Ever since Samuel Hopkins Adams first exposed the evils of the patent medicine industry, in 1905 in a series of articles published in Colliers Weekly, it has been ‘patently’ clear that women have often historically been the prime target for the sale of prescriptive and Continue reading
People that know me well know that I read. I read a lot. I read incessantly, I read everything and anything. I read everywhere, written by anyone, left, right or middle—it does not matter.
I long ago came to the conclusion that whether or not I agree with the points made by an author, this should not be the guiding principal of what I choose to read. I find that, in fact, I learn the most when I read things I do not innately agree with. In reading the contrasting opinions of others, and for the most part with the intent of maintain an open mind, I can try to compare their journey of understanding, expressed in their logic, if it exists, and either validate, or repudiate, parts of my own logic. Hopefully, coming to a better understanding and opinion myself.
Whats the problem?
I am not so sure that this is what people really do anymore! It seems to me more and more people are only interested in letting someone else tell them what to think!
Recently, I have seen a series of articles, from both sides, trying to answer the question of what is wrong with our political system. Each side is spending lots of effort, and ink (or electronic bits), explaining how the system is not working because the other side is conspiring to subvert the system to harm something or someone, or to benefit something or someone at our expense. They often formulate the basic justification as this is clear because we are not getting what we want from the system.
The problem for me, as I see it, is the entire premise is wrong! By starting with the logic that something is wrong because we (pick either side in the argument) are not getting what we want, may be logical but it is not accurate on two levels. First, the assumption that the system is designed to give us something that we want in the first place, is not a correct assumption. Second, the idea that the system is designed so that whatever the majority wants is to be provided to us by the government, is also not true.
System is working fine
The reality is that our political system is still, for the most part, working as it was designed despite the slow erosion of some of the original checks and balances over the past seventy-five years. If you doubt this premise, read any of the biographies of Washington, Adams, Jefferson, Monroe, or Franklin and it will quickly become quite obvious that this was the design.
No, the system is still working just as it was intended. The problem is not the system. Although, if we do not begin to understand the impact of the gradual changes we have made, soon this may not be the case. The problem with the system is we are now starting to get what we want, and compounding this problem we have been for the last fifty or sixty years. We are, in every corner, probably right or wrong, getting too much. No, it is not the system that is the problem it is:
- The changes we have allowed to be made to the original system have weakened the checks and balances on our own greed and avarice
- What we expect that we are due from the system has grown exponentially as we have gained more from the system
The system is being changed
Our system was designed to be based on part-time citizen politicians directly subject to the impact of the laws and policies they create, not a ruling elite political class exempt for their communities day to day trials and tribulations. At the very beginning of the implementation of our new form of government, in April of 1789, the grand design of our form of government showed the promise of its innate slow and difficult process to sort out where power and responsibility resides and to make difficult the ability of the federal government to pass laws that affect us. Rapidly, the two competing philosophies, which I believe are inherent in mankind, congealed into two political parties. The federalists, who advocated a strong federal government authority to foment consistency, rapid growth, and strength, became one pole, and the republicans, who were concerned about the rise of a tyrannical aristocracy or hereditary monarchy developing a predatory system reducing the rights and prosperity of citizens through taxes and needless, unwanted, regulations who advocated for government controls closer to the people at the state level.
While for over sixty years our education system has taught more, and more, that we are a democracy, and that we are by nature a nation where it is the majority that rules, this was specifically and unequivocally not the government that the founders created. We were, and to some extent remain, a constitutional republic. The difference is; in a democracy people have a direct control through their vote, and in a constitutional republic the control is indirect through the election of officials who are supposed to weigh the will of the people against what is best for the country and consistent with the constitutional republican principals of our government as they make law and policy.
System is still fine—For Now!
Today we are clearly migrating away from some of these fundamental principals in two areas:
- We now, as a people, no longer understand the benefits of the constitutional republic and many, if not most, simply believe we are a democracy, and
- We have inadvertently allowed the creation of a stronger federal control by stimulating the creation of a full-time professional political class—potentially, just the kind of tyrannical aristocracy that Jefferson and Madison were so worried about at the beginning of America.
The question we all need to answer is, “Is this what we agree we truly need?” If so, then we will have to accept the consequences of a pandering democratic machine continually taking prosperity from the individuals and granting it to the majority in exchange for the continuation of their livelihood as a full-time professional politician, and the continual erosion of the original system of government and its checks and balances on them and us.
If this is not what we agree we need, then there are some very hard choices and changes we will need to consider to recover the checks and balances. Only then can we once again return to the constitutional republican form of government we had. If this is still what we want! You see that is the question!
Still up to us to define our system for a while longer
The good thing is it is still up to us for a bit longer. The more we continue the erosion of the checks and balances inherent in our original constitutional republic, the more we become a democracy. At some point we will slip over the edge and soon, perhaps, there will be no going back short of another costly and divisive civil war. If our leaders can develop a true process to decide this fundamental issue we may avoid a destructive conflict.
And the answer is?
So the answer to the question that headlines this article, “What is wrong with Politics?” is nothing at the moment, but stay tuned!
Like most things in which our federal government has inserted itself, the issue over the rise in U.S. gasoline prices has become a very complicated one. Like almost everything else in history, the more that the government inserts itself, the perceived benefits are overwhelmed by the unintended consequences. Here is yet another cautionary tale.
(Note: I am analyzing from a California perspective in order to understand the combined effects at the highest level and since this is where I live at the moment, I experience the issue in this way every day—your state’s fees may vary but I would guess your personal experience will be the same!)
In 2004, then California Attorney General, Bill Lockyer, updated his 2000 report on Gasoline Prices in California. Looking back this is an interesting read as we watch gas prices rise beyond $4.00 on their way to, as some are predicting, to as high as $6.00, if not even higher.
Evil Oil Companies Reap Big Profits Cause Gas Prices to Spike!
What is fascinating about both the current concern over the rise in gas prices and the report published by AG Lockyer is the consistent amount of spin on what it was that was causing the rise in prices. As we move into the next few weeks and months, once again, we will hear from the media, and many talking heads, how this is all the “evil” oil companies fault. How they are making record profits and they are simply preying upon the people of California, or on the national scale the U.S. citizens, to enrich their shareholders and continue to pay huge salaries and bonuses to the 1%’ers and leaving the 99%’ers in a continually worsening position. But there is a big problem with this spin! For the most part, it is just not true.
Look, I have no vested interest in the oil companies and I am by no means a fan of some of what they do sometimes. Sure, oil companies make a huge amount of profits when you look at the overall dollars but, like other such vilified industries and their executives including, big Pharma, and insurance companies among others, the percentage of profit is ridiculously small, when compared to other businesses and most small businesses. More telling, however, is that the real profit built into the gas and oil supply chain has reduced significantly since Lockyer published his updated report in 2004. The enclosed chart shows the break out of costs for a gallon of gasoline as reported by the California Energy Commission in 2004 and again as of today in 2012. What is startling is that the “evil” oil companies’ and refineries have reduced the cost and profit part of the price over 27% while the state of CA has increased their percentage per gallon over 42% and the federal government has also increased their take per gallon by 20%.
Another, great misconception—perhaps misrepresentation?—is that the cost per gallon is driven solely by the per barrel price of crude oil. Well again, if you look at the table I prepared, you see that if that logic was, in fact, correct, the price per gallon would now be $6.02 per gallon already instead of the $4.04 it is today. So, there is some disconnect in the price per barrel equivalence to the price at the pump. Clearly, there is not a direct corollary. While it likely does have some impact, I suspect there are a number of other things at work that drive the price at the pump. So, one may want to question if the conventional headline as shown at the beginning of this section is true?
What else could be driving up gas prices in California?
One other interesting segment of the Lockyer report is the change in 2004 from MTBE to ethanol. For many who don’t know, and for those that do not remember, MTBE was the additive to California gasoline to reduce pollution as demanded by the environmental movement. In 1990, with a large amount of money, and huge political activism, environmentalists lobbied the U.S. to amend the Clean Air Act requiring 2% oxygenating additives (typically MTBE) to lower pollution. The cost of refining gas for use in California went up and so did the taxes on gas to help pay for the increased bureaucracy required to monitor compliance.
Now like most things driven by ideology, a number of years later the same environmental factions now came forward to demand the removal of MTBE from our CA gas as it was polluting the environment (it had been found in high concentrations in the water table of Lake Tahoe and in the water table). So once again Californians had to foot an increase in the cost of gas as a result of this change and an increase in the cost of the additive (ethanol) as well as an increase in the bureaucracy to manage compliance—oh and let’s not forget increase in fees and taxes. So far I have yet to see an acceptance of responsibility for the initial inclusion of MTBE in the first place, no offer to pay for the removal, and no apology for the mistake from those that promoted the MTBE solution in the first place! (If you would like to read an interesting article on this read MTBE: A PRECAUTIONARY TALE by Thomas O. McGarity, June, 2004 in the Harvard Environmental Law Review)
On a side note, you will also be hearing how the profits made in California by the evil oil companies surpass the national average! Well the percentage is actually less but the price per gallon is a lot more, so of course the total dollars will be higher. Further, the costs of operating a business in California are intrinsically higher due to higher labor, infrastructure, legal, regulatory and insurance costs. When you look at all the costs, what is surprising is that overall California gasoline retailers, distributors and refiners have fought to lower their costs significantly over 27% since 2004. Not the work of evil geniuses!
The Law of Supply and Demand
Recently, some news outlets are questioning why since the general demand for gas and oil in the U.S. is down significantly and we have had a surplus in supply; prices are still rising—not falling as predicted by the law of supply and demand. Welcome to the One World Economy. There are those in the progressive movement, evidently our President included, that have long desired the U.S. to become a member of the One World vision—a One World Economy. For the past 20 years, much of Europe has been experimenting with this grand vision of utopian fairness. Looking at the status of Europe today, particularly Greece, France, Italy, and Spain one would really want to ask how this is working out for the citizens of those countries!
The problem with the One World Economy is now supply and demand for our U.S. refined products, regardless of their in-ground point of origin, is based on demand anywhere in the world. One can take a narrow view and determine that oil refined in the U.S. should stay in the U.S. but economically that doesn’t work because when “evil” oil companies ship this product to other markets, that will pay a higher price, it is actually a good thing for the economy because the U.S. adds revenue to its export sales, reducing the amount of money we need to print to pay for our international purchasing deficit. We must remember that the U.S. is a net importer of products; therefore more of our dollars flow out of the U.S. than we get back in sales of our goods and services outside of the country.
As an example, suppose you live in a house with your wife and one child. Your mortgage is $1,000 per month, your other expenses are $1,000 per month, you and your wife both work and you both get paid $1,500 per month. You are selling your services in excess of what you are spending and each month you gain real asset value of $1,000 each month. Let’s assume one of you loses your job. Now, each month you are buying $500.00 more in goods and services than you are taking in. All things being equal you can do this for twice the amount of time of when you were both working. When you get to the point that you have spent all the money you accumulated (saved), you look in your checkbook and see you still have checks. So you keep writing them. It won’t be long before someone comes and knocks on your door. We have for the last fifty years been ignoring this very problem of just writing checks because they were in the book and now have a $12 trillion accumulated trade deficit and have over $16 trillion in currency in circulation. Not only is this a big problem for our general economy, it is a big problem when it comes to commodities that have real tangible value like gasoline and oil.
Since we eliminated the international gold standard in 1972, countries whose economy is based on net exports of predominantly tangible goods and services (like manufacturing and raw materials production) have currencies, like China’s Yuan, that are based on increasingly real tangible values. The U.S. economy, being a net importer, with little manufacturing and raw production, has an economy whose currency is more and more based on intangible, perceived value like debt against real estate or financial securities. While the U.S. dollar is still the benchmark currency, perception of many in the world is changing. Oil is perhaps now the single most valued commodity—not in price per se but in need. Its price, like gold before it, is set by world demand. There are those who argue that “petrol dollars” should become the new world benchmark. In other words it would be the new gold standard. The day that the dollar is replaced, the U.S. currency will simply get crushed! If you think gas is expensive now…
So companies selling products today have an interesting problem when it comes to U.S. customers. They can take their production and sell it to us and get paid in a currency that has a total amount of money in circulation of $16 trillion dollars with arguably a real tangible value of only $5 to $6 trillion. Remember they will be selling this valuable commodity to a country that each year is buying much more than it is selling so the tangible value of the assets backing its dollar are continuing to slide down or, they can sell them to China whose currency is now internationally recognized, is relatively stable, and is backed by a constantly increasing national asset base due to huge net exports and low manufacturing costs. Barring a simply patriotic reason, most will sell to the increasing asset value country.
Drill Baby Drill
We can increase domestic production, we can drill more, and we will find that we will reduce local prices somewhat. While the President says, that drilling will not solve the problem, he is not telling the whole truth. We can’t mildly increase our production; if we do then he is correct. We have to significantly increase production to have the effect we seek. The break-point for lowing domestic costs is when we get enough production to reduce the dependency on foreign oil to such a level that the vagaries of their price gaming become meaningless. There are enough oil reserves in the U.S., with existing technologies to get to it, to replace most, if not all, reliance on foreign sources. What is necessary to get there, is time and the will of the people. Unfortunately, we are coming to the point when we simply must face the reality that while protection of the environment is a noble goal it cannot be the only, or preeminent, factor in all our decisions on the energy issue.
Finding alternative sources for energy is definitely a necessary step and is a proper goal. But, the solutions found in the alternate sources, can neither cost more than the available domestic oil, gas and coal sources, nor can they require us to collect taxes from some, or all, to subsidize the price to pay for us to use it. Following the subsidized route as we are increasingly doing in this and other industries, is the height of lunacy. The money we need can no longer come out of thin air as it has for the past forty years. Taking money from ‘us’ to pay for purchases by ‘us’ from ‘us’ is not only a zero sum game, it is simply increasing our costs as a nation and making us further uncompetitive with other nations who in turn are happy to produce the goods that we can actually afford to buy. In the end, we will at the same point we are right now with gas and oil today. We can produce it, but we just can’t afford to buy it. So then we have to sell it to countries that can afford it like China.
Do you think we will ever learn?
(this article originally ran in California Political Review it is re-posted here with permission.)
While the news today is full of various articles touting the $25 billion government settlement between the nation’s biggest banks and homeowners there is one big question for the nation’s citizens, and in my local case Californians—will this really be a benefit? While I am looking at this from a California perspective, this really is the same for the country as a whole.
In examining this question, there are at least three things to consider:
- Will the initial settlement amount become a meaningful amount for homeowners and truly affect their current financial situation?
- What are the long term implications of this settlement for mortgage holders?
- Will this settlement resolve the underlying problem in housing prices and declining values?
Before I get into this topic, first let us commend California’s Attorney General, Camilla Harris, for her efforts at getting a better deal for Californians.
Question number 1 is perhaps the most current. Clearly, this is the question on anyone’s mind who owns a home in California. Will the $25 billion really have a material effect on my mortgage problems? California has the most homes underwater of any state, according to Santa Ana-based data firm CoreLogic. There were as of September 2011, more than two-million homeowners that owe more on their homes than they are worth. By percentage, California ranks fifth with 30.2% of all homes upside down in value. Compare this with the national average of 22.5% and you will see there is a big problem here.
If you take the national total of 10.9 million home owners spread across the $25 billion, and you apply a “historical fairness” standard where everyone gets treated equally, you get an average payment to each homeowner of $2,293.58—not very meaningful is it? Now, some believe that the “rich” do not need, or deserve, the extra money, so using a “revised fairness” standard, and the fact that some significant number of people will not apply for the funds, the settlement group estimates that the average amount granted to those participating will be more like $20,000.00. This number sounds better but, there is a big but attached. The combined negative equity of all US homes is over $700 billion meaning that the average homeowner is underwater by at least $50,000.00. And higher priced homes, like those owned by the rich, often are underwater by a significantly higher percentage. Adding in the fees and other charges that will get levied by the banks for the processing of these claims and the effective gain drops even more. So on a national basis, some could take the cynical view that this is not a meaningful amount—but, what about for Californians?
California, by the CoreLogic study has about 2.06 million homes underwater. The state is targeted to get about $430 million. Using the same comparison above, the “historical fairness” allocation would be $208.74 cents per homeowner and the “revised fairness,” amount, where the rich don’t get any help, will equate to about $3,779.82. Since California’s market has been hit harder than many other states and its average home price is much higher, the proportional amount negative equity is also likely higher. So, one could argue that Californians may not only feel the amount is meaningless, they may also feel it is not fair overall!
