Friday, April 26, 2013

Ultimate Political Incorrectness: Black Americans Commit Majority Of Gun Murders

African American Black persons, mostly young black men, commit the majority (57%) of gun homicides.  They also commit over 52% of all homicides.  The sensational massacres, as horrific as they are, are much less than 1% of gun homicides.

Blacks make up 13% of the population (both sexes) but commit 57% of gun homicides.  It's even worse since it's more like 6.5% of the population (males) committing 57% of the gun homicides.  Where is this discussion in the media?  Where is the program or plan to alleviate this problem?

Political correctness prevents ANY discussion of this fact.  What IS our plan to address this problem?  What,we don't have one??  If you can't correctly name your problem, you will be unable to solve the problem.  This is the problem with political correctness.  \

Instead we focus on relatively few sensational massacres.  Yes, it's horrible that several hundred people have gotten "mowed down" by psychos in public settings at Sandy Hook and Colorado, but there are about 11,000 people murdered by guns (2010) each year and, on average, about 57% of those are committed by black persons (mostly black men).  This means that something like 6,300 murders per year are committed by black persons (mostly young black men)!  

The sensational massacres are "peanuts" compared to routine gun murders committed in mostly impoverished inner cities by black men. There's almost no comparison!  See the data below.

Here's the raw data below from the BJS (Bureau of Justice Statistics) on Table 7 (click as usual to enlarge):



There were about 11,000 deaths in 2010 due to guns.  There were about 16,000 homicides by all means. See data from the CDC here (on table 10).  Since we have 315 million persons, gun deaths are about 3.5 gun homicides per 100,000 persons.  For all homicides, the rate is about 5.3 total homocides per 100,000 persons.    From the BJS (page 11),  in 2008, the offending rate for blacks (24.7 offenders per 100,000) was 7 times higher than the rate for whites (3.4 offenders per 100,000).

On average, Blacks committed 52% of all murders, 57% of the gun murders and committed 66% of the drug related homicides (1980 to 2008)

It's Dangerous to be Black in this Country!

But when you talk of day-in and day-out gun violence and murder, it is blacks (and mostly black men) who are the number one cause of murders (all) at 52%.   And 90% of their victims are other black people.   It's dangerous to be black in this country!  But it's because of their own community!  

But due to our "political correctness problem", all of this can't be uttered much less discussed.  Instead we chase other rabbit tails that are relatively insignificant.

Other data from the BJS:

Figure 1:  Black Homicides are 8 Times Higher Than Whites 
(25 murders per 100,000 population for Blacks vs 3 murders per 100,000 population for Whites)
http://en.wikipedia.org/wiki/Crime_in_the_United_States


Figure 2:  Blacks Victimized 6 or 7 Times Higher Than Whites
The majority of murders are committed with guns of some sort.
Figure 3:  Gun Use Comprise Most Homicides  http://en.wikipedia.org/wiki/Gun_violence_in_the_United_States

Argentina Economic Minister: "I Want to Leave"



This guy looks like a deer caught in the headlights, doesn't he?  What got him so flustered?  It was plain and simple questions from a Greek reporter asking 1) what is the rate of inflation in Argentina? and 2) the IMF has threatened sanctions against Argentina because of fraudulent economic statistics, what are you going to do about that?

From The Telegraph:
"I have a very simple question for you, which seems very complicated these days: How much is Argentine inflation at this moment?" the female interviewer asked.
"Official statistics show month after month the inflation and this is the only inflation possible," the minister responded in Spanish.
"But, how much is it?" she insisted.
The journalist then noted that the IMF has warned that it will impose sanctions against Argentina for putting out false statistics. "What will you do about that?"
"I don't know, I don't know. Can we turn off the camera a moment? I want to leave," Mr Lorenzino said.
Off camera, Mr Lorenzino can also be heard to say: “Talking about inflation statistics in Argentina is complex.”

Thursday, April 25, 2013

Government Causing College Tuition Inflation

The main point of this post is that the government is primarily responsible for college tuition inflation over the past 14 years and has created a new bubble in college debt.  The reason?  The Federal government has explicitly backed and guaranteed a  flood of loans (easy money) from various institutions and has created a flood of money into for-profit educational businesses and both public and private schools pushing up prices.

Have a look at the following graph showing that college tuition has outpaced CPI inflation by a huge margin.

Figure 1
College Tuition and Fees Vs. Overall Inflation from 1985 thru 2011

What Has Caused This Surge In Tuition Cost?


Was there been a baby boom 18 to 20 years ago to create a demographic bulge of new college age people creating demand and cost pressure on this system?  The short answer is: a little bit but not enough to explain the surge in enrollment and tuition costs.  There has been a small baby boom of "millenials" or those babies born between 1980 to 2000 (also called Generation Y) who are the offspring of the original baby boomer who were born between 1945 and 1965.   You could call the millenial generation the "echo baby boom."

But this group of people, who are now of college age, is a small echo of the original baby boom. Have a look at the following graph of births per 1000 population from Wikipedia.  You can see that slight "bulge" in birthrates from 1980 to about 1992  is not enough to explain the tuition inflation "bubble."

Figure 2
Births per 1000 population from 1909 to 2009
So demographics doesn't explain it.  Does the recent recession and higher unemployment lead to more persons seeking a college degree?  I think the answer is yes but you can see from Figure 1 that the inflation rate of college tuition rocketed from 2001 and on, not after 2009.

The Real Reason For Tuition Inflation

From Inflation Data dot com, Gordon Wadsworth, who spent 19 years in college financial aid gives us the answer:
..the main reason tuition continues to rise is a dramatic change that took place regarding the Federal Stafford Loan more than a decade ago. When Uncle Sam opened the floodgates to government-backed student loans without parent income restrictions in 1992, colleges welcomed the news with open arms. The sudden injection of millions of additional aid dollars only furthered tuition increases. Add to that the government’s continued promotion of the Stafford Loan as a low-cost program, and you have the formula for hyper-inflationary costs.
When the government made it exceptionally easy for students to borrow massive amounts of money, the colleges followed the lead by increasing their tuition rates. This combination led to record-level borrowing. Today the average undergraduate student loan debt is nearing $20,000. Those who go on to graduate school often end up with an additional $30,000. Law and medical students report an average accumulated debt from all years (undergraduate and graduate study) of $91,700.

Student Loan Bubble and Upcoming Bailouts 

In my blog Student Loan Bubble and Bailout, I detail how the amount of college debt has risen dramatically since 2000 and now that debt has become unsustainable with rapidly rising default rates. This is a direct result of rising costs and a depletion of credit-worthy borrowers. There's no one credit-worthy left!

The amount of student debt outstanding is now $1 Trillion vs $250 billion just 10 years ago.  This flood of easy money is likely to end in another bubble bursting with more bad debt bailed-out by the Federal Government.

