Fat Cat Bankers??!!

On Sunday, December 13, 2009 President Obama referred to American bankers as "fat cat bankers" who "just do not get it." This was said during an interview on CBS's "60 Minutes." He was referring to bankers inability to understand why Americans were upset with their large bonuses after taking bailout money. I guess President Obama forgot that the sub prime lending which caused the banking and credit crisis started when Fannie Mae and Freddie Mac had to be put in conversatorship in September 2008. President Obama, who said that he would not have anything to do with lobbyists, did accept $120,000.00 from Fannie Mae and Freddie Mac during his 144 days in the US Senate. In a similar vein, there was an article in the New York Times that 4 bailout recipients are still struggling and may need further government funding. Guess who's on this list. If you say Fannie Mae and Freddie Mac, you're today's winner.
Please remember this, it was sub prime lending that set off this recession. Why did banks and mortgage companies make loans to people that could not handle these loans? One big hint, the community reinvestment act. This act requires banks to conduct business with all communities within their service area. The act was passed to prevent redlining, the practice of not engaging in risky and imprudent transactions such as sub prime loans. The US government encouraged and cajoled the "fat cat bankers" to make high risk mortgages with the implicit guarantee that the government would back up the loans if defaults became a problem.

The latest on congressional spending

According to the Associated Press, the house democrats are pushing through a $1.1 trillion (think 11 zeros and 3 commas to the right of the 1.1) spending bill in addition to whatever they finally decide (if anything) on the health care debacle often referred to as overhaul or reform.

The folks at Taxpayers for Common Sense found $3.9 billion funding congressional pet projects known as earmarks. They counted 5227 altogether. On a state by state basis this is over 100 earmarks per state. On a congressional district basis using 435 districts this is 12 per district. President Obama said he would read through every line of legislation and strike out unnecessary spending.

I wonder how many earmarks there were before his careful scrutiny of the bill??

Transparency with the stimulus funds report

I just finished reading an interesting article on the Phoenix Arizona tv Channel 12 news website about the uproar over the errors in the stimulus quarterly reports. Apparently lots of funds were sent to nonexistent congressional districts. Fortunately, there were also lots of jobs created or saved in these same phantom districts. The Franklin Center for Public and Government Integrity reports there were over 440 phantom districts in the stimulus reports.

This amazes me since there are only 435 congressional districts in the USA. I am not an accountant or auditor, but it seems to me that if X amount of funds were paid to phantom districts then there should also be X amount of funds missing from the total paid to the non-phantom i.e. real congressional districts. Channel 12 reports that it appears most of the phantom funds were paid to the intended receivers, they just made a little error in reporting the district number.

I am certain this can be corrected sooner or later. Maybe the stimulus reports should only be done by states and not districts. After all transparency means the ability to see something clearly. Phantom means invisible.

If we, the American people, will have accounting problems with the $787 billion stimulus spending, what problems will we encounter if Obama/Pelosi care gets enacted? The senate finance version was about 1000 pages, the house version 1990 pages. We cannot afford the printing costs of these proposed bills. What will happen when if it is passed and employers, insurers and health care providers have to figure out how to cope with it? I am thinking, if the government cannot do better than this with the stimulus, we may have a health care revolution in the near future.

Poll shows (kinda sorta) increased support for public option.

The WashingtonPost.com ran an article today about a poll that shows increased public support for a public option in the health care overhaul debate. Seniors and independents raised support for the infamous public option to a spellbinding 57%. Of course, there are a few caveats that will not fit into a headline or sound bite.

First, the public option has to be administered by the states, not the federal government. Second, only people without access to affordable private or employer provided plans can participate in the public option. Since the public option provisions all call for federal subsidies as "seed money" I doubt that the states will really run these programs. Too many state administered programs are vying for federal funds and subsidies as it is, what will be different about this one?

And now for the $64,000 question. What is affordable insurance? It will probably be a percentage of annual income. But what percent is a very big and very loaded question.

My prediction is if the public option is voted into law, these provisions will not be respected by congress. Congress will get its way on a short term basis and find themselves facing another republican or better yet independent revolution in 2010 or 2012 at the latest.

Health care math

The Congressional Budget Office announced that the Senate finance committee's bill will cost $829 billion over the next 10 years while generating revenue of $911 billion over the next 10 years. The revenue will be from taxes, fees and penalties in the proposed legislation. This will result in a net deficit reduction of $81 billion. When I subtract $911 billion from $829 billion I get $82 billion. But I am not going to make a big deal of this, I'll attribute it to rounding down. What I do want to rant about is some of the assumptions used here. First, the CBO uses the estimates of the bill for the Cadillac tax, a tax on high cost health insurance plans. Many members of congress have labeled the insurance industry as profit motivated to the point of greed and avarice. (This is a vampire calling a mosquito a blood sucking fiend) What makes anybody think the insurers will not cut back on selling these plans and pass on the tax cost to the buyers who still purchase these Cadillac plans?
The CBO is the same agency that said on July 16,2009 that none of the proposed health care bills would do anything to bring down the curve in health care costs. See my earlier post on the same day for details. In less than 4 months a complete reversal in the impact of health care bills occurred? Wow, I'm impressed.(more sarcasm) Anyone who has suffered the mental torture of an economics class and can still remember any of it will tell you economists always add the caveat "all other things being equal" to anything they say. In real life this does not work, so I doubt that the $81 billion dollar savings will survive the next 10 years.
And another point, this is still proposed legislation, the finance committee will vote on it tomorrow then the process starts over again trying to get the bill signed by the Senate and then it will go to the house of reps. Remember what our wildcat house speaker Nancy Pelosi said? A health care bill will not pass the house without a public option. Let's hope Ms. Pelosi can adjust to the fact that most Americans do not want more government, especially government selling health insurance. More to come as this saga unfolds.

Good Grief, Barack Obama!!

With apologies to the Charles Schulz estate and peanuts fans everywhere, how else can I put it? Friday a week ago, the IOC awarded the 2016 Olympic games to Rio De Janeiro over Chicago. Big shock to the media since there was a "Dream Team" lobbying for Chicago as the host city. Yesterday, President Obama won the Nobel Peace Prize. Another big surprise. The Nobel committee said Obama's promise of nuclear disarmament and diplomacy were the virtues that influenced their vote. I only have one problem with this. The nomination deadline was February 1, 2009. Mr. Obama was sworn in as President January 20, 2009. He won the presidential campaign November 4, 2008. He did not have very much time to turn his potential into acts. The combination of this nomination with Al Gore's Nobel Peace Prize for unfounded and bad science makes me lose faith in the Nobel Prize Committee.

A few random rants and thoughts

One trend that disturbs me is health care overhaul zealots blaming opposition to obamacare on racism. This is not only absurd but completely unfounded by facts. Mr. Obama got 96% of the black vote. Big deal, so what. Even 100% of a minority is still a minority. Mr. Obama got elected President of the USA by not only black people, but white, hispanic & asian people as well. The only people using race as an issue are the Charley Rangels of the world. He told a predominantly black audience in his district over the august congressional recess that opponents to obamacare and the public option just could not accept the fact that a black man was the President of the USA. Mr. Rangel was probably just "playing the audience" to rally support for the misnamed public option. Again, do the math. Mr Obama was elected POTUS by 52% of all the American Voters.
People that say no other president has received so much criticism have not been in the USA very long or have the memory spans of a very brain damaged fruit fly. Criticism is part of the job for any president. To his credit, Mr. Obama has recognized this fact. Now if he will just recognize the fact that he has over 3 years to improve, not tear down the USA's health care system he will accomplish more than he could with his current strategies.

Olympic Committee follows Obama's words

Just one comment on the IOC appointment of Rio De Janeiro as the host city for 2016 Olympic games. Remember Joe the Plumber from the 2008 presidential campaign? Mr. Obama told Joe he "wanted to spread the wealth." The IOC decided to do just that and awarded Rio the 2016 Olympic games. As Brazil's president Luiz Inacio Lula da Silva pointed out the Olympics have been held in North America, Europe and Asia, never in a tropical country. Kudos to the IOC!! Way to go, Rio!!

