Thanksgiving Pilgrims Rejected Socialism in favor of Private Enterprise

Here is our annual Thanksgiving day post.

With the Thanksgiving holiday now upon us, millions of children will hear the story of the First Thanksgiving of 1621. The standard story as told in schools and the media depicts the First Thanksgiving as a celebration of the Pilgrims’ successful harvest and cooperation with the Indians. What the schools do not teach, however, is that a fuller account of the Pilgrims’ story reveals a failure of socialism and a triumph of private property and free enterprise.

1024px-Thanksgiving-BrownscombeThe Plymouth Colony started as a type of commune, or socialist community.

The members of the Plymouth colony had arrived in the New World with a plan for collective property ownership. Reflecting the current opinion of the aristocratic class in the 1620s, their charter called for farmland to be worked communally and for the harvests to be shared.

Interestingly, the colonists’ communist ideology was derived not from Karl Marx, who had not yet been born, but from Plato.

The charter of the Plymouth Colony reflected the most up-to-date economic, philosophical and religious thinking of the early 17th century. Plato was in vogue then, and Plato believed in central planning by intellectuals in the context of communal property, centralized state education, state centralized cultural offerings and communal family structure…This collectivist impulse reflected itself in various heretical offshoots of Protestant Christianity with names like The True Levelers, and the Diggers, mass movements of people who believed that property and income distinctions should be eliminated, that the wealthy should have their property expropriated and given to what we now call the 99%.

The experiment in collectivism failed.

What resulted is recorded in the diary of Governor William Bradford, the head of the colony. The colonists collectively cleared and worked land, but they brought forth neither the bountiful harvest they hoped for, nor did it create a spirit of shared and cheerful brotherhood.

The less industrious members of the colony came late to their work in the fields, and were slow and easy in their labors. Knowing that they and their families were to receive an equal share of whatever the group produced, they saw little reason to be more diligent their efforts. The harder working among the colonists became resentful that their efforts would be redistributed to the more malingering members of the colony. Soon they, too, were coming late to work and were less energetic in the fields.

As Governor Bradford explained in his old English (though with the spelling modernized):

“For the young men that were able and fit for labor and service did repine that they should spend their time and strength to work for other men’s wives and children, without recompense. The strong, or men of parts, had no more division of food, clothes, etc. then he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labor, and food, clothes, etc. with the meaner and younger sort, thought it some indignant and disrespect unto them. And for men’s wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc. they deemed it a kind of slavery, neither could man husbands brook it.”

To their credit, the colonists finally realized their error and changed course. In their third year at Plymouth, the colonists re-introduced private property, and allowed families to keep or trade whatever surplus they produced. As a result, conditions for the colonists improved significantly. As Governor Bradford recorded in his diary

By this time harvest was come, and instead of famine, now God gave them plenty, and the face of things was changed, to the rejoicing of the hearts of many, for which they blessed God. And the effect of their planting was well seen, for all had, one way or other, pretty well to bring the year about, and some of the abler sort and more industrious had to spare, and sell to others, so as any general want or famine hath not been amongst them since to this day.

And Governor Bradford seems to have interpreted the experience of the colony as an empirical rejection of Platonic communism.

The experience that was had in this common course [common property] and condition, tried sundry years, and that amongst the Godly and sober men, may well convince of the vanity and conceit of Plato’s and other ancients; — that the taking away of property, and bringing into a common wealth, would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed confusion and discontent, and retard much employment that would have been to their benefit and comfort.

So there you have it; the lesson of the First Thanksgiving is a triumph of freedom arising out of a failed attempt at socialism. The story must be quite damaging to progressivism, because during the Thanksgiving season four years ago, a progressive propaganda sheet known as The New York Times attempted to refute it. The progressive counterargument is based on two main points. First, common property in the Plymouth Colony did not result in famine and the system was not a failure.

The arrangement did not produce famine. If it had, Bradford would not have declared the three days of sport and feasting in 1621 that became known as the first Thanksgiving.

