David Post • November 20, 2013

Mark Twain said, “There are lies, damn
lies, and statistics.”
Numbers matter. They tell a story.

Eighteen percent.
Eighteen percent is the amount of national
income spent on healthcare. Almost one of
every five dollars.

With more than 10,000 people reaching age
65 each day and healthcare costs increasing, that
number will reach 20 percent within a few years.

Thirteen percent.
Thirteen percent is the amount of the nation’s
total income we, as a nation, pay in income tax.

$50,000 and $15,000.

$50,000 is the average annual household
income in the country. $15,000 is the annual
cost of health insurance for the average household.
45 percent and declining. 25 percent and
growing.

45 percent is the percentage of the population
that is covered by employer provided health
care, even though employer-provided healthcare
is the basis of our national system.

Several years ago, the majority of the population
was covered by employer provided healthcare.

No more.

Not only is employer-provided healthcare
declining, but an increasing amount – now 25
percent – of the cost of employer’s cost is now
paid by the employee.

$1 trillion and 26 percent.

Government spending on healthcare, including
Medicare for the elderly, Medicaid for the
poor, and the military and VA, exceeds $1 trillion
and 26 percent of all government spending.
Within ten years, these costs are projected to
double.

$600 billion and 2.9 percent

Medicare costs $600 billion. The 2.9 percent
Medicare payroll tax brings in $225 billion.

Adding the $75 billion in Medicare premiums
charged to seniors and deducted from their social
security checks, only half the cost is covered.

The taxpayer covers the rest.

$400 billion and 11 percent.

Medicaid and military-based health costs
over $400 billion, more than 11 percent of government
spending, all of which is paid by the
taxpayer.

Fifty years ago, only 2 percent of government
was on healthcare. Today, it’s 26 percent
and growing. Fifty years ago, less than 5 percent
of the economy was healthcare; today it’s 18
percent.

50 million or 16 percent.

50 million people, or 16 percent of the population,
have no health insurance, but receive care
simply by going to a hospital. Taxpayers and
insured people pay more to cover those costs.

Medicare is an example of how insurance
is supposed to work. Everyone pays the 2.9
percent Medicare tax on wages. (The Medicare
tax does not apply to other income.) Everyone,
including the young and healthy, pays over their
lifetime so that all seniors have healthcare.

National healthcare costs can be covered
in one of three ways: The government could
tax and cover everyone like most countries
do. Everyone could be required to have insurance,
the premise behind Obamacare (and
Romneycare). The uninsured and poor could be
denied healthcare.

45 and zero.

Congressional Republicans have voted 45
times to repeal Obamacare.

None. Zero. Nothing. Nada. Zip. Zilch.
Despite objecting to Obamacare, Republicans
have offered no alternative.

The national healthcare system does not
work and is consuming the economy. Employerprovided
healthcare costs are shifting increasingly
to employees with the taxpayer picking up
increasingly more costs.

Mark Twain was funny, but wrong.

Healthcare statistics are not a lie.

Healthcare costs are consuming more and
more of everyone’s wallet.

David Post • October 24, 2013

I’m a deadbeat.

Eight years ago, I purchased a two-year old condo in a beautifully manicured gated community with tennis and volleyball courts, swimming pools, clubhouse and gym, and covered parking in Florida across the street from a major league baseball training camp.

A bank offered me one of those ridiculous nothing-down, interest-only loans. I declined, put 20 percent down, and made regular payments. Three years later, Florida real estate crashed, and dragged my condo with it. Two-thirds of its value vanished. It was so far underwater that it could take decades to recover. My bank went broke, the next bank went broke, and the third bank sold my loan to a fourth bank working for Fannie Mae. The banks wouldn’t talk to me, so I couldn’t sell the condo without paying more money in a market gone sour that was not my fault.

Realtors, lawyers, and bankers all gave me the same advice: Default and do a short sale. That took 18 months. During that time I collected $20,000 rent. At closing, I offered it to Fannie Mae, but Fannie Mae told me to keep the money since any payment would cancel the sale.