A few comments on the health care bill.

It is really difficult to comment on the current health care bill being massaged and sculpted by the senate finance committee. It is still very much so under construction, or destruction depending on your outlook. I am glad the finance committee was able to defeat the public option. Maybe they were paying attention to the voters concerns at all those town hall meetings in August.
On the other hand, I don't see where this so called private co-op (with a $6b government subsidy as "seed money") is a big improvement. It sure looks like this co-op is going to be another government sponsored extortion, excuse me, enterprise. This frightens me because it seems like the health care equivalent of Fannie Mae and Freddie Mac for the housing industry. Do the American Taxpayers need to finance another nightmare for another industry important to the American economy? I think not.
What really burns me up is the congressmen's statement that the insurance business needs to have their feet held to the fire. If this isn't the pot calling the kettle black, I cannot imagine what would be.
Here's a few suggestions for all our congress men and women to help them get through this.

1. Leave your egomania out of the decision making process. The voters did not elect you so you can create a legacy or make history at their expense. The voters elected you to represent their interests in congress, not visa versa.

2. Stop calling anyone who disagrees with your ideas Nazis and astroturf. There are still WWII veterans around who would take great offense at you referring to their sons and daughters as nazis just because they do not believe the public option is a gift from heaven above via yourselves.

3. Start using page limits on legislation. Remember the acronym KISS. Keep It Simple Stupid.

4. Accomplish some real positive health care reform. Put a limit on medical malpractice lawsuit awards. Too many doctors are practicing too much defensive medicine. They order tests and other procedures that are not medically necessary just to protect themselves from lawsuits.

Well, this is enough for now. If I go on any further I might be made an honorary member of congress. (What irony indeed)

A few more thoughts on healthcare overhaul (aka nationalized medicine)

There is an old saying," if it ain't broke, don't fix it." The USA has the best healthcare delivery system on this planet. It is not broken but nonetheless fearless leaders in DC, mainly liberals and democrats, want to overhaul it. An overhaul is not needed. The problem every American has with our healthcare system is the drastic increases in its costs. This is what needs fixing. Unfortunately, our politicians are only good at taxing Americans and then giving some of it back to bribe us to vote for them. This is why there is so much stress and disagreement coming out on the healthcare issue. American voters are justified in their fear of what the warlocks and witches of congress will conjure up as an "overhaul" of our health care system. Americans need to deluge their congressional representatives with their viewpoints on healthcare. Eventually they will listen or be voted out of office.

The lack of universal healthcare coverage is the lamest excuse Big Brother Government Healthcare advocates use in this debate. They harp on the fact that the USA is the only "developed " country on earth without it. Two questions come to mind when I hear this. First,"and your point is . . ?" and second "So Frigging What??!!!" When I was growing up, I used this argument to try to get my parents permission to do something. The conversation would go like this. Me," can I do such and such, all the other kids at school can do it." My parents response, " if all the other kids at school jumped out of an airplane without a parachute, would you do it too?" Needless to say, we did not have very many of these conversations.

Another phrase I am tired of hearing from politicians is "the need to create a level playing field." This is usually given as an excuse for whatever legislation they want taxpayers to fund whether we want to or not. Well, I just found a website dedicated to all you level playing field fans. For a glimpse of level playing field Utopia, click here.

Congress attempts to rewrite preventive care study

The September 1, 2009 issue of the Washington Post reports a study of the cost effectiveness of preventive care is not going to generate the savings that have been promised by advocates of Obamacare. Entitled "Using clinical information to project health care spending," the study was published on the website of the journal of health policy research "Health Affairs." Michael J. O'Grady , one of 4 authors of the study, had this to say about the study. "There's no free lunch here. Prevention will not pay for everything. But it's not as expensive as it looks at first blush"

How did Obamacare supporters in Congress react to this. They have already requested the Congressional Budget Office, the nonpartisan agency established by Congress to provide impartial evaluations of the cost effects of proposed legislation, to revise their studies to support their position. Donna Christensen, (D-US Virgin Islands) introduced a bill which would allow congressional leaders to request the CBO to alter their research methodology to a longer time period in hopes it would show more beneficial cost savings. I wonder what the Obamacare fans would say if the 25 year time frame still did not generate the savings they say preventive care will cause.

I say preventive care should be a major part of any health care reform. It doesn't matter to me if it generates savings or not, it will improve the quality of life for the chronically ill. The Hippocratic Oath requires Medical Doctors to do no harm or injustice to their patients. This is what preventive care is all about, providing the best care possible for the ill. The Obamacare fans seem to want their cake, eat it and lose weight at the same time.

More observations on the economy

Second, one of the first causalities of Obamacare was the "public option" provision. This would have set up a government run and funded insurance plan open to anyone. Its proponents said that the provision would provide a little healthy competition to private insurers to "keep them honest." Private insurers are not saints, but they do not need politicians and bureaucrats to "keep them honest." Insurers today are the referees of this game we call a health care industry. Health care providers want to be paid well for all their training and services given to their patients. Patients want the best care possible with minimal out of pocket expenses. Employers want low premiums. Guess who has to come up with a way to appease these demands and stay on a budget. That's right, the insurers. Imagine, if you will, that the health care providers, consumers and employers were all guests at a dinner party. The host is the insurers. A large strawberry cheesecake is placed on the table for dessert. Each of the guests demanded one half of the cheesecake as their well earned slice. Do you still think the insurers are as greedy and evil as our politicians claim?

Also, the public option was a mandate, which is politico-speak for legal requirement. Option means choice. If the public "option" is required by law, it is not a choice or option. The politicians should have called it a public mandate. I think they were afraid the mandate would give away their real intent, to let the taxpayer subsidized "option" be chosen by so many people it would become a single payer system. Under a single payer system, who do you think will control the system. If you said the politicians, move to the head of the class.

Look back at the end of the first paragraph and the dinner party cheesecake dilemma. Now imagine the same situation except the government is the host instead of private insurers. How do you think the government would have handled the dilemma? Based on their past performances in similar situations, I believe they would have ordered 2 more cheesecakes and put the bill on a credit card billable to the American Taxpayers, present and future generations.

A few observations on the economy

I want to set a few facts straight here.  First,  President Obama is quite sincere when he says he will not raise our taxes by one cent.   The U. S. Constitution says that "All  bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."   US Presidents can and usually do propose legislation to Congress for their approval.   They can hit the campaign trail and try to raise voter support to their proposed bills.   They can hold press conferences  and media appearances to urge, support, cajole or whatever they believe necessary to get their proposed legislation approved by Congress.  They also have the right to veto any proposed bills and return them to Congress.   Congress then has the option to amend the bill to appease the President or hold a second vote in hopes of getting enough votes to override the veto.   Congress also has the option to let their proposed bills die on the vine.  

In summary, when our taxes go up in the future to cover all the funds given away in the name of economic stimulus and recovery, it will be the Congress that passes the legislation.  The President will only be able to veto the bills or sign off on them as law.  

More fact straightening to come soon.

A sign of REAL Hope from the health care front.

Quote of the Day:

"I think there will be a competitor to private insurers," Sebelius says, "That's really the essential part, is you don't turn over the whole new marketplace to private insurance companies and trust them to do the right thing. We need some choices, we need some competition." Kathleen Sebelius US Secretary of HHS. NY Times August 16, 2009.

Counterquote of the Day

"It is not the function of our Government to keep the citizen from falling into error; it is the function of the citizen to keep the Government from falling into error."
-- Robert Houghwout Jackson, Associate Justice of the U.S. Supreme Court and Chief Judge at the War-Crimes Tribunal in Nuremberg

I am glad to hear the President and his health care reform comrades are finally starting to listen to Americans who live outside of the DC Beltway. Most Americans know that health care costs are climbing but they still want their current insurance (if they have it). Remember, when the New Deal gave us the Social Security Act, the social security tax was 1% of the first $3000.00 annual wages for then covered employees. Now workers pay 6.2% of the first $102,000.00 for social security and 1.45% for Medicare on all wages, the sky's the limit for Medicare. Despite these increases lots of people do not believe they will be able to depend on it at all. This is a major reason why American Voters are so concerned about a public option for health care. They believe it will open yet another door for more government intrusion in their personal lives and the American Economy.

