The Redistribution of Wealth in Obamacare

Posted by PITHOCRATES - December 30th, 2013

Economics 101

“Wait a tic.  Blimey, this redistribution of wealth is trickier than I thought.”

Monty Python is a British comedy troupe.  Starting off with a television show in 1969.  And ending their run together with a movie in 1983.  With some other stuff along the way.  They became about the biggest stars ever in comedy.  They redefined comedy.  And have influenced some of the biggest names that followed them.  Part of the reason why Monty Python is so funny is that they are so serious when being silly.  And they are very well educated.   With some members having degrees from Oxford and Cambridge.   Which helps make their humor different.  Such as their take on Robin Hood with a character they called Dennis Moore.

Dennis Moore, Dennis Moore
Galloping through the sward
Dennis Moore, Dennis Moore
And his horse Concorde
He steals from the rich
And gives to the poor
Mr. Moore, Mr. Moore, Mr. Moore

This is the opening verse of a song in the sketch Dennis Moore.  The character steals from the rich who have more than they need.  And gives it to the poor who don’t have enough.  A classic example of redistribution of wealth.  Something the American left is all about.  Being Dennis Moore.  Or Robin Hood.  But in the sketch Dennis Moore takes it to the extreme.  Stealing so much from those who were originally rich that they have nothing left but their underclothes.  While those who were originally poor have everything the rich had.  And the formerly poor (now rich) get ever more demanding of Mr. Moore for better stuff.  As he rides off to please these formerly poor (now rich) we hear the following verse.

Dennis Moore, Dennis Moore
Riding through the land
Dennis Moore, Dennis Moore
Without a merry band
He steals from the poor
And gives to the rich
Stupid bitch

Dennis Moore halts his horse.  And asks the chorus to repeat themselves.  To make sure he heard what he thought he heard.  They do.  Mr. Moore then says, “Wait a tic.  Blimey, this redistribution of wealth is trickier than I thought.”  As he discovers some of the inherent flaws in the redistribution of wealth concept.  Excessive redistribution can take large sums of money away from some.  Which doesn’t help them.  It only punishes them.  And if you’re okay with punishing the rich to help the poor note what happens to the poor when they get the rich’s money.  They become exactly like them.

Buying Votes to Win Elections works as long as you Tax the Few to Spend on the Many

This sketch is funny.  Because it’s true.  You’ve heard the expression “beggars can’t be choosey?”  Well, when it comes to the redistribution of wealth, they can.  And are.  Choosey.  They can become very demanding.  And the more they get the more they want.  And the more like the people they hate and envy—the wealthy—they get.  Mr. Moore learned that.  Where the poor he was trying to help with a hand-up didn’t use it for a hand-up.  They just used the rich’s wealth to enjoy the good life without working and earning it over time.

People may look down on those born into money but that’s only because they weren’t.  This is why poor people buy lottery tickets.  To get rich quick.  Because they don’t want to wait to have money.  They’d like to have it when they’re young.  And not wait until they’re old.  After working 20 years or so.  Which is why selling the idea of wealth redistribution is so easy.  And helps politicians win elections.  Because there are more poor people than rich people.

President Obama said those who could afford it should pay a little more.  Taxes.  To balance the playing field.  To offer a ‘hand-up’ to the poor.  This is the message of the Democrats.  Tax and spend.  Tax the rich.  And give it to the poor.  And the young.  Such as free birth control, tuition assistance, Obamacare subsidies, etc.  Things they tax the rich for.  To get the poor to vote Democrat.  It’s a working formula.  Buying votes.  As long as you tax the few to spend on the many.  Because you need the many to win elections.

Obamacare won’t Work because the Welfare flows in the Wrong Direction

The welfare state taxes the few/rich/old to spend on the many/poor/young.  Which is why it worked.  You angered a smaller group of people than you pleased.  And if you can keep doing that you can keep winning elections.  As long as you keep playing Dennis Moore.  Without being a stupid bitch.  Which the Democrats did well.  Until Obamacare.  The Affordable Care Act.

Obamacare will fail because unlike other welfare programs Obamacare is unique.  For it does not tax the few/rich/old.  It actually taxes the many/poor/young.  To pay for the health care of those who have more money than they do.  The old and sick.  Leaving the young and healthy with less money to start their families.  As they help the old and sick who already had their families.  And something just isn’t right with this picture.  The old and sick are fine with it.  While the young and healthy are calling someone ‘stupid bitch’.  Figuratively, of course.

Young people don’t have a problem with tax and spend.  As long as they are the recipients of those welfare transfers.  So they vote Democrat.  And they also vote Democrat because they are the opposite of their parents.  Who never tell them they can’t do this or that.  But, instead, tell them they should do whatever they feel like doing.  Which they like.  A lot.  But the Affordable Care Act is a whole different animal.  Where Democrats are being like parents.  Telling the young Democrat voters that they can’t do everything they want to do.  Because they’re forcing them to buy something they don’t want.  Which isn’t their parents’ welfare program.  From the few/rich/old to the many/poor/young.  But more of a welfare program for their parents.  Making it more difficult for the young Democrat voters to embrace Obamacare.  Which is why they aren’t.  And why the math won’t work for Obamacare.  Because the welfare flows in the wrong direction.

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Birthrates and Welfare States

Posted by PITHOCRATES - October 22nd, 2013

History 101

Birth Control and Abortion hurt the Welfare State because Babies become Taxpayers

People typically have fewer children during bad economic times.  Because you have to feed and clothe kids.  Which is very hard to do during bad economic times.  Especially if you lost your job during a period of high unemployment.  Such as the Great Depression.  Or if you’re going through a period of high inflation.  Like during the Seventies.  We can see this if we look at the birthrate over the years.

Number of Children per Woman R1

(source: Population Reference Bureau)

Bad economic times (Great Depression) fewer births.  High inflation (the Seventies) fewer births.  Of course, there was something else happening during the Seventies.  Which followed the Sexual Revolution.  Women were having more sex outside of marriage.  But they were using birth control and recently legalized abortion to avoid having children.  Women were liberated.  The feminists were moving into careers once reserved for men.  And because they were having careers they were not being stay-at-home mothers raising a family.

