How Out of Control Is Spending in Washington?

This puts things in perspective

Watch me pull a rabbit out of my hat!

Last week, the Obama administration and Congress did it again. It seems that no matter how many times I tell myself that I won't be fooled by their sleight-of-hand and misdirection, they still catch me napping. This time it was cap-and-trade, and the deception was much more polished than Bullwinkle's, but the effect was the same. Allow me to back up and explain.

For a couple of weeks, the administration has been focused on the election results in Iran and the resulting protests. The Senate, on the other hand, had a number of prominant health care "reform" proposals reviewed by the Congressional Budget Office (CBO). However, both of these things just served to draw attention away from the House of Representatives. And just like the audience watching a master illusionist, such as David Copperfield, I allowed myself to focus my attention on the left hand oblivious to the seemingly insignificant (yet critical) actions of the right hand. My last post was on health care because I bought into the idea that it would be the next issue in the Obamagenda that Congress would attempt to force through. How painfully wrong I was!

Cap and trade is wrong on so many levels, it is hard to know where to begin. Let's start with a clear definition of what cap and trade means. The "cap" is a limit that Congress would impose on greenhouse gas emissions (mainly carbon dioxide). This is scaled to a percentage of the emissions the United States produced in 2005. The House bill would require that the US emit no more than 83% of 2005 levels of carbon dioxide by 2020, and no more than 17% of 2005 levels by 2050. To put that in perspective, that means reducing our carbon dioxide levels back to 1992 levels by 2020, and to the levels emitted by the fabulously industrialized nations of Africa circa 1990 by 2050. The "cap" portion of the bill will basically force some industries (those that produce greenhouse gasses in large quantities) out of business.

The "trade" part of the bill is where the lion's share of the damage will occur. The basic idea is that each company will be allowed by the federal government to emit a certain level of greenhouse gasses. If they emit more than the allowable level of carbon dioxide, they will have to purchase credits that allow them to produce more. Who do they purchase them from? From companies that produce less than their allotment. These companies are allowed to auction their credits through government-sponsored exchanges. Of course, the government takes a cut of each transaction - a broker's fee, if you will. This system of "trading" credits is where the federal government hopes to raise more than $870,000,000,000 ($870 billion) over ten years in new revenue. Make no mistake about it - this is a new tax that will ultimately affect every person in this country in the form of higher food prices, higher energy costs, higher gas prices, and higher prices on manufactured goods.

I mentioned that this was similar to Bullwinkle pulling a rabbit out of his hat. Anyone old enough to remember Rocky and Bullwinkle (like me) knows that he never actually pulled out a rabbit; it was most often a lion or other dangerous animal that he had to quickly stuff back into the hat. In the same way, the House of Representatives tried to produce a rabbit and pulled out a hungry lion instead. Congress has passed a bill without reading it (especially since Rep. Waxman added a 300+ page amendment to the bill at 3:09 AM on the morning it was being voted on) after only being allowed 5 minutes of debate per amendment (and only 5 hours of debate total) that will result in an enormous increase in taxes (at least $2,870 per person using preliminary CBO numbers which did not include the last-minute amendments to buy votes) and a severe blow to American businesses (in a time of deep recession/depression) when almost 10% of Americans are unemployed. And all of this in order to supposedly "save the planet" from man-made global warming, even though even the bills proponents have confessed that it will not really do much to lower the temperatures of the Earth.

Oh, and let's not forget one other little detail:

There is no authority granted to the federal government in the U.S. Constitution to tell us how much we can drive, what kinds of products to buy, what fuels to use, or any other aspect of this bill.

Just like Bullwinkle, we have only one hope - let's make sure we shove this lion back in the hat quick! Please contact your Senators and let them know that this is the wrong approach on the wrong problem at the wrong time and that you will not put up with any excuses from them if they vote for it! As Scott Ott (a political satirist and contributor to the Washington Examiner) said on Twitter the other day, "Dear Congress, You cap us, we trade you! Your Boss."

For a more detailed summary of the impacts of the bill, I invite you to check out the Heritage Foundation's website.

