The Precarious ObamaCare Individual Mandate

The government shut down could have ended in only three days. It did not because the President desperately needs to reconcile his pre-ObamaCare demagoguery and deception with the unbending laws of math and economics.

The partial shut down began on October 1 because the Democrat Senate refused a demand from the Republican House that ObamaCare be entirely defunded so that all of it’s functions would cease to operate and none of its legal and regulatory requirements could be enforced.  error-page-on-monitor

But on October 3, the third day of the shutdown the House dramatically shrank its demand to a one year delay of only one element of ObmaCare, the individual mandate.  This is the requirement that every citizen without employer provided health insurance must buy a government approved health plan from a private sector insurance company.

But Senate Democrats refused to consider this scaled back demand, even after major failures in the online exchanges that are supposed to sell these policies.  Thus the shutdown continues.

The President has already delayed several other provisions of the ObamaCare law.  But he dares not delay the individual mandate because to do so would expose a fundamental deception at the foundation of the health care law. 

During his campaign to sell ObamaCare back in 2009 and 2010, one of the President’s most often asserted claims was:Yelling Obama 3

We’ll make sure insurance companies can not discriminate against people with pre-existing conditions!

The emotionally charged “discriminate against,”  the same phrase that describes the exclusion of ethnic minorities by malevolent bigots, was meant to provoke revulsion against insurance companies, who were the designated bad guys in Obama’s pitch for a government take-over of health insurance.  Beginning 1/1/14 it will be illegal for an insurance company to refuse to cover someone with a pre-existing condition, no matter how sick they are, or how much it will immediately cost to provide the medical services they need.

The insurance industry term for accepting all applicants for health insurance, without consideration of pre-existing conditions is “guaranteed issue.”  To a large extent guaranteed issue was already in effect before ObamaCare.  A 1996 federal law, the Health Insurance Portability and Accountability Act (HIPAA), requires employers to offer guaranteed issue to employees, and prohibits charging extra premiums for employees or their dependents who have pre-existing conditions. 

The rapid rise in the cost of employer-based group health insurance coincides with implementation of guaranteed issue requirements.

To sell ObamaCare the President repeatedly castigated insurance companies for turning away applications from people who were already sick because that was “just when they needed insurance the most.”  Well, yes, if you get sick that’s the moment when you need health/hospitalization insurance most.  You also need fire insurance most the day your house burns, and auto insurance the most on the day your car is wrecked.  But everyone understands that if you didn’t sign up and start paying for insurance before the fire or the wreck you won’t be compensated.

However, Barack Obama has apparently convinced millions of people that government can command health insurance to work in reverse, to begin “covering” people after they get sick, before they buy a policy.  To “cover” and pay the expenses of people who are already sick is to add a costly,  non-insurance function to health insurance.  Guaranteed issue is in reality a government required, private sector, safety net financed by significantly higher insurance premiums paid by all policy holders.

Obama and the Democrats’ theory is that this scheme will “work” because the huge, immediate cost to insurance companies will be offset by millions of new healthy, young insurance customers who will obey the individual mandate to sign up for health insurance and  pay the premiums but will cost the insurance companies little or nothing because they will need little or no medical attention for many years.  Thus, the theory goes, the insurance companies will be able to afford the new customers with pre-existing conditions without significant premium increases.

But if the individual mandate is delayed, if young healthy people are not commanded to buy policies, the scheme implodes.  And, the President’s most compelling promise, that his government is so clever it can care for previously uninsured people with pre-existing conditions – without noticeable cost to anyone – implodes with it.

Even if the individual mandate is not delayed there are two strong disincentives pushing back on the never tested ObamaCare theory.  First, the fine for not buying insurance isn’t nearly as much as the insurance.  Second, guaranteed issue means we can all skip buying insurance until we get sick.  In other words, we need car insurance before we have a wreck, even if we never have a wreck.  But because of government intervention we don’t need health insurance until after we get sick!

Our next post deals with the likely result of these disincentives.

Grim Lessons in Unintended Consequences

My-unintended-consequencesObamaCare must be stopped.  It’s an unacceptable assault on liberty and it’s an extreme example of the inevitable result of government applying force against The People to achieve the Utopian visions of the elite: Unintended Consequences.

The government’s 2013 fiscal year ends September 30 and once again, Congress has been unable or unwilling to pass normal appropriations bills that would authorize spending in the next fiscal year.  Both the House and the Senate must pass a Continuing Resolution (CR) a device that authorizes spending in fiscal 2014 roughly the same amount that was spent in fiscal 2013.  If a CR is not enacted by October 1 parts of the government will “shut down” until both Houses pass and the President signs a CR.

On Friday the House passed a CR that funds the entire government except for Obamacare.  Harry Reid, leader of the Democrat controlled Senate stomped his foot and announced that he had more than enough votes to amend the CR, adding ObamaCare funding back in, and bounce it back to the House, where it would have to pass in amended form to avoid a government shut down.

