Flat Tax Plans and Growing Resentment on Both Sides

The problem is that neither side is willing to move towards the necessary actions required to get to a balanced budget. This is especially true of the Left which will not cut spending in any meaningful way. Of the various flat tax plans, Cain's 9-9-9 plan is revenue neutral, Perry's is set to create stimulus. But the real problem isn't with revenues, like Europe, the problem is with expenditures which are so high that it's estimated income taxes would have to rise to above 65% to bring the budget into balance, that is assuming there will be no drop in economic activity which defies standard economic theory.

It's also interesting to note that every tax plan is rigorously attacked for the "costs" of the plan by the left, but spending on social programs and such are never treated the same.

The demand for lower taxes reflects growing frustration with the current system where a shrinking few are increasingly asked to shoulder the burden. With around 47% of wage earners paying no income taxes whatsoever, the rest are being asked to pay more and more.

Reasonable people would adopt a revenue neutral plan that gets rid of tax breaks for special interests, corporations and the like, but unfortunately, there is an unreasonable side that refuses to bring expenditures in line with revenues.

I will ask this unreasonable side how they propose to bring the budget into balance using tax increases alone. As stated, income taxes would have to rise to above 65% and I've seen higher estimates. Add to that State income taxes, property taxes, and SS/Medicare taxes and the tax burden approaches 100%. This again assumes that there will be no change in economic activity with a nearly 100% tax on income. Once again, I ask how this proposal can be called reasonable by any thinking individual. Instead of rhetoric about the rich, I simply ask for a proposal that includes reality. There are simply some Americans that refuse to deal with the problem at hand and use rhetoric to try and preserve a system that is clearly unsustainable. We need to make changes because we have to. Unfortunately, the first stage is admitting that there is a problem in the first place and too many are not even at that first step.

What You Don't Understand About the Debt Ceiling Debate

What you don't understand is that spending is already at or near record levels. According to the White House, spending has more than doubled since 2000 and is due to increase yet again in 2011 to a record 3.8 trillion. If this isn't stimulus spending, I don't know what is. Yet I and many other common people, have absolutely no faith that this record spending is being spent wisely and will lead to future economic growth.


http://www.whitehouse.gov/omb/budget/Historicals

Year Receipts Total Outlays Deficit

2000 2,025,191 1,788,950 236,241
2001 1,991,082 1,862,846 128,236
2002 1,853,136 2,010,894 -157,758
2003 1,782,314 2,159,899 -377,585
2004 1,880,114 2,292,841 -412,727
2005 2,153,611 2,471,957 -318,346
2006 2,406,869 2,655,050 -248,181
2007 2,567,985 2,728,686 -160,701
2008 2,523,991 2,982,544 -458,553
2009 2,104,989 3,517,677 -1,412,688
2010 2,162,724 3,456,213 -1,293,489
2011 estimate 2,173,700 3,818,819 -1,645,119

The government sector is too large and needs to be restructured. People need to be shifted to jobs in the private sector, government needs to stop trying to be everything to everyone. The fact is that even with Boehner's plan, we would still have record levels of spending along with record projected deficits. That's why his plan is a huge compromise plan that is a win for Democrats already, asking for more is plain insulting. Look at the numbers and take $90 billion off of the outlays and off of the deficit. Does it even matter? Does it change the big picture? Be reasonable.

If these small cuts can't be enacted, what chance is there of real cuts in the future? No, people have been pushed against a wall and can't back up anymore. The fact that Boehner can't even get an agreement to freeze spending at 2011 levels shows how much he's backed down and enough is enough.

Reason Why Deficit Reduction Must Include Medicare

The discretionary budget is much smaller than the non-discretionary entitlements part which includes Social Security, Medicare, and Medicaid. Of those three, Medicare and Medicaid spending are projected to grow the most. So in order to "fix" the budget and get us to where we can run sustainable deficits of approx. -4%GDP, I see no way out other than to tackle Medicare and Medicaid.

I support ending subsidies for corporations including the green subsidies that are so favored right now along with all farm subsidies, but that's just a drop in the bucket.

I also support reducing the defense budget and eliminating costly weapons projects that deal with an enemy we don't have and won't get into a war with, such as Russia and China. Both have nuclear weapons and a war would end in mutual destruction. Due to the proliferation of nukes amongst high tech nations, conventional weapons such as fighters, bombers, and so forth are unlikely to be ever used so there is no need for them. Cutting defense spending would be a help in reducing the deficit, but again, not enough.

At least Ryan made a proposal. It's time for Democrats and President Obama to likewise, make a serious proposal that would reduce the deficit to manageable means. Constantly bashing Ryan's proposal gets us no further towards a solution, there has to be an alternative for the discussion to move forward and we haven't seen it yet. And to cut off the usual cries of tax the rich, that won't be enough either if Obama sticks to his promise that no one making under $250,000 will see a tax increase.

Argument Against Modern Monetary Theory and the New Keynesians

Can the FED can print all the money it wants to? Not without bad consequences, the ultimate being a Zimbabwe-like collapse of the monetary system.

What is missing from the discussion that of confidence. For the dollar to be an unit of account and store of value, society needs to have confidence that the numbers aren't being fudged, that whatever savings I've built up, my delayed consumption, isn't being manipulated.

Proponents of MMT and New Keynesian economics have pointed out that the government doesn't even need to issue bonds, it could just give itself dollars and spend up to the point where it can purchase 100% of the goods and services offered in the economy. Actually it can't, the monetary system would collapse well before the 100% and people would stop accepting dollars as money because they would have lost confidence in it as a fair and accurate unit of measurement. If even a dictatorship like Zimbabwe isn't able to compel its citizens to accept and use their worthless unit of account, I doubt the US Govt. would be able to.

