Friday, November 06, 2009

I have a dream....

Famous words from a famous speech, but do we really ever reflect on this speech? Today one particular line caught my eye.
"I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin, but by the content of their character." Martin Luther King Jr.

Do we really judge people by their character and not the color of their skin? We claim we are colorblind, but are we? Do we not assume certain things about people based on height, weight, race or religion? What is it in us that makes us do this? We all have, at one time or another, judged someone based on these criteria. Being born one race is not a privilege or a disadvantage. People are people and should be treated as equal.

That being said, I tread into hostile waters. My friends are varied. Most of them believe as I do and are of similar backgrounds at least ethnically. It seems to be in human nature to bond with people who are most like yourself. Why is it some intelligent people, who accept conservative ideals, voted for Barack Obama? I ask myself this and remember the Howard Stern experiment in Harlem. It was because of the color of his skin and not the content of his character.

Mr. King had a great point and one that is overlooked in an effort to promote diversity. People should not have privileges because of their race. All men and women are created equal. We should judge people based on their character and their ideals not their skin color. Yet, we do and we did. Make no mistake; I know many people who disagree with over half of what Mr. Obama stands for yet voted for him. They wear “The first black President” shirts and political T-shirts that speak of “Change”. The very change they did not want all because of the color of someone’s skin.

It is a sad fact that we still do not vote based on character. We vote based on who is the most like us or to break some tradition. One day, I hope I see a nation that focuses on character and not skin color. I too have a dream that all people are created equal and that one day we will vote based on principles and character and not skin color.


Thursday, October 22, 2009

Circus or Trial?

There are many things I do not understand about the legal system. I am trying to cure this by getting into law school. One such example is the circus known as Lemaricus Davidson's trial. Two college students were raped, tortured and subsequently murdered and 5 individuals have been charged. There are many things the jury is not allowed to hear because it would "taint" the jury's opinion of a known violent thug. It is a circus.

You can watch it here:

http://www.wbir.com/video/breakingvideo.aspx

And read about it here:
http://en.wikipedia.org/wiki/Murders_of_Channon_Christian_and_Christopher_Newsom

http://www.wbir.com/news/local/christian_newsom.aspx


Thursday, September 24, 2009

Lamar Alexander and Student Loans

This is also worth reading....

Floor Statement of Senator Lamar Alexander
On
FEDERAL STUDENT LOANS

September 23, 2009

"…I would like to say a few words about Federal student loans.


President Obama said the other day, in what I thought was a very perceptive comment, that he understood the health care debate and all its intensity is a proxy for a larger debate, and that is about the role of government in our society. What I and many Republicans believe and, I think, many Independents and Democrats, as well, in the State of Tennessee, and I suspect across the country, is that we have suddenly seen too many taxes, too much spending, too much debt, and too many Washington takeovers.

The President says, and he is correct to an extent with this, that some of these Washington takeovers were not his fault, were not his doing. I suppose he would say that about some of the bank takeovers and the insurance company takeovers. I am not so sure about the takeover of the automobile companies or the takeover of the farm bonds or the proposal to takeover health care. But here is a voluntary takeover that is absolutely unnecessary, is unwise, and the American people should pay attention to this.


This goes to the center of what the President said. If health care is a proxy for a debate about the extent to which the American Government ought to be involved in our society, then the proposal by the President to take over the entire student loan program and move it from the private sector into the government is a perfect example of what we ought not to be doing.

Let me speak first to the dimensions of this program. The United States has the best system of higher education in the world. One of the greatest aspects of it, one of the greatest contributors to its quality, is that we have a generous amount of Federal dollars which permit about half or more of our students to either get a Federal grant, which we usually call Pell grants, or a Federal student loan which follows them to the institution of their choice. So unlike our our elementary and secondary schools, your Pell grant -- your grant going all of the way back to the GI bill in 1944 -- can follow you wherever you go.

That choice and that competition and that money have helped to create not just some of the best colleges and universities in the world but virtually all of them. Most observers agree on that.

The higher education system today is 6,000 institutions. These are the universities of North Carolina and Tennessee. That is what we might think of first, but there are also community colleges, the 2-year schools. There are also nonprofit colleges. There are also the religious institutions -- Notre Dame and Brigham Young and many others. So there are 6,000 institutions.

Last year, 4,400 of those 6,000 institutions used the regular student loan program. That is the one where you go to the bank, usually your community bank or local bank, and you get a student loan. And 1,600 schools, or about one-fourth, used the direct loan program, which was put in at the time I was Secretary of Education about 20 years ago, and you just go to the U.S. Department of Education and get your money. On the private side of it, which is what 3 out of 4 students choose, there are 2,000 lenders that participate in the program.

This year, there are nearly 19 million loans to students and parents and 14 million of them are in the regular student loan program, 4.5 million through the government. There was $86 billion of loans made. So the regular student loan volume through the private lenders was about $64 billion; the direct loan volume was $22 billion.

So all in all outstanding, $617 billion of volume for both programs, and the President has said we are going to take all of that and put it in the U.S. Department of Education. So what his proposal is, if you are one of the 14 million students today who are getting their student loans from their local banks, starting in January you are out of luck. You better line up outside the U.S. Department of Education with the other 19 million people who want a student loan and hope they can provide you with the same sort of service your community bank or lending institution or nonprofit organization in your area provides you today.

There is a lack of evidence to show that the U.S. Department of Education can do a better job of making loans than banks can. I used to work at the U.S. Department of Education. I was the Secretary. It is one of the smaller departments in government. The people there know a lot about education, but none of them really is running for banker of the year.

Arne Duncan is President Obama's Education Secretary. He is one of his best appointments. I would much prefer seeing him in Memphis working on charter schools or in Denver trying to find ways to pay outstanding teachers more or trying to help create a better system of colleges and universities or community colleges instead of trying to manage the problem of, how do I grant $100 billion in new loans to 19 million people every single year? How do I replace 2,000 private lenders?

Let me give you an example of what a private lender might do. In Tennessee, we have EdSouth. This is a nonprofit provider. Here is what they do. They had five regional outreach counselors to canvass Tennessee to provide college and career planning, financial aid training, college admissions assistance, and financial aid literacy. They made 443 presentations at Tennessee schools through college fairs, guidance visits, and presentations. They worked with 12,000 Tennessee students to improve their understanding of the college admissions and financial aid process. They provided training to over 1,000 school counselors so those counselors could work better with their students. They distributed almost 1.5 million financial aid brochures to Tennessee students and families. Will the U.S. Department of Education start providing those services, or will the 19 million students who want student loans simply line up outside the U.S. Department of Education or one of its offices somewhere and apply for a loan? I think I know the answer to that question.

According to the Department of Education, it costs them about $700 million a year to administer the loans they make today. That is for one-quarter of all the loans. They estimate they can make those same loans to 19 million students with about the same amount of money. I doubt if that is true, which brings me to the point of the savings -- the alleged savings of this program.

Senator Gregg and I -- the Senator from New Hampshire, who is the former chairman of the Budget Committee, the ranking member now -- talked about the alleged savings in moving all of these loans from the lending institutions that make them to 19 million students today, to the U.S. Department of Education.
Senator Gregg received a letter from the Congressional Budget Office on July 27. I ask unanimous consent to have that letter printed in the Record.

Senator Gregg basically asked: Is it true that if we stop making loans through private and nonprofit lenders whereby the Federal Government guarantees the loans and pays a regulated subsidy to the lender -- if we stop that and start making all of them through the government directly, will we save $87 billion? And the short answer -- if you want the long answer, the letter is available -- the short answer is no, you do not save $87 billion; you are likely to realize $47 billion in savings over the next 10 years.

Instead of saving $87 billion, we save $47 billion. Then we have to deduct the administrative costs. Remember, instead of making some of the loans, the Department of Education is going to make 19 million loans. The Department estimates it might cost it $7 billion over the 10 years to do that. Others think it might cost $30 billion. So the real savings -- the real savings are either $47 billion or more like $20 billion or $23 billion in savings over 10 years.

In order to do that, of course, we are going to have to raise the Federal debt. We are going to have to borrow $1 billion a year for the next 5 years. So at a time when we are concerned that we are adding $9 trillion to the debt over the next 10 years, we are going to add another half trillion over 5 years so we can make student loans instead of doing it through private institutions.

Here is the real clincher. When you press and say: In order to make these loans, what is the real reason you think you can do this if the savings aren't really $87 billion but they are more like $47 billion or more like $23 billion over 10 years?

They say: Well, the real reason is the government can borrow money cheaper than the private banks can.

That is true. The government can borrow money at a quarter of a percentage point, and then it loans it to the students at 6.8 percentage points.

Well, my first point would be that I don't think the government ought to be making a profit by overcharging students for their student loans and then turn around and take credit for starting new programs. What the government is actually going to be doing is charging a student who has a job and is trying to get a student loan -- is going to say: OK, we are going to borrow the money at one-quarter of 1 percent and loan it to you at 6.8, and then we are going to take that money and pay for your Pell grant or pay for someone else's Pell grant.

