Friday, November 15, 2013

Michael Snyder on the Coming Doctor Shortage

"The United States already has an emerging shortage of doctors, and thanks to Obamacare that shortage is about to become much, much worse. Right now, the U.S. has close to a million doctors, and about half of them are over the age of 50. Many of them are beginning to wonder if practicing medicine is worth it anymore. In some specialties, treating Medicaid and Medicare patients pays so little that many doctors are now turning them away. Other doctors are charging their regular patients enormous amounts in order to make up for the money that they are losing on Medicaid and Medicare patients. And of course the paperwork and the red tape imposed on doctors by the health insurance companies and the federal government gets worse with each passing year. Some doctors actually spend more time filling out paperwork and dealing with red tape than they do seeing patients. On top of everything else, there is the constant and never-ending threat of being sued by predatory lawyers and losing everything."

Read the full article at

Michael Tanner: Lies about Lies

"The Obama administration continues to suggest that it’s not the health-care law that is causing people to lose their current plan, but rather unscrupulous insurance companies, which are canceling plans for reasons unrelated to Obamacare. That’s nonsense. The genesis of the cancellations start with the law’s individual and employer mandates."
"The same conditions that are causing the cancellation of individual policies will eventually result in the cancellation of millions of employment-based policies as well...Even the Congressional Budget Office estimates that as many as 20 million workers will lose their current employer-sponsored plans."

Read the full article at

Dean Kedenburg: FreeMarketCare

"The first thing Republicans need to do is take the largest lesson from the ACA playbook; then do the opposite. The ACA went large, voiding longstanding relationships among patients, providers and insurers, a strategy ill-received by many. A successful alternative plan should begin small, picking apart the vulnerabilities of the ACA and countering with more favorable alternatives. Since proponents of the ACA will strive to thwart every free-market proposal, any step put forward must be simple, popular, and difficult to oppose. Any unnecessary steps should be avoided."

Read the full article at

Kimberly Strassel: The President's ObamaCare Backpedal

"Mr. Obama took to the podium in the White House briefing room to explain that yes, some Americans may indeed now keep the health-care plans they like. Maybe. If insurers can undo three years of work in a few weeks. If state regulators can move at similar lightning speed. So long as the old plans come with new warning labels. And with the understanding that those Americans lucky enough to receive a renewal option can only keep the plans they "like" for a further year. Those giant caveats aside, the president wishes you good fortune."

Read the full article at The Wall Street Journal.

Why does the Pay Suck?

High and rising wages depend on the quantity and quality of liberated capital invested in the labor.

Read the full article at

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Saturday, November 02, 2013

Where do Jobs Come From?

Praise for 'Where do Jobs Come From?'
"This article is an exemplar of clarity, logic, and structure, in its advocacy of literacy in fundamental market economics."
Dernon Ruton

"Excellent article, Mr. Hyde, it should be required reading and re-reading...for all youngsters from Jr. High, Sr. High and throughout their college, trade school and / or apprenticeship years of education"

"There are economics and business majors across the USA (and probably Canada too) who will graduate in May or June of next year. And they have not yet read one article like this."

Read the full article at:

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Sunday, October 27, 2013

Pro American Defense Libertarians of the World, Unite!

Dr. George Reisman is a retired professor of economics at Pepperdine University and was a personal disciple of Ludwig von Mises and Ayn Rand. He has written a 1 million-word treatise on economics titled Capitalism, which as one might expect is an exhaustive defense of free-market principles. Unlike some of his libertarian colleagues, however, he does not drive his theory over the cliff and bury it 6000 feet under the ocean floor. Here is a difference between George Reisman and the Murray Rothbard-Lew Rockwell libertarians. George Reisman: "The paid manufacture of weapons of defense comes under the heading of productive activity. For example, American defense contractors, who produce weapons to defend a division of labor, capitalist society against foreign aggression, perform an invaluable service on behalf of the protection of innocent human life." Rothbard and Rockwell would have difficulty pronouncing such a pro-American government-based defense statement. Ask Ron Paul to declare where he stands.

Saturday, October 19, 2013

Elbert Guillory: Why I am a Republican

Louisiana state senator and African-American Elbert Guillory explains why he switched from the Democrat to the Republican Party.
Watch the video at

Wednesday, October 16, 2013

Howard Hyde Pulls the Plug on Obamacare at AAPS Conference

On September 28th, Howard Hyde presented his vision and strategy for defeating Obamacare at the annual meeting of the Association of American Physicians and Surgeons (AAPS).
Watch the video at

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Friday, September 27, 2013

Three Obamacare Defunding Myths

Liberals seriously exaggerate the costs of the Cruz strategy. Unfortunately, much of the debate surrounding this question has been misleading, if not completely wrong.
Read the complete article at The Cato Institute.

Wednesday, September 25, 2013

Howard Hyde Speaking at Annual Meeting of AAPS Denver Sept 28

Howard Hyde will be one of many distinguished speakers at the annual meeting of the Association of American Physicians and Surgeons (AAPS), which starts tonight in Denver Colorado. Mr. Hyde's talk on Obamacare, citizen economics and the unprecedented achievements of American medicine prior to 2010 is scheduled for Saturday morning September 28.

Obamacare Will Increase Avg. Individual-Market Insurance Premiums By 99% For Men, 62% For Women

For months now, we’ve been waiting to hear how much Obamacare will drive up the cost of health insurance for people who purchase coverage on their own. Last night, the U.S. Department of Health and Human Services finally began to provide some data on how Americans will fare on Obamacare’s federally-sponsored insurance exchanges.
Read the complete article at

Friday, September 20, 2013

GOP Congress Gets Serious About Fighting Obamacare

The GOP House leadership will adopt a politically risky strategy to try to stop Obamacare by passing a bill funding every government function except Obamcare. Also Wednesday, Republicans in the House unveiled legislation they plan to push to replace Obamacare and provide real health care affordability and access to the American people.
Read the complete article at World Net Daily.

Tuesday, September 10, 2013

The Obamacare Bomb

A mere three weeks remain before the Obamacare exchanges open for business. The likely result will be the closing doors on Main Street, as shopkeepers and entrepreneurs shut down, unable to make ends meet. It’s clear that the wounded economy can’t cope with the exploding costs ahead. Ohio announced that premiums would rise in the individual market by an average of 88 percent next year. Premiums will rise 72 percent in Indiana, 125 percent in Wisconsin. Even California, with its relatively robust individual market, is bracing for increases of 66 percent.
Read the complete article at The Washington Times.

The Obamacare Exchanges are only the First Step

Supporters of Obamacare acknowledge that "the exchanges are an instrument of enormous potential power". Anyone who says ObamaCare isn’t a government take-over of health care needs to pay better attention. We should all be very, very concerned.
Read the complete article at The Galen Institute.

Monday, September 09, 2013

As Obamacare's 'Compassionate' Reality Sets In, Companies 'Cruelly' Cut Health Benefits

American businesses are discovering each and every day that the president’s signature law will raise health costs for them and their employees in short order.
Read the complete article by Sally Pipes at

Sunday, September 08, 2013

Migration of Personal Incomes Between States

Some states, due to their tax and regulatory regimes, are gaining in personal incomes at the expense of other, more poorly-run states. Biggest winners: Florida, Arizona, Texas and North Carolina. Biggest losers: New Jersey, Illinios, California and New York.

See the graphic at The Tax Foundation

Saturday, September 07, 2013

ObamaCare Was Sold to American Voters on Deceptive Terms

In most states, the only people who face real premiums are in the “individual market,” where individuals and families pay for insurance out of their own pockets. Yet the Affordable Care Act (ObamaCare) will outlaw the pricing of individual risk (medical underwriting) by year’s end. Health insurance, therefore, is very different from just about every other form of insurance.

Read the complete article by John C. Goodman, PhD at The Independent Institute.

Wednesday, September 04, 2013

The Wisdom of Ronald Coase

Economist Ronald Coase passed away September 2 at age 102. His influence on the discipline is immeasurable. He had co-authored his last book, How China became Capitalist, just last year.
Coase's most famous paper, "The Problem of Social Cost" in 1960, dealt with "externalities," or economic costs (say, downstream pollution) that are used to justify some tax or regulation. Coase showed there may be better ways to address those costs, especially if property rights are well defined. The right to perform certain actions, when properly protected by the law, can be priced and traded like any other good. If transaction costs are low, firms and individuals can bargain their way to a mutually beneficial outcome without litigation, taxation or coercive regulation.

Read the complete article at The Wall Street Journal.

Tuesday, September 03, 2013

Obamacare Threatens Privacy in America

Over the past several months, a stream of reports from government auditors and news stories has raised serious questions about the Administration’s implementation of Obamacare and its effects on the privacy of millions of Americans. The reports paint a portrait of an Administration casting aside security concerns—potentially putting Americans’ financial and health data at risk—in its push to open insurance exchanges in all 50 states by October 1. These recent developments should provide further impetus for Congress to defund the entire law before the exchanges are able to undermine personal privacy.

Read the complete article at The Heritage Foundation.

Thursday, August 29, 2013

Obamacare's Destructive Impact on Business

Obamacare is likely to exacerbate many of the concerns and costs that are already burdening businesses—particularly small-business owners—in at least four ways.
1. Higher Health Care Costs
2. Employer Mandate
3. Higher Regulation Compliance Costs
4. Medicare Taxes on Flow-Through and Investment Income

Read the complete article by Alyene Senger at The Heritage Foundation.

