France tried the President Obama Balanced Approach to Deficit Reduction only to see it Fail

Posted by PITHOCRATES - September 1st, 2013

Week in Review

All we heard during the debt ceiling debate and the sequester debate from President Obama is that we must have a balanced approach.  Tax hikes now.  And spending cuts later.  Which, of course, means no spending cuts.  Ever.  For why would they cut spending after they got their tax hikes?  Too many Republicans got snookered by past Democrats on that false promise.

President Obama assures us that if we raise tax rates it will solve all of our problems.  But if we cut spending that’s just stupid.  Because government spending creates economic activity.  According to the Keynesian economics playbook, at least.  And President Obama is a Keynesian.  In fact, he’s so much a Keynesian that some would even call him a socialist.  But Keynesian economics hasn’t worked in America.  It didn’t work in the 1970s.  It gave us a dot-com bubble in the 1990s.  And the beginning of the real estate bubble that burst into the subprime mortgage crisis in the 2000s.  So we’ve tried Keynesian economics and it doesn’t work.  And, as it turns out, Keynesian economics that borders on outright socialism doesn’t work either (see France signals shift to tax cuts in boost to business by AFP posted 9/1/2013 on France 24).

France’s Socialist government is hinting it may appease discontent at tax rises by putting more stress on spending cuts in its fight to control the budget and boost growth…

France has so far relied on tax hikes for about two-thirds of its fiscal adjustment. Most famously it hiked the tax rate to 75 percent on income above 1 million euros.

The reliance on tax hikes has also prompted warnings from the IMF and European Commission that it should focus more on cutting spending in order to avoid snuffing out the recovery…

France’s social welfare system is funded primarily by charges on labour, burdening businesses…

A threat to nationalise a French plant owned by steel giant Arcelor Mittal to protect jobs raised concerns among foreign businesses…

The latest purchasing managers surveys by Markit found that while business activity is picking up in the eurozone overall, it contracted at a faster rate in France this month.

Francois Hollande has been president since May 15, 2012.  That’s about one year and three months.  And in that time his socialist government raised taxes.  But barely cut spending.  Just as President Obama wants to do to reduce the U.S. budget deficit.  Despite the fact that it doesn’t work.  As France has proven.

The U.S. doesn’t have to try the President Obama way.  The balanced approach.  AKA, the all tax and no spending-cut approach.  Because France has tried it in a grand way only to see it fail.  It failed so badly that they’re talking about outright socialism.  Nationalizing industry.  Because the economic climate is so anti-business in France that there is no job creation.  Because there is no business growth.  Worse, the French economy is contracting.  That’s right, while the rest of the Eurozone is seeing growth France’s economy is going deeper into recession.  Because they’re doing what President Obama wants to do in the U.S.

It’s time we purge Keynesian economics from our governments for good.  It is the source of all the great financial problems countries are having all around the world.  All it does is empower those in power.  Elevating them to elite positions.  Where they enjoy a life of plenty and extreme comfort.  While their people struggle to provide for their families.  It’s time that we return to classical economics.  Save our money and live frugally.  Creating private investment capital from our savings via a sound banking system.  Where bankers practice good lending practices without governments passing their risks onto the taxpayers.  Which is what gave us the subprime mortgage crisis.  And the worst recession since the Great Depression.

Finally, governments have to spend less.  So we can cut tax rates.  Providing the spark to ignite private investment.  Which drives business expansion.  And creates jobs.  Which is what people want.  So they can provide for their families.  Not more benefits that the government can’t pay for.  No matter how high the government taxes them.

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Off-Budget Social Security Surplus

Posted by PITHOCRATES - February 18th, 2013

Economics 101

Because we have Limited Income we Prioritize our Expenses

We all want more than we can afford.  We may want to drive a brand new Lincoln MKT but can only afford a used Focus.  So we drive a used Focus.  We may want to live on the beach in Southern California but can only afford a 2-bedroom apartment in Pasadena.  So we live in a 2-bedroom apartment in Pasadena.  We may want to dine on filet mignon and champagne every night but can only afford Hamburger Helper and a store-brand soda.  So we dine on Hamburger Helper and store-brand soda.

In life we have to make choices.  And live within our means.  So we budget our money. We list all our income.  And all of our expenses.  Breaking down the expenses in order of importance.  Rent is more important than cable television.  The electric bill is more important than stopping at Starbucks every morning for a Venti Caramel Macchiato.  The gas bill is more important than unlimited texting.  Because we have limited income we prioritize our expenses.  Those most important we budget to pay first.  Those less important we enjoy when we have some disposable income left over.  After paying everything that is more important first.

This is responsible living.  Which a lot of people do.  Live responsibly.  While some don’t.  And use credit cards to buy things they can’t afford.  Or they do a little work on the side ‘under the table’ for some extra spending cash.  Money they don’t report as income so they don’t have to pay income taxes on it.  Because like Billy Joel said you can pay Uncle Sam for the overtime.  Or not.  And a lot of people choose not.  Interestingly, a lot who do are die-hard Democrats who want to raise tax rates on the rich.  But when it comes to their hard-earned money they want to hide it from Uncle Sam.  But I digress.

Social Security Taxes are Dedicated for One Thing—Social Security Benefits

We can call money we earn on the side off-budget money.  We don’t add this money to our household budget.  It’s special money to spend on things we enjoy.  For if a husband does some plumbing work on the side his wife may want to use that money to pay down a credit card balance.  Or spend it on new window treatments.  While he may have other ideas for that money.  Maybe some new fishing equipment.  Or a new power tool.  Or maybe using it to go tailgating with the boys.  That money could buy a lot of food to barbecue.  And a lot of beer.  Things that are a lot of fun.  While paying down a credit card balance is not.  Just as window treatments are not.

