The Top 1%--More Things to Consider

My friends will tell you that I was critical of the top 1% for decades before the Occupiers started their demonstrations.  My previous posts on income taxation discussed the issues to some extent.  We need, however, to observe some facts about how taxation relates to income at the federal level.

• In The Week magazine I read that people in the top 1% of income earners earned 20.3% of the nation's total income and paid 21% of the nation's income tax.

That would make it seem that the top 1% are paying their "fair share," wouldn't it?  But consider the following:

• The "income" discussed is reported, adjusted gross income.  We should be aware that the top 1% do not report all of their income, much of which is sheltered in off-shore accounts and received in unreported cash transactions.  In addition, the top 1% find that more of the "adjustments" apply to them than to people whose entire income comes from weekly paychecks.
• Statistics on income reveal that roughly 7,000 of the top 1% payed no federal income tax at all, even though they received sufficient income to place them in the top 1%.

One of my best friends eases the pain of paying taxes by considering them as "fees for services received."  This approach does not work for me, and here is why:

• Each of those 7,000 of the top 1% who paid no income tax probably used about the same amount of Federal services as I did, but they got the services free while I had to pay.
• Each of the 47% of wage earners who paid no income tax used more Federal services than I did.  They collected welfare, food stamps, unempoyment benefits, and medical care, but did not pay for any of the Federal services they received.
• Count up the taxes:  the top 1% pay 21% of the taxes; the bottom 47% pay 0% of the taxes.  That means the remaining 52% of wage earners are paying 79% of the taxes.  That same remaining 52% do not consume even half of all the Federal services.

So, the people who take the beating are the middle 52% of wage earners.  I am a 52-percenter.  Chances are better than 50-50 that you are a 52 percenter.

Consider, too, that the 435 persons in Washington, D.C. who write and administer our laws are part of the 1%.  They carefully craft and enforce our tax code so that the bottom 47% get a free ride (in return for their votes).  And a good share of the embattled 52%, who are either too uninformed or too busy to figure it out, continue to vote for the politicians who are robbing them blind.

Some relatively simple changes to the tax code could reduce or eliminate these inequities.  Don't count on the representatives we elected in the last few years to do that.  They are too busy feathering their own nests at our expense.

If all of us in the 52% could organize into a political party, we would have a majority of the votes.  We could elect some folks who are willing to make the needed changes.

Raise the Debt Ceiling

It's all up to Boehner and Obama. The right answer is in the middle: a lot of spending cuts and a few "tax increases." In other words everyone will have to accept some burdens he will not especially like.

Obama mus appease the far left by getting as many "tax increases" as he can, and Boehner must appease the tea party by getting as few "tax increases" as he can. On spending cuts, their commitments to the extremes force them in the opposite direction. When the compromise is finally achieved, both men will get a lot of criticism from the extremes.

The debt ceiling increase is being held hostage to both issues because it requires a commitment to reduce the debt, and the way to do that is to decrease the annual deficit so that we pay down the debt faster than we borrow.

I put "tax increases" in quotation marks because neither closing some loopholes for large corporations and extremely wealthy individuals nor eliminating federal subsidies for oil companies with multi-billion dollar profits constitutes a tax increase.

To appease the extremists, Boehner and Obama are going to play hardball right up to the last second. That is pretty scary for all of us in the mushy middle.

Taxes, Taxes, Taxes

The Democrats tell me, "Tax the rich people."

The Republicans tell me, "No new taxes."

It would seem there is no middle ground, no compromise. But I believe that there is a middle ground. I just look at the facts and "loosen" the definition of 'new taxes.'

First, some facts, quoted from Bruce Bartlett at NYTimes.com:

• 46 per cent of tax filers pay no federal income taxes.
• 78,000 households with incomes of $211,000 to $533,000 will pay no income taxes this year.
• 24,000 filers with incomes of $533,000 to $2.2 million will also pay zero.
• 3,000 filers with incomes of over $2.2 million will also pay zero.
• Many households with incomes under the median income could, by foregoing some luxuries, afford to pay a small tax.
• Finally, I read elsewhere that 67% of American Corporations pay no federal taxes--I am sure that not all of those are without profit of some kind.

