EconomicPolicyJournal.com: June 2012

Saturday, June 30, 2012

An Upcoming Libertarian Film Star

Lew Rockwell has posted a podcast of an interview he conducted with Amanda BillyRock.

It's a great interview with a talented gal. In recent months, I have seen a few of her youtube videos and have been impressed with her ability to get across libertarian concepts. So it came as a shock to me when she told Lew that she only became aware of libertarianism about a year and a half ago. We have a real quick study on our hands here.

Lew's interview, along with links to some of her youtube videos, her Facebook page, etc. is here

More Evidence that WW II Didn't End the Great Depression

Most economists, but especially Keynesian economists such as Paul Krugman, have long promoted the idea that government spending as a result of World War II created a boom economy that finally launched the economy out of the Great Depression. Krugman has written:

The story of 1937, of F.D.R.’s disastrous decision to heed those who said that it was time to slash the deficit, is well known....Then came the war.

From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today.

Had anyone proposed spending even a fraction that much before the war, people would have said the same things they’re saying today. They would have warned about crushing debt and runaway inflation. They would also have said, rightly, that the Depression was in large part caused by excess debt — and then have declared that it was impossible to fix this problem by issuing even more debt.

But guess what? Deficit spending created an economic boom — and the boom laid the foundation for long-run prosperity. Overall debt in the economy — public plus private — actually fell as a percentage of G.D.P., thanks to economic growth and, yes, some inflation, which reduced the real value of outstanding debts.

Economist Robert Higgs is a pioneer, in revisionist economic history, taking the view that:

World War II got the economy out of the Great Depression, but not in the manner described by the orthodox story. The war itself did not get the economy out of the Depression. The economy produced neither a “carnival of consumption” nor an investment boom, however successfully it overwhelmed the nation’s enemies with bombs, shells, and bullets.

Now, economists Steven Horwitz and Michael J. McPhillips in a new paper, The Reality of the Wartime Economy: More Historical Evidence, on Whether World War Il Ended the Great Depression have taken Higgs' pioneer work further. From the abstract of their new paper:

In response to contemporary arguments that the expenditures associated with World War II were a major factor in ending the Great Depression and should therefore be imitated today, we offer historical evidence to suggest that the wartime economy was hardly a model of success in the eyes of most Americans. Expanding on Robert Higgs’ criticisms of the ability of conventional macroeconomic data to tell the real story, we examine newspapers, diaries, and other primary source material to reveal the retrogression in living standards in the US during the war. Our investigation suggests that wartime prosperity is largely a myth and hardly a model for recovery from the Great Recession.

The full paper can be downloaded here.

Robert Reich and Judge Napolitano on the Bizarre Logic of Justice Roberts

Reich is trying to make a different point, but he correctly understands how Justice Roberts' reasoning for upholding Obamacare is bizarre reasoning that can lead down a very dangerous path:

On the most critical issue in the case – whether the so-called “individual mandate” requiring almost all Americans to purchase health insurance was a constitutionally-permissible extension of federal power under the Commerce Clause of the Constitution – Roberts agreed with his conservative brethren that it was not.

Roberts nonetheless upheld the law because, he reasoned, the penalty to be collected by the government for non-compliance with the law is the equivalent of a tax – and the federal government has the power to tax. By this bizarre logic, the federal government can pass all sorts of unconstitutional laws – requiring people to sell themselves into slavery, for example – as long as the penalty for failing to do so is considered to be a tax.

And Judge Nap backs up Reich:

(ht Kyle Johnson)

Angela Merkel 'Blackmailed' and the Germans React

As always, German Chancellor Angela Merkel proved once again she is a tool of the banksters and, once again, in the 11th hour buckled to bankster pressure. This time at the just concluded EU Summit in Brussels, but it is not making the citizens of Deutschland very happy.

With the headline, "Blackmailed", the German newspaper Die Welt writes:

More money, less reform: Angela Merkel sacrificed more red lines at the EU Summit. The night of the long knives in Brussels will go down in history as the night Germany largely stopped its efforts to force reforms on the problem countries of the euro zone.

German Chancellor Angela Merkel has given one last red line was: no money without verifiable consideration. Italy and Spain are can retrieve resources from the Stability Fund in the future, without having to promise reforms in turn.

