Archive for category Centrally Managed Economy
Obamacare’s Medicaid Crutch Is Bankrupting the States
Posted by Tom in Budgets, Centrally Managed Economy, Constitution, Entitlements, Federalism, Fiscal Policy, National Character, State Finances, Welfare on February 4, 2011
To buttress the shaky fiscal credentials of Obamacare Congress increased the eligibility for Medicaid to 133% of the poverty line adding 25% to the rolls; it sent the bill for this to the states. So those new Medicaid entitlees would not have their healthcare welfare charged against Obamacare. George Melloan exposes this neat little trick in his op-ed in today’s WSJ, The States Can’t Afford Obamacare.
States unlike the federal government are required to balance their budgets. One of the largest cost items in those budgets is Medicaid. This is a federal welfare program which requires state administration and state budgetary contribution. The fed dictates the program which like all fed handouts is rife with fraud and abuse.
In the recent Florida Obamacare case, the 26 states argued that Medicaid was unconstitutional as a coercive control over state budgets; in other words a violation of federalism which forces states to implement and pay for federal welfare. Judge Vinson did not buy the argument stating that the states could merely refuse to implement Medicaid. In short the federal government was not forcing the states to implement Medicaid, AT LEAST NOT IN THE LEGAL SENSE OF THE TERM.
And therein lies the rub! If a state withdraws from Medicaid, the federal government continues to tax its residents. Those taxes that would have otherwise gone in part to pay the state’s Medicaid bill will now go to pay the Medicaid bills for other states. In this hard economic sense, Medicaid is an unfunded federal mandate. This is economic compulsion at its best. And this is undoubtedly a breakdown of our federal system.
To review the bidding, the Obama-Reid-Pelosi triumvirate enacted a new, intrusive and unsustainable federal welfare program, Obamacare, by increasing the size of an existant unsustainable federal welfare program, Medicaid. In the process the three exploded the states budget obligations, exacerbating the states budget deficits. This case of robbing Peter to pay Paul has driven both closer to bankruptcy.
It is good to keep in mind that these federal farces, these piles of money, promote overuse, fraud and abuse. There is little justification for this welfare largess, other than to addict voters to their source, in this case the liberal, leftist Democrats.
Snake Oil Resold: Repealing Obamacare Will Raise Deficit!
Posted by Tom in Centrally Managed Economy, Congress, Deficit, Democrats, Entitlements, Nationalized Health Care on January 9, 2011
The Democrats really think the public is stupid: They are saying that eliminating a new unsustainable Obamacare entitlement will increase the deficit! (Of course, they passed this abomination with cloak room deals, in the dark of night, against the will of the voters.) Let’s see, adding 32 million to a federal health care program will save money. Really!
They who make it their mission to steal from our grandchildren are claiming the high ground and claiming that repeal of this monstrosity will increase our grandchildren’s indebtedness. If the public believes that they will buy bridges in Brooklyn!
Yesterday’s WSJ editorializes against their lies with ObamaCare’s Reality Deficit. The article treats the phony assumptions given to the CBO, and the real assumptions withheld from the CBO, and shows how the CBO can do the math correctly and say that the deficit will increase. Given the real assumptions and complete picture, the CBO would say that the deficit will be reduced by repealing Obamacare.
“Among the worst Democratic abuses was gaming the CBO’s budget conventions to make it seem as if ObamaCare “saves” money.”
“The accounting gimmicks are legion, but we’ll pick out a few: It uses 10 years of taxes to fund six years of subsidies. Social Security and Medicare revenues are double-counted to the tune of $398 billion. A new program funding long-term care frontloads taxes but backloads spending, gradually going broke by design. The law pretends that Congress will spend less on Medicare than it really will, in particular through an automatic 25% cut to physician payments that Democrats have already voted not to allow for this year.”
“The CBO budget gnomes are required to “score” what’s on paper in front of them, no matter how unrealistic, and that’s the method its Congressional masters prefer. The political class makes believe that CBO’s forecasts are carved into stone tablets through divine revelation, but all they really show is that politicians have rigged the budget rules to hide the true cost of entitlements.”
“The government can’t subsidize coverage for tens of millions of new people and simultaneously reduce the deficit, as most Americans seem to intuitively understand. The real offense Republicans are committing in the eyes of Washington is exposing its illusions.”
A quick review of some of the posts on Nationalized Health Care on the right side of this page may refresh any memories that need refreshing. Suffice it to say that the House should repeal the damn law and let the Senate go on record after the November results as favoring it; and let Obama veto any repeal that gets to his desk! 2012 is just around the corner!