At the end of the year, it sent IRS Form 1099 on which I had to pay tax. It was the wrong amount – a lot higher and a nice round number. Fannie Mae said if I could prove how much I really owed, it would replace the form.

I knew that defaulting would destroy my personal credit. (Before doing this, I talked with my bank to make sure it wouldn’t hurt my business.) Now, over two years later, I still can’t get a new credit card even though my income is good, my house has no mortgage, my credit cards are paid in full, and I have some savings. Lenders simply don’t trust me.

Last week, most Republicans voted for the U.S. to default on its debt ceiling to prove, somehow, that we are serious about out budget deficits. When countries such as Spain, Russia, and Greece and cities like Detroit defaulted, interest rates and unemployment rates skyrocketed to 25 percent. They still face years of severe financial problems.

The debt ceiling a quirk of history. Before 1917, Congress had to approve all specific types of borrowings. In 1917, the first debt ceiling law was designed to allow the Treasury to issue the types of debt necessary to finance World War I. After Congress passed Budget Control Act in 1974, the debt ceiling was raised simultaneously as Congress passed appropriation bills.

In 1995, after the federal government shutdown, Congress separated the spending authorization process from the debt ceiling. Since then, Congress passed trillions of dollars on spending bills without providing the money to pay those bills.

No other nation has a U.S.-style debt ceiling. No other nation approves spending without making the money available. No other nation is that insane.

My strategic and intentional default did not prove to my creditors that I was a tough negotiator or that I was serious about dealing with my debt. It proved that they don’t trust me, won’t lend me money, and charge extra. It proved that a deadbeat is a deadbeat.

David Post • May 9, 2013

What happened to “austerity”?

For the past few years, cutting spending was all the rage.

Now, except for the sequester, Congress shooting itself in the foot—which it didn’t expected to happen and is trying to dismantle—the notion of reduced federal spending has quieted to virtual silence.

The Republicans discovered a mistake in a spreadsheet that showed that its ideas of reduced spending–firing teachers and policemen and firemen–would somehow make the economy grow. Europe tried austerity. Some countries are entering their third recession in six years–only because unemployment dropping from 25 percent to 19 percent counted as a recovery–and are now in more trouble than before they tried budget cuts.

Here at home, we can’t cut. While the Defense Department tries reduce its budget, Congress passes legislation to manufacture weapons DOD doesn’t want. Congress doesn’t want to kill the jobs of defense contractors in their states and districts, even if DOD doesn’t need or want the weapons. Congress can’t even agree to stop giving away money to industries that no longer need it, such as farm subsidies, which cover very few people but a lot of geography and a lot of votes in the midsection of the nation.

Remember the complaint, “The Democratic Senate haven’t passed a budget in four years?” It finally did. Ho, hum.

The Congress Budget Act of 1974 passed during Watergate. Few paid attention to it. It required the President to present a budget in January and for the House and Senate to review it and pass a joint resolution by March directing the Appropriations Committees how to spend the nation’s money. That never happened.

Today, warring budgets stake out political positions and are bludgeons for attack the other party, and, of course, for getting votes. The budget itself has no teeth. It’s a road map, but like any road map, you don’t have to follow any particular route.

This year’s Republican House budget proposed the deficit to zero in ten years, mostly by shifting portions of health care costs to the states and by cutting almost $4 trillion from the safety net. Poor people don’t vote. One commentator questioned why all children should be entitled to a kindergarten. Kindergarteners don’t vote. The Republican budget didn’t touch Social Security or Medicare. Seniors vote.
The Democratic Senate budget didn’t touch Social Security or Medicare, cut defense (mostly by subtracting the cost of the wars in Iraq and Afghanistan), raised taxes, and ended up with a deficit almost half what it is today.

President Obama’s budget actually cut Social Security and Medicare, cut defense, raised taxes. He’s no longer worried about getting votes.