In other words, they are going to overcharge the student to make the Congressman look good. That is what we are doing. We are going out and announcing all of these programs. So we are spending $87 billion, when it is really between $23 and $47 billion -- that is the amount we really have -- and we make that money by overcharging the students.

At the very least, if we are going to take all of these loans into the government, we ought to reduce the interest rate so we don't overcharge the students.

I see the Senator from Oklahoma. I am going to defer to him and welcome him to the floor. But I hope, as we think about the issue the President so accurately described -- he said: The health care debate is really a proxy for the role of government in our society. He is exactly right about that. And while some of the Washington takeovers may not have been avoidable at the beginning of the year, there is no reason in the world why Washington should take over 19 million student loans, eliminate 2,000 lenders, stop students on 6,000 campuses from having a choice in competition, and say: The government is the best banker in America; line up outside the Department of Education, all 19 million of you, in January and get your student loan.

So I am thinking of introducing an amendment that is called a truth-in-lending amendment if this legislation were to pass, and it would say to every one of the 19 million students: Truth in lending -- beware. Your government is overcharging you so that your Congressman and your Senator can take credit for starting a new program.

I yield the floor."

Wednesday, September 23, 2009

Something worth passing on...

I received this via email from a co-worker. I think Corker's response is important to read and worth the time. I have inserted the text below:



"Thank you for taking the time to contact my office about H.R. 3200, the America's Affordable Health Choices Act. Your input is important to me, and I appreciate the time you took to share your thoughts.

I share your concerns about the provisions in H.R. 3200, and I assure you that I will not vote for this bill as written if it is introduced in the Senate. I believe that all Americans should be able to purchase affordable, private, quality health care coverage for themselves and their families; however, I do not support an overhaul of the system that eliminates choice of doctor or health care services, forces Americans out of their current coverage, or further burdens Americans with more taxes and more debt.

The America's Affordable Health Choices Act would take money from Medicare, a program that is itself almost insolvent, and use it to create a whole new set of health care entitlements. This is not sensible and will add incredible amounts of debt to our country's balance sheet. To address this issue, I have written a letter signed by 36 senators to Senate Majority Leader Reid stating that that any potential monies found through Medicare reform should only be utilized to secure the financial stability of this program.

I also have concerns about the America's Affordable Health Choices Act's creation of a public plan option as an alternative to private health insurance plans. I believe that the private health insurance market, with many improvements, has the capability to effectively lower the cost of individual health insurance. Although I am supportive of increased competition among health insurers, I believe that a public option could seriously threaten private plans' ability to compete on a level playing field. As the Senate debates comprehensive health care reform, I assure you that I will be working with my colleagues to craft legislation with the best possible balance of choice, quality, affordability, and competition among health insurance plans. The attached op-ed article further explains my views on how I believe responsible health care reform should proceed.

The America's Affordable Health Choices Act has not yet been introduced in the Senate, but the insight you have provided in your letter will certainly help my staff and I more effectively look in to this issue.

Thank you again for your letter. I hope you will continue to share your thoughts with me.

Sincerely, Bob CorkerUnited States Senator"




Here is the content in the attachment:

August 6, 2009

I’ve spent two years and countless hours in bipartisan meetings working toward comprehensive health care reforms that would enable all Americans to access affordable, private health insurance, and last month I accepted President Obama’s invitation to discuss health care reform at the White House. I believe we have a moral obligation to give our honest attention to a crisis that is affecting, to varying extents, every single American.

Unfortunately, I believe the Obama administration’s proposal takes us in exactly the wrong direction. It would be, in Governor Bredesen’s words, “the mother of all unfunded mandates,” sending billions in costs to already overburdened states. It takes money away from Medicare, an already insolvent program, and leverages it to create a new entitlement program, further jeopardizing a program our seniors depend upon and adding to our country’s burgeoning deficit. It asks small businesses to bear the largest brunt of its costs, and perhaps most disturbing, the bipartisan Congressional Budget Office (CBO) says the proposal would “significantly expand” health care spending. Clearly, the administration’s plan is not the answer.

Congress’s first objective should be to do no harm. Second, we should create a budget neutral mechanism to make health insurance more accessible to millions of Americans. Next, it’s critical that we focus on making Medicare more solvent and begin addressing the $40 trillion in unfunded liability that threatens its future. Finally, we should modernize our health care system to increase efficiency, improve quality and lower costs.

Millions of Americans could be covered today, without adding to the federal deficit, by providing advanceable, refundable tax credits, which would give citizens cash in hand to make monthly payments for health insurance. It could be paid for by changing tax code to limit tax benefits for the “Cadillac,” or most costly insurance plans, which are currently not taxed. I believe this concept, and the many variations of it that have been discussed, could win strong bipartisan support.
We could also pass reforms requiring insurers to issue policies to all applicants and preventing insurers from pricing policies based on health status, so that even those with pre-existing conditions would be offered competitively-priced coverage. These reforms would help every American, not just the newly insured.

Nothing poses a greater risk to our country’s financial future than out-of-control entitlement programs like Medicare. Medicare trustees expect the program to be insolvent in 2017. Unbelievably, the administration’s proposal would take cuts made to Medicare and use them to leverage a new program to cover the uninsured – rather than putting the funds toward extending the life of Medicare. Instead of robbing Peter to pay Paul, which compounds debt on future generations, we should focus on making Medicare more solvent. The Centers for Medicare and Medicaid Services and the Health and Human Services Department should spend ample time implementing pilots and doing the hard work to determine how we can deliver Medicare better than we are today. Americans should be fearful of 100 senators and 435 members of the House trying to make these highly specialized decisions about how beneficiaries receive care and what services should be available.
Finally, we need to modernize our health care system to create better, more efficient care. Today, instead of a health care “system” we have health care “silos” that prevent providers from coordinating care effectively. Standard health information technology platforms would help providers communicate, eliminate duplicative tests, and ensure patients receive the best standard of care possible. Standardized insurance claim forms would allow providers to spend more time treating patients and less time doing paperwork. Requiring providers to publish transparent pricing and quality outcomes would empower consumers to make informed decisions about their health. Tort reform is also long overdue. According to the American Medical Association, liability pressure raises health system costs by $84-$151 billion per year. With modernization reforms, Congress could expand access to those who need it most, while strengthening coverage for those already insured – all without adding to the federal deficit.

There is no issue more important or more personal to Americans than health care, and there may be no issue more complex. Reforming our health care system in a way that protects America’s unparalleled quality of care and innovation, preserves choice, expands access, and lowers health care costs for all Americans will take time and hard work. I still believe responsible health care reform is possible this fall, and it’s my hope that Congress will slow down and get it right.


Wednesday, September 16, 2009

Worth noting..

Canada is not the only failure in national health care. Someone recently asked me why I didn't discuss the Cuban model instead of Canada and suggested that perhaps it was because it was the ideal model.

Ideal? To prove my point of how things go awry when government is involved- yes, it is ideal!

Here I thought I might find something enlightening regarding the good sides of government run health care. Nope, just more reasons to oppose health care legislation that puts the government more in my life than they already are.

Don’t get me wrong. I do not hate the government. I respect its institution and the need for laws (after all, I want to be an attorney) and someone to enforce them. Beyond that, I do not need the government intruding into my life and telling me how I should raise my family. It has gotten too big and too all encompassing. We need a limited government that protects the people not controls them.


http://www.nationalcenter.org/NPA557_Cuban_Health_Care.html

Monday, August 03, 2009

Health Care

This is an interesting article on health care in the United States. It can be found here: http://www.stumblingontruth.com/





Health Care Mythology





REVISED DRAFT

7/22/2009







Clifford S. Asness, Ph.D.

Managing and Founding Principal

AQR Capital Management, LLC

Comments welcome: comments@stumblingontruth.com

Related essays at: www.stumblingontruth.com






What We Know That Ain’t So



Will Rogers[1] famously said, “It isn't what we don't know that gives us trouble, it's what we know that ain't so.” So it is with the health care debate in this country. Quite a few “facts” offered to the public as truth are simply wrong and often intentionally misleading. It seems clear that no truly productive solution will emerge when these false facts represent our common starting point. So, this essay takes on the modest task of simply disabusing its readers of some untrue notions about health care.

I do not take on the harder task of prescribing how we should (and if we should) reform health care, though I offer a few thoughts. Important work must be done here by those who understand, far better than I, the details of health care provision. However, no details are necessary for this essay, and no animals (though perhaps some egos) were harmed in its creation. The fallacies I present are basic and it takes only a rational economic framework to expose them

There are large groups of people in this country who want socialized medicine and they sense that the stars are aligning, and now is their time to succeed. They rarely call it socialized medicine, but instead “single payer health care” or “universal coverage” or something that their public relations people have told them sounds better. Whatever they call it, they believe (or pretend to believe) a lot of wrong‑headed things, and they must be stopped. Step one is understanding how and why they are wrong. Step two is kicking their asses back to Cuba where they can get in line with Michael Moore for their free gastric bypasses.

