Archive for the ‘Opinion’ category

On Boycotting Arizona

May 18, 2010

I have yet to hear a call for a boycott of Arizona that made an accurate reference to the Arizona law that is at issue. The full text of the law is here. The new Arizona law will require that if someone is stopped by police for other legal reasons, and the person also presents other legal reasons for doubting their citizenship status, that the police must then check citizenship status with the Federal Authorities.

President Obama claimed that under the Arizona law, anyone could be stopped and checked for citizenship if they were no more than going to an ice cream store.  The President is wrong. The Arizona law requires that there first be a “lawful stop, detention or arrest made by a law enforcement official” which means that the person was stopped for some other legal reason, and then after that also have reason to suspect that they are illegal. Federal agents, by contrast, can stop a person to check immigration status without any such constraint, and the liberal Ninth Circuit has upheld the Feds’ constitutional authority to do so.

The Highland Park High School girls’ basketball team has had its trip to an Arizona tournament canceled by a school superintendent because of “safety concerns.” The “safety” issue is that if one of the girls is an illegal immigrant, is stopped for some crime, and then found to, say, be unable to speak English, her citizenship could then be checked. In other words, the danger that is presented is the danger of the laws against illegal immigration being enforced.

Do schools have a general obligation to protect criminal students from law enforcement? If a precocious teen is dealing crack in the high school, is the school obliged to maintain his cover? Must a field trip to a local police station be canceled for fear that a narc might finger him? A civil rights attorney on The O’Reilly Factor claimed that the school might be sued for subjecting a student to potential arrest.

Because the school authorities in Illinois believe this to be unfair, they won’t allow the students to travel to Arizona. They do allow students to travel overseas, even though students must present passports to reenter the States. China, of course, is a model of civil rights compared to Arizona.

Facts have not gotten in the way of celebrating the joys of self-righteousness. San Francisco and Los Angeles are in the forefront of boycotting Arizona, and there is move afoot for state boycott legislation. It is self-righteousness at it’s most joyous because a boycott can hurt Arizona without significantly harming the righteous Californians. Californians can take their vacations and schedule events in other states, no big deal.

California, however, gets one-third of its electricity from Arizona. That’s a consequence of many years of refusing to build ugly dangerous environmentally-unsound power plants in California, while having Arizona do it for them was just fine.

It would be reasonable for Arizona to asked, pointedly, if California would like to extend their boycott to electricity? I suspect that errant self-righteousness would not be so much fun practiced in the dark.

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Who really wins if health care reform passes?

March 19, 2010

According to CNN, “[Obama] framed the vote as a choice between a victory for the insurers or ‘victory for the American people.’ ” This isn’t the case.

According to Reuters, the current health care bill will still require that all Americans buy health insurance. The choice is gone. The American people will be dependent on the insurance companies for treatment, and when they opt not to pay, the suffering patients will be forced to file for bankruptcy. The option of health care independence, of the health savings account, is vanquished.

Worse, because the demand for insurance is inelastic, the price of insurance will drastically increase. Those that cannot afford insurance will either be fined into oblivion or scooped into Medicare, the failing program that will not cover many key treatments.

So who really wins if this reform passes?  The insurance companies will have an unlimited supply of customers. Obama has it backwards. The American people lose if this bill passes. The insurance companies are the victors.

Why don’t Americans like internationalism?

January 4, 2010

Last night Chris Matthews, the commentator famous for getting a tingle in his leg when Obama speaks, hosted a panel discussion reviewing Obama’s first year in office. The panel cover the spectrum of opinion one would expect on NBC, ranging from overall approval to adoration. I did sense that the obsequiously worshipful category was a bit weak, perhaps due to the bitter realities the past year served up.

One point stumped the panel. All agreed that American are unusually welcoming to foreigners visiting the US. One much-traveled panelist claimed that Americans were clearly the most welcoming in the world. The conundrum, then, it why Americans have not been notably impressed with Obama’s efforts to curry favor with the international community. I’m here to help explain the mystery.

What does it takes to be a full-fledged American? If you apply to become a citizen of Japan, an inspection team comes to your house and checks your refrigerator. True Japanese eat Japanese food, which definitely includes miso and noodles, and definitely does not include Pop Tarts or Wheaties. Americans do not much care about such artifacts of culture. What it comes down to is that what Americans look for and expect of those in their tribe is a love of freedom, and not much more.

Visitors to the US have a prima facia love of freedom simple by the fact that they are traveling here. People who travel are not at home being cared for, they have some gumption to do something. That is enough of a display of independence to gain points.