So by keeping this money off-budget he can use it for what he originally intended it for.  Him having fun.  Keeping the money off the family budget prevents anyone from using those targeted funds for some other unintended purpose.  Preventing out of control spending growth on other less important things.  He is actually doing the family a favor by hiding this money.  Or so he rationalizes.  Because hiding it prevents his family from spending too much money.  For let’s face it if you have that additional money you’re going to budget it on something.  You may even commit to some long-term spending obligation.  Like buying a new Lincoln MKT.  Which will be a problem if the husband throws out his back doing all of those side jobs and goes on disability.

Another example of off-budget money is Social Security.  Specifically, the Social Security surplus.  Contrary to the government calling it a retirement investment it is not an investment.  The government collects Social Security tax revenue.  And pays Social Security benefits from that tax revenue.  What’s left over is the Social Security surplus.  (Until it becomes the Social Security deficit.)  And they put it into the Social Security Trust Fund.  Outside of the regular budget.  So they can’t spend it on other things.  And any budget negotiations won’t affect it.  For employers and employees pay into Social Security.  And this is the money we get back in benefits.  Those benefits are not budget items paid from all the other taxes the government collects.  That pay for things from defense spending to food stamps.  No.  Social Security taxes are dedicated for one thing.  Social Security benefits.  Which is why they moved it off-budget.

If the Deficit is Consistently Understated there will be no Money to Redeem the Securities in the Social Security Trust Fund

But that doesn’t stop the government from spending that money.  Just like so many unions have underfunded pension plans so, too, government can’t resist the allure of a great big pile of money.  Because it’s just sitting there.  Not being spent.  Something that just pains a politician to no end.  Unspent money.  But because it’s off-budget they just can’t spend it.  They have to borrow it first.  So the money goes into the Social Security Trust Fund.  They then remove the money from Social Security Trust Fund.  And leave behind an IOU.  Treasury securities.  Backed by the full faith and credit of the United States.

So even though that money is dedicated for Social Security benefits and is strictly hands-off for other spending the government spends it on other things.  And it works out pretty well for the government.  Not only do they get a little extra money to spend it helps conceal the extent of their other spending.  For this off-budget money decreases the budget deficit.  Caused by all of that on-budget spending.  That far exceeds their ability to pay for it.  To illustrate that see the following table.  This is a very simplified fictional federal budget.  We have tax receipts.  And federal outlays.  Broken down into two general categories.  Guns and butter.  That’s defense spending.  And everything else.  Note how if they leave the Social Security surplus alone (without) there is a deficit of 47%.  But if they borrow that money (with) it reduces the deficit to 10%.

Social Security Surplus Off-Budget

When they talk about the budget deficit it includes the Social Security surplus.  That money is dedicated for one thing.  Social Security benefits.  They’re not suppose to use it for anything else.  So they shouldn’t count this revenue in the budget that pays for everything else.  When they do they understate the true budget deficit.  Worse, the money in the Social Security Trust Fund does not earn a return on investment.  Like with a 401(k).  Yes, there are Treasury securities in the trust fund.  But a government that is consistently understating their true deficit will never have the money to redeem those securities.  So they will do the only thing they can.  Print money.  Which is what they mean by the full faith and credit of the United States.  Print money.  Causing inflation.  And raising prices.  Making that meager Social Security benefit buy less.  Not to mention that Social Security itself will soon be insolvent.  Thanks to the growth in all of that other spending.  That is growing so great that they continually need to raid the Social Security Trust Fund to pay for it.

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Bad Keynesian Policies cause influx of Romanian and Bulgarian Migration into Germany

Posted by PITHOCRATES - February 10th, 2013

Week in Review

It is interesting that countries that get into trouble using Keynesian economic policies tend to go to countries that relied on Keynesian policies less for help.  States with high government spending and bloated public sectors turn to countries with less government spending and less bloated public sectors for help.  Yet Keynesian economic policies are still the dominant polices of many nations.  Including the US, the UK, China, countries within the Eurozone, Bulgaria and Romania (see German warning over Romanian and Bulgarian migration by Rosa Silverman posted 2/6/2013 on The Telegraph).

German cities have warned that an influx of Romanian and Bulgarian economic migrants will cost them dear and put the “social peace” at risk…

Berlin, Hamburg, Dortmund and Hanover have seen a six-fold increase in economic migration from the two countries since 2006, which they say has left them struggling to cope…

The warning comes amid fears in Britain that tens of thousands more Romanians and Bulgarians will come here each year after formal restrictions on the numbers of low-skilled workers from the two countries end next year.

A report by the campaign group Migration Watch UK warned last month that up to 70,000 migrants could arrive annually from then.

Of course the question that just begs to be asked is why are Romanians and Bulgarians leaving their countries in the first place?  The Cold War is over.  The communists are gone.  These are beautiful countries.  Blessed with farm land.  And natural resources.  With some great people.  And a lot of history.  So why leave?  Because they caught the Keynesian contagion during the Nineties.  Their central banks kept interest rates artificially low to stimulate economic activity.  Which they did.  But a lot of that economic activity was artificial.  A bubble.  Times were good.  They expanded government employment.  And government pay and benefits.  And then the 2007-2008 financial crisis came along.  Bursting that bubble.  Leaving these nations with budget deficits.

Both nations were on track to join the Eurozone.  Working hard to meet the Maastricht criteria.  Conditional for entry into the common currency of the Eurozone.  After the financial collapse meeting the Maastricht criteria became more difficult.  As the fall in economic activity and the rise in the unemployment rates of these countries caused tax revenue to fall.  Creating deficits that approached or exceeded those permitted under the Maastricht criteria.  And the Keynesian cure for a recession, easy credit and more government spending, just made those deficits worse.  And it caused inflation to rise to or above that permissible under the Maastricht criteria.  They had to borrow money to meet their spending obligations.   And a condition of those loans was to bring their spending down to acceptable levels.  Like that to meet the Maastricht criteria.

