President Obama’s Investment Skills

GMAfter the Obama administration bailed out General Motors by purchasing a 60.8% ownership share in the company for $49.5 billion, President Obama said, “We expect taxpayers will get back all the money my administration has invested in GM.” (I do like the way the president takes responsibility for the investment.) Now, the president’s administration has sold all of its ownership in GM and taken a $10 billion loss.

It is worth noting that what the president called an investment on behalf of the taxpayers lost 20% of its value, and that the president’s expectations on the investment his administration made did not pan out.

I don’t know whether the president actually believed the GM bailout would yield a profit or whether that was just political rhetoric he hoped people would forget over the years. Either way, it turned out not to be true.

The loss on the GM investment did not attract much notice, especially compared to other investments the president has made on behalf of the taxpayers, such as the $500 million it lost on the Solyndra loan guarantees. Interesting, considering that the GM loss was 20 times larger.

Zeke Speaks Out on McCain and Health Reform

11935359_SNormally, I don’t think Zeke Emanuel has much to say that is both true and interesting. But this insider’s view of the making of ObamaCare is fascinating. Apparently there were people inside the White House who wanted to adopt John McCain’s approach to health reform. We ended up with only a timid step in that direction ― mainly so the president could save face after all the demagogic ads he ran attacking McCain during the campaign:

In 1954, the Internal Revenue Service created a tax exclusion for health insurance premiums, which is why health benefits offered through an employer aren’t subject to income or payroll taxes. This makes an additional dollar of health insurance (which isn’t taxed) more valuable than an additional dollar of wages (which is).

Economists — liberal and conservative alike — overwhelmingly denounce the tax exclusion. It drives costs higher while keeping wages down, it is regressive, and it is a major drag on the federal budget — lowering revenue by a whopping $250 billion a year.

During the 2008 presidential campaign, Senator John McCain proposed eliminating the exclusion and replacing it with a $5,000 tax credit to help families buy health insurance. The Obama campaign ran more than $100 million worth of ads pounding McCain, accusing the GOP nominee of “taxing health benefits for the first time ever.”


NSA Chief Recommends Severely Curtailing Spying. Obama Won’t.

The worldwide heat map from the NSA's data visualisation tool BOUNDLESSINFORMANT, showing that during a 30-day period, 97 billion internet data records (DNI) and 124 billion telephony data records (DNR) were collected.

The worldwide heat map from the NSA’s data visualisation tool BOUNDLESSINFORMANT, showing that during a 30-day period, 97 billion internet data records (DNI) and 124 billion telephony data records (DNR) were collected: largely on Americans in America.


A few weeks ago, Obama triumphantly announced NSA spying “reforms” that got lots of front page coverage, but amounted to: Absolutely No Change.

Further, his speech carried his full endorsement of the sweeping collection and storage in bulk of private phone calls, emails, email address books, online transaction information, location data, and more, on millions of Americans neither guilty nor even suspected of anything.

More recently, NSA’s outgoing director, General Keith Alexander, testified quite differently before the Senate:

The remarks by NSA Director Gen. Keith Alexander were striking because the government’s justification for the data-collection program has been that the NSA needs the full database of Americans’ call records to uncover otherwise unknown terrorist connections.

But Gen. Alexander instead signaled that the information the NSA needs about terrorist connections might be obtainable without first collecting what officials have termed “the whole haystack” of U.S. phone data.

Explaining the option, he told the Senate Armed Services Committee that intelligence agencies could “look at what data you actually need and get only that data.”

What a concept! Don’t tap everyone’s cell phones, email accounts, computers, capture and store every personal tidbit, to be perused when and if you might like to. Only gather information on those suspected of wrong-doing (and, hey, if you’re feeling really generous: get a warrant)!

Interestingly, the General’s testimony didn’t make the front page, and President Obama hasn’t acknowledged the recommendation.

Instead, as observed by the New Yorker:

Obama won’t dismantle a single N.S.A. program, not even those that have been involved in spying on the leaders of America’s allies and hacking into the databases of companies like Google and Facebook without any court approval. He won’t end the practice by which the N.S.A and other government agencies, such as the Federal Bureau of Investigation, can obtain access to Americans’ data records simply by issuing a so-called National Security Letter, which doesn’t require the rubber stamp of the FISA court.

