Friday, September 17, 2010

Next, Michelle Obama's health reform plan for the nation's restaurant menus and families dining out

See Los Angeles Times Sept 14, 2010 at
"Next, Michelle Obama's health reform plan for the nation's restaurant menus and families dining out"

"First Lady Michelle Obama, who has been unable to convince the Smoker-in-Chief to give up that dreadful habit, now has some health suggestions for other American families and for restaurant menus across the country,"

[Michelle] "Obama would like to see more healthy choices for Americans dining out, even if it means a restaurant deleting a best-selling menu item.
The Democrat suggested that Americans are "programmed" by taste and advertising to eat many things that the government and health professionals know are not healthy for their bodies. So she wants to facilitate a nationwide re-programming of personal tastes by having restaurants start serving less of what customers ignorantly want and more of what they should have."

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Monday, September 13, 2010

Could Panic Have Been Prevented? Did Government Regulation and Judgement Fail?

See Robert Samuelson coulmn September 13, 2010
Could Panic Have Been Prevented? at

WASHINGTON -- It's been two years since Lehman Brothers failed (Sept. 15, 2008), and we still can't conclusively answer this question: What if the government had saved Lehman? Its bankruptcy was pivotal. Until then, deteriorating housing and mortgage markets had triggered what seemed a serious -- but not unprecedented -- recession. Once Lehman failed, the economy went into a frenzied free fall. It's hard not to wonder whether some of the ensuing turmoil could have been avoided.

Consider what happened after Lehman:

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Robert Samuelson RealClearPolitics
Lehman Brothers Barclays

Ben Bernanke Henry Paulson
Timothy Geithner US Federal Reserve
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-- Credit tightened. Banks wouldn't lend to each other, except at exorbitant interest rates. Rates on high-quality corporate bonds went from 7 percent in August to nearly 10 percent by October.

-- Stocks tanked. After its historical high of about 14,100 in October 2007, the Dow Jones industrial average was still trading around 11,400 before the bankruptcy. By October, it was about 8,400; by March 2009, 6,600.

-- Consumer spending and business investment (on machinery, computers, buildings) -- together about four-fifths of the economy -- declined sharply. Already-depressed vehicle sales fell a third from August to February.

-- Employment collapsed. Five million payroll jobs disappeared in the eight months following Lehman's collapse. The unemployment rate went from 6.2 percent in September to 9.5 percent in June 2009.

Lehman's failure had dire consequences because it suggested that government had lost control of events. No one knew which financial institutions would be protected and which wouldn't; AIG soon received a massive loan. Uncertainty rose; panic followed.

Worried they'd lose normal credit, companies hoarded cash by cutting jobs, investment and inventories. Disappearing work and wealth (stock losses from September 2008 to March 2009 totaled $3.9 trillion, reports Wilshire Associates) caused consumers to postpone discretionary purchases: cars, homes, appliances.

The explanations of why Lehman was allowed to fail have subtly shifted in two years. Over that weekend of Sept. 13 and 14, Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and New York Federal Reserve Bank President Timothy Geithner desperately tried to organize a private-sector rescue. They almost succeeded. They persuaded a consortium of other banks to assume $30 billion worth of Lehman's weakest investments. It seemed that Barclays, a major English bank, would buy Lehman, but British regulators raised last-minute objections.

At that point, only the U.S. government could have saved Lehman, which faced a self-fulfilling crisis of confidence. Its customers and lenders were fleeing because they feared they might not be paid. Someone with deep pockets had to stand behind Lehman to assuage these anxieties.

The standard explanation now from Paulson and Bernanke of why they refused is that legally they couldn't do otherwise. The Treasury said it lacked authority to make an investment; the Federal Reserve could lend but only if Lehman had adequate collateral, which was allegedly missing. That's the story now, but after Lehman's bankruptcy, the emphasis was different.

"I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers," Paulson said. Indeed, his position initially drew praise as standing up to Wall Street. Bernanke gave similar justifications. Testifying to Congress Sept. 23, he said that "the troubles at Lehman had been well known ... (and) we judged that investors ... had had time to take precautionary measures."

In truth, an informal consensus had formed against using government funds to save Lehman. Harsh criticism of the earlier rescue of Bear Stearns -- done with Bush administration support and Fed money -- had left a deep scar. The Financial Crisis Inquiry Commission has published e-mails reflecting the mood. On Sept. 9, Treasury chief of staff Jim Wilkinson wrote that he couldn't "stomach us bailing out lehman (sic). Will be horrible in the press." Given this bias, there was no Plan B once Barclays withdrew its offer.

