Undoing Obamacare- part 2


Several weeks ago, I blogged on the need to face facts when repealing Obamacare. With this issue front and center this week, I’m returning to the topic to make a few more comments.

During the past several weeks, I’ve heard countless party strategists, Congressional representatives, and Senators explaining how the Republicans will repeal Obamacare. They are routinely asked how they will deal with Americans who have insurance now but did not before the law passed. Most change the subject and wax eloquently about the obvious misgivings of the ACA, and all of them claim to be committed to a new plan that retains coverage for everyone who is currently insured. In essence, they are recommitting the Republicans to maintaining the entitlements already granted by the ACA. Nobody seems to be acknowledging what was obvious six years ago: Obamacare is a massive redistribution scheme we cannot afford. It’s built on false expectations and a complete misunderstanding of economics.

Meanwhile, the Democrats have responded accordingly. “Obamacare repeal will be chaos,” they tell us. To those on the left, chaos is a synonym for markets, as it would require individuals to obtain their own insurance from “evil” providers free to price their services without guidance from Washington. It would be like much of what we do every day—buying groceries, changing cell phone plans, or eating at a restaurant. It would be “chaotic” in the sense that Americans would get back some of the control they use over exert their healthcare prior to the ACA.

Let’s turn back the clock for a minute. When Obamacare was on the docket in 2010, opponents argued vigorously that if passed, such an entitlement could NEVER be undone politically. For the last year, most of the same people are celebrating the impending repeal and replace. Were they right six years ago, or is it really possible to undo such a monstrosity?

For the most part, I think they were right six years ago, as demonstrated by the continued unwillingness to undo the entitlement. If coverage for all Americans is the goal, and if healthcare is such a great priority, then all Americans need to understand the financial reality. The current notion of healthcare—the idea that anyone should be able to pursue almost any treatment at almost any facility regardless of cost—is unworkable. Either individual consumers must be willing to make tough choices about what they need and are willing to pay for, or Washington will do it instead.

I do not favor a single payer plan, but most countries with universal healthcare tax everyone—not just “the rich”—to pay for it. Those who have more pay more, but average citizens have real skin in the game. When healthcare budgets run tight, politicians openly discuss rationing. The idea that government subsidies can magically “make healthcare affordable” is just ballooning the debt.

Is there hope? Yes, but only if we are willing to make bold changes. The idea of a three-year phase-in won’t get it done. Republicans have an opportunity to completely alter the role of government in healthcare, but doing so would require making some tough choices. I don’t see much evidence that they are willing to do so.


The Intellectual Debate- part 2


I addressed the comments of CSU-Dominguez Hills professor Terry McGlynn in my last post. While arguing for the “open exchange of ideas,” McGlynn castigated Trump and his supporters as, among other things, racists and deniers of science. I believe McGlynn’s view is mainstream in academe. Not all academics are progressives or are hostile to those who don’t share their ideology, but McGlynn speaks for far too many when he just doesn’t recognize a genuine, legitimate basis for a non-progressive point of view. If you still think McGlynn is atypical, consider economist Paul Krugman.

I’ve commented on Krugman’s work over the years and I’ve always tried to give him the benefit of the doubt, but his well-publicized tweet on Friday just went too far. Krugman inferred that Trump might instigate a terrorist attack against the US to solidify his legitimacy, noting that he (Trump) “will surely use [the] patriotism card to distract from tainted election and effects of his anti-populist policies.”

The overlap between economics and politics is obvious. Economic policy doesn’t occur in a vacuum; it is implemented by politicians with various motives and incentives. It’s okay for economists to mix some politics with their economic analysis, but I’m hearing less and less economics from Krugman with each passing year. He’s become more of a progressive apologist who rests on his Ivy League laurels. Krugman rarely makes a strong case for anything anymore. He mostly rants and attacks.

Of course, I disagree with Krugman on most issues. I believe less regulation, a simple tax code, and a smaller government is both constitutional and good for our economy. The arguments I present on issues like these are based in evidence and logic, not superior intellect. I don’t presume my detractors to be racists, ignorant, and uneducated. In fact, I enjoy reading clear arguments on the other side, as they help me sharpen my own views. But most of them—especially during the past six weeks—have been political, emotional, and downright insulting. Krugman’s recent tirade is just more of the same.

