When President Hoover Raised Tariffs

An affluent multi-national tycoon is elected to the US presidency.  The anemic economy is unabatedly trajecting downward. He snaps into action enacting a populist economic package in the hopes of coming to the rescue of the everyday working man. Ignoring the advice the egg-headed pundits, he races out to increase tariffs against the foreign traders guilty of rigging the system. 

The president, mugged by reality, is later left devastated when economic miracle he so desperately banked on never materializes. The economic malaise only exacerbates. 

The President was Herbert Hoover. President Hoover was a self-made pull-yourself-up-by-the-bootstraps millionaire. Both his parents tragically died orphaning Hoover at a very young age. Undeterred by life’s anguishing heartbreaks, he went on to graduate from the prestigious Stanford University in engineering and made his millions building a global mining empire. 

While in the Oval Office, the stock market crashed in October 1929, and the Great Depression set it.  Unemployed skyrocketed upwards to unprecedented heights. This is where Hoover gets horrendously inaccurate reputation as doing nothing. Ever heard of the Hoover Damn? President Hoover was pumping out shovel ready infrastructure stimulus projects long before Barrack Obama or Donald J Trump were even a twinkle in their fathers’ eye. 

One of the most Hoover’s most notorious pieces of legislation was the import duty raising Smoot-Hawley Tariff Act. Over a thousand economists penned a letter pleading the President to veto the bill.  Hoover initially spoke scathingly of the Smoot-Hawley calling it "vicious, extortionate, and obnoxious" fearing the damage it would wrought on the nation’s foreign relations. He subsequently caved under the political pressure, and it became law. 

The President’s initial instincts were right.  Even stalwart World War I allies lashed out at the “vicious” and “obnoxious” tariffs with retaliatory export duties of their own. Italy doubled their tariffs on American cars causing US manufactured automobile sales to plummet 90% there. France practically slammed the door on American products. Spain’s mammoth tariff increases as well essentially shut out American goods.

The incensed global community overwhelmingly rejected American exports. American exports dived 61% and imports by 66%. The suffering hit home when US GNP collapsed going down from $103.1 billion in 1929 to $75.8 billion in 1931. Nor was the everyday working man Hoover had so faithfully championed spared. The unemployment rate shot up from 8% in 1930 to 16% in 1931 until finally topping off at 25% between 1932-1933.

Smoot-Hawley set off fuse under the global economy igniting an international trade war of tit-for-tat anti-trade legislation. International trade precipitously descended from $5.3 billion in 1929 to $1.8 billion in 1933 only deepening the global recession. As the lengthy lines of unemployed snaked their way around street corners across the world and with the global economy in shambles, the credibility of the contemporary governments quickly dissolved in the eyes of their suffering populaces.  Authoritarian populists of the likes of Hitler, Mussolini, and Tojo perked up with anticipation.

It was also a nadir for international relations. With the allies bitterly divided over an ongoing and asinine trade war, who was to stop the nascent Axis powers?  The winner of the tariff war was no one. The Smoot-Hawley Tariff Act fiasco stands as a glaring historical warning to anyone in the Trump Administration who thinks that raising import duties is the best way to make America great again.

How Occupational Licensing Hurts The Poor (And My Family)

 

Occupational licensing laws have not only put an excessive burden on Utah workers and consumers but upon my own family as well.

After years of the ubiquitous customer service call centers dotting the state’s job market, I grew increasingly weary and in search of greener pastures. I applied for a health insurance position anticipating a welcome change of pace. The new position required a health insurance occupational license. With higher pay and better benefits at stake, I was in no mood to delay. 

 

After less than 2 months of intense online studying and $160 later—of which my company completely reimbursed,— I excitedly became an official licensed health insurance agent. At the testing site, barely able to contain myself, I went to the bathroom in order to avoid the bewildered gaze of the proctors and proceeded to gleefully jump up and down for joy.

My cousin, Haylee’s, experience with occupational licensing didn’t exactly leave her bounding up and down ecstatically. The mother of three raucous little boys, she had to take an exorbitant amount of time out of her already hectic family life—17 months to be exact. She had to shell out over $1,600 just to be allowed a license to cut hair.

