William Thien

Archive for August 2011

There has been a lot of negative hype about the Obama Administration’s Health Care Law which has been going gradually into effect. In fact some believe Obamacare was one of the driving forces behind the formation of The Tea Party.

There is one provision in Obamacare which I find entirely acceptable, though.

There is one crucial element of Obamacare that I believe is so significant that were it not for the other equally unacceptable aspects of the law (the requirement to purchase health insurance, for example), I would not change a thing, and that one crucial element is the prohibition of “pre-existing conditions” clause, that health insurance companies cannot avoid paying for treatment because someone has a “pre-existing condition.”

I have no way of knowing but I’d be willing to wager that it is the very reason The Tea Party is getting so much support from the health insurance industry (not to mention what I call the “Big Business Robot Frontmen,” so-called conservatives lining up at the Health Insurance Industry trough), that the health insurance industry wants to create political discord in relation to Obamacare because that very provision, “the no pre-existing conditions” clause in the law, is not “in the profit plan.” Nothing wrong with making a profit, as I’ve said many times before. In fact, it’s great! Unless of course it is making everyone sick.

And when all is said and done, when this thing makes it to The Supreme Court, I doubt it will be determined that you can refuse someone because they have a pre-existing condition in the same way that say an auto insurance company can turn someone down because they are a repeat OWI offender. There is a big difference. People generally don’t have a choice with regard to pre-existing conditions.

If there is one thing that comes from Obamacare in the “no pre-existing conditions” clause in the law is that it seems to me to be the beginning, it signifies a new, sensible form of regulation that the government hasn’t been able to induce from within for a long time. All to often there is an over abundant, all-encompassing agency of regulation to the point of stifling manufacturing and industry in general, which the conservative side of the aisle makes known to good standing. But the “no pre-existing conditions” clause within Obamacare seems like a healthy regulatory maneuver on its own merits.

It is yet to be determined if The Supreme Court will throw the entire law out or if they will find parts of it unconstitutional. Let’s just hope they get to it before this entire episode in American History makes everyone sick.

Copyright © William Thien 2011

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There is talk of another stimulus package, conjecture in the news. To me this is an interesting prospect because when a previous stimulus package was proposed I wrote to my elected officials and also telephoned them with some interesting numbers, and my elected treated the numbers with complete disregard, almost as if my elected were on a tether which lead directly to the banks and large insurance companies, who after receiving the stimulus were giving their management $1,000,000 bonuses just six months later. I could hear them partying in their offices shouting, “Suckers!” Blowing on party favors, inhaling helium balloons.

It occurred to me at the time that the amount of money proposed was such a huge sum and it was going to such a small segment of our country’s businesses, primarily banks and insurance companies (primarily in New York’s financial district), that it was really just a special interest favor. Banks and insurance companies tend to be somewhat predatory in social behavior (that’s why some cultures don’t allow the charging of certain types of interest) and I thought it was unusual for the government to be looking out so thoroughly for them. The term “too big to fail” was used as if someone had created a script for the robot media and our elected to flail about so that we should all be scared to death if the money went anywhere else. The media and our elected went along with the story like faithful zombies, infecting the rest of the country with their feverish fear mongering, coming at us from all directions with their crazed lies.

Let me add that the largest banks use supercomputers to figure out every possible economic outcome to every possible economic variable and probably can predict the future better than the local palm reader. So why did they need to be bailed out in the first place? Or was it all a big boondoggle?

So, with that said, getting back to my numbers, my stimulus package. At the time I figured that were the federal government to give that huge stimulus sum to individual taxpayers, it turns out it would amount to anywhere from $3,500 to $7,100 per taxpayer, depending upon which number you used for the total amount of taxpayers. It was my contention that were the money distributed in such a manner it would be a far more effective stimulus package than merely trying to prop up one clever industry after another, if you know what I mean.

If the individual taxpayer had that kind of money coming in they would to a large extent have done things like pay off credit card debt, make purchases (good for sales tax revenues), and take care of the other things which come along with modern American life. In effect, a real stimulus across the board would have happened, not simply banks and insurance companies giving $1,000,000 bonuses to their management, some as soon as six months later, you know, the kind of behavior they would have strung people up for during medieval times, perhaps even just a few decades ago. Nobody of any measure was prosecuted this time, though most would probably agree what happened was really quite criminal at least in a social context, primarily because of the condition the country is in today. In fact, one could probably argue that the stimulus package did exactly the opposite of what it was supposed to do, that it increased credit card defaults and home foreclosures while simultaneously providing a reason for banks to increase credit card rates and increase profits. In a way, not only did the stimulus strengthen the position of the financial sector, it weakened the position of the consumer in relation to the banks, it gave more power to the banks over the consumer. This to me seems like it could not have been by accident. Remember, the largest banks use supercomputers to predict the outcomes of just about every economic variable. In essence, they knew what the outcome would be of such a stimulus package long before it was contemplated.

