How far you go in life depends on
you being tender with the young,
compassionate with the aged,
sympathetic with the striving and
tolerant of the weak and the strong.
Because someday in life you will have been all of these.
George Washington Carver
Pro-Liberty Thought of the Day
No, the quote is not from actress Salma but from Nobel laureate F.A. Hayek is advocating equality in opportunity (nondiscrimination among citizens under the rule of law) and equality in outcome (from distribution to ownership). Hayek is arguing that a rising tide lifts all boats, while "progressive economists" preach zero-sum economics.
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| Via LFC |
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| Via In Liberty We Trust on FB |
ObamaCare Roundup
No, I haven't yet written the third part of this week's rant, but the basic argument is in the recent second part: ObamaCare was a Trojan horse, bait and switch. It looked at roughly 15% of the uninsured--really, self-insured. They didn't tell people, for instance, that a number of large companies are self-insured; they may work through an insurance company, but it basically handles paperwork as a service. That is, the company sets aside funding for estimated worker expenses and basically reinsures against higher than expected expenses. A lot of uninsured are in transition between jobs or can't afford to purchase insurance; others are not freeloaders but feel they can handle their health care expenses out of pocket for less money than buying insurance. (During my work career, being in good health despite battling a weight problem, there have been years I never saw a doctor, despite having insurance.) True, they are taking on the risk of catastrophic health--say, cancer. Still, are we to assume that a disproportionate number of catastrophic health cases among the uninsured? The "progressives", trying to establish the need for a gold-plated government health insurance, have picked and chosen a few politically convenient studies, in one prominent case an Oregon study claiming better health outcomes for Medicaid patients vs. the uninsured. Let Roy of Forbes take it from here:
Piles of studies have shown that people on Medicaid have health outcomes that are no better, and often worse, than those with no insurance at all. But supporters of Obamacare were cheered in 2011 when a lone study, out of Oregon, purported to show that Medicaid was better than being uninsured. Yesterday, however, the authors of the Oregon study published their updated, two-year results, finding that Medicaid “generated no significant improvement in measured physical health outcomes.”Roy then goes into a wonkish discussion of research design problems with the Oregon study and suggests a practical alternative to Medicaid:
Let’s build a new health program for low-income Americans, one that pays primary care physicians $150 a month to see each patient, whether they are healthy or sick. That’s what so-called “concierge doctors” charge, and it would give Medicaid patients what they really need: first-class primary care physicians to manage their chronic cardiovascular and metabolic conditions. Then throw on top of that a $2,000-a-year catastrophic plan to protect the poor against financial ruin. The total annual cost of such a program would be $3,800 per person, 37 percent less than what Obamacare’s Medicaid expansion costs. Hell, put the entire country on that kind of plan, along with giving people the opportunity to use health savings accounts to cover the rest.Why this discussion of Medicaid? Because ObamaCare tried to expand Medicaid coverage to pick up the lower-income tier of uninsured; they have baited the hook for states by waiving or deeply discounting of the state's 50/50 share of the newly qualifying Medicaid enrollment for a trial period. (Any state thinking a chronic-deficit federal government will continue waived share costs is delusional.) Others are basically forced into exchanges, which require guaranteed issue (we cover people regardless of their health condition, socializing expensive health care expenses) and community rating (basically, disallowing application of statistically-relevant but politically incorrect rating factors like age and gender; the net effect is for younger, healthier to pay more, and older, picker to pay less of their estimated costs), not to mention in many, if not most states, ObamaCare requires expensive new benefit coverage (for example, post-menopausal couples forced to share reproductive expenses). The oxymoronic "Affordable Care Act" was justified by laughable smoke and mirrors accounting with deliberately misleading cost comparisons of administration costs, as if they are comparable (the private sector has to negotiate prices, qualify applicants and doctors, control for fraud, and operate within a budget, while the public sector does none of this). More importantly, the model was not emulating a state with more affordable coverage, like Utah, but Massachusetts where premiums are among the highest in the nation--for good reason (i.e., above-cited 1996 mandates and special-interest mandates).
Here are a few other news blurbs that caught my eye:
- the ObamaCare contraceptive coverage mandate ruled unconstitutional, violating the First Amendment
- the Obama Administration lied to the American people about not knowing (embarrassingly low) enrollment numbers:
According to the notes, which were released to the public by the House Committee on Oversight & Government Reform and taken from daily briefings at the Center for Consumer Information and Insurance Oversight, the federal office directly in charge of the exchanges, there were just six successful enrollments across the 36 federal exchanges on launch day.The second day was a little better. By the morning of October 3, officials reported that the number had reached triple digits on the second day of operation. “As of yesterday, there were 248 enrollments,” it says, with the enrollment figure in bold. Later that same day, White House Press Secretary Jay Carney told reporters asking for enrollment figures that “we do not have that data.”
