Tidbits Quotations on November 18, 2010
To Accompany the November 18, 2010 edition of Tidbits
http://www.trinity.edu/rjensen/tidbits/2010/tidbits111810.htm      
Bob Jensen at Trinity University

 

Deficit tops $1 trillion second year in a row ($1.29 trillion before November and December) ---
http://money.cnn.com/2010/10/15/news/economy/treasury_fy2010_deficit/index.htm

Long-term problem:
There has been a lot of political hysteria expressed over the annual deficits of the past two years.

Fiscal experts note, however, that the abnormally large deficits incurred in the wake of the financial crisis are not the primary source of the country's biggest fiscal problems.

The biggest source of fiscal concern remains the so-called structural deficit, which is made up primarily of spending on the big three entitlement programs. That structural deficit will continue to balloon faster than the economy grows long after the current downturn has ended.

Indeed, the Government Accountability Office projects that by the end of this decade, the vast majority of all federal tax revenue will be swallowed up by just four things: Interest payments on the country's debt, and the payment of Medicare, Medicaid and Social Security benefits.

The president's bipartisan fiscal commission, charged with recommending ways to get U.S. debt under control, will issue a report in December.

Also see http://twitter.com/nationaldebt

The Rising Burden of Government Debt [Flash Player] --- http://www.brookings.edu/articles/2010/1101_government_debt_prasad.aspx

This is not a forwarded politically-biased message since David Walker is leading a very bipartisan effort to save the United States from economic disaster. Former Andersen Partner David Walker was appointed U.S. Comptroller General by President Bill Clinton and retained in the same position under President Bush ---
http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)

In his government position David Walker became staggered by the pending economic doom of the United States.

At the American Accounting Association 2010 annual meetings in San Francisco in August, David Walker will be the only person inducted this year into the Accounting Hall of Fame. Since leaving government service, David became the CEO of the Peterson Foundation that is trying to aid our government in saving the United States from entitlements bankruptcy. (By the way, as I read it, the Peterson Foundation supported the latest health care legislation that, in theory, will reduce deficit spending, although I personally think it should’ve been a full-fledged national health plan).

President Obama has appointed a joint task force to find ways of preventing total economic disaster of the United States that exists not so much because of current trillion dollar deficits as the threat of unfunded future entitlements obligations, with Medicare being the biggest unfunded entitlement as baby boomers retire.

Before viewing the Town Hall video, you might want to view the following earlier video:

You can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).  

 This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.



The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.

 

Video

Watch National Town Meetings
http://www.pgpf.org/

 

Video on IOUSA Bipartisan Solutions to Saving the USA

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).
This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.

 

I thought the show was pretty balanced from a bipartisan standpoint and from the standpoint of possible solutions.

Many of the possible “solutions” are really too small to really make a dent in the problem. For example, medical costs can be reduced by one of my favorite solutions of limiting (like they do in Texas) punitive damage recoveries in malpractice lawsuits. However, the cost savings are a mere drop in the bucket. Another drop in the bucket will be the achievable increased savings from decreasing medical and disability-claim frauds. These are important solutions, but they are not solutions that will save the USA.

The big possible solutions to save the USA are as follows (you and I won’t particularly like these solutions):

 

 Peter G. Peterson Website on Deficit/Debt Solutions ---
http://www.pgpf.org/

Watch for the other possible solutions in the 30-minute summary video ---
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/
(Scroll Down a bit)

  

Here is the original (and somewhat dated video that does not delve into solutions very much)
IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com )

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

Watch the World Premiere of I.O.U.S.A.: Solutions on CNN
Saturday, April 10, 1:00-3:00 p.m. EST or Sunday, April 11, 3:00-5:00 p.m. EST

Featured Panelists Include:

  • Peter G. Peterson, Founder and Chairman, Peter G. Peterson Foundation
  • David Walker, President & CEO, Peter G. Peterson Foundation
  • Sen. Bill Bradley
  • Maya MacGuineas, President of the Committee for a Responsible Federal Budget
  • Amy Holmes, political contributor for CNN
  • Joe Johns, CNN Congressional Correspondent
  • Diane Lim Rodgers, Chief Economist, Concord Coalition
  • Jeanne Sahadi, senior writer and columnist for CNNMoney.com

Watch for the other possible solutions in the 30-minute summary video ---
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/
(Scroll Down a bit)

 

CBS Sixty minutes has a great video on the enormous cost of keeping dying people artificially alive:
High Cost of Dying --- http://www.cbsnews.com/video/watch/?id=5737437n&tag=mncol;lst;3
(wait for the commercials to play out)

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

"The Looming Entitlement Fiscal Burden," by Gary Becker, The Becker-Posner Blog, April 11, 2010 ---
http://uchicagolaw.typepad.com/beckerposner/2010/04/the-looming-entitlement-fiscal-burdenbecker.html

"The Entitlement Quandary," by Richard Posner, The Becker-Posner Blog, April 11, 2010 ---
http://uchicagolaw.typepad.com/beckerposner/2010/04/the-entitlement-quandaryposner.html

David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)

Harvard Professor Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson

Harvard Profession Video:   Niall Ferguson: Empires on the Edge of Chaos ---
http://fora.tv/2010/07/28/Niall_Ferguson_Empires_on_the_Edge_of_Chaos

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.