Here is my suggestion for President Obama, Secretary Selebius, Speaker Pelosi et al.
Read Charles Krauthammer's article "Health care reform: a better plan" in the August 7, 2009 edition of the Washington Post. He believes tort reform is the first priority. He cites a Massachusetts Medical Society study that shows that 5 of 6 doctors report 1 of 4 procedures they order are purely for defense from lawsuits. Cut down on these wasteful tests and you will save lots of money that can be directed to more productive use.

Obama's unhatched chickens

We have the AARP on board because they know this is a good deal for our seniors. AARP would not be endorsing a bill if it was undermining Medicare.
-President Barack Obama at Portsmouth, N. H. town hall meeting August 11, 2009

AARP has been working with Democrats and Republicans to fix our broken health care system. While the president was correct that AARP will not endorse a health care reform bill that would reduce Medicare benefits, indications that we have endorsed any of the major health care reform bills currently under consideration in Congress are inaccurate
-Tom Nelson, COO, AARP August 11, 2009 AARP Press Center

Well, can you blame AARP for not endorsing Obamacare at this time? There are 5 different health care "reform" bills under consideration in Congress now. Nobody knows what the final bill will contain or even if there will be a bill to vote on this year. Another reason for AARP withholding endorsement is many seniors concern that Medicare benefits will be cut to help pay for insurance on the currently uninsured. Since AARP is the largest lobby for Americans age 50 and up, to endorse any of the bills at this point would cause an uproar from their membership base. The best thing AARP can do for Americans at this point is advocate what lots of Americans want. They do not want a complete overhaul of the USA health care system in less than 12 months. Maybe if AARP reminded President Obama that he was elected for 4 years he might finally get the message and stop trying to push 1000+ pages of legislation through Congress overnight as if it is emergency legislation. It's not an emergency!!

Three cheers for sensible and reasoned arguments

Quote of the Day:

"I suspect that once we get into the fall and people look at the actual legislation that's being proposed, that more sensible and reasoned arguments will emerge. And we're going to get this passed."
- President Barack Obama on his proposed 1000+ page health care reform bill. Yahoo News August 10, 2009

CounterQuote of the Day:

It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess what is will be tomorrow."
-James Madison Federalist no. 62 February 27, 1788. Italics added

President Obama has gotten me a little dazed and confused. I was in total agreement with this quote until the last sentence. I was hoping he meant that negotiation & compromise would prevail in a bipartisan effort to really trim this whale of legislation down to the size of a tuna, a walleye or even a trout. But no, my hopes are dashed. My interpretation of "and we will get this passed" means his wants the whole 1000+ pages. This quote was made in response of some of the more vocal citizens at the Town Hall meetings. Some were against Obamacare, some for it. It's definitely a political hot potato.

Take a lesson from recent history, Mr. President. Hillarycare was 1300 pages and it never made it to a single vote. Here's another quote from today's WashingtonPost.com to help illustrate this. This is from Susan Wells speaking to Perry Chang, a volunteer canvassing door to door urging people to call their representatives on behalf of Obamacare:

It's like one of those things where you'd like to try it before you buy it," Wells said. "But once we do it, there's no going back."

I'm not sure where she stands on this. She told Mr. Chang she was concerned about friends and relatives without insurance. She likes her insurance but is concerned that her employer, the Red Cross, is cutting benefits. She attributed her angst about Obamacare to "fear of the unknown". This made me realize what bothers me about Obamacare. It is close to fear of the unknown, it is fear of the unknowable, unfathomable and incomprehensible. I am reminded of an old Chinese saying, "We are living in interesting times." This fall will be very interesting inside the DC beltway.

P. S. Is it just me or is there a pattern developing. Whenever we elect lawyers as Presidents, Clinton then Obama, we end up with proposed legislation that no one in their right mind would want enacted.

An Historic Day for Justice Sonia Sotomayor

The US Senate voted 68-31 to approve President Obama's nominee for the US Supreme Court, Sonia Sotomayor. She is the first hispanic/latina and the third woman appointed to the bench of the Supreme Court of the US.(SCOTUS) See my earlier blog on this issue here. I am glad that this issue is resolved and our fearless leaders in the Congress can return to DC after their summer recess with this cleared from their agendas. Now they can devote more time to reforming the health care reform bills in Congress. As I have noted earlier in this blog, I would rather have smaller more efficient changes than a complete remake of the system.

If I found a magic lamp with a genie that could only grant wishes for US Congressional acts, these would be my wishes:

1. Term limits for members of Congress. Barney Frank, Teddy Kennedy, Maxine Waters, The Late Strom Thurmond. Need I go on?


2. Page limits for legislation. The health care reform under current consideration is 1000 pages. Hillarycare was 1300 pages. Get the point?

3. Abolish Government Sponsored Enterprises.(GSE) Social Security, Fannie Mae, Freddie Mac.

More quotes on Obamacare

2 quotes for today

Because they lack the bargaining power that large businesses have and face higher administrative costs per person, small businesses pay up to 18 percent more for the very same health insurance plans – costs that eat into their profits and get passed on to their employees.

As a result, small businesses are much less likely to offer health insurance. Those that do tend to have less generous plans. In a recent survey, one third of small businesses reported cutting benefits. Many have dropped coverage altogether. And many have shed jobs, or shut their doors entirely.

This is unsustainable, it’s unacceptable, and it’s going to change when I sign health insurance reform into law.
President Barack Obama Weekly Address to the Nation 7/25/2009 Available at www.whitehouse.gov/

When I take this bill to the floor, it will win. But we will move forward

Speaker of the House Nancy Pelosi on CNN State of the Union July 26, 2009 Transcript available here.

First, I am absolutely delighted that President Obama realizes the importance of small business in the American economy. He cites a rather long study by the Council Of Economic Advisers to support his concern. The report is also available at whitehouse.gov. It is dated July 25, 2009 the day he gave his weekly address. Too bad the CAE didn't publish it sooner, I'm certain it would have dispelled any and all concerns about a negative impact of health care on small businesses. (slight sarcasm!)

For Speaker Pelosi, a point of clarification please. You stated that when you take the bill to the house floor you will win, which I presume is your goal. Then you say "But we will move forward." The way I interpret this remark is that the health care bill is a move backward, if you move forward after it is passed by the house.

And now a question for both of you. Imagine you are not professional politicians for a moment but small business owners. Which would be easier for you to understand and comply with, a bill that is 10 pages long, 100 pages long or 1000 pages, the length of the current Health Care Reform Bill? Do you see my point? I believe you will have better success if you break it up and try to get the least expensive and burdensome parts of the bill passed first. But then, what would I know? I'm not a professional politician.

Great News for health care reform!

Senate majority leader Harry Reid (Dem-Nevada) announced today there will be no vote on President Obama's requested health care legislation before the summer recess. Thank goodness for this decision. There is still some sanity left in Congress. As I stated earlier, the USA has gotten by without the so-called direly needed health care reforms, we can get by a little bit longer. Again, I remind President Obama he still has 3 years left to do this. A little more deliberation and negotiation will only make it better not worse.

More scare tactics on health care reform

This is from President Obama's weekly address to the nation today. You can read the entire text or watch the video at WhiteHouse.gov.

"Or whether we'll seize this opportunity -- one we might not have again for generations -- and finally pass health insurance reform this year, in 2009."(italics mine)

What is the basis for this?? What will happen 09/01/2009 that will prevent any form of legislation on health care for generations?! Congress is just taking their summer recess. They will come back and carry on as they always do. President Obama does not tell us the source of his urgency in his speech today or any other day that I am aware of. I sure hope he tells America why we can only act now, the suspense is killing me.

Sen. Jon Kyl (R-Az) delivered the Republican Weekly Address today and proposed a reason for President Obama's repeated warnings that it is now or never for health care reform.

"The President and some Democrats insist we must rush this plan through, why? Because the more Americans know about it, the more they oppose it. Something this important needs to be done right, rather than done quickly."

