A View into the Future: Post Script to June-November 2012

Using the previous 4 years experience as guide we may expect:

The national economy will continue to languish with low growth and high unemployment. I do not believe we will enter another recession during the next four years but we will be becalmed. Some states – New Jersey under Christie/Sweeney among them – will continue to apply the brakes on the nations’s economic growth. Neither Obama nor Romney, and certainly not the U.S. Congress, will address the factors in the U.S. tax code which encourage capital export.  Accordingly, regardless of who wins, Wall Street will remain disconnected from Main Street.

Needless to say, the national debt will continue to grow with either one.

Even if president Obama wins in November 2012, we already know his capability for abdicating postulates made while campaigning. We should expect that there will be negative effects on Social Security and Medicare, two social programs which candidate Romney has on his hit list, even if Obama is victorious. Obama will adopt some of Romney’s proposals. Such effects would most likely be cuts in both programs, perhaps somewhat smaller under Obama than those which would be implemented by a hypothetical President Romney.

We should also expect a re-elected President Obama to slightly reduce other social programs that he is now, during the campaign, defending with vigor. Either Obama or Romney will sweeten draconian cuts by phasing them onto the younger generations.

I would also expect that a re-elected President Obama would abandon at least some of his tax positions in support of the lower and middle classes, all for the sake of compromise. Similarly, there will be retreats in issues such as the environment and Wall Street regulatory statutes.

As a rule of thumb, President Obama will cede ground wherever big money is involved. He will hold out better in social issues such as birth control and same sex marriage.

President Romney would be very negative on the social issues mentioned above and similarly or even more accommodating toward big money.

Income gap would grow more under Romney than under Obama although the difference between the two will not be large.

We should expect that either President Obama or Romney will continue making inroads into our civil liberties using terrorism as excuse, even after Al Qaeda is wiped out.

A President Romney would be more likely to get the United States involved in another major foreign war.

With either president, New Jersey should expect very little help from Washington and that is why our own gubernatorial election of 2013 is so important: We will be basically on our own. We can hardly afford irresponsibility, demagoguery, and incompetence any longer.

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Healthcare in Post-ACA New Jersey

The arguments in front of the U.S. Supreme Court have ended and it is likely that the judges have already formed their opinions. But it may take months before they put them in paper, researching for all case-law that supports their conclusions, etc.

The U.S. Supreme Court, like almost everybody else, appears to be divided along party lines

If the insurance mandate – the economic centerpiece of ACA – is thrown out, the entire reform may become untenable for its cost. Once the millions of young and healthy are not forced to buy insurance but the insurance companies are forced to accept customers regardless of previous condition, premiums will dramatically increase for all. Small businesses and those with individual policies who are not poor enough to qualify for subsidies will be the most affected.

New Jersey must chart its healthcare course regardless of what happens in Washington.

I had proposed Medical Tort Reform since 2010 when my campaign began, either with award caps or a right to sue option similar to that of auto insurance. Democrats appear to be the major obstacle to such reform.

My tax reform plan would also assure that more people would have or be able to buy medical insurance without any government intervention. But the hefty increase of the minimum wage with healthcare benefits and even higher without would only be tolerable for businesses if we bring the New Jersey corporate tax to zero. Otherwise we would just be putting people out of business and increasing unemployment.

In turn, to be able to afford the loss of nearly $3 billion in corporate tax revenue, the government itself must undergo a drastic haircut. That haircut can only be functional at the top, with at least an entire layer of government trimmed.

That is how all elements of my plan concatenate. Think of it as a chain and every step is a link. All its components are a must. Perhaps the most important one will be the spike in wages because it will give a super-boost to aggregate demand for all goods and services, including health insurance.

And finally, a New Jersey health exchange should be open to all private insurers, to minimize adverse litigation, but the state should offer a rating of the available plans. The NJ Health Exchange should welcome non-NJ companies. There must be a cost-neutral public option in the exchange as well although I believe its administration should be put out for bid. Republicans are more likely to oppose the public option.

One senator is standing tall

“The Republicans have been absolutely determined to make certain that the rich and large corporations not contribute one penny for deficit reduction, and that all of the sacrifice comes from the middle class and working families in terms of cuts in Social Security, Medicare, Medicaid, LIHEAP, community health centers, education, Head Start, nutrition, MILC, affordable housing and many other vitally important programs.

“I cannot support legislation like the Reid proposal which balances the budget on the backs of struggling Americans while not requiring one penny of sacrifice from the wealthiest people in our country. That is not only grotesquely immoral, it is bad economic policy.”

U.S. Senator Bernie Sanders

Debt crisis: Gang of Six plan stinks

http://money.cnn.com/2011/07/19/news/economy/gang_of_six_budget/index.htm?hpt=hp_t1

http://www.bloomberg.com/news/2011-07-19/u-s-house-set-to-pass-doomed-spending-cut-bill-with-no-debt-deal-imminent.html

As the details of the proposal filter out it is apparent that it is simply a rehashed version of earlier republican demands and most of the changes in the tax code are middle class-adverse. The tax exemptions to be eliminated are among the portions of the tax code which benefit the middle class the most. President Obama already said that he likes the plan although he does not know the details. Is it that all the arguing of the last few days was staged and the final act of the surrender is coming up?

Tax rates: Reduced from 6 to 3. Lowest tax rate remains unchanged: From 10% now it goes to between 8% and 12% in the plan. By comparison, the higher rate will drop from 35% now to between 23% and 29%.

It would also call for a broad overhaul of deductions that would raise $1 trillion by limiting breaks for health, charitable giving, home-ownership, and retirement while lowering individual and corporate tax rates. It would phase out the Alternative Minimum Tax, a system designed to prevent higher- earners from avoiding taxes.

The excuse to eliminate the Alternative Minimum Tax — often called the “wealth” tax — is that it threatens to hit the middle class in increasing numbers every year because of how it was set up.

I would say the solution is to fix the clause; not to scrap it altogether. Without the AMT, creative wealthy individuals will not pay taxes at all while the real middle class is screwed.

It is not clear at this moment how social security and medicare are affected in the plan. But it is clear that they will be.

There is no question that the middle class will be affected in any debt reduction plan. The question is whether the middle class will be the only class affected.

U.S. default is not inconceivable

http://www.bloomberg.com/news/2011-07-11/obama-urges-largest-possible-deal-on-debt.html

The republicans have locked themselves in the position of no tax increases. A block of democrats are against the reductions of social security and medicare. And now the president, who appeared very willing to sacrifice social security and medicare in exchange for some token tax increases, has locked himself in the demand for a big deal – which I interpret like 4 trillion or nothing – an unappealing prospect for the republicans.

So it appears we have a Mexican standoff in Washington. My prediction is still that the democrats will ultimately cave in. But the new element in the president’s grandiose demand – if this was a bluff, it has had the secondary effect of limiting the ability of the president to negotiate without losing face – introduces a new constant to contend with.

In other words, everybody is allegedly negotiating but they have given out ultimatums; weird way of negotiating.

And then, the public seems so apathetic and resigned to whatever it comes that it is disheartening.

My prediction on the U.S. debt

Both parties will reach a rapid agreement when wall street begins to freak out and the phones at the white house and capitol start ringing non-stop. Seniors, students, and the poor will be steamrolled but there will be token cuts in the wealthy’s perks and defense so that it can be claimed that it is a balanced agreement.

More or less like the tax cut extension agreement of 2010, which reduced contributions to social security by 30% while extending the Bush tax cuts. Notice that, regardless of the extension of the tax cuts, the job situation has worsened.

Now, the very rich may be forced to fly first class instead of owning their own jet. Isn’t that dreadful?