Michael Smerconish & President Obama

I just have to sound off about Philadelphia talk show host Michael Smerconish and his interview with President Obama yesterday.

First off, Michael's radio show is one of the best talk radio shows on the air. Unlike Rush and Glenn Beck and these other guys - Michael actually has an honest point of view on subjects instead of simply being against everything President Obama and the Democrats are doing. He actually supported Obama during the election despite being a Republican. He falls into the category of "conservative talk radio" but that is not really accurate.

During the interview President Obama was asked about the government takeover of the car industry, banks and health care. In his answer the President made the statement about how the Government has done helpful things and cited the enactment of Social Security and Medicare as examples. He made the statement that people protested those as Socialism but now that they have it they scream anytime someone tries to get rid of it.

Precisely Mr. President! That is exactly the point! Social Security is about to go bankrupt and will inevitably lead to higher taxes. It is the biggest ponzi scheme out there - it works the same way Bernie Madoff's scheme worked. Medicare is in the same boat - well it's not a ponzi scheme but it has set us up for higher deficits and higher taxes. Both of those programs ARE socialistic and are now a huge burden on our society and are very difficult to get rid of. They are also huge political tools - politicians know they have a built in voting public in those people who are dependent on Medicare, Medicaid and Social Security. Why would we want more of that?

People were correct to protest those programs back then as they are correct in protesting further expansion of government sponsored entitlements now. These things are very insidious. Which brings us to the next point: is President Obama involved in some conspiracy to have government control every aspect of our lives? I don't know but I don't think so. Rather he is misguided.

It can certainly seem great when a populace turns over power to an intelligent and benevolent person and he does a lot of good with that power. Especially when he uses that power to do something you like! But what is often not looked at is after that power has been granted to an institution (like the Presidency) it opens the door to potential malevolent use of that power. Too often we see government programs seemingly meant to be helpful get used to the profit of special interests and the harm of the populace. The truly large special interests love socialism, fascism and communism - they all involve central political control of large amounts of people/markets. Such special interests already have politicians in their pockets and use the governments power to suppress competition and free markets that threaten their interests. As a matter of fact that is already happening in our health care system. There is no free market and insurance companies are being regulated already and one aspect of that regulation is that they are forced to cover certain medical procedures and drugs that are ineffective at best and profit motivated.

Don't you think it is interesting that Big Pharma has already struck a deal with the current administration in terms of what will happen in health care reform? And guess what - part of that deal is to curtail competition!

We already know that the large special interests in that industry have infected both sides of the aisle. In the end they seem to be playing us like fools - damned if we take the currently proposed health insurance reform and damned if we stay with the same thing. They don't care. It is interesting to see both Democrats and Republicans accuse each other of being in Big Pharma's pockets. I guess that's the most honest thing happening out there!

Healthcare. Paul Krugman and Switzerland

Last Sunday New York Times columnist Paul Krugman criticized the U.S. health care system making statements about how great socialized medicine is in other countries like Canada, Britain, France etc. He even cited the health care system of Switzerland as being an improvement over the U.S. system.

I guess it is not obvious to these pedantic columnists that looking at systems being used in countries with one-fifth (or much less) the population of the U.S. might not be the brightest thing to do. Switzerland barely has a population larger than the Philadelphia metro region and certainly lacks the cultural diversity. That can be said of Canada, Britain and France as well which have larger populations but still don't come to more than 25% of the U.S. population. None of those countries touch the religious, ethnic and cultural diversity of the U.S.

Think about it - here one big fight with the public option is about whether abortions will be covered. Many U.S. citizens find abortion immoral and don't want the Government forcing them to pay for it under any circumstances. I am not expressing any opinion on that issue but this country was founded on freedom of religion and the separation of church and state. Wouldn't the Federal Government forcing a Catholic to pay for an abortion through tax funded subsidies be a violation of church and state? What about another "religion" in this country that promotes abortion because they want to control population explosions amongst the "undesirables" in society (take a guess who those are and if you don't believe me Google Margaret Sanger the founder of Planned Parenthood). Those interests won't rest if abortion is not covered by the government plan. One could argue that they are using the government to forward their "church". In other words we have many different cultural and religious factions and health care choices are often modified by religious belief and cultural preferences. Trying to get a consensus for a large federal insurance plan that all tax payers will be forced to contribute to is simply not possible.

