Category Archives: unemployment

President Obama’s Deceitful And Relentless Sisyphean Type Punishment Of The Middle Class

In Greek mythology Sisyphus was a deceitful king who was punished after death by being compelled to roll an immense boulder up a hill only to watch it roll back down, and to repeat this action forever. He deserved the graphic punishment. Middle class Americans are being subjected to a different type of Sisyphean punishment as a result of our government’s failed policies which prevents them, despite a lifetime of hard work and achievement, from being able to earn and save enough to pay for their children’s education, purchase a home, or build a fund for retirement. The middle class is the back bone of American capitalism. They produce our products and services and their spending is vital to GDP growth. It is no wonder that the US economy is sputtering. This article will examine how from the start of his presidency, President Obama’s fiscal, healthcare and immigration policies have exacerbated the undeserved and increasingly severe Sisyphean punishment of the middle class. It will also explore the various actions our federal government can take to improve our economy and our safety and at the same time alleviate the punishment of the middle class.

President Obama calls the socialist economic system developed by liberal Democrat entitlementists, his “Middle Class Economics”. His intent is to deceive voters into believing he cares about the middle class. He talks about creating middle class jobs, but, except for favoritism toward destructive unions that support him and other Democrats, has shown a total disregard of the middle class. We know that the compensation problems of the middle class began before the election of President Obama who inherited a deep recession, but despite a continuing series of stimulus programs from the Fed that reversed the decline, his fiscal policies, or “Obamanomics”, have failed to grow the US economy sufficiently to generate middle class wage increases. In fact, his policies have extended the decline in middle class wages during his presidency. Unemployment is down as a result of the growth of low-paying jobs and people leaving the work force. But, under Obamanomics we have too many middle class or former middle class Americans who are underpaid, unemployed, under-employed or have given up looking for work.

President Obama has raised federal income taxes on many of the middle class by eliminating their Bush tax cuts and imposing a Obamacare income tax on their capital gains income. He talks of spending on transportation infrastructure to grow the economy and create middle class jobs but he failed to do so when Democrats controlled both houses of Congress and he had the opportunity. Nor did he promote adequate spending on defense to maintain our military superiority that also would have created middle class tax-paying jobs. Instead he squandered trillions of dollars on predictably ineffective fiscal stimulus programs that included unsound loans to green energy companies and supported expansion of unproductive welfare programs, including Obamacare which is harming the economy. His claimed Keynesian stimulus programs failed because they were not aimed at creating tax-paying jobs that would have stimulated further economic growth and generated substantial tax revenues. Increased spending on food stamps increases the GDP and provides a short-term benefit to the recipients, but has a low multiplier effect because it leads to the creation of mostly part-time minimum-wage jobs. It increases the National Debt because it fails to generate increased tax revenues.

For decades members of the middle class enjoyed more financial success than their parents. With the decimation of the middle class that is no longer true. The most significant economic problem in the US today is not the growing income of the wealthy who are living the American dream, but the elimination of the gap in discretionary after-tax income after spending on food shelter, transportation, education and healthcare, between the unproductive poor and the productive middle class. The Obamacare subsidies, whether they are intended to do so or not, have narrowed or eliminated the gap. They have even made it possible for families who become skilled at maximizing welfare benefits, legally or illegally, to have higher discretionary income than the hard-working middle class achievers whose wages are declining. A family living of four in New York City can qualify for welfare benefits exceeding $70,000 per annum. Why haven’t more voters recognized that liberal Democrat entitlementists have created a welfare state that makes it financially desirable for many Americans to have children out-of-wedlock to be able to maximize benefits from the wide variety of available welfare programs than to get married, form a family unit and work hard to support it? That situation is unlikely to change as long as a Democrat occupies the White House.

Defining the middle class and the upper-middle class is difficult. Reasonable people can disagree as to what constitutes middle class and upper-middle class income. It varies greatly from city to city. In many cities pre-tax incomes of $70,000 to $100,000 before deducting healthcare, housing and transportation costs might be considered as middle class and $125,000 to $150,000 as upper-middle class. Others like New York, LA and Dallas require much higher income levels like $150,000 or $250,000 for an individual to be considered middle-class or upper middle class and an additional $30,000 to $50,000 for a family of four. Since the cost of living is higher in cities where middle class and upper-middle class incomes are higher, the Sisyphean type punishment applies to virtually all middle class and upper-middle class families. It also applies to many upper income families living in high cost areas.

Middle class and upper-middle class families generally encourage their children to work hard in school to get into the colleges of their choice. Unlike children from poor families who generally get full tuition scholarships if they get accepted at a college, middle class children generally do not qualify for need scholarships and have to bear a large part of the cost of college. Accumulating savings to pay for college has become more difficult during the past decade as the cost of tuition has soared due to government guaranteed loans and middle class incomes have declined. The problem became exacerbated because the savings of many middle class families was decimated when their home and other investments declined in value during the Great Recession. Students and their families have been relegated to taking out college loans in ever-increasing amounts at excessive rates of non-deductible interest. Upon graduation most of the students, except for those graduating college with the most desired skills or who are athletes or entertainers, even if they are hired in good tax-paying jobs that qualify them to be immediately counted in the middle class or upper-middle class, find themselves living with their parents, unable to repay their college loans or form a family unit. Many college graduates are unemployed or under-employed and unless substantially modified many of the current student loans are likely to be defaulted.

President Obama chose Obamacare as his most important Obamanomics initiative. He knew when he proposed Obamacare that it would place a yoke on the shoulders of the middle class and make them pay excessive premiums and deductibles. Although he knew the truth about Obamacare when it was first proposed, he disgracefully lied repeatedly for political gain about the cost reduction of $2500 per year for Obamacare plans and about keeping your doctor and your plan. He also claimed Obamacare would reduce the use of ERs as doctors for the poor. However, many poor people are expanding their demand for free treatment at hospital ERs. Where else can they find a doctor who will immediately treat them or their children 24 hours a day? He lied because he knew that if he told the truth about Obamacare, it would not have passed in Congress. President Obama’s long-term objective is clear. He is an entitlementist who wants to secure votes for Democrats from the people who benefit from Obamacare’s expansion of Medicaid and who receive premium subsidies, the new entitlements. As a socialist he wants the federal government to control healthcare which represents more than 15% of the GDP. Socialists believe that government can provide healthcare better and more efficiently than the private sector. We are already seeing strong evidence to the contrary.

President Obama’s lies also succeeded in preventing most voters from learning prior to his re-election and even to this day that Obamacare requires the middle class to pay grossly excessive premiums and deductibles to help pay for the enhanced mandated benefits given to the poor, the sick and the low-income workers whose coverage is free or highly subsidized. He also failed to disclose that young taxpayers are required to pay even higher premiums to help keep down the rise in costs for the older middle class individuals whose healthcare costs are predictably higher. He deliberately concealed the future rise in premiums and deductibles for the middle class, who are not eligible for subsidies. Such a rise is inevitable as a result of the increase in Obamacare insurers’ outlays as their statutory protection is phased out over a three-year period and as the sick learn how to make greater use of their Obamacare policies that can be purchased without regard to pre-existing conditions, but offer up to $2 Million in benefits. Helping people with pre-existing conditions to obtain improved healthcare is a desirable goal that was being pursued prior to Obamacare. Offering them a Rolls Royce healthcare plan at substantially below cost and requiring the middle class to pay for it, is outrageously unfair. Prior to Obamacare many middle-income families, unless their children qualified for large scholarships, used most or all of their life savings to pay for their children’s college tuition and related costs. After Obamacare they are likely to have little or no savings to pay for education.

Employers, many of whom offer healthcare benefits, are also subjected to the horrors of Obamacare mandates and rising premiums. To avoid Obamacare burdens, many employers are converting full-time to part-time jobs and will pay penalties rather than Obamacare premiums, while encouraging their low-income employees to seek subsidies under Obamacare. Corporate executives facing a long-time stagnant economy and obsessed with increasing profits to please shareholders and to justify their excessive compensation will continue using increasing healthcare costs as an excuse for limiting wage increases.

President Obama is now claiming Obamacare is a success because an increased percentage of Americans have healthcare coverage. The increase results from people taking advantage of Obamacare’s new welfare entitlements that give coverage for free or at below cost to (i) poor people signing up for expanded free Medicaid, (ii) sick people, who couldn’t previously obtain coverage, taking advantage of the opportunity to purchase insurance at standard rates which pay for only a small fraction of their high-cost care and (iii) low-income people buying expensive Obamacare policies because they are offered discounts in the form of subsidized premiums and deductibles. President Obama ignores the evils of Obamacare, which include the hundreds of billions of dollars of costs to offer these new entitlements or the harm to doctors and other healthcare providers and the reduction in the quality of care resulting from attempts to limit cost increases for those who pay. Some healthy middle class people have been tricked by Obamacare ads into signing up for insurance to avoid paying a penalty. They are not told that the penalty is less than the over-priced premium for a Obamacare policy that may be worthless to them because of the exorbitant deductibles. He considers it a success because more people have coverage and once you give an entitlement it is difficult to take it away. He obviously doesn’t care about the spiraling cost of Obamacare premiums for the unsubsidized middle class, the damage to the healthcare system, or the size of the National Debt. That’s for the next president to worry about.

