Obamacare and False Claims

March 7, 2014

Kevin Short over at the Huffington Post produced a wrongheaded post this week titled, “Obamacare Just Made Americans Richer Without Anyone Noticing”.  Citing a report issued by the Commerce Department’s Bureau of Economic Analysis and calculations made by the Wall Street Journal, Short claims Obama’s so-called Affordable Care Act (ACA), better known as Obamacare, was responsible for three-quarters of the rise in Americans’ spending and income growth in January.  Thus, according to Short, the ACA in its first month of operation has already made Americans richer.

The problem with Short’s analysis and the reason why Americans didn’t notice they were richer is because they aren’t.  Short’s claim is nothing more than typical Keynesian bunk.

So, how did the ACA make Americans’ richer in January according to Short?  Well, the expansion of Medicaid funding to the tune of about $19 billion and $15 billion in subsidies received by Obamacare enrollees did the trick.  The logic goes, because some Americans received a combined $34 billion in federal largess, that money will be spent in the economy providing new jobs for countless Americans.

Of course, what Short fails to mention is where the money for those welfare benefits (Medicaid and subsidies) came from.  Did they come from an increase in worker productivity?  Did they come from an expansion of business and employment?  No.  In fact, according to the Institute for Supply Management  its employment gauge in February declined for the first time in 25 months and currently stands at its lowest reading since March 2010.

Obviously, the money came from taxpayers, either through direct tax payments or debt monetization by the Federal Reserve.  Neither approach represents an expansion of the economy or wealth production.  What has happened is akin to taking money from one pocket and transferring it to the other.  Only in Short’s world and the world of Keynesians everywhere is this considered prosperity.

But, what is even more troublesome is how that $34 billion was spent in January.  Again, according to the Bureau of Economic Analysis, Obamacare handouts may have been responsible for a $29 billion increase in health care services.  Besides utilities, all other spending categories experienced a decline.

What this means is if Obamacare further increases government spending on health care, then the cost of health care will rise even higher.  All of that new money entering the health care industry will bid up prices to heights never seen before.  This is precisely the reason health care costs have been on the rise for the last 50 years.

Over the last few years, there have been many false claims made about Obamacare.  From “you can keep your coverage and doctor” to health care costs will decrease to more Americans will have health care coverage, there has been no shortage of mistruths.  And now we have the outrageous claim that the ACA is making Americans richer.  Not only does taking from one citizen and giving to another not make us richer, increased government spending on health care will surely make us poorer.


Young Voters Betrayed by Obama Policies

December 21, 2013

Barack Obama, in large part, owes his presidency to young voters.  In two presidential elections he has garnered 66 percent and 67 percent of their vote respectively.  Many of those votes proved pivotal for him in winning key states like Florida, Virginia, Pennsylvania, and Ohio.  And yet the President apparently feels no loyalty toward this group of voters that has given him so much.  In fact, it has become second nature for him to run roughshod over their interests.

To begin with, the economy Obama has produced for young people in close to five years of his leadership is horrendous.  His policies of regulate and spend have not permitted the economy to recover from the Great Recession that began in 2008.  Unemployment for 15 to 24 year olds is more than double the national average.  Many college graduates, unable to find a job, have returned to their parents’ nests to wait for better days and brighter employment prospects.  African-American teenagers face a jobless rate of more than 40 percent!

And while the President was attempting to “stimulate” the economy back to good health with profligate spending, what he did instead was run up a tab that young folks will have to pay back for many years into the future.  What’s more, when interest rates rise to their historic average and interest payments on the national debt more than double, paying back that debt will have to include much higher taxes or enormous cuts in government services.

Lastly, there is Obamacare.  The President is relying on young folks to make his health care scheme work.  He is counting on millions of them to purchase high cost plans to offset costs for the sick and elderly.  Of course, many will not accommodate the President’s wishes, thereby causing health care premiums to skyrocket for all consumers.  By the time the current crop of 18-30 year olds is interested in purchasing health care coverage the costs will be astronomical.  Thus he has put them in an unenviable position.  They are damned if they do, damned if they don’t.

