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.

Unlicensed masseuse ordered to stop services

This just goes to show that in dealing with the regulatory state everyone has to just toe the line:

ENTON COUNTY, Wash. — A man performing foot massages without a license was ordered to stop.

The State Department of Health says Yansong Yao performed massages at Magic Foot Massage on Grandridge in Kennewick.

The Unlicensed Practice Program notified Yao of its intent to issue a cease-and-desist order. Yao is not a certified massage practitioner or reflexologist.

The Facebook comment below nicely sums up our reaction:

Cody Stewart from Facebook16 hours ago

Stupid.. I could understand if he was practicing medicine or performing procedures, but he’s giving foot massages. Does that mean my wife can’t give me one because she doesn’t have a license? What’s next? Taxing kids’ lemonade stands or shutting down the kids that mow lawns for the summer? Where does the BS end?

Police Use Department Wish List When Deciding Which Assets to Seize

No, we are not making this stuff up.  Here is the story in today’s New York Times:

The seminars offered police officers some useful tips on seizing property from suspected criminals. Don’t bother with jewelry (too hard to dispose of) and computers (“everybody’s got one already”), the experts counseled. Do go after flat screen TVs, cash and cars. Especially nice cars.

In one seminar, captured on video in September, Harry S. Connelly Jr., the city attorney of Las Cruces, N.M., called them “little goodies.” And then Mr. Connelly described how officers in his jurisdiction could not wait to seize one man’s “exotic vehicle” outside a local bar.

“A guy drives up in a 2008 Mercedes, brand new,” he explained. “Just so beautiful, I mean, the cops were undercover and they were just like ‘Ahhhh.’ And he gets out and he’s just reeking of alcohol. And it’s like, ‘Oh, my goodness, we can hardly wait.’ ”

Mr. Connelly was talking about a practice known as civil asset forfeiture, which allows the government, without ever securing a conviction or even filing a criminal charge, to seize property suspected of having ties to crime. The practice, expanded during the war on drugs in the 1980s, has become a staple of law enforcement agencies because it helps finance their work. It is difficult to tell how much has been seized by state and local law enforcement, but under a Justice Department program, the value of assets seized has ballooned to $4.3 billion in the 2012 fiscal year from $407 million in 2001. Much of that money is shared with local police forces

Hmm.  What could go wrong with that system?

25 Years Ago Today, A Historic Triumph of Liberty

Some of us remember 1989 as more than just the name of Taylor Swift’s solipsistically titled new album. It was the year in which a seeming miracle occurred, something that many people thought they would never see in their lifetimes. The Berlin Wall came down and, in a historic triumph for human liberty, hundreds of millions of people in central and eastern Europe were freed from more than forty years of communist tyranny.

Back in December of 1986, before the Wall came down, we were on a ferry crossing Long Island Sound in the company of our physics professor. The conversation turned to the fate of those hundreds of millions of people trapped behind the Iron Curtain. Our professor assured us that those people living under communism must be quite happy. We’re not sure how exactly our professor came to this conclusion. We doubt that he had much experience visiting the region or interacting with those who lived there. Instead, we suspect that he came to his conclusion merely because in his mind socialism was a good thing, and since eastern Europe was socialist, the people there must be happy.

We recall that, at the time, we were skeptical about our professor’s assertion. Less than three years later, that skepticism was validated as the Wall was finally breached and we watched on the news the people celebrate in jubilation. Under communism, they hadn’t been happy, after all. They had been slaves, and they embraced their liberation with joy and euphoria. Our professor was a highly intelligent man. How could he have been so wrong?


Seventeen years later, while lunching with colleagues, one colleague related a personal story of traveling in Asia during the 1980s. On her travels, she encountered a woman from Hungary who was sightseeing. Since this Hungarian woman was, for whatever reason, free to travel, our colleague concluded from this single incident that people behind the Iron Curtain were not actually held captive. Indeed, we listened with amazement as our colleague speculated that the term “Iron Curtain” itself was probably nothing more than electoral propaganda made up cynically by Ronald Reagan’s political campaign.

The term actually was coined by Winston Churchill, but in any event, a woman who attended that same luncheon later confided to us that she was dismayed by our colleague’s remarks. As a student, she had interned with the Victims of Communism Memorial Foundation, and she could not believe that anyone would so nonchalantly dismiss the reality of communist oppression.

The Berlin Wall was in fact a real barrier. Over the years, 138 people were killed trying to cross it to escape to freedom. How could our colleague have been so wrong?

Is seems there are two types of people in the world; those who acknowledge communist tyranny and those who…just don’t get it. Or don’t want to get it.

Professor Glenn Reynolds, who has a talent for pithy and punchy phrasing, summed it up well on his own blog today.

Communism was — and is, still — sold as something moral. But it’s a system of slavery, benefiting a few at the top at the expense of the many beneath. It was enforced by death and cruelty, because without death and cruelty it couldn’t work even for a little while. The people who say nice things about communism today either know this and are lying, or are profoundly stupid. Either way, you need neither listen to them, nor afford them even the smallest degree of respect.

The Dismal State of Italy

The UK’s Spectator has published an eye-opening account of the parlous state of Italy’s economy. Here are some remarkable facts culled from the article.

  • The youth unemployment rate is 43 percent.
  • Just 58 percent of working-age Italians are employed, compared to an average of 65 percent for the developed world.
  • The government pays businesses to retain about a half million unneeded workers, rather than laying them off.
  • The overall real unemployment rate is at least 15 percent, and that does not include discouraged workers.
  • Over the past 5 years the economy has shrunk by 9 percent.
  • In any company with 15 or more employees, labor laws make it virtually impossible to lay off any workers.
  • Outstanding government debt is the third-highest in the world, after Japan and Greece.
  • The tax burden on businesses is the heaviest in the world.

So what’s the underlying problem? Paul Krugman would say the government needs to spend more, but clearly the problem is not too little government or too much freedom. The problem is that the state is a massive blood-sucking parasite that bleeds the private sector white.

To start a business in Italy is to enter a Kafkaesque bureaucratic nightmare, and to keep it going is even worse. It also means handing the state at least 50 cents for every euro paid to staff. Add to this a judicial system that is byzantine, politicised and in possession of terrifying powers, and you begin to understand why no sane foreign company sets up headquarters in Italy.

The parasites, however, are doing relatively well.

Italian MPs are the highest paid in the civilised world, earning almost twice the salary of a British MP. Barbers in the Italian Parliament get up to €136,120 a year gross. All state employees get a fabulous near-final–salary pension. It is not difficult to appreciate the fury of the average Italian private sector worker, whose gross annual pay is €18,000.

The phrase ‘you could not make it up’ fits the gold-plated world of the Italian state employee to a tee — especially in the Mezzo-giorno, Italy’s hopeless south. Sicily, for instance, employs 28,000 forestry police — more than Canada — and has 950 ambulance drivers who have no ambulances to drive.

Facts like these are important to keep in mind whenever leftists point to Europe’s social model (“free” health care!) as an ideal to be emulated.