Thank you all. I appreciate the replies. I can't say I disagree with much that was said.

As for comments on taxes -- I agree the government spends too much (more, in fact, under Bush than any other administration). I agree this capital would be best put to work with private citizens (including the small business at which I work, which has created 30 new jobs in the past three years). But here's the thing: The Bush administration ain't doing this. It's running the largest federal budget in history, and is increasing it at a pace greater than (what they think) is inflation. It's an administration that has somehow depicted itself as "fiscally conservative," yet isn't. The deficit situation is dangerous, if only because the Bush administration ignores it ("deficits don't matter"). If they were running a private company with this attitude ("debt doesn't matter"), and I were the shareholder, I'd be worried.

As far as education and healthcare, I am only speaking from personal experiences and my personal research: This stuff is getting really expensive. And I'm not talking about heart surgery: I'm talking about going to the doctor to get a blood test or stitches in the E.R.

As for the Iraq issue, this topic was not focused on that and that's a whole new can of worms. Let it suffice to say that the administration's approach to Iraq has been similar to its approach to the economy. It has not been forthright with information.

Scott Raynovich

I'd like to point out a few errors in Mr. Raynovich's analysis.

1) He writes:

"Education costs: Well, to NOT consider these means we're only concerned about Americans without families. Education costs are rising at twice the rate of inflation, and this has real-world implications. Factoring these costs is pretty much critical to the average American family. If we really want our kids to have the same level of education as our generation don't we have to do something about that? If we're short-changing the current generation on education what does that say about the future competitive nature of America?"

What education costs is he talking about? Public primary and secondary school? Private primary and secondary school? Public or private college education? Where parents send their kids to school affects how much they pay and, more importantly, the structure of their payments.

Private primary and secondary schools are certainly very expensive, but they have always been expensive. Furthermore, private schools expect parents to cut them checks right away with little or no leeway in tuition costs or financing of the amount. Hence, most parents do not send their kids to private primary or secondary schools (hopefully, this will change with a school voucher or school tax credit program).

Public primary and secondary school finance is a completely different matter. Parents do not pay directly for their children's education. The indirect nature of public school finance, where public schools are paid out of a pool of tax revenue, places a huge wedge between what education actually "costs" and what families actually "pay." Thus, education "costs" are not a factor in any family budget. No parent will ever have to make a tradeoff between, say, feeding their child and sending him to school. Certainly, they will concern themselves with other areas of their budget, like what they have to pay in taxes, but this, in turn, is not uniform anyway. Larger, poorer families are taxed less and subsidized more than smaller, wealthier families. Public primary and secondary school costs are simply not an issue for most families.

Public and private college costs are certainly enormous but, again, there is an enormous difference between what the tuition "costs" are and what people actually "pay". Education loans, grants, and other forms of finance are very easy to get, have very low interest rates and are paid over the course of a lifetime. Consider my own experience. I attended the University of Chicago from 1991 to 1995, graduating with a degree in economics. The tuition cost (including room and board) was $28,000 a year. I had a modest scholarship of $2,000 and paid for the rest of my education with grants and loans. I've carried a total debt load of $25,000 to date and I have the rest of my life to pay for it.

It is true that I come from a lower middle-class family and that for me financial aid was easier to get. Others may certainly have more trouble. It is, however, generally true that people are not going to have trouble going to school. Even if most tuition is taken in the form of loans, interest rates and payment terms are so lenient that paying for school is barely a problem. Heck, even defaulting on student loans has little or no effect on your credit. The bottom line is, paying for college is not going to be a problem for most people.

And does anyone actually believe there is any connection between the quality of education and the cost of education anymore? Maybe if they're Democrats, but anyone can see that that the amount of money spent every year goes up yet the test scores keep going down. We are certainly not getting what we pay for and we should not be throwing good money after bad.

2) He writes:

"Rising healthcare: This has had a massive effect of everybody in the workforce. To ignore this is folly. I am an equity partner a small, entrepreneurial, employee-owned business. The fact is insurance rates have been jacked up dramatically over the last three years. We have been profitable and some employees have benefited from wage increases, but in general these wage increases -- and company profits -- are being eaten away at by health insurance costs. Not many folks are getting raises, and when they do, healthcare is outrunning them. Often take-home pay decreases even if wages have gone up.... because of health insurance costs. What's wrong with this picture?"

Focusing on wages is a mistake since wages have become a smaller component of total compensation. Provision of health insurance and other benefits have taken the place of some salary. If insurance and benefits are items a person will buy anyway, then what matters is changes in the total compensation package, not just changes in a component of that compensation package, like wages. And while insurance costs rise, so do benefits, like better quality drugs.

Because insurance costs take the place of some portion of salary, insurance has always eaten away at wages. While officially both companies and workers "pay into" insurance, the reality is that workers pay for all of their insurance out of their negotiable salary. Remember the history of how such non-wage compensation came about in the first place. Companies began offering insurance and benefits during WWII as a method of getting around wage controls instituted by the Roosevelt administration. Later, they were able to secure tax-deductibility for insurance and other benefits. So, actually, insurance "costs" represent a "windfall" to companies, rather than an expense.

This was driven home to me when my company, Northern Trust in Chicago, gave me a breakdown of my compensation package. On top of my salary was an insurance benefit of $10,000 per year. If they are paying this out in cash to their provider, then they have actually reduced my negotiable salary by $10,000 to provide this benefit. Since they are also taking tax deductions on this benefit, then I am actually costing the company less than if I would've taken the entire amount in salary. If, on the other hand, this $10,000 benefit is merely a "charge" in a bookkeeping entry, then the gains are even larger. The company gets to deduct this money on their taxes while passing the costs of maintaining this coverage onto me in the form of a payment deducted out of my payroll check, plus reducing my cash salary.