At first glance, it sounds like a conspiracy theory. But the more I review the rhetoric and the conspiracy theories of the President and the Democrats, his explanation becomes more and more plausible. You can watch his address here on youtube.

Good news/bad news on health care reform

First the good news. President Obama is trying to have medicare reimbursement rates and policies decided by a commission of health care experts. Right now rates are being set by members of congress. Congressional use of medicare reimbursements as pork is a major cause of the increases in medicare costs. Obama's chief of staff, Rahm Emanuel described this as "the least talked-about, most important issue on the table." (Washington Post Com July 16 2009. "Obama Eyes The Purse Strings for Medicare") On this issue the Obama administration has my full support. Anything is better than setting reimbursement rates with a committee of 535.

The bad news came from testimony by the Congressional Budget Office Director today before the Senate Budget Committee. Douglas Elmendorf said there was nothing in the current bills that slow down the rate of federal spending for health care. Instead of bending the cost curve downward, a goal of health care reform, it will actually raise the rate of federal spending on health care. Here is a snippet of the questions Mr. Elmendorf had to face today. This is from the committee chairman, Kent Conrad (D-N.D.) As quoted from the Washington Post.Com July 16, 2009 "CBO Chief criticizes Democrats health reform measures":

"I'm going to really put you on the spot," Conrad told Elmendorf. "From what you have seen from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?"Elmendorf responded: "No, Mr. Chairman."

I cannot add anything to his response. No means no, what else is there to say. Time to go back to the drawing board.

A Few Quotes on Obamacare

Here's a few quotes on the so-called dire need for health care reform.

"We will work through some of the differences we have among the members, both Democrats and Republicans, with the objective that we will have a bill," Waxman said. "We cannot allow this issue to be delayed. We cannot put it off again. We cannot — quite frankly, cannot — go home for a recess unless the House and the Senate both pass bills to reform and restructure our health care system." Rep Henry Waxman D- California.

"I don't know many small-business men or women who are making themselves $280,000, so I am not sure that very many small businesses are going to be affected by this," Hoyer said. "But we are committed to paying for health care reform. The Senate is committed to paying for health care reform. . . . That is one option that has been proposed." House Majority Leader Steny Hoyer, D-Md

Both quotes from the Belleville News-Democrat July 14, 2009 "House Democrats propose surtax on rich to pay for health care."

And now for a counter quote to both:

"Imagine, if you will, that I am an idiot.
Then, imagine that I am also a Congressman.
But, alas, I repeat myself."-- Mark Twain 1866

To Mr. Waxman, please read my blog on June 16, 2009 on health care reform. Bill Clinton said the same thing you did back in 1993. His prophecy of doom and gloom did not materialize. Health care reform advocates like yourself should read the parable about the little boy who cried "Wolf!" The USA has hobbled by without the so-called needed reforms we can probably get by a little longer. Maybe we should focus on economic recovery first then if there is a need for health care reforms it will be obvious to anyone.

To Mr. Hoyer, just because you don't know many small business people making $250,000 doesn't mean they aren't out there. Maybe you do know some and they just don't feel their earnings are any of your business.

Barney Frank attempts to be Big Brother

Have you read George Orwell's novel 1984? The movie's male protagonist, Winston Smith, was a civil servant who rewrote history to suit the government, embodied by Big Brother. The government maintained all records and newspapers. Whenever something happened that was contradicted by past records or policies, the contrary items were purged and replaced with records that supported the new policy.

As you will see in this youtube video of Barney Frank interviewed by Bill O'Reilly on the O'Reilly factor, Mr. Frank seems to think that all the things he said and did in the past would not come back to haunt him.



Lots more to come on this later.

Last rant on the smoking prevention act (for now)

Remember the Master Tobacco Settlement back in the 1990s? One of the rationales for this legislative extortion was the money would fund smoking prevention programs. Here is a graph from the campaign for smoke free kids. This group supported the smoking prevention act even though they have proof on their website that the states did not use their funds for cessation programs. Where did the money go? Wherever the state legislatures felt like spending it. Not unlike President Obama's campaign chat with Joe the Plumber. Obama wanted to "spread the wealth". A nice vague statement that can easily be sidestepped and revised ad nauseam later.

Spending Graph

The smaller parts of the graph are the amounts the states spent on their smoking cessation programs. The larger one is the amounts states received from the Master Tobacco Settlement and their current tobacco sales and excise taxes. You need a magnifying glass for the spending on smoking prevention programs. You can see the receipts from Tobacco taxes from across a large sized room. Do the math and you will see the states spent less than $7 billion over a 10 year period. During the same 10 year period they received over $200 billion. When politicians receive over $20 billion a year, they are not going to kill the goose that lays this many golden eggs. That is why the smoking prevention programs get such a small percentage of the tax receipts that tobacco generates.

To learn more about how we are doing on smoking cessation, visit Campaign for smoke free kids, just click here

another rant on the smoking prevention act

Let me quote H. R. 1256 title II section 201:

Directs the Secretary (of Health and Human Services) to issue regulations that require color graphics (italics mine) depicting the negative health consequences of smoking to accompany cigarette label statements.

GovTrack.us. H.R. 1256--111th Congress (2009): Family Smoking Prevention and Tobacco Control Act, GovTrack.us (database of federal legislation) (accessed Jun 27, 2009)

Color graphics of lung cancer in a 7-11 store or a Walgreens? That is way beyond the point of unacceptable. 20% of Americans smoke. 20% of Americans are obese. (so overweight it is a major threat to their health. Mainly from Heart Disease, high blood pressure and Diabetes) Is congress going to mandate that Hostess show color graphics of the negative health consequences of twinkies, ding dongs, ho hos, cup cakes and snow balls? That will really enhance the shopping experience for families and children. I have a feeling the tobacco industry will go after this requirement and win.

smoking prevention act redux

One more problem I have with this act is the glaring hypocrisy in both the act itself and in the politicians involved with it. If nicotine is addictive why does the act not allow the FDA to ban nicotine entirely? Alas, I am repeating myself from an earlier post. Banned or outlawed items cannot be taxed. Notice the act allows the nicotine levels to be lowered. This means smokers will have to increase their cigarette consumption to get their daily fix of nicotine. This will increase the tax revenue while exposing smokers to more of the thousands of ingredients in cigarette smoke(several of which are carcinogens and other toxins hazardous to human health). If our politicians are willing to live with the increased health hazards smokers incur in exchange for more tax dollars to spend, it's time for Americans to really wake up and demand better of our elected leaders. It could not get much worse.

When President Obama gladly signed this bill, he said it was to prevent future generations of America's children from picking up the habit. I am a big fan of irony so this statement really takes the cake. He admits to being a former heavy smoker and to "falling off the wagon" since the inauguration. He also said he would not smoke in front of his wife, his kids or in the White House. The reporter he told this to was in a generous mood and did not press him about the Rose Garden, the Presidential limo, Air Force and Marine Corps One etc. Mr. President, America's children are not dumb. They will see it as another "do as I say, not as I do" advice and lose a little respect for you. Good Grief, you promised your wife you'd quit if she let you run for the Presidency. If she can give up her lifestyle and home for 4 years in exchange for being one of the most powerful and influential women in America, You can quit smoking. People do it every day. Chew the gum, wear a patch, get an electronic cigarette.

I have a suggestion on how to manage your stress and lower the urge to smoke. Stop trying to do everything you want done in one year. Don't trust me, read the US Constitution. Unless you're impeached, you've got 4 years to accomplish things. Make this year's goal economic recovery first. To aid this just get one health care reform a done deed. Put a cap on malpractice claims payouts. The health care providers and insurers will appreciate this and might be more willing to help with your other goals later on. The only people who will oppose you will be the American Trial Lawyers Association.

another comment on the family smoking prevention act.

Remember President Obama's promise not to raise taxes on anyone making less than $250,000 a year? What he meant to say was no raises via federal income tax. Unless you have been living in a very remote country or under a really huge rock, you know that our politicians have lots and lots of ways to tax us. The recent increase in the federal tobacco tax is going to be paid by smokers unless they decide to quit. Incomewise, guess who does most of the smoking??? If you say the poor and lower middle class people, you can move to the front of the class. Let me quote Jane Gravelle, senior specialist in Economic Policy Finance and Government Division of the Congressional Research Service. (yes, the US Congress's research service)

It is generally recognized that cigarette taxes are one of the most regressive taxes, that is, a tax that falls more heavily on lower income individuals as a percentage of income.