President Obama believes that even if the Supreme Court rules that a major portion of the subsidies are being paid illegally, Republicans will be afraid to enforce the law and will grant a waiver to those receiving subsidies. Republicans in Congress should go to the aid of the middle class by voting to eliminate all the Obamacare subsidies and mandates regardless of the Supreme Court’s decision and  immediately propose a replacement for Obamacare even though they know it will be vetoed by President Obama. Republicans should make the repeal of Obamacare a major 2016 campaign issue. Republican control of the White House may be required to appeal Obamacare.

Obamacare and the skyrocketing costs of other welfare entitlements are likely to prevent most of the middle class from ever again accumulating meaningful wealth despite a lifetime of hard-earned achievements. They virtually guaranty that the Sisyphean punishment of the middle class will persist from generation to generation unless we find a way to grow the GDP at more than 5% per annum and Congress (i) reins in welfare spending as a percent of the GDP, (ii) modifies welfare benefit rules to discourage bearing children out-of-wedlock and encourage family formations or at least identification of fathers, (iii) creates incentives to work, (iv) repeals Obamacare, or at least its subsidies and mandates, (v) deals with future unfunded Medicare obligations and (vi) modifies and enforces our immigration laws. The horrendous growth of the National Debt resulting from welfare costs, including Obamacare subsidies, has to date gone almost unnoticed because, due to Fed low-interest rate policies, it has not yet significantly impacted taxpayers. The people who qualify for the Obamacare subsidies pay little or no federal income tax and many receive negative income tax payments, another form of welfare for the poor paid for by tax-payers.

Most Americans are oblivious to the dangers posed by the National Debt which exceeds $18 trillion. They know that we are a rich country. They observe our amazing technology, the continuous growth in stock market indexes and the financial success of many Americans and the top 1% in particular. The number of millionaires and billionaires is skyrocketing. They do not understand that if the National Debt continues to grow much faster than the GDP (as it has during the entire term of the Obama presidency) which is likely because our government faces tens of trillions of dollars of unfunded entitlement liabilities, and if interest rates return to prior levels, a time will come when our government has to raise taxes, confiscate wealth or print large amounts of dollars to pay the annual interest charges. Since the tax burden of middle class taxpayers is already excessive, socialist entitlementists are beginning to make demands to substantially increase the tax rates on the upper class and the wealthy and eventually will demand confiscation of wealth. Such tax increases or confiscation of wealth inevitably will likely lead to an economic decline further harming the middle class and jeopardizing the survival of American capitalism. Our country’s financial condition could change suddenly if the National Debt spirals upward and the US dollar is abandoned as the world’s exchange currency and collapses in value.

President Obama argues for a higher minimum wage, which is of questionable overall benefit. It will help some workers working for the minimum wage and hurt others and does not help the middle class. Walmart and others have recently increased wages of their mostly low-income employees, but middle class wages are unlikely to rise significantly unless we have much stronger economic growth that spurs demand for labor or corporations elect to treat their non-executive employees more favorably. Henry Ford believed that raising the wages of his employees would enable them to purchase cars. President Obama has made no meaningful effort to convince corporations to share a portion of their increasing cash flow with middle class employees rather than using it to pay grossly excessive executive compensation and giving it to shareholders in the form of increased dividends and stock buy-backs. He could have tried to encourage voluntary middle class wage increases or proposed changes in the federal corporate tax laws to give tax credits to entities giving salary increases to middle class and other non-executive employees. He might also have proposed legislation to give workers a voice in management by requiring the election of an employee representative to the board of directors.

Socialism has a long history of failure. Some might argue it is beneficial in countries with an educated and motivated work force and only a limited number of people in need of welfare benefits. However, it becomes destructive as the number of families relying on welfare grows to unsustainable levels.

The middle class is not the only group to suffer from excessive welfare entitlements. Although poor families (a large number of whom are single parent families) are singled out for preferential treatment by President Obama’s socialistic policies, quality of life for welfare dependent families has declined. Children from poor families often fail to achieve in school for any number of reasons despite trillions of dollars of government funding provided for food, housing, education and other benefits. Too few of them learn about personal responsibility and self-reliance from a parent, grand-parent or from religious training. Only a limited number of them achieve in school and become eligible for available fully paid college scholarships. Some, whether or not they finish high school, achieve the American dream by working part-time (or full-time) beginning at low pay and with effort advance up the jobs ladder to achieve middle class status or higher. However, under our failing system, a large number of people in our inner cities have turned to the welfare system as their principal means of support. Young girls often become un-wed mothers and live off the wide assortment of welfare benefits which they maximize by avoiding marriage and having additional children with the same or another unidentified father. Too many young men find a way to share the welfare benefits given to women who bear their children out-of-wedlock. Others, relieved of the obligation of supporting a family, are satisfied with part-time dead-end jobs. Many turn to joining gangs and selling drugs as their main source of income.

Recent developments have reminded us of the problems faced by many of our largest cities and how unsuccessful our efforts to improve the lives of the most needy Americans have been. Socialists do not understand that a poor person is better off being given a fishing pole than a handout of a few fish. We are learning from inner city unrest that people can’t live with dignity on welfare by choice or because there are no available tax-paying jobs. Our long list of well-intended housing programs, costing more than a trillion dollars over a more than 50 year period, have often temporarily improved housing conditions for the poor, but have over time destroyed more communities than they have helped. Instead of recognizing the negative effects of our socialistic welfare system on the lives of the poor, President Obama and other Democrat liberal entitlementists are now attempting to expand welfare benefits and shift the blame for their failed leadership on alleged police racism. They have promoted hatred of, and attempted to criminalize the efforts of, the men and women in blue who risk their lives daily to attempt to prevent crime in our inner cities. Almost every incident involving a killing of an unarmed person of color by the police becomes a sensationalized national news event prompting a large protest, whether or not justified. Too often the protests are provoked and get out of control leading to looting and arson because the police are told by local politicians and police chiefs to stand down. The inner city destruction that results leads to a demand for increased welfare to clean up the damage and rebuild. Most of the cost of rebuilding will fall on middle class taxpayers. Crime and murder rates are now on the rise in the areas inhabited by the poor in many cities where the police, prevented from performing their job and facing the risk of being personally attacked or unfairly charged with wrongdoing, become less confrontational to protect their own safety.

The middle class and the poor have also suffered from President Obama’s wanton failure to enforce US immigration laws which has enabled illegal immigrants to work at millions of jobs at below the minimum wage. Many of such jobs had previously been tax-paying middle class jobs available for legal residents. Liberals argue that these are jobs that Americans do no want. That is true in some cases, but is clearly not true for many desirable jobs involving manual labor where language and mechanical kills can be learned on the job. The long list of jobs includes building, improving, repairing and maintaining homes, apartments, sidewalks, driveways, landscaping and pools. Although employers benefit from the cheap source of labor, these are the types of potentially tax-paying jobs we need to rehabitate the middle class and lift the inner-city poor out of poverty and reduce the number of people needing welfare.

The illegal immigrants entering into the US across our borders or overstaying their visas are using their children born in the US and eligible for food stamps and other welfare benefits as their anchor to remain in the US and as their personal ATM to fund their family’s basic financial needs. Illegal immigrants are able to further improve their way of life by working at or even below the minimum wage without paying withholding taxes or receiving healthcare benefits. They get free healthcare for their families at the hospital ERs which causes crowding and adds tens of billions of dollars to the annual cost of operating the ERs. The costs, borne by tax-payers are a further burden on the middle class. We do not know the aggregate cost of providing welfare benefits to illegal immigrants and their US born children. We do know that there has been an enormous rise in the number of people receiving food stamps during the Obama presidency to approximately 50,000,000 at an aggregate cost of about $80 billion per year. A significant portion of that amount is paid to illegal immigrants families.

Unless President Obama’s current blatantly unconstitutional effort to change the immigration laws is stopped by the Supreme Court, it will result in the elimination of even more middle class jobs to the tens of millions of illegal immigrants who are already in our country. Why aren’t voters and the press demanding to know why President Obama is enabling illegal immigrants to take jobs from Americans workers? Although we are a land of immigrants and welcome more than a million people into the US as legal residents annually, as long as we recognize children born in the US to illegal immigrants as citizens eligible for welfare benefits, we will not be able to stem the flood of illegal immigrants. Nor will we prevent people overstaying their visas and going into hiding until we issue everyone an US identification card (“USID”) of a type as described in my book entitled Homeland Security and Economic Prosperity published in 2003. A USID would enable us to track illegal immigrants and serve the even more important purpose of identifying, preventing entry and limiting the movement of Islamist terrorists within our country.

Upper-income individuals and the wealthy are generally able to bear the costs of our welfare entitlements including Obamacare. However, we are already hearing almost daily from socialist entitlementists about the excessive income and assets of the top 1%. It is not the growth in the income of the top 1% that is the problem. The industrial revolution, that created wealthy industrialists, generated the middle class and made it possible for almost all Americans to have the opportunity to achieve a comfortable way of life. We should appreciate the important role now played by our most financially successful individuals who have amassed multi-billion dollar fortunes that are beyond the amounts their descendants will ever need. They currently pay a significant portion of all federal income taxes. Their capital investments are spawning new entities and their personal spending on homes, yachts, jets, cars and other luxury items propel economic growth. They and the entities they own are responsible for the creation of many millions of tax-paying jobs. Their charitable foundations are feeding the hungry, caring for the sick and finding cures for diseases worldwide. We should note that much of the income growth of the 1% results from the asset bubble caused in large part by the Fed stimulus programs that have lasted for over five years because of the failed Obama fiscal policies.