Yet, imagine how such a stimulus as mine, where taxpayers would have received that money, would have stimulated retail sales! You could have even placed a tax break on purchases of products made in The US. Wow! That would stimulate things, now wouldn’t it? And many of the recipients would have probably just put the money in the bank and the “too big to fail” problem would have then been solved as well as the banks would then have maintained solvency, the origin of the fear mongering in the first place.

Instead, credit card companies began raising interest rates causing massive, record numbers of defaults, people started to foreclose on their homes, you name it. It was a poor, perhaps stupid decision on the part of our elected, there can be no question. Banks are going to fail. They do all the time even during good economic times. So why bail them out? Too big to fail? I think the $1,000,000 bonuses tells us all we’ve been had, that it was a crock, sponsored by our elected officials, putting us all into massive debt as a country and prolonged economic strife.

Essentially, our country’s elected decided to prolong the depression and give the money to a few small segments of our economy and let everyone else suffer through protracted economic blight. And they made a conscious decision to do that.

That leaves two choices, either they don’t care about the general public or they are on the take in one way or another. Because I for one offered a different plan, a plan that would have worked. At least it would have worked for me, and I’m willing to bet it would have worked for every one of you as well.

Too big to fail? If you ask me, if our elected need to be looking out for anyone, they should be looking out for the American public, because if you ask me, that’s the “too big to fail” you need to be looking out for.

Copyright © William Thien 2011

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This is a reprint of an essay published on November 5, 2010. Occasionally I will be running some of the previously published essays again, not because I don’t have new issues for you, rather, some essays were dramatically more popular than others, and I would like you to have the opportunity to read them again without having to dig for them.

Income Taxes: Serial Killer of American Small Business, Nov. 5, 2010

Workers in The United States and other established industrial countries tend to earn higher wages than in third world countries or the far east. It’s a fact. We all hear stories about large corporations moving their production lines to the far east and Central America and the low wages those workers are paid. We may have seen stories on the news about the appalling working conditions and long hours those workers endure. But is that really why American companies are moving production overseas? I believe there are other more subtle forces at work that unless we examine them over a period of time, we will not recognize them.

What is significant to us is that products can frequently be made overseas for much less than in America. This of course creates a price gap between goods made here in The U.S. and those made overseas. Some countries can even buy the raw materials from us and ship them overseas, fabricate a quality product, and then ship it back to us for less than we can produce it here because the wages they pay their workers are so much lower. Labor is often the largest part of the production cost equation. But as you shall see, there is something more subtle at work as well and it has nothing to do with American workers being paid a living wage.

What is the result of all of these forces, those obvious and the invisible? Industry, particularly small industry and business, that which employs the greatest number of Americans has suffered in The U.S. for the last thirty or forty years. What does small business have to do with what I describe? Small business and industry manufacture consumer goods, small ticket items. It may not seem like it, but small business and industry are the bread and butter of the economy and it is this market into which foreign manufacturers have made particularly substantial forays into our economy. One could view what is happening to small business and industry in The United States as a form of warfare, economic warfare, because it undermines our economy in such a strategically effective way that somehow it could not be by accident. But as you shall see, we have a saboteur in our midst which is of no foreign origin whatsoever, someone in an entirely deceptive set of threads for which we pay and supply, as you shall see — for which we pay and supply dearly.

When a consumer goes to the store, they are most often spending what is called “discretionary income.” They are on a budget and very “cost conscious.” They have particular needs and only so much money to spend. But they spend that money more often, weekly perhaps, and it is that flow of money into the economy that brings necessary economic sustenance to the entire country. Without it, a country such as ours which is based on industrial and agricultural production will eventually suffer hard times, some believe much worse than current conditions. Bread, as the saying goes, is the staff of life. So too then is small business, that which manufactures consumer goods, the staff of life to our economy.

As I’ve stated, low wages paid to overseas workers and appalling work environments overseas in juxtaposition to working conditions here and higher wages are not the only factors that have contributed to the deconstruction of industry in the United States. I believe our government has had a direct hand in it as well. Please read on.

