Tag Archives: regulation

Net Neutrality Politics: Moving Us Away from a Free, Open Internet

With the help of corporate sponsors like Netflix and Google, net neutrality has gone from being an unknown issue to garnering national attention. Like most fads, though, net neutrality’s popularity has grown far more rapidly than the public’s understanding of it, and people do not realize how unnecessary and destructive net neutrality policies actually are.

“Net neutrality” refers to a principle under which all types of information on the internet are delivered at equal speeds. In a neutral internet, an email from your grandmother will download to your computer at the same rate as a Netflix video. In a non-neutral internet, by contrast, some information could get prioritized, necessarily slowing the rest. Content producers (such as Netflix) and end-users tend to be in favor of net neutrality because they benefit from a vast diversity of content on the internet, and no one wants to run the risk of having their preferred content throttled (slowed).

Opponents of net neutrality tend to include internet service providers (ISPs), such as phone and cable companies, who believe that tailoring their networks to fast-track certain types of content could lead to better end-user experiences and cost savings.

The net-neutrality principle has been invoked in several pieces legislation and proposed administrative rules over the past eight years. Each of these acts would, to varying degrees, restrict the autonomy of ISPs. As a result, the term “net neutrality” now denotes a specific set of public policies, and not just a principle.

Like the proponents of many government regulations, net neutrality supporters will often invoke the public interest, the protection of some disadvantaged group, and/or the promotion of economic efficiency. Touchy-feely catchphrases like “keep the internet free and open” and “all bits are created equal” abound, along with the assertion that net neutrality will bolster marketplace competition by relieving the burden of bandwidth costs for startup tech companies. Proponents also assert that net neutrality will prevent ISPs from arbitrarily censoring (competitors’) content on their networks.

The proponents of such regulation seem to concede the benefit of market competition—a refreshing sign—but they fail to see the contradiction created by invoking it. Net neutrality is properly seen as a hindrance to competition, not a facilitator.

In order to compete in a market, companies must differentiate themselves in a way that satisfies the consumer. This is innovation. One method ISPs have to satisfy the wants and desires of their customers is to expedite the information their customers consume. The net neutrality regulations proposed by the Federal Communications Commission (FCC)—recently struck down in January—would have prevented this, stifling innovation in the provision of internet services. As Larry Downes noted in November:

In all, the FCC’s Open Internet order itself cataloged a dozen major non-neutral technologies, protocols, and business arrangements that have long been necessary parts of the Internet. Sensibly and of necessity, the agency granted exceptions from the rules for each and every one of them, recognizing that the “open” Internet, at least from an engineering standpoint, was anything but. For the Internet to continue functioning at all, the rhetoric had to give way to reality.

But there was no way for the rules to preemptively grant similar permission to any future network optimization technologies, other than to caveat all of the rules with exemptions for “reasonable network management.” That term couldn’t be defined, however, meaning that any future innovations will require FCC approval before large-scale implementation.[i]

In other words, such an obstacle to innovation and experimentation in network management could spell higher costs and a far lesser quality of service for end-users and content providers alike. This seems like a terrible tradeoff, since even an absence of government net neutrality regulations would not prevent ISPs from adopting net-neutral practices; if consumers demanded such practices, they could simply switch from a non-neutral ISP to a neutral one. The same is true for content providers—not only the giant companies like Facebook, Netflix, and Amazon; smaller companies and (yet-to-exist) startups may also switch among ISPs if they believe that their content is being discriminated against. This would be a system of true market competition.

In response, net neutrality advocates quickly (and rightly) point out the monopolistic state of the broadband internet market. The FCC has reported that of the 132 million households in the United States, only 47 million (roughly 35%) have access to four or more video programming distributors (i.e., cable, satellite, and telephone companies); cable companies alone have a market share of 56% among these distributors, and of the roughly 1,100 cable companies in the United States, the top five of them (in market share) account for nearly 82% of all video programming subscribers.[ii] Given that all of these companies also provide broadband internet services to many of their customers, the ISP market looks incredibly uncompetitive.

The uncompetitive nature of the industry would seem to refute the argument that net neutrality stifles innovation—there’s no need for companies to innovate anyway if the market is cornered. Since Comcast and similar companies so effectively control their respective markets, there is virtually no recourse for a dissatisfied customer, which removes the normal incentives for companies to improve services and cut costs.

For most people, unfortunately, this is where the debate ends. Although many will concede the benefits of competition among ISPs, they dismiss those benefits as immaterial, since an effective monopoly exists in the largest markets. Now the only available option they see for ensuring fair or neutral business practices is for government to impose net neutrality upon the industry.

But this disregards the important question of how the industry became so uncompetitive in the first place. If the ISP market is naturally and inevitably monopolistic, it might lend support to net neutrality advocates. But if it is not, then net neutrality may unnecessarily stifle innovation and raise costs. Before we propose policies, we need to ask, “Why is there effectively a monopoly in internet service markets?”

Basic economic theory informs us that monopolies can only endure as long as no new companies enter the market to provide the same (or better) service at a lower price. So why haven’t more companies entered the market to upend the entrenched giants?

There are a number of up-front costs associated with starting a cable company and/or entering a cable market. Building the initial cable infrastructure is one of these costs, but another significant, yet often unmentioned cost is that of acquiring cable franchises. In most states, cable companies must obtain a cable franchise from each and every municipality in which they want to do business. Large companies can easily expand into new markets because they have lots of cash with which to pay licensing fees; but for smaller/startup companies, the licensing requirements present an insurmountable barrier to market entry. Encouragingly, 21 states have passed cable franchise reform bills, meaning that cable companies need only obtain one license to operate within the entire state. In the 29 remaining states, however, cable companies must still work through the old, inefficient system.

Evidence indicates that the entry of companies into previously uncompetitive ISP markets does reduce cable prices and provoke efforts from the incumbent cable companies to improve services. In response to entry by AT&T, which offers video services over telephone lines (and is thus not subject to cable franchise requirements), Comcast of Santa Rosa, CA, rushed to deliver “new features [video-on-demand, more channels] in Santa Rosa […]” In Houston, similarly, Comcast pledged to offer more “linear and high-definition channels, video-on-demand titles and digital phone features” following potential AT&T entry.[iii] A Bank of America study also observed basic cable price reductions of between 28% and 42% in areas of Virginia, Texas, and Florida where Verizon rolled out its FiOS video service.[iv]

The lesson from these stories is clear: Wherever ISPs are able to circumvent onerous cable franchise requirements and enter the market, services and pricing improve. The solution to the lack of market competition, therefore, is not to implement new government regulations, but to repeal the regulations we already have. Getting rid of cable franchising would abrogate the need for net neutrality while also improving consumer choice and quality of services. These reforms, not innovation-stifling net neutrality, will be a crucial step toward a truly free and open internet.

[i] Downes, L. (2002). What Verizon’s Net Neutrality Challenge Is Really About. Forbes. Retrieved from: http://www.forbes.com/sites/larrydownes/2013/09/11/what-verizons-net-neutrality-challenge-is-really-about/

[ii] Federal Communications Comission. (2013). Fifteenth Report. Retrieved from: https://apps.fcc.gov/edocs_public/attachmatch/FCC-13-99A1.pdf

[iii] Singer, H.J. (2007). The Consumer Benefits of Telco Entry in Video Markets. Retrieved from: http://www.justice.gov/atr/public/workshops/telecom2007/submissions/228100.htm

[iv] Bank of America Equity Research. (2006). Battle for the Bundle: Consumer Wireline Services Pricing.

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On Crime, Gun Control Misses the Target

Aurora, CO. Milwaukee, WI. Newtown, CT. These and other tragedies have marked 2012 with physical and emotional pain. The killing of innocent men, women, and children reveals the grotesqueries in our nature which civilized society (too) easily allows us to forget. Citizens everywhere—many of them viewing these incidents as part of a growing trend in mass shootings—have called for an end to the violence; and as politicians promise “meaningful action” to prevent further attacks of this sort, a flurry of political debates has enveloped the nation.

