Economic Update from a Non-Economist and The Joy of Writing Revisited

Revenue, Loopholes, Spending and Sacrifice

Increasing revenues to the Federal government without raising tax rates means closing existing loopholes which presently enable taxpayers to reduce their taxable income.  This comes down to changing the basis for many of the deductions which are presently available to taxpayers.  Of these deductions, the four major ones the elimination (or modification) of which would produce the greatest increased revenue are:

1.     The mortgage interest deduction

2.     The charitable donation deduction

3.     The deduction for local and state taxes

4.    The deduction employers get for paying health insurance premiums

Strong opposition to closing the mortgage interest and local tax deduction loophole is coming from the real estate industry’s powerful lobby.   Charities, hospitals and educational institutions are fighting the elimination or modification of the charitable gift donation deduction.   And since an employer’s ability to deduct the premiums they pay for employees’ health insurance is an integral part of the Affordable Care Act, eliminating that deduction is not going to be on the table either, at least from this administration.  So, while closing loopholes to increase tax revenues sounds nice, elimination of any of the deductions listed above is extremely unlikely.  That means that increased revenues will have to come from increased income tax rates.

The other side of the coin is, of course, government spending cuts.  Some economists believe that government spending is a vital tool in job creation, and that a balanced budget and debt reduction are secondary, something which can be dealt with once new jobs are filled with the unemployed and the gross domestic product is steadily increasing at a significant pace.  Therefore, they believe government spending, at least at this point in time, is a desirable thing.  I agree with them because the private sector’s efforts at job creation are tempered by lower wages overseas and technological advances here reducing manpower requirements of domestic industries. 

I do not think the House’s temporary extension of the “sequestration” spending cuts, although slightly modified, will save enough money to make any difference in how deeply the country is “in a hole.”  On the contrary, they will probably result in layoffs, increasing unemployment and the need for unemployment benefits, and do nothing to increase the gross domestic product.

Once things are on the right path, however, spending will ultimately have to be cut, including military defense and social “entitlement” programs such as Medicare, Social Security and Medicaid, which comprise the bulk of spending on the accompanying 2011 chart.  Actually, such cuts may involve only a reduction in the rate of growth of these programs, but even that would be helpful.

The country must face up to the undeniable fact that the biggest area of spending which must be questioned is Medicare.  People are living longer and the unprecedented medical advances which enable them to do so are very, very expensive. The cost of some life-extending drugs is astronomical.  Without Medicare, very few of its senior beneficiaries could afford this care.   The answer seems to be the reduction of the cost of delivering medical care to those who are no longer working, and who would not be able to afford it without tax-supported government programs.  Nobody lives forever, and the costs of medical care during an individual’s terminal years can be prohibitively expensive.  It is a problem which health care institutions, the insurance industry, the pharmaceutical manufacturers, the government and the entire medical profession must cooperate to solve.  As the chart below shows, they all are part of the challenge to Medicare.

Sacrifices will be necessary on the part of everyone, including patients. Hospitals and doctors’ offices will have to be run more efficiently. Insurance companies, “for-profit” hospitals, extended care facilities, health care providers and even physicians will be making less money.  None of them will be very happy.  This is probably is the greatest single challenge which will face the United States over the next fifty years, and its solution will not only affect Medicare, but the entire health care delivery system in this country for people of all ages.  You and I, hospitals and physicians, and everyone else must recognize this problem.  If you keep your head in the sand for too long, you may suffocate.

Jack Lippman 


                                                     

The Joy of Writing

(From my "archives" but pertinent today in view of the effect social networking, texting, Ebooks, etc. is having on the way we communicate with each other.) 

One of the things which separate the minds of human beings from those of members of other species is man’s ability to formulate ideas outside of the realm of survival and the satisfaction of physical needs.   While animals instinctively think about things crucial to life such as avoiding predators, securing food, finding shelter, or finding a mate with which to procreate, only human beings can generate, develop and embellish far more sophisticated ideas and see them flourish within the confines of their own minds, often deriving great pleasure from such conceptualization.

Human beings are social creatures however, and therefore, they usually want to share their ideas with others.   Such sharing is done most commonly by speaking our thoughts aloud to one another.  Unfortunately, this does not impart any measure of permanence to an idea because the presence on a person’s tongue of what is in their mind is a transitory thing.  Stories, passed down orally through the years, tend to be changed slightly with each retelling.  Writing them down, however, gives permanence to ideas which otherwise might not survive.

                                   

 

Similarly, this is why a painter sits down before an easel, or a composer, at a keyboard.  They are doing the same thing as a writer with a pen or some other writing instrument in their hand does.  They all are trying to capture that elusive something which they see in their mind and make it into something which will endure.   We look at a painting by Rembrandt, listen to a composition by Mozart or read a passage from a play by Shakespeare and can begin to have an insight into what was in their minds by virtue of the skill with which they imparted permanence to their thoughts by putting them down as oil on canvas, as notes on a scale, or as words on paper.

