Obamacare is a Catastrophe That Cannot Be Fixed

Obamacare is a catastrophe that cannot be fixed, because it doesn't fix what's broken in American healthcare.

I just finished a detailed comparison of my current grandfathered health insurance plan from Kaiser Permanente (kp.org), a respected non-profit healthcare provider, and Kaiser's Affordable Care Act (Obamacare)  options. I reviewed all the information and detailed tables of coverage and then called a Kaiser specialist to clarify a few questions.

First, the context of my analysis: we are self-employed, meaning there is no employer to pay our healthcare insurance. We pay the full market-rate cost of healthcare insurance. We have had a co-pay plan with kp.org for the past 20+ years that we pay in full because there's nobody else to pay it.

What we pay is pretty much what employers pay. In other words, if I went to work for a company that offered full healthcare coverage, that company would pay what we pay.

Kaiser Permanente (kp.org) is a non-profit. That doesn't mean it can lose money on providing healthcare; if it loses millions of dollars a year (and some years it does lose millions of dollars), eventually it goes broke. All non-profit means is that kp.org does not have to charge a premium to generate profits that flow to shareholders. But it must generate enough profit to maintain its hospitals, clinics, etc., build reserves against future losses, and have capital to reinvest in plant, equipment, training, etc.

As an employer in the 1980s, a manager in non-profit organizations in the early 1990s and self-employed for 20+ years, I have detailed knowledge of previous healthcare insurance costs and coverage. As an employer in the 1980s, I paid for standard 80/20 deductible healthcare insurance for my employees. The cost was about $50 per month per employee, who were mostly in their 20s and 30s. In today's money, that equals $108 per month.

In other words, I have 30+ years of knowledgeable experience with the full (real) costs of healthcare insurance and what is covered by that insurance.

Our grandfathered Kaiser Plan costs $1,217 per month. There is no coverage for medications, eyewear or dental. That is $14,604 per year for two 60-year old adults. We pay a $50 co-pay for any office visit and $10 for lab tests. Maximum out-of-pocket costs per person are $3,500, or $7,000 for the two of us.

We pay $500 per day for all hospital stays and related surgery; out-patient surgery has a $250 co-pay.

So if I suffered a heart attack and was hospitalized and required surgery, I would pay a maximum of $3,500 for services that would be billed out at $100,000 or more were Kaiser providing those services to Medicare.

(Yes, I know Medicare wouldn't pay the full charges, but if Medicare is billed $150,000--not uncommon for a few days in the hospital and surgery-- it will pay $80,000+ for a few days in the hospital and related charges. All of this is opaque to the patient, so it's hard to know what's actually billed and paid.)

In other words, this plan offers excellent coverage of major catastrophic expenses and relatively affordable co-pays for all services.

The closest equivalent coverage under Obamacare is Kaiser's Gold Plan. The cost to us is $1,937 per month or $23,244 a year. The Gold Plan covers medications ($50 per prescription for name-brand, $19 for generics) and free preventive-health visits and tests, but otherwise the coverage is inferior: the out-of-pocket limits are $6,350 per person or $12,700 for the two of us. Lab tests are also more expensive, as are X-rays, emergency care co-pays and a host of other typical charges. Specialty doctor's visits have a $50 co-pay.

The Obamacare Gold Plan would cost us $8,640 more per year. This is a 60% increase. It could be argued that the meds coverage is worth more, but since we don't have any meds that cost more than $8 per bottle at Costco (i.e. generics), the coverage is meaningless to us.

The real unsubsidized cost of Obamacare for two healthy adults ($23,244 annually) exceeds the cost of rent or a mortgage for the vast majority of Americans. Please ponder this for a moment: buying healthcare insurance under Obamacare costs as much or more as buying a house.

A close examination of lower-cost Obamacare options (Bronze) reveals that they are simulacra of actual healthcare insurance, facsimiles of coverage rather than meaningful insurance. The coverage requires subscribers to pay 40% of costs after the deductible, which is $9,000 per family. Total maximum out-of-pocket expenses are $12,700 per family. This coverage would cost us $1,150 per month, and considerably less for younger people.

How many families in America have $9,000 in cash to pay the deductibles, plus the $13,800 annual insurance fees? That totals $22,800 per year. If some serious health issue arose, the family would have to come up with $12,700 (out-of-pocket maximum) and $13,800 (annual cost of insurance), or $26,500 annually.

Is healthcare that costs $26,500 per year truly "insurance"? I would say it is very expensive catastrophic insurance in a system with runaway costs.

