Health Care, Not Insurance

This is precisely why we need a national health service, and not the mishmosh of tangled threads of bureaucracies and naysayers that the Republicans and other fascists want to use to keep us down:

No one disputes that the $2.3 trillion we devote to the health care industry is often spent unwisely, but the fact that the United States spends twice as much per person as most European countries on health care can be substantially explained, as a study released last month says, by our being fatter. Even the most efficient health care system that the administration could hope to devise would still confront a rising tide of chronic disease linked to diet.

[...]According to the Centers for Disease Control and Prevention, three-quarters of health care spending now goes to treat “preventable chronic diseases.” Not all of these diseases are linked to diet — there’s smoking, for instance — but many, if not most, of them are.

We’re spending $147 billion to treat obesity, $116 billion to treat diabetes, and hundreds of billions more to treat cardiovascular disease and the many types of cancer that have been linked to the so-called Western diet. One recent study estimated that 30 percent of the increase in health care spending over the past 20 years could be attributed to the soaring rate of obesity, a condition that now accounts for nearly a tenth of all spending on health care.

In case you were wondering where the cost savings that would pay for this healthcare reform is coming from, those numbers speak loudly. Right there, just in obesity and diabetes, you have a $260 billion a year. A year.

Considering Obama's paltry proposal will only cost $1 trillion this decade, that savings alone, even if only half realized, means American healthcare would show a profit....IF WE ENACT ACTUAL HEALTHCARE!

Now, there are many who would say this is tantamount to dictating what Americans can and cannot eat.

Bullshit. How many Americans really listen to their doctors? Because if Americans were that easily persuaded off their bad habits, we wouldn't need healthcare reform. We wouldn't need to rein in rising healthcare costs.

You'd think the private insurance companies would have glommed onto this fact: if Americans eat healthier, that's more profit in their pockets.

But then you'd have to take into account America's "farm" lobby (really, it's better called "agribusiness" or for a more descriptive face "Big Food"), which is among the biggest contributors to heartland legislators, bigger in many cases than banks or credit card companies.

As an anecdotal example, just try talking to an Iowa caucus about cutting farm subsidies. There's a quick way to lose a primary cycle.

We don't need insurance reform. We need healthCARE reform, a system that encourages Americans, perhaps even thru tax incentives, to eat healthier, to lose weight, to stop smoking.

Indeed, many private insurers do this now, offering cash incentives: $400 per annum to visit a health club, discounts for being a non-smoker, discounts for attending weight-loss classes, and I'm sure there are a few that will actually rebate some of your premiums if in fact you do lose weight.

Imagine on your 1040 being offered the chance to take a few hundred bucks off your bill to the IRS by affirming, honestly, that you've quit smoking? Or can offer evidence that you went dutifully to the gym twice a week? Or you completed a marathon or a hundred mile bike ride?

We already use the tax code to reward good behavior, to construct social good, like the charitable or home mortgage interest deductions. What's wrong with using this device to cut a tax bill that everyone agrees is going to become more bloated as the tax code ratchets up from the ridiculously undertaxed position it has been for the past eight years?

Economic Dodgeball

This is long overdue:

President Obama yesterday announced a major offensive against businesses and wealthy individuals who avoid U.S. taxes by parking cash overseas, a battle he said would be fought with new tax laws, new reporting requirements and an army of 800 new IRS agents.

During an event at the White House, Obama said his proposal would raise $210 billion over the next decade and make good on his campaign pledge to eliminate tax advantages for companies that ship jobs abroad.

"I want to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens," Obama said, flanked by Treasury Secretary Timothy F. Geithner and Internal Revenue Service Commissioner Douglas Shulman.

The nation's largest business groups immediately assailed the proposal, arguing that it would subject them to far higher taxes than their foreign competitors must pay and ultimately endanger U.S. jobs. Key Democrats were cool to the plan, and said Obama's ideas should be considered as part of a broader effort to streamline the nation's complex corporate tax code.