I’m not complaining about my health insurance licensing requirements. What is inexplicably unfair is how State of Utah decides to pile an excessive and onerous burden on Haylee’s shoulders but not mine. Everyone knows that your hair always grows backs after the awkward stylist errs, but mistakes on your health insurance plan are not so easily remedied.

The asininity of our occupational licensing policy doesn’t end there. Here are just a couple of quick examples. Emergency medical technician requires 28 days of training and costs $145 in fees vs a house painter with a required 730 days of training at a cost of $549. Nurse assistant takes 2 months to train at costs $559 vs a finger nail technician at 4 months and $1,647 or esthetician (makeup artist) at 7 months and $3,145. A fireman requires less training at less expensive than an esthetician.

These exorbitant costs don’t just affect the plucky woman brushing on your daughter’s makeup right before her wedding day. The price tag trickles down to Utah consumers costing households $1,000 extra per year.

In the 1950s, the government required 5% of jobs be undertaken exclusively by licensed workers. That figure has since quadrupled. On average, Utah workers are obligated to spend 417 days taking tests, classes and paying overpriced fees before they are allowed to set foot on the worksite. This ranks at a national high. Sadly, what we purchase isn’t that much safer or better quality to show for it.

Fortunately, change now dangles tantalizingly close to our fingertips.

Like the grainy videos of the enigmatic Big Foot, the rare sighting of the elusive bipartisan agreement seems to be becoming more and more scare. The difference is there is no need to meet this type of welcome ideological convergence with any cynical skepticism. Such is the case when it comes to reforming our tortuous occupational licensing regime.

The Obama administration agrees it needs to change. Conservative Congressional Republicans are on board. Libertarians want it. Even the Euro-liberals at The Economist magazine from across the pound wonder aloud why we haven’t changed it yet.

All we need is for Utah lawmakers to get on board. To find out more what you can do, hop on over to freeutjobs.com, email your state representative or let your friends and family know. No permit is required.

How the GOP can win back Women

A nanny visa will lower childcare costs, increase access, and increase competition

The Republicans have a women problem. There I said it. President Obama won the women by 55% in 2012 by 54% in 2008. Senator Kerry 51%. Vice President Gore 54%. President Clinton 45% to President Bush’s 37% and 54% for his reelection. No Republican has won a majority women vote since President Bush sr. beat Governor Dukakis. What I present will not be a panacea to the problem but will be a step in the right direction.

Working Mothers’ participation in the workforce is very sensitive to childcare costs particularly single mothers. For them, it could mean the difference between employment or the drudgery and dependency of welfare. Social Conservatives (of which I am one) may lecture all they like about how two parent households occupy a higher rung on the socioeconomic ladder than their single parent counterparts, but once the tooth paste is out of the tube, it’s out. Marriage isn’t always an immediate option for all single mothers. We must accept women have become a fixture of the work place and single parenthood probably isn’t going down anytime soon.

Since childcare costs are so pivotal to women with children, the best solution is a supply side one. Many Liberal Democrats offer to increase subsidies and taxes to pay for childcare, but fiscally conservative women are hesitant to fetter their children down with any more debt than this out-of-control federal government already has. And they don’t want to pay any more taxes that would reduce employment and diminish economic dynamism. The solution is to increase the supply of childcare workers through a nanny visa program. It would allow childcare businesses to bring in more needed help, working women to bring in the nannies they need to watch over their children while they earn a living, foreign childcare business owner to set up shop while instantly create needed jobs on American soil, and those who want to bring in their relatives to be nannies. More women who would normally be on unemployment could return to the workforce because if their take home wages after childcare costs only breaks even or leaves is in the red then there is little incentive to return. It will lead to greater access and competition while lowering childcare costs.

Even if this proposal didn’t increase Republicans’ share of women’s vote, it still good economics and with women’s work force participation rate being abysmally low and unemployment stubbornly, good economic policy would be a breath of fresh air for America’s exhausted labor market.

The Right Answer to Obamacare.

