VA

Back in the days when I was doing retirement planning I had to learn about Civil Service benefits. Since 1984 all new federal employees had to join the federal employee retirement system (FERS) and civil service was phased out and there are very few employee who remain in the civil service plan. One of the biggest concerns that employees had when this change was made was whether their union benefits would be changed and they were assured they would not be changed. It was well known at that time that it was difficult and in some cases impossible to fire anyone in the union. In most cases there is a suspension and then the employee is allowed to come back to work. Recently high ranking officials in the VA have been terminated but they have repealed their cases and will be allowed to return to work. A notoriously corrupt Department of Veterans Affairs (VA) manager fired in the first day of President Donald Trump’s presidency — to rousing acclaim from veterans who heralded it as a sign of lasting reform — has been returned to work by VA officials after he filed a civil-service protections appeal. Two Department of Veterans Affairs administrators in Phoenix who were suspended at the outset of a crisis over delayed patient care will return to work Monday, 19 months after they were put on paid leave and given termination notices. This is one of the reasons that it has been so difficult to reform the VA.

Rich and poor

Now with the benefit of hindsight is a good time to review just what happened in the mortgage crisis of 2008. I purchased my first home in 1959 with 4% down payment and a 28% debt to income requirement. This meant that my principal and interest payment plus property tax could not exceed 28% of my gross income. In those days as is still much of the case the cities were segregated by race. The Blacks lived mostly in one area of town and as they came in to apply for a home mortgage the banks would refuse the loan because the borrowers did not meet the required debt to income ratio and did not have enough down payment. Through the 60’s and most of the 70’s this practice continued until one enterprising group did a study and discovered that Blacks were being discriminated against when it came to home buying. This resulted in the passage of the Community Reinvestment Act of 1977 which required banks to make loans to unqualified borrows or be penalized in various ways. After years of disruption of mortgage banks by federal agencies the banks were finally allowed to lower the requirements for mortgages and this came to a head during the Clinton Administration when President Clinton told his HUD secretary Henry Cisneros to use creative financing to get more low income people into the American dream of home ownership and this opened the flood gates. This resulted in what were called NINA loans. No income and no assets! Just about any warm body would now qualify for a home loan. While these changes were occurring another practice became popular and that was the local mortgage company selling the mortgage to another company like Fanny Mae. This meant that the local bank would no longer be responsible if the home owner defaulted. This whole process by design would lead to many defaults mostly among low income borrowers who should not have received a loan in the first place. Then to compound matters many fold the major loan companies began to sell these mortgages as investments. They would put together a bundle of up to 5,000 mortgages and offer them as investments. While interest rates on bank CD’s were running 3%, home mortgage bundles were paying 6% so there was a big demand for these bundles. Rating companies jumped into the fray and rated these bundles as triple A and thus they qualified for pension fund investments. As long as the value of homes kept rising this Ponzi scheme could continue to grow but in time people realized that these mortgages were only good as long as the borrower kept up the payments. As more and more borrowers began to default the house of cards began to crumble. When all the dust settled the government had bailed out the banks and insurance companies and the poor homeowners lost their equity. As my dear mother used to say, the rich get richer and the poor get poorer.

New home solar panels

When President Obama said he wanted to look at all energy sources to combat climate change he was on the right track. Unfortunately most of his emphasis was on solar panels and electric cars. There are two uses for solar panels that currently make sense. The first is to use a small (4 sq ft) panel to power lap tops for use in third world counties where small communities are without a power source. The second is roof top solar panels on new home construction. The estimate cost is $30,000 and when added to a 30 year mortgage that comes to $150 per month which is the average cost of electric power to the average home. These panels last for 30 years and would be replaced when the roofing shingles need replacement. These panels will supply more power than is needed and the excess can be sold back to the power company and those savings can be accumulated in a sinking fund to pay for panel replacement. The cost of solar panels keeps coming down and government will provide incentives to install panels so the original cost can be cut in half. New designs in panels have improved the appearance. Power companies are influencing some states to pass laws which prohibit the sale of excess power back to the power company. One of the problems which happened in Nevada was that only wealthy people could afford to install the panels on existing homes and the price of electric power was increased on those who could not afford panels. Installing panels in new homes is more cost effective and many more people can afford this.