So how do we deal with that? Well if instead of moving toward a more socialized system for health care we moved to a free market system for health care then you get to decide for yourself. The problem of skyrocketing health care costs can be directly traced as coming from the limitations on competition resulting from the current government regulation. Do we really want more of that?

Our nation is not like the European nations and was founded on principles that promote diversity and freedom of choice. I for one want to keep it that way. After all if you want European socialism you are free to move to Europe and enjoy the security they offer. Me, I'd rather have my freedom and that includes the freedom to choose where my money gets spent.

Health Care Reform: Real Change

Being bombarded constantly with the health care reform or more aptly - health insurance reform - I can't help but voice my frustration. Perhaps it will help me feel better. Now I am a bit of a radical and the change I propose would be real change. People are advocating for single payer insurance (where there is only one large insurance entity thus only one entity that pays health care bills) or continuing with the current multi-payer system. The real problem here is that both of those systems are still third party payer systems. In other words the person seeking health care is not the one paying for the service.

This is the root of the problem and we are not even looking in that direction! Believe me you do not want someone else paying for your health care. A third party by nature has in their main interest controlling cost. Health care providers like doctors are then put in the position of having to satisfy the requirements of the third party provider rather than the patient.

Why not set up health insurance just like any other insurance like life insurance where you can purchase fixed amounts of coverage based on what illness you might contract? Should you develop some illness you would receive a lump some payment to help pay for the costs of curing your illness. This would have a couple of effects: First it places a much greater focus on coming up with cures for illnesses rather than treatments. A patient would not be limited in any sense to where they seek treatment and payments to doctors would come in cash from the patient. This would save a ton of money in administrative costs. It also now makes the healthcare industry compete for payments from the party most interested in getting cured - the patient. Insurance companies can also manage their exposure to risk better - they will always know their exposure when someone gets an illness - which will help them offer better plans.

The last thing we want is the government to become the single payer for health care. Why? Because the government has the power by law to force us to pay for things we may not want. It is the only set up where healthcare costs can continue to explode and we would have to pay for it by law! Is that really a situation you want to be in? Factually it is "more of the same" of the system we already have in place.

So lets bring about real change for our health care system - don't bring about single payer or stay with any variation of third party payer like employer based group healthcare plans. ce.

Happy Independenc Day

It was an emotional moment last night as I watched the fireworks here in Philadelphia.

After all here is where around 225 years ago our Founding Fathers and the citizens they represented decided to lay their lives on the line to fight for freedom. What would you do today if you were asked to do the same? Many of these citizens had comfortable prosperous lives. They had children and various other comforts. The punishment for the "treason" they were about to commit was death.

As some of our politicians and various vested interests use public relations techniques to push us towards greater entitlements keep in mind that with all government provided entitlements comes a loss of freedom.

In the past two years, in both the previous administration and the current, we have seen the government apparently, and in our name, basically say that there are some companies that are entitled to succeed: various investment banks, AIG, General Motors to name a few. We watched the resulting government intervention that came as a result of the public outrage at bonuses these companies made, retreats they had planned, that they used their corporate airplanes and more. The intervention to "right these wrongs" of course cost us of a reduction of the free market.

Increasingly it seems we are pushed to believe that a government exists to provide an increasing number of entitlements to protect us from the risks of life. Currently the big one is health care. My understanding is that our Founding Fathers set up government to provide certain entitlements including: The right to choose and follow a religion of your choice, to speak your opinions and beliefs freely, to pursue happiness as you see fit. Inherent in these rights is that you might make a choice in religion that others don't agree with, you might say things that others don't like and you may make bad choices in your pursuit of happiness that result in illness, failure or death.

