By: Jordan and Michelle

Part I: The Structure of American Government

America has always looked to Europe for guidance. During the Revolutionary Era, faction vied for power by claiming to look to Revolutionary France or Great Britain for ideas. In the early 1900s, various Old Progressives were influenced or directly taught by German Idealists and British Historicists. In fact, before he became President, Woodrow Wilson wrote volumes on the superiority of the British parliamentary system while lamenting the flaws of the American Constitution. Today, the New Progressives look to Europe's growing unity (and growing government) and feel envy. The European Union (EU) has passed sweeping environmental laws, has a large welfare system, and in most nations, state-run universal health care. To a leftist, Europe is the future. To most Americans, however, transplanting the EU's system to the U.S. would be a nightmare beyond words. To understand why, we must understand the history of the American structure of government.

The Confederation

The United States of America began under a much smaller and much weaker Constitution. The Second Continental Congress took the role of a provisional national government during the Revolutionary War and presented the Articles of Confederation and Perpetual Union to the states in 1777. After years of haggling and dealing, Maryland, the final state, ratified the Constitution, and the first permanent structured government of the United States was established.

Thirteen articles made up the first Constitution, and recognized the following:

• The name of the United States of America
• The equality between the thirteen states
• The assurance that the United States of America is a free and independent nation
• The union between the states is perpetual
• The freedom of movement between the states except for criminals
• The establishment of a Congress with each state having one delegation and one vote per delegation
• The central government can conduct foreign relations and war, and that no individual state can declare war nor have a state navy
• When an army is raised, all officers ranked Colonel and below are named by state legislatures
• The United States expenditures will be paid by funds raised by the states
• The job of the central government encompassed war, weights and measures, and mediation
• A Committee of the States was to be established to act as the government for when Congress is not in session
• Nine states are needed to ratify new states
• The war debt incurred by the previous Congress is now owned by the Confederacy
• The declaration that the Articles are perpetual and can only be altered by Congress with the approval of all state legislatures

While this document is quite the read, one can see the emphasis on decentralization. Each state had vast amounts of power over its own destiny. The central government was essentially a mediator and a very weak commerce regulator, as the states each had their own trade policy. There was no executive branch, no judiciary and no bureaucratic regulatory commissions. In fact, the Congress had no way to force the states to submit troops or supplies which made it difficult to prosecute the war. Many people such as John Adams, James Madison and Alexander Hamilton saw the weakness of the Articles during and after the war. Congress had no power to tax; and, therefore, it had no power to pay debts, fund roads or any other kind of basic national infrastructure. Congress had to ask the individual states for money. Unsurprisingly, the states, without having any mandatory reason to give money, were reluctant to work outside their own self-interest. A slightly similar, but more centralized version of this structure can be seen in Canada where the provinces are forced to give money to the federal government who then distributes that money back to the provinces. The rich provinces receive very little of what they gave, and the poorer provinces receive far more than their contribution. This system creates a lot of ire between the individual provinces as well as between the provinces and the federal government.

The Union

Due to the compounding problems of the Confederation, a call was made to amend the Articles to create a stronger central government that could levy taxes, create domestic and international trade policy, conduct foreign policy and war with more coordination. This process began with Charles Pinckney of South Carolina (the Virginia Legislature at the time). Following a recommendation by James Madison, the states were invited to Maryland to talk about how to simmer inter-state conflict. That convention endorsed a motion that called for the states to meet in Philadelphia to discuss ways to amend the Articles of Confederation, which became the historic Constitutional Convention of 1787. On its face, the “Grand Convention” was about amending, not replacing, the Articles; however, the delegates in Philadelphia began closed-door meetings and hashed out a new constitution.

There were several proposals on the structure of the new government. The Virginia Plan, drafted by James Madison, proposed a bicameral (two chamber) legislature (seats distributed by population or taxes) with the lower branch being elected by the people and the upper branch elected by nominations from the thirteen state legislatures. The upper house would be able to veto laws of the states if it conflicted with the national union. The executive branch would be elected by the national legislature. Both branches would be limited to one term. A national judiciary was also proposed. With the Virginia Plan and a similar plan proposed by Charles Pinckney, the smaller states were under threat of losing influence in the national government. The New Jersey Plan, or the Small State Plan, proposed a single legislature with each state having one vote. Similar to the Virginia Plan, there was a judicial branch and the single house electing the executive branch. A fourth plan, called Hamilton's Plan after Alexander Hamilton, proposed the abolishment of the states in a government based on the British government. It wasn't seriously considered.

On July 16, 1787, a compromise was proposed by Connecticut that combined the Virginia and New Jersey Plans. There would be a bicameral legislature in which the lower house (House of Representatives) would be elected by the people, and the seats would be distributed by population. The upper house of the legislature (the Senate) would be elected by state legislatures. Instead of the Congress electing the executive branch, the President would be elected by electors who in turn would be elected by the people of each state. Out of all these plans, the only consistent branch was the independent judiciary appointed to life terms. There had been a call for a bill of rights before the Constitutional Convention as a protection against government tyranny. During the ratification of the Constitution, many states added recommendations to amend the Constitution. When the First Congress met, it wrote and proposed the Bill of Rights, which was ratified on December 15, 1791.