- the Obama Administration, in particular, Barack Obama himself, lied to the American people that people would be allowed to keep their existing coverage:
President Obama repeatedly assured Americans that after the Affordable Care Act became law, people who liked their health insurance would be able to keep it. But millions of Americans are getting or are about to get cancellation letters for their health insurance under Obamacare, say experts, and the Obama administration has known that for at least three years.Four sources deeply involved in the Affordable Care Act tell NBC News that 50 to 75 percent of the 14 million consumers who buy their insurance individually can expect to receive a “cancellation” letter or the equivalent over the next year because their existing policies don’t meet the standards mandated by the new health care law. One expert predicts that number could reach as high as 80 percent. And all say that many of those forced to buy pricier new policies will experience “sticker shock.”
- doctors are balking at becoming ObamaCare providers:
A poll conducted by the New York State Medical Society finds that 44 percent of MDs said they are not participating in the nation’s new health-care plan. Another 33 percent say they’re still not sure whether to become ObamaCare providers. Three out of four doctors who are participating in the program said they “had to participate” because of existing contractual obligations with an insurer or medical provider, not because they wanted toHalloween Roundup
- From CAGW: The Social Security Administration is paying for zombies.
Trick: Payments to the Deceased - These zombies are still collecting a paycheck! In a June 2013 audit report, the Social Security Administration Office of the Inspector General revealed that the agency had paid “2,475 beneficiaries for months or even years after it received notifications they were deceased.”
- From LFC on FB. Children learn capitalism from candy exchange after Halloween, socialism from adults spreading some candy around:
John Hasnas once told me a that you can learn everything you need to know about free market economics from kids and candy.He told me that one year him and the other families in the neighborhood took the kids out trick-or-treating. Afterwards, they all ended up back at his house. The adults went into the kitchen to have some coffee while the kids stayed in the family room.Then right away the market opened. Kids were trading away the candy that they didnt want for the types that they preferred. Some of the trades involved 3 or more kids, others were just between two kids, but they traded like this for quite some time, until they had a candy collection that was much closer to their ideal than when they started.He then told me that just a few weeks later, he went to a birthday party for one of the kids in the neighborhood that was attended by many of the same children that were at his house on Halloween. This party featured a pinata filled up with candy and when it broke... well you can guess exactly what happened: kids got violent and engaged in eye gouging, hair pulling, shoving, etc. just to get some candy.He explained that these examples illustrate the benefits of private property and an economy based on voluntary trade between consenting parties: when candy was individually owned, the kids traded and cooperated until they were satisfied. However, when the candy was unowned, the same children who showed a remarkable ability to cooperate and trade resorted to violence.The lesson here is that markets lead to peace, trade, and prosperity, while the absence of markets leads to chaos and violence. Its a concept so easy that even children inherently understand it.Happy Halloween, you greedy, selfish capitalists!
- Jeffrey Tucker explains how kids learn the concept of money from candy trading:
This process of trading began at our house at 8pm and lasted for about 30 minutes, at which point, the children concluded that they had come as close as was possible to what they wanted most and so, that there was no more trading left to do.
During the 30 minutes of active haggling, nine kids sat around the dining room table and participated in a hectic, yet orderly — if complex — interchange, bearing a good deal of resemblance to a Wall Street trading floor.
Some traders shot up and shouted prices, deals, proposals, results, changes in preferences, new resource discoveries. Other traders remained quiet and moved with great subtlety and surprise. The more strategic the plan, the more impressed the other kids were by it.
It was fascinating to watch as the trading began slowly and as the first barter relationships began to form.
One for one; two for one; three packages of Nerds for one popcorn ball; two Snickers for one candy necklace; a Blowpop for two pieces of caramel; and so on.
All children brought to the table their own subjective sense of what was valuable — a sense which was strongly influenced by the corresponding opinions of the other players, but one which also added to it a degree of prediction concerning just how the subjective values of others would stack up.
It wasn't long before barter relationships, even those involving 3 or 4 simultaneous transactions, did not suffice.
What those around the table needed was some means to achieve indirect exchange. They needed to hit upon a good which everyone would desire to posses because of its more certain, onward marketability among all the other kids.