How America's Health Care System Can Go From Bad To Worse

Why do I write this blog? Does anyone even read it? If they read it, do they just not care enough about the issues to comment on it?

I write this blog for one reason only: to educate people about political issues. I don't write often because of the sheer amount of research I insist on doing before writing. It is also a huge time commitment in writing (as you can see from the length of my posts). I don't want to throw generalities out there to confuse people; I want to make sure I have my facts straight so I can present the information in a clear and comprehendable manner. It is the scientist and teacher in me.

Having said that, I feel a need to address the Universal Health Care proposals being prepared in Congress. Several people have been going back and forth on the issue on Facebook, so I wanted to put together my comprehensive take on the subject.

Most of my analysis does not come from the text of the bills themselves (I have looked at them, but at 167 pages for the Kennedy Bill, and with the number of blanks and things left to be filled in, it would have been a pain to read through it all). Instead, I have relied on the Congressional Budget Office (CBO) assessment of the bills in question. The important things to remember are that the CBO is non-partisan, and by their own admission, they have probably underestimated the costs because entire sections of the bill were not factored into their analysis. The CBO analysis is available from their website here.

The official title of the Kennedy/Dodd bill is Quality, Affordable Health Care for All Americans: Effective Coverage for All Americans. The CBO estimates that over the next 10 years (under current law), the number of uninsured people will rise from 50 million to 54 million. The CBO also estimates that over that same time period, 39 million people would obtain health insurance through the provisions of this bill. Problem solved, right? Not so fast! They also estimate that this bill will actually reduce the number of people covered by employer-provided or self-purchased insurance, to the tune of about 23 million people! That means that we get a net decrease in the number of uninsured people of 16 million in 10 years. Shoot, I could have gotten them 3/4 of the way there without adding the estimated $1,300,000,000,000 to the federal deficit over 10 years: stop counting the up to 12 million illegal immigrants who are in our country as being uninsured!

May I just pause here for a moment and point out that insuring 16 million people for ten years at a cost of $1.3 trillion works out to a new federal entitlement of over $81,000 per person covered!!!

But all of those people who would be helped couldn't afford health insurance, right? Wrongo, Mary Lou! You see, the bill specifies that it only provides subsidies to people who make between 150-500% of the federal poverty level (FPL). For 2009, the FPL was $22,050 for a family of four. That means that to be eligible for an insurance subsidy, you have to make between $33,075 and $110,250 per year! How does the administration justify asking someone who makes $30,000 per year and can't afford insurance to subsidize the health insurance costs for someone making $100,000 per year?!? What about the poor people? What happens to them? Absolutely nothing, at least under this bill. The bill does say that states might be expected to expand Medicaid coverage to pick up those below 150% of the FPL, but that cost is not included in this bill.

What if you want to "opt-out" of the insurance? What if you are like me, a healthy, not-quite-middle-aged, (fairly) active man who doesn't smoke, drink, do drugs, drive above the speed limit, and who only goes to the doctor about once a year? What if I don't want to pay for insurance? The bill would impose a fine (read that as a tax) on anyone who does not have health insurance! How much would that penalty be? We don't know. Why not? Because the authority to set the penalty (or to waive it) rests, not with our elected representatives in Congress who would have to answer for any increases in the tax, but rather with the Secretary of the Treasury! That's right, folks, Tim "Turbo Tax" Geithner will get to impose arbitrary fines on anyone who doesn't comply! The bill would exempt those making less than 150% of the FPL from these fees.

Insurers would also be required to issue insurance to all applicants, regardless of sex, age, health history, preexisting conditions, lifestyle choices, etc. The plans would be required to allow parents to insure their children up to the age of 27! I'm sorry, but by 27 my kids will have been long gone (in one way or another). They won't be living with me, driving my car, eating my food, or riding on my insurance policy. At 27, they better have learned to grow up! There would also be no lifetime cap on benefits. Now, I know what some of you are thinking: that sounds great - it's way better than my insurance now! Yes, dear reader, it may be, but when you want better insurance, you have to pay more for it. Normally, insurance companies charge their high-risk customers more to absorb the added costs associated with their increased care, and they set limits to avoid huge losses. Now who will bear those costs? If they can't charge the heroin-using, bungee-jumping, stunt-man more for his health insurance than they charge you and I, then they will have to raise the rates for everyone! Also in the analysis that the costs for the premiums would be tied to the rate of medical price inflation, "so that individuals would (on average) pay a higher portion of their income for [insurance] premiums over time."

