Thursday, June 28, 2012

On the Supreme Court's Decision Regarding 'Obamacare'

The Supreme Court decided today to uphold the individual mandate provision of the Affordable Care Act (ACA). Partisan Republicans are wailing and gnashing their teeth. Partisan Democrats are exulting in their victory. Partisans on both sides of this issue are mistaken about many of the particulars. 

Partisan Republicans assume that ACA embodies their frightening image of what “socialized medicine” represents. They imagine long waits to receive care, the rationing of care, and the further encroachment of government into the healthcare decisions of ordinary Americans. They do not seem to realize that people who currently have employer-sponsored health insurance or Medicare will not see any difference whatsoever in the medical care that they receive. The worst-case scenario is that the increase in number of people seeking medical care will overburden doctors in the short run, but society is likely to adapt by drawing more young people into the medical profession. 

Partisan Democrats assume that ACA embodies their hopes for universal health care. They too are mistaken. It is ironic that Democrats, who have traditionally opposed efforts to privatize government services, are so enthusiastic about a law that solidifies private sector control over the business of insurance (as in, the process of collecting and disbursing money for healthcare-related expenses).

Angela Braly, one of the most influential women in the U.S. (source)
Where do Whigs stand on this issue? A Whig knows that the combination of money and politics creates endless opportunities for corruption. If Congress members were not corrupt, various provisions of ACA would never have been supported. Among these flagrant examples of corruption, consider (1) a law which forbids Congress from negotiating lower prices for pharmaceuticals, (2) the absence of a comprehensive list of approved costs for medical procedures, that private insurance companies would have to abide by just as Medicare does today, (3) the failure to limit administrative costs to between 3 and 5%, and (4) requiring that state-run exchanges purchase group insurance plans from for-profit insurers. 

And now that the individual mandate has been upheld, further occasions of corruption will arise. If someone will profit by skimping on the quality of the healthcare provided, he or she will do so. If a politician will receive campaign contributions from insurance companies, he or she will pass laws to benefit the insurance companies, which will inevitably result in higher healthcare costs for the consumer. Working class Americans who are forced to buy this insurance (or pay a penalty) will be giving their hard-earned money to the millionaire executives such as Angela Braly. The CEO of Wellpoint, she received over $13 million in compensation in 2010. Perhaps she was being rewarded for the decision to ask the state of California to accept a 37% increase in health insurance premiums.

It bears noting that Wellpoint stock has risen since the Supreme Court's decision; even though they lose money by being required to accept customers who have pre-existing medical conditions, this loss is more than compensated by a vast expansion of Medicaid, which Wellpoint administers (source). If it's good for Wall Street, is it good for Main Street?

July 1, 2012: Addendum. One of the events that precipitated the American colonists' revolt against the British Empire was the "Ministerial Plan." The king and his ministers wanted to compel Americans to buy tea from the East India Company, and that company, in turn, gave money to the king and his ministers. The Founders saw this as tyrannical. As I reflect on this history, my concerns regarding the ACA grow. As Americans, we should perhaps reconcile ourselves to the fact that our political leaders are corrupt, and given the fact of this corruption, otherwise laudable goals (e.g., universal health care) must be viewed with suspicion. It is preferable to rid a house of vermin before one moves into it.