Wednesday, August 28, 2013

Has Anyone Asked the Patient?

Non-physician practitioners are gaining the licensing to expand the scope of their work to include more of what has until recently been considered the domain of fully trained and certified physicians. This trend may provide some flexibility in the delivery of care and relieve the doctor shortage. But should patients be obliged, with no choice in the matter, to accept a nurse practitioner as just as good as a physician?

Read the complete article by Howard Hyde at

Sunday, August 25, 2013

ObamaCare Means Whatever Obama Wants It To Mean

On Wednesday, the Nevada AFL-CIO passed a resolution declaring that "the unintended consequences of the ACA will lead to the destruction of the 40-hour work week." That's quite an accomplishment for a "health" "care" "reform" law. But the poor old union heavies who so supported ObamaCare are now reduced to bleating that they should be entitled to the same opt-outs secured by big business and congressional staffers. It's a very strange law whose only defining characteristic is that no one who favors it wants to be bound by it.

Read the complete article by Mark Steyn at Investor's Business Daily.

Wednesday, August 21, 2013

Health Care Solution: Patients in Command

If patients commanded the resources spent on their behalf, most of the economic problems of health care would be resolved. But the government won't permit that.

Read the complete article by Howard Hyde at

Monday, August 05, 2013

‘Stupid’ ObamaCare Provision Offends America’s Highest Caste: Congress

In effect, ObamaCare throws members of Congress out of the Federal Employees Health Benefits Program (where most members and staff obtain health insurance) and offers them no other choice but to enroll in coverage through one of ObamaCare’s Exchanges. But here’s the kicker: though the federal government currently pays thousands of dollars of the cost of the congresscritters’ FEHBP coverage, neither ObamaCare nor any other federal law authorizes the feds to apply that money toward a congresscritter’s Exchange premiums.

Read the complete article at The Cato Institute.

Sunday, August 04, 2013

Hello World! (Especially Ukraine, China, Germany, Russia...)

Over a third of the traffic to this site comes from outside of the United States. Here is the breakdown for the past 30 days:
United States: 64%
Ukraine: 13%
China: 8%
Germany: 4%
Russia: 2%
Slovenia: 2%
Bulgaria: 1%
Israel: 1%
France: 1%
Poland: 1%
Others: 1%

If you are one of HHCapitalism's international readers, we would like to hear from you. Post a comment on an article that interests you or write the editor at What do you think about the content of this site? What are your thoughts about America and/or your home country, historically and/or today, its economic development and direction? Do you think America and/or your home country is ascendant or in decline? What lessons about economics and capitalism are you finding valuable, which ones less so? What improvements would you make?
Best regards.

Friday, August 02, 2013

Americans for Prosperity Sponsors Message from Union Bosses on Obamacare

Americans for Prosperity, the nation's largest grassroots advocate for economic freedom, printed a full page ad in the Washington Post highlighting quotes from over a half dozen major unions leaders urging reforms and expressing serious concerns and questions about the negative impact of ObamaCare.
Read the complete article at

Thursday, August 01, 2013

Hospital Networks Reject ObamaCare Initiative

Nine major hospital networks just decided they'd had enough of being "Pioneers" for ObamaCare. They withdrew from the health reform law's Pioneer Accountable Care Organization (ACO) initiative, which launched in January 2012 with 32 health systems participating. These ACOs are supposed to integrate doctors, hospitals and other providers into one seamless network that could "coordinate" care for Medicare patients — and in so doing, eliminate waste and control costs. But as these nine casualties illustrate, ACOs are going to fail in that mission. Worse, they'll diminish the quality of care that Medicare patients receive.
Read the complete article by Sally Pipes at Investor's Business Daily.

Defunding Obamacare: Worth a Try

Sometimes lawmakers really should stand for something more important than their own reelection. Obamacare is such a fundamental transformation of the American health-care system, and its consequences for patients, providers, taxpayers, and the economy are so grave, that if this is not an issue that Republicans are willing to lose their jobs over, what is?
Read the complete article at The Cato Institute.

Wednesday, July 31, 2013

Obamacare delay will cost $12 billion, affect 1 million workers

The report by the non-partisan Congressional Budget Office is the first authoritative estimate of the human and fiscal cost from the administration's unexpected one-year delay announced July 2 of the employer mandate - a requirement for larger businesses to provide health coverage for their workers or pay a penalty.
Read the complete article at

Obamacare Accelerating U.S. Towards A Part-Time Nation

Obamacare is accelerating a disturbing trend towards “a nation of part-timers.” This is not good news for America.
Read the complete article at

Defunding: Framers’ Remedy For Presidential Lawlessness

Obama does not have the authority to choose which parts of the law are enforced. In 1975, the Supreme Court ruled unanimously against President Nixon’s inflated claims that he could selectively carry out the law.
Read the complete article by Betsy McCaughey at

What the [Un]affordable Care Act Has Already Accomplished

The Unaffordable Care Act (UCA) or ObamaCare, has already achieved much of what its architects intended—if you agree that the purpose if the law was to:
  • line the pockets of certain connected cronies
  • create an industry-wide consolidation in the insurance and hospital business
  • inject mass chaos into the already dysfunctional medical marketplace
  • generate fear amongst physicians such that many would succumb to the hostile takeover offers of the rich hospitals
  • implement the most egregious breach of patient confidentiality by collecting private health information and records

Read the complete article at American Association of Physicians and Surgeons (AAPS).

Thursday, July 25, 2013

Obamacare national marketing campaign to cost $700 million

As President Barack Obama's health care law moves from theory to reality in the coming months, its success may hinge on whether the best minds in advertising can reach one of the hardest-to-find parts of the population: people without health coverage. The campaign won't come cheap: The total amount to be spent nationally on publicity, marketing and advertising will be at least $684 million, according to data compiled The Associated Press from federal and state sources.
Read the complete article at

Obama’s Misleading Obamacare Claims

In reality, Obamacare causes health care premiums to skyrocket—even in the much-touted California market. Obamacare will increase individual health insurance premiums [in California] by 64 to 146% in one year.

Read the complete article at Accuracy in Media.

The Myths of Single-Payer Health Care

Here are some of the more prominent single-payer myths:
Myth No. 1: Everyone has access to health care a single-payer system.
Myth No. 2: Claims of rationing are exaggerated.
Myth No. 3: A single-payer system would save money on administrative costs.
Myth No. 4: Single-payer will provide fair and quality care for everyone.
Myth No. 5: Single-payer leaves medical decisions to patients & doctors.
Myth No. 6: Single-payer systems achieve better health outcomes.
Myth No. 7: The U.S. systems also engages in rationing.
Myth No. 8: A single-payer system will not hamper medical research.
Myth No. 9: Single-payer will save money as patients seek care earlier.
Myth No. 10: The free market in health care has failed in the U.S.

Read the complete article at

Oregon Libertarians to Obamacare: Don’t Fence Me In

Ben Nanke, a 20-year-old aspiring songwriter and filmmaker from Salem, was none-too-pleased to see the glossy odes to Obamacare that will run in Oregon at a cost to taxpayers of some $9.9 million. Who can blame him? The videos claim Obamacare will make you healthier and live longer, even though there is zero reliable evidence that’s the case, and much evidence to suggest it won’t.
Read the complete article at The Cato Institute.

Wednesday, July 24, 2013

Behind the Times’ ObamaCare ‘News’

The Obama administration has been quick to seize on a report last week in The New York Times that the Affordable Care Act, otherwise known as ObamaCare, will reduce premiums for individually purchased insurance in New York from $1,000 per month to just $300, a phenomenal 70 percent reduction. ObamaCare is a success! Happy days are here again.
Or not.
Read the complete article at The Cato Institute.

More health reform information on the Obamacare page.

Under Obamacare, Small Business Owners Will Take Big HIT in 2014

Several small business owners told Congress they don’t know how they will stay afloat when the Patient Protection and Affordable Care Act’s Health Insurance Tax (HIT) raises insurance premiums by as much as $500 per employee in 2014.
Read the complete article at

Moderate Democrats are quitting on Obamacare

The landmark health-reform law passed in 2010 has never been very popular and always highly partisan, but a new Washington Post-ABC News poll finds that a group of once loyal Democrats has been steadily turning against Obamacare: Democrats who are ideologically moderate or conservative.
Read the complete article at The Washington Post.

A union cloud over Obamacare as broken promises infuriate the president’s base

Even people you think would be solid Obama supporters are waking up to the more damaging aspects of the Affordable Care Act. The Teamsters and two other major unions sent a letter to Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi this week, writing: “When you and the president sought our support for the Affordable Care Act, you pledged that if we liked the health plans we have now, we could keep them. Sadly, that promise is under threat.”
Read the complete article at The Washington Times.

