BUILDING A RAILROAD ain’t cheap. It needs dump trucks of money. Especially if it’s transcontinental. And that’s what the Union Pacific and the Central Pacific were building. Starting during the Civil War in 1863 (the year Vicksburg fell and Lee retreated from Gettysburg). The Union Pacific was building west from Iowa. And the Central pacific was building east from California.
For the most part, Protestant, English-speaking Americans settled Texas. Mexico had encouraged the American colonists to settle this region. Because few Mexicans were moving north to do so. The deal was that the colonists conduct official business in Spanish and convert to Catholicism. They didn’t. These and other issues soured relations between Mexico and the American Texans. The Republic of Texas proclaimed their independence from Mexico. America annexed Texas. Mexico tried to get it back. The Mexican-American War followed. America won. Texas became a state in 1845. And that other Spanish/Mexican territory that America was especially interested in, California, became a state in 1850. Hence the desire for a transcontinental railroad.
The U.S. government was very eager to connect the new state of California to the rest of America. So they acted aggressively. They would provide the dump trucks of money. As America expanded, the U.S. government became the owner of more and more public land. The sale of new lands provided a large amount of revenue for the federal government. (Other forms of taxation (income taxes, excise taxes, etc.) grew as the amount of public lands to sell decreased.) Land is valuable. So they would grant the railroad companies some 44 million acres of land (i.e., land grants) for their use. The railroad companies, then, would sell the land to raise the capital to build their railroads. The government also provided some $60 million in federal loans.
But it didn’t end there. The federal government came up with incentives to speed things up. They based the amount of loans upon the miles of track laid. The more difficult the ground, the more cash. So, what you got from these incentives was the wrong incentive. To lay as much track as possible on the most difficult ground they could find. And then there were mineral rights. The railroad would own the property they built on. And any minerals located underneath. So the tracks wandered and meandered to maximize these benefits. And speed was key. Not longevity. Wherever possible they used wood instead of masonry. The used the cheapest iron for track. They even laid track on ice. (They had to rebuild large chunks of the line before any trains would roll.) And when the Union Pacific and Central Pacific met, they kept building, parallel to each other. To lay more miles of track. And get more cash from the government.
PAR FOR THE COURSE. When government gets involved they can really mess things up. But it gets worse. Not only was government throwing dump trucks of American money down the toilet, they were also profiting from this hemorrhaging of public money. As shareholders in Crédit Mobilier.
Thomas Durant of Union Pacific concocted the Crédit Mobilier Scandal. As part of the government requirements to build the transcontinental railroad, Union Pacific had to sell stock at $100 per share. Problem was, few believed the railroad could be built. So there were few takers to buy the stock at $100 per share. So he created Crédit Mobilier to buy that stock. Once they did, they then resold the stock on the open market at prevailing market prices. Which were well below $100 per share. Union Pacific met the government requirements thanks to the willingness of Crédit Mobilier to buy their stock. The only thing was, both companies had the same stockholders. Crédit Mobilier was a sham company. Union Pacific WAS Crédit Mobilier. And it gets worse.
Union Pacific chose Crédit Mobilier to build their railroad. Crédit Mobilier submitted highly inflated bills to Union Pacific who promptly paid them. They then submitted the bills to the federal government (plus a small administration fee) for reimbursement. Which the federal government promptly paid. Crédit Mobilier proved to be highly profitable. This pleased their shareholders. Which included members of Congress who approved the overbillings as wells as additional funding for cost overruns. No doubt Union Pacific/Crédit Mobilier had very good friends in Washington. Including members of the Grant administration. Until the party ended. The press exposed the scandal during the 1872 presidential campaign. Outraged, the federal government conducted an investigation. But when you investigate yourself for wrongdoing you can guess the outcome. Oh, there were some slaps on the wrists, but government came out relatively unscathed. But the public money was gone. As is usually the case with political graft. Politicians get rich while the public pays the bill.
(Incidentally, the investigation did not implicate Ulysses Grant. However, because members of his administration were implicated, this scandal tarnished his presidency. Grant, though, was not corrupt. He was a great general. But not a shrewd politician. Where there was a code of honor in the military, he found no such code in politics. Friends used his political naivety for personal profit. If you read Grant’s personal memoirs you can get a sense of Grant’s character. Many consider his memoirs among the finest ever written. He was honest and humble. A man of integrity. An expert horseman, he was reduced to riding in a horse and buggy in his later years. Once, while president, he was stopped for speeding through the streets of Washington. When the young policeman saw who he had pulled over, he apologized profusely to the president and let him go. Grant told the young man to write him the ticket. Because it was his job. And the right thing to do. For no man, even the president, was above the law.)
THE FINANCIAL WORLD fell apart in 2007. And this happened because someone changed the definition of the American Dream from individual liberty to owning a house. Even if you couldn’t afford to buy one. Even if you couldn’t qualify for a mortgage. Even, if you should get a mortgage, you had no chance in hell of making your payments.
Home ownership would be the key to American prosperity. Per the American government. Build homes and grow the economy. That was the official mantra. So Washington designed American policy accordingly. Lenders came up with clever financing schemes to put ever more people into new homes. And they were clever. But left out were the poorest of the poor. Even a small down payment on the most modest of homes was out of their range. Proponents of these poor said this was discriminatory. Many of the inner city poor in the biggest of cities were minority. People cried racism in mortgage lending. Government heard. They pressured lenders to lend to these poor people. Or else. Lenders were reluctant. With no money for down payments and questionable employment to service these mortgages, they saw great financial risk. So the government said not to worry. We’ll take that risk. Fannie Mae and Freddie Mac would guarantee certain ‘risky’ loans as long as they met minimum criteria. And they would also buy risky mortgages and get them off their books. Well, with no risk, the lenders would lend to anyone. They made NINJA loans (loans to people with No Income, No Job, and no Assets). And why not? If any loan was likely to default it was a NINJA loan. But if Freddie or Fannie bought before the default, what did a lender care? And even they defaulted before, Fannie and Freddie guaranteed the loan. How could a lender lose?
Once upon a time, there was no safer loan than a home mortgage. Why? Because it would take someone’s lifesavings to pay for the down payment (20% of the home price in the common conventional mortgage). And people lived in these houses. In other words, these new home owners had a vested interested to service those mortgages. Someone who doesn’t put up that 20% down payment with their own money, though, has less incentive to service that mortgage. They can walk away with little financial loss.
ARE YOU GETTING the picture? With this easy lending there was a housing boom. Then a bubble. With such easy money, housing demand went up. As did prices. So housing values soared. Some poor people were buying these homes with creative financing (used to make the unqualified qualify for a mortgage). We call these subprime mortgages. They include Adjustable Rate Mortgages (ARMs). These have adjustable interest rates. This removes the risk of inflation. So they have lower interest rates than fixed-rate mortgages. If there is inflation (and interest rates go up), they adjust the interest rate on the mortgage up. Other clever financing included interest only mortgages. These include a balloon payment at the end of a set term of the full principal. These and other clever instruments put people into houses who could only afford the smallest of monthly payments. The idea was that they would refinance after an ‘introductory’ period. And it would work as long as interest rates did not go up. But they went up. And house prices fell. The bubble burst. Mortgages went underwater (people owed more than the houses were worth). Some people struggled to make their payments and simply couldn’t. Others with little of their own money invested simply walked away. The subprime industry imploded. So what happened, then, to all those subprime mortgages?
Fannie and Freddie bought these risky mortgages. And securitized them. They chopped and diced them and created investment devices called Collateralized Debt Obligations (CDOs). These are fancy bonds backed by those ‘safe’ home mortgages. Especially safe with those Fannie and Freddie guarantees. They were as safe as government bonds but more profitable. As long as people kept making their mortgage payments.
But risk is a funny thing. You can manage it. But you can’t get rid of it. Interest rates went up. The ARMs reset their interest rates. People defaulted. The value of the subprime mortgages that backed those CDOs collapsed, making the value of the CDOs collapse. And everyone who bought those CDOs took a hit. Investors around the globe shared those losses.
Those subprime loans were very risky. Lenders would not make the loans unless someone else took that risk. The government took that risk in the guise of Fannie and Freddie. Who passed on that risk to the investors buying what they thought were safe investments. Who saw large chunks of their investment portfolios go ‘puff’ into thin air.
SO WHAT ARE Freddie and Fannie exactly? They are government-sponsored enterprises (GSEs). They key word here is government. Once again, you put huge piles of money and government together and the results are predictable. In an effort to extend the ‘American Dream’ to as many Americans as possible, the federal oversight body for Freddie and Fannie lowered the minimum criteria for making those risky loans. Even excluding an applicant’s credit worthiness from the application process (so called ‘no-doc’ loans were loans made without any documentation to prove the credit worthiness of the applicant.) To encourage further reckless lending. Ultimately causing the worst financial crisis since the Great Depression.
And, of course, members of Congress did well during the good times of the subprime boom. They got large campaign contributions. Some sweetheart mortgagee deals. A grateful voting bloc. And other largess from the profitable subprime industry. Government did well. Just as they did during the Crédit Mobilier Scandal. And the American taxpayer gets to pay the bill. Some things never change. Government created both of these scandals. As government is wont to do whenever around huge piles of money. For when it comes to stealing from the government, someone in the government has to let it happen. For it takes a nod and a wink from someone in power to let such massive fraud to take place.
