Obamacare Creates 860% Tax Bracket

California has a website that you can use to figure out if you qualify for a tax credit towards the new 2014 standardized health plans. Turns out for a family of 4 with a household income of $94,000 you get an $8304 tax credit (whose pretax value is about $11,000). If you make $1000 more, $95,000 per year, the credit is 0. So that means that $1000 in income cost you about $8,600 in taxes which is a 860% tax bracket. Wow. Living on the dole is starting to look more and more attractive even to people making $90K a year. Note to employers, educate your employees that they may actually be better off taking less income.

What Would Happen if the Government ran BP?

BP’s oil leak in the Gulf has been stopped. When the leak started, due to a massive explosion of a drilling rig, BP told us that it would take 90 days to plug the leak. It took 85. When Barack Obama became president he told us that fixing the financial system was his number one goal. It took him 18 months and he still has half the job left (Fannie Mae and Freddie Mac are excluded from this new financial bill). The oil leak can be monitored to see if it is leaking, the financial system now has more laws whose effects can never be understood or controlled. Ironically, government scientists slowed down the final days of plugging the leak because they were afraid something might blow up, at the same time ex-president Clinton suggested we blow up the well with a nuclear bomb. Thank God he isn’t the president any more. BTW, the technology used to install a new blowout protector onto the broken one a mile down in the ocean is incredible. The engineers on the project, those that designed and fabricated the ultimate solution, and those that operating the remove control robots should get an award from the government. Instead I except you will hear moaning of the next few years about why things couldn’t have gone smoother or faster.

Joe Wilson, Deja Vu.

I didn’t watch or listen to our President’s big healthcare speech before Congress yesterday.  i figured if he actually said something important I could read about it the next day. When I read the headlines this morning I saw “Joe Wilson tells President: You Lied!”. Deja vu. Was there some new yellow cake memo? Was his hot wife, Valerie Plame, looking for more headlines to sell her book? Oops. Wrong Joe Wilson, wrong President. Apparently there is a new Joe Wilson calling a President a liar, this one a Congressman.

Everyone (well everyone who hates Republicans) is in a huff that someone had the gall to speak up during a speech in Congress. They should watch the Prime Minister of England talk every week before his Parliament. Anyways I was interested to listen to what the so called FACT CHECK article had so say. “Fact Check” is what modern journalists call it when they actually do research on an issue and don’t just print propaganda. Unfortunately the term has been twisted into just the newest form of propaganda. What I was left with is listening to a clip of the actual speech.

Obama: “The reforms I’m proposing will not apply to those who are here illegally.”

Wilson: “You lie”

So I guess the question is, do the reforms that Obama is proposing apply to those who are here illegally? Well first, what reforms is Obama proposing? Obama hasn’t proposed any specific reforms so in that sense Wilson is wrong. Case closed.

Well, let’s assume, as the “FACT CHECK” guys do, that Obama is talking about the bills propose by his fellow Democrats in the House and the Senate. The fact check guys say the house bill says: “Nothing in this subtitle shall allow federal payments for affordability credits on behalf of individuals who are not lawfully in the United States.” They conclude that Joe Wilson is wrong. Unfortunately for them Obama didn’t say: “The reforms I’m proposing will not provide any federal insurance health subsidies for those who are here illegally.” Then Wilson would be wrong.

Perhaps Wilson was referring to the other 1,000 pages of the bill. How about the part that says that insurance companies cannot discriminate based on preexisting conditions, or the part about employers getting fined for employees that do not have health insurance or the part that allows people to join the “public option.” How about all of the other provisions that are in these bills or may be in these bills in the future? Californians passed a constitutional amendment prohibiting state funds to be used to give state run health care (i.e. publicly funded hospitals) or education to illegals and it was determined to be unconstitutional. So who was more right this time, the President or Mr. Wilson?

BTW, just as an informal poll.  Since I didn’t listen to his speech, did President Obama say his plan includes the “public option” or not?

Put me on the Death Panel

When it comes to a big, long term, government run health programs, the ultimate question is: would you trust YOUR health to President Obama? He would be the ultimate guy in charge, at least according our Constitution. Lots of people say yes.  Then I ask: would you trust your health to George Bush or Sarah Palin?  I just get laughs… “That will never happen. Why would I?” Well, I explain, you don’t know who is coming after Obama, it might even be Sarah Palin herself.

