Obamacare/Medicaid Enrollment Numbers, the Price and “Backed by the Full Faith and Credit of the U.S. Government.”

Obamacare is based upon insuring an estimated thirty million uninsured through ACA Exchanges and Medicaid. The CBO now projects the price of Obamacare to reach in excess of two trillion dollars. (1) (2) (3)

One has to fully appreciate that the few have decided to introduce a new entitlement and expand an existing entitlement through an entity that is seventeen plus trillion dollars in debt. Stated alternatively, the political power purveyors of a de facto bankrupt entity have introduced a new entitlement and expanded an existing entitlement. Not to worry as the spendthrift, the spendthrift to the tune of seventeen trillion plus dollars in debt, can fund the new and expanded entitlement. How so? (4)

These entitlements, other entitlements and a myriad of other U.S. government programs are “backed by the full faith and credit of the U.S. government.” Makes one feel warm and fuzzy, huh?

Then again, how valuable is such a promise? Maybe one should worry.

Yes, the government has the ability to tax or borrow to make good on its promises. Problem is: one would need to tax at near 100% to make good on all the debt and unfunded entitlements. One can not tax at 100% as private economic activity would end. A 100% tax on zero taxable revenue is zero. Borrowing? One has already borrowed the unfathomable sum of seventeen trillion dollars. (5) (6) (7)

What exactly does “backed by the full faith and credit of the U.S. government” mean when the phrase is constantly deployed to assure detractors that a proposition, a proposition brought into being by politicos through the mechanism of government, is solvent? One must appreciate that political power purveyors of a de facto bankrupt entity, that can not tax at a rate to make itself solvent, constantly rely on “the full faith and credit” each time one of their many, many, many existing propositions are questioned as to solvency.

When one aggregates all existing propositions and one considers the solvency of the aggregate, exactly how much meaning is conveyed when the supporter of any one of the propositions states: “backed by the full faith and credit of the U.S. government”?

　

Notes:
　

(1) Obamacare Now Estimated to Cost $2.6 Trillion in First Decade, The Weekly Standard, 07/11/2012

http://www.weeklystandard.com/blogs/obamacare-now-estimated-cost-26-trillion-first-decade_648413.html


(2) Estimated Cost of ‘Obamacare’ Is Now $2.6 Trillion — Nearly $1.7 Trillion More Than Obama Promised, Yahoo News, 07/11/2012

http://news.yahoo.com/estimated-cost-obamacare-now-2-6-trillion-nearly-042311293.html


(3) New CBO health law estimate shows much higher spending past first 10 years, Fox News, 03/14/2012

http://www.foxnews.com/politics/2012/03/14/cbo-health-law-estimate-shows-much-higher-spending-beyond-first-10-years/


(4) US Debt Clock

http://www.usdebtclock.org/


　
(5) Full faith and credit, investor words.com

http://www.investorwords.com/2109/full_faith_and_credit.html


(6) full faith and credit - Investment & Finance Definition, yourdictionary.com

http://www.yourdictionary.com/full-faith-and-credit


(7) The Laffer Curve: Past, Present, and Future, Art Laffer, 06/01/2004

http://www.heritage.org/research/reports/2004/06/the-laffer-curve-past-present-and-future


　

　

　

　



　

　

　

　

　

　

　

　

　

Obamacare Bailout of Health Insurers

“House Republicans floated the idea Friday of demanding that the White House agree to end programs designed to assist insurance companies selling policies as part of the new health-care law in exchange for raising the debt ceiling for one year, according to a GOP lawmaker and senior leadership aides.”

“Under one scenario discussed Friday morning at the House GOP's annual policy retreat held on Maryland's Eastern shore, Republicans would agree to extend the debt limit for one year, but demand that there be "no bailouts for insurance companies under Obamacare," the lawmaker and aides said. House Majority Leader Eric I. Cantor (R-Va.) and House Budget Committee Chairman Paul Ryan (R-Wis.) described to colleagues how this scenario could play out and conservative lawmakers in the room seemed supportive of the idea, including Rep. Michele Bachmann (R-Minn.), who spoke up in support and offered to help whip up support for the plan among Republicans.”