Finally, please read my standard disclosure (though it’s more designed for something that might be construed as financial advice, it can’t hurt) and my admission of non-originality.[i],[ii]



Myth #1 Health Care Costs are Soaring

No, they are not. The amount we spend on health care has indeed risen, in absolute terms, after inflation, and as a percentage of our incomes and GDP. That does not mean costs are soaring.

You cannot judge the “cost” of something by simply what you spend. You must also judge what you get. I’m reasonably certain the cost of 1950’s level health care has dropped in real terms over the last 60 years (and you can probably have a barber from the year 1500 bleed you for almost nothing nowadays). Of course, with 1950’s health care, lots of things will kill you that 2009 health care would prevent. Also, your quality of life, in many instances, would be far worse, but you will have a little bit more change in your pocket as the price will be lower. Want to take the deal? In fact, nobody in the US really wants 1950’s health care (or even 1990’s health care). They just want to pay 1950 prices for 2009 health care. They want the latest pills, techniques, therapies, general genius discoveries, and highly skilled labor that would make today’s health care seem like science fiction a few years ago. But alas, successful science fiction is expensive.

In the case of health care, the fact that we spend so much more on it now is largely a positive. The negative part is if some, or a lot, of that spending is wasteful. Of course, that is mostly the government’s fault and is not what advocates of government control want you to focus upon. We spend so much more on health care, even relative to other advances, mostly because it is worth so much more to us. Similarly, we spend so much more on computers, compact discs, HDTV, and those wonderful one shot espresso makers that make it like having a barista in your own home. Interestingly, we also spend a ton more on these other items now than we did in 1950 because none of these existed in 1950 (well, you could have hired a skilled Italian man to live with you and make you coffee twice a day, so I guess that existed and the price has in fact come down; my bad, analogy shot). OK, you get the point. Health care today is a combination of stuff that has existed for a while and a set of entirely new things that look like (and really are) miracles from the lens of even a few years ago. We spend more on health care because it’s better. Say it with me again, slowly – this is a good thing, not a bad thing.

By the way, I do not mean that the amount we spend on health care in this country isn’t higher than it needs to be. Myth #4 covers that.

In summary, if one more person cites soaring health care costs as an indictment of the free market, when it is in fact a staggering achievement of the free market, I’m going to rupture their appendix and send them to a queue in the UK to get it fixed. Last we’ll see of them.[2]



Myth #2 The Canadian Drug Story

Ah … one of the holy myths of the “US health care sucks” crowd. This should be fun.

The general story is how you can buy many drugs in Canada cheaper than you can buy them in the US. This story is often, without specifically tying the logic together, taken as an obvious indictment of the US’s (relatively) free market system. This is grossly misguided.

Here’s what happens. We have a partially free market in the US where drug companies spend a ton to develop new wonder drugs, much of which is spent to satisfy regulatory requirements. The cost of this development is called a “fixed cost.” Once it’s developed it does not cost that much to make each pill. That’s called a “variable cost.” If people only paid the variable cost (or even a bit more) for each pill, the whole thing would not work. The drug company would never get back the massive fixed cost of creating the drug in the first place, and so no company would try to develop one. Thus, manufacturers have to, and do, charge more than the variable cost of making each pill.[3] Some look at this system and say to the drug companies “gee, it doesn’t cost you much to make one more pill, so it’s unfair that you charge much more than your cost.” They are completely wrong and not looking at all the costs.

So, let’s bring this back to our good natured friends to the North (good natured barring hockey when they’ll kill you as soon as look at you[4]). They have socialized medicine and they bargain as the only Canadian buyer for drugs, paying well below normal costs. Drug companies that spent the enormous fixed costs to create new miracles are charging a relatively high cost in the free and still largely competitive world (the US) to recoup their fixed cost and to make a profit. But socialist societies like Canada limit the price they are allowed to charge. The US-based company is then faced with a dilemma. What Canada will pay is not enough to ever have justified creating the miracle pill. But, once created, perhaps Canada is paying more than the variable cost of each pill. Thus, the company can make some money by also selling to Canada at a lower price; as it’s still more than it costs them to make that last pill.[5]

However, this is an accident of Canada being a less-free country than the US, much smaller, and next door. If we all tried to be Canada, it’s a non-working perpetual motion machine and no miracle pills ever get made because there will be nobody to pay the fixed costs. I’m a big fan of Canadians in general (particularly Wayne Gretzky and Mario Lemieux, who, if healthy, probably would have eclipsed Gretzky – but I digress), but when it comes to pharmaceuticals they are lucky hosers, subsidized by Americans. Drug companies in general sell their products to Canada at low prices, making a little profit, and reducing slightly the amount they need to charge us. This does create the silly illusion that the Canadian system is somehow better than ours because our own drugs are cheaper there. They are only cheaper to the extent we are subsidizing them by paying their portion of drug development costs and, unfortunately, we cannot subsidize ourselves (or we go blind).[6],[7]

So, what is the purpose behind those who tell tales of cheap Canadian drugs? They seek to imply that our system is broken, and delivers only expensive drugs, when the socialist Canadian system delivers the goods for its people. Thus, they implicitly argue that we need to have socialism here. It’s not complicated.

So, repeat after me. We could go with the Canadian system and have super cheap drugs, if only we can find a much bigger, more medically advanced, freer country right next to us to make miracle drugs for themselves, and then we insist that we pay them only a bit above their variable cost for our share, and then they in turn agree to let us be their parasite. Mexico, would you mind helping us out?



Myth #3 Socialized Medicine Works In Some Places

This is a corollary to the “Canada as parasite” parable above. The funny part is socialized medicine has never been truly tested. Those touting socialism’s success have never seen a world without a relatively (for now) free US to make or pay for their new drugs, surgical techniques, and other medical advancements for them. When (and I hope this doesn’t happen) the US joins in the insanity of socialized medicine we will see that when you remove the brain from the body, the engine from a car, the candy from the striper, it just does not work.

So, please, stop pointing to all those “successes” that even while living off the US still kill hard-working people who could afford their own health care while they stand in line for the government’s version (people’s cancers growing while waiting ten weeks for a routine scan, which these people could often afford on their own if allowed, is a human tragedy). Even the successes you gin up for them would not be possible without the last best hope of humankind (the US) on the front lines again making the miracles for the world.

Specifically, let’s also stop citing the Nordic countries as examples. The temporary success of (comparatively speaking) twelve herring-eating homogenous people is not an example that applies to anything outside of perhaps Minnesota, and they elected Stuart Smalley, so under any system they need serious free anti-psychotic medication immediately. Anyway, the Nordic country’s touted “success” is going to go the way of the Soviet Union’s plan to bury us, as their changing demographics (far more economic and social diversity and an aging population) change their culture and show the cracks in their utopian fantasy. As Milton Friedman (paraphrasing) said to a Swede bragging about how little poverty there was in his country "well, yes, I too have observed that among Swedes in America, there's also very little poverty."[8]

To put it simply, right now the US’s free system massively intellectually and financially subsidizes the world’s unfree (socialized) ones. That sucks. The only thing that would suck worse is joining them without anyone to subsidize us all.



Myth #4 Socialized Medicine Is Better Because Their Cost/GDP For Health Care is Lower

The favorite statistic of fans of socialized medicine is that in the US we spend more as a percentage of GDP on health care than in many countries with “universal coverage.” I do not argue with their statistics, but their logic is, as usual, way off. Warning, this list of why these cost/GDP numbers are misleading is long, here goes...

Measuring cost/GDP is inaccurate as it leaves out most of the cost, the cost of lower GDP growth. As one would expect, countries with larger government sectors (including socialized medicine) generally seem to experience slower GDP growth. People are great at measuring costs that they easily can look up, but those are not all the costs!


If I’m right about the US subsidizing the world of course their costs would be lower!


Many of the countries we are being compared with come from, frankly, healthier cultures than ours. I do not think the government should be allowed to make, for instance, your health vs. fast food trade-off for you. If free Americans more often than others go for the Wendy’s Triple w/ Cheese like I do, our cost/GDP will be higher. Freedom sometimes ain’t sugar‑free. By the way, if we change our system to socialism, but these habits persist, our costs will still be higher. So, here come the diet and exercise laws...


I do agree the US system could be better. I mention this again at the end, but I do not think health care should be tax-free if provided by an employer. Being provided by employers in the US leads to over-consumption (as it’s pre-tax and the marginal cost of service is lower to the consumer), and worse, does indeed help lead to the fractious less efficient organization of insurance (and the famous, and real, “portability” problem). I certainly agree that this structure raises costs, but if you have a simple problem like this, you fix it, you do not say “hey, let’s try communism.”


