Category Archives: political economy

Let’s Try That Again

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Joe Rosenberg, Loews Corp Chief Investment Strategist, has suggested that large, rich corporations should bailout a spendthrift, debt-ridden Federal government.  After all, he says, since the Federal government had bailed out some big businesses in the Panic of 2008, it’s only proper to return the favor.  As if two wrongs would make a right.

Rosenberg’s proposal is this in its essence:

Companies like Apple, J&J, Microsoft, and other US multinationals are major vendors to the federal government.  Instead of the deficit-ridden government borrowing money to buy their products, let the companies offer the government long-term, no-interest financing in lieu of cash.

In return for this no-interest loan, the companies—which would be required to source the government-purchased products in the US—would be allowed to repatriate 75 cents of every dollar they lend without incurring income tax.  The repatriated cash would pay US workers and US suppliers, increasing employment in this country.

Sadly, no.  The present problem is government spending too much, not being short of money to spend.  Moreover, the demanded vig—paying a 25% tax on the repatriated funds instead of the current 35%, and that only if the money is turned over to the government, anyway—is a money loser for the companies.  On top of which, requiring the government to buy only from American sources means denying the government the lowest prices available for the goods and services it thinks it needs—more wasteful government spending.

Here’s my proposal: companies like Apple, J&J, Microsoft, and other US multinationals should stop being major vendors to the federal government.  Since the government is so addicted to spending it can’t control itself, it’s time for an intervention: stop selling to the government and thereby force it to reduce spending.  These companies will take a hit to their bottom lines from the loss of revenue, but a) the government is paying them with soon to be depreciated—heavily—dollars (that Bernanke Inflation that’s just around the corner from all of his money printing), and b) the hit will be temporary as the companies find other buyers with which to replace the government.

ObamaTaxes

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Compiled by the good folks at Americans for Tax Reform.  Se the link below for details.

President Barack Obama, in a cynical Mothers’ Day “defense” of Obamacare, actually called these taxes the

largest health care tax cut for working families and small businesses in our history.

Here’s an excerpt of the list.

  • $123 Billion: 3.8% Surtax on Investment Income (Took effect Jan. 2013).  This tax hits capital gains and dividends (think about the impact on your 401(k)s; this doesn’t only hit the evil rich).  It also taxes “other” income—things like interest, annuities, and royalties.  Think this only hits the rich?  Your 401(k) mutual funds also invest in interest-paying instruments—bonds, for instance.  Many of our seniors live on annuities.  Our farmers are making beneficial use of the royalties oil and gas producers pay them for access to these energy sources that lie below their land.
  • $86 Billion: Hike in Medicare Payroll Tax (Took effect Jan. 2013).  This isn’t the end of the payroll tax holiday, this is an Obamacare tax increase: a bump from the present employer tax of 1.45% per paycheck (2.9% for the self-employed) to 2.35% for the employer to pay (3.8% for the self employed).
  • $65 Billion: Individual Mandate Excise Tax and Employer Mandate Tax (Both take effect Jan. 2014).  Employers with 50 or more employees must offer government-approved health insurance if a single employee qualifies for a tax subsidy to buy insurance.  If they do not, they must pay a tax of $2000 for all full-time employees [emphasis added].  It gets higher under certain circumstances.
  • $60.1 Billion: Tax on Health Insurers (Takes effect Jan. 2014).  No particular reason for this one; it’s just an excuse to squeeze the insurance companies for more money.
  • $32 Billion: Excise Tax on Comprehensive Health Insurance Plans (Takes effect Jan. 2018).  These are the Cadillac plans that unions and evil rich get, and they’re pretty good policies.  But since the government doesn’t offer them, you have to pay even more extra to keep them.  Pay up, sucker.
  • $23.6 Billion: “Black liquor” tax hike (Took effect in 2010) This is a tax increase on a type of biofuel.  Because biofuels are unhealthy, so if you’re going to use them, you must pay the resulting health costs.  Never mind that the government requires you to use them.
  • $22.2 Billion: Tax on Innovator Drug Companies (Took effect in 2010): Because the innovators innovate too successfully.  Pay up, sucker.
  • $20 Billion: Tax on Medical Device Manufacturers (Takes effect Jan. 2013): A 2.3% excise tax.  Because these producers produce too successfully.  Pay up, sucker.
  • $15.2 Billion: High Medical Bills Tax (Took effect Jan 1. 2013).  Because if you can afford to get that sick, you can afford to give Uncle Sugar an extra taste.

And so on.  We’re seeing what’s in this…Act…now that it’s been passed, and it’s still incomprehensible.  Except the enormous tax increase—that’s clear to everyone but Obama.

Another Obama Sequester Fail

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Recall that California’s gas and oil industry has been shrinking for years.  It’s a slow shrinkage, but in the present political clime—the green political clime—it’s been inexorable.  This graph tells the tale (ignore, for this post the loud contrast with Texas).

Now this administration’s Bureau of Land Management, the agency responsible for leasing and permitting of Federal lands to oil and gas producers, is claiming that it’s helpless to reverse this trend—the sequester, you see.  The BLM has announced that it

will stop scheduled oil and gas leasing on public lands for the rest of the fiscal year. At least two auctions of more than 3,000 acres with promising oil deposits have already been canceled.

As the WSJ put it,

The state and feds forfeit the money from the leases. The industry can’t move ahead with its planned drilling, which wastes money. And Californians—in a state where nearly one of 10 workers is jobless—lose the chance at hundreds and perhaps thousands of high-paying jobs.

Never mind that lease income, and future royalties from the extractions, are both money makers for the government.  The sequester won’t let them make the money.

