book club

So from time to time I actually do read an occasional book. Although I would have to say over half of what I read is non-fiction, I do enjoy a good novel from time to time. Unfortunately, it has been over a year (since Christmas 2008) that I have read a book cover to cover. So I have decided that I am going to read a book.

As I said, I enjoy non-fiction books. The subject matter that these books come in are in two basic categories: economics/philosophy and golf. However, I really want to read a fictional novel that seems to be a least somewhat related to these two categories. As you may have guessed, this combination does not tend to lead to many dramatic tales of heroism, especially since the political philosophies I enjoy reading about are more libertarian in nature. Nobody seems to want to make their protagonist a golf pro or a champion of laissez faire economics. However, after reading an article in Fortune about Wisconsin Republican Congressman Paul Ryan (btw great article link here), one of his favorite authors caught my eye: Ayn Rand.

Now I have heard of Rand numerous times before, and I knew that her books had been very influential on people like Ronald Reagan, Alan Greenspan, Jack Kemp and Newt Gingrich; however, I have never personally read any of her work.  Obviously, anything that is read by conservative leaders like those mentioned above has never been anywhere near a public high school reading list (where most of the novels I have read have come from).  So I am going to check it out.  And I encourage you to do the same.  Listed below is a link to Rand's masterpiece Atlas Shrugged on Amazon.  From what I have heard, Rand is an excellent writer who champions the idea of free markets and individualism, while still keeping the reader actually engaged in a riveting story.  We shall see.  I am buying the book today, and I will review it on this site when I am finished, although I have no idea when that will be.  Until then, here's to a reading experiemnt.  Hopefully I won't get lazy and try to find a movie version...

government run healthcare at any cost

The Democrats are in a tough spot. Their healthcare bill is unpopular. They don't have any idea how to create private sector jobs. The House and Senate are so far apart when it comes to financial reform that it makes their differences on healthcare look like the differences between Kristina and Karissa Shannon (see Exhibit A). Basically, the Dems are now coming upon the realization that they have no path to anything other than complete and utter decimation in November. At this point it does not matter if they scuttle Obamacare or not.

Exhibit A

With this backdrop, Pelosi, Reid and Obama have decided to simply go all-in. They have accepted these losses and now want to force through the most liberal, far-reaching and redistributive healthcare bill possible. They have decided that since they are not going to have the power to do anything after November, they might as well do as much dirty work as possible now, making it almost impossible to roll back these unpopular and tremendously expensive initiatives until at least 2012 (when Obama leaves office), which is effectively too late to stop it. Just look at all the talk about bringing back the public option.

I watched several hours worth of coverage of last week's healthcare summit at the Blair House. Basically, I came away with the fundamental understanding that the two parties fundamentally see two different healthcare problems. In the democratic paradigm the world works like this:

Health insurance is so important that every single american should get it regardless of their ability to pay for it.  It should be an affirmative, government provided right.  The 60 million Americans who don't have health insurance need and want it, they simply can't afford it.  This is the biggest problem with regards to health care in America.  Health insurance companies face no competition and can gouge consumers, pricing people out of the market.  The federal government should mandate both the minimum protections private insurers can offer, the minimum coverage that a citizen must buy, and will provide subsidies for people up to four times the federal poverty level to purchase this insurance.  This manipulation of the health insurance market will not have many unforseen consequences, and people will be able to keep their current coverage if they like it.  The subsidies can be paid for by taxing just the rich.  

On the other hand, the GOP sees the problem this way:

Healthcare costs are rising too fast.  Perversions in the market destroy the price incentives that normally provide information regarding the relative supply and demand for a given product or service by allowing the customer (you and I) to receive full services without having to realize the full costs of those services (through use of  co-pays, premiums and low deductibles).  By disturbing these incentives, the price system is not allowed to function correctly, allowing for an efficient allocation of resources.  This situation inevitably will lead to excess demand, driving up costs.  Excess demand is also created when doctors practice defensive medicine in fear of malpractice lawsuits down the road.  Capping non-economic pain and suffering damages can reduce this defensive medicine.  The solution is to add market discipline to the health insurance market, by opening competition (like allowing people to buy insurance across state lines) and re-instituting price discipline (like by promoting health savings accounts and eliminating the differential tax status between employer and individual purchased health insurance).  High risk pools can be created to help insure those with preexisting conditions. 

Both sides are open to criticism.  Democrats say the republicans plan does little to help the uninsured get insurance.  That is mostly true, although there plans would drive down healthcare costs in the private market, making insurance more affordable for everyone.  This would allow some people currently priced out of the market to purchase insurance.  Republicans counter with the argument that the Democratic plan would be vastly expensive, would drive up the costs of insurance in the private market (through the coverage mandates) and amounts to little more than a vast wealth redistribution system.  In addition, by adding millions to the insurance market on the public dime, Obamacare will eventually lead to healthcare rationing when the program becomes underfunded (like all other public entitlements).  The true costs of providing healthcare to these individuals will be shifted to private payers whose premium costs are not mandated by the federal government, which could either lead to increases in private insurance premiums/decreases in quality of care or to the destruction of the private market all together when people begin dropping costly private insurance that is subsidizing the entitlement.

