Great video
Friday, August 20, 2010
Thursday, June 3, 2010
Sunday, March 21, 2010
Finally A Reason to Get In Shape
Now that the government seems destined to take over health care, albeit in 4 years even though we will be paying for it next year, I guess I now have the incentive to get back into shape. Afterall, the last thing I want to be is dependent on a health care system that has bureaucrats like B Hussein, Harry Reid, and Nancy Pelosi in control of my life.
We should all be very scared that the will of majority has been completely ignored and that a select group of Congressmen have hijacked government. While I am confident that November will see the Democrat-controlled House end, the damage is done.
So what will B Hussein do to the American people next? My guess is hire more of the unemployed to work for the government at 150% of the prevailing private sector wage and benefits. So who will be the last to actually create economic value in this country? We may know soon enough.
Off to the gym.....
We should all be very scared that the will of majority has been completely ignored and that a select group of Congressmen have hijacked government. While I am confident that November will see the Democrat-controlled House end, the damage is done.
So what will B Hussein do to the American people next? My guess is hire more of the unemployed to work for the government at 150% of the prevailing private sector wage and benefits. So who will be the last to actually create economic value in this country? We may know soon enough.
Off to the gym.....
Saturday, March 20, 2010
Fix It Later..I Doubt It.
From Megan McArdle's blog at the Atlantic:
I agree with her completely. No politician will fix this thing on either side.
But this I am confident of: they're not going to "pass this bill and then fix it," and the people saying that this should be the priority of people who are against the bill--including people like Rep. Lynch--seems borderline delusional. You think the Democrats are going to take up health care again this term? Given that they look more likely than not to lose the House, you think Democrats are going to take it up again before these laws go into effect?
Those like my colleague Andrew, who want Republicans to turn to the task of improving this monstrous bill--how is that going to happen? The "fixes" are all the unpopular stuff: the taxes, the spending cuts. You think that now that Democrats got to hand out the goodies, Republicans are going to be the nasty folks who volunteer to hand around the bill for a law they didn't even want to pass?
Every time I hear comments on this sort of thing, I want to say, "And what other things have you been wondering during your visit to our planet?" I am not perfectly confident about much in regards to this bill. Maybe I'm wrong and politicians won't step in to stop the unpopular stuff already in the bill from happening. Maybe they'll actually bend the curve. Maybe this won't impact innovation (I don't see how that could possibly be, but whatevs, maybe my imagination is limited).
But there is one thing of which I am nearly perfectly certain: If we pass this thing, no American politician, left or right, is going to cut any of these programs, or raise the broad-based taxes necessary to pay for them, without any compensating goodies to offer the public . . . until the crisis is almost upon us. I can think of no situation, other than impending crisis, in which such a thing has been done--and usually, as with Social Security, they have done just little enough to kick the problem down the road. The idea that you pass a program of dubious sustainability because you can always make it sustainable later, seems borderline insane. I can't think of a single major entitlement that has become more sustainable over time. Why is this one supposed to be different?
I agree with her completely. No politician will fix this thing on either side.
Letter to the Editor
Second submission this week to the Wichita Eagle...
Dear Editor,
Much has been made of the recent health care debate. Among those advocating more government involvement in health care are people that claim that a country as great as ours should provide health care for all its citizens.
The point these people are missing is what got America to this point? Was it bigger government and state controlled enterprise that made us great? It most certainly was not. It was the Founders’ ideals of small government and individual freedom and accountability that got us to the pinnacle of history’s standard of living.
German economist Adolph Wagner theorized over 100 years ago that once countries reach a certain level of prosperity the populace will eventually vote themselves ever more benefits accompanied by growth in government. As government grows and more citizens find themselves dependent on those social services, one can only imagine a decline in the overall level of our prosperity as fewer people are actually producing the goods and services that created history’s most prosperous society.
Dear Editor,
Much has been made of the recent health care debate. Among those advocating more government involvement in health care are people that claim that a country as great as ours should provide health care for all its citizens.
The point these people are missing is what got America to this point? Was it bigger government and state controlled enterprise that made us great? It most certainly was not. It was the Founders’ ideals of small government and individual freedom and accountability that got us to the pinnacle of history’s standard of living.
German economist Adolph Wagner theorized over 100 years ago that once countries reach a certain level of prosperity the populace will eventually vote themselves ever more benefits accompanied by growth in government. As government grows and more citizens find themselves dependent on those social services, one can only imagine a decline in the overall level of our prosperity as fewer people are actually producing the goods and services that created history’s most prosperous society.
Wednesday, March 10, 2010
New Editorial for the Eagle
Still trying to decide whether or not to send it to them....
Dear Eagle Editorial Staff,
It appears that health care reform is not going to go away in Washington. There are many considerations to be made on both sides of the issue. However, one thing is known for certain and that is health care consumes a significant portion of US GDP.
Health care is expensive today because most individuals have no incentive to hold costs down. Employers or insurance companies pay most of the costs. Nothing in the current legislation addresses this problem. Bureaucrats want to control escalating costs by capping what insurances premiums are, not what health care actually costs.
Health insurance has become a means to health care payment rather than protection from catastrophic loss. If the US is to tackle these escalating costs, Health Insurance must return to be just that, insurance. High-deductible plans with Health Savings Accounts are fantastic alternative for people to have coverage and still be accountable for cost. These are all available today with no more legislation or interference. They just need to be encouraged and put into practice.
I also know that another certainty is that Congress will get health care wrong. The Washington Times reports recently that Congress expected Medicare to cost $12 billion by 1990 when they made their projections in 1967. Unfortunately they were wrong as Medicare cost $98 billion 23 years later. They missed their projections by 800% and regrettably the US Government has not improved their forecasting in recent years with Medicare and SCHIP following similar miscalculations. Can citizens of this country really afford to have the government to miss projections by this wide margin again? We are now looking at trillion dollar miscalculations.
Under proposed legislation, insurance companies will be forced to insure people that normally would not be insured and cover conditions they would not normally cover. Furthermore, they will be forced to hold premiums down while taking more risk. This is bound to drive many, if not all of them, out of business. After all, healthy people will still not buy insurance and will wait until they are sick to buy coverage. The insurance companies cannot deny them under new rules. How is this different than a driver buying auto insurance after he wrecks his car and expecting full coverage? It is not a sustainable business model.
The competitive market for quality health care is starting to show signs of life. Retail clinics are appearing in malls and shopping centers. These clinics give consumers an affordable alternative to the doctor’s office. Many pharmacies now have $4 generic prescriptions, driving drug costs down. Quality care is also being marketed in foreign countries where surgeries can be done at a fraction of the price one would expect to pay in a US hospital. These are all market-based solutions that need to be encouraged, not sacrificed to special interest groups representing corporations and health care professionals. Cosmetic surgery and laser eye surgery are all very good examples of how market forces can lower the cost and raise the quality of care in this very way.
I do not believe anyone, on either side of the issue, wants to deny anyone access to quality health care. Ironically, the proposals being circulated today may just do that very thing. Let’s let the markets work and hold down costs through competition in health care, not insurance. Let’s also get health insurance back to actually being insurance. Make individuals accountable for costs and let markets work through a market-based system of affordable, high-deductible health insurance and Health Savings Accounts. This alone will determine what the right portion of GDP health care should consume. These small changes can save all of us from rising costs, further government interference and additional misguided projections from Washington.
-Doug
Dear Eagle Editorial Staff,
It appears that health care reform is not going to go away in Washington. There are many considerations to be made on both sides of the issue. However, one thing is known for certain and that is health care consumes a significant portion of US GDP.
Health care is expensive today because most individuals have no incentive to hold costs down. Employers or insurance companies pay most of the costs. Nothing in the current legislation addresses this problem. Bureaucrats want to control escalating costs by capping what insurances premiums are, not what health care actually costs.
Health insurance has become a means to health care payment rather than protection from catastrophic loss. If the US is to tackle these escalating costs, Health Insurance must return to be just that, insurance. High-deductible plans with Health Savings Accounts are fantastic alternative for people to have coverage and still be accountable for cost. These are all available today with no more legislation or interference. They just need to be encouraged and put into practice.
