“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States….
US Constitution, Article 1, Section 8
The commerce clause of the Constitution has been used to justify all manner of government social spending. Does this clause mean that the government can legitimately spend tax money on any project that will enhance the welfare of any American?
A good place to start looking for the original meaning of the phrase “general welfare” is with the author of the constitution. The constitution was drafted by a constitutional convention in Philadelphia in 1786 and 1787. Its primary author was James Madison, who later became the fourth US President. Madison is considered the “father of the constitution.” Together with Alexander Hamilton, James Madison was also an author of the Federalist Papers. Madison authored Federalist #41, which discussed the question of general welfare [1].
Madison, writing as Publius, notes that some critics of the constitution claim that the language of the general welfare clause “amounts to an unlimited commission to exercise every power which may be alleged to be necessary for the common defense or general welfare [1].”
Madison then goes on to note that the second half of the general welfare clause, the same sentence, lists seventeen powers of congress that allow the federal government to “provide for the common defense and general welfare of the United States.” Madison asks, “For what purpose could the enumeration of particular powers be inserted, if these and all others were meant to be included in the preceding general power? Nothing is more natural nor common than first to use a general phrase, and then to explain and qualify it by a recital of particulars. But the idea of an enumeration of particulars which neither explain nor qualify the general meaning, and can have no other effect than to confound and mislead, is an absurdity, which, as we are reduced to the dilemma of charging either on the authors of the objection or on the authors of the Constitution, we must take the liberty of supposing, had not its origin with the latter [1].” In other words, the constitution lists specific powers of congress that are to be used for the general welfare of the United States.
Madison went further in 1817 when he vetoed an internal improvements bill. In his veto message to congress, Madison wrote “Such a[n unlimited] view of the Constitution would have the effect of giving to Congress a general power of legislation instead of the defined and limited one hitherto understood to belong to them…. It would have the effect of subjecting both the Constitution and laws of the several States in all cases not specifically exempted to be superseded by laws of Congress…. [4].”
Alexander Hamilton, another prominent author of the Federalist Papers, took a more expansive view of the clause, but was much more restrictive than modern interpretations. Hamilton wrote in the Report on Manufactures that a limiting factor for the general welfare clause should be “the object to which an appropriation of money is to be made be General and not local; its operation extending in fact, or by possibility, throughout the Union, and not being confined to a particular spot [2].”
According to Hamilton, an appropriation under the general welfare clause must benefit the entire union, not just a locality, and definitely not an individual. In Hamilton’s view, the general welfare might include projects such as parks, libraries, and museums that are open to all people. It would not include transfer payments to benefit an individual. Nor would it include earmarks to benefit the people of a single community.
Even though Thomas Jefferson was not directly involved in the writing of the constitution, he agreed on a limited interpretation of the commerce clause. In his Opinion on National Bank, Jefferson wrote, “It would reduce the whole instrument to a single phrase, that of instituting a Congress with power to do whatever would be for the good of the United States; and, as they would be the sole judges of the good or evil, it would be also a power to do whatever evil they please... Certainly no such universal power was meant to be given them. It was intended to lace them up straitly within the enumerated powers and those without which, as means, these powers could not be carried into effect [3].”
Jefferson realized that an open interpretation of the wording of the constitution would mean that there was no limit at all on the powers of the federal government. If a government can enact any law that it believes will be for the benefit of the nation, then the government can do anything at all. We have seen this in our own time as the government expands beyond its constitutional role to take actions that the founding fathers would have never considered constitutional.
Whatever the founding fathers thought, the principle of federal restraint with respect to spending on the general welfare lasted less than a hundred years. Under President Lincoln, congress passed the Pacific Railroad Acts of 1862 and 1864, which subsidized the construction of transcontinental railroads [6]. This was similar in many respects to the bill that James Madison vetoed in 1817. However these subsidies could be justified under Hamilton’s concept of national good.
In contrast to Lincoln, Grover Cleveland, a conservative Democrat left a legacy of fiscal restraint and protection of free markets. In 1887, congress passed the Texas Seed Bill which appropriated $10,000 to purchase seed for Texas farmers in drought-ridden areas. Cleveland vetoed the bill, stating “I can find no warrant for such an appropriation in the Constitution; and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit [5].”
Since the days of Lincoln, the interpretation of the general welfare clause has continually expanded. Franklin Roosevelt’s New Deal programs were a vast expansion of federal power, as well as a vast expansion of federal spending on social projects. Lyndon Johnson’s Great Society broke new ground in creating more federal entitlements and transfer payments, transfers of federal tax money to for the benefit of specific individuals as opposed to the general welfare. Finally, our own Barack Obama has created a massive new federal entitlement to health care that not only redistributes money, it also requires Americans to purchase a privately marketed service under the guise of promoting the general welfare.
The first Supreme Court review of the general welfare clause came in 1936 in United States v. Butler [8]. The court agreed with Hamilton that the clause granted the federal government power to spend on areas that were not specifically mentioned in the constitution, but that the spending had to be for national welfare. Local spending did not meet the criteria.
Unfortunately, in 1937 the court revisited the issue in Helvering v. Davis [8]. FDR’s court packing scheme may have influenced the outcome of this case because this time the court ruled that congress could determine what constituted the national welfare. This essentially gave congress a black check to spend on whatever they could justify as being for the national welfare. It also overturned 150 years of tradition and the court’s own precedent which was established only a year earlier!
To date, no law has ever been ruled unconstitutional because it violated the general welfare clause. Therefore it falls to voters to vote out officials who allow unchecked – and ultimately unconstitutional – spending.
Notes:
1. http://www.consource.org/index.asp?bid=582&documentid=719
2. http://press-pubs.uchicago.edu/founders/documents/a1_8_1s21.html
3. http://etext.virginia.edu/jefferson/quotations/jeff1020.htm
4. http://millercenter.org/scripps/archive/speeches/detail/3630
5. http://www.independent.org/publications/article.asp?id=1329
6. http://law.jrank.org/pages/8984/Pacific-Railroad-Act.html
7. http://www.answers.com/topic/general-welfare-clause
8. http://www.answers.com/topic/general-welfare-clause
Kansas City MO
April 29, 2010
Thursday, May 6, 2010
Thursday, April 29, 2010
Health care cover-up
When the House of Representatives voted to pass President Obama’s health care reform bill on March 21, 2010, it was opposed by a majority of Americans. In addition to opposing the bill itself, many Americans objected to the manner in which the bill was passed. To avoid the stronger Republican opposition after the election of Scott Brown from Massachusetts, the house passed a previously passed senate bill and then both houses voted on a separate bill containing fixes for the first bill. This was unprecedented.
Now it seems that there was even more political chicanery involved in the passage of the bill. Several weeks after the passage of the health care bill, on April 22 Medicare’s Office of the Actuary released a report that was full of bad news for President Obama and the Democrats [1]. This report from a nonpartisan office stated that the reform bill will actually increase health care costs, in spite of President Obama’s repeated assurances that the bill would control costs.
Further, the report stated that the bill’s cuts in Medicare could drive up to 15% of hospitals and health care providers into the red [1]. These losses could lead to fewer health care providers as demand increases. This would lead to more limited access to health care, especially for seniors who depend on Medicare. Cuts to Medicare’s Advantage program would also mean that many seniors will face higher out-of-pocket costs.
The one bright spot in the report for Democrats was that the percentage of Americans with health insurance is estimated to increase. However, even the White House admits that the bill still won’t cover all Americans.
In addition to the bad news contained in the report, it was also revealed that the report had been submitted prior to the health care vote. Reports are that the report had been submitted to Secretary of Health and Human Services Kathleen Sebelius more than a week prior to the vote [2]. Sebelius’ staff reportedly refused to review the report until after the vote. Conflicting reports [3] are that the report was received only three days before the vote, which was not enough time to review it.
In either case, it looks bad for the Democrats. It is now apparent that the rush in getting the bill passed was related directly to the HHS report. In either case, the vote was pushed through on a Sunday so that the contents of the report would not be made public before the bill became law. The Democrats knew that bad news was coming and delayed it.
In fact, one HHS staffer said as much: "The reason we were given was that they did not want to influence the vote, which is actually the point of having a review like this, you would think" [2].
He goes on to say that the contents of the report were widely known in Democratic circles: "We know a copy was sent to the White House via their legislative affairs staff, and there were a number of meetings here almost right after the analysis was submitted to the secretary's office. Everyone went into lockdown, and people here were too scared to go public with the report" [2].
After years of Democratic complaints about governmental lies, here we have a black-and-white case of intentional deceit. While President Obama and congressional Democrats were claiming that the health care bill would reduce costs, they were aware that actuaries within their own administration were pointing out the flaws in their plan. Even now, more than a month after the vote, are still claiming that the obscenely expensive bill will actually decrease the federal deficit.
All of this points to the fact that the intent of the Democrats is to mislead. They know and have known the truth about their bill for a long time. They concealed the truth in order to deceive the American people and their elected representatives into passing the bill.
We can only hope that the American people will remember this deceit and the arrogance of the Democratic leadership in November.
Repeal – Replace – Reform
Notes:
1. http://news.yahoo.com/s/ap/20100423/ap_on_bi_ge/us_health_care_law_costs
2. http://spectator.org/archives/2010/04/26/what-lies-beneath
3. http://online.wsj.com/public/article/SB10001424052748704423504575212303032885376.html
Kansas City MO
April 29, 2010
Now it seems that there was even more political chicanery involved in the passage of the bill. Several weeks after the passage of the health care bill, on April 22 Medicare’s Office of the Actuary released a report that was full of bad news for President Obama and the Democrats [1]. This report from a nonpartisan office stated that the reform bill will actually increase health care costs, in spite of President Obama’s repeated assurances that the bill would control costs.
Further, the report stated that the bill’s cuts in Medicare could drive up to 15% of hospitals and health care providers into the red [1]. These losses could lead to fewer health care providers as demand increases. This would lead to more limited access to health care, especially for seniors who depend on Medicare. Cuts to Medicare’s Advantage program would also mean that many seniors will face higher out-of-pocket costs.
The one bright spot in the report for Democrats was that the percentage of Americans with health insurance is estimated to increase. However, even the White House admits that the bill still won’t cover all Americans.
In addition to the bad news contained in the report, it was also revealed that the report had been submitted prior to the health care vote. Reports are that the report had been submitted to Secretary of Health and Human Services Kathleen Sebelius more than a week prior to the vote [2]. Sebelius’ staff reportedly refused to review the report until after the vote. Conflicting reports [3] are that the report was received only three days before the vote, which was not enough time to review it.
