Liberty & Power: Group Blog
1. Under the passed legislation, what does it mean that “every American having health insurance”? How much shall be paid by the federal government and how much by the states to gain this objective?
The new law forces everyone to buy health-care insurance. Many people already have such insurance, most of them as part of the compensation they receive from their employer. In general, these people will be able to keep their current coverage. People who do not buy health-care insurance acceptable to the government will be fined heavily, so besides having no health-care insurance, they will be punished by the government!
2. It looks unlikely that this “reform” will result in a better health care for Americans. However, can you think of at least one example where it might actually help someone?
In general, the new system will make health care worse in the United States, for many reasons. However, some persons will benefit. The major beneficiaries will be those with pre-existing conditions who are currently rejected by insurance companies (the companies do not wish to sell fire insurance to people whose houses are already on fire). The new law forbids insurance companies from rejecting any applicant because of a pre-existing condition. Owing to this new legal requirement, health-care insurance will no longer be true insurance, but merely a third-party payment system for health-care expenses.
3. Will the price of health insurance be kept down by state force? Will Americans be forced to buy health insurance – subsidized by the state? Will Americans be forced to pay premiums, as, if I remember correctly, Dr. Ron Paul has once indicated?
Premiums and benefits of health-care insurance plans are already heavily regulated by the state and federal governments. The new law places many new requirements and restrictions on the companies. It also regulates the difference between the amount they may charge older people and the amount they may charge younger people. The result will be that younger people will have to pay greater premiums than they would pay under a fair insurance scheme in a free market; that is, younger people will be forced to subsidize the health-care expenses of older people (who demand much greater amounts of health care).
4. What, in your opinion, will be the long term effects for American health care? Do you expect deterioration in the quality of services, as is often the case in Canada and in Europe?
This system will almost certainly prove to be much more costly than now projected. Pressure will be created to increase the prices of care and the amount of insurance premiums needed to cover the costs of care. The government will respond by measures that amount to price controls and by selective subsidies to lower-income people and to those with the most political clout. Shortages will increase; waiting times for care will increase; the quality of services will decrease. The overall health care system will cost more and more while delivering worse and worse care. Ultimately, the government will probably throw up its hands and nationalize the entire system because it will have become such a terrible mess.
5. Could you say that the Americans are, as a majority, in favor of this legislation? Not even all Democrats supported the bill…
Polls show that a majority of Americans oppose the law just enacted. These poll results seem plausible to me. In truth, however, few Americans have much real knowledge about the present law, which occupies more than 2,000 pages, and even less understanding of the economics and political science required to understand its likely consequences. The law is not simply a shot in the dark, it is a barrage in the dark.
Because the full substance of the government’s actions is much too vast for any single person to grasp, I have sometimes found it helpful simply to list government agencies, laws, or regulations that contribute to the enormous aggregate that composes the state (see, for example, the appendices of my book Crisis and Leviathan). This tactic recommended itself to me recently as I was tracking down a statute in the U.S. Code, the official compilation of all federal laws currently in force.
The U.S. Code consists of 50 “titles.” It is published every six years, and in the interim between editions an annual cumulative collection of supplements is published to keep it up to date. Here is the present makeup:
Read the rest here.
That this much needed reform has come into the hands of California voters is merely a first step, as there will be strenuous opposition from parties with a strong self interest in its defeat. By now we are all too familiar with the litany of exaggerations, half truths and outright lies which will comprise the rationale for voting no on this legislation. However, if past elections like this are any guide precious little will ever be said about what those who oppose this act are voting for.
First and foremost people voting against the Regulate, Control and Tax Cannabis Act of 2010 will be voting for increased alcohol use with its attendant domestic violence, highway fatalities, liver disease, and broken families. From the very beginning of marijuana proscription in the 1930s those most affected by the change, jazz musicians, told us about this consequence. The 1936 song All the Jive is Gone contained the lyric “All the jive is gone, so come on in and drink some gin” while in The “G” Man Got the “T” Man Cee Pee Johnson lamented “They have to drink their lush and stagger, even though they know its wrong.”