Let's make it clear: I do not feel the need to extract tax from a household that does not make, or barely makes, sufficient income to house and feed themselves and transport themselves to work. Likewise, I do not believe that a business that lost money, or did not make a net profit before taxes, should be forced to pay. But the folks who are paying their taxes are paying as much as 25%, or more, of their income, and so probably should most of those 105,000 filers who plan to pay none.
I said I want to 'loosen' a definition. By that I mean I do not accept the position of some conservatives that the elimination of an existing tax credit, loophole, or federal subsidy constitutes a new tax. We should be able to eliminate loopholes. A company that makes a multi-million dollar profit after taxes does not need loopholes, tax credits or subsidies to stay in business.
So, as I see it, the middle ground is to close as many as possible loopholes in the code, and eliminate tax credits and federal subsides for businesses that can make a profit without them.
There are 105,00 households and many corporations out there that need to step up and pay their fair share of the federal taxes that are already part of the law. It probably is not enough to balance the budget, but it would help significantly. Our legislative and executive branches of government need to look at it this way, and act accordingly.

The government should...

A letter to the editor in today's L.A. Times laments the fact that many young people who show the early signs of mental illness do not receive the attention or the medical help they need to keep them from becoming violent. The author continues with a paragraph that begins, "The government should respond immediately by..."

Now I recognize that the people of our nation could do much more in the early detection and treatment of mental illness, but I do not accept that it is necessarily the responsibility of our national government to provide the resources, or to force people to give treatment.


Over and over again people ask congress to solve problems that it has neither the intelligence, nor the resources, nor the funding to resolve, e.g. "Housing costs too much for young folks to buy their homes, The government should..." or "Health care is so expensive that many cannot afford it, The government should..." or "Corporate executives make too much money, The government should..."

And on it goes, until someone starts to complain that the government is creating a "nanny state." or that it constrains us with "fascist control" of our daily lives.

Too many people want to have the government solve all of our problems for us, as opposed to solving problems ourselves as individuals, as families, or in local communities.

Let's all grow up, stop being lazy, and start handling our own problems.

Christmas 2010

Although I consider me to be an agnostic, I was raised in a Christian family. My parents and my brother were not regular church-goers, but they believed in God. From my early years into my teens, Mom, Dad, and I did attend church frequently. I was confirmed in the Methodist Church, and became a member.

In college, I sang in an interdenominational chapel choir, and therefore attended church every Sunday. Singing sacred music brought me closer to God than any other experience I have had. I still feel closest to God at Christmas time.

Maybe that's why two recent events bothered me so much. They seem to show how far from the true essence of Christmas our society is drifting.

• The first was an advertisement on the local radio station: A gun shop is inviting us all to their Christmas sale! Now I am not a gun control fanatic; I was a member of the NRA for a few years. I recognize that the sporting use of firearms is a pleasure enjoyed by many. But to me, Christmas is, among other things, a celebration of PEACE. It seems both blatantly commercial and totally incongruous to suggest that we buy Dad some ammunition for his Glock, or buy Junior an AK-47 for Christmas.
• The second event was an item in the local paper: The Directors of the Chrystal Cathedral cancelled it's annual "The Glory of Christmas" pageant. With revenues decreasing, the church has not paid many of the bills for last year's pageant. The founding family of the C. C. paid their own generous salaries, however. They each take home hundreds of thousands of dollars, but they do not pay the person who cleans the costumes for the pageant, or the one who provides the horses, camels, and other animals.

Because Christmas is a season of peace and good will toward men, it can be embraced and enjoyed by everyone, even those who are not Christians. But Christians especially should live up to the tenets of their faith. And merchants should certainly not stain the holiday with the promotion of fire arms. If those who celebrate Christmas do not abide by its basic premises, then it is they, much more than the atheists and the politically correct "happy holidays" idiots, who are mocking and debasing Christmas.

For Bonnie and me, Christmas is more a secular holiday than a religious one--a time to be with family and to enjoy the process of giving. I sometimes have a hard time "warming up" to the Christmas spirit, but in spite of the above unspirited events, I am looking forward to Christmas more than usual this year, being a little more charitable, and listening with special love to the music of the season. So, have a Merry Christmas everyone!

Can We Fix Our State?

The Orange County Register asks this question in its 'California Project' series of articles. The writers state that only the voters can fix the state, but California voters have consistently demonstrated that they will not.

Polls show that only 21 percent of the voters hold a favorable view of the United States Congress, yet in election after election, Californians have re-elected Senators Boxer and Feinstein, Representative Pelosi, and the many other incumbents whom they claim to view unfavorably.

