GM's Give Back Gimmick ... Happy Talk on the Way to Its Next Bankruptcy

GM, short for Gubmint Motors, is telling a whopper of a fib in its new advertising campaign. Listen to Ed Whiticare's Happy Talk and you'll be informed that through his Masterful leadership GM has become so successful in the last year that it has paid back the government loans in "FULL" with interest 5 years ahead of schedule.

That would be wonderful news, as a matter of fact it would be the best news I've heard out of Detroit in ages, but nothing could be further from the truth. GM has not come roaring back to life after a successful rescue by the brilliant Pols in Washington. GM was, and is still a basket case, only now they have a bank account that is chock full of our money.

In fact, GM's story is just another in a long line of Bailout success stories to go along with Chrysler, AIG, Fannie and Freddie, all of whom received money from the US Taxpayers and will never pay it back. GM didn't pay back, as much as it gave back a tiny portion of the bailout money it received. I Thought paying something back implied that you had earned the money used to pay off your debt. In GM's case ,they got 60 some billion dollars from US taxpayers and gave 6.7 billion of the money back. GM lost 3.3 billion dollars in the 1st quarter of this year, which means there is no way they "paid back the money". That's a Give Back! Not a Pay Back!

More happy talk is on the way with the good news that GM continues to lose market share and is down to 17.6% versus a year ago number of 18%. That's just a small loss of market share, no need to worry right? No! Not right! Last year the economy and auto sales were in a free fall. This year we are in a recovery, albeit a tepid one, and GM is still losing market share. How can things get better when revenues and market share continue to fall and profits are something that you can only dream about having someday? Answer: It can’t and it won’t!

Maybe even more Happy Talk can turn things around. GM can disclose, as it did several weeks ago ,that its pension plan is massively underfunded and short a couple of billion dollars. Well, actually they are short 27 billion dollars, but Like Ed I'm trying to keep the happy talk going. Is there any question about who is going to get stuck with that bill when it comes due? Then there is the Healthcare VEBA. What happens when that goes bust?

GM didn't go bust last year, but should have and almost certainly will go bust at some point in the near future after proving to be the biggest money pit the US tax payers have ever had the pleasure of funding, no matter what kind of snake oil Ed Whiticare is peddling.

Mass Insanity Healthcare Rationing in the Bay State

If I told you a story of how one of the bluest of the blue states, Massachusetts, would of it's own accord institute health insurance rationing three months after electing a Republican to the Senate to stop Obamacare, that would normally be considered satire. That is unless the story was true, then we would just call it irony!

Ironically, it is very true that Massachusetts, with what is essentially it's own Obamacare program, has started to ration health insurance. Surely that wasn't Governor Patrick's intent when he rejected the insurance companies' request for premium increases. Like all politicians, he just wanted to get re-elected, and being tough on insurance companies is a very popular stance among Democrats these days. Never the less, that is precisely what the outcome has been. The insurance companies did what any business does when faced with a money losing product: they declined to sell any more of that money losing product. As a result you can't buy health insurance in Massachusetts, even though it is against the law not to! Ain't that a catch 22?

This is always the result when politicians dictate how businesses must operate; they always do what is politically expedient instead of what makes economic sense. Politicians constantly prove that they are checkers players in the chess match of business, unable to see even one move ahead. As a result, they compound their initial mistakes with additional ones, as the unintended consequences of the laws they've just passed undo what they were supposed to have accomplished.

The governor thought that by standing up to the greedy insurance companies he could portray himself as a hero in the fight against the high cost of health insurance. This is an awfully thin argument, considering that three of the four largest insurers in Mass are non profits, as noted by the Wall Street Journal in a recent article. Those high costs, I might add, were imposed by the state on it's residents when it mandated coverage for all , instituted community rating and eliminated the insurance companies' ability to refuse coverage to people with preexisting conditions. I'm sure it came as quite a shock to him that his savvy political skills had instead of making insurance more affordable to his constituents made it unobtainable. After all, who could have possibly foreseen this would be the result of his actions? I'll tell you who! Any businessman worth his salt would have seen that one coming a mile away, but that's because they are in the business of making economic decisions, not political decisions. Business owners understand that they are in business to make a profit and those who don't , don't hang around all that long.

