By Chris Buchheit on March 29, 2010

Health care reform, even though certainly needed in some aspects, will affect every family in this country. It is one of the most expensive bills to pass Congress (the Congressional Budget Office projects it to cost $940 billion over ten years) and also one of the most widespread in terms of effects.

Of course I’m all for reform and making sure people get some of the care they need, but how in the world are we going to pay for the reform? The answer is ironic – the two ways Congress promised they wouldn’t – by taking money out of Medicare and by charging taxes. Specifically, the tax system would be progressive, meaning that those with higher incomes will be taxed more; those individuals who earn $200,000 or more and married couples who earn $250,000 or greater will be taxed.

Normally I try to refrain from being this outspoken, but this is simply not the time to be levying taxes on anybody. During economic downturns, more taxes are exactly the opposite of what the government should be doing to encourage growth.

The press talks about how the economy is “showing signs of recovery”, but if that is true, then where are the jobs? This recovery has been fueled entirely by government spending, not by the markets. As a result, unemployment still hangs at 10.4%, but this number does not accurately reflect the situation because it does not factor in those individuals who have stopped looking for jobs.

What does the health care bill have to do with unemployment?

In short, a tax on those with incomes greater than $200,000 is an indirect tax on small businesses.

In 2006, according to salary.com, the average income of small business owners was $233,600. If faced with new taxes, these small business owners might be forced to cut costs. When this happens, the first things to go are employees. These new taxes will slash jobs and have no impact on creating new ones.

Instead, the government should be incentivizing small businesses for offering insurance instead of penalizing them for not providing it.

Likewise, the government mandating that employers must offer insurance will also cause higher unemployment. If employers are required to offer health insurance, this will increase their cost per employee. When faced with higher costs, as discussed, employers will cut jobs. The government is not doing the private sector any favors here.

By Chris Buchheit on March 20, 2010

One of the most controversial bills Congress has passed recently was the stimulus package. The bill stipulates $787 billion of public spending in order to create jobs. The argument is whether or not government spending can even stimulate the economy. Did the stimulus bill work?

Since the spending bill is complex, it is difficult to gauge its effectiveness in creating jobs. However, one way of measuring is by comparing it to the Cash for Clunkers program. The controversial 2009 program gave taxpayers a $4,500 credit to buy a “new, fuel-efficient car” if they turned in their “clunkers”.

Opponents of the program say that it creates artificial demand that simply was not in the market to begin with. With the economic downturn, the majority of people were not looking to buy new cars. Under the program, economic demand for cars was artificially shifted, which means that the program was simply a short-term fix for a long-term program. As a result, people who might have been in the market to buy cars in a few years will now not be. Because of this, car dealers will possibly see an artificial drop in sales over the next few years.

There are a few differences between the Clunkers and the stimulus bill. For example, the stimulus bill is basically government spending to other government programs. However, the implications are similar. Where Cash for Clunkers fails to create real demand and cause real change within the markets, the stimulus bill fails to create demand in the private sector while sustaining public jobs. As was the case during Roosevelt’s New Deal, the effects of massive public spending and additional public programs are still hotly contested; and New Deal policies should not be used as a template for pulling nations out of economic decline.

The underlying theme is that government spending on this scale cannot naturally affect the markets, and can only serve as a short-term fix. And with unemployment at 10.4% as of February 2010, the short term effects do not seem to be enough. Indeed, the stimulus bill has funded several public projects, including infrastructure projects. While the projects are needed in this country, it did not need to take a $787 billion bill to get them.

At the end of the day, the stimulus bill offered jobs that simply are not there even a year after the bill’s passing. Unemployment is still high, and the private sector is still trying to recover from the economic turmoil that arguably resulted from government intervention in the first place.

By Chris Buchheit on March 20, 2010

Social Security was never meant to be something to be relied upon for retirement funds. Passed in 1935 as a part of Franklin Roosevelt’s New Deal program, it soon became entrenched within American politics.

The program was essentially a forced version of budgeting during the turmoil of the Great Depression. By law, the federal government required employees to give them a certain percentage of paychecks. After a while, this amount of money would accumulate into a fund that could be used by the employee. The fund was never intended to be a permanent fixation in the federal budget, but as people came to be dependent on it as a means for retirement funds, the more strained Social Security became.

Today, Social Security poses an incredible challenge to politicians and the Office of the Treasury. As the Baby Boomers, those born in the post-World War Two population spurt, age, the American population also ages on the average. This means that since a large portion of the American population is made up by the Baby Boomer generation, as it ages and retires, Social Security funding will be stretched to the breaking point.