At first glance, it seems President Obama is defeating his own goals by putting a very regressive tax on smokers. Bear in mind, this report is dated June 19, 2007 before that latest excise tax increase. I then had an epiphany moment. The rationale for the tax increase was to fund the State Childrens Health Insurance Plan. So, the smokers are actually helping to insure their children. Around here, Marlboros went from $4 and change to $5.25 to $5.60 a pack. I am sure poor people have no problem ponying up the extra money knowing it funds their kids health insurance. Way to go President Obama and Congress!!!

To read Ms. Gravelle's report go to http://opencrs.com/ and put order code RS22681 in the search box. The name of the report is "The Cigarette Tax Increase to Finance SCHIP".

A Few Comments on the Family smoking prevention and tobacco control act.

Today, June 22, 2009 President Obama signed into law the family smoking prevention and tobacco control act. Let's review a few of his remarks during the ceremony. I am getting these quotes directly from the whitehouse's blog. Just go to whitehouse.gov and click on the blog.

Obama accused the tobacco industry of targeting young people, exposing them to a "constant and insidious barrage of advertising where they live, where they learn and where they play. Most insidiously, they are offered products with flavorings that mask the taste of tobacco and make it even more tempting."

R J Reynolds agreed to stop this in 2006, so I'm not seeing a whole lot of benefit from this, especially when one of the most popular cigarette flavorings, menthol, was exempted.

Also, the remark about "constant and insidious barrage of advertising where they live, where they learn and where they play." If where they learn means public schools, I do not recall ever seeing a cigarette ad at my grade or high school. ( I got my h.s. diploma in 1971 in Richmond, Va. The home of Phillip Morris) They were not for sale at my schools, kids who smoked had to buy them in stores. Seniors were allowed to smoke on a huge section of an oak tree outside the shop class if they had a note from their parents. Everyone else had to take their chances in the restrooms. My, how times have changed. But alas, I digress.

Mr. President, now that you are a de facto president of Government . . . wait I meant the new and soon to be improved General Motors, will you restrict auto ads aimed at younger people? Think of the lives you could save. Probably none. Let's get real here. With a few exceptions, most products are marketed to younger people. They are the next wave of customers and marketers want to establish brand loyalty with their newest prospective customers. Cigarette makers are providing a wanted product to consumers, just like car makers, insurance companies, banks, grocery stores etc.

I don't smoke. I used to but gave it up when the bad effects of smoking overwhelmed my desire to smoke. This is how most smokers stop. They just get tired of it and quit. I used to work for Social Security. I was amazed at the number of people I interviewed to start their disability benefits for lung cancer who had 2 packs of smokes, one in each shirt pocket. I know some people will smoke until the day it kills them. I cannot stop that and neither will this bill. More to come on this later.

A Few Comments on Health Care Reform

Guess who said this.

And again I will say we must do this together. I pledge to you that I will do my best to see that business and labor and Government work together for a change.

But all of our efforts to strengthen the economy will fail—let me say this again; I feel so strongly about this—all of our efforts to strengthen the economy will fail unless we also take this year, not next year, not 5 years from now but this year, bold steps to reform our health care system.

No, it wasn't President Obama telling the AMA how he was going to reform the USA's health care delivery and financing system within 90 days. This is a quote from former President Bill Clinton's 1993 state of the union address. Due to the secrecy used to cover byzantine health care rationing, "Hillary Care" never came to be. If it had we would have deficit spending every year of the Clinton Administration and a health care system much worse than we have today. Maybe that's why Obama appointed HRC Secretary of State, to keep her out of his attempts to reform our health care system into what he thinks it should be.

Another question. Who was the first president(or presidential candidate) to advocate health care reform. Not Bill Clinton, but Theodore Roosevelt back at the beginning o of the 20th century, not the end of it.

The only change brought on by congress in our health care system was medicare back in 1966. It was part of LBJ's Great Society platform. It was the first government sponsored enterprise (GSE) to deal with our nation's health care financing. Now Obama and Kennedy want another GSE to help reform some of the shortcomings of our current system. Yes folks, you read me correctly. They want a public health insurance plan to compete with private health insurance. They believe this competition will keep private health insurance on its toes and hold down increases in health insurance premiums. Yeah, Right!! When Medicare was introduced most private insurers decided to not offer primary coverage to medicare beneficiaries. They only offered medicare supplement plans to cover deductibles and coinsurance. I doubt this public option, if it is ever enacted, would do what President Obama and his fellow reformers expect it to do.

And one more comment. This public insurance plan sure sounds like it will become for health insurance what Fannie Mae and Freddie Mac are for housing. This makes me hope congress does not enact this plan. If the 70-80% of Americans are happy with their current coverage why are our leaders doing this public plan???
Also, in Kennedy's plan are 2 interesting provisions. One, all employers will be required to cover their employees or pay into a public insurance pool for people who cannot get or afford existing insurance. Second, Medicaid Coverage (basically health insurance for children,the disabled and seniors (age 65+)with limited income and resources) will be provided to all families whose income is less than 500% of the federal poverty level. For a family of four, this is $110,000 yearly !!!

The first question that comes to my mind is this. IF, employers are required to "play or pay" (give their employees health insurance or fund an insurance pool with their hard earned revenues) won't they be more reluctant to pay more cash compensation to their employees? IF so, won't fewer and fewer employees get raises and bonuses? Won't this mean more and more families will make less than 500% of poverty level income? If so, they will also be eligible for Medicaid. Who will be the primary insurer, medicaid or the employer's insurance? If I were an employer, forced to cover my employees with health insurance and found out several of my employees were receiving medicaid coverage as well, I would want to drop all insurance coverage like a very hot potato.

Second question, how will all these draconian and duplicitous measures make our health care system any better? Or, even better how will it make our economy any stronger or better? Every regulatory process (i.e. burden) the government imposes on employers is actually a really great boon to industry...if you are in the offshore outsourcing industry. Otherwise, it is a boon to the unemployment services industry, the welfare industry etc. When and if the congress and the US government finally figure out that many of their rules and regulations discourage business from hiring US workers, then we will get a better economy and with it, an even better health care system.

P. S. President Obama, Rome was not built in one day nor was it toppled in one day. What's your hurry and urgency on health care? You've got 3+ years to accomplish something. 70-80% of Americans like their current health care arrangements and are alarmed and disturbed by the prospects of changes you propose. Every President before had a full plate of issues just as you do. Why not focus on more demanding issues like Afghanistan, Iraq, the Middle East first and then slowly increase your focus on health care. Look at the Bill Clinton quote above. IF the USA managed to get by for 16 years without his calls for health care reform, maybe we can limp through another 16 months for better results. (no changes can be a very good result)

GM's one very small & very expensive step toward economic recovery

June 1, 2009 GM filed for chapter 11 bankruptcy. 6 months ago, GM's former CEO Rick Wagoner said bankruptcy was unthinkable. He said American car buyers would not purchase cars from a carmaker in bankruptcy for fear of loss of warranty support. For the latest on this and other interesting tidbits of info on this monumental bankruptcy, go to GM's official bankruptcy website, www.gmreinvention.com. There you will find reassurances that current GM customers have nothing to worry about, GM asked the bankruptcy court to require continued honoring of all warranties, parts needs and promotions. Even customers of dealers that will not have their contracts renewed have nothing to worry about. Other GM dealers will gladly step up to the plate and fulfill any customer needs. I hope none of the unrenewed dealers were the only GM dealer within a 25-50 mile radius of their city/town. That would create a major inconvenience for existing customers and a discouragement for future prospective customers.

GM also plans to trim its dealerships down to 3600 by the end of 2010. From its 5969 dealers in 2008, this is a 40% reduction. At the end of 2008 GM had 20% share of the USA auto sales. Toyota had 19% share with 1500 dealers in the USA. Either GM is going to increase their market share or further reduce the number of dealers. Only time (36 to 60 months) will tell.