In the wake of these catastrophes, emotions run hot, and people seek answers. They scapegoat, and they create demons, and those demons often reinforce their long-held beliefs. For some, the availability of guns is to blame. For others it’s the prolific violence in TV and video games. To be honest, we simply do not know what drives people to commit these atrocities, and even if we did know, it is not clear that we could do anything to stop it. The advances in science which have allowed us to understand the causes of volcanoes, earthquakes, and hurricanes have yielded no prescriptions for their prevention. They have, however, helped us develop ways of dealing with these phenomena, and minimizing the damage they cause.

We must treat mass murderers the same way. Given our limited knowledge of psychology and criminology, we must, for the foreseeable future, assume that the people who are predisposed to commit such crimes will indefinitely be a facet of our society. Given that understanding, the question then becomes how to deal with them, and how to minimize their damage.

One solution which has been offered repeatedly throughout history, though in many different iterations, is gun control. Gun control, generally speaking, is the implementation of systemic, legal restrictions on the distribution and ownership of firearms. Notwithstanding proponents’ incessant drumbeat to strip Americans of their Second Amendment rights, we should first ponder both the feasibility and the morality of gun control.

One problem with gun control is that it is simply impractical. Concordant with our observations on the prohibitions of other goods and services like alcohol, drugs, and prostitution, it seems safe to say that people will always find ways to obtain guns. Black markets inevitably emerge, and the importation of guns from other jurisdictions outside of the United States presents an insurmountable hindrance. Indeed, a prohibition on guns may prove more costly and unfeasible than other prohibitions because those gun owners who would resist firearm confiscation are inherently more apt to cause damage while doing so, simply because the product being confiscated is a weapon.

That said, the enforceability of a law should not be the only criterion for judging its validity—no prohibition can ever be completely effective. If we were willing to live in a police state, we could probably achieve a near-perfect enforcement of some laws, though most people would probably view the costs of that approach as outweighing the benefits.

But aside from its impracticability, the main problem with gun control is its immorality. Gun control betrays the main purpose of owning a gun in the first place. The gun, like all other weapons, works as a power-equalizer between those who are naturally weak and those who are naturally strong. If no person ever transgressed against another, then natural inequalities in power would be inconsequential. Unfortunately, criminals exist, and so there is a need to be mindful of these power differentials, and to take precautions which diminish them. This understanding of human relations is greatly damning of gun control. There is no reason to believe that the same criminals who perpetrate violence against their fellow citizens would suddenly follow the laws with respect to gun possession. The only logical result of gun control, therefore, is the minimization of law-abiding citizens’ power relative to that of criminals, and a placement of the former perpetually at the mercy of the latter.

Empirical evidence supports this criticism. Every mass shooting in the United States since 1950, with the exception of one, has taken place in areas where citizens are banned from carrying guns.

One other problem with gun control is that guns do not kill people—people kill people. A gun is one particular tool for doing so, but any individual who is predisposed to kill another will carry out his intentions using whatever tool is at his disposal, whether that tool be a knife, a baseball bat, or a car. Therefore, laws should focus on the violent act, not the tool(s) used in carrying it out.

This argument is often countered by pointing out that guns, unlike other tools used in murder, are unique in that they only serve one purpose: the exercise of deadly force. Since a gun, conversely, can serve no other purpose, the benefit of banning guns (if it were feasible) is therefore infinite compared to the cost.

But deadly force is, in itself, not a purpose. It is a means to an end, and the legitimacy of an end determines the legitimacy of the means required to achieve it. If the desired end is defense for oneself or other innocent people, then deadly force may be entirely appropriate. If the end is unprovoked harm or coercion, then deadly force is rightly prohibited, and we should implement criminal laws to deal with actions of that character. Gun control only works to ensure that a legitimate end is impossible, and an illegitimate end is more likely.

As discussed earlier, gun ownership creates a balance of power between the weak and the strong, and it deters the exercise of force by one against the other. Force can manifest in the actions of common criminals, but force can also be perpetrated by government. When government acts legitimately, its use of force is not a problem. When it acts illegitimately, or tyrannically, it must be controlled using a comparable amount of force. This principle was the primary impetus for the framing and adoption of the Second Amendment to the U.S. Constitution. The Framers included the prefatory clause, “A well regulated militia being necessary to the security of a free state[…]” because the individual right to keep and bear arms is a necessary safeguard against tyrannical government. Gun control, in addition to placing law-abiding citizens at the mercy of criminals, also places individuals at the mercy of government, and removes any incentive for government to act within the confines of law.

On the whole, it would seem that the arguments against gun control are fairly strong, but there still exists a problem (at least a perceived one) of violence in the United States, and a need to ensure that harm does not befall innocent citizens, while at the same time preserving their liberties.

One set of solutions involves prevention. This means putting the teeth back in our psychiatric institutions, which could keep violent people off of the streets. Bolstering law enforcement efforts, and imposing harsher sentences for convicts would also be entailed. Theoretically, this would increase the deterrent effect of law, and improve the ability of police to intervene in ongoing crimes. Unlike gun control, these solutions certainly will not worsen the problem.

However, individuals who are insane, disgruntled, evil, etc., are not likely to be deterred by these changes, and no matter what, the police can never be omnipresent. We must accept a certain possibility that harmful individuals will enter our public venues, and we must also accept that their presence is so dangerous as to warrant an immediate and pacifying response.

Professional armed security guards, stationed in our public venues, could provide this response. Ultimately, though, the decision to employ armed security would be up to the governments who provide the funding. There is a possibility that governments may choose not to install armed security guards on the premises of schools or other buildings, and even if they do, it is possible that murderous gunmen may kill or slip passed them. If this occurs, self-sufficient, everyday citizens need a way to protect themselves and other innocents that doesn’t require security guards, police, or sheer dumb luck.

The only feasible and moral solution to this problem is to allow the carrying of firearms by any/all individuals in any/all public venues. This means that anyone who wishes to take precautions which balance their own power against that of an aggressor would be allowed to do so. Also, if a law-abiding citizen with a gun neutralizes an aggressor in public, this will produce a positive external effect for other innocent civilians in the area.

It has been asserted that such a scenario would amount to a “wild west” in which the ubiquity of guns would somehow incite extra violence. However, the logic simply does not pan out: Presumably, the criminals—the only ones who would ever be violent—will already have guns, regardless of whether or not there is gun control. The legal carrying of a gun by a law-abiding citizen—one who is not predisposed to violence—will cause no more harm than a scenario in which guns are banned. In fact, overall violence may decrease, as criminals become less bold in their transgressions, and those who remain bold enough to commit crimes will become less successful, as they will more-likely be stopped.

Though many have promised meaningful action in the wake of Sandy Hook and other shootings, gun control inevitably fails to hit the mark. Gun-control advocates, stuck in the “never let a serious crisis go to waste” mentality, unfortunately use incidents like Sandy Hook to advance their own agenda, which not only does a disservice to the memory of the victims, but it does nothing to ensure the safety of our citizens. More guns make us more safe, not less, and so the proper solution is to expand freedom, not restrict it.

Understanding ’80s Economics

With the resurgence of American conservatism and the advent of the Tea Parties, politics in the United States has become increasingly polarized. Often cited as evidence of superior fiscal/economic policies is the economic record of Ronald Reagan. Ronald Reagan has become a quasi-religious icon of the American conservative movement and on some practical levels he appeals to politicians of all ideologies. Even Barack Obama, considering himself to be like Reagan in manner and appeal, has invoked Reagan in order to garner support for his leftist policies. Nevertheless, Reagan’s popularity makes him a common target for criticism by the left. Unfortunately, too much of that criticism seems to go unanswered, and pundits on the right seem to take the soundness of Reagan’s policies for granted. I hope to give some support to conservative economic policies by providing some simple answers to questions and comments I’ve heard about our 40th president.

Question: Ronald Reagan is often lauded as a staunch fiscal conservative, but is he not responsible for an increase in U.S. debt by two trillion dollars?

It is true that the debt rose by $1.86 trillion under the Reagan administration, and it is also true that the debt ceiling was raised more often under the Reagan administration than under any administration in U.S. history.[1][2]

How was all this debt accrued? Wouldn’t a lack of budgetary restraint of this magnitude suggest fiscal liberalism, not conservatism?

