Tidbits Quotations
To Accompany January 29, 2015 edition of Tidbits
Bob Jensen at Trinity University

Be brave enough to start a conversation that matters.
Margaret Wheatley,

We must be willing to get rid of the life we've planned, so as to have the life that is waiting for us.
Joseph Campbell

If everyone is thinking alike, then somebody isn't thinking.
George S. Patton

Happiness is like a butterfly: the more you chase it, the more it will elude you, but if you turn your attention to other things, it will come and sit softly on your shoulder.
Henry David Thoreau

Yemen’s al Qaeda claims responsibility for Charlie Hebdo massacre ---
New York Post

Israel is responsible for Charlie Hebdo massacre ---
Jimmy Carter

Muslims are trying to colonize Western countries, because setting up your own enclave and demanding recognition of a no-go zone are exactly that.
Bobby Jindal, Governor of Louisiana
In some nations like Sweden, Belgium, and the U.K., fire trucks and ambulances are afraid to enter the no-go zones without police protection.

Sen. Dianne Feinstein’s husband is about to make $1 billion off a government real estate deal ---
Doesn't she deserve more?

No room in America for Christian refugees

We'd rather be obese on benefits than thin and working.
Janice and Amber Manzur

Moocher Hall of Fame --- https://danieljmitchell.wordpress.com/the-moocher-hall-of-fame/

President Obama is pushing the limits of his executive authority. Here are some big ideas in his State of the Union Address on January 20 that may or may not affect us ---

"A Capsizing Disability-Insurance Program:   Trust-fund reserves will run out late next year. Obama’s solution is a bad idea, but reform is still needed," by  Lanhee J. Chen, The Wall Street Journal, January 20, 2015 ---

While Medicare and Social Security dominate discussion about entitlement reform, too little attention is paid to the dire financial straits of the Social Security Disability Insurance trust fund. Without legislative action, SSDI benefits will be cut nearly 20% by the end of 2016.

Congress likely will pass a short-term measure to shore up the trust fund and enable it to pay full benefits. But to survive long term, the program needs far-reaching reform.

SSDI is funded by a portion of payroll taxes and pays an average monthly cash benefit of about $1,150 to disabled workers below Social Security’s retirement age. The program has been growing rapidly: While the pool of workers eligible for disability benefits increased by 11.3% between 1999 and 2014, to 151 million from 136 million, the number of workers (not including dependents) getting these benefits grew by 83.5%, to nine million from 4.9 million. Between January 2009 and December 2014, more than 1.5 million workers joined the disability rolls.

SSDI paid $140.1 billion to disabled workers and their dependents in 2013 (according to the latest trust-fund data). By the end of that year spending outpaced receipts by $32 billion, and the balance of the program’s trust fund was a little more than $90 billion. Trust-fund reserves are expected to run out in late 2016.

Congress can reallocate payroll tax revenues from the Old-Age & Survivors Insurance trust fund to shore up the SSDI trust fund. But the Congressional Budget Office estimates that rebalancing tax revenue between the trust funds would cause the reserves of both to run out in 2030.

When the disability program faced a crisis in 1994, Congress reallocated payroll-tax revenues. During the same year it also outlawed SSDI payments to individuals with drug or alcohol addictions. This time the Social Security Administration has made clear that President Obama wants revenue reallocated with no strings attached. This is a bad idea.

Instead, any reallocation legislation should include reforms that will reduce the future growth in the number of people getting benefits and increase the number of beneficiaries who can and should return to gainful employment. Some of these reforms were proposed by former Oklahoma Sen. Tom Coburn during his last week in Congress.

One option to tighten eligibility would require that applicants have worked more in recent years—for example, in four of the past six years rather than five of the past 10 years that is currently required. The Congressional Budget Office estimates that increasing the recency-of-work requirement in this way starting in 2013 would have reduced the number of SSDI beneficiaries by 4% and decreased spending by $8 billion in 2022.

Another option: Disability determinations are currently made based in part on factors like age, education and work experience. As an applicant gets older, the eligibility requirements get less stringent. Congress could tighten SSDI eligibility by raising the age when it becomes easier to qualify for benefits.

A third option that has bipartisan support and is included as a pilot project in Mr. Coburn’s bill: “supported work” services such as vocational rehabilitation, health care or wage subsidies, or preventive care that could help keep an individual working instead of going on disability.

Many on disability cannot be expected to return to the workforce. But SSDI has a powerful disincentive for anyone on disability to leave the program: the promise of a stream of income in return for a promise not to go back to work. Mr. Coburn’s legislation places a time limit on benefits for applicants who have temporary physical disabilities or injuries that are expected to improve with time.

Today a beneficiary is generally not terminated from the program unless he is selected for a Continuing Disability Review and the government finds he has experienced substantial medical improvement. By time-limiting benefits for some beneficiaries—those with disabilities that are expected to improve to a point that they are able to work again—Congress can place the onus on them to prove that they are still eligible for benefits while accelerating the transition of more people back into the workforce.

Congress can also boost funding targeted at improving the integrity of the program. This would allow the Social Security Administration, for example, to clear the current backlog of more than one million Continuing Disability Reviews.

Congress could also require the Social Security Administration to assess the quality of decisions made by the administrative law judges who review appeals by individuals whose claims for disability benefits are denied. Particular attention should be paid to judges who overturn denials at disproportionately high rates.

Continued in article

Jensen Comment
People receiving lifetime SSDI benefits also receive Medicare from the time they become eligible for lifetime SSDI benefits. This compounds the total benefits no matter what their ages at the time they start receiving lifetime SSDI benefits. My wife started receiving SSDI benefits after eight spine surgeries. She was about 52 years of age and was also granted full Medicare insurance. There are also temporary SSDI benefits that must be renewed every two years. I don't think Medicare necessarily accompanies temporary benefits. That is the case for one of our children at the moment.

How to Mislead With Statistics
The state of the world's seas is often painted as verging on catastrophe. But although some challenges are very real, others have been vastly overstated, researchers claim in a review paper. The team writes that scientists, journals and the media have fallen into a mode of groupthink that can damage the credibility of the ocean sciences. The controversial study exposes fault lines in the marine-science community.

Daniel Cressey, Nature, January 18, 2015 ---


How to Mislead With Statistics:  2014 Was Not the Hottest Year on Record
"2014 Hottest Year on Record, Says NOAA: Climate Models Still Wrong on Trend," by Ronald Bailey, Reason Magazine, January 16, 2015 ---

. . .

So global average temperature is not increasing at the rate of about 0.3 degree Celsius (0.54 degree Fahrenheit) per decade that is the average of the climate models relied upon by the Intergovernmental Panel on Climate Change (IPCC). Regarding the 17 year slow-down in global temperature increases, the IPCC's Synthesis Report just released in November notes:

The observed reduction in surface warming trend over the period 1998 to 2012 as compared to the period 1951 to 2012, is due in roughly equal measure to a reduced trend in radiative forcing and a cooling contribution from natural internal variability, which includes a possible redistribution of heat within the ocean (medium confidence). The rate of warming of the observed global mean surface temperature over the period from 1998 to 2012 is estimated to be around one-third to one-half of the trend over the period from 1951 to 2012. …

For the period from 1998 to 2012, 111 of the 114 available climate-model simulations show a surface warming trend larger than the observations…. The difference between models and observations may also contain contributions from inadequacies in the solar, volcanic, and aerosol forcings used by the models and, in some models, from an overestimate of the response to increasing greenhouse gas and other anthropogenic forcing (the latter dominated by the effects of aerosols).

Shorter: The climate models could be wrong for all sorts of reasons.

Last week, I reported that the satellite data shows that 2014 was the third warmest year in that record. University of Alabama in Huntsville climatologist John Christy noted:

2014 was the third warmest year in the 36-year global satellite temperature record, but by such a small margin (0.01 C) as to be statistically similar to other recent years, according to Dr. John Christy, a professor of atmospheric science and director of the Earth System Science Center at The University of Alabama in Huntsville. “2014 was warm, but not special. The 0.01 C difference between 2014 and 2005, or the 0.02 difference with 2013 are not statistically different from zero. That might not be a very satisfying conclusion, but it is at least accurate.”

The 2014 average temperature anomaly also is in keeping with temperatures since late 2001, when the global average temperature rose to a level that is generally warmer than the 30-year baseline average. The most recent 13 complete calendar years, from 2002 through 2014, have averaged 0.18 C (about 0.33 degrees Fahrenheit) warmer than the 30-year baseline average, while the global temperature trend during that span was a warming trend at the rate of +0.05 C per decade — which is also statistically insignificant.

In other words, as hot as 2014 is, there is still no sign of a speed up in the rate of global average temperature increase.

In Canada
Lenient Sentences for Rape and Harsh Sentences for Criticizing Islam

Figures show that in 2011, 340 people convicted of grievous bodily harm and eight rapists were handed community sentences - punishments which critics say amount to little more than a slap on the wrist.

Canadian Man Gets 18 Months in Jail for Saying “Islam is Evil” ---

Paul Krugman Rejected by His Peers --- Click Here

The Age-Old Reciprocating Political Payoffs at Taxpayer Expense

"Medical Research and New York Political Scandal," Inside Higher Ed, January 26, 2015 ---

An article in The New York Times details the connection between a Columbia University professor and a political scandal that has shaken New York State government. Sheldon Silver, speaker of the New York State Assembly, was indicted on a series of charges last week on an alleged scheme involving the work of Robert N. Taub, the Columbia professor. The indictment charges that Taub, whose research focuses on a form of cancer caused by asbestos, refers patients to a law firm that employed Silver. In return, the indictment says, Silver obtained millions of dollars, and he funneled state support to Taub's research center. Prosecutors have reached an agreement with Taub not to prosecute him in return for his help on the case. Columbia announced Friday that it was shutting down Taub's research center.

Bob Jensen's Fraud Updates ---

Accountants Play Critical Role in Establishing Global Transparency ---

"Cuomo Takes On the Teachers Unions," by Jason L. Riley, The Wall Street Journal, January 21, 2015 ---

New York Gov. Andrew Cuomo’s budget proposal, announced Wednesday, includes startlingly ambitious education reforms that would expand charter schools, improve teacher tenure rules and implement an education tax credit program to help low-income families attend private schools. The only problem is that he released it the day before state Assembly Speaker Sheldon Silver was arrested on bribery and kickback charges. Or maybe it’s a blessing.

