In response to this editorial in the Chronicle, I sent the following letter:

re:  Bankers' Bonuses:  Fed should rein in compensation that promotes unacceptable risks

In stating that the US financial and banking system is still not "fixed" after last year's near collapse, the Chronicle editorialists correctly identify that unsound incentives promote unsound risk-taking.  Unfortunately, they focus on the symptom -- executive compensation -- rather than the disease itself.  It wasn't "bankers' bonuses" that promoted the financial meltdown, it was government policies that incentivized companies to make loans that couldn't be repaid.   Free market capitalism is based on risk and reward; however, when the government promotes policies that allow companies to keep the reward but makes taxpayers bail out failure, then you get financial institutions taking on levels of risk that would otherwise be unacceptable.

Every gambler knows there's nothing better than playing with "house money", and there's no bigger "house" than the United States government.  Focusing on executive compensation as a fix for our financial situation is like treating a gambling addict by limiting how much he tips the dealer.

Sincerely,
Dave Smith
Houston, TX

In response to this opinion piece by Lisa Falkenberg in the Chronicle, I sent the following letter:

re:  "Power to choose is little more than a myth"

In her commentary on health insurance reform, Ms. Falkenberg seems to identify the deficiency of choice as a consequence of having what is to a large extent what she calls a "market-based health care system".  This isn't so -- it isn't a free market limiting choice for individuals.  Rather, it is government prohibitions that limit competition, such as a federal prohibition against buying insurance across state lines.  Also, because the government refuses to grant the same tax exemption to individuals that it does to employers, individuals are tied to their employer's choice of plans and thus also tied to their jobs for health coverage.  Additionally, the government prevents "group plans", where organizations like, say, the Society of Professional Journalists, the American Diabetes Association, or maybe even the NAACP could pool its members together to supply health coverage, using their numbers to negotiate deals in a free, competitive market.
 
Remove those restrictions and other government mandates and prohibitions, and there would be a great increase in choices for individuals.  That's a much better approach than government edicts and a so-called "public option".

Sincerely,
Dave Smith
Houston, TX

Howard Kurtz is a media writer for the Washington Post.  In a recent column titled "A Black and White Question", Mr. Kurtz asks the following question:  "Maybe Obama's health-care plan is an awful idea and his budget is way too big, but how exactly is any of this unconstitutional?"

In his writing, Mr. Kurtz tends, like most journalists, towards the center-left, but typically he does try to be fair -- he isn't typically a "hater" when it comes to the center-right, and he will call out his colleagues when they cross various lines.  However, the quote illustrates his worldview, and that of many:  they simply don't understand how we could believe that government action, especially that ostensibly undertaken to benefit its citizens, could be un-Constitutional.  In response, I sent the following email to Mr. Kurtz:

Mr. Kurtz,

In your commentary piece, "A Black and White Question", you make the following comment:

"Maybe Obama's health-care plan is an awful idea and his budget is way too big, but how exactly is any of this unconstitutional?"

The answer is found in two main places:  The Constitution itself, and the Federalist Paper 45.

Article I, Section 8 of the Constitution defines (enumerates) the powers of Congress.  Nowhere in this Article, or section, or elsewhere in the Constitution, is the federal government authorized to provide health insurance, or to mandate that citizens purchase it.  Therefore, if one believes that the government functions according to the rules "we the people" agreed to in our contract with it then surely authority not authorized by the Constitution is, by definition, un-Constitutional.

In Federalist 45, Madison explains that the purpose of the federal government is to focus on security and foreign affairs, and for the states to focus on "the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State."  Madison further states that the "powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected."

Having been the principle author of the Constitution, Madison was certainly well-versed in what it meant.  He describes a federal government with few, defined, enumerated powers -- not broad, general ones.  A national health care plan -- especially one based on mandated participation -- is not consistent with either the letter or the spirit of the Constitution.  This is why we consider it, like much of what the federal government endeavors, to be un-Constitutional.