In the best case, the long night of Brussels can help keep Italy and Spain in their debt spiral. At the same time, the likelihood declined that this would help these countries in the long run. And that means only postponing the crisis rather than solving it.

Der Spiegel magazine reaction went his way:

German Chancellor Angela Merkel rarely sees these kinds of negative headlines when returning from European Union summits. During her over six years as the head of Germany's government, she has usually been able to put a positive spin on even unpopular compromises.

But at the most recent emergency gathering of European heads of state and government, which was held in Brussels and lasted until the wee hours of Friday morning, she had a hard time doing exactly that...

In fact, the vehemence of the attacks seems to have taken even Merkel's advisers by surprise.

This is not the first time that Merkel has surrendered what had been repeatedly heralded as Germany's final line in the sand. Every step of the campaign to rescue the euro over the last two years has gone from being a taboo to a done-deal that triggers massive public outrage. Indeed, one could even go further and say that the entire history of European integration has been a series of broken taboos.

On the whole, the summit was a victory for the southern European countries. The summit's decisions will reduce the IMF's influence in Europe and give the European Commission a leading role in supervising reform efforts. One thing is clear: IMF officials will not seize control in Rome or Madrid.

UPDATE Despite the fury amongst the common people, the German parliament has voted in favor of the EZ's latest bailout fund. WSJ reports:

Germany's parliament ratified the euro zone's permanent bailout fund late Friday, as well as rules that enshrine German-style budget discipline in euro-zone countries and most other European Union members, despite widespread criticism of Chancellor Angela Merkel upon her return from a European summit where she made major concessions on support for Spain and Italy....Ratifying the proposals required a two-thirds majority in the Bundestag because of its impact on German states' rights, making Ms. Merkel dependent on opposition votes. The Social Democrats supported the fiscal pact only in return for Ms. Merkel agreeing to a "growth pact" at this week's EU summit. The opposition also made Ms. Merkel promise to push for a tax on financial transactions such as stock and bond purchases in at least parts of the EU...

Dissidents within her center-right coalition criticized her concessions to Spain and Italy, saying they would add to risks for German taxpayers. Some opponents of the ESM had already vowed to challenge the bailout fund's legality in Germany's constitutional court. The court is expected to rule on any challenge within weeks.

Obamacare: 21 New or Higher Taxes

Ryan Ellis puts together some important data on the tax impact of Obamacare:

1. Individual Mandate Excise Tax(Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

	1 Adult	2 Adults	3+ Adults
2014	1% AGI/$95	1% AGI/$190	1% AGI/$285
2015	2% AGI/$325	2% AGI/$650	2% AGI/$975
2016 +	2.5% AGI/$695	2.5% AGI/$1390	2.5% AGI/$2085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS)

2. Employer Mandate Tax(Jan 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees. This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years

3. Surtax on Investment Income ($123 billion/Jan. 2013): This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income

	Capital Gains	Dividends	Other*
2010-2012	15%	15%	35%
2013+ (current law)	23.8%	43.4%	43.4%
2013+ (Obama budget)	23.8%	23.8%	43.4%

*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8% surtax does not apply to non-resident aliens.

4. Excise Tax on Comprehensive Health Insurance Plans($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family). CPI +1 percentage point indexed.

5. Hike in Medicare Payroll Tax($86.8 bil/Jan 2013)

6. Medicine Cabinet Tax($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

7. HSA Withdrawal Tax Hike($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

8. Flexible Spending Account Cap – aka“Special Needs Kids Tax”($13 bil/Jan 2013): Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.

9. Tax on Medical Device Manufacturers($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. Exemptions include items retailing for less than $100.

10. Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI; it is waived for 65+ taxpayers in 2013-2016 only.

11. Tax on Indoor Tanning Services($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons

12. Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D($4.5 bil/Jan 2013)

13. Blue Cross/Blue Shield Tax Hike($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

14. Excise Tax on Charitable Hospitals(Min$/immediate): $50,000 per hospital if they fail to meet new "community health assessment needs," "financial assistance," and "billing and collection" rules set by HHS

15. Tax on Innovator Drug Companies($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

16. Tax on Health Insurers($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.

17. $500,000 Annual Executive Compensation Limit for Health Insurance Executives($0.6 bil/Jan 2013)

18. Employer Reporting of Insurance on W-2(Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

19. Corporate 1099-MISC Information Reporting($17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

20. “Black liquor” tax hike(Tax hike of $23.6 billion). This is a tax increase on a type of bio-fuel.