Why It Works

The key to understanding why the United States government is shaped the way it is in its current manner is to understand why the Revolution happened in the first place. It wasn't simply about taxes, but about representation and rights of citizens of the British Empire. During the Revolutionary Era, colonists were treated as second-class citizens with their natural and legal rights under the British Bill of Rights being violated. After the victory over Great Britain, the founders had it in their mind to prevent an overbearing, centralized government from forming. The way they came to do this was to pit the government against itself while leaving room for it to progress and function.

Unlike a number of other nations who have a parliamentary model based on that of Great Britain (my second home of Canada being one); the lawmakers and the law executers are not of the same cloth. The powers of the executive branch and the legislative branch are specifically appointed to the former or the latter. This allows each branch to try to outmaneuver each other in their mutual attempts to gain more power. However, it was written not only with checks on both the legislative and executive branches, but with an originally established check on both houses of Congress. Before the Progressive push and victory for the popular election of Senators, those of the upper house were elected by state legislatures. This kept a check on the populism of the lower house with the interest of the state governments. The removal of this check has had drastic consequences, as seen with the alliance of both Senators and Representatives on many, many questionable bills that took more power away from the individual states. This would never happen if the state government had its own representation in Congress. In spite of the loss of that check, the short but dramatic history of the United States has shown that the system still works - both before and after the removal of certain checks. During the Civil War, civil rights were suspended, but reestablished quickly after its end. During the First World War, a proto-fascist state was established. However, the President that created it was voted out of office; and the government's powers were reigned in by a rightly fearful judiciary, Congress and public. The policies of the New Deal and Second World War had a similar fate with the slow dismantling of many of Franklin D. Roosevelt's giant government programs and the repeal of questionable war-time laws.

The philosophy behind our entire system, at least at the time it was created, was the idea that human nature will not change. Politicians will grasp for power, national leaders will attempt glory and have grand ambition, and the citizen mob will be moody and prone to frenzy. The founders knew of the history of republics and saw the abuses of a powerful, unchecked government in their own cities and towns. There are millions of Americans today who think we have progressed beyond what the founders deemed an eternal constant. They believe humanity is progressing towards an endgame, a final state of bliss, utopia or some kind of better world. This leads these Americans to promote or defend structural changes that do not fit into the original design and purpose of the American government (popular election of Senators being one example - judicial “first among equal branches” being another). The Declaration of Independence says "That whenever any Form of Government becomes destructive of these ends [life, liberty and the pursuit of happiness], it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness." It does not talk about progressing or advancing. It doesn't talk about modifying our views for a new age. The first document of principles by the United States talked about taking back rights from those who did not believe they existed.

Part II: An Analysis of the European Constitution

Contrasts to the U.S. Constitution

First of all, one must ask if it is possible to unite nations as opposed to individual states. Nations have different cultures, different economic structures and different ideologies. When the founders built the United States government, the nation had just been born. The attempts made by the EU to devise a constitution to bind nations that have long histories of standing on their own is a far more difficult and dangerous task. The caveat here is to question the intentions of such a document. Will such a document preserve individual freedom, or will it be used as a mechanism for regulatory control over multiple nations?

The idea of the constitution has been sold under the guise of unity and that is necessary for better trade between nations, a stronger international market presence and job growth. The Founders of the United States created the Constitution not to strengthen international presence, but to PRESERVE individual liberty and freedom from an overbearing government. Over the past century, the United States has seen power become more centralized in spite of the efforts of the framers of the Constitution to keep power decentralized. An EU constitution does not seek preserve the identity of nations, but to blend nations into one and establish a centralized law-making bureaucracy. Centralized power does not preserve freedom, and for this reason, Europeans should fear an EU Constitution.

In addition to the original intent for a constitution being dissimilar, another stark difference is voting power. The EU constitution seeks population based voting power (Article I-25), which means that nations with the largest populations would have the most control over policy making. A population-based law would violate the classical principle of local control and state equality. The founders in America realized the importance of state and local power – hence the New Jersey Plan. If a population-based policy were implemented in the U.S., then populous states such as New York and California would be making Federal policy while less populous states would have no influence. In addition, as long as there is collusion between the populous states, laws would be passed with ease and little debate.

The Dangers of Centralized Economic and Monetary Policy

Article I-13 of the Constitution gives the EU exclusive legal power to decide policy in regards to trade tariffs, quotas, monetary policy, competition rules for the international market and trade agreements to name but a few. The issue of the Federal Reserve being “constitutional” in United States is a widely debated topic. The idea of a centralized body having total control over monetary policy obviously conflicts with the idea of decentralized power. The powers of the Federal Reserve can essentially make or break the economic stability of the United States. The reasoning behind the establishment of the Federal Reserve was to reduce systemic risk; however, many have argued that such authority and the history of monetary policy have actually increased systemic risk. The Federal Reserve shares the blame for the creation and bursting of the housing market bubble.

If the EU wishes to implement their own “Federal Reserve,” it can be far more dangerous in the sense where the ultimate goal could be to abolish the currencies of individual nations. Such a move would place one institution in charge of the economic fate of several nations.

The corporatist traditions of countries such as Germany and France, whose population size would give them disproportionate influence on monetary policy under the voting system, could make “crony capitalism” the norm for all of Europe in spite of countries that wish to pursue a more classical liberal approach. Article I-4 states that Laissez-faire and economic competition based on the unobstructed movement of goods, capital and labor throughout the EU countries are constitutionally mandatory, however, this motive serves no purpose in a constitution that would bind nations together. Decentralized power seeks to preserve the principles of a free market. A binding document that would determine “fair” economic and social policy for multiple nations would have the opposite outcome.

