Posted by Michael A. Kamperman on January 29, 2011
It is time for the feederal government to step up and assume all funding and responsibility for Medicaid. The federal government spent approximately $290 billion on Medicaid in 2010. The states spent roughly $130 billion on Medicaid in 2010. This included stimulus aid to the states whereby the federal government picked up an extra $50 billion in Medicaid expenditures on behalf of the states. That aid, along with other stimulus aid to the states, ends July 1, 2011. That is when America will hit its real auterity moment if change we can believe in doesn’t come. Most states, and all the large ones, simply cannot afford the ever growing costs of Medicaid in an era of depressed tax revenue and high unemployment. Most states have already made deep cuts to education, which the President emphasizes should be a priority. They will make much deeper cuts to education after July 1 when the stimulus dollars runout. Traditionally liberal states with Democratic Governors like California and New York intend to make cuts to their respective Medicaid programs. The best way to assist the states fiscal burden is for the federal government to end the Medicaid mandate and assume full responsibility for the program.
While this will increase the federal budget and the federal deficit, it will decrease state budgets and state deficits. The states must balance their budgets, whereby the federal government can operate with deficits, even large ones. The states cannot print money and the federal government can. Federalizing Medicaid will not create a new program, it will not create net new federal/state combined government spending, therefore it will not create an extra burden on the taxpayers who pay both federal and state taxes in one form or another. What it will do is end the political trick of claiming fiscal prudence while pushing the mandates for spending and taxes down the food chain to the states, who in turn push it down to the local level.
Despite the rhetoric and the acquisence of the weak minded who are legion amongst us, the fact is the federal government does not have a spending problem. It has an economy in a depression problem. Costs for aid to the needy and the unemployed haved soared, while tax revenues from paychecks have plummeted. Full employment would cut the current federal budget deficit by more than 3/4. Less money out and more money in. From there prudent fiscal management could easily allow economic growth to balance the budget by 2020. One way to ease the pressures of the depression is to remove almost certain draconian austerity cuts coming from state budgets starting July 1. How many kids in grade school can we cram into a classroom before seriously eroding their education and our country’s future? Texas plans to cut $5 billion per year in education funding. That amounts to around $1,000 per kid per year in a state that averages $7,000 per kid in overall education spending. Texas budget hawks looked seriously at withdrawing from Medicaid, but fortunatley reason and wisdom prevailed. Its not rocket science to figure out cutting $3 billion a year in health spending for the poor out of the state budget doesn’t offset foregoing the benefit of $17 billion a year in federal health spending for the poor in Texas. The President needs to step up to the plate and lead us on a path different from the path President Hoover led the nation on during the last depression. Despite current punditry I see him sharing Hoover’s fate at both the polls and in the history books if he doesn’t come forward with an agenda focused on creating good paying jobs with benefits for the middle class. Federalizing Medicaid won’t create new jobs, but it will help stop the bleeding, especially in the classroom.
Posted by Michael A. Kamperman on January 22, 2011
President Obama has just named Jeff Immelt, the head of GE, as the new chairperson of his Whitehouse Jobs and Competitiveness Council. In doing so the President has aligned himself firmly in the camp of Wall Street and Global Corporate Interests and against the interests of the American worker. What’s good for GE shareholders is not necessarily what’s good for American workers. GE considers workers as input costs and it will build its factories where-ever it can get the best deal. GE has created far more jobs overseas in the last few years pursuing cheap labor than it has here at home. Immelt is already pushing the President for lower corporate taxes as key to his strategy to boost GE profits and the value of his stock options under the bogus guise of creating jobs. President Obama is so aligned with these interests that he has chosen someone to advise him with a clear conflict of interest, a person that continues to run a major corporation that was bailed out by the Fed and still has billions of dollars of yet to be repaid low interest loans backed by the Fed. President Obama launched this intiative with a trip to a GE alternative energy plant seeking billions of dollars in federal government grants. There the President said that the key to America’s future was being able to build things here and sell them in Shanghai. Really, the key to restoring the American dream is to make things so cheap here that they will buy them in Shanghai ahead of products made by their own workers working for slave wages?
No, the key to restoring the American dream and creating good paying jobs for millions of Americans is to end free-but-unfair trade that gives countries unfettered access to our markets without unfettered access to theirs. And, that allows workers making non-living wages to underprice American workers in American markets. These policies are creating a two-tier class of citizens in the U.S.; the haves and the have-nots. Its great that GE stock is going up if you already own a lot of it. But its not great if you are a 99′er unable to find work, or just greatful to find a job paying far less than the job you lost. There is actually no better example of the downside for workers created by our trade practices than the iphone and ipad, which were invented in the U.S., but are now manufactured in China where labor is much cheaper and where rare-earth-elements are no longer freely traded to the highest bidder.