21. Codification of the “economic substance doctrine”(Tax hike of $4.5 billion). This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.

(Via Ryan Ellis and Iris Mack)

Krugman Gets Stuffed Trying to Prove Socialized Canadian Healthcare is Great

(ht erik varhaug)

Will Cato Step Forward?

Reports WSJ:

The city of Houston is turning to an unusual source to help fund rape investigations: strip clubs.

The City Council passed an ordinance Wednesday that requires strip clubs to pay a $5-per-visitor fee to help pay for the analysis of biological evidence collected from rape victims in hopes of identifying their attackers.

"There is no known correlation between people going to nice, high-end gentlemen's clubs and rape," said Albert Van Huff, a Houston lawyer who represents local strip clubs.

Perhaps, Ed Crane, as a final Cato gesture, can commission a study on this before he leaves the organization. You know a full analysis on just where libertarians should stand on everything from strip club taxes to date rape drugs.

(ht Kevin K.)

Krugman on the Keynes-Friedman Link and Flip Flopping Theories

Paul Krugman is out with a post today that taken in aggregate is his usual mess. However, he does make a couple of individual points that are spot on:

First on what macroeconomics has become:

Simon Wren-Lewis says something quite similar to my own view about the trouble with macroeconomics: it’s mostly political.

Krugman is very right here, especially about Keynesians and especially about his column! You don't get more political than Krugman.

Krugman also does the very important service of again linking Milton Friedman to Keynesian economics:

What’s the evidence that Keynesians respond to evidence? Just think of how the view we call Keynesian has evolved since the 1950s. Time was when Keynesians were highly skeptical about the effectiveness of monetary policy under any circumstances; evidence, including but not only Friedman and Schwartz, persuaded the school otherwise.

But Krugman's full column is a mess, he pretty much admits that current day Keynesians have no theory and fly by the see of their pants, adopting whatever theory fits the empirical data of the moment:

The idea of the natural rate, that there was no long-run tradeoff between inflation and unemployment, was very much disliked by people like Jim Tobin, but accepted by nearly everyone after the experience of the 1970s.

More recently the revisions have tended to go in the other direction, with a revival of the concept of the liquidity trap in the light of Japan’s experience, and a renewed acceptance, again based on evidence, that wages are downwardly rigid – and hence that the natural rate hypothesis breaks down at low inflation. And there’s a widespread acceptance that we were paying too little attention to debt and the financial sector.

How can you hold theories in your head that contradict one another, at different points in time? Is Krugman saying that if the empirical evidence again shows that there is "no long-run tradeoff between inflation and unemployment," that he returns to the first "theory"?

Bottom line: This shows that Krugman has no theory and attempts to spin tales based on whatever the current empirical data show, and that he is quite willing to reverse his tales 180-degrees based on the new circumstances. This is not economic theorizing. It is a perfect example of why it is incorrect, in the science of economics, to use empirical data to create theories. As Ludwig von Mises and Friedrich Hayek have pointed out, in the science of economics, we are dealing with super complex matter. Because we are dealing with super complex matter, we can not, as Krugman attempts to do, pull out a few data points and claim some kind of correlation as theory.

What the economist must do, to obtain general economic theories, is to deduce from basic principles And here I direct you to Human Action by Mises, to see how this is done.Using deductive logic, Mises creates the entire theory of economics. Theory that holds over time and does not have to be changed with every new data set. Misesian theory can explain why there is "no long-run tradeoff between inflation and employment" and also, without Krugman type contradiction, explain downward economic spirals.

EPJ Week in Review

Below is what has been posted, read and debated at EPJ, during the week ended 6-29-2012. The 10 most popular posts for the week are highlighted in red. Compiled by Chris Rossini

Friday 6/29/12

Thursday 6/28/12

Wednesday 6/27/12

Tuesday 6/26/12

Monday 6/25/12

Sunday 6/24/12

Saturday 6/23/12

Friday, June 29, 2012

When Robert Reich Told the Shocking Truth About Obamacare

This is a recording of Former Labor Secretary Robert Reich, speaking at the University of California, Berkley on September 26th, 2007. He explains what national healthcare (like Obamacare) will mean for the country.

