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Oct 27, 2009

The Stimulus Resort Town

Politicians like the idea of stimulus spending because it justifies taxing, borrowing, and spending. Spending is always pleasant and gains friends and support. They claim that stimulus spending will make us prosperous because it multiplies wealth in the economy.

The Obama team claimsEasyOpinions: Let's counterfeit our way to wealth that each $100 of government spending creates $150 in new wealth, so everyone wins, and it doesn't matter on what it is spent.

Craig C's comment at Mises.org gives an analogy commonly used to illustrate how stimulus loans or spending multiplies production and trade. I repeat it here, revised.

People start in gridlock. A stimulus loan breaks the gridlock. They resume working and trading, and end up happy. The money involved is a true stimulus; it unlocks the local economy and is paid back. This is a vivid and amazing example. But, it is contrived and unreal, like finding five dominoes ready to fall by pushing just the first one.

Stimulus Story

It is rainy and quiet in a small resort town. It is a tough time. Everyone is in debt and lives on credit.

A government official enters a restaurant, lays a $100 bill on the counter, and tells the owner Frank that it is a stimulus loan.

  • Frank takes the $100 and runs to pay his debt to the butcher.
  • The butcher pays his debt to the farmer.
  • The farmer pays his debt to the supply store.
  • The supply store pays its debt for newspaper advertising.
  • The newspaper pays its debt to Frank at the restaurant.
  • Frank lays the $100 bill back on the counter.

The official smiles at all of the good he has done. He remarks that this is the Keynesian Multiplier in action; $100 in new money promoted $500 in production and trade. He takes back his $100 and leaves town. The town is now without debt and looks optimistically to the future.

That is supposedly how the Stimulus Plan works.


I like that story because it sets up a beautiful situation, just so. The government provides a "stimulus", the money flows around, everyone is happy, and it didn't cost anything, like a fairytale.

I like another version even more. Frank writes a bad check for $100. The check goes around the town and comes back to Frank, who tears it up. The check is illegal, but the government stimulus isn't needed. This version supports counterfeiting.

The less amazing, more realistic version of the story goes like this.

Restaurant owner Frank, impractical and desperate, owes everyone in town. He spent his last borrowed dollar rather than sell the restaurant to someone who could run it at a profit. He waits behind the counter for his creditors to call. He doesn't have $100 in the bank to pay the butcher.

Meanwhile, the butcher takes $100 out of his bank account to pay the farmer, and that $100 goes around the town. The newspaper pays Frank $100, and he pays the butcher.

We don't know why the butcher would extend credit to a restaurant with no money in the bank. Soon, Frank declares bankruptcy and sells the restaurant.

The Stimulus Story proposes a group of businesses all doing useful work for each other. They have already produced things and have traded among themselves. They only need to pay their bills. Any one of them can take $100 from his bank account to settle the chain of obligations. Usually, they all take $100 from their accounts to pay their bills.

In reality, a whole town is not caught in the trap of having no cash to exchange while selling to others on credit. A stimulus loan has little or no effect on current business transactions.

The flurry of payments settles $500 in past transactions, which makes it seem like the $100 has multiplied 5 times. It is a distraction from what the stimulus loan actually accomplishes.

The Real Stimulus Effect

The true value of a $100 loan is just the value given to restaurant owner Frank. Frank can buy an extra $100 of goods, pay debts, or save. (Paying debts or saving isn't so bad.)Click/Return to see below why this is not a burden on the economy.

If Frank is going bankrupt, he probably spends his loan, hoping for a miracle. If Frank is not desperate, he pays down his debts or saves the money. He is not going to risk the loan by expanding his business in a poor economy.

Say the money is a grant instead of a loan. Frank is even happier, but this doesn't lead to risky investment. It is his money now, and he doesn't want to lose it.