... Anthony D. Romero, the executive director of the American Civil Liberties Union, told the Times, “the President will go down in history for having retained and defended George W. Bush’s surveillance programs rather than reformed them.”

He ought more accurately to have said, “and expanded” Bush’s surveillance programs.

So why won’t the President pay any attention to the recommendations of the General put in charge of the NSA—wouldn’t Obama expect Gen. Alexander to know whereof he speaks?

Because, as has been known since time immemorial, and as our Founders sought to guard this republic against: power corrupts and no politician vested with power will willingly surrender one jot or one tittle of it.

Which is why it won’t help to elect a “good guy” (or gal) next time. The ring, once held, enchants.

We must wrest it from their grasp, throw it into the fire, and never allow it to be so accrued again.

Take the Money and Run? GAO Reports Significant Dropping Out of Government Electronic Health Records Program

9513068_SA previous blog entry noted that Veterans Affairs and the Department of Defense have utterly failed to execute a plan to develop an interoperable Electronic Health Record (EHR), despite five million beneficiaries receiving health benefits from both bureaucracies.

Despite its inability to manage this for two closely related federal departments, the federal government decided to try the same thing for private hospitals and physicians nationwide. The 2009 HITECH Act authorized billions of taxpayer dollars be spend to pay hospitals and physicians “incentives” to adopt EHRs. The Congressional Budget Office estimates that the total tab will be $30 billion from 2011 through 2019.

The Government Accountability Office has just reported on the results. Not surprisingly, with so much money being spent, there was a lot of uptake. 45 percent of eligible hospitals had EHRs in 2011, versus 64 percent in 2012. For physicians and allied professionals, the share went up from 21 percent to 48 percent.

Hospitals and physicians did not get paid just to buy EHRs and leave them in a closet. They had to demonstrate “meaningful use.” However, we are still in stage 1 of meaningful use, which demands only that 30 percent of patient records be entered by computerized order entry.


Intergenerational Transfers and Political Support for the Welfare State

groovy-manSupporters of the welfare state might see it as a mechanism for transferring income from rich to poor with the idea of helping those at the bottom end of the income distribution, but in the United States, the welfare state is increasingly transferring income from the young to the old, regardless of the wealth or income of the transfer recipients.

Obviously, this is the case with Social Security and Medicare, the federal government’s two biggest expenditure programs, because only old people are eligible, and there is no means test to determine eligibility for the transfer. And, not only are the old wealthier than the young, the wealth gap between the old and young is growing.

These programs transfer resources from the young to the old, but also, on average, from the poor to the rich.

Add to these long-standing programs Obamacare, which charges the young rates above what it costs to insure them so that the old can pay rates below what it costs to insure them. The program’s designers made no secret of the fact that the program was intended to impose costs on young Americans to transfer benefits to the old.

Obamacare makes the intergenerational transfer even greater. Thus, it is somewhat paradoxical that young voters have increased their support for the welfare state even as old voters have decreased theirs.

The transfer recipients, who are older and wealthier than average, and who will be dead when the true cost of the current welfare state must be paid, increasingly oppose the transfers. Meanwhile, young voters increasingly support these programs that cannot possibly provide them with the same level of benefits they now approve paying to their elders.

The young and old are, on average, both moving away from supporting policies that are in their narrow interests.

The most paradoxical part of this paradox is that the policies the young support not only work against their current interests, but also against everyone’s interests in the future because the high cost of funding these programs will slow economic growth. Today the old benefit from those transfer programs; in the future, everyone, both young and old, will be worse off because of them.

Wars on Everything

23908615_SThis year marks half a century since Lyndon Johnson declared a war on poverty. The rhetoric of war harkened back to Franklin Roosevelt’s declaration of war against the Great Depression, in which he demanded all the executive power the president would have against a foreign foe. Johnson’s Great Society inaugurated many billions of dollars worth of social infrastructure. Neighborhoods were torn down and rebuilt. People were forced out of their homes by eminent domain. Trillions of dollars have been spent, mostly on bureaucracies staffed by middle class employees. A fortune has been diverted to favored corporate interests. And crushing poverty persists, inequality has increased, the war on poverty has not succeeded.

