How does this guy keep getting elected?

From The Business Insider:

Of all the things you could say about Fannie Mae (FNM) and Freddie Mac (FRE), too-strict lending standards probably wouldn't come to mind.

Afterall, the companies have been backstopped to the tune of $400 billion, which has to mean their standards were too loose.

But powerful Congressman Barney Frank, in a desperate attempt to reflate the old bubble, says the two GSEs are being too stingy, particularly with respect to condos.

Can't get Something For Nothing...

...but that seems to be what Americans want. According Amy Walter over at National Journal a swath of recent polls tell a similar story. "Americans know that the system is broken and would like to see it fixed. But the more a potential fix affects them personally, the less interested they are in supporting it."

Revolutionizing Health Care

Milton Friedman, recipient of the 1976 Nobel Memorial Prize for economic science, was a senior research fellow at the Hoover Institution from 1977 to 2006. He passed away on Nov. 16, 2006. He was also the Paul Snowden Russell Distinguished Service Professor Emeritus of Economics at the University of Chicago. Eight years ago he wrote a piece entitled "How to Cure Health Care." With the current debate raging over the Obama administration's new proposals it serves as a timely reminder of how we could really revolutionize health care if we chose to. The following are Friedmans conclusions, bold added is mine; for the entire article click here.

Conclusion: Medical Savings Accounts and Beyond

The high cost and inequitable character of our medical care system are the direct result of our steady movement toward reliance on third-party payment. A cure requires reversing course, reprivatizing medical care by eliminating most third-party payment, and restoring the role of insurance to providing protection against major medical catastrophes.

The ideal way to do that would be to reverse past actions: repeal the tax exemption of employer-provided medical care; terminate Medicare and Medicaid; deregulate most insurance; and restrict the role of the government, preferably state and local rather than federal, to financing care for the hard cases. However, the vested interests that have grown up around the existing system, and the tyranny of the status quo, clearly make that solution not feasible politically. Yet it is worth stating the ideal as a guide to judging whether proposed incremental changes are in the right direction.

Most changes made in the final decade of the twentieth century were in the wrong direction. Despite rejection of the sweeping socialization of medicine proposed by Hillary Clinton, subsequent incremental changes have expanded the role of government, increased regulation of medical practice, and further constrained the terms of medical insurance, thereby raising its cost and increasing the fraction of individuals who choose or are forced to go without insurance.

There is one exception, which, though minor in current scope, is pregnant of future possibilities. The Kassebaum-Kennedy Bill, passed in 1996 after lengthy and acrimonious debate, included a narrowly limited four-year pilot program authorizing medical savings accounts. A medical savings account enables individuals to deposit tax-free funds in an account usable only for medical expense, provided they have a high-deductible insurance policy that limits the maximum out-of-pocket expense. As noted earlier, it eliminates third-party payment except for major medical expenses and is thus a movement very much in the right direction. By extending tax exemption to all medical expenses whether paid by the employer or not, it eliminates the present bias in favor of employer-provided medical care. That too is a move in the right direction. However, the extension of tax exemption increases the bias in favor of medical care compared to other household expenditures. This effect would tend to increase the implicit government subsidy for medical care, which would be a step in the wrong direction.

Before this pilot project, a number of large companies (e.g., Quaker Oats, Forbes, Golden Rule Insurance Company) had offered their employees the choice of a medical savings account instead of the usual low-deductible employer-provided insurance policy. In each case, the employer purchased a high-deductible major medical insurance policy for the employee and deposited a stated sum, generally about half of the deductible, in a medical savings account for the employee. That sum could be used by the employee for medical care. Any part not used during the year was the property of the employee and had to be included in taxable income. Despite the loss of the tax exemption, this alternative has generally been very popular with both employers and employees. It has reduced costs for the employer and empowered the employee, eliminating much third-party payment.

Medical savings accounts offer one way to resolve the growing financial and administrative problems of Medicare and Medicaid. It seems clear from private experience that a program along these lines would be less expensive and bureaucratic than the current system and more satisfactory to the participants. In effect, it would be a way to voucherize Medicare and Medicaid. It would enable participants to spend their own money on themselves for routine medical care and medical problems, rather than having to go through HMOs and insurance companies, while at the same time providing protection against medical catastrophes.

A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance (i.e., a major medical policy with a high deductible). Second, it would end tax exemption of employer-provided medical care. And, third, it would remove the restrictive regulations that are now imposed on medical insurance—hard to justify with universal catastrophic insurance.