A large fraction of health care costs are sadly in the short period before death from long-term illness. If socialized societies ration these costs then their total cost/GDP could indeed be lower than in the US. But, I can not see disallowing free people from spending their own money on their last few months of life. If people have what economists would call a “taste” for this (in this case the word seems callous but it’s accurate) then a free system could indeed voluntarily choose to spend more per GDP on health care. That is not a bad feature of the system. It’s a wonderful feature of the system, as it allows someone who spent a lifetime saving for retirement to use a little bit of that to live a bit longer if it’s their desire. Just because you (perhaps) do not agree with the choice does not mean you have a right to dictate to these people.


As I mention again near the end, we also have a true cost problem in this country emanating from our insane tort system. Some argue that this is exaggerated as they measure the cost of the literal payouts to plaintiffs and say that while it is higher here than in other countries it is not enough to explain our cost differential. But, again, they only measure what they can see and fail to account for the massive cost of “defensive medicine” we force doctors to practice in anticipation of these tort lawyers. This indeed makes our cost/GDP spent on health care too high, but the solution is again not the gulag for us all, but perhaps only for half of the American Bar Association (ok, just cap their awards, that would be fine).


I admit this is near a matter of religion for me, but do fans of socialized medicine really want to argue that if both were properly organized and not fettered with things like voracious ambulance chasers, that the government could deliver material goods and service, like health care and drugs, cheaper and more efficiently, for the same efficacy, as the private sector? Really? Wow, even writing this essay, I just didn’t think anyone could really believe that... And, by the way, by “religion”, all I mean is I’m really sure, it’s fact not faith based!


So, all considered, we should indeed be measuring our cost/GDP, and within a free system attempting to keep it reasonable through reasonable policies (like rational tax and tort policies). But a dictatorial socialist system is unnecessary for this purpose. It’s only necessary to enslave the population.



Myth #5 A Public Option Can Co-Exist with a Private Option

This one has been the subject of some hot debate. Let’s first define it. Part of the current administration’s plan is to add a “public option” for health insurance. That is health insurance provided by the government (actually provided by you and your neighbors – this is a good thing to remember whenever you find yourselves thinking anything comes from the government; really, if you take away anything from this essay, take away this!). They claim this “public option” can co-exist fairly alongside private health insurance, increasing competition and keeping the private system “honest,” and not deteriorate to a single payer (socialized medicine) system. They are not leveling with you, as in unguarded moments they admit that the single payer socialized system is what they really want. The New York Times disagrees with me, thinking the two can co-exist. But the New York Times still thinks Stalin was a pretty decent Joe.

Those advocating the “public option” say it’s just there to keep private enterprise honest. They point out that private doctors prescribe more expensive procedures than ones employed by the government, and then use that as evidence that the private system has inefficiencies (to get as inefficient as the government they’d have to prescribe enough CAT scans to turn you into Spider-Man if conveniently bitten by an arachnid along the way). It makes me want to ask them, “but then don’t we need that in every industry? Doesn’t the already massive competition in health care keep things honest?” Of course, this leads to the uncomfortable conclusion that by their logic the government must be a major player in every industry. Ah, just when you think you have them, you remember, they have you! This is in fact what they desire. Don’t throw them in the briar patch, remember, they are socialists! But, in our case they are mendacious socialists who know that if they are honest, the public will not allow them to achieve their massive imposition of state control on all aspects of life. So they are dismantling liberty piece by piece. Now, let’s get back to the idea that the government can run a fair “private option”, but not forget that there’s nothing special about health care.

The government does not co-exist or compete fairly with private enterprise, anywhere. It does not play well with others. The regulator cannot be a competitor at the same time. It cannot compete fairly while it owns the armed forces and courts. Finally, it cannot be a fair competitor if when the “public option” screws up (can’t pay its bills), the government implicitly or explicitly guarantees its debts. We have seen what happens in that case and don’t need a re-run.

The first thing the government does is underprice the private system. You can easily be forgiven for thinking this is a good thing. Why not, cheaper is better, right? Wrong. They will underprice private enterprise by charging less to the purchaser of health insurance, not by actually creating it cheaper. Who makes up the difference? Well, you and your family do if you pay taxes, or your kids will pay taxes, or their kids will pay taxes. The government can always underprice competition, not through the old fashioned way of doing it better, they never do that, but by robbing Peter to pay for Paul. They are taking money from your left pocket and giving you a small portion of it back in your right pocket. They do it every day before breakfast, and take a victory lap for the small portion they return.

Second, the government ultimately always cheats when it’s involved in “honest” competition. Try mailing a first class letter through Fed-Ex, or placing an off-track bet on your favorite horse with a bookie, or playing a lottery through a private company. Uh, you can’t, so please stop trying, I don’t want you to hurt yourself. Once the government discovers it cannot win, it changes the rules. You see, the government has the power to legislate, steal, imprison, and even kill. Those are advantages most private firms do not have, save Google, and you did not hear that from me (we all know the Google guy with one eye-brow would crush your larynx for creating a competing search engine).

I have friends who say that I can’t compare doctors to postal workers or truck drivers or bookies as doctors are tireless altruists (pretty damn arrogant no?). I respect the skills of doctors, but they are the kids in college who wanted good jobs with prestige and money, and worked damn hard to attain them, but barely a one was more altruistic than the average truck driver (ever have a doctor drive you from Cleveland to Spokane for nothing but your participation in a Captain and Tennille duet?) And anyway, those who want socialism want to enslave these altruist doctors while I want to free them, so I am not sure I need to argue this point.

Perhaps the best example of the destructive “public option” is our nation’s schools. Here we clearly have a government provided “public option” competing with (and in fact dominating in size) private schooling. But, is it fair? Does it work well? Not by a long-shot. To send your kids to private school (i.e., a school that competes with the government) you need to first pay your taxes for the public schools. Absent vouchers or tax credits, the bĂȘte noirs of the “socialism in education” set, if you eschew the “public option” you have to pay for education twice. Double payment is not only unfair, but the quality of the public product without competition is inhuman and a catastrophe to a generation of children the Left weeps tears over, but actively works to destroy (after all, the Left needs future customers). That the schools provided by the government pale next to the private options, which themselves pale next to what we would have with a full private system (even if publicly funded) is beyond sad, but not the direct point here. The direct point is a “public option” cannot exist without cheating – in this case making you pay for it even if you don’t use it (I’m pretty sure if a private company tried that it would be called stealing).

With a “public option” things inevitably would go the horrific way of our public schools. Instead of existing to please customers (patients and students, respectively) the “public option” in schools exists largely to benefit empowered stakeholders of the system (health administrators and unionized school employees, respectively), who will shamelessly pretend to give a darn about sick people and children. Watch the analogy play out if we go this route in health care. It will be like looking in a funhouse mirror and seeing a doctor where you used to see a teacher. All else will be the same.

Finally, let’s worry a bit about the end game. We are not here yet, but in a world where the “public option” replaced all private options, would we still be allowed, if we had the resources, to pursue private medical alternatives? Some socialized countries say yes, some say no. Imagine the answer is “no” in this country, where freedom is valued more than anywhere else in the world. Imagine a person is to be prevented from spending their hard earned money on their, or their children’s, health care, or a doctor was prevented from earning what he could in a parallel free system after all his training and work. If we get to this point, and I pray we do not, it’s time to skip all the Constitution but the second amendment (while we still have it), as it won’t be America anymore.

Let’s again conclude by asking why they are lying here about the “public option”? Well, the President has said if starting from scratch he’d prefer socialized medicine (he calls it something different, but it isn’t different). He also now insists that this “public option” is not intended to lead to fully socialized medicine, and accuses those who say it will lead there of, you guessed it, lying. Odd no? But it takes literally seconds to realize that this “public option” cannot co-exist with the freedom to choose and thus will indeed lead to full‑on socialization. Since the simplest answer is usually best, and the President has already declared his preference for a “single-payer” system, and since this “public option” leads there with near certainty, might I be forgiven for assuming he knows this and has a socialized medicine end-game in mind?



Myth #6 We Can Have Health Care Without Rationing

Rationing has to occur. This sounds cold and cruel, but it is reality. A=A. If you have a material good or service, like health care, that is ever increasing in quality, and therefore cost, there is no way everyone on Earth can have the best at all times (actually the quality increases are not necessary for rationing to be needed, it just makes the example clearer). It’s going to be rationed by some means. The alternatives come down to the marketplace or the government. To choose between those alternatives you judge on morality and efficacy.

Everyone on both sides seems to hate the rationing word. People favoring free markets point to the explicit rationing that occurs in other countries with glee, while those favoring socialism point to the number of uninsured who get their health care through emergency rooms and the like (a form of rationing). Both sides are wrong to complain about rationing per se, that’s a fact of life. But there are differences.



It is an uncomfortable truth that tough choices will have to be made. There is no system that provides for unlimited wants with limited resources. Our choice is whether it should be rationed by free people making their own economic calculations or by a bureaucracy run by Congressional committee (whose members, like the Russian commissars, will, I guarantee you, still get the best health care the gulag hospitaligo can provide). Free people making their own choices only consume what they value above price, using funds they have earned or been given voluntarily. With socialized medicine health care is rationed by committees of politicians trying to get re-elected and increase their own power, and people consume as much of it as the commissars deem permissible. I do not find these tough alternatives to choose between.