The media herd stampeded to attack House Republicans, calling them dangerous, stupid and insane for attempting to block implementation of ObamaCare.  Some Republicans who disagree with the de-funding strategy scorned Conservative/Tea Party Republicans for risking a government shut down over a fight that could not be won.  The political media establishment is obsessed with legislative strategy rather than the merits of de-funding ObamaCare

Government  bureaucracies compile lots of statistics.  They count the employed, the unemployed, the rich and the poor.  Bureaucrats divide us into gender, and ethnic identities and count the populations of each.  Politicians are most enthusiastic about counting real and alleged beneficiaries of their big government schemes. 

While there are always unintended and unanticipated negative consequences when the government intervenes, forcing itself into the private economy, they are usually not widely reported or readily quantifiable.  Politicians and the bureaucrats who work for them systematically avoid reporting negative consequences, or unanticipated harm suffered as a result of social engineering programs enacted by Congress.  There’s a Bureau of Economic Analysis and a Bureau of Labor Statistics, but no Bureau of Harmful Consequences. If there were such a bureau it would be busy these days tallying up the damage from ObamaCare.  Here are just a few of scores of recently disclosed examples:

  • We’re told of millions of young adults who are now covered by their parents’ insurance until age 26 but we are not told what that extra coverage has cost or who has had to pay for it, directly or indirectly. Of course it will be paid for by employers who will have to offset the cost by charging employees more for their health care or paying lower salaries or charging customers higher prices.
  • All across the country hundreds of employers have announced plans to lay off employees or to reduce employees to  fewer than 30 hours per week to avoid ObamaCare insurance mandates they cannot afford.
  • Home Depot announced it will end medical coverage for its 20,000 part time employees because the inexpensive policy it has offered is not permitted under ObamaCare regulations.  The employees will be required by federal law to buy a government approved plan from the ObamaCare exchange which in most cases will cost them more than the portion of the Home Depot policy they now pay.
  • The Cleavland Clinic, a world class medical center lauded by President Obama in 2009 as an example of excellence, announced that it will suffer a $330 million annual revenue loss due to ObamaCare while the cost of treating patients will stay the same.   Therefore the Clinic will be forced to make staff reductions.
  • Kaiser Family Foundation reports that 31% of employees in small firms have policies with deductibles greater than $2,000 per year, which will be forbidden by ObamaCare beginning next year.  Thus health insurance premiums will have to rise for these millions of people and the small companies they work for.
  • Most large companies are self insured.  Instead of paying insurance premiums they pay for their employees’ medical expenses directly.  Beginning next year ObamaCare will impose a new “fee” on self insured employers, based on the number of employees and dependents they insure.  Delta Airlines reports that its fee will add up to more than $10 million per year.  Of course these dollars will buy nothing for the Delta employees whose labor produced them.  Delta could recapture the $10 million by increasing the amount employees pay for their insurance which would make the fee is a hidden employment tax.   Or, if Delta is able to pass this additional cost on to its customers, it’s a tax on airline passengers.

Sometimes negative consequences of government schemes are not unintended.  They’re intentional, but undisclosed.  Remember when Speaker Nancy Pelosi said they would have to “pass the bill so we can find out what’s in the bill”? 

ObamaCare supporters keep telling us their law forces insurance companies to provide “free” stuff.  It’s true that new regulations will require a range of services without any copay or deductible.  But the only way these services could be free is if the doctors and staff who provide them worked for nothing. 

To stay in business Insurance companies must collect more money from customers than they pay out for medical services.  So, the only way to fund free” services is to charge higher premiums!  DUH!  Here are some examples from recent news reports.

  • The Florida Office of Insurance Regulation just issued a report on all eleven insurance compares that will be offering policies in the Florida exchange, comparing the cost of their current individual policies with the the cost of their new ObamaCare compliant policies. The increases average 35%, with the highest at 55%.
  • The Ohio Department of Insurance announced that individual consumers buying ObamaCare-compliant health insurance on the federal government’s health insurance exchange for Ohio will pay an average of 41 percent more than they did in 2013.
  • Maryland’s largest health insurer predicts a 25% increase.
  • In New Jersey a very popular low-cost health plan will no longer be offered. Approximately 106,000 policy holders will be required by federal law to switch to more expensive government approved plans.

Because there is no bureaucracy dedicated to collecting and reporting all the negative consequences ObamaCare supporters get away with dismissing these examples as isolated anecdotes.  They still insist ObamaCare will “save money and improve care in the long run.”  But as we get closer to the 2014 start date we can expect a tsunami of these “anecdotes.”

Headline Jobs Numbers Vs Real Life

Virtually all of the reduction in the official unemployment rate from the peak of 10% in 2009 to the current 7.3% is due to reclassifying jobless people from “unemployed” to “not in the labor force.”

The latest jobs report didn’t get much attention as the political-media establishment obsessed over Syria.  The day it was published The White House triumphantly posted several “key Points” on its website including:

Private sector employment has risen for 42 straight months, with business adding a total of 7.5 million jobs over that period.

We’re suppose to be impressed.  But 42 months of job growth is not unusual. There were 45 straight months of job growth from 2003 to 2007.  There was continuous job growth for 86 months in the nineties, 84 months in the eighties and 57 months in the seventies.  Since 1950 seventy seven percent of monthly jobs reports have shown increases.