Long story short the damage these Keynesian policies caused required very painful austerity to fix.  High unemployment and austerity makes people want to leave home for sunnier economic climes.  As Germany has been the bedrock of the Eurozone because of their more responsible governing and restraint in government spending these people went to Germany.  And to the UK.  Who didn’t join the Eurozone.  And aren’t mired in the Eurozone sovereign debt crisis.  Though they are implementing a little austerity of their own to bring down their budget deficits.

High government spending and large deficits cause trouble.  The U.S. has numbers worse than both Bulgaria and Romania.  Which means there is trouble ahead.  But unlike other nations the United States’ population won’t be able to travel to sunnier economic climes.  For no country will be able to absorb that amount of migration.  Not even Germany.  Or the UK.  Combined.

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Undecided Voters, Party Platforms, Capitalism, Socialism, Free Stuff, Taxes, Spending, Deficit and Balanced Budget

Posted by PITHOCRATES - November 29th, 2012

Politics 101

There are Stark Differences between Republicans and Democrats even though many are Equally Worthless

A lot of people listen to opposing candidates before making their voting decision.  The perennial undecided voters.  Who often don’t make up their mind until they enter the voting booth.  Who are swayed by the prevailing political winds.  Who are more susceptible to the lies and misinformation bombarding them during political campaigns.  For these are good people.  Kind people.  Trusting people.  Which is why the Left can lie to them so easily.

Anybody who has to listen to both parties’ candidate make their case before choosing who they will vote for does not follow politics.  Does not understand the platforms of the two major parties.  Does not have an understanding of rudimentary economics.  Or history.  For if they did they would be aligned with one party or the other.  Because all Democrats are basically the same.  And all Republicans are basically the same.

Democrats choose to be Democrats because they believe in and support the Democrat platform.  Republicans choose to be Republicans because they believe in and support the Republican platform.  Not in their entireties.  But pretty darn close.  Otherwise they would not identify themselves with their chosen party.  For there are stark differences between the parties believe it or not.  Even though many candidates from both parties are equally worthless and contemptible.

Republicans lean towards Free Market Capitalism while Democrats lean towards European Socialism

Republicans lean toward free market capitalism.  The Austrian school of economics.  Small government.  Low taxes.  Low government spending.  Sound noninflationary monetary policy.  A business-friendly environment that encourages entrepreneurialism.  And job creation.  They tend to be more socially conservative.  And would prefer to combat the rise in teenage pregnancy and teen sexually transmitted diseases by having teens doing more homework and having less sex.

Democrats lean toward European socialism.  What they call social democracy.  The Keynesian school of economics.  Big Government.  High taxes.  Lots of government spending.  Inflationary monetary policy so they can print the money that they can’t tax or borrow to pay for all that government spending.  They don’t believe that there can ever be too much business regulation (they may talk about creating good-paying jobs but their policies hinder job creation).  They tend to be more socially liberal.  And would prefer to address the issues of teenage pregnancy and teen sexually transmitted diseases by providing free birth control and abortion.  Because teens are going to have sex anyway.  And asking them to do more homework won’t change that.

These aren’t their official platforms.  And it’s not an all-inclusive description of their policy positions.  But it gives you a general idea of their differences.  And as you can see there are differences.  An undecided voter may struggle with their choice between Democrat and Republican.  But that’s a decision few Democrats or Republicans ever have.  Because they know the differences between their two parties.  And really don’t like each other.

Those who vote Straight Party Ticket will know how they’ll vote even before any Candidates Announce

When it comes to wooing the undecided voters both political parties tend to downplay their official platforms.  To keep from confusing the undecided with stuff they don’t understand.  Or, worse, to keep from scaring away the undecided in case they do understand this stuff.  So they make personal attacks.  And promise free stuff to voters who’ll vote for them.  Which Democrats can do a lot better.  As they always want to raise taxes and increase government spending.  Which comes in handy when giving away free stuff.  While Republicans want to govern responsibly.  Which isn’t very conducive to giving away free stuff.

Of course the Democrats don’t come out and say that they will tax people more so they can increase the size of government.  To administer that free stuff.  So they say things like they just want everyone to pay their fair share.  And that those who can afford to pay more (the 1%) should pay more in taxes.  For if only we were fairer we wouldn’t have these trillion dollar deficits.  The president would like to return to the Clinton era tax rates.  Raising the top marginal tax rate from 35% to 39.6%.  In 2010 the top 1% earned about $1.7 trillion.  So raising the top marginal tax rate 4.6 points would raise about $77.5 billion in additional tax revenue.  Sounds like a lot of money until you look at the average annual deficit of President Obama’s 4 years in office.  Which comes to about $1.3 trillion for each of his 4 years.  So the president’s proposal to balance the budget would only raise revenue equal to 5.86% of his average budget deficit.  Which won’t be anywhere near enough to balance the budget.  So we’ll have to do more.  And once we raise taxes on the rich that leaves the middle class.  Which we will have to tax punitively to balance the budget if we don’t cut spending.

Of course, the Democrats don’t tell us this.  This math.  Though they talked about math a lot during the 2012 campaign.  Instead, they just talk about being fair and having the rich pay more.  Which sounds like the decent thing to do.  Especially to the undecided who the Democrats haven’t exactly told the truth to.  Which is why those who understand this math tend to vote straight party tickets.  Either for their special interests and the math be damned.  Those who tend to vote Democrat.  Or those who seriously want to balance the budget before we end up like Greece.  Those who tend to vote Republican.  And unlike the undecided voters these people know who they will vote for even before they know who the candidates are.  Who will ignore whatever the candidates say during the campaign.  And, ironically, these people will probably be more informed than those undecided who study the candidates’ positions up until they enter the voting booth.

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California’s Actual Budget Deficit to Exceed their Highly Skilled Bureaucrats’ Projection by 74%

Posted by PITHOCRATES - May 12th, 2012

Week in Review

Since President Obama came out in favor of same-sex marriage he received a boon in campaign donations.  Especially from those connected to Hollywood.  So there is a lot of money in California.  But apparently that Hollywood money isn’t making it to the state’s coffers (see California budget hole deepens to $16 billion: governor by Tiziana Barghini posted 5/12/2012 on Reuters).