Young people made a serious mistake giving Barack Obama their overwhelming support in the last two presidential elections.  But, what choice did they have?  John McCain and Mitt Romney weren’t much better alternatives.  What young people need are free market policies – sound money, a balanced federal budget, and deregulation.  It doesn’t appear this is going to happen anytime soon.

Old Beliefs Die Hard

July 25, 2012

It is very difficult coming to the realization that something or someone you truly believe in, have revered and defended for a long time, and have dedicated your life to following is not what you thought it was and might even be the exact opposite of what you appreciated about it.

For me recently, I have had to come to grips with the fact that former Penn State head football coach Joe Paterno was not the hero I revered for a long time.  See, I grew up in Pennsylvania and followed his winning teams every year.  His success was abundant while all along running a squeaky clean program with no recruiting violations and a good graduation rate.  To top it off, we shared an ethnic heritage (Italian) which became a source of personal pride.

Then the Jerry Sandusky child abuse scandal hit.  My world was shattered.  How could Coach Paterno only inform his superiors at the University when he was told that his former assistant coach Jerry Sandusky was caught showering with a young boy in a university locker room?  How could he not blow the whistle loudly to put an end to the carnage and bring a deviant to justice?  I mean, Paterno was the moral bastion of college football.  As an educator, he would never forsake the well-being of youngsters in order to protect a friend and/or his football program.

But, it’s true.  Paterno did not do all that he should have and many more young boys were abused at Penn State facilities by Jerry Sandusky as a result  This realization has negated close to 40 years of hero worship.  Joe Paterno made more than a mistake; he allowed a tragedy to continue.  He was not the moral bastion I naively thought he was.  It was tough and a long process, but he is no longer a hero.

Thus, I can now empathize with folks who need to come to grips with their wrongheaded thinking that government is the great solver of our problems.  Take the so-called “War on Poverty”(1) programs launched under Lyndon Johnson in the 1960s.  Supporters would argue that it was the right thing to do at the right time to eradicate poverty.  However, close to 50 years and $15 trillion later, the poverty rate has barely budged going from about 15 percent to 13 percent.  In fact, poverty was on a steep decline for five years preceding Johnson’s programs.  His “War on Poverty” halted that decline and stabilized the poverty rate in the low teens.  But if you listen to advocates of the federal social safety net, you’ll hear how without federal largess the problem of poverty would be more acute.  They just can’t bring themselves to accept the realization that federal welfare programs are wasteful, debilitating, and ineffective.

Of course, the best example from recent history where government policy has been wasteful, debilitating, and ineffective is the economic policies of the current administration.  The same folks that can’t admit to themselves that the War on Poverty was a failure are now defending the Obama Administration’s policies as if they have been successful in bringing about recovery from the Financial Crisis of 2008.  After trillions have been spent and interest rates kept at rock bottom lows for the last four plus years the unemployment rate has never fallen below eight percent.  In fact, the real unemployment rate (U6 which includes discouraged workers) is 15 percent and on the rise. Most embarrassing for the President is the fact that more people went on Social Security Disability than got jobs in June.

To be sure, there are many more examples of government intrusion gone wrong.  The greatest of which is Roosevelt’s New Deal because it prolonged the Great Depression through the 1930s.

So, with such a track record of failure, why is it that advocates of big government cannot bring themselves to realize that their philosophy is bankrupt and wrongheaded?  One reason is emotional.  They think with their hearts and not their heads.  They are so fixated on helping others and believe they may need the same kind of help someday, that they forsake logic and experience for empathy and generosity (of other peoples’ money of course).