Tuesday, July 23, 2013

Bend The Healthcare Cost Curve Downward By Letting Healthcare Costs Rise

Policymakers tend to focus on the six-figure price tag of a new drug or technology. But they ignore the long-term value that medical innovations can bring — for both patients and the broader economy.
Read the complete article by Sally Pipes at

Monday, July 22, 2013

A CEO's-Eye View of Obamacare

The new law's success depends on young, healthy people who are lower-risk signing up for health insurance to offset the costs of insuring individuals who are at higher risk. If predominantly high-risk individuals sign up, health insurance is going to be very expensive. Yet, even after the ACA takes effect, people will still be able to get medical care at the emergency room. Further, the ACA prohibits insurers from denying coverage because of pre-existing conditions. In other words, individuals will no longer have much incentive to get health insurance as a hedge against the possibility of developing a medical condition. The ACA's incentive for young workers to pay for coverage is a penalty (or tax) on uninsured individuals. The penalty in 2014 is $95 or 1% of household income, whichever is greater. It increases in 2016 to $695 or 2.5% of household income, whichever is greater.
Read the complete article at The Wall Street Journal.

Unions Wake Up to Obamacare's Living Nightmare

For years, unions have stood behind President Obama’s health care reforms, dismissing the concerns raised by AFP and millions of Americans as right-wing propaganda. But now that the law’s unintended consequences are becoming visible as implementation looms, Big Labor has begun to change its tune. Last Thursday, the Teamsters, UFCW, and UNITE-HERE heads sent a letter to House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid speaking some tough words on ObamaCare.
Read the complete article at

Saturday, July 20, 2013

ObamaCare Encourages Companies To Drop Health Benefits; Taxpayers Get Stuck With the Bill

There is an unambiguous incentive now for employers to stop providing health insurance, prepare to pay the penalty, and send their employees to the exchanges instead where they can get much-more-heavily subsidized coverage.
The ones who are harmed, of course, are taxpayers who will be paying hundreds of billions of dollars more to provide health insurance coverage for people who previously were getting it through their employers.
Income verification is one of the most complex parts of ObamaCare implementation that requires cross-checking information on each application with seven different government agencies.

Read the full article at The Galen Institute.

Friday, July 19, 2013

Democrats' anxiety over Obamacare shows

Vulnerable House Democrats laid low Thursday after voting to delay two key ObamaCare mandates over a White House veto threat.

Read the complete article at The

“Tax Expenditures”: Not Taxing Is Allegedly Spending

Runaway government spending is among the most important economic problems of our time. It is absolutely urgent that it be brought under control and progressively reduced until it is sufficient to provide for no more than the essential government functions of defense and justice. Only then will the citizens have the greatest possible individual freedom to decide how their earnings are spent and the greatest possible motivation to increase their earnings and improve their standard of living.

Read the complete article by George Reisman at The Ludwig von Mises Institute.

10 Ways ObamaCare Is Not Working As It's Supposed To

President Obama complained Thursday that "despite all the evidence that the (Affordable Care Act) is working the way it was supposed to for middle-class Americans, Republicans in the House of Representatives voted — for nearly the 40th time — to dismantle it."
What Obama didn't say is that he himself has signed three bills that dismantled chunks of ObamaCare. Nor did he mention that his administration has had to issue hundreds of waivers and delay key features that weren't working. Or how the Supreme Court found a major provision unconstitutional. Or that many Democrats want other parts of the law thrown out. Obama also failed to mention the growing opposition from unions that once backed ObamaCare. One has called for its outright repeal, while saying the law will hurt middle class families.
Indeed, the closer ObamaCare gets to its official start, the more it appears not to be working at all in the way it's supposed to.

Read the full article at Investor's Business Daily.

Employer Mandate Delay Slams Taxpayers

On July 3, the Obama administration said that it won’t enforce the Affordable Care Act’s employer mandate until 2015, though the law says it must start Jan 1, 2014. The cost to the taxpayers will be huge.
White House adviser Valerie Jarrett depicted the change as a mere tweaking. Some tweaking: It will affect 10 million workers.

Read the full article by Betsy McCaughey at

The NY Times Tries -- And Fails -- To Protect Obamacare From Health Insurance 'Rate Shock'

Yesterday, fans of Obamacare were cheering. A front-page story in the New York Times announced that individuals shopping for health insurance in New York would see their premiums halved, based on figures released by the Andrew Cuomo administration. It was an “extraordinary decline” that “demonstrates the profound promise” of Obamacare, said one supporter of the law. But the cheerleaders are wrong. New York’s premiums will remain among the costliest in the nation, after Obamacare becomes fully operational. And the unique history of how the Empire State destroyed its individual health-insurance market—using policies quite similar to Obamacare’s—will translate, at best, to only a handful of other states.

Read the complete article at

Thursday, July 18, 2013

Obama to Congress: Only I Can Amend ObamaCare

President Obama has threatened to veto a bill that would codify his own policy of repealing the employer mandate for one year. He supports rewriting federal law – but only if he does it. Not if Congress does it.

Read the complete article at The Cato Institute.

Big Labor Wakes Up to ObamaCare

Every revolution devours its children, but it's still surprising to see some of ObamaCare's keenest boosters deny paternity so soon after the birth. Witness the emotional volte-face from three top union leaders, warning that the program will "shatter not only our hard-earned health benefits, but destroy the foundation of the 40-hour workweek that is the backbone of the American middle class."

Read the complete article at The Wall Street Journal.

Wednesday, July 17, 2013

Stop the (Obamacare) World, I Want to Get Off

The foreign competition doesn't have to pay the Obamacare fines.

Read the complete article at American Thinker.

More health reform information on the Obamacare page.

Tuesday, July 16, 2013

GOP members debate voting for delay, partial repeal

House Budget Committee chairman Paul Ryan (R., Wis.) is backing leadership’s proposal to hold votes on delaying the employer and individual mandates in Obamacare. Some conservatives may balk, however, at supporting any measure that stops short of full repeal. “Do not get cute here,” RedState’s Erick Erickson warned Republicans in a blog post. “Americans sent Republicans to Washington to end Obamacare, not mend it. Repeal the whole damn thing, not parts.”

Read the complete article at National Review.

More health reform information on the Obamacare page.

Monday, July 15, 2013

Why the President's ObamaCare Maneuver May Backfire

The president does not have the power to stop the implementation of a law. If there is one bedrock constitutional legal principle, it is that the president must "faithfully execute" federal statutes. He cannot suspend laws he dislikes on policy grounds or because he fears their political consequences.

Read the complete article at The Wall Street Journal.

More health reform information on the Obamacare page.

Wednesday, July 10, 2013

What if President Romney had Suspended Obamacare?

What if Mitt Romney had won the election, and proceeded to disregard sections of Obamacare in precisely the manner President Obama is presently doing?

WASHINGTON – The Romney administration faces a political and legal crisis as blowback from its controversial decision to unilaterally suspend central elements of the Affordable Care Act continues to intensify...

“President Romney is openly defying the laws of the United States that he swore an oath to faithfully execute,” said the leader of an umbrella liberal interest group that was formed to promote the Affordable Care Act.

Read the complete article by Phil Kerpen at

More health reform information on the Obamacare page.

Tuesday, July 09, 2013

Delaying Obamacare’s Employer Mandate Is Illegal

Has Congress given Treasury the authority to waive the penalties? The answer is no. The employer-mandate penalties unequivocally take effect on January 1, 2014, and the PPACA gives the Treasury secretary no authority to postpone their imposition.

Read the complete article by Michael F Cannon at The Cato Institute.

More health reform information on the Obamacare page.

Monday, July 08, 2013

American Thinker: 'Obamacare: And Then a Miracle Happens'

To believe that Obamacare will all work out in the end is to believe that the whole is not only greater than the sum of the parts, but 180 degrees polar opposite of the sum of the parts.

Read the full article by Howard Hyde at

More Health care reform resources on the Obamacare page.

Saturday, July 06, 2013

The Daily Caller: Obamacare economy pushes workers into part-time jobs

There’s one clear growth area in the Obamcare economy — the share of the nation’s workforce that is stuck in part-time jobs.

BLS Household Survey report for June says economy lost 240,000 full-time jobs, gained 360,000 part-time.

Read the full article at The Daily Caller.

More Health care reform resources on the Obamacare page.

Friday, July 05, 2013

The Hill: 10 Obamacare Fumbles

The President's signature domestic policy initiative has suffered several self-inflicted wounds on the path toward full implementation.
1. The CLASS Act
2. The federal insurance exchange
3. The employer mandate
4. The small-business exchange
5. Waivers
6. 1099
7. Child-only plans
9. The Basic Health Plan
10. ObamaCare for congressional staff

Read the complete article at The Hill.

More health reform information on the Obamacare page.

Wednesday, July 03, 2013

Obamacare mandate delayed to give Dems breathing room

Does the delay in implementing the employer mandate past the 2014 midterm elections benefit more the Democrats or the Republicans?
Read the complete article at The Daily Mail.

More health reform information on the Obamacare page.

Tuesday, July 02, 2013

Washington Times: Obamacare’s employer mandate put off for one year

The decision to delay one of the most controversial elements of the Affordable Care Act is sure to reverberate on Capitol Hill, where Republican lawmakers have bashed the law as a “job killer” and giddily repeated one Democratic author’s remark that the overhaul would be a “train wreck” if small business did not gain a better grasp of the reforms.
Read the complete article at The Washington Times.

WSJ: Health Law Penalties Delayed

The provision of the law that requires individuals to carry health coverage or pay a fine, starting in 2014, remains in effect, the Treasury Department said. The delay only applies to the business penalties, but some experts predicted more changes could come.
Read the complete article at The Wall Street Journal.