In either case, it looks bad for the Democrats. It is now apparent that the rush in getting the bill passed was related directly to the HHS report. In either case, the vote was pushed through on a Sunday so that the contents of the report would not be made public before the bill became law. The Democrats knew that bad news was coming and delayed it.
In fact, one HHS staffer said as much: "The reason we were given was that they did not want to influence the vote, which is actually the point of having a review like this, you would think" [2].
He goes on to say that the contents of the report were widely known in Democratic circles: "We know a copy was sent to the White House via their legislative affairs staff, and there were a number of meetings here almost right after the analysis was submitted to the secretary's office. Everyone went into lockdown, and people here were too scared to go public with the report" [2].
After years of Democratic complaints about governmental lies, here we have a black-and-white case of intentional deceit. While President Obama and congressional Democrats were claiming that the health care bill would reduce costs, they were aware that actuaries within their own administration were pointing out the flaws in their plan. Even now, more than a month after the vote, are still claiming that the obscenely expensive bill will actually decrease the federal deficit.
All of this points to the fact that the intent of the Democrats is to mislead. They know and have known the truth about their bill for a long time. They concealed the truth in order to deceive the American people and their elected representatives into passing the bill.
We can only hope that the American people will remember this deceit and the arrogance of the Democratic leadership in November.
Repeal – Replace – Reform
Notes:
1. http://news.yahoo.com/s/ap/20100423/ap_on_bi_ge/us_health_care_law_costs
2. http://spectator.org/archives/2010/04/26/what-lies-beneath
3. http://online.wsj.com/public/article/SB10001424052748704423504575212303032885376.html
Kansas City MO
April 29, 2010
Saturday, April 24, 2010
FDR's Folly - and what Obama should learn from it
Franklin Roosevelt has for years been given credit for shepherding the nation through the Great Depression. For decades, FDR’s New Deal policies were believed by many economists to have prevented a total collapse of the United States economy until the markets and industry could recover as they geared up production to supply the US and its allies with war material to fight the Axis powers.
More recently, a close examination of FDR’s programs has revealed that the opposite may be true. In FDR’s Folly, Jim Powell shows that many of Roosevelt’s New Deal programs did far more to hurt the economy and delay recovery than they did to help. Higher taxes, strict regulation, and centralized economic planning all combined to keep unemployment high and the economy stagnant for the entire decade of the 1930s.
The recession that became the Great Depression had its roots in the Federal Reserve’s monetary policy. In 1928 and 1929, the Fed increased interest rates and caused a severe monetary contraction. Powell estimates that the money supply actually decreased by 1/3 (chapter 2).
Powell also notes that many states had banking laws that prohibited banks from having branches. This prevented diversification and made banks weaker. Approximately 10,000 US banks failed between 1929 and 1933 [1]. In Canada, where there were no such restrictions on bank branches, there were no bank failures. Most of the failed banks were rural single-office banks (chapter 4).
Herbert Hoover, who was president when the stock market crashed in 1929, took aggressive steps to save the economy, many of which are similar to steps taken by congress and President Obama over the last few years (chapter 3). Hoover encouraged industry to keep wages high in spite of falling sales and demand. He tried to put people back to work with public works projects and signed the Davis-Bacon Act which required local governments to pay union wages, which helped keep labor costs artificially high. He also backed farm subsidies, which led to overproduction and low prices.
Further, Hoover signed the Smoot-Hawley Tariff in 1930, which raised prices on imported goods. Many other countries retaliated by raising prices on American goods. The Revenue Act of 1932 also raised taxes. Other Hoover policies included restrictions on short sales of stocks and revisions to bankruptcy law that limited the rights of creditors. Hoover’s responses, and Roosevelt’s adoption of many of his policies, turned a recession into the Great Depression.
When FDR became president in 1933, he initiated a series of policies called the New Deal. Many of FDR’s policies took Hoover’s government actions and expanded them. One of FDR’s first actions was to declare a series of bank holidays, in which banks were ordered to close. Powell argues that the bank holidays actually contributed to the bank runs. People knew that the banks were going to be closed. They also knew that, in the days before credit cards, they needed cash. Their response was to rush to the bank and withdraw money while it was open… and solvent.
Another early action of FDR was to sign the Glass-Steagall Banking Act of 1933. This law (repealed in 1999) created a wall between investment banks and commercial (lending) banks. It also established the FDIC to insure bank deposits. The separation of banks prevented diversification and required many of the strongest banks in the country to split into smaller – weaker - parts.
Deposit insurance eased the minds of depositors, but Powell argues that it also made people more risk tolerant. If people knew that their funds were insured by the government, they would pay less attention to what the banks were doing with their deposits. In turn, it encouraged the banks to be more risky with their depositor’s money because they knew that it was guaranteed by the government.
FDR also raised taxes dramatically. The Revenue Act of 1936 increased federal taxes on income, dividends and estates, while limiting deductions. The Undistributed Profits Tax of 1936 raised corporate tax rates and limited deductions for business losses (chapter 6). By the end of FDR’s tenure, the top marginal rates for both personal and corporate taxes were in excess of 90% (chapter 18). These high tax rates discouraged corporate investment and further slowed economic growth.
At the same time that federal tax rates were rising, local and state taxes were also increasing. Many states saw dramatic increases in their income taxes for individuals and businesses as well as higher sales taxes.
Congress actually passed the legislation in 1939 which would have reversed the higher tax trend. The Revenue Act of 1939 would have lowered corporate taxes to a flat 18% and eliminated the Undistributed Profits Tax. However, FDR refused to sign the bill into law.
Another massive New Deal tax increase was passed into law as the Social Security Act of 1935 (chapter 13). As originally passed, Social Security established a payroll tax that would go into an Old Age Retirement Account. Benefits for retirees would begin after January 1, 1942 (although this was later changed to 1940). This was meant to allow funds to build up to pay out benefits, although the program quickly became pay-as-you-go after FDR and congress depleted the trust fund in 1940.
The passage of Social Security slowed the recovery for several reasons. First, it obviously depleted the purchasing power of employees since the tax decreased their take-home pay at a time when wages were already depressed. Since employers were also taxed, it made hiring more expensive and discouraged businesses from adding employees. Finally, it removed money from circulation that could have been spent on goods and services because the tax receipts went into a trust fund for several years before they were paid out to retirees. The ultimate legacy of Social Security is an unfunded entitlement that is expected to go bankrupt by 2037 [4].
Since the US was on the gold standard in the 1930s, FDR could not finance his New Deal programs by unlimited borrowing and printing money as President Obama does. If people saw that inflation was rising, they could exchange their paper dollars for gold. One way that avoided this problem was by amending the Trading with the Enemy Act of 1917 to be effective in times of national emergency. Under the authority of this law, FDR issued an executive order (EO 6102) forcing people to turn in all but a small amount of gold to the government. After seizing the gold, FDR increased the price of gold from the free market price of $20 to $35 per ounce [2].
Another intervention in private contracts was the Wagner Act (chapter 14), which established closed shops and banned company (in-house) unions. The Frazier Lemke Farm Bankruptcy Act of 1934 (chapter 15) limited the rights of creditors in an attempt to stem the tide of farm foreclosures. The Supreme Court ruled in West Coast Hotel v. Parrish (1937) that the government could impose limits on the freedom of contract, such as establishing minimum wage laws. The assault on business was so intense that a 1941 Fortune magazine poll showed that 91% of respondents believed that a dictatorship and a loss of many property rights was imminent (pp. 86).
The New Deal also made use of vast public works projects to stem unemployment. The Civilian Conservation Corps (CCC) and the Public Works Administration (PWA) hired large numbers of Americans for make-work projects. According to Powell (chapter 7), these agencies concentrated their efforts on western swing states where FDR stood to gain the most politically. He also points out that many of the jobs that the government created were for skilled workers. Unskilled workers, who would have had a harder time finding employment, were left out. Additionally, government competition for workers kept wages artificially high, which prevented the market from reaching an equilibrium in which workers could have real jobs.
Another upward pressure on wages came in the National Industrial Recovery Act of 1933 (chapter 9). This law contained a host of centralized economic planning measures. The law set minimum wages and minimum prices as well as production quotas. The law also made it easier for workers to unionize.
The effect of the NIRA was to push wages above market rates. Higher labor costs in a tight economy led many businesses to become more automated, which means that the price and wage controls actually cost many workers their jobs. Blacks were especially hurt because, at the time, they were excluded by many unions. If the company was a closed shop, where employees were required to be union members, blacks were effectively barred from employment.
Eventually, the NIRA was ruled unconstitutional by the Supreme Court [3]. The Supreme Court viewed the NIRA as an unconstitutional delegation of legislative authority to the president and industrial groups. The Court also pointed out that while the constitution grants congress the power to regulate interstate commerce, the NIRA’s codes attempted to regulate and control intrastate and local commerce as well.
There were other New Deal laws that attempted to fix prices and reduce competition as well (chapter 17). The Robinson-Patman Act of 1936 foreshadowed modern demonization of Wal-mart by making it illegal for wholesalers to give large chain stores cheaper prices than small retailers. The Miller-Tydings Retail Price Maintenance Act of 1937 also meant to protect small stores against chains by setting minimum prices. The Civil Aeronautics Act prevented new airline competition requiring licenses for airlines to operate. No new licenses were issued until 1978. The war against competition ultimately hurt consumers by keeping prices higher.
More price controls were found in FDR’s farm policy (chapter 10). The Agricultural Adjustment Act of 1936 included price controls as well as output limits designed to reduce food supplies and prop up prices. Under the Agricultural Adjustment Act, the federal government was responsible for literally destroying perfectly good food at a time when hundreds of thousands of Americans were going hungry.
Ultimately, the AAA was also ruled unconstitutional in 1936, but it was replaced by the Soil Conservation and Preservation Act which reduced the acreage for food crops by paying farmers to grow grasses and legumes. Market orders (quotas) for farmers were revived by the Agricultural Market Agreement Act of 1937.
Another attempt to bail out farmers was the Commodity Credit Corporation, which made loans to farmers using their crops as collateral. If the price of their crops fell, the farmers had the option of keeping their money and forfeiting their crops. This arrangement chiefly benefitted wealthy farmers who owned more land. The Farm Security Administration also made loans to farmers. Powell notes that the FSA concentrated its loans, not in poor areas, but in swing states. Powell also points out that in spite of these programs, farm foreclosures remained high throughout the depression. There were simply too many farmers in the post-WWI period.
Eventually FDR was so angered by the Supreme Court decisions ruling his pet programs unconstitutional that he tried to remake the court (chapter 15). The court-packing scheme, formally known as the Judiciary Reorganization Bill of 1937, would have allowed FDR to add more (friendly) justices to the Supreme Court. The bill ultimately failed, but the justices, particularly Hughes and Roberts, were apparently so intimidated that they stopped opposing New Deal laws. Many New Deal programs were blatant violation of the commerce and general welfare clauses of the Constitution, as well as the 9th and 10th amendments.