What is unusual this time is the agonizingly slow pace of job growth. 8-recoveries-aug-13

The chart above tracks every post recession job market since 1950 the same way the Obama Administration tracks the current job market, starting at the first month of growth after a recessionary period of job losses.  We’re living through the weakest of all.

Another “key point” from the White House:

The overall unemployment rate ticked down 0.1 percentage point to 7.3 percent, the lowest since December 2008.

This is textbook spinning, to make bad news look like good news.  Most Americans (those who don’t live in the booming Washington D.C. region) do not understand how the government unemployment rate could have come down when so many around them are still jobless.

The statistic that explains this gap between the official unemployment rate and reality on Main Street is the Labor Force Participation Rate, defined as the percentage of working age adults “in the labor force.” To be included in the labor force one must either have a job or qualify to be counted as “unemployed” by continuously looking for work.

People who have been unemployed for a long time tend to become discouraged and spend less time on job search activities and thus don’t qualify by government criteria to be counted “unemployed.”  Labor Department statisticians reclassify them as “out of the labor force,” the same category as stay-at-home parents, retirees, and anyone else who doesn’t want a job. 

From July to August almost half a million jobless men and women were reclassified and are no longer counted as “unemployed.”  If they were still counted the August  unemployment rate would have gone up to 7.5% instead of down to 7.3%

The next chart, tracking the labor force participation rate since 1980, shows a shocking decline over the past five years as millions have been reclassified from unemployed to out of the labor force.

Arc-of-participation-Sep13If the labor force participation rate were the same today as it was when in 2009 when the unemployment rate hit 10$%, today’s unemployment rate would be 9.8%.

If the labor force participation rate were the same now as it was at the end of 2008, the current unemployment rate would be 11.2%

 

Obama Repudiates His Own Military Operation

“First of all, I didn’t set a red line.”superior-Obama

This was Barack Obama’s preposterous claim at his Wendesday press conference in Stockholm. He Continued:

The world set a red line. The world set a red line when governments representing 98% of the world’s population said the use of chemical weapons are [sic] abhorrent and passed a treaty forbidding their use, even when countries are engaged in war.

But President Obama did draw the red line, himself, on August 20, 2012.  The transcript is still here on the White House website.  NBC reporter Chuck Todd asked if The President “envisioned” deploying the US military to ensure safe keeping of Assad’s chemical weapons.  Obama’s answer:

I have, at this point, not ordered military engagement in the situation.  But the point that you made about chemical and biological weapons is critical.  That’s an issue that doesn’t just concern Syria; it concerns our close allies in the region, including Israel.  It concerns us.  We cannot have a situation where chemical or biological weapons are falling into the hands of the wrong people.

We have been very clear to the Assad regime, but also to other players on the ground, that a red line for us is we start seeing a whole bunch of chemical weapons moving around or being utilized.  That would change my calculus.  That would change my equation.

Mr. Todd followed up with,  “So you’re confident it’s somehow under – it’s safe?”

Obama responded:

In a situation this volatile, I wouldn’t say that I am absolutely confident.  What I’m saying is we’re monitoring that situation very carefully.  We have put together a range of contingency plans.  We have communicated in no uncertain terms with every player in the region that that’s a red line for us and that there would be enormous consequences if we start seeing movement on the chemical weapons front or the use of chemical weapons.  That would change my calculations significantly.

It’s simply not plausible that the President was speaking for “the world” rather than for himself and his Administration when he made these remarks a year ago.  He did not then nor does he now justify his current position that America alone has an obligation to enforce a treaty signed by 189 nations.   And the action he proposes falls short of enforcing the treaty, which requires the destruction of all chemical weapons.  He and Secretary Kerry say the goal is only to discourage Assad from using them again.

Fast forward again to the Wednesday press conference in Sweden.  Obama went on to claim:

My credibility is not on the line. The international community’s credibility is on the line.  America and Congress’s credibility is on the line, because we give lip-service to the notion that these international norms are important.

The reference to Congress supports the cynical view expressed by some Congressmen and pundits that the only reason Obama submitted a request to Congress for authorization to conduct his “limited” operation against Assad was to be able to deflect blame in the event of unanticipated catastrophe.

In the Syrian civil war and chemical weapons matter there is little in the way of reliable, undisputed information.  Speculators, some who speak with great confidence, proffer many possibilities:

  • The “limited” missile and bomb attack President Obama says he has planned and ready to launch will be ineffective, and Assad will emerge to be regarded in the Middle East as a hero who survived a battle with America.
  • The “limited” missile/bomb attack will work out exactly as the President and Secretary Kerry claim it will: Assad will be damaged and “degraded” and will never deploy chemical weapons again.
  • The missile/bomb attack will be so effective Assad’s regime is toppled, opening the way for a new regime will govern Syria.  If that happens there are at least two possibilities, depending on whose version of the situation turns out to be right:
    • The rebel forces who will prevail are wholly owned subsidiaries of Al Qaeda and the Iranian theocratic thugs, OR,
    • Some of the rebel forces, perhaps enough to prevail and become the new government are small d democrats who would be allies of the US and friendly to Israel.

