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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FUNDAMENTAL TRUTH #87: “In a democracy you hold the keys to the treasury. So be careful of what you ask for.” -Old Pithy

Posted by PITHOCRATES - October 11th, 2011

The Founding Fathers Purposely made it Difficult for the New Federal Government to Spend Money

Benjamin Franklin knew.  He knew what would happen once the people learned they held the keys to the treasury.  “When the people find they can vote themselves money, that will herald the end of the republic.”  All the Founding Fathers knew this.  This is why they created a representative government.  They put other people between the people and the treasury.  A lot of people.  Responsible people.  People who knew better.  Or should know better.

It started with the separation of powers.  The country needed a leader.  But they didn’t want a king.  They wanted a leader with limited powers.  So they limited the president’s access to money.  The Founding Fathers gave the power of the purse to the House of Representatives.  The president could only spend the money Congress allowed the president to spend.  The president could veto spending.  But Congress could override this veto by a two-thirds majority in both the House and the Senate.  So the president can try to stop spending.  But he simply can’t spend at will.

But neither can the House.  Because the Senate has to approve any spending initiated by the House.  Before it can even get to the president.  The Founding Fathers purposely made it difficult for the new federal government to spend money.  To limit the power and breadth of the federal government.  By limiting its money.  Even after the president signs it into law.  Should any questionable spending pass both houses, and the president approves it, we can still challenge it.  By the third branch of government.  The judiciary.  Which further checks the power of federal government.  On the rare occasion when the federal government passes bad legislation.

As Originally Written in the Constitution the States’ Legislatures Voted for a States’ Senators

Back at the Founding the states were very powerful.  They were nation-states.  Joined together only by a loose and weak confederation.  And very suspect of any distant, centralized power.  Whether it be a king on the far side of the Atlantic.  Or a president on the near side.  To get the new Constitution ratified the Founding Fathers knew they had to appease the states’ concerns.  And they did that with the Senate.  The states’ house.

As they originally wrote the Constitution, we elected the members of the House of Representatives by popular vote.  But not the Senate.  The states’ legislatures voted for their states’ senators.  These state legislators who we elect by popular vote in their states.  This put even more people between the people and the treasury.  And gave the states a way to rein in a federal government that strayed too far from their Constitutional boundaries.

But that all changed with the Seventeenth Amendment (1913).  At the dawn of big, progressive government.  When great amounts of power transferred from the states.  To the growing federal government.  And the spending began.  The states’ legislatures no longer voted for states’ senators.  The people now voted for their senators.  By direct popular vote.  And got closer to the national treasury.

Growing Spending and a Declining Population Growth Rate required Higher Tax Rates and Class Warfare

The federal government grew as we removed these other people from between the people and the treasury.  Responsible people.  People who knew better.  Or should know better.  Now people were closer to the federal treasury.  And they slowly learned what Benjamin Franklin feared.  They learned that they could vote themselves money.  And did.

Responsible, limited government went out the window.  Pandering for votes was in.  Rugged individualism was descendant.  And the nanny state was ascendant.  Federal government spending grew.  Federal taxes grew.  And federal debt grew.  Because you won elections by giving people stuff.  Paid for with other people’s money.  Which was key.  You didn’t win elections by raising people’s taxes.  You won them by raising other people’s taxes.  And the way you do that is with class warfare.

In the beginning class warfare was easy.  Because the federal budget was a lot smaller than it is today.  So you didn’t need very high tax rates.  And the population base was growing.  A lot of families had closer to 10 children than the 2.3 children of today.  So having lots and lots of new taxpayers in subsequent generations would produce a steady and growing stream of federal tax revenue.  But as spending grew and the population growth rate declined, that caused revenue problems.  Requiring higher and higher tax rates.  And more and more bitter class warfare.

The General Trend of Defining ‘Rich’ Downward has Redefined the Middle Class as ‘Rich’

With the higher spending and falling revenue budget crises followed.  Which ramped up the class warfare.  Pitting the ‘rich’ against the poor and the middle class.  Of course they kept redefining ‘rich’ as they needed to raise more and more tax revenue.  First calling the superrich fat-cat industrialists and Wall Street bankers ‘rich’.  The billionaires.  Then they included the millionaires.  But when they could no longer pay for the growing cost of the federal government people earning less and less were lumped in with these super rich.  Until today it’s someone making as little as $250,000 a year.

Anyone who says these people should pay their fair share should understand the general trend of defining ‘rich’ downward.  And that line that defined ‘rich’ has moved a long way down.  Closer and closer to the middle class.  Like those earning $250,000.  Many of these people aren’t rich.  Not by a long shot.  Despite earning $250,000.  They’re small business owners.  People who risk everything to run a restaurant.  Or start a construction business.  The number one and number two type of business that fails.   Because they can’t cover their bills.  And grow their businesses.  Despite having business income of $250,000.

The problem isn’t that the rich aren’t paying their fair share of taxes.  It’s that the government is spending too much.  In their eternal quest to buy votes.  By granting more and more government largess to the poor and middle class.  Courtesy of the rich.  Who will soon be anyone with a job.  Because of that growing federal spending.  And a declining birthrate.

Today’s Benefits are Paid by the Rich and Future Generations

As Benjamin Franklin feared this spending is threatening the health of his republic.  And governments around the world.  Because people learned that they could vote themselves money.  And politicians were only too glad to oblige.  Promising ever more.  In exchange for votes.  By providing ever more generous and growing government benefits.  Confident that they didn’t have to pay for these costs.  Instead, they could simply pass the cost of this largess to future generations.  Who don’t vote today.

So today’s benefits are in fact paid by the rich.  Who are small in numbers.  And future generations.  Who aren’t voting yet.   You see, it’s easy to provide benefits today.  That helps garner votes for today.  When the costs of these benefits will be borne by a subsequent generation.  A generation so far out into the future that they have no say today.  But over time this future generation has gotten closer and closer to the current generation.  So close that people alive today will be paying for benefits of today.  More importantly, this future generation is already voting today.  And that’s a BIG problem for a growing government.  So expect the class warfare to get uglier still.

This could herald the end of the republic.  Unless the current generation learns that they are in fact the future generation.  And that they are the new ‘rich’.  Regardless of how much they earn.  And they’ll learn this fast as they pay for everyone else.  After which they’ll see that there’s nothing left for them.  Then they’ll take notice.   And stop the insanity.  Then, and only then, will they stop voting themselves money.

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The High Cost of Health Care and Beer

Posted by PITHOCRATES - May 22nd, 2011

The Rising Cost of Beer

Economics can be confusing.  And boring.  A lot of it sounds Greek.  And wonkish.  Worse, there are those who like to sound wonkish.  They like to show charts with curves.  And explain why beer is more expensive these days by moving a curve on their graph.  Yeah, I know.  Yawn.  But they feel smart.  And they think it impresses the ladies.

But beer prices are real.  For some, it’s part of the weekly routine.  Get paid.  Buy a case of beer.  Those who do know this commodity price very well.  And it’s been tracking higher.  Why?  Because of the laws of supply and demand.  You see, the stuff that goes into making beer is getting scarcer.  And, therefore, more costly.  Hence the rise in beer prices (see The economic forces behind the rising cost of beer by Loren Berlin posted 5/22/2011 on msnbc).

Three years ago, Bavaria, the largest state in Germany, suffered a bad hops harvest. These green, pine cone-shaped flowers are the essential ingredient in brewing beer, and because Germany alone provides roughly 35 percent of the world’s supply of hops, the crop shortage created an immediate and significant problem for beermakers who found themselves suddenly scrabbling to locate this key ingredient. And as we all know, when supply decreases and demand doesn’t, prices rise. To cover those new higher costs, brewing companies added a few cents to the price of our beer.

But it’s not just one ingredient.

…a heat wave in the Ukraine can directly add to the cost of beer — and is doing so right now. Global grain production is down, thanks in large part to unusually brutal heat in the former Soviet Union and droughts in China. See the previous discussion of supply and demand, but in this case, the effects are wider, because unlike hops, which is mostly used in beer, we’ve got a few other uses for grains. Between people food, animal food, biofuels and of course, our beer — along with a steadily growing world population that wants to consume them — yes, another few pennies are getting added onto the cost of every beer.

But it’s not just these two ingredients.

Then there’s transportation. All those raw materials have to be shipped to the brewers, and the finished products shipped to the retailers who sell it to us, all of which requires fuel. Fuel, that, until very recently, had been getting steadily more expensive this year. Yet another addition to the price we pay for our beer.

Yes, the cost of fuel, too.  These are all input costs to making beer.  When they go up beer is more costly to make.  And brewers being in the business to make a profit, have to increase the price of beer to cover these higher input costs.  While still being able to make a profit.  For if they couldn’t make a profit, they’d have no incentive to make beer.  And wouldn’t.  And we wouldn’t want that, would we?

