Plutocrats Plotting Payroll Tax Hike?

Key elements of America’s ruling class think you’re not giving enough money to Wall Street, so they have a plan to force you to give more. The so-called James-Ghilarducci plan would force workers to pay a new three percent payroll tax to fund a personal retirement account to be managed by Wall Street firms. The cost to workers would be partially offset by a tax credit of up to $600, and the government would (somehow) guarantee at least a 2 percent annual return, regardless of market conditions.

The plan is being pushed by Blackstone president Tony James, who just by coincidence also happens to be raising millions of dollars for Hillary. As a result, Hillary’s top aides are reportedly warming to his plan.

You have to be a fool to think that James is doing this out of goodwill and public spiritedness. The plan promises to provide firms like his with a huge spigot of cash for accounts on which the firms will charge lucrative fees.

Right now, laws prohibit retirees from investing 401(k) balances in risky and sometimes opaque ‘alternative investments’ offered by hedge funds and private equity firms. Maybe that restriction should be lifted, but James’ plan forces savers to participate.

Chris Tobe, a Democrat who advises institutional investors and who served on Kentucky’s pension board, put it just as bluntly: “James’ plan is a deliberate attempt to get around federal protections for retirees because alternative investments are not generally allowed in the 401(k) world. This is about making Blackstone and other private equity firms even richer than they already are.”

The most objectionable aspect of the James-Ghilarducci plan is its coercive nature. The retirement accounts would be mandatory, and workers would be forced to pay a new three percent tax. A typical household making $60,000 per year would have to cough up $150 every month. Maybe you had other plans for that $150, but the plutocrats have decided they know better; you have to hand the money over to Wall Street.

Worse, under the plan, individuals don’t even get to decide how their own money shall be invested. People can’t choose for themselves how to allocate their own portfolio. That will be decided by the plutocrats.

Under their proposal, “Retirement portfolios would be created by a board of professionals who would be fiduciaries appointed by the president and Congress,” James and Ghilarducci wrote in a New York Times editorial.

James is trying to sell the plan by promising real returns of 6 or 7 percent. In an economy that can’t manage even 3 percent growth, that promise is simply not realistic.

[E]conomist Eileen Appelbaum told IBT, the James-Ghilarducci plan is built on earnings projections that are fanciful.

“The plan’s promise of 6 to 7 percent returns is likely to prove unrealistic, and they fail to discuss the risks inherent in the risky investments that would have to dominate the savings portfolio that could yield such returns,” said Appelbaum, who co-authored the book “Private Equity at Work” and published a study suggesting lower private equity returns are a new normal.

“This proposal is about Wall Street getting more assets under management because that is where they make their money,” she said.

I also fail to see how government could conceivably guarantee the balances. The tax would generate something like $300 billion per year flowing into the new accounts. After one or two decades, the accounts would contain several trillion dollars. And these funds would largely be invested in assets that are relatively risky. In fact, investing in riskier assets is the whole point of the plan, which is to open up risky asset classes that are currently unavailable to 401(k)s. If we experience a crash like we did in 2009, and asset prices fall by 50% or more, the government would be on the hook for trillions in bailout money. Where would that money come from?

The other problem with the plan is that it would increase corruption by furthering ties between Wall Street and government. Wall Street would benefit from a steady source of cash, but the political class would get to dictate the terms of the deal to Wall Street. The government would decide how much Wall Street could charge in fees, and maybe even which firms could receive the cash. Government influence might also politicize the allocation of credit, which in the long term would impair the efficiency of financial markets and the growth of the economy.

What will happen, of course, is the same thing we saw with health care and pretty much every other part of the economy these days. It will be a bust out. The billions that pour into these new funds will be “invested” in things that benefit the rulers. Politicians will get advance notice on some new move so they can cash in their privileged status. The fund managers will kick back a piece of their rake to the politicians for the right to manage these funds. It will be systematic robbery of the middle class.

Will the plan be enacted? Hillary has not been campaigning on it, and when asked to comment on the article excerpted above, her campaign declined. So they won’t even talk about it. But if they don’t talk about it now, during the presidential campaign, then a future Clinton administration will have no political legitimacy for imposing it on the people. A policy change this significant should be debated during the campaign so that voters can have their say. To keep quiet and then spring the plan only after the election would betray the principles of representative democracy. That’s not to say it won’t happen, but if it does, it would be politically illegitimate.

Obamacare: No Free Lunch

Milton Friedman liked to point out that “there’s no such thing as a free lunch,” which means that government spending must be paid for, and for the government to bestow benefits on one person it must impose costs on somebody else.

