Increasing employment

I recently read an internal report that discussed the cost of health care for companies. Effectively, the average cost is over $13,000 a year for family coverage and after employee contributions approaches $10,000 a year to the employer. Now consider this in relation to people's salaries. If you want to hire an employee for a $25,000 a year job, and provide health coverage, you are looking at a 40% health care tax. Of course, if the employee is making $100,000 a year, the health care cost is only 10%.

Now if you have the opportunity, why not either outsource the work of that $25,000 a year person or move the job to a country that has national health care? It is likely that you will actually pay less in salary also but the biggest savings is likely to be the avoidance of that health care bill. There are additional problems and costs associated with moving the work but in any cost/benefit analysis, the cost of employee provided health care in this country is likely to be among the most significant elements.

So consider the current proposals we are seeing about how to increase employment in this country. Many of them are geared to providing short term tax breaks. They could be effective if the tax break was big enough, but think about the impact of taking the cost of health care out of the hire equation. Yes, the bill would still have to be paid for, and how we tax individuals and corporations to do so would be an issue to be discussed, but the cost benefit analysis on whether to hire an employee would have a $10,000 reduction on the cost side.

Let create jobs to reduce the deficit.

The best thing we can do to help with deficit reduction is to create jobs in this country for our unemployed. In order to create those jobs, especially jobs for manual laborers, we need to take a number of what seem to be obvious steps.

The easiest of these steps would be to have an aggressive program to switch to domestic energy sources. These domestic sources right now would have to be natural gas, coal, ethanol and biodiesel as we develop nuclear and renewable power sources. Critics of this approach talk about how far we are from getting off our dependence on foreign oil. True enough, but every kilowatt of domestic energy that replaces a kilowatt of foreign oil helps incrementally. The added benefit of natural gas is that it is cleaner than foreign oil and we have a tremendous amount of it.

Building the infrastructure to deliver the natural gas would in and of itself create thousands of jobs. In addition, the added benefit of reducing our balance of trade deficit would leave more wealth in this country and add thousands of additional jobs. The ongoing development of these resources would increase this benefit year after year.

The other thing we have to fix is the high cost of hiring labor in this country. Business is asking for tax cuts but there is no evidence that allowing corporations to keep additional profits will result in employment. The cost of labor has to be less than the contribution of that labor. Understanding that health care is generally a cost of labor in this country while in most other industrialized countries, the cost of health care is a societal cost, not a labor cost. As long as our model inflates the cost of labor by adding what is effectively a health care tax, companies will analyze the choices and move jobs to more economical locations. Our failure to fix this is costing Americans jobs. It is not the only factor, but the cost of labor in this country would have a much better chance of being competitive without this impediment.

These two things would go a long way to creating jobs and promoting growth. The creation of jobs has two benefits, more people paying taxes and less requiring benefits. This clearly helps the balance sheets at all levels of Government.

Eliminating the Deficit

I think everyone can agree that reducing the deficit and the national debt should be one of our priorities. It is certainly not the only priority and not necessarily even the most important, but a priority none-the-less. It is of course a somewhat painful process but actually quite a simple one. The cost of Government has to be reduced to an amount less than its income.

Now, there are two factors to accomplishing this, reduce expenses and increase income. Most of the current focus is on reducing expenses since increasing income, is associated with raising taxes, a more unpopular idea than the fiction that Government spending reductions are not also a tax on the American people. When the Government spends money, it goes somewhere, either to the public or business that employ the public. Government workers get paid for providing a service, whether they get paid more than they should or less, if they are not there the service they provide will be diminished.

Of course it is important, as it has always been to eliminate waste and excessive spending. However when you hear about the tremendous amount of Medicare fraud in this country, it is not because we have too many Medicare auditors, it is because we have too few. Years ago I remember a time when the state I live in decided to save money by reducing workers. This included sales tax auditors. Of course for every sales tax auditor the state eliminated, they lost about 10 times as much is tax collections. Eventually they wised up and hired most of them back.

If we have waste or non-productive workers, they should be eliminated, but this needs to be balance with the cost benefit analysis Government has so much trouble with. If we have a lot of Medicare fraud, we need more auditors to eliminate it. If we have tax fraud we need more IRS employees. Each agency should be able to figure out the best use of their resources, if they can overcome political interference.