Free Health Care is very Expensive

Understanding health care is a little more difficult.  Because we don’t pay health care costs like we pay for beer.  We know the price of beer.  There’s a price tag stuck to the beer so we can see the full price to make an informed purchasing decision.  The vast majority of people, though, don’t pay the full price of their health care costs.  So they haven’t the foggiest clue of what they are.  Other than the cost of co-pays.  So they keep demanding more.  Don’t want to hear anything about reforms to Medicare.  And are all for free health care for everyone.  Problem is, free health care is very expensive (see Republicans suggest deal possible on taxes, health by Andy Sullivan posted 5/22/2011 on Reuters).

On healthcare, the two sides are separated by a gulf of trillions of dollars. The Republican-controlled House has passed a budget, authored by Ryan, that would save $2.2 trillion by scaling back Medicaid and Medicare, the government-run health plans for the poor and elderly, and repeal President Barack Obama’s signature health reform program, the 2010 Affordable Care Act.

Obama, in turn, has proposed saving $480 billion by accelerating reforms in the program — a nonstarter for Republicans who insist it must be repealed.

The nation’s debt is $14.3 trillion dollars.  And President Obama’s 2010 budget added the last $1.4 trillion of that number.  $480 billion in health care reform savings is less than his last deficit.  This will still result in deficits.  And add to the debt.  The problem is the federal government is giving away too much stuff.  And stuff costs.  Medicare and Medicaid are about 40% of the federal budget.  And the baby boomers are just starting to retire.  Which will break Medicare.  Unless it’s reformed.  And it is amidst all of this that they passed Obamacare.  It’s too much.  Something has got to go.  Like it or not.

Democratic Representative Chris Van Hollen, a participant in the Biden talks who is also the top Democrat on the House Budget Committee, said the Democrats had proposed savings in the Obama’s healthcare program and could find more by lowering the price the government pays for prescription drugs, rather than scaling back benefits for patients.

Van Hollen repeated Democrats’ contention that any debt-reduction plan requires higher taxes, saying Republicans’ reluctance to them forced Ryan to push his unpopular cuts to Medicare and Medicaid.

If it’s that simple, why don’t the beer-makers just lower the price they pay for hops?  And get the price of beer down?  Because it’s not that simple.  With less hops to sell, they have to sell what they can at a higher price to cover their costs.  If they sell at lower prices, and with a smaller harvest to sell, they will lose money.  And possibly their farms.

If the government tells a drug company to lower their prices, what will happen?  With less revenue they won’t be able to spend as much.  They may have to cut research and development, that costly process that brought so many of their wonder drugs to market.  Or they may just say the new law makes it impossible to make a profit and shutter the business.  Either way, there will be fewer drugs to go around than before.  Just as the government wants more drugs to pass around.  And, with medications more difficult to find, people will take less.  And perhaps get sicker.  Possibly requiring hospitalization.  Which will increase costs.  Kind of the opposite of what they would hope for by lowering drug prices.

We’ve hit our head on the debt ceiling.  The White House wants to raise the ceiling.  But don’t you think $14.3 trillion dollars should be enough?  It is.  We’re spending too much.  And raising taxes does nothing to rein in spending.  Quite the contrary.  It encourages more spending.  Ronald Reagan agreed to higher taxes in exchange for future spending cuts.  The spending cuts never came.  They never do.  If you can’t cut the spending now because there’s too much opposition, that opposition will still be there in the future.  And they’re not going to let you cut spending then either.  It’s the oldest trick in the book.  Make a promise that you know you can’t keep.  You lose nothing.  And gain everything.

It’s Simple Supply and Demand

It’s simple supply and demand.  If you buy more you pay more.  If supply goes down prices go up.  And if you have no idea of the full price of what you’re buying you can’t make an informed decision.  Which the politicians count on to keep increasing the debt limit.  So they can keep on spending.

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The Battle to Raise the Debt Limit Begins

Posted by PITHOCRATES - April 11th, 2011

Like Sumter, the Budget Compromise is only the Beginning

The next big congressional battle will be over the debt ceiling.  Which will set the stage for entitlement reform.  And being that this is the sesquicentennial of the opening shot of the Civil War, how about a little Civil War analogy?  About 150 years ago today General Beauregard ordered his canon to open fire on Fort Sumter.  The Union surrendered the fort.  There were about 10 casualties.

The first major land battle of the Civil War was the First Battle of Bull Run (aka, the First Battle of Manassas).  The military then still used Napoleonic tactics.  Armies formed in line, fired and advanced with bayonets amidst cannon fire, drums and regimental colors.  It was quite the spectacle.  The good people of Washington DC planned to make a picnic of it.  They would watch a couple of musket volleys and charges, see one army retire from the field of battle and then go home.  The battle did not progress quite that way.

Though we were still using Napoleonic tactics, we were not using Napoleonic smooth bore muskets any longer.  The effective range of the new rifled muskets was almost three times that of the smooth bores.  So as these men marched to close ranks with the enemy with their bayonets at the ready, the enemy fired accurate volleys into their lines.  The picnickers were shocked by the carnage.   When the Union Army was driven from the field of battle, the roads back to Washington were jammed with picnickers and soldiers alike fleeing for their lives.  There were just under 5,000 total casualties.  A pall hung over the nation.  No one expected the war to be this bad.  Then, about 9 months later, the Battle of Shiloh (aka, the Battle of Pittsburg Landing) saw just over 23,000 total casualties in two days of fighting.  Three months later, the Battle of Antietam (aka, the Battle of Sharpsburg) saw just over 22,000 casualties in a single day of fighting.  About a year later the Battle of Gettysburg saw close to 50,000 in total casualties over three days.

Now comparing political debates with Civil War battles dishonors those who fought those battles.  But because it’s the sesquicentennial, I will do so just for history’s sake.  Besides, politicians like to use war metaphors all of the time.  Even those opposed to the military.  The budget deal recently passed is like the Battle of Fort Sumter.  The battle over the debt ceiling will be like the Battle of Shiloh.  And entitlement reform will be like the three days of Gettysburg.  In other words, though they act like they just went to hell and back over this budget compromise, they ain’t seen nothing yet.

You Fix a Spending Problem by Spending Less, not More

House Speaker John Boehner pulled off a miracle of compromise.  Or some are saying.  While others are saying he caved (see John Boehner’s real tea party test by Chris Cillizza posted 4/11/2011 on The Washington Post).

House Speaker John Boehner is being widely credited as having emerged victorious from last week’s budget showdown — receiving kudos for extracting nearly $40 billion in budget cuts and uniting a fractious tea party behind the compromise bill.

But, the real test of Boehner’s abilities as a party leader will come next month when Congress begins debate on raising the federal debt ceiling.

Because of a fractious Republican Party.  The Tea Party wants serious cuts.  Because that’s why they got elected.  Meanwhile, the old guard doesn’t.  They may disagree with the liberals in theory but they want to be part of the same Washington establishment.  The liberals have the best parties.  With the best celebrities.  And the old guard wants to enjoy that life.

On this issue, at least, the American people side with the Tea Party.

In an NBC/Wall Street Journal poll released last week, just 16 percent of people said the government should raise the ceiling while 46 percent opposed the idea and 38 percent said they didn’t know enough about it to offer an opinion.

Probing deeper, just 32 percent agreed with the statement that the debt limit increase was necessary to avoid the country being “unable to pay the nation’s bills” while 62 percent said that [they] agreed with the statement that such a vote would “make it harder to get the government’s financiaol [sic] house in order”.

Some may not understand the intricacies of the federal budget.  But they do seem to know that when you have a spending problem, you don’t solve it by asking the credit card companies to raise your credit limit.  People know that you fix a spending problem by spending less.  Not more.

But, judging from the concessions people like Rubio have laid out for a deal to be done — tax reform, regulatory reform, a balanced-budget amendment and entitlement reform — it’s hard to imagine the White House being able to give enough to make that sort of compromise possible.

And, all of that means that the burden will presumably be on Boehner to cut a deal that can garner 218 votes in the House while also avoiding a potential filibuster in the Senate from the likes of Rubio or South Carolina Sen. Jim DeMint.

President Obama is a tax and spend liberal.  He’s not going to cede any ground on big cuts.  So Boehner will have to see how little in cuts the Tea Party will accept to vote to increase the debt ceiling.  And that will be a tough sell.  Because they want meaningful cuts.  But that’s something a tax and spend liberal just can’t do.

So as the nation is jubilant over the budget compromise that kept the federal government open, a longer, more bitter and far more partisan battle awaits them.  Which means the sides will entrench.  They will refuse to give ground.  And the compromise we’ll probably get will be similar to the many ones reached over slavery.  Which made the ultimate day of reckoning on that issue far more costly than anyone had ever imagined.

A History of Kicking the can down the Road

With sesquicentennial fever in the air, a 4th grade teacher tries to bring to life the issue that caused the nation to go to war (see Va. teacher holds mock slave auction by Kevin Sieff posted 4/33/2011 on The Washington Post).