Long Term Implications
Like most things revolving around government driven programs and settlements, we need to think about the long term consequences. Where does the money come from that makes up the settlement? Well it comes from the banks—right? As the last stop before it gets paid into the settlement that is correct. But, while this may be the end of the story, as usual, it is not the whole story. The money comes from us via two primary routes; one visible and understandable and the other confusing and relatively insidious. First, it comes from the bank’s profits, if any. And of course their profits, if they have them, come from the fees they charge us, and if the bank’s costs go up they charge more fees to us and we pay them. So in this route the money comes from us. The second main route, the more insidious one, is from loans made to the bank by the Federal Reserve to help the banks maintain liquidity or inject more cash into circulation, sometimes called “quantitative easing.” In this case, the money is created out of thin air by the Federal Reserve increasing the total amount of money in circulation—with no increase in value of the underlying assets—passed down to the banks to pay out to us to reset our loans and it reduces the real value of our money. The result is; goods increase in price, the money we earn goes less far, and we in effect are even poorer.
The cynics among us, who have concluded long ago that there is no free lunch, realize that no matter what the money we get is really coming from us. They may argue that the long term implications from this program are not very good. The reality is, there really is no free lunch and we can expect that this particular settlement will not work out well for any of us in the long run. Since many of the people who have the worst upside down mortgages would appear to many other to have been rich, it is not clear that this program would even be a model for the execution of “income redistribution” that some proffer as a solution to all of our ills.
The Underlying Problem
If you look at the graph at the top of this article you will see that the route of our underlying problem goes much deeper than it first appears. While some argue the cause is the profiteering of the rich and corporations, and others charge it is the irresponsibility of people borrowing to buy houses they could not afford, the real root of the issue is the underlying basis of our economy. Prior to 1972, the total amount of currency in circulation, referred to as the CinC, was about $500 billion dollars. The amount of actual currency was restricted by a mandate that each dollar had to be backed up by a set amount of gold. By 1972, this had become a huge problem as we could not increase the amount of currency and the government, therefore we, did not have enough cash to pay for all the expenses the country was racking up like War, Social Security, Medicare, Medicaid and myriad other subsidy programs. Also we were accumulating an increasingly large trade deficit.
But in 1972, then President Nixon, removed the country from this check and balance. By today we have increased the amount of money in circulation to about $16 trillion. This is a thirty-five times increase in the total amount of the money supply. No one will argue that the total value of the US assets has also increased thirty-five times—hence the problem. If you look at the chart, you will see that the median home price in 1972 was about $24,224. At the peak of the housing bubble in 2005-2006 the median price had risen almost point for point with the increase in the money supply to $298,500. If you now look at what the median home price would have been if we had not done this, the median price projects to be more like $115,734. The point is that if it is true that the amount of money in circulation is not representative of the real value of American assets, then our total economy, is overvalued. Even with the tech gains from our NASA investment in the 1960’s and 1970s, the economy would project to be about a $5 to 6 trillion economy not $16 trillion. Housing, under this calculation, would have to decline another 46% in order for all to match up.
Even if these calculations are off and the relative value of our assets has increased at a rate higher than the pre 1972 rate, there is likely still a large correction coming to our economy in general and housing in particular. California will be the eye of this perfect storm. I submit that this mortgage fix neither addresses the underlying problem nor ameliorates Californian’s personal and current dilemmas. I think it may really do the exact opposite and compound our problems with false hopes, false senses of security and increasing debt based on inflated values that are doomed to correct.
Regardless, this is an unbalanced fix in that it is trying to fix the debt side for a few and ignoring the unbalanced asset value side for everyone else. Even if pumping more arbitrarily printed money into the economy buoys the market in the short term, the continued unrealistically inflated values will again decline and once again we will be faced with the same problem. This will promulgate more borrowing against what likely will continue to be declining values in an overvalued economy—potentially spelling disaster. The only fix that will work is to address both sides of the problem across the board resetting both the Debt and Equity Value side at the same time. Perhaps it is time for either the Federal Government, or California, to consider a “Land Bank” system of mortgage financing. We need to address the balance sheet of the bank and homeowners at the same time we address the asset value side of the equation. Only then can we truly, fairly, and equitably address the fundamental problem.
So in the end is this deal a good deal for Americans? For Californians? And the more important question we all need to start asking is this!
Regardless of the impact to me personally, is this the right thing for America?
I keep wondering why this is so hard!
Associated Press reporter, Bernard Condon, wrote an interesting piece this morning. My local paper, the San Ramon Valley Times, headline was “Once-hot profits may be cooling for big business.” The US. News and Word Report picked up the article as, “Corporate profits aren’t what they seem.” The subtitle is the telling point. Growth appears to ebb as firms find less to cut, dollar strengthens.
This is a good article because the author correctly brings to light that the once mighty engine of America’s prosperity is faltering. It is not a great article because the author misses the real cause of the decline in profits, and like most others,misses the point that we critically need to understand in order to rectify the real problem. America’s prosperity engine faltered quite a while ago. We have been living on years of the banks and the Federal Reserve, steadily increasing the amounts of money in circulation with no regard for real value. While many of us feel like we have prospered because we have continued to get more money and buy more stuff, the amount of our “prosperity” has not kept up with our spending and has left us a very large hole to fill. As my brother-in-law, who was a farmer and a waterman, used to say, “It ain’t no good to want them Cadillacs when you can barely afford one of them Ford Pintos.”
As you have seen me report many times before. We have raised the total amount of money in circulation from $500 billion in 1972 to over $16 trillion today with no real and equal corresponding increase in the total asset value of the U.S. As a result, we have drastically increased the perception of constantly rising profits, because we have simply increased the amount of the benchmark item, U.S. Dollars, that we use to measure our worth. Lest we start to think that perhaps we really have increased the relative net worth of all the value of the U.S. in excess of thirty-five times since 1972, let us remember that we have been buying from other countries much more than we have sold to the other countries since 1972 accumulating over $12 trillion in trade deficits. In other words, our collective house spent $12 trillion more than it took in in the same period.
Thank God for the banks, huh? Their ten-to-one fractional-reserve lending system, and the Fed’s ability to just inject whatever amount of cash was necessary into the banks to make everyone feel like they were earning more money and getting richer has really saved the day—don’t you think?. Without the drastic program of printing new money with no governing checks and balances, we would have faulted long ago—right? It’s just a great thing that they could keep printing money with no real tie to tangible values—wasn’t it?
So in case you did not clearly get the sarcasm… NO, it was not good! In fact, our economy did fault long ago. We have been living on dreams, wishes and baseless valuations for at least forty years. Depending on how you consider the issues, the problems that caused our decline could be argued to trace back almost seventy years.
In order to conceptually grasp the issue let us simplify the problem. Let us go back in time to when there were just a few settlements in America. In this hypothetical example I will use a place near and dear to my heart, St. Mary’s, Maryland founded in 1632. In our hypothetical example, the year is now 1636. The colony has grown to 100 people. The money was Maryland dollars that were acceptable in England at an exchange rate set in agreement between the King and Lord Calvert—the founder of the Maryland Colony. (yes, I know this is not historically accurate, none of it is, this is all made up to illustrate a point). There were only a total of $10,000 printed Maryland dollars available to the residents of St. Mary’s, there was no credit, no electronic money, and no barter.
Since they had been living in the area, they had been focused on building out their community. As such, they had harvested resources like trees, clay, iron, etc., and converted those into lumber, bricks and nails to build their structures. They had planted and harvested crops, hunted and raised animals for food and generally eked out a basic existence. While they had been able to make many things, they had had to purchase as many more through Lord Calvert’s Maryland Company to vendors back in England. Items like dishes, glasses and tankards, patent medicines, fine tools, cloth, clothing, and many others had to be ordered and shipped from other countries to the Maryland colonists.
Since they had been completely consumed with building the infrastructure they need for basic survival, they had yet to develop any industry. They had , as yet, had no excess production of any kind and as such they had been sending their money to England to pay for their goods and, had not sold anything to England to bring these dollars back to the colony. Pretty soon, the colony had spent almost the entirety of their $10,000 Maryland dollars in England and there were only a few hundred Maryland dollars left collectively among all the colonists.
The leaders in St. Mary’s called a meeting of the town to discuss what to do about the pending disaster. In the meeting a member of the town council, Mr. John Connally—a pig farmer and great speaker, suggested they use their last $300.00 to buy a printing press. Then they could print more dollars and they would be able to pay for more goods in England and avoid the pending crisis. Since, Mr Connally’s words were so well spoken and the solutions seemed so simple almost all immediately agreed. All, that is, except Mr. Burns—a clerk, who said that he was concerned that this would not work. As he began to explain his concern, the Governor, Mr. Nixon, interrupted him, told him they would proceed with the purchase since the majority had agreed, and that Mr. Burns would now report directly to Mr. Connally with any of his concerns. Mr. Connally would not longer be a pig-farmer, he would now be in charge of all the money.
The printing press was ordered from the Gutenberg company in Germany, it arrived in time and all seemed to be working perfectly. Mr. Connally, no longer a pig farmer was now the chairman of the central bank and was printing money as fast as it was needed. The new money was going to England to buy goods and everything looks just hunky dory. By about the third purchase of goods in England, with about $2,000 in new money printed and sent to England to pay for the purchases, the settlers were informed that the prices of the goods were going up by 25%. No matter, said Mr. Connally, I will print us some more money and again all will be right with the world. A few months later, another $2,000 is put in circulation, more goods are purchased and the price once again increased by 25%. Again, Mr. Connally printed $2,000 more, they bought even more goods and the prices went up another 25%.
Every time, they got to the point that only $300.00 was remaining, Mr. Connally printed another $2000. All the people were happy! They had been able to buy bigger windows, more and better china, flat screen TVs, new sound systems, GPS for their fishing boats and buggies. They were starting to really feel like they had finally arrived. With all the building and purchasing they still had not gotten around to producing much to sell back to England. In fact, they now wanted to get some indentured servants to do the manual labor because working in the fields, on the water, in the brick yards, and the forests, was hard dirty work and the constant tracking of dirt and grime into their new larger and much finer homes was making their new furniture, and clothing dirty, uncomfortable, and it wore out much faster. The women-folk were getting tired of keeping up these bigger homes and their nice clothing really did not lend it self to domestic work. They wanted more time to get together with the other women-folk to discuss new ways to improve their lives even further. It became fait a’ compli that now that they had money, they could simply get some immigrant workers to do all the hard and dirty work. Getting these indentured servants from other countries, who will be glad just to get out of their slums, would free the colonists and their wives to focus on this productivity thing, that they needed to do, and they wouldn’t have their fine homes and goods soiled and and their wives wouldn’t get so worn out. Evey one was much happier!
Sometime in early 1639, Lord Calvert was informed that his company had in their safe $26,700 Maryland Dollars. Lord Calvert was now very concerned because he had no idea where the extra money came from. His deal with the crown was that Maryland could have $10,000 and the King would back that against 10,000 ounces of gold. That meant that each Maryland Dollar was worth one ounce of gold. The King only provided the 10,000 ounces of gold, no more and no less. Calvert was responsible for any other costs. As the Marylander’s demand for goods increased, the vendors in England charged more so he was getting less and spending more dollars, this was a big problem because the difference was coming out of his pocket. His accounts were in effect making up the short fall and he was losing big money. Let’s take a look at his calculations;
Lord Calvert’s Accounting
|Date||Maryland $||Kings Gold in oz.||Exchange Rate in oz. of Gold||Demand Price Inflation||Lord Calvert’s Loss in Gold oz.|
So Lord Calvert books the first ship he can find to come visit the good citizens of Maryland and find out what the hell is going on. When he gets there he finds out about the press, the the leaders decisions. He is told by the citizens about how great everything is going. He sees that they have bigger houses, servants, Flat Screens, GPS systems, he is told how all this is helping production. He sees the new servants toiling away and while he initially was pissed, he starts to see that it may all work out. Feeling comfortable, he books passage back to England, and tells his partners and the King don’t worry these guys got it all together. This is going to be just great! You should see all the fine stuff they have, all the people working in the fields and factories. They are going to do just great. We will have so much new stuff to sell back here in England, we will all be rich!
Then the goods start to arrive from Maryland; tobacco, corn, pork bellies, cotton, iron, and many more. Initially, the people of England purchase everything they can get because it is all new and hey, it is from Maryland and everybody knows those guys got it goin’ on! But then it all starts to unravel. First with tobacco. New plantations in other places, like Virginia, start to grow more of it. And their quality is just as good and the cost is much cheaper because they are not paying the laborers as much. Soon no one wants to buy Maryland tobacco. Rapidly the costing problem extends to the other products as well. Fisheries, Lumber, Grain, Steel, Textiles, Oil, and the other core exports from Maryland stop selling because they are too expensive. Even the people in Maryland are importing some of the same goods from the other places because they cant afford to buy the stuff they are producing. And it is all getting paid with the dollars they are freely printing.
The next thing Lord Calvert knows, no one wants Maryland goods nor Maryland dollars. They all want to redeem their Maryland dollars for something that has real value. Now, there are over $934,500 Maryland dollars in circulation around the world and Lord Calvert has to come up with gold, or something just as valuable, to pay everybody back for the now worthless dollars they have. When all is said and done he has to come up with 1,158,124 ounces of gold, plus he has to pay back the King an additional 10,000 ounces of gold plus interest. Lord Calvert feels perfectly and totally screwed!
He agrees to “lend” the Marylanders the gold to pay for the debt. Since he is on the hook anyway he has no real choice. The Marylanders agree to pay taxes to Lord Calvert and to pay all the money back with interest. And where does the money come from?
Mr. Connally prints it—of course!
For this fictional Maryland story, as you can imagine, there is no happy ending!
Since in the last 50 years America has purchased $12 trillion more in goods than we have sold, you need to ask yourself one more question.
“Where did all the reported large profits in recent years actually come from?”
To quote the famous song,
There was a farmer had a dog, And Bingo was his name-o.
One of the largest drains on every states budget is healthcare cost. California has historically been in the top of state healthcare expenditures due largely to its past of providing one of the most generous sets of program benefits in the country. Both Governor Brown and Secretary Dooley deserve a tremendous amount of credit for acknowledging the mounting problem of healthcare costs and taking steps to begin the process of addressing it.
Healthcare costs in the U.S. are estimated to top $3 trillion this year. That is a significant increase from the estimated $2.4 trillion in 2009. The Affordable Care Act (ACA), aka Obamacare, is supposed to be lowering the costs and improving efficiencies for healthcare. While it can be argued, and it has vociferously, that it is early in the process and the projected savings will begin in the next four to five years, there are some significant indicators from the administration in Washington DC that more and more of the promised savings will not happen. This will spell further disaster for states like California that already shoulder a disproportionate share of the healthcare burden of our population.
Before we can discuss AB154 and AB171, let’s review some broader recent decisions and data that have a direct impact on California’s projected healthcare costs.
Part of the plan to afford the care under the Affordable Care Act was to appropriate revenue from the purchase of healthcare and penalties for non-purchase of policies. The governing method to assess the fees and assure collection was the IRS. Within months of its passage the government had to admit that the idea of the IRS administering this program’s revenue would not work and that segment of the legislation was repealed. This now begs the question how will this revenue be assured?
As we are all painfully aware, there is some disagreement over whether or not the Affordable Care Act’s mandate to purchase insurance is constitutional. Scholars, pundits, and constitutional lawyers on both sides are already at polar opposites over the issue with each side quoting chapter and verse as to why, or why not, it will be upheld or declared unconstitutional. The reason for the gulf in the interpretation of the underlying law is its base on a prime case called Wickard v. Filburn from 1942 that started the justification for the federal government’s expansion into what had prior been clearly state jurisdiction. Any non-lawyer’s reading of the case simply defies common sense—this will be a very sticky wicket indeed. If the Supreme Court declares the mandate unconstitutional then much of the insurance reform inherent in the bill falls apart. Another large segment of projected saving will revert to increased expenses ultimately burdening the state both directly and indirectly.
The U.S. Secretary of Health and Human Services, Kathleen Sebelius, has recently ruled that the CLASS Act—a segment of the bill that was designed to expand options for people who become functionally disabled and required long-term services and support—is not affordable by the definition under the act and therefore it has been suspended. Where will these costs fall if the federal government stimulates the expectation but fails to provide the funding?
A major part of the projected savings was though the requirements of Accountable Care Organizations (ACO’s). In the bill they were projected to provide a savings of approximately $333 million per year, or just about $1 billion over three years. The CBO recently announced the results of a 20 year study focused on disease management and value based payment methods that fundamentally negate most, if not all, of the assumption on which these projected savings were based. In fact the study indicates they will potentially increase costs.
Another main point of the Affordable Care Act was to eliminate treatment disparity. Who wants to argue for disparity? No one! But even CA Secretary of Health and Human Services, Dianna Dooley, has said publically that “…we all need to get used to the idea that disparities will exist.” I commend her for this statement because it is unequivocally true. There is a basic law of diminishing returns that says that you will spend 80% of your money trying to arrest 20% of the problems.
