Due to the Fed having kept the interest rate at 0% for over 17 months, the destructive effects of inflation are now being felt all across the world. International stock exchanges, commodity prices, costs of housing, education and healthcare, all continue to rise despite massive unemployment, lack of capital investment and no shift in the fundamentals of the international economy. Unfortunately, since people perceive a rise in the stock market as the prophetic sign of good things to come, regardless of cause or context, most Americans remain oblivious to the other side, the dark side, of the inflationary coin that now swells like a tidal wave out on the open ocean: unnoticed, but inevitable and fast approaching. Soon, all time highs on the gold market will be joined by all time highs on the food market, and it is these price rises that will “cause” heartache and demands for federal action.
But since the average American politician or commentator is unable to think beyond the range of the moment, it is likely that the most simplistic, immediate, short-sighted solution will be put into effect – criminalize price increases, i.e. fix prices.
At first, this may appear to be a truly egalitarian policy. After all, what is the argument against price fixing? It is that if a price is set too low, then there will be more buyers than sellers and there will be a shortage. Yet, if prices are “allowed” to rise, or sky rocket, then only the wealthy can afford their bread, and why should we, the American people, allow only the wealthy to eat? Isn’t that also a shortage?
Leaving aside the moral questions here implicated, the answer lies in the long term inner workings of the pricing mechanism. When a price rises it sends a signal to the market that people “demand” a certain good and that they are willing and able to pay for it. Thus, when the price of bread sky rockets past the cost of say, yodels, food producers, and others looking to make the proverbial “buck”, enter the bread industry in order to “exploit” the people’s need for bread. Consequently, there will be a flood of new bread makers, the supply of bread will increase and the shortage will be solved or at the very least softened.
But under the alternative approach of price fixing the shortage is never solved and, more often than not, is worsened. Since the price is set artificially low, no one ever receives the signal that the people need bread. Thus, no “selfish” capitalists respond by “exploiting” the bread market and the people go hungry to a greater extent than they otherwise would have under “the corrupt, profit driven capitalist system”. Furthermore, those already in the bread industry now receive the signal that the people no longer want their product. After all, if they really wanted bread, would they refuse to pay for it? If you were told that the amount of money you make today is the most you will ever be paid until the government says so, how long would you remain in that profession? Thus, the shortage worsens and the government faces a new dilemma: “unleash” the market or make slaves of men.
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Saturday, May 15, 2010
Wednesday, May 5, 2010
Tuesday, April 13, 2010
The National Debt (Part II)
In “The National Debt Part I”, I argued that the national debt should be every American’s greatest political concern, but failed to discuss in any substantive fashion the possible methods by which the problem can be addressed. Having discussed the size of the debt (12 trillion dollars and growing), the nature of its most obvious consequence (ever enlarging interest payments effectively destroying the capacity for American self-governance) and the economic state of affairs likely to follow if proper actions are not taken (hyperinflation), it is now appropriate to discuss the possible methods by which the debt can be addressed. Interestingly enough, USA Today's front page today reads, "Nation's soaring deficit calls for painful choices", so maybe, just maybe, WE THE PEOPLE are awakening to the severity of the problem we now face, which makes talk of solutions to the national debt even more appropriate.
In general, there are five possible courses of action: (1) raise taxes; (2) cut spending; (3) raise taxes and cut spending; (4) lower taxes and cut spending; and (5) print money.
But before discussing which of these are likely to achieve the goal of “getting the debt under control” or, dare I say it, paying off the debt entirely (yes, there was a time when the national debt was ZERO), it is necessary to consider the primary factor which transformed America from being the largest creditor nation to the largest debtor nation. Simply put, the cost of doing business is too high for businesses to compete on the global market. From income taxes, to complex regulatory regimes to huge social liability programs, American producers cannot compete with their foreign competitors. Because of this, capital has fled from the United States to the East.
Generally speaking, there are two methods by which this process can be reversed. The first - reduce the cost of doing business in the United States. The second - increase the cost of doing business in the East. The first, WE THE PEOPLE can control. The second, WE THE PEOPLE cannot control. Of course, this isn’t likely to stop the elites from trying. They are busily working towards a world regulatory regime under the guises of “fair trade” and “global sustainability”, but these are nothing other than thinly veiled attempts at returning capital to the West through control of the East. But it is unlikely that either China or the other wealthy nations will surrender their new found power without a fight. And with the West’s financial prowess weakening it is unlikely that a global government beneficial to the West is likely be established. In fact, if anything comes from attempts at world government it is likely to be a new creditor friendly system designed to help aid the East in its efforts to collect on current Western debts. For those of you who have seen the IMF’s method of debt collection, you have a pretty good idea of what international debt collection looks like. Needless to say, it isn’t pretty. Thus, the United States can either attempt to establish world government, create a uniform regulatory system balancing out the costs of doing business and send production back to the U.S., a long shot which risks placing the United States in a position of subservience to foreign powers, or WE THE PEOPLE can demand a lowering of the cost of doing business in our own territory.
If we are to avoid the “international debt collector” and the exploding interest payment which would result from the amount of time required to establish a global system of governance, Americans must put into effect an immediate change in policy within the United States, such that Americans can go back to work in the private sector creating goods which can be sold to the East in order to pay down our debts and get our financial house in order. That means farming, manufacturing and technology – not census workers, IRS agent and Feds.
Therefore, as to which policy the federal government should adopt in order to address the debt, the answer is clear - lower taxes and cut spending. Raising taxes will destroy our chances of ever paying back the debt as it will lead to even further flight of capital from the United States to the East (See Jamaica and other IMF debtors for all too illustrative examples of this process). Cutting spending is slightly better than raising taxes as it allows for what is left of our private sector to generate the tax revenue necessary to pay down the debt and also decrease or at least create a ceiling to further increases of the national debt, but such measures are likely to be too little too late - a mere band-aid on a bullet hole.