Sincerely,
Dave Smith
Houston, TX

In response to this column by Thomas Friedman in the Chronicle, I sent the following letter:

re:  When it comes to solar energy, U.S. is still in the dark

In his article about solar panel (and computer chip) producer Applied Materials, Thomas Friedman notes that none of the corporation's 14 panel factories are located in the United States, but rather are in Germany, China, Spain, India, Italy, Taiwan, and "even" Abu Dhabi.  He then reasons that this lack of domestic production is the result of a failure of the US government to provide the proper incentives and infrastructure.  He fails to mention, however, that government incentives and infrastructure (or, as he calls them, "prerequisites for growing a renewable energy industry") aren't free -- they must be paid for by taxpayers.  So when he is ultimately decrying is the fact that US investors and consumers are not being forced by their government to pay for less efficient, more expensive solar energy and instead choose for themselves the best return for their investment capital and the best value for their electricity spending.

Mr. Friedman also misses another potential reason, however, for Applied Materials decision to build plants overseas rather than domestically.  Of the countries mentioned as current locations for solar panel factories, each one of them (even Communist China!) has a lower rate of taxation on either capital gains, corporate earnings, or both.  That is, Applied Materials gets to keep more of each dollar it earns on solar panels made elsewhere.

Instead of advocating government subsidies for chosen industries -- i.e., special interests -- a better approach would be for the US to make investing in domestic production facilities for all businesses more profitable by reducing taxes on investment and earnings.  Then perhaps all kinds of businesses would seek to invest here, not just those favored by politicians and editorialists.

Sincerely,
Dave Smith
Houston, TX

In response to this article from the Business section of the Chronicle, I sent the following letter:

re:  Capital gains revenue?  A myth

In his article on the capital gains tax, Scott Burns is more correct than he realizes.  His thesis is that because of capital losses due to the financial collapse of the past year that included the broad stock indexes, government could (as then-candidate Barack Obama advocated) raise the tax rate on capital gains and not "get a cent in capital gains tax revenue because most people don't have any gains to realize and pay taxes on."  However, he misses another point:  increases in the tax rate on capital gains never increase the revenue collected by the government.

In the past 65 years, the taxation rate on capital gains has been increased twice:  in 1968 and 1986.  Not only did the capital tax revenues actually decrease in both cases, it took at least 8 years in each case before the revenue collected even equaled that collected in the year prior to the increase.  In the case of the capital gains tax rate cuts implemented in 1979, 1997, and 2003, tax revenues increased.

The evidence is clear:  raising the capital gains tax does not increase revenue to the government.

Sincerely,
Dave Smith
Houston, TX

The devil is always in the details.  President Obama's proposed "reform" of the health care industry, which comprises approximately one-seventh of the US economy, is no different.

In response to the claim that the President was not providing enough leadership on the issue, President Obama gave a speech to a joint session of Congress last week (a transcript of the entire speech is available here).  The White House also issued a "concise, printable version" of the "Obama Plan for Stability & Security for All Americans".  There are some interesting, devil-containing statements that sound innocuous at first, but become easily more tricky upon further examination.

The first sentence is basically a mission statement:

"It will provide more security and stability to those who have health insurance. It will provide insurance to those who don’t.  And it will lower the cost of health care for our families, our businesses, and our government."

Now other than the fact that starting sentences with "And" is a no-no, what's not to like in that?  Unfortunately, the details of the plan, or rather, what are presented as details in the document (no actual piece of legislation is ever "concise") act in such a way to contradict the very essence of the plan's supposed goal.  How?  Let's look at a few.

The first section of the plan is titled "If You Have Health Insurance:  More Stability and Security":

• Ends discrimination against people with pre-existing conditions.
• Prevents insurance companies from dropping coverage when people are sick and need it most.
• Caps out-of pocket expenses so people don’t go broke when they get sick.
• Eliminates extra charges for preventive care like mammograms, flu shots and diabetes tests to improve health and save money.
• Protects Medicare for seniors and eliminates the “donut-hole” gap in coverage for prescription drugs.

