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ObamaCare Kickoff! By How Much Will My Insurance Rates Drop?

In Uncategorized on September 30, 2013 at 11:48 pm

It’s a cool evening in Illinois.  I’m sitting here on the cold, metal stadium seating, typing by backlight of a laptop.  ObamaCare kicks off in less than an hour!  And perhaps the Federal Government partly shuts down.  Assuming he’s still on the team payroll at midnight, when the President steps forward, will he sky the pigskin to the seats?  Or will it be a squib kick, bouncing a few times before dying? 

Back in 2010, Obama promised I’d be able to keep my plan if I like it, keep my doctor, and my premiums would drop.  I’m so excited!  In just a few minutes, assuming the Illinois ObamaCare website actually works, I’ll see how much I will save!  Yes, there are many ‘glitches’ with the roll-out.  If I, say, wanted Spanish language enrollment in Nevada, mala suerte… hasta Thanksgiving.  Small business plans?  Oops, check back some other time.  But, here in this ‘blue’ wonderland we call Illinois, government healthcare looks as unstoppable as a three hundred pound lineman.

Check back for the latest in health care savings… brought to you by ObamaCare!

Only “Bad People” Send Their Kids To Private School?

In Education on August 30, 2013 at 12:20 am

Ignorance is bliss if your name is Allison Benedikt.  Courtesy of a “terrible public school”, the Salon writer wrote:

I left home woefully unprepared for college, and without that preparation, I left college without having learned much there either. You know all those important novels that everyone’s read? I haven’t. I know nothing about poetry, very little about art, and please don’t quiz me on the dates of the Civil War. I’m not proud of my ignorance. But guess what the horrible result is? I’m doing fine. I’m not saying it’s a good thing that I got a lame education. I’m saying that I survived it, and so will your child, who must endure having no AP calculus so that in 25 years there will be AP calculus for all. [1]

True, a poor education doesn’t have to hold you back.  Ask Joe Biden.  

Her piece is aimed at the rich or upper-middle class person who sends their child to private schools to escape bad public education.  That means you, Matt Damon.  And you, Barrack Obama, Bill Clinton, et al.   Benedickt actually argues you should sacrifice your children’s future, because if no one sent their kids to public schools, you’ll, “freak out a little more than my parents did—enough to get involved.”  She says it may take a few generations (!), but eventually, public schools will have to improve.  You can’t make an omelette without breaking a few eggs!  Your children are not really your concern; sacrifice them for the greater good!

She misunderstands competition.  Communist countries offered horrific products and horrible service because the customer had nowhere else to go to.   What companies are better known for their service: monopolies like utilities or companies in highly competitive industries like restaurants?  As lousy as the Chicago Public Schools are, surely they are better for the pressure from the city’s Catholic schools, the handful of private secular schools, and even from nearby suburban public schools, which act as a magnet to draw concerned families out of the city.  If everyone abandoned all other options and settled for their local public schools, how would that make them better?  Would teachers’ unions become more responsive?  Thought experiment:  you hate the service at your local Unfriendly Groceries store.  Is the solution to take your business to the competing Friendly Grocer or to blindly stay with Unfriendly Groceries?  If you stick it out with Unfriendly, what possible incentive do it have to change? 

Would the American economy be more competitive without private schools?  Benedickt bemoans lousy public schools, like the one she attended, that don’t require students to read books, learn calculus or even offer AP classes.    Yet, her solution is to have all students attend the worst schools?  Will this help us compete in math against the Chinese, Japanese, Koreans and Indians?  Intellectual curiosity is a gift; a fine education is priceless and pays dividends throughout one’s life.  Why not foster creativity, critical thinking and intellectual passion?

Benedickt misses the important fact that students in private schooling benefit local public schools because they aren’t sitting in seats, but the funding stays.  If you put your child in, say, a Catholic school, you still pay the same property and other taxes that fund your local public schools.  But, your local public schools don’t pay a dime to educate your child.  You effectively pay twice for schooling your child.  That should be applauded, not attacked as “bad”.  Even more so, good for you for caring about your child, instead of being like Benedickt’s parents who “weren’t too worried about it.”  I would argue excellence matters.  In many instances, the local public schools are not only substandard in terms of teaching, but dangerous.  Public schools in Chicago often are violent places.  Is it wrong for a parent to want to put their children in a safer environment?  There are some very good public schools and many great private schools.  Those public schools that get it right should be commended and their dedicated teachers rewarded.   Bad public schools should be reformed or shut down, not rewarded with blind allegiance.

