Category Archives: Economics

Economics

Further ado

2007 Mean Household income is $67,609
total of 116,783,000 households
aggregate US income in 2007 – $7,895,581,847,000 –
Let’s call it $7.9T – Total 2007 US income.

The Median Household income is $50,233 which means that 58 million households are making less than $50K and 58 Million households are making more than $50K. And the Mean, or Average, household income is $67K. Something doesn’t seem quite right here… But I didn’t start this to talk about income inequality.

A few days ago I mentioned that the 2007 health care expenditures in the US were $2.2 Trillion and the per capita cost of that comes to ~$7K per person. And I thought that was a doable cost to support. How can it be done?*

If we go to some sort of National HMO plan that covers the full range of health care that $2.2T covered, then we can drop about 20% of the costs right off the top to get rid of the administrative overhead and all those redundant file clerks at every office, leaving us with about $1.8T to manage. I think about $0.5T of the expenses is for Medicare but I want to roll the Medicare expenses into my plan so I will leave them there.

I like the way SSA does it, and Medicare, with the Employee paying 50% and the Employer paying 50%, so the Employees need to cover $0.9T to cover their part of the HMO insurance.  $0.9T/$7.9T = 11.4%.

The Employers get out of the health care management business altogether, saving themselves a lot of aggravation and expense,  and will end up with a presumably healthier, more productive workforce.

So along with the 6.2% FICA, and an additional 11.4% payroll tax to cover the medical  everyone will be paying a 17.6% payroll tax. But unlike FICA/SSA, the medical/HMO can be used immediately. Should be used immediately. If people started getting routine medical maintenance when they are young, and using neighborhood clinics instead of emergency rooms for minor ailments, the long-term medical costs would drop a bit right there.

A 17.6% payroll tax is a bit steep if you have to worry about other taxes on top of that, but that medical coverage could pay for itself overnight if you don’t have the coverage today. I would further propose to get rid of all the deductions and other bits that make tax season so much fun and give a straight single deductible of $50,233. You only pay income taxes on your income greater than the median family income. 

*Must remember to start with First Principles:

We the people of the United States, in order to form a more perfect union, establish

justice, insure domestic tranquility, provide for the common defense, promote

the general welfare, and secure the blessings of liberty to ourselves and our

posterity, do ordain and establish this Constitution for the United States

of America.


I think this comes under the promote general welfare principle, so we can proceed.

Economics, Politics

Planning ahead

Why don’t we set aside 5% per year of initial infrastructure project costs to use for maintenance. If you can’t fund the long-term maintenance then don’t do the project. I suspect a lot of municipal water systems could have used that philosophy a a long time ago.

Should we even consider flying anymore, given the state of the Air Traffic Controllers?

Economics, General, Preparing for the worst

Being Lazy

I just came across this site that gives some guidelines on developing worry-free investment portfolios. They make sense to me and I think I am following them with my own retirement planning.  I do like #5 – If you’re not saving 10%, you’re spending too much.

I wonder about this quote:

Albert Einstein put it very simple: “There is no greater power known to man than compounding interest.”

I checked on Snopes and it is undetermined that Einstein really said anything like that. So he probably didn’t. Even though the sentiment is right on.

I don’t worry about what my portfolio is doing these days and I keep telling Elaine not to worry. We have set up a portfolio as best we could and we will see what it looks like in a few years.

My concern about the current state of the market is for the overall state of the US and Global economy. We have to live with the macroeconomic fallout of this meltdown and I don’t see any reliable hands the helm at present. But what do I know? Maybe paying dividends to shareholders of failing financial institutions is the best way to go. Not.

Economics

The end is just the again beginning

I found this interesting article by Michael Lewis, the author of Liar’s Poker, discussing a bit of what’s been happening on Wall Street in the twenty years since he left. I liked Liar’s Poker when it came out and find it disturbing that the next generation of Wall Streeters found it to be a useful how-to manual.

There is an object lesson somewhere in all this involving doom-sayers, pessimists, and people trying to see the dreams all the while ignoring the nightmares. How to make reality the nightmare? Ignore it for a while. Wall Street seems very good at ignorance.

Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a
depression. I just want it to fucking deleverage.” He had tried a
thousand times in a thousand ways to explain how screwed up the
business was, and no one wanted to hear it. “That Wall Street has gone
down because of this is justice,” he says. “They fucked people. They
built a castle to rip people off. Not once in all these years have I
come across a person inside a big Wall Street firm who was having a
crisis of conscience.”

Even I, an uneducated fiscal novice, could see that a house of cards was being built with my, and everyone’s, money for the past decade. And it was being built in an earthquake zone. And I was asking at every chance “how can I protect my investments?”  And knowledgeable folks couldn’t help me. Even those that agreed that an earthquake was coming didn’t have any viable alternatives. Now I see, I should have shorted the mortgage/CDO/CDS market.

via:

Economics, Politics

Let me see if I have this straight

Let us say I am making $200,000 a year and paying 10% tax on that. My take home would be about $180,000.  So I wouldn’t want to exert myself a little harder to make, say, $300,000 because I would be in a higher tax bracket. For $300,000 I would pay the same 10% on the first $200,000 (Take home $180,000)  and, say, 20% on the next $100,000 (Take home $80,000). Because then I would be taking home only $260,000 instead of $180,000 and there isn’t any incentive in the world that would make me exert that extra effort.

I wouldn’t want to move into the top 2% of earners in the US because I would have to pay more taxes for making more money. Nevermind that I am earning such a comfortable income because I am using the social infrastructure this country has developed with tax dollars. No, I have gotten to this level on my own and nobody gave me anything along the way and they shouldn’t expect me to give back to some imaginary community that makes it all possible.

Yeah, that sounds straight enough.

Economics, Politics

This is not looking any better

The Nation is tracking how the bailout is proceeding.  It continues to ring so wrong.

This bit

But, if you look more closely at Paulson’s transaction, the
taxpayers were taken for a ride–a very expensive ride. They paid $125
billion for bank stock that a private investor could purchase for $62.5
billion. That means half of the public’s money was a straight-out gift
to Wall Street, for which taxpayers got nothing in return.

is very irksome, but the private investor they are invoking is Warren Buffett, who was only putting up a few billion into Goldman-Sachs. And then they extend the analogy of the deal Buffett made with GS to cover all nine institutions, something I don’t think is quite fair.

But the upshot is that we appear to have the wolves in charge of the foxes in charge of the chicken coop. And the wolves are preparing for one last plunder before they retire. I don’t trust the administration to monitor and manage the bailout, I don’t trust the Congress to provide oversight on the wolves. I don’t expect the Justice Department to initiate criminal prosecutions in a timely fashion. I don’t trust the Republicans to do anything other than plunder the US treasury as best they can. And I don’t trust the Democrats to provide any ‘check and balance’ to stop the Republicans. (Hell, they may even join the bandwagon.) It would be nice to be pleasantly surprised.