Playing the Odds

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In the old days, the mob and similar outfits ran the numbers racket in most of your larger American cities. The numbers racket was simple: you pick a three-digit number, give the guy your money, and, if your number comes up, you get a payoff about 600 times as big as the bet. As the overall payout was around 60%, the mob was sure to get a very respectable return on their end.

I think it was in the ’60s that the government started muscling in. Now it’s called the lottery, but it’s the same racket, except the odds were better when it was the mob running it because they did not feel it was incumbent upon them to withhold income tax.

Oh yeah, and now it’s legal. There is a new game now.

Here’s how it works. You pick a federal law. Any law will do. Then you violate that law. That’s right: you break it. Next, you wait to see whether the government decides that the violation entitles you to a cash payout. If so, you go to the government and provide proof that you violated the law. Then you just fill out the usual numerous forms and, eventually, the government hands you the cash.

A guy I know who likes to crack wise calls it “statutory roulette.” The odds that you will choose the right law to break aren’t particularly good, but it could happen.

Here’s an example.

Let us say it is 2009 and Victor, a guy in Juarez, Mexico, chooses to violate US immigration law by sneaking across the border to Texas. So he sneaks. He finds work, gets married, and, in the fullness of time, has a few kids. He files income taxes, but not with a Social Security Number (SSN), because, as he is what is sometimes called an “illegal alien,” he can’t have one. Instead, he has to use an Individual Taxpayer Identification Number (ITIN). All this time, he stays in Texas. His children, having been born in the US, are automatically US citizens, which is only right. Victor keeps his nose relatively clean. He is not convicted of any felonies or even serious misdemeanors. Things are going pretty good for Victor.

Now it’s called the lottery, but it’s the same racket, except the odds were better when it was the mob running it.

So, as of November 14, 2014, Victor is still “unlawfully present” in the United States when, out of the blue, President Barack Obama approves an executive action that changes everything. The action is called Deferred Action for Parental Accountability (DAPA). And, just like that, Victor is eligible for a three-year deferral of deportation, a work permit, and an SSN.

It is hard to believe, I know, but you can look it up right here.

Here’s the good part. With the SSN, Victor can now refile his taxes for the past three years. And since he has that SSN, he is also retroactively eligible for the Earned Income Tax Credit (EITC). The EITC is a cash grant given to working people with kids. It is available only for people who are not in one of your higher income brackets. Which Victor is definitely not.

So. It seems that Victor is now eligible for a cash payment from the feds of somewhere around six to nine thousand American dollars.

At a Finance Committee hearing, Senator Chuck Grassley of Iowa asked John Koskinen, the IRS Commissioner, whether this EITC thing for people who are in the country illegally is on the level. The IRS guy gave a long-winded answer that somewhat conspicuously did not include the word “no.” The exchange was on the TV. You can watch it here.

Just make sure you keep all the evidence that proves you actually did the crime, or the feds won’t pay up.

The senator couldn’t believe what he was hearing, so he said he wanted an answer in writing. The letter the IRS guy sent the senator is here.

Get the picture? That’s right, straight from the horse’s mouth: Victor is entitled to the dough.

Victor entered the country illegally. He lived in the country illegally. I mean, it wasn’t even legal for him to work here. And now, the federal government is going to give him a many-grand payoff for the time when he was “unlawfully present.” What can I say, Victor? Your number came up.

It is widely known that a reliable way to increase your chance of winning when you play the numbers or the lottery is to bet on more than one number. The more numbers you bet on, the better the odds are that one of your numbers will come up. In much the same way, it stands to reason that to improve your chances of winning in “statutory roulette,” it would be highly advisable for you to violate lots and lots of federal laws. The more of them you break, the better the odds that you’ll break one that ultimately entitles you to a wad of c-notes. Just make sure you keep all the evidence that proves you actually did the crime, or the feds won’t pay up.

Which is only fair.




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Updated Aphorism #6

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chambers succeed




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Bugs in the System

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An Unforeseen Development?

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On NPR this morning, I heard that 525,000 people had left the American labor force in December. I couldn’t find the number on the NPR website, so I looked on the Labor Department’s. My “find” function came up empty there as well. It’s probably there, but I think you have to add and subtract a little from the relevant columns of figures to come up with it. Having wasted precious minutes, I grew impatient. I baited my Google hook with the raw number (525k) and cast it into the data sea. The number was reported on many suspect blogs, tagged with red doughnuts warning me away. Then: Voilà. An article from Economics Analytics Research, Unemployment Rate Plunges to 6.7% in Dec. As Labor Force Shrinks; Payrolls Up Disappointing 74K”:

The drop in the unemployment rate came as a result not of new jobs, but a sharp increase in the number of persons not in the labor force — 525,000 — to 91,808,000, an increase of 2,969,000 in the last year. In 2012, the number of persons not in the labor force increased 2,199,000.