Tags: Adjustable Rate Mortgages, America, American Dream, American government, American prosperity, American taxpayer, ARMs, balloon payment, bonds, bubble, California, Campaign contributions, capital, CDOs, Central Pacific, Civil War, code of honor, Collateralized Debt Obligations, Congress, conventional mortgage, cost overruns, Crédit Mobilier, Crédit Mobilier Scandal, credit worthiness, discriminatory, down payment, easy lending, economy, excise taxes, Fannie Mae, federal government, federal loans, federal oversight, financial crisis, financial risk, financing, financing schemes, fixed-rate mortgages, fraud, Freddie Mac, government-sponsored enterprises, graft, Grant administration, Great Depression, GSEs, home ownership, house prices, housing boom, housing demand, housing values, income taxes, individual liberty, inflation, inner city poor, integrity, interest only mortgage, interest rates, introductory period, investment portfolios, land grants, lenders, lifesavings, Mexican-America War, Mexico, miles of track, military, mineral rights, mortgage lending, NINJA loans, no-doc loans, political graft, politician, politics, public land, racism, railroad, refinance, Republic of Texas, risk, risky loans, risky mortgages, securitized, sham company, subprime mortgages, sweetheart mortgagee deals, taxation, Texas, Thomas Durant, transcontinental, transcontinental railroad, U.S. government, Ulysses Grant, underwater, Union Pacific, Washington
IT’S A PROFESSION as old as time. Politics. Prostitution, too.
Hooker: Hey, baby, you got girlfriend Vietnam?
Joker: Not just this minute.
Hooker: Well, baby, me so horny. Me so horny. Me love you long time. You party?
Joker: Yeah, we might party. How much?
Hooker: Fifteen dolla.
Joker: Fifteen dollars for both of us?
Hooker: No. Each you fifteen dolla. Me love you long time. Me so horny.
Joker: Fifteen dollar too boo-coo. Five dollars each.
Hooker: Me suckee-suckee. Me love you too much.
Joker: Five dollars is all my mom allows me to spend.
Hooker: Okay! Ten dolla each.
Joker: What do we get for ten dollars?
Hooker: Every’ting you want.
Joker: Well, old buddy, feel like spending some of your hard-earned money?
(From the movie Full Metal Jacket, 1987.)
In the above scene from Full Metal Jacket, Private Joker (reporter for Stars and Stripes) and Private Rafterman (photographer for Stars and Stripes) are sitting at a table outside a cafe in Da Nang. Minding their own business. The hooker walks up to them. She initiates the conversation. She tells them that for a fee she’ll have sex with them.
Please note that it is the service provider that approached the two privates. They did not go up to random women, offering them money in exchange for sex. Why? Because not all women are for sale. They know this. It would be a waste of their time to ask random women. And it would be rather offensive to the laywoman in the street. Now, Marines may be killers. But they’re polite to the indigenous population.
When you’re selling favors, the onus is on the seller to find the buyers. They have to put the word out that they are for sale (ultra-miniskirt, low-cut tops, high heels, heavy makeup, stand on a corner, flash their ‘wares’, etc.). Or find someone who will broker these sales for them. A pimp, if you will. Or a brothel madam. Or, mamasan, as she is called in Southeast Asia. A prostitute must initiate the process with the ‘john’ (Hey, baby, you got girlfriend Vietnam?). Or she goes to a place where other prostitutes ply their trade to a receptive clientele (such as a brothel).
A prostitute is often a victim of circumstance. Few women seek this life. They’re not shopping one day when a man walks up to them and says, “Wow. I find you beautiful and would like to pay you to have sex with me.” To which she replies, “okay” and leaves one life to start another. It doesn’t happen like that. Often it is some misfortune that forces them into the business. And once there they have but one thing of value that they can sell for subsistence; a young attractive body. For a limited time.
THEY WEREN’T PERFECT. The Founding Fathers had their faults. They knew the evils of a strong central government. And they knew the dangers of a weak central government. John Adams wanted to build ‘wooden walls’ (i.e., a navy) to protect America. Jefferson opposed standing armies and expensive navies. Washington was a nationalist. Hamilton, too. Madison and Jefferson were more states’ rights men. Hamilton was a capitalist and wanted a national bank. Jefferson hated capitalism, banks, cities and Hamilton. It was a rocky start. They had different views about what America should be. But the administrations of the Founding Fathers (Washington, Adams, Jefferson, Madison and Munroe) were for the most part honest. There was partisan fighting, but political corruption was still gestating. Our first Democratic administration would give it real life.
Government was growing. There were more federal jobs to hand out. And with property ownership no longer a requirement to vote, more and more voters had no skin in the game. People were now voting to have a say in how to spend other people’s money. You put the two together and you get political patronage and spoils. Those who help to ‘get out the vote’ to get Democrats elected were rewarded with federal jobs. The more you helped the better the job. And when Andrew Jackson won the election in 1828, federal job seekers overran Washington.
It may have started with the Democrats, but soon everyone was using the spoils of an election victory to repay their most loyal supporters. And government continued to grow. Back then, it was just politics. Egregious, but just politics. Patronage and spoils turned into graft and kickbacks. And the bigger government got, the more money poured into and out of Washington.
Soon, congressmen, senators and presidents steered legislation and/or policy in exchange for sweetheart mortgage deals, vacation junkets, campaign contributions, legal defense funds, retirement of campaign debt, libraries, etc. They were now offering services for a fee. And for a lot more than subsistence. During a limited time. Due to the circumstance of holding public office. Now, they’re not saying “me love you long time,” but they are taking money and someone is getting screwed. And it’s a pretty sweet deal. The prostitute has to earn her money the hard way. She has to put out. A politician, on the other hand, doesn’t. They get rich the easy way. While the public takes it up the pooper.
PEOPLE HATE LOBBYISTS. They hate their influence. They hate Big Pharma, Big Agra, Big Oil, Big Finance and the other ‘Bigs’ that lobby Big Government. But these ‘johns’ only exist because politicians are more than willing (and make it known) that they are for sale. You gotta pay to play in Washington.
Are we to believe that politicians are as pure as the wind-driven snow until a lobbyist corrupts them? Yeah, right. If you believe that be wary of anyone trying to sell you a bridge. It’s a game. And they write the rules. And if you don’t play nice, they can make it pretty unpleasant for you. Anti-business legislation, justice department probes, attorney general investigations, public attacks by administration officials, etc. Nasty things for a business. And costly. Often the cost of avoiding these (i.e., playing the game) is a cheaper option. The business that does not lobby, then, may find themselves under assault by Big Government or at a disadvantage against their competitors who do. So they enter the fray, hedging their bets by throwing large sums of money on both sides of the aisle.
And even though the Republican Party is supposed to be the party of Big Business, have you seen who Big Business often contributes to? More times than not they’re in bed with the Democrats. Who did General Electric endorse in the 2008 election? Obama. Why? You tell me. For I have no idea. They make MRIs. And electricity-generating windmills. I’m not sure how they could benefit by an administration that was going to reform health care and promote green energy. It just baffles the mind.
THE CORRUPTION CONTAGION knows no party lines. Unabashed greed is universal. Especially with other people’s money. Washington has become what the Founding Fathers feared. Big, powerful and awash in cash. Even during record deficits. The days of disinterested public service are long gone. Getting to Washington has become the objective. Not what you do when you get there. Because if you make it to Washington, you leave it rich. And live comfortably ever after.
And now I must apologize to prostitutes everywhere. For they truly earn their money. It is unfair and unjust to compare them to politicians. And the ultimate injustice is the fact that politicians enjoy their services. One of the perks of being in Washington. High-priced call girls at your beckoned call. Paid for, of course, by others.
Tags: America, Andrew Jackson, anti-business legislation, attorney general investigations, Big Government, Big Government, brothel, buyer, Campaign contributions, campaign debt, central government, Congressmen, deficits, Democratds, Democratic, election, electricity-generating windmills, federal, federal jobs, Founding Fathers, Full Metal Jacket, General Electric, get out the vote, graft, greed, green energy, Hamilton, Health Care, high-priced call girls, Jefferson, John Adams, justice department, kickbacks, legal defense funds, lobby, lobbyist, Madison, money, MRIs, Munroe, Obama, patronage, pay to play, Political Corruption, politician, politics, property ownership, prostitute, Prostitution, public office, public service, record deficits, Republican Party, seller, Senators, skin in the game, Southeast Asia, spoils, sweetheart mortgage, vacation junkets, Vietnam, vote, Washington, wooden walls
SLAVERY WAS ALWAYS a complicated issue. Many of the Founding Fathers saw the contradiction with the ideals embodied in the Declaration of Independence. And there were the economic costs. George Washington wanted to transition to paid laborers as the generations of slaves he inherited were consuming an ever growing share of his harvest. (You only pay paid-laborers; you didn’t have to house and feed them and their families.) He had whole families that included babies and the elderly long past their working prime. People would buy slaves in their working prime but wouldn’t take their parents and grandparents, too. He didn’t want to break up the families. And he couldn’t free them. Someone had to take care of those who could no longer work. So he would. Even after death. He freed his slaves in his will and directed his heirs to train and help them so they could integrate into the workforce. (Not every slave-owner, though, was as caring as Washington).
So Washington, John Adams and some of the other Founding Fathers saw slavery as an institution that would eventually wither and die. They saw it as immoral. As well as an inefficient economic system. It would just have to die out one day. So they tabled the discussion to get the southern states to join the union. But they did put an end date on the slave trade. Twenty years should be enough time they thought. And in those 20 years, the South would figure out what to do with the slaves they had. Because no one in the north could figure that one out. Who would compensate the slave owners for their emancipated ‘property’? And there were no biracial societies at that time. No one could imagine that a formerly enslaved majority will become peaceful neighbors with their former minority masters. Especially in the South.
But the cotton gin changed all of that. The one thing that slave labor was good for was big single-crop plantations. And there was none better than King Cotton. Separating the seed from the cotton was the one bottleneck in the cotton industry. Ely Whitney changed that in 1791. Cotton production exploded. As did slavery. The southern economy changed. As did the political debate. The southern economy was a cotton economy. And cotton needed slaves. The South, therefore, needed slavery.
CARVED OUT OF the new Louisiana Territory were territories that would organize into states and request admittance into the union. But would they be free or slave? The first test was resolved with the Missouri Compromise (1820). Henry Clay (the Great Compromiser) kept the peace. Saved the union. For awhile. The compromise forbade slavery north of Missouri’s southern border (approximately the 36th parallel) in the Louisiana Territory (except in Missouri, of course). Martin Van Buren saw this as a temporary fix at best. Any further discussion on the slavery issue could lead to secession. Or war. So he created the modern Democratic Party with but one goal. To get power and to keep power. With power he could control what they debated. And, once he had power, they wouldn’t debate slavery again.
