Latest Book: Delusional Ravings of A Lunatic Mind by Tom Loker

new book by Tom Loker

As I wait for the eventual completion of my book on health care, currently in rewrite, I have put together a book of my best articles from this past year on this blog. The book is now available as an e-pub on Kindle and Amazon and others in the growing list below. (check back here as the list grows) The paperback version will be available in the next few weeks so stay tuned. I will put up the various links as they become available.

We put this book together for those of you how like the blog and Tom’s articles to share with your friends and relatives. And if you don’t like Tom’s writings we would like to point out this book will also make a great gift for those people you don’t like as well! Inside the pages you will find articles about healthcare, history, politics, the economy and a few creative pieces centered on St. Mary’s County Maryland, where Tom grew up. We do hope you enjoy the the stories!

e-Book Links:

Amazon – Kindle http://www.amazon.com/dp/B006G2Q9OC

Barns & Noble – Nook http://tinyurl.com/7cg9mew

Powell’s Books http://tinyurl.com/83ven8p

Diesel Bookstore http://tinyurl.com/74agmps

eBookMall http://tinyurl.com/7jbhl9s

Printed Book Links

Just released to print… Dec 15, 2011

NOW available at Amazon B&N and other booksellers.

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U.S. District Court of Appeals “Reaches” for the answer to the purchase mandate

Click to open DC Appeals Court Ruliing

Yep, I Probably Need to Get  a Life!

The past few days, I decided I really needed, no I really-really needed,  to read the opinion of the United States Court of Appeals for the District of Columbia Circuit ruling on the case of:

SUSAN SEVEN-SKY, ALSO KNOWN AS SUSAN SEVENSKY, ET AL.,
APPELLANTS
v.
ERIC H. HOLDER, JR., ET AL.,
APPELLEES”

Appeal from the United States District Court
for the District of Columbia
(No. 1:10-cv-00950)

The court decided this case on November 8, 2011.  And from new reports you would think that the case made clear that the Patient Protection and Affordable Care Act (PPACA) was in fact constitutional and would lend credence to a affirmative finding of the validity of the law and purchase mandate by the U.S. Supreme Court soon.  Like most, media revelations, or more precisely-media invectives, reading this case neither answers the question of the constitutionality of the purchase mandate nor makes clear a constitutional argument that it will be affirmed by the Supreme Court.  Actually, for me it bolsters the base arguments not only on why it should not be upheld by the Supreme Court, but also why the underlying supporting rulings of prior cases like Wickhard v. Filburn and Miles v. Park need to be reassessed.  To see a background on these cases you can read my article on the Health Care Mandate and the Commerce Clause.

The truth be told, I had some very minor surgery and during recovery needed something to read!

Overall this is a relatively short ruling – just 103 pages – including the majority and minority (dissenting) opinions. I would advise all to read it, (click here to read the ruling) particularly the dissenting opinion even though the base argument for the dissent has little to do with constitutionality of the mandate.  Much of the concurring majority opinions are centered on the ability of the courts to hear this case at this time due to the Anti-Injunction Act.  In reading the concurring majority opinions I was repeatedly struck by the lengths they were willing to go in defiance of what I see as common sense; by ignoring, assuming or obfuscating the issues to arrive at their decision. The majority of their argument is centered on the Anti-Injunction Act, with little argument given to the principal issue of the constitutionality under the Commerce Clause and the Necessary and Proper Clause. The basis for the dissent is that the court did not have jurisdiction to hear this case at this time.  What is interesting in reading the dissent, written by Justice Kavanaugh, is the apparent length Justices Silberman and Edwards are willing to reach to ignore the argument that they do not have  jurisdiction and timeliness to even hear this case.  While I am hopeful this case should be heard at the soonest possible date by the U.S. Supreme Court, the argument by Kavanaugh is clear, concise, and compelling on the law and its prohibitive effect.  His argument, which I found both persuasive and full of common sense, is that due to the Anti-Injunction Act, the judicial branch is barred from hearing such a case until after there is an enforcement action.  Justice Kavanaugh cites:

Enacted in 1867, the Anti-Injunction Act, with a few exceptions, denies courts jurisdiction over pre-enforcement suits that would restrain “the assessment or collection of any tax.” 26 U.S.C. § 7421(a). The Supreme Court has strictly interpreted that Act as a firm bulwark against premature judicial interference with tax assessment and collection. As the Court has stressed time and again, although the Act may seem an inconvenient technicality in the context of a particular case, it is essential to the overall system of orderly and prompt federal tax administration.