The Power of the Lobby

The process of European integration has stemmed from socialist parties, trade unions and big business. These tenants remove freedom and give large bodies the power to impose policy with little resistance. Socialists who have not been able to transform society to their liking through the ballot box, can now have socialist policies imposed through an EU Constitution. In addition, multi-national corporate conglomerates have only one legislative body in which to lobby and negotiate. Compromise and voice from the opposition have only been possible because groups had to deal with the elected democratic governments of each nation. The difference between American framers and their European counterparts is the former sought to protect America from those who have no faith in the democratic process while the latter holds such beliefs.

Summary

If a constitution is not devised as a mechanism to preserve individual freedom and reign in the powers of government, then the creation of such a document serves no purpose. Constitutions should not be devised to band nations together to create a super-power rival to other powerful nations with the “power-elite” in control. Constitutions written with such motives lead to oppression and tyranny. If the EU wishes to follow the footsteps of America’s Founding Fathers, then the framers of the EU Constitution must recognize the importance of localized power, and adhere to the rights of the individual nations’ liberty.

President Obama’s timing of announcing Ben Bernanke’s reappointment as Chairman of the Federal Reserve may not have caused the distraction from the news regarding the federal deficit in which he had hoped. As the federal deficit approaches $1.6 trillion and the debt draws near $12 trillion, Obama has decided to stick with the man who played a significant role in causing this financial turmoil. The starting quarterback has thrown three interceptions, and the score is 21-0 in the first quarter. With no viable backup, the Obama Administration is sticking with their “starter.” However, it is clear that there must be a change in the game plan.

It’s too early for “Hail Mary” passes, and Ben Bernanke is not Roger Staubach. Bernanke’s panicked approach to monetary policy indicates he is afraid of “the bear”…the bear market that is, which is not to be confused with the legendary Chicago Bears’ “46 defense.” Perhaps it is time to slow the tempo of this game down, manage the clock and run the ball. This is not an impossible feat as any member of the 1992 Buffalo Bills who played in the famous “comeback game” will attest. In addition, a one-dimensional offense does not work on the football field or the playing field of economics. Dan Marino was one of the greatest passers in NFL history, but he does not own a Super Bowl ring. “Helicopter Ben”… take a lesson from “Air Marino.”

If Ben Bernanke does not wish to go down in history as the worst Federal Reserve Chairman, he must incorporate a multi-dimensional offense and tough defense in his strategy. When asked about managing asset bubbles, he once said “even if the Fed could identify bubbles, monetary policy is far too blunt a tool for effective use against them.” Bernanke believes that it is easier to clean up the mess after the bubble bursts. It is safe to say that Marv Levy would have preferred to be ahead 35-3 in that famous 1993 playoff game, as the odds for winning would have been much better.

Catch-up football and the Federal Reserve’s strategy of printing money to keep up with government spending have an interesting parallel. Both have very long odds for success. Bernanke is considered to be an expert on the history of the Great Depression, yet his policy does not take into consideration history’s greatest lesson – a nation cannot spend itself into prosperity.

Perhaps Bernanke should seek out a new nickname. How about “Deflator Ben” instead? One of the main reasons why the nation is in perilous financial shape is due to appalling economic policy that does not focus on production and does not use deflation as a remedy to a recession. Bernanke’s predecessor, Alan Greenspan, played a huge role in the crash of 2008 by using low interest rates to induce spending and borrowing whilst outsourcing much of that debt to China and Japan. This policy may have lessened the impact of the previous recession; however, it greatly sharpened the impact of the current demise.

Production is the way out of a recession. The Federal Reserve’s giveaways to induce borrowing and spending will only lead to inflationary nightmares and will make the U.S. dollar worthless. The average American need not plunge farther into debt on account of weak purchasing power.

The price of capital and labor must fall, which will lead to lower prices for goods. When the price of producer goods begins to fall faster than prices for consumer goods, the wheels of the correction process will be rolling. In due time, consumer spending will pick up and market equilibrium will be achieved.

If the answer is so simple, then one must wonder why Ben Bernanke and politicians do not see such a simple solution. Elected officials fear deflation because it is self-correcting. Politicians must sell the illusion that they are needed to “fix” things for people. After the housing bubble burst, prices fell and banks contracted lending. The government responded with financial bailouts which not only prolongs the misery, but stifles the opportunity for capital to be deployed to more opportunistic sectors of the economy. Bailouts, tax credits and all of the other “goodies” politicians give away curtails deflation, and doing so opens the door to more catastrophic consequences in the future.

If Bernanke does not wish to see a repeat of the crash of 2008, he will not repeat the mistakes that were made in “correcting” the recession in the early 2000s. This time, it may not take five years to see an explosion. Economists who are predicting positive GDP growth and cheering over the fact that this ugly recession may be coming to an end is a very hazardous, short-term view. The concern should be on the inflationary impact of the actions taken to “soften the blow” which poses the possibility of a double-dip recession. Will “Deflator Ben” come to the rescue?

The Obama Administration has understood the fact that many Americans do not want a public insurance option. Although it is currently unclear as to whether or not the Administration will abandon the public option, the co-op solution that is gaining some support will extend the same problems that the current health care system has to more people. The only difference between co-ops and the public option is that the term “co-op” doesn’t have as negative of a connotation as “government run.” Once again, politics is put ahead of real solutions that will work.

