Cash for Clunkers

Remember Cash for Clunkers? The program in which the government (taxpayers) overpaid owners of used cars up to $4500 as a trade-in towards a new car? One catch was that the still useful vehicles had to be destroyed. So we spent money to destroy things! It didn’t seem like that would turn out well. Anyway, we recently came across this from the Brookings Institution detailing the work of Ted Gayer and Emily Parker who performed a wide-spread evaluation of the various aspects of the Cash for Clunkers program. Among other conclusions, they found that:

The $2.85 billion program provided a short-term boost in vehicle sales, but the small increase in employment came at a far higher implied cost per job created ($1.4 million) than other fiscal stimulus programs, such as increasing unemployment aid, reducing employers’ and employees’ payroll taxes, or allowing the expensing of investment costs.

That’s right, $1.4 million per job!  Makes you sort of think that “fiscal stimulus” might have been a less important consideration than providing payoffs to the dealers and the unions?

Pizza Belt

Although pizza, like politics and religion, is something best to avoid arguing about, this formulation has a quasi-scientific feel to it.  The “Pizza Belt” areas are defined as:

  • “the area of the United States where the chance of obtaining an adequate-to-good slice of pizza from a randomly chosen pizzeria is greater than 50 percent.”
  • Taken at its strictest, The True Pizza Belt runs, more or less contiguously, hugging the coast, from southern New Jersey to Providence, R.I.
  • Lowering the chances to one in three, or slightly expanding our definition of “adequate,” gives us The Greater Pizza BeltArea, a zone spanning Washington D.C., to Boston, Mass., going no further inland than Albany, N.Y.

Readers from the Chicago, St. Louis or Cleveland areas are encouraged to chime in.

Digital Spy

Maybe one day soon every mile we drive will be relayed back to government tax collectors. Hey, it’s not like we pay copious gasoline taxes already or anything. No, the little digital spy in your car will determine how much you owe above and beyond your Income taxes, payroll taxes, sales taxes, highway tolls, phone taxes, and a load of other taxes that don’t immediately come to mind.  Here is the full story from the L.A. Times.

Obamacare’s unintended consequences

Much of the controversy surrounding Obamacare has focused on the individual mandate to purchase health insurance. But this mandate, however objectionable and unconstitutional, might prove relatively easy to evade, as we’ll explain below. The greater restrictions on freedom arise from the fact that government will now decide which contingencies insurance must cover. That is to say, unelected and relatively unaccountable bureaucrats at the Department of Health and Human services will tell 300 million Americans what sort of coverage they will and will not be allowed to purchase.

Suppose that, to save money, you prefer a policy that does not cover prescription drugs. Or maybe you have no need for insurance that covers mental health treatment. If you are male, you certainly don’t need coverage for obstetrics and post-natal care, and asking you to purchase insurance for that would be absurd.

Well, guess what, your policy must now legally cover all that and more, including post-natal care for men! And that means that, if your policy doesn’t currently cover all that, your policy is now non-compliant with Obamacare, and so your insurer will no longer offer the policy. In its place, your insurer can offer only a policy that covers all the things you don’t want, but must now pay for. This explains why hundreds of thousands of Americans are getting cancellation notices from their insurers, and why Americans are experiencing sticker shock when they see their new premiums.

Listen to Deborah Cavallaro, the Voice of the People.

“All we’ve been hearing the last three years is if you like your policy you can keep it,” said Deborah Cavallaro, a real estate agent in Westchester. “I’m infuriated because I was lied to.”

Cavallaro received her cancellation notice from Anthem Blue Cross this month. The company said a comparable Bronze plan would cost her 65% more, or $484 a month. She doubts she’ll qualify for much in premium subsidies, if any. Regardless, she resents losing the ability to pick and choose the benefits she wants to pay for.

Now here’s Peter Lee, the Voice of People who Don’t Believe in Human Freedom.

Peter Lee, executive director of Covered California, said the state and insurers agreed that clearing the decks by Jan. 1 was best for consumers in the long run despite the initial disruption. Lee has heard the complaints — even from his sister-in-law, who recently groused about her 50% rate increase.

“People could have kept their cheaper, bad coverage, and those people wouldn’t have been part of the common risk pool,” Lee said. “We are better off all being in this together. We are transforming the individual market and making it better.”

Forcing a male to pay for obstetrics isn’t making him part of a risk pool, it’s theft. And when you try to steal from people you will find, interestingly enough, that they resist. Deborah Cavallaro:  “I just won’t have health insurance because I can’t pay this increase.”