. . .

In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.

. . .

Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.

Continued in article --- http://www.newsweek.com/id/224694/page/1

 

Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of The Ascent of Money. In late 2009 he puts forth an unbooked discounted present value liability of $104 trillion for Social Security plus Medicare. In late 2008, the former Chief Accountant of the United States Government, placed this estimate at$43 trillion. We can hardly attribute the $104-$43=$61 trillion difference to President Obama's first year in office. We must accordingly attribute the $61 trillion to margin of error and most economists would probably put a present value of unbooked (off-balance-sheet) present value of Social Security and Medicare debt to be somewhere between $43 trillion and $107 trillion To this we must add other unbooked present value of entitlement debt estimates which range from $13 trillion to $40 trillion. If Obamacare passes it will add untold trillions to trillions more because our legislators are not looking at entitlements beyond 2019.

 

The Meaning of "Unbooked" versus "Booked" National Debt
By "unbooked" we mean that the debt is not included in the current "booked" National Debt of $12 trillion. The booked debt is debt of the United States for which interest is now being paid daily at slightly under a million dollars a minute. Cash must be raised daily for interest payments. Cash is raised from taxes, borrowing, and/or (shudder) the current Fed approach to simply printing money. Interest is not yet being paid on the unbooked debt for which retirement and medical bills have not yet arrived in Washington DC for payment. The unbooked debt is by far the most frightening because our leaders keep adding to this debt without realizing how it may bring down the entire American Dream to say nothing of reducing the U.S. Military to almost nothing.


Niall Ferguson,
"An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1

This matters more for a superpower than for a small Atlantic island for one very simple reason. As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon's present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028.

Over the longer run, to my own estimated departure date of 2039, spending on health care rises from 16 percent to 33 percent of GDP (some of the money presumably is going to keep me from expiring even sooner). But spending on everything other than health, Social Security, and interest payments drops from 12 percent to 8.4 percent.

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America's debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president's first term should be the administration's most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn't come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.

 




I haven't left my house in days. I watch the news channels incessantly. All the news stories are about the election; all the commercials are for Viagra and Cialis. Election, erection, election, erection -- either way we're getting screwed!
Bette Midler

Blessed are the young, for they shall inherit the national debt.
Herbert Hoover --- http://www.brainyquote.com/quotes/quotes/h/herberthoo110353.html

I think political correctness can lead to some kind of paralysis where you don't address reality.
Juan William before he was fired after a distinguished career on NPR.
http://townhall.com/columnists/GuyBenson/2010/10/21/npr_finally_finds_an_excuse_to_fire_juan_williams


Landesman wasn't being asked specifically about negative feelings over the Loveland Museum Gallery in Loveland, Colo., a taxpayer-funded art space that recently featured a controversial painting with Jesus Christ receiving oral sex from a man. He's certainly not used to critical questions about just how this blasphemy-by-numbers seems like a tiresome rerun -- Jesus in urine, Jesus in chocolate, Jesus in (homo)sexual ecstasy.
Brent Boswell, Shock and Awful Art, Townhall, October 22, 2010 ---
http://townhall.com/columnists/BrentBozell/2010/10/22/shock_and_awful_art
Rocco Landesman is the chairman of the National Endowment for the Arts
Landesman does not have the guts to display a similar offensive picture of Allah


Preliminary draft of President Obama's long-awaited bipartisan National Commission on Fiscal Responsibility and Reform report

Jensen Comment
A very preliminary draft of President Obama's long-awaited bipartisan National Commission on Fiscal Responsibility and Reform report was released as a Co-Chairs' Proposal on November 10, 2010
Very Brief Summary --- http://pnhp.org/blog/2010/11/10/deficit-commission-co-chairs-proposal/
Huffington Post Slide Show --- http://big.assets.huffingtonpost.com/CoChairDraft.pdf
Full Report --- http://www.fiscalcommission.gov/news/cochairs-proposal

It's probably a time when accounting professors and students should have more scholarly debates on comprehensive tax reform alternatives. Such debates should be civil and as well-informed as possible. Tax reforms could possibly have an enormous impact on the accounting profession in terms of tax services, course content, employment alternatives for graduates, software development, AIS content, and scholarly research reported in accounting and tax journals.

