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The best analysis of our precarious national debt situation is at JeffVail.net today. China is in between a rock and a hard place. Don’t underestimate their ability to turn aggressive if they see that as their only option. They can’t dump Treasuries because that would lower the value of the remainder of their sizable holding. On the other hand they don’t want to keep buying everything we offer as that ties them too closely to our economic future.
Jeff rightly points out that China is trading our treasury notes to buy things of real value (mineral assets, etc.). Should China not be able to buy items of value, they will be less likely to purchase Treasury notes. If Uncle Sam can’t sell T-bills to China, where will the money come from to continue our wild government spending spree?
From the title above, it sounds like I am prejudging President Obama. In fact, I think I am judging based on what he has said/written. I have read all that was posted on the subject on his Campaign Website (www.barackobama.com) and many blogs and posts on both sides of the aisle. I have been following his public statements. What emerges from Mr. Obama’s election campaign and his first two months in office is a “plan” that hits all the main points of the debate and gives lip service to the problems. It promises reform, cuts, and efficiencies, but few and vague details. For example, he claims the average family will see its health insurance “costs will go down by as much as $2,500 per year.” He implies that your healthcare cost will go down. But, what he says is that your health insurance cost will go down. He mentions only improved technology, competition, better prevention techniques, etc. He mentions nothing of increased deductibles, or cost shifts to the government. In short, he has left enough wiggle room to drive a hospital through it.
It is my intent to do 4 posts (after this intro) on Mr. Obama’s Healthcare Plan. This first post will list and briefly discuss the chief issues currently being discussed regarding the US Healthcare Delivery System as it exists today. The second will discuss the substance of the Obama Healthcare Plan. The third will look at the pros and cons of what Mr. Obama offers. Last will be my opinions as to what needs to be done and how it resembles/differs from the Obama Plan.
The Basic Issue: The Healthcare Industry now accounts for approximately 17% of our Gross Domestic Product, or an annual cost of about $2.5 Trillion. That works out to more than $8,000 per man, woman, and child in the United States. Yet, with all this money allocated to our health, it is estimated that between 45,000,000 and 50,000,000 people lack formal health insurance coverage. In spite of amazing new drugs, new procedures, and new medical equipment, our National Health does not seem to be getting any better. Most agree that the delivery of health care is uneven and could be improved. Many people have little access to quality health care. Employers can’t continue to pay for family healthcare for their employees and are shifting costs to the employees.
The Specific Issues:
1. Cost – Is the price of adequate healthcare too high? Does the cost drive people from the system and make them rely on emergency health care only?
2. Healthcare Delivery – Is the delivery system flawed? Does the market system of allocation actually exist as it pertains to healthcare delivery? Or is allocation of services set by current government controls and/or economic realities? Do HMOs work or is there a better method of allocating healthcare?
3. Prescription Costs – Why are pharmaceuticals priced so much lower in almost every country outside of the USA?
4. Legal Costs – Do malpractice lawsuits and the protection against lawsuits increase the cost of our care out of proportion to the benefit provided by the legal remedies we now have?
5. Prevention – Does our healthcare delivery model neglect prevention as a tool for national health care?
6. Portability – Does a system make sense that would allow a person to retain his or her healthcare coverage inspite of where he or she might work?
7. Insurance – What part should be played in Medical Care by insurance companies?
8. Stem cell Research/Cloning/Abortion/Euthanasia/Assisted Suicide – Should there be national policy on “reproductive rights” or “assisted suicide” or “cloning humans,” etc.? Or, are these purely ethical issues that should be moved away from government action/interference? Are they better considered at the State or local level?
Beware. This is one subject about which I will pose more questions than I will try to answer. Your participation will be most helpful in making this worthwhile. If, for example, I have missed a major issue and a commenter recommends it, I will try to add it to the debate.
Am I the only one who found that a strange thing for the President to say?
In answer to the question about why he didn’t show outrage at the AIG bonuses for days, President Obama responded, ”because I like to know what I’m talking about before I speak.” Really?
How does this square with rushing a “stimulus bill” through Congress and then signing it immediately, without even giving anyone time to read it? Or how about Mr. Obama’s emergency rush on the Omnibus Appropriations Bill that was also signed before there was time to consider the 9000 earmarks?
I think saying ”because I like to know what I’m talking about before I speak” was, at best, a shot from the hip without the aid of a teleprompter. It sure came across to me as disingenuous. I think it was a very crafty politician carefully studying the public reaction and then calculating how best to use the situation to his advantage. Like they say in the Obama Administration, “Never waste a crisis.”
Where is the change we were promised? This is pure and simple politics-as-usual in my book. Maybe the change is that we are getting more of it.
My son Jeff has a very interesting post today regarding the Obama Administration plan to handle the “toxic assets” in the portfolios of most financial/banking companies.
