Warren Buffet and taxes

An editorial that Warren Buffet wrote has been making the rounds recently. I can’t link to it since it’s at the NYT behind a paywall, but the essence is this; Warren Buffet doesn’t think that he pays enough in taxes, he doesn’t think the “super rich” pay enough in taxes, he doesn’t think it will adversely affect either the rich or business, so why not raise the tax rate and stop “coddling” the rich?

He does also say that a lot of the super rich people he knows donate a significant amount of money to charitable causes as well. He said his tax bill last year was over 6 million, but he thinks it should be higher. He claims that over 250,000 people make over a million dollars a year. Let’s bump that to 300,000 and then assume that, on average, they paid 12 million a year in taxes. That would give us 360 billion dollars. Quite a chunk of change, it’s enough that it could take care of around of a third of the debt incurred annually by the US government.

Here’s a thought experiment. Imagine that Warren Buffet convinced all those people to put up that money, but instead of giving it to the IRS, they gave it to charitable causes instead. Would that be better or worse?

 

360 billion dollars. You could give the poorest 20 million people in the US $18,000 in direct aid. Or maybe buy 3.6 million houses worth $100,000. Or maybe take that $360 billion and create business with them and provide who knows how many jobs and income opportunities. Now compare that to cutting the deficit by a third for a single year. Which one of these things would have the most impact?

“But those people won’t do that.” That’s the typical response. The alternative that Buffet offers is that the IRS just take the money instead. Because they do not willingly give up that money, people feel justified in taking it from them. Taking money simply because they have it doesn’t exactly give you the moral high ground. I shouldn’t have to say this, but I always do; the ends do not justify the means. Even if that money were used for the best things in the world, it does not justify forcibly taking it. I think this is made even more clear when we realize that that money would be taken so that a relative handful of people can spend it in politically expedient ways. Is there any reason to believe that money will be spent more wisely than before?

Some people will say I’m “defending the rich,” or some such silliness. I am trying to point out that volunteering other people’s money doesn’t take much imagination or courage. In the end, it won’t actually solve much either. 360 billion sounds like a lot, but when you give it to an origination that has wracked up 14 trillion in debt, it doesn’t go very far. It goes about 2.5% into the debt payment. If you injected it into the economy directly, much more would happen.

Warren Buffet is free to send the IRS any amount over his tax bill that he wants. If some of his friends feel the same way, they can do the same. He really shouldn’t assume that the money would be used well or given freely though.

More net neutrality questions

One of the important things in net neutrality is that providers do not discriminate against certain types of data. The idea is that the network provider is not filtering content before it gets to the user. Don’t we already have this though? The Kindle has a 3G network connection, yet you can only get what Amazon wants you to get, primarily ebooks and periodicals. Isn’t that a big no no under net neutrality ideals? Just to be clear, I don’t think there’s anything wrong with that, and I don’t think that most people have a problem with it. Here’s why…

The Kindle is pretty much made for one thing, reading things. As long as it can get the information you need to read, no one is concerned that you can’t also get Netflix on it. Despite being very un-net neutral, it is a very popular device because it works well. You’ll note that there’s no law or regulation that made that happen. Just sayin’…

That’s really the main point. If a device meets a demand, and does it well, it will be successful no matter how limited it is. On the other hand, if the device didn’t meet a big enough demand, or did it poorly, it would go away. Would Sen. Franken mind if Verizon came out with a VCAST only device with its own network?  More importantly, why should Verizon have to ask the Senator’s permission? Is there a big difference between a network banning other services on one device vs. all devices on that network? Why does anyone think that companies will be successful in banning popular services? There are a lot of possibilities out there with streaming devices, and no one really knows what will be best until it is tried. That goes especially for you Sen. Franken…

Amazon on demand vs. iTunes store

I really will stop talking about streaming media soon, but I’m obsessing right now…. Tried my first Amazon video on demand tonight. Tried a Dr. Who episode (the Agatha Christie one FYI) just to see how it was. I had heard that they let you buy the episode for 99 cents as opposed to the iTunes 99 cent rental. Amazon does let you buy the episode, but there plenty of strings involved.

