Path to Liberty | Privatization or Back to the Plantation?

July 30, 2012August 18, 2017 / L. M. Walker / 2 Comments

“Mr. President, it is natural to man to indulge in the illusions of hope. We are apt to shut our eyes against a painful truth, and listen to the song of that siren till she transforms us into beasts. Is this the part of wise men, engaged in a great and arduous struggle for liberty? Are we disposed to be of the number of those who, having eyes, see not, and, having ears, hear not, the things which so nearly concern their temporal salvation? For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth; to know the worst, and to provide for it.” ~ Patrick Henry

An Accountant Explains Why the U.S. Cannot Balance its Budget

– By: Larry Walker, Jr. –

In following video (link), a former accountant who worked with budgets for over 40 years clearly explains the U.S. budget dilemma. After reviewing the facts contained therein, it should be evident that there are only two possible solutions for the survival of the United States: (1) raise taxes by 50% across the board or, (2) lower taxes and privatize entitlement programs.

Raising taxes leads to a smaller economy and larger government, with the need to eventually raise taxes again at some point. On the other hand, lowering taxes while privatizing entitlement programs leads to a larger economy and less government. Although the latter will cause some pain in the initial years, the affliction will be faced either way. However, privatization is the only path leading to the long-term sustainability of a free Republic.

While some would conclude that the solution involves a combination of increasing tax rates while cutting entitlement programs, I believe the two are mutually exclusive. That is to say, raising taxes reduces the size of the economy leading to the need for even more entitlements. Raising taxes also narrows the tax base leading to less government revenue. On the other hand, privatization requires lowering income tax rates to enable entitlement programs to go private. Cutting taxes also leads to a larger private economy, a broader tax base and increased government revenues. So the latter leads to greater economic independence for free citizens, and less reliance on government programs. This should be the goal for a free society.

Our freedoms may only be sustained by lowering income tax rates in conjunction with privatization of the major entitlement programs (i.e. Social Security, and Medicare). Although some painful days will occur during the initial years of conversion, in which the government must meet its past commitments while transitioning younger workers towards privatization, it is important to note that, “Every time in this century we’ve lowered the tax rates across the board, on employment, on saving, investment and risk-taking in this economy, revenues went up, not down.” Thus reducing income tax rates will actually increase, not decrease, federal revenues during the transition. Therefore, the tax cuts that I am speaking of should be across the board and immediate, as should the transition towards privatization.

There are really only two choices, (1) a larger private economy based on free-market principles and self-reliance, or (2) an ever increasing and invasive federal government with greater dependence on its ability to collect taxes from a shrinking base of those able to pay. The policies implemented today will determine America’s future. The alternatives are clear – live free, or become a ward of the State. There are no laurels to rest upon. Either you favor exercising your God-given right to freedom, or returning to slavery. The decision is yours. As for me, I choose freedom, by any means necessary.

“The day that the black man takes an uncompromising step and realizes that he’s within his rights, when his own freedom is being jeopardized, to use any means necessary to bring about his freedom or put a halt to that injustice, I don’t think he’ll be by himself.” ~ Malcolm X

Photo Credit: English Exercises

Obsolete Government Programs, Part 2 | Medicare – Apr 21, 2011

Social Security: A Breach of Trust – Jan 09, 2011

As I explained in “The Social Security Bust Fund”, the federal government has summarily confiscated and spent every dime of the $2.6 trillion surplus, which would have comprised the Social Security Trust Fund, and has…

Unequally Yoked | Social Security and the Working Class – May 07, 2011

The Social Security Bust Fund – Jan 03, 2011

In other words, the Treasury pays interest to the Social Security Trust Fund, but not in the form of cash, rather in the form of additional special-issue securities. (Huh?) Interest is only physically paid out when money is needed…

Saving Our Way to Prosperity

June 29, 2011August 18, 2017 / L. M. Walker / Leave a comment

Yes. You Can.

– By: Larry Walker, Jr. –

According to Barack Obama, “We can’t simply cut our way to prosperity.” Prior historical references: None. Upon hearing such an absurd statement, and being of the homo economicus persuasion, my first instinct is to define what it means to me, and then to determine whether it has any relevance in my life. If we are honest, we must each define what the word prosperity, or rich, means to us. Only after we have defined its meaning are we able to chart a course.

In the WikiHow.com article, “How to get rich,” there are seven steps, the first of which is to define the word “rich.” Obviously it means different things to different people. According to Obama, the word rich means making more than $250,000 per year. A more formal definition of prosperity is “to be fortunate or successful, especially in terms of one’s finances.” For others it means achieving a certain level of prestige, or being able to afford a comfortable retirement, neither of which necessarily involves making $250,000 in a year. How would you define prosperity?

Homo Economicus

The term Homo economicus, or Economic human, is the concept in some economic theories of humans as rational and narrowly self-interested actors who have the ability to make judgments toward their subjectively defined ends. My definition is that men and women are primarily interested in making judgments which will improve their own economic condition. My goal is not to be a millionaire, although that would be nice. My goal is to be able to meet my obligations in life and to remain self-sufficient upon retirement.

In John Stuart Mill’s work on political economy, in the late nineteenth century, he further defined this economic man as “a being who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labor and physical self-denial with which they can be obtained.” I have to admit that my goal is also to get the most out of life with the least possible amount of labor, but that’s not exactly how it’s been working out. I work much too hard. What’s your goal?

Yes. You can.

Notice that Obama uses the words, “we and our”, as in, “We can’t simply cut our way to prosperity.” Exactly what does that mean? The last time I checked, “we” wasn’t responsible for paying my bills. Actually, you and I just might be able to cut our way into relative prosperity. But I don’t believe that the federal government can tax and spend us into a utopian paradise. If this were possible, wouldn’t we already be there?

Returning to “How to Get Rich,” the 4th Step is entitled, Delay Gratification, under which we find the following guidance on the path to prosperity:

Are you spending money on things that won’t get you rich?
Are you sticking with a job that doesn’t make that much money to begin with?
In order to get rich, you’re going to have to give up some of the things you enjoy doing now, so that you can enjoy those things without restriction later. For example, you might like having free time, so you give yourself a few hours a day to do nothing. But if you were to invest those few hours into getting rich, you could work towards having 20 years of free time (24 hours a day!) with early retirement. What can you give up now in exchange for being rich later?

Cut expenses
Get a job that pays more or get a promotion
Downgrade or give up your car
Downgrade your apartment or house
Reallocate your spare time

Although there is an element of truth in the statement, “we can’t cut our way to prosperity”, the fact is that you and I can, individually. The act of cutting, or reducing, my personal expenses causes me to save money. So to cut means the same as to save. By substituting the word ‘cut’ with ‘save’ in Obama’s original comment; what he is really saying to me is that, “We can’t simply save our way into prosperity.” Why, that’s preposterous! It’s as if he is implying that I should empty my emergency fund and retirement savings, spend it all today, and I will be magically ushered into prosperity. But if I did that, then I would be forced to borrow huge sums of money when ready to invest in furtherance of my dreams. But this won’t work out too well, especially since banks normally require a down payment.