Also during the Seventies there was the zero population growth movement.  Among many other movements.  As the hippies turned antiestablishment.  And anti-capitalist.  Preferring a communal life.  Where there was no greed or profits.  Where everyone was equal and had an equal share.  Like the communists enjoyed.  Or, rather, suffered.  The zero population growth movement protested against having babies.  And the threat they posed to the limited resources of the earth.  So they were quite happy to see the birthrate fall below the replacement birthrate (about 2.1 children per woman in the United States).  Because below this rate future generations will be smaller than previous generations.  Which will burden the limited resources of the earth less.  But it created a big problem for those who wanted a large socialist state to provide cradle to the grave welfare.  For babies become taxpayers.

Because of the War on Poverty it takes Two Incomes to raise a Family Today

We just emerged from a government shutdown that ended with an agreement to raise the debt ceiling.  Why?  Because they can’t raise tax rates high enough to pay for all of the government’s spending.  At least not without putting most everyone below the poverty line after taxes.  Which makes that declining birthrate a big problem.  For the fall in the birthrate coincided with the expansion of the welfare state in the Sixties.  As can be seen in the explosion in welfare spending following LBJ’s launching of his War on Poverty.

Total Welfare Spending 1950 - 2010 R2

(source: The Heritage Foundation)

So just as women were having fewer babies so following generations would be smaller LBJ’s Great Society gave us a new expanding welfare state.  That is, once our tax base began to grow smaller with each subsequent generation federal expenditures were growing larger with each subsequent generation.  Resulting in higher tax rates on the smaller tax base to pay for it.  And massive new borrowings to pay what our taxes won’t.  As the government took more of our earnings away median household income stagnated.

Federal Spending and Median Income

(source: The Heritage Foundation)

If you’ve ever wondered why we can’t raise a family on one income these days this is why.  It’s the growth of federal spending.  Paid for with a growth in tax revenue.  Leaving us less money to raise our families.  Requiring that second income.  This is what the Great Society gave us.  And it’s what birth control and abortion gave us.  But it gets worse.

This Year Adult Incontinence Pants outsold Baby Diapers in Japan for the First Time

The Sexual Revolution gave us a baby bust generation.  Following a baby boom generation.  Giving us an aging population.  Where more people are leaving the workforce than are entering it.  So more people are consuming taxes (Social Security, Medicare, Medicaid, etc.) than are paying taxes.  Causing a massive wealth transfer from the young to the old.  So an aging population makes it even harder to raise a family.  Especially for the young just starting their families.  Because of the higher tax rates on a shrinking workforce required to pay for that aging population.  Which can lead to worse things than a collapse of the welfare state (see Why have young people in Japan stopped having sex? by Abigail Haworth posted 10/19/2013 on The Guardian)

Japan’s under-40s appear to be losing interest in conventional relationships. Millions aren’t even dating, and increasing numbers can’t be bothered with sex. For their government, “celibacy syndrome” is part of a looming national catastrophe. Japan already has one of the world’s lowest birth rates. Its population of 126 million, which has been shrinking for the past decade, is projected to plunge a further one-third by 2060…

Fewer babies were born here in 2012 than any year on record. (This was also the year, as the number of elderly people shoots up, that adult incontinence pants outsold baby nappies in Japan for the first time.) Kunio Kitamura, head of the JFPA, claims the demographic crisis is so serious that Japan “might eventually perish into extinction”.

This is the zero population growth movement on steroids.  The Republicans in the United States shut down the government in an attempt to curtail federal spending.  As the public debt is approaching 100% of GDP.  Very dangerous territory to be in.  But if you think that’s bad it’s far worse in Japan.  As their public debt is approximately 214% of GDP.  To support a massive welfare state.  In a country where the taxpayer is fast becoming an endangered species.

This is the ultimate end of any democracy that learned it could vote itself the treasury.  As taxes rise people cut back on their spending.  And a big cost item is children.  So we have declining birthrates in developed countries with expansive welfare states.  And immigration problems.  Immigrants who come for those generous state benefits.  And governments that want to grant them citizenship.  To make them taxpayers.  To make up for that declining birthrate.  And prevent their own extinction.

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Keynesian Policies and Obamacare reduce Household Incomes

Posted by PITHOCRATES - August 25th, 2013

Week in Review

President Obama is a horrible president.  Why?  Because he’s black?  No, that’s not it.  He’s a horrible president who just happens to be black.  One of the big reasons why he is a horrible president is because he is a Keynesian.  And has tried the same failed Keynesian policies of the past to turn the economy around.  And just as they failed in the past they have failed consistently during the Obama presidency.

Keynesian economics states that during a recession when people aren’t spending money the government should do something about it. They should start spending money.  And they should implement policies that put more money into consumers’ pockets.  So they go out in the economy and spend it.  Thus generating economic activity.  And pulling the nation out of recession.  The government could cut taxes to put more money into consumers’ pockets.  But they don’t like cutting taxes.  Preferring to add more welfare programs.  Which give money to consumers.  So they can spend it.  That’s how President Obama has chosen to pull the nation out of the worst recession since the Great Depression.  And as expected by every non-Keynesian, his Keynesian policies have been an abject failure (see Incomes Have Dropped Twice as Much During the ‘Recovery’ as During the Recession by JEFFREY H. ANDERSON posted 8/23/2013 on The Weekly Standard).

New estimates derived from the Census Bureau’s Current Population Survey by Sentier Research indicate that the real (inflation-adjusted) median annual household income in America has fallen by 4.4 percent during the “recovery,” after having fallen by 1.8 during the recession.  During the recession, the median American household income fell by $1,002 (from $55,480 to $54,478). During the recovery—that is, from the officially defined end of the recession (in June 2009) to the most recent month for which figures are available (June 2013)—the median American household income has fallen by $2,380 (from $54,478 to $52,098).  So the typical American household is making almost $2,400 less per year (in constant 2013 dollars) than it was four years ago, when the Obama “recovery” began.

