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6/29/12

Why People Don't Save Enough

Recent developments caused by the Congress, the President, and the Supreme Court may have changed things for the country in a fundamental way. Having said that, some things never change.

The laws of economics are such things. And since the study of economics is fundamentally about how people respond to different stimuli and the choices they make because of them, a discussion about unchangeable things is appropriate now.

The following TV exchange took place recently and our friend Dan Mitchell posted this video on his blog, International Liberty, along with the accompanying excellent commentary concerning the points he made.

You can read the whole post here. My own comments can be found below the video.



Excellent points and well made. I would take this opportunity however to make an additional point which Dan possibly didn't have time to raise during a short TV spot. Or perhaps he disagrees and therefore didn't make the point purposely. (Dan has a PHD in economics and I got a "C" in high school Econ 101, so enough said about that.)

My point is:

Even in a low inflation environment (on a relative basis) the value of the currency has declined steadily and can be expected to deteriorate much more quickly in the future as the velocity of money movement causes the Fed’s printing to cause a much more virulent inflationary cycle.

That money devaluation does not encourage saving, but rather consumption, as people realize that the value of their savings is declining faster than the paltry interest earnings can keep pace with.

It’s only one more way that the government has changed the culture for average Americans and encouraged financial behavior that is deleterious for them over the longer term.

(I’m not an economist, but I sometimes pretend I am one on this blog.)

6/28/12

Obama Just Lost Re-election. One and Done.



The opposition will be energized like never before. It won't help. 


The Constitution has been judged by the Supreme Court to have no effective restraints on government. 


The great experiment has failed. 


Sorry kids, I did my best.

Birthday and Judgement Day on the Same Day


It’s My Birthday and I Want a Constitutional Present from the Supreme Court
I was born 54 years ago in the People’s Republic of New York.

Back then, all I wanted was a new baseball glove
But I don’t mention that because I want you to send me a present or to say Happy Birthday.
Instead, I’m hoping at least five of the Justices on the Supreme Court will make this day special by rejecting Obamacare.
And I mean the entire legislation, not just the mandate. I want them to throw out all the new taxes, all the new spending, all the new subsidies, and all the new market distortions.
My video on Obamacare, for instance, completely focused on how the legislation would expand the burden of government. The mandate is a bad idea, without question, but it’s also a big mistake to impose more spending and taxes whengovernment already is far too big.
I’m worried, though, that the Court will reject the mandate and decide the rest of the law is okay. Not only does this mean we’ll be stuck with bigger government, but it also creates a scenario where politicians – including squeamish Republicans – may decide to enact other bad laws.
John Stossel shares my concerns about what may happen after a Supreme Court decision.
I’m scared. I fear that even if the Supreme Court overrules most of Obamacare (or did already, by the time you read this), Republicans will join Democrats in restoring “good” parts of the law…parts of Obamacare are popular. People like getting what they think is free stuff.
John elaborates, noting that politicians may enact laws that destroy the insurance market.
…discrimination is what makes insurance work. An insurance regime where everyone pays the same amount is called “community rating.” That sounds fair. No more cruel discrimination against the obese or people with cancer. But community rating is as destructive as ordering flood insurance companies to charge me nothing extra to insure my very vulnerable beach house, or ordering car insurance companies to charge Lindsay Lohan no more than they charge you. Such one-size-fits-all rules take away insurance companies’ best tool: risk-based pricing. Risk-based pricing encourages us to take better care of ourselves. Car insurance works because companies reward good drivers and charge the Lindsay Lohans more. If the state forces insurance companies to stop discriminating, that kills the business model. No-discrimination insurance isn’t insurance. It’s welfare. If the politicians’ plan was to create another government welfare program, they ought to own up to that instead of hiding the cost.
And since big business has a dismaying habit of getting into bed with big government, John isn’t expecting the insurance industry to defend markets.
Women go to the doctor more often than men and spend more on medicines. Their lifetime medical costs are much higher, and so it makes all the sense in the world to charge women higher premiums. But Sen. John Kerry pandered, saying, “The disparity between women and men in the individual insurance market is just plain wrong, and it has to change!” The industry caved. The president of its trade group, Karen M. Ignagni, said that disparities “should be eliminated.” Caving was safer than fighting the president and Congress, and caving seemed to provide the industry with benefits. Insurance companies wouldn’t have to work as hard. They wouldn’t have to carefully analyze risk. They’d be partners with government — fat and lazy, another sleepy bureaucracy feeding off the welfare state. Alcoholics, drug addicts and the obese won’t have to pay any more than the rest of us. But this just kills off a useful part of insurance: encouraging healthy behavior. Charging heavy drinkers more for insurance gives them one more incentive to quit. “No-discrimination” pricing makes health care costs rise even faster.
I’ve repeatedly written that the only way to fix healthcare is to get rid of thegovernment-created third-party payer problem.
Unfortunately, that will be very difficult precisely because people like the illusion that they don’t pay (even though they do bear the costs in the form of lower take-home wages and higher taxes).
So while I want a full-repeal birthday present from the Supreme Court, that will only provide fleeting happiness unless we solve the third-party payer problemcaused by MedicareMedicaid, tax distortions, and other forms of government intervention.