Presently it is normal for Congresses to push a significant amount of tax payer money into the fund in order to sustain it, as Social Security is headed for bankruptcy. As more and more people from the Baby Boomer generation retire, they demand their money from the program. It is currently one of many entitlement programs that cannot be sustained.

There is a great debate on how to fix Social Security. One way would be to terminate the program, have the IRS and Congress return the funds to each taxpayer, and then rely on banks and employers to provide retirement funding. However, there are opponents of this plan, who believe that if Social Security were to be terminated altogether, they then will not have retirement funding. Those opponents should understand, though, that Social Security is only a type of forced budgeting, and if they were to budget a certain amount of their paychecks themselves and not leave it to the federal government the results would be the same.

People must have the responsibility to budget for their retirement themselves. Under this rubric, it would cut the middleman, the federal government, out of the equation. It would also free up funding so that Congress could spend taxpayer money elsewhere.

Social Security, while providing benefits to countless in America, is also a source of unsustainable debt.

By Chris Buchheit on March 16, 2010

Thanks to the “Great Recession” as it is being called, unemployment figures have almost doubled since 2005; and they have ripple effects into other aspects of peoples’ lives. For many people, higher unemployment means a lower chance of getting accepted by a graduate school.

Reportedly, this period of time in America is one of the most competitive in history. Because of the unemployment rates (In February it was 10.4% according to U.S. Bureau of Labor Statistics), many people are going back to school. The USBLS also published a graph in 2008 that draws a good correlation between unemployment rates and fluctuation in the number of people enrolling in graduate schools. When faced with the option of being unemployed or attaining a higher education, many people are choosing graduate school.

Normally graduate schools, depending on the program and the university, are competitive as it is, but with the huge influx of the unemployed, the pool of applicants is much bigger than usual for graduate school and internships. As a direct result, the period of applying is much more competitive than usual.

CNBC shows a similar trend, saying that when the job market dries up, the unemployed try to go back to school in order to increase their marketability upon graduating (http://www.cnbc.com/id/34256312/). This will in theory increase their ability to get a job when the economy recovers.

For those who are about to graduate, such as myself, it has been a very frustrating time. Even though the vast majority of us are wholly qualified for many programs across the country, the rejection letters keep piling in.

I will say that Georgetown has been the only University to have the decency to reject me with an actual rejection letter. The others, who will remain nameless, directed me to a website for their rejections. Totally classy.

Naturally the unemployment rate is a huge problem for the economy. It goes without saying. However, when unemployment goes up, so do enrollment figures of vocational schools, who are “for profit” colleges, which are much more expensive than public or private college equivalents.

Unemployment has great implications for the economy, and can even ripple down to how many applicants are accepted into universities.

By Chris Buchheit on March 11, 2010

In my last blog I discussed the importance of budgeting. The simple skill can keep your costs and income levels in check, and can help you manage your finances with impeccable accuracy, and with as little guesswork as possible. Under this framework, you treat your finances like a business – as long as you come out positive after all costs and factored out of your income, there will be money left over.

However, one organization that is not confined to this framework is the federal government. No matter who is in control of Congress, be it Republicans or Democrats, most recent administrations have thrown the basic principle of fiscal responsibility out the window. The federal government is not run like a business, and is not confined to basic financial principles. As a result, Congresses have the ability to spend at will without short term fiscal consequences. There are many long term consequences, though, including the recent housing bubble.

Because Congress’ main source of income is directly from the American people, the country deserves better financial standards of its legislators. As other countries such as China benefit from America’s fiscal irresponsibility, America’s currency slowly gets devalued. A balanced budget should be backed up by the force of law in this country. Congress owes that to the American people.

Such a law has circulated throughout Congresses for decades, but has never come to fruition. If this kind of amendment were to pass, Congress would be forced to reign in spending on inefficient programs, and might even be forced to come to a solution on constant fiscal problems, such as Social Security and Medicare. Ultimately, it would force Congress to keep track of its spending, which in the end is a huge determining factor of the value of American dollars. Such a law might even make politicians be more careful about their campaign promises, but nobody’s holding their breath on that one.

The ability to budget should not be underestimated. The economy is a complicated system that cannot be predicted. To stay on its good side and avoid any other economic downturns, the best thing anyone can do is keep a close eye on their budgets – and that goes for our federal government too.