Healthcare, Budgeting, and Student Loans – Time for Common Sense

The President, his economists, and the CBO defy common sense when they discuss the costs of the 2010 Budget and new entitlement programs such as health care reform and the federalizing of the student loan process.  A recent story in the Washington Post exemplifies the point; reporting on remarks by CBO director Dougles Elmendorf, Lori Montgomery summarized Elmendorf’s statements saying:

“Other policy changes, such as Obama’s signature health-care initiative and a plan to dramatically expand the federal student loan program, would have significant effects on the budget, Elmendorf wrote, but they generally would be paid for and therefore would not drive deficits higher.”

Yet, according to Montgomery, Elmendorf also argued:

“Obama’s tax-cutting agenda is by far the biggest contributor to those budget gaps, the CBO said. As part of his campaign pledge to protect families making less than $250,000 a year from new taxes, the president is proposing to prevent the alternative minimum tax from expanding to ensnare millions of additional taxpayers. He also wants to make permanent a series of tax cuts enacted during the Bush administration, which are scheduled to expire at the end of this year.”

According to the President and CBO, Americans are not to blame the forthcoming debt on increased government spending on existing programs and new entitlement programs.  Americans are to ignore deficits resulting from the government’s plan to: assume control and responsibility for 1/6th of the economy through healthcare, “dramatically” expand and control the student loan process, and pass a budget which will lead to economy killing deficits if not fixed by a newly appointed government commissions to be begun after the passage of the failed budget.  Instead we are to blame the looming deficits on ourselves for our unwillingness to pay more taxes.  Why?  Because Natoma Canfield needs insurance, the President’s healthcare plan will reduce the deficit, big banks are bad for little people, and the President feels that a lack of courage is the reason that congress hasn’t passed the combination budget/student loan/healthcare initiative.

Common sense tells us that in times of economic turmoil, spending must decrease otherwise debt will increase.  However, Elmendorf is saying that spending need not decrease, but revenue must increase.  Elmendorf, and the President, can make these shocking claims because the federal government has the power to force an increase in revenue by raising taxes.  Make no mistake, that is what they plan to do.  After all, Natoma Canfield needs insurance and the Congress needs courage.

Let’s take a moment to push-back on the notion that the President’s healthcare initiative and student loan program will not drive deficits higher.  Let’s also examine the President’s current budget.

Regarding the healthcare initiative, there are good reasons to doubt the numbers and the demand.  First, at the recent Healthcare Summit, Representative Paul Ryan leveled his devastating critique of the system in place to “pay” for healthcare.  According to Ryan and other Republicans, the President and congressional Democrats are using legislative gimmicks to hide costs, relying on “10 years of tax increases and Medicare cuts to pay for six years of spending,” and implementing stringent federal regulations that would prohibit doctors and hospitals from making necessary spending cuts.  Second, to cover the cost of the bill the new plan would impose a Medicare tax on investments which studies say will lead to 115,000 lost job opportunities per year, a lose of $1.37 in GDP for every additional dollar of revenue collected, and a reduction of household disposable income by $17.3 billion per year, among other things.  Third, the plan operates counter to the wisdom of the internet age.  In an age of open source (read free market) decentralized, problem solving and innovation, the President wants to eliminate private sector innovation, federalize decision making, and centralize and bureaucratize one of our nation’s biggest problems.  Finally, the bill is highly controversial and the American people do not like it.  Why else would House Speaker Nancy Pelosi think it a good idea to attempt to pass the wildly unpopular Senate bill through the house without the House voting on it?  Only those blinded by unrequited loyalty could see the maneuver as anything other than shady, un-American political slight of hand, perhaps even unconstitutional.