Another key segment area of the ACA savings plan is Insurance Rebates. The act maintains that it has teeth to control the insurance industry profits because of its ability to mandate rebates for fees in excess of the medical loss ratio that the U.S. Secretary of HHS sets. In the first place, the rebate amount is a mere trifle compared to the $3 trillion national expense. More importantly, rebates have been mandated by the federal and state governments of Pharma for years. Rebates do not lower costs at all. Rebates in this bad play are methods to redirect money from the general consumers of the products, prescription drugs in this case, to other areas that the federal government, or the state, wants to spend them. They do nothing but increase the cost in an arbitrary and specious way and obscure the real cost of care in America. If monies flow in payments to the drug companies, and then flow back to the states, and the states, like California, can redirect these monies back to the programs or the general fund to fund more patients, it amounts to nothing more and a consumption tax. A look at the California budget shows that about ½ of the drug spend for some programs comes through mandated rebates. Sure this is a good thing for the participants in the programs, if like California the moneys flow back to services—not all states do this, some pay for other infrastructures—but it is not good for understanding the real impact of these programs economically as the myriad of convoluted funds flow become impossible to track or account effectively. Frankly, the $3 trillion in health costs for the U.S. is not likely even close to $3 trillion because it is an unintelligible mix of both invoice pricing and actual reimbursement payments. And for those who do not know, a healthcare provider typically is getting reimbursed from eleven cents on the dollar to twenty-two cents on the dollar for services they bill—and they seldom can predict the amount.
Yet another key segment of savings under ACA was the premise that hospital readmissions will reduce. The plan is to select a series of specific disease states and for the government to begin to select measures that will allow for adjustment, read penalties, to hospitals that have higher than the selected measures for readmission. Houston, we have a problem. One of the biggest drivers of healthcare cost is age related illnesses. Since 1964, when we created Medicare and Medicaid, the lifespan has increased from about 70 years old to almost 83 years old today. The effect of this increased lifespan has been to significantly increase the cost of care in one’s life and shift the cost curve of lifetime health expenses to our last few years of existence. A recent Kaiser study now indicates that almost 85% of our lifetime expense for healthcare will be made in the last 5 years of life—and the trend is still increasing. We are aging, our culture of how we manage our elderly relatives has shifted from family responsibility to outsourced solutions (nursing homes), and we now are more focused on quality of life than just life as the basis for our expectation of care.
Let’s stay on the topic of re-admissions for another moment because this is a big one. One of the assumptions that drive the belief that we can reap savings by setting measures and penalties is that and assumption is that the reason for the readmission is that hospitals get more money for readmissions. As a result, they are not doing much, or enough, to improve the outcomes in the first place. But this is a false assumption for many reasons. To illustrate the issue, let’s discuss Hospital Acquired Infections. The premise is that Hospitals are sloppy or slipping when it comes to hygiene and if they simply do a better job following antiseptic protocols to reduce infection, then these unnecessary costs will go down. The people drawing this conclusion do so from the basis that healthcare is more of a cause and effect system, a static system, where we have fixed cures for most of what affects us. This is one of the main cores of why we keep thinking we can make progress if we just keep doing X process more and better…. But the problem is, the practice of healthcare, after all, actually is largely a war with other species (bacteria, viruses, and other complex pathogens), a war with our environment, (accidents, violence, and pollution) and also a war with ourselves (diet, exercise, work habits, and sleep). From time to time, we can see gains for ourselves in these battles, but our mortality assures us that we will all eventually lose the war. Basic biology and the laws of nature have stacked the deck against us. Innovations in technology, science, and medication have helped many of us delay the day of our ultimate surrender, but these advances have also fostered the false belief that no price is too high to pay for an extra day or week of life. Related to infections, we are losing this war as our chemical and biological weapons have continued to become less and less effective. The protagonists, other species, have evolved resistance to our weapons and the remaining available chemistries’ at our disposal have become more toxic to us who take them. Hospital readmissions will likely continue to increase.
Lastly, ACA relies heavily on projected savings from the mandate of conversion to Electronic Health Records (EHR’s). While EHRs are a good thing and will very likely improve patient outcomes, any projected savings, should they even materialize, will be negligible. How can I predict this so definitively? If you look at where the healthcare dollar is spent only about 12 cents is spent in administrative costs today as it is. The percentage that may be gained in efficiency from conversion to electronic records will likely be 10% to 20% of that number which would yield about 1.2 cents, to 2.4 cents, for every healthcare dollar. The current plan for EHRs does nothing to change the current HIPPA regulations and as such the sharing or coordination of care though the transportability of these records between providers and sponsors is very expensive and practically prohibitive. The application of technology has always been made with the promise of increased productivity and lower costs but an honest assessment of the past 40 years shows that overall lower cost and significant gains in productivity are the exception not the rule.
The largest cost drivers, where EHRs could have a major influence, are in the areas of duplicated services, defensive medicine, fraud, and abuse. By many estimates, on both sides of the political spectrum, only about 33 cents of the governmental healthcare dollar is realized in services—about 60 cents is lost in these areas. There is little debate on this total number across the aisles. There is large debate as to whether the costs are larger in the fraud and abuse area or in the duplicated services/defensive medicine areas. This debate is moot as EHRs could have the potential to drastically reduce these aggregate costs if, and only if, they are coupled with mandated coordination of care and benefits across all available sources. By the way, I don’t mean single payer. Single payer is a great sound bite but the term likely does not really describe what people are seeking. Do we really want all care to come from a governmental source—eliminating choice, volunteer treatment, faith based programs, non-profits, philanthropic sources, corporate sources, etc.? When I have had this discussion with various legislators, both state and federal, the answer invariably has become; well no, of course not! What most really seem to want, and what is necessary to make this all work, is a central point of administration with the ability to connect the providers around the patient as the center point in a kind of virtual care team. This is relatively inexpensive, does not initially even require full HER implementation to achieve significant savings, and provides a great role for state government to play.
With this as a backdrop, we come to the last big issue facing why healthcare is continuously increasing in cost and the issues with AB154 and AB171 drastically put at risk California’s healthcare future. AB154 is legislation recently approved by the Assembly that will require private insurers to cover diagnosis and treatment of mental illnesses (it appears all mental illnesses on the books). AB171 requires coverage of developmental diseases such as autism. The Assembly also approved legislation to cover oral chemotherapy and mammography regardless of age. While I applaud the sentiment, these kinds of actions that constantly increase the overall coverage of anything, and everything, which can ever affect anyone as they perpetuate their long risky walk through life to older and older age, in conjunction with the items previously discussed, are setting California up for a perfect storm. As the ACA projections continue to fall apart and as the federal cost for healthcare programs like Medicare and Medicaid continue to increase, states like California will be left in the crosshairs of larger expectations for treatment and less, perhaps no, federal money to pay for it. Already the president refers to Medicaid as a state program. I guess he forgets that both Medicare and Medicaid are just parts of the federal Social Security Act of 1964. Of course, the states consider this a federal program and due to the increasing drain on state budgets some are trying to figure out how they can again opt out of this federal program.
Our largest issues come down to the following things. We no longer truly insure health care to preserve basic life. More and more we are requiring insurance to cover “quality of life.” We have extended though technological gains the amount of time we can spend on the planet to the point that we are now on average way beyond the period where our bodily systems effectively fight the healthcare war. As we have gained the additional ten more years of life from the past forty years of technical and medical accomplishments, we have moved into a new reality that to preserve our quality of life during this extended period we are consuming consuming more and more of our resources. Unfortunately, much of what programs like Medicare and Medicaid are now paying for are not the actual costs of care. They are paying for the things we purchased during the former years to improve our quality of life way beyond the realm of healthcare. These programs are really funding the earlier purchases of larger screen flat panel televisions, vacations, 2nd homes, new cars. They fund the things that, prior to 1964, we typically did not purchase because we knew we needed the money for our elderly rainy day funds. We were worried that we would need to pay for the catastrophic accidents and illnesses that fate dictated we would face as we aged. Today we are all free to make these lifestyle purchases because the threat of elder catastrophe is now covered by entitlement.
This is not an argument to go back to the way it was, not an argument to eliminate these programs, not an argument that we should die earlier. I know of no one that wants to see people die younger, suffer more, or live in destitution. The point of this article is to bring to the front the dilemma. It is here we need to develop a better dialog and, as Ben Franklin said, “find compromise, through tolerance.” It is here we also need to start to focus our hard decisions on where personal responsibility ends and our safety net begin. Until we do this, California faces the coming perfect storm and like all other state will likely face it alone without federal help. The decisions we make on items like AB154 & AB171 while laudable are significantly increasing expectations and hence our risk of future economic collapse. Remember it was Albert Einstein who said, “Insanity is doing the same thing over and over again and expecting different results.” Wait, is this why AB154 is being passed?
I commend the Governor and the Secretary for their effort to begin to address this dialog. While there are many who want to lay blame for everything at their feet, I find in both inappropriate and counterproductive. Both have had long records of public service. Both began, perhaps, more on the side of idealism but they have each arrived at pragmatism based on hard one experience and dedication to effective solutions. I can’t think of any I would rather have trying to help California move these issues forward. That said it is time we all begin to recognize the depth and diversity of the problems, reset our expectations and all become responsible for the solutions!
Entering the Florida primary-of-the-moment race are ‘The Two-Bit-Kid‘ (Mitt Romney) versus the ‘Come-Back-Kid‘ (Newt Gingrich). Clearly, Newt has earned the title the Come-Back-Kid, as he has been counted out at least three times in the recent months by many pundits on the left and right. I have called Mitt the Two-Bit-Kid for his inability to gain or stay above 25% in the polls for more than just short period. Often, he has risen above this apparent wall only when others implode, sometimes on their own, and then sometimes with a little help from his friends.
Is it just me, or if you’ re a Californian doesn’t Herman Cain remind you of Willy Brown? Or Marion Berry if you’ re from DC?
The Republican race thus far has not been an awe inspiring process has it? If we were to take a path along the lines of creating the next “Steve Austin” we clearly could have combined the candidates into our own “One Billion Dollar Elephant Man.” We could have taken Newt Gingrich’s brain and policy experience (Newt is consistently one of the smartest guys in the room–and he knows how to nail those that the people want nailed!), Hermancain’s simple 999 style(I say Hermancain because, I have never heard any other name for him. I can’t even tell if this is his first or last name—can you?) Let’s add in some of Rick Perry’s reversion-airy ideas on converting our professional political class back to part-time citizen politicians (something that is definitely needed). How about some of John Huntsman’s ability to speak Chinese (he could tell Chinese Premier Wen Jiabao the inside dirty jokes or tell them where the best Chinese food is in Washington, DC–who would know?) Let’s take some of Ron Paul’s views on the Federal Reserve (and their big bank cohorts) and their complicity and obfuscation in the current financial crisis (and perhaps his relationship with Arthur Dent, a hapless Englishman who travels the galaxy, could help if the aliens lose all common sense and decide to invade the planet–Come on, you think he doesn’t know him personally?) Now let’s put in a dash of
John Huntsman seems like a nice enough person but he reminded me of a bobble-head doll every-time he spoke!
Rick Santorum’s ability to keep talking to everyone while not really enhancing the conversation one iota, but seemingly not pissing people off (other than convincing them he is really truly a conservative–and after-all to Rick, that is all that matters right?), Michelle Bachmann’s attractiveness to the Tea Party and her singular focus on repealing Obamacare (Do they still find her attractive?–I mean in a political sense of course), And Mitt Romney’s uncanny ability to continue to run for president after, what is it?–eight years–wining only one state and still not get more than about 25 percent of the electorate interested in him, but still he continues. (Don’t forget the hair–Mitt has great hair! The best that money can buy!)
Please, will someone tell Mitt Romney not to put jell on his implants? It makes them look like a well cultivated cornfield owned by some anally-retentive Iowa farmer.
Now, if we could pull that off we would have the One Billion Dollar Elephant Man (BDEM). The Republicans are going to need this to go up against the One Billion Dollar Donkey Man(BDDM). (I thought about using the pejorative that I know many of you are thinking but, it would not be appropriate!) Oh yea, he already has one billion dollars doesn’t he! I think we should put this fact in a bit of perspective.
Lee Majors vs Barack Obama
I did not realize, until I began to research this article, that the show The Six-Million Dollar Man began in 1974. The same year that President Nixon took us off the gold standard! Now, how about that for a coincidence! Lets take a look at what it is going to cost to build a modern replica of Steve Austin and compare that to what either the BDEM or the BDDM is going to actually cost us all.
In 1974, when Steve Austin was being constructed to protect mom, apple pie, and the American way, He cost America $6 million to build and there was a total of $500 billion of currency in circulation (CinC.)at the time. That was about 0.0012% of the total money in circulation. Now, if we look at the Billion Dollar Donkey Man or the proposed Billion Dollar Elephant Man, using the benchmark of Mr. Austin, either of these candidates should only cost about $192 million based on having almost $16 trillion total Currency in Circulation today. But, they will likely cost at least $1,000,000,000.00 each! That equates to 0.0625%–an increase of 520.83%. That is an inflation rate of 13.71% per year since 1974. What do we get for our money?
That’s a 520% Increase!
I guess we should not complain all that loudly, should we? We only had a 520% increase in the cost of the $6 million dollar man but we increased the total amount of money circulating in our economy by 3,200% Yep, that’s correct! We increase the total amount of money in our economy 32 times what it was in 1972. And of course the value of all the assets of the U.S. increased 32 times as well didn’t they?
While our ideology, and its complete polarization, have made for great copy; no single person or party is responsible for this mess. We all are! As I read the paper this morning, I start to see the new push against Gingrich as angry, unpredictable and undisciplined. I see the attacks on Romney as not in touch with the common man, driven more by greed, and not able to close the sale with voters. Overall I saw so what! In sales and marketing there is a thing called the “so what test!” If after someone tells you something they think is a selling point you can say so what, then they have not made the sale! I think we need to all say so what a bit more!
Conversely, now I hear, over and over, how the democrats are more afraid of Romney than Gingrich–that Gingrich has so much baggage they feel they can easily beat him. And as Yul Brenner said in The Kind and I, “Etcetera…. Etceteraaaa…. Etceteraaaaaaa!” Deep inside, when I hear this I wonder if the words of the queen in Shakespeare’s Hamlet ring true?
Both here and hence pursue me lasting strife,
If once I be a widow, ever I be a wife!
‘Tis deeply sworn. Sweet, leave me here a while,
My spirits grow dull, and fain I would beguile
The tedious day with sleep.
Sleep rock thy brain,
And never come mischance between us twain!
Madam, how like you this play?
The lady doth protest too much, methinks.
Hamlet Act 3, Scene 2
Logically thinking about this, I am not sure I agree with the conventional, or contrived wisdom, that the Democrats are more afraid of Romney. He has more money at this point, he is more organized, and his background accomplishments key him up directly as the economic foil to illustrate the Presidents economic failures. In the long run, if we get our collective heads out of our nether regions, I don’t think the rap against Romney on his fiscal achievements, and liabilities,–Bain Capital, taxes et. al.–amount to much in balance. For everyone who begrudges him his success and fortune, others will want him to translate these skills to work on their behalf.
Likewise, Gingrich may have baggage, but it just different baggage. Like the others, in many of the attacks on Gingrich the supposed weaknesses also become strengths. Unpredictability, is well, unpredictable. Unpredictability makes it difficult for others to prepare their game plan and stick to it. Clearly, Newt is the strongest debater, and by almost every account the smartest man in almost any room. Some have charged this leads him to be undisciplined and that his idea-a-minute brain makes it hard for others to find focus and achieve. Clearly, this is not the case for some others. Newt himself has had a disproportionate share of successes, accomplishments and achievements in his lifetime. Recognized as a quintessential American, more along the lines of the early framers and founders. He is and been a successful politician, author and consultant. He has been Times Man of the Year in 1995 for his role in leading the Republication Revolution and creating the Contract with America, Earned his PhD from Tulane University, has taught History and Geography, founded Conservative Opportunity Society, American Solutions for Winning the Future, The Gingrich Group, and the Center for Health Transformation and co-authored over 27 books and documentary movies. Yes, his marital history and admitted infidelities are cause for some to find him inappropriate to hold the office. A number of our founding fathers had similar transgressions. And for one I am really tired of this as a litmus test for an elected candidate. I want someone who can lead the country, come up with good ideas and solutions and fight hard and passionately to bring them forward to conclusion. I want someone who will call things as they are. I am tired of the politically correct version of our history and our life. Most importantly, I am tired of our desire to offend no one standing in the way of our ability to recognize the issues on either side and deal with them effectively, timely and efficiently.
Newt has baggage but he also has a long and diverse list of accomplishments! While Romney resonates with women Newt does not. While Newt creates the feeling that nothing is beyond his intellect and willingness to take a risk and to fight the full fight, Romney often appears to favor the safe path. Overall, Newt presents to Americans the Passionate Risk Candidate, while Mitt presents the Safe Bet Candidate. Who will eventually win may still be anyone’s guess.
Being a Mugwump, I will end up voting for the person that I believe will do the best job and accomplish the most. There are things that are attractive to me about Newt as I feel what we need now is a fighter, someone who is willing to passionately address the issues we face both inside our nation and abroad. I think now, I want someone who will not play it safe and who will take the risky path and fight for the best outcome.
