OBAMACARE LARGELY UPHELD

The Supreme Court largely upheld the Affordable Care Act, the most important legislation since the Civil Rights Act of 1964. The individual mandate is now ruled to be a tax and is constitutional.

Frankly, I would have preferred a single payer provision over the individual mandate, but compromises had to be made to pass the legislation.

It was a surprise to me that Chief Justice John Roberts cast the deciding vote for Obamacare rather than Associate Justice Anthony Kennedy; however, some pundits before the decision had suggested that Roberts might vote for the Act. I'm rather surprised that Kennedy didn't go along.

The part of Obamacare ruled unconstitutional by a 7 to 2 vote was a provision on the expansion of Medicaid where, if state voted to not participate in the expansion, they would lose all or part of the regular Federal contribution to Medicaid which was judged to be coercive. In the first few years, the Federal government will cover all the cost of the Medicaid expansion, but the Federal governments contribution will eventually drop to 90% leaving states to pick up the remaining 10%. This could cost a state like Texas to pick up $500 million/year by 2019. http://www.guardian.co.uk/world/2012/jun/29/supreme-court-medicaid-expansion-states?newsfeed=true. If states opt out of the expanded Medicaid, this will add thousands to millions of poor people to the uninsured role and make them use the emergency room for their primary care, as is the situation now, adding costs to the insurance bills of those who have health insurance thus defeating an important part of Obamacare.

Roberts' ruling makes up a bit, perhaps, for the worst ruling the Supreme Court has ever made that corporations are people, the Citizens United decision, which they not only ruled constitutionally initially but reaffirmed recently. Maintaining this ruling perhaps led Roberts to his vote on Obamacare to preserve the reputation of the Court.

PRIVATE INDUSTRY IS DOING JUST FINE

President Obama has been highly criticized for making this statement, though it seems to me to be quite correct. After all the business of private industry is not to employ people, but to make profits, hopefully increasing profits; yet the mass media and opposing politicians seem to believe otherwise. In fact, a part of the business of business is to minimize the number of employees. If they could get by with no employees to minimize costs, they they would. This is at the heart of our current problems in that American industry is able to make very good profits with minimum of hiring new employees.

I have written on the jobs disconnect between business and government before at:

http://stopcontinentaldrift.blogspot.com/2010/09/jobs-disconnect-between-business-and.html

One thing that is different in this recovery is that business is having to take the full load of increasing employment because state and local governments are decreasing employment of teachers, firemen, police and other public employees plus decreases by the Post Office. Thus the increased employment we are seeing today is business increases minus state and local government plus Post Office decreases.

INCOME DROP FOR 2007-2010 VERSUS 1978-1983

(The following is from post #394963 on Motley Fool Investment Analysis Clubs/Macro Economic Trends and Risks, June 13, 2012)

If anyone wants to look at the source of all this recent media activity, it is at: http://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf

Median family income, which was already edging down in the years before the recession, continued to decline, dropping from $49,600 in 2007 to $45,800 in 2010, about where it was in the mid-1990s.

As to the 1982 recession (the worst since the Great Depression, by the way), household income (note the change from family to household) began to drop in 1979 in inflation adjusted dollars and continued to 1983 when it began to rise again. See Fig. 1 in http://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf

It is interesting that women's median incomes were actually rising by 1982 for full-time workers (Fig. 2). It was the male full-time workers who made the decline.

Peak household income peaked in 1978 at $46,202 with a bottom of $43,453 in 1983, a drop of $2,749 or 5.95% (inflation adjusted). Household income peaked $52,823 in 2007 and dropped to $49,445 in 2010 or 6.39% (inflation adjusted). Thus the drop in 2007-2010 was bigger by 0.44% than in 1978-1983. http://www.davemanuel.com/median-household-income.php

NOTE: Median household income in nominal dollars actually grew during the 1978-1983 period from $13,121 to $18,859 so the drop in inflation corrected dollars depends on how you count inflation. Whereas even nominal dollars dropped from 2007 to 2010 from $47,752 to $47,022 or 1.53%. Also note that the difference between 1978 and 2010 in nominal dollars is huge but the difference in inflation corrected dollars is small. Also note that the all-time high in inflation adjusted dollars came in 1999 at $53,252.http://www.davemanuel.com/median-household-income.php so the decline has been going on for a long time though the total to 2007 is not huge, just a bit over $429 or a decline of 0.8%, but to 2010 the decline is much larger $3,807 for a decline 7.15%.