America’s economy is too weak. Once the Federal Reserve removes its 0% interest rate stimulus Americans are going to find themselves right back where they left off in the fall of 2008, tail spinning into the greatest Depression of American history. This, of course, is exactly what we need, but only if the cost of doing business is lowered to such extent as to allow the recession to run its course and Americans to get back to work. But without the lowering of the cost of doing business there will be recession, but no recovery. Thus, a decrease in spending by itself is insufficient to solve the problem of our national debt.
As for the options of “raising taxes and cutting spending” and “lowering taxes and cutting spending”, for reasons already discussed the latter is the preferable option. But only so long as a budget surplus is maintained and used to pay the principal on the debt. This will allow the interest payment to be driven downwards and the overall resources of the American economy to be freed up for greater and greater productive uses. Eventually, the debt should be brought to zero and the American people should act as the intelligent capitalists they once were, having the money work for them, rather than against them.
Now, the astute reader may be asking, but what of option five? What of paying our debts with the printing press? Indeed, it seems like an option any debtor would choose as it requires no raising of taxes and no actual work, which is why so many countries have chosen the path (See e.g., Zimbabwe and The Weimar Republic). But the consequences are not worth it. Life’s savings destroyed and earned wages unable to purchase the basic necessities of life will lead people to riot in the streets. To which governments will respond by marching military police armed with tear gas and other riot control tactics. What will follow from such chaos is impossible to say for too many factors are then at work. But beyond social unrest, is the fact that prices are the signals through which society orders itself. We know whether a job is valued or a good needed by the price it finds on the market. But where there is inflation, people no longer have access to the knowledge necessary to properly order themselves. The results are unemployment, shortage of some goods, surplus of others, and general market chaos.
But worst of all consequences is the lack of credibility that America will have with its foreign neighbors following the destruction of the dollar. Post World War II, the United States was entrusted as the guardian of the world’s currency. We told the world, use our Federal Reserve notes and we will keep them redeemable in gold. We revoked that promise long ago, but the world still depended on the Federal Reserve note, hoping that we would exercise the self-restraint necessary to maintain a stable international order. If we fail in this promise, if we inflate the dollar in order to cheat the world of the debts we owe them, not only will our reputation be marred, but the very backbone of the United States will be lost. We will no longer have the capital necessary to finance war or government in any form – our “money” will be valueless. Furthermore, we will become an enemy of the world as a breaker of promises and a rogue force amongst civilized nations. This, coupled with America’s military presence throughout the world, will lead to an international backlash against the United States of magnitudes previously unimagined. Of course, what will follow from this would then be up to the American people. They could choose to apologize, go back to work and make good on their promises. Or, they could do as their fathers have done, tell the world they care not for the contracts they make and will do as they please until someone can do something about it. And then, one day, someone might just do something about it.
In general, there are five possible courses of action: (1) raise taxes; (2) cut spending; (3) raise taxes and cut spending; (4) lower taxes and cut spending; and (5) print money.
But before discussing which of these are likely to achieve the goal of “getting the debt under control” or, dare I say it, paying off the debt entirely (yes, there was a time when the national debt was ZERO), it is necessary to consider the primary factor which transformed America from being the largest creditor nation to the largest debtor nation. Simply put, the cost of doing business is too high for businesses to compete on the global market. From income taxes, to complex regulatory regimes to huge social liability programs, American producers cannot compete with their foreign competitors. Because of this, capital has fled from the United States to the East.
Generally speaking, there are two methods by which this process can be reversed. The first - reduce the cost of doing business in the United States. The second - increase the cost of doing business in the East. The first, WE THE PEOPLE can control. The second, WE THE PEOPLE cannot control. Of course, this isn’t likely to stop the elites from trying. They are busily working towards a world regulatory regime under the guises of “fair trade” and “global sustainability”, but these are nothing other than thinly veiled attempts at returning capital to the West through control of the East. But it is unlikely that either China or the other wealthy nations will surrender their new found power without a fight. And with the West’s financial prowess weakening it is unlikely that a global government beneficial to the West is likely be established. In fact, if anything comes from attempts at world government it is likely to be a new creditor friendly system designed to help aid the East in its efforts to collect on current Western debts. For those of you who have seen the IMF’s method of debt collection, you have a pretty good idea of what international debt collection looks like. Needless to say, it isn’t pretty. Thus, the United States can either attempt to establish world government, create a uniform regulatory system balancing out the costs of doing business and send production back to the U.S., a long shot which risks placing the United States in a position of subservience to foreign powers, or WE THE PEOPLE can demand a lowering of the cost of doing business in our own territory.
If we are to avoid the “international debt collector” and the exploding interest payment which would result from the amount of time required to establish a global system of governance, Americans must put into effect an immediate change in policy within the United States, such that Americans can go back to work in the private sector creating goods which can be sold to the East in order to pay down our debts and get our financial house in order. That means farming, manufacturing and technology – not census workers, IRS agent and Feds.
Therefore, as to which policy the federal government should adopt in order to address the debt, the answer is clear - lower taxes and cut spending. Raising taxes will destroy our chances of ever paying back the debt as it will lead to even further flight of capital from the United States to the East (See Jamaica and other IMF debtors for all too illustrative examples of this process). Cutting spending is slightly better than raising taxes as it allows for what is left of our private sector to generate the tax revenue necessary to pay down the debt and also decrease or at least create a ceiling to further increases of the national debt, but such measures are likely to be too little too late - a mere band-aid on a bullet hole.
America’s economy is too weak. Once the Federal Reserve removes its 0% interest rate stimulus Americans are going to find themselves right back where they left off in the fall of 2008, tail spinning into the greatest Depression of American history. This, of course, is exactly what we need, but only if the cost of doing business is lowered to such extent as to allow the recession to run its course and Americans to get back to work. But without the lowering of the cost of doing business there will be recession, but no recovery. Thus, a decrease in spending by itself is insufficient to solve the problem of our national debt.