Now, there are many who are in favor of a government regulation prohibiting denial of coverage based on the "pre-existing condition".  But this takes it a step further -- "end[ing] discrimination" altogether?  If there's no discrimination whatsoever, then does that mean that I can't be charged more for insurance coverage if I have, say, high blood pressure caused by bad diet, or diabetes?  Not only would this seem to remove incentives for people to act in a more healthy manner (thus lessening their health care bills), but also would serve to increase the costs of health insurance for those that don't have pre-existing conditions.  That hardly seems fair.

In eliminating "extra charges for ... mammograms, flu shots, and diabetes tests", again, the consumer can lose.  Why should I, as a male, be forced to subsidize the cost of mammograms?  Or say I have a strong immune system and choose not to get flu shots, or eat healthfully and don't get diabetes -- by mandating no "extra charges" for these items, it means that the costs are spread out among everyone, even those who never use those services, as well as picking and choosing which special interests to serve -- what about, say, prostate tests for men?  Or skin cancer screenings?  Don't those also potentially "improve health and save money"?  Some consumers -- even women who would be getting mammograms regularly -- might prefer to choose a less expensive, less encompassing health insurance plan and either pay for those other services out-of-pocket or through a health savings account.  Why shouldn't we have that right?

Finally, in expanding the Medicare prescription drug plan, it extends the idea that someone deserves to have their prescriptions paid for by the confiscation of property from others, regardless of either person's income level.  Warren Buffet, one of richest people in the world (if not the richest), currently qualifies for Medicare's prescription drug plan.  Why should my taxes go to providing billionaires with health services?

The next section is called "If You Don't Have Insurance:  Quality, Affordable Choices for All Americans".  It contains the following:

• Creates a new insurance marketplace – the Exchange – that allows people without insurance and small businesses to compare plans and buy insurance at competitive prices.
• Provides new tax credits to help people buy insurance and to help small businesses cover their employees.
• Offers a public health insurance option to provide the uninsured who can’t find affordable coverage with a real choice.
• Offers new, low-cost coverage through a national “high risk” pool to protect people with preexisting conditions from financial ruin until the new Exchange is created.

First of all, why does a "new insurance marketplace" need to be created at all?  There's already an insurance marketplace, although it is limited by federal mandates against buying across state lines and the organization of group plans, and mandates on minimum coverages.  Why not keep the current marketplace, but open it up to give consumers more choice by dropping those prohibitions and mandates?  True competition would produce competitive prices -- that's how markets work.  But government limitations restrict supply and competition, keeping prices high and choices scarce.

Then there's the so-called "public option" -- the government plan.  Much has been written about it here and elsewhere, and deservedly so.  The federal government is not an insurance company, and no amount of mandated bureaucracy can turn it into an efficient, effective one.  Described by advocates as a way to ensure competition, it is perhaps the single most controversial part of the President's proposals, dividing even Democrats.  But just as it isn't competition with the US Postal Service that propels new innovations and efficiencies among FedEx and UPS, health insurance providers don't need a government health plan, especially one designed to eventually swallow private competition.

As always, the devil is in the details of the "Exchange" and the "public option", but the intent is clear.  In seeking to answer Congressman Joe Wilson's now famous cry of "you lie!" during the President's speech with regards to coverage for illegal immigrants, the White House released a set of revised guidelines that contained this gem (emphasis added):  "Undocumented immigrants would be able to buy insurance in the non-exchange private market, just as they do today. That market will shrink as the exchange takes hold..."  Far from promoting true competition on an open, free market, the "public option" will seek to limit it in favor of the government plan.

The final section of the White House plan is titled "For All Americans:  Reins In the Cost of Health Care for Our Families,
Our Businesses, and Our Government".  While just the title is laughable -- since when does greater government intrusion result in lower costs? -- the text of the section reads as follows:

• Won’t add a dime to the deficit and is paid for upfront.
• Creates an independent commission of doctors and medical experts to identify waste, fraud and abuse in the health care system.
• Orders immediate medical malpractice reform projects that could help doctors focus on putting their patients first, not on practicing defensive medicine.
• Requires large employers to cover their employees and individuals who can afford it to buy insurance so everyone shares in the responsibility of reform.

