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Phantoms & Lies of Hitting the Debt Ceiling


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On Oct. 17, the United States will reach a deadline to raise the debt ceiling. At this time, Congress will have to authorize the federal government to continue accruing debts to fund our massive deficit spending. Naturally, the Obama administration has pursued a concerted policy of fear mongering by predicting default on Social Security checks and interest payments on the national debt. The US Treasury Department declared that a default would result in a recession, and President Obama told Wall Street that they should be concerned about the mere possibility of default.

The mantra continues quite simply that “We must borrow money to pay the interest on money that we already borrowed.”

These doomsday predictions are, quite bluntly, complete fabrications. If the debt ceiling is not increased, the United States will not default on its debts and Social Security checks will remain intact. Unless President Obama willfully chooses to defy the Constitution and bring about the apocalypse he envisions, there will be no government default.

If the debt ceiling is reached, the United States has certain obligations which it must pay. A failure to pay these obligations would result in default. The media and government claim that there is no law in place to prioritize these obligations, but they clearly have not read the Constitution since the 1860s.

The Fourteenth Amendment to the Constitution states: “The validity of the public debt of the United States… shall not be questioned.” This clause referred to the debts the United States incurred during the Civil War. Under this provision, the administration would be legally obligated to make payments on its debts even if we reach the debt ceiling.

What exactly are these debts? What qualifies as a legal obligation by the United States government? Interestingly, the answer comes from the very liberal Paul Krugman, as he attempts to widely construe our debts. He identifies both interest payments on bonds and Social Security payments as debts which must be paid. Krugman admits that the Treasury Department could “pay off bonds in full,” but he argues that “Social Security benefits have the same inviolable legal status as payments to investors.”


First, let’s examine the situation with regards to bond payments. Obama’s fear mongering over default involves the declaration that our credit rating would be down-graded if we do not raise the debt ceiling. This would result in higher interest rates on the debt in future. However, Moody’s Investors Service, a major credit rating agency, disputes that claim. They assert: “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt.”

The Fourteenth Amendment makes clear that the government must service its debt. Since the US has approximately $222 billion in monthly revenue, with debt service payment obligations of only $35 billion suggestions that the American government might fall into default are patently absurd, unless Barack Obama willfully ignores the 14th Amendment in order to make his “gloom and doom” projections come true.

Social Security

Second, Social Security would not be destroyed by the debt ceiling. Shocking as it may be to many of you, the Social Security Administration actually runs on a surplus. According to Reuters, payroll revenue (what those of us with paycheck deductions see marked as FIFA on our paystubs) will bring in $38.8 billion more than the SSA must pay in benefits. I recognize that this is incredibly unintuitive and deserves some explanation.

Social Security payroll revenue is held by the Treasury Department in the Social Security Trust Fund. Generally, this money is raided by the Treasury Department to pay for other programs, which is why there is such uncertainty in the stability of the Social Security system. However, if the debt ceiling is reached, and the administration does not intentionally violate the 14th Amendment, all Social Security revenues must be paid out to recipients as Social Security benefits.

Given that the program takes in more revenue than it pays, it is again ridiculous to suggest that payments from the Social Security system to recipients would default, unless, of course, President Obama deliberately ignores the 14th Amendment to transform his scare tactics into reality.

The Debt Ceiling

This is not to say that the debt ceiling would not have an impact on our government spending or the economy. The government would have to make drastic cuts to its spending very quickly, but this would not result in a default.

What we’re doing is borrowing money to pay interest on our debt. That’s similar to a family whose credit cards are maxed out applying for a new credit card to pay the interest of their debt. That is not a long range plan for financial sanity, for the family in our example or for America.

Imagine that that family throws a fit when they are denied their credit card, and you will have a pretty good understanding of the administration’s debt ceiling argument.

Capital dome and new $100 bill

Obamacare – Reality Sets In


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President Barack Obama, July 16, 2009, in a speech to the American Medical Association, said:

“If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”

Sadly, the truth has turned out to be vastly different. Literally millions of Americans, by one report 22 million of us, have been told that they cannot keep their current health care plans, nearly 800,000 of them in New Jersey alone. The long awaited and much ballyhooed launch of the Health Care Exchanges across America came and went two weeks ago, and far too many people find themselves wondering what the heck is going on.

Where are we today with Obamacare, and what can we expect?

This article will examine that question in four ways:

1) We will present an overview of Obamacare news from across the nation as reported in the mass media.

2) We’ll explain something that almost no one has heard from any source, be it newspapers, internet articles, radio and television talk shows, or any of the politicians.  You’ll almost surely be stunned to discover that the way Obamacare charges families to cover their children will create massive premium increases, and the larger the family, the larger the premium increases will be.

3) We’ll analyze plan benefits and premiums by comparing 2013 plans with the new “post-Obamacare” plans that 2014 will bring, and see how that stacks up against Mr. Obama’s July 11, 2009 statement that his plan “would save everyone in America an average of $2,500 in Health Care costs each year.”  Here’s a hint: Don’t get your hopes up!

4) We’ll discuss the launch itself, the ease of access for consumers across America, and the leadership that has brought the President’s “signature law” to where it is today.

An Uproar Across America

San Jose: The San Jose (California) Mercury-News, the only major newspaper in the nation’s 10th largest city, ranks among the most liberal papers in the US, right up there with the NY Times, the LA Times, and the Washington Post.  But the first weekend after the Obamacare launch, even the Merc’s front page reported problems.  They featured Cindy Vinson and Tom Waschura, both of whom said they were big believers in the Affordable Care Act, and were proud that they had helped elect and re-elect President Barack Obama.

Sadly, like many other citizens across the US, they were shocked to discover that their in-force policies were being replaced with new Obamacare plans that will see their costs skyrocket.

Ms. Vinson, of San Jose, will pay $1,800 more a year for an individual policy, while Mr. Waschura, of Portola Valley, will be forced to pay almost $10,000 more to cover his family of four.

“I was laughing at Boehner – until the mail came today,” said Waschura, referring to House Speaker John Boehner, who is leading the Republican charge to defund Obamacare.

“Of course, I want people to have health care,” Ms. Vinson said. “I just didn’t realize I would be the one who was going to pay for it personally.”

Guess what, Cindy: “There ain’t no such thing as a free lunch!”

New Jersey: Bad news arrived in mailboxes across the Garden State this past week, as people discovered that many of their existing health insurance plans had been wiped out by Obamacare because they didn’t meet the provisions of the new law.

How many folks in New Jersey were hit by these cancellations?  Oh, only about eight hundred thousand or so.

Maryann White, 74, of Toms River said she was frustrated by the news. She liked the plan she had and is worried that whatever new plan she buys will cost more. Though she is engaged in the process, she said, many seniors find it difficult to understand their options.

“This is really a shame,” said Ms. White. “I’m not criticizing. I’m just saying, ‘Give us a break.’”

Funny, sounds like criticism to me!

Alabama: Alabamans got slammed with a double whammy!  First came a letter to customers from Blue Cross Blue Shield that premiums would leap upwards by 300 percent, then Blue Cross followed up by announcing that they were canceling the vast majority of their plans because they weren’t in accord with new requirements imposed by Obamacare. New plans are expect to carry a much heftier price tag than the old ones.

WSFA-TV in Montgomery reported, “[we] talked with [a] customer on one individual plan today, he’s been paying $523 a month for his family of four, but starting in January his premium is going up to more than $1,100 a month.  One of the big problems is [the new law requires] rating family costs by the number of people, so large families have to pay more.”

Rating Changes = Extra Costs for Families

One of the big problems indeed. Americans are now discovering something that has been studiously ignored by almost everyone for the past 3 ½ years. Under the new rating methodology of Obamacare, the way children’s premiums is going to be calculated from now on has changed dramatically, and that change is going to smack a huge number of families right in their bank accounts.

The current rating system for small group plans in almost all states charges the same rates for children’s coverage regardless of the number of children in a family. For individual plans, some carriers currently adjust rates upward for those with more children, but not as much as they will come January.

A couple with one child pays the same to cover their kid as does a couple with two kids to cover both of theirs.  Three, four, five…the more the merrier; no matter how many kids you have, the price to cover them is the same.

And of course this deal got even sweeter when the ACA said “you can keep your kids on your medical plan up until their 26th birthday.” The insurers couldn’t even charge more for those extra children as dependents, because of the “cheaper by the dozen” rating system described above.

