Monthly Archives: March 2013

Obamacare, Again

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Here’s another reason why the fight to repeal Obamacare must be continued and driven to a successful conclusion.

The GAO’s report, at the link, opens with this abstract and graph [emphasis added]:

The effect of the Patient Protection and Affordable Care Act (PPACA), enacted in March 2010, on the long-term fiscal outlook depends largely on whether elements in PPACA designed to control cost growth are sustained.  As shown in the figure below, there was notable improvement in the longer-term outlook after the enactment of PPACA under GAO’s Fall 2010 Baseline Extended simulation, which assumes both the expansion of health care coverage and the full implementation and effectiveness of the cost-containment provisions over the entire 75-year simulation period.  However, the federal budget remains on an unsustainable path.  Further, questions about the implementation and sustainability of these provisions have been raised by the Centers for Medicare & Medicaid Services’ Office of the Actuary and others, due in part to challenges in sustaining increased health care productivity.  The Fall 2010 Alternative simulation assumed cost containment mechanisms specified in PPACA were phased out over time while the additional costs associated with expanding federal health care coverage remained.  Under these assumptions, the long-term outlook worsened slightly compared to the pre-PPACA January 2010 simulation.

Those “challenges” to sustaining productivity include keeping doctors, hospitals, et al., in the field under the draconian controls Obamacare imposes on them.  The “phase-out” of cost controls will have been driven by the need to…relax…those controls in order to sustain even a level of performance commensurate with the British failed NHS.  Absent those controls, national debt growth is no better than without Obamacare.

At best, Obamacare does nothing to our finances.  However, the GAO also provides this:

Under the Fall 2012 Alternative simulation, spending for Medicare, Medicaid, CHIP, and federal exchange subsidies almost doubles as a share of GDP by 2035.

That 2012 Alternative is from Senator Jeff Sessions’ (R, AL) request that GAO  re-do their simulations without the administration’s artificial assumptions, eliminating, for instance, the administration’s cynical assumption requirement that the GAO’s original simulation use Obamacare’s initial 10 years—which included only 6 years of costs—as their start point.

The GAO report also has this:

[A]s [the] figure shows, the primary deficit under our Alternative simulation [Sessions’ removed artificial assumptions] increased by 0.7 percent of GDP during this time period [the 75 years of the simulation], due largely to increased spending on Medicaid, CHIP, and exchange subsidies.

That increase works out to over $6 trillion more down the sewer, courtesy of Obamacare.

The US Flag Is Litter?

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An Alabama home owners association thinks so.  This is an image of the letter sent to residents of a condo unit (the unit is owned by one of the resident’s parents).

In case it’s hard to read in this post, the typed part of the letter reads

Resident,
It has come to our attention that you have items in plain sight that are not to be visible from the parking lot by rules and guidelines stated in the home owners association bylaws.  Please remove the following listed item(s) as soon as possible to keep the community as tidy as possible.

The hand written part reads

Your flag attached to the stairs has to be removed ASAP!

When the recipients of this clean-up letter posted it on a number of veteran advocacy Facebook pages, the resulting uproar included a flood of communications to the home owners association president and condo property manager, Carol Coffey, objecting vociferously to the demand and to the implication that the American flag is just litter to be swept away.

In fact, such association bylaws that ban the US flag from public display on (condo owners’, for instance) private property are a violation of Federal law [emphasis in the original; a copy of the law can be seen here or here]:

A condominium association, cooperative association, or residential real estate management association may not adopt or enforce any policy, or enter into any agreement, that would restrict or prevent a member of the association from displaying the flag of the United States on residential property within the association with respect to which such member has a separate ownership interest or a right to exclusive possession or use.

Coffey had this to say to justify her clean-up letter:

I served in Afghanistan, I served in Iraq, and I served in Kuwait.  I am not anti-veteran, and I am not a communist[.]

And

In order to maintain the integrity of that asset [the condominium complex], we have certain rules because people could put anything out here if we let them.

Because, she says, the association bylaws are in place to maintain property value, and naturally, the American flag is just any old thing, and it depresses property values.  Coffey also claimed that she realizes there are laws that protect the right to fly the American flag, but said those are for private property and this condo was not private property, because the condos are owned by a community of people—then she said that the “community of people” who own this particular condo consists of the parents of one of the residents, as noted above.

Coffey had this whine, also:

I think they are persecuting us without knowing all the facts.  And here’s one thing that really bothers me…this person got the letter from our management team and instead of coming to the board and expressing his concern, he went and posted something on two or three veteran’s sites without all the information and without us knowing anything about it, and now we’re being threatened—that’s not right.