The 5th Step in How to Get Rich is entitled, Save Money. It states, “You’ve heard the phrase “It takes money to make money.” So start socking away the extra money you’re making now that you’ve delayed gratification as outlined previously. After all, what’s the point in giving up the stuff you like if you have a hole in your pocket? Start building a “get rich fund” at the bank. Always pay yourself first. This means before you go and blow your pay check on a new pair of shoes or a golf club you don’t need, put money aside in to an account that you don’t touch.” This makes much more sense to me than the idea of squandering my savings, as implied by Obama. So for me, yes, I can save my way into relative prosperity, and so can you. The federal government could do the same, after paying off its massive $14.4 trillion debt, that is. This ought to be Obama’s goal. Yes. You can.

No. Government Can’t.

He jabbers on, “We need to do what’s necessary to grow our economy; create good, middle-class jobs; and make it possible for all Americans to pursue their dreams.“

There he goes with that “our” stuff again. We need to do what’s necessary to grow our economy. That sounds appealing, but fortunately my economy is not yours, and yours is not mine. My economy is comprised of my household, my family, my business customers, vendors, lenders, employees and other obligations. I don’t know where Obama is coming from, but there is one way that the federal government could help to grow my economy, and that would be to stop taking as much of my hard earned money in taxes. That would help quite a bit. If I didn’t have to pay any taxes at all, my economy would be doing pretty well. Try that one on for size! If the government concentrated more on how to take less of my money, then my economy would improve, and so would yours. This simply requires cutting the size of government.

Next, he says that we need to create good, middle class jobs. What exactly is a good, middle class job? Does it require picking up a shovel? The idea of having a good, shovel-ready, middle class job doesn’t exactly mesh with prosperity, at least not in my book. Thanks but no thanks. I don’t really want a middle class job; I would rather have more freedom and prosperity. I don’t believe that group effort is required in job creation. I believe that one economic man can create many jobs. In fact, the true economic man is going to need a lot of help upon reaching his own prosperity. He’s going to need employees, suppliers, accountants, attorneys, financial planners, housekeepers, gardeners, service people, travel agents, retailers, restaurants, auto dealers, gas stations, chauffeurs, etc. It seems to me that Obama’s goal should be to inspire more economic men and women, and greater prosperity, rather than higher taxes, and more mundane, government-manufactured, temporary, shovel-ready, middle class jobs.

Finally, Obama says that we need to make it possible for all Americans to pursue their dreams. But all that’s required here is freedom. Are we not free? As long as I am free, I can do anything, and so can you. Nothing can stop me from pursuing my dreams, yet my dreams are not yours, and yours are not mine. Maybe your dream is to manufacture a product, while mine is to provide a good quality affordable service. Someone else’s dream might involve freeloading off of the toil of others. Just as the word prosperity means different things to different people, our dreams are not all the same. “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” The federal government didn’t give these rights to me, and it can’t take them away. You sir, cannot spend our way into life, liberty, and the pursuit of happiness, they are the gift of God.

The bottom line: Yes we can save our way to prosperity. That’s how it works in this Universe. It takes money, to make money. Here are a few more steps we can follow along the path to prosperity. Step 1: Cut discretionary government spending back to 1996 levels. Step 2: Force the federal government to start making principal payments against its debt. Step 3: Abolish every new governmental regulation established since January of 2009. Step 4: Get rid of Barack Obama and his queer notions about the economy.

Want Tax Hikes? Push the Reset Button

June 26, 2011August 18, 2017 / L. M. Walker / 1 Comment

Cut Government Spending Back to 1996

– By: Larry Walker, Jr. –

Dialing the top income tax bracket back 15 years without a reciprocal cut in government spending does nothing to preempt the debt bubble. However, if the Golfer in Chief and his inept cohorts remain stuck on reinstating those bygone tax rates, then all taxpayers must necessarily stand as staunchly fixated on cutting the size of discretionary government spending, back to 1996 levels if necessary. Those not willing to regress on government spending really need to stop kidding themselves into believing the silly notion of resurrecting 15 year old tax brackets as a serious solution. If you are confounded, then more than likely you have never heard of inflation, don’t purchase goods and services with your own money, and lack the skills required to balance a simple checkbook. In other words, those who don’t comprehend would better serve the public by resigning from government and returning to their own ruinous private lives.

The fallacy of anointing $250,000 as the top tax bracket of the 21st Century is actually based on 20th Century income tax tables. What worked in 1996 won’t work today. What Barack Obama and fellow democratic party residue from the last shellacking are really talking about is reimposing the top income tax brackets of 1996, which applied some 15 years ago. Omitted from this quandary are two key factors: inflation and the level of discretionary government spending in 1996.

Inflation – As far as personal income, $250,000 in 2011 had the same buying power as $175,085 in 1996. And $250,000.00 in 1996 has the same buying power as $356,969.06 in 2011. Annual inflation over this period was 2.40%. Thus $250,000 isn’t what it used to be.
Discretionary Government Spending – Discretionary spending in 1996 was $532.7 billion compared to the 2012 budget estimate of $1,340.3 billion ($1.3 trillion). If they want us to acquiesce to 1996 tax brackets, then shouldn’t the government backtrack to 1996 discretionary spending as well?

In terms of both inflation and discretionary government spending, the budgeted 2012 discretionary spending level of $1,340.3 billion had the same buying power as $938.6 billion in 1996. And the $532.7 billion actually spent in 1996 has the same buying power as $760.6 billion today. If democrats insist on hiking taxes on those making over $250,000, then a simple compromise would be for them to agree to cut discretionary government spending by $579.7 billion in 2012 ($1,340.3 minus $760.6). This would bring both government spending and income tax rates in line with the late 20th century. But the right thing to do under Obamanomic theory is to simply return to actual 1996 discretionary spending. This requires cutting the federal budget by $807.6 billion, as shown below.

From General

This means cutting National Defense by $463.9 billion, International Affairs by $46.1 billion, General Science, Space and Technology by $15.3 billion, Energy by $10.2 billion, Natural Resources and Environment by $19.2 billion, Agriculture by $2.9 billion, Commerce and Housing Credit by $557 million, Transportation by $3.5 billion, Community and Regional Development by $14.2 billion, Education, Training, Employment and Social Services by $66.8 billion, … etc…

Don’t worry about who gets hurt or rewarded, just cut it, and then tell governmental agencies, “Here’s your budget, now you figure out how best to spend it.” Problem solved. Next question!

“Knowledge is an inherent constraint on power.” ~ Thomas Sowell

“Collecting more taxes than is absolutely necessary is legalized robbery.” ~ Calvin Coolidge

References:

http://www.dollartimes.com/calculators/inflation.htm

http://www.gpo.gov/fdsys/pkg/BUDGET-2012-TAB/xls/BUDGET-2012-TAB-8-7.xls

Unequally Yoked | Social Security and the Working Class

May 7, 2011August 18, 2017 / L. M. Walker / 3 Comments

Public vs. Private Sector Inequities

~ By: Larry Walker, Jr. ~

Did you know that most state and local government employees are exempt from Social Security taxes? Millions of Americans who are covered by state or local retirement plans do not pay into the Social Security system. If Social Security is such a great plan, then why are 17,738,156 [1] state and local government workers exempt? Why does the federal government continue to legally bind the rest of us to a sinking ship? This isn’t 1933 anymore. The time for change is now. Social Security is the biggest fraud in American history.

There is no retreat but in submission and slavery! Our chains are forged! ~ Patrick Henry

Teachers Retirement System of Georgia vs. Social Security

For example, teachers in the state of Georgia are covered by the Teachers Retirement System (TRS). Following are some of the differences between teachers covered by TRS and private sector workers covered by Social Security.

