Monday, March 22, 2010

ObamaCare in a Nutshell

Now that the 2700+ page Senate version of ObamaCare has passed, I thought a few people would be interested in what is actually inside it. Pelosi, said that after it was passed we could find out what is great about it. I will break it down into three simple problems, and three government solutions in the bill.

Problem #1: Too many people do not have health insurance.
Solution: Make it a law that all people must have health insurance.

Problem #2 was caused by the solution to problem #1

Problem #2: Poor people can't afford to buy health insurance, even if mandated.
Solution: Have the government pay for poor peoples health insurance.

Problem #3 was caused by the solution to problem #2

Problem #3: The US government is broke, and can't pay for poor peoples health insurance.
Solution: Raise taxes on the rich.

In a nutshell this is a massive welfare program where wealth is redistributed from top wage earners to non or low wage earners, and not much else.

Any problems with the above solutions.

Solution #1 is an unconstitutional taking of liberty (a constitutionally guaranteed right), and a violation of the commerce clause as well. Before this Bill, I had the liberty to determine my own medical care. That has now been taken from me. Liberty is a right granted by God, that can't be taken by congress.

Solution #2 is not a solution because the government does not have a surplus to pay for any additional entitlements.

Solution #3 is not a solution because raising tax rates does not raise tax revenues. This has been proven over the last 50 years where Federal tax revenue has been about 19.5% of GDP regardless of tax policy. Raising taxes on the rich does not produce any additional tax revenue unless the GDP goes up as a result. Tax increases in a vacuum lower GDP. This tax increase on the rich will lower GDP and lower overall tax revenue. The Bush tax cuts of 2001 and 2003 raised and did not lower federal tax revenues for example.

What was Obamacare Sold As?

A way to bend the cost curve down.

What does it actually do?

Bend the cost curve up.


Because there is no such thing as a free lunch (see the laws of thermodynamics). There are lots of insurance goodies that sound nice, and sound free, but they are not.

1) Eliminate the lack of pre-existing condition requirements
Raises the amount of money insurers must outlay without any additional premiums. Insurance premiums must go up.

2) Let children stay on their parents policies until 26
Raises the amount of money insurers must outlay without any additional premiums. Insurance premiums must go up.

3) Eliminate the annual coverage limitation.
Raises the amount of money insurers must outlay without any additional premiums. Insurance premiums must go up.

4) Eliminate the lifetime coverage limitation.
Raises the amount of money insurers must outlay without any additional premiums. Insurance premiums must go up.

5) Vision, Dental, and Well Baby Care now must be covered.
Raises the amount of money insurers must outlay without any additional premiums. Insurance premiums must go up.

6) 10 billion per year in new taxes on insurance companies.
Raises the amount of money insurers must outlay without any additional premiums. Insurance premiums must go up.

Insurance companies typically pay out 70% of premiums in claims. Assuming this rate will continue until 2014 when ObamaCare starts to fully take effect, each of these early changes will raise insurance premium costs. Otherwise, all of the insurance companies will simply go out of business. Would you continue to operate a business whose costs keep going up, but could not raise prices? Individual policies will be hit the hardest, because pre-exisitng are almost never allowed in individual policies. Ultimately, insurance premiums will go up across the board as the goodies listed above become law. Insurance companies are not evil, they just want to earn a fair profit. If they are earning abnormally large profits, the free market system would incentivize new entrant into the industry which would lower prices. The fact that the health insurance industry appears to be not operating as a free market, is 100% the fault of government over regulation. In this case the government is both the cause of the existing problem and the proposed solution with ObamaCare.

What about getting people covered by insurance? When does that happen?

That does not happen until after 2014. The travesty of this steaming pile of crap bill, is that as urgent as Obama made the problem seem, the Bill is written to do nothing about the problem for 4 more years. When Obama signs it into law this week, he will be assuring that nothing will fixed or reformed in health care until he is long out of office, and the bill is likely repealed. Nice work chief.

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Thursday, March 18, 2010

iPad Pants

Lately I have been shopping for iPad pants. I need to be prepared for when the Ipad with 3G is released, and iPad style pants are tougher to find than you would think. Alright blinders, WTF are you talking about? What are Ipad pants? iPad pants are pants that have large cargo pockets below the normal pants pockets. Large enough to slip your 10 inch iPad into so you can bring it anywhere you would have brought your iphone. Most of my shorts already have these pockets in them, and I have some casual pants that do as well. What I have been shopping for is more dress type pants that I could wear to my daytime job, so that lugging around my iPad at work would be less of an issue. If you are like me, you work for a company that restricts Internet access at work in some way. Before I could pull out my iPhone if a certain site was blocked. That still works, but it is just slower, and less convenient to surf on the much smaller screen of an iPhone. I guess you could lug a personal laptop to work with a 3G connect card, to bypass the Internet security, but that is pretty blatant. What if you boss asks why you are using your personal laptop at work, when you work PC is right there. Better have a good reason ready. The iPad is a great solution for this, and thats why you got to get iPad pants. So much more under the radar than a laptop in hand, but serves the same purpose. I plan on using the calendar feature to replace my Franklin planner, so I will already have a reason to bring the iPad to meetings. If the meetings get a bit boring, I can always fire up Safari for some unrestricted surfing.

I am pretty excited about the new iPad. The above reason is just one example of a powerful use for it. For promoting the iPhone was a descent tool, but the iPad is perfect. Now when we are out at events and talking up the site, we can just hand someone the iPad, and show them the site, and get them to sign-up. That works ok with the iphone, but there is too much pinching, scrolling and zooming. The ipad presents the full webpage in viewable form without zooming. The iPad is going to be HUGE for FSL.