She may in fact end up having the last laugh, because there’s relatively little the government can do to make her pay. This year, the fine for not having insurance starts at $95 and goes up to one-percent of pre-tax income. The fine’s a lot cheaper than paying for insurance you don’t want. For instance, Ms. Cavallaro’s fine for a whole year would probably amount to less than two month’s worth of premiums.

Furthermore, it seems that the government’s only available mechanism for collecting the fine is to withhold tax refunds. As a consequence, it’s possible to avoid the fine completely by just carefully arranging your tax withholding so that you don’t overpay and the government does not owe you an end-of-year refund.

Moveover, Obamacare’s “guaranteed issue” requirement obviates much of the risk associated with going without insurance. Guaranteed issue means that you can sign up for insurance even if you have a pre-existing condition. Hence you can game the system by going without insurance, and just wait until you get sick before signing up. The only risk here is that signing up is possible only during open enrollment, a few months out of the year, from October through February or March. So if you get run over by an uninsured illegal immigrant driver in April, you’ve got a problem. But in a lot of cases, even if you’re out of season, you can wait. You can postpone that knee operation for a few months. Or pay out-of-pocket for an expensive prescription for just awhile, until enrollment opens.

So here we have a law that was supposed to produce universal coverage, but which causes a generally responsible citizen like Ms. Cavallaro, who already had insurance which she paid for herself, to contemplate becoming a scofflaw and going without insurance. That’s a pretty remarkable unintended consequence, though not surprising, at least not to anyone familiar with the history of governmental attempts at social engineering. We ask ourselves, when will people learn not to trust in government intervention?

Time to Sell?

We are generally not believers in market timing but this recent comment by Alan Greenspan (who somehow seemed to miss the internet and real estate bubbles) might be the perfect sell side indicator:

 Former Federal Reserve Chairman Alan Greenspan said the stock market has room to rise from record levels.

“In a sense, we are actually at relatively low stock prices,” Greenspan, who guided the central bank for more than 18 years, said in an interview with Sara Eisen on Bloomberg Television today. “So-called equity premiums are still at a very high level, and that means that the momentum of the market is still ultimately up.”

How Popcorn Saved the Movie Theaters

This very enlightening article from the Smithsonian’s Food & Think Blog discusses how popcorn and movies became such close entertainment complements and how selling food helped save many theaters from going under in the 1930s:

The Great Depression presented an excellent opportunity for both movies and popcorn. Looking for a cheap diversion, audiences flocked to the movies. And at 5 to 10 cents a bag, popcorn was a luxury that most people were able to afford. Popcorn kernels themselves were a cheap investment for purveyors, and a $10 bag could last for years. If those inside the theaters couldn’t see the financial lure of popcorn, enterprising street vendors didn’t miss a beat: they bought their own popping machines and sold popcorn outside the theaters to moviegoers before they entered the theater. As Smith explains, early movie theaters literally had signs hung outside their coatrooms, requesting that patrons check their popcorn with their coats. Popcorn, it seems, was the original clandestine movie snack.

Beyond wanting to maintain appearances, early movie theaters weren’t built to accommodate the first popcorn machines; the theaters lacked proper ventilation. But as more and more customers came to the theater with popcorn in hand, owners couldn’t ignore the financial appeal of selling the snack. So they leased “lobby privileges” to vendors, allowing them to sell their popcorn in the lobby of their theater (or more likely on a bit of street in front of the theater) for a daily fee. Vendors didn’t complain about this arrangement–selling popcorn outside the theater widened their business potential, as they could sell to both moviegoers and people on the street.

Eventually, movie theater owners realized that if they cut out

the middleman, their profits would skyrocket.  For many theaters, the transition to selling snacks helped save them from the crippling Depression.

Kathleen’s Chutzpah

More details are emerging about the disastrous launch of the Obamacare exchanges, and it’s looking more and more like an epic failure. Observing the wreckage, Megan McArdle calls the failure “stunning,” and “far worse than I imagined, and I’m pretty cynical.” As she reports on her blog:

Neither the consumer side nor the insurer side is working. A New York Times researcher made more than 40 attempts from Oct. 1 to Oct. 12 to log in, with no luck. Meanwhile, the Times confirms Bob Laszewski’s report that insurers are getting virtually no usable data from the exchanges. As the Times puts it, “just a trickle of the 14.6 million people who have visited the federal exchange so far have managed to enroll in insurance plans, according to executives of major insurance companies who receive enrollment files from the government. And some of those enrollments are marred by mistakes. Insurance executives said the government had sent some enrollment files to the wrong insurer, confusing companies that have similar names but are in different states. Other files were unusable because crucial information was missing, they said.”

