The Intransigent Conservative

Monday, February 18, 2013

Monday's Menagerie

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View the story "Monday's Menagerie (2/18/13)" on Storify Monday's Menagerie (2/18/13) http://theintransigentconservative.blogspot.com Storified by Brian Empric· Mon, Feb 18 2013 18:35:54 Geoffrey Canada (president of the Harlem Children's Zone), Stanley Druckenmiller (former president of Duquesne Capital) and Kevin Warsh (former Federal Reserve governor) collaborate across the political spectrum to agree that government spending levels are unsustainable.

They focus on three main infirmities plaguing Washington and threatening the next generation: the entitlement programs are unfair to young Americans, few elected officials act for the “long term,” and too many politicians “appear more eager to divide the spoils of electoral victory among their own than to increase the size of the economic pie for all.”

“One of us is a Democrat; one, an independent; another, a Republican. Yet, together, we recognize several hard truths: Government spending levels are unsustainable. Higher taxes, however advisable or not, fail to come close to solving the problem. Discretionary spending must be reduced but without harming the safety net for our most vulnerable, or sacrificing future growth (e.g., research and education). Defense and homeland security spending should not be immune to reductions. Most consequentially, the growth in spending on entitlement programs—Social Security, Medicaid and Medicare—must be curbed.

“These truths are not born of some zeal for austerity or unkindness, but of arithmetic. The growing debt burden threatens to crush the next generation of Americans… The failure to be forthright on fiscal policy is doing grievous harm to the country's long-term growth prospects. And the greatest casualties will be young Americans of all stripes who want—and need—an opportunity to succeed.”

“A typical third-grader will get back (in present value terms) only 75 cents for every dollar he contributes to Social Security over his lifetime. Meanwhile, many seniors with greater means nearing retirement age will pocket a handsome profit… the status quo is, in fact, tantamount to saddling school-age children with more debt, weaker economic growth, and fewer opportunities for jobs and advancement.”

“Elected officials continue to allow the immediate to trump the important. Washington appears poised to forego fundamental reform at the altar of the expedient, yet again.”

“The benefits of rising stock prices accrue to those who have already amassed wealth at the expense of those who are struggling to save. And failing to deal with runaway spending will burden the country's children with higher interest rates and a debt bomb that will come due in their lifetimes.”

“Crony capitalism and corporate welfare aren't just expenses we cannot afford. They are an anathema to economic growth. They deny opportunities to aspiring people and companies who seek to better their lot. They ration opportunity based on things other than merit and hard work.” Canada, Druckenmiller and Warsh: Generational Theft Needs to Be Arrested http://on.wsj.com/YbPJMxOpinion & Commentary Erik Wasson reports that former Republican vice presidential candidate and current House Budget Committee Chairman Paul Ryan criticized Barack Obama last week for failing to focus on the deficits and debt during his State of the Union address.

“It seems as if they think the heavy lifting on debt reduction, deficit reduction is behind us, we have just a little bit left and then we’re done,” Ryan said. “I really worry that our partners in government, here — two-thirds of it, the Senate and the White House — are deluding themselves in thinking this thing is taken care of.”

“Ryan cited CBO’s finding that publicly-held debt had doubled from 36 percent of the economy before Obama took office to 73 percent in 2012.”

“Even if we got every tax increase the president has called for we are not even scratching the surface,” Ryan said. “The other problem is growth. If we keep chasing higher spending with higher taxes we will hurt growth.” .@RepPaulRyan: Obama delusional on debt #SOTU http://j.mp/XLsUkJ by @elwassonThe Hill SOTUBrian_Empric Douglas Kellogg and Pete Sepp from the National Taxpayers Union Foundation (NTUF) write that Obama’s agenda proposals added up to $83.4 billion, according to their line-by-line analysis of the State of the Union address.

Download a PDF of the NTUF’s cost analysis of Obama’s most recent State of the Union address here.

“This figure could grow much higher depending on what the President aims to do to avoid the sequester. In either case, if the President intends to follow through on his promise that his speech would not ‘add a dime to the deficit,’ individuals and businesses may be facing another round of tax increases.”

“The speech gave the President the opportunity to preview his forthcoming budget,” said NTUF Director of Research Demian Brady. “And although he said his agenda items would not increase the deficit, he spent far more time detailing new spending initiatives than how they would be ‘paid for.��”

“By far the most costly single agenda item was ‘combating climate change’; a version of the ‘cap-and-trade’ bill to which Obama referred in his speech was priced at $282.4 billion total, or $56.5 billion per year.”