Secretary Kerry has been at great pains to assure Congress and the nation that there are no plans for a war with “boots on the ground.”

But people with military experience know it could become war.  National War College Scholar Christopher Bassford summarized thousands of years of military history.  A military attack ignites:

…a dynamic, inherently unstable interaction of the forces of violent emotion, chance and rational calculation.

The inherently unstable interaction could provoke unanticipated reaction from Assad, the rebel groups, or one or more other nations, drawing America into something more complex, requiring deployment of more military resources than expected, perhaps even including ground troops.  This is not a risk-free undertaking.

Even if there are no unanticipated problems collateral deaths and destruction are to be expected.  Assad’s propagandists will produce photos and video of dead bodies, crippled children, and demolished schools and hospitals that Assad will claim resulted from the American attack.

Next week the President will need lots of Republican House and Senate votes because more than a few members of his own party are always against any military operation and will certainly not see his Syrian adventure as worthy of their votes.  But his lack of leadership, indeed his unwillingness even to affirm his own position as the red line guy will not inspire confidence that he is competent to carry out an effective attack without horrendous complications.

The argument in favor of Congressional approval is to sustain America’s credibility in the world and especially among the thugs of the Middle East.  But Obama’s conduct has already diminished our credibility. 

With the polls showing overwhelming  public/voter opposition, and a President who is already trying to evade accountability before the first missile lifts off, Democrats and Republicans will find it difficult to shoulder responsibility for authorizing an attack on Syria.

ObamaCare’s Vanishng Small Business Tax Credit

Since the Administration’s earliest efforts to persuade America that ObamaCare will do more good than harm, one of the most hyped selling points has been “small business tax credits.”

This is the second of four articles comparing the promises in the President’s 2009 speech with the reality of ObamaCare implementation.  The first is here.

In a September 2009 speech to a joint session of Congress the President promised:

For those small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need.

More recently, during one of the President’s endless campaign tours, he told the audience:

Small business owners who provide health care to their workers can sit down at the end of the week, look at their expenses, and begin calculating how much money they’re going to save!

Wow!  Weekly savings for the small business employer to count. Sounds exciting, huh?  The President and the government PR machine hope to plant a perception that ObamaCare treats small employers generously and they have no reason to complain.small-business-tax-credit table

But, as with all the promises of ObamaCare, the implementation particulars fall short of the hype.  It turns out that the small business tax credit is so limited and restrictive it’s worthless or nearly worthless to most small businesses.

  • The tax credit does not apply to the cost of health insurance for business’s owners or partners. 
  • It doesn’t apply to relatives of owners or partners who are employees in the business.
  • If a businesses grows to 25 full time employees it it’s tax credit vanishes.
  • If the employees’ average wages rise to $50,000 per year are the tax credit vanishes.
  • If the employer chooses a health plan that costs more than the government later determines is more costly than the “average” in the employer’s state, the tax credit is retroactively reduced.

But even these miserly rules make the tax credit appear to be more generous than it is.

It turns out  that the  maximum credit, 35% of the employer’s health care cost, applies only to businesses with fewer than eleven employees who pay average wages of less than $25,000 per year to full time employees.

For employers who hire more than ten employees, or pay more than $25,000 the law imposes a ruthless sliding scale, slashing the value of the tax credit in response to each additional employee and each dollar of increased wages.  The table above shows the value of the tax credit to six hypothetical employers.  

It gets worse next year

For some, probably most small businesses, even this stingy program will vanish at the end of 2013.  After that the tax credit will be allowed only if the small business employer buys an ObamaCare compliant insurance policy through the Small Business Health Options Program or SHOP a government run exchange. 

Because ObamaCare compliant policies come with a raft of new mandates, including a package of “free” (no co-pay) benefits, they will be substantially more expensive than the health plans most small businesses now choose.  Thus, for most small employers it will be less expensive to them to keep the policies they have even though they’ll lose the tax credit. 

Next: ObamaCare is a textbook example of the law of unanticipated, undisclosed consequences.

ObamaCare: 2009 Promises Vs 2014 Reality

Healthcare-speechOn September 9, 2009 the House and Senate Democratic leadership called a joint session of Congress so President Obama could appear on prime time TV, under the most favorable possible conditions, to sell their “health care reform,” what is now called Obamacare. 

To impress the TV audience Mr. Obama entered the hall with State of the Union style pomp and ceremony, complete with several minutes of cheering and applause from all the Democrats and a hundred or so loyal supporters in the balcony.

This is the first of four articles comparing the promises in the President’s 2009 speech with the reality of ObamaCare implementation.

The speech was designed to present only the promised benefits of the pending health care law and to hide costs and risks. 

Obama opened with a list of horrors he claimed were the result of too little government intervention.  One of the most important, indeed one of the top two or three reasons why he insisted the nation should submit to a government take-over of health insurance and medical services was:

Everyone understands the extraordinary hardships that are placed on the uninsured, who live every day just one accident or illness away from bankruptcy…There are now more than thirty million American citizens who cannot get coverage.

