The Federal Budget

           The U. S. Senate has not passed a budget in over three years.  How many of you think you could have kept your job if you were that incompetent?  Why do we put up with elected legislatures that don’t do their job?

        The problem is even more severe considering the debt crisis this country is facing.  We have to cut the size of government and government spending.  We have to balance the budget.  Reducing the deficit is not enough.  Just reducing the deficit is a joke.  All reducing the deficit means is that we are borrowing less every year and going bankrupt slower.

        I don’t care if you are a Republican, Democrat, Libertarian, Socialist, Constitutionalist, Progressive, Conservative, Liberal, Anarchists, Communist, Wig or Tory, you have to recognize this problem.  Even if you are at the extreme left, you have to realize the country cannot continue to increase the dept.  Many of the programs we each feel are important will not just be cut; they will cease to exist if we don’t address this debt. 

        Some politicians keep trying to avoid the problem.  They want to push it off on future generations.  The current excuse is to blame it on the previous administrations, or the other party.  The time for passing the buck is over.

        U.S. Representative Paul Ryan has presented a budget proposed by the U.S. House Budget Committee.  This proposed budget cuts spending, but not enough in my opinion.  It starts to reform Medicare and Medicare, but does not go far enough in my opinion. Presidents Clinton and Bush both tried to address this problem with no results. 

        The budget also addresses tax reform with reducing individual tax brackets from six to two.  It proposes cutting loopholes, but does not go far enough in my opinion.  We need a flat tax or “Fair Tax” with NO loopholes. 

        I am not happy with this budget because it does not do enough.  I have to agree that it could be an acceptable compromise for a first step in the right direction. 

        It almost makes me sick is when I hear politicians saying this budget is too extreme, and cuts too much.  I heard someone from the Progressive Caucus say they were going to propose a budget that would “Invest” our country and balance the budget in twenty years.  You have got to be kidding. 

        In business an investment is generally expected to give some return-on-investment.  The only return-on-investment for many “investments” by our government is to campaign donors, and they get some really good returns in many cases. 

Enough.  The Federal Government should not be in the business of picking who succeeds and who fails in business. 

       

When I hear something like, “balance the budget in twenty years.” it makes me sick.  Twenty years is too little, too late, and it will be changed in twenty years anyway.  Do these legislatures really think the voting public is that naive? 

Obviously, some legislatures think we are that naïve, and they can continue with the old party politics and look after special interest groups to fill their re-election coffers. 

Everyone needs to keep talking about this debt problem.  I don’t want to push this problem off on future generations.  That may be too late.

Obamacare costs 

        I have been on the healthcare and medical insurance topic for a while and planned to leave it for a while, but now the Congressional Budget Office has revised the estimate for what it will cost the taxpayers.  The new estimate is $1.76 trillion for the first ten years.  This is about twice the original estimate. 

I think it is still conservative.  It could be a huge problem with our budget deficits and growing debt.  It scares me in many ways. 

There are other consequences.  Employers may find the most economical way to comply is to drop the medical insurance benefit for their employees and pay the fine.  So much for being able to “keep your insurance if you are happy with it.”  How many businesses, like the unions will be made exempt?  This shows the whole program is flawed.

It may reach beyond keeping your insurance.  It may mean you can’t choice your healthcare providers.  I think we will always have health care in this country, but you may have to wait longer to see a health care provider, or in some cases, pay for that care yourself.  This maybe good as we should be moving away from medical insurance for primary, routine, and preventative healthcare anyway in my opinion.

This has to put more strain on the Medicaid system.  More and more healthcare providers will be refusing Medicaid patients.   I suppose the government could make this business decision by healthcare providers against the law.  So what?  Who cares about freedom of choice anyway?

I think the biggest problem is if Obamacare is illegal under the constitution.  I don’t see how it can be legal under the 10^th Amendment.  The 10^th amendment is pretty clear.  It states:

“The powers not delegated to the United States by

the Constitution, nor prohibited by it to the States,

are reserved to the States respectively, or to the

People.”