As for the options of “raising taxes and cutting spending” and “lowering taxes and cutting spending”, for reasons already discussed the latter is the preferable option. But only so long as a budget surplus is maintained and used to pay the principal on the debt. This will allow the interest payment to be driven downwards and the overall resources of the American economy to be freed up for greater and greater productive uses. Eventually, the debt should be brought to zero and the American people should act as the intelligent capitalists they once were, having the money work for them, rather than against them.
Now, the astute reader may be asking, but what of option five? What of paying our debts with the printing press? Indeed, it seems like an option any debtor would choose as it requires no raising of taxes and no actual work, which is why so many countries have chosen the path (See e.g., Zimbabwe and The Weimar Republic). But the consequences are not worth it. Life’s savings destroyed and earned wages unable to purchase the basic necessities of life will lead people to riot in the streets. To which governments will respond by marching military police armed with tear gas and other riot control tactics. What will follow from such chaos is impossible to say for too many factors are then at work. But beyond social unrest, is the fact that prices are the signals through which society orders itself. We know whether a job is valued or a good needed by the price it finds on the market. But where there is inflation, people no longer have access to the knowledge necessary to properly order themselves. The results are unemployment, shortage of some goods, surplus of others, and general market chaos.
But worst of all consequences is the lack of credibility that America will have with its foreign neighbors following the destruction of the dollar. Post World War II, the United States was entrusted as the guardian of the world’s currency. We told the world, use our Federal Reserve notes and we will keep them redeemable in gold. We revoked that promise long ago, but the world still depended on the Federal Reserve note, hoping that we would exercise the self-restraint necessary to maintain a stable international order. If we fail in this promise, if we inflate the dollar in order to cheat the world of the debts we owe them, not only will our reputation be marred, but the very backbone of the United States will be lost. We will no longer have the capital necessary to finance war or government in any form – our “money” will be valueless. Furthermore, we will become an enemy of the world as a breaker of promises and a rogue force amongst civilized nations. This, coupled with America’s military presence throughout the world, will lead to an international backlash against the United States of magnitudes previously unimagined. Of course, what will follow from this would then be up to the American people. They could choose to apologize, go back to work and make good on their promises. Or, they could do as their fathers have done, tell the world they care not for the contracts they make and will do as they please until someone can do something about it. And then, one day, someone might just do something about it.
Saturday, April 10, 2010
The National Debt (Part I)
While Americans preoccupy themselves with President Obama’s foreign policy and the Democrats’ healthcare mandate, the nation’s financial affairs steadily slip into what promises to be the deep, dark abyss of runaway inflation. Although such concerns are not without merit, as Americans we must prioritize our political concerns if we as a nation are to survive.
As of today the U.S. national debt is $12,799,639,983.01, increasing at an average of 4.11 billion dollars per day. To put this in perspective, the national debt is greater than the total economies of China, the United Kingdom and Australia combined. Furthermore, according to the Congressional Budget Office, this debt is expected to grow 9 trillion dollars over the next decade, bringing us upwards of 20 trillion dollars. However, the sheer magnitude of the debt is not the real problem. Rather, it is our inability to pay it back.
In 2008 the U.S. taxpayer spent 253 billion dollars on interest alone –that’s six times what we spend on the Department of Education, or thirteen times more than NASA. The Congressional Budget Office expects payment on the interest of the debt to rise to $900 billion a year by 2019 – that’s more than all the money we spend on national defense combined. In other words, the national debt is forcing the American people to divert greater and greater resources to servicing the debt rather than funding public services or, better yet, financing the innovations necessary to increase our standard of living. In this way, the national debt is truly a bipartisan issue, as failure to address the debt guarantees a complete inability to finance government projects of any kind, regardless of their breadth or purpose.
For many, this may seem impossible. After all, the United States is a financial giant. How could it be that a nation as great as ours can be brought to its knees by lack of financial prowess? Unfortunately, such belief no longer accords with reality. America is not the financial powerhouse she once was. She neither produces nor trades, but rather lives off the credit of others – hence, the exploding national debt.
All Americans, regardless of ideology, share an interest in solving the problem of the national debt. For if we do not take action and this debt is allowed to continue to grow the results will be catastrophic, and not for our children’s generation, but for ours. We will witness massive inflation of the U.S. dollar as the Federal Reserve pays off the national debt by printing money. And once this threshold is passed, once the Fed opens the door to “monetizing the debt”, all bets are off.
As of today the U.S. national debt is $12,799,639,983.01, increasing at an average of 4.11 billion dollars per day. To put this in perspective, the national debt is greater than the total economies of China, the United Kingdom and Australia combined. Furthermore, according to the Congressional Budget Office, this debt is expected to grow 9 trillion dollars over the next decade, bringing us upwards of 20 trillion dollars. However, the sheer magnitude of the debt is not the real problem. Rather, it is our inability to pay it back.
In 2008 the U.S. taxpayer spent 253 billion dollars on interest alone –that’s six times what we spend on the Department of Education, or thirteen times more than NASA. The Congressional Budget Office expects payment on the interest of the debt to rise to $900 billion a year by 2019 – that’s more than all the money we spend on national defense combined. In other words, the national debt is forcing the American people to divert greater and greater resources to servicing the debt rather than funding public services or, better yet, financing the innovations necessary to increase our standard of living. In this way, the national debt is truly a bipartisan issue, as failure to address the debt guarantees a complete inability to finance government projects of any kind, regardless of their breadth or purpose.