Importantly, these income tallies include government payouts such as unemployment compensation and cash welfare. So Obama’s method of funneling ever-more money and power to Washington, and then selectively divvying some of it back out, clearly isn’t working for the typical American family. Nor would his proposed immigration bill help the income prospects of the median American.  And perhaps it’s just a coincidence, but the span of time over which the typical American household’s income has dropped by about $2,400 a year (during an ostensible “recovery”) corresponds almost exactly with the span of time that we’ve been living with the looming specter of Obamacare—which began to be debated in earnest around June 2009.

Another reason why President Obama is a horrible president is that he is more interested in transforming the nation than he is in improving people’s lives.  He wants to make it what it was before President Reagan made the nation great again.  President Reagan followed President Carter.  Who was another horrible president.  Because of his Keynesian economic policies.  While President Reagan wasn’t a Keynesian.  Which is why the economic recovery following Carter’s malaise was one of the strongest economic recoveries in history.  Making President Reagan a great president.  Because he made life better for people.  Unlike Carter and Obama.  Who made life worse.  Because of their Keynesian economic policies.

Obamacare, the pathway to national health care, is a big driver of the fall in household incomes.  The plan for Obamacare was to put the private health insurance business out of business.  So Obamacare can evolve into full-blown national health care.  And to do that they forced businesses to spend more money on their health insurance for full-time employees.  Of course, the idea was for businesses to avoid this additional cost by pushing people to part-time.  And taking away their health insurance.  Advancing the nation further down the Obamacare pathway to national health care.  Which is more important to him than household incomes.  Which he will gladly trade away to transform the country.  Not to just what it was before Ronald Reagan.  But even further left.  Because, for President Obama, what he wants is more important than what the people want.  Jobs, a rising household income and private health insurance.  Which makes him a horrible president.  Just as his Keynesian economic policies make him a horrible president.

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President Obama increases Joblessness and Poverty with his Policies

Posted by PITHOCRATES - August 3rd, 2013

Week in Review

The political left is ruining the country.  Every time they get into power they leave a swath of destruction in their wake.  And we hear the same things over and over again.  The plans these people have to fix the things they’ve destroyed.  We heard Jimmy Carter.  And now we’re hearing the same things from President Obama.  But they’re just empty words.  For if things get worse while you’re in office it’s you.  Not everything else (see Exclusive: 4 in 5 in US face near-poverty, no work by Hope Yen, Associated Press, posted 7/28/2013 on Yahoo! Finance).

Four out of 5 U.S. adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream.

Survey data exclusive to The Associated Press points to an increasingly globalized U.S. economy, the widening gap between rich and poor, and the loss of good-paying manufacturing jobs as reasons for the trend.

The findings come as President Barack Obama tries to renew his administration’s emphasis on the economy, saying in recent speeches that his highest priority is to “rebuild ladders of opportunity” and reverse income inequality.

Renew his emphasis on the economy?  To renew something you had to have done something first.  The president is in his 5th year in office.  And all he’s done is implement policies that has discouraged job creation.  Obamacare is causing employers to freeze hiring and push some employees to part time.  Obamacare, then, has increased joblessness.  And forcing people into lower-paying part-time jobs has increased poverty.

Shutting down the oil business in the Gulf of Mexico destroyed good-paying jobs in the oil business.  Refusing to approve the Keystone XL pipeline has prevented the creating of good-paying construction jobs.  And the additional good-paying jobs in the oil business that would have processed this new oil coming to American refineries and out into the distribution network.

The president’s war on coal is shuttering coal mines.  And destroying good-paying jobs in the mining industry.  And moving away from cost-efficient coal-fired power plants has increased the cost of electric power for businesses and households.  Something else to put pressure on hiring.  Leading to more joblessness.  And poverty.

Things have gotten worse during the Obama presidency because of his anti-business policies.  When you have anti-business policies you don’t create an environment for job creation.  Which is the source of all of our problems.  People can’t get a good-paying full-time job because President Obama is destroying them.  And if that wasn’t bad enough, liberal Democrat policies make a bad situation worse.

Marriage rates are in decline across all races, and the number of white mother-headed households living in poverty has risen to the level of black ones.

“It’s time that America comes to understand that many of the nation’s biggest disparities, from education and life expectancy to poverty, are increasingly due to economic class position,” said William Julius Wilson, a Harvard professor who specializes in race and poverty. He noted that despite continuing economic difficulties, minorities have more optimism about the future after Obama’s election, while struggling whites do not…

For the first time since 1975, the number of white single-mother households living in poverty with children surpassed or equaled black ones in the past decade, spurred by job losses and faster rates of out-of-wedlock births among whites. White single-mother families in poverty stood at nearly 1.5 million in 2011, comparable to the number for blacks. Hispanic single-mother families in poverty trailed at 1.2 million.

The political left won’t tell kids to stop having so much sex.  In fact, they’re facilitating it.  By giving free condoms to high school kids.   Making abortion available on demand.  And even providing the morning-after pill to any girl regardless of age without a prescription or parental notification.  Because kids are going to have sex no matter what we say.  A message heard loud and clear by our kids.  Who are having a lot of sex.  Hooking up to satisfy their needs.  Then going on their way.  Seeing no need to get married.  Especially the guys.  Who never had it better.

The enlightened attitude of the political left has made it a veritable smorgasbord out there.  Objectifying women like never before.  Where men look at women as sexual flavors.  And wonder what they feel like tonight.  This is the hookup.  And it isn’t conducive to making long-lasting relationships.  These guys don’t even want to talk to these women.  They want to take care of their business.  And leave.  Returning to their male friends.  Where they can enjoy the things they really like once their sexual needs are satisfied.