It might suggest that, if we only look at total spending; but not all spending is created equal, and it is necessary to examine the components of federal spending as well. Federal outlays increased by $466 billion during the Reagan years—from $678 billion in 1981 to $1.1 trillion in 1989.[3] “Human Resources” spending (which includes spending for Social Security, Medicare, Medicaid, and other entitlement programs) accounted for 44 percent of the increase; defense spending accounted for another 31 percent; and every other form of spending (infrastructure, government payroll, general operations, etc.) took up the remaining 21 percent.[4] As we can see, entitlement spending was the primary driver of all federal outlays (a trend consistent with previous presidencies). Spending on the largest entitlement programs is not discretionary, meaning such spending is not affected by the government’s annual budgets, and fundamentally reforming these programs is extremely difficult without a unified government, something America did not have during any years of the Reagan presidency.[5][6] Ultimately, Reagan’s credentials as a conservative will be determined by your view on the effectiveness and necessity of the military buildup which he advanced. We should not lose our sense of perspective, however: Even if defense spending had remained at 1980 levels throughout Reagan’s presidency, the country would still have been running a $6.6 billion deficit in 1989 due to the increase in entitlement spending, something over which Reagan had minuscule control.[7]

Question: Setting aside the country’s fiscal status, what were the economic outcomes of the 1980s?

Under the Reagan administration, the United States began the longest sustained peacetime economic expansion in its history, and the second-longest during either peace or war. Real GDP grew by 33 percent from 1981 to 1989, averaging 4.13 percent annual growth.[8] Real per capita income grew by 22 percent over the same period.[9] There was a net gain of 16.2 million jobs, slashing the unemployment rate from 7.5 percent in January of 1981, to 5.4 percent in January of 1989.[10] The rate of inflation was cut from 11.82 percent in 1981 to 4.67 percent in 1989.[11] Private sector savings increased by $85 billion, and domestic private investment surged by a magnitude of $369 billion.[12] In short, Americans were working more, producing more, earning more, and benefiting from monetary appreciation, all at a faster rate than any other peaceful time in U.S. history.

How was all of this brought about?

From 1981 to 1989, Ronald Reagan signed a series of bills that lowered taxes overall and simplified the tax code. These bills, known collectively as the “Reagan Tax Cuts”, lowered the marginal rate on all income tax brackets—including a drop in the top marginal rate from 70 percent to 28 percent—reduced the capital gains tax from 28 percent to 20 percent, and indexed for inflation marginal tax rates at every income level.[14] They also reduced the Alternative Minimum Tax rate from 25 percent to 21 percent, and they repealed the Add-On Minimum Income Tax altogether.[15] Lastly, they cut the number of income tax brackets from fifteen to four, expanded personal exemptions, and limited deductions to make the tax code flatter and more fair.[16][17] In addition to the significant changes in the tax code, Ronald Reagan also heavily curbed the regulatory reach of the federal bureaucracy. Since its creation in 1936, the Federal Register—which annually chronicles the publication of all new federal regulations—has grown by thousands of pages. These executive edicts, which carry the force of law, saddle Uncle Sam with tens of billions of dollars per year in administrative costs alone, and they produce manifestly detrimental effects for the economy.[18] Up until 1980 this growth was exponential, but under Ronald Reagan the Federal Registry actually shrank from almost 90,000 pages to about 50,000 pages.[19] Although the steep upward trend resumed after Reagan left office, the vast combination of tax cuts and regulatory relief produced an economic climate of unprecedented strength throughout the decade.

Question: It seems that tax cuts of this magnitude would bankrupt the U.S. Treasury. Are these the policies that contributed to the huge amount of added U.S. debt accrued during the Reagan years?

No, in fact, the opposite is true: total federal tax receipts grew drastically, from $599 billion in 1981 to $991 billion in 1989.[20] If the economic growth of the 1980s hadn’t occurred as rapidly or persistently as it did, it’s safe to say that the debt would have been much greater than it was.

Question: How do we know that the economic growth is not attributable to well-timed monetary policy along the Keynesian vein of economics, rather than broad-based tax cuts?

Some have argued that Paul Volcker, Chairman of the Federal Reserve from 1979-1987, is chiefly responsible for the economic boom of the 1980s because of his monetary policies: Specifically, they claim that Volcker’s raising of the Federal Funds rate in the late 1970s reduced inflation, and although this policy caused a recession in 1981 and 1982, the eventual lowering of interest rates in 1982 allowed the economy to take off in 1983. While it is true that Volcker’s actions, which were actually endorsed by Reagan in 1979, greatly helped to curb inflation and the cycle of stagflation characteristic of the 1970s, it is incredible to say that these monetary policies caused the post-1982 boom. Interest rates actually fell twice between the summer of 1979 and the implementation of any of Reagan’s fiscal policies, but contrary to what Keynesian monetary theory would suggest, employment and gross private investment never rebounded to above-1979 levels until 1983 when the Economic Recovery Tax Act had almost been fully implemented (inflation never rebounded to 1979 levels during Reagan’s presidency, which also contradicts Keynesian economic theory because the increased demand should have caused inflation).[21][22][23][24] While it’s safe to say that Volcker’s monetary policies facilitated the economic growth of the 1980s, it’s erroneous to conclude that those policies spurred the growth.

Question: One of the most significant of the Reagan Tax Cuts was the Tax Reform Act of 1986, which decreased the marginal income tax rate for the highest income bracket and increased the rate for the lowest income bracket. Did the subsequent tax relief and economic growth only benefit the rich?

No. If anything, the poor benefited more than the rich. Between 1981 and 1989, the second-lowest and lowest income quintiles saw a drop in effective tax rates by 39.6 percent and 420 percent respectively.[25] This is only possible due to a doubling of personal exemptions and a tripling of the earned-income tax credit, which would have been impossible without the vast new revenue generated by economic growth. These changes effectively abrogated the tax liability of over 4 million low-income taxpayers. Conversely, the middle, second-highest, and top income quintiles saw more modest drops in their effective tax rates of 27.7 percent, 25.2 percent, and 6.3 percent respectively.[26]

We see similar trends when we look at the distribution of the federal income tax burden over the period. In 1981, the bottom 50 percent of income earners paid 7.45 percent of all federal income taxes, but in 1989, they paid only 5.83 percent.[27] By contrast, the top 1 percent of income earners paid 17.58 percent of federal income taxes in 1981, but by 1989 they paid 25.24 percent.[28] Clearly, the poor benefited demonstrably more than the rich in terms of tax liability.

Question: The change in the distribution of the federal income tax burden seems to outright contradict the change in nominal and effective income tax rates. How is this possible?

There are only two ways such a change in tax liabilities could occur after the aforementioned tax acts of 1981 and 1986: one way is if there were more people within the highest group of income earners in 1989 than 1981; the other is if the people in that group were making more money in 1989 than in 1981. The fact is that both occurred: from 1979 to 1986, the real average family income of the bottom income quintile rose 77 percent, 37 percent for the second-lowest quintile, 20 percent for the middle, 10 percent for the second-highest, and 5 percent for the highest.[29] In addition to the benefits of rising real incomes, individuals also benefited from huge amounts of economic mobility: according to a 1992 U.S. Treasury study, 86 percent of individual income tax filers in the lowest income quintile in 1979 had moved to a higher quintile by 1988, and 15 percent of them had moved to the top quintile. For the second-lowest quintile in 1979, 61 percent moved up, and 11 percent moved to the top. For the middle quintile, 47 percent moved up, and a little less than one-third of them moved to the top. For the second-highest quintile, 35 percent moved to the top, and in the top quintile, 65 percent of earners remained there after the 10-year stretch.[30]

Conclusion

The data would seem to confirm what we’d theoretically expect: Reducing the growth of government, cutting taxes, reducing regulation, and limiting inflation with sound monetary policy does in fact lead to economic growth. In a time today when the country is torn about how to get the economy moving again, we may want to look on the 1980s and the accomplishments of Ronald Reagan with a favorable light.

