Monthly Archives: March 2013

Competition and Cadillac Insurance

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Under Obamacare, writes Emily Chasan in The Wall Street Journal, employers will be required by 2018 to pay a tax of 40% on health care plans that President Barack Obama and his minion, Health and Human Services Secretary Kathleen Sebelius, decide for themselves are somehow “excessively rich” in the benefits they pay out.

The excuse these two and other Progressives make for this is that these Cadillac plans, with their low deductibles and “generous” medical coverage, will encourage overuse of our health-care system.  Sure.  Everyone needs to be covered.  But only to a government-approved degree.  And never mind that those low deductibles make the policy purchasers ineligible for Health Savings Accounts—Progressives don’t want Americans to have those, anyway.

But these folks also ignore—or don’t understand—another aspect of their interference.  Competition in a free market for health insurance, including an ability for insurers to charge risk-based premiums, and for health services would address that “overuse” concern much more efficiently than a 2000 page law with its tens of thousands of pages of HHS rules ever could.  Such an environment would directly impact the costs born both by suppliers and their customers/patients.

The competition would drive down the prices charged, and risk-based premiums within that environment would enable insurers to bill for the coverage offered in accordance with the actual likelihood of payout.  Yes, some high-risk coverages would get more expensive, but the vast majority of coverages, by not having to be priced so as to subsidize those high risks, would get a lot cheaper.

Also, customers and patients would gravitate to the combination of policy coverage and medical service usage that actually interested them, instead of having to buy a government-approved policy that included things only a bureaucrat could love.  An equilibrium would develop that had customers and patients getting the policies and services they wanted at prices that suited them with insurers and providers offering those services and policies at prices that would let them stay in business.

There’s no need of a tax to manage demand and supply.  Americans are fully capable of doing that for themselves in a free, competitive market.

House and Income

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I decided to look at real incomes, in terms of what we actually can buy with our paychecks, compared to the purchasing power our grandparents had.  Here’s a coarse summary.

Median household income in 1950 was $3,300/yr (~$18,500 in 2009 dollars).  The median new house price then was $12,800 (~$73,200 in 2009 dollars), and that house was 980 sq ft small.  It took four years of that 1950 income to buy the house (assuming an all cash payment).

In 2009 (post housing bubble burst, with its more plausible prices than those of the peak in 2006-ish), median household income was $49,800, the median price of a new house was $215,000, and that house encompassed 2300 sq ft.  It took a shade over four years of that 2009 income to buy the house (again assuming an all cash payment).

That doesn’t seem like a big change, which itself might be surprising.  What actually was bought when that house was bought, though?  We’ve already seen that the same four years of income bought a much bigger house in 2009.

That 1950 house often came with central heating—in the form of a furnace in the basement that was manually fed with coal or wood.  Really upscale homes had a supply of heating oil.

The 2009 house routinely came with central heating—gas or electric, and automatically controlled with a thermostat, often programmable.  More upscale homes had multiple thermostats to control the temperatures of individual areas of the house.  The 2009 house also came with central air conditioning, controlled from that same thermostat setup.  1950 houses didn’t have air conditioning at all beyond open windows and fans.

The 2009 house also came pre-wired for multiple telephones (one to a house in 1950, with add-on wiring, often), and frequently it was pre-wired for Ethernet—which didn’t exist in 1950.  The 2009 home also came with a dishwasher and a refrigerator already installed.  Ovens—electric or automatically lighting gas—separate from the ranges (cooktops, also electric or automatically lighting gas) were common, as were built-in microwaves.

In 1950, fridges were extra, and the dishwasher was wifey, junior, or sis.  Microwaves didn’t exist, and the cooking was done, typically, on a gas stove, which combined the oven and the range; although electric stoves were available.  That gas range and oven were lit with a match, too, which led to more than one set of singed eyebrows when lighting off the oven.

Of course, no one paid cash for their house in 1950 or 2009.  In 1950 a typical mortgage came with 25% down, and the loan was for 16-20 years.  In 2009, mortgages could be had for 0% down, although 10%-20% were typical, and 30-year mortgages were routine.

Big Brother Alive and Well?

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The House Judiciary Subcommittee held a meeting a week ago Tuesday on potential new provisions of the Electronic Communications Privacy Act (ECPA) of 1986, and the outcome was very disquieting.  Richard Littlehale, of the Tennessee Bureau of Investigation, made this recommendation, and he was serious:

Billions of texts are sent every day, and some surely contain key evidence about criminal activity.  Text messaging often plays a big role in investigations related to domestic violence, stalking, menacing, drug trafficking, and weapons trafficking.

The subcommittee wound up suggesting longer retention times of interpersonal electronic messages as well as the creation of expedited federal access to these databases.

That’s the ticket: we need to start prying into everyone’s personal business because someone, somewhere, might be thinking about committing a crime.  Our 1st, 4th, and 5th Amendments need to by federally regulated.  Sure.  That’s the story, and they’re sticking to it.