Remember that the entire discretionary non-defense portion of the budget is only a little over $500 Billion, not an insignificant number but not even close to the reductions needed to eliminate the deficit. Further, reductions in these numbers would likely lead to more fraud in the programs they oversee.

In reality then we need to address the need for entitlement programs and whether they are a cost effective use of the taxpayers' money. The recent bi-partisan commission has made some recommendations that need to be considered. Whether these are enough is hard to say, and politics being what it is, the debate will probably gut many of the recommendations'.

We need to include defense in this discussion because it is such a large part of the budget. The size of our defense requirements and our capacity to support foreign interventions needs to be scrutinized. The trillion dollars we spent in Iraq and Afghanistan over the last decade has not helped the deficit by any means and the benefit received has been hard to determine. Is American safer now than it was? As terrible an event as 9-11 was, was our reaction the most effective way to prevent another one? Remember that the Soviet Union was ultimately destroyed by overspending on defense. We have to avoid making the same mistake. Defense spending should guarantee that we are fully capable of defending this country in all potential scenarios. We certainly need to maintain allies and have joint support initiatives, but can anyone truly explain the current mission of NATO and why we have troops stationed in Europe?

Realistically, with everything on the table, the trillion dollar deficit will not be eliminated by spending reductions. If the economy improves, tax income will increase naturally but it is unlikely to be enough. We need to get smart as a nation and increase economic activity here, to increase our tax base. The easiest thing to do would be to get off our dependence on foreign oil and use domestic resources, such as natural gas, biodiesel, and ethanol. Renewable energy is a wonderful idea but we need to do something right now. We also need to revamp the way we tax business.

We need to tax products sold in this country and not tax business profits. Our current system effectively punishes American companies who operate in this country.

Healthier but leaner

While it isn't the best of all analogies, one can look at the state of the economy and compare it to the health of an individual. In the last two decades it partied like it was 1999 and overindulged itself in all sorts of things. The ultimate result of this was a series of illness related to this overindulgence.

Recovering from an illness, assuming it isn't fatal, always involves some pain. If we ruined our economic teeth by chewing on two much sweet housing bubblegum, the resulting dental work to remove the rotten teeth and replace them with new ones is painful and expensive. If we got obese on cheap equity and credit card loans, the diet and exercise regimen to get healthy is long and painful and reduces our consumption greatly.

Is the pain worth it? Ultimately yes, but far too many fail to succeed. However, when you do lose the extra pounds, or get your new tooth inserts, you are better off and the memory of the pain fades.

The economy is getting better and healthier, but it is not there yet and the work is still plenty painful.

The Big Lie Theory

What we are seeing develop in American politics is a principle perfected originally by the totalitarian regimes of the 20^th Century and characterized in George Orwell's "1984", namely the Big Lie. Simply if you circulate enough Big Lies and get them repeated often enough, a percentage of the population will simply believe it. It seemed to gain momentum during the 2004 campaign when John Kerry's war record was questioned (whatever happened to that) and was tried in 2008 when Obama's citizen status was questioned (while believed by some the disaster of the Bush administration was hard to overcome).

The last two years saw it used more than can be believed as, it seems, conservative talk show hosts try to outdo each other. Lies that have been circulated include the ongoing allegations about Obama's religion and birthplace, numerous lies about the health care bill, purported Government takeover, increased costs, death squads, etc. etc., lies about tax increases over the last two years, and most recently lies about the cost of Presidential travel.

Most of us, feel that the lies are so preposterous, that no one would believe them. However, an old maxim comes into play here, no one ever lost money by underestimating the intelligence of the American public. Now, I think the statement is more related to the attention span rather than innate intelligence, but the basic principle holds. The public doesn't like to work hard at either entertainment or politics.

If you compare the ratings of low brow entertainment to high brow entertainment, the first easily trumps the latter. This isn't a condemnation of low brow entertainment, I greatly enjoy those shows myself, it is simply reality. Unfortunately, you will hear certain people, who consider themselves and who may be intellectuals, rant about how the public needs to be better informed and learn to appreciate the finer things.