References
1. U.S. Department of the Treasury. Bureau of the Public Debt. Historical Debt Outstanding – Annual 1950 – 1999. Treasury Direct. Accessed 3 Aug. 2011. http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm

2. U.S. Office of Management and Budget. Statutory Limits on Federal Debt: 1940-Current. Table 7.3. Accessed 2 Aug. 2011. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist07z3.xls

3. U.S. Office of Management and Budget. Fiscal Year 2014 Historical Tables: Budget of the U.S. Government. Table 1.1, p. 23, Apr. 2013. Accessed 7 Feb. 2014. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/hist.pdf

4. Ibid. Table 3.1, p. 55-56

5. U.S. House of Representatives. Office of the Clerk. House History. Accessed 12 Aug. 2011. http://artandhistory.house.gov/house_history/

6. U.S. Senate. Senate Historical Office. Party Division in the Senate, 1789-Present. Accessed 12 Aug. 2011. http://www.senate.gov/pagelayout/history/one_item_and_teasers/partydiv.htm 

7. OMB. Historical Tables. op cit. Table 1.1, p 23. Table 3.1, p. 55-56. 

8. U.S. Department of Commerce. Bureau of Economic Analysis. National Income and Product Account Tables. Table 1.1.6, 29 Jul. 2011. Accessed 13 Aug. 2011. http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1

9. U.S. Department of Commerce. Bureau of the Census. Current Population Survey: Income: Total CPS Population and Per Capita Income. Table P-1. Accessed 13 Aug. 2011. http://www.census.gov/hhes/www/income/data/historical/people/

10. U.S. Department of Labor. Bureau of Labor Statistics.  Labor Force Statistics from the Current Population Survey. Accessed 14 Aug. 2011. http://www.bls.gov/data/

11. U.S. Department of Labor. Bureau of Labor Statistics. Consumer Price Index. Accessed 14 Aug. 2011. http://www.bls.gov/cpi/

12. Bureau of Economic Analysis. Account Tables. op cit. Table 1.1.6.

13. Freddie Mac. Monthly Average Commitment Rate and Points on 30-Year Fixed-Rate Mortgages Since 1971. Accessed 15 Aug. 2011. http://www.freddiemac.com/pmms/pmms30.htm

14. Board of Governors of the Federal Reserve System. Selected Interest Rates (Daily) – H.15: Historical Data. Accessed 15 Aug 2011. http://www.federalreserve.gov/releases/h15/data.htm

15. The Library of Congress, Thomas. Bill Summaries and Status. 97th Congress (1981-1982). H.R. 4242. Accessed 4 Aug. 2011. http://thomas.loc.gov/cgi-bin/bdquery/z?d097:HR04242:|TOM:/bss/d097query.html

16. The Library of Congress, Thomas. Bill Summaries and Status. 97th Congress (1981-1982). H.R. 4961. Accessed 4 Aug. 2011. http://thomas.loc.gov/cgi-bin/bdquery/z?d097:H.R.4961:

17. The Library of Congress, Thomas. Bill Summaries and Status. 99th Congress (1985-1986) H.R. 3838. Accessed 20 Aug. 2011. http://thomas.loc.gov/cgi-bin/bdquery/z?d099:H.R.3838:

18. Tax Foundation. Federal Individual Income Tax Rates History: Income Years 1913-2009. Accessed 4 Aug. 2011. http://taxfoundation.org/sites/taxfoundation.org/files/docs/fed_individual_rate_history_nominal%26adjusted-20110909.pdf

19. Dudley, Susan, and Melinda Warren. 2006. “Moderating Regulatory Growth: An Analysis of the U.S. Budget for Fiscal Years 2006 and 2007.” Weidenbaum Center on the Economy, Government, and Public Policy 28. Figure 1, p. 7. Accessed 16 Aug. 2011. http://wc.wustl.edu/files/wc/2007RegReport.pdf

20. Ibid. Figure 3, p. 9.

21. OMB. Historical Tables.  op. cit. Table 1.1, p. 22.

22.  Board of Governors. op cit.

23. U.S. Department of Labor. Bureau of Labor Statistics. Labor Force Statistics from the Current Population Survey. Accessed 14 Aug. 2001. http://www.bls.gov/data/

24. U.S. Department of Commerce. Bureau of Economic Analysis. op cit.

25. U.S. Department of Labor. Bureau of Labor Statistics. Consumer Price Index. Accessed 14 Aug. 2011. http://www.bls.gov/cpi/

26. U.S. Congress. Congressional Budget Office. Historical Effective Tax Rates, 1979 to 2005: Supplement with Additional Data on Sources of Income and High-Income Households. Table 1, p. 7. Accessed 24 Aug. 2011.

27. Ibid.

28. Heritage Foundation. 2011 Budget Chart Book. Percentage of Federal Income Taxes (2008). Accessed 3 Aug. 2011. http://www.heritage.org/BudgetChartBook/top10-percent-income-earners

29. Ibid.

30. Hubbard, R.G., J. Nunns, and W. Randolph. Household Income Changes over Time: Some Basic Questions and Facts. 1992. U.S. Department of the Treasury, Office of Tax Analysis. Table 6. Accessed 10 Jul. 2010. http://www0.gsb.columbia.edu/faculty/ghubbard/Articles%20for%20Web%20Site/Household%20Income%20Changes%20Over%20Time_Some%20Basic%20Questions%20and%20Facts.pdf

31. Ibid. Table 1.

Immigration, and the Multiculturalist’s Paradox

One of the perks of working as a writing tutor is getting to help students with a variety of assignments from an array of academic disciplines. During one particular appointment, I met with a student who was writing an argumentative essay on American immigration and multiculturalism for her English class. She employed many familiar arguments, and though it would have been improper for me to impress my own political beliefs upon a student during a tutoring session, I nonetheless felt compelled to offer some counterarguments here, on my own time.

One of the student’s arguments was one that I’ve heard many times before: “America is a nation of immigrants, and immigrants are responsible for the huge economic and cultural progress of our country, particularly during the late 19th and early 20th centuries. Therefore, limiting immigration would gravely harm our society.”

The first premise of this argument is true on its face. America is indeed a nation of immigrants. However, immigrants are not all the same, and today’s immigration is different from that which helped fuel America’s rapid industrialization. The immigrants of yesterday were confronted with social pressures which facilitated their rapid assimilation into the greater society. For example, our public education establishment stressed the learning of English and American history. In addition, immigrant groups were widely dispersed across the country, and ethnic enclaves never grew so large as to challenge the dominant culture. These, coupled with the absence of numerous welfare programs, meant that immigrants needed to adopt the practices and attitudes of their new nation in order to avoid destitution.

Today, immigrants do not face those same pressures. A massive welfare state insulates a large number of immigrants from the annoying language barriers which inhibit the hunt for employment; bilingual education programs have shifted from emphasizing English to preserving immigrants’ home languages; and increasing numbers of immigrants arrive from a relative handful of regions around the globe, creating large ethnic communities and stunting assimilation. Historian Stephen Tierney observed this phenomenon and its possible implications in his book Multiculturalism and the Canadian Constitution:

In a situation in which immigrants are divided into many different groups originating in distant countries, there is no feasible prospect of any particular immigrant group’s challenging the hegemony of the national language and institutions. These groups may form an alliance among themselves to fight for better treatment and accommodations, but such an alliance can only be developed within the language and institutions of the host society and, hence, is integrative. In situations in which a single dominant immigrant group originates in a neighbouring country, the dynamics may be very different. The Arabs in Spain, and Mexicans in the United States, do not need allies among other immigrant groups. One could imagine claims for Arabic or Spanish to be declared a second official language, at least in regions where they are concentrated, and these immigrants could seek support from their neighbouring home country for such claims—in effect, establishing a kind of transnational extension of their original homeland in their new neighbouring country of residence.

Also, unlike the immigrants of the past, today’s immigrants do not share the same cultural heritage as America’s dominant socioeconomic groups (mostly European and protestant). The spread of collectivism throughout Latin America and East Asia has fostered a political culture in which government is seen as a provider and caretaker, rather than a protector of individual rights. This attitude manifests in immigrants’ overwhelming support for leftist/Democrat politicians. This is understandable because the American Left is familiar to them. Its promises are similar to the ones they heard made by the demagogues and despots back home, the only difference being that American politicians are slightly better equipped to deliver on their promises, having a bit more of “other people’s” money with which to buy votes.