Why are people dropping out of the labor force? Some retire. Some grow weary of a fruitless job search and move in with their parents. Others migrate to the underground economy. But why the “sharp” increase at the end of 2013?

Let’s face it, there are people who will choose to glide into Social Security and Medicare on the wings of Obamacare.

At least part of the reason may be this: before January 1, 2014, when you left the labor force early, not only did you lose any possibility of unemployment benefits but you were also probably tossed into the healthcare jungle of uninsurable pre-existing conditions, crowded emergency rooms, and lousy medical treatment.

Let us say that you are a 60ish empty nester who has been downsized. You have been looking for work for a year. Your unemployment benefits have run out and all your job leads have led nowhere. While you have a modest nest egg, Social Security won’t kick in for a few years and Medicare a few years after that. Your company-sponsored health insurance has run out and you are on the verge of applying for jobs for which you are ridiculously overqualified just to get the insurance.

But not so fast. Beginning on January 1, 2014, if you don’t have a job or more than a modest income, you are eligible for Medicaid — healthcare provided at no cost to you as a result of the Affordable Care Act. Please note: non-income assets don’t count against eligibility, and, under the new law, the allowable income ceiling has been raised (eligibility requirements have been relaxed) to allow millions more to enjoy this benefit, including the boomer described above.

Let’s face it, there are people who will choose to glide into Social Security and Medicare on the wings of Obamacare. They will choose not to take a big step down the career ladder in order to secure a benefit that is available for the asking. There is a facet of human nature that shrugs, “Why not?”

It has to be asked: was this incentive to hang it up early an intended part of the new law, or was this “sharp” shrinking of the labor force an unforeseen development?

In either case: heck of a job, guys.




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Obamacare by the Numbers

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Let's say you were put in charge of Obamacare. It sounds like a daunting business — to provide affordable healthcare insurance for 30 million uninsured Americans. But what if you didn't have to make a profit and were handed $940 billion for giving your product away free to some customers and selling it at steep discounts to others? Throw in $5 billion more for web site development and a $700 million marketing budget to lure reluctant customers.

Too timid to give it a try? OK, let's double the size of the slush fund to $1.8 trillion, pass a law forcing everyone to buy health insurance, and write a regulation that makes the existing policies of perhaps 100 million Americans illegal. I know what you are thinking: even an idiot could sell healthcare insurance, at a discount, to people required by law to buy it. There must be a catch.

And you would be right. But the catch is not the intransigent website problems or greedy, uncooperative insurance companies or bitter Republicans with their feeble attempts to defund the program. The catch is Obamacare itself — an immense, overreaching, already tottering Rube Goldberg contraption that cannot possibly succeed, no matter how much money is thrown at it.

True, most of us would do a better job at salesmanship than President Obama, at least those of us with a couple of years of high school under our belts. We certainly wouldn't have lied to our customers, at least not as often. None of us would have botched the website. We would have had it working like a charm, on time, and for a small fraction of the cost of the three-year, $600 million hack job that still crashes regularly at every whim of its spaghetti code. The frugal among us would have had the insurance industry do it for free. Why not? Look at the profits insurance companies will receive from inflated Obamacare premiums — not to mention the revenues from more than 30 million new customers to be sent goosestepping their way.

Millions of people who thought they would get subsidies earn too little to qualify — another awkward messaging problem for Obamacare navigators.

Nevertheless, we too would fail. A secure, fully operational website will not help. Indeed, it will simply expose and magnify the defects of Obamacare more quickly. Delays to fix the rollout or extend the individual mandate will only postpone the inevitable. When Obamacare is finally deemed open for business, with its shiny, new "tech-surged" website at the floodgates, the deluge of customers qualifying for subsidies and free health insurance will no doubt be flawlessly processed. So too will be the trickle of paying customers. The numbers — provided by the government (the White House, Health and Human Services, the Congressional Budget Office [CBO]) and the insurance industry — are bad. They have always been bad; intentionally hidden or obscured, only to be dismissed as insignificant when becoming visible or clear. And, as emerging enrollment data and insurance cancellation notices reveal, they are getting worse. Much worse.

The paltry enrollment to date provides a mere glimpse of the actuarial havoc to come, as predominantly high-cost customers — the old, the sick, the poor, the unemployed, the desperate — flock to enroll, while the low-cost, young, and healthy customers stay away, as they should, in droves. For a plan purporting to rescue the uninsured by giving 51% of them free medical care and 39% of them subsidies, this should not be unexpected; nor should the shock that $1.8 trillion (already twice the estimate of the $940 billion celebrated only three years ago) is woefully inadequate. Always surprised, always last to know, Mr. Obama will soon be asking for more.

