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Friday, April 23, 2010

Let’s Talk About Real Performance (TARP)

Every month I examine my financial statements to see how I am doing. I think most Americans do that, especially in these times. We compare where we were years ago to where we are now, and generally find that we have stayed even or lost money. Now, in a USA today article entitled “Banks receiving US assist[ance] cut loans,” (April 22, 2010) American University's (AU’s) Investigative Reporting Project studied the impact of the Toxic Asset Relief Program (TARP) on 940 United States banks, receiving those loans versus the 7,400 that did not. What did they find? Exactly what you would expect: rewarding bad behavior results in continued poor performance.

According to the AU report, during its first year of TARP, ending September 30, 2009, TARP distributed $247 billion to 940 banks. American University identified performance differences between TARP and non-TARP banks.

- Lending at TARP banks fell 9.2% versus a decline of 6.2% at non-TARP banks.
- Average employee pay at a TARP bank increased by 9.4%, whereas non-TARP banks raised their average pay by only 1.8%.
- TARP banks added 2.7% new branches, whereas non-TARP banks cut their number of branches by 1.2%.
- Expenses at TARP banks declined by 3.9%, whereas non-TARP banks cut expenses by 6%.

Contrast TARP bank performance with BBVA Compass Bank, a Spanish-owned bank, located in Birmingham, Alabama, that did not qualify for TARP funds. BBVA cut its workforce 10% (1,200 persons), while increasing its lending by 17% to profitable sectors of the market. The same was true at Hancock Bank. “… it was definitely a tale of two worlds: banks that took TARP, and those that did not," said Michael Achary, Chief Financial Officer. Hancock ($3.5 billion in assets) raised $175 million on its own during this period, acquired assets of a failed Florida bank, and increased lending.

What is true in everyday life is true in business: if you don’t expect much, you will not get much. Unfortunately, in this case it cost us $247B and created nothing more than 940 banks that are “too big to fail.”

Friday, April 9, 2010

Hare Today, Gone Tomorrow

When discussing ObamaCare with some of his constituents, Illinois Congressman Phil Hare said "I don't worry about the Constitution on this." Really. And it was all caught on video.

Hare today, gone tomorrow.

USA Today: Trust public sector more than private to spend your money

In a letter to the editor, USA Today, dated April 9, 2010, J.T. Brown asserts “ … I have to strongly disagree with his [Jonah Goldberg’s] supposition that the private sector is somehow inherently more wise and judicious with its resources than the public sector is.” The principal evidence given to support this thesis is: (1) the “common” workers (I assume the author means employees) did not get to democratically elect the company’s leaders; (2) the reason executive salaries are higher is that they set their own salary; and (3) executive compensation in private sector firms has grown at a faster rate than the average American worker’s salary. The author’s conclusion: “Now which sector is it that is taking money without representation again?”

Wow, this writer is factually inaccurate and his or her conclusions are empirically disprovable. The writer misrepresents how corporations work. First, shareholders (who may or may not be “common workers”) do elect directors, who in turn hire company officers, who manage the company. If J.T. Brown wants a vote, he or she can simply invest in company stock or contribute to the 401K plan rather than put his or her money into a flat screen TV. Second, the elected directors, not the officers themselves, set the officer’s salary, and in all organizations with which I am familiar review and approve all compensation policies in the company. Third, the rate at which executive compensation has grown relative to worker’s compensation is irrelevant to whether or not the corporation “judiciously or wisely” employs its resources. In a private corporation – either for-profit or not-for-profit – the marketplace makes that determination and the business either stays in business or goes out of business. If the business fails, its capital is redeployed in the marketplace. The same cannot be said for government, which has no competitors, enacts and enforces its own laws, and prints money when it has none.

So, let’s see: social security is bankrupt, Medicare is bankrupt, Medicaid is bankrupt, and our current levels of debt as a country are unsustainable. Does not sound like judicious and wise use of resources to me.