At the state level, 77 percent of the voters think the state is going in the wrong direction, but 37 percent of them want the next governor to be Gerry Brown, who has been driving the state in the wrong direction from various offices for years. California voters continue to re-elect the very state legislators they criticize for not producing a balanced state budget on time.

If Californians believe that incumbents are doing a bad job, why do they keep voting for them?

Bankers

I don't always agree with Gary Trudeau, but he got it right in his Doonesbury cartoon entitled "A Banker's Progress:"

The college graduate: "I hope to do something of value well and be fairly paid."

In his first job: "I'd like to be paid for doing something of value fairly well."

As a middle manager: "I want to be valued and paid fairly well for doing something."

As a vice president: "I deserve to be paid well for doing something of no value."

As a president: "I demand to be paid obscenely well for destroying value."

To college graduates: "Always hold on to your values."

So true, so true...

Obama Report Card Follow-up

When I followed the content of the Orange County Register article, I neglected to grade President Obama on one of the most important promises that he made: CHANGE the way Washington works, by:

1. Restoring bi-partisanship -- he gets an "F" on this one because he has achieved nothing. Republicans and Democrats are as polarized, if not more so, than before he became president. In both the House and the Senate, the Democrat majority has refused to let Republicans participate in the drafting of key bills such as health care. By discarding all Republican suggestions as without merit, the Democrat majority has forced the Republicans into a 'stop the bill' mode.
2. Implement TRANSPARENCY in Government -- President Obama gets a "D" on this one. He has tried to do this in the Executive branch, but the Legislative Branch, led by his fellow Democrats continues to do all their work behind closed doors, and to force members to vote on measures they have not even had time to read.
3. Eliminate or reduce EARMARKS -- The president gets an "F" on this one, too. The budget and stimulus bills were submerged in earmarks and pork barrel spending. And the Senate bought a Nebraska vote on health care by exempting his state from a tax that other states would have to pay. The very actions that the Democrats criticized the Republican administration for have returned in greater quantities.

The promise was probably more that the President could handle. No President has come into office and immediately changed the way that Washington works, probably because it can't be done. But I believe that the President was so intent upon passing bailout and health care legislation that he did not even attempt to call the congressional leaders aside and convince them to change their ways.

It's a shame that so many of us voted for CHANGE; our disappointment was inevitable.

President Obama's Report Card

On Sunday, January 17th, both the LA Times and the Orange County Register offered opinion pieces on how well President Obama has kept his promises in his first year in office.

As an Independent who cast his lot for Obama, I decided to prepare my own report. I will follow the general format in the Register's article.

