Tuesday, August 24, 2010

Iraq war v. Obama's stimulus

I recently posted the following article on my Facebook page: Little-known fact: Obama's failed stimulus program cost more than the Iraq war

One of my liberal friends came back with a response but the conversation will not fit into the facebook boxes so I’m bringing it to this blog. His post is below:

You have to spend money to make money at this is a direct reflection of the bush years and if anyone says anything different, they are in denial. Instead of just getting the info from right wing outlet like that Washington Examiner. If you look at their site, there is nothing balanced about it; it’s just another scare site.


Reagan blew five trillion on the military without raising taxes to pay for it. Bush blew five trillion on the wars in Iraq and Afghanistan without finding a way to pay for it. Matter of fact, not only did he increase spending but then gave tax cuts that DID NOT trickle down like what he said would happen. Obama is trying to get us out of the hole by a stimulus package by rescuing several companies to prevent the total bankruptcy of the US. The major difference is that Obama will raise taxes on the rich to help pay for these items. Plus some of the money that he is spending will be paid back to us. If you look at the charts during the great depression, you will see a sharp increase of government spending in order to turn things around. There are many sites that are unbiased, that show the facts. The Washington Examiner is not one of them. Trusting that site would be the same as trusting FIXED News.

I have a question. Why is no one talking about the $1 million News Corp and Fox Owner Robert Murdoch gave the Republican Governors Association. Why is there no talk that the person that owns the 2nd largest share of FOX NEWS is one of the main money contributors of the Mosque being built at Ground Zero? They like to talk about why it would not be right to build it but never say that they have a hand directly in it. These are things that need to be pointed out as well but I never hear any of that from the right. All i hear is spending is bad but never come up with a plan as to what they would actually do, except for using bumper sticker slogans. What is there plan?? Can someone tell me that? Cutting social security and Medicare is not a plan either like Mitch McConnell is proposing. That is crazy. He actually wants to do that in order to extend the bush tax cuts for the top 2% of Americans. So let the rich keep their money but then take it out of the hands of people that are less fortunate. They preach that this is a Christian nation; that does not sound too Christian to me. I find you to be a smart person Jason. Do you not see any of this, or are you just so anti Obama that you turn a blind eye? Just curious man, friendly debate, hit me back.

A couple thoughts in response:

1. Bias: There is no such thing as a non-biased news outlet. Everyone has a bias. Fox News is biased conservative, NBC/MSNBC is biased liberal, CNN is more centric but leans slightly liberal, etc. There is no way to completely eliminate bias. As I recall from a previous FB post you made, you prefer to watch MSNBC. It speaks to your view point and that’s fine, but you have to keep its bias in mine. And I freely admit that I prefer conservative news sources.

2. Reagan/Bush: I don’t see how Reagan’s tax cuts are probative to the current situation, other than to say that they were effective in lifting us out of the economic stagflation that characterized the 1970’s. That seems to be an argument against the Obama stimulus so I don’t really understand why you brought it up. As far as Bush, his mistake was in extending the war in Iraq long after we should have. The reason we went in was because of bad intel that was provided. The deficits that Bush ran were because of the war, not the tax cuts. In fact, if you go back and look at the tax cuts which became effective in the 2004 tax year, you will see that the total amount of tax revenue went UP after the tax cut rather than down and has continued to do so:

1998             1,769,408,739
1999             1,904,151,888
2000             2,096,916,925
2001             2,128,831,182
2002             2,016,627,269
2003             1,952,929,045
2004             2,018,502,103
2005             2,268,895,122
2006             2,518,680,230
2007             2,688,946,349
2008             2,742,190,129
Source: http://bit.ly/bJgrOi

3. As to the effect on the little man: most of the working force works for small companies, not large corporations like we do. If a business owner does not see a financial advantage in expanding his business, which is seriously cut into by the level of taxes that they are starting to see, they will have less motivation to hire more people. This contributes to the unemployment/underemployment rate that we are seeing. Also, on a theoretical level, this goes against the traditional promise of America being the land of opportunity. There is little motivation for someone our age to go into business if the risk does not match the reward, and the risk is high. This leads to an eventual shrinking of the private sector which even Obama admits is the vehicle of growth.