The entire Obamacare scheme depends on somebody paying stupendous fees for coverage which then subsidizes the costs for lower-income families and individuals. How many households can afford $23,244 a year for Gold coverage plus $12,700 out-of-pocket for a total of $35,944 annually? How many can afford $26,500 for Bronze coverage? 

Recall that the median household income in the U.S. is around $50,000.
How many companies can afford to pay almost $2,000 a month for healthcare insurance per employee? Even if employees pay a few hundred dollars a month, the employers are still paying $20,000 a year per (older) employee.

If an employer can hire someone in a country with considerably lower social-welfare/healthcare costs to do the same work as an American costing them $2,000 per month for healthcare insurance, they'd be crazy to keep the worker in America, unless the worker was so young that the Obamacare costs were low or the worker was a contract/free-lance employee who has to pay his own healthcare costs.

Uninformed "progressives" have suggested that "Medicare for all" is the answer.Their ignorance of exactly how Medicare functions is appalling; recall that Medicare is the system in which an estimated 40% of all expenditures are fraudulent, unnecessary or counter-productive, where a few days in the hospital is billed at $120,000 (first-hand knowledge) and a one-hour out-patient operation is billed at $12,000, along with a half-hour wait in a room that's billed at several thousand more dollars for "observation." (Also first-hand knowledge.)

Medicare is the acme of an out-of-control program that invites profiteering, fraud, billing for phantom services, services that add no value to care, and services designed to game the system's guidelines for maximum profit. If an evil genius set out to design a system that provided the least effective care for the highest possible cost while incentivizing the most egregious profiteering and fraud, he would come up with Medicare.

Does Medicare look remotely sustainable to you? Strip out inventory builds and adjustments from imports/exports and the real economy is growing at about 1.5% annually. As noted yesterday in What Does It Take To Be Middle Class?, the real income of the bottom 90% hasn't changed for 40 years, and has declined by 7% since 2000 when adjusted for inflation.



Here is Medicare's twin for under-age-65 care for low-income households, Medicaid:



As I have observed for years, Obamacare and Medicare/Medicaid do not tackle the underlying problems of Sickcare costs in America. If you haven't read these analyses, please have a look:

Why "Healthcare Reform" Is Not Reform, Part I (December 28, 2009)

Why "Healthcare Reform" Is Not Reform, Part II (December 29, 2009)

Type sickcare into the custom search box at the top of the left-hand column of the main blog page and you will find dozens of essays addressing what's broken with American healthcare.

Obamacare is a catastrophe that cannot be fixed, because it doesn't fix what's broken in American healthcare. It is a phony reform that extends everything that makes the U.S. healthcare unsustainable sickcare.


If You Seek Practical Gifts, Consider These Everyday Kitchen Tools

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The Nearly Free University and The Emerging Economy:
The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economyWith the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?


We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

Read the Foreword, first section and the Table of Contents.

print ($20)       Kindle ($9.95) 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.
Kindle: $9.95       print: $24 

Thank you, Gwyneth M. ($50), for your superbly generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

What Does It Take To Be Middle Class?

By standards of previous generations, the middle class has been stripmined of income, assets and purchasing power.

What does it take to be middle class nowadays? A recent paper, The Distribution of Household Income and the Middle Class, used Census data to discuss what sort of income it takes to qualify as middle class, but reached no firm conclusion: people tend to self-report that they belong to the middle class based on income, but income is not the only the metric--indeed, it can be argued that 12 other factors are more telling measures of middle class membership than income.

In Why the Middle Class Is Doomed (April 17, 2012) I listed five "threshold" characteristics of membership in the middle class:

1. Meaningful healthcare insurance
2. Significant equity (25%-50%) in a home or other real estate
3. Income/expenses that enable the household to save at least 6% of its income
4. Significant retirement funds: 401Ks, IRAs, etc.
5. The ability to service all debt and expenses over the medium-term if one of the primary household wage-earners lose their job

I then added a taken-for-granted sixth:

6. Reliable vehicles for each wage-earner

Author Chris Sullins suggested adding these additional thresholds:

7. If a household requires government assistance to maintain the family lifestyle, their Middle Class status is in doubt.
8. A percentage of non-paper, non-real estate hard assets such as family heirlooms, precious metals, tools, etc. that can be transferred to the next generation, i.e. generational wealth.
9. Ability to invest in offspring (education, extracurricular clubs/training, etc.).
10. Leisure time devoted to the maintenance of physical/spiritual/mental fitness.