“More than half of the 40 proposals NTUF analyzed in the speech had fiscal impacts that could not be quantified, while just four were classified as generating offsets.”

“This year’s speech will continue to have a significant impact as lawmakers and taxpayers sift through the President’s most ambitious State of the Union Address so far and look out for what may be heading their way,” Brady concluded. “The President’s upcoming budget proposal could clarify just how significant the fiscal fight between the two parties in Congress will be this year.” NTUF #SOTU Analysis: Agenda Adds Up to $83.4 Billion, Does Deficit Pledge Mean More Tax Hikes? http://bit.ly/XBzUCu #tcotNatl Taxpayers Union Ed Butowsky, Managing Partner at Chapwood Capital Investment Management, writes that devaluation of our dollar, by printing and spending money “out of thin air,” causes imported items to cost more. This is excessively detrimental for the middle class, and contributes to high unemployment and anemic GDP.

“When the president says that the country needs more ‘investment’ it is crucial to note that this is code for more printing of money. What that means is further and significant devaluation of our dollar, which will disproportionately hurt the middle class.”

“Want to help middle class? Cut tax rates and stimulate the economy. This is a much better way to get our country back to a GDP growth rate of 5%, where it needs to be to really help the middle class.”

“Additionally, when the president uses in the state of the union the term ‘investment’ this means increasing our debt, which puts our credit rating on watch for a downgrade -- again. This will in turn require the United States -- at some point -- to raise the interest rate we pay on our debt to countries like China in order to make our debt more attractive to those we want to loan us money to finance our nation's ongoing affairs. This will increase our annual deficit, which in turn will directly require us to pay more money in interest, which will put our country at risk in many ways, including national defense.”

“At some point this race to the bottom will hurt corporate earnings and we will see rates rise on fixed income, coupled with stock prices decreasing.” Hot off the presses - please read/share. What the Govt redefines what Investment is.. (via @edbutowsky on #FoxBusiness) http://ow.ly/hKzbZEd Butowsky Robert J. Samuelson writes that everyone wants more jobs. “Scarce jobs are the nation’s first, second and third most important economic and social problem.”

Nevertheless, job creation is weak and unemployment is high, as consumers and businesses have retreated from extra spending. This withdrawal produces a self-fulfilling prophecy of pessimism and economic sluggishness, which is perpetuated by constant political feuds in Washington.

“What’s especially disheartening and mystifying is that, until now, job creation was considered an inherent strength of the U.S. economy. Despite some years of recession-induced joblessness, unemployment averaged 5.6 percent from 1950 to 2007. The Congressional Budget Office doesn’t expect it to fall below 7.5 percent until 2015. That would make six years above 7.5 percent — the longest stretch of high joblessness in 70 years. It has defied massive budget deficits and ultra-low interest rates.”

“We have gone from being an expansive, risk-taking society to a skittish, risk-averse one. Before the 2008-09 financial crisis, the bias was toward more spending. The inclination was to surrender to immediate gratification. Want a new car? Sure, why not? More meals out? Great idea! Businesses behaved similarly. Banks made the next loan; companies hired the next worker and approved the next investment project. An ever-expanding economy justified optimism, and optimism supported an ever-expanding economy. Hello, bubble.”

“The caution and risk-aversion aren’t so great as to cause a recession, but on the margin they have limited the economy’s expansion to rates — lately, 1 percent to 2 percent — too weak to absorb most jobless. Pessimism produces a sluggish economy; a sluggish economy produces pessimism. That’s the main explanation of poor job creation.”

“We are hostage to a stubborn, restraining psychology. There’s no obvious fix for slow job growth, precisely because it requires a change in public mood or some autonomous source of added demand — a burst of exports, investment in new technologies — not easily predicted or controlled.” Robert Samuelson: Why job creation is so hard - President Obama and the Democrats want more jobs. So do Republicans.... http://ow.ly/2uWjLdWashPostNewsMedia Adam Davidson asks if deporting all of the illegal immigrants, who now compete with American workers for low-end jobs, would mean “more jobs, lower taxes and a stronger economy?” Apparently, deportations would help our undereducated and unskilled native-born labor force, but not everyone else.

This is one debate where the economic and political arguments do not coincide. Regardless of the consensus economist agreement that immigrants benefit the overall economy, there is also the historical fact that amnesty has not helped Republicans politically. Furthermore, there is a moral dilemma with purposefully punishing our own less-educated citizens – 27.7 million of which do not currently have a job, while 7-8 million illegal immigrants do - by tacitly allowing unrestrained immigration.