Government Spending

In a bad economy, people have debt and jobs are uncertain. It is natural for them to pay off their debts. What can a government do to "pump" money into the economy to buy goods for consumption? The government spends the money. (Note) If you must ruin an economy by artificially increasing spending on consumer goods, then government spending is about the only way to do it.
 Government claims this helps the economy. Instead, it pays politicians and supporters, and builds voting support. The claim of helping the economy is a cover story.
 The government must collect more tax from productive people to support these schemes.

It is true that a specific $100 in production may occur from an extra $100 in government spending. But, for every Frank who gets extra business, there is a Jim who has the money taxed from him. Jim buys $100 less of something, removing $100 of production which would have happened anyway.

The total effect of the stimulus spending is that Frank gets $100 more business, and Jim buys or saves $100 less. That fails to "jumpstart" an economy, no matter how big the amount which is taxed and spent by the government.

Government Borrowing

The government can borrow the $100 that it spends at Frank's restaurant. Frank is happy, and Jim doesn't seem to be affected, at first glance.

Frank is happy with the extra business. But, this is not a sustained flow of money, and Frank does not install more tables. He hires only temporarily or part-time, if he hires at all.

Business owners read the newsEconomists Surprised That People Read the Paper
06/08/09 - Easy Opinions
  Leftist economists don't consider that people react to policy. People see the coming wave of taxes, regulation, and inflation, and they alter their behavior immediately. They stop investing and prepare for hard times.
. They know the government is temporarily increasing purchases. They can't know what part of their sales is from stimulus and what part is from an improving economy, so they delay expanding and hiring. Worse, they don't know how increased taxes will affect sales in the future.

Business owners are being rational. It is better to miss some business by expanding later, than to expand early and risk bigger losses if sales drop. Ironically, the stimulus interferes with the sales signals and market stability that would encourage businesses to expand. This slows expansion and reduces employment.

The current stimulus is being distributed over a period of years, so it will interfere with business decisions for years.

•  Jim prepares to pay

Jim knows that he will soon have to pay higher taxes to pay off what the government is borrowing. So, he lowers his spending and saves for that future expense. He overestimates; it is better to spend too little than too much. The government creates uncertainty by proposing many, confusing, new and increased taxes.

The result is that Frank gets an extra $100 in business. Jiim reduces his consumption spending by $100 or more, and instead buys safe investments. This does not improve the overall economy, but it does produce a different demand for goods, helping some businesses and hurting others. Unemployment rises as people must change jobs between businesses, and people must take jobs at lower salaries while they learn new skills.

Politicians arrange photo-opportunities with businesses that have government contracts. They don't advertise the many businesses that shrink or close because their sales have declined in a disrupted economy.

Politicians point to improved businesses and call for increased stimulus spending to stop layoffs at other businesses. This is clueless.

Creating Money

The government can "create the moneyClick/Return for detail below. All money is created by the Federal Reserve Bank. The government usually gets to spend it first." and seem to take value magically out of the air. The government first raises taxes and borrows, but that doesn't satisfy its desire to spend.

Creating more money causes all money to lose some value through "inflation". Prices go up as store owners notice they are selling all of their goods on hand. They raise prices following price increases by their suppliers. They wonder where the extra demand (money) is coming from, and why supplies do not increase to meet that demand. The answer is that government is increasing demand without producing much to increase available supplies.

This steals value silently from everyone with a job or a bank account, and it falls more heavily on the lower and middle classes. Their wages fall behind inflation and their savings are more in cash, bank certificates of deposit, and bonds, which lose value as prices go up.

So, Frank happily spends or saves an extra $100, and $100 is silently skimmed from the value of all money. The transfer of value is like a tax, but the result is more negative due to business uncertainties and dislocations.

Some business owners see increasing sales, and wonder if they are from a better economy (more production all around) or from inflation. Other businesses suffer as their customers buy different goods. Some people save more as they see prices going up, or possibly spend more to beat future price increases. Business becomes less predictable.

Notice that the government properly considers counterfeiting to be a serious crime. But, politicians call it "fiscal policy" when they create money out of thin air and spend it to promote projects for their supporters.