I also know that another certainty is that Congress will get health care wrong. The Washington Times reports recently that Congress expected Medicare to cost $12 billion by 1990 when they made their projections in 1967. Unfortunately they were wrong as Medicare cost $98 billion 23 years later. They missed their projections by 800% and regrettably the US Government has not improved their forecasting in recent years with Medicare and SCHIP following similar miscalculations. Can citizens of this country really afford to have the government to miss projections by this wide margin again? We are now looking at trillion dollar miscalculations.
Under proposed legislation, insurance companies will be forced to insure people that normally would not be insured and cover conditions they would not normally cover. Furthermore, they will be forced to hold premiums down while taking more risk. This is bound to drive many, if not all of them, out of business. After all, healthy people will still not buy insurance and will wait until they are sick to buy coverage. The insurance companies cannot deny them under new rules. How is this different than a driver buying auto insurance after he wrecks his car and expecting full coverage? It is not a sustainable business model.
The competitive market for quality health care is starting to show signs of life. Retail clinics are appearing in malls and shopping centers. These clinics give consumers an affordable alternative to the doctor’s office. Many pharmacies now have $4 generic prescriptions, driving drug costs down. Quality care is also being marketed in foreign countries where surgeries can be done at a fraction of the price one would expect to pay in a US hospital. These are all market-based solutions that need to be encouraged, not sacrificed to special interest groups representing corporations and health care professionals. Cosmetic surgery and laser eye surgery are all very good examples of how market forces can lower the cost and raise the quality of care in this very way.
I do not believe anyone, on either side of the issue, wants to deny anyone access to quality health care. Ironically, the proposals being circulated today may just do that very thing. Let’s let the markets work and hold down costs through competition in health care, not insurance. Let’s also get health insurance back to actually being insurance. Make individuals accountable for costs and let markets work through a market-based system of affordable, high-deductible health insurance and Health Savings Accounts. This alone will determine what the right portion of GDP health care should consume. These small changes can save all of us from rising costs, further government interference and additional misguided projections from Washington.
-Doug
Tuesday, February 16, 2010
Sunday, February 14, 2010
My Draft Plan to Save the Country
B Hussein keeps saying he is willing to listen to all ideas to balance the budget and get the US Financial House back in order. So I have thrown a few ideas that I believe we will move us back to what we need to be to ensure the economic freedom that is the backbone of our prosperity.
1. Eliminate the following Departments Completely:
a. Education-Not needed. Leave education funding and standards up to the states. Do it now.
b. Agriculture- The Forest Service moves into Dept of Interior. Eliminate the rest immediately. If States want to fund Ag subsidies, then let them.
c. Energy-Not needed. Eliminate it. Nuclear power can be regulated by Commerce Dept.
d. HHS-Move FDA and NIH into Commerce Dept. Eliminate the rest completely. I believe the Indians have been given enough and can sustain themselves.
e. Homeland Security-This should be in the Justice Dept or Defense Dept. and drastically scaled back.
f. HUD-Close it over 3 years to ween people off the dependency of government aid. Sell HUD assets to private individuals. Sell off Fannie, Freddie and the clan. Stay out of the mortgage market forever.
g. Labor-This should be managed by the States. Parts that deal with Veterans move into the Defense Department.
h. Veterans Affairs-Again, move this into Defense Dept.
2. Change the remaining departments as such:
a. Commerce-Manages inter-State commerce and inspection of foreign goods (safety) only. There will be no tariffs or duties as we will be a market where lower priced international goods will make products cheaper for US consumers and businesses. US Businesses will have to compete head-to-head with the world's best. This will make us stronger, not weaker. It will also eliminate the special interest and political pandering that goes on in Congress today. After all, if there is no money at stake lobbyist will disappear. In addition, get 20% smaller in 90 days. Give terminated workers one year of pay and benefits.
b. Defense-Come on, do you really need more money than the rest of the world spends on weaponry combined? There has to be some where to save. I will give you some time (2 years) before I get involved.
c. State-You get a reprieve, for now.
d. Treasury-get 20% smaller in 90 days. Give terminated workers one year of pay and benefits.
e. Interior. Same 20% rule from above applies. Start selling government owned land that is not part of the National Park System. Consider leasing a few national parks to private business to operate. Plan on making it system-wide in 10 years.
f. Justice. Reprieve, for now.
g. Transportation. Fix the FAA. Eliminate 10% of your positions within the year. All terminated employees get 1 year salary and benefits. Another 10% next year.
3. Taxes.
a. Eliminate the Corporate Income Tax. This will make US businesses the most competitive in the world. It will reduce the return threshold for projects by nearly 40% meaning more growth and capital expenditures. All corporations that are profitable must pay out 30% of profits as dividends to shareholders that will then be taxed as income to those that receive dividends.
b. Total tax receipts cannot exceed 20% of GDP. If they do, everyone gets a proportional refund based on taxes paid. This number drops .25% for the next decade.
c. Eliminate the estate tax. This is really just a way for Life Insurance Companies to sell more policies and produces very little in the way of revenue.
d. Top marginal tax rate is 25%. Why should anyone give the government more than a quarter of your income?
e. Institute at 1.5% Federal sales tax on all non-food goods and retail services. Everyone needs to pay something to the Federal Government to live here, even those that are illegal or bypass the 1040 form (although this will now be the size of a postcard).
f. Income deductions-Most are gone, including charity and mortgage. The self-employed and non-covered can deduct health care coverage. Retirement and Education savings are also deducted as with 401(k)-type mechanisms today.
4. Entitlements.
a. Social Security-FICA maximum tax frozen for 5 years. SS payments frozen for 5 years. After that, FICA is a function of taxes collected in the prior year. Sorry folks it is a Ponzi scheme and your Congressmen lied to you. It's this or nothing.
b. Medicare-Medicare has to get back to providing basic medical care only. No more motorized wheel chairs for everyone that turns 65 and new bionic knees. If you want that coverage, seek alternative coverage or pay for it yourself. Co-pays have to be levied that encourage prudent use of health care resources. Ideally, everyone would have an HSA they have been saving into for 20-30 years to would cover most of these co-pays. Free care encourages over-consumption and has to be controlled.
5. Policy Changes
a. If is not in the Constitution, it is the individual States' responsibility. We want the States to compete. If their balances of taxes and benefits are wrong, people and business will move. It is a great market system at work.
b. Term limits. Senator get 2 terms (or whatever your state decides, see below) and Representatives get 6. No more that 12 years in office. If you can't get it done in 12 years, you failed.
c. Add more Representatives. Makes it harder for special interest to buy votes. The number could be twice what it is today. Need to think about this more.
d. Repeal 17th Amendment. State Legislatures must elect Senators. This government puts more power into the hands of State Government and they must have a voice at the Federal level.
e. No foreign aid until the US financial house is in order. If you are broke, you shouldn't be letting others use your Visa.
f. Immigration. We have laws. Follow them. If you cannot follow the process then please stay home or risk being shot at the border. Given that, we need to encourage legal immigration, especially for those that are talented (aka college graduates). An aging country is not a good thing. Japan and Russia are in trouble for this very reason. You can speak your language at home, but everything else will be in English at the Federal level.
g. No more United Nations or NATO. We know who our friends are.
h. Banks lend money and pay savers. That's it if you want deposit insurance backed up by the Feds.
i. No more FEMA. If you live in a dangerous area, be prepared. No more Federal Flood Insurance. If you live in a dangerous area, be prepared or get out. That includes those nice beach front homes.
j. Earmarks have to be posted on Congressional web pages and why the funding was provided. President gets a line-item budget veto on all matters of spending.
I am not advocating a Federal balanced budget. However, I am advocating deficits that grow less than the overall economy. A surplus would be good now and then to insure we can weather any downturns (they will happen). States have to take back the power. People have to regain Independence from the Nanny State. The courts have to preserve rule of law and property rights. A smaller Federal government has to be the end in mind with more powerful State governments. With this, maybe we can get back to what the Founders envisioned.