This year marks a century since the federal government first got significantly involved in prohibiting drugs. It targeted heroin and cocaine in the Harrison Narcotics Act of 1914. Under the Nixon and Reagan administrations, federal drug policy became a war on drugs. This domestic war has not been metaphorical. Militarized police break down doors every day. The government has taken prisoner millions of people, people who have not committed violence against person or property, and the US now boasts the largest incarceration rate in the world. Prohibition has corrupted police departments, clogged the courts, and fueled most gang violence in the United States. Tens of thousands have died on the Mexican border, and the US can’t even keep drugs out of its prisons. If the goal was to curb addiction, the war on drugs has failed.

This year marks half a decade since Obama first declared that the war on terror was over—but most of the policies have remained. This US government has invaded and occupied two countries and bombed several more. It has institutionalized torture and detentions without due process and created a mass surveillance state. Every time you go to the airport, you are treated as a criminal suspect. The militarization of law enforcement has accelerated since 9/11. If the war on terror protects American freedom, it has certainly failed.

Politicians love war rhetoric, because it facilitates the dramatic expansion of state power, typically at the expense of liberties. America’s been in a state of perpetual foreign war, with domestic counterparts, for generations, and the results are generally not pretty.

Last year we saw some reasons for hope when Obama tried to start a US war with Syria and the public shouted him down. Let’s hope this trend continues. Next time a politician declares a war on something—anything—let’s hope the public demands that instead, we give peace a chance.

VA and Defense Dept. Electronic Medical Records Can’t Talk to Each Other: $29 Billion Fix Already Abandoned

14887950_SA recent survey noted that despite almost $27 billion of federal money spent on implementing electronic health records (EHRs) in the private sector, 70 percent of physicians believe that the adoption of EHRs has not been worth it.

We should not be surprised: The government cannot manage to get EHRs in two of its own closely related departments, Veterans Affairs (VA) and the Department of Defense (DoD), to talk to each other.

According to a new Government Accountability Office (GAO) report, DoD spent $2 billion between 1997 and 2010 on health IT, which now “comprises multiple legacy medical information systems.” The VA has a health IT system that consists of 104 separate computer applications, including:

  • 56 health provider apps,
  • 19 management and financial apps,
  • 8 registration, enrollment, and eligibility apps,
  • 5 health data apps,
  • 3 information and education apps,
  • All of which are customized at all 128 VA sites.

The VA spent almost $600 million between 2001 and 2007 to modernize its health IT systems and estimated a cost of $11 billion to modernize them by 2018. However, the VA abandoned this effort in 2010.


Speak Loudly and Carry a Small Stick

13797229_SAt the beginning of the twentieth century, President Teddy Roosevelt’s foreign policy was, “Speak softly and carry a big stick.” At the beginning of the twenty-first, President Obama’s policy appears to the the opposite: “Speak loudly and carry a small stick.”

President Obama threatened Syria not to step over a “red line” by using chemical weapons or they would face serious repercussions, but they did, without the serious repercussions. He threatened Iran if they continued their nuclear enrichment programs, but they continue as we ease sanctions on them. More recently, he warned Putin “there would be costs for any military intervention in Ukraine,” but realistically, what could he do? Everybody can see it’s big talk with no stick to back it up.

Meanwhile, Putin has indicated a retreat in Ukraine, not because of the big talk from Obama, but because Russia’s hand was slapped by the response of markets. Russian stocks fell by 12% after Russian military forces moved into the Ukraine, and the ruble took a serious hit as well. The reaction of the market had a bigger effect on Putin’s aggression than Obama’s small stick.

The discipline of the market in international affairs is not new to Russia. The Berlin Wall fell, and the Soviet Union dissolved, not because of the military might of the Cold War nations, but because of the economic strength of capitalism compared to socialism.

Because our Cold War adversaries are increasingly a part of the global economy, markets generate repercussions to belligerent actions beyond those of any prudent political responses.

