American Politics during the Obama Presidency

If you love the service you get from the USPS (FYI they are now going for another rate increase and are thinking about doing away with Saturday delivery) love the "savings" Medicare and Medicaid have brought you (in the first ten years of Medicaid and Medicare the costs were over 500% greater than projectd) and love the way Social Security is working (since the 50's the greatest Ponzi scheme in town) then you are going to just love ObamaCare – based on the British model which is now discredited by the new PM. Can anyone show me a program the Government runs that is both successful and cost effective?

What is coming for the small business owners (you know the ones who really create the jobs in any recovery) – the Obama administration is going to grab them by the heels, turn them upside down and shake every penny they can get out of them. There is no question it will be cheaper to pay the fine than pay for employee healthcare insurance. I'm spending $112K per year for healthcare now and since the fine currently appears to be tax deductible I really will have no choice – is a cost benefit no brainer. Any "savings" will be eaten up by additional reporting requirements for businesses to comply with the new statute – probably to the IRS since they are seeded the enforcement duties under the law.

I have been in meetings with clients and their healthcare providers and the picture is grim. The Aetna representative said if ObamaCare takes effect as written in a few years the Public Option will occur by default as all the private insurers go broke. They will be unable to make a profit and will continue to incur losses under the current rules. They will be forced to accept a shrinking pool of patients, which are sicker and cost more to care for while the IRS tracks down those who don't carry the required coverage and force payments from them when they find them (a process with will take months if not more likely years) and the fines they collect from business won't cover the costs of service. In the mean time insurance carriers are paying for healthcare costs NOW. Don't believe me – check out Harry Reid's comments in Vegas this last weekend – it's the dirty little secret along with the cuts in payments to physicians nobody wants to talk about. In Texas, primary care physicians are either dropping out of the Medicare program altogether or limiting the number of patient's they will take. They are not being hard hearted; they just want to survive since every Medicare patient they see is at a loss in most cases (costs more to see the patient than they are reimbursed for the care)

Regarding 401(k) when I started ours we did a 100% match which dwindled over the years. I now doing a 3% Safe Harbor match to eliminate some of the testing required by IRS for our plan. I just love the way the IRS tells you how much of YOUR PROFITS you HAVE to contribute to your employees to put back any of YOUR PROFITS for your own retirement!

End of Rant for today, got to get back to work and pay the bills!

Doppelganger

Thanks Stan. It's useful to see your perspective as a CEO.

I don't think it is at all silly to want to be known as a company that is a good place to work and I don't see where any US company can do that today without offering a health insurance plan. However, if you could get out of the health insurance business without effecting your company reputation or the good will of your current and future employees, you'd want to look at the financial implications of making that change. Correct?

As far as the companies discussed in the CNN article, any company that didn't look at the financial implications and options created by the reform package would be remiss. But it's a long way from looking at alternatives to actually making changes. However, if the exchanges prove to be a success and companies think that they can transition at little to no cost (nobody is going to say "drop") from an employer-based to exchange-based benefit without taking a reputation hit with customers and employees, they are going to do it. If the exchanges are successful and the financial penalties are low enough, employers would be silly not to change. I happen to think that's a good thing as I believe employer-sponsored health insurance is a major market distortion in the USA. It's also worth noting that all the companies in the article have large union work forces so the companies are always looking for a bargaining chip.

Of course, if the penalties are sufficiently high, employers will not drop plans and the exchanges will remain relatively trivial players. They might help you out as they are supposed to provide small business with the opportunity to participate in larger risk pools.

My personal belief is that the reforms are insufficient to do anything to stop health care inflation that will overwhelm us in 10-20 years. Stopping that will require hard choices that no politician can make and keep his job until the problem is still so obvious and severe that can't be ignored. Although I think that examples like California and public pension plans show that we are capable of inaction even when faced with pretty big problems.

[QUOTE=Easy Go]My personal belief is that the reforms are insufficient to do anything to stop health care inflation that will overwhelm us in 10-20 years. Stopping that will require hard choices that no politician can make and keep his job until the problem is still so obvious and severe that can't be ignored. Although I think that examples like California and public pension plans show that we are capable of inaction even when faced with pretty big problems.[/QUOTE]Absolutely true, where California is concerned. The problem and the dynamic are plain for all to see. There is a Democrat-controlled legislature in California and there has been for a long, long time. Their primary constituency and primary contributors are the public sector unions.

