Budget Whoa!

Today, after much posturing and theorizing, the 2006 Federal Budget has been released. You can get your very own copy! Isn’t the internet great?

Now, don’t get to thinking this budget is set in stone. It’s as malleable as a Word document at this point. The Congress still has to wrangle over each line item, alternately decrying what is there and demanding what is not there. The President’s proposal is described as “a tough sell.” Although the 2006 fiscal year starts on October 1, recent history tells us not to expect the final version to pass until next January. It must really be nice to be able to let financial decisions slide for three months; it’s certainly not anything most people can get away with.

Now, the numbers we are talking about are big, big numbers, and most people kind of fuzz over numbers than end in “illion,” so go ahead and start thinking of “a billion” as “a thousand million.” “A trillion” becomes “a million million.” This should help add perspective as you read information about this budget. The overall budget is two and a half million million dollars. That is nevertheless several hundred thousand million less than expected tax revenues.

This budget includes a facade of fiscal conservatism. President Bush’s stated goal is to reduce the budget deficit by half as compared to GDP, a sufficiently vague figure that allows economists plenty of room to argue. Oh, and that figure, estimated at a 2009 deficit of $230 thousand million, “do not take into account some big-ticket items: the military costs incurred in Iraq and Afghanistan, the price of making Bush’s first term tax cuts permanent, or the transition costs for his No. 1 domestic priority, overhauling Social Security.” That’s like writing your household budget without accounting for electricity and the credit card bills.

Just about everything but military spending is supposed to be cut if not eliminated. Farm subsidies top the list, a controversial measure long demanded by the international community, but one must wonder if this is being done in a manner which helps family farms, or whether this is another favor to agribusiness. More cuts will occur in the Department of Education, despite the fact that states and school districts are already screaming about unfunded federal mandates and the expenses associated with No Child Left Behind. Other Big Big Cuts include public health and housing for the poor. Just think how much money this nation can save by making sure there are plenty of chronically ill homeless people. Why, that just makes me want to read some Dickens novels!

Oh but wait, America’s big cities aren’t going to be happy with that arrangement. We both know that the States and cities will not have much choice but to suck up expenses the Feds won’t pay for. Governors on both sides of the political spectrum are not happy. Most of them must balance their budgets every year by law, most of them have cut everything they can, and some of them have raised taxes as high as they dare. Even radical conservatives like The Heritage Foundation say it’s time for the Feds to be honest about their budgetary obligations.

And you know what we haven’t even talked about yet? The cost of President Bush’s Social Security plans. Over the weekend, Cyborg Vice President Dick Cheney admitted that the Bush plan would cost $754 thousand million over the next 10 years, and unknown millions of millions after that. He claims this is still better than the alternatives. Or is it? The money Mr. Cheney is talking about appears to be more than the cost to shore up the current Social Security System. It would be more intellectually honest to say they would like to shut down the Social Security Administration altogether. Supply Siders would have to grudgingly accept this as a good thing because it would have the net effect of a 12% tax cut to most Americans and the businesses that pay them. Fiscal conservatives would have to grudgingly accept this as a good thing because it would allow the government to retire $1.6 million million in federal debt. Many Baby Boomers and younger Americans would grudgingly accept it because it’s at least honest, and many of them never expected to see a dime anyway.

Of course it would really suck for the millions of Americans who need that money to pay the rent. You remember, the ones for whom the Safety Net was built in the first place?

Form 1040, lines 28 and 31

This morning I read an article entitled “GOP taking aim at health insurance paid by employers.” Let me save you some time, it’s another Ownership Society bit of propaganda, stating “they want to erect a system in which workers, instead of looking to employers for health insurance, would take personal responsibility for protecting themselves and their families: They would buy high-deductible “catastrophic” insurance policies to cover major medical needs, then pay routine costs with money set aside in tax-sheltered health savings accounts.”