The Hill: Obamacare Mandate Delayed

The ObamaCare employer mandate requiring businesses to provide their workers with health insurance will be delayed by a year, the administration said Tuesday in a stunning announcement.
Read the complete article at

More health reform information on the Obamacare page.

Eat it, It's Good For You, Says Big Brother Senator Feinstein

We are losing our constitutional liberties and heading toward Big-Brother totalitarianism at a faster rate than at any time in the history of the United States of America, for the sake of social programs that are rammed down our throats on fraudulent premises and which can never fulfill their marketed promises.
Read the complete article at

More health reform information on the Obamacare page.

Monday, July 01, 2013

Los Angeles Schools to get $1M to push Obamacare

According to the Heartland Institute, the Los Angeles Unified School District (LAUSD) will receive almost one million dollars to promote ObamaCare.
Read the complete article at

More health reform information on the Obamacare page.

Monday, June 24, 2013

Why we Don’t Need Trade Wars

In the movie ‘L'Auberge Espagnole’ (‘The Spanish Apartment’) a French college student goes abroad to Barcelona, Spain, to learn Castillian Spanish and complete his studies of economics, with the promise of an attractive job offer from his sponsor upon his return to France. In one scene, one of the economics professors insists upon teaching the course – to his students who come from all over the world – in Catalán, the historical language of Catalonia, the region of Spain of which Barcelona is the capital. “If you want Castellano” – (the language of Castille that came to dominate Spain as a whole and South America besides – what we call ‘Spanish’) – “then go to Madrid!” he booms.
No doubt Catalán is a beautiful language with a rich literary and cultural heritage. But it is worth noting that while this business prof is training his charges in Catalán, the Chinese are teaching their business students (and 300 million of their closest friends, more than the population of the United States) … in English! Pop quiz: Who’s going to dominate the global economy in the 21st century?
This Catalonian professor was practicing what could be called cultural protectionism; insisting upon doing things his way, insulated from external realities. But his students will pay a price in diminished opportunity, for preferring the provincial to the global, blinders to eyes wide open.
And so it is with the more overt forms of economic protectionism and isolationism: tariffs, quotas, regulation that discriminates against imports, supposedly in favor of exports, etc. Most of these measures help only a few privileged or politically connected groups of people, and only for a short period of time, while injuring the welfare of the society at large, especially over the long term.

Trade Facts and Stats
Here are some facts and stats which paint a picture of the globally interconnected economic world in which we live today :
• International trade has tripled to quadrupled in the last 50 years.
• During the same two generations of expanding globalization, the US workforce and total employment have doubled. Prior to 2008, the unemployment rate averaged 5 to 6 percent. Trade is not causing loss of the number of jobs (the employment crisis of 2009 – 2011 was not caused by trade, free or otherwise).
• Trade does not cause declining wages. Real hourly compensation in America, including non-wage benefits, increased 41% on average from 1973 to 2007, and 23% from 1991 to 2007.
• Over the past 40 years or so, median US household income has increased 20%, from about $40,000 per year to about $50,000. The average size of a household was 3.2 people in 1967; 2.6 people today . Therefore those household income figures translate into more dough per individual today.
• 20% of humanity lives in China, and trade with China constitutes 15% of all US foreign trade.
• The USA spends about 2% of its GDP on goods imported from China; $260 billion in consumer goods and $60 billion in industrial goods. Two-thirds of that are products designed in the US, manufactured in Japan, Gernany, South Korea, Taiwan, Singapore, Malaysia and/or the US, and finally assembled, at the end of the chain, in China. Think Apple iPad.
• The percentage of the world’s population living in ‘absolute’ poverty ($1.25/day or less) has decreased from over 50% in 1981 to 25% in 2005. In China, 600 million people have climbed out of absolute poverty in the last 30 years.
• Quality of life has improved across the board in the developing world in this era of globalization. For example, since 1960:
- Life Expectancy: from 45 years to 65 years
- Infant Mortality: down 60 percent
- Food: from less than 2,000 to more than 2,600 calories/day
- Literacy: from less than half to over two-thirds
-- Child Labor: down from 25% to 10%.
• American companies employ 10 million workers outside of the United States. Fewer than 5% are in China; an equal number are in Germany, a country with 1/17th the population of China.
• More than two thirds of American foreign investment flows to other wealthy peer countries, not Third World ‘sweatshops’.
• Wage rates and labor costs are not the same thing. If Fatcatistan’s workers get paid twice the ducats per hour of workers in Pauperia but produce three times the value output, then Fatcatistan has the lower labor costs.
• In 1776, 97% of Americans were farmers. Now only 3% of the population works in agriculture, yet we are the best-fed (overfed? most obese?) nation on earth and the world’s leading exporter of food.
• Employment in the American Manufacturing sector declined 20% in 17 years, from 17.1 million jobs in 1991 to 13.5 million in 2008. On the other hand, employment in the Service sector during the same period increased 51% from 37 million to 56 million. Thus a decline of 3.6 million jobs in manufacturing has been offset by a 19 million-job increase in construction, professional, business, financial, education, health and other services.
• American consumers spend 60% of their discretionary income on services today, whereas two generations ago, they spent more than that proportion on manufactured goods.
• Meanwhile, manufacturing output – productivity – increased by about 60%. We’re making more stuff, producing more value, with fewer people, just as we did in agriculture in past generations.
• America (a.k.a. 250,000 companies) is the world’s #1 exporter. We make $380 billion worth of semiconductors, civilian aircraft, vehicle parts and accessories, passenger cars, industrial machines, pharmaceutical preparations, telecommunications equipment, organic chemicals, electric apparatus and computer accessories …and twice again as much more stuff. Not too shabby for a country that ‘doesn’t make anything anymore’.
• When imports go up, so do exports. When imports go down, so do exports. Anti-trade / pro-protective tariff theory predicts the opposite, and fails.
• The Trade deficit is negatively correlated with unemployment. That is, when the deficit goes up, unemployment falls / employment increases. If you are pining for the good old days, those few individual years when we got the trade deficit ‘under control’, you are a cheerleader for recessions: 1961, 1975, 1982, 1991, 2001.
• More than half of imports into the US are raw materials or intermediate products that American manufacturers use as inputs to their final product. Domestic American companies need imports.
• 97% of job displacement in the US is due to technological change, not trade. Every year, 15 million jobs disappear and another 15+ million are created. Trade-related job churn accounts for up to 500,000 of that, which is to say 3%.
• Stuff that is traded in international markets gets less expensive all the time, whereas products and services protected or insulated from competition get more expensive. Think computers on the one hand vs. college tuition on the other; TVs vs. medical services; cellphones vs Super Bowl tickets; clothing vs. car repair. Trade makes stuff cheaper for you and me.
• Two thirds of GM and Ford’s business is outside the US.
• With your outsourcing hysteria, get some IN-sourcing tranquilizer: For example, Japanese manufacturers employ about a third of all Americans who work in the automotive industry, in factories in 11 US states. The 5+ million American employees of foreign-owned affiliates here earn on average 30% more than employees of domestic companies. Ask them if they think that’s a bad thing.
• Americans own over $100 trillion worth of assets. Our negative Net International Investment Position (the difference between foreign assets that we own and American assets owned by foreigners) is less than 2 percent of that. 40% of that less-than 2% are equity positions – stocks, real estate, direct investment – that is not a debt burden; it does not need to be ‘paid back’.
• Price discrimination, like charging different prices for tickets to occupy the same movie theatre seats to adults, seniors, children and students, is a perfectly economically rational and legal practice. Yet when a foreign company sells in the US market below average cost, we call it ‘dumping’, call the international police and slap fines on the ‘criminals’. Someone please tell BMW that I would like a 2014 740iL ‘dumped’ in front of my garage with the key in the ignition and a blue bow on top. In return I promise: 1) I’ll send a check for $100 to satisfy the ‘below average cost’ requirement (including shipping, handling and gift-wrapping), and 2) I won’t sue or lobby my congressman for a redress of grievance.
• About 100,000 Americans are employed in the steel industry; about 4 million (that’s 40 times as many more) work in industries that use steel to make products. The steel tariff of 2002 may have helped the few steel workers temporarily, but it screwed everyone else, like the steel-consuming industries and you and me who buy or rent cars, machine tools, industrial equipment and office space. Thankfully the tariff was repealed in 2004 under persuasion from that evil foreign menace to our sovereignty, the World Trade Organization (WTO).

Sunday, June 23, 2013

Inflation and Monetary Crises Part 2: Just What the Heck IS Money, Anyway?

(Read Part 1 HERE.)
In order to understand how to avoid the consequences of large-scale monetary disasters, of which hyperinflation is one and depression is another, we have to understand in the first place exactly what money is, how it came about, what it means, how it gets corrupted, and therefore how to manage it correctly.
In order to understand money, we first need to remove it from the scene; imagine what life was like before and without money. Without money, we have a barter economy. If you want to obtain eggs, cloth, cereal and milk for your family, you have to offer a sheep, a goat and/or several pounds of carrots in exchange.
Let us ignore the obvious disadvantages of such a system for the moment. One thing we can note right away is with no money, there is no possibility of monetary fraud and the concept of counterfeiting is meaningless; assuming that all parties to the transaction are satisfied with the quality and quantity of the goats, eggs, carrots etc. involved in the exchange, there can be no such thing as inflation or monetary crisis.
So that’s it! We go back to a barter economy and live happily ever after! The End!

