The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”As the inequality gap grows, there is an ideological battle unfolding in the West.On the one hand, there are those who think government can fix things. It must do more, tax more, […]
On Feb. 7 the United States will once again reach its statutory debt limit, meaning it cannot legally borrow any more money. Since the obvious option of cutting spending to match the amount of revenue that the government collects is off the table for some inexplicable reason, Congress will have to pass a new, higher […]
The New York Times published an interminable article on health care recently. Plenty of facts — how scrupulous are these journalists! — but the article displayed absolutely no comprehension of the basics of cause and effect. I was left wondering about the whole point.The article details how the health care system rewards specialists to an […]
The Largest Company in History:“The United States Corporation of Government (USCOG)”I follow global social and commercial networks, looking for entrepreneurial opportunities.Innovation surges when industry and government models change. Buggy whips. Landline phones. Railroads. The Soviet Union. Apartheid South Africa. All marked social and commercial innovation, both bad and good.We are witnessing a new form of […]
We’d like to give the banks in Australia some credit. They’ve finally gone and done it. They have caught up with 1960s technology. They’ve figured out how to use PIN numbers.How to only use PIN numbers, that is. They’re considering scrapping signatures on credit cards to cut down on fraud. Apparently, having to verify your […]
We put in a good-citizen call to the SEC the other day.“There’s a massive scheme to manipulate stock prices,” we told the friendly agent.“I have to tell you that your call is being monitored so that we can better serve the public,” he replied.“Oh, don’t worry about that. The NSA is tapping our call anyway.”“Are […]
Dr. William C. Padgett is a retired optometrist who has been trying to bring an elderly care facility to Beaufort County, North Carolina, for over a decade.“Our senior citizens,” he laments, “are finding that it is difficult and in many cases impossible to find an appropriate long-term care facility locally.” Though he has received several […]
If you don’t have the angst out of your system concerning Wall Street banksters, Government Sachs, and the Affordable Care Act, settle in with Matt Taibbi’s Griftopia to make your blood boil one more time.Investors should be reminded of 2008 as they shrug their shoulders and put their money back in the stock market. The […]
What do 8 of the 10 wealthiest people in the U.S. have in common?Aside from being able to fly in private jets, the common thread is that each of them has made their fortune thanks to a start-up.Let me explain…From tech titans like Bill Gates and Larry Ellison (founders of Microsoft and Oracle, respectively), to […]
“Inequality is the defining challenge of our time,” according to President Obama. It’s certainly the topic of the day for Paul Krugman, Joe Stiglitz and a whole raft of liberal pundits.But have you noticed that hardly anyone else is talking about it? When is the last time you heard a shoeshine person or a taxi […]
In December of last year, I left my career to travel the world for one year.My plan was to visit as many countries as possible on my Star Alliance Around-the-World ticket in the first nine months, then, for the remaining three months, return back to the country that most caught my eye and my curiosity.Nine […]
Economic history is primed to repeat in the nastiest of ways unless the government stops distorting the price of something we use every day.Every product, good, or service has a price, which is essential to rational decision-making. We use prices every day as vital data that guide us. Without true prices, prices not distorted by […]
A new survey from Harvard University found a large majority of young Americans do not believe the law will save them money, do not believe it will improve their health, and do not intend to sign up for insurance through the new exchanges.
Uh-oh!The new pope, Francis from the Pampas, has just warned us to beware the “tyranny” of capitalism.Each man worships his own gods. Some worship at the altar of Jesus of Nazareth. Some at the altar of the Almighty Dollar. The capitalists don’t bad-mouth Francis’ god. You’d think he would cut them the same slack.Bad-mouthing Catholicism […]
The market has selected different things as money throughout history. Some of these items have served as money in isolated places for specific periods of time — for instance, cigarettes in prisoner-of-war camps. Cigarettes continue to be a currency in prisons if allowed, but if not, according to Wikipedia, “postage stamps have become a more […]
A president stands disgraced. Congress is scattering. Bureaucrats are baffled. Pundits are reaching. Industry is scared. Politicians are scrambling to do something, anything, to make it better. One political party is in meltdown and the other loving every minute of it, hoping to ride the calamity to electoral gains.The so-called Patient Protection and Affordable Care […]
Easy prediction: Congress will not cut spending. The hysteria in Washington is for naught, as usual. There will be no “austerity,” at least not the kind brought on by cuts in government. Nor will there be curbs on the Fed. Our credit-drenched, phoney-money culture would never stand for it.
But let’s just pretend that this fantasy did come true, for once. What would happen?
