This myth of "can't afford social services" right now, so we should cut it off is ridiculous. Real people are affected by these cuts. And the payments to a large majority of these "social services" is actually meant to save the community and individuals a lot of money in the long run.

Investment in many different social services programs is a cost upfront that will become an aggregate much larger expense if not created by government and paid for by taxes.

Some examples:

• Do you pay a traveling nurses aid who can service 10 people in an 8 hour day for $12 an hour plus transportation costs of $5 a patient -- thereby allowing older people to stay at home -- or subsidize private nursing homes for $200 a day?

• Do you cut the police community interaction officer that earns a $65,000 salary, or deal with increased criminal incidents and the accumulated costs of increased crime in the larger community -- auto thief, jail costs, court costs, burglaries, injuries that require hospitalization, and death services?
• Do you fund a network of half-way houses for troubled teens and runaways, or do you ignore the reality of that social phenomenom, the consequences of which are unwanted pregnancies, drug-abuse and alcoholism, and increased criminal activity.
• Do we cut funding for after school programs, or leave students on their own to find some way to occupy their time among other choices, which thereby increases the number of youthful indiscretions that occur -- or stunts the full development and choices our youth are exposed to in addition to limiting their contact with good positive role models?
• Do we cut funding for first-time mothers and create situations where more young girls will make bad decisions because they are under incredible economic duress?

Click here for an LA times story [19 July 2009] with some other real world stories occuring due to these financial cuts.

Spending on social services is also most needed during economic downturns so that the downside isn't so deep that it prolongs the duration of the bottom. When the upfront investment in society doesn't occur at the front-end of the economic downturn -- if we cut everything under the notion that we "can't afford it" -- the only result is a more prolonged downturn that will be exponentially more expensive than if we just paid the money in the beginning.

There are viable plans involving small tax increases which will enable the cuts to social services to be manageable. But the governor and his Republican allies are acting like fools. They don't understand economics and they don't care.

For a Fourty minute audio assessment of all the various facts and players involved in the process of Health care reform, Click here. Jonathan Cohn is interviewed on NPR radio on 16 July 2009.

The interview is very informative, and provides much insight about what has been going on, who the major players are and what their moves and motivations might be.

A caller to a C-span show says “the insurance companies are the ones controlling what tests you can get, when you get them, how you get them and if they’re accepted or not.”

Republican Congressmen from Pennsylvania, Tim Murphy agrees :"one of our big frustrations with insurance companies is they control the market place, they control what’s done, a lot of times doctors not making the decisions here."

Yep, that's it. You can read the Thinkprogress story where I got this from by clicking here.

The real problem is that large insurance providers are consolidating and turning local insurance markets into oligopolies. According to a 9 April 2009 story in the LA Times:

Already, 1 in 6 metropolitan areas in a 2008 study of more than 300 U.S. markets is dominated by a single health insurer that controls at least 70% of consumers enrolled in health maintenance organizations or preferred provider organizations, according to the American Medical Assn.

"It becomes difficult for patients to have choice and doctors to get their patients the care that is needed because a monopoly has been created," said Dr. James Rohack, a Texas cardiologist and AMA president-elect. "Patients don't have as many other options."

Health insurers long have billed industry consolidation as a way to better control costs through efficiencies and leveraged buying power.

...

Medical-care providers say the promise of efficiencies historically has not lowered premiums to consumers.

"The promise of saying we are going to come together and have administrative efficiencies and these other projected savings" never comes to fruition, Rohack said. "Most of these [health plans] have different IT platforms and software, so it is a false promise of being more efficient compared to what their track records are."

The opposition to a surtax on incomes over $350,000 is said to be a bad idea during a time of recession. This is another favorite critique by those who don't understand economics but profuse to be business oriented and knowledgeable about the free market. Another favorite criticism is used when times are good. In that scenario, the opposition to small tax increases is that it will stunt economic growth.

Either way, its a fallacious argument. Investment decisions by those who control the spigot of large financial accumulations are what actually creates and stunts economic growth. Cutting or raising taxes does not influence this reality at all.

The surtax plan is as follows: beginning in 2011, the plan would target all income over $350,000 a year for families and $280,000 a year for individuals. The surtax would start at 1 percent, rise to around 1.5 percent for families earning more than $500,000, then step up again, to around 3 percent, for families earning more than $1 million.

At a minimum this is $2,800 for a single person who makes $280,000. If this person has the typical leftover income of 20%, or $56,000, this person would still have more than $50,000 leftover to save or do whatever. Not a big deal, right? Especially if you no longer have to worry about health insurance and insurance companies ruining your finances because they decide to interpret your health care coverage against your best interest.

More importantly however, the idea that these individuals actually use these leftover funds to create economic growth. This is somewhat true if these funds are left in a bank as deposits , FDIC insured, or put into certificates of deposit, but then the banks who use these aggregate funds will still use them to pursue their own short-term profit goals. There is still no large-scale guaranteed outcome that results by the investment of these funds. Participating in the owning of buildings or stock certificates is not creating economic growth. Economic growth occurs when funds are spent to develop new technologies, build factories, roads, electronic and internet infrastructure, to build buildings that are used for libraries or schools or as community resources like parks and recreation centers and civic centers. Commanding a greater share of the profit from the existing infrastructure of economic marketplace relationships is not the same thing as actually creating sustainable entities within society or the economy.