Now, for the really bad news. What can the owners of GM stock expect now. Go to gmreinvention.com and click on investors. This is how GM will respond to investors that try to file a claim with the bankruptcy court:

Why can't stockholders file claims with the court?
The Bankruptcy Code is clear that stock is an "interest" and not a "claim." Stockholders will be
instructed as to how they can establish their proof of interest. If a stockholder does file a "proof
of claim," the company will object to that claim on the basis that the stockholder does not have a
valid claim according to the rules of the Bankruptcy Code.

In 25 words or less, current GM shareholders are toasted road kill. Now we know why diversification of your investments is so important. If any of the GM shareholders are highly dependent on their GM share dividends in their retirement, they are in a world of pain. I hope most shareholders saw the writing on the wall before the US government did and bailed out. Ultimately, the bankruptcy court will decide if the shareholders will get any compensation. Let's face facts, folks. If the GM shares were worth anything, GM would not be in chapter 11. The share price reflects the market's and investors' valuation of the company as a profitable ongoing concern. The only good news for shareholders is if they also have a GM credit card, they will keep the bonus points and use them to purchase their next GM vehicle, if they feel so inclined and can still afford one. The stock of one of the (formerly) largest corporations in the world gets trashed but credit card points remain intact??!! With priorities like these, I no longer wonder how we got into this recession.

A question for Sonia Sotomayor

President Obama's announcement of Sonia Sotomayor as his Supreme Court Justice Nominee unleashed a flood of favorable and unfavorable comments about her competency as a Supreme. Then came these 32 words from a 2001 lecture at UC Berkeley:

I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn't lived that life."

I am in the midst of a long overdue spring cleaning so I know how much glass is in my home. Therefore, I will not cast stones at Judge Sotomayor. I will ask a very rhetorical question.

Do you know about the Supreme Court ruling "Brown vs. Board of Education?" The long version is "Oliver Brown et al vs. the Topeka Board of Education." In 25 words or less, this decision declared the separate but equal doctrine for racial segregation in public schools unconstitutional. This decision kick started the civil rights movement and made this nation a much better place for everyone. This decision was also reached by white males. The arguments were made by Thurgood Marshall, a black man, but nonetheless the decision was made by white males. (Thurgood Marshall became the first Black Man to be appointed a Justice of the United States Supreme Court)

My question to Judge Sotomayor. How would your wise Latina wisdom and richness of experiences have improved this decision? Maybe, just maybe us white males have richness of experience as well. Remember, you put a lot of emphasis on your experiences, but you seem to have overlooked the wisdom and richness of experience of us white males. Besides, what difference does richness of experience make? This is a country that respects rule of law. Everything I read about you prior to your gaffe makes me think you respect and will defend this concept.

Oh well, that's off my my chest. I wish you the best even if you do not get the appointment. (I think you should get it. Nobody's perfect!)

News from the wonderful world of USA finance

First, Edward Liddy announced that he would be resigning from his $1.00 CEO position at AIG when a replacement was found. He felt that AIG has reached the point where a long term CEO was needed. ( See my 3/19/09 posting "congressional follies about AIG") AIG's Trustees are also requesting 6 new independent board members at the June 30, 2009 annual shareholders meeting. Earlier, Mr. Liddy had said AIG was on track to pay back the bailout money within the next 5 years. Mr. Liddy and the trustees are on the path to recovery for AIG. The USA owes them a well deserved Thank You Very Much for all your effort and endeavor to help get our economy strong again. Our fearless leaders in congress will probably berate them every chance they get. My advice to Mr. Liddy and the trustees, don't let the turkeys get you down!!

Second, Treasury Secretary Timothy Geithner will be announcing rules for executive compensation for the banks receiving bailout funds. Nothing concrete has been announced yet but there are some interesting ideas on the subject already. In a May 24, 2009 Rueters article by Dena Aubin and Corbett Daly, they quoted 2 Harvard Law professors, Lucian Bebchuk and Holger Spamann On the subject. The professors believe executive compensation should be based on more criteria than stock price. Since equity (the bank's stock) is only 5% of a bank's assets, other items such as deposits, loan portfolios & credit ratings should also be used to set performance rewards. The professors argue that if stock price is the only criteria for rewards, the stock price can be artificially boosted at the expense of the rest of the banks assets. I agree with this idea. The purpose of incentives is to reward work that makes the company more profitable, not just the stock. If the company's overall profitability improves, the stock will improve as well.

RIP David Kellermann, CFO Freddie Mac

A rather sad post today. David Kellermann, age 41, CFO for Freddie Mac was found dead today at his home in Fairfax, Va. (a suburb of Washington DC). The police are reporting it as an apparent suicide without any explanation why. The police are still conducting a homicide investigation at his home. Mr Kellermann worked at Freddie Mac for 16 years. He became CFO when Freddie Mac was placed in conservatorship in September 2008.

This is the second loss of a senior executive for Freddie Mac in as many months. On March 1, 2009, David Moffett, CEO of Freddie Mac since it was put in conversatorship, announced his intention to resign as CEO and Board member by March 13 at the latest.

My condolences to the Kellermann family and everyone at Freddie Mac. You lost a good man way too soon.

How to kill 2 birds with no stones

During the recent Maersk Alabama piracy incident, I had a real brain storm. Since the US Government (AKA American taxpayers) is a major funder of the various and sundry plans to bail out/stimulate the economy, let's save them some money. Rather than set up this elaborate public private investment plan, let's cut out a few of the middle men/women and a few layers of regulatory bureaucracy all at once. Just take the absolute worst of the Legacy loans & securities (FKA toxic assets) & sell them off to the pirates (or their ransom victims) for ransom. The Somali pirates consider themselves voluntary coast guard to protect Somali waters from foreign fishing trawlers and toxic waste dumpers. Selling them legacy assets is not much of a reach beyond volunteer coast guardsmen. Remember, the pirates seized the Maersk Alabama, a loaded container ship which is not easily mistaken for a fishing trawler. The fact that the Maersk Alabama was carrying tons of food aid for Kenya, Mozambique and Somalia really makes the volunteer coast guard defense really indefensible. The millions of dollars received as ransom for seized ships speaks for itself.

President Obama should consider putting Bernie Madoff on a work release program to promote the idea to the Somalis. The possibilities are endless. Since the worst of these legacy assets are only suitable for extreme speculative investing or wrapping fish, the Somalis should get better use out of the assets than most nations or investors.

Big Brother or Waxman the wimp??

On Thursday, April 2, 2009 the US House of Representatives passed H. R. 1256, the Waxman Family Smoking Prevention and Tobacco Control Act by a vote of 298-112. (Italics mine) This act gives the FDA authority to regulate tobacco products by such means as larger warning statements, disclosure of ingredients, limits on flavoring additives and control of marketing efforts, especially when children are targeted. (italics mine again) If you are interested in the details and want a better return on your tax dollars, visit this site http://thomas.loc.gov/ . Do not read this in front of your computer workstation. It is such a great antidote for insomnia you will end up with your head on your keyboard which could initiate a large bill for membership to very obscure websites you didn't know existed.

Rep. Waxman proclaimed his so-called triumph over the evil tobacco industry with this press announcement:

"This is truly a historic day in the fight against tobacco, and I am proud that we have taken such decisive action," said Energy and Commerce Committee Chairman Henry Waxman, D-Calif., the bill's sponsor. "Today we have moved to place the regulation of tobacco under FDA in order to protect the public health, and now we all can breathe a little easier."

If this proclamation does not win the lamest, worst excuse of a pun award, there shouldn't be one!!

Also, please note that there are more regulations and restrictions in this bill than the earlier tobacco settlement. (AKA government sponsored extortion) Our fearless leaders in Congress justify this in the name of dramatic improvements in public health. It seems they have discovered what the American public has known for decades. Tobacco use can be bad for your health. Another noteworthy item, all of these draconian "Big Brother" regulations are the result of Congress' supposed altruistic concern for public health. If they are so concerned about their beloved taxpayers, why doesn't this proposed law ban the sale of tobacco products, rather than create more laws and bureaucracy?? The answer is banned products cannot be taxed. In other words, Mr. Waxman and conspirators do not wish to kill the cash cow, just cut back on how much pasture they can access. More on this to come.