Natural gas expansion

Climate change is still being infected with politics instead of science and economics. The upcoming Paris meeting is a case in point. This agreement states: The Paris Agreement requires all Parties to put forward their best efforts through “nationally determined contributions” (NDCs) and to strengthen these efforts in the years ahead. For China and India the world’s two biggest producers of CO2 this means push ahead with building coal plants and offer reductions only many years in the future. Their feeling is that the Western countries went through the industrial revolution using coal and they are just catching up and have the right to do so. To sign this agreement means nothing accept it looks good politically. The US can best do its part by continuing to replace coal fired plant with natural gas. Here are two results of the US efforts in this area. The first is that carbon dioxide emission growth seems to be slowing. 2015 marked the 2nd straight year that the increase in emissions was smaller than the year before But the second positive note in the numbers is that the U.S. continues to lead the world in reducing carbon dioxide emissions. In 2015, U.S. carbon dioxide emissions fell by 145 million tons, by far the largest decline of any country in the world. The next step for the US is to move the transportation industry over to natural gas, something that should have started years ago but politics is in the way. Step two, the recent agreement of China to buy natural gas from the US will make a profound difference and should be expanded to India.

Investigation

Over a two year period there were 7 committees that investigated the Benghazi affair at a cost of 7 million and nothing came of it. The overt purpose was to find out how and why an American was killed. The covert purpose was to find something to blame on Hilary Clinton. The probe finally stopped when Clinton lost the election. We now have six agencies and a special prosecutor investigating the Trump-Russian connection. It has been going on for ten months and will likely continue as long as Trump is in office. The official purpose is to make sure that Russian cannot interfere with our elections but the unofficial reason is to get some dirt on Trump. If this goes on until he is out of office it will cost far more than 7 million.

cost of healthcare

For people like myself who worked in the insurance business it has always been obvious that the way to hold down cost was by limiting service and this is done in two ways. First is to have high deductibles as is the case in Obamacare. Second is rationing which is done with Medicare. When Obamacare first came out I pointed out that all the conversation was about the monthly cost (premiums) but when people went to use the service and discovered the deductible they would be in for some sticker shock. This has now come to pass. The middle income working people pay for most of the free Obamacare but seniors also pay through rationing since Obamacare took about 700 billion from Medicare in payments to doctors and hospitals. Even after Obamacare has insured 20 million new people there are still 28 million without insurance. In 2010 the estimated cost of Obamacare over ten years was $940 billion. In 2012 the cost was raised to $1.76 trillion. In 2014 the cost estimate was 2 trillion which is more than double the cost only 4 years earlier. As the deductibles continue to increase the total health care cost will begin to stabilized.

Race

When I was growing up our sports heroes were noted for their humility and this was best illustrated by Lou Gehrig. He would say things like, Aw shucks guys, I just tried to help the team. This was the norm until Ali came along and announced to the world, I am the greatest. This was followed up mostly by black athletes with their trash talk on the court and dancing in the end zone. I personally thought the dancer should run down the field and shake hands with the offensive linemen but that is old school. When Sam Phillips said about Elvis, If I could find a white man who had the Negro sound and Negro feel, I could make a billion dollars When Joe Biden said what many were thinking about Obama he surprised many. I mean, you got the first mainstream African-American who is articulate and bright and clean and a nice-looking guy Now we have come full circle with Trump saying the equivalent of I am the greatest. Maybe we are getting away from some of our stereotypes and on our way to a race free society.

Mind reading

I usually watch Morning Joe in the AM and he is getting more anti-Trump as time passes. He does like Trumps foreign policy team and today he talked about Trumps trip overseas. After saying the team will do a good job he added that they are too loyal to say anything but he knows they are worried that Trump might mess up their plans with a tweet. Joe has often said that sources he knows close to the White House gave him inside information. I question whether he reported what he was told or what he thought they really meant.