What does this "charge" business actually mean?

Remember that insurance companies do not set aside in cash for the amount of money a person is insured. A person with a $1 million life insurance policy does not have $1 million lying around in an account for his use when he meets the terms of his contract. Instead, he has a claim on a pool of funds. The charge for this claim is his premium, which is based on his probability of filing a claim.

What applies to a person also applies to a company, with the added benefit that employee health is uncorrelated to where a person works and the large size of firms allows the law of large numbers to work in favor of the company. A company with 7,000 employees may estimate that each employee will incur health care costs of $10,000 per year, which means the company will have an insurance burden of $70 million. If paid out in cash, the company will lose $70 million in cash, but gets it back by negotiating smaller salaries for employees. They will also take tax deductions on this amount. If it is a $70 million health insurance policy, then the company pays a premium, passes a portion of this premium to the employee, pays the rest with lower salaries, and deducts the total amount of the premium against their taxes (As an aside, notice that the obvious incentive is to over-insure employees for the purpose of getting larger tax-deductions.)

For large companies, health insurance costs are a non-issue. For individuals who work for large companies (the majority of people), the loss in negotiable salary is transparent, since every company does this. The "lower" salary becomes the market-bearing salary. Therefore, the only component of healthcare costs that actually matter is the monthly premium paid, the co-payment on the choice of plan and the benefits covered. I am paying $15 a month for an HMO to cover myself. PPO's probably go up to $40 a month. Even if this amount were to triple, to $45, that still is not a lot of money (yes, it is a 300% increase, and it looks bad, but this is merely the tyranny of small numbers). After all, the average salary in Chicago is $42,000. In the end, healthcare costs are a non-issue.

3) He writes:

"What about local taxes? This is not factored into much of the economic reality of the Bush Administration -- or what economists say about 'the economy.' They claim there is a flood of tax-cut money coming back to the middle class. What they don't tell you is that many localities are in bad shape and because of a poor economy (really, go out and ask folks on the street how the economy really is) and federal tax cuts, they have been cutting services and raising local taxes -- which again effects your take-home pay."

This is simply wrong. What do federal tax cuts have to do with local services? Furthermore, he is neither showing how the economy is in "poor" shape nor what the economy has to do with local governments.

The reason why localities are in poor shape is because they increased spending during the Internet bubble. They assumed that the flood of tax revenue would last forever, so they expanded programs accordingly. They loaded themselves up with debt, and, when the money mysteriously vanished, they started complaining about hurting. Localities are "hurting" because they do not want to stop their spending, even when they have no money. And why do they keep on spending? Because their citizens buy into the politician-as-Santa-Claus mentality and keep voting Democrats into office.

4) He writes:

"Do you really believe the government's data? I submit to you that whether a Republican or a Democrat is issuing 'numbers,' these numbers do not present an accurate picture of the current economy. For one, the unemployment number is a joke. Everybody knows there are far more people unemployed, because many have dropped off the rolls or left the workforce altogether after being discourage. I propose you go out in the street and talk to folks --- small business owners, working stiffs, whomever, and ask them how the economy is doing vis-a-vis the government viewpoint. Things aren't nearly as rosy as you would believe. The statistics are cooked, pure and simple."

Really? The government's data is wrong? Based on what? And how would all of these people know? Granted, government data may have errors, but suggesting something is imperfect is not enough. What better evidence is there?

Consider, how is it possible to "know" that far more people are unemployed then show up on unemployment statistics? This is not a fact. It is speculation. It is like saying millions of rapes go unreported. But if they are unreported, then how does anyone know they happened?

Surveying people on the street is a very ineffective method of determining the state of the economy. Those people could simply be wrong about the facts. Even if they were basing their opinions on their own experience, what value is that? If I'm doing poorly does that mean everyone else is doing poorly as well?

5) He writes:

"If Kerry is indeed the tax-addicted liberal the Republicans make him out to be, then yes, we may indeed be in trouble. But there is a middle ground that can be struck with fiscal responsibility in trimming SPENDING and delivering only a modest tax burden. The Bush administration has completely lacked in fiscal responsibility... and spending has increased. I also believe that the administration should be honest, and act with integrity, and try to get a realistic picture of what's going on with the so-called average American. Some of Kerry's points about healthcare and education costs are valid -- and to me this is a much more realistic vision than Bush's propaganda that 'everything is fine,' and his view that the government's roll is to resort to printing presses and perhaps dumping money out of airplanes to give us the path to prosperity. Well, that's just out of touch."

How do you trim spending when the standard practice of the Democratic Party is wealth redistribution? How do you challenge Democrats whose basic message is "Vote for me, and I will give you the Treasury and everything it buys?" How is it possible to have fiscal responsibility with Democrats selling Faustian bargains attractive to the public?

Of course spending has increased. Clinton engineered a "smaller" government with drastic cuts in the military budget but continued increasing the budgets of the non-military sector. When that mess resulted in 9/11, and military spending had to be re-instated, then spending, of course, went up. How is this irresponsible? Is Bush supposed to give up his campaign promises? Is he supposed to waste political capital (capital needed to secure votes on Iraq, among other things) to satisfy the Democrat's fake concern about fiscal irresponsibility? Please. And exactly who is not getting healthcare?

Mark Pokorni

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