Thursday, July 16, 2009

Episode 69: Capitalism: The Double-Edged Sword

A comment in my last post about my opinion on capitalism drew a bit of fire in the commentary. And rightly so… it was a bold statement that I didn’t have time to support in that post. Allow me to do so here.

At the onset, I’d like you, loyal reader, to know that I am very much of the capitalist mind. I think our version of capitalism is what makes our country so powerful. If you have a great idea, you are greatly rewarded for your contributions to society by amassing more wealth than some countries are worth. For example, Bill Gates and Steve Jobs took the idea of a computer in this massive warehouse to a device that could fit in your office (now they fit inside a cell phone!) Larry Page and Sergey Brin revolutionized how we navigate through the internet when they made Google (my FAVORITE company). Russell Simmons and Rick Rubin created Def Jam Records in an NYU dorm room. Not to be outdone, Mark Zuckerberg created Facebook in his dorm and turned what was originally an interactive student directory into the #1 social networking site. This is capitalism at its best – find a missing part of our life, dream up a great idea to fill the void, and if the stars align, get paid a hell of a lot to make an impact on the country and the world.

Let’s scale back a bit. Let’s say I’m an awesome cook who could whip up the best tacos in town. After doing a market analysis, I see there is a Taco Bell, Miguel’s Tacos, and El Dorado Restaurant. So when I open up The Law’s Taco Shack, I may do some things like undercut the competition’s prices and offer a taco that tastes so good that it becomes a local brand. Brand recognition is one of the most important assets a business could have, as in this scenario I crush the competition, even putting Miguel out of business.

Let us scale back even more to the personal level. In our free market system, When I get a pay check, I have obligations to make like bills, and loan payments, but other than that, I’m free to spend my money how I please. If I want to save or invest it, I can. If I want to soup up my car and buy aftermarket parts, there is very little a government body can do to stop me. As long as my car passes the emissions test, I’m free to make my roadster as fuel inefficient as I want. Our system allows me maximum selection to buy any of life’s creature comforts like 57” Plasma Screen TVs, leather couches, or a post-modern table that is ugly as hell for $4000 if I want to. There is no government body that could stop me from spending my money as I please so long as my obligations are met.

I like – no, love our system. All the examples above is capitalism at its finest, even Miguel losing his shop to my business. My idea is better than his which in turn made his business lose its solvency. But our version of capitalism even helps Miguel from going to the economic crapper just because his idea no longer appeals to the people. When a business fails, there are numerous ways to get rid of your debt with little impact to the business owner (as long as it is not a sole proprietorship – then it gets a little tricky) and Miguel can quit, or he can come up with a new recipe and try again. Our system of private enterprise employs 80% of our workforce, and is in most cases very honest and legitimate companies. These small, medium, and some big business are completely exempt from my criticism of capitalism. The aforementioned people are the heart of our economic engine and deserve our support and thanks.

With that said, let’s continue forward to my comment from episode 68 that drew much criticism:
“The problem with amassing personal wealth is capitalism. It is the nature of capitalism that for one person to amass wealth, someone also has to lose wealth. Also, many people become addicted to making money, and do so with little to no consideration for others.”

In this quote, I’m referring to big business, namely in the financial, banking, credit, and pharmaceutical sectors. See the problem with big business is they start out with a great and noble idea to help Americans live their lives a little better than it was the day before. As they climb up the ladder, something changes. It becomes less about helping the people they originally wanted to help, and more about increasing their portfolios. Then these established companies hire people who never cared for the “little people;” they got in the investment banking business from the start to make money.

Look at the financial crisis. There were many factors that contributed to the collapse, but arguably the biggest factor (or at the very least the factor that cause the pot to boil over) was the gamble made in the subprime lending market. It was the greed by a few in the upper echelon of the biggest of big business that didn’t care about the American dream, they cared about making more money for themselves. Those business people would rationale their actions by saying they helped to give more people a shot at the American Dream. If it requires so much workarounds and trickery and number manipulation to get these people into those houses, that should’ve been a clue those were risky mortgages to make. Conservative minds may ask “who’s more foolish, the fool or person who follows the fool?” Both. But if we left the system alone, the one that looked at your financial history and determined based on your earnings if you qualify for a loan, we wouldn’t be in the mess we’re in.

