The Fetid Swamp of Tax Reform

The likelihood that either party will ever drain the fetid swamp of corruption that is our tax code is zero, because it’s far too profitable for politicos to operate their auction for tax favors.
To understand the U. S. tax code and the endless charade of tax reform, we have to start with four distasteful realities: 1. Ours is not a representational democracy, it’s a political auction in which wealth casts the votes that count. Those seeking political influence over issues such as taxation place their bids in the political auction via campaign contributions and lobbying. The winner of the political auction gets favorable treatment, and everyone else ends up subsidizing the gains of the winner. 2. The wealthy pay the vast majority of federal income taxes (as oposed to payroll taxes, i.e. Social Security and Medicare), so tax cuts end up benefiting the wealthy. High-income Americans pay most income taxes, but enough to be ‘fair’? (Pew Research Center) In 2014, people with adjusted gross income, or AGI, above $250,000 paid just over half (51.6%) of all individual income taxes, though they accounted for only 2.7% of all returns filed. By contrast, people with incomes of less than $50,000 accounted for 62.3% of all individual returns filed, but they paid just 5.7% of total taxes.

This post was published at Charles Hugh Smith on THURSDAY, NOVEMBER 09, 2017.

Prognostication: Here It Comes

I claim no special power here, nor any inside information. This is simply arithmetic coupled with logic. I’ll give you a “decision tree” sort of format with the critical points outlined.
Note that if you’re going to mitigate any of what I see coming around the bend you need to do it right damn now, not wait. By the time you get to those critical points it’s too late. For many people it’s already too late, but if you’re not in that batch then you need to make your lifestyle changes today.
I am operating on the premise that the rank corruption that I outlined in the Ticker here will not be addressed. It will not be addressed for the same reason the 17th Amendment will be cited as the reason the American political experiment failed when the book on America is finally closed, as that Amendment permanently removed the ability of the States to call a hard-stop on any expansion of Federal Power they did not consent to. That was designed in to our government by the founders and it was removed intentionally by the 17th Amendment. That balance of power can never be restored absent a Revolution because to do so The Senate would have to literally vote themselves out of a job at a supermajority level which they will never do and there is no means to compel them to do so.
For the same reason the 30-year trend in Medicare and Medicaid spending will not be stopped. It may be tinkered with around the edges but it won’t be stopped because to stop it without literally throwing people into the street and letting them die you have to break the medical monopolies and in doing so you will inevitably (1) destroy the graft machine that drives a huge part of DC and at least half of the jobs inside the Beltway, along with the asset values they support, (2) create an immediate and deep (15% of GDP, but temporary) recession on purpose which neither Congress or Trump will ever voluntarily initiate as it would cause a guaranteed 70% stock market crash along with the immediate detonation of about 1/3rd of all in-debt corporations in the United States and (3) expose the outrageous theft of trillions of dollars from taxpayers over the last several decades to fund the medical scam machine at all levels.

This post was published at Market-Ticker on 2017-04-17.

Solutions Abound–on the Local Level

Rather than bemoan the inevitable failure of centralized “fixes,” let’s turn our attention and efforts to the real solutions: decentralized, networked, localized.
Those looking for centralized solutions to healthcare, jobs and other “macro-problems” will suffer inevitable disappointment. The era in which further centralization provided the “solution” has passed: additional centralization (Medicare for All, No Child Left Behind, federal job training, Universal Basic Income, central banking “free money for financiers”, etc.) have all entered Diminishing Returns. The systemic costs of centralization–corruption, cronyism, soaring prices, declining quality, over-reach, insider rackets, regulatory capture by corporations and oligarchs– are soaring as the benefits of centralization plummet. ObamaCare was the penultimate flowering of centralization: every self-serving healthcare cartel and racket had a say in the centralized sausage-making, and the results were entirely predictable: highly profitable to the healthcare cartels and rackets, and soaring costs that rendered the program unaffordable.

This post was published at Charles Hugh Smith on SUNDAY, MARCH 12, 2017.

