Wednesday, October 31, 2007
Should the government regulate internet speed and availability?
According to the Organization for Economic Co-operation and development, which does an international comparison of different economic activities, the U.S. was ranked fifteenth for broadband lines per person. This is a drop from fourth place in 2004. Meaning that the country responsible for inventing the internet is not enjoying it at the top speed possible and with all inclusivity; currently only 55% of American households are connected to the internet. So the obvious solution, according to Congressman Ed Markey of Massachusetts, is to encourage the government to step in and use grants and subsidies in order to allow all parts of the country to have access to high speed internet. Markey says “promoting broadband would help spur job growth, access to health care and education and promote innovation among other benefits. Everyone in society benefits from the internet, and everyone should be able to access it. There is only one reason the government should step in and regulate. The telecommunications corporations are trying to create a monopoly with the internet, limiting who can receive internet and at what speeds, at exorbitant prices. The government does need to step in and prevent a monopoly from occurring. The government’s role in this situation should be to prevent exclusion from the benefits of the internet, and prevent a monopoly from occurring.
I don't want wealth, couldn't afford it if I did
This shows, I believe what would happen if the government paid a similar sum of money to poor people in America. Instead of using it to buy a home and start to build wealth, they would use some of it to pay rent and consume the rest elsewhere. So as we discussed in class, the government could increase the relative income of these poor people by giving them this payment, but it is their "choice" to make it wealth.
I looked for quite a while but could not find any military wide statistics on what percentage of those almost a million service members used their BAH for rent versus owning. So I am using a sample of 33 people in my platoon. I realize this is not a simple random sampling, but I believe it to be fairly consistent with what I have seen throughout my time in the army. And while I will also agree that there may be some characteristics of being in the army that may make those receiving BAH to want to rent versus own a home, in the the long run, I think that it pretty accurately represents the public as a whole and would relate well over to a subsidy program for the poor.
In my platoon of 33, 14 live in the barracks or in on post housing and don't receive BAH. Of the 19 receiving BAH, only 5 own a home. That is almost a 3 to 1 ratio. I will use myself as an example. If married, I would receive over $1000 every month more than a soldier living on base with which to find adequate housing. That is $12000 a year that the army is giving me with the opportunity to invest in my own wealth by paying a mortgage and contributing to my wealth versus paying rent to some other fool and padding his bank account.
The biggest reasons I find why these folks getting BAH don't want to buy a home is that it is too much hassle (pronounced lazy and no initiative) or they would rather find a cheap place to rent and pocket the rest of the money.
So now lets think if the government paid similar payment to the poor....if the figures transferred similarly over between those who rent and those who buy, 3 out of 4 would not take advantage of the money to increase their wealth. And since the two major reasons why soldiers don't buy are semi-laziness and the desire for fast cash..... I'm thinking that it wouldn't be too great of an idea for most people down on their luck.
Currently there are about 47 million Americans without health insurance. Hillary Clinton plans to change all that if she becomes president. Her proposed health care plan (dubbed Hillary Care) makes health insurance mandatory for every American (just like how car insurance is mandatory for all drivers). Also, small businesses would receive subsidies to help fund health insurance plans. In order to do this she proposes to raise taxes on families earning high incomes ($250,000 or more) and require health insurance companies to approve everyone who applies for insurance. However, there is a catch. There will be no limit on premiums. This means that health care could still cost low income families just as much as it did before.
What Hillary Care fails to do is differentiate between health care and health insurance. All Hillary Care talks about is health insurance. However, health insurance is only one piece of the puzzle. If Hillary Care is adopted the quality of medical care in the United States will greatly decrease. For example, the United States military tri-care system is the perfect example of what happens with there is too much government command and control in a health care system. One of my old economics teachers at the Air Force Academy used to say that the reason why military health care is not nearly as good as current civilian health care (for example, the Walter Reed scandal) is because there are no economic incentives in a military, or socialized, health care system. For example, two doctors of the same rank would make the same salary, even thought one doctor might be horrible, and the other amazing. The sad truth is there is simply no economic incentive for doctors to better themselves. In the civilian world this does not happen because the better a doctor is, the more money they earn
Hillary Care would, in a sense, cause the same problems in civilian health care as we see with military health care. If insurance companies are forced to provide insurance to everyone we would see much longer waiting times to see specialists, much longer lines at doctor’s offices (because more people would visit the doctor), and poorer quality health care. The reason why the quality of care would decrease is because doctors would have to see an inordinately large amount of patients, which is a consequence of mandatory insurance. Doctor’s offices would have greatly increased waiting times, which would be a major issue for people with serious conditions. Also, if there are no limits on premiums, would health care really be any cheaper for those who currently do not have health insurance? And finally, if Hillary Care were to establish too much command and control in health care I am concerned that we may eventually see a socialized health care system, which would eliminate the economic incentives that make doctors better.