In this country people can live better than anywhere else in the world. They are also free to make choices that will result in a pretty bad condition for them. It is true that our government does not provide the same level of safety as other governments. Do we a citizenry want it to at the expense of our liberty? Is it even capable of doing that or will we just lose liberty for not much more security than we currently have? Keep in mind that our government had all the regulatory power in place to prevent the banking fraud that is now causing our hardship. We spent (wasted) money on that regulation for the apparency of safety. To rephrase - money came out of your pocket, money you could have used to further your chosen pursuit of happiness, and went to attempting to guarantee your safety from a fraudulent banking system.

I will end with a quote from one of our Founding Fathers:

They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety. - Benjamin Franklin

Health care Reform and 3rd Party Payer System

A third party payer system is when the consumer is actually not the person directly paying for what they are consuming. The system works like this: You the consumer give your money monthly to someone else (like an insurance company) then you go shopping for something (like health care). You and the vendor come to an agreement on what you are going to get and the third party - the insurance company - actually pays the expense.

Imagine that you walk into a hardware store to buy a hammer. First thing you do is go see your home maintenance manager. He asks you why you are there. You explain to him that you need a hammer to drive some nails into a board, showing him pictures of the board to prove you are in need. He says fine and gives you a referral to see the hammer specialist.

You walk over to the hammer specialist with your referral slip. He shows you a selection of two hammers with wooden handles. You have a problem with that because wooden handles destroy trees which harms the environment and you want a hammer with a handle made from a new environmentally friendly material. The hammer specialist explains to you that your hardware insurance only covers the wooden hammer because there is a state law that requires all insurance companies to cover wooden handled hammers but not others.

In the end since the insurance company will cover the hammer with the wooden handle you take it and leave the store happy. You don't have to pay anything. It wasn't exactly what you wanted but the insurance covered it and you had no out of pocket expense. You also feel a small sense of satisfaction that the hardware insurance you have been required to carry by law finally got used.

You will never know actually how much was charged to the insurance for that hammer unless you put some effort into finding out. As a matter of fact you aren't even really sure how much you pay for hardware insurance monthly because it is a combination of payroll deduction subsidized by money you pay out in income tax and a series of other taxes you don't realize you are paying.

Through some inspection you discover that the hardware vendor charged $200 for the hammer and the insurance paid $75 for a hammer that normally would cost $10. The real cost to you was about $150 but because the costs are hidden from you through taxes you don't see this.

Another thing you are unaware of is that because there are a few centralized third party payers in the hardware world it is easier to regulate the market through legislation. Large companies in the market are able to lobby legislatures and other influential politicians to get them to make it law that their products have to be covered by the insurance companies. This is a great way for them to control the consumer who is being forced to pay into the insurance system.

The above ridiculous example is how health care works under the current third party payer system with the exception that, at least for now, we are not required to carry health insurance by law. But state governments and the federal government do use their authority as law makers to require insurance cover certain health care products and services. The consumer routinely does not pay directly for service or even know really how much it costs.

I guess it could be a solution to have the government further regulate health care. However what we really want is a system that gives the best health care possible in the most fair and efficient system. A suggestion is actually to create more of a free market system with the elimination of the third party paying system. I am proposing some regulation which would be to outlaw third party paying systems due to their lack of transparency to the consumer and great propensity for limiting competition. Instead one takes out fixed amounts of insurance to secure themselves in the case of illness. You can insure yourself for $20K worth of benefits if you contract cancer. If you get cancer the insurance company pays you $20k and it is up to you to spend it as you see fit. Now hospitals and care givers and others in the health care industry have to compete for your business.

One thing that is not given enough attention in the health care debate is why are costs so high. In any other industry competition results in better products, better service and lower costs. This is not happening with health care because the health care market is not a free market where suppliers and vendors need to respond to consumers. President Obama made an excellent point that the incentives inherent in our current system are mixed up. The solution is to put the consumer back into control by removing the practice of third party paying.