According to the CBO, Obamacare will reduce the number of uninsured by 14 million in 2014. This will be accomplished, courtesy of the individual mandate, by moving nine million uninsured into Medicaid and five million uninsured into the Obamacare exchanges. In addition, two million with "substandard" individual health insurance policies will be switched to the exchanges, creating a total of seven million Obamacare customers. With incomes between 100% and 400% of the federal poverty level (FPL), they will receive subsidies (averaging $5,290 in 2014) to make their new, government-mandated, "quality" health insurance "affordable." These seven million "partial-payers" will become America's next entitlement class. It will grow rapidly to 24 million by 2023. The average subsidy will also grow (to $7,900), costing taxpayers well over $1 trillion.

Of this initial seven million, 2.7 million must be healthy, in the 18-34 age range, and undaunted by the exorbitant premiums they will be charged to defray the cost of insuring the older and sicker. Snaring them will be no small feat. Apart from rate shock, there is the Obamacare provision that allows them to stay on a parent’s plan until age 26, shrinking the young Obamacare customer pool roughly by half.

People in the other half of the desired customer pool are told that they should be happy paying high rates today; they too will pay lower rates later, when they are old and need the benefits. Medicare is cited as a successful program exemplifying the beneficence of such inter-generational subsidization. It's an excellent example, ironically. Medicare is a program that pays benefits to the old, using taxes paid by the young, which is on track to become insolvent by 2026. This statement clearly applies to Obamacare, except that Obamacare premiums are extraordinarily higher than Medicare taxes and Obamacare will go broke long before 2026. Unfortunately, this poses a difficult messaging problem for Obamacare navigators, who will persuade few with the "Hey kid, sign right here. Sure you'll get screwed by Obamacare, but you're already getting screwed by Medicare" angle.

The nine million uninsured who are ushered into Medicaid are mostly childless adults living in poverty. They reside in the 26 states employing the Medicaid Expansion. When applying for Obamacare, they will be given Medicaid, right after being informed that they won't get a nickel in subsidy money. Alas, millions of people who thought they would get subsidies earn too little to qualify — another awkward messaging problem for Obamacare navigators, who, for example, must explain to an individual making $11,500 per year why he won't get a subsidy, while an individual down the block, making $24,000 a year, will get $1,500.

In apologizing for lying about the ability of people to keep their healthcare providers and plans, Mr. Obama lied again.

For residents of the 24 states that have not expanded Medicaid, HealthCare.gov blithely points out, "you may not have as many options for health coverage." If you are poor, your total number of options is one. And it's not good. For example, an Alabama resident with an annual income of $11,400 (99% FPL) must buy an Obamacare policy costing $3,030 per year, offset by a subsidy of $0.00. Where did the Obamacare wizards think that people with an annual income of $11,400 could come up with $3,030 for Obamacare, when even the $95 fine for declining it is beyond their reach?

The Obamacare Medicaid Expansion, projected to cost federal taxpayers $709 billion, will add 13 million Americans to Medicaid by 2023 — all nonpaying customers. Furthermore, it is likely that this group will consume its "free" healthcare at a much higher rate than normal. That is, the cost will be much greater than $709 billion.

Many of the two million previously insured are people who thought they would be able to keep their existing plans and doctors, if they liked them, period. They may find solace in not being the only ones to be fooled — as they are joined by millions of other individuals who have recently had their "substandard" health insurance plans cancelled. And let's not forget President Obama, the Democrats in both houses of Congress who passed Obamacare in March of 2010, and the tens of millions of other Americans who thought that Obamacare would also reduce the deficit, "bend the health care cost curve down," and shrink health insurance premiums by $2,500.

Amid the furor that he repeatedly and knowingly misled Americans with his incessant if-you-like-it-you-can-keep-it-period incantations, Mr. Obama submitted a most spurious apology (exquisitely characterized by Stephen Cox, in “What? When? Why?”). He expressed sorrow for those "finding themselves in this situation, based on assurances they got from me," right after dismissing the people receiving cancellations as "a small percentage of folks who may be disadvantaged."

But in June of 2010, the Obama administration knew that "66% of small employer plans and 45% of large employer plans will relinquish their grandfather status by the end of 2013” and that 40 to 66% with individually-purchased plans would suffer the same fate. For three and a half years, therefore, the White House has anticipated that as many as 100 million could lose their policies — hardly a "small percentage of folks." That is, in apologizing for lying about the ability of people to keep their healthcare providers and plans, Mr. Obama lied again.

To date, over five million individuals have already received cancellation notices. Together with millions more who will receive them by the time the Obamacare website is fixed, they will rush to the Obamacare exchanges, which have subsidy money for only two million. Where will Mr. Obama get the money for this "train wreck"? Then there is the second, much bigger, wreck arriving next year, when the employer mandate kicks in. And how much money will be needed to bail out health insurance companies, whose profits will shrink or vanish if Obama's youthful fan base doesn't show up in numbers large enough to prevent the so-called adverse selection "death spiral"?

