The Class War Has Begun

The problem with the new administration is that there is just too much good material to chose from in writing these posts. So today I'll pick on their healthcare reform funding proposal.

After a number of dodges and feints, the class warfare has begun. Pres. Obama has proposed a nearly three-quarters of a trillion dollars tax increase to fund his plan for healthcare reform. There is no argument that our healthcare system needs reforming. But the President’s solution is the old leftist bromide, “soak the rich.” Pres. Obama proposes to fund this massive restructuring of healthcare by “ending tax breaks for the wealthiest 2% of Americans,” pledging along the way that taxpayers earning less than $250,000 won’t see “one single dime” of tax hikes.”

Nice try, but the numbers don’t work. Do the math:

About 4 million taxpayers have incomes above $200,000 (forget about $250,000). That’s less than 10% of all returns, and only yielded little over a half-trillion dollars in taxation in 2006. And those taxpayers account for nearly two-thirds of all taxes paid in 2006. So the President would still have a sizeable hole to fill, and not many taxpayers left to fill it with.

So, in order to fund his massive spending plan, he would have to raise taxes—again. Right now the President is proposing to raise the highest marginal tax rate to nearly 40%. Add on another two percent for the net effect of reducing the mortgage and charitable contribution deductions, for an effective top rate of 42%. That still wouldn’t yield enough taxation to fund his social programs. So, in for a penny, in for a pound. Let’s assume the President confiscates all the taxable income of everyone in the U.S. making over a half-million dollars. The result: about an extra $1 billion in taxes. That not even half of the federal budget when the Democrats took over Congress in 2006 and less than a down payment on the $4 trillion this Congress will spend in the next federal budget.

The President’s math relies heavily on the financial assumption that the economy will improve in 2009. How many of you think that’s going to happen? In fact, history shows us the opposite: that taxation is regressive. That is, the more you tax, the less taxation the government collects, because you destroy the productivity incentive (less overtime worked, fewer employees hired, less money spent on development of new products). The less you tax, the higher tax receivables go (companies and workers keep more of their own money, spend in on durable goods, growing businesses and hiring workers).

Finally the unintended consequence of reducing deductions on charitable contributions and mortgage payments for the wealthiest Americans will also have a negative impact. Americans are the most generous people on earth, contributing billions of dollars of personal wealth each year to worthy causes around the world. Mr. Obama’s plan will reduce these contributions by destroying the incentive to make them. His plan will also delay the housing recovery that he is banking on by making it less attractive for wealthy taxpayers to buy homes on a grand scale—the ones that require the most building materials, most shipping, most skilled construction workers and the most support.

The problem with leftist plans like “soak the rich” is that they sound so good. So easy. But the problems are usually a lot more complicated than simplistic solutions like the President is proposing. In this particular case, the numbers just don’t stack up. Simply put: two percent of the American taxpayers that Mr. Obama is hitching this wagon to can’t pull the load he’s piling on them.

Bottom line: if you make $200,000, or $175,000, or even $150,000, get ready. They’re coming for you next.

The Time for Speeches is Over

One wants facts, not fiction from our leaders. So after the first ten minutes of Pres. Obama's address to Congress tonight I realized I was getting more the latter and less of the former.

It is difficult to ignore the evidence that the President is still on the campaign trail. He is a marvelous campaigner, a beautiful speaker and an eloquent debater. None of which is particularly relevant to the troubles facing our economy. It is pretty apparent that this administration is long on style and short on substance. As proof look no further than Treasury Sec. Geithner's recent flub which sent the stock market into a tailspin. Mr. Obama's latest attempt to look presidential, his Tuesday night ersatz State-of-the-Union speech, is another examnple. Once again, the President was long on style and short on substance, heavy on inspiration, but short on perspiration, and most troubling of all, heavy on fiction but light on fact.

