China has a clear message to the U.S., "Stop running up the deficit!"
This clip from a wonderful article by Robert Scheer tells the story well:
"China has a huge amount of investment in the United States, mainly in the form of Treasury bonds. We are concerned about the security of our financial assets" was the way China's assistant finance minister put it. Briefing reporters at the US-China Strategic and Economic Dialogue, he added, "We sincerely hope the US fiscal deficit will be reduced, year after year." Quite sincerely, one suspects, given a US budget shortfall this year that is slated to reach $1.85 trillion.
So how do we balance the fact that our biggest creditor, the Chinese government, is asking us to reduce our deficit to sustainable amounts while we are considering a health care plan that requires more than $1 trillion in additional debt?
I know that health care is imperfect. I know that we need to continue to work on solutions. But stating that there is no better time to take on more debt for the reform sounds to me as if we are trying to borrow our way to success.
If you had a friend, who owed you $50,000, tell you that he would be in a better position to pay you back if you would loan him another $5,000 to fix a few things that really needed fixing, would you believe him? What if you knew he couldn't pay you now and was losing more cash every month. How would you feel? That is how the Chinese must feel today. And that makes us the bum friend...
Thursday, July 30, 2009
Wednesday, July 29, 2009
Who Will Lead?
Republicans lost their way under Bush, and spent money like madmen. Then the democrats came to town under Obama, and made the republicans look like misers. National polls show that we are all sick of Washington D.C., and even president Obama's popularity and charm can't fix it.
So who will lead us forward? Who has the guts to standup and say NO to new budget items and new taxes? Who has the courage to say that the government can't fix everything?
I'm looking for a leader that has the ability to tell us all to suck it up and take responsibility for our own actions and lives, without pissing everyone off. I'm searching for a common sense, balance the checkbook kind of guy. But I'm coming up empty.
Any of you know a leader like that? Because if I can't find one soon, I'm going to have to start doing it myself (this personal responsibility thing is rough!).
Email ideas to me at bwa.texas@gmail.com
Thanks!
So who will lead us forward? Who has the guts to standup and say NO to new budget items and new taxes? Who has the courage to say that the government can't fix everything?
I'm looking for a leader that has the ability to tell us all to suck it up and take responsibility for our own actions and lives, without pissing everyone off. I'm searching for a common sense, balance the checkbook kind of guy. But I'm coming up empty.
Any of you know a leader like that? Because if I can't find one soon, I'm going to have to start doing it myself (this personal responsibility thing is rough!).
Email ideas to me at bwa.texas@gmail.com
Thanks!
Monday, July 27, 2009
The Problem With Fixed Costs
In business there are three primary types of costs: variable, fixed, and primary sunk investments. Taking on too much of any category can quickly become a problem, as we are finding out in this country.
Variable costs are exactly what they sound like - variable. These costs are only incurred when you sell something, and they vary in a direct relationship with sales.
Primary Sunk Investments are large investments in something that is primary to the way you do business. A factory would be a good example of this type of investment.
Fixed Period Costs are costs that you incur regardless of sales. Think of rent, or salaries. These expenses are there every month even if sales go down. These are the expenses that make slow times very hard, and these are the expenses we seem to be taking on more and more as a country. Here are a few examples:
Similarly, the U.S. government has no savings. We are in debt up to our ears. So any proposal to take on more fixed period costs, such as health care administration or extra workers, should be voted down almost immediately. We simply don't have the cash to pay for it.
Variable costs are exactly what they sound like - variable. These costs are only incurred when you sell something, and they vary in a direct relationship with sales.
Primary Sunk Investments are large investments in something that is primary to the way you do business. A factory would be a good example of this type of investment.
Fixed Period Costs are costs that you incur regardless of sales. Think of rent, or salaries. These expenses are there every month even if sales go down. These are the expenses that make slow times very hard, and these are the expenses we seem to be taking on more and more as a country. Here are a few examples:
- Debt Payments - these must be made on the agreed upon schedule
- Social Security - these checks have been promised to citizens
- Government Salaries - more government jobs equals more salary expense
Similarly, the U.S. government has no savings. We are in debt up to our ears. So any proposal to take on more fixed period costs, such as health care administration or extra workers, should be voted down almost immediately. We simply don't have the cash to pay for it.