Correspondent Mark G. recently suggested two more:

11. Continual accumulation of human and social capital (new skills, networks of collaborators, markets for one's services, etc.)

And the money shot:

12. Family ownership of income-producing assets such as rental properties, bonds, etc.

The key point of these thresholds is that propping up a precarious illusion of consumption and status signifiers does not qualify as middle class. To qualify as middle class (that is, what was considered middle class a generation or two ago), the household must actually own/control wealth that won't vanish if the investment bubble du jour pops, and won't be wiped out by a medical emergency.

In Chris's phrase, "They should be focusing resources on the next generation and passing on Generational Wealth" as opposed to "keeping up appearances" via aspirational consumption financed with debt.

What does it take in the real world to qualify as middle class? Let's start by noting that real (adjusted for inflation) income has barely budged in 40 years, while household income has declined: Soaring Poverty Casts Spotlight on ‘Lost Decade’:

According to the Census figures, the median annual income for a male full-time, year-round worker in 2010 — $47,715 — was virtually unchanged, in 2010 dollars, from its level in 1973, when it was $49,065.Overall, median household income adjusted for inflation declined by 2.3 percent in 2010 from the previous year, to $49,445. That was 7 percent less than the peak of $53,252 in 1999.

Here is a chart of the real income of the lower 90% and the top 10%, which by definition cannot be "middle class":


The top 10% takes home 51% of all household income:



Here are my calculations based on our own expenses and those of our friends in urban America. We can quibble about details endlessly, so these are mid-range estimates. These reflect urban costs; rural towns/cities will naturally have significantly lower cost structures. Please make adjustments as suits your area or experience, but please recall that tens of millions of people live in high-cost left and right-coast cities, and millions more have high heating/cooling/commuting costs.

The wages of those employed by Corporate America or the government do not reflect the total cost of benefits. Self-employed people like myself pay the full costs of benefits, so let's "get real" and count *all* costs paid to maintain a middle-class lifestyle.

1. Healthcare. Let's budget $13,000 annually for healthcare insurance. Yes, if you're 23 years old and single, you will pay a lot less, so this is an average. If you're older (I'm 60), $13,000 a year only buys you and your spouse stripped down coverage: no eyewear, medication or dental coverage--and that's if your existing plan is grandfathered in. (If you want non-phantom ObamaCare coverage, i.e. a Gold plan, the cost zooms up to $2,000/month or $24,000 annually.)

Add in co-pays and out-of-pocket expenses, and the realistic annual total is between $15,000 and $20,000 annually: Your family's health care costs: $19,393 (this was before ACA).

Let's say $15,000 annually is about as low as you can reasonably expect to maintain middle class healthcare.

2. Home equity. Building home equity requires paying meaningful principal. Let's say a household has a 15-year mortgage so the principal payments are actually meaningfully adding to equity, unlike a 30-year mortgage. Let's say $5-$10,000 of $25,000 in annual mortgage payments is interest (deductible) and $15-$20,000 goes to principal reduction.

3. Savings. Anything less than $5,000 in annual savings is not very meaningful if college costs, co-pays for medical emergencies, etc. are being anticipated, and $10,000 is a more realistic number given the need to stockpile cash in the event of job loss or reduced hours/pay. So let's go with a minimum of $5,000 in cash savings annually.

4. Retirement. Let's assume $6,000 per wage earner per year, or $12,000 per household. That won't buy much of a retirement unless you start at age 25, and even then the return at current rates is so abysmal the nestegg won't grow faster than inflation unless you take horrendous risks (and win).

5. Vehicles. The AAA pegs the cost of each compact car at $6,700 annually, so $13K per year assumes two compacts each driven 15,000 miles. The cost declines for two paid-for, well-maintained clunkers. Average cost of auto ownership: $8,946 per year. let's assume a scrimp-and-save household who manages to operate and insure two vehicles for $10,000 annually.

6. Taxes. Self-employed people pay full freight Social Security and Medicare taxes: 15.3% of all net income, starting with dollar one and going up to $113,700 for SSA. Since an adjusted gross income (AGI) of $66,193 or more puts you in the top 25% of earners, let's use a base income (self-employed) of $68,000 to calculate our SSA/Medicare taxes: that's about $10,000 annually.

Property taxes: These are low in many parts of the country, but let's assume a New Jersey/New York/California level of property tax: $10,000 annually.