The reason the government issues bonds at all (that is borrow) is to provide an open and transparent account and to assure the public that the dollar remains a good and fair measurement of the future consumption that they have saved. People want to know that, if they have saved $5 and that can purchase a sandwich at a fast food chain, they will wake up tomorrow and still have a sandwich "due to them" whenever they want it in the future. If they wake up and the $5 in their bank account can't buy them a sandwich anymore, then they know they've been had. Add expected inflation into the mix if you want a more accurate explanation.

When the government borrows money, the public knows that either future government spending will have to decrease, allowing the public to consume more (purchasing bonds is a way to delay consumption to the future), or the public will give up that future consumption in the form of higher taxes. Taxes are very visible and politicians are reluctant to raise taxes without implied consent from the public.

The FED printing money on the other hand, is a stealth tax that is not transparent and is not accounted for. At least with open market operations we can see how much the FED has printed, but as an independent agency that is not directly elected, the people have limited means to control the actions of the FED. No taxation without representation! That's a notion fundamental to our ethos. There are many reasons why FED printing of money and uncontrolled government money creation should be avoided.

Only under a communist dictatorship with an iron grip over society tighter than even Stalin was able to achieve, could government create money like the MMT/New Keynesians advocate. If I have $30000 in my bank account and the government all of a sudden types in $1,000,000,000,000 and posts it to their own account, I know all I've worked for my entire life amounts to nothing. Perhaps this gives a clue as to why people are so pissed off right now and are electing "extremists" like Rand Paul, who seem to understand better than the MMT folks.

Japan's Lost Decade, Glimpse of Our Future?

Below is a post by Michael Gordon, "The Buggy Professor", taken from here. It's well worth reading so I've posted it below.



Why Comparisons between the US and Japanese economies --- the latter locked in stagnation for two decades --- Are Misleading and Wrongheaded.

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1) FIRST SOME DATA ABOUT JAPAN, COMPARATIVELY VIEWED: per capita income


All translated into $US at purchasing power parity for 2009, estimated (CIA World Factbook)


USA: …….$46,400
Ireland….$42,700
Swiss……..$41,700


Austria…..$39,400
Holland….$39,200
Aussies…..$38,800
Canada…..$38,400
Belgium….$36,400
Denmark…$36,000


Britain…….$35,200
Finland……$34,900
Germany…$34.100
Spain………$33,700
France……$32,800


Japan……$.32,600
EU-27 Aver,,,,,,,,,$32,600
Greece …..$32,200
Italy………$30,300

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2) WHAT HAPPENED TO THE JAPANESE MIRACLE?

As you can see from the per capita income comparisons, Japan --- once touted by statist admirers like Robert Reich (the salvation from the USA depended on our copying Japanese industrial policies) --- Japan has ended up at just about the level of Greece in 2009.


How did this happen? Consider by way of response the growth rates of GDP from 1960 until 2009.


……………...Growth Rate of GDP
1960-1969: 10%
1970-1979: 5%
1980-1989…..4%
1990-1999…..1.5%
2000-2009…..0.8%

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In effect, Japan’s fast growth rate in the 1960s and 1970s reflected standard neo-classical Solow growth theory, and especially convergence catch-up: the further behind a country is from the lead country or countries in productivity and per capita income when it is launched into sustained economic growth, the faster it will grow compared to the lead countries, only to slow down as it approaches the technological frontier.

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3) Japan’s Government Debt Servicing and Rollover Needs for Government bonds

The two sources for the data in this section need to be set out here: http://ftalphaville.ft.com/blog/2010/03/08/167701/japans-brewing-fiasco/
http://www.economist.com/business-finance/displaystory.cfm?story_id=15663864


• Government debt in Japan already absorbs 35% of government revenues . . . a result of constant fiscal stimuli that failed to kickstart sustained good growth since the early 1990s.
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• Gross Government Debt equaled 192% of GDP in 2009. That is the 2nd highest in the world behind Zimbabwe at 304% of GDP. By comparison, Italy’s gross public debt is 115% of GDP and Greece’s 108%.

…….Japanese official spokesmen, plus some financial institutions, argue that gross total government debt in Japan overstates the problem. The government, it’s said, has lots of assets it could sell like its railway system to private businesses. Maybe. It depends on the estimated value of those assets.
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• In 2010, $2.4 trillion dollars worth of government Yen-denominated bonds are scheduled to be roll over. This astonishing figure equals about 45% of total Japanese GDP!


The big question here?

Will Japanese businesses, financial institutions, and householders be willing to recycle their matured bonds, never mind buy new bonds? Household savings --- which were once about 16% of GDP in earlier decades --- have plunged to around 3.0% of GDP last year. What’s more, as the population ages swiftly --- the Japanese already the oldest people among rich industrial countries ---more and more Japanese households will stop saving and begin to dissave for their retirement.

Up to recently, Japanese investment groups and big businesses have bought the government’s bonds, despite extraordinarily low interest rates --- two year bonds, for instance, returning 0.15% interest. Right now, it’s not clear, but some international financial observers note that the largest government pension funds’ agency,

GPIF, in charge of government pensions, has acknowledged that it won’t be capable of rolling over maturing bonds to meet its pension commitments and is instead going to open credit lines. (GPIF’s portfolio happens to be larger than India’s total GDP)


Note finally here that Japan’s short-term debt-maturity is only 6 years compared to the UK’s average 14 years.
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• Will foreign investment groups buy Japanese bonds if Japanese households and businesses and investment groups can’t cover all the new or rolled-over bonds?