To put all these facts in perspective, we need to consider the concept of culture: A term used to describe the shared characteristics of human beings within a group (e.g. shared thoughts, behaviors, values, etc.), “culture” characterizes a society and serves as the root of all its institutions—from government and politics, to economics. Since culture varies widely from nation to nation, it is integral in answering questions pertaining to immigration. Specifically, what effects will immigration have on the cultural makeup our nation, and, in light of those effects, what policies should we implement to control it?

The policies my student put forth in her paper to answer this question were based on the theory of multiculturalism. This theory holds that all cultures are equally deserving of respect, and that no one culture is inherently better than another. Immigration policies based on this theory would entail that no priority be given to different people(s) in the immigration admittance process. This would purportedly result in a “salad-bowl”-type society which has no dominant culture to which immigrants could assimilate, and in which individuals of many different cultural backgrounds can harmoniously coexist while still retaining fundamental characteristics of their old culture.

Is such a theory actually viable? If there is any nation on Earth where it could potentially work, it’s America—or so it might seem at first glance. America was unique at its founding: In the late 18th Century, almost all nations of the world were ethnic nations (i.e., their shared cultural characteristics were based on race, religion, or bloodline), and the few political nations (i.e., nations in which people are connected primarily or exclusively by the status of citizenship) were all ruled by (near-)totalitarian governments. America was the first political nation in which the defining cultural characteristic of its people was not subservience to the state, as had been the case in all political nations previously, but instead adherence to the ideals of republicanism (that all people are equal under the law, and that individuals should be free to live their lives unimpeded by government). For most of American history, these ideals constituted a dominant culture, and all other aspects of culture were subordinate to them. As a result, America became a place where people could act in accordance with their own values, as long those values did not undermine republicanism.

Such a setup is not impervious or immutable, though. If the culture of a nation becomes fragmented or divided, it is only a matter of time before the nation itself fragments and divides. America in the 1850s and 60s was a prime example of this: Interpretive disputes over the country’s founding republican principles led to a great political schism, effectively creating two competing, irreconcilable cultures—one which sanctioned slavery, and one which did not. The resulting American Civil War jeopardized the fabric of the whole nation because, for the entirety of that period, a dominant culture did not exist to instill political order.

This would seem to raise an issue with multiculturalism. Is the salad-bowl society, with its notorious lack of a dominant culture, not also prone to that kind of instability? Proponents of multiculturalism may try to assert that conflicts of this sort are the result of only large groups competing for power; that a more pluralistic society with many tiny cultural groups—none of them large enough to assert dominance—could be peaceful. That is all very well and good, but the main tenet of multiculturalism does not allow for an immigration policy (or any kind of policy, for that matter), to be used in such a way as to bring about this outcome, since giving priority to immigrants of one culture, even for the purposes of balance and pluralism, would violate the principle that all cultures are equal.

America has survived since its Civil War largely because a dominant culture, the republican ideal, reasserted itself. Though the growing preeminence of leftism has eroded that ideal, we are still largely a nation in which minor cultural characteristics such as language, work ethic, spiritual faith, cuisine, music, art, dance, and etiquette, may coexist peacefully. This may be possible under a scheme of multiculturalism too, but even if it was, the coexistence of these minor traditions would be a hollow victory. The true merit of multiculturalism can be measured by the ability of major cultural traditions to coexist, and by this standard, multiculturalism falls short. There are some cultures in the world which include violent traditions. For example, a literal interpretation of the Koran informs us that all must submit to Islam, that God’s law is supreme, and that those who refuse to follow him may be killed. It is (more than) conceivable that immigrants who follow such a religion could create conflict in nations where the natives do not conform to that way of thinking.

Some multiculturalists may dismiss these occurrences as a mere technical issue: They might concede that multiculturalism cannot grant true equal status to all cultures, because some cultures include violent behavior, and it would be a completely untenable position to assert that violence and non-violence can enjoy the same moral status. However, they would insist that these violent acts, if not representative of a larger, concerted movement, may be dealt with through the criminal justice system, and that the republican government which spawns that system can still be trusted to allow coexistence of non-violent behaviors. Unfortunately, this creates somewhat of a paradox: Not only are the multiculturalists effectively conceding their core principle, but the remnants of their position depend upon the existence of a “live-and-let-live,” republican form of government. Now, what happens when the institutions of a republic are themselves attacked and/or supplanted by opposing cultures?

Multiculturalism has no answer for this. A republic, through limited government and its grant of equality under the law, is alone capable of supporting the coexistence of non-violent cultures within a country; but the insistence upon such a form of government presupposes the propriety/superiority of the culture which underlies it. This is multiculturalism’s paradox. It calls for equal respect to all cultures, but is silent when a culture arises which is decidedly not multicultural.

Because of multiculturalism’s paradoxical nature, it is patently unsuitable as a basis for our immigration policy. If we wish to have a non-violent, republican society, we cannot be completely indiscriminate in our immigrant admittance process: We must assign first priority to those immigrants who already support and adhere to the republican ideal. If there are no prospective immigrants with that cultural background, we must then prioritize immigrants who are apt and willing to assimilate to it. Unfortunately, merely suggesting that someone assimilate to the dominant culture is likely to get you labeled “old-fashioned,” “racist” or “xenophobic,” as if the task of assimilating was somehow insurmountable or even immoral.

The fact of the matter is, however, that immigrants come here for a several different reasons (freedom, opportunity, prosperity, etc.), and whether or not they realize it, those reasons are born out of our culture. Unfortunately, our current policy of admitting immigrants who enjoy the fruits of our republican cultural heritage, but who either do not understand it, or do not respect it, amounts to a robbery of sorts. A robber has no regard for the culture of his victim (his work ethic, his resourcefulness, or his ingenuity—in other words, that which renders him an attractive target in the first place). He only has regard for the spoils of his trespass. But reaping America’s fruits without supplying her ample water and sunlight in return is not a practice which can go on for long. The sustained importation of immigrants who subscribe to the politics of leftism will cause the republican ideal to wither and die, destroying that which appealed to immigrants in the first place.

A more prudent immigration policy is needed. Immigrants should be prepared and willing to relinquish the culture of their home, and to ally themselves with the republican ideal. There is no other way that the nation can survive. If multiculturalism is allowed to persist, America will fracture and cease to be the great beacon for freedom and opportunity which has for so long attracted immigrants to our shores.

A Leftist Misconception: Income Inequality

One of the most important issues to Americans is the economy. The state of the economy is something all Americans have a stake in, and there are a number of indicators we use to know how it’s fairing. GDP, unemployment rates, income, interest rates, and stock market returns are probably the most well-known indicators used by economists today. But there’s one lesser known indicator that leftists prefer to use for measuring the health of the economy: income inequality. While the previously mentioned indicators all measure efficiency in the economy, income inequality measures its equity. In other words, it’s a measure of one person or group’s economic welfare in relation to another. Leftists believe that the income divide between the rich and the poor in America has been widening. This is the misconception.

The main reason for the propagation of this misconception is a misreading of data from the U.S. Census Bureau. The Current Population Survey, the Bureau’s monthly survey of demographic information on roughly 50,000 people, has facilitated the collection of labor statistics for over 50 years. In the year 2000, the Census Bureau published a report summarizing the survey’s findings on income statistics over that time period, with special attention given to the disparity between the concentrations of household income within certain arbitrary statistical ranges. In order to quantify disparity, the report used the Gini Coefficient: a point on a 0 to 1 scale, where at 0 income is equally shared among all people, and at 1 all income resides with one person. According to the report, the Gini coefficient has been increasing steadily from 1968 to 1998, meaning that America has been becoming more unequal. Leftists like to take these data at face value because it justifies their egalitarian tendencies.

