The Obama administration missed an opportunity to extend the term of the US Debt. Each 1% increase in interest rates on the US Debt will soon cost our government $200 billion per year. Janet Yellen babbles on about unemployment, inflation and normalization of interest rates. She ignores the overriding need to keep interest rates as low as possible. The June increase in rates was a major mistake.
I published a letter to President Trump in this blog on February 5 warning of the difficulties in dealing with the repeal and replacement of Obamacare prior to the Ryan healthcare debacle. The Ryan proposal to repeal and replace Obamacare does not resolve Obamacare’s most egregious problems, the continuous increases in healthcare premiums paid by the young middle class and employers and excessive deductibles. Such problems are caused mainly by the need for insurance companies to recover the billions of dollars of welfare benefits required to be given under Obamacare for people with pre-existing conditions, and the excessive fees charged by hospitals to paying customers to make up for patients who do not pay for mandated treatment at hospital ERs and resulting from Medicare and Medicaid underpayments. We must provide healthcare coverage for people with pre-existing as promised by President Trump, but we must subject people receiving underpriced coverage to annual and life-time benefit limits and make them responsible for helping to control the cost of their benefits. Excessive healthcare costs have negatively impacted jobs and wages, are a cause of off-shoring of manufacturing and have made it difficult, if not impossible, for young people who achieve and get a tax-paying job to re-pay their college loans, form families and purchase homes.
I urge everyone to read my February letter which discusses many of the issues affecting healthcare. I encourage treating the replacement for Obamacare as a work-in-progress beginning with a return to free-market competition and a realistic reduction in the Obamacare welfare benefits while we conduct a re-examination of all aspects of the healthcare industry and the health insurance business as it will change following the repeal of Obamacare.
February 24, 2017
Dear President Trump;
Congratulations on your election victory. I am a Harvard Law School graduate with more than 50 years experience as a practicing securities, corporate, tax and estate planning attorney. I self-published two virtually unread books and a blog at sjfeconomics.com relating to homeland security and economic prosperity which I believe have important ideas that can be extremely helpful to your team. I delivered copies of my books to you with my letter of support in March 2016.
I have reviewed your first 100 day plan and strongly approve of most of it. For your program to be successful you must also win the political game for public approval of your actions that will be played against Democrats led most likely by President Obama and the liberal press. We know that they will rely on fake news, misleading statements and lies. Many of your proposals like your cabinet appointments will get delayed in Congress.
You are off to a good start. It is important that you do not lose the momentum. This letter will deal only with immediate steps to take relating to two of the items included in your 100 day plan that will impact job growth, namely, the manner in which Obamacare should be repealed and replaced and the change in the corporation tax laws by lowering the tax rate for repatriating capital held overseas to raise revenues to finance infrastructure construction.
1. THOUGHTS ABOUT THE REPEAL AND REPLACEMENT OF OBAMACARE
I am writing as a game player to suggest a strategy to win the approval of the minds of voters in the game of repealing and replacing Obamacare. I note that my factual knowledge about Obamacare comes primarily from TV and newspaper reports, discussions with friends and doctors and internet searches and must be fact checked. I know that millions of hours have been spent by people more qualified than me to expose the evils of and to guide Congress in developing a replacement plan for Obamacare.
OBAMACARE IS NOT FIXABLE. It is disguised as a health insurance program, but is primarily a welfare platform to provide tens of billions of dollars of healthcare benefits annually for people with pre-existing conditions that are disregarded in setting premiums. It is an intricately designed hodgepodge of laws that create uniform healthcare coverages entwined with Medicaid, Medicare, prescription drug and tax provisions (that further burden the middle class) included to make it appear attractive and to make it difficult to repeal. It was fraudulently promoted as a program that would cover everyone and reduce healthcare premiums. It is very unpopular and is failing primarily because of its excessive and often unaffordable premiums to employers who are the major purchasers of healthcare coverage and the outrageously high premiums and deductibles for healthy young people whose income level does not permit them to qualify for the subsidies. The high deductibles even make it worthless for many low-income people who qualify for premium subsidies. Ignoring pre-existing conditions is like offering fire insurance for your home after a fire has occurred or auto insurance after the accident. It is like telling homeowners that their fire insurance rates are being doubled or tripled so that uninsured owners whose homes have already burned down can buy a policy and collect hundreds of thousands of dollars to rebuild their homes. Trying to trick middle class young people and their employers to pay for such excessive benefits for others is outrageously unfair. The death spiral we are witnessing was inevitable. It has been accelerated because young healthy middle class people learned they were being targeted.
