Obesity is a health challenge in the United States. According to the Institute of Medicine, “fighting obesity will require changes where Americans live, work, play and learn.” So-called walkable neighborhoods, zoning limits on fast-food restaurants, stricter government regulations on marketing foods, and taxes on sodas are among the recommendations in a recent IoM report.

I challenge the premise of this report, namely that capitalism is inherently flawed because it encourages self-destructive behavior—eating Big Macs and drinking too much Pepsi)—and reasonable people must reign in excessive market freedom for their own good. But why is federal action required whenever someone identifies a social ill, and what claim does the federal government have to infringe on the rights of private companies and citizens?

The assumption that underpins each of these recommendations is that government knows best and control is necessary to force Americans to behave appropriately. After spending trillions of dollars in the War on Poverty, left-wing organizations such as Feeding America tell us that hunger is still a problem for one in six Americans. While I don’t buy such statistics, they point to a truth about socialism. Regardless of the programs created and the amount of wealth redistributed, there are always more problems that require additional government spending and control. Obesity is a good example.

I can hear the opposition now: Certainly federal and state governments have a role to play; if not, we’ll all end up paying more in health care expenses. However, this argument assumes that we have a collective responsibility to pay for everyone’s health care in the first place. This is why accepting a “right to health care” is so dangerous. Once you do, you open the floodgates to endless regulations and taxes to pay for it.

Of course, there are some things that can be done on a practical level. For example, schools can provide nutritious meals and limit access to the soda machines, especially in elementary schools. They can provide physical education programs to encourage exercise as well. Decisions like these should be made locally, however, and nobody should seek to regulate the content of the lunchboxes that kids take to school.

In the end, each of us should determine what to eat and how much to exercise. Proper labeling can help us make informed decisions, but the choice should remain with the individual.

Source: www.washingtonpost.com/national/health-science/specialists-debate-solutions-to-americas-weight-problem-_-from-exercise-to-better-kids-meals/2012/05/08/gIQA96jm9T_story.html

GM exported the first Chevy Volts to China earlier this year. A PR video Faces of GM touts the electric vehicle as a perfect fit . The subtle message is that the newly restructured, profitable GM is–thanks to the bailout–actually creating American jobs by exporting cars to China. But there’s a lot GM is not telling you.

Volt sales have been flat so far in the US. Washington recognizes that the Volt’s 40K MSRP is a bit pricey in the US and even offers a $7500 bribe to taxpayers who buy one. The sticker price in less-affluent China is $79,000. Don’t expect many of these to roll off the lot in Shanghai, especially at this price.

GM is one of the top foreign automobile manufacturers in China, selling about 227,000 vehicles there through its joint ventures in April, compared to about 213,000 in the U.S. I certainly don’t mind production and sales in other nations, but a recently filed GM document titled Global Assembly Footprint forecasts that 80% of its production growth over the next 5 years will occur in low-cost countries like the BRIC (Brazil, Russia, India & China) nations and Mexico. Moreover, the Chinese government is pressuring foreign carmakers to share technology and produce vehicles with a Chinese brand. While other carmakers have attempted to resist, GM was the first to comply by introducing the Baujun brand with Chinese partner SAIC last year.

Here’s my problem: Taxpayers financed a bailout and GM responded by producing more cars abroad, sharing technology, and launching a Chinese brand. Executives even plan to export cars back to the US in a few years. GM has already benefitted from CARS (Cash for Clunkers) and other government “incentives,” and Obama is calling for an increase in the Volt tax break to $10,000. To add insult to injury, a special TARP provision means that pre-bankruptcy losses can be counted against future profits, resulting in a potential additional taxpayer drain of as much as $45 billion down the road.

If you’re looking for a definition of crony capitalism, you’ve found it.

We are told that May Day is an international day of celebration. I spent May 1 on the west coast this year and witnessed no celebrations, only a few marches and signs. Three of them caught my eye.

1. “We demand our rights.” Somehow I suspect that the guy carrying the sign wasn’t sure what he was demanding or who was going to pay for it.

2. “Banks are immoral.” Banks provide a storehouse for money. They facilitate transactions with checking accounts and debit/credit cards. They provide access to capital for thousands of businesses–big and small–to keep the economy moving. I just don’t understand the point here. If banks are immoral, then what means should be employed to fulfill these critical functions?

3. “More unions, more jobs.” I understand the argument for unions; collective action places pressure on firms to provide better wages, working conditions, and benefits. The irony here is that union activity tends to be associated with job losses, especially in the private sector. Most of the jobs that have been outsourced overseas have been in union-controlled industries. Say what you want about McDonald’s and Wal-Mart, but they always seem to be hiring.