USA Today: Tax policy works well

The following is my response to a letter to the Editor, USA Today, April 9, 2010. I am tired of the factually inaccurate drival that passes through the pages of our media. Does anyone in the print media vet articles to determine if the facts are accurate or do they simply select those that support their editorial board's progressive view? I believe we need to stand up to this.

Dear Sir or Madam -

Rick Marcell asserts in his editorial “Tax policy works well” (USA Today April 9, 2010) that Jonah Goldberg fails to mention that “much of the debt happened under George W. Bush’s presidency. Bush left the debt at $10.6 trillion after inheriting a budget surplus.” This statement, while essentially factually correct, is intentionally misleading: there is not necessarily a connection between surpluses and deficits and overall debt nor is George W. Bush responsible for $10.6 trillion in debt, as the letter tries to imply.

An everyday example best illustrates the attempted obfuscation. If I buy a $200,000 house, my debt increases by $200,000. If my annual income is $50,000 and I have money left over at the end of the year after I pay off everything I owe, including the $18,000 per year mortgage on my $200,000 debt, I have a surplus. In other words you can run a surplus while still increasing your debt. So, according to Obama’s current Presidential Budget (Table 7.1, Federal Debt at the End of the Year) at the end of 1992 the debt was $4.002 trillion, at the end of 2000 it was $5.628 trillion, and at the end of 2008 it was $9.986 trillion. The debt under Clinton grew $1.626 trillion, and under Bush it grew $4.358 trillion. The difference? My opinion is that Clinton benefited from two things: (1) Newt Gingrich and the Contract with America, which imposed fiscal control on the President by limiting spending and forcing him to dramatically curtail welfare entitlement spending and (2) the dot.com bubble, which dramatically inflated stock prices on which capital gains taxes were paid, increasing tax revenue to the Treasury. Bush on the other hand faced: (1) two recessions (most of the spending to address both the dot.com bubble and housing bubble was incurred during his administration), (2) the cost of two wars, (3) the expansion of government to address terrorist threats, and (4) out of control social spending by both parties in congress.

While we can have an honest debate on the wisdom of the decisions that were made by various administrations, we should not have to debate the facts. However, in a socially progressive, post-modern world where the “truth” is eschewed and the ends-justify-the-means, we should expect nothing less than factual misrepresentation especially if such misrepresentation isolates, focuses on, and seeks to destroy the representation and credibility of the other person.

Wednesday, April 7, 2010

List of Rejected Republican Amendments to Health Care Bill

At various points during the passage of the recent health care legislation, Republicans offered a number of amendments that were rejected by the Democratic majority. The fact that these amendments were rejected gives insight into what the Democratic majority hopes to accomplish. The following summary of the proposed amendments was circulated by Randy Forbes (R-VA). Read them and then ask yourself: does this seem like a reasonable request, and if it is why was it rejected? As you see the consequences of the health care legislation play out over time, your questions will be answered!