 

Initial Reactions on the Left ---
"Deficit panel leaders propose curbs on Social Security, major cuts in spending, tax breaks," The Washington Post, November 11, 2010 ---
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/10/AR2010111004029.html
Initial Reactions on the Right ---
"A Deficit of Nerve," The Wall Street Journal, November 11, 2010 ---
http://online.wsj.com/article/SB10001424052748703848204575608610971091280.html?mod=djemEditorialPage_t

Jensen Opinion
The conservative right always has knee jerking opposition to increased taxes and new taxes of any kind. The liberal media objects to increasing burdens on the middle income class and labor. Nancy Pelosi has already commenced all out war against the deficit commission's preliminary recommendations. Democrats, Republicans, and everybody else agree that the incomprehensible tax system of the United States needs to be drastically reformed but Congress probably will never agree to drastic reforms. Trying for comprehensive tax reforms will be an absolute political dogfight.

Personally, I lean toward eliminating the corporate income tax entirely and replacing the personal income tax code with a flat tax. But in order to keep the flat tax rate relatively low, I support introducing a Value Added Tax (VAT) sales tax that is now common in other parts of the world, especially in Europe. Businesses in the U.S. will fight a VAT tax tooth and nail, and the VAT tax will seriously increase prices of consumer and industrial goods. But serious deficit reductions cannot be financed without pain and sacrifice in all economic sectors These are my personal thoughts and are not all included in the Co-Chair's Report..

More importantly, the VAT tax should be the primary tax that is used to gradually put Social Security, Medicare, Medicaid, and the new "Affordable" Health Care law on a pay-as-you-go basis that no longer will keep piling on to deficits and unfunded entitlements. These are my personal thoughts and are not all included in the Co-Chair's Report..

But the most important thing to do immediately is to extend the retirement age to current average life expectancy averaged across race and gender categories. Persons that elect early retirement should take a heavy hit in benefits and not be eligible for Medicare before reaching the established retirement age.

Of course any increases in taxes will probably slow economic growth. But the insanity of simply printing money (read that buying back Treasury notes by the Fed) and borrowing that increases deficit by well over a trillion each year will eventually destroy the the economy and standard of living of the entire United States ---
http://www.trinity.edu/rjensen/entitlements.htm

From the Left
"Deficit panel leaders propose curbs on Social Security, major cuts in spending, tax breaks," The Washington Post, November 11, 2010 ---
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/10/AR2010111004029.html

The chairmen of President Obama's bipartisan deficit commission on Wednesday offered an aggressive plan to rebalance the federal budget by curbing increases in Social Security benefits, slashing spending at the Pentagon and other agencies, and wiping out more than $100 billion a year in popular tax breaks for individuals and businesses.

The blueprint drafted by former Clinton White House chief of staff Erskine Bowles and former senator Alan K. Simpson (R-Wyo.) would slice more than $3.8 trillion from deficits over the next decade, reversing a rapid run-up in the national debt that many fear has the country headed for crisis.

To meet that goal, Bowles and Simpson are proposing to slay a herd of sacred cows, including the tax deduction for mortgage interest claimed by many homeowners, the tax-free treatment of employer-provided health insurance and the practice of letting retirees claim Social Security benefits starting at age 62. The blueprint would raise the early retirement age to 64 and the standard retirement age to 69 for today's toddlers.

During a briefing for reporters, Bowles and Simpson stressed that the plan is theirs alone and acknowledged that it is unlikely to win support from a majority of the commission's 18 members, many of whom seemed startled Wednesday by its breadth and scope. Bowles called it "a starting point" as the panel attempts to forge an agreement by Dec. 1.

Obama, speaking Thursday at a news conference in Seoul where he is attending the G-20 conference, cautioned that "before anybody starts shooting down proposals, I think we need to listen, we need to gather up all the facts."

"If people are, in fact, concerned about spending, debt, deficits and the future of our country, then they're going to need to be armed with the information about the kinds of choices that are going to be involved, and we can't just engage in political rhetoric," the president said.

"I set up this commission precisely because I'm prepared to make some tough decisions," Obama said, adding that "I'm going to need Congress to work with me."

Balanced-budget advocates praised the seriousness of the effort, saying it has the potential to reframe the debate over taxes and spending that dominated this month's congressional elections, regardless of how many commission members ultimately support it.

"A White House commission has put out a credible plan to eliminate the deficit and debt. This has changed the rules of the game and, for the first time, things are serious," said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, who hailed the blueprint as "a breakthrough."

"After this," she said, "the debate simply cannot go back to silly games where people pretend that eliminating earmarks will solve the problem."

Still, the reaction was harsh in some quarters, particularly among liberals who have vowed to protect retirees from any reduction in benefits. House Speaker Nancy Pelosi (D-Calif.) called the plan "simply unacceptable."

Speaker-in-waiting John A. Boehner (R-Ohio) declined to comment, saying he would discuss the plan with his three representatives on the panel. But Republican anti-tax activist Grover Norquist was not happy and warned that Republicans who support the proposal would be breaking their pledge not to raise taxes.

Continued in article

Jensen Comment
Many far more hostile reactions are pouring forth to support Pelosi's resistance plan. It's unlikely that a sharply divided House versus Senate over the next two years will accomplish a single recommendation in the deficit commission's preliminary report.  Much depends on reducing the Congressional divide in the 2012 election, and at this point we don't know whether the 2013 Congress will be sipping on tea or vodka.

