Obamacare: It’s been tried before.

            In 1994, the Kentucky Democratic Governor Brenton Jones signed HB 250 into law--otherwise known as Kentucky Kare. Identical to Obamacare, it mandated Kentucky residents purchase health care insurance or face a fine. It also prohibited denying coverage to patients based on pre-existing conditions. Intended to lower insurance costs for Kentucky families and reduce the Commonwealth of Kentucky’s healthcare costs, none of it happened. Insurance premiums costs skyrocketed as did the price for taxpayers. What happened unfolded like a classical political debacle that should have prevented Obamacare from ever being seriously considered, but the lessons from history became ignored and forgotten.

            Because the law was so naively crafted, consumers could game the system. They would drop their insurance premiums when they were healthy and wait until they became ill to resume coverage and still pay the prevailing rates. Because of the constant rise in insurance premiums Kentucky Kare caused, it was more economical to pay fines when one was ill than the insurance. Kentucky residents discontinued paying into insurance companies as much as prices dramatically mounted. On average, premiums increased between 36% and 165%, 4 years following the healthcare “reform”—exponentially higher than the national average. 40 insurance companies fled the state. Anthem Blue Cross and Blue Shield and the state owned Kentucky Kare nearly became insolvent. Kentucky Kare eventually did in 1999.

            In 1998 Kentucky Kare was so ruinous, Kentucky voters did something they had not done since 1967—elect a Republican Governor, Ernie Fletcher. In the end, the bill received a robust bi-partisan repeal. Joining the ranks to abolish it were many Democratic lawmakers which had originally legislated it. Insurance companies returned to the state and insurance premiums reseeded back down to the national average. This is not to say the national average is acceptable, but my healthcare reform plan will be a topic for another decision.

            Former Republican Governor of the commonwealth of Massachusetts Mitt Romney’s Masscare is another unfortunate exemplar and a warning to those who oppose the repeal of Obamacare. During the Obamacare debate, Obama’s advisor Davis Axelrod said Masscare was “the template” for the Obamacare program. The Obama administration is working under the assumption that Romneycare decreased insurance costs and decreased government spending—an assumption that couldn’t be more wrong. Like Obamacare, it features the government mandate to buy health care (…or else) and prohibits the denial of coverage to those with pre-existing conditions. And just like Romneycare, Obamacare is also likely to produce dismal results.

At first in 2008, Romneycare enjoyed a robust support from Massachusetts voters. 70% of them approved and only 20% disproved. Recently, a Suffolk University poll cited the fact nearly half of Massachusetts voters did think that Masscare has not helped, and only 38% said it did. Over the past five years, residents of Massachusetts have seen their premiums double. New England denizens pay out higher healthcare costs than the rest of the country. Because Romneycare’s penalty for exercising one’s personal choice not to acquire healthcare are lower than paying Massachusetts abnormally higher healthcare coverage rates, individuals have been terminating their healthcare plans and only resuming them only upon becoming infirm, driving up the costs healthcare insurance just as what happened in Kentucky and will happened nationally if Obamacare isn’t reigned in.

Romneycare made its citizens more dependent on the government and caused the government spent more money on healthcare. The percentage on the state’s healthcare dole has doubled. In 2006, 85% of Massachusetts residents were privately insured. Now, it is 79%. Six non-profit insurance companies are curently suing the commonwealth because Masscare regulations are driving them into insolvency. Romneycare supports often omit the fact that Massachusetts already had one of the lowest rates of uninsured prior to its passage.

Massachusetts tax payers now expend $2.5 billion more on their state’s healthcare budget. In 2006 when Romneycare was passed, the Massachusetts commonwealth estimated the costs to be $88 million a year. Now, it exceeds $4 billion a year. The plan has drowned Massachusetts deeply in the red. Early this year, Governor of the commonwealth Deval Patrick announced a $294 million healthcare shortfall. The only reason Massachusetts didn’t go under was because of a federal bailout. Federal Medicare reimbursements and some propping up from Washington was what kept the commonwealth from going under.