Socialists demands for confiscatory tax policies are not the answer, but changes in the tax laws to make them fair should always be under consideration. Without making income tax rates excessive, unfair and counterproductive we might consider higher, but not confiscatory, marginal rates for people earning in excess of $5,000,000, $10,000,000 or $20,000,000 per year averaged over a 3-5 year period. Investment bankers should pay ordinary income tax not capital gains taxes on disposing of their carried interest. We might also change our estate tax laws to take into account that many of the great fortunes accumulated in recent years came in the form of capital appreciation of assets that has for good reasons never been subject to income taxation until it is sold. That is why Warren Buffett pays a lower-income tax rate than his secretary. The Federal Estate Tax is designed to collect a death tax on such appreciated property. However, permitting the wealthy to donate all of their assets to charitable foundations prevents the US government from ever collecting taxes on such capital appreciation. Federal estate and gift tax laws can be changed to enable the US Treasury to recover such previously untaxed income with the remainder of the estate available to be given to a charity.

Economic growth in the US has been feeble. We need more than a trillion dollars to be spent on transportation infrastructure and increases in defense and homeland security expenditures to generate economic growth and create millions of tax-paying jobs. Many conservatives argue that only the private sector and not government creates jobs. How wrong they are. Adequate spending on infrastructure and defense by governments can lead to the creation of millions of tax-paying jobs and substantially increased tax revenues to enable the GDP to grow at a higher percentage rate than the National Debt. However, many Republican Congressman, who have for six years been unfairly abused by President Obama at every opportunity, are obsessed with the size of the National Debt and have good reasons to dislike the president. They have made no attempt to impeach him for his outrageous conduct, but we should not expect them to cooperate with him during the remainder of his term. However, the Sequester and other forms of austerity pushed by conservative Republicans are not the answer. Our goal should be to grow the GDP at 7 to 10 percent yearly while reducing welfare as a percent of the GDP. A decaying infrastructure coupled with defense and homeland security needs, available raw materials and technology and an underemployed work-force give us the opportunity to do so.

Many Republicans favor tax cuts for corporations which might help to stimulate investment. But, corporations have strong balance sheets and are not investing because they do not see a need to increase their productive capacity. They might just use the tax savings to increase dividends, stock buybacks and executive compensation. They have strong balance sheets and will begin to spend when they see the increased government spending. We should look to the wealthy and our cash rich multi-national corporations to partner with our federal and state governments and invest in and help jump-start our economy by financing transportation infrastructure construction. It can be accomplished by changes in the federal tax laws which permit corporations to bring home the trillions of dollars of cash deposited overseas if they invest it in expanding production capacity or to partner with states to finance transportation infrastructure. We could give a fair return, financial guarantees and naming rights to entities investing in America.

Republicans should take the lead in immediately promoting increased defense and homeland security spending. They should pass legislation to do so even if it is vetoed by President Obama. Although the US remains as the world’s leading military superpower, China is closing the gap and will soon equal the US militarily. China like Russia will continue to seize territory unless we take deterrent actions to prevent it or are prepared to confront them. However, they are unlikely to attack our homeland because of fear we will retaliate. A majority of Americans are war-weary and don’t want to fight to protect the citizens or territory of other nations. But, that is no excuse for decreasing and not materially increasing our military strength and preparedness. President Obama’s inept foreign policy has created a new urgent need to be prepared to defend our homeland from immediate and rapidly expanding security threats.

Throughout his presidency he has failed to recognize the threat of Shiite Islamic terrorism supported by Iran. He falsely claimed that Al Qaeda’s Sunni Islamic terrorists were on the run and diddled when they re-appeared on the scene as ISIS, savagely killed tens of thousands of people and in record time established a rapidly expanding caliphate in Syria, Iraq and elsewhere. Although Iran and ISIS have each made it clear that their goal is to rule the world, our president has downplayed the danger to our allies and our homeland and failed to develop a military strategy to deal with the threat of either Iran or ISIS. He stubbornly refuses to use US troops on the ground, even special forces to stem the rise of ISIS. It is no longer a question of trying to build democracies in Iraq and Afghanistan. We must prevent ISIS from using its caliphate to train Islamic terrorists to attack our allies and our homeland. We must also prevent Iran from developing a nuclear bomb and from gaining control of most of the Middle East. Fortunately President Obama appears to be listening to Congress and public opinion relating to verification of Iran’s current capability and delay in removing sanctions prior to such verification in negotiating his Iran nuclear deal. Our president is placing unjustifiable reliance on ill-equipped countries to retake the territory seized by ISIS and paying lip service to the Iranian risk. Apparently he is prepared to allow Iran to assume control of defeating ISIS and, if it succeeds, become the major political force in the Middle East to the chagrin of Saudi Arabia and other Sunni dominated countries who are taking actions to prevent it and to confront the danger a nuclear Iran will cause.

Meanwhile ISIS is using social media to encourage a significant number of US residents to join its cause. There are potential domestic terrorists who might commit horrendous and financially devastating damage within our country. Our constitution guarantees freedom of speech, but that does not include the right to participate in an Islamic terrorist conspiracy of the type currently being orchestrated by ISIS. The necessary evidence to prosecute the conspirators is available from their Internet communications.

We greatly improved homeland security after the World Trade Center attack on 9/11 and occasionally prevent a terrorist act. But when we examine the terrorist attacks around the globe and listen to daily news reports, it is clear that our anti-terrorist preparedness is woefully inadequate. Incompetence is rife and ignored at most government agencies. Our borders have not been sealed because our President doesn’t want to stop the flow of illegal immigrants to gain votes for Democrats. We must not wait for events that disrupt our economy or cause the death of large numbers of Americans. We must immediately recognize the danger and greatly expand the effort needed to prevent any type of domestic terrorism anywhere in the US and to respond in the event of a catastrophic event caused by a weapon of mass destruction or an attack on the Internet, our power grid or our banks. That will include hiring, training and equipping a large number of additional anti-terrorist specialists to work with current anti-terrorism forces and within local police units. We should increase the number of our military personnel so that we are prepared to fight on three fronts if necessary. Hopefully it will serve as a deterrent so that we will never have to call upon them to do so. We should address our doctor shortage and strengthen homeland security by offering free medical school to military enlistees who agree to serve as military doctors for five years after graduation. Just as the extraordinary World War II military build-up strengthened our economy and enabled us to escape the Great Depression, the effort to upgrade our military strength and to protect our homeland against terrorism, if undertaken, will enable us to jump-start the American economy and re-establish a strong middle class and permit others to escape poverty.

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Annual US GDP Growth Of Ten Percent Should Be The Goal

Annual US GDP growth of ten percent should be the goal. Not the communist goal of eliminating income inequality that President Obama keeps talking about that has never succeeded.  Ironically, the failed socialistic economic policies of the Obama administration have created an immediate opportunity for much larger annual increases in the US GDP. Years of stagnant US economic growth, despite exceptional technology advances, have resulted in a highly under-utilized  and underpaid workforce. We should be seeking the preservation of American exceptionalism by encouraging competence and hard work, not laziness or poor conduct. We should be rewarding success, not encouraging failure. We can only imagine the growth that can be generated by bringing large numbers of people back into the workforce and converting part-time jobs to full-time jobs. Each time a job is lost due to improved technology or a job is lost because production moves offshore, we have an available worker for a new job which can accelerate our growth.

We have had five years of a tepid economic recovery during the period following the Great Recession, the most severe downturn since the end of World War II. President Obama has been very lucky. The recovery has taken place despite the failed fiscal stimulus programs adopted during his administration, his raising income taxes, cutting defense spending, adopting incompetently drafted banking and business regulations that are in large part counterproductive and excessively costly to comply with, and adopting Obamacare and its 18 new taxes and thousands of pages of regulations and then changing them at his whim for political purposes. The recovery has taken place because of developments that President Obama had little, if anything, to do with. TARP loans, which originated during the Bush administration, followed by the Fed’s monetary programs were instrumental in enabling the banking system and the auto and housing industries to avoid collapse, stabilize and return to profitability.

Spectacular developments have spurred the economic recovery, including: 

* Improved horizontal drilling and fracking techniques which, despite the unsubstantiated concerns of environmentalists and interference from the Obama administration, represent the single most important economic development of this century. They have (i) caused an explosion in US national gas and oil production, (ii) created an annual demand for tens of thousands of miles of stainless steel pipe for use in connection with the drilling and transportation of such oil and gas production, (iii) created a growing demand for rail transportation to move the pipe to states such as North Dakota and Texas and the oil and gas being produced to refiners and users across the nation, (iv) created  high-paying jobs leading to increased income tax revenues and a demand for cars and trucks for use by the oil and gas industry and its employees, (v) engendered the rapid growth of new communities to house and service the production employees, (vi) led to the return to the US of industries producing plastics and other natural gas by-products, and (vii) made the US energy independent and strengthened our position as the world leading military power; 

* Rapid expansion of our international businesses throughout the world and increased sales of our exports of products and services, including food, aircraft, machinery, equipment and raw materials to the BRIC and other developing countries;

* The spawning and rapid growth of sales of wireless communications devices, the Internet and social-networking businesses; 

* The wealth effect from rising stock market prices based on increased corporate profitability stimulated by the Fed’s bond purchases and promotion of low-interest rates that enabled corporations to reduce financing costs and inexpensively finance the purchase of cost saving technology. and 

*The exceptionally large sums (financed in large part by federal and state government funding and private insurance) spent for clean-up and rebuilding of roads, infrastructure, housing, and commercial real estate and vehicle replacement following  the many natural disasters that have occurred during the period. 

