Archive for the 'Current Events' Category

Taxes and Entitlements

Thursday, April 16th, 2009

I’ve recently read a couple of stories on the web that had a common element to them. This one from John Feehery CNN is one I’d like to comment on. Not knowing just how long CNN will keep this link live, I’ll summarize his points here. The title of the piece is “Commentary: What’s driving the U.S. over a cliff?”. In it he addresses 4 questions which he claims are relevant. With one underlying theme being that most people want the government to spend less on everyone and everything other than the benefits they personally rely on. (well Duh! Welcome to America – home of Created Equal, as long as I’m first.)

First, why do we let people retire too early and then expect them to live so long without working? He points out that long ago, before real antibiotics, most people simply died before they retired. They died on average around the age of 52 and those that made it to 72 typically retired. Nowadays, people retire 10 years earlier and live significantly longer. So, how is it that people have come to expect that they should retire so early only to be carried by the government entitlement programs?

This is a very sensitive subject. Quite frankly I think 30 years of service is enough. I’m not talking about the 40 quarters spread over 30 years that qualifies folks for Social Security either – 30 years of work. If you put in 30 years I believe you are tired of working and entitled to retirement. The real rub comes in when you talk about inflation, especially in the cost of medicine, and the fact that folks will continue to live longer and longer. Right now we (the US) live 3 months longer for every year that goes by. Soon, we will be seeing life extension that exceeds 1 year per year. When that happens, a whole lot of people are not going to die except by accident. Tinkering with the Social Security taxes, ages, and benefits will not be able to handle that problem. There needs to be a different solution altogether.

Second, why do most Americans spend so much of their health care expenditures in the last three months of their life? His statistics show that 27% percent of medicare costs are incurred by people in the last 3 months of life. Rightly, he equates this to services that do not work. Medical treatment that does not change the outcome.

What he did not say is that in the old days people simply died rather than do everything within their (or the government’s program’s) means to get a little more time. At what level of quality? Is this linked to the decline in morals – which are certainly linked to the decreased importance of religion and the associated increase in the fear of death? We certainly need to have an open discussion/debate of how much effort/expense is appropriate, but once again it is not really the effort, just the expense.

Third, why do so many people pay nothing in federal income taxes? The numbers are pretty shocking. A third of the people in the US pay no federal taxes – at all. The new tax changes working their way through congress could potentially raise that to nearly 50%! This indicates one of two things: either we have a lot of very poor people or some folks aren’t pulling any weight (I won’t get into a discussion of what “their fair share” might mean – you’ll find some of that over at Hooda Thunkit although I’m not quite clear where he stands on the issue).

I think the income and inheritance taxes, both personal and corporate should be scrapped – completely. In its place I would propose a Value Added Tax (VAT). This VAT would also include the costs to government for things like infrastructure (roads & bridges) and other uncovered costs (tobacco and alcohol taxes as well as a carbon tax – not a cap and trade system) so, it would have different VAT levels depending upon the product. This assures that those who spend support the system and those that save/invest provide the growth. Things will and should cost more in many cases – we’ve been living a false sense of wealth or a false low rate of inflation for too long. If you think the projections are bad now, just consider the fact that these same non-tax-paying demographic groups are also those that rely heavily on entitlements and are proliferating more quickly than those that pay the taxes. They vote too so, any change had better come pretty quickly.

Fourth, why is it more profitable to work in the government than to work in the private sector? His fourth and last point is that the statistics show that the average wage/compensation of a public worker is much higher than that found in the private sector. He concludes that public servants are simply over paid.

Show me how many public servants work in fast food restaurants, wash cars, clean houses, or answer phones for a living. Otherwise, make your case for why police, fire, military workers are on the same level and should be paid the minimum wage. Let’s also take the salaries of the president and those in other leadership positions in government and compare them to the CEOs of major corporations. You guessed it. This is simply a case of comparing apples to oranges. No firm conclusion can be drawn from those averages he sites and draws his outrageous conclusion from.

Since I agree with the basic premise of the title of the article – that we are indeed driving off of a cliff – what is the real problem and is there a solution? In my biased view, the problem is that we have shipped a lot of the work out of the country. It has taken a good 20 years to do so, but we have stopped being a producer and become simply the market for the goods of others. The theory that supported this switch was that we needed to send our money overseas so that those folks could raise their standard of living and buy more of our stuff. The problem is that they don’t want our stuff. If you doubt that just look at the trade deficit for the past 20 years. A lot of that money just never makes it down to the average person, but they also do not have the same style of living that we do. They aren’t going to buy a CD or rent a movie or get on a plane built in the US and take a vacation in Las Vegas. It just ain’t gonna happen.