How about the pharmaceutical industry? We are a nation of magical pill poppers. We create diseases to cure so we can sell more medicine. We break the backs of middle class and lower echelon with skyrocketing costs of treatment. We had a government that blocked access to cheaper generic drugs from Canada to appease the big Pharma companies. Conservative minded people may talk about long lines at the hospital under a “socialized” health system, but what’s the difference between that and people not being able to afford medicine? Either way, the middle class is hurt. Case in point, a passerby reader of this blog told me a story on my Facebook page that her friend (who has insurance) needs a surgery which the insurance requires he pays $1000 AND 20% of the costs. Using my own surgery to estimate the cost, he’d have to pay $10,000 out of pocket, plus medicine and other fees. The big business system could care less about the fact that this expense absolutely crushes these young professionals is college educated, working, and has insurance.

That is what my statement means. As capitalism pays in dividends for the individual, someone has to lose. The insurance company could afford to cover more of the cost of treatment, but that means less profit which is bad for its portfolio. So they will do anything in their power *not* to pay for your coverage. The banks could loan money to people who have money to pay it back, but fewer loans means less profit. Add to that the complicated terminology (like credit default swaps), in addition to wrecking the life of one trying to aspire toward a better life for their family, these bankers passed the liability to someone else. Credit card companies could issued limits based on ones credit score, but that would mean less credit equals less interest, so they surprise you with credit line increases. Now yes, we don’t have to spend it, but when you have been laid off and do not qualify for unemployment (another program that causes rifts in conservative ideology) you need to live, and Mr. Gold Card becomes your best friend. To add insult to injury, they even lowered credit lines on some people and charged them penalties after the recession began to worsen! Combine that with super high interest rates and now a bad situation becomes worse for Joe Six –Pack. Not for the credit card Fat Cat CEO however. In the end big business is about making more money, and nothing else. That includes companies I applauded earlier, like Microsoft. They once had a great idea to help Americans compute better, but now they outsource almost all of their manufacturing and customer services overseas which deprives Americans of jobs. Yes, high government taxes drive away big business, but with a $23 Billion profit, I’m sure they could afford to employ more American workers. Apple does… (which hurts for me to say since I’m a windows guy!)

So to amend my statement, I should say “The problem with amassing personal wealth is capitalism. It is the nature of capitalism that for one person to amass wealth, someone also has to lose wealth *** and that person is almost the middle class American.*** And this post is not meant to give a pass to the government, as they do a lot of funky counterproductive stuff as well. If I opened that can of worms, this post would easily be 6-7 pages long. I will instead stop at two and a quarter pages and devote that topic for a post another day.

Monday, July 6, 2009

Episode 68: The American Heathcare Act of 2009

Healthcare is the hot button issue in today’s politics. Both sides have very strong opinions on the topic. Those on the right say “if you want health care so bad, buy it! If you can’t afford it, tough nuggets! “ Those on the left however say “Access to health is a basic right, and a nation as powerful as ours should be able to provide that service to all citizens.” Both sides however, agree that a great deal of reform must be done.

So the argument really boils down to basic liberal vs. conservative principles – the constant need to ensure a high standard of living for all, vs. the constant need to ensure a high standard of living for those who’ve earned it. Both sides raise very valid points, as well as some… let’s say not so plausible ones. In the end it all boils down to money. Liberals tend to want to use money to serve as many people as possible (which is falsely interpreted as socialism) while conservatives want to maximize personal wealth (which is falsely interpreted as selfishness and greed.) The problem with using money to serve as many people as possible (especially during a recession/depression) is the finite amount of capital in the coffers, which can only be made up in tax increases (since we can’t cut too many programs because we “need” them). The problem with amassing personal wealth is capitalism. It is the nature of capitalism that for one person to amass wealth, someone also has to lose wealth. Also, many people become addicted to making money, and do so with little to no consideration for others. Outlined here is the crux of the problem.

But enough pandering to both sides of the argument… this is the L Comment! And here at the L Comment, I like to come up with solutions to big problems because we can point fingers at each other all day and not move an inch. So without further ado, I present my new bill (I believe my third) The American Healthcare Act of 2009! This is the ultimate healthcare plan that will make everyone happy.