California is facing a much deeper budget deficit than expected due to weak tax revenues and slow progress in cutting budgets, Governor Jerry Brown said on Saturday.

Brown said the shortfall for the fiscal year ending on June 30 now stood at $16 billion, up from a previous estimate of $9.2 billion made in January…

The state is still recovering from the 2008-2009 financial crisis that induced the worst recession since the 1930s. In April, California’s tax revenues came in $2.44 billion below the state’s estimate, largely due to weaker-than-expected revenue from personal income taxes…

California is expected to raise $7 billion in new revenue if voters approve a ballot measure in November that would increase the state tax rate on earnings above $250,000 and the state sales tax.

So the deficit will be $16 billion instead of the projected $9.2 billion.  That’s only a mistake of 74% or so.  By government standards that’s pretty good.  It’d get you fired in the private sector.  But not in the government.  Where they treat gross mismanagement and incompetence of government bureaucrats in the usual way.  By raising our taxes.

Interesting.  The solution they want the voters to approve will take more money out of the private sector economy.  Leaving people with less money to spend in the private sector.  Meaning businesses will have to cut back to reduce their output to match this decrease in demand.  And businesses do this by laying off workers.  Which will further decrease the collected tax revenue from personal income taxes.  The very problem they cite for their budget deficit woes.

This logic reminds me of an episode of The Three Stooges.  Where they were in a rowboat.  They accidentally drilled a hole in the bottom of the boat.  Water began to leak into the boat.  To get rid of this water one of them, I think Curly, drilled a second hole in the bottom of the boat.  When asked why he did this he said to let the water drain out.  Of course that didn’t happen.  Instead, water leaked into the boat through two holes.  Sinking it quicker.

I need to tell my mother that I used something I learned from watching The Three Stooges when I wish her a happy Mother’s Day.  To let her know that all that time she said I ‘wasted in front of that television set’ was not time wasted after all.  She’ll be happy to hear that.  And enjoy her Mother’s Day.  Of course it’ll help that she doesn’t live in California.  For no amount of sunshine and perfect weather can make up for the hell of the tax bomb coming in The Golden State.  (Unless you live in Hollywood, of course.)  Which is a microcosm of the tax bomb coming to the United States.  Which will be ugly.  And painful.

Gee.  I’d sure hate to be in our shoes.

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Foreigners using Britain’s Free Health Care are making that Free Health Care ever more Expensive

Posted by PITHOCRATES - May 6th, 2012

Week in Review

National health care systems are straining budgets everywhere.  As countries constantly cut costs and improve efficiencies.  To keep their floundering systems afloat.  And every time they think they’re getting their costs under control something like this comes to light (see GPs ‘threatened with legal action’ for taking failed asylum seekers off surgery lists posted 5/3/2012 on The Telegraph).

It emerged in an investigation which revealed that more than £40 million is owed to NHS hospitals by foreign patients who were not eligible for free care, research indicates…

Freedom of Information requests by Pulse revealed the average unpaid debt for the provision of care to foreign nationals was £230,000 in the 35 trusts which responded.

If this figure was the same across all 168 English acute trusts, the total debt would be almost £40 million, the magazine claimed…

In response to the figures Dr Richard Vautrey, deputy chairman of the British Medical Association’s GP committee, said trusts must put in place arrangements ”that ensure people cannot exploit the system”.

A spokesperson for St George’s told Pulse: ”A high percentage of our patients require life-saving trauma, neuroscience, cardiovascular or paediatric care…

”It is too simplistic to call it health tourism. The reality is a lot more complex.”

The investigation comes days after campaigners warned GPs had too much freedom to register sick foreigners who may not be entitled to expensive British healthcare…

The group’s chairman Sir Andrew Green said: ”To allow such easy and potentially hugely-expensive access without any entitlement must be stopped at once, otherwise the NHS risks becoming the World Health Service.”

The National Health Service (NHS) is the biggest chunk of Britain’s deficit.  So not only do they tax their people heavily they borrow heavily as they are already facing an uphill battle.  An aging population that is living longer is consuming ever more health care services.  And they don’t need to add more to a straining system.  Especially when they are not paying any taxes to fund the NHS.  Or paying any taxes to service the debt that funds the NHS.

Even when the health care is ‘free’ someone has to pay for it.  Because nothing is truly free.  All of this free health care is pushing Britain to the breaking point.  As Obamacare will push the U.S. to the breaking point.  Based on current exchange rates and population differences between the UK and the US, Obamacare could expect a foreign patient loss of approximately $325 million annually.  Or more.  Probably a lot more.  Especially if it’s treat first; bill later.  For people already travel to the US for the best in health care treatment.  Just imagine the health tourism when that care is free to American nationals.  And treat first, bill later for everyone else.  When it becomes difficult to say no.  Because saying no will bring in the lawyers with discrimination lawsuits.  So it will be treat first; bill later.  And based on the UK experience, a large percentage of those bills will go unpaid.

With a large budget deficit already exceeding one trillion dollars all of this health care spending will fall directly to the deficit.  Making it ever larger.  With no hopes of ever reducing it.  Especially when Obamacare evolves into the World Health Service.  Which we can’t afford any more than we could afford being the world’s policeman.  So when will it end?  This ever increasing government spending?  Soon.  And it won’t be pretty.  Because there just won’t be enough people to tax to service the accumulated debt.  And pay for Obamacare.  As well as everything else in the bloated federal budget.  Then the debt defaults will start.  Followed by the collapse of the banking system.  And then the depression.  Sort of like the Great Depression.  Only with a massive welfare state collapsing on top of it. 

But on they spend.  These old people.  Taking comfort in the fact they will be dead before the collapse.  So only their children will suffer through the experience of the oncoming economic carnage.  So not only are they bad stewards of the people’s trust.  They’re bad parents, too.  And if they sacrifice their own children what hope do we have?

