President Obama wants to have it both ways.  He wants to appear to be fiscally responsible and he knows that to do so, that something has to include Social Security.  However, to try to keep as many Democrats in office that he can he has to play that other favorite card of the Democrats, that Republicans want to push grandma in her wheelchair down the stairs by privatizing Social Security.

In a campaign stop in Racine, Wisconsin the president had this to say, “”I’ll fight with everything I’ve got to stop those who would gamble your Social Security on Wall Street. Because you shouldn’t be worried that a sudden downturn in the stock market will put all you’ve worked so hard for—all you’ve earned—at risk.”  Oh, really, Mr. President?  Then perhaps you can show us where all the Social Security money is that you don’t want to put at risk.  The problem is that the government spent it all.  That’s right, there’s no lock box, no account, no bank vault, no hole in the ground were the money is buried, earning nothing.  I only wish I was able to put “at risk” all the money that the government took out of my paycheck along with my employer’s contributions. 

Based on my last annual statement from the Social Security administration, the government collected about $170,000 from me and my employers on my behalf.  Had I the opportunity to put that “at risk” in the stock market, the Dow Jones 30 industrials to be precise, including all the ups and downs, that $170,000 would be worth about $800,000 today.  Thank you Democrats for keeping me safe from accumulating that amount of wealth and instead “investing” it in ethanol, turtle crossings in Florida, bridges to nowhere, airports in John Murtha’s district that no one flies to, etc.  By Social Security estimates, that money they took from me and my employers, will be paid back to me and run out about ten to twelve years before I expire.  So instead of having a real nest egg that I can live off of and pass the rest on to my heirs, my getting Social Security will depend on the next generation getting taxed to the eyeballs to pay me and they can hope the next generation does not rise up in arms when they get the bill.

Everyone who supports the Social Security system as it is today, acknowledging that we have to fulfill our commitment to those who have retired or are very near to retiring, should join Bernie Madoff in cell block C, for the Ponzi scheme the government created.  President Obama, it is time to stop lying to the American people.  We don’t want government to run our lives.  You have crammed your left wing agenda down our throats and we will give you our rebuttal on November 3.  Then your one term will be up two years hence.

Many states have a constitutional requirement to balance their budgets while the federal government has no such limitation.  As such, a number of stately are longingly looking toward Washington to throw some cash their way so they don’t go bankrupt.  It is not going to get better.

If you think Washington awash in debt, is a problem, it is chump change compared to what is brewing at the state level.  Trillions in unfunded pension liabilities are looming and those who are benefiting from those generous plans or who are going to, don’t care about the rest of us who have to pay for them and then go provide for ourselves.

Lawsuits are starting to be filed to stop states from altering the terms of these plans.  The time to act is sooner rather than later, but that is lost on one teacher in Colorado who says, “Why is the state so quick to break its promises.”  Perhaps we should explore how these promises were made, in both directions. 

Unions backed Democrats almost exclusively.  Democrats riding union support into office had a debt to repay.  They repaid it by supporting the kinds of contracts that the unions wanted and the unions returned the favor with their loyalty.  Who paid the bill?  The rest of us.  How much say did we have in the process, next to none.  In private industry, unions negotiate with management.  Unions have almost no say in who gets hired into management and will sit across from them at the bargaining table.  So the adversarial relationship has management supporting the shareholders and unions backing the workers.  As management became more enlightened and took better care of their employees, the need for a union middleman faded away.  That is why in private industry union representation is down to about 7% and falling while in the public sector is around 37% and growing.

The public employees argue that their generous pension plans is merely deferred compensation to make up for their salaries during the time they worked.  The only problem is that the unions did a good job not only on the pensions but on the salaries as well, so that the average public sector employee makes about 34% more than his private sector counterpart.  Fair being fair, our public sector friends would probably recognize their good fortune and agree to help fix the problem, right?  No chance.  As one put it, “I shouldn’t be responsible for past pension underfunding and foolish risks managers made with my money long after I retired,”  Okay, let’s give that a closer look.