The lawmakers’ rationale behind the co-op system is that the creation of private, not-for-profit insurance companies will serve as competition to for-profit private insurance companies in an effort to bring down the cost of insurance. This conclusion is illogical because profits are not the reason for the high cost of health insurance, and the following provides a better analysis:

The Misuse of Insurance

Over the years, health insurance has evolved into the key for getting access to health services as opposed to being a safeguard against catastrophe. Thousands of federal and state mandates exist that define coverage – from prescription drugs to hair transplants. When insurance companies are required to cover certain procedures and medications, the cost will rise. In addition, insurance coverage boosts the demand for services, but supply cannot grow at the same rate which also leads to higher costs.

The current system has the government defining the medical services that should be covered and mandates how insurance companies are able to charge for premiums. The community rating system establishes limits in charging different prices to different consumers which results in healthier people paying for those in poor health who require more care.

The co-op system focuses on getting people insured, when the focus should be on limiting the role health insurance plays in getting access to health care. Instead, co-ops will continue to boost the demand without addressing supply.

Three Percent Profit Margin vs. Not-for Profit

It has been established that the inception of co-ops will continue to stimulate demand for health services without addressing supply. Next, let’s examine the insurance companies’ profit margin. For-profit insurance companies average a 3.3 percent profit margin, and there are 85 industries that do better. (1) Ironically, the beverage/brewer industry is number one with a whopping 25.9 percent profit margin, yet there are no politicians complaining that we have a beverage crisis! Has there ever been a time where news reporters have interviewed families who cannot provide their children with a soda pop treat, or college kids complaining that the cost of a keg for their Friday night bash is killing their future?

Therefore, how can politicians blame profits when it is illogical to conclude that a 3.3 percent profit margin is driving up the cost of care? If co-ops serve their purpose, then they can reduce the cost of premiums by 3.3 percent. In addition, this cost reduction may not even be possible due to the supply/demand concern.

Public vs. Not-for Profit in “Capital” Terms

This is a concern that is currently being glossed over by the lawmakers. If co-ops are to be established, then how will they be funded; and how much of a role will government funding play? Not-for-profit companies do not have the advantages that publicly traded companies have when it comes to raising capital. For example, not-for-profit companies cannot issue common stock or sell bonds in the open market to raise capital.

The issue of raising capital is a critical issue to address since start-up costs will be involved in the establishment of co-ops. There are federal and state laws that require insurers to hold reserves of up to one-third of premiums. If co-ops are to be established in every state, it is possible that the federal government will have to contribute billions of dollars just in start-up costs without even addressing future capital requirements. The result would be as economically catastrophic as a public option and still does not address the high costs of insurance.

The Fallacy of Profits at the Expense of Care

One talking point that liberal politicians cling to is the argument that profit or the incentive to make a profit comes at the expense of quality care. This argument may have some merit if the majority of the health care industry was for profit, and the for-profit sector had very high profit margins. However, the opposite is true. According to the American Hospital Association’s 2007 annual survey, about 15.2 percent of registered hospitals in the United States are for-profit. (2) In addition, for-profit hospitals are not faring much better than the insurance companies as their average profit margin is 3.6 percent. (1)

Another aspect of this argument to consider is that the need to control costs does not disappear with the incentive to make a profit, as funds and resources are limited. However, there might be a correlation between limited resources and removing the incentive to profit. Returning to the beverage industry example, it seems that the supply of beverages is ample and the product is affordable, yet this industry is the most profitable. Although the beverage industry and the health care industry are completely different, the point to be made is that the incentive to profit boots SUPPLY. The problem with rising health care costs leads back to the simple economic concept of supply and demand.

In conclusion, if the government lets the free market work, as opposed to attempting to stifle incentive, we will solve the problem of high costs.

(1) http://seekingalpha.com/article/155858-health-insurance-industry-s-profit-margins-rank-86?source=yahoo

(2) http://www.aha.org/aha/resource-center/Statistics-and-Studies/fast-facts.html

BY: MIKE PORTER

The Car Allowance Rebate System (CARS) is the official title of the program. It has also been called “Cash for Clunkers,” which was the name originally chosen by some dealers to market the incentive-based program to consumers. Essentially, this is another big rescue program by our government intended to save struggling automakers, people who cannot afford a new car and the environment. From the onset, one may think our government has a winning program on their hands. After all, who could deny a program that generously helps people and the Earth? In reality, this program has helped very little and, in some ways, could make things worse.

The plan is loosely based on a program initially implemented in Germany, only this version has a few more restrictions. It issues a credit based on the car you are trading in against the new car you are purchasing. In order to qualify for the program, you have to own a car today that gets combined miles of 18 mpg or less according to www.fueleconomy.gov. Depending on how inefficient your old car is compared to the efficiency of the new car you purchase, the more of a rebate you will receive. The rebates available are $3,500 or $4,500 for your car as long as it is not more than 25 years old.(1) Apparently very old clunkers do not qualify for this program. There is a specific list of vehicles that are approved for you to purchase under this plan that cost $45,000 or less. All cars have to be purchased between July and November of this year to qualify. (1) This program is in addition to any dealer incentives your dealer may be offering such as cash back, low-interest financing, etc. The old car is sent to the salvage yard with the engine destroyed by the dealership. (1) Basically this is a check written from the stimulus package that goes straight to the dealership upon purchase of a new vehicle and the savings is passed onto the consumer at the time of the purchase. The initial amount funded for the program was one billion dollars, and it is now estimated that an additional two billion will be required to fund the remaining portion.