Obama had a father from Kenyan and was raised mostly in Indonesia. Americans did not hold that against him in the election. Origins have little to do with Americanism. Obama’s attractiveness as a candidate had much to with his drive to succeed and his wonderful rhetoric about making the country successful. Remember hope and change? People assumed that the direction of change was towards making the country more prosperous, more free, and better at defeating terrorism — simple things. Obama’s actual idea was to change America to make it more like other countries.

Obama’s message on internationalism has been that we ought to take our place in the world as an equal with all the other countries. Obama speaks out aginst Iran getting nuclear weapons, and he urges fellow nations to act jointly to do something about it. If they don’t act, well, we did our best to exercise leadership, but that’s the way it is.

Freedom protesters in Iran are viewed favorably by Obama, in due time and with the due caution that they should not expect any help from America.

Obama’s overseas speeches always apologize and always provide a message of cooperation without pressing any issue beyond what the rest of the world, the rest of the world being mainly Europe, approves.

What liberals, notably Mathews and his panel, cannot comprehend is the enduring American love of freedom. Liberals believe that a certain concern with freedom is important, so long as it is restricted to a small list of social issues and there is no concern with economic freedom. However, liberals draw the line at willfully imposing or irresponsibly encouraging freedom in other nations. Any encouragement is viewed as irresponsible.

Liberals interpret the American interest in freedom as an interest in world domination. Not at all. What Americans expect are that our freedoms be protected and that America be an unapologetic spokesman for freedom on the world stage. What binds Americans is not country of birth or a large set of cultural traditions. It is unapologetic advocacy of freedom, and the enterprise to act on the belief. The concept eludes Mr. Matthews panel.

On Obama's Healthcare Reform

December 14, 2009

Obama established four purposes for the Healthcare reform bill back in August. This article will analyze each of them, their validity, and their utility.

The first purpose of the healthcare reform bill is to establish a public option. This has since been removed, but it is important to remember why. The public option would necessarily grant anyone that wanted it free healthcare from the government dole. The aim was to focus this on those that would not be able to buy healthcare insurance otherwise, but there was no way to do this without either prohibitively regulating it or creating so-called death panels to examine each case individually. The public option quickly failed both in popularity and practicality.

The second purpose was to cut wasteful government spending on healthcare and substantially cut subsidies on health insurance companies. This as a concept is a great thing, but in practicality, it is mixed in merit. For example, it forces drug companies to give a rebate to people with both medicare and medicaid (causing everyone else’s healthcare cost to go up). But there is some benefit. The medicare reform will cut down on fraud. It will also cut so-called over-billings and some bureaucratic inefficiencies, which improves this portion.

The third purpose is essentially a repeat of the second, a mere piece of rhetoric that exists because otherwise the description of the second purpose would be too long to flow conveniently.

The fourth purpose is the real reform, a regulatory mess sure to cripple the private health insurance industry. One of those chains will keep a company from “discriminating”, or charging a higher price to individuals that are more likely to induce costs. This equalizer will raise the healthcare costs of every American who does not have a pre-existing disposition. People will be penalized for living healthily.

Those were the original goals of healthcare reform, back in August. Since then, a new part has been added in the place of the public option: a mandate requiring all americans to purchase health insurance. Failure to buy health insurance means a quarter of a million dollars in fines and in some cases, jailtime. Economically, such a mandate will cause the demand curve for health insurance to become inelastic, meaning that the price can shoot through the roof without companies fearing market retribution. Health insurance costs would increase, and one’s choice to opt out of insurance would be lost. One could no longer be medically independent, and one would face dependence on either a private collective or a public collective to determine whether one should live or die.

On balance, the current bill is still a wreck. I have not even analyzed the trillion dollar spending, and already the headlights and horn of the freight train of Healthcare reform grow nearer, ready to crush us.

[1] http://energycommerce.house.gov/Press_111/health_care/hr3962_PAYINGFORREFORM.pdf

[2] http://www.democrats.org/a/2009/08/why_we_need_hea.php

Left-wing Think Tank Acknowledges Failures of TARP, But Advocates Wrong Ammendments

November 21, 2009

The Center for Economic and Policy Research, a “progressive” (liberal) economic advocacy group’s director, Dean Baker, criticizes TARP, but for the wrong reasons[1]. Instead of criticizing the practice of malinvesting taxpayer money in failing companies, the testimony focuses on advocating restrictions on the few aspects of the banking industry not controlled by government. However, such restrictions would only cripple the financial market further.

The CEPR suggests a rule that would force banks to allow people to live in foreclosed homes as “renters”. Presumably, the way this would work is that the homeowners would have their houses foreclosed but they would have a right to continue living in the same house, and so the banks would not be able to auction off the real estate. Besides the fact that this would drive up home values due to a decreased supply of cheap foreclosed housing, such a regulation would limit a bank’s ability to pursue profit, and banks would experience more losses. And bank losses began the financial crisis.

