Wednesday, July 1, 2009

Issues on My Mind

From the Desk of Joe Rollins

After reading the New York Times this past weekend, I started wondering when the concept of writing a movie review became so complicated that it’s impossible to tell if the movie is recommended or not. In recent months, the current administration seems to be rewriting every law since the beginning of time. Maybe they should make a new law regarding how movie reviews should be written. In it, they would dictate that every movie review begins with a “like” or “dislike” sentence.

I read two movie reviews this weekend in the New York Times, and by the time I finished, I had no idea whether the reviewer was recommending the movie or not. They seem to get so preoccupied with their flowery prose that they forget the purpose of providing the review to their readers. In any case, since new laws are being made on practically a daily basis, a law of this type would certainly be helpful to moviegoers.

Likewise, there are hundreds of cell phone provider ads on television every day. AT&T and Verizon ads both indicate that they provide cell phone coverage everywhere in the world. However, with my AT&T iPhone, there are three places that I can never seem to get any cell coverage: Turner Field, the Georgia Dome and my own home. Other than my office, I am in these places more than any other, and therefore, I go without cell phone coverage fairly frequently. I just wonder, after seeing all those commercials how a company as large as AT&T couldn’t cover the 70,000 people that regularly attend events at the Georgia Dome.

On Friday, June 26th, the House of Representatives narrowly passed the Waxman-Markey bill, which would be more appropriately titled the “Cap and Tax” bill. The Act now goes to the Senate, and if it passes, every American would face a new large tax. Of course, the end result would be devastating to the U.S. economy, especially since the bill is not even based on sound science. What American would not want a cleaner environment? But at what cost?

Investor’s Business Daily brought up something interesting in last Thursday’s editorials regarding the environmental effect of this bill, “According to an analysis by Chip Knappenberger, administrator of the World Climate Report, the reduction of U.S. CO2 emissions to 83% below 2005 levels by 2050 — the goal of the Waxman-Markey bill — would reduce global temperature in 2050 by a mere 0.05 degree Celsius.” Maybe it’s just me, but doesn’t it seem like cutting our annual GDP in the U.S. by 50% is hardly worth the cost for a reduction of the global temperature by just 0.05 degrees Celsius.

If this bill weren’t so incredibly destructive, it would almost be amusing. Do you realize that the House has now passed a tax on bovine flatulence?!? I can’t make up stuff as incredible as this! This is just my guess, but haven’t cows had gas since the beginning of time?

Did you happen to catch the Congress drilling Federal Reserve Chairman Ben Bernanke regarding the Bank of America/Merrill Lynch merger? It’s downright embarrassing for Americans to have Congressman who are so uneducated and with such little ability to comprehend the complexity of governmental finance.

The Waxman-Markey bill should scare all of us given the intellect of the House of Representatives. The bill itself is approximately 1,000 pages. In addition, at the last moment there were 300 additional pages of amendments added to the bill on the last day of debate. It’s unrealistic that anyone in Congress actually took the time to read and understand a bill that could potentially have devastating effects on the U.S. economy. Given the intellect that the House of Representatives has shown during the hearings on the subject, I’m not sure that even if they had read the 1,300 pages, they would have any idea of what it actually said.

Everyone is in agreement, including the Obama Administration, that all forms of energy will skyrocket in cost. Rates for electric, according to the administration, could go up as much as 90% adjusted for inflation. Inflation adjusted gasoline prices could rise 74% and residential natural gas prices by 55%. The only way you will not have to pay this increase in tax will be if you use no energy. My suspicion is that there are not very many people in the U.S. who would fall into that classification. So much for not having a regressive tax rate system in the U.S!

Notwithstanding the absolute insanity of passing any type of tax increase in the midst of a recession, this one should be particularly frightening to you. The American Farm Bureau warns that the “Cap and Tax” bill will cost the average farmer $175 on each dairy cow and $80 for each beef cattle. Of course, this tax is meant to compensate for the emissions of barnyard animals, including methane from cows.

The Washington Post reports that the legislation also would pay domestic and international companies not to cut down trees in the U.S. While it’s strange enough that our government pays farmers not to grow food, now they’re going to pay companies to not cut down trees. Of course, since wood is such an integral part of our economy, the effect would be devastating to jobs.

The Heritage Foundation projects that in 2035, the new “Cap and Tax” bill would reduce aggregate gross domestic product by a cool $7.4 trillion. They estimate that in an average year, 844,000 jobs will be destroyed if this bill were fully implemented as now proposed. See the chart below.

Even weirder about this bill is that it would increase the taxes on all Americans, including the 95% that President Obama assured us would have no tax. Our only hope is that the Senate slows down and takes the time to actually read and understand this bill before passing it on to the President for his signature. It’s clear that the U.S. Congress is totally out of control, and for whatever reason, is determined to pass all of these large tax bills as quickly as humanly possible and before all the facts are known by the public.

Congress has gone crazy with their spending over the last few months. In fact, they are debating and passing bills with such speed that I have a hard time believing they even have a clue as to what they’re even debating.