So, when it comes to negotiating government contracts with these unions, there is an obvious conflict of interest. It may not be a conflict in the traditional sense, but it is plain as the nose on your face: The foxes are guarding the hen house. There is no incentive for Democrat lawmakers to "get tough" with their biggest constituency, so they've been giving away the store for decades. This process plays out on the state, county and municipal level. It's now at the breaking point. But, who's going to put their foot down? Certainly not Democrat lawmakers.

Study after study has shown that public employees are compensated higher and have richer benefits packages than their private sector counterparts. They also aren't subject to the same free-market pressures -- when the entity is not successful, there are consequences, such as layoffs. Public sector employees are largely insulated from that.

Anyone who has dealt with government, [I]especially in California[/i], knows that employees are largely incompetent. This doesn't mean they are inherently bad people. But, the system that is in place, largely because of union rules and unaccountability, fosters incompetence. When you run a company, you feel personally responsible for the bottom line. Even if you don't feel directly responsible, pressures will be brought to bear on middle and lower level managers when the entity is failing. Generally, the same is not true on the public sector side. There's no one who feels directly responsible. To the extent senior managers have any interest, it is in protecting their budget and expanding their head count. Unfortunately, for most of these folks, that's how they measure status and that's how they massage their egos.

Until this system breaks, there will be no good solution. California is in a particularly acute dilemma. Democrats' traditional response to these issues is to simply raise taxes. But, that's not really a viable option at this point since state and local taxes already are among the highest in the nation. So, it can't raise taxes without driving away wealthy individuals and businesses. Many who could go already have left. That erodes the tax base further. It's credit is impaired. And, it's not willing to make the long-term structural changes that are necessary (e. G. Pension reform) because the legislature is controlled by Democrats. It will break, eventually. The biggest problem for California is that it does not have the traditional private sector option of filing for bankruptcy. States can't do that. (The full faith and credit clause of the Constitution forbids it. The only option, ultimately, will be to sell off some of the state's assets -- buildings, parks, etc. -- and pare back from there.

I threw this question out on this board a while back and got no response, probably because it was at the end of a long e-mail like this. But, I'll try one more time:

What purpose do public sector unions serve?

Historically, unions arose to give workers the ability to collectively bargain against capitalists and large conglomerates. It was a way of evening the bargaining power.

Why is this necessary for public sector workers? They are negotiating with. [b]us[/b]! Citizens are a far cry from the powerful railroads, mining companies, capitalists and conglomerates that originally spawned labor unions.

My solution: Ban all public sector unions. Period. If the voters believe that workers deserve better pay and benefits packages, they can elect politicians who will give them that. There is no need for a union. I'm not naive enough to believe that this will ever happen in my lifetime. But, to paraphrase Ronald Reagan: Public sector unions cannot solve the problem; public sector unions [i][b]are[/b][/i] the problem. Or, to paraphrase Shakespeare: First, let's kill all the lawyers; then, let's get the unions.

I've known that those two references were going to force you to invest all that time writing an anti-Democratic and anti-union screed, I wouldn't have mentioned them as they were tangential to my post. Are you done discussing health care or are unions just a hot-button topic for you?

I suppose that pointing out that Republicans and Democrats have equal blame for California's political problems but most of the blame actually resides with the initiative system which created an impossible gap between spending and revenues. Voters want programs but don't want to pay for them. Of course, both those "wants" have been shaped by heavy investments by special interests in initiatives they favor.

We have no common ground for the union discussion as my view is that unions are a fact of life so figuring out how to live with them is far effective than either blaming them for everything or hoping they will go away. Poor management results in poor unions whether it's the DMV or United Airlines and we don't have much hope of fixing either.

There's a number of reasons that government is a good career financially but it mostly comes down to government and private pension plans and benefits have historically favored long-service employees and, due to civil service laws created to curb huge abuses in government hiring and firing, there are lots of long service employees. Plus, politicians prefer to give away the future if it avoids pain the present so they tend to sweeten pension benefits to avoid having to address current wage issues. Inflation-adjusted pensions are a sweet, sweet deal. Of course, there is a significant downside to being a government employee in that you have to work for the government which is not generally a very satisfying place to work.