From the Right
"A Deficit of Nerve," The Wall Street Journal, November 11, 2010 ---
http://online.wsj.com/article/SB10001424052748703848204575608610971091280.html?mod=djemEditorialPage_t

We've been expecting to dislike the report of President Obama's deficit commission, so count us as pleasantly surprised by the draft outline released on Wednesday by its two chairmen. There's plenty to oppose but also something for the next Congress to build on, not least the plea for a more efficient, competitive tax code.

Neither Democrat Erskine Bowles nor Republican Alan Simpson are trusted by their respective parties these days, so the duo seem to have decided to roil everybody. Fair enough. Even if their proposals fail to gain the 14 commission votes out of 18 needed for a consensus judgment by December 1, they've at least shown that restraining the federal Leviathan is possible.

Before we pound the details, it's important to understand why we have had deficits of 10% and 8.9% of GDP for the past two years, with another 10% or so anticipated in fiscal 2011. The most important reason is the burst of spending from the 111th Congress that has taken federal outlays as a share of GDP to 25% in 2009, 23.8% in 2010 and back to an estimated 25% in 2011. This is unheard of in the modern era, when the average has been under 21%.

The second reason is a revenue shortfall due to the recession and feeble economic recovery. Revenues have averaged about 18.5% of GDP in recent decades, but in 2009 and 2010 they were only 14.9% with little improvement expected this fiscal year. The single least painful way to reduce the deficit is to get the economy growing at a healthy pace again, which would cut the deficit by 3.5% of GDP a year without a dime of spending cuts.

This is where the chairmen's draft is both wrong and useful. Its mistake is proposing new taxes—notably on Social Security payroll taxes—that it claims would raise revenues as a share of GDP to no more than 21%. But this is an accountant's-eye view of taxation. The conceit is that Washington can raise taxes and, voila, revenue will follow on demand. But revenue will only follow if the economy grows, and higher taxes will restrain growth to some extent, depending on the timing and incidence of the tax increases.

The chairmen are on better ground arguing for fundamental tax reform that would swap lower rates for fewer loopholes and "tax expenditures." On the latter, the draft is right to put the mortgage interest deduction on the table, as taboo as that is in Washington. If we've learned anything from the last decade, it ought to be that our many housing subsidies have led to a misallocation of capital with few benefits. Canada has no such deduction but a higher rate of home ownership.

Ditto for the employer deduction for health insurance, which costs some $200 billion a year and has also distorted incentives by creating a system of third-party payments. Individuals who bear little responsibility for their health-care expenses have little incentive to reduce costs, much less lead a healthier life-style that would save money over time. Refocusing this tax benefit on the needy while encouraging wealthier consumers to economize would help health markets and the federal budget.

The chairmen also take aim at the corporate tax rate, proposing in one option a reduction to 26%. Everyone to the right of MoveOn.org knows that the 35% corporate tax rate is a disincentive to invest in America and has sent businesses pleading to Congress for this or that loophole. This is the second Obama-appointed outfit to recommend a cut in the corporate tax rate, following Paul Volcker's economic advisory group this year, and it ought to be one basis for bipartisan agreement.

The draft also proposes spending cuts, albeit far too timidly. Its discretionary spending proposals would take outlays down only to 2010 levels, though Republicans have already promised to take them back to 2008. We wonder if this is a bow to Democrats who think that spending at 25% of GDP should be the new normal.

More egregiously, the chairmen tiptoe around ObamaCare, which has led some on the right and left to claim that the commission is essentially endorsing the largest new entitlement in 40 years. We're told the chairmen mostly dodged the subject because Democrats on the commission made that a nonnegotiable demand. A truly bold report would consider Congressman Paul Ryan's model to make Medicare a defined contribution program. Instead, the chairmen settle for the familiar likes of "payment reforms," which never work because of Medicare's flawed political price-control model.

Medicaid also gets a near total pass, probably because ObamaCare is expanding that program more than at any time since its inception in 1965. Worse, the federal Medicaid formula rewards states for spending more. If the commission's goal is to spur debate, it ought to propose making Medicaid an annual block grant that would force state politicians to better manage what is often the biggest expense line in their budgets. The status quo will lead to huge state tax increases over the next two decades.

The chairmen are braver on Social Security, though again not brave enough. They propose to raise the retirement age for receiving full benefits to 68 from 67 by—brace yourself—2050, and 69 by 2075. For context, consider that the average American woman born today will live to be 80.

The draft also suggests a payroll tax increase, in particular on upper-middle-class earners, even as it proposes to cut their benefits to a greater extent than lower earners. Republicans should rule out a tax increase, while accepting that some benefit cuts on the basis of need will be required.

