Monday, November 30, 2009

Make a Right at the Next Recession

Recessions are no fun for anyone, especially for the party in power. Ross Douthat looks at how our current recession could push voters rightward if Obama and the Democratic Congress continue to flounder.

Meanwhile, the regions hardest hit by the current downturn are places where liberals have dominated for generations, and where government is overextended already. (Of the 10 “States in Fiscal Peril” featured in a recent Pew report, nine went for Barack Obama in 2008.) Even if the residents of California or New Jersey or Illinois wanted further expansions of government, there isn’t any revenue to finance them.

So voters are turning rightward instead. In New Jersey, a recent Quinnipiac poll found that 61 percent of voters favored laying off state workers to reduce the current budget shortfall; only 23 percent favored raising taxes instead. Nationally, the percentage of Americans who say that government is doing “too much” hit a 10-year peak this fall. In 2007, 69 percent of the public said that government should guarantee universal health care; now that number is down to 47 percent.

I think we'll be seeing a Republican landslide come 2010.

This Is Universal Health Care

There's a reason why I oppose universal health care, and it isn't because I'm a heartless bastard. It's because I know government health care will be vastly inferior to what we have now in many important ways.

For example, an inspection of one of Great Britain's NHS hospitals revealed some disturbing results:

That report, published yesterday, noted that: "In the accident and emergency department we … saw floors that were stained with blood and other fluid spillages and black dirt had accumulated in the corners of the bay areas. Six out of 12 privacy curtains we checked were soiled, some with blood spatter." Patient trolleys had side rails that were "marked and sticky". In A&E inspectors found "a trolley mattress with a hole in the cover; we asked the nurses to check the mattress and it was found to be badly soiled and to have a foul odour. In all, 12 mattresses were checked by trust staff and 11 were stained through to the foam."

The Patients Association said clinical safety problems were widespread within the NHS. Katherine Murphy, the charity's director, said: "The evidence was there but not acted on. That is completely unacceptable."

This is unheard of even in the worst hospitals in America. But the lack of incentive and poor management in the NHS has led to potentially deadly consequences, consequences I would like to avoid.

I'll take my hospitals clean and private, thanks.

Sunday, November 29, 2009

The Real Cost of Obamacare

The Democratic health care bill now winding its way through Congress is purported to cost a mere $1 trillion, but the true cost is hidden by legislative gimmicks.

One gimmick makes the new entitlement spending appear smaller by not opening the spigot until late in the official 10-year budget window (2010–2019). Correcting for that gimmick in the Senate version, Sen. Judd Gregg (R-NH) estimates, “When all this new spending occurs” — i.e., from 2014 through 2023 — “this bill will cost $2.5 trillion over that ten-year period.”

Another gimmick pushes much of the legislation’s costs off the federal budget and onto the private sector by requiring individuals and employers to purchase health insurance. When the bills force somebody to pay $10,000 to the government, the Congressional Budget Office treats that as a tax. When the government then hands that $10,000 to private insurers, the CBO counts that as government spending. But when the bills achieve the exact same outcome by forcing somebody to pay $10,000 directly to a private insurance company, it appears nowhere in the official CBO cost estimates — neither as federal revenues nor federal spending. That’s a sharp departure from how the CBO treated similar mandates in the Clinton health plan. And it hides maybe 60 percent of the legislation’s total costs. When I correct for that gimmick, it brings total costs to roughly $2.5 trillion (i.e., $1 trillion/0.4).

When we correct for both gimmicks, counting both on- and off-budget costs over the first 10 years of implementation, the total cost of ObamaCare reaches — I’m so sorry about this — $6.25 trillion. That’s not a precise estimate. It’s just far closer to the truth than President Obama and congressional Democrats want the debate to be.

Six Point Two Five trillion over ten years. And here I thought we were trying to reduce costs.

[Cato via Glas]

Friday, November 27, 2009


When is modern science going to find a cure for a woman's mouth?