Now, don’t get me wrong. I feel that traditional health insurance drives up costs by, among other things, directly short-circuiting market forces. Most people have no idea what their health insurance costs, because it is paid for by their employer. There is no ability, let alone incentive, to try and get a better deal. This GOP proposal largely addresses that problem, although I must admit some amusement that the party of the Supply Siders is proposing a Demand Side solution to the problem. The benefits of this idea are not only that people would be in control of their own medical and health insurance expenses, but also that it would limit the medical expenses that have to be funneled through the overhead (read: unnecessary added expenses) of the insurance company, and that Doctors would actually get what they bill in a timely fashion. Win-Win, so far.

However, there is a bit of this puzzle that is missing, and it can be fixed with a little change of wording on the 1040. Scoll down to the instructions for lines 28 and 31. You can probably get them on one screen together. Line 28 allows you to deduct personal contributions to a Health Savings Account, unless your employer contributed. Oh, yeah, and you need another form. Line 31 allows the self-employed to deduct health insurance premiums.

Change that line so health insurance premiums are deductible, period, without having to itemize, and we might just have a plan to rein in costs.

Of course, this still doesn’t do a darn thing for 45 million Americans who don’t have health insurance at all, mainly because they can’t afford it. They won’t be able to afford this proposal either.

In closing, by the time I finished watching this video clip of Jon Stewart commenting on a Good Morning America interview with the CEO of WalMart, an interesting question came to mind. Why does the CEO of one of the biggest companies in America so rarely appear on America’s number one business news channel, CNBC? (Apparently he was on January 13, but strictly to talk about how they will counteract perceptions, probably to say the exact same things he said on GMA. I can’t tell because I run an “unsupported operating system.”) Maybe because Mark Haines wouldn’t be as nice as Charlie Gibson.

Merger Mania Mania Mania

Today’s big business news is that Dow Component SBC, the company that used to be known as Southwestern Bell, is in talks to buy former parent company, none other than Ma Bell herself, former Dow Component AT&T.

Oh wait, that’s yesterday’s big business news.

Today’s big business news is that Dow Component Proctor and Gamble is planning to buy Gillette for about $57 Billion in stock, creating the world’s biggest consumer product firm. It is a rich valuation. If you happened to own shares of Gillette yesterday and the deal goes through as planned in a timely fashion and you hold until the end, you stand to make a cool 18% on the deal, not too shabby. The second richest man in the world, Warren Buffett thinks this is a great idea, partly because he stands to make a lot of money on the deal.

It is a safe bet that unless you are actively boycotting these companies, you have their products in your home. P&G’s complete product list includes Alldays and Allways feminine hygiene products, Attends incontinence products, Aussie hair-care, Bold, Dash, Era and Cheer detergents, Hugo Boss clothing, Bounce and Downy fabric softeners, Bounty paper towels, Charmin toilet paper, Cover Girl cosmetics, Crest toothpaste, Dawn and Cascade dish detergents, Eukanuba pet food, and that only takes us through the letter E. By my count, there are over 15 kinds of clothes detergents –add in fabric softeners and it’s hard to do laundry without them — about 10 varieties of dish detergent, over 25 hair care lines, a dozen kinds of makeup, fragrances, and toiletries, a half dozen kinds of toothpaste, another half dozen body soaps, and 2 different lines of toilet paper and dog food. Gillette is primarily known for their shaving products, but don’t forget they own Duracell, Oral-B, and a line of skin care products. Just think for a moment about how much of your local grocery store is devoted to their products. Now consider what would happen if they decided to take advantage of this position –ooops, I mean “leverage” their “market advantages.”

Of course, to pull this deal off, they are planning on laying off 6000 people. This deal will also have an impact — mostly negative — on advertisers, suppliers, and of course competitors. In short, the gorilla in the kitchen is rapidly approaching 800 pounds. Will you benefit from any of this? Probably not.

I mean, not unless you are a shareholder.

I leave you with economic growth is slowing while exports drop, the law of unintended consequences, and finally don’t dare think in a crisis.

