Voting With Your Feet Against Disastrous Climate Change Policy

By Deneen Borelli
November 12, 2009

It’s time to kick those expensive kicks, black Americans.  Nike and Timberland aren’t working in your best interests.

Saying goodbye won’t be hard to do since these companies want to eventually make it impossible to afford their shoes.

Nike and Timberland are affiliated with the Business for Innovative Climate and Energy Policy (BICEP) coalition, which wants to unilaterally impose a risky “cap-and-trade” regulatory scheme on our nation.  This would raise prices on virtually everything, with costs falling the hardest on those who can least afford it.

To disrespect consumers in this way is reason enough to take your business elsewhere, but it gets worse.  While asking us to tighten our belts, these companies are going to be making their shoes in countries where they can skirt the laws they want enforced here.

Essentially, cap-and-trade is a tax on fossil fuels.  Businesses, in theory, will convert to alternative energy sources rather than pay higher costs for oil, coal and natural gas.

With wind turbines and solar panels in short supply right now, future suffering is inevitable.  President Obama realizes this, noting in January of 2008 that “under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”  He also casually noted that affected businesses “will pass that money on to consumers.”

A study released by the National Black Chamber of Commerce (NBCC) also suggests cap-and-trade could kill more than 2.7 million jobs a year through 2030.  The liberal Brookings Institution paints no better picture – estimating 1.7 million would be lost annually.

Additionally, the NBCC study says cap-and-trade would reduce the American GDP by $350 billion a year and cost the average worker around $400 while consumer prices rise.

The little guy will suffer most.  The nonpartisan Congressional Budget Office noted “most of the cost of meeting a cap on [carbon dioxide] emissions would be borne by consumers, who would face persistently higher prices for products such as electricity and gasoline… [and] poorer households would bear a larger burden relative to their income than wealthier households would.”

Under cap-and-trade, a policy desired by President Obama, Nancy Pelosi, Harry Reid, Nike and Timberland, it seems the rich will get richer while the poor get poorer.

Nike and Timberland wouldn’t feel the real pain of cap-and-trade restrictions.  The proposal their BICEP coalition wants applies only to the United States.  Nike makes a good deal of footwear in places such as South Korea and Vietnam.  Those countries will not be affected.  Timberland makes shoes in China – another country not willing to inflict cap-and-trade on itself.

Nike recently resigned from the board of directors of the U.S. Chamber of Commerce to protest the business organization’s opposition to the Obama-Pelosi-Reid cap-and-trade scheme.  The Chamber, however, is not opposed to regulating carbon dioxide emissions as much as imposing cap-and-trade restrictions unilaterally.  The Chamber is worried about the United States losing its ability to compete.  Nike and Timberland seem to have put their own interests ahead of America’s.

Placing environmental desires before economic recovery is unpopular.  A recent Public Strategies’ poll found 62 percent of respondents say economic recovery is a higher priority than environmental protection.  A National Center for Public Policy Research-commissioned poll of black Americans found 76 percent held similar views.

In promoting his company’s cap-and-trade policy on the environmental web site Grist, Timberland CEO Jeff Swartz noted “Consumers can now discriminate.”  And they should.  In the face of Timberland, Nike and other companies’ disregard for their customers’ economic well-being, they don’t deserve your hard-earned money.

Many black Americans put a great deal of value on the shoes they wear, but Nike and Timberland don’t appear to put a lot of value in them.  Black Americans should return the favor and buy elsewhere.

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Deneen Borelli is a fellow for the Project 21 black leadership network.  Comments may be sent to DBorelli@nationalcenter.org.

Published by The National Center for Public Policy Research. Reprints permitted provided source is credited. New Visions Commentaries reflect the views of their author, and not necessarily those of Project 21 or the National Center for Public Policy Research.

Obamacare vs. the Working Class

Mises Daily: Thursday, November 12, 2009 by Eric M. Staib

Given the recent announcement that the government’s measure of unemployment has hit 10.2 percent, and given that the official House version of Obama’s healthcare plan, HR 3962, has now passed, a close examination of the effects of “Obamacare” on the labor market is important. It will be no surprise to readers of this site to learn that the Democrats’ bill will seriously harm precisely those poor and uninsured citizens it is ostensibly designed to help. The harm will come by compounding mass unemployment and depriving these citizens of consumption choices.

Obamacare as Labor Tax

According to pages 269–273 of the gargantuan bill, employers of full-time workers will be required to cover at least 72.5 percent of the premium of the least expensive health-insurance plan available that fulfills the bill’s minimum criteria of “acceptable coverage.” In cases in which family coverage is provided, 62.5 percent of the premium is to be borne by the employer. Depending on the specific plan and other variables such as location, this amounts to a direct labor tax of approximately $300 per month for an individual, or nearly $700 for family coverage.

The implication of this increased cost is that workers whose revenue productivity is less than $300 per month higher than their wages will be laid off, or have their hours cut to the level that will classify them as part-time. Ignoring established labor law, the bill leaves the definition of part-time and full-time to the discretion of the Commissioner of Obama’s massive new health bureaucracy. The lower the new “Health Choices Commissioner” sets the threshold in an attempt to maximize the number of people receiving the employer contribution, the more hours of production employers will have to shave off to push their employees under the threshold, and the less those workers will take home in wages each week.

Unfortunately, the bill also requires employers to cover a (smaller) percentage of the premium of the same minimum plan for part-time workers. The effects here are even worse than above, because they weaken the ability of an employer to escape the labor tax by employing his workers for fewer hours. Instead, with a labor tax on part-time workers as well, some low-productivity workers who are currently only working a few hours per week will be forced out of work entirely.