Bottom line: The bastard insiders know that the young will get screwed by Obamacare, that life expectancy will go down under Obamacare and that medical innovation will suffocate.

Cato on Ending the Fed

Well not quite.

In a greats step toward "working within the system," Cato's Mark A. Calabria wants some Fed regional board members to just be appointed in a different fashion:

Here’s my modest proposal to “increase democratization” at the Fed, but to do so in a manner that actually gives more voice to the American public: have the governors of states within the various Fed regions appoint some, or even all, of the board members of the regional Feds. In districts, such a Philadelphia or Cleveland, the governors could appoint multiple members, with over-lapping terms, so that board would have a reasonable minimum size.

To truly increase the “democratization” of the Fed, we should also remove the various vetoes that the DC-based Federal Reserve Board has over regional Fed Bank governance. For instance, Section 4-4 of the Federal Reserve Act requires approval of the DC board of regional bank president appointments. That allows the Fed to reject anyone who might challenge the status quo. Under any circumstances, having the Fed Board appoint a third of the directors (class C) of the regional banks is also problematic. Rather then represent Washington’s interests, all regional directors should be either appointed or elected within the region, and without the need for Washington’s approval.

These modest changes could improve the accountability of the Fed, helping the break the dominance of the current Cambridge-Wall Street-Washington group-think that has so badly undermined the Fed. Of course none of this should deter us from exploring alternatives to the Fed.

This shows the problem with these "work with the establishment" types. The problem is not who is in charge of the printing presses, but the fact that the Fed has printing presses in the first place. If in the extremely unlikely event that Calabria's plan came to fruition and, say, the farm belt members wrestled control away from the "Cambridge-Wall Street-Washington" crowd, this wouldn't stop the presses but most likely result in the Fed propping up wheat futures instead of mortgage backed securities.

But most likely if Calabria's proposal gained mass appeal, with crowds on street corners throughout America calling for his plan, the "Cambridge-Wall Street-Washington" crowd would simply co-opt the plan and see to it that someway, somehow they remained in control of the presses.

The evil institutions need to be abolished, not played footsie with.

Did the EU Summit… Actually Succeed?

Brad Plumer at WaPo correctly points out:

The European bailout funds don’t have unlimited resources. If they throw $125 billion at Spain’s banks and another couple hundred billion toward Italy, pretty soon they’ll be running low. The only entity with unlimited euros is the European Central Bank. And right now, there’s no talk of using the ECB to provide bailouts. Which means that this latest move might have just forestalled the crisis, rather than ending it permanently.

Plumer also shows how bad the situation is for EZ countries relative to the U.S.

To put this in perspective, the liabilities of the entire banking sector in the United States are “only” about 100 percent of U.S. GDP. That’s one reason, Barclay’s notes, why few people question the ability of the U.S. government to act as a “rescuer of last resort” if its banks fail. By contrast, the liabilities of the Spanish banking sector are about 300 percent of GDP. And the Spanish government doesn’t have endless resources the way the U.S. Federal Reserve does. Here’s how Barclay’s sums it up: “[T]hat goes to the heart of the problem with Europe’s banks; simply put, they are much too big for their individual sovereigns to protect credibly.”

Here's a Plumer chart showing country by country eurozone bank liabilities as a % of GDP versus the U.S. and Canada. Note well that even "fiscally conservative" Germany's bank liabilities are 3x those of the U.S. bank liabilities relative to GDP.

How Clueless is the Fed?

I have written before on how limited some Fed economists are with regard their understanding of monetary theory, outside of a very limited Keynesian view. And, when I first noticed money supply growth dropping dramatically a few weeks back, and started reporting on it in the EPJ Daily Alert, I also called a top Fed economist to see if he could provide any background on why it was falling so dramatically, he didn't even know the drop in money supply growth had occurred. (He looked up the charts while I was on the phone with him.)

You really have to wonder what is up with these guys. The latest indication of cluelessness at the Fed comes in the form of a press release from the Fed which states:

The Federal Reserve Bank of New York today announced that Brian Sack has withdrawn his resignation and will remain at the Bank as a senior advisor to New York Fed President William C. Dudley, effective June 30, 2012. As a senior advisor, Mr. Sack will provide analytical expertise and guidance with respect to monetary policy, financial markets and the U.S. economy.