Lastly, Ms. Benedickt’s argument is irrational; she is both saying that lousy public schools don’t matter (“your child will probably do just fine”) and yet, she says it matters that public schools are lousy, therefore you should care.  She contradicts herself.  Do bad schools matter or not?  Which is it?  I’d say bad schools matter, unfortunately.  

With the wacky arguments you used against effective private schools, Ms. Benedickt, perhaps a woeful public education did hold you back!

[1] http://www.slate.com/articles/double_x/doublex/2013/08/private_school_vs_public_school_only_bad_people_send_their_kids_to_private.html?fb_ref=sm_fb_share_toolbar

Minimum Wage Much Higher, Adjusted For Inflation, Than In 1938

In Uncategorized on July 28, 2013 at 2:28 pm

Joe Biden and others on the Left speak with reverence of 1968.  Is it the Summer of Love and urban riots they speak of?  No, the minimum wage, which adjusted for inflation, was higher than today.  “Just pay me what you paid folks in 1968”, Joe recently said. [1]

Biden is cherry-picking the year, though.  The minimum wage peaked in 1968, and today’s minimum wage is higher than it was in 2007, 1938, 1947, 1953, 1988 and plenty of other years.  And excellent graph that shows how today’s minimum wage is not particularly low by historic standards, and certainly much higher than was intended when introduced in the 1930s, can be found at CNN Money: http://economy.money.cnn.com/2013/02/14/minimum-wage-history/. [2]

A minimum wage increases unemployment, for teenagers and others with low skills and a lack of experience; workers whose productivity is worth less than $7.25 are priced out of a job.   The 2007-2009 minimum wage increases were, for example, a time of increasing unemployment.  The impact of the minimum wage, of course, is greater the higher it is.  A 25 cent increase will have a sight effect on employment; whereas a large increase, to say, the $22 per hour Senator Elizabeth “Big Chief” Warren (D-MA) demands, would impact a large number of workers and greatly disrupt the labor market.

Sadly, though, minimum wage tends to be an emotional issue, rather than one which is debated logically.  Joe Biden, Barrack Obama and others who want a higher minimum wage tend to use deceptive evidence when they claim today’s minimum wage is supposedly so low by historic standards.  It’s not.  And they use the absolute high point, 1968, as their reference.  This is no surprise, since they conveniently ignore that minimum wage earners are, disproportionately, teenagers, college students, and others looking for part-time work.  Few are raising families, whereas Biden, Obama and their ideological soul mates falsely imply everyone on minimum wage is a sole-breadwinner of a big family.  In the real world, too, even mediocre employees receive pay raises.

[1] http://blogs.wsj.com/capitaljournal/2009/03/17/a-history-lesson-for-vice-president-biden/

[2] http://economy.money.cnn.com/2013/02/14/minimum-wage-history/

NSA Snooping Impacts The Presidential Election

In Freedom of Speech, Government Power on June 11, 2013 at 11:53 pm

His smile, a simile of sincerity, exploded as the webcast cameras’ ‘on’ lights turned red.  “Good evening, America, I’m Gus Garcia, Chief Washington Correspondent, CNN News.   Welcome to Atlanta, Georgia, America’s third largest city, home of the Peachtree Center and tonight’s 2024 Presidential Debate.”  His brown eyes, circles of wisdom, blinked under graying temples, whitish eyebrows, over a square, handsome jaw.  Garcia’s sultry voice, as deep as the Gulf of Mexico, commandeered the night.   Tens of millions who were too busy with reality Tube and video games for politics finally tuned in for their first chance to see the Republican and Democratic nominees they’d only known thus far as the foil of late night comics and the baddees in over-dramatic political ads.  Garcia spoke with a touch of bravado, knowing he’d sleep with his lovely mistress, barely a third of his 60 years, in a few hours.