Trying to bring a Civil War history lesson to life, [a] teacher…turned her fourth grade Norfolk classroom into a slave auction: She ordered black and mixed race students to one side of the classroom. Then, the white students took turns buying them…

Sewells Point’s fourth grade class is about 40 percent black and 40 percent white.

Though an interesting experiment, she unfortunately made it purely a racial issue.  Which is historically wrong.  There were a lot of whites in the south.  But only a few of them owned the big plantations where the majority of slavery existed.  She should have had only a few of the white children buying slaves.  And she should have identified them as the rich planter elite.  Who was also the driving force behind southern politics.  The other whites should have been identified as poor southerners working on small family farms without any slaves.

Then she could have pointed to the planter elite and said their wealth and political power depended on slavery.  Because all that cotton wasn’t going to pick itself.  Which is why they cited the North’s hostile attitude toward the institution of slavery in their secession documents.  They told everyone else it was about states’ rights.  But it wasn’t.  For the planter elite didn’t respect states’ rights in the North.  The North didn’t want to return fugitive slaves.  So the planter elite demanded the federal government pass the Fugitive Slave Act to override states’ rights in the North.  And force them to return their slaves. 

The debate over slavery was always controversial.  The Southern economy was entrenched in it.  The only way they’d join the Union was with their slaves.  So the issue was tabled for 20 years.  The Founding Fathers hoped the institution would just go away.  And it might have.  If it hadn’t been for Eli Whitney‘s cotton gin.  Because of the amount of cotton it could process, the southern plantations grew.  As did the number of slaves.  And the problem just continued to grow.  The cost to reimburse the plantation owners for the slaves they purchased legally grew too great to even consider.  The North didn’t want to pay that cost.  Slavery was a Southern problem.  And the slave population grew so large that no one wanted to address a post-slavery biracial society.  Because there were none then.  But there were slave uprisings.  And the South feared that a freed slave may try to exact a little revenge on their former master.  So the problem was kicked down the road for someone else to solve.  Until it couldn’t be kicked anymore.

This is where we are in our budget debate.  We’ve kicked that can down the road so many times that federal spending has grown out of control.  Now we’re entering European sovereign debt crisis territory.  And we’ve seen what has happened over there.  It’s a little different over here, though.  Germany and the other financially strong members of the European Union can bail out a Greece, an Ireland, a Portugal, etc.  But who is going to bail out the world’s largest economy?  Don’t spend too much time on that question.  Because there isn’t anyone big enough to bail us out.

Unfortunately, you win Elections with Spending, not with Spending Cuts

History often shows us that the longer we wait to address a problem, the harder and more costly it is to fix that problem.  And yet here we are.  With far too many people in Washington willing to just keep kicking that can down the road.

Interestingly, two who support raising the debt ceiling now were dead set against it at an earlier time.  When George W. Bush was in the White House.  Of course, then Senator Barack Obama was playing pure partisan politics and attacked George W. Bush on everything.  He regrets that vote now.  Because his hypocrisy makes him look partisan and naïve.  Harry Reid also had a hypocritical partisan position on this issue.  Bush spent irresponsibly and it was wrong to raise the debt ceiling.  Obama has spent even more in less time.  But now raising the debt ceiling is the right thing to do.  Go figure.

That recent budget compromise?  It was but a minor skirmish in a long war to come.  And though there was a lot of nasty political rhetoric, the battles to come won’t be as nice.  The Republicans will try to make meaningful cuts.  And Democrats will say that they just want to kill women, children and the elderly.  Knowing full well that the cuts being requested by the Republicans are necessary.  But you don’t win elections with cuts.  You win them by spending money.  So they will resist those cuts.  And try their damnedest to kick this can down the road.

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FUNDAMENTAL TRUTH #60: “Fool me once shame on you. Fool me twice shame on me. Fool me again shame on public education.” -Old Pithy

Posted by PITHOCRATES - April 5th, 2011

The Founding Fathers’ Experiment in Self-Government

Benjamin Franklin said when the people find they can vote themselves money, that will herald the end of the republic.  Because people tend to be greedy.  And lazy.  And they don’t understand public finance.  Especially the uneducated ones.  And there were a lot of uneducated people during our founding.  The Founding Fathers worried about this.  Because governments past have always exploited the uneducated for personal gain.  Kings and lords would give the poor some alms to make them feel good about their lives of unending toil and suffering on the feudal estates.  Should you not be lucky enough to have been born with the ‘right’ last name.  The new United States of America was going to change that.  Here it wouldn’t matter who your father was.  Here, no one would be better than you.

But only if this experiment in self-government succeeded.  So they were very careful when they wrote the Constitution.  And the type of government for the new nation would not be a democracy.  Instead, they chose a representative republic.  For the Founding Fathers all feared democracies.  Which when you come down to it is nothing more than mob rule.  If the mob is racists they’ll pass racist laws.  If the mob is sexist, they’ll pass sexist laws.  And if the mob is greedy and lazy, they’ll vote themselves money from the federal treasury.  This is the risk of democracy.  All you need is a majority.  And whatever you want is yours.  No matter how destructive it is to the country.

That’s why the Founding Fathers did NOT give us a democracy.  We have intermediaries between the mob and the actual law-making.  We call these people our representatives.  At the founding, these were the best of the best.  Well educated and/or experienced.  Men of great honor and integrity.  Imbued with a selfless sense of duty.  These men went out of their way NOT to prosper from their government service.  Really.  It’s nothing at all like today where government service is nothing more than a ticket to a fat pension and early retirement.  Back then such a thought was anathema to the Founding Fathers.  Which is very evident by the type of government they created.

Indirect Elections temper the Populist Tendencies

The Constitutional Convention was a hot, miserable, long summer in Philadelphia.  There was little agreement.  No one liked the final product much.  But most agreed it was the best that they could do.  Even then the U.S. was big.  Lots of different people trying to make the final product favor their state more than the others.  And few were in favor of giving the new central government much power.  They all feared that this new central power would consolidate its power.  And regulate the states to fiefdoms in a new kingdom.  Just like in the Old World.  So they took as many opportunities to restrict federal power.  And minimize the influence of the populist mob.

The new federal government was a limited government.  It was only to do the things the states couldn’t do well.  Maintain an army and navy.  Treat with other nations.  Those things that needed a singular national identity.  Everything else was to remain with the states.  And to make sure the states would not lose their sovereignty, the states’ legislators would choose their federal senators.  The House of Representatives would have direct elections.  Being the closest to true democracy, the House risked being influenced by the mob.  The Senate, then, would be wise and prudent to temper the populist tendencies of the House.  To keep the House from doing something stupid.  Like voting the people the treasury.  (Of course, the states lost a lot their sovereignty when we changed this by amendment to a popular vote like the House.)

The president was to be elected indirectly, too.  Like the senators.  The Founders were worried that the office of the president could be easily corrupted.  So they put great restrictions on its powers.  And made it as difficult as possible for any one group or interest to ‘cheat’ and get their man into office.  Hence the indirect election.  Again, to protect their sovereignty, this fell to the states.  State legislatures would choose electors who would then vote for president.  (With quite a few close elections, there have been calls to eliminate the Electoral College and replace it with a pure popular vote.  Of course, it is usually the loser in a close election who wants this change.  If the same thing happens in a subsequent close election where they win they are quite happy with the Electoral College.)

Talented People create things to trade

The reason the Founders wanted so many people between the voters and the actual law-making is to keep people from voting irresponsibly.  The federal budget is pretty big.  And people see that it is big.  They figure that because they pay taxes, there’s no reason why they can’t have stuff from the federal government.  In a true democracy, the people could vote to cut taxes and increase spending.  They could vote themselves a monthly stipend to live on and quit their jobs.  An uneducated mob can easily do this.  Who wouldn’t want to get a paycheck for doing nothing AND pay less in taxes?  It’s very attractive.  If I ran for office on such a platform a lot of people would probably vote for me.  But there’s a problem with such generosity.  You see, government can’t give money to people unless they take money from other people first.

There appears to be a popular misconception about public finance.  Many believe that government has a stash of cash that they can give out whenever they please.  And that this stash of cash has mystical power.  That it’s endless.  And when they give it away more just magically appears.  But the government has no money.  The public treasury isn’t filled with the government’s money.  It’s filled with our money.  That’s our tax dollars in there.  Or it’s borrowed money.  Borrowed money that costs interest.  Paid with our tax dollars.  Or it’s printed money.  Money created out of nothing.  Which makes our money worth less.  Which makes everything we buy more expensive.  We call this inflation.  You just can’t print money.  Because it just dilutes the purchasing power of the money already in circulation.  It’s like a bartender selling you whisky from a bottle that’s one part water and 4 parts whisky.  It not only tastes bad.  But you’ll have to pay more to get the same buzz from an honest bartender.