One of the most celebrated organizations of the New Deal era was the Tennessee Valley Authority (chapter 11). The mission of the TVA was build dams and bring electricity to rural communities. While it was long considered successful, the TVA had its down side. For example, the TVA took property from private utilities and individuals through eminent domain. Powell also found that TVA states were slower to exchange agricultural economies for more profitable manufacturing jobs. The lower wages found in farm states reduced the demand for electricity.
Another perceived benefit of the TVA was flood control. The dams built by the TVA were supposed to help control the natural cycle of flooding by rivers. However, Powell points out that areas permanently flooded by TVA lakes covered an even larger area than that typically flooded by the rivers.
With the unprecedented expenditures aimed at reviving the economy, what was the result of the New Deal spending? FDR’s Secretary of the Treasury, Henry Morgenthau, said it best when he told the House Ways and Means Committee in 1939, “We are spending more money than we have ever spent before, and it does not work…. I say after eight years of this administration, we have just as much unemployment as when we started and an enormous debt, to boot” [5].
In fact, in 1938 the United States had entered a depression within a depression (chapter 16)! New Deal policies favored labor unions resulting in increased labor costs as well as disruptions from strikes. In response, many businesses replaced their workers with machines. Tax increases decreased the amount of money available to both businesses and consumers. In 1942, the government started income tax withholding in order to get money into the government’s hands faster.
If the New Deal programs exacerbated the Great Depression, what did help the US recover? Conventional wisdom has been that World War II and the massive production needed by the Allies ended the depression. In reality, this spending was similar to the stimulus bill of our own day. It did put people to work for a limited time, but at the cost of a skyrocketing national debt. And when the government spending stopped, the jobs went away.
As the Wall Street Journal noted, both FDR and his successor, Harry Truman, wanted more New Deal policies after WWII [6]. This new New Deal would have included federal health care, government subsidies for housing, more make-work project, and “the right to a useful and remunerative job.”
Instead, led by Georgia Senator Walter F. George, then chairman of the Senate Finance Committee, congress cut taxes. The top individual tax rate was reduced from 94% to 86.45% and the amount exempt from taxation was increased. This change meant that an additional twelve million Americans paid no income tax at all. Further, the excess profits tax was repealed and corporate tax rates were reduced from 90% to 38% [6]. Additionally, FDR’s price controls were eliminated.
Senator George’s claim that the tax bill “will so stimulate the expansion of business as to bring in a greater total revenue” [6] proved correct. The US began collecting more revenue than it had when tax rates were higher and budget deficits turned to budget surpluses. Unemployment rates fell to a fraction of what they had been during the 1930s.
Powell points to other instances in which cuts in taxes and government spending helped heal economic problems (chapter 19). During the Panic of 1837, Martin Van Buren cut spending and taxes. In 1892, Grover Cleveland cut government spending to resolve a decline in prices. In 1920, Warren G. Harding faced the sharpest price decline prior to the Great Depression. Prompted by Treasury Secretary Andrew Mellon, he resolved it by cutting government spending.
There have been other instances of tax and spending cuts stimulating economic growth. Tax rates were cut by Presidents Kennedy, Reagan, and Bush and in each case led to a period of economic growth and increased tax revenues [7]. Other presidents, such as Lyndon Johnson, Richard Nixon, Jimmy Carter, and our own Barack Obama found that high levels of taxes and regulation led to economic stagnation, high unemployment, and rising inflation.
We can learn from the economic successes and mistakes of the past. President Roosevelt’s New Deal programs, while well intentioned, were costly and ultimately not only ineffective, but counterproductive. The New Deal programs caused fifteen years of economic stagnation. The US economy did not fully recover from the Great Depression until after WWII when tax rates were cut and freedom returned to the markets. This success was replicated (and foreshadowed) many times in US history by spending and tax cuts in the face of economic problems. If the federal government continues to follow the example of FDR, we can expect a long period of economic stagnation until a future administration is willing to embrace free market concepts.
Notes:
1. http://www.econreview.com/events/banks1929b.htm
2. http://www.fff.org/freedom/fd0609d.asp
3. http://www.answers.com/topic/schechter-poultry-corporation-v-united-states
4. http://www.usnews.com/money/blogs/the-best-life/2009/05/12/social-security-medicare-busts-move-closer
5. http://www.cnsnews.com/public/content/article.aspx?RsrcID=41784
6. http://online.wsj.com/article/SB10001424052702304024604575173632046893848.html
7. http://www.heritage.org/Research/Reports/2001/05/Lowering-Marginal-Tax-Rates
Powell, Jim, FDR’s Folly. Crown Forum, New York, 2003.
Manassas VA
April 24, 2010
More recently, a close examination of FDR’s programs has revealed that the opposite may be true. In FDR’s Folly, Jim Powell shows that many of Roosevelt’s New Deal programs did far more to hurt the economy and delay recovery than they did to help. Higher taxes, strict regulation, and centralized economic planning all combined to keep unemployment high and the economy stagnant for the entire decade of the 1930s.
The recession that became the Great Depression had its roots in the Federal Reserve’s monetary policy. In 1928 and 1929, the Fed increased interest rates and caused a severe monetary contraction. Powell estimates that the money supply actually decreased by 1/3 (chapter 2).
Powell also notes that many states had banking laws that prohibited banks from having branches. This prevented diversification and made banks weaker. Approximately 10,000 US banks failed between 1929 and 1933 [1]. In Canada, where there were no such restrictions on bank branches, there were no bank failures. Most of the failed banks were rural single-office banks (chapter 4).
Herbert Hoover, who was president when the stock market crashed in 1929, took aggressive steps to save the economy, many of which are similar to steps taken by congress and President Obama over the last few years (chapter 3). Hoover encouraged industry to keep wages high in spite of falling sales and demand. He tried to put people back to work with public works projects and signed the Davis-Bacon Act which required local governments to pay union wages, which helped keep labor costs artificially high. He also backed farm subsidies, which led to overproduction and low prices.
Further, Hoover signed the Smoot-Hawley Tariff in 1930, which raised prices on imported goods. Many other countries retaliated by raising prices on American goods. The Revenue Act of 1932 also raised taxes. Other Hoover policies included restrictions on short sales of stocks and revisions to bankruptcy law that limited the rights of creditors. Hoover’s responses, and Roosevelt’s adoption of many of his policies, turned a recession into the Great Depression.
When FDR became president in 1933, he initiated a series of policies called the New Deal. Many of FDR’s policies took Hoover’s government actions and expanded them. One of FDR’s first actions was to declare a series of bank holidays, in which banks were ordered to close. Powell argues that the bank holidays actually contributed to the bank runs. People knew that the banks were going to be closed. They also knew that, in the days before credit cards, they needed cash. Their response was to rush to the bank and withdraw money while it was open… and solvent.
Another early action of FDR was to sign the Glass-Steagall Banking Act of 1933. This law (repealed in 1999) created a wall between investment banks and commercial (lending) banks. It also established the FDIC to insure bank deposits. The separation of banks prevented diversification and required many of the strongest banks in the country to split into smaller – weaker - parts.
Deposit insurance eased the minds of depositors, but Powell argues that it also made people more risk tolerant. If people knew that their funds were insured by the government, they would pay less attention to what the banks were doing with their deposits. In turn, it encouraged the banks to be more risky with their depositor’s money because they knew that it was guaranteed by the government.
FDR also raised taxes dramatically. The Revenue Act of 1936 increased federal taxes on income, dividends and estates, while limiting deductions. The Undistributed Profits Tax of 1936 raised corporate tax rates and limited deductions for business losses (chapter 6). By the end of FDR’s tenure, the top marginal rates for both personal and corporate taxes were in excess of 90% (chapter 18). These high tax rates discouraged corporate investment and further slowed economic growth.
At the same time that federal tax rates were rising, local and state taxes were also increasing. Many states saw dramatic increases in their income taxes for individuals and businesses as well as higher sales taxes.
Congress actually passed the legislation in 1939 which would have reversed the higher tax trend. The Revenue Act of 1939 would have lowered corporate taxes to a flat 18% and eliminated the Undistributed Profits Tax. However, FDR refused to sign the bill into law.
Another massive New Deal tax increase was passed into law as the Social Security Act of 1935 (chapter 13). As originally passed, Social Security established a payroll tax that would go into an Old Age Retirement Account. Benefits for retirees would begin after January 1, 1942 (although this was later changed to 1940). This was meant to allow funds to build up to pay out benefits, although the program quickly became pay-as-you-go after FDR and congress depleted the trust fund in 1940.
The passage of Social Security slowed the recovery for several reasons. First, it obviously depleted the purchasing power of employees since the tax decreased their take-home pay at a time when wages were already depressed. Since employers were also taxed, it made hiring more expensive and discouraged businesses from adding employees. Finally, it removed money from circulation that could have been spent on goods and services because the tax receipts went into a trust fund for several years before they were paid out to retirees. The ultimate legacy of Social Security is an unfunded entitlement that is expected to go bankrupt by 2037 [4].
Since the US was on the gold standard in the 1930s, FDR could not finance his New Deal programs by unlimited borrowing and printing money as President Obama does. If people saw that inflation was rising, they could exchange their paper dollars for gold. One way that avoided this problem was by amending the Trading with the Enemy Act of 1917 to be effective in times of national emergency. Under the authority of this law, FDR issued an executive order (EO 6102) forcing people to turn in all but a small amount of gold to the government. After seizing the gold, FDR increased the price of gold from the free market price of $20 to $35 per ounce [2].
Another intervention in private contracts was the Wagner Act (chapter 14), which established closed shops and banned company (in-house) unions. The Frazier Lemke Farm Bankruptcy Act of 1934 (chapter 15) limited the rights of creditors in an attempt to stem the tide of farm foreclosures. The Supreme Court ruled in West Coast Hotel v. Parrish (1937) that the government could impose limits on the freedom of contract, such as establishing minimum wage laws. The assault on business was so intense that a 1941 Fortune magazine poll showed that 91% of respondents believed that a dictatorship and a loss of many property rights was imminent (pp. 86).
The New Deal also made use of vast public works projects to stem unemployment. The Civilian Conservation Corps (CCC) and the Public Works Administration (PWA) hired large numbers of Americans for make-work projects. According to Powell (chapter 7), these agencies concentrated their efforts on western swing states where FDR stood to gain the most politically. He also points out that many of the jobs that the government created were for skilled workers. Unskilled workers, who would have had a harder time finding employment, were left out. Additionally, government competition for workers kept wages artificially high, which prevented the market from reaching an equilibrium in which workers could have real jobs.
