ACA/Obamacare: When the Fool Proof Plan Where Nothing Can Go Wrong…Goes Wrong

“Across the country, Americans are facing substantially higher costs under the Affordable Care Act.

In most states, health insurance premiums on the individual marketplace are rising by double digits under Obamacare. Seventeen states will face average premium increases of 20 percent or more. Iowans, for instance, will see their premiums spike by 22 percent this year. In Minnesota, Alaska, Tennessee, and Hawaii, rates will rise by 30 percent or more.

Want to know where your state ranks? Type a state into the search bar to view the average rate hike and the range of premium changes individuals purchasing insurance on the individual market will face. You can also sort or export the data.” - 2016 Obamacare Premium Increase Tracker, 01/10/2016, freedom partners.org

Below is the link to the entire article. You can search any state’s ACA/Obamacare average price increase and the statistics also denote the low and high regarding price increases:

http://freedompartners.org/latest-news/2016-obamacare-premium-increases/

Obamacare: insurers remain with no agreement regarding insurance exchanges

“The Obama administration has delayed a step crucial to the launch of the new healthcare law, the signing of final agreements with insurance plans to be sold on federal health insurance exchanges starting October 1.

The U.S. Department of Health and Human Services (HHS) notified insurance companies on Tuesday that it would not sign final agreements with the plans between September 5 and 9, as originally anticipated, but would wait until mid-September instead, according to insurance industry sources.” - Exclusive: U.S. delays deadline for finalizing Obamacare health plans, Reuters, 08/28/2013

Link to entire article appears below:

http://www.reuters.com/article/2013/08/28/us-usa-healthcare-obamacare-idUSBRE97R04X20130828

ObamaCare: Reports from the Unfolding Train Wreck.

Remember when President Obama famously promised that if you like your health-care plan, you'll be able to keep your health-care plan? It was a brilliantly crafted political sound bite. Turns out, the statement is untrue.

Aside from that small detail, the slightly larger problem is that the Obama administration doesn't have a health-care plan. Yes, the White House has a law with thousands of pages, but the closer we get to Oct. 1, the day government-mandated health-insurance exchanges are supposed to open, the more we see that the administration doesn't have a legitimate plan to successfully implement the law.

Unworkable. That word best describes ObamaCare. Government agencies in states across the country, whether red or blue, have spent countless hours and incalculable dollars trying to keep the ObamaCare train on its track, but the wreck is coming. And it is the American people who are going to pay the price.

Fifty-five working days before the launch of the ObamaCare health-insurance exchanges on Oct. 1, the administration published a 600-page final rule that employers, individuals and states are expected to follow in determining eligibility for millions of Americans. Rather than lending clarity to a troubled project, the guidelines only further complicated it. - Jindal and Walker: Unworkable ObamaCare, Opaque rules, big delays and rising costs: The chaos is mounting, Wall Street Journal, 07/25/2013

Link to the entire article appears below:

http://online.wsj.com/article/SB10001424127887324110404578626452647631608.html?mod=WSJ_Opinion_LEADTop


　

　

　


　

Kathleen Sebelius rules against the church: Kathleen said from on high, let there be "free" contraceptive, and then there was contraceptive

'The White House ruled Friday that employees of religious-affiliated, nonprofit institutions would receive insurance coverage for birth control under Obamacare, ensuring more legal challenges to the rule.


"[Friday's] announcement reinforces our commitment to respect the concerns of houses of worship and other nonprofit religious organizations that object to contraceptive coverage, while helping to ensure that women get the care they need, regardless of where they work," said Health and Human Services Secretary Kathleen Sebelius.


Early last year, the Obama administration said that universities, hospitals, and other employers with a religious affiliation could avoid paying directly for contraceptives.


Under that Obamacare arrangement, insurance companies would instead provide coverage and pay for it.


The rule requires an institution's health insurer or third-party insurance administrator to notify employees about birth control benefits and provide beneficiaries with direct payments that cover the cost of contraceptive services.


The announcement by Sebelius puts into effect a requirement that has been beset by more than a year of talks between administration officials and religious employers.


The U.S. Conference of Catholic Bishops and other denominations oppose contraception on religious grounds and have protested against the requirement, along with conservatives.

"We have received and started to review the 110-page final rule," New York Cardinal Timothy Dolan, the conference’s president, said in a statement. "It will require more careful analysis. We will provide a fuller statement when that analysis is complete." ' - Obamacare Ruling: Religious Employers Must Provide Birth Control Coverage, Newsmax, 06/28/2013


Link to the entire article appears below:

http://www.newsmax.com/Headline/obamacare-insurance-coverage-birth/2013/06/28/id/512562?s=al&promo_code=14029-1

ObamaCare Surcharge Levied by Your Local Eatery? No way! Way!

“Florida based restaurant boss John Metz, who runs approximately 40 Denny's and owns the Hurricane Grill & Wings franchise has decided to offset that by adding a five percent surcharge to customers' bills and will reduce his employees' hour

With Obamacare due to be fully implemented in January 2014, Metz has justified his move by claiming it is 'the only alternative. I've got to pass on the cost to the customer.' “ - UK Daily Mail

　

Link to the entire article entitled Denny's to charge 5% 'Obamacare surcharge' and cut employee hours to deal with cost of legislation:
http://www.dailymail.co.uk/news/article-2233221/Dennys-charge-5-Obamacare-surcharge-cut-employee-hours-deal-cost-legislation.html

Planning Has a Limit

This way lies charlatanism and worse. To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.


But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims.

- F.A. Hayek, from the essay The Pretense of Knowledge

We flatter ourselves undeservedly if we represent human civilization as entirely the product of conscious reason or as the product of human design, or when we assume that it is necessarily in our power deliberately to re-create or to maintain what we have built without knowing what we are doing. Though our civilization is the result of a cumulation of individual knowledge, it is not by the explicit or conscious combination of all this knowledge in any individual brain, but by its embodiment in symbols which we use without understanding them, in habits and institutions, tools and concepts, that man in society is constantly able to profit from a body of knowledge neither he nor any other man completely possesses. Many of the greatest things that man has achieved are the result not of consciously directed thought, and still less the product of a deliberately coordinated effort of many individuals, but of a process in which the individual plays a part which he can never fully understand. They are greater than any individual precisely because they result from the combination of knowledge more extensive than a single mind can master. -
F.A. Hayek from pages 149-150 of the 1979 Liberty Fund edition of Hayek’s 1952 study, The Counter-Revolution of Science

　

Hayek made the point outlined in the quotations above on many occasions and in many ways. Associated, but not exactly the same, Milton Friedman wrote a book and did a ten-part PBS series entitled Free to Choose. The point being made by Hayek and Friedman is that in the aggregate, in the real world, in the real time world where a zillion decisions are made daily.....it's mainly a spontaneous order phenomena [the plans of the many in an environment of free choice] that brings greatest satisfaction, value, wealth, etc. to the greatest number of people.

A confusion that reins supreme surrounds the idea of "planning". Yes, you can make dinner plans, plan the family's evening meal for the evening or even the evening meals for the entire week, you can make wedding plans, plan production, make shopping plans....you can plan your brains out...BUT those plans are, in fact, the plans of the many and are in fact the zillion decisions mentioned above.

