It's a Surreal Day in the Neighborhood ... How Do You Like My New Car?

It certainly is a surreal day in the neighborhood and I don't think it has got anything to do with Rush Limbaugh criticizing the President, as David Axlerod, one of the President's advisor's would like you to believe. What I find surreal is all the attention being paid to the Public Option as well as Al Sharpton's assertion on This Week with George Stephanopoulos that Liberals are the real conservatives. Yes, he actually said that with a straight face. That line was about as surreal as it gets, boys and girls.

Back to the Public Option. The public option argument is no different and just as silly as me arguing with my wife that the pin-stripping should be gold and double lined on our Ferrari Enzo. What makes these arguments different is my wife and I both know we joking, whereas Al Sharpton's conservative wing of the Democratic party is deadly serious. What makes the argument surreal is that we know we can't afford what we want and so do they, but that is not stopping Al's pals.

It gets even funnier when they begin to explain how they will afford the unaffordable. They want you to believe that they are going to cut Medicare. Let me say that one more time, only slower.

The Democrats in Congress lead by the President are going to cut Medicare.

The idea that this Administration is going to cut spending is laughable. The notion that they will take a meat cleaver to Medicare and hack 50 billion dollars from it's budget each and every year for the next ten years is a side splitter. A solemn pledge of fiscal prudence from the leader of the gang that is projecting Trillion Dollar Deficits for as far as the eye can see isn't all that reassuring. But it's comforting to know that their lack of fiscal discipline has some limits, or does it?

Their spin on the deficit is every bit as surreal as their foolish public option debate. The President says he won't sign a bill that will increase the deficit. That's pretty rich, don't you think? What he means to say is get ready for big tax increases, both the direct and indirect kind.

Forcing, excuse me, mandating (that's more PC) that everyone must purchase health insurance while at the same time imposing a tax on medical device manufacturers is merely a stepped transaction. It is a tax increase disguised as a fee extracted from the medical device manufacturers, which they pass on to the insurance company in the form of higher prices, who then passes it on to you through higher insurance premiums. Raising the top marginal rate by 5% is well, it's just a tax increase. Hey good thing that recession is over and the economy is surging ahead, cause we all know that raising taxes in a recession is a recipe for disaster!

What they want you to believe and what is reality in this debate occupy positions that are polar opposites on the reality continuum!

Reality: government programs always cost more than originally projected. Congress has an abysmal record when it comes to cutting spending and raising tax rates, never produces any where near the amount of tax revenue that Congress believes it will.

Surreality: Congress can provide quality health care for everyone without bankrupting us all along the way.


Congress should do what I did when I realized that I couldn't afford the $1,000,000 Ferrari. I settled for just the pinstripes instead. Now I'll be the first to admit they don't look as good on me as they would on that Ferrari, but they don't look that bad, and on the plus side I won't have to hire a bankruptcy attorney.

When you Shake Hands with the Devil, Healthcare Style

When they cut their deal with the Administration the insurance companies rolled the dice and came up snake eyes. They traded away proper insurance underwriting practices in order to capture a larger customer base, one that would be guaranteed through government force. Like their auto company brethren who struck their own Faustian bargains before them, they have come away a several fingers shy!

After promising the insurance companies a government mandate that would force young people under penalty of fines to purchase insurance (not very American sounding, is it?) the administration's minions in the Finance Committee said Oops, we lied. They watered down their mandate, delaying it's start date and reducing the penalties enough as to make it ineffective, leaving the insurance industry hanging out to dry.

Don't get me wrong. I'm not going to shed a single tear for the insurance companies. The bargain they sought with the Administration was despicable. They know how insurance works and doesn't work, and have played the go along get along game with the government for far too long, instead of being a force for positive change. This time it came back to bite them, and they're going to need stitches to close the wound.

The Government in it's extremely finite wisdom is doing exactly the wrong things to fix the problem of rising health care costs.

A quick history lesson for those who have forgotten. It was the Government's involvement in health care, subsidizing employer sponsored insurance payments by making them tax deductible, in order to cure other problems it created by imposing wage and price controls during World War II, that started us down the road to health care ruin in the first place. When you subsidize something the demand for it goes up. It's like having a clearance sale! The very same politicians who believe so strongly in incentives when they are handing out $7,500 of your tax dollars so their fellow eco-warriors can drive green in a $40,000 electric vehicle are just undone by the fact that subsidizing health care has lead to an increased demand for it.