Repeal and Replace Needn’t Be Complicated

The Republicans have a problem. Healthcare prices are so swollen by government imposed monopolies that most people cannot possibly afford to pay the crazy bills without subsidies. What to do?
Example: my son recently went to an out-of-state emergency room for food poisoning. The bill came in at over $8,000. And how is this for fairness: our insurance company knocked it down to about $4,000. An uninsured person would have been liable for the full amount. Might even have faced bankruptcy for failure to pay it.
I personally lobbied for a provision in Obamacare preventing hospitals for charging the uninsured more than the insured. Obama said no. Why? Because the idea upset the hospitals. They wanted to be able to continue to exploit the uninsured. Whew. What does that tell us about Obama?
Under these circumstances, average people cannot possibly pay their medical bills unassisted. Yet if you repeal Obamacare by imposing new price controls and subsidies, in other words, pour old, spoiled wine into new bottles, you just perpetuate the problem. So what to do?
Prices can never be reduced by price controls, much less by price controls on government imposed monopoly prices. Most people do not realize that the government, through Medicare, has fixed medical prices for half a century and the results speak for themselves. At the same time, government has fed price increases by protecting monopolies set up by the drug companies and the American Medical Association. This is what government always does, and it wrecks any sector of the economy where this crony capitalist system is applied.

This post was published at Ludwig von Mises Institute on March 10, 2017.

These Numbers Prove Big Pharma Is Scared of Trump

After just a little over one month in office, President Donald Trump has successfully loosened the big pharma industry’s grip on exorbitant drug price increases.
January is traditionally the month that sees the highest list price hikes from prescription drugmakers. But on Feb. 27, The Wall Street Journal reported that pharma companies did not raise prices for as many drugs as last year and imposed fewer boosts of 10% or greater.
In fact, January saw the lowest increases of drug prices in three years, with hikes over 10% limited to just 5.5% – 15% fewer than in 2015.
The reason for the pullback: Big pharma execs are hoping to stay out of the spotlight at a time when President Trump has called for stronger Medicare authority in negotiating prices and a ‘total overhaul’ of the healthcare system.

This post was published at Wall Street Examiner on February 27, 2017.

We Can Only Afford One, So Choose Wisely: Social Security/Medicare, Cartel Cronyism or Inflation (a.k.a. Central Banking)

Here’s the problem with central banks seeking higher inflation: costs go up but wages don’t.
It’s easy to quantify the annual cost of Social Security/Medicare, and not so easy to calculate the cost of Cartel Cronyism and Central Bank-created inflation. Cartel cronyism is a hidden tax on the entire economy, as is Central Bank-created inflation.
That makes it easy for the financial-political Oligarchy to continue their skimming operations, because nobody says Cartel Cronyism cost us $1 trillion last year, and central bank skimming (inflation) cost us another $1 trillion. The stark reality is there are limits on what we as a nation can afford in the long term. Borrowing trillions of dollars annually at low rates of interest creates a magical-thinking illusion that we can just tack on another $10 trillion, or what the hay, make it $100 trillion, and get away with it, because we’ve gotten away with it so far.
This leaves us an equally stark choice: we can only afford one of these three crushing costs:
1. Limited Social Security/Medicare (no nation can afford unlimited anything, including healthcare)

This post was published at Charles Hugh Smith on THURSDAY, JANUARY 05, 2017.

WHY 2017 is The Threshold to Chaos

I have been warning that 2017 was the Year of Political Hell with four major referendums/elections that would undermine the confidence in government – BREXIT, US Presidential Elections, French Elections, and Germany Elections. These four events hold the potential to overturn the expectations of the future. Whatever the general public felt about government would flip. The key to a shift from Public confidence to Private lies within the scope of these four elections. This is what our computer has been forecasting – political instability on the rise. This is the age of anti-establishment (3rd party) rising globally.
However, I have also warned that Social Security and Medicare go NEGATIVE next year in the United States, which of course mainstream media is not bothering to report for fear that would add fuel to the bonfire of political corruption. But what is also not explained by mainstream media, is that Obamacare is crumbling from within. The entire structural design of Obamacare was the perpetual Ponzi Scheme they used for Social Security.

This post was published at Armstrong Economics on Sep 7, 2016.