Some want to transpose the concept "plan" or "planning" as a second coming of the concept "plan". That is to say, a plan exists ahead of the already conjured up plan -or- as a second coordinating factor ahead of those plans, that are in fact, the plans of the many and are in fact the zillion decisions mentioned above. Somehow a value exists in a second plan, the-plan-of-the-plans, a plan not of emergent order, rather a plan of mass coordination. Stated alternatively, the concept that if the conjured up plans yield value, then certainly the-plan-of-the-plans adds more value.

If you think about it, to plan the zillion plans is to undo the zillion plans in some shape or fashion to meet the supposed super coordinated plan which is the-plan-of-the-plans. Greatest satisfaction of all is now reduced to a third party satisfaction. The third party being the few that authored the-plan-of-the-plans.

Moreover, the zillion decisions resulting in a zillion plans are made in real-time, with real information based on current conditions of alternatives. Any super coordinated plan, the plan-of-the-plans, would be after the fact based on post information and post conditions of alternatives. Further the knowledge of the many making the zillion decisions/plans would be supplanted by the few. The few, no matter how smart, knowledgeable or expert, have less total knowledge than the total knowledge of the many.

Hayek and Friedman's observations are counterintuitive: that planning has a limit.

Occasionally history records the coming of politico-ideologist they believe they can plan the zillion plans, that in essence, planning has no limit, and they have the-plan-of-the-plans . They merely plan to restrict, with their monumental plan-of-the-plans, the spontaneous order phenomena that brings greatest satisfaction, value, wealth...you name it...to the greatest number of people.

The result? The plan-of-the-plans is abysmal.

Hippocratic Ethic Becomes the Veterinary Ethic? And about that Federal Commission for the Coordination of Comparative Effectiveness Research (FCCCER)….

If one considers F.A. Hayek and his writings, one important proposition discussed at length by Hayek was the mundane, real time, applicable-on-the-spot, grand attempt to create maximum utility knowledge of the many and the plans thereof.


Hayek explained the plans of the few which are based on non-real-time, average knowledge of the "expert", regarding an impossible to calculate number of situations, calculating with the expert's average knowledge of most situations, that ends by yielding average or below average results. -Or- the plans of the many vs. the plans of the few.

Hayek's overriding point being: as an economy enlarges and becomes more and more complex, no one single mind or handful of minds, the plans of the few, can possibly comprehend let alone plan the dynamic and ever changing number of situations occurring. Conversely, as an economy enlarges and becomes more and more complex, that the spontaneous/emergent order resulting from the plans of the many, that is, the mundane, real time, applicable-on-the-spot, grand attempt to create maximum utility is the very best and very decentralized way to deal with an ever enlarging and increasingly complex economy.


Yet the "one big brain" idea persists in that some central brain can out think, out smart, out plan and basically trump the mundane, real time knowledge of the many, and the plans thereof. Further, the "one big brain" error, the classic example thereof, is the price fixing schemes of the former Soviet Union and the price planners that somehow had the knowledge to set price of every last item in every last situation. The results were beyond abysmal.

Let us also add in that not one price fixing scheme, never-ever, in all of recorded economic history, has been successful.

However, "the few" remain undeterred! Enter Federal Commission for the Coordination of Comparative Effectiveness Research (FCCER):


“For centuries, my predecessors and I have been inculcated with what has come to be called the “Hippocratic Ethic.” This tradition holds that I am ethically required to use the best of my knowledge to recommend to my patient what I consider to be in my patient’s best interests—without regard to the interests of the third-party payer, or the government, or anyone else.

But gradually the medical profession has been forced to give up this approach for what I like to call a “veterinary ethic,” one that places the interests of the payer (or owner) ahead of the patient. For example, when a pet owner is told by a veterinarian that the pet has a very serious medical condition requiring extremely costly surgery or other therapy, the veterinarian presents the pet’s owner with one or more options—from attempt at cure, to palliation, to euthanasia—with the associated costs, and then follows the wishes of the owner.

Several factors in combination are bringing this ethical approach to my profession.

Since the mid-1980s, Medicare has imposed price controls on health care providers. Over the years, in order to accommodate increasing Medicare utilization, physician payments have steadily dropped.

Meanwhile, the regulatory burden on physicians has increased. In the last few years, CMS required all providers to adopt electronic health records or face economic sanctions from Medicare. It is the ultimate goal that every health care provider, including pharmacies, will have electronic databases that will be accessible to the U.S. Department of Health and Human Services (HHS).

In 2009, as part of the so-called stimulus bill, the Federal Commission for the Coordination of Comparative Effectiveness Research (FCCCER) was created. Its mission is to collect the data culled from all electronic health records and make recommendations regarding the comparative effectiveness of drugs, procedures, and therapies. In rendering advice, the FCCCER will essentially answer the following question: What is the most cost-effective way of allocating a fixed amount of resources among a population of roughly 310 million people?

With this same question in mind, the U.S. Preventive Services Task Force, a committee that reports to HHS, concluded in 2009 that mammogram screenings should not be recommended to women under age 50. This caused an uproar among both private health care providers and breast cancer advocacy groups, and the task force soon backed down. Similarly, in the fall of 2011, the task force recommended the abandonment of certain routine prostate cancer screenings. Once again, health care providers and cancer advocacy groups protested, and the task force rescinded its recommendation.

In 2010 the Patient Protection and Affordable Care Act established an Independent Payment Advisory Board (IPAB). Beginning in 2014, the 15 presidential appointees on this board will determine what therapies, procedures, tests, and medications will be covered by Medicare, using advice provided by the FCCCER. Such determinations will then be used to design the coverage packages for the non-Medicare insurance offered through the government–run exchanges. The decisions of the IPAB are not subject to Congressional oversight or judicial review.

Meanwhile, in an effort to control costs now, CMS has developed practice guidelines and protocols for physicians to follow. Committees of health care academics and statisticians developed these guidelines, using data from large population samples.

These protocols govern the therapeutic decisions made by the health care practitioner—right down to the pre-operative antibiotics a surgeon may order. Despite the fact that several recent peer-reviewed studies concluded that the protocols have had no positive effect—in fact, one study showed post-op skin infections increased since the protocols were instituted—CMS imposes financial penalties on hospitals that fail to get protocol compliance from their medical staff.

Medical students and residents are now being trained to follow federally-derived protocols and guidelines as a normal part of medical practice. As a result, this new generation of doctors will be less inclined to challenge the recommendations of federal task forces and agencies. Some academics also worry that “teaching to the protocol” might discourage independent thinking and the use of intuitive knowledge, two traits essential to the practice of good medicine.” - The Coming Medical Ethics Crisis , Reason.com, Jeffery Singer, 03/15/2012












　

March 45,000 Low Volt Shocker: GM Halts Production Of Chevy Volt… Again

When oil prices climb in a constant fashion [rising oil prices vs. oil price shocks] the consumer has time to adjust consumption patterns. That is to say, James and Jane Goodfellow can change the composition of their basket of goods consumed to accommodate rising oil prices. As the story goes, the Goodfellow’s delay a purchase, substitute goods, and put off some purchases all together (skip a night out for dinner) to accommodate the rising energy price.

A phenomena expected to occur during a constant oil price increase would be the price of gasoline rising hence signaling consumers to increasing car pooling, more combining of trips and one would expect an increase in consumer interest and consequential purchase of electric vehicles and/or hybrid vehicles. That is, consumer preference may change regarding solely gasoline powered vehicles, in that, electric or hybrid vehicles would garner some additional consumer preference even if the increase is at the margin.

