Monday, November 30, 2015

Climate Change Posturing in Paris

Oren Cass in the Europe Edition of Politico has a clear headed analysis of the absurdity of the Paris Climate Change conference taking place this week.  As he notes, "the developing world, projected to account for four-fifths of all carbon-dioxide emissions this century, will earn applause for what amounts to a promise to stay on their pre-existing trajectory of emissions-intensive growth." 

So four-fifths of all carbon-dioxide emissions are not even under discussion -- at all.

Cass goes on: "After all this, the final submissions are not enforceable and carry no consequences beyond shame for noncompliance -- a fact bizarrely taken for granted by all involved."

Meanwhile, Obama and other "world leaders" are taking a bow, while the Pope gazes on, approvingly.  The conference itself is producing 300,000 tons of carbon-dioxide, so, in that sense, the conference is having an impact on carbon-dioxide emissions.

This is a huge hoax and should fool no one.  American taxpayers should not pony up to fund Obama's promised gifts to the developing world for doing nothing whatsoever.  We need the money, after seven years of Obama, more than they do.

Washington Post and Housing Tax Breaks

Not to be outdone by the NY Times, the Washington Post has come out for limiting the mortgage interest deduction. 

I would go a step or two further.  There is no good reason for the mortgage interest deduction at all.  It should be totally eliminated, not capped, as suggested in the WP article. The tax free capital gains up to $ 500,000 for married, $ 250,000 for single for home sales should also be scrapped.

A much fairer and more straightforward tax system would see the total elimination of the two big housing tax breaks -- mortgage interest deduction and (capped) tax free home sales.  Add to that the total elimination of the charitable deduction and you can begin to see the emergence of sanity in the personal income tax code.

Eliminating these unnecessary tax breaks, mostly of benefit to those with extreme levels of income and wealth,  would permit a move toward a flat tax with very low rates (20 percent or less) and a system that is much more transparent and much fairer than what we have now.

Saturday, November 28, 2015

Accountability Problems of Higher Education

It should be no surprise that higher education institutions are among the poorest run institutions on the planet.  How should they be run?

No one knows?  It is not obvious who the true owners are.  The result is the exact opposite of the famous Coase theorem:  when their is no true owner, the result is, eventually, total chaos.

Inevitably, the administrators take over and their main goal is to fatten their own personal economic pie.  The end result: bloated, drifting institutions looking for a purpose.  It is no surprise that such administrators eventually find politics to their liking.  The politics that become most attractive to administrators is the politics that provides more and more taxpayer funding to fatten the economic pie that they consume.

Unfortunately, for today's administrators, the big government political views of today's administrators inspire revolution, demonstrations, and shouting down of opposing views.  So, what is surprising about all of this.  Nothing.

The big government gang consumes its own.

Monday, November 23, 2015

What the French Economy Needs? Free Markets

As reported in today's WSJ, the French economy is, at minimum, 57 percent government.  But that is a gross, gross understatement.  In reality, the true number is more likely 75 percent, because there are so many "private" businesses that exist only to satisfy the needs and demands of the government.  The private sector is, then, likely a meagre one-fourth of the economy.  How much economic growth can anyone anticipate from that?  None

The plight of the French Muslim minority is that their youth have an unemployment rate exceeding 40 percent. Not finding work, they find other things to do.

Absence of free markets breeds problems.  France's future is bleak under socialism.  Only the return of free markets offers hope for the future.

Sunday, November 22, 2015

Its Time to Eliminate the Charitable Deduction

Permitting taxpayers to take a tax deduction for charitable contributions is another reverse Robin Hood exercise.  Almost all of the benefits of this deduction go to extremely wealthy Americans, none at all to poor people.

Worse, average Americans are required to poney up the missing tax dollars that would otherwise be paid by the wealthy.  These deductions have been used to finance phoney charities like the Clinton Foundation, which is mainly a source of funding for Clinton political operatives.

If people want to support a worthy cause, let them do it with their own dollars, not the dollars that other unsuspecting taxpayers will have to put up to make up for the tax breaks for a handful of absurdly rich people.

This should apply to both right wing and left wing not-for-profits.  The phrase "not-for-profits" usually means that average Americans are getting hosed by being unwittingly forced to underwrite things they know nothing about, while the wealthy get massive tax breaks and are able to set the political agenda for the country through their foundations, endowments and not-for-profits.