Old dogs

In a few months I will be 80 years old and I feel that 80 is the new 60. We have a newly elected president who is 70 and Several of Trump’s picks are older than any of the Cabinet-level nominees of Bush or Obama: 79-year-old Ross; 70-year-old Sonny Perdue, the Agriculture nominee; 69-year-old Robert Lighthizer, who Trump picked to serve as the U.S. Trade Representative; and 69-year-old Sen. Jeff Sessions, who Trump has tapped to run the Justice Department. In the news today is former Senator Liebermann age 75 as a possible pick to head the FBI. Don’t count us old dogs out!

Social media

The three major TV networks have a combined viewership of 25 million and Trump through social media reaches 50 million. Everyone is aware that Trump did not campaign like a normal politician because he is not a normal politician. He is not a liberal or a conservative. He is not ideological. This means he does not fit the mold of what most people think of as a politician. This is causing great deal of consternation among the political class as well as the within the media. These two groups along with most of the American people are at a loss when it comes to understanding Trump. Those representing the status quo are most concerned. They have spent their lives leaning the ins and outs of the current system and now find themselves on the outside looking in and this is very upsetting. They have misjudged Trump since the day he decided to run for office and they are still having difficulty in dealing with his unorthodox ways. Case in point is Trumps use of social media which in many cases by-passes the regular media channels. This is very disconcerting to the press so they spend an inordinate amount of time disparaging his use of Twitter. Once again this is not the way they think a president should act but they best get used to it because he will not be the last president to use social media. President Obama started this new way and Trump has expanded it.

Members of congress are objecting to any one with political ties becoming the new head of the FBI. They say politicos cannot be objective. This is what many citizens have felt all along. People feel that most politicians are so biased that they have lost their credibility. When judgement is effected by either being too close to a situation or too opposed then credibility is questioned and the press in on track to fall into that trap. Many in the press are so upset with Trump they are losing the ability to be fair in their analyses. This is not only affecting the commentators but also the regular news people. In the past when the president made a statement like I propose lower taxes it would be reported that way but in today’s world it is reported but then comments are added like what the president should have said is…………. As the press becomes more like politicians the people will turn them off like many have with elected officials. Back when Ken Starr was appointed special prosecutor in the Bill Clinton case, he was appointed because the congress could not be trusted, the state department could not be trusted and the FBI could not be trusted. That says a lot about the way people see the government. When the dust settled Ken Starr was not trusted.

electoral votes

As the results of the past election sink in and the experts start dissecting the data a couple of things stand out. First many feel that if it hadn’t been for the Russian hacks and James Comey, Hilary might have raised her 227 electoral votes to 270 and would be in the White House. They say a win is a win but there are some serious problems that are not being discussed. Raegan beat Mondale 525 to 13 and Nixon beat McGovern 520 to 17. While the democrats are looking at Russian they are not trying to understand what happened. Hilary was on to something when she asked last September, why am I not 50 points ahead. Two seasoned politicians Mondale and McGovern could only gather 30 points between them while Trump a total amateur, got ten times that amount. Hilary made two big mistakes, the first being the emails and the second her remark about the deplorables but Trump made worse mistakes almost every week. Why was this election not a shoo-in for Hilary? Week after week the talking political experts said this is it. He is done for now. Could it be that the old trifecta of unions, minorities and the press are not enough to win? Do the Democratic Party leaders recognize that there is more wrong with this election than the Russian hacks? Did they have a poor candidate and/or a poor message? Trump has changed the press in a good way. They have been awaken from their slumber and as the ratings for network TV, cable TV, radio, newspapers and magazines are all hitting new highs they will continue in this manner even when we get a new president.

LNG to China

There was some news today that was overshadowed by the Comey situation. Under the agreement, the United States is inviting Chinese companies to import U.S.-produced liquefied natural gas. The Energy Department has authorized natural gas shipments of 19.2 billion cubic feet per day to China and other interested countries that lack a broader free trade agreement with the United States, the Commerce Department said This only represents about 1.3% of US usage but it is a start but all parties concerned about climate change will welcome this news.