The website Vox, a mouthpiece for the establishment, recently succumbed to the free lunch fallacy in its defense of Obamacare. One of the goals of Obamacare was to reduce insurance prices for older people by charging them less than their costs. But if old folks pay less than cost, somebody else must make up the difference by paying more. That somebody else was young, healthy people, who would be forced to pay more than their costs.

Obamacare attempted to effect the transfer of wealth from young to old by imposing a ‘3-to-1 age band,’ which means that insurers can not charge older people any more than 3 times as much as they charge young people. If old people cost insurers 4 or 5 times as much, insurers by law have to keep the ratio down to three by charging old people less than cost and young people more than cost. The young thereby effectively subsidize the old.

Whether or not you approve of this transfer of wealth from young to old, there’s no doubt that it’s the young who get fleeced. Yet Vox’s slippery rhetoric suggests that Obamacare is win-win for both old and young; in other words, a free lunch.

The talking point that individual market premiums have skyrocketed…is only true for young people, with no medical problems, who purchased catastrophic coverage plans that cover less than 60 percent of expenses.

Yes, they pay more today. But they are getting plans that cover more of their costs (at least 60 percent), have an out-of-pocket maximum of $7,500 per year, cover more things, have no lifetime maximum benefits, and offer free preventive care. Older people, because of 3-to-1 age bands (the allowable ratio of premiums paid by the oldest members relative to those paid by the youngest) are often paying less. And providing more affordable coverage to older people who are more likely to need coverage is a good thing.


Sorry, but to switch metaphors, Vox can’t have their cake and eat it too. Young people are not better off with those admittedly “skyrocketing” premiums, and being forced to purchase plans they really don’t want. If people want to pay for insurance plans that “cover more things,” that choice should be theirs and not something the government forces on them. That “free preventive care” that Obamacare offers has very little value to people who are young and healthy.

But the salient point is that Vox cannot tout the benefit of the 3-to-1 age band to older people while at the same time eliding the corresponding cost to younger people. That is just plain intellectually dishonest.

I do, however, have to admire Vox’s chutzpah. They entitled their piece “Republican criticisms of Obamacare are extremely misleading.”

Peak Baby Boomer

Like a lot of people, I was both surprised and amused to hear that Bob Dylan, who is not an author, was awarded the Nobel Prize in Literature. A week before the announcement a London betting site gave Dylan a 2 percent chance of winning, but even that slim chance caused The New Republic to write:

Bob Dylan 100 percent is not going to win. Stop saying Bob Dylan should win the Nobel Prize.

And yet it happened. So: William Butler Yeats, Thomas Mann, William Faulkner, Boris Pasternak, Bob Dylan. One of those names does not belong.

How did this happen? The fact is that hardly anybody gives a fig about Bob Dylan except baby boomers. In human society, most leadership positions are usually filled by people in their 50s and 60s, and right now, that’s baby boomers. So at the moment, the baby boomers are in charge, and they have given us Bob Dylan as the Nobel laureate in literature. They also gave us the Clinton Crime Family.

But the Boomers did most of their damage to America’s culture long ago. Prior to the Boomers, America had a thriving ‘high-brow’, or at least ‘middle-brow’ culture. In 1955, classical music concerts had greater total attendance than did major league baseball. In 1958, Leonard Bernstein started producing his Young People’s Concerts, intended to introduce kids to the joys of classical music. The programming, however, included pretty heavy stuff like Bach, Liszt, and Shostakovich, and was watched mostly by adults, not kids. Bernstein’s Young People’s Concerts ran for several years on TV, including three seasons in prime time on CBS. For CBS to run a Shostakovich concert in prime time today seems unimaginable.

Those Americans not into ‘long hair’ music usually enjoyed jazz or well-crafted show tunes by the likes of Gilbert and Sullivan, Rodgers and Hammerstein, or Cole Porter.

America’s cultural landscape was not just musical, but also literary. During World War Two, book publishers created a generation of readers by sending free books to troops serving overseas. The so-called Armed Services Editions were small, compact paperbacks that soldiers could easily carry with them. During the war, a staggering 122 million such books were produced. Many soldiers continued their reading habits after returning from the war. In those days, it was not unusual for people who did not even have high school diplomas to read more books than the typical college graduate does today.

But then, starting in the 1960s, the baby boomers tore down America’s cultural life. They replaced classical music and show tunes with rock. They argued amongst themselves about who was greater, the Beatles or the Stones. Answer: they both suck.

Oh well. There’s nothing to be done except to wait for the boomers to pass from the scene and to be temporarily replaced in power by Gen X. The boomers gave Bob Dylan a Nobel, but I’m guessing that Gen Xers are not so flaky and solipsistic as to want to give one to Kurt Cobain (if he had lived). We shall see.