Under the Anti-Injunction Act, a taxpayer seeking to challenge a tax law must first pay the disputed tax and then bring a refund suit, at which time the courts will consider the taxpayer’s legal arguments. Or a taxpayer may raise legal arguments in defending against an IRS enforcement action. But a taxpayer may not bring a pre-enforcement suit. In this case, the individual mandate takes effect in 2014, so taxpayers without health insurance must start paying tax penalties on their tax returns in 2015. The Anti-Injunction Act means, therefore, that a suit challenging the individual mandate cannot be entertained until 2015, unless Congress acts before then to exempt these suits from the Act.

The Anti-Injunction Act applies here because plaintiffs’ pre-enforcement suit, if successful, would prevent the IRS from assessing or collecting tax penalties from citizens who do not have health insurance. To be sure, the Affordable Care Act labels its exaction for failure to have health insurance as a tax “penalty” and not as a “tax.” But the Anti-Injunction Act still applies. That’s because the Affordable Care Act requires that the tax penalty for failure to maintain health insurance “be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68” of the Tax Code. 26 U.S.C. § 5000A(g)(1). And penalties under subchapter B of chapter 68 in turn must “be assessed and collected in the same manner as taxes.” 26 U.S.C. § 6671(a) (emphasis added). It follows from those two provisions, taken together, that these Affordable Care Act penalties must be assessed and collected “in the same manner as taxes.”

Readers should also note that in contravention to the arguments or the majority opinion, the Federal Government themselves, in numerous early challenges, cited that, despite the language in the PPACA calling the assessment a penalty it was for all purposes a tax. And as my grandfather, a respected country circuit court judge used to say, “Once the animals are out of the barn, it does no good to close the door!”  So while I have been of the opinion it would be best for the Supreme Court to settle this issue, it appears to me that Justice Kavanaugh is correct and the Anti-Injunction Act clearly denies the courts the ability to hear this case until sometime in 2014 or 2015.

Ramifications and Unintended Consequences

The ramifications of the constitutionality of the purchase mandate stretch way beyond health care and should be seen as the proverbial “slippery slope” for concerned people on both the right and the left of the political spectrum.  Just like everything else the government does, an affirmation of the constitutionality of the purchase mandate will have the potential for many unintended consequences.  Justice Kavanaugh, in his dissenting argument, notes;

“But the Commerce Clause issue is extremely difficult and rife with significant and potentially unforeseen implications for the Nation and the Judiciary. Cf. Northwest Austin Municipal Utility District Number One, 129 S. Ct. at 2513.

To uphold the Affordable Care Act’s mandatory purchase requirement under the Commerce Clause, we would have to uphold a law that is unprecedented on the federal level in American history. That fact alone counsels the Judiciary to exercise great caution. See United States v. Lopez, 514 U.S. 549, 580, 583 (1995) (Kennedy, J., concurring) (“The statute before us upsets the federal balance to a degree that renders it an unconstitutional assertion of the commerce power, and our intervention is required. . . .”

If upheld, the exercise of power contemplated under the PPACA purchase mandate would not be clearly confined to health care.  Under the theory argued by the Government, the Government could impose imprisonment or other criminal punishment on citizens who do not have health insurance.  This is far beyond the taxing authority apparently granted in the language of the PPACA.  The PPACA has language restricting the IRS’s ability to use all of the same measures it has claim to under the U.S. Tax code.  But in oral arguments, the Government freely acknowledged further penalties and impositions by the Government beyond the limitations imposed on the IRS as the primary enforcement authority.

Once such actions are taken to enforce the right of the government to mandate the purchase of insurance under this theory, there is little to stop the government to extend such rights beyond health care to include other things like mandating the purchase of retirement accounts, housing, college savings other insurance, etc.  If fact Justice Kavanaugh opines;

“…there seems no good reason its theory would not ultimately extend as well to mandatory purchases of retirement accounts, housing accounts, college savings accounts, disaster insurance, disability insurance, and life insurance, for example. We should hesitate to unnecessarily decide a case that could usher in a significant expansion of congressional authority with no obvious principled limit.”