Enter the Chevy Volt. General Motors announced today that Chevy Volt production will be halted with 1,300 idled and are anticipated to be recalled April 21^st. 


' "Even with sales up in February over January, we are still seeking to align our production with demand," GM spokesman Chris Lee said.

The car company had hoped to sell 45,000 Chevy Volts in America this year, according to the Detroit News, but has only sold about 1,626 over the first two months of 2012.' (1)

"The news comes just one day after GM announced that the Volt sold 1,023 vehicles in February, up from just 603 in January.” (2)

“General Motors has told 1,300 employees at its Detroit Hamtramck that they will be temporarily laid off for five weeks as the company halts production of the Chevrolet Volt and its European counterpart, the Opel Ampera.” (3)

“It will be the third time that Volt production has been stopped for at least a month since the car first went on sale in December 2010.” (4)

Therefore we do see marginal consumer preference change from  603 Volts sold in January climbing to the astounding sales rate of 1,023 albeit the assumed sales rate is 3,750 per month (45,000 unit goal/12 months). Hence January production rate was 16% of goal and February sales was 27% of goal. Wow!

When considering rising gasoline prices pushing Chevy Volts to the astounding sales pace of 1,023 per month, one must not overlook an additional incentive: a $10,000 tax credit! Yes, your tax dollars are at work!

“The White House intends to boost government subsidies for wealthy buyers of the Chevy Volt and other new-technology vehicles — to $10,000 per buyer.


That mammoth subsidy would cost taxpayers $100 million each year if it is approved by Congress, presuming only 10,000 new-technology autos are sold each year.” (5)

Despite rising gasoline prices, despite the massive tax subsidy, the Chevy Volt must be contrasted to total vehicles sales for the month of February which spiked upward.

“For the second month in a row, U.S. auto sales came in much higher than the consensus expected in February and reached a four-year high of 15.1 million units at a seasonally-adjusted annual rate. Despite higher gas prices, total February light vehicle sales came in an impressive 15.7% above a year earlier, led by a 40.4% increase for Chrysler and 34% increase for Volkswagen. Sales of the Ford Focus doubled over the last year, and the company overall had a 14.4% increase. GM highlights included a 28% year-over-year sales increase for the Chevrolet Silverado truck and a 20% annual gain for the GMC Sierra truck.” (6)

Is there a lesson to be learned? Has this lesson been learned before in the US auto industry? The basic lesson is that consumer preference is revealed by the market place. The producers then need to match the demand revealed by the preference. However, if from the supply end producers create a supposed preference item, most times the item does not match the consumers revealed preference as a centrally planned preference rarely matches a spontaneous/emergent order preference of millions of freely choosing consumers. If one recalls, in the early 1970’s Detroit built vehicles they considered vehicles that customers wanted. Sales slumped as low quality non-demand vehicles would not sell and a flood of imports came into the US market that more closely matched consumer preference. Ah, the evil of it all.....history repeats itself yet again.

Moreover, there is likely a third lesson. If a bailed-out producer, beholding to politicos who bestowed taxpayer money onto such producer, is coerced into producing a supposed preference item merely reflecting the vision of particular politicos and their preference for “the way things ought to be”, the plans of the few end in not matching the plans of the many.


Notes:

(1) GM Laying Off 1300 Due to Low Volt Sales, Washington Examiner, 03/02/2012

http://campaign2012.washingtonexaminer.com/blogs/beltway-confidential/gm-laying-1300-due-low-volt-sales/406771


(2) GM shuts down Chevy Volt production for five weeks, temporarily lays off 1,300, Torque News, 03/02/2012


http://www.torquenews.com/1081/gm-shuts-down-chevy-volt-production-five-weeks-temporarily-lays-1300


(3) GM Halts Production of Chevy Volt, Lays Off 1,300 Workers, Zipwire, 03/02/2012


http://weaselzippers.us/2012/03/02/heartache-gm-halts-production-of-chevy-volt-lays-off-1300-workers/

(4) G.M. Again Pauses Production of Chevy Volt, NYT, 03/12/2012


http://www.nytimes.com/2012/03/03/business/gm-suspends-production-of-chevrolet-volt.html?_r=1

(5) More than one way to sell a volt, Edmonds.com, 02/13/2012


http://townhall-talk.edmunds.com/direct/view/.f157543/920

(6) Car Sales Shift Into High Gear, 4-Year High in Feb., Carpe Diem, 03/01/2012


http://mjperry.blogspot.com/2012/03/car-sales-shift-into-high-gear-4-year.html

Examining the Argument Basis for the Continuation of Economic Development Authorities

State, local and municipal economic development authorities based on collective action and funded by taxpayer dollars come in many varieties. In the main one might categorize the central planning entities as:

(1)    those based on central planning techniques regarding urban planning,

(2)    those based on central planning techniques that attempt to attract private or public sector entities via industrial parks or site preparation,

(3)    those central planning techniques awarding tax holidays, subsidized loans and grants-in-aid to attract firms.


The three central planning techniques mentioned above have been challenged as non-effective and unrealistic based upon the position that the private sector will respond if a demand exists [let the market determine]. That is, the spontaneous/emergent order of the plans of the many will be more effective than the central plans of the few. (1)

One of the rebuttals to the argument that economic development plans are ineffective is:  “…others are providing central planning and collective action taxpayer dollar incentives hence one must compete with the other state, local and municipal governments”. That is, the basic debate point of “if they are doing it, we must do it too”.

Drilling down into the rebuttal’s debate point of “….since others offer taxpayer dollars, than we must offer too…” what if the debate point is a signal to consider/investigate the implicit assumption of “if they, then we” and that this aspect of the rebuttal in fact points directly to the summation of components of public choice theory? How so?  

If collective action by use of taxpayer dollars begets another set of collective action through another set of taxpayer dollars, and so on down the line, as argued in the above debate point, then the debate point boils down to  “perpetual” [if they, then we, and we become the next they, and so on]. However, is the underlying basis for the debate point a signal of “purposely perpetual”? Stated alternatively, is "if we, then they" no more than an exercise of purposeful perpetuation, which is a reflection of, and indication of, a purposeful spider web of rent seeking, special interests, politico enablers, and political constituency building through taxpayer dollars?  

Hence the rebuttal is merely based upon perpetuation which then leads one to consider the rebuttal as an indicator of a purposeful perpetuation of a pre-built network of rent seeking. That state, local and municipal authorities that argue they must offer taxpayer dollars in the form of economic development as an exogenous set of state, local and municipal authorities are offering taxpayer dollars in the form of economic development, is not an argument of the exogenous rather an indicator of a scheme of purposeful perpetuation.

One might consider taking the above proposition of a purposeful perpetuating scheme and putting it into “action”:

(1)    local economic development authority X is directed by politico enablers Y and made up of economic development authority employee group G, the summation of which is dispensing taxpayer dollars T.

(2)    one knows as a fact that anytime T is dispensed activities as evidenced by public choice theory emerge i.e. rent seeking, special interests, politicos acting as special interest enablers, crony capitalism, etc. That is, a special group is benefiting from the associated rent seeking and we will designate this group as RS.