The ‘Myth Of Morning In America’ – – How The Public Debt Went From $1 Trillion To $35 Trillion in Four Decades, Part 2

Morning in America – the Historical Inflection Point
……. And that was the historical inflection point. Thereafter, Social Security and Medicare entitlement reform was off the table due to the trick of the front-loaded payroll-tax increase.
This caused cash surpluses in the trust funds and the accumulation of intra-governmental accounting IOUs for the next two decades. At the same time, these front-end surpluses functioned to bury the long range fiscal disaster these intergenerational ‘social insurance’ entitlements embody in 75-year projections that are always way too optimistic.
Likewise, the White House took any further tax increases or defense cuts off the table in January 1985. The spending-cut-weary politicians of both parties, in turn, were more than happy to oblige by shelving any further meaningful domestic spending reforms, as well.
So in 1985, fiscal policy went on automatic pilot – where it has more or less languished ever since. Even well before the fiscal madness of George W. Bush broke out in 2001, the handwriting was on the wall.

This post was published at David Stockmans Contra Corner on September 2, 2016.

USA Watchdog Interview

Greg Hunter does a nice job, and asked me to appear — here it is, embedded at the bottom.
The take-away from this, if you don’t feel like watching the interview, is quite simple: Without the Rule of Law we have nothing, and our nation currently faces a critical fiscal emergency at the federal level just a few years down the road — certainly, during the next President’s term.
There is no way out of that box without taking on the medical monopolies. None.
That’s the math.
2009 / Obamacare was an attempt to “buy more time” along with protecting said monopolies from a market-driven incipient collapse. This was rank public corruption on a grand scale, and it did nothing more than add a small amount of time, much like closing “watertight” doors on the Titanic when the water can cascade over bulkheads (as I expected it would and wrote on at the time) because all it could do is force more people onto a sinking ship. The compound growth nature of federal spending on medical care has remained unaltered; it was not flattened to zero, or even to the expansion of nominal GDP. Worse, the expansion rate for Medicaid, several years after its one-time expansion under Obamacare (in other words the one-time effects are gone), exceeds that of Medicare — so those who claim the cost escalation is due to people getting older are lying through their teeth.
The bigger-picture issue, and the one that threatens to turn this entirely-predicted fiscal catastrophe (one that I’ve talked about for 25 years and written about pretty-much continually for the last 8 right here in The Ticker) into an economic and social disaster never before seen in America (but seen repeatedly in other nations such as Venezuela and Argentina!) is that innovation has effectively collapsed at the same time.
Why?

This post was published at Market-Ticker on 2016-07-31.

Washington’s Anti-Trust Suits Against Two Giant Health Care Mergers – – Bad Policy, But Who Needs Behemoths?

WASHINGTON – The Obama administration announced Thursday it will seek to block two giant health care mergers, citing concerns that the deals could drive up health care premiums, undermine innovation and reduce competition.
The Justice Department filed lawsuits challenging Anthem’s $48 billion acquisition of Cigna and Aetna’s $37 billion takeover of Humana, threatening to put an abrupt stop to the insurance industry’s rapid consolidation.
Eleven states and the District of Columbia joined the attempt to block the Anthem deal, which would combine the nation’s second- and fourth-largest insurers. Eight states and D. C. joined the suit to block the Aetna deal, which would combine the third and fifth largest.
Attorney General Loretta Lynch told reporters the mergers would ‘drastically’ curb competition in the insurance industry, including by reducing the number of options for people who buy insurance on public exchanges.
‘If these mergers were to take place, the competition among these insurers that has pushed them to provide lower premiums, higher-quality care and better benefits would be eliminated,’ Lynch said.
In a show of unity, Hartford, Conn.-based Aetna and Louisville-based Humana immediately issued a joint statement vowing to ‘vigorously’ contest the government’s suit, saying their deal would improve the quality of care and lower costs while increasing insurance options for many Medicare patients.

This post was published at David Stockmans Contra Corner on July 22, 2016.

Obama’s Latest Whopper – -Let’s Raise Social Security Benefits!