For many, this may seem impossible. After all, the United States is a financial giant. How could it be that a nation as great as ours can be brought to its knees by lack of financial prowess? Unfortunately, such belief no longer accords with reality. America is not the financial powerhouse she once was. She neither produces nor trades, but rather lives off the credit of others – hence, the exploding national debt.
All Americans, regardless of ideology, share an interest in solving the problem of the national debt. For if we do not take action and this debt is allowed to continue to grow the results will be catastrophic, and not for our children’s generation, but for ours. We will witness massive inflation of the U.S. dollar as the Federal Reserve pays off the national debt by printing money. And once this threshold is passed, once the Fed opens the door to “monetizing the debt”, all bets are off.
Thursday, September 17, 2009
A voice of reason - Peter Schiff for Senate
Known worldwide as the man who called the recession, Peter Schiff, president of Euro Pacific Capital and author of Crash Proof: How to Profit from the Coming Economic Collapse, recently announced his candidacy for the U.S. Senate. Now, I know a lot of people have been referred to as the “man who called the recession,” but let me be clear about this, with the entire academic and financial community laughing at him, Peter Schiff called the .com bubble, the housing bubble and the financial collapse - years ahead of the competition. See - http://www.youtube.com/watch?v=2I0QN-FYkpw (look, its like bluebooking!)
So, assuming you have considered the evidence of Schiff's predictive insights, you may now be wondering how it is that he was able to see what others could not. Well, according to Mr. Schiff, it wasn't his voodoo power empowering him with foresight, but rather an economic theory grounded firmly in reality. In other words, while everyone else was thinking of wealth in terms of nominal dollars, Peter Schiff was thinking in terms of productive capacity, i.e. real goods and services.
From this vantge point came a unique perspective on the fundamentals of the U.S. economy. While others saw rising stock prices and a housing market not be stopped, Schiff saw an artifically low interest rate and a bubble ready to pop. While others were caught up in a frenzy of market speculation and whimsy, Schiff was hitting the streets of producer economies, looking for companies selling goods and services to people who could afford to buy them. Such was the perspective which led schiff to avoid the booms and busts of credit inflated markets and take advantage of the steady, but massive growth of foreign markets driven by hard working people motivated to better their lives. But with his wealth made and his theory vindicaed, Schiff is giving up the role of investment guru and joining the rat race of politics, with hopes of inspiring Americans to recall the virtues of their past - savings, hard work, self-reliance and, most importantly, liberty.
Unfortunately, Mr. Schiff will be running on an awfully hard ticket to sell - with more than half the country dependent on government, not many people want to hear that government can no longer foot their bills. But hey, that's the reality people. And since it is only when we face our obstacles openly and honestly that we overcome them, I leave you with, Connecticut Senator hopeful, Peter Schiff's estimation of where our country is today.
"On a national level, our circumstances are similar to a philandering playboy who inherits a huge fortune and then proceeds to squander it. During the dissipation period he lives the good life, and by all appearances he seems prosperous. But his propserity is the function of the hardwork of his ancestors rather than his own. Once the fortune is gone, so too will be the gracious lifestyle that it helped support."
Tuesday, September 15, 2009
President Obama Is Horribly Anti-Capitalist
As President Obama continues to push for the radical shift to socialism it is no longer just his handlers and lackeys who are out there shoveling this stuff. While David Axelrod has the audacity to say in an interview Sunday that the 2 million plus protesters who showed up and rallied on the National Mall and the Capitol the day before were, "flat out wrong", President Obama was getting prepared to make a speech to Wall Street on Monday.
President Obama less than a week after speaking to the entire nation was in front of Wall Street. The topic of his speech was economic reforms and policy changes. At both engagements he spoke of changes to the very fabric and core of what the United States has always been about, capitalism and trade. This quote from the article linked below basically says it all:
What the left seems to forget so very frequently is that from the very beginning the the United States recognized the importance of free trade and markets. In the Declaration of Independence the founders claimed the King's, "cutting off our trade with all parts of the world" as a major grievance. The Framers declared that all free and independent states have the right to, "full Power to levy War, conclude Peace, contract Alliances, establish Commerce...". Again recognizing the importance of trade, to establish commerce. The Founders knew that only through prosperity can one achieve self reliance and freedom. The Founders also stated, "we hold the rest of mankind, Enemies in War, in Peace Friends". Why is this important, because we conduct commerce and trade with our friends.
We acknowledge that free markets on occasion have negative externalities. However, for the overwhelming majority of instances, where free markets have been introduced prosperity has followed. President Obama, I beg you to reconsider your socialistic policies, unfortunately the American people cannot afford for you to be so horribly wrong on this.
Read the following article for an expanded view on this subject:
President Obama’s Horribly Anti-Capitalist Monday
President Obama less than a week after speaking to the entire nation was in front of Wall Street. The topic of his speech was economic reforms and policy changes. At both engagements he spoke of changes to the very fabric and core of what the United States has always been about, capitalism and trade. This quote from the article linked below basically says it all:
Obama’s dis of the stock exchange paled in comparison to his inane moralizing at the Federal Hall. No man who has signed into law a $1 trillion spending bill has any right to talk to anyone about financial responsibility, ever. And to tell titans on Wall Street that the solution to the bad lending that got us into this mess is to start doing more bad lending again is just intolerable. The speech was met with a complete lack of applause from the audience, something this President is not used to...What is unfortunate about this situation is that the President does not seem to understand that his policies are wrong. This is forgivable, we all are guilty of falling in love with our own ideology. However, what is worse and unforgivable, is that millions of Americans are voicing their concerns, frustrations, outrage, and opposition to these policies at tea parties, town hall meetings, and DC rallies and the the President and the liberal elitists he surrounds himself with just don't care. The best examples of this come from the Axelrod comment above and from the President himself. I do not know of a better way to tell the American public to shove off than what President Obama basically said in his national address, if you challenge us we will call you out.