It's about time, says me.

The logic is very simple: if you incorporate in the largest economy on the planet and do not move your entire operation overseas (including the executive suites), then you should be subject to US tax on your income.

If you live in the United States and are a United States citizen, then you should be subject to United States tax on your income.

Period. End of discussion.

For far too long it's been way too easy for corporations and people to shelter income by offshoring it. That is, set up a foreign subsidiary (or bank account) and conduct business under that guise. You were exempt from paying tax on any of that income until you repatriated it.

Bollocks. There's a clear economic benefit from that income, even if it remains overseas, in terms of stock price and annual results. So either one of two things must happen: either that income doesn't count towards your annual results, or you owe taxes on it.

For you lay folks out there, please understand that there is little connection between a company's annual income as reported to shareholders and what it claims on taxes. This move is a major step towards what should be the ultimate goal: if you claim earnings to the public, then you owe taxes on those earnings and you should not be able to manipulate your taxable income so easily.

After all, if I tried to shelter American income offshore, I'd be hauled before a Tax Court in no time. But MicroSoft or ExxonMobil or Halliburton can pretty much with a straight face claim American income for the benefit of their shareholders and stock price, but suddenly hold out empty pockets for the tax man.

That's not right and it's not fair and must change. So kudos to President Obama for doing the right thing.

I Got An Uncle Lives In Taxes

It's not often that a 'fact check" gets it wrong, but here's an example of a partisan fact check:

McCain has proposed to end one of the largest tax breaks in the entire economy. Some 60 million Americans buy health insurance thru employers tax-free, and McCain would indeed begin to tax the value of the benefit.

However McCain also proposes to give the money back as a tax credit, $2,500 for individuals, $5,000 for families.

"Let's give them a $5,000 refundable tax credit to go out and get the health insurance of their choice," McCain said.

Riiiiiiiiiiiight.

Because a tax credit is money in your pocket?

Is it?

What is a tax refund? A tax refund is what's left over after your tax liability has been figured out. It is, in essence, an interest free loan to Uncle Sam.

(Side note: In an Actor212 NotPresidency, I would insist the rules be changed that you receive interest at the Applicable Federal Rate on any refund you obtain. But I digress...)

A tax credit merely lowers that tax liability: in effect, it is a dollar for dollar reduction in your taxes, which you've already paid into the pot.

Now, would your taxes go down? Yes, that's a given, particularly since the tax on the health insurance premium plus the insurance premium itself would be less than the $14,000 maximum premium you'd be credited for.

But...you're still paying for the premium, and you're still paying for the tax.

After all, the average annual premium for an individual in the US is about $4,500. But, the average annual premium for a family of four is, ready for this? $12,500 give or take!

So the benefit to a family of four of a tax credit of $5,000, assuming they pay the top tax rate of 35% ($5,000/0.35) would cover a $14,000 premium.

In other words, you're saving maybe $1500 a year or $525 in taxes!

And look what would happen once this new tax was insituted: insurance companies would now be forced to report to the government the premiums paid by employee (as a check to the payroll reports individual employers now provide to the IRS, such as your W2 form).

Who pays for that administrative cost? You do.

This is another example of the mindless, piecemeal, irrational economic approach of what was supposedly the more financially savvy of the two major parties: you know, they made the money to BE Republicans, so they must know how to pass that knowledge on to us, right?

Eight years of a Bush Presidency, which included six years of a Republican Congress, has proved the fallacy of that notion. Next to no job creation (as opposed to Clinton, who created more jobs than anyone else in history, unless you count the global war machine galvanized against Adolph Hitler), an S&P 500 & Dow Jones 35 that has actually lost ground, mortgage foreclosures at all-time record levels, an unemployment rate higher than any seen in a Democratic administration since the 1940s (save for Clinton's first year in office), personal income declines, and now the tanking of the banking and insurance sectors.

Is this any way to run the greatest nation ever to appear on the face of the planet?????

