After 12 years of loose credit, the bubble had finally burst on the housing market and now it was time to fix what was damaged and that was the American economy. President Obama's first move was to bail out Wall street which was an idea that began with his former predecessor, George W. Bush. Next, President Obama decided to create a stimulus package known as the American Recovery and Reinvestment Act, estimated to be around 787 billion dollars which was later increased to 840 billion dollars in order to be more inline with what the President wanted to spend for 2012.
The stimulus package covered a wide range of spending such as giving perks to first time home owners, tax breaks, infrastructure like roads and schools, Medicaid provisions, urban development, energy expenses, heath information technology, assistance for insurance, assistance for people out of work, and even things like broadband connections for the internet!
There were many promises being made on how quick taxpayer money (the stimulus package) would turn into jobs and save existing jobs thus bailing America out of what was known as the Great Recession. Here is a breakdown on the results of those promises of what stimulus money can do according to the government's own stats.
In California, 34.6 billion dollars was awarded, 22 billion given out so far resulting in 20,038 job gains. In Washington, 8.4 billion was awarded, 6.3 billion has been given out so far resulting in 5,258 job gains. In New York, 17 billion dollars was awarded, 12.7 has been given out so far resulting in 10.620 job gains. In Texas, 16.6 billion dollars was awarded, 13.3 billion given out so far resulting in 11,800 job gains. In Florida, 11 billion dollars was awarded, 8.3 billion has been given out so far resulting in 9,455 job gains. In Illinois, 11.9 billion dollars has been awarded, 7.8 billion has been given out so far resulting in 4,856 jobs.
A year later since the stimulus package had been passed in 2010, the Federal Reserve was disappointed with the economic recovery describing it as "disappointingly slow." So the Federal Reserve decided to manufacture 600 billion dollars out of thin air for the purpose of inserting into the financial system in order to keep interest rates low and making it easier for businesses to loan money.
One of the more controversial moves trying to restore the economy but was more of an opportunity than fixing the economy was health-care reform or currently known as Obamacare. It was promised by changing the government-run system of health-care, taxpayers would be saving money while expanding coverage. When the health-care reform law was first enacted, the mayo clinic who lost $840 million in 2009, treating Medicare patients decided not to admit anymore unless medicare patients pay cash, thus the new reform for health-care denies seniors the best medical care in the world for cancer.
And that only scratches the surface, there are other things like 12 million seniors who have relied on Medicare Advantage, which allows them to seek free market heath care without aggravating gaps in coverage. But according to the new law set-up by President Obama which was a political move, not until after the presidential election with the help of another law to obtain an additional 8.3 billion dollars to keep the program going. Then cuts in Medicare Advantage reimbursements would be implemented. As a result, 12 million seniors will eventually be pushed back into the government-run program.
The Trustees of the Medicare program recently released their report and in there they estimate that Employer retiree drug plans will fall from 6.8 million in 2010 to a mere 800,000 by 2016 because of the massive amount of new taxes employers will have to pay with the new health-care law!
What does this all mean? On its current course of spending, the United States is on path to go bankrupt! When former President George Bush left office, the annual the annual deficit was 400 billion dollars a year, but during President Obama's tenure spending has increased to 1.3 trillion a year.
Entitlements like social security, and medicare are predicted to go broke sooner than expected. The Baby boomers who helped drive the economy to new highs back in the 90's will be retiring in mass droves in the future leaving less workers to pay taxes while a lot more seniors will be collecting from the system while living longer due to advancements in medicine! Tax revenue remains low while the economy struggles to recover. The United States credit rating continues to get downgraded. On April 6, 2012, the 4th largest credit agency (Egan-Jones) downgraded the United States credit from AA+ to AA. because of growing concern over the public debt.
Countries who have been in this position usually do the following, they either raise as much taxes as they can, or they get bailout money from other countries, or both or as a last resort, the government starts printing extra currency to pay the bills. A small country like Greece was bailed out not once but twice. The second time, foreign countries demanded that Greece reduce its spending or otherwise it wouldn't get the money. So things like government jobs was cut. Huge protests by the people of Greece resulted.
Unlike Greece however, the United States has a much bigger problem with its financial situation. First of all, there is not enough foreign money to go around that would bail out the debt of the United States! Which would leave the country with two options, raise taxes to astounding new highs, cut programs very deep or print more money to make up the difference. By printing more money on a massive scale to help pay the bills would in turn create hyper-inflation because the dollar would devalue so low, the prices of goods and services would dramatically go up, changing the standard of living for everyone. This is a lot worst than a recession or a depression. It wouldn't be the first time that a country had gone through hyper-inflation. Other countries like Mexico, Russia and Argentina have gone through similar situations.