Healthcare Reform

Health care is an interesting debate. The question is that in this country is government regulated healthcare a good idea.

First thing is that it has to be stated that we currently DO have government regulated health care. For instance state governments have passed laws telling insurance companies what care they have to cover. As it turns out this actually makes the situation worse:

In some states, regulations make it impossible for individuals to purchase a low-cost plan that would provide only catastrophic coverage. In other cases, the benefit mandates and insurance rules might raise premiums to the point that insurance is prohibitively expensive for many people.

from an article The Effect of State Regulations on Health Insurance Premiums: A Revised Analysis. Interesting to note of course is that insurance companies are mandated to cover expensive medical treatments and drugs but none of the less expensive preventative measures. I am not saying it is the case in this country that powerful pharmaceutical and medical lobbies find it convenient and extremely profitable to be able to get state legislatures to force insurance companies to cover their drugs and treatments. I am not saying that...

So it should be clear that the current unworkable system is not a free market system - it is a government regulated system and that regulation can certainly be used by vested interests.

Health care is further complicated by the quantity of inaccuracies and unknowns in the field. A stunning fact is that 20% or more of sick people can be cured by a placebo. As a matter of fact an article in the Washington Post, re-published here, showed that a sugar pill is more effective than anti-depressants in managing depression! Here is another interesting fact:

America's healthcare-system-induced deaths are the third leading cause of death in the U.S., after heart disease and cancer.

The full article on that can be found here.

Given that we spend 15% of our GDP on health care vs. 8% to 10% in other countries considered healthier than ours it certainly doesn't appear that under the current system the money is being well spent.

So something is definitely crooked in the American health care system. I think one way a difference could be made would be to ensure that there is no mis-representation going on with our health care providers. We spend 1.5 to 2 times the amount of our GDP on healthcare than other countries that have lower mortality rates than we do?!?! Do you think there is some fraud in the system that when gotten rid of could lower our costs? Perhaps expensive less effective treatments are being marketed/lobbied for like crazy over less expensive more effective treatments. To wit - recently a court ordered a mother to have her son undergo chemo-therapy. Expensive and extremely doubtful in efficacy.

So the next thing we look for is who benefits from a wealthy country in poor health that spends 15% of its GDP on health care? Don't strain yourself too much on that one. The U.S. is home to more than half of the top 12 pharmaceutical companies and easily has the most pharmaceutical companies of any country. Make no mistake that they make a lot of money off of the current system.

It is also interesting that currently the debate is not about the cost vs. benefits of the treatments we are spending so much money on - it is about lowering the cost to the consumer for insurance coverage. What?!?! Anyone else thinking cart before the horse? Lowering the soaring cost of health care is not about lowering the insurance costs - those will go lower if the cost of the underlying care they have to cover goes down. That would happen freely competing market for health care - one we do not have. Some treatments have the advantage of the government making it the law that they have to be covered.

So trying to address the problem with a national healthcare program in a country with such a powerful pharmaceutical and medical lobby is folly. In the end we will end up paying as much or more of our production toward healthcare forcibly via taxes. This is in fact a dream for wealthy companies with powerful lobbies.

Another aspect is making the consumer accountable for their health care. Currently most consumers don't even know how much their healthcare costs them. "The insurance takes care of it." This is a terrible system - the doctor responsible for making you healthy doesn't even work for you. They work for the insurance company - after all it is the insurance that will in the end pay them. In turn the insurance company is told who and what to cover by state legislatures.

A better solution is a free market system where you can purchase dollar amount coverage for protection against getting certain illnesses. For instance you could purchase $20K in coverage in case you get cancer. If you get cancer your insurance company gives you $20K. It is now yours to spend on whatever treatment you choose to pay for.

Obama made a very intelligent statement - we have to change the incentive in health care. Now the incentive factually is that a person gets an illness that doesn't kill them but requires continuous treatment. With the above system which is more consumer based, treatments with higher success rates for curing what ails you will win out. After all you have $20K to deal with your cancer. You will seek out and spend it on the most effective treatment.