Although Georgia teachers are required to contribute 5.0% of their pay into the TRS, the contribution is considered a pre-tax deduction. Workers covered by Social Security must contribute 6.2% of their pay on an after-tax basis.
Georgia public employers pay a matching contribution of 9.24% into the TRS. Private sector employers pay a 6.2% match to the Social Security Administration (SSA).
TRS contributions are invested in stocks, bonds and other liquid investments earning interest, dividends and the chance for appreciation in value. Social Security contributions are used to pay the benefits of current recipients. Any surplus is borrowed and spent by the federal government which is currently $14.3 trillion in debt.
The normal retirement age for Georgia teachers is 60 years of age. Normal retirement for Social Security recipients is age 65, 66, 67 or greater.
Georgia teachers may retire at any age after 25 years of service. Social Security recipients may not retire until they reach the age of 62 (with reduced benefits).
The amount of benefits received by Georgia teachers is based on the two highest years of compensation. The benefits paid by Social Security are based on the average amount of earnings over a 35 year period.
Georgia teachers become vested in their retirement benefits after 10 years of service. Upon separation from service they may either take a lump-sum distribution or rollover their contributions into an IRA. After the vesting period, Georgia Teachers may also take a lump-sum distribution or rollover the employer contributions into an IRA. Social Security recipients are vested after working 40 quarters, or 10 years, but have no rights to lump-sum distributions or rollovers.
Upon separation of service or retirement, Georgia teachers may either take a lump-sum distribution or rollover their benefits into an IRA account. Georgia teachers may also elect to have their remaining benefits paid to their beneficiaries. Social Security recipients do not have any contractual right to take lump-sum distributions, make rollovers, or to pass benefits on to their heirs.
The maximum amount of annual retirement benefits paid to Georgia teachers is determined by multiplying the average of their top two years’ salary by the number of years of service, and then by 2%. Thus an employee who earned $50,000 in their top two years, with 30 years of service, would receive an annual pension of $30,000 per year, or $2,500 per month [50,000 * (.02 * 30)]. The average amount of benefits paid to Social Security recipients is $14,088 per year, or $1,174 per month. The maximum Social Security benefit for a worker retiring in 2011 is $28,392 or $2,366 per month based on earnings at the maximum taxable amount for every year after the age of 21. The maximum taxable amount of Social Security wages in 2009/2010 is $106,800. [2,3]

Wisconsin Retirement System vs. Social Security

As a second example, teachers in the state of Wisconsin are covered by the Wisconsin Retirement System (WRS). Following are some of the differences between teachers covered by WRS and private sector workers covered by Social Security.

Although Wisconsin teachers are supposed to contribute 5.0% of their pay into the WRS, the contribution is actually paid by their employer (i.e. amounts designated as employee contributions for accounting purposes are actually paid by the employer). [1 (pages 15-17)] WRS employees may also make additional tax deferred contributions to their WRS accounts. Workers covered by Social Security must contribute 6.2% of their pay on an after-tax basis.
Wisconsin public employers pay a matching contribution of 4.5% into the WRS, but since they also pay the employees portion, their total contribution is 9.5%. Private sector employers pay a 6.2% match to the Social Security Administration (SSA).
WRS contributions are invested in stocks, bonds and other liquid investments earning interest, dividends and the chance for appreciation in value. Social Security contributions are used to pay the benefits of current recipients. Any surplus is borrowed and spent by the federal government which is currently $14.3 trillion in debt.
The normal retirement age for Wisconsin teachers is 65 years of age, or 57 with 30 years of service. Normal retirement for Social Security recipients is age 65, 66, 67 or greater.
Wisconsin teachers may retire as early as the age of 55 (with reduced benefits). Social Security recipients may not retire until they reach the age of 62 (with reduced benefits).
The amount of benefits received by Wisconsin teachers is based on an average of the three highest years of compensation. The benefits paid by Social Security are based on the average amount of earnings over a 35 year period.
Wisconsin teachers become vested in their retirement benefits immediately and may either take a lump-sum distribution or rollover the employer contributions into an IRA upon separation. Social Security recipients are vested after working 40 quarters, or 10 years, but have no rights to lump-sum distributions or rollovers.
Upon separation of service or retirement, Wisconsin teachers may either take a lump-sum distribution or rollover their benefits into an IRA account. Wisconsin teachers may also elect to have their remaining benefits paid to their beneficiaries. Social Security recipients do not have any contractual right to take lump-sum distributions, make rollovers, or to pass benefits on to their heirs.
The maximum amount of annual retirement benefits paid to Wisconsin teachers is determined by multiplying the average of their top three years’ salary by the number of years of service, and then by 1.6%. Thus an employee who earned $50,000 in their top three years, with 30 years of service, would receive an annual pension of $24,000 per year, or $2,000 per month [50,000 * (.016 * 30)]. The average amount of benefits paid to Social Security recipients is $14,088 per year, or $1,174 per month. The maximum Social Security benefit for a worker retiring in 2011 is $28,392 or $2,366 per month, based on earnings at the maximum taxable amount for every year after the age of 21. The maximum taxable amount of Social Security wages in 2009/2010 is $106,800. [2,3]

Unequally Yoked

When it comes to retirement, not all Americans are treated equally. State and local government workers have great advantages over private sector employees. Not only does the private sector pay the salaries of state and local government workers through income and property taxes, and not only do we contribute towards their retirement, but we allow them to have better retirement plans than ourselves. As most of us sit, chained to the broken and antiquated Social Security system, state and local government employees continually bargain for more and more. Here are the major inequities in a nutshell.

Most state and local government employees contribute less towards their retirement plans than those covered by Social Security but receive back more in benefits. Wisconsin public employees contribute nothing towards their retirement yet receive back more in benefits than comparable working class peons.
State and local government employees have portable retirement accounts which actually exist. Americans who are covered by Social Security don’t have any portability of savings, nor have their funds been set aside or invested in any manner.
State and local workers have greater options for early retirement based on age and the number of years of service, while Social Security patrons must wait until the age of 62 to receive a reduced amount of benefits.
The age of full retirement for those covered by Social Security continues to be pushed back due to the lack of funds, while state and local employees are allowed to quit their jobs and take their savings with them at any time.
State and local employees are paid retirement benefits based on an average of their top 2 or 3 years of earnings, while Social Security benefits are calculated using an average of 35 years of earnings.
Social Security benefits are limited to $28,392 per year, in 2011, no matter how much is earned in a lifetime. The benefits paid to most state and local plan recipients are for the most part unlimited.

Not all workers in the United States are covered by Social Security, so why don’t the rest of us have a choice? Since state and local retirement plans are required to invest contributions in a fiduciary capacity, why doesn’t Social Security? What makes state and local government employees better than the average American? Wouldn’t privately owned and managed retirement accounts be an improvement for all Americans? It’s time to end Social Security. It’s time for all American workers to be treated equally. The ‘Nanny State’ has failed. The era of big government is over. Give me liberty, or give me death!

