Archive for January, 2010

The Rerun of History

When FDR took office he faced a deepening depression that had begun a few years earlier. Prior administration acts raising taxes and tightening the money supply had contributed greatly to the misery. The Smoot Hawley tariff legislation had sparked a worldwide strangulation of international trade. Unemployment was around 25% and the lower Midwest was in the throes of a devastating drought. Roosevelt knew he had to do something and quickly.

Unfortunately the cabinet and advisor roles were filled up with eastern intellectual types with little practical business experience and political hacks with even less. The President and his team then embarked on a frenzied search for something – anything – that would renew growth and create jobs. In December, 1933 only months into his administration, Roosevelt received a letter from John Maynard Keynes who was just developing the theories we know today as Keynesian Economics. Below are two quotes from that letter:

Thus as the prime mover in the first stage of the technique of recovery I lay overwhelming emphasis on the increase of national purchasing power resulting from governmental expenditure which is financed by Loans and not by taxing present incomes.”

“In the field of domestic policy, I put in the forefront, for the reasons given above, a large volume of Loan-expenditures under Government auspices.”

During the next few years the most common theme among all the programs, bureaus, laws, and plans that came forth was spending heavily by government using borrowed money and higher taxes. The unemployment rate went from 25% to 15% by early 1937. However just when the nation was beginning to feel some improvement, the Depression returned in 1938 with unemployment again at 20%. The national debt had increased by 62% in four years and the economy was tanking into a double dip depression. The beginning of WW II in 1939 with its large defense orders under Lend Lease and sales to allied belligerents was the only thing that pulled the U.S out after over ten years of economic hardship.

Deficit spending and higher taxes – the top marginal rate had been raised to 79% – were only part of the problem. Uncertainty among investors and consumers was rampant. Federal price controls and policing gummed up business planning and profits. Ridiculous programs to kill pigs and burn crops to raise farm prices backfired by making agricultural products unaffordable to millions on limited incomes. Huge public works programs administered by party hacks and unions employed democrats but froze out republican workers. Banks were overwhelmed with repossessions of failed farms, businesses and homes. Fear and uncertainty over what the government might do, or who it would punish next choked off initiative. How and why would anyone even think about starting or expanding a business under conditions such as these?

To quote Yogi Berra, the present administration is “déjà vu all over again. ” Inexperienced intellectual types in charge, a grinding recession, high unemployment, and humongous borrowing and spending look familiar.  The bombastic threats to banks and insurance firms along with the near certainty of higher taxes have a severe chilling effect on business development and future planning. Ersatz nationalization of automobile manufacturers and stimulus cash to states and municipalities mainly benefit the UAW, SEIU, and NEA.  Raising discretionary spending by 20% and jacking the deficit to three times its former amount  with failed stimulus efforts mirror the actions of the ‘30s that obviously failed at that time.

Instead of burning crops and killing piglets, we are threatened with cap & trade, health care, tax increases, draconian regulation, and wasteful government projects.  Trillions will be flushed away on useless boondoggles from light rail to the study of cow manure.  The unholy bill for these expenses will fall upon those yet unborn.

Keynesian deficit spending has failed in the U.S in the ‘30s, the ‘70s, and in Japan yet today.  Such beliefs belong on the ash heap of history.  It is among the universe of ideas so aptly described by George Orwell: “There are some ideas so wrong that only a very intelligent person could believe in them.”  Our leaders are but a cabal of inexperienced, present time oriented elitists who; refusing to learn the lessons of history are doomed to repeat it.  We must slash the spending, lower taxes, roll back regulation, and stop threatening to punish success. 

The American people are beginning to reject this situation.  In their hearts they realize that American Exceptionalism built and sustained this nation for over 200 years.  Americans will bring this economy back if only left to harness their own ideas and entrepreneurship unbound from the leaden hand of huge government and incompetent leadership.  Virginia, New Jersey, and Massachusetts are encouraging signs.


Too Much – Too Fast

Remember that joke about “How do you eat an elephant?” One bite at a time.  We have an elephant in Congress called “Health Care Reform” and Democrats are trying to force America to swallow it whole.  This massive take over of the present health care system threatens a slew of unintended consequences and unforeseen costs absolutely unimaginable to those who are pushing for passage.  Millions of citizens realize this and are routinely disparaged and dismissed as Astroturf by elected officials and the media. 