The reason why printing money doesn’t work?  Because it isn’t the money we want.  It’s the things that money can buy that we want.  Who sits in an empty room and enjoys looking at big piles of cash?  No one.  Take the cash out of your wallet or purse and see how long you can stare at it.  Probably not long.  Why?  Because it’s boring.  We don’t enjoy the cash.  We enjoy the things in the room we trade that cash for.  And this is key.  We trade.  We are traders.  Always have been.  And always will be.  We started out bartering for things.  You traded something you built (this is important) for something someone else built (equally important).  Talented people who created things met to trade.  And we still do this today.  The money just makes it easier to trade.  But this would not be possible if we all lived on a government stipend and nobody worked.  Because if no one worked, there would be no things to buy.  We would be sitting in an empty room staring at piles of useless money.

A Public Educational System that doesn’t Educate but Indoctrinates

The Founding Fathers understood all of this.  And they framed the Constitution accordingly.  They limited the powers of the federal government.  Minimized the amount of actual democracy/mob rule.  And minimized the amount of money in the federal treasury.  For they were capitalists.  They knew money left in the private sector stimulated local economies.  People created useful things.  Brought them to market.  And traded these useful things for other useful things.  That’s the way things were.  It’s not how they are now.  Politicians today are in politics for personal gain.  They pander to the voters.  Buy and sell favors.  Enrich themselves in the process.  And leave a swath of destruction in their wake.  And how are they able to do this?  Because the government has become more of a democracy than a representative republic.

Along the way the educational system failed.  Probably starting in the Sixties.  With the hippies in college.  Who went on to teach in the Seventies.  We spent less time on reading, ‘riting and ‘rithmetic.  And more on American white guilt for what happened to the Native Americans and a slave economy.  We learned less about the Founding Fathers.  And more about the people they wronged.  We learned less about American culture and more about diversity and multiculturalism.  We learned less about American Exceptionalism and more about American Imperialism.  We learned less about Western Civilization and more about ‘enlightened’ oppressive socialism.  We learned less about capitalism and more about the ‘fair’ redistribution of wealth.  Let’s face it.  Kids in school didn’t have a chance.  Their teachers were no longer teaching how America got to be exceptional.  They were teaching that America was anything but exceptional.  That we were guilty of every crime and injustice you could think of.  That America needed to change.  And that they, the young, our future, could make that change happen.

So the dumbing down of America began.  For those unable to escape the indoctrination of the new public education.  And the growth of government took off.  In fact, you can say that as society became ‘less American’ they became more dependent on government.  Where once rugged individualists dominated the land their numbers are thinning.  As slick politicians lure more people by the siren song of an easy life provided by government benefits.  And these politicians find the lie easier to sell with a public educational system that doesn’t educate but indoctrinates.  In fact, it’s quite an incestuous relationship.  The politicians spend more and more money on education.  The money goes to the teachers.  The teachers belong to unions.  The teachers’ unions support and donate to Democrat candidates.  So some of that tax money spent on education goes right back to the politicians that just increased educational spending.  And the teachers, eager to keep a good thing going, teach their students to become good Democrat voters.  Instead of teaching them about the three Rs, the Founding Fathers, American culture, American Exceptionalism, Western Civilization and capitalism.  As the standardized test scores show.  And does their irresponsible voting.

A Rising Sun or a Setting Sun 

America is fast approaching a crossroads.  People have learned that they can vote themselves money.  And have.  Politicians are pandering to these people for personal gain.  Offering to spend more and more money that we just don’t have.  Bringing us closer and closer to the end of the republic. 

Ben Franklin sat through that insufferable summer in Philadelphia.  Swatted at the giant horseflies in the hall.  He was old and his time was short.  He sat quietly during much of the debates.  Often staring at the sun carved into George Washington‘s chair.  He wondered if it was a rising sun.  Or a setting sun.  He saw it as symbolic of their little experiment in self-government and the work they were doing in that hall.  Was this already the end of their noble experiment?  Or was it just the beginning?  After the delegates voted to send the new Constitution to the states for ratification he breathed a sigh of relief.  For it was a rising sun.

I guess that question is once again open to debate.

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LESSONS LEARNED #58: “Presidents with aggressive domestic agendas tend to have inept and naïve foreign policy.” -Old Pithy

Posted by PITHOCRATES - March 24th, 2011

Social Security:  A Fiscal Disaster just Waiting to Happen

FDR’s New Deal programs were an abject failure.  Nothing he tried ended the Great Depression.  Proof positive that Keynesian Economics doesn’t work.  But this Britain infatuated the world.  Many still cling to the teachings of Keynes.  Because he empowered Big Government.  And people in government love that.  But government is pretty inefficient.  And not very good at doing things.  Take Social Security, for example. 

It started as a payroll tax of 1%.  They argued it was a paltry price to pay to help the disabled and retired.  Of course, the actuaries never saw birth control and abortion coming.  So as the population aged, the birthrate declined.  With the boomers starting to retire, the great pyramid inverted.  More people are collecting than paying in.  Today the tax rate is 6.2%.  That’s 6.2 times the FDR rate.  Which is an increase of 520%.  The federal government has increased the rate 20 times to save the program from bankruptcy.  And, guess what?  It’s STILL going bankrupt.  It’s one fifth of the federal budget.  And it keeps getting bigger.  And it’s such a political third-rail that no one will touch it.  Taxpayers will have to pay so much in taxes that they will have to live a very austere life to pay for people they don’t even know who are collecting far more than they ever paid in.  Because, according to the actuaries, people were just living too long.  That’s another thing they never saw coming. 

In 1937, the average lifespan was 60 years.  The retirement age was 65.  So, in other words, the average social security beneficiary would be dead for approximately 5 years before they were eligible to collect Social Security.  Now that’s how you keep a program solvent.  Make sure that most of the people paying into it die before they have a chance to receive benefits.  Today the average lifespan is about 78 years.  The retirement age is 67.  So the average retiree will collect benefits for approximately 11 years BEFORE he or she dies.  The actuaries NEVER envisioned this.  Damn the American health care system and their miracle drugs.  We’ve never lived longer.  Or burdened the government more.

FDR was a domestic policy disaster.  He ruined this country.  Any objective analyst would agree.  But we still love him for getting us through the dark years of World War II.  Of course, much of the world doesn’t for his gift of the Cold War to these oppressed people.

FDR loved Joe Stalin, Joe Stalin walked all over FDR

In the 1930s, there was some serious government tinkering going on with economies.  FDR in the USA.  Hitler in Germany.  Mussolini in Italy.  And Joseph Stalin in the Soviet Union.  FDR was on the same page, especially with Mussolini and his beloved Joseph Stalin.  He loved these guys.  Until they went rogue.  FDR had no problem hating Germany.  He was never a fan of the country.  But when Germany and the Soviet Union entered into a nonaggression pact to divide and conquer Poland, thus launching World War II, it broke his heart.  He and all his New Dealers were devastated.  Uncle Joe was the model they wanted to copy.  They loved this man.  And what he was doing in the Soviet Union.  Acting bold without a pesky Congress hindering him.  They loved him so much that they didn’t try all that hard to hunt down the Soviet spies within the FDR administration.  And there were plenty of them to hunt down.

But then God answered FDR’s prayers.  Hitler launched Operation Barbarossa, a massive invasion of the Soviet Union.  This part of the war became hell on earth.  The Eastern Front.  There cruelty knew no bounds.  Scorched earth policies.  And genocide.  Hitler’s SS did most of these acts of barbarism.  And the dreaded Einsatzgruppen took systematic murder to new heights.  The Eastern Front saw the worst cruelty of man.  But there was a bright spot.  For FDR.  He could welcome Uncle Joe back into the fold.  And did. 

Roosevelt was a master diplomat.  He could charm the pants off of anyone.  He had a gift.  And it filled him with great pomposity and reckless arrogance.  People warned him about Stalin.  And Soviet Communism.  But FDR poo pooed them.  He said he could talk to Uncle Joe.  Reason with him.  Give a lot and ask for nothing.  And he did.  FDR thought Stalin would then ask for nothing more and work with him in establishing world peace.  Just like a typical progressive/liberal.  And how did that work out?  Not only did the Red Army NOT pull out of occupied countries, they tried to occupy more.  Soviet Communism took Eastern Europe, tried to take Turkey and Greece and pushed into Iran.  We pushed some of these pushes back.  But the Cold War was on.  FDR had given so much that the Soviets had control over huge populations, condemning them to the misery of life behind the Iron Curtain.  And suffer they would for 44 long years.

Despite the fiscal carnage and world misery FDR left in his wake, he is still loved and adored by those on the Left.  People as pompous, arrogant and naïve as he.  Who still want to do things the Roosevelt way.  Despite the unmitigated disaster the FDR way turned out to be. 

Mismanaging Medicare/Medicaid and the Vietnam War

We can best describe LBJ‘s Great Society as doubling down on FDR’s New Deal.  And it was as big a disaster as the New Deal was.  LBJ was going to end poverty and racial injustice.  And pour federal money into education to make it better.  He failed.  Based on the Left’s attacks on the Right, we’re still beset by poverty and racial injustice.  (Even though we elected a black president.  Go figure.)  And that the teacher unions are constantly going on strike to get more money.  For the kids, of course.  And if we still have these problems it can only mean one thing.  The Great Society failed.