I do not worry about Newts baggage, I am concerned that we have changed so much as a society that we no longer want citizen politicians with all their flaws–just read any of the recent biographies of Washington, Adams or Jefferson and you will see what I mean they were all flawed men. I am worried that today we want political-celebrity-rock star-gods. We seem to really want to have a Professional Political Class, telling us what to do. We seem to be willing to accept anything they do as long as they do not become regular everyday people like us!
There are things about Romney I like as well. I like his tenacity, his success, and his history in the private sector. His religion and long term commitment with his wife neither sway me nor bother me. I am not voting for a political-celebrity-rock star-god. I will vote for the person I think can and will do the best job. I am still forming this opinion, but I am now down to two candidates only.
What I am most concerned about is us! I am concerned that the criteria we are using to select our next president is not based on the things we really should be evaluating. We have said in years past, mostly in furtherance of political objectives, that it is about character. I think in some cases character matters. But like everything else, even a persons character has to moderated against the other factors and issues we face. Genius lies in many people, many cultures, many demographics, many ethnicities, and many degrees of fidelity. Overall, I want the best person to solve the problems that our country faces today. The characteristics I have looked at in many ways become conflicting with each other and sometimes conflict with basic human nature.
What do I want?
- I want plain talk, I want workable solutions, I want clear answers,
- I want a dedication to America more than I want a dedication to my own self interests,
- I want someone who knows how to get things done in Washington DC, I also want a citizen politician,
- I want a strong leader, I want a leader to balance compassion with responsibility,
- I want a person who can elevate the nation, and myself, to a new level of greatness in the world,
- I want someone who believes enough in our capability to think big thoughts but deliver pragmatic solutions,
- I want a leader who builds admiration and respect in our nations friends and abject fear along with respect in our nations enemies,
- I want someone to lead us to a new era of tolerance and respect for each other as Americans,
- I want someone who can move our full-time professional political class back to part-time citizen politicians,
- I want a president who is selfless who will sacrifice the potential for “4-more-years” to do the correct thing for the country,
- I want a president that can help re-engage our youth and re-invigorate our education system in teaching our next generations our real history–what it takes in terms of knowledge, commitment, dedication, hard work, respect and compassion to be successful and responsible national and family leaders,
- I want a leader that will resolve the ongoing conflict between the powers at the federal level with those at the state level,
- I want a leader that will inspire all of us to be bigger than ourselves, become more self reliant, and do better at helping each other as Americans.
- I want a Washington, or a Lincoln, or an Adams, or a Jefferson, or a Jackson, or either Roosevelt
- I want a pragmatic idealist
- I want a person who believes that faith plays a role–which faith is not important
- I want someone who can sees how the Federal government can provide the checks and balances to make sure we all do our best for the country and each other but not one who sees the Federal government provide for us all
- I want a leader that knows the value of our history–all of it–not slanted to one political side or the other
- I want a leader that will make the hard choices–the ones none of us want to make and does not soft peddle the solutions to preserve the livelihoods in DC
I could go on and on but this is long enough already . I would hope that most of you do not find much, if anything, you disagree with–despite your political affiliation. I also, hope you will notice what you do not see on this list: things like; marriage status, religious affiliation, sexual orientation, size, weight, personal predilections or anything else. In the long run I am not even sure that in the end I want to ‘like’ the candidate. By this I mean they do not have to be someone I want to go have a beer with. I really just want the best person, with the best ideas, singularly dedicated to fix the problems and make us a better country.
In the long run this alone would be a great start! Wouldn’t it?
I have written a couple articles trying to explain the problem with the economy for the middle-class in America. If you listen to the current rhetoric, now apparently from both sides of the isle, you would come to believe that it is the fault of either the political right working to give the rich an unfair proportion of all the money, or it is the fault of the political left in America for running up the debt and increasing significantly the expenses of government.
Of course there are many other flavors of the arguments but, they all center on how someone else is causing the plight of the middle-class and only our side is looking out for you. Oh yea, one more point…. they do it on purpose because they don’t like you and they want to hurt you, or they just don’t care about you! Have you heard this drivel recently? Do you really believe that any leader in America is only looking out for one class of people? If you believe this, I have to say. I feel sorry for both you, and America, as we have lost all reason, understanding, and any opportunity for compromise through tolerance.
I want to tell you that unequivocally I believe, all the crap you are hearing is simply not true!
Why is the Middle Class Suffering Then?
This is the key question isn’t it? And, since we agree this is the “key” question being raised by both parties now, ad naseum, have you happened to notice the issue is not focused as much on the poor? Hum??? Wonder why this is?
Being Poor in America
Well the poor in America have many programs already doing a great job of redistributing income back to them to help them survive. Before, you guys start to say that it is really bad to be poor — I agree it is not a good thing to be poor. But if you are going to be poor, it is better to be poor in America at this time, than any other place, or time, in history.
The U.S. “givernment” and all our states have many, many, programs to help people classified as poor. The definition of poor used to be people earning below the federal poverty level (FPL) which today is roughly less than $25,000 per year. But, this is mostly a myth. Many programs, if not all programs — I can’t verify that any programs work only at the federal poverty level — start their eligibility levels as 200 to 300 percent of FPL. While you may not be legally designated as poor from the FPL definition, practically you are treated as poor if you earn $50,000 or in some cases $75,000 per year. And due to the fact that these programs are not mandated to coordinate their care and benefits across any and all sources, somewhere between 20 and 40 percent of the money for services is paid to program participants more than once for the same need. Meaning, in plain English, they double dip. In some cases, this is nothing more than gaming the system — purposeful fraud. In other cases, it is because they just don’t realize it — hard to believe, but true non-the-less.
A hidden redistribution program!
Few people know, and even fewer people understand, that the government, both state and federal, requires drug manufacturers to pay back to the government rebates on all drugs purchased through most state and federal programs. This is just one example of subversive hidden taxes that we get hit with every day. How can a rebate cost us money you ask? Well in this case it is because the price you are paying is where the rebate dollars come from in the first place. So what happens with drug pricing is this: There are various prices for any given drug, unlike most other industries which have Manufacturer Suggested Retail Prices (MSRPs), all the various drug prices are based on an arbitrary number like Average Wholesale Price (AWP) or Wholesale Acquisition Cost(WAC).
On top of this, there are rebates – rebates for distributors, rebates for pharmacies, rebates for others, and most importantly rebates to the state or federal government. It is the governmental mandated rebates that are the main problem. In other industries rebates paid in the retail path to the customer are checked by the MSRP and the customer’s willingness to buy. Government rebates simply inflate the price paid. And where does this money go? It goes back to the government, sometimes to the programs, and is reallocated to support the government costs or the programs that generate the fee in the first place. So you are paying more in prices that flow back to the government so it can distribute the money back to the people it wants to give it to. It is simply one of the many hidden taxes, perhaps more hidden than most. It also helps the government have flexibility in the disclosure of the real cost of the programs they offer.
These rebates are inflationary, they obscure transparency, and they are not, by any means, the only mechanisms that redirect your hard earned money to others that you just do not know about.
I have documented this in earlier posts, but as a reminder; we are now at a point that almost 50 percent of the population is getting almost one-half of their income from some form of federal subsidy — directly, or indirectly. This is one half of the important facts we all need to consider as we try to move the country forward.
Being Rich in America
How about the other half? While it makes for great copy to vilify the rich as somehow taking the food out of the mouths of the poor in America it is just not true. Sure, there have been people who have gained illegally and profited on the suffering of others. But these despicable people do not represent the norm for rich in America. The title Rich itself is a very frangible determinant. If you are truly poor, meaning you earn at the FPL, then someone earning $75,000 per year could seem rich. But, this person you see as rich is often now just as eligible as you are for federal subsidies. So are they rich?
Many try to classify the rich as millionaires and billionaires. But this is a very problematic determination in itself. There is a 1,000 fold difference between a millionaire and a billionaire. Further many millionaires do not earn a million dollars a year in income. This represents what they have in equity, home, savings, investments etc. Another problem with the designation is that, Millionaires and Billionaires make up a very small percentage of the population and our economy. Less than 5% of the population. They earn about 18% of the total income in the U.S. Sure, this is a large number but, it is not as disproportionally large as many would have thought. And, the “rich” pay over 40 percent of the taxes to the government. Much of which goes to support the programs for the other 50 percent receiving some subsidy.
Romney’s 15% Tax Rate Shows they don’t pay their fair share!
As a very quick point, as I have been working on this article, the Mitt Romney 15% tax fiasco has come to the surface. Once again the argument is false and stupid from both sides. The 15 percent rate is not all the tax paid on these earnings. For the most part, the 15 percent represents the tax paid on the earnings from the money he has invested. Where did he get the money? Well some he likely earned as ordinary income and paid taxes on it at the time of earning of between 22 and 38 percent. Some, he may have earned before as investment income and could have paid between the 15 percent and 22 percent based on when he earned it. Lets say he inherited some of it. Well he would have paid a significantly larger tax on that at the time he received it based on the estate tax (so called death tax) in effect at the time.
Because he chose to invest, or re-invest, these monies, he has paid taxes multiple times on the money. If you want to be jealous of the fact that Mitt Romney has a lot of money, OK, I support your right to be jealous. But, if that is your objection then the rest of your arguments are worthless. This is America, what makes it great is anyone has the ability to get rich. Yep, some will say this ability is not distributed equally. That’s true! But, if you make it truly equal, then no one will have the opportunity to get rich! As I pointed out in the earlier section; rich vs poor is a relative state. You see, if all are truly equal, then everyone has exactly the same — no rich and no poor. Some argue this would be a good thing because they feel that everyone would have enough. History challenges this assertion and it defies human nature. It is the opportunity for disparity, like it or not, that makes people work harder and innovation really happen.
So back to the question; why are the middle-class suffering disproportionately?
Two main points. First, the middle-class is shrinking in number. If you need to be poor to get subsidies from the government then part of the historic middle-class is being subsumed by the subsidies for the poor. You could say that they are becoming poor because they are earning less and can afford less and that they need the programs to survive. That is one way to look at it but, it is the symptom not the cause. In fact, the middle-class, like most of the rest of America, have seen their incomes grow drastically in dollars over the past 40 years. Second, The middle-class do not have the excess equity, cash or assets, to hedge their loss of buying power.
The middle-class are suffering a huge disproportionate loss of buying power in America because they are disproportionately shouldering the burden of the loss of value of the dollar — you can call it inflation or deflation, the point is the same. If you live in the middle-class, you are not eligible for subsidies and you do not have the excess assets, like the rich, to hedge your buying power against the loss of value in the dollar by investment, savings interest, and purchase of long term tangible assets. As a result over the past 40 years, while you have been getting raises, like everyone else, and seeming to live a bit better like many, for you it has been a bigger falsehood than for most others.
In 1974, there was a total of $500 billion of currency (money) in circulation when President Nixon took us off the gold standard. Today, by various estimates, there is over $16 trillion. The real value of the combined worth of the U.S. has simply not increased 32 times in 40 years. It is even harder to believe there was really any increase when you understand that during the same period we have accumulated a combined trade deficit — purchased more from other countries than we produced and sold — of over $12 trillion.
So, this means that all the things we own, all the money we made, all the stuff we buy, the wages, the prices, the stock market, etc, have been inflated to levels that simply are not real. If you are poor, the government has compensated for this by giving you more subsidies in one form or another. If you were rich, you have been able to keep some form of pace with this devaluation problem because you could invest in housing, or businesses or the stock market. And, if you were rich, the loss of buying power may have affected your discretionary purchases but often not your day to day ability to live and pay your bills.
The middle-class, as I laid out before, do not have the assets to offset the increases in the amount of currency without an increase in real value of what they own, and they did not get subsidies either. So the issues of taxes comes to the front now. The rich have been paying much more in real taxes — revenue to the government — during this whole period.
The middle-class have heard over and over how they were getting a tax cut! How come you say the middle-class are bearing the burden? Well, the truth is, that there are Taxes and there are taxes…. Taxes are those things assessed by the government that we pay to support government programs directly through taxation. “taxes” are those things we pay that indirectly are increasing the price of goods and services, increasing the prices in the economy to artificially inflate the amount or money we can claim is in circulation. So you get paid more in wages, your company charges more for its goods and services and the economy appears to rise in value. You get more benefits, you get more vacation days, etc, and each of these things translates in some way to an increase in prices or spending and therefore the economy supposedly was growing. All that is necessary is for the government to be able to print more of that green-stuff to allow you to count it.
But, there is a fly in the ointment. It is a zero sum game. We are not making money as a country we are spending money as a country. So, as you thought that you had more money to buy new cars, new homes, take vacations, get more stuff, and the government has encouraged to do this– and on top of it borrow as much as you can to buy as much as you can — these new dollars were actually reducing in value. The good news is that we are not alone. Most of Europe has been doing the same thing in one form or another. If you were a net exporter, like China, it was not a problem. If you convert natural resources to high margin goods like much of the Arabian peninsula — no problem either. If not? Oh Well– bad for you!
As long as we were buying, most recently houses, and having the prices continue to go up, we could print more money, and no one was the wiser. But, due to increasingly dumb decisions we finally made the mistake of over doing it and it all fell apart. The values we think we have are far different from the real values that we have. Looking at median home prices from 1974 to today, with and without the gold standard, is is clear that we are still 20 to 30 percent too high in real values of homes. If you look at the economy it is much worse. We have $16 trillion in currency circulating in what is really a $5 trillion, maybe $6 trillion, economy.
The middle-class is, and has been getting hosed for a long time. Those in the middle-class have suffered from not enough to be rich and protected, and too much to be poor and subsidized. Further, as prices have risen, they have paid more with less real value and as such have indirectly, and disproportionately, paid for the programs for the poor.
And who is to blame for this? All of us! We have been asleep at the switch for too long. We have allowed all of our administrations, and elected officials to do dumb things — things that defied our own common sense. We allowed it because we all felt we were gaining. In the end, and once again, we will learn there is no free lunch!
Republicans, Democrats, Socialists, and Independents have all been elected to our government in the past 40 years and all have continued to perpetuate these myths and underlying problems. Were they doing this consciously? No more than any of the rest of us! It is not a Tax Problem alone, it is not a spending problem alone, it is a systemic problem.
We need to stop diversion to prurient, ad hominum, vilification of others ideas, and focus on a pragmatic solution founded in tolerance more than compromise. In the end, we must all face the reality that, it will only be a broad based mutual solution that will solve the problems underlying the economic disaster we are now in.
- We need to become competitive in the world from a total costs, benefits, and wages perspective
- We need to get back to manufacturing in the U.S. products for the U.S. and others to consume
- We need to stop subsidizing the existence of such a large portion of our population based solely on the desire to keep them thinking they are doing so much better and that the products we make are competitive and affordable. (subsidizing production to make it affordable so we can pay inflated prices to support inflated costs and wages so we all feel good is not a good thing.)
- We need to eliminate government redirection of monies to support hidden redistribution schemes. (Example: mandated Drug rebate programs see sidebar)
- We need to solve the problem with home equity, home mortgages and home prices in one holistic and complete fashion balancing the problem equally for all parts of society and the economy
- We need to get back to primary production from our own natural resources.
- We need to reduce what we purchase from other countries and buy more here — but this cannot be subsidized to make it affordable or our economy remains false.
I believe it is fixable! It is going to take a fundamental shift in what we all expect and, to some extent, how we view ourselves as Americans. We needed to start this five years ago. It may not be too late now, but it very likely will be in another four or five years.
Since the power of our government is derived from the people in this constitutional republic we call America: It is up to us!
“Outstanding reasoning. I was surprised to find out you weren’t a lawyer in the middle of the text. It is chock full of interesting insights and observations.”
–Kyle Becker, Author and Publisher of Rogue Government Blog
“Wow, You have too much common sense!.”
–James P. Finn, Author and Publisher of Thought Continue reading
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.
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.
-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!
Please bear with me on this article. in contrast to the best advice for writing, I have not put the conclusion at the start. I am assuming you are all thinking Americans, and you are willing to make a short journey with me to find your own answers at the end!
Unequivocally, we have developed a professional political class. We, the people, have created this new ruling class of professional legislators – or at least allowed them to evolve – over the past 72 years. Like most of our entanglements in modern history, this consequence was driven by little more than a series of short term decisions that were made to accomplish short term goals with no thought to the long term impacts of these actions.
Why not a national sales tax on all political sales(contributions)?
Up until the early 1900s, politicians were citizens first. They were regular people, living and working alongside their neighbors. They had local jobs, farms, or businesses and each and every piece of legislation they passed affected the citizen politician exactly the same way it did their neighbors. Since the wages and expenses that they derived from their service in state or federal government was both part time and not meant to provide a living wage; their motivations were to be productive members of their localities, emphasis on production in whatever capacity, as it was the best path to wealth and prosperity.