Instead of raising their standard of living we are and have been lowering ours. Some of that is in hidden inflation, but as we are now beginning to see a lot of that will simply be realized through decreased valuations of property (of all types) and a loss of jobs -  for good. The cliff we are driving off of is built out of high expectations. We are not entitled to very much let alone living so well at the expense of others. I had a discussion at lunch recently with a renowned economist, Jeffery Sachs. I had just asked him whether inflation was required to keep the economy functioning – basically whether it was just a giant ponzi scheme. He dodged the question I asked, but said that it was much easier for folks to accept inflation than it was for the system to absorb rapid decreases in prices. I read between the lines of his reply to my unanswerable question and saw that I may have hit the nail on the head. The cost of a lot of things is going to have to come down. Whether this is by inflation or deflation does not matter. The result is that the value in producing those things will require that wages in those related industries to come down or jobs be completely eliminated through automation.

It is a tangled web especially when you, for example, look at the intertwined industries of medicine, insurance, and lawyers. Who could possibly put a price on life? The balance of a market economy is not relevant in this instance. Looking at the long-term budget of the US, the cost of entitlements and their growth is dominated by the growth in medical costs. I seriously doubt whether congress can come up with and pass a plan that will solve this problem. It is our problem only, because we expect too much from the system. We need to change, personally, and not push the problem over to Washington for congress to solve. We must accept the fact that we are spoiled and expect too much.

Except for me that is. (and so it continues)


Friday, February 27th, 2009

I’ll be short and to the point. Someone submitted one of my flickr photos to digg and it made the front page. Holy Moses! I’m glad I was not serving that from here. It ended up getting 70+ thousand hits on flickr in 3 days. Most of that came on the first day. But that is not the point of this post.

Boy has digg turned into a bunch of whiny self righteous negative nincompoops! I guess digg is old enough now to have turned into just another /. So where is the next digg? I need a new home for tech stuff where the tech still outweighs the stuff.

Stimulus Package

Saturday, February 14th, 2009

Well, the stimulus package is all but signed into law. Looking through the details, I see that (other than getting the bill to pay for all of this spending) I qualify to deduct the sales tax off of any new car I buy this year. Whoop-de-frickin-do! If only someone made a car that I would actually want to buy.

I also note that NASA is getting $1.0B which is down yet again from the $1.5B which had been reduced to $1.3B. I need to dig a little deeper to see how all of the new money is allocated within NASA. I did submit a couple of proposals to the agency in response to their call for ideas on what could we do right away with a stimulus augmentation. I think there may still be a chance of getting at least one funded.

Nasty Game of Chicken

Saturday, January 17th, 2009

It just dawned on me. Why did it take so long? The economy is in a tail spin. People are losing their jobs, their homes, and their dignity. Oil is plummeting. Companies are going out of business. Prices will soon begin to drop on just about everything. The vultures will watch and wait for the onset of the stench of death. The spiral will tighten and pick up speed. … and then they will step in and start buying. It will be those that have survived: people, corporations, banks, & governments. Paying pennies on the dollar, they will scoop up everything and then breathe life back into the economies.

It is a nasty game of chicken – one that I do not want to play.

Caroline Kennedy

Tuesday, December 30th, 2008

Well as long as I’m taking shots here today. Caroline Kennedy is, “ya know”, not exactly qualified for the Senate – by any stretch of the imagination. Simply being a Kennedy is insufficient qualification. She’s been, for all practical purposes, in hiding for decades and now pops up (with someone) wanting to make certain that there is a Kennedy in the Senate. There must be several other truly qualified and established public servants in NY that should be higher on any one’s list of potential appointees. Is this simply an ongoing media love affair with the Kennedy name or something more behind the scenes?

Oh (now for a cheap shot), and what is with that nose/spoiler/winglet thing she has going on? Has she been trying out for a part as an alien in Star Trek (Worf’s long lost half sister or something)? It certainly, “ya know”, looked better on her mother. If she makes it to the Senate at least the cartoonists will have a bizarre facial feature to grotesquely caricaturize.

Middle East Peace

Tuesday, December 30th, 2008

I’m going to cross a few lines here. If you disagree, please feel free to comment. I’m open minded and can be persuaded to change my point of view. Having said that, here I go.

First some context, I think it was arrogant and short-sighted when Israel was created after WWII. The local population did not see the Empire as having the authority to redraw the map and give away their land. I believe this act is the root of the current hostility. I can imagine other things contributing, but this is certainly the main problem. If this is true, then there can only be two long lasting solutions to the problem.

