June 26, 2009

Double Whammy

By Peter Schiff

Misguided government policies have already dealt vicious body blows to our economy, but that hasn’t stopped politicians this week from launching two new kicks to the groin: a national health insurance plan and a carbon emissions regulation system called “cap and trade.” Even if these plans could achieve their desired ends, which is highly unlikely, I would have hoped Washington would refrain from throwing more monkey wrenches into the economy until it shows some signs of resurgence. The last thing we need right now is to further encumber our economy with higher taxes and additional regulations.

The meteoric rise in health care costs, which has become an unending nightmare for U.S. businesses and consumers, is not an accident. This painful condition has arisen from excess government involvement in the system, tax provisions that encourage the over-utilization of health insurance, and government support of an out-of-control malpractice industry. Rather than allowing more bad policy to drive health care costs further upward, we should be looking at ways to allow market forces to reign them back in.

If left alone, the free market drives quality up and costs down. Government programs produce the opposite result. Despite the president’s claim that a federal plan will bring costs down, there is no historical precedent for such faith.

Simply providing more widespread health insurance, as the Obama plan offers, is not a solution. In fact, it will aggravate the problem. Since consumers no longer pay for routine medical expenses out of pocket, comprehensive health insurance creates a moral hazard for both patients and doctors. To maximize the value of the health insurance “benefit,” most workers opt for low deductibles and co-pays. Therefore, doctors learn that their patients are not concerned with the cost of care, and so they are free to bill insurance companies at the maximum allowable rates.

Given our current tax code, the simplest way to bring down medical costs would be to fully tax health care benefits as wages and simultaneously increase the personal deduction by an amount significant enough to neutralize the effect of the tax increase. This would do two things. First, the uninsured would get a huge pay increase, enabling them to buy reasonably priced catastrophic policies. Second, those currently insured could opt out of expensive employer-provided plans, trading premiums for extra wages, then buy a more economical plan. The savings would go right into their pockets.

The bottom line is that aggregate medical costs will never come down unless services are rationed more wisely. Rather than being used as a pre-payment plan for routine care, insurance should only cover unpredictable, catastrophic costs.

As a comparison, homeowners often carry fire insurance, but seldom maintenance insurance. You buy fire insurance to guard against a catastrophic loss, which is a low probability but high cost event. As a result, fire insurance is relatively affordable, since premiums paid by all those homeowners whose houses do not burn down more than pay for the losses on those few whose houses do.

On the other hand, no one carries home maintenance insurance to pay for a clogged drain or broken garage door. If insurance paid for the plumber visit every time a toilet overflowed, we would now have a plumbing crisis, and Congress would be looking to reign in runaway plumbing bills with “national plumbing insurance.”

In his press conference, President Obama claimed that government insurance would not drive private providers out of business. This is absurd. As the government provider will not have to produce a profit or accurately account for its contingent liabilities, it will provide insurance on an actuarially unsound basis. With taxpayer subsidies, the government provider can run losses indefinitely. If private insurers did this, they would either be shut down or go bankrupt. Therefore, the cost of government provided health insurance will not be confined to the premiums paid, but will include the taxpayers’ bill to continually bail out the government provider.

When Medicare was first proposed back in 1966, it cost $3 billion per year, and the projection was for inflation-adjusted annual costs to rise to $12 billion by 1990. The actual cost in 1990 was $107 billion, and the 2009 estimate is a staggering $408 billion! So much for government estimates on health care.

As if this were not bad enough, today the House votes on “cap and trade” legislation. Disguised as an environmental bill, this proposal would merely be another gigantic tax. The lion’s share of the new revenue is already committed to politically connected special interests that will reap windfalls at everyone else’s expense. To make matters worse, the bill before Congress amounts to a blank slate, with the EPA empowered to draft the details in any manner they see fit. If Congress is going to shoot the economy in the knee, they should at least be required to pull the trigger themselves.

“Cap and trade” will do nothing to reduce pollution, yet it will drive up production costs throughout the economy – rendering us even less globally competitive that we are today. In addition to the huge cost of paying the tax, its enforcement involves the creation of an entire new bureaucracy, the costs of which will be borne by American consumers in the form of higher prices.