The Mass insanity that is Playing out now in the Bay State is what's in store for the rest of us if Obamacare remains the law of the land. The government will mandate greater coverages for the insurance companies to provide while denying them the ability to recoup their cost though increased premiums. When insurers are prohibited from selling their products at anything but a loss they will be forced to stop selling them. It will then be time for more regulation to fix the problems the previous laws created. On it will go until it reaches it's inevitable conclusion: the government controlling health care cost through by rationing health care. That's when being politically connected will literally be a matter of life or death.

Washington Wants a VAT... What They Need is a Twelve Step Program

After passing the health care bill that raises taxes on earned income, dividends, suntans, medical devices, capital gains, and pharmaceutical companies, not to mention the cost of health insurance for those of us able to afford it as well as those who can't, you may be asking what Congress plans to do as an encore. Well, just like the drunk who's waking up from a three day bender, they're going to reach for another nip of their favorite hooch, another shot of taxes so to speak. Just so they don't leave anything out this time, their next tax will be on everything. That's right, the same folks who are bringing European style health care to America are beginning to talk up that other European favorite: the Value Added Tax as a way to pay for their unbridled expansion of the welfare state.

What's a Value Added Tax ( VAT) you ask? Well, like I said, it's a Tax on everything.

VAT is a tax assessed and collected on the value of goods or services that have been provided every time there is a transaction (sale/purchase). The seller charges the VAT to the buyer, and the seller pays this VAT to the government. If, however, the purchaser is not an end user, but the goods or services purchased are costs to its business, the tax it has paid for such purchases can be deducted from the tax it charges to its customers. The government only receives the difference, in other words, it is paid tax on the gross margin of each transaction, by each participant in the sales chain.

It's looking like 2010 may yet be the year we try to tax ourselves into prosperity. You can do that, can't you? Just think of how much better off you'll be once this new tax is imposed; think of all the additional revenue your government will be able to squeeze out of you. The proponents of the VAT say it will enable us to once again restore order to our fiscal house and close the gaping trillion + dollar hole that they've created between what the government collects in tax revenue each year and what it spends. Won't that be great? Can't wait till it happens, right? Well, don't hold your breath. The VAT won't even come close to living up to it's advance billing. How do I know this, you ask? Just have a look at the current budget deficits of any of the European governments who already have a VAT Tax.

According to the European Commission, the average budget deficit for 2010 will likely be 7.5% of GDP, a percentage point or two below what the US deficit will be without a VAT. As we've seen, folks drunk with power, just like those overly lubricated with alcohol, can make all kinds of promises that are quickly forgotten as soon as they need their next drink. I'm sure you recall that no one making less than $200,000 would pay a nickel more in taxes and that health care reform would reduce the cost of health care. If eliminating the deficit was really a national priority, the folks who decide what the government is going to spend each year would be in a massive belt tightening mode; but government giving up the sauce just isn't in the cards. Instead, their attitude is why should we cut our budgets, when it is within our power to make you cut yours?

So, if it won't do away with the deficit, and it's as unlikely to restore fiscal discipline in Washington, as one more drink is to sober up the drunk, then what can we expect from the VAT tax, aside from more welfare programs? For starters, you can expect to pay higher prices for everything you purchase, and as a result of increasing the price of everything, you should expect the demand for everything to fall and along with it the volume of all goods and services produced. How many additional employees do you need to produce less? This sounds to me like a recipe for an economy on the rocks, with even higher unemployment than we are currently choking on. Maybe we can make our chronic unemployment rate permanent like our brothers and sisters in Europe have done. They seem to have gotten used to a rate that is two to three times what our unemployment rate has averaged over the past twenty years. Perhaps it's an acquired taste, like scotch or gin?