4. Great Depression: A perfect example of why the government is ineffective at turning things around. It spent billions of dollars (in today’s dollars) when adjusted for inflation on government programs to try to start the economy again, but what actually was effective was the private enterprise being forced to build the mechanisms of war for WWII. Granted, they were building for the government but it was the private sector doing it, and doing it very efficiently.

5. Fox News/Mosque issue: Rupert Murdoch has the right to give money to whoever he wants to, so does Saudi Prince Al-Waleed bin Talal. This issue bears some clarification. First of all, Saudi Prince Al-Waleed bin Talal owns 7% of News Corp, Fox News parent company, which no one will attempt to argue is a controlling interest. Fox News is also the fastest growing news agency in the United States. Any businessman wants to invest in growth. Businessmen regularly buy stock in companies whose products they don’t like because it makes them money. So while it is certainly disturbing to see him contribute to the Mosque, I do not see this as inconsistent under the circumstances (desire to make money and to support his religion).

6. Social Security is not what anyone would call a “going concern”. If you expect to get anything out of it when we’re in our sixties, you have another think coming. As far as Medicare, or Medicaid for that matter, Obamacare has made that more expensive for the middle class. We didn’t need Mitch McConnell for that. As far as Mitch McConnell, I’m not sure what I think of him at this point. He seems to be Republican old guard which I don’t like at all.

7. Economic plan: Get the government out business. Sure, keep the corporate taxes there, just put them at levels that will not kill investment and growth. Allow medical insurance companies to compete across state lines. De-Regulate businesses in general.

8. The Church: The modern American church is a sorry excuse for what it should be. Instead of focusing on the commands of Christ to feed and clothe the poor and do good works it is focused on the latest building programs. I completely agree with you in that regard. Having said that, the government is terribly inefficient in any kind of charitable endeavor. A solution needs to come from the church side on this.

9. I don’t turn a blind eye and I’m always willing to be shown the error of my ways, but this is something that goes to core American principles for me. At its very basis, the Federal government is not supposed to be there to take care of people. Its supposed to protect us from all enemies foreign and domestic, and solve disputes between the states. All other powers are supposed to be reserved to the states and to the people. Both parties have done a miserable job of pursuing these ends. We may disagree on these things, but I respect your opinion while strenuously disagreeing with it.

P.S.  For a better understanding the Great Depression economics and how it effects us today, see the following book:

Monday, August 23, 2010

The Potential Effect of the healthcare bill on the underemployment rate

Yesterday the Waco Tribune had an article entitled "Waco companies search for ways to cut insurance costs".  It specifically addresses how the costs are exponentially increasing for small businesses to provide healthcare to their employees.  The bottom line is that either the employers will have to raise their prices and pass it along to their customers, or they will keep their prices the same and reduce benefits while increasing costs to their employees.  Either way, the cost increase to the employers is inevitiable.  What the article does not address is the potential impact on the unemployment and underemployment rates.

One way to avoid a significant increase in healthcare costs is to backfill any open positions with two part time positions rather than one full time position.  This avoids having to pay expensive healthcare benefits, and it also decreases the unemployment rate.  The job market being what it is right now (an employers' market), there is not much motivation for employers to be competitive with benefit packages as many people are just happy to have work at this point. 

The problem comes with the much-ignored underemployment rate.  Just because people have a job doesn't mean that it is providing their financial needs, as happens with underemployment.  Underemployment does not jump start the economy and does not pull an economy out of a recession.

In the past, employers were more likely to hire full time, all things being equal, because it had less mobilization costs and created a more stable workforce.  However, with the increase in healthcare costs, the mobilization costs for two part time employees may not look as bad compared to the healthcare costs for one employee.

So we see yet another potential way in which the healthcare bill will likely hurt the economy thru the underemployment rate.