[QUOTE=Easy Go]I'd known that those two references were going to force you to invest all that time writing an anti-Democratic and anti-union screed, I wouldn't have mentioned them as they were tangential to my post. Are you done discussing health care or are unions just a hot-button topic for you?[/QUOTE]You don't see the point that many years ago (30+) unions morphed from organized labor (I. E. Give employees strength in numbers) to organized crime (use labor pool, voting pool, union funds to extort third parties)

[quote=]I suppose that pointing out that Republicans and Democrats have equal blame for California's political problems[/QUOTE]I can point out to you that the sun rises in the West. That doesn't make it so.

[ but most of the blame actually resides with the initiative system which created an impossible gap between spending and revenues. Voters want programs but don't want to pay for them. Of course, both those "wants" have been shaped by heavy investments by special interests in initiatives they favor.

[quote=]Poor management results in poor unions whether it's the DMV or United Airlines and we don't have much hope of fixing either.[/QUOTE]Creating government-made, sanctioned and encouraged anomalies in the labor market results in private industries being destroyed by payments to people who have long since left their employ.

[quote=]There's a number of reasons that government is a good career financially but it mostly comes down to government and private pension plans and benefits have historically favored long-service employees and, due to civil service laws created to curb huge abuses in government hiring and firing, there are lots of long service employees. Plus, politicians prefer to give away the future if it avoids pain the present so they tend to sweeten pension benefits to avoid having to address current wage issues. Inflation-adjusted pensions are a sweet, sweet deal.[/quote]

Exactly, artificially high compensation for the skills required and job performed with no little or no accountability.

[quote=}Of course, there is a significant downside to being a government employee in that you have to work for the government which is not generally a very satisfying place to work.[/QUOTE]The over-compensation helps. Plus, for many govt employees, it is a great place to work. They get paid relatively high wages and have to do little more than they would if they collected welfare.

Maybe those government jobs are not as secure as one thinks.

[url]http://money.cnn.com/2010/07/28/news/economy/local_governments_budget_doom.fortune/[/url]

"But sales tax, personal income tax, and corporate income tax (by itself 80% of states' general fund revenue) revenues have fallen off a cliff. As a result, states and municipalities have had to take very drastic measures -- including laying off over 200,000 state and local government employees since June 2009"

The story goes on to say that it's estimated that 900,000 private sector employees are also expected to lose their jobs because of fall in revenues.

I was referring to federal govt jobs. State, muni and other local jobs are subject to the whim of DC and local revenues (tougher for them to steal from citizens than it is for the feds)

Hi Easy:

Yep, I doubt you and I will agree on unions then. It is a hot button issue for me, because they serve no purpose in the public sector, in my opinion, and they are destroying state governments, particularly California. I was hoping you would answer my question as to why they are needed. The only thing you cite is civil service rules designed to "curb huge abuses in government hiring and firing." I'm not quite sure what this means, unless you are referring to patronage. But, of course, this really has nothing to do with unions. Civil service rules can exist entirely apart from unions and, indeed, they began long before government workers were unionized. So, why do you believe public sector unions are necessary? Or, do you just accept them as a fact of life without questioning their utility? That's what most folks have done, which is part of the reason we are where we are today in my opinion.

As to public sector layoffs, there undoubtedly have been some recently with Obama-provided state manna expiring. But, such layoffs pale in comparison to the private sector. For example, between December 2007 and December 2009, the private sector lost more than 7.3 million jobs, yet the number of government jobs actually increased by about 100,000. [url]http://reason.org/news/show/public-sector-private-sector-salary[/url] So, the 200,000 lost that you cite puts them down by 100,000. That's really telling if relativity matters.

This report cites a wide variety of sources to establish that public sector employees are overcompensated, unproductive, over-pensioned and fully aware that they are working the system at taxpayer expense.