Behind him, already sweating under the Kleig lights, the hefty Senator Sheldon’s faux grin faced out while his eyes focused on his GoogleTeleprompter glasses.  Senator Smith, her hair perfect in its manicure, but like kindling from hairspray, held her prominent chin steady and her coal gray eyes looked at the crowd with the confidence always shown by the one-time Ms. Pennsylvania and more recent Chair of the Senate Finance Committee. 

Polite applause, following the network’s cue cards, died away after Garcia’s inevitable lame jokes.  He straightened his back at the podium.  “Senator Smith, for our first question – it’s on Education.  Do you anything to say about the revelation you downloaded 50 Shades from Amazon.com in 2011?”

The rarely-plussed mother of three, her hair reincarnated as blonde for the grueling campaign, smiled as she clenched her teeth.  “Gus, great to see you again.  The American people are sick of negative attack ads like those of Senator Sheldon.  This ridiculous charge about a book, it’s not really about a book, it’s about censorship.”

She paused to clear her throat.  Sen. Sheldon stifled a yawn.  Smith continued, “I’d like to point out that, though people don’t remember it now, 50 Shades was a respected piece of literature that sold millions of copies.”  Sen. Sheldon laughed.  “This is nothing compared to what Sen. Sheldon downloaded when he was single.”

The crowd gasped.  An evil witch smile cropped up between Smith’s perfect lips.  “Yes, I have here, leaked from a friend in the NSA, the websites Sen. Sheldon visited in 2012. Porn, plain and simple.”  The camera cut to a blushing Sen. Sheldon, who ran his index finger over his right eye.

Garcia broke in to moderate.  “Speaking of Senator Sheldon, what does the senior senator from Wisconsin say to critics who say you’re a hypocrite about taxes?  With the revelations that you purchased books, CDs [the crowd laughed at the antiquated technology] and even wine from online retailers.  State tax records show you did not, I repeat, did not file a Colorado use tax form anytime between 2002 and 2018. You just filed 16 years of amended use tax returns. Why will voters trust you to run the IRS if you couldn’t pay your own sales taxes?”

Sen. Sheldon, stammering, said, “Yeah, but, Sen. Smith did something worse, far worse. [the crowd hushed] NSA records reveal she’s a thief! A thief! Without paying, from Napster, she violated willfully violated the Digital Millennium Copyright Act! She downloaded songs by the Ramones, Creed and Billy Ocean.”

Garcia chuckled.  “Billy Ocean? That’s the real crime here.”  A few in the crowd guffawed like a laugh track.

Sen. Sheldon brightened as he wagged his index finger at the cameras.  “It’s no joke. Theft of intellectual property is a real crime and Sen. Smith is unworthy of the presidency.”

A reddening Sen. Smith interrupted, “But the NSA records show you copied a Nicki Minaj CD – the whole thing – burned it from a copy someone lent you – and burned it to your hard drive!”  Numerous chuckles and a few gasps emanated from the crowd.

Sheldon parried.  “Talk about crime!  NSA email records show that you, yes you, you liar- you served beer to an underage minor!”

“That was my daughter – my own 19-year old daughter!”

Sheldon’s face looked like a hunter aiming his spear at a wounded boar.  “Yes, a 19-year old!  Underage drinker, according to email records!”

Smith steamed.  “Let’s not even get started. What’s this Facebook message to your friend, one Alan Huerta? You told him, and I quote, ‘I met one hottie lobbyist at that Ag. Committee confab’? What’s that about?”

Sheldon bubbled like a pot of tomato soup, forgotten on the stove.   “The same NSA files show you downloaded evil works – Karl Marx’s Das Capital and Hitler’s Mein Kampf!  America deserves better!”

“That was for my Master’s thesis!  How dare you – you uneducated lout – how can you attack my education?”  Cat-calls and cheers answered her from the capacity crowd.

Moderator Garcia, interrupted.  “Now, now, we’re off track. Sen. Smith, it’s your turn for a question.”  He paused to clear his throat.  “It’s not important how I got this, but, I have here your 2012 tax return.  How do you reconcile your charitable gift to an immigration group that expressed the exact opposite view of what you have now?”