-Dr. Leo Spaceman

Sunday, November 22, 2009

Ah, The Onion

Obama Bucks

Found this, thought it was funny.

Friday, November 20, 2009

Is this a baby?

Federal Government Wants Subway Safety Oversight

The Obama administration will propose that safety regulations for subways and commuter trains be put under the jurisdiction of the federal government. What do you think?

Tuesday, November 17, 2009

China: Bow Down To Your Lender

China is now using its role as our lender to influence the terms of our health care reform:

In a July meeting, Chinese officials asked their American counterparts detailed questions about the health care legislation making its way through Congress. The president’s budget director, Peter R. Orszag, answered most of their questions. But the Chinese were not particularly interested in the public option or universal care for all Americans.

“They wanted to know, in painstaking detail, how the health care plan would affect the deficit,” one participant in the conversation recalled. Chinese officials expect that they will help finance whatever Congress and the White House settle on, mostly through buying Treasury debt, and like any banker, they wanted evidence that the United States had a plan to pay them back.

Who would have thought health care reform could become a national security issue?

The Chinese are getting skeptical about our ability to pay them back. Perhaps they will need to teach us a lesson in capitalism, which would be ironic to the max.

Shovel Ready My Ass

The $787 billion dollar Stimulus Bill is doing nothing and I couldn't be less surprised. Take California for example:

Figures from the California Department of Transportation show that, as of late October, over $2 billion in federal highway funds had been allocated to the state when the American Recovery and Reinvestment Act passed in February. Of that sum, only $837 million had been awarded in construction contracts. Even more surprising, only $51 million, or about 2.5 percent of the total, had actually been disbursed. Given all the talk when the ARRA was passed about the many projects that were “shovel ready” and primed for construction, this is perhaps a bit disheartening. After all, this spending was pitched as a way to pump immediate life into a collapsing economy.

The Stimulus is a complete failure. Actually, it's worse than a failure, since it's pushing capital to be invested inefficiently.

We would be better off and in less debt if we had just done nothing.

Why You've Never Heard of the Great Depression of 1920

How Warren G. Harding turned a recession around in 1 year.

Monday, November 16, 2009

Market for Education

Skilled teachers have taken to selling their lesson plans online to earn extra cash.

Kelly Gionti, a teacher at the High School for Law, Advocacy and Community Justice in Manhattan, has sold $2,544 worth of unit plans for “The Catcher in the Rye” and “The Great Gatsby,” among others, helping finance trips to Rome and Ireland, as well as class supplies.

Margaret Whisnant, a retired teacher in North Carolina, earns an average of $750 a month from lessons based on her three decades of teaching middle school classics like “The Outsiders,” enough to pay for new kitchen counters and appliances.

Lisa Michalek, 40, who taught for six years in Rochester and now works for Aventa Learning, a for-profit online education company, said she spent about five hours a week tweaking old lesson plans and creating new ones, like an earth science curriculum that sells for $59.95.

“I knew I had good lessons, so I thought, ‘Why not see what other people think of it?’ ” Ms. Michalek said.

After $31,000 in sales, she has her answer.

It's impressive, even in a completely government run enterprise, that a free market can still pop up to improve lives.

Even though this practice is win-win, school officials look upon it with disdain.

A high school English teacher in upstate New York said her bosses barred her from selling plans used in her classroom; she spoke on the condition that she not be named.

Beyond the unresolved legal questions, there are philosophical ones. Joseph McDonald, a professor at the Steinhardt School of Culture, Education and Human Development at New York University, said the online selling cheapens what teachers do and undermines efforts to build sites where educators freely exchange ideas and lesson plans.

“Teachers swapping ideas with one another, that’s a great thing,” he said. “But somebody asking 75 cents for a word puzzle reduces the power of the learning community and is ultimately destructive to the profession.”

Apparently making money in exchange for quality work is "destructive." And here I thought it was a good thing that good teachers were making extra money, other teachers had access to high quality lesson plans, and kids were learning more.