So how can we prevent such a major meltdown in the economy that would affect people lives so dramatically? The answer is simple, the free market! Let's begin with one of the most important government programs which is medicare that contributes heavily to the deficit with its out of control spending. Here are some of the solutions proposed and implemented to a certain degree so far...
Under the Obamacare plan which has been passed but not fully implemented yet, a panel of 15 people would decide how much money the government would pay for various health-care services and which services would be covered and which services would not be covered. If the panel decides to pay less for services than non-medicare patients, they would see higher costs to make up the difference or like the mayo clinic, medicare patients would be no longer accepted.
The Paul Ryan plan is another solution to the problem, this plan would create competition with more consumer involvement in the cost of health-care for those under the age of 55 using competitive bidding which could create reductions in Medicare spending without implementing hard spending caps.
Here is what it says...
"The second-least expensive approved plan or fee-for-service Medicare, whichever is least expensive, would establish the benchmark that determines the premium-support amount for the plan chosen by the senior. If a senior chose a costlier plan than the benchmark plan, he or she would be responsible for paying the difference between the premium subsidy and the monthly premium."
"Conversely, if that senior chose a plan that cost less than the benchmark, he or she would be given a rebate for the difference. Payments to plans would be risk-adjusted and geographically rated. Private health plans would be required to cover at least the actuarial equivalent of the benefit package provided by fee-for-service Medicare."
It has estimated that medicare spending would be reduced by 2.5 trillion dollars while eliminating Obamacare's tax hikes. The plan is going in the right direction, but it doesn't solve the overall problem with the costs of health-care because people do not see spending their own money rather it's the insurance company's money. Obtaining a reduction in health-care services that will provide the highest service at the lowest possible cost relies on you, the consumer rather than just the insurance companies!
Here is how a consumer driven plan works and this goes for both medicare or private insurances. You need an MRI, various hospitals in your area charge anywhere from 2,000 to 3,000 dollars. The MRI specialists charge 600 dollars and you decide to choose that one instead of the hospital. Your plan consists of a deducible. This deducible will be reduced on what you have to pay because of the better choice you made. You save money and also the insurer saves money in this case the taxpayers. A mandated deductible is limited in scope on what it can reduce in terms of medical costs because once the deductible is met there is no incentive to save anymore money for future health-care treatments.
With a consumer driven plan, you can add all kinds of incentives which creates competition in the health-care industry! Another example would be, if you need heart surgery and one hospital charges say, 80,000 dollars and another 43,000 dollars. You choose the hospital charging 43,000 dollars, your deduction is eliminated and no co-pays for drugs or doctors up to three months during rehab. Now the dollar figures may vary in your area, but are you getting the idea on a consumer driven plan rather than just choosing an insurance plan? A consumer driven plan is the solution for bringing down the high costs of health care while maintaining world-class service!
Now on to bringing the United States out of a great recession. As mentioned earlier in this article, President Obama decided to use the stimulus package consisting of taxpayers money to create jobs and also maintain existing ones. Stats from the government have been provided and we can see that the policy is not working like it was promised. The states mentioned are from the west coast to the east coast. The sampling consists of six states that have been awarded money and how much was given so far. The total amount given for all six states is 70.4 billion dollars. The total jobs created for all six states is 62,027. A very low result considering how much money was spent. So the stimulus plan is nothing to brag about, it hasn't turned the economy around nor created many jobs like advertised.
Here is how it can be turned around without using stimulus money. Take Apple for example. They recently announced that their total earnings for the first quarter of this year (2012) which was a staggering $39.2 billion! It blew expectations away! How much stimulus money was used to turn this business into a record sharing profit? You guessed it, none! Apple has become the most valuable business in America and despite the sluggish economy, their business is booming without the help of any stimulus money! So that is the key here, the free market will eventually turn the economy around. And once the economy turns around, tax revenue goes up as well which also helps pays for the programs and national debt down the road.
And one last thing that wasn't previously mentioned but does play a role in deficit spending and that is the post office that has lost billions of dollars. The government hasn't allowed the post office to act like a business thus it has become a liability rather than an asset. One way to fix the post office is to limit delivery for resident mail to 3 days a week and business mail 3 days a week and spread those days out over a course of six days. If a business requires more deliveries than those provided 3 days, they would have to pay a user fee. If mail has to be delivered on a certain day that is not part of the 3 day rotation for residents then they have to pay a user fee.
So there you have it, a simple but effective way to prevent the American economy from going through a major economic meltdown that would affect the standard of living as we know it!
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