Writing Our Representatives

I firmly believe in writing our representatives to tell them where we stand on the current (and for that matter any bill). The following is a letter I wrote to one of my Senators.

Mrs. Hagan,

I wanted to write you regarding the stimulus bill being passed and discussed there in Washington. While I can agree that something needs to be done, I am opposed to the current bill. Every dollar the government spends is a dollar taken away from the private sector. For that reason every dollar spent by the government should be very carefully considered. While I don't agree with Keynesian economic theory (government spending is the way out of economic recessions), I am not naive enough to think that there is any one solution to this current economic problem and that I know what it is. If major government spending is needed (though I have read several economists theories' stating differently; see http://gregmankiw.blogspot.com/), then every dollar spent should be accounted for and should generate more than a dollar's worth of actual stimulus (since leaving that money with the private sector would generate at least dollar for dollar). I want to see that level of accountability for this money. It seems that with the more money involved in the bill, the less concerned everyone is with larger amounts of money (ie, billions in spending seems to make the legislature ignore, or think less important, the "smaller" millions).

Personally I am a firm believer in allowing each individual American the freedom to do with their money what they would. Government exists only to protect those freedoms. That includes protecting our freedom to experience the consequences of our own decisions. If we make poor choices then we should suffer the consequences of those choices. I fully realize that sometimes those choices affect others who had no part of that decision making process (my home has dropped in value too even though I have been paying my mortgage faithfully). It is impossible for government to prevent or fix that, it is a part of life. Also If we make good choices and experience success, we shouldn't be looked down on because we were more successful than others. Saying that the middle class needs to be expanded and that those who have more money than the middle class should have to pay more in taxes is rediculous. I am in the lower middle of the middle class and I plan on moving out of the middle class as defined and move into the upper class. I don't want to push to reach that goal only to be taxed so much that it puts me effectively back into the middle class. To me, that is limiting my freedom.

Please do not support this bill. If it does get signed into law, then please be a leader in demonstrating accountability in the legislature and push for strict reporting. As a taxpayer I want to know, down to my level of budgeting every dollar, how the money is spent and its demonstrated effect. Government has already spent $3-400 Billion on this crisis with no demonstrated dollar for dollar results. Please don't let another trillion plus (this bill and the rest of TARP funds) be spent with the same lack of accountability.

Matt Hicken

Government Stimulus

While most who know me know my stance on whether or not the government should spend more of our money on bailing out banks and companies who made poor decisions (and if you didn't then that sentence should have helped clear things up); I thought I would share just a couple of thoughts.

1- Every dollar our government spends is a dollar taken away from the private sector. If they are spending it then they are, in effect, saying that they feel they will do a better job with that money than individuals would. I don't agree with that line of thought. While there are plenty of examples that have come to light recently of how the private sector has squandered their finances, I believe we would do a bette job of spending our money than our government would. I also believe that with the responsibility of spending our own money we should suffer the consequences of poor decisions and feel the thrill of good decisions.

2- I think that the "debate" on whether or not the stimulus is necessary has been embarrassingly non-existent. Republicans have been railroaded in their arguments. Obama's statement that he is working in a bi-partisan fashion just means he is telling those who disagree with him that he heard them but if they love the American people they would vote for what he wants. This is not what our elected officials should be doing. They should be spending less time trying to control the nation and more time trying to manage it as the representative they are.

3- To quote George Washington: "Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master." Why on earth do we want to make it bigger? And why do some think that the government is responsible for solving problems when they, in many cases, are the problem?

Finally, regardless of how poorly I think our government is currently operating, I agree 100% with Adam Smith who stated in the Wealth of Nations:

"The uniform, constant and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigor to the constitution, in spite, not only of the disease, but of the absurd prescriptions of the doctor."

In other words, we will get out of this regardless of what our apparently ignorant government decides to do. We just most likely will be back in trouble in a few years given their current plans. My hope is that by then we as a people have woken up to the ills of having such a large government and we will vote in representatives who will put the responsibility back onto us.

Is More "Easy" Money Really The Answer?

I've been thinking it for a while, and even wrote about it in my 2009 Outlook (to be posted later), but I think this reporter does a fantastic job of pointing out the follies in the methods the government is seriously considering to get us out of these economic problems.

Click here to the Read the Article

To summarize a couple of his points:

1- Making it easy again for people to get loans is not going to solve the problem, in fact it is what caused our current problems.

2- Sending more money to consumers as tax rebates that will only come this year is not going to boost consumer spending. Even if it did, is that really how we want our economy to work?

3- If this truly is to be the "Age of Responsibility" as Obama put it in his speech (more on that from me later), then why is our government trying to take away the responsibility of companies and individuals by trying to send them money as fast as they can with the sole purpose of getting them to spend exuberantly? I'll add to that: Our government is, in effect, saying two things with their actions. 1. The private sector can't make good decisions as evidenced by the poor decisions that got us in this mess, so we are going to take on the decision making for them. 2. We want everyone to be responsible for their actions, but we are going to make sure that no one suffers much of the consequences of those actions.

Please read the above article. While the media and a large portion of the people out there like the idea of easy money, it is not going to help us in the long run.