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Faced with Unpleasant Austerity Spain follows Greece’s Lead and Riots in the Streets

Posted by PITHOCRATES - March 31st, 2012

Week in Review

The Eurozone is suffering the consequences of their social democracies.  Their cradle-to-the-grave welfare state.  And huge governments full of government jobs.  Paying nice salaries and benefits.  Greece is on the brink of bankruptcy because of their out of control spending.  And when they try to rein in that spending the people take to the streets in violent protest.  Making it very hard for the government to take back some of the free stuff they’ve been giving out to buy their votes.  And making it ever harder to avoid bankruptcy.  Now it’s Spain’s turn (see Spain Unions On Strike Over Austerity Plans by Robert Nisbet posted 3/30/2012 on Sky News).

Scores of Spanish workers have been arrested after protesting on a day of anger over a swingeing austerity drive and changes to labour laws…

In scenes reminiscent of anti-austerity demonstrations in Greece, tens of thousands held protest marches in Madrid and other cities…

There is widespread anger at moves by Prime Minister Mariano Rajoy’s conservative government – which is not yet 100 days old – to slash Spain’s debt and boost the economy.

Spain’s biggest unions called the 24-hour strike over labour reforms which make it cheaper and easier for companies to lay people off and cut wages without consultation.

The government claims they are needed to tackle the 22.85% jobless rate, which is predicted to rise to almost 24.3% this year…

The government is under pressure to reduce its budget deficit, which last year ballooned to 8.51% of all the goods and services produced by Spain.

The European Union says this must be reduced to 5.3% this year and 3% in 2013 but economists warn that growth in Spain is so sluggish and debt so high, it will be a tough deadline to meet.

There is good reason for nervousness in the Eurozone. Unlike Greece and Portugal, Spain is deemed too big to bail and British banks are also heavily exposed to Spanish debt.

With unemployment running at 50% among young Spaniards and, as a member of the Eurozone, no monetary levers to pull, the government in Madrid says it has little choice but to wield the axe once again.

Peak unemployment in the U.S. during the Great Depression was about 25%.  So Spain is enduring Great Depression unemployment.  That’s bad.  What’s worse is that those who can be the most violent in their discontent, the young, suffer from 50% unemployment.  Filling them with discontent.  And a lot of free time on their hands.  Never a good combination.

If Spain has a high budget deficit it can only mean one of two things.  Either their government is spending too much.  Or their economy cannot generate sufficient tax revenue from their tax structure.  Either taxes aren’t high enough.  Or taxes are too high and they dampen economic activity thus reducing tax revenue.  With those high unemployment numbers, though, the smart money is on ‘they’re spending too much’.  Both the government.  And the employers.  Where the unions are holding the cost of labor (wages and benefits) so high that it’s too costly to hire more employees.  Whereas if the market set wages and benefits these costs would come down to reflect that large surplus of labor out there.  And the people who want jobs could get jobs.

The problem with these social democracies is that they are anti-business.  They favor the public sector over the private sector.  But you can’t keep beating up on the private sector.  Because they pay the taxes that fund the public sector.  A lot of that unemployment no doubt are government workers they let go to meet their Eurozone requirements.  And there are probably a lot more to follow.  If they reduce the cost of labor in the private sector the private sector will be able to absorb these people.  And as the private sector grows and becomes more productive more people will be paying taxes.  And they will be able to bring down those massive budget deficits. 

But if they don’t bring down labor costs or cut government spending, hello Greece.  Which they are currently experiencing in the streets of Spain.  Which, incidentally, is the path the U.S. is currently on.

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Elderly Cancer Patients are not Worth the Cost of Health Care they Consume so the Policy of the NHS is to Let them Die

Posted by PITHOCRATES - March 25th, 2012

Week in Review

Proponents of Obamacare attack the profit-oriented private health insurers, medical device and drug manufacturers and hospitals.  Putting profits before people is wrong and shameful they say.  And just plain wrong.  No, the better way is to do like the Canadians.  And the British.  Adopt a health care system that puts people before profits.  Where everyone can smile and enjoy life.  Content in a perfect world where everyone gets whatever health care they need.  Not just the rich who can afford it.  So, with that in mind, let’s take a look at that health care utopia in the United Kingdom.  And see how wonderfully just, kind and generous their health care truly is (see Elderly dying due to ‘despicable age discrimination in NHS’ by Rebecca Smith posted 3/25/2012 on The Telegraph).

A lack of treatment or insufficient treatment is contributing to 14,000 deaths a year in people over the age of 75, Macmillan Cancer Support has found, in what it called an ‘unacceptable act of discrimination’.

Deaths from cancer are reducing in most age groups but at a slower rate in those aged 74 to 84 and are increasing in people aged 85 and over, the report said.

The report, The Age Old Excuse: the under treatment of older cancer patients, said treatment options are too often recommended on the basis of age rather than how fit the patient is…

Few clinical trials involve older people so clinicians are lacking evidence of how effective drugs may be in elderly people and few cancer specialists have had training in care of older people, the report said.

A survey found six in ten trainee oncologists had not received training in the additional care needs of the elderly such as preventing falls and incontinence management. This is despite half of all cancers occuring in the elderly, the report found…

“The NHS and social care providers must wake up to the specific issues older people face and ensure treatment decisions are based on their overall health not just their date of birth. Writing people off as too old for treatment is utterly shameful.”

This is the future of Obamacare.  This is what happens when the government pays for health care.  The government decides.  They decide who lives.  And who dies.  Who gets treatment.  And who is not worthy of treatment and should consider themselves lucky if they get a pill to dull their pain until they die.  When they finally stop being such an inconvenient and inconsiderate burden to government.