Regarding the student loan program, it is an unpopular and costly idea.  Student loans directly from the federal government have been available for decades, but poor customer service has lead the vast majority of students preferring loans from private institutions.  Furthermore, loan season is quickly approaching and students (as well as educational institutions) fear that the government will not be able to get a system in place in time to handle all the loans that they’d need to process for the upcoming Fall semester.  More importantly, a government takeover of student loans is costly and Congress, as well as the President, refuse to acknowledge the true costs.  According to the Wall Street Journal,

“[I]n a remarkable letter to Senator Judd Gregg, CBO Director Douglas Elmendorf admits that government accounting is bogus. He writes that the statutory methodology ‘does not include the cost to the government stemming from the risk that the cash flows may be less than the amount projected (that is, that defaults could be higher than projected).’ Mr. Elmendorf further notes that the government’s accounting system is specifically skewed to make direct loans from the government appear to cost much less than guaranteed loans made by private lenders. He says the real ‘savings’ are only $47 billion, even though, in a deception that would be criminal fraud if it weren’t mandated by Congress, the official estimate remains at $80 billion.”

Not only will this takeover be financially costly, Matt Lewis at Big Government argues that it will also cost us thousands of private sector jobs.  At a time when only 1 available job exists for every 6 unemployed Americans, Congress cannot pass job killing legislation.

Regarding the budget, even the President acknowledges that it is broken and will bankrupt the nation unless fixed.  Common sense, and Republicans, argue that we should make fixes now and approve a future budget that will not bankrupt the nation.  The President argues that we should pass the bankrupting budget now then appoint a commission which will examine the budget and propose fixes.  His is an idea that would only make sense near the end of a long beer summit.  What is so broken about the budget?  First, even operating on its “optimistic projections” concerning GDP and interest rates, the budget is “unsustainable.”  In a recent exchange in Congress, California representative John Campbell pressured Dr. Peter Orzag, President Obama’s Director of the Office of Management and Budget, to flesh this point out in greater detail.  Orzag acknowledges that he, and the President, know the budget is broken, but insists that it is better than what was had prior, so the American people should be grateful.  Second, it would raise taxes for 3.2 million small businesses and upper-income taxpayers by an average of $300,000 over the next decade; in other words, it would place a heavy burden on job creators and innovators.  Finally, it would create an insurmountable mountain of debt:

  • By 2020, the CBO estimates debt held by the public would reach $20.3 trillion, or 90% of GDP. That’s up from 53% of GDP in 2009.
  • The federal government would add an estimated $9.8 trillion to the country’s accrued debt over the next 10 years- $5.6 trillion would be in interest alone.
  • It would borrow 42 cents for each dollar spent in 2010.

And the list goes on.

Common sense tells us that spending, and not the unwillingness of the American people to pay higher and more taxes, is to blame for the coming debt.  The President is acting in defiance of common sense and wants Congressional Democrats to have the “courage” to do likewise.

It’s time that President Obama got his priorities in line: reduce spending, control the debt, ease the tax burden on the private sector, eliminate wasteful spending projects like the high-speed railway from Los Angeles to Las Vegas, and give us, the people responsible for the future of this country, time to read through and decide on important pieces of legislation that could potentially result in significant debt increases.  Don’t make us pass the bill in order to find out what’s in it, the idea defies common sense!  The President should stop defying common sense and give us good reason to hope for some change in our pockets upon the completion of his presidency.

**Author’s Note: If you want to take action, here’s one form, 30 seconds, click here to e-mail your elected representative and Blue Dog Democrats – tell them to use common sense and stop this bill.**

Home-based “lead” heads?

