Category Archives: Economics

Economics

Free

I was thinking about free markets. When many people talk about ‘Free ‘ markets I wonder exactly what they mean.  Is it ‘Free’ as in laissez-faire? Is it ‘Free’ as in ‘no monopolies but anything else goes’? Is it ‘Free’ as in caveat empor? Or is it ‘Free’ as in open and above board – a level playing field with free access to all? Somehow I don’t think the last option fits with most uses of ‘Free Market’.

I was thinking about free markets in terms of rivers. Some people think that rivers should be free. They should flow unobstructed, where ever nature takes them. People have noticed that building communities along rivers led to many good things. Not only do they get the enhanced agriculture from the constantly refreshed alluvial plain, but they also have a handy transport highway on the river itself. The communities learn to deal with the annual floods that refresh the fields. Life is good and everyone prospers. But, once a generation the river runs wild, floods outside its expected fields, diverts its path, gouges new channels, leaves communities high and dry, threatens prosperity, induces change. All-in-all, rivers may cause more damage in one year than all the good produced since the last catastrophe.

Continue reading Free →

Economics, Politics

What a Waste

Each year, the federal government wastes billions of American taxpayers’ dollars on improper payments to individuals, organizations, and contractors.  These are payments made in the wrong amounts, to the wrong person, or for the wrong reason.  In 2009, improper payments totaled $98 billion, with $54 billion stemming from Medicare and Medicaid.  We cannot afford nor should we tolerate this waste of taxpayer dollars and in our health care system.

From the White House

Let’s see, $3,830 Billion budget –  $98 Billion waste. That’s about  2.6% percent waste. Not the best of numbers, but certainly not worth going into a paralytic fury about.  I suppose it is easier for some people to grasp a much smaller number than the almost $4 trillion dollar federal budget. Why not allocate another $1 Billion to Inspector General offices to reduce the waste. If they can reduce the waste by 2% or more they more than pay for them selves.

The 2011 Medicare/Medicaid budget seems to be about $755 Billion. with $54 Billion in waste that is over 7% fraud. HHS is planning to increase their Fraud unit budget $250 million in 2011 to $561 million. Maybe that will reduce the waste a bit.

That leaves $44 Billion in waste for the remaining $3075 Billion  budget, or 1.4% waste.

I was going through the federal budget looking to see who had Inspectors General in their budget items. I was surprised to see that not all departments have an Inspector General. Especially surprised the Department of the Interior doesn’t have one large enough to have its own budget line item. Somewhere in the text write up the Inspector General is mentioned. I guess that explains why billions of dollars from the Indian Trust funds have gone missing. But Interior not only has the BIA but they also oversee our royalty payments from the industries extracting minerals from public lands.

At least GAO gives the citizens a chance to report the fraud they see.

Economics, Politics

A health care option

I guess I would have to put myself in the single payer camp on health care. I would like to see an expanded Medicare system be the primary basic health care insurer/provider. Everyone will get a Medicare account at birth and keep it until they die, and beyond. We will pay for it with a payroll tax such that Medicare and FICA will be 15% of a pay-check. That should provide enough income to both systems to grow flourish as the baby boomers hit their retirement age.

A condition for this payroll tax is that the monies go into the Medicare and FICA trust funds and not into the general fund.  As away to ameliorate the impact on household incomes, I would also suggest that every household get a deduction equal to the median household income.  (I believe that is somewhere about $50K today). No other deductions, just one flat deduction and then tax everyone above the average household income what is needed to balance the rest of the budget.

Economics, Politics

Just Compensating

Daniel Gross, at Slate, wrote a Moneybox commentary on Wall Street bonuses. He makes a point in it that I did not realize:

At most companies, bonuses are paid out of profits. No end-of-year profits, no bonuses. But on the island nation of Wall Street, they’re paid out of revenues.

Bonuses out of revenues, what sort of nonsense is that? No wonder they can pull down ridiculously obscene compensation. Let’s see – we are doing a 10 billion dollar refinancing, we want 10% to do it and 50% of that will go into the bonus pool. The other 50% will go to pay for the office building, the corporate jets,  the million dollar salaries; your basic operating expenses. Anything left over would be profit. How do they get away with it?

Since the 1980s, notes Brad Hintz, an analyst at Sanford C. Bernstein, it’s been the standard for half of revenues to be devoted to compensation. So long as these outfits were private partnerships, that practice didn’t really matter to the rest of us. But since the 1990s, when investment banks went public, compensation has evolved into a zero-sum game between employees and shareholders. Guess who lost?

Any compensation in excess of the annual presidential salary is not deductible from corporate ledgers and the corporation must pay corporate taxes on excessive compensation.

Economics, Politics, Preparing for the worst

Can we start here?

I keep hearing about people trying to shout down health care discussions- and most of the shouters don’t appear to understand what they are talking about. Can we start with this article by Paul Krugman and work from there?

A friend sent me  a link to HR3200 (all 1017 pages) and to a short 35 page summary of the bill (more of a short explanation of each section). Or is it fair to get into a complicated discussion with an informed base?

I don’t see anything on ‘death panels’ in the bill, but maybe I don’t know the right codewords to read it correctly – could:

A BILL To provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes.

be the sinister code words we are looking for? What are those ‘other purposes’? Oh, they appear to be revising the tax code, providing credits for small businesses, and improving Medicare and Medicaid.

I think I found the sinister part that  is so disturbing the American Citizenry :

The bill would prevent foreign multinational corporations incorporated in tax haven countries from avoiding tax on income earned in the United States by routing their income through structures in which a United States subsidiary of the foreign multinational corporation makes a deductible payment to a country with which the United States has a tax treaty before ultimately repatriating these earning in the tax haven country. (from section 451 of the explanation)

Yes, this is decidedly sinister.

Economics, Politics

U.S. Is Said to Agree to Raise Stake in Citigroup

News Alert: U.S. Is Said to Agree to Raise Stake in Citigroup From the NYT.

Why? Why? Why?

Why can’t we just let these ‘big’ banks die? Are the Treasury officials afraid that their friends won’t talk to them any more if their friends lose their shirts and pants and West Side condos? There are a lot of fiscally sound banks out there that can pick up the credit load and remove the credit crunch problem, especially with several hundred billions of support from the Fed. Problem is that they are more ‘Main Street’ banks than ‘Wall Street’ banks.

Providing Citigroup with an additional influx of cash won’t help the credit crunch. All they are going to do is pay off their losses which won’t leave enough for lending to anyone.

Let Them Die!