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Everyone knows that Greece is so far in debt that it is actually impossible for them to ever repay it all. France, Spain, Portugal, Italy, and most of the rest of the EU is not much better. Even worse than Greece is Japan’s debt; at over 200% of GDP — and growing — it seems hopeless, despite some reputable economists thoughts that since a large portion of the debt is owed by one branch of their government to another, it is somehow not all that bad.
The U.S. debt is now $18 trillion and still growing at a rate higher than it ever was before Obama took office (Obama and Democrat protestations being wrong). We recently issued $1 trillion in new debt just to pay off old debt, despite bringing in record revenues. And when unfunded promises to pay for Social Security and Medicare benefits are factored into our liabilities, this debt becomes more than $100 trillion – an amount that has no more likelihood of being paid than Greece’s debt.
Yet all of these countries are fighting over the same issue. Every country knows that its debt was honorably borrowed, and needs to be repaid. One would think that, like an individual or family that incurred too much debt, government spending needs to be reduced to below the level of income, with the excess going to pay down debt. A program to stabilize must present itself as fiscally sustainable so businesses, citizens, and creditors can have renewed confidence.
But the Keynesian mentality – which would argue that such austerity measures would contract the size of the economy, thereby making it even more difficult to pay down debt – is unfortunately winning the day.
I do not believe that many honorable and intelligent people actually believe in this Keynesianism. It is just so much easier politically to tell your constituents that government handouts don’t need to be cut — because in doing so, you risk losing reelection. And populist leaders have a great time casting their (responsible) opponents as scrooges, taking advantage of the lesser educated and poorer individuals who will ultimately be hurt most by these irresponsible, spendthrift policies.
Why do I believe that the Keynesian theory is wrong? Not because of some sophisticated economic theory, but rather some simple history and logic, in no particular order:
1) Government spending wholeheartedly crowds out private spending, substituting inefficient political and crony-based spending for free-market, give-the-public-what-they want spending.
2) After World War II, government spending (military, etc.) dried up overnight. But a free-market, non-coercive environment at the time, allowed private investment to flourish and more than make up for the decline in government spending.
3) The outrageous level of U.S. spending in the last six years has resulted in the poorest recovery since the New Deal; FDR’s meddling only prolonged America’s anemic recovery. But the current sluggish economy should not be surprising either, since Obama’s policies are taken directly from FDR – raising taxes, bad mouthing as well as over-regulating businesses, giving organized labor excessive power, instituting policies that discourage people from working, and hurting international trade.
4) There is no evidence, in the last 50 years, that Keynesian theory worked in the real world. On the contrary, one need not look too far to Northern Europe vs Southern Europe — Latvia compared to Greece — to see the results of strict austerity measures vs fiscal tepidness, and each government’s current level of sustainability. Keynes fails wholeheartedly.
The bottom line is, if you borrow money, you have to pay it back. Just because you irresponsibly spent the money does not give you an out. Just because you can think of reasons to delay repayment, doesn’t mean that you should. Just because you are a government doesn’t mean you are exempt from your fiduciary responsibilities. Historically, the only countries to get their debt under control have been those that have cut spending.
Get spending under control and start paying down the national debt!
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, OBAMA, POLITICS, RETIREMENT, TAXES
The Wall Street Journal unveiled the existence of a new investment plan that was created without Congressional approval. To be fair, we first heard about it during last years State of the Union address in January, 2014; Obama announced that he would instruct the Treasury to craft a new retirement plan, which the WSJ noted “was puzzling because such plans are normally created by law, not Presidential order”
Sure enough, Obama kept his word. It’s called “myRA”, and it is a retirement plan that invests solely in government debt. Here’s more:
“A form of Roth Individual Retirement Account that allows people to save after-tax dollars and watch them grow tax-free until retirement, the new myRA offers a single investment option. It’s a private version of the G Fund that is available to federal workers and has lately been delivering annual returns of about 2% on its portfolio of Treasury securities.
Intended for those who haven’t started saving for retirement, don’t have a retirement plan at work, and make less than $129,000 per year ($191,000 for married couples filing jointly), the myRA requires no minimum investment to open an account and promises no fees for investors.”
There are no other investments except in Treasury bonds. No stocks, no corporate bonds. Just Treasury bonds. And the Treasury department is funding the program.
The WSJ confirmed that the Treasury Department didn’t actually receive any authority to start his program. Instead, it is using the budget from the “Bureau of the Fiscal Service” to do so. “The assertion here is that existing law allows this part of the Treasury to hire financial agents as part of its mission to efficiently finance the federal government.” In order to manage the new program, the Treasury hired a group called Comerica and its partner, “Fidelity National Information Services”.