You Gotta Love the Democrats

I was reading through the headlines like I usually do to find something interesting and noticed that Obama had pledged to fix our entitlement programs. I wish him the best in this endeavor and I honestly hope he can get something done.

At another part of the article however I found these humorous gems: [Obama] named Nancy Killefer as his administration's chief performance officer, creating a new White House position aimed at eliminating government waste and improving efficiency. Wait a minute...creating new positions and adding to the size of government in order to reduce government problems and eliminate waste? I, for one, hope he also creates an oversite committee who would be responsible for reviewing the work of a committee who would be responsible for reviewing the work of this new role to ensure that no one is wasting their time and our money.

He also talked about how concerned he is with the size of deficit he is receiving, almost trying to blame that debt on the Bush administration. This is, of course, after he has released his proposal to finance a $700 to $1 trillion stimulus plan and after his fellows in the legislature have already been on a spending spree to save us from suffering due to poor decisions we made.

I don't know about the rest of you, but I found these two items rather funny.

Free Markets

Does anyone else find it ironic that our entering government is basically saying: "The free market system has shown that it can't work so we are going to implement policies designed to mimic the free markets so that we can control the outcome."

The idea that the free market system has failed us is outright incorrect. We haven't had a true free market in a long while. I also think its funny when it is insenuated that Bush invented the free market system. While in a way he was at the helm when the current market system was developed, he most certainly did not invent a system that had been around for centuries.

A free market is where a buyer and seller can transact business without any interference from each other and the government. When was the last time we had that throughout our economy? I can think of one prime example where this interference has caused huge problems throughout our country and economy: The Health Care System. Costs are rising at twice the rate of inflation, there is not enough money going into Medicare to cover costs, companies are passing more and more of the costs of insurance on to employees and things appear to be getting worse.

The biggest cause of our problems with the health care industry today is the moral hazard (and thereby cancelation of a free market) of having insurance, in particular Medicare, pay for the transaction taking place between doctors and patients. Why is this moral hazard? Since we, as consumers, don’t pay the full bill that we incur when visiting the doctor, since we pay a fixed deductible regardless of actual cost, we tend to not shop for the best, least expensive care and we don’t hold our doctor’s visits to emergencies. In other words, instead of purchasing a cheap mp3 player because we only have $25 to spend, we are going for the most expensive "do-it-all" mp3 player available because someone else is paying for the difference.

Think of it like our recent oil problems. The price of oil went from an average of $64 a barrel in 2007 to its peak this year at above $147 a barrel. One big reason for that 130% increase was the subsidies that many governments placed on the cost of oil. Meaning the consumer wasn’t feeling the full impact of the price and continued to demand more. The price dropped when consumers finally felt the price and demand dropped.

It really is supply and demand at its purest form. The problem has been that doctors are in short supply and costs of producing new drugs that we all demand are higher again limiting supply. Demand, on the other hand, has only increased and will steadily increase while the baby boomer generation goes through their peak medical spending years and they don't feel the full effect of the costs. Because of this disconnect the drug companies feel that they can spend outrageous amounts on R&D and of course pad their own coffers quite a bit and doctors feel that they can charge good amounts to cover their costs (which I understand are a lot higher than many think especially given malpractice insurance) and still pay themselves a salary worthy of someone with such high education.

Insurance companies have been taking the brunt of these increases but they can't keep doing it, hence the costs are finally being passed on to the actual consumers a little bit. At some point, however, something has to give even more.

Unfortunately it is almost political suicide to even suggest real, plausible solutions to the problems in our health care system. It seems, that like deer in the headlights, we all know something is coming, but we can’t seem to decide or agree on how to get out of the way.Our political leaders have proposed some possible solutions to our problems, but as of yet none of them address the moral hazard and limit to free market theory currently involved in the health care industry. We’ve heard President-Elect Obama’s plan, or at least what his plan was while on the campaign trail. What plan will be implemented? How can you allow the consumer to “feel” the costs associated with health care, while not refusing care to those who just can’t afford it? I am not sure, and I don’t think our leaders are either.

The real question is: How can we protect ourselves against the unknown future of health care costs, no matter what government does?

For starters, we can use the vast resources available to us for our health care advice. With resources like http://www.webmd.com/ and others, doctor’s visits could be cut back. Of course you should never rely completely on these sources when and if there is a major concern. We can also start our own savings plan for our future emergency health care costs.

One of those methods is through a Health Savings Account (HSA). HSA’s were signed into law in December of 2003 and can be a little confusing. A great resource, which does explain in a very detailed way what HSAs are and what they do, is http://www.hsaresourcecenter.com/ and I encourage you to visit their site. In particular their site describes what an HSA is and how it could help with health care costs for you as an individual and quite possibly, if participation is good enough, lower costs in general.

The second possible solution comes through purchasing Long Term Care or Life Insurance policies with benefits that give the possibility of using your death benefit for qualified medical expenses. There are restrictions and rules on how it can be used, but could help.

The main idea is that, relying on our political leaders to fix the issues is not going to work because our current leaders are bound and determined to take over the free markets and try to mimic it through their own manipulations.