Mike’s Financial Pocket: 2013 Review and 2014 Preview

It’s been quite a year for the markets and the economy. I think that it is a useful exercise to recap some of the major stories this year, along with some general discussions on how these issues will impact America in 2014.

1. The fiscal cliff and tax reform: a (somewhat) decent start.

We started 2013 falling off of the fiscal cliff, only to have a last minute deal put into place that hiked taxes on “the rich” (those families making $450,000 per year) from 35% to 39.6%. Dividends and capital gains for “rich” folks were also subject to a higher tax (20% if you were in the 39.6% tax bracket for your income). There was a 2% reduction in the payroll tax sunset. However, the AMT and estate tax were “fixed” permanently and indexed for inflation going forward. Also, the Bush-era tax rates for all incomes below $450,000 (families) were made permanent.

This, in my opinion, was a pretty good deal for the GOP, considering the fact that Obama had just trounced Mitt Romney and really had all of the momentum. I would of course like to see more tax cuts across the board — especially for corporations so they can repatriate some overseas money and invest it here instead of simply holding it offshore. That would be some real stimulus.

Of course, a repeal of the income tax or a flat tax would have been much better. But real tax reform isn’t going to happen until the GOP wins a broad election. And even if the GOP wins in 2014 and 2016, it probably won’t happen anyway (to the extent which I want it to happen).

2. The debt ceiling debacle is still a debacle.

The debt ceiling was another hot topic in 2013. For most of the year, Congress essentially suspended the debt ceiling until certain dates on a couple occasions during the year — only to have it culminate in a shutdown and a fight leading us “to the brink” in mid-October. This was somewhat of a replay of the debt ceiling theater from 2011, but the difference was that Congress and the President seemed to understand (at least in private) that a real debt ceiling breach could cause serious economic problems.

Let’s get something straight. We spend too much money. We also owe too much debt. But defaulting on obligations was, is, and continues to be a bad idea.

Even if your position is that the President and the Treasury have the ability to prioritize payments to avoid a default, can we really trust this President to do so? Given his history of “bending” statutory law to what is politically expedient for his administration, I certainly don’t trust him to do the right thing — ever. Again, we have to play with the cards we’re dealt. Without winning an election, it is going to be tough to get real spending and debt reform.

Really, in my opinion, the GOP shouldn’t push on the debt ceiling going into the 2014 election cycle, because there is nothing to gain here. The cuts and spending limits that people on the right want simply cannot be put into effect when Harry Reid runs the Senate and President Obama is in the White House. Period. Full stop.

Of course, that doesn’t mean that the farm should be given away… but expect another punt here, especially with the Ryan budget proposal now being passed by both the House and the Senate.

3. Obamacare, despite being “the law,” is terrible and will be the subject of 2014 and beyond.

Obamacare has been a complete disaster thus far, as we predicted. I’m not just talking about the website, though that has been a good mascot for this situation. Premiums have skyrocketed (really since 2010), policies are being cancelled, and people are finding out that they are paying more for lower quality coverage. Some doctors are not accepting new state exchange policies, while other policies (which are deemed “better” because they cover stuff you don’t need) are pricing more and more people out of the insurance market.

This is really sad because it was preventable. There is no doubt that this will be the dominant issue in 2014. The best thing that the GOP can do is run not just on a “repeal Obamacare” ticket, but set forth a GOP health insurance plan involving free market solutions (including HSAs, cross-border issuance, etc.) to put Democrats on the defensive. Ben Domenech sets forth several plans that the GOP has basically agreed upon and put forth to reform health insurance and the associated costs here:

  • They want to end the tax bias in favor of employer-sponsored health insurance to create full portability (either through a tax credit, deduction, or another method);
  • They want to reform medical malpractice laws (likely through carrot incentives to the states);
  • They want to allow for insurance purchases across state lines;
  • They want to support state-level pre-existing condition pools;
  • They want to fully block grant Medicaid;
  • They want to shift Medicare to premium support;
  • They want to speed up the FDA device and drug approval process; and
  • They want to maximize the health savings account model, one of the few avenues proven to lower health care spending, making these high deductible + HSA plans more attractive where Obamacare hamstrung them.

Avik Roy also set forth the GOP alternatives offered instead of Obamacare in 2009-2010 here, as well as Obamacare replacements:

  • Ten Steps to Transform Health Care in America Act (S. 1783) introduced by Senator Mike Enzi (R-WY) July 12, 2007.
  • Every American Insured Health Act introduced by Senators Richard Burr (R-NC) and Bob Corker (R-TN) with co-sponsors Tom Coburn (R-OK), Mel Martinez (formerly R-FL) and Elizabeth Dole (formerly R-NC) on July 26, 2007.
  • Senators Bob Bennett (R-UT) and Ron Wyden (D-OR) introduced the Healthy Americans Act on January 18, 2007 and re-introduced the same bill on February 5, 2009.
  • Patients’ Choice Act of 2009 introduced by Senators Tom Coburn (R-OK) and Richard Burr (R-NC) and Rep. Paul Ryan (R-WI) and Devin Nunes (R-CA) on May 20, 2009.
  • H.R. 2300, Empowering Patients First Act introduced July 30, 2009 by Rep. Tom Price (R-GA).

With the way Obamacare has developed so far, the momentum should continue to shift to the GOP in 2014. The key here is to get in front of the narrative that the Democrats will likely push in 2014: the GOP has no plan. This is simply not true. The mantra should be that the GOP has a more free market plan — and the Democrats had no plan when they passed Obamacare.

As always, free markets are better markets.


Retail sales will be the big item that folks will be looking for as the Christmas season wraps up in this short week. Jobless claims info will be released on December 26 (expecting 340k). But overall, expect a quiet week heading into the Christmas and New Year’s holidays.

Merry Christmas, Happy Holidays, and Happy New Year! Best wishes to all Pocket Full of Liberty readers, and thank you for your readership this year.