Confuseopoly

There is so much wrong information about Social Security and Social Security Reform and Social Security Privatization that even people who should know better are saying things that don’t make sense.

I will say this one more time: Social Security is not a savings account, it is not a pension plan; it is an insurance policy; it has no returns.

The fact of the matter is that Social Security will take in more money than it hands out in benefits until about 2018. Furthermore, the extra money that has been taken in over the years has been put in nice, safe United States Bonds and Treasury Bills. Yes, that’s right, the Social Security Administration owns a big chunk of the National Debt, and that’s not necessarily a bad thing. The Feds can’t default on this obligation without either defaulting on bonds held by private holders, banks or other nations, or by special, politically suicidal act of Congress. Either way, worldwide economic chaos would ensue. Yes, these bonds earn less over the theoretical long term gain in the stock market, but frankly that is irrelevant. Benefits paid are not linked in any way to performance of the trust fund. Putting the returns on trust fund investments into the argument is a big, fat, red herring. Aren’t you glad these funds haven’t been invested in the NASDAQ Composite for the last 5 years?

If nothing at all is done, there is still no problem until sometime between 2042 and 2052. Even then, Social Security would be able to pay something between 75% and 81% of promised benefits. For “flat broke” and “busted,” that’s not too shabby.

There is no consensus that major changes need to be made. Republicans are daring to ask for details before they pledge support. The religious right is threatening to link support of this to a Gay Marriage Ban Amendment. The AARP opposes major changes, perhaps because enough of their members remember why the program began: a stock market crash plunged the economy into a depression and wiped out many people’s retirement savings.

The idea that a Private Retirement Account would be “your” money to invest as you wish is being exposed as a lie. There would be an approved list of investables, and thus an approved list of Wall Street firms that stand to make a lot of money, particularly since we are talking sums of money that will initially fall under “small accounts” rules. So much for controlling “your” money. Seriously, if the goal is to have more people invested in the stock market, then increase the maximum IRA contribution, maybe loosen 401K requirements. Don’t pretend that a maximum of $1,000 per year, invested in much of anything, is going to provide a decent retirement. Even if you do manage to get 7% a year — which frankly involves a lot of really good luck, skilled investment choices, and no fees whatsoever — we are talking about a PRA nest-egg of less than $200,000 at the end of 40 years. (Note: this figure is from Microsoft Excel’s investment calculator). How long do you expect to live past retirement age? Ten years? More?

And no-one has yet answered the underlying question: If the problem is that Social Security won’t have enough money, how will giving it less money help?

President Bush has said there will be no benefit cuts, and maybe that’s true for the next 4 years. But then again, members of his administration said they knew exactly where Saddam Hussein’s Weapons of Mass Destruction were.

In closing, Fannie Mae Follow Up and Meat Packing Plants Aren’t Just Bad for Livestock.

Must be here somewhere….

They say the devil is in the details, and strangely enough we aren’t getting to see those details.

Florida Governor Jeb Bush is fed up with the rapid increases in state Medicaid expenses. Medicaid, you may recall, is supposed to be a safety net for the health care of Americans near and below the poverty level. The number of Floridians in this system has quadrupled over the last 20 years. The state portion of these expenses have increased 88% since 1998, while tax revenues have only risen 24%. It is not known how much of this increase is due to the Federal government shifting expenses to the states. In which case, Mr. Bush has his esteemed brother to thank.

Having much the same philosophy as his brother, Mr. Bush feels that this problem can be solved by getting private insurance companies involved. Poor people can theoretically choose from a variety of programs, with coverage and limits suiting their individual needs, and the state will pay the insurance company. Policies will pretty much work like any other health insurance policy, paying negotiated rates to doctors and hospitals.