To begin, why are republicans so disgusted with the idea of public health care? Two reasons – cost and quality. Any other argument is a subset of the aforementioned issues. Anything that involves increase a tax, republicans hate it. They also fear losing options because the government will swallow up big business. In my bill, government healthcare and private healthcare HAVE to coexist.

Article 1: All Americans are guaranteed $3,200 worth of medical services per year

By utilizing a healthcare information technology (IT) network, each American will be entered into a national healthcare database. (Put you Ayn Rand books away, if you have a social security card, then you are already in a database!) This database would include your healthcare chart, family history chart, other relevant healthcare info (such as current prescriptions) as well as a healthcare credit. Each citizen is guaranteed $3,200 in free medical costs per year (this number is derived from the $960 Billion dollars already allocated for healthcare - let us for argument’s sake take Obama at his word - divided by 300 million, the rounded up estimate of legal American citizens.) At the end of the year the debit would reset to $3,200. Thus, if a person used all the money, they’d get it all back on January 1st. Likewise if their debit was at $3,100, the system would only add $100 on January 1st.

This money would go towards paying for basic medical services. Without insurance today, it costs about $750 to get a checkup. Since most people go to the doctor twice a year, this essentially would give a person 2 checkups and two visits, with money left for free medicine (prescriptions and over the counter). The goal is to provide some kind of assurance that one could go to a clinic, not an emergency room, to treat an illness because they know they can see a doctor at a clinic if they need to. For people working in government jobs, they could qualify for a Public Premium Plan (PPP). With a PPP, An employer adds an additional $9000 per year on the premium, which would give that individual $12,200 of coverage per year. This saves businesses about $3000 a year per person in health insurance costs. For private enterprise, they can offer their workers a Private Enterprise Plan (PEP). A PEP works just like a PPP, except they cannot participate in both a PEP and private option. Also, a PEP can chose a from a few more packages - $5000, $9000, or $12,000. If a private enterprise wanted to go with an all public option, they could with the $12,000 PEP, but since the public package offers nothing but healthcare credit, it is not always advantageous for private enterprise to use a public plan. Smaller businesses could use the $5000 PEP to save money, while still adding a little more assurance.

Article 2: Credits can be reallocated between family members

Family members can pool their credits together. Divorced couples can only pool money together with written consent. Thus in a family of 4, a family has $12,800 worth of healthcare credits (which is the avg. price of healthcare per year.) Children who claim dependent status (or after they turn 25) can no longer be included in the pool. This allows a family without private insurance more flexibility with doctor appointments and access to medicine.

Article 3: Non basic healthcare is paid for through loans

For anything larger than basic coverage and medicine, such as a surgery, the public option would involve using a loan process nearly identical to student loans. With the Stafford student loan, the government subsidizes part of the interest and puts a cap on the maximum interest rate (as of July 1st 2009, it went from 6% to 5.6%!) If you have an injury that requires a surgery and do not have private insurance, you can pay for your operation by taking out a government loan, which will also cap the interest rate and subsidize a portion of the loan. Congress can debate on the actual cap %, though 5.6% seems fair to me. The person can choose from several payment options: a 6, 12, 24, 48, 60, or 90 or 120 month payment plan. Obviously one should pay as soon as possible to avoid paying a lot of interest, but a 120 month plan could bring a loan to a very small and manageable price per month. Like the Stafford loan, a person can change the payment schedule or pay the loan in full immediately without penalty.

Article 4: Private Healthcare still plays a big role

Notice that I use the term private healthcare quite a bit. I do think that it is important to maintain a vibrant private healthcare system, because our version of capitalism enforces high standards through competition. All citizens are guaranteed $3,200 from the government, but it is not enough in some cases, namely if you have a chronic condition or a major surgery. Thus, it is still necessary to buy private insurance. There will be a lot of private insurance reform, namely eliminating the denial of coverage due to pre-existing conditions and usage of generic medicine to save costs to name a couple, but the majority of major healthcare use will still be through private insurance. Private insurance companies will be required to be in the same medical database, largely to maintain a uniform system of record keeping and medical chart updates. Unlike the public plan, private insurance could offer many perks, such as a deductible for surgeries rather than taking out a loan, discounts for brand name medicine, and coverage for special operations, such as gastric bypass surgeries. However, under the new system, the public plan is built to coexist with the private plan. By offering a guaranteed $3,200 for basic coverage, that is money that the private insurers don’t have to spend. This can bring premiums down by that much money, lowering monthly payments for those already on a private system. Or they can budget the same amount of money to offer more competitive packages.