Robin’s post below pointed out the difficulties that the new CPSIA law will pose for big businesses, but there’s more to the story. Unfortunately, many small home-based businesses will be effectively shut down. Here’s a report from just one small-business owner:
Last August, HR4040 was quietly signed into law. Known as the Consumer Product Safety Improvement Act, it has the laudable aim of ensuring the safety of all toys, clothing, and other products marketed to children under age 12. In pursuit of this, it requires third party lead testing of every single product meant for children, no matter the components used to make the product and no matter the size of the business.
The unintended consequence is that I, and thousands of other artisans, will be forced out of business. HR4040 requires that every baby carrier, blanket, or burp cloth that I make be tested for lead, at a cost of about $4000 per item. Since my items are all one-of-a-kind, I can’t pay a one-time fee to get a sling tested, I would have to pay it for every sling.
According to the US Consumer Product Safety Commission’s website,
All children’s products (as defined by the CPSIA) subject to the lead limit of the Act will eventually require testing for lead, not just those with surface coatings.
Children’s products manufactured after February 10, 2009, when the lead limit may not exceed 600 ppm, will need a general conformity certification based on a test of the product or a reasonable testing program for products after that date. Children’s products manufactured after August 14, 2009, when the lead limit may not exceed 300 ppm, will have to be certified based on third-party testing of the product by accredited third party laboratories after that date.
For those of us who are sole proprietors or have just a few employees, hand-crafting our items, it is simply not possible to conform to the requirements of this law.
It is tempting to think “I’m a little guy – they’ll never even notice me” and ignore it. But built into HR4040 are strong deterrents to this thinking: $100,000 fines per violation and up to five years in prison. Sure, they might not notice me. But if they did? It isn’t a risk worth taking.
The unintended consequences go farther than just putting me and other artisans out of business. The LA Times online posted an article yesterday detailing the results of the law on thrift stores:
Barring a reprieve, regulations set to take effect next month could force thousands of clothing retailers and thrift stores to throw away trunkloads of children’s clothing.
The law, aimed at keeping lead-filled merchandise away from children, mandates that all products sold for those age 12 and younger — including clothing — be tested for lead and phthalates, which are chemicals used to make plastics more pliable. Those that haven’t been tested will be considered hazardous, regardless of whether they actually contain lead. (Emphasis mine.)
I think that the people who drafted, supported, passed, and signed this law had the best of intentions. But it is written far too broadly and without thought for the unintended results. It is in desperate need of amendment.
The Handmade Toy Alliance is working towards that goal. You can join their group on Facebook, and they have written a sample letter that you can use. Etsy has an open letter regarding the CPSIA. You can contact your congressional representatives and senators, as well as the Small Business Ombudsman.
I also strongly recommend writing to Representative Bobby Rush, the sponsor of the bill. If you are an artisan, you might like to send a small handmade children’s item to him, along with a letter explaining your opposition to the bill and pointing out that the item you have sent will be considered “hazardous material” as of February 10th.
HR4040 is already law. We can’t change that now, but we can cause our representatives to take another look at the repercussions of the law and consider the need for amendments.
So please, if you care about handmade toys for your little ones, or the availability of thrift store clothing for children, or have a friend who (like me) is about to lose their business, take a few minutes and write your representatives. It matters.

For more on the CPSIA’s impact on small business, see here, here, and here.

“Lead” Heads

The government is brilliant–they must be, as they say they’re able to create jobs while simultaneously passing laws that destroy them. What genius!
The Consumer Product Safety Improvement Act, passed last year and going into effect on February 10th, will require all manufacturers of anything–be it clothes, bikes, dolls, books, sports equipment, furniture, you name it–that might be sold to children 12-or-under to place their product through expensive lead testing. After all, what kid’s day is complete without a good chewing on Goosebumps or Christmas socks?
In the clothing business, areas largely dependent on fashion retail are going to be hit hard. For example, LA company Charlie Rocket is expecting a $10,000-$20,000 cost for testing, and what’s more, retailers can use the new law as an excuse to return non-selling items to manufacturers, to the latter’s fiscal loss.
Of course, only government certified labs can run the tests, and as there aren’t many, each test will cost a company around $800 and prevent punctual product shipments. Not to mention the over $620 million of taxpayer money that the Consumer Product Safety Commission has been given to enforce the $100,000 fine plus federal prison time punishment for not executing the regulations.
The government cares about your children–it would break their heart to see Billy get lead poisoning from sucking on his bicycle tires.
They care about you too–when you lose your manufacturing job in company downsizing, don’t worry! I’m sure you’ll get a nice job working at the government bank.

How much wood can a woodchuck chuck…

… and how long before the Sierra Club stages a protest?
A group of environmentalists was appalled to find evidence of an illegal logging operation in a Polish nature reserve this fall. When the activists discovered a neat stack of twenty tree trunks they quickly alerted the police – hoping, no doubt, to save the remaining trees that were notched for felling.
As Barry Arrington points out,

Most crimes require the prosecution to prove a culpable mental state. For example, to prove murder the prosecutor must prove the defendant intended to kill the victim. On the other hand, to prove criminally negligent homicide, the prosecutor need only prove that the defendant was negligent.