Let these foundation, endowments and not-for-profits survive without gouging the average American.  Make wealthy folks pay their taxes, then make their contributions.  Why should average Americans be on the hook for this?

Saturday, November 21, 2015

Britain Bails on Green Energy

It is a truism that only free markets can provide for environmental improvement.  If there are any doubts, check out the environmental record of the US and Canada and compare those results to the environmental record of China or the old USSR (or modern Russia).

So, when Britain and Europe began subsidizing green energy businesses and announced its commitment to fight climate change, you knew what the outcome would be.   All of these efforts had the effect of increasing the cost of energy to the average citizen, who might put up with that for a while, but not for long.

In a detailed article in today's Washington Post, Griff Witte discusses Britain's retreat from it's clean energy initiatives.  Having literally wasted billions of pounds subsidizing failing clean energy businesses, the Brits have now thrown in the towel, eliminating 90 percent of the subsidies to clean energy initiatives and walking away from numerous failed clean energy projects.  They didn't work, they cost a lot of money, and the public grew tired of paying for nothing.

Read the article.

The climate change advocates might win an occasional battle, but, in the end, taking the world back to stone age economics will not prove a winning strategy for the environmental crowd.

True environmental progress can only be funded by the economic growth that free markets provide, as history shows.  The idea that stagnant, over-bloated, government-run economies can fight climate change is absurd on the face of it.  So, Britain retreats, as they all will, in time.

Europe is Toothless

The idea that Europe can confront ISIS is a joke.  Europe cannot afford the resources to mount an effort to defeat ISIS and is bound to sit back and endure future terror attacks with little but body bags to show for it.

Why?

European economies no longer grow.  Worse, their Muslim minorities have never been assimilated and never will be.  France and Germany face internal and external threats of violence that they do not have the resources to defend against.  Where will Europe get the troops and resources necessary to take the fight to ISIS?  The answer:  nowhere.

Europe long ago adopted socialism as the economy of choice.  Socialist economies don't grow.  They simply divide a constant pie among an ever bickering population of special interests.  Worse, they accumulate unpayable debts that loom over their economies and darken their economic future.  Economies like this can't fight anything.  All they can do is provide a limited defense at great personal costs to their population.  France will get used to constant domestic violence in time.  There is nothing they can do about it.

Only free markets can provide the resources for the economic growth necessary to defend the developed world.  Unfortunately, the developed world is heading in the opposite direction by increasing the role of government and reducing the role of the free market.

Thursday, November 19, 2015

2016 Sticker Shock - Unaffordable Care is Here

A detailed article in the Wall Street Journal today by Louise Radnofsky, Paul Overberg, and Stephanie Armour describes the disaster that awaits average Americans in 2016: double digit health insurance premium increases and huge increases in deductibles.  The idea, all along, was that average Americans with good health would pay through the nose to provide the money for poor people to gain insurance.  That's what's happening.

Here's just one example of many:

"Eric Elmquist, 37, of Franklin, Tenn., felt he was paying too much in 2014 for his Blue Cross Blue Shield plan at $878 a month for two adults and three children, with an annual deductible of $5,000. A year later, he had a plan with a premium of $1,089 and deductible of $7,000. Now, he is eyeing a premium of more than $1,416 to keep that plan."

The broad conclusion:
 
"Many people signing up for 2016 health policies under the Affordable Care Act face higher premiums, fewer doctors and skimpier coverage, which threatens the appeal of the program for the healthy customers it needs.
Insurers have raised premiums steeply for the most popular plans at the same time they have boosted out-of-pocket costs such as deductibles, copays and coinsurance in many of their offerings. The companies attribute the moves in part to the high cost of some customers they are gaining under the law, which doesn’t allow them to bar clients with existing health conditions."

The reality has arrived.  Under the guise of the "Affordable Care Act," health care in America is becoming increasing unaffordable and unavailable.  This trend is not going to be reversed and things will continue to deteriorate until America's health care system begins to resemble the worst public schools in Chicago with a similar funding status.

