Friday, September 27, 2013

"You Can Keep Your Existing Health Insurance"

I wondered about this statement at the time Obama made it.  Clearly, by changing all the rules of health care insurance and mandating conformity, it was unlikely that the vast majority of Americans would not find themselves forced by 'The Affordable Care Act' to have to deal with a completely different health insurance plan and completely different set of health care providers.

I now understand what Obama meant.   He was speaking to his immediate family and (politician) friends.  They are exempt from the "Affordable Care Act."  Clearly what he meant to say was: "if you are exempt from Obamacare, like me and my family, you can keep your existing health insurance."  He never meant to mislead.

Thursday, September 26, 2013

Things We Now Know

The poor are losing ground in the new Obama world.  The facts are showing up even in the halls of collectivist extremes like the New York Times.  The rich are getting richer and poor are being locked in place.  Big government is throttling the economy and the hopes and dreams of lower and middle class Americans.

Today's Wall Street Journal's article by Simon Constable lays out some of the simple and obvious facts of the Obama era: "The richest 20% of households account for 38% of spending, according to government data for 2011, the latest available.  Compare that with 2003 when the top earners spent 26% of the total."  The article goes on to say..."it could get even worse."  It will.

Who really benefits when the regulators strangle the banks?  Do banks really need to get much more conservative in their lending practices?  Why does the government know best?  How far can you stretch the FDIC guarantees before American banking is simply a subsidiary of the US government?  We are now getting clear answers to these questions.

The big losers are minorities, the poor, the struggling middle class.  These are the folks that are being devastated by Obama's big government agenda.

The next hammer to fall on the middle class is the 'Affordable Care Act,' which, in theory, is due to begin implementation next week.  This 'Act' will destroy the American health care industry, impoverish the average American, and create a bonanza for bureaucrats and politicians.  The wealthy are totally unaffected, as are the politicians.  We don't know this yet, but soon we will know.  This will be the straw that breaks the camel's back.

Stuck under this morass of regulation, that tells you where you can send your kids to schools, what they should eat, what you should eat, where you should go to get your health care, what kind of car you can drive, and even what size soda bottles you are permitted to purchase, is the average American.  The land of opportunity is now the land of regulation and oppression.

Given how bad the public schools are, you might think that learning on the job might be able to give you just the lift you need to begin climbing the ladder of the American dream.  The big government boys have an answer for that too.  The minimum wage.  By escalating the minimum wage, the ladder's bottom rungs are effectively sawed off.  Too bad if you are poor, uneducated and striving to improve your circumstances.  Every opportunity to break out of the low income world has now been criminalized.

Meanwhile, JP Morgan may be facing an $ 11 billion fine from the big government boys.  Like everything else, this is a tax on the American worker, since he/she  are the owners of JP Morgan and will pay this $ 11 billion.  Who won't pay the $ 11 billion are any of the perpetrators of the so-called crimes for which this $ 11 billion is a settlement.  The janitor sweeping out the building will pay this fine and retire on a lower income thanks to the big government boys.  Meanwhile, the directors and senior executives at JP Morgan will see their compensation continue to sail higher and higher.  The rich get richer, the poor get poorer, courtesy of the US government and its cronies.

In every way, government is waging war on its own people.  These things we now know.

Saturday, September 21, 2013

Poor Policies; Poor Predictions

The Obama Administration and the Federal Reserve have consistently over-estimated the strength of the US economy.  The Fed has, on no occasion since 2009, had a remotely accurate prediction, constantly and consistently over-estimating economic growth by well over 40 percent on average.  With that record, one wonders why anyone cares what the Fed thinks about the future.  (The Wall Street Journal on Thursday reported, in a graphic, the predictions that the Fed had made over recent years).

Now, economists like Laura d'Andrea Tyson, a Clinton economic advisor, wonders why the poor are getting poorer in the Obama non-recovery since 2009.  After five years of government expansiveness and a Federal Reserve out-of-control, the rich are getting richer and the poor and middle class are losing ground.

Strangely, these results were perfectly predictable.  They follow from the Obama policies.  We have implemented in detail what David Stockman, in his recent book "The Great Deformation," has excoriated as 'crony capitalism' that benefits mainly rich folks.  It is no wonder that Warren Buffett supports all of this.  He does well in an Obama economy.  I doubt that his secretary's income is growing as fast as his personal wealth, regardless of who pays what in taxes.

Buffett, like other rich folks, is a hypocrite.  He knows that Obama's policies mainly benefit folks like him and destroy opportunity for the middle class and reduces them to scrambling for part-time work or applying for food stamps and other subsidies.  For Buffett, that works.  For Obama, that works.  For the poor and middle class, this is disaster.