Fair enough, but we also have Bradford’s own testimony, quoted above, that Platonic socialism had proved unworkable. Furthermore, if the socialist system had succeeded as progressives allege, how do they explain why the colonists abandoned it?

Bradford did get rid of the common course — but it was in 1623, after the first Thanksgiving, and not because the system wasn’t working. The Pilgrims just didn’t like it. In the accounts of colonists, Mr. Pickering said, “there was griping and groaning.”

“Bachelors didn’t want to feed the wives of married men, and women don’t want to do the laundry of the bachelors,” he said.

In other words, the system was working except that it was making people miserable, so they got rid of it. That sounds to us like a social system that has failed. And it failed for the very reason we would expect, namely, a Tragedy of the Commons that undermined incentives (“Bachelors didn’t want to feed the wives of married men…”).

Progressives’ second counterargument is that the Plymouth Colony, as a for-profit corporation, cannot fairly be deemed socialist.

Historians say that the settlers in Plymouth, and their supporters in England, did indeed agree to hold their property in common — William Bradford, the governor, referred to it in his writings as the “common course.” But the plan was in the interest of realizing a profit sooner, and was only intended for the short term; historians say the Pilgrims were more like shareholders in an early corporation than subjects of socialism.

“It was directed ultimately to private profit,” said Richard Pickering, a historian of early America…

Well, words have meaning, and a society that replaces private property with collective ownership of the means of production meets the textbook definition of socialism. If that’s not socialism, then the word has no meaning. This remains true even if the colony as a whole sought to make a profit by trading with the rest of the world. The Pilgrims may have been capitalists when it came to exporting furs, but the essential fact is that production for domestic consumption was organized as socialism.

This second argument of the progressives also underscores the weakness of their first argument, that “common course” had not failed. Because we can be sure that if common course had been a ringing success, progressive journalists wouldn’t be working to disassociate it from socialism. They’d be hailing it as a triumph of socialism.

In summary, the story of the First Thanksgiving illuminates two crucial and eternal truths. First, collectivism always fails. Second, progressives, to defend their socialist beliefs, will deploy the most appalling sophistry, specious reasoning, and intellectual dishonesty.

Happy Thanksgiving, everyone!

A Seat at the Table

A story about waste in higher ed. via the Daily Mail:

A taxpayer-funded university in New Jersey has spent $219,000 on a custom conference table that was built in China.

Now, state lawmakers are calling for a criminal investigation of Kean University and the no-bid contract that allowed administrators to pay so much for a table.

The president of Kean, which charges more than $44,000 for a four-year degree, has incredibly hit back at critics.

‘It is small-minded to focus on the university buying a $200,000 table,’ Dawood Farahi told the Bergen County Record.

‘Why not? Why not?’

Farahi earns nearly $300,000 a year as the head of Kean and took home a $200,000 bonus last year.

The university has already spent $219,000 and has earmarked up to $51,000 more by the time of the 22-foot circular table is finished.

“Why not?” indeed!  As long as none of this eats into Farahi’s half million dollar total compensation.  However, we do think that Kean students should at least get a framed picture of the table that they could hang up and look at while they are paying off student loan debt into their 30’s.

Spirit of Liberty Triumphant at New England Town Meeting

This week, Americans prepare to celebrate their Thanksgiving holiday, a tradition started by the Puritans who settled Massachusetts in the 1600s. Most of the Puritans migrated from the eastern part of England, and they brought with them from East Anglia an old institution of liberty: the town meeting. Historian David Hackett Fischer, in his monumental Albion’s Seed, describes the origins of the institution (pgs. 196-98).

Within a few years of settlement, a unique system of government by town meetings and selectmen took form in Massachusetts…New England town meetings were transplanted from East Anglia, where they had existed for many centuries before the great migration…

These East Anglian towns governed themselves through officers sometimes called “selectmen.”…

The selectmen disposed of routine business, but in many parishes of East Anglia, larger questions were dealt with by assemblies explicitly called “town meetings,” which brought together the “principal inhabitants” of the community. These East Anglian town meetings were diverse in their structure. No two of them were quite the same. But they commonly allowed a large number of townsmen to participate in local government…

A distinctive pattern of participation in town meetings also developed at an early date in Massachusetts. It was normally characterized by very low levels of turnout–normally in the range of 10 to 30 percent of adult males. But when controversial questions came before the town, participation surged–sometimes approaching 100 percent.