McCain

Hilary Clinton says that the release of information by FBI director James Comey just before the election was instrumental in causing her loss and there is some validity to that claim. This also happened in 2008 to John McCain who had been running 6 points behind Obama though out most of the campaign until late August when he chose Sara Palin for his vice president. She came on the scene with a flair that fired up the base and suddenly McCain pulled ahead of Obama. With an 8 point swing McCain found himself with a two point lead and the momentum. Then on September 15th it was announced that Lehman Brothers would file bankruptcy and panic hit the markets and McCain’s run was over. Pew Research Center data analyzing the tone and focus of media coverage through the final stretch of that election showed how that coverage shifted dramatically in mid-September 2008 to focus on the financial crisis and the media narrative grew increasingly critical of Republican candidate John McCain. During this same period, our public opinion survey data indicate that what had essentially been a deadlocked contest between McCain and Obama before the Lehman meltdown turned into a solid lead for Obama in the weeks that followed.

New business

John and Mary Smith, a young married couple wanted to start their own business. They knew that only one in five startups would make it past five years and even then the chances of earning more than just working for someone else was not good. They put up all of their savings, borrowed from their parents and took a second mortgage on their home and went for it. They worked long hours, seven days a week and after a couple of years they begin to see some extra profits which of course went right back into the business. Ten years later they had a growing business with 20 full time employees. They still worked long hours but now they had some real profits to show for their effort. They had postponed having a family and now were considering children. Last year they had $500,000 profit after expenses and planned on investing half of that to expand the business. The $250,000 after business investment was considered personal income so they had to pay tax on that. After setting aside the half for business expansion they were left with $250,000. From that they paid $90,000 in federal and state income tax, $38,000 in self-employment tax and $7,000 in Medicaid tax. Then they paid $20,000 for health and disability insurance and put $18,000 into a 401K for their retirement. That left them with $95,000 to pay for things like house and car payments, utilities and property tax. They are still each working 60 hours a week which means 6,000 hours per year and dividing that into $95,000 comes to $16 per hour. They get no paid sick days, holidays personal days or vacation like their employees. Then they heard their congressman say the one-percenters should pay more taxes and one-percenters are families who make over $475,000.

Single payer plan

Heath care cost is $3.2 trillion and 646 billion of this goes to Medicare. This means the average cost for everyone is about $10,000 per person while Medicare cost per person is about $12,000. Since these are elderly people the cost should be higher but it is pushed down by various accounting tricks. Medicare’s strength is its low administrative cost but its weakness is rationing which is does in many ways. A Medicare for all system will have lower cost because of lower administrative cost and rationing. The radical revamping of Medicare will slash costs borne by the government, insurance firms and hospital chains by denying Medicare patients what is presently considered to be normal access to medical procedures, drugs and hospital care. The realignment of Medicare more directly with the profit dictates of the market will become the model for the American health care system as a whole. Since the emphasis is all on cost and not on patient care the single payer system called Medicare for all will likely be how everything ends up. This is what Obama wanted from the beginning. Here is a quote from Obama in 2003: “I happen to be a proponent of a single payer universal health care program…I see no reason why the United States of America, the wealthiest country in the history of the world, spending 14 percent of its Gross National Product on health care cannot provide basic health insurance to everybody

Treatment

One of the shortcomings in original Medicaid was the lack of coverage for single adults. Medicaid covered children and adults with children but not adults alone. Obamacare expanded Medicaid to cover single adults. Recently stories have appeared on the Internet showing single adults who had pre-existing conditions and could not qualify for insurance and they died from their illness because they were denied treatment. These stories are designed to show how Obamacare has kept these individual from going without treatment. This is a distortion of what actually occurs. Most of the time these people are admitted to the hospital by way of the emergency room and they receive standard treatment and it is paid for through the charity plan that hospitals have which means they pass the cost onto paying customers. Medicaid worked in this way from its inception in 1965 to 2014 and there were few stories about people going without treatment.

