Some Goldman Sachs dialog:
Saturday, July 25, 2009
"Cash For Clunkers"
A lot of talk about the government's "Cash for Clunkers" program. Unfortunately, this program is another example of government waste and stupidity. The federal government has allocated 1 billion dollars to this rebate program. Which will continue until November 1st 2009, or until the money runs out.
If you forget about the ideological disagreement (govt's stimulus), the problems start with the moronic guidelines Congress hashed out.
In fact, many people with "clunkers" will not be eligible for this program. The "clunker" must have been built in 1984 or after, and at the time of purchase have a combined highway/city MPG of 18 or fewer. Lastly, they must have a blue book value of less than $3500
That means someone driving a 1989 Honda civic or a 1987 Subaru would not be eligible. This legislation is punishing individuals who have always made the intelligent choice--purchasing inexpensive, fuel efficient cars. In their purchase, these consumers saved the environment and their wallet by not borrowing too much money. However, these "smart" consumers are never rewarded for their actions. Both of these cars had far to high an MPG rating when they were bought. Therefore, even though an 89 Civic and 87 GL wagon might get fewer than 18 MPG now, the government will not give you any rebate.
However, if you bought a brand-new Ford Windstar Minivan in 1998 for roughly $25,000 you would be eligible.
What are they going to be eligible to buy? Anything, as long as the MPG is over 22 for cars, 18 for SUVs, and 15 for trucks.
What a great deal, Americans are already broke and now the government creates an incentive to put more debt on their balance sheets. Our country is incentivising the purchase of an SUV that gets 18 MPG. In reality, most SUVs (and cars) get fewer MPG than what is listed at the time of purchase.
This rebate deal will undoubtedly garner much attention in the mainstream media, as people go and buy new vehicles with their government rebate. I would expect all of the stories in newspapers and on TV to be essentially advertisements for an industry that has seen their sales disappear in the past 10 months. From what I have read so far, there is little analysis of the underlying issues.
If the government really wanted to get old cars off the road, they could make any car worth less than $3500 eligible. However, they don't follow rational thinking and instead continue the same subsidized consumerism that has led this country to the brink of disaster.
If you forget about the ideological disagreement (govt's stimulus), the problems start with the moronic guidelines Congress hashed out.
In fact, many people with "clunkers" will not be eligible for this program. The "clunker" must have been built in 1984 or after, and at the time of purchase have a combined highway/city MPG of 18 or fewer. Lastly, they must have a blue book value of less than $3500
That means someone driving a 1989 Honda civic or a 1987 Subaru would not be eligible. This legislation is punishing individuals who have always made the intelligent choice--purchasing inexpensive, fuel efficient cars. In their purchase, these consumers saved the environment and their wallet by not borrowing too much money. However, these "smart" consumers are never rewarded for their actions. Both of these cars had far to high an MPG rating when they were bought. Therefore, even though an 89 Civic and 87 GL wagon might get fewer than 18 MPG now, the government will not give you any rebate.
However, if you bought a brand-new Ford Windstar Minivan in 1998 for roughly $25,000 you would be eligible.
What are they going to be eligible to buy? Anything, as long as the MPG is over 22 for cars, 18 for SUVs, and 15 for trucks.
What a great deal, Americans are already broke and now the government creates an incentive to put more debt on their balance sheets. Our country is incentivising the purchase of an SUV that gets 18 MPG. In reality, most SUVs (and cars) get fewer MPG than what is listed at the time of purchase.
This rebate deal will undoubtedly garner much attention in the mainstream media, as people go and buy new vehicles with their government rebate. I would expect all of the stories in newspapers and on TV to be essentially advertisements for an industry that has seen their sales disappear in the past 10 months. From what I have read so far, there is little analysis of the underlying issues.
If the government really wanted to get old cars off the road, they could make any car worth less than $3500 eligible. However, they don't follow rational thinking and instead continue the same subsidized consumerism that has led this country to the brink of disaster.
Friday, July 24, 2009
Thursday, July 23, 2009
Wednesday, July 22, 2009
Obama's Heath Care Bill
For those that do not know, President Obama has been making daily speeches touting the need to pass his health care bill before congress goes on vacation in august. What follows are a number of points citizens should consider when forming an opinion on the issue.
1) Whenever government gets involved with some entity the price goes up and the quality goes down. One need look only to the government's involvement in the school system to understand how ineffective their involvement truly is. $25,000 per student is what California spends on an annual basis to "educate" children in its public schools. A home schooled child in Texas costs their parents roughly $700. Why such a large disparity?
2) Government-run health care is too expensive. With the tax rate already approaching 50%, this health care bill would push that rate upwards of 55% of gross income for the highest tax bracket. With high-income individuals working almost three days a week for the government, they will be less likely to have the financial motivation to expand their business. Moreover, the individuals who are in the next tax bracket down, would have less of a motivation to work harder and expand their business.
3) Government is not good at running a business. If anyone has ever worked for the public sector they understand this point ad nauseam. For example, the DMV--enough said. The post office, just like the DMV, has horrible lines and is completely incompetent. How much is a stamp now? Big government is not the answer, Bush proved that and Obama is doing the same. Forget about the partisan bickering, both parties legislate in a similar manor.
