After catching up with family news, we got around to talking about some of the subjects addressed in this blog. Leo told me that he had wanted to add a few comments but that the comment feature didn't seem to work.
This did not surprise me but I tested it myself and it did indeed fail on the first try. I finally got it to work for me but, as a member of Google+ (this site is operated by Google), I'm not sure I didn't get preferential treatment. Hopefully, my friends in the software business will test it more.
Here's what I had to do to get it to work:
- Select a specific post on which to comment. These are all listed by month at the top right.
- Type in the comment at the bottom in the area provided.
- Select Comment as: as Name/URL from the drop-down menu.
- Type in your name or alias in the space provided (I used my initials).
- Leave the URL space empty.
- Click Continue.
- Click Publish.
That worked for me three times in a row on 3 different posts. Please try it.
So, having presumably worked that out, I asked Leo what the gist of his comments might be.
Leo, raised in the blue state of New York and having raised his kids in the blue state of Minnesota somehow retained his status as a serious free-market capitalist. Leo reminded me that I was once one of those too and he told me that my thoughts on health insurance and healthcare delivery were tantamount to nationalizing them and that this was the slippery slope to socialism. Socialism is a well known failure of social policy.
I tried to argue that healthcare was something needed by all and that the general welfare clause of the constitution put me on firm ground. I said it was unconscionable to profit from the misery of others. Leo replied that the referenced clause was about promoting the general welfare, not providing it. He argued that it was unconscionable to confiscate one person's earnings because other people felt they could rely on a government-provided safety net instead of earning for themselves. Romney reminded us all that those folks vote and they will always vote to take more of others' money for themselves.
http://en.wikipedia.org/wiki/General_Welfare_clause
http://en.wikipedia.org/wiki/General_Welfare_clause
On regulating utilities' profits, I made pretty much the same argument but got shot down because this would be government nationalization too. On solar power, shot down because this would be government competing with commerce. Yikes! He's correct.
So, I've been sitting here thinking how I strayed so far from where I was when I was a young man. I was a Reagan Republican: small government, low taxes, equality of opportunity, personal responsibility and social-financial standing based on merit and value (skills). I've since switched to Independent but I generally side with Republicans on fiscal matters.
This became clearer in our discussion about the minimum wage.
I was on the fence since the current minimum wage pays an unskilled worker half of what a liberal arts college grad with ungodly debt from school loans would be paid. I might argue that the BA could have made a better choice of study but that's not the point. I must say the BA committed to getting the degree, invested to improve his/her value to society, is obviously able to learn and should be worth a great deal more than twice as much as the unskilled worker. Why should society devalue the college graduate in favor of the unskilled laborer? This is bass-ackwards.
I was on the fence since the current minimum wage pays an unskilled worker half of what a liberal arts college grad with ungodly debt from school loans would be paid. I might argue that the BA could have made a better choice of study but that's not the point. I must say the BA committed to getting the degree, invested to improve his/her value to society, is obviously able to learn and should be worth a great deal more than twice as much as the unskilled worker. Why should society devalue the college graduate in favor of the unskilled laborer? This is bass-ackwards.
Leo believes that there should be no minimum wage since it negates the ability of capital to contract on its own behalf in accordance with the law of supply and demand. It also deprives the employer of the right to his/her own private property (by forcing contract terms against the employer) and also deprives society of its private property by artificially driving up prices. It also inflates the self-worth of the minimum wage employee when what we really want is for these folks to gain useful skills. With FICA the safety net tax, add another 7.65% to what employers must pay (and the employees too!).
I found it tough to argue with that and thankful that the comment software didn't work as well as it should have. I'm guessing there might have been lots of criticism and rightfully so.
I found it tough to argue with that and thankful that the comment software didn't work as well as it should have. I'm guessing there might have been lots of criticism and rightfully so.
As I've aged, I've gotten soft(er) and my left-leaning colleague Larry will attest to this. I like the idea of helping people who need it, I'm just realizing that there's a better way.
I'm retired and my retirement plans rely on Social Security and Medicare to help my wife and me to maintain the lifestyle we've earned. However, if we had been able to keep what we paid in, we'd be far better off.
I stupidly ignored the fact that the profits from the industries I sought to regulate were fueling the other, larger part of my retirement plan which is long-term savings and investment.