Another upward pressure on wages came in the National Industrial Recovery Act of 1933 (chapter 9). This law contained a host of centralized economic planning measures. The law set minimum wages and minimum prices as well as production quotas. The law also made it easier for workers to unionize.
The effect of the NIRA was to push wages above market rates. Higher labor costs in a tight economy led many businesses to become more automated, which means that the price and wage controls actually cost many workers their jobs. Blacks were especially hurt because, at the time, they were excluded by many unions. If the company was a closed shop, where employees were required to be union members, blacks were effectively barred from employment.
Eventually, the NIRA was ruled unconstitutional by the Supreme Court [3]. The Supreme Court viewed the NIRA as an unconstitutional delegation of legislative authority to the president and industrial groups. The Court also pointed out that while the constitution grants congress the power to regulate interstate commerce, the NIRA’s codes attempted to regulate and control intrastate and local commerce as well.
There were other New Deal laws that attempted to fix prices and reduce competition as well (chapter 17). The Robinson-Patman Act of 1936 foreshadowed modern demonization of Wal-mart by making it illegal for wholesalers to give large chain stores cheaper prices than small retailers. The Miller-Tydings Retail Price Maintenance Act of 1937 also meant to protect small stores against chains by setting minimum prices. The Civil Aeronautics Act prevented new airline competition requiring licenses for airlines to operate. No new licenses were issued until 1978. The war against competition ultimately hurt consumers by keeping prices higher.
More price controls were found in FDR’s farm policy (chapter 10). The Agricultural Adjustment Act of 1936 included price controls as well as output limits designed to reduce food supplies and prop up prices. Under the Agricultural Adjustment Act, the federal government was responsible for literally destroying perfectly good food at a time when hundreds of thousands of Americans were going hungry.
Ultimately, the AAA was also ruled unconstitutional in 1936, but it was replaced by the Soil Conservation and Preservation Act which reduced the acreage for food crops by paying farmers to grow grasses and legumes. Market orders (quotas) for farmers were revived by the Agricultural Market Agreement Act of 1937.
Another attempt to bail out farmers was the Commodity Credit Corporation, which made loans to farmers using their crops as collateral. If the price of their crops fell, the farmers had the option of keeping their money and forfeiting their crops. This arrangement chiefly benefitted wealthy farmers who owned more land. The Farm Security Administration also made loans to farmers. Powell notes that the FSA concentrated its loans, not in poor areas, but in swing states. Powell also points out that in spite of these programs, farm foreclosures remained high throughout the depression. There were simply too many farmers in the post-WWI period.
Eventually FDR was so angered by the Supreme Court decisions ruling his pet programs unconstitutional that he tried to remake the court (chapter 15). The court-packing scheme, formally known as the Judiciary Reorganization Bill of 1937, would have allowed FDR to add more (friendly) justices to the Supreme Court. The bill ultimately failed, but the justices, particularly Hughes and Roberts, were apparently so intimidated that they stopped opposing New Deal laws. Many New Deal programs were blatant violation of the commerce and general welfare clauses of the Constitution, as well as the 9th and 10th amendments.
One of the most celebrated organizations of the New Deal era was the Tennessee Valley Authority (chapter 11). The mission of the TVA was build dams and bring electricity to rural communities. While it was long considered successful, the TVA had its down side. For example, the TVA took property from private utilities and individuals through eminent domain. Powell also found that TVA states were slower to exchange agricultural economies for more profitable manufacturing jobs. The lower wages found in farm states reduced the demand for electricity.
Another perceived benefit of the TVA was flood control. The dams built by the TVA were supposed to help control the natural cycle of flooding by rivers. However, Powell points out that areas permanently flooded by TVA lakes covered an even larger area than that typically flooded by the rivers.
With the unprecedented expenditures aimed at reviving the economy, what was the result of the New Deal spending? FDR’s Secretary of the Treasury, Henry Morgenthau, said it best when he told the House Ways and Means Committee in 1939, “We are spending more money than we have ever spent before, and it does not work…. I say after eight years of this administration, we have just as much unemployment as when we started and an enormous debt, to boot” [5].
In fact, in 1938 the United States had entered a depression within a depression (chapter 16)! New Deal policies favored labor unions resulting in increased labor costs as well as disruptions from strikes. In response, many businesses replaced their workers with machines. Tax increases decreased the amount of money available to both businesses and consumers. In 1942, the government started income tax withholding in order to get money into the government’s hands faster.
If the New Deal programs exacerbated the Great Depression, what did help the US recover? Conventional wisdom has been that World War II and the massive production needed by the Allies ended the depression. In reality, this spending was similar to the stimulus bill of our own day. It did put people to work for a limited time, but at the cost of a skyrocketing national debt. And when the government spending stopped, the jobs went away.
As the Wall Street Journal noted, both FDR and his successor, Harry Truman, wanted more New Deal policies after WWII [6]. This new New Deal would have included federal health care, government subsidies for housing, more make-work project, and “the right to a useful and remunerative job.”
Instead, led by Georgia Senator Walter F. George, then chairman of the Senate Finance Committee, congress cut taxes. The top individual tax rate was reduced from 94% to 86.45% and the amount exempt from taxation was increased. This change meant that an additional twelve million Americans paid no income tax at all. Further, the excess profits tax was repealed and corporate tax rates were reduced from 90% to 38% [6]. Additionally, FDR’s price controls were eliminated.
Senator George’s claim that the tax bill “will so stimulate the expansion of business as to bring in a greater total revenue” [6] proved correct. The US began collecting more revenue than it had when tax rates were higher and budget deficits turned to budget surpluses. Unemployment rates fell to a fraction of what they had been during the 1930s.
Powell points to other instances in which cuts in taxes and government spending helped heal economic problems (chapter 19). During the Panic of 1837, Martin Van Buren cut spending and taxes. In 1892, Grover Cleveland cut government spending to resolve a decline in prices. In 1920, Warren G. Harding faced the sharpest price decline prior to the Great Depression. Prompted by Treasury Secretary Andrew Mellon, he resolved it by cutting government spending.
There have been other instances of tax and spending cuts stimulating economic growth. Tax rates were cut by Presidents Kennedy, Reagan, and Bush and in each case led to a period of economic growth and increased tax revenues [7]. Other presidents, such as Lyndon Johnson, Richard Nixon, Jimmy Carter, and our own Barack Obama found that high levels of taxes and regulation led to economic stagnation, high unemployment, and rising inflation.
We can learn from the economic successes and mistakes of the past. President Roosevelt’s New Deal programs, while well intentioned, were costly and ultimately not only ineffective, but counterproductive. The New Deal programs caused fifteen years of economic stagnation. The US economy did not fully recover from the Great Depression until after WWII when tax rates were cut and freedom returned to the markets. This success was replicated (and foreshadowed) many times in US history by spending and tax cuts in the face of economic problems. If the federal government continues to follow the example of FDR, we can expect a long period of economic stagnation until a future administration is willing to embrace free market concepts.
Notes:
1. http://www.econreview.com/events/banks1929b.htm
2. http://www.fff.org/freedom/fd0609d.asp
3. http://www.answers.com/topic/schechter-poultry-corporation-v-united-states
4. http://www.usnews.com/money/blogs/the-best-life/2009/05/12/social-security-medicare-busts-move-closer
5. http://www.cnsnews.com/public/content/article.aspx?RsrcID=41784
6. http://online.wsj.com/article/SB10001424052702304024604575173632046893848.html
7. http://www.heritage.org/Research/Reports/2001/05/Lowering-Marginal-Tax-Rates
Powell, Jim, FDR’s Folly. Crown Forum, New York, 2003.
Manassas VA
April 24, 2010
Friday, April 2, 2010
Does Obamacare really require implanted microchips?
A rumor has been floating around the internet that one of the provisions of Obamacare that we will find out about now that the bill has been passed, as Nancy Pelosi hinted, is that it will require Americans to have a microchip implanted in their bodies that will contain their medical information and be listed in a Medical Devices Registry.
The claims that I have seen center around two different sources. The first is an FDA publication titled “Class II Controls Guidance Document: Implantable Radiofrequency Transponder System for Patient Identification and Health Information.” This document can be viewed online at: http://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/ucm072191.pdf.
The document is dated 2004 and says in the “background” section that it is intended to help manufacturers “comply with the requirement for class II special controls.” It goes on to say that this will enable them to “market their device without being subject to the premarket notification requirements….” In other words, this is not a secret government plan; it is a document that gives guidance to anyone who wants to manufacture a microchip that can be implanted in humans. (The definition of a class II medical device can be found here: http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpcd/315.cfm.
This technology has been used in animals for some time. We have had several dogs with chips implanted with information to help contact us if they were ever lost. At some point, a company might want to offer a similar device for humans. Some people might find it beneficial to have their medical records encoded on a chip that they always have with them. It would be probably be similar to an internal medic alert bracelet.
Some of the claims on the internet also reference a medical device registry found in HR 3200, “America’s Affordable Health Choices Act of 2009.” This reference is moot because the bill never became law. The bill that was recently passed by Congress over the objections of the majority the country was HR 3590, “the Patient Protection and Affordable Care Act.” A search of the text of the actual law (http://www.opencongress.org/senate_health_care_bill) turns up no language similar to that of HR 3200. For example, the word “implant” is not found in the bill.
Additionally, of all the references that I have seen claiming an implantable chip mandate in Obamacare, none point to language in the actual law that mandate. The medical device registry referenced in the failed HR 3200 simply created a registry of all devices “used in or on a patient.” In other words, this registry would include all medical devices (e.g. pacemakers, dialysis machines, blood pressure monitors, and maybe even bedpans). What it does not call for is the mandatory implanting of chips in anyone, whether a patient in the now defunct “public option” or not.
To sum up, in a bill that never became law, there was language calling for a medical devices registry that would have included, among other items, implantable microchips. These implantable microchips had received FDA approval in 2004. However, there is no missing link between registering these devices and requiring them.
Obamacare contains plenty of things that will be bad for patients, doctors, and the economy in general. It is not necessary to create things that aren’t there. Reading things into the legislation that aren’t there (or into bills that did not pass) can only undermine the credibility of conservatives and opponents to Obamacare.
Additionally, the passage of the Bible that many people believe refers to implanted microchips (Revelation 13:16-17) makes no mention of health records. These chips, if that is what is being described, would be linked to financial records and bank accounts.