It implies that in the rush to put together a plan, Mr. Geithner has failed to see a major flaw in the plan. One wonders if Mr. Geithner is being kept on just as a lightning rod to protect Mr. Obama. From the hue and cry that I hear, he does not hold the position because he is qualified or experienced enough to do the job.
There is no doubt that Mr. Geithner is deflecting negatives about handling the economy from his boss. Is this a short term gain for Mr. Obama but a long term disaster in the making for all of us? Could this sort of incompetence doom our financial ship?
If Congress passed and Mr. Obama signed a bill requiring that every family in America immediately be paid a “Stimulus Incentive Payment” of $ 500,000, the economy would turn around tomorrow. Most families would be able to retire their mortgage – poof, the mortgage mess is solved. Those assets would be solid again. Most families would also be able to buy that new car they have been putting off buying – poof, the Auto Industry is humming again. Lots of families would take that vacation they have put off for years – poof, the Hospitality Industry is back on its feet. Entrepreneurs would take advantage of this time and money to start the businesses based on the ideas they have harbored for years. Yes, $500,000 to each of about 100,000,000 families would be about $50 trillion. And, yes, there would be some that would not be helped by all this money, like those who manufacture product in the US to export or those who make a living importing cheaper goods from abroad. But, think of it. Every family with a paid off home, a new car, a Hawaii Vacation. Wow. What a solution. Why didn’t Mr. Obama Think of This?
••••••
There have been a lot of solutions to the financial mess floating around recently. Most of them make very little sense. My personal take is that if the government leaves well enough alone, things will normalize. Yes, many businesses and institutions will fail. But, since nature abhors a vacuum, other enterprises/institutions will take the place of those who fail, if there is a real need. Letting our Government try to buy our way out of this mess seems to me to be the least likely plan to succeed.
This is the solution currently being tried by the new Obama Administration with the willing assistance of Congress. That is, to spend our way out of the mess and to have the spending guided by government agencies. If Congress and Mr. Obama continue to spend at the rate they have since they took office, our government will spend about $50 Trillion in four years. That assumes that about $2 T have been spent in the first two months of this administration. This may be high and I certainly hope the rate of spending slows dramatically, but, humor me and let me use the $50 Trillion figure.
If our government spends $50 Trillion, that will be about equal to the Gross Domestic Product during that same period. In other words, to raise that much in taxes would take a 100% confiscation of all value added to the economy by the people of the United States. This assumes our GDP is about $12.5 T. per year. It is actually more like $14.5 Trillion. Inflation is the most regressive tax. It increases the cost of a loaf of bread by the same amount for a millionaire as for a welfare mom.
What would be the effect of this massive infusion of money into the economy? My opinion is that one really significant effect would be inflation. If we assume that we are planning on doubling the amount of currency in circulation, we can also assume that we will halve the value of the currency. That means that the value of the cash you hold will be half of what it was before the massive spending began. That means your dollars will buy half as much. In fact, it means that your government will have taxed all your cash and your income by 50% without ever collecting a penny of tax. That, of course, is on top of the fact that you are being taxed on average about 25% of what you earn. (That is based on 12.6% average Federal Income Tax, about 3% state income tax, about 6% sales tax and about 4% in property taxes – these last three numbers are guesses and vary widely by state).
This assumes the amount of currency is only doubled. The amount of currency in circulation is now in the neighborhood of $1.5 trillion. That means that injecting $50 Trillion into the system could increase the currency by over thirty times. Visions of Germans taking wheelbarrows of currency to the store to buy bread come to mind.
If you do not regularly read Scrappleface, you are missing some of the best political satire on the web.
Scott Ott is just plain brilliant. Witness his post today.
Scott is not just blogging for fun. He is putting his money where his mouth (pen?) is. He is now running for office (Lehigh County Executive, Pennsylvania) to put to work the principles he feels have made our nation great. Should he win, even if he doesn’t do a good job, there will be far more happy people in government than there were before.
I wish Scott the best of luck.
By getting everyone (well 90% of everyone) in the country angry at those lazy, greedy, rich, thieving AIG executives who got “retention bonuses”, open war was declared against one class of Americans today. I don’t know how you would label the class but it might be something like the “Elite Executive Expletive” Class. It’s not easy to label classes in America since we are largely a class free society. In any event, most of us are being convinced we should hate them and do what ever we can do to get back at them and get a “fair” result for “taxpayers.”
Today we watched class warfare create some of the worst legislation in history. Every Member of the House should be ashamed. The 328 spineless ones who went along with this farce should be both ashamed and run out of town.
If, in the name of “fairness,” our Congress can take 90% of legally paid wage or bonus from one class, when will they come for yours?
It seems that Senator Dodd now is admitting that he wrote in the loophole to his amendment contrary to his many protestations to the contrary yesterday. Watch as he backpedals about a dozen times saying “they” made him do it or his amendment would have been thrown out all together.
He also blames it on staff, on the Treasury Department, the Administration and anyone else he can think of. He did the best he could for all of us. His denial yesterday was just a minor confusion about the date, not an outright lie and coverup. Right.