Of course there were other signs as well, some of them a bit more rational. My point here is that many of the demonstrators just don’t seem to understand how the economy works. I never cease to be amazed watching those who protest one system without proposing another, or those who demonstrate in favor of the very institutions and activities that create their livelihood. They say that ignorance is bliss, but this ignorance is taking a real toll on our economy.

According to a U.S. government report, the Social Security “trust fund” will run out of cash in 2033, three years earlier than the most recent forecast. Anyone paying attention to this demise understands the importance of saving for his or her own retirement. Most Americans include an individual retirement account (IRA) or 401(k) a part of their savings strategy because 401(k)s allow workers to defer the taxability of what they earn today until they take it as income during retirement years. But with $16+ trillion of government debt, some in Washington are looking at the $18 trillion currently sitting in IRAs as part of the fix.

At least two plans are under consideration, one which calls for a reduction in the amount of annual contributions exempt from current taxation from $50,000 to $20,000. The other ends deferred taxation altogether in exchange for an 18% tax credit placed in the retirement account. Washington wants the tax revenue now, and reports suggest that this type of change would increase government revenue by as much as $458 billion annually. Additional details are available at: www.nypost.com/p/news/business/plunder_CrD9s6MElVsEIJj2IVgHuK.

There are many problems with this proposal. First, if the federal government is going to tax income, then it seems reasonable that Americans should be able to defer income from working years to non-working years. The current 401(k) allows you to do that, at least to some extent.

Second, anyone who thinks that the 18% tax credit given will actually survive future attacks on “the rich” is fooling himself. Future leftists will refer to this as another loophole to be closed because wealthy retirees (i.e., those who lived frugally and saved during their working years) just don’t need it.

Third, disallowing Americans to defer taxation on retirement contributions is a disincentive to saving. This means less capital available for business expansion today and lower personal income levels in the future.

Finally–and most importantly–this type of proposal targets REVENUES as the problem when SPENDING is the real issue. Every dollar Washington SPENDS is a tax; it must come from taxpayers today, taxpayers tomorrow if it is borrowed, or all of us if it is financed by printing more currency. Our federal government has a spending problem. Tax overhaul is necessary, but not the core problem.

Don’t look now, but Argentina wants to be the next Venezuela. Leftist President Cristina Kirchner has been leading the charge since her election in 2007.

It started with a mix of populism and protectionism. For example, Kirchner reinstated el impuestazo (The Big Tax) in 2009, doubling the value-added tax (VAT) on imported electronics. Her administration also recently lowered taxes paid by Argentine companies that assemble products in a region known as Tierra del Fuego, the frozen southern tip of the country.

Now Kirchner has taking things to the next level. A few days ago she formally proposed to nationalize the country’s largest oil-and-gas company, YPF, a firm currently controlled by a Spanish majority (57%) owner. Declaring that petroleum is of “national public interest,” Kirchner seeks to acquire 51% of the company for the government from YPF shares. To add insult to industry, the government would not even pay the market price for these shares; the final value will be determined (arbitrarily) by a “federal tribunal.” Kirchner sent her proposal to Congress where her political party holds a majority, so passage is predicted.

The philosophical argument for nationalization is subtle: Some industries are “too important” to be left to the whims and mismanagement of the private sector. But this line of reasoning is not limited to nations like Venezuela and Argentina. The K-12 industry in the U.S. is controlled and delivered by federal and state governments because “the children are too important to be pawns in the profit game.” Privatization efforts with regard to the USPS are blocked because only the federal government can be trusted with something so vital as the mail. Obamacare is an attempt to shift healthcare further in the same direction in part for the same reason: “Life and death is too important to be left to insurance and pharmaceutical companies, physicians, and other profiteers.”

But the profit motive is our friend. It pressures grocery stores, auto repair shops, and movie theaters to deliver the goods and services people really want. It is public ownership that creates the problem because those who produce and deliver the products and services are working for the bureaucracy, not the customer. It might sound attractive at first glance, but nationalization is never productive. I don’t always like everything the folks at my health insurance company do, but I certainly trust them more than somebody from Washington.

I have criticized Obamacare on Constitutional, moral, and economic grounds. However, I am often asked about the alternatives. I’ll discuss 4 options here, although the possibilities are endless:

1.Single payer. Everyone pays more in taxes and the federal government provides every American with insurance. Personal control over health care decisions would erode under such a system and rationing would be necessary to contain costs. Support for a single payer plan is not strong, so we’ve move to the next option.

2. Do nothing. Problems aside, the current system isn’t “broken” as the left often depicts. Most Americans have insurance and most who do not either choose not to or are eligible for federal assistance. Non-payers are a problem and the rest of us must pick up the tab to some extent. Most of us have a number of treatment and physician choices, and the U.S. still provides the best treatment in the world. While most Americans want to do something about the current system, a lack of agreement can result in retention of the status quo. This is not the worst alternative.

