Tag

Generational Theft

Oct 02
0

Thoughts On Obamacare

By | Commentary

I saw a clip of Obama yesterday telling an audience that the reason the Republicans are so hell bent on killing Obamacare is that they are afraid that if they let it through…people will actually like it…..making it impossible to do away with. He’s right you know….just look at Social Security, Medicare, Medicaid, Food Stamps….and dozens of other large federal programs…..How will we ever kill a program that gives free stuff to large voting blocks? We won’t….this, it seems is the Achilles heel of democracy….and will likely be the key to our downfall.

So let’s just admit it… Obamacare is just another government mechanism to give free stuff to a large voting block….probably Obamas voting block. I oppose Obamacare because it’s just another Welfare Program. Republicans, I suspect, oppose it primarily because it is Obama’s welfare program. So Republicans are on the right side of this, but they don’t exactly have the moral high ground.

I don’t know the actual cost…I’ve seen anywhere from $0 to $150B per year. It’s not huge, in a $3.8T budget, but it’s big enough. For about 4 years now, federal outlays have more or less stabilized at around 3.8T. For how long?….probably not much longer, but it’s still a tiny bit encouraging. On the Revenue side, since bottoming out at 2.3T in 2009, annual revenues have risen 30% to $3.0T, including a 12% increase in FY 2013 that just ended.

Four years ago, we were sitting on a 1.8T deficit….it pretty much looked like the end. If you were an optimist….and sat down and penciled out a best case scenario….reality has pretty much followed that script for 4 years now with flat cost and growing revenue. Don’t get me wrong, we aren’t saved….we still have an $800B annual deficit, which is enormous, but an optimist might say hey…if I can keep this streak for another 5 years, who knows, maybe I will actually balance the budget after all(now what to do with this $20T+ debt??).

And then comes Obamacare. After so much progress restraining cost(well…relative progress)…. why come in and create a new entitlement program? Instead of creating feel good programs like this, why not just skip the show, and just write checks to people. Why not give every citizen $50k per year? Or better yet, why not just give everyone a check for $10M and be done with it. Problem solved right? Well…no. You see, if I got a check for $10M tomorrow, I’d quit my job the next day…and so would everyone else, leaving me with the little problem of having $10M in my bank account….but nothing to buy, not even food. That would end quite poorly wouldn’t it?

The bottom line is….despite all of their noble (I assume) intentions, there are problems that government simply can not fix, and their attempts to do so will only make things worse overall. And that’s the problem with Obamacare….sure there are some people who will be better off, but the losses overall will far outweigh the benefits. All government programs are like this…from social security to the Park Service. Taking money from one group and giving it to another will always incur net losses, especially when there is an army of incompetent bureaucrats in the middle.

Honestly, even without Obamacare, the odds of this four year streak continuing were pretty slim. My current forecast is that we are pretty close to a bottom at $700-800B per year deficits for 2014 and 2015 before heading back up as entitlement programs drive outlays to outpace revenue gains. Throw in a recession anywhere in the next 5 years and the numbers get a lot uglier fast…and that’s without any Obamacare costs. I’ll add them to the model once I find a reliable source….(probably actuals sometime next year)


Jul 11
0

Fun With Math – Marginal Cost Of Hiring Minimum Wage Employee

By | Commentary

I’ve been seeing a lot of Obamacare Articles, and even some on the minimum wage, so I thought I would crunch the numbers and see what the fuss is all about.

In Texas, the minimum wage is 7.25 an hour, which pencils out to $15k per year, or $1250 per month. Let’s ignore FICA, unemployment insurance, workers comp, and burdensome administrative costs and go straight to the elephant in the room….healthcare.

Say I have two equally qualified candidates…one a healthy 25 year old non smoking male. The other, 45 year old smoker, with 4 children and a pregnant wife…high risk of course.

The cost of insurance for the 25 year old may be $5000, but there is a good chance actual costs will be zero. Personally, I made it through my 20’s with a single Dr. visit…for stitches, and I paid the full $600 because my deductible was like $2k. On the other hand, a family plan is probably going to run 25k, and actual costs…given the high risk pregnancy and smoking could easily run 100k…or much higher.

What should our business owner do? All he wants is a minimum wage employee to sweep the shop and mow the grass. He’s ready and willing to pay $15k…maybe even 20k. But $40k…no way!! Unfortunately, due to the laws and regulations…our business owner is not allowed to ask, or use the employees health as a factor in his hiring decision, despite the fact that different employees can have a huge difference in cost. This is a huge problem nobody is talking about. Companies, especially smaller ones, need to be able to forecast with precision how much it is going to cost to add headcount, and with the current setup, medical costs to the employer are completely unpredictable. In my opinion, this is one (of many) reasons unemployment/underemployment is as high as it is.

Let’s look at it from another perspective. So, imagine you are at the car dealership…trying to decide between the red minivan and the blue minivan. The cost is the same…$30k. You ultimately decide on the blue one, and walk up the checkout line…where the salesperson rings it up. That will be $60k. Say what?? Well….it turns out that this minivan was built on an assembly line by high risk/unhealthy workers. So while the sticker is $30k just like the red one (built by only young and healthy employees) but there is a $30k surcharge.