Why is the NHS like this?  Are the British cruel?  No.  It’s just business.  Health care costs continue to rise despite the power of government to stop these costs from rising.  Their population is aging.  And they have a massive budget deficit.  Made up primarily from the budget deficit in the NHS.  Taxes are already high.  And the economy is not doing as well as it once did.  Which means you can’t raise taxes anymore.  Unless you want to crash the economy and reduce tax revenues even further.  And with a massive deficit you can’t borrow anymore.  So if you can’t tax and you can’t borrow and you have an aging population consuming an ever larger share of the health care budget what do you do?  Why, you do what the NHS is doing.  You ration health care.  By making life and death decisions.  And the NHS has made a decision.  Old people over a certain age shall die of cancer.  And they will take that health care and give it to someone else who is more worthy of it.

Bureaucrats making life and death decisions for cost reasons?  Kind of sounds like a death panel, doesn’t it?  Now Obamacare doesn’t include anything called a ‘death panel’ but there will be a death panel.  Because there always is when you ration health care.  Which is what will happen as the government tries to rein in health care costs.  Because that’s the only way they can control costs.  By cutting costs.  And how to you cut costs?  You spend less on life-saving health care services.  And ration these services.  Deciding who has enough value to save.  And who doesn’t and should die.  By authority of the death panel.  The secretary.  Or some other bureaucrat.  Who you hope their life and death decisions are based on costs alone.  And not your politics.

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As NHS Budget Deficits balloon Britain tries to Privatize Parts of the NHS to rein in Costs and improve Quality

Posted by PITHOCRATES - March 4th, 2012

Week in Review

The proponents of Obamacare admire Britain’s National Health Service (NHS).  But they settled for Obamacare.  Which stopped short of providing national health care (though it put them on the path towards a national health care by making private health insurance either unaffordable or unavailable).  Because the nation wasn’t ready yet.  Not to mention the fact that most Americans want to repeal Obamacare. 

But they still look to the far side of the Atlantic and dream of having what they have.  Paradise.  At least, what they define as paradise.  Government control of 17.6% of the US economy (based on 2009 numbers) in addition to non-health care spending they already control.  Yeah, to them, this is what paradise is.  But, surprisingly, Britain has this now.  And is trying to move away from it (see NHS changes unavoidable and urgent, says David Cameron posted 3/3/2012 on BBC News UK Politics).

Under the NHS plans, GPs and other clinicians will be given much more responsibility for spending the health service budget in England, while greater competition with the private sector will be encouraged.

Mr Cameron said it would have been easier not to address an “invisible crisis” in the National Health Service in England.

“We could have just protected the NHS from the cuts, as we have, we could have just put in the extra £12.5bn, as we have, and we could have just left it there.

Did you catch that obscene amount of additional money the NHS needs?  £12.5 billion?  Based on the current exchange rate that’s $19.8 billion!  That’s not the budget.  That’s just the budget shortfall.  And if my math is correct that’s about a 12% budget deficit on a $167.8 billion dollar budget.  Worse, the total NHS annual budget is about 3/4 of Britain’s total annual budget deficit.  Meaning the NHS consumes approximately 75% all UK borrowings.

The NHS is bleeding.  And drowning the UK in debt.  No wonder they’re trying to privatize parts of it.  This is an economic model that cannot survive.  Especially with an aging population.  Which will only consume more health services in the future.  And make these deficit numbers grow worse. 

Here’s a lesson the US would do well in learning.  Lest they condemn themselves to making the same mistake.  Oh, wait a minute, that’s exactly what Obamacare is doing.  Repeating this same, horrible mistake.  Even though it is clear that this road they’re on will lead to disaster.  But that’s fine for the Obama administration.  Because at least they will have achieved paradise.  Control of over 17.6% of the US economy.

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The International Fight against Universal Health Care

Posted by PITHOCRATES - April 16th, 2011

The Most Effective Cost Control Mechanism is Market Forces

They keep saying that they’re not trying to nationalize our health care.  In fact, Obama promised that if you liked your doctor you could keep your doctor with the new Obamacare.  Of course, that decision won’t be entirely yours.  For your doctor may choose to drop you.  And if they keeping cutting Medicare doctor reimbursements, doctors will finally say enough is enough.  I’m outta here.  No more Medicare patients.  Which could force you to find another doctor.  Even though Obama promised that wouldn’t happen.

There’s a lot of talk about controlling costs in Medicare.  And there’s only one way to that with the current system.  You pay doctors less.  Which they are always trying to do.  Is that fair?  Put yourself in their position.  Would you keep seeing patients?  After doing what so few other people do (go to college, medical school, serve an internship and a residency after racking up huge student loan debt that has to be paid back at the same time you have to pay ever rising medical malpractice insurance premiums leaving you with little money to enjoy the first decade or so of your new medical career)?  Because some government bureaucrat says you’ve earned enough money?  All the while no government restrictions are placed on public sector pay and benefits?  To add the ultimate insult to injury, a lot of those same bureaucrats telling doctors that they’ve earned enough money and should be happy with what the government deems is appropriate will no doubt make more than the doctor.  With far less training.  And far less responsibility.  Which just ain’t right.

They like to blame the doctors for the runaway costs.  But they’re not the lone scapegoat.  They also blame the pharmaceutical companies.  The hospitals.  And, of course, the great ‘big bad’ in the health care industry, the insurance companies.  Whose costs keep going up.  Greater than the rate of inflation.  So the runaway costs in the health care system must be their fault.  Because they’re greedy.  It can’t have anything to do with the system we force them into.  Where third party payments shut out all market forces (the person receiving the service isn’t paying the bill), thus eliminating the only effective cost control mechanism.  And introduces government.  Making health care a public good.  Where non-health care government bureaucrats determine fair pricing, supply and demand.  And you know where that will lead to.  To the here and now.

Labour fights against Market Forces for the NHS in the UK

Government bureaucrats don’t like privatization.  Or market forces.  They’d rather manage things.  Because they’re smarter.  Narcissistic.   And they covet that money and power.  They want all those tax dollars funding health care to go through their fingers.  And having people dependent on them for their health care makes that a whole lot easier.  So when conservatives try to introduce effective cost mechanisms, liberals push back.  In the US.  In Canada.  And in the UK (see NHS bill to ‘substantively’ change, says Oliver Letwin posted 4/16/2011 on the BBC).