Even the modest recovery in the housing market (and the related housing improvement and rehabilitation market) caused in large part by investors buying up foreclosed properties for resale and rental and rising number of international millionaires seeking to own US-based assets, has contributed to the recovery. However, private home ownership that was the most important asset owned by the middle class for more than 50 years prior to the Great Recession, has been put on the back burner by the Obama administration which favors the poor at the expense of the middle class. Housing construction offers the potential to be a leading force if future US economic growth. 

President Obama claims credit for the recovery, but he had little to do with it. The manner in which he saved the auto industry was disgraceful. He favored his friends, the unions, over secured creditors. He hampered the oil and gas industry by impeding fracking, the leasing of federal lands and pipeline development. The Obama stimulus programs concentrated on increased welfare payments and ill-conceived, failed green energy programs that squandered large amounts that greatly expanded the National Debt, but generated almost no tax-paying jobs. The Fed has repeatedly stated that it has extended QE programs because of failed fiscal policies.

I will not in this writing discuss the harm to the US economy being caused by the adoption of Obamcare. I have and will continue to write about (i) the continuous stream of outrageous, lies and misinformation promoted almost daily by President Obama relating to Obamacare’s costs and benefits, (ii) President Obama’s failure to deal with Medicare spending problems,(iii) how Obamacare is gouging and damaging the lives of the middle class by requiring them to pay for free or highly subsidized healthcare for the sick and the poor and low-income folks and for a significant portion of the healthcare costs of the elderly and (iv) the inevitable economic disaster that awaits the middle class and the US economy when the employer mandate (that has been illegally delayed by President Obama for political purposes) is allowed to become effective. Suffice it to say that if and when the egregious provisions of Obamacare are repealed it will serve as an immediate stimulus to the US economy. 

Can we envision a time soon after President Obama is out of office (i)  when Congress regains control of spending and middle class income growth and not growth in welfare and ending income inequality is the goal, (ii) when Obamacare is no longer interfering with economic growth or destroying the healthcare industry, (iii) when our transportation infrastructure is being adequately repaired and improved, (iv) when employers are investing in expansion, offering raises to current employees and seeking employees for full-time, tax-paying jobs; (v) when young middle class families can pay off their college loans and buy and make improvements in homes which develop growing equity; (vi) when defense spending and homeland security spending is increased to levels needed to protect our country and our allies from aggression and terrorist acts (vii) when the National Debt is stable or declining, (viii) when Medicare costs and welfare abuses are brought under control;(ix) when the Fed permits interest rates to rise during a period with 2 to 3% inflation and (x) when savers can get a fair return on their capital? 

It can happen if we turn away from the path to socialism and focus on GDP growth and strengthening American capitalism.

 

However, the growth will not occur if Republican conservatives insist on policies of austerity or if a needed catalyst fails to occur to get the growth avalanche started. Our international corporations have more than 2 trillion dollars held overseas that can be repatriated if we change the tax laws. Previous changes led to repatriation of overseas funds, but did not result in significantly increased domestic investment. This writer published a book last year (that has not attracted attention) entitled “Perpetuating American Greatness After The Fiscal Cliff” which proposed changes in the US tax laws to finance transportation infrastructure construction projects through the sale of “Jump Start America Bonds”. The name of the bonds tells the story of their purpose. They would serve as the needed catalyst.

The Case For Extending Unemployment Benefits Beyond 26 Weeks

Unemployment insurance was designed to provide a safety net by offering weekly benefits to employees who have lost their job  to enable them to modify their job skills and seek alternative employment. It is funded by payments by employers based on a percentage of payroll that is rated based on experience. During the emergency caused by the Great Recession the maximum period of eligibility to receive unemployment benefits was extended from 26 weeks to 99 weeks. The funding for such extended benefits is provided by the federal government and as a result of repeated extensions threatens to become another welfare benefit.

The extended benefits were sun-setted and expired as the end of 2013 as part of the sequester legislation. Naturally, President Obama and other liberals, who sense an opportunity to distract from the failures of Obamacare and an opportunity to buy votes, are loudly demanding that the extended benefits be reinstated. Most Republicans, who were blamed for the government shutdown, do not want to be hammered by President Obama and the liberal press for any failure to reinstate the extended benefits. However, most of them favor austerity and are looking for ways to cut the explosive growth in welfare benefits. They know that the American public is concerned with the size of the deficit and are insisting on an offsetting cut in government spending to fund the extended unemployment benefits. Do not be surprised in President Obama refuses to discuss any compromise and attempts to play the blame game for political reasons just as he did to encourage and maximize the harm from the government shutdown. 

Instead of allowing President Obama to treat the extension of benefits as a political football, Republicans should be talking about the pros and cons of extending unemployment benefits. They should argue that because of President Obama’s encouragement of welfare and failed stimulus plans, 75% of the jobs created during the recovery are part-time jobs and there are millions of people seeking jobs, a number that is far in excess of full-time, tax-paying job openings. They should acknowledge that unless we greatly expand our economy, the real level of unemployment (after adjusting for people who have given up looking for a job) may remain above historic levels for the indefinite future.

The sudden end to the program, that has previously been extended, will cause immediate hardship to many of the beneficiaries. On the other hand, every case is different. Many of the beneficiaries may have been satisfied with the benefit and were turning down less than desired employment opportunities. Others may have been cheating the system because they have left the labor market and stopped looking for work or may have accepted off-the-books employment or are earning unreported income. We should extend the term of unemployment benefits, but we should modify the unemployment laws so that extended benefits are phased out over time. We might consider gradually reducing benefits to zero over a defined period beginning after 26 weeks. This will eliminate the need for further extensions except in the event of another emergency 

There is validity to arguments that unemployment benefits provide a stimulus that supports the economic recovery. On the other hand the unemployment benefits are not the most desirable form of economic stimulus. They increase the deficit because they are spent in large part on necessities like food and clothing that increase the GDP, but do not create or sustain tax-paying jobs that generate significant tax revenues. Spending on transportation ifrastructure construction is a better way to stimulate the economy because it creates immediate tax-paying jobs and stimulates the creation of additional tax-paying jobs.

The most important reason for extending unemployment benefits is to prevent immediate hardship for those who have diligently sought employment and did not want to be forced to accept a part-time or dead-end job. However, no-one should be entitled to half-pay forever, without working. 

 

ENTITLEMENTISM

I define “entitlementism” as a political process by which voters in a democracy, motivated by greed, need, fear, or a desire to promote the comfort and well-being of others, elect presidents, governors and legislators who favor the retention or expansion of welfare benefits and other economic entitlements mainly for the poor and the elderly. Entitlementists are people who promote entitlementism. Entitlementists generally believe that wealthy and high income individuals and the entities that they control should pay higher taxes, fees and other payments to pay for the entitlements.

The grave danger that entitlementism poses to American democracy is that voters will vote for candidates who support and maximize entitlements and that political candidates who seek to control excessive entitlement spending may become un-electable in many areas of the country. If entitlementists get control of the presidency and both houses of Congress, they may, though a combination of taxes, mandates and penalties on individuals and businesses, turn American free market capitalism into an undesirable form of socialism that may over time erode into communism.

Entitlementists adopted Obamacare to offer new types of welfare benefits, including premium subsidies to many millions of individuals with incomes up to $46,000 and families of four with incomes up to $94,000 expecting them to become entitlements. It mandates the purchase, by businesses and individuals, of over-priced insurance that many of them do not want or need, to pay for new entitlements for others.

Although President Obama and his Democrat supporters refuse to acknowledge it, healthy young people with middle class tax-paying jobs are targeted victims selected to pay for the increased healthcare costs mandated by Obamacare. They are being asked to pay excessive premiums, deductibles and co-pays to (i) finance the expanded Obamacare mandated benefits, (ii) to substantially reduce the premiums payable by people with pre-existing conditions and (iii) to limit the premium increases of the elderly. They will also have to bear the brunt of tax increases that will be required to pay for the multi-billion dollar subsidies for the poor and lower middle class and for the expansion of Medicaid coverage. President Obama and other Obamacare supporters are also concealing the fact that most of the elderly, unless they qualify for premium subsidies, are subject to increased premium rates (even though their premiums are unrealistically limited under Obamacare rules (in disregard of actuarial statistics) to no more than 3 times the premium rates of young people). Most of them do not need the mandated Obamacare benefits.

Right wing conservatives, many of whom claim to be Tea Party members, are taking a political stance that enabled Democrat entitlementists to win a number of contested Congressional elections in 2012. They assess the voting record and statements of Republican candidates and, if they fail to meet pre-determined standards, they call them RINOS (Republicans in name only) and oppose their nomination. As a result Republicans often nominate a right-wing candidate who loses an election the Republicans would in all likelihood have won. Alternately, if a moderate Republican they oppose wins the nomination, they refuse financial support or to vote for him or her and he or she often loses a close election to a Democrat entitlementist. Such actions have been instrumental in enabling Democrats to retain control of the Senate. All Republicans, even moderates, opposed the passage of Obamacare. If Republicans are going to stop the march toward entitlementism, that will gain momentum if entitlements are not brought under control, they must harness their idealism and recognize the importance of winning control of both the House and the Senate in the 2014 elections.