Friday, July 24, 2009
Health Care Solutions - At Least a Start
A friend recently called me on the fact that I have been offering opinions regarding the recent health care proposals without offering any possible solutions. She's right, without offering solutions I'm just another member of the peanut gallery, so here are a few suggestions for moving the conversation on health care forward:
- We simply must start with cost controls. If we aren't willing to discuss cost controls in health care reform then we aren't being serious about the issue at hand. Cost control measures need to involve limiting medical malpractice liability (which the lawyers are opposed to), limiting insurance premiums for pre-existing conditions (which in reality is a method of exclusion), and limiting certain types of care that are free.
- I know that last part makes people angry. But we have to be honest about the fact that it is not possible to give the best/most advanced health care to everyone in the U.S. Our science and capabilities are growing faster than our wealth. The fact that it is possible to save lives with cutting edge heart transplants doesn't mean that we can afford to make it a right that anyone needing one can receive one. If we screw this up and declare advanced care as a right of U.S. citizenship, we will go broke and stop innovation all at the same time.
- Our administration costs are high, but the idea that a large bureaucracy like the U.S. government is well suited to lower those administration costs is laughable. The U.S. government doesn't even understand what it means to lower administration costs.
- Finally, we need to discuss what level of care we are willing to live with. It may be true that our health care costs have climbed dramatically since 1950, but so has our quality of care (and of life). If we want to provide 1950's level care, which is a huge step backwards, we can get serious about cutting costs in half. But that doesn't seem to be the desire. We can't pay 1950 prices and get 2010 health care for everyone in the U.S.
Cost controls are something the government can help with, administrative control is not. And until we decide openly whether health care is a right or a service we will talk around the issue.
These are exactly the kind of hard decisions president Obama referenced in his inauguration speech. Let's be grown ups and make them.The Best of Health Care Commentary
Some of the best articles I've read lately are here for you to follow. I've pulled key snippets and linked the entire article so that you can get the bigger picture if you have the desire.
Charles Krauthammer, who used to practice medicine, discusses legal handicaps:
When a neurosurgeon pays $200,000 a year for malpractice insurance before he even turns on the light in his office or hires his first nurse, who do you think pays? Patients, in higher doctor fees to cover the insurance.
And with jackpot justice that awards one claimant zillions while others get nothing -- and one-third of everything goes to the lawyers -- where do you think that money comes from? The insurance companies, who then pass it on to you in higher premiums.
But the greatest waste is the hidden cost of defensive medicine: tests and procedures that doctors order for no good reason other than to protect themselves from lawsuit. Every doctor knows, as I did when I practiced years ago, how much unnecessary medical cost is incurred with an eye not on medicine but on the law.
Bill Maher, asking a fundamental question, says:
Because medicine is now for-profit we have things like "recision," where insurance companies hire people to figure out ways to deny you coverage when you get sick, even though you've been paying into your plan for years.
When did the profit motive become the only reason to do anything? When did that become the new patriotism? Ask not what you could do for your country, ask what's in it for Blue Cross/Blue Shield.
Brian Gould, MD, discusses why doctors aren't worried about reform:
There is little for a physician not to like about universal coverage and allowing insurance exchanges to offer a greater choice of carrier. Forty-four years of experience dealing with the Medicare program has taught them that over the long run it's a good deal to accept fee limits in exchange for broader coverage - particularly when the government does such a poor job of capping volume, maintaining treatment standards, or even policing outright fraud (estimated to be running $60 B a year in the current Medicare program). From the point of view of the practitioner in the trenches, Medicare-level fees are a grind, but never having to ask a patient if they are insured is a very good thing.
But wait you say, I thought ObamaCare was also promising to "attack excessive costs?" Isn't this where the rubber hits the road? Isn't a good part of "excessive health care costs" really doctor fees? Perhaps, but doctors never think that their fees are the ones being referred to as "excessive." Moreover, they calculate that reducing health care services to control costs will never be politically acceptable in the US. We may want the UK's per capita expenditure on health care, but we're not prepared to accept what the citizens of the UK do to achieve it. On this one, doctors may know their patients better than the politicians do.
