Free to be ill

Without argument, the U.S. is intended to be a free country, yet arguments abound as to how free we really are, as well as how free we really should be.  To illustrate the argument, the City of New York recently attempted to regulate our health by eliminating large sugar-filled drinks – a move that caused uproar from the conservative right, declaring that our government was trying to control our every move and deny us our freedom.  In that vein, should we be free to smoke cigarettes, drink excessive alcohol and sugar, over eat, and not exercise while still being guaranteed access to affordable healthcare?  In recent years, the answer to that question has become “yes”.  As America casts their vote to the left, we make the statement that we have the freedom to be cavalier with our health while expecting a safety net when our health fails.  So where do we find the balance between affordable health care and the freedom to be ill?

The answer to this question has already been determined.  The consequences will be coming soon, and it will come in a surprising way.  Because we have asked our government to force insurance companies to cover everyone regardless of the risks, insurance companies will respond by raising the rates that corporations pay to cover their employees.  Most corporations will not immediately force all employees to pay a greater share of healthcare costs right away because they want to preserve employee retention and morale.  Instead, corporations will find ways to control their risks.  They cannot fire unhealthy employees, and they cannot deny their healthcare.  The only thing they can do is to incentivize employees to get healthier.  Employees are now being asked by their employers to take voluntary health screenings.  We are free to decline the health screen, but we will pay a higher share of our insurance out of our paycheck if we make this choice.  If we take the health screen and are found to be healthy, our insurance costs remain the same or may even be reduced.  If we take the health screen and are found to be ill or at risk, we then have the option to modify our behavior or take a cut out of our paycheck to cover insurance.

  

As we continue to rely on our employers to provide our health insurance, eventually we will be screened, prodded, sampled, questioned, and then asked to modify our behavior to make us healthier.  This may mean quitting smoking, or taking alcohol abuse classes, or losing a specified amount of weight, or hitting a certain target of cholesterol reduction, or even keeping a workout log.  We will be asked to do this for two reasons; one, because our employer cares about our health, and two, because our employer cares about the cost of our healthcare.  Our health will not be defined by how we feel or what a doctor thinks.  Health is more likely become a matter of hitting certain standards determined by insurance companies.  Either way, our health will be regulated, or at least incentivized by the people who are in control of our prosperity.

So, what is the difference if we are regulated by our government or if we are regulated by our employer?  Not much, except that we can hold a corporation liable or change employers if we believe we are treated unfairly.  It is reasonable to say this is the less frightening scenario.  Either way, the state of our health and the things we do to our health will be someone else’s business.  We will no longer be in the position to eat as we want, drink as we want, and relax as we want.  We will be charged by our employers to live a healthier life or pay the consequences.  For better or worse, we are no longer free to be ill.

Tony F.  2013

Leverage

I know a man who represents the classic American story.  He was the son of an immigrant family who struggled to pay rent from month to month.  He loved cars from a very young age, and enjoyed working on them and talking about them.  He is an energetic guy.  In current day, he might have been diagnosed as having ADHD, but his family just diagnosed him as having “ants in his pants”.  He was unrefined - he cussed terribly, smoked cigarettes, refused to cut his hair, did poorly in school, and was generally expected not to do well.

When he was in his early 20’s, he was the passenger in a serious car accident.  The car he rode in was smashed by a cement truck, causing dramatic injury to his head and face.  He was permanently scarred.  He later received $50,000 as a settlement from the cement company.  Unlike many Americans, he did not reward himself with the best new car he could afford.  He did not throw a party, nor flaunt his new money.  In fact, he did not waste a penny.  He invested every dollar in used cars for resale.  After selling those cars for a small profit, he did it again, and again, and again.  He was passionate about his work.  He sometimes rose at 4:00 am to be the first in line to buy more cars, and then he would work late into the evening to prepare his cars for the next day. 

Fast forward 15 odd years and you find that he is a millionaire, owning the largest used car dealership in his city - true story!  This story is the coming together of four key ingredients – knowledge, discipline, hard work, and leverage.  Without any one of these ingredients, this story would not have been possible.  The leverage came as a result of a tragic accident from which he encountered a windfall of $50,000.  Many of us would have spent that leverage, or invested it in risky enterprises that won't pay off, but he didn't.  This fact, combined with his other three attributes, enabled my friend to make a over million from his leverage.    Surprisingly, this man is not the only person I know who has utilized leverage in such an extraordinary way.   I know several people of this ilk, and all of them share the same unique and respectable qualities.