1. Eliminate the following Departments Completely:
a. Education-Not needed. Leave education funding and standards up to the states. Do it now.
b. Agriculture- The Forest Service moves into Dept of Interior. Eliminate the rest immediately. If States want to fund Ag subsidies, then let them.
c. Energy-Not needed. Eliminate it. Nuclear power can be regulated by Commerce Dept.
d. HHS-Move FDA and NIH into Commerce Dept. Eliminate the rest completely. I believe the Indians have been given enough and can sustain themselves.
e. Homeland Security-This should be in the Justice Dept or Defense Dept. and drastically scaled back.
f. HUD-Close it over 3 years to ween people off the dependency of government aid. Sell HUD assets to private individuals. Sell off Fannie, Freddie and the clan. Stay out of the mortgage market forever.
g. Labor-This should be managed by the States. Parts that deal with Veterans move into the Defense Department.
h. Veterans Affairs-Again, move this into Defense Dept.
2. Change the remaining departments as such:
a. Commerce-Manages inter-State commerce and inspection of foreign goods (safety) only. There will be no tariffs or duties as we will be a market where lower priced international goods will make products cheaper for US consumers and businesses. US Businesses will have to compete head-to-head with the world's best. This will make us stronger, not weaker. It will also eliminate the special interest and political pandering that goes on in Congress today. After all, if there is no money at stake lobbyist will disappear. In addition, get 20% smaller in 90 days. Give terminated workers one year of pay and benefits.
b. Defense-Come on, do you really need more money than the rest of the world spends on weaponry combined? There has to be some where to save. I will give you some time (2 years) before I get involved.
c. State-You get a reprieve, for now.
d. Treasury-get 20% smaller in 90 days. Give terminated workers one year of pay and benefits.
e. Interior. Same 20% rule from above applies. Start selling government owned land that is not part of the National Park System. Consider leasing a few national parks to private business to operate. Plan on making it system-wide in 10 years.
f. Justice. Reprieve, for now.
g. Transportation. Fix the FAA. Eliminate 10% of your positions within the year. All terminated employees get 1 year salary and benefits. Another 10% next year.
3. Taxes.
a. Eliminate the Corporate Income Tax. This will make US businesses the most competitive in the world. It will reduce the return threshold for projects by nearly 40% meaning more growth and capital expenditures. All corporations that are profitable must pay out 30% of profits as dividends to shareholders that will then be taxed as income to those that receive dividends.
b. Total tax receipts cannot exceed 20% of GDP. If they do, everyone gets a proportional refund based on taxes paid. This number drops .25% for the next decade.
c. Eliminate the estate tax. This is really just a way for Life Insurance Companies to sell more policies and produces very little in the way of revenue.
d. Top marginal tax rate is 25%. Why should anyone give the government more than a quarter of your income?
e. Institute at 1.5% Federal sales tax on all non-food goods and retail services. Everyone needs to pay something to the Federal Government to live here, even those that are illegal or bypass the 1040 form (although this will now be the size of a postcard).
f. Income deductions-Most are gone, including charity and mortgage. The self-employed and non-covered can deduct health care coverage. Retirement and Education savings are also deducted as with 401(k)-type mechanisms today.
4. Entitlements.
a. Social Security-FICA maximum tax frozen for 5 years. SS payments frozen for 5 years. After that, FICA is a function of taxes collected in the prior year. Sorry folks it is a Ponzi scheme and your Congressmen lied to you. It's this or nothing.
b. Medicare-Medicare has to get back to providing basic medical care only. No more motorized wheel chairs for everyone that turns 65 and new bionic knees. If you want that coverage, seek alternative coverage or pay for it yourself. Co-pays have to be levied that encourage prudent use of health care resources. Ideally, everyone would have an HSA they have been saving into for 20-30 years to would cover most of these co-pays. Free care encourages over-consumption and has to be controlled.
5. Policy Changes
a. If is not in the Constitution, it is the individual States' responsibility. We want the States to compete. If their balances of taxes and benefits are wrong, people and business will move. It is a great market system at work.
b. Term limits. Senator get 2 terms (or whatever your state decides, see below) and Representatives get 6. No more that 12 years in office. If you can't get it done in 12 years, you failed.
c. Add more Representatives. Makes it harder for special interest to buy votes. The number could be twice what it is today. Need to think about this more.
d. Repeal 17th Amendment. State Legislatures must elect Senators. This government puts more power into the hands of State Government and they must have a voice at the Federal level.
e. No foreign aid until the US financial house is in order. If you are broke, you shouldn't be letting others use your Visa.
f. Immigration. We have laws. Follow them. If you cannot follow the process then please stay home or risk being shot at the border. Given that, we need to encourage legal immigration, especially for those that are talented (aka college graduates). An aging country is not a good thing. Japan and Russia are in trouble for this very reason. You can speak your language at home, but everything else will be in English at the Federal level.
g. No more United Nations or NATO. We know who our friends are.
h. Banks lend money and pay savers. That's it if you want deposit insurance backed up by the Feds.
i. No more FEMA. If you live in a dangerous area, be prepared. No more Federal Flood Insurance. If you live in a dangerous area, be prepared or get out. That includes those nice beach front homes.
j. Earmarks have to be posted on Congressional web pages and why the funding was provided. President gets a line-item budget veto on all matters of spending.
I am not advocating a Federal balanced budget. However, I am advocating deficits that grow less than the overall economy. A surplus would be good now and then to insure we can weather any downturns (they will happen). States have to take back the power. People have to regain Independence from the Nanny State. The courts have to preserve rule of law and property rights. A smaller Federal government has to be the end in mind with more powerful State governments. With this, maybe we can get back to what the Founders envisioned.
Fabians....
This is one of the best articles I have read in some time. It is a time of hope and alarm. Let's hope the Fabians don't win.
We Picked the Wrong Roman Dictator
We Picked the Wrong Roman Dictator
Thursday, December 24, 2009
The Senate Health Bill Nonsense, Vol 1.
I am about 80 pages into the Senate Health Bill (AKA Patient Protection and Affordable Care Act or PPACA) and already the nonsense begins in gross quantities.
For instance:
‘‘SEC. 2701. FAIR HEALTH INSURANCE PREMIUMS.
Then it goes on to say:
‘‘SEC. 2705. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS AND BENEFICIARIES BASED ON HEALTH STATUS.
So as the name insurance would imply, people buy it to avoid risk and the insurance company much price the policy to provide for greater revenue than expense associated with the policy. So with the above 9 criteria removed from pricing the policy, I would imagine the insurance company will have to assume everyone has all 9 of the above risk factors and will be forced to price every policy as such. This DOES NOT mean lower premiums for current policy holders. It's impossible, or it will force bankruptcy on the insurance providers. Hummm.....maybe that's what they want so there is no option but the government option?
Can you imagine if an auto insurance company could not price an auto policy if they could not rate the insured based on driving record, number of previous accidents, etc? Everyone would be forced into a higher policy to cover all their risks.
For instance:
‘‘SEC. 2701. FAIR HEALTH INSURANCE PREMIUMS.
‘‘(1) IN GENERAL.—With respect to the premium rate charged by a health insurance issuer for health insurance coverage offered in the individual or small group Market—Even life insurers price insurance based on smoking preference. So health insurers cannot varies premiums by more than a factor of 1.5:1? Does Congress even check with the Surgeon General to assess the risks here? This factor alone means higher premiums for us non-smokers since the insurance companies will have to price insurance for the smoker first, then discount back to find the premium for the non-smoker.
‘‘(A) such rate shall vary with respect to the particular plan or coverage involved only by—
‘‘(i) whether such plan or coverage covers an individual or family;
‘‘(ii) rating area, as established in accordance with paragraph (2);
‘‘(iii) age, except that such rate shall not vary by more than 3 to 1 for adults
(consistent with section 2707(c)); and
‘‘(iv) tobacco use, except that such rate shall not vary by more than 1.5 to 1; and
‘‘(B) such rate shall not vary with respect to the particular plan or coverage involved by any other factor not described in subparagraph (A).
Then it goes on to say:
‘‘SEC. 2705. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS AND BENEFICIARIES BASED ON HEALTH STATUS.
‘‘(a) INGENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan or coverage based on any of the following health status-related factors in relation to the individual or a dependent of the individual:
‘‘(1) Health status.
‘‘(2) Medical condition (including both physical and mental illnesses).