The WSJ raises some good questions pertaining to the existence of the program, its purpose, and its funding:
“[F]ar from delivering efficiencies for the taxpayer, this program is designed to subsidize the investors. Not that a low-yielding Treasury securities fund is the right move for these first-time investors. But this is a deal they cannot find in the marketplace because it would be unprofitable for any company to offer it, given that the investor pays no fees and can contribute as little as he wishes in regular payroll deductions. Taxpayers are covering the costs, though their elected representatives in Congress never voted to create the program. So far Treasury also hasn’t told us the fees it is paying Comerica.
The subsidies in myRAs are likely to be small at first, but the history of government programs is that they expand over time. And if such a subsidy scheme can be enacted administratively, does anyone think this will be the last time such power is exercised?
New investors should be encouraged to consider ways to build wealth beyond simply lending money to the feds. And if politicians want taxpayers to support another retirement program, they should do so through law, not White House whim.”
You can read more about myRA by going to the Treasury page. myRA is touted as “a simple, safe and affordable retirement account created by the United States Department of the Treasury for the millions of Americans who face barriers to saving for retirement.”
All this program seems to do is create another fund that is guaranteed by taxpayers, whose accounts invest in a government program — the Treasury Bond — essentially acting like a prop. How much it will cost the taxpayers remains to be seen.
by | ARTICLES, ECONOMY, ELECTIONS, FREEDOM, GOVERNMENT, HYPOCRISY, OBAMA, OBAMACARE, POLITICS, TAXES
The Daily Caller did a great job uncovering more of the information surrounding the writing and passage of Obamacare. Going back to 2009, the chief architect of Obamacare, Jonathan Gruber, made two very specific points about the bill: 1) it is unaffordable because there are no cost controls; 2) in order to control costs, treatment would have to be denied.
Below are highlights from the 2009 policy brief:
* “The problem is it starts to go hand in hand with the mandate; you can’t mandate insurance that’s not affordable. This is going to be a major issue.”
* “So what’s different this time? Why are we closer than we’ve ever been before? Because there are no cost controls in these proposals. Because this bill’s about coverage. Which is good! Why should we hold 48 million uninsured people hostage to the fact that we don’t yet know how to control costs in a politically acceptable way? Let’s get the people covered and then let’s do cost control.”
* “The real substance of cost control is all about a single thing: telling patients they can’t have something they want. It’s about telling patients, ‘That surgery doesn’t do any good, so if you want it you have to pay the full cost.’”
* “There’s no reason the American health care system can’t be, ‘You can have whatever you want, you just have to pay for it.’ That’s what we do in other walks of life. We don’t say everyone has to have a large screen TV. If you want a large screen TV, you have to pay for it. Basically the notion would be to move to a level where everyone has a solid basic insurance level of coverage. Above that people pay on their own, without tax-subsidized dollars, to buy a higher level of coverage.”
However, what the American public was told by Obama is that Obamacare would lower the cost of insurance by $2500. Now we know, even more than ever, that we were told whatever was necessary in order to make the bill palatable enough to eke out passage in Congress despite protestations from much of around the country.
You can read the entire policy brief here.
For more on Jonathan Gruber and Obamacare, go here
How “Obamacare Was Sold on a Pack of Lies”, go here
by | ARTICLES, BUSINESS, CONSTITUTION, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
The practice of asset forfeiture by the IRS has been highlighted in recent months due to a high-profile case involving a woman who had roughly $33,000 of her money seized by the IRS. The IRS claimed her “pattern” of depositing the money she earned from her restaurant — typically cash and often in sums under $10,000 — was suspicious enough to warrant the plundering of her account.
Several weeks after the public outcry about this woman’s plight, the IRS dropped the case and agreed to return her funds. But here’s the problem. It’s not enough to just give the money back. The IRS needs, at the very least, to pay civil damages. They took assets from a woman who committed no crime, who wasn’t even charged with any crime.
More importantly, the IRS needs to investigate how this case even came about. There was no preponderance of evidence that any crime occurred. There was virtually nothing. The case occurred because an IRS representative watched her accounts over a period of time, and decided – with no basis, investigation, or even inquiry with the taxpayer – that her method of deposits (for which she had a perfectly valid reason in connection with her perfectly legal, decades-owned business) violated a law typically meant to catch money launderers and drug dealers. That is reprehensible.