Sources:

[1] WISCONSIN LEGISLATIVE COUNCIL – 2006 COMPARATIVE STUDY OF MAJOR PUBLIC EMPLOYEE RETIREMENT SYSTEMS

[2] Social Security Administration – Answers

[3] Your Retirement Benefit: How It Is Figured

Other References:

Teachers Retirement System of Georgia – 2010 Annual Financial Report

Wisconsin Department of Employee Trust Funds – 2009 Annual Financial Report

Wisconsin Retirement System (WRS) Benefit Summary

Links:

Chile's Private Accounts Turn 30 – Investors.com

Bill Baar's West Side: NBC LA: A New Party Within a Party? Labor-Skeptic Democrats

Obsolete Government Programs, Part 2 | Medicare

April 21, 2011August 18, 2017 / L. M. Walker / 3 Comments

You Paid How Much For Medicare?

~ By: Larry Walker, Jr. ~

Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over, or who meet other special criteria. Some say that Medicare operates similar to a single-payer health care system, but with one key exception: Medicare Part A, the part that we pay for all of our working lives, only provides hospital insurance, and it doesn’t kick in until after the age of 65. Thus, Medicare is more akin to an excessively expensive, mandatory, long-term health care plan than anything else. Although there is a health insurance aspect to Medicare, known as Part B, it’s not free either. Medicare Part B requires the payment of additional monthly premiums upon retirement of between $96.40 and 308.30 per month, depending on the recipient’s level of income at the time.

Medicare is partially financed through payroll taxes imposed by the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act of 1954. In the case of employees, the tax is equal to 2.9% (1.45% withheld from the worker and a matching 1.45% paid by the employer) of the wages, salaries and other compensation in connection with employment. Until December 31, 1993, the law provided a maximum amount of compensation on which the Medicare tax could be imposed each year. But, beginning January 1, 1994, the compensation limit was removed. A self-employed individual must pay the entire 2.9% tax on self employed net earnings, but may deduct half of the tax from income in calculating income tax. Beginning in 2013, the 2.9% hospital insurance tax rises to 3.8% on earned income exceeding $200,000 for individuals and $250,000 for married couples filing jointly. [1]

Times Have Changed: Medicare is Obsolete

In the 1960s, Medicare was introduced to rectify the following problems: health care for the elderly and health care for the non-elderly with pre-existing conditions. The FICA tax was increased in order to pay for this expense. Both problems are listed below, followed by modern day private-sector solutions meant to address the same.

The U.S. had no federal-government-mandated health insurance for the elderly; consequently, for many people, the end of their work careers was the end of their ability to pay for medical care.
The U.S. had no federal-government-mandated health insurance for all those who are not elderly; consequently, many people, especially those with pre-existing conditions, have no ability to pay for medical care.

Most Americans would be able to afford real health insurance, or better plans, were we not forced to pay huge sums out of our current pay, for benefits that some will never see. For example, Barack Obama paid a total of $48,496.29 in Medicare taxes in 2010 alone. This means he paid $4,041.36 per month for long-term hospital insurance benefits that he won’t realize until he turns 65. A portion of the $48,496.29, namely $5,730.23 was actually paid by his employer, which would be you and I. Could Mr. Obama perhaps find a better deal in the private-sector? I would hope so. Would you pay $4,041.36 per month for long-term hospital insurance coverage if you had a choice? “AFLAC… AFLAC… AFLAC”!

Medicare Benefits

Medicare has four parts: Part A is Hospital Insurance. Part B is Medical Insurance. Medicare Part D covers prescription drugs. Medicare Advantage plans, also known as Medicare Part C, are another way for beneficiaries to receive their Part A, B and D benefits. All Medicare benefits are subject to medical necessity. The original program was only Parts A and B. Part D was new in January 2006; before that, Parts A and B covered prescription drugs in only a few special cases.

Medicare Premiums

Most Medicare enrollees do not pay a monthly Part A premium, because they (or a spouse) have had 40 or more 3-month quarters in which they paid Federal Insurance Contributions Act taxes. Medicare-eligible persons who do not have 40 or more quarters of Medicare-covered employment may purchase Part A for a monthly premium of:

$248.00 per month (in 2011) for those with 30-39 quarters of Medicare-covered employment, or
$450.00 per month (in 2011) for those with less than 30 quarters of Medicare-covered employment and who are not otherwise eligible for premium-free Part A coverage.

All Medicare Part B enrollees pay an insurance premium for this coverage; the standard Part B premium for 2009 is $96.40 per month. A new income-based premium schema has been in effect since 2007, wherein Part B premiums are higher for beneficiaries with incomes exceeding $85,000 for individuals, or $170,000 for married couples. Depending on the extent to which beneficiary earnings exceed the base income, these higher Part B premiums are $134.90, $192.70, $250.50, or $308.30 for 2009, with the highest premium paid by individuals earning more than $213,000, or married couples earning more than $426,000. In September 2008, CMS announced that Part B premiums would be unchanged ($96.40 per month) in 2009 for 95 percent of Medicare beneficiaries. This would be only the sixth year without a premium increase since Medicare was established in 1965.

Medicare Part B premiums are commonly deducted automatically from beneficiaries’ monthly Social Security checks. Part C and D plans may or may not charge premiums, at the programs’ discretion. Part C plans may also choose to rebate a portion of the Part B premium to the member. While private-sector health insurance premiums are deducted from employees’ paychecks on a pre-tax basis, Medicare taxes are confiscated from employees on an after-tax basis. Is that fair? Upon retirement, if one wishes to pay for Medicare Part B, the premiums are conveniently deducted from retirees Social Security checks on an after-tax basis. Is that fair?

Still Clueless?

Three-quarters of all taxpayers pay more in payroll taxes than income taxes. Do you get it now? It’s time for this to change. It’s time to stop confiscating money from today’s payroll checks to cover tomorrow’s health care needs. It’s time to give American citizens more of our own money so that we may provide for our current needs. All that we ever hear from the Democrats is how many Americans can’t afford health insurance. Did it ever dawn on any of them that maybe the reason we can’t afford health insurance is because we are being robbed blind by a 15.3% payroll tax? Out of every American paycheck, 15.3% is being literally looted and squandered by the federal government. We are being robbed by a 1933 law which has outlived its usefulness. It’s time to end Medicare and Social Security. All past obligations of Medicare must be immediately privatized through legitimate private-sector insurance companies.

References:

[1] http://www.ssa.gov/OACT/ProgData/taxRates.html

http://en.wikipedia.org/wiki/Medicare_(United_States)

Obsolete Government Programs, Part 1 | FICA

April 21, 2011August 18, 2017 / L. M. Walker / 2 Comments

“Free at last! Free at last! Thank God Almighty, we are free at last!” ~ MLK, Jr.

~ By: Larry Walker, Jr. ~

Are Social Security Benefits an Inalienable Right? ~

The Federal Insurance Contributions Act (FICA) is codified at Title 26, Subtitle C, Chapter 21 of the United States Code. The FICA tax is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicare —federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits. The amount that one pays in payroll taxes throughout one’s working career is indirectly tied to the social security benefits annuity that one receives as a retiree. Some folks claim that the payroll tax is not a tax because its collection is tied to a benefit. The United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security. [1]

There has been a temptation throughout the program’s history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled “RESERVATION OF POWER,” specifically said: “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor. [1]

In this 1960 Supreme Court decision Nestor’s denial of benefits was upheld even though he had contributed to the program for 19 years and was already receiving benefits. Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, having been a member of the Communist party. Accordingly, Mr. Nestor’s benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not a contractual right. [1]

So did you think that Social Security Benefits were an inalienable right? Think again.