“As Congress debates the contours of immigration reform, many arguments have been made on economic grounds. Undocumented workers, some suggest, undercut wages and take jobs that would otherwise go to Americans. Worse, the argument goes, many use social programs, like hospitals and schools, that cost taxpayers and add to our $16 trillion national debt.”

“Illegal immigration does have some undeniably negative economic effects. Similarly skilled native-born workers are faced with a choice of either accepting lower pay or not working in the field at all. Labor economists have concluded that undocumented workers have lowered the wages of U.S. adults without a high-school diploma — 25 million of them — by anywhere between 0.4 to 7.4 percent.

“The impact on everyone else, though, is surprisingly positive. Giovanni Peri, an economist at the University of California, Davis, has written a series of influential papers comparing the labor markets in states with high immigration levels to those with low ones. He concluded that undocumented workers do not compete with skilled laborers — instead, they complement them. Economies, as Adam Smith argued in ‘Wealth of Nations,’ work best when workers become specialized and divide up tasks among themselves… In states with more undocumented immigrants, Peri said, skilled workers made more money and worked more hours; the economy’s productivity grew.”

“There are many ways to debate immigration, but when it comes to economics, there isn’t much of a debate at all. Nearly all economists, of all political persuasions, agree that immigrants — those here legally or not — benefit the overall economy. ‘That is not controversial,’ Heidi Shierholz, an economist at the Economic Policy Institute, told me. Shierholz also said that ‘there is a consensus that, on average, the incomes of families in this country are increased by a small, but clearly positive amount, because of immigration.’”

“The problem, though, is that undocumented workers are not evenly distributed… Immigrants use public assistance, medical care and schools. Some immigrant neighborhoods have particularly high crime rates.”

“Immigrants bring diffuse and hard-to-see benefits to average Americans while imposing more tangible costs on a few, Shierholz says. The dollar value of the benefits far outweigh the costs, so the government could just transfer extra funds to those local populations that need more help.” My column this week: Do Illegal Immigrants Actually Hurt the U.S. Economy? http://nyti.ms/XyflD7Adam Davidson N.C. Aizenman reports that many young, healthy Americans could face a health insurance price surge due to their insurer’s compliance with ObamaCare. Aetna chief executive Mark T. Bertolini has cautioned that premiums could more than double for the young and healthy, to subsidize the older and sicker people paying lower premiums.

“Insurers point to several reasons that premiums will rise. They will soon be required to offer more-comprehensive coverage than many currently provide. Also, their costs will increase because they will be barred from rejecting the sick, and they will no longer be allowed to charge older customers sharply higher premiums than younger ones.”

“The danger of rate shock has also become the favored weapon of conservative opponents of the law, repeated in a drumbeat of op-eds and policy papers in recent weeks.”

“Most of the new rules that could push up premiums will not apply to plans sponsored by large employers, only to those sold to individuals and small businesses. These policies will be available on insurance marketplaces, or ‘exchanges’… The law will require insurers to offer a generous package of benefits for exchange plans, including coverage of maternity care, prescription drugs and treatment for mental illness… Many 20-somethings who buy their own insurance have plans that are considerably skimpier. So, under the new rule, they will be getting and paying for more, whether they want the added coverage or not.”

“The price of a policy for a young, healthy man in, for instance, Milwaukee, could triple from $58 per month to $175, according to a survey of insurers released by Douglas Holtz-Eakin, president of the American Action Forum, a center-right think tank, and a former director of the Congressional Budget Office.

“Insurers argue that such increases could prompt many healthy young adults to opt out of coverage, skewing the insurance market so heavily toward the old and sick that it implodes.”

“[M]any 20-somethings today buy stripped-down insurance, and that changes the picture. Eighty percent would spend more on exchange policies in 2014 than they do on their current, often bare-bones, plans, even when subsidies are taken into account, according to the New York-based consulting firm Oliver Wyman, which does work for AHIP (the trade group America’s Health Insurance Plans).

“If these young and healthy people find the pinch to their wallets too painful, they could either go without insurance and pay a tax penalty or take advantage of a provision in the law that allows those younger than 30 to buy a high-deductible ‘catastrophic’ plan that will presumably be cheaper.” Will young adults face 'rate shock' because of the health-care law?Insurers point to several reasons that premiums will rise. They will soon be required to offer more-comprehensive coverage than many curr... David Goldhill, President and CEO of Game Show Network, writes that many Americans are unaware of how much of their compensation is eaten up by health care costs. “[T]his share will grow as long as the increase in health costs exceeds growth in gross domestic product. That’s just math.”