1. Stop the government-run health plan. Rep. Paul Ryan (R-WI) offered an amendment to improve the legislation by taking out the section of the bill that would create a government-run health plan to compete with private sector health plans. Reps. Phil Roe (R-TN) and John Kline (R-MN) offered similar amendments in the Education & Labor Committee. The amendments were all killed in committee.
2. Prevent bureaucrats from making personal medical decisions for patients. Rep. Phil Gingrey, M.D. (R-GA) offered an amendment in the Energy & Commerce Committee to bar federal political appointees and bureaucrats from intervening in patient treatment decisions. The Gingrey amendment would have ensured patients and doctors remain as the sole individuals responsible for making these critical decisions. Chairman Henry Waxman (D-CA) led Democrats in opposition to the amendment, which was defeated.
3. Require all Members of Congress to get their health insurance through the proposed government-run plan. Rep. Dean Heller (R-NV) offered an amendment in the Ways & Means Committee that would have required Members of Congress to enroll immediately in the government-run health plan that would be established under the Democratic bill. Rep. Joe Wilson (R-SC) offered an amendment to put his committee on the record in support of enrolling Members of Congress in the government-run plan as well. While the Wilson amendment was approved by voice vote in the Education & Labor Committee, the Heller amendment was killed in the Ways & Means Committee.
4. Establish a $1 trillion deficit cap. During Energy & Commerce Committee consideration of the Democrats’ government-run health care plan, Rep. Lee Terry (R-NE) offered an amendment to delay “disease prevention” spending for items like municipal jungle gyms and bicycle trails until Washington’s budget deficit dips below $1 trillion. Democrats defeated the amendment, paving the way for more unchecked spending.
5. Keep the federal government out of health care decisions. Rep. Wally Herger (R-CA) offered an amendment to prohibit the federal government from conducting so-called comparative effectiveness research, in which the federal government would ultimately help determine which medical treatments are administered to whom in America – otherwise known as government rationing of health care. The Herger amendment was defeated. Days later, in a July 22 prime-time press conference, President Obama told the nation the health care bill “will keep government out of health care decisions,” despite the fact that the comparative effectiveness language remains in the bill.
6. Protect Americans from “hurry up and wait.” Rep. Kevin Brady (R-TX) offered an amendment that would repeal the government-run health plan if wait times exceed the average wait times in private plans. The Brady amendment was not passed.
7. Stop the job-killing employer mandate. Rep. Sam Johnson (R-TX) offered an amendment in the Committee on Ways & Means to improve the Democratic legislation by taking out the section of the bill that requires American employers to provide health coverage for all of their employees, and Reps. Brett Guthrie (R-KY) and Cathy McMorris Rodgers (R-WA) offered similar amendments in the Committee on Education & Labor. Independent analysts agree this Democratic mandate on employers is likely to result in the elimination of millions of American jobs, and it could hardly come at a worse moment for the nation’s economy. The GOP amendments were killed in committee.
8. Suspend the job-killing employer mandate if the national unemployment rate reaches 10 percent. Reps. Wally Herger (R-CA) and Pete Hoekstra (R-MI) offered amendments in their committees that would suspend the job-killing employer mandate in the bill if the national unemployment rate reaches or goes above 10 percent. (It is currently at 9.5 percent.) The Herger and Hoekstra amendments were killed in both the Ways & Means and Education & Labor Committees.
9. Waive the employer mandate if it will cause layoffs, worker salary cuts, or reductions in hiring. Rep. Dave Reichert (R-WA) offered an amendment that would waive the employer mandate in the Democrats’ health care bill for any employer who certifies, under procedures developed by the Secretary of the Treasury, that it would pose a financial hardship resulting in layoffs of existing workers, reductions in salary of existing workers, or the inability to expand via hiring new employees. Rep. Duncan Hunter (R-CA) offered a similar amendment in the Education & Labor Committee, and it was adopted by voice vote. However, the Reichert amendment was killed in the Ways & Means Committee.
10. Protect employers from unfair taxation. Under the Democratic bill as written, if an employer offers qualifying health care coverage but an employee rejects it for any reason, the employer can still be slapped with an 8 percent tax on the value of that employee’s wages as a result of the job-killing employer mandate in the bill. Rep. Geoff Davis (R-KY) offered an amendment to fix this problem and protect employers from such unfair penalization. The Davis amendment was killed in committee.