Another reason is socialization.  There are so many Americans who rely on the federal government for one reason or another that it is hard to find many that are willing to bite the hand that feeds them.  Take college professors and the mainstream media (MSM) for instance.  Very, very few are willing to go against the Establishment line for fear of losing grant money, being denied tenure, or losing the interview or even their jobs (remember Helen Thomas?).  These are the societal elites that most Americans get their information from (many times academics appear on the MSM).  It’s no wonder many Americans lack basic economic knowledge.  They have been bombarded through the years with the party line instead of the truth.

At the end of the day, it’s brutal being challenged let alone acknowledging that what you have believed in for a long time is poppycock.  I know – I lost a long-time hero recently.  It is a tough and long process but one that needs to be undertaken by those that cherish big government intrusion in our economy.  It needs to be undertaken so the widespread suffering resulting from big government intrusion in our economy seizes.

Article first published as Old Beliefs Die Hard on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

We Can’t Afford to Raise the Debt Ceiling

July 20, 2011

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.”

Senator Barack Obama

Senate Floor Speech on Public Debt

March 16, 2006

Senator Obama ended his speech with a profound yet often neglected fact, “Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities.”  He went on to vote against raising the debt ceiling in 2006.

What a shame Barack Obama has such a short memory.  If only he would have paid heed to his own words once he became president in 2008 we wouldn’t be about $3 trillion more in debt and in the worst fiscal crisis the world has ever seen.  But, of course, the President and his supporters claim that he had no choice but to spend us even farther into oblivion.  After all, he inherited an awful economy from his predecessor.  The story goes that his spendthrift policies are what saved us from an economic meltdown.  How they know that exactly is not clear?

What is known is that Obama’s policies have not solved our economic woes.  In fact things have become far worse under his leadership.  The two statistics that the ordinary American cares most about are unemployment and price inflation.  Both have headed in the wrong direction since Obama assumed the reins of power.  The government’s unemployment figure stood at 7.8 percent the month Obama became president.  Today, 9.2 percent of our workforce is without work.  In spite of his “stimulus” spending the unemployment rate has increased 18 percent!

Naturally, with all the new spending and monetized debt over the last two and one-half years, it is reasonable to expect that goods priced in dollars would see an increase.  As I have predicted many times on this post, they have.  If we just use the government’s CPI numbers it is easy to see that prices under Obama’s program have taken off. When Obama took office the government’s CPI number stood at 0.0 percent.  The number released for June 2011 stood at 3.6 percent.  Additionally, gas prices have doubled under Obama and food prices are soaring.

If one were to calculate unemployment and price inflation like they were prior to 1980, we are clearly in a depression.  Bread lines have simply been replaced by food stamps.

The point is that Obama’s polices have been a dismal failure.  The current issue before Congress is whether to raise the current debt ceiling.  It is interesting to note that Obama and his ilk will only talk about what alleged calamities will befall us if the debt ceiling is not raised.  Seniors, soldiers, and the disabled will be relegated to the streets begging for change to support their families they tell us.  No mention is ever made of what calamities will befall us if the debt ceiling is raised and the reckless spending is allowed to continue.  Right now, 43 cents of every dollar Washington spends is borrowed.  Over the next decade, interest payments on that debt assuming interest rates rise gradually will total $5.5 trillion.  That is revenue that cannot be used to invest in America – roads, schools, jobs…  If the current debt ceiling is raised for further deficit spending a greater percentage of each future dollar will not be available for American investment or as Senator Obama put it so aptly in 2006, “Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities.”

The President and Congress have tried to spend our way out of economic crisis.  Predictably, it has failed and even made things worse.  Raising the debt ceiling further will only exacerbate the crisis.  To avoid a “leadership failure” Obama should do whatever it takes to cut trillions in spending.  It is the only way to get “our Government’s reckless fiscal policies” under control and ensure a viable economic future for all Americans.

Article first published as We Can’t Afford to Raise the Debt Ceiling on Blogcritics.