This reform would solve the problem of the currently medically uninsured, eliminate most of the bureaucratic structure, free medical practitioners from an increasingly heavy burden of paperwork and regulation, and lead many employers and employees to convert employer-provided medical care into a higher cash wage. The taxpayer would save money because total government costs would plummet. The family would be relieved of one of its major concerns—the possibility of being impoverished by a major medical catastrophe—and most could readily finance the remaining medical costs. Families would once again have an incentive to monitor the providers of medical care and to establish the kind of personal relations with them that were once customary. The demonstrated efficiency of private enterprise would have a chance to improve the quality and lower the cost of medical care. The first question asked of a patient entering a hospital might once again become "What’s wrong?" not "What’s your insurance?"

Will Obama Care Bring us Togther?

Regular readers of this site will know by now that I favor a meeting of the minds between moderate Democrats & moderate Republicans on many issues. I feel that the nation is essentially center-right and that is where the majority of the governing should take place. Now it seems that perhaps the Obama administration has pushed hard enough from the left to make such a meeting possible. From The Hill:

Centrist House lawmakers from both sides of the aisle are working together privately on healthcare reform.

The talks have been so secretive and politically sensitive that some members interviewed by The Hill refused to name other legislators involved in the bipartisan effort. Members of the centrist GOP “Tuesday Group,” the New Democrat Coalition and the 52-member Blue Dog Coalition have been discussing both the policies and politics of moving their middle-of-the-road ideas in a body of Congress usually dominated by liberal or conservative ideology.

Those centrist factions are wary of the proposals their respective leaders will introduce this month. Blue Dogs are leery of the so-called public option in the healthcare reform bill that is expected to hit the House floor this summer. Meanwhile, GOP centrists opted to release their own healthcare plan a day before House GOP leaders are scheduled to unveil their reform package.

What Media Bias?

From The Drudge Report:

ABC is refusing to air paid ads during its White House health care presentation, the DRUDGE REPORT has learned, including a paid-for alternative viewpoint!

The development comes a day after the network denied a request by the Republican National Committee to feature a representative of the party’s views during the Obama special.

Conservatives for Patients Rights requested the rates to buy a 60-second spot immediately preceding ‘Prescription for America’.

Conservatives Trounce Liberals....in priniciple anyway

From Gallup:

Thus far in 2009, 40% of Americans interviewed in national Gallup Poll surveys describe their political views as conservative, 35% as moderate, and 21% as liberal. This represents a slight increase for conservatism in the U.S. since 2008, returning it to a level last seen in 2004. The 21% calling themselves liberal is in line with findings throughout this decade, but is up from the 1990s.

Hopefully this is the Obama-effect. The more to the left he pushes, the more common sense Americans will move to the center-right.

In Defense of Capitalism

Tha nation's business community is getting more and more nervous about government intervention. From BusinessWeek:

The Administration's approach has real dangers. Attempting to reorganize and tinker with the culture of a giant corporation like GM is risky in the best of times. Taxpayers may find themselves hopelessly entangled in lost corporate causes, with billions of loans never returned. Companies that are shackled with pay restrictions may lose top talent to those that aren't. Countless historical examples show the potential for unintended consequences from well-intended policies. (Just one example: the costly distortions in employee titles and pursuit of tax loopholes that followed imposition of government wage and price controls.)

Now groups are beginning to mobilize in defense of capitalism and against the Obama administration's invasive policies.

The U.S. Chamber of Commerce today announced that it would develop a sweeping national advocacy campaign encompassing advertising, education, political activities, new media, and grassroots organizing to defend and advance America’s free enterprise values in the face of rapid government growth and attacks by anti-business activists.

“Supporters and critics alike agree that capitalism is at a crossroads,” said U.S. Chamber President and CEO Thomas J. Donohue. “It’s time to remind all Americans that it was a free enterprise system based on the values of individual initiative, hard work, risk, innovation, and profit that built our great country. We must take immediate action to reaffirm the spirit of enterprise in America.”

While on the one hand I applaud the belated outcry over government intervention, this recent development belies a deeper problem. Business in general, and the US Chamber in particular, was all too happy to accept government money a few months ago, yet now that there are some strings attached to these billions, they are up in arms. If we truly value a capitalist society, and I do, then we need to retain a certain loyalty to its principles. If that means certain businesses go under (read: GM) then so be it.