Income tax: Since the mortgage interest is only $5-$10K a year, itemized deductions are less than the standard deductions of around $18,000. One-half of the self-employment tax is deductible, as well as the health insurance and IRA retirement contributions, so that's another $30,000 in deductions. That leaves about $20,000 in taxable income and about $3,000 in Federal tax, and let's assume $2,000 in state and local taxes for a total of $5,000.

7. Living expenses: Some people spend hundreds of dollars on food each week, others considerably less. Let's assume a two-adult household will need at least $12,000 annually for food, utilities, phone service, Internet, home maintenance, clothing, furnishings, books, films, etc., while those who like to dine out often, take week-ends away for skiing or equivalent will need more like $20,000.

8. Donations, church tithes, community organizations, adult education, hobbies, etc.: Let's say $2,000 annually at a minimum.

Note that this does not include the cost of maintaining boats, RVs, pools, etc., or the cost of an annual vacation.

Here's the annual summary:

Healthcare: $15,000
Mortgage: $25,000
Savings: $5,000
Retirement: $12,000
Vehicles: $10,000
Property taxes: $10,000
Other taxes: $15,000
Living expenses: $12,000
Other: $2,000

Total: $106,000

Oops. That's more than double the median household income. OK, let's assume the mortgage is a bit high, ditto the property taxes. Let's say we need "only" $96,000.

Oops again: our tax calculations were based on $68,000 in self-employed net earnings. To earn $96,000, our taxes are going to skyrocket, as we're still paying the full 15.3% SSA/Medicare taxes while we'll jump into the 25% tax bracket when our taxable income exceeds $35,000. Since we'll be paying at least $15,000 more in SSA and income taxes, then we're up to $111,000 as the minimum household income to maintain a middle class lifestyle for two self-employed adults.

An individual earning $111,000 is in the top 10% of all wage earners. A household earning $111,000 is in the 80%-90% income bracket--the lower half of the top 20%. This suggests that the "middle class" has atrophied into the 10% of households just below the top 10%. Households in the "bottom 80%" are lacking essential attributes of a middle class lifestyle that was once affordable on a much more modest income.

Note that this $111,000 household income has no budget for lavish vacations, boats, weekends spent skiing, etc., nor does it budget for luxury vehicles, SUVs, large pickup trucks, etc. There is no budget for private schooling. Most of the family income goes to the mortgage, taxes and healthcare. Savings are modest, along with living expenses and retirement contributions. This is a barebones budget.

If costs had stagnated along with wages, it would take a lot less to maintain a middle class lifestyle. But costs for most middle class essentials have skyrocketed. I was struck by something I read recently in a history of the Tang Dynasty in China, circa 700-900 A.D. When costs are cheap, goods and trade are abundant and prosperity is widely distributed. Once costs rise, trade declines and living standards stagnate. Poverty and unrest rise.

Here are a few charts that illustrate the pressures on the middle class:
Wages have risen modestly while debt has increased enormously.




Social Security taxes have skyrocketed:



So have property taxes: they rose right through the last recession even as property values tanked:



Labor's share of national income has plummeted:



Interest income has fallen through the floor (thank you, Federal Reserve):



The bedrock of Main Street, small business, has cratered:



Net worth of the middle income households has been reduced to a sliver:



As costs have risen faster than incomes for decades, households have been priced out of the middle class. By standards of previous generations, the middle class has been stripmined of income, assets and purchasing power.

Of related interest:

Financialization and Crony Capitalism Have Gutted the Middle Class (July 13, 2012)

Healthcare "Reform": the State and Plutocracy Stripmine the Middle Class (Again)(November 9, 2009)


If You Seek Practical Gifts, Consider These Everyday Kitchen Tools 

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The Nearly Free University and The Emerging Economy:
The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economyWith the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?


We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

Read the Foreword, first section and the Table of Contents.

print ($20)       Kindle ($9.95) 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.
Kindle: $9.95       print: $24 

Thank you, Troy T. ($50), for your splendidly generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

Looming U.S. Retail Implosion: DeGrowth 2014

Overbuilding and overconsumption as models of "growth" have reached exhaustion.

I recently addressed the bogus model of "growth" based on adding retail space and the DeGrowth movement, which is based on a sustainable model of doing more with less.

The American Model of "Growth": Overbuilding and Poaching November 19, 2013

Have a Merry DeGrowth Christmas--Boycott Black Friday November 20, 2013

Gordon Long invited me to discuss these topics with him, and the result is this 25-minute video of informative slides and our unscripted discussion of the exhaustion of the consumerist/expanding retail space model of growth.