Secondly those voting no will be voting for extending financial benefits to lawyers and state prison guards at the expense of teachers, students, librarians, health care professionals, firefighters, park rangers and a whole host of other people also performing more useful work. In addition, they will be voting in favor of cutting off economic opportunity for entrepreneurs, agricultural and otherwise, as well as their potential employees wanting to get involved in a growing cannabis culture.
A vote against legalizing marijuana is also a ballot for continuing the high levels of violence in Mexico. The profits from illegal marijuana sold in California are a most important source of income for the brutal Mexican drug cartels. Stop these funds from flowing in and you greatly reduce their ability to create mayhem. Also, it is a vote for reducing the resources available to apprehend and jail murders, rapists, and thieves here in the United States.
Lastly, a no vote sends the message to our children that sustaining the lies of the past, promoting ignorance and hatred of those different, as well as the welfare of a very small special interest are more important than reality and good public policy.
Cross posted on The Trebach Report
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Jeffrey Rogers Hummel
So I was intrigued to notice that the most recent, 2010 edition of Frederic S. Mishkin's standard money and banking text, The Economics of Money, Banking & Financial Markets, observes that, despite the increased consolidation of the U.S. banking industry over the last twenty-five years, it still remains the least concentrated in the developed world. Mishkin, although no market fundamentalist by any stretch of the imagination, writes that"in contrast to the United States, which has on the order of 7,100 commercial banks, every other industrialized country has far less than 1,000. Japan, for example, has fewer than 100 commercial banks . . . even though its economy and population are half the size of those of the United States."
Not only does the U.S. have more banks, but they tend to be much smaller. In Mishkin's list of the ten largest banks in the world as of 2008, not a single one was from this country. They were all from the UK, Germany, France, Switzerland, the Netherlands, or Japan. Admittedly the list only focused on the assets of commercial banks per se, and not of their holding companies. And the subsequent bailout and Fed ballooning of bank reserves by nearly $1 trillion has pushed two U.S. banks into the Bankers Almanac list of top ten for 2010: JP Morgan Chase at seventh place, and Bank of America at tenth.
Yet these facts so far have not even been mentioned in the debate over financial reform. As nearly every knowledgeable economic historian concedes: the past, misguided restrictions on branching, dating back to before the Civil War and making the U.S. banking system the most fragmented in the world, also made it the most fragile, vulnerable to its record number of bank panics. Indeed, the U.S. system of unit banking was one of the major factors that contributed during the Great Depression to the worst banking crisis in world history.
Is it possible that some U.S. banks now exceed the optimal size from the standpoint of economic efficiency? We can expect that kind of simple-minded conclusion from the likes of Joseph Stigliz, but even Alan Greenspan, in a recent paper on"The Crisis," has stated:"Federal Reserve research had been unable to find economies of scale in banking beyond a modest-sized institution." How sad that an alleged defender of free markets would even imply that it is the market's fault when it does not conform to some Fed paper's estimate of what is efficient. Why did these large banks emerge in the first place if they did not capture some economic gain?
If large banks are indeed economically inefficient, this would normally create opportunities for hostile takeovers which could profit by breaking the big banks up. But of course, the same critics who decry markets for creating principal-agent problems between managers and shareholders are often the most strident opponents of corporate takeovers, the markets effective solution to such problems. All corporate mangers, of course, enjoy the partial protection of the federal Williams Act of 1968 and assorted state impediments to hostile takeovers, but less well known is the fact that control over financial institutions is strangled within a still more onerous and convoluted web of protections. The bottom line is that a hostile takeover of any inefficiently managed large bank is all but impossible for non-financial parties, and even when attempted by another financial institution, must virtually be orchestrated by the regulators themselves.
An article by James A. Wilcox in the November 2005 issue of San Francisco Fed's Economic Letter hints at a revealing possible explanation for large banks."Government policies may also increase the economies of scale that depositories face. Recent legislation, such as the Gramm-Leach-Bliley Act, the USA Patriot Act, and the Bank Secrecy Act, may . . . have the effect of imposing various sizable costs that are borne disproportionately by the smaller depositories. Such disproportionate, law-induced costs would increase the returns to scale in the banking and credit union industries and thereby strengthen the motives for consolidation." Although this line of research has not, so far as I know, been followed up on, it coincides with an anecdotal observation that one of my students who then worked in the banking industry made years ago. She reported that at least one-third to one-half of her work time and that of her fellow employees was devoted to complying with various government edicts.