That’s valid as far as it goes; she shouldn’t be getting threatened.  But.  In most (all?) other legal matters, a fundamental doctrine is that ignorance of the law is no excuse.  And she’s already said she knew the law; it wasn’t a matter of her not “knowing anything about it.”  She sent her clean-up letter anyway.

Since she already knew her letter was…invalid…it’s also hard to see what good spending time protesting to her about her letter would have done, especially since that time would have violated her ASAP demand.

The right answer is to stop “considering” waivers, but to correct her homeowners association bylaws so as both to not conflict with Federal law and separately to recognize that our flag, in its own right, is a proper item to display.

A Thought on Defined Benefits vs Defined Contributions

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The Wall Street Journal described some of the problems with defined benefit plans—pensions.

When United Parcel Service Inc said last month that it was taking a noncash charge of $3 billion tied to its pension plan, the package-delivery giant blamed what might seem like an unrelated event: the downgrade last summer of several big banks by Moody’s Investors Service.

But the connection between the two incidents illustrates the complexities of calculating pension liabilities—and how little power companies have in keeping them under control.

UPS is typical, though, not at all unusual, in the problems they’re encountering with their pension plan:

Across America’s business landscape, the gap between the amount that companies expect to owe retirees and what they have on hand to pay them was an estimated $347 billion at the end of 2012.  That is better than the $386 billion gap recorded at the end of 2011, but the two years represent the worst deficits ever, according to JP Morgan Asset Management.
…
A big source of the problem: persistently low interest rates, set largely by the Federal Reserve.

I’ve written about the impact of those artificially low rates here and here.

There are additional major factors in arming this defined benefit bomb.

Putting a value on a pension liability is tricky business. Benefits for individual workers typically are based on their pay and years of service.  A company must also take into account how long retirees are likely to live.

And

Pension liabilities change over time as employees enter and leave a pension plan [including]…the fact that people are living longer.

And

For financial-reporting purposes, companies use a so-called discount rate to calculate the present value of payments they expect to make over the life of their plan.

The discount rate serves as a proxy for the hypothetical interest rate that an insurance company would expect on a bond today to fund a company’s future pension payments.  The lower the discount rate, the greater the company’s pension liabilities.

Boeing’s discount rate, for example, fell to 3.8% last year from 6.2% in 2007.  The aircraft manufacturer said in a securities filing that a 0.25-percentage-point decrease in its discount rate would add $3.1 billion to its projected pension obligations.

That discount rate falls out of those artificially depressed interest rates the Federal Reserve Bank is imposing on our economy.  And that, at the indicated drop in the discount rate works out to a nearly $30 billion increase in Boeing’s defined benefit—pension—liability over those intervening half-dozen years.

Here’s how Moody’s (entirely appropriate) bank downgrade enters into all of this:

Moody’s decision last summer to lower the credit rating of big banks hurt UPS and other companies by booting those banks out of the calculation [because those banks no longer were “safe” enough to have their rates included in the suite of rates used to estimate a discount rate].   And because bonds issued by some of those banks carried higher yields than other bonds used in the calculation, UPS’s discount rate fell 1.20 percentage points.

On the bright side, though, the WSJ article at the link suggests that

…just as falling interest rates have created a massive hole in pension funding, pension plans could quickly recover if interest rates started to climb.

This is a chimera, however.  When the Fed’s already long-term artificially suppressed interest rates are coupled with its massive money printing operation of the last few years, those interest rates will rise, but sharply, in an environment of explosive inflation.  All those dollars that will be paid out to (fixed income) retirees from their nominally recovered defined benefit plans will be worthless as prices those retirees pay with their dollars rise dramatically from that inflation.

Converting to defined contribution plans, like 401(k)s, removes all of these uncertainties from the companies’ liabilities—strengthening them, making them stronger competitors in the market, more stable employers, and so on.  In addition to this, a company’s failure to plan accurately, to fund appropriately its defined benefit plan given that planning, or just to avoid bad luck severely impacts all of its employees (its future retirees) and all of its current retirees.

In contrast, placing these retirement plans into defined contribution plans will let each employee make his own decisions about funding what is now his plan (rather than his employer’s catchall plan), how he wants to accumulate retirement savings, and all in accordance with his own goals and imperatives.  He can tailor his plan to his needs and desires, rather than being dependent on a plan that his employer must drive from a company liability perspective more than from a good for the employee perspective.