3. Market-oriented reforms. For example, consumers can be permitted to purchase health insurance across state lines would make the market more competitive. Health care savings accounts allow us to set aside money from each paycheck tax-free and draw from the account when we need it. Giving everyone a tax break for health insurance premiums–not just those to go through their employers–can encourage consumers to buy their own policies when their company-sponsored plans don’t meet their needs. Proposals such as these improve the current system but they don’t address the core problem of overinsurance (see #4). Besides, the left always opposes such proposals because they still require Americans to pay for their own health care.

4. End all deductions for health insurance premiums. This might sounds odd, but overinsurance is one of the biggest problems we face in health care. When health insurance pays your bills, physicians respond more to insurance companies than the patients. Besides, we don’t really care what a procedure really costs or if it is necessary as long as “insurance pays for it.” As a result, the system is overused and consumers don’t demand the service and value they otherwise would if had to pay the entire bill. I’m not saying that health insurance is a bad idea, but it should be purchased to cover major expenses only.

Think about it this way. What if your employer provided car repair insurance that capped the amount you paid for auto maintenance to $50 per visit to the mechanic. We would no longer care how much the repair shop actually charged and we’d insist that they complete all sorts of “preventive maintenance” while the car’s in the shop. Who cares long as someone else is paying?

If average Americans received increased wages instead of health insurance and paid for doctor visits out-of-pocket, providers would become more competitive and value-oriented. Of course, this proposal suffers from the same problem as #3; the left won’t support it because it doesn’t require the “rich” to pay the health care bills of the “poor.”

There is an irony here. The left tells us that a lack of universal catastrophic insurance is the problem, but they offer us comprehensive insurance covering everything from routine visits to the doctor to viagra as the solution. If catastrophic insurance is really the problem, then why not implement option #4 and provide a universal health care benefit for standard treatment in excess of $10,000 per year to all Americans? This could be financed by a small payroll tax. Problem solved…

I’m not really in complete support of this proposal, but I think it has some merit and I want to call the left’s bluff. If this issue is really about protecting average Americans from financial ruin because of a medical catastrophe as they say–and not about wealth redistribution as I believe–then they should line up in favor of such a proposal. I doubt I’ll get many takers.

Obamacare is unconstitutional. The federal government lacks the authority to compel citizens to engage in commerce. Let’s hope at least 5 of the 9 justices on the Supreme Court get this one right. But while this issue is the focal point of libertarians and conservatives, there’s a deeper concern that is sometimes overlooked.

The purchase provision in Obamacare is unconstitutional because crafters of the legislation wanted to retain the illusion that Americans would retain control of their own healthcare by purchasing their own insurance. This is the key funding mechanism for the scheme, but it could have been circumvented by going straight to a single-payer plan funded through (higher) tax revenues. Democrats are not united behind a single-payer scheme yet, so the purchase provision was as far as they could get. If the Supreme Court strikes down all or part of the plan, there’s nothing to keep the left from expanding Medicare, Medicaid, and other programs to achieve the same goal.

This reality exposes a problem that must be addressed, sooner or later. The 40-60 million Americans “without health insurance” come from various walks of life, but many are and will use the system without paying for it. The “lack of access to healthcare” is a problem, but the fact that many without coverage will shift costs to the rest of us is a major issue. I don’t favor a purchase mandate, but the current approach encourages free riders. If we are going to provide “emergency” health care to anyone in the country regardless of “ability to pay,” we must come up with a way to require that those individuals pay what they can and use the system more efficiently. This will involve some difficult choices about who has a right to various levels of healthcare without paying for it. Until this issue is addressed, the single-payer crowd will try to exploit it.

A February 2021 USA Today/Gallup poll on Obamacare revealed some interesting statistics:

1. Americans are divided (45% vs 44%) on whether Congress did a good or bad thing by passing the law.

2. 72% of respondents believe the law is unconstitutional; 20% believe it is Constitutional.

A very interesting take-away point from this survey is being overlooked. If 45% of Americans believe Congress did the right thing by passing Obamacare and 72% believe it is unconstitutional, then about one-quarter of respondents are applauding Congress for passing an unconstitutional law. It’s impossible to pinpoint the exact percentage here, but 1/4 is a sound estimate given the data that is presented.

Put another way, about 1/4 approve of Congress behaving in an unconstitutional manner as long as they like the bill in question. This is chilling. The argument by many that the Constitution is a “living and breathing document open to interpretation” is being replaced by ignoring it altogether.

I bet most of the estimated 1/4 are not net federal income taxpayers.