‘‘(3) Claims experience.
‘‘(4) Receipt of health care.
‘‘(5) Medical history.
‘‘(6) Genetic information.
‘‘(7) Evidence of insurability (including conditions arising out of acts of domestic violence).
‘‘(8) Disability.
‘‘(9) Any other health status-related factor determined appropriate by the Secretary.
So as the name insurance would imply, people buy it to avoid risk and the insurance company much price the policy to provide for greater revenue than expense associated with the policy. So with the above 9 criteria removed from pricing the policy, I would imagine the insurance company will have to assume everyone has all 9 of the above risk factors and will be forced to price every policy as such. This DOES NOT mean lower premiums for current policy holders. It's impossible, or it will force bankruptcy on the insurance providers. Hummm.....maybe that's what they want so there is no option but the government option?
Can you imagine if an auto insurance company could not price an auto policy if they could not rate the insured based on driving record, number of previous accidents, etc? Everyone would be forced into a higher policy to cover all their risks.
Wednesday, December 23, 2009
You are locked into Obamacare.
This is a great article from an MD answering the question "Can I get out of Obamacare?"
American Enterprise Institute
Some highlights:
It is easy to see how Obama plans to lower "costs." Everyone will now have to pay for standardized care. This means more care for some, but less for others. To save money, some things will certainly be left off the Czar's approved health insurance coverage itinerary. Seems like a lot of power for any bureaucrat (or bureaucracy) to handle. Plus, how does that bureaucrat know what is good for me and my family (and for that matter, yours)? I wonder if a lower life expectancy is considered a "cost?"
American Enterprise Institute
Some highlights:
In effect, the plan creates a single national health-insurance policy. Consumers' only real option is to trade higher co-pays for lower premiums. But we'll all get the same package of benefits established by a series of new agencies and an "insurance czar" seated in Washington.
The overriding goal of this reform is to turn health insurance into a more "egalitarian" benefit that's the same for everyone, regardless of income, personal preference or need. So rules written under President Obama to implement the Obama plan are a sure bet to intentionally curtail anyone's ability to wrap around this national coverage with a supplemental policy or to contract privately with doctors to pay your way out of its limitations.
It is easy to see how Obama plans to lower "costs." Everyone will now have to pay for standardized care. This means more care for some, but less for others. To save money, some things will certainly be left off the Czar's approved health insurance coverage itinerary. Seems like a lot of power for any bureaucrat (or bureaucracy) to handle. Plus, how does that bureaucrat know what is good for me and my family (and for that matter, yours)? I wonder if a lower life expectancy is considered a "cost?"
Sunday, November 22, 2009
Tuesday, November 10, 2009
Shlaes on Hayek
I wrote the following letter to Ms. Shlaes regarding her article on Bloomberg today:
Ms. Shlaes,
I enjoyed your article in Bloomberg today, but disagree with your last point, that Americans will not embrace socialism.
A significant portion of Americans will resist, but an even greater portion will not. When half the US population pays no income tax today, socialism has already set in. Getting something for nothing and having the minority haves pay for the majority have-nots is socialism. Having government bureaucrats decide winners and losers in the economy is socialism.
Socialism sounds like a great panacea in rhetoric and we have a man in the Presidency that is one of the best at rhetoric. Unfortunately socialism's failures take time. It took the Soviet Union decades to fail. It won't be until the standard of living drops to unconscionable levels will there be a revolution to unseat the socialist movement. It is easy to sell the majority of the masses on the rob Peter to pay Paul economy without them giving consideration to the long-term ramifications.
The utopia that Socialism seems to be on paper is one thing, the reality is quite another. Hayek had perfect clarity to this fact.
Respectfully submitted,
Ms. Shlaes,
I enjoyed your article in Bloomberg today, but disagree with your last point, that Americans will not embrace socialism.
A significant portion of Americans will resist, but an even greater portion will not. When half the US population pays no income tax today, socialism has already set in. Getting something for nothing and having the minority haves pay for the majority have-nots is socialism. Having government bureaucrats decide winners and losers in the economy is socialism.
Socialism sounds like a great panacea in rhetoric and we have a man in the Presidency that is one of the best at rhetoric. Unfortunately socialism's failures take time. It took the Soviet Union decades to fail. It won't be until the standard of living drops to unconscionable levels will there be a revolution to unseat the socialist movement. It is easy to sell the majority of the masses on the rob Peter to pay Paul economy without them giving consideration to the long-term ramifications.
The utopia that Socialism seems to be on paper is one thing, the reality is quite another. Hayek had perfect clarity to this fact.
Respectfully submitted,
Monday, November 9, 2009
Why Would Business Hire New Employees?
The recent House Bill restricting health care in this country is bound to have a nasty side effect, more unemployment.
Now that employers are mandated to provide coverage it will be prohibitive to hire new employees whose productivity does not warrant the cost of insurance on top of an already high (relatively speaking) minimum wage.
Minimum wage legislation has already forced the unemployment rate of those ages 16-24 over 25%. Health care mandates will make a bad situation even worse. Those people in our economy with few skills are going to experience a very bleak future and will not get the skills and experience needed to move up the economic ladder.
For the party that claims to watch out for those at the bottom of the economic food chain they sure do all they can to harm them.
Now that employers are mandated to provide coverage it will be prohibitive to hire new employees whose productivity does not warrant the cost of insurance on top of an already high (relatively speaking) minimum wage.
Minimum wage legislation has already forced the unemployment rate of those ages 16-24 over 25%. Health care mandates will make a bad situation even worse. Those people in our economy with few skills are going to experience a very bleak future and will not get the skills and experience needed to move up the economic ladder.
For the party that claims to watch out for those at the bottom of the economic food chain they sure do all they can to harm them.
Sunday, November 1, 2009
Letter To Washington
Dear Congressman:
I am a constituent that is a frequent letter writer to your office. Normally, I am writing to you about a particular issue that is in the headlines, today I am not. Instead, I am writing to give you an idea how the decisions you, and the rest of Congress, are making are paralyzing the economy and business.
While I am not writing the letter on behalf of my company, the issues that I am going to outline drastically effect the decisions made by me and the company that employs me. As a direct result of your actions in Washington, you and the other members of Congress are affecting the competitiveness of our nation and the standard of living that all Americans enjoy today.
My job involves trading a commodity by-product of refineries. These are the refineries that produce transportation and heating fuels that make our economy so productive. State of the art technologies at work in these plants give consumers and businesses the lowest cost energy anywhere in the world. This means that consumers can consume more and business can invest in more machinery that leads to our high, relative standard of living. Congress is threatening this industry with regulation and taxes that will hurt the competitiveness of our domestic refining infrastructure. Whether it is over-reaching environmental legislation or cap-and-trade taxes, this kind of burden adds tremendous cost. This cost must be passed on to consumers or the businesses will close. Either one of these consequences is devastating. Higher costs mean less economic growth and a lower standard of living. Instead of consumers consuming more goods and services, they will be pressed into spending more money on energy. If business cannot pass on these new costs, they will close. This means loss of high-paying jobs in the industrial sector the means so much to the country’s prosperity.
The company I work for is dedicated to following the letter of the law. However, there are so many conflicting and overlapping agencies at all levels of government that it is paralyzing our business and many others. When a business does not know the rules and legal expectations, they are very hesitant to make investments. In addition, they are forced to tie up more capital and resources to maintain compliance thus reducing the investment in plants, property and equipment that to are key to economic growth. Government has to become less burdensome and complex so business feels confident they can make investments that will make our economy more productive.
Congress must also stop subsidizing inefficient businesses in this country with legislation. Inefficient business mean a loss of productivity that is the key to economic growth. Two prime examples are agriculture and shipping, but there are hundreds more examples I could choose. A few examples in the agriculture segment are dairy and sugar farming (not to mention feed grains like corn, wheat and rice).
Today there is a glut of milk on the market. Consequently most dairy farmers are now looking at producing milk at a loss. The reason the price of milk is so low is over supply based on current levels of demand. When this happens in any other industry, the highest cost producers go out of business and the market corrects itself with no help from government. This situation leaves only the very best, most efficient producers operating dairies and redirects the other resources to more efficient areas of the economy. No doubt this creates localized pain when a farmer goes out of business, but why should the taxpayers be left with the burden of supporting that farmer? If that farmer were making paper, furniture or computers the government would not support him. The agriculture lobby has gotten strong because there is money in it. Washington needs to get tough and say no to handouts.