(3)  the economic development authority X is necessarily  perpetuated as both Y and G have a vested interest in employment and power, respectively, and RS has an interest in the taxpayer dollars bestowed upon RS.

(4)  in order to legitimize and perpetuate the existence of X the group Y, G and RS merely point to the existence of another local economic development authority designated as A.

(5)therefore, as the argument goes, since A exists then X must exist and since X exists then A must exist.

However, both X, A and the multitude of other local economic development authorities B, C, D and so on do not exist because of one another. However, they may well exist as an emergent coordinated scheme. That is, once the multitude of local economic development authorities came into existence, then Y, G, and RS associated with each individual authority have a grand incentive to perpetuate their internal employment, politico external power and rent seeking activities of the taxpayer dollar. Their self-preservation then becomes a coordinated scheme of existence due to/based upon their own and other's emergence over time. The self-perpetuation of such authorities then becomes: since X emerged, and A emerged, then B, C, D and so on must exist due to the emergence of others. However, their existence is not due to greater emergence, their existence is due to their internal employment, politico external power and consequential rent seeking activities of the taxpayer dollar.

Which then leads one back to the proposition: it is not an argument of the exogenous rather an indicator of a scheme of purposeful perpetuation. That the separate authorities merely find themselves in a collection of authorities and conveniently point to the other authorities as the basis for their continued existence. That the convenience of other authorities as a basis regarding each seperate authority’s existence is fallacious. That the convenience of other authorities is more likely the knowledge that political power, rent seeking activities and internal employment of the authorities themselves can be perpetuated, in a coordinated sense, by each authority purposefully pointing the other authority as a basis for existence.

Notes:

(1) The Use of Knowledge in Society, 1945, F.A. Hayek.

http://www.econlib.org/library/Essays/hykKnw1.html

Consumer Financial Protection Bureau: Consuming Consumer-Taxpayer Dollars At the Consumers Benefit?

“GOP legislators have been howling for months now about the Consumer Financial Protection Bureau's ability to set its own budget (within a generous upper limit) and why that should concern U.S. taxpayers in a time of ballooning deficits. A congressional hearing this week only underscored the validity of their case.

CFPB chief Richard Cordray told a House Financial Services subcommittee that the bureau "only used $123 million" of its $498 million cap last year and expects to remain "considerably below" budget caps of $356 million and $448 million for 2012 and 2013, respectively. The bureau has already undergone two audits. Those documents, plus the bureau's "budget justification" and quarterly reports are all posted on consumerfinance.gov.

Mr. Cordray's testimony sounded convincing -- until the committee dug into the details. Rep. Randy Neugebauer noted that the bureau asked for some $96 million dollars last year in a single-page letter, with no spending justification -- something Mr. Cordray replied was allowed "by law." Rep. Michael Fitzpatrick pointed out that the 2012 fiscal year budget estimates $130 million for "services," with no more explanation, and gives little reason for hiring 400 employees. Rep. James Renacci asked why the bureau was spending $55 million to renovate its headquarters. Mr. Cordray had no reply, nor could he explain why the the bureau wants to hire 1,400 employees in total. Oh, and the agency offers consumer information in 191 languages.

The bottom line is that Mr. Cordray may be uncomfortable (or not) having to answer tough questions, but ultimately the legislature has little leverage over him. The CFPB chief sets his own budget, can only be fired by the president for extreme malfeasance and holds vast regulatory powers over wide swathes of the consumer financial industry. Expect the CFPB spending machine to keep rolling on.” - The CFPB Spending Machine, Mary Kissel, The Wall Street Journal’s Political Diary, 02/17/2012



　

“Free Contraceptive”: Upon Further Review the “free contraceptive” problem is merely an indicator of base model failure.

A point that seems to be missed by talking heads, pundits, and media-types regarding the Catholic contraceptive issue is: this is one more episode in a series of endless episodes associated with a central planning scheme known as ObamaCare. Further, it is not Obamacare specifically, its any centrally planned scheme that by design continuously exhibits an endless series of negative episodes also known as unintended consequences.

The centrally planned scheme, as with any scheme, comes with endless tangents. Tangents of the unintended, that then interact into cascading unintended consequences.

When the unintended consequences surface one will most certainly note the classic central planning after-the-fact attempt to address unintended consequences by way of back tracking e.g.: ...oh we really meant this or that, ...oh that doesn't apply to YOU after all, ...oh we will waiver that aspect, and on and on and on it goes.

In the main, its not about Catholics, its not about contraceptives, its about a central planning scheme. Yet another scheme in a long parade of schemes based on "the way things ought to be". Scheme based propositions are never able to sort out the endless tangents.

Those gazillion tangents, that the central planners of the centrally planned scheme were suppose to take into account. Those experts with Omni-present knowledge, with grand supposed abilities, with continuous and dynamic real-time knowledge of each and every mundane aspect, that go onto design a socio-economic system…. with knowledge they do not in fact possess. (1)

Those tangents, which are so conveniently assured to never occur when central plans are sold based on a proposition of “the way things ought to be”. Those tangents that have absolutely no chance of being accounted for, but most assuredly were sold as accounted for when “the way things ought to be“ was a warm and fuzzy politico info-mercial. Yes, those many, varied, and consequential tangents go on to tarry at their haunt and re-visit time and time again.

One needs to consider being ahead of the curve regarding the following propositional arguments that surely will surface regarding the endless tangents of the scheme as it unravels and reveals its many and varied errors: (a) if the plan had been different, (b) if the planners had been different, (c) if circumstances had been different, (d) if we would have had more money, (e) if all of the above, a combination thereof, had been different.

Do centrally planned schemes by “experts” through the use of coercive powers, armed at best with non-real time general knowledge….do such schemes historically sort through items resulting in wonderful outcomes? -Or- do free market based, free people, free people basing decisions on real time mundane knowledge, making free decisions at the point of mutual self interest historically result in the best overall outcome?

Notes:
(1) F.A. Hayek, from the essay The Pretense of Knowledge

“Fair Share”: The Allocation Process of Fair-Share-Units

Suppose one viewed the political argument of “fair share” as fair-share-units? That is, if one considers the fair share argument, that of transferring [redistribution], what about considering the argument in terms of transferring or redistribution of fair-share-units from some sort of production realm to some sort of recipient realm.

Putting aside one’s political view of redistribution, consider the following:

(1)    In the abstract, regarding these units of fair share, is it possible that one would experience a production problem of fair-share-units as no incentive exists for production?

(2)    On the consumption side of fair-share-units, would one experience a grand incentive to consume?

(3)    Skipping by utility, marginal utility, production frontiers, etc. …. would there be any chance [using particular debate jargon of particular debaters] of these fair-share-units being affected by “greed” or “hoarding”?

(4)    Would there exist a “1%” of fair-share-unit holders and the other “99%”?

(5)    Would the consumption of fair-share-units create “envy” and lead to class warfare distinctions among those consuming fair-share-units?

(6)    If fair-share-units, the production thereof, suffered problems, is it possible that fair-share-unit production would have to be “bailed out”?

Economics is the allocation of scarce resources with alternative uses. If the allocation thereof, with free participants in a free market is politically framed as greed, hoarding, 1% vs. 99%, envy, class warfare, and bail outs…. then the allocation process of fair-share-units would be otherwise?

Elizabeth Warren's Class Warfare Argument: Upon Further Review.....