Now You Can’t Even Keep Your Obamacare Plan

While peddling Obamacare, the president famously and repeatedly lied to the American people by saying “If you like your doctor, you can keep your doctor. If you like your plan, you can keep your plan.” Four years later, Obamacare caused people to lose their plans. Several million Americans who purchased health insurance on the individual market, and who (according to surveys) were happy with their plans, were prohibited from renewing those plans because they did not fully comply with the arbitrary coverages of Obamacare. After losing their plans, people were forced to purchase Obamacare or pay a fine.

Now it turns out that you can’t even keep the Obamacare plan you were forced to buy, because insurers are losing money and pulling out.

A growing number of people in Obamacare are finding out their health insurance plans will disappear from the program next year, forcing them to find new coverage even as options shrink and prices rise.
At least 1.4 million people in 32 states will lose the Obamacare plan they have now, according to state officials contacted by Bloomberg. That’s largely caused by Aetna Inc., UnitedHealth Group Inc. and some state or regional insurers quitting the law’s markets for individual coverage.

For the people losing plans, there are fewer and fewer choices. One estimate by the Kaiser Family Foundation predicts that for at least 19 percent of the people in Obamacare’s individual market next year there will be only one insurer to choose from.

In North Carolina, for example, a BlueCross BlueShield insurer will be the only option in 95 of the state’s 100 counties after Aetna and UnitedHealth said this year that they would leave. That will leave 284,000 people looking for a new plan, according to the state.

And BlueCross only agreed to remain after the state allowed them to increase rates by 25%. So BlueCross is now effectively the Obamacare monopolist in North Carolina. You don’t like the BlueCross plans or service? Tough luck, because in North Carolina you have no other Obamacare option.

In theory, government is supposed to be protecting consumers from monopolists. The Department of Justice even maintains an anti-trust division that goes after companies for monopolistic practices. Yet in North Carolina, the federal government is now forcing people to purchase from a monopolist under threat of a fine. Good job!

Of course, if BlueCross had left the North Carolina market, there would be no way to purchase Obamacare in that state. And yet federal law says that if you don’t have coverage you must pay a fine. Would the IRS still enforce the fine? Does the law call for suspending the fine in the event that no insurers offer Obamacare plans? Has Obama given this question any thought in between filling out his NCAA bracket and his summer music playlist?

Nationwide, it looks like about one out of eight people on Obamacare will this year need to find a new provider. So it turns out you can’t even keep the plan you were forced to buy when the government abolished the plan you liked after telling you that you could keep it. Awesome job.

By the way, based on projections made in 2010 when Obamacare was enacted, the program was supposed to have 26 million enrollees by now. This year, Obamacare will have about 11 million people enrolled. Heckuva job.

Are Health Organizations Bought Off by Big Soda?

We wrote previously about how the sugar industry, back in the 1960s, paid for research that denied the role of sugar in causing heart disease. That sort of thing is apparently still going on, since evidence suggests that the soft drink industry is paying health organizations to go easy on sugary drinks.

Under the guise of sweet charitable giving, soda makers are handing out millions to big name health organizations so that the groups stay quiet about health issues that threaten to slim down drink profits—not to mention Americans themselves—a new study suggests.

Between 2011 and 2015, Coca-Cola Company and PepsiCo sponsored 96 national health organizations, including the American Diabetes Association, the American Heart Association, and the American Society for Nutrition, researchers report in the American Journal of Preventative Medicine. Meanwhile, lobbyists for the beverage makers successfully campaigned against nearly 20 proposed state and federal regulations aimed at protecting public health, such as improvements to nutrition labeling and soda taxes.

[I]n 2010, the charity Save the Children stunned colleagues and health professionals by abruptly dropping support for a soda tax—a policy the organization had been fiercely supporting as part of a campaign to combat childhood obesity. The turnabout occurred after the organization received more than $5 million from Coca-Cola Company and PepsiCo, though the charity’s executives denied the connection.

Similarly, in 2012 and 2013, the NAACP, which runs a Coca-Cola-funded health program and has close ties to soda makers, firmly opposed Mayor Bloomberg’s soda portion size limit for New York City. The stance was in spite of the fact that African American’s in the city suffer higher than average rates of obesity.

Last year The New York Times uncovered financial links between Coca-Cola and the research group, Global Energy Balance Network, run out of the University of Colorado. The researchers willfully downplayed the role of sugary beverages in poor health and obesity and shifted focus to a need for more exercise. The group has since disbanded and Coca-Cola’s chief scientist stepped down following the revelation.