Once Again Back to the Commerce Clause

There were two primary point of challenges to PPACA by appellants:

Appellants, four United States citizens and federal taxpayers, seek declaratory and injunctive relief to prevent various U.S. Government officials and agencies from  enforcing the minimum essential coverage provisions. They argue that the mandate exceeds Congress’s authority under the Commerce Clause and substantially burdens appellants Susan Seven-Sky’s and Charles Edward Lee’s religious exercise, in violation of the Religious Freedom Restoration Act.

Since I am not a lawyer and must rely on my “every-person’s” common sense approach, the concept of being forced to purchase insurance is a step too far for me when it comes to the argument that it restricts religious freedom.  I am sure there are those that will quote me chapter and verse as to why this is a religious issue but unfortunately I don’t see it, and neither did any of the courts so far.  The prime argument has been, and remains, the authority of the Federal Government to regulate, nee mandate, the purchase of health insurance and to assess a penalty/tax if you don’t purchase insurance.

Clearly, congress has taxing authority under the constitution.  This undisputed fact is why at the outset of these challenges the Government argued that despite the word penalty’s use in the PPACA, it was for all intents and purposes a tax.  But, while that argument perceptibly granted them authority, it raised the questions related to if you can be assessed a tax for NOT doing something.  Further, it creates the problem of judicial authority at this time if this is a tax under the Anti-Injunction Act. It is interesting to note that the Government no longer is arguing so vociferously that this is in fact a tax.

Having exhausted my preamble, I will now turn my discussion to the issue of the Commerce Clause and the rights under the constitution of the federal government to regulate commercial activities of individuals within or between states.  To me this is both the main crux of the argument related to the purchase mandate and the center point of what I think is one of the most heinous and or ingenious – depending on your point of view – extensions of federal authority over the past 100 years.

The concurring majority bases their opinion of the Governments right to regulate commerce on precedent rulings beginning with a ruling where the court decided in 1945 that the Government had the right to seize and destroy a farmers wheat crop because it was in excess of the acreage the farmer was allowed to plant under the National Recover Act (NRA).  The fact that the farmer in question intended it for his own use on his farm and the wheat was not for sale, nor the fact that he likely would not have purchased wheat on the open market from out of state sources-but would more likely have bartered for it from another local instate source-did not sway the decision that this transaction affected interstate commerce and as such was now subject to federal authority. This landmark case, Wickard v. Filburn, and my feelings about this ruling are adequately described in Health Care Mandate and the Commerce Clause so I will not rehash them further here.  If you are not familiar with this history you should be.  Suffice to say, I believe the extension of the government’s regulatory authority as upheld in Wickard v. Filburn are much more than simply problematic.  The ruling endemic in the Wickard case needs a fresh review.  That said, I also think that there are many other problems in using even the logic of Wickard v. Filburn in upholding the insurance mandate.

Unlike Wheat – Health Care is Not Even Remotely Interstate.

While the U.S. Supreme Court, in 1945, stretched the fabric of imagination in tying personal wheat growing to an interstate commerce act subject to federal jurisdiction, health care is even more of a step too far.  Representative Melvin Watt (D), North Carolina during a House of Representatives Judiciary Committee hearing in the early part of 2011 on the need for Health Care/Malpractice Tort Reform commented that he was a strong advocate of states rights, and that in his entire life he had never seen an example of where the provision of medical services, health care, went across state lines.  He further said, he knew of no instance where a hospital existed simultaneously in two states, and that health care was so specifically regulated in each state as to make the provision of health insurance across state lines so problematic that it was in effect impossible.  He continued, that health care was clearly an issue relegated to the states and not subject the federal encroachment under the Commerce Clause and therefore the subject of federal tort reform over this issue, he felt, was out of order and beyond the jurisdiction of the Judiciary Committee.  This seemed like a very good argument to me at the time and still does.  Perhaps Representative Watt should write an amici curiae to the US Supreme Court on this specific topic.

In fact, in my opinion,  Rep. Watt is correct in almost all regards.  During the debate over the PPACA, it became clear that most of the country did not want a national health care option despite the best advocacy, efforts, and in some cases, obfuscation by many in congress.  A review of health care in America, shows that health care is, in fact, a state by state regulated industry.  Many, if not most, insurance providers have specific offices within each and every state to deal with the specific regulations, policy requirements, demographics, and actuarial within the state.  While one can buy policies from companies whose main headquarters may be outside of the state of residence of the purchaser, they can’t buy a generic policy that does not conform to the regulations of the state of residence of the purchaser.