Included in the Great Society were Medicare and Medicaid.  Health insurance for the elderly and the poor, respectfully.  Currently, this is another 1/5 of the total federal budget.  And it has the same problems as Social Security has.  A declining birthrate and a growing elderly population that is living longer.  The actuaries crunched their numbers before the explosion of birth control and abortion.  So their projections are just as bad as FDR’s were.  The tax rate went from 0.35% to 1.45%, and increase of 314%.  Unlike Social Security, the death rate never ran in the black for Medicare/Medicaid.  From the get-go people were living 3 years beyond the average retirement age, consuming health care benefits.  Now the average American is living 11 years into retirement.  And a lot of them aren’t doing that by a healthy diet and exercise.  They’re doing it by consuming vast amounts of health care benefits.   LBJ took the problems of the New Deal and multiplied them by ten.  The cumulative effect of these two programs crashed the economy into stagflation and misery in the 1970s.  And if that wasn’t bad enough, he pushed the nation close to civil war by his mismanagement of the Vietnam War.

JFK got us into Vietnam.  But Johnson expanded our involvement.  And tried to manage it from Washington.  With the Whiz Kids left over from JFK.  A bunch of poindexters who tried to run a war by looking at numbers in columns.  Body counts.  And restrictions on the rules of engagement.  It was a horrible way to run a war.  It just prolonged it.  Created more American casualties.  And empowered our enemy.  Can’t bomb the North.  Can’t bomb their supply routes (i.e., the Ho Chi Minh Trail).  We did everything we could to help the enemy by giving them safe sanctuaries up the ying-yang.  And when we had a chance to deliver a knockout punch after the failed Tet Offensive, we did NOTHING.  Partly because Walter Cronkite said the war was lost.  Partly because of the hippies protesting on our college campuses.  And, of course, the race riots.  LBJ couldn’t understand it.  He had given so much with his Great Society and yet people didn’t love him.  All because of that damn war in Vietnam.  JFK’s war.  How he wished they never went there.  It was a distraction to his beloved Great Society.  And it was a bitch to pay for. 

Bad Domestic Agendas, Bad Foreign Policy

Unlike FDR, LBJ could not win his war.  Of course, FDR didn’t have hippies who hated their country protesting against him.  Just a bunch of communists in his administration who were simpatico with his Big Government view.  Because of Vietnam, though, the Left would never have the same fond feelings for LBJ as they do for FDR. 

Their foreign policy has made the world a less safe place.  FDR gave us 44 years of Cold War.  And LBJ weakened the United States by his failure in Vietnam.  Made us a paper tiger.  Made our enemies not fear us anymore.  They started taking chances.   Doubting our will to respond to their aggression.  Or, if we did, they figured we would just cut and run after a few casualties.  And that has been their strategy since.  Not to win.  But to make us quit.  By making us bleed.

Following World War II we had great prosperity.  Peace.  And happiness.  The 1950s.  Following Vietnam, we had stagflation and misery.  High crime rates.  Drug infestation and abject poverty in our big cities.  Abortion and birth control.  The 1970s.  All this despite the programs of LBJ’s Great Society that were to end all those woes.  And with the declining birthrate, the fiscal problems would only get worse.

Their domestic programs are pushing the nation ever closer to bankruptcy.  There appears to be no solution to the damage they’ve done.  Or will do.  Social Security and Medicare/Medicaid will either bankrupt the country.  Or ignite civil unrest as benefits are slashed.  Neither will be good for the country.  But this is what we get from presidents with aggressive domestic agendas.  Fiscal crises.  Domestic unrest.  And an unsafe world.

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FUNDAMENTAL TRUTH #53: “The essence of politics is taking from the many and giving to the few.” -Old Pithy

Posted by PITHOCRATES - February 15th, 2011

That Great Sucking Sound of our Money Leaving our Pockets

All right, here’s the dirty little secret about politics.  Most people enter politics for the money.  They can say whatever they want but when it comes to voting tax increases, guess what?  There are tax increases.  Always.  The amount of money transferring from the private to the public sector is always increasing.  Always.  Congress set up close to half of the federal budget to increase automatically.  That great sucking sound isn’t jobs going to Mexico.  It’s our money leaving our pockets.

Take a look at your check stub.  Compare gross pay to net pay.  Are these numbers almost the same?  Or is the difference closer to a car payment?  A house payment?  Depending on where you are in your career this difference on your weekly paycheck could pay for a nice car.  Add them up in a month and they could get you into that nice house in the good school district.  This is a lot of money.  Ask your grandparents what was the difference between gross pay and net pay on their paychecks.  You’ll probably be surprised.  Because, back then, net pay was very nearly gross pay.

Today, nobody gives gross pay a second thought.  We talk about what we ‘net’.  Because we’re just used to it.  You see, the government (federal, state and local) didn’t just start taking hundreds of dollars out of our paychecks.  It was incremental.  Over a long period of time.  Sometimes coming to pennies a day.  Hard to see.  And just not enough to bitch about.  We may see tens of dollars of our gross pay taxed away over a decade or two.  But we typically make more over that same time.  Again, in the great scheme of things, these are small incremental changes.  Just not big enough for a great number of people to bitch about.

Incrementalism, Progressive Tax Rates and the Withholding Tax

That’s the power of incrementalism.  Baby steps.  Little by little.  Big growth over time.  Like watching grass grow.  You don’t see it grow.  Then one day you have to cut it.  And so it is with taxes.  One day you look at your check stub and realize how much you’re paying in taxes.  You may have never realized you were paying so much.  A progressive tax system keeps the tax burden on the young who don’t make a lot money yet low.  So they don’t see it at first.  And keep voting Democrat.  Not because they want to pay higher taxes.  But because the higher taxes haven’t impacted their lives yet.  When they do start paying more in taxes, that’s when some of them start voting Republican.

So taxes creep up on us.  We don’t see them all that clearly at first because of progressive tax rates.  And the fact we pay them before we see them.  Via the withholding tax.  Which provided the greatest advancement in the collection of confiscatory taxes.  For without it there would be tax revolts when April 15th rolled around and people didn’t have tens of thousands of dollars sitting in their checking accounts to pay their taxes.  I mean, what’s easier?  Getting us to pay our taxes with money we never saw?  Or paying our taxes after having that money in our hands first?  Funny thing about earnings.  Once we have the cash in hand we don’t give it up lightly.

That’s why the government introduced withholding taxes.  It makes getting our money from us easier.  And allows them to raise our taxes ever higher.  Because we pay those taxes with gross pay.  Pay we never get.  In our real world, gross pay is a myth.  It doesn’t exist.  Our earnings only become real at net pay.  Sad.  But true.  So they can increase our taxes a lot more than if we were paying them in full in April.  And do.

Pandering and Patronage

Yeah, but America is a center-right country.  And liberal Democrats on the left are the ones who want to keep increasing our taxes to pay for their Big Government programs.  So how can they?  When America is a center-right country.  I mean, if it’s a minority of Americans that want to raise our taxes to grow government, how do they get the votes to increase our taxes in the first place?

By pandering.  Buying votes.  And patronage.  The power to tax provides near-limitless money for politicians to spend.  The trick is in the getting and giving amounts of money.  You tax the many.  And give to the few.  You tax a hundred dollars or so from each paycheck.  And give hundreds of thousands of dollars to those who can help you win election.  That’s how the tax and spend people win elections.  They give money to small groups in exchange for their vote.  Or legislate favorable legislation for them.  Or put someone from that group in the government itself in an oversight position of the industry there’re in.

A small group by itself can’t make a big difference at the polls.  But you get enough of them, they can.  Luckily for the tax and spenders, a lot of these small groups can be found in the political center.  Which helps pull some of that ‘center-right’ to the left.  And this is how the difference between gross pay and net pay continues to grow larger.  These ‘swing votes’ may pay more in taxes, too, but the special privileges they receive from the government more than makes up for it.

The Little Programs Add Up

We pay a lot in taxes.  And yet you don’t hear too many people complain about it.  Why?  The progressive tax rate plays a role in this.  There are more poor people than rich.  So fewer people pay taxes.  And the withholding tax helps, too.  Because most of us don’t even pay attention to what we’re paying.  But what really helps government is the number of taxpayers.  The total amount of taxes each taxpayer pays can ‘appear’ small.  And the amount each taxpayer pays for a specific program can appear smaller still.  This can get a lot of people to ‘support’ these little programs.  Simply by their passive lack of opposition.

