FactsPlusLogic
A Careful Look at Issues

When it comes to saving health care costs, nothing beats dying young. Obamacare requires insurance carriers to ignore pre-existing conditions and health risks, with one exception. Being a meth addict or terminally ill will have no effect on an individual’s premiums, nor will a passion for base jumping or tightrope walking. But the line is drawn at smoking. Insurers, subject to state regulations, may tack on up to 50% of the unsubsidized premium on to an insured person’s insurance bill. Since the subsidy may be 90% or more, the effect is to increase the bottom line by up to a factor of ten in the worst case. The oddest part is that smoking actually decreases life time health care costs.

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The election was a clear choice, and the people have spoken. The people want free birth control, free abortion, and free just-about-everything from birth to death. They want it paid for by rich people. What they will get is slow death by regulation. It’s inevitable. Legislation is in place to control banking, energy, health care, education, and a myriad of the details of life. The script for the next four years is bureaucracy producing a rising tide of regulations to consolidate control over peoples lives. Congress will provide sideshow distractions, but the main event will be the growth of bureaucratic power.

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Vice President Biden created a stir in a speech in Flint, Michigan by claiming that by opposing the Administration’s latest Stimulus bill, Republicans would force cuts in police and as a consequence rape and murder rates would rise. Biden cited as proof what turned out to be bogus statistics on crime in Flint. Not only were the data faulty, the logic of the argument fails as well. Opposition to a particular program does not logically equate to opposing the goals of the program.

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There are a three elements to economic recovery: people must need to buy things, they must have the money to buy them, and they must be believe that that the future is worth investing in. Every economic downturn leads to people postponing purchases of new cars, new homes, and new consumer goods. After a while, we expect people to be compelled to catch up with purchases; the old car cannot be fixed and must be replaced, and so forth. What’s remarkable about the current poor economy is how little of the automatic bounce back we’ve seen. We look to the factors of money and confidence to explain the lack of recovery.

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Tue
Aug 30
Loopholes

Tax loopholes are not mistakes. Loopholes are incentives designed into the tax code to encourage behaviors that the government prefers. Home ownership is considered a good thing, so the interest on a home mortgage is a tax deduction. That makes owning a home more affordable, so home ownership is encouraged. The mortgage deduction is a loophole. The pattern of all loopholes is that they cause economic decisions to be altered away from some things and towards others. The tax code has over 60,000 pages, with each loophole designed to favor something deemed good, at least by the Congressman who managed to get the loophole included.

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The debate over raising the debt ceiling has passed, but the debt crisis will be with us for years to come. Unlike news of celebrity meltdowns and notorious crimes, the debt crisis has some tricky points that the press has not well explained. Everyone needs to know about debt ceilings and default and their consequences, taxing the rich, what the people really want (a miracle, of course), and the balanced budget amendment. There never was a danger of default, but the shape of the real problem has been left ill-defined by the press.

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Taxes are explicit, so it is easy to sum them up. Total spending by government at all levels in the US is estimated at $6.41 trillion for 2010. [ 1 ] That’s about 44% of the gross domestic product. So that means that the private sector gets to choose how to spend the remaining 56% of the money, right? Not really. The government also requires us to comply with its rules, and the indirect costs are substantial. My partial list of indirect costs amounts to $1.8 trillion, more than 12% of the economy on top of the 46%.

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Poe wrote, “Once upon a midnight dreary, while I pondered weak and weary, Over many a quaint and curious volume of forgotten lore.” I’ve done that too, in my case trying to figure out my electric bill. The cheapest electricity is from hydroelectric power, a couple of cents per kilowatt hour. Electricity from coal is perhaps four cents, from gas or nuclear around five to seven cents. But here in California, a small allotment of electricity is billed at around eleven cents, then rates rise rapidly to over forty cents. How are the astronomical rates achieved? It’s hard to figure, but when all the costs of green energy are included, a picture starts to emerge.


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Recently Forbes.com columnist Joel Delman asked, Are Amazon, Netflix, Google Making Too Many Decisions For Us? He complained that “Are Amazon, Netflix, Google Making Too Many Decisions For Us? Mr. Delman observes that Amazon suggests what we products want to buy, Netflix suggests what movies we might like, and Google is developing a car that will drive itself. He suggests that assisting technologies ought to have an “off” switch, or that maybe the default should be “off” until we turn them on. I’m here to suggest the opposite, that we should embrace these technologies and push them hard. We are all at war with the complexity of the modern world, and computers are our ally. We need more help, not less.

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Some of the Tea Partiers would like to abolish the Departments of Energy, Education, Housing and Urban Development, Agriculture. They don’t have anywhere near the power to do that, but if they were close, the conventional meaning of “compromise” might be to only abolish two of the four. The compromise is getting part of what is desired rather than all of it. Under the conventional definition, if Democrats want to add legislation and Republicans want to repeal legislation, then leaving it all alone is a compromise. Liberals do adhere to the conventional definitions because they believe the purpose of government is to always expand it. Compromise is restricted to what government power is expanded and by how much.

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