“Concerns about a so-called "Obamacare bailout" have emerged in recent days, especially on conservative op-ed pages. The term is generally used to describe three programs in the health-care law — two temporary and one permanent — that make it less financially risky for health insurance plans to sell on the new exchanges. The term also is sometimes used to refer to one specific program in the health-care law known as "risk corridors" that limit both the amount of money that a health insurance plan can make and lose during the first three years it is sold on the new health-care exchanges established by the law.” - House Republicans might propose canceling ‘Obamacare bailouts’ to raise debt limit, Washington Post, 01/31/2014

Link to the entire article appears below:

http://www.washingtonpost.com/blogs/post-politics/wp/2014/01/31/house-republicans-might-propose-canceling-obamacare-bailouts-to-raise-debt-limit/

PIIGS: the Original Acronym and the Original Proposition

If one thinks back several years to when the acronym PIGGS was coined [Portugal, Ireland, Italy, Greece and Spain] the original proposition put forth was: a debt train wreck involving the PIIGS. Keep this in mind for a moment.

Now consider the many talking heads, pundits and those supposedly in-the-know explaining very assuredly that the EU would “talk” it out and negotiate a deal to avert any supposed debt train wreck.

However, each deal that was supposedly in the pipeline, when hatched, ended, in the main, in yet another deal which lead to another deal and so on which did nothing to solve the crisis. That the debt train wreck would be adverted, really became, a cascading series of “talk” that amounted to more “talk” but never stopped the impending debt train wreck.

One should consider Dr. Frank Knight’s proposition of the First Law of Talk: "Talk is cheap and it drives out talk that is less cheap."

Note: Frank Knight was an economics professor of both Milton Friedman and James M. Buchanan. Both Friedman and Buchanan are Nobel Prize winners in economics.

“Frank Knight humorously hypothesized that this idea about bad and good money could be applied to communication. "Cheap talk" was easily manufactured and it tends to drive out more reasoned talk because the response to cheap talk is more generally even cheaper talk that is yet more inflated. This law can easily be seen in action in the realm of politics and diplomacy. It also applies to academic arguments that generate a certain amount of vitriol.” (1)

Returning to the original proposition regarding a debt train wreck associated with the PIIGS, were the talking heads, pundits and those supposedly in-the-know advocating cheap talk? Was the more reasoned response the original response of: a debt train wreck?


Notes:

(1) Frank Knight's First Law of Talk

http://www.indepthinfo.com/articles/law-of-talk.shtml

Paul Ryan regarding: “The Most Predictable Crisis”

Economic Malaise: simultaneously deploying Keynesian deficit spending and QE in an environment of high public and high private debt

An item that receives little attention is that Keynesian deficit spending and quantitative easing [QE] were both economic theories developed during a period of very low public and private debt. Deploying the theories, simultaneously, in an environment of high public and high private debt within an advanced economy was first tried in the early 2000’s in Japan. The result? Economic malaise.


Fast forward to February 2012 in an advanced economy of the US. What results can one find of simultaneously deploying Keynesian deficit spending and QE in an environment of high public and high private debt?

(1) an 8.5% u3 measurement of unemployment with an army of discouraged workers,

(2) falling home prices which continue to fall,

(3) high public debt morphing into hyper-debt,

(4) a trailing annual GDP growth rate of 1.7%. (1) (2) (3) (4)


The missing element is growth. More importantly growth was attempted by simultaneously deploying Keynesian deficit spending and QE in an environment of high public and high private debt. One can quickly conclude that growth does not occur [Japan and the US now as prime examples] by simultaneously deploying Keynesian deficit spending and QE in an environment of high public and high private debt. The result merely being economic malaise with debt morphing into hyper-debt.

Notes:

(1)
http://www.bls.gov/news.release/empsit.nr0.htm

(2) http://www.propertycommunity.com/forum/north-america-real-estate/21772-nationwide-prices-still-falling-us-analysts-predict-further-decline.html

(3)http://www.denverpost.com/breakingnews/ci_19858627?source=rss

(4) http://articles.businessinsider.com/2012-01-27/markets/30669494_1_gdp-report-private-inventory-investment-real-gdp

　

　

　

　

　

　

　

U.S. enters PIG race -or- S&P Downgrades U.S. debt rating to AA+

The fastest pig in the race is told they are not really, in fact, all that fast. 

Yet the other pigs in the race are simultaneously slowing. Hence the newly proclaimed slower pig, is in fact, relatively speaking, the same fastest pig in the race with merely the pigs to choose from all shrinking in speed.

Hence its not a problem of pig, its a problem of pigs.

Which then leads to the question: does the acronym S&P mean slow and piggy?