From its inception President Obama acting like a snake oil salesman has time and again lied about Obamacare to prevent successful young healthy people from learning that they were intentionally being grossly overcharged to pay for the welfare benefits of others. It was the only game in town and many people bought Obamacare coverage. Now President Obama and other Democrats make misleading claims about the number of people covered under Obamacare, but fail to acknowledge the many millions of people bought Obamacare plans because they lost their former plan or thought they had to or who are without coverage because they lost their employer paid coverage when they changed jobs or their work week was reduced to under 30 hours by their employer to avoid the Obamacare coverage mandate. President Obama didn’t tell Americans that a high percentage of the people who signed up for Medicaid or for Obamacare policies are receiving a welfare benefit. Now former President Obama and his cronies who designed Obamacare want to increase the penalty. In other words, if young people continue to elect not to purchase overpriced Obamacare insurance they should be punished by paying a penalty that the Supreme Court permitted as a tax to subsidize the welfare payments for others. The very existence of the penalty is proof that President Obama and the draftsman knew when they adopted Obamacare that the premiums and deductibles of Obamacare insurance plans offered to young middle class taxpayers were grossly unfair and that many young people would refuse to buy such plans even if they were given names of precious metals, namely, Silver, Gold, Copper and Platinum, to make them appear valuable. They wanted buyers to think they were being given a choice of coverage when there is no choice. They differ only in the choice of paying higher premiums to get smaller deductibles. Obamacare is so unfair that millions of people have elected to have no coverage and be subject to the penalty.
Every American needs access to healthcare. People with chronic conditions need the most expensive treatments, procedures and drugs. Prior to Obamacare we provided subsidized healthcare benefits for the elderly, the poor and the sick under Medicare and Medicaid and at hospital ERs, but many people were unable to afford health insurance because of ratings. We sought ways to assist such people by designing high risk pools. Obamacare was designed to ignore pre-existing conditions when setting premiums. But, we cannot afford to give and no-one should expect to receive unlimited healthcare for a small fraction of its predictable cost, which is what Obamacare attempted to do. A large number of people with pre-existing conditions now have coverage under Obamacare. Many of them were covered and continue to be covered under employer plans. Some of them are receiving hundreds of thousands of dollars of welfare benefits annually for a relatively small premium or co-pay. Those receiving excessive benefits under Obamacare, the Democrats, including President Obama, some Republicans who fear being involved with reducing a welfare benefit and the liberal press will protest loudly against any attempt to reduce the welfare benefits of Obamacare. Even if a special high-risk pool is created and the US government (and not the middle class and employers) contributes a substantial welfare benefit to subsidize those with pre-existing conditions, it will still be painful to people whose benefits are reduced when Obamacare coverage is not renewed and ends. To paraphrase Shakespeare, if it must be done, better it were done quickly. No-one was dieing in the street prior to the adoption of Obamacare. Hospital ERs have long been required to treat all patients and they currently treat many people with Obamacare, Medicare or Medicaid coverage who do not have immediate access to a doctor. Hospitals provide a significant portion of all healthcare benefits and their services must be paid for. Hospitals pass on the cost of all unpaid ER care (and all Medicare and Medicaid underpayments) by increasing the charges to those who pay. As a result the middle class and their employers were, prior to Obamacare, paying a substantial portion of the healthcare benefits provided at ERs for the sick and the poor, including documented and illegal immigrants. Rising healthcare costs paid by employers (which, including employee co-pays, now exceed $20,000 per employee) are largely responsible for the lack of wage increases during the last 10 years. Many ER patients work off the books and claim they are unable to pay. We should seek ways to collect ER payments due from those who hide their income.
Even if Obamacare is repealed, increasing ER, Medicare and Medicaid underpayments to healthcare providers threaten to continue to cause an increase in healthcare premiums and deductibles and further erode the quality and availability of care. The problems of Medicare which has many trillions of dollars of unfunded liabilities have been masked by the obvious failures of Obamacare. Medicare is a needed program for the elderly, but must be reformed before it causes more serious harm to our economy.