1. Troop Reduction in Iraq -- Dena Bunis in the Register gave the president a "B" on this one. But the promise as quoted was not simply a troop reduction in Iraq: "We should end this war responsibly. But in 16 months, we should be able to reduce our combat troops. ... We cannot separate Afghanistan from Iraq...So I would send two to three additional brigades to Iraq." The words in bold are the promise. President has done exactly what he said he would do. I think he could have done the job a little better, but he deserves either an "A-" or a "B+."
2. Lifting the Ban on Stem Cell Research -- I agree with Ms Bunis on this one; President Obama definitely gets an"A."
3. Wall Street Accountability -- Ms. Bunis gives him a "C;" I can only go for a "D." The promise is: "I'll put in place the commonsense regulations and rules of the road I've been calling for since March --rules that will keep our market free, fair, and honest; rules that will restore accountability and responsibility in our corporate board rooms." Yes, some rules have been put in place, but not very strong ones. We'll have to see just how many more will be enacted, and how well they are enforced. Some bank executives have acknowledged their poor decisions and actions, but they have still rewarded themselves with exhorbitant salaries and bonuses.
4. Guantanamo Closure -- Ms Bunis gives him a "C+" on this one. I have never believed it was necessary, let alone a priority. I think the President has discovered that this objective is both more difficult and less desirable than he initially believed. So I won't mark him down if he postpones or cancels his deadline on this one.
5. Credit Cards -- Ms Bunis gives the President an "A-" on this one, and I agree. The bill he signed last May achieves nearly all of the objectives of his proposed 'credit card bill of rights.'
6. Don't Ask, Don't Tell -- President Obama promised to repeal this policy, but no action has been taken, so Ms Bunis gives him a "D." It seems to me, however, that there are much more important fires to extinguish -- the recession, job creation, airline security, the earthquake in Haiti, et al. So I give the President a "B" for keeping his priorities straight.
7. Capping Carbon Emissions -- He promised actions to achieve an 80% reduction by 2050, with specific milestones every 10 years until then. Ms Bunis gives him a "C-" for the progress on the house and senate bills in the works on this. Unfortunately, I will give him a better grade if he changes his mind on this one. Carbon caps will only result in a higher cost of living for us through taxation and energy price increases. Despite the rantings of the 'climate change kooks,' there is not solid evidence that these costly measures will prevent global warming. What we really need is alternatives to the use of fuel oil for automobiles and electricity production.
8. Taxing the Wealthy -- Ms Bunis gives him a "C," noting that Obama said before he was elected that he would not roll back the Bush tax cuts because of the recession. But they will expire at the end of this year. My perception is that the government is doing a better job of taxing the wealthy. My concern is not that we punish the wealthy with higher taxes, but that we make sure that they carry their fair share. Over 6,000 people reported earnings of over a million dollars in 2007 and paid no federal tax at all. Many more, I am sure, paid nowhere near their fair share of the taxes. I have said before that we need true tax reform in the form of a flat tax that exempts only those citizens living at or below the poverty level. So, until the President heads in the right direction, I won't give him a grade.
9. Immigration Overhaul -- He said he would make comprehensive immigration reform a top priority in the first year. He has done nothing, and Ms Bunis gives him a "C-." I guess we can all cut him some slack for dealing with what appear to be more important issues, but I would not consider "cap and trade" to be one of them. Before the economic issues arose, this issue was very high on my list. In my view, the enforcers should be working full tilt on our present laws until such time as the legislators can find time to enact reforms. As I stated in earlier posts, the phrase "comprehensive immigration reform" bothers me. I envision another 2,000 page bill with a costly bureaucracy attached to it. So, until I see the President's definition of "comprehensive," I give him a "D-" on this one.
10. Finally, Health Care -- Ms Bunis gives him a "B." I give him a "C-." Something needs to be done, and we have bills from the house and the senate in the reconciliation process. I have not read either bill (has anyone), but from what I read in the papers they both appear to be big 'cave-ins' to the insurance and pharmaceutcal industries. Neither attempts do define the drivers in cost growth and eliminate them, which would make health care available to more people. Even if the President signs a compromise bill, I will be hard put to give him a passing grade.

So there it is, my report card for the President. It's a long posting; if you have made it this far, thanks for staying with me. The President has disappointed me in several areas, but on some issues he is showing an analytical approach and appears to be seeking fair and reasonable ends.

Airline Security--Here We Go Again!

It's possible that I will never travel by air again. Only the direst of emergencies would cause me to endure the mess that has been created by our government and our air lines.

Every time a radical pulls a terrorist ploy on an airplane, all the idiots jerk their knees and impose inane restrictions on thousands of innocent travellers. Granny can't take her knitting needles on the plane, and that 3-year old toddler must undergo a random search because his number is up. The latest one seems to be that for the last hour of a flight a person may only sit still and pick his nose.

Mind you, I am willing to submit to reasonable measures to ensure that the passenger compartment is safe. That is, I am willing to show proper identification when I travel. I and my carry-on bag can and should be scanned. My laptop can go through the scanner separately. I will even take my shoes off. If something rings the bell, I will submit to a pat-down search. But if I do not want to check my bag, I should be able to take as much shampoo and shaving cream as I need in my carry-on bag, and maybe even a bottle of wine.

But the way it is done now, passengers for some flights spend more time in the airport than they do on the plane. For some of the shorter trips it is actually faster to travel by automobile. It's because too many people are subjected to too many security precautions.

The more absurd measures are either knee-jerk reactions or fill in work for people who are not competent enough to define the most effective measures or to implement them correctly.

For example there is a "no fly" list (good idea) and 3 other lists. Apparently only two of the 3 are actually used, since Abdulmutallab is on the third. Logic says that only two lists beyond the "no fly" list are needed:

• the first is a "suspect list" of all the 1/2 to 1 million people whose life choices are such that we worry about them. Subject those on the "suspect list" to any and all restrictions and inconveniences you want to. They have chosen to behave suspiciously. If they don't want to be inconvenienced, they can choose to behave and associate with appropriate respect for humankind.
• the second is an "express list" for frequent business travellers and others who demonstrate a long-standing reputation for trustworthiness.

I understand that the criterion for the "no fly" list is that of prior actions. The other two lists rely to a significant degree on (nasty word) profiling. I understand profiling as well or better than any of the nuts who are so vehemently opposed to it. A profile is not about a person's race or religion or the way he dresses, but rather about who he associates with, where he has been working or studying, and other actions he has chosen to perform. The simple fact is that every person that has committed a terrorist act fits a terrorist profile.