People are productive because they have knowledge and tools, personally or through their employer. A person needs a hammer to build a house, and a power-nailer builds faster and at lower cost. A small shop can make a few hammers. It takes a large factory to make many hammers and power-nailers, and much effort to work out ways to make them better, safer, more durable, and cost less over time.

There is a big risk in building a factory, and many lose money. Sometimes, the owners become rich through knowledge, planning, management, and some luck. It is fascinating that these people become despised as "the rich", when their wealth comes mostly from practical achievements that help others to a productive and comfortable life.

Progressive tax rates04/2009 - Easy Opinions
  A comparison of the 2006 tax rates and total tax contributions by adjusted gross income.
take more money from high earners as a percentage of their income. The idea of a stimulus extends the idea that the rich should pay more of their lazy money to others who will spend it and create a growing economy.

Here is the problem. The rich are the major investors in companies, and so in factories. Money taken from them does not get to those investments. Instead, it goes to Frank, who buys more consumer goods or invests more conservatively in bank accounts. Investment that would create jobs is drained away to create some overtime for current workers.

"Soak the rich" is bad policy.

  • High productivity produces most high incomes. There is no moral basis for taking a higher percentage of that money from the people who have earned it; they aren't bank robbers. The government is acting like a bank robber, taking money from those who have it, as pure politics and power.
  • Taking that money removes it from the people who have the most judgment and ability to bear the risk of building new companies. The government is much worse at this.
  • "Soak the rich" puts the non-rich out of work or reduces their incomes. That isn't a good tradeoff.

Large Incomes, Skill, and Luck

You may think the rich are partly lucky, so they shouldn't keep all of their money. Do you also think that lottery winners should split their winnings? They are 100% lucky, and do much less to produce a productive society.

Successful actors and athletes are admired because their abilities are on direct display. We like watching them, and we understand the basis for their incomes, even if there is some luck involved. We don't yell at them to take less money, because we understand that they are worth it. They would not have put in long years of training and sacrifice if they didn't have a chance to make it big.

The skills of successful businessmen/women are not directly on display. But, we can see that they produce products and they create jobs to make those products. Products and jobs provide for better lives. Yet, people are easily angered by the large incomes of some businessmen. We should understand that, like athletes, they are worth it. They would not have put in long years of training and personal risk if they didn't have a chance to make it big.


Spending, Paying Debts, and Saving

We hear that 70% of the economy is consumer spending. The quick reaction is to 03/2009 - EasyOpinions: Cargo Cult Economics
 Government sees that people spend more during prosperous times, and wrongly concludes that higher spending causes prosperity
 I get it. People use umbrellas when it rains, so using umbrellas causes it to rain.
do something, anything, to increase this spending
. Government tells us that spending is good and saving is bad.

This has now moved to the strange idea that if the public won't spend enough, then the government will do it for them. This is the idea that the government can spend its way to our prosperity, taxing along the way.

Actually, paying debts, saving, and investing are all types of spending.

  • Paying debts is the completion of past spending. If spending is good for the economy, the debtor has already done his part. Paying off the debt prepares for future spending. Not paying the debt would cause economic disruption.
  • Saving lends money to a bank, which supports spending by other people. Credit card debt supports consumer spending. Housing and car loans support buying those durable goods. Loans to businesses help them produce more.
  • Investing is a high-powered use of resources at a higher risk. Investing directly supports new businesses, major business expansion, and the creation of jobs.

The amount spent on each of these is a personal decision. The "economy" is there to serve the individual, not the reverse. People should acquire the goods, savings, and investments that they understand and can support with their earnings.

Would it help the "economy" if the government forced you to take 10% of your savings and spend it on something? Only in the sense that "consumer spending" would go up. It would hurt you personally because it would disrupt your plans.

If you are saving money rather than buying a new car or a vacation trip, it is because you want the option of buying something more important in the future, maybe food and rent.

Go back

Creating Money

Is Money Worth Anything?

All U.S. dollars are printed or electronically distributed by the Fed, the United States Federal Reserve Banks. The Fed runs the U.S. Mint to print currency and stamp coins. It creates electronic money by sending authorizations to its member banks. Paper dollars are Federal Reserve Notes, literally small obligations of the Fed.