The other example I referred to is sugar. Perhaps no other example is so wrapped up in special interest and government interference. Because of import tariffs and production limits on sugar, US consumers pay two to three times the world market price for sugar. Why? To protect a very small industry, primarily in Florida, with tremendous clout and to support the high price of corn syrup in grain growing regions of the country. No doubt this has saved jobs in these industries, but it has cost many more as consumers had to pay more for sugar than they should have. Industries where sugar is a primary ingredient have moved production overseas because they cannot be profitable paying more than market prices for sugar. This particular situation plays out in any industry where government gets involved. No matter the temptation, government has to stop determining winners and losers in business and let markets decide who succeeds and who fails.
As a taxpayer, I am appalled at what the US Government does in the shipbuilding business. Due to the legislation passed in 1920 known as the Jones Act, the US Shipbuilding business has enjoyed a position in the world market for ships that has made it terribly inefficient and driven the cost of vessel freight between US ports to unreasonable levels. In addition, it has driven the cost of Naval vessels for our own defense to ridiculously high costs for the taxpayers.
I recently received a quote for a vessel that would move the commodity that I trade. If I were to build a Jones Act vessel (one that could move between US ports), the price would be over $100 Million. I can have the same vessel made in Korea today for $30 Million. Not only is the price cheaper, but I can also have it a year sooner. Unfortunately, I cannot take that Korean vessel, loaded, between US Ports due to the Jones Act. This is a terrible outcome for businesses that are trying to compete. I cannot buy and sell with my own countrymen at a price that is competitive with foreign traders in foreign flagged vessels that only move product in or out of the US. To make matters worse, I hear the Navy is buying several high-speed ships at a cost of nearly $400 Million each. I can only imagine how much these vessels would cost if the US Shipbuilders had cost structures that forced them to compete with the Asian builders. The US Taxpayer is getting fleeced only to protect a small industry with very good political connections that have been in place for nearly 100 years.
If the citizens of this country are to continually see our standard of living rise and enjoy the fruits of economic growth, then business has to be allowed to thrive. After all, this is where real jobs are created and real wealth built. There is no better way to do this than to reduce, or even eliminate, corporate income tax. No better stimulus could be designed than a program to eliminate the corporate income tax.
Corporations make capital investment based on after-tax returns. When the government takes nearly 40% of all income on investments, it means that business must have incomes that are 40% higher in order for a capital investment to yield a return that warrants the risk. Imagine all the investment that businesses could make if the return threshold was lowered by 40%! This new investment would mean more jobs for everyone since someone would have to build the new machinery, buildings and transportation networks that new investment would require. Consumers might also enjoy lower prices as the cost of taxes is passed on directly to them. If not, companies would either pay more in dividends (that are taxed as income) or have even more money to invest in productive assets starting this entire cycle over again. A zero tax environment would attract scores of foreign investment, as the US would again be the best place to invest.
Growth in the Federal bureaucracy means more human resources and productive capital are in non-producing, government jobs rather than in production of consumer goods and services. These are jobs that play no role whatsoever in economic growth as they do nothing but force more cost on society. More government jobs mean more taxation on an already stressed private sector. Even worse, this bloated government bureaucracy has over-lapping regulatory authority that complicates all compliance matters as it relates to business. Washington must realize that it is impossible to create greater prosperity and a higher standard of living with a bigger government machine.
The US is losing its competitive edge. It is not too late to stop the decline, but Washington has to make it happen. This is not a Republican or Democrat issue, it is a matter of securing the country’s future. I want my kids to enjoy a better quality of life than mine, just like I enjoy a higher quality of life than my parents. Unfortunately, that history of prosperity and economic growth is now at risk due only to decisions made by politicians catering to special interests. What needs to be done is take the incentive out of lobbying the government for money or special protections, stop having the government determine winners and losers in commerce, and eliminate the tax burden on business. These very simple steps are all that are needed to turn the country around.
Congress is truly destroying the goose that lays the golden eggs and that goose is the entrepreneurial spirit that is historically unique to the United States of America.
Respectfully submitted,
I am a constituent that is a frequent letter writer to your office. Normally, I am writing to you about a particular issue that is in the headlines, today I am not. Instead, I am writing to give you an idea how the decisions you, and the rest of Congress, are making are paralyzing the economy and business.
While I am not writing the letter on behalf of my company, the issues that I am going to outline drastically effect the decisions made by me and the company that employs me. As a direct result of your actions in Washington, you and the other members of Congress are affecting the competitiveness of our nation and the standard of living that all Americans enjoy today.
My job involves trading a commodity by-product of refineries. These are the refineries that produce transportation and heating fuels that make our economy so productive. State of the art technologies at work in these plants give consumers and businesses the lowest cost energy anywhere in the world. This means that consumers can consume more and business can invest in more machinery that leads to our high, relative standard of living. Congress is threatening this industry with regulation and taxes that will hurt the competitiveness of our domestic refining infrastructure. Whether it is over-reaching environmental legislation or cap-and-trade taxes, this kind of burden adds tremendous cost. This cost must be passed on to consumers or the businesses will close. Either one of these consequences is devastating. Higher costs mean less economic growth and a lower standard of living. Instead of consumers consuming more goods and services, they will be pressed into spending more money on energy. If business cannot pass on these new costs, they will close. This means loss of high-paying jobs in the industrial sector the means so much to the country’s prosperity.
The company I work for is dedicated to following the letter of the law. However, there are so many conflicting and overlapping agencies at all levels of government that it is paralyzing our business and many others. When a business does not know the rules and legal expectations, they are very hesitant to make investments. In addition, they are forced to tie up more capital and resources to maintain compliance thus reducing the investment in plants, property and equipment that to are key to economic growth. Government has to become less burdensome and complex so business feels confident they can make investments that will make our economy more productive.
Congress must also stop subsidizing inefficient businesses in this country with legislation. Inefficient business mean a loss of productivity that is the key to economic growth. Two prime examples are agriculture and shipping, but there are hundreds more examples I could choose. A few examples in the agriculture segment are dairy and sugar farming (not to mention feed grains like corn, wheat and rice).
Today there is a glut of milk on the market. Consequently most dairy farmers are now looking at producing milk at a loss. The reason the price of milk is so low is over supply based on current levels of demand. When this happens in any other industry, the highest cost producers go out of business and the market corrects itself with no help from government. This situation leaves only the very best, most efficient producers operating dairies and redirects the other resources to more efficient areas of the economy. No doubt this creates localized pain when a farmer goes out of business, but why should the taxpayers be left with the burden of supporting that farmer? If that farmer were making paper, furniture or computers the government would not support him. The agriculture lobby has gotten strong because there is money in it. Washington needs to get tough and say no to handouts.
The other example I referred to is sugar. Perhaps no other example is so wrapped up in special interest and government interference. Because of import tariffs and production limits on sugar, US consumers pay two to three times the world market price for sugar. Why? To protect a very small industry, primarily in Florida, with tremendous clout and to support the high price of corn syrup in grain growing regions of the country. No doubt this has saved jobs in these industries, but it has cost many more as consumers had to pay more for sugar than they should have. Industries where sugar is a primary ingredient have moved production overseas because they cannot be profitable paying more than market prices for sugar. This particular situation plays out in any industry where government gets involved. No matter the temptation, government has to stop determining winners and losers in business and let markets decide who succeeds and who fails.
As a taxpayer, I am appalled at what the US Government does in the shipbuilding business. Due to the legislation passed in 1920 known as the Jones Act, the US Shipbuilding business has enjoyed a position in the world market for ships that has made it terribly inefficient and driven the cost of vessel freight between US ports to unreasonable levels. In addition, it has driven the cost of Naval vessels for our own defense to ridiculously high costs for the taxpayers.