Dr. Debt Ceiling: -or- how I stopped worrying and learned to understand the Tea Party

Kabuki-debt-ceiling-theater aside, Democrats and Republicans have long ago drawn their swords from the sheath regarding limited government vs. state, spending vs. tax, etc.. Each side betting no one will cross swords. Meanwhile each side compromising their way to spending the country into oblivion.

Then came along the Tea Party that bellied up to the bar and called the bet. Oh yes! The Tea Party decided to cross swords with the both of them! Now its “on”.

A 6 pm Friday Wake Up Call? Better Cancel Those Weekend Golf Plans!

Visit msnbc.com for breaking news, world news, and news about the economy

Armageddon's Armageddon

How many times can one claim pending Armageddon, nothing subsequently occurs, and yet claim pending Armageddon again? Once, twice, three times, even four times?

You see, Armageddon was pending with the bail out, the stimulus plan, ObamaCare, and the financial reform bill. These four horsemen of the apocalypse needed passed post haste or else "Armageddon"!

Now cometh the fifth horsemen of Armageddon. Wait a minute, there is only four horsemen of the apocalypse?!? Exactly. Four Armageddons that never occurred and now appears the fifth horsemen of the apocalypse. However, this time around the fifth horsemen is Armageddon's Armageddon.

Yes, the end of the ends.


'House Republicans are starting to rally behind a strategy on the debt ceiling called "cut, cap and balance." This is the condition for an agreement to raise the $14.3 trillion debt ceiling that was recently laid out by House Republican Whip Kevin McCarthy of California.

"What this means is we want an iron clad cut in spending over the next five years; an enforceable cap on outlays with automatic sequestration if the caps aren't met; and a balanced-budget requirement," said Mr. McCarthy.

The strategy is also being pushed by conservatives on the House Republican Study Committee. According to sources there, RSC Chairman Jim Jordan of Ohio will unveil a plan in the days to come that will require a balanced-budget agreement plus a cap on spending that brings federal outlays down to "around 18% of GDP after 10 years." Several RSC members are still smarting over the fact that the spending cuts in the 2010 continuing resolution were much smaller than promised, and this has only emboldened conservatives to take a harder line on the debt ceiling.

That could be bad news for the White House and Treasury Secretary Tim Geithner, who continues to talk about "Armageddon" if the debt bill is not passed. The scare tactic doesn't appear to be working. This week Mr. Geithner sent a letter to congressional leaders once again urging "timely action to increase the debt limit in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens." Rep. Todd Akin of Missouri echoed the sentiment of a large majority of his House Republican colleagues when he responded, "We just can't fold like we did on the CR, because the real financial crisis happens if we don't solve this debt problem." ' (1)

Some say Washington D.C. is the end of the earth, while others say it is not the end of the earth but you can certainly see the end of the earth from Washington D.C.. Maybe. Or is it that folks in Washington D.C. fancy themselves as the beginning of all and the end of all.

Then again, maybe their only friend is the end.


Notes:

(1) Political Diary, Wall Street Journal, 05/20/2011, Stephen Moore.

Hyper-Debt and Unemployment as a Lagging Indicator

Unemployment is a lagging indicator when Economic Recovery begins. That is conventional wisdom. (1) (2) (3)

(A) Unemployment as a lagging indicator is true in a normal Business Cycle.

(B) Unemployment is a lagging indicator in a normal debt level situation of households, businesses, and government.

(C) Unemployment is a lagging indicator when leverage begins to become readily available as recovery begins in the business cycle.

Conventional Wisdom gets upset from time to time. (4)(5) As the business cycle tries to move into a recovery stage, what if Unemployment is not a lagging indicator? Hmmm.

Is this a normal Business Cycle Recovery?

Consider these items:

(a) businesses and households are deleveraging,

(b) fixed overhead-capital values having fallen in value by Trillions of dollars,

(c) other wealth items having fallen by Trillions of dollars,

(d) sprinkle in some major open market operations aka Quantitative Easing,

(e) add in a falling dollar and the specter of rising taxes.

(f) plummeting Government Tax Revenues and Expanding Expenditures creating unmanageable deficits.

(g) State, Local, and the Federal Governments having over spent for decades while simultaneously creating unfunded entitlements creating an unmanageable accumulated debt level.

(h) looming inflationary pressures.


What is a Published Unemployment Rate of 10.2% and a Real Unemployment Rate north of 16% really indicating?