Health care expenses are not just the employee paid deductible, premium and taxes – they are the employer paid costs that might otherwise be provided to the employee as salary. Goldhill’s solution to lower costs through competition, while improving quality and service, includes HSAs for routine/expected care, and insurance for major/unpredictable expenses.

“Even after decades of financial engineering, including both the already-implemented and the planned aspects of the Affordable Care Act, the American health care system can be called successful mainly in its ability to hide its enormous cost.”

“Clearly, personal health insurance is not the only way our employees pay into our health care system. There is the 1.45 percent of every paycheck that goes to Medicare, as well as the portion matched by the employer. Furthermore, a large slice of her general taxes are, in fact, health care costs: roughly 20 percent of federal spending and 10 percent of state spending support Medicare and Medicaid.”

“Before the Affordable Care Act became law, President Obama’s Council of Economic Advisers warned that its projections to 2040 showed that ‘essentially all of the rise in average compensation due to increasing productivity over time would go to health insurance, and essentially none would go to take-home wages.’”

“In the world of health care analysis, there are basically two schools of thought. The first is that health care is so fundamentally different from other goods and services that a normal market can’t drive down its prices… An alternative to the conventional wisdom is that consumer ignorance is what differentiates health care from other industries. This results in a lack of discipline that allows for pervasive excess care and exorbitant prices.”

“[I]n our exquisitely responsive political system, government intervention in health care has often allowed for giveaways to powerful industry interests.”

“Here’s a completely different idea, one that might actually work. Let’s give every American health insurance, but only for truly rare, major and unpredictable illnesses. In other words, let’s cover everyone but not everything. It would take a generation to transition fully to such a system, but eventually the most routine and expected medical treatments, from checkups and minor illnesses all the way to common chronic conditions and expected end-of-life care, would be funded from our individual health savings; only the most major needs — for example, cancer, stroke and trauma — would be paid out of insurance.” Opinion: The Health Benefits That Cut Your Pay http://nyti.ms/VnuASQNYT Opinion Tom Howell Jr. reports that 26 states (actually 25, according to Kaiser Health News) let the deadline pass last week to apply to HHS for a health insurance exchange state-federal partnership, and have chosen to let the federal government run this online market instead.

“The exchanges, which are designed to let those without employer-based insurance compare and buy plans with the help of tax credits, are a crucial part of the Patient Protection and Affordable Care Act that passed in 2010 and was largely upheld by the Supreme Court in June.”

“The Obama administration says it will be ready to run exchanges in more than half of the states, even though a bevy of Republican governors and lawmakers flouted their intentions by saddling them with the task… State leaders who deferred to the federal government cited numerous reasons for their choices; among them, they wanted to distance themselves from Mr. Obama’s first-term achievement, could not obtain enough information to make an informed decision or ran out of time after Mitt Romney lost the presidential election.”

“From the start, HHS advised states to run the exchanges so they could tailor them to their residents’ needs. But the majority said no.” After Obamacare health exchange deadline passes, 26 states opt in with feds - Washington Times: http://wtim.es/15kF9KzTom Howell Jr. The deadline was 2-15 to apply for a health insurance exchange state-federal partnershipBrian_Empric Chief Congressional Correspondent Susan Ferrechio (@susanferrechio) reports that vulnerable red-state Senate Democrats may be unwilling to support Obama’s State of the Union proposals regarding assault-style weapons, “cap and trade,” immigration reform, minimum wage, and higher spending and taxes.

“While Democrats cheered frequently during the speech, for some, the proposals present political danger. Analysts believe nine Democratic Senate lawmakers will face challenging re-election battles, most of them from red states including Arkansas, Alaska, Minnesota and North Carolina, where voting for many of Obama's ideas, particularly a tax on carbon emissions or major gun control initiatives, could be career-ending.”

“Some of the president's key ideas will be hard to pass because it will be difficult to keep the entire Democratic caucus together,” said Nathan Gonzales, deputy editor of the Rothenberg Political Report.

Sen. Lamar Alexander, R-Tenn., said, “I think the hardest job for Democrats to defend in 2014 is why we are not doing anything about the debt, or about the Medicare program that is not going to be able to pay the hospital bills in a few years.” Red-state Democrats may doom Obama's liberal agenda | WashingtonExaminer.comPresident Obama's ambitious second-term agenda could hit roadblocks in the Senate, where vulnerable red-state Democrats up for re-electio...