Just cut the deductions and loopholes they say. Raise the eligibility age of Medicare to save money.

These two ideas are proposed by the Republicans to raise revenues and avoid raising taxes on wealthy people. They sound good at first, but in reality won't actually achieve their purpose. Instead, they create other cost externalities, most of which will involve increased government spending.

Let me explain.

If the goal is to eliminate deductions for wealthy persons, then you have to devise a system of what counts as wealthy, and what numbers to use and tax. A lot of people who make more than 100,000 are getting their income from multiple sources. For small businesses, the revenue of the business is different than the profit of a corporation. Limited partnerships and S corporations are different then a company with 10,000 employees. Salaried employees can also supplement their income. Assets and different asset classes (buildings, securities, bonds, cash, contracts) all have different issues and variability that is not simple to capture in a tax system that wants to "simplify" the tax code by just charging a percentage to a single number. Upper income people have almost all of their savings in assets; lower income persons little to few and mostly none. For wage earners and small salaried employees this is much easier, but that is beside the point. Remember this was suppose to avoid raising taxes on upper income people.

And who counts as "upper income"? The $40,000 a year pensioner in a home worth $200,000 on the market. A hedge fund manager getting a salary of $80,000 but has a firm with a net worth in the hundreds of millions of dollars. The language in the law is gonna be important. So right off, this will not capture the maximum amount of income, because the very wealthy hire lawyers to scrutinize and understand the updates of the written laws, and accountants to manipulate these laws in their favor.

Increasing tax rates however does not increase the legal bureaucracy or involve interpretations and chicanery. Nothing has to be changed except the number of the percentage. So you see how this works and what this nonsense is really all about. Changing the laws by eliminating a lot (but not all) "loopholes and deductions" really just means a chance to put wording into a new law and create other loopholes.

But leaving that aside, it is the externalities that are more detrimental to the theory of this even saving money. People who can't deduct the interest from their mortgage bills will likely be less inclined to buy a home, which means having a depressing effect on the housing market. If the deductions for charities get hit, then a good chunk of charity will disappear -- but not all, because fact is some people are just generous -- and who or what will be picking up the slack. The government.

At one extreme: it's the police that have to spend their time dealing with a dead homeless person (lack of medical care) who also have to involve other government officials in the process. The lunatic who can't get his meds will break the windows of dozens of cars and cost citizens money directly. The poor kid who can't go to school because they have to work creates lost time and diminished potential from our human resources -- unless you think educational ignorance and poverty is a blessing. Regardless of the 5 to 25 percent who may or may not move out of poverty, the other 75% or more are gonna be poor their whole lives.

By the way, in case you haven't noticed, the government already gives you a subsidy every time you file a tax form. It's called a Personal deduction. That's a subsidy by another name. Turns out that every single American has been on the government teet since birth.

Or what about the hidden subsidizes for families that are deductions for having children. Or the small business tax credit. Eliminate or phase out these, and you pass the burden onto the individuals and negate the reason why these subsidies occurred. Small businesses employ up to 70% of the labor force because they are labor intensive, and have more workers per revenue dollar than larger companies. Diminish the small businesses and replace them with large corporations and you diminish the availability of employment because the number of workers per revenue dollar will DECREASE. Large companies are in business because they are more efficient otherwise they wouldn't be economically viable.

So what happens when small businesses go bankrupt? The courts get clogged with legal matters. A small percentage of frustrated people looking for limited job opportunities choose crime. Violence and other illegal activity increase the costs of government.

Raising the age of medicare, another "necessary" budget saving device, only means a lot of older people will have to wait that much longer to have affordable health care. This will increase the costs of Medicaid, which is an absolute necessity if we are going to have a functional health care system. Without Medicaid, Hospitals would not be profitable at all unless they deny people who are poor, which is what used to happen in the past. Rich people had their own hospitals, and poor people got the Charity hospitals. The history of Catholic and non-profit hospitals evolved in the United States as a means of avoiding this harsh reality, but as the population got large the entire system became over-worked and unmanageable. So the government offered to foot the bill whenever hospitals had to deal with people who can't or won't or will not be able to pay the bills.