Smith, with the skill of a master of Sunday morning political talkathons, deflected Garcia.  “Ancient news isn’t what Americans want.  The long-suffering middle class demands a candidate who looks to the future, not to the past.  And the future, most certainly, does not include breaking the laws of the once great city of New York!”  As the crowd gasped, Smith raised her voice.  “Secret NSA records prove – prove beyond a reasonable doubt – Sen. Sheldon purchased biggie size Coca-Colas and snuck them across the Hudson River – as contraband, yes, illegal contraband, into New York City.”  Several in the Atlanta crowd booed, but Smith’s line wasn’t for the handful of audience participants who worked for Coke, it was for the tens of millions watching on their cell phone internet browsers.

Sheldon answered, “Sen. Smith is deflecting!  She’s trying to divert Americans from seeing the real issues!  The real issue of how much money she spends on clothes!  NSA credit card transaction monitoring files show her completely irresponsible ways!  If she can’t be trusted to shop somewhere other than Rodeo Drive and the Champs-Ellysees, she can’t be trusted to work on America’s $29 Trillion budget deficit!  The Chinese have already demanded Hawaii as collateral for additional loans!  Can we afford to offer California just to appease Senator Pangloss, er, Smith’s love of Tiffany?”

Smith blurted out, “This is exactly what we’d expect from a lout like Senator Sheldon!  Email records show he’s Janus-faced: one formal way for you on TV, but he’s a swearing, foul-mouthed, disgusting pig in his private emails!  NSA email tracking recorded an amazing 12,459 swear words in his emails in the year 2019 alone!”

Moderator Garcia stood unperturbed.  Though small beads of sweat showed on Sheldon’s forehead and tiny creases and wrinkles dug through Smith’s make-up, the CNN moderator was cool as James Dean in Antarctica.  He raised his hand, as if deflecting the fight of mere children.  “Senators, we’re off track again.  The next question is about privacy.  Do you support the proposed planting of microchips in all American minds, since we’ve suffered several major terrorist attacks in recent years?”

Smith answered, “Yes, there’s a proper balance between thought and security but we need to weigh the scales more heavily against the terrorists.  Freedom is not as important.”

Sheldon clenched his fist like Malcolm X.  “For once, I agree with Senator Smith.  Long live security!  Government monitoring and real-time thought-tracking is the only way to stop the pipe bombs!”

And that was the choice before voters in 2024 because most voters in 2013 didn’t care.

George Soros, Me and our Cayman Islands Soccer Team

In George Soros on May 14, 2013 at 7:35 pm
Manchester United annual report

Manchester United annual report

Annual reports fail to bore when the famous red and yellow Manchester United soccer team logo adorns them.  What I hadn’t contemplated was the uber-rich Lefty George Soros and I have something in common: partial ownership in a Cayman Islands-based company.

You may be familiar with Manchester United, the most commercially successful sport team in the world.  It is, as usual, in first place in the English Premier League.  So why does the annual report and the proxy statement state this British sport super power is domiciled as a Cayman Islands company?  The following quote explains:

There is, at present, no direct taxation in the Cayman Islands and interest, dividends and gains payable to the Company will be received free of all Cayman Islands taxes. [1]

So, does Mitt Romney own the team?  No.  The principal owner is the Glazer family.  But, the largest outside owner, holding a cool 3,114,588 Class A Ordinary shares is none other than Soros Fund Management, LLC. [2] 

That goes down less smoothly than a pint of Singha, global beer sponsor of ManU.  Did Soros not back the Super PAC that ran the most anti-Romney ads, the ones vilifying the Governor for being rich – and having offshore investments in tax havens like… the Cayman Islands?  Yes, it’s that George Soros.  The one who gave millions to Obama Super PAC’s. [3]

For good measure, one of the Glazer family directors, Bryan Glazer of Florida, is a Democratic Party donor, too.  A Tampa Bay station found, “$54,600 in political contributions from the Glazer family since 2007, more than 90 percent of which went to Democrats.” [4] 

George Soros and me, investors in a Cayman Islands-based English soccer power.   What do you think?  Is there a foul smell to Soros investing so much in a “Cayman Islands” company even as he funded anti-Romney/pro-Obama campaigns that attacked these very sorts of offshore tax dodges?  Please feel free to comment below.