I recently received a quote for a vessel that would move the commodity that I trade. If I were to build a Jones Act vessel (one that could move between US ports), the price would be over $100 Million. I can have the same vessel made in Korea today for $30 Million. Not only is the price cheaper, but I can also have it a year sooner. Unfortunately, I cannot take that Korean vessel, loaded, between US Ports due to the Jones Act. This is a terrible outcome for businesses that are trying to compete. I cannot buy and sell with my own countrymen at a price that is competitive with foreign traders in foreign flagged vessels that only move product in or out of the US. To make matters worse, I hear the Navy is buying several high-speed ships at a cost of nearly $400 Million each. I can only imagine how much these vessels would cost if the US Shipbuilders had cost structures that forced them to compete with the Asian builders. The US Taxpayer is getting fleeced only to protect a small industry with very good political connections that have been in place for nearly 100 years.
If the citizens of this country are to continually see our standard of living rise and enjoy the fruits of economic growth, then business has to be allowed to thrive. After all, this is where real jobs are created and real wealth built. There is no better way to do this than to reduce, or even eliminate, corporate income tax. No better stimulus could be designed than a program to eliminate the corporate income tax.
Corporations make capital investment based on after-tax returns. When the government takes nearly 40% of all income on investments, it means that business must have incomes that are 40% higher in order for a capital investment to yield a return that warrants the risk. Imagine all the investment that businesses could make if the return threshold was lowered by 40%! This new investment would mean more jobs for everyone since someone would have to build the new machinery, buildings and transportation networks that new investment would require. Consumers might also enjoy lower prices as the cost of taxes is passed on directly to them. If not, companies would either pay more in dividends (that are taxed as income) or have even more money to invest in productive assets starting this entire cycle over again. A zero tax environment would attract scores of foreign investment, as the US would again be the best place to invest.
Growth in the Federal bureaucracy means more human resources and productive capital are in non-producing, government jobs rather than in production of consumer goods and services. These are jobs that play no role whatsoever in economic growth as they do nothing but force more cost on society. More government jobs mean more taxation on an already stressed private sector. Even worse, this bloated government bureaucracy has over-lapping regulatory authority that complicates all compliance matters as it relates to business. Washington must realize that it is impossible to create greater prosperity and a higher standard of living with a bigger government machine.
The US is losing its competitive edge. It is not too late to stop the decline, but Washington has to make it happen. This is not a Republican or Democrat issue, it is a matter of securing the country’s future. I want my kids to enjoy a better quality of life than mine, just like I enjoy a higher quality of life than my parents. Unfortunately, that history of prosperity and economic growth is now at risk due only to decisions made by politicians catering to special interests. What needs to be done is take the incentive out of lobbying the government for money or special protections, stop having the government determine winners and losers in commerce, and eliminate the tax burden on business. These very simple steps are all that are needed to turn the country around.
Congress is truly destroying the goose that lays the golden eggs and that goose is the entrepreneurial spirit that is historically unique to the United States of America.
Respectfully submitted,
Tuesday, March 17, 2009
We Should All Be Afraid
Regardless of your opinion on the recent bonus payments to AIG executives, what the CONgress is considering just might be the greatest loss of liberty in the history of the USA.
If Congress was serious about not paying bonuses to AIG, they should have stopped giving them money months ago. Instead, we now learn that a few hundred million is being paid out of the $150B they received. In the grand scheme of things, this is a very small percentage. Kind of like the small percentage that a few billion in earmarks that CONgress just authorized in the form of earmarks in several hundred billion in omnibus spending. After all that was their argument for the earmarks.
Now for the scary part. If CONgress can target individual people with specific taxes that aim to take 100% of what they earn/make, we should all be afraid. This means that CONgress is no longer the voice of the people, but instead a group of power hungry bureaucrats that will do anything to anyone to stay in power. Now I do not like the idea of giving AIG executives a penny, they obviously did not earn it. However, if the company did not have the money they could not pay it. CONgress created that animal with money and a specific set of rules. This is just another example of how CONgress cannot respond effectively to market activities.
Once these members of CONgress realize they now have the power to target individuals, the AIG confiscation will just be the beginning. Wait until they target people that have different social views, religious views, or any of host of reasons (think gun ownership, etc).
Americans are losing more and more liberty every day. We should all be afraid.
Sunday, December 28, 2008
Job Creation Math
Carol Baum with Bloomberg wrote a great piece on Friday. In short, government does not create jobs it can only enable the private sector to do so. That is done with less regulation and lower taxes. If government could create jobs, their would be zero unemployment. However, when everyone is "working" for the government no value is created. There is no profit to tax and the growth of government cannot be sustained.
It is only through productive investment in the private sector will real job growth occur. The government does not know what industries will be successful. If they did I am sure synfuels and ethanol would be huge today. Instead, they are both colossal failures.
Here are some highlights from Bloomberg:
It is only through productive investment in the private sector will real job growth occur. The government does not know what industries will be successful. If they did I am sure synfuels and ethanol would be huge today. Instead, they are both colossal failures.
Here are some highlights from Bloomberg:
If putting people to work is the goal, we could get rid of all the heavy earth-moving equipment and go back to digging ditches with shovels.
Why stop there? If it takes one man two days to dig a trench three feet deep and 30 feet long with a shovel, how long would it take 100 men using spoons?
You get the point. We can always create jobs by replacing capital with labor, by going backward. The entire history of civilization has been characterized by an effort to move in the opposite direction and become more productive, which is another way of saying produce more with less.
All Aboard
Automation and technological innovation have had the effect of replacing humans with machines. Yet the unemployment rate isn’t perpetually rising. As countries develop, they create new and better jobs, not more of the same old ones. The goal is to raise the standard of living, something that (all economists agree) can only be achieved through higher productivity growth.
That’s something the government can’t provide. It doesn’t “sell” its goods and services to discerning buyers. It isn’t driven by the prospective return on its investment.
Instead, the government requires us to pay taxes in exchange for goods and services -- transportation, education, homeland security -- that may or may not be worth the “cost.”
There’s nothing like a crisis to play on the public’s insecurity and expand the reach of government. There’s nothing like a serious financial crisis to get economists of all persuasions on board.
Tuesday, December 16, 2008
Saturday, December 13, 2008
Spend, Spend, Spend
B Hussein is getting advice from his economic team that he must run huge deficits and push enormous government spending programs to get the US on the road to economic recovery.
Many of these government programs involve the "greening" of industry and heavy spending on Federal buildings to make them more efficient. Of course Jimmy Carter tried this. He spent in the neighborhood of $15-20 Billion to find an alternative to oil and we taxpayers have nothing to show for it today. My guess is that B Hussein will spend many multiples of Carter's folly and have a similar result. Why? Because oil is cheap and oil is effective. Even at $143 per barrel, oil is the best energy bargain there is.
B Hussein is trying to force the economy where he wants it to go. In the meantime, he is suffocating business by employing scarce capital and resources into larger government instead of letting it find its way into productive businesses. Government does not create value, it only robs people of their money. Government programs are nothing more than paying people to dig holes and others to fill them in. They might be disguised as something else, but the results are the same. Expensive programs that add nothing to the wealth of society.
No on entity, not even the Federal Government, can force the economy into a direction it does not want to go. For that matter, the Russians could not even accomplish that feat with fear and intimidation. Market forces are unstoppable and the sooner B Hussein realizes that the sooner we will be on the road to actual recovery. This means companies must fail (and government must let them) and the government cannot run unlimited deficits.
Speculation is that B Hussein will propose over $1T in deficit spending when he takes control. This is money the government does not have. They will either raise taxes and/or borrow more money. If they raise taxes (on individuals or businesses), they send the signal that government knows how to use money more effectively that it citizens. If government decides to borrow more money, it robs the private sector of loans to finance expansions or improvements. After all, there is only so much investment capital to go around. What the government takes, private industry losses. Borrowing will much more expensive, as private sector is forced to compete for funds with the government, and return on investments lower since interests rates will be higher. Since returns will be lower, fewer projects will meet private sector hurdle rates thus fewer of them will be completed.
What needs to be done is to close Federal buildings instead of improving them so government can get even bigger. Government spending needs to be balanced with tax receipts, and the corporate tax rates need to be lowered to levels that are competitive against our economic competition around the globe. Lower government spending and lower corporate taxes mean the private sector will grow creating new jobs and industries. These jobs will make society better and new industries will employ workers in areas where there will be improvements in standard of living.