Charles Krauthammer, who used to practice medicine, discusses legal handicaps:
When a neurosurgeon pays $200,000 a year for malpractice insurance before he even turns on the light in his office or hires his first nurse, who do you think pays? Patients, in higher doctor fees to cover the insurance.
And with jackpot justice that awards one claimant zillions while others get nothing -- and one-third of everything goes to the lawyers -- where do you think that money comes from? The insurance companies, who then pass it on to you in higher premiums.
But the greatest waste is the hidden cost of defensive medicine: tests and procedures that doctors order for no good reason other than to protect themselves from lawsuit. Every doctor knows, as I did when I practiced years ago, how much unnecessary medical cost is incurred with an eye not on medicine but on the law.
Bill Maher, asking a fundamental question, says:
Because medicine is now for-profit we have things like "recision," where insurance companies hire people to figure out ways to deny you coverage when you get sick, even though you've been paying into your plan for years.
When did the profit motive become the only reason to do anything? When did that become the new patriotism? Ask not what you could do for your country, ask what's in it for Blue Cross/Blue Shield.
Brian Gould, MD, discusses why doctors aren't worried about reform:
There is little for a physician not to like about universal coverage and allowing insurance exchanges to offer a greater choice of carrier. Forty-four years of experience dealing with the Medicare program has taught them that over the long run it's a good deal to accept fee limits in exchange for broader coverage - particularly when the government does such a poor job of capping volume, maintaining treatment standards, or even policing outright fraud (estimated to be running $60 B a year in the current Medicare program). From the point of view of the practitioner in the trenches, Medicare-level fees are a grind, but never having to ask a patient if they are insured is a very good thing.
But wait you say, I thought ObamaCare was also promising to "attack excessive costs?" Isn't this where the rubber hits the road? Isn't a good part of "excessive health care costs" really doctor fees? Perhaps, but doctors never think that their fees are the ones being referred to as "excessive." Moreover, they calculate that reducing health care services to control costs will never be politically acceptable in the US. We may want the UK's per capita expenditure on health care, but we're not prepared to accept what the citizens of the UK do to achieve it. On this one, doctors may know their patients better than the politicians do.
Monday, July 20, 2009
Democrats Find $$$ Solution
It seems democrats have one solution to all of our money problems - Tax the Rich! But I am neither convinced nor impressed.
Today the top 1.4% of income earning families, those making more than $350,000 per year, pay over 45.2% of all taxes collected. Are you comprehending that?! Basically 1% pay half of the bills for the entire country.
This same 1% that pay half of our taxes are also the biggest investors and charitable givers. It's not hard to figure out, this wealthier group simply has more money to invest and give away. They drive the stock market, churches, food pantries, programs for the arts, etc. And yet, we want to tax them harder!
But why? Why penalize people for being successful? Why discourage stock market investment? Why are we pretending that taxing the rich will do anything other than destroy wealth?!
The House of Representatives has recently passed new tax increases for the rich. This is happening right now. And like many other recent monetary decisions, this one is a HUGE mistake.
Today the top 1.4% of income earning families, those making more than $350,000 per year, pay over 45.2% of all taxes collected. Are you comprehending that?! Basically 1% pay half of the bills for the entire country.
This same 1% that pay half of our taxes are also the biggest investors and charitable givers. It's not hard to figure out, this wealthier group simply has more money to invest and give away. They drive the stock market, churches, food pantries, programs for the arts, etc. And yet, we want to tax them harder!
But why? Why penalize people for being successful? Why discourage stock market investment? Why are we pretending that taxing the rich will do anything other than destroy wealth?!
The House of Representatives has recently passed new tax increases for the rich. This is happening right now. And like many other recent monetary decisions, this one is a HUGE mistake.
Friday, July 17, 2009
Health Care Reform is Pure Expense
Douglas Elmendorf, chief of the Congressional Budget Office, said this of the leading Democratic health care proposals in the House and Senate: "In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount and, on the contrary, the legislation significantly expands the federal responsibility for health care costs."