Because, Yes, We Want MORE Tax Cuts For The Wealthy!

Oh lord, this can't help but seal the deal for Barack Obama:

WASHINGTON (AP) — Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress.

The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.

Collectively, the companies reported trillions of dollars in sales, according to GAO's estimate.

"It's shameful that so many corporations make big profits and pay nothing to support our country," said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich.

An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called "S" corporations pay taxes under individual tax codes.

"Half of all business income in the United States now ends up going through the individual tax code," Edwards said.

I added that last bit of the story to present a reasonable condition to the headline, but also to rebut it, slightly.

It's true that many corporations are so-called "individual corporations", LLCs and S-Corporations where the income is essentially passed thru to the shareholders for tax purposes.

The problem, one the Cato Institute fails to note, is the compliance with this when filing tax forms.

The IRS estimates that roughly $300 billion in undeclared income just vanishes somewhere between the corporations' books and the shareholders' tax returns each year.

At a 35% tax bracket, that ain't small potatoes, taxwise!

Too, where Cato makes it appear that this problem is almost solely a function of the tax liabilty shifted to the individual business owner, in truth, the GAO report shows that "about 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts."

That's each, not collectively. When you are talking about trillions in revenues, $50 million is a small piece, so this is not an insignificant number of tax evaders.

In plain English, what does this mean?

It means that the entities-- people and corporations-- that beneift most from the bounty of resources of this great nation, its people, land, and other natural resources, are not giving back in a commensurate fashion as payment for these resources.

In other words, they are stealing our country out from under us, and either refusing to pony up reparations or are off-shoring your tax dollars in their Cayman Island bank accounts!

John McCain would encourage this by extending Bush's tax cuts and specifically, his capital gains, estate and dividend tax breaks that benefit the richest one percent of this nation far more than Barack Obama's middle class tax cut would benefit the middle classes of America.

And the middle class outnumbers the wealthy, but make that case and you're declaring class warfare.

I think it's about time we did just that. After all, class warfare has already been declared on the middle class!

No Taxation Without Presentation

Let's talk about money for a moment.

A government is reliant on money. This generally comes in the form of taxes of some sort.

So taxes are a necessity, a necessary evil.

There's a fairly comprehensive, if anecdotal, body of evidence that suggests our current income tax system is not only ineffective, but possibly illegal.

As your NotPresident, I have a simple yet elegant solution, one that will lower taxes for most of us, yet re0jigger the tax liability so that it is more equitably distributed amongst the people who most benefit from our nation's freedoms.

After all, they have more freedoms than you or I. Look at how OJ Simpson got off!

Income is easy to tax and even easier to account for: you get a check, it gets deducted ahead of time, if you earn a salary. But that's not the problem. The problem comes from all those non-wage earnings: dividends, sales proceeds, and so on.

The disincentive of an income tax is to avoid spending money until after you've settled your debt to society. Withholdings make this bit easy, but the first time you get a lump sum from, say, the sale of a stock, you are clueless as to what to do regarding your taxes.

My tax system would avoid all this. Rather than focus on income, I would focus on wealth.

You are free to earn as much money as you can, legally, illegally, I don't care. What I DO care about is how much you keep out of the economy. And there's the difference.

Simply put, I would tax any investment that, in turn, did not create more income. No more tax shelters. No more idle rich sitting on their arses, collecting dividend checks. No more squirreling away money that you earned on the backs of the working and middle classes so that your kids can go to Choate and Harvard.

It's really very simple: the incentive in this tax system is to spend money, actual cash money, and the more you can afford, the more you should spend.

Naturally, there will be some baseline "minimum wealth" figure under which no one would be taxed. It's not fair, for example, to tax someone who owns a $100,000 home for four people, struggling by on an income of $30,000. I'd have to run the numbers a bit, but my suspicion is I would exempt anyone who owns less than $500,000 in assets.

Net of a home mortgage, to boot.