Obama's only economic initiative this year is to encourage expansion of a law that makes it a criminal offense to hire an employee below a certain wage level.  This means that low-skilled workers that wish to learn a skill on the job are told.....no!  Forget about taking a job, without pay if necessary, to learn a useful skill that will enable you to get a real job.  That kind of apprenticeship, long a staple of growing economies, has been criminalized.  Obama would like to criminalize it further.

You wonder why Obama doesn't just propose a law saying that no one can hire a worker unless they are willing to pay them $ 150,000 and provide them with free health care.  That would pretty much eliminate any opportunity for folks below the top 25 percent in income and wealth.  I feel certain that Buffett could endorse such a proposal.  Then he could fire his secretary and no longer have to worry about what taxes she pays.

The hypocrisy of folks like Obama, Bernanke and Buffett knows no bounds.  They have spent the last five years in a successful effort to shut down the great American economic engine.  They have succeeded.  Expect the rich to get richer and the poor to get poorer.   That's where these folks are taking us.

Wednesday, September 18, 2013

A Rose By Any Other Name

The Fed announced today that it would continue it's bond buying binge to the tune of $ 85 billion monthly, a policy that has been in place since the 2008 financial collapse.  This has expanded the once miniscule Fed balance sheet to over $ 4 trillion. 

The Fed, of course, can create money digitally.  That's what it uses to buy the bonds.  It just says:  "let there be money" and there is money.   This massive expansion in the monetary base has created huge excess reserves in the nation's commercial banking system.  Why doesn't anyone loan this money out?

The pitiful loan activity is a result of two factors.  Dodd-Frank and activism in the Justice Department and others has made it a criminal activity to loan money to anyone who doesn't have the very, very best credit.  And people with that kind of credit have lost interest in borrowing to build businesses in the new Obama world of massive regulation and impending soaring health care costs.  So, not too many loans are getting on bank books.  The reserves are simply piling up.

But what happens if, heaven forbid, the economy recovers?  Ah, an outcome not contemplated by the Obama-Bernanke clique.  So far, they have successfully prevented any serious chance of a strong economic recovery that would quickly expand loans and the money supply, bringing on the inevitable out-of-control inflation.  But, that won't happen if you keep the economy from recovering.  I think that I am beginning to understand the Obama-Bernanke plan.  It's working.

Saturday, September 14, 2013

Inequality and the Poverty of Economics

The Journal of Economic Perspectives is an academic journal that summarizes the state of research in various fields of Economics.  Perusing this journal shows the extreme political bias of much of modern day economic research.  The Summer 2013 issue was devoted to "income inequality."  The main theme was that rich folks are getting richer, but, of course, the facts actually show just the opposite.  Not deterred by the facts, the various economists that opine in this edition blithely parrot absurdities such as wealthholders ability to "sustain their preeminence.

What is the analysis?  Imagine that you wanted to know if baseball teams created dynasties and "perpetuate" their dominance of baseball.  What facts would you want to assemble to prove this?

Here's the way economists think:  collect data that shows that back in the old days, the baseball teams that won the pennant won 65 percent of their games each year.  Then show that, today, the teams that win the pennant win 70 percent of their games each year.  (Don't bother to check whether the teams that won in the old days are the same teams that win today.  Why would that matter, say economists?)  Would that evidence convince you that certain teams are dominant and "maintain their preeminence?"  That is the precisely the kind of logic that perpetuates the factually incorrect myth that the rich get richer.  Check out the articles in the JEP and you will see.

The truth is that if you list out the 100 richest Americans today and then compare that to the one hundred richest Americans 25 years ago, you will find very little overlap.  The richest folks have more of the wealth (if you totally leave out the huge proportion of wealth transferred by government transfers such as social security, welfare, medicaid, food stamps and on and on), but it is a different set of rich folks as time goes on.  Wealth rises and falls in the US.

The opposite is true in Europe.  The wealthiest families in Europe are the same families that were wealthy 50 years ago.  Contrary to the complete nonsense you read from economists, the chances of improving your lot in Europe are almost non-existent.

Now, in the US, the Obama Administration would like to create the European model, which traps people into whatever economic group that are born in....or, actually reduces the life chances of the folks born into the bottom half of the income distribution.

Notice the data since Obama came into office.  Since mid-2009, long after the bottom of the financial collapse and well after the Obama $ 800 billion stimulus package, the economic position of lower income folks in the US has deteriorated.  The Obama sledgehammer on business has delivered results.  Jobs are scarce and what few jobs there are, are part-time.  (Obamacare, of course, influences this trend toward part-time employment by creating built-in disincentives to businesses to hire full time employees).

The real truth is that the US has historically always been the best place to be born if you want a chance to move up in the income distribution and it remains the best place for that purpose.  Obama is trying to kill off that opportunity, but so far he has not totally succeeded in this strange endeavor.

Economists have done a disservice to the public by presenting facts in a way that is totally misleading and obscuring the real truth about the economy and about the historical dynamism of the US economy.