Friday, August 20, 2010

Sam Walton's Way

This is another short by New Word City Books about Sam Walton. Sam was incredible in that he started with just about nothing, and built an empire. One of the keys was that he did not try to build all at once. He built one store at a time and grew his business slowly and surely through its formative years.

This short book outlines several things that differentiated Sam Walton and provided him the success that he enjoyed:
1. He defined his overarching goal and never lost sight of it, no matter what little things tried to trip him up.

2. He empowered his employees by giving them information about the business. He stated that the more they know, the more they would understand and the better decisions would be made.

3. Listen and Look. He watched his competitors and listened to his employees for ideas.

I found this interesting because Wal-Mart is a corporation that I do not like very much. I see them as a company that puts small mom and pop businesses out of business. On the other hand, the way Walton built his business reads like a textbook on how a business should be built. He was just very diligent about it, which is a good thing.

So maybe my issue with Wal-Mart isn't a principle issue, it's a charity issue. Wal-Mart obviously doesn't need my business, and probably doesn't even care about my business. I can get better quality merchandise at the same or slightly more prices elsewhere and make me feel that I am actually making a difference in their business and helping someone succeed.

On the other hand, I shop at big box electronic retailers and buy books on Amazon.com. Call me inconsistent, but I'm human.

Monday, August 9, 2010

Some quotes from Peter Drucker

Tonight I read a short book on Peter Drucker who was a business theorist during the 20th Century. While I usually have little respect for theorists because they don't usually know from what they speak and ignore the pragmatic side of things, it seems that Peter Drucker had his feet planted squarely on the ground. The following is a list of quotes from the book that I wish modern management would live by:

1. One either meets or one works
2. The best way to predict the future is to create it.
3. Most of what we call management consists of making it difficult for people to get their work done.
4. There is nothing so useless as doing efficiently that which should not be done at all
5. The most important thing in communication is hearing what isn't said
6. When you see a successful business, someone once made a courageous decision

Some good thoughts for modern management.

Saturday, August 7, 2010

How Obama is about to screw the neediest of the lower middle class

Actually, he's already done it. I know, I know, he said he wouldn't raise taxes on anyone making under $250,000 per year. The buck stops with him, he made a campaign promise. He gave his word.

Please stop laughing in the peanut gallery. We're trying to have a serious discussion here.

This has to do with Flexible Spending Accounts. Now, lets be clear. An FSA is not an entitlement program like Obamacare. It's a tax cut. It allows you to specify a specific amount of money you want your employer to withhold from your paycheck throughout the year, and this money can be used, PRE-TAX, for medical expenses. In other words, no tax on medical expenses. The catch, of course, is that if you don't use it, you lose it. No big deal, just lowball it a bit and you get a great deal.

Roughly 20% of employees take advantage of an FSA account. Of the 20% that participate, 80% of them keep their annual contributions under $2500 (significance of this number discussed below).

Currently, there is no Federal cap on how much you contribute, although most employers place their own cap. My employer has two programs, with caps at either $4000 or $5000. The former program works better for us. Due to my daughters medical expenses, we use every penny of this $4000 every year and it is a huge help. Many other families with special needs kids have used it to great benefit also.

But Obama has to raise taxes somewhere. And this is a way to do it that won't bring a lot of news media or attention. An added benefit? It only effects those who REALLY need medical care, and will be forced to upgrade to more overpriced, government mandated plans that give the same coverage to special needs kids as to kids with runny noses.

So, in 2011 all over the counter medications will need a doctors order to be FSA eligible. Wow, that sounds cost saving. Where before I could have just gone and got the $10 worth of medicine, now I'll have to take them to a doctors appointment which is a $20 co-pay typically and counts towards my FSA limit.

On top of that, in 2013 the government will cap the FSA contributions at $2500. More revenue for them, more taxes for those in need of medical care. Win-Win for Obama.

Glad that he's looking out for the little man. I feel so cared for.

For more information, click here.