Each dollar is an obligation of the Fed to pay you a dollar. You are allowed to laugh at this. What does it mean to present a dollar to the government and be paid back that same dollar bill? Before 1935, the government would give you a definite amount of gold or silver, if you presented the dollar bill for payment. Since then, there is no obligation of the Government to give you anything for your dollar.

All dollars are created out of thin air, so why do they have any value?

  • There is an established market and price for trillions of dollars of real goods and services.
  • Dollars are defined by law as "legal tender". Any transaction can be valued in dollars for disposition by a court or for the collection of taxes.
  • The Federal Government levies taxes and you can use dollars to pay taxes.
  • The Federal Reserve has assets that are supposedly worth the dollars created.

There are trillions of dollars in private loans secured by tangible things, such as commodities, automobiles, and buildings. Some loans are secured only by future income, like credit card balances. All loans are obligations between people, and the supply of money represents these obligations, giving value to the money.


The Federal Reserve Banks can abuse their power to create money, so that all money loses some value.

Inflation results when the Fed loans money to the US Treasury, creating money, which the government spends, without a resulting increase in tax revenues that can pay back these loans. Inflation is the loss of value in the money supply from bad loans made to the US Treasury.

The longer explanation of inflation requires knowing how a good bank can create trustworthy, electronic or paper money. This will wait for another post.

Go back


The Federal Reserve
An overview of the structure and duties of the Federal Reserve.

Money Created Out of Thin Air
07/30/04 - Richard Benson, President Specialty Finance Group

[edited] Money is created in two ways. First, money creation comes from borrowing it and spending it. Second, it is simply printed up "out of thin air" by a central bank and used to buy something.

The Record of the Federal Reserve
07/24/09 - LewRockwell.com by Erik Voorhees

[edited] The Federal Reserve System is fraudulent. Its effective purpose is to create a mechanism of deficit spending by politicians, through invisible taxation by monetary inflation. The Government buys services for its voters with created money at current prices. The voter's money buys less the following year, as the new money raises prices, and they are none the wiser.

From 1776 to 1912 (136 years):

  • A dollar would buy 11% more consumer goods in 1912 than in 1776.
  • $1,110 in 1776 bought the same bundle of consumer goods as did $1,000 in 1912, for comparable goods.
  • The dollar was a stable and slightly increasing store of value. You gained a little if you put it under your mattress.

The United States Federal Reserve (the Fed) was created in 1913 to "conduct the nation's monetary policy in pursuit of full employment and stable prices". "Stable prices" means that a dollar should buy about the same amount of consumer goods over time.

From 1913 to 2008 (95 years):

  • A dollar would buy 95% less consumer goods in 2008 than in 1913.
  • $50 in 1913 bought the same bundle of consumer goods as $1,000 in 2008, for comparable goods.
  • The dollar slowly sank in value. You retained only 5% of its value if you put dollars under your mattress during that time.

Americans should feel outrage about this. Yet, they are not very upset, and the vast majority has no clue. Americans are educated in Government schools, which barely teach basic accounting, let alone monetary theory. In public school, I was forced to memorize the names of every African country. There was no discussion of the nature of money or the economic principles which caused political turmoil in Africa.

Keynes, Upside Down
02/02/09 - Richard Benson, President Specialty Finance Group

[edited] Too much borrowed money has left the private sector riddled with bankruptcy. Far too many loans were made on the probability of being refinanced, not on the ability to be repaid!

Bad loans could be refinanced into bigger bad loans while liquidity (willingness to lend) was flowing. Now, the refinancing has stopped. Millions of Americans and business owners are suffering and can't face the music.

Too many loans (liquidity) were made to people who could not pay them back. This caused mass insolvency. How can more loans and public borrowing be sold as the cure? It is government double talk. They are calling this insolvency a "liquidity trap" so they can print fresh money without guilt.