 Watching a cable news debate over the rising cost of healthcare, I could barely contain my indignation when I heard a pundit claiming the free market had failed us, implying it was now time to unleash the heavy hand of government into our healthcare. Only government intervention could counter the spiraling costs, and on our own we had failed. It was for our own good. I asked myself, how could this person fail to see the downward price affect the free market has had? Had he not read his history? Has he not seen what has happened to the prices of cars, phones, and computers? In the past, these were only play things of the wealthiest among us but now commonplace household items.  I now have the answer and the proof to verify. The solution won’t come from heaps on ineffective federal subsides carelessly tossed at our problems with cult like vigor and a blind faith in a future that never has and never will be. The answer comes from the bottom up and the middleman out and not from the top down. It comes from the free market. It is from the innovativeness of our entrepreneurs—something which has been lacking in the health debates.  It comes from surgery centers and other medical clinics which don’t accept insurance, be they government or private. It is because they only accept out of pocket payment from their patients or their employers. It comes from direct medical expense pay.

                In Oklahoma City, the local hospital, Integris Medical Center primarily receives its revenue from health insurance reimbursements. It charges $7,542 to perform a routine carpel tunnel surgery. In the exact same city, the Oklahoma Surgery Center, that doesn’t take health insurance only out of pocket or out of the employer’s pocket, charges for the same operation $2,750—1/3 the price. In addition, the Surgery center has full price transparency. The cost for the procedure and all other procedures are posted on their website. The clinic works with the Kempton Group, a health care administration firm. The Kempton Group works with companies that pay their employees’ healthcare benefits directly out of their revenue instead of through insurance. The companies working with Kempton agree to wave all copays if employees agree to be treated at the Surgery Center. This is completely unprecedented given that most companies provide their employees’ healthcare through insurance.

                Integris, other hospitals, and clinics, which primarily obtain revenue from private or government insurance, are notorious for outrageous mark ups. For example, the hospital charged over $300 for a steroid that only costs 0.75 cents and over $100 for a pain killer that only costs $1.50 whole sale. Moreover, they are not up front with their prices. The high price inflation puts medical care out of the reach of those who don’t have insurance. Since most Americans receive health insurance through their jobs, it leaves the lion’s share of the 12.3 million unemployed and their families out in the cold.

                The reason the traditional health insurance centered care is so expensive is that patients never see the bill; therefore, there is never any sticker shock. There is a whole host of perverse incentives at work. The health insurance wants to pay out at little as possible. They don’t make money when you’re cured. They make money when you pay your premium. The hospital wants to maximize their share of the insurance reimbursement, and the patient wants to get as much service as possible. It is like an employee at a Vegas restaurant with the company credit card. What is his incentive to just purchase a modest meal? What is the restaurant’s incentive to provide it for a reasonable price? The employee doesn’t lose out if the restaurant over charges him. Meanwhile, the company isn’t the one eating the meal. Their concern is the bottom line. The copay spreads around the burden of payment between the employer, employee, insurance firms, and the government. Most employers receive tax credits for providing healthcare insurance to their employees. The shared cost leaves no one fully responsible for the overall price, diminishing the incentive for cost efficiency. Sadly the consumer loses out, and we’re left with massive inefficiencies.

                The middle man in the health care system aggravates the inefficiencies in hospitals and traditional insurance taking clinics.  Hospitals already have to deal with in-patient, out-patient, and emergency care. A portion of the emergency and routine care must be provided for free for clients unable to pay leaving the burden of cost on those who do. Instead of specializing and focusing in one particular area, the hospitals are spread thin. The multiple levels of service require expensive administrators everywhere who often earn 6 digit salaries. For example, at Integris the top 18 administrators earn $413,000 a year.  The Oklahoma Surgery Center doesn’t have numerous types of services to provide. It only provides surgery and can focus and innovate on their particular facet of the health care industry. It doesn’t have to pay large salaries of administrators to run complex maze of interlocking health care services. It low prices forced it to streamlined it administrative bureaucracy. It only has one level of service: surgery. The center is so efficient it is often able to perform almost twice the amount of surgeries than Integris Hospital.

                Not only does direct pay healthcare bring down the cost but provides an answer to the question Conservatives have not adequately answered: What  to do about those who are denied healthcare insurance due to pre-existing conditions. Because the direct pay cuts out the middle man of insurance, there is no longer any need to worry about being denied insurance for pre-existing conditions. The fact that the Oklahoma Surgery Center can save patients 2/3 or more compared to the traditional insurance based healthcare answers the question: How do we provide affordable healthcare to the middle class? For example, a Complex Sinus Surgery at Integris hospital costs $33,505 while it is $5,885 at the Oklahoma Surgery Center. Because not every type of healthcare provided requires surgery, the direct pay model could easily be adapted to general physician clinics and specialists. This could even be extended to dentistry and eye care.