Eveerything else above that is fair game, and yes, I would tax your retirement savings. But notice something: every dollar you draw down after retirement is 100% tax free.

The tax rates would be graduated. It's not fair to ask someone who owns, say, $500,001 to pay the same rate of tax as someone who owns 500,000,001. If your hogging your wealth, you're going to get hit with a penalty, a big penalty.

Admittedly, this plan would need a lot of fleshing out (actually, it's already been fleshed out, but after Senator McCain stole my idea for a cash prize for alternative energy, I'm laying just enough cards on the table to show my hand without putting my chips in completely.

You want it, Barack? John? Come buy it off me!

I even promise to spend the check!

And Now For News That Shouldn't Surprise Us...

Remember those touted "rebate checks" that were going to spur the economy?

Um...not so much....

MIAMI — The federal government is showering households with tax rebates to spur spending and invigorate a troubled economy. But many Americans are so consumed with debt and the soaring price of gasoline that they are opting to save the money or use it to pay bills, according to surveys, sales data and interviews with people from Florida to California.

Between late April and the end of last week, the Treasury handed out more than $50 billion of the $100 billion in tax rebates it plans to distribute to 132 million households. But only once in the last six weeks have chain stores registered an increase in sales, according to the International Council of Shopping Centers, whose weekly sales survey is a widely watched barometer.

“The initial sense is that people are not running out to the malls to spend their checks,” said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “It’s not quite proving to be a hot potato that’s burning a hole in people’s pockets.”

You read that right folks: only one week in the past 6 has seen an increase in consumer spending. I'd lay pretty good money that it was the second week in May, after everyone had sorted out their mortgages and rent, and decided, yes, the had a little extra to spend.

Here's where the lunatic logic of the Republican party comes into play: When tax rebates have been handed out to Americans, only 20 to 50 percent actually gets flushed back into the economy as fresh spending. THe rest, the other half to four-fifths, gets stuck paying down debts or otherwise improving the balance sheets of consumers.

In short, rebates don't really work. Well, that's not true, they COULD work, but only when consumers have enough income coming in and their debt levels are in line with those incomes. Like when the economy is humming along, for example. Which is when they wouldn't need them, right?

A rebate has to be very carefully timed to be distributed at the precise moment when the economy is just beginning to go south, but the effects of the souring economy haven't been felt in the pockets of the average taxpayer, in other words. Since no government in their right mind is going to do anything but talk up the economy at that stage, rebates are esentially ineffectual.

Rather than distribute that money, what the government could have done was make it 100% fresh money in the economy, and spent it themselves. In an ideal world, this is how it should go, but in that world, pigs really do fly.

The government would spend this money on new initiatives, carefully targeted by sector and geography, and thus drum up further private investment. Things like economic development, seed money for small businesses, and other investments that would show a long term return of tax revenue would be ideally suited for this money.

Further, if the government really thought the country was going to go to hell in a handbasket, it could invest this money in infrastructure repair which would have a two-fold effect: it would prime the country for the eventually recovery at the same time it would provide jobs for the working class, those who are most affected by the current sordid state.

If only Bill Clinton could have run for a fourth term...

Cut The Fatheads

You can be sure the economy is in trouble when Congress and Bush can agree on something to do. Cut taxes:

Democrats and Republicans on Capitol Hill are also suggesting that they might be able to put aside longstanding partisan differences and work on a stimulus measure, lawmakers and aides said Friday.

In a fresh sign of the possibility of an agreement on a roughly $100 billion package of tax cuts and spending to spur the economy, Nancy Pelosi of California, the speaker of the House, and Senator Harry Reid of Nevada, the majority leader, wrote to President Bush on Friday saying, “We want to work with you.”

That little mash note is interesting, since one could easily make the case for ignoring the economy and letting it fester while Bush twists in the wind. Naturally, you'd want to do just enough to duck accusations of doing nothing.