But that all comes to a screeching halt on January 1.  From then on, any children from 21 to 25 will cost their parents the same as any single adult of their age.  Children under age 21 will pay a child’s rate for each child up to a total of three (over three is free!).

As we said above, the rating system for children will also impact costs for individual coverage.

We’ll examine how this can impact a small family, then a large family, in both cases comparing real Anthem Blue Cross plans currently available with real Anthem Blue Cross plans currently available on the CoveredCalifornia Exchange website for effective dates of January 1, 2014 and after.

First let’s look at Wade and Suzan, both age 45, with a 23-year-old son and an 18-year-old daughter. Bob is a programmer for an electronics firm making $90,000 a year; Suzan is a teacher earning $60,000 a year.

Let’s suppose they were to buy a plan today, October 14, 2013, from Anthem Blue Cross (the largest private health care provider in California).  The plan they select has a $1,500 deductible and a $30 copayment for office visits to a non-specialist, a $50 copayment for specialists.  They would pay $1,174 to cover the four of them, of which $380 is the cost for their kids.

But under the new system, their total cost for a $2000 deductible plan (there are no $1,500 deductible plans available from Anthem for 2014 and after) with a $45 copay for non-specialist office visits and a $65 copay for specialists will $1,478. Instead of costing $380 for their kids, it will cost them $435, $266 for their son and $169 for their daughter, because the new system charges for each child.  (Note that the per child rate will is lower than the current “one price for all” rate, so for those who have only one child, the cost to cover that child will go down.)

Nonetheless, here’s a quick summary of the costs and benefits – you tell me whether the new Obamacare plan is better and cheaper than what they could buy today.  Granted that these two plans are not identical, but they’re as close as we could come given the new requirements and guidelines of the Obamacare post-2014 plans:






Office Visit copayment:







Maximum Out of Pocket per person






Everything is higher in 2014.  Their deductible is $500 higher, their office visit copayments are $15 higher per visit, their maximum out of pocket expense is $1,850 higher, and their premium is $304 higher per month, $3,648 per year; a 25% increase even with all the benefit reductions. Such a deal!

But Wade and Suzan are going to be the envy of their next door neighbors, Sean and Sonya, who have five kids – a son age 23, a daughter 22, a daughter 18, a daughter 15, and their youngest, a 12-year-old son.

Sean and Sonya, also both age 45, have income identical to their neighbors, Wade and Suzan. Their cost to cover their family is currently $1,343, slightly higher than Wade and Suzan because in the individual market they are charged more for additional children on their plan.  Their cost for the five kids is $549, $169 more than their neighbors.

But they now have to pay for all five of their kids, two times $266 for those over 21, and three times the per child rate of $169 for the ones under 21.  Imagine their “sticker shock” when they discover that their monthly medical insurance cost for their youngsters has just jumped from $549 to $1,039.

Their monthly premium change from Obamacare:  $738 higher every month, $8,856 per year, a 54% increase. My goodness!  And for their $8,800 more a year they get the same benefit decreases, higher deductible, higher office visit copayments, and a higher maximum out of pocket for the year.

What happened to that “my plan will save Americans $2,500 a year on their health care costs”?

The Truth About Plan Costs

Our original intent for this section of the article was to explore plan rates in several states:  California, Texas, New Jersey, and Louisiana.  One of those, California, has its own state-run Exchange, dubbed CoveredCA, while the other three, Texas, New Jersey, and Louisiana all have defaulted into federally-run Exchanges since the states themselves were uninterested in creating their own. We chose these four because of the 50 states mandated by Obamacare to have Exchanges up and running by 1/1/2014, 35 are federally run while 15 are operated by the states in which they will operate. A 3:1 ratio hence seemed reasonable for our analysis.

Interestingly, and perhaps coincidently, we were able to easily access the state operated Exchange in California and will present our findings herein.  Unfortunately, and perhaps purely by chance, the three states which are dependent on the Feds for their operation were all ultimately inaccessible via their websites.

For the Texas site, we three times got onto their login page after rather lengthy delays and submitted the information to create an account. After clicking “submit,” we eventually received the message, “Your account cannot be created at this time. Please try again later,” three separate times and eventually gave up.

For the New Jersey site, we successfully created an account, verified the account by clicking on a link sent to our email address, then returned to their site and attempted to log in.  The account was not recognized as active, and we were referred to an 800 number for service. Unsurprisingly, that number placed us on hold until we finally gave up.  We repeated the “create account, verify account, return to login” procedure twice more, only to suffer the same “account is not recognized” error both times and eventually gave up.

For the Louisiana account we thrice completed the account information and submitted it for processing, and all three times got the same message as we had on the Texas site, “Your account cannot be created at this time. Please try again later.” We surrendered to the vagaries of the Federal program signup efforts and gave up on Louisiana as well.

California’s site, in contrast, was easily accessible, easy to navigate, quick to respond and all-in-all a pleasure to work with.  We jumped back and forth between entering family data such as names, dates of birth, income, and zip code, making plan choices, examining plan benefit descriptions and plan costs with literally no lag, no delays, no time outs, and no problems. Might have had something to do with Silicon Valley being in California? Who knows…

The proverbial bottom line, however, wasn’t great news for those looking to CoveredCA for coverage. The following two spreadsheets break down rates for the same fairly standard PPO plan which we used in our analysis of increased children’s costs earlier in this article.  We looked at six different regional areas of California (there are 19 across the state) both for a single person, and then for a family of four.

The plans versions, 2013 vs. 2014 are as close as we could come to equivalent due to the new Obamacare plan categories, but are not identical.  As previously mentioned during our discussion of the children’s rates, the benefits provided by the new 2014 plan are significantly inferior to the 2013 plan, as the following chart illustrates:



Benefit Reduction





Office Visit copayment:  









Maximum Out of Pocket per person








Given the 33% to 50% benefit reductions, one might anticipate at least a 33% to 50% cost reduction for the 2014 plans. Unfortunately, that is not the case.  Of the 12 plans analyzed, nine show cost increases in 2014, in spite of the benefit cuts. Three show cost reductions, one of 10%, two of 5%, but compared to the 33-50% benefit cuts, those slight cost drops seem pretty insignificant:













Male, 54, single – San Jose Family of 4 (both 54) – San Jose








Female, 28, single – San Jose Family of 4 (both 28) – San Jose








Male 43, single – Pasadena Family of 4 (both 43) – Pasadena








Female 48, single – San Francisco Family of 4 (both 48) – San Francisco








Male 38, single – San Diego Family of 4 (both 43) – San Diego








Male 25, single – Eureka Family of 4 (both 25) – Eureka









Leadership, or the Lack Thereof

  • March 23, 2010 – President Barack Obama signs the Patient Protection and Affordable Care Act (ACA) into law.
  • October 1, 2013 – ACA Health Insurance Exchanges go live across America
  • Three years, six months, nine days – time to prepare
  • Grade Awarded – You be the judge!

Unless you’ve been in a time warp, or crossing the Atlantic by yourself in a rowboat, you’ve surely heard the complaints, stories, and glitches that have been widely reported, including here, here, here, here, and here, about the less-than-perfect October 1 launch of Obamacare.

One amazing experience came to me from a young woman who lives in New Jersey.  She went on her Exchange website, created an account, logged in and entered her personal information; date of birth, address, social security number and so forth.  Then – to her astonishment! – the system told her that she was ineligible because…she was dead.  Kind of leaves you wondering, doesn’t it? I mean, where do you go from there?

One wonders how the Obama White House, which during the 2012 Presidential Election Campaign was repeatedly lauded for its “tech savvy,” could have allowed this to happen.  One possible explanation (which is actually a compilation of four reasons) was advanced by Julien Eilperin of the Washington Post, but rings hollow in my mind.  In essence, Ms. Eilperin said that the problems were:

  • There was no Chief Technological Officer and they had a “hard launch date” of October 1, which didn’t give them enough time to get things right;
  • They couldn’t hire the same people who worked on the Obama campaign a year ago;
  • The “nuts and bolts” of the Exchange fall under the Department of Health and Human Services, not the White House, and;
  • Constructing a national Health Care Marketplace is more complex than orchestrating voter turnout.

Seriously? She has to be kidding, right?

“There’s no CTO.” Not anywhere in the US government? As of December 2012, the US government had over 21,900,000 employees. Yes, that’s right – almost twenty-two MILLION employees.  And we couldn’t find anyone who could be the CTO?  And the 3 ½ years between passage of the law and the launch date wasn’t enough time?  This woman should be on The Daily Show or Saturday Night Live – the liberals on those programs would love her humor.