First, the misnomer is that the CARS program would actually save struggling dealers. There is a website set up to give dealers the information they need to comply. Many dealers have complained the site is unstable and crashes often. A poorly written disclaimer meant to discourage hacking into the site has actually frightened many into thinking the government can take over their computer if they browse to that website! This prompted Glenn Beck to do a segment on his program dealing with the issue on his television program. The initial disclaimer has since been changed. Also cars that may be clunkers by our standards are not necessarily clunkers in the eyes of the government. (5) Many people will not qualify for this program whether they believe they have a clunker or not. The numbers from the White House paint a rosy picture showing results of thousands of cars that have been sold and inefficient cars that are no longer on the road. What the White House is not telling you is that summer is normally a busy time for car sales.

Critics of the program predict many of these people would have bought cars eventually and as a result waited to buy a car once the “buzz” leaked about this program. Our government very well could have caused dealerships to have slower months leading up to when this program was started. How many people were let go in the auto industry between the time this program was announced and when it was finally available? Many also predict once this program ends car manufacturers will experience more down months which will result in more lost jobs. How does that help anyone in the car business? Forcing dealers to have months of sales squeezed in a limited amount of time can be problematic for the car industry who have cut back and are running with less people. Who is going to change their spending habits in this economy if they know this demand bubble is temporary and will not continue? Many of the cars purchased in this program are going to foreign car manufacturers. Is that really what our government intended to happen after dumping billions into GM and Chrysler? Also, why does our government choose the auto industry? Millions of people have lost their jobs in a variety of industries, but you do not see a program like this for washing machine manufacturers do you? Worse yet, what are the automakers going to owe the government in the end? I fear this could lead to more regulation and more control by our government in the auto industry moving forward.

Next, the idea that CARS is helping people who cannot afford to buy a new car is also a myth. Our government cannot explain how someone who cannot afford a new car could afford to have a new monthly car payment in an environment where we could be coming up on 10 percent unemployment. Increased demand also leads to dealers selling cars at higher prices with fewer incentives than they would otherwise. This could also lead to fewer options for the consumer as dealers run low on some models. Does any of this sound familiar? It sounds a little like the housing bubble we are experiencing today, doesn’t it? Would it surprise anyone if we saw an increase in people defaulting on car loans in the next few years? If that does happen, then you can bet our government would be discussing a big ticket rescue package to save these people who are defaulting largely due to past programs administered by our government. In the long run, I feel this may hurt people more than it may help by forcing some into a more expensive car just to qualify for the program. Also, since dealers are required to destroy the engine, this will result in fewer functioning engine parts for some older cars. Fewer engine parts available will mean higher prices to get these cars repaired which will hurt many who cannot afford to buy a new car even with CARS incentives.

Finally, the claim that CARS is saving the planet is also debatable. Many of the new vehicles purchased through this program average about 25 mpg. (2) At a taxpayer cost of 3 billion dollars, many people could have bought a used car they could actually afford and got similar if not better fuel economy. Is the White House taking into consideration the energy that is spent to properly dispose of these cars according to government rules? The Associated Press has estimated carbon dioxide will be reduced just shy of 700,000 tons a year as a result of this plan. (4) While this sounds like a lot, last year the US emissions totaled nearly 6.4 billion tons, which was down from years prior. (4) One doesn’t have to be a math genius to conclude this hardly represents progress.

In the end, we can conclude this is just another government program that provides very little results and could lead to other problems in the future. In addition, this is costing tax payers more than anyone had expected. The government really needs to stop picking and choosing industries they want to help and allow the free will of the market to decide how they should or should not spend their money. Since the average car being purchased is getting just over 25 mpg, one can easily see there is still a market for bigger cars that use more gas than the economical tin cans our government says everyone wants. We can add “Cash for Clunkers” to the list of many other government programs that cost tax payers a fortune and have not produced the results we had hoped.

(1) http://www.cashforclunkersfacts.com/bill-faq
(2) http://www.foxnews.com/politics/2009/08/04/clunkers-programs-environmental-impact-debate/
(3) http://www.foxnews.com/politics/elections/2009/08/05/experts-carbon-savings-cash-clunkers-small/
(4) http://www.foxnews.com/politics/2009/08/05/car-rebates-populist-stimulus-clunker/?loomia_ow=t0:s0:a16:g2:r2:c0.048353:b26960246:z0
(5) http://www.cbsnews.com/stories/2009/07/11/eveningnews/main5152636.shtml

Linda Douglass, the communications director for the White House Health Reform Office, must have long and tiring days searching for all of those “scary chain emails and videos” that she claims surface when health care reform is on the table in Washington. She also makes the assumption that the people responsible for making these videos and emails have quite a bit of time on their hands. She must not be familiar with the convenience of modern technology, as a simple search can produce results in a matter of minutes. At least the taxpayers are not paying for these scary videos. Instead, they are paying a White House official to spend time searching the internet for scary emails and videos. A wise use of scarce tax dollars, isn’t it?

Douglass Video Response

View the “scary video” here if you dare!

In the beginning of her response, she quipped that the video did not show the President reassuring the American people that they would be able to retain their employer coverage if they wish to keep it. However, if she took the time to watch the scary video (she could have kept the lights on if necessary), she would have seen that the video opens with a clip from President Obama’s recent speech to the American Medical Association that shows him addressing an “illegitimate concern.” The illegitimate concern he addressed was his opponents’ criticism that his plan will lead to a single payer system. The “scary” video then moves on to play clips from speeches that Obama gave at the SEIU Health Care Forum in 2007 and to the AFL-CIO Civil, Human and Women’s Right Conference in 2003 in which he CLEARLY stated that his position that he is in favor of a single-payer system. How is it scary to use Obama’s own words? The only thing scary is that it reveals the hidden truth that is becoming increasingly difficult to suppress.

