Tuesday, October 28, 2008

The Candidates on Health Care

The Wall Street Journal has a good summary on the health care plans of both candidates in the upcoming presidential election (thanks to Paul for sharing this on Google Reader; please also congratulate him on his recent nuptials).

Let's be frank: both of these plans suck. Neither deals with the real problem of health care in this country. There is an artificial demand on the health care system created by a dearth of doctors and the restrictions on acquiring prescription drugs, among other things. All these things drive the cost of health insurance and raise it to exorbitant, unaffordable levels. Currently, health care costs in the U.S. are estimated to be approximately 15% of GDP, and expected to rise to 19% by 2017.

According to the Bureau of Labor and Statistics, over one-third of doctors in 2006 worked over 60 hours per week, and there were approximately 633,000 doctors, a mere 1 for every 475 people in this country. And why do we need to see these overworked physicians to get simple prescriptions for penicillin and allergy medicine? While honeymooning in Greece a few years ago, I experienced my first allergic reaction to some bad fish. My face had swollen to twice it's normal girth and I itched all over. My ever resourceful wife ran to the nearest pharmacy and purchased some Zyrtec over the counter, which instantly eliminated my symptoms. Had I suffered from this allergic reaction in the United States, I would have surely perished from an acute case of big red face disease (BRFD) since I wouldn't have been able to get such a simple drug without visiting my family practitioner and getting a prescription. These things drive the cost of health care up as we rely on the few physicians we have to do mundane things. The demand on the health care system is entirely artificial. These two problems could easily be solved by graduating more physicians every year (accounting for the rate of population increase), and easing restrictions on the purchase of simple prescription drugs (an illiterate child in India can get penicillin from the local pharmacy, but a Ph.D. in pharmacology can't in the U.S.).

That being said, neither candidate wants to tackle the root of the problem. Instead, they both want to exacerbate the issue by doling out government lucre in the form of tax credits (McCain) or a federal insurance program (Obama). By giving away money in either form, all they're really doing is feeding into this artificial demand enforced by the current system. The previously uninsured sector of the population will increase the demand on an already-strained insurance industry. Nothing would be done to alleviate the supply issue. To top it all off, both plans would cost trillions of dollars over the next 10 years at a time when the deficit has reached its highest level yet (in unadjusted dollars, though not as a percent of GDP).

If I had to pick one of these odious plans over the other, I'd opt for the McCain plan. It makes some token moves in the right direction, but still falls short of addressing the system's fundamental problems. Deregulation of the health insurance market is one of its more attractive aspects. McCain advocates the removal of the restrictions on purchasing health care plans from companies across state lines. Current law prevents consumers from buying into a plan in another state. Removing this restriction would increase competition between HMOs and help to lower the price of coverage overall, though in light of the aforementioned problems this might have minimal impact on the cost. Still, I can agree with the principle behind it, as deregulation also offers the consumer more in the way of health care choices.

Another positive aspect to the McCain plan is its push away from employer-based insurance by giving a $2,500 tax credit to individuals (or $5,000 for families) to purchase a health care plan. While I'm against giving away this kind of money without addressing the issue of the artificial demand, the side effect of veering away from employer-sponsored health programs is a positive thing. People should not have to base their health insurance status on their employment. Losing your job means losing your health care, and that is something that really shouldn't be dependent on anything. One should be able to secure a health care plan regardless of employment status, a failing system revealed by the fact that about 1 in 7 people don't have health insurance in this country. In this op-ed from the Wall Street Journal, David Gratzer of the Manhattan Institute argues that the employer-based health insurance system has become defunct. (Interestingly enough, one of his references for this assessment is one of Barack Obama's economic advisors, David Cutler).

In any case, both plans are decidedly the wrong course of action, but McCain's has token elements that nudge the industry in the right direction. I will be voting for the lesser of these two evils.

Tuesday, September 30, 2008

Bailout!

In principle, I'm decidedly against any bailout package for failing financial institutions. Why should taxpayers bear the cost of propping up banks that make risky, ultimately foolish decisions? Aside from that, do we really want to send the message to companies saying it's okay to take risks since failures will be buoyed by the government? Additionally, I firmly believe the individuals who took those adjustable-rate and negative amoritization mortgages without comprehending the potential repercussions should also be made to suffer their losses. Borrowing hundreds of thousands of dollars is no mean undertaking and it's a mutual failure of both lender and borrower should the risk overcome the reward.