So, even if Wickard is based on sound constitutional principals, health care is clearly not wheat.  While the case was made that wheat was a national commodity, and there was a national commodity market for wheat sales, and that poor Filburn by growing his own wheat and not buying it on the open market was affecting demand and therefore the national price of wheat; the same cannot be said for health care.  To amplify this argument, even the federal government through CMS recognizes at least the regional vagaries of the health care market by providing various rates for reimbursement of services based on geographic location.  There are numerous points of authority that will show that health care is, unlike almost every other industry you can think of, a state based economic system.  Again unlike wheat, affecting the sale or cost of a health care product or service in one state has little to no effect on any other state.  It is also likely true that the cost of care in San Francisco has little to no effect on care in Oakland let alone Petaluma, Sacramento, or Los Angeles.

Clearly, there is a national market for pharmaceuticals and medical devices but again each state regulates these items quite closely.  What a pharmacist pays for a specific drug in one state or region is so different for other states or regions that whole businesses like Foxmeyer Health have sprung up over the years to play games of arbitrage between local pricing variance for pharmaceuticals.  In my “every person’s” common sense approach health care is one clear example of a non-national market.

The consenting majority make the point that,

“… Because virtually everyone will, at some point, need health services, no one is truly  inactive, and the health services market is inextricably intertwined with health insurance. Congress found that those who do not purchase health insurance, and instead self-insure, almost inevitably take health care services they cannot afford. Hospitals, by virtue of federal law and professional obligation, provide these services, and as a result, $43 billion in annual costs are shifted to the insured, through higher premiums. That, in turn, makes health insurance less affordable and increases the total number of uninsured.”

While, this argument may be true, and then again it may not be true either, for this to have some form of sway the $43 billion would need to be a cost to all the federal taxpayers would it not?  Not state taxpayers under state regulations because that would not be interstate would it?  For this to be truly a national issue, the $43 billion would have to be almost exclusively a federal cost.  My reason is that since each state offers medicaid under their own authority and their own programs-and even President Obama has specifically referred to Medicaid as state programs-if private health care is also state specific how can this cost shift be a national issue.

One may argue that, Medicare is a national program, and they may also argue that the federal government subsidizes Medicaid at the state level.  But states remit money to the federal government, some of which they receive back, so I question the true source of the funding.  Someone should look at the  funds flow to determine, if possible, if the sources are local or federal.

Lets further assume that the Federal Government provides some funding to state medicaid systems, reimbursements/stimulus to hospitals, to offset uninsured care mandated by the federal government, and other federal governmental programs created by the federal government to subsidize the costs of the poor and the uninsured.  I don’t think it flows logically or constitutionally that this is now interstate commerce just because the federal government voluntarily created a program to provide money to citizens funded by taxpayers and that the costs that are shifted by the under-served drain on these funds makes it is now a national market.  If that is the case, then any time the government wants to take over an industry or regulate something we do, they will just decide to subsidize it and then claim it is now subject to the Commerce Clause and they can regulate it.  Does anyone really believe this is what the founders intended?

It is also good to note that the consenting opinion states that;

“The Government concedes the novelty of the mandate and the lack of any doctrinal limiting principles; indeed, at oral argument, the Government could not identify any mandate to purchase a product or service in interstate commerce that would be unconstitutional, at least under the Commerce Clause.”

So, even the Government acknowledges that his is tantamount to a preemptive right if it is upheld, but they basically then say, Trust Us  – heath care is so unique we would not think of doing this anywhere else!  I am sure the founders would never have contemplated that Mr. Filburn would have had his crops burned by the federal government only because he chose NOT to purchase wheat on the open market thereby maintaining the price the federal government deemed important.

The Majority opinion goes on to analyze the text of the Commerce Clause itself, including a contemporaneous definition from the Dictionary of the English Language of 1773;

“We look first to the text of the Constitution. Article I, § 8, cl. 3, states: “The Congress shall  have Power . . . To regulate Commerce with foreign Nations, and among the several  States, and with the Indian Tribes.” (emphasis added). At the time the Constitution was fashioned, to “regulate” meant, as it does now, “[t]o adjust by rule or method,” as well as  “[t]o direct.” To “direct,” in turn, included “[t]o prescribe certain measure[s]; to mark out a certain course,” and “[t]o order; to command.” In other words, to  “regulate”  can mean to require action, and nothing in the definition appears to limit that power only to those already active in relation to an interstate market. Nor was the term “commerce”  limited to only existing commerce.”