Take a look at just one paragraph from the speech:

The fact is, our economy did not fall into decline overnight. Nor did all of our problems begin when the housing market collapsed or the stock market sank. We have known for decades that our survival depends on finding new sources of energy. Yet we import more oil today than ever before. The cost of health care eats up more and more of our savings each year, yet we keep delaying reform. Our children will compete for jobs in a global economy that too many of our schools do not prepare them for. And though all these challenges went unsolved, we still managed to spend more money and pile up more debt, both as individuals and through our government, than ever before.

Again, the President seemed more interested in giving a good speech and less interested in speaking honestly to the American people. Here are just a few places where the President gets it wrong:

"We have known for decades that our survival depends on finding new sources of energy." True dat. Which is why for years conservatives have pounded on Democrats to allow more domestic drilling, rather than buying oil from those who would destroy us. Gulf Coast, Pacific Coast. ANWR. But the Democrats for ideological reasons refused a common sense solution even as gasoline passed $4.00 a gallon.
"Yet we import more oil today than ever before." The implication is that we import a lot of oil because we stupidly ignore expensive, unproven, uneconomical energy sources like wind and solar. The real fact is that over the last 8 years we've imported a lot of oil to drive our economic engine as we became the most productive nation on earth, creating record job growth along the way.
"Our children will compete for jobs in a global economy that too many of our schools do not prepare them for." Again, true, but unfortunately, the real story here is that the teachers unions, which turned out the vote for Obama and are a major shareholder in the Democrat party, have been the biggest obstacle to meaningful school reform. The only way you really reform our schools is by putting pressure on the education establishment to perform. And the simplest way to do this is by giving parents other options besides socialist education. This is the 800 pound gorilla in the room that the Democrats won't confront. The good news is that the Obama children will probably have a good education that will prepare them for global competition. This is because their parents have the means to opt-out of socialized education and send their kids to the University of Chicago Laboratory School (where I first taught many years ago) and the Sidwell Friends School in Washington. But what about the millions of minority and low income students trapped in failing schools by a socialist education lobby resistant to change? When poor kids have the chance to go to better schools like you did, Mr. President, and your kids do, then come and talk to me about school reform.
"Nor did all of our problems begin when the housing market collapsed..." Well, actually, Mr. President, they did. And your supporters were the root cause of the problem. As early as 2002 conservatives were complaining about Fannie Mae and Freddie Mac, and Democrat-inspired policies of cramming bad loans down the throats of banks in the name of "community reinvestment." Banks did what banks are paid to do--they lent money and offloaded risk in whatever creative way they could. It wasn't irresponsibility on their part. It was irresponsible behavior by Congress trying to use banking laws for social engineering.

This is part of a continuing pattern on the part of the President. He makes a good speech, but if we're really in the catastrophe as he says we are, he's wasted a lot of time on left-wing platitudes and lost a lot of opportunity to address the real facts of the matter.

Just thought you might like to know.

46,000,000

With the debate over economic stimulus behind us, the next frontier in remaking America into a European-type socialist society will be healthcare. And more than anything else, a number you'll be hearing a lot about is 46, 000,000. As in "Forty-six million Americans lack health care." Or, "Forty-six million Americans can't afford healthcare." And, "Our healthcare system is in crisis when 46 million Americans can't afford health insurance." Don't believe it.



Now, I'm the first to admit that our system of healthcare is in need of radical surgery. And I think this nation needs a good, healthy debate on the best way to cure this patient. But the best way isn't by pointing to a statistic that's more fact than fiction. The best way to fix the problem is not to accept as Gospel truth an outright distortion. So here's the real scoop:

• The 46 million number was supposedly generated from the Census Bureau's Current Population Survey, which tracks demographic information on healthcare. In its annual report, Poverty, and Health Insurance Coverage in the United States the Bureau claims that health insurance converage is likely to be underreported in the U.S. So the government agency that initiated the statistic that has become a rallying cry for Euro health care believes that the number of uninsured is smaller than what it reported.


• Second, most people assume that that 46 million is made of up Americans who are chronically uninsured. The fact is that like all surveys the CPS was a snapshot frozen in time. Many of those counted in the 46 million number were transitionally uninsured. For example, they may have just lost a job, graduated from school without having found work yet, or were between policies. So the chronic problem--the number of people uninsured over a long period of time--is probably a lot smaller.


