Archive for February, 2008

Obama’s Economic Masterpiece

Posted in Activism on February 20, 2008 by poyers

Larry Kudlow is the economics editor at National Review online and brings forth some great points on Obama’s economics plan.  Socialism indeed:

“He wants,” says Kudlow, “to spend $150 billion on a green-energy plan. He wants to establish an infrastructure investment bank to the tune of $60 billion. He wants to expand health insurance by roughly $65 billion. He wants to ‘reopen’ trade deals, which is another way of saying he wants to raise the barriers to free trade. He intends to regulate the profits for drug companies, health insurers and energy firms. He wants to establish a mortage-interest tax credit. He wants to double the number of workers receiving the earned-income tax credit and triple this benefit for minimum-wage workers.

“The Obama spend-o-meter is now up around $800 billion, and tax hikes on the rich won’t pay for it. It’s the middle class that will ultimately shoulder this fiscal burden in terms of higher taxes and lower growth.”

He goes on. “Obama believes he can use government, and not free markets, to drive the economy. Obama’s program is anti-growth. A President Obama would steer us in the social-market direction of Western Europe, which has produced only stagnant economies down through the years.”

The Wall Street Journal’s Steve Moore has done the math on Obama’s tax plan. He says it will add up to a 39.6 percent personal income tax, a 52.2 percent combined income and payroll tax, a 28 percent capital-gains tax, a 39.6 percent dividends tax, and a 55 percent estate tax.

Not only is Obama the big-spending candidate, he’s also the very-high-tax candidate. And what he wants to tax is capital.

Obama wants you to believe that America is in trouble, and that it can only be cured with a big lurch to the left. Take from the rich and give to the non-rich. Redistribute income and wealth. It’s an age-old recipe for economic disaster….Obama believes he can use government, and not free markets, to drive the economy. But on taxes, trade, and regulation, Obama’s program is anti-growth.

http://article.nationalreview.com/?q=MGYxYWM4NjkxMjUwMzBhZDAwNTg2NjZmYmU5MWU2ZmQ=

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Evil Evil Exxon

Posted in General on February 7, 2008 by poyers

Full disclosure: I will never ever buy gas at an Exxon station as I still harbor bad feelings about the Exxon Valdez.  Also, my father-in-law is a Conoco employee so I am a little bit biased in my assessment of which is the better company.

However, I am so sick of hearing about how greedy and evil oil companies are!  Most of the arguments are pure poppy cock and nonsensical.  Profits are up.  However, the true measure of anything rests in profit margins and the profit margins of these companies are flat and very low as compared to other businesses. 

Nevertheless, did you know that last year (2007) Exxon paid $30BILLION dollars in corporate taxes!  Exxon pays taxes at a 41% rate on taxable income.  From a study at findingalpha.com (http://seekingalpha.com/article/63131-exxon-s-2007-tax-bill-30-billion?source=side_bar_editors_picks):

just one corporation (Exxon Mobil) pays as much in taxes ($27 billion) annually as the entire bottom 50% of individual taxpayers, which is 65,000,000 people! Further, the tax rate for the bottom 50% is only 3% of adjusted gross income ($27.4 billion / $922 billion), and the tax rate for Exxon was 41% in 2006 ($67.4 billion in taxable income, $27.9 billion in taxes).

However, the “bottom” 50% of Americans do not pay any income taxes.  Do you think that Google or Microsoft pay as much in taxes as Exxon?  These taxes that are paid by Exxon are in fact passed on to shareholders as a matter of fact.  Just think about how many pensions, retirements, savings, and protection are affected by this?  Try to find a high performing fund out there that does not include Exxon.

On the other side, I understand that Exxon Mobil and other oil and gas companies benefit from amazingly generous tax breaks, credits and discounted federal mineral rights that no other industry even approaches.  In addition, the accounting details are a bit out of my league but I understand that the way they book things is as a “deferred income tax” that allows them to purchase capital assets and offset these deferred taxes ongoingly for basically forever.  I also understand that Exxon tends to get most of its crude from the Gulf whereas Conoco and others do not and thus they add social costs by requiring protection from the Navy, the threat of oil spills on public lands, and other subsidized capital and infrastructue expenses.