LOOMING US RETAIL IMPLOSION: An Urgent Re-Think Required

Various propaganda attempts are being made to air-brush lackluster holiday spending into a happy story of strong "growth," but the over-all picture is of stagnation, not "growth."

The propaganda will soon shift to predicting "strong after-Christmas sales" and gift card redemptions in January; if after-Christmas sales are the foundation of "growth" and earnings, the U.S. economy is in real trouble.

Santa, Please Let This Be the Last Christmas in America That "Saves" the U.S. Economy(December 19, 2012)
Santa, please, please, please strangle the idiotic fantasy that Americans buying a bunch of junk (or gift cards for after-Christmas purchases of junk) will "save" the U.S. economy. 

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The Nearly Free University and The Emerging Economy:
The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economyWith the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?


We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

Read the Foreword, first section and the Table of Contents.

print ($20)       Kindle ($9.95) 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.
Kindle: $9.95       print: $24 

Thank you, Dan R. ($10), for your most-welcome generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

Dow 40,000, SPX 4,000: Is this Fed-Fueled Stock Rally Sustainable?

 Since stocks rise when the Fed is adding assets and tank when the Fed pauses...

Now that financial pundits are claiming the current stock market rally is good to go until 2016, it's appropriate to see where the market will be in 2016 if current trends hold.

Let's start with the well-known correlation between the Federal Reserve's balance sheet and the stock market: stocks rise when the Fed is adding assets and tank when the Fed pauses. (Chart courtesy of STA Wealth Management)



Courtesy of Market Daily Briefing, let's look a little closer at the Fed's ballooning holdings of home mortgages (MBS) and Treasury bonds, and extend those trends into the future:



By mid-2016, the Fed will have nearly doubled its Treasury bonds from $2.16 trillion to over $3.5 trillion, and its mortgage holdings will double from $1.44 trillion to $3 trillion. This would represent about a third of total mortgages outstanding.
Here is the Fed's aggregated balance sheet, with the start of each quantitative easing (QE) program indicated:



Grab a ruler and pencil and extend this trendline--you reach about the same target of Fed assets $6.5 - $7 trillion by 2016:



If the S&P 500 (SPX) continues higher in lockstep with the Fed's expanding balance sheet:



Is that SPX 4,000 in 2016, or is it SPX 5,000? The upward trendline is so steep it's hard to project.

Is this uptrend sustainable? You're kidding, right? Don't fight the Fed, Baby--it's Dow 40,000 or 50,000/SPX 4,000 or 5,000 by 2016, guaranteed.

Please note this is sarcasm, not a forecast.


If You Seek Practical Gifts, Consider These Everyday Kitchen Tools

---

The Nearly Free University and The Emerging Economy:
The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economyWith the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?


We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

Read the Foreword, first section and the Table of Contents.

print ($20)       Kindle ($9.95) 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.
Kindle: $9.95       print: $24 

Thank you, Howard R. ($10), for your much-appreciated generous contribution to this site-- I am greatly honored by your support and readership.

Read more...

America's Excuse Book: Take Your Choice, Victim or Heartless Hypocrite

Yes, there are injustices and imbalances of power and wealth that we collectively need to remedy. But the way to do that is to embrace fact, responsibility, choice, consequence and thrift rather than deny those realities in favor of a false dichotomy of victim and non-victim.

A thoroughly enraged reader took exception to my Thanksgiving entry, claiming that the meal portrayed was inaccessible to most Americans. Here's the meal that caused the apoplectic reader to label me heartless because "most Americans" couldn't possibly have this home-made meal:



The courses (all home-made) included the traditional favories:
--turkey
--stuffing
--mashed potatoes
--gravy
--sweet potatoes with sliced apples
--three kinds of home-made cranberry sauce (one with apples, one with orange)

And an international potluck: 

-- mussels with spinach leaves and dipping sauce
--somosas with mint/cilantro sauce
--Hawaii style potato salad
--nimono (a holiday Japanese stew, also called nishime)
--Crackling pork belly with lemon grass and garlic

I decided to fact-test the enraged reader's claim of general inaccessibility of a home-cooked potluck dinner. First, how many meals did this dinner provide, including the soup that was made with the turkey carcass? This potluck dinner served a crowd on Thanksgiving, 6 more friends the following day, neighbors whom we delivered food to, and multiple meals of leftovers for the three of us. It has already made 40 adult servings of a bountiful multi-course meal, and counting the many meals remaining in leftovers and the soup, the total adult servings will be more like 50.