FACE BOOK IPO

I thought that IPOs were supposed to raise money for a company going public. If this is so, then the IPO was a great success because it ended up making the most money for Face Book. Unfortunately for gamblers who are used to making a killing on IPOs, it didn't happen this time. Some of them are taking out law suits. I think judges should throw such suits out. I don't care if institutions knew something more about Face Book than the rest of us. I knew enough to stay out of the IPO. First the IPO price for the stock had a P/E of 100 which is huge. a P/E of 40 would have been generous. Second it was known that Face Book is having a hard time getting advertisements onto cell phones and more and more people are looking at Face Book on their phones. This has been said to be a big challenge for Face Book in the future. It seems to me that when you gamble, you have to accept the results.

There may be big investors in the underwriters that say they will switch accounts unless the underwriter makes them whole. Well, this is something between the underwriter and the gambler, but it is not something for the courts.

AWAYS SOMEONE AT THE BOTTOM

(The following was posted in part on Motley Fool)

An Internet colleague has recently been to Finland which brought back reminiscences. Long ago when I was a geology student in 1953 I lived in a Finnish boarding house called Jukala's for a part of summer in Virginia, MN, in what is called the Iron Range which at one time was the biggest iron mining district in the world. By the time I got there, however, it was pretty well shut down. There was a Finnish immigrant there who had been in this country for two years that wanted to improve his English and befriended me. I heard a couple of old Finns talking and asked him what they were saying. He replied "Don't you understand? They are speaking English." I said "They are?" He said that they were putting Finnish endings on the words. I think he said that Finnish has 21 case endings for nouns.

I had the overpowering urge to ask him how he liked America, but I resisted it until we were in a bar one night having a brew. OK, maybe it was the second one when I turned to him and said, "How do you like America?" He replied,"If you are rich, any country is good, but, if you are a worker, America is the best place."

The Finns were the poor laborers of northern Minnesota, sort of the Hispanics of today. Always somebody on the bottom. Some of my Swedish friends warned me not to walk around at night because I was in a bad neighborhood. I did so, however, and never saw any trouble. Actually not many people were walking around at night. I figured that when the Swedes and Norwegians came in looking for trouble they found it. Sunday mornings, I would wake to the sound of people signing hymns at the Lutheran Church next door. When I went out for lunch, they were out on the lawn taking a break, but when I returned they were back in singing again. I had the feeling they spent the whole day there as the singing lasted until into the evening.

I took out a Finnish girl once, and my Swedish friends told me I shouldn't do that. I didn't have a car, otherwise I would have gone out with her more. It reminded me of back home when my parents got nervous if I dated a Roman Catholic or Jewish girl back in High School. "They are nice people, but I wouldn't want my son to marry one."

The following summer I was to work further north in Ely, MN, about 40 mil; north of Duluth, The Gateway To The Wilderness Area, prospecting for magnetic iron ore for the now defunct Jones & Laughlin Steel Co. This was still Finnish country and there was a billboard on the outskirts of town that said "Vote For Saari" (Finns love the double "a" in names) for something or other. I've forgotten what. On Friday nights, the local bars had polka bands. On some songs they changed the name to a Finnish name, e.g. when You and I were Young Maaki and Who's Saari Now.

In 1969, I actually visited Finland for a few days as the guest of the Finnish government and spent a day in their copper-nickel mine - Otukumpu. My impression was that Finland is a pretty flat country with lots of trees, much like northern Minnesota and with a climate to match so I can understand why they found northern Minnesota attractive (along with northern Wisconsin and Michigan). I was on an extended trip of 17 days through northern Europe (Belgium, England, Scotland, Norway, Sweden, and Finland). I had the impression that my organization was going to pay for this, wrong as it turned out. I had to pick up the whole bill, but I'm glad I took the trip because I doubt if I ever would have taken it had I known I was going to pay for the whole thing. Seeing the fjords of Norway was worth it by themselves.