A number of people are wary of this proposal, and for good reason. They fear this will limit the types of services available, since specialized services cost money, and money spent cuts profits. Of course the insurance companies want to make a profit if they are going to get involved in this thing. And certainly providers have a right to make a living from services they provide. From the TBO link above:

Hospitals are wary that the plan may leave them with more unreimbursed costs for indigent care, but representatives at facilities such as Tampa General Hospital said they were reluctant to comment until Bush’s plan is evaluated further.

There’s the problem. Nobody really knows how this program is supposed to work. Nobody knows how it will be paid for. Nobody knows how much it will cost. Nobody even knows if, in the end, it will be a proposal that insurance companies will want to participate in.

I have long felt that health insurance in particular drove up costs. It inserts a profit-driven middleman. It insulates people from insurance costs, and from actual healthcare costs. It drives up the overhead costs of doctors and hospitals. This proposal does nothing to mitigate these concerns. If Mr. Bush really wants to get the free markets involved in healthcare, he should consider giving the poor a stipend with which to pay for healthcare and/or healthcare insurance. They should get to keep what doesn’t get spent — maybe in one of those nifty Health Savings Accounts his brother is so keen on — but once it’s gone, it’s gone.

But since Medicaid is a safety net, that almost certainly will not work either.

In closing, why does American Airlines want to know who you might be visiting, and is it really a secret TSA regulation?

Perspective

Imagine with me.

It is a couple weeks before national elections. Everybody is worried about terrorism, and whether it could disrupt voting. There is widespread violence, and the police are powerless to stop it. Sometimes, they are targets themselves. Military and law enforcement officers are patrolling every major city, heavily armed; they have an “us versus them” philosophy, and do not hesitate to shoot first and ask questions later. News networks are pressured to limit coverage of these events. Things seem to be getting worse.

In an effort to prevent disruptions to the elections, the border has been closed to all entry except those returning from religious pilgrimages. Citizens outside the country who wish to vote are encountering problems with the registration system. Interstate travel has been closed down and car traffic prohibited except for certain government officials and military troops. Waco, Cleveland, Milwaukee, Las Vegas, and Flagstaff are under martial law. In some places, even the location of polling places is secret. Citizens in these cities must wear ID badges at all times, and travel in or out is almost impossible.

Several dozen people have been arrested preemptively. Some argue that they are militants or militant inciters who would have made trouble. Others aren’t so sure. Some point out that we used to consider people innocent until proven guilty, that we used to arrest people for crimes, not thinking about crimes. Since no names are released, it is impossible to know whether the arrests are politically motivated. Odds are good they are not being treated well.

There is much rumbling in the West Coast Blue States about how the United States Government does not represent them, and hasn’t for a long time. A number of people seem to have forgotten that The Governator only played a commando in movies, and seem to believe he can lead armed rebellion. The NAACP and several other large minority groups have called for members to boycott the elections, and there is some question whether certain more militant members might not be violently enforcing this boycott. Meanwhile, in places like Ohio, Florida, Washington, and Chicago, people openly comment that this election will be no different from any in the last 50 years; just because more than one name appears on the ballot does not mean that the candidates chosen by those in power will not win.

Speaking of the candidates, they fear for their lives. Most of them will not even admit in public that they are running. They issue no statements, have no advertising, give no news interviews. A dizzying array of alternative parties confuse the issue further. The citizens who do think there is something to be gained by voting are frustrated, because they can’t find out anything about who is running and what they stand for. If they live to vote, they are reduced to randomly selecting candidates.

The international community is rightly concerned. They question whether it is possible to hold free and fair elections in this environment. They question whether it will even matter.

What would you do?

This didn’t happen in the United States, but it is happening right now in Iraq. The whole situation is a big mess, and only getting bigger by the day.

Security Theatre, Acts 4 and 5

Act Four, Heathrow and Environs

According to CNN, This Is London, and Reuters, a British Airways flight had a little problem. Somehow — and American officials blame BA — a man whose name was on the Do Not Fly list boarded a flight from London to New York City. This was not discovered until the plane was over international waters.