Since premiums would be capped at a percentage of income, all people obtaining health insurance through this program would have to submit proof of income to the Dept. of Health & Human Services every year. I am sure that they could verify the income of a proposed 39 million Americans every year without any increased staffing, right? lol The cost of all those additional bureaucrats is not factored into this analysis, but according to PayScale.com, the average employee of the federal government makes almost $69,000 per year. And how much will all of those stamps cost us to send in those monthly or quarterly proof-of-income statements? Over $63,000,000 per year(assuming $0.43 per stamp, quarterly proof required (just like Medicaid), and one stamp per envelope).

There is also a provision in the bill to give subsidies to small businesses (under 50 employees) who provide health benefits to their employees. However, the firm would only be allowed to take the money for three years, so my guess is that after those 3 years are up and the cost to the employer goes up, the insurance coverage will go away. But it will give the administration time to claim that all of these new people were provided with insurance for a brief period anyway.

The projected cost for this bill also includes several dubious means of reducing costs. First, it assumes that employers that choose not to offer insurance coverage any more will take the money they were spending on insurance and give it to the employees. Uhh huh! Riiiight! Because every company is just itching for ways to give employees more money during a horrible economy, right?!? The CBO report counts on that money being taxed by the IRS and counts that as offsetting some of the cost of the program (approximately $257 billion). Good luck with that! The CBO assumes the fee for not having insurance will be about $100 per person (yeah right!) providing about $2 billion over 10 years. They also factor in a reduction in spending for Medicaid and CHIP at $38 billion, but if you just put the money in your left pocket instead of your right pocket, are you really spending any less?

Some other factors not included in the analysis of the cost of the bill:

• Would form a Medical Advisory Council to establish minimum levels of benefits and to set the level of insurance people would have to obtain to avoid the No Insurance Tax.
• Would require insurance companies to pay out a minimum percentage of claims paid relative to the amount of premiums collected. This insures that no insurance company can be profitable. It also means that if they have not met their quota as the end of the year approaches, they will get to waste money so as not to be penalized by the government! You have to love this stuff!
• Would require health insurance companies to adopt measures to simplify financial and administrative transactions (such as claims processing). Yeah, because the DMV is a model of efficiency, right?!? In fact, name one governmental agency that requires less paperwork and red tape than an equivalent private business. Can you? I can't.

And let's not lose sight of the bottom-line issue here: there is nothing in the Constitution that allows the federal government the right to do any of this! In fact, the 10th Amendment specifically says that they do not have the authority! If this were a state government proposing this, I would still be against it, but not as vehemently. We must stop the federal government from grabbing control of 17% of our economy. And if you don't think this is the government grabbing control, you obviously didn't learn your lesson from the banks and the auto industry.

Please don't forget that there is no such thing as free health care. The reason the health care system is out of control in this country is not a lack of government regulation, but is because we don't see how much all those tests we are having performed actually cost. We have insulated ourselves by allowing insurance companies to handle it for us. It is as insidious as automatic income-tax withholding: when you don't see it, you don't miss (or appreciate) it.

I hope someone actually reads this. I hope that someone besides my family actually cares. If this gets through Congress, our country is doomed financially. I don't say that to inspire fear; I say it out of desperation. Please look at the graph at the top of this CBO page, and notice the growth in projected spending for Medicare and Medicaid.Now imagine adding another layer of health care costs onto the federal deficit, one that is projected to lead to at least $1,000,000,000,000 in new deficits in its first ten years.

We cannot keep spending like there is no tomorrow, or there will be no tomorrow for our children!