Read more on this type of solution...

Taxation with Unfair Representation

Our forefathers rebelled against the British Empire - put their lives and wealth on the line - because they were being taxed yet unfairly represented in the government that determined the rules under which they lived. Is the modern day progressive tax system any different?

Imagine a system where your tax bracket determines the weight of your vote: If you don't pay taxes you can't vote. If you are in the first tax bracket (lowest) you get one vote, the second two votes etc.

'Crazy!!' you say? Ok - think about this: Under our current system politicians have a vested interest in down-trodden people who are dependent on the government for money be it welfare or unemployemnent. People who are dependent on the government for sustenance or security are easy votes to get. We have set up circumstances where politicians benefit from a lack of success.

What would happen if we reversed this? Politicians benefit from promoting success. Every person who is so bad off they can't pay taxes is a lost vote. There is no benefit to having poorly educated people around who don't get paid well or have to depend on the government for money. Hmm...

The Recession is Over!

Thank goodness the 'worst recession since the Great Depression' is over! The Wall Street Journal has declared that the recession will end in September, CNN changed their slogan from 'America in Crisis' to 'Road to Rescue' about a month or so ago. Obama has changed his tone to one of optimism.

It all started after we let the Government borrow another $800 billion dollars because 'disaster was imminent' and we had to bailout what is apparently the American Aristocracy. Shortly thereafter the Fed Chairman stated that the recession would end this year. A message he repeated and then other media outlets started to fall in line.

I guess I am still a bit curious as to how 3 percent of the U.S. mortgage market caused the 'worst recession since The Great Depression'. It's not even that all those subprime loans were defaulting. I have read about the credit default swaps too and in the end it seems that all that was blown out of proportion too. Certainly there were companies that did some stupid things and brought themselves to the brink of disaster. Unfortunately it was also an election year and there was one party that knew the worse the economic picture was the more they would benefit. So bad economic news was inflated and since economic predictions are mostly self fulfilling next thing we know we really do have a problem because confidence dried up. Since the amount of cash in an economy is really a reflection of confidence that dried up and we enter a dwindling spiral.

So our elected representatives in both the Bush and Obama administrations answered this problem by scaring us into saving what must be some very well connected corporations. They gave those corporations hundreds of billions of our money which in the end appears to have been a thorough waste aside from preserving the fortunes of companies and their principles that really should have simply suffered the consquences of making bad decisions. We were nicely distracted by quibbling loudly about a couple hundred million in bonuses while hundreds of BILLIONS went unaccounted for.

I rant but it is good news that at last what is happening is what is really necessary to save this economy. For all that can be said about President Obama it is undeniable that he and his team are very good at public relations. Saving an economy is about changing a bad and insecure sentiment into one of hope and confidence. With hope and confidence then money flows back into the economy naturally and growth resumes.

Obama and his administration are also correct that to save the economy requires stimulating it with energy (a.k.a money). I think the main question here is whether or not it is the government that should decide where the money gets "flowed" or you and I. Under the current administration they have taken our money by taking out loans that we will have to repay via taxes and will spend it as they see fit. A small centralized group of people deciding how trillions of dollars are to be spent. A great set of circumstances for those that are currently well connected. Hence real change will not really be brought about.

There is also alot of talk now about inflation. Inflation will come about certainly if all the money that is dumped into the economy does not result in goods and services equivalent to or greater than that amount of money. History has shown that this is usually what happens when government does the stimulus spending. This is largely because the government only has as it's goal spending the money. They don't really ensure that the money results in added goods and services of at least equal value to what was spent. A certain portion usually lines the pockets of corrupt individuals, some goes towards projects that were not really needed or wanted and some may go towards things of actual value. There is nothing to say that the government couldn't do this correctly - it just seems that it has never happened that way.