The last line of this extract, again for me is one of the steps too far.  How can you come to the conclusion that the framers in 1787contemplated regulating commerce that was not in existence therefor justifying the argument that you could regulate a non-action? To my simple mind this is word parsing and wordsmithing in the extreme.

The majority go on in their logic strained argument to state that the distinction between interstate and local commerce has been largely eroded and they cite the case U.S. v. Lopez as an example. This case was the “Gun Free School Zones Case” and much of the argument of that case was backward dependent on our old friend Wickard v. Filburn.

Since the concurring majority justices endeavor to find the original meaning and intent of the framers related to the Commerce Clause, perhaps they should weigh if the framers would approve of the federal government, in effect usurping the power of the states by creating national entitlement programs funded by federal tax collections, then using the argument that the lack of purchase of some good or service by the public was inordinately increasing the reliance on these programs and therefore costing the government, and hence the national taxpayers, more money and therefore it was an interstate commerce issue and effectively then subject to total federal control!  I do not see Thomas Jefferson, or even John Adams buying the argument that the Government can voluntarily create a program – that it could also cancel at any time if it got too costly – and then use this argument to claim further encroachment into state and personal rights under the very clauses they constructed to significantly and specifically limit the authority of the federal government and put those un-enumerated powers specifically in the hands of the states.

It should be noted that in this case the Appellants did not argue that Health Care and Health insurance are uniquely state concerns, but this has been argued successfully in other challenges to the PPACA.

Another frightening theory proffered in the majority opinion is based on this quote;

“Appellants’ view that an individual cannot be subject to Commerce Clause regulation absent voluntary, affirmative acts that enter him or her into, or affect, the interstate market expresses a concern for individual liberty that seems more redolent of Due Process Clause arguments. But it has no foundation in the Commerce Clause. The shift to the “substantial effects” doctrine in the early twentieth century recognized the reality that national economic problems are often the result of millions of individuals engaging in behavior that, in isolation, is seemingly unrelated to interstate commerce. See Lopez, 514 U.S. at 555-56.”

Once again this is predominately based on the original Wickard ruling and its extension under Lopez.  If it stays true and the opinion as proffered by the majority stands, there is nothing that stops federal intervention in anything we do or do not do.  I suppose they could argue that they can force us to drink alcohol to excess, then to drive – so the police can stop us, give us tickets, charge us with DUI, pay fines, take remedial classes, and then pay to retake a drivers test because in each case it was stimulating a national economy or it was helping defer the costs of dealing with the problems that were being born by the government, hence the taxpayer, hence it is all an interstate commerce issue under the Commerce Clause. And if we refuse to drink and drive, by extension we are not consuming the services in the interstate market and therefore affecting the prices of those goods and services and the resulting loss of market will cause an increase in the subsidies to those industries by the government, hence a drain on the taxpayer, hence interstate commerce and therefore properly regulated under the Commerce Clause.

My Conclusion

I think that the underlying case law here starting with Wickard v. Filburn, through U.S. v Lopez and other Commerce Clause related rulings dependent on Wickard up to today need to be reviewed.  I doubt this will happen absent a constitutional congress and an amendment to affect the vagaries purposely attributed by the Judicial Branch as justifications to expand federal reach.

I think that we need to focus our arguments in three additional areas:

  1. That health care, and the provision of services thereof, is and are not an interstate market system nor should they be.
  2. Someone needs to raise the constitutional question if the federal government can create programs that effect national markets and then use that effect to justify expanded reach under the Constitution.  If the answer to this is affirmative then this could be the biggest slippery slope of all.
  3. Was the ruling in Wickard v. Filburn correct?  And If not how can this ruling be challenged outside of the question of the Insurance Purchase Mandate.

Like everything else, I want you to ask your own questions and not rely on my opinions?  I do not know that I am correct.  What I do know is I have to read these things myself and attempt to understand them and then do what I think is right.  In effect, I need to be a Mugwump.

Headline Screams – Wealth gap hits record levels: But is this significant?