DON’T WAIT A FEW MONTHS OR LONGER TO PRESENT A PLAN TO REPEAL AND REPLACE OBAMACARE. DEAL WITH OBAMACARE IN STEPS. I APPLAUD YOUR EXECUTIVE ORDER TO END THE OUTRAGEOUSLY UNFAIR OBAMACARE TREATMENT OF YOUNG MIDDLE CLASS TAXPAYERS. YOU ARE CLEARLY CORRECT THAT ALL OBAMACARE MANDATES AND PENALTIES ARE UNFAIR AND SHOULD NOT BE ENFORCED. BUT, DO NOT RELY SOLELY ON THE EXECUTIVE ORDER. WE ARE A COUNTRY OF LAWS THAT SHOULD BE ENACTED, MODIFIED AND REPEALED BY CONGRESS. FOLLOW UP YOUR EXECUTIVE ORDER BY HAVING CONGRESS REPEAL ALL OBAMACARE MANDATES AND PENALTIES, EFFECTIVE IMMEDIATELY AND PHASE OUT REBATES AFTER 2017. IT CAN BE DONE IN A MATTER OF WEEKS. PRESIDENT OBAMA AND THE LIBERAL PRESS WILL ATTEMPT TO SET UP ROADBLOCKS AND WILL CRY THAT PENALTIES AND SUBSIDIES WERE AN INTRICATE PART OF OBAMACARE AND THAT REMOVING THEM WILL DESTROY OBAMACARE. PRESIDENT OBAMA CLAIMS THAT OBAMACARE IS A WONDERFUL IMPROVEMENT IN OUR HEALTHCARE LAWS WHICH HAS PROBLEMS THAT CAN BE FIXED BY RAISING THE AMOUNT OF THE PENALTY AND MAKING OTHER MINOR CHANGES. THAT IS JUST ANOTHER OBAMA LIE (LIKE YOU CAN KEEP YOUR DOCTOR OR YOU CAN KEEP YOUR PLAN) THAT MUST BE STRONGLY CRITICIZED. THE HIGHER THE PENALTY THE MORE UNFAIR OBAMACARE WOULD BE. RISING HEALTHCARE COSTS HAVE DESTROYED THE MIDDLE CLASS AND LEFT MILLIONS OF PEOPLE WHO REFUSE TO PAY THE EXCESSIVE PREMIUMS AND BE SUBJECT TO THE HIGH DEDUCTIBLES OF OBAMACARE WITHOUT HEALTH INSURANCE. FACE DEMOCRATS AND THE PRESS HEAD ON IN THE BATTLE OVER THE REMOVAL OF THE MANDATES, PENALTIES AND REBATES. READ MY ARTICLE ENTITLED PRESIDENT OBAMA’S DECEITFUL AND RELENTLESS SISYPHEAN TYPE PUNISHMENT OF THE MIDDLE CLASS AT SJFECONOMICS.COM. YOU MIGHT WANT TO COMPARE THE PUNISHMENT OF SISYPHUS TO OBAMACARE’S PUNISHMENT OF THE MIDDLE CLASS. OBAMACARE IS JUST ANOTHER SOCIALIST ATTEMPT TO TAKE FROM THOSE WHO EARN AND GIVE IT TO THOSE WHO NEED.
Without mandates insurance companies who conspired with President Obama by participating in the sale of grossly unfair Obamacare plans on the exchanges will incur even more significant losses on Obamacare policies due to expensive benefits given to people who had pre-existing conditions when they bought Obamacare plans. On the other hand, with the mandates removed, insurance companies, which were prevented by the Obamacare coverage mandates will be allowed to immediately start to design new insurance products to compete with Obamacare and seek the approval of state insurance departments to sell such policies. I expect that within a year no insurance company will offer an Obamacare policy. It will confirm and you should explain loudly and clearly by tweets that Obamacare was a hoax conceived and carried out by President Obama and the socialist Democrats with the assistance of the insurance companies to provide a secret welfare program for people with pre-existing conditions and a way for hospitals and other healthcare providers to recover some of their Medicare, Medicaid and ER underpayments (discussed below) by greatly overcharging the young healthy middle class and their employers.
Millions of people will be without healthcare coverage after the self-destruction of Obamacare, but the numbers will be exaggerated by Democrats. The outrage of Democrats claiming that you will be depriving 20,000,000 to 30,000,000 people of coverage has already begun. I believe that about 12,000,000 of them are on Medicaid most of whom should be allowed to keep their coverage as a welfare benefit. Many people with pre-existing conditions are covered by employer plans and will not lose their coverage. On the other hand millions of young people are currently without coverage or they or their employers are paying excessive amounts for coverage. Demonstrate that you seek to be the savior of the young middle class and their employers. We can expect that if healthcare costs decline raises will follow. Put together a group of brilliant actuaries to expose the truth about Obamacare. Have them present examples of young middle class individuals who are paying premiums of more than $10,000 with high deductibles that make their coverage worthless. Have them demonstrate that on an actuarial basis (and assuming a fair billing rate) young healthy middle class people should have paid only a few thousand dollars for a similar plan with a low deductible and including catastrophe coverage to protect against sickness and injury during the one year term. Have the actuaries give specific examples of individuals who were previously uninsurable and received hundreds of thousands of dollars of benefits under Obamacare while paying a subsidized premium of only a few thousand dollars.