Times Have Changed: Social Security is Obsolete

The Center on Budget and Policy Priorities states that three-quarters of taxpayers pay more in payroll taxes than they do in income taxes. The FICA tax is considered a regressive tax on income (with no standard deduction or personal exemption deduction) and is imposed (for the years 2009 and 2010) only on the first $106,800 of gross wages. The tax is not imposed on investment income (such as rents, interest and dividends). As a side note, the Earned Income Credit was enacted in 1975 to “offset the burden of social security taxes and to provide an incentive to work”. More recently the Making Work Pay Credit of 2010 and the 2% Payroll Tax Cut of 2011 were enacted with a redundant goal: “to offset the burden of social security taxes”. Why are Social Security taxes deemed to be so over-burdensome?

Perhaps Social Security has outlived its usefulness. In the 1930s, the New Deal introduced Social Security to rectify the following three problems: retirement, injury-induced disability, or congenital disability. It introduced the FICA tax as the means to pay for Social Security. Following are some of the difficulties that existed for working-class Americans prior to the Great Depression, countered with modern day private-sector innovations meant to address the same.

The U.S. had no federal-government-mandated retirement savings; consequently, for those people who had not voluntarily saved money throughout their working lives, the end of their work careers was the end of all income.

But times have changed. Prior to the Great Depression there weren’t many incentives in place to encourage saving towards retirement, nor were there as many options available as there are today. Nowadays employers, employees and the self-employed can choose between numerous retirement plans not limited to the following:

Defined-Benefit Plans
Defined-Contributions Plans
401(k) Plans
403(b) Plans
Individual Retirement Accounts (IRAs)
Roth IRAs
Qualified Insurance Annuities
Simplified Employee Pension’s (SEP)
Savings Incentive Match Plan for Employees (SIMPLE)

This isn’t 1933 anymore. The time to end Social Security is now. Since we are able to choose between so many pre-tax options which result in the deferral of income taxes until the funds are withdrawn, why are we still stuck on pouring good money down a bad hole? By now, everyone knows that any surplus once heralded by the Social Security Trust Fund has been confiscated and comingled into the government’s general fund. And we all know that the government’s general fund is more than a whopping $14 trillion in the hole. If working folks and their employers weren’t chained by the bonds of mandatory contributions to Social Security we would be living on easy street.

If we were not forced to pay this mandatory tax of 6.2% (12.4% for the self-employed) on earned income up to the limit of $106,800, we would be able to save a greater portion of our own money into the modern retirement vehicles mentioned above. Loosing employers from burdensome payroll taxes will likewise allow them to provide a greater portion of benefits to employees. However, with government-run Social Security literally robbing us of our retirement savings, and ‘investing’ it in the abyss of debt and irresponsibility, known as Washington, DC, there is little leftover for most Americans to save. In fact, if every dollar of Social Security tax paid on my behalf since I began working had instead been invested in the S&P 500 Index; I would now be a millionaire. But since I haven’t had any choice in the matter, I may just have to settle for the paltry poverty level rations offered by Social Security. What’s worse is that thanks to Social Security, on the day that I die the government-squandered fruit of my labors will go with me.

The U.S. had no federal-government-mandated disability income insurance to provide for citizens disabled by injuries (of any kind—work-related or non-work-related); consequently, for most people, a disabling injury meant no more income (since most people had little to no income except earned income from work).

Nowadays, most employers offer mandatory and voluntary disability insurance plans through legitimate insurance companies. Likewise, all employers are required to provide Workers Compensation. Many of us would be able to afford our own portable disability insurance plans were we loosed from the bands of the FICA Act.

There was no federal-government-mandated disability income insurance to provide for people unable to ever work during their lives, such as anyone born with severe mental retardation.

Nor is there any such government-mandated disability income insurance today, the key word being insurance. Who in their right mind believes that the federal government provides insurance? If the federal government wants to provide real insurance for persons in need, then the responsible thing to do would be to pay for private-sector insurance policies, on behalf of those in need.

Social Security is an idea that has outlived its usefulness. It’s time for the United States to begin weaning itself off of Social Security. Let’s stop pretending that we are living in 1933. We have options in the 21st Century that didn’t exist in the 20th, but our options are severely constrained by the bonds of old stale ideas. Although it’s doubtful whether Social Security ever served its original purpose, it is indisputable that times have changed. In the 1930’s Americans had no safety net, today we know that we must provide for our own retirement security. However, the amount we are able to save is limited by the amount of money being confiscated from our earnings to cover past obligations. Get a clue. Three-quarters of all taxpayers pay more in payroll taxes than income taxes. Do you get it? It’s time for this to change. It’s time to phaseout Social Security. The age of federal government mandated retirement looting is over.

References:

[1] http://www.ssa.gov/history/nestor.html

http://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax#cite_note-4

We Are All Billionaires Now

April 18, 2011August 18, 2017 / L. M. Walker / 1 Comment

Tax Breaks for Millionaires and Billionaires ~

“But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society.” ~ Barack Obama

~ By: Larry Walker, Jr. ~

The Class Warfare Instigator in Chief (CWIC) has been railing against wealth. People who have saved up for retirement, or who were fortunate enough to acquire assets which have appreciated substantially are not impressed. Anyone with half a brain knows that a millionaire (or billionaire) is an individual whose net worth is equal to or exceeds one million (or one billion) units of currency. Net worth refers to an individual’s net economic position. It is calculated by adding the value of all of ones assets minus the value of all of their liabilities. Being a millionaire or billionaire has nothing to do with an individual’s annual taxable income. So when politicians, such as Obama, speak of tax breaks for millionaires and billionaires, do they even know what they’re talking about?

In the United States of America, we don’t pay income taxes based on the value of our net worth. We pay income taxes based on the amount of income earned or produced annually. So where exactly are these so called tax breaks for millionaires and billionaires? I contend that they don’t exist, namely because as I just stated; individuals are not taxed based on their net worth.

At the last count, there were just 412 billionaires in the United States. So the next time Obama refers to “billionaires”, it would be more appropriate for him to refer to them as “the 412 billionaires”. When one studies the IRS’ Statistics of Income reports, the top 400 annual incomes reported on tax returns in 2007 averaged just under $138 million, far short of a billion. Word twisting politicians, namely Obama, would have us believe that there are people making billions of dollars per year, but that’s simply not true. In reality, only 400 households were fortunate enough to report average annual incomes of around $138 million. And as stated, only 412 Americans have a net worth of over a billion dollars. According to the Spectrum Group there were 7.8 million millionaires in the United States in 2009. However, according to a Taylor Nelson Sofres report, half of all millionaire households in the US are headed by retirees.

Good luck to Democrats in first identifying tax breaks that benefit people with net worth’s of over $1 million (or $1 billion). They don’t exist. And secondly, since more than half of millionaire households are headed by retirees, most likely the only taxable income they receive is from pensions and investment income (a healthy chunk of that being tax-exempt). So does Obama want to raise taxes on grandpa? You mean to say that when people work hard all their lives and save up more than a million dollars for retirement, now that they have become millionaires they are evil and deserve to pay higher taxes? Get out of town, literally.

So is Obama talking about increasing taxes on investment income? Is he talking about doing away with tax-exempt interest? Does he want to get rid of the favorable capital gains rates? Does he intend to impose a tax based on unearned income (the amount of equity a citizen has in assets on a given date)? Or is he talking about re-imposing confiscatory death taxes? Say what you mean, and mean what you say, otherwise shut the hell up. It’s time to stop inciting envy, strife and class-warfare. On the other hand, if all Obama is trying to say, and rather poorly, is that he wants to lower the top tax bracket down to $250,000 and raise marginal tax rates to 39.6% above that amount (i.e. return to the 1993 tax rate schedules), then he should just continue to say that like a broken record until his demise.