The problem with the current health bill is that everyone who is pushing it really wants a single payer system. Single payer won’t sell now, so they came up with a 1200 page bill that nobody understands and claim it is nothing like a single payer system. Would you believe them? These proponents are being disingenuous, and most people understand that Obama will implement the bill as though it is a single payer system, eventually. In a single payer system all of your health decisions are controlled by a single payer, and guess what, YOU are not that payer.

Whether Congress passes a health bill with death panels or rationed care or free care for illegals or value based decision making really makes no difference. Whatever bill is passed now is just a another step down the path of thinking that the our government knows better than we do. The national health insurance system currently assumes that our employer makes better decisions than we do. Our employer decides our benefits, our deductibles, our drug plans, our co-pay our medical groups, and in many cases our employer even has to approve specific medical procedures. For most people it is not a stretch to change employer to government, in both cases someone else is making our most basic decisions for us.

To say that there is no choice in medical insurance plans is just wrong. There are lots of choices, it is just you aren’t allowed to make them. When my company wanted to offer medical insurance we asked a broker to come up with a list of possible plans. I expected a handful of plans and got literally hundreds, more than we wanted to read or understand. I’m an engineer, not a insurance specialist. We ended up offering our 5 employees a choice of just two plans, one HMO one PPO. Four years later we have more than 40 employess and have added a third choice: Kaiser. This is the way medical insurance is decided for 80% or more of Americans. By the way, employers make the same decisions for 401K retirement plans. I had to pick one of those too.

The health bill I would propose would be very short and contain just two key and simple elements: employers or other groups are not allowed to offer insurance, only individuals and families can purchase insurance; insurance rates or availability may not depend on individual or family genetics or health history but may depend on the number of years they are uninsured (this would have to be phased in) and other general characteristics. This would provided a basis for universal coverage in that all people could be covered if they could pay an average rate. If someone decided not to have insurance, that is OK, but if they get sick they would have to pay up, maybe 2 times, maybe 100 times the going rate before they get coverage. The value of having insurance would be amplified, and the cost would be controlled by the individual. People wanting only catastrophic insurance to reduce their health insurance costs could. If you want complete coverage it is your choice, not your employer’s and not your President’s.

If Congress wants to pass a law to pay for the insurance of people who do not want to, or cannot pay for insurance Congress can, but that would be a different bill with its own issues. Any such law would have to define a minimum acceptable insurance plan (MAP) which would be a source of great debate. It is the same question that each of us would have to answer ourselves, which plan is best, only this time it would have to be a plan that would fit everyone. Let’s face it, there is no such plan. I’m sure they can write another 1000 page bill that describes a minimum plan. 1000 pages may be too few though, I mean the tax code is a lot bigger and that.

While we are at it, we should eliminate the 401K retirement program and replace it with personal retirement accounts too. I like giving people their own choices in life, but I guess that is a perverted idea in Democracy today. I learned in high school that Democracy was about letting people vote for the things that make a difference in their lives. I didn’t realize that meant that my neighbors could vote if I qualify to live. Seventy years ago my father left a country that voted on whether he would live or die. They picked die. Each of us deserves to make our own health insurance decisions, to be the one and only member of our own personal death panel.

U.S. Health Plan: Stay Healthy

I would like to write a post about the truth of the Obama/Reid/Pelosi/Democratic health bill but that is really difficult because I don’t want to read the thousand page bill, and apparently nobody else does either. Even Congressman John Conyers, who heads the committee in charge of the bill, points out that he can’t be expected to read the bill because even if he were to read it aided by two lawyers he wouldn’t understand it. We are supposed to be a country of laws, but this is ridiculous. Perhaps we should be a country of laws that the average person can read and understand. I think that was in the Napoleonic code.

So instead of discussing the facts, let me discuss the claims.

First, Obama says that the bill will allow one to keep their own doctor. What does that mean? Right now my insurance, as is almost everybody’s, is decided by my employer, not by me. My employer today might decide to get insurance that has one set of doctors, but tomorrow (actually they can only change annually), they might decide to choose a different plan that only supports other doctors. Is Obama saying that they cannot make this decision? He has said that employer’s are still going to provide insurance so I am confused. I think he means that your employer will continue to decide your health insurance, not the government. Obama is trying to personalize healthcare today without understanding the basic reality, heath insurance is decided by employers, not by individuals.

The second statement from Obama is that private insurance will be more competitive if there is a “public” insurance plan. Who is going to fund this “public” insurance? The public or the government? All insurance companies are “public” today, they trade on public exchanges, they provide insurance to the public, the raise money from the public, their profits are distributed to the public. I think he means a government insurance plan, not a public plan. So who would put up the capital for a government plan? who would get the profits? who would run the plan? who would be on the board of directors? who would manage the company?