“They couldn’t hire the same people who worked on the campaign.” Again, can she possibly be serious?  There are these tiny little companies called Google, Apple, Microsoft, Oracle, HP, IBM, Cisco, Amazon, Intel, and just a few others scattered about the landscape that operate in the United States. Are we really expected to believe that nowhere in any of those companies are there any people who are as qualified in website design and implementation as the people who worked on Obama’s 2012 campaign?  Initial estimates for the creation of the Federal Exchange website were just over $98 million but as we stand today, costs have surpassed $600 million. Surely for $600 million we could have recruited a few of those tech geeks to work for Obamacare.

“The ‘nuts and bolts’ are in HHS, not the White House.” So what? Obama is the President of the United States, not the President of the White House. He’s supposed to be in charge – of the entire United States!  And last time we checked, the entire United States includes the Department of Health and Human Services.  Maybe he should have kept his finger on the pulse of the development of the website and other launch mechanics to make sure that his “Signature Bill” didn’t do a belly flop on launch day.

“Constructing a national Health Care Marketplace is more complex than getting voter turnout.” Duh! Didn’t the administration know that?  Obama’s supposed to be in charge of HHS, of the entire government, and most particularly, he most certainly could have been expected to keep track of how Obamacare was proceeding towards the starting gate.  It seems he should have kept his eye on the ball a little more closely, instead of trusting Kathleen Sebilius to mind the store.  Or does “keep your eye on the ball” only apply on the golf course?

I doubt if many of those reading this article are big video game players, but this kind of problem – website overload – is not exactly unknown in that world where massive launches, and the avoidance of massive launch screw-ups is critical.  For those who think we’re still talking about financial peanuts here, let me take a quick moment to bring you up to speed.  In 2012 the video game industry generated $66 billion in revenue.  One game, Diablo 3, released by Blizzard Entertainment, sold over $150 million worth of product in its first four months on the shelves; 3.4 million copies at $50 apiece.

In the first 30 minutes after the game’s initial launch, over 200,000 people logged in from the UK alone.  200,000 in 30 minutes! Maybe Ms. Sebilius should have hired some gamers to set up her websites and run her servers.

What the game industry knows, and the White House should have known, is that when you spend months pumping up the public to go to your website, you need to be ready for the rush.  Early adopters make up a huge percentage of long-time clients.  When people like this try to register, try to join, and can’t, many of them give up and walk away forever.  What is worse, and this is something that the movie industry knows full well, word-of-mouth advertising is more impacting, more valuable to the success of a production than anything on TV, the internet, or anywhere else.

All those disillusioned, frustrated people who sighed and logged off, giving up on Obamacare in those first few days, maybe for a few days, maybe forever, are going to pass along their feelings to their friends and neighbors. Those friends and neighbors will listen to them, and many will delay or avoid going to the websites for their own exercise in futility.

The Only Thing Worse Than No Leader is A Leader You Can’t Believe

As mentioned at the start of this article, on July 16, 2009, Mr. Obama said:  “If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”

Two days later, in another speech in another city, he said: “My plan will save everyone in America an average of $2,500 in health care costs each year.”

I don’t know whether he was intentionally saying things that he knew to be untrue at the time that he made these two statements. Perhaps not.

Perhaps somehow, in some way, he lost control of events.  Perhaps as the law progressed it evolved into something beyond his ability to manage so that what he said to America, what he promised to Americans, eventually, against his initial intent, turned out to be lies.

I don’t really care. When the President says something that firmly, that unequivocally, he should stand by it, come hell or high water, and make sure it comes true.  It’s called ethics, integrity, commitment; those are the things that make a good leader.

The reality of Obamacare is upon us, and it is most emphatically not pretty.

health care emergency

Courageous Leadership?


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In time of crisis, do we want a leader who offers courageous leadership, or one who cautions “we should be worried?”

Early on, during the American Revolution, one of our greatest naval heroes, John Paul Jones, found himself and his ship, the Bon Homme Richard, in dire peril. Locked in battle with the much larger British ship, the HMS Serapis, Jones, his ship in flames and near sinking was taunted to surrender by the British captain. His reply:  “I have not yet begun to fight!”  He didn’t say, “Oh, I don’t know, maybe we should be worried.”

Constitutional Compromise

The United States Constitution says “all bills for raising revenue shall originate in the House of Representatives”. What exactly does that mean?  It means that when it comes to raising and spending money, the House must begin the process.  Why? Because at the time of the framing of the Constitution, the founders deemed that it was the House that was closest to the people since it was directly elected by the people.

The Senate was elected by the respective state legislatures until the passage of the 17th Amendment in 1913 gave the power to elect senators directly to the people. The President then and to this day is not elected by the people directly, but rather by the members of the Electoral College.

And so the signers of the Constitution, believing that the one body elected directly by the people would be most understanding of, and responsive to, the will of the people gave the House control over the nation’s purse strings.

That has not changed. The House is still closest to the people as its members are elected every two years, not every six as are Senators.  It is the House, not the President, not the Senate, which is responsible for initiating all bills having with raising and spending money.

But is there not, you might ask, a provision in the Constitution that says, “If the President urgently believes that certain specific financial measures are necessary for the proper conduct of the Government, shouldn’t the House appropriate such funds as the President so desires?”

Of course not! The entire theme of the division of powers lies at the heart of the foundation of our country. When the Constitution was ratified one of the provisions that made America so unique is that the President cannot dictate to the House and the Senate what they should do.

They have to act together.  That is the essence of our system; checks & balances, compromise, working together for the common good.

Compromise was evident time and again throughout the four months of debate and discussion that preceded the adoption of our Constitution.  One of the first major differences of opinion, and one quintessentially recognized by any student of the history of the Constitution, was between the larger states and the smaller over how legislative representation should be allocated. As we all know, this was resolved by what is sometimes called the “Great Compromise” of the Convention. The constitution created a bicameral legislature, two bodies with different means of selecting their members.  In the House of Representatives population is the determiner, but in the Senate each state is represented equally with two members, regardless of its population.

We’ve been compromising for two and a half centuries.  That’s the way it works here in the US – we work together, and we compromise. Our leaders manage to find ways to solve our problems together.

At least they’re supposed to.  And they’re supposed to hold in their hearts, as what Americans have always believed to be of the utmost importance, the cherished commitment to do what is best for America, and Americans.

American Leaders

The United States has surely had its share of great leaders.  No, let me correct that.  I believe we’ve had far more than just “our share” of great leaders, we’ve had blessed with a plethora of great leaders, year after year, decade after decade, century upon century.  Our leaders have been men and women of courage, of heroism, often genius.

From our earliest times, America’s leaders throughout our history have counseled courage in time of fear, confidence in times of uncertainty, and both resolve and determination in the face of danger.

Admiral David Farragut, leading US Naval forces at the Battle of Mobile Bay on August 6, 1864, was warned by his staff of deadly explosives lying between him and a possible victory over the enemy fleet.  He gave the immortal command:   “Damn the torpedoes, full speed ahead!” and his ships won the day.

President Franklin Delano Roosevelt, newly elected in the fall of 1932, facing the greatest economic depression in the history of America and speaking at his inauguration, called for bravery in the face of uncertainty, rallying our citizens to rebuild our country with a cry to courage:  “The only thing we have to fear, is fear itself!”

In January of 1960, President John Fitzgerald Kennedy, a decorated veteran who fought to defend American in the Second World War energized America with the words:  “Ask not what your country can do for you, ask what you can do for your country!”

We now find ourselves again in crisis. Though perhaps not quite so dire as those times cited above, still America is faced with a “government shutdown”, with the coming “debt crisis”, both of which are because  the Executive and Legislative branches of our national government cannot compromise and formulate a concerted and cohesive financial plan for the ongoing future of the United States of America.

Barack Obama – Leadership or Fear Mongering?

Facing the lack of funds necessary to continue to provide vast numbers of government services to our citizens, and the further uncertainly created as we approach the legal ceiling on our mounting national debt what does America’s leader, Barack Obama have to say? What words of courage, inspiration, and resolve does the President of the United States offer to the American people?

We are in trouble,” said Mr. Obama, speaking to CNBC’s John Harwood on the evening of October 3.

When Mr. Harwood made the point to Mr. Obama that Wall Street didn’t seem concerned about the ‘shutdown’ and asked whether that was the way they should be thinking, the response was:

No, I think they should be concerned”.