For example, heating assistance for the poor is not a very big part of the budget.  And it doesn’t take much out of your paycheck.  You feel for the poor who can’t pay for heat.  You want to help.  So there isn’t a lot of political action against this program.  It’s like those commercials where you can save a child in Africa for the price of a cup of coffee.  I mean, who wouldn’t feel guilty for refusing to buy one less cup of coffee to save a life?  It’s an effective tactic.  Making people feel guilty for being so greedy that they are unwilling to drink one less cup of coffee.  And no one wants to be seen as this greedy.

But the little programs add up.  You start out by sacrificing a cup of coffee.  But when each of these little programs costs you a cup of coffee, they can add up to a dinner.  A movie.  A night on the town.  A new car.  And they do.  That’s why a lot of people can’t live in the school districts they want to.  Because of the aggregate of all of these little programs.  But we never look at the aggregate.  It’s always one program at a time.  To make the taxpayer feel guilty for their greed.  To break down their will to oppose cuts.  To go along with further tax increases.  And a lot of us do.  Which makes that gap between gross pay and net pay grow ever larger.

Taxpayers and Tax Consumers

But things are changing.  And it’s causing a problem.  The baby boomers are beginning to retire.  They’ll soon be using Medicare.  And collecting Social Security.  So the number of taxpayers will go down.  While the number of tax consumers will go up.  And that changes everything.  The fewer taxpayers will have to pay a larger amount of taxes to support these entitlements as well as all of those little programs.  And this will make it a lot harder to hide these taxes.  To make them appear small.  More people will have to go with less to pay these taxes.  Even those who once did all right during periods of high taxation will have to go with less.  Because more people will be consuming Medicare and Social Security benefits.  And it’ll be political suicide to cut these programs.  Leaving little choice but to cut some of the little programs.  Which will give the patrons of Big Government little incentive to support tax and spend any longer.  Because they’ll see more taxing.  And less spending.  On themselves.

Politics as usual will not work as well as it once did.  Because they will not be able to hide the cost of Big Government any longer.  They won’t be taking from the many to give to the few anymore.  They’ll be taking from the few to give to the many.  Which can’t be anything but a recipe for disaster.

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President Obama Submits his 2012 Budget

Posted by PITHOCRATES - February 14th, 2011

Deficit Reduction without Touching Medicare, Medicaid or Social Security?

President submits his 2012 budget.  The president says it’ll cut the deficit.  Make America more competitive.  Create jobs.  Restore vigorous economic activity.  And make America dominant again.  Two years of his policy have failed to do any of this.  But it’ll be different this time.  Why?  I haven’t the foggiest idea.  I can only guess that the president is counting on a bunch of poor memories.

Deficit reduction.  Really?  Well, here’re the numbers (see Budget Plan Marks Start of Long Fight on Spending by Corey Boles posted 2/14/2011 on The Wall Street Journal).

Mr. Obama’s budget offers up more than $1 trillion in deficit reductions over a 10-year period—three-quarters coming from spending cuts and the balance from tax increases or the elimination of existing tax breaks.

That’s $100 billion per year.  That sounds like a lot.  But in the first year when we cut $100 billion from the deficit, we’re still adding another $900 billion to the national debt.  That’s more borrowing.  And more interest to pay.  Sort of like living on your credit cards.  And just like the balance on your credit cards never seems to get smaller, neither will our federal debt.

And the proposed Obama budget reductions don’t come close to the $4 trillion in savings recommended by a White House-appointed deficit commission. This is largely because the president’s budget shies away from pushing for any substantial changes to the entitlement programs Medicare, Medicaid or Social Security. Nor does it include a specific outline for overhauling either the corporate or individual tax codes.

Just under half of the federal budget covers the big three: Medicare, Medicaid or Social Security.  Add in interest on the debt and you’re at about half of the budget.  Defense spending is at about 20%.  Discretionary spending (the kind of spending that the law allows us to cut) is at about 20%.  In other words, we’re making small cuts in about 40% of the budget.  While the 50% that is currently growing out of control (Medicare, Medicaid, Social Security and interest on the debt) we’re not cutting at all.  In fact, this 50% is growing.  And Obama is increasing spending still.

“My budget makes investments that can help America win this competition and transform our economy, and it does so fully aware of the very difficult fiscal situation we face,” Mr. Obama said in his budget message.

His budget would boost funding for the Department of Education to $77 billion from the $64 billion it received in fiscal 2010. The money would be used to increase education competitiveness and increase the number of science, engineering and math teachers in schools by 100,000.

More of the same.  Tax and spend.  And for what?  The kind of spending he’s proposing has never paid the dividends promised.  If it has there would be no need to include it in the 2012 budget.  Because they would already have delivered those promised dividends.  But they haven’t.  Just like they never have.  And never will.  Government spending has never caused the great economic expansions in our history.  Cuts in the tax rates triggered those expansions.  And less government spending.

History doesn’t include any success stories of tax and spend Keynesian economics.  But that is exactly what this budget is.

Baseline Budgeting makes Spending Increases Spending Cuts

And what about that deficit reduction?  Is it real?  No (see President Obama’s Budget – Increased Spending and Taxes by Brian Darling posted 2/14/2011 on REDSTATE).

The fact of the matter is that the President is using fuzzy math to create an inflated budgetary baseline (in other words he has inflated projected spending over a 10 year period) so that he can claim cuts that don’t exist.  Today is the President’s day to pitch his plan, but the Obama Administration has to answer why his baseline is so inflated and why he is planning to raise taxes at a time of economic pain.

Baseline budgeting.  That’s the fuzzy math that says how we can count a spending increase as a spending cut.  Here’s how.  I project I’m going to spend $250,000 for a new house next year.  That’s $250,000 in new spending.  Then I change my mind.  Instead, I decide to spend only $175,000 on a new house.  In the real world, that’s new spending of $175,000.  In baseline budgeting, that’s a cut of $50,000.  Because I’m cutting the increase in the amount I’m going to spend.  And the 2012 budget is full of this stuff.

More Obama math.  Add in a $3.3 trillion in program adjustments and $642 billion in debt services on adjustments.  Add in all of these projections to the baseline and you have adjusted the baseline from $5.5 trillion to $9.39 trillion in debt from 2012-2021.  That is how you adjust debt upward to make it look like the President’s budget is cutting spending.  You inflate projected spending over the next 10 years then increase spending at a lower rate than the baseline, you can create a “cut.”

This is smoke and mirrors.  To count huge spending increases as spending cuts, you just say that spending was originally ‘baselined’ at some ridiculously higher number.  And then you sneak in a big tax increase.

On taxes, the President has hidden a massive increase in the gas tax.  There is a line item in the President’s budget summary tables titled “Bipartisan financing for Transportation Trust Fund” that adds up to $328 billion from 2012-2021.  In the President’s Bipartisan Debt Commission Report, they recommended a 15 cent increase in the gas tax.  The President’s budget seems to assume that his commission’s report is implemented by Congress and send to his desk.  This is an implicit endorsement of a massive increase in the price of gas at the pump in the form of increasing the federal gas tax from $18.4 cents.  If this idea does not pass, then you have a $328 billion shortfall in the projected transportation budget.

Hello $4/gallon gasoline.  And when Republicans try to prevent this tax increase from being implemented, the Democrats will call it an irresponsible tax cut.  For the rich, of course.

Tax and Spend, over Promise and under Deliver 

It gets old.  The same old politics.  Tax and spend.  Over promise.  And under deliver.  Banking on Americans having poor memories.  And that a lot of young new voters who haven’t heard the lies before show up at the polls.  Because the ‘get out the vote’ crowd will tell them “yes they can.”  And they will.  Breathe new life into failed, Keynesian economics.  And make the final reckoning ever worse.

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LESSONS LEARNED #48: “Government benefits aren’t from the government. They’re from the taxpayers.” -Old Pithy

Posted by PITHOCRATES - January 13th, 2011

Defense Spending is in the Constitution, Entitlements Aren’t – And it’s Entitlement Spending that’s Growing

People like to bitch about defense spending.  And I can understand why.  It’s a lot of money.  Just to kill people and break things.  People would rather see that money spent on education.  Health care.  Food assistance for the poor.  Entitlements.  Those nice, generous, government benefits.  The kinder, gentler side of government spending. 

People like the free stuff.  They want to get something for all those taxes other people are paying.  And it just kills them to see it spent on the military.  Because they’d rather see that money spent on them.  Of course if you read the Constitution, you’ll find defense spending in there.  It’s in the preamble (provide for the common defense).  You’ll find it in Article I.  In Article II, too.  Defense spending is pretty conspicuous in the Constitution.  Conspicuous by their absence, though, are entitlements.  Did the Founding Fathers overlook this?  No.  It was the whole point of federalism.  They designed the central government to do only those things that the states couldn’t.  To establish credit for the new nation, to treat with foreign nations, to coin money, etc.  And, of course, to provide and maintain a military force.  Alexander Hamilton wanted it to do more.  And he stretched the “necessary and proper” clause in Article I for some of the things he wanted the central government to do (to try and make the nation rich and powerful like Great Britain).  Pity, too.  For the Left has been stretching that clause ever since.