First of all, kudos to the President for recognizing the importance of medical malpractice reform; malpractice insurance itself is a huge cost to doctors, and of course that cost is passed along to consumers.  The threat of malpractice suits also can result in the ordering of unnecessary tests and procedures as hedges against missing something.  Here, however, the devil is in the lack of details, as there has been little talk about what kinds of malpractice reforms would be employed and on what timetable.  To my knowledge, this area has not been one of much focus for any of the current Congressional plans in the process of markup.

By requiring employers to provide health insurance for their employees, the President's plan raises the cost of hiring workers.  Such added costs would be mitigated by employers in one of two ways:  either by hiring fewer workers, or by paying less in wages.  With the current unemployment rate at 9.7%, is increasing the cost of labor a good idea?

Question:  where in the Constitution is the federal government authorizes to "require" anyone to purchase health insurance?  Whether I can afford it or not, the purchase of health insurance (and of how much) should be my own business, not that of politicians in Washington or elsewhere.

Question:  do you really trust "an independent commission of doctors and medical experts" to identify much in the way of "waste, fraud and abuse"?  Really?!?  I don't.

Finally, that the President's "reform" plan "won't add a dime to the deficit" is again laugh-inducing.  Really?  You're going to mandate more coverage to more people through more government programs and bureaucracies, and do it for free?  Not only does it defy common sense, but it defies the non-partisan arbiter of what government programs will cost:  the Congressional Budget Office.  According to the CBO's "preliminary assessment[,] the provisions of the legislation pertaining to insurance coverage would increase federal deficits by $645 billion over the 2010–2019"; expansions in Medicaid eligibility that some of the Congressional plans advocate  "would probably bring the total federal cost to more than $1 trillion".  Well, the President is, I suppose, technically correct -- neither $645 billion nor $1 trillion are a dime...

Those are just a few of the devilish items lurking in the President's plan to reform our health care system.  That's just in a one-page summary of the President's plan, and the various Congressional plans are thousands of pages.  The stakes are too high and the potential damage too great to allow this plan to pass.

During his 2008 Presidential campaign, Barack Obama sent out mixed messages on trade.  He criticized the North American Free Trade Agreement (NAFTA), threatening either to renegotiate the agreement or to pull the US out of it altogether, but then reportedly had one of his advisers assure the Canadians that he was only engaging in political rhetoric.  His campaign website promised that as President he would "fight for fair trade", "amend" NAFTA, and stop "unfair" government trade policies.  And, while presenting conflicting information about what direction he would steer the country in terms of trade policy, there has been one constant in Obama's rhetoric as a candidate and his actions as President:  blistering, unwavering criticism of his predecessor, George W. Bush.

In his first action on trade policy as President, Obama has decided to slap an import tariff on Chinese tires.  The President "decided to remedy the clear disruption to the U.S. tire industry", according to the official White House statement, with union officials claiming a loss of 5000 jobs in the tire industry as Chinese market share has tripled over the past five years.  The tariff, or "safeguard", starts at 35% in the first year, and is being protested by the Chinese government.

So, as it turns out, President Obama has something in common with his predecessor after all.  In 2002, President Bush acted similarly, enacting a tariff on imported steel.  Using similar language, the White House then utilized a "safeguard" to supposedly save US steelworker jobs and allow struggling steel firms to restructure; the tariffs in that case ranged from 8% to 30%, depending on the type of steel.

In both cases, the respective President decided to cast his lot with special interests -- steel makers and tire manufacturers -- and against the interests of individual consumers.  By protecting the business of favored tire makers, President Obama has decided that American consumers should pay more for their tires than they otherwise would absent government action, and that American tire manufacturers should have fewer incentives to cut costs or improve the quality of their tires to attract more business.  He is rewarding American tire manufacturers for providing a product that consumers apparently find inferior, and punishing consumers for not spending their money the way he thinks they should.