Take, for example, your idea that government work is not particularly satisfactory. You may not have meant to imply it, but the suggestion is that it may take more compensation to attract folks willing to work in this unsatisfying line of work. But, as set forth in the report cited above, if that were true then one would expect to find that the job-quit rate in the public sector approaches or even exceeds that of the private sector. But, it's not so. The job-quit rate is 1/3 of the private sector -- suggesting that public sector employees are very satisfied, whether it's because they're overpaid, not forced to work hard, have job security, can't find a job anywhere else because they're worthless, or all of these.

There's still more, which is just illustrative of my point vis-a-vis California:

* "In 2007 the average annual salary of a California state government employee was $53,958, nearly 32 percent greater than the average private sector worker ($40,991)"

* "In California, even as the state struggled with the recession, plummeting revenues, and record budget deficits, and Gov. Schwarzenegger issued a supposed hiring freeze, the state continued to hire more workers. Incredibly, the state has added over 13,000 employees since the onset of the economic recession in 2008 and continued hiring even during the worst of the recession."

As to public sector workers on the whole:

* "As of December 2009, state and local government employees earned total compensation of $39.60 an hour, compared to $27.42 an hour for private industry workers-a difference of over 44 percent. This includes 35 percent higher wages and nearly 69 percent greater benefits."

* "Data from the Bureau of Economic Analysis illustrate that average state and local government compensation has been increasing at a faster rate than average private sector compensation over the past 30 years."

* "According to the U. S. Bureau of Labor Statistics (BLS) National Compensation Survey, private-sector employees worked an average of 2,050 hours in 2008, 12 percent more than the 1,825 hours worked by the average public-sector employee."

My point, which I don't think you challenge too much, is that the system for compensating public sector employees is broken. My further point -- and I think you disagree with me here -- is that the biggest culprits are unions and their patrons, which are Democrat lawmakers. You can make a facile statement such as "Republicans and Democrats are equally to blame for California's mess," but if you've been paying attention at all here, you know that's not true. Democrats have largely had their way with tax increases, even if Republicans were finally able to put their foot down this last budget -- which still resulted in further "temporary" tax hikes. The Legislature's got to live within its means, and the initiative process is part of that. But, historically, it is Democrats who have been responsible for excessive spending, not Republicans. There just aren't any two ways about it. Dems and their union buddies have done more to destroy California's future than any other party, special interest or initiative, individually or collectively, no pun intended.

I could cite example after example of public sector pension and compensation abuse by individuals. In my line of work, we happen to see a lot of it. And, I don't really blame the individuals for taking advantage of what's available. But, it's a system that has been installed by Democrats and the unions that fund their machine. They have been kicking the can down the road for years. There's nothing Republicans can do about that. Democrats have had the numbers in California for decades. But, the chickens are coming home to roost. Unfortunately, I expect we'll hear a lot more 'Republicans and Democrats are equally at fault' rhetoric when that time comes, especially from Democrats who know better.

By the way, I thought I had talked about health care already. If you think I need to say more, I'm willing. But, I think I'm already boring folks to death as it is.

By the way, you probably already have the impression that I'm a Republican-loving, Democrat-hating monger. That's not quite true. At the federal level, the Republicans had their chance to run a tight ship (2000-2004) yet they utterly blew it. They essentially destroyed the party by thumbing their collective noses at what it was supposed to stand for.

As further evidence, I posted long ago that, if I had voted this last election, it would have been for Obama. I've since posted that this would have been a mistake, given what I now know about him. But, I've got no fixed hatred for Democrats per se other than they planks they traditionally embrace and the dependent-class politics they traditionally play. Obama said he was different. I believed him. I was wrong. I definitely am a fiscal conservative, but I don't always side with Republicans.

Nevertheless, in California, there's no need to have any regard for Republicans. Democrats have controlled the purse strings for decades. It's their mess. There's not really any plausible, straight-faced argument that can be made to the contrary, at least in my opinion.

So you don't hate Democrats, just everything that they stand for?:-)

I doubt there is much correlation between either the political party in control or the presence of unions that is highly correlated with the degree to which public sector salaries, pension benefits, and management are screwed up. Public sector employees have a low quit rate because they value stability and quitting isn't something that they do lightly.

My comment on the downside of public jobs was unrelated to the question of appropriate compensation and benefits. It was more about why I went into the private sector rather than the public sector. My time in the military opened the door to federal service for me early in life but I found it to be a soul-killing environment. Not surprisingly, it's not something unique to government work but I've never regretted my choice.