An economic entitlement is a financial benefit that large numbers of people believe they are entitled to receive, generally from the government. Entitlements were adopted in the US over time for various commendable purposes to improve the lives of Americans. They have evolved into a broad range of benefits to provide safety net payments. They are designed to prevent hunger, provide shelter and basic needs, including medical care. Entitlements include Social Security, Medicare, Medicaid, food stamps, housing supplements and other welfare benefits, negative income taxes, unemployment and disability insurance, flood insurance, financial relief following national disasters and now Obamacare. All of these programs are financed in large part by the US government. The costs of providing each of the entitlements are growing rapidly and are out of control. Entitlement costs are increased significantly by payments to beneficiaries and others cheating the system based on fraudulent claims under entitlement programs that now exceed hundreds of billions of dollars annually. Yet, we do almost nothing to prevent or punish the wrongdoers. Entitlementists don’t seem to care.

When adopting legislation authorizing various of the entitlement programs Congress chose different ways to determine eligibility for benefits and to fund the costs. Unfortunately our Congressmen ignored or misjudged the costs of providing certain of the entitlements and we are now facing $60 to $90 trillion of estimated unfunded entitlement liabilities that we cannot afford even if we achieve an annual two or three percent rate of growth of the GDP. We might be able to manage the unfunded entitlement problem if we grow the GDP at 7 to 10% annually for the next ten years, but because our leadership is inept, that is unlikely to be achieved. Therefore, we must find a way to scale back a significant portion of the unfunded entitlement liabilities. As a result of the Great Recession and skyrocketing entitlement payments the National Debt is approaching $17 trillion. It doesn’t seem to be currently affecting anyone. Most people seem to think that the rising National Debt will present a burden for our children and grandchildren, but few people think that our wealthy country can’t handle a National Debt of $20 trillion, $25 trillion or more. Low interest rates have masked the problem. Entitlementists like President Obama have for years been stonewalling any attempts to modify entitlements to reduce rising current entitlement costs or the unfunded liabilities in the out years. To the contrary they have magnified the entitlement problem by adopting Obamacare. In all likelihood, we will not know that the National Debt is too high until interest rates rise and we discover that we are no longer the world’s most powerful country financially or militarily. We will then be faced with a choice of reducing entitlements or other government spending, raising taxes, or printing money and enduring inflation. Moreover, if entitlementists are in control of the presidency and both houses of Congress, it may ultimately lead to confiscation of property from the wealthy.

Most of the entitlement underfunding comes from Social Security, Medicare and Medicaid obligations. Social Security is a fabulous mandated retirement program. The amount a retiree can expect to collect is calculated by taking into account the withholding tax payments made into the system over a life-time. Social Security payments are the principal source of income for a large percentage of elderly Americans. Most people over age 65 in reasonably good health, who are entitled to Social Security and Medicare, can be financially self-reliant.

Although Social Security benefits vary based on the amount of one’s contributions, benefit levels offer a favorable return to our senior citizens. Years ago we recognized the under-funding of Social Security resulting from increased life expectancy and raised the age of eligibility to begin receiving benefits. We have known throughout the Obama presidency that we should again raise the age for commencement of Social Security benefits or change the manner in which inflation adjustments are calculated. Yet, despite the soaring National Debt, because entitlementists are in control of the presidency and the Senate, no action has been taken to make Social Security payments more affordable. Social Security cash flow needs present an additional problem as the number of workers contributing into the system per retiree declines. No trust fund was set aside out of the funds withheld from employee salaries to pay retiree benefits. Our government became obligated for future benefits, but spent the withholding taxes it received.

The other entitlements consist mostly of welfare payments. By design low-income individuals pay little or nothing for their entitlement benefits other than Social Security. Half of our population pays no income tax. They pay sales taxes and withholding taxes (often offset by negative income taxes) in amounts that are insignificant when compared to the benefits they receive. Democrat entitlementists have learned that they can buy votes by expanding entitlements.

Medicare was designed to ensure that healthcare would be available for the elderly. We have Medicare withholding taxes, annual premium payments and co-pays that can be covered in large part by the purchase of supplemental insurance, but the Medicare benefits dwarf the amounts collected. Low income people pay little into the system, yet they are eligible for full benefits. We have known for years that Medicare was an ill-conceived program which our government will not be able to afford as our population ages. Entitlementists rave about the success of Medicare but ignore its funding problem. The elderly and their children, who are relieved of a potential burden, love the benefits. It would be politically suicidal to try to reduce any Medicare benefits currently payable for the elderly. They vote in large numbers and feel entitled to Medicare benefits regardless of the cost. We have known for years that we must raise the age of eligibility for future Medicare beneficiaries (as we did for Social Security) and take other steps to control Medicare costs. President Obama knows this, but, except to state, every once in a while, that he knows we must deal with controlling future entitlements and that he will consider the way in which inflationary increases are calculated, he has not made any meaningful proposal to deal with the problem. The problem becomes greater with each passing year. Congressmen who propose ways to control Medicare payments in the out years are taking a political risk. Anyone who even brings up the subject of reducing entitlement benefits is immediately bashed by the liberal press and entitlementists seeking to gain political advantage.

Various individuals have proposed alternatives to the current form of Medicare. One way to reign in future Medicare liabilities is to modify the system for people currently under a designated age, such as 55, to a voucher system with co-pays and annual or lifetime limits. Each person would be entitled to an amount available to be spent during the remainder of their lifetime after becoming eligible for Medicare. By introducing aggregate spending limits (with higher limits for designated catastrophic injuries and illnesses) we can get the beneficiaries involved in controlling costs. We can even provide a death benefit for unused life-time benefits. Unfortunately, some people might spend their allocated benefits and be unable to afford all of their additional healthcare needs for various reasons. They might include their own negligence, and might be forced into bankruptcy. Our government will have to offer supplemental healthcare coverage, like Medicaid, and welfare assistance for such individuals. As we are learning from the harm being caused by Obamacare, that alternative is preferential to the destruction of the healthcare system and the middle class and the slowing of economic growth.

The SNAP (food-stamps) welfare program evolved to provide food for the poor in a dignified and efficient manner (though subject to abuse) through the use of a debit card. Welfare has been expanded to include housing and transportation subsidies, Medicaid, cell phones, baby sitters, home care and negative income taxes. A growing number of individuals, single mothers (often teenagers and sometimes with the unidentified father of their children moving in and out of the home to avoid the mother losing her welfare eligibility) and two parent families are relying on food stamps and other welfare benefits as their primary source of income. Some of them live comfortably by working part-time at low-paying jobs (which entitle them to negative income taxes) or off the books to supplement their welfare payments. Encouraged to apply for welfare benefits by navigators under programs initiated by entitlementists, more than 45 million people are now receiving food stamps. Most of them of working age are not attempting to further their education or job skills or looking for a job that would improve their standard of living and reduce or eliminate their welfare benefits. Instead they concentrate their efforts on maximizing welfare benefits. They lack the motivation and drive that has made American capitalism revered throughout the world. The increase in the number of welfare recipients has been fueled by an executive order issued by President Obama in violation of the 1996 welfare law, that makes it easier to satisfy the work requirement and gives states the authority to ignore such requirement.

Flood insurance is sold by the US Government at a fraction of its market cost. When flood insurance payments are added to disaster relief it encourages beneficiaries to rebuild in flood zones leading to large government payments when the next flood occurs in the same area.

It is becoming clear that Obamacare was rushed through Congress by President Obama and entitlementist Democrat Congressmen not only to give government control of all aspects of healthcare from birth to grave, but also to create a number of new entitlements for millions of individuals.

Many of the benefits of Obamacare became effective immediately, while most of the funding provisions were delayed for years until January 1, 2014. This was done so that President Obama could claim credit during the 2012 election campaign for all the benefits of Obamacare while concealing the disastrous aspects of Obamacare from the voters. The public heard repeatedly that 30 million people without insurance were going to be covered, pre-existing conditions were being eliminated from consideration, children under age 26 could remain on their parents coverage and a variety of benefits would be required to be covered, including preventive care, birth control, abortion and other women’s healthcare services.

Until recently, few people understood the funding or other provisions and regulations of Obamacare (many of which had not been written) or the secondary effects they would have on jobs, the healthcare industry or previously existing insurance policies. Since the adverse consequences of Obamacare were relatively unknown President Obama was able during the 2012 re-election campaign to time and again repeat a list of deliberately untrue promises (the now infamous President Obama lies), namely, (i) insurance premiums would decline for everyone, (ii) if you liked your insurance you could keep it and (iii) if you liked your doctor or hospital you could keep them. President Obama and the Democrat entitlementists didn’t tell anyone that the Obamacare insurance policies would provide for increased premiums in most states and large deductibles and co-pays which might make the insurance worthless. Nor did they tell voters they might lose their coverage, their doctor or their full-time job. They didn’t tell college students that Obamacare might harm the economy and prevent them from finding a job. They wanted President Obama and other Democrats to be elected and anticipated that the liberal press, most of whom are entitlementists, would let them outrageously stonewall the lies when they were exposed.

