The Market Ticker
Commentary on The Capital Markets- Category [Federal Government]

So Larry Lindsey, former FOMC member and a man with a long pedigree in Washington economic policy, is out with his "grades" on the various candidate's tax policies -- and he likes Cruz's.

With one problem -- he doesn't like Cruz's rates, and says he needs to "tweak" them.  Oh, and not downward either, up, in the case of the individual rates Cruz is talking about, by a full 50%.

Now of course Cruz will probably tout the "high grade."  He won't mention the qualifier; that to obtain the revenue Cruz claims he'd have to increase the individual tax rate by 50%, which means for those who are currently under the 15% threshold (and that's a lot of people) their taxes would go up by half instead of down!

But there's a bigger problem in that Cruz also sticks a VAT into the mix which nobody is paying attention to.  VATs are a tax you pay on domestic consumption, but an attempt to make international competitiveness better since they're not charged on goods for export.

Here's the problem that Lindsey is ignoring (probably because he's paid to ignore it): None of this matters if we don't get the spending side of the ledger under control, and Cruz has no plan to do that since that problem is all in one area of the budget, as I've repeatedly pointed out.

know nobody wants to deal with this because of the political implications with certain pressure groups (that is, about 20% of the economy!) but we have to or this nation is irrevocably screwed.

I am talking, of course, about this sort of thing.

CENTENNIAL, Colo. -- A Centennial man went to get a sinus infection checked out and ended up with a medical bill of $11,251.

It sounds like the cost of major surgery.

It wasn't.  It was for an office visit, effectively, and carried a "facility charge" of over $6,000, none of which the patient was told about in advance.

If you ran a gas station and didn't post a price for your gasoline, refusing to give anyone a price until after the gas was pumped into the tank you'd be in prison right now.  Utterly no business can get away with that in America today, other than one -- the medical industry, which does exactly that every single day to thousands of people.

Further, if you and your gas-station buddies colluded to figure out how many gas pumps to have and how much gasoline to stock in your town you'd also go to prison because that's black-letter illegal under laws that have stood for a hundred years -- collectively found in 15 USC.  The medical industry does this every single day in America and no, there is not an exemption for them either.

This is why someone can get a $11,000 bill for a doctor visit because he's tricked into it.

The medical industry argues that EMTALA, a law I remind you Ronald Reagan argued for and got passed, is responsible for this outrageous financial rape. While EMTALA is an unmitigated disaster it is not the driver of this sort of policy, rather, it's a convenient foil to pull out and scream about all the "poor people" who wouldn't be able to get any medical care if screwing the common citizen was stopped.

The simple fact of the matter is that we spend twice on a percentage of GDP basis what every other major industrialized nation spends on medical care and the rest of them are all socialist medical systems in whole or part.  Socialism always loses to capitalism when the two are allowed to compete because a socialist system provides no incentive to lower cost and improve service, where a capitalist system gradually (or not-so-gradually) winds up with the business going to the better-performing firm and the other loses, eventually being forced to either reform or close.

Without addressing this in full any sort of so-called "Tax reform" is a waste of time because at a 7.2% compounded rate of increase, which is what we've seen over the last 20 years in this regard among just government spending the Federal Budget will collapse, and it will do so within the next ten years irrespective of "tax reform" because right now more than one dollar in three is spent in this area.  You cannot possibly have that go from one dollar in three to two dollars in three and have the federal government's fiscal stability survive because the next doubling literally eats up more than the whole.  

We won't get there, just as you won't get to the end-point around the Lily Pad either.

This, and only this, is the issue that must be addressed.  The only candidate who has put anything on the table to do so is Trump.  Unfortunately while it is clear that he understands it he hasn't articulated what he intends to do in detail, nor has he pointed out that The Executive already has the power to fix this in full under existing law, specifically, 15 USC, never mind "strongly encouraging" states to enforce their existing consumer-protection statutes.

McCarren-Ferguson, which protects insurance companies from most of 15 USC (but not all) needs modification too, but that is an actual law that requires updating (and thus Congressional involvement.)  Enforcing existing law, however, requires no Congressional involvement and in fact Congress can't stop it since the law is already on the books.

Four years ago I was raising Holy Hell in the Presidential season after it became clear in 2009 that Obama's plans would not only do nothing to address the issue despite his lofty speeches he would make it worse.  He did.

This election is, quite-possibly, the last clear chance to stop it since if we do not start posting up some high 3, 4 or 5% GDP rates we don't have ten years left before the budget crisis comes, we have five and due to how the fiscal year aligns with inauguration we won't get to the next Presidential election budget before the bovine excrement hits the fast-moving air handler.

Unless there is real action on this point, not talk, I'm going to go enjoy the last few years of relatively calm and reason in this country -- not tilt at windmills.

It is the body politic as a whole , that is, you dear reader, along with everyone else you know, that decides this outcome by your action or inaction as the case may be.

View this entry with comments (registration required to post)
 

Main Navigation
MUST-READ Selection:
Dawn In America?

Full-Text Search & Archives
Archive Access
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.

NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.

The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.