The Burden of Obamacare

We can say, as a mathematical certainty, that this labor tax is a regressive tax. Because the tax is defined as 72.5 percent of the same premium for all workers, that absolute tax will fall more heavily on workers for whom the tax represents a higher percentage of their wages or salary.

To understand this better, we will apply a $300 monthly labor tax to the differences between wages and revenue production for two different workers. If we make the simplifying assumption that a laborer is paid 99 percent of his revenue productivity, we can see that the absolute difference between productivity and wages is larger for high-income workers.

For example, a worker producing $50,000 of revenue per month will be paid $49,500 over the same period, delivering $500 in profit to his employer. A worker producing $10,000 in revenue monthly, meanwhile, will receive $9900, for a difference of only $100. Despite the differences in their absolute return, in a free economy, both laborers are profitable hires and thus employed.

In a post-Obama America, however, only the high-wage worker will be employed, leaving the low-productivity worker out of employment. When a $300 per month charge is added to the cost of employing either worker, it is plain to see that only the high-wage worker’s absolute profit will remain positive.

The firm will continue to make $200 by employing the high-productivity worker, while it will be forced to lay off the low-productivity worker rather than lose $200 by employing him. The Obamacare health tax thus will fall directly on the same employees who are hurt by minimum wage increases: teenagers, the disabled, and disadvantaged minorities.

If they do not wish to be laid off or cut to part-time, these low-productivity workers will accept a lower salary to keep their position and work schedule. Thus, the worker who produces $10,000 monthly will offer to accept a salary of $9700 or less to save himself from a complete loss of employment or cut to part-time. These workers will offer to shift the cost directly onto themselves rather than burdening the employer with it, which would result in their unemployment.

Predictably, though, the Democrats fully intend to “protect” workers from the choice to save their jobs by working for less. Page 273 of the bill stipulates that any amount pledged for the minimum-health-insurance plan that corresponds to a fall in salary or wage will not be considered a contribution at all. Page 310 establishes a $100 per day, per case fine for any privately negotiated fall in wages. Thus, salaries will be locked in at current rates, with any cuts being considered an attempt to subvert the labor tax, and thus being subject to financial penalties.

In reality, this clause is no favor to workers, and instead acts as a wage floor to ensure that the unemployment effect will be immitigable and widespread. Because any drop in wages during the months following the bill’s enactment would be considered a violation of the employer-contribution mandate and therefore would carry heavy fines, literally all wages will be prevented from falling below their current levels.

Implementing these indirect wage floors in literally every industry during a recession is downright ludicrous. During a recession, wages rise and fall in different lines of production to align producers’ demand for laborers with consumers’ demand for the goods each type of labor produces.

In a dynamic market — that is, any market in which people are free to change their minds — different workers’ wages must rise and fall every day to accommodate changing consumer preferences. To prevent this process from taking place is to prevent the structure of production from being corrected.

These wage floors will also hasten the decline of industries that are less valuable to consumers than they were at an earlier time, but that may still be a productive use of resources at a lower price. Businesses in these industries will be unable to legally cut their labor costs to lower their prices and satisfy consumers who are less eager to buy their goods. Without this option, such firms will need to either lay off part of their labor force, or simply go out of business entirely.

Destroying Real Production

It is equally important to consider the other end of the production chain, which is to say the actual output of goods and services. By destroying the demand for marginally productive labor, Obamacare’s labor tax will necessarily destroy that labor’s end product, which is of course marginally-valued goods and services. Thus, it is rational to expect fewer late-night fast food options, less-cleanly hotel rooms, fewer sales associates at retail outlets, and the like.

While these effects may not be as easily visible as a plant closure, they are real losses of consumable utility. Free-market firms produce convenience and extra quality until the point at which it is no longer profitable to do so. Destroying the production of these goods and services would destroy the niceties that capital accumulation and progress allow Americans to take for granted.

The effect of Obamacare on the prices of produced goods is obviously inflationary. Increasing the cost of employing every single laborer by $300 a piece is certain to increase the price of all produced goods. Combining price increases with rising unemployment is hardly a laudable strategy for improving the lives of poor citizens.

Conclusion

The historic passage of HR 3962 by the House of Representatives is not an event to be celebrated. Obamacare will exacerbate the nation’s rising unemployment and will prevent wages from fluctuating according to market demand. Just as with other sectors, a supposedly beneficial social policy hurts the poorest and least-able citizens the most.

Entrepreneurs: The Real “Peace Prize” Winners

Mises Daily: Monday, November 2, 2009 by Chris Brown

We live in ludicrous times of rewarding good appearance for evil action. President Obama is awarded the Nobel Peace Prize while his war efforts intensify. But those who are true promoters of peace need attention, for they will never likely receive such ostentatious recognition for their noble efforts. Such individuals are those who take risks in a world of uncertainty, and who save or borrow capital to start a business. Such entrepreneurs promote peace by serving the customer better than the next entrepreneur through voluntary transactions in the market, rather than commanding bureaucracy in government.

As part of my entrepreneurship courses, I have students who want to start their own business listen to new entrepreneurs discuss their background, their reasons for starting the business, and of their effort to establish the business. Students usually find these speakers fascinating and inspiring, but also come away with a sense of the enormous amount of effort, capital, risk, and uncertainty that is involved in starting a business. Many of these students decide they no longer want to start their own business. They realize that entrepreneurs, too, have a boss: the customer. Mises put it this way: “Ownership of the means of production is not a privilege, but a social liability.”

One speaker, a recent founder of a small Mexican restaurant (which are not common in Australia), saved his money over 20 years and then took out a bank loan of AU$1 million dollars, with his house and car as collateral. It took him over a year to write a business plan, find a suitable location, develop a menu, hire employees, and create marketing materials before he could open to the public.