This is why marriage rates are declining.  Because with the left’s objectification of women what’s the point of marrying them?  This is the world a girl finds herself in after getting pregnant.  And doesn’t want to get an abortion.  She is on her own.  And there is no faster way to poverty than being a young, single mother.  If she doesn’t graduate from high school or can’t go on to college because she has to raise a baby what chance does she have?  While others are getting an education she is working a job that doesn’t require an education.  When her high school classmates are graduating from college she is still working that same job.  Because she missed out on getting the college education that could have given her a career with a high-paying job.  Instead working a job that requires no advanced education.  The kind that doesn’t pay well.  Because they’re often entry-level.  The kind high school kids work.  And those in college.  Who then quit these jobs to begin the career they went to college for.  But what a single mother can’t do.  Because without that education she doesn’t have that option.

The obvious solution to this problem is for these girls to wait for marriage before having a baby.  When a parent can stay at home with the baby while the other is building a career that lifts them out of the poverty level.  If the left would stop objectifying women people will stop hooking up and get married instead.  To build a career.  And a family.  Instead of just giving in to their base impulses and enjoying the moment.  And living a life of abject poverty.  For like the old saying goes, good things come to those who wait.  And if you wait until marriage before having children life will be so much better than life as a single mother.  As the data shows.

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Cost of Health Insurance

Posted by PITHOCRATES - May 27th, 2013

Economics 101

Making Health Insurance a Fringe Benefit removed Market Forces from the Equation

The reason why health insurance is so expensive is because it is not insurance anymore.  It’s more of a welfare program.  Where other people pay.  Whereas insurance mitigates financial risk.  People pay a small premium to insure against a large financial loss.  They may pay $250/year to insure something that may cost $25,000 to replace.  For something they may own for 10 years.  Because they would rather spend $250 each year (for a total of $2,500 over those 10 years) than have to replace it by paying another $25,000 should something happen.  Insurance reduces the amount of money you can lose.  In this case the greatest financial loss is reduced from $25,000 down to $2,500.  This is insurance.

Health insurance used to be like this.  When we paid for it ourselves.  But things changed when it became an employee benefit.  Where we no longer saw the true cost of that insurance.  This happened during World War II.  As FDR put in wage caps.  Why?  With all the men in the military and wartime production through the roof there was a shortage of labor.  And the last thing FDR wanted on top of the inflation they were causing by printing so much money to pay for the war was wage inflation.  Hence the wage caps.  But the problem with wage caps is that employers could not entice the best workers to come work for them by offering them higher wages.  So to entice the best workers to come work for them and get around FDR’s wage caps employers began offering fringe benefits.

This is the cause of all our health care woes today.  Making health insurance a fringe benefit.  For it removed market forces from the equation.  People receiving the benefit had no idea what the benefit cost.  And did not care.  Which wasn’t a problem at first.  But then the Sixties came around.  And women stopped having as many babies.  Causing the population to start getting older.  Worse (from the perspective of paying for health insurance), people were beginning to live longer.  So when a person retired from a company they lived a long retirement.  So companies who offered these generous fringe benefits began to suffer under the cost of them.  Between pensions and health care costs retirees were costing some companies more than their active workers.  Because they were living so long into retirement.  (Just as these long retirements are straining Social Security and Medicare).  And modern medicine just keeps pulling them back from the brink of death.  Prolonging this crushing financial burden.

Health Insurance is more Expensive than it once was because it now Pays for Routine Medical Expenses

Compounding this problem is how health insurance is no longer insurance.  Instead of a small premium insuring against a large financial loss people expect health insurance to pay for everything.  And get righteously indignant whenever they have to pay anything out of pocket.  From a prescription co-pay.  To a small co-pay at a doctor’s office.  This is not paying a small premium to insure against a large financial loss.  This is demanding a free ride.  If health insurance was actually insurance it would look something like this:

Health Insurance Cost - Insurance

This assumes a health group with 100 participants.  Of this 100 five people suffer a serious accident in one year.  Incurring a large and unexpected hospital expense of $6,000 each.  While three people suffer a serious illness that same year.  Incurring a large and unexpected hospital expense of $4,500 each.  The total for these large and unexpected costs is $43,500.  If we divide this over the 100 members of the group that comes to an annual health insurance premium of $435 each.  Or $36.25/month.  Or $8.37/week.  Which isn’t much.  If you were one of those suffering a serious accident you didn’t have your personal finances wiped out by an unexpected $6,000 hospital bill.  Instead you only paid a manageable and budgeted $435 each year.  In other words, spending $435 saved $5,565.  Not a bad deal.  This is insurance.  Because it only paid for the unexpected.  Not our routine health care expenses that we should pay out of pocket.  If we add these routine expenses into the health insurance formula we can see how they increase the cost of health insurance.

Health Insurance Cost - Welfare

Assume each person consume $750 in routine medical costs.  For office visits.  Allergy shots.  Vaccinations for the children.  Flu shots.  Seeing the doctor when you have a cold.  Annual checkups.  Physicals.  Cancer screening.  Prescriptions.  Etc.  Those things that can be reasonably expected each year.  When our health insurance policies pay for these routine medical expenses note the large increase in the annual insurance policy premium.  Going from $435 to $1,185.  An increase of 172%.  Everyone will pay $1,185.  Whether they consume $750 in medical costs or not.  Also, of the three things health insurance pays for (serious accidents, serious illnesses and routine medical) routine medical is the biggest of the three.  Explaining why health insurance is now so much more expensive than it needs to be.

It was the Pension and Health care Costs of Retirees that Bankrupted General Motors

This is why it is better to pay out of pocket for these routine costs.  Because if you’re really healthy one year and never see the doctor you will not consume $750 in medical costs.  So if you normally pay these out of pocket but don’t you would only spend $435 that year for real health insurance.  Not the $1,185 that pays for everything.  Whether you use it or not.  This is where market forces come in.  Instead of paying for a costly doctor’s visit when you have a cold you may just buy some over the counter cold medicine from the drugstore.  This is how we behave when we pay for stuff.  But when you introduce a third party it alters our behavior.