Democrats might be feeling a little heat from their base, however, with all the kowtowing and rubber stamping they did in 2007. I've been of the mind that Pelosi and Reid were figuring the first year was about setting up the second year of the 110th Congress. Sadly, there at about 800 Americans in Iraq who had to die as part of this strategy.

Some Democrats say they could support tax relief focused on lower-income people and, perhaps, even tax cuts for corporations, if the White House and the Republican Congressional leadership accept some spending increases like extended unemployment benefits or aid to states to help them avert spending cuts.

The unfortunate truth is, Bush's first three tax cuts...2001, 2002, and 2003...ultimately did not benefit the economy in any substantive way, as it was really the sub-prime mortgage business and the ripple effect low-cost mortgages had across the economy.

People spent because they borrowed. This was not current income, not taxable income, and yes, the tax cuts may have generated some tax revenues because the wealthiest among us started shedding some long-term assets because of the the more favorable tax treatment, but it wasn't in line with what was supposedly the "booming economy" that resulted.

Indeed, tax revenues under Bush declined for every year until 2006 when compared to Clinton's last budget. And 2006 only went up because "a big increase in individual taxes on stock market profits and executive bonuses."

Like I said.

Will a tax cut help this time? Probably not. But the key element of this plan is increased government spending: extending unemployment benefits now, before the recession hits, is a sure-fire way of lessening the impact on people and is actually helping to close the barn door before the horse can get out. If it takes a tax cut to get that implemented until a real President comes along, so be it.

I feel both Congress and the President are severely underestimating the nature of this recession (you read that right: our bonds are in danger of losing "government-issue" status!)...I'm pretty sure it will be a depression, as I've said here before...and if I was running for President, I would address this issue in greater depth. Suffice it to say that nature is about to hand us lemons, and I'd have a lemonade stand set up already. We are presented with an opportunity the way FDR was: to do good for a lot of people and help this country improve, at the same moment.

But I digress.

I hope the Democrats are at least listening to Ronald Reagan's old "Trust, but verify" shibboleth:

Democrats said the White House would have to agree not to try to attach favorite measures like repealing the estate tax or making permanent Mr. Bush’s 2001 and 2003 cuts, just as Democrats would have to refrain from attaching extraneous spending.

“It would make sense for the president to do something in a bipartisan way,” said Representative Charles B. Rangel, Democrat of New York and chairman of the Ways and Means Committee. “But I’m scared to death to even talk about tax rebates because of what that might open up.”

A senior Republican aide said: “Republicans will have to talk about making the tax cuts permanent and all that kind of stuff. Democrats are going to want things on their long-term agenda. But if you figure those cancel each other out, there’s probably a playing field where everyone can agree.”

Somehow, I see a fillibuster in our future. And that would be the greatest tragedy of all.

UPDATE

Apparently, I'm not alone in my belief:

The measures now being debated in Washington and on the campaign trail — tax rebates, added help for the unemployed and those facing sharply higher heating bills and, most immediately, a move by the Federal Reserve to further cut interest rates — could certainly moderate the severity of a downturn. Democrats and the Bush administration are considering a package of such measures that could reach $100 billion.

But the forces menacing the economy, like the unraveling of the real estate market and high oil prices, are too entrenched to be swiftly dispatched by government largess or cheaper credit, some economists say.

The New Math Of A False Economy

(graphic courtesy tengrain at mockpaperscissors.com)
As my long-time readers know, I'm a wonk for economic stuff. Hazard of my avocation, I suppose, needing to stay on top of the economy and make decisions based on my observations. So I stumbled across this story, and started reading it, when I found a paragraph that I think can help explain and tie together some loose threads that have been floating on the periphery of your field of perception lately:

"The negative housing wealth effects on consumer spending could be more pronounced than anticipated," Zandi warned, estimating that a third of U.S. households tapped a substantial amount of home equity in recent years to support spending.

But with stagnant or falling home values, and rising mortgage delinquencies, consumer spending's sole support looks to be wage and income growth, and this at a time when households are being heavily taxed with higher energy prices.