AFTER REPEALING THE MANDATES, PENALTIES AND SUBSIDIES, IT WOULD BE A NO-WIN SITUATION TO TRY TO REPLACE OBAMACARE WITH A LAW THAT WILL BE BRANDED AS TRUMPCARE. LET AMERICANS KNOW THAT YOU ARE RELYING ON A REPUBLICAN CONTROLLED CONGRESS TO FIND A WAY TO REPEAL AND REPLACE THE REST OF OBAMACARE ASAP, BUT HAVE LEARNED THAT IT WILL BE EXTREMELY DIFFICULT. OBAMACARE HAS NOT ONLY INCREASED THE COST OF BUYING HEALTHCARE COVERAGE, BUT HAS ALSO SEVERELY HARMED MEDICAL PROVIDERS, REDUCED THE AVAILABILITY AND QUALITY OF CARE, AND INTERFERED WITH THE RELATIONSHIP OF DOCTOR AND PATIENT. REPLACE OBAMACARE BY BRINGING BACK FREE MARKET COMPETITION AMONG INSURERS UNDER STATE INSURANCE DEPARTMENT SUPERVISION. MINIMIZE THE ROLE OF THE FEDERAL GOVERNMENT TO RUNNING MEDICARE AND SUBSIDIZING MEDICAID AND TO A LIMITED EXTENT SUBSIDIZING COVERAGE FOR PEOPLE WITH PRE-EXISTING CONDITIONS. MAKE EVERYONE AWARE THAT OUR HEALTHCARE SYSTEM IS FAILING BECAUSE IT IS OPERATED AS AN OUT OF CONTROL WELFARE SYSTEM WITH ENORMOUS WASTE AND INEFFICIENCY. DOCTORS INCUR EXPENSIVE LONG TERM TRAINING AND SERVE AS UNDERPAID INTERNS AND THEN FACE RECORD KEEPING REQUIREMENTS AND PAYMENT LIMITS THAT PREVENT THEM FROM EARNING DESERVED COMPENSATION. THOUGH MOST HOSPITAL BUILDINGS ARE PAID FOR BY CHARITABLE CONTRIBUTIONS FROM WEALTHY INDIVIDUALS, MEDICARE AND MEDICAID PAYMENTS TO HOSPITALS ARE ON THEIR FACE INADEQUATE TO COVER OPERATING COSTS FOR THE SERVICES PROVIDED. AS A RESULT PROVIDERS CHARGE AN EXCESSIVE AMOUNT FOR THE SAME SERVICES PROVIDED TO OTHERS .
You should encourage Congress, the insurance companies and the healthcare providers to work together to promptly deal with replacing Obamacare, but stay out of the extremely complicated mess that Obamacare has created. It will continue to haunt healthcare for many years. We do not know if most employers will return after the elimination of the mandates to 40 hour work week jobs or offer healthcare coverage to low-income employees after the mandates are abolished. No matter what reasonable approach Congress makes to create high-risk pools, the press will report incessantly about the sad stories of people with pre-existing conditions who lost their Obamacare policy and died, or can no longer afford their healthcare coverage or a needed expensive drug. Parts of Obamacare that make sense like coverage under your parent’s policy until age 26 or the doughnut hole and Medicare and Medicaid changes included as part of the Obamacare can be expected to be considered by Congress and the insurance companies when they are creating new policies. Congress by finally enacting laws limiting malpractice claims will both reduce healthcare costs and make the practice of medicine more profitable and less stressful. We should also consider including sales across state lines, which will require controls on risk taking and adequate capitalization of insurers plus guarantees against the bankruptcy of insurers.
You have only a few months to get the insurance companies to come up with new policies and present them for approval to the state insurance departments if you wish to minimize the number of uninsured people at the end of this year. Get insurance companies to offer inexpensive catastrophe policies as soon as practicable in as many states as possible to healthy young people to offer them protection (even if the are currently covered by an Obamacare plan) against the risk of becoming subject to a pre-existing condition in the interim period while Obamacare is being replaced. We must get patients and healthcare providers involved with benefit choices and place reasonable coverage limits for all plans to encourage wellness programs and avoid wasteful healthcare demands. One way is to encourage expanded use of tax-favored HSAs and tax DEDUCTIONS to supplement healthcare plans with high deductibles. We might also allow HSAs that encourage savings for use with low deductible plans.
Employer plans often cover employees with pre-existing conditions, but the employee must remain well enough to continue to work. Portable catastrophe coverage insuring against acquiring a sickness or injury that would be viewed as a pre-existing condition should be required as part of all future insurance plans. Such requirement will, over time, reduce the number of people who acquire pre-existing conditions and are thereafter unable to afford healthcare coverage. Congress should determine whether employees who lose their coverage because their employment is terminated and who have become subject to a pre-existing condition should be entitled to remain on the employers plan at their own expense (that may be paid in whole or part by their new employer) or become entitled to purchase comparable insurance from a government subsidized high risk group.