What the left seems to forget so very frequently is that from the very beginning the the United States recognized the importance of free trade and markets. In the Declaration of Independence the founders claimed the King's, "cutting off our trade with all parts of the world" as a major grievance. The Framers declared that all free and independent states have the right to, "full Power to levy War, conclude Peace, contract Alliances, establish Commerce...". Again recognizing the importance of trade, to establish commerce. The Founders knew that only through prosperity can one achieve self reliance and freedom. The Founders also stated, "we hold the rest of mankind, Enemies in War, in Peace Friends". Why is this important, because we conduct commerce and trade with our friends.
We acknowledge that free markets on occasion have negative externalities. However, for the overwhelming majority of instances, where free markets have been introduced prosperity has followed. President Obama, I beg you to reconsider your socialistic policies, unfortunately the American people cannot afford for you to be so horribly wrong on this.
Read the following article for an expanded view on this subject:
President Obama’s Horribly Anti-Capitalist Monday
Wednesday, September 9, 2009
A Response to President Obama's Health Care Speech
The beginning of this is my thought by thought process while listening to the speech tonight. My comments are italicized. The end is a 5 step proposal for a free market solution to the health care problems that would not necessitate the installation of a socialist government run health care system.
President Obama: I can stand here with confidence and say that we have pulled this economy back from the brink. -- Really? According to what measures and what prognostications are you claiming our economy is back from the brink?
There are now more than thirty million American citizens who cannot get coverage. -- Notice the emphasis on citizens? Because Americans should not be paying for illegal aliens.
Individual cases of abuse by insurance companies does not necessitate the establishment of a government run socialist health care system.
President Obama: The plan I'm announcing tonight would meet three basic goals:
It will provide more security and stability to those who have health insurance. --HOW?
It will provide insurance to those who don't. -- HOW?
And it will slow the growth of health care costs for our families, our businesses, and our government. -- HOW?
It's a plan that asks everyone to take responsibility for meeting this challenge -- Why am I responsible for taking care of someone else? Health care is not a right, it is a perk for those that work hard and want to pay for it on their own. It's not my responsibility to pay for your health care and it shouldn't be.
President Obama: Let me repeat this: nothing in our plan requires you to change what you have. -- Then why in the bills proposed over the summer did they establish the gradual phasing out of private insurance? The bills stated that no new policy could be written after the first date of the reforms establishment.
That's why under my plan, individuals will be required to carry basic health insurance -- really? while I disagree with this concept in theory I recognize the precedent set by the auto insurance requirements and think that we probably don't have much chance to defeat this particular part of President Obama's plan.
There are also those who claim that our reform effort will insure illegal immigrants. This, too, is false - the reforms I'm proposing would not apply to those who are here illegally. -- if President Obama is being truthful here then why are there parts of the proposed bills that mandate and will fine hospitals for not having staff trained bilingually?
Under our plan, no federal dollars will be used to fund abortions, and federal conscience laws will remain in place. -- If this is true why are there several amendments that were added by democrats to the proposed bills that eliminate conscience rights and mandate payments to providers such as planned parenthood. Even if the money can't go specifically to abortion, the money can be applied to overhead, and other costs freeing up other sources of money to pay for the abortions.
I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. -- If this were the case then why are there penalties for businesses and individuals that don't play in President Obama's system? Why the increased taxes on sugary foods and beverages?
It's worth noting that a strong majority of Americans still favor a public insurance option of the sort I've proposed tonight. -- what polling data supports that statement President Obama? I haven't seen one poll in the last month that supports that statement. The most recent poll I've seen says 52% of people are against this government option. There is plenty of evidence from the town hall meetings and tea parties that took place throughout the summer that people are in opposition to this reform. However, I could be wrong and I kindly ask you to prove me so if I am.
To my Republican friends, I say that rather than making wild claims about a government takeover of health care, we should work together to address any legitimate concerns you may have. -- the problem with this statement is that the democrats don't want to back off of government intervention in health care. The republicans are not willing to allow a socialist government take over of health care and therefore there really is not a common ground unless the democrats can walk away from the public option idea.
First, I will not sign a plan that adds one dime to our deficits - either now or in the future. Period. And to prove that I'm serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don't materialize. -- this is rhetoric that we have heard before and once passed initially Congress can very easily go back and amend this bill or update it to allow for carrying a debt load to run this program.
President Obama goes on about medicare for several minutes... -- Why is it that in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation).... But in 1990 Medicare actually cost $107 billion. President Obama says the expected cost is 900 billion over 10 years. This is not a good track record for the government being accurate...why should we believe that it will only be 900 billion? Why should we believe that taxes and deficits won't go up?
If you misrepresent what's in the plan, we will call you out. -- Is that a threat? Is that a call to close down debate and challenges to your authority President Obama?
President Obama rants on for a few minutes about the Republicans, the War spending, tax cuts under Bush, blah blah blah, typical partisan Obama campaign speechifying.
Way to politicize the death of Ted Kennedy...wow, we've sunk to a new low.
An acknowledgement that sometimes government has to step in to help deliver on that promise. -- Why is it that the democrats always look to government to solve the problems? He talks about us coming together to lend a helping hand, and yes, we do that, individually, through personal choice and charity, not through coercion where the government forces us to take care of others. There is a word for that, socialism.
Somethings I agree with:
1. insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies - because there's no reason we shouldn't be catching diseases like breast cancer and colon cancer before they get worse. That makes sense, it saves money, and it saves lives.
2. it will be against the law for insurance companies to deny you coverage because of a pre-existing condition.
3. So I am proposing that we move forward on a range of ideas about how to put patient safety first and let doctors focus on practicing medicine. I know that the Bush Administration considered authorizing demonstration projects in individual states to test these issues. It's a good idea, and I am directing my Secretary of Health and Human Services to move forward on this initiative today. -- this is a start, but it does not go far enough.