Given a Real Unemployment rate north of 16%, what about the sharp increases in Underemployment, Part Time Employment, Structural Unemployment? What about discouraged workers increasing at an increasing rate? What is being "indicated"? What about the remaining employed having an average work week of 33.2 hours? What does this all "indicate"?

Unemployment is not acting as a lagging indicator this time around? This time around Unemployment as a Lagging Indicator is a statistical outlier?

Hyper-Debt

Of the items mentioned above affecting this particular Business Cycle, the summation of accumulated debt, that is the past use of debt to accelerate future consumption into the present, may in effect be a major influence on unemployment.

We certainly know that "debt" is a drag on any economy. What if the summation of accumulated debt becomes so large its referred to as Hyper-Debt? From Social Security through the Great Society Programs, through the transition to a "service economy", through decades of Keynesian Deficit Government Stimulus Plans , through decades of Politicians buying votes via Pork Barrel Spending, to the decades of the Financial Sector, Consumers, and Businesses over leveraging......that surely the accumulation of too much debt sends up an "indicator" at some point in time.


If borrowing is viewed as accelerating future consumption into the present, that consumer goods, business goods, and government goods can be enjoyed in the present by borrowing from the future. Then at some point future consumption is affected by past borrowing.


However, if you mismanage debt, that you mismanage to the point of reaching a Hyper-Debt state, there are consequences. One consequence of hyper-borrowing, hyper accelerating future consumption into the present, is that you find yourself in the future (time marches on) with no funds to support past consumption patterns. If you over borrow, that is, over consume in the present at the expense of future consumption, and do it on a regular basis, then future consumption must suffer at some point.


Debt is a drag on an economy. Then Hyper-Debt is a Hyper-Drag on an economy.

We may very well have reached that point, upon the time line of Hyper-Debt, that the past borrowing, of accelerating future consumption into the present, has caused present consumption to look completely different than past consumption. That past consumption patterns now effect current consumption patterns.

Consumption of goods and services, the Demand for goods and services, directly effects the amount of human capital employed. If you accelerate too much future consumption into the present then the level of employment of human capital mirrors this over acceleration of future consumption into the present facilitated by Hyper-Debt. When the Hyper-Debt becomes unsustainable, that the cost to service the Hyper-Debt and the need to retire Hyper Debt trumps any further leveraging, then deleveraging becomes vogue.

However, if past employment levels were strongly associated with over accelerating future consumption into the present, and the accelerating of future consumption into the present via leveraging abruptly ends, then employment must fall.



Further, its one thing to deleverage from debt and yet another thing to deleverage from Hyper-Debt. The cost to deleverage from Hyper-Debt is extreme. Hence the new consumption pattern is devoid of acceleration and actually decelerates as the high cost of Hyper-Debt deleveraging demands a greater share of current and additional income, income that otherwise would have, in large part, been used for consumption.



Moreover, its not deleveraging from Debt, its deleveraging from Hyper-Debt. This deleverageing causes a demand for goods and services that is unlike past demand patterns. That deleveraging from Debt takes time, that deleveraging from Hyper-Debt takes a long time. Therefore the new level of demand requires less employment of human resources. That the old level of demand was false due to Hyper-Debt over accelerating future consumption into the present causing an employment level that was accelerated.



Rather than Unemployment being a lagging indicator, Unemployment will remain high and persistent and comparisons of current unemployment to past unemployment figure are apples and oranges as past employment was based on Hyper-Debt over accelerating consumption into the present and causing employment levels to over accelerate.

If in fact Hyper-Debt, over time, is deleveraged and debt levels return to manageable debt levels, then income once used for deleveraging Hyper Debt by Businesses and Households will become available for consumption. The question becomes how long will it take to deleverage from Hyper-Debt to Manageable Debt?



(1)http://www.dmiblog.com/archives/2009/09/leading_with_lagging_indicator_1.html

(2)http://seekingalpha.com/article/114201-unemployment-numbers-losses-were-awful-but-jobs-are-a-lagging-indicator

(3) http://www.ncsu.edu/project/calscommblogs/economic/archives/2009/08/unemployment_as.html

(4) http://latimesblogs.latimes.com/money_co/2009/07/wall-street-opens-this-week-less-confident-that-a-turning-point-for-the-economy-is-on-the-near-horizon-after-last-thursdays.html

(5)http://seekingalpha.com/article/141937-unemployment-as-a-lagging-indicator-not-this-time