So there you have it: the exact same pattern as health care. Government coercion creates unintended outcomes that become the justification for more government coercion that will have even worse unintended consequences down the road. Playing the game of trying to alleviate problems created by some interventions with other offsetting interventions runs up against the hubristic folly of central planning. No one knows enough to do that wisely and effectively, even in the rare cases where it might be politically feasible. If U.S. banks are indeed too big because of stupid government regulations (something we can never know with absolute certainty), then the solution is to repeal those stupid regulations, not break the banks up with more stupid regulations.
Jonathan J. Bean
I am being quite serious: no single human being knows ― no one can know ― what provisions the statute’s more than 2,000 pages contain. Even if someone had the power to read and remember everything in this massive legislative enactment, he would still harbor a multitude of uncertainties about: how the courts will interpret the law’s general provisions; how the various administrative agencies will flesh out the statute with new regulations; the precise way in which each provision will be implemented; how, when, and in what amounts funds will be made available for carrying out the law’s many stipulated actions; how much resistance the law will meet, both in the courts and among the public, and how these conflicts will be resolved; and countless other matters of critical importance to those directly and indirectly affected by the massive statute ― which is to say, virtually everybody in the United States and a considerable number of people elsewhere, as well.
Already, however, we can say a few things with certainty. One is that this statute, like any other of comparable size, amounts to a Christmas tree for politically favored interests. For months, maybe for years, people will be discovering little provisions tucked into the bill, each of which provides some sort of privilege, protection, subsidy, or other benefit to a particular firm, industry, profession, or other beneficiary. Anyone who has ever toiled through the pages of statutes of comparable length and complexity, as I have for a number of defense authorization and appropriation acts, knows that each such law comprises a host of special-interest provisions. If you would care to see some appalling examples laid bare, read chapters 7 and 8 of my book Depression, War, and Cold War or, if you cannot gain access to this book, see the original version of chapter 7, which was published in the Cato Journal in 1988.
We also know that this statute will not be the end of the story of health-care politics in this country. It is, for the current phase, only the end of the beginning. The ink will scarcely be dry in the revised U.S. Code when political factions will undertake to alter or to overturn the provisions just enacted. Thus, within the act’s great expanse, hundreds of little sub-conflicts will rage, as competing interests struggle for control of the state’s coercive power in their area of contention. Politics, in general, is an endless struggle, and the politics of the federal government’s health-care intervention is no exception. Stay tuned.
Finally, because health-care-related economic activity is such a huge part of the overall economy, what happens in this sector will have significant consequences for the operation of other sectors. For example, when Obamacare turns out to be much more costly than the government has claimed it will be, the government’s demand for loanable funds will be greatly increased, with far-reaching effects on interest rates, investment spending, economic growth, and even the U.S. Treasury’s creditworthiness. It is not inconceivable that the burden of supporting this health-care monstrosity will prove to be the (load of) straw that breaks the back of the government camel in the credit markets, where the U.S. Treasury has long been able to borrow the greatest amounts at the lowest rates of interest because its bonds were considered virtually riskless. Indeed, that status as the lowest-risk borrower seems already to be approaching the breaking point, even before the new health-care legislation has taken effect. Implementation of this law can only worsen the Treasury’s plight.
Amy H. Sturgis
Hidden Empire, Orson Scott Card (TOR Books)
Makers, Cory Doctorow (TOR Books)
The Unincorporated Man, Dani and Eytan Kollin (TOR Books)
Liberating Atlantis, Harry Turtledove (ROC/Penguin Books)
The United States of Atlantis, Harry Turtledove (ROC/Penguin Books)
Hall of Fame
“As Easy as A.B.C.,” a story by Rudyard Kipling (1912)
Cryptonomicon, a novel by Neal Stephenson (1999)
“No Truce with Kings,” a story by Poul Anderson (1964)
“‘Repent, Harlequin!’ Said the Ticktockman,” a story by Harlan Ellison (1965)
Full details are available on the LFS press release page.