General thoughts: This speech was filled with partisan remarks and was essentially President Obama flipping the American people the bird or thumbing his nose at them, you pick the reference you like best. There was no acknowledgement that people don't want this. It was basically more of the same from President Obama, we need a government option, I'm for a government option, and here are the reasons why you should be too. This is not change we can believe in, this is not a major shift in the health care debate, this was just a President being confrontational, and deepening the lines in the sand between the two sides.
My very brief and very basic 5 Point Plan for Health Care Reform: This is going to be really short and scant on details since the above reaction to the speech is rather lengthy. There will be more details on each of these proposals to come shortly.
1. Real Tort Reform -- eliminating the spectre of lawsuits from the medical arena except in cases of egregious and gross negligence will lower costs in the system.
2. Competition through opening up insurance to be purchased across state lines. There is no logical reason that allows you to purchase car insurance from companies that operate nationally, but limits through legislation the health insurance options you have to only a very select few companies allowed to operate in your state.
3. Similar to car insurance, allow for differentiated pricing for health insurance. If you smoke, you pay more. If you have children, you pay more. If you are obese, you pay more. You practice preventative medicine by getting a yearly check up and staying in shape, you get a discount. You get the picture.
4. Allowing consumers to choose the levels of coverage they carry through selection of plans that cover different procedures, services, and prescriptions, rather than one size fits all plans. This would allow people to opt out of some of the so called Rolls Royce plans that cover elective surgeries and non-essential drugs like Viagra.
5. The use of a Pigovian tax (a tax levied on market activities to correct negative externalities that are inefficient) to change health and health care. These efforts take aim at altering personal choices and preferences with the goal of increasing the public’s general health while lessening the burden on the health care system.
There you have it, five ideas that are free market based and do not suggest a government take over of health care.
President Obama: I can stand here with confidence and say that we have pulled this economy back from the brink. -- Really? According to what measures and what prognostications are you claiming our economy is back from the brink?
There are now more than thirty million American citizens who cannot get coverage. -- Notice the emphasis on citizens? Because Americans should not be paying for illegal aliens.
Individual cases of abuse by insurance companies does not necessitate the establishment of a government run socialist health care system.
President Obama: The plan I'm announcing tonight would meet three basic goals:
It will provide more security and stability to those who have health insurance. --HOW?
It will provide insurance to those who don't. -- HOW?
And it will slow the growth of health care costs for our families, our businesses, and our government. -- HOW?
It's a plan that asks everyone to take responsibility for meeting this challenge -- Why am I responsible for taking care of someone else? Health care is not a right, it is a perk for those that work hard and want to pay for it on their own. It's not my responsibility to pay for your health care and it shouldn't be.
President Obama: Let me repeat this: nothing in our plan requires you to change what you have. -- Then why in the bills proposed over the summer did they establish the gradual phasing out of private insurance? The bills stated that no new policy could be written after the first date of the reforms establishment.
That's why under my plan, individuals will be required to carry basic health insurance -- really? while I disagree with this concept in theory I recognize the precedent set by the auto insurance requirements and think that we probably don't have much chance to defeat this particular part of President Obama's plan.
There are also those who claim that our reform effort will insure illegal immigrants. This, too, is false - the reforms I'm proposing would not apply to those who are here illegally. -- if President Obama is being truthful here then why are there parts of the proposed bills that mandate and will fine hospitals for not having staff trained bilingually?
Under our plan, no federal dollars will be used to fund abortions, and federal conscience laws will remain in place. -- If this is true why are there several amendments that were added by democrats to the proposed bills that eliminate conscience rights and mandate payments to providers such as planned parenthood. Even if the money can't go specifically to abortion, the money can be applied to overhead, and other costs freeing up other sources of money to pay for the abortions.
I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. -- If this were the case then why are there penalties for businesses and individuals that don't play in President Obama's system? Why the increased taxes on sugary foods and beverages?
It's worth noting that a strong majority of Americans still favor a public insurance option of the sort I've proposed tonight. -- what polling data supports that statement President Obama? I haven't seen one poll in the last month that supports that statement. The most recent poll I've seen says 52% of people are against this government option. There is plenty of evidence from the town hall meetings and tea parties that took place throughout the summer that people are in opposition to this reform. However, I could be wrong and I kindly ask you to prove me so if I am.
To my Republican friends, I say that rather than making wild claims about a government takeover of health care, we should work together to address any legitimate concerns you may have. -- the problem with this statement is that the democrats don't want to back off of government intervention in health care. The republicans are not willing to allow a socialist government take over of health care and therefore there really is not a common ground unless the democrats can walk away from the public option idea.
First, I will not sign a plan that adds one dime to our deficits - either now or in the future. Period. And to prove that I'm serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don't materialize. -- this is rhetoric that we have heard before and once passed initially Congress can very easily go back and amend this bill or update it to allow for carrying a debt load to run this program.
President Obama goes on about medicare for several minutes... -- Why is it that in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $ 12 billion by 1990 (a figure that included an allowance for inflation).... But in 1990 Medicare actually cost $107 billion. President Obama says the expected cost is 900 billion over 10 years. This is not a good track record for the government being accurate...why should we believe that it will only be 900 billion? Why should we believe that taxes and deficits won't go up?
If you misrepresent what's in the plan, we will call you out. -- Is that a threat? Is that a call to close down debate and challenges to your authority President Obama?
President Obama rants on for a few minutes about the Republicans, the War spending, tax cuts under Bush, blah blah blah, typical partisan Obama campaign speechifying.
Way to politicize the death of Ted Kennedy...wow, we've sunk to a new low.