These words do not express confidence in America, do not exhibit the kind of resolve that Presidents Roosevelt and Kennedy expressed in their comments cited above, nor do they reflect the courage and determination shown by the heroic words and deeds of John Paul Jones and David Farragut.

No plan for compromise has been offered by President Obama to end the budget stand-off. In fact, in his brief public statement on September 30 just hours before the government shutdown he neither offered to work to formulate a compromise nor suggested that he would even be willing to accept any kind of compromise.

Is Mr. Obama trying to scare investors and refuse any compromise that might alleviate this crisis?

Could our President, the elected leader of our nation, actually be hoping that the stock market crashes, taking the hopes and dreams, retirement plans and college education funds of millions of Americans down with it?

Because…it might give him a political advantage?  It appears as if a number of financial analysts fear that to be the case.

On October 3, “Squawk on the Street,” CNBC co-anchor Simon Hobbs and senior economics reporter Steve Liesman pointed out the administration’s strategy of trying to scare the markets in order to sway opinion against Republicans. “They’re not scaring the market which is clearly their aim,” and went on to cite a Treasury Department report that makes the extreme claim that a default would result in “the next Great Recession.”

The next day, October 4, Jerry Castellini, co-founder and president of CastleArk Management, said on CNBC, “the administration would love for the markets to be down quite a bit right now to try to amplify their point that this is an area we shouldn’t be playing in and a spot that the markets don’t want to see us in.”

Perhaps part of the reason that this “government shutdown” isn’t as scary as the Obama administration would have us believe is that, in fact, 83% of the government is plowing on full speed ahead with nothing changed. Even the mass media and the Obama administration say that it is not essential government workers who have been sent home, and one could well make the argument that if government workers are not essential, then why do we have them at all!

What is scary is that instead of words of encouragement, a pledge of resolve, and an expression of confidence in the courage of America and the American people to face down this crisis like so many others in our past history, this President of the United States is telling us that we’re in trouble.

There are only two conclusions to be drawn.

The first is that Mr. Obama is truly afraid, and has no solution in sight.

The second is that he’s hoping that if the stock market plummets, it will panic enough people so that he’ll be able to brow beat the House of Representatives into surrendering to his demands.

If Mr. Obama is running out of courage, that is not a harbinger of good things to come.  If he is actually hoping for the sacrifice of the financial holdings of millions of Americans to achieve his own political ends then that is most definitely far worse, and can only be described as despicable.

drafting-declaration Franklin Adams Jefferson

Slouching towards Washington


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Turning and turning in the widening gyre

There is much chatter about the comings and goings of politicians in Washington D.C. The presidential races are watched with the utmost anticipation, and the media obsess over the bickering and scheming of hundreds of federal congressmen. These politicians, of course, have a great deal of power over our country and our lives, especially in this day and age.

However, standing in the shadows, in firm control of our economy and our wellbeing are the generally faceless controllers of the Federal Reserve. The Fed’s Chairman, currently Ben Bernanke, shows his face occasionally, issuing some incredibly obtuse statement about the state of the economy and his policy plans. Unfortunately, the average American cannot understand such statements and thus ignores them. This is the only sad pretense of transparency that we have come to expect from our central bank.

I am writing today to both underscore the extreme importance of this institution and to expose the increasing power being wielded by the bank. Not only does the Federal Reserve have inestimable power over our economy, but the woman who is generally expected to succeed Bernanke will certainly seek to continue expanding this control.

The Federal Reserve has been tasked with two ultimate responsibilities: inflation and employment. It seeks to both control inflation and to maximize employment through manipulation of the monetary supply. In pursuit of these goals, the Fed seeks to balance a precarious juggling act.

The Federal Reserve primarily pursues these goals by controlling interest rates on bank loans, with the purchase of bonds and other securities. Higher interest rates decrease inflation by reducing the amount of money brought into the economy out of bank reserves. A classic example of a high interest rate policy was the Fed’s policies in the late 1970s when interest rates were increased in order to combat rising inflation.

Currently interest rates are very low, ideally increasing employment under classic stimulus principles: more money in the economy boosts consumer spending and thus hiring. Unfortunately, the Fed cannot decrease interest rates below zero but still wants to pump more money into the economy. Instead, they have opted to pursue a policy of quantitative easing.

Under this policy, the bank pumps billions of dollars into the economy each year by purchasing long-term commercial assets from private banks. Predictably, this policy has two primary risks. First, it can lead to higher inflation. More money in circulation reduces the value of the currency, potentially leading to inflation, and the Fed’s quantitative easing pumps enormous amounts of money into the economy.

In addition, the Federal Reserve runs the risk of creating what is known as an asset bubble. These bubbles, as we have recently seen both with the housing and the internet markets, result from too much money being poured into the economy through credit, hence artificially inflating the productivity and value of the marketplace. The disastrous effects of these bubbles need not be explained, I am sure.

It is the Federal Reserve’s job to determine when to raise interest rates in order to prevent both inflation and asset bubbles. Failure to account for either possibility would have an incredible impact on common Americans who will find that their savings accounts have less real value due to increased inflation or who suffer from the sort of economic collapses that we saw in 2008. We are being forced to trust the judgment of bankers and politicians, whose motives and even identities are known to very few Americans. It is a wonder that the media has so little attention to spare on such matters.

The she-devil of Constitution Avenue

Paul Krugman, the former Enron consultant and current columnist for the New York Times, once ironically dubbed Janet Yellen the “she-devil of Constitution Avenue.” Krugman, with the same judgment he used to advocate the artificial housing bubble and predict the transient nature of the internet, assures us that inflation is not an issue and heralds Ms. Yellen for her extremely “dovish” beliefs concerning inflation. Calling her a dove simply suggests that she is less concerned about inflation than she is about restoring employment.[1] This means that if she becomes Chairman of the Federal Reserve, Yellen will be less likely to raise interest rates to fight inflation and artificial bubbles than many.

This predilection is particularly alarming given that Yellen is in large part responsible for the current quantitative easing policy of the Federal Reserve. Additionally, she was in charge of the Fed’s banks in San Francisco, one of the areas hardest hit by the collapse of the last bubble.

Her tendency towards increased government spending suggests that as Chairman Yellen will continue, if not expand, quantitative easing in order to restore full employment. Admittedly, Yellen does seem to be a very intelligent woman, so it stands to reason that we ought to consider whether she would have the good judgment to cut off the spigot should matters begin to spiral out of control. She has repeatedly stated that the government must spend more to bring our country out of the recession, getting further praise from Krugman by doing so. Furthermore, the Wall Street Journal reports that she has always pushed Bernanke into the current policy of quantitative easing.

Yellen was president of the San Francisco Federal Bank and, as the Cato Institute argues, she has defended the Fed’s role in regulating the disastrous bubble that hit the Western States in particular in 2008. A review of her 2010 Senate testimony shows that Yellen defends the role she played in trying to prevent this crisis. She states again and again that the bubble would have been prevented if the Fed had more power, ignoring any possible role that Fed interest rates and policies might have had on this crisis. While she may have been unable to stop this catastrophe, we must seriously ask whether she would consider the Federal Reserve’s role in another asset bubble given her refusal to do so during the mortgage crisis.

Let us put together the pieces. There is plenty of evidence to suggest that Yellen would aggressively pursue quantitative easing as Chairman of the Federal Reserve, hence increasing the risk of inflation or an asset bubble. When combined with her less than strong concern over inflation and her refusal to admit that the Fed’s monetary policy contributed to the housing crisis, her tendencies create a very frightening picture indeed.

A Constitutional Remedy

Predictably, the Constitution provides a very clear alternative to Federal Reserve and its increasing power. In 1791, Thomas Jefferson and Alexander Hamilton engaged in a fierce battle over the creation of the first National Bank. Jefferson argued vociferously that the creation of the bank was unconstitutional.

Hamilton, one of the strongest supporters of big government among our Founding Fathers, justified the bank as an implied power under the Interstate Commerce clause of the Constitution, as well as both the General Welfare[2] and Necessary and Proper clauses.[3] He, of course, ignored the fact that no such understanding of these phrases was accepted at the Constitutional Convention. In fact, an attempt to use simple punctuation to expand the General Welfare clause was resoundingly struck down by the Convention.

Thomas Jefferson, in a famous opinion on the Constitutionality of the bank, argued for a much more strict interpretation of the Constitution. His opinion is widely regarded as a crucial tenant of strict Constitutional constructionism, and I recommend reading it even outside of this specific subject matter.