Try not to be intimidated by what the supposed experts say; rather, think about the following sentence using logic and critical intelligence: “Cutbacks in government spending… will eat into growth.” This statement of seeming ironclad truth was pushed in an editorial in The New York Times. It is without argument or evidence, but it presumes the truth of the “fiscal multiplier effect.”
Let us see. Incontrovertible truth: government has no resources of its own. Everything it has it takes from you and me or borrows. How does forcible extraction of private resources in the service of bigger bureaucracies and transfer payments cause new kinds of prosperity to come into existence? What you take, you have, but there is no turning stones into bread here.
It’s even worse than pure redistribution of wealth. It is actually destruction of wealth for government to rob and spend. This is because it is taking resources from highly valued uses to channel them into less-valuable uses. We know this because it would not happen absent the use of force. People’s preferences for the use of resources are being overridden.
How does that create or sustain prosperity? Of course, it doesn’t. If it did, there would be no economic problem to solve, no need for savings and investment, no need for risk taking or economic calculation of profit and loss. To create prosperity, you would need only unleash the looter state. Absurd.
In fact, the opposite is true. Cuts in government spending release resources from less-valued uses into more-valued uses. It puts wealth back into the hands of private parties, in which it can be saved and invested with economic rationality. The Keynesians have it exactly backward. Defunding bureaucracies and transfer payments provides new and productive funding for entrepreneurs and wealth creation in the private sector.
And hey, this isn’t just speculation. This is precisely what happened after World War II. FDR died and the political system went into full-scale upheaval. His successor, President Harry Truman, didn’t have his stride, a congressional election produced unexpected results, many wartime controls were allowed to expire and, for a variety of reasons, the wartime leviathan began to melt away.
David Henderson beautifully illustrates the point:
“In the four years from peak World War II spending in 1944 to 1948, the U.S. government cut spending by $72 billion — a 75% reduction. It brought federal spending down from a peak of 44% of gross national product (GNP) in 1944 to only 8.9% in 1948, a drop of over 35 percentage points of GNP.
“While government spending fell like a stone, federal tax revenues fell only a little, from a peak of $44.4 billion in 1945 to $39.7 billion in 1947 and $41.4 billion in 1948. In other words, from peak to trough, tax revenues fell by only $4.7 billion, or 10.6%. Yet the economy boomed. The unemployment rate, which was artificially low at the end of the war because many millions of workers had been drafted into the U.S. armed services, did increase. But during the years from 1945-48, it reached its peak at only 3.9% in 1946, and for the months from September 1945 to December 1948, the average unemployment rate was only 3.5%.”
I was just yesterday listening to Paul Krugman (debating Ron Paul) explain that it was Keynesian economics that gave rise to the economic boom in the United States following the Second World War. This is the kind of claim that causes the jaw to drop to the floor. Ron correctly responded that it was the spending and tax cuts, with the release of controls, that did that. In fact, the Keynesians at the time predicted complete disaster just when the very opposite happened.
Paul Samuelson, the leading American Keynesian, warned against dismantling wartime planning. He wrote in 1943 that such a plan would usher “in the greatest period of unemployment and industrial dislocation which any economy has ever faced.”
This was his prediction. Of course, the exact opposite occurred!
The most-spectacular thing concerns the reabsorption of military workers into civilian life. More than 10 million people who might have been unemployed found work. This was a readjustment that hardly anyone expected, and a fantastic tribute to the capacity of the market economy to deliver seeming miracles that defy all the predictions of disaster.
Again, Henderson writes:
“Indeed, in just the 11-month period between August 1945 and July 1946, the number of people in the U.S. military fell from 12 million to 2.7 million, a drop of 9.3 million. Over those same 11 months, civilian employment grew from 53.6 million to 57.8 million, an increase of 4.2 million people. The number of unemployed people did increase, rising from 0.8 million to 2.3 million, but with a civilian labor force of 60.1 million, the 2.3 million unemployed people implied an unemployment rate of only 3.8%.”
Remarkable, isn’t it? Look at our current labor problems. They are incomparable. And we are living through an astounding technological boom that should have created a brilliant market for workers in all sectors. Instead, with the Keynesians in charge, we have persistent unemployment and falling labor participation! They keep being shown wrong, and yet they have no shame and continue to claim to have been right.
Given this history, the prescription for our current troubles reverses all the conventional wisdom. Cut government spending dramatically. Cut taxes. Get rid of regulations and controls. In sum, free the economy! You can say it and prove it ten thousand times, but it makes no difference. A convinced Keynesian is a tough nut to crack.