Since these citizen politicians, could not make their livings relying on the payment from government, the various legislatures were part-time with the sessions restricted to just a few months each year. While in session, citizen politicians also made sure they got as much done as possible, and their supporting staffs and expenses were kept well in check because often the governmental stipends did not adequately support them, so the citizen politicians often came out of their own pockets for at least some of their staff. A great way to assure dedicated representation.
As we move through the early 1900s we see a gradual and steady increase in the salaries, perks, and reimbursable expenses that our legislatures received. Like all of our historical short sited decisions, there was strong rationalization to such increases. Some of the citizen politicians, living with the constant drain on their personal funds, were susceptible to graft and corruption by the men hanging out in the lobby of the Willard Hotel in Washington, DC (origin of the term lobbyist) – where most stayed during the legislative sessions. Of course, it was argued by the legislators that if they received better wages, more liberal expense budgets, and perquisites in office, they would be less susceptible to corruption.
(Business / Commerce) the activity embracing all forms of the purchase and sale of goods and services[from Latin commercium trade, from commercārī, from mercārī to trade, from merx merchandise]
The next step, taken in the middle of the 1900s, was to extend the legislature. Again, it was rationalized that the part-time legislatures, were critical to the growth and prosperity of the country, or the states, and there was so much work to be done that they needed to increase their time in session. These arguments, like all of the rationalizations before them, were seen as reasonable and necessary. As a result, buy the end of the century, we have, with few exception, full-time state and federal legislatures, and most importantly, a full-time, professional political class. Their livelihoods significantly disconnected from the legislation passed and its effects on their local communities.
While in the past, our citizen politicians life and liberty was supported by their own personal productivity in their local communities as farmers, shop owners, business owners, manufacturers, and professionals like doctors and lawyers; for the most part today’s professional political class trades in votes and legislation for the specific benefit of those who can get them re-elected.
It is an easy statement to say that there is a direct relationship from big corporate money and the payments the professional political class receive, through various means both legitimate and illegitimate. While corporate interests play a part, the aggregation of small money interests plays at least as significant a role through unions, political action committees, professional organizations, and the strength of the various parties, among others. Regardless of the source, the money alone is not the focus of the trade – in the end it is about the votes!
Votes themselves are the stock and trade of professional politicians. All the money paid into the various campaigns is exchanged for this tangible, valuable item – the vote. Since we no longer have citizen politicians and most of our state and federal legislatures are the full time employers of this new professional political class – who employ by far much more than half of all the people in America, why don’t we recognize this for what it is? This is nothing more than a commercial enterprise! No different than Google, Linkedin, Facebook, the AARP, or many other national organizations. It can be argued that the parties themselves as simply franchisors.
“Obama visit nets millions: Next stop – LinkedIn for town hall meeting”
– Contra Costa Times, 9/26/2011
President Obama, arguably the top franchisee of the Democratic party, was in the San Francisco Bay area this weekend selling his wares. He collected, somewhere between, $3.5 and $5.5 million in back to back fundraisers. Think about all the money that is being paid for these goods and services sold by our professional political class. It begins to boggle the mind; does it not?
When we had part-time citizen politicians it was appropriate to call these campaign contributions. But I think today we can all agree that calling them political sales is more accurate in this day and age.
Perhaps we should have a national sales tax! But it may not be necessary to assess this tax on all segments of commerce in our economy. We only need to assess a “National Political Sales Tax” (NPST) on the one segment of the economy that is clearly generating most of the “commerce” in the nation. We should implement a national sales tax on these political sales.
In the long run we may get some real benefit. We could see a significant reduction in our state’s and national debts in the short run as the massive amounts of money flow into the various coffers. We may also begin to see the reduction is the constant din of political advertizing, direct marketing and evening phone call solicitations. If for some reason this benefit does not rise, or rise fast enough, then we could extend the NPST to cover all political purchases as well. At a 10% tax rate, the purchase of one of those $19.00 muffins would yield $1.90 in revenue to the federal and/or state coffers. How many muffins do these guys consume in a year? Looking at Jerrold Nadler, Barney Frank, Chris Christie, Haley Barbour, and many, many others this alone could wipe out lots of debt!
Of course many are just not going to like this idea! No one wants to see their livelihood threatened by taxes. I would suggest that if they object to the tax then we should demand a return to the citizen politician, and the part time legislatures of the past. In the long run I think it could be one of the most beneficial changes we could make for our country.
Hey, I’m just asking!
President Obama asked, “Where would America be if we had not passed Medicare and Medicaid?”
This is really a key question, is it not? This question should not be a throw-away line, as it is the underpinning of the base argument, that Medicare and Medicaid have been good for us as a people and for the country. My opinion is this is, in fact, one of the major differences in the grander debate. Clearly, the president believes that the answer to these questions is in the affirmative. But, what if the answer is no? What if the truth is, that Medicare and Medicaid, have driven up our health care costs, disproportionately? What if these programs have fostered an era of unprecedented lack of responsibility? What if these programs have been one of the significant contributors to the base cost of business in America, and are one of the key underlying reasons that America is no longer able to manufacture goods cost-competitively for the rest of the world to purchase from us? What if these programs have so changed the nature of our economy that we now have accumulated a trade deficit in excess of $12 trillion since 1972 and we can’t become a net exporter because our goods are too expensive?
I think these are the key questions that need to be discussed. I submit the president will not like the answer. I also submit neither Presidents Obama nor Bush, nor republicans nor democrats are to blame for the problem. I further submit it is this issue that is the key problem we need to pragmatically solve.
President Obama should get some credit for asking this key question. He should also get some critique for using it as a throw-away feel-good line to rally his base – particularly if the answer is not as he is assuming!
I hope others will help tackle this question in the next few days. I know I will be continuing this dialog in the next few days specifically on this topic. It has been key to my research and understanding on the crisis we have in our health care system, if is one of the core issues discussed in my book and something that I feel we must address.
There has been a bunch of reposts of three charts showing the relative deficits and spending increases from Both President Obama and President Bush. While this gives great fodder for the let’s bash each other and show just how bad the other guys were crowd, the charts themselves are a waste of ink and lung power to debate.
While the charts, are interesting, and like most statistics represent the adage that,
“there are lies, damn lies and statistics”
popularized by Mark Twain and originally a quote from Benjamin Disraeli; they are irrelevant to the bigger problem. While we can argue about one president solving the budget problem and the other one making it worse, all were relying on the underlying bad economic engine to make it all right.
Those who have read my posts on the subject, know I believe there is a deeper problem. The massive increase in currency since 1972, which in my opinion has given rise to a national crisis of false and inflated values and costs for subsidized programs, health care costs and housing I believe, is the real problem. Perhaps, it is our own underlying valuation of our economy and our assets that are the problem?
Since we all seem to like charts, I will pose my own here. I am not posting this to assign blame, we have way too much of that going around. Nor, am I saying this is an infallible calculation – as I myself am not sure. I will leave it to others to wrangle with that debate. I am posting it to have you see what I saw as I was studying the rising costs of health care and started looking at other segments of the economy. I have a number of charts that will appear in my book. In the meantime here is the one that started me thinking.
This chart is relatively simple. It is the M3 (the total money supply calculated by the Fed) from 1900 up to 2010. From 2006 on the Federal Reserve decided to no longer report the M3, the M3 then had to be estimated. There are a number of different estimates, their only variance is the shape of the curve after 2007. And they don’t make much difference in the current problems.
There was about $500 billion in currency in 1972. Today estimates put that number at somewhere between $10 trillion and $15 trillion. What doesn’t change much regardless of the trend, forecast or growth calculation you apply is what the projected economy would be if we had remained on the trend-line as it was prior to 1972. This line will project about $3 trillion on the baseline economy for today – assuming we had continued on the Gold Standard. If you factor in the gains we would still likely have had in the technical sectors as a result of the investment in NASA, the curve shows additional growth to somewhere between $5 and 6 trillion. This is still a far cry from the unbelievable 20 to 30 times we have multiplied the economy during this period. Remember, “lies, damn lies and statistics!” I hope you treat this projection with the same scrutiny as all the others!
I am simply suggesting that we need to look deeply at this issue and diligently consider it’s effects if this supposition is even remotely correct!
In a recent letter to the editor, yet another writer wants to make the point that the current economic problem is President Bush’ fault. He uses all of his 200 words to carefully craft a picture of why it was Bush’ fault.
Yesterday, I saw the same thing as to why it was President Obama’s fault. Again, all two hundred words carefully selected to make this seemingly very important point.
Having written a few letters to the editor, I can tell you from first hand experience it is not usually for me a five-minute thing. Two hundred words is a very narrow field to present a counterpoint to some point you are debating. Usually it takes almost half of the space to frame the issue in the first place.
These two writers are not alone. I see tens, if not hundreds, of these dialogs each day. Each side spending an inordinate amount of time to present the case why this person, or this party was wrong, wrong, wrong…
Clearly, the sheer volume of people, and the amount of time, bandwidth and ink devoted to this subject would indicate it is of the most extreme importance. Well it’s not!
The big issue at the moment is solving the problem. And solving this in a pragmatic way – not partisan way. unfortunately, it is not just the new mayor of Chicago who thinks no crisis should go to waste. It seems to be the philosophy of many of us if not most of us.
Each issue appears not to be an issue we need to solve – more it seems they are issues we should exploit for some other benefit. This has been the pattern since the early 1960s. The Great Society was not just to find solutions to help the poor, it was as stated by Lyndon Johnson on a phone call with Wilber Mills and Carl Albert,
“something that we (democrats) can run on for the rest of the century.” (listen to the President Johnson Tapes online, search on medicare)
And we can’t leave republicans out of this either. They have played the same games over the years.
Since everyone seems to think we need to assign blame before we solve the problem, let’s do this. Lets agree to start at the beginning of the root causes…
- It is Franklin Roosevelt’s fault for describing Social Security in 1935 without recognizing that the transition to a private annuity system as he described would be lost to the winds of entitlement fever.
- It is Truman’s fault for both extending the coverage and not addressing the concerns of the legislators at the time that argued about future insolvency.
- It is Eisenhower’s fault for also increasing benefits and coverage while again not addressing the growing concerns over solvency
- It is Kennedy’s fault for again extending the coverage and entitlements and getting assassinated before he could begin to affect some of the changes he saw needed to be done.
- It is Johnson’s fault for extending the original act to include Medicare and Medicaid, ignoring the advice of the experts in congress including Wilbur Mills who repeatedly warned this scheme would not work, and then codifying the grants and gifts to the poor as the method to ensure democratic election and instituting the class warfare approach that is now the norm.
- It is Nixon’s fault for removing the country from the gold standard instead of extending the standard to all precious metals.
- It is Carter, Regan, Bush and Clinton that further reduced the restrictions on the banks, changed the regulations like the Mark to Market Rule and eliminated the Glass Steagle Act that multiplied the fiscal problem and continued the course of expanding entitlements.
- And it was both Bush and Obama that again compounded the problem by consenting to the short-term solutions and compounding debt based fixes.
- Further, it is all the congresses, bankers and federal reserve leaders that are also at fault for not addressing the issues, using them to fulfill other agenda and promulgating their self interests ahead of strategic solutions.
- And finally, it is us for not paying attention and reveling in the constant, and unrealistic, expansion of our wages, home values, benefits, and desire for more without looking for or listening to concerned opinions.
Did all of these actors in this damnable play behave badly for their own self-interest? Not really. Where there certain hooks that were included at each phase to get our consent that were in their best interest? Of course! In every case there was justifications for why, and many times good arguments on why in the short-term this solution, or that solution, made sense. The problem was, they also knew in the long-term there would be a problem and did, or could do, nothing at the time to fix it. Of course, once the issue was temporarily solved – no one else chose to address it so it was pushed to the future to deal with it. And now it is ours. And it is, in fact ours. It is not our children’s as we like to think. We have run out of time and circumstance. That is why the symptoms of the disease are again raising their ugly heads with a vengeance.
Now that we have discussed blame, let us all tolerate the blame assigned to our favorite figures as we relish the blame in those we don’t like. If we simply agree the blame is inclusive and historically almost all-encompassing, then perhaps we can stop the blame debate, at least for some of us, and focus on solving the current dilemma.
This problem is a collective problem. One – many years, many parties and many administrations in the making. It is at our doorstep and will either define the next stage of our prosperity as a nation or our inevitable decline. We must all stop trying to focus on who it was that is at fault and how we can use it to foist our “pure” ideology on the other side. We simply must find a good pragmatic solution.
As Ben Franklin said, ” it is thus compromise, based on tolerance of others opinions that leads us to the best solution!”
Focusing on the insurance mandate in the Affordable Care Act, (Obamacare) a few months ago I wrote a series of four articles for a publication, reproduced here as, “Health Care Mandate and the Commerce Clause Articles.” In these four articles, I explored why I found the base argument that the government could regulate activities like these in a state difficult to fathom by reading the commerce clause in the constitution.
[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes;
In my original look at this issue, I examined the precedent cases cited by many as the basis for the idea of why the Federal government had, in this case, a superior right to the sovereign rights of the states, something that all agree was expressly limited by the framers of the constitution. Reading these historical rulings made this concept that this is a Federal right even more difficult to swallow because I found that these earlier rulings often were even less convincing and often more startling in the extent that the arguments became even more extracted and remote in their nature.
In reading the arguments and the rulings of the 11th Circuit U.S. Court of Appeals, I found an additional reason why I find the base idea that the Federal government has the right in instances like this to regulate the action of individuals in a state even more specious. This is actually the simplest argument against such a right, and likely it would even hold the same effect at a state level. It is part of the many arguments that have been made in the numerous constitutional challenges over these past few months. But like much of these debates, the nature of the arguments has become complicated by excess verbiage and legal flanking obscuring for most of us the basic concept.
This additional argument comes in to points. First, let us look at the definition of the word commerce. In reviewing the many variations of the definitions available there are some basic common elements throughout. They combine into the following.
- The buying and selling of goods, especially on a large-scale, as between cities or nations.
- Intellectual exchange or social interaction.
Second, we simply need to ask a very obvious question, and one that while it has been raised by the legal scholars in the various debates in one form or another, it has been lost in the myriad levels of complexity provided more, it seem, to delight the ears than to illustrate the point.
If commerce is either the act of buying or selling something, and depending on whether or not the activity was international, with the indian tribes or among the several states it could either be regulated by either the Federal government or the states. How is NOT buying anything then an act of commerce in the first place? And, if it is in fact NOT commerce then the argument on who regulates the action under the commerce clause is moot.
Of course legal scholars will use tangents of the “Wickard vs. Filburn” case to argue that not buying is an action that reduces the commerce among the states and therefore in reducing the revenue is itself something that impacts commerce and therefore can be regulated. I guess this is the kind of argument our parents made for us to eat lima beans.
As a child my parents, who were good and nurturing parents, used to make me eat lima beans. Every time I took a mouthful of lima beans, I had to rush to the bathroom to vomit. And of course when I came back to the dinner table, I had to have yet another mouthful of lima beans, promulgating the same response. Their justification was they were good for you. Of course, the loss of the rest of the contents in my stomach and the various fluids and electrolytes that went along for the ride, did not enter into the equation – lima beans are good for you, we have lima beans, ergo you need to eat the lima beans because they are good for you!
My father, a lawyer and son of a prominent judge, I suppose was simply adapting some of the arguments from the prior court rulings justifying the extension of the federal powers under the commerce clause, when he said, “There are people in other lands who are starving and it would be a sin for you not to eat those lima beans while they starve.” He must have chosen this argument because it is so similar in the base points made in the historic extensions of federal power under the commerce clause.
In “Wickard vs Filburn,” the court ruled that poor old Roscoe Filburn’s wheat had to be destroyed because he grew more than the law, at the time allowed, even though he was using it on his own farm to feed his animals. In the case against Roscoe, it was deemed against the law because his flagrant activities of wanting to feed his animals this ill grown wheat, reduced the grain he would have had to purchase from other states if he had not committed the heinous act of growing it himself. Of course the fact that he likely would have bartered with the farmer down the road in his same state and that Roscoe, during the depression, likely did not have any cash to pay for the wheat in the first place was not relevant. Roscoe, was not buying wheat from other states and as a result he was affecting interstate commerce and therefore the Federal government had the right under the commerce clause to regulate him so his wheat had to go. Now Roscoe, eat those lima beans because they are good for you!
We have a strong habit in this country to stretch quite far to make the points we want to make. We will obscure, misdirect, abstract and extend, often by many more than the “Six Degrees of Kevin Bacon,” in order to get the result that we want. In doing this, either in the desire to accomplish an end we know people otherwise would not support or to appear brilliant by the use of flowery language and abstract argument, we often forget the simple and common sense argument. The one we can all understand. The one that actually stands up to quick and continued scrutiny.
Throughout these articles I have not wanted to argue whether or not we as a nation should require all to purchase insurance. There are very good arguments both for and against this practice. I simply am saying making these further and further abstract arguments, whether by legislative action, or judicial injection is not the way to achieve it. In the end we spend billions of dollars arguing points that any person working in the fields or factories would screw up their faces and say, “What?” If you related the “Wickard vs Filburn” issues to anyone working for a living they would have a simple answer.