Possibly. Japan’s financial flexibility has noticeably improved in the last decade or so. Still, it’s hard to believe that foreign investors would be happy with the very low rate of return on government bonds that the Japanese themselves have accepted. Imagine what Greece’s official national debt would dwindle to as a problem the Greek government could borrow at 3.0% or lower long-term rates for their bonds.

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4) UNSOUND AND MISLEADING COMPARISONS.

All of which brings us to the soundness or not of comparing the US economy today with a slide into a Japan-like future. The comparison, to put it bluntly, seems extravagantly unsound. And for several reasons, to wit:


• Overall, Japan’s economic structures and policies are very different from ours. Which means very different business and financial institutions; and public-private sectors interaction (far more government regulations); and culture (which emphasizes stability); and swiftly aging population; and hostility to immigration and (less now than before) openness to market-oriented reforms.
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• On top of that, Japan’s growth model for decades --- back to the end of WWII --- has stressed export-led growth --- national consumption kept to levels since the 1960s to somewhere between 55-58% (as opposed to the US’s 65-73%). Only Germany has a similar record of restraining domestic consumption (for whatever reasons) among the rich big countries in the world.
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• And until last year, the Liberal Democratic Party --- which united big giant corporations, giant financial institutions (the banks owning the corporations’ equity in large part, and the corporations in turn owning the banks’ lion share of equity), small businesses, and farmers ---ruled as the majority party since the early 1950s except for a 9-month coalition at the start of the 1990s. In the process, political and bureaucratic ties to special interests --- not least to those that cling to the status-quo --- have piled up and fence in the room for maneuver open to policy reforms.
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• Except for impressive technological innovation in the past --- by means of importing American and West European technologies or building around their patents, then improving on their quality incrementally while reducing prices for the finished goods in Europe, the USA, Asia, and elsewhere --- the Japanese have not been creative innovators on their own. As a result, despite noteworthy manufacturing in autos and consumer electronics (and to an extent in some ICT products and optics), the Japanese economy hasn’t experienced any big breakthrough changes in its industrial structures since the 1970s. By contrast, a good 75% of the Fortune 500 Biggest Firms in the USA in the late 1990s hadn’t even existed 25-30 years earlier.
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• As for industrial targeting, the best studies showed that it might have speeded up Japanese economic growth in the 1960s and 1970s by a tad. After that, it was used to prop up the most backward domestic industries and shelter them from international competition.
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• Enter demographics. Japan’s 128 million population is aging rapidly, making its average the oldest among the rich industrial countries. Aging populations are, like aging individuals, less and less willing to undertake risky changes in their lives. At the same time, as people enter into retirement, they begin to dissave. In the upshot, the Japanese face a problem of financially supporting more and more retirees with fewer and fewer active workers. The US native-born population, by contrast, is just about at replacement levels in births, not to overlook the benefits of our openness to legal immigration.
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• Finally, for complex reasons, Japanese culture --- forced under pressure to open up to epochal changes by the intrusions of the US navy and other industrial countries after the 1850s and 1860s and modernize rapidly --- has emphasized stability and aversion to change for decades now . . . the whole massive assemblage around the status-quo well-nigh impregnable.

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5) WHAT EMERGES HERE?

Just all this that follows:

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(I.) A DUALISTIC ECONOMY in Japan

Japan’s economy emerged even in its fast-growth period before WWII and into the next three decades as a dual-system: a small number of giant cartel-like advanced firms like Toyota, Panasonic, Sony, and so on --- increasingly internationalized under pressure of globalization --- and a huge set of backward, low-productive industries that have been protected from change by a combination of political pork-barrel, politically inspired governmental policies, bureaucratic regulations and intrusions into the private sectors of the economy, and fears and worries about disruptive changes that have pervaded the outlook of average Japanese.

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(II.) THE OUTCOME?

Sooner or later, despite all the misleading hullabaloo about Japan’s miracle --- never mind that Japan (like Germany) had won the cold war by 1991 and was about to become the world’s dominant economic and financial superpower --- these anti-change, anti-free market aversions and rigidities were bound to slow down the country’s growth.

--- Since 1991, that landmark year, Japan has vied with Germany to rack up the worst growth-performance of any industrialized or post-industrialized country since the 1930s’ Great Depression. And unlike Germany, whose governments starting in the Socialist-Green era earlier in the last decade – and accelerated in the Merkel era --- carried out a series of major labor-market reforms along free-market lines, the German economy looks capable of sustained solid, if relatively low growth in the future . . . at any rate, once the global economy recovers and the eurozone’s crisis-laden problems are solved one way or another.

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(III.) THE CAUSES OF STAGNATION.

As for the problems of Japan’s failure to recover from its huge financial and economic crash of the early 1990s, it’s not because of what Krugman and a few others have claimed have been the basic causes ---- timid policymaking in fiscal and monetary policies, which to boot now hover over the US economy.

Instead of that, it’s erratic, politicized policymaking that, as one cause, further disrupted a rigid dualistic economy resistant to change once the earlier growth-path and growth-model of a large statist-guided market-system crashed all around them. It’s the combination of these interacting clusters of structural rigidities, politicized catering to public fears of change, bureaucratic pathologies, a small mountain of anti-market rigidities, and a status quo of a dualistic economy marked by low-productive industries for most of the economy that underlies Japan’s two-decade stagnation.