First, Jefferson claimed that the Interstate Commerce clause argument holds no water, because the bank would explicitly impact intrastate commerce, just as our Federal Reserve does today.

Jefferson refuted the implied powers of the General Welfare clause by pointing out that the government only has the right to “lay taxes for that purpose,” rather than “to do anything they please to provide for the general welfare.”

Finally, he attacked the Necessary and Proper argument by pointing out that all the powers of the government can “be carried into execution without a bank. A bank is therefore not necessary, and consequently not authorized by this phrase.”

This is a powerful argument by one of the leaders in constitutional originalism. The existence of a national bank such as the Federal Reserve is as unconstitutional now as then, and for the same reasons. This fundamental discussion has been ignored, however, as we simply debate how much the Fed should pump money into the economy. We have strayed so far from the actual restrictions that the Constitution sets on the powers of a central bank that we would do well to bring the debate back to these fundamentals.

Even if this does not actually end the stranglehold of the Federal Reserve, it cannot help but reduce its influence by shifting the argument from the pragmatic policy decisions of the Fed to the fundamental discussion of whether it ought to even exist. Instead of arguing about whether it should assume more power, we should be arguing whether or not to give it any power at all.

Any liberal reader will be appalled by this notion. They will ask, “But what would we do without a central bank?” I will preemptively say two things on this subject. First, there was a long period of time in the United States where there was no central bank. In fact, one of the most highly regarded banking systems that America has experienced was the privately run and independent Suffolk banking system. This bank provided an alternative to central banking after Andrew Jackson destroyed the Second Bank of the United States, and it ensured market stability and sound currency in New England for almost two decades.

The Suffolk system was distinctly different from the Federal Reserve. It was intended to prevent the inflation of currency, which it did admirably. It is not just libertarians and Austrian economists that admire the Suffolk System. In fact, the Federal Reserve of Minneapolis published a paper analyzing the bank and its successes, eventually asking “is there a need for a government-sponsored central bank?”

Second, we suffer from the same sort of economic collapses that faced America before the Federal Reserve. Don’t take my word for it, though! Janet Yellen herself made that argument in a speech in early 2013. She began this speech on a humorous note, encouraging her audience to remember a well-known incident where a speculative bubble collapsed, leading to economic hardship. She was, however, not referring to 2008 but to 1907. It was not until 1913 that the Federal Reserve was created, in part due to the crisis of 1907, as she explains. Yellen proceeds to state “it is striking how many of the challenges of that era remain with us today.” Does it occur to her that perhaps the answer is not more regulation? Perhaps the Federal Reserve was not the answer to the crisis of 1907? Indeed, if it were the answer to that crisis, then it stands to reason that we would not encounter similar hardships today.


The Federal Reserve demonstrates incredible power which will only expand when Janet Yellen takes charge. How can we trust our economic livelihood to the decisions of a handful of academics and politicians who meet periodically in Washington? Long ago our government abandoned our Constitution, empowering a bank with incredible power over our lives. It is time to push back against the Fed and retake our rights and our freedoms.

[1] It is a commonly accepted fact that Yellen is a dove on monetary policy. Her apologists may attempt to argue otherwise, and I am happy to engage in that debate should any reader wish to.

[2] The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States

[3] [Congress shall have Power to] make all Laws which shall be necessary and proper for carrying into the Execution the foregoing Powers

 Statueof Freedom atop the Capital building smaller

Silliness from South America


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Ecuador’s President Rafael Correa today said that American exceptionalism is reminiscent of Nazism “before and during World War II.”

Correa added that the United Nation’s headquarters should eventually be moved from New York City:  “The headquarters of the organization is in the US and they finance their activities. This is outrageous and an example of a relationship the US established with developing countries in the form of subordination.”

You’ve gotta love it, he actually complains that we’re giving the UN too much money!

I have to say, moving the UN out of the US can’t happen soon enough to please me.  And on the issue of our financing the UN, I’d be more than happy (as I’m quite certain millions of other Americans would be as well) to see us reduce the amount we send the UN every year even BEFORE we kick them out let them move out of New York.

I sincerely hope that if and when Sr. Correa moves the UN out of NY (or before…) he’ll also be willing to move the major sources of funding somewhere other than the US. Considering that there are 198 members at present, the US is clearly paying way over our fair share of 1/198th of the UN budget with an annual contribution of 22% of the total. I think all Americans would be pleased to see some of the other 197 members step up closer to the financial plate.

After the US in annual UN funding come Japan (12.53%), Germany (8.018%), the United Kingdom (6.604%), and France (6.112%). Conspicuously absent from the top of the list are Russia (1.6%) , Saudi Arabia (0.8%) and China (3%). Ecuador, by the way, comes in lumped together with 165 other countries who contribute a grand total of 7.2%. The full list is quite illuminating.

I was going to say, “Put your {insert name of Ecuadorian currency} where your mouth is”…but I can’t, because their national currency is – wait for it! – the US dollar! How funny is that! He says we’re like the Nazis, and complains that we give too much funding to the UN, but his country uses the US$ as their national currency!

Really, Rafael, if you don’t like us, that’s ok, but maybe you should invest in a graphic artist, buy a printing press or two, and get your own national currency up and running before you start spitting on ours!


Obamacare – the View from California


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This article was first posted by American Thinker on September 29, 2013.

California, the so-called Golden State, has often been a national leader over the years.

Now, in the arena of national health care reform, California, with its Covered California (CoveredCA), the first state benefit exchange in the nation, claims to be leading the way in the creation of state health insurance exchanges or marketplaces.  These exchanges, created by the Patient Protection and Affordable Care Act of 2010, PPACA, the ACA, or Obamacare) will allow both individuals and small businesses with up to 50 employees to purchase qualified health care coverage.

The ACA requires that all states have operating exchanges by January 1, 2014 with plan launch dates three months earlier on October 1 to allow time for people to analyze, purchase and enroll in the program before the January 1 effective date.  Two alternative options are provided for the states to achieve this goal:  either create their own or default to a federally run exchange.

When the law was passed in March of 2010, estimates were that it was likely that of the 50 states, 40 or more would choose to create their own exchange, while the balance would default into federally run programs.  In fact, as of this date, the facts show precisely the opposite. Only 17 states have taken the path of doing it themselves, while 33 have decided to leave it up to the Feds.  (For a breakdown of which states have chosen which path, see page three here).

We are now only days away from the October 1 launch date on which CoveredCA has promised that plan rates and descriptions will be available for licensed and certified insurance agents to sell.

In the last three business days, I, as one who’s been involved in California’s health care industry for over 30 years, have spent nine hours in face-to-face seminars and two more hours in a CoveredCA sponsored webinar. I believe that a quick glimpse of some of the hard core realities of the Obamacare Health Insurance Exchanges would be of interest to my fellow Americans.

Sadly, as of now, there are zero plans with rates or benefits approved for sale by either of California’s two state insurance regulatory bureaucracies – the Department of Managed Health Care (DMHC) or the Department of Insurance (DOI).  Even if there were plans available, there’s no one to sell them because there are zero licensed and certified agents contracted with CoveredCA.

Yesterday I was invited to join in a webinar sponsored by one of the General Agencies (general agencies are essentially insurance plan distributors and are an integral part of the health care landscape) and CoveredCA itself.  During the presentation, Chris Patton, Vice President of the SHOP (Small Business Health Opportunities Program, the part of the exchange tasked with selling to small businesses) dodged a key question from the audience with the aplomb of an experienced politician.

Responding to the “elephant in the room” question of whether plan rates and benefits would be available for consumers to purchase and agents to sell as of the 10/1/2013 target launch date, Mr. Patton elaborated at some length that we should understand that with 13 carriers in the SHOP, each of whom was offering multiple plans, the regulators had a lot of work to do, and only a certain amount of time in which to complete it. He continued by saying that although he expected that plans and rates would be approved and announced by October 1, and that he had no reason at all to believe that they wouldn’t be, he hoped that everyone would remember the immense workload, understand that all parties were doing their best and trying very hard to achieve that goal.

Now I don’t know about you, but that sounds suspiciously like a “no” answer to me.

But let’s skip ahead to that time – whenever it comes – when CoveredCA starts selling plans.

The media is infested with glowing claims about how Obamacare will reduce medical plan costs, saving consumers thousands of dollars.  Just days ago on September 25, less than a week before the plans go on sale, the Department of Health and Human Services released a glowing report on premiums, pointing out how much lower costs will be than projected.

