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Today's Commentary: 02.07.05

Throw Momma from the Train
A Look behind the Smoke Screen

While the State of the Union speech delivered by President Bush last Wednesday brought the usual partisanship support and disdain, it proved one thing beyond any doubt: this man can get the country talking. Mr. Bush has the uncanny ability to divide the country even when they discuss something of which residents of both Blue and Red states have an equally vested interest.

Personally, I think the debate about Social Security is overdue. Often thought of as the political third rail, this mostly solvent New Deal program has withstood the test of time and, with a minor tweak or two, will last well into the next century. But according to the President it will be bankrupt in 2042. The President believes that something must be done now and he asked the country to join together to save the program. That may not be the whole reason for this public forum about the retirement program.

There are fundamental changes taking place in your future behind the scenes making the public stomping and touring appear more the smoke screen than a genuine effort to "save the program".

The day before Mr. Bush stood before Congress, his new Secretary of Health and Human Services Mike Leavitt was speaking about a topic that was delivered in a folksy down home parable about three families living on a cul-de-sac. The former governor of Utah, appointed by Mr. Bush first as Christine Whitman's replacement at the EPA and then to his new post was chosen for his effectiveness at rendering Medicaid insufferable in Utah. His mission, at the behest of his boss, is to change the program at the national level.

His example of the three families drifts beyond cute to inane. Using the relationship the federal government has with the states in administering the program for his example, and the manipulative way the states try to make the rising costs of the program affordable while being beneficial for all involved, the benevolent federal neighbor apparently has had enough.

This is where the smoke gets thickest. As Mr. Bush travels around the country telling folks that his accounts would create inheritable wealth, Mr. Leavitt is taking that wealth and penalizing it. In his proposal the day before the President addressed Congress and the nation, his newly appointed secretary was describing his method of punishing those cheating grannies who put all of their assets - their inheritable assets - into their children's names thus making them eligible for Medicaid.

This despicable behavior will stop according to Leavitt who suggests that these assets must first be used to pay for the medical bills and therefore are nontransferable.

Meanwhile, over at the Commerce department, Donald L. Evans and the Secretary of Housing and Urban Development Alphonso R. Jackson are working on eliminating or consolidating eighteen programs designed to lift the nation's poor through development of inner cities. Programs such as Community Development Block Grant create jobs by stimulating depressed neighborhoods while encouraging businesses to grow in the newly revitalized area.

Citing their reasons for consolidation as a way to reduce overlapping programs, the cost to low income people is far greater than the 33% reduction these programs will face under the new budget. Although this behind the smoke screen effort will find a tough audience in Congress, it is still a telling sign that this administration wants to grow the distance between those that have and those that some day would like to have.

While we are on the subject of budgets, the President's new budget submitted Monday will find many of the groups that voted for him being forced to pick up the check for the first four years of fiscal irresponsibility. One hundred and fifty programs will face some sort of cut in the next year in a effort to rein in the spending habits of the country. While Mr. Bush claims to have political capital, his financial capital has always been spent quickly, which forces him to borrow on the world stage.

The first four years have left us with a war that is sucking the lifeblood out of the GDP to the tune of a billion dollars a week, a pair of deficits that are not containable, and a dollar that is floundering in an ever shrinking pool of creditworthiness. While his budget puts the clamps on how the federal government funds many projects in the states, on a national level, he cannot seem to mention Social Security without also mentioning the need to borrow to fix it.

In the meantime, the first leg of tort reform will also be enacted systematically shifting what the states understood and had the capacity to handle to the federal courts. This move to the federal level finds judges that are over booked but an environment where it will be easier to legislate caps on lawsuits. Neutering the process by shifting to a new judiciary has happened with very little fanfare as well, the shouts of advocacy groups getting lost in the Social Security debate.

The long range implications of this shift will further change the economic landscape of not only catastrophic injuries, now making them eligible for a fixed award cap, but also how business operates. Understanding the cost of grievous mistakes makes those mishaps not only insurable but cost-effective.

Separating meritorious claims from frivolous ones seems to be at the heart of the move, supported by some Democrats in the Senate Judiciary Committee, the group that recommends the change for a Congressional vote. That however will prove to be another behind the scenes smoke and mirrors trick that has yet to be played out completely.

Throwing Momma from the train may be the best option for retirees who want to leave an inheritance, live in viable communities, be able to right a wrong caused by a corporation all while avoiding bankruptcy, a cut in benefits and further deterioration of their quality of life. Momma will be on her own because these cuts will have an effect on you as well. The changes in Social Security will be continued to be dissected both economically and politically for as long as it takes for the agenda you can't see for the smoke to get passed.

The Blue Money Report
Financial Commentary covering a wide range of topics concerning money, investing, and how it effects the average investor and their financial health.

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