I don’t expect the Russians to pull out of the Ukraine. They are still occupying a part of the Republic of Georgia after having invaded there in 2008. What I’m saying is that any moderation of Russian policy there is more directed by the market’s response rather than any international political response.

I am not too concerned about President Obama’s actual policy responses. The small stick is OK with me, and we can see in Iraq and Afghanistan what can go wrong when we try to play the role of the world’s policeman. The problem is the “speaking loudly” part, because it costs our president, and our country, some credibility when people know the president won’t follow through on his big talk.

Lankford Introduces Legislation Giving Congressional Authority to Interstate Health Care Compact

priceless_180x270In February, Rep. James Lankford (R-OK) introduced legislation (H.J.Res.110) that would give congressional approval to states entering the Health Care Compact. This is an important step forward for one of the most innovative ideas that has been developed to reduce federal interference in regulating health markets. As Lankford notes in a recent Forbes op-ed, eight state legislatures have already voted to join the Compact.

Priceless, John Goodman’s book on how to cure the healthcare crisis, champions federal tax reform that would give every legal resident of working age or younger a refundable tax credit to buy the health insurance of his or her choice in a lightly regulated market. This raises the questions: Who regulates this market? What happens when a person or family moves from one state to another? How can they keep the same policy?

One answer is to continue to allow Congress to have a hand in regulating health insurance. But that is a major cause of the current malfunction. Another approach is to allow states to figure this out on their own. This is how other lines of insurance are regulated, and there is no crisis of access to life insurance or auto insurance when people change jobs or move to a new state. As I wrote in a previous blog entry, there already is an interstate compact for other lines of insurance, and it works fine:


The Double Faustian Minimum Wage Bargain of 2007

"Faust" by Rembrandt, Metropolitan Museum of Art

“Faust” by Rembrandt,
Metropolitan Museum of Art

In an ordinary Faustian bargain, a mortal sells his (or her) soul to an incarnation of the Devil in exchange for worldly power. However, in 2007 an extraordinary double Faustian bargain took place, in which, in effect, Lucifer and Mephistopheles both gave up their own souls, in exchange for the other’s.

In 2006, Democrats swept into power in both houses of Congress, on a platform promising to extract the US from George W. Bush’s increasingly unpopular intervention in Iraq. Their strategy, as led by House Majority Leader Nancy Pelosi, was to insert wording into the defense appropriation bill calling for withdrawal, thereby leaving President Bush with essentially no choice but to sign it.

Meanwhile, Bush had been following the earlier Reagan strategy of allowing the real minimum wage to gradually wither away through inflation, by letting it be understood that any attempt to increase its nominal value would meet with a veto. As a result, the nominal federal minimum wage had stood unchanged at $5.15 ever since 1997.

In addition to wanting to end the war, Democrats were anxious to use their new power to raise the minimum wage after this long hiatus. So early in 2007, Pelosi and Bush struck a “win-win” deal, in which the Democrats would sell out on their peace promise, provided the administration would at the same time sell out on its free market principles. On May 25, both bills were signed into law. See ”Congress Passes Increase in the Minimum Wage,” New York Times, 5/25/07.

The minimum wage bill increased the minimum to $7.25 by 2009 in three steps, a total increase of over 40%. In 2007 the old $5.15 minimum wage was practically a dead letter, and few imagined that even a $7.25 minimum wage would ever have much effect. However, the new minimum acted like a hidden IED, waiting to blow up as soon as it was tripped by a passing recession that cut into the demand for labor. By 2009, the new minimum was binding on about 5% of the labor force, and teen unemployment had surged to over 25%. In exchange, US combat troops got to stay in Iraq for three additional years.

Today, just as the economy is finally beginning to recover, Democrats are anxious to raise the federal minimum wage another 40%, to $10.10 per hour. According to a new Report by the Congressional Budget Office, such an increase would indeed raise the incomes of approximately 16.5 million low-wage workers, but only at the expense of approximately 500,000 even less fortunate workers who will not be employed at all.

See also “Two Minimum Wage Fallacies,”, The Beacon, Dec. 31, 2013.