As I understand it government should be in charge of services that would otherwise be inefficiently taken care of in a regular market economy. This might have been the case for delivering mail a long time ago but the market can handle it today. It seems that this is a sign of just too much unnecessary government involvement in our lives. I believe our government should stick to its basic necessary tasks such as keeping law and order, helping us to maintain clean air, and providing national security. Delivering mail is something we can take care of ourselves.
Forgive Me IRS, For I Have Sinned
The most famous example of a sin tax is undoubtedly the one levied against cigarettes, and while there may actually be an externality here (one may make the claim that the smoke from a cigarette is air pollution in much the same manner as exhaust from a car, albeit a very localized version), it’s rarely the one discussed in relation to the tax. Instead we often hear about the staggering medical bills that eventually accumulate for long term smokers, but that fails the externality test immediately. It’s not non-market, the cost is built right in and the obvious cause for trepidation. Many claim the government still has a role to play here because it often is fitted with smoker’s health tabs. However, it seems to me, if that’s the real concern, the root of the problem isn’t the smoking but that the government is on the hook for these medical treatments. Otherwise a million little unhealthy activities must be tracked down and corrected, and we move a great deal away from the ideal of a government of liberty.
But the idea that dealing with these unhealthy actions is becoming the role of government leads nicely to our next topic, the fat tax. Thus far, to my knowledge, there are none in existence here in the US, but the discussion has, more than once, reached the halls of congress so it’s difficult to imagine we’ll continue to be without one for long. The stated reasons for a fat tax are, again, because fat people tend to contract a variety of illnesses related to their heftiness, and thus burden the tax payer with their medical bills. We’ve already discussed why this argument is specious at best.
But if a tax here isn’t correcting an externality generated market failure why do they exist at all? Again I think the key is in the names. Both the word sin and fat have negative connotations, one much more obviously, and thus it would seem the taxes exist simply to discourage behavior that many find unsuitable. But that’s not the role of a government. That’s the role of a nanny.
A good example of this thinking is Rep. Rangel's comments related to his tax reform plan. He describes working with Secretary of the Treasury Paulson, noting his "courage" in regard to closing corporate tax loopholes. This shows that Rangel sees the purpose of taxes (i.e. the government) as encouraging good things (the middle class) and discouraging bad things (big business). In our class we (and maybe Paulson) would think of closing loopholes and lowering corporate tax rates as simply good for efficiency.
It is hard to determine whether a protective state or a caretaking state is better, given our current problems. Are today's problems the result of not enough, or too much caretaking? How many of today's retirees are unable to care for themselves because they thought social security would take care of all their needs? As the textbook points out, these types of programs can increase dependency and lower incentives to behave appropriately.
If the caretaking state is better, then is democracy the best vehicle for providing it? In our country, the caretaker state is so intertwined with politics that pork seems to be inevitable. A voter always thinks that their personal cause should be something the government encourages. This will lead to subsidies where there are no externalities. With this government, the Bootleggers are governed by the Baptists and vice versa. I think our founding fathers may have been thinking along these lines when they enumerated the powers of the government in Article I, Section 8 of the Constitution.
The House of Representatives passed a newer version of the unpopular child health care insurance program leading America to a more doomed command society once again. Democrats said this new version changed some aspects of the previously vetoed bill to quench the concerns of the Republicans. The new changes include, tightening restrictions on illegal immigrants from receiving benefits, putting an income limit on families to qualify and preventing adults from also receiving benefits. These are huge concerns that should have been addressed in the first bill. It seems that the people that are pushing this bill are starting with a very wide bill to try and get as much funding as they can squeeze out of the American people. When that doesn’t work tighten up the bill a little and ask for the same amount of funding as before and try again.