“Whether you use it or not.”  When people can get something more for no extra money they are going to take it.  Like going for seconds and thirds at an all-you-can-eat buffet.  It doesn’t cost anything more for the second and third plate.  In fact people will feel cheated if they don’t go for plates 2 and 3.  Because all-you-can-it is pretty expensive if you only eat one plate.  Because that one price pays for 2, 3, even 4 plates.  If you can eat that much.  It’s this mentality that causes people to go to the doctor when they have the sniffles.  So they can get ‘free’ antibiotics.  Because it doesn’t cost anything more.  Since their health insurance is already paying for it.

But it does cost more to those who are paying for it.  A lot more.  So much more that small business owners can’t afford to provide health insurance for their employees.  Because to do so would require that they greatly increase their selling price.  Which they can’t do and expect to stay in business.  Because the market sets the price.  Not them.  It’s up to them to figure out how to sell at a price the people will pay.  And if they raise it too high to pay for health insurance for their employees the people will stop buying from them.  Putting them out of business.  Even bigger businesses struggle with this.  For it was the pension and health care costs of retirees that bankrupted General Motors.  Which was one of those companies that started offering health insurance as a benefit during World War II.  Giving us all our health care woes today.

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FT113: “In the liberal war on women their number one enemy are stay-at-home mothers not on welfare.” -Old Pithy

Posted by PITHOCRATES - April 13th, 2012

Fundamental Truth

Plato’s Perfect State included Selective Breeding, State Rationed Health Care and Euthanasia

Liberals are fans of the ancient Greek philosopher Plato.  And his utopian idea of the perfect state.  Which he passed down to us in his Republic.  His book of fictional conversations where Socrates engaged in dialogs to develop and advance his philosophy.  His utopia?  A totalitarian state.  Where everyone sacrifices for the good of the state.  Sound familiar?  Think of Marxism, socialism, communism, fascism, National Socialism, Islamism, etc.  Where the state provides the basic necessities of life.  And frowns on luxuries, liberty and free speech. 

In Plato’s world everyone is equal.  Only some people are more equal than others.  The Guardians of the state are the wisest and brightest and make all the decisions of this perfect state.  These are the most equal.  Then came the state bureaucracy.  Those who manage things for the Guardians.  Then came the reeks and wrecks of society.  The expendables.  The undesirables.  Who are little more than slaves.  Or are slaves.  The workers who get their hands dirty while providing for the state.  The Guardians maintain these divisions through selective breeding and propaganda.  Making the people believe the separation of these classes is just and right.  And nothing to question.  Even to accept the selective breeding to produce a super race.  Or to learn not to question it.  The perfect state includes a national health care system.  To manage the super race.  That determines who to treat based on their usefulness to the state.  And who to euthanize because they have no state value.

Plato’s perfect state destroyed the family.  People lived communally.  The state took away babies from mothers and raised them ‘correctly’ to grow up to best serve the state.  Determining their level of ‘equalness’ and placing them accordingly.  Educating the children in the public education system.  Where the most equal make it to the Academy.  The state-run college.  Where the wisest philosophers of the state indoctrinated the new Guardians.  And educated the state bureaucrats.  To ensure that only the best stock entered their schools they managed the mating between men and women and forbade cross-class mating.  To maintain the purity of the classes.  Especially the higher classes.  A society where all children grew up loyal to the state.  Not to their parents.  To promote the superiority of the state.  And the subjugation of the people. 

Abortion and Birth Control helps the State Limit the Birth of People they Deem less Desirable

This is the liberal utopian view they see for America.  Where a kind and just government grows to protect the people.  Where the smartest people run things.  Who know what’s best for the people.  And decide for the people.  For the people aren’t wise enough to know what’s best for them.  Just like in Plato’s perfect state.  The wisest and brightest advance through the most prestigious of America’s universities.  And enter leading positions in the government.  After learning what the ideal state should be.  Progressive.  And subjugated to the state.  Lower universities train future state bureaucrats to embrace the ideal state.  Emphasizing fairness and justice.  And shared sacrifice.  Pointing out the cruel unfairness of capitalism.  And the kind, loving care of the government.  They will manage the state for the enlightened leaders.  While the lower classes are kept uneducated.  And dependent on the government.  Where they provide a critical service for the state.  By making the government necessary for most to survive.  To get around the repugnant restraints of democracy.  By having people continuously vote for the state to subjugate them.  Thus disciplining the masses.  And keeping them in their place.  At the lower end of the social strata.  And away from the upper classes.

The Holy Grail of large, interventionist government has always been national health care.  For it extends the state’s control to almost every facet of the people’s lives.  For they can tie anything into being health related.  And thus subject to the state’s regulation.  Also, this power over life and death serves another purpose.  Spreading limited resources over a larger group of people requires rationing of health care treatment.  As determined by the wisest and the brightest.  Who will direct their bureaucrats in the rationing of health care treatment.  Determining who’s too sick for treatment so they can use that treatment, instead, on someone more beneficial to the state.  A passive euthanasia policy.  Until the people will not object to a proper active euthanasia policy.

At the other end of the spectrum is abortion and birth control.  Which they make plentiful and easy to get.  Especially for the lower classes.  To limit the birth of people the state deems less desirable.  Those who give in to their animal passions instead of sacrificing for the state.  A common problem with the people in the lower classes.  Who lack a proper college education indoctrinating them into the proper behavior that best serves the state.  These lower class people are useful to the state by keeping the government necessary.  But at the same time they upper classes of government don’t want to be overrun with these people they see as inferiors.  Birth control and abortion helps the state to keep the births of this class at more acceptable levels.