Recipe for Economic Stagnation
07/21/09 - American Thinker by Andrew Foy and Brenton Stransky

[edited] John Maynard Keynes recommended government intervention. Milton Friedman recommended free markets and a predictable, boring economic policy.

The government followed Keynesian principles in response to the Great Depression. It created 15 agencies, increased spending by 220%, increased taxes by 68%, and increased the deficit to $24 billion.

Friedman proposed that government intervention prolonged the depression. His view has been validated over time. "Far from the depression being a failure of the free-enterprise system, it was a tragic failure of the government."

Cargo Cult Economics
03/2009 - EasyOpinions

Government economists see that people spend more during prosperous times, and wrongly conclude that higher spending causes prosperity.

I get it. People use umbrellas when it rains, so using umbrellas causes it to rain.

Let's Counterfeit Our Way to Wealth
02/2009 - EasyOpinions

The Obama team follows Keynesian economic principles. They claim that every dollar in government "stimulus" spending creates $1.50 in wealth.

The 1.5 wealth multiplier is part of the Keynesian myth that distributing money promotes a recovery. But, every dollar spent by government has to be collected as tax, sooner or later. Any money borrowed now takes resources now from some other, valuable use.

If the multiplier were true, then the government could license counterfeiting and we would all become rich. Actually, the government attitude toward printing money is very close to counterfeiting.

Banks Create Money
08/09/09 - Ingri Mayne - CyberEconomics

[edited] For several centuries now most money has been in the form of bank debt. A checking account is merely money that the bank owes you, and paper money represents something that the Federal Reserve System owes you. (Try to collect this debt from the Federal Reserve, though, and see what you get.)

The creation and destruction of money is the creation and destruction of bank debt.

Federal Reserve Ready To Buy Assets
07/29/09 - Telegraph Co UK - by James Quinn

[edited] The Fed may buy back U.S. Treasuries, support lending to small businesses, and support credit card and car loans. The Fed continues to buy large amounts of government-backed mortgage securities.

The Fed creates more money by buying assets. Usually, it limits itself to buying government debt, Treasury bonds. It is now directly buying other debt, such as bonds representing bundles of home loans (Mortgage Backed Securities).

If these debts are paid off, then the money created will not cause inflation. If not paid off, the losses show up as inflation, the decreased value of all money.

Google Search: Money Creation Inflation

Oct 22, 2009

TV Commercial For Healthcare Reform

Healthcare reform is available now for the very affordable price of an $81 billion reduction in the U.S. debt! 1

Think of all the free healthcare you will get in the future.2 Support us now, and you will get your second and third medical tests FREE.

Your order has been entered, and there is no need to pay us now. We already have your credit card number.3  We always like to hear from you. Compliments only, please.

Delivery guaranteed in 30 days or double your money back.4

You have our unconditional guarantee.5

1 Reform will cost a very affordable $829 billion, for which we will charge you only $710 billion, plus $200 billion shipping and $1,000 billion handling. The numbers may seem confusing. Don't think about them; they are going to change.

2 Subject to the participation and availability of doctors, hospitals, clinics, and midwives. Some copayments and bribes may be required.

3 Members of Congress, current and former federal employees, preferred union members, and Designated Important People (DIPs) are excluded from this offer, because they get all of these benefits and additional benefits FREE.

4 Shipped in 30 days, or up to 3 years, whichever happens.

5 All promises, representations, estimates, and deadlines are subject to increase, decrease, alteration, and/or revocation for any reason, contradictory reasons, or no reason whatsoever. Send any complaints to the U.S. Congress. We'll get back to you.


The Hypocrites Are Trying To Pass a Doozy
10/15/09 - PJTV Video 3 min
Dr. Peter Weiss talks about the bad impact of the Baucus senate healthcare bill.

More Healthcare Spending - More Taxes
10/10/09 - EasyOpinions

Quip: Reduced deficit. Yay!   By increasing taxes. Boo!   And $829 billion more spending. Bummer!