 The words "Manchester" and "United" surround a pennant featuring a ship in full sail and a devil holding a trident.

[1] page 93 of Manchester United, PLC’s SEC Form 20-F, 2011-2012 annual report

[2] Ibid, pg. 84.

[3] http://www.huffingtonpost.com/2012/09/27/george-soros-super-pac_n_1920491.html

[4] http://www.wtsp.com/investigators/article/235368/34/Athletes-and-politics-Following-the-money

Photo by author; ManU logo from Wikipedia Commons.

ObamaCare Buyer’s Remorse

In Uncategorized on April 20, 2013 at 12:36 am

The Administration’s implemenation of “ObamaCare” is proving problematic.  Some unions are not turning against the very law they once supported.  See this link for a detailed story: http://finance.yahoo.com/news/unions-grow-wary-health-law-034700539.html

The International Union of Operating Engineers Local 150 of Countryside, Ill., which represents construction workers and insures about 65,000 people, is also examining whether some lower-earning workers would eventually be better off leaving the union-sponsored plan and instead getting federally subsidized insurance.

 

“I’ve told my members, as this evolves, your health care will not look like it does today,” said James Sweeney, president and business manager of the local. “I have to cut it back.”

One of the laws’ architects, Sen. Max Baucus (D-MT), told HHS head Sebelius he sees “a huge train wreck coming down” because of Administration implementation failures.  (see  http://www.politico.com/story/2013/04/max-baucus-stirring-controversy-on-all-sides-90295.html#ixzz2QycKQV7Z)

The 1950s 91% Income Tax Rate Virtually No One Paid

In Income Tax Rates, Obama Administration on March 12, 2013 at 12:46 am

Economic commentator Peter Schiff, nicknamed Dr. Doom for his prediction of the 2008 economic crisis [1], wrote in the Wall Street Journal about the so-called 91% tax rate of the 1950’s. The rate applied to very, very few and due to deductions, was paid by nearly no one. [2] The article is linked below and is free, no paywall.

I quote excerpts below:

Liberal pundits point out that in the 1950s, when America’s economic might was at its zenith, the rich faced tax rates as high as 91%. True enough, the top marginal income-tax rate in the 1950s was much higher than today’s top rate of 35%—but the share of income paid by the wealthiest Americans has essentially remained flat since then.

In 1958, the top 3% of taxpayers earned 14.7% of all adjusted gross income and paid 29.2% of all federal income taxes. In 2010, the top 3% earned 27.2% of adjusted gross income and their share of all federal taxes rose proportionally, to 51%.

So if the top marginal tax rate has fallen to 35% from 91%, how in the world has the tax burden on the wealthy remained roughly the same? … Lower- and middle-income workers now bear a significantly lighter burden than in the past. And the confiscatory top marginal rates of the 1950s were essentially symbolic—very few actually paid them.

In 1958, an 81% marginal tax rate applied to incomes above $140,000, and the 91% rate kicked in at $400,000 for couples. These figures are in unadjusted 1958 dollars and correspond today to nominal income levels that are about eight times higher. That year, according to Internal Revenue Service records, about 10,000 of the nation’s 45.6 million tax filers had income that was taxed at 81% or higher.

In 1958, approximately two million filers (4.4% of all taxpayers) earned the $12,000 or more for married couples needed to face marginal rates as high as 30%. These Americans paid about 35% of all income taxes. And now? In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans—many of whom would hardly call themselves wealthy—reported an adjusted gross income of $209,000 or higher, and they paid 49.7% of all income taxes.