Dan Mitchell is a Senior Fellow at the Cato Institute. He blogs at International Liberty. His articles are republished here occasionally with his express permission.

6/18/12

Repealing Obamacare Won't Fix the Problem

Mitt Romney has promised that if he is elected President he will rid the country of Obama-care.

Putting aside for the moment that his credibility on the issue is less than inspiring, and also putting aside the notion that the Supreme Court may possibly make that point moot by tossing the Obamination entirely, it won't be enough to fix what ails the American health care problem. The problem won't just go away even if he and his terrible plan do.

The problem is: either the way the system was, or the way the system will be, it didn't/won't work because there is no incentive for people to buy their health-care the same way they buy every other good or service they consume. In a post-Obama world we will still have problems and we will need a plan to deal with them.


Although imperfect (as all things are), the free market is what made American health-care exceptional by comparison to the rest of the world, and political tinkering and force based government mandates are what led to its gradual decline and skyrocketing costs.

This Econ 101 video from the Center for Freedom and Prosperity explains why things go wrong with such systems and why a market based system will get us back on track. It is presented by Eline van den Broek of the European Independent Institute who has seen first hand what happened in her country of the Netherlands with such a system.

If you have friends or family who have a less than clear understanding of the problems of government mandated heath-care "solutions" you might want to pass a link to this video along to them.



For more information you can visit the excellent blog, International Liberty.

6/14/12

Green Eggs and Ham ala Dan Mitchell


by Dan Mitchell

In my efforts to promote liberty, I’ve noticed that some people seem impervious to logical arguments and empirical evidence.

Since they have a child-like faith in government, perhaps the best way to reach them is with updated versions of children’s stories and fables.

I’ve already shared the PC version of the story about the ant and the grasshopper, as well as the modern fable about bureaucracy, featuring an ant and a lion. Now it’s time for a revised version of Green Eggs and Ham.

I do not like this Uncle Sam,
I do not like his health care scam.

I do not like these dirty crooks,
or how they lie and cook the books.

I do not like when Congress steals,
I do not like their secret deals.

I do not like ex-speaker Nan,
I do not like this ‘YES, WE CAN!’

I do not like this spending spree —
Even a fool knows that nothing’s free.

I do not like the smug replies,
when we complain about their lies.

I do not like this kind of hope.
I do not like it, I’m not a dope!

If your left-wing friends understand this fable, then you can see if they’re ready for more advanced stories, such as the one about using beer to explain the tax system, the joke about using two cows to explain various economic and political systems.

At some point, after years of therapy and education, maybe they’ll even be ready for grown-up analysis!