The person in charge of this train wreck is Kathleen Sebelius, the Secretary of Health and Human Services, and member in good standing of America’s corrupt and incompetent Ruling Class (her father was governor of Ohio and her father-in-law was a congressman), which is striving to condemn the rest of America to serfdom.

Kathleen Sebelius: In the private sector, she would have been fired long ago.

In response to the failures, Secretary Sebelius pleaded for people to withhold judgment, and asked the public to cut her some slack.

Hopefully they’ll give us the same slack they give Apple…. If there’s not quite the operational excellence right away, we’ll continue to press for that.

“Last time I checked,” writes Reason‘s Nick Gillespie, “buying Apple products is voluntary, so this analogy is a no-go from the get-go.” Gillespie then calls “nauseating” the following quote from Sebelius.

Apple, you know, has a few more resources than we have to roll out technology, and a few more people who’ve been working on the system for a while, and no-one is calling on Apple to not sell devices for a year or to, you know, get out of the business because the whole thing is a failure.

Gillespie comments:

Over the past few years, Apple has had a market cap anywhere from $400 billion to $650 billion, depending on a wide variety of factors. The federal government has been spending north of $3.5 trillion a year for a while now and, unlike Apple, it can’t go out of business even if it keeps rolling out crap devices.

Indeed, unlike the government, Apple does not have plenary power to tax. Every penny of Apple’s income has to be earned by selling a product to someone who purchases it voluntarily. Unlike the government, Apple can’t raise revenue by literally pointing a gun. Furthermore, any manager in the private sector who oversaw a product launch as catastrophic as Obamacare would be promptly terminated. Yet Secretary Sebelius still has her job.

That’s what makes Sebelius’ comments so outrageous; she is in effect arguing that those in the government are somehow held to a higher standard than the folks at Apple and the rest of the private sector. But in the federal government, no matter how badly people screw up, nobody ever seems to get fired. The FBI and CIA failed to “connect the dots” that could have prevented the terrorist attacks of September 11, 2001. No one was fired. Instead, the FBI and CIA were rewarded with higher budgets. More recently, the government failed to catch up with the Tsarnaev brothers who bombed the Boston Marathon, even though the U.S. was warned by the Russian government. Rather than catching up with the Tsarnaevs, federal bureaucrats devoted more energy and resources to catching up with Tea Party organizations and their donors. We suppose the government knows its true enemies.

In contrast, in the private sector, screwing up has real consequences–people get fired, or go out of business, or go to jail. When Enron executives engaged in malfeasance, they went to prison and the company was liquidated. But financial and accounting practices that would land private sector actors in jail are standard operating procedure for the government. The government gets away with counting Social Security taxes as both an asset and a liability. Indeed, the Social Security system as a whole bears all the essential hallmarks of an illegal ponzi scheme. And check out what passes for bookkeeping at the Pentagon.

Preoccupied with protecting their turf, the Army, Navy, Air Force, and Marines continue to maintain separate, increasingly outdated systems that can’t talk to each other, trace disbursements, or detect overbilling by contractors. At the Indianapolis facility, as at the Defense Department’s four other main U.S. centers for financial operations, accounting programs under the same roof can’t share information without extensive jury-rigging, as though contracts, payments, and accounting had nothing to do with one another.

“In the Defense Department, what you have now are material weaknesses that are in every single area, in every part of the department, so deep and so wide you do not really have any way of figuring out where money is being spent,” says Linda Bilmes, a federal budget expert at Harvard’s Kennedy School of Government.

Every year, the Pentagon tries to justify its budget request to Congress by submitting three years of financial data: “actual” performance for the past fiscal year plus projections for the current year and the next. But because of the lack of reliable accounting, these totals are largely fictional.

In 1990, Congress enacted legislation requiring all federal agencies to pass independent audits. Every year, the Defense inspector general dispatched dozens of auditors to the military’s financial and accounting centers. Every year, they reported back that the job couldn’t be done. Defense Department records were in such disarray and were so lacking in documentation that any attempt would be futile. In 2000, the inspector general told Congress that his auditors stopped counting after finding $2.3 trillion in unsupported entries made to force financial data to agree.

In 2002, Congress relented. Until the Pentagon can get its records in order, no comprehensive audit is required. Instead, the department writes each year to the inspector general certifying that “material amounts” in its financial reports can’t be substantiated.

Tea partiers and small business owners are expected to be fully responsive to audits. The Pentagon, not so much. As taxpayers, that’s our money that the Pentagon is spending, but “you do not really have any way of figuring out where money is being spent,” and over the years, the unaccounted for expenditures total into the trillions of dollars. That’s how seriously and responsibly the federal government practices stewardship of our money. Again, in the private sector, people would go to jail.