Some of this time was wasted dealing with local-council–government officials, to whom he had to pay AU$25,000 just to open his restaurant. Delays in approval by government bureaucrats meant paying rent of AU$7,000 a month for several months on an empty restaurant. This entrepreneur said dealing with local government was the most difficult and discouraging battle he had to face. (Getting credit from banks, he said, was not a problem.)

This entrepreneur still works seven days a week, from morning until evening, to get the business established. After six months, and still not at a break-even point, he realized his business is only as good as the next day’s sales. As Mises said, “There is no security and no such thing as a right to preserve any position acquired in the past.” (Human Action, p. 311)

He knows he has to continually innovate through better quality products and services, better management of operations and resources, and more accurate pricing. He also realizes his competitors next door are trying to do the same.

Students inevitably ask him if he would do it again, knowing how difficult it is to establish a business, and after having some of the myths surrounding entrepreneurship contradicted by the founder’s experience. “Definitely,” he confidently responds, “… if you see the risk perhaps you shouldn’t start the business. I was so passionate about Mexican food I saw an opportunity.” This founder is passionate about serving customers Mexican food — an action so simple, so peaceful, and so far removed from force and war.

Such efforts, in my opinion, are not merely bordering on heroic, but are no doubt worthy of a peace prize. I cannot help but point out how absurd it is — in contrast to the voluntary, coordinating, and peaceful actions of entrepreneurs — for virtually any political bureaucrat to receive an award that has anything to do with peace. It is the seemingly small efforts of millions of hardworking, passionate entrepreneurs who make it difficult to understand why a peace prize still goes to someone who lives off the fruits of entrepreneurs’ efforts. Not only does President Obama depend on the force of taxes for his position, but he also decides how much and what to spend on with others’ money. Government merely consumes the efforts and capital of individuals. To award a political bureaucrat for this is to add insult to injury.

President Obama is not only engaged in foreign wars with some nations; he is engaged in economic wars with nearly every nation, including his own, through trade barriers and inflation, which often lead to actual war. Ludwig von Mises provided great insight on this issue. Mises realized the link between foreign trade wars and foreign wars. When countries are trading freely and frequently there is less need to protect them with soldiers and go to war over resources. When entrepreneurs are allowed to engage in production and exchange, the economic incentives to initiate war and conquest are minimized. Mises put this idea succinctly when he wrote: “War is the alternative to freedom of foreign investment as realized by the international capital market.” (Human Action, p. 502)

Murray Rothbard also recognized the likely outcomes of political intervention versus the market process:

It would be almost inevitable for such an autistic world [exchange involving coercion without receiving anything in return] to be strongly marked by violence and perpetual war. Since each man could gain from his fellows only at their expense, violence would be prevalent, and it seems highly likely that feelings of mutual hostility would be dominant. (Man, Economy, and State, p. 101)

Contrast this with the individual sovereignty found in the marketplace. Entrepreneurs only reap profits by offering something that individuals will buy voluntarily. They obviously cannot force anyone to buy their product. If they knew ex ante that their product had guaranteed demand, there would be little risk. And if entrepreneurs do not satisfy the consumer, they take a loss. Sustained losses (without government support) lead to the entrepreneur shutting down unprofitable operations. Government, paradoxically, rewards its losses with more funding and more labor.

In contrast, about the likely social outcomes of the market process Rothbard wrote,

On the other hand, in a world of voluntary social cooperation through mutually beneficial exchanges, where one man’s gain is another man’s gain, it is obvious that great scope is provided for the development of social sympathy and human friendships. It is the peaceful, cooperative society that creates favorable conditions for feelings of friendship among men. (Man, Economy, and State, p. 101)

The more entrepreneurs can engage in peaceful and coordinating actions that try to satisfy demands of consumers, the less likely war is made. Surely, noble entrepreneurs who contribute to the peaceful and voluntary exchange of property as part of the coordinating market process are worthy of peace awards. Political bureaucrats, who act as parasites on the rewards of such entrepreneurs, should be disqualified by their very nature.

[VIEW THIS ARTICLE ONLINE]

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Chris Brown is a lecturer at the Australian Graduate School of Entrepreneurship at Swinburne University. He also centrally plans the Austro-libertarian blog. Send him mail. See Chris Brown’s article archives. Comment on the blog.

SENATOR NOZZOLIO PROPOSES BUDGET CUTTING MEASURES

Last April, when Governor David Paterson and the New York City-controlled legislature adopted a New York State budget that carried a $13 billion increase in spending, I warned the Governor and his colleagues that there would be dire consequences for their actions. Now, NY faces a deficit of nearly $4 billion as a result of their actions.

Clearly, immediate and comprehensive action must be taken to address this massive deficit. That is why my Senate Republican colleagues and I have proposed a budget cutting plan that would close the deficit without raising taxes on our already overburdened New York State taxpayers . Our plan would eliminate over $3.4 billion in excessive spending.

The budget proposal put forward by my colleagues and I is the only savings plan that proposes specific spending reductions to help close the deficit. In cutting state spending, we cannot raise taxes on hardworking New Yorkers or impose costly unfunded mandates on local governments that would force them to raise property taxes. We must control state spending and reduce the tax burden if we want to create jobs and help stabilize the economy.

Specifically, my colleagues and I have proposed:

• Cutting back the $2.2 billion in general fund spending added to the 2009-10 budget by the New York City legislators who controlled the budget process;

• Cutting state agency non-personal services by ten percent to save $480 million;

• Freezing state purchases of recreational lands to save $78 million;

• Freezing planned Medicaid expansions to save $200 million;

• Reinstating welfare and Medicaid anti-fraud protections to save $34 million;

• Cutting Medicaid optional services to save $150 million; and

• Reducing state agency contract balances by five percent to save $300 million.