American officials refused to allow the plane to land as scheduled, instead demanding that the plane land at Bangor, Maine. Thus, the situation could be dealt closer to the middle of nowhere than to New York City. Instead, the airline decided to have the plane turn around and land at Heathrow, avoiding international incident.

This turned out to be a very lucky break for the gentleman in question. It turns out that the man merely had a similar name to someone who might be connected to Moroccan terrorists, that he was “not under investigation for carrying out any terrorist act.” In fact, he was questioned by Scotland Yard and then released.

238 passengers were delayed over 6 hours because one guy, who turned out to not be a terrorist.

Air Travel in the United States could be crippled by putting J. Smith on the Do Not Fly list.

Act Five, DHS Headquarters

In Act Four we learned that determining a person’s identity is not the same as determining whether or not they are a threat. This is to say nothing of the mental gymnastics we must use to see the logic in a list of people so dangerous they must not be allowed on an airplane, but yet are so innocent that there is no grounds to arrest them.

This simple logic has no place here at the DHS.

Mere hours ago, Tom Ridge announced enhanced expediting of international visitors through JFK Airport, the very airport that BA jet was to have landed. Here’s how it works: someone who wishes to visit the United States essentially completes a customs check before arriving, then checks out at a JFK kiosk when they arrive. Part of this pre-clearance process involves an iris scan so the kiosk can tell the same person did the interview as actually arrived. Assuming the smart-card on which this data is stored is not damaged going through the scanning equipment. I am not sure what this is supposed to prove.

Mr. Ridge would also like to see fingerprint information on every American passport. His reasoning is that we require it of other countries, so what’s fair is fair. Critics point out that it will be expensive to put that information on the passports, and even more expensive to have the information read. Do you prefer having a forensics expert at every international airport, or an expensive machine reader?

If the expense is not enough to make you blanch, let’s talk about the civil liberties. The Fifth Amendment says you have the right not to incriminate yourself, right? Except now to get a passport they are talking about wanting to have a complete set of fingerprints. We have no assurance that these prints will not be checked against a database of prints from unsolved crimes. “I’ve got nothing to hide” is not a good enough answer. Just because you did not commit a crime is no insurance that you will not be questioned; maybe you happened to touch something in a place where a crime later occurred; maybe you just happened to have a false positive. Which brings me to my final point.

Fingerprint scanners can have a false positive rate of up to 2% and a false negative rate of up to 7% Think about the number of international travelers there are every day. There were 239 people on that BA flight in Act Four; we are talking about having to question as many as 16 of them as the result of a false negative. A Boeing 777-300 seats 550 people. We are talking about potentially having to do an expanded security check for 38 people who are falsely singled out as not matching their own fingerprints. On one flight. Dallas Fort Worth International Airport had 4,429,005 international passengers in 2003. Seven percent of that is over 310,000, about 850 false-negative passengers every single day, 35 every hour.

Strike one, it’s expensive; strike two, it doesn’t work; strike three, it doesn’t actually identify who might be a threat.

Why exactly are we talking about doing this?

News Potpourri

Robert Scheer asks Is Al Qaida Really All That? Or has the reality been distorted to scare us? Are we right now in the midst of a popular delusion?

The United States is not the first nation to consider privatizing a government run stipend program for the elderly. The good news is that we can learn from the mistakes of others. The bad news is such schemes have been a miserable failure in Britain, Argentina, and only moderately successful in Sweden (where the payroll tax is 18%, somewhat higher than here in the States).

Expenses for President Bush’s second inauguration are expected to run $40 Million. This figure apparently does not include $17.3 Million in expenses incurred by the District of Columbia including such items as police overtime and building reviewing stands. So $11.9 Million will have to come out of the District’s Homeland Security Funds. Keep in mind, the whole city has the potential to be a terrorist target, albeit a difficult target. By comparison, the District estimates it spent $8 Million on the last inauguration. Money is tight right now, the Federal Government is running record deficits, and security is so tight it’s cutting off circulation because after all “we’re at war.” Maybe this time, we could do without a big gala with parades and dances, and who knows what else. Let’s consider a nice little swearing-in in the Rose Garden with dignitaries and lots of cameras. That sure would be easier on the guy who is supposed to swear Bush in.

