The Santa Claus Syndrome: Where Things Come From

Free Money! How healthcare financing will work

             What we and Obama need is free money for healthcare.  A few days ago there was a segment on the PBS NewsHour about potential changes in medical care and it gave me an idea of where the money is coming from.  One of those interviewed was a doctor who was head of a society of neurological surgeons.  He described a case he had seen that day of an 82 year old woman with a back problem.  She needed an operation, a BIG operation.  He said that in England, she would not be able to get this surgery at her age from the government controlled health care system. 

They don’t find a way to do a $50,000 operation for $10,000.  They just don’t do the operation and use the money for somebody else.  She does not get the surgery she was expecting to get through Medicare or insurance. But she not only doesn’t get the surgery, she doesn’t get the money back either.  The money she has paid in for decades is taken away and used for somebody else. 

The only way for the Obama healthcare plan to work is to keep some from getting what they are currently eligible for and use the money to provide services to others who may have paid little or nothing into the system. 

It is important to think about these aspects before we go down this path.  There is no doubt that some way must be found to keep from spending vast sums on people who aren’t likely to live much longer anyway.  That’s a system that has no regard for costs at all.  But should it be the government who dictates the answer to these questions?  Do we trust them that much?

There was an ad on the radio about hunger stating that one in eight Americans has problems with hunger.  But we also hear frequent reports about the huge number of cases of obesity.  Both of these problems could be solved if Obama stepped in and took the excess food from the overeaters and gave it to the hungry.

They could then move on to the homeless problem.  Just have the local Commissar go around to each home and inventory the extra bedrooms.  There must be a million of them with all the empty nesters we hear about.  Then just assign the homeless to these rooms and the problem will be solved, the Obama way.

We already know that Obama immediately put a fat tax on those addicted to cigarettes to provide free healthcare to middle class children.  We hear everyday of plans for more taxes on the richest, and most productive, 5% or so of taxpayers to pay for healthcare for others.  So where does this stop.  Is the government going to be allowed to just redistribute everything?

More California Lessons

            Lesson number one from California is that there is no magic.  When you do things that cost money, somebody has to pay.   And it can’t always be somebody way off that you don’t know, like the idle rich who won’t notice a few million extracted from their purses.

If you don’t realize this, you can just keep getting more generous all the time.  There are really endless things that might be of use to somebody.  There are always the problems of the dividing line between needs and wants.  Of course services for children and others who can’t take care of themselves are easier to define as needs.  But you then have to answer the question of who should be responsible for these needs.  The first source of services for children should always be their parents.  It’s easy to say that it isn’t the fault of the children if parents had more children than they can afford.  But if this course is followed with no restraint, the well is eventually going to run dry.

                It’s also easy to say “lock ‘em up and throw away the key” about criminals.  But that means the state is taking on their upkeep for the rest of their lives, including the stage where they have Alzheimer’s and need constant care they couldn’t afford if they were out.  I have read that California already has plenty in this category.  So California is now thinking of turning loose about 27,000 prisoners. 

    While California property taxes are a little lower because of the voter initiatives that have limited them, their income and capital gains taxes are already among the highest.  This means they are already getting the money they might go after with any kind of reasonable tax increase.

Maybe their problems came because things were going so well for so long out there, they thought the good times would never end.  But nobody can predict the future with any certainty.

           Of course I’m not getting around saying we should sympathize with their plight and I’m certainly not saying we should help them out.  What I am saying is that we should learn what we can from the state that often prides itself on leading the way in so many areas.  Both in our own states and at the federal level, we need to realize that spending can’t continue unrestrained just because we think we need things.  If the California Dream is now so expensive that even the Californians can’t afford it, the rest of us probably can’t either.  There is a long list of things that President Obama says we absolutely must do.  They all cost a lot of money.  I hope he keeps getting reports on how things are going in California.

 

How Real Are These Capital Gains?

Now that the Congress is looking high and low for money to grab to pay for new programs, the idea of more taxes on capital gains, especially if you can make it look like this just involves the “rich,” is mentioned more often.   At first it could seem simple, especially if you are looking from the outside and just want a number to apply a tax rate to.  There are cases where people make gigantic amounts in a short time just by chance.  But for people like you and me who don’t get by on luck or inside info, our capital gains will be a little more pedestrian and, as I will explain, are often not even gains.

         My favorite illustration involves the Buick LeSabre, a nice American car which I don’t believe is in production any more.  I’ve had a couple of them myself.  But that isn’t where the gain comes in.  Let’s say you bought a piece of land for $100,000.  Perhaps you were planning to build on it someday.  Or maybe it seemed like a good investment.  Let’s also say it was a few years ago when Buick LeSabres were cheaper.  Just after buying the land, you happened to look in a newspaper and noticed that Buick LeSabres were on sale for $10,000 and you thought, “I could have bought ten LeSabres for that same money.”

Ten or fifteen years goes by.  You have paid property taxes and other expenses necessary to hold the land.  But now your plans have changed.  You decide to sell the land instead of using it.  You are pleased to find that land has gone up and you sell for $200,000 giving you a nice fat capital gain of $100,000.  The IRS sees things this way too and is ready to apply a 15% haircut to the good news. 

But is there a real gain?  Let’s say you again pick up a newspaper and notice that Buick Lesabres are now selling for $20,000 and you quickly calculate that you could buy ten of them with the proceeds from the sale, the same number you could have bought when you made the purchase.  Where is the gain? 

         If the transaction is measured in Buick LeSabres, there is no gain.  You got back just the purchasing power you had before. 

What has changed is that the currency has been inflated so that it is worth much less than is was ten or fifteen years before when you made the purchase.  A big factor in inflation is the combination of monetary and fiscal policy of the government.  They have increased the money supply and picked half the value out of your pocket and they hope you are naïve enough to think you should pay them additional money in the form of capital gains taxes.  So when politicians talk about capital gains taxes on the rich, as they are now to pay for medical care and other things, remember this swindle and write them about it.