Environmental laws are an exception to this rule and fall under the rubric of “strict liability.” To obtain a conviction for violation of an environmental law the prosecutor need only prove that the defendant engaged in the proscribed conduct (in this case, felling trees). His mental state is not relevant.


So, just to be clear, the culprits that started this illegal logging camp should be prosecuted no matter what their mental state. Motive is irrelevant here – the culprits belong in jail, right?
Right.
Because if we don’t keep those renegade beavers at bay, the Cows With Guns may come after us. And we can’t have that.
I echo Mr. Arrington’s query:

Now here’s my question for the materialists. Should the beavers be arrested and jailed for violating the environmental laws? It is no answer to say the beavers cannot form the requisite criminal intent. The crime is, after all, a strict liability crime and their mental state when they felled the trees is not relevant.


Materialists? What say you?

East Meets West: Sharia Law Sanctioned in UK

Upon hearing about the government sanctioning Sharia law in the United Kingdom, I was immediately concerned that western law was being subverted in an ally country with whom we share a unique history. There are two levels on which there might possibly be concerns. The first possible concern arises when one compares Sharia law to a traditional, Western sense of justice. The second possible concern arises when this event is viewed from a historical perspective. Upon thinking through these possible concerns, I believe that the first one raises interesting questions that Christians especially ought to consider and the second may actually be troubling.

In his speech on the rise of Islam in the United Kingdom and the coming sanctioning of Sharia law, Archbishop Rowan Williams best draws out the nature of the first concern.  Williams said,

And what most people think they know of sharia is that it is repressive towards women and wedded to archaic and brutal physical punishments; just a few days ago, it was reported that a ‘forced marriage’ involving a young woman with learning difficulties had been ‘sanctioned under sharia law’ – the kind of story that, in its assumption that we all ‘really’ know what is involved in the practice of sharia, powerfully reinforces the image of – at best- a pre-modern system in which human rights have no role.

Off-the-hip criticisms of sharia law, especially in the media, will tend to focus around the easiest elements to critique.  Namely, criticism will focus on the areas where sharia law tends to most barbarically separate from traditional, Western ideas of justice.  The contrast between sharia law and Western law is especially easy to notice when one compares the rights of women within the two systems.   In an election year where Hillary Clinton was almost a presidential nominee for one ticket and Sarah Palin is the Vice-Presidential nominee for another, it seems pitiful that there is still a legal and cultural tradition where a man can divorce his wife via text message while the wife cannot divorce her husband save for impotence or his extended absence. 

Nonetheless, while we believe in the rights of women we simultaneously highly value cultures, especially minority cultures, and their traditions.   We value liberty and the freedoms of those with religious beliefs.  We desire to liberate people from oppressive systems, but we simultaneously believe that we liberate people from oppressive systems so that they may live freely according to their beliefs so long as they are not openly subversive to the state.  At the heart of these beliefs is an interesting tension between free expression and how one chooses to express himself/herself freely.  At the center of the tension are questions about the nature of law which are especially important for Christians to consider.

Continue reading East Meets West: Sharia Law Sanctioned in UK

Free to be Commie:
“Freeconomics” as Market Communism

Has technological innovation ushered in a new era of communism?
Communism is the economic theory that describes production of goods under public ownership, their free exchange, and their free consumption by all members of the society according to their needs. That idea, as Ilya Vedrashko observes, is also as the core of Chris Anderson’s latest Wired cover story, Free! Why $0.00 Is the Future of Business.
Vedrashko notes that there are “at least two answers to the question whether and how communism is compatible with capitalism” and concludes that “Anderson’s are the ideas of Howard Sherman, a radical American economist.” In his 1969 paper The Economics of Pure Communism, Sherman wrote:

Marx divides the post-capitalist era into two stages. The first stage is ‘socialism,’ in which there is public ownership of the means of production and payment of wages according to the amount produced by the worker. The second state is ‘communism,’ in which there is still public ownership, but worker receive goods according to ‘need.’ Now there are as many interpretations of the word ‘need’ as there are of ‘communism.’…
Under pure communism, free goods would be produced under public control and ownership, and consumed by everyone according to his desires.

