Tuesday, June 30, 2009

Peter Schiff is the man

It's always reassuring when your beliefs are validated. Peter Schiff tends to do this a lot with mine. Of all the possible people to validate my viewpoints, he's a good one.

"The bottom line is that aggregate medical costs will never come down unless services are rationed more wisely. Rather than being used as a pre-payment plan for routine care, insurance should only cover unpredictable, catastrophic costs.

As a comparison, homeowners often carry fire insurance, but seldom maintenance insurance. You buy fire insurance to guard against a catastrophic loss, which is a low probability but high cost event. As a result, fire insurance is relatively affordable, since premiums paid by all those homeowners whose houses do not burn down more than pay for the losses on those few whose houses do.

On the other hand, no one carries home maintenance insurance to pay for a clogged drain or broken garage door. If insurance paid for the plumber visit every time a toilet overflowed, we would now have a plumbing crisis, and Congress would be looking to rein in runaway plumbing bills with 'national plumbing insurance.' " Peter Schiff, via lewrockwell.com.

[I've been saying the same thing for a long time. Health insurance has less in common with traditional insurable risks than it does extended warranties. And you know how I feel about those.]

"In his press conference, President Obama claimed that government insurance would not drive private providers out of business. This is absurd. As the government provider will not have to produce a profit or accurately account for its contingent liabilities, it will provide insurance on an actuarially unsound basis. With taxpayer subsidies, the government provider can run losses indefinitely. If private insurers did this, they would either be shut down or go bankrupt. Therefore, the cost of government-provided health insurance will not be confined to the premiums paid, but will include the taxpayers’ bill to continually bail out the government provider." - Peter Schiff

[I agree completely.]

"When Medicare was first proposed back in 1966, it cost $3 billion per year, and the projection was for inflation-adjusted annual costs to rise to $12 billion by 1990. The actual cost in 1990 was $107 billion, and the 2009 estimate is a staggering $408 billion! So much for government estimates on health care." - Peter Schiff

As I've said before, government forecasts for its own programs almost invariably underestimate the costs, and overestimate their effectiveness. Then, when the government is finally forced to admit their ineffectiveness, the response is to take more of the public's money, and give it to the ineffective programs. It's a system that literally rewards failure by design.

If only there were an alternative that rewards efficiency and punishes inefficiency...

Friday, June 26, 2009

My First Letter to my Congressman

OK, so technically it isn't my first letter to a congressman. Some of you might remember when Ms. Flahrety made her 5th grade classes write on behalf of the homeless, but this one was my own idea.

Congressman Dennis Moore
1727 Longworth House Office Building
Washington, DC 20515

Dear Congressman Moore,

I'm writing you regarding legislation currently under House consideration. President Obama's own office has estimated the Cap and Trade bill to cost over $650 billion over the next eight years. Even though this cost is shockingly high, I fully expect the true cost to be much higher, as this type of legislation is almost always presented as being cheaper than it really is.

For example, this amount is similar to President Obama's May estimates regarding health care reform - $634 billion. Not surprisingly, on June 15, the CBO estimated the costs of the proposed health care proposal to be $1 trillion, or as I like to think of that amount, $1,000,000,000,000.


When you're forced to look at all of the zeroes, it brings the reality of these numbers a little closer to home. On June 16, the estimates were revised upwards to $1.6 trillion.


Since then, the parties pushing for this legislation have been manipulating the numbers using suspect accounting tricks based on unrealistic assumptions in an attempt to claim the cost will be below $1 trillion.


$1,000,000,000,000 is shocking enough, but when these rosy assumptions inevitably prove unrealistic, the true cost will be even more staggering.

Considering the United States' debt levels and deficits are running at unsustainable record levels already, legislation such as these two bills, which will cost trillions more over the next few years, is incredibly irresponsible.

President Obama has advocated a return to PAYGO rules. If he and Congress are serious about implementing such rules, they can only fund legislation of this magnitude in three ways: 1) MASSIVE tax increases like never seen before in the United States; 2) unrealistic manipulation of cost estimates, or; 3) simply printing money.

Tax increases, especially of this magnitude, will suck the life out of any potential economic recovery. Further, assessing taxes on businesses punishes everyone, not just corporate fat casts. If a corporation's taxes are increased, it has few options: 1) raise prices, punishing everyone who uses their products, including middle class and poor people; 2) lay off employees, which effects far more people than merely those laid off; or 3) make less money, which hurts their stock price. This doesn't merely impact wealthy investors, but harms everyone with a retirement fund, pension, or college savings plan which includes securities, or mutual funds comprised of those securities. Many people don't consider this, but it's oxymoronic to rail against corporate profits while simultaneously expecting your 401k to gain value.