There’s still a lot left to be resolved in Washington. Will the Republicans have the courage to pull the plug on Obamacare, and if so, what will replace it? How will Trump and the Congress deal with trade policy? How will they deal with the Paris accord on climate change? Will Congress balk at Trump’s infrastructure plans? How will Trump address issues with China and Russia? Calling Trump names and attempting to delegitimize his election won’t help.

There are real disagreements among Republicans, so serious Democrats could play a greater role than minority Republicans could when Obama controlled both the House and the Senate in 2008. But if they fall in line behind Krugman and others who refuse to at least recognize the case for liberty, then Washington will continue to be completely divided, but with a new sheriff instead.

Merry Christmas!


Serious Debate


I understand why progressives feel disdain for the recent election. While President-elect Trump has some progressive tendencies, he’s a far cry from President Obama or Secretary Clinton. But what frustrates me the most is the complete lack of understanding of anyone or anything in disagreement to the progressive agenda. This frustration can be seen clearly in CSU-Dominguez Hills biology professor Terry McGlynn’s recent piece in the Chronicle of Higher Education, the industry’s legacy publication in terms of both news and opinion:

Like free speech and freedom of the press, scholarly inquiry is an ingredient of a functional democracy. With our federal government careening toward an anti-intellectual autocracy — led by a science-denying president who panders to white male insecurities and prejudices — the open exchange of ideas is as essential as ever.


The entire article is a window into the progressive academic view of Trump and the Republican party. The hypocrisy seems evident at first glance. In the same breath that he defends the “open exchange of ideas,” McGlynn expresses personal contempt for Trump and his ideas. McGlynn doesn’t explain why his ideas are superior, but instead tags Trump as racist, reckless, and hostile to science and academe. Perhaps this qualifies as the open exchange of ideas, but McGlynn’s article is riddled with contempt and scorn, and displays no intellectual curiosity.

But after reading McGlynn’s article a couple of times, I’ve reconsidered. McGlynn might not be a hypocrite after all. Maybe he’s just ignorant of the opposition. His article reminds me of a young man I saw on CNN the day after the election. His name escapes me, but he was affiliated with a religious tolerance group and seemed to be a nice guy. He said he walked over to Trump Tower on election night “to try to understand what Trump supporters were all about.” Really? Apparently, he assumed they were all idiots or malcontents unworthy of his time when he thought Trump was going to lose anyway. I guess he spent the previous year as an avid Clinton supporter who never stopped to wonder why so many people between New York and Los Angeles were not going to vote for her.

My message to the guy on CNN, McGlynn, or any other progressive is simple: There are other legitimate ways to view society, the economy, and national security. In fact, there’s a lot of diversity in the Republican party, from Trump’s populism to traditional conservatives to neo-cons to quasi-libertarians. Each perspective has a serious intellectual basis if you’re willing to open your minds, treat people with respect, drop the blanket bigot claims, and engage in real dialogue. You’ll learn something. You’ll probably find some common ground and meet some nice people while you’re at it.

Or you can continue to label all non-progressives as bigots who just don’t know better. So much for tolerance.


Undoing Obamacare


There’s a reason why Marxism in practice is often called creeping socialism. It’s built one entitlement—or entitlement enhancement—at a time. Once in place, entitlements are difficult to undo because reformers must survive a siege of charges that they are taking something away from someone. The “something” can be food on the table, unemployment benefits, social security, or just about anything the left has decided should be provided by government. In this instance, it’s healthcare.

The left’s narrative on repealing Obamacare is that Republicans must figure out how to improve the system while not affecting those who are currently covered, including millions who received heavily subsidized plans through the so-called Affordable Care Act. The average monthly subsidy for new enrollees was almost $300 for a plan with an average premium of less than $400. In effect, this means that newly covered Americans are paying about $100 per month for a $400 plan. The upper limit for subsidy eligibility is 4 times the poverty level, or about $100,000 a year for a family of 4. Obamacare proponents consider existing subsidies to be cemented, so any rollback would just be heartless.