The 2012 election debates over Obamacare focused on birth control, abortion and other women’s rights issues that proved harmful to the Romney campaign and would have been of lesser importance had voters known the truth about how Obamacare would affect their jobs, the loss of their existing insurance coverage, their increased premium costs and the large deductibles and co-pays that were being imposed to enable insurance companies to provide expanded Obamacare mandated benefits and to offer health insurance policies at below free market rates for the sick, the disabled and the elderly. Postponing the harm of the employer mandate until 2015 was clearly intended to and may have a similar effect of deceiving the voters in the 2014 elections except to the extent that voters learn that many employers are taking steps to protect themselves against Obamacare mandates in advance of its effectiveness. To attempt to keep control of the Senate in the 2014 elections, President Obama will do everything possible to focus on women’s rights issues and criticize the stance of the Tea Party on such issues to divert attention from the harm to the middle class being caused by Obamacare.

Few people understand the enormous amount by which eliminating pre-existing conditions will increase insurance premiums. The healthcare costs of people born with special needs, or who become ill or injured may be 10 or 20 or more times more costly than those of a person in good health. Prior to the adoption of Obamacare, individual insurance policies generally had a one year term. Coverage for catastrophic injuries and illness were covered during the term. However, insurance companies would renew the policies of people who became ill or injured during the term only at greatly increased rates. People with pre-existing conditions were generally unable to purchase health insurance at affordable rates. They became cost conscious and limited their demands for treatments and procedures or spent their personal funds. Now, individuals and families burdened with the costs of pre-existing conditions will, if they haven’t already done so, purchase Obamacare qualified policies as soon as HHS gets its Obamacare website to function. We can expect them to make substantially increased demands for healthcare services. Some are rich and getting an undeserved windfall being paid for by the increases in the premiums, deductibles and co-pays of Obamacare mandated policies. Some of them who had lost their job and their coverage have sympathetic arguments for assistance and we should have found ways to help them independently of the adoption of Obamacare using high risk pools that were available in some states.

Healthcare needs for people of all ages are in large part based on discretionary decisions made by a patient and his or her doctor. Elective treatments or procedures can be delayed or avoided. Some people are willing to endure physical difficulties or high thresholds of pain rather than face the risk or cost of surgery. The high deductibles and co-pays under Obamacare will encourage more people to avoid elective procedures.

Unlike Medicare and Medicaid, under Obamacare, federal and state governments are not paying for all of the benefits. The entitlementists, who designed it, believe that they have found a way for insurance companies to (i) provide healthcare benefits mandated by Obamacare, (ii) cover the enormous costs of disregarding pre-existing conditions when determining premiums and (iii) limiting insurance premium increases for the elderly, by overcharging businesses and healthy young and middle-class workers.

In addition, the US government is subsidizing premium costs for low-income people and some small businesses, and expanding free Medicaid coverage for the poor. Almost all part-time workers will receive substantial premium subsidies. As a result, millions of voters will benefit from the new entitlements moving our country closer to entitlementism. Despite the myriad of new taxes imposed by Obamacare, if not modified or repealed the Obamacare premium subsidies will add hundreds of billions each year to federal spending that will have to be paid for by tax increases (to be paid in large part by the same middle class workers who are being overcharged for their health insurance) or by increasing the National Debt. President Obama and the Democratic entitlementists apparently believe that the Obamacare subsidies will gain Democrats more votes than they lose.

Most of the low-income people who purchase highly subsidized insurance policies on the Obamacare exchanges will still be faced with substantial deductibles and co-pays. As a result they receive will have little or no value to them. They will continue to satisfy a significant portion of their families’ medical care needs at hospital emergency rooms. Existing laws provide that they must be treated even if they do not pay the amount due. In all likelihood doctors, hospitals and other providers will be unable to collect a substantial portion of the deductibles and co-pays from such people. Hospitals, facing revenue shortages, will whenever possible increase the rates they charge for patients not covered by Obamacare, Medicare or Medicaid. The insurance companies will pay and, in turn, raise their premium rates on policies not being offered on an exchange. In the event that a patient shows up at a hospital or other healthcare provider without any insurance coverage, the healthcare provider may, if permitted by law, offer to pay the patient’s Obamacare insurance premium in excess of the subsidy, in an attempt to limit is losses to the amount of such premium payments plus the uncollectible deductibles and co-pays.

Over time, an increasing number of doctors, hospitals and other healthcare providers are likely to refuse to treat Obamacare, Medicare and Medicaid patients unless they receive adequate fees from the Obamacare exchange insurers or the US Government. Unless we adequately compensate healthcare providers we can expect the quality and availability of healthcare to decline.

President Obama has made it clear that despite its faults he will veto any attempt to repeal Obamacare. He will continue to use his executive powers to grant exemptions principally for groups that favor Democrats. It is difficult to predict what other steps President Obama may take to try to prevent Obamacare from failing regardless of the cost to the middle class or the US government. Since deductibles and co-pays are already causing serious problems for both insurance policy purchasers and healthcare providers, we can expect that President Obama will propose further additional government subsidies, regardless of cost, to cover the deductibles and co-pays payable by the poor and lower-income people. If Republicans refuse to approve his proposed changes because of costs, he will brand them as unfair obstructionists.

One of the favorable features of Obamacare is that it will create significant healthcare cost savings by creating clinics and expanding nursing care, but that could have been accomplished independently of Obamacare. Hospitals should be given the choice of treating patients unable or unwilling to pay either at emergency rooms or at clinics created at or near the hospital.

Employer provided health insurance has been a major source of funding for employee healthcare and has represented a significant portion of employee compensation for years. Many businesses have been offsetting healthcare cost increases by increasing deductibles and co-pays and reducing middle-class cash compensation. Some are reacting to Obamacare by reducing full-time head count and hiring part-time employees to limit healthcare costs. Some businesses have delayed expansion plans. Other businesses are going to use Obamacare mandated requirements as an excuse to cease providing healthcare benefits to employees in order to reduce costs. Instead many of them will pay the applicable penalty and offer a taxable salary increase and advise employees how to purchase insurance on Obamacare exchanges. Many of the employees will be unable to purchase an exchange offered policy with the after-tax dollars received or will decline to purchase insurance when they realize that it is of little value because of the high premiums (even if reduced by a subsidy), deductibles and co-pays. They will pay the penalty and take the risk of living without insurance. If they later need catastrophic coverage they will acquire it during the following eligibility period. The result will be that the poor and those with pre-existing conditions will have insurance or Medicaid and millions of people who had jobs and insurance coverage will lose their job or their coverage. We are learning that Obamacare is not promoting the common good as claimed by the entitlementists. Instead it is destroying the American way of life. We can nevertheless expect that President Obama and the Democrats will ignore the detrimental affects of the dropped employer coverage and claim credit for pre-tax amount of the cash compensation increases. They will also claim that Obamacare enrollment is improving as anticipated by including individuals who lose their employer coverage and purchase insurance on the exchanges. A portion of the cost of providing health insurance for low-income workers will pass from the employer to the US Government which will subsidize the premiums for such workers’ policies purchased on the Obamacare exchanges.

Congress should take immediate steps to modify Obamacare to encourage employers to continue to provide health insurance for their employees. This might entail elimination of the employer mandate or limiting the required benefits to be offered under employer plans. President Obama may, in an attempt to help Democrat candidates in the 2014 elections, again postpone the employer mandate by fiat, even if he does not have authority to do so.

Giving free Medicaid or health insurance with greatly expanded mandated coverage to 30 million additional people and eliminating pre-existing conditions had to substantially increase the cost of healthcare insurance for everyone except for those who were going to receive underpriced or highly subsidized policies. The designers of Obamacare didn’t tell voters that their plan was to reduce healthcare costs for the sick, the poor and low-income workers by sticking a large part of the new entitlement costs on businesses, the rich, the healthy middle-class and young people. They also relied on unjustifiable expectations that fees to providers for treatments and procedures could be reduced, without harming the quality and availability of healthcare, because providers would be treating large numbers of additional patients.

They also created the fiction, that if enough healthy people were forced to over-pay for health insurance, it would pay for the enhanced benefits of a Obamacare policy and the extra costs for reducing the premium costs for those with pre-existing conditions and the elderly. They knew or should have known that they significantly underestimated the costs to be incurred by the exchange qualified insurance companies in paying for the mandated Obamacare benefits and the requirement that they provide coverage for people with pre-existing conditions and the elderly at below actuarially calculated rates and that not enough young or healthy people existed even if all of them bought the overpriced Obamacare qualified policies. Although the facts relating to the percentage of healthy young people buying Obamacare exchange policies are being concealed for political reasons and ignored by the liberal press, the truth will eventually be learned. President Obama and the Democrats also deliberately underestimated the government costs of providing the premium subsidies by underestimating the number of employees who would lose their full-time jobs or their employer coverage.