The Senate healthcare bill promises to reduce the deficit by $81 billion while spending $829 billion more. How? By raising taxes and fees by $910 billion.

Obamacare Bails Out Medicare
09/2009 - EasyOpinions
"Healthcare Reform" is a huge tax hike plus rationed medical services.

ObamaCare and the Doctor
08/08/09 - EasyOpinions

Dr. Zane F. Pollard tells about the frightening current reality of Medicaid, and by extension the future ObamaCare.

Medicaid pays for medical services to the poor, and in this case to poor children who face vision impairment or blindness. Regardless, Medicaid denies and delays their care.

Consider that Medicare/caid are intentionally underpaying for the medical care that they mandate.

The government is proud of how they are negotiating lower prices for Medicare/caid, but these are still going bankrupt due to exploding costs.

Hospitals are caught in the middle. They survive by raising prices on the insured sick, who can pay. Then, the government blames the insurance companies for raising premiums to cover the increasing prices for insured hospital care. Doctors are forced to refuse treating Medicare patients because they actually lose money on each patient while becoming subject to bureaucratic control for receiving Medicare payments.

Boston Medical Center Sues Massachussetts Medicaid
07/16/09 - The Boston Channel

Boston Medical Center says the state is underfunding the hospital by $181 million annually by failing to cover the cost of care for Medicaid, Commonwealth Care, and uninsured patients.

Boston Medical Center CEO Elaine Ullian: "This institution was and remains an enthusiastic supporter of the state's health care reform law. But it should not and cannot be financed on the backs of the poor. We hope our suit serves as a cautionary tale to federal policymakers as they take up national health care reform."

Health-Care Reform: A Better Plan
08/7/09 - Washington Post by Charles Krauthammer

Krauthammer proposes a practical approach to reforming healthcare regulation.

[edited] Our healthcare system is extremely high-quality, but inefficient, and therefore expensive. Today's ruling Democrats propose to fix it with 1,000 pages of complexity.

They promise that this massive concoction will lower costs. Their solution is mandates on employers, individuals, and insurance companies; allocation formulas; political payoffs; and myriad regulations and interventions. It creates a Rube GoldbergFrom the link: Rube Goldberg (1883-1970) was a Pulitzer Prize winning cartoonist, sculptor, and author. He is famous for his cartoon contraptions using an elaborate set of arms, wheels, gears, handles, cups, and rods, put in motion by balls, pails, boots, bathtubs, paddles, and animals. These contraptions do a simple task through an extraordinarily complicated sequence of interactions. system that multiplies current inefficiencies and arbitrary rules. This will produce staggering deficits, less choice, and lower-quality care. That's why the administration can't sell Obamacare.

My plan. Strip away current inefficiencies before remaking one-sixth of the U.S. economy. There are just two parts: radical tort reform, and severing the link between health insurance and employment.

I disagree that U.S. healthcare is inefficient. High costs are the result of:

  • Too much testing due to the legal liability lottery.
  • Cost-shifting onto the insured to pay for those who won't or can't pay. The government won't fully pay for its health mandates, forcing up costs and insurance rates for everyone.

Oct 14, 2009

Blunting the Costs of Healthcare Reform

States of Personal Privilege
10/09/09 - WSJ Opinion by by Kimberley A. Strassel

Quip: This bill is vital to our country and will save a lot of money. We just don't want to depend on it.


Powerful senators have avoided the most costly provisions of healthcare reform for their own states. They want "reform" for the nation, so long as it doesn't disadvantage the people who support or vote for them.

  • The Baucus bill vastly expands state Medicaid programs, requiring the states to pay an additional $37 billion.

    Senate Majority Leader Harry Reid of Nevada is worried about losing his seat next year. He has arranged for the federal government to pay Nevada's increased Medicaid expenses for the next five years. This applies to only three other states: Oregon, Rhode Island, and Michigan, because they "are suffering more than most."

  • The Baucus bill would tax expensive insurance plans at 40%, so that those with "luxury" health insurance help to pay for the poor. But states like New York and Massachusetts have a lot of those plans, having a lot of union members with great benefits, and high-cost insurance mandated by state regulations.