That being said, I cannot stand hearing politicians talk about “taking profits” as if they belong to someone other than private individuals and investors.  The oil companies add a HUGE benefit to the world.  Petroleum can be found in one way shape or form in just about every product that we use and it is in great thanks to the refiners that this is possible.  Not to mention all of the jobs that these companies provide, the benefit to our savings, the benefit to communities, the addition of health care to people who need it, and the wealth that they help to create by basically powering the rest of industry thus adding more jobs, products, etc.

Thank goodness God blessed us with such a wealth of natural goodness and thank goodness that He blessed his children with the intellect to harvest that product and help make our lives great and comfortable and free! 

The Cost of Health Care

Posted in Activism on February 7, 2008 by poyers

In 2005, Americans spent roughly $2 trillion on health care, or an average of $6,700 per person.  This amounted to 16 percent of the gross domestic product.  In other words, nearly one-sixth of the total output of goods and services produced by our economy in 2005 was devoted to health care (including both public and private expenditures).  Many analysts expect total spending on health care to rise to $4 trillion and 20 percent of GDP by 2015. 

In the aggregate, high levels of health care spending is a good thing because it means that millions of Americans are receiving the highest quality medical care that is available anywhere in the world.  Compared to citizens of other western countries, the average American has more access to the best doctors, the best facilities, the best medicines, and the best diagnostic and treatment technologies.  This is why people from Canada and Britain and Europe, indeed from all over the world, come to the United States to obtain needed medical care that is not available to them in their home countries. 

Yet the highest quality medical care in the world comes at a steep price.  This price has nothing to do with “greedy” doctors, HMOs, and drug companies.  Rather, as with any other good or service, the price of medical care fundamentally is determined by the value of the resources required to produce it.  And the resources required to produce, say, a world-class cardiologist or orthopedic surgeon or oncologist are extremely valuable. 

For starters, only the smartest people in our society (roughly the top 10 percent) have the innate ability to become competent, modern doctors.  Then these people must go through 10 to 15 years (post-high school) of very demanding, and very expensive, education and training.  Then they must be equipped with the most advanced tools and drugs and machines, all of which cost many more millions (sometimes billions) of dollars to develop and produce.  Only at this point can these doctors start providing us with the high-quality medical care that we expect in this country and thank goodness for their grit and determination (and debt). 

To expect that this medical care can come cheap is to indulge in wishful thinking. 

Barack Obama acknowledges that “the best medical technology and scientific research in the world” come at a heavy price, but he believes it is possible to provide “affordable, comprehensive, and portable health coverage for all Americans.”  This is pure fantasy.  True, we can provide more Americans with lower cost health care — by reducing the quality of the health care they receive.  Or we can provide more Americans with higher-quality health care — by increasing the total amount of health care spending.  But we cannot provide every American with the best medical care money can buy, while at the same time reducing the amount of our gross domestic product devoted to health care.  This is an economic impossibility. 

To some, the argument is that Americans use too much health care because they do not pay the true costs of services as a result of insurance and a lack of out-of-pocket payments for a doctor visit transaction.  Surely, if Americans were to consume less and lower-quality health care, total health care spending would decrease.  This is precisely why health care spending in countries like Canada and Britain is lower than in the United States.  Their citizens are provided by their governments with less and lower-quality health care than the vast majority of Americans currently enjoy under our mixed system.  If we adopt one of the health care plans being peddled by the Democrats, in the future Americans, too, will consume less and lower-quality health care. 