I'm retired and my retirement plans rely on Social Security and Medicare to help my wife and me to maintain the lifestyle we've earned. However, if we had been able to keep what we paid in, we'd be far better off.
I stupidly ignored the fact that the profits from the industries I sought to regulate were fueling the other, larger part of my retirement plan which is long-term savings and investment.
I lost sight of the fact that while our plan was to save and invest toward retirement, others choose to direct their incomes to other pursuits like wine, women and song. I'll grant the short term appeal of this fiscal philosophy but it implies that the adherent is willing to either starve to death later on or rely on the public trough. We chose to cut expenses in tough times while others chose to borrow and continue spending. Free will has consequences and, with the current system, responsible folks lose.
While it's true that not everyone chooses their paths in life (some are simply physically or mentally unable to provide for themselves), it's equally true that not everyone else has the same altruistic desire to help both them and those who do choose poorly. It is not the role of government to foist the morals of the majority on any minority. This is one of many good reasons for the separation of church and state. The US Constitution is a good thing.
I can't call myself a fiscal conservative while espousing socialistic ideas.
So I recant the views I've expressed regarding healthcare, energy generation and utility costs. I no longer feel that entitlements should be untouchable either for as Cicero said in 55 BC:
"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome become bankrupt. People must again learn to work instead of living on public assistance."
I have also retooled my plan to pay off the national debt.
So I recant the views I've expressed regarding healthcare, energy generation and utility costs. I no longer feel that entitlements should be untouchable either for as Cicero said in 55 BC:
"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome become bankrupt. People must again learn to work instead of living on public assistance."
I have also retooled my plan to pay off the national debt.
I still maintain that the healthcare, electric, telephone, internet and television companies are ripping us off but I acknowledge that these are a mere nuisance compared to taxes for the middle class. I also maintain that harvesting free energy from the sun makes more sense than burning stuff.
For the average middle class earner ($62,000/year), taxes this year will be:
Federal Income Tax $11,530
FICA $4,743
Property Tax $2,097 (median home value of $155,000, median rate of 1.38%)
State Income Tax $3,720 (assumes 6%)
Sales Tax $1,995 (assumes savings of 10% of net income)
Total $24,085 38.8%
Of course, there are some states without some of these taxes but I'm looking for the average. This is not far from the overall rate of 43% so the middle class is really getting hammered and the wealthy are clearly subsidizing the "poor". If we included the $10,000/year in health insurance benefits many in the middle class currently get tax-free through employers, the situation is much worse. When Obamacare plays out, this will change since it will be cheaper for employers to pay a fine than pay a premium.
For the average middle class earner ($62,000/year), taxes this year will be:
Federal Income Tax $11,530
FICA $4,743
Property Tax $2,097 (median home value of $155,000, median rate of 1.38%)
State Income Tax $3,720 (assumes 6%)
Sales Tax $1,995 (assumes savings of 10% of net income)
Total $24,085 38.8%
Of course, there are some states without some of these taxes but I'm looking for the average. This is not far from the overall rate of 43% so the middle class is really getting hammered and the wealthy are clearly subsidizing the "poor". If we included the $10,000/year in health insurance benefits many in the middle class currently get tax-free through employers, the situation is much worse. When Obamacare plays out, this will change since it will be cheaper for employers to pay a fine than pay a premium.
This makes Leo's private property argument fairly compelling.
Leo also points out that LBJ's Great Society programs are a failure: poverty is not decreasing. Part of this is the way poverty is measured since by some measures, lack of internet access constitutes poverty. But it is also widely reported that nearly half of our population pays no federal income tax and to do that, the incomes must be fairly small. To these folks, FICA is the big hit at a flat 7.65%.
Pension programs are anachronistic: we should all be saving and investing for our own retirements. In addition, businesses will soon stop providing health insurance so we'd better get used to buying our own. We all fret about the impact of the baby boomers but population growth is now at nearly the same post-war level of the 1950's.
This does not bode well for the future.
We have to take advantage of the lull that arrives in 20 years to fix this thing. I propose that we increase revenues and cut spending to the bone (as outlined in my post on deficit reduction) to finance entitlements for the next 20 years then cut the safety net and drop revenues to the $600 billion/year needed for a minimalist government.
So, for the federal government, I'm back to just the original four: Justice, State, Defense and Treasury. I still like EPA and the national parks but these and transportation can be handled at the state level. Veteran's Affairs can be handled by Justice and things like drilling rights and grazing can be handled by Treasury. Foreign aid will stop. Defense will be pared back to the levels before 9/11 but they will and should pick up air traffic control.