Medicaid saved the health care system. So it's amazing to me that anyone even contemplates ending or decreasing the funds for Medicaid.

[SOURCE: Jackie Calmes |  | 4 December 2012]

Barry Ritholtz asks the commentariati "Why are US Healthcare Costs twice as expensive as the rest of the world?"

And the commentariati responds:

1. So afraid are they of having to give a poorer person medical attention ... that they have allowed an entire insurance industry to grow up and require financial support in order to have a third party BETWEEN patient and doctor so they can tell themselves that their tax dollars are not being spent on a poorer American.

   The least expensive way to deliver medicine is to socialize delivery, giving direct necessary care to everyone and covering the bill through taxes.

   It flat out costs less than essentially doing this while paying for insurance agents to interfere with every aspect of doing this.

   BUT IT INVOLVES GIVING DIRECT SUPPORT TO POOR AMERICANS.

   What are you a Nation of again?

   
   

2. The American model of fee-for-service medicine cannot create a viable market: It must lead inevitably to market failure after market failure because the price of the good — health — has no reliable price signal, the ability to clearly associate the good with its cost. The invisible hand cannot operate without price signals. Full stop.

   
   

3. 
   

   The full picture:

   1) U.S. Pharma manufacturers routinely reformulate and re-patent existing drugs, as much as they can, to extend full price chargeability.

   2) Pharma chains routinely over price for prescriptions, e.g.: Duane Reade

   3) Doctors are “bribed” to write prescriptions for dubiously required drugs, and for brand vs. generic.

   4) More than 20%+ of physicians bill for unecessary or non-performed procedures, especially for gastro and cardio diagnostics.

   5) Insurance companies deny payments for as much as 25%+ of legitimately billed tests and procedures, while retaining premiums and ancillary fees.

   6) Hospitals, health systems and freestanding facilities routinely both over bill and over collect for tests, procedures, and other patient treatments and care.

   7) The government regulatory agencies charged with oversight are grossly incompetent.

   Fraud, incompetence, and kickbacks are the rule of the day. God bless America!

   Tim McInerney, Healthcare Capital LLC

   
   

4. Doctors, hospitals, clinics and labs are paid nearly 2x in the US compared to the rest of the world. What’s the difference?

   In the US, the medical industry is a private, for profit business, that has been allowed to run amok for the last 75 years. In the rest of the world health care is either a government service, or treated as a tightly regulated public utility. The kind of disgusting, disgraceful medical profiteering that goes on all the time in the US simply IS NOT LEGAL anywhere else.

   From the doctors to the hospitals and insurers, all are operating a massive scam and ripoff, and it’s all legal, thanks to the government being in the pockets of the industry. As a result, Americans pay an 80% penalty relative to the rest of the world to support the scam. The US medical scam industry exacts a private tax of 18-19% of GDP, while in the rest of the civilized world, medical care costs only 10-11% of GDP.

   It just doesn’t get any simpler than that. But the American people have been brainwashed by the massive industry propaganda machine, and corrupted by the massive bribery of a slight majority of people who get coverage without having to pay out of pocket. If they never see the cost, the can’t understand the cost. Meanwhile, 15% of us go without, too rich or too young to qualify for government insurance, and either not healthy enough or not rich enough to pay for private insurance.

   Obamacare does not address the true nature of the problem of excessive cost.

   
   

[SOURCE: Barry Ritholtz |  the big picture blog | 4 December 2012]

Over all, global emissions jumped 3 percent in 2011 and are expected to jump 2.6 percent in 2012, researchers reported in two papers released by scientific journals on Sunday. It has become routine to set new emissions records each year, although the global economic crisis led to a brief decline in 2009.

The level of carbon dioxide, the most important heat-trapping gas in the atmosphere, has increased about 41 percent since the beginning of the Industrial Revolution, and scientists fear it could double or triple before emissions are brought under control. The temperature of the planet has already increased about 1.5 degrees Fahrenheit since 1850.

Further increases in carbon dioxide are likely to have a profound effect on climate, scientists say, leading to higher seas and greater coastal flooding, more intense weather disasters like droughts and heat waves, and an extreme acidification of the ocean. Many experts believe the effects are already being seen, but they are projected to worsen.