During the 1844 presidential campaign, the annexation of the Republic of Texas was an issue. The secretary of state, Daniel Webster, opposed it. It would expand slavery and likely give the Senate two new democratic senators. Which was what John C. Calhoun wanted. He succeeded Webster as secretary of state. The new northern Whigs were antislavery. The southern Whigs were pro-cotton. The Whig presidential candidate in 1844 was Henry Clay (the Great Compromiser). He wasn’t for it or against it. Neither was Martin Van Buren, the Democrat frontrunner. They wished to compromise and avoid this hot issue all together.
Well, Clay wasn’t ‘anti’ enough for the antislavery Whigs. So they left and formed the Liberty Party and nominated James. G. Birney as their candidate. Meanwhile, the Democrats weren’t all that happy with Van Buren. Enter James Knox Polk. He didn’t vacillate. He pledged to annex Texas. And the Oregon territory. The Democrats nominated him and said goodbye to Van Buren.
The Whig and Liberty parties shared the northern antislavery votes, no doubt costing Clay the election. A fait accompli, President Tyler signed off on the annexation of Texas before Polk took the oath of office.
BUT ALL WAS not well. Those sectional differences continued to simmer just below the boiling point. The Fugitive Slave Law now made the ‘southern’ problem a northern one, too. Federal law now required that they help return this southern ‘property’. It got ugly. And costly. Harriet Ward Beecher’s Uncle Tom’s Cabin only inflamed the abolitionist fires in the North. And then Stephen Douglas saw a proposed transcontinental railroad that could take him to the Whitehouse.
The railroad would go through the unorganized Nebraskan territory (the northern part of the Louisiana Purchase). As Washington discussed organizing this territory, the South noted that all of this territory was above 36th parallel. Thus, any state organized would be, by the terms of the Missouri Compromise, free. With no state below the 36th parallel added, the balance of power would tip to the North. The South objected. Douglas assuaged them. With the Kansas-Nebraska Act of 1854. Which replaced the Missouri Compromise (the 36th parallel) with popular sovereignty. And Kansas bled.
The idea of popular sovereignty said that the people of the new organized state would determine if they were free or slave. So the free and slave people raced to populate the territory. It was a mini civil war. A precursor of what was to come. It split up the Whig and Democratic parties. Southern Whigs and Northern Democrats quit their parties. The Whig Party would wither and die. The new Republican Party would rise from the Whig’s ashes. They would address the cause, not the symptoms. And at the heart of all the sectional divides was the issue of slavery itself. It had to be addressed. As Abraham Lincoln would say in 1858, “A house divided against itself cannot stand.”
ZACHARY TAYLOR CHOSE Whig Millard Fillmore as his vice president to appeal to northern Whigs. When Taylor died some 2 years into his first term, Fillmore became president. His support of the Compromise of 1850 (admit California as a free state, settle Texas border, grant territorial status to New Mexico, end the slave trade in the District of Columbia and beef up the Fugitive Slave Law) alienated him from the Whig base.
In the 1856 presidential contest, the Republicans nominated John C. Frémont. The Democrats nominated James Buchanan. And Millard Fillmore (compromiser and one time Whig) ran on the American Party ticket. There was talk of secession should Frémont win. It was a 3-way race. Buchanan battled with the ‘compromiser’ in the South. And with the ‘abolitionist’ in the North. The race was close. Buchanan won with only 45% of the vote. But Frémont lost by only 2 states. He had won all but 5 of the free states. Had Fillmore not run, it is unlikely that these free states would have voted for the slavery candidate. So Fillmore no doubt denied Frémont the election.
AMERICA’S ORIGINAL TRUST buster, Teddy Roosevelt (TR), said he wouldn’t run for reelection. And he didn’t. He picked Howard Taft as his ‘successor’. TR was a progressive frontier man. He had that smile. This made him a popular and formidable candidate. Taft just wasn’t as much of a TR as TR was. So some asked TR to run again. Against his own, hand-picked ‘successor’. Which he did.
Taft won the Republican Nomination, though. Undeterred (and having a really big ego), TR formed a third party, the Progressive Party. He moved to the left of Taft. So far left that it made Woodward Wilson, the Democrat candidate, look moderate.
The 1912 presidential election turned into a 3-man race. Between 3 progressives. Taft ‘busted’ more trusts than did TR. But he just wasn’t TR. Woodward Wilson was probably the most progressive and idealist of the three. But in the mix, he looked like the sensible candidate. Roosevelt beat Taft. But Wilson beat Roosevelt. Wilson won with only 45% of the vote. And gave us the income tax and the Federal Reserve System. Big Government had come.
IN THE 1992 presidential campaign, George Herbert Walker Bush (read my lips, no new taxes) ran in a 3-way race between Democrat Bill Clinton and Ross Perot. Perot bashed both parties for their high deficits. He was a populist candidate against the status quo. He went on TV with charts and graphs. He called Reaganomics ‘voodoo’ economics. While Bush fought these attacks on his 12 years in the executive office (8 as vice president and on 4 as president), Clinton got by with relative ease on his one big weakness. Character.
Exit polling showed that Perot took voters from both candidates. More people voted that year. But the increase was roughly equal to the Perot vote (who took 19%). If anyone energized the election that year, it wasn’t Clinton. He won with only 43% of the vote. The majority of Americans did not vote for Clinton. Had the focus not been on Reaganomics and the deficit (where Perot took it), Clinton’s character flaws would have been a bigger issue. And if it came down to character, Bush probably would have won. Despite his broken ‘read my lips’ pledge.
HISTORY HAS SHOWN that third party candidates don’t typically win elections. In fact, when a party splinters into two, it usually benefits the common opposition. That thing that is so important to bring a third party into existence is often its own demise. It splits a larger voting bloc into two smaller voting blocs. Guaranteeing the opposition’s victory.
Politics can be idealistic. But not at the expense of pragmatism. When voting for a candidate that cannot in all probability win, it is a wasted vote. If you’re making a ‘statement’ with your vote by voting for a third party candidate, that statement is but one thing. You want to lose.
Tags: abolitionist, Abraham Lincoln, American Party, antislavery, Big Government, Bill Clinton, California, character, Compromise of 1850, cotton, cotton gin, Daniel Webster, Declaration of Independence, deficits, Democratic Party, District of Columbia, Ely Whitney, Federal Reserve System, Founding Fathers, Fugitive Slave Law, George Herbert Walker Bush, George Washington, Harriet Ward Beecher, Henry Clay, Howard Taft, income tax, James Buchanan, James Knox Polk, James. G. Birney, John Adams, John C. Calhoun, John C. Frémont, Kansas, Kansas-Nebraska Act, King Cotton, Liberty Party, Louisiana Purchase, Louisiana Territory, Martin Van Buren, Millard Fillmore, Missouri Compromise, moderate, Nebraskan territory, New Mexico, North, Oregon, plantations, popular sovereignty, Progressive Party, Read my lips, Reaganomics, Republic of Texas, Republican Party, Ross Perot, sectional differences, slave trade, slave-owner, slavery, slaves, South, Stephen Douglas, Teddy Roosevelt, Texas, third party, TR, transcontinental railroad, Uncle Tom's Cabin, union, voodoo economics, Whigs, Whitehouse, Woodward Wilson, Zachary Taylor
THIRD PARTY CANDIDATES are often election spoilers. Dissatisfied with the direction of their party, they leave that party to form a new party. This, of course, will split the party they left. Some may follow. Most will probably not.
Third party candidates have small followings. They typically have a single issue that pushes them to leave their party. That single issue, though, may not be as important to those they leave behind. And this one issue may be anathema to the opposition. Guaranteeing very few, if any, will follow that candidate into a third party.
The Green Party, for example, is an environmental party. Environmental issues, then, dominate their political agenda. Environmental policies typically do not result in jobs or economic prosperity. They will draw some people from the Democratic Party. But only those with extreme environmental views. They will draw no one from the Republican Party which is more associated with jobs and economic issues than environmental issues. They, then, would have little impact on the party they oppose. But they may have a negative impact on the party that they would have otherwise supported.
And then you have your core voters. They have and always will vote for their party. Populist movements rarely change the way they vote. Populist movements may be single-issue. They may be more of a subset of an existing political party. Or they may be vague on details completely. They may be many things but the paramount thing they are is popular. And they pander to the people that are demanding something. And whatever that is, they say they will give it to them. Populist trends, though, don’t sway core voters.
SO WHO ARE in the two core parties? The liberals? And the conservatives?
Liberals are pseudo-intellectuals who want to tell others how to live. Because they are ‘smarter’ than everyone else. Most have never held a real job. They inherited their money or made it big in Hollywood or in some other entertainment genre (the guilty rich), are college professors, sponged off of government (the self-proclaimed political aristocracy) or are in the mainstream media.
Conservatives typically have jobs.
Few people agree with liberals so they have to offer special privileges in exchange for votes and political power. They get the support of the poor because they get the poor dependent on their charity. They get the entertainment elite by stroking their intellectual vanity. They get the various minorities and single-issue groups by throwing a few bones to them (i.e., by buying their votes). They get Big Business with crony capitalism. They get the unions in exchange for anti-business legislation. They get the young by being weak on drugs and morality. They get a lot of women because of their abortion stance. They get the illegal immigration community because they dangle citizenship in front of them while getting as many as they can addicted to welfare (so when they do become citizens they will become good Democrats. Of course, with the majority of illegal immigrants in question being Hispanic, it will be interesting to see how that loyalty will play out. A lot of Hispanics are practicing Catholics. Will they continue to support the party that attacks their religion and religious values? After all, they’re leaving a corrupt nation where only the ruling elite live well. They come here for a better life for themselves and their families. And many work hard for it. With their religious values being a strong part of their lives. Will the liberals tempt them with their welfare state after citizenship? Time will tell).