Perhaps viewers could dismiss his claims as pandering to his base. All politicians make promises to their base that they know they cannot keep. However, the next person to show up in this video is Barney Frank, and he confirms the suspicion that opponents to President Obama’s health care plan have. Frank asserts that if a good public option is passed, it could lead to a single-payer system. He also goes on to say that this approach is the best way to reach the ultimate goal of a single payer system. This clip was taken from a left-wing organization called “singlepayeraction.org.” (View here) Do they make “scary” videos as well? At least Ms. Douglass is even handed!

Frustration continues to grow due to the fact that the Obama Administration continues to insult people’s intelligence. It is no secret that the Obama Administration and Congressional leaders that represent the far-left wing of the Democratic Party want a single-payer system, and they know they don’t have the votes for it. The only approach is to lure people into the public option so the private option will either be eliminated completely or only be available to the very wealthy over time.

Perhaps Ms. Douglass could take a more constructive approach to her job and refute the following claims:

1) How does a private company compete with a public plan when a) the government heavily regulates insurance coverage and b) the public option has access to blank U.S. Treasury checks?

2) Why will employers provide private insurance coverage when a public option is available? The current proposal in the Senate does impose fines on employers with 25 or more employees for failure to provide insurance coverage; however, there is no specific mandate that employers must provide PRIVATE insurance. Therefore, businesses will provide assistance for the public option. The public option will be offered at a lower cost initially to drive out the private option.

Ms. Douglass could also make better use of her time by giving specifics rather than encouraging people to report these “scary” videos. Giving specifics on policy proposals is not something this Administration does well, nor does it respond well to criticism. Recently, I wrote a three-part piece that constructively criticized “Obamacare” and explained how a free-market solution would work. Hopefully, my columns didn’t qualify as “scary,” although it would be an honor to be on Ms. Douglass’ watch list as one of those “scary” people. This can only mean that my work challenges people to think!

August is going to be a difficult month for Congressional leaders who will face their angry constituents. The following list of “scary” videos is a preview of coming attractions. Beware! You may run into these scary people at your local grocery store:

Arlen Specter and Kathleen Sebilius – Pennsylvania Town Hall (Specter actually states single-payer should be on the table.)

Tim Bishop – Setauket, NY

Lloyd Doggett – South Austin Texas

Protesters are also showing up at the President’s Town Hall Meetings, possibly because they are not being let in to politely discuss the issues! The motorcade had to drive through a protest four blocks long.

I’ve written extensively about bad economic policy for over a decade, not because I have too much time on my hands, rather it is an issue too important for me not to donate some of my limited free time. For the people who voted for “hope” and “change” last November and those who were blind to the Republican Party’s faults, it is never too late to see the light. I encourage people to speak their mind because, eventually, someone will listen. After all, “facts are stubborn things.”

Adam Smith once wisely said “Great ambition, the desire of real superiority, of leading and directing, seems to be altogether peculiar to man, and speech is the great instrument of ambition.” If only President Obama would embrace more of Smith’s beliefs…

The first two pieces (Part I, Part II) of this series exposed some major caveats in the healthcare bill that Obama is urging Congress to pass and addressed some of the common myths of a free market enterprise system. Now that the criticisms have been established, it is time to focus on the solution.

The Invisible Hand vs. The “Visible” Hand

As President Obama continues to campaign around the nation in an effort to win support for the current healthcare proposal, he is selling the “visible” hand approach. The visible hand has been present in the healthcare sector for decades. The result has been out-of-control costs and a monopoly by the insurance companies.

In 1964, President Lyndon Johnson promised the American people that Medicare would not cost more than $1 per month. For $1 per month, Americans would have a secure financial future knowing that all of their medical costs would be paid when they reach an age when they will require more medical care. It is safe to say that Medicare costs today are far off the inflationary curve, and Medicare no longer covers all costs.

Proponents of government healthcare say that rationing is a scare tactic used by the opposition. The truth is rationing is not a scare tactic, as it has taken place with Medicare. In an effort to control costs, Medicare no longer covers medical care in full. Senior citizens must purchase supplemental insurance in order to have little or no out-of-pocket costs.

Part II of this series touched on government regulation of the insurance companies and the community rating system. Obama’s plan is more of the same. People will not have the freedom to choose what is in their plan. Government regulations require anything from in-vitro fertilization to hair transplants to be covered. Those who may never require those services are forced to pay for those that do, which is why insurance premiums are so expensive. If people have the freedom to pick and choose what they wish to have insurance cover, the premiums will be more affordable.

The community rating system states that people must pay the same rates for their level of coverage regardless of their age or medical condition. It’s a wonder why so many young people opt out of purchasing health insurance when they have to pay the same rates as those who require more medical services. Under the current proposed plan, insurers would not be allowed to charge more than twice as much for one patient than any other patient with the same coverage.

Perhaps it is time for the invisible hand. Real healthcare reform should allow the consumer to freely choose what to buy, how much to buy and allow the producer to freely sell it. This means allowing people to purchase insurance policies across state lines, and removing all government mandates that dictate what should be covered.