The Republicans I’ve heard are playing along. Nobody will lose their plan because of reform, they say. To be frank, real reform isn’t possible if healthcare—including routine trips to the doctor—is considered an entitlement. Quality care costs money, and it’s time that Americans who can afford iPhones, Netflix, Body art, and lottery tickets accept responsibility for paying the piper.

I don’t want to be an early Grinch, but we must face facts. When government pays for something, we all pay for it indirectly. It’s direct payments that give us control over the grocery stores, gas stations, auto repair facilities, and restaurants we deal with every day. If they don’t meet our needs, we find another provider who can. But with healthcare, government and insurance companies pay most of the bills, so they call most of the shots. It’s no surprise that doctors and hospitals don’t post prices for their services and most people involved in their delivery have no clue what they actually cost. The only way to regain control is to limit subsidies to catastrophic care for the truly poor, while unleashing the market and demanding control of our own healthcare expenses.

A predominantly market-based healthcare system would be a paradigm shift for most. If you get the flu, you should decide if a trip to the doctor is worth $100. Instead, if you have coverage with a modest copay, you are more likely to go and pass the additional cost along to others in the pool, who are, of course, doing the same. Economists refer to this as perverse incentives and it drives up costs for everyone.

I’m saying what Trump, Ryan, and other Republicans are hesitant to say. Yes, some Americans should lose their subsidies. Some assistance for those in poverty makes sense, but the rest of use need to regain control of our choices. That means no mandated plans, the ability to purchase coverage across state lines, and no expectation that insurance companies will accept us as new customers after we get sick.

Here’s to a complete overhaul of the system. Unfortunately, I doubt the Republicans have the fortitude to go as far as we need to go.


Trump & Mexico


On Monday I addressed a group of business leaders in Mexico City. We covered a lot, including global trade. I wasn’t surprised that Trump, NAFTA, and the wall were hot topics in the Q&A. Essentially, I was asked to explain the Trump-trade phenomenon by Mexican managers who have benefitted over the years from the growth in US-Mexico trade.

For the record, I’ve been to Mexico dozens of times to lecture, conduct research, and speak to business groups. Their managers are talented and engaging, and they always express frustration with government corruption and infrastructure problems. My address on Monday was scheduled before the election when most Mexicans expected Hillary Clinton to win. The focal point changed when she was defeated. There is some uneasiness there about Trump, but they seem to understand the issues pretty well.

If you a regular on this blog, then you know my position on trade. Free trade is undeniably positive, but it’s really just an academic concept. In practice, there are lots of issues to negotiate, including currency manipulation, intellectual property protections, differences in tax policies and regulatory environments, state-owned enterprises (SOEs) and “catch up” provisions that allow one country to protect “infant” industries. In practice, negotiators from each country must hammer out their differences before trade can occur. President-elect Trump widely criticized NAFTA and other trade deals during the campaign, threatening tariffs as a means of addressing inequities. The US is a huge market for Mexico, and this is what makes Mexican business leaders nervous.

And then there is the wall. Nations have recognized the need to control borders for millennia. Hillary Clinton even voted for constructing a fence in 2006 while in the Senate. Regardless of one’s view on immigration, making sure individuals have permission to enter the country is a sound part of any policy. But the US does not have control of its southern border, a problem that has actually been a boon to our southern neighbors, as Mexicans working in the US send an estimated $25-50 billion home every year, accounting for 2-4% of Mexico’s GDP.  There is no doubt that simply enforcing laws currently on the books—along with a structure that eliminates most of the free passage between nations—would negatively hit the Mexican economy.

I understand the Mexican concerns given their strong ties to the US economy. Unfortunately, their press seems to follow the lead of the US mainstream media, stoking fears that the President-elect wants to completely abolish trade with Mexico. Overall, they were respectful of the election process and seemed to understand the concerns of workers who drove the results in the rust belt. None of them expressed the kind of disdain for Trump that numerous HRC supporters continue to do, although it would have been easy to do given I was the only American in the room. Their primary concern is trade, not the wall. In fact, several executives told me that they fully understand the need to secure the border, and they complimented Trumps economic plan to business prowess. They also noted the widespread frustration with President Peña Nieto, something that I did not hear reported when the media criticized Trump’s trip to the DF during the campaign.