Mr. Obama joined Congress in decrying the bonuses given to the AIG execs. He was incensed that a Company that was given $170 billion taxpayer dollars would have the gall to give out $165 million in bonuses to retain key executives. So was almost everyone in Congress.
“It’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay,” Obama said at the outset of an appearance to announce help for small businesses hurt by the deep recession. “How do they justify this outrage to the taxpayers who are keeping the company afloat.” Obama said he has asked Treasury Secretary Timothy Geithner to “…pursue every legal avenue to block these bonuses and make the American taxpayers whole.” All this is according to the Huffington Post, normally quite sympathetic to President Obama.
The folks at Huffpo didn’t, however, mention that this was a special ‘pet project’ use of one, one-thousandth of the money they were given. So a diversion from the intended use of a tenth of a percent of the money has Mr. Obama hopping mad.
Let’s compare that with Mr. Obama’s reaction when questioned about signing the Omnibus Appropriations bill which was written to bail out our government until the next budget cycle. It contained 8500 to 9300 (depends on who is counting) earmarks worth somewhere north of $12 Billion. Mr. Obama said, “I am signing an imperfect omnibus bill because it is necessary for the ongoing functions of government. But I also view this as a departure point for more far-reaching change. The future demands that we operate in a different way than we have in the past,” Obama declared. “So let there be no doubt: This piece of legislation must mark an end to the old way of doing business, and the beginning of a new era of responsibility and accountability that the American people have every right to expect and demand. . . . That’s the government I promised. That’s the government I intend to lead.”
Doesn’t sound hopping mad to me. In fact, it sounds like he said he knew he was signing a bill which diverted $12 Billion of the $410 Billion away from the intended purpose of the bill. And he did so without so much as an “I’m Sorry.”
So if Mr. Obama diverts to improper uses about 3% of the Appropriations bill, that is okay. If Executives (from a company being bailed out by money from the same taxpayers) divert 0.1% (one thirtieth as much as was diverted in the Omnibus Bill) of the funds they have received, it is an “outrage” that requires investigation and someone’s head on the block.
I wonder when the politics-as-usual will stop and Mr. Obama will start to deliver on his promises. The smart money is betting it won’t be anytime soon.
The country is all abuzz about the Arrogance of AIG. To have paid out approximately $165 Million in “retention bonuses” after being bailed out to the tune of about $170 Billion takes some real guts, or arrogance. Really?
The bonuses that Congress (and in particular Democrats in Congress) find so offensive are the very ones that were exempted from restrictions on pay in the Stimulus Bill passed in such a hurry last month. Senator Chris Dodd, a Democrat from Connecticut and Chairman of the Senate Banking Committee, amended the Stimulus Bill to restrict the salaries and bonuses paid to “bailed-out” companies. Included in his amendment was an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009.” It is assumed that he did this to ensure that the companies had the tools necessary to keep the people most important to guiding the companies back to financial health. Without the ability to give bonuses to key individuals, it is likely that the most capable people would have left the sinking ships.
To hear Chris Dodd today, he is aghast at these very bonuses and wants them stopped. Either he has a very short memory, or he is a hypocrite of the first order, or, someone changed his amendment. If someone did change his amendment (and you can bet it wasn’t a Republican since they have no power with which to pull off a trick like that)it is still the fault of the President and the Democrats in Congress who forced the bill through before anyone had time to read it.
To top it off, during lasts year’s election cycle, Chris Dodd received more money than any other candidate from, you guessed it, AIG. You could consider the $103,000 AIG donated to Mr. Dodd, as his bonus. Until the public became recently enraged at AIG, it looks like their “bonus” to Mr. Dodd was a wise investment, far wiser than many other investments that the company made.
Who do you think got the second highest sum from AIG in last year’s elections. Barrack Obama received $101,000. To be fair, AIG hedged its bets and gave $60,000 to John McCain (third highest on their list of bonusees) and $36,000 to Hillary Clinton (fourth highest on the bonus list).
I’m still convinced that the Stimulus Bill was rushed through so that special favors like this could be passed without ample time for the public to respond. I have serious doubts that Mr. Obama or Mr. Dodd will ever fess up to any of this. Is anyone asking Mr. Obama and Mr. Dodd to give back their bonuses like they want the AIG Execs to do? Is anyone chastising Congress for mishandling this whole thing. Actually, yes. Regarding who might have removed the bonus ban, even Huffington Post said, “And, so far, no one in the administration of a president who promised that transparency would be a “touchstone” of his presidency has demanded that whoever killed the provision step forward and own up to it.” In other words, in front of the TV cameras, everyone is crying foul and yelling at the evil executives from AIG. Away from the cameras they aren’t even interested enough to look into who might have made a change to their bill.
Is it possible that nobody changed it but it makes a good story/alibi? Is it possible that this might have been caught if Members of Congress had had time to read the bill they were in such a hurry to pass?
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