In other words, the proposed reforms are MORE EXPENSIVE than the current system, NOT LESS! How did that happen? How did we take a national mandate to control health care expenses and screw it into a system that costs more? This is legislative failure, pure and simple.
Our history of predicting what government run health care programs will cost is tragically painful to review:
If we can't predict medical expenses with any confidence, and the current reform plans don't predict any savings to begin with, aren't current reforms relaly just an open liability that could become excessively huge in the near future? How can we afford that?!
In other words, the proposed reforms are MORE EXPENSIVE than the current system, NOT LESS! How did that happen? How did we take a national mandate to control health care expenses and screw it into a system that costs more? This is legislative failure, pure and simple.
Our history of predicting what government run health care programs will cost is tragically painful to review:
- The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly "conservative" estimate. But in 1990 Medicare actually cost $107 billion.
- Anticipating a 3.5-percent annual inflation rate, government actuaries predicted that the cost of a day’s hospital stay by 1985 would be $155 and that the hospital insurance portion of Medicare would cost $9 billion by 1990. The actual average cost of a hospital day by 1985 was over $600; instead of $9 billion, the hospital-insurance program cost $63 billion in 1990.
If we can't predict medical expenses with any confidence, and the current reform plans don't predict any savings to begin with, aren't current reforms relaly just an open liability that could become excessively huge in the near future? How can we afford that?!
Tuesday, July 14, 2009
Culture of Change
Last winter the markets collapsed. There were screams and tears and calls for hangings. So we went into debt, deeply, in an effort to stop the bleeding. Anything to fix it!
The second quarter of 2009 saw a rally in the stock market, the conviction of Bernie Madoff, and an auto industry bailout. Hope was the lead story on the nightly news.
But now what? The story of hope is fading, and behind it is the reality of less work and less money for American workers. Despite massive amounts of bailout money being borrowed against future taxes, the unemployment rate climbs. And some say we have a ways to go, from our current 9.5% to a staggering 14%. Could it really get 50% worse? Unfortunately, it could, and very well might.
As the market rally stalls out U.S. companies are reminded that recessions can last a very long time. Managers are being told to stay lean and reduce head counts, as payroll is always one of the biggest expenses a company has. State and local governments, facing huge revenue shortfalls, and are being forced to layoff teachers, agency employees, and support staff. Charitable organizations, facing lower rates of donations, are also laying off paid staff. With all of this bleeding, how can unemployment not go up?
At the point it is vital that we admit that the first stimulus package did nothing to slow job loss, it simply protected large investors and big corporate shareholders. A second package can't be expected to do any better, and I can't emphasize this enough - WE CAN'T AFFORD MORE DEBT!!
The second quarter of 2009 saw a rally in the stock market, the conviction of Bernie Madoff, and an auto industry bailout. Hope was the lead story on the nightly news.
But now what? The story of hope is fading, and behind it is the reality of less work and less money for American workers. Despite massive amounts of bailout money being borrowed against future taxes, the unemployment rate climbs. And some say we have a ways to go, from our current 9.5% to a staggering 14%. Could it really get 50% worse? Unfortunately, it could, and very well might.
As the market rally stalls out U.S. companies are reminded that recessions can last a very long time. Managers are being told to stay lean and reduce head counts, as payroll is always one of the biggest expenses a company has. State and local governments, facing huge revenue shortfalls, and are being forced to layoff teachers, agency employees, and support staff. Charitable organizations, facing lower rates of donations, are also laying off paid staff. With all of this bleeding, how can unemployment not go up?
At the point it is vital that we admit that the first stimulus package did nothing to slow job loss, it simply protected large investors and big corporate shareholders. A second package can't be expected to do any better, and I can't emphasize this enough - WE CAN'T AFFORD MORE DEBT!!
Tuesday, July 7, 2009
New Polls Show Obama Trouble
President Obama's job approval rating has dropped from a +44 to a +22 in the last seven months. And Ohio, who voted for the president, seems to be the first state to have changed it's mind (with less than 50% approving of the president). Many are wondering if this is the beginning of widespread discontent.