If you hear something that sounds too strange to be true, check it out. Snopes.com, politifact.com, and factcheck.org are good websites to check out rumors (although factcheck.org does have a Democratic bias). Additionally, there are news sites that aren’t in the tank for Obama and the Democrats. If such legislation was real, you would probably have read about it on Foxnews.com or in the Wall Street Journal (wsj.com). If you only see a story in blogs, which refer you to other blogs or Youtube as sources, that should raise a red flag.
We live in a strange world and strange things have happened a lot recently. Pirate attacks are front page news. The government is taking control of industry after industry. The Democrats won an election based on promises of bipartisanship and tax cuts. Health care reform that actually increases costs and decreases choice is passed in spite of popular opinion. In this world, hoaxes can mix easily with real news. The bottom line is that if you cannot verify information from a reliable source, don’t trust it.
NOTE: I have not read the entire law. I have better things to do that read 2,000 pages of legislation. I am not a member of congress, after all! If anyone can provide a source within HR3590, “the Patient Protection and Affordable Care Act,” or some other verifiable document that actually shows a government policy of implanting of microchips in people, send it me. I would love to see it.
The claims that I have seen center around two different sources. The first is an FDA publication titled “Class II Controls Guidance Document: Implantable Radiofrequency Transponder System for Patient Identification and Health Information.” This document can be viewed online at: http://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/ucm072191.pdf.
The document is dated 2004 and says in the “background” section that it is intended to help manufacturers “comply with the requirement for class II special controls.” It goes on to say that this will enable them to “market their device without being subject to the premarket notification requirements….” In other words, this is not a secret government plan; it is a document that gives guidance to anyone who wants to manufacture a microchip that can be implanted in humans. (The definition of a class II medical device can be found here: http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpcd/315.cfm.
This technology has been used in animals for some time. We have had several dogs with chips implanted with information to help contact us if they were ever lost. At some point, a company might want to offer a similar device for humans. Some people might find it beneficial to have their medical records encoded on a chip that they always have with them. It would be probably be similar to an internal medic alert bracelet.
Some of the claims on the internet also reference a medical device registry found in HR 3200, “America’s Affordable Health Choices Act of 2009.” This reference is moot because the bill never became law. The bill that was recently passed by Congress over the objections of the majority the country was HR 3590, “the Patient Protection and Affordable Care Act.” A search of the text of the actual law (http://www.opencongress.org/senate_health_care_bill) turns up no language similar to that of HR 3200. For example, the word “implant” is not found in the bill.
Additionally, of all the references that I have seen claiming an implantable chip mandate in Obamacare, none point to language in the actual law that mandate. The medical device registry referenced in the failed HR 3200 simply created a registry of all devices “used in or on a patient.” In other words, this registry would include all medical devices (e.g. pacemakers, dialysis machines, blood pressure monitors, and maybe even bedpans). What it does not call for is the mandatory implanting of chips in anyone, whether a patient in the now defunct “public option” or not.
To sum up, in a bill that never became law, there was language calling for a medical devices registry that would have included, among other items, implantable microchips. These implantable microchips had received FDA approval in 2004. However, there is no missing link between registering these devices and requiring them.
Obamacare contains plenty of things that will be bad for patients, doctors, and the economy in general. It is not necessary to create things that aren’t there. Reading things into the legislation that aren’t there (or into bills that did not pass) can only undermine the credibility of conservatives and opponents to Obamacare.
Additionally, the passage of the Bible that many people believe refers to implanted microchips (Revelation 13:16-17) makes no mention of health records. These chips, if that is what is being described, would be linked to financial records and bank accounts.
If you hear something that sounds too strange to be true, check it out. Snopes.com, politifact.com, and factcheck.org are good websites to check out rumors (although factcheck.org does have a Democratic bias). Additionally, there are news sites that aren’t in the tank for Obama and the Democrats. If such legislation was real, you would probably have read about it on Foxnews.com or in the Wall Street Journal (wsj.com). If you only see a story in blogs, which refer you to other blogs or Youtube as sources, that should raise a red flag.
We live in a strange world and strange things have happened a lot recently. Pirate attacks are front page news. The government is taking control of industry after industry. The Democrats won an election based on promises of bipartisanship and tax cuts. Health care reform that actually increases costs and decreases choice is passed in spite of popular opinion. In this world, hoaxes can mix easily with real news. The bottom line is that if you cannot verify information from a reliable source, don’t trust it.
NOTE: I have not read the entire law. I have better things to do that read 2,000 pages of legislation. I am not a member of congress, after all! If anyone can provide a source within HR3590, “the Patient Protection and Affordable Care Act,” or some other verifiable document that actually shows a government policy of implanting of microchips in people, send it me. I would love to see it.
Thursday, April 1, 2010
Israel's fall and redemption
When I was a child of the ‘70s, I saw Star Wars for the first time in a theater when it was a new release. At that point, it was just Star Wars, not Star Wars IV: A New Hope. At the time, it seemed to be the exciting story of Luke Skywalker and his friends in their fight against the evil Empire. It was only years later, as the newer prequels were released, that I realized that Star Wars was not the story of Luke. It was actually the story of his father, Anakin Skywalker, and his fall into the dark side and ultimate redemption.
The Bible can be viewed in much the same way. On a small scale, it can be viewed as a collection of stories about people in ancient history, along with poetry and prophecy about the future. However, when viewed on a larger scale, as a single work, we can see that it is the story of the nation of Israel, its fall into sin and rebellion, and its ultimate redemption in times yet to come.
The Bible begins in the beginning. Most of us are familiar with the stories of creation, of Adam and Eve, and Great Flood of Noah, but also important are the genealogies that lead to the sons of Noah, Shem, Ham, and Japheth. Shem was the forefather of Abram (Genesis 11:10-27). Abram, in turn, fathered Ishmael (Genesis 16:15) and Isaac (Genesis 21:3). Ishmael founded the Arab race [1], while Isaac fathered Jacob. Jacob tricked his father Isaac into giving him the blessing that rightly belonged to his older brother Esau (Genesis 27:22-29). His name was later changed to Israel (Genesis 32:28) and his sons fathered the twelve tribes of Israel.
Genesis also contains God’s first promises to Abram, who is renamed Abraham. Repeatedly, God promises Abraham that he will be the father of nations with offspring as numerous as grains of dust (Genesis 12:1-3, 13:14-17, 15:7-21, 17:1-14). Abraham’s offspring were also promised possession of the land of Canaan, which eventually became the nation of Israel. God also says that he will bless those who bless Abraham’s descendents and curse those who curse them. These descendents were through the family line of Isaac and Jacob and became known as Israelites, Hebrews and Jews.
A covenant was also extended to Ishmael (Genesis 16:11-13, 17:20, 21:13). His descendents, the Arabs, would also become a great nation, but they would live in hostility with their half-brothers, the Jews.
God’s covenant to the Jews was repeated to Moses after the Israelites left Egypt (Exodus 19:3-6, 24:3). God’s stated intention was for Israel to become a nation of priests that would share God’s word with the world. In Leviticus 24, the Jews were promised a multitude of blessings if they obeyed God’s commandments, but they were also warned that they would be punished if they disobeyed. God’s warning eerily foreshadows the fall of Jerusalem, the exile of the Jews from their Promised Land, and centuries of massacres, pogroms, and racial hatred that continues to this day (Lev. 26:27-39). Nevertheless, God promises that He will never reject them or forsake His covenant with them (Lev. 26:44-45).
The Bible goes on to describe how, with God’s help, the Israelites conquered the tribes of Canaan. Under King David, the nation of Israel became unified and strong. David’s son, Solomon, was chosen to build a temple to the Lord, to replace the tabernacle tent that had been used thus far (2 Chronicles 28:2-11). The site of the temple was the site of an altar built by David where an angel afflicting Israel with a plague had been stopped the Lord (2 Samuel 24:15-18). There is also speculation that this is the same site where Abraham was told to sacrifice Isaac (Genesis 21:1-15) and where Jacob dreamed of a ladder to Heaven (Genesis 28:10-22), but this is by no means certain.
The temple in Jerusalem was the center of the Jewish religion until it was destroyed, not once, but twice. The original temple was destroyed by the Babylonians in 586 BC [2]. Seventy years later, Ezra returned from exile in Babylon and led the Jews in building a second temple. This temple, often referred to as Herod’s Temple, was destroyed by the Romans in AD 70 [3].
The destruction of both temples, as well as Jerusalem itself, was foretold in Old Testament prophecies in accordance with God’s covenant with Abraham. Much of the prophecy of the Bible consists of warnings to the people of ancient Israel and Judah that if they persisted in idol worship they would face divine judgment. Micah warned against corrupt officials who believed that they were untouchable because they were under God’s protection and said that “Jerusalem would become a heap of rubble, the temple hill a mound overgrown with thickets” (Micah 3:11-12). The prophet Jeremiah specifically named the king of Babylon as the one who would destroy Jerusalem and Solomon’s temple because of the evil that the people of Israel and Judah had done (Jeremiah 32:30-41). Nevertheless, Jeremiah also promised that God would restore the Jewish people back to their land and “never stop doing good to them” (vv. 37-40).
The second temple was destroyed after Israel’s rejection of Jesus. Jesus Himself predicted the destruction of Herod’s Temple (Mark 13:1-2). God permitted the destruction of Herod’s Temple because after the time of Jesus it was no longer needed. The destruction of Herod’s Temple and Jerusalem was also foretold by the Old Testament prophet Daniel (Daniel 9:26) hundreds of years before it happened.
The function of the temple was to serve as a center for sacrificing animals to atone for sins. The Levites served as temple priests who performed the sacrifices and interceded for the people. With the sacrifice of His life, Jesus assumed the role of both priest and sacrifice (Hebrews 9:6-28). After Jesus conquered death, there was no longer any need to atone for sin with animal sacrifices.
Many of the first converts to Christianity were Jews (Acts 2). In time, however, most retained the traditional form of Judaism for a variety of reasons. There was likely intense pressure from Jewish leaders who knew that Jesus had been resurrected, but who nevertheless attempted to cover up the fact to preserve their own power (Matthew 28:11-15). In fact, Paul, who later spread the Gospel throughout the Roman Empire, began as a Jewish official whose job was to persecute those who believed in Jesus (Acts 9:1-2). A good portion of the blame also probably belongs to gentile Christians who pressured Jews to reject their culture as well.
The Bible makes clear, however, that God never entirely rejected the Jews. In Romans 9-11 Paul discusses the question of whether God has rejected Jews because they rejected Him and His Son. Paul’s conclusion is that when Israel failed to uphold the covenant, God extended salvation to the gentiles in order to make Israel jealous (Romans 11:11). Paul goes on to state that when the full number of gentiles has been saved, all of Israel will be saved (Romans 11:25-27).