As you recall, some of my blog posts suggest higher taxes on the wealthy.  Conservatives label this attitude as “class warfare”.  I’m writing this post is to explain why I take such a position despite my respect for these great people.  The key here is leverage.  As you have read, our true life hero has taken $50,000 in leverage and very carefully increased it to over a million dollars.  I respect this man, and I would not take a single dollar from him.  That said, I do have a different attitude regarding his future earnings.  Because of his hard work over the last 15 years, he currently has hundreds of thousands in leverage, which is likely to earn him his next million in just a few years.  Once he’s earned that million, the added millions can come with comparably little work.

Does he deserve to be wealthy?  Sure!  Does he deserve to continue getting wealthier?  Without a doubt!  Is it possible that he didn't earn every dollar honestly?  Well, he is a used car salesman after all, but that's not my point here.  The heart of the question here is whether he deserves to become wealthier at the highly accelerated pace afforded him by his leverage.  Contrary to trickle-down theory, the wealthy do not create jobs or boost the economy at a pace in keeping with their increased wealth.  A reasonably disciplined person of wealth is likely to double his wealth every 5 years while not working quite as hard as he had worked to earn his first million.  This is the very reason why the wealthy are supposed to be taxed at a higher rate than the middle class.  As it stands, though, they are not.  Most wealthy do not pay much in payroll taxes or income taxes.  The taxes that they do pay, corporate tax and capital gains, are assessed at a lower percentage than the taxes paid by the middle class.  Consequently, over the past 12 years, the wealthy have amassed added wealth at an extremely accelerated pace while average middle class earnings have been reduced.

Is higher taxation the same as class warfare?  Absolutely not.  In fact, it is not even an attempt to redistribute wealth, which implies an effort to take from the rich.  Leveraged taxation is simply an effort to regulate the pace in which the wealthy continue to grow wealth.  It does not make them less rich.  My friend will continue to grow wealth because he takes the right steps to earn.  I only argue that he should get wealthier at a slightly slower pace than his increased leverage will allow.

Tony F.  2013

Bad Timing

This week our Federal government has enacted a sequester due to their stalemate over the Federal budget.  The left believes we need to remove tax deductions for the rich; while the right believes we should focus solely on reforming Medicare, Medicaid, and Social Security, negatively referred to as entitlements.  Until this standoff is resolved, we are held hostage with threats of government layoffs, shutdowns, and economic decline.   

The truth is, both sides are right.  If done correctly, these solutions could become the perfect grand bargain.  In fact, Barack Obama and John Boehner came very close to agreeing on it.  We now know that this solution is not very likely, as it fails to appeal to the extremists.  The actual solution will probably look more like a series of deadlines and capitulations that slowly chip away at the problems.  In the meantime I need to offer a few complaints and conclusions about our congress. 

First of all, why are entitlements the primary focus of the right?  Believe it or not, these programs have very little to do with the national debt.  All of the entitlement programs (Social Security, Medicare, and Medicaid) have operated at or near break even throughout the Great Recession.  The largest, Social Security, is fully funded through 2036.  Yes, it is true entitlements are projected to go under water in the next 10 years due to a huge increase in the number of elderly who will enter the system, but the great distraction of entitlement reform is that if they had been corrected 10 years ago it would have had very little effect on the current deficit.  Because entitlements only threaten future debts, making major moves to correct entitlements today would amount to bad timing.  As it stands, the CBO predicts our national debt will actually decrease if we make no changes to budgetary law over the next 10 years.

So, why won’t Democrats go to work on entitlements anyway?  Several viable proposals have been presented, but the Democrats prefer to stand off instead of doing what is prematurely asked.  I have a theory:  The most likely solution to entitlement futures is to raise the tax for entitlements, specifically on the wealthy.  Note that this is not necessary today, but it will be necessary 10 years from now.  Most entitlement revenues do not apply to those earning over $120,000 per year, so an easy solution to the future shortage is to raise the exemption for higher wage earners while also instituting an incremental raise in the retirement age.  In other words, future high income earners will pay a little more, while future workers will wait a few more years to retire.  Problem solved, right?  Wrong.  If the Democrats make this move before correcting budget deficits, Republicans will scream that Democrats have raised taxes on the rich - not once, but twice - while making no correction to the deficit!  And it all happened because Republicans forced the Democrats to raise revenue on systems that did not need to be fixed - at least not yet - and had very little to do with the national debt.