The U. S. has approximately $80 trillion of unfunded liabilities for social security, medicare and other entitlements sitting atop a work force that is rapidly aging and an economy that is lapsing into stasis. Yet in the midst of a campaign diatribe about Donald Trump’s alleged lack of preparation for the highest office in the land, the current White House occupant proved that in nearly eight years he has learned exactly nothing about the nation’s abysmal fiscal plight.
‘And not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned,’ Obama said in an economic call to arms in Elkhart, Indiana.
Don’t bother to say he must be kidding. After all, our President also claims the disaster known as Obamacare is a roaring success; and that he has created 14 million jobs – -when, in fact, there are fewer full-time, full-pay ‘breadwinner jobs’ in America today than when Bill Clinton scuttled out of the White House 16 years ago.
Still, your don’t have to be even a know nothing about baby-boom demographics to recognize that the words ‘increase’ and ‘social security benefits’ will never again inhabit the same universe. To wit, there are about 50 million persons 65 or over at present, but this number will rise to 80 million by around 2040 and nearly 100 million a decade or two thereafter.

This post was published at David Stockmans Contra Corner on June 2, 2016.

Trumped! Why It Happened And What Comes Next, Part 2 (The Peace Deal)

When it comes to the economic future, a Trump presidency could bring either a shitstorm or salvation. Regrettably, the odds of the former are immensely the higher.
That’s because Trump is a welcome, but extremely unguided missile. On the one hand, his great virtue is that he is a superb salesman and showman who has captured the GOP nomination and has a serious shot at the White House with absolutely no help whatsoever from the Washington/Wall Street establishment.
So unlike any other candidate in recent memory, he owns his own talking points; is not saddled with a stable of credentialed advisors schooled in three decades of policy error and failure; and has the hutzpah to trust his own instincts – – many of which, especially on foreign policy, are exactly the rebuke that Imperial Washington and its legions of parasites and racketeers so richly deserve.
On the other hand, the Donald’s policy thinking, if you can call it that, is thoroughly inchoate. His policy pronouncements amount to little more than spontaneous eruptions of sentiment, prejudice, hearsay, bile, applause lines, wishful thinking and disconnected non sequiturs. That’s where thoughtlets like Muslim bans, mass deportations, a Trump Wall on the Rio Grande, paying off the national debt, 40% tariff barriers, obliteration of ISIS and numerous other stray verbal hand grenades come from.
Yet occasional wild pitches are not really the problem, and the cynics are surely correct in predicting that Trump will excise most of them from his patter even before the GOP convention. The real problem is that Trump has no detectable economic philosophy or policy framework, and it is in that arena that he could go careening off into a cacophony of misfires, mistakes and statist mayhem.
To wit, Trump has already said that he likes the Fed’s low interest rates, is considering a minimum wage hike, thinks social security and medicare should remain untouched, will rebuild the military, intends to drastically increase spending for veterans, wants to slash income taxes on corporations and individuals, thinks a big infrastructure program is warranted, plans to spend tens of billions on border security and the Wall and will drastically hammer $2.2 trillion of imports in order to bring jobs back home.

This post was published at David Stockmans Contra Corner on May 5, 2016.

Obamacare Bushwhacked – -Three Big Blows In One Week

Health Reform: ObamaCare rates will skyrocket next year, according to its former chief. Enrollment is tumbling this year. And a big insurer is quitting most exchanges. That’s what we learned in just the past few days.
Marilyn Tavenner, CEO of America’s Health Insurance Plans, revealed that she expects ObamaCare premium hikes ‘to be higher than we saw previous years,’ including last year, which saw double-digit rate increases across the country.
Tavenner, for those who don’t know, was head of the Centers for Medicare and Medicaid Services until early 2015, which means she helped bring ObamaCare to life. In November 2014, she was boasting how ‘the Affordable Care Act is working to improve competition and choice among marketplace plans.’
Now that she’s jumped to the other side of the fence, she’s discovered the dark side of the health reform monster she helped unleash.
Why will 2017 rates spike even higher? In addition to the cost of complying with ObamaCare’s insurance regulations and mandates, there’s the fact that the ObamaCare exchanges have failed to attract enough young and healthy people needed to keep premiums down. Plus, two industry bailout programs expire this year, Tavenner notes.

This post was published at David Stockmans Contra Corner on April 25, 2016.