A few days after the article came out about the case, the IRS issued a policy change over the practice. The IRS stated, “the agency will no longer pursue asset forfeiture in cases in which the source of the funds is legal except in exceptional circumstances and only with the approval of the director of field operations.” This means nothing and changes nothing — because someone higher up on the IRS food chain can still sign off on cases, or when someone within the IRS deems it “an exceptional circumstance”. It’s not good enough.
If the IRS is sincere about regaining the public trust, it needs to clean house, starting with the agents involved in this and other similar forfeiture cases.
by | ARTICLES, ECONOMY, POLITICS, RETIREMENT, SOCIAL SECURITY, TAX TIPS, TAXES
They say March comes in like a lion and goes out like a lamb. That expression is also applicable to persons in their 80s — they go in like a lion and out like a lamb. As they start going along in those years, their ability to discern and filter out the problematic elements of society become worn down.
We see the elderly become more vulnerable to Nigeria scams, people selling them bad investments, being taken advantage of on the streets. It is incumbent for children, therefore, to protect their parents. They must think about their parents’ style of living as well as their physical and mental capabilities — preferably in advance.
As an accountant, I typically see three styles of living for older folks:
1) Independent — As parents get older, they try to work out a simple living situation. They will find a small, basic home to live in, usually comprised of one floor and no stairs, and relatively inexpensive. The parent wants to live on his or her own which opens the person up to some vulnerability, but hopefully the parents have a decent support network
2) Shared space — Here is the situation where a parent moves in with one of their children. Depending on the capacity of the parent, he or she can either contribute as a grandparent, or else carry along medical issues that will impact the household.
3) The independent living facility — This is a growing movement, which, in many ways, is also starting to become the best choice for many. With this type of facility, costs are not exceedingly expensive, and the ability to have medical help nearby as needed is usually seen as a huge benefit.
Whatever the case may be for choosing a particular living situation over another, it is imperative for everyone involved to plan in advance. Often it becomes too late and untenable to move a parent out into a home or an independent living facility because the parent, in their advanced age, does not or cannot make such a life altering change without difficulty, resentment, and confusion.
As people are living longer and more productive lives, the need to plan for the advanced years is best done early on, with everyone involved in conversations and calculations. There is no one-sized-fits-all approach, but whatever decision is made, should be a well-thought out plan that takes into account both dignity and finances.
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The rapid rise of public sector jobs is a cause for alarm. While the private sector still struggles with an anemic economy, the government has expanded its employment steadily throughout the economic downturn. A majority of private sector workers rightly believe that the public sector has better wage and benefit compensation than its private counterparts.
With the continuous expansion of public sector jobs comes the cost to the taxpayer to fund the numerous positions. In order to rein in the Leviathan, I propose the following: there should be a requirement that restricts any federal government employee from receiving a raise if it puts his compensation in excess of the wages and benefits paid for the same work in the private sector.
Such a restriction should include the cost of all benefits. Private companies have a several factors in place that help control runaway costs, chief among them being competition. The profit motive in the private sector keeps compensation at levels where economic factors limit them to their true market value, reflecting economically rational, “fair” compensation levels. On the other hand, there are no such competitive inhibitions in the public sector where politics and cronyism rather than economics create an “Alice in Wonderland” “negotiation” for wages and benefits.
By “competing”, per se, with the private sector for a raise, the government can help keep budget and deficits from soaring — and taxpayer from continuously being fleeced.
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Rubio is right and Rand Paul is wrong on the recent Obama deal with Cuba. As someone who spent more than 14 weeks over the last decade in Cuba, I can personally refute the following falsities that are being circulated by supporters of Obama’s rapproachment with Castro.
1) The Cuban people like Castro: This is a joke. Everyone knows if Castro speaks, they must listen on the radio. So they turn up the radio loudly in their own homes – it is common knowledge that there are informers on every block working for the Cuban government — and then they go into another room to avoid actually having to listen to his speeches.
2) Expanding American business will allow the Cubans to see what it is like in America: The Cubans already know what it is like in America — because they know how poor they really are. They just can’t do anything about it because there is such a tightly controlled police state. I recall speaking with a woman and her 12 year old daughter. The woman explained that they had virtually nothing to do. They just spent each day existing with no real life. But it brought tears to my eyes when the woman asked, “are we even more poor than the people in Afghanistan?” She had caught snatches of what was going on over there and from what she could tell, the Cubans were even poorer. Coupled with the fact that their government is brutal, they are resigned to the fact that they can do nothing to improve their own station in life.