The solution to rising health care costs is LESS GOVERNMENT, NOT MORE!

The government needs to let insurance companies get back to selling insurance, which is a protection against a loss that is not economically recoverable from. Insurance is not a payment system designed to take the brain power out of the decision to go see a doctor simply because the cost of that visit is near zero.

The government needs to Stop subsidizing health care via the tax code. When consumers of health care start to pay the real costs of the health care they purchase they will respond, like they do when the price of any other commodity they purchase increases. They will reduce their demand for it.

The Government mandating what procedures need to be included in an individual's policy needs to end. Only the consumer can know what is of real value to them, and what they are willing to freely exchange their hard earned dollars for. When they are able to shop and compare costs and benefits, they will.

We need to let doctors be doctors and practice medicine again, instead of having to practice the bizarre form of health care CYA that an out-of-control trial lawyer lobby has forced upon them through outrageous malpractice awards.

Until we get the Government out health care, no real reform will be possible, and Government will continue to play their game, which is to shift costs onto what ever group happens to occupy their demon of the day spotlight.

Below is a link with the fax number of every senator who is voting on the bill today. Send your senator a note and let him know how you feel.

http://www.grassfire.org/1122/targets.htm

Pump Primining is Nonsense..... Tax Reform is What's Needed

To hear our Representatives in Washington and their economic guru's talk, the economy works like a pump, which they have been busy priming with large amounts of government spending, courtesy of taxpayer canteens. Their theory is that once they have primed the pump sufficiently business activity will flow and end the current economic drought.

This kind of thinking betrays Congress's ignorance of the working of both pumps and the economy. The mere act of priming a pump does nothing to produce the desired outcome, a greater supply of water. Using a lot of water to prime a pump when only a small amount is necessary is wasteful and does not pay off in an increase in the amount of water produced. What really creates the flow of water is the effort of the individual who forces the pump handle down, then up, and down once more.

Whether pumping water or increasing economic activity, it's really all about the individual and his effort. We should be doing everything we can to encourage this effort, but instead our government is hell bent on doing just the opposite. The return an individual receives from his efforts is his incentive, and is being reduced year after year, with the government taking a greater share of his production. The unwieldy mess that our current tax system has become discourages those who would generate the increased economic activity we need.

The greater the number of buckets an individual pumps from the well, the less he is allowed to keep from each additional bucket. If increased economic activity is the goal then our tax system is backwards. The first bucket or two pumped are the easiest of the day and also have the lowest tax cost to the individual. Our progressive income tax that takes a bigger share of each additional bucket , discourages the individual precisely at the point that an incentive to produce more is needed. The basic premise embodied in the tax code says the harder you work the less you get to keep! If that is not a system rigged to stifle production, what is?

Hiring additional employees to help increase one's output has it's own code of discouragement. Let's start with the sponge of a tax called Social Security; it soaks up 15% or so of each and every bucket you fill. If the Democrats have their way with health care and you're a small business you can count on losing another 8% to pay for the government run health insurance plan. That's almost a quarter of every bucket gone before you've even had a chance to wet your beak.

That's just for starters, if you're not discouraged yet there is still the progressive income tax structure which will sop up another 35+% of what's left in your bucket today, and 40+% after the Bush tax cuts expire in 2010. That is unless the various surtaxes that have been proposed are imposed, draining even more from YOUR BUCKET. That's without considering State, County and local income taxes, which with very few exceptions are on the rise. That will mop up more of what is left from your day at the well .

The biggest problem our Nation faces is the government's never ending thirst for a greater share of your labor and mine. While the rest of the world lowers tax rates making them more competitive, our leaders are constantly finding news ways to make you and I less competitive through higher taxes that discourage production.

We need to scrap the Tax on Labor, that we refer to as the Social Security Tax, all together. The tax money that Washington takes from us is fungible; it doesn't matter what label they put on it. It's no secret that Social Security receipts in excess of Social Security payments are spent as soon as they are collected on other items in the government's budget. There should be only one low, flat rate income tax, spread over the broadest base possible, to encourage a revival of economic activity.