The history of dealing with financial crises goes back to before the constitution. Dealing with them has always taken ingenuity, and some form of economic rebalancing.

the central principle for understanding macroeconomic policy has been that everything is different when you’re in a liquidity trap. In particular, the whole case for fiscal stimulus and against austerity rests on the proposition that with interest rates up against the zero lower bound, the central bank can neither achieve full employment on its own nor offset the contractionary effect of spending cuts or tax hikes.

This isn’t hard, folks; it’s just Macro 101. Yet a large number of economists — never mind politicians or policy makers — seems to have a very hard time grasping this basic concept.

A Liquidity trap occurs when investment opportunities are not attracted by low interest rates, and thus economic growth cannot be stimulated by simply making borrowing less expensive.

[SOURCE: Paul Krugman | New York Times | 1 December 2012]

Apparently there is no substance to the belief that people have different "learning styles." This surprises me, but I'll defer to the scientists while I assess their study.

Research has never been able to back up that which seems so obvious in the classroom. Studies reveal that under controlled conditions, there is actually no difference in the way people respond to visual, auditory or kinesthetic modes of teaching

According to science, our brains all learn in pretty much the same way. What does differ between students is background knowledge, areas of greater or lesser ability and areas of more or less interest. All of these factors affect how well people learn

Incorporating variety in lessons, then, and even sensory variety, is an excellent approach to increasing understanding across the board -- but not because students have inherent, sense-based learning styles. Variety helps because students come with different knowledge bases, talents and interests -- and because it can help keep them awake during math class

Psychologist Dan Willingham at the University of Virginia, who studies how our brains learn, says teachers should not tailor instruction to different kinds of learners. He says we're on more equal footing than we may think when it comes to how our brains learn. And it's a mistake to assume students will respond and remember information better depending on how it's presented.

For example, if a teacher believes a student to be a visual learner, he or she might introduce the concept of addition using pictures or groups of objects, assuming that child will learn better with the pictures than by simply "listening" to a lesson about addition.

In fact, an entire industry has sprouted based on learning styles. There are workshops for teachers, products targeted at different learning styles and some schools that even evaluate students based on this theory.

This prompted Doug Rohrer, a psychologist at the University of South Florida, to look more closely at the learning style theory.

When he reviewed studies of learning styles, he found no scientific evidence backing up the idea. "We have not found evidence from a randomized control trial supporting any of these," he says, "and until such evidence exists, we don't recommend that they be used."

Willingham suggests it might be more useful to figure out similarities in how our brains learn, rather than differences. And, in that case, he says, there's a lot of common ground. For example, variety. "Mixing things up is something we know is scientifically supported as something that boosts attention," he says, adding that studies show that when students pay closer attention, they learn better.

And recent studies find that our brains retain information better when we spread learning over a longer period of time, say months or even a year, versus cramming it into a few days or weeks. Rohrer and colleagues nationwide are currently researching what teaching methods work best for all students, but only using the evidence.

Cedar Riener is an assistant professor of psychology at Randolph-Macon College.

Daniel Willingham is a professor of psychology at the University of Virginia. He blogs at the Washington Post and is the author of Why Don't Students Like School?

It's just a subterfuge to disguise what they are really after. A Trojan Horse.

One of the Fix the Debt campaign’s main proposals for deficit reduction is creating a “territorial tax system” that would enable corporations to evade taxation on offshore earnings—which amounts to a combined $418 billion from the Fix the Debt member corporations—when they bring that money home, and giving themselves a $134 billion tax break, according to a new report from the Institute for Policy Studies titled “The CEO Campaign to ‘Fix’ the Debt: A Trojan Horse for Massive Corporate Tax Breaks.”

Just to be clear, they are talking about paying off the national debt by pocketing $134 billion in taxes annually.

And that’s just from Fix the Debt corporate signatories. Taken as a whole, the S&P 500 currently has an estimated $1.5 trillion in revenues in offshore havens. That’s roughly the size of the national debt in 2009.

You should read the entire article.