First off, if you’re on a Mac, you can’t download the content you have purchased from Amazon on Demand. You watch it on the Amazon website. That’s kind of a bummer, but really, the only thing I would really need on my computer for was if I was going to put it on my iPod. I’m always online whenever I use my computer, so I can get to it whenever I want.

By using the viewer, I get all of the advantages of cloud computing. My library could potentially all be stored up at Amazon, it wouldn’t take up any space on my computer, and I wouldn’t have to worry about losing the data if my computer died.I could also watch it on other computers too I suppose. On the other hand, I would always have to be online. Like I said that’s not a big deal usually but if I go to my father’s place, I can’t use his bandwidth limited internet connection to watch it.  The thing I actually worry about is Amazon changing its mind or changing period. All of my purchases could just go away…

I think in this case, I like Apple’s approach better. I can rent the episode for the same 99 cents. For just a little bit more, I can buy the episode and download it to my computer. The folks doing the pricing have done their homework, it’s a tough choice. It might be different if I had a set top box that could use Amazon (like the Roku). IWith set top boxes, the price would be the same, the difference would be that with Amazon, I could go back and watch it whenever I wanted to since I would have “bought” it. Since I will be doing everything on the computer, think I’ll stick to the iTunes store. God, I love having all these choices…

"It’s not a single payer system, so what’s the big deal?"

That’s a response I got to my last post. It’s true, I don’t know of anyone seriously promoting that, but it can still do what I said in my previous post. Why? It all has to do with the fact that it is a federal program.

Imagine that you have kids and live in an area with lousy public schools. You really don’t want to send your kids to neighborhood school, what to do? Sure, you have a choice, you don’t have to choose to use the state’s school, there are plenty of private schools to choose from. Here’s the thing, even if you choose to not use the public school you still have to pay for it. Your choice to not use the school does not help you out at all. You have to come up with the money for both the public and the private school. On top of that, the public school doesn’t really care if your children don’t go, they won’t change what they do at all.

Facing that decision, most parents go ahead and send their kids to the public school. If they are really committed, they will agitate to improve the school. Of course, if anything ever does come of that agitation, it will only be long after their kids are through that school.

It’s a similar thing with a federal health insurance “option.” It will be optional to use the services, but it will not be optional to pay for it. Faced with that decision, most people will go ahead and use it. Using what you are charged for is the rational thing to do, even if that thing is substandard. The cost of using something else is just too much for most people. This is the mechanism that will cause the federal program to squeeze out the private ones.

Keep in mind that this holds even if you can opt out of the premiums. This is because the inevitable cost over runs and/or cost underestimates will still be the responsibility of the federal government. Without any real reason to worry about profitability, there will be both. It will be like Fannie mae and Freddie Mac, political promises with no incentive to rein in costs or risks. In other words, a disaster waiting to happen.

My thoughts on health care reform

I have had several people say to me that I must be excited about the effort to reform the medical world what with my MS and all. Despite what some people would see as an advantage to me, I don’t really see much upside in my circumstance.

It probably doesn’t come as any surprise that I just don’t trust reform coming from DC that involves more federal activity. The political process is not conducive to doing that well. Even if they managed to set the ideal system up, how long would it last? Special interest groups will be rewarded for their contributions and we will get mission creep like all other federal programs. The bill in the house is a prime example. It is currently over 1000 pages long, it isn’t a stretch of the truth to say that nobody can understand the thing in its entirety. The most recent concession involves an ethanol program for a lawmaker in Illinois. Perhaps there should be a law stating that new laws can be a maximum of 5 pages long…

A bigger worry is that with more government involvement we will get far fewer innovations in the medical world. Say what you want about the US healthcare industry, but there’s no question that it is responsible for the vast majority of medical innovations in the world. This is especially true when it comes to drugs. It is the quest for profit that drives inventions like MRIs, laser scalpels, heart valves, etc. Of course those new treatments are one of the reasons that costs keep going up.

On a less grand scale, I also worry about people losing options that lay outside of the medical mainstream. MS is a case in point. The approved drugs are expensive, don’t have a great track record as far as effectiveness goes, and of course have various side effects. There are some other drugs that have been approved for other conditions that seem to help a lot of people with MS. They are much cheaper, have no significant side effects, and seem to have at least a similar amount of success as the approved drugs. Right now, I can get a doctor to prescribe these for me, but will I have that option if the feds are much more involved? Would I be able to get drugs that are not approved by the FDA for my condition?