Evaluating Obama’s Record After More Than Two Years as President

April 26, 2011

Recently, President Obama kicked off his 2012 reelection campaign.  Looking past all the political jabbering of the talking heads and pundits, the most astounding prediction of all about the next race for the White House is that Obama is expected to raise $1 billion for his campaign efforts.  Given the president’s failure to fulfill his previous campaign’s promises of hope and change, a great question to ask is, who is going to donate that large amount of money to his campaign coffers?

I mean the guy has an absolutely abysmal economic record as president.  Adhering to a dogmatic Keynesian policy, in just two years he has increased the national debt by 50 percent with nothing good to show for it.  Unemployment, counting the underemployed and discouraged workers, was about 19 percent when Obama took office.  Currently that number is at about 22 percent.  After more than two years in office, Obama’s economic policies have given no hope to millions of unemployed Americans.

Of course, all of the spending and inflating of the money supply under Obama is beginning to have a huge negative effect on the economy.  Anyone who has grocery shopped or purchased gasoline lately has certainly noticed higher prices.  Now, many would blame Federal Reserve chairman Ben Bernanke and his ridiculous easy money policy for current rising prices.  They are correct.  But, let’s not forget that Obama nominated Bernanke for a second term as chairman in 2009.  The president had the opportunity to do the right thing and nominate an individual that could have brought sanity back to our monetary policy.  But then again, Obama and his cohorts in Congress need Bernanke to monetize their lavish spending programs to ensure their reelections.

In fact, Obama won’t recognize his or the Fed’s culpability in bringing about inflation.  Instead he is resorting to the famous political technique of scapegoating.  According to Obama, speculators are potentially to blame for high gas prices and thus rising prices in general.  His Justice Department is going to investigate whether speculators are driving up the price of oil and therefore harming consumers.

Well, of course speculators are driving up the price of oil because they know more about how economics work than anybody in the Obama Administration.  They know that with the trillions of new dollars the Fed has pumped into the economy since 2007 oil prices which are priced in dollars are going to go up, probably way up.  They would not be bidding up the price of oil today if they believed that in the future they will not be able to find a buyer for their oil futures.   They are not causing harm to consumers.  Fed policy under Bernanke is the culprit, but the president seems clueless about this fact.  As general prices continue to rise because of Obama’s Keynesian policies, Americans will continue to lose hope that their lives are getting better.

Obama’s foreign policy is as abysmal as his economic policies.  During the 2008 campaign he promised “change that we can believe in”.  If by “change” Obama meant even more war than George Bush provided than he has fulfilled that campaign promise.  Since taking office Obama has not ended the U.S. occupation of Iraq.  He has increased troop levels in Afghanistan by about 30,000.  He has increased unmanned drone attacks over Pakistan killing innocent civilians and providing a recruitment tool for Al Qaeda.  He led the NATO invasion of Libya, which was supposed to be a “humanitarian” effort, but has quickly turned into a regime change operation.  Obama claimed he would not put boots on the ground in Libya and then it was reported that U.S. special operations forces had been on the ground in Benghazi for three weeks training the rebels.  Now, fighting between Qaddafi forces and the rebels is in stalemate and many analysts believe it will take a NATO invasion with ground troops to dislodge Qaddafi from power in Tripoli.  The president has put himself in a tough spot.  If his previous war-like tendencies are any indication, we can expect U.S./NATO troops to be fighting pro-Qaddafi forces in Libya soon.

Barack Obama’s first two years as president has been a catastrophe.  Unemployment and prices are up and we face a national calamity because of burgeoning debt at the state and federal levels.  He has increased not diminished our exposure to war by ramping up military attacks over Pakistan and leading the effort to overthrow Qaddafi in Libya.  These conflicts will only waste more money we don’t have and make us less safe.  Again, it should be asked, if Obama hopes to collect $1 billion in campaign contributions, where will it come from?  My best guess is Wall Street and the Military Industrial Complex.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

