Cord Blomquist

Wayne Crews Considers the Cost of Regulation

by Cord Blomquist on February 26, 2009

in Economy, Features, Regulation, Zeitgeist

Wayne Crews, CEI’s Vice President of Policy, has an article at RealClearMarkets today, challenging the Obama administration to look at cutting mroe costs than just items in the budget.

Regulation aren’t as visible as taxes and big items on the federal budget but their effects are just as great.  Just like taxes remove money from the economy, regulations weigh down productivity, often with very little benefit to show.

Wayne’s advice on how to fix this:

  • Compile a periodic “report card” on the numbers and costs of regulations in each agency
  • Establish a regulatory cost freeze
  • Set up a Regulatory Reduction Commission to assemble a package of regulations to cut
  • Employ separate budgets for economic regulation and environmental/social regulation

Read more at RealClearMarkets.com

Obama’s Bankruptcy Math Has to be Wrong

by Cord Blomquist on February 25, 2009 · 7 comments

in Healthcare, Politics as Usual, Regulation, Zeitgeist

President Obama claimed in his speech tonight:

“For that same reason, we must also address the crushing cost of health care.

“This is a cost that now causes a bankruptcy in America every thirty seconds.”

This number can’t be true.  A bankruptcy every 30 seconds would be equal to 120 bankruptcies per hour.  Multiply that by 24 hours in a day and 365 days in a year (presuming a non-leap year), and you get 1,051,200 bankruptcies per year.

This numbers seems a little high, even considering that 2008 was a year with a lot of a bankruptcies.  But there’s a reason that number seems high.  Namely, it’s not true.

According to Zacks Investment Research:

“During 2008, personal bankruptcies had the most significant increase since the major rewriting of the laws governing it were put in place in 2005.

“According to data from U.S. bankruptcy courts and compiled by bankruptcy data firm Automated Access to Court Electronic Records,  total filings of Chapter 7 and Chapter 13 bankruptcies rose 33% year-over-year to 1.1 million compared to 0.8 million.”

So, unless only 100 thousand bankruptcies were caused by non healthcare-related expenses—doubtful in the worse housing market in recent memory—these numbers are simply wrong.  (Too bad CNN couldn’t pick up a calculator and do a little fact checking on this one.)

Health care is still a serious issue and needs to be reformed.  But that’s not the point.

The point: don’t believe everything you hear, especially from politicians.

 

Update: Where Obama got his Numbers

Obama’s claim that the cost of health care “causes a bankruptcy in America every thirty seconds” is based on a study from the journal Health Affairs.  Here’s a synopsis of the study according to suite101.com (bolding is mine):

The study, conducted by researchers at Harvard’s medical and law schools, is based on interviews with 1,771 individuals who filed for bankruptcy in 2001. Of these filers, 931 cited medical causes for their financial woes.

The results of the study indicate that an estimated 1.9-2.2 million Americans (the filers and their families) are affected annually by medical bankruptcy. In other words, every 30 seconds someone new is forced to contend with the double whammy of medical and financial catastrophe.

Mr. Obama was very much technically incorrect.  A bankruptcy isn’t caused every 30 seconds by medical bills, but every 30 seconds an individual person is forced to contend with one.

So, the President was wrong, but it’s more sloppy math or repeating of the facts than out-and-out lying.  All the same, we should expect that our President gets the facts right, especially if those “facts” are going to be used as a basis for sweeping national policy changes.

Speaking of the facts, it turns out that this study was challenged by a study that appeared about a year later in the same journal, Health Affairs.  ”Medical Bankruptcy: Myth Versus Fact” by David Dranove and Michael L. Millenson challenges the findings of the “every 30 seconds” study.  Here’s an excerpt from the paper’s abstract:

David Himmelstein and colleagues recently contended that medical problems contribute to 54.5 percent of personal bankruptcies and threaten the solvency of solidly middle-class Americans. They propose comprehensive national health insurance as a solution. A reexamination of their data suggests that medical bills are a contributing factor in just 17 percent of personal bankruptcies and that those affected tend to have incomes closer to poverty level than to middle class. 

So, it’s more like every 90 seconds or so it seems, if such a calculation is a fair way to represent the facts at all. 

Making matters worse is another finding from the Dranove and Millenson, namely that health insurance reform alone wouldn’t solve the bankruptcy issue.  Again from the abstract:

Moreover, for national health insurance to have an impact, it would have to define “medical” expenses in a much broader way than is now typical of either private or government-funded plans.

This seems to be saying that medical bills alone don’t account for “medical related” bankruptcies.  Most likely this is due to loss of income from loss of a job due to a debilitating injury. That’s a problem that cant’ be addressed through health insurance, so using the figure as justification for overhauling health insurance isn’t a fair use of the facts.

Bottom Line: Statistics are always manipulated by those in power to justify their own agenda.  Mr. Obama isn’t going to go into the subtleties of the math with us, he’s not going to say that experts disagree on an issue—he’s going to say that a bankruptcy happens every 30 seconds due to medical bills, or some other claim that scares you into giving him more power.

So, check the facts.  Challenge authority.  Be a responsible citizen.  That’s the change we really need.