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Examples:

• Japan’s regulators didn’t seek to overhaul the banking system for a good 8 to 9 years into the crisis of the 1990s. That included more effective regulations as well as seeking with government assistance to make the banks liquid and solvent. In the US, these measures were taken almost immediately. And that includes, let us hope, new and effective regulations to prevent a financial meltdown in the future. Here, despite all the fretful worries about our political system, it has generally performed with unusual speed and flexibility since the fall of 2008.

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• The claim that Japan’s governments haven’t fought the stagnant economy and deflationary tendencies with aggressive fiscal policies is simply wrong. If that were the case, how did the Japanese public sector end up with national debt almost 200% of its GDP (vs., to take one well-known calculation, about 80% here, much of which is intra-governmental transfers between programs and agencies). What is accurate is the haphazard ways fiscal stimuli have been applied: large amounts for a while, then the spigot shut tight for fear of inflation or excessive governmental debt.

--- Even now, Japanese and foreign specialists haven’t reached a consensus on whether the fiscal policies helped or hurt the Japanese economy’s short- and mid-term revival.
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• Monetary policymaking has also been erratic. At times it supported the fiscal expansion. Most of the time, it proved timid and often worked against fiscal stimuli. At times too, it engaged in outright quantitative expansion (along Krugman-urged lines), with dubious results


As for monetary policymaking, the fears of change pervading the shared mentality of a rapidly aging population --- where the ratio of active workers to retirees living for decades is declining too --- would have stymied even more effective monetary expansion had it been implemented.

Traditionally, you see, like all the Asian Pacific countries, the Japanese have been big savers for a combination of cultural reasons reinforced by the kinds of export-oriented policymaking of intrusive state-led policies.

One of the curious results?

When interest rates are low, Japanese households – like those in China or South Korea --- don’t interpret those low rates the way Americans (and Europeans) do: as signs that asset prices in the bond and stock-markets or in owned residences have risen in value and start consuming more. Americans in such a context feel wealthier. Not so the Japanese and other Asians. They have, apparently, set ambitions to save such-and-such a percentage of their annual income no matter whether their incomes have risen or fallen under pressure of boom-times or recessions or, in the Japanese case, prolonged stagnation. And so they try to save more.

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• Note though the contrary trend in the last 12-15 years among households.

Incomes have stagnated for two decades now in Japan. In the early and mid-1990s, Japanese household savings remained fairly high as a percentage of GDP, only --- as the stagnation persisted and people entered retirement --- for the households that are rapidly aging to be forced to dissave. That did help to offset the culturally inherited tendencies of younger households to save, but not nearly enough to interact with fiscal and monetary expansionary policies to kick-start the Japanese economy into any sustained growth from domestic stimuli.

Instead, the only sustained growth --- about four to five years in the middle part of the last decade --- came from export-surges prodded by the huge expansion of the global economy. Domestic consumption remained low (55-57% of GDP), and the solid if mediocre growth (about 2.0% a year) ensued. When the global economy tanked into a financial and economic crisis in 2008 and 2009, the Japanese export-dependent economy tanked too.

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(iv.) THE MISLEADING COMPARISONS WITH THE USA?

 By now, hopefully, they’re self-evident.

As it happens, Cassandras abound in certain economic and journalistic circles in this country, among which doomster-warnings are those of Krugman who has been sounding them since the fall of 2008.

At times, he’s been a good soundboard for those in the Obama administration who were planning a fiscal stimulus anyway. At other times, his dire warnings seem to reflect excessive pessimism compounded, perhaps, by his pique at not being where Larry Summers happens to be.

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 The fact is, the US economy – the most flexible and innovative among the rich industrial countries --- has recovered faster from its financial and economic crash than Japan or any of the EU countries, the whole Continent there stagnating since the official end of the recession in August 2009. There has been virtually no growth in GDP anywhere in the EU. The eurozone crisis has further inhibited a recovery by creating huge uncertainty in the business and financial worlds (with some limited spillovers here in our stock markets)

By contrast, the US economy has grown not just more quickly but by a long-shot compared to Germany, Japan, and all other industrial countries except Australia and Canada . . . both countries admirably undertaking noticeable economic and financial reforms, with Canada’s recovery closely tied to the American recovery, what with 80% of its strong export-performance slated for our country.

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 As for the unusual high unemployment, it’s worth remembering here: job-creation is always a lagging indicator in the recovery from a recession. Even after the shallow recession of 2001 ended in the start of the fourth quarter, it took nearly two years before the rise in unemployment topped and then began to fall fairly quickly.

Is 10% unemployment a bad thing?

Sure, no two ways about it. But, for the Cassandras in this thread, note 10.5% or so was the normal level of unemployment in France from the mid-1980s until the boom period (with some labor market reforms) in the middle part of the last decade. In Germany, the unemployment rate since 1990’s unification was even higher until the boom and even more impressive reforms.

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 A flexible innovative economy requires continual sector-reallocation of capital, skilled workers, entrepreneurial innovation, and constant technological change and adjustments before it can absorb the changes and the new surges in productivity. What government can do is limited: for those workers displaced from jobs owing to trade competition, accelerate trade-adjustment assistance. For other unemployed workers, seek to encourage better information about job-growth in other communities or economic sectors, all the while giving tax breaks to firms that hire new workers beyond a certain percentage of their existing employee staff.

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Michael Gordon, AKA the buggy professor

Our Current Low Inflation Environment

There is no inflation right now because people are deleveraging by cutting down their debt loads. Credit is still very very hard to get for the average person, I just applied for a mortgage and the fees alone are outrageous, but credit is limited and those who offer credit can charge whatever they want to. Most banks aren't interested in lending.