Labour wants the plans for the NHS in England, which encourage more private sector competition, to be scrapped.

Under the shake-up, GPs are also to be given control of much of the NHS budget.

To cut costs, reduce wait times and improve quality of the NHS, the UK is trying to decentralize the NHS.  Give more decision-making authority to the general practitioners (GPs) in the local communities.  Letting the local health care providers in the communities they serve determine how to best spend the NHS money.  Which, of course, is anathema to Big Government liberals.  Such as Labour in the UK.

Liberals fight against Market Forces for the CHA in Canada

Wherever you find national health care, you’ll find bitter partisan debate over the money paying for that health care.  Except in Cuba.  Or North Korea.  Luckily, for them, there are no opposition parties.  And no one complains about anything.  For they know better.  But Canada has a national funded health care system.  And opposition parties.  Which can get pretty nasty when they’re trailing in the polls (see Liberals drop gloves with attack ad on Harper’s ‘secret’ health agenda by John Ibbitson posted 4/16/2011 in The Globe and Mail).

Conservatives are reacting with fury to a Liberal attack ad that accuses them of harbouring a secret agenda to cut health care funding if they obtain a majority government.

“The Liberal ad uses some of the dirtiest tricks in the book — including twisting words out of context and deliberately altering dates to make old words appear recent,” Tory campaign manager Jenni Byrne wrote to party supporters in reaction to the new attack ad.

In America, the go-to strategy is to threaten Medicare.  In the UK it’s the NHS.  In Canada, it’s the Canada Health Act (CHA).  The reason is, of course, the sheer size of this budget item.  If you’re trying to cut a budget deficit, that’s where you do it.  Cuts elsewhere just won’t be big enough to matter.  And everyone knows it.

If Mr. Harper is given “absolute power,” the ad warns, he plans to cut $11-billion from the federal budget. “Where would Harper’s cuts leave your family’s health?” the narrator asks.

“The stakes are too high. Vote Liberal.”

So you threaten certain death for you and your family should the opposition get elected.  While all the time promising yourself to cut the deficit.  Which, of course, you won’t.  For it will require cuts in health care funding.  And you’re not going to do that.  For there will be another election.  Eventually.  Sure, it makes you a hypocrite.  But a hypocrite with a job.

The Conservatives do plan to cut government spending as part of their own plan to balance the budget, but they promise to do so without reducing transfers to provinces, including health transfers.

It is true that the Liberal government of Jean Chrétien cut funding for health care in the 1990s as part of its efforts to eliminate the federal deficit. Once the budget was balanced, the Paul Martin government signed a ten-year accord to increase funding by six per cent a year. The Conservatives, when they came to power, honoured that commitment, and pledge to continue the arrangement, as does Mr. Ignatieff.

Anyone living near the Canadian-US border only knows too well the consequences of painful health care cuts.  When doctors and nurses get pay cuts, they scoot across the border for higher paying jobs in the US.  Which makes Canadians’ long waits for health care even longer.  This is the ultimate consequence of national health care.  Cost problems you solve by rationing services.  Whether in the UK.  Canada.  Or the USA.

Massachusetts:  Blueprint for Obamacare

We have Obamacare now.  Maybe.  We’ll see.  There’s a popular movement to repeal it.  After it was snuck through Congress.  By the time people learned what was in it (long after Congress voted it into law), the majority of the population didn’t want it.  It’s a big reason why the Republicans won back the House of Representatives in the 2010 mid-term elections.  For the people felt betrayed by their representatives.  So they fired a bunch of them.  Except Nancy Pelosi.  Who the good people of San Francisco reelected with like 80% of the vote even though her national approval numbers as Speaker of the House were closer to 10%.  Which makes it clear that the San Francisco district she represents is an anomaly in the American fabric.  Where the people think against the national grain, so to speak.  But I digress.

Anyway, before Obamacare there was Massachusetts.  And their little experiment in universal health care.  Which now covers every man, woman and child.  Well, almost.  Only 98% are covered.  That other 2% are the state’s Republicans.  I’m kidding, of course.  I don’t know who that 2% is.  Except that they must be the most unlucky sons of bitches ever to live in Massachusetts.  To live in a state where everyone gets free health care and they still get bupkis.  Imagine how that would make you feel.

But even there, in that universal health care utopia, they have a problem.    They gave health care to everyone (except that unlucky 2%, the poor bastards) but they never figured out how to pay for it (see Massachusetts, pioneer of universal health care, now may try new approach to costs by Amy Goldstein posted 4/15/2011 on The Washington Post).

Massachusetts Gov. Deval L. Patrick (D) is trying to “shove,” as he put it, the health-care system here into a new era of cost control. He is proposing a new way of paying for care that would try to propel changes in the way it is delivered. It would give lump payments to teams of doctors responsible for almost all the care of a group of patients, with bonuses for saving money and dispensing high-caliber services that keep people healthy.

Interesting.  Sort of going the route of the GPs in the UK.  Decentralizing the health care system.  After they just centralized it.

Massachusetts in 2006 created a health insurance exchange, a requirement that most residents carry coverage and subsidies to help them pay for it — central elements now in the federal law. As a result, 98 percent of the residents here are now insured, the highest rate in the nation. But the state’s first round of health-care changes devoted far less attention to medical costs.

“We did access first,” said state Senate President Therese Murray (D). “Now we have to figure out how we afford that.”

Oops.  No doubt during the debate for universal care the opponents said something like, “Are you out of your minds?  You have any idea what something like that will cost?”  Which, of course, the proponents replied, “Don’t worry about it.  We have a plan.”  And that plan was apparently to get the law passed first then figure out how to pay for it.

Fee-for-service medicine “is a primary contributor to escalating costs and pervasive problems of uneven quality,” the commission unanimously concluded in 2009.