Energy costs rose only 2.9 percent in 2006. But in the first three months of this year, they shot up at an annual rate of 22.9 percent, accounting for about 41 percent of the increase in U.S. consumer prices.

The Consumer and Producer Price indices that are so heavily reported by the mainstream media purposely ignore energy and food prices, due to their volatility. Personally, I think that's a mistake: first, we have much better tools to measure these and to factor out volatility now, and second, these are two core purchases that consumers must make, so to say "inflation was only 3% last year," while food and energy prices were up together anywhere around ten percent is a lie designed to make the administration look good.

But I digress.

Take a closer look at the excerpt I posted: you'll note that the past several years' economic growth has been generated not by wage and income increases (which have remained stagnant to down. It wasn't until 2004 that the final leg irons of recession, consumer income, surpassed the levels at the end of the Clinton administration and even that's not factoring in inflation), but by borrowing against the equity in our homes.

An increase in debt, in other words. Debt can be defined as an advance against income you hope to receive in the future, and interest payments a hedge against the lender losing all that money if your gamble fails.

The optimistic presumption the average American lives on is things are going to get better: my company will make more money. They'll pay me a higher wage. I'll be able to pay off my debts.

Not so much, anymore. Wages have stagnated for nearly thirty years while the banking industry has gone to great lengths to fool consumers into believing they are worth more money than they truly are.

I suppose to a large extent, bankers can be blamed for this situation. Anyone with half a brain who spends a little time studying the overall economic state of this nation would have tightened their lending rules, not expanded them, in order to keep their balance sheets honest and their mortgages current. And banks are chock-a-block with MBAs from Ivy League schools who are trying desperately to learn the lessons I learned on the streets of Noo Yawk: don' lend someone money what can't pay youse back, unless youse is prepared to break deir bot' legs.

See, another side of this comes out in the quarterly earnings report that banks have to prepare for their shareholders. Obviously, if I'm Chase Manhattan, I have to keep my earnings higher than Citibank in order to keep my investors from moving their money there. New loans generate gobs of short term income. Old loans do not. The shell game is to keep those fees and surcharges rolling in (which is why the penalties on credit cards have also become so exorbitant: that's pure profit).

That "immediacy culture" pervades right down to the administrative level, as those Ivy League MBAs are thrown into competition with each other to come up with "the next insanely profitable cash cow." To the winner goes the spoils: make the bank the most money, and you get the corner office, the bigger bonus, the trips to Hawaii.

No one thinks long term, so no one looks long term, so in truth, no one saw this coming, but it is.

We're already in the soup on this, and there's not much to do to bail Americans out. The government could try but thanks to Bush and his tax cuts for the wealthy and his invasion of Iraq, the government has no money either and the money it has borrowed is not going to be allowed to go to its people who need it most.

In effect, we'll all be wage slaves to China. And we've seen what their standard of living is like.

After that, the future gets murky. Obviously, taxes on the wealthy will skyrocket. They have to, particularly as baby boomers retire in greater numbers each year and the pool of productive tax paying Americans dwindles. Taxes on all of us will go up, as well.

Suppose for a second, though, that they don't. Some political pressure keeps honest politicians from talking about tax increases. It becomes a political third rail.

We can't cut spending sufficiently to offset the loss in revenue. Aside from Social Security (which is funded separately anyway) and defense, there's not a whole lot the government spends money on that could scale up to free hundreds of billions of dollars for domestic spending programs that would now go from discretionary to mandatory, unless the sight of people dying in the streets is somehow magically made palatable to Americans. Events of the past week indicate Americans wouldn't want that on their TVs.

About the only places we could cut are defense. And defense. And homeland security.

I think we all know what that means.

So by destabilizing the American economy for decades if not centuries to come, Bush has created the single most dangerous breeding element for the domestic security of Americans: a weakened economy with not enough money to spend on protecting us all.

Thanks, Dumbya.

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