Mr. Sack will step down as head of the Markets Group and Manager of the System Open Market Account (SOMA) today as announced on April 5, 2012, and in his new role, he will no longer be involved in the management of the Markets Group or the SOMA portfolio.

What's this all about? .The Markets Group oversees domestic open market and foreign exchange trading operations and the provisions of account services to foreign central banks.

In an email to me, Bob English speculates:

Suggests (i) Simon Potter might not be up to the job, and/or (ii) new LSAP of a different flavour is around the corner.

Indeed, Potter has been designated to succeed Sack, but there is nothing in Potter's background that suggests he knows anything about running a trading desk. He has been, his entire career, a research and academic economist. From his CV:

Current Employment

June 1998 to present, Federal Reserve Bank of New York

Current position: Executive Vice President and Director of Economic Research

Current Responsibilities

Member of New York Fedís Management Committee

Lead FOMC brieÖngs and preparation for Bank President

With Director of Financial Research, manage Research and Statistics Group

Construct analytical tools for forecasting and monetary policy analysis

Member of BIS Macroeconomic Assessment Group

Other Employment

April 2011 - July 2011 Senior Policy Advisor, Financial Stability Oversight Council, U.S.
Department of Treasury

Headed team producing Örst Financial Stability Oversight Council Annual Report to
Congress

September 2009 - June 2010 Visiting Lecturer, Department of Economics, Princeton University

January - May 2005 Adjunct Professor, Department of Economics, New York University

September - December 2002 Adjunct Assistant, Professor Stern School of Business, New York
University

January - June 2001: Adjunct Associate Professor, Department of Economics, Johns Hopkins
University

July 1990 - June 1998: Assistant Professor of Economics, University of California, Los Angeles

Why would you put this guy in charge of the most powerful trading desk in the world? Scary, very scary,

"A Fine by Any Other Name Stinks as Bad," You Gowned Clown

Becky Akers tells it straight:

I’ve never bought medical insurance. The only time a policy has covered me was when it came incidental to a job. The Lord has blessed me with disgustingly good health; then, too, when I was 18, my mother died of a brain tumor that had escaped diagnosis for six years despite excruciating headaches and other symptoms a professor of nursing later described as “classic.”

If I were bleeding and unconscious, I might wind up in the clutches of the medical establishment, but never of my own volition.

So I deeply and personally resent Roberts’ little parlor-trick of a word-game. Forcing me to buy medical insurance is unconstitutional if we call it a “fine” but perfectly OK if it’s a “tax.”
I should think even the sponges out there dancing for joy that the Feds have nationalized yet another industry would despise this craven cretin’s insult to simple logic and our intelligence.

Sheldon Adelson Pledges $10M to Koch Effort

Are the Koch brothers war hawks?
Casino mogul Sheldon Adelson this week pledged $10 million to the Koch brothers’ 2012 efforts, cementing a potent alliance of two of the biggest spending forces in conservative politics, according to Politico.

Adelson has been a one trick pony, writing checks to anyone that is willing to support an aggressive Israeli middle east policy, which, of course, would include an attack on Iran.

Writes Politico:

Adelson has long been a major Republican financier. But his donations have primarily benefited establishment Republican groups and candidates, or those supportive of his single biggest pet issue — the vigorous defense of Israel.

Does Adelson know something about the Koch brothers that the rest of us don't or is he simply funding anti-Obama forces?

According to Politico, the summit also featured the unveiling of a new candidate training academy supported by the Kochs called the Grassroots Institute.

The Grassroots Institute adds a new tool to a loose coalition of groups backed by the Kochs that increasingly resembles a political party of its own, says Politico.

World Markets Are Rallying Because of This?

Mish nails it:

Futures are flying over a "breakthrough" that supposedly will lower borrowing costs for Italy, Spain, and Ireland. The "breakthrough" is a modification to the terms of the ESM to allow "the possibility" to recapitalize banks directly.

Amusingly, the existing ESM agreement has not even been ratified. The agreement is still on hold in Germany (numerous other countries have yet to ratify as well).

Yet the "Memorandum of Understanding" worked out at the summit today appears to require changes to the ESM.

Other ambiguous statement from the eurogroup committee are simply laughable. Here is the complete text. Emphasis added in places.