An acknowledgement that sometimes government has to step in to help deliver on that promise. -- Why is it that the democrats always look to government to solve the problems? He talks about us coming together to lend a helping hand, and yes, we do that, individually, through personal choice and charity, not through coercion where the government forces us to take care of others. There is a word for that, socialism.
Somethings I agree with:
1. insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies - because there's no reason we shouldn't be catching diseases like breast cancer and colon cancer before they get worse. That makes sense, it saves money, and it saves lives.
2. it will be against the law for insurance companies to deny you coverage because of a pre-existing condition.
3. So I am proposing that we move forward on a range of ideas about how to put patient safety first and let doctors focus on practicing medicine. I know that the Bush Administration considered authorizing demonstration projects in individual states to test these issues. It's a good idea, and I am directing my Secretary of Health and Human Services to move forward on this initiative today. -- this is a start, but it does not go far enough.
General thoughts: This speech was filled with partisan remarks and was essentially President Obama flipping the American people the bird or thumbing his nose at them, you pick the reference you like best. There was no acknowledgement that people don't want this. It was basically more of the same from President Obama, we need a government option, I'm for a government option, and here are the reasons why you should be too. This is not change we can believe in, this is not a major shift in the health care debate, this was just a President being confrontational, and deepening the lines in the sand between the two sides.
My very brief and very basic 5 Point Plan for Health Care Reform: This is going to be really short and scant on details since the above reaction to the speech is rather lengthy. There will be more details on each of these proposals to come shortly.
1. Real Tort Reform -- eliminating the spectre of lawsuits from the medical arena except in cases of egregious and gross negligence will lower costs in the system.
2. Competition through opening up insurance to be purchased across state lines. There is no logical reason that allows you to purchase car insurance from companies that operate nationally, but limits through legislation the health insurance options you have to only a very select few companies allowed to operate in your state.
3. Similar to car insurance, allow for differentiated pricing for health insurance. If you smoke, you pay more. If you have children, you pay more. If you are obese, you pay more. You practice preventative medicine by getting a yearly check up and staying in shape, you get a discount. You get the picture.
4. Allowing consumers to choose the levels of coverage they carry through selection of plans that cover different procedures, services, and prescriptions, rather than one size fits all plans. This would allow people to opt out of some of the so called Rolls Royce plans that cover elective surgeries and non-essential drugs like Viagra.
5. The use of a Pigovian tax (a tax levied on market activities to correct negative externalities that are inefficient) to change health and health care. These efforts take aim at altering personal choices and preferences with the goal of increasing the public’s general health while lessening the burden on the health care system.
There you have it, five ideas that are free market based and do not suggest a government take over of health care.
Wednesday, August 12, 2009
U.S. Moving Towards Bankruptcy
If you care about the future of the nation, you need to watch this video.
The United States is on the edge of bankruptcy and the tipping point will occur when the aging baby boomer generation that is on the brink of retirement ceases to contribute to the tax rolls. At current spending rates with nothing changing (meaning no health care reform) the U.S. will run out of money by 2040. That may seem dramatic and it is, but the dirty little secret that only one man is telling the American people is that by 2040 the entire tax revenue will only be enough to service the debt load that we currently carry.
It's time to wake up. It's time to stand up. It's time to tell our elected officials who know this information, are not sharing it, and continue to spend as if money grew on trees that we are not going to sit by and be fooled any longer. The republicans and the democrats are both on the wrong side of this problem. We can no longer afford to believe the fantasy that we can take care of everyone and pay for everything.
The simple fact of the matter is that we are going to have to dramatically reform how we do things in America. It is going to be hard and some people will suffer, but unfortunately we do not have any other choices left. We have come to the precipice, we have mortgaged our future, and there is no where left to go, we must turn back, we must stop the spending madness.
For more watch this video as well.
The United States is on the edge of bankruptcy and the tipping point will occur when the aging baby boomer generation that is on the brink of retirement ceases to contribute to the tax rolls. At current spending rates with nothing changing (meaning no health care reform) the U.S. will run out of money by 2040. That may seem dramatic and it is, but the dirty little secret that only one man is telling the American people is that by 2040 the entire tax revenue will only be enough to service the debt load that we currently carry.
It's time to wake up. It's time to stand up. It's time to tell our elected officials who know this information, are not sharing it, and continue to spend as if money grew on trees that we are not going to sit by and be fooled any longer. The republicans and the democrats are both on the wrong side of this problem. We can no longer afford to believe the fantasy that we can take care of everyone and pay for everything.
The simple fact of the matter is that we are going to have to dramatically reform how we do things in America. It is going to be hard and some people will suffer, but unfortunately we do not have any other choices left. We have come to the precipice, we have mortgaged our future, and there is no where left to go, we must turn back, we must stop the spending madness.
For more watch this video as well.
Thursday, August 6, 2009
Murdoch's Folley
Rupert Murdoch, media mogul and news magnate, is about to go off the deep end. After creating the massively successful News Corp empire it seems that Murdoch wants to commit online suicide. Murdoch's decision to charge consumers for Internet news content will be akin to taking a bullet to the head or noose around the neck.
I predict this will be the undoing of Mr. Murdoch's empire. While News Corp has been having an abysmal year and is hemorrhaging money; attempting to charge the online community for access to it's news content is a step further down the rabbit hole towards implosion. When News Corp makes the switch to charging for Internet content, the majority of users will simply switch to other sources like CNN, Newsweek, Drudge, Christian Science Monitor, BBC, etc. etc. etc. to get their news content. This will flood the competitor sites with users thereby allowing them to charge online advertisers more to post ads on the sites thereby increasing their revenue exponentially. Meanwhile, News Corp will continue to hemorrhage capital and eventually either reverse course or begins to sell off assets.
Your humble writer is not a market analyst, an economist, or the CEO of a media corporation, so of course I could be wrong on this whole thing. If you'd like more information on this story, go here.