Next, the cost of the meal. Since everything was home-made in basic kitchens (tiny, in our case), the cost was ingredients. The labor was provided by mutliple hands--the essence of community, friendship and family.
--turkey: on sale everywhere.
--potatoes: huge bag from the dollar store.
--macaroni in potato salad: cheap, either on sale or at dollar stores.
--sweet potatoes: cheap.
--a few apples: cheap, found in the remainder-bruised bin of the supermarket, 75 cents.
--2 lbs. fresh cranberries: less than $4.
--ingredients for handmade somosas: potatoes (cheap), peas (cheap), flour (cheap).
--day-old bread for stuffing: cheap.
--handful of mushrooms for stuffing: $1.17
--eggs for pies: $3.99 for two dozen
--fresh pumpkin: cheap.
--onions for stuffing: 72 cents
--ingredients for nimono: a few pieces of chicken (cheap), Asian potatoes (cheap), a few pieces of seaweed (cheap).
--pork belly: cheap
--flour, sugar for pies/cake: cheap
--carrots, potatoes, onions and a few stalks of celery for turkey soup: cheap
--natural gas to cook/bake the meal: cheap, a couple bucks if that.

Our cost of ingredients for the traditional meal was less than $80, or roughly $2 per serving. The cost of all the potluck dishes brought by others was less than $30. The sparkling wine, ginger ale and red wines (all bought on sale) was about $20.

Total cost of the meal: $130, or $3.25 per serving, less than a "value meal" at a fast food outlet. If we add in meals made from leftovers (the turkey soup, etc.), the cost per serving drops to less than $3.

Are the "poor" really too poor to buy fresh ingredients that add up to $3 per serving? Let's start with the fact that according to the U.S. Census Bureau, 49% of Americans Get Gov’t Benefits; 82 million in Households on Medicaid. That means roughly 156 million Americans out of 317 million total population are receiving cash benefits (i.e. direct transfers) from the Federal government. Approximately 57 million receive Social Security retirement or disability benefits.

Over 47.6 million people get SNAP food stamps, a non-cash benefit that acts just like cash at the grocery store. Clearly, the vast majority of those with low incomes receive government cash or equivalent benefits.

How many "poor" people routinely buy fast food meals that cost $3 or more? How many buy frozen waffles, chips, snacks, frozen pizzas, etc. with food stamps, purchases that add up to way more money than the ingredients of the Thanksgiving dinner that so enraged the reader? How many households would it take to pool some food stamps to spend $130 to make 40-50 servings of a great, healthy home-cooked meal?

The excusers, enablers and guilt-trippers seek to divide the populace into two (and only two) classes: victims and non-victims, who are by definition heartless hypocrites (or worse).

Luckily for the excusers, enablers and guilt-trippers, America's Excuse Book runs into the thousands of pages. There are excuses for literally everyone and every situation; almost everyone can stake a claim to victimhood.



People have written me that the "poor" don't have stoves/ovens, and this is why they are forced to eat junk food. Really? What percentage of people in America live in dwellings without stoves/ovens? People in residential single-occupancy (RSOs) flophouses, perhaps, but precisely how many people of the 317 million Americans have zero access to a single burner?

I suspect the number is quite small.

As I have noted before, 2 billion people in China and India prepare meals with one burner and a wok. If I didn't have an oven, I can prepare a nice meal with a single-burner camp stove and a small wok. So can several billion other people.

This kind of refutation of victimhood enrages the excusers, enablers and guilt-trippers because it demolishes the primary claim of victimhood: that people have no other choices--in other words, denying that the vast majority of situations offer a range of choices, and that choices have consequences.
The basic assumption of excusers, enablers and guilt-trippers is that victimhood arises not from choices but from Fate or the heartlessness of those with "more."

Let's distinguish between Fate and consequences of choices. A person who discovers they have a brain tumor had no choice in the matter--the cancer was a matter of fate. A person who is obese due to poor dietary and fitness choices and presents their sleep apnea, diabetes, high blood pressure, etc. etc. as fate is avoiding the causal connection between their lifestyle and life choices and their health problems.

Can we deny that most people have choices, even in poverty? Can we plausibly claim that poverty is all Fate and choice is inconsequential? If choice is inconsequential, then isn't our entire system of government and all major religions completely false, because they are all based on human will and choice being consequential?