Shows what I know.

[NYTimes via StormD]

Can Someone Tell Me

What the FDA actually does?

WASHINGTON — Federal health regulators have found tiny particles of trash in drugs made by Genzyme, the second time this year the biotechnology company has been cited for contamination issues.

The Food and Drug Administration said Friday that bits of steel, rubber and fiber found in vials of drugs used to treat rare enzyme disorders could cause serious adverse health effects for patients.

Despite those problems, the FDA said the products would remain on the market, because there are few alternative treatments.
The FDA has an annual budget of $3.2 billion, plus Cato's estimated societal cost of $49 billion, and it can't even keep garbage out of our medicine.

What are we paying for exactly?

Saturday, November 14, 2009

Evil/Genius: Verizon Wireless

Have you ever noticed the button on Verizon phones for Get It Now or Mobile Web? It's the large button in the middle of the D-pad or some other prominent location, and you're always hitting it accidentally.

Well, every time you hit it, if you don't have a data plan, Verizon charges you $1.99 for use of its data network. Multiply that small charge by the thousands of people who accidentally hit that button, and you've got a $300 million business, according to an anonymous Verizon employee:

"The phone is designed in such a way that you can almost never avoid getting $1.99 charge on the bill. Around the OK button on a typical flip phone are the up, down, left, right arrows. If you open the flip and accidentally press the up arrow key, you see that the phone starts to connect to the web. So you hit END right away. Well, too late. You will be charged $1.99 for that 0.02 kilobytes of data. NOT COOL. I've had phones for years, and I sometimes do that mistake to this day, as I'm sure you have. Legal, yes; ethical, NO.

"Every month, the 87 million customers will accidentally hit that key a few times a month! That's over $300 million per month in data revenue off a simple mistake!

"Our marketing, billing, and technical departments are all aware of this. But they have failed to do anything about it-and why? Because if you get 87 million customers to pay $1.99, why stop this revenue? Customer Service might credit you if you call and complain, but this practice is just not right.

"Now, you can ask to have this feature blocked. But even then, if you one of those buttons by accident, your phone transmits data; you get a message that you cannot use the service because it's blocked–BUT you just used 0.06 kilobytes of data to get that message, so you are now charged $1.99 again!

"They have started training us reps that too many data blocks are being put on accounts now; they're actually making us take classes called Alternatives to Data Blocks. They do not want all the blocks, because 40% of Verizon's revenue now comes from data use. I just know there are millions of people out there that don't even notice this $1.99 on the bill."
Very clever, Verizon. Glad I'm not on your network anymore.

[Pogue @ NYTimes via Gizmodo]

Value of the Dollar

I posted something similar before, but this graph goes even further back in time, showing what happens to the value of a currency when it is no longer backed by a tangible asset. It isn't pretty.

Coolest Thing: Let's See a Robot Do THIS

I guess some of us still have an advantage over those metallic beasts. By "some of us" I mean not me.

[via Gizmodo]

Robot Apocalypse: Swordplay, eh?

This menacing robot brandishes a toy sword after practicing Tai Chi.

[via Gizmodo]

Thursday, November 12, 2009

It's Bubble Time

Here we go again:

In the last eight months, the Dow Jones Industrial Average has risen from its March 6 low of 6470 to over 10290 today, a gain of roughly 59%. The Nasdaq Composite Index and the S&P 500 Index have likewise increased about 71% and 65%, respectively, since early March. Are we looking at the restoration of legitimate values or the emergence of disastrous new asset price bubbles?

The answer would seem to lie in whether the Fed's money machine is fueling an illusory recovery that is only manifested in financial markets as opposed to the general economy. The FOMC's own report acknowledges that economic activity remains weak, household spending is constrained, and businesses are still cutting back on fixed investment and staffing.

The Fed's 0% interest loans to banks are contributing to yet another massive bubble, though instead of real estate, this time its the stock market.