      

In Macbeth, when Macduff learns that his wife and helpless children have been brutally murdered by Macbeth’s henchmen, Shakespeare has him pose the question, “Did heaven look on and wouldn’t take their part?”  Shakespeare espresses a universal question which has

  
Murder of Macduff's family and murder during the Holocaust.  Why did God allow this to happen? 

been asked throughout history whenever mankind found itself confronted by the brutal slaughter of innocents and wondered why God allowed it to happen.  Shakespeare’s words make sense today, for example, when we think of the Holocaust.  Why did God permit it to happen?  And we know the Bard indeed did ask this question because he gave his thoughts permanence by writing these lines to be spoken by the grief-stricken Macduff.   If he had merely discussed the slaughter of innocents with his cronies in a London coffeehouse, he might have expressed the same thoughts, but without his having put these precise words down in his play, we wouldn’t know what had been in his mind five hundred years ago.

Now, one need not be a Shakespeare to record their ideas.  Anyone can do it.  Keeping a diary, writing about what one did over their vacation, sending someone a letter, and of course, engaging in creative writing, all serve to record and hence, give permanence to ideas.  To be able to do it well, however, one must develop a facility with words and the use of them to express ideas.  This involves doing a lot of reading, building a vocabulary and having the patience to edit and rewrite what one is writing, repeatedly revising and reworking one’s ideas, striving to make the words expressing them more and more precise and meaningful.

Once a person gets into it, and starts giving permanence to their ideas by writing them down, another important consideration comes up.  For whom is the writer writing?  For whom is this permanence with which an idea is being endowed intended?  It could be for only the writer himself, if he or she is reluctant, ashamed or afraid to share their thoughts with others, but still wants to record them for future self-review, or to leave to be read by others at some time in the future, after they are gone.  It could be written for close friends, as letters might be, for a class, for the people in a particular audience, or even for the general public, if they are willing to read it.  It is strange that when an idea is given permanence by being put into written words, the writer never truly knows by whom or when what they put down will be read.  The inscribers of Egyptian hieroglyphics or the prehistoric cave painters of France in all likelihood never anticipated that their work would be looked at centuries later, and if they did, they had no idea of whom their future audience would consist.  And I doubt that William Shakespeare’s ego was such that he suspected that his plays would still be popular many centuries after he wrote them.   

So without knowing for sure who will be reading what you write, if you believe that your thoughts are worthwhile ones, you should  take great pleasure in developing the writing skills necessary to enable you to give them the permanence without which they might just float away and be lost.  Consciously doing this, at least for me, is the joy of writing.

JL

                                    

                                          

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Jack Lippman

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WHO AM I TO PONTIFICATE, ANYWAY? WHAT CREDIBILITY DO I HAVE? and THE PRESIDENT'S TRIP TO ISRAEL

                                                              


                                                                   

What Do I Know, Anyway?

Who am I, anyway, to pontificate about such demanding subjects as the government's deficit?  What credibility does what I say carry?  Admittedly, my thoughts are based primarily on my "gut" feeling seasoned by what I read in  newspapers, in magazines and see on television.  My last official contact with the “science” of economics was Economics 101 and 102 back at Rutgers University well over half a century ago.  I do, however, now want to reprint a letter which I wrote to the Palm Beach Post and which was published by them on December 1, 2007.   Perhaps it will give me some "cred," as they say on the street in the 'hood where I once lived.

"To the Editor

  According to the article “HSBC to rescue troubled funds,” (Tuesday, Business), “Structured investment vehicles, or SIVs, sell short-term debt such as unsecured commercial paper to hedge funds and other investors.  The banks use the proceeds to buy longer term assets such as mortgage-backed securities."

  Unsecured commercial paper, hedge funds, mortgage-backed securities: Balderdash! (used in lieu of a more feisty, unprintable expletive).  Investing in money as a commodity never will replace the economic growth that manufacturing and harvesting of natural resources produces.  It may make millionaires out of some bankers and investors, and create some liquidity in the financial marketplace, but it does not create jobs and consumer spending, without which our economy will continue its slide down the tube.

Jack Lippman

Boynton Beach"

We all know what happened to our economy over the next few years following the publication of my letter.  The "recession" was just then starting but I was able to see worse things coming down the pike and voiced my warning.    Apparently, many of those in the financial world were far less astute.

    Employees leaving bankrupt Lehman Brothers in 2008

And if you question my credibility when I voice an opinion on foreign affairs, another area about which I occasionally comment, check out what appeared on this blog on September 16, 2011, shortly after a Taliban attack on our Embassy in Kabul.  We just don't seem to learn.  Here is an excerpt from that day’s posting:

“The following is the text of an Email I sent to President Obama and my Congressman on September 13, 2011.  I am not bothered in the least by the fact that the only Presidential aspirant who apparently agrees with me is Ron Paul:

In view of today's headlines, I see no purpose in leaving one single American in Afghanistan at this point.  Once our scheduled departure takes place in a year, there is no question that Afghanistan will be under the rule of those we now call "insurgents."   Karzai will be history.  So let's avoid any further American casualties there.  I suggest the following plan.