It happens that I know a lot about California as I lived there most of my life. I could have retired there but even ten years ago it was clear that the state was broken beyond repair. I visit friends and family there frequently and have seen nothing to make me regret my decision to retire elsewhere.

[QUOTE=Easy Go]I doubt there is much correlation between either the political party in control or the presence of unions that is highly correlated with the degree to which public sector salaries, pension benefits, and management are screwed up. [/QUOTE]You might think that, but you might want to look a little closer. Look at traditional red state / blue states and the degree to which their budgets are messed up. Big blue states like California and New York are seriously, seriously messed up. Big red states such as Texas and Arizona are not. There are degrees for all of this. But, by and large, there's your correlation: In traditionally blue states with big Democrat and union machines, the budgets are broken beyond repair. In traditionally red states without union and Democrat control, there are problems, but generally nothing near as bad as the blue state mess.

I commend you on your retirement decision. Things are going to get a lot worse for California before they get better.

[QUOTE=Wild Walleye]However, from 1975 to 2007, the percentage of Americans living below the poverty line in nominal terms only increased from 12.3% to 12.5% (during a period when the US population grew 42%)[/QUOTE][QUOTE=Wild Walleye]If the percentage in poverty is slightly down over the period of time, then, the percentage is down. [/QUOTE]Beyond confusing up from down, what is remarkable is that anyone would actually see these poverty rates as any kind of success or achievement. Even if we call it flat, what that means is we made no progress at all in reducing poverty in the past three decades. We had an economic expansion and created a lot of wealth, but most of it went to the top few percent. That the poverty rates did not improve is an absolute failure.

Of note, poverty rates steadily increased under Bush. The 2008 number was 13.2%.

[QUOTE=Tiny12]Among the ways you can go about improving income equality are (1) higher taxes on ordinary income that would discourage over-achievers from working harder and small businesses from taking risks, (2) higher taxes on capital gains and dividends and interest that would reduce savings and investment, and (3) overly generous unemployment benefits. I think there's a strong correlation between "3" and the rate of unemployment. The correlation between measures of income inequality and unemployment would be weaker.[/QUOTE]Historical evidence demonstrates you can implement moderate, targeted tax increases without overly discouraging hard work, risk-taking, investment and economic growth. I agree with your correlation, and I don't support generous unemployment benefits in general. I do think the current benefit extensions make sense at this point in time, but its temporary.

[QUOTE=Tiny12]I think each side accuses the other of extremes. [/QUOTE]I agree!

[QUOTE=Tiny12]Regarding your link, I don't think you get my point. I'm not arguing about whether statistical measures indicate there's more inequality in the US versus, say Europe. I am arguing that the average middle class or lower middle class American is better off than his counterpart in Europe, and I believe statistics of MEDIAN income adjusted for purchasing power support that. Someone at the 50th percentile of income in the US is more likely to have a larger house, a nicer car (s) air conditioning, etc.[/QUOTE]I agree! (more or less). And if you are content with that metric and see no need to address other issues within the US, you are welcome to support the status quo. Others don't feel the same way.

[QUOTE=Esten]Beyond confusing up from down, what is remarkable is that anyone would actually see these poverty rates as any kind of success or achievement. Even if we call it flat, what that means is we made no progress at all in reducing poverty in the past three decades. We had an economic expansion and created a lot of wealth, but most of it went to the top few percent. That the poverty rates did not improve is an absolute failure.

Of note, poverty rates steadily increased under Bush. The 2008 number was 13.2%.[/QUOTE]Yes, you are correct, the percentage was up a statistically insignificant amount. My error, I was typing too quickly and thinking too slowly. That doesn't change the premise. The striking point is that the rate did not rise during a period of extreme population expansion. When a country's population grows by 42% what to you think the socioeconomic profile of the 42% is? All rich people from other countries? The average rich person, living comfortably in his / her home country was not a likely emigre during this period of time. I wonder why they made that law in AZ? To keep rich Mexicans from coming into their state to help create new jobs and lift the standard of living for the entire state?

[url]http://www.mainjustice.com/2010/07/29/fbi-wants-to-see-your-google-searches/[/url]

Exon