This Morning on BubbleVision

I woke up this morning to a beautiful day and streaming video with people talking about the impending budgetary disaster in health care entitlements of all sorts, whether Medicare, Medicaid or pension programs.
But….. not one person talked about 15 USC, medical monopolies or similar. All were talking about how these plans are economically unsustainable due to being underfunded instead of where the real problem lies — that the “benefits” being promised are increasing in cost due to acts that, in virtually any other industry would be considered felonies across the board, whether it be a refusal to quote a price, billing out at 2, 3, 5 10x or even more than the claimed price, discriminatory pricing that is flatly illegal under Robinson-Patman for anything that is a tangible good and more.
The simple matter is that while wider discussion is (occasionally) happening on what is about to happen nobody in either the BubbleVision or political field is talking about the why, nor proposing the most-simple of solutions: Enforce the damned Rule of Law.
This issue is not difficult to resolve in terms of how to fix the problem. The issue is simply this: If you take this issue on in an honest fashion then a large percentage of GDP instantly disappears. While that will very-quickly shift to other areas of the economy and in fact will lead to a huge growth boom as it will make the United States far more competitive on the world economic stage that shift will not be painless and the firms and individuals that will lose their “special snowflake” status that currently allow them to rob you blind with impunity spend a hell of a lot of money lobbying Congress to both establish and protect those privileges.

This post was published at Market-Ticker on 2016-04-11.

The Public Is Being Looted By Privatization And Deregulation – Paul Craig Roberts

The privatization movement and the deregulation movement have turned out to be failures.
Privatization in Britain under the Thatcher government had its origin in the belief that the absence of incentivized managers and shareholders with a stake in the bottom line resulted in nationalized companies operating inefficiently, with their losses covered by government like the big private banks’ losses today. Thatcher’s government believed that privatizing socialized firms would reduce the UK budget deficit and take pressure off the British pound.
Today privatization is a way that governments can reward cronies by giving them valuable public resources for a low price. When the UK government privatized the postal system, there were news reports that one postal property in London alone was worth the purchase price of the entire postal service.
Privatization is also a way that conservatives, who object to social pensions and national health, can stop ‘taxpayer support of welfare.’ In the US conservatives want to privatize Social Security and Medicare. In the UK conservatives want to privatize the National Health System.
It looks like the UK Conservative government is taking a step in the direction of privatizing the national health system, one of the great social reforms in British history.

This post was published at Paul Craig Roberts on February 23, 2016.

Thanks Obamacare – -Health Care Spending Hits Record 17.5% Of GDP

U. S. health-care spending jumped 5.3 percent last year, the biggest increase since President Barack Obama took office, as millions of people gained insurance coverage under Obamacare.
Spending on hospitals, doctors, drugs and other health-care expenses hit $3 trillion in 2014, or 17.5 percent of the economy, according to a studyreleased Wednesday by government actuaries. Enrollment in private health plans increased by 2.2 million people to 189.9 million, while 7.7 million more people were covered by Medicaid, the U. S.-funded, state run program for the poor, bringing the total to 65.9 million.
The U. S. had seen years of slow health-care cost growth after the economic downturn that ended in 2009. The 2.9 percent rise in 2013 was the slowest in the 55 years that the U. S. has studied the figure. Actuaries at the Centers for Medicare and Medicaid Services, or CMS, estimated in July that spending will rise an average of 5.8 percent a year over the decade through 2024.

This post was published at David Stockmans Contra Corner on December 3, 2015.

Why The Obamacare Exchanges Are Failing

I reported earlier this week that the Obamacare Marketplace is slowly failing. Three days later the largest health insurer in America, UnitedHealth Group, announced it expects to lose $500 million on exchange plans next year and may exit the market in 2017.
The issue for many insurers is they were encouraged to participate in the exchange in return for a temporary risk sharing program called Risk Corridors. Under this program, all insurers paid into a pot of money and the firms suffering excessive losses were to share the funds based on a formula. However, a budget deal passed late in 2014, the ‘Cromnibus’ Spending Bill, required the program to be budget neutral. The losses far exceeded the pot of money collected by the program. Insurers have only received about $0.13 cents on the dollar of what they would have gotten under an opened-ended program.
The Centers for Medicare and Medicaid Services (CMS) has affirmed insurers will get their money. But the question is: where it is going to come from? CMS has $363 million to divvy up while insurers have requested $2.87 billion.