Don't worry you say, the President's Budget Commission is sure to deal with the deficit. Don't kid yourself! The President's new Budget Commission is just a diversion from reality. It is but a group of stammering, stuttering politicians who will will seek to convince you just how sober they are; whose pretense will be to convince you and me that there is just no way to cut government spending any further, and the only way out of the nation's fiscal troubles is to raise more revenue. After all, everyone knows Obama has frozen the spending on 13% of the budget already; so what else is there left to do?

What our representatives fail to see is that the way out of a spending problem is to stop spending, just like the way out of a drinking problem is to stop drinking. But we all know addictions can be difficult to break, and sometimes you have to hit bottom before you can admit you actually have a problem and seek help. I'm thinking that their political bottom is coming, and they'll be free to spend some much needed time in rehab, come November.

When Congress Commits Malpractice... Can We Sue?

In order to fix the “Health Care Crisis,” the House passed legislation on Sunday which outlaws sound health insurance underwriting practices; if they don't immediately follow that by repealing the laws of Economics we're all pretty much screwed! Healthcare reform, as passed, will transform the Health Insurance industry from one where companies assess medical risk and price their products based on that assessment into one that merely processes payments, leaving it to collect what will be an ever shrinking pool of premiums while confronting the inevitable explosion in cost that subsidized health care, our newest entitlement program, will lead to.

According to the Democratic Policy Committee's website, as of 2014 the bill does the following:

Implements strong health insurance reforms that prohibit insurance companies from engaging in discriminatory practices that enable them to refuse to sell or renew policies due to an individual’s health status. Insurers can no longer exclude coverage for treatments based on pre-existing health conditions. It also limits the ability of insurance companies to charge higher rates due to heath status, gender, or other factors. Premiums can vary only on age (no more than 3:1), geography, family size, and tobacco use.

Sounds good doesn't it? Yes, but there's just one enormous little problem with it. All insurance has one universal characteristic that defines it as insurance; it is the current pooling of resources to protect against a potential future risk. Absent this characteristic, insurance ceases to be insurance, and is instead merely a pool of money used to pay current medical bills.

Recent articles that suggest that reform will turn Health Insurers into a regulated industry, much like the Electric utilities, miss the mark completely. Is your monthly electric bill the same as your neighbor's regardless of how much power you consume? I'll bet the answer is no. You pay only for the power you currently use, and that's not insurance.

Healthcare reform, as enacted, will force insurers to take all comers while at the same time limiting their ability to charge premiums that are appropriate for the risk involved in providing coverage. This will raise the cost of insurance for healthy premium payers as it has done wherever community rating is the law of the land. If you can buy health insurance after you become ill, why would anyone pay premiums until then? The answer; they wouldn't unless the government fine was higher than their premium. In other words, the government's $695 per year fine for those who don't buy mandated health insurance is a just a sick joke!

When only sick people pay premiums that are less than the cost of their treatment, how long will it be before the bankrupted health insurance companies are added to our growing list of tax payer owned and funded not for profit businesses?

Making health care treatment available to those who can't afford it should be one of our nations priorities but this giant Rube Goldberg of a system they are creating surely isn't the right way to go about it.

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The Nuclear Option ... A Neutron Bomb Aimed at the Democratic Majority

It's looking more and more likely that Nancy Pelosi and Harry Reid will trigger the so called nuclear option to push through their health care legislation for the benefit of the American people; the very same people whom overwhelmingly have rejected it and it's big government solutions to rising medical costs.

Her fanatical desire to pass this legislation has overwhelmed her ability to reason critically, as is evidenced by recent interviews in which she is quoted as saying, "Representatives are not in Washington to self perpetuate their political careers." While Mrs. Pelosi may inhabit a very safe district her words have probably come as quite a surprise to a number of her less safe Democratic colleagues, but hopefully will give them enough advanced warning to begin in earnest the search for a new career.