This entity did not need to be highly valued from the outset by everyone present. What the kids only needed to notice was that there was something which a sufficient number of their group tended to want more than any other competing candy on offer.
It was a short step from there to the dawning of a realization would occur to one or two kids. These would then try to acquire that particular candy, not to consume it themselves, but to use it to trade it for whatever other candy they really wanted to enjoy.
As more and more of the participants copied them, this one candy would come to play a role in more and more indirect exchanges. Child A would accept it from Child B for a less desired kind of candy and would instantly swap it again with Child C who happened to have the goodie he or she really preferred, but who hadn't wanted any of A's originally proffered treats.
This way, this one candy would come to posses a quality none of the others had. It would come to be money.
- Via Patriot Post, Michael Ramirez and/or Gary Varvel:
- From We the Individuals on FB: the masked man who robbed his piggy bank
Facebook Corner
(LFC) Can you point me to the counter argument to when someone says that business owners "owe" a high wage to their employees because they enjoy roads, post office, etc.? Haven't you all had a lot on this subject in the past?
First, it seems that the questioner is assuming the businessman's taxes aren't paying off public "investments" and operating expenses. Second, employees are in various labor markets with supply/demand and productivity considerations. An employer doesn't "owe" an employee beyond a market wage. Business owners also have equity, a personal stake in the company--money that could be profitably invested elsewhere--and that capital is at risk--from competition, the economy, etc. If an employee feels that he can sell his labor at a higher price elsewhere, he has that right. But the employer has no obligation beyond their contract.
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| Via the Milton Friedman group on FB |
On a Libertarian Republic thread (featuring a photo of JFK being visited in the Oval Office by his Halloween costumed kids):
The last good democrat president....rip sir.
The last good Democrat President was Grover Cleveland. JFK was a reckless interventionist in both foreign policy and the domestic economy.
Political Humor
Here is the latest satirical letter from Government Motors "CEO" Porter Stansberry:
Dear shareholders,
As I'm sure you've seen, our stock price jumped higher this week on heavy trading.
We earned lots of applause in the press and even on Wall Street because we reported outstanding operating results. It's true… on an operating basis… General Motors is doing better than many people (including me) thought possible.
What explains the quarterly surge in profits? In North America, we launched a new version of our best-selling truck, the Silverado.
This helped drive North American sales and units higher. Units sold increased 6.5% over last year. Our operating income from the automotive business globally was up by 40% over last year's third quarter. On an operating basis, we made more than $2 billion selling cars in the quarter, up from $1.4 billion in last year's third quarter.
Our automotive margins increased, too, from 3.9% "all the way" to 5.5%. I've been crowing publicly about the increase in margins and the strength of our Chevy brand.
But privately… I've got plenty of concerns.
You see, all of these numbers are presented on an "operating" basis. We make plenty of other "adjustments," too. At the risk of spoiling the surprise in this letter, let me simply summarize by explaining that our real earnings… the earnings attributable to common-stock holders… fell by about 50%. Even worse, our market share in North America fell, too – even in trucks. You'll notice I didn't mention anything about that in the quarterly press release.
Instead, to cover up the real results, we dusted off our bag of accounting tricks.
Just check out the headlines on the slides that accompanied our latest quarterly results press release: "Impact of Special Items," "Consolidated EBIT – Adjusted," "Adjusted Automotive Free Cash Flow," and my personal favorite: "Operating Income Walk to EBIT-Adjusted."
I challenge any financial analyst outside of GM to explain what "Walk to EBIT-Adjusted" means… or come up with any sensible explanation for why we would present our results in this way.
At GM, we're doing our best to make sure that no one can possibly understand what's really happening in our company.
But privately, I can tell you what's really going on…
The truth is, we're barely hanging on to the market share we've got. Yes, trucks bolstered our results. And yes, we sold a lot of trucks. But we didn't sell nearly as much as our competition. We actually lost market share in the U.S. truck market.
You must remember that, at GM, we can't compete on brand. We can't compete on quality. And we can't compete on price because of the huge amount of overcapacity in the worldwide car-manufacturing industry. As a result, we must compete on credit:We will lend to just about any potential car buyer.
Lots of Americans have terrible credit. So our lend-no-matter-what strategy can create a lot of business in the short term. In fact, our loan and lease book increased by almost $9 billion over the last year.
But this strategy won't work for long.