This pattern still exists in New England. The major issues today might be a tax-override or a middle school, rather than the choice of a new minister or the location of a meetinghouse. But the traditional pattern of very low participation, punctuated by sudden surges of very high turnout, has been characteristic of New England town government for three centuries.

One of those “sudden surges of very high turnout” occurred recently at the town meeting in Westminster, Massachusetts. At issue was a proposal by the town’s Board of Health to ban the sale of all tobacco and nicotine products. The plan would have made Westminster the first community in the nation to implement such a ban. At the town meeting, however, the Board found that its proposed ban had unexpectedly awakened the spirit of liberty among the people.

Only a handful of people were able to speak on a proposal that could make the tiny Massachusetts town of Westminster the first in the nation to ban all sales of tobacco products before boos and shouts from the crowd shut down the public hearing Wednesday night.

According to the CBS report, 60 people were registered to share their opinions and “several hundred” held signs opposing the ban. The Boston Globe reported the audience at 500 people.

Twenty-five minutes into the meeting, the hearing was closed by Board of Health chairwoman Andrea Crete, amid shouts of ‘America!’ and ‘Freedom Now.’

[...]

“The crowd’s getting out of control and the room’s filled to capacity,” Crete said. “We don’t want any riots.” Crete and two other board members were escorted out by the police. The crowd sang “God Bless America” as it was cleared out of the room.

The Board cut short the meeting, but got the message delivered by the people. The Board decided to drop the proposed ban.

The test of a true friend of liberty is if he supports the freedom of others to do even things that he does not approve of. To their credit, the Westminster residents passed that test.

“I find smoking to be one of the most disgusting habits anybody could possibly do. On top of that, I find this proposal to be even more of a disgusting thing,” resident Kevin West said during the session, according to CBS Boston.

Store owner Brian Vincent, who organized a petition drive, gathering more than 900 signatures, asked, “Having other adults decide what legal item we’re not allowed to consume just makes you wonder: If this passes, what could be next? Sugar? Bacon?”

Well if they ever come for our bacon, they’ll have a real riot on their hands.

This week, as we celebrate Thanksgiving, the holiday inspired by the Puritans, let us give thanks for something else the Puritans gave us–the town meeting, an institution that has now served the cause of liberty for more than 300 years.

freedom-of-speech-1943.jpg!Blog

 

Your bank has failed. What happens next?

Back in 2009, the Federal Deposit Insurance Corporation (FDIC) granted 60 Minutes extraordinary access to film the government takeover of a failed bank. The resulting video report offers a fascinating look at the FDIC’s procedures, which include the launching of a surprise raid to secure the physical takeover of the bank.

In our experience, foreign students in particular usually react to the video with astonishment, since no such raids on banks occur in their home countries. Indeed, the procedures shown in the video are unique to the United States. The reason is that only the United States has small banks. Known as “community banks,” these are banks with less than $1 billion in assets, and the U.S. has about 6,000 of them. These are the banks that get raided by the FDIC.

In contrast, the biggest banks in the U.S. and the rest of the world are considered Too Big to Fail. When these big banks become insolvent, they don’t get raided, they get bailed out with taxpayer money. Designating banks as Too Big to Fail removes market discipline, and gives giant banks the incentive in the long run to take on too much risk.

Our comments on the video appear below.

1:07. The plan to seize the bank is shrouded in secrecy “to prevent a run on the bank.” Another reason for the secrecy, unmentioned, is to prevent last-minute looting or risky lending by the bank’s managers.

2:33. The bank targeted for seizure has a bit more than $200 million in assets. While to some people that might sound like a lot, it’s far short of $1 billion, so this bank definitely qualifies as a small community bank.