When I first heard him promote a public plan equal to private plans my  thought was “will private insurance companies be allowed to raise my taxes?” I know it is a strange question, but I assume that the government plan would have such a right, so if the government can do it and they are equal to the private companies then the private companies must have the right to do it. You probably are thinking that I am crazy, or as someone said to me recently, that I engage in hyperbole. Well it turns out that I was right. Regular  insurance companies will, under the Obama plan, be able to raise my taxes, at least indirectly, by skewing the cost curve. The government, i.e. my taxes, will under the laws of economics have to match the private plans, so basically my taxes will be paying for other people’s premiums which means that my taxes will be controlled by insurance companies while my employer will pay for my insurance.

The result will be a system whereby the only insurance that I will NOT be deciding or paying is my own!!

I think this is the ultimate goal of the Democratic plan: create a system so confusing, so open to abuse, so out of control that in a few years we will all be screaming for someone to step in and fix it. Then, enter single payer health, where it will be illegal to get health insurance, and illegal to pay for ones own health care and ultimately illegal to get any health care unless you can convince that “single payer” that you are worthy to be treated. I think this is called a slippery slope. Let’s hope we don’t slip, that might not be covered.

Fix It First

I know that it is easy to criticize what Obama and Congress are doing to try to recover jobs and value in the economy, so today I am here to make a suggestion: before you throw another $1T into the economy. fix the problems that got us here!

As I recall, things started to head south as real estate prices fell. Lots of people, including most of Congress, regulators, banks, insurance companies, etc. thought that housing prices would never go down. Massive financial instruments were developed based on this one assumption. They were all wrong. We can’t fix the fact that real estate prices fell, but we can fix the institutions that collapsed because of it. Before we go try to fix the entire economy, let’s fix the government and its regulatory institutions. More regulations? No, Just fix what we have. If you don’t fix it, it is still broken.

Let’s start with the institution designed specifically to let the government interfere/regulate home mortgages, Fannie Mae and her cousin Freddy Mac. I haven’t heard one word about the “New Fannie Mae” because there is no new Fannie Mae. Is Fannie Mae operating the same way it did 4 years ago? I don’t know but I would guess yes, since I haven’t heard anything to the contrary. Will Fannie Mae still underwrite loans to people that everyone knows will never be able to pay them back. Probably. Banks aren’t loaning the money now, but if they did, I’m sure Fannie Mae would rubber stamp the transaction.

Then we have $70T in default credit swaps, a secret system of alliances designed to spread the risk. These financial instruments remind me of pre World War I Europe, where the risk of one country gaining military domination over all others was spread with a complex and often secret set of alliances and mutual support treaties. One Serbian kills one Austrian and before you know it everyone is fighting everyone. Four years later half of Europe is in such a deep depression that a wheelbarrow full of cash isn’t enough to buy a loaf of bread. Default credit swaps should be illegal.

Next we have new accounting rules for valuing homes and real estate. The rules were updated a few years ago, an act to increase transparency, to force banks to value property at resale value instead of book value. Like most rules with good intentions, this rule turned a bad real-estate market into bankrupt banks and insurance companies. Maybe not the best regulation.

There are also those quasi-regulators who misrated the risk in commoditized mortgages. Business as usual there too. These so called independent evaluators of risk are not so independent since the company doing the assessment profits more or less by the assessment they give. I think this is called corruption.

Until all these problems are fixed, who would invest in this known broken system? Who would trust that a seamingly strong company might, the day after you put in your life saving, go belly up because a bank on the other side of the country made one too many bad loans?

The public is smarter than Obama or the Congress. We don’t want to throw our good money after bad. But the government knows better and is going to spend our money, whether we like it or not, on the same of things that got us here in the first place. More than half of the “stimulus” bill gives money to programs and people that “need” the money. Why do they need it? For the most part, because they didn’t manage their money well. This goes for bank CEOs, for state governments, and for the chronically unemployed. I would give a break to those people that are recently unemployed due to the failures of their management, but for others, sometimes it is better to fail and let someone else figure out how to succeed than to stay in power and repeat your failure.

We tried the money giveaway thing nine months ago and that predicably went nowhere. Most of that money went into our gas tanks. Now we are trying it again. What is it that Einstein said about insanity? it is doing the same thing over and over and expecting a different result.