The fallout from this follow-on wreck will peak just before the 2014 elections. What then will Mr. Obama and Democrat candidates have to say about the disruption and premium increases caused by Obamacare? With the Obamacare rollout last October, outrage was expressed by Republican and independent voters, while Democrat voters were silent. But their support was only apparent; they were in a sullen Obamacare transition from infatuation to familiarity. Next October they will be among many of the 100 million new and angry Obamacare customers clamoring for subsidy money. Many will be employed by insurance companies clamoring for bailout money.

How surprised will President Obama be when he is finally notified of the anger and unrest of more than "a small percentage of folks"? Whom will he blame for the mess this time? Doctors and hospitals, for charging too much? The old and the sick, for being too old and sick? What will be his solutions? What will he say they will cost? Will anyone believe him, or care about anything he has to say?




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Non-Starters

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President Obama recently made a whirlwind tour of colleges and issued a series of proposals for making college more affordable. On the good side, his speeches spurred public discussion about the problems of higher education, especially its costs. On the bad side, they deflected attention from the causes of the problems.

U.S. higher education has been providing questionable products at high costs for years. Under the Bush administration, Secretary of Education Margaret Spellings tried to address the weaknesses with a special commission on higher education. Among other things, the commission proposed requiring schools to report their students’ learning outcomes. (That is, did they learn anything?) This caused something of a stir among universities, which scurried to create a voluntary program of “accountability” — briefly. The urgency faded away, especially when university lobbyists got Congress to forbid the Department of Education from making too many demands.

It was only with the 2008 crash and recession that the public took notice of higher education again. The economic downturn revealed that many college graduates, some with mindnumbing debt loads, were not able to get jobs. That public notice meant that President Obama would not be far behind.

Unfortunately, Obama’s recommendations are superficial. The centerpiece is the idea of rating colleges on affordability, graduation rates, and access to low-income students. That’s not very much different from the College Scorecard that the Department of Education issues now. The department even has a “hall of shame” — an annual listing of colleges that have too-high tuition or that raised their tuition too much. These efforts don’t seem to have had much of an impact, although more information is generally a good thing.

Obama wants to use the rating system to reward the schools that score well. He would provide higher Pell grants to students at schools that have both high graduation rates and high percentages of low-income students. But it is simply a fact that high percentages of Pell grantees are correlated with lower graduation rates. To have both a high percentage of Pell grantees and high graduation rates would probably require gaming through grade inflation (and grade inflation is already a problem).

Fundamentally, President Obama is trying to “fix” college problems through regulation and legislation, without changing the underlying incentives that push costs up at most schools. It does not take rocket science to diagnose what is wrong with higher education.

Essentially, too many students are going to school who don’t want to, who don’t benefit, and who don’t learn enough to justify high wages. The national mantra that “everybody ought to go to college” is reinforced by federal grants and loans (and, until recently, federal guarantees of private loans).

This artificial demand, a lot like the artificial demand for housing in the mid-2000s, enables colleges to keep pushing up their tuitions. They do this shamelessly because they are spending for education, which is “priceless.” Furthermore, most colleges are either government-owned or nonprofit, and thus there is no pressure to make, or even identify, a profit. The result is that all revenues are spent, and the hard task of controlling costs is ignored (again, education is “priceless”). Since there is no market for control (economists’ words for potential buyers scrutinizing a company to decide whether they can run it more efficiently and thus profitably), there is no pressure to keep prices down . . . as long, of course, as there is this continual demand.

With these university characteristics firmly in place, the president’s proposals are window-dressing. And it’s unlikely that Congress will pass any of them.

In closing, I should say that one of Obama’s suggestions is a good one: He thinks that students should not be able to get additional Pell grants if they have not completed a specific number of courses within a certain period of time. That would be a start in reforming the $30-billion-a-year Pell grant program — but only a start. Much more needs to be done.




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October Angst

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Obamacare is upon us. Uninsured Americans will begin enrollment at health insurance exchanges this October. The floodgates will be open to 57 million uninsured American citizens and legal residents, who will finally have the opportunity to purchase affordable, high quality healthcare coverage. It comes with Obamacare discounts, in the form of subsidies and tax credits, that are quite generous and widely available, even for foreign students and guest workers. They can be obtained by families and individuals with incomes up to four times the federal poverty level; the average amount of the subsidy, just to get things started in 2014, is $5,290 a year.

At last there is manna for our forgotten poor, our reckless youth, our promiscuous women, and our income-challenged aliens. America will no longer deny them healthcare. Their benefits, too numerous to count, are listed in the 2,000-plus pages of the Obamacare law, which, according to ObamacareFacts.com, is chock full of "really impressive and long-overdue reforms." When Obamacare enrollment opens for business, many people, such as Nobel Prize winning economist and New York Times columnist Paul Krugman, expect "unexpected success." To such advocates, come October the biggest Obamacare worry will be crowd control.