Social Security and Medicare are the pins that are going to prick the budget balloon. With 75 million baby boomers knocking at their gates, they are the largest and fastest growing parts of the budget, and they are on auto-pilot. Even though Obama tossed out an idea–any idea–both the House and Senate rejected the president’s budget immediately.

For years, the country has operated on “continuing resolutions.” In other words, because they can’t compromise, Congress votes to “keep doing what we’re doing.”

Don’t hold your breath. Federal budgets are not spending tools. They are political weapons. Since Congress knows little is going to change, it found one solution: just stop talking about it.

David Post • April 11, 2013

Where I’m from – Salisbury, Rowan County, North Carolina – is still a mystery location, but it is on a map.

Two weeks ago, a suit was filed against the county commissioners because they open every meeting with a prayer to Jesus. In response, Rowan County’s two state legislators proposed a “Defense of Religion Act.” A dozen legislators joined as co-sponsors.

Within minutes, we were national news. Huffington Post. NPR. Jon Stewart. The BBC. Stephen Colbert. The media said that North Carolina wanted to declare that Christianity was the state religion. One legislator remarked that he didn’t know that he’d be famous by the end of the day.

Our commissioners believe Jesus leads them to the right decisions, regardless of the Constitution. Their solution is to discard the Constitution.

Their resolution begins by suggesting that the First Amendment does not apply to states, municipalities or schools. Sweeping aside the Fourteenth Amendment adopted in 1868, our legislators said that the federal courts had [wrongly] required the states to follow the First Amendment. The resolution also proclaims that the First Amendment doesn’t apply to the states because the Tenth Amendment delegated power to the states.

The resolution flatly states that the Constitution does not grant the federal courts the power to determine what was constitutional or not even though that is exactly what Marbury v. Madison held in 1803 in surely the most famous and important Supreme Court case in history. It’s no secret. It’s in every U.S. history and civics book ever written. Marbury established the role of each of the three branches of government and how they serve as a system of checks and balances on each other.

Having tossed aside the First Amendment and the federal courts, the resolution concludes that government officials can do whatever they want with religion because they are also private citizens.

Hence, it asks the North Carolina General Assembly to assert that the U.S. Constitution does not prohibit the state from establishing a religion and that North Carolina is not subject to federal court rulings.

After a day of howling, the legislators withdrew their resolution as “poorly written . . . and ambiguous.” Meanwhile, gigantic billboards in yellow and red are sprouting up around my county shouting, “Keep Praying Commissioners . . . in Jesus’s Name, Amen.”

David Post • April 10, 2013

Happy Birthday, dear 16th Amendment.

You are now 100 years old. And, what a 100 years it’s been.
Before Roe v. Wade, you were aborted twice. During the Civil War, the country needed revenues, so Congress passed the first income tax. Today, war is no reason for a tax, but the Civil War tax expired after ten years, birthing the idea of temporary tax provisions.

During the 1800s, government raised revenues from excise taxes and tariffs. In 1894, thinking that those taxes caused inflation, Congress reduced tariffs by adding an income tax. The Supreme Court held that income from property such as rents and dividends could not be taxed while income from labor could be taxed. The entire law was tossed out.
Your birth was a long and difficult. In 1909, Republican President Taft proposed amending the constitution to allow an income tax. It took the states four years to ratify the 16th Amendment granting Congress the “power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the . . . states.”

Once born, you grew quickly. That single sentence of the 16th Amendment has grown to a tax code of five or six million words, most dedicated to defining the word “income.” What counts? What doesn’t? What reduces it? And, at what rate? True to the Supreme Court 125 years ago, the tax code today taxes income from property at a lower rate than income from labor.

The tax code is flawed, for sure. It has become a hodgepodge of incentives that encourage certain economic behavior in exchange for lower taxes. The result is that many rich taxpayers pay lower rates than middle and lower class taxpayers. Similarly, many corporations – Exxon, Apple, and GE to name a few – report billions in profits and pay little or no tax in the US.