In my opinion, both sides are missing the larger point.  What was the original point of health insurance?  To hedge against the risk large healthcare costs if you are in a accident or are diagnosed with an unforeseeable disease.  The reason health insurance today provides the much different service today of covering not only unforeseen injuries and illnesses but everyday check-up and dental visits is because of the tax structure that was in place over the past 25 years that allowed employers to purchase health insurance for their employees using tax free money.  This made it cheaper for employers to offer an increase in health insurance value to their employees (which they paid for before being taxed) to a corresponding increase in pay (which would be paid for post taxes).  This scenario inevitably lead to hugely expensive insurance plans that covered all types things instead of simply increasing an employees pay.  Until the U.S. moves away from the tax system that heavily favors employer purchased plans, it will be difficult to have any price discipline in this market.

The most effective way to reform the health insurance market would be to simply give move away from the employer provided system and towards and individual market system.  In this scenario, consumers would be better able to gauge their true health care costs, and make rational decisions using a cost-benefit analysis.  Despite all the talking points about "waste" in the health care system, the only way to truly keep costs at an appropriate level is to allow effective market signals (using the price mechanism) establish the equilibrium level for these services.  History has shown that when a market is able to provide such incentives, resources will be distributed in the most efficient way possible.  This is perhaps the most important reform that could be considered in any health care overhaul, unfortunately neither side seems to grasp this important point.

obama is failing, but can the gop succeed?

By now everyone has heard about the revolution (as my Dad likes to call it) that occurred in Massachusetts last week.  Scott Brown was elected Senator, taking away the Democrats filibuster proof majority in the Senate (which, by the way, they never should have had because Al Franken manufactured votes last year in the Minnesota recounts).  Everyone is proclaiming that Obamacare is dead and that the Democrats are going to get murdered in the midterm elections in November.

Well I do agree with the first point; Obamacare is probably dead in the water, at least anything close to its current form.  I am not sold, however, on the fact that Democrats will be wiped out in November.  I understand that it will be a tough year for Democrats, but unless the Republicans stop simply being the party of "no" (which I am completely fine with if they are the minority party) and put out ideas of their own, their gains will not be substantial enough to effect real change (i.e. for them to take control of one or both houses of Congress).

Well guess what GOP?  I am here to help.  I have identified FIVE issues that can lead the Republicans to the promised land.  These are issues that in my opinion can not only bring victory to the party, but would also put America back on the path of unbridled economic vitality and sustainability.  Although I think each of these issues is important, they are listed in reverse order of importance (at least in my opinion).  The first two deal with foreign policy, while the last three are domestic issues.  Here we go!


5.  Legal Status of Terrorists
Scott Brown showed that even in Massachusetts more of the public support the more conservative view of the rights of enemy combatants and other terrorists.  The attempted Christmas Day Bomber, however you say his stupid name, was taken into custody by the FBI immediately after he landed in Detroit, was read his Miranda rights, and then he immediately lawyered up.  He still isn't talking.  It's pretty hard to fight a "War on Terror[ists]" when you cannot legally get the best possible information on your enemy.  Look, I am about as libertarian as you can get, and even I don't think these murders are entitled to all the rights afforded by the Constitution.  These guys are (for the most part) not U.S. citizens and they entered this country solely to attack civilians.  That is an act of war, not crimes in an ordered society.  The protections of the Constitution are rights that U.S. citizens hold and that the government cannot encroach.  In my opinion, these foreign terrorists should be treated like the shits they are, and that Constitutional rights are reserved for U.S. citizens.  Now I understand there are many, many situations were non-U.S. citizens should be afforded Constitutional rights, but this is not the case here.  They kill indiscriminately and are no different than any other barbarians that have emerged throughout history.  They should be dealt with accordingly.


4.  Make Freedom, Liberty and Security, Rather than Climate Change, the Focus of Foreign Policy
Since Obama took office the overriding theme of his foreign policy has been that global warming is the most serious international threat of our time.  Guess what?  That simply is not true.  At least in my opinion.  And I think the majority of Americans would agree with me.  Nuclear proliferation is a much, much larger problem both now and into the future.  Rogue regimes like North Korea and Iran are pushing hard to develop weapons that could be used against the U.S. and its allies.  This should be the focus of foreign policy.  We should make it known that we support anyone in the world who shares our belief in freedom and liberty.  This includes dissenters in China and the Green movement in Iran.  Democracy and individual liberty are the greatest pacifiers our civilization has ever seen, and as those beliefs proliferate, the world will become a much safer place.