Mr. Silver, a personal injury lawyer who has been under federal investigation since 2013, was taken into custody by the FBI on Thursday and released on $200,000 bond. According to the indictment, the Democratic legislator received more than $5.3 million in salary and attorney-referral fees from a law firm “based on his official position rather than any work he was expected to perform.”

The New York Post reports that the “feds seized $3.8 million in allegedly corrupt payments to Silver that were stashed in eight accounts spread out among six banks.” Following his arrest, Mr. Silver denied any wrongdoing and told reporters, “I hope I’ll be vindicated.”

Mr. Silver is one of the famed “three men in a room” who run the state—the other two being the governor and the state Senate leader, Republican Dean Skelos. Technically, the New York legislature is comprised of 213 people, but in reality this trio calls all the shots, mostly behind closed doors. A new budget is due by March 31, and Mr. Silver’s arrest has paralyzed Albany.

Mr. Cuomo’s $142 billion proposal would cap property levies for homeowners, cut taxes for small business, hike the state minimum wage and increase overall spending by 2.8%. But the governor’s most noteworthy plans concern education, where he is pushing reforms that are anathema to teachers unions. And it so happens that Mr. Silver is labor’s strongest legislative advocate.

How Mr. Silver’s legal woes will affect budget negotiations is anyone’s guess at this point, and questions remain about whether he will remain in the leadership or even in office while he fights the charges. But we do know that labor unions loudly denounced the governor’s school proposals and that their man in the room is weaker politically than he was before his arrest.

Mr. Cuomo has prided himself on passing budgets on time, and the speaker will be happy to run out the clock on the assumption that the governor will jettison his reforms and cut a deal rather than risk a late budget. If Mr. Cuomo is serious about fighting for his education agenda, he may need to use the best leverage he has, which is allowing the government to shut down unless the legislature passes his budget intact.

Jensen Comment
This will put NY Governor Cuomo at odds with NYC Mayor De Blasio who is a Teachers Unions' puppet.


7 Down, 1 to Go An ungracious address even by this president’s standards.---

In four of the past six midterm elections, voters have administered what is sometimes called a “shellacking” or a “thumpin’ ” to the sitting president’s party. In 1994, 2006, 2010 and 2014, the president’s party lost seats in both houses of Congress and the majority in at least one. In 1995, 2007 and 2011 the president began his State of the Union address with an acknowledgment of the other party’s electoral success.

Bill Clinton, 1995: “Mr. President, Mr. Speaker, members of the 104th Congress, my fellow Americans: Again we are here in the sanctuary of democracy, and once again our democracy has spoken. So let me begin by congratulating all of you here in the 104th Congress and congratulating you, Mr. Speaker. If we agree on nothing else tonight, we must agree that the American people certainly voted for change in 1992 and in 1994. And as I look out at you, I know how some of you must have felt in 1992.”

George W. Bush, 2007: “Thank you very much. And tonight, I have the high privilege and distinct honor of my own, as the first president to begin the State of the Union message with these words: ‘Madam Speaker.’ In his day, the late Congressman Thomas d’Alessandro Jr. from Baltimore, Maryland, saw Presidents Roosevelt and Truman at this rostrum. But nothing could compare with the sight of his only daughter, Nancy, presiding tonight as speaker of the House of Representatives. Congratulations, Madam Speaker. . . . Some in this chamber are new to the House and the Senate, and I congratulate the Democrat majority.”

Barack Obama, 2011: “Mr. Speaker, Mr. Vice President, members of Congress, distinguished guests, and fellow Americans: Tonight I want to begin by congratulating the men and women of the 112th Congress, as well as your new Speaker, John Boehner. And as we mark this occasion, we’re also mindful of the empty chair in this chamber, and we pray for the health of our colleague—and our friend—Gabby Giffords. It’s no secret that those of us here tonight have had our differences over the last two years. The debates have been contentious; we have fought fiercely for our beliefs. And that’s a good thing. That’s what a robust democracy demands. That’s what helps set us apart as a nation.”

This year’s State of the Union was an ungracious address even by this president’s standards. There was no word of congratulation for the Republicans or even for the new Congress. Worse, Obama extemporaneously taunted his adversaries about his own past electoral success.

Continued in article

Jensen Comment
The GOP might even take the Presidency in 2016 if they find a competitive and highly respected candidate. There's not a snowball chance in Hell that the GOP will nominate a competitive and highly respected candidate. My hope would be for Condoleezza Rice, but she has a zero chance of being nominated ---

Say what?

"Stay-at-Home Parents Already Get a Tax Preference," by Josh Barro, The New York Times, January 23, 2015 ---

President Obama’s proposal to expand a tax break for working parents with children under 5 has some conservatives criticizing it for discriminating against stay-at-home parents.

Those parents wouldn’t be able to take the proposed tax credit equal to 50 percent of child care expenses, up to a maximum of $3,000 per child. What the critics fail to see is that the playing field wasn’t level to begin with. The tax code is already hugely distorted in favor of stay-at-home parenting: Labor outside the home is taxed; household work, such as stay-at-home parenting, is not.

I realize that sounds like a bizarre thing to say. Why would there be a tax on parenting, and why would the lack of such a tax constitute a tax preference? But productive activities within the home are not especially different from the taxable work we do outside the home. We labor, and instead of receiving a cash wage, we receive something else we value: a clean house or a mowed lawn or a well-behaved child. In 1973, the economist John Kendrick estimated that unmeasured and untaxed household activities like child rearing amounted to about a quarter of the size of the whole economy as measured by gross national product.

Continued in article

Jensen Comment
Does anybody see a flaw in this logic? Whether or not one parent stays at home there still must be a clean house, a mowed lawn, and a well-behaved child. Those domestic jobs are not going away. With more tax credits when both parents work they are getting a tax break for doing those same domestic chores.

The argument should instead center around incentives to get stay-at-home parents on welfare to get off welfare by getting a job. This, however, is not a politically correct argument so progressives are dredging up the old argument that stay-at-home parents are providing free labor for themselves. There's moral hazard in making transfer payments from taxpayers to stay-at-home parents. Firstly, its simply trading cash flow when Parent A in Cleveland pays Parent B in Toledo who in turn pays Parent A in Cleveland. Secondly, should Parent A get more than Parent B when Parent A has twice as many kids, a much larger house, and a much larger yard to mow? Thirdly, Parent A can hire a minimum wage worker to do the domestic chores to free up more time for golfing, social clubs, and sunbathing by the pool.

Wall Street banks slash FIFTY THOUSAND jobs and reduce bonuses and expenses as profits continue to dry up ---

"A Champion of Law Informed by Economics," by Henry G. Manne, The Wall Street Journal, January 19, 2015 ---

. . .

Currently, the SEC sees its job as regulating the entire market for information. This is madness. It starts at the supply side with accounting rules that began life as managerial tools and tries to make them into a valuation scheme. It finishes on the demand side by restricting insider trading, which merely shifts the identity of the people who may trade first on undisclosed information.

If insider trading were legal and used to replace or supplement stock options, there would be no “tragedies” of employees being left high and dry with options way out of the money. There would be no loss of reward when an innovation merely resulted in a reduction of an expected loss. There would be no unearned gain because a company’s stock appreciated in line with a market or industry rise. And there would be no peculiar problems of accounting since such trading would be entirely extraneous to the company’s accounts.

From “Regulation ‘In Terrorem,’ ” Nov. 22, 2004:

Since [New York Attorney General Eliot] Spitzer wins his cases in the media, where business is now all but defenseless, the best hope is for the American business community to develop its own public voice. The free-market scholarship needed for this purpose is available, though it is rarely availed of in these fights. Too often the corporate defenders conclude, out of ignorance to be sure, that the opposition really has the better case.

But make no mistake: Eliot Spitzer represents, wittingly or not, an attack on the entire corporate free-enterprise system. Clearly we need new or invigorated institutions to defend industries and companies publicly when they come under unwarranted or disproportionate attack. Responsible leaders of the business community should make it a high priority to develop these capabilities before more harm is done.

From “ Milton Friedman Was Right,” Nov. 26, 2006:

Now I realize (I should have known) he was absolutely correct about the significance of proposals for socially responsible corporate behavior, whether they emanated from within or outside the corporation. These proposals reflect, as well as anything else happening today, the inability of many commentators to distinguish between private and public property—in other words, between a free enterprise system and socialism. Somehow large-scale business success, usually resulting in a publicly held company, seems mysteriously to transform the nature of numerous individuals’ private investments into assets affected with a public interest. And once these corporate behemoths are “affected with a public interest,” they must either be regulated by the state or they must act as though they are owned by the public, and are therefore inferentially a part of the state. This attitude is reflected not merely by corporate activists, but by many “modern” corporate managers.

From “The ‘Corporate Democracy’ Oxymoron,” Jan. 2, 2007:

They’re back! Every 20 or 30 years shareholder democracy ideas come back in vogue, and their time seems to have arrived again—with a vengeance. . . .

There is absolutely nothing new in any of this discussion. The real world has not changed in any significant way, and our knowledge of corporate governance has not been revolutionized by some intellectual breakthrough. Furthermore, the provenance of the “corporate democracy” oxymoron has long been understood. The idea results from the inappropriate conflation of political ideals with market institutions. Its persistence can only be attributed to the intelligentsia’s far greater comfort and familiarity with political models and events than with knowledge and appreciation of how markets function.

Jensen Comment
Keep in mind that the poor do not pay income taxes in the USA. The top 50% of taxpayers pay 97% of the federal income tax and almost the same percentage of state income tax since so many states peg the state income tax to the federal income tax returns. Poor people do pay consumption taxes and property taxes (even when they rent housing) and low income workers as well as other workers do contribute Social Security and Medicare taxes that, in turn, entitle them to collecting those entitlements when they retire or are declared disabled.