Compare this to Anderson’s term “freeconomics.”

The rise of “freeconomics” is being driven by the underlying technologies that power the Web. Just as Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.

Historically, we have thought of communism as public ownership of all enterprises by the government or the nation-state. But what if instead, as in Anderson’s article, the goods and services were owned by private enterprises and distributed by a system that nearly eliminates the cost of distribution (i.e., the internet)?
There are indeed significant similarities between “pure communism” and “freeconomics.” Because of this resemblance we can look at Sherman’s three main problems with pure communism and see how they apply to the freeconomic model:

Continue reading Free to be Commie:
“Freeconomics” as Market Communism

Markets and Miracles:
What the Market Economy Needs to be Moral

Almost everyone has heard economics referred to as “the dismal science.” And if you took a course in macroeconomics you probably recognize that the appellation was given by the Scottish historian Thomas Carlyle. But what few people realize is that Carlyle coined the term in an 1849 magazine article titled Occasional Discourse on the Negro Question in which he denounced the two groups within the UK who championed the cause of antislavery: market economists and evangelicals.
Today we have become so accustomed to hearing criticisms of free market economics from socialists, Marxists, and other extremes of the political left that we find it difficult to imagine that it being opposed by conservatives. Attitudes toward the market economy, however, have less to do with the political spectrum than they do with the conception of who should retain control over economic life. Progressives, fearing that no one is in control and that powerful will take advantage of the weak, believe the state must step in to prevent inequitable and unjust outcomes. Conservatives (as we would define them today), by contrast, put their faith in the system itself and believe that left unhindered by the state, is sufficient to lead to the best possible end result. Libertarians, who view markets as morally neutral, contend that the individual, when allowed total liberty, will usher in the ideal end state. While all of these positions have some merit, they all ultimately fail when they leave out the most significant reason for putting our trust in the markets: because all control ultimately belongs to God.
Recognizing this fact, however, does not release homo economicus from all responsibility. A market is, after all, merely a mechanism for buying and selling goods and services. And while it is often viewed as highly individualistic and selfish, the fact remains that markets cannot exist without a network of humans in relationship with one another. As with all human interactions, though, our natural proclivity to sin can have a detrimental effect. Market forces and outcomes are prone to injustice and inequitable distribution precisely because man is by nature a sinful creature.
As Christians, we can never embrace any system or institution without being wary of how we are likely to abuse it for our own depraved purposes and rationalize our reasons for doing so. This is the primary reason we cannot fully embrace either a conservative or libertarian view of market economics.

Continue reading Markets and Miracles:
What the Market Economy Needs to be Moral

The Poets of the Economy

“Money,” said Wallace Stevens, “is a kind of poetry.” As a Pulitizer Prize-winning poet and president of the Hartford Accident and Indemnity Company, Stevens was familiar with both free verse and the free market. So if Stevens is correct, and money is a kind of poetry, then who are our epic monetary poets, the “poets of the economy?”
As the mid-term elections draw near we will hear countless debates over who is responsible for the flourishing (if a Republican politician) or stangating economiy. But while the President and Congress play a significant role in shaping our material fortunes, we often give politicians too much credit. The true leaders, the poets, of the economy are often found far from Washington, D.C.
I’ve made a list of the five individuals and the five organizations that I think have had the greatest impact on the economy since World War II. The completely arbitrary criteria I’ve laid out for the “poets” is that they must have been born after 1900 and cannot be a politician or elected official; for the companies/organizations that they must have been created after 1900 and that they are still in operation today.
My list includes the following:
1. Alan Greenspan (b. 1926) – Former chairman of the Federal Reserve
2. Bill Gates (b. 1955) – Founder of Microsoft
3. Sam Walton (b. 1918) – Founder of Wal-Mart
4. Tom Watson, Jr. – Leader of IBM
5. Ray Kroc (b. 1902) – Founder of McDonald’s Restaurants
1. Microsoft – developed software that had a significant impact on office productivity.
2. Wal-Mart Stores, Inc (1962) – transformed both retailing and corporate logistics
3. IBM (1924) – revolutionized mainframe computers and invented the personal computer
4. Bell Labs (1925) – invented the transistor, UNIX, C++ software, etc.
5. The American Legion (1919) — pushed for the introduction of the G.I. Bill
What names would you include and why?
[Note: I reserve the right to update my list if I find an answer that I like better.]