Dan Mitchell is a senior fellow at the Cato Institute 
He blogs at International Liberty
His articles are republished here from time to time with his express permission.

6/11/12

Julia the Moocher

This new video from the Center for Freedom and Prosperity would have been considered almost insulting if it had come out when I was a young person. Back then, this stuff was a given. Sadly, today we must pass these videos around so some people can have the obvious explained to them.

You don't need to embrace the (purposely false) notion of the total dismantling of the social safety net in order to see why it has turned into a grotesque path to "Greekdom."

The information is more than Econ 101, it's fundamental morality 101. It can't hurt to have this circulated widely, so I'm doing my part, and you can do yours, by passing the link around.



Hat tip to Dan Mitchell, as usual.

6/8/12

Gary Johnson - The Other Guy

People who read this blog regularly know that I'm not a supporter of either of the two political parties that have a stranglehold on American politics.  My problem with Republicans is that they are too much like Democrats. And my problem with Democrats is that they are too much like Democrats.

It's also no secret that I think that the Obama Presidency has been a nightmare for our liberties and our country.  By comparison, I expect a Romney Presidency to be only a bad dream.

One more term for Obama and his ideology may very well put the country into an unrecoverable slide into the historically familiar condition of top down rule of the elitists over a second class of subservient drones. It's not a stretch to say that a return to a "bread and circuses" world, not unlike that of the Roman Empire, is almost a certainty. We're very nearly there already.

With almost half of the population being a net recipient of government "largess" while the rest pay for it, we are perilously close to the tipping point. At 51%, it's game over folks. The majority of voters will never vote against cash in their own pocket, no matter who else's pocket it comes out of. So it's for certain that I oppose the re-election of Barack Obama and the "progressive" agenda.

Does that mean I support Mitt Romney? Hardly. Anyone who thinks Romney will "save America" merely by being elected over the worst President in history is suffering from a delusion shared with Democrats and Independents who thought everything would be better with GWB in retirement. Oh, it's good that Bush and the neo-cons are out of power, but things are hardly better. In fact they are worse. It's rather like favoring plague over small pox.

So, do I recommend voting for the above named "third choice", Gary Johnson? Well, maybe..it depends on where you live. Huh?

I live in a city I call, Unfortunately, Illinois. My town is not worse than most, but my state is. And one of the reasons that Illinois is in a hot race for "worst in the nation" is that it's run by crooked people, mostly Democrats. But Republicans have shown that they are plenty crooked too whenever they get a chance to run things. The point is, Illinois is going for Obama. Probably in a big way. It's a blue state and people vote with their political tribe no matter what. The feeling here seems to be, "They're all crooks, I'll vote for my band of crooks."

So here's the deal for me: if the polls show (I hate polls, BTW) that Romney is within realistic striking distance of Obama, I'm going to do what I have never advocated before, vote for Romney in order to dismiss Obama and the progressives.

But, that "ain't gonna happen." So I'm going to do what I've always done, vote for what I want. And I want to be free again, or at least more free than I am now. So I'm going to vote for Gary Johnson. I agree with 95% of what he is running on, and right now I can't think of the 5% I disagree with.

I advocate that you do the same, depending upon where you live. If you live in a state that's "safe" for Romney, or "safe" for Obama, and you value your freedom and that of your children and grandchildren, you should vote for Johnson as well. If you live in a battleground state, well, you have the short term fate of the country in your hands. If you want to live in France, please move there, don't bring the Euro-misery here.

From my perspective, the ideal outcome for this election would be for Obama to be dismissed, Romney to be elected, (because a third party candidate will not be elected) and Johnson to get a huge number of popular votes. That will push both parties to take the freedom movement of smaller government seriously in the elections of the future. And time has almost expired on the greatest experiment in political history.

Here is a video of Gary Johnson on the Daily Show. Jon Stewart is pretty funny in this spot and you can get an adequate feel for what Johnson is trying to accomplish.