds. Weren’t they issuing IOUs not long ago?  But that’s not the point. The state has just made it clear that it has first claim on what Californians earn. If that doesn’t scare the bejesus out of them, I’m not sure what will.

And if that doesn’t increase the emigration to less oppressive climes I’m not sure what would.

~McQ

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How To Make $1.5 Trillion Look Like $894 Billion

Actually, it isn’t that hard.  And the Democrats demonstrate how to do it in the House Health Care bill. James C. Capretta explains:

For starters, the gross cost of expanded Medicaid coverage and a new entitlement to subsidies for health insurance is much higher than Democrats are suggesting, according to the cost estimate released yesterday by the Congressional Budget Office (CBO). The Democrats report a lower number by netting out the taxes some individuals pay when they don’t enroll in insurance as well as the tax payments from employers who choose to “pay” rather than “play.” But that accounting confuses tax increases with spending reduction. The gross spending increase from the entitlement expansions in the revised House bill is $1.055 trillion over ten years, not $894 billion.

Remember, this is about what it will cost taxpayers. And netting out those who “pay” doesn’t lessen the cost or necessarily mean the revenue collected will go toward paying for this expanded health care.

Secondly:

In addition, as I noted previously, House Democrats have conveniently decided to take the so-called “doc fix” out of the larger health-care bill and pass it as a standalone measure, at a cost of $250 billion over ten years. The House health-care bill is bursting with other Medicare-related provisions. What could possibly justify separate accounting for the physician fee fix? In fact, there is no justification, other than budgetary smoke and mirrors. House leaders are splitting the costs of their scheme into two bills and pretending that this maneuver somehow brings down the overall cost to taxpayers. It doesn’t. In reality, House Democrats are still planning to spend $250 billion on Medicare physician fees, and that should be made clear in any honest accounting of what’s afoot here.

So a quarter of a trillion dollars in cost is going to be excluded from the pending health care bill and passed separately. This defines the terms “smoke and mirrors” when it comes to the real cost of this “reform”. And you can count on Democrats using every little procedural and legislative trick in the book to make this appear to be something it isn’t from a cost stand point – as demonstrated by this particular exclusion from the larger bill.  This is, along with global warming, is one of the biggest con jobs ever foisted upon a people.

Finally, there’s the other spending in the health-care plan. There’s loads of it. Higher Medicaid matching funds to buy off selected governors. A new program aimed at encouraging more physicians to enter primary care. Prevention spending. And apparently just about anything else House Democrats could think of to spend taxpayers’ money on. When it’s all racked up, these programs cost $230 billion over a decade. And that’s not even including the extra spending on Medicare drug coverage, which is obscured in CBO’s accounting by provisions which allow the government to set payment rates for certain products.

The 900 billion that President Obama set as an upper limit that would not add a “dime to the deficit” isn’t even close to being met. The cost curve and the deficit curve, as demonstrated above, will definitely go up. But there’s political cover here because the CBO has scored this bill under the 900 billion “won’t add to the deficit” threshold. Of course the CBO can’t score a separate bill that hasn’t been written yet (“doc fix”) nor can it add it to the bill it just scored. And, of course, the CBO estimate for 10 years assumes the legislation will be enacted precisely as it is written and remain unchanged for those 10 years – and we know that won’t happen as well.

But that won’t stop Obama and the Dems from claiming they’ve met the goal of not adding to the deficit when this monstrosity passes. Just hide and watch.

And they’ll also claim they have the revenue to pay for all of this:

On the tax side, Democrats are planning to saddle those with incomes exceeding $500,000 per year with a new 5.4 percent surtax. That would raise $461 billion over a decade, according to the Joint Tax Committee. But there’s also the penalty tax imposed on individuals who don’t sign up for health insurance. That raises $33 billion There’s also the employer “pay or play” mandate, which brings in $135 billion. And finally, there are the taxes on medical device manufacturers and many others. These provisions raise an additional $100 billion over a decade. All in, therefore, House Democrats want to raise taxes on Americans by $725 billion over the period 2010 to 2019 to partially pay for their health-care scheme.

Again, the assumption is that all of these will remain constant revenue streams. Of course, they won’t. The rich will find a way to avoid the tax eventually as will individuals taxed for not getting insurance. And employers will certainly find a way to avoid the penalty of “pay or play”. Plus, I’d be willing to bet that medical device manufactures and other providers will eventually be exempted from their tax when a outcry is heard from those who benefit from their products that the cost is too high. While these revenue streams won’t dry up, common sense says they will be vastly reduced.

