Liberal and Conservative

While the conservatives slept the liberals were hard at work. It started with George McGovern in the 1972 Presidential election. As the Democratic candidate for president he demanded that Convention delegates be representative of the country. This vastly increased the percent of women and minorities. They lost the election in a landslide but have profited by gaining voters in these groups. After the fiasco in the 1968 convention where they protested in the streets they made up their minds to work from inside the system and started pushing for liberal professors to gain tenure. They worked hard to elect liberals to school boards, county commissioners, city council members and state representatives. Once their people were in office they negotiated public union contracts that brought union workers into the fold. After the McCarthy era they infiltrated the entertainment industry. All of these 50 years of work paid off handsomely in the election of President Obama. Will the conservatives wake up and more importantly are they prepared to work hard for the next 50 years to explain to people why the trend toward bigger government will fail especially for those for whom it is intended to help?

Obama budget

My take on the Obama budget released today. Spending on infrastructure. Money will only be approved by local officials if it is a new structure of some type so they can have a ribbon cutting ceremony and that requires planning and as we found out there are no shovel ready jobs. To do something practical like fixing potholes could be done right away but there is no glory in that for the local mayor. The president learned his lesson and this time he specifies repairs to highways, bridges, transit systems and airports. Spending on early education. This is a supplement to the head start program which is government baby-sitting for 3 to 5 year olds. The new plan is for more baby-sitting but this time for 4 year olds. Head start has proved a waste as all the gains made are lost by third grade. The advantage to these programs is the free meals and providing jobs for pre-school teachers and of course free baby-sitting. This program will be paid for by taxing cigarettes and this is a regressive tax hitting the poor people the hardest. This will take money from the poor and give it to the poor with the administrators taking a share and the government getting the credit for the program. They will love this. Spending on non-defense research can be a good thing if projects are merit based and not crony based. Good luck with that. Changing how increases in social security are calculated is a start. Right now the adjustments are based on the consumer price index and this will change to a chain method. This takes into account the change in spending habits when the price of one item increases. For example if the price of beef goes up people buy more pork. This adjusting by consumers lowers the price index so future increases will be less. This will lower the average social security recipients payment about $350 per year by 2020. That doesn’t sound like much but since there are so many people receiving government money it comes to 230 billion over ten years. I feel they can keep this but should also include means testing for social security. Doing that would require people who have lots of retirement money to take less social security. It could be set up for couples who have $200,000 of retirement income to take a reduce social security benefit and by $250,000 the benefit would be zero. There is a proposal to cap itemized deductions at a 28% tax rate. For example a wealthy person who deducts mortgage interest saves 39% but with the new rule would save only 28%. If you pay $30,000 in home mortgage interest this would save you 39% of $30,000 or $11,700 in taxes verses the Obama rule of 28% of $30,000 or $8,400. This would not affect the rich, rich since mortgage interest deductions are already eliminated for mortgages that are more than one million. This will hit people earning between $300,000 to $500,000 and bring in $529 billion over ten years. Looks like a good idea to me. He institutes the Buffett rule which states that people income over one million after deductions will be taxed at 30%. This is an indirect way to raise the capital gains tax from 20% to 30%. There are pros and cons to this but I see it as a good thing and it will bring in about 50 billion over ten years. He places a limit on deduction for private pension plans like IRA and 401K. After you have 3 million in the account you can no longer get a tax deduction on new money. This does nothing but if it opens the door to lowering the 3 million limit it could be the most important part of his plan, so look for that to happen in the future. As it stands it will only bring in about 9 billion over ten years. IRA’s have only been around since 1974 and for most of those years you could only contribute $2,000 so you couldn’t get close to 3 million. Many people when they retired transferred their company plan to an IRA and these can have a lot of money in them. His plan would eliminate carried interest. This is OK and will hit hedge fund managers. Recall that a hedge fund is a pile of money put in by private investors and they invest in business where they can make money. They like this since there are no government regulations on their actions. If they invest a billion in a company and make 2 billion they pay capital gains tax on the profit and that is as it should be but they sometime uses their own expertise to make profits and receive payment for that and they also call that capital gain. The rule change will call that money earned income and it will be taxed at 39% instead of 20%. That makes sense but the expected money from this change will be reduced if they start the Buffett rule because it will be taxed at 30% There will be $200 billion in unspecified defense cuts and $400 billion from Medicare mostly by cutting payments to hospitals and drug companies. Another 600 billion in non-defense cuts including agriculture and unemployment insurance. The law says the president’s budget must be presented by Feb 4th and it came out today two months late. I suggest you not be two months late on filing your income tax as you are not the president.

Obamacare

Obamacare is once again in the news or I should say has never been out of the news. When Nancy Pelosi said we have to pass it to find out what is in it, she didn’t realize how prophetic she was. As each new part of the plan is revealed it is followed by more controversy. The bill of course was destined for trouble as it was formulated behind closed doors and the final passage was stained with the payoff to Senator Land rue. For those of you who don’t remember the incident. On the eve of Saturday’s showdown in the Senate over health-care reform, Democratic leaders still hadn’t secured the support of Sen. Mary Landrieu (D-La.), one of the 60 votes needed to keep the legislation alive. The wavering lawmaker was offered a sweetener: at least $100 million in extra federal money for her home state. And so it came to pass that Landrieu walked onto the Senate floor midafternoon Saturday to announce her aye vote — and to trumpet the financial “fix” she had arranged for Louisiana. “I am not going to be defensive,” she declared. “And it’s not a $100 million fix. It’s a $300 million fix.” Not one Republican voted for the bill and this added to the controversy. In contrast the final passage of Medicare in 1965 had 57 democrats for and 7 against and 13 republicans for and 17 against. This is considered true bi-partisanship and gives the bill a good send off. In the house 70 republicans voted for the bill.