Many agree with conservatives because they, too, just want to work and provide for their families. And they would like their children’s future to be a good one. (Again, the Hispanic question is interesting. For they have conservative values, too. Amnesty for illegals may be a Faustian bargain, but wouldn’t be ironic if it’s the Democrats who are selling their souls? I mean, this large bloc of Catholics could very well vote for the religious right after citizenship.)
So liberals must appeal to their base during the primary election to get their party’s nomination. Once they have that, they then must start lying about who they really are during the general election. Because their views and opinions are minority views and opinions.
The conservatives just need to be themselves. When Ronald Reagan did just that, he won in a landslide. Twice.
LET’S CRUNCH SOME numbers. Some simple numbers. Let’s say there are only 11 voters. America is a center-right country based on honest polling. So let’s say that 4 voters are conservative and 3 voters are liberals. The 4 in the middle are independents and moderates. So what happens at an election?
If all of the independents and moderates do not vote, conservatives win (4-3).
Liberals cannot win unless some moderates and independents do vote. So liberals must encourage the moderates and independents to vote. And, of course, to vote for them. While making sure their base votes (‘vote early and often’ is their mantra). As well as some criminals. And some dead who haven’t been purged from the election rolls.
Independents and moderates, therefore, determine elections. And the general election is all about getting these votes. Both sides turn down the volume on the ‘extremist’ positions they held during the primaries. Conservatives talk about bipartisanship and reaching across the aisle. Liberals campaign as conservatives. (Bill Clinton ran as a new kind of Democrat with some very conservative planks in his platform. When he won, though, he moved so far back to the left that he lost the House and Senate at the midterm elections, proving once again America is a center-right country.)
So back to our little example. If the conservatives get 2 of the 4 independent and moderate votes, they win (6-5). Liberals need 3 of their votes for the same winning margin. Advantage, conservatives.
Now let’s look at a rift in the conservative party. Two leave and form a third party. And take 2 votes with them. For the sake of argument, let’s say these two call themselves the Anti-Abortion Party. It is doubtful that any liberals will leave their party to join them. And it is doubtful that independents and moderates would make overturning a Supreme Court decision a key voting issue. They tend to tack to a centrist course through the prevailing political winds.
So the Anti-Abortion Party candidate will only get 2 votes. This candidate will not win. That leaves only 9 votes in play. Which means getting only 5 votes will win the election (less than a majority of the total 11). All the third party candidate did was to make it easier for the liberals to win. They only need 2 of the 4 of the independent and moderate votes. Conservatives now need 3. The third party took the conservative advantage (only needing 2 additional votes to win) and gave it to the liberals.
THE MORAL OF the story here is that a vote for a third party candidate is a vote for the opposition. The lesser of two evils may still be evil, but it is still ‘less’ evil. You should never lose sight of that. If a political statement is only going to result in the greater evil, it is better to be more pragmatic than idealistic when voting in a general election.
The energy of a third party or third party-like movements (such as the new Tea Party) should be marshaled during the primary election. To get good candidates who can win general elections. And who will remember that they are the people’s representative, not a member of a privileged, ruling elite.
Tags: abortion, America, amnesty, Anti-business, anti-business legislation, aristocracy, better life, Big Business, Bill Clinton, bipartisanship, Catholics, Center-right, charity, citizenship, conservatives, crony capitalism, Democratic Party, Democrats, economic prosperity, entertainment elite, environmental issues, environmental policies, Faustian bargain, general election, Green Party, guilty rich, Hispanic, illegal immigration, independents, inherited money, intellectual vanity, jobs, lesser of two evils, liberals, mainstream media, midterm elections, minorities, moderates, opposition party, political party, political power, populist, populist movements, primary election, privileges, pseudo-intellectuals, Religion, Religious Right, religious values, Republican Party, Ronald Reagan, ruling elite, single issue, Tea Party, third party, unions, vote early and often, votes, welfare, welfare state
ONCE UPON A TIME, in a distant land, there once lived a merry people. And life was good. They lived together in sweet harmony. They worked long and hard to sustain their happy life. And when people fell ill, they went to the doctor. And after treatment, THEY PAID THEIR OWN DAMN BILL!
But those days are gone. We don’t pay our own doctor bills anymore. Health care is no longer between a doctor and a patient. There’s somebody else involved now. Someone who says what a patient can or cannot have. Someone that tells doctors what they can or cannot do. And our doctors have a bull’s-eye on their backs.
Medical care has taken a back seat to medical costs. It’s not about what’s best for the patient. It’s about what costs the least. Think of a graph. Increasing along the bottom are medical services rendered. Increasing up the y-axis are costs. On this graph picture two curves. One that plots costs of medical malpractice lawsuits (very high when the doctor provides no medical services and decrease as the amount of medical services increase). The other that plots costs of doctor reimbursements for services rendered (very low when the doctor provides no medical services and increases as the amount of medical services increase).
This is what a doctor considers when seeing a patient. They don’t want to. But the system forces them to. Because of the conversion of health insurance (to protect your personal financial wealth) into a benefit/entitlement (to get free stuff with other people’s money). And the rise of that other benefit/entitlement, the malpractice lawsuit as a vehicle to early retirement.
What better way to illustrate how cost takes center stage in our health care today but by some personal anecdotes? So here is a smattering of our collective pasts.
I WAS IN some junior officer training program. It was the last full day. The last training we did was a run on the obstacle course. It was hot. Humid. I kept pushing myself. Now, I’ve suffered dehydration and heat exhaustion before, but whatever hit me wasn’t that. I looked okay. I had one of those ‘spike driven through your skull behind the eye’ migraines. Nausea. Some other discomforts. All we had left was retreat. Where we formed, though, we faced into the setting sun. I asked my CO if he would excuse me from retreat. I just wanted to hit my bunk. To die. Or sleep it off. Whatever it was. Training was over. After retreat, they were going to open the pool for us.
Well, he denied my request. And made me feel like a little girl for even asking. (I regret that moment of weakness to this day). After I was dismissed, he called me back and said, “And if you do vomit in rank, vomit with bearing.” “Yes, sir,” I replied and saluted. Made it through without vomiting. Crawled into my bunk. When my CO saw that I was not partaking in the ‘mandatory’ fun he came to see me. Was about to send my ass to the infirmary. But whatever I had passed. I felt fine. The following day it was as if nothing had happened.
When you got through something like that, you’d be surprised how it impacts you. You ignore things. And live with things.
I HAD A WART once under my thumbnail. I made an appointment with my doctor to have it removed. The day before my appointment, though, was a very busy day at work. Didn’t sleep well the night before, either. So I was tired. And drinking coffee. Apparently, I was the only one. In the afternoon, half a pot was still remaining. From the morning. Nice and black. Thick, too. Like tar. Strong. I finished that pot. Later that night, I had heart palpitations. I rationalized it was from drinking too much coffee.
While getting that wart removed, I mentioned in passing the heart palpitations from the night before. Laughing about it. Last time I drink a pot of coffee, I said. The doctor looked up from the wart and said, “Heart palpitations? That’s serious. This,” he pointed to the wart, “is piddling. Heart palpitations? That’s serious.” The next thing I knew was getting an EKG and sent home with a heart monitor strapped to my chest.
I now thought about those things I was ignoring and living with. Perhaps I was being irresponsible. I mean, I was feeling things in my chest. When I went in to get the results of all those tests, I told him about those things I’ve been ignoring and living with. My test results were fine. I asked him about those other things. He asked, “How old are you? You’re fine. You just have some anxiety. Here’s some Xanax.”
When I mentioned heart palpitations, he couldn’t laugh it off with me. For one, he was a doctor. It’s what doctors do. Save lives. But he also buys malpractice insurance. He was leaving himself open to a lawsuit if he didn’t do everything expected when a patient says he has had heart palpitations. Once those tests came back confirming it was most probably the excess amount of coffee I drank that day that gave me the palpitations, I was just a young, healthy man. Who did not justify any further testing. At least, my insurance company wasn’t going to reimburse any further testing.
My test results looked good. Feeling things in the chest, though, could mean something. A stress test might be prudent. But unless something turned up in that test, the insurance company wouldn’t reimburse that cost. Which meant I would ultimately end up paying for it. And stress tests are expensive. Of course, if I paid cash outside the bureaucracy of the health insurance maze, it could be less. So I said let’s do the stress test. I’m buying. I took the test. Did okay. Didn’t die. Nothing strange happened. The cost? About half of what they would have charged had it gone through the myriad levels of overhead that process an insurance claim (at the health insurance company, at the hospital where the test was done and at my doctor’s office).
And I continued to ignore and live with those things I was feeling in my chest. Even stopped taking the Xanax. If I was feeling any anxiety, it was from my little episode in the health care machinery.
BUT THINGS SEEMED to only get worse after a year or so. I started wondering that maybe I was only making things worse by ignoring them. So I went to the doctor. I explained what I was feeling. He did the perfunctory tests that shrunk the lawsuit window. Again, things looked good. “How old are you?” he asked. “You’re fine. Look, we can keep doing tests but it’s going to get expensive. Your insurance isn’t going to pay for them if nothing turns up. And, I gotta tell you, I don’t think anything’s going to turn up.”
Again, he was looking at the cost-service tradeoff. He felt he had minimized his costs. He did enough testing to protect himself from a frivolous lawsuit. And he didn’t do more testing than the insurance companies would reimburse. Further testing would be on my dime. Not that I didn’t think my life was worth the investment, but more tests would mean more missed work. And with me feeling he wasn’t going to do anything but throw darts in the dark, I didn’t pursue additional testing. It didn’t appear that anything big was wrong so I continued to live with those feelings.