[SOURCE: Jonathan Valania | Philly Magazine | 29 November 2012]

These multi-millionaires can't take defeat. Just can't stand it. They must have their way and they will spend their money to get what they want, because it's not really one-man-one vote. The Supreme Court said Money is Free Speech. Money can influence and manipulate voters and get face time with politicians that ordinary middle-class folk do not have. The opinions of the elite are pushed into the minds of the media watching public. The beliefs of ordinary folk (unless they agree with the elites) not much at all, even though those beliefs are in the majority.

The class war is from above, not from below. Rich people aren't in danger of having their money taken by an uprising of poor, angry citizens. The poor, angry citizens make their voices heard the only way they can, by showing up in droves and voting on election day. They aren't storming the mansions and gated communities. Not yet.

But the mega-rich are sore fucking losers. So spoiled and used to always getting what they want, they mistake their morbid selfishness for patriotism.

Here's what Paul Krugman had to say about this today:

what voters said, clearly, was no to tax cuts for the rich, no to benefit cuts for the middle class and the poor. So what’s a top-down class warrior to do?

The answer, as I have already suggested, is to rely on stealth — to smuggle in plutocrat-friendly policies under the pretense that they’re just sensible responses to the budget deficit.

Consider, as a prime example, the push to raise the retirement age, the age of eligibility for Medicare, or both. This is only reasonable, we’re told — after all, life expectancy has risen, so shouldn’t we all retire later? In reality, however, it would be a hugely regressive policy change, imposing severe burdens on lower- and middle-income Americans while barely affecting the wealthy. Why? First of all, the increase in life expectancy is concentrated among the affluent; why should janitors have to retire later because lawyers are living longer? Second, both Social Security and Medicare are much more important, relative to income, to less-affluent Americans, so delaying their availability would be a far more severe hit to ordinary families than to the top 1 percent.

Or take a subtler example, the insistence that any revenue increases should come from limiting deductions rather than from higher tax rates. The key thing to realize here is that the math just doesn’t work; there is, in fact, no way limits on deductions can raise as much revenue from the wealthy as you can get simply by letting the relevant parts of the Bush-era tax cuts expire. So any proposal to avoid a rate increase is, whatever its proponents may say, a proposal that we let the 1 percent off the hook and shift the burden, one way or another, to the middle class or the poor.

One of the comments left was also insightful, and historical

I agree with Mr. Krugman that there is a class war but the choice between Romney and Obama is not a very comforting one for those - the poor and middle class - on the losing end of that war. President Obama, after all, invited the captains of industry and the architects of the crash to help steer the country back to health. In the middle ages noble lords defended their wealth with armed mercenaries. In the 20th century they did it with tax lawyers and corrupt politicians. This strategy has expanded in the 21st century to include entire parties, news outlets and pet pundits in the service of preserving the wealth of their masters. It is an odd phenomenon but I've noticed that those who have more than they need are often those who are most afraid to lose what they have.

Many of the founders feared the creation of an hereditary aristocracy in America. Their fears seem to have been realized. The only antidote I'm afraid, is the dreaded income redistribution. When a hedge fund manager - a person essentially charged with the socially useless task of making rich people much richer - makes a billion dollars or more a year and wages of people doing useful work stagnate, something is seriously wrong with society. When a professional golfer makes more in a weekend than a teacher makes in 15 years something is seriously wrong with society. Yes, there is a class war but unfortunately, while the Republicans may be part of the problem, the Democrats really aren't par of the solution.

[SOURCE: Paul Krugman | New York Times | 30 November 2012]

They're usually not quite as transparently fraudulent as Fix The Debt, but all debt/deficit hawkery is just a front for cutting taxes on rich people. No this doesn't make any sense, but it sounds great to the likes of Dancing Dave so they get away with it.

Rich people want to steal the Social Security money. It's really that simple.

Despite being a person schooled in graduate level economics, Duncan Black keeps it real every single time. Perhaps his knowledge of the insider monkish ritualism gives him confidence to call a turd a piece of shit.

Of course, I suppose it helps that I also agree with him nearly 100% of the time.