Not to be outdone, the NY Times today has two articles of its own detailing the disastrous results of Obamacare.  Stacy Cowley's article discusses the problems that small business faces having to choose between compliance with Obamacare and their own growth or even their own survival.  Abby Goodnough describes one of life's new stresses, the annual search to find some health insurance that meets their needs.  This, of course, is something new that has been added to life by Obamacare -- fear, panic and anxiety as average Americans desperately try to find new coverage in the Obama world, most of whom were satisfied by the coverage they already had before the brave new world of Obama began.

Here's an apt quote from Goodnough's article: "I don't have a regular doctor anymore, so I avoid going."  Ah, health insurance without health care -- the Obama dream come true.

It is hard to imagine a worse health care regime than Obamacare.  Almost anything would be better than this.  For a country that grew up with free markets delivering the best quality of health care in the world, it is remarkable that this could all be destroyed in less than a decade by overzealous, inexperienced, dogmatic politicians, who, themselves, will never be subject to this terrible law.

Sunday, November 15, 2015

The Pernicious Role of Government in Higher Ed

Higher Education is less and less about education these days and more and more about social protest.  This, in the wealthiest society in the world.  Poor people in America live by a standard that the vast majority of the people of the world have no hope to ever achieve.  But, it isn't the poor that are protesting.

The protests are coming from the wealthiest strata of society.   The wealthy and privileged, apparently, are the new victims of oppression, or, at the very least, the newly self-appointed spokesmen for the oppressed.  Colleges and universities all over America have turned into hotbeds of unhappiness.  Many college students seem unable to weather the slings and arrows of events both near and far away.  They are suffering, they say, leaving little time to pursue an education.

Instead, the demand is to convert the university itself, more and more, into an institution devoted to political agitation.  Those who might question such a move are no longer considered worthy of the right of free speech.  They need to move on or be run over.

This is the natural result of deep federal government involvement in education, mostly driven by using taxpayer money to fund political activities and politically-motivated research at America's universities.  The usual response when one questions why university administrators tolerate illegal, sometimes violent, activities by 19 and 20 year olds, is that government funding might be threatened if they took any action other than surrender.

Thus, universities are more and more devoted to "centers" that separate students into various categories, categories which are multiplying every year.  Integration has given way to enforced and institutionally encouraged separation, one race from another, one gender from another, one ethnic group from another, one nationality from another -- unending and confusing multiplicities of identities, most of whom feel victimized, they say,  by the universities and colleges they attend.

How to divide the university financial pie among all of these competing victim groups?  That is the modern question facing the modern university.  Education has become an after thought, no longer relevant to the modern higher ed establishment.  It's all about identity, not about building strength or character through education.

The folks that lead these institutions now make whopping salaries (seven figure salaries are rampant at the elite schools), typically with accompanying entourages that would make the ghost of Louis the XIV blush.  Faculty parking lots are full of mercedes, bmws and the occasional ferrari.  Times have changed.

The real victim is the education process itself, no longer of much concern to folks out raising money to perpetuate these institutions.  Taxpayers, either through direct government grants or tax deductions provided to wealthy donors, provide the funding for institutions that have long since lost their moorings and are constantly casting about for a new champion or cause that might stir up students, many of whom no longer see education of much value anyway.

Ultimately, there will be no financing to support all of this, since no real product is created or even envisioned by the increasingly politicized modern education model.  Tuitions are continuing to escalate skyward and that process will not abate.  Eventually, however, the tide will turn and many, if not most of these no-longer-functional monstrosities will collapse of their own weight.

Education, as such, is, after all, pretty cheap and not in any way political.  That simple and obvious fact will spell doom for the higher education system that big government has spawned.

Insurance Without Health Care

As Obama trumpets the meagre spread of health insurance occasioned by the fourth year anniversary of the passage of the bizarrely-named Affordable Care Act, it is becoming increasing clear to many Americans that having Obamacare insurance is not the same as having access to health care.

"We have insurance, but can't afford to use it." So says, David R. Reines of New Jersey, quoted in today's NYTimes article, penned by Robert Pear.

In order to make Obamacare work, the deductibles -- that means what you pay before the insurance kicks in-- were raised to "sky-high" (that's the description in the article) levels.

Kevin Fanning of North Texas was quoted in the article saying:  "We could not afford the deductible.  Basically I was paying for insurance I could not afford to use."  He dropped his policy, according to the article.

Wendy Kaplan pays $ 1,200 per month for her Obamacare health insurance, according to  the article, for coverage with an annual deductible of $ 12,700.  Only Obama and his allies would call this "affordable."