THIRD TIME’S A charm. After another year or so, I went to another doctor. Again, I thought I might be doing more harm by ignoring these things. Being further away from my original heart tests, I didn’t really discuss them this time. Which was good. It was a red herring. You start talking ‘heart’, you look at all things ‘heart’. High risk. High costs. But if you don’t start from ‘heart’, you can explore things that are lower risk and lower costs. I had some serious acid reflux. Acid regurgitating up your esophagus can mimic heart attack symptoms. Who’d a thunk it?
HAVING AN INTERMITTENT problem is hard to diagnose. All but impossible if you’re young. I was a young college student. With intermittent stomach pain. I went to a doctor. He felt me up to see if it was appendicitis. I didn’t feel anything when he pressed over my appendix. So he ruled that out. “How old are you?” he asked. “You’re fine. You just need to get drunk and get laid.”
A couple of years later, I was still feeling that intermittent stomach pain. So I went to another doctor. (It was a clinic. The doctor I saw last since retired.) He felt me up. Ruled out appendicitis. Sent me for an upper GI (where you drink a cup of barium and they x-ray your esophagus and stomach). Test came back. Everything looked fine. “How old are you?” he asked. “You’re fine. Just drink some Maalox.”
So I drank some Maalox for awhile. Didn’t seem to help. Another year and another trip to the doctor. And another upper GI. The instructions this time called for a wait time before one last x-ray. This x-ray showed an ulcer. Just past the stomach at the beginning of the small intestine.
MY MOTHERINLAW WENT into the hospital with chest pains. She was in her mid-sixties. She spent the night in the ICU. The next morning they transferred her to the cardiac care wing. They did just about every test they could. She was elderly. Elderly people have health problems. So doctors do ALL the tests to slam shut the lawsuit window knowing that the health insurance company or Medicare will reimburse for most of those tests. They found nothing. She went home. Without them doing anything or being able to explain what had happened. They had practiced due diligence to protect themselves legally. And the health insurance company would rule that any further testing would be frivolous and unnecessary, only to produce additional revenues for the hospital and doctors.
This repeated a few times until they found pancreatitis and stones in her bile duct.
IT’S NOT THE doctors. It’s not the hospitals. Or the insurance companies. It’s the system. When other people pay your way there has to be rules. For a free ride is not free. We just make other people pay. The problem with all things free? We over consume.
How many plates of food do you eat in a restaurant when you pay per plate? One? How many plates of food do you eat when you eat at an all-you-can-eat buffet? The answer? More. It’s happening in health care. Those with insurance don’t care a whit about cost. Don’t give me generics, I have insurance.
But someone is paying all those bills. And they see this over-consumption. They raise their premiums to cover it. But when they do, they find some people stop buying their health insurance. Which means they have to raise their premiums again. More people stop buying. So they need to raise their premiums again. But they can’t keep doing this. So they have to put in some kind of spending rules. Say what they will reimburse and what they will not. And they force the poor doctor to police this mess who is trying to help you get well at the same time. All the while trying to keep the lawyers off his back.
It’s worse on the Medicare side. For private health insurance has some young, healthy people paying for insurance who aren’t consuming medical care. Everyone in Medicare is sick and/or old. Big consumers of medical care. The trend has been to micromanage the rules more as the consumption of medical care has outpaced the taxes collected to pay for that care. And with an aging population, those costs are running well ahead of tax receipts. It’s not a question of if the program will go bankrupt. But when. And a national health care system will only be worse. The added costs will require massive taxation and cost management worse than any hated HMO.
AND LOST IN the shuffle is the patient. Who, once upon a time, went to his doctor. And the doctor did what was best for the patient. And the patient paid the doctor for his services. And everyone lived happily ever after.
Tags: acid reflux, aging population, anxiety, appendicitis, benefit, bile duct, bureaucracy, chest pains, doctor, doctors, EKG, entitlement, frivolous lawsuit, generics, Health Care, health insurance, heart monitor, heart palpitations, HMO, hospitals, insurance companies, insurance company, Maalox, malpractice insurance, malpractice lawsuits, medical care, medical services, Medicare, national health care system, over-consumption, pancreatitis, patient, premiums, reimbursements, stomach pain, stress test, taxes, test results, ulcer, upper GI, Xanax
THE PROBLEM WITH cost cutters is their vision. They see costs. Not the big picture. Rockefeller was a notorious cost cutter. Even determined he could save money by using a few less welds on his oil barrels. But he saw the big picture, too. He grew sales. Something that cost cutters have trouble doing. He didn’t. In fact, he was so good that it took the government to stop his sales growth.
Roger Smith was a numbers man. He managed costs. Starting in the accounting department of GM, he reorganized GM to make better sense. On paper. To make nice, neat, bookkeeping-like ordered sense. Things tend to work better on paper, though, than in reality. Suffice it to say that few laud Smith as the greatest CEO of GM.
Robert McNamara was also a numbers man. And he ran the Vietnam War by the numbers. He carefully determined what U.S. forces could NOT attack. (Any place outside South Vietnam was basically a sanctuary for the enemy.) And he introduced the body count. There was no strategy to win. Just a policy to verify you were killing more of theirs than they were killing of yours. Wars of attrition, though, take years. And lives. On both sides. Americans don’t like sitting back and waiting for enough of their sons to die to declare victory. McNamara failed to see the big picture. Strategy. He just tried to make the combat efficient. Which did little to inhibit the enemy from making war.
Managing costs is important. It can improve profits. But it can’t grow sales. And if you can grow sales, you’ll be able to pay your costs. Even if they are high and inefficient. Few companies fail because they have a cost problem. They file because they have a revenue problem. They lack sales. Cost cutting cannot fix this problem. It can temporarily help reduce operating losses. But if you don’t increase sales, you’ll probably fail in the long run.
There are detail people. And people with vision. Rarely are people both. Rockefeller was. Smith and McNamara were detail men. They could not see the forest for the trees. And this is the problem in health care. We’re not looking at the big picture of medical care. We’re looking at the details of cost.
YOU WOULD THINK that doctors would oppose the government taking over health care. Because when governments do, they tend to put salary caps on doctors. Kinda diminishes the return on all that costly medical training. I talked to two recently who favor a national solution. Why? Because of costs. They like Medicare. Because it’s simple. Most of their patients are seniors. So the bulk of their billings are uniform. Medicare reimbursements. They like anything that simplifies their overhead costs. Private insurance companies don’t do this. They’re not all the same. Different people to call. Different procedures. Different approved tests. Different paperwork. And more of it. And a bigger staff to handle it.
Doctors hate paperwork. No doctor ever went through medical school because they wanted to shuffle paper. Or because they wanted to fend off malpractice lawsuits. Doctors are under a bureaucratic assault. They spend more time with paperwork than with patients. And paperwork does have a cost. As do frivolous lawsuits. A government takeover would standardize the one. And, hopefully, eliminate the other.
I understand these doctors’ concern. But they can’t see the forest for the trees. Government is not going to approach health care from a medical basis. They’ll approach it from a cost basis. They’ll use statistical analysis. They will manage care to maximize cost efficiency. They will approach health care like Smith did in GM and McNamara did in Vietnam. They’ll crunch the numbers. Then determine what health care is cost effective.
THEY PROBABLY NEED no introduction. Most people are family with the British comedy troupe called Monty Python. Funny, a bit naughty and rather bookish, they’ve appealed to the masses across generations. They spent a lot of time researching before making some of their movies. Reading books. The realism it adds made some of the funniest scenes. A Roman centurion gives a Jewish terrorist a Latin lesson at the point of a sword (Life of Brian). Dennis the constitutional peasant arguing with King Arthur (Monty Python and the Holy Grail). And this scene from The Meaning of Life during a live birth lampooning the British National Health Service:
Nurse: The administrator’s here, doctor.
First Doctor: Switch everything on!
[They scramble to do so. Machines turn on with flashes and sounds. The administrator enters.]
Administrator: Morning, gentlemen.
First and Second Doctors: Morning Mr. Pycroft.
Administrator: Very impressive. Very impressive. And what are you doing this morning?
First Doctor: It’s a birth.
Administrator: Ah, what sort of thing is that?
Second Doctor: Well, that’s when we take a new baby out of a lady’s tummy.
Administrator: Wonderful what we can do nowadays. [A machine makes a ‘ping’ sound.] Ah! I see you have the machine that goes ‘ping’. This is my favorite. You see we leased this back from the company we sold it to. That way it comes under the monthly current budget and not the capital account. [They all applaud.] Thank you, thank you. We try to do our best. Well, do carry on.
This is funny. Because it’s true. When we approach health care on a cost basis. You must show you need and use every piece of expensive equipment you have so it stays in the budget. And the administrators administrating health care don’t understand health care. They understand and make their decisions based on numbers in columns. And speaking of numbers in columns.
ONE THING STANDS out more than everything else when looking at numbers in columns. In one cost column in particular. Of all the costs in columns, one dwarfs all others. The costs in treating very sick and very old people. You can cut and trim the budget everywhere else but you won’t make a dent in overall costs. Unless you cut and trim this one column. Manage these costs. Do some statistical analysis on these costs. For if you cut THESE costs, it will make a difference. It could even stave off bankruptcy without having to further raise taxes. Yes, we can make the system more financially sound if we just stop treating so many sick and old people.
But it’s a body count mentality. You have to willingly accept a defined number of additional deaths. The Soviets were willing to trade 10 lives for one against the Nazis. A steep price to pay. But it did wear the Nazis down and lead to victory. There was a similar ratio in Vietnam with America on the better side of that ratio. But it was still too high a price for Americans. It goes against our nature to think in terms of ‘acceptable’ losses.
But there will have to be a line that health care will approach but does not cross. Where there are ‘acceptable’ losses. Statistical analysis will take into account probable remaining years of life in a potential patient. If few, the system will assign an appropriate value of care to match the health care expenditure with the expected return on the medical treatment. People with more probable years of life left will receive more health care treatment. People with fewer years left will receive less. We’ll help manage their pain until they no longer feel that pain. For it would be inefficient to spend a lot of money on someone who is going to die ‘soon’.
Perhaps I can best summarize this in song.