Mexican business leaders see these issues from the Mexican perspective, but I was impressed with their ability to empathize with Trump’s concerns and work with him as our nation’s duly elected leader. I wish those American protesting and rioting could display the same class.


No matter who wins…


Today we will decide who will be our next president. The winner will have a lot to do with immigration, trade, and the Supreme Court. Don’t get me wrong, this is a huge election. But I’d like to point out some very important issues that will remain on the table no matter who wins.

This election will be close. I’m always amazed that we refer to 5-point wins as “decisive” or “landslides.” The winner will claim vindication and some sort of mandate, but our country will be as divided as ever on November 9. The best case (realistic) scenario for Clinton includes a Republican House and ongoing investigations. A President Trump would face opposition in his own party and constant Senate filibusters. We can expect our government to be as divided as the voters. If divided means that less gets done, this isn’t the worst outcome.

Clinton may have promised “debt-free college” and Trump better trade deals, but Congress will have a lot to say about these issues. The President can wield a lot of influence, but his or her views will be tempered by the will of legislature. If you’re worried that Clinton might by-pass Congress with “a pen and a phone,” my guess is that she might not hesitate to anger the Republicans while her investigations are ongoing, which could be a while.

Regardless of the victor, the national debt will continue to rise. While Clinton seeks to expand entitlements, Trump wants to hold steady and is counting on economic growth to save the day. Trump’s prospects would be better given his tax proposals and the leanings of a Republican House, but both candidates have kicked the entitlement issue can down the road.

Win or lose, the Republican Civil War will begin on Wednesday. If Trump loses, he and his followers will likely blame the establishment for a close defeat and many will call for a new party. The Trumpsters would have a point. While Trump has made some errors along the way, never before has a presidential nominee had to battle so many within his own party. A Trump victory would mean an entirely new look for the Republican party, but don’t expect Romney, Bush, Kasich, Ryan, McCain, and the rest of the usual suspects to go down easy. There’s a lot of political blood left to be shed either way, and it will probably be a good thing over the long haul. The Republican party has been feckless for years now and needs a major overhaul.

Win or lose, we will still have a massively biased “mainstream” media. WikiLeaks continues to expose CNN’s corrupt ties to the DNC. While past GOP nominees seemed easily intimidated, Trump (to his credit) has kept this issue front and center. Imperfect though it may be, Fox News will continue to lean right to counter the herd. Kudos to Fox for its investigative work with WikiLeaks and the FBI investigations while others conveniently swept these issues under the rug.

There’s a lot riding on this election, but it’s only part of the equation. If you read this on November 8 and haven’t voted yet, your vote can make a difference. But no matter who wins, the battle for our liberties won’t end on Wednesday morning.


Revisiting the Tax Plans


There’s a lot of confusion about taxes in this and every election cycle. Here’s what you should keep in mind as you dissect the plans proposed by the two major presidential candidates.

Before we start, taxes are essential to an economy. Even a limited constitutional government requires revenue to operate. A lower tax rate is almost always better than a higher one, but the details are important. Taxes should be spread among the beneficiaries of government services—not just the rich—and should be as low as possible to as to fund a constitutional government. Tax systems should be simple and transparent; our current code is neither.

Clinton’s proposal is simple—tax the rich to pay for more government. Aside from the moral problem with such plunder, it doesn’t work. The rich don’t have enough to pay for our oversized government and soaking them hurts business investment. Clinton would counter this with more tax “incentives” to prod individuals and businesses into activity she thinks is best for them and the country. Add to this another “stimulus plan” to reward her supporters and you have a repeat of the last eight years. It’s classic progressivism.

Trump’s proposal is equally simple—cut taxes across the board and reduce regulation. The resulting growth would expand the tax base and increase tax revenues. Trump isn’t looking to reduce spending, although he could (arguably) hold the line if he has majorities in the House and Senate. His approach is a blend of supply side economics and populism.