5:42. “We’ve been around 75 years,” says Sheila Bair, the head of the FDIC, “and nobody’s lost a penny of insured deposits.” Well, as Churchill said, that is true, but not exhaustive. To make those depositors whole, the government had to take from various third parties, including from depositors and shareholders at sound banks as well as from taxpayers. Moreover, these costs to third parties have been elevated enormously by the government’s failure, often for political reasons, to shut down insolvent institutions in a timely fashion.

A noteworthy historical example is the Savings and Loan Debacle of the 1980s. At that time, hundreds of insolvent S&Ls needed to be subjected to a shut-down operation like the one depicted in this video. For mostly political reasons, however, the authorities held back and allowed the insolvent institutions to continue to operate for years, which increased costs dramatically. The phenomenon of regulators failing to shut down insolvent banks is known as regulatory forbearance.

The cost of bailing out the Federal Savings and Loan Insurance Corporation (FSLIC), which insured the deposits in failed S&Ls, may eventually exceed $160 billion. At the end of 2004, the direct cost of the S&L crisis to taxpayers was $124 billion, according to financial statements published by the Federal Deposit Insurance Corporation (FDIC), the successor to the FSLIC. Additionally, healthy S&Ls as well as commercial banks have been taxed approximately another $30 billion to pay for S&L cleanup costs…

Delayed closure of insolvent S&Ls greatly compounded the FSLIC’s losses by postponing the burial of already dead S&Ls…

Congressional and administration delay and inaction, due to an unwillingness to confront the true size of the S&L mess and anger politically influential S&Ls, prevented appropriate action from being taken once the S&L problem was identified…

Congress chose to put off the eventual day of reckoning, which only compounded the problem. Over half of these losses reflect the pure cost of delayed closures—compound interest on already incurred losses. The rest of the cost, except for the part that went to owners of S&Ls, represents the waste of real resources—building unneeded shopping centers and office buildings and keeping open S&L branches that should have been closed. However, there would have been little, if any, of this real waste if all of the then-insolvent S&Ls had been closed by mid-1983; they would not have been around to make all the bad loans they made after 1983 or to incur wasteful operating expenses.

9:20. After seizure, the FDIC has the option of shuttering and liquidating the failed bank, but more often they keep it open and try to find a ‘buyer,’ that is, a healthy bank willing to merge with the failed institution. Often the ‘buying’ bank doesn’t actually pay anything, since the failed institution has little or no net worth. In fact, the FDIC typically has to provide the acquiring bank with a financial inducement such as a cash infusion and a promise to backstop losses.

10:30. Mitchell Feiger, CEO of the acquiring bank, claims that many dozens more banks have to fail, and that’s “OK.” Notwithstanding the skepticism of the interviewer, Feiger is correct. Were the opposite to occur, and the insolvent banks were not shut down, the losses would increase exponentially, as actually happened during the S&L Debacle. Feiger is therefore correct that eliminating the unsound banks makes for a healthier and more efficient banking industry. Furthermore, the process of merging banks is smooth, and customers incur no substantial costs.

11:00. Bair is remarkably frank about the problem of Too Big to Fail, and that something should probably be done to limit the size of the largest banks. We agree with this, and we also agree with the narrator’s point that the system is “unfair to smaller banks,” since “giant banks get bailed out,” while investors in insolvent community banks “get wiped out.”

The FDIC was created in 1933. Prior to that date, how did insolvent banks get shut down? The mechanism was a market-based one in which depositors and creditors, suspecting that the bank had become unsound, would pull out their cash, thereby forcing the institution into bankruptcy and liquidation.

Which system, market-based or FDIC raids, is better? Both systems have their pluses and minuses, but the overriding problem of regulatory forbearance makes us prefer the market-based approach. Regulators in the past have proven themselves unreliable.