Unfortunately, there are some problems with measuring inequality this way. The first is the use of household incomes instead of individual incomes. The average household size for all Americans, according to Current Population Survey, has been steadily decreasing since before 1968, and that downward trajectory continues to this day. As we would expect, this has allowed the concentration of income in each quintile of households to change despite contradictory changes in median individual income over the same time period. Unfortunately, individual incomes cannot be effectively used to calculate the Gini Coefficient because of factors like unearned income, the earned income tax credit, government in-kind transfers, and countless other variables which can only be measured individually.

The main problem with the Gini Coefficient, however, is that it relies on measuring the concentration of incomes within statistical ranges. When you do this, income stops being a characteristic of a person, and starts being a characteristic of a given statistical range. Statistical ranges such as quintiles only outline boundaries, however, which are superimposed onto an income scale to capture multiple units of data. Looking only at these boundaries instead of looking at the people within them is going to give us a distorted view of the economy. The simple reason for this is that the statistical ranges of income on which the Gini Coefficient relies do not change: the bottom income quintile will always be the bottom income quintile, no matter how much income the people within that quintile individually earn over time.

This fact approaches the heart of the problem. What if a person within one income quintile begins to make so much money that he/she moves to a higher quintile? Likewise, what if a person takes such a sharp pay cut that he/she moves to a lower one?

The Gini Coefficient cannot measure these occurrences. In other words, the Gini Coefficient cannot measure income mobility.  We should all be concerned with the phenomenon of income mobility (the ease with which one can change their own income) because it is the free-market remedy for inequality, and it is one of our most important traditional values as Americans. It can be contrasted with redistribution, which is the leftist remedy for inequality.

We’ve now established that the Gini coefficient is inadequate for ascertaining the state of income mobility, so we need another measurement to use in its stead. What happens when we abandon the Gini Coefficient’s reliance on measuring household income concentrations within quintiles, and focus instead on the changes in individual incomes over time? Do we still see the growing disparity between the rich and poor in this country like the Census would suggest is occurring? No! In fact, the opposite has been occurring! In 2007, the U.S. Department of the Treasury published a report of trends in income mobility in the decade of 1996 to 2005. Using data from a sample of tax returns for over one-hundred and sixty thousand primary and secondary taxpayers, the Treasury finds that

There is considerable income mobility of individuals in the U.S. economy over the 1996 through 2005 period. More than half of taxpayers (56 percent by one measure and 55 percent by another measure) moved to a different income quintile between 1996 and 2005. About half (58 percent by one measure and 45 percent by another measure) of those in the bottom income quintile in 1996 moved to a higher income group by 2005.

In addition to reporting on income mobility, the report offers some insight on the overall strength of the economy. Also, the poor benefited more from income mobility than did the rich:

Median incomes of taxpayers in the sample increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. Further, the median incomes of those initially in the lowest income groups increased more in percentage terms than the median incomes of those in the higher income groups. The median inflation-adjusted incomes of the taxpayers who were in the very highest income groups in 1996 declined by 2005.

The composition of the very top income groups changes dramatically over time. Less than half (40 percent or 43 percent depending on the measure) of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of the individuals in the top 1/100th percent in 1996 remained in the top 1/100th percent in 2005.

The report also comments that

The degree of relative income mobility among income groups over the 1996 to 2005 period is very similar to that over the prior decade (1987 to 1996). To the extent that increasing income inequality widened income gaps, this was offset by increased absolute income mobility so that relative income mobility has neither increased nor decreased over the past 20 years.

Referenced in the study is a litany of prior research on income mobility dating back to the 1960s, all of which indicates that there was a large amount of mobility within past decades as well, especially in the decade of 1979-1988, where by one measurement, “86 percent of taxpayers in the lowest income quintile in 1979 had moved to a higher quintile by 1988 and 15 percent of them had moved all the way to the top quintile.”

Leftists and others looking at the Current Population Survey might suggest that more government regulation and more progressive tax policies are needed to improve equity in the economy, but if we’ve learned anything here, it’s that liberty and opportunity are the greatest equalizers. If we wish to promote equality of opportunity, we should ensure a free market economy, of which economic freedom and mobility is a central component. We should accordingly dismiss the policies that, in an effort to achieve equality of outcomes, must necessarily destroy that freedom and mobility.

A Piece on Health Care “Reform”

Here we have the champion issue of the Democrat Party, the Holy Grail of leftism, President Obama’s “Waterloo;” it is the quintessential form of federal government control over the lives of Americans in a modern world. This issue has recently been the centerpiece of mainstream, left-wing reporting, and every day we hear the latest propaganda supporting the so-called “healthcare reform” proposals circulating within congress. This is a large topic, so I will break the left’s arguments down in to its components of philosophy, and statistical rationale.

The ideological foundation for this debate is the question “Is health care a right?” The Democrat Party’s proposals rely on an affirmative answer, but in taking a closer look beyond its emotional appeal, we find that the question must first be broken down into two more basic questions: (1) What is health care? (2) What is a right?

Most people seem to have a good concept of what health care is. When patients are administered medicine, they are receiving a tangible good. When a patient visits a doctor or nurse, they are receiving the tangible services of those professionals. Regardless of what the particular good or service is, health care is something that professionals in the field own and provide at a cost to themselves.

Defining a right is a little bit trickier. The conservative perspective holds that a right is a product of natural law; natural law is based on morality, and morality is based on human nature. Still, the concept of rights seem nebulous and intangible, so it’s best to start with its most basic characteristics. Most people would agree that in order for something to be a right, it must be inalienable from an individual, undeniable to them by both other individuals and by government. If rights are inalienable from individuals, then the rights of one individual necessarily cannot contradict the rights of another. Given these stipulations, let us consider the example of health care.

If health care is declared a right, then the rights of those without health care must necessarily contradict the rights of those with health care. If I walk into a hospital and demand treatment, claiming it as my right, I am actually claiming as my right the service of whoever provides the treatment–if they are unable to refuse, it would render the health care provider a slave. Because this would contradict the rights of the health care provider, health care cannot be a right. The same is true for all other goods and services, such as food, clothing, and housing. These things are produced by individuals at a cost to themselves.

Rights are not something that can be granted or confiscated by government, but goods and services are. In its endeavor to provide health care for all, government has fostered a sense of entitlement in people that causes them to view goods and services as a right. The irony is that the government’s reforms aren’t even focused on health care, but rather health insurance coverage. Health insurance coverage is a promise, and nothing more. Promises are something the government has an abundance of.

I also want to address the left’s use of the word “reform.” Its adoption for this context is no accident, though the way they use it is dishonest. There are two types of large scale change: Reform and Revolution. Edmund Burke, known as the founder of modern conservatism, knew from his observations on the French Revolution and the surrounding time periods what the characteristics and effects are of each. Change through reform is a healthy practice to amend and refine current systems which are believed to be effective, but inefficient. Change through revolution (also referred to sometimes as change through innovation) radically alters a system to the point of being unrecognizable (or does away with a system altogether), based either on the assumption that the current system is horribly inadequate, or that the new system will be so wonderful that continuation of the current system in any way is unacceptable. The two types of change are mutually exclusive, with reformation producing results opposite to those of revolution, which often have unintended consequences, and as Burke put, “A spirit of reformation is never more consistent with itself than when it refuses to be rendered the means of destruction.” The healthcare proposals originating in the U.S. House and Senate are not reform. They are a complete short circuit and doing-away-with of the current healthcare system of America, including its positive aspects. It is revolution, and if implemented, will be disastrous.

The Problem According to the Left

Dearth of Insurance Coverage

By now, there’s no doubt you’ve heard the figure thrown around by Nancy Pelosi, Barack Obama, and several media pundits that there are at least 47 million uninsured Americans in this country. According to them, there is a crisis in the United States of such magnitude that you wouldn’t be able to walk down the street without seeing uninsured Americans sprawled out on the sidewalk, or spilling out of emergency rooms. They would have you believe that unless a great, new, federal government insurance agency is created, there will be a profusion of sickness, injury, and death in America for which we would all share blame.