So unless the lawmakers can get their act together and draft a law that anyone can read and figure out (If no one else reads it and understands it, at least they should be able to) I am firmly against this current legislation. It may have some good stuff in there, but how can anyone know?

More on selling kidneys

I’ve had a little exchange with a friend on facebook over my ideas on selling kidneys. I’m sure that other people have similar fears, so here are my responses.

First off, it must be remembered that if selling and buying kidney were legal, things would not be the same as they are now. Issues relating to variable quality, obtaining kidneys from unsavory sources, the cost, and the potential violence of harvesting from unwilling people would be solved by the ability to go to a local clinic or hospital to have the procedure done. Imagine that kidney clinics were as common as fertility clinics, or dialysis clinics… There is no reason to think that kidney transplantation would be much different than it is now when it comes to safety. Selling would be done at the same places.

You have to keep in mind that you can’t just pop any old kidney into anyone else. There are compatibility issues. In addition, you don’t want any sort of nasties to be transmitted to the recipient, so proper screening is necessary. When dealing with a black market, you take some pretty big risks, but there’s no reason to in a legal market.

As far as the cost goes, it would still be expensive, but what major medical thing isn’t expensive? It’s hard to imagine that insurance companies wouldn’t cover the procedure since it would prove to be a great savings over dialysis costs and complications. Legalization also would end up lowering the costs since the supply would be dramatically increased.

My friend David summed it up like this, “Would selling organs open a Pandora’s box? Yes. Do I have the right to keep that box closed. No. Should I fight to make sure people aren’t exploited- absolutely.” I would never claim that legalizing this wouldn’t bring up some tricky issues or solve all of the problems out there but it would help a lot.

In the end, all of the positive results are very nice and good, but they are not the real reason to legalize the buying and selling of organs. The real reason is that people should be in charge of their own bodies. If ethical issues come up because of that, so be it. taking control away from people in regards to their own body is the real crime, everything else is a secondary effect.

Victim of the minimum wage

As I was heading to my fathers, I ran into some construction. They had closed off one lane and so we had to take turns using the one remaining lane. Instead of the usual pair of flagmen with radios, they had an automatic gate system set up. One would open up and allow traffic through, then it would close. After a small bit of time, the gate at the other end would open up and repeat the process.

This is the first time I had ever seen this system. It is another example of how labor can be replaced by machines when the price of labor gets too high. I have no proof of this, but I suspect that the new minimum wage laws played a part in these machines becoming affordable. I’m sure there were all sorts of other costs involved too, like insurance, people not showing up on time, people not showing up, etc. but I’m also sure that paying a pair of people to stand around and direct traffic for $7.24 an hour was just a bit much for some employers.

I know that some of you are going to think that $7.24 an hour is too little, so why don’t we raise it to $75 an hour? Oh, that would be too much. So what is a good rate to pay someone that? What is a good rate to accept to do that job? The only honest answer is that we don’t know. I’m sure that there are some high school kids that would rather do that for $5 an hour instead of being unemployed and I’m also sure there are lots of people that wouldn’t bother to do that job at $10 an hour. We don’t know what circumstances people are in and what they are willing to do for any given amount of money. We also don’t know how many more people would be hired if companies could pay less per hour. The only sensible thing to do when unemployment is high is to allow people to accept or reject jobs on their own. No one in DC can set a wage without effects. What effect? Fewer high school kids being employed and fewer flag men. Aren’t we glad that congress is doing what it can for this economy?

Something has to give

I’m trying to keep up with the whole health care reform thing, and it’s making me question my sanity. I thought that the pressing issue was how much our health care cost, but now it seems like “coverage” is the big thing. The real problem is how we imagine health care should be. The ideal coverage doesn’t cost us anything and treats everything. Clearly, that can’t happen.

I got this comparison from Penn Gillette of all people… Imagine that we had “food insurance” that worked the same way as our health insurance does now. Do you think that the prices of food would rise if there wasn’t any incentive to look at how expensive things are? If our insurance covered everything (and what good is insurance if it doesn’t?), we would buy the best food all the time. In addition, all of the people that made food would make more and more expensive food. In other words, the good things about a market would get turned on it’s head and we’d have ever increasing costs instead of competition driving prices down.