An on and on.

The best quote of all in Pear's article is from Anne Cornwell of Chattanooga (whose annual deductible is $ 10,000): "When they said affordable, I thought they really meant affordable."

The insurance is affordable so long as you don't plan to use it.  Insurance without access to health care -- the Obama dream.   Form without substance.

Friday, November 13, 2015

A World of Low Expectations

"The slowdown underlines the tepid nature of the eurozone’s economic recovery, which began in mid-2013 but has now eased for the second straight quarter. Weak growth has left the economy still 0.5% smaller than it was at its largest in the first three months of 2008."

The above quotation, taken from this morning's Wall Street Journal, is the latest report on economic progress in the Eurozone.  No growth is now the norm for the Eurozone.  Greek results were cheered.  Here's how things are going in Greece:

"The Greek economy contracted by 0.5%, but that was a better outcome than economists had feared, having expected a drop of 3% after capital controls were introduced in June as the leftist government scrambled to prevent a collapse of the financial system amid doubts over the country’s future in the eurozone."

Meanwhile, Mario Draghi promised more quantitative easing, a policy that has consistently failed everywhere in the western world to produce results.

So, essentially zero growth in the Eurozone and no expectations for improvement. 2 percent growth in the US, less than half of the normal recovery rates following a severe contraction.  Not only is economic growth over for the West, but expectations have been lowered to match the reality.

Having demolished free markets for the past decade, Europe and the US are reaping the rewards of an absurd economic policy.  Patterning your economy after the old Soviet Union is not a ticket to prosperity.  But, Europe and the US no longer expect prosperity, mired in economic stagnation for the foreseeable future.

Wednesday, November 11, 2015

The VA Should Not Be a Surprise

From public education to public health care, the results are terrible and getting worse.  So, why is anyone surprised that the Veterans Administration is letting veterans die waiting for care and then covering the facts up.  That is precisely the ultimate outcome of all government run operations.

Our public schools suffer from the same problem.  The teachers' unions try their best to cover up the pitiful jobs our public schools are doing as they campaign for more and more money.  But, the results are there for all to see.  We have the worst public education system in the developed world.  Our health care will soon arrive at a similar state.

So, the VA woes should come as no surprise.

Misleading Fact Checking

There is an Associated Press story today supposedly "fact checking" the Republican debate. 

Here's an example:  Ben Carson was accused of "wrong facts" when he pointed out that "Every time we raise the minimum wage, the number of jobless people increases."  Then as proof that Carson was wrong they noted that: "When the minimum wage was increased in 1996 and 1997, the unemployment rate fell afterward.'  This is proof of nothing. 

Other factors can lower the unemployment rate -- economic boom, e.g., that overpowers the adverse effects of higher minimum wage laws.  But, more specifically, if massive numbers of folks give up looking for work because of the increase in the minimum wage, that will guarantee that the unemployment rate will fall, even though Carson is 100 percent correct.  The unemployment rate only counts those actively looking for work, not those who have thrown in the towel thanks to misguided policies like minimum wage laws.

Another AP incredulity was Jeb Bush's comment that "We could get to 4 percent growth."  Here's what the AP said to that: "THE FACTS: That's a highly improbable target because of forces in the economy that are beyond the control of the president."  Nonsense.  Even 4 percent is minimalist thinking. The only reason 4 percent seems aggressive is that the Obama Administration can't do better than 2 percent.

Indeed, 6-8 percent growth is achievable, given the technological revolution that we are currently undergoing.  Only a regulatory clampdown can produce the pitiful results that America achieves today.

The AP is a joke.  They are nothing more than an arm of the Democratic Party and their fact checking is nonsense.  The Republican candidates' comments were spot on.  The AP should learn some economics.

Sunday, November 8, 2015

The Ultimate Elitist Argument by Ezekiel Emanuel

One of the originators of the ideas behind Obamacare is Ezekiel Emanuel, brother of Chicago Mayor and former Obama Chief of Staff, Rahm Emaneul.  Emanuel has written an editorial in today's NYTimes (otherwise known as the Democratic Party Times) with the headline: "I am paying for your expensive medicine."

Emanuel is now concerned that drug price increases make "affordable care" unaffordable, especially for low income Americans.  Everything about the ACA (the "Affordable Care Act") makes health care unaffordable, not just for low income Americans, but especially for middle income Americans.