This gives us a federal budget of just $600 billion/year. This is an amount that could be funded by a flat tax of 3.75% of GDP in today's dollars. Now we're talking about something fair and manageable.
This makes balancing the budget a simple matter: drop Social Security, Medicare, Medicaid, food stamps and welfare after 40 years and, voila: the currently-retired are covered, the debt is paid off, a surplus is saved for rainy days and fair warning is given to everyone else. Pare away the other government agencies described in my post on deficit reduction and we're back to an efficiently sized government.
Yes, the economy will take a hit for laying off 3 million or so government employees but we're down 12 million or more already. Another 2% won't kill us especially since spending must stay effectively the same even without them. The big difference is that we won't borrow to pay the bills any more.
Leo also points out that LBJ's Great Society programs are a failure: poverty is not decreasing. Part of this is the way poverty is measured since by some measures, lack of internet access constitutes poverty. But it is also widely reported that nearly half of our population pays no federal income tax and to do that, the incomes must be fairly small. To these folks, FICA is the big hit at a flat 7.65%.
Pension programs are anachronistic: we should all be saving and investing for our own retirements. In addition, businesses will soon stop providing health insurance so we'd better get used to buying our own. We all fret about the impact of the baby boomers but population growth is now at nearly the same post-war level of the 1950's.
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| US Birth Rate |
We have to take advantage of the lull that arrives in 20 years to fix this thing. I propose that we increase revenues and cut spending to the bone (as outlined in my post on deficit reduction) to finance entitlements for the next 20 years then cut the safety net and drop revenues to the $600 billion/year needed for a minimalist government.
So, for the federal government, I'm back to just the original four: Justice, State, Defense and Treasury. I still like EPA and the national parks but these and transportation can be handled at the state level. Veteran's Affairs can be handled by Justice and things like drilling rights and grazing can be handled by Treasury. Foreign aid will stop. Defense will be pared back to the levels before 9/11 but they will and should pick up air traffic control.
This gives us a federal budget of just $600 billion/year. This is an amount that could be funded by a flat tax of 3.75% of GDP in today's dollars. Now we're talking about something fair and manageable.
This makes balancing the budget a simple matter: drop Social Security, Medicare, Medicaid, food stamps and welfare after 40 years and, voila: the currently-retired are covered, the debt is paid off, a surplus is saved for rainy days and fair warning is given to everyone else. Pare away the other government agencies described in my post on deficit reduction and we're back to an efficiently sized government.
Yes, the economy will take a hit for laying off 3 million or so government employees but we're down 12 million or more already. Another 2% won't kill us especially since spending must stay effectively the same even without them. The big difference is that we won't borrow to pay the bills any more.
This should probably fix "poverty" too since ending the government safety net will strongly incentivize people go back to earning a living. Think about it: a safety net encourages risky behavior.
Use the same formula with state governments. It will not fix irresponsible behavior but it should reduce it a great deal.
But there's a price to be paid to free us from the current level of taxation. In order to fulfill the promises made, federal revenues must increase long enough to keep entitlements going for those who are too old to take up the slack.
To get there based on 2012 federal tax revenue of $2.5 trillion won't be possible. We need to increase revenue by about $600 billion/year for 20 years.
Use 20% of the $3.1 trillion total to pay for the much smaller government, use 30% to pay off the debt and use 50% to pay out Social Security and Medicare for the baby boomers who are too old to take the hit. Then, as the smaller group following the boomers retires, start dropping taxes and loopholes and deductions with the reduced demand on the treasury. When another 20 years has passed and tax revenue and spending has dropped to $600 billion in today's dollars then convert to a flat tax of 4% and be done with it.
Most of the $600 billion/year in extra revenue can be had simply by following my plan for public school reform. The rest (about $200 billion/year) would come from rolling back the rest of the Bush tax cuts until we can get past this mess.
Meanwhile, eliminate employee-paid FICA for the 45-and-under group to enable them to save for their own retirement; the government will still get the employer-paid half. The graph below shows the effect for the average $62,000/year household that also saves 10% of their income in a 3%-yield investment. This yields about $1,250/month over 30 years; about the same as Social Security. A 3% investment in bonds will do it. With a 5% investment return, the total increases to $390,000; enough to fund private insurance as well. Interest rates are already starting to rise again.