As a member of the Senate Finance Committee, I will continue to oppose any effort to balance the budget on the backs of Upstate taxpayers just as I opposed the 2009-10 State budget last spring. We need to do more with less and cut government spending, not increase it.

My Senate Republican colleagues and I are fighting to return common sense to State government and enact these cost-saving measures to close the deficit without raising taxes. During these challenging times, New Yorkers all across our State have had to cut back. It is now time for State leadership to make the same tough decisions and comprehensively attack this budget deficit.

Sincerely,

Mike Nozzolio

Senator, 54th District

 

Senate Republican Recommendations For

Cost Cutting and Budget Savings

Review $2.2 billion in General Fund spending added to the 2009-10 Budget by the Legislature for possible reductions.

The SFY 2009-10 budget includes over $2.2 billion in General Fund spending that was added to Governor Paterson’s Executive budget proposal by the Democrat majorities in the Senate and Assembly. In other words, more than $2.2 billion in General Fund spending which was not originally proposed by Governor Paterson was included in the final adopted budget. All of this additional spending was discretionary and was not required under the American Recovery and Reinvestment Act.

Approximately $1.2 billion was used to restore reductions proposed by the Governor in his Executive budget and approximately $1 billion was used to finance new spending. All of these spending items should be immediately reviewed for potential reductions. Freezing all funds for new and increases to current spending programs alone would save hundreds of millions of dollars. In addition, the Democrats in both houses rejected many of Governor Paterson’s proposed legislative changes in the budget that would have saved over $100 million this year. Lastly Governor Paterson proposed $700 million in health care savings initiatives that were not included in the adopted budget which should be revisited.

10% Cut in State Agency Non-Personal Service – $480 million

Efficiency savings of 10% are assumed under this proposal. Selected categories include: equipment spending; employee travel; lease, maintenance and repairs; supplies and materials; telephone services; employee benefits and general state charges and utilities and centralized services. Potential actions include: Freeze all new vehicle purchases; Freeze all new equipment/furniture purchases; Suspend all unnecessary travel for State employees; Limit agency printing to essential services only; Limit agency mailings/postage expenses to essential services only; Eliminate all agency non emergency blackberry/cell phone usage; Turn down the heat in state buildings everyday and not just weekends; Freeze agency spending from state operation reappropriations; Freeze agency spending for employee training; Close agency regional offices; Reduce the size of agency public information offices; Freeze agency spending for conferences; Freeze all pending State rental agreements- new or renewal – to reduce space; Freeze all State agency advertising and marketing spending; Freeze all state agency public information office spending; Eliminate all State agency intern program spending; Freeze all new technology spending; Freeze equipment leases not executed; Freeze nonessential building repairs; Freeze all agency subscription service spending; Freeze agency membership payments for professional entities; Competitively bid State Employee medical/ hospital/ dental programs.

Freeze State Purchases of Recreational Land – Savings $78 million

This proposal would freeze the purchase of additional recreational land by the State. Given the State Fiscal Year (SFY) 09-10 Executive proposal to renege on the State’s current local tax obligation on existing State owned lands, the State cannot continue to purchase land. Current cash balances for this purpose would be transferred from the Environmental Protection Fund.

Freeze Planned Medicaid Expansions – $200 million by 2011-12.

 

All initiatives to expand the State’s Medicaid program should be stopped immediately as the State cannot afford the current program which is the most expansive in the nation. The Paterson administration is seeking to expand eligibility for Family Health Plus (FHP) to 200 percent of the federal poverty level. FHP enrollment in New York is projected to grow by another 128,000 families over the next four years. Expansions in eligibility to the Child Health Plus program should also be reevaluated. Higher Medicaid enrollment and use will add $975 million to the state-taxpayers’ share of Medicaid costs by 2011-12, according to the governor’s financial plan. Meanwhile, federal stimulus aid is supposed to expire the year after next, which will leave New Yorkers to cover more than $3 billion a year now temporarily underwritten by federal stimulus aid.

Reinstitute Medicaid and Welfare Anti-Fraud / Taxpayer Protections – $34 million

 

The adopted budget includes an initiative to “streamline access to coverage”. This “streamlining” of the Medicaid and welfare application process works by eliminating mechanisms designed to protect the taxpayers from fraud, waste and abuse such as the requirement for face-to-face interviews, fingerprinting and asset tests for determining eligibility. All of these safeguards should remain in place to insure that those receiving Medicaid and welfare benefits are indeed eligible under the law.

Cut Medicaid Optional Services – $150 million

The New York State Medicaid program offers nearly 2 dozen optional services not required under the Federal Medicaid program. Reducing the number of optional services to those required by the Federal government would reduce costs. Eliminating all optional services would save the state $150 million.
 
Cut 5% from Select Agency Contract Balances – $300 million

As of September of 2009, the undisbursed balance of existing state contracts totals more than $129 Billion. This proposal excludes the following types of contracts: authority, revenue generating, repayments to state contracts, community project fund, construction, construction related, non general fund, Department of Health, State Ed, and contracts with zero balance. The proposal assumes a 5% reduction in all undisbursed balances, of which 1% would be General Fund savings.

Big Business, “Organized Crime”, and Real Prosperity

by Tommy Davis

I had a fellow state to me that Republicans are for big business and don’t care about the black community. He went on to spew forth how they (the government) should tax the rich and provide tax breaks to the people at the bottom. He seemed to blame the deficient economy and the state of the black community on capitalism and the Republicans. Thus, he voted Democrat.