Americans understand that they can't spend like they used to, debt loads cannot continue to go up like they did before, the banks/credit lenders won't allow it and people don't want more debt anyway. So instead of spending and bidding up prices by demand, people are paying off debt as they can. We won't see inflation until the average American's balance sheet is repaired.

That means government fiscal policy will not be able to increase aggregate demand. As soon as government stops spending, demand will fall back to levels Americans find appropriate. However, should government continue to spend and spend, a new crisis will emerge pertaining to government debt loads. We'll be in the same position as Japan, the spending having accomplished nothing but with a huge debt weighing on our heads. Unlike what MMT proponents say, government cannot finance its debt and interest payments by itself, any attempt to do so will cause a collapse in confidence and bring about a crisis, much like the one we're witnessing in Europe.

The European crisis is one of the reasons for such low Treasury yields. Investors are pulling money out of Europe, selling their bonds, and investing in US Treasuries instead, causing a decline in yields. If there is one thing to be learned, it's that the financial landscape can change very very quickly once a tipping point is reached. Once confidence is lost and fear takes over, a stampede for the exits ensues. The collapse of the Euro from $1.50 to $1.23 was as quick as lightning. And it only took a matter of months for Greece to find out that their debt could only be sold at incredibly high interest rates, that is if it could be sold at all.

A similar tale awaits the US should it continue on with reckless spending, especially the useless pork barrel spending that the Congress is accustomed to. Once it becomes evident that the debt load is too large to finance, yields will rise very quickly and capital will flee the scene. Confidence once lost, is hard to regain. Draconian cuts to government spending will be demanded and government will have to surrender to the bond vigilantes and speculators as they have done in Greece, Spain, and even France.

We don't have to go down that road. And it bothers me that what money is being spent is not being spent well. At the very least spend money for productive projects that has some chance of paying off in the future, not on cars for clunkers or any of the crap that has so far been proposed. Tax breaks for corporations to buy equipment? No thanks. How about extending the Bush tax cuts permanently if you insist on continued stimulus? Allowing Americans to deleverage faster by taking less from them is the quickest way out of this crisis. The economy cannot heal until Americans are in better financial shape and are ready to spend again.

Commentary on Deficit Debate

The issue at hand isn't with the current budget and the huge deficits that may not be possible to cut in this time of crisis. It is with the continuation of these deficits for as far as the eye can see. Furthermore, the administration has attempted to enact additional programs that would be permanent and add to that already endless morass of large deficits. This is what people are concerned about.

There would be no issue if we ran -10%GDP deficits for 3 or so years, but the problems are structural and the current administration and congress refuse to acknowledge or deal with the long term problems that will impact us as soon as more Boomers begin to retire. No one wants to deal with tough issues and choices, but our leaders were elected for that purpose. The country has every right to be pissed, the buck has been passed for long enough, it can no longer be delayed for the next administration to handle.

We don't want to play the blame game. Fine past administrations and congresses put us in this place, but the current crop of officials were elected because we needed change. We needed people who would deal with the buildup of debt and crap and obligations. We didn't elect these officials just so they can whine and continue ignoring the problems of the country like past administrations. We expected real change, and change is difficult. These people who ran on change have failed to be different from the people we wanted to change. Enough excuses, it's time to deal with the situation at hand. Americans do not like whiners in our leadership, they expect decisive actions, not more finger pointing!

The F-22 vs. F-35 Debate And Government Waste

The US has been carrying the cost of defense for both Europe and Japan, the F-35 JSF was developed in order for our allies to share in the costs of defense.

Unfortunately, the defense department is a part of the government and thus, subject to all the waste and stupidity common to government entities. The F-22/F-35 conflict highlights the problem with having multiple goals.

The F-22 is an air-superiority fighter designed to take out tough defenses. With the F-22, there is no need for the F-35 since legacy F-16 fighters would be able to fly in unopposed and above short range SAM systems.

But then our allies wouldn't be able to share in the costs! So F-35 production moves on, but the F-35 is not as good of an air superiority fighter. It can't overcome tough defenses, but it can perform multi-purpose bombing and other roles and is a replacement for the F-16. The main advantage of the F-35 is that it is cheap, or is supposed to be cheap. But with cost overruns, it might cost over $100 million each when it's all said and done, which means POOR VALUE. No surprise that our government cannot get good value for the money.

http://www.f-16.net/news_article3370.html

The F-22 was designed to break stiff enemy air defenses long into the future. F-22 systems have truly no peer in lethality. The F-22 uses extreme altitude, high speed, high quality stealth, and leading edge sensors to kill and survive on its own terms.

What the two USAF leaders don’t understand is that once the F-22 has cleared the huge threats which are enemy long range super surface to air missiles (SAMs) and enemy aircraft, common legacy aircraft can do the rest of the bombing and not get touched by the lesser threats. In other words, current legacy aircraft that are in production now, the F-15, F-16 and F-18 can drop cheap near all weather precision bombs from high altitude and not get touched by shorter range battlefield SAMs, shoulder fired SAMs, anti-aircraft artillery ( “triple A”) and trash fire. “I can touch you, but you can’t touch me”.

Based on this, the USAF has not justified a reason to acquire the F-35. The F-35 is not interchangeable with the F-22. The USAF claiming that it needs an expensive all stealth fighter force isn’t practical.

With its limited funds, the USAF can rebuild its fighter force to meet requirements of expeditionary war and home air defense. This can be done by funding the F-22 to a proper number of aircraft and buying new build F-16s which still contain a significant war fighting capability.

All these issues show why it's so hard for government to get its act together and why it so often wastes money buying stuff that is not a good value. Obama would be lauded as one of the greatest presidents ever if he could only make government get its money's worth when spending.