Thursday, June 21, 2012

On the Redistribution of Wealth

In 2008, a man named Joe “The Plumber” Wurzelbacher asked then-candidate Barack Obama to expand on his economic policy. During the resulting exchange, Mr. Obama indicated that “when you spread the wealth around, it is good for everybody.” If he knew that he was being recorded at the time, he might have chosen his words more carefully.
In some circles, it is generally understood that Mr. Obama is a Maoist.
Mr. Obama’s statement gave substance to an idea that many conservatives find profoundly disturbing. Conservatives prefer to allocate their personal wealth on their own, with minimal outside interference. They also worry that the money they’ve earned through hard work will be taken from them and placed into the hands of malingerers and shirkers. These are legitimate concerns, even if many people on the political left do not believe so.
Joe the Plumber became a cause célèbre among conservatives, apparently, because he had unmasked Mr. Obama as a socialist. However, redistribution of wealth is not a practice that is confined to socialists, communists or even Welfare State Liberals. Any government which collects taxes and spends money redistributes wealth. If there were no government at all and a state of anarchy prevailed, the redistribution of wealth would still occur on a regular basis: gangs of thugs would roam the countryside, stealing from the less powerful. There are small groups residing in Montana and Idaho who believe that they could protect themselves from roving gangs during the post-Apocalypse, but I doubt that many of them have stockpiled enough ammunition or canned goods for the long haul.
The word “redistribution” has acquired frightful connotations as a result of the writings of people such as Ayn Rand, who once said, “Whoever claims the ‘right’ to ‘redistribute’ the wealth produced by others is claiming the ‘right’ to treat human beings as chattel.” And, “If a man proposes to redistribute wealth, he means explicitly and necessarily that the wealth is his to distribute.”
To better understand the connotations of the word “redistribution,” I consulted Conservapedia, and learned that Ludwig von Mises – a favorite among libertarians – helped to popularize the notion that Adolf Hitler was a socialist. If this were true, it would be an excellent reason to avoid socialism. However, even if the Nazi Party (aka, “National Socialist German Workers Party”) called itself “socialist,” the Nazis were a notoriously dishonest crowd. They were fascists, pure and simple. And fascism is a poisonous mixture of totalitarianism, militarism, and blind faith in the Nietzschean doctrine of the Übermenschen. The latter doctrine encourages fascists to view the human race as comprised of “producers” and “parasites.”
The point here is that, in the minds of many conservatives, the words “socialism,” “communism,” and “fascism” are synonyms, and they are all linked to the phrase “redistribution of wealth.” This is a mistaken view, but it is also an understandable view if it is seen in historical and social context. American conservatives, since the early days of the Republic, have lived alongside liberals who are – it must be admitted – a bit too glib in recommending that wealth be redistributed from the wealthy to the poor. There are liberals who still believe that the writings of Karl Marx offer practical guidance on equitable government. They fancy themselves proletarian when they are in fact bourgeois.
Eminent liberals such as Paul Krugman have said that it would be a good idea to “soak the rich.” And “soak” is slang for “overcharge” or “extort money from.” One can hardly blame the rich if they object to the idea of getting soaked. And no matter what he says in public, Warren Buffett wouldn’t stand for getting soaked either.  
The question of whether or not we should soak the rich has become ideological. As such, some people believe that soaking the rich is always a good idea and other people believe that it is never a good idea. People rarely if ever have calm discussions on the subject. They don’t make distinctions between personal income and corporate earnings. If one turns on the television, one doesn’t hear people saying, “If a corporation hires American workers, it should get a tax break. But if the corporation is firing people, increasing the number of unemployed Americans and putting money into the pockets of the Chinese and the Arabs, we ought to soak them.” And you don’t hear people saying, “If people invest in a hedge fund that earns money every time a home is foreclosed on, they should be soaked.”
Right now, the Chinese are sending their navy over to join its friends the Syrians, Iranians, and Russians for some military exercises. That’s a diplomatic way of saying that, if America were to do anything about those tyrants Assad and Ahmadinejad they are going to shoot at us. Some friends they turned out to be. Since a number of American corporations have been responsible for the rise of China as an economic and military power, maybe it’s only fair that they pay a little more in taxes.

Monday, June 11, 2012

On Capitalism

One of the most frustrating examples of partisan political discourse is the habit of people on the left to proclaim “Capitalism is evil!” and the habit of people on the right to proclaim, “Capitalism is the best of all possible systems!” Both claims are simple-minded and mistaken. Capitalism is neither good nor evil. Capitalism is like fire: if it is carefully tended, it powers the engines of economic growth and innovation. If it is left untended, it becomes a destructive force capable of devastating neighborhoods, cities, states, and entire countries. Yet, conservatives and liberals are locked in opposition to one another. Conservatives dare not admit the dangers of capitalism, and liberals dare not admit the virtues of capitalism, lest it weaken their respective positions. 

The Left looks at capitalism.
The New Independent Whig, if nothing else, is meant as a tribute to the wisdom of the Founders. The Founders articulated a brilliant vision for United States government in the Declaration of Independence and the United States Constitution. But in other, lesser-known documents and speeches, the Founders warned the American people of the factors that might defeat the promise of America. These factors had to do with the risks associated with untended capitalism.

The Founders warned us against relying on political parties to express the will of the people, because political parties will set Americans against one another if it will achieve their goals. The first and foremost goal of a political party is to win an election. It achieves this goal by (a) inflaming the passions of party members, to turn out the vote, (b) dispiriting members of opposing parties, so they will stay at home on Election Day, and (c) raising money, by any means possible. With each election cycle, the cost of winning an election increases. It took Scott Walker and his allies 130 million dollars just to stave off a recall election in Wisconsin. That was roughly the amount of money that the Democrats paid for the presidential campaign, back in 1972 (dollars adjusted for inflation, source). 