The first problem with this is that I don’t see uninsured Americans sprawled out on the street. I assume this is because I live a very sheltered life, but still, one must be at least a little bit skeptical. 47 million Americans is over 15 percent of the current United States population, so one would think that this crisis would have been all over the news for years up to this point. 47 million uninsured Americans don’t just appear over night, but I seem to recall only hearing about this figure during the 2008 election as one of the Democrat Party’s talking points, so where did this figure come from? It turns out, the figure originates from the 2006 U.S. Census Report. As with most statistics, these require more than a face-value appraisal. In his book, Liberty and Tyranny: A Conservative Manifesto, Mark Levin digs deep into the report and points out a few problems with the Democrats’ conclusions:

“In 2006, the Census Bureau reported that there were 46.6 million people without health insurance. About 9.5 million were not United States citizens. Another 17 million lived in households with incomes exceeding $50,000 a year and could, presumably, purchase their own health care coverage. Eighteen million of the 46.6 million uninsured were between the ages of eighteen and thirty-four, most of whom were in good health and not necessarily in need of health-care coverage or chose not to purchase it. Moreover, only 30 percent of the nonelderly population who became uninsured in a given year remained uninsured for more than twelve months. Almost 50 percent regained their health coverage within four months. The 47 million “uninsured” figure used by Pelosi and others is widely inaccurate.”

The existence of 10-15 million truly uninsured people is no small problem, but when we honestly consider all the facets of the data, we must seriously question the exigency of overhauling our entire health care system. The coverage of non-citizens and people who, for whatever reason, abstain from purchasing health insurance, all in hopes of helping a small percentage of truly disadvantaged Americans, is not wise, and we must give fair examination to less drastic policy alternatives.

The Insurance Companies

How did this problem start? If and when one accepts the “47-million-uninsured-Americans” figure as accurate (ignoring the facts mentioned earlier), one must wonder where all these uninsured Americans came from and how they got to be in their current situation. The talking heads on the left, including politicians such as Barack Obama, Nancy Pelosi, and Harry Reid, seem to have decided upon private insurance companies as the culprit. They constantly re-iterate the horror stories of how people cannot acquire health insurance through their employer, or how skyrocketing health insurance premiums are preventing individuals and employers from purchasing a policy or prescription drugs, or how they are denying coverage to people with pre-existing conditions, etc. The fact is that some of these stories have some elements of truth to them, and there are a few cases in which people more or less fall “victim” to these situations. The health insurance system in this country is far from perfect, and it could stand to be reformed in many ways.

However, this leaves out an important aspect of the debate, and fails to explain the behavior of the insurance companies other than through words like, greed, malevolence, and selfishness. The purpose of health insurance is not to act as a buffer zone for the entirety of a population. As much as it pains some people to hear, it was never designed to provide for all people and cover all medical conditions. The way all insurance works is that the participants pool against risk–in this case, the risk of sickness or injury. When an individual requires treatment for some affliction, the insurance company is required by contract to pay out the premiums it collects according to a payment schedule. We are most familiar with such schedules through car and home insurance. When accidents occur, certain damages are covered, whereas others are not. Even compensation for similar damages may vary depending on other circumstances, such as who was at fault.

There is a big difference with health insurance, however, in that participants are not always pooling against risk. Since the advent of health insurance, the coverage of most insurance plans has grown to grotesque proportions to the point that insurance companies are no longer insuring only against risk–regular check-ups and procedures, weight-loss surgeries, and prescription drugs are but a few of the litany of covered treatments today (this is the main reason health care costs are so high). Given this overabundance of coverage, it would not make sense for a healthy person to participate, because instead of paying only for the unlikely, occasional, catastrophic illness or injury–which health insurance was originally designed to cover–their premiums would instead be going to pay for the near constant claims of people looking to fund their own lifestyle. The system would basically become a transfer payment. As a result, we have 18 million young people who wisely choose not to buy health insurance.

Given the lack of premiums from healthy people to subsidize perpetually sick people, insurance companies have to be discriminatory in deciding whom to cover. An insurance company would go broke if it had to provide for every single sick person or every pre-existing condition because there simply are not enough healthy people to pay for them all, and this would ultimately defeat the purpose of having health insurance in the first place. This is the sad, ultimate truth about the current health insurance system, and although it is sometimes a painful truth, it is the only way the insurance system can function to provide for the truly needy.

The Solution As They See It

Nationwide Private Insurance Mandates

Here’s what the Democrat politicians plan to do about the problem: Because they believe the insurance companies to be acting out of greed, selfishness, and discrimination, denying coverage purposefully because it would diminish their profits, they intend to solve this problem by punishing the insurance companies in a variety of ways. First and foremost, they intend to use the law to prevent insurance companies from denying coverage based on pre-existing conditions in individual insurance markets. The problem with this proposal is not hard to understand. I just explained why insurance companies do not cover all people and conditions, and to force them to do so would be to force them out of business. Besides, the federal legislation HIPAA which was passed in 1996 already mandates insurance companies to sell coverage for groups such as businesses regardless of the health of its employees. They also wish to prevent insurance companies from dropping coverage of those who become sick, but this problem is pretty much imaginary, as HIPAA already prevents this for groups as well as individuals, and no business in their right mind would charge for a product and not deliver the goods. They would go out of business in an instant. They also plan to prevent insurance companies from “watering down” plans and paying only for a limited supply of drugs and medical procedures. Although I actually believe this to be a noble endeavor, I also believe an insurance company that did this would not last long in a free market, and it is because of current federal law that these companies are able to perform such practices and still retain consumers, but I’ll address this subject later. They also intend to disallow “arbitrary cap[s]” on coverage after certain time periods. Again, in a free market, this would not occur, and it is because of federal law that this problem occurs, though it even sounds preposterous in itself. They also want to limit how much a person can be charged for “out-of-pocket expenses,” which I’ll assume to mean co-pays for medicine, check-ups, and non-covered expenses. This has less to do with insurance coverage (although it does revisit the problem of forcing coverage for everyone) than it does with simple economics. You cannot limit the price of those health services and medical supplies through law without causing vast, negative repercussions for the companies and clinics that provide those commodities.

Public Health Insurance Entity

Here is the tricky part of the Democrat plans in congress: The “public option,” as the politicians evasively describe it. It has had many names over the months and been talked about by many people. It has been called names like “government co-op,” “public option,” “health insurance exchange,” “universal healthcare,” oh, and don’t forget “Hillary-Care.” As much as the left wants to deny it, they are all means to the same end: socialized medicine. Every name, every government plan described, takes the power of health insurance away from the private sector, and gives it to a government entity. Here’s what will happen: The government plan, if it doesn’t immediately become the only insurance provider by law, will gradually become this. It may start out as a “government co-op,” or a “health insurance exchange,” both of which are designed to compete with the private companies in the free market. Eventually, the private companies will go out of business, as they will not be limitlessly funded by the federal or state governments, and they will not be able to compete with something that is. This is simple economics. Anyone who says that people may retain their private coverage in this newly created, government monopolized environment with no negative consequences are simply lying. If the government does not immediately force people to sign on to the government plan, then those people who retain their private coverage will see dramatically increasing premiums, and soon their plan and their company will cease to exist.

But what will this new government insurance entity look like, and how will life change with it? Most likely the newly created entity will be a bureaucratic agency, far away in the distant realm of Washington D.C. It will be large, of course, and inefficient as most bureaucratic agencies are, and it will be expensive to run. Many people have listened to the president’s rhetoric, and come away thinking such a system would be benevolent, down to earth, and even cost effective. The biggest misconception today, however, is that the government can actually provide healthcare for us at all. The government does not produce anything; it only rearranges things. The politicians will say they have achieved “healthcare for all,” but what does that really mean? When you go to the doctor for a checkup, you’re not getting the insurance you bought. You’re getting the tangible services of another human being. When you buy and use a pharmaceutical drug, it’s not the health insurance that makes you healthier, it’s the tangible effect of medicine. Of course the government will provide free health insurance coverage to all people in America (including illegal immigrants), but what will we really be getting? The only thing the government can deal with is money–your taxpayer money: You will be using it to buy health insurance once again, only this time there won’t be any private insurance companies to blame for lack of care. There will only be the government. You won’t be paying for your own health insurance, nor will you be paying for the insurance of a group of people associated with a private business. No, this time, you will be paying for the insurance of everyone, whether they be sick or well, whether they pay taxes or not. The government will not discriminate in providing coverage. Everyone will get it, but only a few will pay for it. If you are healthy and don’t feel the need to buy insurance, that’s too bad. You have to pay taxes, and taxes are not a selective matter.