There have been so many attempts to solve the Middle East problem that there isn’t enough room or time to summarize them in a meaningful way. Let me just say that there has been a lot of give and take, but there has never been an agreement where every one of the parties that needed to partake could fully support. There are now so many factions in the area that is it is virtually impossible to get complete agreement.

These agreements and cease fires are tenuous at best partly because of the eye-for-an-eye Israeli way of neighborly foreign relations. All it seems to take is for a small group of neredowells to lob a few rockets over the border and we are where we are today – AGAIN. Honestly, I really can’t blame them. I have a hard enough time keeping my neighbors from driving on my lawn as they back out of their driveways. It is a good thing I do not own nukes, but I digress. The Israelis are not without blame. They do have a tendency to overuse bulldozers and erect settlements in sensitive areas with a thumbing-their-nose attitude.

I do not have a solution to the problem. I’m not that smart. Well I do have a solution, but it is a certainly too heavy handed. There are surely too many weapons in the area and they are in the hands of too many autonomous factions whose power is derived from sustained hostilities. If the neighboring governments had any control and authority over their countries and populace, there might be a ray of hope for peace in the region. As it is now, it reminds me of our Wild West days. I would not be surprised if things get very very heavy handed in the coming weeks.

I have a hard time decoding the oft quoted ‘we have a Special Relationship with Israel’ concept. I do believe that we have a fundamental responsibility for creating the problem in the first place. Honestly, if all of this was happening in the middle of Africa, like so many other and more horrible things are occurring today, we really would not care so much (not that we should not care). If it were not for the potential disruption of the flow of oil from the region and it, therefore, became just a moral issue as opposed to an economic issue, I do not think we would have a ‘Special Relationship’.

So other than making me feel a little better, where does this leave things? Although we would like to think of ourselves and the world as civilized, we are far far from it. We are too obsessed with Our Needs, Our Desires, and imposing Our Way on everyone else. We appear incapable of caring about anyone else, especially if they are not just like us. Civilized – yeah right!

Merry Christmas!

Wednesday, December 24th, 2008

Another year has just about passed and it is always a good time to look back and reflect. A lot has happened this year, some good and some bad. For us it has been good enough in that we are all still here and in reasonably good health and spirits. We hope the same is true for you and wishing that the next year will be better than the last.

Merry Christmas and Happy New Year!

Deflation Threat?

Wednesday, December 17th, 2008

I was just reading this story on CNN and began thinking (always something to be worried about). In the old days, deflation was a worry because the reduction in prices meant cut backs in production which led to job losses and salary decreases which then reinforced the deflationary cycle. Those were the old days. Now we hardly produce anything here – in the US – anymore. The production is overseas. Yes we still have sales jobs here, but even those are being phased out thanks to the internet. Cutbacks will surely include a reduction in advertising (thank God!). What we tend to ‘produce’ now in the US are services and intellectual property (something large parts of the rest of the world do not even recognise). The MPAA and RIAA members really do not have much cost tied up in production so they can easily reduce prices along with the reduction in demand. Many service industries (like medical) are simply not discretionary spending – so they are safe.

What is really going on here and is it something to worry about? It will not be painless, but all I see is a reduction of this mindless consumerism that is destroying the planet. As technology progresses we will eventually have to face the prospect that most people will not have to have jobs – and I’m not talking about living on the dole either. There simply will be very little reason to ‘work’. It is going to happen and when it does we had better be socially ready for the consequences. Perhaps a bit of deflation will serve as a test of how we will deal with our inevitable future.

GM near death

Friday, November 7th, 2008

I understand the argument that saving GM with a $25B “loan” might prevent an $80B shock to the economy, but who can say whether $25B will save them? GM does not produce a quality product that the consumer wants. If they did they would not be in trouble now would they? Then there is the other problem of the high cost of union labor. I’m sorry but I do not believe that a guy/gal with just a high school degree and a union job should be earning $100K+/yr putting parts of a car together.

If GM can come forth with plans/agreements that cut the cost of labor in half, build cars of the future (i.e., don’t rely solely on giant internal combustion engines), and do so with a quality product – I’d be in favor of a loan. Otherwise let them die and well pick up the pieces later. I still think they should be building wind turbines instead of cars.

Election Prediction

Tuesday, November 4th, 2008
2008 Sticker

2008 Sticker

I’ve cast my vote for president and was pleasantly surprised that I had virtually no wait to do so. I’ve been playing with some on-line electoral simulators recently and predict that the winner will end up with 338 electoral votes. The shocking news came this morning when I read and realized that Karl Rove chose exactly the same state-by-state outcome that I did. Very scary.

If you have not done so already – Go VOTE.