Elizabeth Warren made the following statement in September, 2011:

  “Nobody in this country got rich on his own. Nobody. You built a factory out there good for you, but I want to be clear, you moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because the police forces and the fire forces the rest of us paid for….because of the work the rest of us did”.

Before considering Warren’s statement, please review the following:

“The notion of civil liberty which we have inherited is that of a status created for the individual by laws and institutions, the effect of which is that each man is guaranteed the use of all his own powers exclusively for his own welfare.

…. Hence, liberty for labor and security for earnings are the ends for which civil institutions exist, not means which may be employed for ulterior ends“.

“An immoral political system is created whenever there are privileged classes - that is, classes who have arrogated to themselves rights while throwing the duties upon others.

….the real danger of democracy is, that the classes which have the power under it will assume all the rights and reject all the duties - that is, that they will use the political power to plunder those-who-have.

….[democracy] must oppose the same cold resistance to any claims for favor on the ground of poverty, as on the ground of birth and rank.

….It [democracy] must put down schemes for making “the rich” pay for whatever “the poor” want, just as it tramples on the old theories that only the rich are fit to regulate society.”

“A free man in a free democracy has no duty whatever toward other men of the same rank and standing, except respect, courtesy, and good-will. We cannot say that there are no classes, when we are speaking politically, and then say that there are classes, when we are telling A what it is his duty to do for B. In a free state every man is held and expected to take care of himself and his family, to make no trouble for his neighbor, and to contribute his full share to public interests and common necessities. If he fails in this he throws burdens on others. He does not thereby acquire rights against others. On the contrary, he only accumulates obligations toward them; and if he is allowed to make his deficiencies a ground of the new claims, he passes over into the position of a privileged or petted person-emancipated from duties, endowed with claims. This is the inevitable result of the combining democratic political theories with humanitarian social theories.”

Pages 26-29, What Social Classes Owe to Each Other, William Graham Sumner, 1883

Now consider this:

“There is an old ecclesiastical prejudice in favor of the poor and against the rich. In days when men acted by ecclesiastical rules these prejudices produced waste of capital, and helped mightily to replunge Europe into barbarism“.

“We all agree that he is a good member of society who works his way up from poverty to wealth, but as soon as he has worked his way up we begin to regard him with suspicion, as a dangerous member of society. A newspaper starts the silly fallacy that “the rich are rich because the poor are industrious”, and its copied from one end of the country to the other as if it were a brilliant apothegm”.

Page 32, What Social Classes Owe to Each Other, William Graham Sumner, 1883


Please note that William Graham Sumner is writing in the year 1883 and he is drawing on circa 1883 political arguments as well as prior/past arguments in history occurring before 1883. That is to say the same class warfare arguments have been made for centuries on end. Hence Ms. Warren’s argument is absolutely and positively a centuries old class warfare argument.


Upon further review….

One must examine the debate strategy of Warren framing her notional political argument into three classes: “we”, “ you” and “them” with the implicit assumption that “we” and “you” are the same whereas “them“ is an outside group/class diametrically opposed to the group/class “we-you“. Sumner explains above that the only class that actually exists in a democracy based upon freedom of the individual is in fact “you”. There is no such thing as “we” and “them”. However, as a purposeful debate point Warren merely creates classes in a classless society them divides the classes as opposing forces.

The next notional political concept framed by Warren is that goods are moved to market on roads paid for by the class “we-you”, workers are educated by the class “we-you” and that somehow, someway the class “them” uses the roads and educated worker for their exclusive use. What Warren purposely leaves out is the concept of “public goods”. Public goods are those items collectively provided by all the “you(s)” for the collective benefit of all the “you(s)”. That the movement from the ancient concept of many small protective societies to one state is partially based on all the “you(s)” collectively empowering the state to provide limited government, of which one function of limited government is to provide public goods such as infrastructure financing and educational financing. That is to say, all the “you(s)” collectively finance a limited amount of public goods that all the “you(s)” benefit from collectively (collectively benefit from the existence of such public goods). (1)

Police forces and fire forces are yet another public good, of which, is a function of the limited government of the state to provide through the financing of/by the single class “you(s)” for the benefit of all “you(s)”. The idea that some “you(s) provide police and fire for the fictional class “them” for their exclusive use is fallacious. (2)

The next item Warren implicitly employs in the perfect vs. the known. Warren creates the perfect [her perfect] world and contrasts it against the real world. That the real world is not her perfect world and hence she rejects the real world in favor of her perfect world skipping by the fact that “perfect” does not exist.

Another implicit assumption put forth by Warren is the “me” vs. “them” argument of transposing the political and economic power purveyor. Stated alternatively, who ever “them” might be, what ever political and economic power “them” might have, should be given to “me” [Warren] as with the power moved from “them” to “me” allows “me” to pursue the notional world of “me” as exclusive power has been transferred to “me”. That exclusive power transferred to Warren to shape her world is better than diffused power which results in Warren not being able to pursue her perfect world.

All and all, Warren’s argument is merely the classic debate position as outlined by Thomas Sowell: a notional proposition is put forth as fact, the notional proposition is then argued to be an empirical fact, the notional proposition is delivered through verbal virtuosity, and the notional proposition ends merely in one [Warren] painting the world in one’s own self image [the self image of Warren]. (3)

If James and Jane Goodfellow feel that politicians dupe them, James and Jane really need to look further into notional propositions put forth as fact.

Notes:

(1) (2) Anarchy, State, and Utopia, Robert Nozick

(3) Intellectuals and Society, Thomas Sowell

Government planned regulation and over regulation as a job creator? Huh?

‘ "I think the answer is no," Ellison said when asked if he believes regulations kill jobs. "And here is why: When we talked about increasing fuel efficiency standards, the industry responded, and they need engineers and designers and manufacturers, and they need actually more people to help respond to the new requirement."

"I believe if the government says, look, we have got to reduce our carbon footprint, you will kick into gear a whole number of people that know how to do that or have ideas about that, and that will be a job engine. I understand what you mean, because if anything adds a cost to a business, you could assume that that will diminish that business's ability to hire. But I don't think that's actually right. I think what businesses want is customers and what -- if they are selling product, if they have a product to sell they will do well even if they have some new regulations to meet," the Congressman said.’ (1)

For a moment examine Rep. Ellison’s economics. “I understand what you mean, because if anything adds a cost to a business, you could assume that that will diminish that business's ability to hire. But I don't think that's actually right“. OK, and an increased cost is not a factor of production due to what? “I think what businesses want is customers and what -- if they are selling product, if they have a product to sell they will do well even if they have some new regulations to meet". Hence cost is a non-factor in production and firms merely need to “want customers” and product is sold regardless of cost.

That’s it, is it? Amazing economic breakthrough!

Therefore we need to throw out the following economic axions:  regulation is a form of tax, regulation is generally a limitation on private property rights, capital and human capital migrate to the environment of lowest tax and lowest regulation, overtime most capital and most human capital migrates to the environment of lowest tax and lowest regulation.