Finally, don’t miss the John Stossel video below about how the Department of the Interior has mismanaged Indian reservations. Shortly after the 5:00 mark, the video focuses on the story of $2.5 billion gone missing from the Indian trust fund. When Stossel tries to ask then-Interior Secretary Bruce Babbitt about the missing billions, the dedicated public servant removes his microphone and walks out!

For Kathleen Sebelius to suggest that government gets cut less slack than does the private sector deserves some kind of Chutzpah of the Year Award.


Other people’s money

With every October comes the open enrollment season for health care plans, and this year’s season was punctuated by the long-awaited rollout of Obamacare. Despite three and a half years to prepare–longer than it took to defeat the Nazis–the government’s Obamacare website proved to be fundamentally flawed and dysfunctional, which made signing up for the program difficult or impossible. Indeed, in the video at the bottom of this post, CBS called the website launch “nothing short of disastrous.” Like we said, government always fails.

Even people who don’t get their insurance through Obamacare got a rude awakening in the form of higher premiums caused by Obamacare’s distortions of the marketplace. Among those suffering sticker shock were Tom Waschura and Cindy Vinson of the San Francisco Bay area. The San Jose Mercury News has the story, in an article flagged by James Taranto. The article has an interesting title: “Obamacare’s winners and losers in Bay Area.” Wait: some people lose from Obamacare? Ordinary people and not just billionaires? Funny, we don’t recall the politicians telling us that when they passed the bill.

Cindy Vinson and Tom Waschura are big believers in the Affordable Care Act. They vote independent and are proud to say they helped elect and re-elect President Barack Obama.

Yet, like many other Bay Area residents who pay for their own medical insurance, they were floored last week when they opened their bills: Their policies were being replaced with pricier plans that conform to all the requirements of the new health care law.

Vinson, of San Jose, will pay $1,800 more a year for an individual policy, while Waschura, of Portola Valley, will cough up almost $10,000 more for insurance for his family of four. . . .

“I was laughing at Boehner–until the mail came today,” Waschura said, referring to House Speaker John Boehner, who is leading the Republican charge to defund Obamacare.

“I really don’t like the Republican tactics, but at least now I can understand why they are so pissed about this. When you take $10,000 out of my family’s pocket each year, that’s otherwise disposable income or retirement savings that will not be going into our local economy.” . . .

“Of course, I want people to have health care,” Vinson said. “I just didn’t realize I would be the one who was going to pay for it personally.

Cindy was feeling real generous until she saw that the money being spent was hers. Until then, being generous with other people’s money was easy. But as the great Margaret Thatcher famously said, “The problem with socialism is that you eventually run out of other people’s money.”

Like Cindy, we too want people to have health care. But what Cindy might not realize is that health care is not the same thing as health insurance. It happens every day in this country that people without health insurance still get health care. In fact, it is generally illegal in the U.S. to withhold treatment from sick people merely because they don’t have insurance. Conversely, it is possible to have health insurance and yet not be able to get care. See, for example, Canada, where insurance gives people access only to a waiting list.

The Obamacare legislation promises only to expand health insurance; it does nothing to increase the quantity or quality of health care. Indeed, the legislation adds not a single new doctor, although it does add more than 1,000 new IRS agents. Worse, in the long run, it is likely that Obamacare will decrease the quantity and quality of health care. Doctors fed up with dealing with red tape and bureaucracy could decide to retire early, and fewer young people would choose to attend medical school. Furthermore, as the government inevitably starts to run out of money, the authorities will be tempted to impose price controls on drugs and medical procedures, such as exist in Britain, Canada, and Europe. Price controls would substantially impede Americans’ access to drugs and treatment, and the consequences would get dramatically worse over time as the controls start to stifle innovation.

Obamacare, especially in the long run, promises to make losers out of most of us. The legislation’s few winners will be mostly concentrated among the political class, which will see its power increase. We might also reasonably surmise that certain segments of the medical and insurance industries might come out ahead since, after all, it was industry lobbyists who mostly wrote the 2,300 page bill, and they probably weren’t inclined to write in provisions against their own interest.

Shortly after the bill passed in 2010, we were standing in the hallway at school, griping about the new legislation. One of our colleagues disagreed with us, and said about the legislation, “It’s about compassion.” Yeah, so when Nancy Pelosi and Congressional staffers wrote the 2300 pages by conferring behind closed doors with industry lobbyists, what all that was about was compassion. Kinda like Mother Teresa meeting with her nuns. Right.

But don’t feel too bad, Tom and Cindy! You’re not alone. Lots and lots of people are, just like you, hopelessly naive about government and politicians.