3.  Swear off Earmarks, and Cut Domestic Discretionary Spending
So apparently Obama is going express support for a cap on discretionary spending in his state of the union on Wednesday night.  Well it seems like a great idea, but in all reality it is nothing more than a political farce.  In his first two budgets Obama raised total federal spending from about 21% to 26% of GDP.  So after this huge hike, he is now trying to claim fiscal discipline.  Please.  What's more is that discretionary spending is only approximately one-sixth of the federal budget, so capping its growth will do little to stop the deficits.  It is however, a good start if it is done right.  The Republicans should go a step farther than announce their attention to not only halt, but to cut domestic discretionary spending.  Republicans need to stand up and say they will not support another pork-riddle farm bill or unproductive funding for the departments of energy, education or labor.  If that means we lose Iowa, then we lose Iowa.  Fuck em.  Pork is pork whether it is in farm subsidies, bridges to nowhere or other wealth distribution programs.


2.  Make the 2001 Bush Tax Cuts Permanent
Everyone is hoping that 2010 will be better than 2009.  And that 2011 will be better than 2010.  Guess what?  That probably won't happen if we allow the Democrats allow the Bush Tax cuts to expire.  All of the marginal income tax rates will rise, the capital gains tax will rise and the tax on dividends will close to double.  Is this smart policy during an economic recovery?  The bad consequences of such a policy have been chronicled in numerous sources, but check out this WSJ editorial by Peter Du Pont for some grim predictions.   I find Arthur Laffer's analysis in his January Economic Outlook very compelling as well (the analysis is also mentioned in Du Pont's editorial).  Obviously I think this issue is a self starter for the Republicans.  I'm not one for litmus tests, but any Republican who does not support this policy should not be running for federal office.


1.  Entitlement Reform
In my opinion this is the most important, most contentious and most difficult problem that the U.S. will face in my lifetime.  Everyone knows the narrative: These programs (Social Security/Medicare/Medicaid) were initiated originally to help the the poor and indigent.  Over time they expanded to cover more and more Americans.  They are now approaching fiscal disaster as payouts are increasing far more than revenue.  This is the one and only issue (barring any major wars, knock on wood) that could simple bankrupt our country and our currency.  Without this problem all other problems seem very solvable.  If we could kick the habit we could end our reliance on foreign financing, increase economic productivity by stopping this huge drain on our resources, and focus on more pressing domestic and international issues.  The problem is in the pudding (I don't know what that means).  The problem actually is that at this point so many people have been promised benefits and have paid into the system their whole lives that it would be fundamentally unfair to deny them their benefits.  However, a large chunk of the population is aging fast, and there soon will not be enough productive workers to pay for their benefits.  Do I know a politically feasible answer to this problem?  No.  Personally I am for a combination of benefit cuts, allowing young people to opt out of the program instead rely on personal savings accounts, and cutting spending in other areas to fill the gap.  We need to tell young people today that social security in its current form will not be around when they retire.  Unfortunately, because of the largess of their parents and grandparents, they will be forced to pay for the program while not benefiting from it.  There is no feasible way that last statement is not true.  We might as well own up to that fact now, and end any reason for a sane American to rely on these programs for retirement in 50 years.  Obviously I don't have all the answers, but it is at least time for Republicans to start the debate.

crony capitalism

So thanks to a recommendation by my Dad I have been on a reason.com kick.  This article is one of the best articles I have read about capitalism in America today.  It is entitled Let's Take the "Crony" Out of "Crony Capitalism."  As I mentioned in my last post, we currently do not have free markets in most industries in America.  Over-regulation has made many markets pseudo-competitive.  Because of these regulations, there are tremendous capital and legal barriers to entry, making it very difficult for new firms to enter the market.  And guess what?  Established firms are completely for this.  Less competition for them.  Thats why you see auto-makers lobbying for stricter regulation for emissions, insurance companies in favor of Obama's health care bill and energy companies in favor of cap and trade.  In a truly free market all these ideas would be fought by these companies because it drives up their costs.  But in today's crony-capitalist America, the major corporations understand that these regulations mean it will be harder for competitors to enter their market and that they will cement their market share.  Then can then game the system down the road.  As long as we try to put these huge regulatory regimes in place, it is the inevitable outcome.  Anyway, the article does a better job of articulating that point than I do, so please read it.

second class citizens

In my opinion, 2010 is truly a pivotal year in our nation's history.  According to most commentators, beginning with  the Republican takeover in 1994 and ending with Barack Obama's victory in 2008, the U.S. had been in period dominated by conservative free market ideology.  Many of those same commentators will claim that the reckless reliance on "free markets" caused what they have dubbed the great recession.  Their solution is more regulation and more government.  In my opinion, however, just the opposite is in fact the case.  Yes I agree that Republicans have been in control of Congress for most of that period and held the presidency for eight years, but the Republicans who were making policy surely did not believe in free markets.  And obviously with a Democratic Congress and President, things are only getting worse.