Four years later one can only wonder why supposedly free people are being forced to endure the wrenching implementation of Obamacare.  According to the Congressional Budget Office (CBO) there are some 55 million Americans who are uninsured now, in 2013.  The latest CBO health care report  projects 30 million or more will be uninsured in each of the next ten years –  the same as in 2009 when the President gave his big speech!CBO projected uninsured

The President went on to assure us that Obamacare would address the problem of people who could not afford insurance with government run “markets” called exchanges:

Now, if you’re one of the tens of millions of Americans who don’t currently have health insurance, this plan will finally offer you quality, affordable choices…We will do this by creating a new insurance exchange – a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices.

Reality turns out to be another disappointment. Back in April the Administration quietly disclosed that the Small Business Health Options Program or SHOP would not comply with the law’s requirement that employees of small businesses be offered several health plan options, like government and big business employees are.  Instead, depending on state and county there will either be one small business option or none at all.

While the President presented the individual exchange as a gift from government it’s actually an enforcement mechanism for the individual mandate.  Everyone above a certain income threshold who is not part of an employer insurance group must purchase Obamacare-compliant insurance, which includes an expensive package of coverages and provisions.

Nearly all states that have determined the cost of ObamaCare-compliant individual policies in their exchanges found that they will be will be much more expensive than the individual plans now available to their residents.  For example:

  • The Florida Office of Insurance Regulation just issued a report on all eleven insurance compares that will be offering policies in the Florida exchange, comparing the cost of their current individual policies with the the cost of their new ObamaCare compliant policies.  The increases average 35%, with the highest at 55%.
  • The Ohio Department of Insurance announced that individual consumers buying ObamaCare-compliant health insurance on the federal government’s health insurance exchange for Ohio will pay an average of 41 percent more than they did in 2013.
  • Maryland’s largest health insurer predicts a 25% increase.
  • In New Jersey a very popular low-cost health plan will no longer be offered.  Approximately 106,000 policy holders will be required by federal law to switch to more expensive government approved plans.

There are reports of similar increases, as much as 150%, in several other states. Next:  Small business tax credits promises vs reality

No Thumbs Up for the July Jobs Report

Historic deterioration of the labor market makes monthly jobs numbers meaningless.

The unemployment rate is misleading because millions of jobless people are not counted.  The number-of-jobs-created headline is misleading because of an unprecedented increase in part time employment. 

When the latest jobs report was published the White House guided headline writers with this spin from Alan Krueger, Chairman of the President’s Council of Economic Advisers:

While more work remains to be done, today’s employment report provides further confirmation that the U.S. economy is continuing to recover from the worst downturn since the Great Depression…Today’s report from the Bureau of Labor Statistics (BLS) indicates that the unemployment rate declined from 7.6 percent to 7.4 percent in July, reaching its lowest level since December 2008.

As usual, the White House is seeking to mislead those who don’t have the time or inclination to dig into the numbers.  A drop from 7.6% to 7.4% looks like significant progress until you discover how it came about.

Arc-of-participation-Aug-20

It turns out that most of the decline in the unemployment rate was due not to more people finding work but to fewer people being counted as unemployed. 

To qualify as “unemployed” one must seek work continuously.  But people become discouraged after many months or even years of fruitless job hunting and seek employment less often.  Because they were not actively involved in job searches during July government statisticians reclassified 240,000 jobless people from “unemployed” to “not in the labor force,” so they were not included in computing the headline unemployment rate.

The labor force participation rate, tracked in the chart above is the percentage of the working age population that is in the labor force.  The labor force is the sum of all those who have jobs plus all those who qualify as “unemployed” by actively seeking work.

Since the recession ended in June 2009 the labor force participation rate has fallen from 65.7% to 63.4% because more than six million people have been reclassified from unemployed to not in the labor force.  If all those people were still counted as unemployed, the July 2013 unemployment rate would have been a catastrophically high 10.6%.  If the labor force participation rate were the same as it was before the recession began in 2008 the unemployment rate would be over 11%

The Chart above, by tracking the labor force participation rate since 1980, and shows why America still suffers so much economic misery even as the unemployment rate declines.

 As the American economy recovered from a severe recession in 1980 and 81 the participation rate went up at the same time the unemployment rate went down.  In that recovery employers were creating jobs rapidly enough to reemploy all those who had lost jobs in the recession and accommodate the second half of the baby boom generation, tens of millions of men and women who reached working age during those years.

Those who are old enough to have lived through the 1980s as adults remember an explosion in job opportunities as the economy roared back to life.  Then, the declining unemployment rate was an indicator of greater prosperity and economic opportunity.  But today, because of an unprecedented drop in labor force participation, the unemployment rate is not an indicator of progress toward prosperity.  Instead it’s an indicator of the grim reality faced by millions of long term unemployed men and women.

Major Shift to Part Time Employment

Most of those who are counted as newly employed are underemployed.  According to the Labor Department Household Survey 980,000 previously unemployed people found jobs in the first seven months of 2013.  But  more than two-thirds of those jobs are part time.  full-part-time-2013

The spike in part time jobs appears to be statistical confirmation of one of the adverse, unintended consequences of ObamaCare. 