In contrast, the share of taxes paid by the bottom two-thirds of taxpayers has fallen dramatically over the same period. In 1958, these Americans accounted for 41.3% of adjusted gross income and paid 29% of all federal taxes. By 2010, their share of adjusted gross income had fallen to 22.5%. But their share of taxes paid fell far more dramatically—to 6.7%…

In 1958, even the lowest-tier filers, which included everyone making up to $5,000 annually, were subjected to an effective 20% rate. Today, almost half of all tax filers have no income-tax liability whatsoever, and many “taxpayers” actually get a net refund from the government. Those nostalgic for 1950s-era “tax fairness” should bear this in mind.

The tax code of the 1950s allowed upper-income Americans to take exemptions and deductions that are unheard of today. Tax shelters were widespread, and not just for the superrich. The working wealthy—including doctors, lawyers, business owners and executives—were versed in the art of creating losses to lower their tax exposure.

For instance, a doctor who earned $50,000 through his medical practice could reduce his taxable income to zero with $50,000 in paper losses or depreciation from property he owned through a real-estate investment partnership. Huge numbers of professionals signed up for all kinds of money-losing schemes. Today, a corresponding doctor earning $500,000 can deduct a maximum of $3,000 from his taxable income, no matter how large the loss.

When Ronald Reagan finally lowered rates in the 1980s, he did so in exchange for scrapping uneconomical deductions.

It’s hard to determine how much otherwise taxable income disappeared through tax shelters in the 1950s. As a result, direct comparisons between the 1950s and now are difficult. However, it is worth noting that from 1958 to 2010, the taxes paid by the top 3% of earners, as a percentage of total personal income (which can’t be reduced by shelters), increased to 3.96% from 2.72%, while the percentage paid by the bottom two-thirds of filers fell to 0.51% in 2010 from 2.7%. This starker division of relative tax burdens can be explained by the inability of upper-income groups to shelter income.

1950s pictures from Wikipedia Commons.

[1] http://www.webcitation.org/5oz96pIPX (Fortune: “Peter Schiff: Oh, he saw it coming.” Brian O’Keefe, January 23, 2009.

[2] http://online.wsj.com/article/SB10001424127887324705104578151601554982808.html

America’s- and the World’s- Baby Bust

In Economy, Immigration on February 3, 2013 at 1:22 am

Jonathan V. Last’s article “America’s Baby Bust” [1] is thought-provoking and echoes points I’ve made myself.  Specifically, the US birthrate has recently dipped below replacement and it already far below replacement in Japan and many European nations.  A surprising number of developing nations, e.g. Mexico, are below replacement rate as well. 

Mexico is a dramatic example, with female lifetime fertility dropping from about 7 in 1970 [1] to 2 today.  One implication is we should expect less immigration from Mexico in the future because there will be less need for the safety valve of El Norte.

The economic implications will be severe.  Think how much of the US economy is geared to market growth.  In sixty years or so, Europe, China and Japan will be shrinking at a fast rate.  The US may be, as well.  Construction will still occur, but for replacement rather than new growth.  Companies will have to take market share from each other or develop wholly new products to grow their revenues.

There will be significant social impacts.  Social Security programs will be challenged worldwide as a shrinking pool of workers is pressed to pay for large cohorts of retirees.  Schools and colleges will need to be closed.  In some places, roads and highways may be abandoned.  Even today, in the growing USA, there are areas that shrunk in population in the 2000’s (e.g. Chicago and Detroit) though they were offset by growth in places like Dallas and Atlanta.  Imagine how severe local depopulation will be if the overall US population is shrinking.  Since many municipal costs are largely fixed (e.g. maintaining sewer systems), a shrinking taxpayer base will challenge many towns in the future.

Mr. Last points out how this future is all but unavoidable.  Raising children is a cost and a major effort.  Even if government tax breaks for children are increased (which he recommends), people marry later, partly due to the high rates of college and post-graduate education, and have fewer children.  One unexpected consequence of national welfare and social security systems has been fewer children.  Baring major medical advances allowing the safe birth of children into later ages, the preference for fewer children is not easily overcome.  Thus, we will all have to plan for a future where the US, and especially Europe, China and Japan are shrinking.

[1] http://online.wsj.com/article/SB10001424127887323375204578270053387770718.html

Pictures from Wikipedia Commons.