Logic not Emotions Should Rule the Day

December 4, 2010

Washington is an emotional basket case right now.  Besides the looming partisan all out war that will come with divided government, in its lame-duck session, Congress is currently struggling with the heartrending issue of whether to extend unemployment payments for over 2 million Americans that have been on that dole for close to two years.  On the one hand is the difficulty of denying federal largess to people in a horrendous economy.  On the other hand is the need to rein in federal spending and stop disastrous policies that are making economic recovery impossible.  What is needed by Congress to make a good decision on this issue is logical thinking not the super charged emotional sound bites, diatribes, and appeals to our vulnerable human sensitivities

The problem with our current economy is that we just experienced the popping of the mother of all economic/financial bubbles and the reaction of our government to it has been to attempt to re-inflate it with stimulus spending, bailouts, and quantitative easing.  Common sense alone would indicate to any reasonable person that more of the spending and cheap credit that got us into this mess is not going to get us out of it.

Thus, since it was a housing bubble in particular, housing prices nationally have experienced deep drops in value.  You see, all the cheap cash and credit the Federal Reserve and Uncle Scam provided between 2001 and 2007 was mal-invested into too many homes at prices that too many borrowers could not normally afford.  When interest rates were raised by the Fed, and this always happens in boom and bust cycles, millions of Americans could no longer live beyond their means.  They defaulted on their mortgages.  A cavalcade of foreclosures transpired and home prices dropped.  At the beginning of the housing collapse, the federal government should have let the market liquidate the mal-investment and allow the artificially high housing prices to drop.  By now, the housing market would be recovered.  Instead, Washington attempted to “stabilize” the housing market by instituting programs to prop up unrealistic values and here we are over two years later with no signs of recovery in sight for the housing market.

The same is true of the labor market.  A person’s labor is bought on the open market just like houses, except payment is called wages instead of prices.  During the Fed induced boom, companies hired too many workers and wages rose too high.  The excessive hiring and wage hikes were based on the phony wealth that Fed policies were producing.  No one believed the spending binge of the American consumer, fueled by all that cheap credit and “equity” in their homes would ever end.  Well, it did end with the depletion of all that “equity”.  Workers got laid-off and millions began collecting unemployment.

Now, there is no question that we have been and are currently in a financial depression exactly like the one experienced in the 1930s.  Real unemployment rates of between 17 and 22 percent attest to that fact.  In the 1920s the Fed’s easy credit policies, primarily low interest rates and margin buying of equities, caused a huge stock market bubble.  When that bubble popped in 1929, loans were called in, and it became apparent that Americans were broke.  Instead of letting the market sort things out, both Hoover and Roosevelt spent lavishly and intervened on a scale never seen before in American history.  The result was more than a decade of economic depression.

Fast forward to the first decade of the 21st Century and it is déjà vu all over again.  Both Bush and Obama have attempted to “stimulate” the economy out of depression with lavish spending.  Once again the technique has failed.  There is no doubt that much of the money, specifically unemployment payments, has been a humane attempt to deal with the personal hardships of those who have lost jobs.  But, it can also be argued that sustaining unemployment benefits indefinitely has an even larger negative effect on recipients – the perpetuation of high unemployment rates.

As was mentioned earlier, during the phony Fed induced boom of 2001-2007 companies hired and wages rose too much.  In order for recovery to take place in the labor market, wages must come down in the same way that home values have come down in the housing market.  Unemployment benefits prevent that from happening because the government provides a floor for wages.  In other words, if a person is receiving $400 a week in unemployment benefits why would they accept a job that pays less?  They wouldn’t.  Thus, employers are faced with either raising wages – a proposition fraught with peril and one they can’t afford in this economy or not hiring at all.  Many are obviously choosing to not hire at all as is evident from the new unemployment figures released yesterday.

So, yes, it is hard to cut off those millions of Americans who have been collecting unemployment for close to two years now, but it is necessary to help those same people in the long run.  Essentially, unemployment payments set a minimum wage that most employers cannot meet right now.  If we clear away the emotional hyperbole and demagoguery of those that foolishly want to sustain unemployment benefits indefinitely we can begin to address high unemployment in America.  The Great Depression ended only after Washington cut spending in 1946.  This is a lesson we can ill afford to ignore.  Logic not emotions should rule the day.