I'm also aware that a small number of people who fit the terrorist profile never have and never will do something bad. But they will be on the "suspect list." They and only they will be subject to the numerous and onerous restrictions. That is the result not of our meanness, but of their personal choices.

The rest of us can and should proceed with little or no inconvenience.

Global Warming--Caught Red-handed

I hate to say it, but I told you so.

The "consensus of global warming experts" is now exposed for the sham that it is. Internal documents from the Climate Research Unit at the University of East Anglia expose the falsification of data and the 'cherry picking' of data that the Unit used to 'cook the books' on global warming.

They claim that we don't understand the subtle interplay among experts during the study process. That's simple hogwash.

The scientific method involves obtaining and organizing data to support a hypothesis, but it does not condone selecting only the data that supports the hypothesis. Nor does it allow adjusting or adding data to support the hypothesis. Nor does is involve hiding data or preventing the publication of data that does not support the process. But the members of the "global warming consensus" have apparently committed all of these sins.

When we look at all of the data, we will see that climate change is occurring. There is no conclusive proof however, that mankind is causing it, or can alter it.

But that reality does not keep us from doing the right things: conserving water, using less energy, reducing our use of fossil fuels, preserving and restoring the rain forests, and on and on. We should do all of these things for our own good, and for the good of the planet, not because the 'global warming' crew is trying to scare us into doing them.

Water and Health Care

I was happy to see the Yorba Linda Water District embrace conservation in order to minimize the impact of the recent draught. Back in July, I reset the timers on my irrigation system to operate on the schedule provided by the District. Conservation is good, I think. We should all do our part to conserve the precious resources that Providence has provided.

This month I decided to see exactly what is the impact on my water bill. My November bill was 15% lower than the bill for November last year. My effort to conserve was rewarded!

...or so it seems at first glance.

But, wait a minute--the bill also states that my water usage was over 40% lower than last November. Why isn't my bill 40% lower?

The reason is obvious: the price per unit of the water increased by 42%.

Oh yes, the rate increase was announced in advance. A public hearing was conducted. Of course, most of us sheep were to busy, or too lazy, to attend. And, after all, The water district obviously needs to compensate for the reduced consumption by raising the rates. After all, they have to keep paying those high salaries and exhorbitant pension benefits. And they need to pay the "water cop" who comes around to make sure I am not watering my lawn on the wrong days.

We can see a similar situation coming with the federal government's so-called health care reform. Instead of passing laws to reduce and control the costs of health care, Congress wants to establish commissions and committees to "oversee" health care and to provide subsidies to people who cannot afford it. Taxpayers will see the system "reformed," but the prices will go up, not down.

So this is the insanity of our times. Our government agencies ask us to pitch in and help. For our efforts they reward us by taking more of our money. Voters need to think deeply about this before we go to the polls again. We need to find and elect representatives who will cure the madness, not prolong it.

Public Option Revived?

I see in today's paper that the Senate is considering ways to include some form of public option in the health care legislation. The stated reasons are fears of high costs for the plan and mistrust of insurers.

It sure has taken them long enough to figure that out. Both reasons are valid. The proposed plans cost too much because our legislators refuse to identify the root causes of the high costs and to write specific laws to reduce them. The continued pressures of insurance company lobbyists and campaign contributions have blinded our lawmakers to the greed of the insurers. These issues are not new--I have mentioned them from the start in my posts on health care costs. Maybe the reality is beginning to set in for our lawmakers.

It is obvious that we are not going to keep the federal government out of the health care situation. I suspect most people want the government to find a way to make health care more affordable, and therefore more available.

The initial solution seems almost silly: force everyone to buy health insurance. There is no better way to drive the cost of health insurance costs even higher. If we want the government to take action, and if we want everyone to have health insurance, then a public option is mandatory. If the public option is not part of the deal, the insurers will raise prices to their hearts' content, and government (taxpayers') money will be paying that price via subsidies for individuals who cannot afford the increased premiums. Has it taken the Senate so many years to understand that simple fact?

What other obvious flaws are in the health care bills proposed in the House and the Senate? We don't know. We haven't read the thousands of pages of the bills. Nor have most of our legislators.