Here Come the Taxes II

From USA Today

Providing health care coverage to millions more Americans is going to cost money, and lots of it, so perhaps it's not surprising that some in Congress want people with unhealthy diets to foot part of the bill. But where would the concept stop?

Congress is eyeing a menu of "lifestyle tax proposals," most prominently a new federal tax on soda and other sugary drinks.

With e record debt and healthcare reform on the docket we should expect a lot of new and interesting tax proposals coming our way. The silver lining? Middle American backlash.

The Center Grows

This graph from Pew Research shows how the middle keeps growing at the expense of both the hard right and the hard left. However it may be of more concern to Obama than the GOP right now. From the WSJ

For the Obama administration, the rise of independents so soon after the election should be a wake-up call. While Mr. Obama remains very popular among independents, their approval of the Democrat-controlled Congress is at 29%. Independents identify with the president's desire to overcome the left-right divide, but his fiscal record looks increasingly at odds with his rhetoric of responsibility.

A Development to cheer about in Europe...no really...

Making plain their unhappiness with the European parliament and local officials across Europe, voters rejected leftist and socialist governments and overwhelmingly voted for conservative and far-right parties. From the WSJ:

Elections to the 736-seat body were a mishmash of local political needs and lofty debates over the future and purpose of the European Union. But one thread was clear. It was a "very sad evening for socialists in Europe," said Martin Schulz, a German who is president of the Socialist group in the European Parliament. "In most countries we did very badly."

Sign of things to come?

Bait and Switch Stimulus

Let's go back in time a few months and recall how The President's Stimulus package was sold to the American public. Obama claimed that this package would be "one that will invest in our most important priorities like energy and education; health care and a new infrastructure that are necessary to keep us strong and competitive in the 21st century."

He also argued that his stimulus plan aimed at boosting production while creating or retaining between three and four million jobs, and would inject new life into the shrinking economy.

He said his proposal was not "just be a short-term program to boost employment.

His economic team's report said some 500,000 jobs would be created by investing in clean energy and committing to double the production of alternative energy over the next three years.

About 400,000 people would be put to work repairing US infrastructure, including crumbling roads, bridges and schools, the advisers estimated.

"These made-in-America jobs building solar panels and wind turbines, developing fuel-efficient cars and new energy technologies pay well, and they can't be outsourced," Obama said.

And hundreds of thousands of others jobs were to be created through improvements to the nation's health care system.

Now fast-forward to the present and what exactly have we seen? According to this article in the Las Vegas Review-Journal not much.

As it turns out, most of that money is going where government always puts most of its money -- into fat paychecks for social service bureaucrats.

"Most of the roughly $300 billion coming directly to the states is being funneled through existing government programs for health care, education, unemployment benefits, food stamps and other social services," The Associated Press reported this week.

Two-thirds of recovery money that flows directly to states will go toward health care. Not hiring new doctors or nurses, mind you. Just paying medical bills for poor people -- and the salaries of those who handle this redistribution of your hard-earned cash.

By comparison, about 15 percent of the stimulus money will end up going for transportation -- including airports, highways and rail projects -- according to Federal Funds Information for States, a service of the National Governors Association and the National Conference of State Legislatures.

Overall, two-thirds of the stimulus funds will go to subsidize state budgets and unemployment compensation -- paying people not to work. Much smaller pieces of the pie will be allocated for weatherization, affordable housing and other projects designed to create jobs, The AP reports.

In Georgia for instance, two-thirds of the $3.9 billion in "stimulus" funds the state expects to receive over the next 16 months will go to support existing social programs. Mississippi expects to spend only about 13 percent of its $2.8 billion in federal "stimulus" money on highways and bridges. The rest will be spent, as it is in other states, to preserve existing government programs and jobs.

Is GM the new Amtrak?

As General Motors becomes Government Motors it may be instructive to look at the history of the last national foray into the transportation industry.

Amtrak commenced operations in 1971 with $40 million in direct Federal aid and $100 million in Federally insured loans. Officials expected that Amtrak would break even by 1974, but it still hasn't. In fact by 1995 Amtrak was on the brink of a crashing (pun intended) and was unable to continue to service its debts. In response, in 1997 Congress authorized $5.2 billion for Amtrak over the next five years—largely to complete the Acela capital project—on the condition that Amtrak submit to the ultimatum of self-sufficiency by 2003 or liquidation. No surprise, while Amtrak made financial improvements during the period, it ultimately did not achieve self-sufficiency.