Competing in the global marketplace of the 21st Century will require us to either attract the necessary capital or cut wages to be competitive. Only one of those alternatives produces rising incomes for American workers. Yet the Policies to make the US a country that is capital friendly are nowhere to be found. The anti capital accumulation tax called the capital gains tax should be yanked from the tax code. Doing so will ensure that capital will once again be in greater supply relative to labor, and will result in rising wages and providing the higher standard of living all working people seek.

In order for the US to once again become the low tax, high wage economic juggernaut of the past, something's got to give. That something is run away government spending. Lowering the Tax rate and making the base as broad as possible will give everyone an incentive to help their representatives in government understand what is a good use of taxpayer money and what is not. Just as Congress is now getting an earful from the folks who aren't enamored with the Government Health Care Option. The kind of political push back they are sure to receive, once all working citizens have an interest in how their tax money is being spent, will make it easy to chop a trillion or two from an insanely bloated Federal Budget and then restrain it's growth after that.

Washingtons Newest Game Show "Cash for Clunkers"

In Washington this week we find our economically illiterate Congress hurriedly working to provide the funding needed to bring you another season of every stimulus junkies favorite program called "Cash for Clunkers".

The Show opens with the announcer asking the studio audience and the millions of unemployed people viewing from home a question by borrowing a line from the old Rolaids commercial.

"How Do You Spell Relief"?

The audience and the voters back home yell out the answer:

C A S H - F O R- C L U N K E R S!

The premise of the show is that everyone will be better off if the price of used cars, the kind bought by folks who can't afford new ones, are more expensive, and new cars for people who can afford to buy them are subsidized by you, the taxpayer. To do this the government will overpay people who can afford to buy new cars, for their used cars, giving them free money to buy a new car while crushing the used cars they bought. See how that works? It's pure Genius . Do you get it?No? I don't either!

The producers of the show can't believe how wildly popular free money has become. After being delayed by three weeks while they tried to work out the kinks, this version of the free money give away show has become a smashing success, no pun intended. Successful to the point that all the money allocated to produce the show through the fall has been used up in just two weekends.

During a commercial break we are reminded just how hard they are working in D.C. to brings us the sequel to our favorite new stimulus show. They point to the speed with which they ran through the budget of "Cash for Clunkers One" as proof of the fact that it's working so well. Go figure. Who would of thunk that so many people would be clamoring for free money?

Some of the show's critics point out that it hurts every taxpayer who is stuck footing the bill in order that a few lucky folks can get a good buy down at the new car dealer. While others point out that the poorer folks who may have wanted to buy one of those inexpensive cars now destined for the scrapper are the ones who will literally pay the price by paying more for a clunker to get around in. But hey, the show has got great ratings, and that's what counts in Washington. Effectiveness? Not so much. In Washington it's all about the ratings.

So, I say why stop at Cash for Clunkers? After all, when you are on this big of a roll, you've got to go for broke! Which apparently we are! It's just not happening fast enough for our Congressional buddies. So, I'd like to suggest they try my all time favorite show called : "Money for Nothing"! Yeah, that's the ticket. Just hand out free money to everyone. Then we'd really be getting somewhere. There's already a catchy theme song we could use for the show, by a band appropriately named Dire Straits. Which is where we are heading as a result of the foolishness that passes for leadership and sound economic policy by this Congress.

Small Business Squarely in the Government's Crosshairs

The Obama Administration and it's policies have the business community squarely in it's cross hairs and is moving in for the kill. Proposed taxes on energy, increased taxes on businesses to pay for expanding health care coverage, and the rising cost of complying with ever more regulation are serving to choke off profits and restrict growth at the very time our country needs them the most.

Policy makers across the nation choose not to understand a very basic yet simple truth, the more difficult the government makes it for an employer to earn a profit, by confiscating profits through taxation and increasing expenses through regulation, the fewer profitable employers there will be. By extension, corporate and personal income tax revenues will be lower, as will the growth in employment. Thus, government spending on welfare and unemployment must be higher. This seems like pretty basic stuff, don't you think?

Even the economist they love to quote when they want to increase government spending understood this.

“Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.” John Maynard Keynes

Sadly it is the rare Politician who understands the quote above. Raising tax rates to raise tax revenue, and passing regulations that restrain the capacity of entrepreneurs is ultimately the disappointing folly of fools, for it never produces the desired results. When you reduce incentives you restrict growth. When you limit economic growth, you lessen opportunity and eliminate prosperity.

The bell curve also applies to folks who run small businesses, not just college entrance exam scores. Only a relative few business owners are near genius at organizing and running profitable companies. Most of the rest are spread out across the balance of the curve. It's these business owners, at the margin, who are hit hardest by increases in taxation and the cost of more government regulations. They run businesses where profit margins can be razor thin, even in good times. The one other critically important thing that needs to be remembered is that they are the job growth engine of the economy.

A business only grows when the principals responsible for the decision to expand or not conclude that the risks of a proposed expansion are outweighed by the potential for increased profits. When they conclude otherwise, businesses don't expand and jobs are not created. Yet it is these very business owners who find themselves under attack and in the administration's cross hairs. We hear it over and over again from the President and his advisers in a never ending chorus: "We'll take it from the rich," "We will only tax those earning over $250,000 per year because they can afford it." “They need to pay their fair share.” The large majority of these folks are small business owners.

We have heard this all before and tried it with disastrous results, but evidently congressional memories are short. I remember the luxury surtax on boats which came into effect in the early 90's; it too was supposed to raise additional revenue for the government. It would do so by soaking rich boat buyers who could afford to pay the surtax, billions in tax revenue would be made available for the Washington pols, or so the theory went. Did it work ? No, it seems the rich opted not to be taxed more and they stopped buying boats from American manufacturers. The American boat building industry was crushed, and it's hard working employees were forced into unemployment lines. I'm sure that wasn't the intent of the do gooders who passed the legislation. But it was the result, and as always the folks at the margin were the ones who felt the pain of the government's misguided attempts to “soak the rich.”

What politicians fail to understand is that the rich who work hard to earn their wealth in the first place will rightly work just as hard to protect it. The governments new found infatuation with income redistribution, which they hope to accomplish by once again “soaking the rich” will only serve to dig our nation deeper into the hole of diminishing revenues and increased spending on transfer payments.

Business owners will keep their powder dry, delaying their expansion plans until the misguided policies of this administration are replaced by the wisdom of the electorate in the voting booth. The American people instinctively know that the massive increase in government spending accompanied by a reduction in the incentives for productive work and economic expansion is a recipe for disaster soup.

The Public Option ... Only Your Wallet Will Feel the Squeeze!

In an editorial in the Wall Street Journal on Wednesday, Robert Reich argues that the central idea behind the public option for health care is to squeeze the profits of insurers and push them to make changes to reduce costs. This exposes his seriously infirm grasp of economic reality and points to his near religious belief in the power of "Good Government", a phrase which perhaps defines the word oxymoron. The only squeezing a public option would produce would be the squeezing of additional dollars from your wallet, and the only cost reductions will come from the imposition of health care rationing .


Mr. Reich is living both figuratively and literally in economic La La Land, with Liberally tinted political blinders so large that they block out reality. From his lofty perch at the University of California at Berkely, yes the very same California that is teetering on bankruptcy due to unrestrained "good governance ", a large part of which goes to pay for health care programs for state employees and the poor, he sends down his prognostications for fixing everything that is wrong with capitalism. His usual cure, as you may have guessed, is more spending on more "Good Governance". This time he's fixing health care.

You would think that with his bird's eye view, so to speak, of the destruction wrought by his beloved "Good Governance", he might change his tune. But this song bird of ever more government spending, can only warble for yet ever more government spending to fix the very problems too much government spending has caused. It's a vicious cycle.

That he can't or won't connect the cause (too much government spending) with the effects (a meltdown of his state's budget process) which have his state a mere 30 days from insolvency, and at the same time advocates even further expansion of the government's role in health care is nearly beyond belief.

The government option he promotes doesn't pass the economic smell test. People respond to incentives, even the " good governance" types will admit this when it comes to taxing cigarettes and soda pop, but not when it comes to government run health care. If you want less of something tax it. Want teenagers to drink less soda? Put a surtax on it. Want smokers to cut back? Add another dollar of tax, to the price of a pack of cigarettes. If, on the other hand, you want people to use more of something, lower the cost.