Obamacare was adopted at the depth of the Great Recession. President Obama and the Democrats ignored the risk of further damaging the economy or slowing the hoped for recovery. It’s adoption coincided with the adoption of what turned out to be a failed stimulus plan that led to an unprecedented expansion of welfare benefits and squandered funds on other liberal causes (that included excessive payments to Obama supporters) and pork spending while creating few tax-paying jobs. However, they anticipated that Obamacare would be disruptive to business and the healthcare industry and therefore postponed the effectiveness of many of the provisions of Obamacare until after the 2012 presidential elections. They wrote the law and regulations so that almost all individual insurance policies would be cancelled and the individuals would have to purchase replacement policies on the exchanges. They also knew that, despite the employer mandate and the penalties they imposed, millions of employees would ultimately lose their existing employer paid coverage because businesses would do everything possible to increase short-term profits and would attempt to avoid increases in or reduce healthcare costs. They were relying on the better health status of the individuals who were losing their employer paid coverage to improve the quality of the pool of exchange policy purchasers to help pay for the extra costs the insurance companies would have to pay to meet Obamacare requirements.

Obamacare mandates are leading to the loss of full-time jobs, the increase in part-time jobs, the loss of existing healthcare coverages and the continuance of an upward spiral of insurance costs in most states. These factors have caused a slowdown in the economic recovery that was predictable when Obamacare was passed. President Obama was fortunate that events he had nothing to do with, like actions taken by the Fed, amazing oil and gas fracking successes, the rapidly expanding use of social media and new internet devices and software and business and growth in the developing world, helped the US economy make a modest recovery from the Great Recession.

President Obama and the Democrats are changing their tune. They ignore the lies about being able to keep your insurance and claim that Obamacare requires better benefits. They now argue that requiring young and healthy people and businesses to purchase insurance policies, subject to high deductibles and co-pays, they don’t want or need, or pay a penalty, to pay to help the poor and those people with pre-existing conditions, serves the common good. They are claiming that more people will be helped that hurt by Obamacare. Even if it turns out to be true because of the enormous government subsidies, that claim does not justify the great harm it is causing. The outrageous taking of property and damage being inflicted by entitlementists on the quality and availability of healthcare, businesses, millions of individuals and the US economy, is unjustifiable. They are trying to trick young and healthy people into purchasing insurance policies on the exchanges using government paid advertising and navigators to convince them it is their patriotic duty to do so while misleading them as to the aggregate costs.

Obamacare is furthering the destruction of the middle class. An individual or family whose income slightly exceeds the maximum amount that qualifies for a Obamacare subsidy will find that the portion of their income remaining after paying taxes and excessive healthcare costs may be negligibly higher (or in some case lower) than the disposable funds available to those who work part-time, collect negative income taxes and maximize their welfare benefits including healthcare subsidies. What incentive will young people have to incur college loans in a country that is more interested in expanding entitlements for the poor and low-income workers than in creating full-time high-quality job opportunities?

Like all entitlements, once people are getting the benefits of Obamacare, it will be difficult or impossible to take them away. We will never know the extent of middle-class job or wage losses or the negative impact on the US GDP caused by Obamacare. President Obama and other Democrats will try to shift the blame for Obamacare failures to the Republicans. They will resurrect outrageous claims for political purposes that Republicans who have criticized Obamacare and President Obama’s lies about it are extortionists and obstructionists. It is all but forgotten that President Obama refused to negotiate with Republicans relating to their concerns about Obamacare or unfunded entitlement obligations. Ted Cruz, Mike Lee and other conservative Republicans may have made tactical mistakes by failing to anticipate that they would be fiercely attacked by President Obama and the liberal press and that the American public would blame them for the government shutdown. They were not trying to harm the US economy. They were trying to prevent the upcoming Obamacare disaster that they anticipated. Although President Obama acts like he has dictatorial powers, the US Constitution gives Congress control over government spending.

The actions and statements of President Obama and his appointees during the partial government shutdown, like causing barricades to be placed at monuments and parks, were obviously intended to inflict as much pain as possible on the American people that he could blame on the Republicans. They are indicative of the fact that President Obama wanted a much publicized short, but painful, government shutdown for his own political gain. His obvious goal was to shift the blame for his economic failures to the Republicans to enable entitlementists to retain a majority in the Senate and gain control of the House in the 2014 elections. Although it was ignored by the liberal press, President Obama and his cabinet appointees, seeking to maximize the criticism against Tea Party conservatives, shamefully played politics by exaggerating the risk of default and failing to assure financial markets around the world that President Obama would use his Presidential powers to ensure that the US would not default on its debts. They knew that more than adequate monthly incoming tax receipts would be available to be used to meet the interest and principal payments on US debt as they became due. President Obama’s political gamesmanship, and not the short-term partial government shutdown, is responsible for any long-term damage to our credit in world financial markets.

Entitlements do not care if the entitlements they propose promote the common-good as long as they result in additional voters becoming dependent upon them. Obamacare is reducing the quality and availability of healthcare. Encouraging insurance companies to limit their extra costs by reducing payments to doctors, hospitals and other healthcare providers is going to backfire. Healthcare providers are going to suffer great financial harm with the result that they will refuse to participate in Obamacare exchange insurance provider networks. Doctors are leaving private practice in large part because of reduced Medicare, Medicaid and Obamacare fees, excessive record keeping requirements, difficulties in getting paid and excessive malpractice insurance costs. Low-income people with newly issued insurance policies can be expected to greatly increase the number of malpractice claims that will speed the doctor exodus.

Some doctors will perform services only for individuals and families willing to pay them directly. Concierge healthcare plans with limited benefit are being offered by groups of doctors, outside of Medicare, Medicaid and Obamacare. They will become more popular as the quality and availability of healthcare provided under government programs further declines.

The initial failure of the federal government’s Obamacare website is a “red-herring”. It is merely a sign of the HHS’ incompetence in running a business. They will eventually get it to work. The website failure is merely delaying the distress which is going to be suffered by millions of Americans when they discover they are facing job and insurance coverage losses, large premium cost increases and large deductibles and co-pays. We can expect that the government will investigate and fail to disclose how the contractor to build the website was selected, how the website requirements were determined and who failed in monitoring the installation.

Look for President Obama to use the website failure as an excuse to postpone the penalties for failing to comply with the individual mandate so that people will not have to pay or leave themselves subject to the penalty if they decide not to purchase insurance. He will claim that registration is growing each month and that it will take a few years to get the kinks out and reach satisfactory enrollment levels. We know that if they do not get a large percentage of healthy people to pay for coverage (and even 100% may be insufficient), the insurance companies will lose money and will raise the premiums as soon as they can unless they are subsidized by the government. Obamacare anticipated the problem and provides for declining subsidies for the insurance companies over the next few years. We can anticipate that if premiums go up or the quality and availability of healthcare decline the entitlementists will then blame the insurance companies for operating inefficiently and demand single payer healthcare.

Make no mistake, the principal purposes of Obamacare is to give a new welfare entitlement to the poor and low-income individuals and to give the government control of healthcare. It promotes entitlementism and enlarges the Democrat base, by offering a new complex welfare entitlement benefit to a very large group of low-income people. It furthers the plan of liberal Democrats to take from those who have and give to those who have not. It also enables Democrats to demonize Republicans who want to control the costs of entitlements and preserve American capitalism. Entitlementists will seek to make Obamacare a pillar of entitlementism.

Even if Republicans gain control of both the Senate and the House in the 2014 elections it will be extremely difficult to reverse the damage already caused by Obamacare. However, it will give them the opportunity to seek changes in Obamacare, to limit future damage and reduce unfunded entitlement obligations.

They are talking about the unfair increase in insurance premiums, deductibles and co-pays to finance the costs of eliminating pre-existing conditions from consideration and reinstating high risk pools to help alleviate the healthcare costs for those with pre-existing conditions. They also propose the sale of health insurance beyond state lines to create competition among providers.

OBAMACARE IS A WELFARE PROGRAM THAT IS REDUCING THE QUALITY AND AVAILABILIITY OF HEALTHCARE AND HARMING BUSINESS AND THE MIDDLE-CLASS

Obamacare is a multi-trillion dollar welfare program that makes health insurance available to 30 million previously uninsured Americans. It requires insurance companies to disregard pre-existing conditions. The inevitable affect is to raise the rates of required Obamacare policies. Most importantly, it makes Medicaid available for free to the poor and offers large premium subsidies to lower income individuals. It also offers other benefits to selected individuals, such as, allowing students to stay on their parents healthcare plan until age 26 and elimination of the doughnut hole in Medicare drug plans.

Why do Americans not like Obamacare if it helps so many people? Americans are discovering what the draftsmen of Obamacare knew, or should have known, that businesses, middle-class and healthy individuals are going to have to pay, directly or indirectly, for a substantial portion of the increased costs mandated by Obamacare. They will not be paying for improved insurance coverage for themselves, but to provide free coverage for the poor and reduced or subsidized premium costs for people with pre-existing conditions and low income individuals. Obamacare is designed to advance liberal Democrats acknowledged goal of improving the lot of the poor by taking money from the rich individuals and businesses who they think have more income than they need. To make matters worse it is destroying the availability and quality of healthcare and is giving too much responsibility to bureaucrats at the IRS.

Liberal Democrats do not seem to care that it will cost hundreds of billions of dollars a year to make such insurance benefits available. They fraudulently claimed, that when Obamacare was adopted and became effective it would enable everyone with insurance to keep their policy and receive the same benefits from the same doctors and healthcare providers, at reduced costs. We are only beginning to recognize how fraudulent those claims were. The draftsmen hid the true cost of purchasing healthcare under Obamacare by including large deductibles and co-pays that significantly raise aggregate healthcare costs. The availability and quality of care are declining. Doctors are leaving the profession and hospitals are reducing staffs. Medicare benefits are being reduced. President Obama repeated the false claims about Obamacare during the re-election campaign and now unashamedly claims that voters supported his views on Obamacare. The Obamacare discussion during the 2012 campaign focused on women’s rights issues, not the disastrous financial consequences of Obamacare.