Remember, it was a flood of easy (under-priced) money caused the housing inflation and subsequent bubble with the government, including Fannie Mae and Freddie Mac and government tax incentive at the epicenter of that bubble. The collapse of that bubble created a huge crisis and surge in government deficit spending.

Expect More Crises

Expect more crises caused by clueless and/or disingenuous people in Congress.  It won't end until these people are voted out of office and the Federal Reserve is ended.  But that's another upcoming blog post.

Wednesday, April 24, 2013

Obama Deliberately Disrupting Air Travel

Obama is deliberately trying to amplify the effect of the ever-so-small sequester spending cuts. His strategy has been to portray small 4% spending cuts as "draconian," so his genius administrators and him have decided to maximize air traveler inconvenience and then blame it on the Republicans. I hope the public can see how despicable this is.  It also exposes how poorly the government is managed and argues loudly for less government, not more.

Obama is determined to "prove" that big government is better and that there is zero room for ANY spending cuts.

It's time to run this guy out of town on a rail.   Tar and feathers would be equally suitable.

Air travelers already pay the majority of the FAA budget through air fare fees, so the 'damage' should be limited, right?.   There's where you're wrong thanks to our affirmative action President!  People, you're getting what you deserve!  Here's the Wall Street Journal exposing the sorry state of affairs.
Flyers directly fund two-thirds of the FAA's budget through 17 airline taxes and fees—about 20% of the cost of a $300 domestic ticket, up from 7% in the 1970s. Yet now the White House wants to make this agency that can't deliver what passengers are supposedly paying for even more dysfunctional.
The sequester cuts about $637 million from the FAA, which is less than 4% of its $15.9 billion 2012 budget, and it limits the agency to what it spent in 2010. The White House decided to translate this 4% cut that it has the legal discretion to avoid into a 10% cut for air traffic controllers. Though controllers will be furloughed for one of every 10 working days, four of every 10 flights won't arrive on time.

It Gets Worse

From the same WSJ article,
Legally speaking, the sequester applies at a more general level known as "accounts." The air traffic account includes 15,000 controllers out of 31,000 employees. The White House could keep the controllers on duty simply by allocating more furlough days to these other non-essential workers.
...the FAA is even imposing the controller furlough on every airport equally, not prioritizing among the largest and busiest airports. San Francisco's Napa Valley airport with no commercial service will absorb the same proportion of the cuts as the central New York radar terminal, which covers La Guardia, JFK and Newark International, as well as MacArthur, Teterboro, New Haven, Republic and other regional fields.
Like most government work, productivity continues to decline. Staffing of air traffic controllers has remained the same but the number of flights have dropped 23% since the late 1990s, so there's an overstaffing issue and a PUBLIC UNION issue as well.

More Federal Government Incompetence

For more than a decade the FAA has promised to modernize and make the civil aviation system more efficient and reliable, but the only things it has reliably generated are delays or cost overruns or usually both. The project, known as NextGen, is four years off schedule with no end in sight.
The FAA's troubles are the result of bad management and a lack of oversight, according to multiple Department of Transportation Inspector General audits. A 2011 investigation found that one part of NextGen ran $330 million over budget—or half of the FAA sequester—and then the FAA paid the contractor responsible $150 million in bonuses that were supposed to be an incentive for making the budget targets. The overruns are now approaching $500 million, and that's merely one item.
This administration is a shining example of why the government deserves LESS of your tax dollars and LESS of a role in the economy not MORE as Obama and Democrats insist!  As as many functions of the Federal Government as possible should be devolved to The States because everything the Federal government touches is mismanaged to the Nth degree.  See How to Cut $450 Billion in Federal Spending.   See Healthcare Law Shows Obama's Inability to Govern.  

It's time to reverse course and seriously reduce government expenditures.  The sequester cuts are peanuts compared to the task required.


Tuesday, April 23, 2013

European "Austerity" Is All About Tax Increases--Not Spending Cuts

Lower taxes and less government help the economy.  Higher taxes and more government hurt the economy.  These statements you can take to the bank.

The Economy is Facing some Tough Headwinds  (You think??)

In my blog, Austerity? What Austerity? I note that government (public) expenditures in Europe are mostly going up and, in the few countries where spending is going (slightly) down, it's just a reversal of spending gains in prior years.  Here's the evidence (unfortunately I can't find data for 2011 and 2012):


European Austerity is All About Tax Increases

Most of Europe is in recession.  This shouldn't be a surprise, but don't believe that it's from government austerity!   It's because taxes have been going up and because many peripheral countries are trapped in the euro but need a much lower, devalued currency instead.

Nearly all of the "austerity" in Europe is due to raising of taxes; especially on highest earners and VAT increases.  From Daniel Mitchell at RealClearPolitics:
The PIIGGS imposed no austerity at all on the public sector in the past five years. Government spending on bailouts, subsidies, grants, salaries and entitlements commands a much larger share of these economies than it did just a few years ago.
European austerity has been focused on the private sector — namely, taxpayers with high incomes. That is the second thing the PIIGGS have in common. The highest income tax rate was recently increased in every one of the troubled PIIGGS except Italy (where it was already too high at 43%). The top tax rate was hiked from 40 to 46.5% in Portugal, from 41 to 48% in Ireland, from 40 to 45% in Greece, from 40 to 50% in Great Britain, and from 48 to 52% in Spain.
I’ve already discussed their unfortunate propensity to hike value-added tax rates. Alan explains that they’re doing the same thing for income tax rates. 
In other words, Veronique de Rugy is correct. The “austerity” in Europe generally has been in the form of higher taxes, squeezing the productive sector to prop up the public sector. 

Budget Cutting and Reducing Government Works

History is full of examples where government expenditures were drastically reduced but the private economy boomed:  government spending dropped drastically in the US after World War II and after the Korean war.

So, listening to Democrats and Paul Krugman their biggest cheerleader, austerity is a "dirty word."  He wants even bigger deficits!   Here's some other examples from Daniel Mitchell at RealClearPolitics (with some quotes from Alan Reynolds at RealClearPolitics and IBD)
In Iceland, which did not throw taxpayer money at the banks, government spending was slashed from 57.6% of GDP in 2008 to 46.5% in 2012. The deficit fell from 12.9% of GDP to 3.4%. The economy began to recover in 2011. Iceland’s economic boost from fiscal frugality was neither unorthodox nor unique. After all, the U.S. economy boomed in the late 1990s when federal spending was cut from 22.3% of GDP in 1991 to 18.2% in 2000 [government spending NEVER actually declines but, instead, GDP boomed]. In Canada, total federal and provincial spending was deeply slashed from 53.2% of GDP in 1992 to 39.2% in 2007 with only salubrious effects.
 Compare the tax raisers to tax reducers (from the same article):
It is enlightening to compare the depressing performance of these tax-and-spend countries to the rapidly-expanding BRIC (Brazil, Russia, India and China) and MIST economies (Mexico, Indonesia, South Korea and Turkey). Government spending is frugal in these countries, averaging 32.1% of GDP in the BRICs and 27.4% for the MIST group. Rather than raising top tax rates, all but one of the BRIC and MIST countries slashed their highest individual income tax rates in half; sometimes lower. Brazil cut the top tax rate from 55 to 27.5%. Russia replaced income tax rates up to 60% with a 13% flat tax. India cut the top tax rate to 30% from 60%. Similarly, the top tax rate was cut from 55 to 30% in Mexico, from 50 to 30% in Indonesia, from 89 to 38% in South Korea, and from 75 to 35% in Turkey.