• Third, even if you accept the 46 million number, you owe it to yourself to examine it closely. If you do, you'll find that 18 million of the 46 million make more than $50,000 per year! 40% of the uninsured earn more than the median income in the United States. So far from the picture of Dust Bowl Okies painted by Euro health proponents, 40% of the uninsured are uninsured by choice. Maybe they'd rather spend their money on lux car leases rather than premiums. Maybe a kick-ass sound system is more important to them than annual checkups. I don't know, and I don't care. Not my problem. My problem is being forced to pay for their healthcare while I drive cars that are 11 and 12 years old. Statistically, twenty-somethings make up the fastest growing segment of this population. Insurers call them the "invincibles" because they think they'll live forever (C'mon, didn't you think that when you were 25?) Oh, and by the way--more than half of that 18 million uninsured-by-choice population makes more than $75,00o per year.


• Fourth, of that 46 million uninsureds, about 10 million are non-citizens. In all probability they wouldn't be covered by Euro health anyway.


• Fifth, about 14 million of the 46 million are already eligible for government-sponsored healthcare, like Medicaid, Medicare or SCHIP (the federally funded, state-run insurance plan for working class kids). For whatever reason, they've chosen not to enroll in these healthcare programs. Yet we're being told that we need to adopt Euro health to reach people who for whatever reason have chosen not to take advantage of current government insurance programs.

So who's left? If you do the math, we're left with about four to eight million chronically uninsured people. These are largely the working and underemployed poor. And we have a moral obligation to them as Americans to fix the problem. That's where our responsibility starts and ends. But four million doesn't sound as catastrophic as 46 million, so the administration and the leftist-controlled Congress will chant the mantra of 46 million until they achieve their goal of Euro health. And if it works as well as Medicare, Medicaid, and SCHIP those eight million people will continue to fall through the government's insurance cracks. We'll have radicalized this country without having any effect on the problem. Don't fall for it.


Just thought you might like to know.

The Real Catastrophe

In campaigning to shore up dwindling support for what the Wall Street Journal has called Congress' "self-stimulus" package, Pres. Obama has repeatedly referred to the U.S. economy as a "catastrophe." Perhaps no president since the Roosevelts has used his office as a bully pulpit more effectively to drum up support for his policies. Despite this effort, polls show that about two-thirds of Americans disapprove of the direction in which the President is leading the country--about the same percentage as when George W. Bush was president.


With the campaign long over, Pres. Obama continued to stump for the recently passed Recovery and Reinvestment Act. Or more precisely, The Democrat Retrenchment and Renewal Act. Many economists believe this bill will do very little to stimulate the economy in 2009 or 2010. What it does, however, is provide givebacks to the special interest groups that supported candidate Obama in his historic run to the White House. The teachers unions. The service workers union. The public sector workers union. The list goes on.



Presumably the bill will strengthen the unions, replenish their coffers, and allow them to generously fund Democrat candidates in the 2010 elections. So the intended or unintended consequence of this bill isn't to stimulate the economy over the next two years; it's to ensure a continued Democrat stranglehold on Congress. So much for post-partisanship.


But to shore up wavering support for his bill, the President has spread a message of economic fear, likening the current economy to the Great Depression. A Dec. 3, 2008 post on this page showed how the two events were dissimilar. If there were continued doubts about that, here is where the President's message of fear is incorrect:

• Pres. Obama claims that the U.S. needs his bill to replace the 3 million jobs lost last year. But that is still only 2% of the U.S. labor market. His comparison with the Great Depression rings hollow because in 1932 job loss was over 7% of the job market. 3 million jobs lost is a tragedy but comparing it to the Great Depression is disingenuous.


• The Congressional Budget Office is forecasting a decline in the Gross Domestic Product of some 2%. That's on par with 1982's recession, which we managed to live through without a trillion dollar special interest group giveaway. But it's not even in the same ballpark with 1930's 9% drop in GDP.