The American people understand what is happening. Consider the results of a poll which shows that 74% of Republicans and 73% of Democrats agree that the Citizens United Supreme Court decision will have a corrupting influence on politics. Two-thirds of Americans believe, quite reasonably, that an ordinary voter has less access to political candidates than big donors to Super PACs (source).
The Founders also warned of the dangers of extreme wealth concentrated into the hands of a few, because the wealthy will always seek to influence government. The patriot Samuel Adams said, “Some will say, is it a Crime to be rich? Yes, certainly [if it is] At the Publick Expense.” 

This is the view shared by many of the Founders. The Founders did not oppose the idea of capitalism and they did not oppose the accumulation of wealth. However, they were deeply frightened by the prospect that people who hold inordinate wealth could start buying elections. And if they buy elections, they will advance policies that serve their own private interests. 

The interests of the wealthy are often hostile to the interests of ordinary working people. The Founders believed that, as long as the American people remained alert to this danger, they would elect ordinary working people to the House of Representatives and the Presidency, to stand up for the interests of ordinary working people, to enact laws and policies that benefit all Americans, and not just a few. 

To illustrate how the interests of the wealthy differ from those of ordinary Americans, consider the following. Ordinary working people might prefer to see jobs kept in the United States; the wealthy few will seek cheaper labor in other countries. The wealthy benefit from economic austerity measures; it allows them to preserve the real value of their wealth against the effects of inflation. Ordinary working people will find that, as austerity measures increase, their children will receive a poorer education, crime will rise owing to the lack of a police force, roads will fall into disrepair, and businesses will fail. The wealthy oppose Social Security because it adds about 6% to the cost of employing an American worker, but ordinary Americans benefit from having Social Security. The wealthy benefit when they are exempted from taxation, ordinary Americans suffer from it.

John Adams was also concerned about the concentration of wealth in a few hands. In a letter to Thomas Jefferson, Adams offers a telling parable. He imagined boys playing with frogs that they catch by the water’s edge and a frog saying to the boys, “What is sport to you is wounds and death to us.” In this parable, the boys are the aristocrats – that is, holders of wealth and influence. Among the aristocrats, Adams observed weakness, folly, pride, vanity, and selfishness; the want of Principle, avarice, unbounded ambition, and unfeeling cruelty. The frog represents the multitude of ordinary men and women who foolishly allow themselves to be “taken in by their tricks.” 

Thomas Jefferson agreed. He wrote, “Experience declares that man is the only animal which devours his own kind, for I can think of no milder term to apply to ... the general prey of the rich on the poor.”[i]

John Adams saw that most aristocrats of his day arrived at a position of wealth and influence through the inheritance of wealth. They were born and raised exposed only to other aristocrats and their only contact with members of the poorer classes came from dealings with servants, groundskeepers, and tenants. From the perspective of the aristocrat, the poorer classes are people that they command and people from whom they extract money.  

Today, when looking at the 20 wealthiest people in America, one sees that 4 of the 20 are heirs of Sam Walton’s fortune and did not earn the money through by their own labor. Sam Walton, as you may know, was responsible for the spectacular financial success of Wal-Mart

In other instances, we see examples of self-made men. These include some college drop-outs named Bill Gates, Larry Ellison, and Michael Dell. 

But there is also another pattern that may be discerned from looking at the 20 wealthiest people in America. Take Michael Dell, for example. His company, Dell Computers, has become enormously profitable by outsourcing American jobs. He is one of the legendary “job-creators” who has hired 20,000 people in India to answer customer phone calls, and thousands in China to manufacture computer components, while firing thousands of American workers. 

When Congress was putting together financial stimulus legislation in 2009, one of the provisions in the legislation was that federal stimulus money should only go to American made goods. Dell employed his money and influence over politicians to strike that provision. 

A social safety net, envisioned by Foxconn (source).
Dell, like Apple and Hewlett Packard, hire their Chinese workers through a company called Foxconn. Foxconn employees are expected to share cramped, company-owned dormitories with 6 other employees (source). Working conditions there are so grueling that 9 Chinese workers committed suicide by jumping off the roof. Since then, the upper levels of factories have been ringed with suicide nets, security patrols walk the rooftops, and employees are asked to sign a pledge not to kill themselves. Employees may decide not to kill themselves, but die nonetheless in explosions, such as the one which killed two last May (source). Overtime is mandatory and unpaid. In exchange (following a recent increase brought on by adverse public opinion), starting employees receive a salary of  1,800 yuan or $290 dollars per month (source). 