It isn’t exactly front page news, but the search for Weapons of Mass Destruction in Iraq is over without finding much of anything, despite earlier claims. So these American and Coalition soldiers and these Iraqi civilians (maybe more) and these contractors died for a lie. The democracy that we now claim to bringing to the Iraqi people is already a failure. Don’t get me wrong, Saddam was not a good man, but the current situation stinks.

And finally, a message for all the bloggers. I have little sympathy for everyone’s fired over his/her blog story, including the latest one, wherein he refers to his immediate supervisor in less than glowing terms. I offer the same advice for blogs as I give for e-mail: Don’t put anything in writing you wouldn’t want to read out loud to your mother, your boss, or a judge. Following these rules will help you avoid embarrassment, termination, and courtrooms.

Clearly, common sense isn’t common.

Weight Loss Follow-up

Just a short note about two news items that relate to my last missive on weight loss. Today’s big revelation is that calories matter when you are trying to lose weight. Furthermore, exercise is good for you. Even the article concedes that “The advice is not really new.”

The other news is that there seems to be a link between weight and sleep. Specifically, people who sleep less are more likely to be overweight. Without invoking any science whatsoever, there are a couple of common sense reasons this might be so. Perhaps people who are tired are trying to get more energy by eating more food, when what they really need is a nap. This might be conscious or unconscious. The other unscientific but common sense explanation is that most people do not eat while they are asleep.

In any event, adequate sleep, exercise, and moderate quantities of nutritious food are good for human beings. Science confirms it.

But 157,000 Sounds Good

December of 2004 added 157,000 jobs to the American economy, for a 2004 total of 2.2 million jobs, short of the 2.6 million new jobs the Administration predicted for 2004. This is still described as “Another employment report, another month of mediocre job gains.”

It has been a while since I have sung this particular tune, but the song remains the same. It still takes 150,000 new jobs a month to take care of new entries to the workforce. Remember that when the AP says ” With Friday’s report, Bush is close to closing the gap in job creation that has plagued him since taking office in 2001. There are now just 122,000 fewer jobs.” The economy isn’t just short 122,000 jobs, it is short that plus 150,000 jobs for every month of this Administration. That comes to about 7.3 million jobs. The Administration has also revised its estimates of 2005 job creation downward from 3.6 million to 2.2 million. About 1.8 million would be break-even.

The Bush Administration has yet to hit, let alone exceed, a yearly job creation target.

Then why is the unemployment rate so low? Partly because of the way the unemployed are counted. Partly because, as the AP points out in that same article, “Separately, labor force participation is trending down…. The participation rate has declined sharply in the past several years among younger workers, with economists speculating that a weak labor market is causing those people to stay in school, including seeking higher degrees. But the number of people age 55 and older working or looking for employment has risen in the past four years. ”

As if this is not bad enough news, there is anecdotal evidence that there are fewer job listings. In short, fewer jobs to be had. Competition is stiff enough that CNN put out this handy list of job-seeking tips today. Elsewhere, CNN points out that “The average work [week] edged up a tenth of an hour to 33.8 hours last month.” “Average” is still part time, at a level such that most employers do not provide benefits. Still another article today, CNN points out that wage growth is less than inflation, and payroll data suggests that actual wages decreased almost 5% at the small firms that created 2/3 of the new jobs.

So, small firms are hiring, but at lower pay levels. Big firms are continuing to lay off more workers each month. In fact, over one million lay-offs were announced in 2004.

In closing, I join others in asking Where are the insurgents coming up with the materials and know-how to blow up a tank? Granted, the Bradley is not the greatest tank in the world, but it is still a tank. It is not a Hummer with a couple of trash can lids welded to the doors. A Tank.

What the heck is going on here?