Most of the people who think the iPad will flop, simply do not understand the superior form factor. Lets face facts, laptops were not designed to be easy to use. They are designed to be portable. Would you really hinge the keyboard to the monitor, and use some crappy pointing pad, if you were designing it for usability? If you want to sit at a desk and do work a laptop is OK, but still awkward. But this is a portable device. Why is it designed to work on a desk, where you already have a much better desktop solution? Apple did what they do, and thought outside of the box. What if I wanted to surf the Internet from the comfort of a couch, or while standing in line at the DMV? Here a laptop simply fails, and the iPad shines. While standing you can hold the iPad with one hand and operate it easily with the other. Try that one with a laptop while standing. While sitting on the couch the same is true with an iPad. With a laptop, you have to balance it on your knees, and extend it away from you so you can type. Sure a laptop can have a bigger monitor, but you cant really use it very close to your face. The 10 monitor is not a negative at all. It will actually work better than a laptop monitor, because the orientation can be flipped.

Apple stock has been running up in anticipation. Pretty much a no brainer. Apple has already developed this device, and it looks like they will pre-sell a million or so before launch. The development expense has already been paid for, so all of these sales drop straight to the bottom line. Apple can also book 100% of the revenue at delivery, because there is no cell phone contract required. It really took someone like apple to get a tablet out that could suceed and this one is it!

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Monday, March 08, 2010

The Difference Between Tax Cuts and Tax Credits

There is a pretty huge difference between tax cuts and tax credits. They are not interchangeable terms. For example the 900+ billion dollar stimulus plan did not contain any tax cuts in it. Obama and the media over and over talk about "tax cuts" in the stimulus plan, when there were none (they know the difference BTW). Repeating the lie over and over again does not make it true. So what is the difference? Tax cuts apply to everyone equally, and the tax is never collected. They simply starve the government of some revenue. Tax credits are more like legislating (spending) through the tax code. You pay your normal tax like everyone else, but then you get a credit back from the Treasury for fitting into some special class that the government wants to spend money to incentivize. For example if you offered a 10k tax credit for installing solar panels on your roof, you pay your normal taxes like everyone else, but then you get paid back out of the treasury pool the 10k. The government has just redistributed 10k from everyone else to you, because you did something they wanted you to do. Lets say this program costs 1 billion per year, you could also do a tax cut to the lowest marginal rate that would cost the same amount instead. As a result every tax payer would be able to keep their money instead of paying for a handful of solar panel installations. If everyone got to keep there money instead, they would spend it more efficiently and for things that they actually want and need, instead of what the government wants.

Recessions have ended before with tax cuts. They have never been ended before with tax credits. Of the three recent large recessions, two were ended via across the board tax cuts, and one was ended via fiscal policy alone before tax cuts were required. The Carter/Reagan recession was ended via tax cuts. This is not disputed by anyone. The 2001 Tech-bubble/9-11 recession was ended via tax cuts. You may not like the Bush tax cuts, but they did end the recession. If anything they worked too well. The Fed needed to slow things down after the economy was on fire shortly after the Bush tax cuts, but never did and hence the housing bubble. The across the board nature of both the Reagan and Bush tax cuts are designed to incentivize anyone who works for a living and pays taxes. The more you make the more your incentive for these types of tax cuts. These types of cuts work, because they incentivize hard work, and the money goes directly and immediately (through lower payroll deduction) to the workers who can spend it in the most efficient way for their individual needs.

Now lets contrast that with some of the main tax credit in the stimulus plan. I think it is called the make work pay tax credit or something like that. It is a tax credit of up to $400 for individuals and $800 for couples. The credit phases out at 75k/150k and is completely gone at 90k/190k. You can get the credit even if you did not pay any taxes as you can be eligible from your social security/medicare withholdings. So if you are not paying any taxes this is obviously not a tax cut in anyway, and simply a welfare plan. Besides that point, the government is incentivize you to not make more than 75k, and there is no incentive at all to make more than 90k. The amount of the credit is also way too small to have any meaningful impact on the economy. If the entire stimulus plan amount would have gone to an across the board tax cut the recession would be over now. So there is no incentive to work extra hard and be a top earner in the United States. If you make 95k a year, there is some incentive to work less hard, or less hours and fall below the credit cut-off amount.

Next up is the continued extension of Unemployment Benefits. This is not a tax credit or tax cut, but pure welfare. I really do not have a problem with an extension beyond the normal 26 weeks in very difficult times like now, but it has to be a one-time extension only. After you are 9 months unemployed you need to find a way to fend for yourself. I was on unemployment once many, many years ago, and I never bothered to look for a job. When they extended the benefits, again I did not look. When my benefits ran out, I went out and got a job. Extending benefits does not help the situation, because it incentivizes people to not get a job. People need to be doing something productive, anything productive, to help society. Unemployment insurance for 9 months is plenty. After 6 months start figuring out how you will survive without the governments help. You would be surprised what can and will happen when individuals are pushed to the edge. New home businesses spring up to fill a niche. A down economy can be a great time to start a business because rents and salaries are down.

The fact the Obama is refusing to do what historically works to end deep recessions, and that is specifically across the board tax cuts, is keeping the economy from recovering. I guess you can start to argue that Obama is ideologically opposed to an end to the recession. This is what is leading us towards depression.

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