OK, I’m kidding. We’re just getting started here. There are distinct disadvantages to the barter economy that make an alternative highly desirable (just, without the crises). These disadvantages include:
• Granularity: If all you possess to exchange is one 3000-pound ox, whereas all you need right now is a day’s supply of various foodstuffs and clothing, then even if you could find a trading partner who had just the exact mix of items you needed (unlikely), the quantity mismatch works against the trade taking place.
• Transportability: If you live on a small farm near a bucolic village, then walking your ox to the market, permitting it to graze on grasses and contribute productive fertilizer by the side of the road, may not be too much of a problem. But if you want to exchange for some grain, silk or molasses produced hundreds or even thousands of miles away, or if you live in an apartment in a city, keeping and transporting your ox is a major inconvenience.
• Security: An ox is perishable; it can easily get sick and die. It’s too big and temperamental to keep in a cash drawer.

OK, what’s with the obsession on oxen? Well, first, Adam Smith used an ox in his example illustrating the same point about the difficulty of barter. But also, Carl Menger, the founder of the ‘Austrian’ school of economics, pointed out that cattle in the form of smaller specimens such as goats and sheep were among the earliest forms of money in agrarian and nomadic societies . That is, a man’s wealth was largely measured by how many heads of sheep, goats, cows etc. that he owned, and perhaps more importantly, people would willingly accept such cattle as payment for other goods in the market, even if they had no immediate use for them themselves, because they knew that they could easily exchange them for the other items that they did need. While retaining all of its value in use, cattle took on additional special value as the most marketable commodity in the economy and therefore highly useful in indirect exchange. Money, in the true and original sense of the word, was born.
• Fundamental definition of money (in case you missed the point): Any commodity generally accepted in a particular market in exchange for other goods, which the receiver intends not to use him/herself but to exchange for yet other goods and/or services.

Or, condensed:
• Money is the common commodity used as a medium of indirect exchange in a given market.

Note again that there is no possibility of inflation or purely monetary crisis under a commodity-money economy. It’s very difficult to ‘counterfeit’ a goat, or to ‘print’ too many of them; if you could reproduce a large number of goats, the fact that they are real, useful and valuable goods rather than pieces of paper means that their increase cannot defraud a market, even if the relative scarcity of other goods changes the exchange rate. Any banker-shepherd who issued more than one claim ticket for the same goat would soon be bankrupt and possibly lynched.
Over the generations and across cultures, hundreds of commodities having intrinsic use value have been used as the common medium of exchange in particular markets: furs (in Canada), tobacco (in Maryland and Virginia), cakes of wax (on the upper Amazon), cod (in Iceland), bolts of silk, slaves, salt, seashells, nails, dates, tea-bricks, glass beads, grains --- in short, anything which was in common or abundant supply in a given market, which people knew they could easily trade for something else if they didn’t need the particular thing themselves.

An important aspect of the emergence of money in civilization is that it occurred originally without coercion or government intervention of any kind. It was a spontaneous creation of the individuals acting in their own best interest in voluntary exchanges of the marketplace. No decrees or authorization of ‘legal tender’ was required for the origin of money.
As trading and industry evolved to become more sophisticated, highly developed, and extended over greater distances, there emerged independently in many cultures at different times in history a tendency to prefer above all other money-commodities, the precious metals: copper, tin, nickel, silver, and the king of them all, gold.
Gold is the most advantageous of all the money-commodities in the overwhelming majority of markets. Its beauty gives it aesthetic value. It has real value in use, for ornamentation, fashion accessories, art, statuary, and in an advanced civilization, electronic components. Its physical characteristics, weight and relative scarcity give it a high value relative to its bulk. As metals go, it is soft and malleable, easily minted into coins or sub-divided into small units. It isn’t perishable like livestock or foodstuffs. It is easier to carry, store and guard, especially in a city or on a long journey, as compared to a comparably valuable quantity of cattle or molasses. For these reasons gold has emerged as the closest thing to a universal standard across history and cultures for monetary currency.

So, just what are paper money and electronic bank credits? Do these represent a higher level of monetary evolution?
Paper money originated as claim receipts for a certain quantity of real commodities on deposit with another party, such as a granary or bank. Paper and electronic bank credits are entirely consistent with the principle of sound money as long as they are not counterfeit, that is, they represent real promises to redeem claims for the commodities they represent. A treasury note, such as a dollar, originally acted like a warehouse receipt, giving the owner a claim, if not to a specific identified unit, then at least to a certain specific quantity of gold (1/20 ounce) that the treasury had in it warehouse (bank vault). As long as paper money (and its modern, high-tech counterpart) retained this anchor to real goods, and the issuing agency made good on its promise to redeem the notes on demand for the promised quantity of gold, then there was no fraud and no possibility of a monetary crisis. It was when the banks succumbed to the temptation to issue more notes than it had gold to back them, in effect issuing multiple claims to the same units of real goods in the warehouse, that the trouble started. Jesus Huerta de Soto has documented the phenomenon of fractional reserve banking from the time of the ancient Greeks and Romans, though the middle ages and Renaissance up to the present day. Significantly, the Bank of Amsterdam (Holland) of the 17th and 18th centuries was the longest enduring financial establishment for as long as it maintained a strict policy of 100% gold reserves. This institution endured in spite of wars, pestilence, political upheaval and other crises that make our own modern problems seem trivial.

A private or independent bank could not and cannot long issue more claims than it has gold to back them, because sooner or later, depositors are going to attempt to redeem their claims. It doesn’t take much to trigger a panic run when customers suspect that the bank won’t be able to make good on all its promises. For this reason, the free-market failure feedback mechanism functions perfectly to correct errors and fraud in private banking. Note that by private banking, I mean banking exercised neither with interference nor (extremeley important point) with any privilege from government, such as the right not to fulfill its contracts.
Under central banking however, where the government grants a charter to one institution, giving it the exclusive privilege to originate money and/or set fractional reserve policies, requires all other banks to keep their reserves on deposit with the central bank and doesn’t redeem its notes in real commodities, then at the very least, a bias for inflation is built in to the foundation of the financial system. With virtually complete control of the total money supply of a nation, the government has an unmatched ability to conjure monetary units out of nothing.
This essentially fraudulent act is the origin of the debauchery of paper currency, the root, indeed the very definition of inflation.
• The general rising prices of commodities in the market are the symptom and end result of inflation, not inflation itself.

Inflation comes about for reasons of political corruption. It is easier for governments to inflate on the sly than to openly raise taxes. In desperate times such as wars and revolutions, kings and presidents have financed armies with counterfeit money, with disastrous consequences . Even in less-than desperate times, politician love to print money and spend it on themselves, their friends, and the constituents most likely to vote for them. The perpetual motion machine of politics works for a few cycles, until the crisis erupts.

Inflation and Monetary Crises - Part 1: A Crisis of Counterfeiting

In 1924, the German government printed and circulated a 100 trillion-mark note . Billions to tens of billions of marks were required to exchange for one dollar. This was the culmination of a period of catastrophic hyperinflation in which the value of the mark dropped, not by a few percentage points per year or even per month, but on an hourly basis. Prices rose from a few marks for common items first to hundreds, then to thousands, then millions and finally to billions of marks. A single egg was priced at 150 billion marks at one point. Workers demanded to be paid twice a day so that they could get rid of the money and exchange it for something --- anything tangible and physical --- before the money lost more of its value. An anecdote which may or may not be true in fact but which illustrates the nature of the crisis tells of a wheelbarrow full of cash found in the street that was dumped out so that the thief could make off with the wheelbarrow, never mind the cash. Money was so worthless that bills were burned in fireplaces to conserve firewood fuel. Life savings were wiped out. Economic and social chaos ensued. The crisis contributed to the rise of Hitler.

The story of Germany in the 1920’s is only one of the more dramatic historical examples of hyperinflation and its power to destroy civilization. Argentina in the 1980’s is another well-known example, described succinctly by Tom Chao:
“Argentina went through steady inflation from 1979 to 1991. Before 1979, the highest denomination was 10,000 Pesos. By 1981, the highest denomination was 1,000,000 Pesos. In the 1983 currency reform, 1 Peso Argentino was exchanged for 10,000 Pesos. In the 1985 currency reform, 1 Austral was exchanged for 1,000 Pesos Argentino. In the 1992 currency reform, 1 new Peso was exchanged for 10,000 Australes. The overall impact of hyperinflation: 1 new Peso = 100,000,000,000 pre 1983 Pesos.”