Why do you think the pension is underfunded?  Could it be that the government entity could not afford to make the extravagant  payments the union contract required and still balance the budget?  If they tried to raise taxes to cover the shortfall then even the unions with all their political muscle couldn’t get those responsible re-elected.  So it was better to sweep it under the rug for a future administration to deal with.  What about those risky investments?  Well, with risk goes reward.  If you need bigger payoffs on your pension assets to make up for the shortfalls in funding that you didn’t want to make, you may take bigger chances to make a bigger payoff.  But if you are wrong, instead of fixing the problem, you make it worse.  So the real problem is that the unions and the politicians they fought to elect negotiated contracts that were unrealistic and unsustainable.  What does the union member say. “I’ve got mine, you go get yours.”

What are some of the onerous changes that states are asking for?  In New Jersey, Chris Christie asked for a one-year freeze on public employees pay and for them to contribute 1.5% of their salary toward their retirement.  Outrageous!  How about in Colorado where they asked for a 2% cap in the Cost of Living Adjustment (COLA) for retirees instead of 3.5%, in an environment with 0% inflation.  Dastardly!  One individual’s justification was that he does not and cannot pay into Social Security so the pension is all retirees have to live on.  He fails to point out that being prohibited from contributing to Social Security puts 6.2% more of his salary in his pocket, since he pays no Social Security taxes, and if he had the self discipline to take that and invest it in the Dow Jones Industrial Average he would have far more money of his own than he would ever get from Social Security.

This problem is not going away.  Once upon a time, public sector employees did earn less in salary than those in the private sector, but those days are long gone.  They earn more, can retire earlier, can retire with more money for longer periods of time and put the burden on all taxpayers who have to cover their pension while providing for their own.  Their “too bad” attitude is shameful.

This week we saw President Obama come out swinging to that old class warfare tune.  Lashing out at Republicans in Congress for not adding to the deficit by extending unemployment benefits, he implied they were heartless and cruel.  The president used the same tired prop of the straw man, that is, accusing “the same people” without naming any of those people.  He uses this tactic because if he actually named the people he was accusing he would have to produce facts to back up the charges and Obama, as usual, doesn’t have any.

But here’s what he does have.  He has a record of focusing his energy on passing ObamaCare instead of focusing on growing the economy.  He is layering on more uncertainty of huge government programs and impending taxes that are scaring most small businesses from any hiring until the dust settles and they can tally up the bill.  He has Republicans who are ready to go along with the extension in benefits, if and only if, they are paid for.  With only about half of the $787 billion stimulus bill money spent, which is working fabulously by the way, taking the needed $30 billion from that kitty should be obvious. 

President Obama also has a chief economic advisor named Larry Summers.  Mr. Summers wrote an article on unemployment for the Concise Encyclopedia of Economics while at Harvard and in it he raised the following points:

• Government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work.
• Unemployment insurance also extends the time a person stays off the job. [Colleague Kim] Clark and I estimated that the existence of unemployment insurance almost doubles the number of unemployment spells lasting more than three months.
• If unemployment insurance were eliminated, the unemployment rate would drop by more than half a percentage point, which means that the number of unemployed people would fall by about 750,000.
• Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment.

It seems as if President Obama has painted himself into a corner.  The stubbornly high unemployment numbers are poised to ravage the Democrats in the mid-term elections.  But if his advisor, Mr. Summers, is to be believed, the unemployment benefits he is trying to use as a campaign issue against the Republicans is probably propping up the unemployment numbers.

The American people have reached their limit on deficit spending and want it reined in.  The Democrats put in place something called Paygo, which means pay as you go.  If you want something, you have to pay for it.  However, the Democrats are bypassing their own rule at every turn.  You can’t have it both ways, ceremoniously pass a Paygo rule for the purpose of the photo op and to look responsible, and then spend recklessly once the klieg lights go dark.

What prompted this president to conduct his Rose Garden show with three unemployed Americans used as props?  Could it be that Nancy Pelosi is hopping mad that this president has not been helping Democrats to get reelected in the fall?  If so, perhaps that was the point of the Rose Garden performance, nothing but election year politics.  And you wonder why the American people are becoming increasingly cynical about their government?

The clock is running out on the Democrats.  This week’s dismal jobs report, hailed by this Pollyanna administration as more good news because somebody somewhere hired someone, means the number of job reports before Election Day to is down to three.  So the Democrats are calling for the Hail Mary pass.  Propose extending unemployment benefits and when the Republicans balk unleash a fusillade of class warfare:  cruel, heartless, racist, homophobic, sexist… did I leave anything out?