The game is rigged to blow, get out while you can.

[via WSJ]

Wednesday, November 11, 2009

Health Bill's Medicare Cuts are Wishful Thinking

The Democrat Health Plan now working its way to the Senate is being marketed as deficit reducing, despite its $1.2 trillion price tag. The plan will be paid for by increased taxes and reduced Medicare payments.

Specifically, the plan calls for $426 billion in spending cuts and $572 billion in taxes, and is projected to net a $104 billion deficit reduction over 10 years.

The proposed cuts are likely to be short lived, as Congress has a history of proposing Medicare spending cuts, then abandoning them as medical interest groups turn up the heat.

Under both Democrats and Republicans, Congress repeatedly has waived curbs it has tried to place on spending. It has given back other savings from the 1997 law to hospitals, skilled nursing facilities and other providers, most notably in 1999. More recently, Congress has twice switched off a cost-saving trigger that was contained in a 2003 bill establishing a Medicare prescription-drug benefit. Congress also frequently has waived budget resolution limits, as well as pay-as-you-go rules requiring offsets for tax cuts and entitlement spending.

Since 1997, Congress has passed five Medicare spending cuts, only to repeal all five shortly after they went into effect.

A plan that cuts Medicare spending by half a trillion dollars is wishful thinking. Do not be fooled.

Five Dollar Economics

It is standard liberal dogma to believe that capitalists are greedy pigs who will squeeze consumers for every last cent just to make a profit. While some may be, the smarter ones know better.

Stuart Frankel is one of those smarter capitalists, and to boost sales at his Subway store in Miami he decided to give his customers a deal: a footlong sub for $5.

For Frankel, the biggest surprise from his $5 promotion was that his profit margins didn't decline. Many promotions are so-called loss leaders designed to draw customers in the hope they'll buy higher-margin items alongside the featured special. That's one reason most offers have a time limit. Frankel's food costs did rise as a percentage of sales, but that was offset by the overall boost in volume and the increased productivity of his employees, who had less down time. Even after adding two new staffers, Frankel made money on each $5 sandwich.

The free market responds to good deals, and rewards those who give them. Walmart is another great example of a business that exists to give people low prices, and they are now the largest retailer in America. Watch how fast Walmart spreads.

There is tremendous profit in saving consumers money. Markets must be kept as free as possible to allow this phenomenon to continue.

Tuesday, November 10, 2009

Communism vs. Capitalism

Experiment over.

Screw Net Neutrality, The Internet Regulates Itself

Yesterday, I came across a story about Comcast, the nation's 2nd largest cable provider. The story surrounds a Comcast FCC filing concerning a bandwidth throttling scheme to slow down bandwidth hogs in order to preserve the network for other customers.

Its network throttling implements a two-tier packet queueing system at the routers, driven by two trigger conditions.

Comcast's first traffic throttling trigger is tripped by using more than 70 per cent of your maximum downstream or upstream bandwidth for more than 15 minutes.

Its second traffic throttling trigger is tripped when the Cable Modem Termination System you're hooked-up to – along with up to 15,000 other Comcast subscribers – gets congested, and your traffic is somehow identified as being responsible.

Tripping either of Comcast's high bandwidth usage rate triggers results in throttling for at least 15 minutes, or until your average bandwidth utilisation rate drops below 50 per cent for 15 minutes.

Basically, if you max out your bandwidth for over 15 minutes straight, Comcast will slow you down. That's trigger one. Trigger two occurs when your actions on the internet are congesting your local node. After both triggers, you will be slowed down for 15 minutes.

The blogosphere, on a hair trigger after Comcast's last foray into throttling, spread this story like wildfire after it popped up on Slashdot. Cooler heads paid attention to the date of the original story, which was nearly a year ago.

This system, launched in January of 2009, replaced Comcast's old tactic of using forged TCP packets to throttle upstream P2P traffic for all users, all the time. The new system is actually an improvement, but Comcast's beating yesterday continued.