EURO AREA SUMMIT STATEMENT - 29 June 2012 -

• We affirm that it is imperative to break the vicious circle between banks and sovereigns. The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution-specific, sector-specific or economy-wide and would beformalised in a Memorandum of Understanding. The eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally.

• We urge the rapid conclusion of the Memorandum of Understanding attached to the financial support to Spain for recapitalisation of its banking sector. We reaffirm that the financial assistance will be provided by the EFSF until the ESM becomes available, and that it will then be transferred to the ESM, without gaining seniority status.

• We affirm our strong commitment to do what is necessary to ensure the financial stability of the euro area, in particular by using the existing EFSF/ESM instruments in a flexible and efficient manner in order to stabilise markets for Member States respecting their Country Specific Recommendations and their other commitments including their respective timelines, under the European Semester, the Stability and Growth Pact and the Macroeconomic Imbalances Procedure. These conditions should be reflected in a Memorandum of Understanding. We welcome that the ECB has agreed to serve as an agent to EFSF/ESM in conducting market operations in an effective and efficient manner.

• We task the Eurogroup to implement these decisions by 9 July 2012.
ESM Under Review by German Constitutional Court

Bear in mind that ESM ratification in Germany has already been delayed subject to Review by German Constitutional Court

Assange Statement Coming

Wikileaks reports that Julian Assange will make a statement later today in London on the steps of the Ecuadorian embassy.

The Details Your E-Book is Collecting about You (and passing on to e-book publishers)

By Alexandra Alder

It takes the average reader just seven hours to read the final book in Suzanne Collins's "Hunger Games" trilogy on the Kobo e-reader—about 57 pages an hour. Nearly 18,000 Kindle readers have highlighted the same line from the second book in the series: "Because sometimes things happen to people and they're not equipped to deal with them." And on Barnes & Noble's Nook, the first thing that most readers do upon finishing the first "Hunger Games" book is to download the next one.

In the past, publishers and authors had no way of knowing what happens when a reader sits down with a book. Does the reader quit after three pages, or finish it in a single sitting? Do most readers skip over the introduction, or read it closely, underlining passages and scrawling notes in the margins? Now, e-books are providing a glimpse into the story behind the sales figures, revealing not only how many people buy particular books, but how intensely they read them...

The major new players in e-book publishing—Amazon, Apple and Google—can easily track how far readers are getting in books, how long they spend reading them and which search terms they use to find books. Book apps for tablets like the iPad, Kindle Fire and Nook record how many times readers open the app and how much time they spend reading. Retailers and some publishers are beginning to sift through the data, gaining unprecedented insight into how people engage with books...

Barnes & Noble, which accounts for 25% to 30% of the e-book market through its Nook e-reader, has recently started studying customers' digital reading behavior. Data collected from Nooks reveals, for example, how far readers get in particular books, how quickly they read and how readers of particular genres engage with books. Jim Hilt, the company's vice president of e-books, says the company is starting to share their insights with publishers to help them create books that better hold people's attention.

Read the full story here.

15 Reasons Why The Obamacare Decision Is A Mind Blowing Disaster For America

Michael Snyder has put together an excellent recap of some of the major problems with Obamacare:

#1 According to the U.S. Supreme Court, the federal government has the power to force you to buy private goods and services. Now that this door has been opened, what else will we be forced to buy in the future?

#2 Obamacare is another step away from individual liberty and another step toward a “nanny state” where the government dominates our lives from the cradle to the grave.

#3 The IRS is now going to be given the task of hunting down and penalizing millions of Americans that do not have any health insurance. In fact, the Obama administration has given the IRS 500 million extra dollars “outside the normal appropriations process” to help them enforce the provisions of Obamacare that they are in charge of overseeing.

#4 Obamacare imposes more than 20 new taxes on the American people. You can find a comprehensive list of Obamacare taxes right here. If you love paying higher taxes, then you are going to absolutely love Obamacare once it is fully implemented.

#5 In an attempt to “control costs” and “promote efficiency”, Obamacare limits the treatment options that doctors and patients can consider. This is likely to result in a decrease in life expectancy in the United States.

#6 Obamacare is going to impose nightmarish paperwork burdens on doctors, hospitals and the rest of the healthcare system. This is going to significantly increase our healthcare costs as a nation.

#7 Obamacare is going to send health insurance premiums soaring. This is especially true for younger Americans.