"Obama's Empty Tax Hike Populism," by Paul Suderman, Reason Magazine, January 12, 2015 ---

Over the weekend, the White House revealed that President Obama would propose $320 billion in additional taxes during tonight’s State of the Union address.

Rest assured they’re not going to happen—not while Republicans control Congress. This is about political signaling more than it’s about policy; it’s a tax-hike wish list put forth by a president who wants people to know that he favors higher taxes, not a genuine attempt at concocting an overhaul of the tax code that could actually pass. It’s game day, and President Obama wants to show everyone to know which side he’s rooting for, so he’s showing up early in a jersey that says Team Tax Hikes.

The White House fact sheet makes it clear that Obama is rooting for a particular kind of tax hike populism. The opening line declares that "middle class families today bear too much of the tax burden because of unfair loopholes that are only available to the wealthy and big corporations." The rest of the document reads much the same way. But Obama’s populist tax hike rhetoric doesn’t always capture the full reality of the tax hikes he’s proposing.

For example, Obama will propose ending the "stepped-up" basis "loophole" in the capital gains tax. According to the fact sheet, President Obama will propose closing "the trust fund loophole—the single largest capital gains tax loophole—to ensure the wealthiest Americans pay their fair share on inherited assets."

That’s one way of putting it. Another way of putting it is that it is essentially a brand new tax on inheritance. It’s a proposal that either doesn’t understand or doesn’t care about the primary reason the tax code employs the stepped-up basis calculation. As Ryan Ellis of American for Tax Reform explains:

Under current law, when you inherit an asset your basis in the asset is the higher of the fair market value at the time of death or the decedent's original basis. Almost always, the fair market value is higher.

Under the Obama proposal, when you inherit an asset your basis will simply be the decedent's original basis.

Imagine buying a piece of property in 1980 for $100,000. It’s worth a $400,000 now. If you sell that piece of property before you die, you’ll pay capital gains on $300,000—the difference between the two. But if you pass that on to your daughter, the value of that property will be "stepped up" to $400,000. The way it works today, if she sells the property for $440,000, she’ll pay capital gains on $40,000—the amount it appreciated while in her possession. Under Obama’s proposal, she’d be liable for capital gains on $340,000. (The Wall Street Journal has more on how this works in practice.)

As Ellis argues, it basically amounts to a "second death tax."

There are exemptions for most households, but this misses the larger point: the whole reason we have step up in basis is because we have a death tax. If you are going to hold an estate liable for tax, you can't then hold the estate liable for tax again when the inheritor sells it. This adds yet another redundant layer of tax on savings and investment. It's a huge tax hike on family farms and small businesses.  

Another provision outlined in the White House fact sheet would "roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions." Those 529 education plans are college savings plans geared toward the broad middle class—the folks his tax plan is supposedly intended to boost—the value of which was dramatically expanded by a 2001 tweak that stopped taxing those plans as ordinary income once withdrawn.

As Ellis notes in a separate post, the amount of money families put in those college funds following the 2001 reform doubled over a year, and then continued to grow rapidly. As Ellis writes, Obama’s plan would undermine the value of those plans:

The Obama plan aims to turn back the clock, once again taxing earnings growth in 529 plans as ordinary income. This is a direct and clear tax increase on middle class families sacrificing to save for college, and it’s likely to result in a mass divestment from this type of savings.

The White House proposal also calls for raising the capital gains rate from its current rate of 23.8 percent (including a 3.8 percent surtax built into Obamacare) to 28 percent. The White House describes this as a plan to "raise the top capital gains and dividend rate back to the rate under President Reagan." It’s true that in 1986 Reagan supported a law raising the capital gains rate to 28 percent. But that was in the context of a bipartisan deal to significantly overhaul (though not completely wipe out) the tax code, one that the Reagan White House worked on diligently for years.  

Similarly, Obama’s fact sheet declines to mention is that it was a Democratic president who lowered the capital gains rate back down to its current level: Bill Clinton signed the reduction into law as part of a package of tax cuts in 1997. That too was passed on a bipartisan basis as part of a broader package of federal tax reforms.

That’s obviously not what’s going on here. Obama isn’t after plausible reforms that could pass on with support of the opposition party. He’s not after anything that could pass, or even lead to a compromise that could pass—at least not while he’s in office. Which means that, despite the populist rhetoric, he’s not actually looking for ways to reduce the tax burden the middle class. He's looking to make a speech, not do the hard work of negotiating real reforms. 

Jensen Comment
Since President Obama is proposing significant populist redistribution of income it would seem that any type of tax reform over the next two years will probably have to be proposed by Republicans. Whether of not such reforms put into effect depends heavily upon whether the President will sign any kind of Republican tax reforms. He may be forced to compromise on Republican demands to keep his initiatives on ACA heath care and immigration amnesty alive.

Some outlier Republicans are proposing tax reforms that have little chance of passage by other Republicans like a proposed flat tax that eliminates popular deductions (e.g., charitable gifts, medical expenses, and home mortgage interest) of the middle class as well as higher income taxpayers. A flat tax might also eliminate exclusion of municipal bond interest. Since most legislators are lawyers I don't anticipate any tax reforms that will simplify the tax code and put lawyers and accountants out of business.

In the far background there is always a possibility of federal or state VAT (turnover) taxes. But turnover taxes are so actively despised by business firms tax payers will probably be ice skating in Hell before the USA gets a VAT tax similar to the VAT taxes of Europe.

IRS Enters Contract For MILLIONS With Company HHS FIRED Over Botched Healthcare.gov

Seven months after federal officials fired CGI Federal for its botched work on Obamacare website Healthcare.gov, the IRS awarded the same company a $4.5 million IT contract for its new Obamacare tax program. CGI is a $10.5 billion Montreal-based company that has forever been etched into the public’s mind as the company behind the bungled Obamacare main website.

What will business tax reforms look like?
From the CFO Journal's Morning Ledger on January 22, 2015

President Obama’s State of the Union address was long on ideas for boosting the middle class through adjustments to personal-income-tax rules. But the White House hasn’t omitted business taxes from the agenda. The WSJ’s John D. McKinnon reports that Treasury Secretary Jacob Lew is optimistic that a business tax overhaul could happen with the current Congress, and the two top tax writers in Congress agree.

Both House Ways and Means Committee Chairman Paul Ryan (R., Wis.) and Senate Finance Committee Chairman Orrin Hatch (R., Utah) have signaled their willingness to address business taxes alone, even though they would prefer to address the entire tax system at once, including individual rates. Such a move would allow the White House and Congress to sidestep their differences over Mr. Obama’s various proposals for individual taxation that could have a larger impact on wealthy Americans.

Mr. Lew said in a speech Wednesday, “The fact is, there is a growing bipartisan consensus in Washington on how to achieve business-tax reform, and we have a unique opportunity now to get this done.” He added, “I am confident that as long as we keep our focus on doing what is right for our economy and our nation, we will get this done.”

Jensen Comment
Problems at the state and local levels are inconsistencies in the way businesses are taxed. Virtually all states (ranging from Illinois to Vermont) give governors and town leaders powers to selectively waive taxes and even grant subsidies for business firms, especially firms that have learned out to play the game of threatening to leave or threatening develop in locations that give them the best deals.

Other problems are the added deals where tax revenues are diverted to the private sector. Exhibit A is comprised of the tens of billions of scarce tax dollars being diverted to football stadiums, hockey arenas, basketball arenas, and baseball stadiums. If you want to see the examples of waste witness the Silverdome stadium near Detroit that will probably cost tens of millions of taxpayer dollars for demolition after earlier tens of millions of taxpayer dollars for construction ---

One thing that is as certain as death and taxes is that team owners will want a new facility even before they move into their new facility. Tens of millions of taxpayer dollars were spent on the money-losing Alamo Dome that was built for the San Antonio Spurs. Before the Spurs even moved in they wanted another (read that exclusive) new basketball domed arena that taxpayers also built for them so the Spurs no longer had to use the "new" Alamo Dome.

By the way the Spurs originally wanted not to have to compete with baseball teams for use of the Alamo Dome. So the Spurs insisted that the roof of the facility be built too low for baseball. Now that they've departed the Alamo Dome, San Antonio cannot use the huge Alamo Dome to attract a major league baseball team. For a major league baseball team, taxpayers of San Antonio would have to build yet a third domed sports facility. And so the beat goes on and on and on.

"How Government-Funded Stadiums and Museums Harm Taxpayers," by Barton Hinkle, Reason Magazine, January 21, 2015 ---

Man found not responsible for rape blasts Sen. Kirsten Gillibrand for 'harassment campaign' ---

Paul Nungesser was found “not responsible” for sexually assaulting another student at Columbia University. The student who accused him, Emma Sulkowicz, has since began carrying a mattress around the university as part of an art project to protest a finding she claims was unfair.

Sulkowicz’s activism earned her an invitation to President Obama’s State of the Union address Tuesday night from Sen. Kirsten Gillibrand, D-N.Y. When Nungesser heard of the invitation, he blasted the senator for rewarding Sulkowicz’s attacks against him.

“I am shocked to learn that Sen. Gillibrand is actively supporting Ms. Sulkowicz’s defamation campaign against me by providing her with a public forum in which to broadcast her grave allegation,” Nungesser told New York Magazine on Tuesday. “By doing so, Sen. Gillibrand is participating in a harassment campaign against someone, who, for good reason, has been found innocent by all investigating bodies.”

Nungesser reminded people that the university, after a seven-month long investigation, found him not responsible in 2013 — even in the current atmosphere where colleges are encouraged to find students guilty to appease political interests. Nungesser also pointed out that he cooperated with police after Sulkowicz filed a report (after the university found him not responsible) and that prosecutors declined to pursue the case.

Jensen Comment
Instead of proposing that taxpayers can invest in tax exempt bonds for towns, counties, and schools, President Obama is advocating extending the tax exempt bonds into the public-private sector.

"Obama Proposes New Muni Bonds for Public-Private Investments," by Brian Chappatta, Bloomberg. January 16, 2015 ---

The program, called Qualified Public Infrastructure Bonds, wouldn’t expire, and there’d be no cap on issuance, the administration said in a statement Friday. The debt also wouldn’t be subject to the Alternative Minimum Tax, which limits the tax benefits and exemptions that high-earning individuals can claim.