The fact is, just about any country in the world has experienced periods of high inflation at some time in its history and to the present day. A representative sampling of 55 national currencies in February 2007 revealed 21 which traded at more than 10 to the U.S. Dollar, of which 5 trade between 100 and 1000 to the Dollar and 7 which trade between 1000 and 25,000 to the Dollar . It is doubtful that any of these currencies were originally established at such valuations; it is also likely that many of the more ‘normal’ currencies are only trading within a reasonable range following one or more orders-of-magnitude re- (or de-) valuations.
It doesn’t take a hyperinflation on the order of tens of percentage points per month in order to destroy wealth and leave a lasting impression. People who have sacrificed, scrimped and set aside pennies, earning a few percent on their savings each year, can have decades’ worth of saving wiped out by ‘mere’ double-digit annual inflation. The decline and fall of the Roman Empire has been blamed by some on erosion of the currency’s value. The 1970s is remembered by the baby-boom generation of America very negatively as the decade of ‘malaise’, never to be repeated, even though inflation was ‘only’ between 10 and 20 percent per year.
Inflation leaves deep mental impressions upon those who live through it.
The currency crisis in France following World War II was mild compared to the one in Germany in the 20’s. Yet 25 years after President de Gaulle created the ‘new Franc’ which was reset at 100 times the old depreciated one in order to normalize its value (to something on the order of an American quarter dollar), I personally met many older-generation people in France on different occasions who would go through a moment of mental hesitation when computing or contemplating complex or large monetary amounts, calculating and re-calculating the value in terms of ‘ancien’ and ‘nouveau’ (‘old’ and ‘new’).

We see that inflation is a significantly evil, destructive force in the economy, to be contained, preferably extinguished completely. But not only do people disagree on the cause (greedy businessmen, greedy unions, greedy consumers, greedy speculators, greedy foreigners or greedy politicians), they frequently can’t agree even on exactly what inflation is. So, permit me to assert the following definition, which the next section will be required to explain in detail:
• Inflation is: Government-initiated counterfeiting on a massive scale.

Inflation is the introduction of an excess of paper money or (electronic) credits into an economy over the real assets of the economy. It is caused essentially by the government creating, out of thin air, what is essentially counterfeit money.

See Part 2 HERE.

Saturday, June 22, 2013

Why we don't need a new New NEW Deal - Part 2

(Click here for Part 1.)
Franklin Delano Roosevelt took office in March 1933. He would create hundreds of new interventionist agencies and embark on unprecedented projects, transforming American society on a massive scale. The following is only a representative sample of the alphabet soup of interventions, projects and agencies initiated by the Roosevelt Administration known in the aggregate as the New Deal:
• United States Bank Holiday / Emergency Banking Act: FDR ordered every bank in the country closed on the first week of his term. No one could make deposits or withdrawals, that is, have access to their own property.
• “Relief, Recovery and Reform”: slogan of the early FDR administration
• Tennessee Valley Authority (TVA)
• Works Progress Administration (WPA)
• Wagner Act: Boosted privileges of unions and approved collective bargaining rights.
• Federal Deposit Insurance Corporation (FDIC)
• Federal Housing Administration (FHA)
• Securities and Exchange Commission (SEC)
• Agricultural Adjustment Association (AAA)
• National Recovery Administration (NRA)
• Works Progress Administration (WPA)
• Executive Order 6102, a.k.a. gold confiscation
• Farm Credit Act
• National Industrial Recovery Act / National Recovery Administration
• Public Works Administration
• Civilian Conservation Corps
• Federal Emergency Relief Administration (FERA)
• Reconstruction Finance Corporation
• Civil Works Administration
• Emergency Relief Appropriation Act
• National Labor Relations Act / National Labor Relations Board (the people who tell Boeing they can’t open a new plant in a non-union state.)
• Fair Labor Standards Act
• Fair Employment Practices Commission
• Federal Project Number One (sponsoring artists, artistic works and productions)
• Committee on Economic Security
• Social Security Act

Finally, toward the end of his reign, FDR attempted to implement what he called the
• Second Bill of Rights

Many of these agencies and institutions are with us to this day and are likely to continue for generations. What these acts, agencies and institutions DIDN’T do is end the Depression.
The Depression lasted seven more years beyond Hoover, with a second, ‘double-dip’ recession in 1937-38. It didn’t end definitively, with the return of full employment, until World War II production and mobilizations were well under way. World War II’s destruction and death per se didn’t fix the Depression. It was the return of relatively free-market policies and the END of the most aggressive interventions and the demonization of businessmen which permitted the economy to return to a more rational basis for functioning.

So what would you have done, smarty-pants?
Crises always look a lot simpler from a distance in space and time. But the response of Hoover and Roosevelt to the Crash and Depression were not those of panicked, surprised men with no clue what to do. They were the premeditated strategies of calculating men, carried out in their moment of opportunity. Hoover and FDR were interventionists who didn’t believe in free-market, laissez-faire capitalism and exploited every crisis for the purposes of implementing their own vision of governance, fully formed years earlier.
It’s not that these were bad men; we can assume they sincerely believed, as many of our politicians to this day believe, that it is the appropriate role of the federal government, its hundreds of agencies and tens of thousands of bureaucrats, to micro-manage every aspect of our economic lives ‘for the greater good’. To a degree they can be forgiven for being, as all mortal men are, imperfect and in this case, mistaken.
The same is difficult to say for the politicians who, 80 years later, insist upon leading us down the same path to government expansion, micromanagement and high taxation above and beyond the New Deal (and later, Lyndon Baines Johnson’s Great Society) with the excuse that it’s necessary in order to resolve or prevent the crisis and bring prosperity, security and health care to all. The evidence is overwhelming that regardless of political party, such intervention only amplifies and prolongs the crisis. Politicians and government, even ‘good’ ones, do not create wealth, produce high wages and low prices for workers, high revenue and low costs for businesses, or innovative and environmentally friendly products and services. They can’t guarantee no one will fail and shouldn’t guarantee that anyone succeed at the expense of anyone else. Only the market – entrepreneurs, business people, private firms big and small, investors, speculators, insurers and individual consumers – cooperating voluntarily, acting in their own interest within the rule of law, can accomplish the best production and distribution of wealth possible in an imperfect, physical world (as opposed to celestial paradise).

As a matter of economic principle, it was futile for Hoover or FDR to:
• Attempt to prop up wages. If the total amount of wealth and activity in an economy has diminished for whatever reason (natural disaster, war, contraction of trade due to protectionism – Smoot Hawley – and retaliation by partners, or other destruction of wealth), then someone’s wages will have to fall in real terms. If one politically favored group’s wages are artificially maintained above what they would be under un-coerced voluntary cooperation, then someone else’s wages have to fall proportionately (and unjustly, including to zero – unemployment) to balance the aggregate accounts.
• Attempt to prop up commodity prices for farmers. If corn is too cheap, marginal corn farmers need to grow soybeans or take a higher-paying job in industry. This is how it has always been. When our nation was born, 97% of the population worked the land; now that proportion is reversed, with only 3% in agriculture feeding the entire US and much of the rest of the world. Low prices benefit the consumer and as such are not inherently bad.

The futility of the intervention was brought to light when the Federal Farm Board’s policy of price supports encouraged overproduction of wheat, cotton, wool and other products, resulting in even worse collapsing market prices and devastating losses. At that point Hoover intervened in another direction, to order acreage to be plowed under, taken out of production, and to destroy ‘excessive’ livestock.
• Attempt to prop up prices for the benefit of big industrial producers. If oil or lumber is too cheap, marginal oil/lumber companies have to get into a different business where they have a relative advantage and/or where the consumers are clamoring for the product. No subsidy or privilege is required, let alone justified, to bring the economy back into balance.
• Attempt to ‘protect’ domestic industries from foreign competition via protective tariffs such as the Smoot-Hawley bill. Such actions always hurt domestic consumers and invite retaliation from foreign governments and their favored industries. The Smoot-Hawley bill was arguably the single most important trigger of the October 1929 crash, as investors and economists correctly re-estimated the value of their investments under a reduced-trade market.
• Herd workers into unions that they would not join under conditions of voluntary cooperation. Favoring unions at the expense of free labor is a violation of liberty; it raises wages for some at the expense of others who receive less (or nothing) and undermines the ability of workers to develop as independent entrepreneurs. Independent-minded Americans have always resisted unionization compared to other western nations, for good reason.
• Manipulate money and credit prices / interest rates. Monetary manipulation by private individuals is prosecutable as counterfeiting and/or fraud, and is no less evil or destructive when practiced by government. Forcing interest rates too high chokes economic activity; forcing them too low makes longer production cycles – and with them higher investment returns – appear like mirages in the desert, deceiving investors to make bets that are destined to fail.
• Embark on public works projects for the purpose of ‘putting America back to work’. If a road or bridge needs to be built, let the agency most impacted by it (municipal, country or state government, or private firms) build it. If an electric company sees a business opportunity in building a dam, let them buy the property, indemnify 3rd parties and other stakeholders, carry plenty of insurance, clean up their messes, reimburse anyone they harm, and finance the project with their own investor’s resources (and reap whatever profits the market may bear without having it taxed away). But spending capital for the sake of busy activity does not increase wealth; it sucks wealth away from where it is more desperately needed. The 1930’s Autobahn in Germany was a glamorous showcase, but an economic and social disaster.
• Weaken protection for creditors in bankruptcy proceedings. This is a classic case of attempting to make a balloon smaller by squeezing it at one end; it always bulges out at the other. What person with money to lend wants to risk their capital in an environment in which the government has signaled its willingness to arbitrarily change the terms of any loan contract? Such uncertainty leads to a contraction of credit. How does that help future borrowers/debtors?
• Threaten and demonize innocent people. In different times and places, this has meant Christians, blacks, Jews, merchants, bankers, gypsies, homosexuals, whites, Hutus, the mentally deficient, the culturally undesirable, browns, union workers, strike breakers (‘scabs’), foreigners, rich people, poor people, good people, bad people and ugly people. Corrupt and despotic politicians have employed this base technique for millennia, but it is unworthy of an enlightened leader of a free people today to do so. The only justification for any accusation is specific allegations of criminal wrongdoing targeted at the specific individuals (not groups) who committed them. Investing and/or speculating against the market outcomes desired by a political party or government program does not qualify as justification for group persecution.
• Increase government spending in time of diminished tax revenue.
• Micromanage business.