Wait just a minute you say….I changed my mind. I want the red one for $30k…or maybe I no longer need a minivan. “See…the thing is” the salesman replies….”if you try to change your mind now….the unhealthy employees and the federal government are going to sue your ass to the moon.”

As a buyer of consumer goods….you can realize the absurdity of this scenario, but this is in fact businesses…as consumers of labor must deal with on a regular basis. Is it any wonder employer’s are hesitant to hire? They have no idea what an employee is going to cost them until after they make an offer, and especially with low wage employees, the cost of insurance could easily be more than the wages they are offering. No thanks!! So…they stick with contractors and part time workers. Everybody ends up losing, most of all the employee who now can’t find a job period. Thanks Uncle Sam….those darn unintended consequences….when will he learn?

Now…back to our example, assume that the businessman instead ends up hiring both guys. They have the same skills, and perform the exact same task, but the healthy, unmarried employee has a total compensation package of $20k…$15k wages and $5k of healthcare. Our second employee makes twice that….$15k of wages, and an additional $25k for healthcare. Blatant discrimination right? Nope…just the status quo….an involuntary transfer of wealth from the young and healthy to the old and sick.

The solution is simple….employment and healthcare must be severed completely, and individuals must take personal responsibility for their own healthcare needs. Were this done…the businessman in our example above could offer a wage of $25k to both of his new employees with no health benefits. Each employee could then go purchase whatever health care plan…or no plan that best met their needs. Furthermore…they would need to accept responsibility for their own decisions. If they decide to smoke…and then need $250k for a lung transplant…well…better crack open the piggy bank….you made your life choices…you can no longer force your co-workers and/or society pay the tab for your decisions. Same goes for the myriad of other health woes caused by personal choices.

The bottom line is…the current healthcare delivery model in this country is all kinds of screwed up. An employer should be able to offer an employee a specific wage for a specific job just as I can walk into a grocery store with $3 and walk out with a gallon of milk.  Until we have that, it is going to be very difficult for all young and unskilled workers to find employment

 

 

 

 

Apr 11
0

Social Security Demographics Guarantee US Bankruptcy

By | Commentary
From money.com

“I cannot afford to have my Social Security cut by one penny! Plain & simple.”

and

“I doubt that one government official can begin to live on what the average senior citizen does,” wrote one 77-year-old woman. “I hope that Pres. Obama truly understands the dire straits that his plan could cause senior citizens.”

As discussed a few days ago the latest discussion to fix the deficit has to do with changing the annual inflation adjustments from regular CPI to “chained cpi”, which supposedly runs a few fractions of a % under CPI. Both numbers are laughably bogus…CPI has been running around 2% or year….gasoline has more or less doubled in the last 4 years…you do the math. Actually…the government gets to do the math, and make the number whatever they want anyway…not sure why they need to pretend about using a different made up number, but I digress. That we are even discussing such miniscule cuts and pretending they will save us is a testament to the rampant financial stupidity present in DC.
Back to the article, which basically has a bunch of seniors discussing whining about the potential impact of losing a few dollars a year…you know, throwing them back into poverty ect… They are all pretty pissed at Obama for even allowing the discussion. This is one of the main reasons I firmly believe we are incapable of fixing our problems….In a democracy, it is possible for a powerful voting block to demand, and get free stuff from a weaker voting block. And please don’t send me anything about how you paid into Social Security so you are owed. The truth is, every penny you ever paid into social security was stolen and spent years ago by politicians you elected…
Regardless, with 300k seniors retiring every single month (netted against the 200k or so that pass), I suspected that the demographics are getting close to if not already past a point where it is likely impossible to actually make any real changes to the program. I mean what are the odds of anyone on social security supporting any reduction at all? Pretty close to zero I’d say, and I completely understand that. If I was living off$1400 a month of government cheese, and hadn’t saved a dime of my own money, I suppose I might feel the same way.
So I looked at the US population, finding that in 2011, the population over 20 (sorry…no breakdown of 18+) was 223M. Of that population, 44% was over 50, and I assume not willing to vote to make any voluntary cuts to social security. Then, I looked at some other statistics and determined that the over 50 crowd has a voter participation rate of about 66% compared to the under 50 rate at ~50%. After adjusting for participation, on a straight vote, Over 50 has 51% of the vote to 49%, and thus the power of the majority to do whatever it takes to prevent benefit cuts for themselves, and even raise taxes on the under 50 crowd to pay for it. So absent a moral uprising against the blatant generational theft that is the Social Security/Medicare program, the demographics of democracy virtually ensure we will go full speed over the cliff. No matter what the  politicians say, or the jokesters at the CBO predict…there is no way in hell the hundred trillion or so of promises made by the federal government won’t be defaulted on in one way or another, so you might as well get ready for it. If you can’t afford the $3 a month cut being proposed, you’re going to be in for a rude awakening when the checks stop coming altogether.