Now, it’s bad enough having to pay for the care of others in a totally cost-ineffective system, but what if you’re sick? The proponents of government run healthcare tout the excellent quality of socialized medicine. But what happens when the only window you have to obtaining state of the art healthcare is a cost-ineffective system? As the number of people who would require healthcare treatment by law would increase exponentially, and as healthcare costs continue to rise due to inflation, the government will inevitably be forced to ration care. This is where the “death panels” you hear about come in to play. The left-wing media uses that term to mock the opponents of socialized medicine, but when there is only so much healthcare to go around, and too many people to be treated, someone is going to be neglected. The bureaucracy, in its unending quest to be cost effective will have to start cutting healthcare options from the plan until costs can be met. This means the people with the most expensive ailments will be neglected first: People with heart conditions, trauma disorders, cancer patients, mental disorders, asthma patients, etc. These are the people that the far off bureaucratic agency in Washington D.C.—with no regard for the thoughts of the patient, the doctor, or the spirit of life that each patient holds—will cut first. These are what the “death panels” are for. They are to decide who is the most inefficient; who has the least bang for the buck. It doesn’t stop there, though. Coverage will continue to deteriorate until there truly are millions of people (most of them being senior citizens and the disabled) without healthcare in America. When there is no one else to blame but the government, it will be too late. Private insurance will be long gone, the deficit will have ballooned, and millions will have suffered.

Then there are always those proponents of socialized medicine that refer to the success of government plans in Britain, Canada, and other countries. I don’t understand exactly how they would define success, but if they mean substandard care, long waiting lines, and higher mortality rates than the U.S., then yes, I would say they’re successful as well. Here are a few examples of the many “success” stories coming out of those countries:

http://www.liberty-page.com/issues/healthcare/socialized.html

Even though we actually have the best healthcare system on the face of the Earth, and many people from other countries flock here because they are prevented from even purchasing privately state-of-the-art medical care, herds of drones on the left still rant about revolutionizing the healthcare system here. There are plenty of countries around the world with socialized medicine. If those countries are the wonderful utopias that they are purported to be, why don’t huge quantities of Americans flock to nations like Great Britain and Canada? Just leave here, and stop trying to ruin our system for generations to come. Here’s something for those who say that the healthcare system in terms of quality here in America is miserable:

http://www.ncpa.org/pub/ba649

The Problem As We See It

Misguided Federal Regulation

As for the proponents of new federal laws and increased federal regulation to solve the problems with America’s healthcare system (mostly Democrats and soft Republicans), it seems that the 1996 law HIPAA would be at least mostly satisfying. It provides for nationwide guaranteed issuing of coverage in group/business cases, and guaranteed renewability of coverage for groups/businesses and individuals. But apparently this doesn’t go far enough, hence the need for government run healthcare, and the inevitable destruction of the private insurance market. What most people fail to realize is that the laws of HIPAA already existed in many of the states to varying degrees. For example, by the mid 1990’s, 36 states had laws requiring guaranteed issue, and 46 states had laws requiring guaranteed renewability. I would see this as another strength of federalism, as it should promote national competition and give insurance shoppers more choices when it comes purchasing affordable plans that work for them, no matter their geographical location. Unfortunately, many states also have laws and regulations restricting which policies can be bought where.

The Solution As We See It

Tax Credits

Offering federal tax credits to individuals and families would significantly reduce the number of uninsured United States citizens, with a decreased risk of illegal immigrants or anyone else less inclined to pay taxes getting a free ride. It would also increase insurance participant pools overall, offsetting the spikes in premiums due to expensive, pre-existing, or other specifically designated conditions.

National Insurance Market

As of now, the tangle of state and federal regulations prevent individuals from shopping for insurance across state lines. Some policies and packages are only available in certain geographical areas. Reconciling state regulation through federal law could open up a national insurance market, increasing competition, driving down prices, and increasing levels of customization among plans.

Block Grants

If federal subsidies for insurance are absolutely necessary, they should be issued through block grants that allow states to control how much money goes to individuals and companies, and not waste money when it’s not needed.

Tort Reform

One of the biggest factors in the rise of healthcare costs in the United States is a plethora of malpractice lawsuits against doctors, hospitals, clinics, and HMO’s. Most of these cases are frivolous. Some experts say that 10-15% of the increases in healthcare costs are due to frivolous lawsuits, and federal law needs to be changed to limit them.

Where are the Republicans?

Although the left-wing media would have you believe that all the Republicans in Congress are a bunch of stubborn naysayers who only oppose real healthcare reform because they hate the president and want him to fail, the Republicans between June and the present day actually have had three pieces of legislation introduced in Congress (all three of them combined are smaller than any of the Democrat bills, and add to the deficit much less as well). None of them are really going anywhere, and they likely won’t because the Democrats have the majority in Congress. At least the rapid push to ram the government run healthcare bills down the throats of the American People is being slowed by the Republicans (besides Olympia Snowe and a few others), right?

I guess what the debate boils down to is this: If you support a destroyed private health insurance market, a government run health leviathan, rationed care, “death panels,” a ballooned federal deficit, substandard quality of care, long waiting lines, coverage for illegal immigrants, and higher mortality rates all for the sake of 10-15 million long term uninsured who will end up worse off than now anyway, then the Democrat proposals fit your bill. But if you believe that the system we have here, albeit imperfect, is the greatest healthcare system on the face of the Earth, and can be made better in a low cost and efficient way, without endangering the lives and prosperity of Americans for generations to come, while preserving and streamlining federalism, and while preserving coverage and quality of care for the most people possible, then not only do the Democrat proposals need to be opposed, but the Republican proposals need to be championed.

We do not elect our representatives or our president to authorize a cost-benefit analysis on the lives of their constituents, the American People. We elect them to preserve our freedom to choose the best path for our own lives.

Sub-Priming It Up

This may seem like old news by now, but I am constantly suprised by how many people are unaware of many factors in this discussion of the “sub-prime loan banking crisis.”

Either you are of the mindset that the government created the sub-prime mortgage crisis, that excessive regulation of the banks starting with the Community Reinvestment Act signed by Jimmy Carter and perpetuating with the folly of the Clinton Administration and Congress through Fanny Mae and Freddie Mac in the early nineties led to the collapse of the banking industry through a massive wave of defaulted mortgages (here is a piece on IBD that summarizes this view very well), or you are of the mindset that greedy bank executives created it, or perhaps even some combination of the two. Whatever the cause, the practice of issuing risky loans to unqualified home buyers has proven to be unproductive and foolhardy. Given this knowledge, the debate over whether or not to use federal tax dollars to bail these banks out is mute, as you will only be funding the current business practices.

To solve this problem, we again see two diverging mindsets: One, that government regulation, having caused the problem in the first place, should be drastically reduced, giving the free market room to correct itself. A second, that new, heavy government regulation of the banks should be employed to protect unqualified home buyers, and by setting business conditions for receiving federal bailout money, defeat the schemes of evil bank executives, seems to have been commonly vocalized in Washington for the past few months.

This second mindset should be a warning sign to all. It is the chant of a leftist demagogue, and holds no basis in our society, nor any place in public policy. First of all, why on Earth should the money of federal taxpayers be used to buy up all the “toxic assets” the banks currently hold? They’re toxic for a reason, and to shift the burden created by the unwise actions of unqualified home buyers to the entire responsible and productive sector of the economy is idiotic. To the holder of this mindset, I must ask “Where in the Constitution is the power to run private entities delegated to any branch of the United States Government?” It is obvious that because the powers of Congress are even enumerated in Article 1 Section 8 that Congress was not meant to have unlimited power. This is again exemplified by Amendment 10 in the Bill of Rights, reserving unenumerated powers to the States and the people. If you dismiss the boundaries specified by the Constitution, where then do you draw the line of governmental prerogative? Without the Constitution, there is no rule of law. There is only the free acquisition of power by governing bodies, and no remaining safeguards against tyranny.