The only question is what to do about Americans in poverty? Former Utah State Senator Dan Liljenquist had the right answer. He crafted legislation which provided Medicaid patients with a fixed amount to spend on healthcare. This brought cost as close to home as possible for Medicaid users and their doctors, cutting out the middleman. This would have provided better care for many Medicaid patients who were winding up in the emergency room because of the inability to find doctors accepting Medicare. It would have also saved Utah tax payer money because paying for an emergency room visit is much more expensive that paying for a general physician. Unfortunately, the legislation depended on a federal waiver request which the Obama Administration denied. Congressional Republicans have long championed healthcare savings accounts which could easily be adapted to work the direct pay system. Healthcare savings accounts need to be more privatized. Employers could easily provide defined contribution healthcare savings accounts. Employees would provide a set percentage of their pay toward the accounts; employers would match, and if the employee wished, he could invest funds similar IRA or 401K. The employee would then choose how risky or safe the nature of his investments would be.

Does this mean that insurance companies will no longer play a role in providing healthcare? No, insurance companies where created to insure against catastrophic events; therefore, they are often good for emergency care but not always good for day to day care given that catastrophic events are uncommon while everyone eventually gets sick. To bring down the cost of insurance, changes need to be made. Health insurance companies need to be able to compete across state lines. Because they can’t, in the majority of states only two major healthcare insurance companies provide the lion’s share of care and that leaves little competition thus driving up prices. Insurance companies also need the leeway to base charges off of their clients’ lifestyle. They should be able to charge the coach potato employee who overeats, smokes, drinks heavily, and exercises little more than the marathon runner employee who takes care of himself, so that the healthy employee doesn’t have to subsidize the healthcare of the unhealthy one. Safeway has done just that, and it has allowed them to keep healthcare insurance rates low and flat, according to the WSJ.  

The idea of direct medical pay is already on the table and the proof of its practicality is already out there. The question is now: how do we implement it? The biggest obstacle is that few people know of it. Everyone know the Democrats’ plan in that Obamacare forces American citizens to buy insurance to pay fines and forces health insurance providers to cover those with pre-existing conditions. Most people know that the Right opposes Obamacare because of the cost, but few people understand what the Right wants to replace Obamacare with. Their ideas are not that clear. We must get the word out about the Oklahoma Surgery Center’s direct pay system. We must tell our friends and family members. This article is based on a ReasonTV video called OklahomaDoctors vs Obamacare. Share it with friends on Social Media such as Facebook and Twitter. Healthcare Administration Companies must move away from insurance toward direct pay. The political and pundit class must start speaking out in order to win back control of the debate. The worst thing we can do is subsidize it in some form or another such as a tax credit lest we end up in the same place we started.

A State of Near Insolvency

            In the halls of the state houses and governors’ mansions rages a debate on how to best address the multi-billion dollar budget short falls. California is wrestling with a budget short fall of $26.6 billion, New York $10 billion, Florida $3.7 billion, Illinois $15 billion, and Texas $27 billion. As the austerity debate rages on, permit me to float my own solution. Fiscal restraint thy name is pension reform. The situation is more dire than most think. Even though Forbes magazine rated Utah one of the most fiscally well managed state, Utah still has an unfunded pension obligation shortfall of $7,000 per resident. For all 50 states total, the total estimated unfunded pension liability is $1 trillion to $3 trillion. US municipalities are currently facing a pension funding gap of $574 billion. Watchdog.org called US local and state pension system "criminal" and said.  “U.S. pension funds received a poor grade in a recent study examining systems around the world, ranking tenth of 14 nations, behind relatively poor nations such as Singapore, Chile and Brazil.” The rating was based off of capability, sustain ability, and integrity. 