Baltic Countries Had Real Austerity and are Back to Growth

Latvia, Lithuania and Estonia imposed real government spending cuts and are recovering nicely now.  Estonia's president Toomas Hendrik Ilves recently rebuffed Paul Krugman in HuffPost of how horrible government spending cuts are there by saying:
Ilves, a strong austerity advocate, told Bloomberg News in May that the EU should implement austerity in order to boost economic expansion. “You can achieve growth through austerity. Estonia has done that.”
Other quotes from that article say:
Estonia, which in 2011 became the latest country to join the eurozone, has been heralded by some as an austerity success story. That year, it clocked a faster economic growth pace than any other country in the European Union, at 7.6 percent. Estonia is also the only EU member with a budget surplus, and had the lowest public debt in 2011 -- 6 percent of GDP. Fitch affirmed its A+ credit rating last week.

Sunday, April 21, 2013

Climate 'Change' Update

It's a fact that the earth's atmosphere has been slowly and gradually warming (about 1.6 degrees F in 100 years). But, intriguingly  the warming has apparently "paused" in the past decade or two. Meanwhile carbon dioxide levels, although still quite low at 380 parts per million, have continued their gradual ascent.

In my blog "Global Warming Made Easy" I've presented data about the extent of warming and the extent of sea-level change. The post is mostly raw data but I make a point that warming and sea level change is very gradual (1/10th inch per year) and does not appear to be catastrophic. I also mention there that the cost of mitigating the effects of sea level change is orders of magnitude cheaper than attempts at carbon capture and sequestration. See here. In subsequent blogs, I've indicated that molten salt Thorium reactors may be the carbon-free answer to the future of global energy. Thorium reactors are being tested commercially in Norway and soon in China---even though America invented the technology.

The real danger to earth's inhabitants is the extreme cost burden of trying to capture carbon dioxide spent to avoid fairly mild consequences. Worse, so-called "cap and trade taxes" and "carbon trading" schemes are all about taxing and thereby ruining the world's economy and that these 'measures' won't do anything to reverse the warming.  As you've surmised, global politicians are the biggest danger to the health and well-being of earth's inhabitants!!

Not only are politicians the biggest danger to earth's inhabitants, but the climate scientists are slowly discrediting themselves by their inability to "process" actual data that global temperatures are not increasing recently (appear to have "paused") and that their models are wrong.  Worse, the scare-mongering continues but is thankfully receding.

But Al Gore, nearly a US president, is continuing to spout his extreme climate-change scare tactics despite the fact that global temperatures are failing to confirm the dire and direst predictions. Here are some quotes from a speech at Harvard in February 2013:

Gore stated that consequences of global warming are compelling and devastating...
“The dangers we face are almost unimaginably dire,” Gore said. “My hope is based on the history of our experience as a species.”
Gore said that the warming climate has destructive effects on human health. He noted examples of climate change that have influenced insect behavior and, therefore, the spread of diseases such as West Nile virus.
Gore continually stressed the urgency of the current situation, appealing to the audience with analogies.  “We’re using the atmosphere as an open sewer and it’s functionally insane,” Gore quipped.
Now global warming is helping to spread the West Nile virus??  Oh my God! Worse, Harvard is supposed to represent our best and brightest intellects, but Al Gore's nonsense gets an audience?

Actual Climate Data Vs Climate Models


Here's some recent data about global temperatures compared to the climate model predictions. Mind you, billions and billions of dollars have been spent (invested??) at academic institutions to fund 'scientists' who are trying to develop the climate models. I guess when job security is on the line---that could explain the reluctance of scientists to admit partial failure after billions and billions have been spent!  A small amount of modesty and humility is also indicated as the climate is quite a complex thing and defies easy prediction. Humility is a quality that you will find from true scientists---people who will admit that they don't know everything.

Figure 1 Global Temperatures Versus Various Climate Models

Figure 2 IPCC Climate Model Predictions Versus Recent Measurements

Figure 3
Upper Troposphere Temperatures Were "Supposed" to Rise and Create a Runaway Temperature Scenario. The Earth's oceans were predicted to "boil." There is no evidence of that "theory."

I support continued research in the area of "climate change." It would be incredibly foolish to NOT study these issues. I also call on our nation's scientists, our nuclear industry and our government to re-invigorate our research and to test commercially the intrinsically-safe Molten Salt Thorium reactors as a path forward since we have decades of Thorium fuel already stock-piled.

Friday, April 19, 2013

Islam: Making a Difference, One Body at a Time

"Mohammed is God's apostle. Those who follow him are harsh to the unbelievers but merciful to one another."  Quran 48: 29

"O ye who believe! Fight those of the disbelievers who are near to you, and let them find harshness in you, and know that Allah is with those who keep their duty"  Qur'an, Sura 9:123

Let's be clear, Islam is the only religion (ideology) in the world that prescribes violence against other people who are "unbelievers". There are some 109 verses prescribing violent "war" against those who oppose Islamic "rule."  In fact there are few counterbalancing views of tolerance or peace in the Quran. There's no "turn the other cheek" in Islam!  Yes, the Old Testament has violence but it is confined to the specific historical situation, not an open-ended prescription of violence.

Mohammed himself was a violent man in a violent time which is amply reflected in the Quran. This is the source of centuries of blood and tears caused by Islamic violence. Since 9/11 alone, there are over 20,000 deaths attributed to Muslim jihadists (not including war deaths in Afghanistan and Iraq).  To read more about Islam and the Quran, see the website called Religion of Peace.  

Recent worldwide Islamic Terrorist Acts:
  • In the past week alone: April 6 to April 12, there were 49 Jihadist attacks killing 195 persons with 468 injured.
  • In the last month alone, March 2013, there 189 Jihadist attacks killing 988 and injuring 2093 persons.
For a very good and complete list of Islamic terror since Sept 11, 2001, check out this very detailed list.

Outrageous Muslim Violence In Thailand

In my blog "One Day, 5 Murders By Islamists in Thailand", I describe that over 4000 persons (Buddhists) have been mowed down by Islamic murderers in southern Thailand since 2004.  The reason?  Oh there are made up reasons including separatist feelings, but the truth is that these people are ignorant, useless and desperately unhappy and lash out at anyone in murderous rage----a rage supported by they religion!  These people are criminals plain and simple.

I say in that blog:  "As in all other parts of the Muslim world, this violence continues because no citizen informs the authorities of sons, friends, brothers or cousins that are making bombs, buying grenades, hiding guns and plotting attacks.