        This is pretty plain, and since the Constitution does not give the “United States” the power to require the “People” to buy medical insurance, the “United States” is clearly prohibited from doing so.  I sincerely hope the Supreme Court will uphold the Constitution and find Obamacare illegal.  Personally I don’t see how any other decision can be reached. 

        The 10^th Amendment clearly does not prohibit States from requiring mandatory medical insurance.  I don’t like the “States” making medical insurance mandatory, but it makes a lot more sense than “experimenting” on a national level. 

        If a “State” finds a workable solution, other states can follow.  If a “State” tries something that does not work, it can be changed easily.

        This makes so much more sense than Obamacare.  I am constantly amazed at the foresight of our founding fathers.  We should stop trying to reinvent the wheel.

The Tea Party 

        I heard our Senate Majority Leader, Harry Reid call the Tea Party “right-wing extremists” a few days ago.  I found this statement interesting.  There was a time in this country when most views shared by the Tea Party would have been considered “politically moderate.”  How far to the left have some of our politicians moved to call people associating with the Tea Party “right-wing extremists.”

        I have heard the Tea Party called fragmented and unorganized.  They are not an official party and have no formal platform or candidates.  This is all true and I am glad for that.  I hope they never become a political party or align with an existing political party.  If they did, the Tea Party could get as mired down in “party politics” as the Republicans and Democrats.   

A friend once told me that, as a country, we have not put “our country” before personal interests since WWII.  I don’t totally agree with that statement, but we definitely have a lot of special interest groups that put their interests ahead of the best interests of the country.  Our growing government, out-of-control government spending, and increasing government debt is clear proof of this. 

So who is the Tea Party?  I think the Tea Party is a lot of “politically independent” people that were the “silent majority” of this country, and are now concerned for the future of this country.  There are a lot of different issues.  Not everyone involved with the Tea Party movements agree with the issues, and that’s the way it should be. 

There are social issues and fiscal issues.  Personally I think we need to address the serious fiscal issues and put the social issues on hold.  Most social issues should not be the business of our Federal Government anyway in my opinion. 

I think the most predominant concerns for most people that might associate with the Tea Party movement is the growth of government, out-of-control government spending, and government debt that could threaten the future of this country.  These Tea Party supporters will support candidates for office from any party that have these same concerns. 

They will elect candidates that express similar views.  If the elected officials don’t follow through, they will be voted out the next time.  This is the way it should be.  People associated with the Tea Party are tired of the political deal making and “compromises” that perpetuate the problem.  They want results.

       

        I don’t care if you are Republican or Democrat, conservative or liberal, left or right, if you get a chance to attend a tea party event, do it.   I have attended several Tea Party events.  I have even been a scheduled speaker at a couple.  You may not agree with some or all of what you hear.  I don’t agree with everything I hear at a Tea Party event, but I am impressed and admire the way the events are conducted. 

People conduct themselves in an orderly and civilized manner.  If there are signs or individuals that are not appropriate, they are asked to leave.  Tea Party attendees understand they all are responsible for the image they project and are responsible for self-policing their events.  No BS excuses like, “It’s OK, they’re just so passionate about their beliefs.”

There is no damage, violence or death threats at Tea Party events.  When an event is over, there is hardly a scrap of paper left behind.  Other groups staging rallies and protests could learn a lot from the Tea Party.  They might actually do some good for their cause.  They might actually change someone’s mind instead of just alienating people.

Health Care and Medical Insurance

        We have a problem with raising health care costs.  I find it is interesting that when we listen to our politicians address this problem, they interchange the terms “Health Care” and “Medical Insurance”. 

        These terms are not interchangeable.  One is the problem and the other is one of the causes of the problem.  Our “First Dollar Coverage” medical insurance is one of the causes for rising health care costs.  It is crazy to think we can fix the problem caused by insurance with insurance. 

        The only change to medical insurance that can help control health care costs is eliminating “First Dollar Coverage” medical insurance, and replacing it with true “Major Medical” insurance and medical savings accounts. 