The Federal Reserve’s easy money policy has been keeping interest rates below the long-term expected rate of inflation. Many see this as a big plus for Americans struggling to survive the down economy, particularly those who wish to purchase or refinance a home. There are many reasons why this is simply not true, one of which I’ll focus on here.

We always purchase more of something that we otherwise would when we don’t have to pay full price. Artificially low interest rates allow homeowners to purchase a house below market price. Visit www.mortgagecalculator.org and you’ll see that the monthly payment for a 30-year. $250,000 mortgage at a 5% fixed rate (not including property taxes or PMI) is $1342. Raise the rate to 6% and the payment climbs to $1499.  In order to keep the payment at the same level, you must must cut your mortgage by about 11%. Put another way, if the Fed keeps your mortgage rate 1% lower than the market would otherwise charge, then about 11% of your mortgage is being subsidized by a depreciating dollar. But this is not as innocent as it sounds.

First, there is no such thing as a free lunch. In fact, the subsidy is being financed indirectly through a weaker dollar. Whether it’s the cash in your wallet or your 401(k), each dollar you have declines in value to balance the system. In essence, those of us with any accumulated wealth are paying part of the interest. (A weaker dollar also drives up oil prices, as previously addressed on the blog).

Second, there is also a problem when people buy more house than they can afford, as the recent housing meltdown should remind us. When we create an excess of supply, prices rise in the short term because of the temporary shortage and then plummet when an economic shock hits and the oversupply is too much to hide. By encouraging Americans to buy more expensive homes than they can really afford, the Fed is blowing up the next housing bubble.

Third, in a free economy–one without a Federal Reserve controlling the price of money–interest rates rise and fall to maintain a balance between legitimate demand for capital and funds available in the private sector. When the Fed keeps rates too low, the demand for borrowed funds is higher than the supply available to fulfill it. By augmenting funds in the private sector, the Fed is pushing more money into the system than the private sector can support over the long term. This surplus is what some economists call malinvestment because it represents riskier loans that should never have been made.

Finally, artificially low interest rates drive down the returns on savings. As a result, Americans with extra dollars can’t even keep up with inflation without putting their money at risk, usually in the stock market. Those on fixed incomes or living on savings suffer the most as purchasing power is extracted from their monthly checks.

We’ve been told that easing will continue, but it’s time that we realize the cost we pay for this intervention, as individuals and as a society..

When it comes to the Chevy Volt, the market has spoken. The Volt is not ready for prime time.

The facts are clear. GM sold 7671 Volts in 2011, short of its target of 10,000. GM sold about 1600 Volt in January and February this year, a far cry from the pace needed to reach the 45,000 target for 2013. The average household income of a Volt buyer is $170,000. Mainstream America is rejecting it.

Perhaps allegations of battery fires are to blame. Perhaps Americans are leery of a battery-operated car that can’t go beyond 40 miles before shifting to gasoline. Perhaps the $40,000 price tag is a bit steep. Perhaps the $7500 government subsidy isn’t enough.

There is little the President can do about these problems, except for one. On Wednesday, he proposed an increase in the Volt subsidy to $10K. Put another way, President Obama is proposing that $10,000 be transferred from taxpayers who choose not to buy a Volt to each taxpayer that does. $7500 was already $7500 too much.

In President Obama’s world, the Chevy Volt simply cannot fail. It’s a referendum on the GM bailout, the UAW, and “green” energy all rolled into one.

Apparently GE’s recent commitment to purchase 12,000 Volts wasn’t enough to boost sales. Don’t think for a moment that Obama’s ties to Jeff Immelt didn’t influence this decision. And don’t think for a moment that Immelt will actually drive a Volt on a daily basis.

President Obama simply does not respect markets. When consumer choice doesn’t deliver the outcomes he thinks are best for society, the President castigates the producers or manipulates the markets altogether with taxes or subsidies. When healthcare and gasoline cost too much, greedy producers are to blame. But when solar energy and Chevy Volts cost too much, greedy or ignorant consumers are the problem. While the President doesn’t refer to consumers as greedy or ignorant, his actions tell the story. He blames us for consuming more than our “fair share” of global oil while bribing us with tax dollars to buy more Volts. To the President, American consumers just aren’t capable of managing their own economic affairs without a heavy dose of central planning.

Perhaps the Volt will be a competitive car one day. New technology can take some time to develop, and I don’t have any problems with the Volt per se. I simply oppose the use of taxpayer funds to pick winners and losers in the effort to improve energy alternatives. This includes bailout funds, special tax breaks for GM, and subsidies for those who purchase Obama-approved products. Markets can do this more efficiently without Washington’s interference. Obama’s interference with market activity is both costly to taxpayers and counterproductive for society.