Click Image to Link to Article

Reading my local paper I was struck by the headline, “Wealth gap hits record levels” by Hope Yen.  The secondary headline “Divide between younger and older adults widens as lengthy downturns erodes net worth of those under 35” also raised my curiosity.  In both cases I did not find either statement unusual.  Why would there not be a gap in net worth between people 65 and older and people under 35?

The article further states that there is a 47-1 gap between the old and the young, and states it is the highest ever recorded.  The article cites that the median net worth of a household headed by a person 65 or older is $170,494 and that the median net worth of  households with people under 35 is just $3,662.  I really just want to say – Yea – So what’s your point?

I am more or less astounded that anyone would find this remarkable. All of my life experience indicates that there should be a substantial gap in net worth between the ages under 35 and those 65 and older.

Yea-So what’s your point?

I mean, after all wouldn’t it make logical sense for someone who has worked 40 or 50 years longer to have accumulated much more net worth?  In fact the statistic of the gap in the relative net worth of 47 times actually seems low to me – I will tell you why.  I am starting to knock on the door of the upper age quoted in the article.  From my own history, I had no where near the net worth when I was 35 or younger that I have today. Nor would I have expected it.  Let’s take a look at why that might be – shall we?

When I was 35 and younger, I did not earn anywhere near as much as I have during the period after 35, nor should I.  When I was under 35, I was learning my trade, earning my stripes, gaining experiences that helped me make fewer mistakes and become more valuable.  In those years I was just starting out.  For part of that period, I was renting a home, then later purchasing one.  As such, I was not yet rapidly building equity.  When I did purchase a home I had to buy stuff to put in it; so instead of building net worth I was spending money.

In the years under 35, I was also living a more – I can live forever and worry about retirement after I do and get all the things I want – lifestyle.  I guess you could say, I was less responsible with my money.  Also, this is the period that we go from spending money to attract mates and practice the art of procreation to actually procreating.  For those of us who have both practiced procreating and then later actually procreated, I think we can all attest to the fact that both of those things cost money – sometimes a lot of money.  These costs significantly reduce what we can save and therefore our net worth.

Age - Net Worth Table (by author)

From the age of first procreation to the age of 35, the actual procreants got older and the worry of looming higher education cost came home to roost.  So not only did I have the expense of  increasingly ravenous, and growing children to contend with, I had the resulting increases in costs to go along with said children.  So increasing net worth was still not that much of a viable option.

So you see, maybe I am not typical, maybe I was just irresponsible, maybe it is simply my generation, but I don’t see how at the age of 35 and younger one would even begin to have the net worth of someone in 65 or older.  Another factor for the younger households among us is that the percentage of inherited wealth likely does not befall them until they break the 35 year barrier.  Since the average life span for a person in the U.S. has been between 73 and 83 years old throughout my life time, I would have typically been between 47 and 58 when I received an inheritance assuming that a.) my parents had me as their first born at the age of 25 and they lived the average lifespan.  Even if I was second born and my parents had a 5 years gap between their children,  I would have been over 40 before I received an inheritance. And to push the statistic one more level, If I was third born with another 5 year gap I would have been 37 upon receipt of inheritance.  So Inherited wealth, which can add to net worth, and should from my point of view, would not arrive till after the age of 35 years old.

I put together the above chart, simply to see how much a person would have to save each year from the age of 18 in order to achieve the 47 times multiple quoted in the article.  I used the number of periods to earn the multiple as 47 more for convenience than anything else.  I also chose it because it is exactly 47 years from 18 to 65 years of age.  I could not forgo the irony of the calculation.  You will see, that it is very possible for one to achieve this net worth from simple savings of $2450.85 cents per year at an annual interest rate of 1.5% alone.  Forget appreciation in home ownership, forget increasing value and salary in the workplace, forget lowering of cost as children grow and move on, forget inheritance, forget any other factor that could affect the rate of appreciation of net worth as one ages.

The point of the article seem to be saying there is some base inequity between the older generations and the younger generations.  Perhaps, it is laying the groundwork for elimination of social security and medicare because after all older people have had lifetimes to accumulate their wealth and the younger, under 35 have not – but they will won’t they? The article states, that it is the result of the economic downturn that the multiple has arrived at its worst in history.  But I simply do not believe that statement.  I want to see some indication of what the historical period of record is.  I suspect we will find that this measure is a relatively new one and its history does not go back that far.