This post was published at David Stockmans Contra Corner on November 25, 2015.

Ex-GAO Head: US Debt is Three Times More Than You Think

The former U. S. comptroller general says the real U. S. debt is closer to about $65 trillion than the oft-cited figure of $18 trillion.
Dave Walker, who headed the Government Accountability Office (GAO) under Presidents Bill Clinton and George W. Bush, said when you add up all of the nation’s unfunded liabilities, the national debt is more than three times the number generally advertised.
‘If you end up adding to that $18.5 trillion the unfunded civilian and military pensions and retiree healthcare, the additional underfunding for Social Security, the additional underfunding for Medicare, various commitments and contingencies that the federal government has, the real number is about $65 trillion rather than $18 trillion, and it’s growing automatically absent reforms,’ Walker told host John Catsimatidis on ‘The Cats Roundtable’ on New York’s AM-970 in an interview airing Sunday.

This post was published at David Stockmans Contra Corner on November 9, 2015.

Good Riddance To Johnny Lawnchair – – The Fastest Fold On The Potomac

There are few political hacks in Washington more deserving of everlasting ignominy than retiring speaker John Boehner. So here’s a vehement good riddance to the man who has single-handedly destroyed whatever pathetic semblance of fiscal responsibility that remained in Washington.
The so-called bipartisan budget deal he confected as a parting gesture doesn’t even deserve to be called a farce. It’s actually just an extension of Washington’s pathological lying to the American public about the monumental fiscal calamity now brewing.
The chart below shows the patented formula – – employed for the second time since the sequester mechanism was put in place during the debt ceiling crisis of 2011.
It will increase spending by $85 billion in the here and now by busting the FY 2016 and 2017 caps. This new red ink will then, purportedly, be off-set way down the road with gimmicks, imaginary IRS audit revenues and hazy disability benefit reforms which will never materialize. Never.
Indeed, these people are beyond shame. The big bulge of $33 billion of savings shown for the never never land of 2025 is due to a sharp increase in assumed discretionary spending cuts and Medicare benefit reductions. That is, the very same programs that are being pumped up during the next three years!
And that’s the same thing the Ryan-Murray budget did two years ago with respect to FY2014-15. In combination these 11th hour bipartisan shams have thus added $143 billion of real money to the national debt for the years before 2021, ‘paying’ for them with imaginary savings to be realized after 2021. That is, until we get there – – at which time anything which bites into the gravy train will be predictably deferred.
So in a nutshell here’s Johnny Lawnchair’s odorous record of fiscal betrayal since 2011. First he broke the will of fiscal conservatives just when they had Washington over the debt ceiling barrel in August 2011 with the promise of $1.5 trillion of entitlement savings via the Super Committee.

This post was published at David Stockmans Contra Corner on October 28, 2015.

The Long-Range Social Security/Medicare Deficit: $72 Trillion And Counting

The Social Security/Medicare Trustees have issued their latest reports and they are not easy reading for the uninitiated. I suspect most of the Trustees hope you don’t read them at all. They prefer their own spin. Under both Republican and Democratic administrations, these reports are invariably accompanied by a press release that completely ignores what is important and focuses instead on what is unimportant.
What’s unimportant? The trust funds and when they will run dry. Like most social security systems in the world today, ours is a pay-as-you-go system. Nothing has been saved or invested. What we call trust funds consist of nothing more than IOUs the government has written to itself. (More on that below.) Yet, that is what the official press releases emphasize and this focus is reflected in the first graph below.
What’s important? Cash flow. In fact, in a pay-as-you-go system, cash flow is the only thing that matters. As the second graph shows, Social Security and Medicare are paying out more than they are taking in. As the baby boomers retire, the total deficit will grow dramatically. Currently, we are using about one in every seven general revenue dollars to cover these deficits. By 2020, we will need more than one in five. By 2030, we will need about one in three.
That implies that in order to fund Social Security and Medicare benefits at their current levels and at the same time balance the budget, in just five years the federal government will need to stop doing about one out of every five other things it is currently doing. In just 15 years, the government will need to stop doing about one out of three other things it is currently doing. Clearly, elderly entitlements are on a course to crowd out all other federal programs.

This post was published at David Stockmans Contra Corner on August 11, 2015.