Emanuel's solution?  Make drug prices equal to the value that they create.  Who decides value?  He does.

This is the ultimate destination for those who are destroying our health care system -- impose the system that existed in Soviet Russia.  An unelected bureaucracy decides who gets what and at what price.

This means that folks like Emanuel and his brother will always gets great health care, but that the average American will increasingly be exposed to a third world health care system.

The elite always wants to substitute their judgment for that of ordinary individuals.  The elite assume that the average person is an idiot and his/her views don't count.

Once you require that everyone buy only what Emanuel and his ilk want them to buy (aka Obamacare), regardless of what people want or need, it is a short step to raising the price and reducing the quality of what the public is buying.  That is where Emanuel and his cohorts in the Obama-Clinton world are taking us.

Saturday, November 7, 2015

The Keystone Rejection is Ridiculous

By rejecting the Keystone pipeline, the Obama Administration has exposed North America to more environmental damage, not less.  The product that would have been shipped by an environmentally friendly pipeline will now be moved by rail, environmentally much more threatening.

Typical environmentalist policy -- destroy the environment while claiming to help the environment.  Even Heather Ross, an extreme environmental activist, made exactly this point in her book "Green Gone Wrong," in which she thoroughly documents how environmental activists have, on balance, damaged the environment by their activist policies.

Results don't matter to environmentalists.  The only thing that matters to these folks and to Obama is the narrative, even if that narrative is a false narrative.

"Affordable Care" Costs Spiral Out of Control

The "Affordable Care Act" is turning into a bad joke.  There has been zero material reductions in the number of uninsured, the main goal of the act, while health insurance costs as well as basic health care costs are spiraling out of control.

For most American families, health care costs, if you add in the rise of deductibles, are now nearly double what they were before the ACA come into existence, little more than five years ago.  Meanwhile the quality of health care available to the insured has dramatically fallen, as bureaucrats replace doctors as the decision makers. 

There are no incentives for government bureaucrats to produce quality health care at a reasonable price -- so they don't -- why should they?  Only rich and powerful liberals like Obamacare, as the ACA is known, mainly because they don't have to experience it.   Only the poor and middle class have to fight their way through life with Obamacare -- Obama and Hillary have other ways of getting their health care.

The public has always been right on this issue.  Obamacare has never been popular in any polls with the average American, who saw through the fabrications and misrepresentation of the Obama Administration and their allies in a Democratically-controlled Congress.

But the truth is now there for all to see.  An article in today's Wall Street Journal by Evelyn Everton and Chris Hudson notes the disastrous impact on state budgets of the "free-money" medicaid expansion.  States already reeling from misrepresentations by politicians of the costs of public retirement systems are now overwhelmed by the dramatic and apparently unexpected costs of "free-money" medicaid expansion. 

The staggering costs of medicaid expansion should sink the almost non-existent presidential hopes of Ohio Governor John Kasich, whose misrepresentations of the facts regarding medicaid expansion are embarrassing to his candidacy.

The idea that government could provide a health insurance scheme that could maintain health care quality and reign in costs was a ridiculous proposition in the first place, something a majority of Americans have known from the very beginning.  Only an autocratic, undemocratic elite could impose something as horrible as Obamacare on the American public, who will, in time, overturn this nightmare.

Only free market health care and free market health insurance can deliver quality health care at a reasonable cost.  Europe learned that long ago; Americans are learning it now.

Friday, November 6, 2015

Good, Not Great, Employment Number

Up 275,000 -- jobs created in October.  That's a good number.  But, hardly a great number.  62.5 % labor participation rate is a terrible number.  Americans are still leaving the work force in record numbers, having given up any hope of getting a job. 

The reported unemployment rate is 5.0 percent, which is only comforting to the confused.  If Americans continue to avoid work, because the economy is so poor, an unemployment rate of zero isn't going to mean much. Corrected for folks who have quit looking, the "real" unemployment rate is closer to 10 percent - typical of recession levels.

Free markets, not government bureaucrats, are what we need.  Don't expect much from the economy until free markets gain a little visibility -- not likely any time soon.