Answering a Question

A question was asked of me on Facebook, but the answer was going to be long enough that I thought I would do it here. Here is the question:

I have a question that's been bugging me and maybe you can offer some insight. I know you advocate the government getting out of, well, just about everything, which would be good if possible, but how do you deal with rampant problems in an unchecked capitalist society? In many ways, especially in the pharmaceutical industry, they seem more about profits than ethics and if they can make an unethical buck, then they'll do it. Is regulation part of the giant beast of a government, or should it be considered more a part of law enforcement?

First of all, let me point out that we haven't lived in "an unchecked capitalist society" in well over a hundred years. Perhaps you don't fully appreciate the level of government involvement (interference) in the "free" market. But just for fun, let's pretend that there is an idealized capitalist free market, and see how it is supposed to work to control problems. You used the pharmaceutical industry, so lets stick with that.

In our example, let's say two drug companies each come up with a new product. ImAJerk Pharmaceuticals comes up with a drug to reduce cholesterol levels in the blood; Health Co. comes up with a new medication to slow the advancement of HIV into full-blown AIDS. The CEO of Health Co. is a doctor who truly believes his Hippocratic Oath and demands the highest quality of research and testing before sending a drug to market. However, the CEO of ImAJerk is far more concerned with profit; he routinely instructs his scientists to cut corners, down-play potential side effects, and uses inferior ingredients because they are cheaper.

When the cholesterol medicine hits the market, patients immediately begin having serious side effects. Doctors quickly stop prescribing it, the company loses money. In addition, the patients harmed by the drug (or their insurance companies) sue the company to recoup any medical bills incurred as well as to cover any future treatments that might be required for the complications caused by the new drug. Also, doctors are now much more leary about recommending any product made by ImAJerk.

By contrast, Health Co.'s product underwent rigorous testing before coming to market. Are there still potential side-effects? Of course. But they are stated up front and the patients are able to weigh the risks versus the benefits and make an informed decision. Because of the stringent testing, the only side effects that regularly occur are fairly minor, so no law suits are filed. In addition, the drug is very successful, so Health Co. makes enough money from drug sales to recoup their R&D costs and make a profit.

Now, in an ideal case, that would be how it worked. ImAJerk will go out of business because no one will trust their products; Health Co. will prosper because they took care of their customers. Now, let's see how far we have moved away from that ideal.

The federal government, through the FDA, has a number of hoops drug companies must jump through to bring a drug to market. According to the FDA's own website, there are over 200 laws thay are responsible for enforcing. The FDA is also a bureaucracy which is part of the Department of Health and Human Services; the Secretary of HHS is a cabinet-level position within the executive branch, meaning it is run by whoever the President chooses to appoint (subject to Senate confirmation). The current Secretary is Kathleen Sebelius. According to the HHS website, she lists no work ever held outside of political elected office. Not exactly ideal, if you ask me. Anyway, the approval process can take several years, and this is on top of whatever testing the drug company did before bringing the product to the FDA for approval. During this time, the company has invested millions, or even billions, of dollars in R&D costs and is seeing zero return on that investment.

Once the FDA approves a new drug, the company is granted a two-year period in which the drug is protected. During this time, no generics are allowed. This is supposed to allow the company an opportunity to recoup the investment made to create the drug before other manufacturers swoop in, make a cheap immitation without all the R&D costs, and undercut their prices. However, after two years, the generics come out and no one buys the name brand anymore. This is why we have some companies that specialize in research (developing new drugs) and others that specialize in manufacturing (making generics cheaply).

Once a drug has been brought to the market, the drug company also faces the risk of lawsuits. Some are legitimate, some are frivilous. Some seek reasonable compensation, others seek outrageous sums for minor side effects. The trial lawyers make a fortune off these lawsuits, and drug companies are forced to "factor in" a certain amount of lawsuit settlements into the cost they charge for their medicine.