3) The Cuban people are generally safe: This is also patently untrue. The police harass citizens for no reason and the people are afraid to travel about their country. There was one episode where I took some people traveling from one city to a nearby beach. Neither of our companions, ladies in their late 20s, had ever been more than 20 miles from their home. When we got to the beach, as long as they stayed with us, they were fine. But they took a smoke break for a few minutes away from us, and when they did not return after about 5 minutes, we went looking for them. We found the ladies being grilled by the police as to why they were not in their hometown. They finally released the girls back to our custody because we were foreigners with hard currency. From there we went on to Havana. The ladies were so afraid at the episode that had just taken place, they would not even dare emerge from the car when we arrived in Havana — even though these girls had never been to the city before. Their brief exchange with Castro’s police was that horrific.
The main reason to oppose this deal is that it will accomplish nothing other than put more money in the Government’s hands, allowing them to be even more brutal to their people. What the Cubans see is that we made a deal with their government, who has made their lives miserable for the last half-century. Rubio is right when he points out that this arrangement will likely do nothing to improve the lives of the Cubans — which should be the basis for any policy initiatives with regard to Cuba. Though I agree with many things Rand Paul has to say, on this issue, he is uninformed.
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Peter Shumlin, a Democrat governor from one of the most liberal states, made a jaw-dropping admission when he released his much-awaited plan for a single payer health system in Vermont. Shumlin’s proposal called for massive tax increases to pay for the system, which Shumlin himself called “detrimental to Vermonters”. Shumlin stated,
“These are simply not tax rates that I can responsibly support or urge the Legislature to pass. In my judgment, the potential economic disruption and risks would be too great to small businesses, working families and the state’s economy.”
Support for this proposal was tepid at best. His plan, which he eventually submitted after missing two financing deadlines, called for “businesses to take on a double-digit payroll tax, while individuals would face up to a 9.5 percent premium assessment.” Shumlin also stated that federal funding for the transition into such a health system was now expected to be $150 million less than originally planned, a huge amount of money at stake for such a tiny state.
Perhaps feeling the heat from the extremely narrow election in November (which he actually hasn’t officially won yet), Shumlin basically denounced his own proposal as soon as it was released. What’s more, Obamacare is particularly odious in his state right now as well, as Vermont shelled out some $400,000 in taxpayer funds to Jonathan Gruber, for health care “consulting”.
Shumlin is finally learning that, with socialism, you eventually run out of other people’s money.
by | ARTICLES, ECONOMY, HYPOCRISY, POLITICS, TAXES
Last week, Kathleen Sebelius peddled the idea that Obamacare is merely “a very bad brand” and blamed misinformation via “a lot of paid advertising” for it; she also calculated spending on anti-Obamcare ads to be around $400 million:
“So Obamacare no question has a very bad brand that has been driven intentionally by a lot of misinformation and by a lot of paid advertising and I think we may need to call it something, in the future, different. But it’s working and now people are getting coverage. I think by the time that the enrollment started in 2013, clearly we had a terrible eight weeks of website disaster, which didn’t help. But by that time there had been $400 million worth of ads that had been run against the law”.
The problem with the narrative is that the Administration spend nearly $700 million during the same time frame touting the law. What’s more, even the government’s own advertising used the term “Obamacare”, which completely dispels the idea that Obamacare is “a very bad brand”.
Three days after the close of the first enrollment period, Washington Free Beacon gave a rundown of various federal and state costs associated with advertising Obamacare. The amount, compiled by the AP, was calculated to be $674 million for TV, radio, social media, and print advertising. The Obama Administration also took some some unconventional approaches to reach various audiences, including cartoons, a hippie playing the guitar, “doge” memes, cat GIFs, and paying NFL teams. You can read the detailed breakdown here.
And what about those government advertisements? Most of the ads paid for by the federal government with your tax dollars used the term “Obamacare” in them. For instance, remember the particularly visual ads run for the Colorado exchange? You can still view them here, at the catchy “Do You Got Insurance” website (can we at least use proper grammar?) EVERY single one of the ads has “thanks Obamacare!” emblazoned on them. That is the very definition of “branding” right there.
The Obama Administration embraced the term Obamacare because it was supposed to be the signature policy of Obama’s presidency — until disaster after disaster occurred: the website went awry, enrollment was under projection, Jonathan Gruber spoke out; you name it. Ad nauseum, ad infinitum.
Just how much as the Obama Administration paid to advertise Obamacare? No one actually knows. In September, 2014, the Government Accountability Office (GAO) explicity reported that the Department of Health and Human Services Centers for Medicare and Medicaid (CMS) “did not provide estimates of fiscal year 2014 obligations for certain categories of Center for Consumer Information and Insurance Oversight-related transactions, such as advertising and other public relations activities.”