When street thugs rob at gunpoint to pilfer possessions from another person it is another example of misguided hoodlums who feel that they cannot —and will not— compete for a share in our economy. They believe that they must deprive others of their material goods in order to gain an economic advantage. Armed robbers must continue to commit crimes because their income will only resume through swindle. Lacking the intellectual capital and patience to participate in the free market, they cheat and steal from those who possess wealth.

Time after time the media reports this kind of action and it is justified by shifting the blame to a legacy of slavery, racism, fiscal predicament, or capitalism.

Political speeches about taxing the rich and redistributing their wealth are no different than a robbery that hasn’t yet turned bad. When liberal socialists go after companies who make an honest living and attempt to redistribute their wealth (communism) they are stealing. If big business fails, there are no employees to provide with a tax break because they will lack employment.

As a Republican I understand that businesses manufacture a product that consumers purchase. Therefore, a fair exchange takes place. When those consumers turn around and accuse business owners of making too much money, this is nothing short of envy and wanting to “buy” the cake, eat it, and then want your money back. Also, such folks elect government officials who will penalize companies for being successful by taxing them severely; this is nothing short of criminal —- professional stick-ups that results in loss of capital that translates into unemployment and higher prices.

Entrepreneurs did not become wealthy by swindling citizens out of money. Companies satisfied the consumer by providing a product or service. When Henry Ford mass produced the automobile, the Ford Model T, he provided a manufactured good that pleased the world. We bought it. The Fords got rich. In the process, the company created a middle class who put in the work. In 1913 Henry Ford paid his employees at a rate of $5.00 per day which was the highest wage in manufacturing at that time! Profits were good until competition, coupled with collective bargaining agreements, entered the picture. Vehicles were priced too high and were less efficient than the competition.

Pathetically, now the government (under Democratic control) wants to borrow money from me (the taxpayer) to “invest” into companies “too big to fail”. Rather than provide me with a dividend (at least a discount), they want to sell me the product I help build. That’s like borrowing my car to burglarize my home only to turn and sell me my stuff back.

It doesn’t matter if Obama is president. The community (especially the black community) will still suffer because the problems are self inflicted. Those black folks who voted for Obama just because he’s black are racists and no different from the Southern Democrats who initiated the poll tax to keep white candidates in office and poor blacks from voting despite the possible economic advantage.

He will not “change” the 50 percent school drop-out rate among African-Americans, or the 70 percent illegitimacy rate regarding two parent households in black communities; and he will not transform the high murder rate (over 50 percent) committed by black males in this country.

If blacks do not save, there will be check cashing centers in predominantly black neighborhoods with a five dollar fee rather than commercial banks. There will be corner stores and clothing outlets rather than grocery stores and malls. If the police are too busy, Wal-Mart will never open a store within the city limits.

The same candidates who say that they will create jobs are promoting the very policies that cause businesses to lay off employees and slow production. The same candidates who are soft on crime are the same ones who “prevent” businesses from opening in certain communities.

Governments do not create jobs. Citizens generate employment by starting businesses constructing products that benefit society. They hire the labor to bring this innovation to pass. The government’s job is to supervise fair enterprise—-not socialize. The proper role of supervision is to create an atmosphere for growth. This involves cutting taxes to free up reinvestment capital for business owners; improving public safely, and prohibiting business regulatory fees implemented to raise money.

Time will tell how many government robberies will bring about the fatal wound to our financial prudence. In other words: time will tell which straw will finally break the camel’s back.

Is Emergency Care a Failed Market?

Mises Daily by Eric M. Staib | Posted on 9/24/2009

In response to my recent article on health-insurance mandates, I received many emails from readers who argued that mandates, as unappealing as they may be, are necessary to prevent market failure in emergency medical services.

Specifically, they argued that there is a “free-rider problem” in emergency care because individuals are currently able to visit the emergency room (ER) without insurance or the means to pay, receive care, and then skip out on the bill. Such free riders force the hospital to either accept the losses or spread the costs to other patients. Therefore, the readers reasoned, there is a market failure in that health insurance is under-demanded and ER care is over-demanded, increasing health care costs and dumping them onto those consumers who do purchase insurance and pay for their visits.

As accurate as this common depiction of the symptom is, however, it misdiagnoses the disease. The free-rider problem in ER care is not a market failure, but a government failure. The Hippocratic Oath notwithstanding, hospitals only accept all patients irrespective of their ability to pay because they are required to by government regulations. These laws, which are in place in countries around the planet, result in a simple welfare scheme whereby the costs of the uninsured are transferred to insured patients. With this reality in mind, it is easy to see that the free-rider problem in ER services is not a market failure, but rather a government failure.

A Libertarian Alternative

How, then, would truly free-market hospitals handle patients who are now free riders? There is every reason to expect that these uninsured, mostly low-income people would be treated more humanely and with greater dignity than they are in the current quasi-socialist system.

Without government regulations on their payment collection methods, hospitals would be free to offer more flexible prices and payment options, and to negotiate contracts with individual consumers. Those patients with little financial leverage would be able to form creative payment plans, and those without any savings or insurance could even contract to pay for their services with labor.

Furthermore, in a truly free market for medical care, even patients who intentionally try to skip payments and thus dump the costs on others cannot. This is because, in the absence of supposedly compassionate hospital legislation, to admit oneself or someone else to emergency care is to agree to the terms and conditions of service at that hospital — most importantly, to pay for treatment.

Thus, in the libertarian society, checking out without arranging payment would constitute a violation of contract, and therefore these malicious free riders would be held accountable. In the current situation, however, such predatory patients are subsidized by others in the name of social compassion.

