Category Archives: Economics

Miscellaneous economy stuff

A Thought on some Taxes

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Romain Hatchuel, Square Advisors LLC Managing Partner, has an excellent op-ed in The Wall Street Journal, but I want to comment on one small part of it:

In his November investment commentary for bond giant Pimco, [billionaire investor Bill] Gross asks the “Scrooge McDucks of the world” to accept higher personal income taxes and to stop expecting capital to be taxed at lower rates than labor.

Gross is right, partly.  The use of tax code to effect social engineering does not achieve the goals of the “engineering” effort, but it does effect coarse distortions in a free market.  These distortions range from slanting business decisions toward (or away from) debt according to the differential ways in which debt interest and capital gains are taxed; they impact individual investment decisions according to the way debt interest, capital gains, or dividends are taxed; they even distort the price (and so availability) of housing according to the way in which mortgage debt interest is taxed.

Capital should not be taxed at a lower rate than labor.  Businesses should not be assessed tax at all—the ones who actually pay those business taxes, after all, are the final customers—us—as that tax bill-as-cost-center gets figured into the prices charged.  Nor should there be deductions, credits, etc on individual income, with or without variation according to the source or amount of income.

Contra Gross, though, a single, low flat rate that every individual pays on the total of that individual’s income would achieve a market neutral tax that would impose the minimum of distortion on the market even from the tax’s existence (a 10% rate that everyone with an income pays even would represent a significant increase in total revenue to the Federal government).

Banking Regulations

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Are they anti-bank?  They’re certainly in the way of getting new organizations into the banking business.  The total number of banks in the US has fallen from a peak over 18,000 to under 6,900 this year.  The first new bank to be Federally chartered since December 2010 [sic], the Bank of Bird-in-Hand in Bird-in-Hand, PA, opened last week after spending 7 months in charter Hell working on getting permission to open.  Here’s a sample of what BiH had to go through to be allowed to operate as a private business.

  • [T]he backers behind the Bird-in-Hand group raised about $17 million from investors.
  • Brent Peters, Bank of Bird-in-Hand CEO, estimated the group spent about $800,000 in preparing its application for a new charter
    • consulting and legal fees
    • rent on a temporary office
    • salaries of top managers, four of whom were on the payroll one month before the bank won FDIC approval
  • [L]ay out internal policies and procedures in detail
  • [S]pecify the systems in place to, for example, guard against cyberattacks
  • Paid consultants analyzed the local lending market and the feasibility of opening a bank there
  • The FDIC interviewed senior management and contacted banks competing nearby

All that because the feasibility of doing business and that business’ internal practices are for government to determine, not that business.

Government asks competitors what they think because competitors get a voice in whether a new bank should be allowed to operate in their territory.

Sounds pretty anti-bank to me.

Union Leadership Greed in Illinois

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Details of a plan reached last week appear to show [Illinois] state legislative leaders are attempting to solve Illinois’ $100 billion pension crisis in part by changing workers’ retirement age, reducing automatic pension increases, and limiting their collective-bargaining privileges.

Public union leadership disagrees with this, though, and they’re turning on that Democratic Party leadership.  These union leaders consider carefully selected and targeted Democrats to be “persuadable,” and these unionists are going to do some “persuading.”

Never mind that the plan will save roughly $160 billion over 30 years, according to Governor Pat Quinn (D) and the leaders of the Democrat-controlled State Assembly.

Illinois’ public sector union leaders object to their unions paying their fair share.  They have theirs, and to Hell with anyone else, to Hell with the fact that Illinois is bankrupt in every way but the filing.  Pay up, suckers.

A Cost of Obamacare

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Anecdotal, certainly, but anecdotes are data, and they can accumulate into trends.  This one comes from Fox News‘ “Kelly File.”

One late-middle-aged family with two college-age children were paying $500/mo for a health insurance plan that suited their needs.  President Barack Obama’s Obamacare, though, termed that plan inadequate and so illegal: the family got one of those ubiquitous cancelation letters.  The new health “insurance” plan they got runs them $1,250/mo.

With that explosion in their pocketbook, this family did what any American family does and what the Obama administration refuses to do seriously: they budgeted.

“That’s actually a little bit more than my monthly mortgage on my home, so you can imagine that you have to start thinking about, you know, where is the extra money coming to pay for the policy,” the mother said.

They made a list of things that had to go in order to afford the new plan: charitable donations, extra mortgage payments, “splurges” such as more frequent haircuts, and so on.

Courtesy of Obama and his Obamacare, charity is hurt—that should be a government welfare program, anyway, eh?—accelerated debt pay down is hurt (isn’t that how we got into this mess, excessive debt?), less money to spend on the private economy, ….

The mother added, with considerably more economics acumen than Obama,

…maybe not eating out as much, not going to the movies, that directly affects small business in our community[.]

How Does This Work?

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The CMS has a Request for Proposal out [emphasis added]:

Solicitation Number: RFP-CMS-RMADA-2014
Notice Type: Modification/Amendment
Synopsis: Added: Nov 20, 2013 1:17 pm

The purpose is to develop a Research, Measurement, Assessment, Design, and Analysis (RMADA) IDIQ [Indefinite Delivery, Indefinite Quantity contracting/procurement type] to respond to expanded needs of the Patient Protection and Affordable Care ACT (ACA) and Health Care reform ACT (HCERA).  The work awarded under the RMADA will involve the design, implementation and evaluation of a broad range of research and/or payment and service delivery models to test their potential for reducing expenditures for Medicare, Medicaid, CHIP, and uninsured beneficiaries while maintaining or improving quality of care.

Section C of this RFP has this expansion [emphasis added]:

…the [CMS] will award task orders (TOs) for a wide range of analytic support and technical assistance activities that support models and demonstration programs created or derived under the auspices of the Patient Protection & Affordable Care Act (ACA), and future health reform legislation where new delivery and payment reform models are enacted.  The demands of new reforms created under ACA have redefined the way CMS approaches and conducts research activities and demonstrations affecting Medicare, Medicaid, CHIP, and uninsured populations.  The role of state and private sector payers is also redefined as many of the new models include multiple payers working in collaboration with CMS to reform the care delivery system.  The RMADA will provide CMS with a robust tool to meet those challenges.  Some of the major activities this umbrella contract will address include the following: designing, maintaining and refining model/demonstration design and operations; monitoring model site implementations; designing and carrying out surveys and other data collection activities; obtaining and analyzing secondary data sources including Medicare, Medicaid and Children’s Health Insurance Program (CHIP), and private payer sources that support model design and evaluations.  Some other evaluation activities envisioned under the RMADA include reporting on formative and summative analyses, providing rapid cycle quarterly evaluation feedback to all model participants and CMS, and the creation of summative annual and final program findings.

Aside from only just figuring out that “The demands of new reforms created under ACA have redefined the way CMS approaches and conducts research activities and demonstrations affecting Medicare, Medicaid, CHIP, and uninsured populations” and “The role of state and private sector payers is also redefined…,” they’ve also just discovered HHS, or its CMS ObamaMart Project “Integrator,” hadn’t thought about doing these things from the jump.

As a result, now they want to spend an additional $7 billion of our money on their failure.  Probably, it’s too much to hope for any of these billions being committed to saving pennies will be committed to reducing the costs of all that added reporting and paperwork.  Or even that the entire $7 billion could be saved (and sent over to Treasury to reduce our national debt) with withdrawing this foolish RFP.