The states are often called the laboratories of democracy. From them, we received the welfare reform of the 90s and the public school system. The experiments of Kentucky Kare and Masscare and their dismal results should have taught us all a valuable lesson. They offer a bleak preview for what Obamacare has to offer unless it is replaced with a more market oriented planed based in the realities of the market system and solid economics instead of mawkish bromides. There is still time. We can learn from history because the only thing inevitable about history is that it will eventually happen.

Why the Trade Deficit is Washington’s Fault and not Beijing’s

            As the US economy was struggle, it was not long ago announced that our trade deficit with China had culminated to a 6 month high of $7.3 billion. The trade balance was growing even prior to the Great Recession—unabated—with little sign of slowing down. Many from the Conservative spectrum (Michael Savage and Pat Buchannan) to Liberal spectrum (Pro-union and Liberal Democrats) have been calling for tariffs or quotas on Chinese products.

Many political pundits posit the low wage and currency manipulation theories. The low wage theory goes like this: China and other third world countries are able to undercut US workers because their workers will work for much less.The price of labor in Africa and Haiti are significantly lower than America’s; however, we do not see jobs going over there. Last time I checked Haiti is not the next Greenwich, Connecticut nor is it likely to be any time soon. A successful industrial base requires machinery, educated people to run the factories, and political stability—exactly what Africa and Haiti lack.

It is not the wage price necessarily but wage price relative to output. For example, worker A works for $1 per hour but produces $1.25 per hour profit. Meanwhile, worker B earns $15 per hour but produces $100 per hour profit. Employers are obviously going to favor B. Of course, workers with machinery and an education will able to produce much more than a worker in a 3^rd world country without. The difference is a farmer with a tractor and a farmer with a just hoes and shovels.The tractor farmer will be able to produce so much more.

Many of those who want tariffs on Chinese goods cite China’s manipulation of currency. It is true that China has manipulated its currency.  Recently, the Chinese Renminbi has appreciated 25% against the US dollar. Any drastic and quick changes in monetary system would be disastrous for their economy; therefore, China knows it must make changes incrementally and it is. The currency manipulation theory is still lacking to explain the massive trade imbalance. Devaluating one's currency causes inflation which raises prices and eats away at savings and wages--not a winning long term economic strategy if you want to defeat poverty.  Somalia could attempt to manipulate its currency, but I doubt it would become the next raising economic star.

Our trade imbalance with China cannot be fixed with currency manipulation or tariffs. Economically speaking, when tariffs are raised or quotas imposed, it pushes supply curve back. This causes prices to rise and the wealth the nation to decrease. For example, the US raises taxes on the foreign widgets as a result domestic widget makers may be shielded from the competition, but it raises prices on construction workers who buy the widgets, making them poorer and making the widget makers richer at the expense of the construction workers. Often even the widget makers are not helped. One example of imposing tariffs wielded only disappointing results.  

In 2009, Obama slapped China with a tariff on cheap tires.  In the US, tire prices rose between 10% to 20%, and the domestic production of tires did not increase.

What then is the cause for America’s high trade deficit? We have machinery, educated individuals who can run an industrial sector, and political stability. The answer is America has highest corporate taxes in the world. The average Organization for Economic Development and Co-operation Development country corporate tax is 27.6%. America’s is 35%.  Even with tax breaks for our business, the tax rate is still higher when you factor in their corporate taxes with their tax breaks. If you were an employer, what would you rather pay—27.6% or 35%? It shows. Other countries are receiving much more foreign direct investment than us. It is time we have serious discussion about a trade parity act that will at least put our business tax rates on par with the rest of the world then we'll see who has the trade deficit.

How to become Poor (and stay that way)

Jesus Christ once said. “It is easier for a camel to enter the eye of the needle than a rich man to enter the kingdom of heaven.”* While living in Guadalajara, a Mexican national once told something similar. He was just glad that he was not rich. Who wants to be rich any or middle class for that matter? Material possessions take us away from the here and now with things such as higher living standards and better health. They lead to pleasure and the seeking of greater knowledge. The later which over extends our scope of vision to the “long term” and force us to become politically and socially active. Who knows it might even lead to the edification of the human race and a better world. (Gasp!)