Tax cuts to wealthy people do not get invested in economic growth. They are either swallowed up by short-term consumption, or they are invested in interest-bearing securities. For instance: A lawyer that gets an $11,000 tax cut buys a brand new $3,000 suit, takes a more expensive vacation, and puts an extra $2000 grand in their retirement fund. Which means more than 80% is spent within the year as consumption (suit + vacation). Imagine if that $11,000 was instead collected by the government to build a first rate high-speed train system across the united states, or was invested in free college education, or was spent on universal health care, or used to repair the thousands of bridges and roads that are in bad shape across the nation. Or....

Saying this surtax is a bad idea in the face of a recession also ignores the fact that it will only affect 2% of the entire population. 98% of the entire United States will not be affected at all.

Dig in folks. It's gonna get ugly.

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UPDATE: Lo and behold, Kevin Drum has published a takedown of his own called "fighting the zombies" -- at Mother Jones.

Here's a snippet:

"At a time like this." I think I've read critiques similar to this about a thousand times now. I guess it sounds mighty clever, .... But it's nonsense. The "pay-or-play" payroll tax increase doesn't go into effect until 2011 — and if the recession isn't over by then we've got way bigger things to worry about than a minor increase in payroll tax receipts.

After waiting 2 weeks, the book I ordered from Princeton books arrives, packed in a box that is 4 times larger than necessary, stuffed with styrofoam.

OH. MY. GOD. IT'S A HARDCOVER BOOK. It could have been sent in a puffy envelope. What a useless waste of resources.

According to Bill King, from Barry Ritholtz's blog [ Click here ].

Stocks ignited in the early afternoon when CNBC and other financial media outlets reported that renowned doomster, Prof. Roubini, said the worst of the financial and economic crisis is behind us. After the close Roubini denied that he had changed his forecast. This led astute operators to wonder if someone planted the erroneous story as part of a well-orchestrated option expiration squeeze.

Options are a type of security that locks in a price over a period of time, usually 3 to 6 months and sometimes a year. You buy a contractual right to buy or sell a certain commodity at a certain time in the future at a set price dictated by the contract. Typically the price is a small percentage of the actual cost, say one or two percent.

Here's how people make money using options. If you think the price will drop, purchase the right to sell at a fixed price at a certain time in the future, say 3 months. So if the price drops, than you buy up the commodity at the cheaper price and immediately sell it for the price in the future contract, keeping the difference for yourself. You get a profit so long as you make more than the small 2% cost of the option contract. A 10% drop minus 2% is an 8% profit. If these sales involve 10 million dollars, 8% of 10 million is $800,000 !!!! It's not chump change.

If works the same way on the upside. If you think the price will rise, then you purchase the right to buy at fixed price. When they day comes, you buy at the cheaper price from the option contract and immediately sell at the higher price in the market.

Options expire usually in large blocks at certain intervals throughout the year. When options expire, a lot of heavy trading occurs due to the buying and selling of the underlying commodities discussed above. If someone with influence bought a lot of options contracts on securities betting prices would rise, financial news could stimulate individual investors to take actions that would influence price rises.

CNBC (the network that brought us Jim Cramer) has been criticized by many knowledgeable people for having a dishonest and disreputable reputation on reporting business news. The advice offered is often very laden with ignorance and quite faulty or out-right erroneous. Jon Stewart on the Daily Show once drew the networks ire when he used segments of the show adjacent to actual market occurrences to reveal how consistently the network was wrong.

Today Karl Denninger from Niceville, Florida responds to last night's attempt by the CNBC network bobble-heads (none of whom have any investment experience whatsoever) confabulate the notion that Nouriel Roubini says "the worst is over" to mean the end of the recession and good times just around the corner (Nouriel Roubini is the contrarian who has predicted the Great Recession, noted for his book The Black Swan).

Roubini was very upset. And wrote a scathing rebuttal on his web portal The RGE Monitor, a site that is worth a constant read. Click here for a direct link to the rebuttal.

If you want to watch the CNBC 2 minute snippet followed by a very knowledgeable takedown by a YouTube from Karl Denninger, go to Barry Ritholtz's page of the two videos. Watch as the CNBC Cheerleaders stumble over themselves to find creative adjectives while disseminating the myth. Then watch as Mr. Denninger shrinks their credibility beyond non-existence.

But it's more than sport. Unlike the CNBC tripe, you actually learn quite a lot by listening to Mr. Denninger.

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hat tip to Barry Ritholtz.

Wow. Max Keiser really tells all. Even the French dude he's with doesn't deny the general theme of his assertions, saying "I wouldn't be as extreme". But how else can you explain the history of the last 12 months. Keiser is not that far off from the truth, in my opinion.

The AMA has just endorsed a bill that includes a public option. Click here for the story in the New Republic.

This is the same AMA that called Harry Truman's 1948 attempts at National Health care a "road to socialism". Times have changed.