Because no citizen stands up for what is right, the entire community is complicit in the violence!

It's not just the "radical element" as the "politically correct" would like you to believe.  The violence is supported by Muslim scripture, teachings and many religious leaders everywhere and tolerated by the entire Muslim community.  The entire Islamic culture refuses any self-examination since they blame everyone else for their problems."

Boston Bombers

I'm listening to the media coverage of the Boston marathon bombers and the subject of Islam hasn't come up much at all.   Very few reporters would even know how to handle such a topic.  In case you haven't heard, both suspects were Islamic from Chechnya and/or Russia.

One of the bombers is reported to have said that "I don't have any American friends. I don't understand them."  I find this telling and it reminds me of the few occasions that I've been around Muslims in America.  Usually Muslims that I've met (since I was in engineering field and met mostly engineers) were reasonably prosperous but unhappy to be here.  They'd rather be back in their home countries regardless how impoverished or violent.  I've noticed that Muslim women (wives), in particular, do not integrate well into the community. To a great extent they choose this (of course) by separating themselves due to their attitudes, social awkwardness, low confidence and their choice of clothes (wearing scarves or Hijab headgear).  Muslims are not so common in America but those that are here seem to integrate somewhat better in this country and in Canada compared to other places.  In Britain, for example, Muslims create entire "Islamic" neighborhoods where "nonbelievers" can face intimidation by thugs or punks.

Back to the Boston Bomber deaths.  Don't expect any condemnations of such violence by any Islamic leaders.  There won't be any.

Thursday, April 18, 2013

World Central Banks Facilitating Huge Deficits


Central Banks Facilitating Huge Deficits 

World Central banks are making it easy for governments to spend huge amounts of money that they don't have. There is no need for any spending reforms or restraint while the Central banks are printing money ad infinitum.

The Central banks all over the world are also limiting the rise of interest rates and interest payments on their debts.  Zero interest rates are limiting the cost of servicing the rapidly rising debt.

The US's cost for interest payments back in 2008 was $451 billion, when interest rates were "normal" but the national debt was about $10 Trillion. In a few more years, we'll have $20 Trillion in debt---double the debt of 2008.  So, if interest rates were "normal" than interest payments on the debt would be DOUBLE the amount in 2008 or $900 Billion!!  Mind you, our current defense budget is $680 billion.  Our entire Federal tax collection is only $2400 billion, so $900 billion is a huge number.

What happens if inflation picks up sharply (the last thing anyone is expecting at the moment) and/or the bond market revolts and demands 10% on government bonds?  Interest payments could jump to about $2,000 billion per annum!  The debt that we're creating doesn't go away!  Debt is like a stone around your neck!

A worse example: take Japan, with 230 percent debt-to-GDP ratio, a rise of interest rates from about 1.0% currently to just 2 % would consume half of their annual budget.. The Japanese are already borrowing 10% of their GDP per annum, so debt is already accumulating rapidly.  In terms of debt sustainability, they are rapidly moving up the time when they reach a point of no return.  It's getting close.

More details about the Japanese budget situation from Forbes,
In the FY 2011 ordinary budget expenditures total JPY 92.4 trillion. Of this, JPY 28.7 trillion (31.1 percent) is expenditure for old age social security programs, and JPY 21.5 trillion (around 25 percent) is debt service. A doubling of interest rates would double debt service costs to 50 percent of budget. Is this feasible? Obviously not.
But the situation is actually direr still, as we see by looking at FY 2011 budget “revenues.” Of the JPY 92.4 trillion in revenues, only JPY 48.1 trillion has come from taxes. The remaining JPY 44.3 trillion has come from additional government debt issuance.

Huge Japanese QE Program

The Japanese Central bank recently has embarked on a HUGE quantitative easing (money printing) program that is 3 times the magnitude of the US QE program in relation to the size of their economy.  They aim to go from -0.5% deflation to 2% inflation.  If they succeed and investors demand 2 or 3% for holding government bonds (as opposed to the 0.5 to 1% range of yields currently), they are deep, deep budget trouble.  One might expect their rates to rise to Italian or Spanish levels of about 5% when their situation is "distressed."

It's entirely possible that the Japanese will trigger an unmanageable crisis in their debt markets.  Already the Japanese bond market is in turmoil already---having huge and unprecedented price swings that are triggering circuit breakers nearly every day.   I've said for 3 years now that Europe will be the epicenter for the next leg of the financial crisis.  I believe it's still true, but now Japan is in contention for that prize.

The flood of free money in Japan may fund a carry trade to other Asian countries---precisely what caused the Asian crisis of 1997.   Like I've said, free money and zero interest rates create bubbles on top of bubbles.

Wednesday, April 17, 2013

The New and Absurd Financial Orthodoxy

Below is a summary of the new financial orthodoxy from Charles Gave's article Take Everything That You Know and Burn It reprinted in Zero Hedge.  Have a look at his entire article.

He describes, tongue-in-cheek, the now prevailing financial orthodoxy in force from the USA to Japan and most places in between:
  1. Government allocates capital better than the private sector, and should use interest rates, exchange rates, price fixing, price controls or whatever artifice it deems fit to ensure that capital goes to where it is properly directed.
  2. The alpha and omega of the central bank’s proper role is to finance government spending.
  3. Money belongs to the government, as we have seen properly demonstrated this week in Cyprus.
  4. Property rights, the antediluvian obsession of the market fundamentalists, have been subject to a doctrinal revision “the template” as also shown this week in the eastern Mediterranean.
  5. As a result of this new paradigm, asset prices must rise for the foreseeable future so long as The Great Oz decrees that the money printers keep printing. How can asset prices fall while the US central bank is printing more than $80bn a month? Even the unreformed Bundesbankers will surely grasp that if the European Central Bank did the same thing, the euro's problems would disappear overnight and prosperity would swiftly return to southern Europe, (Really, Germans should not be allowed into politics until they have had a primer indoctrination at either Cambridge or Princeton.)
  6. More money creates more wealth, and more wealth, especially in real estate, creates more jobs—evidence to the contrary in Spain only represents a small setback on this road to happiness. As we all know, a rise in real estate prices leads to a massive increase in productivity, a prerequisite for an increase in the standard of living.
  7. Services or goods provided to the population by the government, borrowing money from the central bank to pay the fellows who produce the goods that nobody needs with money that does not exist, will add tremendously to the GDP. This is a sure sign that the right policy is being pursued.
  8. These goods and services anyway have a higher moral value than the ones produced in the private sector. One should simply compare the "social usefulness" (a favorite notion of Lenin and Stalin) of a nurse versus a hedge fund manager to be convinced. I rest my case.
It's too bad that all of this will lead to financial ruin: debasement of currencies, higher inflation, ruining savers and retirees and more government intervention because of another "crisis."