#8 Many small businesses are going to be absolutely crushed by the provisions in Obamacare that require them to provide expensive health insurance coverage for their employees. This is going to make them even less competitive with companies in other countries where businesses are not required to provide healthcare for their workers. This is also going to make it even less attractive for businesses to hire new employees.

#9 Obamacare is going to make the emerging doctor shortage in America a lot worse. Surveys have found that we could potentially see hundreds of thousands of doctors leave the medical profession because of Obamacare.

#10 Obamacare has already forced the cancellation of dozens of doctor-owned hospitals.

#11 Obamacare is going to result in a much bigger federal government. In order to fully implement all of the provisions of Obamacare, hordes of new government bureaucrats will be required.

#12 Thanks to Obamacare, you are going to have to wait much longer to see a doctor. Just look at what happened once Romneycare was implemented in Massachusetts….

In fact, we have already seen the start of this process in Massachusetts, where Mitt Romney’s health care reforms were nearly identical to President Obama’s. Romney’s reforms increased the demand for health care but did nothing to expand the supply of physicians. In fact, by cracking down on insurance premiums, Massachusetts pushed insurers to reduce their payments to providers, making it less worthwhile for doctors to expand their practices. As a result, the average wait to get an appointment with a doctor grew from 33 days to over 55 days.

#13 Obamacare contains all kinds of insidious little provisions that most people don’t even know about. The following is one example from the Alliance Defense Fund….

“Did you know that with ObamaCare you will have to pay for life-saving drugs, but life-ending drugs are free. One hundred percent free. If this plan were really about health care wouldn’t it be the other way around?”

#14 As if the U.S. government was not facing enough of a crisis with entitlement spending, it is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls. You and I will be paying for all of this.

#15 The Congressional Budget Office estimates that Obamacare will add more than a trillion dollars to government spending over the next decade. Considering the fact that the U.S. government is already drowning in debt, how in the world can we afford this?

Socialized Healthcare vs. The Laws of Economics

By Thomas DiLorenzo

The government's initial step in attempting to create a government-run healthcare monopoly has been to propose a law that would eventually drive the private health insurance industry out of existence. Additional taxes and mandated costs are to be imposed on health insurance companies, while a government-run "health insurance" bureaucracy will be created, ostensibly to "compete" with the private companies. The hoped-for end result is one big government monopoly which, like all government monopolies, will operate with all the efficiency of the post office and all the charm and compassion of the IRS.

Of course, it would be difficult to compete with a rival who has all of his capital and operating costs paid out of tax dollars. Whenever government "competes" with the private sector, it makes sure that the competition is grossly unfair, piling costly regulation after regulation, and tax after tax on the private companies while exempting itself from all of them. This is why the "government-sponsored enterprises" Fannie Mae and Freddie Mac were so profitable for so many years. It is also why so many abysmally performing "public" schools remain in existence for decades despite their utter failure at educating children.

America's Healthcare Future?

Some years ago, the Nobel-laureate economist Milton Friedman studied the history of healthcare supply in America. In a 1992 study published by the Hoover Institution, entitled "Input and Output in Health Care," Friedman noted that 56 percent of all hospitals in America were privately owned and for-profit in 1910. After 60 years of subsidies for government-run hospitals, the number had fallen to about 10 percent. It took decades, but by the early 1990s government had taken over almost the entire hospital industry. That small portion of the industry that remains for-profit is regulated in an extraordinarily heavy way by federal, state and local governments so that many (perhaps most) of the decisions made by hospital administrators have to do with regulatory compliance as opposed to patient/customer service in pursuit of profit. It is profit, of course, that is necessary for private-sector hospitals to have the wherewithal to pay for healthcare.

Friedman's key conclusion was that, as with all governmental bureaucratic systems, government-owned or -controlled healthcare created a situation whereby increased "inputs," such as expenditures on equipment, infrastructure, and the salaries of medical professionals, actually led to decreased "outputs" in terms of the quantity of medical care. For example, while medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account.

The more money that has been spent on government-run healthcare, the less healthcare we have gotten. This kind of result is generally true of all government bureaucracies because of the absence of any market feedback mechanism. Since there are no profits in an accounting sense, by definition, in government, there is no mechanism for rewarding good performance and penalizing bad performance. In fact, in all government enterprises, exactly the opposite is true: bad performance (failure to achieve ostensible goals, or satisfy "customers") is typically rewarded with larger budgets. Failure to educate children leads to more money for government schools. Failure to reduce poverty leads to larger budgets for welfare state bureaucracies. This is guaranteed to happen with healthcare socialism as well.