• The President is correct in believing that the auto sector is a key part of the U.S. economy. Today he announces creation of a special "task force" to figure out how to jump start the car business, which last year saw production drop by 25%. Again, this shouldn't be minimized. However, in 1932 auto production shriveled by 90%. Think about the order of magnitude. It's not even close.


• For the last three months we've focused on the troubles in the banking sector, with a handful of national bank brands vanishing from the financial landscape. But this pales in comparison to the 10,000 bank failures in 1933.

Economist Bradley Schiller has done a good job exploding Pres. Obama's message of fear and doubt. The President's the-sky-is-falling comparison to the Depression is inaccurate. But it is also dangerous. It is a significant factor in the decline in consumer confidence. It is keeping consumers out of auto stores they think might not be there next month. It's hemorrhaging money from investment funds that in better times would be used for private sector investment. And worst of all, it's creating doubt and fear in Americans in their ability to rebuild this economy.

When Americans doubt themselves, they look to Uncle Sam to save them, which is the endgame for Pres. Obama and the Democrats. That's the real catastrophe.

Just thought you might like to know.

The Real Obama--or His Evil Twin, Skippy?

Pres. Obama outfoxed Hillary Clinton on his way to the Democrat nomination for president by pandering to the left wing of the party with red-meat platform that was part populist, part socialist. He then trounced his Republican opponent John McCain by tacking back to the center to attract moderate Republicans and independents to his campaign.

One of candidate Obama’s pitches to seduce moderates and take the political center away from Sen. McCain was a proposal to eliminate the 14% capital gains tax for small and start-up businesses. Small business was the sacred cow of this campaign, with both candidates falling over themselves to appeal to our nation of shopkeepers.

The proposal itself was modest, but it was a good symbol to demonstrate that the Democrats would help the job-creation generator that is small business. It was a simple, less costly way to attack the growing unemployment problem. After all, small businesses create three-quarters of the jobs in this country.

But instead, candidate Obama’s plan to eliminate the small business tax was emasculated to a 50% reduction instead in what the Wall Street Journal has called the Democrat's "self-stimulus" bill that the President is to sign today .

So who’s to blame? Certainly not the Republicans whose playbook for stimulus is cutting taxes.

The villain here is the Democrats who own Congress now and who detest tax cuts on ideological grounds. This is because Republicans like George Bush and Ronald Reagan (not to mention Democrat patron saint John F. Kennedy) were able to create millions of jobs and lift the country out of past recessions by cutting taxes and putting money immediately into the hands of the middle class.

Unfortunately, the Democrats continue to view taxes as divine retribution to business for making profits. And this crew led by Nancy Pelosi wastes no chance to try and punish business with a messianic fervor. So small business becomes the scapegoat for past conservative economic successes.

While the problem may be House Democrats, Pres. Obama is far from blameless here. He could have sent a strong message to middle class America and his party that the first “post-partisan” president won’t tolerate fighting ideological battles where the losers are the American people. Unfortunately, he chose not to do so.

So we’re left to wonder if the President is really the post-partisan centrist that millions of Americans thought they were electing. Or, is he really the left-leaning candidate who campaigned on using the tax code to punish success and redistribute wealth?

After 3 weeks in the White House he hasn’t done much to burnish those post-partisan credentials.

Just thought you might like to know.

Politicizing the Census

Rep. Carolyn Maloney (D-NY) introduced a bill in the last Congress that would guarantee that the U.S. Census Bureau remains an independent agency. We hope the bill would be re-introduced again this session, but doing so would put Ms. Maloney at odds with her Democrat Party.

Rep. Barbara Lee (D-CA), chairwoman of the Congressional Black Caucus, is griping to the White House that Pres. Obama's pick to head the Commerce Dept., which oversees the Census Bureau, can't be trusted to conduct an honest census in 2010. Why? Because Judd Gregg is a Republican and you know how wicked and deceitful they are. So much for bonhomie of a bi-partisan cabinet.


The census is what drives the apportionment of representation in Congress as well as the doling out of billions of dollars in federal aid.