11. Protect employers who offer health care coverage to their workers. As written, the Democratic health care bill would gut ERISA (the Employee Retirement Income Security Act), the federal law that makes it possible for millions of American workers to receive quality health care benefits and other benefits through their employers. Rep. John Kline (R-MN) offered an amendment to fix this flaw and shield employers who offer health care coverage to their workers from being caught up in a web of legal liability systems that would vary from state to state. The Kline amendment was killed in committee.
12. Create small business health plans. Rep. Howard P. “Buck” McKeon (R-CA) offered an amendment that would modify the bill to allow the creation of small business health plans (also known as Association Health Plans) that allow trade, industry, professional, or other business associations to form and purchase health care coverage at a lower cost. The McKeon amendment was killed in committee.
13. Keep unnecessary lawsuits from driving up health costs. Under the Democratic bill, Americans would be required to obtain their health care through a “national health insurance exchange” that is limited to “qualified” providers. In the Ways & Means Committee, Rep. John Linder (R-GA) offered an amendment that would keep the so-called exchange from operating in states that do not have reasonable limits on lawsuits relating to medical care. Unnecessary lawsuits have long been identified as one of the primary factors in rising health costs nationwide. Rep. Glenn Thompson (R-PA) offered a similar amendment in the Education & Labor Committee that would prevent the creation of the so-called “exchange.” Both the Linder and Thompson amendments were voted down.
14. Prevent taxpayer-funded health benefits from going to illegal immigrants. Rep. Dean Heller (R-NV) offered an amendment that would increase safeguards to ensure taxpayer-funded benefits do not go to individuals who are not lawfully present in the United States. This amendment, too, was killed.
15. Prevent taxpayer funding of abortion. Reps. Sam Johnson (R-TX), Eric Cantor (R-VA) and Mark Souder (R-IN) offered amendments to remove language from the legislation that would result in American taxpayers subsidizing abortion-on-demand. A recent Zogby survey determined that more than 70 percent of Americans are opposed to taxpayer funding of abortion. The amendment did not pass.
16. Ensure states are not forced to provide abortion benefits. In the Energy & Commerce Committee, Rep. Nathan Deal (R-GA) offered an amendment to ensure that states are not required to provide coverage for abortion – or even procedures such as Botox injections and hair plugs. Under the Democrats’ legislation, the federal government could deny the states funding if such services are not provided. Rep. Deal’s amendment was rejected in a party-line vote.
17. Prevent health care providers from being forced into a government-run plan. Rep. Charles Boustany, M.D. (R-LA), a physician, offered an amendment to prevent American health care providers from being forced into the government-run plan established under the Democratic bill. The Boustany amendment was killed in committee.
18. Require the government-run plan to operate under the same rules as private health plans. Rep. Boustany offered an amendment to improve the Democratic legislation by requiring that the government-run plan established in the bill maintain reserves and other margins in amounts consistent with the standards that apply to private plans. Reserves would have to come from premiums, not federal subsidies. This amendment was not passed.
19. Specify that Congress should read the health care bill before voting on it. Rep. Kevin Brady (R-TX) offered an amendment expressing the sense of Congress that Members of Congress should read the health care bill before they vote on it. More than 80 House Republicans have signed a pledge vowing they will not vote to enact a health care bill they have not read and which has not been posted online publicly for at least 72 hours. The Brady amendment was defeated in committee.
20. Keep President Obama’s tax pledge not to raise taxes. Last year, in his campaign for the presidency, President Obama pledged he would not raise taxes on anyone making less than $200,000 ($250,000 for those filing jointly), but the health care legislation written by House Democrats would violate this pledge. Rep. Paul Ryan (R-WI) offered an amendment that would keep the new taxes proposed in the Democratic legislation from applying to those with incomes under $200,000 ($250,000 for those filing jointly). The Ryan amendment was killed in committee. Rep. Cathy McMorris Rodgers (R-WA) offered a similar amendment in the Education & Labor Committee. It was not even allowed to come to a vote.
21. Keep President Obama’s pledge that health care reform will not add to the deficit. Rep. Tom McClintock (R-CA) offered an amendment to prohibit the government-controlled health care system from taking effect unless the legislation is and remains “deficit neutral.” The Congressional Budget Office (CBO), the nonpartisan “scorekeeper” for Congress, has determined that the bill as drafted will add hundreds of billions of dollars to the deficit. The McClintock amendment was killed in committee.
22. Ensure that workers who like their current health plan can keep it. Reps. Judy Biggert (R-IL) and Tom Price (R-GA) offered an amendment to ensure that Americans who like their current employer-provided coverage can keep it by shielding such coverage from the costly and complex new mandates in the Democratic health care bill. Under the amendment, employer –based health plans that comply with ERISA (the Employee Retirement Income Security Act), the federal law that makes it possible for millions of American workers to receive quality health care benefits and other benefits through their employers, would be considered as having met all of the mandates specified in the bill. The Biggert-Price amendment was killed in committee.