I'm afraid that, in the years ahead, it will end up leading to bloodshed as the only way to get rid of the idiots who are ruining our nations will be to shoot them in the head--so profoundly stubborn are they in their "dogma" and phony orthodoxy.

Monday, April 15, 2013

1913 Income Tax Starts at 1%

Tax returns are due today: April 15, 2013.  To make note of this day and provide a glimpse as to how federal taxes started exactly 100 years ago, I've attached page 1 of form 1040 from 1913 below.

Top Tax Rate was 7% in 1913

The tax rate for the vast majority of people, after the standard deduction of $3,000 and up to $20,000 annual income, was 1%.   There was another 1% (2% top rate) on income over $20k up to $50k, 3% on income of $50k to $75k.  The top rate on income over $500,000 was 7%.

Four years later, the tax rate was 77% or an eleven-fold-but that's another story.

Put This In Perspective

Prices (and presumably wages) are roughly 25 times higher now compared to 1913, so income of $20,000 in 1913 is equivalent to $500,000 today.  So, the 1% income tax covered incomes up to $500,000 (in today's dollars).  

Since the standard deduction was $3,000 or about $75,000 in today's prices, the vast majority of people did not pay any income tax at all.  The top rate was 7% on income over $500,000 (or $12.5 million in today's dollars).

The Federal Reserve act passed in 1913 and this body is responsible for the 23 fold price inflation (at least) in 100 years.  That's 2,300% over 100 years!  The Federal Reserve was created to maintain "price stability" and "economic growth."  What a joke! Prices went up 110% from 1913 to 1921 alone!  I'll cover this disaster in another blog entry.

IRS Form 1040 in 1913



Saturday, April 13, 2013

The House of Horrors Trial--Unreported by Media

A USA Today article by Kirsten Powers wonders why nobody is aware of the horror story emerging from the murder trial of Kermit Gosnell, a black abortionist in Philadelphia.  She asks, why isn't this page one news?

Indeed.

Why haven't you heard the news?  Because media outlets are refusing to cover it.  For what it shows is the dark underbelly of abortion clinics and that it is unlikely to be an isolated case.  It's shocking and blood-curdling stuff:

From USA Today:
Since the murder trial of Pennsylvania abortion doctor Kermit Gosnell began March 18, there has been precious little coverage of the case that should be on every news show and front page. The revolting revelations of Gosnell's former staff, who have been testifying to what they witnessed and did during late-term abortions, should shock anyone with a heart.
NBC-10 Philadelphia reported that, Stephen Massof, a former Gosnell worker, "described how he snipped the spinal cords of babies, calling it, 'literally a beheading. It is separating the brain from the body." One former worker, Adrienne Moton, testified that Gosnell taught her his "snipping" technique to use on infants born alive.
Massof, who, like other witnesses, has himself pleaded guilty to serious crimes, testified "It would rain fetuses. Fetuses and blood all over the place." Here is the headline the Associated Press put on a story about his testimony that he saw 100 babies born and then snipped: "Staffer describes chaos at PA abortion clinic."
Chaos?  Horror is more like it.

Eight co-defendants have pleaded guilty and most will testify against Gosnell.   Gosnell's wife Pearl has confessed to performing abortions and may, herself, go to prison. From The Daily Mail other testimony during the trial:
Kermit and Pearl Gosnell
"Stephen Massof, who is awaiting sentencing after pleading guilty to the murder of two newborns at the clinic, revealed Thursday that he witnessed an abortion at 26 weeks - two weeks beyond the 24-week limit in the state.
He also claimed he saw about 100 babies born alive and then 'snipped' with surgical scissors in the back of the neck, to ensure their 'demise'.
'It would rain fetuses. Fetuses and blood all over the place. It is literally a beheading. It is separating the brain from the body,' he told NBC.
A Grand Jury report said the clinic was crawling with cats and reeking of animal urine and feces.   Furniture and blankets were stained with blood and instruments were not properly sterilized.
Disposable medical supplies were also reused while vital medical equipment such as the defibrillator and EKG machine were 'generally broken'.
Disturbingly, the report alleged that fetal remains were stuffed into: 'cabinets, in the basement, in a freezer, in jars and bags and plastic jugs'.
Tiny baby feet, it is claimed, were discovered in specimen jars, lined up in a macabre collection."
In other trial testimony
"Prosecutors allege that Gosnell’s untrained staff let patients pick between ‘local,’ ‘twilight,’ ‘’heavy’ or ‘custom’ anesthesia based on how much they could pay. And they say he did little to monitor patients afterward, failing to utilize blood pressure cuffs, oxygen machines, a pulse monitor and other standard surgical equipment.
The jury heard testimony from the mother of “Baby Boy A,” the child aborted alive in July 2008 who was so big Gosnell “joked” that he could have walked to the bus stop; and from the employee (Adrienne Moton) who saw the baby before “Gosnell rushed in and carried the boy away.”

There is so much that is wrong here!  

To some extent this entire story is surely part of the African American and the larger American cultural "train wreck."  Several of my recent blogs (one here) have criticized the Media and television coverage that CONSTANTLY misrepresents the sorry state of African American "culture." "Train wreck" is an apt description.  Most white people don't have a clue about how bad it is.  The incident of Gosnell gives just one glimpse as to what I'm talking about--which is another reason that major media outlets are ignoring the story.  

Furthermore, one of my blogs (here) makes a point that affirmative action has created a two-tier qualification level of medical doctors: one level for blacks and one for all of the rest.  The result of these two-tier standards is that two doctors like Gosnell and Conrad Murray are somehow being granted medical licenses.  Conrad Murray received his medical degree in Granada, the same medical school as unlicensed Stephen Massof, of one of the defendants above.  

Nebraska Cornhusker's Rex Burkhead & Jack Hoffman - An Inspirational Story

Check out a moving story of a 7 year old cancer survivor and his new friend:  Nebraska Husker running back Rex Burkhead:


It's well worth a look.   Have some tissues ready.

Friday, April 12, 2013

A Message From The UK in the 1970s


Uh Oh: Here Comes Another Bubble!?

Obama administration pushes banks to make home loans to people with weaker credit

The Federal Reserve and the Obama Administration are pushing for more housing loans to individuals with marginal credit which could set off a new round of taxpayer bailouts of bad mortgage loans.

Haven't we learned our lessons?  Nope.

From Moneynews.com
The Washington Post reported that housing officials [in the administration] are asking the Department of Justice to assure banks they will not have to worry about financial or legal consequences should they lend to riskier borrowers who measure up to government standards and later default. [can you believe it??!!]
Under Federal Housing Administration (FHA) rules, borrowers can get a mortgage with a credit score as low as 500 or a down payment as small as 3.5 percent[!!!], according to The Post. In the event of a default, taxpayers “are on the line, a guarantee that should provide confidence to banks to lend.”  [I would say that FHA rules are already far too lax]
However, banks are rejecting low scores, with the average on FHA loans at about 700, and under some situations, the FHA can retract insurance or take legal action penalizing banks in the event of a default, The Post stated.
Does Washington DC ever learn any lessons?  I know that housing and housing prices are recovering.  It is true to some extent, but recovering from a very low level.  If you need a house to live in, then it's probably a good idea to buy a house that you can comfortably afford.  But if you're buying on speculation, which accounts for many of the transactions and holdings in the 'bubbly' areas like Phoenix, then good luck to you.