Use the Mattress

This story from the Columbus Dispatch about the bankruptcy filing of the Blue Jacket’s Jack Johnson reminds us of this previous post.  We stand by our opinion that athletes should “protect their money by keeping it under the mattress or invested in CD’s”. It is amazing how much damage financial illiteracy can do.  Of course, athletes probably have to be more careful than most people in fending off grifters. They seem to be more susceptible to hooking up with the wrong advisers and trusting them implicitly.  Still, few of us would anticipate the need for having to be on the lookout for shenanigans from our parents:

On the morning of Oct. 7, two days before the Blue Jackets opened the 2014-15 season, Jack Johnson left his Ferrari parked in the garage of his Dublin apartment and drove his BMW to a federal courthouse Downtown to file for bankruptcy.

Johnson has earned more than $18 million during his nine-year NHL career, not including the $5 million he will be paid this season by the Blue Jackets.

Almost all of the money is gone, and some of his future earnings have already been promised — which is why Johnson, surrounded by a new team of financial advisers and an attorney, signed his financial surrender.

The scene was nearly four years in the making, after a string of risky loans at high interest rates; defaults on those loans, resulting in huge fees and even higher interest rates; and three lawsuits against Johnson, two of which have been settled and one that’s pending.

“I’d say I picked the wrong people who led me down the wrong path,” Johnson, a 27-year-old defenseman, told The Dispatch last week. “I’ve got people in place who are going to fix everything now. It’s something I should have done a long time ago.”

He has declined to comment further.

But sources close to Johnson have told The Dispatch that his own parents — Jack Sr. and Tina Johnson — are among the “wrong people” who led him astray financially.

In 2008, Johnson parted ways with agent Pat Brisson, who represents some of the National Hockey League’s biggest stars, including Sidney Crosby, Patrick Kane and Jonathan Toews.

With no agent and little knowledge of how the financial world works, Johnson turned over control of his money to his parents.

In 2011, in the weeks leading up to Johnson’s first big contract — a seven-year, $30.5 million deal signed with the Los Angeles Kings, under which he now plays for the Blue Jackets — Johnson signed a power of attorney that granted his mother full control of his finances.

Tina Johnson borrowed at least $15 million in her son’s name against his future earnings, sources told The Dispatch, taking out a series of high-interest loans — perhaps as many as 18 — from nonconventional lenders that resulted in a series of defaults.

 

Buffalo Bills offer fans money, tickets to shovel out stadium

There is a pretty old debate in the history of macroeconomics about whether unemployment is most usefully modeled as being voluntary or involuntary. The main figures in the controversy were J.M. Keynes and A.C. Pigou and the dispute seems to us to be largely an argument over semantics. Luckily, this story allows us to confidently state that there will be zero involuntary unemployment in Buffalo for at least the next few days:

BUFFALO, N.Y. – The Buffalo region of eastern New York got hit with one of the worst early snowstorms in recent memory for residents. Up to 6 feet of snow blanketed some parts, and more snow is expected to come piling in Wednesday evening.

But the Buffalo Bills have a game to play Sunday in Ralph Wilson Stadium, so they’re pulling out all the stops.

The team’s twitter account announced it is offering $10 per hour and game tickets for fans willing to grab a shovel and clear out the stadium.

They say the job won’t be small.

Just how much snow needs to be removed? 220,000 TONS, enough to fill the @ADPROSports Complex 8 times over.

If area residents are worried they can’t grab their shovel and hop in the truck quick enough to score seats to watch the 5-5 Bills host the 2-8 New York Jets, the team said not to worry.

“We can’t have too many people helping,” said Andy Major, vice president of operations. “We won’t be turning anyone away.”

What Gruber says Obamacare will do, is what President Obama promised it wouldn’t

MIT economist Jonathan Gruber, the ‘architect of Obamacare,’ received unwanted publicity this week after getting caught on multiple videos referring to the “ignorance” and “stupidity” of American voters. Since many people find those comments insulting, and illustrative of the arrogance and condescension of liberal elites, most discussion has revolved around those particular remarks. The remarks also reinforced the belief among many that the Obamacare law was enacted deceptively.

Relatively little attention, however, has focused on perhaps the most significant revelation from the Gruber videos–that Obamacare was secretly designed to bring about the long-term death of employer-sponsored health insurance. Until now, just about the only professional journalist who has recognized the importance of this revelation is CNN’s Jake Tapper.