When you were young and your heart was an open book
You used to say live and let live
(you know you did, you know you did you know you did)
But in this ever changing world in which we live in
Makes you give in and cry
Say live and let die
Live and let die
Live and let die
Live and let die
(Live and Let Die, Paul McCarthy)
And that’s what bureaucrats will use all that statistical analysis for. To determine who to let die. You can sugarcoat it anyway you’d like, but it comes down to this. A bureaucrat, not a doctor, will have the power of life and death as they decide what health care is appropriate and prudent. As it must be under a system where bureaucrats distribute limited resources on a cost basis. They will have no choice but to deny care that is not in the budget.
ONE PUZZLING THING about health care is that it is perfectly acceptable to approach it from a cost basis but not on a revenue basis. For it is immoral to profit on health care. Pity, because introducing market forces is one sure way to bring down costs. People are willing to pay for medical services. They pay for abortions. And abortion clinics are readily available. The free market laws of supply and demand work for abortions. And so they would for other outpatient medical services.
Instead of running a battery of tests because an insurance company requires this incremental approach of the cheap stuff first, you could go to an MRI (or some other expensive procedure) clinic and pay out of pocket. Because they do nothing but MRIs, they achieve economies of scale. The clinic makes money by offering low cost, high quality MRI scans that result in a high sales volume. You benefit because you miss less work. The doctor benefits because he gets your MRI scan results without additional paperwork to process. I’m sure a market is there just waiting for an entrepreneur to come along. I mean, if you can make money by performing abortions, you should be able to make money with some non-invasive, high-tech machines.
HEALTH CARE SERVICES will not become more affordable and more readily available by cutting costs. If the bean counters try, they’ll damage the quality of health care. Because the bean counters rarely look at the big picture. You need someone with vision. Because no cost cutter ever saved a business. Or made the world better.
Tags: abortion, abortion clinics, America, bean counters, Big Government, billings, body count, British National Health Service, budget, bureaucrat, Business, cost, cost cutters, cost effective, cost efficiency, doctors, economies of scale, entrepreneur, frivolous lawsuits, GM, Health Care, insurance, Life of Brian, limited resources, Live and let die, malpractice lawsuits, Managing costs, market forces, Meaning of Life, medical care, medical services, medical training, Medicare, Monty Python, Monty Python and the Holy Grail, MRI, Nazis, non-invasive, old people, paperwork, patients, profit, reimbursements, revenue, Robert McNamara, Rockefeller, Roger Smith, salary caps, sales volume, seniors, sick people, South Vietnam, Soviets, statistical analysis, supply and demand, taxes, Vietnam War, war of attrition
THE LONGER YOU live, the more you see and hear. Here’s a smattering of our collective experiences.
YOU CAN LEARN a lot working in a small business. I did. I did about everything you could in a small business. Including keeping the books. And getting fired. Over money. It’s always about money, isn’t it? And broken promises. But I digress.
The business owner had a couple of kids. As did some other ‘key’ employees. I didn’t. I was a young, single man. Rarely went to the doctor. So the ‘Cadillac’ health care plan we had meant little to me. But it was important to them. So important that it was a serious financial burden to the company. The owner scrimped and saved elsewhere to maintain it. Including my salary.
I helped to bring us through a difficult time. I did my part. Now it was time for the owner to do his part. But he forgot those promises. (Important life lesson? Get things in writing.) We had words. I considered my options all the while dealing with one of the ‘key’ employee’s wife. Who was always calling to bitch about the medical plan. She didn’t like her co pays, that the non-generic drugs cost more, being billed for something that SHE thought should have been covered, etc. I talked to her (it seemed like) at least once a week. So and so who worked at such and such didn’t have to pay for this or that or the other thing. And, perhaps, in some fairyland, they didn’t. Our plan was good. Above average. She just didn’t want to pay for anything. In fact, she wanted the business to pay for the things the plan didn’t cover. She wanted it all. But didn’t want to pay a dime for any of it.
She thought it was an outrage that she had to pay her bills. But she took the health care. Just wanted others to pay for it. Even if cuts had to be made elsewhere. Even if others didn’t get promised raises or bonuses. As long as the cuts didn’t affect her.
My experience is only a microcosm, but it applies to the big picture. Our health care system is the best in the world. But the way we go about paying for our health care is threatening to destroy that great system. We’re voting ourselves the treasury. We want more and more things but forget that old saying. There’s no such thing as a free lunch. Costs are costs. And someone has to pay them. If we don’t, others have to. Until they choose not to. And then what are we going to do? Run to government?
Well, yeah. There has to be someone we can take more money from. Make those young and healthy people buy insurance so more people contribute into the big insurance pot and bring down the cost per person. If they pay more, I wouldn’t have to pay as much. Or my fair share.
Don’t like that? Why, then let’s just nationalize it. Wait a tic, nationalize care sucks. So let’s not nationalize it. Let’s do that other thing. It’s just like nationalizing but we get to keep the things we have now. Single payer. Yeah, that’s it. Let’s go with a single-payer system. We keep the care we have and tax the rich to pay for it.
Or let’s be like Canada.
I DROVE INTO Quebec once from upstate New York. At Canadian customs, the guy asked if I had any cigarettes.
“No,” I said.
“Really?” he asked.
“No,” I said. “I don’t.”
“Come on. You must have some cigarettes.”
“No. I don’t have any cigarettes. I don’t smoke.”
“I don’t believe you.”
“Well, I don’t.”
He stared at me, smiling. Waiting for me to break, I guess. I didn’t. I was confused. Customs never interrogated me like that before. He kept staring. And smiling. I looked backed. Befuddled.
“Okay,” he finally said. “You can go.”
And I did. Found out later what that was all about. Obscene cigarette taxes. In an effort to stop people from smoking cigarettes. But it opened a huge black market. Drug dealers switched from smuggling in drugs to smuggling in cigarettes. It was as profitable. And less punishable. If caught.
CANADA HAS A large tourism industry. And high taxes. They tax everything. Making it costly to be in Canada. They have a Value Added Tax (VAT). It’s called the Goods and Services Tax (GST). That means they tax most goods and services you pay for from the first level of being to its final delivered form. They tax the thing you buy. And they tax the things that made that thing you buy. At every level, when someone adds value, they add another GST. Taxes upon taxes. They can collect a lot of money. But they also raise prices. Which makes everything more expensive. So Canadians can’t afford to buy as much as they once did. Less demand contracts supply. Lays people off. They spend less. Pay less in taxes. Collect unemployment benefits. Government collects less and spends more. Deficit spending. They raise taxes to offset the deficit spending. And the cycle repeats.
There’s been talk about establishing a VAT in the United States. Because of out of control government spending. Those who support it say it will help the economy. They lie. Taxes don’t help economies. At least, they haven’t yet.
In order not to hurt their tourism industry the Canadians (for a time, at least) let tourists get a refund on the provincial and GST taxes paid while in Canada. Canadians have no choice. But tourists do. They could choose not to go Canada. So they allowed the refund because they knew that higher taxes don’t stimulate consumer spending. And they wanted stimulated consumers to come to Canada to spend.
SOME CANADIANS DO have a choice, though. Those who live near the US-Canadian border. I’ve worked with Canadians who traveled to America to work. They love their country. Believe America could learn a lot from her. But they buy their gasoline in the States. And everything else they can to escape their own high taxes.
WHEN MY DAD was in the hospital for quintuple bypass surgery, a few of his nurses were Canadian. They said a lot of Canadian doctors and nurses crossed the border into the United States for better paying jobs. My dad had no complaints. They were good nurses. He was grateful for their care. That’s what high paying jobs do. Attract high quality talent.
I SAW A fund drive once while in Canada. There was a sign on the lawn with a colored-in bar showing where they were in achieving their goal. A hospital was raising money to buy something. An MRI machine. For there was none in this medium-sized Canadian city.
I WAS AT a small community hospital (in an American city) walking the grounds with the facilities manager. He had to close a small road intersection on campus that doubled as the helipad. The university hospital’s medical helicopter was making a test flight to this small hospital. I asked him if they flew in many patients here. He said no. But they flew critical patients at this hospital to the university hospital (about 30 miles away) where they had a better chance for survival.
I ONCE WENT on a skiing vacation throughout New England and Quebec. I skied Jay Peak, Mont Tremblant, Mont-Sainte-Anne, Sunday River, Stowe and Killington. I remember a helicopter flying overhead at one. (It’s been awhile, but I think it was in Canada). There was a sanctioned FIS ski event there. Part of the requirements for a high-speed ski event is a readily available rescue helicopter to immediately air-lift a seriously injured skier off the hill.
NATASHA RICHARDS HAD a freak accident while taking a ski lesson at Mont Tremblant in Quebec. She fell. Like we all have while skiing. She got up. Like most of us do. Laughed it off. She felt fine. But there was now a silent killer at work. She declined immediate medical attention. After awhile, she started to feel ill. She would subsequently die from an epidural hematoma due to a blunt impact to the head. A shame it was only blunt. Had it knocked her unconscious, she may have survived. That would have demanded immediate medical attention.
She died because her initial injury was not painful enough. She therefore had little cause for concern. As many of us no doubt would have if we were in her place. Critical time was lost. Time that she couldn’t get back. There’s no one to blame. It was a freak accident. What made the headlines, though, was an interesting fact. The province of Quebec did not have a single medical helicopter (probably wouldn’t have made a difference for Richardson). The province had determined that the cost of a helicopter system was greater than the perceived benefit.
SO THERE’S A smattering of health insurance, tax and health care anecdotes. A small smattering, but nevertheless a smattering you can draw some conclusions from. First and foremost, people are cheap bastards. And they have an entitlement mentality. Put the two together and you’ve got an ever-expanding, under-funded, welfare state. And that can only lead to one place. Bankruptcy.
You can’t keep raising taxes on people to solve problems. They’re just not going to whistle a happy tune and keep paying. They will make efforts to evade those taxes. Or they’ll simply cut back on their spending. And when they do, they will create other problems in the process. Those unintended consequences that have bedeviled government planners since the dawn of government planning.