The Old Testament prophets also agreed that Israel would one day be restored. Jeremiah said that the Jews would be “brought up out of the land of the north and all the countries” where they had been scattered (Jeremiah 16:14-16). Ezekiel also foretold the return of the Jews to their homeland (Ezekiel 20:39-44, 37:11-14). Zechariah wrote that Israel would one day accept the Messiah as God pours out His grace on them (Zechariah 12:8-10). John also wrote in Revelation about a remnant of who would worship Christ (Rev. 7:1-8).
Part of these prophecies has already come true. After WWII, Jews from around the world returned to what was then called Palestine. The United Nations voted to create separate Arab and Jewish states in Palestine in 1948. The Jewish state, called Israel, was immediately set upon by its Arab neighbors. Israel’s very survival over the next six decades is almost miraculous in itself. However, it has not only survived, it has thrived. Its territory has been enlarged and it has become prosperous, even without possessing oil.
But the story of Israel is not yet over. There are more Bible prophecies concerning Israel that have not yet been fulfilled. One of these is Ezekiel’s vision of a third temple (Ezekiel 40-43). This temple has never been built and cannot be today because a Muslim mosque occupies the ancient Temple Mount. The Dome of the Rock mosque was built around AD 638 and is one of Islam’s sacred sites [4], even though Mohammed only went there in a dream [5]. The Dome of the Rock is currently under Israeli government protection, although there is a group of religious Jews, the Temple Mount Faithful, who are preparing for the day when a third temple can be built. It is possible that the Dome of the Rock may be destroyed in the war described in Ezekiel 38-39.
There are numerous references in prophecy to a final climactic war in which the whole world is aligned against Israel. Zechariah wrote that Jerusalem would send surrounding nations “reeling” and that they would “injure themselves” trying to move it (Zechariah 12:2-3). Zechariah says that “all the nations” will fight against Israel, and then the Lord Himself will return to defend Israel (Zechariah 14:1-4). This may be the same battle described in the book of Revelation where the army of the Antichrist gathers at Armageddon and is destroyed (Rev. 16:16, 19:11-21). The Bible also warns us that the nations will be judged based on their treatment of Israel and the Jews (Joel 3:1-2).
The story of Israel is one of a fall from grace and ultimate redemption. But this isn’t only the story of an ancient nation and its people. The story of Israel is also an allegory for our own lives. Like the nation of Israel, we all cannot live up to God’s holy standard (Romans 3:23). We all face punishment for our sins and shortcomings (Romans 6:23). As God has supernatural patience and love for the people of Israel, He also loves and offers forgiveness for the rest of us (Romans 10:9-13). That is the real story of Israel and the Bible.
Happy Easter!
Sources:
1. http://www.gotquestions.org/Jews-Arabs.html
2. http://www.jewishvirtuallibrary.org/jsource/Judaism/The_Temple.html
3. http://www.eyewitnesstohistory.com/jewishtemple.htm
4. http://www.sacredsites.com/middle_east/israel/jerusalem.html
5. http://www.muslimhope.com/NightJourney.htm
The Bible can be viewed in much the same way. On a small scale, it can be viewed as a collection of stories about people in ancient history, along with poetry and prophecy about the future. However, when viewed on a larger scale, as a single work, we can see that it is the story of the nation of Israel, its fall into sin and rebellion, and its ultimate redemption in times yet to come.
The Bible begins in the beginning. Most of us are familiar with the stories of creation, of Adam and Eve, and Great Flood of Noah, but also important are the genealogies that lead to the sons of Noah, Shem, Ham, and Japheth. Shem was the forefather of Abram (Genesis 11:10-27). Abram, in turn, fathered Ishmael (Genesis 16:15) and Isaac (Genesis 21:3). Ishmael founded the Arab race [1], while Isaac fathered Jacob. Jacob tricked his father Isaac into giving him the blessing that rightly belonged to his older brother Esau (Genesis 27:22-29). His name was later changed to Israel (Genesis 32:28) and his sons fathered the twelve tribes of Israel.
Genesis also contains God’s first promises to Abram, who is renamed Abraham. Repeatedly, God promises Abraham that he will be the father of nations with offspring as numerous as grains of dust (Genesis 12:1-3, 13:14-17, 15:7-21, 17:1-14). Abraham’s offspring were also promised possession of the land of Canaan, which eventually became the nation of Israel. God also says that he will bless those who bless Abraham’s descendents and curse those who curse them. These descendents were through the family line of Isaac and Jacob and became known as Israelites, Hebrews and Jews.
A covenant was also extended to Ishmael (Genesis 16:11-13, 17:20, 21:13). His descendents, the Arabs, would also become a great nation, but they would live in hostility with their half-brothers, the Jews.
God’s covenant to the Jews was repeated to Moses after the Israelites left Egypt (Exodus 19:3-6, 24:3). God’s stated intention was for Israel to become a nation of priests that would share God’s word with the world. In Leviticus 24, the Jews were promised a multitude of blessings if they obeyed God’s commandments, but they were also warned that they would be punished if they disobeyed. God’s warning eerily foreshadows the fall of Jerusalem, the exile of the Jews from their Promised Land, and centuries of massacres, pogroms, and racial hatred that continues to this day (Lev. 26:27-39). Nevertheless, God promises that He will never reject them or forsake His covenant with them (Lev. 26:44-45).
The Bible goes on to describe how, with God’s help, the Israelites conquered the tribes of Canaan. Under King David, the nation of Israel became unified and strong. David’s son, Solomon, was chosen to build a temple to the Lord, to replace the tabernacle tent that had been used thus far (2 Chronicles 28:2-11). The site of the temple was the site of an altar built by David where an angel afflicting Israel with a plague had been stopped the Lord (2 Samuel 24:15-18). There is also speculation that this is the same site where Abraham was told to sacrifice Isaac (Genesis 21:1-15) and where Jacob dreamed of a ladder to Heaven (Genesis 28:10-22), but this is by no means certain.
The temple in Jerusalem was the center of the Jewish religion until it was destroyed, not once, but twice. The original temple was destroyed by the Babylonians in 586 BC [2]. Seventy years later, Ezra returned from exile in Babylon and led the Jews in building a second temple. This temple, often referred to as Herod’s Temple, was destroyed by the Romans in AD 70 [3].
The destruction of both temples, as well as Jerusalem itself, was foretold in Old Testament prophecies in accordance with God’s covenant with Abraham. Much of the prophecy of the Bible consists of warnings to the people of ancient Israel and Judah that if they persisted in idol worship they would face divine judgment. Micah warned against corrupt officials who believed that they were untouchable because they were under God’s protection and said that “Jerusalem would become a heap of rubble, the temple hill a mound overgrown with thickets” (Micah 3:11-12). The prophet Jeremiah specifically named the king of Babylon as the one who would destroy Jerusalem and Solomon’s temple because of the evil that the people of Israel and Judah had done (Jeremiah 32:30-41). Nevertheless, Jeremiah also promised that God would restore the Jewish people back to their land and “never stop doing good to them” (vv. 37-40).
The second temple was destroyed after Israel’s rejection of Jesus. Jesus Himself predicted the destruction of Herod’s Temple (Mark 13:1-2). God permitted the destruction of Herod’s Temple because after the time of Jesus it was no longer needed. The destruction of Herod’s Temple and Jerusalem was also foretold by the Old Testament prophet Daniel (Daniel 9:26) hundreds of years before it happened.
The function of the temple was to serve as a center for sacrificing animals to atone for sins. The Levites served as temple priests who performed the sacrifices and interceded for the people. With the sacrifice of His life, Jesus assumed the role of both priest and sacrifice (Hebrews 9:6-28). After Jesus conquered death, there was no longer any need to atone for sin with animal sacrifices.
Many of the first converts to Christianity were Jews (Acts 2). In time, however, most retained the traditional form of Judaism for a variety of reasons. There was likely intense pressure from Jewish leaders who knew that Jesus had been resurrected, but who nevertheless attempted to cover up the fact to preserve their own power (Matthew 28:11-15). In fact, Paul, who later spread the Gospel throughout the Roman Empire, began as a Jewish official whose job was to persecute those who believed in Jesus (Acts 9:1-2). A good portion of the blame also probably belongs to gentile Christians who pressured Jews to reject their culture as well.
The Bible makes clear, however, that God never entirely rejected the Jews. In Romans 9-11 Paul discusses the question of whether God has rejected Jews because they rejected Him and His Son. Paul’s conclusion is that when Israel failed to uphold the covenant, God extended salvation to the gentiles in order to make Israel jealous (Romans 11:11). Paul goes on to state that when the full number of gentiles has been saved, all of Israel will be saved (Romans 11:25-27).
The Old Testament prophets also agreed that Israel would one day be restored. Jeremiah said that the Jews would be “brought up out of the land of the north and all the countries” where they had been scattered (Jeremiah 16:14-16). Ezekiel also foretold the return of the Jews to their homeland (Ezekiel 20:39-44, 37:11-14). Zechariah wrote that Israel would one day accept the Messiah as God pours out His grace on them (Zechariah 12:8-10). John also wrote in Revelation about a remnant of who would worship Christ (Rev. 7:1-8).
Part of these prophecies has already come true. After WWII, Jews from around the world returned to what was then called Palestine. The United Nations voted to create separate Arab and Jewish states in Palestine in 1948. The Jewish state, called Israel, was immediately set upon by its Arab neighbors. Israel’s very survival over the next six decades is almost miraculous in itself. However, it has not only survived, it has thrived. Its territory has been enlarged and it has become prosperous, even without possessing oil.
But the story of Israel is not yet over. There are more Bible prophecies concerning Israel that have not yet been fulfilled. One of these is Ezekiel’s vision of a third temple (Ezekiel 40-43). This temple has never been built and cannot be today because a Muslim mosque occupies the ancient Temple Mount. The Dome of the Rock mosque was built around AD 638 and is one of Islam’s sacred sites [4], even though Mohammed only went there in a dream [5]. The Dome of the Rock is currently under Israeli government protection, although there is a group of religious Jews, the Temple Mount Faithful, who are preparing for the day when a third temple can be built. It is possible that the Dome of the Rock may be destroyed in the war described in Ezekiel 38-39.
There are numerous references in prophecy to a final climactic war in which the whole world is aligned against Israel. Zechariah wrote that Jerusalem would send surrounding nations “reeling” and that they would “injure themselves” trying to move it (Zechariah 12:2-3). Zechariah says that “all the nations” will fight against Israel, and then the Lord Himself will return to defend Israel (Zechariah 14:1-4). This may be the same battle described in the book of Revelation where the army of the Antichrist gathers at Armageddon and is destroyed (Rev. 16:16, 19:11-21). The Bible also warns us that the nations will be judged based on their treatment of Israel and the Jews (Joel 3:1-2).