Doctors have struggled with declining incomes and quality of life as a result of Medicare, Medicaid and Obamacare under-payments and complex paper work needed to comply with federal regulations and get paid for services. Many doctors have left the practice of medicine. Others have become employees of large hospital groups or medical practice organizations. We can greatly lower healthcare costs and improve outcomes. We should make greater use of clinics staffed by nurses and clinicians to reduce cost and alleviate the overcrowding of ERs by permitting hospitals to treat patients at clinics as well as ERs. Hospitals can improve care and reduce duplicate and unnecessary procedures by assigning a clinician, a nurse or a doctor to co-ordinate the treatment of each patient. To encourage students to become doctors we should expand the program offered by the armed services by providing medical school scholarships for individuals who commit to provide a designated number of hours of service before and after graduation at ERs and clinics.
EXPLORE A MAJOR CHANGE IN HEALTHCARE BY AUTHORIZING A 90 DAY STUDY TO CONSIDER PERMITTING HOSPITALS AND OTHER HEALTHCARE PROVIDERS TO CREATE INSURANCE SUBSIDIARIES AND OFFER INSURANCE COVERAGE OR A VARIETY OF CONCIERGE PLANS (THAT MIGHT BE TAX DEDUCTIBLE) TO COMPETE WITH THE PLANS OFFERED BY INSURANCE COMPANIES. HOSPITAL GROUPS ARE ALREADY EXPANDING TEAMS OF EMPLOYED DOCTORS THAT COULD PROVIDE THE SERVICES FOR SUCH PLANS. TO ENABLE HOSPITALS TO SPECIALIZE INSURANCE COVERAGE OR CONCIERGE PLANS COULD INCLUDE SERVICES OFFERED BY PARTNERSHIPS OF MULTIPLE HOSPITALS OR GROUPS OF PHYSICIANS.
In conclusion, I ask myself why a program so fraudulent as Obamacare can be defended by a large number of intelligent and successful people. Many of them are earning more than $250,000, are satisfied with their lives and are willing a contribute a small portion of their income to improve the lives of the sick and the poor. Many of them are clueless as the the damage to the middle class caused by such excessive premiums. Most of them have growing investment portfolios and have their healthcare paid by their employer. Unlike American capitalism which has relied on hard working individuals and endured for more than 200 years, no socialistic country has succeeded in the long run. Most people believe that we are a rich country. They ignore the surge in the National Debt to over $20 trillion coincidental with the increases in welfare and disability payments and the large number of people not working or paying income taxes. The slow conversion of our economy to socialism must be reversed and we must grow the GDP before our National Debt becomes unsustainable and our economy collapses.
2. THOUGHTS ON INFRA STRUCTURE CONSTRUCTION AND AN INTIAL CHANGE IN CORPORATE TAXATION
I urge you to ask Congress to immediately reduce the corporate income tax to 10% on repatriation of foreign earnings. It is a “no-brainer”. Make this a stand alone proposal with a sundown provision after two years unless modified in the expected comprehensive corporate tax legislation. Getting the remainder of your tax reduction plan through Congress expeditiously is important, but it may take more time than you think to do so. Hopefully the tax revenues from the repatriation of funds will immediately provide funding of about 100 billion dollars that can be applied to increase transportation infrastructure spending and propel GDP growth without increasing the federal deficit. Act quickly because the extra tax revenues are going to be offset in large part by two factors that have occurred following the presidential election, namely (i) the spike in US interest rates that will raise US government interest costs by $100 Billion for each 1/2% increase in rates as the National Debt is refinanced and (ii) the negative impact on the US trade deficit and corporate profits resulting from the increase in the value of the US Dollar. Bringing the money back to the US may further stimulate capital spending but the cash might be used for dividend increases and stock buybacks that provide lesser stimulus for the GDP. That is why I proposed corporate income tax changes in my book published a few years ago entitled “Perpetuating American Greatness After the Fiscal Cliff” (see pages 64 to 77 in the enclosed copy) to encourage corporate and private investment in partnership with government spending on transportation infrastructure through the purchase of “Jump Start America Bonds” which might now be called “Make America Great Again Bonds”. Individual and corporate balance sheets are much stronger than governmental balance sheets and are better prepared to finance transportation infrastructure.
I will in future letters comment on other parts of your 100 day plan and describe my plan for an interstate fresh-water pipeline project that could be the most important economic development of this century. Constructing a privately owned and financed fresh-water pipeline would create hundreds of thousands of jobs, add tens of billions of dollars to the GDP, reduce the federal deficit, provide water for farming and controlling wind fires, assist in flood control and lower ocean levels to mitigate any potential climate change. I will also propose a very simple proposal for a corporate income tax credit that will encourage immediate wage increases for non-executive middle class workers to stimulate economic growth, help recreate a middle class and generate increased long-term federal income tax revenues.