Jane S. Shaw
In an article on the Pope Center site today, I list four events that are revealing the cavernous gulf between academia and the public. One is Climategate; another, academics' concession that they are indeed liberal; the appearance of Atlas Shrugged in college courses; and, finally, public questioning of the conventional wisdom that"everybody has to go to college."
Once the faultlines are visible, can the earthquake be far behind?
In retrospect, it would have saved a bit of time for Bloomberg Radio, and a bit of embarrassment for Mr. DeLong, had the former first conducted a Google search regarding the latter, as it would have revealed his deep seated hatred for Lew Rockwell and, as an added bonus, Ludwig von Mises. In a blog entry from March 25, 2009 Mr. DeLong issues a screechy demand that “let it be said that as Brad DeLong I assert the moral right to ownership of the tag"brad delong," and I expressly forbid its use by anybody who uses either of the tags"ludwig von mises" or"lew rockwell"; expressly forbid repeat forbid”.
Besides the amusing picture of a grown man stomping his feet while angrily pounding his latest temper-tantrum into the keyboard, I was confused – since when does a Keynesian believe in the “moral right” to private property? The people of Bloomberg Radio, had they performed this simple search, would have had instant nightmare visions of putting an academic too tight for his tweeds in front of a live microphone, and wisely moved on to the next candidate on the list. But as it was they asked, and as it was Brad DeLong replied, and then posted it all on his blog.
“You have got to be kidding” he began in a calm, rational manner, and it was all downhill from there, through a rude order to “clean up your act” to telling them how to run things with “you have no business putting Lew Rockwell on the air, and I am ashamed for you.” Then, after posting it along with the contact information of the person at Bloomberg (since removed), he cries out to his blog readers, “why oh why can’t we have a better press corps?”
The reason Mr. DeLong gave for his outburst and refusal (whatever happened to a simple “no thank you”?) was Lew Rockwell’s alleged involvement with the Ron Paul newsletter scandal, a seedy little episode best recalled by AntiWar.com’s Justin Raimondo . The fact that Lew Rockwell categorically denies having written them means nothing, he has been tried, convicted, and hung by popular demand, and that’s the end of it for Mr. DeLong.
Yet, the issue here was not to be about racism, but economics. Mr. DeLong used unproven accusations of the former to get around the latter, you'd expect better from a professor. How incredibly close-minded and shortsighted. If Mr. DeLong feels so strongly about the matter of race, where even the mere accusation of being a racist sends him fleeing in disgust, why does he remain a big supporter of Obama, despite that man's close, long time affiliation with the virulently racist Rev. Jeremiah Wright? (DeLong even publicly endorsed Obama.) What about Biden’s comment on Obama being “the first mainstream African-American who is articulate and bright and clean”?
Why would he remain employed by UC's educational system, the very same which at this moment is yet again in the news with racial problems? (Where do they find all these nooses?) What about Berkeley's long standing overt hostility towards non-minority students? Why does that racist policy not bother Mr. DeLong?
Mr. Delong protests too much.
Instead of jumping at the chance to debate economic policy, he declares his opponent so beyond the pale that he won't even participate. It is not always so. Mr. DeLong once wrote a blog entry defending James Webb waxing weepy at the Confederate Memorial, words that got him in a bit of hot water. Mr. DeLong called the vituperation hurled at Mr. Webb “an intellectual foul…for Webb is saying something different” than suggested. He linked the entire speech, so his readers could see the quote in “broader context”.
No such politeness was given to Ron Paul’s newsletters, and no thought of possible innocence given for Mr. Rockwell, just a mere accusation, in his case, would suffice for Mr. DeLong. His refusal to debate his economic views does more to reveal the narrow-minded view he has of the august position he holds then it does of any alleged shortcomings in Bloomberg Radio or Lew Rockwell.
To quote a great man, “why oh why can’t we have a better professorship?”