Another advantage of contractual enforcement of payment for ER services on the free market is that it removes hospitals from financial responsibility for those patients who are admitted to the ER by another party while incapacitated. Which party will be held responsible for the hospital bill in each case would be decided by negotiation between the two parties and perhaps even by court arbitration. Which party eventually pays is not important for this matter, though; what matters is that the hospital will be paid either way, and that other patients will no longer be stuck with the bill.

Now that we’ve seen that the free rider problem does not exist in a free market for medical care, we can address other readers’ concern that the profit-driven market process is unsympathetic to the suffering of those patients who are truly unable to pay in any way and can’t afford market insurance, but who shouldn’t simply be left to suffer.

The Market for Free Riders?

To argue that the market discards those it regards as undesirable is to both ignore the prevalence of private charity and deny the existence of the entire public-relations industry. Indeed, setting socialist doctrines aside, we can see that affectionate treatment of the poor and downtrodden is actually a very profitable endeavor.

In every market, firms of all sizes expend resources to maintain a positive public image. There are few actions better received by a community than healing and treating their vulnerable and disabled at a discounted or zero price. As such, it is absolutely foolish to believe that hospitals would not take in such customers for treatment.

In fact, if we examine the nature of prices and income differentials closely, we arrive at another instance of destructive government intervention. Price discrimination of almost every form is illegal in almost every market, and health care is certainly no exception.

Price discrimination may feel unfair, but if allowed by law it can lead to much more efficient market outcomes and higher market quantities of all goods and services. Using price discrimination, hospitals would be free to provide additional and cheaper services to low-income consumers without decreasing the price for high-income consumers.

Price discrimination would benefit the hospitals as well, because they would not only increase the quantity of services they perform and add potentially loyal new customers, but would also be able to increase the price of services to their high-income patients without losing their business.

Viewing the converse of this market outcome, then, we can observe that laws against price-fixing necessarily decrease quantities of goods and services, and squeeze marginal consumers out of the market. In the health care market, this means that those who are most in need of low-cost care are forced out of the market in the name of social justice.

In contemplating competition between medical service providers, we can deduce that the market will indeed treat people who are now free riders with dignity, but that those consumers will no longer actually be free riding on others. Instead, they will provide a valuable good to society — namely, the satisfaction that comes with supporting others in their time of need. While it may seem strange to think of this as an economic good, it certainly is, as evidenced by consumers’ willingness to forgo other forms of consumption in favor of charity.

While caring for these patients would still redistribute costs to other consumers, it would do so only to the extent that these paying consumers would tolerate it by continuing to purchase care and services. That is to say that consumers’ choices between competing hospitals’ services would, just as in any market, force those hospitals to provide equilibrium quantities of charitable care.

This efficient market quantity would therefore be determined by the charitable inclinations of insured and higher-income patients. And in a truly libertarian market, which would lack taxes, we can say that these individuals would inarguably be more giving of their own income.

Perhaps the best feature of the free-market process in a libertarian health market is that it would allocate charitable funds to their best use. In our emergency services case, this axiom of market behavior implies that hospitals will spend their charity budgets on the most destitute and impoverished patients.

Whereas government funds are allocated according to political cronyism and electoral opportunism, free-market hospitals will always attempt to maximize the benefit to their public image — nothing more than profit maximization — by providing for those patients who are most in need.

Conclusion

With rigorous examination, we can see that emergency medical services function like any other market, and that the free-rider problem is the result of a government failure. Furthermore, we can safely expect that the free market would treat the most deserving of these free riders more humanely than does the supposedly compassionate central health administration.

[VIEW THIS ARTICLE ONLINE]

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Eric Staib is an economics major at the University of Oklahoma. Send him mail. See Eric M. Staib’s article archives. Comment on the blog.

Liberal Lies About National Health Care: Second in a Series

by  Ann Coulter

With the Democrats getting slaughtered — or should I say, “receiving mandatory end-of-life counseling” — in the debate over national health care, the Obama administration has decided to change the subject by indicting CIA interrogators for talking tough to three of the world’s leading Muslim terrorists.

Had I been asked, I would have advised them against reinforcing the idea that Democrats are hysterical bed-wetters who can’t be trusted with national defense while also reminding people of the one thing everyone still admires about President George W. Bush.

But I guess the Democrats really want to change the subject. Thus, here is Part 2 in our series of liberal lies about national health care.

(6) There will be no rationing under national health care.

Anyone who says that is a liar. And all Democrats are saying it. (Hey, look — I have two-thirds of a syllogism!)

Apparently, promising to cut costs by having a panel of Washington bureaucrats (for short, “The Death Panel”) deny medical treatment wasn’t a popular idea with most Americans. So liberals started claiming that they are going to cover an additional 47 million uninsured Americans and cut costs … without ever denying a single medical treatment!

Also on the agenda is a delicious all-you-can-eat chocolate cake that will actually help you lose weight! But first, let’s go over the specs for my perpetual motion machine — and it uses no energy, so it’s totally green!

For you newcomers to planet Earth, everything that does not exist in infinite supply is rationed. In a free society, people are allowed to make their own rationing choices.

Some people get new computers every year; some every five years. Some White House employees get new computers and then vandalize them on the way out the door when their candidate loses. (These are the same people who will be making decisions about your health care.)

Similarly, one person might say, “I want to live it up and spend freely now! No one lives forever.” (That person is a Democrat.) And another might say, “I don’t go to restaurants, I don’t go to the theater, and I don’t buy expensive designer clothes because I’ve decided to pour all my money into my health.”

Under national health care, you’ll have no choice about how to ration your own health care. If your neighbor isn’t entitled to a hip replacement, then neither are you. At least that’s how the plan was explained to me by our next surgeon general, Dr. Conrad Murray.

(7) National health care will reduce costs.