As a solution to the economic crisis, Roosevelt’s interventions and the alphabet soup of angencies created to implement them were equally or more futile than those of Hoover. The Social Security Act and system will require its own in-depth discussion. But make no mistake, Bernie Madoff could not have done worse in the long term.

• The Great Depression was a crisis of government intervention, not one of free-market capitalism. Government intervention is the problem; free-market capitalism under the rule of law is the solution.
• The Hoover-Roosevelt administrations constituted a continuum, not a fundamental change of policy direction. Herbert Hoover was not a free-market, laissez-faire capitalist, limited-government president.
• As long as the interventionist philosophy prevails in our nation’s capital and in state capitals, we can expect more economic crises, as bad or worse. It doesn’t matter that the interventions are ‘for the greater good’ or that the people leading the intervention are good, well-intentioned, virtuous, upstanding citizens. An impossible task is still impossible when undertaken by a mortal saint.

It is remarkable that the myth of the ‘success’ of the New Deal lives on to this day. The Depression lasted seven more years beyond Hoover, with a second, deep recession in 1937-38. The depression didn’t end definitively, with the return of full employment, until World War II production and mobilizations were well under way. In other words, a calamitous event in which tens of millions of people worldwide were killed and hundreds of cities, with all of their wealth and assets, were completely destroyed, was by one measure less damaging to the economy – perhaps even beneficial – than the policies of Hoover, FDR and the New Deal.
It is dangerous to hold the thought that war is an antidote to economic depression, just as is it is to consider war and conquest a solution to economic challenges such as securing reliable supplies of materials that your country lacks (from Caesar’s conquests to Hitler’s ‘lebensraum’).

World War II’s destruction and death didn’t fix the Depression. What happened was that many government interventions of the New Deal, including the demonization of businessmen, were abandoned and not reinstated after the war was over. The end of the Hoover-FDR New Deal ended the Depression. It would have ended 10 years sooner if this tragic blunder had never been attempted. Moreover, some of the worst tragedies of the War might have been avoided if not for the worldwide ripple effects of the economic malaise. May we never again be tempted to repeat such a disaster.
That depends on YOU, citizen economist.

Why we don't need a new New NEW Deal - Part 1

The last time the American economy was in such dire straits was over 30 years ago; perhaps 70. Do the lessons of the Great Depression perhaps hold any explanations, let alone solutions? Let’s recall a bit what happened all those years ago (it might even feel familiar):
• From September 1929 to July 1932, the Dow Jones Industrial Average (DJIA) fell from a high of 381 to 43, an 88% decline. In our time, that would be like the Dow falling from 15,000 to 1,800.
• Some of the most dramatic moments occurred in late October 1929, on the 24th (‘Black Thursday’: almost 13 million shares, or approximately 3 times the daily average, traded for a 6-point drop in the DJIA) and the 29th (‘Black Tuesday’: 16+ million shares traded for a 30-point drop).
• The market didn’t recover its pre-crash level for 25 years.
• Chronic unemployment soared from a historical average of 5% to over 15% for almost a decade, peaking at 25% in 1933.
• Industrial production was cut in half.
• Business construction dropped 84%.
• Bank failures spiked from a historic average of 700 per year to 1,350 in 1930, 2,293 in 1931, 1,453 in 1932; 4000 commercial banks failed in 1933.
• The crisis rippled worldwide and contributed to the rise of Hitler and Mussolini in Europe.
• Four years into the Roosevelt presidency, in 1937-38, the economy sank into recession for a second dip.
• Only World War II in the 1940’s resulted in increased production and put an end to high unemployment, at a terrible price; millions of lives lost in the war, all production being channeled into armaments with little left over for consumer goods or comforts. True prosperity would not return until the late 1940’s or later.

The lessons to be learned from this calamity are indeed applicable to our present-day crisis. But the conventional wisdom about the Great Depression – that it was caused by the excesses of free markets that must necessarily lead to crisis by virtue of capitalism’s inherent contradictions, abetted by the laissez-faire policies of a Republican president Herbert Hoover, and that the government-expanding New Deal policies of Democratic president Franklin Delano Roosevelt were the necessary and proper remedy which saved us from a worse fate – is entirely wrong.
The stock market crash of October 1929 was the direct result, not of free-market capitalism, but precisely of government interference in the market, transmitted via the political signal that the Smoot-Hawley Tariff bill, a protectionist monstrosity, would be made law. The market correctly estimated that this bill would substantially constrain international commerce, reducing the current market value of financial and other assets. The search for the right revaluation was a panicked activity; but that panic was rationally justified.
The subsequent government responses to the initial crisis dug the country increasingly deeper into the hole.

A Crisis of Intervention
Remember the Great Depression of the 1920s? Of course you don’t, because it didn’t happen. It might be because President Warren Harding ignored his Secretary of Commerce Hebert Hoover’s advice to intervene in the recession of 1921, and that recession quickly recovered and was forgotten.
Herbert Hoover was no laissez-faire leader. In the early ‘20s, before either was president, Hoover collaborated with Franklin Delano Roosevelt in the American Construction Council, an attempt to turn the construction industry of the entire nation into one giant cartel. He participated in the drafting of the Railway Labor Act of 1926, a major step to collectivizing labor relations. He believed that high wages in an economy cause general prosperity, rather than – the other way around – that prosperity produces higher wages. From this premise much of Hoover’s efforts as president would be targeted at maintaining pre-crash wage rates for those workers who still had jobs. Economic theory states that artificially attractive prices cause shortages. In this case, it lead to a shortage of jobs: unemployment.

After the crash, President Hoover (1929-33) intervened aggressively in the economy. Hoover:
• Summoned the leaders of the largest corporations and business associations to a series of conferences for, in his own words, “the coordination of business and governmental agencies in concerted action.” They acted in large part to maintain existing wage rates and continue expansion. Real wages for employed workers increased for most of Hoover’s term, peaking at 11% above 1929 levels in 1931 and still a ‘healthy’ 8% in 1933 while unemployment simultaneously soared to 25% (in other words, nice work if you can get it; God help you if you can’t).
• Urged public works programs in response to the crisis. The Division of Public Construction of the Department of Commerce was created in December 1929. Hoover urged state governors to follow suit at their level.
• Intervened in different directions at different times in commodity markets. When the Federal Farm Board’s policy of price supports resulted in overproduction of wheat, cotton, wool and other products, thereby collapsing prices and bringing devastating losses, Hoover changed course to order acreage to be plowed under, taken out of production, and to destroy ‘excessive’ livestock.
• Authorized construction of Hoover Dam on the Colorado River, at a cost of $915 million (equivalent of roughly $45 billion of today’s dollars).
• Signed the Smoot-Hawley Tariff into law in 1930.
• Weakened bankruptcy laws in favor of debtors and eroding the property rights of creditors.
• Imposed an immigration ban which effectively reduced legal immigration from Europe by 90% overnight. He deported as many as 20,000 ‘undesirable’ aliens per year.
• Publicly assailed speculators and coerced the New York Stock Exchange to curtail short selling; campaigned against ‘unpatriotic’, ‘traitorous’ hoarders (or put another way, demonized frugal, risk-averse citizens who claimed the right to their property and thereby exposed unsound credit policies and institutions).
• In February 1931, signed the Employment Stabilization Act, creating the Employment Stabilization Board. Unemployment soared to 25% in 1933 and didn’t fall to pre-depression levels until 1940.
• Massively increased government expenditures at a time when revenue to the treasury was falling, resulting in the largest peacetime deficits to date in American history. Federal expenditures rose 30% in 1930 alone, from $4.2 billion to $5.5 billion.
• In 1931, created the President’s Organization on Unemployment Relief, effectively inserting the federal government for the first time into a sphere that had previously been considered the responsibility of private charities and religious organizations.
• In 1931-32, created the Reconstruction Finance Corporation, intended to centrally and comprehensively direct and manage the banking, lending, insurance and finance industries.
• Reduced the hours worked by government employees without reducing their salaries.
• Cancelled oil-drilling permits on publicly-owned land, in an effort to restrict supply and maintain a ‘minimum fair price’ for the petroleum industry.
• In May 1931, closed Federally-owned forest land to new logging, in order to defend timber prices.
• Urged the Federal Reserve to relax its lending and discount standards (in other words, engaged in artificial credit expansion). See: Glass-Steagall Act of 1932.
• Signed the Federal Home Loan Bank Act, creating the Federal Home Loan Bank Board, since 1989 the Office of Thrift Supervision, intended to promote home ownership.