Electronista joined in, posting a story proclaiming Comcast's throttling as new. They amusingly linked to the Inquirer without giving Slashdot any finder's credit, or noticing the story's ripeness. Pretty soon even our forums started to fill up with posts from confused Comcast users (1, 2) suddenly outraged by a year old change. At this point, entire legions of Internet users were outraged by -- a twelve month old improvement.

To refresh for those who apparently haven't been paying attention: Comcast's old network management techniques included booting users off the network for excessive consumption without defining "excessive," and forging TCP packets to screw up everybody's upstream connections. Comcast's new throttling system was implemented in January of 2009 and combines a clear 250GB month cap with a throttling system that only temporarily targets heavy users on congested nodes.

The reason we don't need any new Net Neutrality legislation is because we are perfectly willing and able to regulate ISPs ourselves.

Comcast's last attempt to throttle their network was a violation of existing law. Their recent throttling scheme, though actually an improvement, still elicited a strong, if somewhat misguided, backlash.

Comcast is in good company though, as they are not the only ISP to feel the sting of consumer scorn. Time Warner Cable attempted to roll out a new tiered pricing scheme, but was thoroughly rejected by consumers.

Consumers are paying attention. They will take the necessary steps to ensure no company hinders the Internet. And they will do a better job of it than the government.

Existing legislation has proven sufficient for the FCC to regulate the internet. I'm going to agree with the Father of the Internet and say we need no new Net Neutrality laws at this time.

Monday, November 9, 2009

America the Beautiful

I post a lot of negative stories on here, so here's something inspiring for you.

Behold, the Mike O'Callaghan-Pat Tillman Memorial Bridge. In the background is the Hoover Dam.

More images here.

[via Gizmodo]

The Man Who Predicted The Depression

The Great Depression and our current Great Recession were both predictable and preventable, at least if you're Ludwig von Mises:

The 1920s were marked by the brave new era of the Federal Reserve system promoting inflationary credit expansion and with it permanent prosperity. The nerve of this Doubting-Thomas, perma-bear, crazy Kraut! Sadly, poor Ludwig was very nearly alone in warning of the collapse to come from this credit expansion. In mid-1929, he stubbornly turned down a lucrative job offer from the Viennese bank Kreditanstalt, much to the annoyance of his fiancée, proclaiming "A great crash is coming, and I don't want my name in any way connected with it."

We all know what happened next. Pretty much right out of Mises's script, overleveraged banks (including Kreditanstalt) collapsed, businesses collapsed, employment collapsed. The brittle tree snapped. Following Mises's logic, was this a failure of capitalism, or a failure of hubris?

Mises's solution follows logically from his warnings. You can't fix what's broken by breaking it yet again. Stop the credit gavage. Stop inflating. Don't encourage consumption, but rather encourage saving and the repayment of debt. Let all the lame businesses fail—no bailouts. (You see where I'm going with this.) The distortions must be removed or else the precipice from which the system will inevitably fall will simply grow higher and higher.

The system we have today is destined for failure. Our government thinks it can just do more of the same and achieve a different result.

With interest rates at zero, monetary engines humming as never before, and a self-proclaimed Keynesian government, we are back again embracing the brave new era of government-sponsored prosperity and debt. And, more than ever, the system is piling uncertainties on top of uncertainties, turning an otherwise resilient economy into a brittle one.

The take away from all this? Stay out of the stock market.

Millionaires in Congress

A new report finds that of the 535 members of Congress, 237 of them are millionaires.

That’s 44 percent of the body – compared to about 1 percent of Americans overall.

CRP says California Republican Rep. Darrell Issa is the richest lawmaker on Capitol Hill, with a net worth estimated at about $251 million. Next in line: Rep. Jane Harman (D-Calif.), worth about $244.7 million; Sen. Herb Kohl (D-Wis.), worth about $214.5 million; Sen. Mark Warner (D-Va.), worth about $209.7 million; and Sen. John Kerry (D-Mass.), worth about $208.8 million.