Colleges and Private Sector Employers Cut Worker Hours, Avoid New Hires to Avoid ObamaCare Fines

In Obama Administration, ObamaCare, Unemployment on January 20, 2013 at 1:48 am
Eddie Bauer store closing, Rockford, IL.  Jan. 20, 2013.  Photo by author.

Eddie Bauer store closing, Rockford, IL. Jan. 20, 2013. Photo by author.

Colleges and private employers are cutting hours to stay under 30 hour per week threshold for paying $2,000 “ObamaCare” annual fines.  Others are using independent contractors rather than hire full-time workers to avoid the 50-employee threshold mandating insurance coverage or fines.

It is fascinating to watch how it plays out.  Any massive law such as “ObamaCare” will have unexpected impacts, many negative.  Middle of the night sessions that create laws cannot possibly anticipate – or control – how everyone will react.  We read how colleges are cutting adjunct hours to keep them under 30 hours, since adjuncts generally are not offered healthcare.  [1] There will be additional effects.  The WSJ article quotes Dan King, executive director of the American Association of University Administrators, saying colleges fear ObamaCare will increase unionization efforts of adjuncts.  Why?  The reason being they will end up with fewer hours, pressuring adjuncts, who earn only a fraction of what full professors earn.

Private sector employers, “particularly restaurant operators, have been moving to cut hours to reduce the number of workers to whom they would be required to offer health insurance.” [1]

A Wall Street Journal article [2] goes into detail about one company that is actually expanding, but doesn’t want to crack the 50 full-time employee ObamaCare threshold.  As a result, the owner will hire independent contractors, who, of course, receive no benefits at all.

During her two-plus years in business, Elizabeth Turley has steadily recruited new employees for her apparel company, Meesh & Mia Corp., to keep pace with its rapid growth. But this year could be different. Instead of increasing her staff, she plans to hire independent contractors for tasks that can be outsourced, such as marketing and product development.

Her reason? Meesh & Mia is on the cusp of having 50 full-time employees. If the company hits that threshold, it will have to provide health coverage that meets government standards or potentially pay a penalty.

Elizabeth Turley, CEO of Meesh & Mia, plans to hire independent contractors this year because of health-insurance changes. Ms. Turley looked at fabric options at a trade show Tuesday.

“We are poised this year to more than double or even triple business,” says the 58-year-old Ms. Turley, whose Idaho-based company makes “spiritwear,” or clothes with licensed college and football-team colors and logos. “And then this happened…. We have to find another way to get there.”

Even though the rule doesn’t go into effect until early 2014, a business could be subject to the so-called employer mandate if, during 2013, it averages 50 or more full-time equivalent employees, according to recently released regulations from the Treasury Department and the Internal Revenue Service.

Employers have the choice to calculate their head counts by averaging the full 12 months of 2013 or a consecutive six-month period during the year.
Many small-business owners haven’t yet realized that the way they structure their firm in 2013 could determine their status under the law in a year’s time.

The government issued the little-noticed regulatory guidance on Dec. 28. Ms. Turley says she wasn’t aware of the rules until a Journal reporter informed her.

….Typically, independent contractors are less expensive for employers, who don’t have to pay taxes on wages or supply benefits, as they would for their employees. Reliance on independent contractors has increased over the years, particularly in the recession, when employers sought less expensive labor.

How far does the hour-cutting and non-hiring go?  No one can tell.  Reduced hours may mean crimped service.  I suspect one impact of the law will be more low-income workers working two part-time jobs of approximately 25 hours each, as employers do everything possible to avoid cracking 29 hours per part-time employee.  Others will work as independent contractors rather than obtain full-time employment.  Either would be examples of unintended consequences of the law.  The article about contractors points out the IRS rules are complex, leading to more disputes and audits.

If anything, [audits] will increase more” in light of the health-care law, says Monique Warren, partner at workplace law firm Jackson Lewis LLP in White Plains, N.Y. “Employers have to be real careful about calling someone an independent contractor.”

Government auditors would determine whether a worker misclassification triggers the health-care law’s employer mandate. That means the stakes are higher for employers, particularly those who have close to 50 full-time employees. They could have to pay back taxes in addition to potential penalties associated with the health-care law, should the revised classification push their employee headcount over the threshold.