One of the few of Hoover’s acts which could be qualified as pro-limited government and individual property rights was his income tax rate cut of 1930, from the stratospheric height of 5% to 4% (a cut of 20%) for individuals, and 12% to 11% for corporations. Prior to the 1930’s, the income tax had not taken anything like its modern bite in the daily lives and livelihoods of citizens.
However, in 1932 he reversed course and raised income taxes as well as prior wartime excise taxes and sales taxes on hundreds of consumer goods. The surtax on the highest incomes went from 25% to 63%. When businessmen suggested to Hoover that the tax regimen was detrimental to the general economic health and that the government would do better to cut expenditures by $2 billion, Hoover brushed them aside.

Read Part 2 of Why we don't need a new New NEW Deal HERE.

Friday, June 21, 2013

Understanding the Financial Crisis of 2008

The Housing market – prices and lending behavior – went irrational in the first half of the first decade of the 2000’s, then crashed in 2008, sending seismic financial shock waves around the world which are still reverberating late in 2013, with stubbornly high unemployment and massive increases in public spending and debt which haven’t improved the situation at all.
Since housing was the spark that set off the fire, let’s take a closer look at that.
Not all housing markets (by geography) experienced the same wild gyrations. As a national average, the rise in purchase prices paid was only 38% from 1999 to 2005, and the ‘collapse’ only 10 percent from 2006 through 2008 (in other words, home prices were still higher in 2008 than in 1999 by 28% – hardly a crisis). But in certain local markets in Nevada, Florida, Arizona and coastal California and a few others, the rise and fall was much more amplified, with prices more than doubling in some places during the boom and falling almost as far or farther in the crash. Most of the rest of the country was not going nuts. In places like Houston and Dallas Texas, for example, there was hardly any extraordinary rise in prices and therefore no traumatic bust. Moreover, housing in general has been more affordable in those markets, taking a substantially smaller share of an owner’s or renter’s income to maintain than in the ‘hot’ markets.
In other words, the housing market surge and collapse was at its root a localized phenomenon, not a general or national one.
So why did prices rise so dramatically in these particular markets? It’s a question of Supply and Demand: mainly for land on the one hand, and for mortgage loans on the other.

The supply of loans (price/interest rate and availability/approval) is principally governed by the lender’s perception of the risk of getting paid back (or not) for the cash advanced to the borrower. In a free market, banks that lend to deadbeats will soon be bank-rupt, unable to recoup the money they’ve advanced (bankers consider that a bad thing). So traditionally these have been very conservative and prudent, wearing their bow ties and green eyeshades, scrutinizing and documenting every potential borrower’s credit history, good character and sources and amounts of income, as well as general economic conditions that may affect the continuance of the same. The higher the perceived risk of lending, the more constrained the supply of lendable funds and the higher the interest rate (credit price) charged. The calculation of risk and supply are made on the basis of general market conditions, the amount of cash that each bank has available, and case-by-case particulars centered around the individual borrower or co-borrowers.
In the 1970’s, the price of housing in Nevada, Florida, Arizona and coastal California were not that much different from the rest of the country, neither in absolute terms nor as a percentage of the owner’s/renter’s income required to maintain a home (which is to say, affordability).
Two contradictory and not fully thought-through political goals kicked off the long march to disaster:
• Wilderness Preservation
• Affordable Housing

Wilderness Preservation
Beginning in the 1970’s, the environmental movement and its political allies promoted increasingly extensive and rigorous land-use restriction laws. These policies were always promoted under the slogans of preserving wilderness, saving farmland, creating open space, ‘smart growth’, rescuing endangered species and/or habitat and other happy, desirable outcomes.
News Flash! Reducing the supply of a good puts upward pressure on its market price! In the markets and geographical regions where such laws were passed, real estate prices began to climb out of previously ‘normal’ ranges. The cost of real estate, and with it, housing, skyrocketed in relation to other regions where the legal environment favored full unfettered private property rights. Housing became less affordable.

Affordable Housing
"Neither by comparison with the recent past nor by comparison with other countries today is most housing in the United States unaffordable. The median-priced home in the United States as a whole is 3.6 times the median income of Americans. For Great Britain, the median-priced home is 5.5 times the median income and in Australia and New Zealand, the ratio of home prices to income is 6.3."
-Thomas Sowell, The Housing Boom and Bust

Nevertheless, the federal government and its appendages have been on a decades-long crusade to make housing in America more ‘affordable’.
The Community Reinvestment Act of 1977 gave the federal government an unprecedented foothold in micromanaging the business practices of lenders, telling them to whom they should lend, how much and on what terms. In the 1990’s the power of this act were amplified, with banks having to establish racial and ethnic quotas, both in their lending and in their hiring practices, and ask permission before merging or opening new branches (permission which might be denied on the political grounds of not having done enough ‘socially responsible’ work or lending in their communities). In 1993 the Department of Housing and Urban Development , or HUD, began suing banks over race-based statistical disparities.
The implicit assumptions seem to have been that a) bureaucrats in Washington (and community activists at ACORN) know better than bankers in Peoria what are the ‘correct’ lending criteria and practices for their local markets, what is the best and soundest ‘socially responsible’ policy for what to do with their depositor’s money, b) that lending is somehow doing someone a favor as opposed to being a mutually beneficial exchange, and c) that unless Washington keeps a close vigil on greedy, racist bankers, they would discriminate unfairly against racial minorities, denying them loans more often than White/European majority applicants.
Point a) is laughable on its face, yet its premise underlies most government economic policy today. Point b) seems to ignore the fact that lenders are in the business of lending and benefit from it, WANT to lend.
Point c) is easily refuted:
• Banker’s favorite color is not white or black, but green. Any banker offended by receiving a monthly loan payment from a brown or yellow person will soon find himself in the red. The natural mechanism of the market is for gaps in supply to be eagerly filled by entrepreneurs, however greedy or racist they may be. Customers missed by one supplier will be eagerly served by another.
• Statistical differences between racial groups are not proof of unfair discrimination against individuals. When controlled for credit ratings, wealth, income, employment history and other factors, no material discrepancies remain.
• Black-owned banks have been shown to turn down black applicants for loans at a higher rate than White-owned banks .
• Chinese and Japanese Americans have suffered discrimination and even internment in the past. But today, Asian applicants in the aggregate are turned down for loans less often than White/European Americans. This fact does not support a theory of white racism among bankers.
So banks were under increasing pressure to make loans to satisfy politicians rather than depositors and borrowers; to loosen lending standards, to NOT scrutinize and document the individual applicant’s creditworthiness, good character and sources and amounts of income but to focus their attention on rectifying the supposed evils of ‘redlining’ and ‘disparate impact’. Thus the non-traditional or ‘subprime’ market grew from 7 percent of all loans in 2001 to 19 percent in 2006.
But how could the banks do this (neglect their lending standards) without cutting their own throats?
The politicians who did the banker no favors by bullying them into making millions of loans that they might not have made, gave them a way out: Flip the loans, and with them the default risk – good, bad or ugly – to someone else.
Over the past 40 years, the privileges and obligations of two government-sponsored companies, Fannie Mae and Freddie Mac , have been significantly beefed up, again for the purpose of promoting ‘Affordable Housing’. These companies have CEOs, stockholders and profit-and-loss statements like private banks and other publicly-traded companies, but they were chartered by the federal government for the purpose of doing ‘good’ in their markets (as opposed to merely raking in obscene profits for their greedy shareholders and CEO’s like Franklin Raines and his $90 million compensation package), in exchange for which they enjoy preferential tax treatment and the implicit guarantee that if anything goes wrong, Uncle Sam (that’s you and me the taxpayer) will pick up the tab.
Since at least 1992, Fan and Fred have been under orders to buy up more and more ‘affordable housing’ mortgages from the originating lender banks. By 2007, Fan and Fred had purchased 40 percent of the sub-prime and/or non-traditional mortgages (a.ka. ‘Liar Loans’, loans made with minimal or no documentation, due diligence, credit checks, character references etc.) originated in the United States, or about one million million dollars worth . The total value of their debt outstanding as of 2010 was over 8 million million dollars; that’s two-thirds the magnitude of the national debt of the United States.
Fannie Mae and Freddie Mac have long enjoyed unwavering support from cheerleaders in positions of significant power in the federal government, among them Barney Frank, Christopher Dodd, Maxine Waters, Joe Baca, Nancy Pelosi, Charles Rangel and Kit Bond, among others.
In any event, the inevitable happened. In 2006, loan default rates, especially in the sub-prime market, reached record levels. In 2007 Countrywide Home Loan’s share price collapsed and it was acquired by Bank of America. BofA itself was one of several targets of the Troubled Asset Relief Program (TARP) to the tune of $45 billion, along with several other financial dominoes that were deemed ‘too big to fail’: Citigroup, $50 billion; AIG, $40 billion; Wells Fargo, $25 billion; J.P. Morgan Chase, $25 billion.
In spite of TARP and multiple rounds of economic ‘stimulus’ spending plans by the Bush and Obama administration (or perhaps because of them), the employment rate and general economic health of the country has sunk to lows not seen in at least 30 years, with hardly an exit in sight.
The natural economic forces of Supply and Demand were derailed in housing markets in America in the early years of the 21st century, leading first to the craze and then inevitably to the crisis. Like all crises of this magnitude, this one was one of government interference in the natural, self-correcting mechanisms of the free market, building one intervention on top of another until it collapsed of its own dead weight.