23. Stop seniors from being stripped of their health care choices. Rep. Brown-Waite offered an amendment that would remove portions of the health care bill that would cut the Medicare Advantage program. Such cuts would impact millions of seniors nationwide, taking away their choices and forcing them into a government-run health care plan with fewer options. The Brown-Waite amendment was killed in committee.
24. Prohibit unfair advantages for government-run health plan. The Democratic health care bill would create a government-run health care plan to “compete” with private sector plans that currently provide health coverage for millions of Americans. House Republican Conference Chairman Mike Pence (R-IN) has warned that a government-run health care plan will compete with private sector health plans “the way an alligator competes with a duck,” and the legislation written by Democrats would allow the government-run health plan to have distinct advantages at the expense of taxpayers and private plan enrollees. Rep. Peter Roskam (R-IL) offered an amendment that would prohibit the Secretary of Health & Human Services from basing payment rates for the government-run health plan established under the Democratic bill on Medicare rates, and instead would require that they pay an average of what private plans in the market pay. The Roskam amendment was killed in committee.
25. Keep the federal government from choosing “favored” physicians. Rep. Tom Price (R-GA), a physician, offered an amendment to keep eliminate the flawed “tiered” payment structure in the health care bill, which would give preference to physicians who participate in the government-run health care plan. This provision would allow the government to reward physicians who play by its rules while financially harming those who do not. The Price amendment was defeated.
26. Allow states to opt out. Bipartisan opposition to the Democratic health care bill has been expressed by governors and state legislators throughout the country. Rep. Price offered an amendment to permit states that have crafted their own health plans to apply for waivers from the Democratic legislation’s requirements. The Price amendment was killed in committee.
27. Preserve Americans’ health care freedom and choice. Many Americans favor Health Savings Accounts (HSAs), which give individual Americans more direct control over their health care spending, but the Democratic bill as written would wreak havoc on HSAs and similar tools that empower individuals and consumers. Rep. Eric Cantor (R-VA) offered an amendment to improve the Democratic bill by ensuring that HSAs would not be shut down or gutted by federal mandates. Specifically, the Cantor amendment stated that HSAs tied to high deductible health plans are deemed to meet the “minimum benefit level requirements” under the Democratic bill, and struck changes to the bill’s “definition of allowable medical expenses” for HSAs and similar accounts. The Cantor amendment was defeated in committee. Rep. Tom Price (R-GA) offered an amendment to provide greater portability and individual control over health care by allowing employers to contribute to “defined contribution” health care plans, which workers could use to purchase the coverage and services of their choice. The Price amendment was defeated in the Education & Labor.
28. Allow Americans to continue to enroll in private individual market health plans. Rep. Dave Reichert (R-WA) offered an amendment to repeal the bill’s prohibition on new enrollees in private individual market plans. This amendment was killed.
29. Slow Medicare’s march toward bankruptcy. Concerned about the coming fiscal tsunami that will result from out-of-control spending on entitlement programs, the GOP-led Congress earlier this decade passed legislation specifying that if 45 percent or more of the Medicare program's funding came from general tax revenues for two consecutive years, the President had to submit to Congress legislation that would slow spending and make the program financially stable. Democrats gutted this rule as part of their rules package for the current Congress. Rep. Paul Ryan (R-WI) offered an amendment to restore it. The amendment was killed in committee. Prohibit new taxes until Medicare fraud rate is reduced to below 1 percent. Rep. Dave Camp (R-MI) offered an amendment to improve the bill by specifying that the new taxes that would be imposed on Americans under the bill could not take effect unless the fraud rate in Medicare is reduced to below 1 percent of the amount of taxpayer money spent on the program. The Camp amendment was killed in committee.

Remember ...

"You're entitled to your own opinion, but you're not entitled to your own facts," Sen. Daniel Patrick Moynihan.

"Against public stupidity, the gods themselves are powerless." Schiller.

“Who controls the past controls the future. Who controls the present controls the past.” – George Orwell, 1984

"Statistics are no substitute for judgement," Henry Clay

"The problem with socialism is that you eventually run out of other peoples' money," Margaret Thatcher