President Bush vetoed the first bill on October 3rd because of concerns that it would give incentives for families to move away from private health insurance to the government funded program. President Bush was right to veto a bill that would give incentives for people to move from a self-sufficient life to one dependent on the government, it’s inefficient. When people can get something for less money they will demand more of it. When it’s something free, people will go nuts for it. This child health insurance bill will offer cheap or even free insurance to people and they will demand a huge quantity of it. There might not be enough of it to go around so the new restrictions of the new bill are a good way of limiting the huge demand. The bill is getting more efficient at helping the people it is intended to help and reducing the number of people it is not meant for. It also has another benefit, it is getting people used to the idea that the government can decide what is best and that free markets are cold and evil. It chips away at the liberties and bank accounts of the people who have to front the cash for the bill. People will so learn that freedom and liberty are not as good as getting something for free. Good job government, here, want to take my sanity too?
Tuesday, October 30, 2007
Demystifying Social Security
What is Social Security? A transfer program designed to a a small short run solution to elderly poverty. Yet some still don’t understand the program. An example is shown from the Congressional Institution's website
Return on Investment
Many Americans have little idea what "return on investment" means. Yet, though they may not know the definition of return on investment, analysis of public opinion reveals that they understand and apply the concept in practice.
In the prior sections, we defined Social Security's return as the change in fund available per beneficiary. While accurate in that context, we will use a more simplified definition in the context of public opinion. Simply put, the return is a measure of the efficiency of an investment. Like the gas mileage of an automobile, it tells you how much return you get for every unit -- be it dollars or gallons -- you put in.
The website, prepared to educate the public, doesn’t gets its wording correctly. First, Social Security isn’t an investment (capital or infrastructure). An Investment implies that their is (or my be) a future gain to society, but the program is a transfer program from the working class to those whom are no longer working. An investment would also help (in theory) increase productivity per worker allowing the economy as a whole to produce more with less: thus making society better off. Yet transfer programs don’t focus on productivity (GDP or a workers output) it instead focuses on a person’s income (GDI). What is the investment? Are workers more productive paying for non-workers? Is it allowing more income/wealth to be generated in the future? Is it helping future generations? Social Security does none of these and isn’t an investment. So we, as a society, need to be honest about what it is: income for the retired, and as such shouldn’t be treated as an investment.
Another problem is that the program is being misrepresented by the government and/or those who report on the government actions again the Congressional Institution:
It appears the public's feelings of self-confidence and distrust of government pass on to the evaluation of reform options. Americans have doubts about investing in the market... Yet, when phrased in terms of personal choice, support for the option of market investment is overwhelming...
...And when asked who they trust most to manage Social Security investment, the public again strongly favors the individual over government...
...Support for individual investment choice is consistently strong through all categories...
(..are deleted percentages of persons polled, unimportant because for this argument)
This passage illustrates the problem with even having a discussion about social security. This passage, like the one previous, doesn’t describe the actual program or problems with the actual program (a transfer program). What this passage is saying is that the government has a bank account for each citizen and is investing the money for us, but we don’t think they are doing a good job of it. If this was the problem then an easy fix is at hand: change those people making the investments. But that then shows us this isn’t a problem of investment return it’s a problem of the program. What the above is asking for is a government forced 401K or other retirement program. As stated above the government has a transfer program; the government taxes the working (or those with income) and gives the money taxed then to those not working. The government doesn’t save the money or invest the money it spends the money as soon as it gets it (sometimes sooner). Therefore this illustrates another lie being shoved down the throats of the people.
More examples or government miscommunication about social security exist but these two issues. The idea that social security is an investment and that it is a retirement program (in the form of a 401K) are two lies that are crippling the arguments to fix the system.
To read the full report by the Congressional Institute visit
Monday, October 29, 2007
Edwards universal plan might insure that low-income individuals and rural seniors would have immediate access to health care, but could not provide a figure on how much these individuals would save from this plan. The plan itself would work like "'health care markets,'" which would be operated by the government, and be based on what region the individual lived in. In these "markets," people could be assisted in selecting the best plan for the person, whether private insurance or government. The estimated costs might only be about $90-120 billion which would come from the taxes applied to the people making more than $200,000 (Edwards would repeal the tax cut President Bush placed on these citizens). Edwards stated that he would issue an ultimatum to congress if elected to, "'Bring health care to all Americans by July of 2009 or risk losing federally funded health care.'"