ObamaCare will require employers to provide health plans that include a very expensive package of government mandated benefits to full time employees.  But it does not require any health insurance for part time employees working fewer than 30 hours per week.   The incentive to replace full time jobs with part time jobs is obvious, especially for employers in low-margin businesses that simply can’t afford to meet the Obamacare insurance requirement.

From May to July the population of part time workers increased  535,000, while the full time workforce shrank by 148,000.

Stubborn Refusal to Acknowledge Economic Reality

The Commerce Department has issued its Economic report for the second quarter.  Gross Domestic Product or GDP increased by an anemic 1.7%.  First quarter GDP, which had already been revised downward from the initially reported 2.5% to 1.8% was further downgraded to 1.1%.

Over at the White House web site Alan Kruger, the President’s chief economic adviser tried for a positive spin, emphasizing the total growth in GDP since the end of the recession in June, 2009:

Real GDP has risen by 9.0% since the business-cycle trough in [second quarter of 2009]

As with almost all public communication from the Obama White House, this was intended to deceive people who don’t have the time or inclination to become fully informed.  Mr. Kruger hopes that without any context we’ll think 9% sounds like a lot. 

The red bars in this chart provide context around the White House spin by comparing the last four year’s 9% growth rate with every previous post-recession recovery of the last six decades.  It turns out that for four years we’ve endured the weakest recovery since the government began issuing quarterly GDP reports.

The blue bars compare increases in government spending during the first two years of each recession and recovery cycle.  As the the 2008-09 recession began Congress and the Bush  Administration followed the advice of Keynesian economics and enacted a relatively modest spending increase.  Then President Obama roared into office and piled on what turned out to be the largest, Keynesian “stimulus” ever recorded, nearly three times the second place increase on the chart.

Together, the red and blue bars show that the biggest Keynesian spending increase ever enacted, bought the weakest post-recession recovery.  Indeed, if there is any correlation to be discerned from history it is that more spending correlates with a weaker recovery.  Certainly our actual experience does not support the Keynesian doctrine of government “stimulus” that is an article of faith on The Left.

One would hope that politicians and academics would acknowledge from the numbers plotted in the chart that Keynesian economic theory has been repudiated, once and for all.  Surely, even the most naive have learned from the past 5 years that government can not buy prosperity by taxing and borrowing resources away from the productive, private economy to spend on political priorities. 

But our agonizing lesson in economic reality has gone right over the heads of the President and his allies in Congress and the media who now say the 2008-09 spending surge didn’t deliver the promised results because it wasn’t big enough! 

Obama has begun a campaign style series of speeches to excoriate House Republicans for refusing to appropriate funds for his “economic vision” of even larger spending programs on the same old progressive priorities including

Construction projects (remember “shovel ready”?)

Subsidies for green energy schemes (remember Solyndra?)

Job training programs, The Government Accountability Office reports that 9 federal agencies already spend $18 billion on forty-seven training programs.  Those programs do not report back to Congress on results.  Nobody knows if the trainees actually learn any legitimate skills or if they eventually land jobs that require the skills they are taught.

“Rebuilding our manufacturing base”: Government should build what the president calls “regional manufacturing hubs” as if the problem were lack of space rather than vacant, shuttered manufacturing facilities all over the country.

Education:  The Progressive Movement, which is Obama’s intellectual, philosophical and emotional base, is sure government will never, can never spend enough on programs, subsidies, studies and bureaucracies, associated with “education.”  But, much like our experience with Keynesian stimulus, federal education spending correlates with deterioration, not improvement in public schools.

We’re told by the media that the problem is Republican induced gridlock in Congress that prevents enactment of the President’s “jobs plan” for economic growth.  But  the real problem is his stubborn refusal to acknowledge economic reality.

Obama’s Phony Economics

President Obama’s much hyped Big Economic Speeches were largely a rerun of his standard campaign speech, complete with the usual, bitter attacks on House Republicans and misleading or false claims of economic success including:
Over the past 39 months, our businesses have created 7.2 million new jobs.
The President hopes you’ll perceive this number as a lot of jobs.  But as this chart shows the Obama era has been the weakest post recession job market ever recorded.
Job growth during the last 8 post recession economies
A few minutes later President Obama said: “Our deficits are falling at the fastest rate in 60 years.”
Obama wants you to be persuaded that concern about deficits is now behind us and it’s time to crank up the spending machine.  But his statistic is simply not true.  His administration ran the biggest deficit in US history in 2009.  If the Congressional Budget Office’s projection for 2013 turns out to be accurate the deficit will have fallen at the rate of 55% over the last four years. 
But 55% in four years isn’t even close to Obama’s claim of “falling at the fastest rate in 60 years.”
  • In three years, from 2004 to 2007 the deficit fell at the rate of 61%.
  • In four years from 1993 to 1997 the deficit fell by 91%
  • In one year, from 1968 to 1969 a $25 billion deficit became a $3 billion surplus, for a drop of 112%
  • In three years, from 1962 to 1965 the deficit declined at the rate of 80%.