Here are the averages of recent polls. Click on the links to see detail (and play with the cool graphs):
President Obama Job Approval
RCP Average
Approve 58.3
Disapprove 36.3
Spread +22.0
Congressional Job Approval
RCP Average
Approve 35.3
Disapprove 54.7
Spread -19.4
Direction of Country
RCP Average
Right Direction 43.3
Wrong Track 52.0
Spread -8.7
A majority of us believe Congress is a mess, the country is on the "Wrong Track", and that the president seems much less exciting than before. This is what you call a BACKLASH. Huge deficits and new proposed taxes don't seem to be a recipe for success, and I can't believe anyone ever believed they would be.
Here are the averages of recent polls. Click on the links to see detail (and play with the cool graphs):
President Obama Job Approval
RCP Average
Approve 58.3
Disapprove 36.3
Spread +22.0
Congressional Job Approval
RCP Average
Approve 35.3
Disapprove 54.7
Spread -19.4
Direction of Country
RCP Average
Right Direction 43.3
Wrong Track 52.0
Spread -8.7
A majority of us believe Congress is a mess, the country is on the "Wrong Track", and that the president seems much less exciting than before. This is what you call a BACKLASH. Huge deficits and new proposed taxes don't seem to be a recipe for success, and I can't believe anyone ever believed they would be.
Monday, July 6, 2009
South Korea Openly Grateful
In a recent speech Lee Myung-bak, the president of South Korea, was openly grateful for U.S. help. What surprised me most was the fact that he actually said the words "thank you." It seems that all the media reports now are stories of U.S. hatred and condemnation.
Here's a quote from his speech to Georgetown University on June 17th:
"The Korean War Memorial is not far from here. It is in front of the Arlington National Cemetery and those of you who haven't visited this beautiful memorial yet, please do so. There, you will find what your country stands for and what your grandparents did for others. You will find what courage and sacrifice means. You will be proud of what your country did and understand how grateful we are and that when we say thank you, we really mean it. Likewise, in my message to the American soldiers in Korea commemorating Memorial Day, I said that we will never forget the selfless sacrifice given to us by the young American soldiers to defend freedom and peace of Korea."
At a time when many seem content to take the blame heaped upon us for perceived ills, I for one am not buying it. I am proud of the generosity of our country. I am proud of the sacrifices brave men and women have made to further freedom. And I am beyond tired of apologies by our government.
We have succeeded in Iraq. We will succeed in Afghanistan. And we have our military (and their families) to THANK for it.
Happy July 4th everybody!
Here's a quote from his speech to Georgetown University on June 17th:
"The Korean War Memorial is not far from here. It is in front of the Arlington National Cemetery and those of you who haven't visited this beautiful memorial yet, please do so. There, you will find what your country stands for and what your grandparents did for others. You will find what courage and sacrifice means. You will be proud of what your country did and understand how grateful we are and that when we say thank you, we really mean it. Likewise, in my message to the American soldiers in Korea commemorating Memorial Day, I said that we will never forget the selfless sacrifice given to us by the young American soldiers to defend freedom and peace of Korea."
At a time when many seem content to take the blame heaped upon us for perceived ills, I for one am not buying it. I am proud of the generosity of our country. I am proud of the sacrifices brave men and women have made to further freedom. And I am beyond tired of apologies by our government.
We have succeeded in Iraq. We will succeed in Afghanistan. And we have our military (and their families) to THANK for it.
Happy July 4th everybody!
Thursday, July 2, 2009
Recession Proof Businesses
Here is a list of attributes you can use to grade a business as recession proof (Yes is good, No is bad):
Besides being safer places to work during bad times, such companies tend to be better places to work in general. Productive, successful, thoughtful, and honest companies do great work, and tend to attract great people. So seek quality, regardless of the industry, and you may find shelter from the economic storm.
- Is the product/service the best there is?
- Is the product/service a necessity for those that buy it?
- Are there just a few alternative competitors?
- Is the company creating a lot of free cash flow to the equity holders?
- Is the product/service protected by patent, intellectual property copyright, or something else?
- Are the employees top notch?
Besides being safer places to work during bad times, such companies tend to be better places to work in general. Productive, successful, thoughtful, and honest companies do great work, and tend to attract great people. So seek quality, regardless of the industry, and you may find shelter from the economic storm.
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