Government shutdown, Obamacare, now what?

Maybe you, like "the markets" just don't care about a government shutdown. I am still at work, but I do have friends who are sitting at home and not working, not by choice, which means they are not getting paid.  Here is a quick rundown of the what/why.



Image from Cnn.com

1. What's going on?
Congress is supposed to pass a budget so the government can pay for things, aka their "power of the purse". As a new fiscal year has started, there was no  new budget, so there is no purse. Also, the first "Obamacare" healthcare exchanges are opening up, albeit with some glitches.

2. But why?

House republicans (and Texas' own Ted Cruz in the senate) are using this stalemate/government shutdown rhetoric to continue to attempt and get the Affordable Care Act (AKA Obamacare) defunded, cut back, or delayed because they just don't like it. The Senate, with its Democrat majority, continues to offer a budget that contains implementation of Obamacare, while the Republican majority in the House continues to not approve the Senate proposals and offers in return a plan that defunds/delays Obamacare, but funds the government. Think ping pong, with Obamacare as the ball.


3. What does this mean, really?

This shutdown means different things to different people. If you're a furloughed government worker, you don't really care as much about the healthcare squabble as you do about your job. As long as they fight, you sit at home idle, as does the mars rover and the pandacam.  (Disclosure, I love the national zoo, and the pandacam).

Obamacare is a trickier position. The general pro-obamacare argument can be summarized in this quote from the Washinton Post's Ezra Klein: "this is all about stopping a law that increases taxes on rich people and reduces subsidies to private insurers in Medicare in order to help low-income Americans buy health insurance. That's it. That's why the Republican Party might shut down the government and default on the debt."

Yes, but also no.

The conservative view, is generally that Obamacare is another handout to the poor, a tax on those who already work hard, that anything mandatory is an affront to personal liberty, and it will be another costly step into the ever growing welfare state where we now live.

Yes, but also no.

Universal healthcare seems to work in other countries. Can it work here? I don't know, but if yes, it will take a while to get it right. The grandstanding of the President and Congress that it if its good enough for America, it is good enough for them as well seems to be a sham, and even the new IRS agents that will be enforcing the law do not want it for their own plan.  Seems fishy.

See how the coverage of today's shutdown taken from the frontpage of foxnews.com, is slightly different than that of cnn.com:


Foxnews.com front page 10/1/2013

Cnn.com frontpage, 10/1/2013



Image from cnn.com

Two very different approaches to the same story. Notice how shutdown changed to slimdown,  on foxnews.com  and things really are not that bad. Here, we have heroes of WWII "storming" the monument after it was closed by big bad government on the day they were supposed to visit, with bagpipes as their war cry. Cnn.com mentions it too, but not as the lead story. The lead story is that there is a no deal, which is a big deal.

Yes, the fight against Obamacare is the fight of the "rich" against the poor and uninsured or underinsured, sort of. But its also the fight against the middle against insurance companies who already took too much of their paycheck, and against the government for making the insured pay for the uninsured who abuse emergency rooms as if they were their private physicians, and for making a mandatory system that you pay a fine into even if you don't use.

I am a relatively healthy person with insurance I pay for. My insurance costs are rising, substantially, under Obamacare. Thus, I don't really like the plan. However, I do know some people who are not healthy, tried to find private insurance, but due to pre-existing conditions, could not get any insurance at all. These are not the "poor" or the "morbidly obsese" or any other of the ridiculed "other" that get the blame for rising healthcare costs, they are just sick folks who got cancer, or ALS, or were born with whatever they suffer from. So, I can see why they would want Obamacare, and I can't argue that too much.

Also, the government "shutdown" really is a "slimdown," as only "non-essential" workers go home or get furloughed. Mail still gets delivered, social security and medicare benefits still go through, planes can still take off and land, and our armed forces are still getting paid. So there's that, but I have friends sitting at home who have jobs they deem "essential," to their families.  A slimdown is not a good thing either.
 
Take aways:

The shutdown is bad. Congress is a mess, and it has been for a long time.  The Affordable Care Act was passed over 3 years ago, yet Republicans are still not letting the biggest pieces of the President's legacy go without a fight that he will refuse to lose...seem like an impass? Is it perfect? No. Do I like it? No, but that is only because it just costs me more money: I'd love it if it helped me out. Do I have a better idea? No, and neither do the Republicans as of yet, which is why this fight can really do no good.  Lets just give this a try, if it doesn't work, we can change it. This is America, that's what we do. Albeit slowly.