    New York Sen. Chuck Schumer didn't want angry, overtaxed voters, so he and other similarly situated Democrats carved out a deal to reduce the tax on 17 states, mostly with Democratic politics.

  • The Baucus bill taxes pharmaceutical companies, on the principle that they are filthy rich and involved in health care.

    But, New Jersey boasts it is the "global epicenter" of the drug industry, where "15 of the world's 20 largest pharmaceutical companies have major facilities." Its Sen. Menendez has a deal for a $1 billion tax credit for companies investing in drug R&D.

  • Many Dems assure us that the Baucus bill will "bend down" the health-care cost curve. Michigan Sen. Debbie Stabenow and Massachusetts Sen. John Kerry aren't counting on it. They included $5 billion in the bill to reduce costs for union members.

So, health-care "reform" is good, smart, and necessary, so long as it isn't fully applied to the states of the senators who are pushing it.

Most senators are saving up their special demands for the Senate floor. Then, we'll know how much change Democrats truly believe in.

Baucus Bill Bull: The Hypocrites In DC Are Trying To Pass a Doozy
10/14/09 - PJTV: Medically Incorrect (video 3 minutes)

A video opinion of the Baucus bill by Dr. Peter Weiss.

Dr. Weiss is an OB/GYN at Cedars Sinai Medical Center in Los Angeles, the Medical Director of Rodeo Drive Women's Health Center and Rodeo Drive Dermatology and Aesthetics, and an Assistant Clinical Professor at the UCLA School of Medicine.

Obamacare Bails Out Medicare
09/12/09 - Easy Opinions by Andrew Garland
"Healthcare Reform" is a huge tax hike plus rationed medical services.

Oct 10, 2009

More Healthcare Spending - More Taxes

CBO report: New taxes will pay for Senate health care bill
10/08/09 - OpenMarket by Fran Smith

[edited] The Congressional Budget Office reports that the Baucus healthcare bill in the Senate would reduce federal budget deficits by $81 billion during 2010-2019. Supporters were ecstatic.

The government and most news reports emphasize deficits. But, it is the SPENDING that matters. This healthcare bill gigantically increases spending. It reduces the deficit by increasing taxes and fees by more than the increased spending. Further, past healthcare programs have been 5 to 10 times more expensive than estimated at the time they were enacted.

A clearer statement would be:
"Healthcare legislation will raise government spending by at least $829 billion. But don't worry, it will raise taxes and fees by $910 billion, providing an extra $81 billion to the Treasury."

The major problem for the Baucus healthcare bill has been to hide the massive tax increases on people. It pretends these taxes are on businesses and insurers. But, all of these "business taxes" will be passed on to the people, at all levels of income.

The savings included in the bill are unrealistic. They are there only to get a good score from the Congressional Budget Office. The CBO must assume that those savings will be there, because the bill says they will be there.

Businesses organize work. They aren't a magic piggy bank. Taxes on private health insurance companies must be paid by charging more for insurance. So, the company writes the check, but the customers pay those taxes.

Taxes on employement must be paid out of the total productivity of the employees. Employee salaries are what is left over. The government wants to charge companies 8% of salaries to support government health insurance. That 8% actually would be paid by employees as a reduction in salaries.

The truth about the Baucus bill - Part Two
10/12/09 - Washington Examiner Editorial

[edited excerpts] The Baucus bill generates revenue or shifts costs in many ways:
  • Cuts to Medicare and Medicare Advantage - $426 billion
  • Fines imposed on those who do not purchase insurance - $4 billion
  • Levies on health insurance companies providing high-end health insurance plans - $201 billion
  • New taxes on medical devices and drugs - $180 billion
  • New income taxes on individuals - $83 billion
  • New taxes on employers - $25 billion
  • Reductions in Medicare reimbursements to hospitals, which will require more cost shifting from such facilities to their patients

Price Waterhouse Coopers has released a study done for the health insurance industry.