And that leave them with what? It leaves them with little choice but to do what everyone has said they’ll be forced to do:

The Democrats close the remaining gap (excluding the physician fee spending) by cutting Medicare and Medicaid spending by about $550 billion over ten years and starting up a new, budget-busting long-term care program that brings in $72 billion in excess premiums in its early years.

The plan is $550 billion in cuts over 10 years. The reality, because the other revenue streams will begin to dry up, will be much higher.

That reality will eventually mean what as costs spiral upward alarmingly?

Rationing.

And who stands the biggest chance of becoming the victim of that rationing?

Those who use the most health care.

And as a demographic, who are they?

The elderly.

“Death panels” anyone?

~McQ

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How Out Of Touch Is The GOP?

Maybe a better question is “how far out of touch is the RNC” since Dede Scozzafava was their candidate?

Dede Scozzafava, the Republican and Independence parties candidate, announced Saturday that she is suspending her campaign for the 23rd Congressional District and releasing all her supporters.

[…]

Ms. Scozzafava told the Watertown Daily Times that Siena Research Institute poll numbers show her too far behind to catch up – and she lacks enough money to spend on advertising in the last three days to make a difference. Mr. Owens has support from 36 percent of likely voters in the poll, with Mr. Hoffman garnering 35 percent support. Ms. Scozzafava has support from 20 percent of those polled.

Now I have no idea if that means Mr. Hoffman will win (if the 20% Ms. Scozzafava had were really GOP supporters then he should win in a walk – but given Scozzafava’s more liberal leanings on many issues such as card check that’s a toss up), but what this indicates is the rank-and-file GOP voters aren’t at all satisfied with the RNC’s strategy or choices (as an aside, the fact that Scozzavafa hasn’t enough money left to spend on advertising says, at least, that the RNC knows it was supporting a loser). It seems to me to be a pretty in-your-face repudiation of this “big tent” theory of theirs which says “we’ll compromise our principles to boost our numbers”. Instead they seem to favor the “here’s our tent, if you like what we stand for, you’re welcome to come in” approach.

It’ll be interesting to see how the RNC and the establishment GOP types react to this mini-revolution. Given their tone-deafness of the past, they’ll ignore it and pay the consequences in 2010. But I see that as a very, very interesting turn of events.

~McQ

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Travesty In Honduras

There were so many ways to get this right, and one clear to way to completely blow it. The Obama administration chose to blow it, and to blow it big, by embracing an imbalanced dictator-wannabe whose efforts are supported by the worst offenders of representative democracy and individual freedom in the region:

Zelaya prodly shows off his tinfoil curtains to US Assistant Secretary of State Thomas Shannon

Zelaya prodly shows off his tinfoil curtains to US Assistant Secretary of State Thomas Shannon

The interim leader of Honduras says he is ready to sign a pact to end its crisis which could include the return of ousted President Manuel Zelaya.

Roberto Micheletti said the agreement would create a power-sharing government and require both sides to recognise the result of November’s presidential poll.

Mr Zelaya said the deal, which requires the approval of the Supreme Court and Congress, would be signed on Friday.

The opponents had earlier been told by US Assistant Secretary of State Thomas Shannon that they had to reach an accord in order to ensure international support for the election on 29 November.

Afterwards, Mr Micheletti announced that a power-sharing deal had been reached that included a “significant concession”.

“I have authorised my negotiating team to sign a deal that marks the beginning of the end of the country’s political situation,” the interim leader told a news conference.

“With regard to the most contentious subject in the deal, the possible restitution of Zelaya to the presidency” would be included, he said.

Mr Zelaya described the accord as a “triumph for Honduran democracy”, and said he was “optimistic” of returning to power.

Fausta calls the above analysis “tactful” and translates the local press reaction as “Micheletti caves under US pressure and agrees to Zelaya’s return” and lists the following terms of the deal:

Noticias 24 lists the main points of the agreement (my translation: if you use this translation please credit me and link to this post):

1. The creation of a reconciliation government.
2. Rejection of political amnesty.
3. Recognition of the November 29 elections.
4. Transferring control of the Armed Forces from the Executive to the Supreme Electoral Tribunal.
5. Creating a verification commission to enforce compliance with the agreement.
6. Creating a truth commission to investigate the events before, during and after June 28, the date of Zelaya’s removal.
7. Requesting that the international community end all sanctions against Honduras and that they send in observers to the presidential election.
8. Supporting the proposal for a vote of the National Congress with the approval of the Supreme Court of Justice to reinstate all the Executive Power prior to June 28, that is, restoring Zelaya to power.