In my opinion, the argument presented in the news article did not appear economically sound. One, if only one state was having a problem, why does the current system needed to be reworked for the other 49 states? Two, if everyone were to be insured, either by private insurance companies or the government, there would be two main issues. The first issue would be that there might be an increase in insurance rates to help spread the risk around and so that the companies could still make a profit. If the companies, which are businesses at heart, have to accept "more risky" people because of a presidential decree, the cost for that firm will likely increase. This increase in cost would decrease the supply of insurance available. The firm then has two options: either leave the market or increase the price of the plan. For example, if the costs have increased then to remain at a profit or "break-even" stage, rates for those individuals and all others would likely have to increase to balance the increased demand. This would shift the graph back into equilibrium between the supply and demand.
The second issue was the funding for the government-run health care program. As mentioned before, Edwards would repeal the tax cut to pay the program. Wouldn't this be just a transfer of the tax burden onto these other individuals and not solve the issue at hand? Another problem with this idea for funding was if those individuals knew that this tax cut would disappear, this might discourage them from making the $200,000 income because they might then have to pay more in taxes and their own insurance. If this were to happen, the economy would be worse off overall and the program would experience a decrease in the funding needed for the annual health care budget. Once the program was implemented it might not be easy to change or create another, so the income source would have to come from somewhere else, such as the average tax payer. While the idea of a universal health care program sounds nice, it might not benefit those it was targeting and the people and the insurance businesses would not be better off. At most the plan could do is increase the amount of money one would have to give up to obtain the same or less amount of benefits as they get today.
Sunday, October 28, 2007
1. Income taxes must be eliminated to make way for a national retail sales tax of 33 percent.
2. Social Security must be privatized so that each worker will own their own account and so that the government cannot take money from the program.
3. Implement a national health care system that covers all Americans in which tax vouchers are issued by the government and can be used with the various heath care companies.
These reforms are necessary because of the enormous amount of national debt that is seemingly not being paid off. The gap between what the government will make in taxes revenues and our national debt is an incredible 65.9 trillion dollars. Drastic measures indeed would be necessary to slowly account for this difference. Since astronomical corporate and personal taxes and cuts benefits of government programs such as Social Security are hardly likely it seems there is one more direction our government may turn.
Hyperinflation could occur if the Federal Reserve is forced by government to buy up treasury bills and bonds in order to lower interest rates. The financial markets would see this action as a threat to their financial well being and begin to dump their holdings of bills and bonds, an action that would raise interest rates. This could in turn lead to the Fed printing up more money to buy those bonds and with this money creation we would inevitably see hyperinflation.
More trouble looms in the near future in the form of 77 million baby boomers that might have the idea that they're entitled to some of that Social Security they have been paying into their entire lives. Some might even be expecting the use of Medicare as well. It seems government has little concern for this matter as nothing has been done to prepare for this enormous financial obligation. This doomsday article highlights the fact that the Social Security program must be reformed in order for it to be functional in the future. The system, which is already running on fumes, will not withstand the demand placed on it with the coming of the baby boomer populace.
The article concludes with the ideas that the U.S. government will neither repay social security nor national debt to those it owes.
Thursday, October 11, 2007
Monday, October 08, 2007
Perhaps I am the only person that finds this news story ironic. When a developed nation leader goes to the USA to receive ‘better’ healthcare as oppose to the socialize medicine that she has in Canada. In Canada, it seems that government control on the healthcare system has limited innovation in medical advances… the reason why this happen is simply because ‘healthcare is too expensive’ therefore the government should do it rather than private companies. And the voters whole heartedly agree even though they will pay more for it than the privatize version. Healthcare is like any other industry except with more demand when it is a life or death situation. And healthcare like any other industry will have an economy of scale…i.e. reduced cost due to mass production. That $4,000 MRI scan will soon be $1,000. The designer drug that was $100 a pill will be $2 a pill in a decade.
To socialize medicine in the United States would have a detrimental and devastating effect on medical innovations. Despite the promise of free healthcare, the cost of free healthcare is too much. America is a leader in medical technology and services because there are market incentives for private companies to make better products. It is more likely that the US will find a cure for cancer before any country with socialists medicine does because of the market incentives. Socialization is stagnation for any country healthcare system, privatization is innovation.