Ms. Lee claims that blacks and Hispanics were under counted in the last census. Her solution: use statistical sampling and computer models to adjust the results of the census count. In other words, if the results don't come out your way, just change the results to make it look like there are more of your constituents than there really are.


All of this is a bad idea, according to Bruce Chapman, who directed the census 20 years ago. Sampling has the same subjectivity and margin of error that opinion polls do, he says. That's why no matter what the polls say we go ahead and vote anyway.


While Ms. Lee and her caucus have no evidence to support their claim of under representation, Mr. Chapman has three years of empirical data, gathered by a number of outside statisticians that show samplings don' t improve the accuracy of the census.


In addition to the weight of this data, 7 previous census directors, both Democrat and Republican, last year signed a letter in support of Ms. Maloney's bill to turn the Census Bureau into an independent agency, theoretically beyond the pale of partisan politics.


Here's the fear: In 2010, without that independence, you could have an uber-partisan White House staff (see prior posting on "The Obamassarriat") led by Rahm Emmanuel, convince the President to issue an executive order that would trump the work of professional statisticians, further changing the makeup of Congress, and re-directing your tax dollars in a way not envisioned by the Founders.


Just thought you might like to know.

The Truth about Healthcare in America

Needless to say, we'll be hearing more and more about healthcare "reform" over the next year. Pres. Obama made healthcare reform the tall pole in his campaign tent over the last two years. But reform that's not real, just makes a bad system worse. I'm the first to admit that our healthcare system is badly broken. Pretty soon you're going to be hearing proposed solutions from Democratic Washington. But don't take the politicians' word for it. Remember, if it seems too good to be true, it generally is.

If you want to get a balanced view of healthcare, download Sally Pipes' book, The Top Ten Myths of American Health Care.Just click here and it will take yout to the download site. It's completely free and a must-read for anyone who wants an informed opinion on healthcare.

You'll hear a lot of proposed solutions over the next several months. Ms. Pipes looks at 10 of them and exposes them for the myths that they are. Here are three:

• Government healthcare is more efficient. Proponents of a government-run health system say healthcare will be more efficient if the government eliminates the "middleman" and directs it all from Washington. But who's a bigger middleman than Uncle Sam? Think about it...what does government do that's more efficient than you or I or the private sector can do? What's government's efficiency track record? How efficient is our tax code? How about our schools? The government runs most schools. How efficient are they? What results to they produce, compared to private schools? How about our government's current experience with healthcare: Medicaid and Medicare. Every try to fill out Medicare paperwork? Ever read about Medicaid fraud? So why would we trust these people with our health?


• Healthcare costs too much; the government can reduce the cost. I suppose Uncle knows a thing or two about overspending, I'll give him that. But why would we think that a national healthcare system would spend less than we spend now? Healthcare costs a lot because you get a lot for it. The average life span increased 30 years over the 20th century. Over the last 50 years death rates from heart disease--our number one killer--dropped by 60 percent. The issue isn't how much we spend on healthcare; the real issue is what we get for it. And we get a good return: dads who live to walk their daughters down the aisle, grandpas watching their grandkids playing Little League, and great grandmas holding a fourth generation baby. Not a bad ROI. Expensive? Yea. Worthwhile? You bet.


• The cost of drugs is driving up the cost of healthcare. Actually, the opposite is true. It takes 15 years and costs over a billion dollars to bring one drug to market in the U.S. But these drugs drive down the cost of healthcare in the long run. Why? Because, for example, the cost of cholesterol-lowering drugs like Lipitor are cheaper than open heart surgery, that's why. Ms Pipes explains how, for every dollar spent on drugs to fight high blood pressure, cholesterol and diabetes, $4.00 to $7.00 are saved in clinical costs.

There's a ton of scientific evidence and just plain common sense in The Ten Myths of American Health Care. Over the next few months, I'll be blogging about them. But just remember, when somebody tells you something that sounds too good to be true--like nationalizing healthcare will improve coverage, improve quality and lower cost--it probably is.

Just thought you might like to know.

Just Thought You Might Like to Know: The Obammissariat

Just Thought You Might Like to Know: The Obammissariat