Liberals hate Stay-at-Home Mothers because they Sacrifice for their Family and not the State

But this causes a bit of a problem.  By limiting the birth of the state-deemed undesirables they are also limiting the number of voters who will ask the state to subjugate them.  Which is a problem because the upper classes aren’t having a lot of kids themselves.  Women are too busy with their careers for the inconvenience of family.  Unless they’re rich and can afford to nanny it out.  As the properly educated higher classes enjoy sex without the consequence of children they cull the stock of the higher classes.  Leaving only one group embracing the family and having children.  Those who reject the state’s view of the perfect society.  Enjoy sex.  And like making babies.  Who they raise.  Some even becoming stay-at-home mothers.  Devoting everything to their families.  While their husbands provide their financial needs they take on the full-time job of parenting and managing the household.  On call 24/7.  Even taking their work with them on vacation.  And all without any help from the government.  Fully independent.  Responsible.  And free.  Which is a great threat to the ideal state as envisioned by Plato.  And every totalitarian state since.  These people who put family first instead of the state.  These people who don’t even need the state.

The state wants women to work.  If they have children, they want these women to return to work as quickly as possible.  To break up the family.  To separate their children from their parents as soon as possible.  Putting their children into state-sponsored childcare.  To begin the indoctrination process.  To make them loyal to the state and not their parents.  Which is why they love the two-parent income required to raise children today.  It helps to separate children from their parents.  Putting kids into after-school programs to further their indoctrination.  Better yet are the single mothers.  Who become fully dependent on the state.  And teach their children to love the state.  Because only the state provides.  Unlike the father that abandoned them.  These single mothers are the most likely to vote to further their state of subjugation.  To become fully dependent on the state.  And forever obedient.

This is why liberals today have a war on women.  In particular, the stay-at-home mother.  Who they hate.  And attack at will.  For choosing to be a stay-at-home mother.  For focusing too much time on their children.  For being too involved in their children’s education.  And for teaching their children to be independent and responsible.  Undoing years of the state’s indoctrination in the public school system.  These women are enemies of the perfect state.  Because they sacrifice for their families.  Not the state.  Worse of all, these most disobedient of women are having too many babies.  The real reason why the state hates them so.  Because if they can’t get rid of that problem they call democracy they will need to keep winning elections.  Which will be harder to do when each subsequent generation of like-minded voters is smaller than the last.  So their super race will disappear over time.  As will the perfect state.   For selective breeding will only work when people breed.  But not just any people.  It has to be the right people.  Not these stay-at-home mothers.  Who don’t sacrifice correctly.  And don’t subjugate themselves to the state.  As liberals believe they should.  Because liberals love Plato.

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Three Members of the EBT Card Commission going Rogue, Try to Ban EBT Card use for Strip Clubs, Booze, Cigarettes and Scratch Tickets

Posted by PITHOCRATES - April 7th, 2012

Week in Review

When it comes to battles between conservatives and liberals the battle lines they draw often concern welfare benefits.  The conservatives want to take away milk for children while liberals want to make sure welfare recipients still have their dignity.  And can enjoy strip clubs, booze, cigarettes and scratch tickets (see Pundit: EBT card overhaul puts Hill bigs ‘in the hot seat’ by Chris Cassidy posted 4/5/2012 on the Boston Herald).

Outraged lawmakers trying to prevent taxpayer-funded EBT card abuse are putting the political screws on House and Senate leaders, who will face election-year pressure to place real reforms on the floor for an up-or-down vote, a GOP pundit told the Herald…

Three members of the state’s EBT Card Commission, formed to clean up the program, yesterday announced details of a bill to crack down on abuses, after last week slamming the commission’s failure to come down hard enough.  The rogue group’s bill would ban the use of EBT cards at such places as strip clubs, rent-a-centers, gyms and gun shops; banning card use outside New England states; and restrict how much cash can be drawn. The reform efforts followed Herald reports of welfare recipients spending benefits on booze, cigarettes and scratch tickets.

This is politics.  And, sadly, politics as usual.  Buying votes versus responsible governing.  For both conservatives and liberals know of these welfare abuses.  The difference is that conservatives want to reform the system to stop the abuses.  And liberals want to allow the abuses for the votes these abuses buy.  For they need those votes as few people will vote to raise their taxes to pay for poorly run welfare programs.  But if you’re the recipient of those welfare programs, well then, that’s a different story.  Your votes are for sale.  Which is why liberals fight to make sure welfare recipients can enjoy strip clubs, booze, cigarettes and scratch tickets.  As long as these people remember who it was that allowed them to enjoy these things in the election booth.

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Insurance and Risk Management

Posted by PITHOCRATES - April 2nd, 2012

Economics 101

By collecting a Small Fee from Many Policy Holders Insurance Companies can Afford to Pay for the Large Losses of a Few

Insurance has one purpose.  To protect wealth.  People work hard accruing wealth.  Buying a house.  Cars.  College fund for the kids.  Retirement 401(k)s and IRAs.  It takes a long time to earn the money that lets us have these things.  And they take a constant stream of payments to sustain them.  And we are always at risk of losing them.  Something can interrupt that stream of payments to sustain them.  An accident or illness that prevents us from working.  Burying us in a stack of unexpected bills.  A tree could fall onto the house during a bad storm.  You could total your car while driving to work in a thick fog.  A wife could lose her husband leaving her to raise their children on her own.

These are very real risks that we must manage.  Because we need to protect our wealth.  We buy house and car insurance so we can keep or replace our houses and cars because we can’t afford to buy new ones should we lose the old ones.  We buy life insurance to provide for our families should we die.  We buy health insurance so an accident or disease doesn’t wipe out our savings, college fund and retirement investments.  Because we do do these things we can manage the risks in life.  So that something unexpected and incredibly expensive doesn’t take everything away that we worked so hard for.

Managing our risks allows us to live our lives.  To plan for the future.  A future that has a price tag.  A future that takes a lifetime of accumulating wealth to pay for.  And to protect the wealth that provides for our families and our retirements we buy insurance.  Groups of people join together and pay a small fee for an insurance policy that will protect a very large amount of wealth.  So if we have an unexpected and very expensive event in our lives our insurance will protect our wealth by paying for our losses.  By collecting a small fee from hundreds of thousands of policy holders insurance companies can afford to pay for the large losses of a few.  Allowing life to go on.  As best as it can following these  unexpected events.  So even in the worst of events families can keep their homes.  Keep their kids in their schools.  Protect their kids’ future by keeping their college fund intact.  Replace their property.  Allowing life to go on as close to what it was before the event.  All thanks to insurance.