The last housing bubble long ago exhausted the pool of qualified buyers with a need for housing and have sufficient ability to service their debts.  In fact, they exceeded it by a wide margin.  Now many of the housing plays are dominated by speculators again.   I don't know how it will play out.  I don't think the economy will be in good shape until after Obama's 2nd term, so I question whether home prices will keep going up.  If they do keep going up, then I'll be more worried than now.

Lastly,  the Federal Reserve is also trying to re-ignite any bubble that it can; in housing, in gov't bonds, in equities, you name it.

I just think it's ironic when I hear the same government initiatives and rhetoric from politicians that led to the last disaster.  

Monday, April 8, 2013

Margaret Thatcher: Rest In Peace

Margaret Thatcher, rest in peace.  

Margaret Thatcher changed the UK and especially the English-speaking world---all the way to New Zealand and Australia.  Like staunch conservative Churchill, she came to power in a time of chaos and crisis caused by socialist policies of the far left Labour Party in that country.  Out-of-control public expenditures on entitlements and industry supports led the UK to request an IMF in bailout loan in Sept 1976.  The IMF demanded budgetary restraint and devaluation.  The British pound was crashing at the time.  In 1979, the country was gripped by inflation and strikes called the 'winter of discontent.'   During the 1970s, the UK was known as the "poor man" of Europe in terms of GDP.   (If you think that this is not instructive to the current situation in the US, I believe that you are mistaken)

Margaret Thatcher, like Churchill, came to power in crisis to "save" Britain once again---this time from inflation, strikes and financial ruin.  Ronald Reagan also came to power in 1980, in the wake of the largely failed and left-leaning "malaise" administration of Carter, and also defeated rising inflation, cut taxes and boosted defense in the midst of the cold war.  Both Thatcher and Reagan created conditions of prosperity lasting decades and well past the Clinton administration.

From the Obit in the Financial Times (to follow the link, you'll need a subscription):
The developed world's first woman prime minister transformed a sclerotic UK economy, all but neutered the trade unions and endeavoured “to roll back the frontiers of the state” with a policy of offloading the great nationalised industries and selling council houses to their occupants. Abroad, she was the indomitable leader who won victory over Argentina in the Falklands war, who decided that Mikhail Gorbachev was a Soviet leader she could “do business with” and who inspired a respect for “Thatcherism” as a political philosophy that was never quite matched on the domestic front.
Well said.

I lived in Britain during some of the early Thatcher years in the 1980s.  When I arrived, she was in the middle of a confrontation with the labor unions led by coal mining union leader Arthur Scargill.   Scargill was a communist idiot.  His ideas HAD to be defeated.  In a way, Thatcher had to answer the question of "who's running this country?"   She decisively answered that the government ran the country and not the Unions.  To some extent, SHE ran the country! 

To give you some idea of how radically things changed after her, the next Labour PM, named Tony Blair, came to power with a demeanor and political philosophy quite similar to Thatcher's.  These policies eventually migrated all the way to socialist bastions of Australia and New Zealand.

But unlike Churchill, Thatcher still isn't held in high regard in the UK.  If you ask a British person, in general you'll get derisive comments about her. The British never seem to understand what's good for them or learn the lessons of history. That's the problem with The Left.  They have a faulty memory.  It's the same with the Democratic party in the US.  They never got (or remember) the lessons of the successes of the Reagan or Thatcher administrations nor the serial failures of European socialism.  So expect lukewarm comments from the likes of Piers Morgan and the US left-leaning media outlets.

The Brits promptly dumped Churchill after the war to pursue decades of disastrous socialist governments and policies culminating in the "winter of despair" in 1979.  Churchill had warned the people against taking the path of socialism but they didn't listen---just like they didn't listen to him about the rising danger of Nazism in Germany in the 1930s.  Like I said, the British never seem to know what's good for them.

People will keep saying how "divisive" Thatcher was.  The problem is that there are a lot of dumb asses out there who must be defeated and defeated decisively.  You can call that divisive, but one path is a proven failure: the failure of leftist policies that wrongly put the State and government in the driver's seat with ever rising taxation--- rather than free market capitalism.  Thatcher won 3 general elections.  She was wildly successful (judging by Labour successors adopting her policies), and created a much more prosperous Britain.  No longer is Britain the poor man of Europe.  Now France is headed in that direction with a lower per-capita income than Britain (by some measures).

She was stridently against communism alongside Reagan--which was controversial at the time--especially in Europe.  Of course Reagan and Thatcher were dead right.

Thatcher was dead set against joining the Euro currency and warned repeatedly, and ad nauseum, against a European supra-national government.  This led to her eventual defeat in 1990.  Judging by the events of recent years, she is completely and utterly vindicated in these convictions!  The Euro currency is a complete and utter disaster and the EU is like a political "circus act."  From the FT Obit:
As prime minister she had sanctioned the Single European Act, creating a genuine single market. Yet she hated any idea of a European superstate. In an outspoken speech at Bruges in 1988, she insisted: “We haven't worked all these years to free Britain from the paralysis of socialism only to see it creep in through the back door of central control and bureaucracy from Brussels.”
It's the socialism, stupid!

US Employment Situation: The Big Picture

The March Employment came out April 5, 2013 and reported that the unemployment rate dropped to 7.6% and the economy created 88,000 jobs.  Good, right?    Well, not really.

The civilian labor force dropped by 496,000 according to the Household Survey---the other part of the employment report.  Those "not in the labor force" increased by 663,000.   The participation rate of workers compared to the working age population dropped to 30 year lows at 63.5%.  See the BLS summary here.

The Really Big Picture

The US population keeps rising but the jobs are not being created.

Since the bottom of the steep recession ending in May 2009, 5 million jobs have been created but not enough to keep up with the population and barely exceeding the peak in 2000 and well below the peak in 2007.  See Figure 1.
Figure 1 Total Employment Since 1991
In December 2000, the number of total jobs peaked at 132,000,000  when the working age population was 215 million.   See Figures 1 and 2.  Now fast-forward to March 2013; thirteen years later.  The population is now 240 million and the total number of jobs is 135 million--an increase of only 3 million in 13 years.  The working age population increased about 25 million but only 3 million jobs were created in the period of 2000 to 2013.

Fully 5 million of those people went on Social Security Disability and out of the workforce.  There are almost 11 million total on SSDI roles whereas there were 6 million in 2000.  Once on Disability, very few ever leave it.   See the Figure 3 below.   For current SSDI beneficiaries see here.