Years of reckless borrowing and spending have left us in a gigantic hole. Getting out of it requires that we make the most effective use of all available resources. We need labor and capital to operate as efficiently as possible so we can save and produce our way back to prosperity. Unfortunately, national health insurance and “cap and trade” are two steps in the wrong direction. Rather than getting us out of this hole, they will merely cave in the walls around us.

Advocates of free markets say that the only feasible way that a business could close entry to a field and therefore be able to raise prices free of competitive forces, i.e. be a coercive monopoly, is with the aid of government in restricting competition. It is argued that without government preventing competition, the firm must keep prices low because if they sustain unreasonably high prices, they will attract others to enter the field to compete. In other words, if the monopoly is not protected from competition by government intervention, it still faces potential competition, so that there is an incentive to keep prices low and a disincentive to price gouge (i.e., competitive pressures still exist in a non-coercive monopoly situation).

There’s also a good discussion from an old posting on the Mises forum.  I’ll quote one of the better explanations here…

What do you consider a monopoly and for how long?  All monopolies die in the long run as other businesses complete for the same customers.  Keep in mind that in the absence of government protection temporary monopolies see competition from all over the world.  The most powerful government protection is in the form of patents and copyrights.  If you remove this protection then a ton of the market influence of the largets companies suddenly dissapears.  Patents are followed closely by limited liability.  If the people who made the Love Canal had to bear the full brunt of their destruction then the Love Canal would have never happened.

Even in our system with tons of protection from patents and copyrights, super wealthy and powerful corporations like Microsoft now, IBM and GM a generation ago, are constantly having market share ripped from them.  Where did Google, Amazon and Ebay come from?  Who will win between Microsoft-Yahoo or Google, or someone else?  The ultimate examples of government as the agent ensuring monopoly are AT&T and Standard Oil.  AT&T lived for years on government protection from wireless, FM, stallites, cable TV, the power company etc.  (The Baby Bells still are protected from most of these competitors.)  Standard Oil had a 98% market share in the US but got into a price war in Europe with BP and Shell.  The result of which was an incremental raising of prices.  As prices went up their market share went down.  When Standard Oil was broken up the company had under a 70% market share.  Contrast that with AT&T who kept their market share in local phone service for at most of the 1900s.

So what say you?

Why are Comcast & AT&T your only options when it comes to local cable, internet, & phone providers?  Is it because of a lack of competition or governmental protectionism?

It seems to me that the consumer advocate (ala Nader) should be more concerned with government created monopolies if they truly had the common man’s interests at heart.

If the government truly cared about its people, why wouldn’t they be helping Dean Kamen (creator of the Segway) out with his amazing technological innovation that could potentially solve the world’s water problems?  If the government wanted to throw its monolopy money around, at least send it to something that could benefit mankind…not toxic banks & corporations.

See the clip of Dean Kamen on Colbert here

The examples go on and on…

Here’s a good essay on just how meddlesome government has become in just one narrow segment of American life.

Everything I want to do is illegal. As if a highly bureaucratic regulatory system was not already in place, 9/11 fueled renewed acceleration to eliminate freedom from the countryside. Every time a letter arrives in the mail from a federal or state agriculture department my heart jumps like I just got sent to the principal’s office.

And it doesn’t stop with agriculture bureaucrats. It includes all sorts of government agencies, from zoning, to taxing, to food inspectors. These agencies are the ultimate extension of a disconnected, Greco-Roman, Western, egocentric, compartmentalized, reductionist, fragmented, linear thought process.

I say enough is enough liberal democrats.  Stop demonizing Walmart, and turn your attention to where it would be better suited…fighting government largesse.

AAA ratings being lost, bailouts left & right, and … wait a minute, “Dancing with the Stars is on”…

Another spot-on Schiff video.