Manipulating the numbers to make it appear that 2+2=10 violates the entire principle behind PAYGO rules, turning them into a sham.

Federal Reserve and Treasury action, effectively "printing money", will raise inflation even more, and dig an even deeper hole for younger generations. Please consider this chart of the United States money supply, provided by the St. Louis branch of the Federal Reserve:


The chart is so ridiculous, that at first, I assumed it was a joke. It is no joke. It's deadly serious. To think that such reckless manipulation of the money supply won't negatively impact the purchasing power of the dollar is either naive or insane.

I'm highly concerned about irresponsible government spending. The following information indicates I'm not alone:

"Nearly seven in 10 have serious reservations about the federal government’s ownership stake in General Motors. Almost 60 percent say that President Obama and Congress should worry more about keeping the deficit down — even if that means it will take longer for the economy to recover. And fewer than half of Americans have confidence in the president’s policies to improve the economy."


President Bush spent trillions of dollars on overseas military action, and pushed for the initial round of bailouts, despite their staggering cost. Unfortunately, President Obama appears to be content continuing these same tragic policies, and actually increasing the speed at which our nation marches toward economic default. A number of decades ago, the United States was the world's greatest creditor. In a relatively short time, it has become the world's biggest debtor.

No matter how noble the intentions of proposed legislation, I urge you not to vote for it unless there is a clear plan to pay for it other than accounting tricks and nebulous assumptions about "savings" the legislation will create.

Thank you for your time.

Brad Raple

Olathe, KS

Tuesday, June 23, 2009

Does not compute

"[Obama] practically taunted those who denigrate government bureaucrats and exalt the free market.

'Why would it drive private insurance out of business?' he said of the proposed public option. If private insurers 'tell us that they're offering a good deal, then why is it that the government, which they say can't run anything, suddenly is going to drive them out of business? That's not logical.'" AP Article (via Yahoo!)

Well, a lot of it has to do with the fact that private insurance companies can't print money to pay their bills, and can't force non-policyholders to subsidize the people covered under their plan.

On a side note, in May, Obama estimated his plan would cost $634 billion. Despite the rosy assumptions leading to that number, on June 15, it became $1 trillion. The very next day, it went to $1.6 trillion. They've been monkeying with the numbers to make the cost appear lower, because with increasing public concern with US debt, a $1 trillion-plus commitment is politically dangerous.

Monday, June 22, 2009

CNN Should Know Better

"Under the shah's regime, Iran saw nationalization of its oil and a strong movement toward modernization. Still, his secular programs and recognition of Israel cost him the support of the country's Shiite clergy, sparking clashes with the religious right and others who resented his pro-West views." -CNN Article regarding the Shah's son. (emphasis added)

This is a gross example of selective oversimplification at best. I realize the paragraph below sounds like a conspiracy theory. That's because it is one. It just happens to be true. Check the citations, if you don't believe me. We don't learn much about this in school.

The Shah was a brutal, repressive dictator, installed and supported by the United States, after the US organized a coup to overthrow Iran's democratically elected leadership. This was done to protect Western oil interests. The CIA trained SAVAK, the Shah's secret police force, which suppressed the media and engaged in torture, including rape. Frankly, running a fluff piece about the Shah's son weeping for dead protesters is disgusting. His father killed hundreds to thousands of them.

See how much of Wikipedia's explanation of the Islamic Revolution is related to "secular programs" and "recognition of Israel." (excerpts below)

"Several events in the 1970s set the stage for the 1979 revolution:

- The 1971 2,500th anniversary of the founding of the Persian Empire at Persepolis, organized by the shah's regime, was attacked for its extravagance. "As the foreigners reveled on drink forbidden by Islam, Iranians were not only excluded from the festivities, some were starving."

- The oil boom of the 1970s produced "alarming" increase in inflation and waste and an "accelerating gap" between the rich and poor, the city and the country, along with the presence of tens of thousand of unpopular skilled foreign workers. By mid-1977 economic austerity measures to fight inflation disproportionately affected the thousands of poor and unskilled male migrants to the cities working construction. Culturally and religiously conservative, many went on to form the core of revolution's demonstrators and "martyrs".

- All Iranians were required to join and pay dues to a new political party, the Rastakhiz party — all other parties being banned. That party's attempt to fight inflation with populist "anti-profiteering" campaigns — fining and jailing merchants for high prices — angered and politicized merchants while fueling black markets.