Patent office

This past week I visited with an economics teacher who told me that Trumps promise of a 4% GDP was not going to happen. He said the United States is a mature economy and that 2% growth is the price you pay for this maturity. This caused me to think about the 20 million abled bodied people between the ages of 16 and 65 who are not currently working. If these people went to work for $10 an hour this would add 2.2% to the GDP which has been running at 2% for the past ten years bringing us up over 4%. Many of these people have dropped out of the work force because they have other income either from some government source or other financial help. There are signs up all over the place offering employment but these jobs are not being filled. If this trend continues wages will rise and perhaps these people will find it to their advantage to work. In the past innovation has both created and eliminated jobs but created far more. This could easily happen again. One prime example is controlled fusion. The science on this is already established and the engineering as usual will follow. This means an almost unlimited supply of power. This power will be used to produce steam which will produce electricity. It will be used to break down water into hydrogen which will power the transportation industry with the only by-product being water. It will transform the deserts into cropland and thus feed the world. I don’t believe that the United States is as my friend says a mature economy but rather that there will be great strides in future growth some in areas that have not yet been developed. I am reminded of the patent officer who said in 1900 that the patent office should be closed down since everything that could be invented was already invented. Charles H. Duell was the Commissioner of US patent office in 1899. Mr. Deull's most famous attributed utterance is that "everything that can be invented has been invented."

Health bill

The Republican version of health care reform was passed by the house and those members who voted for it are being criticized for not knowing what is in the plan by others who do not know what is in the plan. This is similar to what happened when Obamacare was passed when each group, neither of which knew what was in the plan, criticized the other group. This is just further evidence that what side of the isle a person is on matters more than what is in the plan. Politics as usual!

Make fun of

At school today I was reading a National Geographic issue from May of 2016 and thought of an old phrase I use once in a while, “smug cometh before the fall”. On the cover it was poking fun at people with odd and seemingly ignorant ideas. Climate change….does not exist Evolution….never happened Moon landing….was fake Vaccines….cause autism Genetic modified food....evil Just take a short trip into the past and you will find: Dr. Jenner who was run out of town when he suggested that doctors may be killing their own patients….before they knew about microbes. Spontaneous generation….belief that rotten meat could change into flies Blood letting….belief that illness could be cured by removing blood More recently Stomach problems treated as ulcers when in fact it was a bacterial infection and that the brain was only an organ and not a gland. Finally what will the future say about chemotherapy and radiation. When I was in school we had what scientist called laws, things like the laws of thermodynamics but quantum physics has challenged this and the word law is now in jeopardy. While it is good to always question it is not wise to ridicule.

Approval

Sometimes the writing on the wall is hard to see as is the case with how the people around the world view their politics. It started with Brexit in England and followed with Trump. Even during the primaries experts failed to see the warning when Bernie beat Hilary in Wisconsin, Michigan and Minnesota. This Sunday there is an election in France with two outsiders running. It would be like a presidential election here with the Green Party candidate running against the Libertarian candidate. Trumps approval rating at 40% is still higher than the rating for congress and for the press. It is clear that people are not happy with their government and are crying out for change. It may one day swing back but it will be different. How different, who knows?

Divided

There are 20 million people covered under Obamacare and 80% receive subsidies and for 65% of those the insurance is free which means no monthly free and no deductible. The government pays for this using various taxes from Obamacare at a cost of one trillion dollars over ten years. Even with this help there are still 27 million Americans without health insurance. Congress working together could make considerable improvements but the country over the past 20 plus years has been faced with what Lincoln called the house divided. It used to be that only the politicians were placing party ahead of country but now many voters have joined them. For all of those who wanted Obama to fail we now have a similar number who want Trump to fail.

Filibuster

The senate filibuster rule was to be used in extraordinary situations but over the years that changed and it became a tool used more for political reasons. Trump tweeted that he may ask the senate to get rid of the filibuster. Here is some history. The filibuster has been used 1,300 times since 1917. However, the vast majority of those filibusters have taken place in recent years. Filibuster use began to increase dramatically in the 1970s. Even so, there still had only been a grand total of 413 Senate filibusters by 1990. Over the last 12 years, however, the filibuster was used nearly 600 times! And since 2004 it has been used another 350 times. It started out as a reasonable use of power but given enough rope?