Mr. Obama conceived the deficit commission as a form of political cover for his spending blowout—and to coax Republicans into a tax increase. So it's notable that Democrats and liberals have been more critical of the chairmen's draft than have Republicans. Having put the U.S. in a fiscal hole, Nancy Pelosi's minority wants to oppose all spending cuts or entitlement reform to climb out.

House Republicans should react accordingly, which means taking what they like from the commission report and making it part of their own budget proposals. If Senate Democrats and Mr. Obama want to regain any fiscal credibility, they'll be willing to listen and talk. If not, the voters will certainly have a choice in 2012.

Jensen Comment
Meanwhile the United States will continue to both print more money supported by neither taxes nor borrowing plus continued to borrow over a trillion dollars each year to finance the cash flow deficit differences between what the government takes in in revenue and what the government pays out. At this point voters are simply numb to the difference between a billion dollars and a trillion dollars, but in terms of economic survival the difference is crucial.


"Worry Over Trade Deficits," by Walter E. Williams, November 12, 2010 ---
http://townhall.com/columnists/WalterEWilliams/2010/11/10/worry_over_trade_deficits

At the recent Group of 20 (G 20) meeting, U.S. Treasury Secretary Timothy F. Geithner called upon the largest industrialized economies to get their current account balance -- whether a surplus or a deficit -- below 4 percent of their gross domestic product by 2015. Four countries have current account surpluses exceeding 4 percent: Saudi Arabia (6.7 percent), Germany (6.1 percent), China (4.7 percent) and Russia (4.7 percent.) Countries like Russia and Saudi Arabia that are "structurally large exporters of raw materials" would be exempt from the 4 percent limit, so the pressure of the U.S. proposal falls mainly on China and Germany. Our annual trade deficit of $500 billion is less than 4 percent of our GDP.

Acting on behalf of various interest groups, politicians fret over trade deficits but is it something that ordinary Americans ought to worry about? What politicians and inept people in the news media, whose duty is to inform, never bring up is that in the international trade arena, there are two accounts. One is called the current account, which consists of goods and services exchanged between Americans and foreigners. That's the account where we have a large trade deficit. Americans buy more goods and services from foreigners than they buy from us.

There's another account called the capital account. It consists of foreign direct investment in the U.S. such as the purchase or construction of machinery, buildings or even whole manufacturing plants plus foreign purchases of stocks, bonds and currencies. For example, Toyota might sell me a Lexus, manufactured in Tahara, Japan for $70,000 but not purchase any American goods such as wheat, cotton or steel. That means there is a $70,000 trade deficit with the Japanese. What will the Toyota seller do with the $70,000? It would be wonderful if Toyota and other foreign producers just treasured dollars and simply stored them. We'd be on easy street having a few Americans printing up dollars whilst the rest of the world sends us cars, computers, coffee and other goods in exchange for them.

It doesn't work out that way. In our example, instead of purchasing American goods with the $70,000, Toyota might put the money toward building a Toyota plant, as it has already done, in Huntsville, Ala., that employs nearly 800 Americans. As a result of that current account deficit of $70,000, we have a capital account surplus (net inflow of capital into the U.S.) of $70,000.

Continued in article


"An Undeserved Win for the GOP Conventional wisdom says the president was too liberal and tried to do too much. Nonsense," by KATRINA VANDEN HEUVEL, The Wall Street Journal, November 5, 2010 ---
http://online.wsj.com/article/SB10001424052748703506904575592900976030696.html#mod=djemEditorialPage_t

This was an unearned win for the Republican Party. The election was fundamentally about one thing—the rotten economy—and Democrats paid the price as voters expressed their discontent. Conservatives in both parties who claim the vote represented an ideological shift to the right are plain wrong.

The quickly congealing conventional wisdom is that President Obama tried to do too much and was too liberal. The opposite is true: Voters were alienated because they didn't believe his team had fought aggressively enough for the interests of working- and middle-class citizens.

For 30 years, these Americans have seen their incomes stagnate as the top 1% accrued a staggering percentage of the nation's wealth. By rescuing the big banks and failing to place demands on them, the White House economic team, led by Larry Summers and Tim Geithner, ceded populist energy to the tea party. The inadequacy of the recovery program—largely a result of concessions to the GOP—became a political catastrophe for the White House.

In the face of this anemic economy, the president failed to convince voters he was on a consistent course that would turn things around. Furthermore, the absence of a clear explanation about how conservative policies have failed in the past and will continue to fail allowed a right-wing narrative of empty slogans to gain traction. Mr. Obama abandoned his smart argument about building a new foundation for the economy, embracing deficit reduction instead. This only left voters confused about the White House's recovery plan.

Going forward, Mr. Obama would be wise to lay out a bold plan to create jobs. He should take the advice of the more than 300 economists, including former Clinton labor secretary Robert Reich, who have urged his administration not to undercut the recovery by focusing prematurely on deficit reduction. Joining Republicans' embrace of Social Security cuts and austerity makes for bad policy and bad politics. Instead, Mr. Obama and Democrats should promote sensible investments, particularly in vital infrastructure like roads and rail, as well as green energy initiatives.