I think it was back before WW-II and the Soviets invaded Finland. The Finns planted Christmas trees out on a frozen lake and lured the Soviet army onto it and blew it up. Mighty clever. Of course, the Finns eventually settled the war on Soviet terms but remained independent. Finland is also known as the only country to repay their WW-II reparations.

LOWERING TAX MYTH

There are those who think the myth that lowering taxes, especially on the wealthy, improves the economy. I have been fond of pointing out that lowering taxes is an inefficient way of improving the economy (http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html).

A more recent analysis that comes to the same conclusion is by Fareed Zakaria

(http://www.washingtonpost.com/opinions/fareed-zakaria-romney-is-wrong-on-tax-cuts/2012/06/07/gJQAy1pHLV_story.html?wpisrc=nl_opinions_Fri).

OK, the drill is that when the wealthy get more money, they buy more non-productive things like Treasury bills, notes and bonds, and buying existing stock does nothing for the company the stock represents, only the IPO and bonds benefit the company. Also when the wealthy get more money they do things that might benefit the global economy (like buying chalets in Switzerland, Bombardier personal jets from Canada, and islands in the Bahamas). When the middle class gets more money they pay down debt.

It is quite clear that Bush-41 and Clinton raised taxes, and we had the best economy of my lifetime and the Federal government had four years of positive cash flow. Bush-43 got the biggest tax cut in history and the economy tanked, from which we still haven't fully recovered. Even job growth from 2002 - 2007 was the poorest since the Great Depression. And all the tax cuts that Obama has given (e.g. extension of the Bush-43 tax cuts, a third of the stimulus package, the payroll tax cut and its extension, the small business tax cut, etc.) may have kept us out of a deep depression but haven't pulled us out of the poor economy, though we may be slowly coming out of it.

Though all the evidence is to the contrary, the myth of the benefits of tax cuts continues.

WASHINGTON, D.C. -- SOUTHWEST (Poem)

(The following poem was written in 1970 during

the period of intense construction in SW Washington, D.C.)

Those buildings that rise where swamp was king

Were poured from concrete by men of will.

Hard hats of yellow on black and white

Hammered their molds from muck to sky.

Cranes tower overhead. Their buckets swing

To gather the fruit from trucks aligned.

Wood molds all in place, the concrete pours.

Cranes ladle the brew between the forms.

A few brave souls face this awesome task

To inch ever upward into the sky.

Our flag now unfurled, the frame is done;

Man triumphs again against the gods.

Hard hats remain to skeleton dress.

Interior too, a lot remains.

Innovation, strength, patience to act,

This monument, gave hardhats to you.

1970

SUICIDE

I don't have any prohibition against suicide and feel that physician assisted suicide should be available to the elderly and terminally ill that want it.

There is a danger that the family and perhaps some others might try to hasten a person's decision for suicide so they could get at the inheritance. I think this should be made a crime.

Suicide among the young, however, is a tragedy in that some tend to see the future as being so black and don't understand the ups and downs of life and that there probably are opportunities for better things awaiting. Even someone like John Hinckley, who almost killed a president of the United States and turned his press secretary - Brady - into a vegetable, is spending about a third of his time out of confinement and even has a drivers license (http://en.wikipedia.org/wiki/John_Hinckley,_Jr.). I disagree with this, but it does show that even what should be the blackest of futures may not be.

What I am devastated over, however, is those committing suicide first taking the lives of many others before killing themselves. We all recall the massacres at Columbine High School, CO, in 1999* and Virginia Tech, VA, in 2007.** A recent case is that of Jason Todd in Gilbert, AZ on May 3, 2012: http://phoenixcriminallawnews.com/2012/05/police-gilbert-shooting-that-left-5-dead-was-murder-suicide.html. A greater alertness to the potentials of certain mentally unstable people might help prevent such things, but making guns more difficult for such people would help. Unfortunately, gun control of any sort in the U.S. is vigorously opposed.*** As for individuals, wouldn't physician assisted suicides be preferable to the more than 15,000 gun related suicides per year in the U.S.?

* http://en.wikipedia.org/wiki/Columbine_High_School_massacre

**http://en.wikipedia.org/wiki/Virginia_Tech_massacre

*** http://en.wikipedia.org/wiki/Gun_violence_in_the_United_States