In the end it is not hard to subvert intentions. In the case of our current political motivations regarding the Affordable Care Act , so called Obamacare, we see exactly the extent that politicians and governments will go to get the outcome they want. It takes years of very expensive education and hundreds of millions, if not billions of dollars, to arrive at the decisions that have been rendered based on the various political governmental and abstract interpretations of the commerce clause! Only we can ultimately stop this and force those we elect to find the simple and most pragmatic answers.
Ever since I read Mark Twain’s Autobiography, I have come to realize that the form of political activism he and others of his time practiced is needed now more than ever. Nothing is a better indicator of that need than the actions of congress in the past two years on both sides of the aisle.
I have yet to speak to anyone, in any are of the political bell curve who is not disgusted, and even more concerned with what is transpiring.
I invite you all to come take a look at the site and if you find your frustrations and views in line with mine – please join. You can choose to join and not have your name listed (you will still receive updates from time to time on interesting articles related to true political independence) . What I am hoping is you will list your name and we can build a groundswell.
This is not a political party, and it is not driven by one candidate or ideology. Find out more and come visit the site: http://www.mugwump.co(yes that is CO not COM. Someone has the dot-com name already but does not appear to be using it. Maybe one day I can get that and make it easier.
I hope to see you there soon.
We have all become inundated with a daily dose of how unfair the world is to all of us. Thanks to the media in general, and the partisan public relations engines of both parties, it seems we have nothing to worry about regarding our future, other than getting what we want by taking what others have. Or for a select few – and you know who you are – having others take what we have worked so hard to earn.
Oh yeah, some of you didn’t really earn it did you? You got it from your parents, didn’t you? And of course your parents didn’t really earn it either, they took it from the masses. They had the audacity many years, or generations ago, to start a business and be successful. And of course they were successful because people, mostly middle-class people no doubt – the robber barons always sell their insidious goods to the middle class don’t they?
Yes they made their widgets and sold them to the people. And at first it all went well and everyone was happy. The businessmen (robber-barons) made the things we want in the U.S. and we paid them for them and then IT happened…
We found out just how much money you were making, even though each of us only paid a small amount – and at the time that small amount seemed ok. But you committed a heinous crime. You got successful. Not just successful – too successful. You made too much money and you moved up town… How could you?
Then as we complained to our congress people about how you were simply robbing us all, they stepped in and enacted, rules, and laws and taxes to make it fair. So we could get some of our money back in our pockets by redistribution.
And then you made it worse! As your profits went down you didn’t hire as much, in fact you laid off some of us. And then when we bought less because some were out of work you raised prices. Then we could not afford to buy your products as often and your sales dropped and you laid off some of us people.
The Chinese saw your success and your rising costs and they started to build the same product you did. We bought theirs because it was cheaper, and also to teach you a lesson. Soon, you on your own decided if you didn’t find cheaper workers you would be out of business. So you moved your factory to Mexico, or Singapore or China. How could you?
So, we asked our congress-people to fix this again, and they slapped on import duties. Yea, that will show them – and you… But, you both just raised the retail price and we ended up paying more for the same thing. Yea, our wages were not going up as fast as the prices but we had some tricks up our sleeves yet.
Since you and the other businessmen (robber barons) were now hiring cheaper and cheaper workers, we formed unions and made you pay us more and give us more stuff just to work for you. If you didn’t unionize, we got congress to increase the minimum wage and legislate some of the great free things you need to give us just cause we work for you – again we showed you. Now again, you had to pay us what we wanted if you hired any of us. Sure, you could no longer sell much of your product to the rest of the world cause it was too expensive and the quality was no longer any good because we don’t really have to meet any standards for you to pay us, but you were sharing your prosperity with us weren’t you? It’s only fair!
Of course, you again raised your prices to cover these new costs and you complained that you were no longer competitive and foreign products were taking the market and your company could not export anything either because of price and quality. Look, when we saw that what you said was true we stood up to help didn’t we? We are not uncaring after all! We came to your rescue and we asked congress to give you some tax breaks and subsidize our purchase of your products.
I know what you’re going to say! Sure, all of our taxes went up to pay for the cost of the programs to give the tax breaks and subsidies – but look even you understand the money has to come from somewhere. And rightly so, most of it came our of your share. That’s why you raised your prices again isn’t it? When will you learn, Mr. Robber Baron, that you can’t fool us! Yea, you say you’re not making any money, but we don’t believe you! You live uptown. You made a lot of money. We see your cars, your yachts, your corporate jets… So what if we are only paying a few cents profit for your product when we buy it, you sell a lot of it to us don’t you. Look you owe us! Without us you would not exist. What do you take us for, common workers? We don’t do common labor – don’t you get it! We are Americans, not some third-worlders. We don’t work cheap buddy. It’s about time you figured that out. And don’t try to hire those illegal immigrants either. We won’t let you exploit them like you used to exploit us!
So you better get a clue. It is not important if you can produce a product cheap enough so we can afford to buy it. We don’t need your product. We can buy the one from India, or Sulawesi. America is the import master of the world don’t you see? Why do you think we have such a huge trade deficit – we have bought over $11 trillion more in goods than we sold since 1972 – only American’s can do something like that bub!
You know we don’t need your kind in America – I mean you manufacturers, and oil producers, and steel companies, and commercial fishers, and lumber companies, farmers, and miners, and others like you. You are not nice to the environment, you harm animals, you exploit workers, you make noise, and you don’t create the kind of jobs we deserve. We went to college you know. We deserve high paying non-labor jobs anyway. We buy all that stuff from other countries anyway. Let their people not go to college and do that hard messy and dangerous work.
You know, it doesn’t matter anyway. When we want more, we will just increase regulations, increase taxes – on you, and get our legislators to increase what the government owes us, and what you have to pay for, or give to us – that is if If we debase ourselves enough to actually work for you. Yea sure, you can try to increase the prices but you know what we will do about that – now don’t you?
As the Patient Protection and Affordable Care Act (ACA) continues the trek down the long tortuous hallway to become implemented law, a misquoted line, from Hunter S. Thompson, comes to mind. (I am using one of the misquotes)
“Hollywood, a long tortured hallway where thieves and pimps run free and good men die like dogs, for no good reason. There is also a bad side” – mis-quote of Hunter Thompson
We have all become complacent as to the unintended consequence of government deeds. In researching my book, “The History and Evolution of Health Care in America: The Untold Backstory of Where We’ve Been, Where We Are, And Why Health Care Needs More Reform,” In a small way, I have become some kind of dubious expert on the historical record of the unintended consequences of the actions taken by our government, and many others, related to healthcare in America. For some time now, I have been concerned that there may be very significant unintended consequences of the Affordable Care Act, particularly relating to special disease state programs offered by both states, and the federal government like; HIV/AIDS, hepatitis, heart disease, COPD, diabetes, etc.
ADAP as an Example
(While mandated rebates sounds like a great thing for consumers – it is not. Federally mandated rebates are one of the drivers increasing the cost of medications to all of us and a major cause of the lack of transparency in drug pricing. I discuss this extensively in my upcoming book.)
An example of the kind of program I am referring to in California, would be the AIDS Drug Assistance Program (ADAP). The California AIDS Drugs Assistance Program is a prescription drug coverage program funded, in part, by Title II of the Ryan White CARE Act created in 1990 by the US Congress and reauthorized in 1996, 2000, 2006 and 2009.
The ADAP program, provides medication purchase assistance to people suffering with AIDS, based on specific eligibility criteria. The program sets limits on income, viral load, CD4 count, etc. Depending on the criteria, eligible participants receive assistance ranging from; payment of insurance co-pay – up to and including full coverage of the medications proscribed, as long as the drugs are covered under the state’s extensive ADAP medication formulary (the approved list of medications).
You may be eligible for California ADAP services if:
- You are a resident of the State of California
- You are at least 18 years of age
- You have a HIV/AIDS diagnosis (Requires Physician’s Letter and recent CD4 Count and Viral Load)
- ADAP will only process prescriptions written by a licensed California physician/prescriber
- You have limited or no prescription drug benefit from another source
- You have a Federal Adjusted Gross Income of not more than $50,000.
ADAP is not all that California provides under the Ryan White Care Act to Californians suffering from AIDS, but it makes up the largest of the Office of AIDS’ (OA) expenditures – roughly $434 million of $1.3 trillion in total budget. Of the $434 million number about 30%, approximately $126 million, comes from the California State General Fund, approximately 23%, $100 million, comes from the Ryan White Care Act funds, and 48%, $210 million, comes from mandated rebates from drug manufacturers
The Ryan White Care Act ¹
The Ryan White Care Act is the United States largest federally funded program for people living with HIV/AIDS. The act sought funding to improve availability of care for low-income, uninsured and under-insured victims of AIDS and their families.
Unlike Medicare or Medicaid, Ryan White programs are “payer of last resort”, which fund treatment when no other resources are available. As AIDS has spread, the funding of the program has increased. In 1991, the first year funds were appropriated, around US$220 million were spent; by the early 2000s, this number had almost increased 10-fold. The Ryan White Care Act was reauthorized in 1996, 2000 and 2006. The program provides some level of care for around 500,000 people a year and, in 2004, provided funds to 2,567 organizations. The Ryan White programs also fund local and State primary medical care providers, support services, healthcare provider training programs, and provide technical assistance to such organizations.
In fiscal year 2005, federal funding for the Ryan White Care Act was $2.1 billion. As of 2005, roughly one-third of this money went to the AIDS Drug Assistance Programs (ADAP) which provides drugs for 30 percent of HIV-infected patients. The primary activity of ADAP is providing FDA approved prescription medication.
So, why should we be concerned?
One of the major reasons for the enactment of The Ryan White Care Act, and the subsequent creation of ADAP programs in the first place, was the inability of those with this tragic disease to get adequate coverage from their insurers. A diagnosis of HIV/AIDS became a red flag to insurers that either precluded coverage, if it was a pre-existing condition, or HIV/AIDS patients found their policies dropped for a myriad of other reasons mostly due to lifetime limits and trumped-up problems. As a result, people with a diagnosis of HIV/AIDS could not get insurance. The Ryan White Care Act and the various ADAP programs offered under this federal program through the 58 states and territories have done a wonderful job of helping treat, help to arrest the spread, and improve the quality of life of those with this horrible disease. I think, this is undisputed. The Ryan White Care Act and ADAP have been unqualified successes. One of those rare occurrences within governmental programs.
President Obama’s 2012 HIV/AIDS budget requests $21.4 billion in funding for Domestic HIV/AIDS activities. – Kaiser Family Foundation Report on HIV/AIDS Policy
Having spent a good deal of time, for the past few years, in Washington, DC traveling the same long tortured hallway Hunter was claimed to have spoken about, I have developed a pretty good understanding of what is making things work there now-a-days. The main issue on everyone’s lips, not just Republicans, is reducing spending. The last re-authorization of Ryan White, in 2009, was a heated, and anger riddled, argument. There were those then (including many leading democrats like Senator Kennedy) that did not want to reauthorize the existing legislation. They were advocating creating new legislation that better dealt with the realities of the disease as it stood today. But like most entitlements, the constituents, and their very vocal advocates, did not trust the government to bring them the program that they wanted. While, they all agreed that the Ryan White Care Act was not great, they felt it was better than what they might get. In the end, the political pressure drove the legislation to be reauthorized and extended four more years. Determined to not see this, in their view, unwieldy and ineffective Act reauthorized one more time, Kennedy’s staff made sure that the 2009 re-authorization legislative language included a sunset provision that prohibited another re-authorization down the road.
Well Things Have Changed – Haven’t They?
The biggest problem with AIDS today is that people no longer feel guilty nor afraid of the disease!
– Britt Weinstock, Senior Health Policy Advisor – Congressional Black Caucus
Well they have and have not. Illustrated in the statement made by Britt Weinstock (one of the brightest and dedicated individuals I have met in Washington DC) in a meeting with me in 2007, the overall nature of the nations focus and funding for HIV/AIDS had changed. It was then getting increasingly difficult to get attention in congress and squeeze out the necessary funding. When the Ryan White Care Act was originally conceived the nature and treatment of HIV/AIDS was that of a terminal illness on the rise to a national epidemic. Today it can be a treatable, if chronic, condition. Then people diagnosed with AIDS had an expected lifetime of a few months to 8 years. Today, with treatment, they can live mostly full and productive lives. Like most other chronic diseases we face today, as the prognosis for HIV/AIDS has improved the lifetime cost of treatment has increased many fold.
As far as the Affordable Care Act goes, if this legislation continues to be enacted, it will prohibit insurers from barring HIV/AIDS patients from getting insurance to cover their needs – a seemingly good thing. In fact, many states have already set up special funds for patients with pre-existing conditions and temporary high-risk insurance pools as an interim solution till the ACA takes full effect. In the May revision of California Governor Brown’s 2011-12 Budget, the Office of AIDS are projecting saving some money by changing ADAP eligibility so that some of the covered patients shift into the states Pre-Existing Condition Insurance Plan (PCIP). This program is a federally funded program and does not, at this point, receive any funding from the California State General Fund. With cuts to Medicare, Medicaid, and Social Security now in open discussion, will such programs be deemed as necessary? With Ms. Weinstock’s statement in mind will American citizens agree with the priority of additional funding?
As a result of the historical empathy and generosity of Californians, HIV/AIDS patients in California currently receive some of the best program benefits in the US today, and as a result, the public health crisis from HIV/AIDS has been contained and almost all patients in California have access to quality care and the required medications. The question is – for how long?
As was seen in the 2009 re-authorization of Ryan White, many politicians did not want to be on the wrong side of the HIV/AIDS or GLBT activist communities and as such even the lion of the senate yielded and agreed to their demands for re-authorization. But the game has definitely changed! Before the choice for politicians was either, I agree to fund these programs or, since there was no insurance or other option for HIV/AIDS patients – they would die.
Today, the question politicians have to answer from the general public is; “Why do we need these types of programs? We just passed ObamaCare and everyone now gets insurance, or subsidies to buy insurance!” The question for HIV/AIDS and other special disease state patients is, will politicians, having many fiscal-crisis related issues now the focus before them – without the ability to just print money to pay for them as we have in the past – have the strength to stand up to the rest of the fiscally troubled middle-class and say…
“Well you see… Ahhh… Well… the Affordable Care Act… aaaa, really didn’t cover everyone they way we thought… And you see…”
Or will they just not re-authorize Ryan White and other special disease state programs like it and push it all off to MediCare, Medicaid and the ACA or the states.
How long can politicians in Washington, DC and Sacramento, continue to fund these needed programs? How long will the politicians have the courage to stand up and continue in light of the looming fiscal crisis and its impact on seniors, disabled, children and under-served middle class and lower class Americans? The question to the politicians really will be,
“Why do we need these programs if we just passed ObamaCare and spent trillions on it?”
“Politicians could use the answer, “Well…. Ahhh… You see – aaaaa….. Well it’s like this, you see, the Affordable Care Act really didn’t protect everyone!” Some politicians may see it as a safer action – a more re-electable action – to not reauthorize these programs because; unlike before, when the choice was either we authorize these programs or people die because they can’t get insurance; now, to the vast majority of Americans, it seems no longer necessary because we just spent trillions to ensure that everyone has health care – didn’t we? Can a politician stand there and tell Mr. and Mrs. Middle Class America that the health needs for this increasing but still minority population of Americans is greater than their own fiscal needs? And more importantly will these middle class Americans have the willingness to accept it. Do we truly think, that we can fund everything we want by just taxing the richest 1%, 5%, or 10% of Americans? If you look at the numbers, despite the rhetoric, we probably can’t.
This is a tough one! Regardless of how anyone feels about the ACA – and almost no one actually likes it on either side – just like most other government programs, it is designed for somewhat near the lower-middle of the bell curve. The people on the extreme edges of the bell curve get either poor or no benefit from these programs. This is a fiscal reality. The cost of the benefits for the people in the covered range of the bell curve where the programs are offered, has to be born by all the rest of the population. The fringes never really get completely covered, even though the center of the bell is not in the middle-point of these curves. So, we will always likely need specialty programs if we are going to commit to have the government take care of the most fragile among us!
It remains to be seen if this will be the case. As I said, I am very concerned at this point that the Givernment of the People, By the People, and For the People is still able to do this, unless we rethink what this commitment means and more importantly, how to accomplish it. We need to fundamentally restructure healthcare and rework, from scratch, the supply chain. Perhaps we need to look not just at the government, but beyond government as well, to our individual relationships with, and responsibilities to, each other if we hope to find some answers.
—————————————————————————————-¹ Wikipedia contributors. “Ryan White Care Act.” Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 19 May. 2011. Web. 8 Jul. 2011.
Anyway, my angst over finding I have a routine aside; when I was reading my morning paper, the headline of the business section this morning shouts,
“June jobs outlook turns around”.