The story of Israel is one of a fall from grace and ultimate redemption. But this isn’t only the story of an ancient nation and its people. The story of Israel is also an allegory for our own lives. Like the nation of Israel, we all cannot live up to God’s holy standard (Romans 3:23). We all face punishment for our sins and shortcomings (Romans 6:23). As God has supernatural patience and love for the people of Israel, He also loves and offers forgiveness for the rest of us (Romans 10:9-13). That is the real story of Israel and the Bible.
Happy Easter!
Sources:
1. http://www.gotquestions.org/Jews-Arabs.html
2. http://www.jewishvirtuallibrary.org/jsource/Judaism/The_Temple.html
3. http://www.eyewitnesstohistory.com/jewishtemple.htm
4. http://www.sacredsites.com/middle_east/israel/jerusalem.html
5. http://www.muslimhope.com/NightJourney.htm
Saturday, March 27, 2010
Easter egg economics: a health care parable
This weekend my town, Villa Rica, Georgia, had a public Easter egg hunt at the local recreation park. As I stood among the multitudes with my family, it occurred to me that this was similar to what we will soon be experiencing in our health care system.
To begin with, the Easter egg was free of charge on the surface. Of course, it wasn’t really free, but there was no charge at the gate and there was no fee for the games and activities. The cost was paid by local tax dollars. As the law of supply and demand dictates, since the price was low, demand was high. There were hundreds of kids lined up to hunt the eggs. So many in fact, that when the hunt actually started, it was over within minutes. Each child was lucky to get a handful of eggs.
There were also bouncy rides, face painting, balloon animals, and other activities. Because these were also free, there were long lines. The lines were also partially due to the fact that there were few volunteers who were running the activities. These people were dedicated and you could tell that most of them enjoyed making kids happy, but as the day wore on and the lines became never-ending, some of them understandably became a little frazzled.
My son stood in line for quite a while to get a balloon T. Rex. The girl who was making the balloon animals was very patient and talented (I had never seen a balloon tyrannosaur before!). Nevertheless, I noticed that the first balloon animals were very intricate and decorated with magic marker fur, eyes, and teeth. By the time that my son got his T. Rex, the product was a little more hurried and little less detailed. She was very nice, but I could tell that she wanted us to hurry so that she could get to the next balloon and, hopefully, to the end of the line before dark. Similar circumstances were found at the face painting booth and other activities.
The healthcare system will be under similar stress as the government begins to subsidize health insurance. The apparent price of health insurance will be zero to many people. This will fuel a sharp increase in demand. More people will be competing for a finite amount of resources, in this case, appointments with doctors. There simply won’t be enough doctors to go around and some people will likely have to wait weeks or months for care. When you do get an appointment, the doctor will likely hurry you though to get to the next patient and quality of care will suffer.
As people see that medicine is no longer the profitable and rewarding career that it used to be, fewer and fewer people will make the long and difficult commitment to finish medical school. There will ultimately be fewer doctors (supply) for an increasing number of patients (demand). When this happens, economic law dictates that the price should rise to reduce demand. (In fact, Investor’s Business Daily reported that 45% of doctors would consider quitting if Obamacare passed [1]. This would reduce supply even further and cause more of an imbalance with demand.)
The government is unlikely to let prices rise sharply. Over the past few years, Medicare’s reimbursement rate for doctors has been below market rates. In essence, if a doctor visit costs $100, Medicare might only authorize reimbursement of $60. The remaining $40 has to be passed along to patients with private insurance, driving up insurance rates. As a result, many doctors are not accepting Medicare patients [2].
The only alternatives to letting prices rise is to either increase supply (more doctors) or keeping prices artificially low (price controls). Since it takes a lot time to train a doctor, the supply of doctors is unlikely to increase in the short term, no matter what incentives the government provides. To cut corners on medical training would decrease the quality of care.
If the government chooses price controls, the effect will be further shortages. Demand will not be reduced, but the limited supply will doled on either a first-come-first-served basis or some sort of rationing scheme. In either case, not all of the people trying to get medical care will get it.
An obvious way to resolve these problems would be to charge more. Even an admission price of a dollar to the Easter egg hunt would cause some people to forgo the egg hunt for other activities. Only the people who really wanted to hunt Easter eggs would come. Similarly, having people pay more of the cost of their own health care would encourage people not to go to the doctor if they don’t really need to go.
Some of the proceeds from the admission fees could be used to pay the volunteers who paint faces and make balloon animals. This would encourage more people to learn these skills. More volunteers would mean fewer and shorter lines. If the volunteers were allowed to charge a dollar per face or balloon, they would make even more money and people who didn’t really want a painted face or balloon T. Rex would be provided with an incentive to stand aside in favor of those who did.
Finally, imagine that the community rose up and 60% of Villa Rica and Carroll County told their elected officials in a loud, strong voice that we do not want our local government to pay for further Easter egg hunts. Some people might be philosophically opposed to publically funded Easter egg hunts in general. Others might simply feel that in the current economy, public dollars should be saved to spend on projects that are absolutely necessary.
I hope that if a strong majority spoke in a clear voice, the city and county would reconsider spending money on the Easter egg hunt. In contrast, when almost 60% of Americans stood up to tell congress to junk Obamacare and start over [3], the government ignored them and proceeded to ram an unpopular plan down the throat of the country.
President Obama ignored signs of public discontent in numerous elections since he took office. Strong Republican victories in New Jersey and Virginia, plus Scott Brown’s senate victory in Massachusetts (which already has government-run health care), should have encouraged President Obama to seek a bipartisan solution. Instead he did the opposite. Seeing the writing on the wall that he would likely lose his Democratic congressional majorities in November, he pushed through his plan against the will of the people in hopes that the Republicans would not become strong enough to repeal it.
Election Day, judgment day for the Democrats, is less than eight months away. Currently signs are pointing to devastating Democratic losses at the hands of an angry electorate. Our democracy depends on a government that is subject to the will of the people. When a party in power so blatantly disregards the will of the people, they do not deserve to hold power. They deserve to be discarded like a rotten Easter egg.
Sources:
1. http://www.investors.com/NewsAndAnalysis/Article.aspx?id=506199
2. http://www.nytimes.com/2009/04/02/business/retirementspecial/02health.html
3. http://www.rasmussenreports.com/public_content/politics/current_events/healthcare/september_2009/health_care_reform
To begin with, the Easter egg was free of charge on the surface. Of course, it wasn’t really free, but there was no charge at the gate and there was no fee for the games and activities. The cost was paid by local tax dollars. As the law of supply and demand dictates, since the price was low, demand was high. There were hundreds of kids lined up to hunt the eggs. So many in fact, that when the hunt actually started, it was over within minutes. Each child was lucky to get a handful of eggs.
There were also bouncy rides, face painting, balloon animals, and other activities. Because these were also free, there were long lines. The lines were also partially due to the fact that there were few volunteers who were running the activities. These people were dedicated and you could tell that most of them enjoyed making kids happy, but as the day wore on and the lines became never-ending, some of them understandably became a little frazzled.
My son stood in line for quite a while to get a balloon T. Rex. The girl who was making the balloon animals was very patient and talented (I had never seen a balloon tyrannosaur before!). Nevertheless, I noticed that the first balloon animals were very intricate and decorated with magic marker fur, eyes, and teeth. By the time that my son got his T. Rex, the product was a little more hurried and little less detailed. She was very nice, but I could tell that she wanted us to hurry so that she could get to the next balloon and, hopefully, to the end of the line before dark. Similar circumstances were found at the face painting booth and other activities.
The healthcare system will be under similar stress as the government begins to subsidize health insurance. The apparent price of health insurance will be zero to many people. This will fuel a sharp increase in demand. More people will be competing for a finite amount of resources, in this case, appointments with doctors. There simply won’t be enough doctors to go around and some people will likely have to wait weeks or months for care. When you do get an appointment, the doctor will likely hurry you though to get to the next patient and quality of care will suffer.
As people see that medicine is no longer the profitable and rewarding career that it used to be, fewer and fewer people will make the long and difficult commitment to finish medical school. There will ultimately be fewer doctors (supply) for an increasing number of patients (demand). When this happens, economic law dictates that the price should rise to reduce demand. (In fact, Investor’s Business Daily reported that 45% of doctors would consider quitting if Obamacare passed [1]. This would reduce supply even further and cause more of an imbalance with demand.)
The government is unlikely to let prices rise sharply. Over the past few years, Medicare’s reimbursement rate for doctors has been below market rates. In essence, if a doctor visit costs $100, Medicare might only authorize reimbursement of $60. The remaining $40 has to be passed along to patients with private insurance, driving up insurance rates. As a result, many doctors are not accepting Medicare patients [2].
The only alternatives to letting prices rise is to either increase supply (more doctors) or keeping prices artificially low (price controls). Since it takes a lot time to train a doctor, the supply of doctors is unlikely to increase in the short term, no matter what incentives the government provides. To cut corners on medical training would decrease the quality of care.
If the government chooses price controls, the effect will be further shortages. Demand will not be reduced, but the limited supply will doled on either a first-come-first-served basis or some sort of rationing scheme. In either case, not all of the people trying to get medical care will get it.
An obvious way to resolve these problems would be to charge more. Even an admission price of a dollar to the Easter egg hunt would cause some people to forgo the egg hunt for other activities. Only the people who really wanted to hunt Easter eggs would come. Similarly, having people pay more of the cost of their own health care would encourage people not to go to the doctor if they don’t really need to go.
Some of the proceeds from the admission fees could be used to pay the volunteers who paint faces and make balloon animals. This would encourage more people to learn these skills. More volunteers would mean fewer and shorter lines. If the volunteers were allowed to charge a dollar per face or balloon, they would make even more money and people who didn’t really want a painted face or balloon T. Rex would be provided with an incentive to stand aside in favor of those who did.
Finally, imagine that the community rose up and 60% of Villa Rica and Carroll County told their elected officials in a loud, strong voice that we do not want our local government to pay for further Easter egg hunts. Some people might be philosophically opposed to publically funded Easter egg hunts in general. Others might simply feel that in the current economy, public dollars should be saved to spend on projects that are absolutely necessary.
I hope that if a strong majority spoke in a clear voice, the city and county would reconsider spending money on the Easter egg hunt. In contrast, when almost 60% of Americans stood up to tell congress to junk Obamacare and start over [3], the government ignored them and proceeded to ram an unpopular plan down the throat of the country.