At issue is the tax on so-called “Cadillac plans,” more expensive employer-provided health insurance plans. While employers do not currently have to pay taxes on health insurance plans they provide employees, starting in 2018, companies that provide health insurance that costs more than $10,200 for an individual or $27,500 for a family will have to pay a 40 percent tax.

This insidious part of the tax is the indexing method which is “tied to the consumer price index instead of to the much higher rate of medical inflation.” As a result, medical inflation would cause the tax to fall on more and more plans.

Eventually, the 40% tax on the more expensive plans would impact every employer-provided insurance plan.

“What that means is the tax that starts out hitting only 8% of the insurance plans essentially amounts over the next 20 years essentially getting rid of the exclusion for employer sponsored plans,” Gruber said. “This was the only political way we were ever going to take on one of the worst public policies in America.”

As we reported in the post immediately below, the plan to kill off employee health benefits was initiated with the direct participation of President Obama. Gruber explains that Obama attended in person the meeting at which the plan was hatched. Now Tapper reports that Obama assented to the plan despite promising the American people that he would do no such thing.

At a town hall meeting where he campaigned for health care legislation in 2009, President Barack Obama pledged to voters that he did not want any tax on health insurance plans he perceived as wastefully generous to ever impact average Americans. But in recent comments by one of the men who helped draft the legislation, MIT economist Jonathan Gruber, that is not only precisely what will happen — but that was the intention of the tax.

White House officials had no comment, despite repeated requests by CNN.

[...]

The President at that point hadn’t yet signed off on a Cadillac tax (he would eventually) but he did make the pledge: “what I said and I’ve taken off the table would be the idea that you just described, which would be that you would actually provide — you would eliminate the tax deduction that employers get for providing you with health insurance, because, frankly, a lot of employers then would stop providing health care, and we’d probably see more people lose their health insurance than currently have it. And that’s not obviously our objective in reform.”

That promise is completely at odds with how Gruber describes not only that provision of the Affordable Care Act, or Obamacare, but the intention of that provision.

Thanks to Gruber’s loose lips, we now know that Obamacare is deliberately designed to do exactly what President Obama said it would not.

Obamacare must rank among the greatest frauds ever perpetrated upon the American people.

In the video below, Tapper provides a good summary of Grubergate. The key point about the Cadillac tax starts at about the 2:25 mark.

 

Gruber Points Finger at Obama

President Obama and other Democrats are desperately trying to distance themselves from Jonathan Gruber, the blabbermouth who is inadvertently revealing the deliberate deceptions of Obamacare. In the video below, however, Gruber directly implicates Obama in the hatching of the ‘Cadillac tax,’ perhaps the most significant deception in the whole Obamacare law.

As we reported in the preceding post, the Cadillac tax is a Trojan Horse for putting an end to all employee health benefits in America. Although the tax would initially apply to only a small percentage of insurance plans (the White House claimed as few as 3%), the fact that the tax is not fully indexed means that, after a number of years, it will eventually reach most plans. An appropriate analogy would be the Alternative Minimum Tax, which was initially directed only at a tiny percentage of the richest people; but because the AMT was not indexed, it eventually hit even middle-class households.

Putting a prohibitive tax on employee health benefits marks a huge shift in policy that promises to have a substantial financial impact on most Americans. The fact that such a consequential policy was slipped into law surreptitiously and without debate is an affront to American ideals of self-governance and representative democracy.

Gruber’s testimony reveals that responsibility for this appalling deception goes straight to the top–President Obama himself. Obama was present in the room when the idea for the Cadillac tax was hatched. Moreover, the deception was pursued at the president’s behest. According to Gruber, it was the president who declared that taxing people’s benefits was “just not going to happen politically,” and so they had to “somehow get there through phase-ins and other things.” In other words, they weren’t going to succeed by proceeding honestly and transparently, so they needed a more clandestine and opaque approach. Hence they conceived the insidious Cadillac tax, with its inconspicuous indexing mechanism that allows it to phase in gradually and to affect more and more plans over time.