TARP in Pictures

by Cord Blomquist on February 20, 2009 · 4 comments

in Bailout Watch, Economy

We’ve talked a lot about the TARP or Troubled Assets Relief Program over the past several months here on OpenMarket.org.  But perhaps the entire thing can be summed up in this simple slide show.
[click to continue…]

CNBC’s Rick Santelli on Obama’s Mortgage Plan

by Cord Blomquist on February 19, 2009 · 3 comments

in CEI Projects, Video

[youtube:http://www.youtube.com/watch?v=bEZB4taSEoA 285 234]

Obama, Waxman to Square Off on Free Speech

by Cord Blomquist on February 18, 2009 · 5 comments

in Features, Zeitgeist

From FoxNews.com:

“As the president stated during the campaign, he does not believe the Fairness Doctrine should be reinstated,” White House spokesman Ben LaBolt said.

If this is indeed the Obama administration’s official stance, the news couldn’t have come at a better time.  Just last week FCC officials met with Rep. Henry Waxman’s staff to discuss resurrecting the Fairness Doctrine under a new name.  Waxman, the head of the House Energy and Commerce Committee, has also been looking into “fairness” issues on the Internet—creating an expanded, Fairness Doctrine 2.0.

The American Spectator reported on this reanimation of the long-dead doctrine and brought us this great quote from a Waxman staffer:

“It’s all about diversity in media,” says a House Energy staffer, familiar with the meetings. “Does one radio station or one station group control four of the five most powerful outlets in one community? Do four stations in one region carry Rush Limbaugh, and nothing else during the same time slot? Does one heavily trafficked Internet site present one side of an issue and not link to sites that present alternative views? These are some of the questions the chairman is thinking about right now, and we are going to have an FCC that will finally have the people in place to answer them.”

It doesn’t seem that Waxman’s real concern is having an FCC that can answer questions, but an FCC that will ignore its obligation to uphold the Constitution and sacrifice our freedom of speech on the alter of “fairness.”

Of course, none of this has anything to do with fairness, but has everything to do with politicians controlling what we can say, write, or otherwise express.

If Congress is somehow able to dupe the American people into accepting such speech restrictions—and President Obama doesn’t block a Fairness Doctrine 2.0—we can look forward to websites being patrolled by federal fairness cops, radio stations being staffed by stop-watch-toting FCC agents, and a presidential appointee sitting on the editorial board of every newspaper and magazine that still chooses to publish.

Let’s hope the President takes his oath seriously and defends the Constitution.  Our basic freedom to speak our mind—the most fundamental of all freedoms—may rely on Mr. Obama’s resolve.

Chairman Tom Price with 1,073-page Non-Stimulus Text

by Cord Blomquist on February 13, 2009 · 1 comment

in CEI Projects, Video

[youtube:http://www.youtube.com/watch?v=A68eWFAbClA 285 234]

Just How Much is $13 Trillion?

by Cord Blomquist on February 12, 2009 · 7 comments

in Bailout Watch, Economy, Features, Stimulus to Nowhere, Zeitgeist

Regardless of your political party or ideological leanings, the notion of the federal government spending $2 trillion, adding to the national debt of nearly $11 trillion already, should make you stop and consider the staggering size of our national tab.

If the irony of using debt-based spending to solve a problem caused by debt-based spending has escaped you, perhaps these fun facts will put things into perspective:

  • If you spent $1 every second, you’d have to keep spending for 412,000 years to get to $13 trillion.  That means you’d have to start shortly after the time human beings first starting using stone tools and fire to get to $13 trillion today.
  • $13 trillion in one dollar bills weighs 28 million pounds.  That’s as much as 87 blue whales or 462 Statues of Liberty.
  • If you laid 13 trillion one-dollar bills end-to-end they’d reach from the earth to the sun and back…five times over.  That’s 946 million miles of greenbacks.

The amount we’re looking at now—roughly $2 trillion between the Secretary Geithner’s new bank bailout plan  and President Obama’s stimulus package—isn’t small potatoes either.  So what is $2 trillion?

  • $2 trillion is bigger than the entire Gross Domestic Product of our neighbor to the north, Canada.  In fact, according to the IMF, only Japan, Germany, China, the United Kingdom, France, and Italy have bigger total economies than the combined bailout/stimulus plan—all other countries on Earth have economies smaller than $2 trillion per year.

Then there’s the interest on this staggering debt, which isn’t exactly small.  Paying the interest on the current $10.7 trillion debt cost Americans $451.1 billion last year alone.  How big is that?

  • That’s $1478 dollars in interest for every man, woman, and child in the United States.
  • That’s bigger than the annual budgets of  New York ($121.1 billion), California ($111.1 billion) and Texas ($83.8 billion) combined.

If you’re scared, upset, or disgusted by this, you can do something.  Visit BeyondBailouts.org and tell your Congressman and the President what you think of the bank bailout and stimulus.

You can also click on the “ShareThis” button at the top of this post to forward these fun facts to your friends or share them on your favorite social network.

Correction: I originally listed the state budget of Texas as $167 billion, but that figure was not annual.  Texas budgets for two years at a time, so the figure has been cut in half.