Cost Control vs. Number Insured

Which is more important? The magic number is 47 million. Try and type the number “47 million” in a general internet search and leads for “47 million uninsured Americans” will appear. The focus in the current proposal is on the latter when it should be on the former. What good does insuring everyone do if the costs are not addressed? Furthermore, if the costs are not addressed, everyone’s quality of care will be severely diminished.

Countries that have universal care face rationing of care and lack of access to modern medical technology because rising costs do not allow for such investment. Healthcare reform should not be about getting people insured, but rather bringing down the costs in order to allow more people to have access to QUALITY care at an affordable price. Nations that reject centralized government control and incorporate market mechanisms have the best chance of accomplishing this feat. Nowhere in the world has any nation’s government been able to successfully control costs without it coming at the expense of quality care. France’s healthcare system, a country that Michael Moore suggests the United States follow, is the single largest factor driving their overall budget deficit.

Empowering the Government vs. Empowering the People

Which has the power to do more harm? The United States is a country that embraces freedom, so why does the Obama Administration want to empower the government to make the American people’s most PERSONAL decisions? Benjamin Franklin once said: “They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.” If the government bureaucrats are empowered to make people’s health decisions, the United States will suffer one of the greatest losses of liberty.

The Bush Administration didn’t get much right when it came to fiscal and economic policy, but one bright spot was the creation of the Health Savings Account (HSA). HSA accounts create a market that is strictly CONSUMER driven. People are empowered to make their own decisions and use tax-free dollars to pay for medical care. HSAs are not about insurance. They are about people spending their OWN dollars which induces far more cost-conscious behavior, which will play one of the largest roles in bringing healthcare costs down for everyone. This is due to the fact that people spend their own money much more wisely as opposed to “using their insurance.”

HSAs can be structured to reward those who live a healthy lifestyle and give people the freedom to choose the level of insurance based on their needs. People who complete personal health assessments are given funds, and employers can fund the accounts much more cheaply than being forced to insure their employees. Preventative care is encouraged and is FREE. In addition, some people may choose to use HSA dollars to purchase a high-deductible plan in an effort to guard themselves against higher medical costs. The bottom line is the consumer is empowered to make their own decisions as opposed to the government.

The modern technology of government takeover is not improving the wellbeing of America’s healthcare system. Perhaps it is time to try an age-old, natural remedy that has historical proof of success…

Part one of this column focused on criticisms of the Obama Administration’s Plan. This part will focus on dispelling the myths of a decentralized, free market approach, which should be the solution to providing affordable health care. The last and final part of this column (to be published next week) will elaborate on why a free market solution should be sought.

President Obama will address the nation in another press conference this evening urging the nation to back his health care proposal. It is very likely that he will continue to preach the same old, tired talking points in an effort to win support. The public is beginning to catch on, as support for Obama’s health care plan is steadily declining.

My columns are not meant to predict the future by any means, but it might be safe to say that at least two of these common myths will be discussed by the President this evening.

Myth Number One: Those who oppose Obama’s plan are in denial of the fact that America’s health care system needs reform and accept the status quo.

This statement could not be further from the truth. Politicians (including a growing number in the Democrat Party), columnists and economists who oppose the President’s plan have never said that the health care system is not in need of reform. Instead, they oppose a big-government, centralized solution.

Myth Number Two: More government control in the health care system is needed because insurance companies have “run-away profits” and are gouging the consumer.

Even Fox News’ Bill O’Reilly emphasizes this falsehood on a regular basis in his “talking points memo.” Leftists such as Michael Moore tout France’s system – a country he suggests the United States emulate. Perhaps Mr. Moore is onto something. The eye-opening fact that no one discusses is that France’s private health insurance market is less regulated than the United States. How so? Regulations in America come from both the Federal and State level. Many states in America require community ratings and/or put limits on premiums whereas private insurance in France is mostly experience rated. There are no regulations that specify what benefits must be included in coverage. Regulation from the U.S. Congress and state governments have gone as far as dictating which drugs doctors can prescribe and the dosage of medication that can be given. The health care market is one of the most regulated markets in the nation.

These types of strict mandates are solely responsible for driving up the cost of coverage. According to the Council on Affordable Health Insurance, state government mandates (mandates that prescribe everything from the treatments private insurance must cover or additional services they must add) can increase the cost of health insurance sold in the individual market by 20 to 50 percent, depending on the state and the mandate. In its annual survey, the group counted more than 1,900 benefit mandates in 2008. (1)

Therefore, the pundits have it backwards – more government regulation in the health care market INCREASES costs for consumers.

Myth Number Three: The free market health care system has failed the American people. Anyone who espouses such a system is obviously “in bed” with the insurance companies and not on the side of the hard-working American people who see their health care costs skyrocketing.

This is a very easy liberal talking point to debunk. America’s health care system is NOT free-market based! The dispelling of the penultimate myth is proof. The U.S. system is the furthest thing from a market-based system. Fifty cents out of every dollar paid for health care comes from the GOVERNMENT. (2) Since World War II, the health care market in the U.S. has been a hybrid system that utilizes very few free market principles and massive government intervention in most areas. The outcome has been an inefficient bureaucratic mess.