Republicans know that it is inevitable that this solution for entitlements will be needed over the next 10 years, but they don’t want to be the party who does it.  It is vitally important for the GOP to make sure the left is blamed for raising taxes while also raising the retirement age, and making no progress on the deficit.  Who could support a party who gives you so much less for so much more?  In fact, this bad timing is so important that Republicans are willing to hold other programs hostage until this dirty work gets done.  In a political climate full of scare tactics and standoffs, the most important thing for the GOP is to generate bad timing for the left, so the Democrats will appear as wrong as possible.

Tony F.   2013

A Unique Breed

Imagine a place where the most adventurous, creative, hard-working, and outgoing people would come together from all over the world.  Add to this group a few key ingredients like mutual respect, collaboration, and honesty.  Now imagine that this collection of fine people live together for generations, mixing their good traits and their collaborative spirit into an ever growing population.  I am not describing an imaginary Utopia.  I am describing the United States of America.  We Americans are a unique breed.

In 2005, a Johns Hopkins University psychologist name John Gartner wrote an book called “The Hypomanic Edge” in which he concluded that the brains of Americans shared a unique quality when compared to average people of other countries.  This trait, which he called “ hypomania”, characterized his subjects as uniquely optimistic, impulsive, and driven.  These are the very traits that caused most immigrants to declare that they would not tolerate the life offered to them by their native countries.  These are the traits that cause people to drop all that they know of their native lands and set out for something better in a place called America.  These are the traits that allowed these unique individuals to start from virtually nothing and make their life in a strange new land.  As it turns out, America is uniquely filled with hypomaniacs.
 

You may wonder how these highly adventurous and competitive folks didn't eventually attack one another once they landed on this new soil.  This is addressed by conservative commentator Michael Medved in his 2008 book, “The 10 Big Lies about America”.  Medved suggests that it is not greed, dominance, or power that has drawn these poor foreigners to American soil; rather it is a desire for free religion, fair labor practice, and honest business ethic.  According to Medved, most immigrants came to America so they could own a home and raise a family in a place where their hard work and honesty actually paid off!  They most certainly didn't come here to fight.  They could have done that where they came from.  Throughout our history, U.S. immigrants have been the most honest and hard-working people on earth.

Immigrants arrive at Ellis Island

We could argue that the American immigration system has worked because of our tight border security and our strict system of screening those who enter here.  This would simply be untrue.  Until 1875, we had virtually no immigration laws whatsoever.  Until 1925, immigrants were screened solely for good health and enough money to get them situated for a week or so.  During this period, only 2% of immigrants were deported, usually due to illness or mental disability.  I believe it is fair to argue that most of our ancestors came to America during this pre-1925 era.  I know mine did, and they were hypomaniacs.

Given this background, I would strongly argue that any immigrant family who manages to come to America, work hard, raise a family, and get their children through high school with decent passing grades deserves to become a U.S. Citizen.  I believe they have shown the fortitude of an American.  I believe they have passed the same test that my ancestors passed.  For these people, it is not an American dream - they have done the work necessary to make it into a reality.  A successful and honest immigrant belongs in America because they are wired to make the right difference in an honest and fruitful way.  They are driven to do the right thing.  For over 200 years we have collected on this soil to do these things together.  We are the super society - pulled together because our ancestors had the drive and the decency to earn their way.  We are a unique breed.

Tony F.   2013

More Than Mold

In the bottom drawer of my refrigerator I sometimes find an orange that has been ignored for what appears to be a very long time.  At some point during this orange’s life in the dark drawer, a few mold spores found their way onto its surface.  The spores then harvested nourishment from the orange and began grow and multiply.  The mold continued to consume the nutrients that the orange provided and continually procreated until it eventually covered the entire surface of the orange.  A good time later, the orange was depleted of useful nutrients, leaving the dried, fuzzy, disgusting and useless green ball that I later discovered.

I can’t help but to compare ourselves to that mold.  At some point in the life of the planet Earth, we humans found our way onto its surface.  We then harvested the life giving nutrients of the Earth and began to grow and multiply.  Like mold, we behave as if our “orange” will never run out of nutrients because the surface seems infinite in comparison to our tiny selves, so we continue to harvest, grow, and multiply.  To me it seems inevitable that someday far into the future, mankind may experience the same fate as the mold.