However, the federal system presents a different story where the number of those imprisoned increased enough last year to produce an overall total more than 1000 people higher. Perhaps the difference lies in the fact that many states must balance their budgets while the federal government seems to have a credit card with no limits allowing harsh and counterproductive drug policies.
Cross posted on The Trebach Report
Jeffrey Rogers Hummel
However, during the past year, so much attention has been focused on the financial debacle in its various dimensions, and on the Fed’s and the Treasury’s efforts to deal with it, that the growing unemployment - now amounting to approximately 15 million persons - has become almost a footnote to the welter of troubles besetting the economy, and the labor market itself has received relatively little attention. Of course, the government’s “stimulus” spending programs purport to be aimed at restoring employment, and, if we subscribed to vulgar Keynesianism, we might expect them to do so.
Sound economists know, however, that, as some of them like to say, the labor market clears in the labor market, not in the product market or the bond market. When we seek to understand changes in the volume of employment (and by loose implication, the amount of unemployment), we are well advised to pay closest attention to what is happening in the labor market.
When we shift our gaze there, we behold an interesting, almost totally neglected, yet critical fact: while unemployment has been rising steadily, the real hourly wage for all workers employed in private industries has also been rising. According to the Bureau of Labor Statistics, the average hourly earnings of workers in all private industries rose from $17.23 in March 2007 (when the rate of unemployment was 4.4 percent) to $18.59 in July 2009 (when the rate of unemployment was 9.4 percent). During this same period, the consumer price index for all urban consumers rose by about 5 percent. Using this index to adjust the earnings data, we find that real hourly earnings rose by 2.8 percent during this 28-month period of deepening recession.
Even introductory economics courses teach students that the quantity of labor services demanded is a negative function of the real wage rate. If the real wage rate rises, other things being equal, employers will demand a smaller quantity of labor services. Thus, in view of the rise in the real wage during the past 28 months, we might well have expected employment to fall - and hence the unemployment rate to rise - simply because labor services were becoming more expensive.
However, other things were not equal during this period. Because the demand for labor services is derived from the demand for the goods and services that the laborers produce, and because that final demand has declined recently, the effect of the increase in the real wage has been magnified. The obvious question: why, in a situation of falling demand for labor services, has the real wage risen? This outcome is not what we would expect to see in a freely functioning labor market. Economists have advanced a variety of explanations to account for this anomalous occurrence (as observed on other occasions), but they have yet to agree on how it may be understood best.
We might well note, however, that an increase in the real wage at a time of deepening recession is an occurrence first observed in the United States between 1929 and 1933, during the Great Contraction. Economists from that time onward, including C. A. Phillips, T. F. McManus, and R. W. Nelson (1937), Murray Rothbard (1963), Lowell Gallaway and Richard Vedder (1993), and most recently Lee Ohanian (2009 unpublished), as well as yours truly (1987 and later works), have attributed a large part of the responsibility for the depth of the Great Contraction to this failure of the real wage rate to fall - as it invariably had fallen in economic downturns before 1929, including the sharp but brief contraction of 1920-21. It is scarcely reassuring to see that in the present contraction, the labor market is, in this regard, mimicking its behavior during the Great Contraction.
In 1937, Phillips, McManus, and Nelson wrote: “The brutal truth is that the standard of life for the American people has fallen drastically since 1929 for the simple reason that the policy of maintaining high wage rates has resulted in reduced employment and decreased production of the goods and services that constitute ‘real income’” (p. 225). Today, although we have not yet suffered the same reduction in living standards that our forebears suffered during the Great Depression, essentially the same brutal truth is haunting us again. Whether the increased real wage rate of the past two years reflects government policies or other causes, it has exacerbated the decline of real output. A reduction of the real wage rate would hasten a recovery from our present economic misfortunes.
It might, if there was a withdrawal planned.
When is a withdrawal not a withdrawal? When you will leave behind"no more than 50,000 American forces", according to someone named"Senior Obama administration officials" who, judging by the number of quotes he plants across the daily papers is a regular Gabby Gus. And, lest the eternally fearful war-hawks shit their feathers in fright at the word"withdrawal" Vice President Joseph R. Biden Jr. let’s out that, not to worry, regular Rambos will be left in Iraq as"we’re not leaving behind cooks and quartermasters". So Max Boot & Pals can come out from under the covers.