Also note-worthy is the fact that Social Security, while collecting revenue from all worker, will only pay out to one member of a married couple. With self-savings, married folks can collect both halves.
For those still earning minimum wage at 45, the graph looks like the one above with an end result of about $75,000 or $95,000. Over 30 years, this will pay about $312/month and may also pay for minimalist private insurance; health insurance is so heavily subsidized right now that it is impossible to predict where premiums for low-budget health insurance will stabilize. For as little as $50/month, it is possible to get a 'mini medical plan' that will cover a predetermined number of doctor visits, many prescription medications, daily hospital benefits and limited accident coverage. Medicare costs $100/month today.
http://www.medhealthinsurance.com/low-income-insurance.htm
After 20 years, the last of the baby boomers has retired and the drain on the treasury will drop by 20% over a few years and taxes can drop right along with the drain. Taxes can continue to drop over the next 20 years as the boomers and over-45 set die off. The national debt goes to zero (effectively a $5 trillion surplus since that's how much congress has pilfered from the trust funds over the years), the budget balances at $600 billion/year and entitlements are no more. See graph.
All government pension money ($3 trillion from all 50 states; the federal government has none) gets swept into the treasury immediately and all retired government employees (except military pensioners and those who were routinely in harm's way) are moved to Social Security and Medicare. Those government employees under 45 get the same FICA treatment as 'normal' people.
The $3 trillion in real state deposits combined with the net $5 trillion surplus from paying off the national debt can be used to smooth any bumps in the transition.
We must not allow means-testing on benefits since this scheme punishes good behavior and rewards bad behavior: those who save for retirement would lose benefits they earned while those who spend every penny are rewarded with extra benefits. Romney got this wrong.
State- and local-level finances are tougher to figure out but the spending percentages would be roughly the same and for the same purposes: smaller government, helping to pay healthcare and pensions for those 45 and up and debt service. The smaller governments manage education, transportation, parks, education and so-called protection (police, firefighters, national guard, etc.).
I suggest a move away from fuel taxes to mileage taxes to fund transportation. My views on education cost control are in another post. Pension issues are gone and politicians who campaign to bring them back should be shot. Health benefits issues are also gone.
Use 20% of the $3.1 trillion total to pay for the much smaller government, use 30% to pay off the debt and use 50% to pay out Social Security and Medicare for the baby boomers who are too old to take the hit. Then, as the smaller group following the boomers retires, start dropping taxes and loopholes and deductions with the reduced demand on the treasury. When another 20 years has passed and tax revenue and spending has dropped to $600 billion in today's dollars then convert to a flat tax of 4% and be done with it.
Most of the $600 billion/year in extra revenue can be had simply by following my plan for public school reform. The rest (about $200 billion/year) would come from rolling back the rest of the Bush tax cuts until we can get past this mess.
Meanwhile, eliminate employee-paid FICA for the 45-and-under group to enable them to save for their own retirement; the government will still get the employer-paid half. The graph below shows the effect for the average $62,000/year household that also saves 10% of their income in a 3%-yield investment. This yields about $1,250/month over 30 years; about the same as Social Security. A 3% investment in bonds will do it. With a 5% investment return, the total increases to $390,000; enough to fund private insurance as well. Interest rates are already starting to rise again.
 |
| 20-Year Retirement Savings for 45-and-Up |
For those still earning minimum wage at 45, the graph looks like the one above with an end result of about $75,000 or $95,000. Over 30 years, this will pay about $312/month and may also pay for minimalist private insurance; health insurance is so heavily subsidized right now that it is impossible to predict where premiums for low-budget health insurance will stabilize. For as little as $50/month, it is possible to get a 'mini medical plan' that will cover a predetermined number of doctor visits, many prescription medications, daily hospital benefits and limited accident coverage. Medicare costs $100/month today.
http://www.medhealthinsurance.com/low-income-insurance.htm
After 20 years, the last of the baby boomers has retired and the drain on the treasury will drop by 20% over a few years and taxes can drop right along with the drain. Taxes can continue to drop over the next 20 years as the boomers and over-45 set die off. The national debt goes to zero (effectively a $5 trillion surplus since that's how much congress has pilfered from the trust funds over the years), the budget balances at $600 billion/year and entitlements are no more. See graph.
 |
| Federal Taxes and Spending to 2052 |
The $3 trillion in real state deposits combined with the net $5 trillion surplus from paying off the national debt can be used to smooth any bumps in the transition.
