A Careful Look at Issues

Obamacare is now unraveling. Over five million people have lost their health insurance, and if they manage to log on to the government website, many are finding policies with twice the monthly premiums and twice the deductibles. Young people are being encouraged to sign up for expensive policies. They are told it would be foolish to be uninsured, so never mind the price. The question is then: At what price is health insurance not worthwhile? As President Obama says, it’s complicated. But for some, going without insurance is a better bet than it might seem.

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The election was a clear choice, and the people have spoken. The people want free birth control, free abortion, and free just-about-everything from birth to death. They want it paid for by rich people. What they will get is slow death by regulation. It’s inevitable. Legislation is in place to control banking, energy, health care, education, and a myriad of the details of life. The script for the next four years is bureaucracy producing a rising tide of regulations to consolidate control over peoples lives. Congress will provide sideshow distractions, but the main event will be the growth of bureaucratic power.

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Bill O’Reilly has been on a rampage recently complaining that because oil supplies are now ample, prices should be low. He’s had a couple of guests try to explain it to him, but he’s not one to sit still for a long explanation — or actually for a short explanation either. There’s not much chance Mr. O’Reilly will read my explanation, but I suspect many other people have similar misunderstandings so I’ll go ahead explaining anyway.

There are a three elements to economic recovery: people must need to buy things, they must have the money to buy them, and they must be believe that that the future is worth investing in. Every economic downturn leads to people postponing purchases of new cars, new homes, and new consumer goods. After a while, we expect people to be compelled to catch up with purchases; the old car cannot be fixed and must be replaced, and so forth. What’s remarkable about the current poor economy is how little of the automatic bounce back we’ve seen. We look to the factors of money and confidence to explain the lack of recovery.

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Aug 30

Tax loopholes are not mistakes. Loopholes are incentives designed into the tax code to encourage behaviors that the government prefers. Home ownership is considered a good thing, so the interest on a home mortgage is a tax deduction. That makes owning a home more affordable, so home ownership is encouraged. The mortgage deduction is a loophole. The pattern of all loopholes is that they cause economic decisions to be altered away from some things and towards others. The tax code has over 60,000 pages, with each loophole designed to favor something deemed good, at least by the Congressman who managed to get the loophole included.

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The debate over raising the debt ceiling has passed, but the debt crisis will be with us for years to come. Unlike news of celebrity meltdowns and notorious crimes, the debt crisis has some tricky points that the press has not well explained. Everyone needs to know about debt ceilings and default and their consequences, taxing the rich, what the people really want (a miracle, of course), and the balanced budget amendment. There never was a danger of default, but the shape of the real problem has been left ill-defined by the press.

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“Money should not go to Planned Parenthood because money is fungible and can be redirected to support abortion.” No, sorry, money is not fungible and government accounting rules see to that. “If Planned Parenthood is not funded, women will die because there is no other way to get health services.” No, sorry, there are many health service providers. The arguments echo the controversy over faith-based initiatives, in which Liberals argued that money given to churches for any purpose amounted to supporting religion.

Taxes are explicit, so it is easy to sum them up. Total spending by government at all levels in the US is estimated at $6.41 trillion for 2010. [ 1 ] That’s about 44% of the gross domestic product. So that means that the private sector gets to choose how to spend the remaining 56% of the money, right? Not really. The government also requires us to comply with its rules, and the indirect costs are substantial. My partial list of indirect costs amounts to $1.8 trillion, more than 12% of the economy on top of the 46%.

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Some of the Tea Partiers would like to abolish the Departments of Energy, Education, Housing and Urban Development, Agriculture. They don’t have anywhere near the power to do that, but if they were close, the conventional meaning of “compromise” might be to only abolish two of the four. The compromise is getting part of what is desired rather than all of it. Under the conventional definition, if Democrats want to add legislation and Republicans want to repeal legislation, then leaving it all alone is a compromise. Liberals do adhere to the conventional definitions because they believe the purpose of government is to always expand it. Compromise is restricted to what government power is expanded and by how much.

One of the Democrats campaign themes is to assert that Republicans will return us to the failed policies of the past. The talking heads on television repeat the theme every day. It’s not unusual for a Party to have a broad generic slogan. What’s odd is that no one seems to ask, “Exactly what failed policies are you talking about?” Not even conservative commentators often ask the question, and Democrats rarely volunteer. It turns out that most of the failed policies were instigated and sustained by Democrats, and others were by the Federal Reserve Board, beyond Bush Administration control. Aside from policies, the mentality of an economic bubble was a product of human nature, not government. The Bush Administration can be faulted for some of it’s weak efforts to clean up the policies they inherited, but they made strong attempts to reform Fannie and Freddie.

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