If a person with low income chooses to stop buying fast food, junk food, sodas, snacks, chips and convenience food and only buys and prepare real food low on the food chain, they will instantly become wealthier because real food that is prepared and not thrown out is significantly cheaper than fast food, junk food, snacks, etc.

If the low-income person also stops smoking, they will also instantly become wealthier.

Since all that's needed to prepare the great cuisines of Asia is a single burner and single wok or equivalent, we don't need much to prepare healthy, tasty real-food meals. (I've posted photos here many times of my one-wok meals.)

If low-income (i.e. poverty) is fated, or the result of institutional forces that cannot be overcome, then how do we explain the multitudes of immigrants from every continent who arrive in America essentially penniless and who somehow manage to improve their lives despite low income, unfamiliarity with English, a dearth of institutional or family connections, etc. etc. etc.?

How is a low-income immigrant family able to pay off the mortgage on the family home in a few years while others blame the system for their heavy debt loads?

Since wealth creation is increasingly based on human and social capital and learning on one's own, the low-income person who stops watching TV and spending hours on social media will instantly be "wealthy" in terms of time that can be invested in building human and social capital--subjects I have written about extensively here, precisely because they require essentially no money other than an Internet connection. Building human and social capital is mostly a matter of effort and time. Anyone can improve their human and social capital and thus eventually their income and financial security.

Surveys routinely find that typical Americans spend 4-6 hours a day watching TV or other entertainment. The individual who chooses to take those 28-42 hours a week and invest them in mastering a new skill, seeking mentors, becoming a mentor--all the building blocks of human and social capital--will soon find that there are multiple returns on their investment of time and effort.

This kind of refutation of victimhood enrages the excusers, enablers and guilt-trippers for another reason: we know from psychology that two primary psychological defenses against accepting responsibility are transference and projection: if we can project our own ills onto others, we feel justified in our self-pitying victimhood.

If we can transfer the source of our problems (i.e. our own issues and failures) onto someone else, then we feel blameless for our own difficulties, i.e. being a victim.

This is why troubled families will often subconsciously select one child as the "cause" of the family's difficulties. If everyone blames this one child, they are magically free of responsibility.

This is the root psychology of the permanently-enraged excusers, enablers and guilt-trippers, i.e. those who have memorized entire chapters of the Book of Excuses: people are victims not from their own choices or a combination of choice and the fate that everyone is exposed to just by being alive, but because the non-victims are heartless hypocrites clinging greedily to everything that victims don't have access to, for example, a potluck Thanksgiving meal that costs $3.25 a serving.

Did the person who claims to be denied access to a $3/serving meal really do everything in their power to forego counterproductive or wasteful spending so they could spend their food stamps or cash on real food? Did they devote their spare time to building human and social capital, for example, learning how to cook, sharing meals with others, teaching others how to cook once they had learned, etc.?

Everyone who feels enraged by the previous paragraph has to ask themselves: what is the real root of your outrage and your need to make excuses for everyone with difficulties resulting from choices made in response to their circumstances?

The question is always: is there absolutely nothing that a person can do to improve their circumstances? Are there things that could be learned for free that would improve their life? Is there absolutely nothing they can do on their own behalf in terms of building human and scial capital, both of which require only effort and time? Are there absolutely no alternatives or choices, even in the smallest details of everyday life?

Stripped to its essence, the outrage of excusers, enablers and guilt-trippers is phony and self-righteous, a classic psychological defense against having to accept responsibility: blame the heartless who "should" be giving their own meal away (if you don't, you're a heartless hypocrite, you heartless hypocrite!), blame Fate or something/somebody, do anything but accept that there are choices and that choices have consequences, both short and long-term.

I have a number of disabilities that are "good enough" to claim membership in the victimhood class (one famously "owned" by a Steinbeck character) but they are none of anyone else's business. I think it's self-evident that victimhood and the sense of enraged, self-pitying entitlement it fosters is a dead-end, ethically, spiritually, psychologically, politically and financially.

According to Social Security, I have earned $543,718 in 43 years of ceaseless toil (2013 is not yet included, of course, so I have been working for 44 years), generally working 50-60 hours a week in multiple endeavors. That is $12,644 per year. That was a decent wage in 1977, now, not so much. Inflation makes it difficult to adjust previous years' income into "today's dollars," but however you figure it, it isn't the lifetime earnings of a "wealthy" person. And no, I have never received an inheritance or made a fortune in capital gains or made a ton of unreported income in the black market, nor did my wife have any advantages or unearned wealth.