Fast forward a few years and in Congressional testimony, the Department of Transportation's inspector-general confirmed that Amtrak would need at least $1.4 billion to $1.5 billion in fiscal 2006 and $2 billion in fiscal 2007 just to maintain the status quo. Most recently the "Rail Safety Improvement Act of 2008", was enacted on October 16, 2008. The bill appropriates $2.6 billion a year in Amtrak funding through 2013.

Taxpayers are still sinking billions of dollars into Amtrak—almost 40 years after buying it. Economist James Langenfeld says the bailout of GM could be an even bigger disaster.

Dr. James Langenfeld the director at the economics consulting firm LECG and professor at Loyola University Chicago was previously a senior economist at General Motors and an analyst at Amtrak. He has an interesting and informed take on this issue. In short he says that taxpayers are still sinking billions of dollars into Amtrak—almost 40 years after buying it. Economist James Langenfeld says the bailout of GM could be an even bigger disaster.

Here we go again.

Obama is Cornering Republicans....

...and Conservatives are helping him.

Politico has an interesting article today that details how President Obama is using moderate Republican appointments to burnish his bipartisan credentials while creating problems for the GOP.

“It’s very smart politically on a lot of levels. First, it’s a demonstration that he’s keeping his promise to govern in a bipartisan way. Second, the fact is, every time you open up a seat in the House or Senate that an incumbent Republican holds, you give your party an opportunity to win one back. And some of those seats may come our way,” said Tad Devine, a veteran Democratic strategist. “It forces Republicans to defend their own territory and spend money on defense.”

“Boxing the Republicans into a South-dominated party is very good strategy, because the more you reduce the Republican Party, the more conservative and reactionary it will become, and thus less attractive to moderates,” said Tom Schaller, a University of Maryland-Baltimore County professor and the author of “Whistling Past Dixie: How Democrats Can Win Without the South.” “The Midwest and the Northeast are the places where there are still remnants of old-line Rockefeller Republicans. And these are the places where the Democrats will build durable majorities.”

So, if "true" conservatives keep trying to purge the party of anyone they deem unfit to be a Republican, are they in effect helping Obama?

Cheney 1; Obama 0

After a two week scuffle over the issue of the detainee prison facility at Guantanamo Bay, it seems Cheney's argument won. That is at least according to a poll released this morning by Gallup. The vast majority, 65%, say the US should not close down Gitmo. Tom Bevan at RCP agrees stating,

[T]he poll shows that Vice President Cheney clearly won the national security "showdown" on Guantanamo Bay with President Obama last month. Forty percent (40%) of those surveyed agreed with Cheney's belief that the prison at Guantanamo Bay had helped make America safer. Only 18% agreed with President Obama's assertion that the housing of detainees at Gitmo had made America less safe.

While many people seemed to have vehemently disliked former President Bush, one gets the feeling that when push comes to shove they did not really disagree with everything he did, especially in terms of the war on terror.

Protectionism and GM

Now that the tax payers own 60% of GM we have to ask the question. Is the Obama's bail out and now take over of GM a form of protectionism? Stephen Spruiell thinks so, and he may have a point.

The greater concern is the, as the Journal put it, "raw trade protectionism" at the heart of the GM restructuring. The Treasury has made the sale of GM's German Opel unit conditional on the buyer's agreement not to export small cars to the U.S. Our tariffs on imported trucks and SUVs remain a sticking point in the stalled negotiations over a trade deal with South Korea (which is going nowhere under this administration). And the government rescue of GM and Chrysler is itself a form of protectionism — the foreign transplants that employ thousands of Americans at factories in the Midwest and the South did not ask for or receive a bailout. When the government picks winners in the market, the loser is almost always the consumer, who ends up paying higher prices to subsidize inefficient producers. And if the consumer is a taxpayer, he usually ends up paying twice.

Obama Should've Listen to Romney 6 Months Ago...

...oh well better late than never. So after billions of dollars in bailouts and constant hand ringing from the Obama administration both Chrysler and GM are going bankrupt. Of course if we had followed Mitt Romney's lead six months ago we could have been well on the way to a restructured GM by now.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check. - Mitt Romney from Nov '08

Think we can get our collective $85 billion spent on Detroit back?