Figure 2:  Working Age Population (left scale) Vs Participation Rate (right scale)

Figure 3 Social Security Disability (right scale) and U-6 Unemployment Rate (left scale)

China Helped Hollow-out US Manufacturing Capability

What happened?  China and the rest of Asia were shutting down entire industries in the USA!  Textiles, Furniture, Tobacco,  Steel and countless small manufacturing were put out of business by China, Korea, Japan and other countries in Asia. But the Chinese damage is the worst.  It started in earnest in the 1990s but we didn't notice it.   But, like the rest of Asia, China didn't play by free-trade rules limiting imports by various means.  But China, unlike Japan, and has maintained their currency at an artificially low exchange rate to continue their vast trade advantage while they accumulated some $3 Trillion in USD foreign exchange reserves.
.
That's the difference between trade deficits with Japan in the 80's and 90's vs. China in the 00's.  The Japanese Yen was always free-floating and, because of persistent Japanese trade surpluses, it rose and rose eventually causing the Japanese to build car-making factories in the USA.  Today most Hondas and Toyotas in the US are made in the US by US workers.  No such mechanism exists today with the Chinese.   (The Chinese wouldn't even be welcome here or in most countries).

In hindsight, Bush, or even Clinton should have enforced steep tariffs on the Chinese in the 1990s or early 2000s unless they let their currency appreciate in a free market.  This would have stopped the "hollowing out" long ago.

Friday, April 5, 2013

How to Cut $450 Billion in Federal Spending

Cut $450 Billion from the Federal Budget Now (Without touching Medicare/Medicaid)
  1. Eliminate Ethanol subsidies. These subsidies exist because ethanol is not cost-effective (why else would it need subsidies?)   Imported Brazilian ethanol is cheaper (but there are trade barriers to this source). Ethanol doesn't make economic sense compared to petroleum distillates. Stop consuming up to 40% of the corn crop for fuels! Stop the madness! The agriculture department couldn't even cut this consumption when corn prices were soaring during drought conditions in recent years.  Cost: $6 billion per year.
  2. Cut much of the Agriculture Dept.  Eliminate most of the current programs per Cato Institute suggestions,  Subsidies to corporate farmers has never made sense.  Devolve the food stamp and food subsidies to the States. All of various food subsidy programs including SNAP cost $100 Billion per year would be transferred to The States.  Net savings: $31+ Billion per year (assumes The States keep all of the SNAP expenditures.
  3. End Electric car subsidies to wealthy people who buy $100,000 electric cars (Tesla and Fisker cars cost $100k), Cost: $6.5 billion.
  4. Cut Defense Department per Cato Institute suggestions. We don't need troops in 140 countries. Military procurement has been a boondoogle for decades.  Veterans retirement benefits are very generous and expensive.  Cost savings: at least $100 Billion each year for the next decade.
  5. Downsize Commerce Department per Cato Institute suggestions.  Cost Savings: $2 billion
  6. Eliminate the Department of Housing and Urban Development per Cato Institute Suggestions.  Cost savings: $62 Billion per year.
  7. Cut Mortgage subsidies (tax credits) for mostly wealthy or well-off people to finance their homes and even multi-million dollar McMansions,  These tax subsidies should be limited!  Cost savings: $69 billion to $100 billion per year depending on who you believe. 
  8. Education department is wasting money that we don't have, Sending money to Washington DC for them to re-allocate it doesn't make sense.   End the entire department and dismantle all of it's programs! Cost savings: $106 billion each year.
  9. Energy department who brought you Solyndra and countless other wasteful boondoggles.  End it per Cato Institute suggestions!  Private enterprise is entirely capable of providing funding for energy research. Privatize the Strategic Petroleum storage program. Put defense related expenditures in the Defense budget.  Cost savings: $38 billion per year.
  10. Cut Health and Human Services Dept. . HHS spending is over 1/4 of the total federal spending or $900 Billion per year. Cut many of the programs that the Cato Institute recommends (exclude Medicaid/Medicare cuts). Cost Savings:  $81 Billion per year.
  11. Medicare and Medicaid fraud Cost estimated at up to 20% or $150 billion in fraud.  Go to the block grant to the states per the Paul Ryan budget.  There is some chance that States might root out that fraud which is exactly why no one wants to do this!
  12. SS Disability Fraud:  How about the rising fraud in the $124 BILLION Social Security disability program?  Disability program enrollments soar after easing of rules allowing claims of "mental distress" or "back pain"?  Cost of fraud: I don't know but I would estimate about 10% of claims or $12 billion.  Tighten standards back to where they were before Obama was elected.  
  13. Repeal 1931 Bacon Davis Act and 1935 National Labor Relations Act. The extra cost of union requirements in Federal projects is huge.  Stop it!  Pass a National Right-to-Work act.  See Cato Inst write-up on reforming Labor Markets
  14. Substantially Dismantle the Department of Labor.  Devolve the $131 Billion Unemployment Insurance program to the states.  Eliminate job training programs, job corps, trade adjustment services per Cato Institute suggestions.  Net Cost savings: $13 Billion per year if States provide exactly the same Unemployment insurance.
  15. Sugar industry price supports are a complicated combination of import restrictions, production quotas and a kind of guaranteed prices.   The US government makes sugar prices higher than world prices and drives candy-making businesses to Canada and Mexico taking factory jobs with it! , Last year, the price of sugar around the world averaged 26.5 cents per pound, compared with 43.4 cents in the U.S.  Stop it!
Total Cost Savings per year: $450 billion without including any Medicare and Medicaid reforms which are the biggest areas where cost restraint is required going forward.

Obama Incompetence: No Budget Again

If you can't budget, you can't lead.

After over 1200 days, the Senate finally proposed a budget.  The House passed Ryan's budget proposal, but the White House remains predictably incompetent in proposing ANYTHING. Obama is at least 60 days late in his promise to deliver a budget this year (or any year).   Maybe budgeting is interfering, and secondary to,  his golfing or holiday outings?  No doubt!

Worse, Jack Lew, in reality just a political operative and who was formerly a "placeholder" for the Director White House Office of Management and Budget, never produced a budget is now rewarded by Obama for his incompetence to become his Chief of Staff.   Don't expect a budget ever. .

You know what?  Never mind!  The White House is once again irrelevant to the discussion of budgets just like they were during the fiscal cliff discussions.  Furthermore, previous budgets were nearly laughable.

Response to Sequester "Cuts" Show Washington Incompetence 

Even the fairly mild sequester "cuts"drain the swamp slightly and immediately begins to show how incompetent Washington and Obama are. (Oh and by the way, there are no 'real' cuts;  federal spending will continue to rise this year.)  Why? Because there's no budgeting!  With no budget, spending is literally out of control.

In response to sequester "cuts", the best that Obama can conceive is to cut back on White House guided tours costing a couple of million dollars per year rather than cut back on the thousands of areas of waste that could and should be cut.  Meanwhile billions and billions are being wasted.  See my blog "How to Cut $450 Billion per year Federal Budget."