Article first published as Logic Not Emotions Should Rule the Day on Blogcritics.

There’s No Recovery, Just More Hard Times Ahead

July 7, 2010

It’s comical to watch the financial channels’ pundits and Obama Administration officials almost on a daily basis tell us that we are well into an economic recovery.  Yes, there have been times when the economic data looked promising.  During some weeks first time unemployment claims have been down.  The economy has grown between two and three percent some months.  And there have even been some months when new home sales have swelled and the prices of houses in general have increased.  But the fact of the matter is that the worst of the crisis is yet to come and of course like the initial crisis which has lasted for close to three years already it will be Washington’s fault.

So, what are the indications that we are not well into an economic recovery and the worst of the economic pain is yet to come?  For one thing, the National Bureau of Economic Research (NBER), the government’s official judge of economic expansion and contraction, has not pronounced the recession that began in 2007 to be over.  Additionally, just yesterday the government announced the economy lost 125,000 jobs last month.  The real unemployment rate which takes into account discouraged and underemployed workers is still north of 16 percent.  Food stamp usage has skyrocketed to a record high of 40.2 million recipients.  Bank repossessions are still a massive problem.  They hit a record 93,777 in May which represented a 44 percent increase over May of the previous year.  Worst yet, all 50 states are experiencing year-over-year increases.  Banks still aren’t lending; consumers aren’t spending; and the national deficit and debt is in outer space with nothing good to show for it.

In all fairness, as mentioned above, there has been some good economic news from time to time.  For instance, housing prices did increase in April.  But most analysts attribute the rise to the rush to take advantage of the government tax credit for homebuyers which expired at the end of that month.  Since the tax credit expired almost all housing market barometers have dropped significantly.

Then there were those months that jobs were produced.  But, again, this had more to do with government gimmicks – 2010 census hiring and government spending then real economic progress. 

To be sure, some Americans are doing quite well in this recession and this might account for the president’s insistence that the recession is over and prosperity is just around the corner.  Who is doing well?  Well, folks that live close to Washington and Wall Street are doing very well.  Forbes Magazine has reported that 12 of the 25 riches counties in the country border the nation’s capital and financial headquarters.  It’s no wonder since government workers receive 45 percent more in pay and benefits than their private sector counterparts.  This is pretty good when you consider that it’s almost impossible to lose a government job even in economic recessions.  Of course, given the huge taxpayer bailouts to Wall Street bankers and the generous Federal Reserve policies towards the same it is also easy to see why suburban New York City is riding high in these tough times.

Besides the bureaucrats and bailout recipients several political cronies of the president have cashed in during this recession.  According to Floyd Brown and Lee Troxler in their book, Killing Wealth, Freeing Wealth, Larry Summers, chair of Obama’s Council of Economic Advisors, made $5.2 million in 2008 through his hedge fund.  Tom Donilon, a deputy National Security Advisor, made $3.9 million in legal fees representing Citigroup and Goldman Sachs.  As members of Obama’s inner circle, they are uniquely positioned to guarantee that federal policies continue to favor their interests.

And let’s not forget Obama’s huge financial supporter and billionaire buddy, George Soros.  According to Brown and Troxler, the financier pulled in $1.1 billion in trading profits in 2008.  After helping to finance Obama’s White House run, the president has wasted little time in rewarding his benefactor.  It is ironic that their partnership involves deepwater drilling.

The president and his cohorts in the media can spin economic news anyway they wish.  But, after 17 months in office and trillions of dollars spent to stimulate the economy the only thing the president’s policies have produced is more debt and predictions from many analysts that we are headed for a double-dip recession.  This should be no surprise – since similar economic policies deepened and prolonged the recession of 1929.  Then, Americans had to wait about 16 years for good economic times to return.  Given this president’s current propensity to spend there’s no telling how long it will take for this recession to end.