This claim comes from the same government that gave us the $500 hammer, the $1,200 toilet seat and postage stamps that increase in price every three weeks.

The last time liberals decided an industry was so important that the government needed to step in and contain costs was when they set their sights on the oil industry. Liberals in both the U.S. and Canada — presidents Richard Nixon and Jimmy Carter and Canadian P.M. Pierre Trudeau — imposed price controls on oil.

As night leads to day, price controls led to reduced oil production, which led to oil shortages, skyrocketing prices for gasoline, rationing schemes and long angry lines at gas stations.

You may recall this era as “the Carter years.”

Then, the white knight Ronald Reagan became president and immediately deregulated oil prices. The magic of the free market — aka the “profit motive” — produced surges in oil exploration and development, causing prices to plummet. Prices collapsed and remained low for the next 20 years, helping to fuel the greatest economic expansion in our nation’s history.

You may recall this era as “the Reagan years.”

Freedom not only allows you to make your own rationing choices, but also produces vastly more products and services at cheap prices, so less rationing is necessary.

(8) National health care won’t cover abortions.

There are three certainties in life: (a) death, (b) taxes, and (C) no health care bill supported by Nita Lowey and Rosa DeLauro and signed by Barack Obama could possibly fail to cover abortions.

I don’t think that requires elaboration, but here it is:

Despite being a thousand pages long, the health care bills passing through Congress are strikingly nonspecific. (Also, in a thousand pages, Democrats weren’t able to squeeze in one paragraph on tort reform. Perhaps they were trying to save paper.)

These are Trojan Horse bills. Of course, they don’t include the words “abortion,” “death panels” or “three-year waits for hip-replacement surgery.”

That proves nothing — the bills set up unaccountable, unelected federal commissions to fill in the horrible details. Notably, the Democrats rejected an amendment to the bill that would specifically deny coverage for abortions.

After the bill is passed, the Federal Health Commission will find that abortion is covered, pro-lifers will sue, and a court will say it’s within the regulatory authority of the health commission to require coverage for abortions.

Then we’ll watch a parade of senators and congressmen indignantly announcing, “Well, I’m pro-life, and if I had had any idea this bill would cover abortions, I never would have voted for it!”

No wonder Democrats want to remind us that they can’t be trusted with foreign policy. They want us to forget that they can’t be trusted with domestic policy.

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Ann Coulter is Legal Affairs Correspondent for HUMAN EVENTS and author of “High Crimes and Misdemeanors,” “Slander,” ““How to Talk to a Liberal (If You Must),” “Godless,” “If Democrats Had Any Brains, They’d Be Republicans” and most recently, Guilty: Liberal “Victims” and their Assault on America.

Jimmy Carter’s Record on Race

Guess whom Carter called “the essence of the Democratic Party”? 

Originally Published on NewsReal Blog  by Ben Johnson

As Jimmy Carter portrays conservatives as violent racists, it’s worth remembering Carter’s own history of racial demagoguery. Carter campaigned for governor of Georgia as a self-proclaimed “redneck,” in an era when that word had pronounced racial connotations. His campaign distributed a photo of his gubernatorial opponent Carl Sanders being embraced by black basketball players to a Ku Klux Klan rally. Carter pledged to invite Alabama’s infamous segregationist governor George Wallace to Georgia if elected. He once said he was “proud” to have the equally segregationist Lester Maddox as his lieutenant governor following the 1970 election, calling Governor Axe-handle “the essence of the Democratic Party” (which he was).

In 1972, Carter promised – then broke his promise – to the newly crippled Wallace to nominate or second him at the Democratic National Convention in Miami, jumping at the opportunity to give the nomination speech for Henry “Scoop” Jackson (and the national exposure that would bring; see Obama, Barack).

 

According to his son, Jack Carter, the man from Plains had his surrogates lobby aggressively to become ultra-leftist George McGovern’s vice president. By 1976, “Jimmy Who” had traded his “redneck” status for a pose as the “Born Again” exemplar of the New South.  (His religiosity poll-tested well. He actually won more Southern Baptist votes than Ronald Reagan in 1980.)

Since the country’s near-unanimous repudiation of his presidency, Carter has lashed out at evangelical Christians, conservatives, the late Pope John Paul II, “Neoconservatives,” and anyone else who — well, everyone who isn’t a Southern “progressive” Baptist who admires Liberation Theology. In his 2005 book, Our Endangered Values, he described “fundamentalists” as people who believe “they are right and that anyone who contradicts them is ignorant and possibly evil.” They tend “to demagogue emotional issues.” Moreover, “They are often angry and sometimes resort to verbal or even physical abuse against those who interfere with the implementation of their agenda.”

That sounds very much like the Obama administration’s race-baiting surrogates, including Jimmy Carter, who was willing to stoke those fires when it worked to his advantage.

(For more, read my retrospective of his presidency, probably the second-worst in our history; and my review of Our Endangered Values.)