In any case what does one do to participate in the recovery and not get screwed by inflation? This is actually simple - make sure you are producing goods and services that are of value. If there is inflation then your recompense for those goods and services will simply increase along with everything else. If a time comes when we are paying $10 for a dozen eggs it won't matter because people earning $40K a year will now be earning $400K a year. Another part of this is don't sit back apathetically letting the government waste this stimulus money. Those deals are done but Obama has promised transparency and we can hold his and the Congresses feet to the fire. Pay attention, monitor the websites that make public where this money is going. If it is used to add value to our country and its economy we really can come out of this in a much better situation.

Everybody is an Economic Expert

On a morning radio the announcer exclaimed that it seems like everyone is an economic expert these days. I guess as compared to how our finance and banking system has been run and our governments current answer to economic distress most people are economic experts.

It's very scary to hear President Obama exclaiming that "trickle down economics" and tax cuts are "the failed economic policies that got us here." I actually don't think that Obama is that stupid but like any other politician is simply pushing some partisan rhetoric to help him implement his agenda and strengthen his party's influence. It is unfortunate because as Obama and his PR machine are trying to lead us away from the hard won personal liberty that this country is about with misleading statements about what caused the economic crisis he is also not bringing about any meaningful change in this country.

Let's be clear about what caused the economic meltdown: financial institutions sold risky debt as though it wasn't risky. What some bankers and mortgage brokers and other financial firms committed was flat out fraud. We don't need new regulations or bank bailouts or other nonsense. We need those organizations that mis-represented risky loans as not being risky to be sued for the damage they caused and their executives to be imprisoned for fraud and their ill begotten assets seized. That is the government's responsibility in this situation. If a bank was bamboozled into making bad loans based on fraud then they should sue whoever ripped them off and if they can't and go broke as a result then tough.

The new administration could bring about real change by for once not bowing to the political clout of Wall Street and Bankers and just start investigating for fraud and legal violations in this sub-prime mortgage meltdown. We don't need new laws - just enforce the ones already in existence.

Tax cuts and de-regulation are so far the only proven policy to ever bring about rapid economic recovery. Socialism has never resulted in anything but pushing a society to a base mediocrity at best and in the extreme impoverishes all citizens except politicians and the politically connected. Socialist countries like France hope for 7.6% unemployement in GOOD times.

Economics and banking are not complicated subjects. Economics is about people supplying each others needs. Banking is the service of using the excess produced by a society to fund new enterprises and raise the standard of living. The system can expand continuously with an ever improving standard of living for all participants. There doesn't have to be booms and busts and ups and downs. Governments role is to ensure that the participants act honestly and do not misrepresent their products or services. This should extend to honesty in the press and laws against the press being used to spin situations which is simply another form of fraud.

Generally when governments get into the business of "managing" the economic system they simply wind up reducing the economy's effectiveness to raise the standard of living and maintain a continuous expansion. That's why socialism and it's extreme communism when implemented on a large scale leads always to lower standards of living for everyone. This is because the government has to try and guess the needs and desires of its constituents which it cannot do effectively. That's why the government trying to save an economy with bailouts or government spending is a very inefficient way to save an economy.

So what is this "economic expert's" solution: I offer a 3 pronged attack -
1. Start vigorously enforcing current laws and removing fraud from the system. Loudly start arresting the bankers, corrupt regulators, politicians who committed the fraud that lead up to this mess.
2. Agressive corporate and personal income tax cuts that will immediately energize the economy and make the U.S. the best place to make investments.
3. Instead of hundreds of billions in bailouts use that money to put out some positive press about the economy. Press manipulation is a fact in this country (if you don't believe this then WAKE UP). So be that as it may lets use it to bring about a more positive economic attitude because you can pump all the money you want to into the economy if people don't feel upbeat and confident that will kill any economy even in the best of times.

I'm no community organizer but I think that will work. Unfortunately it also means less opportunity for political power - after all when you are a politician doling out billions of dollars it is pretty easy to get "favors". That doesn't happen with tax cuts.