Conservatives and Liberals United Against Health Care Bill Madness

It's incredible that this piece of crap can be passed with everyone against it. Conservatives and liberals both hate it, but somehow it's going through? I don't think it's too late to mount effective opposition, it's time to call the Senators that were on the fence and encourage them to switch over to a no vote. Then the House members, only one Senator has to switch and less than 10 Representatives.

Democrats need to oppose this bill and make sure it never passes. Everyone is in agreement that this is a piece of crap and will fail spectacularly. Once it fails, Democrats will get all the blame, they're the ones who crafted it, who passed it, who control all the levers of government, the backlash will be enormous, the progressive movement will be set back ten years, just as the conservative movement was set back by the horribly incompetent policies of Bush.

You all know what will happen, there is nothing in this bill that will reduce or control costs, when Americans find out that their health care will cost more and be no better, only worse, there will be a lot of anger. We elect Democrats and this is what we get? You can expect another 1994, time for people to DO SOMETHING and voice your displeasure with Senators and Representatives, tell them that you're not in their district but this bill affects everyone in this country and so you are telling them to vote no. If they don't, you'll donate to their opponent come election time and do everything you can to make sure they are defeated. This is the only type of populism that works, the only threat that Congressmen take seriously and the only weapon the people have as powerful as the ones wielded by the large corporations and special interests that have inserted all they've wanted into this bill.

What's Wrong with California

What's wrong with California? I've collected a few articles that highlight the reasons why California is in such serious trouble. A couple of friends have already moved away, I'm thinking of moving myself. If you don't understand what is going on with California, the articles below will reveal the hellhole I call home.

City Journal says,

When I recently appeared on Glenn Beck’s TV show to discuss California’s dreadful fiscal situation, I mentioned that in Orange County, where I had been a columnist for the Orange County Register, the average pay and benefits package for firefighters was $175,000 per year. After the show, I heard from viewers who couldn’t believe the figure, but it’s true. Firefighters, like all public-safety officials in California, also receive a gold-plated retirement plan: a defined-benefit annual pension that offers 90 percent or more of the worker’s final year’s pay, guaranteed for the rest of his life (and the life of his spouse).

Government employees use various scams to boost their already generous benefits, which include fully paid health care and cost-of-living adjustments. The Sacramento Bee coined the term “chief’s disease,” for example, to refer to the 82 percent (in 2002) of chief’s-level employees at the California Highway Patrol who discovered a disabling injury about one year before retiring. That provides an extra year off work, with pay, and shields 50 percent of their final retirement pay from taxes. Most of these disabilities stem from back pain, knee pain, irritable bowel syndrome, and the like—not from taking bullets from bad guys. The disability numbers soared after CHP disbanded its fraud unit.

From the Sac Bee

Just days before Gov. Arnold Schwarzenegger and legislators finalized a water package, including an $11.1 billion bond issue, state Treasurer Bill Lockyer warned them not to do it.

California is already deeply in debt, Lockyer warned, has huge budget deficits and can't afford another big bond issue.

"The days of blithely heaping more and more debt burden on the general fund are over – at least they should be," Lockyer said.

The earmark-laden bond issue, the package's single most controversial element, raises an interesting question: Just how deeply in debt are our state and local governments?

The answer: No one knows for certain, since debt is scattered through myriad agencies in many forms, but well over a half-trillion dollars is a fair estimate.

Lockyer's warning pertained to the state's "general obligation debt," which currently stands at $59 billion, and there are an additional $50-plus billion in general obligation bonds that have not yet been sold. The biggest chunks of debt, however, are the unfunded obligations for pensions and health care of retired public employees.

The latest annual pension report from the state controller covers 2006, when the unfunded liability was $64 billion. But since then, state and local pension funds have lost at least $150 billion on investments, so a reasonable estimate of today's unfunded liability is $200-plus billion. A state commission, meanwhile, says the state-local liability for retiree health care is about $100 billion.

No one keeps complete data on local government general obligation debt, but it appears to be roughly the same as the state's, perhaps $50 billion, plus several billion dollars in debt incurred by local redevelopment agencies.

There are tens of billions in specialized state debt, such as veteran home loan bonds, "securitization" of tobacco lawsuit proceeds, and budget deficit bonds.

The interest that must be paid on all that state and local debt is probably an additional $100 billion, so we're already talking about well over $500 billion.

Forbes weighs in,

Right now California's economy is moribund, and the prospects for a quick turnaround are not good. Unable to pay its bills, the state is issuing IOUs; its once strong credit rating has collapsed. The state that once boasted the seventh-largest gross domestic product in the world is looking less like a celebrated global innovator and more like a fiscal basket case along the lines of Argentina or Latvia.

It took some amazing incompetence to toss this best-endowed of places down into the dustbin of history. Yet conventional wisdom views the crisis largely as a legacy of Proposition 13, which in effect capped only taxes.

This lets too many malefactors off the hook. I covered the Proposition 13 campaign for the Washington Post and examined its aftermath up close. It passed because California was running huge surpluses at the time, even as soaring property taxes were driving people from their homes.

Admittedly it was a crude instrument, but by limiting those property taxes Proposition 13 managed to save people's houses. To the surprise of many prognosticators, the state government did not go out of business. It has continued to expand faster than either its income or population. Between 2003 and 2007, spending grew 31%, compared with a 5% population increase. Today the overall tax burden as percent of state income, according to the Tax Foundation, has risen to the sixth-highest in the nation.