I continue to hear enormous amounts of bad information reported by the media regarding the deficits and the exact amount of the deficits. Therefore, I decided to compile the information and let you decide what it’s all about. The Congressional Budget Office prints a total budget analysis going all the way back to its beginning. I have gone back to the Nixon Administration, and the accumulated deficits under each President in office from that administration forward are as follows:

Even more interesting than this list of accumulated deficits under Presidents is what is being projected for the Obama Administration. Based on the current estimated budget deficit of $1.9 trillion in 2009, in only one year, President Obama will almost exceed the accumulated deficits in the eight years of the GW Bush Administration. Don’t blame it on the recession – GW Bush had his own recession after September 11, 2001.

The projected deficits do not relate to the stimulus bill. Even though we were assured that all the stimulus money would be spent immediately, very little of it has actually been spent. As of late May, only $36 billion of the original stimulus money of $787 billion has actually been expended. In fact, it is estimated that only 24% of the entire stimulus act money will be spent in the 2009 fiscal year. A full one-quarter of the bill will not be expended until 2011 through 2015.

See the embedded chart produced by the Congressional Budget Office as to the publicly held debt as a percentage of gross domestic product. As you can see, by the year 2021, the total amount of debt as a percentage of the gross domestic product will be greater than it was during World War II.

Of course, all of these increases in the national debt do not even take into consideration the new proposed healthcare bill that is projected to cost a minimum of $1 trillion over the next 10 years. Obviously, the taxes or deficits to fund this bill would clearly increase the amount of the deficits indicated in the chart above. I couldn’t even believe my ears when I recently heard several talking heads explaining how a government-sponsored program would be advantageous for the U.S. economy.

It’s hard to imagine that they even expressed the opinion that the Medicare program was a prime example of how well (?) a government run health program could be managed. At last count, the Medicare program in the United States will completely run out of money within the next decade, and it is now projected to have an accumulated actuarial deficit of $35 trillion. Again, that’s trillions, not billions or millions.

Obviously, anyone using Medicare as a good example of anything is incredibly uninformed. In 1965, when the Medicare Health bill was passed, it was estimated by Federal actuaries that the cost of the program would be a mere $9 billion by the year 1990 – 25 years from the date of enactment. The real cost, however, was a cool $66 billion. Another bad estimate?

When Medicare Part D, the portion of the program related to prescription drug benefits, was passed in 2003, the estimated cost was $534 billion over 10 years. Less than two years later, the government was forced to admit the actual entitlement cost $1.2 trillion over the first decade. With our experience of these two programs, can you even imagine what a program projected by Congress at $1 trillion over the next 10 years is going to actually end up costing.

I have now read on a number of occasions the same statistics that were provided in my post of Saturday, June 20th (Healthcare Relief Without Universal Health) as to the number of uninsured Americans today. As I pointed out, the numbers being used to represent this great need for medical insurance are just inaccurate. Presumably, these inaccurate numbers represent a failure to do the research, but that seems hardly likely since the same numbers have now appeared on the front page of the New York Times, The Wall Street Journal, and the Washington Post.

The bigger issue regarding medical insurance is just because someone doesn’t have medical insurance doesn’t mean that they don’t have medical care. I think I have beat that point into submission in prior postings. Not that I feel my postings will actually change the trend by the Congress to spend more and more money on programs with less and less credibility, but I thought I would at least do my part.

The most discouraging part of the healthcare proposal is that it proposes a government sponsored health program to compete with the private sector. I like the comment of Representative Paul Ryan (R-Wisconsin): “Having the government compete against the private sector is kind of like my seven-year old daughter’s lemonade stand competing against McDonald’s.” I think everyone gets the point that a government agency competing against the private sector is absurd. With the clear intent of governmental subsidies of medical care with your tax dollars, it will only be a matter of time before medical insurance from the private sector disappears. At that point, we as taxpayers will be assuming a liability many times the $35 trillion facing Medicare today.

You might think that I’m very discouraged after reading all of the above. Actually, I’m probably more encouraged today than I have been at any time during 2009. Congress has passed such ridiculous bills that are so far “over the top” that even the public is catching on. Lesser bills probably would not have received the same amount of negative publicity. The polls clearly reflect that most people in the U.S. do not support a government sponsored health plan.

No one understands the “Cap and Tax” bill, but that’s only a matter of time. Once the public understands the boondoggle of these two bills, I think there will be an immediate backlash against the irresponsible members of Congress that support them. While we surely cannot continue to run the deficits that are now proposed for the next decade by the current administration, I have confidence that the public will resist them.

As we move further into 2009, we must get away from the Rahm Emanuel (President Obama's Chief of Staff) mentality of “You never want a serious crisis to go to waste. And what I mean by that is it's an opportunity to do things that you could not do before.” We must now slow down and actually think about the laws we are passing. Eventually, sanity will return to the taxpayers, and they will vote against these extraordinarily new high taxes and a government that more closely resembles Europe than the United States.

As always, above are my opinions and observations. I could be wrong.