And one more thing. Isn't the FDA the same government agency whose diligent efforts maintain our food safety and security from such diseases as Escherichia coli (E. coli), salmonella and Bovine Spongiform Encephalopathy(aka Mad Cow Disease)??? More on this to come as well.

US Congress's strengths and weaknesses

Quote of the Day

"Were we directed from Washington when to sow, and when to reap, we should soon want bread."
Thomas Jefferson, Autobiography, 1821


What Congress is good at:

Creating new taxes

Raising existing taxes

Filibustering

Grandstanding

Slandering and disrespecting people they grill at committees and hearings.

Catering to their own interests (AKA Pork Barrel legislation)

Writing incomprehensible laws

Micromismanagement

Usurping individual rights guaranteed by Our Constitution

What congress is bad at:

Managing Automobile Companies

Managing Banks

Managing Insurance Companies

Managing Investment Companies

Managing Mortgage Companies

Managing Tobacco Companies

Managing the US Government

Managing the US Economy

Protecting Individual Liberties

congressional follies redux 3/24/09

Here's a quick post on a lighter note. Today Treasury Secretary Timothy Geithner and Federal Reserve Board Chairman Bernard Bernanke testify before congress today. They will ask for increased regulatory oversight and power over financial institutions that are in dire straits. The press (AKA the media) report that the congressmen/women plan to "grill" Mssr. Geithner and Bernanke about the government's handling of the AIG Bonus payments. Yes, folks, you got that right. Our beloved legislators that amended the stimulus/bailout bill to allow the bonus payments in the first place will "grill" these men about how these payments were handled!! Sounds to me like Congress wants to pass the buck on their own legislation to the executive branch. The notion of Congress protecting the taxpayers from the executive branch is similar to using wild weasels to guard a chicken coop from a fox. DC is a town where blame is ladled out like gravy over a thanksgiving dinner at a homeless shelter while responsibility and accountability for acts committed or omitted is avoided at any cost. No wonder we are in an extreme recession. Will senator Michael Dodd (dem. Connecticut) have to sit between the congresspeople and 2 of Obama's biggest dogs of financial regulation?

A Few Thoughts on the 90% Bonus Tax.

Quote of the Day:

“We figure the local and state governments will take care of the other 10 percent.”

Rep. Charley Rangel's explanation for the 90% tax on tarp recipients bonus payments.


Counterquote of the Day:

"No man's life, liberty, or property are safe while the legislature is in session."
-- Mark Twain (1866)

Holy Smoke, America!! Did this really just happen to us? The American colonies rebel yell against England was "taxation without representation is tyranny!" Now we have a 90% tax rate with representation!! Perhaps it is time for another tax rebellion. The Senate is proposing a 70% tax on bonus payments, 35% paid by the company and the other 35% paid by the recipients. Even that is way too high. I think our representatives need to take a real deep breath, exhale slowly, then read the Constitution. Is this what they want for our future generations? I think not. This bill was composed mainly to make the most political hay over the public's distress over the bonus payments. It scares me how quickly this bill was passed. Congress, especially the house financial services committee, used delaying tactics and dogged resistance to prevent reform or overhaul of Fannie Mae/Freddie Mac for years. If they had acted half as fast on reform of these GSEs, (government sponsored enterprises, more on this later) the USA could have avoided the super recession we are experiencing and just had a nice regular recession that goes away in a year or two. If Congress can pass such outrageous tax bills for one reason, I am certain they will be able to think of more. Who knows, maybe all the opponents of war will tax the extra pay for overseas and dangerous duty military people receive.

Since the unions and activists have arranged busloads of people to hike to the AIG executives homes, would it not be fair to let the overtime pay of union workers be taxed the same as bonuses for people who do not get paid by the hour but by results? When it comes down to brass tacks, overtime is just another bonus. Since the UAW get paid when they are out of work, congress could really clean up here.

If the unions and activists cared more about all the taxpayers and not just the unionized ones, they would also organize a march in DC to all the congresspeople's DC homes to lodge complaints about their micromismanagement of this financial fiasco. Remember, all this started with Fannie Mae and Freddie Mac, not AIG.

Congressional follies about AIG

Quote of the Day:

"Some People say I make jokes. I just watch the government and report the facts."

Will Rogers

First of all, a standing ovation is due to Edward Liddy, CEO of AIG for standing up to the arrogance of Steven Lynch. (A Massachusetts democrat, definitely not the comedian!) Mr. Liddy took the job for $1.00 and no stock options to try and help out his country. Mr. Lynch was way out of line in his questioning of Mr. Liddy and should apologize. What do you have to say for yourself, Mr. Lynch?

Second, this is $165 million, that's 6 zeros and 2 commas, not the trillions (12 zeros and 4 commas) that the bailout efforts and economic stimulus packages will cost the American taxpayers. This is just political grandstanding to deflect the interest of the press and public away from the massive spending the Obama Administration and Congress want to enact in the name of economic recovery. Politicos are very good at straining minnows and swallowing whales. It's called micromismanagement.

Third, were President Obama and Rep. Lynch both absent from law school the days contract law was taught? This was a pre-existing contract and failure to pay could have exposed AIG to lawsuits.


Fourth, will Timothy Geithner get his old job as Governor of the New York Federal Reserve Board back if he takes the fall for all this congressional hubris over $.0000165 trillion retention bonus that the original bailout bill allowed to go through in the first place?

I think Mr. Liddy should be given the chance to do what he said he will do in his recent letters to Treasury Secretary Geithner. Repay the bailout money and keep the good businesses of AIG intact and contributing to the USA economy. He was the CEO of Allstate, another large insurance company. He is offering all his experience for $1.00. He has a better chance of succeeding than any and all members of the house financial services committee could do. Remember, this committee repeatedly defended Freddie Mac and Fannie Mae right up until they went into conservatorship. How many of them work for $1.00. My educated guess is none,zip, goose egg, zero.

Barney Frank: Plenty of rich people that we can tax

Here is a really interesting interview of Barney Frank by CNBC's Maria Bartiromo. Thanks to her control of the interview by stopping Mr. Frank from chatting on about his influence on John McCain, it is only 52 seconds long. It is very revealing of Mr. Frank's attitudes on taxes, the rich and the role of government.

I was so impressed I had an epiphany moment. I realized there was a whole class of people who could be made super rich by legislative fiat, one of Mr. Frank's favorite pastimes. Let's declare all political campaign contributions as taxable income to the end user, politicians such as Mr. Frank. The politicians usually do whatever whim and fancy hits them regardless of how it affects major contributors. Remember the tobacco settlement back in Bill Clinton's presidency. The tobacco companies contributed $millions if not $billions and they still got screwed - whoops, make that sued by the US Government. Part of the settlement required smoking cessation programs support and severe curtailment of advertising. To make matters worse if these draconian measures did not produce a certain level of smoking cessation after a few years, more penalties would be applied!!!

Just think, several hundred new millionaires all conveniently working within the DC beltway. That is my idea of change for the better. Since our politicians seem so obsessed with controlling executive compensation in the private sector, what better way to lead than by such a courageous example. However, I believe this bill is ever proposed would generate an unprecedented amount of bipartisan opposition.

Still, It is a great idea, maybe it will inspire other great ideas that stand a snowball's chance in Heck of becoming the law of the land.

Why the Economic Corpulence Package will not work

President Obama (and his supporters) said one of the ways his economic stimulus package will (eventually) succeed is by encouraging banks and other creditors to start lending again so people can go out and buy lots of stuff. All of this spending will "save or create" lots of jobs, all good ones and all here in the USA. Wait one minute here, what happened to more manna from heaven than we can shake a stick at?? Cures for cancer, heart disease, diabetes, obesity, hangnails, etc, etc?? Throw in the moon and stars while you're making pie in the sky promises.