I do think that the price we pay is way out of whack, but I don’t put the blame on greed, I put it on the fact that our incentives are all screwed up. If you wanted to get philosophical, you could claim that greed is what causes people to want services at either no cost or very little cost to them… but I would never do that.

We need insurance to be more like our home insurance or car insurance. Those policies do not cover everything, they are there for catastrophic losses. The typical health insurance tries to be exhaustive. What ends up happening is the worst of all worlds. We end up paying for our health care in installments AND we get the high prices from the screwed up system. Yes, we should insure against really bad things happening, but we have gone overboard in insulating ourselves from the cost of things, our current system is the result.

Needless to say, the 1000 page monstrosity that is being worked on up in DC is nothing more than doling out favors and scoring political points. I am very certain that whatever comes out of that process will cause prices to go up even more, our quality of service to go down, or some other really bad outcome. The political process is not a very good tool for problems like this, look at what it has already done! If more people would realize what has happened, we wouldn’t be turning to the same people that screwed us up in the first place.

Beware any corporation that supports legislation that will cost them money.

Wal Mart is support new legislation that would require employers of a certain type to provide health insurance to their employees. Shouldn’t they be fighting that? After all, it is one of the things that is supposed to make them monsters. Yes, in their ideal world, they would not have to offer anyone health insurance at all. So why are they supporting this legislation?

It’s easy, this will hurt their competition (and potential competition) more than it will hurt them. The government will, in effect, strengthen Wal Mart’s position in the retail sphere. Yes, it will cost Wal Mart money, but it is the only way to make their competition incur costs that will hurt them. Usually Wally World is unable to dictate what costs places like Target and Costco have to deal with, but with the federal government’s power to regulate employee benefits, the way is opened to inflict damage to their competition.

This goes on all the time. Legislation that is supposed to help people ends up hurting by limiting competition. In reality, this is a way for congress and big companies to work together. The big business gets protection and the legislators get cheap political points. Sigh…

Two sides to everything (pt. 1)

This bailout business is comical. Both “sides” can line up economists that agree with them. All of them have models and historical facts and figures to make their case. Unfortunately, macroeconomics isn’t something that can be proven. i wouldn’t be surprised if both sides were right some of the time.

This event is not so much about competing schools of economics, but of world views. I’ll start with the “side” that I’m in because I understand it pretty well.

Resistance to this bailout goes well beyond the idea “It won’t work.” At their best, people who do not want this bill passed believe that everyone should spend their money the way they see fit. People should be free to labor for what they think is important with a minimum of burden from outside influences like the government. This means keeping the tax levels low, and therefore keeping government spending low. Not everyone will do what we like, but c`est la vie, everyone is different and we can’t expect them to do our bidding. They don’t believe that this “stimulus” will work because no one can steer an economy. It is built on what is done by everyone in it as opposed to being directed from above. If things are left to themselves, the entire economy may look like it’s going up or down, but that isn’t really important. Allowing people to have the freedom to react to their world is paramount. There is a coherent, logical form of economics that says that this type of arrangement would allow for the most widespread prosperity not only in this country, but worldwide. History would seem to bear them out. While it’s true that there has never been a government like this, the opposite has been tried with disastrous results.

At their worst, the people that oppose this “stimulus” believe that the real motivation for it is slavery. Massive spending is the first step to higher taxes, and being forced to work without remuneration is in fact slavery. Think about it, if the government taxes you at 8.3 percent, that means that you would work for an entire month without seeing any money. It might be OK if they then spent it on things you agree with, but these people would never admit to that, plus, if they wanted it, they wouldn’t need to have the threat of incarceration to pay for it. In reality, people are generally taxed at much higher rates already and if taxes are not paid, you go to jail. In these people’s eyes, the current bill is simply the latest effort to force people to live and work in a way that the political elite want them to.

Like all extremes, the worst version of this view is a little kooky although it’s hard to argue against the slavery definition. One thing that needs to be emphasized is that just because someone is against this bill, it does not mean that they want people to suffer. They just have different priorities in how our labor should be spent. I’m somewhere closer to the first, or best case scenario in my own outlook, but I can sympathize with people who have the second. I’ll try my hand at the “pro” side to the bill in the next post.

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