Tag: Economics

Paying for Health Care

On December 31, 2010, many of the products currently eligible for reimbursement through Flexible Spending Accounts will no longer be covered unless your physician provides you with a prescription.    That’s important to note since you can get your physician to write a prescription for the expensive OTC drugs that you use, and you will be eligible for reimbursement.  You will need to send in your prescription with your receipts for reimbursement, and you will not be able to use an FSA debit card.  That may be a good thing since many of the those debit cards are a nightmare to use.

Here’s a handy list of qualified and nonqualified expenditures post 12/31

heb.com/fsa

The Joint Committee on Taxation estimates that this will generate revenue in excess of $5 billion in the first ten years.

Here’s  a website that you can use to calculate your share of the $5 billion: Save Flexible Spending Plans.

All the Devils are Here: The Hidden History of the Financial Crisis

John Stewart interviews the authors of  a new book about the subprime and derivatives-driven financial crisis.  Caveat:  Stewart manages to work in one f-bomb.  The authors claim that the bank regulators required state attorney generals to role back rules that regulated predatory lending and that Wall Street blames the whole mess on the stupid consumers that bought houses they couldn’t afford.  Ironically, we are being encouraged to both save and borrow to save the economy.

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Will the Bush Tax Cuts be Reinstated?

The problem:  how to tackle the deficit.    Not extending the cuts immediately raises taxes on everyone.  Spending cuts are difficult since Medicare, Social Security, and Medicaid represent 50% of our budget by 2015 (  Peter Orzag ).  The other half of our budget is split 50/50 between interest payments on US debt and discretionary spending.  The discretionary spending is 50% defense and 50% non-defense.

Here’s an opportunity  for you to try your hand at balancing the budget.  Especially pay attention to the revenue options:  you’ll find many of the tax effects you may face in 2010.

Get a Pencil.  You’re Tackling the Deficit.

PACT (Prevent All Cigarette Trafficking) Law Now in Effect

A bit of legislative trivia.  Note that Cigars are exempt.

The legislation titled “Prevent All Cigarette Trafficking (PACT) Act,” was passed by Congress and signed into law by President Obama on March 31, 2010.

Effective immediately, the U.S. Postal Service® cannot accept or transmit any package that it knows, or has reasonable cause to believe, contains nonmailable smokeless tobacco or cigarettes.

Cigarettes, including roll-your-own tobacco, and smokeless tobacco are considered “nonmailable” matter, unless the shipment falls within certain exceptions. The acceptance and transport of packages containing cigars is not prohibited under the Act.

Read More USPS.com.

Texas-The World’s 11th Largest Economy

Comptroller’s Economic Outlook

“The Texas economy, the world’s 11th-largest, continues to fare better than those of many other states. But Texas felt the effects of the worldwide recession during 2009. Despite the state’s economy contracting in 2009, Texas’ relative economic advantage should continue as the state and U.S. economies turn around and expand again in 2010. The Comptroller’s office estimates that Texas’ gross state product will grow by 2.6 percent during calendar 2010. The U.S. economy should grow at a slower rate of 2.0 percent during the year.”

Read more of Susan Comb’s remarks.

In support of Entrepreneurs and Small Business

David Brooks column in the NY Times, An Economy of Grinds, emphasises that the economy will continue to creep along until the business climate for “the country’s loners, its contrarians and its narrow, ambitious outsiders”  is “wide-open” with an “atmosphere of general confidence”.  Brooks calls these outsiders The Grinds.

Here’s a link to the article:  An Economy of Grinds.

Don’t throw good money after bad

Austin Talk Radio Batters Metrorail

Not a real headline but the discussion was a good reminder of how to NOT make a decision to abandon a project.

Investors are notoriously emotionally involved in decisions that they have made.  It is almost impossible to divorce ourselves from the consequences of important decisions that we have made.  This is called  Loss Aversion.

When we have made a decision such as investing $65 million  in a Metrorail or $5000 in WholeFoods and watch the trains operate at a loss or our stock decline by half of its value, our loss aversion and emotions keep us from correctly considering our original investment as a sunk cost.  Sunk costs are non recoverable costs that force us to admit that we have made a bad decision.

Some decisions require that we abandon our prior investment and invest additional funds that will correct the decision.  One example is abandoning a website that is too expense to maintain but that cost $15,000 for a $1000 out of the box website that works great.

Other decisions require that we look at future operations but on a cash flow basis.  If an operation, perhaps a commuter train, is cash flowing, consideration of the original investment is irrelevant to the decision as to whether to continue or stop the train.  The relevant costs to compare with income from the project are the costs that will end if operations are ceased.

Finally, we might need to consider selling assets that we can’t afford to pay for even though we would lose our investment, especially if we can pay off any debt associated with the property.  Continuing to own an asset with operating losses due to mortagage payments that could be sold is also an example of loss aversion.

The Great Recession

The jobless recovery was discussed on the March 5, 2010, broadcast of The Takeaway.   Lakshan Achuthan, managing director of Economic Cycle Research Institute , a market analysis company,   tells a tale of two economic Americas. Contrary to popular belief, the current recession has not been all that bad for many Americans. Unfortunately, the other 40 percent of unemployed fall into what Lakshman calls the “long term unemployed;” and he adds that their plight may not be over any time soon.

Achuthan comments that the Jobs Package which offers a payroll tax reduction incentive to employers will not address the problem of the long term unemployed as employers will only accelerate hiring that is already on the table.