In his book “How We Believe”, Michael Shermer identifies the reasons why most of us believe in God.   From numerous surveys, Shermer identifies two primary and distinct reasons; (1) without God we would have no moral values; and (2) without God we would have no purpose.  The first of these two reasons is arguable because moral values are life promoting values.  Mold has life promoting values – that is to say that the mold is not likely to do things which are destructive to their own success as a life form, therefore the mold’s ability to coexist and not destroy one another simply allows it to survive as a species.  Hence, our morals do not make us any better than mold.  The second reason we believe in God is a need for purpose, which is far more complex.  If our sole purpose as ordained by God is to “be fruitful and multiply” we are once again no better than mold.  So what is it that gives us greater purpose?  Perhaps we should take a harder look at the orange, and at that commandment.

Notice Genesis 1:31 -“God saw all that he had made, and said This Is Good.”  Why then would he want us to systematically sap the Earth of energy and nutrients, ultimately destroying the Earth as the mold did to the orange?  Now take a look at Genesis 31:28 –“Be fruitful and multiply, and replenish the earth…”   Replenish?  Why haven’t we heard more about this word?  Is the care and replenishment of the Earth our higher purpose? 

Imagine a mold that has the ability to take stock of the nutrients in the orange and is able to create ways to grow, reuse, and increase those nutrients.  Moreover, imagine a mold that has the ability to recycle waste and place it back into the orange for future generations.  It would certainly increase the livability of the mold on that particular orange.  More importantly, it would be a  truly unique species of mold!  If we truly believe we are better than mold, we must work together to increase our sustainability on this planet.  We must create renewable resources that enable each of us to tap less from the planet.  We must stress the importance of energy efficiency and a light footprint.  We must find ways to grow and multiply while furthering resources for our descendants.  In the long run, perhaps this will be the only thing that makes us truly more than mold. 

Tony F.  2013

The Real News

Imagine an evening news cast that starts something like this:

 “In America today, 6,758 people died.  4,923 of the dead were over 65 years of age.  336 people died today as a result of an accident, and 145 were killed by means of suicide or murder. 31 were killed with a firearm.  112 died today in auto related incidents.  It was an average day.  Also in America today, more than 300 million people coexisted peacefully.  In today’s news we will only focus on the most intriguing accidents and murders.  They are as follows…”

The stories we hear on the evening news are the stories of the unusual, the sensational, and the scary.  The producers decide which stories are told based on the amount of interest, emotion, or drama they will evoke from their audience.  For this reason, we seldom hear the real news.  The numbers in the paragraph above are based on real 2010 death data from the U.S. Centers of Disease Control.  Thousands of Americans die each day, mostly after long and painful struggles with disease.  Although these deaths are extremely difficult for the families involved we don’t hear about them because they are far too common and unpreventable to keep our interest.  Consequently, the violent murder of 22 kids at Sandy Hook completely overshadows the deaths of 6,730 others who die every day, 28 of whom are also kids. 

It is difficult to hear news like that of Sandy Hook Elementary.  These events are staggering to all of us, particularly because the victims are young, beautiful, healthy, vibrant, defenseless and innocent people.  The largest school killing in American history was done in 1927 in Bath, Michigan.  The attack was carried out with explosives by a school board member.  The second deadliest was carried out at Virginia Tech in 2007 by a student with two handguns.  The most infamous school killing was carried out at Columbine High School with illegally obtained guns and homemade explosives during the time that assault weapons were banned.  The most recent was carried out at Sandy Hook with legal and registered guns taken from the killer's mother.  These are sensational anomalies carried out by disturbed people, and no new law would have stopped their illegally hatched plans.  These insane killers wanted to be sensationalized in the headlines.  Nonetheless, we can't force the news to tell only boring stories.

One good thing in America over the last 20 years is a measurable reduction in overall crime.  According to statistics from 1960 to present, the US Disaster Center reports that crime reached an all-time high in 1990 and 1991 at about 8.3% per capita.  That is to say that approximately 8 out of 100 Americans were arrested for some sort of crime, violent and non-violent, in a given year.  There are several theories for the climb from 1960 to 1990, such as increased drug use, increased liberalism, and a general disregard for authority.  A counter theory suggests that the climb was due to stricter law making and increased reporting.  Yet another theorizes that we fell out of touch with one another due to increased population and limited contact.  After 1991, however, the crime rate declined back down to today’s rate of 5.7% per capita.  What caused this noticeable decline in crime is the subject of wide debate.  In their book “Freakonomics”, writers Steven Levit and Stephen Dubner present the very controversial theory that the decline in crime coincides with the passing of Roe v. Wade, thus increasing abortion among families who are at the highest risk of future crime.  Other theories cite better crime investigation and high-tech deterrents.  Yet another theorizes that social websites, cell phones, and text allow us to keep each other in check.  Either way the news is good, and when it comes to crime we become safer each day.