The current situation is a little more complicated, however. The bad assets in question, in the form of mortgage backed securities (MBS), are ridiculously convoluted such that no one really knows how much money is tied up in a potential failure. While a mere 1% of homes nationwide have entered foreclosure, the rate of increase is significant and shows no signs of slowing down, which could result in a tightening of credit policy (despite the fact that the number of commercial and industrial loans has risen over the past year).

While we can debate the necessity of Paulson's bailout package, its structure leaves much to be desired (which is a politically correct way of saying "it sucks"). A $700 billion tax-payer funded lump of cash for the government to purchase bad assets, no oversight, no regard for who might succeed him as Treasury Secretary: all this so we can keep afloat firms in a market rife with blatant incompetence? No, thanks. On top of it all, there is the pressure to accomplish a bailout in one week, hardly enough time for Congress to deliberate the matter, much less consider decidedly superior alternatives.

Let's assume, for the moment, that a bailout package needs to happen ASAP (a big assumption since overt effects from these failures have yet to be really felt). Here is what I propose: instead of having the government purchase these bad assets, we should loan the money to solvent banks and private equity firms so they can purchase the MBS in question. This would be the most efficient way to pump liquidity into the market, I think. Much less oversight on the part of the government, and the financial institutions will redistribute the bad debt on their own via traditional market forces, thereby protecting the integrity of the larger financial institutions. It's not the government's place to own these securities; that's the function of our free market.

I'm interested in hearing what others have to say on the matter, in addition to any alternative bailout plans out there.

Wednesday, September 3, 2008

Pork Chopped

In one of my recent public tirades against Barack Obama (again in a bar on a Friday night; I know, I know, I really need to stop doing this), I came across a nice young man who, when asked why he was voting for the Democratic nominee, responded "Because he's fresh!" When I asked him to elaborate, he responded confidently that Obama was untained by Washington politics and wasn't knee-deep in things like pork barrel spending.

Um, what?

I shouldn't have been surprised by this for two reasons: a) while a pleasant sort, it was painfully obvious that this nice young man was not at all well-versed in the machinations of his candidate of choice, or politics in general (for which I don't really blame him any more than I would the vast majority of people), and b) the Obama campaign has done a splendid job of avoiding direct comparisons to the Republican candidate's record on earmarks (until the arrival of Sarah Palin on the scene). And since all the news these days is clearly biased in Obama's favor, it's not difficult to see why the press tended to gloss over this subject.

The term "earmarks" refers to requests by Senators and Representatives for federal funding of pet projects in that member of Congress' home state or district. These requests are usually tacked on to bills just prior to voting. Once the legislation is passed, the funding requests become part of the law and are appropriated. Here are the problems with earmarks:
  • Transparency - as in there is none; members of Congress are not obligated to disclose how much federal money they request for their pet projects
  • Procedure - the practice of tacking on a rider to a bill immediately prior to the vote is dubious at best; those rendering the decision are forced to approve spending bills they wouldn't necessarily agree with if they are in favor of the original legislation
  • Causes - ostensibly, earmarks can go towards worthy projects like schools and hospitals, but politicians usually request funding for inane things that don't really warrant spending; even if the cause is worthy, many causes don't necessarily deserve federal money (i.e. your tax dollars), especially when they may have other sources of funding available

Barack Obama has a fairly poor record when it comes to earmarks. He's requested nearly a billion dollars in federal money between 2006 and 2008. In absolute terms, this is not nearly as much as others in the Senate (he's no Thad Cochran after all), but it's a fair sum considering he's been in office for only 3 years. His list of earmarks contain several shady and egregious requests, including $1 million for a new pavilion at the hospital where his wife is Vice President of Community and External Affairs, and military funding for General Dynamics, which is directed by James Crown, long-time Obama supporter and fundraiser.

Allow me to come to Obama's defense on this issue for just a moment. Earmarks are a decidedly small portion of the multi-trillion dollar budget passed by Congress. Obama has made his earmarks public record, which is certainly not the norm. Finally, Obama has finally stepped up and done the right thing by requesting no earmarks for the 2009 fiscal year, which is a lot more than we can say for certain other senators. I am giving credit where credit is due.

However, if we compare Obama's record on earmarks to Senator John McCain's, we find a stark disparity. In his 20+ years in the Senate, McCain has requested exactly zero dollars in earmarks. He eschews wasteful spending and has called on his fellow senators to do the same, unfortunately to little effect.

Why are the candidates' records on earmarks important? I believe it is one of the few ways we have of determining their fiscal responsibility based on their experiences. The deficit is about to reach an all-time high, which has the calamitous effect of raising the tax burden on our children and making it more difficult for individuals to accumulate wealth. (As an aside, there are many that argue that a moderate deficit is a good thing for the U.S. economy as it provides international collateral that promotes trade and liberates capital from inefficient markets. But is a deficit the only way to do that, and do we need such a monumental one?) While earmarks represent but a small portion of the national budget, it is one of the few indicators we have that allows us to gauge financial conservativeness. Cutting wasteful government spending eases the tax burden on all of us (and our children) and promotes individual and corporate prosperity.