The President just doesn’t get it. We are not going to restore the American dream via exports to Shanghai. We will restore the American dream if and when we invent things in Cupertino, California, we then make them in Indianapolis, Indiana, and we then sell them in Newark, New Jersey. We will restore the American dream when the housing market is fixed and people can get a mortgage on reasonable terms knowing their investment will not collapse in value two years later. We will restore the American dream when a middle class family can buy a home, buy a new car, take their kids on vacation, and still afford to send them to college. The President can afford to do that. Its time he focused on making it possible for the rest of us to be able to do that rather than focusing on how to make the haves have even more. China is experiencing tremendous economic growth for two reasons. First and foremost, China’s policies benefit China first. Secondly, American trade policies benefit China first. Its time we change that.
Posted by Michael A. Kamperman on January 20, 2011
We will not revive the economy and create the millions of jobs necessary to put the millions of 99′ers back to work until we fix the housing market. Housing is the key, and the housing market remains broken. There is still a deep backlog of foreclosures. New home construction remains at levels comparable to 50 years ago despite a big boost in population. Because the Zombie Banks are sitting on numerous unrecognized losses from housing, they remain extremely conservative in lending new money to small businesses and consumers. The best way to end the foreclosure backlog and stabilize home prices is to refinace every mortgage in America without an appraisal, without verification of income, and without a new title policy. This means every mortgage, a change in my perspective, whether it is current or not. I now believe the housing market is so broken that just refinancing current mortgages is insufficient. The mortgage lenders can take mortgages that are delinquent and roll the amount of money into the loan and hot the reset button. Refinancing delinquent mortgages will give those who have fallen behind the ability to catch up and start over. Additionally, those that are underwater can request an appraisal. If the appraisal is more than 10% below the mortgage amount, then that mortgage would be refinanced at 3% with the payment based on a 4% 30 year mortgatge and the difference going to principal enhanced principal reduction. Going forward, those who fail to pay the new mortgages will be foreclosed upon. This will give the whole housing market the breather from foreclosures that it needs to gain stability.
It is important to remember that all of these mortgages already exist and we will not be creating “new” problem loans. The federal government already guarantees about 90% of all mortgages already between its backing of Fannie Mae, Freddie Mac, Ginnie Mae, the VA, the FHA, the FDIC, the SIPC, and the Pension Guarantee Investment Corporation. The taxpayer will be taking on less risk by refinancing 100% of the outstanding mortgages because the entire market will improve versus the alternative of maintaining the status quo. The market will be able to provide the money to refinance these mortgages because everyone who takes advantage of this opportunity will have repaid their existing mortgage. Refinancing all mortgages will improve the cashflow of all mortgage holders allowing them to spend or invest in the rest of the economy. By ending the foreclosure and short sales plaguing the market it will once again make sense to pay full boat and invest in a brand new home spurring construction jobs.
The President is looking for ways to jump start the job market on the cheap. This is because he believes that the risk of entering a depression is over. He is wrong. The risk of entering a depression is over only because we have already entered one. He believes we are not in a depression and that the natural business boom-bust business cycle has entered a recovery phase that will soon right the economic ship and create millions of jobs. Refinancing all mortgages at 4% is a cheap idea, because the federal government can currently borrow money for 10 years at less than 3.5%. And, the Federal Reserve can invest in these mortgages if no one else will because their souce of funding is unlimited and their cost of funds is zero. Every home owner, whether they have a mortgage or not, will benefit from a stabilized home market. Even if you own your home outright you don’t benefit if your neighbor moves out and squatters move in to the vacant unkept property next door. Construction jobs are a very important part of modern-day economies. We cannot expect to lower unemployment significantly if we ignore good paying construction jobs and all of the industries and service businesses associated with new home construction.
Posted by Michael A. Kamperman on January 17, 2011
President Hu is rolling into the U.S. and the Obama Administration is rolling out the red carpet with a State Dinner. This is positive since the best course of action is cooperation between the U.S. and China on a host of issues, not all of which are economic. However, the reality is China is interested only in what’s in it for China. Therefore, it’s time for President Obama to get tough and tell President Hu, in private, that he now has a deadline to solve the huge imbalances in America’s trade deficit with China. He can either start by revaluing the yuan by 20%, or let it float freely on currency markets, or he can choose to substantially increase purchases of U.S. goods and services to balance out the trade deficit. It’s Hu’s choice, as the U.S. would not be dictating Chinese policy. President Obama would simply use the same tactics as China and declare that U.S. policy will be for the benefit first and foremost for the U.S. Were I President I would set a deadline of July 1, 2011, which is plenty of time for action on the part of China. The U.S. is in a jobs depression and we can no longer just give U.S. jobs away with nothing to show for it in return. If Hu fails to act, then President Obama can implement an across the board 30% tariff on all Chinese goods and services entering the U.S. and declare Chinese currency policies in violaion of the WTO. This will make both China and the global corporate interests that benefit from current policies furious. But it is necessary to restore the “American Dream” to the average American family.