By the way, nothing says that part of this rationing cannot include large amounts of charity, privately or even (and the libertarian in me quakes) publicly, but that still involves rationing. Sorry, we can’t suspend the laws of physics and arithmetic.



So, why do they lie about rationing, other than habit? Well, rationing isn’t pleasant news for those who don’t get that 2+2 will always equal 4. Telling optimistic innumerates that your plan does not include rationing wins support.



Myth #7 Health Care is A Right

Nope, it’s not. But we are at the nuclear bomb of the discussion. The one guaranteed to get me yelled at or perhaps picketed by a mob waving signs printed up with George Soros’s money. Those advocating socialized medicine love to scream “health care is a right.” They are loud, they are scary, but they are wrong about rights (as the 1980 kid in me resists the temptation to type “TO PARTY” – you had to be there).

This is more philosophy than economics, and I'm not a philosopher. But, luckily it doesn't take a superb philosopher to understand that health care simply is not a “right” in the sense we normally use that word. Listing rights generally involves enumerating things you may do without interference (the right to free speech) or may not be done to you without your permission (illegal search and seizure, loud boy-band music in public spaces). They are protections, not gifts of material goods. Material goods and services must be taken from others, or provided by their labor, so if you believe you have an absolute right to them, and others don’t choose to provide it to you, you then have a “right” to steal from them. But what about their far more fundamental right not to be robbed?



In fact, although it’s not the primitive issue, the constant improvement in health care gives another good example of why the “right” to health care makes little sense. Did you have a right to chemotherapy in 1600 AD? You could have protested to Parliament all you wanted, but chemo just didn’t exist. Then, did you have a right to it the moment some genius invented it? You did not pay for the research. You did not make the breakthrough. Where do you get the right? How did it come into existence for you the moment somebody else created these things? I’m pretty sure you cannot have rights to material goods that don’t exist, and I am pretty certain that the moment some genius (or business, or even government) brings them into the world your “rights” do not improve. But strangely, many disagree.



Conundrums are easy to create. If a cure for all disease is discovered but it costs the GDP of Europe for each treatment, do we all have a right to it? Of course not. We can say we do, but it does not matter. We cannot have it (unless you agree with my forecast for Europe’s GDP and wait 50 years). But the absolute “health care is a right” position leads to a clear yes (you know those people bussed in by ACORN and the SEIU carrying signs saying “health care is a right”? Ask them what they think about this issue; I dare you). The smarter crazies might argue that they only mean the right to a reasonable level of health care. But then we have government running and rationing health care, as Congressional committee decides what’s “reasonable”? Health care is not a primitive right, but keep printing those signs.



So why do people scream health care is a “right” if it so obviously is not? If not a right it can still be willingly provided as charity by society. But those screaming “health care is a right” worry that this will not work out as well for them. In fact it would work out if all they cared about was good health care for all, and not power, but they do love that power.



Those seeking free health care could admit these are not rights but they simply want other people’s stuff, and be honest supplicants, or open thieves. However, they believe that guilt and the false moral high ground work better for them. Do not cede that ground. They are beggars with the government’s guns behind them. They are beggars you may, or may not, choose to help. I personally have chosen to help many (those with my views are painted as non-humanitarians but we believe our ideas will make everyone better off and many of us are willing to help). But that is your and my choice, not their right. When they ask you to help, please consider it, and do what your conscience and abilities suggest and allow. When they try to take it as their right, they are thieves, tell them “no.”

Finally, while again we may choose to provide a minimum standard of health care to our neediest, we should not be ashamed that better health care, like all material goods, comes with success. Capitalism is simply what happens when you mix freedom and economics. Capitalism says if you achieve and build more, you can spend more and have more. You can have a bigger TV, a bigger house, a hotter spouse, and shinier teeth for your pets (or a hotter pet and shinier teeth for your spouse). How on Earth did the notion that it’s “unfair” to spend the money you earned on your own health care, probably the most important thing to you, come about? Well, I know how it came about. It has been pushed by a far left academia, political candidates who don’t have a clue about economics beyond cashing a lobbyist’s check, trade union organizers pining for a workers revolution that just never came but now they’re trying to steal on the sly (but God forbid a secret ballot), and a biased media who just thinks they are smarter, better and kinder people than everyone else because they enjoy making snotty sarcastic comments about Republicans (and where is Jon Stewart going to get his health care under the new system anyway?).

But I digress again.

Ironically of course, as in all things, the profits made on allowing people to spend differentiated amounts of their own money on health care would fund so much better health care for all it’s sickening (pun intended). Think of the newly invented drugs and other advances that shortly would be cheap enough for everyone if companies were actually fully free to profit on them. It would be too long of an economics lesson to explain to my beret-wearing friends of Che that profits are a good thing, and that companies cannot charge whatever they want forever, as the essence of capitalism is not love of the corporation but love of competition. But, while I admit it looks dark now, everyone would do well to study up on those things as signs are beginning to emerge that they are going to be making a comeback soon.

Finally, to reiterate, calling something a “right” and holding up signs screaming you have that right just does not make it so. I once picketed NASA for a whole summer with a sign that said "Faster Than Light Travel Is A Right" and "FTL NOW!!" (it was actually a whole back and forth chant that went “when do we want FTL!!”, with the sing-song response,“now!!”, etc., but it was just me and didn’t work too well). Alas, those twisted fascist bastards ignored me and we still have not visited the Crab Nebula.



So, Why Are These Crazy Things Believed (Or, Pretended to Be Believed)?

I forgive individuals (not that they need or want my forgiveness!). Lots of people are scared and misinformed by their politicians and the media or else they would understand the whitewash that is going on here and reject socialist “solutions” to a problem best solved for their families by freedom. In fact, eventually I think they will (if Congress and the President don’t first intentionally jam through a bill they know cannot survive scrutiny by the American people). Now as to why the media and politicians say what they say, and propose what they propose, it is more complicated.

Actually the media is often just plain intellectually lazy, repeating tired leftist dogmas and looking down on anyone who believes in freedom as just a red state moron (trust me, they think that). How else do you explain free infomercials for Obama’s socialized medicine without rebuttal? How else do you explain the failed New York Times front page that’s less news and more editorial parody than Steven Colbert? Why the politicians do it is somewhat more complicated, and a bit more nefarious.

Some politicians may indeed just be idealistic dupes who actually want to help people but don’t realize they will harm them. I have sympathy for these people but they still should not win the day. Some just want to feel important. But let’s leave Ms. Pelosi out of this for now. Let’s talk about the smart ones who understand these issues. I do not think true confusion among the political and intellectual class is most of their problem. I do not think they believe for a second that socialized medicine will make people better off. How could they? I think most of the Congressmen for socialized medicine, Rahm Emanuel (and his boss), and the rest of the K-street gang are smarter than that. I think they understand that when the people’s power grows, theirs shrinks, and vice versa.

Lots of politicians understand that the simple free system leaves them out in the cold. No power for them. No committees to sit on to decide people’s lives. No lies to tell their constituents how they (the government) brought them the health care they so desperately need. No fat checks from lobbyists as the crony capitalists pay dearly to make the only profits possible under this system, those bestowed by the government. Libertarians are often accused wrongly of loving “big business,” but we don’t, particularly when corporate executives predictably turn themselves into crony capitalists who try to succeed by wheedling from the government. On the other hand the socialists love cronies of all sorts, ones who command large enterprises all the better. Liberals are far closer than libertarians to building and countenancing the all-powerful corporate state they claim to fear. Odd I know!

That an array of crony capitalists are lining up from Wal-Mart to hospitals to medical insurers (bringing back Harry and Louise - this time for socialism) hoping to cut the best deals for themselves before the iron curtain falls is sad. That they are being lauded by the administration as a sign its health care position is right is simply propaganda. Yep, when someone agrees to pay Al Capone protection, it's a clear sign Al Capone was right to begin with....

We further see this predicted abuse of power as the health care proposals are already filled with freebies to the President’s friends – including exempting unions from onerous features. Gee, the same unions in whose favor he has re-written the bankruptcy rules and wants to exempt from the most American of ideas, the secret ballot. It’s good to be a friend of “the most ethical administration ever.”

For another example how this is about government power and the suppression of private liberty, and not about helping people, look no further than the fact that their proposed massive tax increase on the "rich" (which by leftist definition are never paying their "fair share" if they have enough left over to remain rich) is on pre-deduction income.[9] That means if you give all your money to charity you still owe Caesar his 5+ percent on money you did not keep and do not have, but gave away to a good cause. This might raise some revenue, but it is largely about the destruction of private charity. Barack and Harry and Charlie and Nancy and the other gang of four (yes our gang of four is much bigger than four) are about the people having to crawl on their knees to government (them) instead of anyone else, including private charity, not about helping people.