And that’s not all the GAO report found, with regard to Obamacare spending. The report also stated,
“GAO was unable to consistently verify the reliability of the data received from CMS. Specifically:
GAO was able to determine the reliability of CMS’s estimates for total obligations for fiscal year 2014, which was $3.7 billion; the number of staff as of September 30, 2013, which was 347; and total salary expenditures from March 2010 through fiscal year 2013, which were $79.8 million.
GAO could not determine the reliability of any of the other financial information CMS provided because CMS’s core financial system did not produce totals for much of the CCIIO-related information requested. For example, the system did not produce expenditure totals for CCIIO-related polling, focus groups, or advertising and other public relations activities because of how these activities are captured in the system.
Similarly, information related to reassignment of staff to CCIIO from other CMS and HHS units was not readily available. Consequently, the staff reassignment information provided to GAO was not complete, was not supported by documentary evidence, and could not be verified.”
So, $3.7 billion was spent on Obamcare for Fiscal Year 2014 alone — we just don’t know where. For Kathleen Sebelius to whine about $400 million in advertising against Obamacare just goes to show the depth of desperation for the Obama Administration to blame someone, anyone, for the failure that is Obamacare. And that the most toxic part of the brand Obamacare is “Obama”.
by | BLOG, BUSINESS, ECONOMY, ELECTIONS, FREEDOM, GOVERNMENT, OBAMA, POLITICS
Friday before Election Day, the Obama Administration via the Department of Education released a “gainful employment” rule applicable to higher education, which singles out a particular type of learning institution: the for-profit school. The new regulation will prohibit students from being able to receive federal student aid “unless the program can show that their graduates’ annual loan payments do not exceed 20% of discretionary income, or 8% of total earnings.” The Department of Education essentially surmises that for-profit schools do not produce quality programs.
Basically this new rule will throw many for-profit colleges out of business. It’s not the first time a regulation of this kind has been issued, either. A federal court struck down the first attempt put forth by the Administration back in 2012. And yet, this newer version is more stringent — with 7 times as many programs likely to not pass standards/criteria for “gainful employment” now. The estimate is that around 1,400 programs educating 840,000 persons will fail the new magical threshold.
The Administration has stated that the goal of the new rule is to “protect students”, and that the rule is necessary “to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes.” However, the rule is not applicable to public and nonprofit institutions. When pressed for the double standard during a congressional hearing on the topic last spring, Education Secretary Arne Dune said that “development of the college rating systems would address the rest of higher education”. That is a cop-out.
So here we have an Administration interfering with the ability of adults to pursue the educational path that best fits their needs by limiting their choices through the deliberate withholding of financial aid assistance from certain schools or programs that the government deems unfit. The government has chosen to redefine the term “gainful employment” in such a way that many career pathways will now be closed at a myriad of institutions that have previously educated many — especially a large number of poor and/or minority persons. These students quite often lack parental financial assistance anyway, and now removing the option for financial aid adds another barrier to upward mobility.
This ridiculous regulation was opposed in a signed letter by 18 members each of both the Republican and Democrat parties last spring, many of whom are minorities, citing their concerns for its adverse affect on low income students and those from non traditional backgrounds. However, their non-partisan approach fell on deaf ears.
Our country has many options for education — some students thrive a four year public institution; others, a community college or small private school and still others, a for-profit institution. Though Obama has consistently championed college education, this rules changes will make it harder, not easier, for a segment of the population to become a college graduate.
Another troubling aspect is how the rule measures debt. The WSJ points out that, “if the department were merely trying to protect students, then Mr. Obama’s “Pay As You Earn” plan that caps loan payments at 10% of discretionary income would make the rule moot. This is why the rule doesn’t measure graduates’ actual loan payments, but rather the median amount of debt they incur amortized over 15 years for bachelor’s degrees. Many students take up to 25 years to repay their loans.”
And more: “This economic reality is why the Administration is steering students toward loan forgiveness plans like Pay As You Earn. Grads who find non-gainful employment in government or at a nonprofit can get their loans forgiven after 10 years of modest payments. So the White House is encouraging graduates to pursue low-paying jobs in “public service” even as it punishes for-profit colleges whose graduates do precisely that.”
The Administration is once again picking winners and losers, this time in the realm of education. The new rule essentially encourages students to pursue their education — but only at places whose programs and operations are subsidized by taxpayer dollars.