Wouldn't it be nice if we had access to a simple 'dot list' of the elements of each proposed bill so we could see exactly which cost drivers are being addressed, and how they are brought under control? That will never happen because the lawmakers fear that such a list would generate more opposition than support. Each item on the list would offend a major lobby or source of contributions. Insurers would oppose the public option; pharmaceutical companies would oppose any action to reduce the prices of prescription drugs, and so on.

Congress should expect that kind of opposition to any legislation that is designed to bring the price of health care down because that legislation reduces the (excess) profits of the providers of health care goods and services. But that opposition comes from a small minority of our population who make large campaign contributions and who hire persistent lobbyists. The voting majority of the population are the consumers who purchase health care; they will support reasonable measures to reduce the price of good health.

The public option is one of those reasonable measures.

Greedy Executives

I just have to hammer this nail one more time to drive it home.

I recently heard on the radio that financial organizations have given $11 billion of the taxpayers' bailout funds to their own executives in the form of bonuses.

These companies are not lending the money to stimulate the economy; instead they are paying it to their own greedy executives. In other words, they are rewarding themselves for not using the bailout funds as we intended.

Most of us are unaware that this is happening. The rest of us just yawn and do nothing about it.

The Week magazine spotlighted Lloyd Blankfein, CEO of Goldman Sachs, last week. They quoted him as saying that much financial activity "lacks social or economic value." That is essentially what I said in my earlier postings on the subject.

So we continue to pay these executives huge salaries and bonuses for activity that lacks social or economic value. This needs to stop. Let's restructure so that the money goes to people who make things and who provide needed services.

Health Reform Plan--More Nonsense

Amid anguished cries of 'fascism' and 'socialism,' critics of the Government's health care reform bills proclaim that THEY DO NOT WANT THE GOVERNMENT RUNNING HEALTH CARE.

At the same time, people say, 'Health care costs too much,' 'Millions cannot afford health care,' 'Millions cannot afford health insurance,' 'THE GOVERNMENT SHOULD DO SOMETHING ABOUT IT.'

Come on, guys, you can't have it both ways. We all can see that health care costs too much, and the costs continue to increase. The players in our health care system can not, will not take actions to cut the costs. If we want the government to fix the problem, the government will either have to regulate the system, or take it over.

But is the government capable of doing either of those things? As I mentioned in my last post, I doubt it. Congress is refusing to identify 'cost drivers' in the system and eliminate or regulate them. Instead of trying to simplify the process and regulate the specific activities that are out of control, Congress is proposing to add complexity to the system, get more people involved, and introduce more reporting and paperwork. It's another example of their "comprehensive" plans.

The Commentary section of Sunday's Orange County Register contained two diagrams of the proposed reform plan. One drawn by Republicans on the front page, large and in color, was on the front page. The second, drawn by Democrats, nearly microscopic and monochrome, was on page 5. For me the issue is not the relative emphasis of one over the other because both are ridiculoulsy complex. One had over 50 'bubbles' on it; the other had over 60 blocks. Commisions, boards, reports, hundreds of people doing everything except curing illnesses. The costs will show up on our health care bills and our tax bills as increases, not reductions.

A direct, top down analysis would start with a simple diagram that has only a few boxes:

1. consumers
2. health care providers (doctors, laboratories, hospitals)
3. pharmaceutical manufacturers
4. health insurance companies and management organizations
5. Law firms (handling the suits pressed by consumers against providers)
6. federal government (assuming we want them involved)

Then you draw some lines between them that represent the flow of money, products, and services. To do it right, the preparer has to virtually 'sit' in each block and determine where revenue comes from, where the income is spent, and what the net gain is. The resulting diagram will generate a lot of questions to be answered, and identify real problems to be resolved in order to make sure that the largest portion of the dollar spent by the consumer is used directly to cure his health problem.

I read an article the other day claiming that a congressman stated he does not want to look at ways to cut costs. If that is so, I know why I cannot support the administration's health care reform plan

Health Care Reform Is a Farce

Unfortunately, the health care reform issue is a total shambles. Only politicians could muck things up so totally. I posted some suggestions months ago, but I'm sure very few read them and nobody acted on them.

Political payoffs prevent the President and Congress from doing the obvious and logical thing, that is: Determine what portion of each health care dollar goes to each element of the process: patient insurance, hospital liability insurance, doctors malpractice insurance, insurance billing and administrative costs, hospital buildings and maintenance, cost of medication, doctors office rent, and (I almost forgot) doctors pay, and nurses pay.