Senator McCain clearly wins on this issue. I believe it is time we put a real fiscal conservative back in office, not the fake one we have now. The last thing we need is someone who plans on increasing federal spending on wasteful government projects. Obama's plan has undergone serious scrutiny and has been found wanting. While Obama plans to spend, McCain promises to cut back on expenditures and veto any bill containing profligacy in the form of earmarks.

It's comical how everyone's supposed "agent of change" is really the one mired in typical Washington lucre while the one derided as "Bush III" has been the model politician in this regard. Will the public ever learn? Even if they do, will they ever change their minds?

Saturday, August 23, 2008

Thank You, Come Again

Despite the fact that no formal announcement has been made, various news sources have reported that Senator Joe Biden of Delaware will be Barack Obama's vice-presidential candidate. Yet another abject racist on the Democratic Party ticket. Good job, guys.

Then again, Obama could have made an even worse choice.

This blog entry has suddenly become a good segue into another issue I've been requested to write about. Coming soon to a blog near you.

Thursday, August 7, 2008

Sad At ANWR

Updates to this blog have been infrequent as of late, for which I apologize profusely to my readership (yes, both of you). I spent all of last week trekking through the Andes to the storied ruins of Machu Picchu. Since a picture is worth a thousand words, here is the image tells all about my trip:

I nearly fell off a cliff while posing for this stupid photo. Luckily, we got it on the first try.

In any case, let's put aside my acrobatic achievements south of the Equator for a moment and discuss that which the title of this blog entry alludes to (hint: it's not my second-favorite Egyptian of all time; it's not even my favorite Egyptian): drilling for oil in the Arctic National Wildlife Refuge (ANWR). A great debate is raging across the country regarding this issue and its ramifications. On the one hand, there are those who believe in maintaining the integrity of America's coastal environments above all else. At the other extreme are those who are willing to despoil said areas in an effort to extract a domestic source of energy. My opinion is that there is no good reason not to drill there. Let us examine the reasons why people suggest we shouldn't drill there to understand why I feel this way.

First, there is an environmental concern. The conservationists believe this tract of land should be preserved in order to maintain its flora and fauna. There are all kinds of birds that roost in these lands, in addition to a large population of caribou. I agree with the principle of this argument as I am a Teddy Roosevelt-styled conservationist: I believe in protecting large swaths of the wilderness for the enjoyment of the people and the survival of various species. However, considering the scale of the land required for drilling, I don't this argument makes much sense. ANWR is approximately 19.8 million acres in area, of which only about 2,000 acres (3.125 mi2) would be developed for drilling (about 0.01% of the total area). Yes, some birds would be displaced and the caribou would lose a portion of their calving grounds, but let's be realistic here: are we really concerned with preserving such a tiny fraction of the land in the face of such volatile oil prices? It is silly to stymie our livelihood on such a small area of practically no consequence.

And that brings me to the next point: those opposed to drilling in ANWR argue that the increase in oil production will have no bearing on the price of oil. They usually base their argument on an Energy Information Administration report that cites a minimal impact (< $1) on the price of oil at peak production in ANWR. Additionally, the report states that the impact would be 10-20 years from now as production ramped up. I do not believe this to be the case. We have only to look at recent history to show that there will be an immediate impact. Merely announcing that ANWR is open for drilling would send the price tumbling.

For evidence of this, let us consider some recent news events, such as the threat of Hurricane Dolly in the Gulf of Mexico. Oil production in the Gulf was halted in fear of Dolly, and that triggered a $3.09 spike in oil prices. Also, after last June's OPEC summit meeting, oil prices soared to a record high of $136 after Nigeria (the fourth-largest exporter to the U.S.) expressed concerns about militants bombing its pipelines, thereby reducing its supply. Finally, consider the timely announcement made by President Bush that the White House ban on offshore drilling had been lifted. This accelerated an ongoing drop in oil prices (due mostly to a decrease in demand and other market forces).

The point is this: news about supply and demand affects the price of oil almost as much as the actual supply and demand. Currently, there is thought to be about 9 billion barrels of oil in the Gulf of Mexico, roughly half of what is predicted to lie in ANWR. News about the dramatic increase in the domestic supply by merely announcing the removal of the ANWR drilling ban would set off a selling spree that would reduce the price of oil considerably.

