Tag Archives: deficit

Socialized Heathcare… Do we want this?

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First Step: Watch this video on Canadian Healthcare

Did you watch the video?  I would embed it so you can watch it here, but it seems that due to technological limitations (or decisions) that isn’t going to happen.  And no I’ve decided against figuring out how to circumvent such actions.  So, click the link already.  It is only 20 minutes out of your life to watch a humorous yet somewhat painful video on the realization of socialized health care.  Don’t believe me then click the link.

Obama Plan: How do we pay for it?

You may be wondering what my take on the Obama plan is.  Well, firstly I want to know how we are going to pay for it.  Really, Social Security is going in the red, and so is Medicare.  Last I check in the red means that it isn’t profitable, and also means that there is no money to fund it.  Tax reciepts are down significantly, not to mention State Tax receipts.

So, the “income” that the Federal Governement receives is down.  Remember that the government doesn’t actually make or produce anything and is soley funded by us the taxpayer.  So, to pay for this we are going to go further in the red.  We already have a trillion plus deficit for 2009, which means borrowing or printing substantial sums of money.

While Univeral Health Care sounds wonderful, but again to pay for it we have to get the money from somewhere.  That somewhere is from the “rich”.  Maybe you feel entitled to health care, maybe not.  Essentially what is going to happen is that money will be siphoned from those with high incomes to subsidize the plans.  This is a blatant transfer of wealth, which is what the government does.

At what point do high income earners decide that enough is enough and decide to earn less?  If I were taxed at say 60%, which means I get to keep 40% of my income my incentive to earn more declines.

Rationing: Supply and Demand

Here is where socialized health care gets interesting.  Let’s say there is $100 billion dollars allocated to public health care per year.  For the moment don’t worry about the exact sums of money as this is an example.

With that $100b services can be provided up to that point.  Once that point is reached or even if we start to near that point where if anything else is spent then the program is in the red.  How might the administrators prevent that from happening?

1) You have to wait in line for your turn… these lines could get really long

2) Deny you service… bummer looks like you don’t get that MRI

3) Rationing, where there is a limited number of services available

So, in a perfect world we would all be healthy, and have 100% health care.  As much as I’d like that to be a reality we have to be realistic.  The only thing we get for free is the air we breath.  Anything else requires work, which then can be exchanged for a good or service.  I’m not saying our present system is perfect, by no means, but I don’t think this is the way.

Congressional Budget Outlook :: CBO

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Hold your hats folks as here are some of the forecasts for 2009 (link):

  • GDP falling by 2.2%
  • Slow recovery in 2010
  • > 9% unemployment by 2010
  • Decline in inflation (hmmmm… if monetary policy says anything this will reverse or at least eventually destroy the dollar)
  • Continued decline in housing prices
  • Decline in real consumption of more than 1%
  • Indeterminate on the financial system

And the best of all

$1.2 trillion dollar budget deficit for 2009*

*That doesn’t include the proposed stimulus package
*That amounts to 8.3% of GDP

So, we have an economy in decline, and digging a deeper and deeper hole to climb out of.  What I really want to know is how are we going to pay for 1) a 1.2T dollar deficit, and 2) a large fiscal stimulus package of a indeterminate size.

Let’s see our foreign friends have been purchasing our debt, which enabled us to essentially live off of their productive labor.  China for example is seeing a marjor reduction in exports, its economy is contracting, and eventually it is going to have to decide if it is worth supporting the American lifestyle at their own expense.  Presently, everyone is so intertwined I think there is a fear that if one jumps the house of cards falls down and we all lose.  However, is it possible for say China to pull out of the house of cards with minimal damage?  Is there a way they can reduce their exposure to US debt, and not have their savings collapse?  This is something I’d really like to know.

Seems to me that if they slowly shift some of their dollar reserves into commodities and other currencies SLOWLY, especially when there is increased demand they will be able to lessen their exposure.  The US import market is tanking, and has been tanking.  With unemployment increasing Bloomberg people are going to have a smaller income and will be forces to save thus hurting exporting countries.  This isn’t a US phenomena alone as Europe and frankly the rest of the world is contracting simultaneously, while being fed a mouthful of credit from central banks to re-inflate the bubble.  Last I checked it is very difficult to inflate a popped bubble.

Let’s take the latest number from Taiwan Bloomberg.  Their exports dropped by a record 41.9%.  We all know that Taiwan exports electronics, which have been a major boon ever since the technological revolution, which also saw a major hiccuup in 2000-2003.  So, this is confirmation of a major exporting taking a major hit.  There will be ramifications for the Taiwanese economy.

I can’t imagine that after the dust settles the world’s economies will look the same.  The sea of money will shift to where is sees the most opportunity and in its movement will tear apart the economies of many.

Here are a few more headlines on Bloomberg alone that tell a um telling story:

Fed Revives Discussion of Inflation Target to Counter Risk of Price Slide

ECB Expanded Balance Sheet by 36 Percent Last Year to Revive Bank Lending

Apartment Rents Fall, Vacancies Rise to Four-Year High on U.S. Job Losses

Shopping Center Vacancies in U.S. Approach 10-Year High as Stores Fail

Procter & Gamble Fights to Refinance as U.S. Borrowings Reach $2 Trillion

U.S. Banks Will Need to Raise More Cash in 2009, Meredith Whitney Writes

I’ll leave it at that, but what I’m seeing is RECESSION coupled with the Fed trying to stave it off through any means necessary, which is now including outright purchases of securities on the open markets.  Again we have no savings and are either monetizing debt or borrowing it from somewhere.  To do this will be disastrous to the dollar and our reputation as a solid financial center of the world.  Sure there are plenty of other economies in dire situations, but in the end who will come out with the heads up high and who will come out still in the sand?