- The first casualties suffered in major demonstrations against the Shah came in January 1978. Hundreds of Islamist students and religious leaders in the city of Qom were furious over a story in the government-controlled press they felt was libelous. The army was sent in, dispersing the demonstrations and killing several students (two to nine according to the government, 70 or more according to the opposition).

- According to the Shi'ite customs, memorial services (called Arba'een) are held forty days after a person's death. In mosques across the nation, calls were made to honour the dead students. Thus on February 18 groups in a number of cities marched to honour the fallen and protest against the rule of the Shah. This time, violence erupted in Tabriz, where five hundred demonstrators were killed according to the opposition, ten according to the government. The cycle repeated itself, and on March 29, a new round of protests began across the nation. Luxury hotels, cinemas, banks, government offices, and other symbols of the Shah regime were destroyed; again security forces intervened, killing many. On May 10 the same occurred.

- In May, government commandos burst into the home of Ayatollah Kazem Shariatmadari, a leading cleric and political moderate, and shot dead one of his followers right in front of him. Shariatmadari abandoned his quietist stance and joined the opposition to the Shah.

- Facing a revolution, the Shah appealed to the United States for support. Because of Iran's history and strategic location, it was important to the United States. Iran shared a long border with America's cold war rival, the Soviet Union, and was the largest, most powerful country in the oil-rich Persian Gulf. The Shah had long been pro-American, but the Pahlavi regime had also recently garnered unfavorable publicity in the West for its human rights record.

- The U.S. ambassador to Iran, William H. Sullivan, recalls that the U.S. National Security Advisor Zbigniew Brzezinski “repeatedly assured Pahlavi that the U.S. backed him fully." On November 4, 1978, Brzezinski called the Shah to tell him that the United States would "back him to the hilt." But at the same time, certain high-level officials in the State Department believed the revolution was unstoppable. After visiting the Shah in summer of 1978, Secretary of the Treasury W. Michael Blumenthal complained of the Shah's emotional collapse, reporting, "You've got a zombie out there." Brzezinski and Energy Secretary James Schlesinger were adamant in their assurances that the Shah would receive military support.
[NOTE: Why was the US Energy Secretary promising military support for a foreign dictatorship? Think about it.]

- By summer 1978 the level of protest had been at a steady state for four months — about ten thousand participants in each major city (with the exception of Isfahan where protests were larger and Tehran where they were smaller). This amounted to an "almost fully mobilized `mosque network,`" of pious Iranian Muslims, but a small minority of the "more than 15 million" adults in Iran. Worse for the momentum of the movement, on June 17 1978 the 40-day mourning cycle of mobilization of protest — where demonstrators were killed every 40-days as they mourned the dead of earlier demonstrations — ended with a call for calm and a stay-at-home strike by moderate religious leader Shariatmadari. In an attempt to appease discontent the Shah made appeals to the moderate clergy, firing his head of SAVAK and promising free elections the next June.

- [In] the August 1978 Cinema Rex Fire in Abadan ... over 400 people died. Movie theaters had been a common target of Islamist demonstrators but such was the distrust of the regime and effectiveness of its enemies' communication skills that the public believed SAVAK had set the fire in an attempt to frame the opposition. The next day 10,000 relatives and sympathizers gathered for a mass funeral and march shouting, ‘burn the Shah’, and ‘the Shah is the guilty one.’

- A new prime minister, Jafar Sharif-Emami, was installed in late August and reversed some of the Shah's policies. Casinos were closed, the imperial calendar abolished, activity by political parties legalized — to no avail. By September, the nation was rapidly destabilizing, and major protests were becoming a regular occurrence. The Shah introduced martial law, and banned all demonstrations but on September 8 thousands of protesters gathered in Tehran. Security forces shot and killed dozens, in what became known as Black Friday.

- The clerical leadership declared that "thousands have been massacred by Zionist troops," but in retrospect it has been said that "the main casualty" of the shooting was "any hope for compromise" between the protest movement and the Shah's regime. The troops were actually ethnic Kurds who had been fired on by snipers, and post revolutionary tally by the Martyrs Foundation of people killed as a result of demonstrations throughout the city on that day found a total of 84 dead. In the mean time however, the appearance of government brutality alienated much of the rest of the Iranian people and the Shah's allies abroad."

Thursday, June 18, 2009

Actual ad from American Airlines in-flight magazine

Next up: "Lose that stubborn belly fat with crystal methamphetamine!" Or maybe: "Get a good night's sleep with all-natural carbon monoxide!"