“QPIBs will extend the benefits of municipal bonds to public private partnerships, like partnerships that involve long-term leasing and management contracts, lowering the cost of borrowing and attracting new capital,” the administration said in the statement. The bonds will serve “as a permanent lower cost financing tool to increase private participation in building our nation’s public infrastructure.”

The proposal for a new type of security in the $3.6 trillion municipal market is part of a broader White House plan calling for more investment in roads, bridges and other infrastructure in advance of the administration’s budget proposal that will be released Feb. 2.

Building Block

The market contracted in 2014 for an unprecedented fourth straight year as local officials refrained from borrowing even as tax-exempt interest rates were close to generational lows.

The last time the market expanded was in 2010, the final year of the federal Build America Bonds program. The initiative, popular with local officials and Wall Street investors, gave municipalities a subsidy on interest costs for issuing taxable debt to finance infrastructure work.

The new type of debt for public-private partnerships, or P3s, would build upon the $10 billion private-activity bond market by including funding for airports, ports, mass transit, water and sewer initiatives. There’s a $15 billion limit to issuance of private-activity bonds. The proposed bonds can’t be used to privatize public systems or finance privately owned facilities.

America’s federal, state and local governments need to spend $3.6 trillion through 2020 to put the nation’s critical systems in adequate shape, according to a 2013 report from the American Society of Civil Engineers. Without higher spending, the group projects the costs of travel delays, power and water outages will reach $1.8 trillion by 2020.

Alternative Appeal

“The interest in P3s has clearly been growing, and we’ve seen states in particular launch a lot of these projects,” said Robin Prunty, who oversees state credit ratings at Standard & Poor’s in New York, said in an interview. “The availability of an attractive alternative with cost-effective financing, certainly from a strict muni perspective that’s a positive.”

Obama has made previous calls for increased infrastructure investment since the end of Build America Bonds, which were part of his 2009 stimulus plan. He asked Congress in 2013 to create a national infrastructure bank and recommended a program called America Fast Forward Bonds. He sought the same initiatives last year after they failed to advance in Congress.

Continued in article

How to mislead with statistics
Media Misrepresents Poverty Rate of US Children by More Than Double ---

In a breathless, Drudge Report-linked headline, the Washington Post reported last week that the “Majority of U.S. public school students are in poverty.”

A Huffington Post piece by Rebecca Klein, published 12 minutes earlier, sported a similar headline, “More Than Half Of American Schoolchildren Now Live In Poverty.”

. . .

In 2013, some 19.9 percent of children in America were in families with income at the poverty line or below—in 2014, the income threshold was $23,850 for a family of four. (Among the native-born of all ages, the poverty rate was 13.9 percent while among non-citizens, the rate was 22.8 percent while naturalized residents had a poverty rate of 12.7 percent.)

So, how does 19.9 percent become 51 percent?

Continued in article

A Model for Teaching About Corrections and Criticisms in Lies With Statistics
"Ranking The States From Most To Least Corrupt," by Harry Enten, Nate Silver's 5:38 Blog, January 23, 2015 ---

Jensen Comment
The article itself is great for pointing out how corruption rankings are misleading in this ranking that paints Louisiana and Mississippi as the most corrupt and Oregon and Washington states as the least corrupt.

Bob Jensen's threads on ranking controversies ---

How to Mislead With Statistics
The ITEP would have you believe that the poor in every state of the USA would be better off if wealth was redistributed and the poor get even more of a free ride in terms of state taxation

Institute for Taxation and Economic Policy --- http://www.itep.org/
Also see http://en.wikipedia.org/wiki/Institute_on_Taxation_and_Economic_Policy

"Who Pays?" ITEP, January 2015 ---

Jensen Comment
The first thing that makes me suspicious is that ITEP bills itself as being bipartisan. There's nothing bipartisan about the Board of Directors of ITEP --- http://www.itep.org/about/board_directors.php

Personally, I have much more respect for the professionalism and independence of the Tax Foundation ---
Also see http://en.wikipedia.org/wiki/Tax_Foundation

The Tax Foundation's Review of the ITEP report on "Who Pays?"

The Institute on Taxation and Economic Policy (ITEP) released a report last month titled Who Pays? A Distributional Analysis of the Tax Systems in All 50 States.[1] The study attempts to examine the overall level of regressivity of the tax systems of the fifty states and Washington, D.C. and presents state and local effective tax rates (total state and local taxes paid as a percentage of income) for each state’s five income quintiles. The report finds that nearly all states have regressive state and local tax systems.

The report also surveys the features of each state and local tax system, characterizing each feature as either regressive or progressive. Some of the tax system characteristics that ITEP regards as regressive are narrow income tax brackets, lack of a state income tax, and high reliance on sales and excise taxes. Progressive characteristics include little reliance on consumption taxes and graduated income tax rate structures.

Here we present three issues with ITEP’s conclusions and policy recommendations, in addition to their methods of presentation.

Issue #1: ITEP advocates tax policies that dampen economic growth in favor of short-term income redistribution.

A tax system should choose long-term economic growth over short-term redistribution.[2] Tax Foundation Chief Economist Dr. William McBride recently published a comprehensive review of the literature on the empirical relationship between taxes and economic growth over the last three decades, finding overwhelming evidence of a negative relationship between the two.[3] What’s more interesting is that among the work that examined specific tax types, researchers found that the most harmful to growth were corporate and individual income taxes, followed by taxes on consumption. The least harmful were taxes on property.

ITEP suggests that states move away from taxes on consumption (sales and excise taxes) and aim for “highly progressive income taxes.” That is, the report suggests moving more towards the taxes that are most harmful to economic growth. One study in Dr. McBride’s survey, an OECD panel data analysis, found progressive income tax systems specifically are negatively related to economic growth.[4] This may occur due to the way these systems disincentivize certain behaviors. According to Dr. McBride,

The more we try to make an income tax progressive, the more we undermine the factors that contribute most to economic growth: investment, risk-taking, entrepreneurship, and productivity. This is because high-income earners tend to do much of the saving, investing, risk-taking, and high-productivity labor.[5]

ITEP suggests that states move toward a tax revenue source that would harm future economic growth in favor equalizing incomes in the short term.

Issue #2: ITEP recommends that state and local governments rely on unstable sources of revenue.

ITEP suggests states move more toward progressive income tax systems. Income tax revenues, however, are much more volatile from year to year than sales taxes or property taxes. Using state and local government finance data from the U.S. Census Bureau,[6] we analyzed the U.S. totals of various combined state and local tax revenue sources to identify the most volatile sources of tax revenue from year to year. Figure 1 shows the annual percentage change in various types of state and local tax revenues.

Figure 1 Not Quoted Here

The Census data indicates that the most volatile source of combined state and local government tax revenues in the U.S. is corporate income tax, followed by individual income tax and sales and gross receipts taxes. Property tax revenues are the least volatile from year to year. These findings are confirmed by a 2010 Tax Foundation analysis of state tax revenue volatility by tax type, which found that corporate income and personal income tax revenues were the most volatile.[7] Further, the general shape of annual changes in revenues from taxes on corporate income, individual income, and sales and gross receipts closely follows the shape of the overall economy. Changes in income taxes, however, are much more pronounced as the overall economy changes.

In their analysis, ITEP punishes states that depend heavily on consumption taxes as a main source of revenue while advocating moving toward income taxation. Depending largely on a volatile source of revenue can cause budget issues in the event of an economic downturn. This is especially important in light of the inadequacy of state rainy day funds in providing additional funding during the most recent recession.[8]

Depending on high-income earners for tax revenue is even more problematic. Using 2009 IRS data, we found that millionaire income, in addition to the tax revenues they generate for the federal government, is quite volatile:

Comparing the 2009 data to the pre-recession data for 2007 shows that not only did the number of millionaires fall by 40 percent, but the overall income of millionaires fell by 50 percent. The result for the U.S. Treasury was that 54 percent of the total drop in tax revenues during this period was due to the falling tax collections from millionaires.[9]

Though this example uses federal tax collections, the principle still applies to state and local governments. The more a government relies on volatile sources of revenue, the more unstable overall funding will be when the economy dips.

Issue #3: ITEP includes one regressive feature of the federal income tax in its calculations, but excludes the rest of the highly progressive federal income tax.

Perhaps the most problematic part of ITEP’s report is its selective inclusion of federal policy. When ITEP presents effective state and local tax rates they also include what is known as the federal offset. The federal income tax code allows taxpayers who itemize their deductions to claim tax payments to state and local governments as a deduction. ITEP argues that since this benefit disproportionately helps high-income taxpayers lower their total tax bill, it should be accounted for in an analysis of regressivity. Including the federal offset in an analysis of state and local tax structures is misleading because it is a feature of the federal tax code, not state and local tax systems.[10]

When the federal offset is not included in the calculations of state and local effective rates, ITEP’s regressivity conclusions are much less severe. ITEP also breaks the top quintile into three smaller income groups, making the difference between the richest and the poorest appear much more pronounced. In the following analysis, we present the top quintile as a whole, rather than breaking it up into smaller income groups. Figure 2 shows the U.S. average of state and local effective tax rates, with and without the federal offset.

Fiture 2 Note Quoted Here

Continued in the article

Jensen Conclusion
It all boils down to how biased the unending debate about whether the poor will be better off if all wealth and income is equally distributed versus whether the poor in the USA are actually doing better by having incentives to strive for differential wealth and income.

Some analysts argue that we will have just as many dedicated brain surgeons if they make no more than dishwashers in a restaurant. I happen to not agree, but it's probably something that cannot be answered with data since we have very little to compare it with. Castro complained that when Cuban workers all received the same allowances they did not want to work very hard. Certainly, many of the most skilled professionals escaped and are still trying to escape Cuba. But comparing Cuba with the USA is not really fair in terms of so many factors affecting prosperity.

In the final analysis it's still Karl Marx versus Friedrich Hayek

Karl Marx --- http://en.wikipedia.org/wiki/Karl_Marx

Friedrich Hayek --- http://en.wikipedia.org/wiki/Friedrich_Hayek

The world is still waiting for any of the 200+ nations to demonstrate that Karl Marx had a better idea.