free insurance

We were told that the cost of health care would not increase under Obamacare but the latest figures from the GAO show a cost of 100 billion per year. I believe that figure is low because we were told this plan will insure 31 million new people at no additional cost. Being a man of the world that I am, I knew immediately that you could not insure that many people at zero cost. If we divide 100 billion by 31 million that comes to $3,300 and I don’t believe you can offer insurance that cheap. When the final cost come out it will be three or four times that amount. Stayed tuned for new cost updates as they are released.

guns

Two items in the news caught my attention as they both indicate the ignorance of some of our elected officials. The first was here in Minnesota where slot machines were introduced for charitable gambling to bring in money to help pay for the new Vikings Stadium. The projected income for 2013 was initially 30 million but recent results show it will be closer to one million. Upon investigating how such a large discrepancy could exist it was discovered that the projections were made by the people who sold the slots. The next was a US congresswoman who was supposed to be writing legislation on gun control suggested that they limit the number of magazines that could be purchased stating that when the magazine was empty it had to be discarded and thus would indirectly limit the number of bullets. When it was pointed out to her that you can refill magazines her assistant followed up the next day saying she meant clips not magazines not realizing that clips can also be refilled. I am not surprised that a liberal woman does not understand about guns but this lady is responsible for writing new gun laws. I am not trying to put anyone down here as I know that mistakes are made by all of us but I wanted to point out that just because people are in charge of some situation does not mean they are experts. Too often we feel that if the government is proposing something that they must have studied it and that is not always the case. I think we would be wise to use the Reagan adage of trust but verify.

pension money to balance budget

A couple of months ago I wrote rather f and apparently naively that the government currently 17 trillion in debt might be looking at private pension plans like 401K’s for some money since there just happens to be 17 trillion in those. It was leaked today that part of President Obamas budget for this year includes a limit on the tax deductibility of 401K’s. The limit will be set at 3 million so when a person’s account reaches that point they can no long tax deduct additional contributions. This means that these people will have to forgo contributions and pay tax on the amount. This will bring in more revenue to the government. Now many will say so what. 3 million is more than enough since the average 401K plan has only $60,000. Taxing the rich is easy as most people could care less about the rich. Does this bring us a step close to the idea of government taking assets as was done in Greece? Here is the argument. Bill Gates is worth 60 billion dollars. Shouldn’t one billion be enough for any person.

Easy loans

The President began this week to push for more home ownership. He has told the banks to loosen their standards and start taking on more risky loans. He has said that the loans will be backed by the FHA, which by the way has no money, meaning that the taxpayers will back the loans. He did not give the banks direct guidelines but told them to use subjective judgment. If you are a banker and you make money on each loan and the government has assumed the risk for bad loans and you can use your subjective judgment to determine who qualifies, what will you do? Stay tuned for the logical ending to this scenario.

Gay marriage

The Supreme Court is currently ruling in the issue of gay marriage and I am somewhat confused by the whole issue. For years I have read articles about the importance of a father in the home. Experts agree that daughters gain in self-esteem and sons have role models when dad participates in raising children. Now I am told that two mommies can do just as good a job. On a regular basis experts come out with statistics showing that major problems in the inner city are directly related to the lack of fathers in the home. Will this problem be solved by replacing the missing father with a second mother? I am in favor of gay marriage based on the equal protection clause but it raises some important questions. The two phrases most often heard are one, that people should be allowed to marry whom they love and two, what two people do in the privacy of their bedroom is no one’s business as long as no one gets hurt. Will these same principals apply to three people? Is bigamy the next civil right? A few years ago I wrote in a somewhat factious manner about the advantages of two women being married. How they could share the house work and go shopping together. With current technology they could have children using the sperm bank so they could be a family. On a regular basis articles appear showing the decline in boys school work and the rise in the work of girls. While early development in language skills, have always given girls a head start more recently things like video games have exacerbated the problem and add to that the girls are more attentive to things like homework. This has led to the current situation where 57% of college students are women. Women now are represented in equal numbers in professional schools like medicine and law and over represented in graduate school. While all this has been going on the past ten years showed a 50% increase in the number of boys diagnosed as having attention deficit disorder. The result of the drugs given to these boys has increased other medical problems. All of these problems with boys are further exaggerated if you look at the inner city schools. Did the changes in the laws that allowed single moms to have access to financial aid aggravate things? Does the fact that the number of single black moms increased from 25% to 75% since these changes were introduced have any bearing on these boys? I believe that many of these issues are interconnected and need further study. Beware of unintended consequences!

Supreme Court

The Supreme Court this week heard opinions on the subject of gay marriage. In discussing this with several friends, I detected a reluctance to offer their thoughts on the subject. This prompted me to look further into the matter. To start with, I agree with the concept of gay marriage and I base that on the equal protection clause in the 4th amendment but there are many unanswered questions that need to be discussed. Webster defines marriage as a union between a man and a woman but the second definition uses the words two people so I didn’t get much help there. Next are the words husband and wife and the dictionary defines these using the words man and woman. That just serves to muddy the waters as gay marriage does not attempt to change the gender of a person. Will a gay woman introduce her spouse as her husband? I am not sure how this will work out. For years sociologist have spoken about the lack of fathers in the home and the adverse effects this has on children. They write that fathers provide daughters with self-esteem and sons with roll models. They recommend that single moms use uncles or some male friends to interact with their sons. What about sexual intimacy. What explanations will be given when it is time for the “birds and bees” talk?