When a consumer goes to the store with a number of purchases in mind, retailers like to have several items available at differing prices, or price points, to allow the consumer to make a purchasing decision. It’s part of the psychology of retail. The consumer doesn’t feel like they are getting something shoved down their throat because there is only one choice, and the retailer or store owner can offer a variety of items from inexpensive to expensive items with the hopes of taking in more income by selling what is more expensive. For the sake of this discussion you could call the difference in prices from low to high on the same type of product as a price spread or gap in price.

Prior to going to the store the consumer has to earn some money, though.

Enter the income tax. When income taxes increase as they have for the last sixty years (In 1952 a family of four paid less than 2% of their income in taxes) consumers are able to buy fewer products made here in The United States because, as I mentioned previously, products made in other countries can often be made for less, much less. U.S. income taxes then shrink or decrease the spread or the gap, the choices based on price of available products an American consumer can purchase.

Income taxes don’t just decrease purchasing power in The United States, income taxes hack at the consumer’s purchasing power as with the lopping stroke of a rusty axe. Today, some of us pay over twenty percent in income taxes. That is an eighteen percent decrease in purchasing power in comparison to the family in 1952 that paid only 2 percent of their income in taxes to the federal government. And when you add all of the social programs we pay into that are not classified as taxes but are deductions to your pay nevertheless, what is withdrawn from your pay can easily exceed forty percent for some before your paycheck is even in your hands. That forty percent is more often than not the difference in price between the products made in The. U.S. and those made overseas. In fact, that very fact is incorporated into the price structure of products made overseas. Products are priced at an amount equivalent to the average income tax rate less than those made in The United States. Products manufactured overseas are priced at a level which brings them in line with your real wages, that which is left after taxes and other deductions. Clever, isn’t it.

Taxpayers have been struck with such excessive taxation in The U.S. since the 1950’s on an increasing, sliding scale. Why? There were great excesses after World War II and nobody thought about the future. There was a melding of political ideals across the globe with some of them heavily socialist/communist which frequently remain today and are enormously expensive to maintain even though they have proven false in communist countries. And finally, people became busier with the woman leaving the house to go to work and they didn’t see it coming.

Now, strapped with high income taxes, on a heavy sliding scale for some, coupled with sales taxes that creep up every few years, real wages, or the net people take home for working the same amount of time and producing the same and frequently more, has been halved in many places. People are working into the middle of the week before they begin earning. Less and less is there any difference between what a person makes in wages in The U.S. in comparison to what a worker makes in the countries where there are such appalling work conditions. But it is not the industrialist or the small business person that is to blame, not the employee whether they be union or not.

It is our own government who frequently seems to pit the employee against the employer to redirect the focus away from the government’s desire to tax more and more. Our own government is working to break up industrial productivity simply to perpetuate its own existence. They understand the economics at work here. Yet, they let the employer and the employee work at each other as if they were enemies. Income taxes also create discord in our industrial economy. Income taxes are divisive. High income taxes are treacherous. A point could be made that high income taxes are treasonous because they undermine a country’s ability to perpetuate itself through its own industrial production and economic self-reliance.

So, the effect of such heavy taxation is to drive the American consumer down to the lower priced products since they have effectively less to spend. And where are the lower priced products often made? All too often it is overseas. Income and sales taxes actually force the consumer to purchase products that are manufactured overseas by hacking away at the choices they can afford. Therein, ladies and gentlemen, lies the saboteur, income taxes, the hacking, slashing serial killer of the blood spattered American Dream. With each week, with each paycheck comes another fall of the axe. “Kill! Kill! Kill!” The shadowy face growls.

If we want to make it possible for industry to flourish here, even just to function here in The U.S., we need to attack income and sales taxes with the goal of making it possible for Americans to buy American made.

Because our taxes are literally cutting us right out of the market.

Copyright © William Thien 2010

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Last week’s announcement by the Federal Reserve Bank that it is unlikely to raise the prime lending rate until 2013 SoUndS good…at first.

Great! Borrowing money will be cheap for the time being.

At the very least, the announcement should create some economic stability, you would think.

On the same day there was a note mentioned as an aside that we should expect food prices to rise on average four to five percent this year. What’s four or five percent? Ten years in a row, it can be substantial. But immediately, it’s nothing really. The explanation for the increase was that production costs are up. But they generally are talking about things like milk and eggs when they mention such price increases. Milk and eggs are commodities that are subsidized by the government. Packaged goods will likely go up much more. Watch.