Already, many of the message transporters and facility providers retain copies of our electronic correspondence for inordinately long times: Verizon, for instance as recently as 2010, kept customer text messages on file for three to five days, while Virgin Mobile stored them for 90 days.

Other providers haven’t been so cavalier with our private correspondence.  AT&T (then Cingular Wireless in the text-messaging arena), Sprint, and Nextel didn’t hang onto any of it for any length of time.

Of course, that means these…persons…in the House need to standardize message handling.  All for the convenience of government.  Littlehale talked about this, too.

We’re at the mercy of the service providers to determine how long it’s going take them to comply with that request [for the customer’s messages].  I would suggest whatever the level of standard of proof, the thing that really matters most to us at state and local law enforcement is prompt response.

Well, I would suggest that this is a textbook example of why none of the providers should retain this information at all, for any length of time.

And this from Republicans and Conservatives.

More “Muddled” Foreign Policy

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Courtesy of The Wall Street Journal‘s transcript of President Barack Obama’s joint presser with the Palestinian Authority’s Mahmud Abbas, an affair which Obama carefully conducted beneath a banner of the terrorist Yasser Arafat,

we have these…remarks…from our President in answer to the questions “After you meet leaders from both sides, is there any chance to resume peace talks as soon as possible?   And do you think that the two-state solution is still valid in this policy of expanding settlements is continuing going on?”:

I think it’s important for us to work through this process, even if there are irritants on both sides.  The Israelis have concerns about rockets flying into their cities last night.  And it would be easy for them to say, you see, this is why we can’t have peace because we can’t afford to have our kids in beds sleeping and suddenly a rocket comes through the roof.  But my argument is even though both sides may have areas of strong disagreement, may be engaging in activities that the other side considers to be a breach of good faith, we have to push through those things to try to get to an agreement….

Let me get this straight.  Our President says that murderous acts of terrorism, blatant acts of war, are just “strong disagreements?”  Mere “breaches of good faith?”

And then he said this:

And those two states I think will be able to deal with each other the same way all states do.  I mean, the United States and Canada has arguments once in a while, but they’re not the nature of arguments that can’t be solved diplomatically.

So our good friend Canada is no better than the PA?  Just a bunch of thuggish, ungovernable terrorist wannabes?

Does it get any more incompetent than this?

The Aftermath Begins

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Spiegel Online International is describing it, albeit with some misconceptions.

Not even savings accounts are safe, as was recently seen in Cyprus. Such deposits are actually guaranteed to up to €100,000, but the euro rescuers cared little about this as they desperately searched for funds.  Cypriot small savers may have escaped this time around, but the realization remains, even beyond Cyprus, that a state teetering on the edge of bankruptcy will resort to all available means to raise money—and a guarantee is only worth something as long as the entity that stands behind it remains solvent.

Nothing is safe from being seized by the state, no savings account, but also no house or apartment.  …  Governments have even banned the possession of gold during currency crises, forcing citizens to exchange the precious metal for the national currency.

That’s the nub of the aftermath.  No one’s private property is safe from an overweening government.

Those paragraphs, though, carries SOI‘s first misconception: the original demand to expropriate private savings came from the Euro Group, not Cyprus.  Cyprus’ Parliament rejected it at the start.  However, Cyprus’ government, including its Parliament, is complicit in the present theft—it could have rejected that attempt, too.

Then there’s this:

Greece and Cyprus have millionaires and billionaires of whom many profited from the artificial boom fueled by low interest rates after the introduction of the euro—a boom that subsequently went bust.  Why shouldn’t they help finance efforts to deal with the aftermath?  Is it fairer to place the burden on the euro bailout fund, and thus distribute it among the taxpayers of other countries?

Why shouldn’t they?  The question is a demonstration of the lack of understanding.  Why should folks who played by the rules placed before them, and with no other responsibility for the companies, have to pay for the failures of the companies, at least as part of the first resort?  Why should not the companies’ investors and creditors be the only ones to suffer the consequences of the failure of their investments and loans—or at least be wiped out entirely  before depositors—those not responsible at all—suffer any loss?

Is it fairer to place the burden on the euro bailout fund?  To ask this is to demonstrate, again, a lack of understanding.  The euro bailout fund should not exist at all.  The taxpayers of other countries should not even be under consideration of paying for the failure of one country.

Finally, this:

A levy on assets would immediately reduce the debts of crisis-stricken countries, whereas bailout packages pool risks and shift them to the future.

Those risks can become dangerously explosive.  The more countries that have to be bailed out, the fewer countries remain that have to bear the burden—as long as they are able to.  This could even prove to be too much for Germany at some point.

The second answers the first, but only partially.  A levy on assets does not cure the reason the crisis-level debts exist in the first place, but it does destroy property rights.  Neither does any bailout address the underlying causes.  Levy or bailout, they merely perpetuate the situation—as we’re seeing in the euro zone and in the US.