It’s official, born-again christian / neo-conservative Stephen Baldwin has gone the way of Gary Busey.  He’s a fucking train wreck.  It’s not bad enough that his acting career has been a complete joke, he all of a sudden has an ephiphany that forces him to be a moral crusader in his spare time.

Before you see Ron Paul obliterate Jeebus Baldwin, take a look at this little snippet from Baldwin’s wiki…

As a political conservative, he was a public supporter of the McCain-Palin presidential ticket for 2008, after Mike Huckabee dropped out of the presidential race. Baldwin pledged he would leave America^[13] should Barack Obama win the Presidency. Stephen later claimed he was joking when he made the pledge, supposedly poking fun at an Alec Baldwin statement made in 2000 regarding Bush.^[14]

He resides in the village of Nyack, New York, with his wife, Kennya. In 2006, he launched a campaign to prevent an adult bookstore from opening in Nyack.^[15]

He has a tattoo on his left shoulder of the initials “HM” for Hannah Montana. His daughters are fans of Hannah Montana, and he got the tattoo after making a pact with Miley Cyrus that he would be allowed to cameo on the show if he had the initials tattooed on him. He revealed the tattoo to Miley at a book signing in Nashville, TN on November 10, 2008.

Legal power is no longer in the hands of a select few ordained by a dying inbred class of elite lawyer priests.

The best part of the current economic crises is that more and more people are turning to paralegals and legal document assistants to solve their legal problems instead of using expensive attorneys. There is a solid transformation of power taking place as individuals take responsibility for their own legal power by going it alone with the help of a paralegal. Attorneys are even trying to get jobs as paralegals either because they can’t get a job as a lawyer or because they want to learn more about how a one-man paralegal business can deliver high quality legal products at a very affordable price. Well to do cities like , and that have high concentrations of lawyers are seeing a decline in their economic health as the Lawyer Priesthood hegemony declines in proportion.

The Lawyer Priesthood created a complex court system using the foreign language of “legalese,” detailed ritualistic procedures and an old boys network. For hundreds of years only lawyers could navigate the treacherous waters of the American court system.

Then somewhere at some unknown time, some unknown genius legal secretary became the first hybrid legal secretary-paralegal. “Para” means next to or alongside in Greek. This first legal secretary-paralegal was learning so much about the essential nuts and bolts operation of the legal system by working alongside an attorney that the transformation from legal secretary to paralegal was a natural and necessary evolution. Many paralegals go on to actually become attorneys. Many paralegals, this writer included, have taken a few law school classes and decided to remain paralegals.

Many of the most meaningful transformations in life occur as the result of overcoming a crises. In crises we are forced to reevaluate and think anew. In crises we are reborn. The alcoholic hits bottom and finds sobriety, marriages that no longer work are ended for a new beginning, a dead end job is left behind and a new entrepreneurial venture is begun.

With money tight people begin doing things for themselves, like exercising their constitutional right to represent themselves in legal matters. However the court system is still that same complex beast created by attorneys for attorneys, and the help of a paralegal can help smooth the way to an affordable solution to one’s legal problems. And in the current economic crises a legal problem is transformed into personal empowerment to the people.

Things like open source have been our answer to corporate monopolies. Microsoft and Apple are the coke and pepsi of computing, and they both suck ass. Linux is the far superior system and the lionshare of software is free. Furthermore, the general users of the software all work in unison to improve it. This is why Firefox blows away Internet Explorer. Things like this can truly revolutionize industries. Imagine being able to obtain software that used to cost you tens of thousands of dollars for free. It makes starting up certain businesses much easier.

I’ve always maintained the smartest car company is a company that will create an “open source” car. They should give everyone full specification details on the entire vehicle. Make it easily modifiable and encourage third party parts makers to produce parts. Give users complete access the computer system in the car. Then finally, send one off to every engineering school in the country. Let them all modify and test the crap out of them to come up with the best mods to obtain maximum fuel efficiency and what not. You could get everyone to do you R&D for free! In fact, people are already doing this on certain cars like the Geo Metro.

Open source has been an ideology that has allowed us to create superb resources with minimal or sometimes, near zero capital. Truly revolutionary.