I find it hopelessly ironic that the 5 4 of the 5 richest people in Congress are Democrats. I guess I shouldn't be surprised.

It's funny how the people most able to directly help the poor refuse to do so, and instead wish to pass the check to taxpayers. Hey Kerry, instead of supporting this draconian health reform, why not use a few thousand dollars and buy insurance for a poor family?

But that's not even the best part:

Some lawmakers have profited from investments in companies that have received federal bailouts; dozens of lawmakers are invested in Wells Fargo, Citigroup, Goldman Sachs and Bank of America.

I'm sorry, but HOW THE FUCK IS THIS LEGAL? This country is being bankrupted so our "representatives" can profit on their investments? This is torch and pitchfork stuff here.

This only reaffirms my belief that government debt is bad, and government involvement in the marketplace is worse.

[Politico via rastian77]

Sunday, November 8, 2009

Limiting Services Raises Prices

In New York City, if you want to drive a taxi cab, you have to buy a permit. These permits, or "medallions," are in short supply, and there are actually fewer medallions in NYC today than there were in 1937.

In New York, the ever-spiraling demand for taxi service, coupled with draconian limits on supply, has had predictable results. Corporate medallions, which permit the holder to operate a single cab, were selling for an eye-popping $760,000 in September. USA Today recently noted that medallion prices have risen 126 percent since 2004; Andrew Murstein, president of a firm that invests in medallions, reports that “it’s an industry that has always gone up. It has outperformed every index you can think of — the Dow, Nasdaq, gold, you name it.”

When the government throws up barriers to entry, like requiring permits or licenses for certain professions, it automatically raises the price for consumers. In some cases it may be necessary, such as limiting the number of cabs on the streets of New York to reduce congestion, but it must always be weighed against the certainty of price increases.

I'm looking at you, medical licenses.

Facts About Health Spending

America spends more than any other country on health care, and this spending rises every year. So here's a breakdown of our National Health Expenditure (NHE).

  • NHE grew 6.1% to $2.2 trillion in 2007, or $7,421 per person, and accounted for 16.2% of Gross Domestic Product.
  • Medicare spending grew 7.2% to $431 billion in 2007, or 19 percent of total NHE.
  • Medicaid spending grew 6.4% to $329 billion in 2007, or 15 percent of total NHE.
  • Private spending grew 5.8% to $1.2 trillion in 2007, or 54 percent of total NHE.
  • Hospital expenditures grew 7.3% in 2007, up from 6.9% in 2006.
  • Physician and clinical services expenditures increased 6.5% in 2007, the same rate of growth as in 2006.
  • Prescription drug spending increased 4.9% in 2007, a deceleration from the 8.6% growth in 2006.
  • At the aggregate level in 2007, businesses (25 percent), households (31 percent), other private sponsors (4 percent), and governments (40 percent) paid for about the same share of health services and supplies as they did in 2006.
Many people claim we need a larger government presence in health care to control costs, but the government programs of Medicare and Medicaid already account for 34% of all health spending, and costs continue to spiral out of control. In fact, spending by the government increases significantly faster than private spending.

We already have a third of our health care industry supported by the government, how much more do we need before we accept that more government is not the answer?

Friday, November 6, 2009

Hope vs. Reality: The Economic Stimulus [UPDATE]

The graph says it all. Recovery Plan Fail. [via Innocent Bystanders]

GOP Announces Rival Health Plan

The number one problem with American healthcare is the cost. It's just too expensive. So what should we focus on? Maybe the cost?

Unlike the Democrats’ strategy of trying to provide near-universal coverage and force other major changes to the insurance system, the Republican approach is an incremental one with a different goal – controlling health care costs.

The bill does not aim to cover every person in America, nor should it. Our country cannot afford its current expenses, much less the extra trillion dollars for a new entitlement. The Republican bill is significantly cheaper.