The author states that Social Security accounts for 55 percent of the income of people 65 and older.  Duh – what would you expect to see as many over 65 are retired and rely now on Social Security, retirement, savings,  and pensions to pay their expenses.  And this measure they are arguing is NOT earnings, it is net worth –  apples and oranges.

In the article the author cites, Sheldon Danzinger, a University of Michigan public policy professor, who says,

“The elderly have a comprehensive safety net that most adults, especially young adults, lack.”

Again, I hope this was not some government funded study to come up with yet another “Duh” moment.

Paul Taylor, director of Pew Social & Demographic Trends and co-author of the analysis, said,

“the report shows that today’s young adults are starting out in life in a very tough economic position.  If this pattern continues, it will call into question one of the most basic tenets of the American Dream – the idea that each generation does better than the one that came before.”

Tell that to those who suffered growing up during the great depression.  I am sure they felt the same way.  The realty is that many generations have not done as well as the previous generation.  The history we learned in school simply ignored many of these facts.  Our history was written to drive the concept of American Exceptional-ism.   So these historical pronouncements often are based less on facts than perception.

Other findings:

-Households headed by someone under age 35 had their median net worth reduced by 27 percent in 2009 as a result of unsecured liabilities, mostly a combination of credit card debt and student loans. No other age group had anywhere near that level of unsecured liability acting as a drag on net worth; the next closest was the 35-44 age group, at 10 percent.

-Wealth inequality is increasing within all age groups. Among the younger-age households, those living in debt have grown the fastest while the share of households with net worth of at least $250,000 edged up slightly to 2 percent. Among the older-age households, the share of households worth at least $250,000 rose to 20 percent from 8 percent in 1984; those living in debt were largely unchanged at 8 percent

We have been preaching, some would say irresponsibly, buy on credit since the 1970s.  We have spent much of the past two decades allowing banks to market credit cards to students in college.  We have been stimulating everyone to go to college ignoring the very visible unintended consequences of a reducing labor pool, lowering income level for college graduates, and massive education debt load upon starting their early life.  Adding insult to injury, or stupidity upon ignorance, our own government practically has forced these individuals to purchase homes in those formative years where they could have perhaps saved a small bit, maybe $2,500.00 per year.  Instead, our government manipulated the market using Fannie and Freddy, stimulated the myth of viable ownership with steadily increasing money supply, and in some cases, forced banks to lend to these young people who were really not yet ready to assume such debts.

So what now?  Along with the class war Occupy Wall Street, you know the 99% against the 1% crowds, who are angry with the people who make large amounts of money through the form of legal gambling called the stock market and who are angry with banks for now wanting to collect on those student loans and mortgages they can’t or don’t want to pay back – will we have another group wage “age war”?  Will we see a new slogan the 27% (those under 35) vs the 12.3%(those 65 and older).

So what is the point of this article?  Is it to amplify a point of how capitalism doesn’t work?  Well it fails there because clearly it has worked for the elderly.  Is it to make the point that it won’t work any more?  Again it fails when you look at the gains simple savings will yield over time.  Is it to make the point that the young have it so tough?  Tell that to the people who grew up in the late 70s and 80s when mortgage interest rates were 14% and 16%!

Perhaps it is time to really look at the lessons from this study.  They are not how inequitable the world is and how unfair it is for the coming generations.  The lessons are imbedded in undoing some of the things that have caused the current problems.  Instead of preaching how all Americans should spend more, and use their credit card more, perhaps we need our government to start to preach austerity for the average citizen!  Perhaps, we should correctly instruct our youth on the real history of America.  You know they still may see America as a great nation!  Perhaps, we should once again tell our youth they need to save and become responsible for their retirement years.  That relying on the government to collect a dollar in taxes that will ultimately end up as less than 30 cents of benefits for them in the future is not a good formula. Perhaps, we need to eliminate the death tax so that what people save and gain in their net worth can actually go to help benefit their procreants – you know their children, their heirs and assigns – the ones who are now worrying so much about their future!

Whatever the point of this article, I submit it is not good for America, unless it was written to point out the fundamental systemic problems and address them in some way other than promoting more income redistribution, and more entitlements for all.  The approach seemingly inherent in this article will not be good for We – the People of America. Of course, maybe I am just reading it wrong. Then again maybe not!

Post a comment if you agree or disagree!  As I am declared a Mugwump, I hear both sides.  I try to decide what I think is best – not what any party tells me.  So tell me what you think!