Over the past dozen years ago, Steve Forbes and Herman Cain have run for president proposing a flat tax, while Mitt Romney proposed lower rates. Their fundamental ideas were to eliminate incentives (loopholes) and reduce rates. The idea seems simple, but defining “income” remains exceedingly complex.

The best tax is one that neither alters taxpayer behavior nor allows taxpayers to manipulate the tax base. Taxpayers rarely make “what to do” decisions based on sales or consumption taxes or property tax. Sometimes, consumption taxes affect behavior if a lower cost option is easily available. For example, cigarette taxes of $4.25 per pack in New York encourage a black market in Virginia cigarettes with its $0.30 tax.

The proposed Fair Tax is a consumption tax-based system. “Fair” is a good marketing word, but it hits lower income taxpayers harder because they spend a higher percentage of their income on consumption – meaning they would pay more tax proportionally – than do higher income taxpayers. Instead of “income,” the code would have to define a “sale?” Would it include the sale of stocks or bonds? A house? Medical services or education? Soon, the Fair Tax would be a few million words long, and have a zillion lobbyists.

Taxes are complicated. My daughter is a CPA. She will never starve.

Anyway, Happy Birthday, Income Tax. When you blow out the candles on your cake, here’s hoping you don’t get your wish.?

David Post • February 28, 2013

A glimpse, by definition, is a brief preview of what lies ahead.

The last quarter of 2012, last October through December, provided a glimpse of what happens when federal spending is cut.
The economy shrunk. Not much – only 0.1% – but it shrunk. When the economy shrinks for two straight quarters, a recession is declared. That doesn’t have to happen unless we make it happen.

During the third quarter of 2012 (last July, August, and September), the economy grew at 3.1%, almost the nation’s average of 3.2% since the end of World War II.

Over the past three months, the private sec- tor did pretty well. Consumer spending went up. Durable goods like appliances and furniture al- most doubled. Investment in equipment and soft- ware increased six times. Even housing invest- ment increased.

What went down? Federal government spending declined at a 15% rate due to a drop in defense spending. In fact, government spending has declined in 10 of the last 12 quarters slowing the country’s overall economic growth.

Government spending has kept the economy out of recession since 2009. The United States is the only economy on earth, of any size, that has grown in the past three years. Austerity – reductions in government spending – hasn’t worked anywhere in the world except arguably in two small countries.

Greece and Spain are getting a great deal of attention for their economic woes. Their budget cuts have led to downward spirals and 25% un- employment. Great Britain adopted an austerity plan last year and just entered its THIRD recession in five years.
The poster children for “austerity works” are Estonia and Latvia, two Baltic states tucked be- tween Russia, Poland, and Scandinavia and together about the size of Ohio. Their combined population is about 3 million, a little more than half the D.C. metro area. Though their economies are now growing, they are still suffering with unemployment rates of 12-15%.

Government spending matters. Reductions in unemployment benefits, food stamps, and social security hurt small businesses and grocery stores. When housing assistance is reduced, the pain is felt by both landlords with more vacancies and lower rents and by local governments with lower property values and reduced tax collections. Reduced highway construction today puts construction workers out of work and reduces economic growth tomorrow.

Nonetheless, Congress is currently focused only on cutting spending with several deadlines quickly approaching. In two weeks, the “sequester” – automatic across-the-board spending cuts that Congress imposed on the nation when it couldn’t agree on what to cut – take effect. In late March, the nation hits the debt limit – like a credit card limit – that would not allow the government to pay the bills it promised to pay a few months ago. That’s like buying a car and then telling the bank you’re not going to make the payments.
By disagreeing on budget priorities, Congress has kicked the can down the road for three years. Oddly, that’s probably been best for the economy.

The last few months both in the U.S. and Great Britain provide a glimpse into the future. What do we really want? Austerity or more can- kicking? ?