Another suggested regulation on the financial industry was a cap on executive pay. Because such a cap would only apply to our country and because executives can afford to move, it is likely that this would cause the best of the executives to seek working in foreign markets. Because this regulation, as currently proposed, would only affect the financial sector, the best executives would leave the financial sector in search for higher pay elsewhere. The CEPR does not understand that there is a competitive market for effective executives, in the interest of company profit.

The CEPR also mistakenly asserts that bank executives decide their own pay. This is absurd. If the bank is a corporation, then a board of trustees decides executive pay. If the bank is owned by the executive, then executive pay is determined entirely by the profit of the bank. Else, the executive is an employee whose way is determined by his/her employer. The wages of an executive are not a drain on the company, but a necessary investment. to ensure the efficiency of a company.

The CEPR also mistakenly asserts that regulations are not interference with the market. Any regultion is an interference with the market if it has any effect at all.

The CEPR is correct in asserting that banks are not forced or pressured into making loans it would otherwise make, because such loans would constitute a loss. However, when we cross apply this premise to some of the policies they advocate, such as expansionary monetary policy, the contradiciton is certain. Expansionary monetary policy necessarily encourages banks to give out loans because the Federal Reserve interest rate decreases and more loans become profitable. The bubble is then formed which the CEPR next criticises as the cause of the recession. If this bubble was most certainly the cause of recession, and it was, and this bubble was caused by expansionary monetary policy, and it was, shouldn’t the CEPR change their advocacies?

The CEPR will not change their advocacies because they are dedicated neokeynesians who believe that individuals are incapable of effectively and efficiently controlling their own actions in the pursuit of their own welfare. This is absurd, for the only thing that keeps individuals from doing this is the hand of government.

This article refers to http://www.cepr.net/index.php/publications/testimony/the-failures-of-tarp/.

Let Cap and Trade Die

November 18, 2009

Tyler Prochazka

Former Vice President Al Gore tells us that the world is on the brink of disaster. Global warming, he says, will destroy the planet. According to him, there is no room for debate. The government must save us. Despite these claims of catastrophe, be cautious of global warming hysteria and calls to take “drastic action.”

In the 1970s, scientists seemed to overwhelmingly agree that a devastating ice age was imminent. It would last for “10,000 years” they said. Famine and nuclear wars would result from this global cool down. Obviously, this didn’t exactly pan out. [1]

Since that time, it has been global warming that will doom us all.

Fool me once, shame on you.

According to the U.N. World Meteorological Organization, there has been no global temperature increase in over a decade. [1]

Moreover, a group of over 30 thousand scientists signed a petition that said greenhouse gasses have no negative effect on the environment. It went on to say that extra carbon dioxide actually helps the environment. [2]

To solve this non-crisis of global warming Congress is proposing a cap-and-trade system where the government sets a limit on the amount of pollutants a business can emit.

The current cap-and-trade bill being considered would cause severe damage to the economy. The Heritage foundation found that millions of jobs would be permanently lost and incomes would contract sharply. [3] It would likely amount to the largest tax increase in American history, costing the average American about $1,000 more a year directly. [4] It would hit people in poverty the most who would have to devote more of their income to energy instead of food and shelter.

Even with the destructive distortions to the economy, cap-and-trade would not have any noticeable effect on carbon dioxide levels. EPA administrator Lisa Jackson even admits this saying, “U.S. action alone will not impact world CO2 levels.” [5]

The real solution, if global warming is a problem, is to allow for the economy to grow so that people can innovate and create adaptations to natural disasters. Some scientists that believe in global warming say that adapting to the new environment will be far cheaper and far more effective than something like cap-and-trade. [6] Stifling the economy only undercuts the effort to innovate and create these adaptations, which would save us from any potential global warming crisis.

Furthermore, the encroachments on freedom perpetrated by this bill should not be even on the table. It seems as if every supposed crisis is just another way for politicians to defy the constitution and defy individual liberty. It should not be up to a bureaucrat how much energy I use.

Global warming likely won’t destroy the world, but the hysteria surrounding it just might.