The media and political pundits refuse to see this gap between the state's budget and its ability to pay as an essential issue. It is. (This is not to say structural reform is not needed. I would support, for example, reforming some of the unintended ill-effects of Proposition 13 that weakened local government and left control of the budget to Sacramento.)

But the fundamental problem remains. California's economy--once wondrously diverse with aerospace, high-tech, agriculture and international trade--has run aground. Burdened by taxes and ever-growing regulation, the state is routinely rated by executives as having among the worst business climates in the nation. No surprise, then, that California's jobs engine has sputtered, and it may be heading toward 15% unemployment.

So if we are to assign blame, let's not start with the poor, old anti-tax activist Howard Jarvis (who helped pass Proposition 13 and passed away over 20 years ago), but with the bigger culprits behind California's fall. Here are five contenders:

continue reading

National Affairs writes,

It would be difficult to overstate the magnitude of California's troubles. In economic terms, the state is simply broke: issuing IOUs as payments for goods and services, begging the federal government to back state debt (a request the Obama administration denied), and watching its credit rating plummet. To address a $42 billion shortfall in February of this year, the legislature enacted a package that included the largest state tax increases in American history, leaving California with the highest sales and personal income-tax rates in the country (though Hawaii would supplant its lead in the latter category in May). When another $26 billion shortfall emerged by summer, lawmakers — chastened by the 2-1 rejection of further tax hikes in a May 19 special election — agreed on another package that featured more than $16 billion in spending reductions, including deep cuts to education, health, and social services.

That's not even the worst of it. For all of the high drama that has accompanied 2009's fiscal travails (a stunning populist backlash against high taxes, widespread public-employee protests over spending cuts), California's lawmakers let the crisis go to waste — failing to use the moment to improve the state's financial outlook. As the San Diego Union-Tribune's John Marelius noted:

[California projects] a deficit of between $7 billion and $8 billion for the next budget cycle. Plus, federal stimulus money, $5 billion of which was used to backfill education cuts this year, may not be available. And about the time the next governor takes office, $16 billion in temporary tax increases that were included in [the] February budget deal will expire.

As if that weren't apocalyptic enough, California's short-term ­financial difficulties pale in comparison to its long-term obligations. In the most recent fiscal year, the California Public Employees' Retirement System and the California State Teachers' Retirement System, the state's two largest pension plans, lost a combined total of nearly $100 ­billion — about a quarter of their value — in the market downturn. If legislators thought tackling a $60 billion deficit was trying, they are sure to love the challenge of making good on California's fixed pension obligations — which Governor Arnold Schwarzenegger has estimated are $300 billion in the red.

And fiscal troubles are just the tip of the iceberg. California's percentage of adults without at least a high-school education is the second-highest in the nation (and the fact that 72% of those without diplomas are immigrants only fuels the state's growing problem of social stratification). The Commonwealth Fund has ranked the quality of California's health care lowest of the 50 states. The state has the highest rate of criminal recidivism in the country. It has six of the ten worst cities in the country in air pollution. Los Angeles and San Francisco have some of the most congested roads in the nation, which costs the state's employers billions in lost productivity each year. The state is seriously discussing mandatory water rationing, and has in recent years experienced severe disruptions of its electricity supply. Unemployment is over 11%, and a recent survey of corporate CEOs ranked California the worst state in the country in which to do business. It is losing native-born ­citizens faster than any other state.

Finally, the New York Times offers another clue as to why California is imploding,

Still, what California does often takes on outsized significance because the state’s welfare rolls are outsized. In July, while looking for budget cuts, Mr. Schwarzenegger complained that California had 12 percent of the nation’s population but 30 percent of the people on welfare.

As elsewhere, California’s welfare rolls plummeted after the 1996 national overhaul of welfare, from 921,000 families in 1995 to 466,000 families in 2008, but they did not fall as much as in most states. In the recession, rolls have climbed and are projected to reach 557,000 families in 2010, or about 1.3 million individuals.

Parents with special hardships or the youngest babies have always been exempt from work requirements in California, but now two large groups making up one-third or more of all applicants can also opt out: single parents with a child age 1 to 2, or those with two children under 6.

Ms. Zendejas, 20, is the mother of two boys under 6. She has worked part time as a supermarket cashier, but under the old work-to-welfare rules she was supposed to spend an additional 15 hours in vocational training or searching for a more stable job, an effort that she found too hard to juggle, resulting in a financial penalty.

Now she needs to do none of that to get her check, and the penalty of more than $120 a month is ending, too. “It’s a relief,” she said.

The shit is hitting the fan. It won't be long now until the final confrontation between the various leeches who are sucking Californians dry and the taxpayers who have clearly reached their limits. After a record tax increase and already with the nation's highest sales taxes and second highest income taxes, the budget deficit will again be in the tens of billions. Stay tuned.

Health Care Bill Giveaways

Wow, just got through reading the summaries and skimming over the bill. I don't see how this bill will not cost us a LOT more to provide health care. It drastically expands the subsidies to "low-income" people and also expands Medicaid to cover more people. It also removes lifetime caps from all policies! Just some of the benefits that are being added from the government webpage:

* It will end increases in premiums or denials of care based on pre-existing conditions, race, or gender, and strictly limit age rating.
* The proposal will also eliminate co-pays for preventive care, and cap out-of-pocket expensesto protects every American from bankruptcy.

Improving quality of care for every American. The legislation will ensure that Americans of all ages, from young children to retirees have access to greater quality of care by focusing on prevention, wellness, and strengthening programs that work.