To extend jobless benefits requires government money.  The government is out of money and is borrowing like mad.  But extending jobless benefits only makes the slightest bit of sense if there are prospects for jobs in the immediate future.  But this government’s policies, despite their delusional happy talk, is the reason we are stuck in a jobless recovery.  This government is intent on adding program after program that someone will have to pay for.  Until the smoke clears and small businesses can tally up the cost, they are not going to hire anyone unless they absolutely have to hire to fulfill whatever book of business they currently have.  But even Democrats who have a prayer of staying in office do not want to spend more money lest that turn into the tipping point to send them packing.

So look for the shrill pitches by Nancy “Unemployment Checks are the Fastest Way to Create Jobs” Pelosi to try to tar fiscally responsible Republicans as heartless.  The way to solve the problem is by allowing the economy to grow and by growing create jobs.  Otherwise we are just kicking the can down the road.  Extend unemployment benefits today while continuing job killing policies, will only mean the same scenario repeating a few months down the road.  People are tired of drawing unemployment checks, they want to draw a salary and that means jobs.  Let’s hope the next three months will be swift and the government house cleaning equally so.  They don’t get it and there is little hope,  given Nancy Pelosi’s bizarre understanding of economics, that they will.  Throw the bums out and let’s get back on the road to recovery.

Well the cat’s finally out of the bag and it’s been loosed by none other than President Obama himself.  Once again out on the stump where he is most comfortable and away from the Oval Office where decision making is required, the president is now taking a new tack, or it is an old one?  He is now saying how much worse things could have been if not for his stimulus program.  This is the standard progressive/statist line that we didn’t do enough… if only we spent more money our program would have worked.

But here’s the problem.  To get the $787 billion stimulus package passed the president said that if we did nothing, unemployment would rise to 9%, but if we passed his stimulus package it would go no higher than 8%.  Where is the unemployment rate?  It is at 9.7%.  So if things could have been worse if they did nothing, his economic team is totally clueless because they were the ones who put forth the 8% vs. 9% argument.  Now Obama is trying to tell us that if we did nothing, the unemployment rate could have been in the double digits.  Who says so?  Is this his own projection or is his economic team back at the Ouija board?  Is anyone from the economic team being fired?

Here is an alternate theory.  If the stimulus plan was not implemented and the president cut taxes by $787 billion instead and promised not to introduce any new government programs for two years, that the unemployment rate would be much lower.  How can I make such an outrageous claim?  Let’s look to history.  In 1920-1921 there was a steep recession where the unemployment rate hit 11.7%.  Back then, government didn’t saddle businesses with regulations and businesses were free to cut wages and make other adjustments without government meddling.  Within one year the unemployment rate fell to 6.7% and the following year it was down to 2.4%  Contrast that to the Great Depression where we had massive government intervention and massive government spending and the unemployment rate never fell below 14.7%.

Bringing Jobs Back to America

Another brilliant example of your government killing the economy comes from the company Bucyrus Erie.  They were bidding on a job in India to provide heavy equipment to help them mine coal for a power plant the Indians were building.  Bucyrus Erie went to the Export/Import bank, a government agency, to try to get a loan guarantee to finance the deal.  Because a coal plant would increase the carbon footprint of India, the Ex/Im bank turned down the request.  This didn’t stop the plant being built, it just meant that the heavy equipment was going to be provided by China or Russia instead of the USA.  There would be no effect on the carbon footprint, a big effect on jobs in the US.  At the same time, President Obama is on the stump talking about how hard he is working to bring jobs back to the US.  Really?  They must have read his speech over at the Ex/Im bank, because they are reconsidering Bucyrus Erie’s request.

More government is killing our economy.  Our economy is very tough and it is extremely hard to bring down, but the current administration is trying its best to do so.

If the news hasn’t reached you yet, we are all on an express train heading over a cliff due to public unions and the ridiculously generous pay and benefit packages they have gotten from the taxpayer, and we never even got to sit at the bargaining table.  A report in the New York Times  yesterday reports that there are 8,074 employees of the Metropolitan Transportation Authority, the entity that runs the commuter railroads and subways in and around New York City, that made more than $100,000 per year.  This includes a conductor who retired in April that made $239,148 which was $4,000 more than the Chief Financial Officer made.