Texas Holiday Facts

TXHolidayFacts-300x450

During the holiday season, people across our state will gather together and celebrate with friends and family to exchange gifts, offer thanks and reflect on the past year. Many Texans are also expected to buy Christmas trees, bake holiday treats or hit the roads to travel. To commemorate this special time of year, Texas Comptroller Susan Combs has compiled some festive holiday facts about our state and its economy related to the season.
• Texas has approximately 150 Christmas tree farms across the state producing 200,000 trees annually on 2,500 acres. Texas Christmas tree growers contribute $12 million each year to the state’s economy. Christmas trees have been grown commercially in Texas since 1977. Virginia and Afghan pines are the most common Christmas trees grown in Texas.
• In Houston, the city saved $185,000 in landfill costs by recycling 5,800 tons of tree waste from 47,000 homes from October 2007 to September 2008. Seventy-nine tons of this tree waste was from Christmas tree recycling.
• In 2007, Texas producers contributed 75 million pounds of pecans toward the record United States total crop of more than 385 million pounds.
• The Neiman Marcus Christmas Book was first published in 1926. Neiman Marcus is headquartered in Dallas.
• The Collin Street Bakery in Corsicana has been baking the world-famous DeLuxe fruitcake since 1896, the recipe for which was brought over from Wiesbaden, Germany. The bakery ships its Texas fruitcakes, pecan cakes and other delicious pastries to 196 countries.
• In 2008, 5 million Texans traveled during the Christmas and New Year’s season, with 4.5 million traveling by car. Only California had more holiday travelers.
• According to the U.S. Census Bureau, three places in the country are named after the main course of Christmas dinner: Turkey, Texas, was the most populous in 2008, with 456 residents, followed by Turkey Creek, La. (361) and Turkey, N.C. (272).
• According to climate data gathered over the years, Abilene, Lubbock and Wichita Falls have a 3 percent chance of having a white Christmas, and Amarillo has a 7 percent chance of having snow on Dec. 25. The other major cities in Texas have nearly zero chance of a white Christmas.
• More than half of Texas consumers (55 percent) hope to spend more or the same on the holidays this year, an improvement from 43 percent last year. Texas consumers anticipate spending $1,380 over the holiday season, or 21 percent higher than the national average of $1,145.
• Three in four Texas consumers plan to use cash, checks or debit cards to pay for their gifts, compared to 65 percent nationwide. Only 23 percent of Texans expect to use credit cards.
• More than 60 percent of Texans expect to shop at discount/value department stores and 50 percent plan to shop via the Internet.
• Gift cards are expected to be the top gift for the sixth year in a row, with 67 percent of Texas consumers planning to buy an average of six gift cards for presents this year.

During the holiday season, people across our state will gather together and celebrate with friends and family to exchange gifts, offer thanks and reflect on the past year. Many Texans are also expected to buy Christmas trees, bake holiday treats or hit the roads to travel. To commemorate this special time of year, Texas Comptroller Susan Combs has compiled some festive holiday facts about our state and its economy related to the season.

• Texas has approximately 150 Christmas tree farms across the state producing 200,000 trees annually on 2,500 acres. Texas Christmas tree growers contribute $12 million each year to the state’s economy. Christmas trees have been grown commercially in Texas since 1977. Virginia and Afghan pines are the most common Christmas trees grown in Texas.

• In Houston, the city saved $185,000 in landfill costs by recycling 5,800 tons of tree waste from 47,000 homes from October 2007 to September 2008. Seventy-nine tons of this tree waste was from Christmas tree recycling.

• In 2007, Texas producers contributed 75 million pounds of pecans toward the record United States total crop of more than 385 million pounds.

• The Neiman Marcus Christmas Book was first published in 1926. Neiman Marcus is headquartered in Dallas.

• The Collin Street Bakery in Corsicana has been baking the world-famous DeLuxe fruitcake since 1896, the recipe for which was brought over from Wiesbaden, Germany. The bakery ships its Texas fruitcakes, pecan cakes and other delicious pastries to 196 countries.

• In 2008, 5 million Texans traveled during the Christmas and New Year’s season, with 4.5 million traveling by car. Only California had more holiday travelers.

• According to the U.S. Census Bureau, three places in the country are named after the main course of Christmas dinner: Turkey, Texas, was the most populous in 2008, with 456 residents, followed by Turkey Creek, La. (361) and Turkey, N.C. (272).

• According to climate data gathered over the years, Abilene, Lubbock and Wichita Falls have a 3 percent chance of having a white Christmas, and Amarillo has a 7 percent chance of having snow on Dec. 25. The other major cities in Texas have nearly zero chance of a white Christmas.

• More than half of Texas consumers (55 percent) hope to spend more or the same on the holidays this year, an improvement from 43 percent last year. Texas consumers anticipate spending $1,380 over the holiday season, or 21 percent higher than the national average of $1,145.

• Three in four Texas consumers plan to use cash, checks or debit cards to pay for their gifts, compared to 65 percent nationwide. Only 23 percent of Texans expect to use credit cards.

• More than 60 percent of Texans expect to shop at discount/value department stores and 50 percent plan to shop via the Internet.

• Gift cards are expected to be the top gift for the sixth year in a row, with 67 percent of Texas consumers planning to buy an average of six gift cards for presents this year.