If I were grading, Clinton’s plan would easily get an F. Without some good luck in the coming years—no wars, cheap energy, and the like—the best it can produce is a repeat of the Obama stagnation. With a bad break or two, it could be worse. The irony is that the social engineering (loopholes) inherent in her plan creates the very cronies she claims to despise. Wealthy individuals and corporations can reduce their taxable income by taking advantage of the “tax incentives” progressives inflict on the economy. It also increases complexity and reduces transparency, with more tax brackets and complications.

Trump’s plan would get a C. It’s decidedly better than Clinton’s, but it could be better. Trump and the Republicans had a huge opportunity to simplify the tax code with a single, low flat rate, or even two rates to win over the moderates. He could have addressed entitlements, capping the growth on Social Security and allowing younger Americans to choose another option. He could have proposed a universal basic income (UBI) to completely replace ALL government transfers. Any of these would have been game-changers. His election would be a wrecking ball for Washington, but his economic policies wouldn’t differ much from those of previous Republicans.

Of course, we shouldn’t assume that either candidate’s proposals would be implemented as proposed. The Republicans aren’t known for much opposition in the House, but if they maintain one or both majorities and a scandal-ridden Clinton is elected, major initiatives could be off the table. Likewise, Trump hasn’t made too many friends in the halls of Congress, so he would likely face some opposition as well. The only scenario that would likely result in major economic change would be a Democrat sweep. It’s not out of the realm of possibilities, but I’m not betting on it.

Overall, a C is not an A, but it’s better than an F.


Lester Holt’s Opening Question


Issues related to economics and business were front and center during the first presidential debate. There is a lot I could discuss, but Lester Holt’s opening question is enough for this post:

There are two economic realities in America today. There’s been a record six straight years of job growth, and new census numbers show incomes have increased at a record rate after years of stagnation. However, income inequality remains significant, and nearly half of Americans are living paycheck to paycheck. Beginning with you, Secretary Clinton, why are you a better choice than your opponent to create the kinds of jobs that will put more money into the pockets of American workers?

First, Holt’s question is far too generous to President Obama’s record on the economy. The “job growth” he mentioned is expected in a lackluster economy, so “six straight years” is no accomplishment. The income increase he referenced only appeared in the most recent data and does not negate the rest of Obama’s tenure as president. Holt also overlooked the extremely low labor participation rates, especially among youth and minorities.

Second, Holt’s question legitimizes the 2004 “two Americas” argument by former Democrat presidential candidate John Edwards. Of course, versions of the haves and have-nots argument have been bantered around politically since the days of Marx and Engels.

Third, Holt assumes that it’s the role of the President and/or federal government to “put more money in the pockets of American workers.” It’s not. The government’s role is to protect liberty so we can achieve on our own. Instead of opening the discussion on how much government intervention is best, Holt framed the debate as one over which type of intervention is best.

Finally, Holt made Hillary Clinton’s most difficult argument for her. Secretary Clinton needs to stay close enough to Obama to leverage his strength with certain voter groups, but far enough away to combat Trump on trade and other vulnerable issues. By establishing the pretext that Obama has advanced the economy but more intervention is necessary, he set the stage for Clinton’s narrative.

Holt’s opening question introduced a subtle bias that was present throughout the evening and set the stage for the debate. Hillary Clinton was ready for the softball he tossed her, responding as if on cue with all of the predictable clichés—“trickle down economics,” the need to “help families,” and making the “wealthy pay their fair share.”

If you’re upset about the bias, get used to it.


Dog Whistles & Donald Trump


I recently reread Paul Krugman’s bestseller, Conscience of a Liberal. My respect for Krugman has waned over the years, but I still try to give him the benefit of the doubt when I can. There are some decent economists on the left, but most of them just can’t put the pieces of the puzzle in the right places. Otherwise smart people reach wrong conclusions and promote bad policy.

Nonetheless, Krugman’s book is an essential read for anyone seeking to understand the intellectual basis of the left. Most conservatives and liberals agree that the gap between the political left and right has widened considerably in the past several decades. Conservatives argue that socialists and other statists pulled the Democrat party to the far left. Liberals like Krugman tell a different story, maintaining that “movement conservatives” pulled the Republicans to the far right. Krugman’s argument is flawed in a number of ways, but I want to focus on one of his key themes.