But the 2,000 pages of bold promises has become a 20,000-page (and rapidly growing) monstrosity of officious bewilderment, provoking fear, disappointment, and confusion in the hearts of the uninsured, not to mention distrust, despair, and anxiety among taxpayers and business people. An astonishing two-thirds of the uninsured do not know whether they will purchase healthcare insurance by the January 1, 2014 deadline. Many fear that they will have to pay more than they can afford, even after getting their subsidy checks and tax credits. Some, including those who have enthusiastically waited for their chance to get Obamacare, worry that they may not qualify, and be shuttled instead into Medicaid.

Still others are troubled by the prospect of losing their jobs or having their hours reduced. A poll of 603 small businesses found that 19% have laid off workers specifically because of Obamacare; 41% have suspended hiring; 55% believe Obamacare will lead to higher healthcare costs. Businesses, from small to large, are circumventing Obamacare with part-time jobs; in labor-intensive industries, the new work week is 29.5 hours. Even altruistic organizations such as school districts and state and local governments are employing this strategy.

According to the Congressional Budget Office, the number of uninsured people will never fall below 30 million, even by 2023.

Then there is the troubling spate of recent news decrying the Obamacare implementation delays, missteps, unmet milestones, and special treatment (waivers, exemptions, and exceptions) of politically favored groups. Public support is eroding, with 63% of voters believing the Obamacare law must change. Similar dissatisfaction has been expressed regarding the clumsy rollout, with 57% referring to it as "a joke."

Mr. Obama believes that these attitudes have been shaped by his adversaries and by people who do not understand Obamacare — as if the layoffs, work week reductions, benefit cuts, and cost increases (insurance rates and the 18 new Obamacare taxes and penalties) were merely rumors spread by Fox News and angry Republicans. According to Obama, the number one priority of the entire Republican Party is to ensure "that 30 million people don't have healthcare." But according to the Congressional Budget Office, the number of uninsured people will never fall below 30 million, even by 2023 — after ten years and $2.6 trillion of Obamacare. Looks like Obama wins the uninsured contest.

Republicans certainly revel in Obamacare's inherent flaws and design errors (what Obama calls "glitches and bumps"), but after all, they played no role in writing it, and not a single one of them voted for it. Republicans have not caused what one of Obamacare's senior authors, Senate Finance Committee Chairman Max Baucus (D-MT), called a "huge train wreck coming down." The cause of the inevitable wreck is the tricks, gimmicks, and false promises that were stuffed into the bill to get it passed — that, and the Byzantine regulations written by Obamacare lawyers, lobbyists, and bureaucrats who now, in frantic futility, struggle to implement the law.

It is Obamacare itself, at least the grand version sold to the public, that troubles Obama. As he observes its slow, painful, horribly costly implementation, he seems to have come to understand that the public will not see the real version for years (if ever), let alone by October. Consequently, his objective is not to make Obamacare succeed but simply to keep it alive long enough for it to take root (i.e., for the Obamacare insured to become dependent on its handouts). To achieve this, the administration must (a) convince enough people to turn out to enroll in October and (b) ensure that the Obamacare Data Hub will be ready to process them.

Obama has decided that the objective can be effectively accomplished with a $700 million marketing campaign.After all, campaigning is what he does best. And the people he must reach are the same people who voted for him (twice). Bamboozling some of them should be easy, but conscripting the so-called young invincibles, not all of whom voted for him, or anyone, is critical. The premiums paid by the young and healthy are needed to defray the cost of insuring older, higher risk individuals and pay the subsidies for the 30 million heretofore denied health care.

Obama’s marketing blitz will promote the idea that health insurance is necessary, affordable, and "cool" to have. "Don't be left out," reads one pitch. Expect a barrage of ads containing various "guiltless" lures of handouts (similar to the SNAP marketing of food stamps, and hoping for similar success). Although we can expect ads ranging from the most condescending (e.g., wealthy celebrities extolling Obamacare for the poor) to the most shameless (e.g., 21 year-olds fraught with fears of sudden, crippling accidents or early heart disease and cancer), the underlying theme — aimed at the poor, the young, the uneducated, the disengaged — is that health insurance will make you feel good, like a winner. These are exciting times to be temporarily uninsured.

Many states have launched similar campaigns. For example, Minnesota recently announced that Paul Bunyan and Babe the Blue Ox will be the faces of its Obamacare exchange. The equally banal creative director of Minnesota's $9 million Obamacare web-based marketing campaign enthusiastically said that the Paul and Babe angle is "great news for those that are uninsured." He was looking for something "easy to work with" and "unique to Minnesota." Presumably, the coolness will be provided by the campaign's motto, "The Land of 10,000 Reasons to get Health Insurance." (Minnesota may be, as it calls itself, “the land of 10,000 lakes,” as if someone were counting, but Michigan and Wisconsin would challenge the uniqueness claim about the pseudo-mythology of Paul Bunyan.)

