The buzzwords for the day is regulations and taxes. These are two words that strike fear in the hearts of all who embrace capitalism. Capitalism was destroyed in September amidst the banking crisis and was buried with GM and Chrysler. We are entering a new era.
The President spoke to the American Medical Association as he moves across the country to sell his new vision for health care reform. As a side note, he is not planning to meet with the mayors of America this week when they gather for their annual convention. We can only assume he has nothing to sell them and moreover doesn't want to be bogged down with whiney mayors who slept while the recession destroyed their cities.
The health care debate is shaping up to be interesting indeed. There are a number of challenges of which how to pay is a biggie. Some of the costs estimates are rather staggering. For example, Orrin Hatch of Utah calculated that the Kennedy bill will cost $62,500 per uninsured person over 10 years. The Kennedy bill is designed to eliminate the uninsured but studies show that the net help would only be 16 million leaving another 36 million uninsured.
A big problem is how to pay for all of this. There are currently two major discussions. One is to tax soft drinks and the other is a value added tax or VAT. Presumably the idea of taxing soft drinks is to once again punish people for drinking disease in a bottle. We seem to be on this kick of taxing everything that is unhealthy. The value-added tax, common in places like Europe, is collected in stages from each business that contributes to the production and sale of consumer goods. Economists say a 5 percent VAT could have raised $285 billion last year. The bugaboo of course is the President's promise to tax only the wealthy. A VAT will tax everyone.
Taxes are on the horizon. We think the next big tax will be on Internet sales. Best Buy had a less than glowing report today even with Circuit City going away. It turns out that online sales are doing just fine. We think the smart money is shopping online to get free shipping and no sales tax. Plus, who wants to drive and spend money on gas and parking when they can shop in pajamas.
Commodities are starting to rise. The dollar is getting weaker, the Fed is flooding the system with money and inflation is going to go up. The brains in the Fed and Treasury Department have assured us that in a slow economy inflation is not possible. Obviously they are not monitoring things in Zimbabwe where life is dismal and inflation is in the thousands of percent.
Expect gas prices to continue rising and the cost of goods getting pricier. Gasoline is up for the 50th straight day in a row. Gas is up 60% this year which is, according to AAA, the fastest rise ever. California's average just went up to $3.00 which is not a welcome site in this state where things are not getting fixed very quickly.
The fastest growing economies are meeting today. The so-called BRIC (Brazil, Russia, India, China) nations are gathering in Moscow for their first exclusive gathering ever. The Russian Czar, Demitry Medvedev announced this morning, "No currency system can be successful if we have financial instruments denominated in just one currency. We must strengthen the international financial system not only by making the dollar strong, but also by creating other reserve currencies."
Dear Mr. President, Mr. Bernanke and Mr. Geithner: please heed the warnings of this dangerous man. They (the BRIC countries) own 40% of the world's currency reserves so pay attention. They mean business and they mean now, right now, today, ASAP. Please, gentlemen, you must get it or we are all in deep green pea soup.
Congress is working a "cash for clunkers" bill to stimulate auto sales. The idea is to give car buyers a break of up to $4,500 for putting their old car in the land fill. It would be nice to see our government stop encouraging more waste. This bill seems very counterproductive in a world of global warming, over taxed landfills and CO2 emissions.
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