If, as University of Massachusetts economist Robert Pollin and others argue, the single most important reason for the failure of economic recovery is that private credit markets are locked up, especially for small businesses, then the federal government could help by expanding existing federal loan guarantees by $300 billion. Meanwhile, excess cash reserves held by banks—now estimated at an unprecedented $1.1 trillion in Federal Reserve accounts—should be taxed an initial 1%-2%. Mr. Pollin estimates that this combination could generate about three million new jobs if it succeeds in pumping about $300 billion into productive investments. This plan should get bipartisan support.

As the president made clear in his press conference Wednesday, he remains committed to a politics of "civility and common ground." Common ground is fine, so long as it makes the government more responsive to the needs of the majority of Americans. This means investments in people and deteriorating infrastructure; ending a wasteful and futile war in Afghanistan; and enacting ethics and campaign finance reform that levels the playing field so ordinary Americans' voices aren't drowned out by covert political money. If this sensible agenda is met with Republican obstruction, as is likely, Mr. Obama should channel Harry Truman and come out fighting against a know-nothing, do-nothing GOP.

Common ground and common sense also demand that the president listen to and remobilize the base that is the heart of his party. An empowered Democratic electorate—the young, Latinos, African-Americans, single women, union folks—will be an effective counterweight to the assaults of the GOP and its corporate funders.

The Republicans have won control of the House, but they do not have a mandate to dismantle government. According to many polls, majorities across party lines want government to work. They aren't interested in rolling back decades of social and economic progress, abolishing the Education Department and the minimum wage, or privatizing Social Security and Medicare—issues that many tea party candidates touted.

More than 20 million Americans are out of work or underemployed. These people are interested in real solutions. They will not find them with a GOP committed to slashing billions from key domestic programs even as they make tax cuts for the rich permanent.

All of this presents an opportunity for Mr. Obama to show he stands with working people and the middle class. This not a time to retreat. This is a time for the politics of conviction that Mr. Obama has said so many times he believes in.

Jensen Comment
What Katrina fails to explain is why the voters thought the GOP and the tea party voters think the "do nothing" GOP can do a better job managing the economy and restoring jobs and careers. Let's face it! All voters who are not progressives are just ignorant for being so afraid of deficits, increases in the cost of health care insurance, decline in health care quality, and social entitlements. Why don't the dummies worship supremely intellectual progressive magazines like The Nation magazine?

Progressives are seeing only what they want to see in the election outcomes.
How could voters be so smart in 2008 and dumb in 2010?

Why are so many more stupid retired voters conservative relative to millions of unemployed younger smart progressives who will be footing the bill for the fruit us retired folks are currently plucking from Social Security and Medicare?

Yeah! Conservatives didn't deserve to win this one, but Katrina thinks they never deserve to win anywhere and anytime.

Progressives shouldn't worry about the forthcoming 2012 election. By then the GOP will be so split that what happened in Alaska in 2010 will happen in the other 49 states in 2012. All Democrats have to do is keep the focus on abortion, stem cells, evolution, farm subsidies, protectionism, and earmarks that increasingly divide the GOP. The tactic for the Democratic Party should be to encourage voters to switch parties and then work for nominating more hopeless GOP candidates like Sharon Angle, Joe Miller, and Christine O'Donnell. Religious fanatics are tremendous choices a GOP downfall.


"Iowa's Total Recall Voters give activist judges the boot. Lawyers are shocked," The Wall Street Journal, August 6, 2010 ---
http://online.wsj.com/article/SB10001424052748704353504575596441490066762.html


"Can a Republican House Stop Farm Subsidy Nonsense? Yeah Right," Jr. Deputy Accountant, November 7, 2010 --- Click Here

Listen, I am all for farmers getting a piece if it means they can keep bringing me ice cold milk, cheese curds and corn. I don't want fucking corn in my gasoline, I'm talking corn on my plate. I don't think people who own farm land should be given free money just because someone once grew something there. But more notoriously anti-big-government Republicans in DC isn't going to do much to solve the problem of ethanol subsidies as many of them would have pissed off constituents to deal with if their people didn't get a cut. When oh when will we learn? The Republicans only dislike free money for other people's people, their own seem strangely immune to this belief that the dole should not be passed around. Fire up the corn!

The Renewable Fuels Association (or generalize and say "the biofuel lobby") doesn't seem very afraid of the idea of losing any precious federal farmer bribe cash with the Republicans finally back in town and they really shouldn't be. As we all know, just because they aren't Democrats doesn't mean they won't be giving away their fair share of protection money, be it cornfield or infrastructure. It's all the same and you can't tell me Chuck Grassley is over in Iowa turning down free money for his Iowa people.

See also Stephen Moore via Cato:

 
Rep. Bill Archer, R-Tex., is a heroic politician. He is heroic not just because he has constructed a commendable tax cut bill, despite the tight budget constraints that Bill Clinton and Republican leaders forced upon him. He is also heroic for his courage in taking on a foe that has intimidated most of his Capitol Hill colleagues: Washington’s parasitic ethanol lobby.