Global corporate interests, like Apple Computer for example, benefit greatly from current policies at the expense of U.S. workers. While the ipod, iphone, and ipad are great American inventions, they are mainly manufactured in China. The reason of couse is cheap Chinese labor. Billionaires are popping up everywhere in China on the backs of cheap Chinese labor. And, billionaires are popping up in the U.S. without nary a thought of driving down the living standards of working Americans. Plainly put, what’s good for Apple and other global corporate interests and what’s good for China is not good for the rest of us.
Our unemployment rate of 9.4% is by now well known to be undercounting the truth of an unemployment rate closer to the mid-teens. We simply continue to drop people who want to work out of the labor force, even if they are healthy and in their 20′s. But less well known, and much less often discussed by the media, is the fact that the U.S. unemployment rate is a quantitative measure, not a qualitative one. If you get a temporary part-time job working for minimum wage and no benefits, then you are counted as a new hire and employed by U.S. government statisticians. Try raising kids and paying a mortgage on minimum wage, part-time. Or imagine yourself as a Chinese laborer working 80 hour weeks for a few hundred dollars a month and no benefits. This is the world current policy has driven us too. And current policy will continue to drive a world where workers are viewed as discardable input costs forced to compete across the globe with each other based on price, rather than viewed as people. If President Hu does’nt want to change his currency policy, then he could offer healthcare to the vast majority of Chinese citizens now forced to go without it. The U.S. is the leader in healthcare and China could help balance out the trade deficit by buying U.S. healthcare products and services. Afterall, when U.S. employers are forced to provide healthcare in 2014 it will only make U.S. workers even less competitive when we allow iphones to be sold in the U.S. made by workers with no healthcare benefits. The current path we are on is a path to a third-world entire world without a middle-class. Where will the iphone buyers come from then?
Posted by Michael A. Kamperman on January 8, 2011
The insane have taken over the asylum. With pitch-forks in hand the mob of the masses symbolized by the Tea Party has cowered Washington into promising no more bail-outs. The coup-de-grace was yesterday’s testimony by Fed Chairman Ben Bernanke that the Federal Reserve has no intention of bailing-out state and municipal governments. He said it was a fiscal issue and will be left in the hands of Congress. The Dodd-Frank Financial Reform Act has tied the Fed’s hands in bailing-out just about anybody according to Bernanke. I will not lose sleep over this even though we desperately need a bail-out mechanism in Washington. Believe me, when the Fed sees the whites of their eyes they will blink. Just act former Treasury Secretary Hank Paulson who proudly made a moral example of Lehman Brothers only to be forced onto one knee begging Nancy Pelosi not to let the whole financial system crash, because of his unspoken error. But make no mistake, it was TARP, yes the bank bail-out bill, that left us in a mere depression rather than utter anarchy. So Ben is letting us know nothing will be done until he too is forced one kneel. The Congress is expressing no appetite to further aid the states.
What this means is the depression will roll on and on despite the claims it is over, and despite the opinions of analysts reported as fact that a significant Christmas selling season and job creation environment arrived. Target and the unemployment report exposed the false-hood of such claims. Leaving the states to fend for themselves means leaving education as priority number 99 for the U.S. We might as well burn books and forbid reading and independent thinking.
There is no one on the national stage willing to give a clear and coherent explanation of where we have been, why we have been there, and how we can fix the economic mess we are in. So the people are left to resort to voodoo economics. They are left to fix that which they don’t understand on their own. Hence, they are looking for witches to drown and stone. Sadly, while President Obama is not the One, I do not see the One out their in the arena. Without a chance to have a real leader it is up to us to do what we can. I plan on pressing two issues this year that hopefully will gain traction. The first is to refinance every mortgage that can be brought current at 4% without an appraisal and without income verification. The second is to federalize Medicaid. These two simple steps will do more to aid the economy than anything else. And, with the right persuasion they have a chance to get passed. Refinancing every mortgage can stabilize the housing market. Federalizing Medicaid can be sold as a state’s rights issue. More on those two later.