I think I understand what Obama is really saying. What he’s saying to me is that since $250,000 is to $1 billion as $25,000 is to $100 million, if you make $25,000 per year, you’re a billionaire. Got it? That seems to be how Obama, sleepy Joe, and the 143 Democrats in Congress see it. With 535 members of Congress, and only 143 of them Democrats, how are they controlling this conversation anyway? After all, there are 311,174,158 citizens, only 412 billionaires, 7.8 million millionaires, and a mere 145 delusional Democrats in DC. Perhaps one of these 145 simpletons can list for the public all of the alleged tax breaks for millionaires and billionaires. I will attempt to identify a few of them presently.

Alternative Minimum Tax (reference)

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.

The AMT exemption amounts are set by law for each filing status. For tax year 2010, Congress raised the AMT exemption amounts to the following levels:

$72,450 for a married couple filing a joint return and qualifying widows and widowers;
$47,450 for singles and heads of household;
$36,225 for a married person filing separately.
The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,700 for 2010.

Do the AMT exemption amounts (above) look like they’re targeting millionaires and billionaires to you? It doesn’t look that way to me. Not unless, like I said from the beginning, “we are all billionaires”. So just what kind of items can trigger the AMT? Here are a few.

Personal Exemptions – What? Believe it or not, personal exemptions contribute to AMT liability. The exemptions you claim for yourself, your spouse and your dependents are not allowed when calculating alternative minimum tax. It’s pretty rare (though not impossible) to see a tax return where someone had to pay AMT solely because of their exemptions, but the more exemptions you claim, the more likely it is that you’ll have AMT liability.

Standard Deduction – What? Some 70% of American taxpayers claim the standard deduction (rather than itemizing). The standard deduction isn’t allowed under the AMT. Usually this isn’t a problem because the AMT generally hits people with higher incomes, and these people are more likely to claim itemized deductions. Yet it’s worth noting that a deduction that’s so widely used can contribute to AMT liability.

State and Local Taxes – What? If you itemize, there’s a good chance you claim a deduction for state and local tax, including property tax, income tax and sales tax. These deductions are not allowed under the AMT. If you live in a place where state and local taxes are high, you’re more likely to be subject to the alternative minimum tax.

Interest on Second Mortgages – The AMT allows a deduction for interest on mortgage borrowings used to buy, build or improve your home. If you borrowed against your home for some other purpose, the interest deduction isn’t allowed under the alternative minimum tax.

Medical Expenses – The AMT allows a medical expense deduction, but it’s more limited than the deduction under the regular income tax. If you claim an itemized deduction for medical expenses, part or all of it will be disallowed when you calculate your alternative minimum tax.

Miscellaneous Itemized Deductions – Certain itemized deductions are available if your total deductions in this general category add up to more than 2% of your adjusted gross income. Among the items here are unreimbursed employee expenses, tax preparation fees and many investment expenses. You can’t deduct these items under the AMT, though. A large deduction in this category could lead you to pay alternative minimum tax.

Various Credits – Some of the credits that are allowed when you calculate your regular income tax aren’t allowed when you calculate your AMT. The more credits you claim, the more likely it is that you’ll end up paying alternative minimum tax. Fortunately, Congress has extended relief for the “personal credits” in recent years.

Well, the AMT certainly doesn’t constitute a tax break for millionaires and billionaires. Heck, we’ve barely breached the $75,000 mark if married ($50,000 if single) and most of the main tax breaks have already dissipated. Next!

Retirement Contributions Credit Limitation (reference)

You may be eligible for a tax credit if you make contributions to an employer-sponsored retirement plan or to an individual retirement arrangement. If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income. However, income limits apply to individuals with a filing status and income of the following amounts:

Single, married filing separately, or qualifying widow(er), with income up to $27,750
Head of Household with income up to $41,625
Married Filing Jointly, with incomes up to $55,500

So if you’re single and make more than $27,750 you can forget about this tax credit. It doesn’t appear that we’ve tapped into those elusive tax breaks for millionaires and billionaires yet. So let’s try again.

Earned Income Tax Credit Limitation (reference)

The Earned Income Tax Credit or the EITC is a refundable federal income tax credit for low to moderate income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

Tax Year 2010 maximum credit:

$5,666 with three or more qualifying children
$5,036 with two qualifying children
$3,050 with one qualifying child
$457 with no qualifying children

Earned Income and adjusted gross income (AGI) must each be less than:

$43,352 ($48,362 married filing jointly) with three or more qualifying children
$40,363 ($45,373 married filing jointly) with two qualifying children
$35,535 ($40,545 married filing jointly) with one qualifying child
$13,460 ($18,470 married filing jointly) with no qualifying children
Investment income must be $3,100 or less for the year.

So much for tax breaks for millionaires and billionaires. There don’t appear to be many real breaks for folks making even $50,000 per year. Shall we try again?

Mortgage Interest Limitation (reference)

Interest deductions on home mortgages are limited. The law allows taxpayers to deduct interest on two categories of indebtedness secured by their residences. Acquisition indebtedness is used to acquire, construct, or substantially improve a residence, and cannot exceed $1,000,000. Home equity indebtedness is any debt other than acquisition indebtedness and cannot exceed $100,000.

So if you are lucky enough to be able to borrow more than $1 million on a mortgage, you cannot deduct any mortgage interest for the amount above $1 million. And if you have a home equity loan of more than $100,000, the amount of interest you can deduct is not allowed for the amount above $100,000. This doesn’t look like a tax break for millionaires and billionaires either. Surely there must be a humongous tax break for rich folks with children.

Child Tax Credit Limitation (reference)

The Child Tax Credit is for people who have a qualifying child under the age of 17. It is in addition to the earned income credit, if you even qualify for that. The maximum amount you can claim for the credit is $1,000 for each qualifying child. However, you must reduce your child tax credit if your modified adjusted gross income (AGI) is above the amount shown below for your filing status.

Married filing jointly – $110,000.
Single, head of household, or qualifying widow(er) – $75,000.
Married filing separately – $55,000.

So if you’re married with children and have income of more than $110,000, you don’t get the full $1,000 child tax credit. Oh well, this isn’t a tax break for so called millionaires and billionaires. Maybe if you borrow a ton of money to invest in a graduate degree you’ll get a huge tax break.

Student Loan Interest Limitation (reference)

You can claim up to $2,500 of student loan interest you paid as an above-the-line tax deduction on Form 1040. What? Does the government even have any idea that some people are paying upwards of $4,000 – $10,000 in student loan interest per year? And do they understand that an above-the-line tax deduction on $2,500 can at the most save an individual or couple 25-28% of the maximum amount? So if you’re married and pay $7,000 in student loan interest, you’ll receive a tax break amounting to between $250 and $700 depending on your tax bracket.

But if your income is too high, you won’t get any break at all. You can take this deduction only if your modified adjusted gross income (AGI) is less than: $75,000 if single, head of household, or qualifying widow(er); or $150,000 if married filing jointly. Oh well, we could go on and on, but so much for that theory.