The 2013 deficit will be the smallest of the Obama era but will still be larger than any deficit ever run prior to the Obama era and 40% larger than the largest Bush deficit.  Even after adjusting for inflation the 2013 deficit will be the largest in history, except for Obama’s four previous deficits. Little Obama

[The rate of growth of ] Health care costs is slowing, but many working families haven’t seen the savings yet.

But there are no “savings” as long as the costs continue to grow, even if the rate of growth is slower than it was (a dubious claim.)  Savings would result only if costs go down.  Does Mr. Obama understand basic economics?  Little Obama

In the period after World War II, a growing middle class was the engine of our prosperity.

While there is no standard definition of “middle class” an overwhelming majority of Americans identify themselves as members.  Thus, all politicians strive to be seen as favoring the middle class.  Obama’s crediting the middle class with being “the engine of  prosperity” is cynical flattery, an appeal to ignorance, not a legitimate lesson in economics.

An expanding middle class, is the result of, not the engine of prosperity.  The real engines of prosperity are entrepreneurs and investors who innovate and/or create new products and services, organize new enterprises or expand exiting companies, and in so doing create jobs, thus increasing the demand for labor.

The middle class is made up mostly of “labor” or people who earn their compensation in the form of wages from jobs.  Labor, like everything else has a price which is subject to the market forces of supply and demand.  When demand for labor rises relative to supply the price of labor – wages, benefits – increases.  When demand for labor weakens, the price stagnates or goes down.  Since the end of the recession in mid 2009 the demand for labor has not kept up with the increased supply of labor from growth in the working age population.  Thus, average compensation, the price of labor, is down.

A “growing middle class” is the result of growing demand for labor.  The government can not cause the total, economy-wide demand for labor to grow because it takes the resources that fund it’s programs from the private economy, causing an offsetting decrease in private sector demand for labor.

During the post-war period Obama references with nostalgia there was greater economic opportunity because government was far more restrained than it is today.  Most of today’s federal regulatory and economic intervention systems didn’t even exist in the 1950s and 1960s.

Barack Obama’s ideological belief that prosperity stems from government decree rather than from maximum economic opportunity has never produced the results he claims he wants, and it never will.

Was the Zimmerman Trial a System Failure?

Since the jury’s not guilty verdict the media have exploited outrage, the outraged have exploited the media, and cunning, duplicitous politicians have exploited both.  It has been impossible to avoid the trash-talk.

  • Al  Sharpton bellowed through his MSNBC megaphone:  “Now every child is at risk” [of being murdered.]
  • Atlanta Falcons wide receiver Roddy White: “All them jurors should go home tonight and kill themselves for letting a grown man get away with killing a kid.”
  • Chicago’s activist Priest, Father Pfleger, roared at a raucous crowd of demonstrators: “We’re tired of race being the foundation of justice in America.”
  • PBS host Tavis Smiley: “Something is wrong in this country when adults can racially profile and gun down children.
  • Juan Williams on Fox News: In their verdict, the jury failed to show any compassion for the Martin family.
  • MSNBC’s Melissa Harris-Perry: “[when the verdict was announced] I thought, I live in a country that makes me wish my sons away, wish that they don’t exist, because it’s not safe.
  • Lawrence D. Bobo, Chair of the Department of African and African American Studies at Harvard University: “A teenager went out to buy Skittles and iced tea. At some point, he was confronted by a man with a gun who killed him. There is no universe I understand where this can be declared a noncriminal act. Not in a sane, just and racism-free universe.”

In a speech to the NAACP Tuesday Attorney General Eric Holder called for:

…respectful and responsible dialogue about issues of justice and equality to  confront underlying attitudes, mistaken beliefs and perceptions, so we can meet division and confusion with understanding and compassion and ultimately with truth, however hard that is.

This article is Liberty Works’ humble contribution to Mr Holder’s dialogue.

The attackers of “the system” either do not understand what trials and juries do or they are willfully deceiving their audiences.

I would like to counter these attacks on the jury system in general, and the Zimmerman jury specifically with the story of another trial.

Two years ago I was summoned for jury duty in federal court.  I grumbled, but resigned myself to submission to authority and showed up at the court house, albeit with an attitude.  I didn’t know the experience, my first time on jury duty, would profoundly change that attitude.

After a couple of hours of bureaucratic tedium I was called to join a group of prospective jurors for a trial.  We were escorted to a jury deliberation room by a staffer who told us nothing about the case except that it was a lawsuit – not criminal.

The door from the courtroom opened by a Bailiff who invited us in and we saw the plaintiff for the first time.  He was a black man, dressed in an orange, prison jump suit, handcuffed to his chair.  Behind him stood two armed, stone-faced guards.

The Judge announced that the plaintiff – I’ll call him Mr. Jones –  was an inmate in the California State Prison System.  Mr. Jones was suing four prison corrections officers, and he was representing himself – he did not have an attorney.  He was in his fifties and we learned later that he had served more than one prison term and a total of more than 25 years.  We were not told what crimes he had committed.

The judge called on us one at a time to answer screening questions including, “have you ever been a victim of a serious crime?”  I answered yes, and the judge asked me to tell the court the details.  Decades ago, when I was a teenager working in a gas station, I was the victim of armed robbery.  Given that the plaintiff was a convicted felon I thought my answer would get me booted off the jury.  But it didn’t.