It has become something of an urban legend among the Democrats that it was their inability to pass health care reform in the first Clinton administration that was responsible for their loss of the Majority in the House. In other words, the American people were deeply upset by the Democrats' inability to deliver on legislation that would greatly increase their taxes and add mountains of new regulations to an already over regulated health care industry.

This is simply a major misread of history on their part. A more plausible reason for their rebuke and loss of Majority in the following Midterm elections were the Clinton tax increases and the arrogance of their members, as exemplified by the check kiting scandals of the house. This same arrogance was last displayed by members of the Republican party shortly before they lost their Majority status in the midterms in 2006.

Their fall back reasoning to vote for this legislation is no better. The idea that voters will seek retribution against the legislators who first cast a yes vote for the bill, and then once it became clear that nobody wanted it voted against it, is just silly. Do they really believe that if you vote for a bill that is hated by the majority of the public twice somehow you are safe? Have they never heard the old saying that “two wrongs don't make a right?”

Before the Democrats trigger their Nuclear option, they should review their college physics text books one last time and realize that at it's essence the Nuclear option, like the bomb it is named after, is an uncontrollable chain reaction. This Nuclear option has all the makings of a Political Neutron Bomb for their party; a tactical nuclear weapon designed to eliminate people but leave buildings intact. The Democratic Leadership should take a deep cleansing breath, remove their ideological 3D health care shades and have a look around. Somehow in the mass confusion that has been characteristic of this torturous process of producing health care legislation they have overlooked the Bright red rings outlining the bulls eye that this monstrosity has imprinted on their political careers.

Mouse Clicks.... The New Brute Force in Politics

With the election of Scott Brown to the Senate in Massachusetts, internet- enabled voters have given the political parties and their machine politicians the same bruising that a whole host of formerly successful business models have received, while barely lifting a finger in the process. They have bested the legions of campaign workers and party bosses by going straight to the candidate digitally (note: none of these puns are intended;) a political progression that has rendered the power structure of the Political Parties irrelevant. Politicians can no longer count on the machine to protect them. What's in store for Representatives who refuse to represent is going to rock their worlds!

It's no coincidence that the Big City Newspapers have experienced this same digital beat down; they are a glaring example of a industry that has also lost it's focus: reporting news. As a result, their business models and bottom lines that rely on the continuing trust and confidence of their readers have been crushed. More and more, people get their news on line these days, with fewer and fewer of them perusing the offerings of the MSM. Newspaper Editors are left seething in a state of denial as they watch their circulation numbers and ad revenue continue to plummet. So too, the C's as in the ABC, NBC, CBS , CNN and MSNBC who have suffered similar losses in viewership and ad revenue. Why have they fallen so far, so fast? The answer is simple. Their own voters, the readers and viewers who vote daily with their remote controls and pocketbooks, are no longer confident that they are reporting the truth to them. They have been punished in the market place because they stopped representing the truth to their readers.

Scott Brown's victory in the Massachusetts Senate election is just the latest example of the incredible power of the internet to organize and flatten distribution channels. The money-bomb posted on Glen Reynold's Instapundit and elsewhere to solicit campaign contributions first met, then exceeded, then nearly doubled Scott Brown's Campaign fund raising goal as contributions poured in from all over the country. A couple of lines of code had replaced the many hundreds of bodies of the party's machine and nullified two of the biggest advantages of incumbency: name recognition and the ability that comes with it to raise money. This new way to political prominence is brought to you Courtesy of ordinary people and their mouse clicks. Ouch, that's got to sting!