Bismarck’s analogy about making laws and sausage comes to mind and this sausage is bound to be tainted.  Amtrack, Social Security, Medicare, the Postal Service, defense procurement, and The Indian Health Service are rent with inefficiencies, graft, theft, low morale, and above all huge deficits.  What in the world makes people think that a government takeover of 17% of the US economy won’t lead to more of the same? 

The best cure for this headless monster grinding its way to passage is a good explosion.  All versions of the bill should be stacked on the street in front of the capitol and detonated by the DC bomb squad.  The resulting confetti should then be picked up, debated and passed one piece at a time. 

Health care costs have risen dramatically for several reasons.  First is the amazing development of technology and wonder drugs which has accelerated since penicillin became available in the early ‘40s.  Does anyone want to go back to when life expectancy was 63? Our present life expectancy is now 78 and such progress costs money. 

Second; the massive handoff of medical costs to HMOs and insurance companies creates an insulating effect.  When people paid their GP doctor directly, it was a direct payment for services rendered.  Now the doctor bills the insurance company for whatever amount the procedure is pegged at and the patients do not care one way or the other whether the fee was fair since it only cost them a small co-pay.  The involvement of the insurance company separates the doctor and the patient from a true direct transaction.  Health savings accounts and catastrophic insurance coverage go a long way toward redressing these market distortions.

Third; trial lawyers delight in gathering up “victims” of medical malpractice and bringing lawsuits against doctors, hospitals, and medical suppliers.  They cherry pick venues and jury shop for the best jackpot potentials and then either force an expensive settlement or brazenly convince a jury that there is some connection between a procedure or medicine and the adverse effects on their clients.  These trends have led to huge liability insurance burdens for all providers in the industry.  Thousands of specialist physicians have discontinued certain procedures completely.

The flip side is that billions are spent on unnecessary tests for the sole reason to escape the potential of a damaging lawsuit if and when a patient does not recover completely.  The costs of the huge insurance premiums and redundant tests are passed along by physicians to patients, HMOs and insurance firms as higher fees for services.  Medical malpractice reform should be legislated to blunt these abuses.

Fourth; state insurance mandates which demand which services and procedures insurance firms must cover restrict choices among consumers.  A policy available in Colorado most often cannot be purchased in Washington.  Therefore people cannot select among a wide variety of plans and are strictly limited to plans approved by the individual states.  This unduly restricts interstate competition among insurance companies who being in business to gain customers and make a profit would quickly fill the gaps if allowed to and increase consumer choice dramatically. 

These are just a few of the situations that are adversely affecting health care costs and insurance availability.  They should be dealt with individually to reform care and reduce costs for the good of the entire country.  President Obama should stand before the American people and pull the pin on these massive and dangerous schemes now emerging from Congress and start from a clean sheet of paper.  His popularity will skyrocket if he is man enough to admit a mistake before it metastasizes into a national disaster.

The Last President

The last President we had who criticized our own people and was weak on national defense was tossed out in a landslide after one term.  His continued derogatory statements, support of brutal dictators, and unending sniping at American policy have relegated him to the status of a bitter has-been destined for the dustbin of history.  Now we have a President who seems to be following the same path with near exponential zeal.   

The Peronistic demagoguery of doctors, banks, insurance firms, Wall Street, news organizations, and corporations wears out welcome mats over time.  The Huey Long promises of handouts, benefits, entitlements, and government largesse are unaffordable for future generations.  The constant apologies for America’s past and apparent disbelief in American exceptionalism grate on millions of proud, hard working citizens across the land.  Continued dithering on vital decisions demonstrates a lack of executive skills. 

We have only had a handful of former senators as presidents.  There is a very good reason that more former governors come to the White House instead.  They have true executive experience directing people and projects and making tough decisions.  Senators on the other hand come from a congenial world of negotiation, compromise, and are used to turning their ideas and decisions into consensus rather than action.  We are witnessing this dichotomy in the present administration.