11 times more deadly than guns

In the heat of recent tragedy, our politicians are proposing new legislation in the hope of reducing future risk.  Given the real facts, the only proposed laws that might help are the ones governing the size of clips, increasing the magnitude of background checks, and increasing psychological support.  We may also gain some ground by vigilantly enforcing current laws.  In truth, we are 11 times more likely to be killed by a car than we are of being killed by a gun, yet we are not debating car control.  If an insane killer chose to ram a car through a crowd of people we would most likely regard this a one-of-a-kind unpreventable tragedy.  We would focus much more heavily on the killer's state of mind than we would on the car. 

Tony F.  2013

Four Big Fibs About National Debt

In August of 2011 I wrote a post called “The Pity Party” which discussed the political cost of our battle over the National Debt.  Well, they are at it again.  Now that the debt ceiling has once again reached its maximum, the conservative wing has decided to leverage this opportunity to force cuts in government spending.  In order to achieve this goal, conservatives need to bend the truth just a bit. 

Fib #1 – The debt is caused by increased spending.

Conservatives have created the illusion that the Obama administration has somehow increased spending by trillions of dollars.  This is simply not true.  There are three primary reasons for our growing deficit:  1) Economic changes resulting in lower tax revenue.  2) Tax cuts and economic stimulus.  And 3) Increased military spending, primarily due to war.  Of these, the largest factor is sharp reduction in tax revenue.  The Bush era tax rates were the lowest in 60 years, and were designed to spur the economy, but the Bush administration took no action to reduce spending.  Instead they chose to apply it toward debt.  Much of the continuing deficit during the Obama administration is due to continuance of Bush policy, not new spending instated by Obama.

Fib #2 – The debt is the highest ever.

As a reader of statistical data, you must be very wary of the words highest ever when it comes to dollar amounts.  Because the American economy is intentionally geared to be in constant inflation, the dollar cost of everything, if held at the same value, will always be the highest ever due to inflation.  Because of inflation, the national debt must be measured in ratio to the Gross Domestic Product.  In this case the debt is high.  In fact, it is currently running at about twice the historical norm, but still not the highest ever.  The highest national debt occurred at the end of World War II and nobody suffered as a result of the payback.  The WWII debt was easily paid down and the economy continued at a moderate and healthy pace throughout the 1950’s and 1960’s.  After WWII, war expenses were covered by increased taxation therefore war costs were not applied directly toward debt until after 2001.

Fib #3 – Our kids will be paying it back.

In fact, we have rarely paid the national debt back at all.  When we did, it was done through increased taxes levied during economically stable times.  More often, the debt remained unpaid as inflation and population growth continued to spur the GDP.  Consequently, the debt would shrink in relation to GDP without any pay back.  The hard truth is that the national debt is growing primarily due to our intolerance toward taxation and our current enjoyment of historically low tax rates.  Fortunately, as our economy stabilizes and inflation continues to rise, tax income will also rise due to higher incomes.  The debt therefore shrinks in relation to GDP without placing a greater burden on our kids.

Fib #4 – Federal interest is unmanageable.

In fact, interest rates are at an all-time low, consequently Federal interest expenses are also at an all-time low.  According to the Congressional Budget Office, despite the sharp rise in the Federal Debt from 2007 to 2012, the Federal outlay for interest is actually lower today than it was in 2007.  Of course, this extremely low rate will not last forever, which raises concern over whether we will be able to pay interest in the future.  But then again, interest will only rise if inflation rises, GDP rises, and tax income rises.  In this case, the debt will self-correct as it always has.

So, as you hear that we are racing toward a fiscal cliff while holding a ticking time bomb that will cause a government shutdown, try not to panic.  These are just scare tactics designed to move you to one side of the debate.  Ultimately our leaders in Washington will find ways to increase taxes and decrease ineffective spending as needed to keep us out of hot water.  In truth, as we continue to pay lower taxes than our forefathers, we are to blame for the rising national debt.

Tony F.  2013