Monopoly

Everyone agrees that monopoly is bad. When there is a monopoly, the buyer has no choice but to purchase that good from that only supplier. Consider the possibility of Mega Tire Company buying all the tire manufacturers. Bridgestone, Michelin, Firestone, Dunlop, and all the rest rolled into one giant tire company. Of course, under current law, the government would step in to prevent a monopoly. But what if they didn't? Ford, Chrysler, GM, and other domestic manufactures of cars would only be able to get tires from Mega Tire Co. What would Mega Tire do? Would Mega Tire keep their prices as low as possible? Probably not. Would Mega Tire be interested in the highest possible quality? Again, probably not. Why not? Well, the car companies have no other alternative. If Mega Tire produces shoddy tires at a high price, what are the car companies going to do? That is the problem with monopolies. Without competition, quality goes down and price goes up.

Now tires are only a fraction of the inputs that the car companies require to produce their product. There are several factors of production: Labor, Land, Capital, Entrepreneurship. Do any of these suffer from a monopoly? Land is plentiful and there are lots of landowners who would be glad of the rent. Capital is more scarce these days but there is no one bank that has cornered the market. Entrepreneurship is paid in profit, and there are lots of people eager for some profit. What about labor? Hey, look at that. There's the United Auto Workers. And there is no competing union. It looks like the UAW has a monopoly on labor.

It is interesting to note that the government approves of labor monopolies. In most states, membership in the monopoly... er, union is required to work in the industry; there shall be no competition. This monopoly has, over the years, demanded more benefits for less work. It is no wonder that GM and Chrysler went bust. However, since government favors this particular monopoly, it arranged for a reorganization/bankruptcy that benefited labor and penalized investors.

Monopoly is bad unless it is a labor monopoly, in which case it is great. It is so great that we have heard much talk on the Freedom of Choice Act, which would make it easier to monopolize... er, unionize labor.

VAT

The balloon has been floated. The debt is so bad and so out of control that the US may need to institute a Value Added Tax, basically a national sales tax, in order to raise sufficient revenue to stave off bankruptcy. Amazing. Didn't Obama promise not to raise taxes on anyone earning less that $250K a year? A VAT will raise everyone's taxes, no one exempted. Prices for everything will go up, even items supposedly exempt from the tax. For example, let's say apples are exempt. The trucks that deliver them aren't, nor will the gas that fuels the trucks be. As transport costs rise, the price of tax-exempt apples will go up. What happens when prices go up? Demand falls?

One should think of the economy as a race horse and the government as the jockey. The heavier the jockey (government taxes/regulation), the slower the horse (economic growth). Most of Europe has the VAT and look at the economic growth and unemployment numbers. It is not an example that the US should follow.

If you want more of something, subsidize it. If you want less of something, tax it.

Nuclear Deterrence?

There are now rules on when the US may or may not use nuclear weapons. Rather than allow the uncertainty to deter enemies, we have spelled out when nukes are appropriate. As it turns out, a chemical or biological attack would not call for a nuclear response, except in the case of a country that is not current on the Nuclear Non-Proliferation Treaty. So, you better watch yourselves North Korea and Iran! We reserve the right to nuke you. However, if Jihadistan isn't proliferating nukes, we will refrain from a nuclear response as long as attacks are limited to biological or chemical or just plain conventional.

This policy is preposterous. The whole point of a nuclear deterrence is to deter aggression. One does not then explain what sort of aggression is to be covered. Imagine Teddy Roosevelt walking down the street with his big stick. Who wants to mess with Teddy and risk being cracked on the head with the stick? Nobody. Well, now let's suppose that Teddy says he won't use the stick if someone kicks him in the shin. Do you think that will result in Teddy being kicked in the shin more or less often?

Western Europe was protected from Soviet tanks thanks to the potential nuclear response by the United States. The new policy declares that, provided the Soviets refrained from using nukes and were not proliferating, their tanks could roll across Europe and the US response would be limited to conventional weapons. That is a gamble the Soviets were much more likely to risk.

Obama has stated his desire to have a nuclear-free world. This is so painfully unrealistic that it is scary that the leader of the free world would express it. Pacifism is great until one warmonger shows up to enslave the pacifists.

If you want peace, prepare for war.