Here is a another gem from Rep. Ellison and regards to his breakthrough work in the field of economics: “When we talked about increasing fuel efficiency standards, the industry responded, and they need engineers and designers and manufacturers, and they need actually more people to help respond to the new requirement”. Hence additional resources are required [“…need engineers and designers and manufacturers…”]. Apparently those resources appear magically and have no effect on other recourses with alternative uses within a macro economy. According to Ellison we merely throw out the current economic axiom that we live in a world of scarcity, there is never enough of anything to satisfy all those who want it, hence a rationing agent must be introduced which is price in a free market economy. That the allocation of scarce resources with alternative uses is merely a fallacy. You merely regulate allocation!

Tax comes in many forms including regulation. Regulation besides acting as a tax is also a form of central planning. Maybe Rep. Ellison should consider the following:

(1) A tax levied on corporate profit reduces the care and effort owners put into its operation, since part of the return that would have been received by owners will go to the state. Defacto, private owners of the corporation are saddled with a shirking partner, the state, which takes part of the revenue and provides none of the effort to improve the firm’s return. Consequently the greater is the corporate tax rate, the greater the incentive for corporate owners and management to pursue the “quiet life”. - Harold Demsetz, From Economic Man to Economic System, page 158.

(2) This way lies charlatanism and worse. To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.

But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. - F.A. Hayek, from the essay The Pretense of Knowledge.

(3) Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do-- and nothing is more unpredictable.

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. - Thomas Sowell

H/T: Our Dinner Table blog

(1) http://www.realclearpolitics.com/video/2011/10/09/dem_congressman_keith_ellison_regulations_create_jobs.html

ObamaCare: Hayek's central authority paradox

The Paradox
Many argue that as an economy becomes larger and more complex that a central authority needs to handle the economic decisions. In other words, central planning is necessary as the large economy and complex economy appears as chaos and the apparent chaos needs “organized”.

F.A. Hayek pointed out and argued successfully that as an economy becomes larger and more complex that decentralized decision making by individuals is the route to pursue. That no central authority is capable of gathering all the knowledge necessary to run a dynamic economy. Hayek was proven correct by the dismal results of the former Soviet Unions and their central planning. Hayek pointed out that the mundane knowledge of households and firms (decentralized authority) is the correct way to handle large complex economies. (1)

That it’s a paradox that as size grows and what some view as chaos that needs organized by a central authority is exactly opposite in that decentralized authority is the route. The chaos is not chaos. Apparent chaos is an economy based on price signals and the mundane knowledge of the individual households and firms is the best and most timely knowledge base to react to the price signals.

Large Central Authority and Large Mistakes
However, what gets little press time in the above Hayek argument is the sub-topic he raises about size and mistakes. That a centralized authority would be by definition absolutely enormous. The enormous centralized authority has to make assumptions leading to plans. If the assumptions are poor or incorrect, then the mistakes are of the enormous variety affecting many. If decision making is decentralized, then large numbers of households and firms make plans also based on assumptions. At any one time good and poor plans are devised. However, in the decentralized model only small decentralized mistakes occur affecting few.

Larger and Larger Government (Government Creep)
If one takes Hayek’s centralized authority with its inability to collect complete and timely knowledge, then takes the poor plans leading to enormous mistakes proposition, then larger and larger government becomes more apt to fail due to partial and untimely knowledge leading to poor assumptions leading to plans that lead to enormous mistakes. One might point to the recent $800 billion stimulus as a plan based on partial and untimely knowledge leading to poor assumptions leading to plans that lead to enormous mistakes. When the enormous mistake occurs many are harmed e.g a 17.3% u6 unemployment measurement.

Running in the Background
As government enlarges as a percentage of the economy then of course the centralized decisions of government increase as well. Hence in the foreground we have a decentralized private sector functioning within an economy based on price using mundane up to the minute information to devise plans. Functioning in the background is a centralized authority (government) based on partial and untimely knowledge leading to poor assumptions leading to plans that lead to enormous mistakes.

Centralizing Authority in the Health-Care Sector of the Economy
Health-Care is currently a decentralized mundane dynamic knowledge sector being replaced by ObamaCare which is a centralized authority based on partial and untimely knowledge leading to poor assumptions leading to plans that lead to enormous mistakes.

It would likely be Hayek's contention that problems occurring within an economic sector, what ever those underlying reasons are regarding the perceived problems, the underlying reasons for the problems are not solved by applying centralized authority based on partial and untimely knowledge leading to poor assumptions leading to plans that lead to enormous mistakes.



Notes:

(1)Hayek: His Contributions to the Political and Economic Thought of out Time, Butler and Riggenbach

ObamaCare: more on categorical risk management

As previously discussed, households and firms exercise incremental risk management decisions on a cost-benefit basis regarding the implementation of increased levels of risk management. Conversely, institutions such as government agencies, public interest private organizations, and public interest movements exercise categorical risk management with decisions based on a zero cost basis with the incentive being purely benefit based. (1)

A short review:

(a) Categorical risk management appears when the "cost" component of the cost-benefit approach to risk management is born by an exogenous entity. That is, when the institution making risk management decisions has no cost basis they opt for categorical risk management. The implicit assumption to categorical risk management is that no risk can be taken. Items and situations must be absolutely safe. (2)

(b)What institutions have no cost basis, exercise categorical risk management, and make the assumption that absolute safety must exist? Government agencies, public interest private organizations, and public interest movements have no cost basis and exercise categorical risk management. The cost basis used by these organizations is taxes, donations and in some cases law suit proceeds (using other people's money).


(c) How does this difference in incremental risk management and categorical risk management relate to ObamaCare? Beyond ObamaCare being a price fixing scheme, the health-care reform legislation comes from and sponsored by the same group of institutions that have the mind-set of categorical risk management. The mandated coverages, deductibles, co-insurance requirements, the requirement everyone must buy coverage or else be fined, etc. comes from the exact same organizations that perceive absolute safety at any cost. In other words, the absolute coverage mandates, the exercise of categorical risk management, the deletion of incremental risk management, is due to the years and years of making risk management decision with other people's money.

(d) Hence one of the drivers of the future increased cost of health-care via ObamaCare, which is becoming increasing evident, is in fact due to the framers of such legislation exercising categorical risk management based on their prior experience of of using other people's money, leading to incentives to produce purely benefit based items with disregard to cost-benefit incremental risk management.

One of the best examples of categorical risk management appeared last week that might help the reader better understand categorical risk management and how the framers of ObamaCare used categorical risk management that will drive up health-care costs in the short, medium, and long run.

USA Today published an article 09/01/2010 entitled Kid-in-car warning systems urged.

"Safety advocates are urging Congress and regulators to force carmakers to install warning systems that would prevent distracted parents from leaving children in cars, preventing heatstroke deaths."

"At least 41 children have died already this year in hot cars, more than any previous year at this point. August was the deadliest month on record, according to the advocacy group Kids and Cars." (3)

A child's death is tragic beyond belief. However, these children died due to "distracted parents"?
What exactly is the trend and scope of this particular risk of "distracted parents"? Five (5) children died in 1990 of unattended vehicle heatstroke deaths and forty one (41) have died of unattended vehicle heatstroke death in 2010. (4)

The article goes onto report "From 1998 through 2009, 51% of the deaths involved children forgotten in cars, 30% were children playing in unattended vehicles and 18% were intentionally left in cars, says Null". (5) Forgotten children, children playing unattended, and children intentionally left in cars are not exactly the components of the concept of "distracted parents".