A few years ago, somebody fairly close to me died of heart disease. In lieu of flowers, the family requested that mourners make donations to the American Heart Association. I made the donation, but I didn’t feel entirely good about it, because I knew that the AHA basically downplays the role of sugar in heart disease. Instead, the AHA promotes the theory that heart disease is caused by consumption of saturated fat–the theory favored by the sugar and soft drink industries–even though that theory is increasingly contradicted by the latest scientific research.

I’ve often wondered by the American Heart Association so stubbornly remains focused on fat rather than sugar. Maybe the reason is that they’ve been bought off by Big Soda. Big Sugar and Big Soda do seem to have wielded quite a lot of power for many decades now.

[I]f you don’t get the President of the United States on that phone, you know what’s gonna happen to you?
You’re gonna have to answer to the Coca-Cola Company.

No Ceasefire in War on Men

Just another day in The Matriarchy.

A New York City pharmacy is making a political statement by slapping male shoppers with a “man tax.”

Thompson Chemists in Manhattan’s SoHo district posted signs in the store’s front windows announcing the new policy. A pink sign in one window reads, “New store policy: All Female Customers Shop Tax Free,” and the other window sports a blue sign that reads “All Male Customers Are Subject to a 7% Man Tax.”

The female owner of the pharmacy made the decision due to last year’s study showing women pay more than men for some products.

That study found that the ladies’ version of some products is priced somewhat higher than the male version. For instance, ladies’ razor cartridges are priced about 11% higher than men’s.

The horror.

But what does the pharmacy owner who wants to tax men think about the fact that it’s already the case that, on average, only men pay net tax? A recent study from New Zealand found that the average woman is a net fiscal drain on the government, since she receives more in government benefits in her lifetime than she pays in taxes. The average man, in contrast, makes a positive lifetime contribution.



Overall, the research suggests that male taxpayers are the only ones to ever have a positive contribution in taxes. Based on Figure 17, the closest that the average woman will come to having a positive fiscal incidence is when she is at minus $50,000 around 55 years of age.

These results are from New Zealand, but a study of the United States or any other Western democracy would yield similar results.

Basically, the modern welfare state is little more than a gigantic mechanism for transferring trillions of dollars in wealth from men to women.

And that doesn’t even count the massive transfers created by the family courts that require men to pay women alimony and child support.

But, but…the pink razor costs 30 cents more!

Just try to imagine the reaction if a male pharmacy owner tried to protest the unfair fiscal treatment of men by charging a ‘woman tax.’

A Martyr for Technological Progress (Bumped)

Over one hundred years ago, Thorstein Veblen argued in A Theory of the Leisure Class that rich people engage in ‘conspicuous consumption.’ That is, they purchase goods only to impress people, and not because the goods are inherently useful to them. Veblen argued that such expenditures amounted to a waste of resources.

In The Constitution of Liberty, however, F.A. Hayek explained that conspicuous consumption could be productive. By acting as ‘early adopters’ of new products, rich people effectively help to finance research and development. The rich buy new goods while those goods are still expensive and relatively unreliable, and those expenditures keep producers in business while they find ways to make the products cheaper and more reliable. Eventually the goods become cheap enough even for poor people to afford them.

Recall, for instance, Michael Douglas’ character Gordon Gekko in the 1987 movie Wall Street talking on a mobile phone that looked like a brick. The phone couldn’t do anything except place a voice call and cost about $7,000 in today’s dollars.

If Gordon Gekko hadn’t spent as much as he did on that phone 30 years ago, the rest of us might not have the much better and cheaper phones we carry today.

The Gordon Gekko character was fictional, but here’s a real guy named Joshua Brown of Canton, Ohio, riding in a self-driving Tesla vehicle.

Sadly, only a couple of months after this video was made, Mr. Brown was killed when his car, operating on autopilot, plowed full speed into a tractor trailer. The autopilot never applied the brakes.

Mr. Brown’s tragic end demonstrates that ‘early adopters’ sometimes risk more than just their money in implementing new products.

I’m glad early adopters like Mr. Brown are out there helping with their purchases to finance the development of new technology. Without people like Mr. Brown, developing innovative products would be difficult or impossible. People like him in the long-run are helping to move humanity forward.

But personally, when it comes to new technology, I prefer to wait until they get the bugs out.

RIP Joshua Brown.

Great Moments in Journalism


Yeah, I’m willing to bet a lot of money that this would not happen.

Anyone who wants to vote against Trump can easily find legitimate reasons for doing so, but this is not one of them.

But as we’re now less than a month from election day, it’s not surprising to see this sort of Silly Season nonsense from ostensibly VERY SERIOUS professional journalists. At this point, journalists must rank well below car dealers in respectability, and maybe even lower than gypsy pickpockets since, in the aggregate, pickpockets cause less harm.