Centralized health care planners enjoy accusing advocates of a free market approach of being “in bed” with the insurance companies. However, is it the other way around? The answer can be found by tracing the history back to 1939 – the year of the inception of “The Blues” – Blue Cross and Blue Shield. Hospitals created Blue Cross and doctors started Blue Shield shortly thereafter. Under pressure from hospital and physician organizations and with the help of politicians, “The Blues” were able to win competitive advantages from state governments and special discounts from medical providers, which is how they and subsequent major insurance companies gained a MONOPOLISTIC position. Once these giant companies were able to gain most of the market share, the medical community could refuse to deal with other commercial insurers (which would have provided competition to lower prices) unless they adopted the practices followed by “The Blues.” Even the government’s Medicare and Medicaid plans are modeled after “The Blues.”

Those who support a decentralized system wish to end the monopolistic control of large insurance companies and force them to compete, which would play a significant role in lowering costs for the consumer. A decentralized system would also end the practice of state health insurance mandates. The federal government, through the "Health Care Choice Act," would allow health insurance to be sold across state lines. Through existing federal law, states could open their own markets to competition. In New Jersey, with the highest insurance rates in the country, this has just been done. If it were done in Illinois, a family living in Chicago, for example, could save upwards of $3,000 per year if they were able to buy their insurance in Iowa. (3)

In 2008, President Obama opposed the Health Care Choice Act. (4) Why would Obama oppose a measure that forces the insurance companies to compete and provide several low-cost options to the consumer? Insurance companies also oppose this measure. Why would they want to give up their monopoly? This action leaves one to wonder who is “in bed” with the insurance companies and whether this entire debate is not about care of hard-working Americans and more about power and control.

Myth Number Four: America is in a “health care crisis.” Immediate action is needed.

Rahm Emanuel says “you never want a serious crisis to go to waste.” Translation: when the government wishes to fundamentally restructure a major sector of the economy in which it stands to gain great power, it is best to sell it under the guise of protection when the public is too panic stricken to object. Power-hungry authoritarians have always sold their ideas at times when the public can be misled into thinking that personal choice and deregulation cause chaos in the market and that centralized planning best manages systemic risk which maintains economic stability. However, government power grabs quickly lose public support once the public realizes what these measures entail.

President Obama campaigned on transparency. In the first seven months of his presidency, transparency has meant ramming legislation through Congress without representatives reading the bill! A perfect example was the stimulus package that was passed earlier this year. The situation was too dire for Washington to play the usual political games. Immediate action was needed. This is the type of “change” in which America could be confident – the public’s elected officials passing legislation without reading it first.

The President has just recently admitted that he does not know all of the measures that are contained in the current health care bill. During a conference call with leftist bloggers, a blogger from Maine claimed Section 102 of the House health legislation would outlaw private insurance. He asked: “Is this true? Will people be able to keep their insurance and will insurers be able to write new policies even though H.R. 3200 is passed?” President Obama replied: “You know I have to say that I am not familiar with the provision you are talking about.” (5)

Myth Number Five: A government option provides more competition as it serves as a competitor to the private industry. Anyone who says this plan is a “back-door” government takeover of health care is simply not telling the truth.

Perhaps the President was confused by the question the blogger from Maine asked because he seems to be confused over the fact that the government can provide additional competition in the health care market.

In order to effectively break this point down, the following question must be asked: Can a private company with limited capital compete with a government plan that has access to a blank checkbook? Furthermore, if the government has the power to mandate and regulate a private company with limited capital, how can it compete? The answer is NO. A similar comparison would be a “mom and pop” shop competing with the likes of Wal-Mart. Just like the many well-intended government incentives of the past, the outcome is very different than the initial intention.

Since the U.S. Treasury gives Congress an unlimited supply of blank checks, the government can offer a lower price for its health care plan in the beginning in order to attract people towards the plan. After all, what is another trillion dollars added to the deficit at this point? Private insurance companies do not have access to such capital. In addition, if Obama’s plan is passed, the government will have even stricter control over what is to be included in the coverage. The end result will be many people dropping their private plan in favor of the government’s plan.

Moreover, the blogger in Maine had a very valid concern. There is a provision in the bill that restricts people from choosing a private plan should they lose their job. Page 16 of the now 1,018-page bill states the following: “Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day" of the year the legislation becomes law.” (6)

Obama’s insistence that Americans will be able to keep the coverage they have if they are satisfied is a half-truth because there are exceptions. Page 16 of this bill states that those who currently have private individual coverage won't be able to change it, and neither will those who are laid off or leave a company to work for themselves be free to buy individual plans from private carriers.

In summary, there is one question I would like to ask of everyone: who is better equipped to make decisions regarding your well being and the well being of your family – you or government bureaucrats? Do not be fooled by the notion that everyone will receive quality care simply because they required to purchase insurance. Countries that have national health care systems have very serious problems that include rising costs, rationing of care and lack of access to modern medical technology. Profits and market-based mechanisms, (words despised by authoritative leftists) are the key reasons why America has been the leader in innovative technology and quality care and NOT the reasons why people cannot afford care, as blame there is attributed to government intrusion.

(1) JP Wieske & Victoria Craig Bunce. "Health Insurance Mandates in the States 2008." Council on Affordable Health Insurance, 2008, p3.

(2) Regina Herzlinger. Who Killed Health Care? America's $2 trillion Medical Problem – And the Consumer-Driven Cure. McGraw-Hill: 2007

(3) Greg Blankenship. "Should Affordable Health Care Stop at the State Border?" Illinois Policy Institute. February, 2008.

(4) http://online.wsj.com/article/SB122282743245193057.html

(5) http://fixhealthcarepolicy.com/in-the-news/obama-admits-hes-not-familiar-with-house-bill/

(6) http://www.ibdeditorials.com/IBDArticles.aspx?id=332548165656854