When government acts against consumers through tariffs, taxes, quotas, and price supports, the policies are typically justified in the name of "fair" trade and "saving jobs".  And when a textile or tire or steel plant goes out of business, it is easy to measure the impact on a specific area -- the number of jobs that are "lost" in the shuffle.  What isn't as obvious, however, but no less real, are the positive impacts of less expensive goods and services.  Cheaper steel means that construction is less expensive; how many construction jobs are created when the price of steel is reduced?  Much harder to say.  How many lives are saved when people can more easily afford new tires?  Extremely difficult to calculate.  Plus, construction jobs not created or lives not lost have no special interest lobbying group making campaign contributions to Democrats and Republicans.

In face of economic downturn, President Herbert Hoover raised taxes and signed the Smoot-Hawley Trade Act, which was a massive increase in import tariffs on a variety of goods and services; the international response was to close foreign markets to American-made goods in retaliation, gravely damaging the American export market.  In choosing to interfere with the purchasing decisions of American consumers, President Obama is emulating the two American presidents for whom he has offered the most criticism:  George W. Bush and Herbert Hoover.  He's choosing the wrong role models.

In response to this column by Thomas Friedman in the Chronicle, I sent the following letter:

re: "Can it be a democracy if only one party participates?"

In his article describing the US as a "one-party democracy", Thomas Friedman makes several mistakes, but central among them is his over-arching theme:  that government direction, command, and control is somehow superior to individual liberty, choice, and free markets.  In praising the Chinese autocracy, he seemingly ignores its abysmal human rights record and the oppression it carries out on the Chinese people.  Regardless of political ideology, does he really believe that our protected freedoms -- of speech, religion, association, and self-determination, to name a few -- are "worse" than the Chinese government's active persecution of religious expression and political dissent, its censorship, and its overall intrusion on the freedoms of its people.

 

Mr. Friedman also mistakes opposition to his favored policies as inaction (or, as he puts it, "standing [with] arms folded and saying 'no'").  Opposition earlier in the year to the "cap-and-trade" legislation wasn't opposition to investment in green technology; rather, it was a protection of taxpayers' interests and the idea that individual investors acting voluntarily are more knowledgeable than politicians and special interests about how to invest their money for the best return.  If Mr. Friedman believes he knows best what those investments are, he is free to use his own capital and to persuade others to join him; instead, he seeks to use the power of government to force taxpayers to make those investments.

 

Finally, in opposing government-centered health care "reform", free market Republicans have done anything but simply say "no" to the Democratic approach.  Free market reforms that increase individual choice, increase access to health insurance, and increase competition in the marketplace have been proposed; to those ideas, it is the Democrats who have responded with folded arms and refusal -- even to allowing the ideas to be debated in the halls of Congress.  But again, because individual choice and free market competition are in opposition to Mr. Friedman's worldview, he refuses even to acknowledge their proposal, apparently believing that only "reforms" that increase the size, scope, and intrusiveness of the government comprise "participation" in the political process.

 

Sincerely,

Dave Smith
Houston, TX

There has been much written about the death of Senator Edward M. Kennedy and, never having met him personally, I'll just have to take a lot of the accounts at face value.  I have no reason to think that he wasn't a good friend, father, etc. in his private life, and I prefer to stay in the realm of ideas rather than speculation.  I've seen a few inappropriate comments regarding his death, but that has become the coin of the realm in political rhetoric these days.  But what I particularly noticed this week is completely divorced from the person of Ted Kennedy.

Edward Moore Kennedy was first elected to the United States Senate in 1962, at the age of 31.  A classic quote came from his opponent in the Democratic Primary:  if his name had simply been Edward Moore, without the Kennedy, his candidacy would've been a joke.  The joke was on his opponent, as Kennedy won the primary with 65% of the vote, and beat George Cabot Lodge in the general election.  While now a lost name, the Lodges were then what the Bushes (or Kennedys) are now:  almost royalty.