The CBO put the price tag for the GOP plan at $61 billion, a fraction of the $1.05 trillion cost estimate it gave to the House bill that lawmakers are set to vote on this weekend. And the CBO found that the Republican provision to reform medical malpractice liability would result in $41 billion in savings and increase revenues by $13 billion by reducing the cost of private health insurance plans.

The CBO estimates that cost savings will translate into lower premiums.

According to CBO, the GOP bill would indeed lower costs, particularly for small businesses that have trouble finding affordable health care policies for their employees. The report found rates would drop by seven to 10 percent for this group, and by five to eight percent for the individual market, where it can also be difficult to find affordable policies.

The GOP plan would have the smallest economic impact on the large group market that serves people working for large businesses that have access to the cheapest coverage. Those premiums would decline by zero to 3 percent, the CBO said.

The Republican plan aims to lower costs through increased competition:

--Let insurers sell policies across state lines. That would loosen the strangling state-by-state regulations and unleash competition to drive premium prices down.

--Give people who buy insurance in the private market the same tax breaks as those who get it through employers. Now, employers that offer coverage get a tax break on the premiums they pay for employees. And employees don't pay taxes on the value of the coverage they receive. People who want to buy insurance in the individual market should get the same tax breaks. That would help millions of people acquire coverage.

--Expand the ability of small businesses, trade associations and other groups to set up insurance pools to offer coverage at more attractive rates.

--Control health costs in part by reining in the medical malpractice system that raises insurance premiums and forces doctors to order tests to protect themselves from lawsuits. Limiting certain kinds of damage awards would reduce spending on health care by about $11 billion in 2009, or about one-half of 1 percent, the Congressional Budget Office estimates. Think about that in human terms: Reform would save millions of patients the expense and trauma of unnecessary tests and procedures.

By allowing interstate competition between insurers and eliminating the tax advantage of employer based insurance, the GOP bill will open up a great deal of competition as quality insurers can compete across the country to increase the size of their risk pools, and their profits.

With the spotlight shining so brightly on insurance companies, they will have to compete on quality and price as they expand across the country. Integrated insurance and health delivery systems like Kaiser-Permanente come to mind as a possible model for much of the US.

The insurance market to date has almost completely stagnated. Most states have one or two large insurers splitting their entire market, and they use their monopoly power to edge out newcomers.

This is why it is so important to unleash large insurer vs. large insurer, to let them tear each other apart trying to grow their market shares.

We must also make sure to reduce barriers to entry where we can to allow newcomers to bring fresh ideas to the table.

This new plan from the GOP excites me for two reasons. One, it presents very reasonable ideas to greatly improve the existing system and control costs. Two, it shows the country that reform does not have to be a trillion dollar, 2000 page, bureaucratic expansion.

The bill is far from perfect, though. It will not cover nearly as many people as the Democratic House bill (3 million vs 36 million), as there is no mandate for coverage.

Also, the Republicans stopped short of ending the anti-trust exemption for insurance companies.

The GOP bill also has no provision against dropping coverage for pre-existing conditions. However I personally think this will become less of a problem with increased competition on the individual policy market.

Also I would rather see insurance premiums taxed at the same rate as other income. This could be done without raising total taxes (the last thing we want in a recession) by taxing insurance premiums while lowering the overall tax rate. This puts more pressure on insurance companies to do more with less, and ends the inflation-inducing tax-free premium.

House Minority Leader John Boehner (R-Ohio) was refreshingly candid in his summation:

"We do not attempt to cover 46 million more Americans. We will cover millions more Americans. We do not increase taxes. We do not cut Medicare and Medicaid. We dot not have mandates on individuals or businesses."

It doesn't go far enough, but the GOP bill is a good starting place, with affordable, common sense reforms.

Quote: George Orwell

Sometimes the first duty of intelligent men is the restatement of the obvious.