We will continue to "find out what's in it,” as Nancy Pelosi said — through more discoveries of unforeseen problems, unintended consequences, and the "bumps and glitches" of moral hazard.

When October arrives, many tens of thousands of “navigators” will be available to guide applicants through the steps in the Obamacare enrollment system. They will be paid $20–$48 per hour; a high school diploma is not required, nor is a criminal background check. The Department of Health and Human Services (HHS) tells us that Navigators must take a 20–30 hour online course (to learn about a 1,200 page law with over 20,000 pages of regulations) and that Americans "can trust that information they are providing is protected." That should quash any quality or privacy concerns.

Integral to the enrollment system looms the Obamacare Data Hub — a colossal database system storing unprecedented reams of applicants' personal information. To determine eligibility and subsidy size, navigators and other government officials will use the hub to evaluate applicant records at various government agencies. These include, for starters, the IRS, the Department of Justice, the Social Security Administration, the Department of Defense, the Veterans Administration, the Department of Homeland Security, the Peace Corps, the states' Medicaid systems, and, of course, the HHS.

The Obama administration is confident that it can persuade the young and healthy. But most who show up to enroll will likely do so under the duress of the Individual Mandate. The Obamacare Data Hub is another story. Although the administration insists that it will be open for business on October 1, it has been plagued by development problems. One difficulty, in particular, stemmed from the Employer Mandate (requiring that employers provide coverage to full-time workers). The complexity involved in verifying people’s income and employment status threatened the timely development of the Hub, which cannot tolerate delays. Thus, the Employer Mandate was delayed for one year. Administration officials gave large employers a one-year break, but they let the Individual Mandate stand, certainly annoying many from the critical target group (the young and healthy) whom they must somehow hornswoggle. Brilliant! And as if to demonstrate the essence of Obamacare, they wrote a new regulation for the delay in the Employer Mandate. Quietly released on a Friday (the Friday following the Fourth of July, no less), the regulation was 606 pages long. (Would a two-year delay be 1,212 pages?)

The massive public relations campaign will have some success. The same team and strategy (targeted messaging) that got Obama reelected should not be underestimated. Obamacare advocates will improve their messaging and they will never miss an opportunity to blame Republicans. They will convince many young invincibles to purchase insurance they don't want and many others to purchase insurance that they still cannot afford, even with their subsidies. So despite Obamacare's growing disfavor, campaign leaders remain optimistic, at least in public. But will the sizzle in their messaging entice enough enrollees to require October crowd control?

The vast majority of the uninsured may stay home. Along with most of the 157 million who already have health insurance, they may be and remain skeptical about the Obamacare PR campaign (a marketing blitz for a product so wonderful that it must be required by law), confused by the complexity of the program (mandates, rules, options, taxes, fees, penalties, waivers, exemptions, exceptions, etc.), and frightened before the vision of a $2.6 trillion house of cards in which we must now reside. Peering in from its rickety porch, we will continue to "find out what's in it,” as Nancy Pelosi said — through more discoveries of unforeseen problems, unintended consequences, and the "bumps and glitches" of moral hazard. What else could be found in a 20,000 page regulatory labyrinth of specious minutia, concocted by unscrupulous lawyers, venal lobbyists, and smug bureaucrats, all of whom possess at once the utmost lack of any practical medical or business experience and the utmost disdain for free-market capitalism?

As October approaches, anxiety over the turnout will shift to the Data Hub. But the Hub will not be ready, at least not to the extent Obama expected. He will worry that it will be unable to process enough applicants for the financial sustainability of his prize legislation. And worry he should. If the American public comprehends the capabilities of his Hub, not to mention what it could become, they will burn the entire operation to the ground, if only to keep the NSA from getting its hands on it.




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A Program that Any Drunk Can Understand

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Libertarianism enjoys the contributions of many pioneers, several of whom spring immediately to mind. There’s H.L. Mencken, to whom I recently paid homage in these pages. There’s Murray Rothbard and Ludwig von Mises, Rose Wilder Lane, Isabel Paterson, and, of course, Ayn Rand. There are others I’ve neglected to mention here, but of whom readers may remind me. And there are Bill W. and Doctor Bob.

At my mention of the last two, some may scratch their heads. They may search their anthologies of political works, trying to find some mention of these eminent persons. When they come up short, they may conclude that I am kidding. But though Bill W. and Doctor Bob are better known in Twelve-Step recovery circles than in libertarian ones, and though neither may ever have considered himself a libertarian, together they formulated a philosophy that, in many ways, bears a striking similarity to the political convictions we hold dear. They were the founders of Alcoholics Anonymous.

Of all political persuasions, libertarianism most nearly conforms to the principles of A.A. Both are clear and simple enough for any drunk to understand. Both adhere to guidelines everybody learned in kindergarten. And if most people hadn’t forgotten those guidelines by the time they graduated from high school, we would all live in a much better world.