Today what I want to focus on is the emergence of the public sector employee as the new bourgeoisie of our society.  All of us know people who work for the government: teachers, police officers, parking attendants.  But there are many, many more public employees who do jobs and work for agencies that the large majority of Americans have never heard of and will never benefit from.  All told, according to the Bureau of Labor Statistics, in 2008 (the last year data was on the website), there were approximately 23,000,000 public employees in the U.S.  That is a lot of employees, and it is a major change from how the U.S. labor market used to be structured.  We all know about the growth of the federal government has expanded tremendously over the past half century, but growth in state and local governments (often driven from federal mandates/revenue sharing deals like Medicare and Medicaid) has risen as well.  The United States had 2.3 state and local government employees per 100 citizens in 1946 and now has 6.5 state and local government employees per 100 citizens.  According to a study by Michael Hodges, in 1947, 78 percent of the national income went to the private sector, 16 percent to the federal sector, and 6 percent to the state and local government sector. Now 54 percent of the economy is private, 28 percent goes to the feds, and 18 percent goes to state and local governments.

Not only has the size grown, but public sector employees are being disproportionately compensated as well.   The average federal worker made $59,864 in 2005, compared with the average salary of $40,505 in the private sector.  And that is just compensation.  Public employees really make their money in benefits and pensions.  Unlike private employers who refuse to enter into unfundable pension agreements for fear of bankruptcy, the government does not have the same problem.  In June 2005, BusinessWeek reported that “more than 14 million public servants and 6 million retirees are owed $2.37 trillion by more than 2,000 different states, cities and agencies” in pension liabilities alone, numbers that have risen since then. State and local pension payouts, the magazine found, had increased 50 percent in just five years.  And that is just state pensions, not federal level pensions.

Last but definitely not least is the lack of accountability for public sector employees.  In the private sector, most jobs are an employment-at-will, and if you mess up you can be fired on the spot.  Not true for public employees.  Just look at teachers in America.  So much focus is on the fact of how the American education system is failing.  Well, there is one group most responsible for that: unionized teachers.  The unions make it impossible to fire bad teachers (and other public employees) even if they are grossly negligent.  This simply can't happen.  The reason why private employees are so much more productive than the public sector is because of competition: they are scared for their jobs.  They know that they must not only do a good job, but also constantly improve because that is what private employers expect.

The size of the government workforce is getting to a tipping point.  Public employees, and the unions that represent them, have grown so large that they now are extremely successful in influencing national policy.  Just look at the healthcare debate.  Thanks to union lobbyists, union workers will be exempt from paying the excise tax on high cost insurance plans that is designed to reign in out of control health costs.  Thats really fair right?  I'm sure the tax on the rest of us will be enough to "bend the cost curve."

But that isn't even union members biggest benefit from the health care proposal.  Their number one goal is to increase the size of government so that there are more government employees, increasing the numbers in the union, and increasing their power to influence policy, and that is exactly what is happening.  It is simply unsustainable.  Is now at the point were private sector employees are forced to work harder, longer and for more years just so we can afford to pay government employees their full pension (which can be as high as 100% of their final year salary).  And they can retire at age 50.  It's absolutely unbelievable.

So here is the question America: Barack Obama's entire agenda is focused on increasing the size of the government so that it can take care of us "from cradle to grave;" do you want to be a second class citizen to finance the government employees that will implement that agenda?  Some may laugh at such a question, but the prospect of just such an arrangement is becoming more an more real with each passing day.

*note* I used some of the data from an article my old man sent me by Steven Greenhut in the February 2010 Reason Magazine.   This link is here.

sorry

Sorry for the lack of updates.  I have been extremely depressed for the past few days for obvious reasons.  I have to go back to Texas on Friday, just in time for the divisional games, and I am not looking forward to it at all.  I think I am going to go golfing both Saturday and Sunday so that I can pretend football season is over.  Anyway, I hope to write a real post by the end of the week when I am feeling better (hopefully), but no promises.  But for now here is some interesting reading that I found on my old psu dell.  Actually its not interesting at all.  It's my senior honors thesis in electrical engineering.  It's very boring and not very understandable.  However, I made a bet with someone that I would put it on this site, so I've got to follow through.  Pay up!

Klinicki Senior Thesis

quick update

So I am going to a more complete Eagles post either tomorrow or before the game Saturday.  I just want to point a nice pick for anyone taking the MPRE in march! Exciting I know.  Check out this review book.