The fools chatter incessantly as to whether based on its Congressional mandate the Fed missed the opportunity to raise interest rates or when they should raise interest rates based on misleading unemployment statistics and inflation prospects. Now they talk about a host of international economic events to speculate and advise on what the Fed might or should do. The rarely mention the cost of paying interest on the National Debt which is approaching $20T on its way to $25T and $30T in a few years no matter who wins the presidency unless we have unexpected growth in the economy
At a 1% rate, interest on the National Debt totals $200B per year and it rises to $800B if the government is required to pay 4%. The latter rate would raise interest costs to an amount roughly equal to our military budget or our federal welfare or infrastructure spending. We need to spend substantially more on military and infrastructure needs and printing dollars to pay excessive interest will exacerbate our National Debt problem. We simply can’t afford to pay higher interest rates so that they can be lowered if our economy goes into recession. Like the Europeans and the Japanese, the Fed will be able to find ways to stimulate the economy and deal with future banking problems even if interest rates remain low.
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.
Early in his presidency, President Obama introduced and the Democrat controlled Congress adopted what they believed was an $850 billion Keynesian stimulus plan. However, it predictably failed to grow the US economy as he expected. There are multiple reasons for its failure. Not enough was directed to infrastructure construction spending. Taxpayers struggling with excess debt used the extended tax reductions to pay off credit card balances. Giving away many billions of dollars in the form of food stamps and other welfare payments and as loans (which later defaulted) to reward green energy companies rewarded his political base. Although almost all welfare payments are spent, they have an insignificant multiplier effect. They grow the National Debt because they stimulate the creation of mostly non-tax-paying jobs and do not generate significant tax revenues for the federal government or the states to offset the expenditures.
His stimulus program should have been designed exclusively for projects that would have generated hundreds of thousands of tax-paying jobs and income for the tax-paying entities receiving the contracts. One way to do so would have been to use a large percentage of the stimulus to subsidize shovel-ready state infrastructure projects to repair and improve our decaying highways, bridges, tunnels and airports.
Despite the failure of his stimulus plan, the Obama administration continues its unprecedented expansion of welfare benefits for the poor leading to the unending rise in the National Debt. His main effort after adopting the stimulus plan went into adopting Obamacare which is an abomination. It is not only destroying the healthcare industry, and causing the conversion of forty hour per week jobs to part-time jobs, but also creates new types of welfare subsidies for people with pre-existing conditions, the poor, and low-income workers that have to be paid for. Obamacare was passed and President Obama was reelected based on an elaborate series of lies which were intended to, and with the aid of a politicized press, succeeded in preventing the American voters from learning the truth about the required major changes in healthcare policies and the outrageous excessive Obamacare premiums and deductibles required to be paid by the young and healthy middle class and businesses to fund the cost of the Obamacare subsidies.
Fortunately, while the president’s economic policies were failing, the low-interest rates maintained by the Fed over many years promoted a rise in stock prices that promoted spending that grew the GDP and generated tax revenues that contributed to the reduction in the deficit. A major stimulus to our economy was also supplied by fracking. Although conducted only on private land and impeded by President Obama because of his generally unfounded environmental concerns, fracking generated enormous revenues and created millions of tax-paying jobs in the oil and gas, steel, pipe-line, auto and railroad industries. Fracking grew the GDP and limited the rise in the deficit because it produced a multiplier effect on our GDP that the president’s stimulus program failed to achieve.
We now face a serious danger that our economic growth will stagnate because the increases in oil and natural gas production from fracking in a stagnating world economy has caused a temporary glut of supply and a precipitous drop in oil and natural gas prices. The expected large economic benefit from increased consumer spending and reduced costs to business resulting from hundreds of billions of dollars of reduced energy costs may be more that offset by reduced capital expenditures for drilling new wells, employee layoffs and debt defaults in the oil and gas industry, reduced demand for steel pipe and pipeline and rail services and trucks.
Now, after his inept policies have added many trillions of dollars to and doubled the size of our federal debt, President Obama is proposing a true Keynesian stimulus by seeking funding for transportation infrastructure. He blames Republicans in Congress, whom he has refused to negotiate with on most issues and consistently mocked and abused throughout his presidency, for creating grid lock and being the cause the government shutdown that he encouraged and exacerbated for political reasons. Looking back, we see that President Obama has repeatedly violated the Constitution and acted like a “banana republic” dictator while dangerously steering our economy toward socialism and communism.
The Republican controlled Congress will have the opportunity to take control of and stimulate the economy by (i) funding the repair and upgrading of our decaying transportation infrastructure, (ii) strengthening our military, (iii) improving homeland security and (iv) eliminating the Obamacare mandates. Despite his veto threats, President Obama will find it difficult to prevent passage of spending to improve our economy and our safety. However, if Republicans listen to the inept economists who insist on austerity to reduce the budget deficit and the National Debt or if they politicize the spending as the Obama administration does, they will fail.