From the labyrinths of the Daley machine in Cook County, this President and his closest associates brought the “Chicago way” to DC.  Associated baggage included a number of various hacks and camp followers of rather dubious backgrounds and beliefs.  Their vetting process was either totally slipshod or intentionally permissive and a long list of tax cheats, radicals, and various & sundry questionable sycophants have been slipped into positions throughout the government.  When the administration ran out of slots, they tucked more odious characters into instant czar positions.  The Attorney General was the fixer on the Marc Rich pardon.  The White House communications director looks to Mao Tse Tung for guidance.  The regulatory czar believes that animals should be enabled to bring lawsuits.  The secretary of homeland security thinks a bomb going off killing innocents is a “man caused disaster”.  Only a year into this administration, the lights are being shined into these folks’ closets and the skeletons come running out.    

Now we have the skivvy-shorts bomber provided with a lawyer and tucked safely in a Detroit jail instead of being put under the light in Gitmo.  KSM and his closest co-conspirators are now scheduled for a fiasco in a New York courtroom.  A jihadist mole in a major’s uniform murders 13 people while screaming “Allah Akbar” and the Army whitewash does not even mention his religion.  North Korea and Iran are rolling their own nukes with no end game in sight.  The stimulus spending is so far an abject failure based on the President’s own promises and the deficit is three times as big as it has ever been.  We are not allowed to drill for oil and gas in our own country and off its shores while we import nearly 70% of it from hostile regimes that only wish us ill.  A whole valley full of the most productive farmland in the world bakes and dies out for lack of water to make some insignificant minnows comfortable.

This is not change we can believe in.  It is a vile mixture of lunacy, stupidity, inertia, political correctness and naivety run amok.  It is time for pitchforks, torches, tar and feathers.

Stealing is Wrong

Stealing is wrong; thieves go to jail for it. We condemn the schoolyard bully who beats up smaller kids for lunch money. Now let us look in the mirror and observe the protagonist in the greatest case if intergenerational theft in history. We baby boomers and our parents – the greatest generation – have stolen trillions from those yet unborn. Most of us will be long gone before our victims are old enough to recognize what we have done and confront us. It is the epitome of cowardice to rob the entire future from later generations and then use our deaths to escape responsibility.

A combination of unfunded entitlement programs, misguided subsidies to unsound businesses and discredited Keynesian economic deficit spending have created a disastrous level of debt.  If you have children, grandchildren, nieces or nephews you sincerely care about, you will be interested to learn the following facts:

If we were to add up the total unfunded liabilities of present “entitlement” programs (Social Security, Medicare, and Medicaid) and add the current national debt as of today, we would get a general figure of $117 TRILLION DOLLARS which our government has promised to pay and has no visible means of support to do so. A $100 bill is 4/1000 of an inch thick. A stack one inch high amounts to $25,000. One foot would be $300,000. One mile would be One Billion, Five Hundred and Eighty Four Million Dollars. $117 TRILLION adds up to a stack of $100 bills 73,863 MILES HIGH. That is three times around the earth, or 336 stacks that would reach the International Space Station! On an individual basis, that works out to only a little over 15 inches par person alive in the US today. Each and every newborn enters this world with about $396,000 in accumulated debt and incurred liabilities. Do you think your little loved ones and their generational fellow travelers will earn enough to pay that off? Apparently Congress and Presidents over the past 75 years have assumed so.

Who EXACTLY is ever going to pay for this irresponsible fiscal lunacy? Well, let’s let the kids pay it off for the rest their lives long after we who spent the dough are gone. They won’t ever be able to remove our dead hands from their pocketbooks. Our children and grandchildren will be condemned to lives of serfdom.  We will be remembered as the ones who crippled our nation with debt, spent the dreams of our children, and sold them into financial servitude.

If you have young ones that you love as I do, and you have one scintilla of self respect and common decency, you will help reverse this disastrous course before it consumes our nation and its people. How do we begin? First we must realize that in nearly all cases, “something for nothing” from the government is just flat wrong. Second, we must elect representatives who will covert the Ponzi scheme nature of entitlement programs into self funded, sustainable entities – exactly as promised when they were first introduced. Third, stop subsidizing utopian failures like ethanol, wind farms, flood insurance, and light rail. Lastly, let’s dump Keynesian economics into the ash heap of history where it has belonged since its failure in the 1930s.

According to Albert Einstein, insanity is doing the same thing over and over and expecting different results. Rebooting the New Deal, subsidizing failure, taxing success, and exposing the general fund to liabilities of poorly planned entitlement programs is folly. We owe our descendants a huge course correction before their lives are ruined by our greed and foolishness.