– San Ramon Valley Times Business and Technology Section July 8, 2011
Immediately, I felt pretty good. We have all been looking for some good news – Right? With the general irritation over the Casey Anthony trail, the wall street ups and downs, the problems with California’s fiscal health, the concerns over the rising cost of health care, the debt ceiling debacle, Japan’s nuclear crisis, Arnold and Maria, comets, global warming, the effect of sunspots – a little good news is certainly a welcome relief – isn’t it? Well, at least that was what I was thinking as I went into my office to login to my computer.
As I was basking in the glow of good news and logging in…
Almost immediately when I login to my PC, my glow is harshly doused. First I see,
“A dismal report showing the U.S. added the fewest jobs since September soured Wall Street’s optimism over the strength of the economic recovery, sending the Dow sliding more than 100 points on Friday morning.”
then almost immediately following,
“President Obama to deliver statement on the June employment report at 10:35 a.m. ET”
So which is it?
Is it just me, or, have we seen a constant, reversible pattern over the past few months? Sometime we see, glowing economic statements telling us how everything is just hunky dory, only to have them followed in a day, or so, later with dismal news based on the exact same indicators. Other times, we get the dismal news first, and a few days later, great articles about how the economy is improving so much.
All this prompts me to have a few questions:
- It this just bad reporting?
- Is this propaganda and good reporting?
- Or do most just think we are all stupid?
if we all work together to help each other then, most of the big problems can get solved much easier and much, much cheaper
I am not sure myself which of the above, if not all of the above, is the right answer. But for me this – along with a myriad of other things I now see day-to-day, from reporting (both print and broadcast), to business matters, to personal interatcions, to governmental actions (at all levels) – makes me feel like nobody really gives a darn about each other, or themselves, anymore. If we really did care, how in the world would we allow these kinds of things to keep happening?
So now on top of the problem that I now realize I have become my father, not that he was a bad guy at all – in fact he was a great guy – and I have a routine – mostly meaning I am getting old – I now have to worry about what the deeper cause of this growing phenomenon is.
Let’s make a deal!
I will make you all a deal! If you agree with me and try to help me cope with the growing angst and stress, I will help you find an answer to fix what is wrong.
If we have a deal, post a comment and tell me what it is you think is the problem. Who knows maybe someone else might have an answer along the way and they might be good enough to respond. See, I believe if we all work together to help each other then, most of the big problems can get solved much easier and much, much cheaper.
Do you want to try?
The patient protection and affordable care act purchase mandate –
A four-part series on the relation and effects of the Commerce
Clause to Health Care
By: Thomas W. Loker
PART FOUR: A Time for a Fresh Look
However, going back to the issues the framers were attempting to protect against, is it consistent with the framers view that the expansion of liability, as it is promulgated under this act, should so far abrogate personal responsibility as to the outcome of bad choice and bad behavior? Merely arguing that there is some benefit to a consumer does not make the clause relevant. The original expansion argument under Filbern that any commerce can be derived to be interstate commerce no longer seems to be a reasonable inference. Intrastate commerce itself is not innately subject to federal jurisdiction. The principle motivation to protect the consumer is not, in-and-of-itself, sufficient justification to regulate intrastate commerce, nor does it immediately give rise to the notion that all commerce is interstate.
The issue of the application of the Commerce Clause related to PPACA is even more muddled in that one of the principled arguments against this legislation is that it does not open the state-centered administration of health insurance nor does it provide an open and competitive interstate market. Most, if not all states, specifically regulate insurance provided within their borders. The inability of consumers to purchase insurance plans across state lines itself should stave off the argument that this is in some way per se interstate commerce and subject to the clause. The historical Filbern argument is even more difficult to rationalize in the absence of a transportable open state policy mandate.
Intrastate Regulation and Fairness
A reach to enforce the mandate for purchase of insurance under the auspices of the Commerce Clause is a hard one, indeed, in that the benefits to consumers that could be argued in the justification to impinge individual freedoms and economic liberties for the greater good are lost when the purchase itself is confined within intrastate regulation. Effective argument can only be made based on interstate availability of insurance whereby the policies available across the state line are comparable in standard of fees and services provided and transportable from state to state after purchase. An item, good, or service that is purchased in, and only is consumable, within one state and is subject only to the regulations of the state where the service was purchased and consumed in no way logically rises to become interstate. Further, any argument that attempts to provide nexus for an interstate affect, as in the case of Filburn, should be deemed to interpretation in the same manner as was done in Lopez.
A Voice Speaks Out
Specifically in relation to the Commerce Clause; let us agree with Justice Kennedy and walk a slow and careful path. In every case possible, let us demur to the authority of the state and the preservation of individual rights and liberties.
Finally, most recently in hearings of the Judiciary Committee relating to the debate for the need of tort reform legislation pursuant to the PPACA debate, one congressman, who shall remain nameless, while arguing why Tort reform was not necessary for the federal government to consider, made the following argument: He stated that in his long history as a strong states’ rights advocate, he had never seen an instance where health care was provided in a clinical setting and where the clinic existed simultaneously in two states, or between the borders of two states. As such, the provision of care was always done within the border of one state and therefore could not be interstate. The congressman further stated that if the person received care in one state, while a resident of another state, and that the care was provided under the licensure, regulations and authority of the state where the service was provided, that this was still no more interstate commerce than any other commercial action as prosecuted within a state on a daily basis.
Clearly, the evolution of the argument of the Commerce Clause, as providing a basis for regulations governing protection to consumers, can from time to time provide a broad and expedient method to justify such federal powers; these powers are innately the proverbial slippery slope. The framers carefully crafted the Constitution to preserve individual liberties and freedoms above all others. To allow expansion of federal powers under the aegis of the Commerce Clause, which has happened over the past few hundred years, is one of the more dangerous areas of law we have today. As such, full and unfettered caution must ensue.
The Judge Steps Up
Justice Kennedy wrote,
“[T]he Court as an institution, and the legal system as a whole, have an immense stake in the stability of our Commerce Clause jurisprudence as it has evolved to this point. Stare decisis operates with great force in counseling us not to call into question the essential principles now in place respecting the congressional power to regulate transactions of a commercial nature. That fundamental restraint on our power forecloses us from reverting to an understanding of commerce that would serve only an 18th century economy, dependent then upon production and trading practices that had changed but little over the preceding centuries; it also mandates against returning to the time when congressional authority to regulate undoubted commercial activities was limited by a judicial determination that those matters had an insufficient connection to an interstate system.”
Let us agree with Justice Kennedy and walk a slow and careful path. In every case possible, let us demur to the authority of the state and the preservation of individual rights and liberties. I also suggest we only allow federal regulation when such regulation is meant to provide a mechanism by which it can normalize controls on behalf of consumers among states; where interstate commerce requires only federal control for solution or provision of benefit; or where it is necessary to regulate the actions among the states, not among or between the citizens of the states. Let us be mindful that the actions of the states themselves will not harm the public good or unfairly impost taxes, duties or levies between the states or with other nations or Indian tribes.
This treatise, outlied in these four articles, is just one lay person’s read of this issue. If we cannot explain it to every man and woman. Perhaps the reach is simply too far!
Please remember to post a comment below. If you like the article please let others know about it!
- Charles Francis Adams, Jr., president of the Union Pacific Railroad and the American Historical Association
- Henry Adams, author
- Edward Atkinson, entrepreneur and business executive
- Charles William Eliot, President of Harvard University
- E. L. Godkin, editor of The Nation
- Thomas Nast, political cartoonist
- Carl Schurz, former Senator from Missouri and Secretary of the Interior, editor of the Saturday Evening Post
- Moorfield Storey, lawyer and NAACP president from 1909–1915
- William Graham Sumner, social scientist, Yale University
- Horace White, editor of the Chicago Tribune
- And in his own autobiographical words Mark Twain, author
I am a Mugwump! What is a mugwump? Well you need to let historical records be your guide, not modern interpretation. If you use Wikipedia, where I got the image I use in this piece, you would come to the conclusion it was a bunch of Republicans who betrayed their party to vote for a democratic candidate. In much of the modern literature, you will see a similar characterization. You need to go back and read contemporaneous descriptions.
While it is true the name was applied to those Republications like Mark Twain (Samuel Clemmons) who felt the corruption of then Republican presidential candidate James G. Blaine in 1884, was beyond their limits and instead they campaigned and voted for Grover Cleveland. Soon, this movement rapidly began to encompass members of both political parties deciding to vote the best man as opposed to the party line. The most notable Democratic rise of “mugwumpery” was during the election of Teddy Roosevelt in 1901.
Why do I think we need more mugwumps today? Perhaps, it is the constant cry for political purity I am reacting to. I find myself, more and more, irritated by those seeking their political solace in the wrapping of party purity. Party purity is always a much easier choice – isn’t it? Simply swallow the syrup and be content with your choice. If you do that little thing, we will assure you that you will get exactly what
we, I mean you want. No worries! We will take care of it all. Don’t pay any attention to the man behind the curtain.
This has worked so well for both parties throughout my lifetime, most people can’t contemplate any other way. The divisions in ideology have gotten progressively further and further apart! There is one problem – it’s never worked for me!
Mugwump Revelation #1
I voted for Jerry Brown… There I said it, although I have said it before as well. I voted for Jerry, because I have come to know him personally and professionally and his actions undermined the convenient image I allowed to be crafted by the media of “Governor Moonbeam” many years before. I found him refreshingly pragmatic, dedicated, committed to concepts much larger than himself and highly principled. Most importantly, I learned I could trust that he would do as I expected – not always as I want. That is for me, and should be for all of us, highly prized in a politician.
Mugwump Revelation #2
I consider Don Perata (the President Pro Tempore emeritus of the California Senate) a good friend. If I had been a resident of Oakland, I would have voted for him as well – for the same reasons. I have found him to be highly dedicated, pragmatic and committed to issues bigger than himself as well. Like Jerry, he is – from my viewpoint- predictable and willing to listen and assimilate contra-posing viewpoints.
So, I have been damned and ridiculed by some for these positions, but I feel I am a stronger man for it and more importantly I feel we are a stronger California and country as well. I am fortunate that I was raised to have good self esteem, and a strong personality so I don’t have a problem saying scr– them to those who have attacked me on this front. Like Twain, I will pick who I feel is the best person to fulfill the task in front of them, regardless of party and opposing ideology.
Sure there are some ideological positions that are selection points but they are not all inclusive. Now, I simply have become able to look deeper at the candidate and find out where we agree and focus there as opposed to vilifying where we disagree.
I shout – I am a mugwump – and I am proud!
More should be mugwumps, in my opinion. If we had more mugwumps we may have less, and more effective government because ideological pandering would no longer be profitable.
So, in the end I ask you: Consider a mugwump! Perhaps you have an inner mugwump yearning to be free!
The patient protection and affordable care act purchase mandate –
A four-part series on the relation and effects of the Commerce
Clause to Health Care
By: Thomas W. Loker
Part Three: Sliding Down the Slope
At the end of the last article, Simple Issues – Complicated Problems, we were discussing some of the earlier expansions of the federal reach under the commerce clause and one landmark case, Wickard vs. Filburn, which strains many ordinary people’s cognitive grasp. There are some other significant legislations and court decisions that take this strain to a new level – perhaps venturing into lands, heretofore, exclusively explored by the venerable Rod Sterling of Twilight Zone fame.
Two Sides of the Same Coin
The Pure Food and Drug Act of 1906, made law that the liability for addiction and potential harm of a nostrum was in the hands of the person who purchased it not the manufacturer
In the late 1880’s, the rise in power of monopolies and cartels was having a deleterious effect on the population. State laws provided effective controls intrastate, but the lack of solid legislative protections for the patent medicine manufacturers interstate was leaving them open to both economic and physical damage. The so called patent medicines were not protected by patent at all. Patents mandated disclosure of materials and methods so instead these manufacturers relied on trade secrets and brand protection. Brand protection on an interstate level was the root of the problem for the patent medicine men. In this mix grew one of the most dangerous cartels, the Proprietary Manufacturers Association, the makers of patent medicines. While most states had forms of trademark protection, it was effective interstate protections that the Proprietary Association effectively lobbied for, and congress passed, with the Trademark Act of 1870. Enacted under the authority of article 1, section 8, clause 8 alongside the Commerce Clause (clause 3), the Trademark Act allowed the members of the Proprietary Association to receive additional protections fostering their rapid growth and providing an instrument that allowed them to secure their brands interstate without having to disclose their formula or ingredients. The effect on the population was devastating, not so much as to the economic impact, but to the addictive and deadly nature of the hidden ingredients in these nostrums. The effect on congress was even more troubling as the association’s power grew exponentially and soon they controlled 80% of all newspapers in the U.S., and with that and other contract-related devices, they had substantially gained effective legislative control.
Trademark Law Found Unconstitutional
As part of the political battle taking hold to reign in this emerging problem, the initial Trademark Act was challenged and found unconstitutional because it failed to make any reference to commerce with foreign nations, among several states, or with Indian tribes. Moreover, the court found that the act made no mention of “the character of the trade to which it was to be applied or the residency of the owner.” The battle continued with the Trademark Act of 1881, and then later the Trademark Act of 1905.
In addition to the Trademark laws that were effectively lobbied on behalf of the patent medicine men, the Sherman Antitrust Act of 1890 was another step in the government’s battle to protect the citizenry. Created to control the anticompetitive and harmful actions of cartels like the Proprietary Manufacturers Association, the Sherman Act provided a framework to protect consumers from anticompetitive behaviors of cartels, monopolies and trusts. Reflecting the political climate of the day, and the power of the Proprietary Manufacturers Association, the Sherman Act politicians were virtually unwilling to use the law until Theodore Roosevelt’s presidency fifteen years later. Specifically justified under the Commerce Clause, the Sherman Act and the extensions that followed like the Clayton Act, Robinson-Patman Act and other pieces of law began to leverage the Commerce Clause as a means to argue for and extend the reach of federal regulation in areas of interstate commerce, particularly when it was for the good of the consumer.
The Control of the Patent Medicine Industry
Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911) established that Retail Price Maintenance (RPM) was per se illegal and helped to interrupt the significant control the patent medicine industry was exerting over retailers of the period. The tenant of the per se illegality of Retail Price Maintenance remained black letter until recent years. Recent rulings like GTE Sylvania (1977) and Leegin Creative Products, Inc. v. PSKS, Inc., 128 S. Ct 2705 (2007) have begun to reverse these long standing decisions as reconsideration by the courts are again questioning the underlying basis of authority under the Commerce Clause.
Like Wickard v. Filburn, the creation and enforcement of the Sherman Act was motivated by the desire to protect the public. Unlike Filburn, the Sherman Act stays well within the logical confines of interstate commerce to provide its authority for the protection of the consumer. It also serves to establish a limited framework for its use. This act provided an indirect method by which to limit harm to consumers being wrought from the Proprietary Manufacturers Association. This indirect method also became necessary and appropriate because the courts at that time did not recognize an ability to assess the manufacturer of an items liability mainly because the consumer made a reasonable choice.
As seen codified in the enactment of the Pure Food and Drug Act of 1906, much of the liability for the addiction and the potential harm of a nostrum was not in the hands of the manufacturer, but in the hands of the person responsible for its purchase. So, as long as the manufacturer made the consumer aware of any of a list of specific potentially “harmful” ingredients it was thought to be held harmless.
Civil Rights Act—Interstate Normalization
The Commerce Clause has repeatedly been used to help legislate behaviors at the federal level. After the passage of the Civil Rights Act of 1964, the Supreme Court issued several rulings supporting the use of the Commerce Clause in regulating enforcement of discriminatory behavior in businesses. In the case of Heart of Atlanta v. United States, 379 U.S. 241, the court ruled that Congress could regulate a business that served mostly interstate travelers. More interestingly, in Daniel v. Paul, 395 U.S. 298 (1969), the court ruled that the regulation of recreational facilities was permitted because three out of four items sold at its snack bar were purchased outside of the state thereby subjecting the facility to the jurisdiction of the federal regulation under the Commerce Clause.
Again, it is clear that the intention of the act itself was to protect consumers against discrimination based on race, religion, or national origin. The intention of this particular legislation is clear and understandable. For the everyday person, the argument endorsed in Daniel v. Paul becomes problematic in that it smacks of interpretation driven by outcome. For most readers, it is very hard to swallow that the Commerce Clause comes into play because some or even most of the items sold in a related activity may have been subject to interstate purchase. This stretch makes it hard to find any tacit alignment that bolsters the rest of the arguments many of which appear weak and overly broad.
Gun Free School Zones
Gun-Free School Zones v. Lopez, the Supreme Court was faced with a challenging decision. A 12th grade student had been convicted of carrying a concealed handgun into a school in violation of the Gun–Free School Zones Act of 1990. The lower court found that in Wickard v. Filburn the Court had ruled that Congress was exercising its Commerce Clause power to police local economic activity because the individual states were powerless to regulate it themselves. More specifically, this was determined to be the case because in the opinion of the court only the federal government was able to manage the national wheat supply and control prices. The lower court reasoned that if you extrapolated the same arguments to acts of gun violence because crime negatively affected education, congress could conclude that crime in schools clearly affected commerce; therefore it ought to be federally regulated.