Conclusion

No one pays income tax based on their net worth. We pay income taxes based on the amount of income we earn or produce each year. The simplistic act of raising the top marginal tax rate from 35% to 39.6%, and lowering the top tax bracket down to $250,000 won’t bring in an extra dime from millionaires and billionaires. Although it will take some money out of the pockets of small businesses, families and other hard working Americans, it will leave true millionaires and billionaires unscathed. There’s a dearth of tax breaks for anyone making more than $75,000 per year, and marginal tax rates are already way too high across the board, so Obama’s comments are simply absurd. Perhaps one of the other 144 Democratic Party simpletons in DC can list for us all of the alleged tax breaks for millionaires and billionaires. But until then, I’m going to have to ask you to muzzle it. Otherwise, prepare to give up your remaining 145 seats.

It’s not the 412 billionaires that worry me; it’s the federal government, $14 trillion in debt, with its hand in my pocket. That makes me queasy.

Keepin’ It Real: Jobs Lost or Squandered

February 9, 2011August 18, 2017 / L. M. Walker / 1 Comment

Stimulus: Failure to Launch

– By: Larry Walker, Jr. –

Can we call the American Recovery and Reinvestment Act of 2009 (ARRA) a failure yet? After all, the number of black and white Americans who are no longer counted as part of the labor force has reached a record high under the present White House occupant. Is this good or bad? According to the Bureau of Labor Statistics, since the beginning of February of 2009, an additional 772,000 black Americans, and an inconceivable 3,743,000 white Americans have left the labor force. Additionally, the labor force participation rate among both white and black Americans has declined to the lowest level since 1984. From the start of February of 2009 through January of 2011 the labor force participation rate among whites fell from 66.0% to 64.5%, while the participation rate among blacks declined from 63.2% to 61.7%.

If he was so wrong about the Stimulus Bill, couldn’t he also be wrong about health care and every other one of his experimental proposals?

In the past 8 months, only 92,000 net jobs have been created, so exactly how are we better off? Has the back of the Great Recession really been broken? I would say not.

According to my previous post which is based on data which is publicly available from the Bureau of Labor Statistics, through January of 2011 the Stimulus Bill has resulted in a loss of 3.3 million jobs, and that is in addition to the number of jobs lost from the beginning of the recession until that time. The total number of jobs lost or squandered under the policies of the current White House occupant has been 5.19 million.

Revised: Stimulus Jobs Tracker

Step 1: Honesty – Get honest (with yourself).

Video: Vanguard TV3 Failed Rocket Launch after Sputnik

——————–

Sources:

http://stats.bls.gov/news.release/empsit.t02.htm

http://stats.bls.gov/webapps/legacy/cpsatab2.htm

Final: Tracking the 5.19 Million Jobs Obama Squandered

February 5, 2011August 18, 2017 / L. M. Walker / 4 Comments

“We have a system that increasingly taxes work and subsidizes nonwork.” ~ Milton Friedman ~

– By: Larry Walker, Jr. –

Formerly: Tracking the 5.2 Million Jobs Obama Squandered (published on 10/29/2010) *

Obama’s economic stimulus bill was sold to us with the promise of creating 3.5 million jobs by January of 2011. Well, since January has now passed, it’s time to tally up the results. My previous post, Tracking the 5.2 Million Jobs Obama Squandered, was about dead on. You can call it 5.19 million jobs squandered if you like, but it’s still 5.2 million when rounded off.

For a refresher, “Tracking the 3.5 million jobs Obama will save or create” was the title of a blog post, last updated on January 8, 2010, on a website named Understanding The Market – Capire Il Mercato. In a note, the author, Cole Kendall stated, “I will make the calculations in a way that provides a “best case” to the Obama team.” Since Mr. Kendall decided to give up on his tracking operation at the end of 2009, I decided to follow it through to it’s dire conclusion.

Using the same criteria as originally outlined by Obama’s (now former) economic team, jobs are defined by counting the total non-farm employment, from Table B-1 of the Bureau of Labor Statistics, “Employment Situation Report” (as seasonally adjusted). Instead of boring you with the month-by-month data, I went ahead and cut to the chase, skipping from December of 2009, where Mr. Kendall left off, to January of 2011, up to the latest data available from the 02/04/2011 jobs report.

Following is an excerpt from Cole Kendall’s original blog post, followed by my revised stimulus jobs tracker, and a brief analysis:

In an earlier essay I tried to explain President Obama’s notion of saving or creating jobs. The stimulus plan bill was passed by both houses of Congress last night and the final plan was a bit smaller than the earlier version, so the President now asserts that the plan will save or create 3.5 million jobs.

This post will track the 3.5 million jobs. There are a number of ways to measure jobs in the US. Some people work several different jobs at a time while others change employers frequently, so measuring jobs is not as simple as it might seem. There was a cartoon from the Clinton era showing the President speaking at a dinner that he had created 8 million jobs and an overworked waiter thinking that he had three of them. Obama’s economic team defined jobs [as those contained in the Department of Labor’s establishment payroll data] (see here for their original report).

Just before the stimulus bill passed the Department of Labor issued a report (see here). The number of people working (see Table B1, about 2/3 of the way down, with the heading “Establishment Data”) was 134,580,000 (seasonally adjusted). This is a preliminary measure and will be revised next month and probably revised again in a year. Using the Obama team methodology, without the stimulus bill employment would be expected to fall by around 1,613,000 jobs during the next two years so that without the stimulus bill we would expect employment to be 132,967,000 in January 2011.

With the revised estimate of 3,500,000 jobs “saved or created”, employment should be 136,467,000, creating 1,887,000 in addition to the 1,613,000 jobs saved.

The table below will be updated with every new employment release to see how jobs have changed. The first column is the actual number of payroll jobs starting with the month before the stimulus plan passed; the second column is the total change in employment since the month when the stimulus plan passed and the third column shows the gap remaining of jobs to be “created” in order to reach the target.

Revised: Stimulus Jobs Tracker

The conclusion is pretty grim, and certainly doesn’t mesh with what Obama has been saying out on the campaign trail. The sad truth is that instead of creating 3.5 million jobs, since it was passed, the stimulus plan has instead resulted in the loss of 3.3 million jobs. Since the stimulus plan was supposed to have saved 1,613,000 jobs, in addition to creating 1,887,000 jobs, by January of 2011, and since it has actually resulted in the loss of 3,298,000 jobs, Obama’s Economic Stimulus has fallen short of the original target by 5,185,000 jobs.

I don’t know what you call this, but I call it a colossal failure. Perhaps it’s time for an orderly transfer of power? Do we need another stimulus plan, or just another President? I don’t think Obama is helping his case by roaming around the country making false claims in what appears to be a frantic effort to get re-elected, especially when he’s the one who screwed this up. The thought of trillions in deficit-financed spending flushed down the drain, to no avail, doesn’t bode well for Democrats, nor for Mr. Obama.