Finally, we stand to gain something even more important from drilling for oil in ANWR: energy independence. Not having to rely on autocratic, despotic nations like Saudi Arabia and Nigeria would be the greatest benefit from domestic drilling. Domestic oil is, of course, just one of the means to this end. Delving into alternate forms of energy, (nuclear, wind, solar, et al.) is the more important issue to consider. However, the sad reality is that the U.S. is not getting off the oil standard any time soon. Thus, we might as well use our domestic supply while we develop new technologies that will one day supplant fossil fuels. Personally, I'm sick of this great nation remaining beholden to terrorist countries whose populations want nothing more than to kill innocent Americans. Drilling in ANWR will help us move away from these bonds.

I have yet to come across a legitimate argument for not drilling in ANWR, and more than enough in favor (a friend of mine recently pointed out that drilling in ANWR would reduce oil spills, the vast majority of which are caused by leaking tankers; the oil from ANWR would be transported via the Alaskan pipeline; as compelling as all this sounds, I have yet to independently verify it). I'm interested in hearing other thoughts on the matter, though I believe the evidence leans towards lifting Congress' ban on offshore drilling.

Tuesday, July 22, 2008

The Great Divider

I'm going to shed some light on an issue that's been bothering me for some time.

Barack Obama is billing himself as a bipartisan candidate. He is advertising himself as someone who will transcend the traditional party divide in Congress and work with both Democrats and Republicans. Sadly, there is no basis for believing this, and to make matters worse history tells us the exact opposite of that which he would have us believe. Contrary to what his campaigners (and the teeming masses that have fallen prey to Obamania) would tell you, Barack Obama is one of the most divisive people in the U.S. Senate.

The National Journal ranked Obama as the Senate's most liberal member in 2007. While this may seem like the highest of accolades to the typical snobby elitist San Franciscan, think (for once) about what this infers: Obama was most likely to vote along the Democratic Party line and was least likely to consider voting favorably with Republicans. Obama's voting record (gauged over 66 votes) gave him a composite liberal index of 95.5. If you compare this to his few previous years in the Senate, you will see that over time he veers further towards the left. He has an average lifetime rating of 88.0. All this data can be found here.

Forget the fact that Obama has never authored a single important piece of legislation. He simply can't break the political divide between Democrats and Republicans on any issue by voting in the opposite direction, or even by working with Republicans on important legislation. He has no history in Congress as a unifier of any kind. I posit that he (along with whomever was rated as the least liberal senator) is the most divisive person in the Senate because of this. He is one of the least likely people to serve as a mediator between the two parties.

The truly amazing thing about the situation is that the person possibly best described as a bipartisan uniter is Obama's opponent: John McCain. Unfortunately, McCain missed more than half the key votes in the economic and foreign policy categories that determined his liberal rating, but on social issues (like immigration) he scored a 59, towards the middle of the pack. I think his lack of votes (due to campaigning) speaks volumes about him, but there are plenty of more important reasons to be disappointed with McCain (and which shall be discussed in a future blog post). In any case, at the very least we have some indicator about McCain's stance on things, and that leads us to believe that he is unconcerned with partisan politics and more concerned with enacting positive legislation. A rating of 59 puts him in the middle, right where a uniter ought to be, not too far towards the left or the right.

More important than his 2007 voting record, though, are the extreme examples of bipartisanship McCain has shown throughout his 20+ years in the Senate. He's co-authored legislation on immigration reform with Ted Kennedy, easily one of the Senate's most left-wing members. He's written campaign finance reform laws with Russ Feingold, another Democrat. McCain was also part of the Gang of Fourteen in 2005, the seven Democrats and seven Republicans that broke the deadlock on confirming Supreme Court appointees. He's even authored climate change bills with Joe Lieberman to put a cap on greenhouse gas emissions (this bill was eventually defeated in the Senate). Simply scrolling through McCain's Wikipedia entry can reveal how often he's worked with Democrats on various important issues.

It's hard to fathom how the public has been hoodwinked into this idea of "Obama the Uniter" in light of all this evidence. It's a testament to the effectiveness of the Obama campaign that the public remains blind to this issue. So who is the real uniter here? In my opinion, Obama's move to the center in this election can't discount his history of partisan politics that stymies efforts towards progress. This is especially important in a Congress nearly equally divided between Democrats and Republicans.

If being a uniter were your only criterion for selecting a president, Barack Obama is clearly not the right choice.

Saturday, July 19, 2008

Ignorance Is A Convenient Bliss

This is perhaps a discouraging way to inaugurate this blog, but it is certainly emblematic of one of the reasons I choose to write.