SOURCES:

  1. http://www.washingtonpost.com/wp-dyn/content/article/2009/02/13/AR2009021302514.html?sub=new
  2. http://www.lewrockwell.com/paul/paul537.html
  3. http://www.heritage.org/Research/EnergyandEnvironment/cda0904.cfm
  4. http://online.wsj.com/article/SB123655590609066021.html
  5. http://blog.heritage.org/2009/07/08/epa-admits-cap-and-trade-won%E2%80%99t-work/
  6. http://articles.latimes.com/2008/mar/26/science/sci-adapt26

Insurance Industry Profits are an Insignificant Part of Total Health Costs

November 2, 2009

Advocates of increased government involvement in health care frequently cite the profits of private health care providers as a major part of the costs of health care. The numbers, however, show that health insurance and managed care industry profits are 0.36% of the national bill for health care. If the compensation of industry executives is added as part of the alleged problem, then the industry accounts for 0.37% of total costs. The notion that industry profits are responsible for rising health care costs is a fraud.

An example of the criticism is that of Representative Anthony Weiner (D-NY) on the Rachel Maddow show, who said, speaking of proposed legislation that would heavily tax the health insurance industry:

“Well, the one behavioral change we are clearly not going to see is the insurance companies aren’t going to suddenly start saying, ‘You know what, we are going to stop making 30 percent profits and cut it down to 10 percent or 5 percent because of this bill.’ “

So are the insurance company profits really 30%, as claimed?

Fortune magazine rated the health insurance industry as the 35th most profitable of 53 industries surveyed for 2008:

Health Care: Insurance and Managed Care 2.2%

In 2006, in better economic times, according to CNN, health insurance company profits were 7.1%. In the Yahoo Finance ranking of industries (they divide industry into more categories than Fortune) by profitability, “Health Care Plans” rank 84th, with a profitability of 3.3%.

Total insurance company profits were $12.87 billion in 2007 and $8.40 billion in 2008. Total health care spending in the United States was $2.2 trillion in 2007. Insurance company profits were therefore 0.59% of total health care costs in 2007. Since total costs have been rising at about 6%, the insurance company profits would be about 0.36% of total health care costs in 2008.

Ten companies account for the health insurance company profits. The highest paid executive received about $11 million, and the others much less, going down to a few million. In each company the top guy gets by far the largest compensation. The pattern I’ve seen is that the top person at any large company gets about half of the total pay. To be generous, I will suppose that the average top pay is $8 million, and that it is only a third of the total executive pay. So that would make the total for the industry 10 x $8 million x 3 = $240 million. The industry profits were $12.87 billion and $8.4 billion, so $0.24 billion would be added using Con’s definition of profit. that would make the contributions to total health care costs rise from 0.59% and 0.36% to 0.596% and 0.37%, respectively. Even if one were to indulge fantasies that executive compensation were much higher than I had supposed, it would not approach being a major part of health care costs.

Critics counting the numbers from public records for top execs claim that compensation was about $115 million in 2007 and less in 2008. That’s much less than the $240 million I’ve estimated. My estimate includes a factor for second-tier execs.

It’s worth noting that executives earn their pay by reducing costs. In Medicare, some put fraud as 20% of the programs costs. That would be 20% of $440 billion, $88 billion. Private insurance companies police fraud, so their losses to fraud are much less.

The hard numbers do not support critics arguments, so they avoid the numbers by spinning percentages. Percentage increases in profits do not mean the profits were significant. If your business made $10 last year and $100 this year, that’s a 900% increase, but it doesn’t imply you are ready to retire on the Riviera. Insurance companies have made billions, but as we have seen, the billions are not a significant part of the trillions involved in health care.

The health insurance industry profits rose “from $2.41 billion in 2001 to $12.87 billion in 2007.” Thus, I included the highest profit year, when the profits were 0.57% of total spending. Critics uniformly ignore the decline in profits since 2007. The profits in health insurance vary between about 2% and 8%.

To make a more dramatic story, critics ignore the 2008 data. It’s likely 2009 will be even worse, so of course that will have to be ignored as well. What the large percentage changes mean is that the industry is volatile. Anything that can go up rapidly is subject to coming down just as rapidly. Profit margins of 2% to 8% are well below the 9% average for the market as whole, so the picture is not particularly attractive.

Critics also try to spin the profit percentages by claiming that reserve funds keep by insurance companies should not be included in basis for calculating profits. That’s nonsense because the main way that insurance companies make money is by investing the funds held in trust. That’s true of life insurance and virtually all forms of insurance. An insurance company may actually pay out in benefits more than it receives in premiums. A large part of profit comes from investing the reserves, and an insurance company that does a better investment job earns more profit. That’s what they do for a living.

Besides, using a definition of profit that is not shared by anyone in the financial community is a scam in the first place.

Note that changing the definition of profit changes the percentages with respect to the company, but not to the total cost of health care. Even if it is deemed a million percent company profit, it is still $8.4 billion of the $2.2 trillion in health care costs. That’s 0.36%, an insignificant part of the total cost.