More Uncertainty, the sinister kind under Obamacare
Posted by Tom in Centrally Managed Economy, Corporate Welfare, Democrats, Government Regulation, Nationalized Health Care on January 7, 2011
It’s axiomatic that uncertainty breeds caution. In an economy, uncertainty slows growth, inhibits investment and delays or reduces employment. After four years of a Democratic Congress and two years of a Democratic President we have seen plenty of statutory uncertainty. And during the last two years the regulatory uncertainty has increased dramatically from leftist control freaks; just consider recent actions in the FCC and EPA. And quite a bit of this, without statutory authority!
As if that’s not enough, we now see a sinister regulatory uncertainty under Obamacare. This regulatory uncertainty is the discretionary kind, in which Obama supporters are granted waivers from various provisions of Obamacare, but his opponents are not.
Two articles highlight the problem. Dr. Paul Hsieh pens a telling article in The Washington Times, Best health care political pull can buy. “According to the New York Times, many consumer advocates thus fear Obamacare will have the perverse effect of reducing competition and driving up costs.”
“Yet while Obamacare is suppressing genuine marketplace competition for medical services, it is also spurring a more sinister facsimile of competition – for political favors. Employers and insurers with sufficient political clout can save money by obtaining a much-coveted “waiver,” exempting them from onerous new insurance regulations. The 222 current recipients of such waivers include popular employers such as McDonald’s and Universal Orlando as well as the Service Employees Benefit Fund, which insures members of the Service Employees International Union (a major political supporter of the Obama administration). Because these waivers are granted at the discretion of the secretary of health and human services, they create easy opportunities for political favoritism and corruption.”
Karl Rove in his WSJ op-ed, ObamaCare Rewards Friends, Punishes Enemies, adds that HHS Secretary Kathleen Sebelius exceeds her statutory by regulating insurance rate increases needed to cover the additional health services mandated by Obamacare: “Then, on Dec. 21, Ms. Sebelius announced that insurance companies seeking rate increases of 10% or more in the individual or small group market must publicly justify the hikes under standards set by her department.”
“Insurance regulation has traditionally been a state responsibility, and 43 states must already approve proposed insurance-rate increases. ObamaCare does not authorize HHS to deny rate increases, but the agency said that if a state “lacks the resources or authority” to conduct the kind of review the agency wants, it will conduct its own”
And this after exempting AARP’s lucrative “Medigap” plans from rate review and other Obamacare requirements. This so-called “non-profit” won’t pay any of the new taxes on insurance companies; nor will it be required like other insurers to spend 85% of Medigap premiums on medical claims. Oh, by the way, AARP spent a big chunk of the $121 million in advertising supporting Obamacare passage.
A line from Hamlet, “Something is rotten in…Denmark,” is sadly appropriate! The lack of basic morality here is troubling, but not unexpected considering who is in power.
Fannie & Freddie: How To Exit?
Posted by Tom in Banks, Centrally Managed Economy, Government Regulation, Real Estate, Subsidies on January 4, 2011
Government interference in the economy always results in trouble. Government preferences to housing and subsidies of affordable housing misallocated capital. The Savings and Loan bubble spurred by promoting a quadrupling of the size of the S&Ls to promote home finance burst some 20 years ago costing the taxpayers $150 Billion. Learning nothing from that waste, in 1992 congress told F&F to support “affordable housing” with subprime loans and low down payments; this will wind up costing taxpayers between $221 and $363 Billion. No we don’t learn.
Intelligent people want the government out of home financing but today there is no other game in town. F&F do virtually all of the current mortgage lending; the capital markets have been burned so badly they have no stomach for it, especially at the subsidized government rates.
Peter Wallison in a WSJ article, Moving Beyond Fannie and Freddie, argues that other developed countries rely on private markets to finance home ownership, and so should we. He suggests that we gradually lower the size of mortgages that F&F are allowed to buy, say in $50,000 increments each six months. Soon they would become a much smaller part of home finance, while direct lending and securitization picked up to fill the void. He also implicitly argues that underwriting standards should be strengthened. Well, sure.
An Atlantic article, How Quickly Can We Rein in Fannie and Freddie?, criticizes Wallison’s faith in the securitization market which has been dead since 2007. It also says his exit time frame is much too ambitious and would kill the nacent recovery as it kills home building. So perhaps the gradual decrease in mortgage size for F&F should be $50,000 each 18 months.
Mark Toomey, our expert in the business, points out that the securitization markets are held back by a number of uncertainties:
- Confidence that housing prices will stabilize; not helped by Dodd-Frank, mortgage deductibility questions, or government interference with foreclosures.
- Transparency of actual performance of mortgage assets on bank balance sheets.
- Dodd-Frank Quantitative Risk Management “hold-back” requirements depending on how applied could force lenders out of the business.
Mark concludes that we are stuck with something like an explicit government guarantee through F&F for three to five years.