Increasing credit liquidity (aka encouraging banks and other creditors to start lending at lower standards just to boost Gross Domestic Product) will not turn around the worldwide economic recession. The reason for this blog and the current economic crisis is the gross overextension of credit caused by subprime mortgage lending. In other words, lending money for extremely high ticket purchases, homes that the buyers were not expected to be able to repay in the long run, turned a nice normal all-American business cycle recession into a severe worldwide recession.

In 2005, the USA had a negative personal savings rate, the first time since the great depression. In 25 words or less, the USA spending exceeded its disposal income. (disposal income is money after taxes. Jiminy Cricket, talk about your endangered species!!) A return to the credit abuse habits that got the USA into this extreme recession will not get us out of it. We may see an increase in sales and gross domestic product on a short term basis, but another extreme recession will be just around the corner. IMHO, Americans don't need more cell phones with cameras, music, video and web surfing ability; we need to hunker down, tighten our belts and get our feet back under us. Put another way, start living within our means and saving money for long term wants and needs. College tuition, home purchase, retirement come to mind.

President Obama recently said he wanted the US government to do the same thing American families do with their money. Sit down, work out a budget so the family income will cover all necessary expenses and some savings for future items. This would be real, unprecedented change for the better. Now the decision must be made, do we continue to encourage a consumption based economy or start to encourage a savings based economy?

Armageddon California style updates for 02/09

Time to review the latest events in the California State Budget crisis. Notice I did not label this a progress report since there has not been enough of that to report. However, here are the highlights for this month.

First, John Chiang, the state controller announced suspension of all travel and per diem expense checks for all state employees including the legislators. They receive per diem checks of $173.00 to offset the expense of living in Sacramento. Let's do the math. 120 lawmakers times $173.00 a day is $20,760.00 daily savings. For a 5 day work week, that's $103,800.00 a week. This does not include the travel and per diem expenses for the rest of the state work force. Remember, this is just a suspension of payments due. When the legislators finally get around to passing a budget it will be paid.

Next, Governor Schwarzenegger tried to enact a 2 day a month furlough (days off without pay) for all state employees. John Chiang resisted the effort with the support of state employee unions, so Arnold had to take John to court to enforce it. The courts have already ruled that Arnold can do this since it is an emergency.

On February 10, Governor Schwarzenegger announced that the State of California will lay off 20% of its work force, letting go of those with the least amount of seniority. Wow, that's one out of 5 workers. California has about (for now anyway) 200,000 employees. I can't imagine that in a pool of 200,000 employees some wouldn't be willing to accept an early retirement if some of the payment reductions that usually apply to early retirements were waived. But then again, public employee pensions are very expensive. Maybe Arnold and the lawmakers made a good choice to let go of the least senior employees. If anyone has any thoughts on the subject, share them here.

Time for the USA to change its national bird.

US Treasury Secretary Timothy (doggone, I forgot to file my taxes!!!) Geithner announced a plan to set up a government and private investor partnership to buy up to $1 trillion+ (that's 12 zeroes and 4 commas) worth of troubled assets from the nation's financial firms. In Wall Street jargon this is known as a vulture fund. Since the distressed securities involved are close to dead, this moniker is very fitting, even explicit. Vulture fund investors take the risks involved with deeply discounted securities in hopes that the investments will eventually recover and then be sold at a profit. The biggest risk for VF investors is the market is right about the securities and they are wrong. Most VF investors minimize this risk by researching the companies in the VF to find out what the odds are of a recovery. They also make certain the fund is well diversified so that one failed security will not wipe out any hopes for future profits.
I just do not see how this $trillion+ vulture fund will work. The hope being that trading out these bad debt instruments with money or better debt instruments will encourage the firms to start lending to consumers and businesses again. First, where are the private investors going to come from? How many people will buy into the notion that a portfolio of mortgages issued to people who were not expected to afford them when they were issued has the potential for profit? Not many, that's for sure. Most investors would not touch these portfolios unless they were buying them at pennies on the dollar or if the government were to guarantee the investments in some way. (remember Bear Sterns, AIG, Citigroup, GM, Chrysler, Fannie Mae,Freddie Mac?)
Secretary Geithner's announcement was given a thumbs down response on Wall Street as investors voted with their wallets and sold off a lot of stocks. This in turn led to declines in world stock markets as well.

A Very Brief History of California State Budget Crises

Yes, folks, crises is not an error. It is the plural of crisis. Just since 1992 there have been 3. In 1992 the state funds ran so low that the state employees were issued warrants instead of paychecks. Banks honored the warrants and redeemed them later with a 5% premium. It took 2 months for the legislature to pass a budget.

In 2002, thanks to California's kinda sorta deregulation of the electricity market, there was another crisis. The legislature assumed the competition that(snicker snicker ha ha)deregulation brought would hold prices down until 2 weeks after Heck froze over. So they put a cap on how much electric companies could charge consumers. Yes, the politicos in Sacramento put a limit (AKA regulation) on how much electricity providers could charge their customers. They never thought that inflation would nudge prices up, that developing countries (India, China for example) would not want more oil for their expanding energy needs or anything else would drive prices for electricity production up. In other words, the legislature did not do much thinking at all when they set up this "deregulated" electricity market. When real life kicked in, California's electric suppliers were forced (by legislative fiat of course!!) to pay more for electricity then they were allowed to charge consumers. This brought on rolling brownouts and the recall of Governor Gray Davis.

Now, Arnold Schwarzenegger is Governor and dealing with the same problem. The state of California spends more money than it takes in. If California was a nation onto itself separate from the USA, it would be somewhere between the 5th and 10 largest economy worldwide based on gross domestic product. How does a state with a gross domestic product larger than lots of nations end up with such a deficit that a budget emergency needs to be declared and the state stops paying its bills ??!!! Truth is much,much stranger than fiction.

The First Lady is Smoking Hot!!!!

I saw a picture of President & First Lady Obama walking down Pennsylvania Ave on January 20. The Prez had his overcoat buttoned up, probably due to the ambient air temperature of 20 something fahrenheit. The First Lady had her coat open. Unless she had thermal underwear on, I don't know how she could not feel the chill in the air. Perhaps it has something to do with the fact that she was born and raised in Chicago, the windy city on the shore of Lake Michigan. President Obama was raised in much balmier climates( Hawaii, Indonesia & Kansas) so it would be natural for him to button up his overcoat. Oh well, just more proof that opposites attract! Maybe Barack's balmy nature and Michelle's Chicago heartiness will make for a winning team in the White House. Let's hope so.

Armageddon California Style!

Here's the latest news from the California State Budget Crisis:

John Chiang, Controller for the State of California, announced on Friday, January 17, 2009 suspension of some State debt payments effective Feb. 1, 2009. $3.7 billion will be suspended (AKA not paid) unless the governor and legislature can work together and put together a working budget in 2 weeks. At a news conference in his office Friday, Chiang said "It pains me to pull this trigger. But it is an action that is critically necessary."

The suspended payments include $2 billion in tax refunds, $13 million in student grants and $300 million for elderly, blind and disabled Californians. The tax refunds are actually excess collection of income tax payments to the state from the taxpayers wallets in the first place. This has got to hurt the taxpayers unless they are masochistic, suicidal or both. The $300 million for the blind and disabled may be a place to start trimming the budget. Here is a quote from www.news10.net, the website for News 10 KXTV in Los Angeles:

Also affected are an estimated 1.3 million blind and disabled Californians, like Kathy Hall, who's friend Lillian Duran explained the impact it could have. "She will not be able to pay her house payment, her VISA payment, her rent."

Only in California can the blind and disabled afford house payments and rent, not to mention a visa card. I don't mind a whole lot assistance for someone to pay either a house payment or rent but not both. I also find the visa a little too much. Maybe that statement needs some clarification.

While we're on the subject of clarification, let's review the budget crisis over the last 12 months. Governor Schwarzenegger declared a fiscal emergency for the state of California under the rules of proposition 58, which he sponsored and the voters ratified in 2004. Proposition 58 requires action by the legislature to correct the anticipated monetary shortfalls. 1 year later, they are still trying to resolve the shortfall. Most emergencies and crises have such urgency that 12 months with no resolution is unthinkable.

More on this later.