-- Post From My iPhone

New iPhone arrives tomorrow

I'm curious how much faster a 3G connection and the beefed up hardware will make it. I hope the battery life is at least what my 2G had when it was new.

I'm also looking forward to turn-by-turn GPS apps. I'd pay $100 for a good one, and ditch my Tom Tom. I'd never need to screw with or pay for Hertz Neverlost again. It would save my firm hundreds each year, and I could enter the destination on the flight, instead of messing with it at the rental car pick-up, or worse, in traffic.

-- Post From My iPhone

Tuesday, June 16, 2009

Well, that didn't take long

"WASHINGTON – Sen. Edward M. Kennedy's health overhaul bill would cost at least $1 trillion over 10 years but only insure about 16 million." -AP article quoting the Congressional Budget Office (yesterday)

"[T]his is likely a best case scenario. It unrealistically assumes the program will come in on budget."-Me (also yesterday)

"WASHINGTON – The latest cost estimates for health care legislation in Congress are around $1.6 trillion over 10 years, two Senate sources said Tuesday as concerns mounted over the price tag for the sweeping overhaul. Two Senate staffers, one Democratic and one Republican, said Congressional Budget Office estimates put the cost of the Finance Committee version of the bill at around $1.6 trillion." -AP article (today)

I'd like to take credit for calling this, but betting on government projects to overrun their budgets doesn't require clairvoyance. It's more like betting the sun will come up in the morning.

Monday, June 15, 2009

A model of efficiency

"WASHINGTON – Sen. Edward M. Kennedy's health overhaul bill would cost at least $1 trillion over 10 years but only insure about 16 million." -AP article quoting the Congressional Budget Office

Leaving aside the "at least" language, and the fact that government estimates are usually unrealistically optimistic, we'll give Mr. Kennedy the benefit of the doubt as we do the math:

$1,000,000,000,000/16,000,000 people = $62,500/person
$62,500/10 years = $6,250/person/year

To test my suspicions, I requested some private health insurance quotes for my family. Prices varied, but a reasonably good, middle of the road plan goes for $270 per month, for all three of us. Let's do some more math.

$270/3 people = $90/person/month
$90 x 12 months = $1,080/person/year

That means the government could buy insurance on the retail market for my family, and nearly six similar families for what the government would spend on us under Senator Kennedy's proposal. Stated another way, it could do it for 17% of the cost of Senator Kennedy's proposal. In other words, 83% cheaper. Or, in yet other words, at a savings of $827,000,000,000. Or at a savings exceeding the cost of the TARP.

Of course, this is likely a best case scenario. It unrealistically assumes the program will come in on budget. It ignores the likely unintended consequences of employers who currently provide insurance ceasing to do so. It does not, and cannot, account for the opportunity costs of how that trillion dollars could otherwise be used.

If current health care benefits are taxed to pay for it, it leaves out the resulting impact on the currently insured, their employers, and their ability to hire new workers. It also ignores the inflation and interest charges that will come if (or more likely when) the bill for this is monetized by the government.

Considering 16 million people equates to approximately 5% of the US population, you'd have to multiply Senator Kennedy's $1 Trillion by 20 to insure all Americans. That's $20 Trillion dollars, my friends.

Sunday, June 14, 2009

If you think the free market caused the Economipocalpyse...

...consider that a group of non-elected, politically appointed bureaucrats fixed the price of the most important economic variable through central planning. I'm not talking about oil, I'm talking about credit.

We have not been dealing with true free market capitalism for some time.

Our problems are largely caused by the fact that the US has a net negative savings rate. Do you think the setting the Fed Funds Rate at 0% is going to encourage many people to save? Even if you believe the understated inflation numbers from the government, you're losing money if you put it in a 1% interest savings account.

This is just one more example of well-intentioned government meddling backfiring and causing unintended consequences.

Well, he didn't ask me.

"Biden says 'everyone guessed wrong' on [the stimulus'] jobs number" -AP Article

I didn't guess wrong. Neither did this guy.

The Daily Show With Jon StewartMon - Thurs 11p / 10c
Peter Schiff
Daily Show
Full Episodes
Political HumorNewt Gingrich Unedited Interview

Tuesday, June 09, 2009

I know this is old...

...but it's classic. The light saber zipper pull sends it over the top.

I'm at a loss for words

For those people with too much back hair, and without a significant other to shave it for them.

Check out the close up:

And in case that wasn't disturbing enough:

See where those arrows are pointing? Yikes.

-- Post From My iPhone