[SOURCE: Clinton Black | Eschaton blog | 28 November 2012]

From a speech before the Center for American Progress, Senator Dick Durbin from Illinois outlined his view of the Administrations ideas and intentions:

• In addition to rejecting the privatization of Medicare or Social Security and the block granting of Medicaid – a common tactic to reject the extreme view to provide space for more modest but still damaging cuts – Durbin took Social Security almost entirely off the table.

• Durbin said, regarding spending cuts on anti-poverty social programs, “Let me be clear: Those cuts will not happen.”

• Republicans would have to build the framework on taxes, which includes an increase in the top marginal rates, before any Democrat will even begin to talk about social insurance programs.
• He sought to line up with the Administration’s viewpoint that any changes to Medicare and Medicaid can happen without cuts to benefits.

• He also wanted to exempt infrastructure spending fully from any cuts. In fact, Durbin said that any long-term deal would have to include short-term stimulus:“We can’t just cut our way out of this deficit or tax our way out. We have to think our way out. We have to invest and work our way out”

• Durbin also said that any deal would have to include a solution for extending the debt limit

[SOURCE: David Dayen | Firedoglake | 27 November 2012]

I will not offer any opinions at this time. I'm just passing along the information.

A recent NY Times article by Adam Davidson points out that manufacturers screaming about not being able to hire enough workers with the requisite skills are really just not willing to pay enough money to attract the necessary talent.

Eric Isbister, the C.E.O. of GenMet, a metal-fabricating manufacturer outside Milwaukee, told me that he would hire as many skilled workers as show up at his door. Last year, he received 1,051 applications and found only 25 people who were qualified. He hired all of them, but soon had to fire 15. Part of Isbister’s pickiness, he says, comes from an avoidance of workers with experience in a “union-type job.” Isbister, after all, doesn’t abide by strict work rules and $30-an-hour salaries. At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald’s can earn around $14 an hour.

The secret behind this skills gap is that it’s not a skills gap at all. I spoke to several other factory managers who also confessed that they had a hard time recruiting in-demand workers for $10-an-hour jobs. “It’s hard not to break out laughing,” says Mark Price, a labor economist at the Keystone Research Center, referring to manufacturers complaining about the shortage of skilled workers. “If there’s a skill shortage, there has to be rises in wages,” he says. “It’s basic economics.” After all, according to supply and demand, a shortage of workers with valuable skills should push wages up. Yet according to the Bureau of Labor Statistics, the number of skilled jobs has fallen and so have their wages.

In a recent study, the Boston Consulting Group noted that, outside a few small cities that rely on the oil industry, there weren’t many places where manufacturing wages were going up and employers still couldn’t find enough workers. “Trying to hire high-skilled workers at rock-bottom rates,” the Boston Group study asserted, “is not a skills gap.” The study’s conclusion, however, was scarier. Many skilled workers have simply chosen to apply their skills elsewhere rather than work for less, and few young people choose to invest in training for jobs that pay fast-food wages.

UPDATE: 28 November 2012 ~ ~ ~ ~
This got me thinking, how much is this entrance wage of $10 an hour in an entire year? Or the top wage of $18 an hour?

Assuming a 40 hours a week (big assumption) and that 50 weeks total wages are paid, minus the various holidays, this is 2000 times 10 and 2000 times 18. $20000 a year low end and $36,000 a year high end BEFORE TAXES ARE TAKEN OUT, which is probably close to 70% left -- that's $14,000 and $25,000 a year after taxes.

1,350 to 2,083 per month. Depending on where you live, rent can start at $600 or $1200. With food costs a minimum of $10 a day, that's another $300 a month. Assuming you can afford a car, there is $100 a month insurance and gas that could be more than $100 (especially if you need the car to go to work 5 days a week). At the low end with $600 rent, that's already over $1000.

This is not a lot of money. Try paying off $50,000 in student loans, especially when the loans have 6% interest. If you own a car, there is always $1000 of expenses extra per year. Tires, Oil changes, Brakes cost money.

And if you want to raise a family, it's called POVERTY.

How outta touch are these employers? They complain that the country is lacking skills when they are paying nearly poverty wages, and don't realize that only the lower 30% is applying because the upper 70% is better educated and gets better jobs.

So you see, their paradigm is the real problem.