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What of any consequence remains beyond the state’s reach in the United States today? Not wages, working conditions, or labor-management relations; not health care; not money, banking, or financial services; not personal privacy; not transportation or communication; not education or scientific research; not farming or food supply; not nutrition or food quality; not marriage or divorce; not child care; not provision for retirement; not recreation; not insurance of any kind; not smoking or drinking; not gambling; not political campaign funding or publicity; not real estate development, house construction, or housing finance; not international travel, trade, or finance; not a thousand other areas and aspects of social life.
One might affirm that the state still keeps its hands off religion, but it actually does not. It certifies certain religious organizations as legitimate and condemns others, as many young men discovered to their sorrow when they attempted to claim the status of conscientious objector during the Vietnam War. It assigns members of certain religions, but not members of others, as chaplains in its armed services.
Besides, isn’t statism itself a religion for most Americans? Do they not honor the state above all else, above even the commandments of a conventional religion they may embrace? If their religion tells them “thou shalt not murder,” but the state orders them to murder, then they murder. If the state tells them to rob, to destroy property, and to imprison innocent people, then, notwithstanding any religious strictures, they rob, destroy property, and imprison innocent people, as millions of victims of the wars in Iraq and Afghanistan and millions of victims of the so-called Drug War in this country will attest. Moreover, in every form of adversity, Americans look to the state for their personal salvation, just as before the twentieth century their ancestors looked to Divine Providence.
When the state produces unworkable or unsatisfactory conditions in any area of life, and therefore elicits complaints and protests, as it has for example in every area related to health care, it responds to these complaints and protests by making “reforms” that heap new laws, regulations, and government bureaus atop the existing mountain of counterproductive interventions. Thus, each new “reform” makes the government more monstrous and destructive than it was before. Citizen, be careful what you wish for; the government just might give it to you good and hard.
The areas of life that remain outside the government’s participation, taxation, subsidization, regulation, surveillance, and other intrusion or control have become so few and so trivial that they scarcely merit mention. We verge ever closer upon the condition in which everything that is not prohibited is required. Yet, the average American will declare loudly that he is a free man and that his country is the freest in the world. Thus, in a country where more and more is for the state, where virtually nothing is outside the State, and where, aside from pointless complaints, nothing against the State is permitted, Americans have become ideal fascist citizens. Like the average German during the years that Hitler ruled Germany, most Americans today, inhabiting one of the most pervasively controlled countries in the history of the world, think they are free.
Please note: For security purposes, you will be asked to provide a valid government or state-issued photo ID at check-in.
I cannot recall ever having been required to show official identification papers merely to register at a hotel — a credit card, yes, but not a government-issued photo ID. Though offended, I cannot say that I am surprised by this turn of events. I wonder whether some law or regulation now requires the hotels to check their guests’ official papers.
Anyone who has paid the least attention over the years has noticed that more and more businesses and government agencies have required that one show his official — that is, government-issued — identity papers in order to be served or admitted. Airlines, of course, have required such identification for many years, although I can remember a time when they did not do so — indeed, a time when one simply walked, with freinds and relatives if one wished, to the departure gate and boarded the airplane without any interception for security screening at all. Auto rental companies demanded an official driver’s license. Now, even hotels treat their customers as suspected terrorists.
Who’ll do so next — the dry cleaners, the grocery store, the bank, the gas station? Will the gestapo lurk outside my front gate to make sure that I identify myself properly before driving my automobile onto the highway? Will the church demand my papers before administering the Holy Communion?
Most Americans, of course, will take such new impositions in stride, just as they have accepted the outrageous treatment they must suffer at the airports. If you have nothing to hide . . . la, la, la. One who protests or complains will be viewed as paranoid or as a troublemaker.
The slope toward totalitariansim is slippery, indeed, but sometimes the slope is so gradual that one scarcely notices that one is sliding downward. Ask the ordinary Germans who slid down that slope after 1933; heed the voice of those who can still recall, with a chill, the horrible sound of those dreaded words, “Papiere Bitte!”