BTW, Congressman Rangel, the House’s chief tax writer and current tax cheat investigatee, said lawmakers targeted high earners because it “causes the least amount of pain on the least amount of people.” So does, in the short-run, imprisoning the rich and harvesting their organs for better health care for everyone else. Charlie, any thoughts on where you stop? When is enough enough?

Finally, if the above is not enough, the rush to pass a huge expansion of government now, and limit debate and discussion, is indicative of a group that knows it is wrong, and if people have time to think they will refuse to go along, but is attempting an exercise of naked power, to impose dictatorship before the people wake up. Paraphrasing Mark Twain, a lie can travel halfway around the world while the truth is putting on its shoes. They are counting on this, and they don’t want to give the truth time to be shod.



And In Conclusion

At this point you might accuse me of offering only complaints about the Administration's plans, without constructive suggestions of my own. There is truth to that. But I make no apologies. If people believe crazy things it’s first and foremost important to change that before progress can be made. But also, I think we're doing okay enough without radical changes, certainly not hastily panicked changes towards socialism, and also because I lack the expertise to recommend the detailed practical steps that would be productive (in contrast it requires much less expertise to see that the myths above are indeed lunacy).

I do understand people are frustrated at many aspects of the current system, and it is tempting to tear it all down and build something that looks shiny and new and perfect in the advertisement. Many of the complaints concern the complexity of getting insurance, treatment and reimbursement. I blame this mostly on excessive regulation, a complex employment-based insurance system strongly encouraged by tax law, and litigation for the benefit of trial lawyers rather than patients or anyone else. We do not need a single payer (socialized medicine) system to cut confusion and inefficiency. On the contrary we need unfettered competition and clear legal standards. Another major concern is provision of basic health care to the needy. This is an important issue, but not an expensive one in the scheme of things, and not one that should drive the trillion-dollar health care debate. You do not reorganize the entire housing industry and tax policy around the need for homeless shelters, you just build enough shelters and let the market take care of, and discipline, the people who can pay for their own housing. Finally there is the concern that health care costs make US workers too expensive to compete in global markets. As long as workers get full value for their health care dollars, it shouldn't matter whether companies pay in cash or in health benefits. The competitiveness issue is an important one, but health care costs versus wages versus taxes to pay for public health care is a minor detail in it. The main thing is not how it’s divided up but total costs, and total value received by the worker. Costs are minimized, and value received maximized, by open competition. I recognize these are general prescriptions rather than specific health care reform proposals, but you don't have to be a weatherman to know which way the wind blows (are non-Leftists allowed to quote Dylan?).



--------------------------------------------------------------------------------

[1] A few commentators on my earlier drafts have pointed out that this quote is attributable to several different people, and it’s far from clear it’s really, or only, by Will Rogers. Interestingly these particular commentators went on to say that nothing I say has value because of this possible “oversight” of mine (while admitting that many others also attribute the quote to Rogers). The only possible response a gentle author like myself can have is that they can bite me.

[2] Some say health care advances are really an achievement of the government as the government funds university research. Wow. What a clear case of the government muscling in, taking over, and then pointing to their taking over of Poland as a success. We Poles feel differently.

[3] By the way, that companies try to maximize profit is not something they or I should apologize for, it is beautiful and fair and the reason why great things are created.

[4] FYI, your author is a hockey nut.

[5] Canada's national healthcare does not cover all prescription drugs, just those prescribed in hospitals and drugs for poor people. But it imposes price controls and uses bulk purchase negotiations, and it recognizes less patent protection than US law. The net result is drug companies recover much less of their fixed costs per person in Canada than in the US. If the US imitated Canadian health policy, rewards for medical innovation would be much less.

[6] Truth be told this isn’t about just Canada but any group that negotiates en masse for prices that cover variable not fixed costs. But the general point is still valid. The success of some groups at this does not mean it’s a viable system for all, in fact it’s impossible to be a viable system for all. We cannot all be free riders.

[7] The true subsidy of the US does not result only from US companies producing most of the drugs, but free people in the US paying full price for drugs produced the world over.

[8] Note that doctors also get paid comparatively very little in these countries. This was a bait and switch on the current generation. It remains to be seen if it can be done again to the next generation, though one has to presume not. The best and brightest will choose other careers. Another reason why the future for the socialized medicine Nordic El Dorado is less bright than its current reputation.

[9] While not the subject of this essay, let’s put another widespread myth to bed. “The rich only give to charity for the tax deduction.” Please note, when the rich give substantial amounts to charity they end up with substantially less for themselves. The idea of the charitable deduction (which some libertarians may argue with as it subsidizes behavior the government finds “nice”) is that if you do not keep the money you earned, but pass it on to a good cause, you do not also pay taxes on it. That seems pretty reasonable as you did not keep it. That many, even most, think this is somehow a giveaway to the rich is a statement on the sorry state of understanding, and the dangerous level of class-warfare we already have in this country.



--------------------------------------------------------------------------------

[i] AQR Disclosure

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC its affiliates, or its employees. The information set forth herein has been obtained or derived from sources believed by the author to be reliable. However, the author does not make any representation or

warranty, express or implied, as to the information's accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any investment decision and it has been provided to you solely for informational purposes only and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such.



Cliff’s Additional Disclosure

This is Cliff speaking now. AQR's legal department would like me to add that I am criminally insane and barred by an order of rhetoric protection from speaking on AQR's behalf. Anyone trading on my advice, or a client, consultant, employee or Iraqi insurgent thinking he has been wronged by my attitudes or opinions can have a $250 out-of-court

settlement right now if you'll sign a waiver, otherwise we'll break you. Oh, and we lied about the $250, but seriously, we will break you. Please note, nobody can predict where markets will go in the short-run and sometimes even the long-run. When I point out individual things in the marketplace that I think are strange, or wrong, it doesn't mean I have the perfect answer or can easily make money from it for my clients, for myself, or certainly for you reading this essay! Furthermore, if you read one guy's opinion and do anything based solely on that, you are an idiot. Next, as the legalese above alludes to, the actual funds and accounts AQR manages are run using models that may or may not agree with what I'm writing herein, particularly as our models will generally have a shorter time horizon than the things I'll be writing about. Listen to me at your own risk! If you choose to read what I write please only use it as one input for you to critically evaluate in your decision process.



Finally, my style is to write very aggressively and passionately about what I believe. So unless you are a libertarian/objectivist, small government and free market loving, socialist hating, value investing geek you probably won't agree with everything or anything I say. If you find the way I say it insulting, I'm sorry about the first few words you couldn't help reading, but if you read a moment past that (in this disclaimer or later), it is on you. I agree we need to censor things occasionally but only to protect children and madmen (and of course the children of madmen). If you believe in censoring anything else short of a nuclear secret you'd probably look good in hobnail boots and the crooked cross. Thanks for listening.



[ii] I don’t claim any great originality here. Much, or even all, of what I’m saying has been said elsewhere. But, we’re still losing, so it’s worth repeating all this again with some new angles, a few new pieces of black humor, and perhaps a different font. In particular, and not even close to exhaustively, I can recommend recent pieces of Newman, Sowell, Stossell, Szasz , Will, and many by the Cato Institute that cover a lot of the same ground I attempt to re-take.

Tuesday, July 21, 2009

Health Care and Abortion

This is an informative- yet short- read on what is going on legislatively regarding the new Health Care plan and the implications is may have regarding Federal funding and abortions. I am pleased to see some Democrats are pushing to not turn this Health Care plan into an abortion debate (by not including language in the bill which could create abortion centered issues).

Wednesday, June 17, 2009

Two things

Anonymous. It's a title that cloaks people who are not brave enough to state their opinions and ideas and attach a name; it affords them the ability to attack at a whim people who are not hiding and who are publicly stating their ideas and opinions. It's an act of internet cowardice and I have decided to no longer respond to it.

This is the last post I will make regarding comments from anyone who attempts to post as "Anonymous". In his/her last comment, you could feel the hate spew from the screen. It is always a sign you have won a debate when the other side resorts to name calling, rash generalizations, sexism and stereotypes.

I am a stickler for grammar- particularly your and you're and the like. I am not perfect, no one is, but if you are going to attempt to insult someone, it is best you use proper grammar. Another thing I assume someone in the South isn't expected to understand.

This is the end of Anonymous. If you have something to post and would like to comment, find the courage to post under your real name and engage in thoughtful, calm, rational debates, in which no name calling is tolerated. I do not tolerate childishness, sexism or stereotyping.

It's my blog; I make the rules. If you can't stand behind your ideas and opinions by posting under your true name, then perhaps you shouldn’t post at all.


Thursday, June 04, 2009

FFELP comments





I had a recent comment on my post about Obama and his socialist plan to take over not only the auto industry but the student loan industry. Instead of just sharing the comment and it likely going unread, I am going to publish it in a new post along with my comments. I appreciate the alternative point of view but disagree whole heartedly as someone who use to work in the industry and who is married to someone who still does.


Kudos to the President, the first president who actually had student loans.