But, in the words of Forbes magazine, “the reality is starkly different.”

Assuming that the price and plan benefit structures of the plans which are eventually approved for sale by CoveredCA end up more or less as they were submitted to the regulators, a full and complete analysis of the 2014 plans vs. the 2013 plans will be very interesting.

Many analysts from all sectors are asking the same question: With the elimination of health underwriting (meaning that unhealthy buyers will pay the same premiums as healthy ones), the mandatory increase of benefits such as pediatric dental and vision care, as well as the mandatory inclusion of ten Essential Health Benefits in all plans, and finally the inclusion of a number of new fees and taxes, how can costs possibly go down?

It’s easy.

  • Find doctors who’ll work more cheaply
  • Restrict consumer choice so plan members can only go to those lower priced doctors
  • Degrade the benefits of those much ballyhooed “cheaper” plans.

To explore how insurance companies get doctors who’ll work more cheaply requires a brief explanation of provider networks, often called PPO (Preferred Provider Option) or HMO (Health Maintenance Organization) plans.

The way both of these types of networks operate is that the insurers get together with doctors and negotiate prices.  Those doctors who agree to give the insurer lower prices, or perhaps who capitulate to the insurer’s demands for lower prices, depending on one’s perspective, are the ones who get on the network.

Both PPOs and HMOs have become the standard in the medical plan world over the past 25 to 30 years.  Most insurance carriers have developed comprehensive, widespread networks that include many outstanding medical practitioners, including such famous medical centers as Stanford, Cedars-Sinai, UCLA, UCSF and many more.

But which hospitals and doctors do you think we’ll see on the new restricted, leaner, limited networks?  The famous ones who have six-week waiting lists to get seen?  Don’t bet on it.

The Los Angeles Times wrote in May, “People who want UCLA Medical Center and its doctors in their health plan network next year, for instance, may have only one choice in California’s exchange: Anthem Blue Cross. “  But less than a month later Anthem Blue Cross pulled out of the California SHOP.  Let’s see, one minus one equals zero, right?

In the same article Blue Shield admitted that its slimmed-down CoveredCA members would see only 37% of the doctors who make up Shield’s regular, long-established network.

Health Net, the only other state-wide carrier with a variable size network, a network that the insurer can enlarge or reduce at will by modifying the requirements for participating doctors, may have as few as 33% of their regular network providers available to CoveredCA members in many geographic areas.  Health Net explains that to the currently uninsured, price is a key factor, so it built a narrow and hence less expensive network to serve that target market.

That’s fine, shave your costs and restrict your networks to help push the prices down – but then don’t use those plans to tell us that Obamacare Exchanges are reducing costs.

Interestingly, Kaiser, which historically has been the lowest cost plan provider in California, will very likely lose that distinction in the Exchange. Why? Because Kaiser doesn’t have a variable size network; it has its own closed network, and the size of that network is fixed. If you’re on a Kaiser plan, you have to go to a Kaiser doctor in a Kaiser facility or you won’t be treated.  And Kaiser has no way to further shrink its own proprietary network. Kaiser is Kaiser, end of story.

As to my comment about degrading plan benefits, during the seminar which I attended today, one of a series of many nationwide events held by an industry leading insurer, there was a PowerPoint slide which compared one of their 2013 current plans with an “equivalent” 2014 plan (which they’re hoping the California bureaucracy will soon approve).

The slide showed a 2013 $500 deductible, $30 office visit copay plan with what was offered as an equivalent 2014 plan, a $1500 deductible, $20 office visit copay plan.  Remember, the deductible is that amount that must come out of your pocket before the insurance company starts paying the big bills, like surgery, hospitalization, MRIs, CT scans, lab tests, and so on.

Seriously?  Since when does a 2013 deductible of $500 become equivalent to a $1500 deductible plan in 2014?  That’s 300% inflation – not equivalent! If you’re comparing costs between those two plans, it’s not hard to see how you’d think the 2014 plan was cheaper, but only until you have a claim.

I will leave you with two critical questions to ponder:

1 – If California, the alleged national leader, is this far behind where they promised to be and where they should be to have a viable, functional product available by October 1, how far behind the deadline are all the rest of the states and the federal government?

2 – If CoveredCA is this far over their heads in getting ready to sell these brand new plans to millions of people all over California, how ready are they going to be to administer, service, and satisfy those millions of people as customers once they sign up for coverage?

I, for one, have no great interest in becoming one of the first guinea pigs in the beta testing of any of the Obamacare Medical Exchange upcoming product launches. Do you?


The Problem with Internationalism


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The recent debate over intervention in Syria demands a broader discussion of the United States’ role in the international community. While the notion of an imminent military strike seems to have passed for now, we should not let this incident slide into obscurity. It is time to critically evaluate American foreign policy and to determine what role our nation must have as a part of the international community.

For years we have been considered the “world’s policemen”, a role that is untenable and often promotes the interests of foreign countries over our own. This role has a lengthy history, but it is important to examine how our foreign entanglements have changed over the last couple of decades. During the Cold War, we could not police the entire world, but we were tasked with preserving stability in what was then referred to as the Free World, with the Soviets enforcing stability on their side of the Iron Curtain. During the Cold War, we actively worked to promote our interests throughout the world. We supported regimes that opened trade with the United States, and we suppressed rebellions that would disrupt the stability of allied countries and crucial regions.

The end of the Cold War saw a collapse in this international balance, with the former Soviet states incapable of enforcing the stability to which the Eastern world had grown accustomed. In the intervening two decades, the United States has been called in to act as an enforcer of international law. Time and time again, we intervene in foreign affairs due to human rights violations or as part of a UN or NATO task force. The crucial difference being that rather than engaging in competition with our political and economic enemies we are enforcing the dictates of international conventions and organizations. We have shifted from pursuing foreign policy concerns that further our interests to channeling our resources into matters which are necessarily to the benefit of our citizenry. It is this change from national concerns to international concerns that must be re-evaluated.

The duty of a national government is to promote the interests of the nation first and foremost. The Founding Fathers understood this, with political ideals derived from the philosophical tradition of social contract theory. This theory held that individuals came out of the state of nature (a state of anarchy before political institutions) in order to enjoy certain benefits that they had lacked in the state of nature. John Locke was arguably the most influential of these political philosophers on the founding of America, and he claimed that individuals join together in governments in order to protect their natural rights and allow for some impartial judge to adjudicate disputes between members of this government.

This philosophical tradition is relevant to the concerns of American foreign policy as it designates the purpose of a government, at least a government that the Founding Fathers hoped to create. While clearly nuanced, the purpose of a government, under this theory, is the protection of the rights of its citizens and the adjudication of their differences within the civil society. It is the promotion of the members of the social contract that concerns the government. That which does not advance their concerns by protecting their rights and property is not the purpose of a government as the United States was envisioned.

In this philosophical context, I will call upon George Washington’s famous farewell address of 1796. This speech is often quoted as an endorsement of isolationism, but it is more complex than that. “It is our true policy to steer clear of permanent alliances with any portion of the foreign world; so far, I mean, as we are now at liberty to do it; for let me not be understood as capable of patronizing infidelity to existing engagements. I hold the maxim no less applicable to public than to private affairs, that honesty is always the best policy. I repeat it, therefore, let those engagements be observed in their genuine sense. But, in my opinion, it is unnecessary and would be unwise to extend them.”

The salient feature of Mr. Washington’s speech is its warning against the idea of entangling alliances. In the 1790s, war was brewing between France and England, and Washington was afraid that an alliance with either one would drag the fledgling nation into war and destruction. Today, we do not primarily fear being brought into a war where we will be overpowered and crushed, and we certainly are not overshadowed militarily by our neighbors. The dangers of entangling alliances, however, remain as they can obligate the United States to enter conflicts which are of no benefit to its citizenry.

It is generally accepted that a strike on Syria does not promote our national interests. We have been reluctant to even arm the opposition, in fears that the widespread conflict will spread to other regions. The idea that conflict in Syria could spill even more into Israel and Turkey, or even into Iran, is a terrible specter that has given American policy makers pause time and time again (cite). Furthermore, it seems clear that, regardless of which side wins the Syrian civil war, we will not find an ally there. Assad will continue to work with Russia, China, and Iran, which certainly would not promote our interests. If the rebels succeed, we face the prospect of a hardline Muslim regime. Egypt’s brief rule by the Muslim Brotherhood certainly did not further United States interests, suggesting that a similar regime in Syria would be equally inhospitable. The destruction of Assad’s regime, moreover, would promote instability in the country, just as Mubarak and Gaddafi’s overthrows did.