            Statistically speaking, most of rich Americans were born into money, so were most poor. It is therefore clear that poverty starts at birth. In fact, it starts at conception. Do not attempt to wait until a responsible and responsible age to have children (20). Our minds do not finish developing until 25, and we wouldn’t want to make any prudent or informed decisions. When making the decision to have children with your significant other, steer clear of marriage option. Marriage leads to the down the long road leading to happiness and the middle class. Also, don’t bother to finish high school.  Remember the words of the UCLA public policy professor emeritus James Q. Wilson. “You need only to do three things to avoid poverty in this country. Finish high school, marry before having children, and produce children after the age of 20. Only 8% of families who do this are poor; 79% of families who fail to do this are poor.” Remember Wilson’s advice then forget it, and then blatantly disregard it.

According the US Census Bureau in 2009, 7% of all US residents in a married couple family were under the poverty line while 32.5% of single mother families were under the poverty line. After all, what chance does a 15-year-old female with a baby risk in ending up in the Middle class or graduating from college? It would be such a struggle to graduate high school. When one’s own personal decisions are so misguided, there is then little state social programs can do to assist.

            It is important to ignore or distract away from the root causes and solutions of poverty and turn to mawkish slogans and unprovable assertions such as racism. Do not permit notions such as personal responsibility and accountability to enter the discourse. Should they happen to enter into the dialog, denounce the claimants as judgmental and inflammatory as quickly as humanly possible. Be sure to shroud yourself in the mantle of compassion and evade tricky things such as logic and facts. Steer clear of those in favor of a more emotive and mystical stance.

Race	% Born out of Wedlock	% Under Poverty Line
White	29	12.3
Black	72.8	25.8
Asian	17.2	12.5
Hispanic	53.2	25.3

 Source: CDC and US Census Bureau

            The most damaging assault against poverty was not committed by The Great Society. (In 1968, 12.8% of all Americans were under the poverty line. In 2009, it was 14.3%) No, it was Deng Xiaoping’s Gaige Kaifang—the capitalistic reforms to China’s economy. Prior to that, China was known for its massive poverty. American mothers would tell their children. “Eat your food. There are millions of children starving in China.” Today that would be laughable. Instead, we should focus on blaming capitalism for causing the problem. Better yet blame capitalism for causing racial prejudice which then in turn causes poverty.

We should seek the creation of more poverty through the state. The great example is how Communism causes massive amounts of poverty during and even after its fall for such a long period of time. It should be ignored that the government has been a long time sponsor of racial discrimination that prevented minorities from becoming education and finding good employment. The government used its power to enforce pro-slavery laws, and it was the Supreme Court that held created the institution of segregation. Capitalism’s law of opportunity cost punishes racism. For example, an employer likes racial group A and despises racial group B. An individual of group A and one of group B both apply for the same job. B has the capacity to make the employer $100 per hour while A only %50. The employer goes with A thus forfeiting the difference. B goes unto the competition, and the competition gets the leg up on the discriminatory employer. Opportunity cost punishes him.   

                It is also crucial we evade educating ourselves. Those with education have higher earnings and higher living standards. They are also equipped to make better life decisions. It is any wonder why Mexico can boast of such high rates of poverty. 56% of Mexicans drop out of high school. That is the second highest rate in the OCED nations next to Turkey.  In fact, in order to continue to push the percentage rate of US residence in poverty up, I suggest we continue with the open border policy, and diminish the already low merit qualifications from immigration prerequisites. Those who proscribe that immigrants should learn English should be immediately denounced as xenophobic and mean spirited. Be sure to claim to be pro-immigrant and mutli-cultural.  After all, if an immigrant learns English he now has a greater risk of graduating from high school and even going on to college. Remember in the US there are no college graduates who are ignorant of English.

*Note: I am not mocking the teachings of Jesus Christ, which I myself adhere to. I am only pointing out the misinterpretations of scripture.