Despite the consensus, huge questions loom: Who should be part of the new medical teams? How would the idea work for most doctors who practice alone or in small groups? How much clout should the state wield to blunt the ability of powerful local health systems to drive up costs? And, importantly, how heavy a hand should the government use to compel change?

Fee for service is NOT the problem.  It’s never the problem.  If I want to hire a contractor to build a deck in my backyard, I’ll ask some contractors to quote their fee to build a deck.  If the prices are $15,000, $10,000 and $5,000 for identical services, guess who I’m going to hire.  Now, for the sake of argument, let’s say that each of these prices are fair prices for each of these contractors because of their cost structure (e.g., one may have his office on the beach and pays ten times as much in property tax as the others and therefore has to charge more). 

Now in a system where the government steps in to make prices fair, let’s see what happens.  Say a bureaucrat gets three quotes and determines the fair price is $10,000 (the average of the three).  So the contractor who quoted $15,000 now has to build decks at $10,000 and lose money, eventually going out of business.  The contractor that quoted $5,000 will get rich making over a 100% profit on each deck.  And me?  I’ll end up paying twice as much as I had to for the deck.  This is what happens when you don’t let the market set prices.  You get a mess.

In the pressure-cooker of medical costs in the United States, Massachusetts offers a particularly vivid example. The spending per person on health care is 15 percent higher than the national average — even taking into account the comparatively high wages here and outsize role of medical research and training. The move to near-universal coverage, state figures show, accounts for a sliver of recent increases in insurance premiums, which have soared above inflation. The main reason has been a rapid escalation in prices.

“The growth is outstripping every single measure of society’s ability to keep up,” said Glen Shor, executive director of the Commonwealth Health Insurance Connector, which runs the insurance exchange.

So much for the theory of an insurance exchange being the panacea Obama claimed it would be.  For whenever has a bureaucracy been cost efficient?  Never.  It’s impossible.  You can’t manage an economy and do better than market forces.  It’s never happened yet in human history.  So why do some people (i.e., Big Government liberals) still think they can do a better job?  Oh, but we must remove filthy, nasty profits from health care.  This ‘public good’ deserves better.  It deserves the tender love of a caring government bureaucracy.  Not some evil corporation trying to maximize profits.  Of course, look at what happens when these corporations do just that.  Stuff we like and want to buy is plentiful and inexpensive.  But God forbid if we do that to health care.

Some doctors are embracing the new way of working. David C. Pickul is the medical director of the physicians group affiliated with Lowell General Hospital, in an economically bruised community about 30 miles northwest of Boston. The group is in the third year of a five-year “alternative quality” contract with Blue Cross involving a hub of 70 primary care doctors and a looser group of 200 specialists who are responsible for 20,000 HMO patients. The team now has a financial incentive, Pickul said, to track down patients when it is time for their mammograms or for eye exams for those with diabetes. Under Blue Cross’s quality rating, Lowell has soared the past two years.

Blue Cross is not alone. At Partners HealthCare, the famous Boston-based medical system that dominates health care here, Massachusetts General Hospital has been conducting a Medicare experiment in which nurses are assigned to coordinate care for about 2,500 older patients with multiple ailments. The experiment, which began five years ago, so far has reduced hospital re-admissions by one-fifth and cut medical spending by 7 percent.

“Frankly, the market has already . . . responded,” said Gary Gottlieb, Partners’ president and chief executive. “There is enough momentum for us to do this without instrumental regulation” by the state.

The governor and some other officials disagree. The need to lower costs, they say, is urgent enough that the government should step in, and they have been laying groundwork.

Financial incentive?  Isn’t that another word for profit?  And this pursuit of profits has done what?  Improved patient quality?  Reduced hospital readmissions by one-fifth?  And cut medical spending by 7 percent?  Amazing what will happen when you let the market respond.  What a success story.  But they want to do what?  Step in?  To lower costs?  After the market lowered costs already by 7 percent?  You got to be kidding me.  Whatever happened to if it ain’t broke don’t fix it?

And Alice Coombs, president of the Massachusetts Medical Society, is especially concerned about physicians who work alone or in small groups, older physicians who might choose to retire rather than switch or new doctors who might leave for other states.

And how do you solve that problem?  With compulsory medical service.  Which universal health care coverage gives you.  If you worry about doctors opting out of a new cost-contained system, you make it impossible to opt out.  You simply nationalize health care.  Letting the doctors know, yeah, they may be miserable and unhappy with the new system, but you’ll be just as miserable and unhappy where ever you go.  So why move out of state?  For any where you go, we’ll be there.  Understand?  So just keep curing the people and stop your bitching. 

Sure will make all that medical school, internship and residency worth it, won’t it?

The Song Remains the Same

Liberals everywhere want to expand the size of government.  And a national health care is the holy grail of government expansion.  But everywhere it’s tried the same thing happens.  Cost and wait times increase.  Quality decreases.  And services are rationed.  Most people (especially liberals) want to blame the greed of those who work in health care.  So they come up with new ways to manage and control costs.  Which inevitably adds yet more layers of bureaucracy.  Which benefits liberal governments.  At the expense of the taxpayer.  And patients’ health.

But nothing they try works.  Costs keep going up.  For good reason.  Because the problem is not the greed of the health care people.  It’s the health care system.  There are no market forces in it.  Which is the most efficient cost control mechanism.  Of course, admitting this is an admission that Big Government has failed.  And liberals can’t have that.  So they fight.  Demonize.  And scapegoat. And try to scare the bejesus out of everyone by saying conservatives want to cut health care funding so they can kill your family.

Whatever the name, whatever the country, the song remains the same.  Conservatives will try to cut deficits by reforming the biggest budget item.  And liberals will fight them every step of the way.  Ultimately giving us a health care system with greater costs, longer wait times, lower quality and rationed care.  As demonstrated everywhere in countries with a national health care system.

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