In Cuba where the goal was to eliminate inequality, Fidel Castro found that his ration books, free housing, free public transportation, and minimal wages destroyed incentives to work.

"Report: Castro says Cuban model doesn't work," by Paul Haven. Associated Press, Yahoo News, September 8, 2010 ---

Fidel Castro told a visiting American journalist that Cuba's communist economic model doesn't work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago.

The fact that things are not working efficiently on this cash-strapped Caribbean island is hardly news. Fidel's brother Raul, the country's president, has said the same thing repeatedly. But the blunt assessment by the father of Cuba's 1959 revolution is sure to raise eyebrows.

Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba's economic system was still worth exporting to other countries, and Castro replied: "The Cuban model doesn't even work for us anymore" Goldberg wrote Wednesday in a post on his Atlantic blog.

He said Castro made the comment casually over lunch following a long talk about the Middle East, and did not elaborate. The Cuban government had no immediate comment on Goldberg's account.

Since stepping down from power in 2006, the ex-president has focused almost entirely on international affairs and said very little about Cuba and its politics, perhaps to limit the perception he is stepping on his brother's toes.

Goldberg, who traveled to Cuba at Castro's invitation last week to discuss a recent Atlantic article he wrote about Iran's nuclear program, also reported on Tuesday that Castro questioned his own actions during the 1962 Cuban Missile Crisis, including his recommendation to Soviet leaders that they use nuclear weapons against the United States.

Even after the fall of the Soviet Union, Cuba has clung to its communist system.

The state controls well over 90 percent of the economy, paying workers salaries of about $20 a month in return for free health care and education, and nearly free transportation and housing. At least a portion of every citizen's food needs are sold to them through ration books at heavily subsidized prices.

President Raul Castro and others have instituted a series of limited economic reforms, and have warned Cubans that they need to start working harder and expecting less from the government. But the president has also made it clear he has no desire to depart from Cuba's socialist system or embrace capitalism.

Fidel Castro stepped down temporarily in July 2006 due to a serious illness that nearly killed him.

He resigned permanently two years later, but remains head of the Communist Party. After staying almost entirely out of the spotlight for four years, he re-emerged in July and now speaks frequently about international affairs. He has been warning for weeks of the threat of a nuclear war over Iran.

Castro's interview with Goldberg is the only one he has given to an American journalist since he left office.


Jensen Comment
Jacob Soll has a somewhat unique joint appointment at USC. He purportedly is both a professor of accountancy and a professor of history. I could not find him listed in my 2013 edition of the Hasselback Accounting Faculty Directory.

How to Mislead With Statistics
"Greece's Accounting Problem," by Jacob Soll, The New York Times, January 20, 2014

Greece is back as a focal point of the world financial crisis. While coming elections are spooking the markets, the supposed cause of the crisis has not changed. Greece has a declared debt of 319 billion euros, or about $369 billion, 175 percent of its 182-billion-euro ($210 billion) gross domestic product. This sounds like a nearly impossible task for any government: to govern effectively, spur economic growth and avoid default. The shackles of the declared Greek debt have effectively paralyzed the country. Yet maybe all of this debt drama is unnecessary.

The way this story is usually told, inside and outside Greece, is as a morality play: the profligate Greeks don’t pay taxes and their banks and elites, in turn, rob Greek citizens and foreign investors alike. The Greeks, it seems, need to be held accountable and to pay back their debt at any cost.

The brutal and counterproductive response has been austerity. But given Greece’s problems, what the country really needs is transparency and accountability. Greece has a very weak tradition of accounting, with few homebred trained accountants. The government does not use International Public Sector Accounting Standards, or Ipsas, which measure liabilities and assets over time, similar standards to those used by leading governments, businesses, banks and investors at all levels. It’s of little surprise that without internationally verifiable accounting standards, no one feels the need to be accountable.

This lack of accountants not only means poor administration; it also means that the Greek government has done a lousy job of accounting for its debt number. In fact, the debt has been calculated to be larger than it actually is, or would be if one used Ipsas.

Without real accounting, we also can’t evaluate the claims of Prime Minister Antonis Samaras’s government — as well as those of numerous commentators — that Greece has made improvement in its fiscal position over the last two years. If the European Commission, the International Monetary Fund and the European Central Bank (known as the troika) are giving Greece 283 billion euros ($327 billion) of financing in return for good economic indicators — and credit ratings agencies like Moody’s shake Greek and eurozone economies with pronouncements made on these numbers — one would think they would want to verify the numbers, using Ipsas, which would be much more transparent and something people outside the troika could realistically evaluate.

But the Greeks are not the only ones content with bad accounting and fishy numbers. The troika itself does not use Ipsas in calculating Greek debt, but rather what is confusingly called the Maastricht definition of debt, which is based on face value.

Think of face value as a promise to pay something in the so-far-distant future because its value is essentially worthless today if you don’t get interest payments. This means that the troika calculates debt neither according to its financial worth, but rather according to a political agreement that ignores very low interest rates and the fact that money increases in value the longer you can hold and invest it. This is working to Greece’s advantage, but Greece can’t show it, and thus benefit from better credit ratings. Continue reading the main story Continue reading the main story Continue reading the main story

Neither economic principles nor international accounting standards would regard this as an acceptable way to report a debt position. Greece was so cash-strapped and used to European Union handouts that its leaders signed off on the bailout deal without international accounting standards.

The fact that Germany has acted as a vigilant gatekeeper over Greece’s agreement to abide by the agreed debt and austerity measures should deserve scrutiny. Look again at the 57 billion euros ($66 billion) in German loans through the lens of accounting logic. The loans have been made at under 2 percent with maturities as far out as 2054.

That means that, in reality, the interest on this loan is under market rates. Giving loans well under market rates with gaping repayment schedules amounts to a grant. According to Ipsas standards on German debts, this portion of the debt alone would require only about 13 billion euros ($15 billion), leaving Germany with a considerable 44-billion-euro ($51 billion) loss.

But given the current draconian austerity conditions, Germany might be able to avoid showing the losses on the loan, yet it will destroy Greece in the process. Germany’s demands for both austerity and overvaluing of the debt are both unjust and counterproductive for Greek and European stability.

Greek debt is not what it seems. One reason might be that the Germans have refused to price the debt fairly, or properly report its value, which means in the short run that they extract more austerity from the Greeks than they should, and that they also keep this loan off the budget balance sheets because it would come up as a loss under any legitimate accounting standard.

A little-known fact is that the Germans also do not use Ipsas and have notably opaque public finance standards. This means their potential loss on the Greek loan is out of sight of the German public, who, not great fans of the Greek bailout, would be even less enthusiastic if they understood the terms.

It should also be noted that the Greek crisis has contributed to the 15 percent drop in value of the euro over the last year, and, with this low rate, German exports have been given a huge boost.

By overstating Greek debt and effectively creating a false sense of crisis (the Greeks have been bailed out), the troika is undermining growth and investment through both the drama of overstated debt and by austerity measures that are ripping apart Greek society. If Greece continues with the yoke of this inaccurate debt number, it faces more recession and possibly political unrest, further destabilizing a hobbled Europe and the euro.

Greek leaders should demand neither more austerity nor debt default. They should simply ask that the debt be calculated using Ipsas. And while they are at it, they should implement Ipsas at home to boost confidence, investment, credit and political stability. Clear accounting would show the Greek debt to be lower, stabilize the country, and bring confidence to Greece and, correspondingly, to the euro.

Jacob Soll, a professor of history and accounting at the University of Southern California, is the author, most recently, of “The Reckoning: Financial Accountability and the Rise and Fall of Nations.”



"Economic Lessons from Scandinavia," Daniel J. Mitchel, Townhall, January 10-2015 ---

As I’ve previously argued, the Nordic countries demonstrate that a big welfare state is “affordable” so long as countries are willing to accept less growth and so long as they are willing to compensate for high taxes and high spending with very pro-market policies in other areas.

And that’s definitely the case. If you examine the Economic Freedom of the World data, you see that Nordic nations get fairly decent scores because they have very laissez-faire policies for regulation, trade, monetary policy, and property rights.

Yes, the fiscal burden of the welfare state slows growth and drags down their rankings, but they still do far better than other European countries that have big governments and a lot of intervention. Just think of France (#58), Italy (#79), and Spain (#51).

With this bit of background, let’s now look at two new and interesting articles about the extent to which the Nordic nations should be role models.

Our first story is from the Washington Post, and it’s authored by a British journalist who lives in Denmark. He starts by noting the inordinate amount of praise these countries receive.

The United States is in the midst of an episode of chronic Scandimania, brought on in part by the habitually high placing of Sweden and its similarly prosperous, egalitarian, collectivist neighbors — Denmark, Norway, Iceland and Finland — in global rankings of everything fromhappinessto lack of corruption.

But he then points out that these is trouble in the Nordic paradise.

The Washington Post is not immune to Scandinavia’s charms, recently marveling at how Danish branches of McDonald’s manage to pay their employees 2.5 times U.S. McDonald’s workers’ wages (clue: When about 75 percent of earnings disappear as income and consumption taxes, higher wages are more necessity than choice). …and last month the Times assured us that “A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia.” (*Cough* unemployment is 5.6 percent in the United States, vs.8.1 percent in Sweden, 8.9 percent in Finland and 6.4 percent in Denmark.) …And global and domestic events are conspiring to make life a little more uncertain for these former high achievers. …the Scandinavian model’s structural fissures are coming under increasing stress. …the Norwegians seem to have lost their parsimonious, workaholic, Lutheran mojo. Norwegians treat Friday as a “free day” and take more sick leavethan anyone else in Europe, if not the world — a law enshrines their right to claim sick days even while on holiday.

The author continues, pointing out some serious warts.

Sweden’s political establishment was subverting the democratic process. This has distracted from the slowing economy, increasing state and household debt levels, and one of the highest youth unemployment rates in Europe. …Denmark took a bigger hit than its neighbors following the 2008 global economic crisis, which increased pressure on its massive welfare state, funded by the highest taxes in the world. Household debt is the highest in Europe (any connection there, I wonder?). …along with the Norwegians they work among the fewest hours a year of any Europeans. …In Iceland, …ultra-Nordic social cohesion…led to the near-bankruptcy of the entire country.