One other "hidden" factor that may make it seem like the drug companies are price gouging is how they price medicine in the US vs. the rest of the world. It is my opinion that there are two major factors that cause drug companies to charge more in the US. First is the lawsuits that I mentioned, which are much more prevalent and costly in the US. The second is that the population of the US is far wealthier, on average, than any other country in the world. If drug companies charged $2 per pill in Zimbabwe, people would have to work for 2 years to afford a single pill. So they charge what the market will bear. Is that wrong of them? If they charge too much, no one buys the medication; if they don't charge enough, they don't recoup their R&D costs on the medicine and then they may not have the funds available to fund their ongoing research into the next "miracle drug."

I do not begrudge companies for making a profit. Out of that profit, they pay the salaries of hundreds of employees, they create medicines that have improved and extended the quality of life for millions of people all around the world, and they have provided income for their shareholders and investors.

I would ask you to cite some examples of major pharmaceutical firms that have engaged in unethical behavior. I am not saying it hasn't happened, just that I can't remember any instances.

As far as regulation goes, I think the government does more harm than good in most cases. By only allowing drug companies two years to manufacture a trademarked pill, they force drug companies to jack up the price in order to recoup their R&D expenses. If the government did the same thing with copyright laws, books would have to cost a lot more and CDs would be priced very high, because after two years, anyone could download the book or song for free without any fear of punishment. The artists and authors would rightly want to make money during that short period of time before it became legal for others to profit on their hard work.

I think the single biggest thing we could do to improve the pharmaceutical industry is to implement tort reform (cap the punitive damages that can be awarded in lawsuits). This would lower the risks to the drug companies, thereby costing them less in attorney fees and settlements, and thereby requiring them to earn less and still be profitable. However, that will never happen: most lawmakers are lawyers and they know that when they get out of government (if that happens before they die, a la Sen. Kennedy and Sen. Byrd) they will go back to working at law firms, so why make laws that will negatively affect their own futures?

Hope that answers your question. If not, post a comment and we can attempt to resolve it.

Your Honor, I object (to you)

Judge Sonia Sotomayor of the 2nd Circuit Court of Appeals is the wrong person for the Supreme Court. It has nothing to do with her being a woman or a Latina; it has everything to do with her views, her ability to uphold the Oath of Office she would be required to take, and her judicial temperament. Let's look at each in turn.

Her Views

Let's tackle the most talked-about issue first: her racist and sexist statements about the quality of judgements she makes relative to those of white male judges. In at least 7 seperate speeches between 1994 and 2003, she asserted that a Latina woman (or just a wise woman) with her experience would make better judgements than white males who lacked that kind of life experience. I fail to see how life experience plays a role in interpreting the law; now, if you are CREATING law, I could see how it could make a difference.

Her rascism becomes even more apparent in her ruling against the New Haven 20. In New Haven, CT, the city arbitrarily decided to throw out the results of their carefully-crafted, race-neutral firefighters promotion exam when almost all of the top scorers turned out to be white. The case was thrown out by a local judge but then appealed to the 2nd Circuit Court of Appeals. Judge Sotomayor was one of three judges that heard the case. She voted to deny their case, despite the fact that the vacancies for Captain and Lieutenant were temporarily being filled, in some cases, by firefighters who had actually FAILED the exam. That case is on appeal to the US Supreme Court and could be heard later this year.

A panel including Sotomayor ruled against the firefighters in a perfunctory unpublished opinion. This provoked Judge Cabranes, a fellow Clinton appointee, to object to the panel's opinion that contained "no reference whatsoever to the constitutional issues at the core of this case." (The extent of Sotomayor's involvement in the opinion itself is not publicly known.)

She has also shown a willingness to rule against 2nd Ammendment rights. In US vs. Sanchez-Villar in 2004, Sotomayor wrote, "the right to posses a gun is clearly not a fundamental right."

Then, in January of this year she concurred with a judicial panel in Maloney v. Cuomo that the Second Amendment “imposes a limitation on only federal, not state, legislative efforts.” This sentence is not only unnecessary to the overall opinion, but also seems to ignore the Supreme Court’s recent ruling in Heller – outlawing many local gun bans as unconstitutional.

She has also had her decisions reversed by the US Supreme Court in 60% of the cases they have reviewed. If they decided to hear and overturn her on the New Haven 20, that will bring her record up to 67%.