The problem with keeping interest rates down is that it artificially stimulates the economy and causes inflation. It’s like printing money: more money available, less value to the money. I discuss some of the negative aspects in an essay titled Why is the Federal Reserve Deliberately Stimulating Inflation?

The real reason The Federal Reserve Bank has been keeping interest rates low for the last two administrations and the second half of Clinton’s Administration is that we are in a political climate that does not allow increasing taxes. To increase taxes is political suicide. You may as well forget about getting elected if you “promise” to raise taxes.

Consequently, in order to increase tax revenues, the government, in this case it’s The Federal Reserve Bank, creates economic policy that drives up the cost of things and as a result increases sales tax revenues. The more expensive things are, the more sales taxes they bring as a direct proportion. It’s that simple.

The FED is driving the price of things up, instead of letting the market work itself out, in order to increase tax revenues. This is my own hypothesis, by the way, so feel free to chime in.

Furthermore, it restores people’s faith in the hyper-inflated values of their property, property of whatever type. In this way, governments can justify outrageous taxation. “Yer house ain’t worth that much but we’re gonna tell you it is so we can screw ya on them taxes, you know.”

Instead of letting the market correct itself so we can get on with things, the government is deliberately stimulating inflation, stirring things up, tinkering, that’s right, tinkering with the economy by keeping the Prime Lending Rate down only to justify higher taxes.

Otherwise, why is there such a fear on behalf of the government to let the markets correct themselves? What other reason is there for the government to keep constantly intervening in the economy with these monthly announcements about the Prime Lending Rate?

Now that they have taken the economy to absurd valuation extremes in terms of market values and commodity prices, now that they have used the final tool left in the economic tool box, making more money available with a prime lending rate of practically zero, what is left to do when things stall, when the market realizes things are not properly valued and go into market free fall as the economy runs out of the real fuel that drives it? Because bottoming out the prime lending rate is the last resort. That means that quite possibly the next correction is going to be the real correction, the big one, and there won’t be anything else anyone can do.

Copyright © William Thien 2010

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The premise of my most recent essay on health care is that our current system of medicine in The United States is more expensive and less efficient than many socialized systems in other countries because their people live longer and pay less for the services. That’s pretty significant. They don’t want you to know that here in The United States.

I concluded that the reason our system is less efficient and more expensive is that we pay into many systems, our own private health insurance, as well as Medicare, Medicaid and Social Security. The administrative costs to maintain those systems and administer medicine is enormous. In contrast, in a country with socialized medicine, or perhaps theoretically a single, privatized system, they pay into only one system which is much less complicated, much less expensive, and often more efficient due to its simplified design.

The problem many conservatives have with government-run health care, or socialized medicine, is that it means more government. But I’ve proven that our current system of medicine in The United States, which is really a contrivance of a number of systems, is actually more government than in many of those countries with socialized medicine. Why? Because we have several systems all working at once with redundancies and multiple administrative costs to accomplish one goal, America’s health.

This raises the question, then, with conservatives believing in less government, and a one system form of socialized medicine which exists in other countries being less government than the system we currently have composed of many complicated systems, it raises the question, would conservatives go for such a single, socialized system (or privatized) of health care if it means less government, less cost, and more efficiency, or, would conservatives simply have an ideological difference which prevents them from accepting such a system of medicine even if it meant a substantial cost savings and that citizens subject to such a system of medicine lived longer, or, is there another factor in the equation that we don’t know about, that of the health insurance lobbyist that likes things this complicated because it is more profitable?

That’s a long question. That’s a good question. It’s the question they don’t want anyone to ask of the general public, I guarantee.

As a conservative myself I can honestly say that if it meant substantially less government and less cost and I got more out of such a health care system, my answer would be a definitive “YES!”

But America is not those other countries. Our social makeup is far more complex. We speak many languages and have many customs whereas in other countries, they have a more homogenous population, all speaking one language, perhaps all eating very similar foods and having similar behaviors. It stands to reason that it would be less complicated to treat such a population.

Yet, it still doesn’t negate the fact that our system of medicine in The United States is very complicated and as a result more expensive and probably less efficient, even though many trumpet our advances in medical science and diagnosis. The fact remains that people often live longer in countries with socialized medicine and if you ask me, longevity is really the final word on whether a system of medicine is effective or not.

And, as a country desperately looking to trim the budget, maybe we should look into it, even if it means less cost and better services.

I think the question at the back of everyone’s mind is, “has anyone done the math, yet?”

Copyright © William Thien 2011

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August 2011
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