Lending to borrowers who aren't creditworthy only pushes today's losses out into the future. After all, if we weren't making these bad loans to customers who can't really afford a new car or truck, what would our results look like?
Sooner or later, these loans will sour. And the profits we're bragging about today will disappear. Losses will soar.
Why would we knowingly pursue a strategy to "pull forward" sales, even though this will surely cost us massive losses in the future?
You might remember in the last letter I wrote to you as the new Chairman of General Motors, I warned that capitalists were no longer operating GM:
What's happening with GM is a microcosm of what's happening with the rest of our society. Where once we sought only a fair opportunity for greatness, now we seek the false security of collectivism. I see it happening right in front of me every day.
The people who control GM – namely the UAW union and its stooges in Washington – have decided to cash in while they still can.
In the last quarter, we borrowed $6.6 billion from Wall Street. We needed some of this cash to finance our lending and leasing operations… but the lion's share of this cash was used to repay legacy union obligations.
We bought back a little more than $3 billion worth of preferred shares from the union's health care trust. Expensing this to earnings cost us $800 million in the last quarter. That's why all of the results we've been boasting about are all on an "operating" basis.
If you look at actual net income that was attributable to shareholders, our results were horrific: We only made $700 million, down from $1.5 billion a year ago. On a per-share basis, genuine net income fell from $0.89 a share to $0.45 a share, a decline of 49%.
As I have long warned you, the "bankruptcy" that GM went through in 2009 didn't address the legacy obligations accrued by the "old" GM and owed to its union employees. We left bankruptcy, which was supposed to wipe GM's slate clean, with the union holding almost $7 billion in preferred stock and more than $26 billion in unfunded pension obligations. Paying for these obligations makes it unlikely that our common-stock holders will ever benefit from our operating profits.
Even Steve Rattner, who put this entire catastrophe in motion, must know it's not going to work out. The government itself is bailing out on the deal as quickly as possible, taking a $10 billion loss.
The union is going to sell next, forcing us to buy back its preferred stock. GM will have to borrow again next year (and take more charges against earnings) to afford the rest of this nearly $4 billion, union-owned, preferred stock. Then… after we're finished buying back the union's stock… we'll have to begin paying huge sums into the union pension plan.
The point is… even if we continue to perform on an "operating" basis, it will probably be years, maybe more than a decade, before we are in a position to actually use our cash flows to benefit our actual owners.
In my last letter to you as the new chairman of GM, I made three bold predictions about the likely future problems at our company. In closing today, I'd like to update you on these predictions.
I predicted that all of our profits… and more… would end up in the hands of the unions and retired workers.
In the last nine months, we made $8.2 billion in cash selling cars around the world.
We invested $5.7 billion in property and equipment to maintain our production, leaving us with roughly $2.5 billion in free cash flow. We spent $4 billion in direct payments to the union's health care trust, paying dividends, and buying back preferred shares. Not a single cent was spent on common-stock holders. By my calculations, we spent $1.5 billion more than we really earned on the union's legacy claims last quarter.
I predicted that overcapacity would continue to drive profit margins lower and result in declining market share for GM.
While the last quarter saw our margins increase (thanks to the favorable product mix), our key North American market share continued to decline, a presage of future margin declines.
I predicted that we would begin to borrow massively from Wall Street to finance the buyers of our cars and to finance contributions to our pension fund.
In the last quarter, we saw the first long-term borrowing for the "new" GM. We now owe $6.6 billion to bondholders in a debt financing orchestrated by Wall Street. It's incredible when you think about it. Just four years ago, we defaulted on about $30 billion in bonds. And yet… the world is willing to lend to us again already. What a bunch of fools!
What's really happening at GM is easy to see if you just take the time to wade through our filings. We're making billions in bad loans to car buyers now, so that we can earn enough money (in the short term) to pay off the union's preferred stock and generate "operating results" that make it easy for the government to sell its common shares.
What happens after that isn't really my concern. But it ought to be yours, if you're holding our common stock.
Regards,
The Chairman of General Motors
P.S. You might wonder what ever happened to the Chevy Volt? Former management spent $1 billion to develop a battery-powered car. Thankfully, nobody wanted one. Sales peaked in 2012 at 23,461. We've only sold 16,760 this year. We were lucky. We've been losing about $50,000 each time we sell a Volt. I wish folks had considered President Obama's track record with the car sector before they voted for his health care plan…Political Cartoon
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| Courtesy of Bob Gorrell and Townhall |
Richard Marx and Donna Lewis, "Anastasia - At the Beginning"