Bigger government means more bureaucracy and more waste. Bigger deficits mean our children and grandchildren will live in a more uncertain world where their economic security is at risk (as if more than 40% of the US Federal Budget to pay interest on debt was not enough today). A program that decreases the size of government, spends less, and lowers taxes will take incredible courage and there will be short-term despair. However, this is the process of economic pruning that will make society more prosperous in the future.
Many of these government programs involve the "greening" of industry and heavy spending on Federal buildings to make them more efficient. Of course Jimmy Carter tried this. He spent in the neighborhood of $15-20 Billion to find an alternative to oil and we taxpayers have nothing to show for it today. My guess is that B Hussein will spend many multiples of Carter's folly and have a similar result. Why? Because oil is cheap and oil is effective. Even at $143 per barrel, oil is the best energy bargain there is.
B Hussein is trying to force the economy where he wants it to go. In the meantime, he is suffocating business by employing scarce capital and resources into larger government instead of letting it find its way into productive businesses. Government does not create value, it only robs people of their money. Government programs are nothing more than paying people to dig holes and others to fill them in. They might be disguised as something else, but the results are the same. Expensive programs that add nothing to the wealth of society.
No on entity, not even the Federal Government, can force the economy into a direction it does not want to go. For that matter, the Russians could not even accomplish that feat with fear and intimidation. Market forces are unstoppable and the sooner B Hussein realizes that the sooner we will be on the road to actual recovery. This means companies must fail (and government must let them) and the government cannot run unlimited deficits.
Speculation is that B Hussein will propose over $1T in deficit spending when he takes control. This is money the government does not have. They will either raise taxes and/or borrow more money. If they raise taxes (on individuals or businesses), they send the signal that government knows how to use money more effectively that it citizens. If government decides to borrow more money, it robs the private sector of loans to finance expansions or improvements. After all, there is only so much investment capital to go around. What the government takes, private industry losses. Borrowing will much more expensive, as private sector is forced to compete for funds with the government, and return on investments lower since interests rates will be higher. Since returns will be lower, fewer projects will meet private sector hurdle rates thus fewer of them will be completed.
What needs to be done is to close Federal buildings instead of improving them so government can get even bigger. Government spending needs to be balanced with tax receipts, and the corporate tax rates need to be lowered to levels that are competitive against our economic competition around the globe. Lower government spending and lower corporate taxes mean the private sector will grow creating new jobs and industries. These jobs will make society better and new industries will employ workers in areas where there will be improvements in standard of living.
Bigger government means more bureaucracy and more waste. Bigger deficits mean our children and grandchildren will live in a more uncertain world where their economic security is at risk (as if more than 40% of the US Federal Budget to pay interest on debt was not enough today). A program that decreases the size of government, spends less, and lowers taxes will take incredible courage and there will be short-term despair. However, this is the process of economic pruning that will make society more prosperous in the future.
Pianos and Cars
From the Mises Institute this week.
The End of the US Piano Industry
Today the highest-price good that people buy besides their houses is their car, and this reality leads people to believe that we can't possibly let the American car industry die. We couldn't possibly be a real country and a powerful nation without our beloved auto industry, which is so essential to our national well-being. In any case, this is what spokesmen for the big three say.
What about the time before the car? Look at the years between 1870 and 1930. As surprising as this may sound today, the biggest-ticket item on every household budget besides the house itself was its piano. Everyone had to have one. Those who didn't have one aspired to have one. It was a prize, an essential part of life, and they sold by the millions and millions.
That too was new. Americans before 1850 mostly imported their pianos. American manufacturing was nearly nonexistent. After 1850, that changed dramatically with the flowering of what would become a gigantic US piano industry. The Gilded Age saw a vast increase in its popularity. By 1890, Americans fed half the world market for pianos. Between 1890 and 1928, sales ranged from 172,000 to 364,000 per year. It was a case of relentless and astounding growth.
They were used in classrooms everywhere in times when music education was considered to be the foundation of a good education. They were the concert instruments in homes before recorded music and iPods. They were essential for all entertainment. American buyers couldn't get enough, and private enterprise responded.
New York, Boston, and Chicago were the homes of these companies. There was the great Chickering piano made by a company founded in 1823 and which later led the world in beauty and sound. There was Hallet and Davis in Boston, J. and C. Fischer in New York, as well as Strich and Ziedler, Hazelton, William Knabe, Baldwin, Weber, Mason and Hamlin, Decker and Sons, Wurlizer, Steck, Kimball in Chicago, and, finally, Steinway.
The American piano industry was the greatest in the world, not because the Americans came up with any new and great manufacturing techniques, though there were some innovations, but because the economic conditions made it most favorable to be manufactured here.
With the rise of this industry came a vast marketing apparatus. Piano ads were everywhere, as a tour of old magazines shows. It was widely believed that spending money on a piano wasn't really spending. It was an investment. The money you paid would be embedded right there in this beautiful and useful item. You can always sell it for more than you paid for it, and this was generally true. So people would make great sacrifices for these instruments.
With the growth of this manufacturing came an explosion of shops that served the piano market all up and down the industry. Piano tuning was a big-time profession. Retail shops with pianos opened everywhere, and the sheet-music business exploded with them. Ever notice how in big cities the music stores are typically family owned and established 40, 50, and even 100 years ago? This is a surviving remnant of our industrial past.
All of this changed again in 1930, which was the last great year of the American piano. Sales fell and continued to fall when times were tough. The companies that were beloved by all Americans fell on hard times and began to go belly up one by one. After World War II the trend continued, as ever more pianos began to be made overseas.
In 1960, we began to see the first major international challenge to what was left of the US market position. Japan was already manufacturing half as many pianos as the United States. By 1970, a revolution occurred as Japan's production outstripped the United States, and it has been straight down ever since. By 1980, Japan made twice as many as the United States. Then production shifted to Korea. Today China is the center of world piano production. You probably see them in your local hotel bar.
And what happened to the once-beloved and irreplaceable American piano industry? Steinway survives to make luxury instruments that few can afford (a reader notes that Baldwin is still around today too). Mason & Hamilin has made a great comeback in the high-end market. The rest moved overseas under new ownership or were completely wiped out.
Does anyone care that much? Not too many. Have we been devastated as a nation and a people because of it? Not at all. It was just a matter of the economic facts. The demand went down and production costs for the pianos that were wanted were much cheaper elsewhere.
Now, a piano aficionado reading this will say, buddy, you are crass. Listen to the sound of an older model Chickering and you can tell the difference. It was warm and wonderful, nearly symphonic. It is mellow and perfect for the best repertoire. By comparison, this new Chinese piano is sharp and angular and pointed. It sounds like a marimba. You can't play Schubert or Brahms on such junk. No one wants to hear that thing. Bring back the old days when pianos made sounds that sounded like real music!
Well, you can still get that old Chickering sound, even from a piano made in New York. You can buy a Steinway. Of course you have to pay $50,000 plus and even as much as $120,000, but they are there. You say that is unaffordable? Says you. It is all a matter of priorities. You can forego your house and live in a tiny apartment and still own the most gorgeous instrument money can buy. In any case, it makes no economic sense for you to demand a magnificent piano at a very low price when reality does not make that possible.
In the same way, many people will bemoan the loss of the US car industry and wax eloquent on the glory days of the 1957 Chevy or what have you. But we need to deal with the reality that all that is in the past. Economics demands forward motion, a conforming to the facts on the ground and a relentless and realistic assessment of the relationship between cost and price, supply and demand. We must learn to love these forces in society because they are the only things that keep rationality alive in the way we use resources. Without them, there would be nothing but waste and chaos, and eventual starvation and death. We simply cannot live outside economic reality.
Let's say that FDR had initiated a bailout of the piano industry and then even taken it over and nationalized it. The same firms would have made the same pianos for decades and decades. But that wouldn't have stopped the Japanese industry from taking off in the 1960s and '70s. Americans would have far preferred them because they would have been cheaper. American pianos, because they would be state owned, would fall in quality, lower and lower to the point that they would become like a Soviet car in the 1960s. Of course you could set up tariff barriers. That would have forced American pianos on us. Except for one thing: demand would still have collapsed. The pianos still have to have a market. But let's say you find a workaround for that problem by requiring everyone to own a piano. You still can't make people play them and value them.