Thursday, November 5, 2009

US Still the World's Largest Manufacturer

Reports of US manufacturing's death have been greatly exaggerated. Despite China doubling its market share in the last 10 years, from around 4% of global manufacturing (1995) to 8% (2005), the US has held steady at a little over 22% of the global market.

Total manufacturing output has been increasing steadily over the last 20 years, yet we never stop hearing complaints about jobs moving to China. While this is true in some cases, in many places automation and production technology are reducing the need for employees. In 1987, 16.5% of American workers worked in manufacturing. Now that figure is around 11%.

Look out though, as American manufacturing could be experiencing a renaissance as the falling dollar increases our global competitiveness. Companies who have offshored their production to save money many times find hidden costs through lower quality facilities and suppliers. These companies may see our current economic climate as an opportunity to bring those jobs back home.

Wednesday, November 4, 2009

News Gangster Rap

Betting Against the Greenback II

India is also hedging against the US dollar, and has moved 2.3 percent of its reserve holdings into gold. This $6.7 billion deal to buy 200 metric ton signaled bullion markets yesterday, which have pushed the price of gold to $1084.50.

Central banks, after many years of selling gold reserves, have reversed course and are rapidly driving up the price of gold with large purchases.

If you're looking to speculate on gold, China and the IMF are still likely to make large purchases of their own. Also, gold still provides a safe investment in uncertain times.

Betting Against the Greenback

Amid crushing federal deficits, zero-interest financial bailouts, and a struggling US economy, it is hard to find something to smile about, unless your Warren Buffet.

Warren Buffett has made what he calls an “all-in wager on the future of the United States”, spending $US26 billion on the rest of Burlington Northern Santa Fe railroad.


Burlington Northern is a proxy for the competitiveness of the US economy, since its main business is hauling coal and grain to the coast for export.

The latest Institute for Supply Management survey for the US, out yesterday, showed that the lower dollar is already helping: the manufacturing sector grew in October for the third consecutive month and at the fastest pace since 2006.

Buffet's strategy is two-fold: as the dollar falls, he protects his wealth by staying invested in inherently valuable assets. A wise move, but the really clever part is that the profits of Burlington Northern are tied directly to American manufacturing and export growth.

As the dollar gets weaker, Buffet's new acquisition does more business.

A shrewd move indeed.

Monday, November 2, 2009

There is Something Wrong with the Airline Industry: UPDATE

As an innovative move, United Airlines will boost revenue by doing away with seats completely and instead stack them like cordwood.

"Research shows that we lose millions of dollars each month by having them all sit upright in individual seats for the duration of the flight," said CEO Glenn F. Tilton, speaking to reporters at United Airlines' corporate headquarters. "However, if we were to remove these seats, we could just sort of stack them all in there, one by one, as they file into the plane."

"If a 747's maximum takeoff weight is 875,000 pounds, then we should be packing that plane with 875,000 pounds," Tilton added.

According to a press release, the company estimates that the new policy of simply arranging them in a towering mound will allow it to sell approximately 20 times more tickets per flight. In addition, executives claimed they would be able to eliminate the unnecessary cost of in-flight magazines, chairs, seat belts, blankets, bathrooms, headphones, and oxygen masks.

Haha, another good story from the Onion. Except The New York Times carried this story in April 24, 2006:

Airbus has been quietly pitching the standing-room-only option to Asian carriers, though none has agreed to it yet. Passengers in the standing section would be propped against a padded backboard, held in place with a harness, according to seating experts who have seen a proposal.

That the airlines are even considering such things is the result of several factors. High fuel costs are making it difficult for carriers to turn a profit. The new seat technology not only allows airlines to add more places for passengers, it also reduces a seat's weight by up to 15 pounds, or 7 kilograms, limiting fuel consumption. A typical seat in economy class now weighs 74 to 82 pounds.

I feel comfortable in the fact that Americans are far too lazy to put up with standing room only airplanes. [Times story via Nergol]