Also, should an individual employee fail to plan accurately, to fund appropriately his retirement plan given that planning, or just to avoid bad luck, he only impacts himself and a very few others.  The damage from failure of an individual’s defined contribution plan is enormously circumscribed compared to the damage from failure of a defined benefit plan.

Moreover, an American citizen isn’t as mind-numbingly stupid as our Progressive objectors to defined contribution plans make him out to be.  He’s at least as capable as a company—or a government—in making his own decisions about his future.

Score One for the Other Part of the 1st Amendment

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The Wall Street Journal’s Law Blog describes a victory for religious freedom.  In a case about which I first wrote just after its inception, a gang known as Freedom From Religion Foundation sued the village of Warren, MI, for having the temerity to put up a Christmas display without permitting FFRF to put up a sign next to it announcing that religion is “myth and superstition that hardens hearts and enslaves minds.”

First, Mayor James Fouts told them to take a hike, followed by their suit:

If you requested permission to put up a sandwich board saying that there is no Santa Claus, you would be met with the same response.  Santa Claus lives in the minds and hearts of many millions of children.  The belief of God and religion lives in the hearts and minds of hundreds of millions of people and is as much a part of the fabric of America, as the belief in democracy and freedom….

Your non-religion is not a recognized religion.  Please don’t hide behind the cloak of non-religion as an excuse to abuse other recognized religions.

Then a Michigan district court told these folks to take a hike.

Then the 6th Circuit told this…crowd…to take a hike.  On the matter of Warren’s alleged favoring of the religious over the secular, they had this:

That is not true even on its own terms.  All but one of the objects in the holiday display are nonreligious.  Ribbons, ornaments, reindeer, a lighted tree, wreaths, snowmen, a mailbox for Santa, elves, wrapped gift boxes, nutcrackers, poinsettias, candy canes, a “Winter Welcome” sign—all of them, all that is but the nativity scene—are secular…

A city does not run afoul of the Establishment Clause by including a creche in a holiday display that contains secular and religious symbols.

On the matter of the “Winter Welcome” greeting in particular, the 6th expanded with this [emphasis added]:

When one neighbor greets another in mid-December with “Happy Holidays,” it is the rare person who hears “Happy Holy Days.”  What was once the most religious of invocations has become one of the most faith-neutral, even secular.  One indeed can fairly wonder who has co-opted whom over time with these displays and words.  But that is a matter for another day.

On the gang’s bellyache that Fouts’ letter was itself some sort of cynical violation, the 6th had this:

These are not the words of someone trying to establish any one religion or religion in general; they are the words of someone trying to explain the common sense risks of disparaging faith-based and secular symbols, whether a creche or a Santa, alike….

It may be true that the Mayor misapprehended the Religion Clauses when he implied that atheists receive no protection from them by saying that the Foundation’s “non-religion” was “not a recognized religion.”  In this respect, the Mayor, apparently untrained as a lawyer, may not have missed his calling….  But this defense of his actions, premised on a misreading of precedent, does not transform his actions or the City’s display into an establishment.

On the gang’s crying about their free speech rights, here’s the 6th, again:

[Warren] could choose to add a Santa.  And it could choose to deny a sign saying, “There is no Santa.”  It could choose to incorporate a message about Ramadan.  And it could choose to deny a message disparaging any one religion or religion in general.  Just as Congress’s creation of a National Day of Prayer on the first Thursday of May does not compel the legislature to recognize a National Day of Non-Prayer each year, so too the City of Warren could opt to have a holiday display without a Winter Solstice sign.  Such holiday displays are quintessentially government speech….

And the Foundation, like everyone else, is free to urge the City to add or remove symbols from the display each year or to try to elect new officials to run the City—the customary answer to permissible government speech and the customary answer to policies with which citizens disagree.

FFRF Co-President Annie Laurie Gaylor responded to her loss without any sense of irony:

Apparently we are a Christian nation, and cities may prefer religion over non-religion[.]

On the first, well, duh.  On the second, she needs to ask her lawyer to read the 6th‘s opinion to her.  It’s not what they said.  Her lawyer can find that opinion can be found here.

Thus we see the benefit of not taking the easy way out—the coward’s way out—and acceding to the demands of such anti-freedom fighters as these as soon as the latter threaten.

These lose—as all bullies lose—when faced with forthright and just opposition.

Facing down bullies is expensive, certainly.  However that expense pales beside the expense of meekly surrendering freedoms for the demanding.  Once you pay the Danegelt, you never get rid of the Dane.