4) Canada does NOT have great health care. As much as the media wants you to believe Canada has a wonderful health care system, they are simply wrong. 15% of Canada's population is not covered under any policy. The wait times of 4-6 weeks to have a procedure are similar to those in the US. However, these wait times do not include the number of steps one must go through to reach the doctor who finally decides on an operation. For example, if you have a stomach ache you will likely go to your internal medicine doctor, who then sends you to a specialist, who then orders some tests and want to see you back when the results are in. After seeing the specialist, he determines that you need an operation and then wants to set a date. All the Canadian system counts as a waiting period is from the last doctor visit until the procedure. Unfortunately, the steps leading up to this final doctor visit regularly take months. Alas, "there are lies, there are damn lies, and then there are statistics."
5) Why become a doctor? Imagine, you graduate medical school with $200,000 in loans and now you want to become a family doctor (FD)--something that few want to do today. The average salary for and (FD) is $135,000 per year. With a tax rate of 45%, your income is down to $74,250. With interest on your loans at 5%, you want to pay your principal of $10,000. However, since you now have a job, and you believe interest rates will rise in the future, you decide paying off some of you debt would be a wise idea. Therefore, you pay another 10k on top of the principal. Your left with $54,250. Factor in rent of $1500 (we hope young doctors would not be stupid enough to buy at the present time)car payment of $400, food cost of $500 and that leave our young doctors with $24,650 or $2,540 per month of disposable income.
If Obama were to reduce the cost of health care by forcing doctors to take a government option which pays them 20% less per patient, our young ambitious doctor is looking at taking home $1,643 per month. This begs the question: why become a doctor? It's certainly not for the money.
6) Too expensive. The 8% tax that would be applies to businesses that do not provide health care to their employees is a terrible idea. This would absolutely kill small business. How is a small retail shop--that has already seen its sales decline 20-30% over the past year--going to afford to lose another 8% of their revenue? They simply will close-up shop and their employees will be added to an already burgeoning unemployment list.
This health care bill will have negative effects on our fragile economy. Small businesses provide more than 70% of the employment in this country. Most of their cost are associated with labor, not health care like the White House wants people to believe. Large companies such as GM and GE do not provide jobs because they are a financial juggernaut that uses its money to make money. However, someone must do the work and produce a good that can be sold for the investor to make their profit. If we cannot pay the worker to do the work because of taxes, then the entire system collapse.
This is the wrong bill at the wrong time, and if it passes we will be in more trouble than we are at the present time.
1) Whenever government gets involved with some entity the price goes up and the quality goes down. One need look only to the government's involvement in the school system to understand how ineffective their involvement truly is. $25,000 per student is what California spends on an annual basis to "educate" children in its public schools. A home schooled child in Texas costs their parents roughly $700. Why such a large disparity?
2) Government-run health care is too expensive. With the tax rate already approaching 50%, this health care bill would push that rate upwards of 55% of gross income for the highest tax bracket. With high-income individuals working almost three days a week for the government, they will be less likely to have the financial motivation to expand their business. Moreover, the individuals who are in the next tax bracket down, would have less of a motivation to work harder and expand their business.
3) Government is not good at running a business. If anyone has ever worked for the public sector they understand this point ad nauseam. For example, the DMV--enough said. The post office, just like the DMV, has horrible lines and is completely incompetent. How much is a stamp now? Big government is not the answer, Bush proved that and Obama is doing the same. Forget about the partisan bickering, both parties legislate in a similar manor.
4) Canada does NOT have great health care. As much as the media wants you to believe Canada has a wonderful health care system, they are simply wrong. 15% of Canada's population is not covered under any policy. The wait times of 4-6 weeks to have a procedure are similar to those in the US. However, these wait times do not include the number of steps one must go through to reach the doctor who finally decides on an operation. For example, if you have a stomach ache you will likely go to your internal medicine doctor, who then sends you to a specialist, who then orders some tests and want to see you back when the results are in. After seeing the specialist, he determines that you need an operation and then wants to set a date. All the Canadian system counts as a waiting period is from the last doctor visit until the procedure. Unfortunately, the steps leading up to this final doctor visit regularly take months. Alas, "there are lies, there are damn lies, and then there are statistics."
5) Why become a doctor? Imagine, you graduate medical school with $200,000 in loans and now you want to become a family doctor (FD)--something that few want to do today. The average salary for and (FD) is $135,000 per year. With a tax rate of 45%, your income is down to $74,250. With interest on your loans at 5%, you want to pay your principal of $10,000. However, since you now have a job, and you believe interest rates will rise in the future, you decide paying off some of you debt would be a wise idea. Therefore, you pay another 10k on top of the principal. Your left with $54,250. Factor in rent of $1500 (we hope young doctors would not be stupid enough to buy at the present time)car payment of $400, food cost of $500 and that leave our young doctors with $24,650 or $2,540 per month of disposable income.
If Obama were to reduce the cost of health care by forcing doctors to take a government option which pays them 20% less per patient, our young ambitious doctor is looking at taking home $1,643 per month. This begs the question: why become a doctor? It's certainly not for the money.
6) Too expensive. The 8% tax that would be applies to businesses that do not provide health care to their employees is a terrible idea. This would absolutely kill small business. How is a small retail shop--that has already seen its sales decline 20-30% over the past year--going to afford to lose another 8% of their revenue? They simply will close-up shop and their employees will be added to an already burgeoning unemployment list.
This health care bill will have negative effects on our fragile economy. Small businesses provide more than 70% of the employment in this country. Most of their cost are associated with labor, not health care like the White House wants people to believe. Large companies such as GM and GE do not provide jobs because they are a financial juggernaut that uses its money to make money. However, someone must do the work and produce a good that can be sold for the investor to make their profit. If we cannot pay the worker to do the work because of taxes, then the entire system collapse.
This is the wrong bill at the wrong time, and if it passes we will be in more trouble than we are at the present time.
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