And here are some more details that also don’t sound so encouraging.

These countries that do so well in life-satisfaction surveys also record the highest consumption of antidepressants in the world, and despite their reputation for gender equality, they have thehighest rates of violence against womenin Europe. …few Americans would truly embrace a Scandinavian-style society. The tax rates alone would likely be a sufficient deterrent. Though I’m a freelance journalist, I essentially work until Thursday lunchtime for the state. And it’s not as if the money that is left in my pocket goes all that far: These are fearfully expensive countries in which to live.

Here’s the bottom line from a balanced story.

Scandinavia is not the utopia that American liberals or the 11 million Americans of Nordic descent often make it out to be, just as it is not the quasi-commie, statist gulag that those on the right would often have us believe. …I’m not saying the Nordic miracle is over, but it was never a miracle. And it’s over.

Now let’s look at our second story, which was published by the New York Post.

The tone is more negative, but it basically has the same message.

In the American liberal compass, the needle is always pointing to places like Denmark. Everything they most fervently hope for here has already happened there.

But there’s bad news in the land of the Northern Lights.

Here’s what he writes about Denmark.

Visitors say Danes are joyless to be around. Denmark suffers from high rates of alcoholism. In its use of antidepressants it ranks fourth in the world. (Its fellow Nordics the Icelanders are in front by a wide margin.) Some 5 percent of Danish men have had sex with an animal. Denmark’s productivity is in decline, its workers put in only 28 hours a week, and everybody you meet seems to have a government job. …Danes operate on caveman principles — if you find it, share it, or be shunned. Once your date with Daisy the Sheep is over, you’d better make sure your friends get a turn.

Though Daisy is lucky that she’s not on the tax rolls. The tax system in that nation is so oppressive that I’ve joked birthers should accuse Obama of having been born in Denmark.

In addition to paying enormous taxes — the total bill is 58 percent to 72 percent of income — Danes have to pay more for just about everything. Books are a luxury item. Their equivalent of the George Washington Bridge costs $45 to cross. …Health care is free — which means you pay in time instead of money. Services are distributed only after endless stays in waiting rooms. (The author brought his son to an E.R. complaining of a foreign substance that had temporarily blinded him in one eye and was turned away, told he had to make an appointment.) Pharmacies are a state-run monopoly, which means getting an aspirin is like a trip to the DMV.

But the author doesn’t just pick on Denmark.

Iceland’s famous economic boom turned out to be one of history’s most notorious real estate bubbles. …The success of the Norwegians — the Beverly Hillbillies of Europe — can’t be imitated. Previously a peasant nation, the country now has more wealth than it can spend: Colossal offshore oil deposits spawned a sovereign wealth fund that pays for everything. Finland, which tops the charts in many surveys (they’re the least corrupt people on Earth, its per-capita income is the highest in Western Europe and Helsinki often tops polls of the best cities), is also a leader in categories like alcoholism, murder (highest rate in Western Europe), suicide and antidepressant usage. …Booze-related disease is the leading cause of death for Finnish men, and second for women. …“Dark” doesn’t just describe winter in the Arctic suburbs, it applies to the Finnish character.

Sweden gets a lot of attention.

Immigration is associated in the Swedish mind with welfare (housing projects full of people on the dole) and with high crime rates (these newcomers being more than four times as likely to commit murder). Islamist gangs control some of the housing projects. Friction between “ethnic Swedes” and the immigrants is growing. Welfare states work best among a homogeneous people, and the kind of diversity and mistrust we have between groups in America means we could never reach a broad consensus on Nordic levels of social spending. Anyway, Sweden thought better of liberal economics too: When its welfare state became unsustainable (something savvy Danes are just starting to say), it went on a privatization spree and cut government spending from 67 percent of GDP to less than half.

And then there’s this excerpt about the Swedes, which makes me think it might be better to cohabit with a sheep in Copenhagen.

…a poll in which Swedes were asked to describe themselves, the adjectives that led the pack were “envious, stiff, industrious, nature-loving, quiet, honest, dishonest and xenophobic.” In last place were these words: “masculine,” “sexy” and “artistic.”

And here's the conclusion

Continued in article

Jensen Comment
Scandinavian nations are relatively small countries. It's not at all clear that the hands-off models would work as well in much larger nations having enormous cities.


How to mislead with statistics
The Cost of Living in Nations Around the World

Highest Cost of Living Nations

  1. Switzerland

  2. Norway

  3. Venezuela

  4. Iceland

  5. Denmark

  6. Australia

  7. New Zealand

  8. Singapore

  9. Kuwait

  10. United Kingdom

  11. Ireland

  12. Luxenbourg

  13. Finland

  14. France

  15. Belgium


The lowest cost of living nations are also ranked in this study, but I would not want to live in any of those nations.

Jensen Comment
You have to go to Movehub site for details on how the cost of living index is calculated ---

Any CPI index is controversial. It's not clear that it's very comparable between all these nations.

The low cost of living nations are poverty nations where most of the people barely stay alive in spite of a low cost of living.

Some of the high cost of living nations are rich oil producing nations like Norway, Venezuela, and Kuwait. Some have very high taxes with benefits redistributions like Denmark and New Zealand. Note that "free health care" is not really free. Even the lower income people are taxed somewhat for the their national health plans. Most nations do not have as many poor people on totally free medical and medicine health plans that the USA provides with Medicaid.

My impression is that some things we take for granted in the USA are luxuries in the highest cost of living nations. For example, it's not uncommon for middle class families in the USA to have homes with over 2,000 square feet. Such large homes are luxuries in all the 15 nations ranked above. Energy is relatively cheap in the USA in terms of electricity, heating oil, and gasoline compared to most of the high cost of living nations ranked above.

Health plans are difficult to compare between nations. For example, most on national health plans will provide organ, knee, and hip replacements but the waiting times may stretch into years. But those national health plans may also provide nursing care for the elderly that's not covered by Medicare in the USA.

Some of the high cost of living nations provide free or nearly free college education. But free college is not universal and may be limited to 25% or fewer of the college-age prospects. I don't think any nation provides free college education to everybody such as is now being proposed by President Obama.

My general impression is that most tourists would tend to agree that the the top 15 nations ranked above are indeed very expensive tourism destinations. But  some of the low cost of living nations are also expensive tourism destinations when there are high safety and kidnapping risks such as in Pakistan.

From the Scout Report on January 16, 2015

Obama Proposes Free Community College for All
Obama, in Tennessee, Begins Selling His Community College Tuition Plan

Federal Promise Unveiled

The Genius of Obama’s Two-Year College Proposal

President Obama’s community college proposal doesn’t make the grade

College the New High School?

FACT SHEET - White House Unveils America’s College Promise Proposal:
Tuition Free Community College for Responsible Students

"France Has A History Of Anti-Semitism And Islamophobia," by Mona Chalabi, Nate Silver's 5:38 Blog, January 14, 2015 ---

Obama's Foreign Policy Argument Is All Spin And No Substance ---

It may be unfair to expect any meaningful discussion of strategy and America’s security position in a State of the Union address.

But, it is all too clear that President Obama failed to go beyond a few sentences of vacuous spin in dealing with the world outside the United States. The most he did was to claim that the United States has fewer troops at war.

He provided no insights at all as to the security of the United States, his future defense policies, and his ability to translate strategic concepts into action.

Unfortunately, he has done little better in the past. President Obama has often been strong on concepts, but short on actual plans and progress. He has often talked about the importance of transparency, but has then provided little more than rhetoric and spin. Some six years after taking office, he still seems to find it extraordinarily difficult to get down to actual substance and to provide the kind of supporting data that gives him real credibility.

Consider where the United States now stands and what the president has not addressed in any detail or tangible form: He has decided to rush a withdrawal from Afghanistan by the end of 2016 without issuing any meaningful assessment of the risks, a clear action plan for the critical period between 2015 and the end of 2016, details on what the small number of U.S. forces and civilians left in country will actually do, and a clear explanation of planned U.S. expenditures.

The president said nothing about Russia and the Ukraine. More broadly, his administration has failed to define a clear strategy for dealing with Russia, for strengthening NATO, or reassessing the U.S. presence and force levels in Europe. The United States has issued many statements, concepts, and exercises in rhetoric about its policies, but little real substance.

It is now well over two years since the Obama administration announced a rebalancing to Asia. Once again, however, it has stuck with concepts and rhetoric and provided few actual details. It is unclear how U.S. force levels in Asia will change, how many aircraft and ships will shift from NATO to Asian missions, or what changes will take place in the U.S. budget.

As has been the case with all of the cuts in the U.S. defense budget and future programs, and discussion of sequestration, there has never been any explanation of how these affect U.S. strategy by major region or mission. The Obama administration can get down to details when it comers to defense budgeting, but it seems incapable of dealing with defense planning and programming.

The administration keeps implying that the United States is more secure in terms of indirect threats like terrorism. Once again, however, the president and key officials almost never address the trends actually reported in documents like the most recent State Department country reports on terrorism.

The database for the Statement Department report issued in April 2014 shows a massive rise in total terrorist activity from 2010 to 2014, driven largely by developments in countries where the United States has some degree of military involvement or is aiding the government: Afghanistan, Iraq, Syria, Yemen, Somalia, the Philippines, and Pakistan. If the United States is “winning” in any of these countries, the START database that the State Department uses in its Annex of Statistical Information does not show this. In fact, its trend analysis shows exactly the reverse.

The Obama administration, however, not only ignores these trends, it has yet to show it has any clear and well-defined strategy and action plans to deal with terrorism on a global basis. It seems to be fighting terrorism one country at a time, and it is not doing well.

The START global terror database demonstrates that major incidents have risen from less than 300 a year in the Middle East and North Africa region from 1998 to 2004 to approximately 1,600 in 2008, and increased again from around 1,500 in 2010 to 1,700 in 2011, and jumped to 2,500 in 2012, and 4,650 in 2013. This is a fifteen-fold increase since 2002, and threefold increase since 2010.