Such a study would reveal the obvious -- that insurance companies and pharmaceutical companies take the lion’s share of the dollar in exhorbitant premiums and obscene profits. To change that, government must enact controls to minimize those cost drivers. Elected officials will never do this, because their elections were bought and paid for by those very companies. Democrats won't give up the financial support and Republicans will scream that the changes stifle free enterprise…

Professor Gates and Officer Crowley

I read that they had a "beer summit" with President Obama, and that they agreed to disagree.

Now that I have read both versions of the story, I have formed my own opinion.

I worked in Cambridge, MA, for two years. The Cambridge police department has a specific procedure that an officer must follow when he investigates a report of attempted break in. I believe that the procedure is exactly the same, no matter what the race is of the person who answers the door. And I believe that an officer who is given authority to investigate must maintain control of the situation to the extent needed to complete the investigation. I was taught always to comply courteously with requests from a policeman. The time to challenge his authority, if necessary, is after the fact, in a court of law. That's the way it works in our country.

By his own account, Professor Gates operated on the assumption that a white police officer who comes to his door is there to hurt him, not to help him. Professor Gates, operating on that prejudice, is the racist. Instead of being civil to an officer of the law, the professor chose to be belligerent. But the good professor is blind to his own racism, and he belligerently accused an officer who was following protocol of being a racist, without any specific facts to support that accusation.

There is is no way for me to know how intense things got at that moment, and whether or not the professor's actions justified an arrest for "disorderly conduct." For me, that issue is secondary; it would not have come into play if Professor Gates had not acted on his own prejudice in the first place.

A double standard applies to the concept of racism--perpetuated by radicals like Professor Gates, Rev. Wright, and Al Sharpton.

Economic Food for Thought

I recently read an article proposing a “progressive consumption tax.” It made me look at economics and taxation from a totally different viewpoint. On the surface the ideas have merit, but I am a little concerned about the possible unforeseen consequences.

The author, Professor Frank, suggests that the Feds tax consumption rather than the income. You report your total income, the amount you saved, and the amount you spent. Both the amount saved and a pre-determined portion of the amount you spent are not taxed. The “excess” spending is taxed at a progressive rate. To me, it seems a lot more fair than the "fair tax."

The populist side of me has always sought a way to tax the super-wealthy. The article reminded me of Thorstein Veblen’s writings about “conspicuous consumption.” And it occurred to me that if we really want to “soak the rich,” we should find a way that does not penalize earning, but instead punishes wasteful consumption and enables and encourages spending of money on things for the common good. Theoretically, government revenue increases. With this approach, the economy is not driven by an "invisible hand," but by a very visible government.

The article does bother me a little because I believe that the purpose of taxation is to fund government operations, not to control human behavior.

I am including a link to the article. It is fun to see the (almost fanatic) comments it drew from the (somewhat conservative) Cornell alumni.

http://cornellalumnimagazine.com/index.php?option=com_content&task=view&id=483

If you are too dogmatic a conservative to read this with an open mind, please don't append knee-jerk tyrades in your comment. I am looking for calm analytic discussion of the merits and potential dangers of the concept.

Executive Compensation Caps

While announcing his policy to cap the salaries of executives in the companies that receive federal bailout funds, President Obama declared the same disgust that I have for the activities of the "bad guys" that I mentioned in my Tuesday posting. Thank you, President Obama, for acknowledging the need to prevent the misdeeds of the "bad guys."

The ultra-right-wing critics are screaming, "socialism," of course. But they need to understand that if you live in your parents house, and accept an allowance from them, you must obey their rules. People involved in education and health care have known this for years. When schools accept money from the Government, they can expect that the Government will place constraints on the content of their courses and on school activities. If you don't want Government control, don't accept Government money.

Rightfully, the cap policy extends only to a few very high-paid executives of some large corporations, the greediest offenders. CEO's of many small banks and companies will not be impacted, nor should they be. As much as I would like to "nail" the specific "bad guys" I mentioned in Tuesday's post, I understand that legal complications make a retroactive order impractical.

But I am not sure the order reaches far enough. Many brokers and salesmen who get absurdly high salaries and bonuses are not included in the order. Bonuses and golden parachutes are not just received by executives; they are also distributed by executives, often to people who are equally incompetent or equally guilty of shoddy practices. And nothing is done to prohibit luxurious office remodeling and other gifts such as "retreats" at luxurious resorts.

It appears that President Obama has a reasonably good understanding of the current financial problems and their solutions. He has established a policy to curb executive greed. Unfortunately the policy seems more symbolic than effective.