We are not run by any elites who are presumed to know better than we do. Our leadership always emerges from the bottom up, and is guided not by airy theories but by practical experience.

How close is A.A. to libertarian principles? Strikingly close. We Twelve-Steppers believe in taking responsibility for ourselves. We believe, as we like to say, in “keeping our side of the street clean.” In seeking out solutions to our problems ourselves, instead of sitting around waiting for somebody else to do it for us.

Helping other people is also not something we’re encouraged to sit around and wait for somebody else to do. When we’re able, we’re supposed to pitch in and do it ourselves. No faraway potentate is seen as our ultimate benefactor. No potentate, that is, except our own, individually identified Higher Power — a Power that never takes a dime from us in taxes, yet provides far greater assistance than we’ve ever gotten from Washington D.C., for all the trillions we’ve sent it.

Just as in an economy based on liberty, an “invisible hand” can truly be said to govern the workings of Twelve-Step programs. Nobody needs to plan, organize, or dictate matters from the top, from the heights of any centralized organization. We are not run by any elites who are presumed to know better than we do. Our leadership always emerges from the bottom up, and is guided not by airy theories but by practical experience.

Busybodies and know-it-alls gain no traction in A.A. None has ever succeeded in taking charge. To outside eyes, this seems nothing short of miraculous. It may also seem miraculous that a ragtag assortment of freedom-loving citizens were ever able to govern themselves in a country without kings, emperors, or any sort of grand council to oversee operations down to the minutest detail.

In A.A., we hold each other individually accountable. And every individual counts. The dignity of each person’s choices is honored, whether for good or ill. In recovery, we come to appreciate that our lives have a value no one else can ever take away, and that — for the sake of our very survival — we must never throw away ourselves. Though I was well on my journey toward a libertarian perspective years before I became involved in A.A., my experience in the program had much to do with clinching my political conversion.

Over the past three-quarters of a century, millions of people’s lives have been saved by their adherence to the principles of Twelve-Step recovery. Those lives bear testimony to the fact that the principles work. If they work to save human lives, they might also help to save the larger human society.

When recovering drunks run across people who labor without the benefit of such help, those who are apparently clean and sober but who are whiny, self-absorbed, irresponsible, childish, over-dependent, nosy, meddlesome, or just plain impossible to get along with, we often remark that they “need a program.” We say this with a smile, but we are serious. We count ourselves fortunate that we have found a way of life that makes our individual lives worth living, and actually feel sorry for those who haven’t. More than ever before, today, Americans need a program. Be they drunk or sober, and regardless of whether they use recreational drugs, a huge number of them direly need to be Twelve-Stepped.

As a nation, many Americans are addicted to the hallucinogen of government aid. They grope their way through their existence under the delusion that, although they’re doing a lousy job of managing their own lives, they have the wisdom to manage everyone else’s. They may not believe that their Higher Power resides a bottle or a syringe, but they just as mistakenly believe that it resides in the state. This, as surely as alcoholism or drug addiction, is a disease that leads to disappointment, despair, and destruction. As we in A.A are also fond of saying, they “need a meeting.”

The next meeting of our local Libertarian Party, or of any similar group of liberty-loving individuals, would very nicely fit the bill.




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Asset-Backed Commercial Paper Syndrome

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Merely a few years back sophisticated investors in the Western world were obsessed with ABCP, which was designed on the premise that if you put a lot of risky investments together, whirl them together nicely — removing the need to see the actual ingredients — make them tradable and hence liquid, somehow the basic risk that was right at the core of the ABCP would disappear. Alas, as can be expected, ABCP actually worsened the risk-reward situation, for now broker commissions had to be paid and the lack of risk perception encouraged an increase in the size of the higher-risk ingredients of ABCP.

How did ABCP come to be acceptable by the very best in Western society? It was a result of an irrationality that has been creeping into the society, a result of the subservience of the individual and his thinking to the institutional order, and more importantly of a corruption of the feedback mechanism by the politicization and collectivization of every aspect of life.

By suffering or benefiting from the consequences of our actions, we are enabled to align actions and beliefs to what is best for our prosperity. This we often no longer do. Institutions have interfered to privatize profits and socialize costs. This is socialism. It is also the mysticism that constitutes the very essence of backward, poor societies. For all intents and purposes, mysticism is synonymous with socialism.

In the West, there has been a significant break from individual self-responsibility. It is no longer necessary to do productive work or look after for your health or have a husband to have babies or save for your old age. The nanny state promises to look after you. This has broken the feedback system. The result is that our thinking is no longer aligned to what is best for us, what is rational and what makes for a productive society.

In the West, people increasingly believe that something can be created from nothing, the magic that either the state or God will provide for you if you pray. Rhetoric and sound-bites, accepted as universal truths, allow people to avoid delving deeper. It is now believed possible that the inherent risks of life can be eliminated through top-down management by experts. You have the same vote in political space whether you understand the issues or not, and this means mediocrity in the intellectual space. No value is found in deep exploration of a subject. Meanwhile, mysticism produces a significantly reduced sense of causality. The passion to advance one’s life and explore its possibilities has little value in a mystical culture.