Probably because the self-represented Mr Jones wasn’t sophisticated enough to challenge potential jurors, he ended up with what would, from his point of view, be the jury from hell.  Not only had I been a crime victim, two others had relatives in law enforcement, including prison corrections officers.

In federal court civil cases are tried before eight person juries.  This black inmate’s lawsuit against four white prison guards would be heard by seven whites and one Asian-American.  Later, during deliberations it became evident that none of us was a “soft-on-crime liberal.”  All of us were uncompromising “law and order types.”

At this point most readers would likely conclude Mr. Jones lawsuit was probably without merit, but even if he had a case “the system” had already failed him.  As the trial began I felt like I was an unwilling participant in a stupid waste of time.

But there’s an element to the jury service experience that isn’t often discussed.  The majestic processes and formality of the court, the precise supervision by the Judge, and the deference and respect that jurors are shown by the Judge, attorneys, and court staff all serve to motivate jurors to focus on the facts and evidence, to set aside biases and preconceptions and take their solemn responsibilities seriously.

It was a complicated case but I’ll strip it down to essentials. Mr Jones had fallen in a prison stairwell, suffering injuries serious enough for a three day stay at a hospital outside the prison.  We were not told the circumstances that led to his fall.  The day after he came back from the hospital, while he was still recovering from his injuries, the four guards came to his cell to escort him to an administrative appointment.  As they were leaving his cell he fell to the floor.  He claimed the guards had caused his fall, and that the fall had aggravated his injuries, rendering him disabled, and unable to walk without a cane.

So how did this case end up in federal instead of state court?  Mr. Jones claimed the guards deprived him of every prisoner’s Eighth Amendment right to be free of “cruel and unusual punishment.”  Under laws passed by Congress that define cruel and unusual punishment the incident could have been a civil rights violation if we the jury found that certain legal tests were met, including unnecessary force.

Unlike the Zimmerman trial there was no media coverage at all.  Nobody was in the courtroom watching except the defendant guards, their supervisor and a couple of their relatives.

Mr. Jones was poorly educated and struggled to articulate even simple ideas as he presented his case and questioned witnesses, including the guards.  The guards were defended by an experienced trial attorney who was paid by the state. 

After considering applicable laws and prison regulations we jurors found that the guards’ actions were indeed a violation of Mr Jones’ Constitutional rights.  We awarded only one dollar in compensatory damages because the medical evidence was ambiguous and inconclusive and because an inmate’s medical costs are already paid by the prison system.  But because we were persuaded that the guards had violated his Eight Amendment rights, as defined by the law, we awarded Mr. Jones $15,000 in punitive damages.

So how is this story relevant to the Zimmerman case?  The Zimmerman Jury Instructions included:

  • You must follow the law as it is set out in these instructions.  If you fail to follow the law, your verdict will be a miscarriage of justice.
  • This case must be decided only upon the evidence that you have heard from the testimony of the witnesses and have seen in the form of the exhibits in evidence and instructions.
  • This case must not be decided for or against anyone because you feel sorry for anyone, or are angry at anyone.

Our instructions included similar language.  I didn’t detect racial bias in any of my fellow jurors.  But to measure up to these standards we all had to overcome a powerful bias in favor of prison guards who we respected for serving society by doing a difficult, dangerous job.   And of course we were biased against a convicted criminal. 

But we opened our minds.  We were ordinary, flawed people, but we rose to the implicit expectation that we would, like countless juries before us, make a trial in the United States of America unbiased and impartial.

Like the Zimmerman verdict, our verdict was about one event, one moment in time.  We were not asked to decide if the judicial and prison systems are fair to blacks or to settle any broad societal conflicts.  All we were asked to do is decide if one inmate’s civil rights were violated for one minute on a Tuesday in 2006.

The Zimmerman jury’s duty was not to assess and pass judgement on race relations in America.  They were not asked if it’s “fair” that some whites are afraid of black men.  They did not decree that from now on whites are free to shoot black children.  All they did was determine that in one tragic moment George Zimmerman acted in self defense.

My experience demonstrates not that I or the other members of the Mr. Jones’ jury were morally superior, but that under our system a jury can overcome a high wall of natural biases.   It’s likely that some or all of the women on the Zimmerman jury shared the belief held by most whites, that African Americans do, at least sometimes, suffer from prejudice and discrimination.   They might have felt a bias in favor of a verdict that would, in the words of Juan Williams above, show some compassion for Trayvon Martin’s family.

But they focused on the actual testimony and evidence and found, as anyone who takes the time to listen to the closing arguments would agree, that the Prosecution simply did not meet the standard of guilt beyond a reasonable doubt for either the crime of murder or of manslaughter, as those crimes are defined in Florida law.

Mr. Holder could make a major contribution to healing the wounds this trial has opened with a robust defense of the Zimmerman jury.  Six women rose above politics, overcame breathtaking bias in the media, and set aside fears for their own safety, to make a trial in the United States of America fair and impartial.

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