Read the rest here.

Thursday, June 28, 2012

How You Can Find Out How Obamacare Will Impact You

Read the Act. You will be the first to do so.

The House version of the Obamacare bill was 1990 pages. There is no one in the world that knows every detail of this or the final Act that is now law, given that in addition to it being 1990 pages, it is also written in legalese that can often be interpreted in different ways. If Justice Roberts can take the individual mandate of Obamacare and call it a constitutional tax, can you imagine how D.C. lawyers and lobbyists will be able to spin, on behalf of their client, paragraphs in this obese document. Bottom line: You are screwed, very screwed.

Obamacare Destroyed

In July, 2009, Professor Hans-Hermann Hoppe delivered a speech at the Mises University titled "Economics of Risk and Insurance: From Healthcare to Welfare".

The speech starts off with a discussion of probability theory as it applies to insurance and continues on to explain why socialized healthcare leads to higher prices, poorer healthcare services and a society constructed to look for illness.

This is a complete and thorough smackdown of Obamacare and all other national healthcare schemes.

The lecture can be heard, here.

Where Jack Hunter Fears to Tread: Power Elite Analysis and Hidden History

by Charles A. Burris

Over the past several weeks at LRC I have written various articles and blogs touching upon my favorite area of commentary: that of power elite analysis and the hidden history related to this subject.

These topics have included Watergate, the Bush dynasty, the 1980 October Surprise, and the 1980s Vatican Banking scandal.

I have received quite a number of enthusiastic responses from readers seeking more information on these concerns. It seems our LRC audience loves stuff which "names names," and details chapter and verse how the power elite covertly operates in ripping them off by bamboozling them.

Accordingly they have asked for book titles and references with which they can further pursue exploring power elite analysis. So here are a dozen principal books which I particularly recommend one starts with which I have found extremely insightful over the past four decades.

Let’s begin at the beginning, the beginning of the American Republic.

Two books published contemporaneously in the early 1930s must be at the top of my reading list. They are Albert Jay Nock’s Our Enemy, The State; and John McConaughy’ Who Rules America: A Century of Invisible Government. The first is readily available, the latter is almost impossible to find (read it and you will know why it has been suppressed). Both are masterfully written, unflinching in their boldness, and authoritative. I have found nothing which supersedes them in dissecting this formative period of the American state.

The Ur-book of "Establishment studies" is Carroll Quigley’s Tragedy and Hope: A History of the World in Our Time, the importance of which I have commented upon previously at LRC.

Unsurpassed in detailed documentation is Philip H. Burch’s three volume set, Elites in American History: The Federalist Years to the Civil War, The Civil War to the New Deal, and The New Deal to the Carter Administration. Professor Burch, by his exemplary scholarship and meticulous research into the elite structure of the American Establishment, has written the landmark definitive series in the exploration of power in America.

One would be negligent in not mentioning that much-heralded hagiographic tome of "Establishment studies," The Wise Men: Six Friends and the World They Made, by insiders Walter Isaacson and Evan Thomas. The authors practically genuflect upon every page in paying homage to these overlords who once reigned supreme in the American presidium of power and privilege.

G. William Domhoff’s insightful The Higher Circles: The Governing Class in America; and the incomparable Peter Dale Scott’s American War Machine: Deep Politics, the CIA Global Drug Connection, and the Road to Afghanistan, complete this elementary canon which court historians would no doubt label "the dirty dozen."

But the intellectually curious reader should not stop here. At Amazon.com I have 104 Listmania! Book and DVD lists.

Here are a number of specific lists which delve further into the topic of power elite analysis:

Read the rest here.

Of course, you can ignore this post and close your eyes to the fact this stuff really happens and subscribe to the Jack Hunter view:

Most in the constitutional conservative or libertarian movements do not subscribe to conspiracy theories...but the small minority who do continue to embarrass and hinder everyone's efforts...There is no need to remove ourselves from the national conversation by having insular conversations that no one else cares about, that make us look crazy, or that turn inroads into permanent roadblocks.

Yes, nothing to see here, just keep moving. It all happens by spontaneous combustion.