Why I Will not Vote the Democratic Ticket

“We regard the Reconstruction Acts (so called) of Congress as usurpations, and unconstitutional, revolutionary, and void.” – Democratic Party Platform 1868

1880 VOTER HANDBILL 

     “I am opposed to the Democratic Party, and I will tell you why.  Every State that seceded from the United States was Democratic State.  Every ordinance of secession that was drawn was drawn by a Democrat.  Every man that endeavored to tear the old flag from heaven that it enriches was a Democrat.  Every enemy this great Republic has had for twenty years has been a Democrat.  Every man that shot Union soldiers was a Democrat.  Every man that starved Union soldiers and refused them in the extremity of death of crust was a Democrat.  Every man that tried to destroy this nation was a Democrat.  Every man that loved slavery more than liberty was a Democrat.  The man that assassinated Abraham Lincoln was a Democrat.  Every man that sympathized with the assassin —every man glad that the noblest President ever elected was assassinated – was a Democrat.  Every man that impaired the credit of the United States; every man that swore we would never pay the bonds; every man that swore we would never redeem the greenbacks was a Democrat.  Every man that resisted the draft was a Democrat.  Every man that wept over the corpse of slavery was a Democrat.  Every man that cursed Lincoln because he issued the Proclamation of Emancipation — the grandest paper since the Declaration of Independence— every one of them was a Democrat.  Every man that wanted an uprising in the North, that wanted to release the rebel prisoners, that they might burn down the homes of Union soldiers above the heads of their wives and children, while the brave husbands , the heroic fathers, were in the front fighting for the honor of the old flag, every one of them was a Democrat.  Every man that believed this glorious nation of ours is only a confederacy, every man that believed the old banner carried by our fathers through the Revolution, through the War of 1812, carried by our brothers over the plains of Mexico, carried by our brothers over the fields of the Rebellion, simply stood for a contract, simply stood for an agreement, was a Democrat.  Every man who believed that any State should go out of the Union at its pleasure; every man that believed the grand fabric of the American Government could be made to crumble instantly into dust at the touch of treason was a Democrat.  Soldiers! Every scar you have got on your heroic bodies was given to you by a Democrat.  Every scar, every arm that is lacking, every limb that is gone, every scar is a souvenir of a Democrat.”

Dr. Davis’ commentary:

“Even though this handbill was published in the year 1880, how many similarities can you find today?  What politician or policies come to mind as you read through a document written fifteen years after the Civil War.?”

They’re Insurance Companies, Not Healthcare Companies, by Drexel Kleber

Posted 9/5/2009 11:45 AM EDT on democratandchronicle.com

I wonder what insurance companies are thinking about healthcare reform. It seems to me there is a fundamental shift occurring for them and I have to imagine they don’t like it.

What is the purpose of an insurance company? Insurance companies are for-profit businesses whose modus operandi is to get us to give them our money so that they can invest it in a variety of vehicles which provide profits for the company. They entice consumers to give them their money based on the agreement that if a policy holder gets sick or injured the company will pay for their medical needs. As such, if I have minimal medical needs the insurance company will pay out less money to me and, thus, have more money at their disposal from which they can earn investment profits. If, however, I am prone to illness or injury, the insurance company must pay out more money for my care, even to the point where they pay out more than they earn from me in premiums and interest. For the company, these are losses. (It’s interesting to note that few individuals invoke the same language when we are healthy. If I don’t get sick or injured or go to the doctor, then I have essentially paid more money IN than I have received back: rightfully, I should view these as losses. Of course, my ability to recoup my investment requires injury or sickness– situations which most folks would rather avoid.)

From the insurance point of view, this entire arrangement is a wager. The bottom line is they are making an informed investment decision: they evaluate my medical history and current health and venture a guess regarding the capital outlay required to attend to my health care needs. They then charge a premium sufficient to cover those expenses and still return a profit to their shareholders.

Insurance companies and individuals enter into a binding agreement. Specific items will be paid for, specific items will be excluded. Caps are provided in order to protect the insurance company from catastrophic losses, and which underscore the basis of their decision and support the assumptions they made in establishing a premium. When I read my insurance policy, I know what is covered and what is not and I sign the document agreeing to its terms.

Insurance companies are NOT healthcare companies. They take no Hippocratic Oath. They are closer to lawyers—enforcing contracts—than medical professionals—healing the wounded and infirm. I have no illusion that they will show benevolence or compassion. They exist to make money for their shareholders. I can’t imagine that I will ever hear in a hushed whisper from an insurance company representative, “Mr. Kleber, as you know you haven’t been paying for coverage that includes FREE prescriptions, but your story of job loss and misfortune has touched my heart so, just between you and me (and, please, don’t tell my supervisor) I’m going to approve those benefits.”

The other side of this coin is equally relevant, however. I expect the company to provide nothing less than to what it’s contractually obligated. I understand that their goal is to minimize capital expenditures and doing so requires a certain amount of belligerence to ensure that abuses aren’t taking place. But we’ve got a deal—we both signed. If there’s a covered benefit, well, they lost the bet. Tough.

Yet the healthcare debate in Washington these days seems to be taking place with the notion that insurance companies are “healthcare” companies, whose primary purpose is to provide access to healthcare. How can an insurance company make money for its share holders if it can’t cap certain expenses? If there is no way to control costs, they would, theoretically, have to charge exorbitant premiums to allow for such possibilities. Personally, I’m not prepared to pay the premiums required to make that math work. I take a certain measure of responsibility on my end of the arrangement–I pay a limited premium for limited coverage. I eat right and exercise to limit the chances of uncovered health needs.

I’m surprised that I haven’t heard more outrage from the insurance companies; even to the point of threatening to go out of business. I don’t understand how they will be able to run their business given the proposals that are being bandied about in the name of healthcare reform. It would be as if Congress suddenly told GMAC that even though their customers are only making payments on Chevy Cobalt, GMAC had to provide them with a Cadillac Escalade to drive.

We ought to proceed cautiously where healthcare reform reaches beyond healthcare companies. Insurance is but one means of PAYING for healthcare, but it is a limited contract arrangement. Expecting more from insurance companies would fundamentally change their mission. Smart people may decide that there is still money to be made in a new system, but it’s wrong of us to assume that companies will continue to operate in a new system with outdated methods.

There are many unknowns in the healthcare debate. One thing we do know is that companies will find a way to make a profit or they will go out of business. Assumptions about the future and who might facilitate implementation must include a realistic assessment of the players involved and their motives.