“Some businesses may be tempted to classify someone as an independent contractor to avoid the headcount that could subject them to the [employer mandate],” says Edward Lenz, senior counsel at the American Staffing Association, an Alexandria, Va., lobbying group for temporary and contract staffing firms. “If anything, the risks of misclassifications are exacerbated by the [health-care law].”

Adding to the confusion for small firms is that an employer’s view of who is an independent contractor may not align with the government’s. The guidelines defining independent contractors “aren’t black and white,” says Ms. Warren. “To some extent, it is deliberately vague. The IRS can’t… account for every different situation.”

Simply juggling schedules if you’re a part-time worker working 20-25 hours per week at two different employers is a challenge.  In today’s economy, finding one, nevermind two, jobs is tough enough.  More than a few workers will find their hours cut from ObamaCare, reducing their total earnings. 

 

[1] http://online.wsj.com/article/SB10001424127887323635504578213502177768898.html?KEYWORDS=health+law+colleges

[2] http://online.wsj.com/article/SB10001424127887324595704578241510527580352.html?KEYWORDS=cutting+hours+employers+health+law

Store closing picture by author.  IRS Building from Wikipedia Commons.

Nobel Prize Winner Gary Becker Argues For Drug Decriminalization

In Uncategorized on January 6, 2013 at 9:18 pm

Nobel Prize winning economist Gary Becker and his University of Chicago colleague, the esteemed Kevin M. Murphy, discuss the failure of the American War on Drugs in the linked article (free, no pay wall): http://online.wsj.com/article/SB10001424127887324374004578217682305605070.html  Murphy was the 1997 winner of the John Clark Bates Medal, granted every other year to the top American economist under age 40.

The economists point out:

The paradox of the war on drugs is that the harder governments push the fight, the higher drug prices become to compensate for the greater risks. That leads to larger profits for traffickers who avoid being punished. This is why larger drug gangs often benefit from a tougher war on drugs, especially if the war mainly targets small-fry dealers and not the major drug gangs. Moreover, to the extent that a more aggressive war on drugs leads dealers to respond with higher levels of violence and corruption, an increase in enforcement can exacerbate the costs imposed on society.

The large profits for drug dealers who avoid being caught and punished encourage them to try to bribe and intimidate police, politicians, the military and anyone else involved in the war against drugs. If police and officials resist bribes and try to enforce antidrug laws, they are threatened with violence and often begin to fear for their lives and those of their families.

Mexico offers a well-documented example of some of the costs involved in drug wars. Probably more than 50,000 people have died since Mexico’s antidrug campaign started in 2006.   For perspective, about 150,000 deaths would result if the same fraction of Americans were killed. This number of deaths is many magnitudes greater than American losses in the Iraq and Afghanistan wars combined, and is about three times the number of American deaths in the Vietnam War. Many of those killed were innocent civilians and the army personnel, police officers and local government officials involved in the antidrug effort.

They address some of the perceived benefits of the admittedly costly War on Drugs:

It is generally harder to break an addiction to illegal goods, like drugs. Drug addicts may be leery of going to clinics or to nonprofit “drugs anonymous” groups for help. They fear they will be reported for consuming illegal substances. Since the consumption of illegal drugs must be hidden to avoid arrest and conviction, many drug consumers must alter their lives in order to avoid detection.

Usually overlooked in discussions of the effects of the war on drugs is that the illegality of drugs stunts the development of ways to help drug addicts, such as the drug equivalent of nicotine patches. Thus, though the war on drugs may well have induced lower drug use through higher prices, it has likely also increased the rate of addiction. The illegality of drugs makes it harder for addicts to get help in breaking their addictions. It leads them to associate more with other addicts and less with people who might help them quit.

….

Just as gangsters were largely driven out of the alcohol market after the end of prohibition, violent drug gangs would be driven out of a decriminalized drug market. Since the major costs of the drug war are the costs of the crime associated with drug trafficking, the costs to society would be greatly reduced even if overall drug consumption increased somewhat.

Pictures from Wikipedia Commons.

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