Instead the impetus for a strike is based on the so-called “red line” advocated by President Obama. In 2012, Obama declared that he would intervene in Syria if Assad were to use chemical weapons. When Assad eventually did use chemical weapons, Obama announced that we would strike Syria and destroy their capability to use such tactics. A hailstorm of criticism against Obama harangued him for not consulting Congress before establishing this “red line” as it forced our foreign policy credibility to depend on a unilateral policy statement by the president. Obama responded to this criticism claiming that it was not his red line, but instead it was a line drawn by the international community. Despite the lack of UN support for the strike, Obama claimed that the international community had historically condemned and forbidden the use of chemical weapons as enshrined in the Chemical Weapons Convention. A failure to enforce these laws, he said, undermines not just his credibility but the credibility of these international agreements.

Let us take Obama at his word for a moment. There is certainly a lot of international legal precedent against the use of chemical weapons. Obama’s claim that there is an international red line is accurate, but why does that mean that America must enforce those laws? This is an even more pressing question given that the UN itself is not supportive of a strike. How is the enforcement of international law in this case important enough to outweigh all the potential negatives of a strike? Our president’s desire to spend American taxpayer dollars and jeopardize American national security and economic interests in such a manner sets this international law over the pursuit of American interests. How is this the proper function of our government?

Now, of course, I must be charitable towards President Obama. He is our president after all. There are plenty of arguments for why a strike on Syria is necessary for American interests. While I explain these arguments, please keep President Washington’s warning in mind.

The President of the United States did set an ultimatum concerning the use of weapons of mass destruction. If he chose not to enforce this declaration, it would undermine the credibility of the United States on international matters. South Korea has expressed fear that North Korea would not be deterred by American threats of violence. This is a problem similar to that which faced President Eisenhower when the Soviet Union invaded Hungary. He had pursued a foreign policy which asserted that the United States would attack the Soviets if they attempted to expand in such a fashion. When he did not uphold this threat, it undermined our credibility and foreign policy strategy. This is a very real problem in today’s age, as we attempt to enforce global stability and support our allies across the globe.

So here is the crucial problem. We have become obligated, based on our extensive involvement in the international community, to advance a foreign policy agenda that does not promote our interests. It does not promote our economic ties, nor does it advance allied interests in Syria, nor does it promote stability in the region, yet it is necessary to strengthen our credibility given our traditional role of enforcing international law. We have entangled ourselves so hopelessly in the international world, so completely embraced this internationalist mentality, that our government is compelled to act against our interests.

This dilemma does not mean that the United States should pursue a policy of isolationism. There are plenty of ways in which our foreign involvement does benefit the United States. We promote economic growth in countries that either manufacture goods for export or purchase American products, and we ensure stability in regions that are crucial to our national security and economic interests. The extent of this involvement, however, should be a pragmatic one. The pursuit of international law and order, as we can see with Syria, is not a pursuit in and of itself that benefits the United States. We must be aware, however, that our leaders should be looking out for our interests, not those of the UN Security Council.

The debate over Syria should be a wakeup call to America. It teaches us that our foreign entanglements have reached such a point where we can no longer be the sole judges of our national policy. By refusing foreign involvement in Syria, we can start a precedent that the United States is no longer the world’s policeman. We must demand that our leaders uphold our laws and our interests, not those of the international community.

Thomas Jefferson painting 518

Challenging the New Aristocracy


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The following was first published by American Thinker on their website, September 19, 2013.

Do we, as Americans, want political office in the United States to be up for sale to the highest bidder?

A “yes” answer to this question may come to define our nation’s leadership if we don’t all unite to stand forth and give a resounding shout of “NO!” that resonates from sea to shining sea.

Thomas Jefferson has always been regarded as an honest, ethical leader, even by his opponents.  What would Thomas Jefferson do if he were asked this question? He gives us at least a partial answer in his draft of “A Bill for the More General Diffusion of Knowledge” (1779):

“For promoting the public happiness those persons whom nature has endowed with genius and virtue should be able to guard the sacred deposit of the rights and liberties of their fellow citizens, and they should be called to that charge without regard to wealth, birth or any other accidental condition or circumstance.”  (emphasis mine)

We all surely agree that given a choice, we would want our leadership to be endowed with both “genius and virtue.”  I ask you:  “Do those qualities strike you as defining the majority of our current and recent leaders?”

A specific person-by-person enumeration would accomplish little, but with almost no effort one can call to mind politicians who have resigned their office for sexual misadventures such as “sexting,” and for accepting bribes and illegal use of campaign contributions.

Even worse, presidential candidates commonly make campaign promises and statements, only to renege once they’ve changed their residence to the White House.

But now let us move on to the part of Mr. Jefferson’s statement that is easier to remedy, for neither genius nor virtue can be easily legislated.

“They should be called to that charge without regard to wealth,” he said in the above referenced bill. He later expanded upon the same theme in his Autobiography: “An aristocracy of wealth is of more harm and danger than benefit to society.”

A very interesting phrase – “An Aristocracy of Wealth.”

With that in mind, let’s take a quick look at the net worth of ten prominent 21st century American political figures:   (Sources are here and here.  Also note that married couples reflect their joint assets though both spouses are listed only if both are political figures.)


Michael Bloomberg (Governor) $19.5 billion
John Kerry (former Senator, 2004 Presidential nominee, current Secretary of State) $394 million
Arnold Schwarzenegger (former Governor) $300 million
Mitt Romney (former Governor, 2012 Presidential nominee) $250 million
Michael McCall (US Congressman) $290 million
Darrell Issa   (US Congressman) $140 million
Bill and Hillary Clinton (Bill – former President, former Governor; Hillary – former Senator, former Secretary of State) $101 million
Caroline Kennedy (US Ambassador to Japan) $100 million
Jay Rockefeller (US Senator) $ 81 million
Mark Warner (US Senator) $ 76 million


Obviously these figures fluctuate from year to year. For example, when John Kerry ran for President, his net worth was variously estimated at between $900 million and $3.2 billion.

The brief list above ignores such luminaries as George W. Bush, Diane Feinstein, Barack Obama, Nancy Pelosi, and many others. It’s nearly impossible to name all of those who fall into the lesser category of from $10 million to $50 million in net worth.

The resources provided by this much wealth are immense! How can anyone even begin to compete against a man like Mr. Bloomberg, with a net worth of nearly $20 billion, unless it might be Donald Trump, who proclaims his net worth as over $10 billion and has said he’ll spend what it takes if he decides to run for President.

Has America now reached the point where you must be rich to be a leader?  That’s a question we’ve been asking ourselves for years, but unfortunately it seems that the answer is becoming a more resounding “YES!” every year.

Isn’t it time to consider changing the mechanics of campaign funding following the spending explosion in 2012 when the two major candidates combined to spend in excess of $2 billion on their presidential campaign?

You may now be asking, “Hasn’t anyone ever thought about this before?”  The answer is, “Of course they have.”

In 1971 Congress passed the Federal Election Campaign Act and the Revenue Act, which established the Presidential Campaign Election Fund (PECF) and allowed taxpayers to designate $1 (later increased to $3) of their tax dollars to finance presidential elections.

Keep in mind, this campaign reform law only addressed presidential elections.  Neither US senatorial or congressional campaigns, nor any campaigns at the state or local level were included; just the race for the White House.  But we have to start somewhere, and the logical place to start is the Presidency, since it’s the highest office in the nation.

A key point here is that by checking the box, you don’t pay more in taxes, or reduce your tax refund.  You simply tell the government that they MUST take $3 of your taxes, and put those funds into the PCEF.

2012 Form 1040

In the beginning, right after the fund was established, it was very popular, but over the years, perhaps because of lack of understanding or lack of publicity, the contributions have declined significantly, as the following chart reveals:

% of US income tax returns directing the government to deposit tax income into the PECF





















A very cynical person might suggest that the federal government would prefer that fewer Americans select this option because every dollar that goes into the PECF is one dollar less that the Feds have to spend in other areas.  This writer, of course, is not that cynical.

The catch to accepting federal funding is that it imposes a limit on how much each candidate could spend. So if there’s not enough money in the pot to reasonably fund a campaign, or if the candidate thinks he or she can raise more campaign funds on his or her own, there’s a compelling reason to decline the PECF support.