From Gruber’s remarks, it’s clear that he knows the Cadillac tax is a big deal. He calls it “one of the most important and bravest parts of the health care law.” He’s not calling it brave because he thinks the tax will impact, as the White House claimed, just 3% of plans. He’s calling it brave because the ultimate objective of the tax is so ambitious–the total elimination of employer-sponsored health insurance.

Revealed: Obamacare intended to kill off employee health benefits

This week a series of controversial videos emerged featuring the ‘architect of Obamacare,’ MIT economist Jonathan Gruber. In the so-called ‘sixth’ video, Gruber discusses Obamacare’s ‘Cadillac tax’ on high-cost insurance plans. CNN’s Jake Tapper explains.

While employers do not currently have to pay taxes on health insurance plans they provide employees, starting in 2018, companies that provide health insurance that costs more than $10,200 for an individual or $27,500 for a family will have to pay a 40 percent tax.

Until now, the Cadillac tax was generally believed to apply to only a very small percentage of plans, and this belief was reinforced by statements from the White House and various Obamacare supporters.

When the Cadillac tax was first rolled out, it was explained by Obamacare backers as a tax that would only impact those with “high end plans” — not all employer sponsored plans. A White House economic adviser in 2009 set “the record straight” by saying “the excise tax levied on insurance companies for high-premium plans, the so-called ‘Cadillac tax,’ will affect only a small portion of the very highest cost health plans — a total of 3% of premiums in 2013.”

In the sixth video, however, blabbermouth Gruber lets slip the secret that the Cadillac tax is intentionally designed to apply eventually to all plans, not just high-end plans, with the deliberate long-term goal of destroying all employee health benefits. 

Obamacare’s designers essentially included in the law a slow-acting poison intended to, over a number of years, totally kill off employer sponsored insurance. The toxic formula was provided by the fact that the cut-off level of benefits for applying the tax was indexed to the slow-growing Consumer Price Index rather than to fast-growing health care costs. The plan, Gruber explains, was to defer the start of the tax until 2018.

“[B]y starting it late, we were able to tie the cap for Cadillac Tax to CPI, not medical inflation,” Gruber said…Gruber explains that by drafting the bill this way, they were able to pass something that would initially only impact some employer plans though it would eventually hit almost every employer plan…”What that means is the tax that starts out hitting only 8% of the insurance plans essentially amounts over the next 20 years [to] essentially getting rid of the [tax] exclusion for employer sponsored plans,” Gruber said.

But without the tax exemption there will remain little incentive for employers to offer health benefits. Employers can redirect their health spending to paying higher wages and salaries, but in that case households will be facing a massive tax increase. Their current health benefits are not taxed, but the extra income would be.

What’s really amazing is that we’re only finding out about all this nearly five years after Obamacare was enacted. An awful lot of middle-class soccer moms voted to reelect President Obama two years ago. How many of them might have thought twice about it if they had known that Obama had already passed a death sentence on their employee health benefits? But to Jonathan Gruber, who gloats about deception and lack of transparency, those voters are just suckers.

Gruber called the tax exemption “one of the worst public policies in America,” and insisted that “every economist should celebrate” its repeal.

Well, pardon us for not celebrating, because we take issue with how the legislation was enacted. Unlike Gruber, we don’t agree with imposing major social change on the people by surreptitiously inserting language into 2,000 page bills that nobody reads and that Congress approves without debate or deliberation. Such a legislative process leaves the citizenry entirely in the dark about what is being done to them and makes a mockery of the institutions of representative democracy.

If the political elites can impose a change as consequential as putting an end to employee health benefits without informing or consulting the people, then our whole system of democratic political institutions–voting, elections, staged debates, Congressional hearings, CBO reports, Sunday talk shows, town halls, etc.–amount to little more than an elaborate sham intended to hoodwink the people into believing they have a say in how they are governed. Gruber even boasted that, by the time the people figure out they’ve been swindled, it will be too late for them to do anything about it.