The student loan industry is ripe with greed, arrogance, and corruption. The Sallie Mae CEO has taken nearly a half billion dollars personally as a middleman. He now owns three mansioned estates (annapolis, MD / Harwood, MD / Naples, FL), one with a private 18 hole golf course - although an old photo and the golf course is still under construction, you can see where taxpayer subsidy dollars go via Google Maps at coordinates 38°51'38.52"N, 76°40'4.47"W

I know of no industry that is not ripe with greed,
arrogance or corruption. When people are involved, these negative aspects
pop up. It’s not an excuse but it isn’t a reason for the government to
control the industry either.


Sallie Mae owns two private jets - they used to own three. The jets are tail numbered N50FD and N188AK.

And the President of my company, no doubt, owns a boat and a lovely house
but it doesn’t mean he shouldn’t.

That is where the taxpayer subsidies are going, private golf courses and private jets.

When a FFELP loan defaults, the taxpayer pays nearly twice the amount of the loan. Sallie Mae is allowed to attach fees, penalties, and crank the interest rate up to above credit card rates. After a period, they capitalize those fees, penalties, and interests and put the loan to the taxpayer for payoff. So, a 20k loan becomes more than 40k cost to the taxpayer. In the direct program, the 40k might still be the receivable, but it does not effect cash flow as we see with the middlemen involved. Why are we funding this madness?

When a loan defaults, the loan is turned over to the DOE. The DOE will add
additional fees and increase the rates in order to pay to collect the
debt. When you promise to pay a loan back and fail to do so, the lender
has the right to charge a fee. Unlike a mortgage, Sallie Mae and the like
cannot take away your education like a lender can take your home. Everyone
is a taxpayer- the CEO of Sallie Mae as well as you and me. So the
taxpayer who defaulted on their student loan will have to pay more than
borrowed; that is the nature of a loan a defaulted loan is even more
expensive. Student loans are the only loans that allow you to apply a
forbearance or deferment to your account. Try deferring your mortgage
payments because you have an economic hardship let alone your credit card
payments.


Let's not forget the corruption that the subsidies fund. The following student aid administrators got into more than a little hot water for taking kickbacks and other inducements from the student loan industry - most lost their jobs:
Ellen Frishberg - Johns Hopkins
Catherine Thomas - USC
David Charlow - Columbia
Lawrence Burt - University of Texas
Walter Cathie - Widener University
Tim Lehmann - Capella University
Daniel Pinch - Emerson College

Yes, there is corruption in some schools but you don’t cut down the apple tree because it produces one bad apple.


In the investigations of 2007, many Universities were fined for revenue sharing schemes. Specifically, University of Pennsylvania, New York University, Syracuse University, Fordham University, Long Island University and St. John's University have agreed to reimburse students a total of $3.27 million for inflated loan prices caused by revenue sharing agreements.

Perhaps we should nationalize those schools also…


And it just seems to never end. In May of 2009, "District attorney's investigators raided City College of San Francisco on Wednesday, seeking evidence that college officials had illegally spent public money on donations to education-related political campaigns. A copy of a search warrant served on the college shows that investigators are scrutinizing the actions of former Chancellor Philip Day, who left the college last year to work for an education lobbying firm in Washington, D.C." (from San Francisco Chronicle) Mr. Day happens to be CEO of the NASFAA, the organization that represents financial aid directors.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/07/MNJQ17FTEQ.DTL


Again, this is a college with corruption not a lender and not even corruption-
they were “seeking evidence” meaning none had been found as of yet.
Corruption exists from the White House to the taxpayer house. We are
imperfect people and cannot expect to have a perfect world or system.


CHOICE? Choice is a myth or a lie depending on how you look at it. In 2008, more than 100 Universities were under investigation for more than 90% of their FFELP loans going to one provider. The notion that there is competition in this "market" is ridiculous - the student loan companies pay or induce schools for preferred lender status resulting in nearly all loans at any one school going to one provider. In the above instances, those inducements were to the administrators themselves. From "School as Lender" to call centers to printing - the inducements to schools are great and the payoffs for the middlemen even greater.

There is competition; in most schools, you can choose from a multitude of
lenders. Have you had a different experience? Some schools however, do not allow the student to choose; they are forced to go with Direct…the government run lender. My personal experience is any student that enters these doors can choose from any lender who agrees to make the student loan for them.


Of course, some in congress receive so much cash from the student loan industry, they will try to derail this improvement. Particularly, Buck McKeon and John Boehner receive the most from the student loan industry. Buck and Boehner have been the champions of the industry for years and are responsible for much of the elimination of competition and stripping of consumer protections for student loans - all to the benefit of the middlemen lenders. There are no student loan companies in Buck or Boehner's districts and no meaningful employment by student lenders in those districts. Now, Lamar Alexander is joining in with them. This is pure pay for play.

And Barack Obama received a lot of money from Fannie Mae and Freddie Mac yet
bailed them out- Kudos to the President? Fannie Mae….sounds a lot like
Sallie Mae another of Obama’s favorite GSEs?


Regardless, it appears my point has been missed. The employees of these companies will be unemployed; where will they work? Will Obama help or is this the change he promised? There is more corruption in the government than in the private industry, as your comments proved; so why would we want to turn this industry completely over to the government?

Friday, May 22, 2009

This weekend.....

This weekend my life will change.
This weekend I will marry my best friend.
This weekend my life will be the same.
Because this weekend I will marry my best friend.

It’s amazing to find the one person who gets you
And doesn’t run away.
It’s amazing to finally have someone who loves you
And loves you in spite of your ways.

This weekend I will marry my best friend
And this weekend, I will hold on to my forever with open arms.



I love you Jeffrey with all that I have-





Forever and Today



Thursday, May 21, 2009

T-Mobile Mom to Mom Quiz

T-Mobile Mom to Mom Quiz: "

Take the fun, Mom to Mom quiz and discover your parenting style.

"

Wednesday, May 13, 2009

Pot....meet Kettle

Is Shannon Moakler really critiquing Miss California's pictures? She claims she wants to be a role model for her children- does that include her Playboy stint? I know I am not perfect but I’ll admit when I am wrong. But does Shannon even understand that her posing in Playboy is far worse than any modeling pictures Miss California took? Am I the only one that sees this? I haven't checked out either's photos, nor do I intend to, but something tells me we aren't even comparing apples to oranges. Perhaps potatoes to athlete's foot....hmm

Kettle meet Pot- Pot meet Kettle….in this case I think the kettle has been smoking so much pot it doesn’t know its own color.

Moakler resigns after Miss California flap
Pageant co-director Shanna Moakler says 'I no longer believe in it'

Access Hollywood
updated 1 hour, 53 minutes ago

A day after Donald Trump allowed Miss California Carrie Prejean to keep her crown following a semi-nude photo scandal, Shanna Moakler resigned from her post at the organization.
“Since the press conference yesterday, I had a chance to think about what has taken place, and I feel that at this time it is in my best interest to resign from the Miss California USA organization,” Shanna released in a statement to Access Hollywood. Up until her resignation, Shanna held the co-Executive Director post at the Miss California Organization.
Shanna continued on that following yesterday’s press conference, she lost faith in the organization.

“I can not with a clear conscious move forward supporting and promoting the Miss Universe Organization when I no longer believe in it, or the contracts I signed committing myself as a youth,” Shanna’s statement continued. “I want to be a role model for young woman (sic) with high hopes of pageantry, but now feel it more important to be a role model for my children. I am sorry and hope I have not let any young supporters down but wish them the best of luck in fulfilling their dreams.”

When contacted by Access Hollywood, the Trump Organization was unaware that Shanna had resigned.

Despite racy photos of the beauty queen that surfaced on TheDirty.com last week and new topless photos that surfaced on TMZ.com on Tuesday, which showed Prejean posing without a shirt, Trump allowed the beauty queen to retain her title.

“We’ve reviewed the pictures very carefully... we are in the 21st century and I talked about relevance and the pageants have been updated tremendously. And Carrie is a model, she’s a very successful model, we have determined — and we have the absolute right under the contract — we have determined that the pictures taken are fine,” Trump said at Tuesday’s press conference. “So, we’ve made a determination that everything we’ve seen to this date that she’s done, some were risque, but again, we’re in the 21st century, so we’ve made a determination that the pictures taken were acceptable they were fine in many cases. They were lovely pictures and in some cases they were modeling pictures, so I think that’s very important to understand.”

Trump also addressed the strife between the co-directors of the Miss California USA, Shanna Moakler and Keith Lewis, and Prejean.

“The last thing… is we have Keith and Shannon from the pageant, the directors of the Miss California pageant. I met them today for the first time…they were having some miscommunication with Carrie. The communication, I believe, is totally solved. They are really getting along very well,” Trump said on Tuesday. “They’ve been meeting for hours in my office and I really think that they are and have developed a relationship that they didn’t have before. Carrie will remain Miss California. She, I believe will do a fantastic job.