By the way, did I mention, that the MTA had a budget deficit of $400 million?  Did I mention that they went through a series of service cutbacks to try to close the gap?  Perhaps, I can suggest another place to look?  But there’s more.

Two train car repairmen and twelve police officers who guard the bridges and tunnels under the MTA’s control were among 50 employees that pulled in more than $200,000.  Mr. Thomas J. Redmond, the aforementioned conductor had a base salary of $67,772, overtime of $67,000 and he took in almost $100,000 in unused sick days and vacation time. 

A locomotive engineer earned $75,000 in base salary, with overtime of $52,000, but wait there’s more.  He also received $94,600 in penalty payments.  What are those, you might ask?  Union rules say that because the engineer worked in a storage yard, he gets paid extra if he is assigned to move a locomotive outside of the storage yard, for example to a nearby maintenance facility.  I don’t understand your pique.  Don’t you have a similar arrangement with your employer?  You mean you don’t get a penalty payment when you have to go to a meeting on another floor in your building? I am shocked!

But don’t feel sorry for the senior management.  The new president of the Long Island Railroad, part of the MTA, now earns $350,000 plus a $3,500 monthly housing allowance.  I guess $350,000 is not enough to get by on so we have to pay the guy’s mortgage too.

This is what the politicians give to the unions when they negotiate contracts with them.  The unions in turn, make sure those politicians get re-elected, through the unions electioneering efforts.  Does that sound like collusion to you?  New York State is broke, just like California but we will have to pay for all these sweetheart contracts that make the federal budget deficit look like chump change.

The above chart was produced by President Obamas’s economic team to pitch the stimulus.  As you can see, they projected that with the stimulus unemployment would peak at about 8% by the third quarter of 2009 and then steadily fall, passing through about 7.3% by now.  But if we didn’t spend $787 billion dollars to enact the stimulus plan, unemployment would grow to about 9% in mid 2010 before falling.  The Obama administration passed the stimulus by a straight party line vote and the unemployment rate is currently at 9.7%.

So what does the president have to say about this? 

“If the just-say-no crowd had won out—if we had done things that way—we’d be in a deeper world of hurt,” he told workers at the V&M Star steel plant in Youngstown. “The steady progress we are beginning to see across America just wouldn’t exist. … So I invite anyone who thinks we shouldn’t have taken those actions or made those investments to come to places like this and tell us why.”

Does the man have no shame?  In February he tells us that if we did nothing we would be better off than we are today (9% unemployment vs. 9.7%).  Today, he says wasting $787 billion on dubious pork barrel spending is working just swell.  So, let me tell you Mr. President, we shouldn’t have made those investments because we are worse off now than you said we would be and you added nearly a trillion dollars to our national debt.  We knew it.  We opposed it.  You ignored us.  Now you are trying to tell us up is down and down is up. 

President Obama is telling us that if we did nothing unemployment would be much worse.  He didn’t know then.  He doesn’t know now.

The other day we read reports of Democratic Senators scrambling to create an oversight panel to prevent health care providers from dramatically increasing premiums over the next four years because, shockingly, costs are supposed to go down not up.

Yesterday, the Department of Health and Human Services released a report analyzing the effects of ObamaCare:

The sobering assessment by the Centers for Medicare and Medicaid Services concludes what Republicans had warned about during heated debate — that the double-counting of Medicare spending — as both savings and as a means to shore up the debt-ridden government fund for seniors’ health care — means the cost is unrealistic.

The analysis also found that the law falls short of the president’s twin goal of controlling runaway costs, raising projected spending by about 1 percent over 10 years, or $311 billion, up from the $222 billion previous estimated.

Excuse me, captain, but was that an iceberg we just hit?  We all know the Titanic sank on her maiden voyage, and it looks like ObamaCare is taking on water only weeks after being launched.  As Congressman John Boehner said:

“According to his own administration’s analysis, the health care law the president signed one month ago today would violate his pledge to ‘bend the cost curve’ and force millions of seniors off their current Medicare coverage. This is in addition to what we already know about how this new law is squeezing employers with job-killing tax hikes and leaving middle-class families to brace for higher premiums,” he said. 

