Joe, please pass whatever you’re smoking

Posted by Ray on April 23, 2010 under Politics | Be the First to Comment

I am not a fan of the current administration, I think most people know this by now and no I am not a racist or anti-government, but the action lately has just gone over the top of prudent governance. Joe Biden, at a fund raising event, said that the economy will be adding 500,000 jobs a month in the near future. Joe, whatever you are smoking, please pass it because you are feeling no pain and I could use that for a little while.

The notion that this economy will create 500K jobs a month in the “next few months” is absurd and irresponsible. How in the world will this happen? We are still seeing 450K+ a week in initial claims which shows that employers are still laying people off. The work week is still well below 40 hours, coming in at a little over 33 hours a week, and wages are starting to deflate. If this economy was going to create 500K jobs in the next few months we would not be seeing what we are seeing. I understand this administration is under tremendous pressure to boost employment, but there is a difference between giving people hope and flat out lying, Joe is doing the latter.

I suspect he made this statement because census hiring will kick into high gear for April and with the passage of the health care bill the government will begin hiring for the new agencies being created. However, those jobs are not “real” jobs, yes they pay people and they do work, but they are not private sector jobs which actually create products or services. Government jobs create nothing and are actually a drain on the citizens of the country as the salaries for these positions must be paid for by some type of tax or fee which sucks capital out of the economy.

Clearly Joe was being Joe when he made that statement because, as usual, it was reckless and inaccurate, like most of the things Mr. This is a Big F****** Deal says. I see a trend with this administration that is eerily like that of FDR’s administration, please read The Great Depression: A Diary by Benjamin Roth to see the similarities, which would not stand for criticism of any kind. I get many do not like the Tea Party because there are a few nut jobs in the crowd, as with any crowed, but look at what they are doing to them. They branded them anti-government, racist and dumb which is largely unfounded accusations and I seem to recall liberal rallies which were supported by the Democrats as citizens exercising their right to free speech. However, when the speech is criticizing the Democrats, well, they can’t have that now, can they?

Regardless, let’s take a look at another report about the health care bill. A new report from the Associated Press today says the bill will cost far more than what was projected by the CBO and by the Democrats, are you really surprised by this? The bill will cost $311B between 2010 – 2019 and, which the CBO already admitted, will raise premiums for everyone. However, there is way more cost than most people think about, let’s take a look at some back of the envelope costs.

The bill mandates that everyone has to have coverage or face a fine, but because of this mandate the government will offer generous subsidies up to individuals/couples making $88K a year. Who knows if these subsidies get bigger or smaller in the future, but we will use what we know for sure. The good news is that the poor will get “free” coverage and as your income increases so will the amount you will have to pay. The range of premiums owed is based on a sliding scale and will cost you between, assuming you make less than $88K, 3% – 9.5% of your income.

That is a heavy burden on a family even making $88K a year and for the kind of poor, making, say, $50K a year, you are taking a big chunk of a person’s income which they have no choice but to pay. On $50K a year they will end up paying about $1,500 a year for health insurance, $125/month, that is a lot of money considering the bi-weekly pay is about $1,200 for someone in that income range. This means that money will impact their standard of living perhaps preventing them from even owning a home. At the very least this bill will pull billions out of the economy every year, that is not what we need right now.

If we look at the 32M this bill will insure times the estimated about they will have to pay, the number gets pretty ugly. If we assume the average person will pay $3,500 a year in premiums, who much money will that take out of the economy? The answer, $112,000,000,000, almost 1% of the current GDP. If we look at the average subsidy you will receive, which the government, i.e. other taxpayers, will provide people, how much would that be? The answer, $288,000,000,000 (32M x $9,500 – average subsidy by my calculations based on current insurance premiums on an annual basis). I am not sure how Congress came up with the cost of this bill being only $930B or so, but I do not want whoever crunched those numbers to do my taxes.

The point I am making is that this bill which is being bragged about by the Democrats is not good for business and not good for the middle class. Let’s not forget that the real middle class, couple, will more than likely make more than $88K per year which means no subsidy at all for them. Paying for a $12K or $1,000 a month for a health insurance policy is a lot to ask. Most people do not realize that making $100K in today’s world is not that much money, after taxes, mortgage payments, property taxes, energy costs, kids and so forth.

The worst part is that the GAO has estimated that by 2020 93 cents on every dollar collected by the government through taxes will have to go towards entitlement programs. That means only a small portion will be available to go towards everything else we have, you know, like debt servicing costs. Does anyone think taxes on everyone are not going to go higher? I know, they promised that only the rich will pay higher taxes, news flash, politicians lie, shocking. If we do not have a VAT, value added tax, it will have to come from higher income taxes and, more than likely, we will end up with a VAT AND income taxes which would be horrible. I am not even going to go into the tax base they used to calculate this, but I will say it is absurd.

No one did not want to reform health care we just wanted it done right. I think people would have been for the stimulus if it was done right. The problem is that these programs were not done right and will cost us all dearly in the future. This is not about party lines, the Republicans stink as well, this is about the countries very survival. To put this into perspective, Obama just said I walked into a bad situation with trillion dollar deficits and $8T in national debt. Well, it is Obama’s second year in office and the national debt is now reaching $13T and somewhere along the way we are being told that 2 wrongs make a right, because bush did it first.

This is unsustainable and I mean any annual deficit is now unsustainable. Adding even $500B a year is irresponsible and will have catastrophic consequences let alone adding trillions more to this figure. People say we have to run deficits because we have trade deficits. What they don’t tell you is our trade deficits are not that big and we have enough debt outstanding that would cover our trade deficits for a very, very long time. I believe we are past the point of no return and freezing spending after increasing the budgets of government agencies by 20% is doing nothing to reduce our long-term debt obligations. Just like we are seeing in Greece now, this will all come to ahead very soon and who will bail us out?

In the meantime, if you actually believe we will have 500K a month job growth in the next few months while initial claims come in at 450K per week, pass me whatever you’re smoking.