The president also needs to be more active in steering Congress toward a truly effective stimulus bill, as opposed to the current collage of government spending on programs and activities that do little to create jobs for people.

Merely pumping money into our economy will not resolve our financial problems. We must implement projects that create many jobs for workers in many disciplines. We must aggressively act to eliminate the greedy, selfish, and foolish practices that created the problems in the first place.

The sources of the financial mess are bi-partisan. One party encouraged the use of unsound credit practices in order to allow people who could not afford homes to purchase them. The other party insisted on less and less regulation and oversight of financial activity. One party insisted on spending more and more money of federal give-away programs and pork-barrel projects. The other implemented tax cuts, loopholes, and tax-dodges for the greedy billionaires.

So the solutions to the problem must also be bi-partisan. The time has come for members of Congress to stop blaming each other and to accept ownership of both the problems and the solutions. The current Democratic Party leadership in Congress appears both unable and unwilling to do that.

Who Are the Bad Guys?

Like just about everyone, I have been watching the value of my house and my IRA decline over the last year.

Someone once told me we should try to fix the problem, not the blame. But to fix the financial mess we are in, fixing the blame is essential. That's because problem was caused by people acting irresponsibly, and we must identify the people and stop their greedy and irresponsible actions.

So who are the bad guys? They are in two groups of people that I have criticized before:

The first are corporate executives who not only take obscenely large salary and benefit packages, but also accept gigantic bonuses and/or separation packages even after their poor decisions have driven their company into the ground. In addition, they pay out large bonuses to second- and third-tier executives even when their actions fail to improve the company's financial position. They attempt to justify these bonuses by saying they need to pay them in order to keep good employees from leaving the company. If these employees are so great and so worth keeping, why have they driven the company down the drain? Some companies even used Federal bailout funds to pay the bonuses. The Orange County Register of Sunday, Feb. 1, names some of the specific bad guys:

• Ameriquest--Roland Arnall and Dawn Arnall, whose net worth was estimated at $1.5 billion in the year their company closed. Lee was paid $34 million as a consultant. A federal lawsuit brought by a group of borrowers argues the Arnalls paid Lee "hush money" to keep their predatory lending secret.
• Countrywide Financial--Angelo Mozilo, who sold off $478 million in shares while his company fell into the position where it had to be sold, then walked away with a gigantic separation package.
• Lehman Brothers--Richard Fuld acceped $40 million in compensation in 2007. He recently transferred his $13.3 million Florida home to his wife for $100.00.
• Washington Mutual--Kerry Killinger accepted $46 million in compensation from 2005 to 2007 while he lowered WaMu's underwriting standards.
• Merrill Lynch--John Thain spent $1.2 million to redecorate his office last year, and doled out $4 billion in 2008 bonuses after the investment house lost $15.3 billion.
• New Century Financial--Robert Cole, Ed Gotschall, Brad Morrice took $58 million in stock profits, dividends and bonuses in 2005 and 2006 as the company headed for collapse in 2007.

A second category, related in some ways to the first, is people who identify their profession as "investor." An investor buys shares in an enterprise in hopes of sharing the the profits from its success. There is nothing wrong with investing--it's the core of the capitalist system. In fact, if we are all smart, we make investments in addition to doing our "real job." But some investors have no "real job." They buy one stock and sell another, based on projections from analyists, newspaper articles, and plain old rumors. Their entire "work day" is spent pushing paper, gambling on the success of one business or the failure of another. That's what they really are: professional gamblers. They do not make a product or provide an essential service. They invest their money in a company, but not their time, work, or wisdom. They do not contribute to a company's success. If a company they have invested in runs into hard times, they do not try to help it succeed, they just sell their stock and buy a more promising one. Even today while the rest of us work, these professional "investors" are responding to rumors and driving the stock market further down with their continuing gambles.

The goal of the bad guys is not to help companies be successful, but rather to get as rich as they can.

Some people have already identified a few of the bad guys. Federal and state attorneys have begun investigations. Shareholders and borrowers have initiated lawsuits. But the bad guys are devious, and not dumb. They will rationalize, duck, and weave. The process of nailing them will be long, costly and inefficient.

We need to identify the bad guys and pursue them zealously. We need to punish the greedy, the incompetent, the gamblers, and the thieves. We need to regulate their successors so that the errors and the crimes will not be repeated. And we need to stop rewarding people who do poor work, or no work at all.