When talk turns to repealing this law is Obama still smugly saying, “Bring it on”?

It was like the movie Rocky the Democrats (Rocky) were getting pounded left and right over their heavy handed tactics.  They crammed through a health care bill that an overwhelming majority of the country opposed.  They moved on to financial reform and they still couldn’t get any traction.  Their poll numbers continued to drop and it was looking like a dismal election coming up in the fall. 

 And then, just like in the movie Rocky swings from his heels and connects knocking the champ to the canvas.  In this case it was the SEC charging Goldman Sachs with fraud.  Now they could fire a full fusillade of class warfare at the Republicans and either get Republicans to help pass the financial reform bill or be tarred as the party of the evil bankers and greedy Wall Street robber barons.  But unlike the movie, right after knocking the opponent down, when the referee sends Rocky back to a neutral corner he slips in his own sweat, flips on his back and knocks himself out.  By that I mean the news came out that employees of the SEC spent an inordinate amount of their time watching porn instead of the financial markets.  How do you expand the role of government on the heels of that disclosure?

 Trying to Make Up for Bernie Madoff?

When Bernie Madoff’s ponzi scheme was in full swing, Harry Markopolos brought the scam to the SEC practically tied in a bow.  The SEC did not respond.  Perhaps they were too busy…, well never mind.

With the Democrats trusty weapon, class warfare, holstered it’s time to delve more deeply into this financial reform legislation.

In a letter to Senate majority leader Harry Reid and minority leader Mitch McConnell, luminaries including former SEC Chief Accountant Lynn Turner, former Labor Secretary Robert Reich, hedge fund owner Jim Chanos, former Lehman Brothers Vice Chair Peter Solomon, former S&L investigator Bill Black, former Senate Banking Committee Chief Economist Rob Johnson, economists Dean Baker, Barry Eichengreen and others pointed out that Dodd’s proposed financial reform legislation wouldn’t have prevented the current crisis … and won’t prevent the next crisis.

So tell me again why we are doing this?  It’s all about more government control and more power in Washington, not about fixing any real problem.  Where are Fannie Mae and Freddie Mac in this bill?  They were at the very core of the financial meltdown.  In other words it’s all politics and it’s all straight out of the Saul Alinsky tome Rules for Radicals:

 Rule No. 13. Pick the target, freeze it, personalize it, and polarize it.  In conflict tactics there are certain rules that [should be regarded] as universalities. One is that the opposition must be singled out as the target and ‘frozen.’…

     “…any target can always say, ‘Why do you center on me when there are others to blame as well?’ When your ‘freeze the target,’ you disregard these [rational but distracting] arguments…. Then, as you zero in and freeze your target and carry out your attack, all the ‘others’ come out of the woodwork very soon. They become visible by their support of the target…’

     “One acts decisively only in the conviction that all the angels are on one side and all the devils on the other.” (pps.127-134)

The target in this case, is Wall Street and the Banks.  Demonize them.  When the “others”, meaning the Republicans, come out to challenge the ineffectiveness of the bill, then they can be attacked as being for the fat cats and against the little guys; class warfare at its ugliest.

 Follow the Money

But who is really in bed with the fat cats?  The Political Action Committees (PACs), employees, families of employees and other associates of Goldman Sachs gave almost $1 million in campaign contributions to Obama.  In this legislation, the concept of too big to fail remains untouched.  There will be a $50 billion fund created with money from the top banks to standby if needed for a bailout, but this also gives the impression that the largest banks are now safer because of this fund and therefore can get a lower interest rate on their borrowings compared to smaller banks.

 Democratic Congressman Brad Sherman said:

 “The Dodd bill has unlimited executive bailout authority. That’s something Wall Street desperately wants but doesn’t dare ask for. The bill contains permanent, unlimited bailout authority.”

 Why ask for it when the Obama administration will give it to you.  All you have to do is let them smack you around a bit to prime the class warfare pump, and you’re all set.

If you are backstopped by unlimited executive bailout, go ahead, take bigger and bigger risks.  The government will step in if you fail.  So here we have yet another fat cat (Wall Street/Big Banks) wolf dressed in sheep’s clothing (the little guy; Main Street). 