Earlier this evening, I went to a bar with some friends, where I engaged in serious conversation with a seemingly nice young man I had never met before. The conversation was certainly erudite as far as trendy bar talk in SF goes, but those who know me well would testify under oath that I would never forego the opportunity to discuss issues of import at any time or in any setting.

So it was this evening, when a spirited conversation about European football (so nice to find a fellow fan of the Beautiful Game in the U.S.) turned into a discussion on politics, fossil fuels, the legitimacy of Barack Obama's candidacy and the Iraq War. This last topic of discussion caused an abrupt and rather rude ending to what I thought was a spirited discussion (something I truly value since it's very difficult to find people willing to engage in this sort of thing).

The point of contention was something minor: the number of military personnel currently deployed in Iraq. I can't even remember what the relevance was at this point, but I was attempting to make an argument based on the fact that there were approximately 130,000 U.S. troops in Iraq prior to the "surge", and about 150,000 troops thereafter. My opponent (for lack of a better term) insisted there were on the order of 500,000 troops in Iraq (I can't remember if this was his pre- or post-surge value, or if he even made a distinction), and cited his many friends in military service as a reference for this number. Having acquired my numbers from various news sources and websites (it's not like it's privileged information here), I asserted that the numbers he cited based on his sources were decidedly incorrect. At this point, he ended the conversation with a half-hearted "It was fun talking to you, dude," and walked off.

This guy had no reason to believe me over his military buddies, and I wouldn't fault him for doing so, but I have two distinct problems with this episode: 1) the denouement was rude and completely lacking in courtesy, and 2) he passed off the knowledge gleaned from all his friends in the military as factual. Now, I'm willing to forgive and forget on the first item. We were in a bar, there was a lot of alcohol involved, and social grace is not always the first thing we think of when inebriated (indeed, it is often the last). However, the second point is both inexcusable and intolerable.

Please leave your anecdotal evidence at home. It has no factual basis, nor does it grant you any argumentative superiority. Even if this guy has "lots of friends in the military" as he stated, I find it hard to believe he consulted every single one of them specifically to learn how many troops have been deployed to Iraq. And if someone challenges you on your anecdotal data, at least have the decency to admit to yourself (if not the person you're debating) that the information you were told by your buddies could be incorrect. I'm not claiming to be a legitimate source of information, but incongruous statements should at least be checked to determine which, if any, are correct. Clinging to anecdotes and refusing to acknowledge the truth is even worse than being ignorant.

Perhaps I'm overreacting a bit. For all I know, this guy could have run home and fact-checked everything I told him about troop deployment in Iraq. I hope he did. But the point I'm trying to make is that this incident is emblematic of a larger trend I see here in San Francisco, particularly among the snobby liberal elitists I encounter everywhere.

Facts, knowledge and data are like kryptonite to these people. It usually conflicts with what little information they have on any given subject and forces them to admit they are wrong. Most fragile egos can't handle this, so they will end the debate before it even begins when faced with the possibility they might be wrong. They try so hard to appear worldly and knowledgeable about the world, politics, energy policy, etc., but it's quite easy to poke through their veneer with a few simple numbers. It's entirely too convenient for them to ignore the truth so that they might seem (or even feel) right.

We're all guilty of this. Every last one of us, including me. Admitting you're wrong or ignorant is akin to admitting you're stupid, and who would do that in public? The ego is a difficult and fragile thing. It's amazing the stories we concoct and the lies we cling to in order to preserve it. We all want to seem wise and informed, but so few of us put the effort into truly understanding what we think, or why we think it in the first place. The unwashed masses, of course, take the easy way out and consciously avoid these discussions altogether.

Aside from this less-than-astute observation of mine, I learned one other thing from tonight's discussion. Canada is the top exporter of oil to the U.S. Researched and validated for your pleasure here. I suppose it would be too much to ask if the person I debated with tonight took anything home from our conversation, but that won't stop me from arguing with people in public places.

On a final note, I related tonight's incident to someone very close to me, who found fault with my argument. After I told her I had acquired my numbers on Iraq troop deployment from various sources, she insisted I was making a character judgment on the people my "opponent" consorted with by siding with the legitimacy of Wikipedia, the Department of Defense, and news agencies like MSNBC and CNN. There are very few statements that could make less sense. Just because I believe in these sources versus the second-hand anecdotes of a random person I meet in a bar doesn't mean I'm making a "character judgment". What would any normal person believe, some entirely random anecdote, or this and this? It seemed incredulous to her that I would go out of my way to verify my facts before spouting them off in a debate, but the truth is that I find it too inconvenient not to do so.