Democrats, who rammed through the passage of Obamacare withhout a single Republican vote, knew that because our country was in the midst of the Great Recession, the federal and state governments couldn’t afford to pay for a new gigantic welfare program. They therefore devised an extremely complicated plan relying on a hodge-podge of new taxes and rules and regulations applicable to Medicare, Medicaid and health insurance to provide for funding the costs of Obamacare and to limit benefits and payments to providers. They gave it the misleading name of “The Affordable Care Act”. They didn’t care, or negligently failed to realize, the secondary affects of the new taxes including the negative impact they would have on young people looking for jobs and the middle-class who are losing good full-time, tax-paying jobs and existing insurance coverage.

Businesses seek to maximize profits. They have for years been seeking ways to limit increases in employee healthcare expenses. Outrageous Obamacare requirements encourage businesses to rethink their providing of healthcare benefits for employees. They are modifying business plans in ways to minimize or eliminate their health insurance costs. Some employers will save money by requiring their employees to purchase their own insurance from the state exchanges. Some will pay penalties to avoid paying for expensive Obamacare policies. Aggregate payrolls are being controlled by not hiring or laying off full-time employees and hiring additional part-time employees. Retired employees and spouses are losing healthcare coverage.

Obamacare is based on tens of thousands of pages of laws and regulations which are extremely difficult to understand and interpret. It requires the filling out of forms that make the practice of medicine and the delivery of healthcare more stressful and less profitable. Liberal Democrats who proposed Obamacare deliberately ignored pleas of doctors about the outrageous cost of purchasing malpractice insurance because of out of control claims and excessive jury awards. Why would we expect them to do otherwise? Tort lawyers are major contributors to Democrats. Obamacare was promoted to gain votes for Democrats. It is turning into a train wreck which may cost them votes.

The draftsmen of Obamacare tried to hide the cost of giving the new benefits by adopting a variety of new taxes on the middle-class and the rich and requiring businesses and individuals to purchase insurance. They knew that taxes on medical products and drugs, not only drive business off-shore and reduce research and development efforts to produce new products, but also, are inevitably passed on to the consumer. They knew that, if they told the truth about Obamacare, young people, middle-class workers and their employers would object to paying larger insurance premiums or penalties to pay for the new welfare benefit for the poor and those with pre-existing conditions. That is the reason they adopted penalties for businesses and individuals if they failed to buy insurance. They did not anticipate many of the adverse consequences that have surfaced as businesses and individuals have learned about the requirements of Obamacare. Now they are trying to get people to purchase Obamacare policies by claiming it is the patriotic thing to do to help your fellow Americans. Why should young people, strapped with student loans or working in part-time jobs as a result of Obamacare, do so?

BEWARE OF LEVERAGED STOCK BUY-BACKS

Every few days an investment banker takes a position in a profitable and cash rich company and suggests a leveraged share buy-back. Why not? Interest rates are low and reducing the number of shares outstanding has the immediate effect of increasing earnings per share. When the stock rises the investment banker will sell the shares it controls and realize a profit. The investor does not care that the company may be harmed years later if it goes through a challenging period and finds itself unable to meet its obligations. Judiciously repurchasing shares and paying higher dividends with excess cash is part of management’s responsibility to stockholders. However, the long-term fiscal soundness of the company is of paramount importance. 

Have we forgotten that our mortgage lenders induced middle-class Americans to over-leverage their homes though refinancing and home-equity mortgages.  Such excess debt coupled with other irresponsible lending practices, created the housing and mortgage bubbles, the bursting of which caused  the Great Recession. When home prices declined millions of middle-class Americans lost their homes and their life savings. Home owners didn’t foresee the risk and were blind-sided. We should have limited excess housing debt.

The strength of corporate balance sheets and rising profits helped the US to get through the Great Recession. We should adopt a federal law limiting corporate borrowing to finance stock repurchases. Otherwise too many corporate executives anxious to please powerful outspoken investors or to raise short-term earnings to justify large compensation packages, will engage in stock buy-backs that impair the long-term soundness of their corporations.

 

DEMOCRATS WANT A SHORT GOVERNMENT SHUTDOWN

A federal government shutdown for a few days will do little damage to the US economy, but will inconvenience and scare many Americans. Democrants  want the shutdown to enhance their chances of gaining control of the House in the 2014 elections. They are goading Republicans into a fight over the funding of Obamacare to give President Obama the opportunity to claim Republicans have forced a shutdown. Polls show that any shutdown will cause great political harm to Republicans who are being wrongfully attacked by President Obama as extortionists. 

Regardless of whether it was adopted based on false promises, Obamacare is the law of the land. Like it or not, many of its provisions will become operative on October 1, with, or without, US government funding.  It is irrelevant that Obamacare is a new welfare program that is causing great damage to our economy. The poor and low-income people it is designed to help  will line up to enroll for the free or highly subsidized insurance policies, with no pre-existing conditions. President Obama has committed to spend billions of marketing dollars to convince Americans that they will love Obamacare in a few years after we make some corrections and to get young people to purchase policies.

Republicans, led by Senators Cruz and Lee, are publicizing many of the negative aspects of Obamacare. They should continue to make their case before the Senate over the next few days.  However, it is inevitable that the Senate bill will be passed without the provision to de-fund Obamacare. When it returns to the House, Republicans should permit the Democrats to prevail. The best that Republicans can accomplish is to get an agreement for the appointment of a joint Congressional committee to consider the modification or repeal of Obamacare. Any attempt to de-fund or delay the effectiveness of Obamacare merely runs time off  the clock before the potential government shutdown.  Republicans will have an opportunity to expose the terrible consequences of Obamacare, including the harm to the middle-class, in the 2014 Congressional campaigns.

Obamacare, even if further modified, will remain a horrible law and hodge-podge of regulations rammed through Congress, without a Republican vote, during the Great Recession. It changes Medicare, Medicaid and almost every aspect of healthcare. It mandates federally approved insurance to be purchased by or for everyone. The poor and low-income taxpayers get free or highly subsidized coverage. To expand the class of beneficiaries, they threw in benefits for children living at home until age 26 and eliminated the doughnut hole from the Medicare drug plan. Our federal and state governments couldn’t afford to pay for it. They, therefore, adopted all kinds of new taxes and penalties on businesses and individuals to pay for their new welfare program.  Our economy, businesses and the middle-class are suffering from the confusion and increased costs. Obamacare is slowing hiring and capital investment and Is is leading to an increase in undesirable part-time  jobs, while causing the loss of full-time, tax-paying jobs.  It is increasing insurance premiums and causing the loss of coverage for many who had insurance. It is harming doctors, hospitals and other healthcare providers and reducing the availability and quality of healthcare. It taxes the gross sales of medical equipment suppliers and drug companies. Such taxes
(unless passed on as increased healthcare costs that will add to the burden being placed on the middle-class) will confiscate the cash needed to support research and development efforts that have placed the US in the forefront of life saving and enhancing equipment and medications. Some of the manufacturers will become unprofitable or will be unable to raise capital, and go out of business. It puts the IRS in control of major healthcare decisions.  Based on recent experience this assures that healthcare subsidies and availability will become politicized and allocated unfairly.  It is so complex that years after its adoption our governments are not prepared for it to become effective.

Why does President Obama like it? It gives the government greater control of our lives and  takes from businesses and individuals who have and gives to those who have not. It adds to his base of people who benefit from handouts. It is unlikely that President Obama and his liberal cronies realized, when it was adopted, how much damage it would do to the economy and the middle-class. As the problems have surfaced, he has made changes in the law and granted waivers without Congressional approval. He talks of further adjustments in the law to work out the kinks. He may not have yet realized that  Obamacare is so conceptually flawed that it is irreparable and should be repealed so that we can go back to a free market solution. Of course that would require taking away or reducing the new welfare benefit. Why should the poor expect to get the same or better healthcare benefits for free than will be available for middle-class people who work to earn the insurance or who may lose their benefits or have to pay for them? Why should we harm business and eliminate or prevent the creation of middle-class jobs, to create another welfare benefit, while the economy remains in a weakened state?

With all the hull-a ballo over Obamacare and the  potential government shutdown, it has gone virtually un-noticed that the disastrous Sequester cuts are retained in the proposed government funding proposal. President Obama and the liberal financial press have been effective in misleading  voters into thinking that the economy is improving  because unemployment is falling and the federal deficit is shrinking. They disregard the large number of people who have left the work-force, the great increase in the number of part-time jobs (largely as the result of Obamacare),  the reduced government spending as a result of the Sequester and the increased revenues from the 2013 tax increases. As a result, and because he refuses to discuss un-funded long-term entitlement (largely Medicare) liabilities, he is in no position to be insisting on necessary increases in defense and infrastructure construction spending to stimulate the economy, provide homeland security  and create full-time, tax-paying jobs. The Obamacare mess makes it highly unlikely that our economy will grow satisfactorily during the remainder of the Obama term.