Moore’s Law, the IRS and Obamacare

May 20, 2013
by Bob Adelmann

Obamacare could be torpedoed by an unlikely combination of causes: Moore’s Law and the inability of the IRS to keep up with the new healthcare morass could spell the end of the program altogether.

Nearly 50 years ago, Intel co-founder Gordon Moore predicted that the number of transistors implanted on circuit boards would continue to double every two years. So accurate was his prediction that “Moore’s Law” is now used in the semiconductor industry as an underlying assumption for planning for future growth and development.

The ripple effect has been enormous, with the improvements in processing speed, memory, capacity – even the number and size of pixels in digital cameras – tracking Moore’s Law ever since.

The revolution has been called the Gutenberg Press of the 21st century, with ramifications for freedom and individual empowerment that still can’t be estimated clearly. Since the company Echo Bay conducted its first commercial transaction online in September 1995, and soon thereafter changed its name to eBay, nearly every conceivable part of the economy has benefited … with the exception of the Internal Revenue Service. It has fallen behind the technology curve and has little chance of ever catching up, no matter how many billions of dollars are thrown at it.

Back in 1997, the General Accounting Office (GAO) complained about how the $4 billion spent in the previous decade had not achieved the IRS’s much-touted goal of integrating databases and replacing paper tax returns with digital, paperless ones. In what was probably the understatement of the year, assistant GAO comptroller Gene Dodaro said, “They are doing or planning to do many of the right things. Unfortunately, some of the areas … will take many years to see improvement.”

In 2011, the IRS was still trying to finish implementing its new computer system that it began installing 12 years earlier to replace its Tax System Modernization plan. It proved a complete failure after spending $2.5 billion on it. And efforts to play catch-up with the IT revolution have since cost the agency (read: taxpayers) another $4 billion. For example, in 2010 the IRS was still using mainframe computers from the 1960s to process returns. Those computers allowed the agency to handle only about 30 percent of the total individual tax returns received – those considered “relatively simple” – in a timely and efficient manner. The others had to be done by hand.

The fiscal cliff threw another monkey wrench into the IRS’s system, which delayed tax refunds so much that even Walmart felt it when reporting its February numbers. And we now know that with the Citizens United ruling by the Supreme Court, a virtual avalanche of applications for tax exempt status – estimated by some to exceed 60,000 – poured into the IRS in early 2010. This delayed approval of many of them – especially those that had names like “Tea Party” and “patriot” in their titles – for up to 27 months.

And now comes Obamacare, with the requirement that the IRS enforce the program’s 47 new taxes and mandates, and integrate them with the Social Security Administration and the Department of Health and Human Services. As Ryan Ellis, the Tax Policy Director of Americans for Tax Reform, put it:

It’s this very same IRS that the Obamacare law envisions as the primary enforcer of the new healthcare regime. It will be the IRS’s job to determine whether you or your family purchased “qualifying” health insurance in the past year.

It will be the IRS’s job to deliver an advanced and refundable tax credit to insurance companies on behalf of millions of Americans, and to reconcile all these numbers when those same Americans try filling out their confusing tax forms. If your faith precludes the purchase of health insurance, it will be up to the IRS to ratify that creed.

This is wonderful news. The decision to give enforcement of the Obamacare monstrosity to the IRS that is so far behind the technological curve increases the likelihood that the whole system will blow up. The resulting disgust and frustration might just be enough to force Congress to end Obamacare altogether. For that, we would have Gordon Moore to thank.

----------------------------

Sources:

Can the IRS handle Obamacare?

IRS Chief Tries to Protect Crown-Jewel Computer System From Budget Cuts

Success of IRS computer upgrade key to agency's broad reforms

The Internet

Moore’s Law

eBay

The Internet: the Gutenberg Press of the 21st Century

Add new comment

Plain text

CHECK OUT THE ENTIRE MCALVANY NETWORK

McAlvany Weekly Commentary provides investors with valuable monetary, economic, geo-political and financial information that cannot be found on Wall Street. Your host David McAlvany presents a solid strategy of wealth preservation for your financial and retirement assets while living in an unstable economy.

Through its client focused, customized approach, MWM is committed to providing independent, well-researched, objective advice, and investment professionalism. At MWM, our client commitment is to preserve capital, manage risk, and grow your assets in an ever-changing global environment.

At International Collectors Associates (ICA), we specialize in the sale of bullion, semi-rare U.S. and European gold coins and secure offshore storage in Switzerland for your precious metals. Our highly trained and experienced advisors strive to help you in customizing solid strategies of wealth preservation for your financial and retirement assets.

McAlvany Financial Group

The McAlvany Financial Group has a contrarian, in-depth approach to its analysis, allowing the company to avoid decisions based on emotion, and thus combine maximum risk mitigation with consistent real growth for its clients’ investments. Integrity, attentiveness, and longevity have characterized the company’s client relationships since 1972.