Ethanol is a corn-based gasoline substitute. Gasoline is a creation of the marketplace, but ethanol is a creation of Washington, D.C. The ethanol program originated in the late 1970s during the energy crisis. A quarter-century later, there is no energy crisis and virtually every independent assessment --by the U.S. Department of Agriculture, the General Accounting Office, the Congressional Budget Office, NBC News and several academic journals -- has concluded that ethanol subsidies have been a costly boondoggle with almost no public benefit.

Yet even after ethanol has siphoned $7 billion from the federal treasury, the mighty ethanol subsidies still flow. Why? Ethanol’s survival has nothing to do with economics or the environment and everything to do with political muscle. Almost 70 percent of ethanol is produced by America's premier agri-giant, Archer Daniels Midland. ADM, the self-proclaimed "supermarket to the world," has spent a small fortune on farming Capitol Hill over the past 20 years. Through programs like ethanol and sugar price supports, it has reaped a profitable harvest from taxpayers. In fact, an estimated 40 percent of ADM’s profits come from government-subsidized products.

Continued in article


"How Wall Street Fleeced the World:  The Searing New doc Inside Job Indicts the Bankers and Their Washington Pals," by Mary Corliss and Richard Corliss, Time Magazine, October 18, 2010 ---
http://www.time.com/time/magazine/article/0,9171,2024228,00.html

Like some malefactor being grilled by Mike Wallace in his 60 Minutes prime, Glenn Hubbard, dean of Columbia Business School, gets hot under the third-degree light of Charles Ferguson's questioning in Inside Job. Hubbard, who helped design George W. Bush's tax cuts on investment gains and stock dividends, finally snaps, "You have three more minutes. Give it your best shot." But he has already shot himself in the foot.

Frederic Mishkin, a former Federal Reserve Board governor and for now an economics professor at Columbia, begins stammering when Ferguson quizzes him about when the Fed first became aware of the danger of subprime loans. "I don't know the details... I'm not sure exactly... We had a whole group of people looking at this." "Excuse me," Ferguson interrupts, "you can't be serious. If you would have looked, you would have found things." (See the demise of Bernie Madoff.)

Ferguson—whose Oscar-nominated No End in Sight analyzed the Bush Administration's slipshod planning of the Iraq occupation—did look at the Fed, the Wall Street solons and the decisions made by White House administrations over the past 30 years, and he found plenty. Of the docufilms that have addressed the worldwide financial collapse (Michael Moore's Capitalism: A Love Story, Leslie and Andrew Cockburn's American Casino), this cogent, devastating synopsis is the definitive indictment of the titans who swindled America and of their pals in the federal government who enabled them.

With a Ph.D. in political science from MIT, Ferguson is no knee-jerk anticapitalist. In the '90s, he and a partner created a software company and sold it to Microsoft for $133 million. He is at ease talking with his moneyed peers and brings a calm tone to the film (narrated by Matt Damon). Yet you detect a growing anger as Ferguson digs beneath the rubble, and his fury is infectious. If you're not enraged by the end of this movie, you haven't been paying attention. (See "Protesting the Bailout.")

The seeds of the collapse took decades to flower. By 2008, the financial landscape had become so deregulated that homeowners and small investors had few laws to help them. Inflating the banking bubble was a group effort—by billionaire CEOs with their private jets, by agencies like Moody's and Standard & Poor's that kept giving impeccable ratings to lousy financial products, by a Congress that overturned consumer-protection laws and by Wall Street's fans in academe, who can earn hundreds of thousands of dollars by writing papers favorable to Big Business or sitting on the boards of firms like Goldman Sachs.

Who's Screwing Whom? In the spasm of moral recrimination that followed the collapse, some blamed the bright kids who passed up careers in science or medicine to make millions on Wall Street and charged millions more on their expense accounts for cocaine and prostitutes. After the savings-and-loan scandals of the late-'80s, according to Inside Job, thousands of executives went to jail. This time, with the economy bulking up on the steroids of derivatives and credit-default swaps, the only person who has done any time is Kristin Davis, the madam of a bordello patronized by Wall Streeters. Davis appears in the film, as does disgraced ex--New York governor Eliot Spitzer; both seem almost virtuous when compared with the big-money men. (See "The Case Against Goldman Sachs.")

The larger message of both No End in Sight and Inside Job is that American optimism, the engine for the nation's expansion, can have tragic results. The conquest of Iraq? A slam dunk. Gambling billions on risky mortgages? No worry—the housing market always goes up. Ignoring darker, more prescient scenarios, the geniuses in charge constructed faith-based policies that enriched their pals; they stumbled toward a precipice, and the rest of us fell off.