Although Zelaya’s restoration is largely symbolic (e.g. while he is returned to his office, the election in a few weeks will still occur, and the Supreme Court Electoral Tribunal [Thanks, La Gringa – ed.] now has power over the military instead of the President), the very fact that he is allowed to re-enter Honduras without being immediately arrested, much less that he will be able to call himself President once again, is perhaps the greatest shame of Barack Obama’s young presidency. Without Washington’s bullying of the duly constituted authorities in Honduras, the country would have been held up as an example of independent democracy done right, making a definable break with the banana republics of the past. Instead, the US entered the fray on the side of a criminal Chavista and used our considerable power to retard Honduras’ institutional growth.

There have been times in America’s past where the decision to throw our lot in with certain regimes was questionable at best. In the world of realpolitik, however, it is sometimes necessary to chose the least bad to defend against the infinitely worse. Much of our assistance and meddling in South and Central America, aimed at rebuffing the spread of communism, can be chalked up to that realpolitik. Yet never have we sided against the rule of law in order to defend the wishes of dictators. That is, until now.

Honduras will emerge from this escapade with its dignity and political institutions intact. Unfortunately, that will be despite our best efforts, not because of them.

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“Your Taxes Won’t Go Up By A Single Dime”

Wasn’t that the promise? Well Americans For Tax Reform have looked at the 1990 pages of the House monstrosity and found 13 taxes that will indeed raise yours by much more than a “dime” [HT: United Liberty].  Here are just three of them.  You can take a look at the entire list here. [pdf]

  • Employer Mandate Excise Tax (Page 275): If an employer does not pay 72.5 percent of a single employee’s health premium (65 percent of a family employee), the employer must pay an excise tax equal to 8 percent of average wages. Small employers (measured by payroll size) have smaller payroll tax rates of 0 percent (<$500,000), 2 percent ($500,000-$585,000), 4 percent ($585,000-$670,000), and 6 percent ($670,000-$750,000).
  • Medicine Cabinet Tax (Page 324): Non-prescription medications would no longer be able to be purchased from health savings accounts (HSAs), flexible spending accounts (FSAs), or health reimbursement arrangements (HRAs). Insulin excepted.
  • Individual Mandate Surtax (Page 296): If an individual fails to obtain qualifying coverage, he must pay an income surtax equal to the lesser of 2.5 percent of modified adjusted gross income (MAGI) or the average premium. MAGI adds back in the foreign earned income exclusion and municipal bond interest.

As everyone has been saying since the beginning of the debacle, there is no way this can be paid for without increasing taxes – and not just on the rich. Why that seems to fall on deaf ears in some circles remains a mystery to me. While the taxes may not effect everyone, they certainly effect a large portion of the public. For instance:

  • Excise Tax on Medical Devices (Page 339): Imposes a new excise tax on medical device manufacturers equal to 2.5 percent of the wholesale price. It excludes retail sales and unspecified medical devices sold to
    the general pulic.

Does anyone want to try to make the argument that the 2.5% tax at the wholesale level will be paid at that level and not passed on to the consumer? Yeah, I didn’t think so.

For the masochists out there, here’s the House bill, all 1990 pages of it in pdf form.  Make sure you consider the purpose: “To provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes.”

“… and for other purposes”. When you see that, you should know to grab your wallets and hold on tight.

~McQ

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CBO Says Public Option Would Cost More Than Private Insurance – Don’t Believe It

And the Politico presents that little nugget this way:

The public insurance option would typically charge higher premiums than private plans available in the exchange, according to the Congressional Budget Office analysis of the House bill.

That surprising conclusion raises doubts about Democratic promises that a government-run insurance plan would provide a lower-cost alternative to consumers. At the same time, it calls into question Republican charges that the plan amounts to government takeover of health insurance — because only 6 million people would enroll in the plan, according to the CBO.

Nonsense. As has been pointed out any number of times, it depends on how robust the public option is, how it is configured and whether or not it uses public money. If, for instance, it was structured as some would like – Medicare – there’s no question that what the GOP charges would be true. And, this is the House bill before the vote. What I think is may happen is this version of a “public option” may be in there as a place holder to get the bill passed out of the House with the idea that a more robust version will be added during the markup with the Senate version (assuming it gets passed). CBO has most likely scored this particular House version properly for now but don’t believe for a second that ends this.

In this fight, every trick in the book is being used, and if you believe this is the final version of the public option, I have some ocean front property in Kansas in which you may be interested.

This isn’t about a sales job, folks.  It’s about a con job.

~McQ

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