* Guarantees that every child in America will have health care coverage that includes dental, hearing and vision benefits.
* Provides better preventive and wellness care. Every health care plan offered through the exchange and by employers after a grace period will cover preventive care at no cost to the patient.
* Increases the health care workforce to ensure that more doctors and nurses are available to provide quality care as more Americans get coverage.
* Strengthens Medicare and Medicaid and closes the Medicare Part D ‘donut hole’ so that seniors and low-income Americans receive better quality of care and see lower prescription drug costs and out-of-pocket expenses.

Even more found elsewhere:

INCREASE DEPENDENT AGE FOR POLICIES THROUGH AGE 26: Allows those through age 26 not otherwise
covered to remain on their parents’ policies at their parents’ discretion.

COBRA EXTENSION: Allows individuals to keep their COBRA coverage until the Exchange is up and running.
[NOTE: This is separate from the Recovery Act provisions that provide premium assistance for selected groups.]

ENSURING RECONSTRUCTIVE SURGERY FOR CHILDREN: Requires plans to pay for reconstructive surgery for
children with deformities.

Even more:

IIMMPPRROOVVEEDD BBEENNEEFFIITTSS
CREATES REINSURANCE FOR EARLY RETIREES: Creates a new temporary reinsurance program to help offset
the cost of coverage for companies that provide early retiree health benefits for those ages 55-64.

IMMEDIATE HELP FOR THE UNINSURED (INTERIM HIGH-RISK POOL): Creates a $5 billion fund, modeled after
the President’s plan, to finance an immediate, temporary insurance program for those who are uninsurable
because of pre-existing conditions.

NEW LONG-TERM CARE PROGRAM (CLASS ACT): Creates a new, voluntary, public long-term care insurance
program to help purchase services and supports for people who have functional limitations. Benefits are a
daily or weekly cash benefit to help people with functional limitations purchase the services and supports
needed to maintain personal and financial independence. CLASS would supplement, not supplant, traditional
payers of long-term care (e.g. Medicaid and/or private long term care insurance).

PPUUBBLLIICC HHEEAALLTTHH IIMMPPRROOVVEEMMEENNTTSS
INCREASES FUNDING FOR COMMUNITY HEALTH CENTERS: Provides increased funding for community health
centers that will allow them to double the number of patients served over the next five years.

IMPLEMENTS NEW PREVENTIVE HEALTH SERVICES PROGRAM IN COMMUNITIES: Provides immediate
funding for preventive services at the community and local level to address public health problems such as
obesity, tobacco use, and diabetes.

EXPANDS PRIMARY CARE, NURSING AND PUBLIC HEALTH WORKFORCE: Increases access to primary care by
sustaining the current efforts to increase the size of the National Health Service Corps. Primary care and nurse
training programs are also immediately expanded to increase the size of the primary care and nursing
workforce. Ensures that public health challenges are adequately addressed.

EMPLOYER WELLNESS PROGRAMS: Establishes a grant program for employers to promote healthy behaviors
among their employees.

And even more!!!!

BEGINS TO FILL IN THE MEDICARE PART D DRUG DONUT HOLE: Provides for a 50% discount on brand-name
drugs in the Part D donut hole, and immediately shrinks the size of the donut hole by $500 in 2010. The donut
hole continues to be narrowed over the coming years until it is fully eliminated by 2019.

ALLOWS STATES TO COVER LOW-INCOME INDIVIDUALS WITH HIV: Gives States the option of extending
Medicaid coverage to HIV-positive individuals and provides enhanced federal matching payments for the costs
of care.

INCREASES REIMBURSEMENT FOR PRIMARY CARE IN MEDICAID: Brings reimbursement for primary care
services in Medicaid up to Medicare levels with 100% federal funding (phased in over several years).

PROVIDES FOR 12-MONTH CONTINUOUS ELIGIBILITY IN CHIP: Provides continuity of care for children by
requiring that states provide 12-month continuous eligibility for children in the CHIP program

ELIMINATES BARRIERS TO ENROLLMENT IN MEDICARE LOW-INCOME SUBSIDY FOR PART D DRUG
PROGRAM: Eases burdens on enrollment so more low-income beneficiaries can get the financial help they
need to make health care affordable.

NEW PROTECTIONS IN MEDICARE ADVANTAGE: Limits cost-sharing for services in Medicare Advantage plans
to no more than cost-sharing in traditional Medicare, and provides for bonus payments to high-quality plans.

ESSENTIAL BENEFITS: In preparation for reform, the Health Benefits Advisory Committee reports their
recommended essential benefits package to the Secretary of HHS for adoption.

Additional federal funds to states with high unemployment. Assists States in maintaining access to
Medicaid services during the recession by extending the current Recovery Act increase in federal Medicaid
payments to states with high unemployment rates.

IMPROVES LOW-INCOME PROTECTIONS IN MEDICARE: Increases the assets test limits in the Part D drug
program and Medicare Savings Programs to ensure that more low-income beneficiaries get the financial help
they need to make their health care affordable.

EXTENDS MONTHS OF COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR KIDNEY TRANSPLANT PATIENTS:
Lifts the current 36-month limitation on Medicare coverage of immunosuppressive drugs for kidney transplant
patients who would otherwise lose this coverage on or after 2012.

I didn't bother to go on because this post is already getting too long. How much will this all cost? The site says zero for the first 10 years, actually a positive $100 to the deficit in the first 10 years, but I'm waiting to see the total cost, I bet most of the costs are delayed in order to game the 10 year projection the CBO issues, the numbers breakdown is not yet available. Wow, a whole bunch of giveaways and expanded services, I just don't see where the cost savings would come from and how we're going to pay for the real costs once the plan is implemented and real numbers come in instead of these projections. More posts later