The shell game continues. Inside Job also details how, in Obama's White House, finance-industry veterans devised a "recovery" that further enriched their cronies without doing much for the average Joe. Want proof? Look at the financial industry's fat profits of the past year and then at your bank account, your pension plan, your own bottom line.

Video:  Watch Columbia's Business School Economist and Dean Hubbard rap his wrath for Ben Bernanke
The video is a anti-Bernanke musical performance by the Dean of Columbia Business School ---
http://www.youtube.com/watch?v=3u2qRXb4xCU
Ben Bernanke (Chairman of the Federal Reserve and a great friend of big banks) --- http://en.wikipedia.org/wiki/Ben_Bernanke
R. Glenn Hubbard (Dean of the Columbia Business School) ---
http://en.wikipedia.org/wiki/Glenn_Hubbard_(economics)

Bob Jensen's threads on the Greatest Swindle in History ---
http://www.trinity.edu/rjensen/2008Bailout.htm#Bailout

 




  • "How Medicare Killed the Family Doctor:  Low government payment rates became the private-sector benchmark, resulting in fragmented care," by Richard M. Hannon, The Wall Street Journal, November 8, 2010 ---
    http://online.wsj.com/article/SB10001424052748704353504575596140752021042.html?mod=djemEditorialPage_t

    I work for a health-insurance company, and my brother is a primary-care physician. As he tells it, my industry is responsible for the death of his. Insurance companies, he argues, have killed primary care by grinding down reimbursement and compelling doctors to see more and more patients just to make a living.

    I sympathize with my brother, because I know that doctors' business with insurers isn't always easy. I'm also aware of the market's price sensitivity—and reimbursement paid to doctors comes from premiums paid by customers. Insurers must keep costs down.

    Remember Marcus Welby, M.D.? He defined the family doctor on TV in the 1970s, exemplifying the four Cs: caring, competent, confidant and counselor. In the mid-'60s, I remember my father-in-law, a real-life Dr. Welby, telling me the exciting news that the federal government was going to start paying him to see seniors—patients who before he had seen for the proverbial chicken (or nothing at all). That fabulous deal was Medicare.

    Medicare introduced a whole new dynamic in the delivery of health care. Gone were the days when physicians were paid based on the value of their services. With payment coming directly from Medicare and the federal government, patients who used to pay the bill themselves no longer cared about the cost of services.

    Eventually, that disconnect (and subsequent program expansions) resulted in significant strain on the federal budget. In 1966, the House Ways and Means Committee estimated that by 1990 the Medicare budget would quadruple to $12 billion from $3 billion. In fact, by 1990 it was $107 billion.

    To fix the cost problem, Medicare in 1992 began using the "resource based relative value system" (RBRVS), a way of evaluating doctors based on factors such as education, effort and specialized training. But the system didn't consider factors such as outcomes, quality of service, severity or demand.

    Today most insurance companies use the Medicare RBRVS because it is perceived as objective. As a result of RBRVS, specialists—especially those who perform a lot of procedures—do extremely well. Primary-care doctors do not.

    The primary-care doctor has become a piece-rate worker focused on the volume of patients seen every day. As Medicare and insurers focused on trimming the costs of the most common procedures, the income and job satisfaction of primary-care doctors eroded.

    So these doctors left, sold or changed their practices. New health-care service models, such as the concierge practice and the Patient-Centered Medical Home, drew doctors away from the standard service models that most patients rely on for coverage.

    All of these factors have contributed to a fragmented, expensive health system with most of the remaining doctors focused on reactive instead of preventive care.

    The solution to the problem is making primary-care physicians the captains of the ship. They must have the time and financial resources necessary to take care of their patients, tailoring care to patients' specific conditions and needs. And they need the data to track their patients' results, so they can guide patient progress. They will then be able to slow (and sometimes reverse) their patients' illnesses, keeping them out of hospital emergency rooms and specialists' offices. The end result: reduced costs and improved quality of care.

    So who really killed primary care? The idea that a centrally planned system with the right formulas and lots of data could replace the art of practicing medicine; that the human dynamics of market demand and the patient-physician relationship could be ignored. Politicians and mathematicians in ivory towers have placed primary care last in line for respect, resources and prestige—and we all paid an enormous price.

    Mr. Hannon is senior vice president of marketing and provider affairs for Blue Cross Blue Shield of Arizona.




     

    Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

    Return to the Tidbits Archives ---
    http://www.trinity.edu/rjensen/tidbitsdirectory.htm 

     

    Shielding Against Validity Challenges in Plato's Cave ---
    http://www.trinity.edu/rjensen/TheoryTAR.htm

    Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
    By Bob Jensen

    What went wrong in accounting/accountics research?  ---
    http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

    The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---
    http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

    AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 ---
    http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm#_msocom_1

    Bob Jensen's threads on accounting theory ---
    http://www.trinity.edu/rjensen/theory01.htm

    Tom Lehrer on Mathematical Models and Statistics ---
    http://www.youtube.com/watch?v=gfZWyUXn3So

    Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---
    http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews

    Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

    Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

    Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/