Conservatives—which include most Republicans—have held their own at the ballot box by blowing “dog whistles” to ill-informed, racist southern voters who are unable to see that their interests are really represented by Democrats. This point is not merely a side comment in his book, but a major crux of Krugman’s political philosophy. When Hillary Clinton claimed that half of Trump’s supporters are deplorables of some kind—“racist, sexist, homophobic, xenophobic, Islamaphobic”—she wasn’t just getting caught up in a political speech. She was parroting the core argument of modern statists like Krugman.

The problem with the Krugman/Clinton argument is that it lacks a factual basis. Bigots vote too and are probably split between Clinton and Trump, but this does not make either candidate a bigot. The notion that a large percentage of Americans fall into one of Clinton’s hate categories is hard to support, but that is not what is so problematic about her statement. Clinton’s contention that Trump voters are either haters or confused suggests that she simply does not understand the intellectual arguments for liberty and limited government. Put another way, she argues for a more intrusive government because she does not see any alternative.

It’s impossible to have a meaningful conversation with someone who believes that their view is the only legitimate one. If you’re in this camp, please understand the following. There IS a rational argument for strong borders that is not based in racism, isolationism, or xenophobia. There IS a rational argument for traditional family values that does not condone mistreatment of the LGBT community. There IS a rational argument that Islamic thought is a key issue with ISIS and other terrorists. There IS a rational argument for “law and order” that respects individual liberty and seeks to treat all Americans fairly.

If you’re on the left, know that the dog whistle argument is a non-starter and offends thoughtful Americans who don’t see things your way. If you want to have a productive conversation, dispense with the allegations of hatred and political correctness. You might find more common ground than you think.


The Value of Polls


Polls get far too much attention in the press, especially several months before an election. Nonetheless, the misnomers about the polling process never cease to amaze me. I’ve addressed polling in the past, but I’m going to update my comments in this post.

Who you ask, what you ask, how you ask, and how you tabulate the results are critical. Polling is a science, but it’s also a social science. Instead of measuring chemical reactions in a lab, you are measuring attitudes. People are much more complicated than chemicals, they don’t always tell the truth, and election polls must factor in one’s likelihood to vote. For these reasons, even the best professional pollsters get different answers when they are polling on the same issue.

Of course, another reason poll results can vary widely is that some pollsters are biased and seek certain results as a means of influencing behavior. If polls show that most Americans support candidate A, then some supporters of candidate B might give up or blame the candidate, and undecided voters—wanting to get behind a winner—might tend to support candidate A as well. I think the actual behavior of most voters is not affected by polls, but this isn’t the point. Even if poll results only influence the activity of 2-3% of voters, they can easily swing an election.

Leading questions and poor wording are common problems. Consider the question, “Do you think Hillary Clinton should be held accountable for using a private email server during her tenure as Secretary of State? Even if respondents share a common understanding of the scandal, “held accountable” might mean a reprimand to some and jail time to others. The results from questions such as these are simply not valid.

Even when questions are clear and worded correctly, some errors are difficult to overcome. Election pollsters try to survey a small group of voters that precisely represents the population of actual voters. A common misconception is that you cannot produce a reliable poll with only several hundred respondents. Statistically, you can. The real problem is how you select the respondents. Phone polls are common, but they not include lots of voters who don’t have landlines, don’t answer calls from unknown callers, or do not respond in a truthful manner.  Pollsters try to account for this problem by adjusting results, but they are really guessing.

Some errors are difficult to calculate from the outset. For example, should polls include candidates other than Clinton and Trump? The knee-jerk answer is yes because they will be on the ballot, but history—which can be wrong—tells us that most third party supporters end up voting for one of the two major candidates. Gary Johnson might poll at 10% in some states, but how many of his supporters will switch to Clinton or Trump in November? Nobody really knows. This issue alone is enough to weaken the results.

If you really like to follow polls, I suggest tracking averages at Real Clear Politics. By incorporating lots of polls into a composite, they probably average out some of the error on both sides. This is still just a best guess, but it’s better than relying on a single poll. At the end of the day, however, I suggest that you treat all polls with serious caution. They can and will be deceiving.

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