If that is the case, (1) there should be strict underwriting requirement including 10-20% down payments, (2) guarantee fees to compensate for the risk of loss and increase the borrowing costs so as to give private markets pricing room to re-enter the market, and (3) a specific, gradual diminution of F&F lending ability, along the lines discussed above.
Above all, there should be no more government interference in home finance whether under the euphemistic guise of “low-income affordability” or the more realistic, vote buying rationale!
Health Care, Right or Entitlement?
Posted by Tom in Centrally Managed Economy, Constitution, Entitlements, National Character, Statism on January 2, 2011
Is health care a right? How about health insurance? What about car care! What is a right and how is it distinguished from an entitlement?
Ross Kaminsky in his American Spectator post, Is It a Right or Isn’t It?, treats the rights issue with respect to health care. If health care is a right as both Obama and McCain asserted, then it is a positive right, one that is provided by others without regard to its being earned or paid for. He distinguishes this from negative rights such as those in our constitution, the right to be free from interference by others.
“The problem with Obama’s positive right formulation — as with all positive rights — is that one never knows where such a right ends, if or when such a right might be curtailed when it conflicts with citizens’ other (usually negative) rights.” Thus if health care is a right, how can we cut it off at the point society can no longer afford it? “This leaves proponents of a “right” in the uncomfortable position of having to say that it’s only a right up to a certain age, a certain degree of sickness, or a certain cost.” Kaminsky comes down against health care being a right.
Steven Yates, a philosopher, distinguishes between Rights Versus Entitlements in the Freeman blog.
“If we consider the original rights expressed in the Declaration of Independence and enumerated in the U.S. Constitution, it should be clear that there are massive differences between those rights and these new ones. The original rights were rights to live by one’s personal efforts without the interference of others, and in particular, without interference by government. That is what the founders of the United States were declaring independence from, after all. The Declaration of Independence speaks of the right to pursue happiness; it does not offer a guarantee that one will achieve happiness. This makes all the difference in the world; for in a free society there can be no guarantee that effort will meet with success.”
“In other words, there is a hard and fast difference between rights and entitlements, a difference which the past seventy years of government policy has blurred to the point of indistinguishability. A free society must recognize the distinction. Otherwise, it has no way of knowing which claims of rights to acknowledge and which to reject as spurious. Legitimate rights are easy to recognize. They can be acted on by individuals without the assistance of government and without forcibly interfering with other individuals. Entitlements, on the other hand, cannot be fulfilled except through specific government actions which require forcible interference with others. Protecting rights is thus compatible with limited government. Granting entitlements requires an ever- expanding and increasingly meddlesome state. The more entitlements the state grants, the more it must extend itself to make good on its promises, and the greater its level of interference with people’s actions. Moreover, by interfering with successful actions, government becomes a drain on the individual’s energies. The individual must expend more and more effort to get the same personal benefits. This translates into a disincentive to produce, and when less is produced, there is less to seize and distribute. Soon, the state can no longer keep its promises.”
Since the dawn of the progressive era, we have seen the United States becoming more and more an entitlement dependent society. The recent passage of Obamacare on top of the bankrupt Medicare, Medicaid and Social Security systems is only the last example. To paraphrase Margaret Thatcher, the problem with entitlements, like socialism, is that eventually you run out of other peoples money to spend on them.
Sucking Air: Wind Energy’s Compound Felony
Posted by Tom in Centrally Managed Economy, Energy Facts & Policies, Statism, Subsidies on January 1, 2011
T. Boone Pickens finally admitted his multi billion “Pickens Plan” to make the U.S. the “Saudi Arabia of wind” was uneconomic even with the multi billion dollar tax subsidies. Wind subsidies at $6.44 per MBTU are 160% of the $4 per MBTU price of natural gas! That’s wasted money in desperate economic times. See Robert Bryce’s WSJ article, A Wind Power Boonedoggle. Of course, our lame duck 111th Congress renewed the investment tax credit for renewable energy projects.
But compounding this taxpayer theft, is another regulatory usurpation by the Obama administration. This time by the Federal Energy Regulatory Commission and its imposition of a multi million dollar annual surtax on utility bills in 13 midwestern states to cover the costs of transmission lines to wind and solar projects.
This has no statutory authority. Nor is there any legal precedent for this action by these unelected leftist bureaucrats. Legally FERC’s rate schemes have been based on the principle that users pay, non-users don’t. This new tax is imposed on non-users as well as users to promote so-called “multi value projects’ that take into account broad “public policy goals.” In other words the unelected bureaucrats without congressional authority or court precedent can do just about anything they damn well please!
Thursday’s WSJ editorialized against The Midwest Wind Surtax, calling it the latest scheme to socialize the costs of renewable energy. The folly of the renewable energy proponents is getting out of hand.