The Jena 6 Documents

For the past several weeks the blogosphere has been discussing the incidents involving the “Jena 6.” The reporting on the events in Jena by the mainstream media has been disappointing, with the focus being placed on the emotional reactions and protests rather than on the relevant facts.
In order to facilitate a substantive discussion of the case, Laura Curtis and I have decided to make public several documents, including: the official statements from the students and coaches that witnessed the assault on Justin Barker; the statements of Mychal Bell and Jesse Beard; the police reports related to the Gotta Go and Fair Barn incidents; the motion for post verdict acquittal; and a portion of the hearing to deny bail to Mychal Bell.
Every effort has been made to scrub the documents of any details that might violate the privacy of the witnesses.
Misc. Documents

  • Convenience Store Incident — Police statements on the incident involving Robert Bailey, Jr. and Theo Shaw at the Gotta Go convenience store.

Court Documents

  • Motion for post verdict acquittal [Note: Because Bell’s case has been transferred to the juvenile court system, I’ve decided to pull this document.]
  • Walters’ Argument to Revoke Bell’s Bail — Provides the justification for the District Attorney’s case for denying bail to Mychal Bell [Note: Because Bell’s case has been transferred to the juvenile court system, I’ve decided to pull this document.]
  • State of La v Munoz — Explains the criteria for determining whether an instrument (i.e., a tennis shoe) can be deemed a “deadly weapon.”

Statements of the Accused

Witness Statements

Markets and Miracles:
What the Market Economy Needs to be Moral

Almost everyone has heard economics referred to as “the dismal science.” And if you took a course in macroeconomics you probably recognize that the appellation was given by the Scottish historian Thomas Carlyle. But what few people realize is that Carlyle coined the term in an 1849 magazine article titled Occasional Discourse on the Negro Question in which he denounced the two groups within the UK who championed the cause of antislavery: market economists and evangelicals.
Today we have become so accustomed to hearing criticisms of free market economics from socialists, Marxists, and other extremes of the political left that we find it difficult to imagine that it being opposed by conservatives. Attitudes toward the market economy, however, have less to do with the political spectrum than they do with the conception of who should retain control over economic life. Progressives, fearing that no one is in control and that powerful will take advantage of the weak, believe the state must step in to prevent inequitable and unjust outcomes. Conservatives (as we would define them today), by contrast, put their faith in the system itself and believe that left unhindered by the state, is sufficient to lead to the best possible end result. Libertarians, who view markets as morally neutral, contend that the individual, when allowed total liberty, will usher in the ideal end state. While all of these positions have some merit, they all ultimately fail when they leave out the most significant reason for putting our trust in the markets: because all control ultimately belongs to God.
Recognizing this fact, however, does not release homo economicus from all responsibility. A market is, after all, merely a mechanism for buying and selling goods and services. And while it is often viewed as highly individualistic and selfish, the fact remains that markets cannot exist without a network of humans in relationship with one another. As with all human interactions, though, our natural proclivity to sin can have a detrimental effect. Market forces and outcomes are prone to injustice and inequitable distribution precisely because man is by nature a sinful creature.
As Christians, we can never embrace any system or institution without being wary of how we are likely to abuse it for our own depraved purposes and rationalize our reasons for doing so. This is the primary reason we cannot fully embrace either a conservative or libertarian view of market economics.

Continue reading Markets and Miracles:
What the Market Economy Needs to be Moral