        I also seldom hear a politician say that health care should be between the patient and the health care provider with no third party influence.  Both the government and the medical insurance company are a third party.  They should not be involved in this relationship.  The only relationship for the medical insurance company should be with the insured.  There should be no contact with the health care provider.

        I would encourage both the public and the health care providers to make an attempt to eliminate the medical insurance company from this relationship.  Health care providers should offer discounts to patients that do not want the health care provider to bill their insurance.  Why not?  It saves the health care provider time and money if the patient just pays the bill.

        Did you know that today many health care providers offer discounts of up to 70% to insurance companies?  This means that if you just want to pay your bill, they are ripping you off.  The discounting should be to the patient and not the insurance company.  Let’s start asking. This is one way we can start to address the rising health care costs. 

        We the public must do our part.  Ask what a medical service costs.  If we shop for medical services, we can help to bring down costs.  A higher price does not mean better quality in many cases.

        The current attitude with “First Dollar Coverage” must change.  The “Who cares what it costs?  It’s covered by insurance anyway.” attitude must change.

I get frustrated when I here someone say they can’t afford to go to the doctor or dentist because they don’t have insurance.  If they can’t afford a normal routine doctor or dentist visit, they certainly cannot afford “First Dollar Coverage” insurance to cover these visits. 

        One of the problems with the current “First Dollar Coverage” insurance is that the coverage is sometimes gone when you really need it.  Think about it.  You, or your employer, may pay for your medical insurance for decades.  There is no cash value built up over the years like there would be with a medical savings plan. 

        When you get sick, you have to keep paying the premiums, deductibles, and co-pays.   The problem is if you are too sick to work, you may not be able to pay those insurance premiums, deductibles, and co-pays.  You now have no insurance.  What good was that insurance?  With a medical savings plan, you would have a cash reserve to pay the “Major Medical” insurance premiums and deductibles. 

Where do your premiums for your “First Dollar Coverage” medical insurance go?  You would like to think you get your money back in claims.  This only happens for something over half of your premiums.  If fact, a large portion of the premiums never go to pay claims. 

Insurance companies are in business to make money.  They want a profit.  They also have expenses.  They have employees and huge buildings.  They pay for advertising, marketing, sales commissions, and bonuses.  Don’t forget the campaign contributions and lobbyists.   They have to look out for the medical insurance company’s best interest. 

I love some of the television ads saying how buying their insurance can save you money.  You almost get the idea the insurance company is a charity.  What a joke.

We need change, but this change can’t happen overnight as people do not have the medical savings accounts at this time.  It will have to be gradual.  This slow change is good anyway, because as we eliminate the medical insurance involvement in health care except for the true catastrophic health care cost, thousands of people working in medical claims will be no longer be needed and will be out of work. 

We will still need to provide medical services to the poor.  This should be done with clinics and charity.  The Veterans Administration Medical system is proof of how well it can work.

It cannot be done with either government or private

insurance.  Running routine and preventive heath care through insurance increases the cost 200% to 500%.  It is time we address this problem. 

1.      Eliminate expensive “First Dollar coverage medical insurance

2.      Move to true “Major Medical” insurance and medical savings plans.

3.      Eliminate any third parties from the patient-health care provider including insurance companies and government.

The Greatest Marketing Job Ever in the US.

        When we think of great marketing campaigns, we normally think of products like Marlboro, Coca Cola or Budweiser.  They are real amateurs compared to the medical insurance industry. 

I have a Bachelor of Business Administration with a major in marketing.  I have a Masters of Business Administration with a major in marketing.  I have worked in small business and marketing my entire career.  I am in total awe at the marketing job the medical insurance industry did on the people of the United States. 

        I took several insurance courses from Emmett Vaughan at The University of Iowa.  Emmett was the best teacher I ever experienced.  He not only knew his subject, he could teach.  Emmett became one of the most recognized names in insurance.  I talk more about him in my book, How To Find The Right Business For You. 