Martha Coakley and the political elites, who were trying to save "Ted Kennedy's seat" by flying to Washington and holding a wine and cheese party for the big Pharma and the Health-care lobbyists ( tell me again, who was she representing?) were no match for the ordinary people who voted first with their visa and debit cards and then when it mattered most: their ballots on election day. Poor Martha, having to go all the way to Washington to scoop up campaign contributions. It just seems so inconvenient.

This new Digital Revolution is being fought by patriots armed not with pitch forks and ax handles but by voters armed with PC's using visa and debit cards as ammunition to defeat those who claim to represent their interests, but instead serve their real masters: the special interest groups and the party. They organize in digital Town Hall meetings, and gather at rallies to show their support for candidates who will truly represent their values.

And so, the latest business that has been forever changed by the power of the internet is Politics, an Industry whose business model had for too long counted on brute force instead of brain power to carry the day. Mouse clicks are the new brute force in this unfamiliar Political paradigm. It's about to get real interesting.

Jobs Created ZERO, Jobs Saved or Imagined Make Up Your Own Number That's What They Do!

It's time for this administration to fold up their wishful thinking that the country can spend it's way out of economic problems, put it back on the shelf, and get in the game by doing something effective on the Job Creation front. Their singular accomplishment, if you can call it that, since taking office has been to pass a boondoggle of a Stimulus Bill, and that was a year ago. Their gigantic spending bill that was going to keep the economy from going over the cliff has been, by any measure, an abject failure; so much so that they had to invent an unmeasurable new measure in an attempt to quantify how many jobs were saved or imagined. Oh please!

Who cares how many jobs were saved or imagined? Am I really supposed to congratulate them for taxing me to give government employees (employee: one who is employed) who already have a job, a raise. Where I come from that's not creating jobs; but then again, I wasn't one of the folks under the illusion that the so called stimulus bill would actually create any jobs.

Perhaps I'm being to hard on them. Passing the stimulus bill is not their only accomplishment. They have managed to make possible the election of Republican Governors in NJ and VA, and a REPUBLICAN SENATOR to represent the good people of Massachusetts, so I guess they have done some good!

A real Jobs recovery can start tomorrow or not; all that need happen is for the government to give up on their current wish list of job destruction legislation and pursue policies that are pro growth and pro entrepreneur instead. The President can announce that he's ditched his favorite job killing bills like Health-Care Reform, Cap and Tax, the Bank Tax, the 250 thousandaire tax and all the other business choking regulations he wants Congress to enact.

He can instead champion tax reform that rewards the job creators by increasing the return on successful risk taking. Why not cut the corporate tax rate to 25% so that American corporations are not at a competitive disadvantage to foreign firms . Making American firms more competitive means more production and more jobs in America.

While he's at it, he can give give all those evil 250 thousandaires he's been verbally persecuting as though they were the Jihadist a break; a tax break. Many of them are owners of S-Corps who are paying a 35% marginal tax rate that will soon be 39.6% or more. The balance of them are a part of the top 5% that are picking up the tab for his massive government spending spree.

As Jack Kemp was quick to remind us, you can't have Capitalism with out capital.Taxing capital out of the hands of Entrepreneurs who would use it to create more jobs is no different than eating the farmer's seed corn. The next crop of jobs will always be smaller as a result.
Larry Kudlow inadvertantly illustrated the real problem while calling for a cut in the capital gains tax rate on his show the other night. Larry is a Free Market Capitalist to the bone, but he has made the mistake of letting the Democrats frame the debate. He spoke of a study which showed that the optimal rate at which to tax capital to maximize revenue is 10%, and called for a reduction in the rate.

Here is where Larry's went wrong: it's not about the government and it's revenues, it's about the citizens of this country and their well being. The optimal tax rate on capital is 0%, that's the rate at which the most capital is available to finance the most businesses to create the most JOBS. Our Government has lost it's way, it's needs now take priority over those they govern; they are more worried about their budgets and programs, not your well being. To this government, it is all about how much revenue they can squeeze out of you. It's time for you to squeeze back!