The Canadian health care system is not the utopia some claim it to be. It’s big. And costly. Bureaucrats conduct cost-benefit analysis. It’s cold and impersonal. What is the cost per unit life saved by having a medical helicopter system? Does the mean wait-time justify adding another MRI in a geographic region? Or would the resultant excess capacity from a second MRI be too wasteful? And what is the acceptable mean wait-time for a procedure? Would a 2% cost savings from a reduction in staff be acceptable if the corresponding rise in mortality rates is kept at or below 1%? It’s all very analytical and rational. But when it’s your loved one in a critical condition, you’re rarely analytical and rational. And you’ll do just about anything. Even go to the United Stated and pay out of pocket for medical care.
Of course, if the United States adopts a Canadian system, the Canadian system should improve. Without those better paying jobs a short drive from the border, those doctors and nurses would probably stay in Canada and work within the Canadian system.
Tags: air-lift, America, Bankruptcy, black market, bypass surgery, Canada, Canadian health care system, Canadians, cigarette taxes, co pays, consumer spending, cost-benefit analysis, Costs are costs, doctors, entitlement mentality, epidural hematoma, FIS, free lunch, Goods and Services Tax, government planners, government planning, GST, health care plan, health care system, health insurance, high paying jobs, high taxes, Jay Peak, Killington, medical helicopter, Mont Tremblant, Mont-Sainte-Anne, MRI, Natasha Richards, nationalize care, non-generic drugs, nurses, Quebec, rescue helicopter, Single payer, single-payer system, small business, smuggling, Stowe, Sunday River, tax the rich, the States, tourism industry, unintended consequences, United States, US-Canadian border, value added tax, VAT, welfare state
YOU CAME IN with a grand ‘to lose’ but have been riding a hot streak. You’re up 5 grand. And feeling luckier still. You came in with a grand, you think, so you can just as well leave with a grand. So you bet 5 grand. Cause those cards have been so good to you tonight. And there it is. Blackjack! And just as you’re about to shout to the heavens you see the dealer throw an ace on his down card. The dealer asks, “Insurance?”
You don’t want to but you just KNOW what’s under that ace. All of a sudden you’re not so cavalier about losing 5 grand. Too many friends have told you the same story. “I was up 5 grand until that last hand.” You could cry. You don’t buy insurance. Only suckers buy insurance. That’s what you’ve always said. But when you’ve got 5 grand on the table, the dealer can’t have anything but blackjack. You know it. He knows it. And your wife knows it even though she’s off playing the slots somewhere. You pull out $2,500 from your ‘do not touch’ money and buy the insurance. (Let’s end this on a happy note. The down card was a queen. You walk away as if that last hand never happened, $5,000 richer. Less taxes, of course.)
LIFE’S BEEN GOOD. You’re making good money. You have a beautiful wife and 3 great kids. You just sold that small house and moved into that big house you always wanted for the holidays. Cost a pretty penny. But you had $75,000 in equity in the old home. And cashed in a CD to furnish the new one with some nice new toys. After all, life has been good.
The mortgage stings a little, but not too much. You’ll get by. You got all the big things you’ve wanted. Now you can settle in and live modestly in your new home. And you bought insurance up the wazoo. If there is fire, flood, theft or death, no worries. Well, there’ll be some worry, but you won’t financially ruin your family. They’ll keep the house. And there will be college for the kids. Because you were responsible. You protected the greatest investment of your life. Yes, things have been good. But not good enough to pay for everything twice.
TRADE EXPLODED IN the 17th century as little wooden ships crossed the oceans. Storms and rough seas, though, toss around little wooden ships. A lot of them sank. With their cargoes. But they didn’t all sink. So owners insured their ships and cargoes. For a nominal fee, they protected their investment. For those that didn’t sink, the insurance wasn’t much of an added expense. For those that did sink, it paid to replace the lost ship and cargo.
YOU’VE ALWAYS WANTED to open a restaurant. And your dream finally came true. You saved for years. You scrimped on vacations. Didn’t by a new car. Expensive toys. No. Your years of denying yourself the little pleasures in life saved up enough money to buy that restaurant. To put enough money down to borrow to fit out the kitchen and dining area. To stock your fridge, freezer and pantry. You maxed out your credit and sunk your life savings into your dream. And you’re loving it. But you don’t want to lose it. So you have all the insurances. Fire. Property. Workers’ comp. Liability. So in case of fire, celebrating students (who trash the town after winning the championship), a strained employee back or an E. coli outbreak (because an employee didn’t wash his hands after using the toilet), you’re protected. Your business may suffer, as they are wont to do after an E. coli outbreak, but the lawsuits won’t leave you destitute.
BEING IN THE NFL is a dream come true to many athletes. But it can be a brutal occupation. Compared to other professional sports, it has a short season. Why? Attrition. Concussions, broken bones, torn ligaments and contusions take their toll. The short season allows a longer healing period. And time for surgeries.
Players can make obscene amounts of money. But they can also suffer a career-ending injury in the first year of a multi-year contract. Great playing potential means great earning potential. If you stay healthy and play. Of course, if injured, all gone. Some players insure against a career-ending injury. Lloyd’s of London will insure an athlete. For a price. It ain’t cheap. But if it keeps you from losing, say, 20 million in earnings, it could turn out to be quite the bargain. If you’ve got huge potential.
THE MOST PRECIOUS gift we all have is our life. So we take care of it. We watch what we eat, don’t drink, don’t smoke, don’t take drugs, don’t speed in our cars or while on our motorcycles, don’t drink and drive, don’t drive around flashing railroad crossing barriers, don’t binge drink, don’t have unprotected sex, don’t play with matches or run with scissors and don’t do that thing where you jump up on a railing with a skateboard and fall, crushing your testicles on the railing and hitting your head on the concrete step. No, we exercise, go to bed early and eat a lot of bran.
All right, we probably don’t eat as much bran as we should. And maybe we do a risky thing or two. But we understand that those risky things we DO do can cost us. Could wipe us out financially. So we buy insurance to protect our life savings in the event of a catastrophic event that could be medically very expensive.
Or do we?
EVERYONE THAT HAS ever bought blackjack insurance didn’t get a winning blackjack hand. Everyone that has ever bought homeowner’s insurance didn’t get a new home with their policy. Everyone that has ever bought mariner’s insurance didn’t get a ship and a cargo of goodies with their premium payment. Everyone that has ever bought business insurance didn’t get a business with their payment. And an NFL player doesn’t get a dime from Lloyd’s of London until something pretty horrible happens first. No. These purchases were ‘just in case’. Most people will never get anything for their payments (other than peace of mind). Only those who suffer a loss will. And those that do will have mitigated their financial losses with the insurance they so wisely purchased. And they will get on with their lives.
This is insurance. We use it to protect our wealth. It takes a lot of time to accrue it. So when we have it, we tend to protect it. We do risky things. And insurance manages that risk. So we don’t lose everything we have because of a catastrophic event.
We don’t think like this when it comes to health insurance, though. We don’t think of health insurance as a way to manage our risk. We look at it as a free ride. If we have it, we expect free health care. We want everything. But we don’t want to pay for anything. Free mammograms. Those blue pills for the old johnson. Heart valves. Prenatal care. Child vaccination. Etc.
The problem is, these things cost. A lot. And if anybody can have them, those who actually pay for insurance have to pay for them. And they’ll be paying for things they aren’t using. All those things listed above mean nothing to a young single male. But he’s helping to pay for that stuff. Either by his premium contribution. Or in lost wages. Because an employer can’t afford such quality health insurance AND high wages.
Health insurance has become nothing more than a wealth transfer. It’s like a Ponzi scheme. A large and ‘growing’ group of healthy young people pay into the system and collect few benefits. The ‘fewer’, older, sicker people pay little into the system but consume the lion’s share of the benefits. At least in theory. But like social security, and all Ponzi schemes, the theory doesn’t work in practice.
AMERICA HAS THE best health care in the world. If you judge by where the affluent go for their health care. They go to America. And the best is never cheap. You get what you pay for. And if you want the best, expect to pay. A lot.
All right, we have the best and some of the most expensive health care in the world. Add to that an aging population. What do you get? A shrinking group of people (the young and healthy) paying for a growing group of people (the old and sick). That means the burden on those paying into the system has to what? It has to keep getting bigger.
But it can’t. The young and healthy will just opt out. Eventually. When it gets to the point that it’s a car payment or a health insurance payment, what do you think they’ll choose? Their annual health care expenses for an entire year may not equal one premium payment. So they’ll say screw that. And do. A lot of young do not have health insurance because they choose not. It’s just too fricking expensive. And this just shrinks the shrinking group more. Which increases the amount those with insurance pay. And so it goes.
AND YOU DON’T fix this problem by nationalizing health care. That doesn’t address the problem. You have to tie the cost to the benefit. People only chose to pay for things they get. Those receiving the benefit, then, need to pay its cost. Like we do with every other thing in our lives. You want a TV you pay for a TV. You don’t pay for one so your neighbor can have one. TV prices are very reasonable, too. They keep coming down. The quality is fantastic. And so it would be in health care.
Single payer health care insurance ain’t the answer either. Because it’s not insurance. It’s a wealth transfer. That means it’s political. It will serve political ends. Not make good health care. First of all, they’ll force the young and healthy to pay for insurance under penalty of law. Or they’ll raise taxes until it hurts. Then they’ll cut costs. First by limiting what doctors can earn. Then they’ll limit the profits the pharmaceuticals can make. Then the medical device makers will have their turn. Soon, people won’t want to be doctors any more. Or make new and life saving drugs. Or make medical devices. So when the supply of these things falls, rationing must follow. And if you really want to cut costs, there’s really only one place to do it. The really sick and the really old. These people, after all, consume the lion’s share of health care services.