A RAND Corporation study on trends in terrorism in 2014 found:

Another report by the Institute for Economics and Peace found that:

If one looks more broadly at the Middle East, which is the principal scene of U.S. military action outside Afghanistan, the United States has have been involved in a low-level war in Yemen for years and seems to be losing it decisively. Yemen may seem far away, but it is on the border of Saudi Arabia and a critical center of the oil exports that feed the global economy, as well as that of the United States. Yemen is also the center of al Qa’ida in the Arabian Peninsula—arguably the most direct terrorist threat to the United States.

The president has extended nuclear negotiations with Iran without ever clearly defining U.S. goals or updating unclassified assessments of the Iranian nuclear threat. He has never clearly defined what the United States hopes to achieve in terms of the other threats Iran poses—in terms of missile threats to its neighbors and Israel, asymmetric sea-air-missile threats to our Arab allies in the Gulf, or its efforts to expand its influence in Iraq, Syria, and Lebanon. Yet, it is these nonnuclear threats that are the reason the United States now maintains a major warfighting capability in the Gulf and is making massive arms transfers to the Gulf Arab states. Once again, there is no real transparency and no clear strategy.

Like much of the media and the Congress, the president deals with three related conflicts in Iraq and Syria by focusing on the Islamic State, which is only one part of the reason for U.S. military action in Iraq and Syria. Even then, he has said nothing substantive about our progress in attacking the Islamic State to date nor provided any detailed reporting on the results of some 1,800 strike sorties on targets in Syria and Iraq. He did not mention the fact that the Islamic State is only one of the jihadist movements that now dominate the Syrian rebels and that it was the Al Nusra Front that decisively defeated the moderate rebel faction the United States had done most to support and arm in battles during late 2014.

Continued in article

Quantitative Easing (QE) despite arguments to the contrary can boil down to simply printing money to pay government bills, a strategy that destroys interest payments on savings accounts and pension funds. Exhibit A is the way QE in the USA drove interest rates on CDs from over 5% to virtually zero.

From the CFO Journal's Morning Ledger on January 23, 2015

Stimulus through bond purchases helped tip America back toward growth, but will it work in Europe? Investors certainly seemed to think so, as both stock and bond markets rallied on the news that the European Central Bank plans to flood the eurozone with more than $1.16 trillion in newly created money, the WSJ reports. Corporate leaders also responded with guarded optimism. “It’s one piece of getting Europe back to growth, and we should see an impact,” said Novartis AG CEO Joe Jimenez.

But the launching of quantitative easing won’t necessarily solve Europe’s problems, and soaring markets are just one piece of the puzzle. Denmark’s central bank cut its main interest rate 90 minutes after the ECB announced its plan, underscoring how swiftly the stimulus plan is likely to ripple through the region. While the euro sinks in response to the stimulus, that puts other currency areas in the region at risk, as it will likely weaken their exports. Denmark had feared that investors would rush into its currency, widening the spread against the euro further.

Meanwhile, a few savvy investors had anticipated last week’s surprise from the Swiss central bank, when it chose to scrap its three-year-old policy of limiting its value against the euro. Swiss investment firm Quaesta Capital AG bought options “a considerable time” ago betting that the euro would drop below 1.20 francs, said Chief Executive Thomas Suter.


Harvard's LARRY SUMMERS: 'There Is Every Reason To Expect QE Will Be Less Impactful In Europe' ---

On Thursday, the European Central Bank is expected to announce a new quantitative easing program. 


And according to a report from The Financial Times, Harvard professor Larry Summers is not convinced that the ECB's program will live up to the hype. 

Speaking at the World Economic Forum in Davos, Summers said, "There is every reason to expect QE will be less impactful in Europe." QE programs in Japan and the US have had at least some success in reaching their goals, which in Japan was devaluing the yen and in the US was boosting economic growth. 

Summers said, however, that the risks of doing too little in Europe outweigh the risks of doing too much. Summers has been the leading voice behind the economic idea of "secular stagnation," or that certain of the world's economies will be unable to create enough demand to sustain their current or expected growth trends. 

According to the FT, Summers outlined three reasons why Europe's QE program might not be as impactful as those undertaken in the US:

The latest indications are that the program will see the ECB buy €50 billion per month in bonds in an effort to stave off deflation and kickstart the sputtering European economy.

Markets have expected that the ECB would launch a QE program for some time, and over the last few months the euro has weakened and European stocks have rallied in anticipation of this program. 

Read more: http://www.businessinsider.com/larry-summer-on-european-qe-2015-1#ixzz3PYlz8iDl


"How Obama’s $3 Trillion Health-Care Overhaul Would Work," by John Tozzi, Bloomberg Businessweek, January 26, 2015 ---

The Obama administration has announced plans to accelerate a shift in how the U.S. pays its $2.9 trillion annual health-care bill. Officials at Medicare, which covers one in six Americans, want to stop paying doctors and hospitals by the number of tests and treatments they do. Instead, the government wants to link payments to how well providers take care of patients, not just how much care they provide.

This transition is already under way. Millions of Americans are now covered in experimental programs created by the Affordable Care Act designed to reduce unnecessary care and incentivize doctors to focus on quality, not quantity. The administration wants to vastly expand such programs to include half of all Medicare payments by the end of 2018. Here’s what you need to know:

Growth has slowed in recent years. Since 2010, per capita health spending has increased at about the same rate as the U.S. economy, a historically low rate for American health spending. Even if that holds steady, 17¢ of every dollar spent in the U.S. goes to health care, far higher than in other countries that have health outcomes as good or better than America’s.

The government’s starting to change how it pays doctors and hospitals

After the Affordable Care Act was passed in 2010, the federal government started experiments with doctors and hospitals willing to try new payment models. One of the attempts to do this was a program called Accountable Care Organizations (ACOs), which would let medical providers share in the savings if they reduced the overall health-care costs for their Medicare patients. Now more than 7.8 million of Medicare’s 55 million beneficiaries get their care through such arrangements, up from zero in 2011.

The Obama administration would like to speed this up. Medicare wants 30 percent of all payments to go through models like ACOs by the end of next year, and 50 percent by the end of 2018, up from about 20 percent now. Other incentives already in place, such as penalties for hospitals when patients get readmitted, nudge providers to improve care, even if they’re still getting paid in a traditional fee-for-service system. The government wants 90 percent of all Medicare payments to include such incentives by the end of 2018.

It still has a long way to go

It’s hard to say precisely how much of the total $2.9 trillion in health spending flows through fee-for-service payments, but a safe answer is: most of it. Even hospitals participating in Medicare’s new payment experiments often get paid the old way by commercial insurers, for example. Those contradictory incentives can make it hard for hospitals to fully make the changes they need to care for patients more efficiently. “Can you create a situation ultimately where you’re treating fewer people in the hospital and doing fewer higher-reimbursement treatments? That’s a real risk,” Moody’s health-care analyst Dan Steingart told me this month. “If your contracts only pay you on a pure fee-for-service basis, you’re basically shooting yourself in the foot.”

This is the first time Medicare officials have set clear targets for how much spending they want to flow through new payment systems. The Obama administration said the goals should incentivize more doctors and hospitals to join, and give them some certainty that the switch to new payment methods is real. The government also wants private-sector buyers of health care to make the shift. A council of executives from the insurance and medical industries, as well as big employers such as Boeing and Verizon, will try to expand alternative payments.

We don’t know how well it will work

Medicare is trying a few experiments, including ACOs and bundled payments (which try to put limits around how much hospitals can charge for common procedures like knee and hip replacements). While economists and medical providers largely agree that ending the fee-for-service program is essential to containing health-care costs, the evidence for the new models isn’t really in yet. Medicare officials said they have no results on bundled payments yet. The early years of the ACO program have shown some savings, but a majority of ACOs for which Medicare has data have not generated savings yet.

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

"Tax Preparers Brace To Give Bad Health Law News," by April Dembosky, KQED and Jeff Cohen, WNPR, WebMD News from Kaiser Health News, January 21, 2015 ---

Are you thinking about tax day yet? Your friendly neighborhood tax preparer is. IRS Commissioner John Koskinen declared this tax season one of the most complicated ever, and tax preparers from coast to coast are trying to get ready for the first year that the Affordable Care Act will show up on your tax form.

Sue Ellen Smith manages an H&R Block office in San Francisco, and she is expecting things to get busy soon.

“This year taxes and health care intersect in a brand new way,” Smith says.

For most people, who get insurance through work, the change will be simple: checking a box on the tax form that says, “yes, I had health insurance all year.”

But it will be much more complex for an estimated 25 million to 30 million people who didn’t have health insurance or who bought subsidized coverage through the exchanges. To get ready, Smith and her team have been training for months, running through a range of hypothetical scenarios. One features “Ray” and “Vicky,” a fictional couple from an H&R Block flyer. Together they earn $65,000 a year, and neither has health insurance.

“The biggest misconception I hear people say is, ‘Oh the penalty’s only $95, that’s easy,’” says Smith, but the Rays and Vickys of the world are in for a surprise that will hit their refund. “In this situation, it’s almost $450.”

That’s because the penalty for being uninsured in 2014 is $95 or 1 percent of income, whichever is greater. Next year, it’s 2 percent. Smith says the smartest move for people to avoid those penalties is to sign up for insurance before Feb. 15, the end of the health law’s open enrollment period.

But a lot of people may not think about this until they file their taxes in April. For them, it will be too late to sign up for health insurance and too late to do anything about next year’s penalty too, says Mark Steber, chief tax officer for Jackson Hewitt Tax Services.

Teaching Case on How New Health-Care Rules Affect Your 2014 Tax Return
From The Wall Street Journal Accounting Weekly Review on January 16, 2015

How New Health-Care Rules Affect Your 2014 Tax Return
by: Maria Armental
Jan 09, 2015
Click here to view the full article on WSJ.com

TOPICS: ACA, Individual Taxation

SUMMARY: For 2014, there are only two important federal income-tax changes for individual taxpayers, beyond the usual inflation-indexing of tax-rate brackets and various other parameters. Both have to do with the Affordable Care Act, and both may be complicated enough to inspire many people to engage the services of a professional tax preparer.