As you can see, the categorical risk management being advocated is the concept that complete and absolute safety must occur. Who would be advocating such categorical risk management? The National Highway Traffic Safety Administration (government), Kids and Cars President Janette Fennell, and Consumer Federation of America and Advocates for Highway and Auto Safety. You guessed it, entities that have zero cost basis and advocate total safety (benefit) regardless of cost. That is, when you have no cost basis in risk management (using other people's money) your incentive to produce the product of risk management is no longer cost-benefit based. The incentive becomes purely benefit based. That is, the public must be made safe at any cost. Even safe from "distracted parents" leaving children in unattended vehicles.

What would such a system cost to produce this "absolute safety"? Is the system available? No cost estimate was forth coming and as far as the system: "Automakers say it's not as easy as it sounds. Using sensors to detect heat, heartbeats and/or the weight of children can be an inexact science, as is deciding when to sound alarms". (6)

Hence we have an unknown cost to produce a non-reliable system. The cost is not a consideration in the least and absolute safety is not achieved. Categorical risk management at it best!

Enter incremental risk management. The cost of "Safety advocates are urging Congress and regulators to force carmakers to install warning systems..." would be a cost added to each vehicle manufactured. Who will oversee such systems and at what additional cost? Do all vehicles have children within them all the time? What about single people that rarely if ever have children in the vehicle? What about commercial vehicles that rarely have children within the vehicle? What about the vast majority of parents that are not "distracted" when it comes to leaving children in a vehicle? Should the overwhelming amount of situations, that yield no heatstroke death, incur an added cost that makes the marginal situations absolutely safe from "distracted parents"? Is the real risk associated with a very, very marginal amount of "distracted parents"? Is the risk based in responsibility, planning, and common sense? Should the responsible, common sense minded, non-distracted parent be able to opt-out? Or is the best course of action to rely on those spending other people's money, that suffer no cost, and advocate only the benefit of absolute safety?

The reason categorical risk management is a necessary study within the field of risk management is: how it costs you, the household or firm, added expense in the quest of absolutes. Now think about ObamaCare. The same categorical risk management process was used by the proponents/framers of ObamaCare. That is, absolute coverage for all with an absolute fine for non-purchasers. An absolute coverage design exists that produces the one size fits all approach of low deductibles, low co-pays, and expanded scope of coverage. Absolute government intervention within a private sector based on absolute price controls that end in quantitative and qualitative reductions in supply. The absolute addition of participants to Medicaid roles. A plan to create absolutes regardless of cost.

One fine point about categorical risk management and its absolutes is that someone or some organization must oversee the absolutes. One must not forget that the concept of "regardless of cost" comes with oversight. Oversight, especially government oversight, costs even more money. Oversight by government is produced through highly paid bureaucrats in a highly rigid manner (central planning). Don't forget the flow chart pictured below that depicts the organizational aspects of ObamaCare delivered through oversight of categorical risk management thinking regarding absolutes.

Hence ObamaCare is merely unknown costs to produce a non-reliable system (rationing due to qualitative and quantitative reduction in supply) managed through central planning through categorical risk management. Brilliant!




(1)http://thelastembassy.blogspot.com/2010/08/obamacare-error-of-categorical-risk.html

(2)Applied Economics, Thomas Sowell, pages 144 - 145

(3) (4) (5) (6)http://www.usatoday.com/MONEY/usaedition/2010-09-01-hotcars01_ST_U.htm

ObamaCare: consequences, unintended consequences and hidden consequences

ObamaCare, the unread, un-debated , and poorly crafted legislation has immediately yielded consequences.

We need to examine the immediate consequences, immediate unintended consequences, and the continuation of consequences and unintended consequences. Once we examine the self evident consequences we can then seek hidden consequences.

What kind of consequences and unintended consequences have already occurred and what hidden consequences can one expect as time passes?

News stories will surely rage on as the consequences and unintended consequences continue to mount. Over time the unintended consequences will begin interacting with one another creating yet a new set of unintended consequences. Then all the unintended consequences will begin to cascade and create a seemingly insurmountable economic mess.

However, hidden consequences need examined as well.


Why are there going to be Unintended Economic Consequences?

The ObamaCare legislation fails a series of important economic axioms and fails a series of important insurance axioms. The major axioms violated by ObamaCare is that the plan is the world's most expensive and complicated solution that does not solve the problem. ObamaCare is a scheme to allocate scarce resources to competing ends through price fixing which merely causes non-price rationing (time/quality). (1) (2) Also, the risk management matrix of insurance being applied to low frequency/high severity risk is totally mismanaged. (3)

The correct solution would have yielded the simplest and least expensive solution that actually solves the problem. The correct solution would have allocated scarce resources to competing ends through a free market based on price as the only logical rationing agent. The correct solution would have applied insurance to its most efficient area which is low frequency and high severity risks.

It should be clear to all that violating economic and insurance axioms sets a stage for a train wreck. The violations listed above are a mere sampling of axioms broken. The list of economic and insurance errors within the legislation creates a laundry list. Violating sound economic and insurance principles yields unpleasant unintended consequences.

Put aside economic and insurance axioms for a moment and purely look at ObamaCare from a consumer purchase perspective: (a) the consumer has been warned for years to "read their insurance policy" before purchasing the policy, (b) understand your insurance before you purchase the insurance, (c) ask questions before you purchase insurance, (d) fit the insurance to your particular need for insurance. ObamaCare violates every basic consumer purchasing guideline.

What are the immediate Consequences and Unintended Consequences?

Mr. Obama hadn't put his pen down after signing the poorly crafted legislation into law when the consequences and unintended consequences began. Here is a short sampling:


(a) not all components of the plan where scored by the Congressional Budget Office (CBO) and hence any deficit savings referred to were immediately lost when additional components were added and a $260 billion dollar deficit increase appeared over the next 10 years. Hence an already widening deficit ending as national debt puts the U.S. in a more precarious financial situation, (4) (5) (6)


(b) the medicare physician fee schedule change aka "Doc Fix" was not added into the CBO calculation by design. Hence add another $371 billion to the deficit over the next 10 years. More debt to an already out of control deficit and consequently national debt, (7)


(c) authorizes the hiring of 16,000 additional IRS agents to enforce the rules yet no enforcement mechanism was written into the legislation. We then have 16,000 more public employees with no mechanism for enforcement, (8) (9) (10)


(d) AT&T, 3M, Deere & Co., Caterpillar Inc., AK Steel, Valero Energy and Verizon by law had to immediately restate earnings to reflect the present value of their long term health liabilities as well as the higher taxes. The total amount is estimated at $14 billion once all companies write down earnings. Companies had been incentivized through the tax code to provide benefits to retired employees. That tax incentive has been removed. Retired employees with health-care benefits and drug benefits provided by their x-employers will likely be cut loose by smaller employers and hence forced to purchase such coverage themselves. (11) (12) (13)

(e) your freedom to choose different health care plans has been extremely curtailed and mandated coverage elements must be included in your plan regardless of your needs. The most ridiculous being that single men and women who can't have children must still have pediatric services included in their plan and pay the premium to fund the benefit. Further, the reduction in available deductibles, the mandated inclusion of preventative benefits and the many mandated coverages will force insurance cost to rise significantly, (14)


(f) an additional 2.3% tax is imposed on medical device makers and an annual tax of 2.3 billion will be applied to drug makers. When you increase the tax on something you get less of that item. Medical devices that could save your life or a drug that could save your life will now be curtailed,
(15) (16)

(g) the mandate of requiring everyone to buy health insurance was immediately challenged by a series of state attorney generals as unconstitutional. (17) The U.S. Constitution has no clause requiring a citizen to buy any particular product. Will you be required to by a vehicle from GMC next?