All right, defense spending is a constitutional requirement of the federal government.  Entitlements aren’t.  So how much are we spending on these?   In 1962, defense spending was 49% of all federal spending (see Federal Spending by the Numbers 2010).  Social Security and Medicare (the two biggest entitlements) were 13%.  Current baseline projections show that, in 2020, defense spending will drop to 14%.  And Social Security and Medicare will rise to 36%.  Medicare is the real cost driver here.  In the decade from 2000 to 2010, Medicare spending has jumped 81%.  It is outgrowing Social Security and Medicaid.  The runaway costs of Social Security, Medicare and Medicaid (the Big Three) are projected to equal total current tax revenues in the year 2020.  That means the total federal budget today will only pay for the Big Three in 2020.  Concerned?  You should be.  Especially if you’re a taxpayer.

You can pay Uncle Sam with the Overtime.  And will.

Taxpayer, beware.  The government is feeling especially generous.  With your money.  By 2020, Washington will be spending $35,604 per household.  That’ll take almost $5,000 in additional taxes per household for the Big Three alone.  That is projected to jump to $12,636 in 2050.  And that doesn’t include Obamacare.  When that is factored in, it’ll cost you as much as paying cash for a new car each and every year.  And a nice one, not a subcompact with a sewing machine for an engine.  Can you afford that?  I hope so.  Because you won’t have a choice.  You’ll be buying it.  But not for yourself.  No.  That nice beautiful car you’ll be buying each and every year?  You don’t get to drive it.  It will be for someone else.

The entitlement spending is getting so out of hand that we have record deficits.  Compounding this problem is the 2008 recession corresponding with a huge jump in entitlement spending.  It’s opened a rather large gap between revenue and spending.  And that gap isn’t going anywhere soon.  Unless they cut entitlements.  Or raise taxes.  And you know they won’t be cutting entitlements.  So, guess what?  You can pay Uncle Sam with the overtime.  Because that’s all you’ll get for your money (borrowed from Billy Joel’s Movin’ Out (Anthony’s Song)).  So get used to it.  Paying Uncle Sam.  Because Sam is going to raise your taxes.  He has no choice.  Because he won’t cut entitlements.

And they’ll have to raise taxes.  Because we’re running out of creditors to borrow from.  I mean, the Chinese only have so much money to lend.  And we can’t keep printing money.  They’ve been doing that.  Quantitative easing, they call it.  But they can’t keep doing it.  Anyone alive during the Seventies will know why.  Or anyone who has done some reading outside the public school curriculum.  In a word, stagflation.  That’s a phenomenon where you have both high inflation and high unemployment.  It’s usually one or the other.  The normal rules of economics don’t allow both to happen at the same time.  Unless you’re printing money like there’s no tomorrow.  Which they were in the late Sixties and Early Seventies.  To pay for the Vietnam War.  NASA’s Apollo program (to the moon and back).  And, of course, entitlement spending.  The biggest to date was a group of programs we called the Great Society.  Inflation was so bad that they joked about it on Saturday Night Live.  Dan Aykroyd played President Jimmy Carter, joking about the pleasure of owning a $400 suit.  And how easy it was to just call the treasury to have them print off another sheet of hundred dollar bills.  (Or something like that.)

The Reagan Deficits were Bad, but they Make the Obama Deficits look Good

The Seventies were a bad time.  Economically speaking.  Printing money was bad.  Quantitative easing was bad.  Easy money was bad.  So Paul Volcker started tightening monetary policy.  And Ronald Reagan cut taxes. And the Eighties were like a glorious spring following the bleakest of winters.  But you can’t teach an old dog new tricks.  The liberal Democrats weren’t going to roll over and cry ‘uncle’.  For they knew there was more spending left that they could do. 

So the spending continued.  Reagan had a Democrat Congress.  They fought him tooth and nail.  But he spoke directly to the American people and got his tax cuts.  And Reagan’s tax cuts resulted in a windfall of revenue.  And the Dems in Congress couldn’t spend the money fast enough.  Actually, they could.  They spent it so fast that surpluses soon turned into deficits.  They blamed Reagan’s defense spending.  So he made a deal.  He agreed to increase taxes.  If they would cut some of their entitlement spending.  To get the deficits under control.  So they did.  Increased taxes.  But they never cut spending.  Which just goes to show you that you can’t trust liberal Democrats.

You youngsters probably have no memory of these times.  But Ronald Reagan was attacked more than George W. Bush.  Hell, he was attacked almost as much as Abraham Lincoln.  The Seventies were the high-water mark of liberalism.  Then it went head to head with Reagan’s limited government supply-side economics in the Eighties.  And lost.  The hatred for Reagan knew no bounds.  For he was the man that repudiated liberalism.  So they attacked him ruthlessly. Screamed about his defense spending.  And yet his deficits were only around $200 billion.  Obama’s, on the other hand, are around $1,500 billion.  But they’re okay with that.  It’s no big deal, they say.  Just raise the debt ceiling.

It’s Spending, not Tax Cuts, that’s Causing those Record Deficits

But they can’t just raise the debt ceiling to keep spending.  Because spending is the problem.  Our debt is approaching 100% of our GDP.  When you’re borrowing money at record levels, you’re doing this because you just can’t raise taxes anymore.  You put the two together and it’s destroying the economy.  Taxes kill economic activity.  And the interest on the debt is soaring.  It’s projected to be approximately $760 billion in 2020.   That’s more than 70% of the projected budget deficit.  That means that most of the money we’ll be borrowing will go to pay the interest on the money we’ll be borrowing.  At that rate we’ll never pay down our debt.

Revenue averaged 18.0% of GDP from 1960-2009.  During the same period, spending averaged 20.3% of GDP from 1960-2009.  Not good.  But not too bad.  That’s a small, somewhat manageable deficit.  But spending takes off in 2010.  It’s projected to rise to 26.5% of GDP.  Meanwhile, revenue is projected to rise only to 18.2% of GDP.  That’s a projected deficit of 8.3% of GDP.  That’s fricking huge.  And that’s all runaway spending causing this mammoth deficit.  It ain’t tax cuts causing this.  It’s those entitlements.  Those fat, generous government benefits.

By this time there won’t be anything left to cut from the defense budget.  So they will have to turn to the generosity of the taxpayers.  And hope they enjoy personal sacrifice.  Because they’re going to be doing a lot of that.  To pay for these generous benefits.  These benefits for other people.

www.PITHOCRATES.com

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Partnering with the Grim Reaper: Saving Medicare, Medicaid and Obamacare

Posted by PITHOCRATES - December 29th, 2010

Taxing the Young to Save Medicare for the Old

Medicare and Social Security make up the lion’s share of the federal budget.  The government is setting records for both deficits and debt.  And everyone is projecting both of these programs to go bankrupt.  A dim picture for anyone hoping to rely on either for their retirement.  And they’re worried (see AP-GfK Poll: Baby boomers fear outliving Medicare by Jennifer Agiesta and Ricardo Alonso-Zaldivar posted 12/29/2010 on the Associated Press).

A new Associated Press-GfK poll finds that baby boomers believe by a ratio of 2-to-1 they won’t be able to rely on the giant health insurance plan throughout their retirement.

The boomers took a running dive into adolescence and went on to redefine work and family, but getting old is making them nervous.

Now, forty-three percent say they don’t expect to be able to depend on Medicare forever, while only 20 percent think their Medicare is secure. The rest have mixed feelings.

The problem with both Medicare and Social Security is that they are both Ponzi schemes.  Scams by the government to make generations dependent on government.  And to funnel a lot of cash to Washington.  But the Baby Boomers mucked up the works.  Their free love in the 60s and use of birth control and abortion left their family tree a barren one.  The boomer generation of families with maybe 2-3 kids will support in retirement their parent’s generation of families with 10+kids.  There’ll be more people entering retirement than entering the workforce to pay for those retirees.

Here’s the math: when the last of the boomers reaches age 65 in about two decades, Medicare will be covering more than 80 million people. At the same time, the ratio of workers paying taxes to support the program will have plunged from 3.5 for each person receiving benefits currently, to 2.3.

And the numbers are worse.  Because Social Security will be covering those same people.  We’re approaching one working person supporting one person in retirement (Medicare and Social Security benefits combined).  Even Bernie Madoff’s great Ponzi scheme had a better ratio when his pyramid imploded.  It just isn’t sustainable anymore.  Something’s gotta give.  And by something I mean benefits paid out to people.

The government can’t balance its books without dealing with health care costs, and Medicare is in the middle. Some leading Republicans and a few Democrats have called for phasing out the program and instead giving each retiree a fixed payment — or voucher —to help them buy private medical insurance of their choice. The poll found doubts about the idea, and a generational debate.

Overall, a narrow majority (51 percent) of Americans opposed the voucher plan. But those born after 1980 favored it by 47 percent to 41 percent, while seniors opposed it 4-to-1. A majority of boomers were also opposed, with 43 percent strongly objecting.