We must not allow means-testing on benefits since this scheme punishes good behavior and rewards bad behavior: those who save for retirement would lose benefits they earned while those who spend every penny are rewarded with extra benefits. Romney got this wrong.
I suggest a move away from fuel taxes to mileage taxes to fund transportation. My views on education cost control are in another post. Pension issues are gone and politicians who campaign to bring them back should be shot. Health benefits issues are also gone.
In my state, if we pulled out the giveaways, state & local government spending drops from $41 billion/year to $10 billion/year (assuming we follow my plan to reform education spending by focusing on the classroom). I cut everything but transportation, education and protection (assuming this means local cops, state cops, fire departments and national guard). This could be covered by a flat tax of 4% of state GDP.
The net result is that total government spending drops from 43% of national GDP to 7.75% of national GDP. I'm sure that this would be much more in line with the vision of the founders who went to war over a tax rate of about 11%. I'm not suggesting a shooting war, just a checkbook war.
This rate would reduce the tax burden of the average earner by $19,096/year. For those who spend every cent they earn and save nothing, they'll reap what they sow. The rest of us must prevent them from starting the exercise in socialism back up again. I suggest two constitutional amendments: balanced budget and no pyramid schemes.
All so-called entitlements gone. All deductions gone. All tax loopholes gone. All government subsidies gone.
Taxes reduced to just 7.75% and everyone must pay, no exceptions: individuals, households, businesses and corporations all pay. Whether the production, income or consumption method is used is irrelevant to me. Tax everything and tax it just once.
http://en.wikipedia.org/wiki/Gross_domestic_product
Property taxes disappear as do the deductions for them.
I think this is a worthy goal and it won't take much more pain to attain it.
The result is far more appealing than the one I proposed in my previous post on the national debt: that plan ended with the continuation of entitlements and a middle-class tax rate of over 40% (Clinton-era tax brackets) although that plan also paid off the debt. That plan also jacked up taxes on top earners to 50% for 20 years.
This plan zeroes the debt so our children can have a turn at ruining the country just like us. It cuts overall government spending from 43% to 7.75% of GDP. It also gives us a shot at being the second greatest generation.
Taxes reduced to just 7.75% and everyone must pay, no exceptions: individuals, households, businesses and corporations all pay. Whether the production, income or consumption method is used is irrelevant to me. Tax everything and tax it just once.
http://en.wikipedia.org/wiki/Gross_domestic_product
Property taxes disappear as do the deductions for them.
I think this is a worthy goal and it won't take much more pain to attain it.
The result is far more appealing than the one I proposed in my previous post on the national debt: that plan ended with the continuation of entitlements and a middle-class tax rate of over 40% (Clinton-era tax brackets) although that plan also paid off the debt. That plan also jacked up taxes on top earners to 50% for 20 years.
This plan zeroes the debt so our children can have a turn at ruining the country just like us. It cuts overall government spending from 43% to 7.75% of GDP. It also gives us a shot at being the second greatest generation.
Hi Mart,
ReplyDeleteHere's a test comment.
Kel
Hi Marty,
ReplyDeleteA lot of compelling/conflicting issues. Interested in your opinion on the Special Report in Time magazine entitled "Bitter Pill" written by Steven Brill. He posits that the discussion on healthcare costs is looking in the wrong direction. Everyone is in a lather about "who" pays rather than "how much" we're paying. Take a read it's well worth it.
Hi Anonymous,
DeleteThanks for reading.
After a fruitless 15-minute search, I was unable to find the full text of the article without subscribing to Time.
There were numerous related articles about the ridiculous hospital charges exposed in Bitter Pill. I'm not surprised since I've already written about the 40% profits taken by hospitals.
Between health insurers and hospitals, the profits are 54% of healthcare costs.
Before I decided to return to my free market, capitalist roots, I decried these profits as a means to help balance the national budget. Now I can compare them to profits in other industries where the rule of thumb is that wholesale is twice cost and retail is twice wholesale.
If you can direct me to a copy of Bitter Pill, I'd like to read it.
My actually comment about means testing social programs was akin to the Ant and the Grasshopper. "Most of the money I spent on wine, women and song. The rest I just wasted."
ReplyDelete