Nevertheless, the concept created in 1971 performed excellently in every presidential election campaign from 1976 through 2004, with every single qualifying candidate accepting the federal funds and adhering to the required maximum spending limit. Every single one!

Sadly, the system broke down in 2008, for the first time in history, when one of the two major party candidates declined to accept the federal funds, choosing to refuse the PECF support and hence escape the campaign spending limits created by the Federal Election Campaign Act reform 37 years earlier.  Four years later, in 2012, both major party candidates declined federal funds.

This doesn’t mean we need a radical revision of our entire campaign system.  What we’re suggesting is a small adjustment which will have significant positive ramifications in future elections.

The problem facing America today is that there is such an incredible amount of money out there – corporate funds, PAC funds, union funds, and what seems like “pocket money” from billionaires – that a pittance like the less than $100 million offered by the PECF in 2012 just doesn’t cut it.

But there is a fix.  If we publicize the PECF check off box on our tax returns we could almost certainly increase the funding for candidates so significantly that the system would once again function as intended.  It would give the lesser known people with “genius and virtue” a real chance to compete.

Let’s look at the numbers:

In the four-year period from 2009 to 2012, the average check off percentage was 6.5% for taxpayers, which created a total influx into the PECF of $188.5 million over the four years.

If we could get the contribution back to the approximately 20% level that it was during the first 20 years of the PECF, that $188.5 million could become $582 million!  At the 25% level that it averaged for the first 10 years after reform, the pot becomes over $742 million.

Of course, the solution isn’t quite that simple.  Part of the PECF goes to to primary participants, there’s a matching formula involved, and the current spending limit might need to be addressed.  But with three to four times the resources available to help the candidates out on the campaign trail, we’d definitely be taking a big step in the right direction.

It is probably unlikely that Americans would raise the PECF to where it would surpass the resources of the multiple PACs, unions, and media giants, and even if it did, this would not eliminate PAC spending. PAC spending is not legally a campaign contribution, but almost surely with increased publicity and a strong bipartisan effort we could push the PECF dollars up to where less financially endowed candidates would be able to enter the fray, make themselves heard, and have an excellent chance to reach the magical debate platform where the voters of the nation could examine their qualifications as serious candidates.

We need to change the current paradigm, and the revival of the PCEF is an excellent way – perhaps the only possible way – to continue to make political office accessible to Americans who aren’t extremely wealthy.

Clearly this is not a complete and total solution to the problems we face, but it would be a start, a way to begin to level the playing field.  We must wrest control of America from those of well-nigh unlimited wealth or it won’t be too long before we see political offices up for sale on eBay.

Thomas Jefferson, who distrusted the aristocracy of wealth, did believe in an aristocracy of a different kind, as described in his letter to John Adams, October 28, 1813:

“I agree with you that there is a natural aristocracy among men. The grounds of this are virtue and talents. [This] natural aristocracy [is] the most precious gift of nature for the …government of society.”

Jefferson Memorial Statue 518

War on the Coast of the Mediterranean?


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On the night of February 16, 1804, Lieutenant Stephen Decatur led a small force of U.S. Marines on board a small captured Tripolitan vessel re-named the USS Intrepid close enough to the USS Philadelphia to board her. Under Decatur’s leadership, the Marines stormed the ship and overpowered the pirates to take control. With fire support from  American warships, the Marines then set fire to the Philadelphia, destroying her in order to prevent her future use by the enemy. British Admiral Horatio Nelson, one of the all time greatest heroes of the British navy, reportedly called this “the most bold and daring act of the age.”

Did the United States undertake this campaign on its own?  Did Congress approve of President Jefferson’s deployment of US naval forces?

Emphatically not!  While Congress never made a formal declaration of war, they did authorize President Jefferson to issue orders to the commanders of American ships-of-war to seize all vessels and goods of the Pasha of Tripoli as well as “to cause to be done all such other acts of precaution or hostility as the state of war will justify.”

As allies, the Americans squadron joined a Swedish flotilla under Rudolf Cederström in blockading Tripoli, the Swedes having been at war with the Tripolitans since 1800.  US forces were also aided by King Francis of the Kingdom of the Two Sicilies who supplied the Americans with manpower, craftsmen, supplies, gunboats, mortar boats, and the ports of Messina, Syracuse and Palermo to launch the offensive against Tripoli.

In the painting shown here, the small boat in the near left corner is the Intrepid carrying the escaping Marine raiders away from the flaming Philadelphia.



Leading the Way?


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California, the Golden State, named incidentally for the state flower, the Golden Poppy, not for the veins of the shiny metal that engendered the Gold Rush of the mid 1800’s, has often been a national leader in many ways over the years.

Now, in the arena of national health care reform, California with its Covered California (CoveredCA), the first state benefit exchange in the nation, is leading the way in the creation of state health insurance exchanges or marketplaces. These exchanges, created by the Patient Protection and Affordable Care Act of 2010 (PPACA, the ACA, or Obamacare) will allow both individuals and small businesses with up to 100 employees to purchase qualified health care coverage.

The ACA requires that all states have operating exchanges by January 1, 2014, and provides two alternative options for the states to do so:  either create their own, or default to a federally run exchange.

Initially when the law was passed in March of 2010, estimates were that it was likely that of the 50 states, 40 or more would choose to create their own exchange, while the balance would default into federally run programs.  In fact, as of this date, the facts show precisely the opposite. Only 17 states have taken the path of doing it themselves, while 33 have decided to leave it up to the feds.  (For a breakdown of which states have chosen which path, see page three here).

In May, CoveredCA made three significant announcements.

First, they announced the health insurance carriers that would be offering plans in the exchange, though several major national carriers which have been offering plans in California for years were conspicuously absent from the list: Aetna, CIGNA, and United Healthcare.  Anthem Blue Cross, the largest non-Kaiser provider of health plans in California subsequently joined those three as a non-participant, leaving only three major insurers in the Small Business exchange: Kaiser, Blue Shield, and Health Net.

Second, CoveredCA provided a comparison chart showing plan benefits and costs for two examples, a 25 year old and a 40 year old, and promised to release full details for all plans and their respective costs in June.

Third and last, CoveredCA confirmed that only licensed insurance agents would be able to actually sell these plans, and that an additional certification would be required on top of an active insurance license to do so. Planning, they said, was underway for the certification requirements, process and completion protocols, and the required classes would be available no later than early August.

At this point the timeframe was beginning to look a little tight, since the plans are scheduled to go on sale as of October 1, 2013 for a January 1 effective date.

June and July passed with no announcement of complete plan and cost details. The explanation given was that the release had been delayed until August due to “rate concerns.”

In early August, CoveredCA released a statewide rate summary reflecting costs for four sample plans (see pages 14 & 15 here), but nothing more.  Since that time, nothing more has been heard about rates or benefits.

Within days it was also announced that agents should pre-register for the certification classes.   August 19 was announced as the date on which agents would be able to register with CoveredCA and sign up for those new classes.

Unfortunately, when August 19 dawned the massive outpouring of agents trying to sign up for classes crashed the CoveredCA website, and few if any agents were able to get in without hours of hitting their web browser’s refresh button.  It was then discovered that in spite of previous assurances that the pre-registration would expedite the actual registration process for certification classes, it did not. Instead, all agents were required to redo their registration and wait for that registration to be approved before being able to actually sign up for certification classes.  To date – nearly three weeks later –  the vast majority of California agents are still reporting their registration process as “pending”.

With less than three weeks to go before the product goes on sale, rates and plan benefits are still unknown.

The bottom line:  CoveredCA, the self-proclaimed leader in the implementation of the ACA’s state benefit exchange sweepstakes has made little or no progress on the three key steps required to bring their product to consumers:

1 – Providing sufficient numbers of certified agents to help consumers buy the new plans

2 – Telling consumers and agents alike what the various benefit plans and plan options will actually provide in terms of benefits and coverage, and

3 – Letting everyone involved know the costs of the plans and how those costs will vary between multiple plan options.

We, as interested observers and potential clients, have two critical questions to pose:

1 – If California, the national leader, is this far behind where they promised to be and where they should be to have a viable, functional product available by October 1, how far behind the deadline are all the rest of the states and the federal government?

2 – If they’re this far over their heads in getting ready to sell these brand new plans to millions of people all over California, how ready are they going to be to administer, service, and satisfy those millions of people as customers once they sign up for coverage?

I, for one, have no great interest in becoming one of the guinea pigs in the beta testing of CoveredCA’s upcoming product launch. Do you?

california geographical features

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