(In fact, she dropped out of college to spend three years working 60+ workweeks in low-paying jobs to save the money to buy her single-parent mother a modest home. In other words, clearly she too is a heartless hypocrite for daring to spend hours preparing a meal from scratch for family, friends and neighbors.)

Thank goodness some people are so saintly and godlike that they can discern heartless hypocrites without knowing a darn thing about the people they so assuredly toss into the heartless hypocrite class. Now I know how the Inquisition worked: the saintly sinless fingered the heartless without needing any facts.

In 14 of the past 20 years, my net taxable wages were less than $10,000 a year.

In other words, by official measures, I have been "poor" for much of my working life.

For the vast majority of those who choose to write for money (as opposed to pursuing an unpaid hobby), one consequence of that choice is a low income. Choices have consequences; there is nothing mysterious about this causal link. If you want another consequence, fire up your will and make another choice.

Changing one's circumstances for the better generally requires not months of unceasing discipline, work and effort, but years or even decades of unceasing, dedicated toil, and daily sacrifices of present-day convenience for future benefits.

Improving one's circumstances (health, mindset, spiritual attainment, financial security, networks of colleagues, circles of friends, etc. etc. etc.) is the same process as getting good enough at something that people will pay you to perform that service or make that good for them.

Sometimes it requires moving to a new locale, changing careers, studying hard, and distinguishing between conveniences that are assumed to be essentials but that are actually luxuries that can be sacrificed for thrift in service of long-term goals. In all cases, it requires accepting risks: risks of failure, risk that the study might not pay off, risk that some accident could derail your plans, and so on.

Victimhood is not just a rejection of choice and consequence, but of risk--yet risk is ever-present and cannot be disappeared. Risk can only be managed and hedged, and only imperfectly at best.

Another big chunk of my life was spent working for low-paying non-profit groups advancing causes I believe in. The low pay was a consequence that went with the choice of advancing causes one is devoted to furthering.

When I was a builder in my youth, I gave jobs to vets and guys with criminal records-- marijuana dealing convictions, petty theft, that kind of thing. This choice opened the door to various risks and potential non-financial rewards. The reality is that "there is no security on this earth; there is only opportunity." Some opportunities you take, others you give.

Alas, earning a modest income doesn't preclude one from being tossed into the "heartless hypocrite" class if your ceaseless toil includes being extremely thrifty and making your own Thanksgiving meals with family, friends and neighbors. That you have have something others do not makes you a heartless hypocrite, regardless of your own frailties, disabilities, income or indeed, any other fact.

Here's your Excuse Book, America. There's something for almost everyone. Luckily, there is still an infinite abundance of excuses, guilt-tripping, victimhood, rage against those with "more" (never mind what they sacrificed to build it) and denial of choice, consequence, risk and fact.

Sadly, there are consequences to the pursuit of victimhood and the denial of will, choice, consequence, risk and fact, and they will be consequential indeed.

Yes, there are injustices and imbalances of power and wealth that we collectively need to remedy. But the way to do that is to embrace fact, responsibility, choice, consequence and thrift rather than deny those realities in favor of a false dichotomy of victim and heartless non-victim.

If those are the only "choices" left, America, count me out. 

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The Nearly Free University and The Emerging Economy:
The Revolution in Higher Education

Reconnecting higher education, livelihoods and the economyWith the soaring cost of higher education, has the value a college degree been turned upside down? College tuition and fees are up 1000% since 1980. Half of all recent college graduates are jobless or underemployed, revealing a deep disconnect between higher education and the job market.

It is no surprise everyone is asking: Where is the return on investment? Is the assumption that higher education returns greater prosperity no longer true? And if this is the case, how does this impact you, your children and grandchildren?

We must thoroughly understand the twin revolutions now fundamentally changing our world: The true cost of higher education and an economy that seems to re-shape itself minute to minute.

The Nearly Free University and the Emerging Economy clearly describes the underlying dynamics at work - and, more importantly, lays out a new low-cost model for higher education: how digital technology is enabling a revolution in higher education that dramatically lowers costs while expanding the opportunities for students of all ages.

The Nearly Free University and the Emerging Economy provides clarity and optimism in a period of the greatest change our educational systems and society have seen, and offers everyone the tools needed to prosper in the Emerging Economy.

Read the Foreword, first section and the Table of Contents.

print ($20)       Kindle ($9.95) 

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Once we accept responsibility, we become powerful.
Kindle: $9.95       print: $24 

Thank you, Gregory D. ($5), for your most generous contribution to this site-- I am greatly honored by your support and readership.

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