Article 5: Americans can choose their own doctor, or keep the one they have

Because the public plan is only a credit, there are absolutely no restrictions on which doctor one can see. For people using a PPP or PEP, they have maximum choice in the doctor they see because of the amount of credit they have to spend. People on private insurance are bound by the rules of their contract. Because of the complication of being able to choose your doctor under the public system and then having restrictions with private enterprise, I think private insurance companies will allow one to see any doctor. Also, with medical records being stored in a database using a universal protocol, there is little reason not to let one chose their own doctor anyway.

How much does it cost?

The price tag of the plan is 960 Billion. This will cost the taxpayers no money and it will not add to the deficit. In fact, it is 40 Billion cheaper than the proposed plan. The money for this plan comes solely from the reallocation of the funds for the current healthcare budget. Given our population is under 300 Million (because illegal immigrants do not have social security cards, they do not qualify to receive any funds.) To pay for the loan subsidies, revenue from the rollback of the Bush tax cuts will be used, as well as accrued interest on healthcare loans (money gains from healthcare gets reinvested back into healthcare). Over time, the costs will start to decline, as most people will not use all of their credit in one year. We should see an all around reduction in price because government offers basic services that private companies do not need to spend, and the number of people using emergency rooms as clinics should sharply decrease.

If you are on the left, you like this bill because: it offers every American citizen a piece of mind. It seems impossible to fund a full blown healthcare program without raising taxes or cutting a significant number of programs. However, because all Americans can get basic needs met and essentially get free medicine which does include over the counter medicine too, this act is a foundation for a universal healthcare system that is uniquely American in operation. As we pull out of the recession and look forward to better economic days ahead, more tweaks can be made to the system, like increasing the amount of credits per person.

If you are on the right, you like this bill because: you have to admit the idea of a little piece of mind that doesn’t compromise the already budgeted monies and costs nothing for you is a good thing. Moreover, healthcare remains in the domain of the private insurance industry. There are far better perks to getting a private plan that using the public option for credits and loans. In time you can find ways to streamline the process further to save even more money, such as further reform to reduce operational costs to lower the annual healthcare budget. However, and most importantly, this is in no way a government healthcare plan. The government is limited by the extent to which they can pay for health services, so a “government takeover” is no possible in this proposal

I submit this bill to you, readers of the L Comment… what say ye?

Friday, July 3, 2009

Episode 67: Sarah Palin Resigns? What?!

Sarah Palin never ceases to entertain. In the early days of this blog, I’ve spent a good amount of time bashing Palin because she is the worst kind of leader this country could have (by which I mean she is ignorant, uninformed, lacks intellectual curiosity, and lacks the culture to thrive in a national or international stage.) My guy won, so I saw no reason to continue the Palin bashing, and I was getting bored ding so anyways.

I hop on Facebook today only to find a bunch of links about Palin’s resignation on my feeds. Was this some kind of joke? So I read NY Times, Fox News, WSJ, and a few other sources, and lo and behold it is indeed true. Her reason? Because she can have a larger positive impact if she could travel around, presumably to raise her stock in 2012.

Sarah Palin are you crazy?! Do you realize being a governor is like being the president of the state of Alaska?? You have the perfect forum to show America your leadership skills! Take a stand on the economy, and sign legislation that sticks it to Obama’s face! Enact trade deals with Canada for oil and generic medicine to save your citizens some money! Use your executive power to travel across the country and speak with other governors… see what works in other states and how you can apply what you learned in Alaska! There are so many ways you can innovate and prove your mettle in Alaska, that one could only assume that you either still think the far right is going to get you into office or you simply have no sense whatsoever. Either way, I want you nowhere near the oval office. I can’t respect a politician who would abandon her people in the middle of an economic crisis to raise her own political stock. Absolutely absurd.

So much for my preliminary thoughts on this… it could change after more info is released, but I strongly doubt it…