        Emmett had some very strong opinions about medical insurance.  Remember, this was the 1960s.  Emmett recommended a true major medical policy.  A true major medical as he defined it at that time had a high deductible.   It also was strictly between the insured and the insurance company.  The object of a true major medical policy is to cover the insured in the event of catastrophic medical bills.  The insurance company would have no involvement with any routine, preventative, or elective medical expenses.

The insurance company had no contact with the medical provider or any other third party.  If the insured incurred enough medical expenses to surpass the high deductible, these bills and/or paid receipts would be sent to the insurance company by the insured.  This would be a relatively rare occurrence.

        Emmett warned about the high cost of any “First Dollar Coverage.”  I know most medical insurance policies have some deductible and co-pay so they don’t pay the first dollar, but if the insurance company is sent a bill for the first dollar by a health care provider, it is considered a “First Dollar Coverage” policy.  The insurance company incurred expense to process the claim in spite of the fact they did not pay anything on the claim. 

        Emmett strongly discouraged buying a “First Dollar Coverage” medical insurance policy.  He recommended a true major medical policy.  He then recommended putting the savings from the difference in premiums in a savings account. 

        He went on to say that if you did not like to handle the paperwork of saving your medical receipts and sending them to your medical insurance company yourself, you could hire a Certified Public Attorney to do it for you.  You could pay him or her from the medical savings account and you would still be better off than buying a “First Dollar Coverage” policy.  

        Emmett went on to say that if the medical insurance industry were able to “sell” the public on the idea of “First Dollar Coverage”, our health care costs would increase at an alarming rate.  So what happened in the last 45 years?  The medical insurance industry “sold” the public on the idea of “First Dollar Coverage”, and our health care costs are now almost totally handled through medical insurance.  Our health care costs are out of control. 

        The insurance companies “sold” the public on the convenience of having the health care provider bill the insurance company directly.  The insurance companies sold the health care providers that they needed to handle the insurance calms for their patients.  This added cost for both the health care provider and the insurance company. 

        The insurance companies “sold” unions and employers on the idea of providing benefits including medical insurance.  In many cases these “benefits” were given in lieu of wages.   Have you ever heard someone say their job had “great benefits?”

        If you ask someone about their medical insurance, they will often say, “I have the best coverage.  Everything is covered.”  Translated, this means they have no idea of what they have for coverage. 

        We have dental insurance now.  We even have pet medical insurance. This has gotten to the point of ridiculous.  Wake up.  Insurance companies do this for profit.  They do not have an objective of saving you money.

So how much has this “First Dollar Coverage” and third party involvement raised the total cost of our health care?  Estimates are in the 200% to 500% range.  My opinion is that the real cost is probably closer to the 500%.

 Do you think 500% sounds crazy?  That means you are paying $500 in insurance premiums for a medical service that should cost you $100.  Yes, that could be true. 

I like convenience and service too, but at what cost.  More on how insurance increases healthcare costs and possible solutions later.

       

Should The Rich Pay their Fair Share?

          I got a phone call last week asking me to call my U.S. Congressman and ask him to make the rich pay their fair share.  I feel my congressman that is doing an outstanding job, but I understand partisan politics. 

        Let’s get back to the rich paying their fair share.  I would like to modify it to “everyone” paying their fair share. 

        The American Magazine gave the following quote:

“The latest data show that a big portion of the federal income tax burden is shouldered by a small group of the very richest Americans.  The wealthiest 1 percent of the population earn 19 percent of the income and pay 37 percent of the income tax.  The top 10 percent pay 68 percent of the tab.  Meanwhile, the bottom 50 percent – those below the median income level – now earn 13 percent of the income, but pay just 3 percent of the taxes.  These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare.”

Some people may argue with some of the specific figures, but they are basically correct.   I understand the “Make the rich pay their fair share.” argument has a great emotional appeal, but obviously is not supported by the facts in general.