And by that time, those who object to the tax will be obligated to figure out how to come up with the money that repealing the tax will take from the treasury, or risk significantly adding to the national debt…Unions and employers who object in 2018, he noted, “at that point if they want to get rid of it they’re going to have to fill a trillion dollar hole in the deficit…It’s on the books now.”

What does it say about Jonathan Gruber’s political philosophy that he thinks people who object to the tax are “obligated” to fill the “hole in the deficit,” but he and others who imposed the tax in the first place were not obligated even to consult or to inform the people?

It’s as if Gruber sees politics in America as merely a private conversation among political elites and technocrats. And one of the gentlemanly rules of that private debate states that, if a gentleman opposes a tax, he is ‘obligated’ to explain how he proposes to ‘fill the hole in the deficit.’ Meanwhile, the people who have to pay those taxes are excluded from the conversation.

Jean-Baptiste Colbert

Jean-Baptiste Colbert

We appreciate Gruber’s candor, but this is political elitism worthy of a French aristocrat of the Ancien Régime, as if Louis XIV’s legendary finance minister, Jean-Baptiste Colbert, had been reincarnated as an MIT economist.

In contrast, here at Yet, Freedom! we remain committed to post-Enlightenment political ideals of openness and transparency. Even if Jean-Baptiste Gruber doesn’t.

Political Class Views the American People with Contempt

MIT economist Jonathan Gruber is known as the ‘architect of Obamacare.’ We wrote here and here about Gruber’s dubious attempts to publicly defend the Obamacare law. Now video has been unearthed showing Gruber admitting that Obamacare was enacted by deceiving the American people about the effects of the law.

Gruber reveals his contempt for the American people by approving of the deception, and refers to the “stupidity of the American voter.” He apparently thinks that the people are too stupid to know what’s good for them, and so cannot be trusted to govern themselves. It’s OK therefore, according to Gruber, for elites like himself to impose the policies they want by tricking and deceiving an unwilling people.

Gruber’s statement unintentionally exposes the fundamental political conflict underlying the debate over Obamacare. That debate is not merely or even primarily about the specifics of health care policy. No, the debate is ultimately about where power in America shall reside–with the people, or with the Political Class of politicians and unelected so-called experts like Jon Gruber.

The problem with Obamacare is not just that it’s bad health care policy (see Fourteen Ways Obamacare is Still a Disaster). The problem is that it significantly shifts the balance of power away from the people and towards the Political Class.

Before Obamacare, the federal government could tax only economic activity, like income earned from selling a product. Now Obamacare has empowered the government to tax even inactivity, like not purchasing medical insurance.

Obamacare also empowers unelected bureaucrats at the Department of Health and Human Services to determine which treatments your insurance will and will not cover. Individuals have no say in the matter, nor do employers who provide coverage; just bureaucrats.

In an affront to the rule of law, the administration has exercised arbitrary power by granting Obamacare waivers to politically connected groups.

These are just a few of the ways that Obamacare enhances the power of the Political Class, and weakens the freedom and autonomy of the people. That power shift is the reason why the elites fought so hard to enact the law. Obamacare was very good for Jon Gruber, who pocketed some $400,000 in consulting fees. For about 5 million people on the individual market who weren’t allowed to keep their insurance plans, Obamacare has not been so great.

Political elites like Gruber want to subordinate ordinary people to themselves. They must be stopped and Obamacare must be repealed.

Update. Yet another video has emerged of Gruber gloating about deceiving American voters. The key segment occurs between about 2:50 and 3:35.

It’s a very clever, you know, basic exploitation of the lack of economic understanding of the American voter.

Back in the day, economists saw their role as working to inform and to educate the public about the economic effects of government programs and regulations. Enlightening the public was what economists Henry Hazlitt and Milton Friedman did back in the 1960s and 70s when each wrote a regular column for Newsweek magazine. Today, in contrast, we have Jonathan Gruber, who instead of trying to ameliorate the public’s “lack of economic understanding,” seeks to exploit it. Deplorable.

Finally, don’t miss point 1:50 of the video where Gruber is talking about the fact that people’s health benefits aren’t taxed, and he calls that an expense. When you view letting people keep their own money as a cost, you might be a statist.