 If you want real financial reform, then in the name of capitalism, the big banks and Wall Street have to learn to play with their own money. If they hit a home run, good for them.  If they strikeout, they should lose their own money and if they don’t have enough to cover their losses, goodbye.   They should not be allowed to take huge risks and if they pay off, everybody there gets a new mansion in the Hamptons, but if they go bust, hand the bill to us.  Fannie Mae and Freddie Mac, we were told were private entities, not part of the government, but wink, wink, nudge, nudge, everyone knew the federal government was standing behind them and would not let them go bust.  So they too, got the kind of interest rates, half a point lower than their competitors, based on this implied backing not based on the strength of their balance sheet.

We have to fight this one too.  This is just more smoke and mirrors from the Obama administration.  Another power grab without any substantive benefit to the American people.

This is from today’s New York Times:

“Fearing that health insurance premiums may shoot up in the next few years, Senate Democrats laid a foundation on Tuesday for federal regulation of rates, four weeks after President Obama signed a law intended to rein in soaring health costs.”

With the ink barely dry on ObamaCare, Democrats in Congress are scrambling to keep their masterpiece from unraveling.  As I have pointed out repeatedly, there is nothing in the ObamaCare plan that helps reduce the cost of delivering health care.  It is all about controlling what doctors, medical service providers, and insurance companies are paid.  All the underlying pressures on health costs (tort reform, 3rd party payer, etc.) are still in place.

“We Have to Pass the Bill to Know What’s In It”

Nancy Pelosi’s stunning but famous words are coming into play.  Let’s see what has the senators panicked.

• To hoodwink the American people that this abomination is cost effective, ObamaCare warms up by hitting us with four years of taxes before the expensive benefits come into play.
• Every American will be required to purchase health insurance or pay a penalty.  That penalty will initially be $95 per adult in 2014, rising to $695 per adult in 2016 and $2,085 for a family.  This money will be collected by the IRS, not by insurance companies
• Americans cannot be denied coverage for an existing condition

So here’s the scenario.  If you compare the cost of the penalty of $2,085 for a family vs. the cost of insurance for a family of $10,000, coupled with the inability of insurance companies to deny coverage for pre-existing conditions, healthy people will start dropping insurance coverage left and right.  Why not?  On the way to the hospital, you can call an insurance company and say you want to be covered for the pains in your chest and you cannot be denied.  So insurance companies will only have sick people as clients.  With only sick people that they constantly have to pay claims on, their only course of action if they want to stay in business is to raise premiums on all those sick people.  If they start doing it now, they may be able to raise them less than if they wait until 2016.

So the insurance companies are acting rationally to this mess the Democrats dragged across the finish line and now they are shocked, SHOCKED, that they should do this. 

Grace-Marie Turner, president of the Galen Institute, a research center that advocates free-market health policies, said the Democrats’ proposal was unlikely to succeed in lowering insurance costs.

“Capping premiums without recognizing the forces that are driving up costs would be like tightening the lid on a pressure cooker while the heat is being turned up,” Mrs. Turner said.

The Democratic fix is to have a new bureaucracy that will provide a check on unjustified premiums.  I think you can look at this in one of two ways, both plausible.  The Democrats were stupid enough to believe, as they typically do, that Americans don’t act rationally to their government policies.  It’s also why they don’t understand that when they raise taxes they never collect as much money as they thought, and when taxes are cut they can’t believe how much money flows into the Treasury due to economic growth.  The second scenario is this new commission will cap premiums to the point of driving private insurance companies out of business and then the Democrats will say, “Geez, we didn’t want to do this, but I guess we have to put in place a public option that, by the way, will be the only option.”

Senator Lamar Alexander of Tennessee, the No. 3 Republican in the Senate, said: “Health insurance companies’ profits for one year equal about two days of health care spending in the United States. So even if we were to take away all the profits of the so-called greedy insurance companies, that would still leave 363 days a year when health care costs are expanding at a rate our country cannot afford.”

Now that I think about it, it is probably the second scenario that is more likely, that is, force the public option.  Your government is about to swallow up another big chunk of the economy if  we don’t turn them out in November.