Nothing circular or political here.  Mm, mm.

Debt, Taxpayers, and Morality

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President Barack Obama wants to forgive another batch of debt, this time owed by America’s youth.  This is another of those tidbits buried in his latest pseudo-budget proposal.

Obama wants to

increase the number of borrowers eligible for a program known casually as income-based repayment, which aims to help low-income workers stay current on federal student debt.

Borrowers in the program make monthly payments equivalent to 10% of their income after taxes and basic living expenses, regardless of how much they owe.  After 20 years of on-time payments—10 years for those who work in public or nonprofit jobs—the balance is forgiven.

Noticed that: “stay current.”  Not “pay off.”

That this would cost American taxpayers billions of dollars, in the middle of a very long failed recovery, doesn’t bother Obama at all.  After all, it’s only MonopolyFed money.

This would make all lending riskier.  This precedent would let every group of borrowers with a “good reason” (and they all will have good reasons) to be allowed to walk away from their debts.  There’d be no incentive left at all to borrow carefully and responsibly.  Dishonoring a promise would be destigmatized.

It also ignores the morality of the thing.  It removes all incentive to honor commitments solemnly made—indeed, it would condone “commitments” made for the most frivolous reasons, by eliminating the consequences of failing to satisfy them.

A Grant of Dominion

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…of one group of Americans over another, courtesy of President Barack Obama, congresswoman Nancy Pelosi (D, CA), Senate Majority Leader Harry Reid (D, NV), and their Obamacare.

Dr Ezekial Emanual, ex-health-care adviser to Obama and presently senior fellow at the Center for American Progress strongly recommended this grant in a recent op-ed in The Wall Street Journal.

In touting Obamacare’s health “insurance” exchanges, he recommended government add overt pressure on our young to buy health “insurance,” in addition to the existing Individual Mandate requirement, because their participation is a necessary subsidy for others’ purchase.

Emanual began his push for this strengthening of the grant of a claim on one person’s private property to another with this…error:

Government exchanges on a national scale have never been tried before.

This is clearly untrue.  Canada, which is moving away from its national health “care” travesty, and Great Britain, which still is maintaining its National Health Service disaster, have already done this creation of health “insurance” on a national scale.  We know the failure that is pending.

Emanual had this in support of his push for extending that grant of dominion:

Here is the specific problem: insurance companies worry that young people, especially young men, already think they are invincible, and they are bewildered about the health-care reform in general and exchanges in particular.  They may tune out, forego purchasing health insurance and opt to pay a penalty instead when their taxes come due.
…
The consequence would be a disproportionate number of older and sicker people purchasing insurance, which will raise insurance premiums and, in turn, discourage more people from enrolling.  This reluctance to enroll would damage a key aspect of reform.

There are a number of things wrong with this.  In the first place, young people aren’t invincible and generally don’t think they are—this is just a cynically dragged red herring.  Young people, though, generally are healthy enough that both health “insurance,” especially the expensive, overwrought versions being pedaled by government, and health welfare, which is what the government’s product really is, are bad bets.

Insurance companies—when they’re allowed to sell true insurance policies—make their money by correctly assessing the likelihood of payout and adjusting the premiums they charge in advance of the expected payout accordingly.  The likelihood of payout for a young person (the odds of his getting sick) is quite low over any reasonable time frame.  The healthy young are wise to take that risk on themselves.

Secondly, young people aren’t as bewildered as Emanual makes them out to be.  They understand the risks they’re assuming, and they’re quite clear on the wisdom of the assumption.  They just don’t have the same assessment that Emanual—who apparently Knows Better—does.

Third, the penalty of the Individual Mandate itself is nothing more than a sinister enforcing mechanism of government’s grant of dominion over one man to another.

Fourth, the consequence of not following Emanual’s “recommendation” is simply the consequence of government’s demand for health welfare rather than allowing free market, competitively sold health insurance.  That consequence has nothing to do with the choices the young might freely make.

Emanual added further defense:

[W]e need to make clear as a society that buying insurance is part of individual responsibility.  If you don’t have insurance and you need to go to the emergency room or unexpectedly get diagnosed with cancer, you are free-riding on others.  …  The social norm of individual responsibility must be equated with purchasing health insurance.

Stipulating, arguendo (and only for that), that this is an accurate characterization, this justifies being forced to let others free-ride on me how, exactly?

Moreover, when I get sick and I’m uninsured, I don’t go to the ER and freeload—I pay for my infirm out of my own resources.  Just as my wife and I did when we were uninsured and paid for her biopsy and bilateral mastectomy out of our own resources.

Additionally—and this is a critical point that Progressives in general either can’t understand or simply ignore—helping those less well off is a matter of individual responsibility, not a government one.  Paying into government-provided welfare is legitimate, but only when government involvement is the last resort, not the default one.

Buying insurance or not, though—real insurance, not the present health welfare—has nothing at all to do with individual responsibility or with welfare.  That’s purely a personal economic and risk assessment choice.  Demanding that this man buy insurance so as to hold down that man’s cost for insurance is just, again, a grant of dominion to that other over the one: it’s government’s grant to another man of a claim superior to the one’s on his own property.

That’s tyranny, at best.

Emanual gave his game away here:

The president connects with young people, too, so he needs to use that bond and get out there to convince them to sign up for health insurance to help this central part of his legacy.

How cynical.  They should spend money on a thing they don’t need because Obama says that’s cool.  And to preserve a political legacy for Emanual’s hero.

Nor another man nor government has dominion over us.  Especially, government has no dominion over us; government, contrary to Emanual’s apparent understanding, is our employee.