CLASSROOM APPLICATION: This article offers a good explanation of tax penalties under the Affordable Care Act.

1. (Introductory) What is the Affordable Care Act? Why are individual tax returns affected by the ACA?

2. (Advanced) What is minimum essential coverage? What are the penalties for failure to carry that coverage?

3. (Advanced) Who should be concerned about the penalty? How is the penalty calculated? How is it reported and paid?

4. (Advanced) What is the premium assistance tax credit? Who is eligible for the credit? What are the options for disbursement of this credit?

5. (Advanced) What is a refundable credit? Why are some credits refundable and others are not?

Reviewed By: Linda Christiansen, Indiana University Southeast

"How New Health-Care Rules Affect Your 2014 Tax Return," by Maria Armental, The Wall Street Journal, January 9, 2015 ---

Tax forms for 2014—such as W-2s and 1099s—will soon be arriving in the mail, which means it isn’t too early to start thinking about putting together your Form 1040 for last year.

For 2014, there are only two important federal income-tax changes for individual taxpayers, beyond the usual inflation-indexing of tax-rate brackets and various other parameters. Both have to do with the Affordable Care Act, also referred to as “Obamacare”—and both may be complicated enough to inspire many people to engage the services of a professional tax preparer.

Here’s what taxpayers need to know. Penalty for failure to carry “minimum essential coverage”

The health-care overhaul established a new federal income-tax penalty for the failure to carry what it deems minimum essential coverage. Last year was the introductory year for the penalty, which can potentially be owed for any month when qualifying health coverage wasn’t in force. (In Internal Revenue Service speak, the penalty is called a “shared responsibility payment.”)

You don’t have to worry about the penalty if you—and all members of your family, if applicable—had qualifying coverage for all of last year. In this case, simply check the box on line 61 of Form 1040, and you’re done.

If you didn’t have qualifying coverage for the entire year, the first task is to determine if you are exempt from the penalty. For that, see the instructions to new IRS Form 8965 Health Coverage Exemptions (and instructions for figuring your shared responsibility payment). If you were exempt for last year, file Form 8965 with your 2014 Form 1040 to prove it.

For additional information on exemptions, see IRS Publication 5187, Health Care Law: What’s New for Individuals and Families. (All IRS forms and publications discussed in this article can be found at www.irs.gov.)

If you weren’t exempt, the next step is to calculate the penalty amount that you owe using the work sheet in the instructions to Form 8965. Enter the penalty amount on line 61 of your return. For 2014, the penalty can range from $95 or less to a good deal more for higher-income folks. Also be aware that the penalty for 2015 and beyond can be much higher than the penalty for last year. Premium assistance tax credit

The other Affordable Care Act-related change for 2014 was the debut of the so-called premium assistance tax credit, or PTC. It is available to eligible individuals and families who obtain health coverage in a qualifying plan by enrolling through a state-run insurance exchange or through the federal exchange (www.healthcare.gov).

In general, you are eligible for the credit if your household income was between 100% and 400% of the federal poverty line and you didn’t have access to affordable employer-sponsored coverage last year. The allowable credit amount can vary widely depending on your specific circumstances. (For additional information on the PTC, see IRS Publication 974.)

The PTC can be advanced directly to the insurance company to lower your monthly premiums, or it can be claimed when you file your return. You may not know the exact amount of your allowable PTC for last year until you actually file your 2014 Form 1040. Calculate the PTC using the new IRS Form 8962.

If advance PTC payments were made on your behalf last year, the amount of those payments should be reported by the exchange to you on the new Form 1095-A, Health Insurance Marketplace Statement. You should receive Form 1095-A by no later than early February. Then calculate the difference between your advance PTC payments (if any) and the PTC amount you are actually entitled to claim on Form 8962. Enter any excess PTC amount on line 46 of Form 1040 and pay it when you file.

The PTC is a “refundable credit.” That means you can collect the full allowable credit amount even when it exceeds your federal income tax liability for last year. Specifically, the PTC amount is first used to reduce your federal income tax bill. After your bill has been reduced to zero, any remaining PTC can be either refunded to you in cash or used to make estimated tax payments for the 2015 tax year.

Bob Jensen's taxation helpers ---

Bob Jensen's threads on the ACA legislation ---



"What '60 Minutes' Didn't Say: Hospitals Will Charge You More Under Obamacare," by Avik Roy, Forbes, January 12, 2015 ---

On Sunday evening, CBS’ 60 Minutes did a feature story on Steven Brill’s new book, America’s Bitter Pill, in which Brill complains that Obamacare didn’t do enough to tackle the exorbitantly high price of U.S. hospital care. “Obamacare does zero to change any of that,” says Brill. That’s not exactly right. What Brill—and CBS—don’t tell you—is that Obamacare is driving hospitals to charge you more than they already do.

The U.S. hospital industry is crony capitalism at its finest

Steven Brill, founder of The American Lawyer and Court TV took a starring role in the health care debate when he published the Time articleBitter Pill,” describing how hospitals charge extreme prices for ordinary care to the uninsured. For example, Sean Recchi, an uninsured lymphoma patient, went to MD Anderson Cancer Center, a world-renowned facility in Houston, to seek treatment. MD Anderson proceeded to charge him $283 for a $20 chest X-ray. They charged him more than $15,000 for blood tests costing a few hundred dollars. They charged him $13,702 for a dose of Rituxan, a lymphoma drug, for which the average U.S. hospital price is around $4,000. All told, Recchi’s course of treatment cost $83,900. Whatever he couldn’t pay was called “uncompensated care.”

MD Anderson is not struggling under the weight of bills unpaid by the uninsured. In 2010, MD Anderson recorded revenue of $2.05 billion and operating profits of $531 million. Brill recounted several other patients at other hospitals with similar stories.

This is a topic we’ve covered extensively at The Apothecary, and elsewhere: the U.S. hospital industry is the single largest example of crony capitalism in the history of civilization. In 2013, I wrote a piece for National Review calledAn Arm and a Legexplaining the problem.

To summarize: the average day spent in a U.S. hospital costs five times as much as it does in other industrialized countries. That’s not because U.S. hospitals use higher technology or better care. It’s because they charge more for the same technology and the same care. Because they can get away with it.

Obamacare subsidizes hospitals’ already-high prices

Thanks to federal intervention in the health care system—Medicare, Medicaid, and the employer tax exclusion—hospitals have been able to charge whatever they want for their services, knowing that the average consumer has no idea how much he’s paying, because he’s paying mostly through taxes and other indirect means.

In 2013, U.S. government entities—i.e., taxpayers—spent a half-trillion dollars subsidizing American hospitals. By 2021, thanks in part to Obamacare, that will grow to $800 billion a year. That’s more than twice what the military spends subsidizing the aerospace industry.

And here’s the thing. While Brill rightly criticizes Obamacare for not doing anything to bring down the cost of hospital care, he’s actually an ardent supporter of the law. And this is the fundamental problem with Brill’s thesis. Obamacare doesn’t merely not do anything to bring hospital costs down. It actively works to drive hospital costs upward, by doubling down on the incentives hospitals have to charge more to patients.

In every state, it’s the hospital industry that has been the principal lobbyist in support of Obamacare. Why? Because the law increases taxpayer subsidies of the hospital industry by around $400 billion per decade. In other words, it takes the currently high prices that U.S. hospitals charge and says “keep doing what you’re doing.”

If Obamacare had never passed, hospitals would have been under much more pressure to keep these costs down, because no one would be bailing them out if hospital care became increasingly unaffordable. The opposite, of course, has happened.

Obamacare encourages hospitals to increase their market power

The next thing Obamacare does is it encourages hospitals to merge, thereby giving hospitals even more market power to charge even higher prices. A study by Jamie Robinson of the University of California found that highly concentrated hospital markets–where one or two hospitals controlled most of the patient volume—hospitals charged an average of 41 percent more for common procedures than they did in more competitive markets.

Continued in article

The Health Care Market is Not a Market

"Video:  Inside ‘Bitter Pill’: Steven Brill Discusses His TIME Cover Story," Time Magazine, February 22, 2013 ---

And Yet in New Hampshire and Other States Upwards of Half the Hospitals are Refusing to Serve Patients with ACA insurance?

Answer One of the main reasons is that hospitals serving ACA patients get stuck with having to serve deadbeats who are behind in paying their insurance premiums. For 60 days doctors and lawyers must serve ACA patients that are behind over 30 days in paying insurance premiums such that insurance companies no longer have to pay their medical bills.

In the past people who defaulted on premiums became uninsured people who were treated in special facilities such as county hospitals funded by taxpayers. Now people who default on premiums get a 90-day grace period where insurance companies pay their medical costs for 30 days and the doctors and hospitals have to pay for their medical care for 60 days.

There's a 90-day grace period in the ACA where people who default on paying premiums are still covered for the first 30-days by the insurance company and the next 60 days by the doctors and hospitals providing the care is absolutely absurd. The insurance companies will simply pass on these bad debt losses (which may be enormous for surgeries and hospital confinements) into higher premiums for the people who pay their medical insurance billings.



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

Bob Jensen's Tidbits Archives ---

Bob Jensen's Pictures and Stories

Summary of Major Accounting Scandals --- http://en.wikipedia.org/wiki/Accounting_scandals

Bob Jensen's threads on such scandals:

Bob Jensen's threads on audit firm litigation and negligence ---

Current and past editions of my newsletter called Fraud Updates ---

Enron --- http://www.trinity.edu/rjensen/FraudEnron.htm

Rotten to the Core --- http://www.trinity.edu/rjensen/FraudRotten.htm

American History of Fraud --- http://www.trinity.edu/rjensen/FraudAmericanHistory.htm

Bob Jensen's fraud conclusions ---

Bob Jensen's threads on auditor professionalism and independence are at

Bob Jensen's threads on corporate governance are at


Shielding Against Validity Challenges in Plato's Cave ---

·     With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier

·     With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams

·     With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR

·     With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

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?  ---

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


Bob Jensen's threads on accounting theory ---

Tom Lehrer on Mathematical Models and Statistics ---

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

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/