The Oath of Office

According to Title 28, Chapter I, Part 453 of the United States Code, each Supreme Court Justice takes the following oath:

"I, [NAME], do solemnly swear (or affirm) that I will administer justice without respect to persons, and do equal right to the poor and to the rich, and that I will faithfully and impartially discharge and perform all the duties incumbent upon me as [TITLE] under the Constitution and laws of the United States. So help me God."

Can Sotomayor fulfill this oath? Not if you believe the opinions of some of the clerks and lawyers who worked with/in front of her. For example:

Michael Bachner, a New York defense lawyer who has handled trials and appeals before Judge Sotomayor, senses a divide in her criminal jurisprudence. She can be "very tough" on white-collar defendants from privileged backgrounds, but is "more understanding of individuals who grew up in a tougher circumstance."

So much for the "do equal right to the poor and to the rich," not to mention the "equal protection under the law" clause of the 14th Ammendment of the Constitution. Also, in a 2005 speech at Duke University, she stated that the Court of Appeals is where policy is made. Not exactly in line with performing all the duties incumbent upon her as a Justice under the Constitution.

Judicial Temperament

Writing in The New Republic, Jeffrey Rosen talks about the people who he interviewed about Sotomayor:

The most consistent concern was that Sotomayor, although an able lawyer, was "not that smart and kind of a bully on the bench," as one former Second Circuit clerk for another judge put it. "She has an inflated opinion of herself, and is domineering during oral arguments, but her questions aren't penetrating and don't get to the heart of the issue." (During one argument, an elderly judicial colleague is said to have leaned over and said, "Will you please stop talking and let them talk?")...Her opinions, although competent, are viewed by former prosecutors as not especially clean or tight, and sometimes miss the forest for the trees...Some former clerks and prosecutors expressed concerns about her command of technical legal details: In 2001, for example, a conservative colleague, Ralph Winter, included an unusual footnote in a case suggesting that an earlier opinion by Sotomayor might have inadvertently misstated the law in a way that misled litigants.

Conclusion

Overall, I think that Sonia Sotomayor is not a suitable choice for the US Supreme Court. Although she will likely be confirmed by the Senate, I do not think she can objectively evaluate cases, get to the heart of the legal issues, and interpret the law in a consistant and impartial manner. I do not expect President Obama to ever select a judge whose views I agree with; however, I would like him to pick the best person for the job, not the one that matches his desired racial/gender profile.

Ironic, Isn't It?

In December of 2008, GM and Chrysler asked Congress to provide a package of bail-out funds amounting to over $17,000,000,000 ($17 billion) in order to help them avoid bankruptcy. According to a BBC News report, "The car makers have argued that even an orderly bankruptcy would send them out of business forever, with the loss of millions of American jobs." The Senate listened to the American people and rejected the bail-out, which should have cleared the way for GM and Chrysler to enter bankruptcy protection and work out a new plan for reducing overhead and debt while keeping the parts of their companies that worked. However, that wasn't acceptable to President Bush. He decided to use the TARP funds (provided by Congress to bail-out the banking industry) to circumvent the will of the American people.

Now, President Obama has literally taken control of GM and Chrysler. He has ordered the firing of GM's CEO, Rick Wagoner. He has oredered Chrysler to merge with Fiat. And, ultimately, he has forced GM and Chrysler to undergo bankruptcy anyway. The difference between allowing the automakers to go through bankruptcy in December vs. doing it in May? Now the American taxpayers are on the hook for billions of dollars in bad loans. Now, you and I own majority shares in GM, despite having no desire whatsoever to invest in the auto industry. Now we will be forced to throw good money after bad, because we will have to pay unemployment benefits to all the laid off autoworkers, bail out the Michigan state government, and face the fact that the shares of GM have fallen from around $6 per share at the end of October to less than $1 per share today. This was a horrible waste of billions of tax-payer dollars at a time when we could least afford it with absolutely no upside; the jobs will still be lost, the plants will still close, the government will now force GM to make cars no one will want to buy, and we will end up dumping billions more down an abyss that we had no Constitutional authority to create.

But hey, at least we are being Progressive!