Obama’s Billions

The stimulus package proposed by Congress reminds me of an old Richard Pryor movie, “Brewster’s Millions”. In that movie Pryor could inherit $300M if only he spent $30M in 30 days. Sound familiar. Hand it to Paulson. He managed to spend $350B in about that time. The catch for Pryor was the he had to get value for that money but end up with nothing at the end. We don’t know yet if Paulson would pass or fail that test because while we all own a bunch of stock in various banks, we won’t know what it’s worth for a while.

The stimulus package follows much of Pryor’s solution – hire overpriced employees to do meanial and useless tasks. That is what the lion’s share of the stimulus will do. For $825B spent we will get at best $100B in infrastructure improvements, the rest will just go straight to various people’s pockets. I support those Democrats who want to remove all the tax cuts from the stimulus bill. I would remove all of the block grants for education, unemployment, and health too. While we are at it, remove all spending for things more than 2 years out. Doing all that would leave maybe $100B, if that, of infrastructure stimulus. I bet they won’t be able to spend most of that either.

Last month the Conference of Mayors put out a list of “shovel ready” transportation projects that don’t have funding. They came up with $90B worth. I can tell you that they just made up those number. $825B on the line and all that the mayors of all the cities in this country could come up with is $90B? The stimulus bill is giving them $30B. So much for infrastructure.

Why can’t the govement spend more than $30B on transporation infrastructure over the next 18 months? Too much government interference. In order to spend money this fast the government will have to suspend most of the “protections” that it places on spending. Environmental impact reports? forgot it. Multiple bid contracts, only superficial ones. It is not like there are millions and millions of skilled freeway, bridge, or road workers out there. Contractor managment will get rich, but jobs for the masses? I doubt it.

One interesting protection that must be waived is the idea of state matching funds. Normally when the feds spend on a project they require state or local governments to put up 10% or 20% of the cost. Given the state of states, this protection is going out the window for sure. Since the states are broke, maybe the federal government can instead extend its matching funds policy to the public. I heard an interesting suggestion for helping car companies: let people deduct up to $10K from their taxes for any car purchase this year, especially for a domestic car purchase. That sort of stimulus would help car companies pay us back for the last $700B bailout.

Calling this stimulus package an investment in infrastructure is a lie. Blaming the Republicans for the “tax cut” portion of the package is a further lie, but that is another post. In “Brewster’s Millions” Pryor managed to spend the $30M ending up with nothing in return. His fans who adored him when he was giving away money abandoned him when the well ran dry. Obama seems locked in the same plot.

The Big Pig

I just read the official press release for the big stimulus package. The federal government has obviously hired a really good marketing firm because I have never seen so much pork masquerading as “stimulus”. There is no underlying theme to the spending except to spread the money around. Let me offer some interesting tidbits:

The overall summary states that there will be unprecedented accountability in the spending because of the RAAT (Recovery Act Accountability and Transparency) Board. Maybe their first act should be to figure out where the $31B is missing from their Executive Summary. I added up all of the spending in the executive summary and got $518.7B, about $31B short of the $550B mentioned in the summary. I guess that $31B already went down the RAAT hole.

I also performed a simple classification analysis of spending. Turns out most spending will not go to new stuff (i.e. stimulus) but instead will go to just doing things the way we currently do them. All of the fighting in the California legislature, for example, will be moot because $328B (of which California will get maybe $30B) of the stimulus goes directly to states to keep their entitlement programs and government employees employed. California, problem solved! Of course I’m sure that they will raise a whole bunch of taxes before “discover” this aspect of the stimulus package.

I was interested in the $11B “Smart Grid Investment Program”, which is supposed to be used to modernize the electricity grid. I looked it up on Yahoo and got 54 hits, all of which were copies of the press release in one form or another. We are going spend $11B on something that nobody knows what it is? If this is an honest thing it will take 4 years just to define it. $11B on paperwork. That is the change I expected.

Another piece spends $2B on battery technology. $2B? I can’t imagine how to spend $2B on battery technology. How many battery researcher are out there? I can’t imagine spending this in a year or two years or even four years.

Overall, the stimulus package will spend $825B, of which 4% is unaccounted for, 40% is doing business as usual, 33% is for “tax cuts” (actually just giving money to some people for nothing), and finally 23% for new stuff. Among that new stuff, most is going to rebuilding things to make them more energy efficient. That is probably a good idea, but my guess is that if they were to spend that money on building nuclear power plants we would all be better off.