However, there is a flaw in the over-consumption and insurance argument.  The problem with health care spending is not the reliance on insurance arrangements, per se.  In a free market, insurance arrangements are economically efficient.  Insurance works by pooling resources and rationally distributing risks and costs among large numbers of people.  This enables more people to enjoy the benefits of various goods and services at a lower cost per person.  Indeed, insurance arrangements are a vital feature of any modern commercial economy.  The critical feature that underlies the economic efficiency of insurance arrangements is that individual premiums are based on each consumer’s risk-cost profile.  That is, riskier consumers must pay a higher price for their coverage.   

Where insurance companies are allowed to charge each consumer a premium commensurate with the consumer’s level of risk and amount of coverage desired, then insurance arrangements are economically efficient.  This also comports with our basic moral intuition that people who need or want more coverage should pay for it. 

The inefficiency in the American health care market is the inevitable result of government tax-and-spend programs and regulatory mandates that interfere with the free market by eliminating the vital link between insurance premiums and each consumer’s risk-cost profile. 

The premiums for Medicare and Medicaid are not based on a rational assessment of each beneficiary’s risk-cost profile.  Instead, these programs require only small co-pays based on income level.  Moreover, these payments do not come close to paying the full cost of the medical care provided.  On the contrary, the cost of this medical care is primarily paid for by payroll taxes and income taxes on all Americans.  Medicare and Medicaid are not insurance arrangements but entitlement programs. 

Government regulations have transformed private health insurance policies into pseudo-entitlements by mandating that employers and insurance companies provide a panoply of benefits without taking into account each consumer’s risk-cost profile.  Barack Obama’s plan requires insurance companies “to provide comprehensive benefits, issue every applicant a policy, and charge fair and stable premiums.”  From his own website, the “Obama plan will create a National Health Insurance Exchange to help individuals who wish to purchase a private insurance plan. The Exchange will act as a watchdog group and help reform the private insurance market by creating rules and standards for participat­ing insurance plans to ensure fairness and to make individual coverage more affordable and accessible. Insur­ers would have to issue every applicant a policy, and charge fair and stable premiums that will not depend on how healthy you are. The Exchange will require that all the plans offered are at least as generous as the new public plan and have the same standards for quality and efficiency. The Exchange would evaluate plans and make the differences among the plans, including cost of services, public.”  Thus, insurance companies will be strictly limited in their ability to calculate premiums based on the nature of the risks and costs to be covered for each consumer.   

In addition, Obama’s plan forces companies to “contribute a percentage of payroll toward the costs of the national plan.”  He also makes it mandatory that all children have insurance and defines children as all people under the age of 25.  Also, while he claims to support the rights of states to experiment and provide solutions to their constituents, he will insist that the state plans are in line with his federal mandates. 

This will raise the cost of insurance, unjustly shift costs from some consumers to others, and create an increasingly untenable situation for all but the largest and most diversified insurance companies. 

Under greater free market conditions, Americans will be required to pay more individually for the health care they receive.  Whether these payments are made out-of-pocket or through rationally priced insurance premiums, this will create the financial incentives to control spending.  Yes, this also will mean that many Americans will not be able to afford the same level of health care that they currently enjoy as a result of government subsidies.  However, the moral and financial responsibility for providing medical care should rest with each individual citizen and his or her family, not the business community or general public.  Where an individual’s resources are not enough, private charity, not the government’s taxing authority, should fill the gap.

Why are oil prices high?

Posted in General on February 7, 2008 by poyers

It seems that there are 6 real indicators as to why the price of oil, as measured in the price per barrel, is so high.  Those indicators are: The weakness of the US Dollar, Fund Investments, Demand, OPEC, Refining Limitations, and Geo-Political turmoil.According to Pilot Travel Centers, LLC (www.pilottravelcenters.com) “Commodities that trade in USD are viewed by investors – both domestic and international – as cheap.”  The rise in oil is in line with increases in most other commodities like wheat, cattle feed, lead, coffee, etc.  “The trading liquidity provided by crude oil has encouraged oil buying as a hedge against the anemic USD.  Since oil world wide primarily trades in USD, the weakness has impacted the purchasing power of OPEC and has receded in line with the USD.”  They say that a good indicator of the trend in commodities is to track the performance of the US Dollar to that of the Euro; oil moves in the opposite direction.