I predict this will be the undoing of Mr. Murdoch's empire. While News Corp has been having an abysmal year and is hemorrhaging money; attempting to charge the online community for access to it's news content is a step further down the rabbit hole towards implosion. When News Corp makes the switch to charging for Internet content, the majority of users will simply switch to other sources like CNN, Newsweek, Drudge, Christian Science Monitor, BBC, etc. etc. etc. to get their news content. This will flood the competitor sites with users thereby allowing them to charge online advertisers more to post ads on the sites thereby increasing their revenue exponentially. Meanwhile, News Corp will continue to hemorrhage capital and eventually either reverse course or begins to sell off assets.
Your humble writer is not a market analyst, an economist, or the CEO of a media corporation, so of course I could be wrong on this whole thing. If you'd like more information on this story, go here.
Thursday, July 23, 2009
Tragedy of the Commons Plays Out on National Mall through Congressional Earmarks
The tragedy of the commons is an economic theory proposed by Garrett Hardin in 1968. Essentially the premise is that where no one owns property, (i.e. it is communal) then no one has incentive to protect it. In actuality, there is more incentive to use up the resource before someone else does.
Central to Hardin's article is a metaphor of herders sharing a common parcel of land (the commons), on which they are all entitled to let their cows graze. In Hardin's view, it is in each herder's interest to put as many cows as possible onto the land, even if the commons are damaged as a result. The herder receives all of the benefits from the additional cows, while the damage to the commons is shared by the entire group. If all herders make this individually rational decision, however, the commons are destroyed and all herders suffer.
Positive: the herder receives all of the proceeds from each additional animal.
Negative: the pasture is slightly degraded by each additional animal.
(Taken from Wikipedia.)
Thinking in terms of commercial fishing we see this problem all the time. No one owns the fish stock and therefore no one protects it so it comes back year in and year out. Instead, fisherman are induced to take as large a catch of fish as possible because they know if they do not someone else will. They will then forfeit revenue that someone else gains.
What does this have to do with the National Mall you may be asking. Well, the answer to that question is that because essentially no one owns the mall it is not getting the money it needs in order to be maintained and improved. When I say no one owns the mall what I mean is that there are no Congressional representatives that can score political points or win votes by giving money to the Mall. Instead through earmarks and diversion of funds, they send money back to their home states and the money that should be going to the National Mall is diverted away.
Stephen Ellis, vice president of Taxpayers for Common Sense has said, "We're making spending decisions on the basis of political muscle, rather than project merit. Because the mall is owned by nobody, even though it is this gem for many Americans, it gets short shrift," he said.
While law makers can score points by sending money home to repair a Mother's Day Shrine in West Virginia or build a bridge to no where in Alaska, the National Mall gets short changed over and over again based on the appropriation of money via earmarks. However, the mall doesn't just lose out in the earmark process, it loses out in the regular funding process as well. Just this year, Congress removed $200 million that would have been directed to National Mall repair in the stimulus bill and last year they voted down a measure that would have spent $100 million on the Mall. No one cares about the Mall because it isn't politically expedient.
Meanwhile the Mall receives more than 25 million visitors a year from all over the globe with as many as 1.8 million at a time for large events like the Presidential Inauguration and National 4th of July Festival.
Until we can stop the corruption of the appropriations process and eliminate earmarks, there does not appear to be much hope for the National Mall or financial accountability for our tax payer dollars. The tragedy of the commons will continue to play out on the Nation's front lawn for all the worlds visitors to see.
Read more about the problem here.
Central to Hardin's article is a metaphor of herders sharing a common parcel of land (the commons), on which they are all entitled to let their cows graze. In Hardin's view, it is in each herder's interest to put as many cows as possible onto the land, even if the commons are damaged as a result. The herder receives all of the benefits from the additional cows, while the damage to the commons is shared by the entire group. If all herders make this individually rational decision, however, the commons are destroyed and all herders suffer.
Positive: the herder receives all of the proceeds from each additional animal.
Negative: the pasture is slightly degraded by each additional animal.
(Taken from Wikipedia.)
Thinking in terms of commercial fishing we see this problem all the time. No one owns the fish stock and therefore no one protects it so it comes back year in and year out. Instead, fisherman are induced to take as large a catch of fish as possible because they know if they do not someone else will. They will then forfeit revenue that someone else gains.
What does this have to do with the National Mall you may be asking. Well, the answer to that question is that because essentially no one owns the mall it is not getting the money it needs in order to be maintained and improved. When I say no one owns the mall what I mean is that there are no Congressional representatives that can score political points or win votes by giving money to the Mall. Instead through earmarks and diversion of funds, they send money back to their home states and the money that should be going to the National Mall is diverted away.
Stephen Ellis, vice president of Taxpayers for Common Sense has said, "We're making spending decisions on the basis of political muscle, rather than project merit. Because the mall is owned by nobody, even though it is this gem for many Americans, it gets short shrift," he said.
While law makers can score points by sending money home to repair a Mother's Day Shrine in West Virginia or build a bridge to no where in Alaska, the National Mall gets short changed over and over again based on the appropriation of money via earmarks. However, the mall doesn't just lose out in the earmark process, it loses out in the regular funding process as well. Just this year, Congress removed $200 million that would have been directed to National Mall repair in the stimulus bill and last year they voted down a measure that would have spent $100 million on the Mall. No one cares about the Mall because it isn't politically expedient.
Meanwhile the Mall receives more than 25 million visitors a year from all over the globe with as many as 1.8 million at a time for large events like the Presidential Inauguration and National 4th of July Festival.
Until we can stop the corruption of the appropriations process and eliminate earmarks, there does not appear to be much hope for the National Mall or financial accountability for our tax payer dollars. The tragedy of the commons will continue to play out on the Nation's front lawn for all the worlds visitors to see.
Read more about the problem here.
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