Thursday, November 5, 2015

More Fed Nonsense from Janet Yellen

Yellen's statements yesterday were ridiculous.  She said that the decision as to whether or not to raise rates would depend upon "further improvements in the labor market."  What exactly does that mean?  Employment creation is anemic and has been since the Fall of 2008.  That's seven years.  So, what does she mean?

If given a healthy dose of truth serum, here's what I think she really means:  "I have no idea why rates haven't gone up.  We've been hoping and praying for years that rates would rise, but they never seem to.  We plan to keep hoping and praying.  Obviously, we have no ready mechanism to raise rates.  Just saying "go up rates" doesn't make it so and, as everyone knows, open market sales to reduce reserves could easily be destabilizing."  Okay, I got that.

The Fed has the power to add to and subtract from the monetary base.  Outside of that, the only other power the Fed has is to badger big banks to bend to their will when they feel in the mood to badger.  But, one power the Fed does not have is the power to precisely control interest rates.  That they cannot do.  The past five years is pretty demonstrative evidence.

Paul Volcker, the greatest Fed Chairman in history in my view, always said that "we are just following the market," at the time the Fed announced a new target range for the Federal Funds rate.  Volcker understood what was going on and, I suspect, Yellen does as well.

But, it is so much easier to believe that the Wizard behind the curtain controls all of this than to accept the reality that markets control rates, not the Wizard.  So, look for more Fed speak nonsense.  Rates will rise when markets make them rise....not before.

Wednesday, November 4, 2015

Another Clueless Economist

Left wing economists tend to park their economics on another planet when they opine about political issues.  It takes pretty crazy distortions to end up concluding that the minimum wage doesn't cost jobs, but liberal economists seem to have no difficulty getting there.

In today's NYTimes, economist Eduardo Porter has managed to embarass himself while discussing America's failing education system.  To skip to the chase, here is Porter's conclusion: "Teachers are paid poorly compared to those working in other occupations.  And the best of them are not deployed to the most challenging schools."  And that's that, according to Porter.

Some economist!

What about the role of the teachers' union?  What about the fact that anything that government takes over is run poorly and never in the interests of poor people?  Watch as Obamacare rolls out. The rich will still do fine, but poor and middle class Americans will be treated to third world health care, similar to the pattern of public education.

What is the answer?  Competition!

Vouchers.  Let families decide for themselves where to send their children to school.  The only hope for poor people and the middle class is to bring free market principles to education.  To continue to argue that raising teacher salaries is the answer is embarrassing. 

Porter should know better.  Wonder why Porter and his ilk don't apply the same argument to health care -- raise doctor salaries.  They don't seem to like that idea.

By not favoring a voucher system, economists are not only turning their back on their main field of study, but as a practical matter they are part of a system that condemns the poor to perpetual poverty.  Even the middle class are now sending their children to failing schools thanks to the advice of "economists" like Porter.

If big government actually worked, the old Soviet Union would not have failed. 

Sunday, November 1, 2015

Economic Growth Is No Longer a Topic

Notice how economic growth no longer interests anyone.  Wonder why?  Maybe because growth is such a distant memory, we no longer really expect economic growth anymore. As we load on more and more regulations, we are way past the point point where regulations slow the economy. At this point, the economy barely has a pulse.  That pulse can get weaker, but most of the real damage is already done.

We are becoming a totally stratified society, where division of a stagnant pie is becoming the political debate, but growing the pie is no longer even a topic of discussion. If economic growth were a topic of discussion, it would become apparent that the US economy has undergone a fundamental change.

Good times used to be 4.6 percent economic growth (the average of the 1950s) or 4 percent economic growth (the average of the 1960s).  Today, economists and media pundits cheer 2 percent economic growth (when we are lucky enough to experience that number, which we didn't in the most recent quarter). 

Given the pace of technological change, there is no reason why 8 to 10 percent growth is not feasible for the US economy, but the burden of regulation suggests that anything above zero is becoming increasingly less likely.  Moreover, no one seems to care.  There is no longer much discussion about increasing our economic growth rate.

Even with a slowdown, China is moving along at a 7 percent pace and will return to higher numbers in time, as the center of world economic power shifts to Asia and the US and Europe continue their decline into long run economic stagnation.

Once you lose interest in growing your economy, you enter a period of economic and political decline.  That's the trajectory of the US and Europe, but that is not the trajectory of many other parts of the world.  Asians want to grow their economies and they will do just that, while we watch and grumble.