Since that point -- nearly 50 years ago -- Ted Kennedy has served in the Senate.  By any account, he has been an influential legislator; whether or not he's been "successful" depends on your point of view.  He's only lost one election, ever:  his challenge to Jimmy Carter for the Democratic nomination in 1980; he responded by giving one of the most memorable speeches I've ever seen, a speech that even when viewed today is an example of great political rhetoric, well delivered.  Whatever he might have lacked in other areas Senator Kennedy was gifted in oratory.

But here's the key:  why should anyone, whether Ted Kennedy or, say, Barry Goldwater, stay in the senate for 50 years?  Seniority in our Congress -- especially the Senate -- brings with it influence and power.  The longer one stays in the Congress, the more well-connected he or she becomes.  In the House of Representatives, this is certainly noticeable, but in the Senate --one-quarter the size of the House, and laden with arcane rules and procedures -- seniority and knowledge of the Senate workings becomes a weapon, one that Senator Kennedy learned to wield with deft precision.

But again comes the question:  should anyone have that much time to accumulate that much power?  My response is a resounding "NO!"  That's why I favor term limits for our national legislature.  Our President has a limit of two 4-year terms, largely as a reaction to President Franklin D. Roosevelt's four elected terms (the last of which he was unable to serve to its completion).  In my opinion, George Washington set the correct tone when he voluntarily left after 2 terms.  His driving force, from what I've read, was the idea that he shouldn't die in office, thus potentially setting up a near-monarchal succession.  I believe his instincts were correct.

In addition to the mere accumulation of power, unlimited terms in Congress provide the incumbents with huge advantages in future elections.  Whether it is the "franking" privilege ("informational" mailings paid for by tax dollars) or the opportunity to "earmark" pork barrel projects in their home states, or merely name recognition and the ability to generate free press, incumbents have major advantages when running for re-election compared to their challengers.  Add to that campaign fundraising restrictions and other "reform" measures, and you have a clear advantage to incumbents legislators.

Many legislators need never live under the laws that they work to pass.  How many more restrictions and mandates do we have on, say, small businesses because we have legislators who have never themselves run one? 

There are many who repeat the mantra that "elections are term limits", and a high-profile, unexpected defeat of an incumbent is given as evidence that it is possible for a Goliath to be toppled; however, I take it as the opposite:  the idea that such surprises are so easily named is evidence of how rare they are.  When they do occur, it tends to involve not just a change in the will of the electorate, but some sort of corruption or scandal. 

Another reason given in opposition to term limitations is that because of the turnover, the officeholders themselves are less knowledgeable of the issues and details, thus making lobbyists and staff more powerful.  To that, I first would say that we need to make the government less intrusive on liberty and the economy, and there would be less incentive to have lobbyists as intimately involved in writing legislation.  But to the address the less philosophical issue of staff and lobbyist influence on unseasoned legislators, I would merely say that if a particular Senator or Congressman can't learn the job in 2 or 6 years, it would sound like a good reason to vote in someone new; likewise if someone is so easily manipulated by others.  I've seen no real evidence of this problem in other bodies that have implemented term limits, and it doesn't seem to hamper the President very much.  The limits I favor would still provide ample time for Senators and Representatives to become acquainted in the ways of Congress and, if successful legislators, enact an agenda:  10 years (5 terms) in the House, and 12 years (2 terms) in the Senate.

There are some that argue that term limits are limits on individual choice.  To some extent that's true, but the idea of enacting limitations on officeholders is hardly unprecedented; the Constitution provides residency and age restrictions.  Obviously, each state's voters should decide whether or not to implement limits on state government officials; however, if Massachusetts sends Ted Kennedy to the Senate for 50 years, it doesn't just impact that state, it impacts government policy in all 50 states.  Based on the aforementioned advantages of the incumbency, enacting term limits actually empowers citizens -- it empowers them not to be at the mercy of an individual legislator amassing vast power based on a few voters in another state.

To cash in on the condolences for Senator Kennedy's death, some have called for the health care "reform" legislation to be named in his memory.  However, rather than an "Edward M. Kennedy Health Reform Act", I propose instead a "Kennedy Amendment" to the Constitution.  Let's put an end to lifetime legislators, once and for all.