“Obama was a job creator from day one.” ~ Nancy Pelosi

You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time. ~ Abraham Lincoln (R-IL)

Sources:

http://stats.bls.gov/news.release/empsit.t17.htm

http://stats.bls.gov/webapps/legacy/cesbtab1.htm

http://understandingthemarket.com/?p=63

Table B-1 Data: Total Non-Farm Employment (In Thousands, As Seasonally Adjusted):

http://stats.bls.gov/webapps/legacy/cesbtab1.htm

Amtrak: A Lesson in Government Takeovers

January 23, 2011August 18, 2017 / L. M. Walker / 1 Comment

– By: Larry Walker, Jr. –

The Quest for Affordability

“They say it’s a government takeover of health care, a big lie just like Goebbels. You say it enough, you repeat the lie, you repeat the lie, you repeat the lie, and eventually, people believe it.” ~ Rep. Steve Cohen (A Government Employed Psychotic)

“If it ain’t broke, break it, and then when it’s broke, nationalize it.” ~ A Wayward Progressive

When facing a régime hell-bent on government takeovers, one must first understand exactly what a government takeover is, how one occurs, and whether or not a takeover is good for the nation. Once we understand what a government takeover is, how one occurs, and how it will end; and once convinced that a takeover is indeed occurring, we can make up our own minds about how to handle it. Of course, proponents of government takeovers will always deny that one is occurring. Such denial is generally accompanied by calling anyone who would so hint a liar, or Nazi propagandist.

According to advocates of government takeovers, any private entity which makes a profit is bad and worthy of increased regulation, and once bankrupted, in certain cases, worthy of takeover. Under the rules for government takeovers, the objective is government control of everything, from private industry to personal lives, and everyone is a loser. The only thing that matters for most politicians is that they keep their own government backed jobs, retirement security, and benefits; and the best way for them to ensure this is through increased government control.

The Government Takeover of Passenger Railroads

For example, before the National Railroad Passenger Corporation (a.k.a. AmTrak) existed, there was a profitable private passenger rail industry. But profits being deemed a bad thing by both big government and unions, meant that its days were numbered. “Bring them down”, they decried. “Top down, bottom up, inside out.” While unions pushed for higher pay, greater retirement security, and more benefits, big government tightened regulations — limiting the amount railroads could charge for their services. The attack came by big government from the top, and unions from the bottom. The only thing lacking was a thrust from the inside out.

The first line of attack would come from the Interstate Commerce Commission which prevented increases in the amounts that privately owned railroads could charge both shippers and passengers. This meant that the only way in which railroads could become more profitable was through cost-cutting. But the ability to slash costs was greatly hampered by agreements with aggressive employee unions. Eventually, the railroads turned to mergers as the only way of escape. What else can an industry do once it has been obstructed from responding to changing market conditions?

In 1968, the New York Central and Pennsylvania railroads merged creating Penn Central, which would result in a virtual monopoly within the U.S. passenger rail industry. But the nation would be shocked when only two years later, in June of 1970, Penn Central declared bankruptcy. At the time, it was the largest corporate bankruptcy in American history. But this was only the beginning. Behind the scenes a government takeover was being staged from the inside out.

In May of 1967, the National Association of Railroad Passengers (NARP) was founded to lobby for the continuation of passenger trains in the United States. Imagine that, a few months before the railroads were forced to merge, and just three years before they would go bust; a government takeover was already in the works. This was the missing link, an attack from the inside out. It was big government from the top, employee unions from the bottom, and now passengers themselves (at least in name) were demanding continued services, profitability be damned. The man-made crisis was complete and there was now enough force to justify a full blown government takeover.

The NARP’s lobbying efforts were successful at dividing both political parties. The Democratic Party was opposed to any sort of subsidies to privately-owned railroads, and the Republican Party feigned opposition to the nationalization of the industry. Sound familiar? But in the end, both Democrats and Republicans would compromise for fear of being responsible for the extinction of passenger trains. So what did big government do? What they always do, they agreed to both subsidize and nationalize the passenger rail industry.

In 1971, the federal government stepped in and created Amtrak, a virtual government agency, which began to operate a skeleton service on the tracks of Penn Central and other U.S. railroads. Today, the federal government owns all of the preferred stock in AmTrak, has invested $32.4 billion of taxpayer’s money into the government owned corporation over the past 40 years, and in return, AmTrak has netted total losses of $27.1 billion. In fiscal year 2010, the federal government pumped in an additional $2.4 billion, and AmTrak promptly lost $1.4 billion of it, before the red ink dried. Besides the federal government, the only other shareholders in AmTrak are the old railroad companies themselves, which are now consolidated into other private companies.

The Fate of Shareholders

AmTrak initially issued 10,000,000 shares of common stock, with a par value of $10 per share, to the bankrupt railroads in exchange for their assets. In fact, American Financial Group (AFG) still owns 5.2 million shares which were acquired directly from Penn Central. Although Congress, in 1997, ordered AmTrak to buy back all of its common shares by the year 2002, AmTrak has yet to have the funds, and has in fact been totally dependent on additional government subsidies just to remain viable.

In 2002, AFG filed suit against AmTrak seeking $52 million, plus interest (5.2 million shares @ $10). Two years prior, AmTrak had offered to buy back all of its common shares for a measly three cents per share. Of course none of the common stock holders accepted such a ridiculous offer. Who in their right mind would settle for $156,000 in return for a $52 million investment made some 40 years prior? This is a fine example of what private stock and bond investors may expect in the wake of a government takeover. The original stockholders would have gotten a better deal through normal bankruptcy proceedings, but because of the government’s takeover, everyone got screwed, including generations of unborn taxpayers. It would be wise to remember this as the government attempts to takeover the health care industry.

The Government Takeover of Health Care

And that brings us to the main point of this post, the government’s attempted takeover of the health care industry. The only difference between what I will call AmHeal, and AmTrak, is that the health care industry isn’t broke (yet). But regulations are coming which will attempt to restrict the amount that health insurance and health care providers may charge their customers, while increasing the burden of services they must provide. These regulations will naturally cripple the industry from the top down and from the bottom up.

Health care insurers and providers will quickly realize that the only way they can remain profitable is through cost-cutting, yet their ability to cut costs will be restricted by the increased amount of services they will be required to provide. With millions more customers having been mandated by the federal government, and with restrictions on the amount which may be charged, companies will begin to consolidate in order to achieve economies of scale. But just like the railroads, their attempts will fail. In the meantime, labor unions and progressive community organizers are seeking to stir up public support by way of demanding that health insurers and providers do more with less, profitability be damned. In the end, we will wind up with government run health care, just like many have warned all along.

Unless a poison pill strategy is implemented to derail this insidious disaster, we will soon see the AmTrak of health care, AmHeal. And AmHeal will be just as disastrous as AmTrak in every way. Over time, AmHeal will not only lose billions of dollars per year, but potentially trillions, and will eventually bankrupt the United States of America. Investors in health care companies will be among the first to get burned, as health care companies begin filing for bankruptcy. This will be the final blow to the $2.3 trillion health care industry, and the end of 1/6 of our free market economy.

So how do we derail AmHeal before it reaches the tarmac? In dealing with a government takeover, a poison pill must be taken from within the government itself. We must takeover the government with a top down, bottom up, and inside out approach. We the people must elect politicians dedicated to defunding all regulatory aspects of the affordable health proposal, and then put pressure on the political system from the bottom up. Then all private industry must place additional pressure on the government by requesting waivers, thereby opting out of the government’s proposed mandates. Tea Party advocates, moderates, centrists, conservatives, State governments, lobbyists, and proponents of the free-market must band together. We know that we must stop the government takeover of health care, and that is precisely what we are doing, and what we will accomplish.

References:

Penn Central Transportation

National Association of Railroad Passengers

Major Acts of Congress – Rail Passenger Service Act

AMTRAK REFORM AND ACCOUNTABILITY ACT OF 1997

History of U.S. Gov’t Bailouts

Amtrak management = worthless Amtrak stock

RAILROADS: Perils of Penn Central