Even though the spending programs proposed above will provide a Keynesian stimulus to our economy, we will need enormous amounts of capital to pay for the needed transportation construction projects across the country. Instead of complaining repeatedly as President Obama does about growing wealth discrepancies we should be seeking ways to encourage privately held wealth to partner with government to finance infrastructure construction projects. Our safety, domestic production and quality of life will clearly benefit from the improved infrastructure.
I attempted to address the financing problem in my book published in March 2013 entitled “Perpetuating American Greatness After The Fiscal Cliff”. I proposed changing our tax laws to enable the creation of “Jump Start America Bonds” to encourage American corporations with trillions of dollars parked overseas to finance domestic transportation infrastructure construction projects. Perpetuating American greatness is at issue.
MIMI was three years old when her father, a Jewish immigrant, died. She was the fifth of six children, the eldest being age eleven. Her mother got assistance from her father’s painters’ union and other recent immigrants living in the fledgling Jewish community located in the poorest section of downtown Yonkers, to pay for the funeral and temporarily feed her family. Her mother, who spoke only broken English mixed with Yiddish, was suddenly thrust into the role of a single parent provider. There was no welfare available. In order to keep her family together, her mother got permission to sell fresh fish at the local Kosher butcher shop on the days prior to the Jewish sabbath. To buy the fish she had to travel two hours each way, first on an electric trolley and then a subway, from the station located on Broadway at the NYC border, to and from the Fulton Fish Market in lower Manhattan. She bought the fish for cash and carried it on her back, packed in ice, on her return trip.
As MIMI and her brothers and sisters grew, their clothing consisted mostly of hand-me-downs from relatives and friends or an occasional item purchased with money earned from part-time jobs. They learned to live with very little.
MIMI grew into a beautiful young lady. At age 14 she became a part-time personal assistant in NYC for a prominent logo designer. She lived near the Yonkers train station on what is now the Hudson Line of Metro North and commuted to Grand Central Station in NYC. Upon graduating high school, she became employed as a full-time sales girl selling women’s clothing at Genung’s, a local department store. Her beauty was recognized when she was selected as Miss Yonkers in the early 1930’s.
MIMI focused on and was acutely aware of current fashion trends. She spent her limited earnings carefully, displaying an exceptional flair for style. Her ambition was to open a women’s clothing store in downtown Yonkers, patterned after the Saks Fifth Avenue store on Fifth Avenue in NYC. Young Jewish men and an unprecedented number of women had opened retail stores in Yonkers’ downtown Getty Square area to sell all types of merchandise, including clothing, appliances, jewelry, eyeglasses, sporting goods and cameras. MIMI could only dream of opening a woman’s clothing store.
Her opportunity came unexpectedly. One afternoon she was helping a customer at Genung’s who told her that she had just bought some hosiery bargains from a store going out of business. Mimi left work to go to the store, which was located a few blocks away at one of the least desirable locations, on a very steep hill at the outskirts of Getty Square area. She inquired about purchasing the store, but was advised that they were merely liquidating the merchandise and going out of business. When she pressed them, they offered to sell her the remaining merchandise and the fixtures for $100 and to speak to the landlord about giving her a lease.
Mimi didn’t have any savings. She immediately went to her sister, Rose, who was married and had a young son, to try to borrow $100. Rose at first declined because that amount represented almost all of her family’s savings, but Mimi was relentless. She convinced her sister that this was the opportunity she had been looking for and would not fail. The next day, MIMI produced the $100 and purchased the fixtures and the remaining almost worthless inventory.
MIMI was immediately faced with a dilemma. She now had a store, but had no cash, no credit and no merchandise to sell. That didn’t stop MIMI. She conceived an imaginative plan to solve the problem. She took the train into Manhattan and walked to the area west of Fifth Avenue below 42nd Street where many Jewish manufacturers produced and sold wholesale all types of high fashion womenswear products, such as blouses, sweaters, gloves and lingerie. She knew the names of some of the manufactures and located their showrooms. Many of them were pleased to show this pretty, fashionably dressed, young woman their lines. She selected a total of a half-dozen items to buy at each showroom at an aggregate cost of less than $20 and then told them she had no cash and needed credit. She explained that she had customers for each of the items and that payment the next Monday morning would not be a problem. The size of the order was meaningless to them, but MIMI’s charm, knowledge of their merchandise and enthusiasm were persuasive. A few were willing to take what for them was an insignificant monetary risk.