I do agree some of the rich don’t pay their share, so what is the problem?  Warren Buffet paying a smaller percentage than his secretary is an often-quoted example.  General Electric paying zero taxes is an even more extreme example. 

If these individuals and corporations are not paying their share, it means that the top ten percent that are paying taxes may be paying more than their fair share.  What’s fair?

What is the problem?  How do we get everyone and every business to pay their fair share?  The problem seems pretty clear to me.  The problem is the 70,000-page IRS tax code. 

The tax code is a joke.  There are too many ways for the rich to avoid paying their “fair share.”  I am surprised the rich pay any taxes at all.  General Electric paid no taxes.  If the tax rate were 100 percent, it wouldn’t make any difference.  GE would still pay zero taxes. 

If there are not enough ways to avoid paying taxes and you are a General Electric, make some more campaign contributions and the tax problem should be fixed.  You may even get a return on the campaign contributions in the form of stimulus money or subsidies. 

We subsidize all kinds of industries including the oil industry.  Stop.  Actually, I prefer the term “Porkulus” instead of stimulus or subsidies.  It is probably more descriptive in many cases.

Listen to most politicians talk about solutions for the economy, unemployment, energy cost and many other problems, and you will hear tax credits and subsidies mentioned as part of the solution.    You have got to be kidding me.  Our tax code is already 70,000 pages and full of loopholes. 

We have to get real about fixing this problem.  We must elect representatives that are willing to fix the problem.  This means people that are willing to give up power and money for the good of the country.

The IRS tax code needs to be totally eliminated and start over.  A “flat tax” or the “Fair Tax” both have merits.  Even the “9-9-9” plan proposed by Herman Cane had merits.  The current tax code is no longer a workable option.  We must make some major changes.

Another benefit of total tax reform will be the drastic reduction of the size of IRS.  The IRS now has over 100,000 employees, which could be trimmed significantly.  The IRS is part of The Department of the Treasury, which has a $14 billion budget.   We must reduce the size and cost of government.

Banks Make Business Loans. 

          I want to talk a little about business today.  The book I am writing, How To Find The Right Business For You has a chapter called “Myths About Starting a Business.”  One of the myths is “Banks Make Business Loans.”  Here is that section.

        Banks do not make business loans.  It makes me so sad when I hear people wanting to start their own business say that they have to get their business plan completed so they can go to the bank and get a business loan.  They are under the misconception that a bank will make a business loan if the business plan is good enough.  Banks do not make loans based on a business plan.  I will repeat.  Banks do not make business loans based on business plans.  No exceptions.

        I will probably catch flack for this statement, but most bankers don’t even read a business plan and could not evaluate a business plan if they had to make a decision based on that business plan.  The only reason a bank asked for a business plan is to show you have given it some thought. 

       

        The best chance of getting money from a bank based on a business plan is to get one of the bankers to invest in the concept personally.  If you are going to the bank with a business plan to get money, your plan better be to get the banker you are meeting with to be an investor personally. 

        Keith Elwick was a friend of mine from when I was a Ford-Mercury Dealer.  Keith always said he would a lot rather be lucky than good.  There is a lot of truth in that.  Keith described himself as a farm kid from a farm that was all sand on the wrong side of the river. 

        Keith invented the side-fail manure spreader.  None of the implement companies even expressed interest in it except John Deere.  John Deere took the prototype to Moline, Illinois for evaluation and decided they were not interested. 

        Keith decided to manufacture the manure spreader himself.  When he started Hawk-Bilt, one of his initial investors was a local banker.  The Banker invested personally even though he would not make a bank loan to Keith.  Getting money from the individual banker personally is a very remote possibility, but has a much better chance than getting a bank loan based on a business plan. 

        Keith used individual local investors to finance Hawk-Bilt.  Besides Keith’s banker, Keith’s lawyer and several other local individuals invested in Hawk-Bilt.  We will talk more about this type of financing later.

        Keith later invented the big bale baler.  He said if he had any idea what he was doing when he started, he would have known better. 

        Later in the book I expand on how banks make loans on asset equity and credit scores.