The bigger issue is going to come in 16 days, when we have to place the Full Faith and Credit  of the United States on the line again when we run up against our debt ceiling, which we have to raise again or run the risk of default. This is even a bigger deal than the shutdown. And the fight starts all over again.

Fiscal Cliff Deal Passes the Senate

Here it is: the bill the senate passed, and now its on to the house.  I read most of it.

The "American Taxpayer Relief Act of 2012" is a compromise, but its pretty much what we thought it would be.

The highlights:

·      The level at which tax rates will go up is $450k for families $400k for individuals. Not the $250k/$200k limit initially discussed. Capital gains and dividends rates go up for these people too.

·      Estate tax stays at a $5 million applicable exclusion amount, but the rate above that goes from 35% to 40%. The exclusion amount will go up, as it is indexed for inflation. 

·      Personal exemptions and itemized deductions are phased out at $300k for a family, and $250k for an individual. 

·       Mortgage interest deductions, tuition deductions, stay in place. 

·       Unemployment will be extended for a year. 

·       There are extensions for medicare/aid, clean energy companies, agri-business, indian owned businesses.

·       Payroll tax cuts were not extended. 

The lowlights:

·      Doesn't address the "sequester," the big federal budget cuts that are mandated to kick in to balance the budget, just delays it 2 months. 

·      Doesn't address the debt ceiling, which we apparently hit again, yesterday. That will need to be address in the coming months, AGAIN. 

Summary:

Income taxes go up, but it won't affect many people. Payroll tax cuts will affect a lot of people. Most everything in this bill just kicks the can down the road, a year or two, a month or two, we will have this battle again. We still don't have the budget cuts needed to pay down the national debt. 

And the real kicker: the house swears in a new batch of representatives on Thursday. So, if they don't pass this by Thursday, we start from scratch. Again. Make it happen, Boehner. 

Congress leaves us hanging, and Tech companies have all the money.

In the days after the crisis of a US default being remedied, the market is still collapsing, and August 4th was one of the worst single days in stock market history. All the hard work Congress put in didn't do much to help the investor or those counting on their retirements to support them in their golden years.

So what do your representatives do, in this time of economic crisis? They go on vacation. Early.

Job numbers are ghastly. When jobs are bad, we try to get more educated. Good luck, seeing as the cost of education has outpaced just about every other comparable sector.

So, in times of crisis, there are no jobs, you can't pay for school, and Congress is on vacation. What to do?

What seems interesting is where the actual money is, and what people are spending it on.
Apple allegedly has more money than the US Government. Or maybe it does not. Either way, tech companies, your Apple/Google/Facebooks of the world have a ton of money, and they take in more than they spend, unlike the U.S. Government. But what, in real terms, are they adding to our economy, except distractions and ipads?

Here is an excerpt from the Founder of Facebook's sister, Randi Zuckerberg, on leaving the most profitable website in history and starting her own new venture:


"My goal is to launch my own innovative programming and work with media companies to develop their programming in new, and more social ways."

What does that even mean? Her brother is one of the world's youngest billionaires, and I have no doubt she is also independently wealthy, and will only become more so as a result of her new venture. But why?

These companies don't make guns or butter. They do not grow corn or pave roads. If your power goes out, your computer crashes, or your internet slows down, they disappear.

However, as much as I despise them, these internet companies and "social media" outlets have become a necessary expenditure for business and commerce. Society now spends the bulk of their waking hours using some form of media. The phone book is becoming obsolete, so now you "google" things or see what sort of review a business has online. If you are invisible in that world, someone else will gladly take what could have been your clients and make them their own (hence why, after years of being anti-website/blog, I made a blog).

Wait, I thought Google and facebook were free? How do you think these companies make money? Advertising, and it isn't cheap.

The story I always heard was the back of the phonebook lawyer gets 80% of the fist calls, the next guy gets 15%, and everybody else picks up the scraps. After reviewing one facet of my own firm's internet advertising, I discovered we were paying about $400 per actual view or click from a potential client, and of those views,  this avenue had generated a grand total of 0 clients since we started using it in 2008.

The takeaway: when thinking of your retirement or how to make your current business grow, there are a slew of new marketing, advertising, and customer feedback mechanism's available. I am very against buying into the hype of Paying a Randi Zuckerberg or the like a king's ransom to develop my company in "new, and more social ways," but maybe that is what is necessary to compete in an internet-driven world. Talk to a professional before you make any decisions, and then talk to a couple more.