We don’t have a health care problem. People are living longer than ever. We have a dependency problem. The current system has made us dependent on others for our health care. And dependency kills. It cowers a people. Takes away their dignity. Makes them subservient. People live in fear. Of what they may lose. Nationalizing health care will only make us more dependent. It’s not the answer. Unless you want to conquer and subjugate a people. I mean, how many of you have stayed at job you absolutely hated because of the health insurance? If that ain’t subjugated, I don’t know what is. As bad as that was, at least you got something for it. Good health care. If you think you’re going to get that under a national system, think again. Or ask those people with a national system that come to this country for better care.
Tags: aging population, America, benefits, Blackjack, business insurance, career-ending injury, cargoes, catastrophic event, cut costs, dependency problem, doctors, earning potential, financial losses, fire insurance, flood insurance, free health care, health care problem, health insurance, healthy young people, high wages, homeowner's insurance, insurance, investment, liability insurance, life insurance, life saving drugs, little wooden ships, Lloyd's of London, lost wages, mariner's insurance, medical devices, nationalizing health care, NFL, penalty of law, pharmaceuticals, Ponzi scheme, premium payment, property insurance, raise taxes, rationing, risk management, ships, Single payer health care insurance, Social Security, wealth, wealth transfer, workers' comp insurance
ECONOMIES OF SCALE and vertical integration can do two things very well. Make industrialists rich. And make the things they sell cheap.
The more you make, the less each thing you make costs. Businesses have fixed costs. Big one time investments in plant and equipment. Businesses have to recover these costs. Each thing they sell has a portion of these fixed costs added to its price. The more they sell, the less they need to add to each unit sold. This is economies of scale. Think of bulk goods. Warehouse clubs. Places where you can buy large quantities of things at lower unit prices. You may buy an ‘economy pack’ of 3 bottles of shampoo shrink-wrapped together. The purchase price of a 3-pack will be greater than the price of a single bottle of shampoo at your convenient corner drug store. But the unit cost of each of the bottles in the 3-pack will be less. You save more over time by buying 3 bottles at a time. Spending more, then, means spending less. In time.
Few of us buy raw materials. Few have a need for crude oil. Iron ore. Coal. Limestone. Manganese. But they make the stuff we buy. A lot of things have to happen before those raw materials make it to us in those things we buy. It has to be mined or drilled/pumped. Transported. Processed. Stored. Transported again. Processed again. Stored again. Transported again. There are many different stages between extracting raw materials from the earth and incorporating them into a final product we consumers buy. At every stage there are costs. And inefficiencies. Which add to costs. By reducing these costs along the way, the component materials used at the final manufacturing stage cost less. This reduces the selling price of the final product. This is what vertical integration does. It puts everything from the extraction of raw materials to the incorporation of those processed materials into the final product for sale under control of the final user. It brings in a high level of quality, cost containment and reduction of inefficiencies into the entire process resulting in a high quality, mass produced, inexpensive product.
Not everyone can do these things. You have to live and breathe the industry you’re in. You have to understand it intimately. An industrialist at the top of his game can do this. A politician can’t. States trying to take control of their economy have failed. Every time they’ve tried. Why? Politicians are ‘intellectuals’. They’ve never run a business. They only thought about it. And, somehow, that gives them the moral authority to tamper in something they are simply unqualified to do. And when they meddle, they destroy. Purposely. Or through unintended consequences. In the process, though, they enrich themselves. And their cronies.
ANDREW CARNEGIE WAS a brilliant entrepreneur. After working for a railroad, he saw the future. Railroads. And he would build its rails. And its bridges. With his Keystone Bridge Company. Which used steel and iron. So he built his Union Mills. Which needed pig iron. So he built his Lucy blast furnace. Which consumed raw material (iron, coke, limestone). So he secured his own sources of raw materials.
His Lucy blast furnace set world records, nearly doubling the weekly output of his steel competitors. No one made more steel than Carnegie. For less. In about 20 years, he brought the price down for steel rails from $160/ton to $17/ton. And got rich in the process.
Economies of scale. Vertical integration. And innovation. Carnegie hired the best people he could find and used the latest technology. Always improving. Always cutting costs. Always making steel more plentiful. And cheaper. His steel built a nation. Dominated the industry. And destroyed the competition. Of course, that drew the attention of the government. And they tried to break up the steel giant because it was unfair to the competition. Who couldn’t sell steel as cheap as he could.
JOHN D. ROCKEFELLER was a brilliant entrepreneur. After trying the oil drilling business, he saw the future. The refining business. For America lit the night with kerosene. And he would provide that kerosene. At prices that a poor man could afford. And he did. And he saved the whales in the process (his cheap kerosene put the whale oil business out of business).
Like Carnegie, cutting costs and production efficiencies consumed him. He built his own kilns and used his own timber for fuel. He made his own barrels from his own timber. He used his own horse-drawn carts, boats, rail cars and pipelines. He bought up competitors. He grew to dominate the industry. By far the biggest shipper, he got better shipping rates than his competitors. And he constantly innovated. When others were dumping the gasoline byproduct from refining kerosene into the river (no internal combustion engine yet), he was using it for fuel. He hired the best talent available to find a use for every byproduct from the refining process, giving us everything from industrial lubricants to petroleum jelly (i.e., Vaseline).
His company, Standard Oil, was close to being a monopoly. When they controlled 90% of the market kerosene was never cheaper. He brought the price down from $0.26/gallon to $0.08/gallon. And that was an outrage. We can’t allow any one company to control 90% of the market. Sure, consumers were doing well, but the higher-cost competitors could not stay in business selling at those low prices. So the government broke up Standard Oil via antitrust legislation (the Sherman Act). To protect the country from monopolistic practices. And cheap kerosene, apparently.
BILL GATES WAS a brilliant entrepreneur in building Microsoft. The personal computer (PC) was new. You couldn’t do much with it in the early days unless you were pretty computer savvy. But programs were available that made them great business tools (word processing and spreadsheet programs).
IBM created the PC. And they licensed it so others could make IBM-like machines. IBM clones. The PC industry chewed each other up. But Gates did well. Because all of these machines used his operating system (Microsoft’s Disk Operating System – DOS). Apple developed the Macintosh (with a mouse and Graphical User Interface – GUI) but it was expensive. Anyone who used one in college wanted to buy one. Until they saw the price. So they bought an IBM clone instead. And when Gates came out with Windows, they were just as easy to use as the Macs.
Because of the higher volume of the IBM platform sold, Microsoft flourished. Software was bundled. New machines came preloaded with Windows. And Internet Explorer. And Windows Media Player. You got a lot of bang for the buck going with a Windows-based PC. And Windows dominated the market. Consumers weren’t complaining. Much. Sure, there were things they did bitch about (glitches, drivers, viruses, etc.), but it sure wasn’t price.
Of course, Microsoft’s competitors were hurting. They couldn’t sell their products if Microsoft was giving away a similar product free. Because they were hurting their competitors, the government tried to break up the company with the Sherman Act.
THE NORTHERN SECURITIES SUIT of 1902 found a holding company guilty of not yet committing a crime. Teddy Roosevelt’s administration filed a Sherman antitrust suit against Northern Securities. This was a holding company for Northern Pacific, Great Northern, and Chicago, Burlington, and Quincy Railroads. What’s a holding company? It replaced a trust. Which large corporations created in response to government’s attacks on large corporations.
Small competitors feared large corporations. They could not compete against their economies of scale and vertical integration. The little guys couldn’t sell things as cheap as the big corporations could. So the government intervened to protect the little guy. So they could sell at higher prices.
But businesses grow. All big corporations started out as little guys. And the growing process doesn’t stop. So the big corporations had to find other ways to grow. They formed trusts. Then the trust-busters busted up the trusts. The next form was the holding company.
The trust-busters said that the big corporations, trusts and holding companies were all trying to become monopolies. And once they eliminated all competitors, they would raise their prices and gouge the consumers. Northern Securities never did. But they could. So they were guilty. Because they might commit a crime. One day.
ALL BUSINESS OWNERS aren’t morally ethical and honest. But the market is, albeit cruel. Economies of scales will always put the little guy out of business. Sad, yes, for the little guy. But for every little guy put out of business, millions of consumers save money. They can buy things for less. Which means they have more money to buy more things. New things. Different things. From new little guys who now have a chance with this new surplus of purchasing power.
But when politicians get involved, consumers lose. When they help a competitor, they help them by keeping prices high. To keep competition ‘fair’. For the politically connected.
Consumers never complain about low prices. Only competitors do. Or their employees. Those working on whaling ships didn’t like to see the low price of Rockefeller’s kerosene. But the new refining industry (and its auxiliaries) created far more jobs than were lost on the whaling ships. We call it progress. And with it comes a better life for the many. Even if it is at the expense of the few.
Tags: America, Andrew Carnegie, antitrust legislation, Apple, bang for the buck, Big Government, Bill Gates, bulk goods, Business, Coal, competition, Consumers, cost containment, costs, crude oil, cutting costs, Disk Operating System, DOS, economies of scale, economy, entrepreneur, fixed costs, gasoline, graphical user interface, GUI, holding company, IBM, IBM clones, industrial lubricants, industrialist, industrialists, inefficiencies, innovation, intellectuals, internal combustion engine, Internet Explorer, Iron ore, John D. Rockefeller, kerosene, Keystone Bridge Company, large corporations, Limestone, Lucy blast furnace, Macintosh, Macs, Manganese, manufacturing, materials, Media Player, Microsoft, monopolies, monopoly, moral authority, Northern Securities, Northern Securities Suit ofr 1902, oil drilling, PC, personal computer, petroleum jelly, pig iron, plant and equipment, politician, predatory pricing, progress, railroad, raw materials, refining business, refining process, selling price, Sherman Act, spreadsheet, Standard Oil, steel, steel giant, Teddy Roosevelt, trust, trust-busters, unintended consequences, Union Mills, Vaseline, vertical integration, Warehouse clubs, whale oil business, whales, Windows, Windows-based, word processing