And here’s the problem.  Those who don’t pay payroll taxes anymore (retirees) are all for raising taxes to pay for their current level of benefits.  No matter how much it bankrupts future generations.  And these people vote.  More than anyone else.  So for good reason they call Social Security the third rail of politics.  You touch it at your own peril.  Those with a lifetime of paying taxes ahead of them, on the other hand, would rather raise a family than support an individual in retirement.  Not only do they want to touch the third rail, they want to short it out.  But they don’t have the numbers.  Yet.

States to Make Steep Cuts in Medicaid to Stave off Bankruptcy

And we even haven’t talked about Medicaid yet.  This program is bankrupting the states.  It’s their biggest budget item.  And they can’t sustain it any longer (see Medicaid Pushes U.S. States Off ‘Cliff’ as Governors Seek Cuts by Christopher Palmeri and Pat Wechsler posted 12/22/2010 on Bloomberg).

Governors nationwide are taking a scalpel to Medicaid, the jointly run state and federal health-care program for 48 million poor Americans, half of whom are children. The single biggest expense for states, Medicaid consumes about 22 percent of their total $1.6 trillion in expenditures, more than what is allocated to elementary and secondary education, according to a National Governors Association report.

Talk about being stuck between a rock and a hard place.  You know that states aren’t going to cut education.  The unions won’t let them.  So they have to address the 800 pound gorilla in the room.  And cut Medicaid.

Governors are slashing Medicaid to close as much as $140 billion in budget deficits for the 12 months starting in July 2012, after eliminating $130 billion in gaps this year, according to the Center on Budget and Policy Priorities, a Washington-based research group. Spending is being cut even though state revenues rose for the three quarters ended Sept. 30, as the U.S. recovered from the longest recession since the Great Depression, the Nelson A. Rockefeller Institute of Government in Albany, New York, said in a Nov. 30 report.

“I don’t think most states want to sentence people to death,” said Judy Solomon, co-director of health policy at the Center on Budget and Policy. “But what we see is a pretty bleak picture of tough cuts made this year, and next year’s numbers look worse.”

The sad truth is that sick people are costly.  Dead people aren’t.  So you can see where this is going.  Rationing.

Spending on Medicaid nationwide rose 8.8 percent last year, the most since 2002, according to Kaiser. Nearly every state issued at least one new policy to cut program costs in the past two years, including benefit reductions, increased copays and lower reimbursements to health-care providers.

Cost cutting and reductions in benefits.  Rationing.  And you know where that will lead to.  More dead people.  Which is the only thing that will save Medicaid.  That, or federal contributions.

Every state has a unique formula for calculating the federal contribution for Medicaid. The 12 with the highest personal income, including California, New York, New Jersey, Connecticut and Colorado, typically depend on the U.S. government for about half their expenditures.

Lucky for the states that the federal government has money to spare.  Wait a tic, they don’t.  They’re setting record deficits and debt.  They don’t have the money.  Especially now that they’ve thrown Obamacare into the mix.  And the cost for this behemoth will dwarf Medicare and Medicaid.

States face the prospect of enrolling 16 million more people in Medicaid beginning in 2014 under the Patient Protection and Affordable Care Act, the health-care law Obama signed in March. It expands coverage to include certain childless adults under 65, according to Foley & Lardner LLP, a law firm in Milwaukee. The federal government will pay 100 percent of the increased expense for the first three years.

Well, perhaps not.  They’ll be sticking the states with some of those costs.  Poor states.  These unfunded federal mandates are killing them.  But they won’t be the only ones dying.  In three years time, when those federal subsidies expire, some of the current Medicaid patients may lose their heath care benefits.  And die.

Death Panels to Decide Life and Death

The problem with healthcare is that the raison d’être of healthcare is the very thing bankrupting it.  Providing healthcare to sick and dying people.  If the sick and dying would just hurry up and die these healthcare programs (Medicare, Medicaid and Obamacare) would be just fine.  If only there was some mechanism to encourage people to take a pill to manage pain instead of consuming expensive healthcare services.  I mean, they are only delaying the inevitable.  They should just suck it up.  And do the right thing.  After receiving something like, oh, I don’t know, let’s call it end of life counseling (see WSJ Opinion Death Panels Revisited posted 12/29/2010 on The Wall Street Journal).

On Sunday, Robert Pear reported in the New York Times that Medicare will now pay for voluntary end-of-life counseling as part of seniors’ annual physicals. A similar provision was originally included in ObamaCare, but Democrats stripped it out amid the death panel furor. Now Medicare will enact the same policy through regulation.

We hadn’t heard about this development until Mr. Pear’s story, but evidently Medicare tried to prevent the change from becoming public knowledge. The provision is buried in thousands of Federal Register pages setting Medicare’s hospital and physician price controls for 2011 and concludes that such consultations count as a form of preventative care.

No wonder they hid it.  Encouraging people to hurry up and die.  That’s something that doesn’t win you points at the PTA.  The law as written isn’t all that bad, though.  The panels are voluntary.  So far.  But everything Big Government has done started small.  They are, after all, the master of incrementalism.  And with out of control healthcare spending bankrupting Medicare and Medicaid, what do you think these panels will evolve into?

The regulatory process isn’t supposed to be a black-ops exercise, but expect many more such nontransparent improvisations under the vast powers ObamaCare handed the executive branch. In July, the White House bypassed the Senate to recess appoint Dr. Berwick, who has since testified before Congress for all of two hours, and now he promulgates by fiat a reimbursement policy that Congress explicitly rejected, all while scheming with his political patrons to duck any public scrutiny.

If there was nothing to hide they wouldn’t have hidden this provision so deep in the federal register.  But when you hide things, there are reasons you hide them.  So much for transparency.  And the most ethical Congress ever (of course an ethical Congress is a moot point when the executive rules by fiat).

Under highly centralized national health care, the government inevitably makes cost-minded judgments about what types of care are “best” for society at large, and the standardized treatments it prescribes inevitably steal life-saving options from individual patients. This is precisely why many liberals like former White House budget director Peter Orszag support government-run health care to control costs: Technocrats in government can then decide who gets Avastin for cancer, say, and who doesn’t.

When a government bureaucrat decides who gets life-saving medication and who doesn’t, that sounds like a death panel to me.  Because that decision has the power of life and death.  They can be as nontransparent as they want but the truth is pretty clear.  To control the out of control spending of Medicare and Medicaid (and, in time, Obamacare), they will be partnering with the Grim Reaper.  Because dead people don’t consume health care benefits.  And that is their biggest problem.  Consumers of benefits.

The Swedish National Health Care System Rations Care

So what about the social utopias of European Socialism?  Those advanced nations that have national healthcare?  Are they having these problems?  Of course they are.  In fact, their future is ours.  Here’s a small sampling of what to expect (see Man’s penis amputated following misdiagnosis posted 12/29/2010 in Science and Technology on The Local).

A Swedish man was forced to have his penis amputated after waiting more than a year to learn he had cancer.

The man, who is in his sixties, first visited a local clinic in Blekinge in southern Sweden in September 2009 for treatment of a urinary tract infection, the local Blekinge Läns Tidning (BLT) reported.

When he returned in March 2010 complaining of foreskin irritation, the doctor on duty at the time diagnosed the problem as a simple case of inflammation.

After three weeks passed without the prescribed treatment alleviating the man’s condition, he was instructed to seek further treatment at Blekinge Hospital.

But it took five months before he was able to schedule an appointment at the hospital.

When he finally met with doctors at the hospital, the man was informed he had cancer and his penis would have to be removed.

It remains unclear if the man would have been able to keep his penis had the cancer been detected sooner.

The matter has now been reported to the National Board of Health and Welfare (Socialstyrelsen) under Sweden’s Lex Maria laws, the informal name used to refer to regulations governing the reporting of injuries or incidents in the Swedish health care system.

Misdiagnosis.  And long waits.  National healthcare.  Where government bureaucrats cut costs and make doctors work long hours.  Not a very attractive offer for all those years of medical school.  So there’s a doctor shortage.  And, consequently, long waits.  In this case, 6 months to be advised he needed to go someplace else.  Then another 5 to get an appointment someplace else.  In the mean time the cancer spread.  This is what happens when you ration health care.

Is this the future you want?  It’s not the future I want.

The Third Rail of Politics is a Generational Thing

It’s a generational battle.  The young want to cut taxes (and benefits).  Because they’re paying those taxes.  And not consuming the benefits.  The old want to raise taxes and maintain benefits.  Because they’re not paying those taxes.  But are consuming the benefits.  Right now there are more old than young.  So you can guess who will win this struggle.  Bankrupting the future will help the politicians stay in office today.  So the old will win.

But there is a little irony in all of this.  To save these programs (Medicare, Medicaid and Obamacare), they need old people to die.  But once they do, the politicians will lose their political support.  The younger generation (whose future the politicians mortgaged) will then broom them out of office.  And they will be all too glad to short out that third rail once and for all.

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