  • Average family health insurance is now $12,300.
    This will be $18,400 by 2016 doing nothing.
    Baucus will make it $21,300.
  • Individuals average $4,600.
    This will be $6,900 by 2016 doing nothing.
    Baucus will make it $7,900.
  • Obamacare advocates say that higher costs will be largely offset by tax credits for lower-income families. But, tax credits only shift the burden of payment from Peter to Paul [from the middle class to the poor].

Memo - Health Plan Deficit Reduction
09/2008 - EasyOpinions Outlink

A (fictional) memo has surfaced revealing the thought guiding healthcare policy.

Excerpt: "The estimated deficit for our health reorganization plan is causing us trouble in the press. President Obama has promised not to raise taxes on the middle class, and not to increase the deficit. Unfortunately, we have to live with this until the plan passes Congress."

The Real Tax Burden
01/2009 - EasyOpinions

The real tax burden is current government spending. Government borrowing and delayed taxes are merely finance. It won't be just "the other guy" who will pay. The middle class and rich will pay in dollars. Poorer citizens will lose employment.

Company Paid Health Insurance is Part of Your Salary
12/2008 - EasyOpinions

You generate all of the wealth that pays your salary and the taxes associated with your employment. The employer writes the check, but you earned that money, and it would be part of your take-home pay if the burden did not exist on the employer. Competition for skills would arrange that outcome.

In the same way, when a company pays for your health insurance, it is merely writing the check with part of your earnings, earnings that you never see, but could control yourself.

Oct 3, 2009

Better Through Creative Statistics

Reagan's Unemployment Numbers
10/03/09 - DonSurber's blog - Comment by John D.


John D:  I am a little confused when I see unemployment numbers from the Reagan years compared to unemployment since 1993.

I believe that the Clinton Administration changed the formula for figuring unemployment to make the numbers smaller. They stopped counting the long term unemployed and those that had quit looking for employment.

Are the Reagan numbers being compared to numbers using the new method, or have the Reagan numbers been recalculated?

Surber:  They are not recalculated. Good point.

Don't believe government statistics and historical comparisons.

The Democratic President Clinton changed the unemployment computation to make his administration look better compared to Reagan and Bush the father. Bush the son didn't change it back; doing so would have made him look worse.

So, now we have unemployment statistics that specifically leave out the long term unemployed and those not looking regularly for work. People who are in part-time jobs are naturally left out, even if they consider this a fallback from former full-time employment.

This is fine for government, which claims that things are just as good as 20 years ago. This supposed progress is a result of manipulating the numbers.

This distortion builds over time as the definitions change to make things look better. The numbers become more unreal, leaving us ignorant about how effective our policies are.

USA Healthcare is First - Infant Mortality is Low
01/08/09 - Easy Opinions by Andrew Garland

Health statistics are intentionally misrepresented to argue for socialized medicine. The major argument is that the US spends more than Europe, but lags behind in health outcomes. So, US healthcare is both expensive and inefficient. Actually, government administration hides much of the socialized cost, and the USA has better health.

Consumer Price Index -
Things You've Suspected But Were Afraid to Ask

10/01/06 - Shadow Stats by Walter J. Williams (John Williams)
Via 11/05/08 - Alpha Dominance

[edited] Inflation, as reported by the Consumer Price Index (CPI) is understated by roughly 7% per year, due to recent redefinitions of the numbers and flawed methods, particularly adjusting prices for changes in quality.

The CPI was designed to help everyone adjust their financial planning to the impact of inflation. Since the early 1980's, these statistics have changed to meet demands from miscreant politicians. Politicians were and are intent upon stealing income from social security recipients, without public discussion or Congressional approval.

The Clinton Administration changed the CPI to significantly understate inflation, along with changes in the late-Carter and early Reagan Administrations. This has reduced current social security payments by roughly half from where they would have been otherwise.

Anyone who receives payments adjusted by the CPI has been similarly damaged. On the other side, the government makes out like a bandit making payments adjusted by this lowered CPI.