Michael Crichton in his novel, “The Five Patients” speculated that the cost of healthcare will increase because people viewed it as a right and they are living longer, this was in 1960’s. It is hard to think about the money families that have large medical bills, but that is what health insurance is for, to help a family get through the tough times without going broke. Unfortunately, many people refuse to get health insurance and when they have a medical emergency they won’t pay which drives up the cost for all the other consumers.
Monday, October 01, 2007
tax on fat or fat on tax?
|As an occasional writer, sometimes fictional pieces like plays and screenplays and short stories, sometimes articles for pay, I am one who believes in holding onto his writings for possible future retrospect. My first attempt to blog here resulting in my computer freezing up and today when I came on to see if my blog still existed (evidence of at least 20 minutes of work), I was disappointed, no enraged, to see that it wasn't. I look below to a little pop-up that says, "Now Blogger saves your drafts automatically!" HA!|
So the subject of my interest pertains to the "twinkie tax."
The concept was pioneered in the early 1980s by Kelly D. Brownell, Ph.D., director of The Rudd Center for Food Policy and Obesity at Yale. Brownell proposed that revenue from junk-food taxes be used to subsidize more healthful foods and fund nutrition campaigns. It is estimated that a national tax of 1 cent per 12-ounce soft drink would generate $1.5 billion annually, and a national tax of 1 cent per pound of candy, chips and other snack foods would generate revenues of up to $314 million.
The idea of taxing something, since we’re a taxing kind of nation anyway, that would discourage a person from over-indulging in something that is creating obesity sounds alright by me! Granted, I could stand to shed a few pounds, I don’t eat much junk food and thus would not be affected much by the tax. But, 314 million dollars sounds pretty good, and perhaps that would alleviate other goods from being taxed… yeah right! The issue that is of concern in light of the lessons in class, is that such a tax would be an example of a “nanny state” and from what I understand about the various ‘states’ our government can be, (protective, corrective, redistributive, paternalist) I’d prefer that our government be protective more so than the other ‘states.’ Because I look at the increase of size of our government and am cynical of what these numbers mean. 314 million dollars sounds great to someone like me, but I’m sure that of that money, there would be a committee designated to oversee the ‘project’ and there would be ‘research’ involved, etc. Of that $314, how much would actually go towards something like supplementation of health care or national defense? And how much would go into some appointed person’s paycheck? To me, government is just as fat as many of the Americans who would be ‘positively’ affected by implementation of the sin tax towards obesity-fueling foods. One point of discussion in class has been regarding the economic efficient allocation of whatever resource, including fatty foods. Would the allocation of the monies earned (what a funny word to put here) from the ‘twinkie tax’ be efficient? I highly doubt it! Ideally, government would function as an element of the governed. In his writings, Buchanan adopts, modifies, and transfers Wicksell's 1896 principle of unanimity to the constitutional stage of collective choice.
Buchanan's "contract theory of the state" shifts Wicksell's analysis of taxation into the sphere of constitutional choice. Throughout his career, Buchanan has aspired to the Madisonian goal of first empowering and then constraining government.
James M Buchanan's book, The Calculus of Consent (1962), co-authored with Gordon Tullock, is considered one of the classic works that founded the discipline of public choice, a melding of economics and political science. In particular (1962, p. v), the book is about the political organization of a free society. But its method, conceptual apparatus, and analytics "are derived, essentially, from the discipline that has as its subject the economic organization of such a society."
Seeing the words, “Madisonian” and “unanimity” makes me think of class and what we’ve been learning. And according to Holcomb “…for a market economy to function, property rights need to be defined and protected…” So, would a tax on the free trade of fatty foods from a producer to a person who wants to gorge freely be an example of legitimate coercion by government? The juggle of the governed allowing the government to grow is a slippery slope. For one, it makes sense to limit government, but on the side, it seems like a good idea to give the authority to government to discourage obesity. As I stated above, I wouldn’t be disinclined to vote “yea” on a tax that would neither affect me personally (directly) or would discourage people from frivolously purchasing something that will later have to be dealt with and paid for by my tax dollars. However, from an economically normative stance, government is already big and getting bigger, why encourage it to continue? In fact, I wouldn’t mind a ‘fat tax’ being implemented to the growth of government! Wouldn’t that make things interesting?