Ordinary Americans have been made fools by partisan politics, some unwilling to see the virtues of capitalism, and other unwilling to see the evils of capitalism. And as Americans remain divided on this purely academic question, our jobs continue to be sent overseas, and foreign laborers are tortured and killed by the ruthless monsters who operate companies such as Apple, Dell, and Hewlett Packard. If Americans continue to sit idly by as these monsters are allowed to roam unchecked, the future will be even darker than the present. The evils we allow to continue overseas will come home to roost.

For more information: link

Update, 10.17.2012: Foxconn employs underage workers as young as 14 yrs (here)

[i] letter to Edward Carrington, 1787

Wednesday, June 6, 2012

On Wisconsin and Labor Unions

According to the Democratic Party platform, a true Democrat will support unions (source). And according to the GOP Party platform, a true Republican will oppose unions (source). Therefore, when union-busting governor Scott Walker of Wisconsin retained his post following a recall election, Republicans were overjoyed and Democrats were crestfallen. Inasmuch as the Wisconsin election was about labor unions, it’s worth thinking about the sources of anti-union sentiment and what it means for America. 

Lech Walesa's union stood up against communism in Poland.
First, it will be stipulated that supporters of unions have a valid perspective. Unions have provided great benefits to this country. Before organized labor, people were expected to work 10 hours a day and 6 days a week. Now we are blessed with the more humane 40 hour work week, complete with weekends. It is not necessary to continue listing what unions have achieved over the years, as far as supporting legislation to protect workers’ safety and improve their living conditions. 

It will also be stipulated that opponents of unions have a valid perspective. By the middle part of the 20th century, unions had become so powerful that they were able to negotiate excessive salaries for their members, and preserve the jobs of employees who deserved to be fired. Union members have used intimidation to advance their separate interests. They have reaped profits from compulsory union dues. Again, it is not necessary to continue listing all the shortcomings of the labor movement as it has evolved in the United States. 

It is very unfortunate that political partisanship has made it impossible for Democrats to admit that, yes, unions have their faults. Likewise, Republicans cannot admit that unions have their virtues, even though Republicans enjoy their weekends as much as anybody. 

And in fact, the truth of the matter is summed up by Thomas Jefferson’s quote: “We have the wolf by the ears, and we can neither hold him, nor safely let him go.” That is, if it were possible to wipe out all labor unions, big business would go back to trampling over workers’ rights. And if it were possible to strengthen unions, union leaders would likely make excessive demands of employers. Thus, if there is a constructive solution to be found that serves workers as well as employers, both sides will have to agree to compromise. Or else, both sides will have to agree to change the rules of the game, and become partners instead of adversaries. This model has worked well in Germany; unlike the rest of Europe – and unlike the U.S. – Germany is experiencing a growing, export-driven economy and low unemployment (source, source).

Just to round out the topic of alternative models of union-management relations, employee-owned companies provide relatively high shareholder value as compared to other companies (source). This may be partly the result of the fact that these companies are less likely to part with ten million dollars a year to pay one CEO’s salary. 

As it stands, dysfunctional relationships between unions and management are quite common, and perhaps the norm, in the United States. This brings us back to Wisconsin. On average, union employees who are employed in the public sector earn more than union workers who are employed in the private sector, and have more generous benefits and greater job security than other workers (source). A non-union worker can be forgiven if he or she resents the idea that his or her tax dollars are spent on these relatively lavish salaries. 
A telling negative depiction of unions. Also, I recommend this.

To understand the plight of non-union employees, take into account the fact that taxes in Wisconsin are regressive. As a result of high a sales tax and other state and local taxes and fees, the bottom 20% of earners pay a higher share of income in taxes than the top 20% of earners (source). Thus, in addition to receiving lower wages, fewer benefits, and having less job security, non-union employees must also contend with a high tax burden on groceries and other necessities.  

Arguably, Wisconsin Democrats’ partisan loyalty to unions resulted in their being insensitive to the situation of low-paid non-union workers. Republicans’ partisan views are equally problematic. By focusing their wrath on public sector union employees, Republicans have overlooked other reasons why ordinary working people face a high tax burden. For example, between the years 2000 and 2007, Wisconsin’s Mercury Marine made over a billion dollars in profit but didn’t pay a cent in taxes. And, despite being profitable, the CEO of Mercury Marine chose to further increase shareholder value by shedding hundreds of workers (source). 

In conclusion, then, Democrats will likely continue defending labor unions, and Republicans will continue to oppose them. While the two parties act out this tired script, and regardless of the outcome, wages will continue to decline. And neither Democrat nor Republican would ever dare to say, “Let’s follow Germany’s example.”