Screw them. The public is always right, just like the customer and the voter. If you want to entertain them you have to actually give them something they will enjoy. People have the right; it's in the bill of rights, to pursue happiness. If you think the way they pursue it is wrong, you are wrong. By the same token, if you take the high ground in Politics, the odds are that you will lose.

The last two years demonstrated that the debate about major social initiatives was lost by the Democrats. I believe it is clear that in many cases, and maybe the President needs to think about his role, they let the grounds for debate be dictated by the opposition. I know most Americans believe that people are entitled to health care. However, they were told the Government was going to make them change doctors, decide what sort of treatment they could have and greatly increase their costs. None of these things are true, yet they are believed by significant numbers of Americans. The selling of the Health Care Act was perhaps the single greatest failure of the last two years. It was done so terribly that many Democratic candidates attempted to distance themselves from the act like naughty children with their hands in the cookie jar. Reforming health care was one of the greatest accomplishments of the last 50 years and over time will be perceived that way, but shame on Democratic opinion makers for failing to extol its virtues.

Similarly the stimulus package likely helped us avoid a complete financial collapse. Unfortunately, as big as it was it wasn't big enough or fast enough to reverse the fallout from the economic crisis the Administration inherited. The biggest failure here was probably the initial selling of the package as a way to keep unemployment below 8%. It didn't and in fact unemployment hit that level before any impact from it was felt. The loss of equity in people's homes took a tremendous amount of spending power out of the economy and the stimulus was not big enough to offset that.

The lesson that needs to be learned is that if you care about the country and your countrymen you have to be willing to fight for your beliefs. I believe a lot of the American public will become quickly disillusioned by the new crop of congressmen who really have no coherent ideas about how to fix things, but I also know the problems that will persist will be blamed on the President and the Senate by those same unethical conservative talk show hosts. If the Democrats don't figure out how to seize the debate 2012 will be another bloodbath.

Coogan’s Bluff looking at Highbridge

Failure, again

One of the great disconnects in politics is the let down that inevitably comes after a charismatic leader is voted into office. In our representative Government, only so much can be accomplished when we elect a group, or a cause. Most recently we see the election of Obama and the large Democratic majorities as another example of failed expectations. Running on a platform of change, he was able to defeat arguably much better qualified opponents in the primaries and ride a wave of disgust over the failed policies of the Bush administration into office.

Now two years late we see tea party republicans stirring up enough enthusiasm about the "failed" policies of the Obama administration to most likely take control of the House of Representatives and possibly the Senate. Of course this may be the best thing for the potential reelection of Mr Obama, since the failures of the next two years will discredit the winners of this election and may lead to a belief that the President was right in the first place. Hard to predict right now, but I think the example from 1994 when Gingrich and the republicans took control, only to bicker so much that they guaranteed Clinton's reelection could serve as an example.

The problem with all of this is that there is really only so much any party can accomplish, no matter the size of the majority, in our system. We have checks and balances and enough differences of opinion, even in the parties themselves that a change that is clearly something most Americans have wanted for quite a while, such as Health Care Reform, has been so argued about and so distorted in people's minds that the law that was passed, ended up not pleasing anyone very much, even though it is going to lead to quite a few changes that most Americans favor.

However, many Americans don't let facts get in the way of a good rant about Government and the health care bill has been blamed for ills that predated it by decades, such as the growth in health costs. Certainly the growth we have seen to date is unnerving, but the cause is not the health care bill, and based on almost every objective analysis I have seen, it will reduce the rate of increase in the future.

Providing health care to everyone in this country is simply the right thing to do, and something we already do, inefficiently and at great profit to the Health Insurance Industry. The New England Journal of Medicine had a recent article about how as much as 40% of health care insurance premium went to profit and overhead and not to claims payment. Wouldn't reducing that 40% seem like a good thing?

However, I digress. The election of charismatic leaders can only lead to truly revolutionary change, if it is accompanied by a revolution. Since revolutions are messy and unpredictable (take a look at history) we are probably going to continue to elect charismatic leaders who are doomed to failure, again and again and again.