CEI Commends Sen. Judd Gregg

by Cord Blomquist on February 12, 2009 · 2 comments

in CEI Projects, Economy, Features, Stimulus to Nowhere, Zeitgeist

Wayne Crews, CEI’s Vice President of Policy, made this statement about Senator Judd Gregg’s withdrawing his name as the nominee for Commerce Secretary:

Congratulations to Sen. Judd Gregg (R-NH) for standing on principle and withdrawing his name as U.S. Commence Secretary nominee.

The easy path would be to stay in the job, and enter the history books as holder of one of the most prestigious titles in American government and society.

While Congress seems recklessly bent on “stimulating” this nation off an economic cliff, not just Gregg but the whole country should reject the idea that America can spend its way into prosperity. In fact, spending and decades of mixing of politics with free enterprise in virtually every realm of private endeavor has damaged this country’s economic prospects to a now-incalculable extent.

President Obama taunted critics by saying “Doing nothing is not an option.” In fact, this package does active damage, which is worse than nothing. Congress has received ample advice from numerous quarters on how to actually stimulate a faltering economy whether through tax reform, regulatory freezes and reform, liberalizing infrastructure and more. It has chosen to ignore pro-free enterprise reforms—reforms that would actually do something–at every turn.

This anti-stimulative piece of legislative wreckage posing as “stimulus” is an opportunistic and politically motivated abomination unrelated to economic recovery. We can’t know the full motivations of Sen. Gregg, but we do commend his refusal to legitimize the stimulus or be a part of it and its destructive aftermath.

I often tongue-in-cheek grant a Least-Objectionable Legislator (LOL) Award. Sen. Greg certainly warrants that distinction for this courageous move.

If only more politicians in Washington could stick to their principles like Senator Gregg.  We salute you sir!

Sirius XM Bankruptcy: Thank Washington for the Delay

by Cord Blomquist on February 10, 2009 · 1 comment

in Regulation, Tech & Telecom

Sirius XM Satellite Radio—the company born from the merger of Sirius Satelllite Radio and XM Satellite Radio—has “been working with advisers to prepare for a possible bankruptcy filing,” according to the New York Times.

Some may say that Sirius XM was never a fit business to begin with—many of their new subscribers came from the bundling of  subscriptions into the sale of new automobiles—but it’s hard to say what might have been had federal regulators not delayed the merger for 18 months and then added insult to injury by subjecting them to seemingly arbitrary restrictions.

My colleagues Wayne Crews and Ryan Young wrote about this last year at Real Clear Markets noting the conditions that the merged company had to adhere to:

One condition of appeasement for the Sirius-XM merger is that they hand over 8 percent of their channels to noncommercial and “public service” programming. Internet radio does not face this requirement.

Another condition is that they freeze their prices for three years. Meanwhile, their competitors are still free to set their own prices to reflect changing market conditions.

A third condition is that XM-Sirius must introduce á-la-carte subscription models. If this were economical, they would have done this already.

The motivation for these conditions was just as absurd as the conditions themselves—regulators worried that the combined company might overcharge and otherwise abuse consumers.  That’s right, regulators actually believed that consumers would just pay and pay for satellite radio if the prices were raised, rather than abandon the fledgling technology for competing technologies.  Regulators thought this despite the fact that we have no shortage of alternatives.  Traditional radio, iPods, streaming music on our cell phones, Pandora, Last.fm, CDs, MP3s, and the hundreds of other ways that music and talk entertainment can enter our ears.

So why did regulators do it?  Simple, they do what it takes to protect their fiefdoms.  As Crews and Young put it:

FCC commissioners and DOJ appointees are political actors. Their decisions are thoroughly politicized. They have no real incentives to ensure an open, competitive market. Their goals are to keep bad press to a minimum, and to increase their budgets by appearing to be “doing something.”

Too bad this case of “doing something” has threatened a frontier industry before it ever had the chance to settle its new terrain.

Stanford Economist Blames Government for Crisis

by Cord Blomquist on February 9, 2009 · 4 comments

in Culture, Economy, Zeitgeist

on February 20th Stanford economist John B. Taylor will be publishing a book analyzing the financial collapse.  According to the book’s current home on the web at Stanford’s Hoover Institution’s website, the book will:

The author tells how unusually easy monetary policy helped set the crisis in motion, as interest rates at the Federal Reserve and several other central banks deviated from historical regularities. He explains monetary interaction with the subprime mortgage problem, showing how the use of these mortgages, especially the adjustable-rate variety, led to excessive risk taking. In the United States this was encouraged by government programs designed to promote home ownership, a worthwhile goal but overdone in retrospect. Looking ahead, the author suggests a set of principles to follow to prevent misguided actions and interventions in the future.

The book already has rave reviews from several leading intellectuals, like Anna Schwartz, who, with Milton Friedman, authored The Great Contraction, 1929–1933.  Schwartz writes:

If Milton Friedman and I had written as persuasive an analysis as this, one year—rather than 30 years—after the Great Depression began, the United States might have had a typical recession rather than the greatest downturn in history.

We at CEI eagerly await the arrival of what is sure to be a very illuminating book.

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