“And I think that Carrie will go down as somebody that Shanna and Keith will be very proud of in the end,” he added.

When contacted by Access Hollywood, the Trump Organization was unaware that Shanna had resigned.



Thursday, May 07, 2009

Scattered

This is a scattered post but I suppose there is a theme- encouragement.

I did not know this woman’s face nor did I know her name. I read it this morning on Love 89’s site and decided to find out who she was and why Pat Summit was at her funeral. This is a touching video and well worth the time to listen, even if you cannot watch it. There is a lot that comes into focus when you know you don’t have much time and I hope this puts your life into perspective and you are encouraged by it.

Secondly, I heard about this book on Love 89 this morning. The author, as it turns out, goes to my church. The book just seems like a good read for any woman who has children and struggles to keep her own identity in Christ while still being mom and wife. I may end up getting this for my mommy-to-be friend for a shower present! The author’s site can be found here. If you join Chick-Chat on Love, they will give you a 20% off coupon to use at Cedar Springs Bookstore. My favorite passage on her site is this-

“I am grateful to be God’s child, knowing my life is in His hands and He is in control of my time. God also reminded me of the scripture that says “whatever you do, do it all for the glory of God.” 1 Cor. 10:31 I am serving Him as I wash dishes and do the laundry because I am serving my family! What an awesome opportunity and blessing to know that I am where He wants me doing what He has called me to do.

I just wanted to encourage some moms who may think that your work at home is meaningless. God says that He knows those who trust in Him and is close to all who call on Him. I pray that today you will call on Him and know that whatever you are doing, do it for the glory of God!”



I love you all-

Tuesday, April 28, 2009

Senator Alexander Statement on Motion to Instruct Conferees On the Budget Conference to Preserve Choice in Student Loan programs

Senator Alexander Statement on Motion to Instruct Conferees On the Budget Conference to Preserve Choice in Student Loan programs

April 24th, 2009 - This should be a relatively easy motion for our colleagues to support because it simply instructs the conferees to support a position that the entire Senate adopted unanimously. That provision during our budget debate was to accept the position of maintaining a competitive student loan program that provides students and institutions of higher education with a comprehensive choice of loan products and services.

Madam President, there are three reasons in support of maintaining a competitive student loan system. The first is that 12 million students rely on it today in New Hampshire, in Tennessee, in North Dakota -- all across our country.

Second is that now is not the time to be creating a new half-trillion-dollar national bank that would run up the debt, a bank that would replace 2,000 private lenders, and make $75 billion in new loans a year. That is not a proper function of the U.S. Department of Education.

And third, the cost savings that is alleged is -- and I will be gentle in my words -- a trick on students to make Congressmen look good. What we are going to be doing if we do not preserve this choice is saying to all the students who get a loan that we are going to take money from them and then give it to other students so that Congressmen can go home and brag that he or she has increased the amount of the Pell grants. Let me be specific in what I say.

I was the U.S. Secretary of Education in 1991 and 1992 when we created something called the Direct Loan Program. We have a federal student loan program. Most people who go to college are familiar with it. About two-thirds of the students at our 6,000 different institutions from the University of New Hampshire to the Nashville Auto Diesel College to Harvard to San Francisco State have a Federal grant or a loan. When you get a student loan, you take it to the institution of your choice.

We now have 2,000 lenders who help provide all those different kinds of loans. They give financial aid counseling, they give interest rate deductions, they help students and families plan on how to pay for college. In other words, they service the loans and then the Government supports that by guaranteeing almost all of the loans.

We set up a separate program which we called direct lending. That was, you could come straight to the Government to get your loan. In other words, we created a government bank run by the Department of Education. We said to the students and to the institutions: You make the choice. You may either have a private student loan guaranteed by the Government through your local bank or financial institution, or you may come to the U.S. Department of Education to get your loan.

We have had more than 15 years of experience with that now, and what have the students and institutions said? Three out of four say we like the regular student loan program, we like the choice, we like the private lender. Since we are getting the loan, we like the idea of going to a bank to get a loan because that is what banks do. If you want a car, you go to a car dealer. That may be changing. You may have to go to the Department of Treasury to get a loan the way the country is going. For 15, 16 years we market tested this and so we have that direct loan program.

The situation right now is we have 12 million students at 4,400 different institutions getting $52 billion in loans by their choice from banks instead of from the Government. One-fourth get it from the Government. It has been that way for a long time.

What the President's proposal wants to do is to take all those choices away from the students and say: Line up outside the Department of Education to get your student loan, all 15 million of you. There will be 4,400 institutions and 12 million students who may not like that.

Second point. Is a national bank a good idea? We read in the paper that the Government is going to take stocks in the biggest banks. So we are going to nationalize the banks. Then we read in the paper the Government is going to take stock in General Motors and Chrysler -- hopefully that is not true -- so we are going to have the Government deciding what kind of car we are going to be making, what kind of plants we will have, where the plants are going to be. I cannot think of a worse organization to do that. This is a proposal to say: All right, now the Government is going to be your bank. It is going to be the bank for your student loans. We are going to create a new national bank. It would have over a half trillion dollars in outstanding student loans. It would make 15 million student loans every year, $75 billion in loans a year.

We will run all this out of the U.S. Department of Education, a wonderful Department. I was myself there for 2 years. But what do we know about being a national bank? Not very much. Andrew Jackson would roll over in his grave about the idea of a national bank of this size.

My final point. This proposal, with all due respect, is a trick on students to make Congressmen look good, and here is why.

The budget we originally got said we will take $94 billion in savings and we will spend it on Pell grants. Let's think about that a minute. Common sense will tell you that the Department of Education is not going to know more, is not going to be able to replace 2,000 lenders at a cheaper cost. That simply is not going to work. That is what common sense would tell you.

The Congressional Budget Office has told us that in order for the Department of Education to administer these loans, it would cost about $28 billion over the next 10 years. That is the computation I have made. They estimate that the cost of administering the current Direct Loan Program is about $700 million a year. So if they did them all, that would be at least $2.8 billion a year.

Conservatively speaking, you don't have $94 billion in savings; you have 94 minus 28. So you have around 66. So you have $66 billion that goes somewhere out to banks, maybe to reduce loans, maybe to reduce interest rates, maybe to administer the loan program. But the bottom line is, if the Government takes this program over, it is going to be borrowing money at one-half of 1 percent and loaning it out to 15 million students at 6.8 percent. Borrowing at one-half of 1 percent and loaning it out at 6.8. On every student loan -- and I hope all 15 million students listen to this -- your friendly Government is going to take back 6.5 percent of the 6.8 percent interest you are paying. What is it going to do? The Congressman or Congresswoman can go home to Tennessee or wherever and say: I increased Pell grants. But they won't tell you: I took money from this student to give it to that student. That is not the way to do it.

What we should do, if that spread is too high right now, is let's cut it down -- if the savings is estimated at $90 billion. We know it is closer to $60. Maybe it is $20, maybe it is $30, maybe it is $35. Maybe we should lower the interest rate to 3 or 4 percent or 5 percent or whatever is the appropriate rate.

But that does not justify creating a national bank in the Department of Education to try to handle 15 million loans.

So my argument, Madam President, is this: There are colleagues on both sides of the aisle -- and there are a number of Democrats -- who strongly support the idea of competition and choice in higher education. That is why we have the best higher education system in the world. We have competition and choice all the way through it. The grants and the loans don't go to colleges; they go to the students, and the students choose the college. They can go to Nashville Auto Diesel College if they want or they can go to Harvard; it follows them to the school of their choice. They ought to be able to go to the lending institution of their choice and not line up outside of the Department of Education to get 15 million loans every year. That is not right. It is not the way our country ought to work. So the first is to preserve choice for the 15 million students who now have it at 4,400 institutions.

The second reason is, let's not be creating another nationalized asset in America. We need to be thinking of ways of getting the Government out of the private sector. I mean, this recession is not for the purpose of the Government taking over every auto company, every bank, all the student loans, and every business that is in trouble. We need to be thinking of ways of going the other direction. That is the America we know. That is the America we want.

So we don't need a new national bank.

Arne Duncan is the new Secretary of Education. I think he is the President's best appointee. He ought to be working on paying teachers more for teaching well, creating more charter schools, helping states create higher standards. That is his agenda. I don't think he came from Chicago to Washington to be named banker of the year, which is what he would be doing if he became a national bank president for student loans. That is what this proposal would do unless the Senate sticks to its position.

Finally, I don't want to be a part of any situation which has Congressmen and Senators playing a trick on 15 million students and saying: I am going to borrow money at a quarter of 1 percent and loan it to you at 6.8, and then I am going to take credit for giving the rest of it away. I think that will come home to roost, and it ought to come home to roost.

I appreciate the opportunity to make this motion to instruct, and I hope it will come to a vote. I hope it has the kind of bipartisan support it had before. I hope the President will think of all the other things there are to do that need attention, such as fixing the banks, getting credit flowing, restoring the auto companies, and leave the student loan system to continue to work in the way it should work.