From Investor's Business Daily:
The House and Senate have passed their respective, wildly different budget plans to cope with the nation's debt crisis. So where's the president? Seems he'd rather do anything but lead on this critical issue.
By law, the president is obligated to produce a budget plan on the first Monday of February, establishing his priorities for federal spending and taxes for the next year and the decade ahead. It's the first step that gets this all-important annual process under way, one that's more critical than ever as the U.S. careens toward a massive debt crisis.
But Obama apparently can't be bothered with this mundane responsibility. He's now 50 days late with this budget [yeah, 50 days plus 4 years!], and is giving no indication of when, or even if, he'll bother to offer one up.
Instead, Obama is planning yet another pointless and costly trip around the country, this time to try to rally support for politically expedient gun control laws.
Meanwhile, House Republicans have passed their budget plan, as have Senate Democrats (for the first time in four years).
Democrats and Obama will never balance any budget.  It's just not in their DNA.  They will never "get real" about any serious and proper administration of your tax dollars.  Why should they? The Federal Reserve is creating a $1 Trillion dollars of new money per year now to effortlessly fund astronomic deficits nearly ad infinitum!   Monetizing of the debt by the Federal Reserve should be outlawed.

What you have is a president who is simply an actor.  You have a 1/2 term Senator with little competence.  There will never be any leadership from this president.  His weak attention span prevents any useful focus but instead "flits" off onto supporting "brain mapping" or whatever "sounds" good.  He doesn't do any actual work!

Obama is a slacker.

Thursday, April 4, 2013

Healthcare Act Shows Obama's Inability to Govern

The New York Times reports that the Obama maladministration has failed to setup the health insurance exchanges that were promised three years ago to start in 2014.
Unable to meet tight deadlines in the new health care law, the Obama administration is delaying parts of a program intended to provide affordable health insurance to small businesses and their employees — a major selling point for the health care legislation.
The promise of affordable health insurance for small businesses was portrayed as a major advantage of the new health care law, mentioned often by White House officials and Democratic leaders in Congress as they fought opponents of the legislation.
I have to laugh at the so-called tight deadline comment. The administration has had 3 years and unlimited money to implement the law.

So much for the activist government model.  Expect more delays. In fact, expect complete and utter failure of the entire initiative as the costs and complexity become fully known. But taxes are being collected.  Even if the law is never implemented, as I expect, the taxes will be sure to remain. This is how big government works: make lots of promises, take your money and then piss it away. The Democrats never learn about the folly of big government.

Even Times Democrat Joe Klein complains:  Healthcare Act Shows Obama's 'Inability to Govern.'  From Newsmax:
The implementation of universal healthcare is way behind schedule, and Time columnist Joe Klein blames the president. 
President Barack Obama’s Administration has had three years to set up exchanges for small businesses and has failed to do so, Klein writes. And he’d better not say it’s because of Republicans or having to deal with the economy.
“Nonsense,” says Klein. “Where was the contingency planning?”

If Obama isn’t careful, Klein warns, Republicans might find a more efficient way to run the program. And if they do they might just be running the country, too.

“As a Democrat — as someone who believes in activist government — (Obama) has a vested interest in seeing that federal programs actually work efficiently, Klein writes. “I don’t see much evidence that this is anywhere near the top of his priorities."

Wednesday, April 3, 2013

HHS Head Sebelius Doesn't Understand Insurance

To me it's not a surprise to find more government officials who know nothing about what they administering; especially in this administration.

Afterall, Jack Lew didn't know about budgeting issues and certainly didn't produce a budget the entire time that  he was White House Budget director, Obama continues to be the one man wrecking ball for the economy and undermines any remaining social cohesion in our country, now Kathleen Sebelius shows that she doesn't understand the basic concepts of insurance as the head of the Dept of Health and Human Services.  HHS (Health and Human Services) is the arm of this maladministration for the (now further delayed) implementation of "ObamaCare,"

From Meagan McArdle at Daily Beast, she discusses how Sebelius has her facts about insurance all upside down.  So when the Department Head for Health and Human Services has it wrong, then wrong-headed Obama and most other Democrats also have it dead wrong.

The key to controlling costs in a health care system anywhere is to make it as close to practical to a cash system.  This is the system in Thailand where I spend a good deal of time during the past 14 years.  There, most medical expenses are paid on a cash basis without an insurance or government intermediary. Because of this, and the low general cost of salaries, prices for medical care is, without exaggeration, some 10 times cheaper than in the US.  It is even cheaper in the smaller cities outside of Bangkok.  If the US went to, or had been on a cash basis with no government or private insurance, then prices would decline to what people can afford or manage and they would be MUCH lower than now.  Instead, there's nothing but intermediaries here in the US with no one spending their own money!

The next best thing to a cash system, and what is the true role of insurance, is to insure against large unexpected costs with high deductible catastrophic insurance policies covered ideally by medical savings plans. Premiums for high-deductible policies are MUCH lower since the buyer is "on the hook" for routine costs, routine prescriptions and less-than-catastrophic expenses.  In this way, the insured pays cash for nearly all of his or her medical expenses out-of-pocket (except for the big events).  Like I said, it's as close to a cash system as possible.

Catastrophic insurance was the only way that costs MIGHT have come down for medical costs in this country.  Those policies are now essentially "illegal" going forward due to the wrong-headedness of people like Sebelius and Obama and Democrats.

In the Daily Beast article by McArdle, exposes how Sebelius has it all wrong:
But Kathleen Sebelius, the Secretary of HHS, thinks that catastrophic insurance isn't really insurance at all.
At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance."
She said this in response to a report from the American Society of Actuaries arguing that premiums are going to rise by 32% when Obamacare kicks in, as coverage gets more generous and more sick people join the insurance market. Sebelius' response is apparently that catastrophic insurance isn't really insurance at all--which is exactly backwards. Catastrophic coverage is "true insurance". Coverage of routine, predictable services is not insurance at all; it's a spectacularly inefficient prepayment plan.
What Sibelius and Dems don't understand is the cost trajectory of ObamaCare is UP not DOWN.  It's really the UNaffordable Health Care Act!  Why? Because now you'll have BOTH government AND insurance company bureaucracies, plus the admin costs of covering more people and nearly all of the routine medical payments plus more fraud.  Costs will only go up.  Also nothing has been done to address costs (malpractice reform, for eg.) or the "supply" of medical services for the additional enrollees.  Furthermore, the government will make everything even more complicated and bureaucratic and even more costly.  Finally, catastrophic policies will be essentially 'illegal' and, since the government is going to become a buyer with infinite resources (not cost sensitive) for a vast portion of the nation's medical services (taken together with Medicare/Medicaid),  true "cash" market discipline will never occur and costs will likely escalate at an even a higher rate along with our country's entitlement deficit.

It will end in an unsustainable mess.  In fact, it may never even get off the ground as it's flaws and costs become more widely known.  Worse, a financial crisis brought by such programs may bring an end to the entire liberal "experiment."