Bad Insurance Risks have an Advantage over Insurance Companies due to Asymmetric Information and Adverse Selection

Insurance companies provide this valuable service.  But it isn’t easy.  Because insurance isn’t a science.  But statistical analysis.  And risk analysis.  Which is how they determine the cost of their insurance policies.  A critical part for the survival of insurance companies.  So they can continue to provide this valuable service.

Insurance companies are at a disadvantage because of asymmetric information.  Meaning their customers know more about how great a risk they are than the insurance company.  For example, reckless drivers don’t offer that information when someone is quoting a policy for them.  For they want a low price.  Not a high price that reckless drivers normally get charged.  This is a problem mostly with young drivers.  Older drivers have a driving record.  If it’s a safe record they get a low quote.  If the record includes many points and at-fault accidents they will get a high quote.  Young drivers, though, don’t have a driving record yet.  This is where the statistical analysis comes in.  On average young men drive more recklessly than young women.  Based on the statistical evidence.  So they charge young men higher rates than they charge young women.  Problem solved.  But this causes another problem.

Not all young women are good drivers.  But by charging young women lower rates some bad women drivers are getting a rate lower than their risk warrants.  Which means insurance companies will lose money insuring these drivers at rates below their risk level.  In fact, this will attract more high-risk drivers.  Thus increasing an insurance company’s risk exposure.  And as they pay out claims that exceed the premiums they collect they have to raise insurance rates for all women drivers.  Thus discouraging some good drivers from buying insurance because of the higher premiums.  Thus increasing the percentage of high-risk drivers.  Which forces the insurance companies to raise their premiums again to cover these higher losses.  We call this problem adverse selection.  Where pricing plans to manage risk ends up increasing risk.  One way around this is by group coverage.  Like in health insurance.  Where everyone at a company buys insurance in exchange for a lower group rate.  Including the high-risk people.  And the low-risk people.  Thus avoiding adverse selection.

Economic Growth is the Creation of Wealth and our Insurance Protects that Wealth

When is insurance not insurance?  When it is health insurance.  At least as it is today.  It still acts like insurance for the unexpected and catastrophic accident or illness.  But it is anything but insurance for most everything else.  The latest example in the media these days being birth control.  Which is neither an unexpected nor a catastrophic expense.  For there are few expenses that are more expected and more affordable than birth control.  Unlike, say, chemotherapy.  Or trauma care in the emergency room.  Both of which are unexpected.  And very, very expensive.

When insurance pays for everything for everybody it is no longer managing risk.  Insurance companies are no longer collecting a small fee from all policy holders to pay for the large losses of a few.  Instead they’re collecting a large fee from everyone to pay for the costs of everyone.  Or more precisely, they’re collecting a large fee from the employers who provide health insurance to their employees.  So the recipients of all those free health care goodies don’t see their costs.  Which is how they’ve been able to include everything but the kitchen sink in today’s health care insurance policies.  Causing the price of health insurance to soar.  Hurting families.  Businesses.  And the economy as a whole.

A healthy economy allocates scarce resources to where we use them most efficiently.  When we do we create the most goods possible from these scarce resources.  Making society as a whole better off.  By improving the standard of living for society as a whole.  But by turning health insurance into a welfare program it increases the cost of doing business.  Which puts downward pressures on wages.  Preventing real wages from keeping pace with the rise in consumer prices.  Leaving workers with less disposable income.  Which translates into weak economic growth.  And a stagnant or declining standard of living.

Economic growth is the creation of wealth.  And our insurance protects that wealth.  When we convert that insurance into welfare, though, we put our wealth at risk.  By putting greater pressures on that stream of payments to sustain our wealth.  Our future plans.  And our families.

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Welfare and Pensions in the UK are Bankrupting the Nation

Posted by PITHOCRATES - February 26th, 2012

Week in Review

The United States followed the United Kingdom into the Industrial Revolution.  And emerged the greatest superpower on the planet.  We did well following her lead.  Emulating her capitalistic ways.  But we can stop now.  For we don’t need to follow her to where she is now.  Although we’re pretty darn close to that place already (see Osborne: UK has run out of money by Rowena Mason posted 2/26/2012 on The Telegraph).

“The British Government has run out of money because all the money was spent in the good years,” the Chancellor said. “The money and the investment and the jobs need to come from the private sector…”

The Chancellor’s tough words were echoed by Liberal Democrat Jeremy Browne, the foreign minister, who warned that Britain faced “accelerated decline” without measures to tackle its debt and increase competitiveness…

Mr Browne writes that reform of pensions, welfare and defence is essential to stop the departments “collapsing under the weight of their own debt”. “Just because the spending was sometimes on worthy causes does not in itself mean it was affordable,” he says…

Amid warnings that Britain urgently needed to adopt a more pro-business outlook, senior Conservatives have urged the Government to get rid of the 50 pence top rate of tax.

Figures from the Treasury last week suggested the policy was not raising the expected amount of revenue and was threatening to drive leading business people and entrepreneurs away from Britain. Dr Liam Fox, the former Conservative Defence Secretary, yesterday argued for the top tax rate to be scrapped, but added that cutting taxes on employment was even more important.

“I would have thought the priority was getting the costs of employers down and therefore I would rather have seen any reductions in taxation on employers’ taxation rather than personal taxation,” he told the BBC’s Sunday Politics show.

Oh Britannia, what has become of you?  And why in the world are we still following you?

Money, investment and jobs must come from the private sector?  Why that’s a novel idea.  One Britain had a century or more ago.  And one the United States had, too.  Before the welfare state made these two great nations less great.

Everyone knows that too much debt is a bad thing.   It’s no secret.  Bad things happen to people who can’t pay their bills.  And as it turns out, worse things can happen when a government can’t pay its bills.  Just ask the Greek government.  Who are dealing with riots in their streets.