Precedent

It is a sad fact that once one person does it, it is that much easier for the next person to do it. Setting a precedent is the goal of those who seek change. George Washington served only 2 terms as president, setting a precedent. It wasn't until FDR, nearly 150 later, that the established - though not legally binding - norm was breached. The Congress understood that FDR had established a precedent and immediately sought to codify Washington's policy.

So it is with Health Care Reform. Requiring Americans to buy a product is a precedent. If it stands, it is only a matter of time before Congress requires all Americans to buy cotton balls or unicycles. As with FDR, this precedent must be overturned swiftly. A precedent that stands too long becomes 'settled law' which must not be questioned.

Abandoning Space

On March 10, President Obama canceled the Constellation Program. With this decision, the United States will no longer be able to place astronauts in space once the space shuttle is retired later this year. Just as China is working on a space program and even Hugo Chavez wants to team with the Russians for a launch facility in Venezuela, the US is throwing in the towel. We must now hitch a ride on Russian rockets, which I expect will be increasingly more expensive as they realize they have a monopoly on space travel. What will happen if they refuse? Perhaps Virgin Galactic will be able to taxi American astronauts to the international space station.

Obama has said that the US cannot afford the expense of the Constellation Program. Funding for the next 15 years was projected to be $217 billion, a little over one fourth of the cost of last year's Stimulus. And who knows how much Health Care Reform will eventually cost. So, yes, we cannot afford it but that could be used as a reason to stop all of the spending that Obama hasn't canceled.

However, this change has allowed NASA scientists the free time to help Toyota figure out their brake problem. Ah, I can just image all the kids with dreams of being astronauts and rocket scientists.

Social Security Flipping Point

When I was a senior in high school, I took a political science class. The instructor was Mr. Lindfors. One day, he called for a show of hands of those who thought there would be no Social Security when we retired. The result was a majority. Here, a bunch of 17 and 18 year-old kids knew in 1984/5 that Social Security was a Ponzi scheme which would rob us but never benefit us. And, unlike a Madoff-type Ponzi scheme, we were required to invest! Thanks to forced contributions, the system has been 'solvent' during the intervening 25 years.

During that time, the government has been able to get away with excessive spending by 'borrowing' from Social Security Revenues. Social Security has generated more tax revenue than it spent, which allowed the Feds to spend the excess while placing an IOU in the Al Gore's "Lockbox." This year, Social Security has generated less revenue than it spent. Now, instead of spending the excess, the Feds must start paying back those IOUs. The timing could hardly be worse. The government has just passed a new health care entitlement that needs funding and finds that the magic income stream from Social Security has reversed course. Hard budget decisions must be made soon. Those decisions have been exacerbated by the passage of Obamacare, a program that will make Social Security seem cheap by comparison.

Social Security has an unfunded liability of more than $14 trillion. Sadly, it is in third place among America's unfunded liabilities. George W. Bush's ill considered drug benefit is number 2 at $18.6 trillion. Medicare dwarfs them both, having an unfunded liability of $75 trillion. This is economy-crushing debt. It has been coming for decades. No one can be surprised. But as long as it seemed to be in the distant future, no one wanted to fix the problem. It has been a political third rail.

This is understandable. Those now benefiting from these programs had to pay for the previous generation to receive the benefits. "I paid for it, now it's my turn." I get that. However, I am currently paying for it and will never get it. I have viewed that money as gone the moment it left my pay check. Now that the time has come to ween the public from this unsustainable entitlement in order to save the Republic from bankruptcy, we have instead added a new entitlement.

Corporate Costs for Healthcare

I have read many accounts of companies declaring skyrocketing costs for health care in the wake of the passage of Obamacare. Oddly, I have no sympathy for those companies. What has happened is that the government will no longer subsidize these companies through tax breaks. To me, that is a good thing. I don't like when government offers subsidies. It would have been better if the health care reform had removed all such tax breaks, notably the tax deductible status of health insurance supplied by an employer. If we got rid of that, there would be little incentive for employers to supply health insurance. People would buy policies for themselves, much like they buy car insurance, home owner's insurance, life insurance, etc. This would drive down prices. How? Everyone wants a $10,000 health insurance policy when the employer is footing the bill. Very few people want it when they write the check. Insurance would quickly transform to cover catastrophic health issues and not cover such things as the yearly physical or flu shot. Insurance is meant to cover the unexpected, not the routine.

Third party payer systems are the bane of cost containment. No one is ever as price conscious when spending someone else's money. Don't believe me? Look at the spending habits of the US Congress.