Nationalizing Police Power
One can rapidly come to the conclusion that if this in fact were true, the entirety of all police power in all states could be nationalized because all crime therefore has some impact on interstate commerce. In this case, the Supreme Court overturned the lower courts verdict. Justice Thomas, in his concurring opinion, argued that allowing Congress to regulate intrastate, noncommercial activity under the Commerce Clause would confer on Congress a general “police power” over the entire nation.
Clearly, once again, the intention was to find some way to allow the federal government to help protect the citizenry from harmful acts. While the intention was and is noble, the argument that this is an applicable extension of federal power under the Commerce Clause simply does not hold. In allowing these stretches to carry our normal imagination to such levels that old Rod would be proud. Mr. Sterling started each show with the quote, “You’re traveling through another dimension — a dimension not only of sight and sound but of mind. A journey into a wondrous – land whose boundaries are that of imagination. That’s a signpost up ahead: your next stop: the Twilight Zone!” The difference between Mr. Sterling’s excursions and the commerce clause debate, are that the ramifications of this mind trip have very significant consequences on each of us, and ultimately the health care we will be able to
access. In the last and final article we will discuss the Patient Protection and Affordable Care Act. (PPACA)
Health Care Mandate and the Commerce Clause
The patient protection and affordable care act purchase mandate
A four-part series on the relation and effects of the Commerce Clause to Health CareBy: Thomas W. Loker
The following is the second segment of a four-part series where author, Tom Loker, explores the impact of the Commerce Clause on Obama-Care.
Part Two: Simple Issues—Complicated Problem
In the prior segment, Clear Words – Muddy Intent, we discussed the evolving debate over for what most people on the surface seems a simple, clear and concise statement as to where the federal branch of government’s responsibility related to commerce begins and ends. The simple and direct interpretation that most laypeople draw from the Commerce Clause—which is an “enumerated power” in the United States Constitution (article I, section 8), that provides that Congress has the power ” To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”—is that when commerce transpires among the states, as in between one or more states, then the federal branch is responsible to provide regulations that control such commercial transactions, and when commerce is between citizens inside of the boundaries of a state then it is the state’s responsibility to regulate those transactions. This seems clear to most people but…
Over the past several hundred years, smart men, (perhaps sometimes not-so-smart) often trying to secure honorable goals, (OK, sometimes selfish goals) for the common good, (yes, sometimes not for the common good at all) have parsed, prodded, twisted and convoluted these sixteen simple words into marvelous interpretations that confound the average persons intellect.
Wickard v. Filburn: A broad reach?
Filburn was growing more wheat than allowed—even though it for private consumption. He was fined and ordered to destroy his crops by the federal government.
The historical applications of the authority as interpreted under the sixteen words in this clause have ranged from the sublime to the ridiculous. In Wickard v. Filburn, 317 U.S. 111 (1942), the U.S. Supreme Court upheld a lower court’s decision that increased the power of the federal government to regulate what would seem to most a state-based, perhaps private activity. Roscoe Filburn was growing wheat for his own consumption. As part of the “New Deal” legislation, rushed through congress to ameliorate the effects of the Great Depression, The Agricultural Adjustment Act of 1938 limited the area in which farmers could devote to wheat production. Filburn was growing more wheat than was permissible—beyond the limits even though it was not for sale. Filburn intended it for private consumption. Ultimately, he was fined and ordered to destroy his crops. The courts found that because Filburn was growing more wheat than allowed, his actions somehow reduced the amount he would have purchased on the open market. Simply because wheat was traded nationally, the courts maintained Filburn’s acts affected interstate commerce which meant that he was under the federally regulated mandate of the court’s interpretation of the Commerce Clause.
The Government’s Unfettered Access
It seems that it is a difficult and dangerous stretch to view the Commerce Clause as a law that allows the federal government unfettered license to restrict individual freedoms in the same manner as the restrictions against Filburn. By nature of the argument as upheld in Filburn, any self-reliant activity could be determined to impede commerce in that if I, as an individual grow it, hunt it, or fish it, then I am not purchasing the item from others and therefore am affecting interstate commerce. I further find the argument specious, in that there is no basis to determine, other than abject supposition, that should Filburn have not grown his wheat himself that the wheat would have been purchased from an interstate supplier instead of an intrastate source. More likely in keeping with the times, he would have simply bartered for the un-grown grain in the first place. I believe this is a very dangerous expansion of federal powers that directly and potentially infringe permanently upon Filburn’s liberties which, in the end, caused him economic harm.
What’s the Logic?
If this remains the modern interpretation of the Commerce Clause, then it is would be clear that the mandate to purchase health care, as proscribed by the PPACA, strictly by the historic definition as decided in Wickard v. Filburn is therefore constitutional because any commerce between parties, even intra-state, can affect the purchase of goods and services inter-state. Further, using the same logic, any affect that the lack of purchase could have on the cost of care to others within a state to offset the cost to the individuals supported by the state’s health systems, including private insurance, Medicaid, community based etc., would also become subject to the federal regulation under the commerce clause.
There are at least two flies in the ointment to these arguments. One is the obvious one as discussed in the Wickard v. Filburn case, which is that it is a large conceptual leap for most normal people to see how the actions that Mr. Filburn engaged in should have been subject to federal intervention in the first place. But the second, and more interesting, argument is based on the circumstances of how insurance is actually provided to citizens of the states in the first place, and the resistance by some in the federal government to actually have a national insurance market at all.
Crossing State Lines?
Insurance within states today is subject to regulations that exist in, and are specific to, each state. Health care provided within one state is subject to the health regulations of that state. There is little, to no, transportability of an insurance policy for a worker in Pittsburg, Penn. to have the same policy in San Francisco, Calif. Recently, during a congressional hearing on tort reform, one democratic congressional representative (and noted constitutional lawyer) remarked—and I will paraphrase here—that since health care was not provided in a manner that it crossed state lines, that in every case he was aware of such care was provided within the jurisdiction of the state, and since he had never heard of care being provided in any hospital where the patient receiving care, or the hospital itself for that matter, existed simultaneously in two states at the same time, therefore, in his learned opinion, tort reform was a state’s rights issue and not subject to federal jurisdiction under the commerce clause. So how is it that the foregoing statement can be factual and true, while at the same time Wickard v. Filburn is also true? One of them simply must be a dangerous canard! But the key question is which one? This is THE question that today we, the people, must decide as the outcome of this decision will either fundamentally empower us or further restrict our life and liberties. This must be our collective choice alone.
In the next installment, we will look at other regulations and decisions by the courts that further confound this vital determination, and most importantly, further expand the gulf between the ordinary ability of a normal person to read and understand common language and the legal wrangling and interpretations that follow.
Tol·er·ance – noun[tol-er-uhns]
- A fair, objective, and permissive attitude toward those whose opinions, practices, race, religion, nationality, etc., differ from one’s own; freedom from bigotry.
- A fair, objective, and permissive attitude toward opinions and practices that differ from one’s own.
- Interest in and concern for ideas, opinions, practices, etc., foreign to one’s own; a liberal, undogmatic viewpoint.
- The act or capacity of enduring; endurance: My tolerance of noise is limited.
- The power of enduring or resisting the action of a drug, poison, etc.: a tolerance to antibiotics.
- The lack of or low levels of immune response to transplanted tissue or other foreign substance that is normally immunogenic.
It is amazing, that such a small word can reflect so much of what all of us are actually wrestling with today! During the recent debates and congressional committee meetings working on ObamaCare, the “Us” vs “Them” attitude that was displayed kept bringing me back to this simple word and the realization that, for a country founded on tolerance, we had seemingly lost our way.
In an attempt to reinforce what I thought were the lessons drilled into me by my father as to the meaning of tolerance and our fundamental obligation to extend tolerance so we can get such in return; I went to reading. Reading things like the writings of Thomas Paine, Thomas Jefferson, and others of our founding fathers. I wanted to see if the teaching of my father, and my often flawed memory or interpretation of them, were in fact accurate. Lo and behold, and seemingly for once in my life, they were.
But Houston we have a problem! If these are accurate understandings of the meaning, and if my father was correct that the act of tolerance is likely the single most important ingredient of our counrty’s success and our main obligation as a people, then what the heck happened? How have we moved to the point where the only thing we tolerate today is intolerance? How have we gotten to the point that anything that could possibly offend anyone else is something that becomes prohibited. This is in fact the textbook definition of intolerance! For one to tolerate something, one must not like it in the first place.
For you to exercise tolerance, you must object to the action of another – morally, ethically, religiously, what have you – and still allow the other party, or parties, to continue their expression or action. As I have studied this more over the past few months, I began reading the recently released Autobiography of Mark Twain, Volume 1, from the University of California Press. In this excellent read, I found an interesting observation from Mr. Twain, dictated to his scribe January 24, 1906, in a section called, The Character of Man.
“All the talk about tolerance, in anything or anywhere, is plainly a gentle lie. It does not exist. It is in no man’s heart; but unconsciously and by moss-grown inherited habit, drivels and slobbers from all men’s lips. Intolerance is everything for one’s own self, and nothing for the other person.
The main-spring of man’s nature is just that – selfishness. Let us skip the other lies, for brevity’s sake. to consider them would prove nothing, except that man is what he is – loving, towards his own, – his family, his friends, – and otherwise the buzzing, busy, trivial, enemy of his race – who tarries his little day, does his little dirt, commends himself to God, and then goes out into the darkness, to return no more, and send no messages back – selfish even in death.”
Now I am not sure who is correct… Clearly, from reading the words of our founding fathers they felt it was very important for America to be successful both in succession from England and as a future nation. We needed to become one people, not a nation of singularities – not singularities of religions, or singularities of cultures, or singularities of language or behaviors. We had to all become Americans and develop an American identity – first and foremost. Thomas Paine was one of the people who was enlisted to help establish this identity. But by 1906, a relative drop in the bucket of time, Mark Twain was already observing, to his own dismay, that man had again reverted.
So where are we today, really? We face may issues and problems of historic proportions – in American terms and timescale. Can we defeat the current obstacles, most of our own creation, if we don’t again become a nation united as one? I am not advocating an abandonment of cultural, racial, or religions identity! I am just asking, can we get where we need to go, if we don’t again find tolerance?
I would submit, the problem we have in all of our governmental bodies today – federal, state and local – is that we have lost our tolerance. Benjamin Franklin said, “…it is thus compromise on the basis of tolerance for others’ opinions that lead us to good solutions….” Perhaps we need to revisit this concept – and soon!
Bruce Hurwitz Presents is a live 30-minute call-in program. Shows fall under four different segments: Ph.D. Forum introduces listeners to doctoral and post-doctoral students and their cutting-edge research in the arts, … sciences, or humanities; Business Forum features guests from the for-profit and non-profit sectors discussing their careers and professions; guests on Social Forum discuss current events and trends, especially pertaining to employment issues; and Oral Essays features presentations by Bruce Hurwitz on topics pertaining to employment, careers and business. Bruce is the president and CEO of Hurwitz Strategic Staffing, Ltd., a New York City-based boutique executive recruiting firm. A recognized expert on employment and career issues, he has been cited in well over 160 articles nationally and internationally. He holds a Ph.D. in International Relations from the Hebrew University of Jerusalem, Israel, and has over 80 academic and journalistic publications on topics ranging from international law to career advancement.
Social Forum: The Pharmaceutical Industry – Round Two is todays program. Tom had the privalege to be Bruce’s guest today. Check it out!
The following is a four-part series intended to provide a historical perspective as to the exhaustive debate over the constitutionality of the health care mandate. Part One, “Clear Words—Muddy Intent” explains the Commerce Clause—its origins and purpose and what our fore-fathers intended with it; Part Two, “Simple Issues—Complicated Problems” delves into “New Deal” legislation and the impact of the Willard vs. Filburn Supreme Court case as well as the Agricultural Act of 1938 and how all those legalities intertwined with the Commerce Clause; Part Three, “Sliding Down the Slope,” explores the Trademark and Sherman Acts and its effect on the patent medicine manufacturer’s industry and further discussion of how these two acts, and court cases addressing them, have created more federal oversight and control. In the final segment, Part Four, is a discussion of how Obama-Care is yet another legislative act that allows Congress to enact legislation that states and individual’s rights regarding the intent of the Commerce Act.
Part One: Clear Words—Muddy Intent
The Commerce Clause has defined the balance of power between the federal government and the states.
There has been a constant battle in application of the Commerce Clause between the need to protect consumers from abuse and the obligation of individuals to exercise personal responsibility
It has a direct impact on the lives of ordinary Americans beginning with the enactment of the Interstate Commerce Act of 1887 and the Sherman Anti-trust Act of 1890. According to Article 1, section 8 of the United States Constitution, this is an “enumerated power” in the United States Constitution (article I, section 8), provides that Congress has the power “To regulate Commerce … among the several States …” In response to rapid industrial development, Congress used the Commerce Clause to justify a new era of federal regulation, beginning with enactment of the Interstate Commerce Act in 1887 and the Sherman Antitrust Act in 1890. The outer boundary of Congress’s use of this power over the states has been the subject of a seemingly never-ending – and sometimes heated – debate. The Commerce Clause has defined the balance of power between the federal government and the states. It has a direct impact on the lives of ordinary Americans.
Speaking strictly as a layman, I find it very difficult to justify the argument that the mandate in the Patient Protection and Affordable Care Act (PPACA), so called “Obama-Care,” to purchase some form of health insurance is consistent with the intention of the Commerce Clause. I am neither a constitutional law scholar nor even a lawyer. However, I am well read and I had the benefit of growing up around a family law practice. Like some, whose fathers ran a hardware store, or whose family was in the grocery business, my understanding of the law comes mostly from my grandfather who was a judge, and also as a result of long hours after school following the explicit instructions of my father, or numerous uncles; gathering research, or hanging out in the record room of the old county courthouse documenting title transfers or other such legal recordings.
Regardless, in my everyman’s view and due to significant reading, I still am stymied at how one can assume the intention of the Commerce Clause was to use it to regulate such a wide array of activities. In fact the argument itself is not only counterintuitive; it has been very difficult for the courts to maintain a consistent view of federal power under this clause almost from the time of its original writing.
The Commerce Clause is exceedingly simple in construction. To most readers, it comes across as straight up in its potential interpretation, yet like much of the practice of law these days, interpretation is more driven by the desired outcome than the original intent of the wording.
There has been a constant battle in application of the Commerce Clause between the need to protect consumers from abuse and the obligation of individuals to exercise personal responsibility. Spending considerable time reading various papers written by the framers of the constitution, it is clear to me at least that the founders were attempting to solve relatively simple issues.
One State Over Another
As the U.S. was forming out of the chaos that was a byproduct of the Revolutionary War, the founders were wrestling with a number of problems that had been endemic in the colonies and in the end decided to only provide a set of very limited controls for federal exercise. The framers wanted to empower the federal government to act in a central fashion in negotiations and commerce relations with foreign nations in order to not have one state undercutting another state in the impost of duties, taxes or discounted prices. Second, there was an intention to restrict the ability of a state to impose interstate duties and taxes. It can be persuasively argued that part of the role of the Commerce Clause that the framers saw as necessary, but that does not seem explicit in the language, included a role for the federal government to play in adjudicating the differences arising between actions under disparate laws between the states in order to provide continuity for interstate issues as to fair and equitable protections of the individuals rights and freedoms. These intentions do not readily translate to the many arguments currently defined in expanding federal reach. For instance, in the phrase “To regulate commerce… among the several states…” they specifically use the term “among,” not between the states. Nor does it say between the citizens of the states, nor among the citizens of the states. In truth, it seems to become even clearer to me and others that if the framers had intended to empower the federal government to regulate commercial relationships between the citizens of one state to the citizens of another, or within a single state, these powers would have been specifically said so in pointed and specific language as one of the few federal enumerated powers.
Who has the Authority?
Therefore, the basic issues over the constitutionality of the PPACA mandate to purchase insurance, hinges on whether or not the original intention of the framers of the constitution was to give the federal branch, as opposed to the various state governments, the authority to regulate transactions between the citizens inside the borders of a state. Regardless, of whether or not you believe the framers intended to only have the federal branch control the business between the states or not, there have been a series of decisions and additional legislations that have significantly muddied the water of their intentions in regard to what is, or is not, a simple and clear statement. We will be discussing this in more detail in the next article.
Tom Loker has written a book that takes the reader on an intriguing journey as he/she walks along with Loker from the inception of this country to learn about the behind-the-scenes goings on with health conditions, health maladies, health remedies, and evolving health care reform. Beginning with the state of health when the Pilgrims first hit that “rock” to the current day when Congress locked horns, Loker stuns the reader with knowledge never Continue reading