Paulson, Bernanke and Geithner later performed commendably in preventing a wider financial collapse and restoring confidence that, arguably, averted a second Great Depression. Though their measures (TARP, government loan guarantees and Fed lending facilities) were unpopular, they ultimately calmed markets. But the lingering question is whether Paulson & Co. were cleaning up a mess they helped create. Even now, it's unclear whether Lehman lacked sufficient collateral to justify a loan. There was a "senseless panic" argues William Isaac, former head of the Federal Deposit Insurance Corp., in a book with that title.

Or perhaps not. Maybe saving Lehman would merely have postponed panic and requests for broader powers to deal with a weakening financial system. Citigroup and Bank of America, among others, needed help. The nature of crisis is that people are surprised and overwhelmed by events, and in that sense, the mistakes made in dealing with Lehman might have been unavoidable. One way or another, the first draft of history is still being written -- and it remains very rough.


Gangster government stifles criticism of Obamacare

See Michael Barone column "Gangster government stifles criticism of Obamacare"

September 10, 2010

Secretary of Health and Human Services Kathleen Sebelius sent millions of senior Americans a brochure that is packed with blatantly false claims about Obamacare. (Alex Wong/Getty Images)
"There will be zero tolerance for this type of misinformation and unjustified rate increases."

That sounds like a stern headmistress dressing down some sophomores who have been misbehaving. But it's actually from a letter sent Thursday from Health and Human Services Secretary Kathleen Sebelius to Karen Ignagni, president of America's Health Insurance Plans -- the chief lobbyist for private health insurance companies.

Secretary Sebelius objects to claims by health insurers that they are raising premiums because of increased costs imposed by the Obamacare law passed by Congress last March.

She acknowledges that many of the law's "key protections" take effect later this month and does not deny that these impose additional costs on insurers. But she says that "according to our analysis and those of some industry and academic experts, any potential premium impact . . . will be minimal."

Well, that's reassuring. Er, except that if that's the conclusion of "some" industry and academic experts, it's presumably not the conclusion of all industry and academic experts, or the secretary would have said so.

Sebelius also argues that "any premium increases will be moderated by out-of-pocket savings resulting from the law." But she's pretty vague about the numbers -- "up to $1 billion in 2013." Anyone who watches TV ads knows that "up to" can mean zero.

As Time magazine's Karen Pickert points out, Sebelius ignores the fact that individual insurance plans cover different types of populations. So that government and "some" industry and academic experts think the new law will justify increases averaging 1 or 2 percent, they could justify much larger increases for certain plans.

Or as Ignagni, the recipient of the letter, says, "It's a basic law of economics that additional benefits incur additional costs."

But Sebelius has "zero tolerance" for that kind of thing. She promises to issue regulations to require "state or federal review of all potentially unreasonable rate increases" (which would presumably mean all rate increases).

And there's a threat. "We will also keep track of insurers with a record of unjustified rate increases: Those plans may be excluded from health insurance Exchanges in 2014."

That's a significant date, the first year in which state insurance exchanges are slated to get a monopoly on the issuance of individual health insurance policies. Sebelius is threatening to put health insurers out of business in a substantial portion of the market if they state that Obamacare is boosting their costs.

"Congress shall make no law," reads the First Amendment, "abridging the freedom of speech, or of the press."

Sebelius' approach is different: "zero tolerance" for dissent.

The threat to use government regulation to destroy or harm someone's business because they disagree with government officials is thuggery. Like the Obama administration's transfer of money from Chrysler bondholders to its political allies in the United Auto Workers, it is a form of gangster government.

"The rule of law, or the rule of men (women)?" economist Tyler Cowen asks on his blog. As he notes, "Nowhere is it stated that these rate hikes are against the law (even if you think they should be), nor can this 'misinformation' be against the law."

According to Politico, not a single Democratic candidate for Congress has run an ad since last April that makes any positive reference to Obamacare. The First Amendment gives candidates the right to talk -- or not talk -- about any issue they want.

But that is not enough for Sebelius and the Obama administration. They want to stamp out negative speech about Obamacare. "Zero tolerance" means they are ready to use the powers of government to threaten economic harm on those who dissent.

The closing paragraph of Sebelius' letter to AHIP's Karen Ignagni gives the game away. "We worked hard to change the system to help consumers." This is a reminder that the administration alternatively collaborated with and criticized Ignagni's organization. We roughed you up a little but we eventually made a deal.

The secretary goes on: "It is my hope we can work together to stop misinformation and misleading marketing from the start." In other words, shut your members up and play team ball -- or my guys with the baseball bats and tommy guns are going to get busy. As Tyler Cowen puts it, "worse than I had been expecting."

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