“For example, a 2009 study by the California Public Utilities Commission finds that to meet the state’s “33% RPS by 2020 target, seven additional [transmission] lines at a cost of $12 billion would be required.” By some estimates, electricity from the Cape Wind project off Massachusetts will cost about two to three times more per kilowatt hour than electricity from coal or natural gas. The wind industry has essentially conceded that without the ability to socialize the cost of multibillion dollar transmission lines, its projects can’t compete with coal, natural gas and nuclear power.”
“The FERC pricing scheme is politically insidious, and arguably unconstitutional, because it enables states with renewable standards to export the costs of those policies to other states without these laws. Why should a factory in Pontiac, Michigan subsidize the wind energy costs of a plant in Elgin, Illinois? Michigan has a renewable energy standard, but it is already complying through instate renewables.”
No doubt that true renewable energy should be used where available without subsidy, hydroelectric and geothermal power are examples. Nuclear power should be promoted for base load purposes throughout the country. But the waste of taxpayer money on part-time renewable boondoggles like wind and solar compounded by the imposition of transmission taxes on non-users by FERC is truly a compound wrong against taxpayers and common sense.
Shades of George Orwell
Posted by Tom in Centrally Managed Economy, Constitution, Federalism, Government Regulation, Individual Freedom, Law, Morality & Religion in the Public Square, National Character, Statism on December 28, 2010
Hopefully only a bad dream from which we shall awake!
Gaping Hole in Financial Regulation
Posted by Tom in Centrally Managed Economy, Constitution, Financial Policy, Housing, Welfare on December 27, 2010
Tom Cargill has an excellent article in today’s RGJ, Reforming Freddie and Fannie is No. 1 Priority. In it he sets the record straight as to the causes of our current financial mess, “Incredibly easy monetary policy, lax regulatory oversight and flawed government incentives to expand homeownership to moderate- and low-income households based on “junk” mortgages are the source” of the Great Recession.
He correctly points out that the Democrats would rather point fingers elsewhere, Wall Street greed and deregulation. But these same politicians are responsible for the Community Reinvestment Act and the Fannie/Freddie subprime engorgement. Barney Frank famously wanted to roll the dice with F&F, he later admitted his error, after the international financial damage was done!
Tom rightly points out that the recently passes financial regulation failed to touch F&F, the prime cause of the Great Recession and that failure of courage must be remedied. Why? because they will continue down the same blind path if left to their own devices.
Housing has been a major economic driver as the baby boomers aged. It has been a first step toward everything in those new houses from beds to babies! The industry is in the tank now and hasn’t reached botton, again because of federal efforts to keep deadbeats in homes and prevent foreclosures. The overhang of underwater home mortgages is a major drag on home values. And until the secondary market reaches market clearing pricing, no upturn can happen.
Another downer is the maturity of the babyboomers. As that demographic lump passes from house to home to grave, the demand for housing will be less, absent some dramatic increase in immigration or fertility rates. So, the future does not look good.
But for the health of what will be left of the industry, the health of the economy, and the sanity of the financial markets, Fannie and Freddie must be dealt a death blow. The mortgage market must be allowed to operate in the private sector.
I have a basic prejudice toward government interference in free markets. Thus, I wonder what today would be like without the Community Reinvestment Act and without Fannie and Freddie? They forced or incentivised a large build up in the housing industry, misallocating investments and creating the bubble that burst. My gut is that we, all of us, would be much better off if they had not been around. And, where in the Constitution is there an enumerated power to promote home ownership to low income families or high income families for that matter? Truly beyond the scope of those powers. Something to think about!
Subsidiarity
Posted by Tom in Centrally Managed Economy, Government Regulation, Individual Freedom, Law, Morality & Religion in the Public Square on December 26, 2010
Club for Growth published a simple video which makes a profound point–government action necessarily implies force, force which we wound not wield as individuals, simply because we prefer our own freedom of action or inaction if that force were threatened against us. The corollary is that smaller units of society can accomplish the needs of society more effectively. The family, church, social group, or local government are always closer to the need. Moral obligations to help are stronger than legal obligations that force help. States over federal governments, local governments over state governments, social groups and churches over local governments, all work more effectively and more intelligently. Here’s the video:
Think of the myriad of ways the federal government spends your money to address so-called problems that could better be handled locally!
Merry Christmas…but for how long?
Posted by Tom in Bankruptcy, Centrally Managed Economy, Congress, Deficit, Fiscal Policy, National Debt, Statism on December 25, 2010
Check out OweNo.com, a project of the Peter J. Peterson foundation. Here’s a sample:
Foreign Debt from Hugh Jidette on Vimeo.