The private sector created jobs long before governments ever did.  We need to remember this.  And we solve economic problems in the private sector.  Where there is a high price for failure.  Thanks to capitalism.  And profits.  Alien concepts to governments.  Which is why the greatest debt crises are always in the government.  Not in the private sector.  Something else we would do well to remember.

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FT104: “Driving is more of a right than health care because it doesn’t cost others when someone drives.” -Old Pithy

Posted by PITHOCRATES - February 10th, 2012

Fundamental Truth

Although it doesn’t Cost Others when Someone Drives it’s Still not a Right because Driving Recklessly can Cost Others

Freedom of religion is a right.  It doesn’t cost me anything (money, time, inconvenience, etc.) for my neighbor to go to church or to practice their religion.  Freedom of speech is a right because it doesn’t cost me anything when someone writes a letter to a newspaper editor.  The right to bear arms is a right because it doesn’t cost me anything when a neighbor owns a gun.  Rights are free in the sense that others don’t have to incur any costs whenever someone exercises a right.  And because they are free no one can grant them.  Or take them away.  Hence they are God-given.  And only God can take them away.  Even an atheist will favor this definition.  For these God-given rights prevent any man from taking away his or her right to publically protest the existence of God.

Housing, food, education, etc., are not rights.  Because these things are expensive.  Someone has to pay for them.  And if you don’t pay for them they will take them away from you.  Or you can lose them if you don’t follow the rules.  A principal can expel a student for causing trouble in high school.  A landlord can evict an unruly tenant in an apartment building.  And if you don’t pay your mortgage the bank can foreclose on your house and take it back.  So these aren’t rights because someone has to pay for them.  You.  Or other people.  And there is a process to go through where someone grants us access to these.  Typically paying for these things.  And following certain rules.

Interestingly, when someone drives a car it doesn’t cost me anything.  Yet driving a car is not a right.  It’s a privilege.  And the thing that makes it a privilege and not a right is similar to housing, food and education.  There are certain rules to follow.  And if a driver doesn’t follow these rules it can then cost others when they drive.  Such as if a driver ignores traffic signals, drives under the influence of alcohol, ignores the posted speed limits, drives recklessly, etc.  Such a person can involve other people who follow the rules into accidents.  Costing them dearly.  It’s because of this that driving is a privilege and not a right.

Unlike Obamacare you can Choose not to Buy Car Insurance by Choosing not to Drive

A car or truck is very heavy.  And as it moves it creates a lot of kinetic energy.  The faster it goes the greater the kinetic energy.  And the greater amount of damage it can cause in an accident.  Causing great damage to other cars.  And their occupants.  Those who were not at fault will incur great costs from these accidents.  The at-fault person, though, may not be wealthy enough to pay these costs.  That’s why we make ALL drivers buy insurance.  So the few that have accidents can have their insurance pay these great costs.  This is a classic example of the use of insurance to spread risk.  Everyone pays a small fee to create a large pool of money to pay for the few who incur these great costs.  By making drivers buy insurance we make them responsible for the consequences of their driving.

Health care is very similar to driving a car.  Only many say health care is a right.  Unlike driving a car.  But health care isn’t a right.  Far from it.  For health care is very expensive.  And someone has to pay for it.  The patient.  Or others.  Just like housing, food and education.  Also, much of our health problems are self-inflicted.  Health problems plague obese people as they age.  Smokers tend to suffer from cardiovascular disease and lung cancer.  Heavy drinkers and drug users suffer a variety of ailments.  People get hurt doing risky things (take dangerous risks while drunk, extreme sports, etc.) and incur great medical costs.  But unlike the driver of a car we don’t make these people responsible for the consequences of their actions.  Instead, we treat them and have other people pay for the consequences of their actions.

Some like to point to the individual mandate in Obamacare as addressing this very problem.  By forcing people to buy health insurance.  So they are responsible for the consequences of their actions.  They say making people buy health insurance is no different from making people buy car insurance.  But it’s not.  Because buying car insurance is not mandatory.  You can choose not to buy it simply by choosing not to drive.  Obamacare offers no such choice.  Unless you call choosing not to live an option.

Health Care is Expensive because Unlike a Driver those who don’t follow the Rules of a Healthy Lifestyle never lose their Living Privilege

Health insurance is nothing like car insurance.  Car insurance protects a person from losing all their savings from an unexpected and unfortunate accident.  By spreading the risk over a great number of people who pay a small premium.  Whereas health care has become welfare.  It has nothing to do with spreading risk.  For people today expect a complete free ride.  For everything.  Whatever the cost.  They don’t want to pay a dime.  Not even for their prescriptions.  They want someone else to pay all of their costs.

And what really makes this welfare is that it will become a pure transfer cost under Obamacare.  The vast majority of people consuming health care are senior citizens.  While the young and healthy consume the least amount of health care.  Obamacare will transfer the costs of those who consume health care to those who don’t.  By forcing the young and healthy to buy health insurance.  That they currently do not buy because they rarely see their doctors.  Instead they use the savings from not buying health insurance to afford something they do use.  Like to pay for a house to live in to start their families.  But once Obamacare forces them to buy health insurance they’ll have to find another cost to cut.  Perhaps selling their car and using public transportation.  Saving on both a car payment.  And the car insurance payment.  Because they have that choice.  Unlike under Obamacare.

Driving a car is more like a right than health care.  It doesn’t cost anyone else as long as they follow the rules of the road.  But we still make them buy car insurance in case they have an accident.  Whereas health care is unlike a right in every way.  There is always a cost whether you follow the rules or not.  And unlike a driver those who don’t follow the ‘rules of a healthy lifestyle’ never lose their ‘living privilege’.  (At least, not yet.  And let’s hope it remains that way.)  They just pass their higher health care costs to others.  Especially the young and healthy who consume very little, if any, health care.  Making it a pure welfare transfer cost.  Of course, in this case, unlike other forms of welfare, this cost will be transferred to those least able to afford it.  The young.  Most of who are not rich.

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