President Obama ignored signs of public discontent in numerous elections since he took office. Strong Republican victories in New Jersey and Virginia, plus Scott Brown’s senate victory in Massachusetts (which already has government-run health care), should have encouraged President Obama to seek a bipartisan solution. Instead he did the opposite. Seeing the writing on the wall that he would likely lose his Democratic congressional majorities in November, he pushed through his plan against the will of the people in hopes that the Republicans would not become strong enough to repeal it.
Election Day, judgment day for the Democrats, is less than eight months away. Currently signs are pointing to devastating Democratic losses at the hands of an angry electorate. Our democracy depends on a government that is subject to the will of the people. When a party in power so blatantly disregards the will of the people, they do not deserve to hold power. They deserve to be discarded like a rotten Easter egg.
Sources:
1. http://www.investors.com/NewsAndAnalysis/Article.aspx?id=506199
2. http://www.nytimes.com/2009/04/02/business/retirementspecial/02health.html
3. http://www.rasmussenreports.com/public_content/politics/current_events/healthcare/september_2009/health_care_reform
Monday, March 22, 2010
Thoughts on the passage of health care reform
Freedom is inversely proportional to the size of government. Last night, our government suddenly grew in size to control almost one-fifth of the national economy. We will surely notice the loss of freedom as soon as the “benefits” of this new law go into effect in 2013. First, we will see fewer choices in our health care options and higher taxes. Later, our children will see a large loss of economic freedom as taxes are raised even further to pay for this “free” health care and Big Government makes even more of our personal choices for us.
We can see what is likely to happen in the next few years by looking at government run health care that already exists in this country. In Massachusetts, RomneyCare has caused health insurance costs to increase at a higher rate than the rest of the country [1]. Increased demand for health care with no corresponding increase in supply is causing shortages in the form of long wait times to see a doctor. Nationally, many doctors refuse to see Medicare patients because of the price controls and bureaucracy associated with the program [2]. In the future, many doctors will likely leave the profession rather than submit to restrictive regulations.
Insurance companies will be forced to cover patients with pre-existing conditions but without charging these sick people more. This means that rates will rise for everyone to pay for those who elect not to buy insurance until they are sick. Eventually many insurance companies will decide that the new rules are unprofitable and may withdraw from the marketplace entirely.
This will lead to an additional health care crisis. Depending on the party in power, further government “fixes” will be needed, which may consist of the longed-for “public option” – fully nationalized health care – of the Democrats.
Ayn Rand described this process her novel Atlas Shrugged. The government enacts regulation to fix perceived flaws in the free market. The government fix causes more problems, which require further government fixes since the marketplace is failing. Eventually, the government totally controls the market.
As both Speaker Pelosi [3] and President Obama [4] pointed out, none of us will know exactly what is in this monstrous law until it is in force. That alone should be sufficient reason to throw from congress each and every Democrat who voted for the bill, but there are plenty of other reasons as well.
The passage of the law directly contravened the will of the people. A recent poll [5] showed that 54% of Americans opposed the plan, while only 41% favored it. Moreover, only 26% strongly favored it, while 45% strongly opposed it. This is not democracy in action. Conversely, ramming the plan through will do more to erode the confidence of the people in government, especially when their worst fears are confirmed and things get worse.
This health care plan will also bust the budget in spite of claims that it will save money [8]. Analysts put the cost of Obama’s health care reform at over $1 trillion dollar, boosting the already record-breaking deficit to its highest point since WWII. Back then, we had a plan to reduce the deficit: win the war. Today, the deficits will keep rising until the government can either no longer, raise taxes or print more money. The true cost of health care reform will be measured in lost jobs, or jobs never created, as higher taxes and new regulations strangle the economic recovery.
Furthermore, the hyper-partisanship of Obama’s first year will likely become the norm. The health care battle is not over; in fact, it is just beginning. The next step, after a massive Democratic loss this November, will be to start the battle to either repeal or reform the reform. Obama is almost certain to veto any attempt to repeal his signature legislation. While Republican gains are not likely to be enough to override an Obama veto, they may win enough seats to at least make positive changes. Off the top of my head, I cannot think of any entitlement that has ever been repealed.
The battle will also move to the courts and the states over the next few years. There will certainly be lawsuits filed over the constitutionality of the government forcing people to buy insurance. I am not optimistic about this avenue since a large number of judges have questionable views about what the constitution actually says. After all, 4/9 of the justices on the Supreme Court don’t believe that “the right of the people to keep and bear arms shall not be infringed” actually means that the right of the people to keep and bear arms shall not be infringed.
At least thirty states have proposed or passed legislation that will allow their citizens to opt out of federal health insurance mandates [6]. Georgia’s senate passed a proposed opt-out constitutional amendment last week, and it should go to the house this week [7]. There is some question about the effectiveness of such measures since federal law typically trumps state laws. However, the tenth amendment to the constitution says “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” This issue will probably have to be settled by the courts as well. Even if the courts decide in favor of the states, opt-out laws will not be able to mitigate all of the damage of the federal regulations.
The first step on the road to recovery will be to remove as many Democrats who voted for the bill from office. With a few exceptions, Democrats have controlled congress since the days of FDR. The country now has a federal budget bloated with entitlements and restricted freedoms to show for it. To begin correcting this problem, we must throw the spenders out of congress, and then hold the Republicans who replace them accountable.
Sources:
1. http://online.wsj.com/article/SB10001424052748703625304575115691871093652.html?KEYWORDS=romneycare
2. http://www.bloomberg.com/apps/news?pid=20601087&sid=aHoYSI84VdL0
3. http://www.usnews.com/blogs/peter-roff/2010/03/09/pelosi-pass-health-reform-so-you-can-find-out-whats-in-it.html
4. http://patriotpost.us/edition/2010/03/19/digest/
5. http://www.rasmussenreports.com/public_content/politics/current_events/healthcare/september_2009/health_care_reform
6. http://www.ama-assn.org/amednews/2010/02/15/gvsb0215.htm
7. http://wsbradio.com/localnews/2010/03/bill-to-opt-out-of-health-care-1.html
8. http://www.csmonitor.com/Money/Donald-Marron/2010/0320/Hold-on.-Healthcare-reform-will-cost-more-than-1-trillion
We can see what is likely to happen in the next few years by looking at government run health care that already exists in this country. In Massachusetts, RomneyCare has caused health insurance costs to increase at a higher rate than the rest of the country [1]. Increased demand for health care with no corresponding increase in supply is causing shortages in the form of long wait times to see a doctor. Nationally, many doctors refuse to see Medicare patients because of the price controls and bureaucracy associated with the program [2]. In the future, many doctors will likely leave the profession rather than submit to restrictive regulations.
Insurance companies will be forced to cover patients with pre-existing conditions but without charging these sick people more. This means that rates will rise for everyone to pay for those who elect not to buy insurance until they are sick. Eventually many insurance companies will decide that the new rules are unprofitable and may withdraw from the marketplace entirely.
This will lead to an additional health care crisis. Depending on the party in power, further government “fixes” will be needed, which may consist of the longed-for “public option” – fully nationalized health care – of the Democrats.
Ayn Rand described this process her novel Atlas Shrugged. The government enacts regulation to fix perceived flaws in the free market. The government fix causes more problems, which require further government fixes since the marketplace is failing. Eventually, the government totally controls the market.
As both Speaker Pelosi [3] and President Obama [4] pointed out, none of us will know exactly what is in this monstrous law until it is in force. That alone should be sufficient reason to throw from congress each and every Democrat who voted for the bill, but there are plenty of other reasons as well.
The passage of the law directly contravened the will of the people. A recent poll [5] showed that 54% of Americans opposed the plan, while only 41% favored it. Moreover, only 26% strongly favored it, while 45% strongly opposed it. This is not democracy in action. Conversely, ramming the plan through will do more to erode the confidence of the people in government, especially when their worst fears are confirmed and things get worse.
This health care plan will also bust the budget in spite of claims that it will save money [8]. Analysts put the cost of Obama’s health care reform at over $1 trillion dollar, boosting the already record-breaking deficit to its highest point since WWII. Back then, we had a plan to reduce the deficit: win the war. Today, the deficits will keep rising until the government can either no longer, raise taxes or print more money. The true cost of health care reform will be measured in lost jobs, or jobs never created, as higher taxes and new regulations strangle the economic recovery.
Furthermore, the hyper-partisanship of Obama’s first year will likely become the norm. The health care battle is not over; in fact, it is just beginning. The next step, after a massive Democratic loss this November, will be to start the battle to either repeal or reform the reform. Obama is almost certain to veto any attempt to repeal his signature legislation. While Republican gains are not likely to be enough to override an Obama veto, they may win enough seats to at least make positive changes. Off the top of my head, I cannot think of any entitlement that has ever been repealed.
The battle will also move to the courts and the states over the next few years. There will certainly be lawsuits filed over the constitutionality of the government forcing people to buy insurance. I am not optimistic about this avenue since a large number of judges have questionable views about what the constitution actually says. After all, 4/9 of the justices on the Supreme Court don’t believe that “the right of the people to keep and bear arms shall not be infringed” actually means that the right of the people to keep and bear arms shall not be infringed.
At least thirty states have proposed or passed legislation that will allow their citizens to opt out of federal health insurance mandates [6]. Georgia’s senate passed a proposed opt-out constitutional amendment last week, and it should go to the house this week [7]. There is some question about the effectiveness of such measures since federal law typically trumps state laws. However, the tenth amendment to the constitution says “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” This issue will probably have to be settled by the courts as well. Even if the courts decide in favor of the states, opt-out laws will not be able to mitigate all of the damage of the federal regulations.
The first step on the road to recovery will be to remove as many Democrats who voted for the bill from office. With a few exceptions, Democrats have controlled congress since the days of FDR. The country now has a federal budget bloated with entitlements and restricted freedoms to show for it. To begin correcting this problem, we must throw the spenders out of congress, and then hold the Republicans who replace them accountable.
Sources:
1. http://online.wsj.com/article/SB10001424052748703625304575115691871093652.html?KEYWORDS=romneycare
2. http://www.bloomberg.com/apps/news?pid=20601087&sid=aHoYSI84VdL0
3. http://www.usnews.com/blogs/peter-roff/2010/03/09/pelosi-pass-health-reform-so-you-can-find-out-whats-in-it.html
4. http://patriotpost.us/edition/2010/03/19/digest/
5. http://www.rasmussenreports.com/public_content/politics/current_events/healthcare/september_2009/health_care_reform
6. http://www.ama-assn.org/amednews/2010/02/15/gvsb0215.htm
7. http://wsbradio.com/localnews/2010/03/bill-to-opt-out-of-health-care-1.html
8. http://www.csmonitor.com/Money/Donald-Marron/2010/0320/Hold-on.-Healthcare-reform-will-cost-more-than-1-trillion
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