In the West, people increasingly believe that something can be created from nothing, the magic that either the state or God will provide for you if you pray.

The product is an increasingly superstitious society and confused, cloudy thinking. Increased crime and loss of prosperity are the obvious consequence, because self-responsibility has taken a back seat. Dependence on thinking driven by the media and whatever is in fashion makes superstitious beliefs spread very quickly. Not many question how the printing of currency can create prosperity. Who needs to work when wealth can be created by the magic wand? Why look after your health when ultra-high-tech medical technology can take care of all ailments, perhaps making a lot of people subliminally believe that mortality can be avoided. Not many question that the world can be changed by the heavy hand of the US military. Everyone seems to have an answer for how to get rid of poverty and crime.

ABCP thinking makes people in the West worry about such things as the possibility that a certain drug might kill one in a million users. This endless worry about the smallest harm that may come from anything creates terrible regulatory problems and cost increases. Delays in drug approval kill far more people than they were supposed to save.

When 9/11 happened, a lot of Americans shouted, “How could this happen here? This is America.” Alas, there is nothing about America that makes it immune to attacks. It was not just the deaths of 3,000 people that affected Americans but their nationalistic arrogance. The steps Americans took to deal with 9/11 damaged liberty and security instead of strengthening them. Now the equivalent of thousands of lives is wasted in lineups at American airports.

As heartless as it may sound, 20 children being killed by a gunman is not a world-changing event. Many more people are killed on the roads each day in the United States. Many more are murdered in other ways. Just because a certain crime is covered by major news channels does not meant that people have to do something in a kneejerk fashion. That is superstition. Of course, one might want to explore the various reasons behind violent crimes, but putting restrictions on society without a cost-benefit analysis only leaves people with a false sense of security.

Gun control, putting metal detectors in every school, making people to go through porno-scanners at airports, is a wrong reflex. People must get some perspective on life. They also need to develop, or redevelop, a sense of responsibility for themselves. Then, after a bit of thought they may realize that shooting massacres have a way of happening in areas where guns cannot be taken in by decent people. In the end, they may accept the fact that even after all proper actions are taken, bad things will happen. This is the nature of life.

Western society must find a way back to rationality and restore a social structure shaped so that a person faces the consequences of his actions. This will be the antidote to mysticism and will likely put the West back on the path to progress.




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The Sequester Effect

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At this writing, the Republicans have refused to cave in on sequestration. Because half the cuts will come from defense, I thought the GOP would do almost anything to prevent the sequester from happening. But I was wrong. Whether they are operating on principle (i.e., sticking to their belief that spending must be brought under control) or simply doing what they think is politically advantageous, I couldn’t say. In either case, it may provide a lesson in political economy for all Americans.

Back in 1990, Bill Weld was elected governor of Massachusetts. Upon taking office, he instituted relatively minor cuts in social services. I can still remember the street protests and wailings from advocacy groups that the cuts would cause homelessness, starvation, and other enormities. Of course, after the cuts went through, nothing of the sort happened. People suddenly discovered that they could work at a job, or call upon relatives for assistance, or rely on private charity. It was an object lesson in how bloated and dishonest the welfare state had become since LBJ put in place the “Great Society.” Recipients and advocates of government largesse in Massachusetts had for a time persuaded a majority of their fellow citizens that welfarism was just, honorable, and necessary. But when Massachusetts ran into a fiscal wall, with deficits looming and taxes just too much of a burden, a Republican (Weld) squeaked into office and — poof! — the illusion that the state alone stood between the less well-off and a Dickensian fate burst like a soap bubble.

The sequester may prove this point again, and on a national scale. The Obama administration has been ratcheting up the hyperbole as the dread date of March 1 approaches. Beware the Kalends of March! Children will be thrown off Head Start. Small business loans may be delayed, or even (gasp!) unobtainable. National defense, on which we spend about as much money as the rest of the world combined, will be compromised when civilian employees of the Pentagon are required to take a day off per week without pay. And God alone knows what else may happen.

In fact, sequestration calls for the elimination of a little over $1.1 trillion in federal spending over a period of ten years. That’s about three cents out of every dollar in a budget that has doubled under Bush II and Obama. If the American economy can’t survive that, then the country may as well pack it in and become a province of China.

Probably the Republicans will cave later in March, as defense contractors join food stamp recipients and the long-term unemployed in bleating that the trough is no longer full. But maybe not. Maybe they’ll stand firm long enough for the public and the establishment media to realize that sequestration ain’t so bad after all.

Sequestration is a lousy way to trim the federal budget. But it’s better than business as usual. And it just might teach the citizenry that it can live with a little (or even a lot) less government.




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