Robert wants to increase the demand for health care by providing it to more people for free, while at the same time reducing the cost. This flies in the face of economic reality. The end result is obvious. If you are buying steak for your family's dinner and your free- loading brother- in- law wants to pop by with his clan for a meal on the house , your options are the same ones the government faces . You can cut everyone's steak in half(rationing) eat hamburger instead (provide an inferior service) or bust the budget and provide steak for everyone.

Here's my prediction: When the same politicians, who only ever make political decisions because they are incapable of making economic decisions design and run your health care program, you'd better get ready to pay dearly. There will be lots of steak for some, a little hamburger for others and a great big tab for the taxpayers.

One Step Forward Two Steps Back... The Governments Strange Dance with GM and Fiysler!

The logic behind this ill fated rescue attempt of Green Motors and Fiysler (Fiat + Chyrsler = Fiysler, pronounced Fiz-ler) doesn't add up, but the tab that the government expects the taxpayer to pick up is mounting, and continues to add up and up and up! What started out as a $17.4 billion dollar bridge loan from the Treasury Department, via the Mother of all political slush funds, the TARP program, to forestall the inevitable GM and Fiysler bankruptcy has turned into an ongoing corporate welfare scheme whose price tag so far is a whopping $80 billion or so.

Even the No More Corporate Welfare Chorus in Congress has now changed it's tune, and is singing that classic hit by The Car's: "Let the Good Times Roll"! It is a pity these song birds don't know the next several lines of the song which are as follows:

Let the good times roll
Let them knock you around
Let the good times roll
Let them make you a clown

As the Auto Oracles in Washington warned, to let GM, or Fiysler for that matter fall into bankruptcy would mean the end of automobile manufacturing in the US and the collapse of the entire auto supply chain. As the months since it's dire warnings have passed, and the costs of keeping GM and Fiysler out of bankruptcy have skyrocketed, we can now see that it wasn't the sky that was falling, it was GM and Fiysler. The sky is still overhead where it belongs, and now so too are GM and Fiysler where they belong: in bankruptcy.

If the new GM and Fiysler that emerge from bankruptcy as less bloated organizations with greatly reduced liabilities, courtesy of taxpayers, bondholders, auto dealers and the rule of law, can be seen as one step forward, then the continuing militant culture of the UAW, that bought and paid for this egregious display of political favoritism and the government's mandates for smaller greener cars must surely be seen as two steps backward.

For this rescue to work, a smaller GM, with the UAW's two left feet now stepping on toes not only on the assembly line but in the board room as well , will have to dance it's way back into the hearts of the American car buying public and do what the old GM and Fiysler could never do: build small cars that the public will buy in large quantities, and do it profitably. If that is not enough to ensure their next bankruptcy filing, they'll need to do this while the auto oracles in congress call the tune for future design, production and distribution. Good Luck GM and Fiysler! Things are going to get small!

How small is small? As I looked down from the drivers seat of my 96 Jeep Cherokee at the Mini Cooper that had pulled up along side of me at the stop light, I noticed the new car sticker on the window which proclaimed the car's superior gas mileage. I also noticed it did not meet the revised cafe standards of 35.5 mpg's highway that the government has mandated, not that it missed by a mile, it only missed by half a mile, per gallon. I pointed out to my wife and 3 daughters who fit very comfortably in our car that Washington had decreed that this would be the new standard for size and comfort going forward. They pointed out to me that they weren't going to drive in a car like that because they wouldn't fit. Can you imagine that? A family- sized car that your family won't fit in! Only the government could do this with a straight face. When the comedian Steve Martin said to us "Let's get small," we all knew that he was was high. What excuse can Congress give?

When the bailout music stops the next time, I predict that once again it will be the taxpayers who are out of luck, looking for a seat and finding that in the politically charged game of auto industry musical chairs ,the unions having paid the man in charge of the music will get a heads up and grab the only seat left before the government calls "game over".

One last question: Why is there a need for Ford and the other two now bankrupt automakers to give $52,000,000,000 to the UAW's VEBA to fund health care costs if Obama and Co. are going to deliver on Universal Health Care?