Enough American air travel must be cancelled over the next week or so in order to make available sufficient airliners to fly into Afghanistan and return all of our troops to this country immediately.  Equipment left behind should be destroyed.  This will amount to something like the Berlin Airlift, but we ought to have all of our troops home by the weekend.  This would be a great use of an "Executive Order" to get it done."

Okay, it is now a year and a half later and   

Afghan President Kharzi is now accusing the United States of working with the Taliban against him!  Wow!  What unmitigated gall!  We well know he will be chased out of office once we leave, with the Pakistani-supported Taliban taking over.  We should have done what I suggested eighteen months ago and many lives would have been saved;  President Obama’s plan to have us out of Afghanistan by 2014 is stupid.  There is no need to wait.  We should now proceed exactly as I suggested in the Email quoted above, getting out now, right now! This week, starting today!

Jack Lippman

                                                                                                       
                         
                                                                       

Items for the President to Read on Air Force One

There were a couple of columns in the paper the other day dealing with President Obama’s forthcoming trip to Israel.  Both are worthy of mention, if you have not read them. 

  Thomas Friedman’s column, originally in the New York Times, describes the President’s visit to Israel as that of a “tourist,” pointing out that “the Israeli-Palestinian conflict has shifted from a necessity to a hobby for U.S. diplomats.”  Why?  Friedman cites that the danger of that conflict erupting into a superpower confrontation with Russia has abated and that growing petroleum resources in Canada, Mexico and the United States have lessened our dependency on Middle East oil.  But he goes on to point out that while this “status quo” might be very acceptable to the United States, it should not be for Israel.  He hopes the President asks the Israelis about their “long term strategy,” if they even have one, for resolving the dispute with the Palestinians, and infers that if they do not have one, continuance of the “status quo” can ultimately “undermine Israel as a Jewish democracy and delegitimize Israel in the world community.”  This is a typical Tom Friedman column, containing his usual well thought out analysis of the problem, but offering no real solutions.  Friedman rarely does.

More to the point is an op-ed piece originally appearing in the Los Angeles Times, offering four suggestions to the President, made because the writer fears that Israel “is on a suicidal path” and that “it could cease to be the democratic home of the Jewish people,” language not unlike that appearing in the Friedman column.  His suggestions to the President may be summarized thusly:

First, avoid ambiguity, making it clear that maintaining the existing "status quo" can only lead into an abyss.

Second, espouse a “two-state” solution with borders based on the 1967 lines with land swaps to accommodate settlements on the West Bank, Jerusalem as an open city serving as capital of both states with Palestinian sovereignty over Arab neighborhoods and Israeli sovereignty over Jewish neighborhoods, joint administration of holy sites, a demilitarized Palestine with international security guarantees, return of Arab refugees only to the Palestinian state or resettled in third countries with some compensation and finally, a declaration of the end of conflict by all sides. 

  

Third, make sure the parties talk about an agreement and not merely a negotiating process, concentrating on the “ends” rather than the “means,” a shortcoming which has stymied earlier negotiations.

Finally, although bilateralism is the only way to reach an agreement, the U.S. should not hesitate to support unilateral actions even if not agreed to by both parties, if they indeed amount to a step closer to the “reality of two states for the two peoples.”  Examples of such “coordinated unilateralism” might be support of Palestinian statehood in the United Nations, endorsing a Hamas-Fatah unity government if committed to a two state solution and any Israeli evacuation and compensation program to encourage settlers to move from the West Bank.  Of course, the U.S. should oppose any unilateral steps that take us further from a two state solution. 

In the eyes of many, probably more so in the United States than in Israel, these are wild suggestions.  There are many Israelis who do not believe in a two state solution, some on a biblical basis, and many who will not trust the Palestinians to live up to any agreement they sign.  Some would consider these ideas to be no more than clever Arab propaganda, urging the President to take a pro-Palestinian stand on his forthcoming visit to Israel.  That is not the case.    

  Their author is Ami Ayalon, who served for five years as commander-in-chief of the Israeli Navy and later as head of Shin Bet, Israel’s domestic security agency.  He is one of the former Shin Bet directors featured in the currenl documentary film, “The Gatekeepers.”  His article nicely complements that of Tom Friedman, and does offer the long term strategy about which Friedman wonders.  The full text of Ayalon's article can be found at  http://articles.latimes.com/2013/mar/08/opinion/la-oe-ayalon-israel-obama-20130308    Study it carefully; I welcome your comments.

     Jack Lippman

                                                                  

                                                                                                                              

Most readers of this blog are alerted by Email every time a new posting appears.  If you wish to be added to that Email list, just let me know by contacting me at Riart1@aol.com. 

Also, be aware that www.Jackspotpourri.com is now available on your mobile devices in a modified, easy-to-read, format.

Jack Lippman

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To view older postings on this blog, just click on the appropriate date in the “Blog Archive” off to the right, or scroll down until you see the “Older Posts” notation at the very bottom of this posting.  The “Search” box can also be used to find older postings.

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