In the end you have to ask, is it really worth trillions in subsidies, vast tariffs, impositions all around, just to keep what you declare to be an essential industry alive? Well, eventually, as we have learned in the case of pianos, this is not essential. Things come and things go. Such is the world. Such is the course of events. Such is the forward motion of history in a world of relentless progress generated by the free market. Thank goodness that FDR didn't bother saving the US piano industry! As a result, Americans can get a huge range of instruments from all countries in the world at any price they are willing to pay.
Today government is even more arrogant and absurd, and it actually believes that by passing legislation it can save the US car industry. It can subsidize and pay for uneconomic activities, and pay ever more every year. The government can also pay millions of people to make mud pies because mud pies are deemed to be an essential industry. You can do this, but at what cost and what would possibly be the point? Eventually, even the government will have to accord itself to the reality that economics reminds us of on a daily basis.
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Tuesday, December 9, 2008
Another Great LTE
Editor, Baltimore Sun
Dear Editor:
Dan Neil wants to nationalize General Motors, in part because "without big subsidies, there is no way in the near term to build these [electric] vehicles and make a reasonable profit, because of the stubbornly high cost of advanced batteries" ("Let's nationalize GM," Dec. 8).
Neil makes several wrongheaded assumptions. For example, he assumes that the future benefits of such a battery would outweigh the current costs of using them. But there's no way he can know this to be true. These batteries cost a lot today because their production requires an extraordinary amount of resources today. Using these resources to produce an unprofitable battery means that we sacrifice, TODAY, a great deal of profitable outputs and investments in other industries. Perhaps resources artificially forced into advanced-battery development would otherwise have helped cure cancer, or encouraged development of more fuel-efficient jet engines, or deployed to keep millions of retired Americans more financially secure. Neither Neil nor Uncle Sam can know the value of what would never be created as a result of subsidizing unprofitable production in
Sincerely,
Donald J. Boudreaux
Don Boudreaux is the Chairman of the Department of Economics at George Mason University and a Business & Media Institute adviser
Letter To My Congressmen
Dear Senator,
I understand there will be a vote any day on the Big 3 bailout. As my Senator, I request that you reject this bailout as nothing more than rewarding failure. The management failed to negotiate profitable deals with unions and develop cars people actually wanted to buy. Unions failed by holding companies hostage in good times and running them into the ground in bad times. Government failed as it pushed ridiculous CAFE standards on carmakers that did nothing to curb gasoline consumption.
The entire domestic auto business, as it relates to the Big 3, is a failure and the money thrown at this problem will do nothing to get consumers to buy their products. Let them go bankrupt. There will be investors willing to buy the assets in bankruptcy and produce cars and trucks in these very same plants. Yes the unions will have to make huge concessions and I am sure new owners will change the management teams. This is a good thing and the only thing that will save Detroit.
Just as Pittsburg rebuilt itself after the bust in steel 20 years ago, Detroit will find it’s way too. Reject the bailout and focus on cutting government spending and waste. If the Big 3’s business plans were so good, investors would be buying bonds today. Government is no wiser than the markets and will certainly lose it all for the taxpayers.
Respectfully yours,
XXXXXXX
I understand there will be a vote any day on the Big 3 bailout. As my Senator, I request that you reject this bailout as nothing more than rewarding failure. The management failed to negotiate profitable deals with unions and develop cars people actually wanted to buy. Unions failed by holding companies hostage in good times and running them into the ground in bad times. Government failed as it pushed ridiculous CAFE standards on carmakers that did nothing to curb gasoline consumption.
The entire domestic auto business, as it relates to the Big 3, is a failure and the money thrown at this problem will do nothing to get consumers to buy their products. Let them go bankrupt. There will be investors willing to buy the assets in bankruptcy and produce cars and trucks in these very same plants. Yes the unions will have to make huge concessions and I am sure new owners will change the management teams. This is a good thing and the only thing that will save Detroit.
Just as Pittsburg rebuilt itself after the bust in steel 20 years ago, Detroit will find it’s way too. Reject the bailout and focus on cutting government spending and waste. If the Big 3’s business plans were so good, investors would be buying bonds today. Government is no wiser than the markets and will certainly lose it all for the taxpayers.
Respectfully yours,
XXXXXXX
Saturday, December 6, 2008
Sowell Wisdom
Thomas Sowell has a great column in Townhall this week.
Referring to mandatory community service for young people:
Indeed, many of those who promote compulsory "community service" activities are bitterly opposed to even voluntary military training in high schools or colleges, though many other people regard military training as more of a contribution to society than feeding people who refuse to work.
In other words, people on the left want the right to impose their idea of what is good for society on others-- a right that they vehemently deny to those whose idea of what is good for society differs from their own.
The essence of bigotry is refusing to others the rights that you demand for yourself. Such bigotry is inherently incompatible with freedom, even though many on the left would be shocked to be considered opposed to freedom.
Great Letter
Great letter in Baltimore Sun this week:
Editor, Baltimore Sun
Dear Editor:
You opine that Detroit automakers "need to explain in detail to Congress how they intend to eliminate thousands of uneconomical dealerships, swiftly bring their labor costs closer to what Toyota pays its workers in this country, and quickly produce more energy-efficient cars that Americans will want to buy" ("Selling American cars," Dec. 4).
No. These companies deserve investment funds only if they're able to make cars that will sell AND can demonstrate this ability to private investors. Congress is manned by people who specialize in winning popularity contests called "elections." These are not people expert in judging business models, or at pondering the pros and cons of different retail-distribution methods, or equipped to accurately discern the nuances of consumer demands for automobiles, or even – judging from their track record – aware of the most elementary principles of finance and economics.
If, say, you're looking for someone to manage your 401(k), would you entrust that job to Sen. Mikulski or Rep. Hoyer? Of course not, for that's not what they do. So why entrust them and other politicians with the job of investing on a vastly larger scale?
Sincerely,
Donald J. Boudreaux
Don Boudreaux is the Chairman of the Department of Economics at George Mason University and a Business & Media Institute adviser.
Thursday, December 4, 2008
If the plan is so good, why not sell bonds?
With the Big 3 lobbying for a bailout with their new and improved business plans, one has to wonder why Congressmen would not buy bonds with their own money if they were so good?
Wall Streeters are not giving them money or issuing bonds, so I believe very smart finance people think the Big 3 are doomed to fail.
Good Posts:
Sunday, November 30, 2008
What the Chinese Don't Know
This story from AP makes it clear the China is not the threat we all make it out to be.
He are some parts:
Hu told members of the Communist Party's powerful Political Bureau that the financial meltdown posed critical challenges to a government that has staked its legitimacy in part on competent management of a rapidly developing society.
Whether the pressures can be turned into a driving force and the challenges turned to opportunities ... is a test of our ability to control a complex situation, and also a test of our party's governing ability," Hu said.
First, a government that stakes it's legitimacy on competent management is doomed to fail. Government is made up of bureaucrats and politicians that have incentives to stay in power, not create value for society. When the pace of change is as fast as it is in China, government cannot respond as fast as markets. Hu is right on one front, the situation is complex. It is so complex that no human, or group of governing humans, can expect to coral and control it. Market forces work and are unstoppable. They brought down the Soviet Union and they will bring down China as well.
He said greater effort should be made to raise living standards, use resources more efficiently and develop rural and urban areas, the report said.
Governments cannot choose how to use resources more efficiently. Only markets can and after entrepreneurs that fail are allowed to go out of business and successful ones thrive. The above statement says the government will always know how to best use resources and that is just not possible. Products have to be created that people actually want and those products have to be created as inexpensively as possible. Again, governments cannot do either of those things. Governments create things like the Postal Service, Department of Motor Vehicles, and Medicare. These are the best creations of our government where losses mount every year, are inefficient uses of citizens' time, and where waste, fraud and corruption run wild.
As long as the US is a free market and upholds the virtues of economic freedom, China will never be a threat to the US.
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