RIGHT: Laurel wreath of chronic bud: Handmade by Michael's mother.

It’s always a treat when someone captures my sentiments on a particular subject pretty much in whole.  So I’m just going to lazily re-post what I think is a brilliant letter written by fellow blogger Radley Balko, via TheAgitator.com.  The MSM’s proverbial lynchmob mentality on this non-story is enough to make any thinking-man vomit.

A Letter I’d Like To See (But Won’t)

Dear America,

I take it back. I don’t apologize.

Because you know what? It’s none of your goddamned business. I work my ass off 10 months per year. It’s that hard work that gave you all those gooey feelings of patriotism last summer. If during my brief window of down time I want to relax, enjoy myself, and partake of a substance that’s a hell of a lot less bad for me than alcohol, tobacco, or, frankly, most of the prescription drugs most of you are taking, well, you can spare me the lecture.

I put myself through hell. I make my body do things nature never really intended us to endure. All world-class athletes do. We do it because you love to watch us push ourselves as far as we can possibly go. Some of us get hurt. Sometimes permanently. You’re watching the Super Bowl tonight. You’re watching 300 pound men smash each other while running at full speed, in full pads. You know what the average life expectancy of an NFL player is? Fifty-five. That’s about 20 years shorter than your average non-NFL player. Yet you watch. And cheer. And you jump up spill your beer when a linebacker lays out a wide receiver on a crossing route across the middle. The harder he gets hit, the louder and more enthusiastically you scream.

Yet you all get bent out of shape when Ricky Williams, or I, or Josh Howard smoke a little dope to relax. Why? Because the idiots you’ve elected to make your laws have without a shred of evidence beat it into your head that smoking marijuana is something akin to drinking antifreeze, and done only by dirty hippies and sex offenders.

You’ll have to pardon my cynicism. But I call bullshit. You don’t give a damn about my health. You just get a voyeuristic thrill from watching an elite athlete fall from grace–all the better if you get to exercise a little moral righteousness in the process. And it’s hypocritical righteousness at that, given that 40 percent of you have tried pot at least once in your lives.

Here’s a crazy thought: If I can smoke a little dope and go on to win 14 Olympic gold medals, maybe pot smokers aren’t doomed to lives of couch surfing and video games, as our moronic government would have us believe. In fact, the list of successful pot smokers includes not just world class athletes like me, Howard, Williams, and others, it includes Nobel Prize winners, Pulitzer Prize winners, the last three U.S. presidents, several Supreme Court justices, and luminaries and success stories from all sectors of business and the arts, sciences, and humanities.

So go ahead. Ban me from the next Olympics. Yank my endorsement deals. Stick your collective noses in the air and get all indignant on me. While you’re at it, keep arresting cancer and AIDS patients who dare to smoke the stuff because it deadens their pain, or enables them to eat. Keep sending in goon squads to kick down doors and shoot little old ladies, maim innocent toddlers, handcuff elderly post-polio patients to their beds at gunpoint, and slaughter the family pet.

Tell you what. I’ll make you a deal. I’ll apologize for smoking pot when every politician who ever did drugs and then voted to uphold or strengthen the drug laws marches his ass off to the nearest federal prison to serve out the sentence he wants to impose on everyone else for committing the same crimes he committed. I’ll apologize when the sons, daughters, and nephews of powerful politicians who get caught possessing or dealing drugs in the frat house or prep school get the same treatment as the no-name, probably black kid caught on the corner or the front stoop doing the same thing.

Until then, I for one will have none of it. I smoked pot. I liked it. I’ll probably do it again. I refuse to apologize for it, because by apologizing I help perpetuate this stupid lie, this idea that what someone puts into his own body on his own time is any of the government’s damned business. Or any of yours. I’m not going to bend over and allow myself to be propaganda for this wasteful, ridiculous, immoral war.

Go ahead and tear me down if you like. But let’s see you rationalize in your next lame ONDCP commercial how the greatest motherfucking swimmer the world has ever seen . . . is also a proud pot smoker.

Yours,

Michael Phelps