Will there be more Unintended Consequences?

ObamaCare's 3000 pages are basically an outline. The legislation authorizes over 100 new government departments that will then write the rules and regulations. That is to say, ObamaCare is an attempt to centrally plan a once free market through rules and regulations. Planned economies always fail as they attempt to plan what were once millions of daily individual decisions made in each individuals self interest. Each individual made decisions based on the least expensive simplest solution that actually solved their individual problem.


The mountain of rules and regulations that are about to appear will attempt to duplicate the workings of a free market. The "control" of the individual and his/her individual decisions that existed with in a free market is now replaced with "control" being mandated and assumed by a central authority aka government. The attempted central planning is no different than the former Soviet Unions attempts to centrally plan. That somehow the central government has "special knowledge" that you and other individuals do not possess and hence this special knowledge replaces the individuals self interest based decisions. Centrally planned economies result in vast shortages in many areas while creating mass surpluses in other areas.

Hidden Consequences

Hidden consequences are those economic undercurrents, those economic trends and economic phenomena acting in the background.

There lurks plenty of hidden economic consequences. However for this discussion think of these three factors acting in the economic shadows:

(1) over 100 new federal government departments created to handle a command and control market for health-care and health insurance,

(2) 16,000 new IRS agents to enforce government mandates,

(3) the unionization of the personnel in (1) and (2) above.


Consider this economic phenomena: the tax increases added to medical device manufacturers and drug makes will be passed onto consumers. Its an economic fact that input costs, and tax is an input cost, is always reflected in the final price of the producer. Hence the consumer of a product or service ultimately pays any tax placed on the producer.

Now consider this economic phenomena as described by William Graham Sumner is his 1883 essay The Forgotten Man:


"Sometimes people go on to notice the effects of trades-unionism on the employers, but although employers are constantly vexed by it, it is seen that they soon count it into the risks of their business and settle down to it philosophically. Sometimes people go further then and see that, if the employer adds the trades union and strike risk to the other risks, he submits to it because he has passed it along upon the public and that the public wealth is diminished by trades-unionism, which is undoubtedly the case. " (18)

What Sumner is explaining is an economic phenomena in the private sector. Unionization of the public sector had not occurred in 1883. However, just like taxes being assessed to a producer and ultimately transferred to the consumer, the cost of unionized labor is transferred from the producer to the consumer.

Now think about the difference between the private sector producer negotiating with unionized labor and the public sector negotiating with unionized labor. What incentive exists for the private sector producer to negotiate with unions vs. the incentive that exists for the public sector to negotiate with unions? That is, do the incentives differ between private and public entities when negotiating with unions?

William Graham Sumner and Milton Friedman


If we take Sumner's theory that the cost of unions to the producer is consequently a cost passed onto the consumer, then the cost of unions in the public sector is passed onto the tax payer. Then is there a difference in the magnitude of the "transfer of cost" of union labor in the private and public sectors?



The magnitude of the transfer of cost of union labor in the private and public sectors is related to Milton Friedman's four categories of spending. In other words, incentive exists in the private sector to negotiate for the best price for union labor. In the public sector there is less incentive to negotiate for the best price therefore causing a greater transfer of cost. The less the incentive to negotiate with union demands surely affects the magnitude of the transfer cost of union labor. Why is there less incentive in the public sector?

The incentive level between private and public sector negotiations with union labor costs lies within Milton Friedman's four ways that money is spent:

The first and most common way in the private sector is people spending their own money on themselves. In this case, the buyer is interested in both quality (the best product or service that he can afford) and value (getting it at the best price) because he is both the producer of the wealth being spent and the consumer of the good or service being procured.

The second way is when people spend their own money on others (such as gifts). Here they are still concerned about value (it's their money), but less concerned about service quality as they are not the consumer.

The third way is spending other people's money on yourself. Think of the rich man's girlfriend who buys herself the nicest dresses in the store on his credit card without even looking at the tag. She wants quality, but value is irrelevant since she sacrifices nothing.

The fourth way is when people spend other people's money on other people. In this case, the buyer has no rational interest in either value or quality. Government always and necessarily spends money in this fourth way. This guarantees inefficient public spending because the spenders have no vested interest in efficiently allocating those funds.

Public sector money falls in the fourth way of spending. Bureaucrats spend your tax money when negotiating with federal workers that are almost all unionized. In other words, other people are spending other people's money on other people. Since no rational interest exists in either value or quality, we find that the union employees within government have negotiated large salary, benefit, and pension packages.

Hence Sumner and Friedman are correct. Much of their correctness lies in the fact that today public sector employees total compensation far exceeds that of private sector employees. (20)That is, over time the fourth category of spending has benefited public sector unions and the enormous cost has been passed onto the consumer which is the tax payer.

Therefore we have a hidden economic phenomena at work within ObamaCare. Those public sector employees charged with overseeing the centrally planned program known as ObamaCare will create a dynamic, continuous, shadow cost driver. The unions representing these public sector employees will push as hard as ever for compensation enhancements. The compensation enhancements will be approved just as they have in the past due in part to Friedman's fourth category of spending. And as Sumner explained those compensation enhancements will be passed onto the consumer (taxpayer).




(1)http://www.washingtonpost.com/wp-dyn/content/article/2010/03/14/AR2010031401389.html

(2)http://online.wsj.com/article/SB10001424052702304871704575159940357375132.html

(3)http://thelastembassy.blogspot.com/2010/03/socialized-medicine-scheme-trickle-up.html

(4)http://www.gop.com/index.php/comms/comments/obamacare_quick_facts/

(5) http://www.investors.com/NewsAndAnalysis/Article.aspx?id=527363

(6)http://article.nationalreview.com/429092/an-off-budget-office/thomas-sowell

(7) http://www.gop.com/index.php/comms/comments/obamacare_quick_facts/

(8) http://thehill.com/blogs/on-the-money/domestic-taxes/87697-republicans-assail-irs-provision-in-health-care-bill-

(9)http://www.newsmax.com/InsideCover/Obamacare-Democrats-healthcare-IRS/2010/03/18/id/353209

(10)http://online.wsj.com/article/SB10001424052702304370304575152181030785348.html

(11) http://online.wsj.com/article/SB10001424052748704100604575146002445136066.html

(12)http://www.smartmoney.com/investing/economy/congress-hates-capitalism-it-seems/

(13) http://online.wsj.com/article/SB10001424052748704100604575145981713658608.html

(14) http://www.investors.com/NewsAndAnalysis/Article.aspx?id=528137

(15) http://www.smartmoney.com/investing/economy/healthcare-change-will-leave-you-with-less-change/

(16)http://farrmiller.com/blog/?p=323

(17)http://www.ameripac.org/original-articles/states-wage-constitutional-obamacare-legal-war/

(18) http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle=1654&layout=html#chapter_108194

(19)http://newsgroups.derkeiler.com/Archive/Soc/soc.history.medieval/2006-05/msg00040.html

(20)http://mjperry.blogspot.com/2010/03/two-americas-public-vs-private-sector.html