Secondly, “investment funds – both hedge and pension – have been flooding into commodity markets as they attempt to secure the greatest returns for their investors.  The recent injection of billions of dollars by central banks around the world to provide liquidity in the face of massive write-downs in the credit arena has brought money into energy and commodities.”  Commodities are a very attractive hedge against unstable asset-based funds and oil prices change accordingly.

With low inflation and a strong US economy, demand remains high locally.  Investment into more energy efficient means of transportation and higher performing vehicles in regards to fuel economy typically take between 8-10 years to influence prices.  Throw in the mix the huge growth that India and China have shown in terms of demand and prices are being affected as to be expected.  The supply of oil is affected world-wide and small changes in local demand, no matter where the locale might be, have limited impact on prices due to the nature of oil as a commodity. 

As is to be expected, OPEC continues to dominate the supply of oil to market.  “With world inventories at record high levels in late 2006 (aided by a price structure that encouraged buying and holding), OPEC commenced to reduce oil output to stem the steep fall in prices” in the second half of 2006.  Now that prices are rising and the typical winter demand for oil increases, OPEC has expanded production of an extra one-half million barrels per month.  However, there apparently are no supply shortages as no country or enterprise is being turned away from purchasing oil.  As a result, the expansion in production will not have an effect on the price per barrel of oil.

Refining capacity in the US and abroad have been limited this year as well.  “Extended maintenance programs and unplanned downtime have kept refining capacity below historical levels.  Fall maintenance programs are now ending, so some return to higher capacity is expected.  With short-term fuel demand questionable and growing worldwide capacity, refining should be able to handle supply as we go forward.”

However, one of the most problematic issues behind high oil prices remain geo-political issues.  Middle-East issues continue to add cost to the price per barrel with some estimates around $15-$25 per barrel caused by uncertainties alone.  Iran is the world’s fourth largest exporter of oil, Nigeria is the world’s eighth largest supplier, Iraq used to provide over 3million barrels per day, Turkey’s problematic northern pipeline produces now only 2million barrels per day, and Syria, Pakistan, Israel, and Lebanon are additional suppliers; all of which are under obvious tensions.  In addition, Russia and Venezuela continue their nationalization of oil companies and other shenanigans further adding to the risk in the price per oil.  Thus, oil is a great hedge against these uncertain worldly conditions and is being exploited accordingly. 

That being said, Americans are resilient to these types of price effects regardless of what weaselly politicians may say.  Thanksgiving travel was at an all time high and all reports seem to indicate that Christmas will be the same.  In addition, coal production is going great guns so that the costs to heat our homes this winter will be reasonable and manageable as well.  Just keep those darn loony environmentalists away from the coal industry and power industry and life will go on just fine.  Remember, the internal combustion engine is one of the greatest inventions ever made and there is a reason that it powers almost all of our transportation today.  Efficiency is the name of the game and nothing is more efficient than American and her people.

Romney the Conservative of Choice

Posted in Activism on February 1, 2008 by poyers

Some striking data compiled from exit polls after the Florida primary:

Romney won pro-lifers. Romney won the mainstream religious. Huckabee won the very religious, which is less than one-fifth of the pool. Romney won the Protestants. Romney tied Huckabee with evangelicals. Romney won the pro-George W. Bush voters. Romney is the primary second choice of Giuliani voters and Thompson voters and McCain voters. Romney won the immigration hardliners. Romney won the upper middle class earning between $100,000 and $200,000 annually. Romney won the terrorism-oriented voters. Romney won the self-identified conservatives and the self-identified very conservatives. Romney won the values-oriented voters. Romney won the white voters. Romney won the tax-cutting voters. McCain wins the elderly, the hispanic, moderates, independents, and the establishment. Romney is winning the Republican base and they are behind him despite his horrendous campaigning and his reliance on loser consultants. In addition, the talk radio and blogger base is also stridently behind Romney. For some reason, the true red-bloods are behind him.