 

            Is it any wonder? The Bureau of Labor Statistics found in 2009 state and local public employees amassed $39.83 in salary and benefits per hour. That is 45% higher than private sector employees. This is during a recession in which private employee salary growth has been slowed. After only 5 years of work, California employees can retire at age 50 with a pension of 50% or more of their highest salary locked in for life. After 20 years of work, the state will finance 100% of their retired employees health care cost. For example, the State of California employs a man at the age of 30 and gives him a wage of $100,000 per year. At the age of 50, he retires with a pension of $50,000-a-year or more plus 100% of his healthcare costs paid until the day he passes from this moral coil. When New Jersey Governor Chris Christie (R) took office, he went public to announce that a New Jersey public servant who put in 20 years of service and contribute only $124,000 to his personal pension, may retire at age 45 and attain $3.3 million dollars in retirement benefits and half a million in health benefits. In total, it is $3.8 million in exchange for $124,000 and 20 years of work.

            The shear abuse alone of the system is breath taking. A retired New York fire fighter, John C. McLaughlin, has been taking advantage of an $86,000 per year disability pension since 2001. Supposedly, he is asthmatic with decreased lung capacity despite the fact he a triathlete who frequently participates in long distance races. This exploitation goes far behind McLaughlin's case. Currently, 80% of NY retired fire fighters have qualified for disability benefits.

            It seems the political winds have shifted against the big  public sector unions which so ardently support the existing exorbitant public pension systems. Utah switched over to a successful and cost saving 401K-style plan for its workers. The state contributes 10% to non-safety municipal and state workers and 12% to state workers. It is capped at 10%; however, it is still more generous than most private sector benefits. Discover Financial Services has caped my 401K at 8%. 

 

            For the first time in 70 years of polling history, Gallup found that the majority of Americans opposed labor unions in 2009. In April of 2010, Pew uncovered that union favorability had fallen from 58% to 40% in 2010. Rasmussen Reports uncovered that only 19% of Americans were willing to pay higher taxes to prevent public employee layoffs while 69% would not. In another survey, Rasmussen reported 71% of likely voters believe public sector employees receive better pay and benefits than their private sector counterparts. The same study found only 32% of likely voters believe the current public pension system to be sustainable while 56% said unlikely, and 16% said not likely at all. The majority thought public employees should wait until 65 to retire. The National Arts Endowment President, Dennis Van Roekel, (hyperbolically) said. “[O]ur members face the most anti-educator, anti-union, anti-student environment that I have ever experienced.” To be fair, Rasmussen polling of likely Wisconsin voters stated. “39% favor weakening collective bargaining rights and 52% are opposed. At the same time, 44% support a 10% pay cut for all state workers. Thirty-eight percent (38%) are opposed.” This does not mean that reducing and/or reforming public pension is politically unviable. It means taking away collective bargaining is most likely going to have to be outside of the political calculus.    

            This pension reform wave has spread beyond Main Street the mainstays of the GOP to the political elite and is quickly nearing bi-partisan consensus. Last month in Massachusetts, the Democratically dominated Commonwealth House voted to strip peace officers, teachers, and local public employees of their ability to collectively bargain for healthcare benefits in a 111-to-42 vote. The Speaker of the House Robert DeLeo (D-Suffolk) claimed the bill would save $100 million for localities over the next budget year and help evade layoffs and reduction in services. He also claimed it would help to control increasing healthcare costs. Had I a blind fold I would have assumed Deleo was a rock ribbed Republican. Most surprising was the reaction from Robert J. Haynes, President of the Massachusetts AFL-CIO. He said. “These are the same Democrats that all these labor unions elected. The same Democrats who we contributed to in their campaigns. The same Democrats who tell us over and over again that they’re with us, that they believe in collective bargaining, that they believe in unions… . It’s a done deal for our relationship with the people inside that chamber.’’ To be fair, DeLeo’s bill will be a tough sell for in Massachusetts State Senate.

            The list of Liberal Democrats supporting pension reform continues to grow faster. It includes: former Mayor of San Francisco and Speaker of the State Assembly Willie Brown (D), Green Party member and former President of the San Francisco Board of Supervisors Matt Gonzales, Ralph Nader’s former running mate Marcia Fritz, and Mayor of San Jose Chuck Reed (D). While the effort to reform state pension quickly accelerates from states coast to coast, in Washington D.C. the message seems to be collecting dust; however, what often starts in states has the tendency to eventually move to Washington. Let us pray sooner than later.