With the garments in hand she immediately became one of the first personal shoppers in the US. While she was selecting each on the items, MIMI had envisioned who she would sell them to. MIMI went home and enthusiastically contacted her friends and their mothers to get them to buy the items she had personally selected for them. As promised, on Monday morning she was back at the showrooms to make payment and to get credit to purchase a larger number of additional items on the same terms. Within a few weeks MIMI’s merchandise was the gossip of the Jewish community. She knew almost every customer by name and was able to convince them how great they looked in garments purchased from MIMI’s,
In a short period of time she got credit until the end of the month and was able to purchase inventory for display at her store. Her business prospered and she soon relocated it to a much larger store on Broadway near the center of Getty Square. She was joined in business by her husband, Nat, and within a few years they rented a larger prominent location at 3 North Broadway, just off Getty’s Square’s most important corner. It was stocked with sweaters, blouses and lingerie. Christmas was a special and busy time at MIMI’s and your gift was wrapped in an expensive red and gold box with a ribbon patterned after the Saks Fifth Avenue Christmas wrapping.
The store at 3 North Broadway occupied almost half of the ground floor of a rundown and low occupancy hotel, a four story structure built over 100 years before to house travelers by stagecoach on their first stop of the multi-day trip from NYC to Albany along Broadway, route US9. Soon thereafter, MIMI and Nat approached the hotel owner and negotiated a 25 year lease for the entire premises. They thereafter hired a prominent local architect and borrowed heavily to renovate the structure into a modern department store to be known as MIMI’s. The store, completed in 1948, opened with the Lieutenant Governor speaking before a crowd of thousands. MIMI’s was an immediate success and sparked a major revival of Getty Square. The name MIMI appeared in large neon letters on the front of the building. MIMI was in the store to greet customers almost every day, six days a week. MIMI, known only by her first name, after a few years became one of the best known people in Yonkers.
MIMI’s had large windows along both Broadway and Main Street that MIMI changed frequently to always display a large number of stylish but affordable items. There was a reason for MIMI’s merchandise being affordable. MIMI had used her ingenuity to became one of America’s first discounters. She knew from her personal dealings with the NYC manufacturers that during the 50’s they shipped their large orders across the country before Thanksgiving and were left with large quantities of unsold high quality merchandise that could no longer be sold and delivered to customers for pre-Christmas availability. Because MIMI’s was located about 20 minutes by car from the garment center, Nat could drive MIMI into NYC to buy and take immediate delivery of large quantities of merchandise that the manufacturers were stuck with. MIMI, who knew every item offered by the manufacturer by style number and color, would buy thousands of dollars of the latest high-style merchandise for cash at cost or below. She immediately displayed the items in MIMI’s windows for sale at prices often at or below wholesale. MIMI’s newspaper ads in the Yonkers Herald Statesman became a weekly highlight for shoppers who sought the special MIMI’s bargains. MIMI’s expanded its sales, before the availability of credit cards, by offering MIMI charge accounts, an in-house credit system administered by hand by MIMI’s brother. MIMI employed her sister Rose and other family members in the business. She provided for her mother, who lived with her, and her younger sister’s family and gave merchandise and support to many local charities.
MIMI’s construction was completed in 1948. It was an immediate success. The Cross County shopping center, one of the earliest in the US, opened in the early 50’s and introduced limited competition to Getty Square. However, because MIMI’s customers came by car and public transportation mainly from southwest Yonkers and other areas stretching from Riverdale to the south and Hastings and Dobbs Ferry to the north, MIMI’s was protected by geography from competition to the east.
MIMI’s prospered for years until the late 1960’s when a drastic change took place in the Getty Square area. Large population shifts occurred in Yonkers resulting in large part from school busing and the construction of a very large, low-income housing project that attracted large numbers of poor people from near-by cities. Well-intentioned attempts by liberals to improve the lives of low-income people had the reverse effect. The income level of Getty Square customers declined precipitously. Crime became a serious issue and as a result traffic in Getty Square after dark was greatly diminished. The quality of merchandise being offered by merchants declined and weaker businesses closed their doors. MIMI’s, which had for more than 25 years remained open until 10:00 six days a week between Thanksgiving and Christmas decided that it was too dangerous to remain open at night. It closed daily in the late afternoon well before sundown to let its sales girls get home safely. Within a few years a business that had been highly profitable selling quality merchandise at discounted prices, could no longer cover its costs.
MIMI was in her 60’s, in excellent health and was current with all the trends and developments in the women’s clothing business. She loved her work. She still got excited every time she saw one of her customers in a sweater or blouse or wearing lingerie MIMI’s had sold her. She didn’t want to make the final decision that a business that is unprofitable should be closed. Her husband and son, the author of this article, convinced her it was time to retire and enjoy the fruits of her success. MIMI’s dream ended as it had begun with a going out of business sale followed by the sale of the converted hotel they had acquired years before. Social issues beyond her control had destroyed the neighborhood in which her business was located.